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332 F.Supp.2d 869 (2004)
Carmelina SCOTT o/b/o Marcus SCOTT,
v.
Jo Anne B. BARNHART, Commissioner of Social Security.
No. CIV. SKG-02-2741.
United States District Court, D. Maryland.
August 10, 2004.
*870 *871 Paul Rodney Schlitz, Jr., Jenkins Block and Associates PC, Baltimore, MD, for Plaintiff.
John Walter Sippel, Jr., Office of the United States Attorney, Baltimore, MD, for Defendant.
MEMORANDUM OPINION
GAUVEY, United States Magistrate Judge.
Presently pending before this Court are Cross-Motions for Summary Judgment concerning the Commissioner's denial of the plaintiff's claim for Supplemental Security Income ("SSI") payments (children's benefits) under Title II of the Social Security Act, 42 U.S.C. §§ 401-433. (R. 14-26). This Court must uphold the Commissioner's decision if it is supported by substantial evidence and if proper legal standards were employed. 42 U.S.C. § 405(g); Craig v. Chater, 76 F.3d 585, 589 (4th Cir.1996); Coffman v. Bowen, 829 F.2d 514, 517 (4th Cir.1987). A hearing is unnecessary. Local Rule 105.6. For the reasons that follow, this Court GRANTS the plaintiff's Motion for Summary Judgment and DENIES the Commissioner's Motion, and REMANDS the case to the Commissioner for proceedings consistent with this opinion.
Carmelina Scott ("plaintiff") filed an application for SSI on behalf of her son, Marcus Scott ("claimant"), on February 29, 2000, alleging disability due to asthma since January 1, 1995. (R. 57-59, 61). A hearing was held on May 15, 2001; whereafter, the Administrative Law Judge ("ALJ") denied plaintiff's claim in a written decision dated August 30, 2001. (R. 14-26). The ALJ concluded that claimant was not under a disability, under § 416.920(f) of the Social Security Act. (R. 25). Specifically, at Step Two of the Children's Benefit Analysis,[1] the ALJ determined that claimant suffers from asthma and Attention-Deficit Hyperactivity Disorder ("ADHD"), but neither of the impairments nor the combination of the impairments cause more than minimal functional limitations. (R. 25). Therefore, the ALJ concluded that claimant's impairments are not severe. (R. 25). On June 28, 2002, the Appeals Council denied plaintiff's request for review, thus making this case ripe for judicial review. (R. 5-6).
The Commissioner's decision must be upheld if supported by substantial evidence which is more than a scintilla, but less than a preponderance, and sufficient to support a conclusion in a reasonable mind. See 42 U.S.C. § 405(g) (1998); see also King v. Califano, 599 F.2d 597 (4th Cir.1979); Teague v. Califano, 560 F.2d 615 (4th Cir.1977); Laws v. Celebrezze, 368 *872 F.2d 640 (4th Cir.1966). This Court may not weigh conflicting evidence, determine credibility, or substitute its judgment for the Commissioner's. See Hays v. Sullivan, 907 F.2d 1453, 1456 (4th Cir.1990). Although deferential, this standard of review does not require acceptance of a determination by the Commissioner which applies an improper standard, or misapplies the law. See Coffman v. Bowen, 829 F.2d 514, 517 (4th Cir.1987). Following its review, this Court may affirm, modify, or reverse the Commissioner, with or without a remand. See 42 U.S.C. § 405(g) (1998); Melkonyan v. Sullivan, 501 U.S. 89, 111 S.Ct. 2157, 115 L.Ed.2d 78 (1991).
I. Factual Background
Claimant is a thirteen-year-old male, born on November 3, 1990. (R. 71). Claimant lives with his mother, one brother and sister. (R. 170). At the time of the ALJ hearing, claimant was enrolled in the fifth grade at Dr. Carter G. Woodson Elementary School, a public school in Baltimore City. (R. 154). Claimant has never worked. (R. 69).
On February 29, 2000, plaintiff filed an initial Children's Disability Report, alleging that her son became disabled due to asthma on January 1, 1995. (R. 61). Plaintiff indicated that claimant required hospitalization at Harbor Hospital for an asthma attack in December 1999. (R. 63). Plaintiff reported that asthma limits her son's ability to walk and run. (R. 61). To control his asthma, claimant takes Albuterol through an inhaler and a nebulizer. (R. 65). Plaintiff further specified that claimant requires his nebulizer treatment four times a day. (R. 62).
In the accompanying Children's Function Report, plaintiff reiterated that claimant's asthma affects his endurance and indicated that claimant has other physical and mental limitations. Plaintiff stated that her son has difficulty completing a full spoken sentence and that it is difficult to understand claimant when he speaks. (R. 73). Also, plaintiff reported that claimant often prints letters backwards and cannot add or subtract numbers over 10. (R. 75). Plaintiff noted that her son's tendency to fight with his peers prevents him from making new friends. (R. 77). While he is able to take care of most of his personal needs, plaintiff stated that claimant is unable to comb his hair. (R. 78). Lastly, plaintiff noted that claimant has poor concentration and will only complete his homework and chores under constant supervision. (R. 79).
Plaintiff completed a Daily Activities Questionnaire on March 16, 2000. (R. 83-85). Plaintiff reported that her son's asthma affects his ability to breathe early in the morning and throughout the night. (R. 83). As a result, claimant often requires his nebulizer treatment in the mornings before school. (R. 83). While claimant enjoys engaging in certain physical activities, such as football and basketball, he experiences a shortness of breath during these activities and, therefore, cannot participate regularly in gym class at school. (R. 85, 83). In addition, plaintiff noted that claimant believes that the other kids in his class are smarter than he is, because he has difficulty spelling and reading in school. (R. 83-84). Plaintiff reported that her son frequently starts fights while playing with his older brother and his neighborhood friends. (R. 84-85). Despite this aggression, plaintiff stated that her son behaves well around her and his school teachers. (R. 84).
On July 5, 2000, claimant visited Dr. Barry Reiner, M.D., a doctor at Harbor Hospital, for a consultative examination. (R. 107). Dr. Reiner noted that claimant was diagnosed with asthma at the age of two. (R. 107). Dr. Reiner also noted that claimant had been hospitalized for his *873 asthma on two prior occasions, but the most recent hospitalization occurred two years prior to his examination. (R. 107). Dr. Reiner acknowledged that claimant is medicated with Albuterol to control his asthma, as well as daily doses of Singulair and Flovent for his allergies. (R. 107). While claimant will require ongoing medical treatment and access to medications, Dr. Reiner concluded that claimant's asthma was "generally well controlled" on his current regimen. (R. 108). Moreover, Dr. Reiner determined that claimant is able to participate fully in activities of daily living. (R. 108).
Dr. Reiner also addressed claimant's functional and behavioral limitations. Based on plaintiff's complaint that claimant was performing poorly in school, Dr. Reiner speculated that claimant "seems to have [a] learning disability and perhaps attention-deficit disorder." (R. 108). However, Dr. Reiner added that claimant would require a full neurodevelopmental assessment to determine his cognitive and communicative abilities. (R. 108).
On July 31, 2000, a non-consultative physician from the Disability Determination Services ("DDS") completed a Childhood Disability Evaluation Form to determine the extent of claimant's impairment. (R. 109-111). The physician confirmed Dr. Reiner's conclusion that claimant's asthma is well-controlled with his medication. Accordingly, the physician concluded that claimant's impairment is not severe. (R. 111).
On August 23, 2000, plaintiff submitted a Reconsideration Disability Report to address a change in her son's condition. (R. 94). In this report, plaintiff stated that her son increasingly complained of chest pains and that he could not walk as far as he used to without experiencing shortness of breath. (R. 94, 96). Plaintiff further stated that claimant's nebulizer treatment no longer prevents claimant's chest pains and breathing difficulty. (R. 94). In addition, plaintiff indicated that claimant has a history of lead poisoning and currently has a learning disability.[2] (R. 94).
Plaintiff completed a second Daily Activities Questionnaire on September 20, 2000. (R. 86-88). This questionnaire echoed many of plaintiff's observations from the March 16, 2000 questionnaire. Plaintiff emphasized that her son experiences shortness of breath from walking one block and tires when he walks up the stairs in his home. (R. 86). According to plaintiff, claimant frequently complains of chest pains and now requires his nebulizer treatment every four or six hours. (R. 88, 90). While claimant is still able to play outside with his friends, plaintiff reported that claimant's asthma limits his participation in outdoor activities to one or two times per week. (R. 86).
On October 10, 2000, a second non-consultative physician from DDS completed a Childhood Disability Evaluation Form to address plaintiff's Reconsideration Disability Report. (R. 133-35). The physician noted that claimant's lungs were clear and that claimant's asthma is well-controlled with his medication. (R. 135). Accordingly, the physician concluded that claimant's asthma is not severe. (R. 135).
Based on Dr. Reiner's suggestion that claimant undergo a full neurodevelopmental assessment, plaintiff sought treatment with Orlando Davis, M.D., a psychiatrist with Urban Behavioral Associates, on August 17, 2000. Plaintiff's presenting complaint was that claimant is unable to stay focused on his school activities and exhibited poor concentration. (R. 166). In his *874 initial evaluation, Dr. Davis reported that claimant does not have any ongoing behavioral problems and maintains good relationships with his family, classmates and playmates. (R. 170). Moreover, Dr. Davis observed that claimant seems well-developed and well-nourished, behaves appropriately and cooperatively, and operates with a coherent and goal-directed thought process. (R. 171-72). Dr. Davis estimated that claimant's intellectual functioning is average. (R. 173). Based on plaintiff's complaint and his own observations, Dr. Davis concluded that claimant suffers from ADHD. (R. 174). In his clinical assessment, Dr. Davis reported claimant's ADHD as "severe" and evaluated his Global Assessment of Functioning ("GAF") score at 53.[3] (R. 174)
On September 16, 2000, Dr. Davis completed an Areas of Development and Functioning evaluation form for the claimant. (R. 139-143). The form indicated that claimant had "severe limitations"[4] in three areas: the ability to comprehend and produce language, to learn, understand, and solve problems through intuition and acquired knowledge, and to maintain concentration and pace in the completion of tasks. (R. 140, 142). Dr. Davis reported that claimant had "marked limitations"[5] in several areas: the ability to retain and recall information, to request help and meet personal needs, to express feelings and ideas, to use gross and fine motor skills, to form relationships, to interact and respond appropriately to authority, to take care of one's self, to adhere to medication regimens and to follow safety precautions. (R. 140-42). According to the report, claimant did not have a limitation in his ability to respond appropriately to stimuli. (R. 143). In addition, claimant's "functional age" was nine years old with regard to his ability to maintain personal hygiene, proper nutrition, sleep and health habits.[6] (R. 142).
Dr. Davis submitted progress notes for three sessions with the claimant. (R. 144-45). On January 16, 2001, Dr. Davis noted that the plaintiff complained that her son was starting fights with his twelve-year old brother. (R. 145). In addition, Dr. Davis reported that claimant would not complete his homework independently, but was still doing well in school. Dr. Davis indicated that, as of this session, claimant had taken Dexadrine to control his ADHD for one and a half months. (R. 145).
The March 2, 2001 progress notes indicated that plaintiff complained that the claimant was not taking his medication. (R. 144). In addition, plaintiff complained that her son was doing "mean things" to the dog, including poking the dog with a knife and shocking the dog with electricity. *875 (R. 144). At this time, claimant was still taking Dexadrine for his ADHD. (R. 144).
On March 23, Dr. Davis reported that claimant did not experience any side effects from the Dexadrine. (R. 144). Dr. Davis observed that his play was energetic. (R. 144). In addition, Dr. Davis noted that claimant was "doing well in school." (R. 144).
On April 6, 2001, Dr. Davis completed a Childhood Disability Evaluation Form. (R. 136). In this form, Dr. Davis indicated that claimant had no "extreme limitations" and had "marked limitations" in two domains: attending to and completing tasks, and interacting and relating with others.[7] (R. 136). The form further stated that claimant had no limitation or "less than marked" limitation in the four remaining domains. (R. 136-37).
On May 15, 2001, plaintiff testified at the ALJ hearing.[8] Plaintiff reported that claimant is still unable to participate in physical activities, such as football, basketball, and gym class, and that he often has to rest after playing outside for an hour. (R. 156). In addition, plaintiff stated that her son experiences asthma attacks every two or three months and is medicated with Provental to prevent these attacks. (R. 152, 158). Moreover, claimant requires his nebulizer treatment once a month. (R. 158).
Plaintiff's testimony at the hearing focused primarily on claimant's ADHD. Plaintiff stated that her son has difficulty following directions and attending to tasks, such as cleaning his room and finishing his homework. (R. 151-52). As a result, claimant's ADHD frustrates his ability to understand and independently complete his school assignments. At the time of the hearing, claimant was in the fifth grade and has never attended special education classes.[9] (R. 153). However, plaintiff stated that she did not believe that her son would pass the fifth grade, because the claimant had failing grades in his math and reading courses. (R. 154).
Plaintiff also indicated that her son continued to exhibit behavioral problems at home. (R. 152). Plaintiff reported that her son has a propensity to start fights with his siblings and other children in the neighborhood out of frustration when things he do not go his way. (R. 155-56, 160-61). However, claimant has never seriously hurt any of his friends. (R. 155-56). Despite the reported behavioral problems at home, claimant has not encountered similar behavioral difficulties at school; claimant has been suspended from school for fighting only once, two years prior to the hearing. (R. 154). Aside from this isolated incident, claimant's teachers have never approached plaintiff about his behavior at school. (R. 154).
II. Analysis
Plaintiff argues in her Motion for Summary Judgment that the ALJ erred at Step Two of the inquiry, and that the ALJ's determination that claimant is not disabled is not supported by substantial evidence. (Paper No. 23 at 4). Specifically, plaintiff makes three arguments on appeal. First, plaintiff argues that the ALJ accorded improper weight to Dr. Davis' *876 medical opinions. (Paper No. 23 at 9). Second, she asserts that the administrative record was deficient at the time of the ALJ's decision, because the ALJ did not consider all available medical reports from Dr. Davis and the ALJ should have ordered a consultative examination for claimant's ADHD. (Paper No. 23 at 8-9). Third, plaintiff argues that the ALJ erred by finding that the claimant did not demonstrate a disability for a period of twelve months, because the record demonstrates that claimant began treatment on August 17, 2000, over one year before the ALJ's decision on August 31, 2001. (Paper No. 23 at 7).
The defense counters that there was substantial evidence in the record to support the ALJ's determination that claimant was not disabled. (Paper No. 41 at 17). The defense also contends that the ALJ properly accorded little weight to Dr. Davis' opinions, because his opinions merely formalized the subjective complaints of the plaintiff. (Paper No. 41 at 25).
Upon review of the record, this Court finds that it cannot perform a meaningful review of the record without an understanding of the weight attributed to the additional evidence submitted by the plaintiff after the ALJ issued her decision. Accordingly, the undersigned does not address the issues raised by the parties.
Although not addressed by either party in their memoranda, this Court necessarily raises the issue sua sponte. A reviewing court cannot properly discharge its judicial review function without an evaluation and explanation of all material evidence. Therefore, this Court finds that it cannot determine whether the ALJ's decision to deny benefits to claimant is supported by substantial evidence without an adequate explanation of the Appeals Council's evaluation of the new evidence.
The Appeals Council must consider evidence submitted with a request for review in deciding whether to grant review "if the additional evidence is (a) new, (b) material, and (c) relates to the period on or before the date of the ALJ's decision." Wilkins v. Secretary, Dep't of Health & Human Servs., 953 F.2d 93, 95-96 (4th Cir.1991) (en banc) (quoting Williams v. Sullivan, 905 F.2d 214, 216 (8th Cir.1990)); see also 20 C.F.R. §§ 404.970(b), 416.1470(b).[10] Although, in making their decision about whether to grant review, the Appeals Council must consider additional evidence that is new and material, the Appeals Council need not grant review unless "it finds that the administrative law judge's action, findings, or conclusion is contrary to the weight of the evidence currently of record." 20 C.F.R. §§ 404.970(b), 416.1470(b).
If after making such a determination, the Appeals Council denies review, the ALJ's decision becomes the Commissioner's final decision. Wilkins, 953 F.2d at 96; Casey v. Secretary of Health & Human Servs., 987 F.2d 1230, 1233 (6th Cir.1993); Russell v. Bowen, 856 F.2d 81, 83-84 (9th Cir.1988); O'Dell v. Shalala, 44 F.3d 855, 858 (10th Cir.1994); see also 42 U.S.C. § 405(g); 20 C.F.R. §§ 404.955, 416.1555. Thus, if the Appeals Council has declined to grant review, this Court only reviews the ALJ's decision, as it is the final decision of the Commissioner. Wilkins, 953 F.2d at 96; accord Eads v. Secretary of Health & Human Servs., 983 F.2d 815, 816 (7th Cir.1993)(J. Posner)(giving an informative explanation of the rationale for *877 lack of review of Appeal's Council's decision).
At the ALJ hearing, plaintiff's attorney stated, and the ALJ agreed, that the record did not contain all available medical reports from Dr. Davis. (R. 162). On August 21, 2001, plaintiff submitted Dr. Davis' records from August 17, 2000 and September 16, 2000. (R. 165). Although plaintiff submitted these additional documents to the ALJ prior to her decision on August 31, 2001, the ALJ did not incorporate them into the record, and therefore did not consider the additional medical reports.[11]
On June 28, 2002, the Appeals Council issued an order stating that it had received evidence "in addition to that which was before the Administrative Law Judge" and that it incorporated that additional evidence into the administrative record. (R. 7). By incorporating this evidence into the record and considering it upon request for review, the Appeals Council determined that this evidence was both new and material, and related to the period on or before the date of the ALJ's decision. See 20 C.F.R. §§ 404.970(b), 416.1470(b). On June 28, 2002, the Appeals Council declined plaintiff's request for review. (R. 5). In its decision, the Appeals Council concisely stated, without further explanation, that it had considered the entire record, including the post-hearing evidence, and did not find cause to disturb the ALJ's decision.[12] (R. 5).
The Appeals Council's denial of review without further explanation of the additional evidence creates a dilemma for the reviewing court. Under the regulations, this Court does not have the jurisdiction to review the actions of the Appeals Council, because the denial of review made the ALJ's decision final. 20 C.F.R. § 404.981; Wilkins, 953 F.2d at 96. Therefore, this Court may review only the ALJ's decision to deny plaintiff's request for benefits. However, that review must include the new and material evidence that the Appeals Council incorporated into the administrative record. Wilkins, 953 F.2d at 96. Thus, this Court faces the task of reviewing a record that contains evidence not seen, and therefore not evaluated, by the ALJ.
There is a difference of opinion among courts as to whether or not the Appeals Council must articulate its assessment of new evidence. Some courts find that the Appeals Council is not obligated to discuss its treatment of additional evidence submitted after the ALJ issues its decision. Browning v. Sullivan, 958 F.2d 817, 822 (8th Cir.1992); Damato v. Sullivan, 945 F.2d 982, 988 (7th Cir.1991). These courts assert that the language of the regulations does not require the Appeals Council to articulate its consideration of new evidence. Browning, 958 F.2d at 822. Moreover, these courts emphasize that when the Appeals Council denies review, the regulations allow the reviewing to court review only the actions of the ALJ. Id. at *878 822-23 (finding that "[j]urisdiction to review whether the Appeals Council has complied with the procedural requirements of the regulations does not imply jurisdiction to review the Appeals Council's non-final, substantive decision to deny review"). Contrarily, a number of courts have recently found that an explanation from the Appeals Council is necessary for a reviewing court to properly perform its statutory function. Hawker v. Barnhart, 235 F.Supp.2d 445, 452 (D.Md.2002); Harmon v. Apfel, 103 F.Supp.2d 869, 873 (D.S.C.2000); Riley v. Apfel, 88 F.Supp.2d 572, 579 (W.D.Va.2000). These courts assert that a reviewing court cannot properly review an administrative record without an understanding of the weight assigned to all evidence. Hawker, 235 F.Supp.2d at 449. While there is no published Fourth Circuit authority on this issue,[13] this Court finds that the more appropriate course for a reviewing court is to remand the case to the Commissioner for an articulation of its assessment of the new evidence.
In the instant case, the plaintiff submitted additional medical reports from Dr. Davis dating August 17, 2000 and September 16, 2000. Some of the additional evidence is duplicative of evidence already contained in the record, such as plaintiff's subjective complaints regarding her son's limitations. (R. 168-70). However, the additional evidence also consists of Dr. Davis' observations from his examination of the claimant. (R. 171-73). After this examination, Dr. Davis concluded in the additional evidence that claimant suffered from ADHD. (R. 174). Moreover, Dr. Davis characterized claimant's disability as "severe" and assigned him a GAF score of 53. (R. 174). Therefore, this new evidence is potentially contradictory to the ALJ's conclusion that claimant's impairments are not severe.
To affirm the decision of the ALJ without an explanation from the Appeals Council, this Court would have to determine that this new evidence supports the conclusion that there is substantial evidence to uphold the ALJ's denial of benefits. Browning, 958 F.2d at 822-23. Since there is no discussion of this evidence, or weight attributed to it by the Appeals Council, this Court would be in the position of weighing and evaluating the additional medical reports. However, that is not the function of this Court. The Fourth Circuit has consistently held that a reviewing court is not permitted to weigh evidence; that function is within the province of the Commissioner. See Hays, 907 F.2d at 1456; Stawls v. Califano, 596 F.2d 1209, 1213 (4th Cir.1979); Blalock v. Richardson, 483 F.2d 773, 775 (4th Cir.1972). Thus, this Court should not review evidence without an understanding of how the ALJ or the Appeals Council weighed and evaluated that evidence.
This Court instead agrees with those courts that find that a reviewing court cannot properly engage in a meaningful review of the record without some indication of the weight assigned to new evidence. By incorporating the new evidence into the record, the Appeals Council made the determination that Dr. Davis' medical reports were both new and material. However, the Commissioner is required to explain the weight and effect of material evidence when benefits are denied. *879 42 U.S.C. § 405(b)(1); DeLoatche v. Heckler, 715 F.2d 148, 150 (4th Cir.1983); Stawls, 596 F.2d at 1213. This principle applies even where new evidence appears before the Appeals Council for the first time. Hawker, 235 F.Supp.2d at 447; see also Riley, 88 F.Supp.2d. at 579-80 (noting that "[w]hen this Court is left in the dark as to how the Appeals Council treated the new evidence, a meaningful review is impossible"); Harmon, 103 F.Supp.2d at 874 (finding that a reviewing court "is not a soothsayer and cannot base its conclusion on surmise and conjecture as to the reasons the Commissioner disregarded new, additional evidence"). The Appeals Council stated that it considered the additional reports from Dr. Davis, but did not explain its assessment of this new evidence. (R. 5). Without a proper understanding of the weight attributed to this evidence by the Appeals Council, this Court cannot properly perform its statutory function of determining whether the ALJ's decision is supported by substantial evidence. Hawker, 235 F.Supp.2d at 452; Harmon, 103 F.Supp.2d at 874.
As explained above, the absence of weight assigned to the new evidence is troublesome. Because the Appeals Council chose to incorporate Dr. Davis' additional reports into the administrative record, this Court is obliged to review the entire record, including the additional evidence. Wilkins, 953 F.2d at 96. However, for this Court to engage in a meaningful review, this Court must understand the weight attributed to all material evidence. DeLoatche, 715 F.2d at 150 (holding that "[j]udicial review of an administrative decision is impossible without an adequate explanation of that decision by the administrator"). Accordingly, the undersigned remands this case for the Commissioner to articulate her assessment of the additional evidence.
III. Conclusion
For the foregoing reasons, this Court REMANDS this case to the Commissioner for proceedings consistent with this Memorandum Opinion. Accordingly, the Court Orders that defendant's Motion for Summary Judgment be DENIED.
NOTES
[1] According to 42 U.S.C. § 1382(a)(3)(c), a child under eighteen is considered "disabled" if he has:
"[A] medically determinable physical or mental impairment or combination of impairments that causes marked or severe functional limitations, and that can be expected to cause death or that has lasted or can be expected to last for a continuous period of not less than 12 months."
In making this determination, 20 C.F.R. § 416.924(b)-(d) provides that the ALJ must engage in a three step sequential analysis determining: (1) whether the child is engaged in substantial gainful activity; (2) whether the child suffers impairments or a combination of impairments that is severe; (3) whether the child's impairments meet, medically equal or are functionally equivalent in severity to any of the listed impairments delineated in 20 C.F.R. Prt. 404 Subpt. P, App. 1.
[2] At the age of two, Shirlene Williams, M.D., a pediatrician at Cherry Hill Medical Center, also reported that claimant had a history of lead toxicity, with the highest lead level measured at 16.6 Mcg/dl on November 30, 1992. (R. 106).
[3] The GAF score is for reporting the clinician's judgment of the individual's level of functioning. The GAF score is useful in planning treatment and measuring its impact, and in predicting outcome. Diagnostic and Statistical Manual of Mental Disorders 32 (4th ed. 2000) ("DSM-IV").
A GAF score of 51-60 indicates moderate symptoms (e.g., flat affect and circumstantial speech, occasional panic attacks) or moderate difficulty in social, occupational or social functioning (e.g. few friends, conflicts with peers or co-workers). Diagnostic and Statistical Manual of Mental Disorders 34 (4th ed. 2000) ("DSM-IV").
[4] "Extreme limitation" is defined as "functioning as one-half chronological age or less" or "no meaningful functioning in a given area." (R. 139).
[5] "Marked Limitation" is defined as a limitation that is "more than moderate and `less than extreme.'" (R. 139).
[6] "Functional Age" is defined as "the age at which the child is functioning in a given area, as opposed to the child's chronological age." (R. 139). Claimant was nine years old at the time of the examination.
[7] The form defines "marked limitation" as when an impairment "interferes seriously with the child's ability to independently initiate, sustain, or complete domain-related activities." (R. 138).
[8] Claimant did not appear to testify at the ALJ hearing, because his asthma was "acting up." (R. 151). Instead, plaintiff testified on behalf of her son. (R. 148).
[9] Claimant's school records indicate that claimant passed all of his fourth grade courses except for composition and spelling. (R. 93). Claimant satisfactorily completed these courses in summer school. (R. 92).
[10] Unlike a plaintiff seeking remand on the basis of new evidence under 42 U.S.C. 405(g), a claimant requesting review by the Appeals Council must not establish good cause for failing to present the evidence earlier. Wilkins, 953 F.2d at 96, n. 3.
[11] Although plaintiff's letter has a time-stamp indicating that it was received on August 21, 2001, the ALJ did not acknowledge the receipt of this letter or the accompanying medical reports in her opinion. To the contrary, the ALJ stated that she reviewed and considered medical reports dating from September 16, 2000 to April 6, 2001. (R. 24). Thus, it appears that this information was never before the ALJ and only considered by the Appeals Council.
[12] The Appeals Council stated that the "Appeals Council has also considered the contentions raised in your representative's letter ... as well as the additional evidence identified on the attached Order of the Appeals Council, but concluded that neither the contentions nor the additional evidence provides a basis for changing the ALJ's decision." (R. 5).
[13] There are two conflicting unpublished Fourth Circuit opinions on this issue. In Hollar v. Commissioner of Soc. Sec., 1999 WL 753999 (4th Cir.1999), the court rejected a claim that the appeals council must explain its treatment of additional evidence, because the regulation addressing additional evidence does not direct the Appeals Council to do so. See 20 C.F.R. § 404.970(b). However, in Thomas v. Commissioner of Soc. Sec., 24 Fed.Appx. 158, 2001 WL 1602103 (4th Cir.2001), the Fourth Circuit found that the Appeals Council must indicate the reasons for discounting additional evidence.
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332 F.Supp.2d 1356 (2004)
Susan E. MORLAN, Plaintiff,
v.
QWEST DEX, INC., a Colorado corporation, Defendant.
Civil No. 03-1406-MO.
United States District Court, D. Oregon.
August 25, 2004.
*1357 Richard C. Busse, Busse & Hunt, Portland, OR, for Plaintiff.
Christopher L. Garrett, Perkins Coie, LLP, David P.R. Symes, Perkins Coie, LLP, Portland, OR, for Defendant.
ORDER and OPINION
MOSMAN, District Judge.
In this diversity action, the issue is whether statements by company officials about plaintiff, a former employee of the company, supports a claim for defamation. Because the company's defense of privilege carries the day, the court grants summary judgment in the company's favor. (Doc. # 17).
I. BACKGROUND
The facts, construed in favor of the nonmovant plaintiff, are as follows. Defendant Qwest Dex, Inc. ("Dex") employed plaintiff Susan Morlan as a Portland-based *1358 director of advertising sales and general manager for Dex's "yellow pages" phone directories. Plaintiff managed the sales organization responsible for selling advertisements to customers located in Oregon and southwest Washington.
In November 2002, Dex CEO George Burnett received an anonymous phone call, purportedly from a former employee, complaining about plaintiff's management of the Portland sales organization. The caller specifically mentioned plaintiff's refusal to allow employees to remove advertisements from the Portland-area directory. The caller also complained about plaintiff's management style and alleged drinking problem. The caller further told Burnett that Dex would begin losing sales personnel unless he fired plaintiff. In response, Burnett ordered a formal investigation of plaintiff's management of the sales team.
Jill Groves, a member of Dex's security department, conducted the investigation. Groves had no personal knowledge or experience with Dex's credit policies and procedures. Therefore, she sought guidance from Jim Dodson, manager of Dex's credit management organization ("CMO"). CMO's function is to review credit applications to ensure the sales team sells advertising only to creditworthy customers and that the directory includes no "bad debt" advertisements (i.e., advertisements for customers delinquent on their bills). Generally, when an account is delinquent, CMO sends a "notifier" informing the responsible sales team about the account.
Based on information provided by Dodson, Groves discovered about $1.5 million worth of bad-debt advertisements published in the 2002 Portland-area directory. The total number of delinquent accounts was 245, which included 141 accounts worth $500,000 that had been referred to collection agencies.
From July 23 to July 26, 2002, in anticipation of the 2002 directory to be published in September, CMO sent a "blitz" of about 500 email notifiers reminding Portland sales representatives about various bad-debt accounts and instructing them either to make proper payment arrangements or remove the accounts from the upcoming directory. CMO did another "blitz" in September, days before the new directory was to be sent to the printer.
Dodson testified at his deposition he commonly used blitzes of notifiers as a way to inform sales personnel about problematic accounts, although Portland-area sales personnel found the July blitz unusual for the volume of notifiers involved. Dodson further testified he expected sales personnel to remove advertisements upon receipt of the notifiers. But he could not cite any policy supporting that expectation.
At some point before publication of the 2002 directory, Dodson or his boss, Tony Basile, expressed frustration to Gary Gibson, Dex's director of sales operations, about a specific account handled by plaintiff's sales team. The account at issue was a $10,000 per month account for a company called "Action Locksmith." Dex argues Action Locksmith's credit application was certain to fail but plaintiff nevertheless told her sales team to keep the company's advertisements in the directory. Art Townsend, the Action Locksmith account manager, testified that plaintiff instructed him to ignore calls from CMO regarding the account. Plaintiff herself also ignored repeated calls and emails regarding that account. Eventually, Gibson himself had to remove the Action Locksmith advertisement days before the directory was to go to the printer.
Groves's report described this incident involving Action Locksmith. The report also recounted other incidents employees had described to Groves. For example, a sales manager told Groves that plaintiff instructed the manager to leave a Vancouver, *1359 Washington customer's advertisements in the 2002 directory even though plaintiff knew CMO had denied a credit application submitted by the customer. Another sales manager asked plaintiff about removing advertisements for a customer who owed overdue payments; plaintiff told the manager not to remove the advertisements because the customer planned to sell his boat to pay the overdue balance. Other Dex employees testified regarding plaintiff's decisions to keep advertisements in the directory for delinquent customers. See, e.g., Depo. of O'Connor at 16 (testifying plaintiff told personnel not to remove bad-debt advertisements); Depo. of Mitchell at 9 (testifying plaintiff instructed managers to "leave the advertising in," despite CMO notifiers, because otherwise there was not "a lot of negotiating power with CMO"). Based on the employee interviews, Groves discovered that plaintiff's sales team felt "between a rock and a hard place" in that CMO told the team one thing, while plaintiff's "wrath" awaited team members who listened to CMO.
David Quinn, a Dex sales-staff manager, testified that plaintiff's approach to bad-debt advertisements reflected her desire to circumvent Dex's credit policy. Pursuant to that company policy, for new advertisers whose accounts would exceed a certain dollar amount, CMO had to approve their credit applications before their advertisements were placed in a directory. In contrast to that policy, Quinn testified plaintiff wanted sales personnel to put the advertisements in the directory first so CMO would be less likely to take action.
Pursuant to the practice followed by sales personnel, as described by plaintiff, upon receipt of a CMO notifier, the account's sales representative would first attempt to collect the outstanding account. Then, if that failed, the account's sales manager would attempt collection. If the sales manager was unsuccessful, sales personnel would hire independent-contractor collection agencies to pursue the account. Finally, if those efforts failed, the responsible sales representative generally was expected to pull the delinquent customer's advertisements from the directory. Consistent with this sales-department policy, plaintiff told sales personnel they should not remove advertisements unless all collection efforts first had been exhausted.
The record shows there generally was an ongoing conflict between CMO and sales personnel including plaintiff. As one witness put it, CMO and sales were "rowing the boat in different directions." Dodson, for instance, testified that the Portland sales department's practice of hiring independent contractors to collect bad debts had "been kind of a thorn in [his] side for some time." According to Dodson: "the problem with the contractors [is] they often confuse the issue; they would interfere with payment arrangements or demands that [his CMO] team had already had in place." Thus, Dodson agreed, CMO personnel sometimes felt that the independent contractors effectively "undercut" CMO's authority.
Dodson told his boss at CMO, Mr. Basile, he believed plaintiff failed to remove bad-debt advertisements in order to inflate her sales team's revenue. Dodson and Basile both told another Dex manager, Gary Gibson, that they believed plaintiff had artificially inflated her sales team's revenue by about $1.3 million. Gibson, in turn, conveyed this information to plaintiff's supervisor, Ms. Shaw. The allegation plaintiff was improperly inflating revenue found its way into Groves's report.
Ms. Groves interviewed plaintiff just once, on November 18, 2002. Groves asked plaintiff about fifty-eight specific delinquent accounts, but would not allow plaintiff to take the list of the accounts at *1360 issue so plaintiff could formulate a response. Groves testified she could not articulate a reason for why she did not allow plaintiff to take the list.
Eventually, Shaw held a conference call with Groves and a Dex attorney to discuss the bad debts. At the conclusion of the call, Shaw decided to terminate plaintiff's employment in light of her violation of CMO policy and Dex's Code of Conduct provision requiring employees to maintain accurate books and records. In a December 10, 2002, meeting, Shaw informed plaintiff of the decision to terminate her.
A short time later, plaintiff filed an administrative complaint with the United States Department of Labor, alleging she had been terminated because of her association with colleagues who allegedly were "whistleblowers" within the scope of the Sarbanes-Oxley Act (an issue not before this court). In defending Dex's termination of plaintiff, a company attorney, David Elchoness, explained to the department the company fired plaintiff because of her decisions regarding bad-debt advertisements. The Department dismissed plaintiff's complaint.
Plaintiff filed this lawsuit on September 8, 2003, alleging state law claims for defamation, wrongful termination, and retaliation. Plaintiff concedes summary judgment is appropriate as to her wrongful-termination and retaliation claims. The court, therefore, grants summary judgment as to those two claims. The only remaining dispute is whether summary judgment should be granted as to plaintiff's defamation claim.
II. DISCUSSION
In support of her defamation claim, plaintiff's briefing relies on statements which, she alleges, defamed her by suggesting she allowed "bad debt" advertisements to remain in the directories in an improper effort to inflate her sales team's revenue. Because meaningfully assessing a defamation claim calls for a statement-specific inquiry, it is important, as a threshold matter, to determine precisely what statements plaintiff alleges defamed her. While plaintiff does not clearly set forth the statements upon which she relies, her briefing mentions the following statements and inferences:
. Dodson told his boss at CMO, Mr. Basile, he believed plaintiff had intentionally failed to remove bad-debt advertisements to inflate her revenue.
. Both Basile and Dodson told Gibson (Dex's sales-staff director) that plaintiff had inflated her revenue by $1.3 million.
. Basile told Gibson and Ms. Shaw (plaintiff's boss) that he believed plaintiff had intentionally failed to remove bad-debt advertisements.
. Although plaintiff does not identify specifically the content of any statements made by Gibson, plaintiff's arguments imply Gibson made statements conveying the same message as that conveyed by Basile and Dodson.
. Groves, in her written report, stated the following: "Allegedly, Ms. Morlan allowed 162 bad-debt customers to remain in the Portland directory in order to inflate her sales results by $1.3 million." This statement was derived from statements by Groves's boss, Susan Demmin.
. In a November 20, 2002, draft of her report, Groves stated plaintiff might have violated Dex's code of business ethics by "[i]nflating revenue by allowing bad debt accounts to remain in the 2002 Portland book."
. Plaintiff also argues that Shaw's notes support the inference Groves made additional statements during a meeting with Shaw; while plaintiff does not identify any specific statements, she *1361 suggests the statements also charged plaintiff with improperly failing to remove bad-debt advertisements.
. In response to the Department of Labor's investigation of plaintiff's complaint, Dex attorney David Elchoness wrote a letter stating: "[T]here are numerous examples of employees who, like Ms. Morlan, were terminated from their employment based on their enhancement of data and falsification of Company documents."
For the reasons discussed below, the court concludes no statement specifically identified or presumed by plaintiff to have been made supports a defamation claim in this case.
To establish a claim for defamation, a plaintiff generally must show harm resulting from defendant's publication to a third party of a defamatory, false statement of and concerning the plaintiff. Wallulis v. Dymowski, 323 Or. 337, 342-43, 918 P.2d 755 (1996); Restatement (Second) of Torts § 558. Even if a plaintiff can satisfy the basic elements of a defamation claim, however, a statement nevertheless is not actionable if it was privileged. In certain narrowly defined cases, statements are absolutely privileged, including when they were made in the course of "quasi-judicial" administrative proceedings. See, e.g., Tillamook Country Smoker, Inc. v. Woods, 732 F.Supp. 1091, 1093-94 (D.Or.1990); Moore v. West Lawn Mem'l Park, Inc., 266 Or. 244, 250-51, 512 P.2d 1344 (1973). More often, a defendant will argue that otherwise actionable statements qualify for a conditional (or, stated differently, qualified) privilege. A statement qualifies for a conditional privilege if:
(1) it was made to protect the interests of defendants; (2) it was made to protect the interests of plaintiff's employer; or (3) it was on a subject of mutual concern to defendants and the person to whom the statement was made.
Wattenburg v. United Med. Labs., Inc., 269 Or. 377, 380, 525 P.2d 113 (1974). Under Oregon law, even when statements otherwise are conditionally privileged, plaintiffs can pierce the privilege by showing the privilege was abused. Wallulis, 323 Or. at 348, 918 P.2d 755. Abuse exists if the speaker "either lacked objectively reasonable grounds for the statement or did not, in fact, believe the statement to be true." Muresan v. Philadelphia Romanian Pentecostal Church, 154 Or.App. 465, 472, 962 P.2d 711 (1998). A conditional privilege also "may be forfeited by abuse if the defendant's primary purpose in making the defamatory statement was improper and unrelated to the purpose of the privilege." Wheeler v. Green, 286 Or. 99, 104, 593 P.2d 777 (Or.1979); see also Schafroth v. Baker, 276 Or. 39, 47, 553 P.2d 1046 (1976). On this record, the court concludes defendant Dex is entitled to summary judgment for the following reasons.
A. Absolute Privilege
As an initial matter, to the extent plaintiff's claim is based on statements made before the Department of Labor by David Elchoness (Dex's attorney), summary judgment is granted on absolute-privilege grounds. Plaintiff, in fact, does not deny the application of an absolute privilege to that correspondence. Accordingly, Dex's attorney's statement (suggesting Dex fired plaintiff for "enhancement of data" and "falsification of documents") does not support plaintiff's claim. Elchoness made the statement in a letter submitted to the Department of Labor as part of Dex's defense against plaintiff's administrative complaint. See Tillamook Country Smoker, 732 F.Supp. at 1094 ("The absolute privilege ... applies to administrative agencies in a `quasi-judicial' capacity.").
*1362 B. Conditional Privilege
The remaining statements identified in plaintiff's briefing are protected under a conditional-privilege analysis. Again, construing the record in plaintiff's favor, the gist of those statements was that plaintiff would not permit the removal of bad-debt advertisements in an effort to inflate her sales team's revenue. Plaintiff concedes Dex makes the threshold showing for a conditional privilege, given that the statements, taken at face value, were made to protect the interests of Dex, the employer. Plaintiff, however, argues that Dex lost the privilege by abusing it. Specifically, plaintiff argues the speakers lacked a reasonable basis for believing the statements at issue were true. Plaintiff additionally argues there are material issues of fact about whether Dex published the statements for a purpose unrelated to the purpose of the privilege.
In deciding whether Dex abused its conditional privilege, the court considers separately the various alleged speakers.
1. Groves
As an initial point, the only statements by Groves specifically identified by plaintiff are fairly read as "allegations." In her final report, Groves stated plaintiff "[a]llegedly" had allowed bad-debt advertisements to remain in the directory to inflate her revenue. Similarly, in a November draft of her report, Groves charged plaintiff with "inflating revenue"; as plaintiff conceded at oral argument, that charge, read in context, is framed as an allegation.
Under Oregon law, there can be no abuse of a conditional privilege when the speaker "republishes a defamatory statement ... under circumstances that make it clear that it is an allegation, not a fact, that is being repeated." Vanderselt v. Pope, 155 Or.App. 334, 345, 963 P.2d 130 (1998). "If merely repeating an accusation that has been made in the context of determining what should be done about it constituted defamation, then employers would be severely crippled in their abilities to verify rumors and accusations by employees about management, or about employees by management, for that matter." Id. at 346, 963 P.2d 130. Pursuant to this analysis, Groves did not abuse the conditional privilege by making the two statements specifically identified by plaintiff.[1]
In any event, even assuming Groves made other statements which are not fairly characterized as "allegations," plaintiff has failed to show evidence sufficient to defeat defendant's qualified-privilege defense. Plaintiff uses most of her briefing on the abuse issue to challenge the adequacy of Groves's investigation. Although plaintiff's briefing is not entirely clear, it appears she is arguing that whether Groves's report was adequate is relevant to analyzing all the challenged statements made by the different Dex officials. The court fails to see how any errors made by Groves is material to whether other employees had a reasonable basis for the statements they made. Attacking Groves's investigation and report would seem to bear only on whether Groves had a reasonable basis for her statements. In any event, however the issue is approached, plaintiff has not shown that Groves's investigation produces a material issue of fact on the issue of abuse.
*1363 Plaintiff first argues that Dex's assigning the investigation to Groves, who lacked personal experience and familiarity with Dex's credit policies, shows a lack of reasonable basis for the alleged statements. The record, however, shows Groves diligently pursued the investigation, interviewing several Dex employees, a number of whom told Groves about plaintiff's reluctance to allow the removal of bad-debt advertisements. Thus, even assuming (as plaintiff alleges) Groves did not attempt to verify Dodson's claims about plaintiff, Groves spoke with other employees who corroborated Dodson's allegations that plaintiff kept bad-debt advertisements in directories. Plaintiff cites no evidence showing that Groves had reason to believe she could not trust the information she received from the various sales and CMO employees.
Plaintiff also argues that most of the bad-debt advertisements were placed in the directories for reasons unrelated to her responsibilities.[2] While plaintiff's analysis of those advertisements may create issues about the truth of the statements at issue, truth is not the issue. She must show there was no reasonable basis for the statements; she has failed to do that. Again, plaintiff does not challenge the testimony of employees that plaintiff in fact did resist CMO's campaign to remove bad-debt advertisements. Ms. Shaw, plaintiff's boss, called the number of bad-debt advertisements in the 2002 directory "extremely high." Thus, even assuming that plaintiff told Groves that she had no responsibility over some of the bad-debt accounts, Groves's interviews with other Dex employees gave her reason to believe plaintiff's treatment of bad-debt accounts was improper. In just about any employer investigation, investigating officials will be faced with competing stories; that an official believes one side over the other does not, without more, show there was no reasonable basis for the official's charges.
Plaintiff also summarily states the "investigation did not meet Defendant's own basic expectations of fairness." Plaintiff's Memorandum at 25. There is nothing cited from the record indicating Groves acted unfairly. As mentioned, she interviewed several employees and sought guidance from those familiar with the company's credit policies.
In addition, the fact Groves in a meeting with plaintiff challenged plaintiff's management style has no bearing on whether there was a reasonable basis for the statements regarding the bad-debt advertisements. Indeed plaintiff does not even question Groves's statement that plaintiff's sales managers were threatened by her management style. Nor does the fact Groves declined to give plaintiff a copy of a list of the questioned accounts give rise to any material issue; that decision may be subject to challenge on other grounds, but it does not cast meaningful light on whether Dex reasonably believed the allegations against plaintiff. At most, plaintiff's attack on Groves's investigation shows that Groves could have made some different decisions about how to conduct her investigation. But, even assuming Groves made some errors, plaintiff's attack does not create any issues material to whether Groves or any other Dex official lacked a reasonable basis for the challenged statements. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d *1364 202 (1986) (explaining that for facts to be "material" under summary judgment standard they must be crucial to case's outcome).
2. Gibson
In her briefing, plaintiff argues Gibson's primary purpose in making statements about plaintiff was unrelated to the purpose of the conditional privilege. See Wheeler, 286 Or. at 104, 593 P.2d 777 (observing conditional privilege is abused if "the defendant's primary purpose" was "improper and unrelated to the purpose of the privilege"). Specifically, plaintiff argues, Gibson did not defame plaintiff out of concern for bad-debt advertisements but "because he was concerned about human resources issues, Defendant losing its sales force, and Plaintiff's alleged alcoholism." Plaintiff's Memorandum at 31. In addition, at oral argument, for the first time, plaintiff suggested Gibson lacked a reasonable basis for his statements, in that he failed affirmatively to verify the allegations underlying his statements.
As an initial point, plaintiff offers only speculation that Gibson's motives were unrelated to concerns about bad-debt advertisements. For instance, there is nothing in the record to suggest Gibson wanted plaintiff fired because of her suspected drinking problem. In any case, the court fails to see much logic in plaintiff's argument. Plaintiff seems to argue that Gibson complained about bad-debt advertisements, not because he was concerned about that issue, but because he had other legitimate concerns about plaintiff, including that her management style might chase away the company's sales force. But it seems only reasonable to presume that Gibson could have openly revealed the alleged alternative motives which, again, appear related to legitimate concerns and thus would have no reason to complain about bad-debt advertisements in an effort to further these other motives. In fact, Gibson testified he did convey his concerns about plaintiff's management style to plaintiff's boss, Ms. Shaw. The inference plaintiff would draw the statements regarding bad-debt advertisements were actually motivated by other concerns related to plaintiff's management style is not reasonable. See Poppell v. City of San Diego, 149 F.3d 951, 954 (9th Cir.1998) (explaining court-drawn inferences cannot "be mere speculation, intuition or guessing," as the "key to a logical inference is the reasonable probability that the conclusion flows from the evidentiary datum because of past experiences in human affairs"). In short, there is no probative evidence that Gibson's primary purpose in making the alleged statements was "improper and unrelated to the purpose of the privilege." Wheeler, 286 Or. at 104, 593 P.2d 777.
As stated, plaintiff also contended at oral argument that Gibson lacked any reasonable basis for his statements. Plaintiff bases that argument on the idea Gibson did not verify what he was told about plaintiff's treatment of bad-debt advertisements before Gibson himself repeated the charge. A failure to act affirmatively to verify an allegation, however, is not, itself, sufficient to defeat a conditional privilege. Cf. Muresan, 154 Or.App. at 472, 962 P.2d 711 (explaining to show abuse of privilege one must show defendant either lacked "objectively reasonable grounds for the statement or did not, in fact, believe the statement"). If each company official had to verify independently allegations of employee misconduct, internal investigations would become impractical. Here there is no indication Gibson lacked a reasonable basis for trusting the allegations regarding plaintiff. Indeed the only record evidence bearing on the issue suggests that Gibson had no reason to *1365 doubt his sources. For example, Gibson testified that his colleague Mr. O'Connor whom Gibson had known for at least nine years and considered a friend expressed concerns about a bad-debt advertisement which O'Connor felt should not be in the directory but which plaintiff insisted be included in the directory. In sum, plaintiff's defamation claim cannot rest on the alleged statements made by Gibson.
3. Dodson
Plaintiff makes a two-pronged attack on Dodson's statements: First, plaintiff argues he lacked any reasonable basis to believe the statements he made about plaintiff. Second, she argues Dodson's primary motive was essentially based on anger toward plaintiff for undercutting CMO's authority by using independent contractors to collect debts.
In arguing Dodson lacked reasonable grounds to believe his statements, plaintiff relies heavily on the fact Dodson at his deposition could not specifically name which employees had told him that plaintiff was acting improperly. While not remembering specific names, Dodson testified that "various salespeople and sales managers" told him that plaintiff had instructed them not to pull bad-debt advertisements. On this record, the court finds that Dodson's failure to give specific names is insufficient to create a material fact issue regarding the reasonableness of his statements. As mentioned, plaintiff does not challenge the fact that several sales employees did in fact corroborate the charge that plaintiff gave instructions not to pull bad-debt advertisements. In addition, Groves's report, based on several interviews with sales employees, found that plaintiff had "frequently said" sales personnel would not have the desired "leverage" with CMO if they removed bad-debt advertising. Groves's report further found that employees felt put between "a rock and a hard place" by plaintiff's reluctance to remove bad-debt advertising. Groves's findings served to corroborate the anonymous call which CEO Burnett received and which triggered the investigation in the first place complaining about plaintiff's refusal "to let people pull advertising out of the books." In sum, Dodson's assertion that "numerous salespeople" had said plaintiff was reluctant to remove bad-debt advertising finds record support.
Moreover, plaintiff does not challenge the fact Dodson relied on internal CMO documents which showed that Portland's sales team failed to remove significant numbers of bad-debt advertisements. Indeed plaintiff does not dispute the fact that the 2002 Portland directory as published included over a $1 million worth of bad-debt advertisements. While plaintiff now contends she was not responsible for many of the accounts which were "foreign in" and "spare worker," she makes no showing that Dodson should have reasonably known many of the bad-debt accounts were of that nature, much less that she was not responsible for those accounts. Even assuming Dodson should have known plaintiff was not responsible for many of the bad-debt advertisements, plaintiff does not rebut other evidence which indicates Dodson had a reasonable basis for his statements. Aside from Groves's interviews with sales employees, it also is undisputed that plaintiff failed to respond to numerous messages from Mr. Basile, Dodson's boss, regarding Portland-area, bad-debt advertisements. Similarly, Gibson testified he had left numerous messages for plaintiff regarding the Action Locksmith account, but plaintiff never responded even though, according to Gibson, "everyone knows" issues involving bad-debt advertisements are "important and need to be handled."
Plaintiff also argues that the fact her sales team ultimately removed $4 million *1366 of bad-debt advertising shows there was no reasonable basis for the statements at issue. Plaintiff, however, cites no evidence showing Dodson or any other alleged speaker knew or should have known that $4 million worth of bad-debt advertisements had been removed. In any event, even if the alleged speakers should have known about the $4 million figure, the fact remains that the 2002 Portland-area directory was published with a large number of bad-debt advertisements. Moreover, as mentioned, Ms. Shaw testified that the number of bad-debt advertisements appearing in the 2002 directory was "extremely high."
The court also rejects plaintiff's argument that Dodson's primary motive in making the statements was to protect CMO from independent contractors. Even assuming Dodson's alleged alternative motive regarding contractors could be characterized as a selfish one unrelated to the company's interests, there is insufficient evidence to show that such a motive was Dodson's primary motive in making statements about plaintiff. See Wheeler, 286 Or. at 104, 593 P.2d 777 (stating privilege is abused when defendant's "primary purpose" was "unrelated to the purpose of the privilege" (emphasis added)). At most, Dodson's testimony showed that he disagreed with the use of independent contractors; there is nothing, aside from pure speculation, to show that Dodson harbored a personal grudge toward plaintiff, much less a grudge so strong he was compelled to make false, defamatory statements about her. The court, therefore, finds plaintiff's cited cases inapposite. Those cases involved evidence persuasively showing that the speakers held personal grudges against the subject of the challenged statements. See Wallulis, 323 Or. at 350 n. 7, 918 P.2d 755 (finding fact issues as to whether privilege was abused where speaker "was extremely angry with plaintiff over a work-related disagreement," told colleagues he would "get" plaintiff, and, in fact, had become "enraged, using obscenities and telling others that he would `tear [plaintiff's] head right off his shoulders'"); Muresan, 154 Or.App. at 468, 473, 962 P.2d 711 (finding fact issue as to abuse of privilege where "there was evidence of a personal grudge against plaintiffs," including fact that after plaintiffs challenged speaker's authority, speaker "began to isolate and avoid" plaintiffs and repeatedly made defamatory charges without at all investigation underlying facts).
In addition, plaintiff's testimony that Dodson could be "moody and difficult" is not enough to create a fact issue; such a conclusory assessment would apply to most bosses. Nor does plaintiff's argument that the July "notifier blitz" was vindictive advance her abuse theory. That argument, at most, shows a disagreement with CMO's approach, which may have been rude and disruptive, but plaintiff does not explain, beyond mere speculation, how the blitz shows Dodson's primary motive in making the statements was improper and unrelated to the purpose of the privilege. In sum, plaintiff has not shown there are any material fact issues regarding whether Dodson abused the conditional privilege in making his alleged statements.[3]
*1367 4. Summary
In summary, on this relatively meager record, there is no "significantly probative" evidence rendering summary judgment inappropriate on the issue of whether defendant abused the privilege. See Liberty Lobby, 477 U.S. at 249-50, 106 S.Ct. 2505 ("If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted."); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (emphasizing that to defeat summary judgment nonmovant's evidence must create more than "some metaphysical doubt as to the material facts"). At best, plaintiff's evidence shows that company officials disagreed with how to treat bad-debt accounts. While plaintiff certainly disagreed with CMO's credit policies and Dex's tolerance of those policies in this case, plaintiff's disagreement cannot be the basis for finding defendant abused its conditional privilege. Cf. Lund v. Arbonne Int'l, Inc., 132 Or.App. 87, 97 n. 8, 887 P.2d 817 (1994) ("[Plaintiff's argument] is a statement about the way Arbonne operates its business. Standing alone, it permits no inference as to intent or motive.").
III. CONCLUSION
For the reasons outlined above, the court grants Dex's motion for summary judgment (doc. # 17). Plaintiff simply has not come forward with sufficient evidence showing material fact issues as to whether Dex abused its conditional privilege. As a result, the court dismisses this lawsuit with prejudice, and pending motions, if any, are denied as moot.
IT IS SO ORDERED.
NOTES
[1] The same conclusion applies with regard to any statements made by Susan Demmin, Groves's supervisor. Demmin allegedly told Groves initially about the accusations regarding plaintiff. Plaintiff's briefing does not even discuss any statements by Demmin, nor does plaintiff dispute Dex's position that Demmin merely repeated allegations made by others. Accordingly, to the extent plaintiff's defamation claim is based on statements made by Demmin, the court grants summary judgment.
[2] Specifically, after her termination, plaintiff (relying on documents obtained during discovery) contends she discovered that at least 71 of the bad-debt advertisements related to the 2002 directory were "foreign in," meaning they were advertisements for out-of-state customers over whom plaintiff had little responsibility. In addition, plaintiff argues that at least twenty of the bad-debt advertisements were related to "spare worker" accounts, that is, small-value accounts not assigned to any particular sales representative.
[3] In her summary judgment briefing, plaintiff nowhere argues that Mr. Basile's statements abused the conditional privilege. Nevertheless, at oral argument, plaintiff refused to concede that Basile's statements were not actionable. Even if the court were inclined to consider plaintiff's argument regarding Basile, there is no indication his statements abused the privilege. Indeed, as Dodson's boss, Basile for the most part considered the same material as did Dodson; it would seem to make little sense to hold that Dodson's statements did not abuse the privilege but that Basile's statements about the same exact matter did.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2515595/
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202 P.3d 238 (2009)
225 Or. App. 666
STATE of Oregon, Plaintiff-Respondent,
v.
Jethro E. MYERS, Defendant-Appellant.
04FE0112; A131358.
Court of Appeals of Oregon.
Submitted on July 31, 2008.
Decided February 11, 2009.
*240 Peter Gartlan, Chief Defender, Legal Services Division, and Marc D. Brown, Deputy Public Defender, Office of Public Defense Services, filed the brief for appellant.
Hardy Myers, Attorney General, Mary H. Williams, Solicitor General, and Inge D. Wells, Senior Assistant Attorney General, filed the brief for respondent.
Before ROSENBLUM, Presiding Judge, and BREWER, Chief Judge, and RICHARDSON, Senior Judge.
ROSENBLUM, P.J.
Defendant appeals his convictions for assault in the fourth degree and unlawful use of an electrical stun gun. He assigns error to the trial court's denial of his motion to dismiss on speedy trial grounds under ORS 135.747. We conclude that the state bears responsibility for a total of 18 months of the period between defendant's indictment and his trial. Given that all of the delays were explained and, in particular, that most of the *241 total delay is attributable to a lack of judicial resources, we conclude that defendant was brought to trial within a reasonable period of time. Accordingly, we affirm.
The relevant facts are undisputed. On July 9, 2004, defendant entered the victim's residence and assaulted him with an electrical stun gun. Defendant was arrested shortly thereafter. He was released from custody on July 13. On July 15, the state issued an indictment charging one count of burglary in the first degree (a felony), ORS 164.225, one count of assault in the second degree (a felony), ORS 163.175, and one count of unlawful use of a stun gun (a misdemeanor), ORS 163.212. Also on July 15, on defendant's motion for a continuance, the trial court continued the arraignment until July 20. On July 20, the court arraigned defendant and set the case for a pretrial conference on September 24. On September 24, the court continued the conference to October 15. The conference was held as scheduled on October 15, and at that time the court set the trial for January 4, 2005, with a trial readiness hearing on December 30. Defendant failed to appear at the December 30 hearing. The court scheduled a status check hearing on January 5, at which defendant did appear. At that hearing, the court set the trial for March 8, with a new trial readiness hearing on March 3. On March 3, the court postponed the trial to June 21, with a trial readiness hearing on June 16. At the June 16 hearing, the court, once again, postponed the trial to October 4, with a trial readiness hearing of September 29. On September 29, the court again postponed the trial, to January 17, 2006. On January 12, 2006, defendant moved to dismiss on speedy trial grounds.
In moving to dismiss, defendant argued that, pursuant to ORS 135.747, the 546-day delay between his arraignment on July 20, 2004, and his trial on January 17, 2006, was unreasonable. He relied on ORS 135.747,[1] which provides:
"If a defendant charged with a crime, whose trial has not been postponed upon the application of the defendant or by the consent of the defendant, is not brought to trial within a reasonable period of time, the court shall order the accusatory instrument to be dismissed."
The trial court found that the majority of the delay was attributable to the state, but it denied the motion, concluding, in essence, that the delay was reasonable in light of a lack of judicial resources, the priority given to older cases and trials involving in-custody defendants, and the fact that the delay did not exceed the period established by the statute of limitations. The court acknowledged that the documentation of the specific reasons for the delays was minimal, but it explained that, in general, it sets a number of trials on the same day, that many of those do not go to trial, and that, of the ones that do, the court uses the age of the case and the custody status of the defendant to decide which case to try and which cases to set over. The pertinent portions of the trial court's findings are as follows:
"So I think irrespective of everything, this case was bumped, and for the purpose of the record, * * * we set our trial readiness conferences and our trials somewhere between five and six to seven cases deep, the cases are timed or dated, the oldest case goes first unless we have a statutory priority, for example, like an in-custody case, an in-custody case because of the sixty-day rule, bumps a person that is not in custody, and the defendant was never in custody after he signed the third party release agreement in this case.
"* * * * *
"I would note that it's the practice, and most of these trial readinesses are done by myself, that when I am asking-when I am setting a new trial date, I'm asking that we come up with a trial date when it's the next available trial date that we have, as best we can, and I ask the counsel if they're available on that date. * * *
"* * * * *
"And for the purpose of the record, this is a three-judge judicial district, myself, who does most of the trial work here in *242 Crook County, generally on the first and third week of each month, and two other judges, Judge Nelson and Judge Ahern, who live in Madras and cover when we're having court trial weeks the first and the third week; they're down in Courtroom B, which is a courtroom that's not equipped to have second jury trials going at the same time.
"I would also point out for the purpose of the record that, unlike my adjoining county, and I'm not talking about Jefferson County, we do not have Referees to do all the juvenile work, we do our own. We do not have Referees that do small claims and FED's [forcible entry and detainer], we do our own. We don't have volunteer judges that come in and do traffic court, we do our own. So the judges in this judicial district do everything from traffic cases to murders, and everything from small claims to major personal injury cases. We do it all. We have nobody substituting for ourselves, and the attempts in the last two legislative sessions to get additional judicial help from the legislature have failed. I don't think that's an excuse necessarily, but it's certainly pertinent in regards to this.
"The documentation on this is minimal, but I've tried to provide fairly the documentation of what I think happened, without knowing what the conversations are at each of the trial readiness conferences. I don't recall a particular conversation in regards to this case. I think that most of the trial readiness conferences were done by myself, but I don't recall the particular conversations in any of the cases until last Thursday regarding the issue of speedy trial. And that doesn't mean they did not take place, but I don't recall them personally.
"* * * I'm not particularly pleased that it has taken this long to try this case. I'm not particularly pleased that it takes so long to try any of our cases in this judicial district, but I think the Court attempted to set this case on a regular basis and tried to get it into court, and sometimes you get snake bit, and I think you get snake bit, one, because of lack of judicial resources, but secondly, because frequently there are in custody cases in front of you that bump cases off.
"I can't say without looking at the trial readiness conferences on each of these dates whether there was an in custody, but I can say that we date these cases, and the oldest case goes first, which is the way that it has always worked, from my understanding, since I started practicing law in 1972 * * * continuing until today's date [in] 2006.
"I'm denying the motion to dismiss. I don't think it fits the criteria of certainly beyond the statute of limitations * * *."
Following a jury trial on January 17 and 18, defendant was acquitted on the burglary charge and convicted of assault in the fourth degree[2] and unlawful use of a stun gun. This appeal followed.
In reviewing the denial of a motion to dismiss on statutory speedy trial grounds, we review for errors of law the trial court's conclusion that the delay in bringing the defendant to trial was reasonable under ORS 135.747. See State v. Johnson, 339 Or. 69, 86, 116 P.3d 879 (2005). Our first task under ORS 135.747 is to determine the amount of the delay that is attributable to the state-that is, that the defendant did not request or consent to.[3]See State v. Spicer, 222 Or.App. 215, 221, 193 P.3d 62 (2008) ("If the defendant did not apply for or consent to a delay, that delay is part of the period included in the statutory calculation of reasonableness."). If the delay is longer than "ordinarily would be expected," we determine whether the delay was reasonable by examining the "attendant *243 circumstances," including the reasons for the delay. Johnson, 339 Or. at 88, 116 P.3d 879.
Even if the delay was unreasonable, ORS 135.750 provides that trial courts have discretion to continue a case if "sufficient reason therefor is shown." Whether sufficient reason exists is a question of law. Johnson, 339 Or. at 86, 116 P.3d 879.
In this case, defendant was indicted on July 15, 2004, and brought to trial on January 17, 2006. A period of 551 days-just over 18 months-passed between the indictment and the trial. On the date that defendant was indicted, he moved for a continuance of the arraignment to July 20, 2004. Thus, the first five days of delay are attributable to defendant. During the period that followed defendant's arraignment, the trial court postponed the pretrial conference once and the trial four times. It is undisputed that defendant did not consent to any of the delays between his arraignment and the first trial readiness hearing on December 30, 2004, or to the last three postponements of his trial, which encompasses the period from March 3, 2005 to January 17, 2006. Thus, the state bears responsibility for those 483 days-approximately 16 months.
It is also undisputed that defendant consented to the six-day delay between the first scheduled trial readiness hearing (December 30, 2004), for which defendant failed to appear, and the date on which he did appear (January 5, 2005). The only period in dispute, then, is the 57 days between January 5, 2005, and the trial readiness hearing on March 3. We briefly address that disputed period.
Defendant asserts, without explanation, that the 57-day delay is attributable to the state. The state responds that the delay is "arguably" attributable to defendant, given that he failed to appear at the first trial readiness hearing. The state does not belabor the point, however, for two reasons. First, it concedes that the evidence suggests that the January 4, 2005, trial would have been cancelled even if defendant had appeared for the readiness hearing. Second, it asserts that attributing the delay to one party or the other will not affect the outcome of our analysis. The trial court did not make any express conclusions as to which party bears responsibility for the period in question. We conclude that the approximately two-month delay between January 5, 2005 and March 3, 2005, is attributable to the state because defendant revoked his consent to further delay by appearing at the January 5 court date. See State v. Peterson, 183 Or.App. 571, 573-74, 53 P.3d 455 (2002) (consent to a delay by failure to appear is revoked by reinitiation of contact with the court). Accordingly, for purposes of our analysis, we conclude that the state bears responsibility for 540 days-just under 18 monthsof the delay in bringing defendant to trial.[4]
The state concedes, and we agree, that a delay of 18 months between arraignment and trial is longer than would ordinarily be expected. Cf. State v. Garcia/Jackson, 207 Or.App. 438, 446, 142 P.3d 501 (2006) (concluding that a delay of 14 months was longer than would ordinarily be expected). Accordingly, we must examine the circumstances to determine whether the delay was reasonable. See Johnson, 339 Or. at 88, 116 P.3d 879.
The trial court found that the bulk of the delaythe postponements of defendant's trial dateswas caused by a combination of a lack of judicial resources and the court's prioritization of cases by age of case and custodial status.[5] Defendant acknowledges *244 that some accommodation must be made for delays due to overcrowded dockets, but he argues that the overall delay of 18 months in this case was too long to be justifiable on the basis of lack of judicial resources. The state argues, among other things, that the reasons cited by the trial court for the delays justified denying defendant's motion to dismiss.[6]
There is no precise formula for determining whether a particular delay is reasonable. The determination requires courts to weigh several factors, including the reasons for the delay, the length of the total delay attributable to the state, and the length of any portion of the delay that was unjustified.[7] Prior cases illustrate the weighing process.
In Peterson, no justification was offered for six months of delay, but, given that the total delay attributable to the state was only seven months, we concluded that the defendant was brought to trial within a reasonable period of time. 183 Or.App. at 575, 53 P.3d 455.
Garcia/Jackson involved a longer total delay attributable to the state, 14 months, but 11.5 months of the delay was attributable either to the routine scheduling delays that occur in every case or to judicial resource limitations, both of which provided sufficient justification for that portion of the delay. 207 Or.App. at 446-47, 142 P.3d 501. Even assuming that the remaining 2.5 month delay was unjustified, we concluded that the total *245 delay was not so long as to be unreasonable. Id. at 447, 142 P.3d 501.
The balance shifted in State v. Allen, 205 Or.App. 219, 228, 134 P.3d 976 (2006), in which, as in Garcia/Jackson, 11.5 months of the delay attributable to the state was caused by justifiable circumstances. However, although it was not clear from the record on appeal, an additional 3.5-month delay may have been caused by a discovery violation by the prosecutor. Assuming that it was, the total delay would have been 15 months, which we held would be unreasonable under the circumstances.[8]Id.
The various factors were again somewhat different in Spicer, 222 Or.App. 215, 193 P.3d 62. There, the total delay for which the state bore responsibility was approximately 17 months. A little more than five months of the delay was attributable to routine scheduling. A delay of three months resulted from several state witnesses being unavailable on a date for which trial was scheduled. See Peterson, 183 Or.App. at 575, 53 P.3d 455 (explaining that "the unavailability of witnesses is one of the most common causes of delay" and does not weigh heavily against the state). Thus, eight months of the delay was justified.
However, the remainder of the delay in Spicer was not justified. Seven months of the delay resulted from there being no judge available on two of the scheduled trial dates. Although some delays can be justified by unavailability of judges when that is an effect of the trial court having an overcrowded docket, the "record of each case must demonstrate precisely how an overcrowded docket contributed to the period of delay at issue." State v. Schneider, 201 Or.App. 546, 554, 120 P.3d 16 (2005), rev. den., 341 Or. 392, 143 P.3d 544 (2006) (citing Johnson, 339 Or. at 89, 116 P.3d 879). In Spicer, the state did not argue that any of the delay was attributable to a lack of judicial resources. 222 Or.App. at 220 n. 3, 193 P.3d 62. The lack of an explanation in the record for the court's inability to have a judge available indicated that the delay was not reasonable. Id. at 223, 193 P.3d 62 ("[T]he state has not shown that defendant could not reasonably have been brought to trial within a substantially shorter cumulative period of time.").
The remaining delay to which the defendant did not consent lasted nearly two months and was caused by a scheduling error by the court that necessitated resetting the case for trial. Spicer, 222 Or.App. at 217, 193 P.3d 62. We concluded that, under the circumstances, the defendant was not brought to trial within a reasonable time. Id. at 223, 193 P.3d 62.
Even when all of the delays in a case are individually justifiable, there comes a point at which the total length of the delay attributable to the state outweighs the reasons for it.[9] In State v. Adams, 339 Or. 104, 116 P.3d 898 (2005), the state bore responsibility for a total of 23 months of delay. The state argued that the delay was reasonable because it was caused by a lack of judicial *246 resources. The Supreme Court acknowledged that a lack of judicial resources can justify at least some trial court decisions to postpone a trial, but it held that the total delay in that case was simply too long to be justifiable on that ground. Id. at 111-12, 116 P.3d 898.
Viewed together, the cases discussed above illustrate that the acceptability of the total delay in a case is influenced by the extent to which it is justified. The longer the total delay is, the shorter any unjustified portion may be. To recapitulate: Peterson involved a substantial unexplained delay (six months) but a relatively short total delay (seven months). Garcia/Jackson involved a longer total delay (14 months), but the unjustified portion of it was relatively short (2.5 months); thus, despite the longer total delay, the period of time in which the defendant was brought to trial was still reasonable. In Allen, both the total delay and the unjustified portion of it were, in one factual scenario, a month longer than in Garcia/Jackson (15 months and 3.5 months, respectively), which tipped the balance against reasonableness. In Spicer, both the total delay (17 months) and the unjustified portion of it (nearly 9 months) were longer still, again leading to the conclusion that the total delay was unreasonable. Finally, in Adams, no unjustified delay was identified, but the long total delay (23 months) nevertheless led to the conclusion that the defendant was not brought to trial within a reasonable period of time.
The facts of this case do not neatly match those of any of the above casesor any other of which we are aware. However, weighing all of the circumstances, we agree with the trial court that the delay here was reasonable. Although it was longer than in either Allen or Spicer, the balance in those cases was shifted by the presence of delays that were not justified. Here, all of the delays were justifiedin the early part of the case's life, by the routine scheduling delays that are always present and, later, by the lack of judicial resources in the Twenty-second Judicial District (Crook and Jefferson counties).
Furthermore, the total length of the delay does not, in our view, outweigh the reasons for it, as was the case in Adams. The Supreme Court noted in Adams that it is "difficult to identify the point at which delay becomes unacceptable," but it concluded that the statute of limitations provides "some indication of what the legislature views as the outer limit of reasonableness for proceeding against a defendant for a given crime." 339 Or. at 112, 116 P.3d 898. In this case, defendant was charged with two felonies and one misdemeanor. The statute of limitations for the felonies is three years; for the misdemeanor, it is two years. ORS 131.125(6)(a), (b). Even if we considered only the misdemeanor limitation period, the 18-month delay does not come so close to it as to become unacceptable.
Defendant points out that the delay significantly exceeds the Oregon Standards of Timely Disposition, the aspirational standards adopted by the Oregon Judicial Conference in 1990. Those standards provide that, with respect to both felonies and misdemeanors, all cases should be tried within one year "except for exceptional cases in which continuing review should occur." See Oregon Standards of Timely Disposition in Oregon Circuit Courts, Oregon Judicial Conference (Reapproved April 7, 1999). The Supreme Court has noted that the standards are "informative in determining the length of time that is `reasonable' in which to bring a case to trial." State v. Emery, 318 Or. 460, 471 n. 17, 869 P.2d 859 (1994).
Although the delay in this case exceeds those standards, "continuing review" did occur. This is not a case like State v. Hampton, 152 Or.App. 742, 954 P.2d 1267 (1998), on which defendant relies, in which a total delay of nearly two years consisted primarily of a 19-month delay that was caused entirely by the court's inattention to a motion that it had taken under advisement. Here, the case was before the court for conferences and hearings at least every two to four months. Although the case misses the mark established by the aspirational Standards of Timely Disposition, under the circumstances, we cannot say that the delay was unreasonable.
In short, the 18-month delay attributable to the state was justified under the circumstances. The trial court did not err in concluding that the delay was reasonable under *247 ORS 135.747 and, thus, in denying defendant's motion to dismiss.
Affirmed.
NOTES
[1] Defendant also made a constitutional speedy trial argument, but on appeal he relies solely on the statutory ground, so we need not address his constitutional argument.
[2] Although defendant was charged with second-degree assault, the jury found him guilty of the lesser-included offense of fourth-degree assault.
[3] As we have previously noted, for purposes of ORS 135.747, "the state" is a unitary political entity that includes the courts as well as the executive and legislative branches, and, thus, court-related delays are attributable to the state. See State v. Brunoe, 204 Or.App. 749, 754, 131 P.3d 743, rev. den., 341 Or. 245, 142 P.3d 73 (2006). Thus, when we use the phrase "the state bears responsibility for the delay," we do not mean to imply that the prosecutor is necessarily responsible for it.
[4] We acknowledge that a defendant's failure to appear at a readiness hearing (also referred to in some jurisdictions as "call") affects scheduling and usually requires a continuance of the trial. However, a delay that follows a defendant's revocation of consent by failure to appear is still attributable to the state. See Spicer, 222 Or.App. at 221, 193 P.3d 62 ("[T]he issue under ORS 135.747 is not whether the state caused a delay but whether the trial was `postponed upon the application of the defendant or by the consent of the defendant.'"). There is nothing in this record to suggest that defendant requested or consented to a postponement of his trial after January 5, and certainly not a two-month postponement.
[5] The trial court candidly stated that the documentation in support of its findings was "minimal." We have previously held that a 15-month delay was unreasonable in spite of the trial court's finding that it was caused by the "financial incapacity of the courts," where no evidentiary record was made. See State v. Greenlick, 210 Or.App. 662, 664, 152 P.3d 971 (2007); see also State v. Schneider, 201 Or.App. 546, 554, 120 P.3d 16 (2005), rev. den., 341 Or. 392, 143 P.3d 544 (2006) ("[T]he record of each case must demonstrate precisely how an overcrowded docket contributed to the period of delay at issue."). In this case, defendant does not challenge the sufficiency of the evidence in support of the trial court's findings, so we do not consider whether the record supports them. Cf. id. at 555, 120 P.3d 16 (noting that the defendant did not contend that the state had failed to make an adequate record regarding a delay caused by a shortage of judges, and thus considering that shortage in making the "reasonableness" determination). We take the opportunity, however, to reiterate the importance of an adequate record to our review function.
[6] The state also argues that, even if the delay was unreasonable, the record demonstrated sufficient reason to continue the case under ORS 135.750. Because we conclude that the delay was not unreasonable, we need not consider that argument.
[7] In several of our cases in recent years, we have noted that courts have generally concluded that delays of more than 15 months that are attributable to the state are unreasonable. If taken out of context, that observation may give readers the erroneous impression that such delays are unreasonable regardless of the reasons for them. Those cases do not stand for that proposition. In State v. Davids, 193 Or.App. 178, 183, 90 P.3d 1 (2004), aff'd, 339 Or. 96, 116 P.3d 894 (2005), we said that, in cases that have considered whether a particular delay is reasonable under the circumstances, "the courts generally have concluded that state-caused delays to which a defendant has not consented of 15 months or more are generally unreasonable and that delays of seven months or less are reasonable." See also Spicer, 222 Or.App. at 222, 193 P.3d 62 (citing Davids for that proposition); State v. Forsyth, 220 Or. App. 476, 485, 188 P.3d 299 (2008) (same).
In support of that assertion in Davids, we cited State v. Harman, 179 Or.App. 611, 40 P.3d 1079 (2002). In Harman, the delay to which the defendant had not consented totaled at least five years. Much of the delay was occasioned by a dispute over a discovery request that the defendant had made and a collateral mandamus actionincluding an appealthat arose from that dispute. We concluded that that portion of the delay was reasonable under ORS 135.747. However, there were two periods of timeone lasting ten months and the other five monthsfor which no explanation was given. We concluded that 15 months of unjustified delay was unreasonable. Id. at 616-17, 40 P.3d 1079. We accurately summarized the assertion in Davids in State v. Johnson, 193 Or.App. 250, 256, 90 P.3d 4 (2004), aff'd, 339 Or. 69, 116 P.3d 879 (2005) (decided on the same date as Davids), stating, "In general, when a defendant has not consented to the delay and the state does not offer an explanation for it, delays of 15 months or more are unreasonable." (Emphasis added.) Furthermore, as we pointed out in Forsyth, 220 Or.App. at 485, 188 P.3d 299, our assertion in Davids "was not a bright-line test, and the analysis of the reasonableness of any delay necessitates consideration of the `attendant circumstances,' which includes the reasons for the delay." See also Spicer, 222 Or.App. at 222, 193 P.3d 62 (making the same observation).
Our assertion in Davids that delays of 15 months or more are generally unreasonable should be understood in context with Harman and our explanation in Forsyth and Spicer.
[8] The additional 3.5-month delay may have been attributable to the defendant. We remanded to the trial court to determine which party actually bore responsibility, stating that, if it was attributable to the defendant, the pertinent delay would be less than one year and would not be unreasonable under the circumstances. Allen, 205 Or. App. at 228-29, 134 P.3d 976.
[9] The point at which that occurs varies depending on the strength of the reasons for the delay. To put it bluntly, some reasons are better than others. Thus, although the Supreme Court held in State v. Adams, 339 Or. 104, 116 P.3d 898 (2005), that a total delay of 23 months in a misdemeanor DUII prosecution was unreasonable even if it was attributable to a lack of judicial resources, longer delays have been held reasonable in other circumstances. For example, in State v. Ayers, 207 Or.App. 668, 692-93, 143 P.3d 251, rev. den., 342 Or. 253, 149 P.3d 1213 (2006), we held that a delay of more than four years was reasonable, given that the defendant had been incarcerated in Washington and, under the circumstances, the state could reasonably have assumed that she had waived the right to a speedy trial on the charges against her in Oregon. See also State v. Johnson, 342 Or. 596, 616-17, 157 P.3d 198 (2007), cert. den., ___ U.S. ___, 128 S.Ct. 906, 169 L.Ed.2d 753 (2008) (holding that a delay of more than four years caused largely by the state making pretrial appeals was reasonable under the circumstances); State v. Fleetwood, 186 Or.App. 305, 323, 63 P.3d 42, rev. den., 336 Or. 125, 79 P.3d 882 (2003) (holding that a delay of more than eight years attributable to the "normal workings of the appellate process" in addressing a pretrial appeal is reasonable).
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https://www.courtlistener.com/api/rest/v3/opinions/2504491/
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332 F. Supp. 2d 1261 (2004)
UNITED STATES of America, Plaintiff,
v.
Arnaldo LOSOYA-MANCIAS, Defendant.
No. C4-02-050.
United States District Court, D. North Dakota, Northwestern Division.
August 25, 2004.
*1262 Scott J. Schneider, U.S. Attorney's Office, Bismarck, ND, for Plaintiff.
Gary Harold Lee, Olson Burns Lee, Minot, ND, for Defendant.
ORDER DENYING DEFENDANT'S MOTION UNDER 28 U.S.C. § 2255 TO VACATE, SET ASIDE, OR CORRECT SENTENCE
HOVLAND, Chief Judge.
Before the Court is Defendant Arnaldo Losoya-Mancias' ("Mancias") motion under 28 U.S.C. § 2255 to Vacate, Set Aside, or Correct Sentence. The motion was filed on August 2, 2004. On August 3, 2004, the Court reviewed the motion and ordered the Government to file an answer. On August 12, 2004, the United States filed a response requesting that the Court deny Mancias' motion for post-conviction relief. Mancias submitted a reply brief on August 23, 2004. For the reasons set forth below, this Court denies Mancias' motion.
I. BACKGROUND
On September 26, 2002, Mancias pled guilty to one count of Possession With Intent to Distribute a Controlled Substance in violation of 21 U.S.C. § 841(a)(1). Mancias agreed to criminal forfeiture in the amount of $2,225.00. On December 16, 2002, the Court sentenced Mancias to 80 months imprisonment, 4 years supervised release and a $100.00 special assessment. In doing so, the Court found Mancias to be a career offender based on his prior convictions for Escape and Possession of Marijuana With Intent to Deliver. See U.S.S.G. § 4B1.1. Judgment was entered on December 17, 2002. On December 27, 2002, Mancias filed a Notice of Appeal. On November 28, 2003, the Eighth Circuit affirmed his conviction. United States v. Mancias, 350 F.3d 800 (8th Cir.2003).
This action arises out of Mancias' current motion under 28 U.S.C. § 2255 to vacate, set aside, or correct sentence citing the recent Supreme Court decision of Blakely v. Washington, ___ U.S. ___, 124 S. Ct. 2531, 159 L. Ed. 2d 403 (2004).[1]
*1263 II. LEGAL ANALYSIS
Mancias contends that Blakely requires that his sentence be vacated because it was based on federal Sentencing Guideline enhancements not supported by facts found by a jury beyond a reasonable doubt, in violation of his Sixth Amendment right to a jury trial. In Blakely, the Supreme Court invalidated an upward departure under the State of Washington's sentencing guidelines using the rule expressed in Apprendi v. New Jersey, 530 U.S. 466, 490, 120 S. Ct. 2348, 147 L. Ed. 2d 435 (2000), that "[o]ther than the fact of a prior conviction, any fact that increases the penalty for a crime beyond the prescribed maximum must be submitted to a jury, and proved beyond a reasonable doubt." The Supreme Court struck down Washington's sentencing guidelines and held that the sentence imposed was improper because the facts supporting the departure "were neither admitted by the petitioner nor found by a jury." Blakely, ___ U.S. at ___, 124 S.Ct. at 2537.[2] The Court will address the issue of whether the Blakely opinion operates in favor of Mancias.
A. THE DOCTRINE OF STARE DECISIS EXISTING PRECEDENT
This Court is bound to apply the precedent of the United States Supreme Court and the Eighth Circuit. The doctrine of stare decisis demands that the Court not lightly cast aside past decisions. See Moragne v. States Marine Lines, Inc., 398 U.S. 375, 403, 90 S. Ct. 1772, 26 L. Ed. 2d 339 (1970).
The United States Supreme Court laid out the rationale behind the doctrine of stare decisis:
[T]he desirability that the law furnish a clear guide for the conduct of individuals, to enable them to plan their affairs with assurance against untoward surprise; the importance of furthering fair and expeditious adjudication by eliminating the need to relitigate every relevant proposition in every case; and the necessity of maintaining public faith in the judiciary as a source of impersonal and reasoned judgments.
Moragne, 398 U.S. 375, 403, 90 S. Ct. 1772, 26 L. Ed. 2d 339.
The Supreme Court made it clear in Blakely it was not invalidating the federal Sentencing Guidelines. 124 S. Ct. 2531, 2538 n. 9. In what has become a famous and oft-quoted footnote, Justice Scalia wrote "[t]he Federal Guidelines are not before us, and we express no opinion on them." Id. Likewise, in Apprendi, the Supreme Court did not alter the Sentencing Guidelines beyond its ruling in the case. 530 U.S. 466, 497 n. 21, 120 S. Ct. 2348, 147 L. Ed. 2d 435 (stating "[t]he Guidelines are, of course, not before the Court. We therefore express no view on the subject beyond what this Court has already held") (citing Edwards v. United States, 523 U.S. 511, 515, 118 S. Ct. 1475, 140 L. Ed. 2d 703 (1998)).
Despite Justice Scalia's footnote and deflection of what many maintain is the real issue, federal and state courts are daily weighing in on the "havoc" the Blakely decision has created. See ___ U.S. ___, ___, 124 S. Ct. 2531, 2549, 159 L. Ed. 2d 403 (2004) (O'Connor, J., dissenting "The Court ignores the havoc it is about to wreak on trial courts across the country.") *1264 It is clear the "havoc" envisioned and feared by Justice O'Connor has occurred. There is currently no consensus and considerable uncertainty among the federal circuit courts and district courts as to whether Blakely applies to the federal Sentencing Guidelines.
Prior case law reveals that the Supreme Court has consistently upheld the Sentencing Guidelines against close scrutiny and constitutional attack. See Mistretta v. United States, 488 U.S. 361, 109 S. Ct. 647, 102 L. Ed. 2d 714 (1989); Stinson v. United States, 508 U.S. 36, 113 S. Ct. 1913, 123 L. Ed. 2d 598 (1993); Witte v. United States, 515 U.S. 389, 115 S. Ct. 2199, 132 L. Ed. 2d 351 (1995); United States v. Watts, 519 U.S. 148, 117 S. Ct. 633, 136 L. Ed. 2d 554 (1997); Edwards v. United States, 523 U.S. 511, 118 S. Ct. 1475, 140 L. Ed. 2d 703 (1998). However, after carefully surveying the Supreme Court precedent, it is undisputed that the Sentencing Guidelines have never faced a Sixth Amendment right to jury trial challenge such as the one mounted in Blakely against the State of Washington's sentencing guidelines. None of the Supreme Court cases which have addressed the federal Sentencing Guidelines have even discussed the Sixth Amendment right to a jury trial, and none have involved a Sixth Amendment challenge.
The Eighth Circuit has held that the Sentencing Guidelines do not violate the rule of Apprendi. See United States v. Banks, 340 F.3d 683, 684-85 (8th Cir.2003). No other Eighth Circuit opinions have been finalized since Blakely regarding the constitutionality of the Sentencing Guidelines. Although the Eighth Circuit held in United States v. Mooney, No. 02-3388, 2004 WL 1636960 (8th Cir. July 27, 2004), that the Sentencing Guidelines were unconstitutional, that decision has since been vacated and will be heard en banc at a later date. A similar decision in a case entitled United States v. Pirani, No. 03-2871, has also been vacated and a rehearing en banc has been ordered to be "held at a time and place to be announced." 2004 WL 1748930 (8th Cir. August 16, 2004). As a result, there is no binding post-Blakely precedent in the Eighth Circuit.
B. CAREER OFFENDER
Mancias' upward departure stems from Section 4B1.1 of the United States Sentencing Guidelines (U.S.S.G.). That section provides in relevant part as follows:
(a) A defendant is a career offender if (1) the defendant was at least eighteen years old at the time the defendant committed the instant offense of conviction; (2) the instant offense of conviction is a felony that is either a crime of violence or a controlled substance offense; and (3) the defendant has at least two prior felony convictions of either a crime of violence or a controlled substance offense.
(b) Except as provided in subsection (c), if the offense level for a career offender from the table in this subsection is greater than the offense level otherwise applicable, the offense level from the table in this subsection shall apply. A career offender's criminal history category in every case under this subsection shall be Category VI.
At the time of his sentencing, Mancias had two prior convictions for Escape and Possession of Marijuana With Intent to Deliver. The Court used Section 4B1.1 to assign an offense level of 24 to Mancias. As a result of the plea, the Court imposed a three-level reduction for acceptance of responsibility, leaving a total adjusted offense level of 21 under the Sentencing *1265 Guidelines. Mancias challenges this finding.
There are a multitude of complex questions raised by the Supreme Court's decision in Blakely v. Washington. Suffice it to say there is a great deal of legal uncertainty in the wake of Blakely. There are many who believe the Blakely decision almost certainly invalidates the federal Sentencing Guidelines. The landscape has now changed dramatically and there is a need for a careful evaluation of the sentencing system in federal court and the federal Sentencing Guidelines. Hopefully, guidance from the United States Supreme Court is forthcoming. The Supreme Court has recently agreed to hear two appeals on October 4, 2004, the opening day of the new term, to address the implications of Blakely and the future of the federal Sentencing Guidelines. However, despite the fate of criminal justice and federal sentencings in the wake of Blakely, it is well-understood that Blakely did not disrupt the maxim that courts may take into account the fact of a prior conviction without the use of a jury. ___ U.S. ___, ___, 124 S. Ct. 2531, 2536, 159 L. Ed. 2d 403. In other words, the fact of a defendant's prior convictions does not require a jury determination in order to support an increase in a defendant's sentence.
In Almendarez-Torres v. United States, 523 U.S. 224, 228, 118 S. Ct. 1219, 140 L. Ed. 2d 350 (1998), the Supreme Court held that the government does not need to prove beyond a reasonable doubt that a defendant had prior convictions for a district court to use those prior convictions for purposes of enhancing a sentence. While the Almendarez-Torres rationale was called into question in Apprendi, the Supreme Court expressly said the decision would not be reconsidered. 530 U.S. 466, 489-90, 120 S. Ct. 2348, 147 L. Ed. 2d 435 (stating "[e]ven though it is arguable that Almendarez-Torres was incorrectly decided ... we need not revisit it for purposes of our decision today to treat the case as a narrow exception to the general rule we recalled at the outset"). This Court acknowledges that the soundness of the prior conviction exception under Almendarez-Torres has again been questioned in light of Blakely. Nevertheless, the Almendarez-Torres exception remains the law of the land until the United States Supreme Court chooses to revisit the matter.
In a pre-Blakely decision, the Eighth Circuit held that is was proper for a district court to make findings, in accordance with the preponderance of the evidence standard, that a defendant had prior convictions for serious violent felonies which thereby enhance a sentence. See United States v. Davis, 260 F.3d 965, 969 (8th Cir.2001). The Eighth Circuit said that "[i]t is our role to apply Supreme Court precedent as it stands, and not as it develops." Id. Accordingly, the Eighth Circuit followed Alemdarez-Torres and did not require the government to submit the fact of the prior convictions to the jury to be proved as an element beyond a reasonable doubt. The Eighth Circuit also made it clear that the rule of Apprendi that exempts a fact of prior conviction from a jury determination "includes not only the fact that a prior conviction exists, but also a determination of whether a conviction is one of the enumerated types for the sentence enhancement under section 3559." 260 F.3d 965, 969 (citing United States v. Gatewood, 230 F.3d 186, 192 (6th Cir.2000) (en banc)).
Recent case law reveals that Blakely does not impact these holdings. In United States v. Sanders, 377 F.3d 845 n. 3 (8th Cir.2004), the Eighth Circuit held that Blakely did not affect a trial court's finding that the defendant met the career-criminal enhancement under U.S.S.G. § 4B1.4 for having at least three prior violent felony convictions. The decision *1266 was based on a plain reading of Blakely in that the Supreme Court explicitly exempted prior convictions from its holding. Id. (citing Blakely, ___ U.S. ___, ___, 124 S. Ct. 2531, 2536, 159 L. Ed. 2d 403). Other post-Blakely decisions have reached similar conclusions. See United States v. Marseille, 377 F.3d 1249 (11th Cir.2004) (holding that Blakely does not put the finding of prior convictions into the hands of a jury); United States v. Burrell, No. 2:03CR10095, 2004 WL 1490246 (W.D.Va. July 6, 2004); United States v. Byrd, No. SA-03-CR-547-XR, 2004 WL 1618832 (W.D.Tex. July 20, 2004).
In the present case, Mancias contends that the Court should not be able to make findings under Section 4B1.1 of the Sentencing Guidelines to treat him as a career offender. However, existing case law clearly establishes that prior convictions can be taken into account by the sentencing court without a factual finding by a jury. Almendarez-Torres, 523 U.S. 224, 228, 118 S. Ct. 1219, 140 L. Ed. 2d 350. Neither Apprendi nor Blakely have changed that result.
It is certainly possible, and likely probable, that the United States Supreme Court will hold that Blakely applies to the federal Sentencing Guidelines. However, even if that pronouncement is made, Mancias would not benefit from such a ruling. Simply stated, Mancias' case is unaffected by the Supreme Court's recent pronouncement in Blakely v. Washington because the fact of a prior conviction need not be proved to a jury in order to support an increase in a defendant's sentence. An exception has been carved out for prior convictions and that was the express holding in Almendarez-Torres. In this case, the enhancement to Mancias' sentence was because of his prior felony convictions. This Court's finding that Mancias is a career offender under the Sentencing Guidelines was based on his prior convictions, which convictions were appropriately used for purposes of enhancing Mancias' sentence. The Court is loath to rule otherwise because both the United States Supreme Court and the Eighth Circuit have spoken.
III. CONCLUSION
For the reasons set forth above, the Court DENIES the Defendant's Motion to Vacate, Set Aside, or Correct Sentence under 28 U.S.C. § 2255 [Docket No. 58]. The Court also DENIES Mancias' request for an evidentiary hearing. In light of this ruling, the Court need not address the issue of whether the Blakely decision is retroactive.
IT IS SO ORDERED.
NOTES
[1] In Mancias' motion he advanced three reasons why he believes Blakely affects his sentence:
(1) by preponderance of the evidence, and against his Sixth Amendment right, movant's escape conviction was considered to be a violent offense.
(2) by preponderance of the evidence, and against his Sixth Amendment right, movant was enhanced on his prior Criminal History Category, without the filling of a Title 28 U.S.C. § 851 information, other than for the one prior drug conviction that raised his statutory maximum to ten years from 5 years.
(3) by preponderance of the evidence, and against his Sixth Amendment right, movant was enhanced to a Career Criminal Status.
[2] The relevant facts in Blakely were briefly summarized by the Court: "Petitioner Ralph Howard Blakely, Jr., pleaded guilty to the kidnaping of his estranged wife. The facts admitted in his plea, standing alone, supported a maximum sentence of 53 months. Pursuant to state law, the court imposed an `exceptional' sentence of 90 months after making a judicial determination that he acted with `deliberate cruelty.'" ___ U.S. at ___, 124 S.Ct. at 2534.
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332 F. Supp. 2d 626 (2004)
NATSOURCE LLC, Plaintiff,
v.
GFI GROUP, INC., Patrick Curley, Christopher M. D'Ambrosi, Richard G. Heffernan, John Prendergast, Angelo Primavera, Jr., Joshua D. Slansky and Gregory Woyshner, Defendants.
No. 03 Civ. 10071(RWS).
United States District Court, S.D. New York.
August 20, 2004.
*627 *628 *629 Kasowitz, Benson, Torres & Friedman, By: Daniel B. Goldman, Gary W. Dunn, of counsel, New York, NY, for Plaintiff.
Epstein, Becker & Green, By: Peter L. Altieri, Lauri F. Rasnick, of counsel, New York, NY, for Defendants.
OPINION
SWEET, District Judge.
The defendants have moved under Fed.R.Civ.P. 12(b)(6) to dismiss the complaint of Natsource LLC ("Natsource") and under Fed.R.Civ.P. 56 for summary judgment. For the reasons set forth below, the motion to dismiss the complaint is denied, and the motion for summary judgment is granted.
The Parties
Natsource is an inter-dealer broker of electrical power.
GFI Group, Inc. ("GFI") is the parent of non-party GFI Brokers LLC, and is also an inter-dealer of electrical power. GFI Brokers LLC is the employer of Patrick Curley ("Curley"), Christopher D'Ambrosi ("D'Ambrosi"), Richard Heffernan ("Heffernan"), John Prendergast ("Prendergast"), Angelo Primavera ("Primavera"), Joshua Slansky ("Slansky"), and Gregory Woyshner ("Woyshner") (collectively the "Individual Defendants"). The Individual Defendants are brokers of electrical power formerly employed by Natsource who have been hired by GFI.
Prior Proceedings
Natsource filed its complaint in this action on December 18, 2003, seeking redress for damages that it suffered as the result of, inter alia, GFI's unlawful attempt to monopolize the voice brokerage of electric power in the "Eastern Market," which includes the New England states, New York, Pennsylvania, New Jersey, Maryland and the "ANC business," which "involves the buying and selling of electrical line capacity, as it is conducted in the Eastern market and other markets." Complaint. ¶ 19. Natsource alleged that in an attempt to obtain monopoly power, GFI, through wrongful means, induced a large group of Natsource's brokers to leave the employ of Natsource and to join GFI, effectuating the transfer of the vast majority of Natsource's customers in the Eastern Market to GFI. Complaint ¶ 28-52.
To achieve its goal of attaining monopoly power, Natsource has alleged that GFI misappropriated confidential information from Natsource, (see id. at ¶¶ 28-32), breached a confidentiality agreement with Natsource and used confidential information protected by that agreement in furtherance of its plan to co-opt Natsource's customers, see id., aided and abetted breaches of the fiduciary duties of Natsource's former brokers, see id. at ¶¶ 33-38, and tortuously interfered with the employment contracts between Natsource and such brokers, see id. at ¶¶ 33-38, 44-45.
As the result of this wrongdoing, GFI achieved a market share in excess of 60% of the Eastern Market, and Natsource, suffering millions of dollars in damages, can no longer effectively compete in that market. See id. at ¶¶ 39-43, 47-48.
No discovery has been conducted. The instant motion was heard and marked fully submitted on April 28, 2004.
The Facts
The facts are set forth in the Rule 56.1 Statement of GFI and have not been challenged by Natsource and consequently are not contested except as noted.
GFI and Natsource are both inter-dealer brokerage firms which engage in voice-based *630 brokerage, id. at ¶ 18, and function as intermediaries, matching the bids and offers for various products, including financial products and energy-related products. These bids and offers are made by institutions, primarily large banks and utility companies (the "dealers" or "customers"). Id. at ¶ 21.
Electric power, which is one of the products brokered by the Individual Defendants, is a highly homogeneous product, differentiated primarily by the region in which it is traded. Id. at ¶ 20. Customers of electric power do not necessarily use the power that is bought and sold. Id. at ¶ 21. Some customers, such as financial institutions, merely engage in speculative trading of the product. Other customers, such as utilities, may buy or sell electric power depending upon the needs of their respective companies. Id. at ¶ 20. Regardless of the purpose behind the purchase, customers of inter-dealer brokerage firms want one thing to efficiently get the best price for the purchase or sale of electric power. Id. at ¶ 18.
As the customers of inter-dealer brokerage firms which broker electric power are large financial institutions and utility companies, they are readily identifiable by all brokers of electric power and can be easily located in public sources such as OPIS/-Stalsby's Who's Who in Natural Gas & Power. Neither trade secrets nor proprietary information are involved in the identification of possible customers. The relationships between brokers and traders, by necessity, are personal, and they can only be developed over many years in both a business and, often, a non-business context. Id. at ¶ 4. Traders in the Eastern Market allow a select few brokers with whom they regularly do business to establish a direct phone line to traders, which operate like an intercom in which traders and brokers can instantly communicate with each other by simply touching a button and talking into a speaker. Id. at ¶ 25. The traders allow only a few of these lines to be installed at their desks. Only the brokers who have the closest relationship with them secure this privilege.
Each institutional customer routinely utilizes the services of competing inter-dealer brokerage firms simultaneously. No inter-dealer brokerage firm possesses a proprietary interest in any of these customers concerning the buying and/or selling of electric power. While an inter-dealer broker can act as an intermediary between or among customers regarding the negotiation of a price, the broker does not take a proprietary position during the transactional process, nor does (or can) he or she set the price or have any particular interest in whether prices of the electricity are higher or lower. In exchange for successfully completing transactions, inter-dealer brokerages earn commissions from both counter-parties to the trade.
The Motion To Dismiss The Complaint Is Denied
The complaint has stated a claim for attempted monopolization. In reviewing a 12(b)(6) motion, courts must "accept as true the factual allegations of the complaint, and draw all inferences in favor of the pleader." Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993) (citing IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1052 (2d Cir.1993)). However, "legal conclusions, deductions or opinions couched as factual allegations are not given a presumption of truthfulness." L'Europeenne de Banque v. La Republica de Venezuela, 700 F. Supp. 114, 122 (S.D.N.Y.1988). The complaint may only be dismissed when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 *631 L.Ed.2d 80 (1957); see also Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996). "This rule applies with no less force to a Sherman Act claim....'" McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232, 246, 100 S. Ct. 502, 62 L. Ed. 2d 441 (1980).
In determining a motion to dismiss, "only the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the pleadings and matters of which judicial notice may be taken are considered." Samuels v. Air Transport Local 504, 992 F.2d 12, 15 (2d Cir.1993). "A court's task in ruling on a Rule 12(b)(6) motion is `merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence to which might be offered in support thereof.'" Levitt v. Bear Stearns & Co., Inc., 340 F.3d 94, 101 (2d Cir.2003) (quoting Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir.1998)).
"No heightened pleading requirements apply in antitrust cases. `[A] short plain statement of a claim for relief which gives notice to the opposing party is all that is necessary in antitrust cases, as in other cases under the Federal Rules.'" Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir.2001) (quoting George C. Frey Ready-Mixed Concrete, Inc. v. Pine Hill Concrete Mix Corp., 554 F.2d 551, 554 (2d Cir.1977)). "The discovery process is designed to provide whatever additional sharpening of the issues is necessary." George C. Frey, 554 F.2d at 554. "[I]n antitrust cases in particular, the Supreme Court has stated that `dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly.'" Todd, 275 F.3d at 198 (quoting George Haug Co. v. Rolls Royce Motor Cars Inc. 148 F.3d 136, 139 (2d Cir.1998)).
Natsource has pleaded a claim for attempted monopolization. Section 2 of the Sherman Act makes it unlawful to "attempt to monopolize ... any part of the trade or commerce among the several States ..." 15 U.S.C. § 2 (1997). "To establish a claim for attempted monopolization, a plaintiff must prove: (1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize[1] and (3) a dangerous probability of achieving monopoly power." Tops Markets, Inc. v. Quality Markets, Inc. 142 F.3d 90, 99-100 (2d Cir.1998).
Natsource has alleged, inter alia, that GFI tortiously interfered with its contracts and business relationships, that it aided and abetted certain Natsource employees in breaching their fiduciary duties, that it intentionally breached a confidentiality agreement for the purposes of co-opting Natsource's business, and that it misappropriated Natsource's trade secrets. (Id. at ¶¶ 28-65, 75-83).
While the hiring of employees alone generally cannot give rise to antitrust liability, the hiring of a competitor's employees in conjunction with other wrongful acts, such as those alleged in the complaint, can constitute anticompetitive conduct in violation of the Sherman Act.
In Int'l Distribution Ctrs., Inc. v. Walsh Trucking Co., 812 F.2d 786 (2d Cir.1987), the Second Circuit reversed the denial of a motion for a judgment as a matter of law following a jury verdict in favor of plaintiff. The jury had found that plaintiff's competitor, Walsh, and certain of plaintiff's former employees conspired in restraint of trade when the former employees, prior to leaving plaintiff's employ for jobs with Walsh, met with Walsh and purportedly agreed to assist in Walsh's plan to wage a predatory *632 price war. Id. at 794. Finding the jury's verdict with respect to this claim to have been improperly based on speculation, the court emphasized "that the evidence must be evaluated in the context of the pending employer/employee relationships between the competitor and plaintiff's former employees." Id. at 795. The court noted that "[a]s a general policy matter, one firm's hiring of its competitor's employees does not present a `compelling case for antitrust intervention.'" Id. at 795 n. 7 (citing 3 P. Areeda & D. Turner, Antitrust Law, § 702b at 109 (1978)). Finding the plaintiff had not met its burden of proof, the court held that "[t]he pre-employment meetings between [Walsh] and [plaintiff's employees] were just as likely held to discuss their future employment relationship as to hatch a predatory pricing scheme." Id. at 795. The court stated that:
[o]ur conclusion might be altered had the [former employees] misappropriated trade secrets from [plaintiff] in the course of working for [the competitor]. The jury, however, found that [plaintiff] possessed no such trade secrets.
Id. at 795 n. 7.
While Walsh Trucking states that the hiring of a competitor's employees alone generally cannot result in an antitrust violation, it supports the proposition that the hiring of a competitor's employees in conjunction with other wrongful acts such as misappropriation of trade secrets or aiding or abetting breaches of loyalty can result in such violations. 813 F.2d at 795 n. 6 & 7;[2]see also 1 Callmann on Unfair Competition, Trademarks and Monopolies § 421 (4th Ed. West 2003) (Under § 2 of the Sherman Act, "[p]rocuring a breach of the fiduciary duty owed to a competitor by its employees can be a predatory tactic. So can conspiring with a competitor's employees to obtain the competitor's trade secrets.") (footnotes omitted). Since Natsource alleges, inter alia, that GFI aided and abetted breaches of fiduciary duty and that it misappropriated trade secrets, Natsource clearly has alleged the additional wrongdoing necessary to state a valid antitrust claim.
Summary Judgment Is Granted
"When a motion for summary judgment is made ... an adverse party may not rest upon the mere allegations ... of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party." Fed.R.Civ.P. 56(e). Here, Natsource has relied solely on the allegations of the complaint and did not oppose GFI's motion for summary judgment, either by raising issues of fact or *633 controverting the Rule 56.1 Statement in any way.
Rule 56.1 provides that "papers opposing [summary judgment] shall include a separate, short and concise statement of the material facts as to which it is contended there exists a genuine issue to be tried." Local Civil Rule 56.1(b). Accordingly, summary judgment is appropriate because the facts contained in defendant's statement of facts must be "deemed to be admitted." Local Civil Rule 56.1(c). See Dusanenko v. Maloney, 726 F.2d 82 (2d Cir.1984) (finding that facts set forth in movant's statement of undisputed facts were properly deemed admitted where the nonmovant failed to serve any opposing statement); Naantaanbuu v. Abernathy, 816 F. Supp. 218, 222 (S.D.N.Y.1993) (where the party failed to submit an opposing statement of material facts, "all facts in the defendants' [Rule 56.1 Statement] [were] deemed admitted").
To withstand a motion for summary judgment, on an attempted monopolization claim, a plaintiff must identify a plausible antitrust market and establish that defendant has sufficient market power in that market to create a dangerous probability of obtaining monopoly power. PepsiCo., Inc. v. Coca-Cola Co., 315 F.3d 101, 106 (2d Cir.2002); Tops Mkts., Inc. 142 F.3d at 100. The Second Circuit has "consistently interpreted both monopoly and the attempt to monopolize as requiring some measure of market power." Walsh Trucking, 812 F.2d at 791.
Monopoly power has been defined by the Supreme Court as "the power to control prices or exclude competition." United States v. E.I. du Pont de Nemours & Co. 351 U.S. 377, 391, 76 S. Ct. 994, 100 L. Ed. 1264 (1956). Thus, to succeed on its "Attempted Monopolization" claim, Natsource must be able to demonstrate that GFI's hiring of former Natsource brokers has created a dangerous probability that GFI will be able to raise prices above competitive levels, or to exclude competition in the relevant market defined in the complaint.
Natsource has failed to establish that the hiring of seven employees gives GFI the ability to raise its commissions. Commission rates are established through negotiations with customers who use multiple brokers and who have other avenues for trading electric power. Natsource has not advanced any plausible antitrust theory to explain how GFI possibly could exclude competition as a result of the hires at issue, especially since Natsource, along with at least ten other entities, now compete with GFI in voice-brokering.
In assessing whether GFI has a dangerous probability of achieving monopoly power, four elements must be considered: (1) whether Natsource has adequately alleged the relevant market; (2) market shares within the market; (3) barriers to entry in the relevant market; and (4) whether market power has or can be obtained.
The Relevant Market
Natsource has defined the relevant market in relying on the "Eastern Market" as the applicable one. "Absent an adequate market definition, it is impossible for a court to assess the anticompetitive effect of challenged practices." Re-Alco Indus., Inc. v. National Ctr. for Health Educ., 812 F. Supp. 387, 392 (S.D.N.Y.1993) (citation omitted).
In AD/SAT, Div. of Skylight, Inc. v. Associated Press, 181 F.3d 216, (2d Cir.1999), the Second Circuit laid out the standards for determining whether the relevant market has been adequately defined:
The relevant market for purposes of antitrust litigation is the "area of effective *634 competition" within which the defendant operates. Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327-28, 81 S. Ct. 623, 5 L. Ed. 2d 580 (1961). As the Court explained in United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 76 S. Ct. 994, 100 L. Ed. 1264 (1956): "The ... [relevant] market is composed of products that have reasonable interchangeability for the purposes for which they are produced-price, use and qualities considered." Id. at 404, 76 S. Ct. 994. Thus, products or services need not be identical to be part of the same market. See id. at 394, 76 S. Ct. 994 ("[W]here there are market alternatives that buyers may readily use for their purposes, illegal monopoly does not exist merely because the product said to be monopolized differs from others."). In economists' terms, two products or services are reasonably interchangeable where there is sufficient cross-elasticity of demand. Cross-elasticity of demand exists if consumers would respond to a slight increase in the price of one product by switching to another product.
Id. at 227. Further, "[t]he relevant market product must be identified, and the plaintiff must `allege how the net economic effect of the alleged violation is to restrain trade in the relevant market, and that no reasonable alternate source is available' to consumers in that market." Granite Partners, L.P. v. Bear, Stearns & Co. Inc., 58 F. Supp. 2d 228, 238 (S.D.N.Y.1999) (internal quotations and citations omitted).
Here, Natsource has alleged that the relevant market is limited to voice brokerage in a geographic area described as the "Eastern Market," which Natsource defines as including "the geographic regions known as NEPOOL (New England), New York, PJM (Pennsylvania, New Jersey and Maryland) and ANC." Complaint ¶ 16. Natsource does not explain what ANC is beyond stating that it "involves the buying and selling of electrical line capacity, as it is conducted in the Eastern market and other markets." Complaint. ¶ 19. Natsource further asserts in a conclusory fashion "[t]here is little or no cross elasticity of demand ... between the Eastern Market and other voice brokerage markets." Id. at ¶ 23. Natsource has asserted that the power grids are physically distinct, and the individual brokers only have relationships with individuals who trade within their limited areas.
Notwithstanding Natsource's demarcation of the Eastern Market, many transactions are undertaken by national customers that do not trade electric power for their own use, see id. at ¶ 21, and accordingly are not bound by any grid system or otherwise limited geographically to when they can buy or sell electric power.
Although Natsource has alleged that there is no cross-elasticity of demand between voice brokerage and electronic brokerage because electronic brokerage is appropriate only for less complex deals, GFI has established by factual assertion that the majority of the deals completed through voice brokers are considered to be less complex deals.
Although Natsource claims that direct deals between customers are rare and confined to short term trades, see id. at ¶ 27, inter-dealer brokers are not privy to the internal deals conducted by and among the customers. Peter Wise ("Wise"), the head of the Energy Division at GFI, stated in a sworn affidavit that, based on his experience in the energy brokerage business, "some very complex deals are negotiated directly between customers." Wise Affidavit, ¶ 17. GFI has established as a factual matter that voice brokerage is used by customers of electric power when they believe it offers the best prices as a result of the efficiencies involved.
*635 Even if it is assumed that Natsource had correctly defined the relevant market, it cannot demonstrate that GFI has or could obtain the necessary market share from which a finding of market power can be inferred. "The law in the Second Circuit is clear that a 19% market share cannot sustain a monopolization or attempt to monopolize claim." Cohen v. Primerica Corp., 709 F. Supp. 63, 66 (E.D.N.Y.1989) (citing Nifty Foods Corp. v. Great Atlantic and Pacific Tea Co., 614 F.2d 832, 841 (2d Cir.1980)). Even market shares of approximately 50% are insufficient to demonstrate market power where other factors such as low barriers to entry and strong competition, both of which are present here, exist. U.S. v. Waste Mgmt., Inc., 743 F.2d 976, 984 (2d Cir.1984); see also Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 490 (5th Cir.1984).
Natsource has alleged that GFI has obtained a 60% market share as a result of the employment of the Individual Defendants, but there are no publicly available figures to indicate the market shares of voice brokerage firms in any geographic area, calculated either by gross or net revenues, or even numbers of transactions.
In addition to GFI and Natsource, there are at least ten other competitors engaged in the voice brokerage of electric power and capacity within the area described by Natsource as the Eastern Market. In the aggregate, GFI's competitors collectively employ approximately sixty-five to seventy-five brokers in the so-called "Eastern Market." According to the evidence on the record, GFI's market share has not been established by the undisputed facts presented in this record. The rough measure of market share proposed by GFI is to determine the proportion of GFI's brokers in relations to the total number of brokers in the Eastern Market alleged by Natsource, which yields a figure of approximately 20%. As Natsource points out, this method is likely to be inaccurate because an accurate "calculation will include the volume of revenues or commissions generated by GFI and by its brokers." Natsource Opp. Brief at 21 n. 10. However, Natsource has provided no evidence to show that the 60% figure could be established, and has only made the conclusory assertion that "GFI's brokers generate the vast majority of the revenues and commissions in the Eastern Market." Id. On a motion for summary judgment, this failure to present any evidence is dispositive.
In any event, "[m]arket share is just a way of estimating market power, which is the ultimate consideration. When there are better ways to estimate market power, the court should use them." Ball Mem'l Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325, 1336 (7th Cir.1986) (citing Waste Mgmt., Inc.). These ways include a contemporaneous rise in price with increased market share. Menasha Corp. v. News America Marketing In-Store, Inc., 354 F.3d 661, 666 (7th Cir.2004). Natsource has not established showing market share sufficient to wield the market power required to raise prices to exclude competition.
In addition, barriers to entry in the voice brokerage market are low, and as such, there can be no dangerous probability of monopolization. Tops Mkts., Inc., 142 F.3d at 99. It is well settled that "market share analysis, while essential, is not necessarily determinative in the calculation of monopoly power ... [and][o]ther market characteristics must also be considered ... [including] the barriers to entry ..." Walsh Trucking, 812 F.2d at 791-92 (citations omitted). See American Prof'l Testing Service, Inc. v. Harcourt Brace Jovanovich Legal and Prof'l Publications, Inc., 108 F.3d 1147, 1154 (9th Cir.1997) *636 (citing Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1439 (9th Cir.1995)) (stating "[e]ven if [defendant] has a high market share, neither monopoly power nor a dangerous probability of achieving monopoly power, can exist absent evidence of barriers to new entry or expansion."); III P. Areeda & H. Hovenkamp, Antitrust Law ¶ 807g (2d ed.2002).
To enter the voice brokerage market, there is little impediment, if any. There are no regulatory requirements, and very little capital is needed to engage in the voice brokerage of electric power, or other commodities. Nothing more is required than office space, telephone lines, and the brokers themselves, who can be employed at relatively low base salaries, as Natsource's contracts with the Individual Defendants amply demonstrate.
In contrast to Natsource's allegations, the undisputed facts establish that individual brokers are far from unique. Significantly, six of the seven Individual Defendants were employed at-will and could have left at any time, the majority with only a months' notice. Also, Natsource's employment agreements with six of the seven Individual Defendants did not specify that the brokers' responsibilities were limited to the brokerage of electric power in the so-called "Eastern Market," nor did they limit their employment responsibilities to the brokerage of electric power.
New brokers are hired, trained and are conducting business in a matter of months and experienced brokers have the ability to change product areas and can handle different trading responsibilities as the market dictates. Also, experienced brokers frequently are hired from one market competitor to another.
The Department of Justice Antitrust Division's Merger Guidelines adopt a two-year test for determining whether there are barriers to entry in a market: if successful entry is likely within two years, there are no significant entry barriers and the government will not challenge mergers in that market. See generally, U.S. Dep't of Justice and FTC, 1997 Horizontal Merger Guidelines § 3.2; see also F.T.C. v. Cardinal Health, Inc., 12 F. Supp. 2d 34, 55-58 (D.D.C.1998) (recognizing the Merger Guideline's two year test); U.S. v. Syufy Enters., 903 F.2d 659, 666 (9th Cir.1990) (recognizing that there were no barriers to entry where competitors entered market within two years).[3] Thus, to establish sufficiently high entry barriers, Natsource would have to show that it would take at least two years for a competitor to enter the market and compete with GFI once it had obtained monopoly power. Here, however, finding brokers to service this market, whether by training, switching product areas or hiring brokers, and establishing phone lines and customer relationships, can be done in a matter of months.
Natsource does not allege that it would take years to enter the market, and Natsource's own employment agreements make clear, "timing" is not a serious concern in this market. Specifically, Natsource's non-compete clauses in the employment agreements at issue are for far less than two years indicating that it takes less than two years to use experienced brokers hired from competitors or *637 to train new brokers in order to enter or expand in the market.
There can be no violation of the antitrust laws unless the challenged conduct has harmed consumers, or at least has the potential to harm consumers, by increasing price and/or decreasing output.
[E]ven assuming that [plaintiff's] market share evidence were sufficient to create a triable issue as to market power, [plaintiff's] claim could not withstand summary judgment. "[A] showing of market power, while necessary to show adverse effect indirectly, is not sufficient. There must be other grounds to believe that the defendant's behavior will harm competition market-wide...."
CDC Technologies, Inc. v. IDEXX Laboratories, Inc., 186 F.3d 74, 81 (2d Cir.1999) (quoting K.M.B. Warehouse Distribs., Inc. v. Walker Mfg. Co., 61 F.3d 123, 129 (2d Cir.1995)). As explained by Judge Easterbrook, "[m]arket power means the ability to injure consumers by curtailing output and raising price; no possible injury, no market power, no market power, no violation; injury to the consumers is therefore an essential ingredient of liability." Flip Side Prods., Inc. v. Jam Prods., Ltd., 843 F.2d 1024, 1032 (7th Cir.1988) (citations omitted). See F.T.C. v. Indiana Fed'n of Dentists, 476 U.S. 447, 460-61, 106 S. Ct. 2009, 90 L. Ed. 2d 445 (1986) (stating that "`proof of actual detrimental effects, such as reduction of output,' can obviate the need for an inquiry into market power, which is but a `surrogate for detrimental effects.'") (quoting 7 P. Areeda, Antitrust Law ¶ 1511, p. 429 (1986)).
Here, there has been no reduction in output or change in price. There are multiple inter-dealer brokers currently doing business in the geographic market defined by Natsource, including Natsource. That has not changed by the movement of some brokers from one company to another. GFI has not increased prices, nor could it and still remain competitive. "[W]hen customers are not tied to particular sellers each seller may perceive the demand as highly elastic (meaning the customers will quickly switch if any one supplier raises price, which makes the increase unprofitable)." Ball Mem'l Hosp. Inc., 784 F.2d at 1332. The existence of price sensitive consumers prohibits any competitor from obtaining the power to control prices. Id. In fact, in the complaint, Natsource concedes that the customers of "power brokers expect that brokers will attempt to match offers and bids as closely as possible to obtain what is known as the `best price.'" (Id. at ¶ 18). If customers purchasing electric power desire the best prices, their multiple relationships with a variety of inter-dealer brokers permits them to shop for the best prices for the underlying commodities and the commissions both before or after the employment of the Individual Defendants by GFI.
Significantly, Natsource does not allege that prices have increased, or that they will increase, as a result of the employment changes. Paragraph 46 of the Complaint alleges, upon information and belief, that GFI has hired the Individual Defendants "in expectation that it will be able to raise, directly or indirectly, the prices that it charges its customers in the Eastern Market," without conclusory and self-serving allegations are insufficient to withstand the instant motion. See e.g., Three Crown Ltd. P'ship v. Salomon Bros., Inc., 906 F. Supp. 876, 887-88 (S.D.N.Y.1995).
Natsource has sought to resist summary judgment because there has been no discovery. However, the absence of discovery alone does not necessarily bar summary judgment. Connecticut Nat'l Bank v. Trans World Airlines, Inc., 762 F. Supp. 76, 79 (S.D.N.Y.1991) (holding that the court was not precluded from *638 entering summary judgment due to the fact that no discovery had been conducted). Where a non-movant simply relies on bare allegations, dismissal is appropriate prior to discovery. Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 251 (2d Cir.1985). For example, the Eastway court dismissed an antitrust claim, stating that "[a] bare assertion that evidence to support a fanciful allegation lies within the exclusive control of the defendants, and can be obtained only through discovery, is not sufficient to defeat a motion for summary judgment." 762 F.2d at 251 (citations omitted). An "opposing party's facts must be material and of a substantial nature, not fanciful, frivolous, gauzy, spurious, irrelevant, gossamer inferences, conjectural, speculative, nor merely suspicions." 6 J. Moore, Federal Practice ¶ 56.15(3) at 56-486 to 65-487 (2d ed.1976) (cited by Contemporary Mission Inc. v. U.S. Postal Serv., 648 F.2d 97, 107 n. 14 (2d Cir.1981)).
"[I]f the nonmoving party does not [set forth specific facts showing there is a genuine issue of material fact] summary judgment will be entered against him." Gan v. City of New York, 996 F.2d 522, 532 (2d Cir.1993). Here, Natsource not only admitted the facts contained in Defendants' Rule 56.1 Statement, but failed to set forth any disputed substantial facts whatsoever, relying solely on allegations in an unverified complaint. Summary judgment may properly be granted in antitrust cases and regularly is, where, as here, there is no viable claim based on the undisputed facts. See AD/SAT, Div. of Skylight, Inc. v. Associated Press, 181 F.3d 216, 229-30 (2d Cir.1999); CDC Techs., 186 F.3d at 81.
In any event, Natsource failed to submit a Rule 56(f) affidavit which is required where discovery is allegedly needed to oppose a summary judgment motion. See Fed.R.Civ.P. 56(f). Pursuant to well-settled law, even "[a] reference to Rule 56(f) and to the need for additional discovery in a memorandum of law in opposition to a motion for summary judgment is not an adequate substitute for a Rule 56(f) affidavit, and the failure to file an affidavit under Rule 56(f) is itself sufficient grounds to reject a claim that the opportunity for discovery was inadequate." Paddington Partners v. Bouchard, 34 F.3d 1132, 1137 (2d Cir.1994) (citations omitted); Gurary v. Winehouse, 190 F.3d 37 (2d Cir.1999) (affirming Judge Stanton's grant of summary judgment and denying opportunity for discovery in securities case where plaintiff failed to satisfy Rule 56(f) test). This is clearly insufficient under the law:
If facts essential to support opposition to the summary judgment motion are not available, the nonmoving party may seek a continuance under Rule 56(f) to permit affidavits to be obtained or discovery to be had, but may not rely simply on conclusory statements or on contentions that the affidavits supporting the motion are not credible, or upon the mere allegations or denials of the moving party's pleading.
Gan, 996 F.2d at 532 (citations and quotations omitted).
To be a sufficient affidavit, it "must include the nature of the uncompleted discovery; how the facts sought are reasonably expected to create a genuine issue of material fact; what efforts the affiant had made to obtain those facts; and why those efforts were unsuccessful." Paddington, 34 F.3d at 1138. Nor does Natsource, even in its legal memorandum, explain how discovery would lead to evidence to create material issue of fact. See Hudson River Sloop Clearwater, Inc. v. Department of the Navy, 891 F.2d 414, 422 (2d Cir.1989) (denying request for discovery to oppose summary judgment because "even if plaintiffs had obtained what they *639 stated would be uncovered, the information would have been insufficient to defeat summary judgment"). Accordingly, Natsource's request for discovery to avoid summary judgment must be denied.
Because Natsource has failed to allege a relevant market, has not shown that GFI has a sufficient market share to demonstrate market power, has not shown that there are significant barriers to entry, and has not shown that the challenged conduct would harm consumers, it has not demonstrated that GFI's actions create a dangerous probability of obtaining monopoly power. Accordingly, Natsource's claim for attempted monopolization under Section 2 of the Sherman Act is dismissed.
Natsource's Remaining New York Law Claims Will Be Dismissed For Lack Of Subject Matter Jurisdiction
According to 28 U.S.C. § 1367(c)(3), a district court may decline to exercise supplemental jurisdiction over state law claims if the court dismisses all claims over which it has original jurisdiction. See United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966) (holding "[c]ertainly if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well"); Jordan Inv. Co. v. Hunter Green Inv., Ltd., 154 F. Supp. 2d 682, 695 (S.D.N.Y.2001) (after dismissing RICO claim, dismissing state law claims without prejudice); Yellow Page Solutions, Inc. v. Bell Atlantic Yellow Pages, No. 00 Civ. 5663, 2001 WL 1468168, at *15 (S.D.N.Y. Nov.19, 2001) (after dismissing antitrust claim, dismissing state law claims without prejudice); Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir.1994).
The Court declines to exercise supplemental jurisdiction over its New York law based claims, dismissing the complaint against all defendants in its entirety.
Conclusion
For the reasons stated above, GFI's Rule 12(b)(6) motion to dismiss Natsource's complaint is denied. The motion for summary judgment dismissing Natsource's claims for attempted monopolization under Section 2 of the Sherman Act is granted, and the remaining New York State law claims are dismissed without prejudice for lack of subject matter jurisdiction.
It is so ordered.
NOTES
[1] GFI has not challenged Natsource's complaint on the grounds that Natsource has not sufficiently pleaded that GFI had a specific intent to monopolize.
[2] Other cases cited by GFI are similarly unavailing. In Adjusters Replace-A-Car, Inc. v. Agency Rent-A-Car, Inc., 735 F.2d 884 (5th Cir.1984), a case in which the court affirmed judgment as a matter of law, the court stated that a valid antitrust claim can be predicated "on the basis of evidence that the defendant had induced the plaintiff's employee to act disloyally ..." Id. at 894 (emphasis added). However, the court found that plaintiff's former employee did not act disloyally under the specific facts of this case. Id.
In Abcor Corp. v. AM Int'l, Inc., 916 F.2d 924 (4th Cir.1990), the court considered the appeal of a grant of summary judgment dismissing an antitrust case predicated in part on the defendant's hiring of two of plaintiff's employees. Id. at 930. The court affirmed, finding, based on the unique facts of that case, that "nothing suspicious taint[ed] the hiring of the two employees." Id. Thus in Abcor, after being allowed to conduct discovery, plaintiff failed to marshal evidence in support of its claim. Nothing in this case supports the proposition that Natsource's claims now should be dismissed as a matter of law.
[3] Although the Merger Guidelines do not carry the force of law, the courts note that they are helpful in providing an analytical framework for evaluating antitrust cases. See New York v. Kraft General Foods, Inc. 926 F. Supp. 321, 359 (S.D.N.Y.1995) (relying on the Merger Guidelines to determine the relevant product market); see also Waste Mgmt., Inc. 743 F.2d at 982 (using Merger Guidelines to evaluate ease of market entry); Ball Mem'l Hosp., Inc., 784 F.2d at 1336 (utilizing Merger Guidelines to calculate market share).
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2504814/
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126 F.Supp.2d 479 (2000)
UNITED STATES of America, Plaintiff,
v.
Wiley T. NICHOLS, Jr., Defendant.
No. 1:92-CR-01.
United States District Court, W.D. Michigan, Southern Division.
December 15, 2000.
*480 Donald Daniels, U.S. Attorney's Office, Grand Rapids, MI, for U.S.
Wiley T. Nichols, Leavenworth, KS, Pro se.
OPINION
ENSLEN, Chief Judge.
This matter is before the Court on Defendant Wiley T. Nichols, Jr.'s ("Nichols") Motion for Correction of Sentence pursuant to 28 U.S.C. § 2255. The Court denies his Motion.
I. Introduction
On January 8, 1992, the United States Attorney filed a single count Indictment in the Western District of Michigan charging Nichols with being a felon in possession of a firearm in violation of 18 U.S.C. *481 § 922(g)(1). The Indictment also charged that Nichols should receive an enhanced sentence under 18 U.S.C. § 924(e) because he had at least three prior convictions for violent felonies: two breaking and entering convictions under Michigan Compiled Laws § 750.110, and an armed robbery conviction under Michigan Compiled Laws § 750.529. On January 17, 1992, Nichols, accompanied by counsel, appeared before this Court and pled guilty to Count One of the Indictment. Nichols filed no direct appeal of his case and filed no Motion pursuant to § 2255 at that time. On July 6, 2000, Nichols filed his Motion pursuant to § 2255. The government filed a response on August 23, 2000. Without leave of this Court, Nichols filed a traverse on September 6, 2000.
II. Time Limit under § 2255
In his present Motion, Nichols argues that he received an improper sentence from this Court because one of the requisite elements for his enhanced sentence under 18 U.S.C. § 924(e)(1) did not exist; namely, he did not have three prior violent felony convictions.[1] Nichols asserts that five of the six prior felony convictions used by the Government to enhance his sentence were not violent felonies for purposes of 18 U.S.C. § 924(e)(1)(B), and therefore his sentence for violation of 18 U.S.C. § 922(g) should not have been enhanced pursuant to 18 U.S.C. § 924(e)(1). Second, he asserts that under Michigan law, his rights were restored as to three of the prior convictions, and that this prohibits the Government from using these offenses as enhancements pursuant to 18 U.S.C. § 921(a)(20).
Without addressing Nichols' arguments in his Motion for Correction, the Court finds that his Motion fails because it is time-barred under 28 U.S.C. § 2255. Section 2255 provides the following:
A 1-year period of limitation shall apply to a motion under this section. The limitation period shall run from the latest of
(1) the date on which the judgment of conviction becomes final;
(2) the date on which the impediment to making a motion created by governmental action in violation of the Constitution or laws of the United States is removed, if the movant was prevented from making a motion by governmental action;
(3) the date on which the right asserted was initially recognized by the Supreme Court, if that right has been newly recognized by the Supreme Court and made retroactively applicable to cases on collateral review;
(4) the date on which the facts supporting the claim or claims presented could have been discovered through the exercise of due diligence.
The Sixth Circuit Court of Appeals has stated that a one-year grace period be applied to motions under 28 U.S.C. § 2255 for all cases which became final before enactment of this time limitation. The grace period started on April 24, 1996, see Ellis v. United States, 1998 WL 777995 (6th Cir. Oct. 21, 1998), United States v. Flores, 135 F.3d 1000, 1006-07 (5th Cir. 1998), and ended April 24, 1997. Hyatt v. United States, 207 F.3d 831, 832 (6th Cir. 2000); Rogers v. United States, 180 F.3d 349, 355 (1st Cir.1999).
Nichols pled guilty to being a felon in possession of a firearm on January 17, 1992. Judgment in his case was entered on April 10, 1992. Nichols filed no direct appeal, and the Judgment became final on April 21, 1992. Nichols did not file his Motion for Correction until July 6, 2000. This filing date puts the timing of his *482 Motion well beyond the 1-year grace period adopted by the Sixth Circuit Court of Appeals for Motions under 28 U.S.C. § 2255. Therefore, Nichols' Motion is time-barred under the 1-year grace period applied to 28 U.S.C. § 2255 motions by the Sixth Circuit Court of Appeals.
Notwithstanding this critical timing defect to his Motion, Nichols' Motion fails to meet any of the four criteria set forth in the statute. As indicated above, Nichols is time-barred from now making this Motion because he did not file it within the 1-year time limitation. In his original Motion, Nichols alleges no government-created impediment that violated the Constitution or laws of the United States and prevented him from filing the Motion in a timely manner. In his Traverse, Nichols argues that he did have an impediment to filing this present Motion under subsection (2), and that the recent removal of this impediment makes his Motion timely. Nichols maintains in his Traverse, for the first time, that because he was challenging one of these state-law convictions in the state system, and did not receive a final order on that conviction until July 27, 1999, this means his § 2255 Motion is timely. Nichols cites to Custis v. United States, 511 U.S. 485, 114 S.Ct. 1732, 128 L.Ed.2d 517 (1994), Rust v. Zent, 17 F.3d 155 (6th Cir.1994), and Rogers v. Howes, 144 F.3d 990 (6th Cir.1998), in support of this proposition. Nichols argument is mistaken and his cites are off the mark.
Nichols has failed to point out how § 2255(2) applies to his case. Simply because Nichols waited a significant period of time before challenging his state-court conviction does not mean that there was a governmentally created impediment in violation of the Constitution or laws of the United States that prevented Nichols from making a timely motion under § 2255. Nothing the government did, either at the state or federal level, caused Nichols to delay in challenging his state-court conviction. Nothing done by the government violated the Constitution or any laws of the United States. Therefore, subsection (2) simply does not apply to this case.
Contrary to Nichols' argument, the dicta in Custis does not support his position that this was a government-created impediment that prevented him from filing this Motion. The Supreme Court in Custis held that "§ 924(e) does not permit [a defendant] to use the federal sentencing forum to gain review of his state convictions." Custis, 511 U.S. at 487, 114 S.Ct. 1732. The Supreme Court went on to say in dicta that a defendant, "who was still `in custody' for purposes of his state conviction at the time of his federal sentencing under § 924(e), may attack his state sentences in [the state court] or through federal habeas corpus. If [the defendant] is successful in attacking these state sentences, he may then apply for reopening of any federal sentences enhanced by the state sentences." Id. Nichols was not in state custody when attacking his state conviction, and he was not successful in that attack. These two facts mean that the dicta in Custis provides no support for his argument.
Nichols' cites to Rust and Rogers are equally unavailing in his case. Both cases dealt with the exhaustion of state-law remedies under 28 U.S.C. § 2254, and not governmentally created impediments for filing § 2255 motions. They provide no support for the proposition that his late appeal in the Michigan court system is somehow an impediment, the removal of which would allow him to file a late § 2255 motion under subsection (2). These cases simply do not implicate subsection (2), and do not justify Nichols' untimely Motion.
Neither in his Motion nor in his Traverse does Nichols assert a newly recognized right by the United States Supreme Court made retroactively applicable to his case. Finally, Nichols alleges no new facts in his case that could not have been discovered within the 1-year limitation period. Because Nichols' Motion meets none of the requisite statutory criteria that might have allowed him to file this Motion more than eight years after the final Judgment in his *483 case, his Motion is time-barred under 28 U.S.C. § 2255.
III. Violent Felonies under 18 U.S.C. § 924(e)(2)
Putting aside the fact that Nichols' Motion is time-barred, his Motion fails with regard to the issue of how many violent felonies he had at the time of his offense under the statute. Nichols argues that because five of his six prior convictions were not within the definition of a "violent felony" as defined by 18 U.S.C. § 924(e)(2)(B)(i) or (ii), he should not have been sentenced to the mandatory fifteen years pursuant to 18 U.S.C. § 924(e)(1).
Section 924(e)(2)(B) provides the following:
the term "violent felony" means any crime punishable by imprisonment for a term exceeding one year ... that
(i) has as an element the use, attempted use, or threatened use of physical force against the person of another; or
(ii) is burglary, arson, or extortion, involves use of explosives, or otherwise involves conduct that presents a serious potential risk of physical injury to another.
In determining whether a predicate offense is a violent felony warranting an enhancement for sentencing purposes under § 924(e), courts should use a "categorical approach." Taylor v. U.S., 495 U.S. 575, 601, 110 S.Ct. 2143, 109 L.Ed.2d 607 (1990); United States v. Houston, 187 F.3d 593, 594 (6th Cir.1999). The "categorical approach" means that a court "should not use the actual facts of an individual's prior conviction but should instead look to the statutory definition of the crime charged." Houston, 187 F.3d at 594.
Nichols' first offense, breaking and entering a business, as defined by Michigan law,[2] falls within the ambit of "burglary." United States v. Fish, 928 F.2d 185, 188 (6th Cir.1991) ("A conviction under the Michigan statute for breaking and entering ... a business place would constitute burglary under the Taylor definition.") The fact that Nichols' breaking and entering offense was of an unoccupied business is of no consequence. Under the guidelines set out in Taylor, "[a]ny specific, underlying facts regarding the offense should be irrelevant to a sentencing court's determination." United States v. Arnold, 58 F.3d 1117, 1121 (6th Cir.1995); United States v. Melton, 149 F.3d 1185, at *1 (6th Cir. June 25, 1998) ("under no circumstances should a court consider the actual criminal conduct."). Thus, Nichols' conviction for breaking and entering a business is a "violent felony" for purposes of § 924(e)(2)(B).
Nichols second offense, escape from prison, is also a violent felony under § 924(e). See Houston, 187 F.3d at 593. As indicated previously, burglary of a business is a violent felony for purposes of § 924(e) making Nichols' third offense for burglary a violent felony under this section. Finally, Nichols' fourth offense, armed robbery, is also a violent felony under § 924(e). See United States v. Brady, 988 F.2d 664 (6th Cir.1993). These four violent felonies place Nichols squarely within the scope of § 924(e)(1) which requires three previous violent felony convictions for a sentence of fifteen years. Therefore, Nichols' sentence was in accordance with the requirements of 18 U.S.C. § 924(e)(1), and his Motion fails on this issue.
IV. Restoration of Civil Rights under 18 U.S.C. 921
Nichols' most substantial and problematic argument is that because his civil rights *484 were restored under Michigan law for his prior convictions, he should not have received the enhanced sentence under § 924(c). He bases this argument on the Sixth Circuit Court of Appeals' recent ruling in Hampton v. United States, 191 F.3d 695 (6th Cir.1999). Nichols contends that according to the holding in Hampton, three of his six state-law convictions cannot be used for enhancement purposes under §§ 922(g) and 924(e) because his civil rights for these convictions were restored pursuant to § 921(a)(20) and Michigan law.
Sections 921(a)(20), 922(g)(1), and 924(e) all dovetail together, and thereby define both the crime of, and the prison time for being a felon in possession of a firearm. Section 922(g)(1) makes it a crime for a felon to possess a firearm. Section 924(e) establishes the enhancements and corresponding sentences for this crime. Finally, § 921(a)(20) spells out which jurisdiction's laws define what constitutes a conviction for purposes of this statute.
Nichols' argument hinges on § 921(a)(20), and the retroactive application of any case law interpreting this section. Section 921(a)(20) provides, in relevant part, the following:
What constitutes a conviction of such a crime shall be determined in accordance with the law of the jurisdiction in which the proceedings were held. Any conviction which is expunged, or set aside or for which a person has been pardoned or has had his civil rights restored shall not be considered a conviction for purposes of this chapter, unless such pardon, expungement, or restoration of civil rights expressly provides that the person may not ship, transport, possess or receive firearms.
18 U.S.C. § 921(a)(20).
Until its decision in Hampton, the Six Circuit had held that "Michigan law [did] not fully restore a felon's civil rights for purposes of § 922(g) because a Michigan felon [was] restricted from serving on a jury." Hampton, 191 F.3d at 701. Upon the decision of a Michigan Court of Appeals in Froede v. Holland Ladder & Mfg. Co., 207 Mich.App. 127, 523 N.W.2d 849 (1994), the Sixth Circuit revisited the issue of restoration of civil rights in Hampton. See also United States v. Tait, 54 F.Supp.2d 1100 (S.D.Ala.1999) (applying the holding in Froede); United States v. Bolton, 32 F.Supp.2d 461 (S.D.Tex.1999) (same).
In Hampton, the defendant was convicted under § 922(g) because he possessed a firearm and had a single prior felony offense. More than eight years had passed between the time of the felony conviction and the charged § 922(g) offense. The Hampton Court held that since under the decision in Froede, Michigan law restored the defendant's right to serve on a jury, in addition to his right to hold office and right to vote, that the defendant's civil rights had been restored under Michigan law. Given the fact that the defendant's civil rights were restored under Michigan law, his prior felony conviction could not count against him under § 921(a)(20) for purposes of § 922(g)(1). The Hampton Court vacated the defendant's sentence, and remanded the case to the district court to determine whether or not after its ruling, the defendant could establish actual innocence in order to overcome his § 2255 procedural default on this issue.
Nichols argues that according to the holding in Hampton, he should not have received a sentence enhancement under § 924(e)(1) because he did not have three prior violent felonies convictions. He bases this assertion on the premise that the decision in Hampton should retroactively apply to his § 2255 Motion, and that under Hampton, he did not have three prior violent felony convictions at the time of his recent offense. The threshold question then is whether the decision in Hampton can be applied retroactively to Nichols' case.
*485 A. Retroactive Application of a New Rule
In order to arrive at the issue of whether Nichols' civil rights were restored for purposes of §§ 921, 922, and 924, the Court must first determine if decision in Hampton is to be retroactively applied to Nichols' case.
In Griffith v. Kentucky, 479 U.S. 314, 328, 107 S.Ct. 708, 93 L.Ed.2d 649 (1987), the United States Supreme Court held that "a new rule for the conduct of criminal prosecutions is to be applied retroactively to all cases, state or federal, pending on direct review or not yet final." The Court later circumscribed this holding for purposes of cases on collateral review in its decision in Teague v. Lane, 489 U.S. 288, 109 S.Ct. 1060, 103 L.Ed.2d 334 (1989). In Teague, a § 2254 case, the Court stated that "new constitutional rules of criminal procedure will not be applicable to those cases which have become final before the new rules are announced." Id. at 310, 109 S.Ct. 1060. The Court in Teague also described two exceptions to this general rule: (1) "a new rule should be applied retroactively if it places `certain kinds of primary, private individual conduct beyond the power of the criminal lawmaking authority to proscribe;'" and (2) "a new rule should be applied retroactively if it requires the observance of those procedures that ... are implicit in the concept of ordered liberty.'" Id. at 311, 109 S.Ct. 1060 (quoting Mackey v. United States, 401 U.S. 667, 692, 693, 91 S.Ct. 1160, 28 L.Ed.2d 404 (1971) (Harlan, J., concurring in part and dissenting in part)).
Based on these decisions, "the central issue of whether retroactivity applies is whether Teague applies." Murr v. United States, 200 F.3d 895, 905 (6th Cir.2000). "Teague applies if the new case for which retroactive effect sought announces a procedural rule; if the new case announces a substantive rule, Teague does not apply." Id. (citing Bousley v. United States, 523 U.S. 614, 118 S.Ct. 1604, 140 L.Ed.2d 828 (1998)). Hampton involves the substantive construction of a criminal statute. The Hampton Court examined the meaning of the term "conviction" in § 921(a)(20) in light of the decision in Froede. That Court determined that according to Froede, under Michigan law, a person does not have a "conviction" for purposes of §§ 921(a)(20) and 922(g)(1) if he has completed his sentence. Therefore, in light of Bousley, Hampton applies retroactively because it sets forth substantive law.
B. Procedural Default
The determination that Hampton can be applied retroactively does not end the analysis. The scenario in this case mirrors that confronted by the United States Supreme Court in Bousley. Nichols never raised the issue of restoration of civil rights at the time of sentencing, nor did he raise the issue on direct appeal. Instead, he waited some eight years before raising the issue of his sentence in a motion under § 2255 after the decision in Hampton.
As enunciated by the United States Supreme Court, "[h]abeas review is an extraordinary remedy and `will not be allowed to do service for an appeal.'" Bousley, 523 U.S. at 620-23, 118 S.Ct. 1604 (quoting Reed v. Farley, 512 U.S. 339, 354, 114 S.Ct. 2291, 129 L.Ed.2d 277 (1994)). "Where a defendant procedurally defaults a claim by failing to raise it on direct review, the claim may be raised in habeas only if the defendant can first demonstrate either `cause' and actual `prejudice,' or that he is `actually innocent.'" Id. (citations omitted); Hampton v. United States, 191 F.3d 695, 698-99 (6th Cir.1999). "Cause," according to the holding in Bousley, cannot be grounded in a defendant's belief in the "futility" of his argument. Bousley, 523 U.S. at 623, 118 S.Ct. 1604 ("`futility cannot constitute cause if it means simply that claim was unacceptable to that particular court at that particular time.'") (quoting Engle v. Isaac, 456 U.S. 107, 130 n. 35, 102 S.Ct. 1558, 71 L.Ed.2d 783 (1982)). Nor can a defendant show "cause" based on *486 the belief that the legal basis for his or her claim is not reasonably available at the time. Bousley, 523 U.S. at 622, 118 S.Ct. 1604.
Although the government may have waived the procedural bar of "cause" and "prejudice" by failure to raise the issue,[3] the Court need not address the waiver issue because of its conclusion that Nichols cannot demonstrate "cause" under Bousley. Grant v. United States, 1998 WL 808240, at *2 (6th Cir. Nov. 13, 1998). Nichols has provided nothing persuasive to this Court regarding "cause" for his failure to file a direct appeal of his sentence under the standard enunciated in Bousley. Although prior to Hampton, the Sixth Circuit's interpretation of the restoration of civil rights under Michigan law bent against Nichols, that decision did not prevent Nichols from raising that issue on direct appeal. See United States v. Gilliam, 1996 WL 272392, 86 F.3d 1156 (6th Cir. May 20, 1996) (raising the issue post-Driscoll); United States v. Reiche, 1995 WL 6242, 47 F.3d 1172 (6th Cir. Jan. 5, 1995) (same); Fish v. United States, 1994 WL 577177, 38 F.3d 1215 (6th Cir. Oct. 18, 1994) (same); White v. United States, 1994 WL 514524, 36 F.3d 1098 (6th Cir. Sept. 20, 1994) (same).
Nor can Nichols assert actual innocence. Based on the facts and admissions contained in his own Motion, Nichols was a felon when he possessed the firearm in question. Therefore, the Court finds that Nichols procedurally defaulted his claims, and the Court must deny his Motion. The Sixth Circuit's reasoning and decisions in Gilliam v. United States, 2000 WL 553919 (6th Cir. Apr. 28, 2000) (stating that defendant did not procedurally default his claim and need not show cause and prejudice because he had raised it on direct appeal, and there was an intervening change in the law under Hampton that allowed him to raise the issue again in a § 2255 motion), and Hampton support this determination.
V. Conclusion
Based on the tardiness of his Motion under § 2255, and his inability to show "cause" for failure to raise the issue at sentencing or on direct appeal, the Court must deny Nichols' Motion. In finding that Nichols' Motion is both time-barred and procedurally-defaulted, the Court need not reach the issue of whether Nichols' civil rights were restored under Michigan law as to certain of his prior convictions.
VI. Certificate of Appealability
This Court will grant a certificate of appealability for Nichols' Motion under 28 U.S.C. § 2253(c)(1)(B). Under Section 2253(c)(2), a certificate of appealability ("COA") may issue "only if the applicant has made a substantial showing of the denial of a constitutional right." 28 U.S.C. § 2253(c)(2). The standard for a certificate of appealability when a district court denies a petition on procedural grounds is as follows:
a COA should issue when the prisoner shows, at least, that jurist of reason would find it debatable whether the petition states a valid claim of the denial of a constitutional right and that jurist of reason would find it debatable whether the district court was correct in its procedural ruling.
Slack v. McDaniel, 529 U.S. 473, 120 S.Ct. 1595, 1604, 146 L.Ed.2d 542 (2000).
Nichols has made a "substantial showing of the denial of a constitutional right" in his Motion. As indicated above, Nichols' arguments are compelling, regardless of the lethal timing and procedural defects in his Motion. His issue does present a showing of the denial of a constitutional right, and a jurist of reason would find it *487 debatable whether Nichols stated a valid claim of a denial of a constitutional right.
ORDER
IT IS HEREBY ORDERED that Defendant Nichols' Motion for Correction of Sentence (Dkt. No. 14) is DENIED.
In accordance with the Opinion issued this date,
IT IS FURTHER ORDERED that a certificate of appealability for Defendant Nichols' Motion for Correction of Sentence on the issues of the retroactivity of Hampton and "cause" for procedural default (Dkt. No. 14) is GRANTED.
NOTES
[1] In his Motion for Correction, Nichols asserts that this Court can correct his sentence pursuant to 18 U.S.C. § 3582(c). Subsection 3582(c)(1)(B) has nothing to do with this Court's ability to vacate, set aside, or correct a sentence pursuant to 28 U.S.C. § 2255. Therefore, the appropriate vehicle to address Nichols' Motion is § 2255, and the Court need not discuss Nichols' reference to § 3582.
[2] "Any person who shall break and enter with intent to commit any felony, or any larceny therein, any tent, hotel, office, store, shop, warehouse, barn, granary, factory or other building, structure, ... or any unoccupied dwelling house, shall be guilty of a felony punishable by imprisonment in the state prison not more than 10 years." Mich.Comp. Laws § 750.110.
[3] The Court is under no obligation to raise the issue of procedural bar sua sponte. See Mathews v. United States, 11 F.3d 583, 587 n. 2 (6th Cir.1993); Grant v. United States, 1998 WL 808240, at *2 n. 3 (6th Cir. Nov. 13, 1998).
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126 F.Supp.2d 730 (2001)
Robert VOGEL, Sam Vogel, Dr. John McCracken, John Mazarra and Alan B. Werner, Plaintiffs,
v.
SANDS BROS. & CO., LTD., Defendant.
No. 98 Civ. 2527 BDP.
United States District Court, S.D. New York.
January 4, 2001.
*731 *732 Jill Rosell, Thomas M. Skelton, Lowey Dannenbeg Bemporad & Selinger, White Plains, NY, for plaintiffs.
Walter C. Carlson, R. Rene Pengra, Sidley & Austin, Chicago, IL, for defendant Conseco.
Richard A. Roth, Ira Meyerwitz, Littman Krooks Roth & Ball P.C., New York City, for defendant Sands Bros.
MEMORANDUM DECISION AND ORDER
BARRINGTON D. PARKER, Jr., District Judge.
By Memorandum Decision and Order dated March 30, 1999, this Court dismissed the original complaint (the "Complaint") filed by lead plaintiff David Schnell on behalf of a purported class of public investors in NAL Financial Group, Inc. ("NALF"). See Schnell v. Conseco, 43 F.Supp.2d 438 (S.D.N.Y.1999). The Complaint alleged violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., against Conseco, Inc. ("Conseco"), and violations of § 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder by the Securities Exchange Commission (the "SEC"), 17 C.F.R. § 240.10b-5, against Sands Brothers & Co., Ltd. ("Sands").
The RICO claim against Conseco was dismissed with prejudice because plaintiff failed to adequately allege a scheme to defraud, a pattern of racketeering activity or causation. The § 10(b) and Rule 10b-5 claims were dismissed against Sands without prejudice because the Complaint failed to satisfy the heightened pleading standards set forth under the Private Securities Litigation Reform Act (the "PSLRA"), 15 U.S.C. § 78u-4(b) for alleging misrepresentations and omissions, and because it failed to adequately allege scienter. This Court granted leave to amend the Complaint against Sands.
On April 29, 1999, lead plaintiffs Robert Vogel, Sam Vogel, Dr. John McCracken, John Mazarra and Alan B. Werner,[1] on *733 behalf of the same purported class of investors of NALF, filed an amended complaint (the "Amended Complaint") against Sands. The Amended Complaint again alleges violations of § 10(b) of the Exchange Act and Rule 10b-5.[2] Before this Court is defendant's motion to dismiss under Fed. R.Civ.P. 12(b)(6) and 9(b). For the reasons stated below, defendant's motion is granted.
BACKGROUND
Many of the facts relevant to this dispute are set forth in this Court's prior decision, with which familiarity is assumed. See Schnell, 43 F.Supp.2d at 438. For purposes of deciding this motion, the Court is obligated to construe the pleadings in favor of the plaintiffs, and must accept as true all factual allegations made in the Amended Complaint. See Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir.1998); Serrano v. 900 5th Avenue Corp., 4 F.Supp.2d 315, 316 (S.D.N.Y.1998). All reasonable inferences must be made in plaintiffs' favor. In re Blech Securities Litigation, 961 F.Supp. 569, 579 (S.D.N.Y. 1997) (citing Hernandez v. Coughlin, 18 F.3d 133, 136 (2d Cir.), cert. denied, 513 U.S. 836, 115 S.Ct. 117, 130 L.Ed.2d 63 (1994)). The following facts are construed accordingly.
Conseco is an Indiana based financial services holding company, engaged in the development, marketing and administration of annuity, supplemental health and individual life insurance products. Sands is an investment banking firm, a broker and dealer in securities registered with the SEC, a member firm of the New York Stock Exchange and of the National Association of Securities Dealers ("NASD"). Conseco is alleged to be Sands' most valued client, and certain executive officers of Conseco are claimed to share a long-lasting relationship with Sands' co-founders, Martin and Steven Sands, spanning over fourteen years.
NALF is a Delaware corporation founded in 1991. It is engaged in the purchase and servicing of automobile loan and lease contracts. One year after becoming a public company on November 30, 1994, NALF began securitizing its loan portfolios whereby it would periodically sell an asset pool of various loan contracts to a trust. In turn, the trust would pay NALF with proceeds raised by issuing securities to investors in the form of notes and certificates backed by the assets of the trust. NALF collected payments due on the loan contracts, receiving an annual servicing fee equal to 3% of the principal of the outstanding loans.
The collections of interest and principal on the loan contracts were used to pay interest and principal due on the securities issued by the trust. Any payments in excess of those needed to service the securities and to pay other fees and expenses of the trust were deposited into a reserve account to the extent necessary to maintain a prescribed operating level. Any remaining cash was paid directly to NALF. The gains on the sale of the loan contracts under this securitization program enabled NALF to record significantly increased revenues in each of the quarters during which a securitization was completed.
NALF's stock price remained steady throughout most of 1996, peaking at over $16 per share. From late 1996, however, NALF's stock started to decline, particularly after a February 1997 announcement of reserve deficiencies deemed to be attributable to weak underwriting guidelines in the loan contracts from December 1995 through March 1996. On March 23, 1998, *734 NALF filed for protection pursuant to Chapter 11 of the bankruptcy laws. No claims are asserted in this action against NALF.
The gravamen of the Amended Complaint revolves around plaintiffs' theory that Conseco devised and successfully implemented a scheme to take control over NALF at the expense of its public investors. Specifically, plaintiffs allege that Conseco intended to, and did, make a nominal investment in below-market convertible debt securities of NALF. Plaintiffs allege that the purpose of these investments was to obtain effective control over NALF through "arrangements" made with its corporate insiders and controlling shareholders, to permit those insiders and controlling shareholders to cash out their investments at a profit by artificially inflating the value of NALF's stock, and to cause NALF to conduct quarterly securitizations until its financial statements were in a position to support a public offering. Plaintiffs further allege that Conseco improperly schemed to use the proceeds of the public offering to continue the securitization program until the conversion date of the debt securities, to artificially depress the stock price of NALF after the offering to permit Conseco to convert the debt securities at a market discount, and finally to force NALF into a pre-packaged bankruptcy reorganization. See Amended Complaint at ¶ 4.
According to plaintiffs, Sands helped further Conseco's scheme by making material misrepresentations and omissions about NALF's business, and by using its market-making ability to manipulate NALF's stock prices in ways favorable to Conseco's purported scheme.
Plaintiffs support their theory with the following factual allegations made in the Amended Complaint. Sometime in 1995, one of the major shareholders of NALF, Howard Appel ("Appel"), allegedly began to seek outside financing for NALF through his relationships with brokerage and investment banking firms. Appel, a former stockbroker who had been permanently barred by the NASD in 1991 from becoming affiliated with any member of the NASD, allegedly offered NALF warrants as a "reward" for introducing the company to brokerage and banking institutions.
Sands began making a market in the stock of NALF in December 1995, allegedly around the time Appel began implementing his "reward" plan. On January 29, 1996, Sands entered into an investment banking agreement with NALF (the "Investment Banking Agreement") pursuant to which Sands introduced Conseco its most valued and long-standing client to NALF.
On April 23, 1996, Conseco, through two of its subsidiaries, acquired $10M in convertible debentures of NALF with a life span of eighteen months, expiring in October 1997 (the "Convertible Bonds"). At Conseco's option, the debentures were convertible into NALF common stock at the lesser of $12.00 per share or 80% of the market price of the stock on the date of conversion. In addition, Conseco received warrants to purchase 515,000 shares of NALF (the "Conseco Warrants") at an exercise price which was reduceable in the event a subsequent public offering of NALF priced shares lower than the originally agreed-upon exercise price of the Conseco Warrants. Plaintiffs allege that the market conversion feature of the Convertible Bonds and the price protection mechanism of the Conseco Warrants provided Conseco an incentive to artificially depress the stock price of NALF.
The Investment Banking Agreement was amended in April 1996 to provide for compensation to Sands for acting as NALF's investment banker in connection with the Convertible Bonds. Under the amendment, Sands received $550,000 in cash, as well as warrants to purchase 160,000 shares of NALF (the "Sands Warrants") which also included a price protection mechanism as its placement fee. *735 Sands allegedly distributed the warrants to its individual brokers soon thereafter. According to the Amended Complaint, the cash portion of Sands' fee was "unusually high," while the warrant portion of the compensation was an "unusual form" of compensation. Amended Complaint at ¶ 35. Moreover, Sands' purported distribution of warrants to individual brokers was labeled an "unusual compensation arrangement" by plaintiffs. Id.
In addition, plaintiffs allege three other general problems associated with the issuance of the Convertible Bonds. First, plaintiffs contend that under NASD rules, NALF was required to but did not obtain shareholder approval for the issuance of the Convertible Bonds. According to plaintiffs, NASD rules provide that shareholder approval is required for the placement of below-market conversion rate securities if such securities are convertible into 20% or more of the issuer's outstanding shares of common stock before their issuance. Since the combination of the Convertible Bonds and the Conseco Warrants allegedly conferred beneficial ownership of 20.1% of the outstanding shares of NALF before their issuance, NALF's failure to obtain approval was, according to plaintiffs, a violation of NASD rules.[3]
Second, because NALF relied upon the private placement exemption, § 4(2) of the Securities Act of 1933, to exempt the placement of the Convertible Bonds from the Act's registration requirements, plaintiffs contend that NALF should have filed, but failed to file, a Form D with the SEC.
Third, Robert Bartolini, Chairman of the Board and Chief Executive Officer of NALF, allegedly failed to receive the proper authorization from NALF's board of directors to sign the purchase agreement governing the sale of the Convertible Bonds from NALF to Conseco. Plaintiffs contend that these failures by NALF in connection with the issuance of the Convertible Bonds support the existence of Conseco's illicit plan to control NALF, as well as Sands' knowledge and involvement in that plan.
After Conseco's purchase of the Convertible Bonds, the Amended Complaint alleges that Sands engaged in artificially inflating the price of NALF stock through an illegal "pump and dump" scheme to enable insiders to make increased profits on sales of NALF stock. In furtherance of this scheme, plaintiffs contend that Sands made phone calls to investors, disseminated false opinions on the valuation of NALF stock, and failed to inform public investors of Conseco's plan to exercise the 80% market conversion feature of the Convertible Bonds and acquire NALF stock at severely depressed prices. Moreover, plaintiffs allege that Sands' principal market-making activity in NALF stock, coupled with its misrepresentations and omissions concerning its valuation, enabled NALF's stock price to reach an unsustainable peak in 1996 during which time corporate insiders were able to profit at the expense of public investors.
In November 1996, the Investment Banking Agreement was amended a second time to provide for a facilitation fee to Sands in connection with its efforts on a public offering of 2.5 million shares of NALF to be issued at the end of December 1996 (the "Public Offering"). Sands received $300,000 as its facilitation fee, less any actual underwriting fees and commissions it received from the Public Offering, up to $150,000. Moreover, the exercise price of the Sands Warrants, as well as the Conseco Warrants, were reduced to the Public Offering price of $7.50 pursuant to the price protection provisions provided in the warrants. NALF raised over $21 million from the Public Offering, which was used to repay short term notes and to fund additional securitizations before the expiration date of the Convertible Bonds.
*736 At the end of February 1997, NALF disclosed reserve deficiencies attributable to weak underwriting guidelines in place regarding its loan contracts from December 1995 through March 1996. Shortly thereafter, Sands purportedly reduced its earnings estimates for NALF, blaming the nonperforming loans and general industry conditions. Further, plaintiffs contend that after the disclosure, Sands engaged in conduct designed to lower the price of NALF's stock, including ceasing all market-making activities in NALF stock, removing NALF stock from its recommended list and stopping its aggressive efforts to market NALF shares. As a consequence, NALF's stock price already trending downward began an accelerated descent.
Despite its financial difficulties, NALF was able to complete two more securitizations prior to the expiration of the Convertible Bonds. On July 3, 1997, Conseco loaned an additional $5 million to NALF and received additional warrants from NALF to purchase over 250,000 shares of common stock at an exercise price of $.15 per share. The exercise price of the Conseco warrants was also reduced to $.15 per share. On August 21, 1997, Conseco acquired 5 million shares of Series A Preferred Stock of NALF in exchange for an additional $5 million of short term financing. Moreover, Conseco acquired all of NALF's outstanding convertible debentures held by third parties.
On October 1, 1997, Conseco converted the acquired debentures into over 1.5 million shares of NALF common stock at conversion prices ranging from $.30 to $.32 per share, and converted the Convertible Bonds into over 35 million shares of NALF common stock at a conversion price of $.32 per share, pursuant to the 80% market conversion feature. In connection with the conversion, plaintiffs allege that Conseco caused NALF to disseminate a false and misleading information statement on Schedule 14C on November 21, 1997 (the "Information Statement"). There, plaintiffs contend that rather than solicit the necessary shareholder approval for the conversion, the Information Statement falsely represented that NALF had complied with its legal requirements and that § 203 of the Delaware General Corporation Law, requiring shareholder approval for certain business combinations with an interested shareholder, had been waived by the company. This misrepresentation, according to plaintiffs, was designed to mislead public shareholders into believing NALF had complied with Delaware law, when, in fact, it had not.
Facing a purported liquidity crisis which resulted in a slowing in the origination of receivables and a suspension of the lucrative securitization program, NALF filed a Chapter 11 petition for bankruptcy on March 23, 1998. Pursuant to a court-approved plan of reorganization, NALF's existing stock was extinguished with Conseco owning all of a new Class A shares of NALF and 80% of a new Class B shares. Other creditors received approximately 80% of the amounts owing to them.
Plaintiffs argue that the factual allegations asserted in the Amended Complaint are sufficient to allege that Sands engaged in securities fraud in violation of § 10(b) of the Exchange Act and Rule 10b-5. Sands has moved to dismiss the Amended Complaint on grounds that it fails to state a claim upon which relief could be granted and that it fails to plead fraud with particularity. See Fed.R.Civ.P. 12(b)(6) & 9(b). In particular, Sands argues, inter alia, that the Amended Complaint fails to plead allegations of fraud with particularity as required under the PSLRA, that it fails to adequately allege scienter, and that it fails to adequately allege loss causation.[4]
*737 DISCUSSION
Section 10(b) of the Exchange Act provides in relevant part:
It shall be unlawful for any person, directly or indirectly ...
(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
15 U.S.C. 78j(b). Similarly, Rule 10b-5 makes it unlawful for
any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, (a) to employ any device, scheme, or artifice to defraud, (b) to make any untrue statement of a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, or (c) to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
17 C.F.R. § 240.10b-5.
Therefore, in order to state a claim for securities fraud under § 10(b) and Rule 10b-5, "a plaintiff must plead that the defendant made a false statement or omitted a material fact, with scienter, and that plaintiff's reliance on defendant's action caused plaintiff's injury." San Leandro Emergency Medical Group Profit Sharing Plan, 75 F.3d 801, 807 (2d Cir.1996).
Here, plaintiffs also allege that defendant engaged in manipulative practices and schemes to defraud in connection with NALF shares. See T.H.C., Inc. v. Fortune Petroleum Corp., No. 96 Civ. 2690, 1999 WL 182593 at *2 (S.D.N.Y. March 31, 1999). To properly state a market manipulation claim under Rule 10b-5, plaintiffs must plead "(1) damage, (2) caused by reliance on defendants' misrepresentations or omissions of material facts, or on a scheme by the defendants to defraud, (3) scienter, (4) in connection with the purchase or sale of securities, (5) furthered by the defendants' use of the mails or any facility of a national securities exchange." Schnell, 43 F.Supp.2d at 448 (citing Dietrich v. Bauer, 76 F.Supp.2d 312, 338 (S.D.N.Y.1999); Cowen & Co. v. Merriam, 745 F.Supp. 925, 929 (S.D.N.Y.1990)).
I. Pleading Fraud with Particularity
Under the PSLRA, each allegation of misrepresentation or omission under Rule 10b-5 must be made with particularity i.e., the Amended Complaint must "specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed." 15 U.S.C. § 78u-4(b). Moreover, Rule 9(b) requires that in all allegations of fraud, the circumstances constituting the fraud must be "stated with particularity." Fed.R.Civ.P. 9(b); see also In re Livent, Inc. Securities Litigation, 78 F.Supp.2d 194, 213 (S.D.N.Y.1999). In order to satisfy these heightened standards of pleading, our Court of Appeals has required that a complaint "(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." Acito v. IMCERA, Inc., 47 F.3d 47, 51 (2d Cir.1995) (quoting Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir.1993)).
While the Amended Complaint does describe some of the alleged misrepresentations and omissions in greater detail than in the original Complaint, problems *738 endemic to the original have still not been resolved. Specifically, plaintiff alleges that Sands engaged in the following activities to improperly inflate the price of NALF stock: (1) Sands made statements in its cold calling sales pitches throughout 1996 and in January 1997 regarding the general benefits of the Conseco relationship, including Sands' expectation that Conseco would ultimately buy out shares of NALF at a premium and its belief that NALF's book value was higher than its market value (Amended Complaint ¶ 57), (2) on eight occasions throughout 1996 and January 1997, Sands rated NALF a "buy" or "speculative buy" in its coverage through Bloomberg News, reporting price targets of $20 - $24 for NALF (Amended Complaint ¶¶ 40-42), (3) on April 25, 1996, Sands disseminated a Research Review stating, inter alia, that it saw "potential for NALF's stock trading at $22 - $24 per share one year forward" (Amended Complaint ¶ 58), (4) NALF disseminated a press release on April 23, 1996 disclosing Conseco's investment and quoting Conseco's chairman as stating that NALF was "well positioned to capitalize" on "significant profit opportunities" (Amended Complaint ¶ 59), (5) NALF disseminated a proxy statement on May 2, 1996 in connection with an upcoming shareholders' vote for issues unrelated to the Convertible Bonds stating that Conseco's beneficial ownership of NALF would be 16.75% after the issuance of the Convertible Bonds, rather than 20.1% before the issuance of the bonds (Amended Complaint ¶ 60), (6) on December 26, 1996, NALF filed a prospectus with the SEC in connection with the Public Offering where it represented that it "plan[ned] to continue to employ its securitization program as an integral component of its funding strategy and anticipates that it will generally complete securitization transactions on a quarterly basis" (Amended Complaint ¶ 66-67), and (7) Sands distributed another Research Review on December 31, 1996 opining that NALF would experience 55% earnings growth in 1997 and that "the money raised from the [Public Offering] should fulfill NALF's capital needs through 1997" (Amended Complaint ¶ 68). In each of the statements, plaintiffs allege that material misrepresentations were made, and moreover, that Sands omitted mention of the market conversion features of the Convertible Bonds and Conseco's plan to take control of NALF at depressed prices.
These allegations of misrepresentations and omissions share a variety of deficiencies. For example, the Amended Complaint fails to identify the speaker in connection with the cold calls allegedly made by Sands throughout 1996 and early 1997, and, other than by year, fails to allege specific dates of when such calls were made. In addition, certain of the alleged misrepresentations were not made by nor were they attributed to Sands, including NALF's April 23, 1996 press release quoting Conseco's chairman, as well as statements made in the May 2, 1996 Proxy statement and the December 26, 1996 prospectus, which were made by NALF.
Mostly importantly, however, the Amended Complaint fails to set forth sufficient reasons "explain[ing] why the statements were fraudulent." Acito, 47 F.3d at 51; see also 15 U.S.C. § 78u-4(b) (Amended Complaint must "specify ... reasons why the statement is misleading," and since the allegations are made on information and belief, "the complaint shall state with particularity all facts on which that belief is formed"). The Amended Complaint does not state the reasons why any of the statements were false; rather, it couples each statement with a conclusory allegation that it was false. In addition, plaintiffs attempt to bootstrap these conclusions by relying upon the very theory they are trying to assert namely, that because Sands must have known of Conseco's alleged plot to take control of NALF at a low market price, any statement made by Sands stating that NALF had a positive future must have been false. These *739 kinds of circular, speculatory and conclusory allegations are inadequate to satisfy the PLSRA's and Rule 9(b)'s requirement of particularized pleading. See generally In re Health Management Systems, Inc. Securities Litigation, No. 97 Civ. 1865, 1998 WL 283286 at *4 (S.D.N.Y. June 1, 1998) ("the conclusory allegation that the opposite of a statement ... is true, without further elaboration, is insufficient").
II. Scienter
Even if the Amended Complaint satisfied the heightened pleading requirements discussed above, it must be dismissed as it fails to adequately allege scienter. Generally, securities fraud allegations under § 10(b) and Rule 10b-5 are subject to Rule 9(b)'s scienter requirements. See Chill v. General Elec. Co., 101 F.3d 263, 266 (2d Cir.1996); Acito, 47 F.3d at 52; Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1127-28 (2d Cir.1994). In addition, the PSLRA mandates that a complaint "shall, with respect to each act or omission alleged to violate this title, state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." 15 U.S.C. § 78u-4(b)(2).
The scienter required in relation to securities fraud is intent "`to deceive, manipulate or defraud,' or knowing misconduct." Press v. Chemical Investment Services Corp., 166 F.3d 529, 538 (2d Cir. 1999) (quoting Securities and Exchange Com'n v. First Jersey Securities, Inc., 101 F.3d 1450, 1467 (2d Cir.1996)). By enacting § 78u-4(b)(2) of the PSLRA, Congress "did not change the basic pleading standard for scienter in this circuit (except by the addition of the words `with particularity')." Novak v. Kasaks, 216 F.3d 300, 311 (2d Cir.2000). Our Court of Appeals has required that as a pleading requirement under the PSLRA for scienter, a plaintiff may "either (a) allege facts to show that `defendants had both motive and opportunity to commit fraud' or (b) allege facts that `constitute strong circumstantial evidence of conscious misbehavior or recklessness.'" Press, 166 F.3d at 538 (quoting Shields, 25 F.3d at 1128); see also Rothman v. Gregor, 220 F.3d 81, 90 (2d Cir. 2000) (approving of the two-part test for scienter described in Shields).
A. Motive and Opportunity
In reviewing the Amended Complaint's pleading of motive and opportunity, this Court is mindful that our Court of Appeals has admonished not to "create a nearly impossible pleading standard when the `intent' of a corporation is at issue." Press, 166 F.3d at 538. Moreover, as explained by Novak, "what is required ... is not a bare invocation of `magic words such as motive and opportunity' but an allegation of facts showing the type of particular circumstances that our case law has recognized will render motive and opportunity probative a strong inference of scienter." Rothman, 220 F.3d at 90 (quoting Novak, 216 F.3d at 311).
As was the case with the original Complaint, however, the Amended Complaint fails to adequately plead Sands' motive to commit the alleged securities fraud with regard to NALF's stock and its alleged takeover. For reasons discussed in this Court's previous opinion, Sands' alleged desire to realize greater transaction fees and its close relationship with Conseco are insufficient to show an improper motive. Schnell, 43 F.Supp.2d at 449; see also Acito, 47 F.3d at 54; Ellison v. American Image Motor Co., Inc., 36 F.Supp.2d 628, 639 (S.D.N.Y.1999); Fisher v. Offerman & Co., Inc., No. 95 Civ. 2566, 1996 WL 563141, *6 (S.D.N.Y. Oct. 2, 1996). Indeed, plaintiffs do not dispute that the Amended Complaint does not base its allegations on the motive and opportunity prong of the scienter requirements. See Plaintiffs' Memorandum of Law in Opposition to Sands' Motion to Dismiss, at 18.
B. Conscious Misbehavior or Recklessness
In the absence of motive, a plaintiff may plead scienter by identifying circumstances *740 indicating conscious fraudulent behavior or recklessness. Rothman, 220 F.3d at 90; Shields, 25 F.3d at 1129; Beck v. Manufacturers Hanover Trust Co., 820 F.2d 46, 50 (2d Cir.1987), cert. denied, 484 U.S. 1005, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988), overruled on other grounds, United States v. Indelicato, 865 F.2d 1370 (2d Cir.1989) (en banc). In such a case, the strength of the circumstantial allegations must be correspondingly greater. Beck, 820 F.2d at 50. Accordingly, "[i]n order to satisfy this pleading requirement, a plaintiff must now plead specific facts that create a strong inference of either knowing misrepresentation or conscious recklessness" by the defendant. In re Health Management Systems, 1998 WL 283286, at * 6 (emphasis added); see also Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir.1990); In re Glenayre Technologies, Inc. Securities Litigation, 982 F.Supp. 294, 297 (S.D.N.Y.1997); In re Blech Securities Litigation, 961 F.Supp. at 579.
Plaintiffs contend that the Amended Complaint alleges facts that constitute strong circumstantial evidence of Sands' actual knowledge of fraud. Plaintiffs' allegations of circumstantial evidence fall generally into four categories: (1) circumstances surrounding the Convertible Bonds, including NALF's purported disregard of the NASD rules, Delaware law and SEC filing requirements, as well as nature of the bonds' market conversion feature, (2) the timing of Sands' market-making activities and its alleged misrepresentations and receipt of fees, (3) the close relationship between Conseco and Sands, including Sands' dual roles as NALF's investment banker and placement agent for the Convertible Bonds, and (4) Appel's alleged role in his dealings with Sands. None of these assertions, taken individually or in the aggregate, provide the strong inference necessary to adequately allege scienter in a securities fraud action.
First, plaintiffs contend that circumstances surrounding the issuance of the Convertible Bonds lead to a strong inference that Sands was aware of fraudulent activity. In particular, plaintiffs refer to NALF's alleged violation of the NASD's shareholder approval requirements, the alleged failure of NALF's Chief Executive Officer to receive the proper authorization from NALF's board to sign the securities purchase agreement, NALF's alleged failure to file Form D with the SEC in connection with the placement of the Convertible Bonds, and NALF's alleged failure to obtain shareholder approval of Conseco's conversion of the Convertible Bonds in violation of Delaware law. Although plaintiffs do not state exactly how these allegations amount to fraudulent or reckless intent on the part of Sands, it is reasonable to assume that plaintiffs mean to use these instances to support the existence of Conseco's "secret" scheme to take control of NALF by characterizing them as attempts to hide the existence of the Convertible Bonds, particularly its market conversion feature, from the public shareholders. See Amended Complaint § 93.
Any notion that Delaware law, NASD rules and SEC filing rules were purposefully violated in order to hide the existence of the Convertible Bonds is belied by the detailed description of those securities in NALF's publicly disclosed filings with the SEC.[5] In NALF's Quarterly Report on Form 10-Q filed May 14, 1996 ("NALF 10-Q") less than one month after the issuance of the Convertible Bonds the company specifically disclosed that it had raised $10 million in convertible debt with an exercise price of the lower of $12.00 or 80% of the market stock price. See NALF 10-Q, Notes to Consolidated Financial *741 Statements, note 5. Further, the NALF 10-Q described the Convertible Bonds in detail under the section entitled "Private Placement of Convertible Subordinated Debentures," highlighting the market conversion feature and warning that the Convertible Bonds were not redeemable by NALF at any time.
Similarly, the Convertible Bonds were fully disclosed in NALF's December 23, 1996 Prospectus issued nearly a full year prior to Conseco's actual conversion of the bonds. There, under "Risk Factors," NALF clearly warned the public of the possibility of "substantial dilution from convertible securities," specifically referring to $38.8 million outstanding in convertible debentures and cautioning that "holders of [these convertible debentures] may exercise their rights of conversion ... at prices below the trading price of the Company's Common Stock at the time of conversion." Prospectus at 13. Moreover, under the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operation," the prospectus painfully detailed the relevant aspects of the Convertible Bonds, including the 80% market conversion feature, and the material details of NALF's outstanding warrants. See Prospectus at 29-30.
Plaintiffs' accusation that NALF knowingly dodged state, federal and exchange rules in order to keep the nature of the Convertible Bonds a secret from shareholders does not make sense in light of the full, detailed disclosure of those securities in public filings prior to the realization of Conseco's alleged scheme.
Moreover, the alleged violations of Delaware, NASD and SEC rules by NALF fail to show the requisite intent on the part of Sands. To the extent they show an intent to deceive, at best they are indications of NALF's intent, not Sands'. Other than by conclusory and speculative allegations stating that Sands must have known of the violations due to its role as NALF's and Conseco's investment banker, the Amended Complaint does not connect Sands with NALF's purported violations.[6] Such conclusory allegations are insufficient to allege scienter in the absence of facts giving strong inference of fraudulent intent. See In re Blech, 961 F.Supp. at 580.
Plaintiffs also suggest that the mere existence of the 80% market conversion feature with regard to the Convertible Bonds leads to an inference of fraudulent intent on the part of Sands. According to plaintiffs, the holder of a security with a market conversion feature benefits from a lower stock price because the cost of conversion to equity is cheaper. This reverse market incentive, according to plaintiffs, supports the existence of Sand's knowledge of a fraudulent scheme. See Amended Complaint ¶¶ 46-48.
However, in order to exercise the conversion feature of the Convertible Bonds, Conseco would be required to forgo repayment of its $10 million loan to NALF in exchange for the right to purchase a nonperforming stock a risky proposition at best. This reality discounts plaintiffs' notion that Conseco would expect to receive an undeserved windfall through conversion of the Convertible Bonds. Also, in addition to fully disclosing the existence of the conversion features to the public, NALF had issued, by late 1996, millions of debentures with conversion features similar to those of the Convertible Bonds to investors other than Conseco, including Merrill *742 Lynch, Westminster Capital and Michael Karp none of whom were alleged to be involved with Sands in any way. Merely labeling such debentures as "toxic," "death spiral" or "resembl[ing] ... a transaction with a loan shark" (Amended Complaint ¶ 48) is insufficient to allege scienter on the part of Sands.
Second, plaintiffs contend that the timing of Sands' market-making activities in NALF stock, its purported misrepresentations concerning NALF's valuation and future prospects, and its receipt of banking-related fees provide allegations of circumstantial evidence of fraudulent intent on the part of Sands.
In connection with Sands' market-making activities, the Court's review of NALF's monthly trading report provided by the NASD reveals no inference of fraudulent or reckless intent on account of such activities.[7] Sands was one of over thirty different sophisticated market-makers of NALF stock in between 1995 and early 1997, including Oppenheimer, First Boston, Prudential and Smith Barney, and, in any given month, Sands' trading volume averaged around 200,000 shares, topping out at less than 400,000 shares in its most active month. In comparison, NALF's total monthly trading volume for market-making activity ranged from anywhere between over 1 million shares to more than 4 million shares, with a total of approximately 6 million to 10 million shares outstanding in NALF during the time Sands participated in market-making. Indeed, during the time that plaintiffs contend Sands was purportedly "pumping" the stock to artificially inflate it, NALF's price went from around $15 - $16 per share in December 1995 (the first month of Sands's market-making) to approximately $8 - $9 per share towards the end of December 1996, around the time of the Public Offering a nearly 50% reduction.[8]
With regard to alleged misrepresentations on the part of Sands, as discussed earlier (supra Section I), none of those alleged statements in the Amended Complaint properly articulated reasons as to why they were false at the time they were allegedly made. See San Leandro, 75 F.3d at 813 ("Plaintiffs have made no showing that defendants' descriptions of [the company's] performance were not based on the facts available to the company at the time the statements were made."); In re Health Management Systems, 1998 WL 283286, at *5 ("the complaint wholly fails to specify how the statements ... were false at the time they were made."). As such, the Amended Complaint "obviously fails to allege facts constituting circumstantial evidence of reckless or conscious misbehavior on the part of defendants in making the statements" for purposes of scienter. San Leandro, 75 F.3d at 813.
Further, conceding that most of alleged misrepresentations were various optimistic statements and news releases by Sands, such statements, without more, are insufficient to support a claim for securities fraud. See Shields, 25 F.3d at 1129 ("misguided optimism is not a cause of action, and does not support an inference of fraud. We have rejected the legitimacy of `alleging fraud by hindsight.'") (quoting Denny v. Barber, 576 F.2d 465, 470 (2d Cir.1978)); see also Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 117 (2d Cir. *743 1982) ("economic prognostication, though faulty, does not, without more, amount to fraud.") (internal quotation omitted). While plaintiffs contend that defendant had access to facts that contradict these generally optimistic reports, other than by reference to plaintiffs' theory of Conseco's scheme, plaintiffs fail to "specifically identify the reports or statements containing this information." Novak, 216 F.3d at 309.
In connection with the two amendments to the Investment Banking Agreement used to provide Sands with fees for the placement of the Convertible Bonds and for the Public Offering, as stated previously, there is nothing inherently fraudulent about an underwriter's motive to earn fees. See, e.g., Acito, 47 F.3d at 54; Ellison, 36 F.Supp.2d at 639; Fisher, 1996 WL 563141, at *6. Sands earned these fees in connection with actual and documented transactions e.g., the placement of the bonds and facilitation and underwriting activities for the Public Offering. Allegations that plaintiffs believe the fee amounts and arrangements to be "unusual," without more, is insufficient to plead scienter.
Third, plaintiffs contend that the relationship between Conseco and Sands supports allegations of scienter. However, as discussed in the Court's previous opinion, allegations of a close relationship fail to establish the kind of circumstantial evidence necessary to support a claim of fraudulent or reckless intent. See Schnell, 43 F.Supp.2d at 449. In addition, a desire by Sands to maintain that relationship is not unlike its desire to earn underwriting fees, discussed supra, and, similarly, is not sufficient to satisfy the pleading requirements for scienter. Id.
Finally, plaintiffs' argue that Appel's supposed role in dealing with Sands provides circumstantial support for Sands' fraudulent intent. It is not clear to this Court how an allegation that one of NALF's major shareholders had been disciplined by the NASD helps to establish the requisite level of scienter required by the PSLRA. Even if Sands knew of Appel's problem with the NASD, this Court is not persuaded that the nature of its purported contacts with Appel, as set forth in the Amended Complaint, provides an inference that Sands may have behaved with the level of scienter required by the PSLRA.
In sum, plaintiffs' allegations in the Amended Complaint, considered either in the aggregate or individually, fail to set forth facts that "give rise to a strong inference of fraudulent intent," In re Time Warner, 9 F.3d 259, 268 (2d Cir.1993) (internal quotations omitted), and, consequently, are insufficient to satisfy the scienter requirements for securities fraud under 10(b) or Rule 10b-5. See Novak, 216 F.3d at 311; 15 U.S.C. § 78u-4(b)(2).
CONCLUSION
For the foregoing reasons, the Amended Complaint is dismissed. As plaintiffs have been provided opportunities to correct the deficiencies of the original Complaint, but have failed to do so, the dismissal is with prejudice. The Clerk of the Court is directed to dismiss the Amended Complaint with prejudice.
NOTES
[1] On June 28, 1998, following motions made, Robert Vogel, Same Vogel, Dr. John McCracken, John Mazzara and Alan B. Werner were added as plaintiffs by Order of this Court. They adopted the original pleading.
[2] On December 9, 1999, this Court denied plaintiffs' motion for leave to file a Second Amended Complaint to assert securities fraud claims against both Conseco and Sands, and the motion of Richard Scherrill to intervene as a plaintiff in a newly proposed class action. See Vogel v. Conseco, No. 98 Civ. 2527, slip op. at 3-6 (S.D.N.Y. Dec. 9, 1999).
[3] NALF's stock was delisted by the NASD in December 1997 for the alleged failure to obtain the necessary shareholder approval in violation of NASD rules.
[4] Defendant further argues that the Amended Complaint should be dismissed because leave to amend the original Complaint was granted only to plaintiff David Schnell and not to the new lead plaintiffs. Accordingly, Sands characterizes the Amended Complaint as an entirely new one, and that many of the claims asserted therein are time-barred.
[5] For purposes of this opinion, the Court may consider public disclosure documents filed with the SEC, as well as documents which plaintiffs rely upon in their Amended Complaint. See Cortec Industries, Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir. 1991), cert. denied, 503 U.S. 960, 112 S.Ct. 1561, 118 L.Ed.2d 208 (1992); I. Meyer Pincus & Assocs., P.C. v. Oppenheimer & Co., 936 F.2d 759, 762 (2d Cir.1991).
[6] Defendant attaches to its motion a number of documents such as a legal opinion from NALF's counsel, a copy of the resolutions of NALF's board of directors, and the representations and warranties section of the securities purchase agreement which tend to show that NALF made affirmative representations that all the required approvals and pre-conditions, including SEC filings, requisite board approvals, and shareholder approvals, had been properly received prior to the issuance of the Convertible Bonds. Plaintiffs, however, argue that this Court may not consider such documents in this stage of the proceedings. That debate need not be decided here, since for reasons discussed above the Court does not rely upon these documents for its conclusions on this issue.
[7] The information on the monthly trading report provided by NASD was relied upon by plaintiff in making their allegations in the Amended Complaint. Moreover, as plaintiffs themselves attached the same report to their opposition papers in connection with the dismissal of the original Complaint, it has been clearly in plaintiffs' possession for some time. Accordingly, this Court may consider the trading report in deciding this opinion. See Cortec, 949 F.2d at 48 (permitting a court to consider "documents that plaintiff had either in its possession" or documents which plaintiff "had knowledge of and upon which they relied in bringing suit.").
[8] The implications of the trading report on defendant's claim that the Amended Complaint fails to allege loss causation need not be addressed here.
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126 F. Supp. 2d 487 (2001)
Richard T. HEIT, on behalf of himself and all other persons similarly situated, Plaintiff,
v.
Marjorie VAN OCHTEN et al., in their official capacities, Defendants.
No. 1:96-CV-800.
United States District Court, W.D. Michigan, Southern Division.
January 8, 2001.
*488 Elizabeth Alexander, National Prison Project of the ACLUF, Washington, DC, Patricia A. Streeter, Detroit, MI, for Richard Terry Heit.
Anthony Pryor, ICF, Ionia Maximum Correctional Facility, Ionia, MI, pro se.
Mark W. Matus, Jennifer M. Granholm, Attorney General, Corrections Division, Lansing, MI, for Michigan Department of Corrections, Marjorie Van Ochten, Richard Stapleton, Thomas P. D'Haem, Len Denhouter, Alice Florida, Bill Martin, Dan Bolden.
OPINION
ENSLEN, Chief Judge.
This matter is before the Court on three Motions by Plaintiff, all of which the Court will dispose of in this Opinion. Plaintiff filed (1) a Motion for Permission to Withdraw as Counsel for Richard Heit, (2) a Motion to Add Named Plaintiff, and (3) a Motion for Approval of the Proposed Settlement Agreement. Defendants have filed a Brief Concurring in Plaintiff's Motion for Approval of the Proposed Settlement. The Court grants Plaintiff's Motions.
BACKGROUND
This case began in 1996 when Plaintiff Richard Heit and two other individuals filed a Complaint on "behalf of themselves and all persons similarly situated." The Complaint generally alleged that Michigan prisoners were subjected to unconstitutional State Administrative Prisoner Disciplinary Hearing practices and procedures. Specifically, the Complaint alleged that the Michigan Department of Corrections ("MDOC") kept statistical records of its wins and losses before Administrative Law Judges ("ALJs"). Plaintiff also alleged that the MDOC used disciplinary threats against ALJs to manipulate the conviction rate in prisoner misconduct cases. According to the Complaint, supervisors instructed ALJs to issue not guilty rulings in no more than 10% of the disciplinary cases. The Plaintiffs sought injunctive relief.
In December 1996, the Court denied Plaintiff's Motion for a Preliminary Injunction, and in January 1997 denied Plaintiff's Motion for Certification as a Class Action. After various Motions, the Court appointed counsel, who renewed the Motion for class certification in April 1998. The Court certified the action as a class action in May 1998.
In July 1998, Magistrate Judge Doyle A. Rowland ordered that notice of the pending action be given to the class. The parties engaged in substantial discovery, regulated by several orders from Magistrate Judge Rowland. In March 1999, Magistrate Judge Rowland allowed Plaintiff to amend the Complaint and add parties. In addition, a pretrial conference was scheduled in April 2000, but shortly before that conference, the parties reached a proposed settlement. In May 2000, the Court ordered that notice of the Proposed Settlement be given to the class, and the class be given a deadline by which to file any objections to the Proposed Settlement.
*489 DISCUSSION
A. Motion for Approval of the Proposed Settlement
When evaluating a proposed class settlement, a court looks to whether the proposed settlement is fair, adequate, reasonable, and consistent with the public interest. See Bailey v. Great Lakes Canning, Inc., 908 F.2d 38, 42 (6th Cir.1990). The four factors that assist a court in determining whether a proposed settlement is fair, adequate and reasonable are: (1) the strength of the class's case compared to what is offered in the proposed settlement, (2) the presence or absence of collusion, (3) the reaction of the class members, and (4) the stage of the proceedings and the amount of discovery completed. See Akkala v. Lake Shore, Inc., No. 95-1400, 1996 WL 166736, at *1 (6th Cir. April 9, 1996), quoting Officers for Justice v. Civil Serv. Comm'n of the City and County of San Francisco, 688 F.2d 615, 625 (9th Cir.1982); see also James Wm. Moore et al., 5 Moore's Federal Practice ¶ 23.85(2)(a) (3d ed.1999). Case law indicates that included in the Court's discretion to accept a proposed settlement is the Court's ability to review the views and experience of a plaintiff's counsel. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir.1998); see also Petruzzi's, Inc. v. Darling-Delaware Co., Inc., 880 F. Supp. 292 (M.D.Pa.1995).
1. Strength of the Class's Case Compared to what was Offered in the Settlement
The Complaint alleges that Defendants have a policy or custom of coercing or interfering with hearing officers to assure findings of guilt in prisoner misconduct hearings, and this policy or custom deprives prisoners of procedural due process by denying them an impartial decision-maker. The Complaint further alleges that the lack of an impartial decision-maker results in arbitrary and irrational decisions.
The Complaint describes the policy as a standard expectation that no more than 10% of prisoner misconduct charges would result in dismissals or findings of not guilty. Allegedly, wardens communicate ex parte to the Office of Policy and Hearings ("OPH") supervisors their disagreements with dismissals and findings of not guilty. In addition, the Complaint alleges that hearing officer supervisors keep statistics on the percentage of hearings resulting in dismissals and not guilty findings. The class also alleged that supervisors apply an unwritten policy that a prisoner is not to be found more credible than staff when statements of the two directly conflict and no independent evidence exists supporting the prisoner's statement. The Complaint describes the policy as placing pressure on hearing officers to call a supervisor before a difficult decision and claims the rehearing process is used to enforce the unwritten policy of automatically discounting a prisoner's credibility.
Plaintiff hired Vincent Nathan, who has worked as a lawyer, law professor, and a "special master in significant prison litigation." Mr. Nathan recommended that any proposed remedy address the following:
1. Ceasing to keep statistics regarding hearing officers' percentages of acquittals and dismissals, and these rates should play no role in the performance evaluation or retention of hearing officers.
2. Institutional staff should be prohibited from contacting OPH staff regarding determinations made by a hearing officer. Criticism of a hearing officer's evaluation of credibility, without more, should not be a basis for ordering a rehearing.
3. OPH staff should limit their communication to wardens and other institutional staff regarding disciplinary decisions by a hearing officer to those relevant to the rehearing process.
4. OPH staff should maintain a record of prohibited communications, and these *490 prohibited communications should be the basis for disciplinary action against the offending employee.
5. OPH staff should instruct hearing officers to make individualized determinations of credibility of staff and inmate oral or written testimony. Hearing officers should not automatically credit officers' statements over those of prisoners.
The Proposed Settlement Agreement addresses many of Mr. Nathan's concerns. The Proposed Settlement forbids Defendants from keeping statistics on the guilty, not guilty, or dismissal rates of individual hearing officers. The Proposed Settlement also prohibits Defendants from threatening a hearing officer with personnel disciplinary action, in whole or in part, because of the percentage of the hearings resulting in a finding other than guilty.
The Proposed Settlement also addresses Mr. Nathan's concerns regarding communication between OPH staff and MDOC staff, as well as his recommendation that OPH staff maintain a record of these communication attempts. The Proposed Settlement does not allow MDOC staff to communicate with OPH staff regarding a hearing decision outside of the rehearing process, although this does not prohibit OPH staff from training MDOC staff by using references to decisions in particular hearings. In addition, the Proposed Settlement mandates the OPH staff log any communications or attempts to communicate in violation of the policy barring communications outside of the rehearing process.
Finally, the Proposed Settlement directs hearing officers to refrain from automatically crediting the testimony of staff over that of a prisoner. Furthermore, hearing officers will be required to make credibility determinations and set forth the evidence relied upon to make such determinations.
Aside from Mr. Nathan's concerns, the Proposed Settlement also gives the class one year from the effective date of the prospective Policy Directives to petition to reinstate this case on the ground that Defendants have committed a material breach of their undertakings in the Proposed Settlement. The Proposed Settlement also specifically states that it does not preclude an individual class member from filing separate litigation seeking relief from a finding of guilt and any sanctions imposed in a prisoner disciplinary misconduct hearing. Neither does the Proposed Settlement entitle any individual class member to any relief or compensation not specifically set forth in the agreement. The Proposed Settlement states that Defendants shall pay the reasonable attorney fees and costs incurred by the class.
The Proposed Settlement does not provide permanent injunctive relief, which was a relief requested in the Complaint. The provisions allowing the class to refile within one year if Defendants breach their undertakings in the Proposed Settlement and allowing an individual class member to challenge in court a finding of guilt or a particular punishment imposed seem to address this type of relief. Furthermore, the Court finds the fact that the relief will be formally incorporated into official MDOC Policy Directives gives some assurance that the Proposed Settlement will be enforced.
The Court has considered the strength of the class's case. First, the Court recognizes the inherent uncertainty of litigation. It is impossible to foretell what the outcome of a trial in this case would be. Second, the class complains of unwritten policies, and unwritten policies are exceedingly more difficult to prove than written policies. Third, it is difficult for the Court to ascertain what, if any, reasons may exist for the various findings of guilt or punishments other than those alleged by the class. Therefore, it appears that the certainty of a settlement is in the class's interest when compared to the strength of the class's case.
2. Collusion
Inquiries into possible collusion between any of the parties address two issues: (1) *491 whether the named plaintiff's claims are treated more favorably then other plaintiffs' claims, and (2) whether the fee agreement suggests collusion. See 5 Moore's Federal Practice ¶ 23.85(2)(c). In this case, Richard Heit, the named Plaintiff, does not receive relief distinct from the relief provided to the class. In addition, the fee clause indicates that Defendants will pay reasonable attorney fees and costs to be determined later. If the parties cannot agree on reasonable fees and costs, the Court will make this determination.
These factors do not suggest collusion. Furthermore, the discovery in this case seemed to be fraught with battles, one of which ended with the imposition of discovery sanctions against Defendants. The Proposed Settlement appears to be fair, adequate, reasonable, and in the class's interest. Collusion simply is not supported by the facts and circumstances.
3. Reaction of the Class
The Court is well aware of the many objections filed by individual class members. According to figures obtained from MDOC, the class numbered 45,879 as of October 6, 2000. The Court has attempted to count the number of class members who objected to the Proposed Settlement. Although it was difficult to determine the exact number of objections filed because some class members filed more than one objection, the Court agrees with Plaintiff counsel's estimate that approximately 824 class members objected to the Proposed Settlement. This means than less than two percent of the class filed objections.[1]
Even a majority opposition to a proposed settlement does not automatically bar court-approval of a proposed settlement. See Thomas v. Albright, 139 F.3d 227, 232 (D.C.Cir.1998)(court approved a settlement despite fact that 15% of class opposed it); 5 Moore's Federal Practice ¶ 23.85(2)(d). The small percentage of class members objecting to this Proposed Settlement, on the other hand, supports the Court's approval of it.
4. The Stage of the Proceedings
This case was settled shortly before trial and after the close of discovery. Nothing indicates that the parties or their counsel were less than well-informed about the particulars of this case. Rather, each party had the benefit of discovery material to assist it in drafting and reviewing the Proposed Settlement. Moreover, Plaintiff's counsel hired an expert with whom she worked closely in reviewing the Proposed Settlement. These factors suggest that the parties arrived at a compromise based on their full understanding of both the factual and legal issues surrounding this case. This supports approval of the Proposed Settlement. See e.g., In re Fleet/Norstar Sec. Litig., 935 F. Supp. 99, 106 (D.R.I.1996); see also In re Marine Midland Motor Vehicle Leasing Litig., 155 F.R.D. 416, 420 (W.D.N.Y.1994); Manchaca v. Chater, 927 F. Supp. 962, 966 (E.D.Tex.1996).
5. The Public Interest
The Court finds that nothing within the Proposed Settlement is inconsistent with public interest. Rather, the Proposed Settlement will help ensure that Michigan prisoners receive due process with respect to their disciplinary hearings. The Proposed Settlement also prohibits Defendants from threatening hearing officers with, or subjecting them to, personnel disciplinary actions based on the number of hearings resulting in dismissals or findings of not guilty. These measures are all in the public's interest.
B. Class Member Objections
The Court has considered all timely filed *492 objections from individual class members.[2] Although the class members objected on various grounds, most of their objections can be placed into one of five categories.
1. Failure to Provide for Reversal or Damages
The most frequent objection was the failure of the Proposed Settlement to provide that past hearing results would be reversed or damages awarded to class members injured from previous biased hearings.
The Supreme Court in Edwards v. Balisok, 520 U.S. 641, 645, 117 S. Ct. 1584, 137 L. Ed. 2d 906 (1997), addressed a prisoner's 42 U.S.C. § 1983 case challenging the procedures used in certain prison disciplinary proceedings. The prisoner did not ask for the return of the good time he lost, but he did ask for a declaration that the procedures were illegal, an injunction to prevent future violations, and damages. Id. The Supreme Court recognized that the prisoner claimed that the hearing officer was biased against him but ultimately held that the prisoner could not seek damages on this claim without first having the misconduct hearing overturned in state court pursuant to Heck v. Humphrey, 512 U.S. 477, 114 S. Ct. 2364, 129 L. Ed. 2d 383 (1994). See Edwards, 520 U.S. at 648, 117 S. Ct. 1584. The Supreme Court allowed injunctive relief to proceed provided that the injunctive relief did not necessarily imply that any particular disciplinary proceeding was invalid. See id.
Moreover, in Sandin v. Conner, 515 U.S. 472, 486, 115 S. Ct. 2293, 132 L. Ed. 2d 418 (1995), the Supreme Court held that 30 days of disciplinary confinement did not trigger protection under the due process clause. Rather, only disciplinary confinement involving "atypical, significant" deprivation implicates due process. See id.
Based on these two cases, it appears that the class could not seek, in this action, expungements, reversals, or damages for hearings that resulted in loss of good time. In addition, it is questionable whether some of the class members experienced "atypical, significant" deprivations implicating due process. While the Court certainly understands the class members' desires to obtain expungement, settlement of the class action is not the appropriate vehicle to do so. No class member, however, is enjoined from seeking relief in an individual action.
2. Relief is Ineffective
Some class members objected because they deemed the relief ineffective as it was not incorporated into an injunction and because Defendants cannot be trusted to carry out their obligations under the Proposed Settlement. The Proposed Settlement appears to be drafted according to the Prison Litigation Reform Act, 18 U.S.C. § 3626(a), which places some significant restrictions on the form of settlements in prison condition cases. In addition, the Proposed Settlement allows the class to refile their complaints if Defendants do not fulfill their obligations within one year of the enactment of Policy Directives. Class members are also able to challenge their disciplinary hearing results in state court, and this gives assurance that Defendants will be unable to ignore their obligations under the Proposed Settlement.
3. The Provision Prohibiting Automatic Credit be Given to Reporting Officers Cannot be Enforced
Many class members object because they do not believe it is possible to enforce the provision mandating that hearing officers make credibility determinations and refrain from giving report officers automatic credit. Class members also worry that hearing officers remain biased or corrupt.
*493 While the Court appreciates the class's concerns, especially given their past experience with hearing officers, the Court also notes that this provision would be difficult to enforce even if it were incorporated into an injunction. Regardless of whether a prisoner challenges the settlement in a contempt proceeding or challenges a hearing outcome in state court, it would be difficult to enter the mind of the hearing officer to ascertain whether he or she maintained some bias against prisoners. The Proposed Settlement attempts to counter this by requiring hearing officers to set forth in the hearing report the evidence relied upon in determining credibility. This should assist a court in reviewing a hearing officer's decision. Furthermore, if there exists an outward manifestation of bias, hearings are subject to review in state court.
4. Perry Mandates that More Relief Should be Given
Many objectors noted Perry v. McGinnis, 209 F.3d 597 (6th Cir.2000), wherein a former hearing officer filed suit alleging that he suffered adverse personnel action because of his race, and his First Amendment right to speak had been violated. Perry, 209 F.3d at 600. The District Court dismissed Mr. Perry's First Amendment claim, and the Sixth Circuit reversed, stating that overwhelming evidence suggested "at the very least, a strong expectation that the nonguilty/dismissal rate should not rise above 10%." Id. at 606. The Sixth Circuit further stated that hearing officers cannot be impartial as required by Wolff v. McDonnell, 418 U.S. 539, 94 S. Ct. 2963, 41 L. Ed. 2d 935 (1974), if they focus on finding 90% of the prisoners before them guilty. See Perry, 209 F.3d at 606.
The Court notes, however, that the Sixth Circuit did not grant judgment to Mr. Perry, but it merely reversed the defendants' motion to dismiss and remanded the case for trial. Mr. Perry's claim involved his employment from 1988 until 1993, whereas this suit alleges that the wrongful conduct began in 1990. Although these times overlap, the policies or "pressure" exerted on hearing officers are not necessarily the same. Furthermore, the remand does not mean that Mr. Perry will succeed, nor does it mean that the court will find that MDOC practices violate prisoners' rights.
Regardless of Perry, the Proposed Settlement appears to be fair, adequate, and reasonable. It also appears to be in the class's best interest. It ensures the class of positive changes within MDOC Policy and also provides the class with a means of enforcing the Proposed Settlement by further court action if necessary.
5. Various Issues were not Addressed
Some class member object to the Proposed Settlement because it does not address certain issues such as the rehearing process, various hearing procedures, and appeals of special designations. These issues are not within the Complaint's scope. Nothing in the Proposed Settlement, however, prejudices any class member from pursuing other legal claims on these issues.
Nothing in any of the objections provides a reason for disapproving the Proposed Settlement.[3] The Court finds the *494 Proposed Settlement to be fair, adequate, reasonable, and in the class's interest. Therefore, the Court approves the Proposed Settlement.
C. Motion for Permission to Withdraw as Counsel for Richard Heit
Plaintiff's counsel seeks to withdraw from representing Richard Heit because he filed objections to the Proposed Settlement after orally approving the Proposed Settlement. Plaintiff's counsel relies on the Model Code of Professional Responsibility and the Manual for Complex Litigation (Third) § 30.43 (1995) to support her argument that she should withdraw as Richard Heit's counsel because of her independent duty to the class. Plaintiff's counsel believes that the Proposed Settlement agreement is in the class's interest, and she cannot advocate on behalf of Plaintiff's objections.
The Sixth Circuit has not spoken directly on this issue, but has stated that accepting a settlement over the objections of the named representatives is not necessarily an abuse of discretion. See Laskey v. International Union, United Auto., Aerospace and Agr. Implement Workers of America (UAW), 638 F.2d 954, 957 (1981). Other Circuits, however, have spoken on this issue. In Kincade v. General Tire and Rubber Co., 635 F.2d 501 (5th Cir. 1981), the named class members appealed from an entry of a settlement agreement negotiated by their attorney, arguing that the attorney acted without their authorization. The Fifth Circuit held that it may be impossible for a class attorney to "do more than act in what he believes to be the best interests of the class as a whole[.]" Id. at 508. The Fifth Circuit has also stated that the duty owed by class counsel is to the "entire class and is not dependent on the special desires of named plaintiffs." Parker v. Anderson, 667 F.2d 1204, 1211 (5th Cir.1982)(affirming approval of settlement even though ten of eleven class representatives rejected it). The Parker court reasoned that a named plaintiff should not "be permitted to hold the absentee class hostage by refusing to assent to an otherwise fair and adequate settlement in order to secure [his] individual demands." Id.
The Fourth Circuit recognizes that an original plaintiff should be given an opportunity to retain new counsel to represent him or her in objecting to the settlement. See Flinn v. FMC Corp., 528 F.2d 1169, 1174 (4th Cir.1975). The Second Circuit has held similarly, stating that if the named plaintiff objects to settlement, class counsel must so inform the court so that the named plaintiff can pursue his or her objections with a new lawyer. See Saylor v. Lindsley, 456 F.2d 896, 900 (2nd Cir. 1972).
Recognizing Plaintiff counsel's duty to the class, it appears she cannot represent Richard Heit because he objects to the Proposed Settlement, which Plaintiff's counsel argues is in the class's interest. The Court also finds that the Proposed Settlement is in the class's interest. Mr. Heit should have the opportunity to pursue his objections with a new lawyer if he so chooses. As such, the Court grants Plaintiff counsel's Motion to Withdraw as Mr. Heit's counsel.
D. Motion to Add Named Plaintiff
Plaintiff's counsel seeks to add Joseph Corsetti as class representative. Plaintiff's counsel asserts that Mr. Corsetti is an experienced "jail house lawyer" with the appropriate judgment and experience to represent the class well. Plaintiff's *495 counsel seeks to add Mr. Corsetti as class representative because Plaintiff Heit filed objections to the proposed settlement agreement after approving it following the parties' negotiations.
The Supreme Court has stated that a court can re-examine a named plaintiff's ability to represent the class, and if it is "found wanting, the court may seek a substitute representative.." U.S. Parole Comm'n v. Geraghty, 445 U.S. 388, 416, 100 S. Ct. 1202, 63 L. Ed. 2d 479 (1980); Fed. R. Civ. Proc. 23(c)(1), 23(d); see also Robinson v. Sheriff of Cook County, No. 95 C 2205, 1996 WL 417559, *1 (N.D.Ill. July 22, 1996)(allowing addition of plaintiff as representative because proposed representative was inadequate).
In this case, it seems apparent that Mr. Heit's ability to represent the class is wanting and inadequate. Mr. Heit's two written objections to the Proposed Settlement contain mostly the objections addressed in this Opinion. Mr. Heit's objections also make it clear that he absolutely opposes the Proposed Settlement. Yet, a thorough review of the Proposed Settlement by the Court indicates approval is appropriate and in the class's best interest. Having found Mr. Heit's ability to represent the class wanting and inadequate, the Court therefore grants Plaintiff's counsel's Motion to add Mr. Corsetti as the named Plaintiff.
CONCLUSION
For the foregoing reasons, the Court grants Plaintiff's Motion for Approval of the Proposed Settlement Agreement, Plaintiff counsel's Motion to Withdraw as Counsel for Richard Heit, and Plaintiff counsel's Motion to Add Named Plaintiff.
NOTES
[1] The Court notes that the named Plaintiff, Richard Heit, objected to the Proposed Settlement even though he had orally agreed to it. The Court will address the class members' objections later.
[2] At Plaintiff counsel's urging, the Court looked at all later objections as well. The Court found, however, that these late objections were similar to those timely filed.
[3] The Court notes that courts generally hold "fairness hearings" before approving a proposed settlement agreement in a class action. The purpose of these hearings is to allow those affected by the settlement to be heard with respect to its fairness. See Williams v. Vukovich, 720 F.2d 909, 924 (6th Cir.1983). Fairness hearings are not required, however, if the record is adequate and the objectors fail to raise cogent objections to the settlement. See Malchman v. Davis, 706 F.2d 426, 434 (2nd Cir.1983); see also Officers for Justice v. Civil Service Comm'n of City and County of San Francisco, 688 F.2d 615, 624-25 (9th Cir.1982)("members raising substantial objections must be afforded an opportunity to be heard with the assistance of privately retained counsel if so desired, and a reasoned response by the court on the record; and objections without substance ... require only a statement on the record of the reasons for so considering the objection.") (citations omitted). The Court finds that hearings in this case would be impractical given the size of the class, and they are not necessary. Recognizing the importance of the class's opportunity to be heard regarding the Proposed Settlement's fairness, however, the Court considered the class's objections. Thus, all class members who deemed the Proposed Settlement unfair had the opportunity to express this, and the Court considered this when evaluating the Proposed Settlement.
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714 S.E.2d 732 (2011)
311 Ga. App. 54
LEWIS
v.
The STATE.
No. A11A0842.
Court of Appeals of Georgia.
July 15, 2011.
*733 Ryan John Swingle, for appellant.
Kenneth W. Mauldin, Dist. Atty., David T. Lock, Asst. Dist. Atty., for appellee.
MIKELL, Judge.
Following trial on a six-count indictment, Torrie Antoine Lewis was convicted of armed robbery and burglary and acquitted of aggravated assault and three counts of possession of a firearm during the commission of a crime. On appeal from the denial of his motion for new trial, Lewis asserts that the state failed to prove his guilt beyond a reasonable doubt and that the trial court erred in admitting into evidence the statements of *734 his co-conspirator, Feandre Loggins.[1] Discerning no error, we affirm.
1. Lewis essentially argues that the evidence is weak and thus does not support his conviction of armed robbery and burglary. The strength of the evidence, however, is not the relevant issue.
On appeal from a criminal conviction, we view the evidence in the light most favorable to the verdict and an appellant no longer enjoys the presumption of innocence. This Court determines whether the evidence is sufficient under the standard of Jackson v. Virginia,[2] and does not weigh the evidence or determine witness credibility. Any conflicts or inconsistencies in the evidence are for the jury to resolve. As long as there is some competent evidence, even though contradicted, to support each fact necessary to make out the [s]tate's case, we must uphold the jury's verdict.[3]
So viewed, the evidence shows that at 11:00 p.m. on March 18, 2009, Steven McNutt lay in bed listening to music through his headphones. There were no lights on in the house. After getting up to put away his headphones, McNutt opened his bedroom door and encountered a man, later identified as Lewis, holding a pistol. Lewis's face was partially obscured by a shirt. Lewis demanded money, pulled back the slide in the gun and pointed it at McNutt, who retrieved his wallet and showed Lewis that there was no cash in it. A second assailant then entered the room and assured McNutt that he would not be hurt. The second man took McNutt's cell phone, then told him to kneel down by the bed and put his face down. After the second man left McNutt's room, McNutt heard a commotion in the hallway, followed by "Torrance, Torrance, let's go." The assailants left the house, and McNutt went downstairs. He saw that the front door had been kicked in so violently that the wood frame splintered and the knob gouged a hole in the wall. McNutt also saw that a television was missing. McNutt identified Lewis in court as the man who held the gun on him.
Lewis gave a statement to police admitting that he entered the house; that McNutt spoke to him; that Loggins and another man, Quameik Aziz, pushed in the door and took the television; and that Lewis ran out the door after talking to McNutt. Lewis and Loggins made incriminating statements to Shuntivia Campbell, who gave a recorded statement to Athens-Clarke County Police detective Charles Ivey. Campbell testified at trial but contradicted her recorded statement, and it was introduced through Ivey's testimony. According to Ivey, Campbell stated that she was driving Lewis and Loggins home one day in late March when they asked her to stop at a house, which they identified, to "pick up a TV." Campbell told them that she wanted "nothing to do with that," and she took them home. Later, she returned and saw the police at the house that they had identified. Lewis and Loggins told Campbell that they had just "hit a lick." They stated that they kicked in the door, saw a man, pointed a gun at his head, and went through his wallet. Lewis stated that he was carrying the gun, and he showed it to Campbell. The men told her that they hid the TV in the bushes, retrieved it later, and sold it to someone. They also stated that they took the man's cell phone and that they had covered their faces with their arms.
In challenging the sufficiency of the evidence, Lewis cites the absence of forensic evidence tying him to the crime and McNutt's inability to identify him from a photographic array shortly after the robbery was committed. But an appellate court does not weigh the evidence or determine witness credibility.[4] Rather, "the relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt."[5] An armed robbery occurs *735 when a person, with intent to commit theft, takes property of another from the person or the immediate presence of another by use of an offensive weapon.[6] A person commits burglary when, "without authority and with the intent to commit a felony or theft therein, he enters or remains within the dwelling house of another."[7] Here, Lewis's statement admitting entry into the home, his statement to Campbell, the victim's in-court identification of him as the armed robber, and the victim's testimony that he overheard one of the robbers calling Lewis "Torrance" provided ample evidence to support his conviction of armed robbery and burglary beyond a reasonable doubt.[8]
2. Lewis next contends that the trial court erred in admitting statements attributed to Loggins, including that Lewis possessed a gun and that the men "hit a lick," under OCGA § 24-3-5,[9] the exception to the hearsay rule for declarations of a co-conspirator, because there was no evidence of a conspiracy between Lewis and Loggins. We disagree.
Statements made by a co-conspirator during the pendency of a criminal project, including the concealment phase, are admissible against all other co-conspirators. To render an out-of-court statement admissible under OCGA § 24-3-5, the state must make a prima facie showing of the existence of the conspiracy, without regard to the declarations of the co-conspirator, in order to admit his out-of-court declarations. The trial judge may admit testimony by co-conspirators before the conspiracy has been proved, provided its existence is ultimately shown at trial. The question of the existence of a conspiracy is ultimately for the jury to determine.... In order to prove a conspiracy, the state may rely upon direct or circumstantial evidence.[10]
Here, contrary to Lewis's contention, evidence independent of Loggins's declarations to Campbell authorized the jury to infer the existence of a conspiracy. The jury heard Campbell's statement that she drove Lewis and Loggins to the victim's home before the crime was committed and that she observed them at the scene of the crime afterward, while the police were there. Campbell also testified that she told Lewis and Loggins, "ya'll are stupid, you're going to get in trouble anyway not having your face covered trying to rob somebody." Campbell's observations of Lewis and statements to him are not hearsay, as "anything seen or heard by a witness in the presence of the defendant is admissible and does not constitute hearsay. And, where a witness testifies as to what he or she told another person, it is not hearsay."[11] Moreover, the jury heard Lewis's statement that he went to the victim's house with Loggins and Aziz because the victim owed Aziz money.[12] "Presence, companionship, and conduct before and after the commission of the alleged offenses may be considered by the jury and are circumstances which may give rise to an inference of the existence of a conspiracy."[13] The circumstances described above permitted the jury to find that a conspiracy existed without regard to the hearsay declarations of co-conspirator Loggins. The trial court did not abuse its discretion in allowing his statements in evidence.
3. Finally, Lewis argues that the trial court erred in charging the jury on the law of conspiracy because no conspiracy existed. This enumeration of error fails because we have decided that the evidence authorized *736 the jury's determination that a conspiracy existed.
Judgment affirmed.
SMITH, P.J., and DILLARD, J., concur.
NOTES
[1] Lewis and Loggins were indicted jointly but were not tried together.
[2] 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979).
[3] (Citations omitted.) Rankin v. State, 278 Ga. 704, 705, 606 S.E.2d 269 (2004).
[4] Id.
[5] (Punctuation, footnote, and emphasis omitted.) Scott v. State, 297 Ga.App. 577, 579, 677 S.E.2d 755 (2009).
[6] OCGA § 16-8-41(a).
[7] OCGA § 16-7-1(a).
[8] Jackson, supra.
[9] OCGA § 24-3-5 provides: "After the fact of conspiracy is proved, the declarations by any one of the conspirators during the pendency of the criminal project shall be admissible against all."
[10] (Punctuation and footnotes omitted.) Dickerson v. State, 280 Ga.App. 29, 31-32(1)(a), 633 S.E.2d 367 (2006); accord White v. State, 308 Ga.App. 38, 39-40(1), 706 S.E.2d 570 (2011).
[11] (Footnotes omitted.) English v. State, 288 Ga.App. 436, 440(2), 654 S.E.2d 150 (2007).
[12] See Livingston v. State, 271 Ga. 714, 719(3), 524 S.E.2d 222 (1999) (defendant's statements to cellmate showed he was involved with others in committing felony murder).
[13] (Punctuation and footnote omitted.) Dickerson, supra.
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261 F. Supp. 2d 955 (2003)
Russell JOHNSON, et al., Plaintiffs,
v.
DELPHI CORPORATION, Defendant.
No. C-3-02-313.
United States District Court, S.D. Ohio, Western Division.
March 25, 2003.
*957 Dwight Allan Washington, Washington & Hollingsworth, Dayton, OH, for plaintiffs.
Colleen A. Deep, Robert William Edmund, Jones Day Reavis & Pogue, Columbus, OH, Andrew M. Kramer, Jones Day Reavis & Pogue, Washington, DC, for defendant.
EXPANDED OPINION; DECISION AND ENTRY SUSTAINING DFENDANT'S MOTION TO DIMISS, TREATED AS ONE FOR SUMMARY JUDGMENT (DOC. #6); JUDGMENT TO BE ETERED IN FAVOR OF DEFEDANT AND AGAINST PLAITIFFS; TERMINATION ENTRY
RICE, Chief Judge.
Plaintiffs[1] are experienced skilled tradesmen (e.g., electricians, plumbers, millwrights, mechanical repairmen, and tinners), who were hired by Defendant Delphi Chassis Systems ("Delphi") in 1999 and 2000.[2] Prior to interviewing for employment with Delphi, Plaintiffs each completed a job application, which contained information about their work background and experience, as well as their current employment status, including their pay and fringe benefits. Their applications revealed that their hourly rate of pay from their then-current employers was greater than that offered by Defendan As part of the hiring process, Plaintiffs were interviewed by Ms. Carol Duff ("Duff), Delphi's Hourly Employment Coordinator. Duff had access to the information contained on the job applications. During the interviews, Duff allegedly represented to and promised each of the Plaintiffs that, due to the work schedule (i.e., the hours of work offered by Delphi to Plaintiffs), they would earn more pay for a fixed period of time than in their current jobs. Duff further informed each of the Plaintiffs that, until September of 2002, the work schedule guaranteed each Plaintiff the opportunity to work for seven days a week and twelve hours a day ("7/12"), with no reservations. Based on these representations, Plaintiffs resigned from their positions and accepted employment with Delphi. In December of 2000, Delphi unilaterally stopped the 7/12 Program without notice to Plaintiffs. Defendant has refused to reinstate the program, despite repeated requests. As a result, Plaintiffs have suffered extreme financial hardship and emotional distress.
On May 28, 2002, Plaintiffs initiated the instant litigation in the Montgomery County Court of Common Pleas, setting forth six claims for relief, to wit: (1) breach of implied contract; (2) promissory estoppel; (3) fraud in the inducement; (4) fraud; (5) misrepresentation; and (6) negligent infliction of emotional distress (Doc. # l).[3] On July 10, 2002, Defendant removed the action to this Court, asserting that subject matter jurisdiction exists due to both the existence of a federal question, 29 U.S.C. § 1331, and diversity of citizenship, 28 U.S.C. § 1332 (Doc. # 1).
*958 Pending before the Court is Delphi's Motion to Dismiss, pursuant to Fed. R.Civ.P. 12(b)(1) and 12(b)(6) (Doc. #6). For the reasons assigned, Defendant's Motion, treated as one for summary judgment, is SUSTAINED.[4]
I. Standard Governing Defendant's Motion
Summary judgment must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). Of course, the moving party:
always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact.
Id. at 323, 106 S. Ct. 2548; see also Boretti v. Wiscomb, 930 F.2d 1150, 1156 (6th Cir. 1991)(The moving party has the "burden of showing that the pleadings, depositions, answers to interrogatories, admissions and affidavits in the record, construed favorably to the nonmoving party, do not raise a genuine issue of material fact for trial.")(quoting Gutierrez v. Lynch, 826 F.2d 1534, 1536 (6th Cir.1987)). The burden then shifts to the nonmoving party who "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)(quoting Fed.R.Civ.P. 56(e)). Thus, "[o]nce the moving party has met its initial burden, the nonmoving party must present evidence that creates a genuine issue of material fact making it necessary to resolve the difference at trial." Talley v. Bravo Pitino Restaurant, Ltd., 61 F.3d 1241, 1245 (6th Cir.1995). Read together, Liberty Lobby and Celotex stand for the proposition that a party may move for summary judgment by demonstrating that the opposing party will not be able to produce sufficient evidence at trial to withstand a directed verdict motion (now known as a motion for judgment as a matter of law, Fed.R.Civ.P. 50). Street v. J.C. Bradford & Co., 886 F.2d 1472, 1478 (6th Cir.1989).
Once the burden of production has so shifted, the party opposing summary judgment cannot rest on its pleadings or merely reassert its previous allegations. It is not sufficient to "simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986); see also Michigan Protection and Advocacy Serv., Inc. v. Babin, 18 F.3d 337, 341 (6th Cir. *959 1994)("The plaintiff must present more than a scintilla of evidence in support of his position; the evidence must be such that a jury could reasonably find for the plaintiff.") Rather, Rule 56(e) "requires the nonmoving party to go beyond the [unverified] pleadings" and present some type of evidentiary material in support of its position. Celotex Corp., 477 U.S. at 324, 106 S. Ct. 2548. Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Summary judgment shall be denied "[i]f there are ... `genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.'" Hancock v. Doolson, 958 F.2d 1367, 1374 (6th Cir. 1992) (citation omitted). Of course, in determining whether a genuine issue of material fact exists, a court must assume as true the evidence of the nonmoving party and draw all reasonable inferences in favor of that party. Anderson, 477 U.S. at 255, 106 S. Ct. 2505 (emphasis added). If the parties present conflicting evidence, a court may not decide which evidence to believe, by determining which parties' affiants are more credible; rather, credibility determinations must be left to the factfinder. 10A Wright, Miller & Kane, Federal Practice and Procedure, § 2726. In ruling on a motion for summary judgment (in other words, in determining whether there is a genuine issue of material fact), "[a] district court is not ... obligated to wade through and search the entire record for some specific facts that might support the nonmoving party's claim." InterRoyal Corp. v. Sponseller, 889 F.2d 108, 111 (6th Cir.1989), cert, denied 494 U.S. 1091, 110 S. Ct. 1839, 108 L. Ed. 2d 967 (1990); see also L.S. Heath & Son, Inc. v. AT & T Information Systems, Inc., 9 F.3d 561 (7th Cir.1993); Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915 n. 7 (5th Cir.), cert. denied, 506 U.S. 832, 113 S. Ct. 98, 121 L. Ed. 2d 59 (1992)("Rule 56 does not impose upon the district court a duty to sift through the record in search of evidence to support a party's opposition to summary judgment....") Thus, a court is entitled to rely, in determining whether a genuine issue of material fact exists on a particular issue, only upon those portions of the verified pleadings, depositions, answers to interrogatories and admissions on file, together with any affidavits submitted, specifically called to its attention by the parties.
II. Defendant's Motion (Doc. # 6)
Defendant asserts that Plaintiffs' claims must be dismissed, because they are inextricably intertwined with Delphi's collective bargaining agreements with IUCWA and Local 755 ("the Union") and, therefore, they are preempted by Section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185. Defendant further argues that the claims are preempted by the National Labor Relations Act ("NLRA"), 29 U.S.C. § 151-169. Thus, Defendant contends that Plaintiffs' claims belong either before an arbitrator or the National Labor Relations Board ("NLRB"). Because the Court concludes that Plaintiffs' claims are precluded by § 301, only that argument will be addressed.
A. Complete Preemption under Section 301 of the LMRA
There are two aspects to federal preemption of state law: conflict preemption and complete preemption. Conflict preemption arises where compliance with both federal and state law is a physically impossible, or "where state law stands as an *960 obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Hines v. Davickwitz, 312 U.S. 52, 67, 61 S. Ct. 399, 85 L. Ed. 581 (1941); Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248, 104 S. Ct. 615, 78 L. Ed. 2d 443 (1984); see Warner v. Ford Motor Co., 46 F.3d 531, 533 (6th Cir.1994)(en banc)(discussing difference between conflict and complete preemption). In contrast, "[i]f Congress evidences an intent to occupy a given field, any state law falling within that field is [completely] preempted." Pacific Gas & Elec. Co. v. State Energy Resources Conserv. & Dev. Comm'n, 461 U.S. 190, 103 S. Ct. 1713, 75 L. Ed. 2d 752 (1983).
Under Section § 301 of the LMRA, Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect of the amount in controversy or without regard to the citizenship of the parties.
29 U.S.C. § 185(a). "[T]he preemptive force of § 301 is so powerful as to displace entirely any state cause of action `for violation of contracts between an employer and a labor organization.'" Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 23, 103 S. Ct. 2841, 77 L. Ed. 2d 420 (1983). "State law is thus [completely] `pre-empted' by § 301 in that only the federal law fashioned by the courts under § 301 governs the interpretation and application of collective-bargaining agreements." United Steelworkers of America v. Rawson, 495 U.S. 362, 110 S. Ct. 1904, 109 L. Ed. 2d 362 (1990).
The reach of § 301 is not limitless, however. In Caterpillar, Inc. v. Williams, 482 U.S. 386, 107 S. Ct. 2425, 96 L. Ed. 2d 318 (1987), the Supreme Court made clear that § 301 does not completely preempt claims that are independent of the CBA. "[I]ndividual employment contracts are not inevitably superseded by any subsequent collective agreement covering an individual employee, and claims based upon them may arise under state law ... [A] plaintiff covered by a collective-bargaining agreement is permitted to assert legal rights independent of that agreement, including state-law contract rights, so long as the contract relied upon is not a collectivebargaining agreement...." Caterpillar, 482 U.S. at 396-97, 107 S. Ct. 2425. The Sixth Circuit has summarized this, stating:
Section 301 preempts only state law claims that are "substantially dependent on analysis of a collective-bargaining agreement," not claims that only "tangentially" involve CBA provisions. Furthermore, a defendant's reliance on a CBA term purely as a defense to a state law claim does not result in section 301 [complete] preemption.
Fox v. Parker Hannifin Corp., 914 F.2d 795, 799-800 (6th Cir.1990) (citations omitted).
In DeCoe v. General Motors Corp., 32 F.3d 212, 216 (6th Cir.1994), the Sixth Circuit detailed a two-step approach to deciding whether complete preemption applies. First, the district court must examine whether proof of the state law claim requires interpretation of collective bargaining agreement terms. The Court must "look[ ] to the essence of the plaintiffs claim, in order to determine whether the plaintiff is attempting to disguise what is essentially a contract claim as a tort." DeCoe, 32 F.3d at 216. "Only if the plaintiff can prove all the elements of her claim without requiring the court to examine the Collective Bargaining Agreement does her claim escape preemption." Beckwith v. Diesel Technology, Inc., 215 F.3d 1325, *961 2000 WL 761808 (6th Cir. May 30, 2000), citing id. Second, the court must ascertain whether the right claimed by the plaintiff is created by the collective bargaining agreement or by state law. If the right is born of state law and does not invoke contract interpretation, then there is no preemption; however, if the right is not born of state law and/or if contract interpretation is required, section 301 preemption is warranted. Id. (citations omitted). "To test the independence of the state law claim, the court reviews the elements of the state law cause of action to determine whether each element may be proved without interpretation of the contractual terms or substantial reference to the CBA." Powers v. Kroger Co., 2002 WL 485011 (S.D.Ohio 2002), citing DeCoe, 32 F.3d at 216-219.
1. Breach of Implied Contract
Plaintiffs' breach of contract claim is based on the allegation that Delphi offered them employment under a 7/12 program, which was guaranteed to continue until September of 2002. To prove a breach of contract claim, a plaintiff must show "the existence of a contract, performance by the plaintiff, breach by the defendant, and damage or loss to the plaintiff." Doner v. Snapp, 98 Ohio App. 3d 597, 600, 649 N.E.2d 42, 44 (1994); Nilavar v. Osborn, 137 Ohio App. 3d 469, 483-84, 738 N.E.2d 1271, 1281-82 (Ohio Ct.App.2000). Plaintiffs were not members of the bargaining unit at the time that Delphi made this promise, nor were they union members at the time that they agreed to employment. The alleged promise by Delphi was made to them individually, not as part of a collective bargaining agreement. By seeking to enforce this alleged contract, Plaintiffs are not attempting to enforce the CBA. In fact, they are attempting to enforce an agreement that is seemingly in conflict with the terms of the labor agreement. Whether the parties abided by the terms of the alleged individual agreements can be resolved without reference to the terms of the CBA. Thus, the first DeCoe element has been satisfied. Turning to the second prong, Plaintiffs claim is not premised on the CBA. Again, they are seeking to enforce promises which seemingly conflict with that agreement. Accordingly, Plaintiffs breach of contract claim, which is based on pre-employment promises, is independent of the CBA, and it is not subject to complete § 301 preemption.
2. Promissory Estoppel
To recover under the doctrine of promissory estoppel, a plaintiff must establish that: (1) the defendant made a clear, unambiguous promise; (2) the defendant should have reasonably expected the promise to induce action or forbearance on the part of the plaintiff; (3) the promise actually induced action or forbearance that was detrimental to the plaintiff; and (4) enforcement of the promise is necessary to avoid injustice. Fisher v. Trinova Corp., ___ F.3d ___,___, 1998 WL 774111 at *9 (6th Cir.1998); Snyder v. Ag Trucking, Inc., 57 F.3d 484, 488 (6th Cir.1995); Wing v. Anchor Media, Ltd., 59 Ohio St. 3d 108, 570 N.E.2d 1095, 1098 (1991); Mers v. Dispatch Printing Co., 19 Ohio St. 3d 100, 483 N.E.2d 150 (1985). Delphi allegedly promised to allow 7/12 work schedules through September of 2002. It is unnecessary to review the CBA to determine whether that promise induced action or whether Plaintiffs suffered an injury due to that reliance. In addition, interpretation of the CBA is not required to determine whether Delphi should have expected Plaintiffs to rely on their representations and whether Plaintiffs reasonably did so. Accordingly, the first DeCoe prong is satisfied. Again, because Plaintiffs are seeking to enforce a pre-employment promise which was made apart from the CBA, *962 Plaintiffs' promissory estoppel claim is independent of the CBA, and it is not subject to § 301 complete preemption.
3. Fraud in the Inducement, Fraud, Misrepresentation
Under Ohio law, to establish a claim of fraud, a plaintiff must prove that the defendant made a representation or concealment, material to the transaction at hand, made falsely with the intent to mislead the plaintiff, upon which the plaintiff justifiably relied to his detriment. Burr v. Stark Cty. Bd. of Commrs., 23 Ohio St. 3d 69, 491 N.E.2d 1101 (1986), paragraph two of the syllabus. A claim of fraud in the inducement "arises when a party is induced to enter into an agreement through fraud or misrepresentation." ABM Farms, Inc. v. Woods, 81 Ohio St. 3d 498, 502, 692 N.E.2d 574 (1998). In resolving Plaintiffs' fraud claims, the Court need not resort to interpreting the CBA to determine whether a representation regarding the 12/7 program was made to Plaintiffs during their pre-hiring interviews, whether those representations were material to Plaintiffs' decision to change employment, and whether Plaintiffs relied on them.
A closer question is whether interpretation of the CBA is necessary to establish that Delphi's alleged representations were falsely made and with the intent to mislead. Addressing circumstances similar to that herein, the Eighth Circuit ruled that § 301 did not preempt the plaintiffs' fraud claims. Anderson v. Ford Motor Co., 803 F.2d 953, 957 (8th Cir.1986), cert, denied, 483 U.S. 1011, 107 S. Ct. 3242, 97 L. Ed. 2d 747 (1987). Therein, Ford hired the plaintiffs, who were former employees whose recall rights had expired, offering them permanent positions. The plaintiffs were concerned that they would be "bumped" by the subsequent hiring of "preferential hirees," i.e., individuals who had been laid off due to plant shutdowns. Ford gave repeated assurances that the plaintiffs would not be "bumped." However, before the end of their probation period, plaintiffs were bumped from their positions by employees on the preferential hiring list. In rejecting Ford's argument that the plaintiffs' fraud claims were preempted by § 301, the Eighth Circuit found "it significant that these [fraud] claims are based on representations Ford allegedly made before the time that [the plaintiffs] became employees of the company, that is, before they were even covered by the collective bargaining agreement."[5]Id. at 957-58. It reasoned: "It is clear that [plaintiffs'] contractual and quasi-contractual claims do not originate in, nor refer in any substantial way to, the rights and duties established in the collective bargaining agreement." Id. at 958.
The Eleventh Circuit has also held that fraud claims premised on pre-hiring representations are not preempted by § 301. In Varnum v. Nu-Car Carriers, Inc., 804 F.2d 638 (11th Cir.1986), the plaintiff asserted that his employer represented to him during his job interview that he would be allocated work without consideration of his seniority, and that he could expect to gross about $7000 per month. The plaintiff alleged that the company's representative knew that the company was planning to implement a seniority-based dispatch system. After the seniority-based system was implemented, the plaintiffs income fell sharply, and he sued the company for fraud. Upon reviewing the district court's conclusion that the plaintiffs claim was preempted by § 301, the Eleventh Circuit reversed, reasoning that the plaintiff did *963 not complain about the seniority system itself but, rather, the failure of his employer to inform him of the impending change while inducing him to accept employment. The court concluded that, because the plaintiffs complaint did not concern the seniority system itself, it "did not go to a term of employment covered by the collective bargaining agreement. Instead, the complaint involved Nu-Car's conduct prior to [the plaintiff] accepting employment." 804 F.2d at 640.
Taking a contrary view, in Aguilera v. Pirelli 223 F.3d 1010, 1015 (9th Cir.2000), the Ninth Circuit concluded that interpretation of the collective bargaining agreement was vital to the resolution of fraud claims related to any terms of employment. It reasoned: "[T]here is no way to assess the alleged misrepresentation without examining the instrument that has been misrepresented, the collective bargaining agreement." In Adkins v. General Motors Corp., 946 F.2d 1201 (6th Cir. 1991), the Sixth Circuit has likewise held that fraud claims were preempted. Therein, former employees brought fraud claims against their union and their former employer, alleging that the two entities had colluded together; that the union president had fraudulently induced them to ratify a new collective bargaining agreement, which deprived them of special seniority rights contained in a prior "bridge agreement;" and that the president misrepresented that the seniority rights would continue to be respected. The Sixth Circuit held that the resolution of the fraud claims was substantially dependent on an analysis of the collective bargaining agreement, reasoning that the bridge agreement was the product of collective bargaining, and that the court would be obliged to determine that the "bridge agreement" conferred special seniority rights on the plaintiffs, that the subsequent collective bargaining agreement abrogated those rights, what the president told the plaintiffs, and whether these representations were false, given the court's construction of the agreements. Id. at 1209. The Court concluded: "If plaintiffs have been betrayed by their employer and their union and cheated out of valuable seniority rights in a fraudulent ratification procedure, their remedy is a timely suit for unfair representation/ unfair labor practices. Plaintiffs cannot be permitted to revive rights deemed extinguished under federal labor law by relying on state common law." Id. at 1210.
This Court finds the situation in Adkins to be distinguishable, and it agrees with the Eighth and Eleventh Circuits that Plaintiffs' fraud claims do not require interpretation of the CBA. In Adkins, the plaintiffs were existing bargaining unit members, and their claims were based on a misrepresentation of their rights under a new collective bargaining agreement and of the effect of ratification on their seniority rights. Thus, an analysis of the former and new collective bargaining agreements was necessary to determine the rights that actually existed and if they had been misrepresented. In the present case, Plaintiffs were not members of the bargaining unit at the time the alleged misrepresentations were made. They have not asserted that Delphi misrepresented the provisions of the 12/7 program, as it exists under the collective bargaining agreement, nor have they asserted that Delphi lacked the ability under the CBA to terminate the program at any time. Thus, in order to resolve Plaintiffs' claims herein, it is not necessary for the Court to determine whether the CBA permitted Delphi to terminate the 12/7 Program before September, 2002. Rather, the necessary inquiry is whether Delphi represented that the 12/7 program would continue until that date, knowing that it would be terminated (rightly or wrongfully) earlier. See Kittle v. Prudential Ins. Co. of Amer., 102 *964 F.Supp.2d 1029, 1036 (S.D.Ind.2000) (claim by former employee that employer fraudulently induced him to quit his job with previous employer was not substantially dependent upon analysis of the collective bargaining agreement). Because the Court need not consider the terms of the CBA at issue in determining whether Plaintiffs were fraudulently induced to accept employment with Defendant, their fraud, fraudulent inducment and misrepresentation claims are not completely preempted by § 301.
4. Negligent Infliction of Emotional Distress
Defendant's Motion to Dismiss Plaintiffs' negligent infliction of emotional distress claim is uncontested. Under Ohio law, claims of negligent infliction of emotional distress are generally limited to instances where the plaintiff is a bystander to an accident or was in fear of physical consequences to his own person. Gearing v. Nationwide Ins. Co., 76 Ohio St. 3d 34, 40, 665 N.E.2d 1115, 1120 (Ohio 1996); Bunger v. Lawson Co., 82 Ohio St. 3d 463, 466, 696 N.E.2d 1029 (Ohio 1998); Reiner v. Moretuzzo, 73 Ohio St. 3d 80, 86-87, 652 N.E.2d 664 (Ohio 1995). Upon review of the relevant case law, the Court agrees that Plaintiffs' claim is not viable, whether construed as a § 301 claim or a state law claim for negligent infliction of emotional distress. Accordingly, Defendant's Motion to Dismiss Plaintiffs' negligent infliction of emotional distress claim is SUSTAINED.
B. Whether Plaintiff's Claims are Subject to Conflict Preemption, in Light of the CBA
Defendant claims that the CBA addresses the same terms of employment as are contained in the Plaintiffs' individual agreements, and thus Plaintiffs cannot prevail on their state law claims, due to conflict preemption. Specifically, it argues that the CBA contains provisions relating to hours of work, overtime and wages. It further notes that the CBA contains a provision on "full utilization," which it equates with the 12/7 program. Delphi asserts that, due to these provisions, Plaintiffs individual contracts with the company are rendered unenforceable, because the individual agreements conflict with the terms of the CBA.
In J.I. Case Co. v. NLRB, 321 U.S. 332, 64 S. Ct. 576, 88 L. Ed. 762 (1944), the Supreme Court recognized that collective bargaining agreements supersede individual employment contracts, including prehiring agreements, which limit or condition the terms in the CBA. Id. at 337, 64 S. Ct. 576. It stated: "It is equally clear since the collective trade agreement is to serve the purpose contemplated by the Act, the individual contract cannot be effective as a waiver of any benefit to which the employee otherwise would be entitled under the trade agreement." However, the Court left unresolved whether individual contracts which are more advantageous for the individual employee may be enforced, stating: "Individual contracts cannot subtract from collective ones, and whether under some circumstances they may add to them in matters covered by the collective bargain, we leave to be determined by appropriate forums under the laws of contracts applicable, and to the Labor Board if they constitute unfair labor practices." Id. at 339, 64 S. Ct. 576. Although declining to rule on that issue, the Court noted that "[t]he practice and philosophy of collective bargaining looks with suspicion on such individual advantages" and "advantages to individuals may prove as disruptive of industrial peace as disadvantages." Id. at 338, 64 S. Ct. 576. The Supreme Court later stated in Caterpillar that "individual employment contracts are not inevitably superseded by any subsequent collective bargaining agreement covering an individual employee, and claims based *965 upon them may arise under state law." 482 U.S. at 396, 107 S. Ct. 2425.
Since that time, the federal courts of appeals, as well as state courts, have failed to reach a consensus as to whether individual employment contracts whose terms are within the scope of a CBA but are more advantageous may be enforced. As argued by Defendant, the Ninth Circuit has taken the position that state law based contract claims arising from alleged preemployment misrepresentations are preempted by § 301 when the employee is subsequently hired under a CBA, stating, "when an independent agreement is inconsistent with the provisions of a collective bargaining agreement, the bargaining agreement controls." Aguilera, 223 F.3d at 1015. The Ninth Circuit distinguished Caterpillar on its facts, noting that Caterpillar involved an individual employment contract negotiated for a position not covered by the CBA, at a time when the employee was not covered by a CBA.
In contrast, the Eighth Circuit has permitted claims by bargaining unit employees based on pre-hiring promises that fall within the purview of the CBA. Anderson, supra. The court of appeals further reasoned: "[W]e don't think that because Ford had the right to displace [plaintiffs] under the terms of the collective bargaining agreement, the company also had the right to either misrepresent to [them] the terms and conditions of employment or to avoid contractual or quasicontractual obligations based on pre-employment promises." 803 F.2d at 958. The Seventh Circuit has likewise held that individual employment contracts are superseded only to the extent that they are less advantageous than the CBA. Loewen Group Internat'l, Inc. v. Haberichter, 65 F.3d 1417, 1423 (7th Cir.1995). The Seventh Circuit explained: "[A] plaintiff covered by a collective bargaining agreement is permitted to assert legal rights independent of that agreement, including state-law contract rights. Therefore, as long as the employer is not attempting to circumvent a union or undermine a collective bargaining agreement, it is permissible to negotiate more favorable contracts with individual members." Id. at 1426 (citations omitted). The Fourth Circuit has stated that "Employees who have made valid individual contracts that conflict with subsequent federal labor agreements, and thus cannot be specifically enforced, are still free to bring damages claims against their employer for breach of contract." White v. National Steel Corp., 938 F.2d 474, 486 (4th Cir.1991). The Third Circuit has also permitted claims based on pre-hiring misrepresentations. In Berda v. CBS, Inc., 881 F.2d 20 (3d Cir.1989), the plaintiff accepted employment with CBS for a bargaining unit position, based on representations of permanent, reasonably longterm employment. He alleged that, at the time of his interview, CBS knew that substantial layoffs would soon occur. He subsequently sued for breach of contract, promissory estoppel and other torts. The Third Circuit permitted the employee's claims to proceed, on the ground that "as in Caterpillar, the oral agreement at issue in the instant case gave an advantage to the employee, and thus, as in Caterpillar, we cannot say that the oral agreement was subsumed by the collective agreement such that no state cause of action can be premised on the oral contract." Id. at 26. See also Varnum v. Nu-Car Carriers, Inc., 804 F.2d 638, 640 (11th Cir.1986) (permitting claim based on pre-hiring representation was not preempted by § 301); Rand v. Bath Iron Works Corp., 2001 WL 127655 (D.Me. Feb. 15, 2001) (same). The Court finds this reasoning to be persuasive.
However, as asserted by Defendant, the Sixth Circuit has implicitly articulated its *966 agreement with the Ninth Circuit, as expressed in Maushund v. Earl C. Smith, Inc., 795 F.2d 589 (6th Cir.1986); Ulrich v. Goodyear Tire & Rubber Co., 884 F.2d 936 (6th Cir.1989); and Fox v. Parker Hannifin Corp., 914 F.2d 795 (6th Cir.1990). Defendant is correct that Maushund takes the position that a collective bargaining agreement supersedes individual agreements, whether made prior to or during the term of employment, when the terms are covered by the CBA. In Maushund, a truck driver, who believed that the CBA did not cover him, sought to enforce an oral contract not to discharge him without cause. The Sixth Circuit concluded that the plaintiff was precluded from enforcing a separate agreement with his employer, because he was, in fact, covered by CBA. It held that "[t]he collective bargaining process prohibits [a bargaining unit employee] from engaging in separate negotiations with the company and precludes any action to enforce such an agreement." 795 F.2d at 590. The Maushund court specifically held that § 301 preempts claims recognized in Toussaint v. Blue Cross & Blue Shield of Mich., 408 Mich. 579, 292 N.W.2d 880 (1980), which permitted claims for breach of a "just cause" termination agreement created from pre-employment representations of job security. The court also specifically approved of the decision in Fifield v. `U.AW., 570 F. Supp. 562 (W.D.Mich.1983), in which the district court concluded that § 301 preempted the plaintiffs breach of contract claim, which was based on her employer's assurances of just cause termination.
In Ulrich, salaried employees sought to return to their former bargaining unit positions, pursuant to terms of the collective bargaining agreement. Their requests were denied, due to an impeding sale of the corporate division, and the union refused to process their grievances, on the ground that, as salaried employees, they were no longer covered by the CBA. The Sixth Court concluded that the plaintiffs' right to return and their request for seniority rights depended on rights created by the CBA. Thus, the plaintiffs' state law claims turned on a determination of the language of the CBA and, therefore, they were inextricably intertwined with the CBA. The court of appeals reiterated its prior holding in Maushund that employees covered by a CBA cannot rely upon the existence of a separate, individual employment contract giving rise to state law claims. Id at 938. In Fox, a bargaining unit employee brought state law contract, promissory estoppel and fraud claims against her employer, arising out of the company's alleged failure to control coworkers' harassment and the inadequate investigation of employee's grievances and complaints. The Sixth Circuit held that the employee's state law claims were preempted by § 301, reiterating that "employees covered by a CBA cannot rely upon the existence of a separate, individual employment contract giving rise to state law claims." The Fox court recognized, however, that individual contracts are not necessarily rendered void upon accepting a bargaining unit position. It stated: "[R]ights under individual employment contracts predating the existence of a CBA are not extinguished by the subsequent negotiation of a CBA, and promises made by an employer after the expiration of a CBA similarly may give rise to viable state law claims for breach of contract." 914 F.2d at 801 n. 5. Since Fox, the Sixth Circuit restated its expansive interpretation of § 301 preemption:
We have had many opportunities to interpret and apply the §§ 301 pre-emption doctrine set forth in Lingle and Allis-Chalmers. We have not applied a cramped and narrow construction of the dictates of Lingle and Allis-Chalmers in reaching our decisions, nor have we limited §§ 301 pre-emption to cases where *967 the precise meaning of precise words in the CBA is the crux of the state-based claim. Rather, we have found many state-based claims pre-empted because they have implicated the federal policies underlying federal labor law. In doing so, we have followed the dictates of the Court in Allis-Chalmers that "[t]hese policies require that `the relationships created by [a collective bargaining agreement]' be defined by application of 'an evolving federal common law grounded in national labor policy,'" Allis-Chalmers, 471 U.S. at 210-11, 105 S. Ct. at 1911, and that "state-law rights and obligations that do not exist independently of private agreements, and that as a result can be waived or altered by agreement of those parties, are preempted...." Allis-Chalmers, id. at 213, 105 S. Ct. at 1912.
In applying these principles, we have stated that §§ 301 preempts state law when "employment relationships which are subject to a collective bargaining agreement" are implicated, Maushund v. Earl C. Smith, Inc., 795 F.2d 589, 591 (6th Cir.1986), or when "the rights to be vindicated and the relationship between the parties are created not by state law, but by the collective agreement itself," Terwilliger v. Greyhound Lines, Inc., 882 F.2d 1033 (6th Cir.1989), cert, denied, 495 U.S. 946, 110 S. Ct. 2204, 109 L. Ed. 2d 531 (1990), or when a statebased claim requires examining the practices and customs of a workplace whose conditions are governed by a CBA, Ulrich v. Goodyear Tire & Rubber Co., 884 F.2d 936 (6th Cir.1989), or when "employees covered by a CBA ... rely upon the existence of a separate, individual employment contract giving rise to state law claims." Fox v. Parker Hannifin Corp., 914 F.2d 795 (6th Cir.1990). Jones v. General Motors Corp., 939 F.2d 380, 383 (6th Cir.1991) (citations omitted).
Regardless of how this Court might resolve the question of the viability of state law claims based on pre-employment representations if presented with a tabula rasa, the Sixth Circuit has already spoken on this issue. Based on the Sixth Circuit's decision in Maushund and its progeny, which have rejected state law breach of contract claims and other reliance-based claims, based on pre-employment representations, this Court is constrained to conclude that Plaintiffs' breach of contract claims are precluded by § 301, because their relationship with Delphi concerning the 12/7 program is governed by a collective bargaining agreement and the terms of their individual contracts conflict with the CBA. Plaintiffs' state law claims of promissory estoppel and fraud, which are likewise based on pre-employment representations concerning bargaining unit positions, are also conflict preempted by § 301. See Fox, supra. Accordingly, Defendant's Motion to Dismiss Plaintiffs' Complaint, treated as a motion for summary judgment (Doc. #6), is SUSTAINED.
For the foregoing reasons, Defendant's Motion to Dismiss, treated as a motion for summary judgment (Doc. # 6), is SUTAINED.
Judgment will be entered in favor of the Defendant and against the Plaintiffs.
WHEREFORE, the captioned cause is hereby ordered terminated upon the docket records of the United States District Court for the Southern District of Ohio, Western Division, at Dayton.
NOTES
[1] Plaintiffs are Russell Johnson, Jeff Cohee, Tim Evans, Chris Schultz, James Saylor, Bob Snow, Doug Finkbine, Patrick Greggerson, Billy Farmer, Steve Maxwell, Don Stephens, Chuck Foster, Jeff Kelly, John Reinhart, and Richard Brown, J
[2] The following facts are taken from Plaintiffs' Complaint (Doc. # 1).
[3] In Count Seven, Plaintiffs seek punitive damages.
[4] Defendant has submitted a copy of the collective bargaining agreement ("CBA") between Delphi and the IUE. Plaintiffs have not mentioned the CBA in their Complaint, and the failure to do so does not constitute "artful pleading" as a means to avoid indications that they have asserted claims for breach of the CBA. As stated, infra, Plaintiffs' claims are based on alleged contracts that were made independent of the CBA.
Defendant has raised § 301 preemption, based on the CBA, as a defensive argument to the viability of Plaintiffs' claims. In a Rule 12(b)(6) Motion, the Court would be prohibited from considering the CBA, because it constitutes materials outside of Plaintiffs' pleading. However, Plaintiffs have not disputed that Defendant's submission is an accurate copy of the CBA, and the presence of the CBA is dispositive of whether they may assert their state law claims, as a matter of law. Accordingly, the Court concludes that it is appropriate to consider the CBA and, consequently, to treat Defendant's Motion as one for summary judgment.
[5] The Eighth Circuit further noted that a plaintiff who is an employee covered by a CBA cannot avoid preemption simply by la beling a claim for violation of the CBA as a state law fraud claim. Id. at 957 (citing Bell v. Gas Serv. Co., 778 F.2d 512 (8th Cir. 1985)).
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https://www.courtlistener.com/api/rest/v3/opinions/2505597/
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263 F.Supp.2d 986 (2003)
LEXINGTON INSURANCE CO., Plaintiffs,
v.
David FORREST, and T. Beauclerc Rogers, IV, Defendants.
No. CIV.A. 02-4435.
United States District Court, E.D. Pennsylvania.
May 6, 2003.
*989 Edward P. Krugman, New York City, Glenn F. Rosenblum, Philadelphia, PA, Ira *990 J. Dembrow, Scott M. Mory, New York City, Jeffrey R. Lerman, Philadelphia, PA, for plaintiffs.
Edward M. Dunham, Jr., James J. Rohn, Philadelphia, PA, Kevin Dooley Kent, Nicholas M. Centrella, Philadelphia, PA, for defendants.
EXPLANATION AND ORDER
ANITA B. BRODY, District Judge.
On July 3, 2002, plaintiff Lexington Insurance Company ("Lexington") filed suit against defendants David Forrest ("Forrest") and T. Beauclerc Rogers, IV ("Rogers"). In its five-count complaint, plaintiff alleged that defendants, by and through various companies under their control, conspired to defraud Lexington of millions of dollars in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968 (Counts I-III), and that they also committed common law fraud (Count IV) and tortious interference with contract (Count V).
On September 12, 2002, Rogers filed a motion to dismiss plaintiffs complaint or, alternatively, stay the proceedings. His motion seeks dismissal of plaintiffs complaint on the following grounds: lack of subject matter jurisdiction, forum non conveniens, principles of international comity, and failure to state a claim for which relief can be granted. On November 4, 2002, Forrest filed an identical motion, save that he also alleges that the court lacks personal jurisdiction over him. For the reasons discussed below, I will deny defendants' motions.
I. FACTUAL BACKGROUND
Plaintiff states that this litigation arises from the following alleged circumstances: Defendants controlled a set of companies collectively referred to as "Flashpoint." Compl. ¶¶2, 3, 14. Defendant Rogers resides within the Eastern District of Pennsylvania, and several of the Flashpoint companies, including Flashpoint Ltd., are located at his home in Gladwyne, Pennsylvania. Id. ¶¶8, 14. Defendant Forrest is a subject of the United Kingdom, and Flashpoint UK Ltd. is organized and exists under the laws of that same nation. Id. ¶¶7, 12. Plaintiff is a Delaware corporation with its principal place of business in Massachusetts. ¶6. It writes property and casualty insurance business in the United States and the United Kingdom. Id.
Defendants were in the business of securing financing for motion pictures. Id. ¶16. Typically, movies produced by independent film makers initially have few assets other than the anticipated success of their as-yet unfinished product. To secure bank loans or alternative forms of financing, production companies are sometimes required to enter into agreements with insurance companies that insure the investments of a film's creditors. By issuing what are known as "credit enhancements" for film production loans, insurers like Lexington agree to pay a film's creditors for any shortfall between the film's revenue stream and the face amount of its loan as of a specified "claim date." Id. ¶¶17, 18. Plaintiff maintains that defendants obtained insurance for film loans by promising to serve as "risk managers," meaning that Flashpoint would monitor a film's production and sales on behalf of the company insuring the film's loans. Id. ¶19. These promises allegedly induced Lexington to enter into eight film finance transactions with companies connected to defendants.[1]Id. ¶¶23, 29, 31-34, 38. According to plaintiff, these eight transactions constituted an elaborate Ponzi scheme, wherein the *991 defendants used funds from later projects to pay off those debts incurred in earlier ones. Id. ¶3.
Plaintiff claims that defendants reneged on their promises to serve as risk managers for those film projects insured by Lexington and connected to Flashpoint. In particular, plaintiff accuses defendants of (i) fraudulently inflating the estimated sales receipts of the various films and projects that Lexington insured, (ii) misappropriating funds from one set of insured films and applying those funds toward a different set, (iii) misappropriating funds from insured films for personal investments like a California office building ("The Building"), a film post-production site in Los Angeles ("New Standard Post"), and a chain of Russian cinemas, (iv) deliberately concealing their ownership of the production companies that they had promised to monitor, (v) removing a profitable film from a slate insured by Lexington in order to avoid using the film's proceeds to repay the insured loans, and (vi) hiding their misdeeds in order to induce Lexington to issue insurance policies for successive projects. Id. ¶20-23, 26, 29, 31-35.
Some time after Lexington entered into the eight financing agreements with defendants, and before defendants could enter into "Hollywood Funding No. 7," Flashpoint UK went into judicial administration proceedings, the British equivalent of bankruptcy. Id. ¶44. Following the collapse of defendants' alleged Ponzi scheme, Flashpoint's creditors have come calling. Id. ¶¶3-5. As a result of its insurance contracts with Flashpoint, Lexington is now embroiled in a series of British lawsuits with Flashpoint's creditors that threaten plaintiffs credit rating and risk costing it close to $200 million. Id. Lexington has already spent several million dollars defending itself against these suits. Id. Neither the defendants nor Flashpoint are parties to the lawsuits against Lexington.
In support of its underlying legal claim, plaintiff alleges that: (i) the collection of Flashpoint companies that committed the alleged frauds constitutes an enterprise, (ii) defendants' frauds required the use of the mails and/or wire transmissions in interstate and foreign commerce and that numerous such communications occurred in furtherance of their scheme, (iii) defendants knowingly caused the transportation of fraudulently-obtained funds in interstate or foreign commerce, (iv) defendants agreed and conspired to commit the acts of racketeering activity alleged above, and (v) such conspiracy was at least partially implemented through phone and fax communications between Rogers in Gladwyne and Forrest in the United Kingdom. Id. ¶39, 40.
II. DISCUSSION
Defendants' motions raise a number of issues. First, Forrest contends that this court lacks personal jurisdiction over him. Second, both defendants aver that plaintiffs complaint should be dismissed for lack of subject matter jurisdiction based on their arguments that (a) plaintiff lacks standing to make the complaint, and (b) that the complaint is not ripe. Third, the defendants maintain that the complaint should be dismissed based on the doctrine of forum non conveniens. Fourth, they seek dismissal based on principles of international comity. Fifth, they argue that plaintiffs complaint fails to state a claim upon which relief may be granted.[2] And, finally, if the court elects not to dismiss the complaint, defendants request that the *992 court grant a stay pending resolution of the British lawsuits involving Lexington and Flashpoint's creditors.[3] I will address each of defendants' arguments in turn.
A Personal Jurisdiction Over Defendant Forrest
A complaint may be dismissed when the court lacks personal jurisdiction over a defendant. Fed.R.Civ.P. 12(b)(2). "[C]ourts reviewing a motion to dismiss a case for lack of in personam jurisdiction must accept all of the plaintiffs allegations as true and construe disputed facts in favor of the plaintiff." Carteret Sav. Bank, F.A. v. Shushan, 954 F.2d 141, 142 n. 1 (3d Cir.), cert, denied, 506 U.S. 817, 113 S.Ct. 61, 121 L.Ed.2d 29 (1992) (citation omitted).
Unlike with Rules 12(b)(1) and 12(b)(6), the plaintiff may not rely on the pleadings alone to withstand a motion to dismiss for lack of personal jurisdiction. Stranahan Gear Co., Inc. v. NL Indus., 800 F.2d 53, 58 (3d Cir.1986). Rather, "plaintiff bears the burden of establishing with reasonable particularity sufficient contacts between the defendant and the forum state to support jurisdiction." Gehling v. St. George's Sch. of Med, 773 F.2d 539, 542 (3d Cir. 1985). This burden both distinguishes a Rule 12(b)(2) motion from other motions to dismiss and engenders a particular procedural posture: If the court neither conducts an evidentiary hearing nor permits hmited discovery to determine personal jurisdiction, the plaintiff "need make only a prima facie showing of jurisdiction through its affidavits and supporting materials." Kishi Int'l v. Allstates Textile Mack, Inc., No. 96-6110, 1997 WL 186324, at *2 (E.D.Pa. April 11, 1997) (quoting Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981)). Plaintiff, however, "must eventually establish jurisdiction by a preponderance of the evidence, either at a pretrial evidentiary hearing or at trial." Id. (citation omitted).
The federal courts employ a twopart test to determine whether a federal court may exercise personal jurisdiction over a defendant. First, because "[u]nder Fed.R.Civ.P. 4(k), a district court's personal jurisdiction is usually coextensive with that of courts of general jurisdiction in the state where the district court sits," Electro Med Equip. Ltd v. Hamilton Med. AG, No. 99-579, 1999 WL 1073636, at *2 (E.D.Pa. Nov.16, 1999), the court must begin by ascertaining whether state law permits the exercise of personal jurisdiction. Grand Entm't Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 481 (3d Cir.1993). Second, the court must determine whether the exercise of personal jurisdiction would comport with a defendant's federal due process rights. IMO Indus., Inc. v. Kiekert AG, 155 F.3d 254, 259 (3d Cir.1998). Pennsylvania's long-arm statute permits the exercise of personal jurisdiction to the full extent allowed by the Fourteenth Amendment and its guarantee of due process. 42 Pa. Cons.Stat. Ann. § 5322(b) (Purdon 1981);[4]see also Time Share Vacation *993 cation Club v. Atlantic Resorts, Ltd., 735 F.2d 61, 63 (3d Cir.1984). Consequently, within Pennsylvania the two stages of analysis used to determine whether a court has personal jurisdiction collapse into one.
A defendant's objections regarding due process and personal jurisdiction are resolved through a familiar two-part inquiry. The court must ask: (i) whether the defendant has minimum contacts with the forum "such that [he] should reasonably anticipate being haled into court there," World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980), and (ii) whether the exercise of personal jurisdiction comports with "traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945).[5]
For minimum contacts to exist, "[t]he defendant must engage in some affirmative act `by which the defendant purposely avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Grand, 988 F.2d at 482 (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)). The contacts alleged by plaintiff are Forrest's "numerous" faxes and telephone calls to Rogers in Gladwyne. PL's Mem. of Law in Opp'n to Defs.' Mot. to Dismiss ("PL's Mem.") at 12.[6]
This Circuit takes a "highly realistic" approach to analyzing minimum contacts. Mellon Bank (East) PSFS, Nat'l Assoc. v. Farino, 960 F.2d 1217, 1224 (3d Cir.1992). For this reason, minimum contacts need not include a defendant's physical presence in the forum. Quill Corp. v. North Dakota by and through Heitkamp, 504 U.S. 298, 307, 112 S.Ct. 1904, 119 L.Ed.2d 91 (1992). Telephone calls and fax transmissions can create the requisite contacts. See Grand, 988 F.2d at 482, Carteret Sav. Bank, 954 F.2d at 147-48. The facts in Grand resemble those now in dispute. In Grand, a Spanish defendant accused of violating the RICO Act argued that the district court's exercise of in personam jurisdiction violated due process. The defendant, Ricardo Sanz Perez, was a Spanish national living in Spain who was *994 connected to approximately twelve telexes sent to Bala Cynwyd, Pennsylvania regarding a contract negotiation.[7] On appeal, the Third Circuit found that Sanz Perez's telefaxes constituted minimum contacts with the Eastern District of Pennsylvania and that the district court's exercise of personal jurisdiction over the defendant accorded with notions of fair play and substantial justice. Grand, 988 F.2d at 476. Forrest's case bears a number of similarities to those of Sanz Perez. In both cases the defendants' communications involved commercial matters that, by occurring within this forum, benefitted from the laws of this state. See id. at 483. Like Sanz Perez, Forrest freely chose to communicate with this forum and the resulting communications gave rise to the lawsuit whose jurisdiction each man contested. See id. Based on these factual similarities and the Third Circuit's approval of the district court's exercise of personal jurisdiction over Sanz Perez, I find that Forrest's phone calls and faxes with this forum suffice to present a prima facie case of minimum contacts.[8]
Having found that minimum contacts exist, it remains to be determined whether the exercise of personal jurisdiction squares with notions of "fair play and substantial justice." See Int'l Shoe, 326 U.S. at 316, 66 S.Ct. 154. There is a heavy burden on a defendant who seeks to demonstrate a lack of fairness or substantial justice. Grand, 988 F.2d at 483. Once the plaintiff has made out a prima facie case of minimum contacts, "the defendant `must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.' " Car teret Sav. Bank, 954 F.2d at 150 (quoting Burger King Corp. v. Rudzeuricz, 471 U.S. 462, 477, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)). For the reasons discussed below, I do not find that Forrest has made a sufficiently compelling case.
In evaluating the reasonableness of a district court's exercise of personal jurisdiction, the Third Circuit considers the following factors: (i) the burden on the defendant; (ii) the interests of the forum state; (iii) the plaintiffs interest in obtaining relief; (iv) the judicial system's interest in judicial efficiency; and (v) "the shared interests of the several States in furthering fundamental substantive social policies." Grand, 988 F.2d at 483 (quoting Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987)). I will now consider these factors in light of Forrest's motion.
*995 Defending a lawsuit in a foreign country is a burden. See Asahi, 480 U.S. at 114, 107 S.Ct. 1026. It is not, however, an unjustifiable burden. Id. (noting that when "minimum contacts have been established, often the interests of the plaintiff and the forum in the exercise of jurisdiction will justify even the serious burdens placed on the alien defendant"). Once again, I take my cue from Grand. Like the Spanish defendant in that case, Forrest "has shown his ability to conduct business in the United States and has actively carried on substantial activities here." Grand 988 F.2d at 483. Plaintiff attached to its brief a Flashpoint brochure whose opening page is signed by Rogers and Forrest. PL's Mem., Ex. TBR at 2. This brochure reveals at least seven Flashpointrelated entities located in the United States. Id. at 3. Forrest's connection to Flashpoint's U.S. subsidiaries and transactions is also documented by his prominent signature and picture on two Flashpoint brochures. Id. at 2, 20. In one of these two brochures, Rogers and Forrest state that "we are driven by a desire to reach audiences in every part of the world." Id. at 20. Rogers's demonstrated interest in reaching a U.S. audience and in developing successful commercial properties in this country shows that "[t]his is not a case where a party without a significant presence or ability to act in the United States is drawn into litigation as a result of acts outside the forum." Grand, 988 F.2d at 483. Although inconvenient, this litigation should not have been an unforeseen consequence of Forrest's business dealings with the United States and it is not unjustifiably burdensome.
Moreover, this litigation is of concern to the Commonwealth of Pennsylvania. The Goldberg case cited by plaintiff demonstrates that this forum has a legally-protected interest in preventing wire fraud from either passing through or occurring within its borders. Goldberg, 830 F.2d at 465. This interest justifies any burden that Forrest might encounter in defending suit in the Eastern District of Pennsylvania. See Asahi 480 U.S. at 114, 107 S.Ct. 1026 ("When minimum contacts have been established, often the interests of the plaintiff and the forum in the exercise of jurisdiction will justify even the serious burdens placed on the alien defendant.").
The plaintiff has an interest in obtaining relief. When evaluating a 12(b)(2) motion to dismiss, the court must "accept all of the plaintiffs allegations as true and construe disputed facts in favor of the plaintiff." Carteret Sav. Bank, 954 F.2d at 142 n. 1. Plaintiff claims to have lost millions of dollars as a result of those fraudulent acts that occurred in this forum. This loss evinces an interest in securing relief and outweighs any burden Forrest might bear if this court exercises personal jurisdiction over him.
The concerns of judicial economy also weigh in favor of exercising jurisdiction. Dismissal of the suit against Forrest will not necessarily forestall suit in this forum. Regardless of where Lexington might sue Forrest or Rogers, Rogers remains connected to assets in this forum. Consequently, if plaintiff ever obtains a judgment against Rogers, it will have to come before this court if it is to enforce the judgment against Rogers's local assets. Dismissal of the present suit would therefore engender additional litigation in other forums without necessarily forestalling suit here. Such a proliferation of lawsuits would run counter to the interests of judicial economy.
Finally, there is no evidence that the social policies of the several States would suffer any harm by dint of this court's exercising jurisdiction in this matter. For these reasons and those expressed above, I find that Forrest has not shown that defending himself in this forum would be so *996 unreasonable as to deprive him of his right to fair play and substantial justice. See Grand, 988 F.2d at 484. Personal jurisdiction over defendant Forrest is therefore proper and his Rule 12(b)(2) motion is denied.
B. Rule 12(b)(1): Subject Matter Jurisdiction
Rule 12(b)(1) allows the court to dismiss a suit for want of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). There are two types of Rule 12(b)(1) motions. The first type, a facial attack, challenges only the court's subject matter jurisdiction. The second type, a factual attack, allows the court to question the plaintiffs facts after the defendant files an answer. See Mortensen v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir.1977). As defendants have not filed an answer, their motion is necessarily a facial attack.
It is unclear what standard of review governs facial attacks made via Rule 12(b)(1). The Third Circuit has "cautioned against treating a Rule 12(b)(1) motion as a Rule 12(b)(6) motion and reaching the merits of the claims" because "the standard for surviving a Rule 12(b)(1) motion is lower than that for a 12(b)(6) motion." Gould Elecs. Inc. v. United States, 220 F.3d 169, 178 (3d Cir.2000) (citation omitted). Nonetheless, the Third Circuit has also held that, when considering a facial attack under Rule 12(b)(1), "the trial court must accept the complaint's allegations as true." Turicentro, S.A v. Am. Airlines Inc., 303 F.3d 293, 300 n. 4 (3d Cir.2002) (citing NE Hub Partners, L.P. v. CNG Transmission Corp., 239 F.3d 333, 341 n. 7 (3d Cir.2001)). Rule 12(b)(6) requires that a court considering a motion to dismiss draw all reasonable inferences in favor of the plaintiff. Ford v. Schering-Plough Corp., 145 F.3d 601, 604 (3d Cir.1998). Because Rule 12(b)(1) has a more forgiving standard of review than that for Rule 12(b)(6), it logically follows that a court should also draw all reasonable inferences in the plaintiffs favor when considering a Rule 12(b)(1) defense.
Having determined that the court has personal jurisdiction over Forrest, the non-resident defendant, the question now becomes whether the court also has subject matter jurisdiction. Defendants raise two justiciability considerations in support of their argument that this court lacks subject matter jurisdiction: standing and ripeness. As some commentators have noted, discussions of standing and ripeness often blend together. See 13A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3531.12 (2d ed. 1984); Erwin Chemerinsky, Federal Jurisdiction § 2.4.1 (3d ed. 1999). For this reason it is practical to frame standing as an inquiry into whether a plaintiff has adequately stated an injury and to frame ripeness as an inquiry into whether a plaintiffs adequately-stated injury has occurred. See Wright & Miller, supra, §§ 3531, 3532. For the reasons discussed below, I find that plaintiff has demonstrated that it has standing to make its complaint and that the complaint is ripe.
1. Standing
The doctrine of standing "consists of both a `case or controversy' requirement stemming from Article III, Section 2 of the Constitution, and a subconstitutional `prudential' element." Pitt News v. Fisher, 215 F.3d 354, 359 (3d Cir.2000). Defendants have not referred to the prudential element and this decision shall focus only on constitutional concerns.[9]
*997 Constitutional standing requires that the pleadings show: (i) an injury-infact; (ii) caused by the named defendants or at least "fairly traceable to the challenged action of the defendant[s]"; which (iii) a favorable decision by the court would likely redress. Pry or v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 561 (3d Cir. 2002) (quoting Bennett v. Spear, 520 U.S. 154, 167, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997)); Doe v. Nat'l Bd. of Med. Exam'rs, 199 F.3d 146,152-53 (3d Cir. 1999).
Defendants argue that Lexington has failed to state an injury-in-fact. In particular, defendants argue that a RICO plaintiff does not have standing to recover legal fees. Rogers's Mot. to Dismiss at 16. In the section of Rogers's brief that discusses standing, which Forrest adopts and incorporates, defendants appear to conflate the requirements of 12(b)(6) and 12(b)(1). The confusion perhaps arises from a short quote in the Supreme Court decision, Sedima S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), upon which defendants' argument relies. See Rogers's Mot. to Dismiss at 16. Sedima addressed what types of injuries could be brought under RICO. In Sedima, Justice White rejected a decision by the Second Circuit Court of Appeals, which had held that a successful RICO plaintiff needed to plead a "racketeering" or mob-related injury. 473 U.S. at 495, 105 S.Ct. 3275. The question of what type of injury the plaintiff needed to plead arose in the context of a Rule 12(b)(6) motion granted by the district court. See Sedima S.P.R.L. v. Imrex Co., Inc., 574 F.Supp. 963, 965 (E.D.N.Y.1983). In deciding the case on review, Justice White commented that Sedima "only has standing if, and can only recover to the extent that, [it] has been injured in [its] business or property by the conduct constituting the violation [of § 1962]." Sedima, 473 U.S. at 496, 105 S.Ct. 3275. Rogers, with Forrest's approval, appears to argue that this quote precludes a court from finding standing for a plaintiff who alleges losses incurred through legal fees. Rogers's Mot. to Dismiss at 16. There is, however, no discussion of the standing doctrine in Sedima. This void, together with the procedural posture of Sedima, which came before the Court after a dismissal on a Rule 12(b)(6) motion, leads me to conclude that constitutional standing requirements for deciding a 12(b)(1) motion are not governed by Sedima. The Third Circuit's observation that "determination[s] of the likelihood of success on the merits of the case is a separate inquiry from the threshold issue of Article III standing," supports this conclusion. Pitt News, 215 F.3d at 360.[10] Consequently, I reject defendants' interpretation of Sedima.
Lexington's out-of-pocket loss of millions of dollars in legal fees states an injury. When determining standing, the court must accept as true all material allegations set forth in the complaint, and must construe those facts in favor of the complaining party. Storino v. Borough of Point Pleasant Beach, 322 F.3d 293 (3d Cir.2003) (citing Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)). The plaintiff has less money today than it did before defendants' alleged frauds occurred. This loss is concrete and actual. It is an injury-in-fact. See Pitt News, 215 F.3d at 360 (citing Lujan v. Defenders of Wildlife, *998 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). Although defendants argue that plaintiffs injury is speculative because Lexington could conceivably win attorney's fees in the British lawsuits, pending parallel proceedings "should not preclude this RICO action, when all that defendants can say is that there is a `distinct possibility' that plaintiffs will recover completely" in those proceedings. In re Foundation For New Era Philanthropy Litigation, No. 96-3554, 1996 WL 585577, *2 (E.D.Pa. Sept.4, 1996). The possibility that Lexington will recoup its loss, which plaintiff contests, does not preclude my finding an injury-in-fact. Moreover, those fees spent by Lexington pursuing creditors remedies in England will not be recompensed.
Turning to the second and third prongs of the standing test, I find that, as required by the second prong, plaintiffs injury is traceable to defendants' challenged actions and is an injury that this court can redress. Consequently, plaintiff has standing to sue for recovery. According to plaintiffs complaint, defendants' frauds caused it to spend millions of dollars in legal fees: but for defendants' purported misrepresentations and subterfuge, Lexington would not have incurred this loss. Based on the alleged but-for causation presented within the complaint, the injury is "fairly traceable" to defendants' alleged misdeeds. See Pitt News, 215 F.3d at 361. Finally, a favorable judgment for Lexington would compel defendants to make plaintiff whole by compensating it for its losses. This court can thus effectuate legal redress for plaintiff. See id. Plaintiff has therefore satisfied the three prongs of the constitutional requirements for demonstrating standing.
2. Ripeness
"Intertwined" with Article Ill's requirement that a plaintiff demonstrate standing is the ripeness doctrine, "which seeks to `prevent the courts, through the avoidance of premature adjudication, from entangling themselves in abstract disagreements.'" Artway v. Attorney Gen. of N.J., 81 F.3d 1235, 1246-47 (3d Cir. 1996) (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 148, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967), overruled on other grounds, Califano v. Sanders, 430 U.S. 99, 105, 97 S.Ct. 980, 51 L.Ed.2d 192(1977)). To determine whether a claim is ripe, a court must weigh: "(1) the hardship to the parties of withholding court consideration; and (2) the fitness of the issues for judicial review." Planned Parenthood of Cent. N.J. v. Farmer, 220 F.3d 127, 147-48 ( 3d Cir.2000) (quoting Artway, 81 F.3d at 1247). Judicial determination of an injury's ripeness are to be performed in "a pragmatic fashion." Barmo v. Reno, 899 F.Supp. 1375,1379 (E.D.Pa. 1995).
The difficult issue here is not whether Lexington's injury is ripe, but, rather, which injury is ripe. The legal fees incurred by plaintiff are not "abstract," for there is no question that this alleged injury has occurred. See Artway, 81 F.3d at 1247. If the court were to withhold review, plaintiff would be forced to go uncompensated for those losses it incurred as a result of defendants' alleged actions. This decision would constitute a hardship. Furthermore, whether defendants' past communications within this forum constituted wire fraud and whether these frauds harmed Lexington by forcing it to defend itself against third parties are questions that are fit for judicial review. Because Lexington has standing to make its complaint and because it has stated an injury that is ripe for review, I will not consider defendants' argument that plaintiffs risk of losing more money in the pending English litigation means that Lexington's complaint fails to satisfy the ripeness requirement of Article III. Defendants' concerns regarding plaintiffs alleged losses in legal fees are best addressed in the context *999 of its Rule 12(b)(6) motion, as they pertain to whether plaintiff has stated a claim for which relief can be granted.[11] For the purposes of conferring standing, however, these losses are ripe.
C. The Doctrine of Forum Non Conveniens
The law regarding the doctrine of forum non conveniens is well-established. The "polestar" in dealing with a forum non conveniens motion is Piper Aircraft Co. v. Reyno, 454 U.S. 235, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981). Lacey v. Cessna Aircraft Co., 862 F.2d 38, 39 (3d Cir.1988) ("Lacey I"), rev'd after remand, 932 F.2d 170 (1991) ("Lacey II"). Piper requires defendants who file motions to dismiss on forum non conveniens grounds to supply the court with enough information such that it might balance the parties' interests. Piper, 454 U.S. at 258, 102 S.Ct. 252. Based on both sides' submissions, the district court must "develop adequate facts to support its decision" and "articulate specific reasons for its conclusions." Lacey I, 862 F.2d at 39.
Consistent with this posture of review, a district court may exercise its discretion and dismiss a case "when an alternative forum has jurisdiction to hear the case, and when trial in the chosen forum would `establish ... oppressiveness and vexation to a defendant ... out of all proportion to plaintiffs convenience,' or when the `chosen forum' [is] inappropriate because of considerations affecting the court's own administrative and legal problems.'" Piper, 454 U.S. at 241, 102 S.Ct. 252 (quoting Koster v. Am. Lumbermens Mut. Cas. Co., 330 U.S. 518, 524, 67 S.Ct. 828, 91 L.Ed. 1067 (1947)). There are two stages of analysis in evaluating a forum non conveniens claim. First, the court decides whether an adequate alternative forum exists; second, the court must evaluate several private and public interest factors. The parties have raised a number of arguments and I will address them in the contest of this analytic frame. I will do so mindful of two considerations: (i) that Plaintiffs choice of forum "should rarely be disturbed," Lacey I, 862 F.2d at 43; and (ii) that defendants bear the burden of persuasion "as to all elements of the forum non conveniens analysis" and they must show that the "private and public interest factors weigh heavily on the side of dismissal." Id. at 43-44 (citation omitted).
1. Availability of an Adequate Alternative Forum
The parties disagree on whether an adequate alternative forum exists. *1000 An adequate alternative forum exists if the defendants are amenable to process in the other jurisdiction and the alternative forum permits litigation of the disputed subject matter. See Piper, 454 U.S. at 255, n. 22, 102 S.Ct. 252. Both defendants agree that they would be amenable to jurisdiction in the United Kingdom. At issues is the fact that RICOand its award of treble damagesis a legal remedy particular to the United States. In Piper, the Supreme Court held that "the possibility of a change in substantive law should ordinarily not be given conclusive or even substantial weight" when determining dismissal on the grounds of forum non conveniens. Lony v. E.I. Du Pont de Nemours & Co., 886 F.2d 628, 632 n. 2 (3d Cir. 1989) "Lony I"), appeal after remand, 935 F.2d 604 (1991) ("Lony II") (citing Piper, 454 U.S. at 257, 102 S.Ct. 252). Although neither Piper nor Lony I involved RICO, my colleague the Honorable Norma L. Shapiro has held that assertion of RICO claims "does not preclude application of forum non conveniens." Winex, Ltd. v. Paine, No. 89-2083, 1990 WL 121483, at *5 (E.D.Pa. Aug.15, 1990). As defendants point out, differences between British and American law do not preclude plaintiff from bringing suit in England. In both nations legal remedies for fraud are available. Id. In light of Piper, Lony I, and Winex, I find that Britain is an adequate alternative forum. I will therefore not address defendants' additional arguments about the possibility of combining this nascent lawsuit with the longer-standing litigations taking place in England.
2. Private Interest Factors
As stated above, the court must also consider several private and public interest factors. In Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055 (1947), the Supreme Court listed private interest factors that a court should consider. They included: (i) the relative ease of access to sources of proof; (ii) the availability of compulsory process for unwilling witnesses; (iii) the cost of obtaining witnesses; (iv) the enforceability of a judgment, if one is obtained; and (v) all other practical problems concerning litigation. Id. at 508, 67 S.Ct. 839.
Defendants make a series of arguments about why the private interest factors weigh in their favor. They contend that many witnesses are British citizens who are unwilling to travel to the United States to testify, that evidence is located in England, that the disputed events transpired in England, that this lawsuit could be brought in conjunction with future British lawsuits involving creditors' claims against plaintiff, and that plaintiff "has no compelling reason with respect to its own convenience to support its choice of forum." Rogers's Mot. to Dismiss at 24.
Plaintiff disputes defendants' contention that the balance of private interests weighs in defendants' favor. Although agreeing with defendants that discovery materials are located in England, Lexington points out that materials are also located in the United States and Canada. In particular, the funds allegedly misappropriated by defendants were allegedly siphoned off for Flashpoint projects in California and Canada, where discovery will need to be conducted. In addition, documents are to be found in Massachusetts at Lexington's office and in Gladwyne, Pennsylvania.
Regarding the availability of witnesses, defendants have identified four British citizens who would be unwilling to travel to the United States. They argue that these four individuals are critical to the defense, but likely to be unwilling witnesses. Defendants think that because the English courts could better compel the testimony of these witnesses the case should be dismissed on the basis of forum non conveniens. *1001 Rogers's Mot. to Dismiss at 22. In response to defendants' arguments, plaintiff points to the numerous U.S.-based individuals involved in Hollywood Funding Nos. 3, 4, and 5 and "It Had To Be You." This court has previously noted that "the need to resort to videotaped depositions, obtained through letters rogatory, should not mandate dismissal." In re Corel Corp. Inc. Sec. Litig., 147 F.Supp.2d 363, 366 (E.D.Pa.2001). Similarly, the potential need to videotape the four British defendants does not mandate dismissal in this case either.
At least on the face of the pleadings, it appears that the allegedly fraudulent transactions spanned three countries and involved many individuals. The complexity of this lawsuit's underlying facts means that it will be costly and complicated wherever it is brought. The court must thus address the relative costs of bringing suit in the various countries involved. Defendants have failed to demonstrate why bringing suit in the United States is so much more expensive or oppressive than litigating in England. Furthermore, any judgment acquired in either nation will potentially require enforcement in the United States, England, and Canada, as the defendants have assets in all three countries. Finally, there are no additional practical considerations that compel disregarding plaintiffs choice of forum. The evidence, when evaluated with the deference owed to a plaintiffs choice of forum, leads me to find that defendants have not demonstrated that the private interest factors weigh heavily in favor of dismissal.
3. Public Interest Factors
In Piper, the Supreme Court stated that the relevant public interest factors in a forum non conveniens inquiry include: (i) administrative difficulties flowing from court congestion; (ii) "local interest in having localized controversies decided at home;" (iii) avoidance of unnecessary problems in conflict of laws, or the application of foreign law; and (iv) the "unfairness of burdening citizens in unrelated forum with jury duty." 454 U.S. at 241 n. 6, 102 S.Ct. 252 (citation omitted).
Defendants argue that these public interest factors weigh in favor of dismissal. In support of their argument, they make the following statements. First, that there is no need to congest this forum's docket with an action whose factual predicate overlaps with that of the pending British litigation. Second, that the United States has negligible interest in the outcome of this litigation. Third, that the parties' common law disputes might be governed by British law. Fourth, that jurors from this district should not be burdened with the duty of hearing this matter.[12]See Rogers's Mot. to Dismiss at 25.
Defendants' arguments regarding the public interest factors are unpersuasive. While court congestion is a reality of the modern judicial system, this case does not represent the straw that might otherwise break the proverbial camel's back. The court is equipped to hear this case and doing so will not prejudice the interests of those parties who do not have the option of choosing from the variety of fora available *1002 to plaintiff. The overlap between this case and the ongoing British litigation does not diminish this court's capacity, nor does it erode the deference that a court owes to a plaintiffs choice of forum.
With regard to local interest, this forum has more than a negligible interest in the outcome of this case. RICO's availability within this forum testifies to its commitment to providing legal redress for victims of racketeering conspiracies. If the defendants did indeed use the U.S. mails and phone lines to perpetuate an elaborate fraud in Pennsylvania, Massachusetts, and California, whereby a Delaware corporation lost millions of dollars, then it stands to reason that the United States would have an interest in regulating such conduct and in indemnifying its citizens for their losses. Cf. Lacey I, 862 F.2d at 47 (recognizing, in federal diversity action, "Pennsylvania's interest in regulating the manufacture of products within its borders").
Both parties agree that there is a possibility that British law will govern Lexington's common-law claims against defendant. This possibility weighs heavily in favor of dismissal. It is counter-balanced, however, by the fact that more than half of the complaint involves RICO claims that are governed by federal law. So long as these RICO claims are legally viable, the possibility that British law will need to be applied by this court cannot outweigh the presumption against dismissal for forum non conveniens.
Finally, the risk that residents will be called to serve on a jury for this case does not weigh heavily in favor of dismissal. If defendants, by and through their actions in Gladwyne, conspired to effectuate the alleged Ponzi scheme, then a local jury has an interest in sanctioning such behavior insofar as it offends the laws of this forum. Cf. Corel, 147 F.Supp.2d at 367 n. 2.
Because I find that neither the private nor the public interest factors discussed above weigh heavily in favor of dismissal, defendants motion to dismiss based on the doctrine of forum non conveniens is denied.
D. Principles of International Comity
Similar to the doctrine of forum non conveniens, principles of international comity allow a district court to exercise its discretion and dismiss a case over which it has subject matter jurisdiction in deference to the laws and interests of another nation. See Societe Nationals Industrielle Aerospatiale v. United States Dist. Ct. for the So. Dist. of Iowa, 482 U.S. 522, 543 n. 27, 107 S.Ct. 2542, 96 L.Ed.2d 461 (1987); Paraschos v. YBM Magnex Int'l, Inc., No. 98-6444, 2000 WL 325945, at *5 (E.D.Pa. 2000). In Hilton v. Guyot, 159 U.S. 113, 164, 16 S.Ct. 139, 40 L.Ed. 95 (1895), the Supreme Court defined international comity as: "the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard to both the international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws." These principles permit a court to engage in "a spirit of international cooperation." Paraschos, 2000 WL 325945 at *5 (citation omitted). They do not, however, extend judicial deference to those cases whose dismissal would be contrary to domestic public policy. Id. Nor do they compel dismissal when the suits in question are neither duplicative nor parallel. Id.
Even the existence of a "parallel" case, however, need not compel dismissal.[13]*1003 "[A] district court should exercise jurisdiction over an action even where identical subject matter is concurrently before a foreign court." Id. at *6 (citing Ingersoll Mill. Mach. Co. v. Granger, 833 F.2d 680, 685 (7th Cir.1987)). Dismissal for reasons of international comity is appropriate only in "extraordinary circumstances." Id. Such circumstances include: (i) duplicative litigation, (ii) inconvenience of the domestic forum, (iii) the governing law, (iv) the order in which jurisdiction was obtained, (v) the relative progress of each proceeding, and (vi) the "`contrived nature' of the domestic claim." Id. (citations omitted).
Addressing the circumstances that inform a court's decision to dismiss based on principles of international comity, I make the following conclusions: First, this lawsuit is not a duplicate of the creditors' British suit against Lexington. The defendants are not parties to both suits and it is possible, according to plaintiff, that the English court will never reach Lexington's fraud defense to the creditors' claims. In addition, the British court is not determining whether defendants' alleged fraud injured plaintiff. Rather, the question before the British court appears to be whether defendants' fraud obviates plaintiffs obligation to indemnify Flashpoint's creditors. Second, I have already addressed the relative inconvenience of bringing suit here and abroad and found that the comparative drawbacks of bringing suit in either forum do not weigh heavily in defendants' favor. Third, my earlier conclusions regarding the issue of which forum's law governs plaintiffs claims apply here as well: The specter of a conflict of law problem is not "extraordinary" and does not does require dismissal. Fourth, defendants are correct that the present suit could have been brought when Flashpoint's creditors filed suit against Lexington. Although the British litigation preceded this suit, plaintiffs "should be permitted to bring their claims in the forum of their choice." Id. Finally, the availability of treble damages under RICO, together with the fact that plaintiff is a U.S. company, allay any doubts that plaintiff is merely casting about for a pretext on which to bring suit outside of Britain.
Earlier, defendants also raised the argument that a failure to dismiss would be disrespectful to the British courts. Supra, at n. 12. I suspect that the British courts are less thin-skinned than defendants maintain. This lawsuit has no bearing on the creditors' rights at issue in the British litigation. Nor does it purport to evaluate the fitness of any British court's decision. Should English law govern plaintiffs common-law claims, adjudication will be done with the utmost deference to England's jurists and its case law. Contrary to defendants' warning, I believe the sovereignty of that forum will not be impinged upon by American adjudication of this lawsuit. For these reasons and those expressed above, defendants' motions to dismiss based on principles of international comity are denied.
E. Rule 12(b)(6): Failure to State a Claim for Which Relief Can Be Granted
Rule 12(b)(6) permits dismissal of a case when the plaintiff has failed to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering a Rule 12(b)(6) motion, the Court must accept as true all of the allegations set forth in the complaint and must draw all reasonable inferences in favor of the plaintiff. See Ford v. Schering-Plough Corp., 145 F.3d 601, 604 (3d Cir.1998). Dismissal of plaintiffs claim is appropriate only if plaintiff "can prove no set of facts in support of *1004 his claim which would entitle him to relief." Id. (quotations omitted). The court need not, however, accept conclusory allegations or legal conclusions. Morse v. Lower Merion School District, 132 F.3d 902, 906 (3d Cir.1997).
Defendants make two arguments for why plaintiffs claim should be dismissed under Rule 12(b)(6). First, they argue that Counts I, II, and IV, which allege fraud, fail to meet Rule 9(b)'s heightened pleading standard for fraud claims. Second, Rogers argues that plaintiffs legal fees are not an injury for which relief can be granted under RICO and that Counts IIII, which invoke this federal statute, should therefore be dismissed. I will address both these arguments.
1. Rule 9(b)
Rule 9(b) provides a heightened pleading requirement for fraud claims. This rule provides that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed.R.Civ.P. 9(b). The purposes of this rule are to provide notice of the precise misconduct with which defendants are charged and to "safeguard defendants against spurious charges of immoral and fraudulent behavior." Seville Indus. Mack v. Southmost Mack Corp., 742 F.2d 786, 791 (3d Cir. 1984). Although heightened, the pleading standards for fraud are not insurmountable. "As long as the allegations of fraud reflect precision and some measure of substantiation, the complaint is adequate." In re Meridian Sec. Litig., 772 F.Supp. 223, 226 (E.D.Pa.1991) (citing Seville, 742 F.2d at 791). The Third Circuit has cautioned against over-zealous enforcement of this rule. See Seville, 742 F.2d at 791; In re Craftmatic Sec. Litig., 890 F.2d 628, 645 (3d Cir.1989).
Lexington's 24-page complaint adequately particularizes the alleged fraudulent conduct. Having read the complaint, there can be no reasonable doubt in defendants' minds as to what acts, taken in regard to which transactions, are the basis of plaintiffs complaints for fraud. The detail with which plaintiff describes the predicate acts is in such depth that it would be a burden for this court to repeat them all. Defendants' 12(b)(1) motion with regard to Rule 9(b) is denied.
2. Failure to State an Injury for Which Relief Can Be Granted
Defendants argue that plaintiff cannot state a claim for which relief can be granted because its injury, in the form of legal fees, is too remote from the alleged predicate acts necessary for a successful RICO claim. Defendants do not, however, present this court with any controlling case law that either precludes an alleged RICO victim from recovering legal fees related to a predicate act or establishes when an injury is too remote. Although plaintiff has found the decision of Seaboard Surety Co. v. Permacrete Construction Corp., 221 F.2d 366, 371 (3d Cir.1955), which permits a victim of fraud to recover legal fees incurred defending itself against a thirdparty lawsuit when the alleged fraud caused that lawsuit, it has not presented the court with any controlling case that involves a RICO claim for legal fees. The controlling law in this circuit is thus unclear as to what type of injury a plaintiff must allege in order to state a RICO claim for which relief can be granted. Considering the case-at-hand in the light most favorable to plaintiff, I will deny defendants' 12(b)(6) motion.
F. Request for a Stay
Both defendants have requested a stay in this matter if the court declines to grant their motions to dismiss. In addition to the power to dismiss, federal *1005 courts have the power to stay an action based on the pendency of related proceedings in a foreign jurisdiction. Nat'l Union Fire Ins. Co. of Pittsburgh v. Kozeny, 115 F.Supp.2d 1243, (D.Col.2000) (citing Landis v. Am. Water Works & Elec. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153 (1936)). This power, however, is checked by the courts' "strict duty to exercise the jurisdiction that is conferred upon them by Congress." Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996). The Third Circuit has not addressed what standard governs determinations of whether to award a stay in the event of related litigation pending in an alternative forum. In National Union, the Colorado district court performed a helpful survey of those federal cases that address this issue. After its review, the court found that the relevant factors for determining whether a stay was warranted were virtually identical to those concerning dismissal based on principles of international comity. See Nat'l Union, 115 F.Supp.2d at 1247. Although I agree with the Colorado district court's legal analysis, I reach a different conclusion. While resolution of the British litigation will clarify whether plaintiff has a claim for additional damages, it will not address plaintiffs alleged loss of millions of dollars in legal fees. Nor will it determine whether defendants committed wire and mail fraud within this forum or whether those frauds unlawfully injured plaintiff. Rather, the parallel litigation will determine the rights of those creditors now suing Lexington. For this reason I see no reason to delay what looks to be an expensive and protracted litigation. Defendants 12(b)(6) motions are therefore denied.
III. CONCLUSION
For the reasons articulated above, defendants' Motions to Dismiss, or, Alternatively, Stay the Instant Proceedings are denied.
ORDER
AND NOW, this 6th day of May, 2003, the defendants' Motions to Dismiss, or, Alternatively, Stay the Instant Proceedings (Docket ## 6, 11) are DENIED.
NOTES
[1] Lexington refers to these eight transactions as "The New Professionals," "It Had to Be You," and "Hollywood Funding No. 1" through "Hollywood Funding No. 6"
[2] Defendants' 12(b)(6) motions do not seek dismissal of plaintiff's entire complaint, but only counts I-IV, that is, the motions do not challenge the tortious interference claim, but only the RICO and fraud claims.
[3] In his separate motion to dismiss, Forrest adopted and incorporated Rogers's arguments regarding standing, ripeness, forum non conveniens, principles of international comity, subject matter jurisdiction and the need for a stay. For this reason, I will attribute those arguments made in Rogers's brief to both defendants.
[4] The Pennsylvania statute provides in relevant part that "the jurisdiction of the tribunals of this Commonwealth shall extend to all persons ... to the fullest extent allowed under the Constitution of the United States and may be based on the most minimum contact with this Commonwealth allowed under the Constitution of the United States." 42 Pa. Con. Stat. Ann. § 5322(b) (Purdon 1981).
[5] There are two categories of personal jurisdiction that satisfy the fairness standard articulated in International Shoe: general and specific jurisdiction. General jurisdiction exists when a defendant's contacts with the forum state are "continuous and systematic." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). Specific jurisdiction "arises out of or relates to" the defendant's limited contacts with the forum. Id. at 414, 104 S.Ct. 1868. To establish general jurisdiction over a defendant the plaintiff "must show significantly more" contact between the forum and the non-resident defendant than that required to establish specific jurisdiction. Provident Nat'l Bank v. Cal. Fed. Sav. & Loan Assoc., 819 F.2d 434, 437 (3d Cir. 1987). General jurisdiction requires that the non-resident's contacts with the forum be "continuous and systematic." Fields v. Ramada Inn, Inc., 816 F.Supp. 1033, 1036 (E.D.Pa.1993).
Plaintiff has not sought to prove that Forrest's contacts with this district were continuous and systematic. Thus, although it has not specified which of the two types of personal jurisdiction it believes applies to Forrest, I will presume that plaintiff is only arguing for specific jurisdiction.
[6] Lexington also asserts that Forrest's contacts constituted wire fraud and that he could therefore be indicted and tried in this district. In support of this argument, plaintiff points to a Third Circuit Court of Appeals case that upheld prosecution for wire fraud where the relevant wire transfer merely passed through the district wherein defendant was convicted. See United States v. Goldberg, 830 F.2d 459, 465 (3d Cir. 1987). The defendant in Goldberg, however, did not dispute the court's personal jurisdiction. Absent evidence to the contrary, the possibility of indictment does not amount to a minimum contact for the purposes of federal civil procedure.
[7] These telexes seem to be Sanz Perez's only contacts with this forum, since it appears from the opinion that he never visited or called Pennsylvania.
[8] Forrest argues that the "corporate shield" doctrine prevents his actions from constituting minimum contacts for jurisdictional purposes. See Forrest's Mot. to Dismiss at 15. Under this doctrine, "the actions of corporate employees and officers that are conducted within their corporate capacity do not constitute contacts with the forum that support jurisdiction over them." Perry v. Markman Capital Mgmt., Inc., No. 02-744, 2002 WL 31248038, *4 (E.D.Pa.2002).
Even assuming, arguendo, that Forrest's contacts occurred while he was acting in his official capacity, this doctrine does not prevent a court from exercising personal jurisdiction over defendant. The corporate shield doctrine does not apply to RICO claims. Am. Trade Partners, L.P. v. A-1 Int'l Importing Enters., Ltd., 755 F.Supp. 1292, 1303 n. 17 (E.D.Pa. 1990). Nor does it apply to torts, for the "courts have refused to permit a corporate officer to invoke the shield when the officer was involved in tortious conduct...." Lautman v. Laewen Group, Inc., No. 99-75, 2000 WL 772818, *5 (E.D.Pa.2000). As Forrest is accused of having violated RICO and of having caused two torts (fraudulent misrepresentation and tortious interference with a contract), he is amenable to personal jurisdiction regardless of what capacity he was acting in when he initiated contacts with this forum.
[9] The Supreme Court has identified three prudential standing requirements. They are: (i) a general prohibition on allowing a plaintiff to raise the concerns of a third party, (ii) a prohibition on taxpayer suits wherein the grievance is common to all taxpayers, and (iii) a requirement that the plaintiff raise a claim within the zone of interests protected by the statute in question. See generally Lujan v. Defenders of Wildlife, 504 U.S. 555, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). None of these requirements are at issue in the case now before me.
[10] Consistent with the Third Circuit's observation, I will reserve my determination of whether plaintiff's injury is sufficient to state a claim for the discussion of defendants' Rule 12(b)(6) motion below.
[11] Rogers's argument relies in part on a Rhode Island district court opinion, Terra Nova Ins. Co., Ltd. v. DiStefano, 663 F.Supp. 809 (D.R.I.1987). See Rogers's Mot. to Dismiss at 15. The plaintiffs in Terra Nova were litigating against the defendants in both state and federal court. The state and federal cases rested on the same set of facts and involved identical parties. Because the state court proceedings could have preclusive effect on the federal proceedings, the district court dismissed the federal case as unripe. Unlike Terra Nova, this case involves different parties and relatedbut differentsets of facts. Although defendants' alleged frauds are at issue in the British litigation, plaintiff has argued that they are neither dispositive nor exclusive. Furthermore, the British court's decision regarding those lawsuits against Lexington, which Rogers submitted, recognizes that even those issues arising in the British lawsuits are not uniform. In deciding against consolidating the trials for Hollywood Funding No. 5 and The New Professionals, the British court held that "the extent of overlap of those issues [in the two cases] is in fact minimal..." Rogers's Mot. to Dismiss, Ex. B at 4. The diversity of issues being litigated in England stands in contrast to the uniformity of Terra Nova. This diversity, coupled with questions of whether any British decision would necessarily have preclusive effect in this jurisdiction, lead me to reject defendants' argument that Terra Nova governs this case.
[12] Without explaining how this argument factors into the Gulf Oil analysis, defendants also maintain that a failure to dismiss "could impinge on the sovereign interests of the English legal system in overseeing discovery conducted within English borders." Rogers's Mot. to Dismiss at 26. This argument does not appear to represent one of the public interest factors at issue in a forum non conveniens motion, but rather a concern that should be addressed in the section on principles of international comity. For that reason I will address this argument below.
[13] Two actions are "parallel" when the parties "share some legal identity of interest such that they are `substantially the same.'" Id. (quoting Caminiti & Iatarola, Ltd. v. Behnke Warehousing, Inc., 962 F.2d 698, 700 (7th Cir. 1992)). They are "substantially the same" when there is a "substantial likelihood that the [foreign] litigation will dispose of all claims presented in the federal case." Id. (quoting Lumen Constr., Inc. v. Brant Constr. Co., 780 F.2d 691, 695 (7th Cir.1985)).
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726 S.E.2d 824 (2012)
STATE of North Carolina
v.
Megan Sue OTTO.
No. 523A11.
Supreme Court of North Carolina.
June 14, 2012.
*826 Roy Cooper, Attorney General, by William P. Hart, Jr., Assistant Attorney General, and William P. Hart, Sr., Senior Deputy Attorney General, for the State-appellant.
Robinson Law Firm, P.A., Greenville, by Leslie S. Robinson, for defendant-appellee.
Isaac T. Avery, Raleigh, III for North Carolina Conference of District Attorneys; Tiffanie W. Sneed, Chapel Hill for North Carolina Association of Police Attorneys; and Edmond W. Caldwell, Jr., Raleigh for North Carolina Sheriffs' Association, amici curiae.
HUDSON, Justice.
The State seeks review of a divided Court of Appeals opinion holding that one of the trial court's findings of fact was not supported by the evidence and reversing the trial court's denial of her motion to suppress evidence obtained from the stop of her vehicle. While we agree with the Court of Appeals that one of the trial court's findings of fact was not supported by the evidence, we hold that the trial court did not err in denying defendant's motion to suppress, because there was reasonable suspicion for the traffic stop.
Background
On 29 February 2008, Trooper A.B. Smith was working on preventive patrol near the intersection of NC 43 and NC 264 in Pitt County. Around 11:00 p.m., as the trooper sat on a cross street, he observed a burgundy Ford Explorer drive past him on NC 43 heading south. At that point, he was about a half mile from Rock Springs Equestrian Center ("Rock Springs"), and the vehicle was coming from its direction. But, because NC 43 is a busy road into and out of Greenville, Trooper Smith did not know specifically where the vehicle was coming from. He did know that Rock Springs was hosting a Ducks Unlimited Banquet that night, and he had heard from others that Rock Springs sometimes served alcohol.
Trooper Smith happened to turn onto NC 43 behind the Ford, and he did not notice anything out of the ordinary when he pulled onto the road behind it. But while driving about a hundred feet behind the Ford, he "immediately started noticing [it] was weaving" within its own lane. The vehicle never left its lane, but was "constantly weaving from the center line to the fog line." The Ford appeared to be traveling at the posted speed limit of fifty-five miles per hour. Trooper Smith watched it weave in its own lane for about three-quarters of a mile, and then he activated his lights and stopped defendant, the driver. During the traffic stop, Trooper Smith issued defendant a citation for driving while subject to an impairing substance.
After several proceedings in both the district court and superior courts in Pitt County, on 3 December 2009, defendant filed in Superior Court a motion to suppress the evidence obtained as a result of the traffic stop. The matter was heard on 27 September 2010, and an order was entered on 13 January 2011, nunc pro tunc 30 September 2010, denying the motion to suppress. Defendant pleaded guilty to driving while impaired, reserving her right to appeal. She was sentenced to sixty days imprisonment, suspended, with twenty-four months of supervised probation. Defendant appealed to the Court of Appeals, which, in a divided opinion, reversed the decision of the trial court. State v. Otto, ___ N.C.App. ___, 718 S.E.2d 181 (2011). The State appealed.
Findings of Fact
In its 30 September 2010 order denying defendant's motion to suppress, the trial court made, inter alia, the following finding of fact:
5. Trooper Smith knew that there was a Ducks Unlimited Banquet being held at the Rock Springs Equestrian Center that evening, which was approximately four-tenths to five-tenths of a mile away from where he initially observed the vehicle, and Trooper Smith knew that Rock Springs Equestrian Center serves alcohol.
*827 (emphasis added). Defendant argues here, as she did at the Court of Appeals, that the trial court erred in finding that Trooper Smith "knew" that Rock Springs served alcohol. The Court of Appeals majority held that the evidence did not support the finding that the trooper "knew" Rock Springs served alcohol.
"The standard of review in evaluating the denial of a motion to suppress is whether competent evidence supports the trial court's findings of fact and whether the findings of fact support the conclusions of law." State v. Biber, 365 N.C. 162, 167-68, 712 S.E.2d 874, 878 (2011) (citing State v. Brooks, 337 N.C. 132, 140-41, 446 S.E.2d 579, 585 (1994)).
At the suppression hearing, Trooper Smith testified that he had never personally been inside Rock Springs, nor had he ever witnessed anyone drinking alcohol there; however, he did state that he had "heard that they do serve alcohol." He further testified on cross-examination that he did not know what Rock Springs was like on the inside, but added that he would not classify the facility as creating the same atmosphere as the downtown area of Greenville where multiple bars are located.
We hold that this evidence does not support the trial court's finding that Trooper Smith "knew" that alcohol was served at Rock Springs. Accordingly, this finding of fact is not binding on this Court. However, we note that reliable information received or obtained by a law enforcement officer indicating that a facility serves alcohol may provide a basis for an officer's reasonable suspicion that a motorist has consumed alcohol. The better practice, which also facilitates appellate review, is for the trial court to set out the nature and extent of an officer's knowledge or belief when making findings of fact.
Motion to Suppress
Both the United States and North Carolina Constitutions protect against unreasonable searches and seizures. U.S. Const. amend. IV; N.C. Const. art. I, § 20. Although potentially brief and limited in scope, a traffic stop is considered a "seizure" within the meaning of these provisions. See Delaware v. Prouse, 440 U.S. 648, 653, 99 S. Ct. 1391, 1396, 59 L. Ed. 2d 660 (1979). "Traffic stops have `been historically reviewed under the investigatory detention framework first articulated in Terry v. Ohio, 392 U.S. 1, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968).'" State v. Styles, 362 N.C. 412, 414, 665 S.E.2d 438, 439 (2008) (citation omitted). Therefore, "reasonable suspicion is the necessary standard for traffic stops." Id. at 415, 665 S.E.2d at 440 (citations omitted). As articulated by the United States Supreme Court in Terry, the stop must be based on "specific and articulable facts which, taken together with rational inferences from those facts, reasonably warrant that intrusion." Terry, 392 U.S. at 21, 88 S. Ct. at 1880 (citations omitted). "The only requirement is a minimal level of objective justification, something more than an `unparticularized suspicion or hunch.'" State v. Watkins, 337 N.C. 437, 442, 446 S.E.2d 67, 70 (1994) (quoting United States v. Sokolow, 490 U.S. 1, 7, 109 S. Ct. 1581, 1585, 104 L. Ed. 2d 1 (1989) (internal quotation marks omitted)).
Here the Court of Appeals majority determined that the traffic stop of defendant was unreasonable because it was supported solely by defendant's weaving within her own lane. Otto, ___ N.C.App. at ___, 718 S.E.2d at 184-85. The dissenting judge would have held the stop was reasonable. Id. at ___, 718 S.E.2d at 186 (Ervin, J., dissenting). Looking to its own prior precedent, the Court of Appeals determined that in each case in which weaving in one's own lane was a basis for the traffic stop, reasonable suspicion was found only if the weaving was accompanied by some other factor. For example, in State v. Aubin, the Court of Appeals found that there was reasonable suspicion for the traffic stop when a driver was weaving within his own lane and traveling below the speed limit. 100 N.C.App. 628, 632, 397 S.E.2d 653, 655 (1990), appeal dismissed and disc. rev. denied, 328 N.C. 334, 402 S.E.2d 433, cert. denied, 502 U.S. 842, 112 S. Ct. 134, 116 L. Ed. 2d 101 (1991). In State v. Jacobs, the Court of Appeals found reasonable suspicion for a traffic stop when the driver was weaving within his own lane and driving at 1:43 a.m. in the vicinity of several bars. 162 N.C.App. 251, 255, 590 S.E.2d 437, 440 *828 (2004). On the other hand, in State v. Fields, the Court of Appeals determined that there was not reasonable suspicion when the driver was weaving within his own lane at 4:00 p.m. 195 N.C.App. 740, 746, 673 S.E.2d 765, 769, disc. rev. denied, 363 N.C. 376, 679 S.E.2d 390 (2009). Given this precedent, the majority here concluded that "[w]ithout any additional circumstances giving rise to a reasonable suspicion that criminal activity is afoot, stopping a vehicle for weaving is unreasonable." Otto, ___ N.C.App. at ___, 718 S.E.2d at 184 (majority).
A court "`must consider "the totality of the circumstances the whole picture" in determining whether a reasonable suspicion' exists." Styles, 362 N.C. at 414, 665 S.E.2d at 440 (citations omitted). The totality of the circumstances here leads us to conclude that there was reasonable suspicion for the traffic stop. Unlike the Court of Appeals cases in which weaving within a lane was found to be insufficient to support reasonable suspicion, the weaving here was constant and continual. In Fields the defendant weaved only three times over the course of a mile and a half. 195 N.C.App. at 741, 673 S.E.2d at 766. Similarly, in State v. Peele, there was only one instance of weaving. 196 N.C.App. 668, 671, 675 S.E.2d 682, 685, disc. rev. denied, 363 N.C. 587, 683 S.E.2d 383 (2009). In contrast, defendant here was weaving "constantly and continuously" over the course of three-quarters of a mile. In addition, defendant was stopped around 11:00 p.m. on a Friday night. These factors are sufficient to create reasonable suspicion.
Accordingly, we reverse the Court of Appeals holding that there was no reasonable suspicion for the traffic stop, and we hold that the trial court correctly denied defendant's motion to suppress.
REVERSED.
Justice NEWBY concurring.
I agree with the majority that there was reasonable, articulable suspicion to stop defendant's vehicle. In my view, however, defendant's constant and continuous weaving standing alone is sufficient to support such a conclusion.
A law enforcement officer may conduct an investigatory stop when there is "a reasonable, articulable suspicion that criminal activity is afoot." Illinois v. Wardlow, 528 U.S. 119, 123, 120 S. Ct. 673, 675, 145 L. Ed. 2d 570, 576 (2000) (citing Terry v. Ohio, 392 U.S. 1, 30, 88 S. Ct. 1868, 1884, 20 L. Ed. 2d 889, 911 (1968)). As this Court has explained:
Reasonable suspicion is a less demanding standard than probable cause and requires a showing considerably less than preponderance of the evidence. The standard is satisfied by some minimal level of objective justification. This Court requires that [t]he stop ... be based on specific and articulable facts, as well as the rational inferences from those facts, as viewed through the eyes of a reasonable, cautious officer, guided by his experience and training.
State v. Styles, 362 N.C. 412, 414, 665 S.E.2d 438, 439 (2008) (alterations in original) (internal citations and quotation marks omitted).
A criminal act need not occur before an officer may initiate a stop. In Terry v. Ohio, the law enforcement officer observed lawful conduct, "a series of acts, each of them perhaps innocent in itself, but which taken together warranted further investigation." Terry, 392 U.S. at 22, 88 S. Ct. at 1880-81, 20 L.Ed.2d at 907. Furthermore, the reasonable suspicion standard is a "commonsense, nontechnical conception[] that deal[s] with `"the factual and practical considerations of everyday life on which reasonable and prudent men, not legal technicians act."'" Ornelas v. United States, 517 U.S. 690, 695, 116 S. Ct. 1657, 1661, 134 L. Ed. 2d 911, 918 (1996) (quoting Illinois v. Gates, 462 U.S. 213, 231, 103 S. Ct. 2317, 2328, 76 L. Ed. 2d 527, 544 (1983) (quoting Brinegar v. United States, 338 U.S. 160, 175, 69 S. Ct. 1302, 1310, 93 L. Ed. 1879, 1890 (1949))).
In this case, Trooper Smith followed behind defendant "for approximately three-quarters of a mile, during which time Trooper Smith observed the vehicle weaving constantly and continuously within the width of the travel lane." That alone provides the minimal level of objective justification required for reasonable suspicion. The specific and articulable fact that defendant weaved *829 "constantly and continuously" for three-quarters of a mile is sufficient to cause a reasonable and prudent officer to infer that defendant may be driving while impaired. See Terry, 392 U.S. at 22-23, 88 S.Ct. at 1880-81, 20 L. Ed. 2d at 907 (concluding that a series of lawful acts, while seemly innocent in isolation, can warrant investigation when taken together); see also, e.g., State v. Barnard, 362 N.C. 244, 248, 658 S.E.2d 643, 645, cert. denied, 555 U.S. 914, 129 S. Ct. 264, 172 L. Ed. 2d 198 (2008) (holding that a defendant's singular, but prolonged, delay in response at a green traffic signal gave rise to reasonable suspicion of criminal activity). While constant and continuous weaving within defendant's own lane could be innocent, lawful conduct, it also gives rise to reasonable suspicion that defendant is driving while impaired. Thus, there was reasonable, articulable suspicion for Trooper Smith to stop defendant's vehicle.
Although unnecessary to resolve this case, I believe the trial court had sufficient evidence to find that Trooper Smith "knew" when he stopped defendant's vehicle that Rock Springs Equestrian Center served alcohol. Under common-usage definitions of the word "know," actual certainty or first-hand knowledge is not required. See Random House Webster's College Dictionary 750 (1991) (defining "to know" as "to be cognizant or aware of" or "to be acquainted or familiar with (a thing, place, person, etc.)"). Further, this is a matter on which our Court should defer to the trial court. See, e.g., Ornelas, 517 U.S. at 699, 116 S. Ct. at 1663, 134 L.Ed.2d at 920-21 (pointing out that a reviewing court should give due weight to inferences drawn from facts by resident judges and local law enforcement officers since a trial judge views the facts "in light of the distinctive features and events of the community" and a law enforcement officer views the facts "through the lens of his police experience and expertise").
In any event, defendant's constant and continuous weaving standing alone is sufficient to support reasonable suspicion.
Justice JACKSON joins in this concurring opinion.
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874 F. Supp. 1255 (1995)
UNITED STATES of America,
v.
Aaron Tremayne DANIELS.
No. CR 93-AR-167-S.
United States District Court, N.D. Alabama, Southern Division.
February 7, 1995.
W. James Ellison, Stephen H. Jones, Birmingham, AL, for Daniels.
Adolph J. Dean, Jr., Walter Braswell, Acting U.S. Attys., Birmingham, AL, for U.S.
*1256 MEMORANDUM OPINION
ACKER, District Judge.
The above case presents an interesting combination of procedural and constitutional questions.
This court sentenced Aaron Tremayne Daniels on September 29, 1993, for a violation of 18 U.S.C. § 922(q)(1)(A), and sentenced him to probation. Two weeks later, on October 12, 1993, this court in United States v. Morrow, 834 F. Supp. 364 (N.D.Ala. 1993), held that 18 U.S.C. § 922(q)(1)(A) is unconstitutional. This court's opinion in Morrow was appealed by the United States to the Eleventh Circuit, which is holding up its decision on it awaiting instruction from the Supreme Court in United States v. Lopez, in which that court granted a petition for writ of certiorari directed to the Fifth Circuit for the purpose of reviewing the Fifth's opinion in Lopez found at 2 F.3d 1342 (5th Cir. 1993), upon which this court predominately relied in Morrow.
A reconsideration of this court's conviction of Daniels is now forced by the filing of a petition to revoke probation for Daniels' alleged violations of certain terms of his probation. In response to the petition to revoke, Daniels, represented by new appointed counsel, has moved to vacate his sentence and to dismiss the indictment, citing Morrow and Lopez. The issues in the case have been well briefed by both parties and were orally argued on February 3, 1995.
It is incumbent on courts to apply the same principles of law alike to all litigants, unless and until those principles of law change. There was no change in the law between September 29, 1993, when Daniels was sentenced, and October 12, 1993, when Morrow was exonerated, the only difference being this court's absence of knowledge of Lopez on September 29, 1993 and its knowledge of Lopez on October 12, 1993.
The United States first points to the fact that in the formal plea agreement signed by Daniels on September 14, 1993, he said:
Unless this plea is rejected or withdrawn, the defendant thereby waives and gives up any and all motions, defenses, objections or requests which have been made or raised, or could assert hereafter, to the Court's entry of judgment against and imposition of a sentence upon consistent terms with this Agreement. Defendant further waives and gives upon the right to appeal or collaterally attack the conviction and sentence based upon any of the above.
The United States argues that, literally construed, this language precludes Daniels' present motion purporting to collaterally attack his conviction. This court agrees that the language in the plea agreement is as broad as it could possibly be. This court believes, however, that the Fifth Circuit was not only right in Lopez but that it was right in United States v. Knowles, 29 F.3d 947 (5th Cir.1994), which stands for the proposition that the unconstitutionality of a statute [incidentally, the Gun Free School Zones Act] upon which a conviction is based is not something that can be casually waived. The Fifth Circuit said in Knowles:
"Waiver" in this context is the `intentional relinquishment or abandonment of a known right.'"
Id. at 951 n. 2.
* * * * * *
[T]he novelty of our decision in Lopez also militates in favor of allowing Knowles to raise a Lopez-based argument for the first time here on direct appeal. Cf. Reed v. Ross, 468 U.S. 1, 16, 104 S. Ct. 2901, 2910, 82 L. Ed. 2d 1 (1984) ("[W]here a constitutional claim is so novel that its legal basis is not reasonably available to counsel, a defendant has cause for his failure to raise the claim" on direct appeal and may thus raise it in a habeas corpus proceeding). It is also evident that this error affected the outcome of the proceedings below. Had the Lopez argument been raised in the district court, it should have resulted in the dismissal of the Gun Free School Zones Act count from Knowles's indictment. Finally, we agree that our failure to address Knowles's challenge to the constitutionality of the Gun Free School Zones Act would seriously affect the fairness, integrity, and public reputation of judicial proceedings. Accordingly, since this Court found in Lopez *1257 that the Gun Free School Zones Act is unconstitutional, we must conclude that Knowles's conviction based on that Act must be reversed.
Id. at 951-52. (emphasis supplied). On September 29, 1993, Daniels was blissfully unaware of the serious constitutional question that had been answered in Lopez and would be addressed two weeks later in Morrow. Perhaps as good, if not a better expression, of the principle here applicable comes from U.S. v. Jacobson, 15 F.3d 19 (2d Cir.1994), as follows:
Turning to the merits of the appeal, we believe that Kogut did not waive his right to appeal on the grounds specified. Although an agreement not to appeal a sentence within the agreed Guidelines range is enforceable, United States v. Salcido-Contreras, 990 F.2d 51, 53 (2d Cir. (per curiam), cert. denied, ___ U.S. ___, 113 S. Ct. 3060, 125 L. Ed. 2d 742 (1993); United States v. Rivera, 971 F.2d 876, 896 (2d Cir.1992), we see nothing in such an agreement that waives the right to appeal from an arguably unconstitutional use of naturalized status as the basis for a sentence.
The pertinent paragraph, which we set out in the margin, is concerned with "Guidelines adjustments, enhancements, or calculations." The right to appeal is waived so long as the sentence is within the prescribed range "even should the Court ... reach that sentencing range by a Guidelines analysis different from that set out above." Given that a waiver of the right not to be sentenced on the basis of a constitutionally impermissible factor may be invalid, see United States v. Marin, 961 F.2d 493, 496 (4th Cir.1992) ("a defendant could not be said to have waived his right to appellate review of a sentence ... based on a constitutionally impermissible factor such as race"), we read the agreement narrowly and hold that the present appeal, which raises no Guidelines issues, has not been waived.
15 F.3d at 22, 23 (emphasis supplied). If Daniels had been informed on September 29, 1993, during the colloquy leading up to his plea, that he was being asked to waive any question about the constitutionality of the Gun Free School Zones Act, when the question had already been answered in his favor by the Fifth Circuit, it is inconceivable that he would knowingly have executed such a "waiver."
Understandably unwilling to place all of its eggs in the "waiver" basket, the United States glowingly predicts that the Supreme Court will reverse the Fifth in Lopez. To the contrary, Daniels expects an affirmance of Lopez. If this court were called on to predict the Supreme Court in Lopez, a reading of the news reports of the oral argument there may be more instructive than a reading of the briefs filed there. Lyle Denniston, who reports on Supreme Court matters for The Baltimore Sun, and who is an adjunct professor of law at Georgetown University Law Center, heard the arguments in Lopez and wrote an article after hearing them. He described them this way:
A lawyer trying to get the notably cautious Supreme Court to endorse broad constitutional power for an arm of the government must make it unmistakably clear that there would be significant limits that would keep that power in check. But U.S. solicitor general Drew Days, III, arguing U.S. v. Lopez, failed to leave the Court with any such assurances as he recklessly pursued sweeping authority for Congress to control crime.
* * * * * *
Days, seeking to resuscitate the act [Gun Free School Zones Act], promptly stirred deep skepticism among the justices with the sweep of his argument. Justice Sandra Day O'Connor began by asking whether "the simple possession of something at or near a school is commerce at all." When Days said it was, O'Connor disagreed, adding: "If this is covered, what's left of enumerated powers? What is there that Congress could not do, under this rubric, if you are correct?"
* * * * * *
Next, Justice Ruth Bader Ginsburg wondered if Days were arguing that "all violent crime, if Congress so desired, could be placed under a federal wing" on the theory that all violent crime affected interstate *1258 commerce. The solicitor general said that "it may be possible for Congress to do that under the commerce power."
James M. Maloney anticipated the tenor of the oral argument in his pointed article, which strongly takes the Lopez and Morrow viewpoint. See SHOOTING FOR AN OMNIPOTENT CONGRESS: THE CONSTITUTIONALITY OF FEDERAL REGULATION OF INTRASTATE FIREARMS POSSESSION, 62 FORD.L.REV. 1975 (1994).
If this court could do it, it would delay answering the questions here presented by Daniels and by the United States until the Supreme Court decides Lopez, but such a postponement would be improper under the circumstances. In fact, if this court had realized the circumstances sooner, it would have acted sua sponte. Daniels must face revocation, or he must go free, subject, of course, to the right of the United States to appeal as it did in Lopez and in Morrow. This court cannot revoke a probationary sentence that never should have been imposed in the first place.
All things considered, the court will, by separate order, grant Daniels' motion, rendering moot the petition for revocation.
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01-03-2023
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(2008)
UNITED STATES of America, ex. rel. Jerre FRAZIER, Plaintiff/Relator,
v.
IASIS HEALTHCARE CORPORATION, Defendant.
No. CV 05-766-PHX-JAT.
United States District Court, D. Arizona.
April 21, 2008.
ORDER
JAMES A. TEILBORG, District Judge.
Pending before the Court is Defendant's Motion to Dismiss the Second Amended Complaint (Doc. #68). The Court now rules on the Motion.
I. BACKGROUND
Qui tam Relator, Jerre Frazier, the former Chief Compliance Officer and Vice President, Ethics and Business Practices, of Defendant IASIS Healthcare Corp., brought this False Claims Act (FCA) case on March 11, 2005. Mr. Frazier served in the Compliance Officer and VP position at IASIS from November 1999 until April 2003, then served as a consultant for another year. During his tenure with IASIS, Mr. Frazier monitored compliance with various healthcare laws and regulations.
Mr. Frazier filed this action under the FCA to recover damages and civil penalties. The FCA permits individuals to bring fraud actions on behalf of the United States and to retain for themselves a portion of any recovery. The United States may choose to join in the action, but if it does not, the individual can maintain the action on the government's behalf.
The FCA provides in pertinent part that any person who:
(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval;
(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government;
(3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid; ...
(7) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government, is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains....
31 U.S.C.A. § 3729. Mr. Frazier alleges that IASIS violated all these sections by defrauding the government of medicare and other federal health program funds.
Pursuant to the FCA, Mr. Frazier filed his original complaint under seal and served it only on the United States Attorney for the District of Arizona and the Untied States Department of Justice. The United States sought to extend the statutory sixty-day period of the seal to further investigate Mr. Frazier's allegations. In September 2005, the Office of Inspector General issued subpoenas to IASIS and certain physicians. In September 2006, the United States sought leave to interview former IASIS employees (Doc. # 23). The Magistrate Judge denied leave to interview former employees because he found that the request called for an advisory opinion (Doc. # 27).
In May 2007, the United States requested a further extension of one-hundred eighty (180) days to elect whether to intervene in the case (Doc. # 31). The Magistrate Judge denied the motion (Doc. # 33). Consequently, the United States elected not to intervene in the case, but reserved the right to intervene at a later date and stated that "the government's investigation will continue." (Doc. #34). Mr. Frazier decided to proceed with the action on his own and filed a Second Amended Complaint on July 20, 2007.
II. LEGAL STANDARD
Complaints filed pursuant to the FCA, an anti-fraud statute, must meet the requirements of Federal Rule of Civil Procedure 9(b). IASIS moves to dismiss the First Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b) for failure to adequately plead the FCA claims. "Because a dismissal of a complaint or a claim grounded in fraud for failure to comply with Rule 9(b) has the same consequence as a dismissal under Rule 12(b)(6), dismissals under the two rules are treated in the same manner." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir.2003).
Rule 9(b) requires that allegations of fraud be "`specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.'" Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir.2001)(quoting Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir.1993)). But furnishing defendants with notice of the fraud is not Rule 9(b)'s only function. In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547 (9th Cir.1994), superceded by statute on other grounds, Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4, (stating, "We cannot accept plaintiffs' position ... Plaintiffs argue essentially that the only function of Rule 9(b) is to furnish defendants with notice. Plaintiffs thereby collapse Rule 9(b) into Rule 8(a).... But Rule 9(b) clearly imposes an additional obligation on plaintiffs: the statement of the claim must also aver with particularity the circumstances constituting the fraud.")(emphasis in the original). Rule 9(b) also functions to deter the filing of actions as a pretext for discovery of unknown wrongs, to protect defendants from "the harm that comes from being subject to fraud charges, and to prohibit plaintiffs from unilaterally imposing upon the court, the parties and society enormous social and economic costs absent some factual basis." Bly-Magee, 236 F.3d at 1018.
To accomplish those goals, "Rule 9(b) requires particularized allegations of the circumstances constituting fraud." Id. (emphasis in the original). The "who, what, when', where, and how" of the misconduct must accompany allegations of fraud. Vess, 317 F.3d at 1106 (9th Cir.2003)(internal quotation marks omitted). A plaintiff cannot survive a 12(b)(6)/9(b) motion to dismiss by alleging only the neutral facts necessary to identify a fraudulent transaction. In re GlenFed, 42 F.3d at 1548 (stating, "[A] plaintiff must set forth what is false or misleading about a statement, and why it is false ... A plaintiff might do less and still identify the statement complained about; indeed, the plaintiff might do less and still set forth some of the circumstances of the fraud. But the plaintiff cannot do anything less and still comply with Rule 9(b)'s mandate....").
Because Mr. Frazier was a corporate insider, he should have adequate knowledge of the alleged fraud to comply with the heightened pleading requirements of Rule 9(b). Bly-Magee, 236 F.3d at 1019; see also Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1052(9th Cir.2001)(holding that relator was not entitled to a more lenient application of Rule 9(b) because relator had worked as a supervisor for defendant for twenty years and had knowledge of the allegedly false tests at issue).
III. FCA ALLEGATIONS
Mr. Frazier argues that IASIS violated the FCA, 31 U.S.C. §§ 3729(a)(1), (a)(2), (a)(3), and (a)(7), by allegedly submitting claims for reimbursement from federally-funded health care programs for medically unnecessary procedures and by falsely certifying that it had complied with the Ethics in Patient Referral Act of 1989, Omnibus Budget Reconciliation Act of 1989, Pub.L. No. 101-239, 103 Stat. 2106 ("Stark I"), Omnibus Budget Reconciliation Act of 1993, Pub.L. NO. 103-66, 107 Stat. 312 ("Stark II"), 42 U.S.C. § 1395nn et seq. (collectively, "Stark Law") and the Medicare and Medicaid Anti-Kickback Statute, 42 U.S.C. § 1320a-7b ("Anti-Kickback Statute").
To prevail on a false certification theory under the FCA, a plaintiff must: 1) allege some falsity; 2) allege that the claim was false at the time it was made-the Defendant must have knowingly made the false claim; and 3) demonstrate that the false statement was material to the government's decision to pay the claim. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1171-72 (9th Cir.2006). The materiality element is satisfied if, as here, government funding is conditioned upon certification of compliance.
Violations of laws and regulations alone do not create a cause of action under the FCA. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir.1996). It is the false certification of compliance that creates liability. Id. Some request for payment, made with scienter and containing a false statement, must exist to impose liability under the FCA. Id. at 1265.
A FCA plaintiff cannot prevail by describing in detail a private scheme that violates laws and regulations. U.S. v. Kitsap Physicians Serv., 314 F.3d 995, 1002 (9th Cir.2002). The plaintiff must establish that a false claim was actually submitted to the government. Id. "Evidence of an actual false claim is the sine qua non of a False Claims Act violation." Id. (internal quotations omitted). The FCA focuses on the submission of a claim, not on whether or to what extent a "menacing underlying scheme" exists. Id. Because it is the submission of a false claim that triggers liability under the FCA, a plaintiff must plead the submission with particularity. Corsello v. Lincare, Inc., 428 F.3d 1008, 1013 (11th Cir.2005).
A. Medically Unnecessary Procedures
Mr. Frazier alleges that since at least 1999, IASIS has received millions of dollars from Medicare and other federal health programs for medically unnecessary procedures performed by physicians with whom IASIS had improper financial relationships and by unspecified IASIS hospitals. (Compl.¶ 130). The Second Amended Complaint names six physicians specifically. Mr. Frazier claims that Dr. Siegel at Mesa General Hospital and St. Luke's Hospital and Drs. Rao and Keise at Mid-Jefferson Hospital performed a large number of medically unnecessary interventional cardiology procedures. (Compl.¶ 10). Mr. Frazier further alleges that Dr. Srivastava at Odessa Regional Hospital performed unnecessary heart surgeries (Compl.¶¶ 93-94, 130); that Dr. Pollack performed unnecessary ostomy surgery "in the Florida market" (Compl.¶¶ 99, 130); and that Dr. Stein from Memorial Hospital of Tampa performed unnecessary diagnostic radiology procedures (Compl.¶¶ 113, 130).
Mr. Frazier argues that IASIS violated the FCA by submitting payment claims to the government for unnecessary medical procedures.[1] Rule 9(b) requires Mr. Frazier to plead the "who, what, when, where, and how" of the alleged misconduct. Vess, 317 F.3d at 1106. Mr. Frazier has failed to meet the Rule 9(b) burden with regard to his medical necessity claims.
In six instances, Mr. Frazier has adequately alleged the "who" of the fraud by alleging the doctor who preformed the medical procedures. He also has alleged the "where" for five of the doctors by naming the hospitals where the doctors practiced. While Mr. Frazier has alleged generally the "what"-performing certain general types of procedures, he has not alleged any specific surgeries. Nor has Mr. Frazier provided any specific dates for the procedures (he claims generally that the doctors began performing the unnecessary procedures in 1999). Most importantly, Mr. Frazier has not alleged the "how" of the fraud. He has not stated why the procedures were medically unnecessary.
Mr. Frazier cannot meet his heightened pleading standard by making general allegations of fraud. His bare allegations that certain doctors performed "medically unnecessary procedures" without any additional detail cannot survive the motion to dismiss. Mr. Frazier's statements lack the required specificity as to the "what, when, and how" of the allegedly fraudulent procedures. The allegations also suffer from a lack of detail regarding the submission of the claims. Mr. Frazier does not list a single specific "unnecessary procedure" for which IASIS submitted a claim for funds from a government health care program.
The Court therefore grants IASIS's motion to dismiss with regard to all claims based on the "medically unnecessary procedure" theory.
B. Violations of Stark and Anti-Kickback
Mr. Frazier bases his false certification theory on IASIS hospitals' submission of annual cost reports following alleged violations of the Stark Law and the Anti-Kickback Statute. From at least 1999 to 2004, the hospitals owned by ISIS had to submit annual Form CMS-2252s, otherwise known as Hospital Cost Reports. These cost reports contained the following certification:
I further certify that I am familiar with the laws and regulations regarding the provision of health care services, and that the services identified in this cost report were provided in compliance with such laws and regulations.
Misrepresentation or falsification of any information contained in this cost report may be punishable by criminal, civil and administrative action, fine, and/or imprisonment under federal law. Furthermore, if services identified in this report were provided or procured through the payment directly or indirectly of a kickback or where otherwise illegal, criminal, civil and administrative action, fines and/or imprisonment may result.
See 42 C.F.R. § 413.24(f)(4)(iv). Once Stark became effective, hospitals also certified on Form 2552 that the services provided were billed in compliance with the Stark Law.
The Stark Law prohibits a hospital from submitting Medicare claims for payment for certain services based on patient referrals from physicians who have an improper "financial relationship" with the hospital. 42 U.S.C. § 1395nn(a)(1). A hospital that collects payment for a healthcare service performed pursuant to a prohibited referral must timely refund all collected amounts. 42 C.F.R. § 411.353. The Anti-Kickback Statute prohibits a hospital from making or accepting payment to induce or reward any person for referring, recommending, or arranging for the purchase of any item for which payment may be made under a federally-funded health care program. 42 U.S.C. § 1320a-7b(b).
Mr. Frazier has made allegations of varying detail regarding certain doctors' prohibited financial relationships with ISIS hospitals. Mr. Frazier claims that IASIS impermissibly compensated physicians in many different ways in return for valuable patient referrals. For example, Mr. Frazier alleges that in exchange for referrals, IASIS: (1) paid above fair market value for cath lab services (Compl.¶¶ 84, 86-87); (2) leased spaces for below their fair market value (Compl.¶¶ 92, 95-98, 117, 123); (3) assumed a lease for unnecessary space (Compl.¶¶ 111); and (4) compensated physicians for services that the physicians did not actually render or gave compensation that exceeded the value of services rendered (Compl.¶¶ 80, 100-102, 105, 117, 122).
While not all of Mr. Frazier's allegations regarding Stark and Anti-Kickback violations meet Rule 9(b)'s required level of specificity, some do. But merely alleging a violation of the Stark Law and/or Anti-Kickback Statute does not sufficiently state a claim under the FCA. Hopper, 91 F.3d at 1266. It is the false certification of compliance that creates liability. Id.
The Second Amended Complaint dedicates pages and pages to describing the allegedly improper relationships between certain physicians and IASIS hospitals, but provides no detail regarding the referral of Medicare-eligible patients as a result of those relationships or the submission of claims to the government for payment. Because the crux of an FCA claim is the submission of a false claim, the Second Amended Complaint's lack of any detail regarding the referrals and submission of the certification is fatal.
Mr. Frazier alleges that IASIS had improper financial relationships with certain physicians. He also alleges, in some cases, that those physicians referred patients to IASIS hospitals. In most instances, however, he does not specifically allege that the physicians referred medicare-eligible patients to IASIS Hospitals. And the Stark Law and Anti-Kickback statutes do not regulate private pay patients.
Further, in order for the annual cost reports to have been false, the doctors with prohibited relationships must have referred medicare-eligible patients to an IASIS hospital, and the individual IASIS hospitals must have then sought government money for the services provided to those patients. The Second Amended Complaint addresses these crucial aspects of the FCA claim with only scant details. The Second Amended Complaint focuses on the illegal relationships, then only generally alleges that the physicians referred "patients" to IASIS hospitals, that IASIS improperly billed the government for services to those patients, and that IASIS nonetheless certified it had complied with health care regulations in annual cost reports from at least 1999 to 2004.[2]
Other courts have faced similarly deficient FCA complaints. In Peterson v. Cmty. Gen. Hosp., 2003 WL 262515 (N.D.Ill.2003), the plaintiff brought a qui tam action under the FCA against three hospitals for falsely certifying they complied with the Stark Law. The pleading deficiencies in the Peterson case closely mirror the problems here. The Peterson court noted that the relator essentially alleged that: "(1) defendants provided financial remunerations and other benefits to various physicians; (2) in exchange, those physicians referred Medicare patients to defendants; (3) defendants billed Medicare for the services they provided to those patients; and (4) defendants falsely certified their claims complied with federal law." Id. at *1.
In describing the insufficiency of those allegations, the Peterson court stated:
Although he has provided ample detail about (1), relator has made only the sketchiest allegations concerning (2), (3), and (4). Specifically, throughout his complaint relator does not identify a single Medicare patient referred to defendants pursuant to any of the allegedly unlawful self-referral arrangements. Nor does he identify or attach a single Medicare claim submitted by defendants for services rendered pursuant to a forbidden referral, let alone one for which defendants certified their compliance with federal law.... As explained above, the whole point of relator's case is that defendants submitted Medicare claims for services they provided to patients who allegedly had been referred to them in violation of the Stark law. But which patients? And which claims? And which claims or other documents show defendants falsely certified their compliance with federal law? These questions are absolutely essential to relator's claim of fraud.... They must be pleaded with particularity. To be clear, the court does not expect relator to list every single patient, claim, or document involved, but he must provide at least some representative examples.
Id. at *1-2 (citing Clausen v. Lab. Corp. of America, 290 F.3d 1301, 1312-13 (11th Cir. 2002)).
The Court has the same type of lingering questions in this case. As IASIS points out, the Second Amended Complaint does not answer the following questions, among others: (1) Which IASIS hospitals submitted false certifications?; (2) How many cost reports and certifications did each hospital submit?; (3) When specifically did an individual IASIS hospital submit the alleged false report?; (4) Who at each hospital, or which officer or position, provided the certifications?; (5) What line items in the cost reports were affected by alleged illegal physician relationships?; (6) By how much was a reimbursement in the cost report allegedly overstated?; (7) Did a particular physician in fact make any prohibited Medicare referrals to a particular hospital while an alleged improper relationship existed; (8) If so, when did the physician make the referral?; (9) When did the hospitals submit claims for interim payment to Medicare; and (10) When, if at all, did Medicare pay on those claims?[3]
The Court recognizes that Mr. Frazier has alleged a fraudulent scheme that spanned several years and that he might not know the names of all the IASIS employees involved at the various hospitals. And the Court does not suggest that Mr. Frazier should have to detail every single referral and submission that occurred over the course of the alleged fraud.[4] Representative examples would suffice.
Nor does the Court want to enumerate a list of things that a FCA plaintiff has to allege in order to survive a motion to dismiss. But without pleading some detail regarding actual Medicare referrals, billing and payment for services provided to the Medicare patient, and the submission of the certification of billing compliance, a complaint cannot sufficiently allege a claim under the FCA for violations of the Stark Law and the Anti-Kickback Statute. See Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 232-35 (1st Cir.2004); Clausen, 290 F.3d at 1311-14. To hold otherwise would eviscerate the particularity requirements of Rule 9(b).
The Court therefore must dismiss the allegations regarding false certification of compliance with the Stark Law and the Anti-Kickback Statute. The Court likewise dismisses Mr. Frazier's conspiracy allegations. The Second Amended Complaint perhaps sufficiently states a conspiracy to violate the Stark Law and the Anti-Kickback Statute, but does not allege with any particularity a conspiracy to submit false claims to the government.
Because the foregoing are the only issues remaining after the motion to dismiss briefing, the Court grants IASIS's Motion to Dismiss.
IV. LEAVE TO AMEND
Leave to amend, "shall be freely given when justice so requires." Fed. R. Civ. Pro. 15(a). Whether to grant leave to amend depends on the following factors: (1) undue delay, (2) bad faith, (3) prejudice to the opposing party, (4) futility of amendment, and (5) whether plaintiff has previously amended his complaint. Western Shoshone Nat. Council v. Molini, 951 F.2d 200, 204 (9th Cir.1991).
Relator first filed this action over three years ago on March 11, 2005. Relator filed a First Amended Complaint about a year later on March 27, 2006. (Doc. # 19). Relator filed a third complaint, the Second Amended Complaint, on July 20, 2007, after the government had engaged in nearly two years of investigation. (Doc. # 43). Relator now seeks leave to file a fourth complaint.
Given his former position with IASIS and given the government's extensive investigation, Mr. Frazier should have had ample information when he filed the Second Amended Complaint.[5] Yet, the Court has found that complaint insufficient. And without further participation from the government or discovery, Mr. Frazier likely will not have access to additional information. Further, Mr. Frazier's opposition to the motion to dismiss indicates that he does not have the type of information regarding patient referrals and claim submissions that the Court has stated he must allege to survive a motion to dismiss. In that case, any leave to amend would be futile.
Because of the advanced age of the case, Relator's two prior amendments, and the seeming futility of allowing Mr. Frazier to file a Third Amended Complaint, the Court will deny leave to amend. The Court therefore grants the motion to dismiss with prejudice.
Accordingly,
IT IS ORDERED GRANTING Defendant IASIS's Motion to Dismiss (Doc. # 68) with prejudice.
IT IS FURTHER ORDERED DENYING all remaining pending motions in this case as moot.
IT IS FURTHER ORDERED that the Clerk of the Court shall enter formal judgment for Defendant.
NOTES
[1] Medicare and other federal health care programs require as a condition of coverage that services rendered be reasonable and medically necessary. 42 U.S.C. § 1395y(a)(1)(A).
[2] Actually, IASIS would not have submitted anything. The individual hospitals owned by IASIS would have submitted the annual cost reports.
[3] The cost reports at issue are false only to the extent that they are used to retain money already received from Medicare. Thus, if money was not received before submission of a report, the certification could not have been false. (Reply, Doc. # 106, p. 7 n. 15).
[4] The Court recognizes potential privacy concerns regarding alleging patient names. But a plaintiff could allege, for example, the patient's gender, age, the date of the referral, who referred the patient, the date she or he received medical services, where he or she received the services, the type of medical services received, and from whom.
[5] Mr. Frazier made no effort to file an amended complaint in the time between filing the Second Amended Complaint and IASIS's filing of the motion to dismiss in November of 2007.
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602 F. Supp. 2d 22 (2009)
In re PAPST LICENSING GMBH & CO. KG LITIGATION.
This Document Relates To: Papst v. Konica Minolta Holdings, Inc. and Konica Minolta Business Solutions USA, D.D.C. 08-cv-1404 (N.D.Ill. No. 08-cv3606).
Misc. Action No. 07-493 (RMC). MDL Docket No. 1880.
United States District Court, District of Columbia.
March 26, 2009.
MEMORANDUM OPINION
ROSEMARY M. COLLYER, District Judge.
Papst Licensing GMBH & Co. KG ("Papst") filed a complaint against Konica Minolta Business Solutions U.S.A., Inc. ("KMBUS") alleging that KMBUS infringed two patents owned by Papst, U.S. Patent Nos. 6,470,399 and 6,895,449 (the "Patents") by selling or importing digital cameras in the United States. KMBUS moves for judgment on the pleadings. Because KMBUS is not in the business of manufacturing or selling digital still cameras, Papst's Complaint will be dismissed.
I. FACTS
Papst filed a Complaint against KMBUS alleging in pertinent part:
10. Upon information and belief the Konica-Minolta Defendants[1] have made, used, sold, or offered to sell to numerous customers in the United States or have imported into the United States digital cameras which infringe the Patents in Suit.
11. A reasonable opportunity for further investigation or discovery is likely to provide evidentiary support that the Konica-Minolta Defendants have actively induced others and/or contributed to the infringement of the Patents in Suit.
Compl. ¶¶ 10 & 11. The Complaint is bare bones; it does not alleges any facts in support of these allegations.
*23 Contrary to Papst's allegation that KMBUS manufactured, sold, or imported digital cameras, KMBUS indicates that it has not ever made, sold, or imported digital still cameras; it sells business equipment. Jonathan M. Remshak, Senior Corporate Counsel of KMBUS, indicated in his Declaration:
2. KMBUS is in the business of selling business equipment, such as printers, copiers, fax machines, and software solutions.
3. KMBUS is not now, nor has it ever been, involved in the digital still camera ("DSC") business. KMBUS has never made, sold, or imported DSCs. KMBUS did not have control over or association with Konica Minolta's now-discontinued DSC business.
Decl. of Jonathan M. Remshak (Remshak Decl.) [Dkt. # 278] ¶¶ 2 & 3. Two different Konica corporate entities were responsible for manufacturing digital cameras and selling them in the United States: Konica Minolta Photo Imaging, Inc. ("KMPI") manufactured digital cameras and Konica Minolta Photo Imaging U.S.A., Inc. ("KMPUS") sold digital cameras in the United States. See KMHD's Reply [Dkt. # 236] at 1 n. 1. Both KMPI and KMPUS left the digital camera business in April 2006. Id.
II. LEGAL STANDARD
KMBUS seeks dismissal pursuant to a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). Rule 12(c) provides, "[a]fter the pleadings are closed but early enough not to delay trial a party may move for judgment on the pleadings." A motion for judgment on the pleadings is treated as one for summary judgment, however, where the moving party asks the court to take into consideration matters outside the pleadings. See Fed.R.Civ.P. 12(d) (on a 12(c) motion, if matters outside the pleadings are presented and not excluded, a court must treat the motion as one for summary judgment under Rule 56); see also McGovern v. Martz, 182 F. Supp. 343, 349 n. 19 (D.D.C.1960). Here, KMBUS relies on the facts set forth in the Remshak Declaration. Accordingly, the Court treats the motion as one for summary judgment.
Summary judgment must be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); see also Diamond v. Atwood, 43 F.3d 1538, 1540 (D.C.Cir.1995). Moreover, summary judgment is properly granted against a party who "after adequate time for discovery and upon motion . . . fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party's favor and accept the nonmoving party's evidence as true. Anderson, 477 U.S. at 255, 106 S. Ct. 2505. A nonmoving party, however, must establish more than "the mere existence of a scintilla of evidence" in support of its position. Id. at 252, 106 S. Ct. 2505. In addition, the nonmoving party may not rely solely on allegations or conclusory statements. Greene v. Dalton, 164 F.3d 671, 675 (D.C.Cir.1999). Rather, the nonmoving party must present specific facts that would enable a reasonable jury to find in its favor. Id. at 675. If the evidence "is merely colorable, or is not significantly *24 probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S. Ct. 2505 (citations omitted).
III. ANALYSIS
KMBUS argues that (1) it has never manufactured, sold, or imported digital still cameras and thus could not have infringed the Patents as alleged in the Complaint; and (2) the Complaint fails to allege facts sufficient "to raise a right to relief above the speculative level" as required under Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007). In response, Papst focuses on KMBUS's second argument, ignoring the first. Papst states that it is willing to amend the Complaint to delete the "upon information and belief" and the "reasonable opportunity for further discovery" language. Papst's Opp'n at 1. Papst argues:
Papst has reviewed its investigation and negotiations with the infringers in this matter, including an infringing camera and the claim charts it provided to the infringers. On that basis, Papst has concluded that it has sufficient evidentiary basis to plead patent infringement without invoking the language authorized and permitted by Rule 11(b). . . . Papst respectfully requests an opportunity to cure any perceived defects in pleadings by filing an amended complaint after the court has identified what it perceives those defects to be.
Id. at 4. Papst does not contest KMBUS's assertion that it is not in the digital still camera business and never has been. Having failed to contest this critical fact, it is deemed conceded. See LCvR 7(h) (facts set forth in a motion for summary judgment are admitted if not controverted in response); accord Jackson v. Finnegan, Henderson, Farabow, Garrett & Dunner, 101 F.3d 145, 151 (D.C.Cir.1996); cf. Greene, 164 F.3d at 675 (the nonmoving party must present specific facts that would enable a reasonable jury to find in its favor).[2] Because the Complaint rests on the allegation that KMBUS manufactured, sold, or imported digital cameras and the uncontested fact is that KMBUS has never been in the digital still camera business, KMBUS is entitled to a judgment as a matter of law.
IV. CONCLUSION
For the foregoing reasons, the motion for judgment on the pleadings filed by Konica Minolta Business Solutions U.S.A., Inc. ("KMBUS") [Dkt. # 256 in Misc. No. 07-493], which the Court treats as a motion for summary judgment, will be granted. Papst v. Konica Minolta Holdings and Konica Minolta Business Solutions USA, D.D.C. 08-cv-1404 (originally N.D.Ill. No. 08-cv-3606), will be dismissed and closed. A memorializing order accompanies this Memorandum Opinion.
NOTES
[1] The Complaint named as defendants KMBUS and Konica Minolta Holdings, Inc. ("KMHD"). KMHD was dismissed for lack of personal jurisdiction via Memorandum Opinion and Order filed March 5, 2009, 602 F. Supp. 2d 10, 2009 WL 540095, [Dkts. ## 271 & 272 in Misc. No. 07-493 and Dkts. ## 24 & 25 in Civ. No. 08-1404].
[2] Even if the Court had treated KMBUS's motion for judgment on the pleadings as a motion to dismiss instead of a motion for summary judgment, the Court would have to conclude that Papst conceded the issue. "It is well understood in this Circuit that when a plaintiff files an opposition to a motion to dismiss addressing only certain arguments raised by the defendant, a court may treat those arguments that the plaintiff failed to address as conceded." Hopkins v. Women's Div., Gen. Bd. of Global Ministries, 238 F. Supp. 2d 174, 178 (D.D.C.2002) (citing FDIC v. Bender, 127 F.3d 58, 67-68 (D.C.Cir. 1997)).
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33 P.3d 1152 (2001)
DeAnn TOLAN, Appellant,
v.
Gary KIMBALL, Appellee.
No. S-9374.
Supreme Court of Alaska.
October 19, 2001.
Vincent Vitale, Anchorage, for Appellant.
Allison E. Mendel, Penny Agallianos, Mendel & Associates, Anchorage, for Appellee.
Before: FABE, Chief Justice, MATTHEWS, EASTAUGH, BRYNER, and CARPENETI, Justices.
OPINION
PER CURIAM.
1. DeAnn Tolan and Gary Kimball began dating in 1989. In April 1990 Tolan purchased, with the title issued in her name only, a single-family house on Ruth Drive in Wasilla. According to Kimball, the Ruth Drive house was purchased with the intention that Tolan and Kimball would share the home; accordingly he gave Tolan approximately *1153 $3,600 toward the down payment and closing costs of the house. Tolan moved into the house in April 1990 and Kimball moved in shortly thereafter. They lived together in that home until Tolan asked Kimball to leave in December 1997, remaining unmarried throughout.
2. Kimball testified at trial that the parties elected not to place his name on the title of the house because he had defaulted on his previous mortgage. According to Kimball, the parties agreed at that time that they would add his name to the title as soon as his credit was cleared.
3. From the purchase of the property in 1990 until the parties' separation in December 1997, the property's value increased from $66,000 to $168,000. The parties dispute the cause of the $102,000 increase. Tolan attributes $88,000 of the increase to an improved real estate market in the Mat-Su Valley. Kimball cites his investments of labor and materials used in making extensive renovations and improvements on the property. These improvements include replacement of a collapsed porch with an enclosed addition, and construction of a shed, a greenhouse, decks, a wood workshop, and a two-car garage.
4. The parties disputed the source of the funds used to purchase the building materials. Tolan testified that she had paid for all materials from her cash savings regardless of who made the actual purchase or held onto the receipt. Kimball claimed at trial to have paid for or salvaged from his prior home nearly all of the building materials, which totaled approximately $40,000 in value. The superior court disbelieved both accounts and found it "[m]ost likely [that] the parties pooled their cash in roughly equal amounts to pay for the improvements."
5. Kimball, who kept his retirement savings in cash in the parties' bedroom, dealt mainly in cash and only occasionally wrote checks. Although she was employed as a financial planner, Tolan also claimed to keep a substantial cash fund in the bedroom. Tolan testified that she ordinarily wrote checks for regular expenses. She also used automatic payroll deductions for her 401(k) and insurance premiums.
6. During the course of their cohabitation, Kimball paid Tolan $200 per week, a figure which exceeded the monthly mortgage, tax and insurance payments. These payments were commonly in cash, although they were occasionally paid by check. Kimball testified that such payments were "towards mortgage and bills and ... whatever it was needed for." Tolan notes, however, Kimball made no direct payments on the mortgage. Tolan paid for all utility bills, most of the food purchases, and most of the vehicle costs. Tolan did not report Kimball's weekly cash contributions as rent on her tax returns.
7. On two occasionsin 1992 or 1993 and in 1994Tolan refused Kimball's requests to put his name on the deed, explaining that she "didn't want him on any of [her] credit or financial obligations."
8. After their separation, Kimball filed suit in superior court alleging that "[i]n the course of their domestic partnership, plaintiff and defendant acquired property together, improved their joint property, commingled their property, and acquired partnership assets and debts, including but not limited to real estate, personal property and a mortgage." Kimball's amended complaint presented six theories of recovery: partnership dissolution; breach of express contract; breach of implied contract; resulting trust; constructive trust; and reformation of deed and partition of real property.
9. On August 25, 1999, Superior Court Judge Dan A. Hensley issued a decision and order in which he found that the parties had made "an informal, express agreement under which Tolan considered [Kimball's] contributions of cash and labor as an `investment' in the house equal to one-half its value." The court dismissed Kimball's other claims, finding that the contract provided an interest in the appreciation of the value to the home but not for an interest in the title. In addition, the court dismissed Tolan's counterclaims for waste, negligence, and breach of contract. After settling several claims to the personal property contested by the parties, the court awarded Kimball one-half the net value of the home at the time he departed. After *1154 several adjustments, the court entered judgment for Kimball in the principal amount of $41,199.50.
10. Tolan now appeals.
11. Citing our opinion in Wood v. Collins,[1] the superior court held that the parties made an informal, express agreement according to which each party was entitled to one-half the value of the house. Judge Hensley supported this conclusion with factual findings based on the testimony presented at trial. In particular, the court was persuaded by the following factors: (1) Kimball paid Tolan $200 per week in cash; (2) over the eight years of their relationship, "Kimball contributed hundreds of hours of labor making additions and improvements to the property"; (3) Tolan told her friend Debbie Richter that she considered Kimball's weekly payments to be contributions toward the mortgage and that Kimball had an "investment" in the house; (4) Tolan "allowed [Kimball] to make the kind of significant planning and design decisions regarding [the] improvements that only a homeowner would make"; and (5) "although Tolan insisted at trial that Kimball was only a tenant, she did not declare Kimball's monthly payments as rent on her tax returns."
12. On appeal Tolan argues that, for several reasons, the superior court erred in holding that the parties formed a contract regarding the ownership of the Ruth Drive house. But in order to affirm the judgment of the superior court we need not hold that a contract between the parties existed.[2] Rather, we follow Wood and the Oregon Supreme Court decision in Beal v. Beal[3] and hold that because property accumulated during a period of cohabitation should be divided according the parties' intent, the judgment of the superior court, which is supported by record evidence regarding the parties' intent, was not error. Because Tolan's appellate arguments primarily address various aspects of contract law, but do not challenge the notion that Tolan and Kimball intended to share equally in the house, they are not relevant.[4]
13. In Wood we addressed the question of whether, in dividing property acquired during the course of a relationship between unmarried cohabitants, the superior court correctly credited the man with one-half of the payments he had individually made on a condominium owned by the two parties as tenants in common.[5] We held that as a matter of law the superior court correctly concluded that "for unmarried cohabitants, the intent of the parties will control division for property acquired before separation."[6] We remanded there because the record did not support the superior court's factual finding that the parties mutually intended to share expenses incurred while in the relationship.[7]
14. In Wood we relied heavily on Beal, in which Oregon adopted the rule that property accumulated during cohabitation should be determined by the express or implied intent *1155 of the parties. We described the facts and lower court proceedings of that case:
Barbara and Raymond Beal, recently divorced, purchased property together, listing themselves as husband and wife. Both contributed to the down payment, Barbara paying $500 more. Barbara made the first monthly payment; Raymond made all subsequent payments. The parties lived together in the house, both contributing to the household. After two years, Barbara moved out. Raymond remained and made all monthly payments on the house. The court decided the property dispute should be resolved by looking at the parties' intent. Before Barbara moved out, the trial court found that the parties intended to pool their resources for their common benefit. Therefore, both parties were held to have an undivided interest in the property.[8]
Rejecting the rules of cotenancy, under which the parties would have been required to share expenses based on ownership share, the Beal court stated that
a division of property accumulated during a period of cohabitation must be begun by inquiring into the intent of the parties, and if an intent can be found, it should control that property distribution. While this is obviously true when the parties have executed a written agreement, it is just as true if there is no written agreement. The difference is often only the sophistication of the parties. Thus, absent an express agreement, courts should closely examine the facts in evidence to determine what the parties implicitly agreed upon.
....
In summary, we hold that courts, when dealing with the property disputes of a man and a woman who have been living together in a nonmarital domestic relationship, should distribute the property based upon the express or implied intent of those parties.[9]
15. We reaffirm our approval first stated in Wood of the Beal rule that, to the extent it is ascertainable, intent of the parties should control the distribution of property accumulated during the course of cohabitation.[10] Hence the trial court was correct to follow Wood and Beal in looking to the intent of the parties to resolve the disputes regarding the property acquired during their relationship. In addition, the factual findings of the superior court are well supported by the record and present a compelling case that the parties intended to share the equity in the home equally.
16. As the Beal court explained, in cases such as this one, "inferences can be drawn from factual settings in which the parties lived."[11] Here, both parties contributed to the down payment and both made financial contributions to the upkeep of the house throughout their cohabitation. Tolan argues on appeal that Kimball was Tolan's tenant and his weekly payments were understood to be rent. But we believe that the superior court did not err in rejecting Tolan's version based on the fact that she never claimed the payments as rent on her tax returns, on the fact that "Tolan needed Kimball's $200 per week to help pay ... expenses, including the mortgage," and on the testimony of Tolan's friend that Tolan confided to her that she considered the payments to be contributions to the mortgage.
17. Also compelling evidence of the parties' intent is the extensive renovations which Kimball performed with neither direction from Tolan nor expectation of payment. As the trial court found, "[Tolan] encouraged him to spend hundreds of hours making improvements in the property, and allowed him to make the kind of significant planning and design decisions regarding the improvements that only a homeowner would make."
18. Tolan argues that her repeated refusals to add Kimball's name to the title to the property, as Kimball requested, demonstrate that she did not intend that the property be jointly owned. Under this view, if both parties had intended to share the property *1156 equally, they would have formalized that intent by adding Kimball to the title. But we, as did the Beal court, reject "[t]he unannounced but inherent rule ... that the party who has title, or in some instances who is in possession, will enjoy the rights of ownership of the property concerned."[12] That rule is unfair, for it "tends to operate purely by accident or perhaps by reason of the cunning, anticipatory designs of just one of the parties."[13] Though we reject a rule that title or possession equals ownership, Tolan raises a valid point that an express refusal to add Kimball's name to the title could be an indicator of intent not to share an interest of the property. But here a disinterested witness, Debbie Richter, testified that Tolan "made a comment one time that [Kimball] was stupid for putting all of his cash into a house that his name was not on the title to" and stated that "since [Kimball] paid in cash, [he] had no proof that he was anything other than a tenant." Thus the trial court did not err by discounting Tolan's failure to put Kimball's name on the title. Tolan's refusal appears, in light of Richter's testimony, to be a "cunning, anticipatory design[] of just one of the parties," rather than an indicator of the parties' mutual intent.[14]
19. For these reasons, we AFFIRM the judgment of the superior court.
NOTES
[1] 812 P.2d 951 (Alaska 1991).
[2] See In re A.B., 791 P.2d 615, 621 n. 9 (Alaska 1990) (noting that this court "may affirm a lower court's decision without embracing the reasoning employed in it").
[3] 282 Or. 115, 577 P.2d 507 (1978).
[4] Tolan argues, citing Sykes v. Melba Creek Mining, Inc., 952 P.2d 1164, 1167 (Alaska 1998), that the essential elements of a contract were not present: there was no offer encompassing the essential terms of a contract; there was no unequivocal acceptance; no consideration was defined; and there was no mutual intent to be bound. But we affirm under Wood and Beal, which ask what the parties intended, not whether they formed a contract. Therefore these arguments are irrelevant.
Tolan also argues that the trial court failed to apply the clear and convincing evidence standard as is required for proof of an oral contract to convey an interest in land. Again, because this argument applies only in a contract setting, it is not persuasive.
Tolan also contends that the statute of frauds bars the contract. Because the statute of frauds is a defense to contract cause of action only, it is not relevant to our analysis under Wood.
Tolan also argues that the superior court erred by dismissing her breach of contract counterclaim. Because this claim also depends on the existence of a contract between the parties, it is not relevant to our holding.
[5] See Wood, 812 P.2d at 955-57.
[6] Id. at 957.
[7] See id.
[8] Id. at 956.
[9] Beal, 577 P.2d at 510 (emphasis added) (quoted in Wood, 812 P.2d at 956).
[10] See Wood, 812 P.2d at 956 (agreeing with Beal that "[p]roperty accumulated before separation should be divided by determining the express or implied intent of the parties").
[11] Beal, 577 P.2d at 510.
[12] Id. at 509.
[13] Id.
[14] See id.
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602 F. Supp. 2d 770 (2009)
BRIDGESTONE FIRESTONE NORTH AMERICAN TIRE, LLC, Plaintiff
v.
J & J TIRE COMPANY, L.L.C., Jimmy D. White, Jerry W. Robinson, Joan White and Karen Robinson, Defendants.
Civil Action No. 4:08CV88TLS-LRA.
United States District Court, S.D. Mississippi, Eastern Division.
February 5, 2009.
Graham P. Carner, David L. Ayers, Jimmy Fred Spencer, Jr., Watkins & Eager, Jackson, MS, for Plaintiff.
*771 S. Craig Panter, Panter & Harvey, PLLC, Madison, MS, for Defendants.
MEMORANDUM OPINION AND ORDER
TOM S. LEE, District Judge.
This cause is before the court on the motion of defendants to dismiss or, in the alternative, to compel mediation and arbitration. Plaintiff Bridgestone Firestone North American Tire has responded in opposition to the motion and the court, having considered the memoranda of authorities, together with attachments, submitted by the parties, concludes that the parties have entered a mediation and arbitration agreement which covers all of plaintiff's claims herein, and that therefore, defendants' request for an order dismissing this case and compelling mediation/arbitration is well taken.
According to Bridgestone's complaint in this cause, J & J Tire Company (J & J) was an independent dealer of Bridgestone tires at two locations in Mississippi, one in Forest and one in Taylorsville. The parties operated pursuant to an Affiliated Dealer Agreements entered between the parties, under which J & J would purchase tires from Bridgestone for retail sale at its stores. These agreements incorporated Bridgestone's Government Sales Policy, pursuant to which J & J was to sell tires to government agencies and entities at a discounted price and tax-free but was entitled to receive reimbursement from Bridgestone for the amount of the discount and taxes J & J had paid on the tires. In this action, Bridgestone has asserted claims of fraud, negligent misrepresentation and breach of contract against J & J based on allegations that between 2002 and 2004, J & J submitted false and inflated requests for reimbursement pursuant to the Government Sales Policy and as a result, received reimbursements to which it was not entitled. Specifically, Bridgestone has alleged that J & J sought reimbursement under the Government Sales Policy for at least 1754 more tires than were actually sold under the policy. In addition, Bridgestone has claimed that J & J breached the parties' agreement by refusing to pay $132,450 it owes for products it has received from Bridgestone.
In addition to suing J & J, Bridgestone has also named as defendants Jimmy White, Joan White, Jerry Robinson and Karen Robinson, who owned and operated the J & J locations, and who are alleged to have executed unconditional guarantees related to the operation of J & J, by which they "jointly and severally, absolutely and unconditionally guarantee[d] full payment when due ... of all liabilities, obligations and indebtedness" of J & J, "whether now existing or hereafter arising and regardless of how evidenced or arising...." Bridgestone alleges that these individual defendants committed the same tortious acts as J & J and hence are jointly and severally liable to Bridgestone pursuant to Mississippi Code Annotated § 85-5-7(4), and that they are also jointly and severally liable to Bridgestone by virtue of their unconditional guarantees.
All defendants have moved to compel mediation or arbitration in accordance with the mediation/arbitration provision in their Dealer Agreements, which provides:
Except for controversies, disputes or claims related to any alleged breach of Paragraph 14, all controversies, disputes, or claims between you and BFS arising out of or relating to:
a. This Agreement or any other agreement between you and BFS or any provision of any such agreement;
b. BFS' relationship with you;
c. Any aspect of the Affiliated Dealer Program; or
*772 d. The validity of this Agreement or any other agreement between you and BFS or any provision of any such agreement which cannot be settled through negotiation, will first be submitted by the parties to mediation at a mutually agreeable location ... under the Commercial Mediation Rules of the American Arbitration Association. If the parties are unable to resolve the dispute through mediation, then the dispute will be submitted for binding arbitration to the Chicago, Illinois office of the American Arbitration Association on demand of either party.
"In adjudicating a motion to compel arbitration under the [FAA], courts generally conduct a two-step inquiry. The court must first determine whether the parties agreed to arbitrate the dispute. This determination involves two considerations: (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement. The court then must determine if any legal constraints foreclose arbitration of those claims." Brown v. Pacific Life Ins. Co., 462 F.3d 384, 397 (5th Cir.2006) (internal citations omitted). "The FAA expresses a strong national policy in favoring arbitration of disputes, and all doubts concerning arbitrability of claims should be resolved in favor of arbitration." Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th Cir.2002).
Defendants maintain in their motion that the subject mediation/arbitration agreement in the Affiliated Dealer Agreements is valid, and that all claims asserted in Bridgestone's complaint against J & J fall squarely within the scope of that provision so that J & J is entitled to an order compelling mediation/arbitration according to the terms of the parties' agreement. They argue that the individual defendants are likewise entitled to invoke the mediation/arbitration provision, as they are alleged to have committed the same wrongs as J & J and to have acted in concert with J & J. See Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 537 (5th Cir.2000) (nonsignatory may compel signatory to arbitrate when the signatory "raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract" or where the signatory "must rely on the terms of the written agreement in asserting its claims against the nonsignatory").
In response to defendants' motion, Bridgestone does not dispute the validity of the mediation/arbitration agreement. Indeed, it concedes the agreement is valid, and concedes, as well, that its breach of contract claim against all defendants for failure to pay for tires is subject to the mediation/arbitration agreement. Accordingly, it expressly consents to mediation/arbitration of that specific claim. Bridgestone submits, however, that the remaining claims are beyond the scope of the mediation/arbitration agreement. Citing Rogers-Dabbs Chevrolet-Hummer, Inc. v. Blakeney, 950 So. 2d 170 (Miss.2007), Bridgestone insists that its claims for fraud, negligent misrepresentation and breach of contract relating to defendants' submission of false and inflated claims were not within the contemplation of the parties at the time they entered the mediation/arbitration agreement and that it therefore cannot be compelled to mediate/arbitrate these claims.
In Rogers-Dabbs, Blakeney executed an arbitration agreement in connection with his purchase of a vehicle from Rogers-Dabbs Chevrolet-Hummer in which he agreed to submit to arbitration "all claims, demands, disputes or controversies of every kind or nature between them arising *773 from, concerning or relating to" the transaction, including negotiations, financing arrangements, extended warranties, performance of the vehicle, "or any other aspect of the vehicle and its sale, lease, or financing." Id. at 174. Blakeney subsequently sued Rogers-Dabbs, alleging that employees of the dealership had misappropriated the title to his vehicle, had forged his name on numerous fake titles to facilitate their sale of stolen vehicles, and had engaged in identity theft in furtherance of an ongoing criminal enterprise. In considering whether these claims were covered by the arbitration agreement, the court held that while claims related to the sale of the vehicle were covered, the arbitration provision did not extend to the scheme involving forgery, sale of stolen vehicles, and identity theft. The court wrote:
While Blakeney no doubt agreed to arbitrate claims that originated from the sale of the vehicle or related to the sale of the vehicle, no reasonable person would agree to submit to arbitration any claims concerning a Hummer to which he would never receive a title; a scheme of using his name to forge vehicle titles and bills of sale to sell stolen vehicles; and the commission of civil fraud against him by misappropriating his title to the Hummer he purchased and forging his name on fake titles and bills of sale on various stolen vehicles-actions of which Blakeney was presumedly totally unaware at the time of the execution of the documents in question, including the arbitration agreement.
Id. at 177-78.
Seizing on the court's statement that "no reasonable person would agree to submit to arbitration any claims concerning ... the commission of civil fraud against him," Bridgestone offers Rogers-Dabbs for the proposition that "claims of civil fraud are not subject to arbitration, even when then arbitration agreement at issue is broad." However, Rogers-Dabbs cannot bear the weight of Bridgestone's reliance, for the case clearly does not hold that civil fraud claims necessarily fall outside of arbitration provisions. The court in Rogers-Dabbs made clear that it did not view its decision as undermining that court's "long line of cases ... undergirding the federal policy favoring arbitration," id. at 178, and that it was merely excluding from arbitration specific fraud claims which Blakeney asserted fell outside the scope of that particular arbitration agreement. Id. at 178, n. 9. See Hemphill v. Coldwell Banker Real Estate Corp., 2007 WL 3244793, *3 (N.D.Miss.2007) (distinguishing Rogers-Dabbs and concluding that "given the extremely broad language of the arbitration agreement in this case, the plaintiffs' (fraud) claims against State Bank clearly fall within the scope of the agreement").
The nature of the fraud alleged by Bridgestone in this case is hardly comparable to that involved in Rogers-Dabbs. In Rogers-Dabbs, Blakeney's fraud-based claims did not relate to his purchase of the vehicle from Rogers-Dabbs, which was what the arbitration agreement covered; rather, the claims involved Rogers-Dabbs' employees' post-sale fraudulent scheme to use Blakeney's identity and documents in a criminal enterprise involving the sale of stolen vehicles. Here, in contrast, the alleged fraud arises from and/or relates directly to the parties' relationship and to a specific aspect of the Affiliated Dealer Program, namely, the Government Sales Policy, and in the court's opinion, the claims fall directly within the scope of the mediaton/arbitration agreement.[1]
*774 Based on the foregoing, the court concludes that defendants are entitled to an order compelling arbitration. The court will therefore grant defendants' motion to dismiss. In so doing, the court acknowledges Bridgestone's argument that defendants' motion to dismiss is "procedurally flawed" because it seeks outright dismissal of the case rather than a stay pending mediation/arbitration, given that 9 U.S.C. § 3, by its terms, provides only for a stay, not dismissal, even when all claims in a case are subject to mediation/arbitration. In fact, however, defendants' request to dismiss is on solid procedural footing. The Fifth Circuit has explicitly held that "district courts have discretion to dismiss cases in favor of arbitration under 9 U.S.C. § 3." Fedmet Corp. v. M/V BUYALYK, 194 F.3d 674, 676 (5th Cir.1999) (citing Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir.1992)); Westervelt v. Bayou Management, L.L.C., 2003 WL 22533672, *3-4 (E.D.La.2003) ("While § 3 of the FAA states that a court shall `stay' judicial proceedings where the dispute is referable to arbitration, it does not expressly prohibit or even reference dismissal[,] [and] [a]s such, it has been held that district courts have discretion to dismiss cases in favor of arbitration under 9 U.S.C. § 3, if it is determined that all the issues raised are arbitrable.") (also citing Alford). Given that all claims herein are subject to arbitration, the court finds there is no practical reason for staying the case, rather than dismissing.
Accordingly, it is ordered that defendants' request for dismissal is granted.
NOTES
[1] This case would be more analogous to a claim that an automobile dealer misrepresented the year model, mileage or some other condition of the vehicle to obtain a higher price; and had Rogers-Dabbs involved such a claim, there is little doubt that the court would have held it was subject to arbitration. Misrepresentations of this type relate directly to the sale/purchase of the vehicle, and while a buyer may not expect the dealer to make these kinds of misrepresentations, it must be within his contemplation that this kind of misrepresentation could occur and that if it does, it would be covered by his arbitration agreement (though the same could not be said of a scheme by the dealer's employees to steal the buyer's personal information and forge his name and information on fraudulent documents to sell stolen vehicles.) It should likewise have been within Bridgestone's contemplation that if defendants submitted fraudulent requests for reimbursement under Bridgestone's Government Sales Policy, Bridgestone would have to pursue a remedy in accordance with the parties' mediation/arbitration agreement.
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720 S.E.2d 446 (2011)
STATE of North Carolina
v.
Brandon Jason BROWN.
No. COA11-709.
Court of Appeals of North Carolina.
December 20, 2011.
*447 Attorney General Roy Cooper, by Assistant Attorney General Jess D. Mekeel, for the State.
William B. Gibson, Winston-Salem, for defendant appellant.
McCULLOUGH, Judge.
Brandon Jason Brown ("defendant") appeals from the denial of his motion to suppress evidence of his alleged impairment. For the reasons discussed herein, we agree with defendant and reverse.
I. Background
On the night of 6 November 2009, around 9:00 or 10:00 p.m., two black males entered a Dollar General Store located on Highway 64 East in Henderson County, fired shots, robbed the store, and fled on foot. In response to the armed robbery, Sergeant Lowell Griffin ("Sgt. Griffin") of the Henderson County Sheriff's Department continued to survey the Edneyville area surrounding the Dollar General in search of the two suspects. Around 2:00 a.m. the same night, after searching for almost four hours, Sgt. Griffin *448 backed his cruiser into "T.J. Trail," a rural road intersecting with Highway 64 not far from the Dollar General.
Soon thereafter, Sgt. Griffin noticed lights of an oncoming vehicle coming down Highway 64. The vehicle came to a stop on the side of Highway 64 near a wooded area between the Dollar General and Sgt. Griffin on T.J. Trail. Sgt. Griffin rolled his window down and heard yelling and a car door slam. He then observed the car "accelerate rapidly" past him. Sgt. Griffin decided to follow the vehicle under the suspicion that the suspects could be in the car. After following the vehicle for over a mile, Sgt. Griffin activated his blue lights and pulled the vehicle over.
Sgt. Griffin called for backup and then approached the driver's side of the car. As soon as he reached the back of the car he could tell that the occupants were Caucasian. Upon reaching the driver's side window, he also immediately "smelled the odor of alcohol from within the vehicle" and asked defendant, who was driving, to exit the car. Sgt. Griffin and Deputy Terry Patterson had defendant separately blow into two Alco-sensors, which both showed a positive indication for alcohol. They subsequently placed defendant under arrest.
Defendant filed a Notice of Intention to Move to Suppress the stop on 17 June 2010. He filed a motion to suppress on 11 October 2010 and the case was tried later the same day before the Honorable Mack Brittain in Henderson County District Court. The trial court denied the motion and defendant pled guilty. The trial court imposed a 60-day suspended sentence under Level V. Defendant appealed the denial of his motion to suppress to superior court.
On 14 January 2011 in superior court, defendant filed a pretrial motion to suppress the stop and any fruits thereof as unconstitutional. The trial court held a pretrial hearing on 24 January 2011, regarding the motion in which Sgt. Griffin stated, "my thought process at that point was that the vehicle was possibly picking up robbery suspects, and I wanted to investigate the vehicle for that reason." Sgt. Griffin did not have a tag number or vehicle description for a getaway car for the robbery suspects. Sgt. Griffin also testified in the pretrial hearing that he was not investigating the vehicle for "a Chapter 20 violation" at the time, but once defendant exited the car he ruled him out as a robbery suspect and the investigation turned to defendant "for suspicion of driving while impaired." The trial court denied defendant's motion to suppress and the case came to trial on 27 January 2011.
At trial, the State presented evidence and upon completion of the State's evidence, defendant made a motion to dismiss which the trial court denied with defendant's exception noted. Defendant renewed his motion to suppress, which the trial court denied. Defendant subsequently withdrew his plea of not guilty and entered a plea of guilty. At this point defense counsel stated that he "would ask the Court to allow me to say to the record that [defendant] would like to preserve any appellate issues that may stem from the motions in this trial." The trial court answered by stating, "All right, let me do some findings in this last one[,]" referring to the renewed motion to suppress. The trial court proceeded to orally enter findings of fact regarding its denial of defendant's renewed motion to suppress and then questioned defendant pursuant to a Transcript of Plea. Defendant provided a factual basis for the plea and the trial court again imposed a 60-day suspended sentence under Level V. Defendant gave oral notice of appeal in open court.
II. Analysis
Defendant raises a single issue on appeal of whether or not the trial court erred in denying his motion to suppress evidence of his alleged impairment based on the grounds that the evidence was obtained as a result of an illegal stop and subsequent arrest in violation of his rights to be free from unreasonable searches and seizures guaranteed by the Fourth and Fourteenth Amendments to the United States and North Carolina Constitutions. However, we must first address the preliminary matter of whether defendant preserved his right to appeal the issue and in the alternative whether we should grant his Petition for Writ of Certiorari. We believe defendant did preserve his right to appeal *449 and consequently dismiss his Petition for Writ of Certiorari as moot.
The State contends that defendant did not preserve the issue regarding his motion to suppress because pursuant to N.C. Gen.Stat. § 15A-979(b) (2009), a defendant must give notice of his intent to appeal the motion to suppress to the trial court and prosecution prior to the finalization of plea negotiations. See State v. Reynolds, 298 N.C. 380, 397, 259 S.E.2d 843, 853 (1979). If a defendant does not give specific notice of his intent to appeal a motion to suppress, then the defendant has waived the right to appellate review. State v. Brown, 142 N.C.App. 491, 493, 543 S.E.2d 192, 193 (2001). The State argues the language used by trial counsel in preserving defendant's right to appeal the motion to suppress was not specific enough to put the trial court and prosecution on notice.
In State v. Pimental, 153 N.C.App. 69, 75, 568 S.E.2d 867, 871 (2002), our Court held that the defendant did not preserve his right to appeal a motion to suppress after giving a guilty plea where the defendant stated that he wished to "preserve[ ] his right to appeal any and all issues which are so appealable pursuant to North Carolina statutory law and North Carolina case law and pursuant to this plea agreement." On the other hand, in the case at bar, defense counsel made the statement "that [defendant] would like to preserve any appellate issues that may stem from the motions in this trial," immediately following an attempt to make a renewed motion to suppress at the end of the State's evidence. Defendant had only made five motions throughout the trial and two of them were motions to suppress in regard to the stop. The other motions were: (1) a motion to suppress with respect to the arrest, which was never addressed; (2) a motion to dismiss at the end of the State's evidence, which in most trials is a formality; and (3) a quasi-motion for mistrial along with the renewed motion to suppress. Following defense counsel's request to preserve his right to appeal any issues from the motions, the trial court reentered substantially similar facts as he did when he initially denied defendant's pretrial motion to suppress. Clearly, the trial court understood which motion defendant intended to appeal and decided to make its findings of fact as clear as possible for the record.
The State also contends that defendant's renewed motion to suppress during trial was improper because a motion to suppress may not be renewed during trial unless "additional pertinent facts have been discovered." N.C. Gen.Stat. § 15A-975(c) (2009). Consequently, the State argues defendant may not appeal the renewed motion because no new facts were discovered during the trial. While we agree with the State on that specific point, we do not believe it has an impact on defendant's appeal. The only issue is whether defendant's preservation of his right to appeal was with sufficient specificity, and we believe that it was.
As briefly discussed above, the State attempts to rely on our Court's decision in Pimental where we held that the defendant did not give notice of his intent to appeal the denial of his motion to suppress with sufficient specificity. See Pimental, 153 N.C.App. 69, 568 S.E.2d 867. However, our case can be distinguished from Pimental. One difference is that in Pimental, the defendant gave the purported notice in the Transcript of Plea, while in our case defendant gave notice to the trial court and prosecution prior to the finalization of plea negotiations. Id. at 75-76, 568 S.E.2d at 871. See also Reynolds, 298 N.C. at 396-97, 259 S.E.2d at 853 (where our Supreme Court found a lack of specificity in the defendant's notice because the suppression and sentencing hearings were before separate judges and the sentencing judge noted that he "did not anticipate such an appeal").
Even further, in Pimental the defendant failed to object on numerous occasions to the trial court's denial of his motion to suppress. The record did not contain any written rulings or findings of fact relating to the trial court's denial of the defendant's motions, while in the case at hand, defendant objected to each denial of his motion to suppress, and the trial court entered similar findings regarding the denial on two occasions. Pimental, 153 N.C.App. at 75-76, 568 S.E.2d at 871. While we do note, as in Pimental, that it *450 would have been easiest if defendant stated in the Transcript of Plea that he was "`reserving his right to appeal the Court's denial of his motions to suppress pursuant to N.C.G.S. § 15A-979(b),'" we do not believe defendant's notice lacked specificity to warrant a waiver of appellate review. The trial court clearly understood defendant intended to appeal the denial of his motion to suppress as it reentered findings of fact regarding the motion, albeit based on an improper renewed motion. Defendant had already appealed his motion to suppress from the district court to superior court. Defense counsel also made defendant's intention to appeal clear by entering his notice concurrently with the changing of defendant's plea from not guilty to guilty. See State v. McBride, 120 N.C.App. 623, 625, 463 S.E.2d 403, 404 (1995) (defendant must notify the State and trial court prior to pleading guilty). We believe defendant's concurrent notice satisfied the holding of McBride. Id. Even more, the lack of motions for defendant to appeal, the objection to the motion to suppress, and the amount of discussion spent on the motion to suppress also made it clear as to which motion defendant intended to appeal. Therefore, defendant gave sufficient notice of his intent to appeal the denial of his motion to suppress to maintain his right to appellate review, and we must now address his sole issue on appeal.
Defendant argues the trial court erred in denying his motion to suppress evidence of his alleged impairment because the evidence was the fruit of an illegal stop. We agree.
In reviewing the denial of a motion to suppress our Court
"is strictly limited to a determination of whether the court's findings are supported by competent evidence, even if the evidence is conflicting, and in turn, whether those findings support the court's conclusions of law." In re Pittman, 149 N.C.App. 756, 762, 561 S.E.2d 560, 565 (citation omitted), disc. review denied, 356 N.C. 163, 568 S.E.2d 608 (2002), cert. denied, 538 U.S. 982 [123 S. Ct. 1799], 155 L. Ed. 2d 673 (2003). "[I]f so, the trial court's conclusions of law are binding on appeal." State v. West, 119 N.C.App. 562, 565, 459 S.E.2d 55, 57, disc. review denied, 341 N.C. 656, 462 S.E.2d 524 (1995). "If there is a conflict between the [S]tate's evidence and defendant's evidence on material facts, it is the duty of the trial court to resolve the conflict and such resolution will not be disturbed on appeal." State v. Chamberlain, 307 N.C. 130, 143, 297 S.E.2d 540, 548 (1982).
State v. Veazey, 201 N.C.App. 398, 400, 689 S.E.2d 530, 532 (2009), disc. review denied, 363 N.C. 811, 692 S.E.2d 876 (2010). "[T]he trial court's conclusions of law must be legally correct, reflecting a correct application of applicable legal principles to the facts found." State v. Fernandez, 346 N.C. 1, 11, 484 S.E.2d 350, 357 (1997). We review the trial court's conclusions of law de novo. State v. Johnson, 204 N.C.App. 259, ___, 693 S.E.2d 711, 714 (2010).
Defendant contends Sgt. Griffin lacked the reasonable suspicion necessary to justify a Terry stop. See Terry v. Ohio, 392 U.S. 1, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968).
In Terry, [the United States Supreme Court] held that an officer may, consistent with the Fourth Amendment, conduct a brief, investigatory stop when the officer has a reasonable, articulable suspicion that criminal activity is afoot. Terry, supra, at 30 [88 S. Ct. 1868]. While "reasonable suspicion" is a less demanding standard than probable cause and requires a showing considerably less than preponderance of the evidence, the Fourth Amendment requires at least a minimal level of objective justification for making the stop. United States v. Sokolow, 490 U.S. 1, 7, 109 S. Ct. 1581, 104 L. Ed. 2d 1 (1989). The officer must be able to articulate more than an "inchoate and unparticularized suspicion or `hunch'" of criminal activity. Terry, supra, at 27 [88 S. Ct. 1868].
Illinois v. Wardlow, 528 U.S. 119, 123-24, 120 S. Ct. 673, 145 L. Ed. 2d 570 (2000). "The stop must be based on specific and articulable facts, as well as the rational inferences from those facts, as viewed through the eyes of a reasonable, cautious officer, guided by his experience and training." State v. Watkins, 337 N.C. 437, 441, 446 S.E.2d 67, 70 (1994). We "must consider `the totality of *451 the circumstancesthe whole picture' in determining whether a reasonable suspicion to make an investigatory stop exists." Id. (quoting U.S. v. Cortez, 449 U.S. 411, 417, 101 S. Ct. 690, 695, 66 L. Ed. 2d 621, 629 (1981)).
In the present case, Sgt. Griffin testified that defendant pulled off to the side of Highway 64 in a wooded area and Sgt. Griffin subsequently heard some yelling and car doors slamming. Defendant, after a short amount of time, accelerated rapidly past Sgt. Griffin, but not to a speed warranting a traffic violation. However, Sgt. Griffin thought defendant may have been picking up the robbery suspects, so he decided to investigate. After following defendant for almost a mile without any traffic violations, Sgt. Griffin decided to pull over defendant based on his suspicion that the vehicle may have contained the robbery suspects. Sgt. Griffin did not have any information regarding what direction the suspects fled the Dollar General, nor did he have a description of a getaway vehicle. Defendant argues this did not amount to reasonable suspicion because armed robbers would not be hiding in the woods near the scene four hours after the crime and then proceed to yell and slam car doors while attempting to remain unnoticed.
Defendant cites to a few of our Court's recent decisions in arguing that Sgt. Griffin's beliefs did not amount to reasonable suspicion. In State v. Chlopek, ____ N.C.App. ____, 704 S.E.2d 563 (2011), our Court recently held that a deputy's stop was based on an "`unparticularized suspicion or hunch'" and not the requisite reasonable suspicion where there were no traffic violations. Id. at ____, 704 S.E.2d at 566 (citation omitted). The deputy only stopped the defendant because he was driving a work truck late at night in a partially developed subdivision during a time when numerous copper thefts had been reported in the county. Defendant also cites to State v. Murray, 192 N.C.App. 684, 666 S.E.2d 205 (2008), where we held that the stop of a vehicle in an area where break-ins of businesses had occurred did not reach the level of necessary reasonable suspicion, but was only based on the officer's "`unparticularized suspicion or hunch.'" Id. at 687, 666 S.E.2d at 208 (citation omitted). In that case the businesses were closed, there were no residences in the area, and it was in the early hours of the morning. Id. at 689, 666 S.E.2d at 208.
On the other hand, the State argues we should view the totality of the circumstances and any "rational inferences which the officers were entitled to draw from [the] facts" of the situation. State v. Thompson, 296 N.C. 703, 706, 252 S.E.2d 776, 779 (1979). The State would have us rely on our decision in State v. Covington, 138 N.C.App. 688, 532 S.E.2d 221 (2000). However, in Covington, the facts tend to show that following a breakin, officers received a report that the suspects had left the scene of the crime heading in a particular direction on a particular street, so the officers set up a stop point three hundred yards from the scene on the specific street given. Id. at 689-90, 532 S.E.2d at 222. The facts of Covington are distinguishable because the officers had an idea of which direction the suspects fled, while in the case at hand, the only information was that the suspects fled on foot. The State also attempts to rely on State v. Thompson, but that case can also be distinguished because there the officers relied on reports that a van had been used during break-ins in the area and they witnessed suspicious activity involving a van in the same area. Thompson, 296 N.C. at 707, 252 S.E.2d at 779. If we were to decide in the State's favor, we could potentially set a precedent allowing law enforcement to pull over any citizen driving without exhibiting any traffic violations in the vicinity of a break-in or robbery with the most minimal suspicion of involvement in the crime. We are reluctant to allow such unfettered discretion and must consequently agree with defendant's argument that Sgt. Griffin's reasoning for pulling over defendant's vehicle did not amount to the reasonable, articulable suspicion necessary to warrant a Terry stop.
III. Conclusion
As a result, we must reverse the decision of the trial court in denying defendant's motion to suppress the evidence of his impairment due to Sgt. Griffin's lack of reasonable, articulable suspicion. Sgt. Griffin's reasoning must be based on more than an "`unparticularized *452 suspicion or hunch.'" See Chlopek, ____ N.C.App. at ____, 704 S.E.2d at 566 (citation omitted).
Reversed.
Judges HUNTER, JR., and THIGPEN concur.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2506582/
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203 P.3d 33 (2009)
KANSAS HEALTH CARE STABILIZATION FUND, Appellee,
v.
ST. FRANCIS HOSPITAL, a/k/a Via Christi Regional Medical Center, Inc., Appellant.
No. 99,009.
Court of Appeals of Kansas.
March 20, 2009.
*36 James D. Oliver, of Foulston Siefkin, LLP, of Overland Park, and Darrell E. Warta, of the same firm, of Wichita, for appellant.
Thomas D. Haney, of Henson, Clark, Hutton, Mudrick & Gragson, LLP, of Topeka, for appellee.
Before RULON, C.J., GREENE and HILL, JJ.
GREENE, J.
St. Francis Hospital in Wichita, a/k/a Via Christi Regional Medical Center (Via Christi), appeals the district court's ruling based on summary judgment motions and a subsequent bench trial that the Kansas Health Care Stabilization Fund (Fund) had no liability to indemnify Via Christi for a settlement wherein Via Christi agreed to pay the Maria Brower family $3.3 million for a comprehensive release of all their claims, which arguably included medical malpractice, fraud, and spoliation of evidence. The district court held that to the extent the settlement included payment for covered injuries, that payment did not exceed Via Christi's self-insurance, thus triggering no liability of the Fund. We affirm the district court.
Factual and Procedural Background
This litigation has a long and rather tortured factual and procedural history. In October 1987, Maria Brower, a minor, had surgery to remove a spinal tumor and to correct a spinal defect. Following the surgery, Brower suffered partial paralysis, including the loss of bowel and bladder control. Brower sued the surgeon in 1992, but the trial resulted in a defense verdict. Thereafter, the district court granted Brower a new trial based upon juror misconduct, and the surgeon then settled the suit with Brower for an undisclosed amount.
This settlement did not end Brower's litigation, however, because of alleged misconduct by Via Christi or its agents during the initial suit. The alleged misconduct in that litigation surrounded the production by Via Christi of two inconsistent printouts of the somatosensory-evoked potential (SSEP) monitoring during Brower's surgery. This *37 alleged misconduct provoked Brower's 1996 suit against Via Christi and its electroencephalogram technician, Lisa Gould, alleging negligence in SSEP monitoring, fraud, spoliation of evidence, intentional infliction of emotional distress, and violations of the Kansas Consumer Protection Act (KCPA). The suit prompted a letter from the Fund to counsel for Via Christi, stating:
"This Department has been advised by the insurance company that you have been appointed to represent the following defendant(s) whom they insure:
Via Christi Medical Center
"Our records show that the defendant(s) named above qualifies for coverage provided by the [Fund] pursuant to statute, K.S.A. 40-3401 et seq. In order that we can be kept apprised of the status of this matter, we ask that you provide us with the following information [including an estimate of liability and other information to enable evaluation of exposure of the Fund]."
In April 1997, the district court granted Via Christi's motion for partial summary judgment on the negligence claim based on the statute of repose. The court rejected Brower's argument that the statute of repose should be tolled as the result of allegedly fraudulent conduct by Via Christi and, in doing so, refused to follow the majority opinion of this court in Robinson v. Shah, 23 Kan. App. 2d 812, 936 P.2d 784 (1997), instead following the concurring and dissenting opinion in that case, 23 Kan. App. 2d at 833-36, 936 P.2d 784 (Knudson, J.).
Whether to appeal the district court's ruling then became the subject of consideration and discussion between the parties. From correspondence in the record, Via Christi's counsel reported to his client in early 1998 that Brower's response to a motion for summary judgment included a request for the court "to amend its previous ruling and allow for an interlocutory appeal" and stated an intention "to voluntarily dismiss all remaining claims, thereby allowing appeal of the court's earlier ruling." This letter suggested that Brower's counsel "wants in the worst way for the negligence issue to be immediately presented to the Kansas Court of Appeals."
In May 1998, an internal memo of Via Christi's counsel suggested that they were "still deliberating the possibilities of whether we should agree" to an immediate appeal regarding the negligence claim. The memo discussed the pros and cons of such an appeal, noting that a detriment would be the loss of some useful testimony concerning the equitable estoppel argument by Brower. The memo reported no decision as to an agreement to an interlocutory appeal.
Sometime prior to July 1998, and purportedly due to a perceived conflict of interest created by the potential need for counsel to testify as to the fraud claim, Brower's counsel withdrew and new counsel entered his appearance. New counsel then moved to voluntarily dismiss the remaining claims in the case without prejudice. The record on appeal does not contain the motion, order, or transcript of ruling, but correspondence from Via Christi's counsel reported that in granting Brower's motion, the district court ruled "that all discovery conducted and the summary judgment rulings received would be applicable in any refiled action."
Later in 1998, Brower refiled her suit against Via Christi and Gould, alleging negligence, together with fraud and evidence spoliation, but deleting the intentional infliction of emotional distress and KCPA claims. Based on correspondence in the record, it appears that the Fund notified Via Christi in late December 1998 that the claims asserted "were based upon fraud and intentional tort and that [the Fund] hoped that coverage did not become an issue."
In May 2000, the Fund's chief attorney questioned its potential liability in a letter to Via Christi's counsel and inquired whether there were any claims being made against Via Christi for negligence. In response, Via Christi's counsel stated:
"You are correct that the original petition contained five claims: Negligence, spoliation, fraud, intentional inflection [sic] of emotional distress and consumer protection violations. The last two listed claims were dropped when the case was dismissed and refiled. Summary judgment has been *38 entered against the negligence claim. Therefore, at the moment, the only surviving claims are for spoliation and fraud. However, plaintiffs will likely appeal, and may even seek rehearing, on the order holding that the negligence claim was barred by the statute of repose.
"The bottom line response to your letter, therefore, is that at present the only surviving claims are for fraud and spoliation, but there is a negligence claim waiting in the wings. As to the fraud and spoliation cases, they both arise out of the providing of medical services and allege as damages injuries arising out of alleged medical malpractice. Obviously it would not be appropriate for me, as defense counsel, to offer an opinion as to whether the Fund has coverage under these circumstances." (Emphasis added.)
On August 15, 2001, Via Christi formally tendered its liability limits to the Fund and requested the Fund to assume the defense of the litigation. The Fund responded to Via Christi by letter, stating: "In the event that it is determined that the Health Care Stabilization Fund has coverage in this matter, the tender will be accepted as of August 16th, the date your letter was received in our office. At this time, however, we do not accept nor deny the tender."
In late 2001, trial counsel for both Via Christi and Gould wrote letters to the hospital's counsel, indicating bleak predictions for the potential liability Via Christi faced if the jury awarded Brower damages. Following additional negotiations with Brower, Via Christi ultimately settled the suit for $3.3 million in a confidential settlement agreement on June 7, 2002. The Fund did not participate in the settlement. The settlement agreement contained a provision which stated in material part:
"All sums set forth in this Settlement Agreement and Release constitute damages on account of personal injuries or sickness in a case involving physical injury or sickness arising from the accident, casualty or event stated in Paragraph 1 of this agreement and within the meaning of Sections 104(a)(2) and 130(c) of the Internal Revenue Code of 1986, as amended."
On July 16, 2002, Via Christi advised the Fund of the settlement and requested contribution in the amount of $3 million and requested payment of attorney fees for its defense costs. On July 26, 2002, the Fund noted its disagreement that it was obligated to contribute to the settlement or pay for Via Christi's defense costs. Five days later, the Fund filed a declaratory judgment action in Shawnee County seeking judgment that it had no coverage and thus no obligation to reimburse Via Christi for the settlement. Via Christi filed a counterclaim alleging wrongful denial of coverage for the settlement.
On September 21, 2004, the parties filed joint stipulations of fact, which the district court accepted. Thereafter, each party filed competing motions for summary judgment. The district court held that the Fund covered any of the claims contained in the settlement "arising out of the rendering or failure to render professional services" by Via Christi but did not cover any other claims settled. The court further reasoned that, since the nature of the fraud claim did not involve improper medical treatment but occurred subsequent to the medical treatment, the fraud claim was not covered by the Fund. Because the court could not apportion the settlement according to the claims resolved, it ordered the parties into mediation to attempt to reach agreement on the amount owed by the Fund.
The Fund filed a motion for rehearing or modification of the memorandum decision, arguing that Gould was not covered by the Fund and that her negligence would not be covered by the Fund. The district court rejected the Fund's argument, noting that Via Christi was covered by the Fund and Gould's negligence could be attributed to Via Christi under a theory of respondeat superior.
When the parties failed to reach an agreement pursuant to the court-ordered mediation, the district court conducted a bench trial on the issue of apportioning the settlement between covered and noncovered injuries. On June 7, 2007, the district court concluded that less than $200,000 of the $3.3 million settlement in the Brower case was *39 paid to eliminate the remote possibility that a negligence claim might be revived at some unknown date in the future. Because Via Christi was self-insured for the first $200,000 of liability, the court granted judgment against Via Christi on its counterclaim.
Via Christi filed a timely notice of appeal from the district court's judgment.
Prior to oral argument before this court, we issued an order for supplemental briefing to address the legal impact of the voluntary dismissal without prejudice after the summary judgment ruling on the negligence claim. The parties filed and we have now considered the supplemental briefing on this issue.
Is the Issue of the Fund's Duty to Defend Properly Before this Court?
On appeal, Via Christi principally contends that the Fund had a duty to defend Via Christi on a potential negligence claim and, because the Fund breached that duty, the Fund cannot now contest the reasonableness of Via Christi's settlement with Brower absent some demonstration of fraud or collusion. Although this legal construct might ordinarily have validity, Via Christi has never alleged the Fund breached a duty to defend. Instead, Via Christi's entire case in district court focused on allegations that the Fund breached a duty to indemnify. In other words, our review of pleadings and summary judgment motions reveals this was merely a coverage battle, without the complications and legal consequences inherent in litigation alleging breach of the duty to defend.
Via Christi did not raise any issue of the Fund's duty to defend until appeal. The issues framed by the initial pleadings and the summary judgment motions were limited to coverage, and we view this question as quite distinct from the broader duty to defend. Our Supreme Court recently discussed the distinction in these duties:
"`As between the duty to pay proceeds and the duty to defend, the more expansive, broader duty is the duty to defend. The source of this observation is in the fact that an insurer is contractually obligated to defend even meritless suits that fall within the coverage. Presumably, the plaintiff's claims in meritless suits will be defeated, and the insurer will therefore not incur any obligation to provide indemnification. But before the merits are decided, the insurer must provide and pay for the insured's defense. In effect, the insured receives "coverage" for the defense itself, even though no duty to indemnify will ever exist in that situation. In other words, the duty to defend is broader in the sense that it is triggered in more situations than the duty to indemnify.' [Citation omitted.]" Miller v. Westport Ins. Corp., 288 Kan. ___, ___, 200 P.3d 419, 423-24 (2009).
Contrasting Via Christi's summary judgment motion to its brief on appeal, it is clear that the issue presented to the district court did not encompass the broader duty to defend now argued on appeal. The summary judgment motion framed only the following as the question presented:
"Should Via Christi be denied its insurance coverage with the Fund simply because the Browers' claims included allegations of fraud and spoliation of evidence, in addition to allegations of medical negligence, all of which arose out of Maria Brower's surgery and other related medical care?"
The brief on appeal suggests that "[w]hen an excess liability insurer has denied coverage and refused to defend a covered claim, it is bound by the insured's settlement of the claim unless it proves the settlement was fraudulent or collusive." (Emphasis added.) The brief goes on to provide tenets applicable to the duty to defend, including the duty to defend even though the possibility of coverage may be remote.
Here, the district court was not asked, and the parties had not pleaded, that there was a duty on the part of the Fund to defend Via Christi. Instead, the focus was unequivocally on the question of coverage after the settlement. Via Christi's attempt to shift its theory on appeal would dramatically alter our approach and the applicable legal principles on review; we are not inclined to permit such a shift.
Indeed, the district court noted the distinction between the duty to defend and the duty *40 to indemnify and ultimately focused on "the underlying facts as they existed when the claim was settled and [made] the determination as to whether the incident [fell] within coverage." Accordingly, we decline to decide this appeal on this issue, instead focusing on the issues that were framed by the summary judgment motions to the district court. See Miller v. Bartle, 283 Kan. 108, 119, 150 P.3d 1282 (2007) (issues not raised before the trial court cannot be raised on appeal).
We revisit the district court's rulings to ascertain the scope of this appeal. The district court held that the motions for summary judgment were limited to two specific issues:
"1. Whether any or all of the settlement in Sedgwick County Case No. 98-C-3467 was for claims `arising out of the rendering of or the failure to render professional services' pursuant to K.S.A. 40-3403(c)(1); and,
"2. Whether the Kansas Health Care Stabilization Fund is obligated to pay any or all of the settlement in Sedgwick County Case No. 98-C-3467 pursuant to K.S.A. 40-3403(c)(1)."
Our extensive analysis of the summary judgment motions and supporting memoranda reveals that these were the only issues framed below, and the district court's resolution of these issues led to the necessity of a bench trial on the issue of apportionment of the settlement. Accordingly, we limit our decision to these issues, reviewing the district court's findings and conclusions on each.
Did the District Court Properly Construe and Apply the Phrase "Arising Out of the Rendering of or Failure to Render Professional Services" Contained Within K.S.A. 40-3403(c)(1)?
Via Christi argues that the district court erred in construing and applying K.S.A. 40-3403(c), which provides:
"Subject to subsections (d), (e), (f), (i), (k), (m), (n), (o), (p) and (q), the fund shall be liable to pay: (1) Any amount due from a judgment or settlement which is in excess of the basic coverage liability of all liable resident health care providers or resident self-insurers for any personal injury or death arising out of the rendering of or the failure to render professional services within or without this state."
The interpretation of a statute is a question of law over which an appellate court has unlimited review. We are not bound by the trial court's interpretation. LSF Franchise REO I v. Emporia Restaurants, Inc., 283 Kan. 13, 19, 152 P.3d 34 (2007).
The district court's memorandum decision reviewed the legislative history of the enactment and concluded the Health Care Provider Insurance Availability Act "must be interpreted for the benefit of all Kansans in order to promote the purpose and to protect the financial integrity of the Health Care Stabilization Fund." Relying on Bell v. Simon, 246 Kan. 473, 790 P.2d 925 (1990), the district court then held that "`K.S.A. 40-3403(c) must be read in harmony with the entire Act.'" The court found the language of that statutory provision to be clear and unambiguous and concluded that claims which do not arise out of the rendering of or failure to render professional services by a health care provider are not within the coverage of the Fund. Because the claims against Via Christi arose from Gould's intentional and fraudulent conduct in concealing and altering evidence, the court concluded they arose out of fraudulent conduct committed subsequent to the rendering of or failure to render professional services and were not within the coverage of the Fund under K.S.A. 40-3403(c).
At the outset, we fundamentally disagree with the district court's reading of the statute. The subject phrase "arising out of" does not modify claims, but rather it modifies "any personal injury or death." In fact, the statutory provision makes no reference to claims. In other words, K.S.A. 40-3403(c) provides that the Fund is liable to pay any excess amount from a settlement "for any personal injury or death arising out of the rendering of or the failure to render professional services." The district court's reading is not supported by the clear language of the provision. See Wilson v. Ramirez, 269 Kan. 371, 381, 2 P.3d 778 (2000) (quoting with approval that district court's order and analysis as to Fund coverage).
*41 Thus, the question framed is whether the Brower settlement was paid for personal injury arising out of the rendering of or the failure to render professional services. Via Christi argues that the settlement arose out of the rendering of such services. It suggests:
"If there had been no negligence in rendering professional services, there would be no damages. The damages claimed by plaintiff were the same on both the negligence and fraud theories. The effect of the fraud theory was to prevent Brower being deprived of a remedy for the damages arising out of negligence in the professional services rendered during her spine surgery."
We disagree. What injuries were suffered by Brower as a direct result of the alleged fraud and spoliation of evidence? Her injury was the loss of her ability to timely seek redress for the negligence of Gould, not the injuries sustained by reason of Gould's negligence. The measure of damages for the fraud claim may well have been the amount Brower would have recovered on a negligence claim, if the alleged fraud had not prevented her from bringing the action within the period established by the statute of repose. But the injury to Brower as the result of Via Christi's fraud, i.e., the loss of her cause of action sounding is medical malpractice due to the operation of the statute of repose, does not arise out of the rendering of or the failure to render professional services.
The rather subtle distinction between the measure of damages in the fraud case and the injuries that arise from such a case is best explained by our court in Robinson. There, in addressing statute of limitations issues for claims of negligence and fraud against a health care provider, the court carefully distinguished between the claims as follows:
"We hold that where a patient has a cause of action against a physician for malpractice and has been duped by the intentional and knowing lies of the physician to the extent the patient in reliance on the fraudulent misrepresentation permits the statute of limitations to bar his or her action, the patient can maintain an action for fraud against the physician, not on account of the original negligence or malpractice but on account of the fraudulent actions of the physician which deceived the patient with the consequence that the time bar ran against the original action." (Emphasis added). 23 Kan. App. 2d at 824, 936 P.2d 784.
Another panel of our court recently quoted Robinson and characterized its holding as follows:
"[T]he holding of Robinson ... requires a plaintiff to establish two separate instances of misconduct: one forming the original cause of action and the other in concealing or misrepresenting the facts that would allow the plaintiff, exercising reasonable diligence, to detect the underlying tortious conduct." Bonura v. Sifers, 39 Kan. App. 2d 617, 632, 181 P.3d 1277, rev. denied 286 Kan. 1176 (2008).
Although neither of these cases addresses the precise question before us, these cases instruct that a fraud case based upon conduct that conceals a negligence action until the statute of limitations or statute of repose has run must be viewed as separate and distinct from the underlying negligence action. In fact, to the extent that the elements of the actions are merged as suggested by Via Christi herein, the analytical framework for application of the statute of limitations becomes unworkable. Viewing the claims separately, the injury sustained by reason of the fraud is the loss of opportunity to litigate the negligence claim within the statute of limitations or statute of repose. The measure of damages in that fraud case is the potential recovery if the negligence case had proceeded on a timely basis. Clearly, however, the injury for the fraud does not arise from the rendering of professional services.
Via Christi relies on cases that have liberally construed the phrase "arising out of," including Pestock v. State Farm Auto. Ins. Co., 9 Kan. App. 2d 188, 189, 674 P.2d 1062 (1984). These cases, however, ultimately concluded the insurers did not owe liability for the accidents, noting the remoteness of the causal relationship between the injuries *42 and types of activity covered by the respective policies.
The more instructive authority is Garrison v. State Farm Mut. Auto. Ins. Co., 258 Kan. 547, 907 P.2d 891 (1995), where the question was whether an accident "arose out of ownership or use" of a motor vehicle. The court held that in order for coverage to exist for accidental bodily injury caused by the discharge of a firearm within an automobile, there is no requirement that the vehicle be either the proximate cause of the injury or physically contribute to the discharge of the gun. "Coverage exists where the minimal causal connection between the use of the vehicle and the injury is provided by the foreseeable and reasonable use of the vehicle for hunting. [Citation omitted.]" 258 Kan. at 551-52, 907 P.2d 891.
While the holding of Garrison broadly construed a contract provision similar to the statutory provision at issue in this case, the court in Garrison clearly required a causal connection between the injuries and the conduct covered by the insurance provision. See Molitor v. Davidson, 26 Kan. App. 2d 83, 85-87, 978 P.2d 294, rev. denied 267 Kan. 889 (1999) (construing and not extending the holding of Garrison). Via Christi does not argue that fraud is a natural and foreseeable aspect of the professional services provided to the plaintiff; thus, the rationale of Garrison would not support Via Christi's argument to abandon a causal connection in construing the phrase "arising out of."
Under the facts of this case, Brower's allegations of fraud and spoliation of evidence against Via Christi and Gould did not arise out of the rendering of or the failure to render professional services. The district court properly held that the Fund's coverage did not include Brower's injury due to the fraud and spoliation of evidence. To the extent the settlement paid Brower sums for having lost her medical malpractice action due to the operation of the statute of repose, the Fund was not liable. This does not resolve this appeal; we must now examine whether the settlement also paid Brower for injuries that arose from any aspect of her original medical malpractice claims.
Did the Brower Settlement Include Payment for Injuries that Arose From the Original Negligence Claims Against Via Christi?
Even though we have concluded that the Fund had no liability for settlement amounts paid for Brower's injuries due to fraud, Via Christi argues that the original negligence or malpractice claims remained in the suit at the time of settlement and that the settlement amount included payment for Brower's injuries arising out of the rendering of professional services. Via Christi argues the negligence claim was improperly dismissed by the district court and this decision was never appealed; thus, the negligence claim was alive, pled in the subsequent action, included in the pretrial order, and acknowledged by counsel as "waiting in the wings." The Fund argues that the settlement did not include any payment for the negligence claims and, to the extent any such claims were included, Via Christi failed to shoulder its burden to demonstrate any basis for apportioning the amount paid among negligence claims, fraud claims, and punitive damage claims.
The district court initially determined that the negligence claims "could have been revived at any point prior to the entry of the final judgment" but "no attempt was ever made to allocate or itemize the settlement based on the type of claim asserted." When the parties were unable to come to an agreement as to an apportionment of the settlement amount, the district court conducted a bench trial and made factual findings to support its conclusion that "less than $200,000 of the $3.3 million settlement in the Brower case was paid to eliminate the remote possibility that a negligence claim might be revived at some unknown date in the future."
What impact did the dismissal without prejudice have on the summary judgment terminating the negligence claim?
Upon this court's initial review, we perceived a threshold issue that must be resolved: Was the negligence claim subject to revival in a subsequent action after its termination by summary judgment was not appealed before the entire initial suit was *43 dismissed without prejudice? Put another way: Did the dismissal without prejudice after summary judgment was entered on the negligence claim have a preclusive effect on any subsequent attempt to assert the claim? As indicated above, the parties were requested to submit supplemental briefs on this issue because both parties' initial briefs seemed to concede (and the district court seemed to believe) that the claim was unaffected by the dismissal after summary judgment.
Our initial concern was based upon this court's opinion in Grimmett v. S & W Auto Sales Co., 26 Kan. App. 2d 482, Syl. ¶ 4, 988 P.2d 755 (1999), wherein a panel of our court held that preclusion doctrines should be applied when a party voluntarily dismisses a case after an adverse ruling has been made on a summary judgment motion. The rationale of the court was that "[s]ummary judgment procedure, at least from the defendant's point of view, would become a virtual nullity if plaintiffs could obtain `overs' by dismissing and refiling a case rather than fully litigating an adverse summary judgment decision through the appellate process. [Citation omitted.]" 26 Kan. App. 2d at 486, 988 P.2d 755. The precise holding was stated by the panel as follows:
"We conclude a trial court's decision on summary judgment satisfies the final judgment on the merits requirement for purposes of claim preclusion when the parties were fully heard, the decision is made with a reasoned opinion, and the ruling is subject to appeal or, in fact, reviewed on appeal. [Citations omitted.] Although interlocutory when rendered, the trial court's decision became final when the appeal was dismissed." 26 Kan. App. 2d at 488, 988 P.2d 755.
If we apply this rule here, the summary judgment terminating Brower's negligence claim in the first Brower case would have preclusive effect and that claim could not have been any part of the remaining litigation as a matter of law.
Via Christi argues in its supplemental brief, however, that this application is of no value in this case. The argument is that whatever preclusive effect there may have been by virtue of the dismissal, there was no affirmative defense raised on this basis by St. Francis/Via Christi in the second Bower case. See K.S.A. 60-208(c). Absent any such pleading, the defense was waived. In re Parentage of Shade, 34 Kan. App. 2d 895, 903-04, 126 P.3d 445, rev. denied 281 Kan. 1378 (2006).
We agree with this assertion and therefore conclude that the negligence claim was not precluded as a matter of law from being asserted in the second Brower litigation.
Did the district court err in concluding that any payment to Brower for release of the negligence claim did not exceed the self-insured's coverage?
Having determined that the settlement may have included payment for both covered and noncovered injuries, the district court conducted a bench trial on the question of apportionment. We review the findings of fact to determine if they are supported by substantial competent evidence and are sufficient to support the trial court's conclusions of law. Substantial evidence is such legal and relevant evidence as a reasonable person might regard as sufficient to support a conclusion. An appellate court has unlimited review of the trial court's conclusions of law. LSF Franchise REO I, 283 Kan. at 19, 152 P.3d 34.
First, we examine the legal predicate for the bench trial. Was apportionment of the relative risks of covered and noncovered aspects of settlement the proper question, and, if so, was it a fact question? The district court relied principally on federal authorities in deciding its course and direction, by stating:
"`Although the duty to defend is determined by the allegations of the underlying complaint and by facts discoverable to the insurer, the duty to indemnify is determined by the facts as they are established at trial or as they are finally determined by some other means (e.g. summary judgment or settlement).' Bankwest v. Fidelity & Deposit Co. of Maryland, 63 F.3d 974, 978 (10th Cir.1995). See also American Motorists Insurance Co. v. General *44 Host Corp., 946 F.2d 1489, 1490 (10th Cir. 1991). When a lawsuit is settled, `the duty to indemnify is determined from the facts forming the basis of the settlement.' Employers Reinsurance Corp. v. NewCap Ins. Co., 209 F. Supp. 2d 1184, 1192 (D.Kan. 2002). Thus, in the present case, `the Court must assess the underlying facts as they existed when the claim was settled and make the determination as to whether the incident falls within the coverage....' Employers Reinsurance Corporation v. Newcap Insurance Company, 209 F. Supp. 2d 1184, 1192 (D.Kan.2002)."
Although Kansas law is scarce on the proposition, our Supreme Court quoted with apparent approval a district court's statement of similar principles in AT & SF Ry. Co. v. Stonewall Ins. Co., 275 Kan. 698, 740-41, 71 P.3d 1097(2003), where the district court stated the principles as follows:
"`... [C]ourts applying Kansas law have held that when liability issues have been tried or settled, coverage issues are "controlled" by the settlement in the underlying litigation. The general rule is that "the duty to indemnify is determined by the facts as they are established at trial or as they are finally determined by some other means." [Citation omitted.]'
"`After a settlement, the underlying claimants' liability contentions are accepted as true for purposes of determining whether there is coverage. [Citation omitted].'"
These principles appear to be fully supported by at least one learned treatise on insurance law. An excellent discussion of the precise problem faced by the district court appears in 1 Windt, Insurance Claims and Disputes § 6.31, pp. 6-244 to 6-250 (5th ed.2007):
"Following a settlement as to which the insurer denies coverage, the existence of coverage should depend on what claims were settled; that is, it should depend on why the money was paid. The actual merit of each of the plaintiff's claims against the insured is not directly relevant. The only question should be how the parties to the settlement viewed the relative merits of the plaintiff's claims at the time of the settlement and whether, if the insured settled without the carrier's approval, the settlement amount was reasonable. Neither the insurer nor the insured should be allowed to try the plaintiff's claim in the coverage suit. The insurer should not, however, be bound by how the settlement is allocated by the insured/claimant or by what the agreement states is the reason the settlement money was paid."
Obviously, the question is one of fact, not one of law. Especially where the determination of coverage is compounded by a comprehensive settlement of both covered and noncovered injuries, the question turns on how the lead players valued the relative risks in arriving at the final settlement. See Cyprus Amax Minerals v. Lexington Ins., 74 P.3d 294, 301-02 (Colo.2003) (determination of whether a duty to indemnify exists requires factual development, as it is largely a question of fact).
Accordingly, we conclude the district court's conduct of a bench trial to address the ultimate issue here was quite appropriate, and the court's focus appears to have been consistent with sound principles of law. We must, however, determine whether the court's findings were supported by substantial competent evidence.
The district court's findings consist of 62 separately numbered paragraphs and its conclusions based on those findings are summarized in 5 pages of its final memorandum opinion. Both the findings and the conclusions include a comprehensive chronological itemization of evidence that the parties used to evaluate all the respective risks faced by reason of Brower's litigation during the time period March 21, 2001, and final achievement of settlement in July 2002. The findings are supported by the record evidence, and the ultimate conclusions of the court can be summarized as follows:
1. Given the procedural posture of the case, the only way for plaintiff to have prevailed on her negligence claim would have required trial on the fraud claim, appeal thereafter challenging the old summary judgment, reversal of that judgment by the appellate courts, and a new trial thereafter. *45 Revival of the negligence claim was remote at best, both in time and in likelihood of success.
2. Via Christi faced substantial risk on the fraud claims at the time of settlement, and defense counsel strongly believed the trial judge would impose up to $5 million in punitive damages.
3. Although there was a remote possibility of a negligence claim "waiting in the wings" at the time of settlement, the amount of the settlement was based not on that remote possibility, but on eliminating exposure of an "extremely high" verdict being returned on the fraud and spoliation of evidence claim.
4. In an 11th-hour memo to the executive committee of the hospital, its general counsel advised it was facing trial in "an extremely difficult and dangerous case" that was "based in fraud" and could result in punitive damages. He assessed the hospital's exposure at $7 to $10 million plus punitive damages.
We recognize that Via Christi views the risks somewhat differently from what the district court found. The Via Christi lawyers may well have held strong views about the vulnerability of the district court's summary judgment barring the negligence claim and its likelihood of being reversed on appeal. Likewise, they may have believed their knowledge was superior to that of the Fund's counsel on many of the questions bearing on risk valuation. Nevertheless, it is not our function to reweigh evidence, evaluate witnesses' credibility, or redetermine questions of fact; our task ends at the determination whether there is substantial competent evidence to support the district court's fact findings. LSF Franchise REO I v. Emporia Restaurants, Inc., 283 Kan. 13, 19, 152 P.3d 34 (2007).
After an extensive review of the district court's findings and conclusions, together with the transcript of the bench trial, we are satisfied that the district court's findings are supported by substantial competent evidence and they adequately support the district court's conclusion of law that less than $200,000 of the $3.3 million settlement was paid to eliminate the remote possibility that a negligence claim might be revived at some unknown date in the future. Because Via Christi was self-insured for $200,000, the excess liability coverage of the Fund was not triggered, and the Fund was entitled to judgment on Via Christi's counterclaim.
Affirmed.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2515755/
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202 P.3d 289 (2009)
226 Or. App. 84
HILL
v.
REEDER-KUCINSKI.
Court of Appeals of Oregon.
February 18, 2009.
Affirmed without opinion.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2506626/
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718 S.E.2d 160 (2011)
WACHOVIA BANK NATIONAL ASSOCIATION, and Preserve Holdings, LLC, as Substituted Successor Plaintiff, Plaintiff
v.
SUPERIOR CONSTRUCTION CORPORATION, George Rountree, III, Receiver for Intracoastal Living, LLC; Western Surety Company and Coastal Sash & Door, Defendant.
No. COA10-1158.
Court of Appeals of North Carolina.
July 19, 2011.
*161 Shumaker, Loop & Kendrick, LLP, by Frederick M. Thurman, Jr., Steele B. Windle, III, and Bonnie Keith Green, for Defendant-Appellant Superior Construction Corporation.
Conner Gwyn Schenck, PLLC, by C. Hamilton Jarrett and Luke J. Farley, for Defendant-Appellant Western Surety Company.
Andresen & Arronte, PLLC, by Kenneth P. Andresen, for Defendant-Appellee Preserve Holdings, LLC.
Nexsen Pruet, PLLC, by Eric H. Biesecker, Richard W. Wilson, and David A. Luzum, for amicus curiae American Subcontractors Association, Inc., and American Association of the Carolinas.
ERVIN, Judge.
Defendants Superior Construction Corporation and Western Surety Company appeal from an order granting judgment on the pleadings in favor of Preserve Holdings, LLC, and determining that Preserve Holdings' lien arising from a deed of trust in favor of Wachovia Bank & Trust Co., N.A., had priority over Defendant Superior's contractor's lien. On appeal, Defendants argue that the trial court erred by granting judgment on the pleadings in favor of Preserve Holdings on the grounds that Defendant Superior's contractor's lien had priority over the lien created by the Wachovia deed of trust. After careful consideration of Defendants' challenges to the trial court's order in light of the record and the applicable law, we conclude that Defendants' arguments have merit, that the trial court's order should be reversed, and that this case should be remanded to the Mecklenburg County Superior Court for further proceedings not inconsistent with this opinion.
I. Background
On 21 January 2005, Intracoastal Living, LLC, entered into a contract with Defendant Superior pursuant to which Defendant Superior, acting as general contractor, agreed to construct certain improvements on real estate owned by Intracoastal Living known as The Preserve at Oak Island. In return, Intracoastal Living agreed to pay $19,300,000.00 to Defendant Superior for performing the necessary construction work. Defendant Superior first furnished labor and materials under the contract on 22 April 2005.
In April 2005, Wachovia agreed to loan money to Intracoastal Living for the purpose of funding construction activities at The Preserve. On 19 May 2005, Intracoastal Living executed a construction loan agreement, a $22,835,000.00 promissory note, and a properly recorded deed of trust in favor of Wachovia.
As construction proceeded, Defendant Superior submitted numerous applications for payment. The first two applications, which were dated 11 May 2005 and 9 June 2005, were accompanied by documents titled Partial Waiver of Lien. The two partial lien waivers contained identical language, differing only in the amount of the requested draw, the date through which Defendant Superior waived and released its lien rights, and the identity of the person signing on behalf of Defendant Superior. Both partial lien waivers provided that:
Whereas Superior Const. has been employed by [Intracoastal] LLC to furnish labor and/or materials for the project known as [The Preserve.]
Now, therefore, the undersigned, for and in consideration of the sum of $ [___, ___. ___] and other good and valuable consideration, the receipt whereof hereby acknowledged, do hereby waive, relinquish, surrender and release any and all lien, claim, or right to lien on the above said described project and premises, arising under and by virtue of the mechanic's lien laws of the State of North Carolina on account of any labor performed or the furnishing of any material to the above described project and premises up to and including the (day) ____ of (month) ____, (year) 2005. Upon receipt of this month's draw request of $ [____, ____. ____] [Superior *162 Construction] will also waive and release any and all liens or claims, or right to lien on the above project as it relates to the stated draw request.
Defendant Superior last furnished labor and materials in connection with construction activities at The Preserve on 29 June 2007, at which point it stopped work at the project due to nonpayment.
On 25 September 2007, Defendant Superior filed a claim of lien applicable to The Preserve property in which it alleged that it first furnished labor and materials on 22 April 2005 and that Intracoastal Living owed it $1,286,000.00 for construction work performed under the contract. On 23 October 2007, Wachovia filed a declaratory judgment action in which it sought a determination that the lien resulting from Wachovia's deed of trust had priority over the lien claimed by Defendant Superior. On 14 January 2008, Defendant Superior filed an answer in which it denied that Wachovia's lien had priority over Defendant Superior's lien.
On 24 July 2008, Defendant Western Surety Company sought leave to intervene. Defendant Western Surety's request to intervene was allowed on 24 November 2008. On 4 December 2008, Defendant Western Surety filed an answer denying the material allegations of Wachovia's complaint and asserting a crossclaim against Defendant Superior and the receiver for Intracoastal and Coastal Sash & Door, George Rountree, III, in which Defendant Western Surety sought a declaration concerning the priority of Defendant Western Surety's claim to the balance owed to Defendant Superior.[1] Intracoastal filed its answer to Defendant Western Surety's crossclaim on 9 January 2009.
On 15 September 2008, Preserve Holdings, LLC, filed a motion seeking to replace Plaintiff Wachovia as the plaintiff in this case.[2] Preserve Holdings' motion was granted on 15 October 2008. On 3 November 2008, Preserve Holdings filed a motion for judgment on the pleadings. On 12 February 2010, Defendant Superior filed a summary judgment motion. On 23 April 2010, the trial court granted Preserve Holdings' motion for judgment on the pleadings, stating, in pertinent part, that:
[47]... [T]he Waivers clearly provide that[,] in exchange for the consideration received, Superior did "waive, relinquish, surrender and release" "any and all liens, claims or rights to liens" it might have on the Project, arising under North Carolina law, on account of the work it performed up to and including May 31, 2005. The words of waiver are clear and not ambiguous. Further, the words "any and all" suggest there was no limitation on Superior's waiver of its rights. Moreover, the "on account of" language would exclude from the waiver what future rights Superior would gain upon future provisions of labor and material. Such an interpretation would not be inconsistent with the "any and all" language.
[48].... [T]the language of the Waivers clearly and unambiguously expresses Superior's intent, and binding contractual agreement, to waive its existing lien rights, including those arising from its date of first furnishing of labor and materials on the Project, in exchange for the consideration provided by Wachovia, up to and including May 31, 2005.
[49] One effect of this contract is a change in Superior's Date of First Furnishing of labor and materials from a date preceding Wachovia's deed of trust to one after May 31, 2005, thus placing Superior's claims behind Wachovia's in priority. While such a result may seem harsh, the wording of the contract clearly demonstrates the parties' intent to achieve such a result. Superior cannot successfully rely upon the materialman's statute when it waived the statute's protections.
*163 ...
[50] Based upon the pleadings, the court CONCLUDES that [] the Wachovia deed of trust lien had priority over Superior's claim of lien; and that Plaintiff Preserve Holdings, LLC, as substituted Plaintiff in this action, is entitled to judgment in its favor upon the First Claim for Relief (Declaratory Judgment Regarding Lien Priority) in this matter.
(footnotes and citations omitted) Defendants noted an appeal to this Court from the trial court's order.[3]
II. Legal Analysis
A. Standard of Review
"A motion for judgment on the pleadings is authorized by Rule 12(c) of the North Carolina Rules of Civil Procedure. N.C. Gen. Stat. § 1A-1, Rule 12(c) [2009]. The rule's function is to dispose of baseless claims or defenses when the formal pleadings reveal their lack of merit." Judgment on the pleadings is properly entered only if "all the material allegations of fact are admitted[,]... only questions of law remain" and no question of fact is left for jury determination.
"In deciding such a motion, the trial court looks solely to the pleadings. The trial court can only consider facts properly pleaded and documents referred to or attached to the pleadings." "This Court reviews de novo a trial court's ruling on motions for judgment on the pleadings. Under a de novo standard of review, this Court considers the matter anew and freely substitutes its own judgment for that of the trial court."
N.C. Concrete Finishers v. N.C. Farm Bureau, 202 N.C.App. 334, 335, 688 S.E.2d 534, 535 (2010) (quoting Garrett v. Winfree, 120 N.C.App. 689, 691, 463 S.E.2d 411, 413 (1995), Ragsdale v. Kennedy, 286 N.C. 130, 137, 209 S.E.2d 494, 499 (1974), and Reese v. Mecklenburg County, 200 N.C.App. 491, 495-99, 685 S.E.2d 34, 37-38 (2009), disc. review denied, 364 N.C. 242, 698 S.E.2d 653 (2010)) (internal citations omitted). As a result, since neither party has argued that the trial court impermissibly resolved a disputed factual question, the only issue before this Court in connection with Defendants' appeal is whether the trial court correctly decided that, given the information disclosed by the pleadings, Preserve Holdings was entitled to judgment in its favor as a matter of law.
B. Relative Lien Priority
On appeal, Defendants argue that the trial court erred by granting Preserve Holdings' motion for judgment on the pleadings on the grounds that Defendant "Superior[ Construction's] lien was effective as of 22 April 2005 and has priority over Wachovia's deed of trust." Defendants' argument has merit.
N.C. Gen. Stat. § 44A-8 provides, in pertinent part, that:
Any person who performs or furnishes labor or ... furnishes materials ... pursuant to a contract, either express or implied, with the owner of real property for the making of an improvement thereon shall, upon complying with the provisions of this Article, have a right to file a claim of lien on real property on the real property to secure payment of all debts owing for labor done or professional design or surveying services or material furnished or equipment rented pursuant to the contract.
Pursuant to N.C. Gen. Stat. § 44A-10, "[a] claim of lien on real property granted by this Article shall relate to and take effect from the time of the first furnishing of labor or materials at the site of the improvement by the person claiming the claim of lien on real property." "By virtue of this statute, a contractor's lien for all labor and materials furnished pursuant to a contract is deemed prior *164 or to any liens or encumbrances attaching to the property subsequent to the date of the contractor's first furnishing of labor or materials to the construction site." Connor Co. v. Spanish Inns, 294 N.C. 661, 667, 242 S.E.2d 785, 789 (1978) (citing Heating Co. v. Realty Co., 263 N.C. 641, 652-53, 140 S.E.2d 330, 338-39 (1965), and Assurance Society v. Basnight, 234 N.C. 347, 352, 67 S.E.2d 390, 394 (1951)). "The lien provided for by [N.C. Gen.Stat. § ] 44A-8 is inchoate until perfected by compliance with [N.C. Gen.Stat. §§ ] 44A-11 and -12, and is lost if the steps required for its perfection are not taken in the manner and within the time prescribed by law. However, when a lien is validly perfected, and is subsequently enforced by bringing an action within the statutory period set forth in [N.C. Gen.Stat. § ] 44A-13(a), the lien will be held to relate back and become effective from the date of the first furnishing of labor or materials under the contract, and will be deemed perfected as of that time." Connor Co., 294 N.C. at 667, 242 S.E.2d at 789.
According to the parties' pleadings, the relevant events occurred in the following order:
1. 21 January 2005: Intracoastal Living and Defendant Superior entered into a contract, in which Intracoastal Living agreed to pay Defendant Superior $19,300,000.00 for work performed on a construction project.
2. 22 April 2005: Defendant Superior first furnished labor and materials for the project.
3. 11 May 2005: Defendant Superior executed a partial lien waiver in which it waived any claim of lien "on account of any labor performed or the furnishing of any material ... up to and including [30 April 2005]."
4. 19 May 2005: Intracoastal Living executed a construction loan agreement, a promissory note in the amount of $22,835,000.00, and a deed of trust in favor of Wachovia.
5. 9 June 2005: Defendant Superior executed a partial lien waiver in which it waived any claim of lien "on account of any labor performed or the furnishing of any material ... up to and including [31 May 2005]."
6. 25 September 2007: Defendant Superior filed a claim of lien on the property.
According to this timeline, the accuracy of which has not been disputed on appeal, Defendant Superior first furnished labor and materials at The Preserve on 22 April 2005, approximately one month prior to the date upon which the deed of trust in favor of Wachovia was recorded. As a result of the fact that Defendant Superior first furnished labor and materials at The Preserve prior to the date upon which Wachovia's deed of trust was recorded, Defendant Superior's lien would ordinarily have priority over that of Wachovia. The only way in which Wachovia's deed of trust could be deemed to take priority over Defendant Superior's mechanics' lien is in the event that the partial lien waivers signed by Defendant Superior have the effect of subordinating its entire claim to those creditors with liens perfected prior to the date upon which Defendant Superior signed the second partial lien waiver. We do not believe that the partial lien waivers signed by Defendant Superior have that effect and conclude that the trial court erred by reaching a contrary conclusion.
As the trial court recognized, "[l]ien waivers are interpreted according to the principles applied to contracts in general[.]" Cowper v. Watermark Marina of Wilmington, 2009 WL 4405184 *2, 2009 Bankr.LEXIS 3896 *4 (U.S.Bank.Ct.E.D.N.C.2009) (citing Chemimetals Processing, Inc. v. Schrimsher, 140 N.C.App. 135, 138, 535 S.E.2d 594, 596 (2000) (stating that "[r]eleases are contractual in nature, and their interpretation is governed by the same rules governing the interpretation of contracts") (citations omitted)). As a result, the ultimate issue which we must decide in order to resolve Defendants' challenge to the trial court's order is whether the relevant provisions of the partial lien waivers had the effect of subordinating Defendant Superior's lien to all other secured creditors with perfected liens as of the date of the second partial lien waiver or whether they merely released the labor and materials costs for which Defendant Superior had been reimbursed *165 as of the date of the second partial lien waiver.
"Whenever a court is called upon to interpret a contract[,] its primary purpose is to ascertain the intention of the parties at the moment of its execution." Gilmore v. Garner, 157 N.C.App. 664, 666, 580 S.E.2d 15, 18 (2003) (quoting Lane v. Scarborough, 284 N.C. 407, 409-10, 200 S.E.2d 622, 624 (1973)). "The heart of a contract is the intention of the parties, which is to be ascertained from the expressions used, the subject matter, the end in view, the purpose sought, and the situation of the parties at the time." Electric Co. v. Insurance Co., 229 N.C. 518, 520, 50 S.E.2d 295, 297 (1948). "If the plain language of a contract is clear, the intention of the parties is inferred from the words of the contract." Walton v. City of Raleigh, 342 N.C. 879, 881, 467 S.E.2d 410, 411 (1996). "[I]f the meaning of the [contract] is clear and only one reasonable interpretation exists, the courts must enforce the contract as written; they may not, under the guise of construing an ambiguous term, rewrite the contract or impose liabilities on the parties not bargained for and found therein." Gaston County Dyeing Machine Co. v. Northfield Ins. Co., 351 N.C. 293, 300, 524 S.E.2d 558, 563 (2000) (quoting Woods v. Insurance Co., 295 N.C. 500, 506, 246 S.E.2d 773, 777 (1978)). "An ambiguity exists in the event that the relevant contractual language is fairly and reasonably susceptible to multiple constructions." Glover v. First Union National Bank, 109 N.C.App. 451, 456, 428 S.E.2d 206, 209 (1993) (citing St. Paul Fire & Marine Ins. Co. v. Freeman-White Assoc., Inc., 322 N.C. 77, 83, 366 S.E.2d 480, 484 (1988)). "The trial court's determination of whether the language in a contract is ambiguous is a question of law[.]" Duke Energy Corp. v. Malcolm, 178 N.C.App. 62, 65, 630 S.E.2d 693, 695 (citing Bicket v. McLean Securities, Inc., 124 N.C.App. 548, 553, 478 S.E.2d 518, 521 (1996), disc. review denied, 346 N.C. 275, 487 S.E.2d 538 (1997)), aff'd, 361 N.C. 111, 637 S.E.2d 538 (2006).
Although a party may certainly elect to forgo the protections of N.C. Gen.Stat. § 44A-7 et seq. including its right to have its lien treated as having taken effect from the date of first furnishing of labor or materials, by executing a lien waiver, Electric Supply Co. v. Swain Electrical Co., 328 N.C. 651, 660, 403 S.E.2d 291, 297 (1991) (stating that "the use of lien waivers, used other than in anticipation of and in consideration for the awarding of a contract, may also minimize liability by contractors who deal with the owner"), the scope of the rights waived hinges upon a proper understanding of the relevant waiver language. As a result of the fact that, as the trial court concluded and both parties appear to agree, the language of the partial lien waivers is unambiguous, the only step we need to take in order to resolve the issues raised by Defendants' appeal is to construe the relevant language.
Although the trial court concluded, consistently with Preserve Holdings' argument, that the partial lien waivers signed by Defendant Superior effectively changed the date of first furnishing of labor and materials from 22 April 2005 to 31 May 2005, this argument misconstrues the literal language of the partial lien waivers, which state that Defendant Superior "do[es] hereby waive, relinquish, surrender and release any and all lien, claim, or right to lien on the above said described project and premises, arising under and by virtue of the mechanic's lien laws of the State of North Carolina on account of any labor performed or the furnishing of any material to the above described project and premises up to and including the [date specified in the partial lien waiver]." The critical language for the purpose of resolving the present dispute is the "on account of" provision, which clearly specifies the scope of the rights that Defendant Superior waived by signing the partial lien waivers. Thus, we must focus our inquiry on the meaning of the language providing that Defendant Superior waived "any and all" lien rights "on account of" the furnishing of labor or materials up to the date specified in the partial lien waiver.[4]
*166 In Rousey v. Jacoway, 544 U.S. 320, 125 S.Ct. 1561, 161 L.Ed.2d 563 (2005), the United States Supreme Court addressed the meaning of "on account of" in the context of construing bankruptcy exemptions for certain payments received "on account of illness, disability, death, age, or length of service." At that time, the United States Supreme Court stated that:
We turn first to the requirement that the payment be "on account of illness, disability, death, age, or length of service." We have interpreted the phrase "on account of" elsewhere within the Bankruptcy Code to mean "because of," thereby requiring a causal connection between the term that the phrase "on account of" modifies and the factor specified in the statute at issue.... This meaning comports with the common understanding of "on account of." See, e.g., Random House Dictionary of the English Language 13 (2d ed.1987) (listing as definitions "by reason of," "because of") [.]
Rousey, 544 U.S. at 326, 125 S.Ct. at 1566, 161 L.Ed.2d at 571 (quoting Bank of America Nat. Trust & Saving Ass'n v. 203 North LaSalle Partnership, 526 U.S. 434, 450-51, 119 S.Ct. 1411, 1420, 143 L.Ed.2d 607, 621 (1999)). We find the United States Supreme Court's analysis of the meaning of the expression "on account of" to be persuasive and conclude that the plain meaning of a waiver of lien rights arising "on account of" labor performed before 31 May 2005 is that the only lien rights being waived are those arising "because of," "as a result of," or "on the basis of" work done prior to the relevant date. The language utilized in the partial lien waivers does not in any way refer to a waiver of Defendant Superior's "place in line;" instead, it simply refers to a waiver of "any and all" lien rights applicable to specific payments. In essence, the partial lien waivers at issue in this case function as an acknowledgement that a payment for labor and materials expended through a certain date has been made and that Defendant Superior has no further lien rights in the furnishing of labor and materials reimbursed by those payments. Thus, we conclude that the partial lien waivers executed by Defendant Superior merely operated as a waiver of its right to claim a lien on amounts for which it had been paid in return for supplying labor and materials before 31 May 2005 relating back to 22 April 2005, the date upon which it first furnished labor and materials at The Preserve. See Metropolitan Federal Bank v. A.J. Allen, 477 N.W.2d 668, 673-75 (Iowa 1991) (holding that a statutory lien waiver provision resulting in the waiver of "any and all lien or claim of, or rights to, lien ... account of labor [or] services ... furnished up to and including" the date of payment did not waive the priority of the contractor's lien and that "[]ny ... lien rights ... accruing subsequent to the issuance of the initial lien waiver documents relate back to the commencement of their work"); Duckett v. Olsen, 699 P.2d 734, 736-37 (Utah 1985) (holding that a lien waiver provision releasing "all lien or right of lien now existing for work or labor performed or materials furnished on or before the date of" payment did not waive the contractor's "lien or right of lien ... for work or materials furnished at a date subsequent to" payment).
In seeking to persuade us to affirm the trial court's decision, Preserve Holdings asserts, in essence, that this Court is bound by the trial court's determination that "the language of the [partial lien w]aivers clearly and unambiguously expresses [Defendant] Superior's intent, and binding contractual agreement, to waive its existing lien rights, including those arising from its date of first furnishing of labor and materials on the Project, in exchange for the consideration provided by Wachovia, up to and including May 31, 2005." In support of this assertion, Preserve Holdings points to this Court's statement that "[t]he trial court's determination of original intent is a question of fact" and that "[i]ssues of fact resolved by the trial court in a declaratory judgment action are `conclusive on appeal if supported by competent *167 evidence in the record, even if there exists evidence to the contrary.'" Bicket, 124 N.C.App. at 552, 478 S.E.2d at 521 (quoting Miesch v. Ocean Dunes Homeowners Assn., 120 N.C.App. 559, 562, 464 S.E.2d 64, 67 (1995), disc. review denied, 342 N.C. 657, 467 S.E.2d 717 (1996)). The fundamental problem with Preserve Holdings' reliance on the quoted language from Bicket is that, in the present case, the trial court properly did not make any factual findings addressing the parties' intent in deciding that Preserve Holdings' motion for judgment on the pleadings should be granted. See Erickson v. Starling, 235 N.C. 643, 657, 71 S.E.2d 384, 394 (1952) (stating that, "[o]n a motion for judgment on the pleadings, the presiding judge should consider the pleadings, and nothing else" and "should not hear extrinsic evidence, or make findings of fact") (citing Johnson v. Insurance Co., 219 N.C. 445, 448, 14 S.E.2d 405, 406 (1941)) (other citation omitted). Instead, the trial court derived its view of the parties' intent, which it expressly and properly labeled a conclusion rather than a finding, by examining the relevant portions of the partial lien waivers. As the result of the fact that the construction of unambiguous contractual language is clearly an issue of law for the Court, Schenkel & Shultz, Inc. v. Hermon F. Fox & Assocs., 362 N.C. 269, 273, 658 S.E.2d 918, 921 (2008) (stating that "[a] contract that is plain and unambiguous on its face will be interpreted by the court as a matter of law") (citing Lane, 284 N.C. at 407, 410, 200 S.E.2d 622, 624 (1973)), we are not obligated to give any deference to the trial court's conclusion concerning the intent of the parties as expressed in the relevant contractual language. Thus, the fact that the trial court reached a particular decision with respect to the manner in which the relevant language should be construed has no conclusive effect for purposes of appellate review.[5] Having examined the relevant language on appeal, we conclude that the trial court erred by construing the partial lien waivers to effectively change the date of first furnishing and that the partial lien waivers merely precluded Defendant Superior from asserting a lien relating to the amounts already paid for work performed at The Preserve without having any further effect.
III. Conclusion
Therefore, for the reasons set forth above, we conclude that Defendant Superior's lien has priority over that created by Wachovia's deed of trust and that the trial court erred by concluding otherwise. As a result, the trial court's order should be, and hereby is, reversed and this case should be, and hereby is, remanded to the Mecklenburg County Superior Court for further proceedings not inconsistent with this opinion.
REVERSED AND REMANDED.
Judges ROBERT C. HUNTER and STEPHENS concur.
NOTES
[1] Western Surety issued a payment bond applicable to The Preserve project on 14 May 2005. As of the date of its answer and crossclaim, Defendant Western Surety had paid $1,623,759.30 to persons that had supplied labor or materials to Defendant Superior in connection with construction activities at The Preserve. These payments formed the basis of Defendant Western Surety's claim to an interest in the funds owed to Defendant Superior.
[2] Plaintiff Preserve Holdings purchased The Preserve from Wachovia at a foreclosure sale on 28 January 2008.
[3] The trial court's order expressly stated that its decision was "dispositive of all issues in this matter, including any issues raised by" Plaintiff Preserve Holdings' request for a determination of the amount due and "the crossclaim by [Defendant] Western [Surety] against the Receiver," so that "no action or ruling with regard to either" claim "is required." Thus, the trial court's order is a final judgment on the merits of all claims and subject to appellate review pursuant to N.C. Gen.Stat. § 7A-27(b) despite the fact that the trial court left certain issues unaddressed in its order.
[4] In its order, the trial court focused on the fact that Defendant Superior waived "any and all" of the rights that had accrued on account of the labor and material that had been furnished as of the relevant date, noting the unconditional nature of this language. The trial court's analysis overlooks, however, the fact that the rights waived necessarily had to arise from labor or materials supplied as of the relevant date. As a result, while we agree that Defendant Superior certainly waived "any and all" rights that might have existed "on account of" the furnishing of labor and materials as of the date of the second partial lien waiver, that fact does not determine the extent to which particular rights had been acquired "on account of" that furnishing of labor or materials.
[5] Even if the proper interpretation of the partial lien waivers is treated as a question of fact rather than a question of law subject to de novo review, the trial court's determinations are entitled to deference on appeal only if adequately supported by the record. In this case, the only relevant material in the record concerning the parties' intent consisted of the partial lien waivers themselves. As a result, ascertaining the parties' intent ultimately comes down to an examination of the language of the partial lien waivers signed by Defendant Superior. Having carefully examined that language, we do not believe that it provides adequate support for the trial court's decision. As a result, we do not believe that the extent to which one treats this issue as one of law or fact affects the outcome in this instance.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2506690/
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724 S.E.2d 644 (2012)
MEHERRIN TRIBE OF NORTH CAROLINA a/k/a Meherrin Indian Tribe, Petitioner and Plaintiff
v.
NORTH CAROLINA STATE COMMISSION OF INDIAN AFFAIRS, Respondent and Defendant.
No. COA11-885.
Court of Appeals of North Carolina.
April 3, 2012.
*645 Barry Nakell, for petitioner-appellee.
Attorney General Roy Cooper, by Special Deputy Attorney General Donald R. Teeter, Sr., for respondent-appellant.
ERVIN, Judge.
Respondent North Carolina State Commission of Indian Affairs appeals from an order entered by the trial court reversing the Commission's decision to overturn an order entered by Senior Administrative Law Judge Fred G. Morrison granting summary judgment in favor of Petitioner Meherrin Tribe of North Carolina. The ultimate issue in dispute between the parties is the extent, if any, to which the Commission erred by declining to seat a representative favored by the leadership of the Tribe as the Meherrin representative on the Commission.[1] After careful consideration of the Commission's challenges to the trial court's order in light of the record and the applicable law, we conclude that the trial court's order should be reversed and that this matter should be remanded to the trial court for further remand to the Commission for the entry of an order dismissing the Tribe's petition.
I. Background
A. Substantive Facts
"The Meherrin Indian Tribe [] is composed of the descend[ants] of indigenous peoples who formerly resided at the mouth of the Meherrin River Valley and `who are of the same linguistic stock as the Cherokee, Tuscarora, and other tribes of the Iroquois Confederacy of New York and Canada....' N.C. Gen.Stat. § 71A-7.1 (2007). These descend[ants] `now resid[e] in small communities in Hertford, Bertie, Gates, and Northampton Counties....' Id. The [Meherrin have] not been recognized by the federal government and although N.C. Gen.Stat. § 71A-7.1 states that `in 1726 [the Tribe] w[as] granted reservational lands[,]' any such right to these lands now appears extinguished. The [Meherrin are] governed by the 1996 Meherrin Tribe Constitution and By-Laws, as amended." Meherrin Indian Tribe v. Lewis, 197 N.C.App. 380, 381, 677 *646 S.E.2d 203, 205 (2009), disc. rev. denied, 363 N.C. 806, 690 S.E.2d 705 (2010) (Meherrin I).
"On 10 November 2007, the [Meherrin] held a duly noticed and regularly scheduled meeting of its General Body." Meherrin I, 197 N.C.App. at 381, 677 S.E.2d at 205. At this meeting, those in attendance voted to remove Thomas Lewis as Chief and scheduled the next tribal meeting for 12 January 2008 at the Meherrin Indian Church. Prior to the January meeting, Chief Lewis announced on the tribal website that the meeting had been moved to the Elks Shrine Building. As a result, two meetings were conducted on 12 January 2008. While the group supporting Chief Lewis met at the Elks building, the group supporting the removal of Chief Lewis met at the Church, where they voted to replace Douglas Patterson with Ms. Hall as the Meherrin representative to the Commission. Based on these events, the Tribe, which represents the anti-Chief Lewis faction, contends that Chief Lewis was properly removed from his position on 10 November 2007; that Ms. Hall replaced Mr. Patterson as the Tribe's representative to the Commission on 12 January 2008; and that the Commission was obliged to seat Ms. Hall as the Meherrin representative. The pro-Chief Lewis faction contends, on the other hand, that Chief Lewis was not properly removed as Chief on 10 November 2007; that Mr. Patterson was not properly replaced by Ms. Hall as the Meherrin representative on the Commission on 12 January 2008; and that Mr. Patterson should be seated as the Meherrin representative to the Commission.
On 13 March 2008, the Tribe, as representative of the anti-Chief Lewis faction, filed a civil action against former Chief Lewis, Mr. Patterson, and others associated with the pro-Chief Lewis faction seeking the entry of a declaratory judgment identifying the individuals who constitute the lawful leadership of the Meherrin. Among other things, the Tribe asked for a declaration that "Thomas Lewis has been removed as Chief" and that the actions taken at the 10 November 2007 meeting and 12 January 2008 meeting of the anti-Chief Lewis faction be deemed valid.
"On 8 May 2008, [the Meherrin I] defendants filed a pre-answer motion to dismiss pursuant to N.C. Gen.Stat. § 1A-1, Rule 12(b)(1), (2), and (6). Defendants' motion to dismiss claimed `the underlying facts raised in the Complaint arise from acts of self-governance over the people and property of the Meherrin Tribe of North Carolina[;] this action should be dismissed for lack of subject matter jurisdiction, lack of personal jurisdiction and for Plaintiffs' failure to state a claim upon which relief may be granted.' Defendants further alleged that `Plaintiffs' action should be dismissed for lack of subject matter jurisdiction based on Plaintiffs' lack of standing to bring suit.'" Meherrin I at 382-83, 677 S.E.2d at 206. The trial court denied the defendants' motion to dismiss, and the defendants appealed to this Court. We upheld the trial court's decision, stating that:
The Meherrin Tribe has no reservation. The Tribe has not been recognized by the federal government. The constitution of the Tribe has no functioning judiciary for resolution of intra-tribal disputes to which this dispute could be referred prior to litigation. The sole source of legal authority of the Tribe flows from N.C. Gen.Stat. § 71A-7.1[.][2] ... While indigenous tribes may enjoy sovereign immunity over some disputes, the predicate facts which would present a sovereign immunity defense are not present here.
Meherrin I at 385-86, 677 S.E.2d at 208 (citing Jackson Co. v. Swayney, 319 N.C. 52, 352 S.E.2d 413, cert. denied, 484 U.S. 826, 108 S. Ct. 93, 98 L. Ed. 2d 54 (1987)). As a result, we held in Meherrin I that this intra-tribal power struggle was properly resolved in superior court given the absence of tribal institutions which had the authority to make the necessary decision and that the case should be remanded to the Hertford County Superior Court for resolution of the underlying leadership dispute.
B. Procedural History
On 13 May 2008, Chief Lewis wrote the Commission for the purpose of asserting that *647 Mr. Patterson was the duly elected Meherrin representative to that body. On 16 September 2008, the Tribe filed a petition for a contested case hearing pursuant to N.C. Gen. Stat. § 150B-2 alleging that the Commission had improperly refused to seat Ms. Hall as the Meherrin representative. The petition made no reference to the controversy over the validity of the vote by which Ms. Hall was allegedly elected to the Commission or the fact that litigation to resolve the underlying leadership dispute had been initiated and was ongoing. On 17 October 2008, the Tribe filed an amended petition in which it repeated its earlier allegations regarding Ms. Hall's status as the elected Meherrin representative to the Commission and asserted that the Commission had improperly acted in support of the other faction. On 8 October 2008, the Commission moved to dismiss the Tribe's petition on the grounds that there "existed an internal dispute within the [Meherrin] as to the actual and proper leadership of the tribe which resulted in the commencement of litigation" and that "said litigation is still pending." In addition, Respondent asserted that it had "received two names to fill the Meherrin seat" and had, for that reason, decided to allow the seat to remain vacant until the internal tribal controversy had been resolved.
On 27 March 2009, the Tribe sought partial summary judgment with respect to its claim that Ms. Hall had been properly elected as the Meherrin representative to the Commission. In support of this motion, the Tribe submitted a copy of the tribal constitution and bylaws and an affidavit executed by Chief Wayne Brown, the chief elected by the anti-Chief Lewis faction, delineating the events which led to his election. On 30 March 2009, the Tribe filed a revised motion for summary judgment supported by the materials that had been previously submitted and numerous e-mails between the Tribe's counsel and others involved in the dispute concerning various substantive and procedural issues relating to the validity of actions taken by the competing factions on 10 November 2007 and 12 January 2008. On 17 April 2009, the Tribe filed a second affidavit executed by Chief Brown addressing the validity of one of the competing meetings held on 12 January 2008. On 9 March 2009, the Commission submitted a brief in opposition to the Tribe's partial summary judgment motion in which it argued that, pursuant to certain provisions of the Meherrin constitution and bylaws, Chief Lewis was never properly removed and that the meeting held by the pro-Chief Lewis faction on 12 January 2008, rather than the competing meeting held by the anti-Chief Lewis faction on that same date, was the official tribal meeting. On 9 April 2009, the affidavit of the Commission's Executive Director, Greg Richardson, detailing the history of the communications that the two factions had had with the Commission and the Commission's decision to declare the seat vacant pending resolution of the internal tribal conflict was filed. On 4 June 2009, Chief Lewis executed an affidavit setting out his basis for believing that he remained the lawful Chief. On 15 June 2009, Judge Morrison entered an order granting summary judgment in favor of the Tribe[3] in which he stated that:
As there is no genuine issue as to any material fact, [the Tribe] is entitled to judgment as a matter of law. [The Tribe]'s Motion for Summary Judgment is Granted. There has been no vacancy from [the Tribe]'s perspective as it voted for Ms. Hall to replace Mr. Patterson as its representative prior to the expiration of his term, and so notified the Commission. [The Commission] shall accept and recognize Chassidy Hall as the Meherrin representative on the North Carolina Commission of Indian Affairs for a term of three years.
On 17 November 2009, the Tribe filed a petition for judicial review in which it argued that, because the Commission had not yet filed a final agency decision, Judge Morrison's decision had become final by operation of law. On 17 December 2009, the Commission filed a response asserting that it had not been properly notified of Judge Morrison's *648 decision or provided with a copy of the record developed before the Office of Administrative Hearings. On 22 December 2009, the Tribe filed motions for summary judgment and judgment on the pleadings; however, the trial court denied those motions on 10 February 2010. On 29 January 2010, the trial court ruled that the record developed before the Office of Administrative Hearings had not been properly delivered to the Commission, that the Commission was required to render its final decision by 4 February 2010, and that the Commission must issue a written decision by no later than 12 February 2010. After conducting a hearing on 2 February 2010, the Commission determined that the record disclosed the existence of genuine issues of material fact, all of which pertained to the tribal leadership dispute and the validity of various actions that had been taken by the competing factions, and remanded this case to Judge Morrison for further proceedings.
On 1 March 2010, the Tribe filed a petition for judicial review. In its petition, the Tribe alleged that the 2 February 2010 hearing had not been held in a timely manner, an assertion that implicitly challenged the trial court's earlier decision to allow the Commission to make a decision on or before 4 February 2010, and that "the hearing was held in violation of state law and due process," an assertion that rested on a variety of challenges to the manner in which the hearing before the Commission had been conducted. The assertions in the Tribe's petition focused on aspects of the procedure employed at the 2 February 2010 hearing that the Tribe considered unfair, improper, or as tending to favor the other faction of the tribe, and on assertions tending to support the Tribe's position that Ms. Hall, rather than Mr. Patterson, was the properly elected Meherrin representative on the Commission. However, the Tribe conceded that "[t]he issue before the Administrative Law Judge and before the Commission was only whether Chassidy Hall or Douglas Patterson had been designated or selected by the Meherrin Indian Tribe, a/k/a Meherrin Tribe of North Carolina, as its representative on the Commission." On 26 March 2010, the Commission filed an answer to the Tribe's petition in which it requested the trial court to affirm its decision to reverse Judge Morrison's order.
On 29 and 30 March 2010, the trial court conducted a hearing concerning the issues raised by the Tribe's petition for judicial review. On 8 June 2010, the trial court entered orders denying several motions filed by the Tribe for the purpose of seeking reconsideration of earlier rulings and denying the Tribe's motion for summary judgment. On 9 June 2010, the trial court entered an order in which it stated, in pertinent part, that:
2. In his Decision Granting Summary Judgment for [the Tribe], ... the Administrative Law Judge determined that there were no genuine issues as to any material fact and that [the Tribe] was entitled to judgment as a matter of law[.]
3. While [the Commission], in its Decision and Order ..., identified eight issues of material fact ..., those issues are not of such material fact as to constitute grounds for remand of the case to an Administrative Law Judge[.] ...
4. There is no genuine issue as to material fact in this administrative contested case proceeding.
5. The Administrative Law Judge ... properly found that there is no genuine issue as to any material fact.
6. The Administrative Law Judge properly found that the [Tribe] is entitled to judgment as a matter of law.
7. The Administrative Law Judge properly granted the [Tribe's] Motion for Summary Judgment[.] ...
8. ... [The Court] adopts the Administrative Law Judge's decision allowing summary judgment for the [Tribe] ..., thereupon reversing the [Commission]'s decision.
The Commission noted an appeal to this Court from the trial court's order.
II. Legal Analysis
A. Standard of Review
As of the date upon which the trial court *649 entered its order,[4] N.C. Gen.Stat. § 150B-36 provided, in pertinent part, that:
(d) An Administrative Law Judge may grant ... summary judgment, pursuant to a motion made in accordance with G.S. 1A-1, Rule 56[.] ... For any decision by the Administrative Law Judge granting ... summary judgment that disposes of all issues in the contested case, the Agency[5] shall make a final decision.... The party aggrieved by the Agency's decision shall be entitled to immediate judicial review of the decision under Article 4 of this Chapter.
Similarly, at the time that the trial court's order was entered,[6] N.C. Gen.Stat. § 150B-51 provided that:
(d) In reviewing a final Agency decision allowing judgment on the pleadings or summary judgment, or in reviewing an Agency decision that does not adopt an Administrative Law Judge's decision allowing judgment on the pleadings or summary judgment pursuant to G.S. 150B-36(d), the court may enter any order allowed by G.S. 1A-1, Rule 12(c) or Rule 56....
According to well-established North Carolina law, a trial court's decision to grant summary judgment raises a question of law, which we review de novo. Krueger v. N.C. Criminal Justice Educ. & Training Standards Comm'n, 198 N.C.App. 569, 577, 680 S.E.2d 216, 221 (2009) (stating that, "[s]ince the decision at issue is a summary judgment decision and an appellate court reviews a grant of summary judgment de novo, this Court canand, according to [N.C. Dep't of Env't & Natural Res. v.] Carroll, [358 N.C. 649, 664, 599 S.E.2d 888, 898 (2004),] shouldgo ahead and review the final agency decision under the correct Rule 56 standard."). As a result, the ultimate issue that the Commission's appeal presents for our consideration is the extent, if any, to which Judge Morrison appropriately entered summary judgment in favor of the Tribe.
B. Jurisdiction over Internal Tribal Disputes
As we have already indicated, the fundamental issue around which the present case revolves is the extent, if any, to which the Commission acted appropriately by failing to determine that Ms. Hall should be seated as the Meherrin representative on the Commission. "Administrative boards have only such authority as is properly conferred upon them by the Legislature." Insurance Co. v. Gold, Commissioner of Insurance, 254 N.C. 168, 173, 118 S.E.2d 792, 796 (1961). "As a creature of the Legislature, an agency of the State `can only exercise (1) the powers granted in express terms, (2) those necessarily implied in or fairly incident to the powers expressly granted, and (3) those essential to the declared [purposes] of the [agency].'" Carl v. State, 192 N.C.App. 544, 553, 665 S.E.2d 787, 795 (2008) (quoting Madry v. Scotland Neck, 214 N.C. 461, 462, 199 S.E. 618, 619 (1938)), disc. review and cert. denied, 363 N.C. 123, 672 S.E.2d 684 (2009). As a result, the initial question we must address in order to decide the issues raised by the Commission's appeal is the extent, if any, to which the Commission has the authority to resolve disputes over its own membership arising from intra-tribal controversies.
The Commission was established by N.C. Gen.Stat. § 143B-404 and is "administered under the direction and supervision of the Department of Administration[.]" N.C. Gen. Stat. § 143B-407, which governs the composition of the Commission and the manner in which its members are selected, provides, in pertinent part, that:
(a) The State Commission of Indian Affairs shall consist of ... [appointed members and] representatives of the Indian *650 community. These Indian members shall be selected by tribal or community consent from the Indian groups that are recognized by the State of North Carolina[.] ... [T]he Meherrin [has] one [representative]....
(b) ... Members representing Indian tribes and groups shall be elected by the tribe or group concerned and shall serve for three-year terms[.] ... Vacancies occurring on the Commission shall be filled by the tribal council or governing body concerned.... In the event that a vacancy occurs among the membership representing Indian tribes and groups and the vacancy temporarily cannot be filled by the tribe or group for any reason, the Commission membership may designate a tribal or group member to serve on the Commission on an interim basis until the tribe or group is able to select a permanent member to fill the vacancy....
According to N.C. Gen.Stat. § 143B-405, "[t]he purposes of the Commission shall be as follows:
(1) To deal fairly and effectively with Indian affairs.
(2) To bring ... resources into focus for the implementation or continuation of meaningful programs for Indian citizens[.]
(3) To provide aid and protection for Indians as needs are demonstrated[.]
(4) To hold land in trust for the benefit of State-recognized Indian tribes.[ ]
(5) To assist Indian communities in social and economic development.
(6) To promote recognition of and the right of Indians to pursue cultural and religious traditions considered by them to be sacred and meaningful to Native Americans.
In order to achieve these ends, N.C. Gen. Stat. § 143B-406 authorizes the Commission:
(1) To study ... assemble and disseminate information on any aspect of Indian affairs.
(2) To investigate relief needs of Indians of North Carolina and to provide technical assistance in the preparation of plans for the alleviation of such needs.
(3) To confer with appropriate officials ... to encourage and implement coordination of applicable resources to meet the needs of Indians in North Carolina.
(4) To cooperate with and secure the assistance of the local, State and federal governments ... in formulating any such programs, and to coordinate such programs with any [federal] programs[.]...
(5) To act as trustee for any interest in real property that may be transferred to the Commission for the benefit of State-recognized Indian tribes[.] ...
(6) To review all proposed or pending State legislation and amendments to existing State legislation affecting Indians in North Carolina.
(7) To conduct public hearings on matters relating to Indian affairs and to subpoena any information or documents deemed necessary by the Commission.
(8) To study the existing status of recognition of all Indian groups, tribes and communities ... [in] North Carolina.
(9) To establish appropriate procedures to provide for legal recognition by the State of presently unrecognized groups.
(10) To provide for official State recognition by the Commission of such groups.
(11) To initiate procedures for their recognition by the federal government.
A careful examination of the relevant statutory provisions clearly demonstrates that the General Assembly intended for the Commission to primarily serve an advocacy and resource provision function and that the General Assembly did not appear to contemplate that the Commission would function as an administrative or judicial body vested with substantial decision-making authority, including the authority to resolve intra-tribal disputes.
As we have already noted, the ultimate issue raised by the Tribe's initial petition was the extent to which the Commission should resolve the dispute between the competing Meherrin factions concerning the *651 identity of the Meherrin representative on the Commission by determining that Ms. Hall had been properly selected to fill that position. The validity of the Tribe's position hinges upon the lawfulness of the decision to remove Chief Lewis on 7 November 2008 and the decision of the anti-Chief Lewis faction to elect Ms. Hall to replace Mr. Patterson as the Meherrin representative to the Commission on 12 January 2009. Thus, in order to grant the relief requested by Petitioner, the Commission would be required to resolve the underlying intra-tribal dispute, a decision well outside the scope of its explicit or implicit statutory authority. As a result of the fact that we have identified no statutory provision that would authorize the Commission to adjudicate intra-tribal controversies such as the one that underlies the present dispute,[7] we hold that the Commission had no authority to decide which of the two competing Meherrin representatives should be seated on the Commission and that the Tribe's petitions ultimately seek relief which the Commission is not empowered to provide. For that reason, we further conclude that the trial court erred by reversing the Commission's decision to refrain from seating Ms. Hall as the Meherrin representative and that Judge Morrison had no authority to grant summary judgment in favor of the Tribe in connection with its request that the Commission seat Ms. Hall as the Meherrin representative.[8]
III. Conclusion
Thus, for the reasons discussed above, we conclude that the Commission's challenge to the trial court's order, which erroneously assumed that the Commission had the authority to resolve the issue of whether Ms. Hall or Mr. Patterson should serve as the Commission's representative to the Commission, is well-founded. As a result, the trial court's order is reversed and this case is remanded to the trial court for further remand to the Commission with instructions that the petition be dismissed for lack of jurisdiction.
REVERSED AND REMANDED.
Judges BRYANT and ELMORE concur.
NOTES
[1] As will be explained in more detail later in this opinion, two factions are competing for control of the tribal government. In order to avoid confusion, references to "the Tribe" should be understood to be to the faction that removed the former tribal chief and wishes to have Chassidy Hall seated as a member of the Commission and references to "the Meherrin" should be understood to be to all individuals eligible to claim membership in the Meherrin Tribe regardless of their position concerning the underlying tribal dispute.
[2] N.C. Gen.Stat. § 71A-7.1 does not grant any executive or judicial power to the Tribe.
[3] The record also indicates that Judge Morrison denied Mr. Patterson's motion to intervene or to dismiss, continue, or stay the present proceeding "pending a final adjudication in the Superior Court of Hertford County in [Meherrin I]."
[4] N.C. Gen.Stat. § 150B-36 was repealed, effective 1 January 2012.
[5] The parties appear to agree that the Commission is an "agency" as defined in N.C. Gen.Stat. § 150B-2(1a), which defines an "agency" as "an agency or officer in the executive branch of the government of this State," including "the Council of State, the Governor's office, a board, a commission, a department, a council, and any other unit of government in the executive branch."
[6] N.C. Gen.Stat. § 150B-51 was amended, effective 1 January 2012.
[7] Although N.C. Gen.Stat. § 143B-407(b) does authorize the Commission, in the event that "a vacancy occurs among the membership representing Indian tribes and groups" that "temporarily cannot be filled by the tribe or group for any reason," "to designate a tribal or group member to serve on the Commission on an interim basis until the tribe or group is able to select a permanent member to fill the vacancy," we do not believe that this provision authorizes the Commission to determine whether Ms. Hall or Mr. Patterson should represent the Meherrin on the Commission given that the underlying problem is a dispute between two competing tribal factions over which group is entitled to control the Meherrin and which of two competing candidates for Commission membership should be deemed legitimate rather than a temporary vacancy that the Meherrin are unable, for some reason unrelated to an intra-tribal dispute, to fill.
[8] In light of our determination that the Commission lacks the authority to resolve the underlying intra-tribal dispute and to identify the lawfully-elected Meherrin representative to the Commission, we further conclude that the General Court of Justice provides the appropriate forum within which these questions should be resolved, with the available options including, but not necessarily being limited to, amending the pleadings in the Hertford County Superior Court action discussed earlier in this opinion to include resolution of the Commission membership controversy or, depending upon facts and circumstances of which we lack complete information, initiating a separate action devoted to the resolution of that issue.
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717 S.E.2d 295 (2011)
311 Ga. App. 775
DAVIS
v.
FOREMAN et al.
No. A11A0857.
Court of Appeals of Georgia.
September 22, 2011.
*297 James Edward Stein, St. Marys, for appellant.
Douglas Lamar Gibson, Waycross, Kenneth Anthony Taft, for appellees.
MIKELL, Judge.
Marion Davis appeals[1] the trial court's order granting summary judgment to Robert Foreman and other homeowners in the Dogwood Forest subdivision (collectively, "the plaintiffs") in this suit concerning an easement.[2] We affirm.
To prevail on a motion for summary judgment, the moving party must demonstrate that there is no genuine issue of material fact, and that the undisputed facts warrant judgment as a matter of law.[3] The grant of a motion for summary judgment is reviewed de novo, and the evidence and all reasonable inferences drawn therefrom must be viewed in the light most favorable to the nonmovant.[4]
So viewed, the record demonstrates the following relevant facts. Tibsen & Fair, Inc. ("Tibsen"), developed the Dogwood Forest subdivision in Charlton County and recorded a plat referencing a 0.394-acre common area adjoining the St. Marys River for use by residents of the subdivision (the "first plat"). This common area was deeded to the Dogwood Forest Homeowners' Association, Inc. ("HOA"), and Tibsen sold several lots with deeds that referenced the first plat. About ten months later, Tibsen recorded a new plat (the "second plat") in the same subdivision that omitted the common area described in the first plat and created a different 0.310-acre common area, and incorporated the original common area into a new lot. This new lot was then conveyed to Marion Davis.
The plaintiffs then filed an action for declaratory judgment and injunctive relief against both the developers and Davis, arguing that they had an easement in the original common area by virtue of their property deeds referencing the first recorded plat. They sought a declaration that they had a continued easement in that area and an injunction, preventing Davis from interfering with their use and enjoyment of such easement. The plaintiffs moved for summary judgment, but the trial court denied the motion. The trial court recognized the "[w]ell-established law ... that the sale of a single lot which references a plat containing such a common area for the use of purchasers of lots completes the granting of [an] easement."[5] The trial court nonetheless found that an issue of fact remained as to whether the plaintiffs abandoned their easement interest by virtue of an agreement made by the HOA to trade the 0.394-acre common area for the 0.310-acre common area. Plaintiffs appealed to this Court for interlocutory review of that decision. This Court denied the Application for Interlocutory Appeal.[6]
The plaintiffs then filed a renewed motion for summary judgment in light of additional evidence. In support of this motion, the plaintiffs submitted the affidavit of Robert Foreman, current president of Dogwood Forest Homeowners' Association, which addressed the factual questions raised in the trial court's order. Foreman testified that there had never been a discussion or vote at *298 any HOA meeting transferring, exchanging, or abandoning any common area belonging to the HOA and that no written documents concerning a transfer of common areas existed.
1. As a threshold matter, we note that Davis has failed to comply with Court of Appeals Rule 25(c)(1), which requires that the sequence of arguments in a brief follow the order of the enumeration of errors and be numbered accordingly. Davis includes two enumerations of error, but only one argument section. As we have previously held, Rule 25(c)(1)
is more than a mere formality. It is a requirement which this Court imposes to ensure that all enumerations of error are addressed and to facilitate review of each enumeration. By failing to comply with the rule, [Davis has] hindered the Court's review of [his] assertions and [has] risked the possibility that certain enumerations will not be addressed.[7]
However, to the extent that we are able to discern which enumeration is supported in the brief by citation of authority or argument, we will address each enumeration.
2. Davis contends that the trial court erred in granting the plaintiffs' renewed motion for summary judgment after it denied an earlier motion for summary judgment. Finding no error, we affirm.
The trial court did not err in considering the plaintiffs' renewed motion for summary judgment after plaintiffs submitted the affidavit of Robert Foreman, the president of the HOA. Nothing in the summary judgment statute limits the number of times a party may make a motion for summary judgment.[8] The trial court may consider a renewed motion for summary judgment at its discretion, especially in the case of an expanded record.[9]
Further, the law of the case rule did not prohibit the trial judge from granting the plaintiffs' renewed motion for summary judgment in this case. OCGA § 9-11-60(h) provides in pertinent part that "any ruling by the Supreme Court or the Court of Appeals in a case shall be binding in all subsequent proceedings in that case in the lower court and in the Supreme Court or the Court of Appeals as the case may be." Although "the law of the case rule has formally been abolished... it [still] applies to rulings by one of the appellate courts; they are binding in all subsequent proceedings, including a second trial."[10] The denial of an application for discretionary appeal invokes the doctrine of res judicata where the judgment appealed from was final and on the merits.[11] However, "when the judgment being appealed was interlocutory in nature, the denial of an application for discretionary appeal does not operate as res judicata."[12] This is because "the denial could have been based on the appellate court's desire to wait until a final judgment was entered before exercising appellate review, rather than a determination on the merits."[13] An order denying a motion for summary judgment is nonfinal and hence interlocutory in nature.[14]
On their first appearance before this Court, the plaintiffs sought review of the trial court's order denying their original motion for summary judgment. Because the trial court's order was nonfinal, this Court's denial of Davis's Application for Interlocutory Review does not operate as res judicata.
3. Davis next argues that the trial court erred in granting the plaintiffs' motion *299 for summary judgment because an issue of material fact existed as to whether the plaintiffs, as members of the HOA, entered into an express agreement to abandon the original common area. We disagree.
Georgia law is clear that "where a developer sells lots according to a recorded plat, the grantees acquire an easement in any areas set apart for their use."[15] An easement "acquired in this manner is considered an express grant, and is an irrevocable property right. The rationale is that the grantees of the property have given consideration for its enhanced value in the increased price of their lots."[16] The "sale of a single lot with reference to the plat would complete the granting of an easement or an offer of dedication of the area to the public."[17] In the present case, it is undisputed that the plaintiffs acquired an easement in the original 0.394-acre common area because they purchased lots with deeds referencing the first plat.
Davis argues that the plaintiffs, as members of the HOA, agreed to exchange their easement in the original 0.394-acre common area for an easement in a different common area, as indicated in the second plat. The plaintiffs' easement in the original common area cannot be lessened by the recording of the second plat that did not include the original common area, but instead substituted for a different common area.[18] Rather, the grantees of an easement "cannot be deprived of that right except by express abandonment, or by such conduct on their part as would be tantamount to express abandonment."[19] Thus, in order for the subdivider to properly exchange one common area for another "equal" common area, the grantees of the original easement must have expressly abandoned their original easement.
The Supreme Court of Georgia has held that such abandonment may be effectuated by an action of a homeowners' association.[20] In Hampton Ridge, this Court found that homeowners in a subdivision who purchased lots including easements set aside for an area dedicated to recreational use expressly abandoned that easement when, subsequent to the filing of the plat, they agreed to be bound by a Declaration of Covenants and Restrictions which stated that the developer would retain fee simple title and "all rights" to the recreational easement.[21] The Court reasoned that by signing over "all rights" to the easement to the homeowners' association, the lot owners had relinquished their easements in the recreational facility.[22]
In the present case, unlike in Hampton Ridge, Davis has not presented any evidence that either the plaintiffs or the HOA on their behalf abandoned their interest in the original easement. After reviewing the record, we conclude that Davis has failed to present evidence sufficient to create a triable issue of fact as to whether the HOA agreed to exchange the original common area easement for another.
When a motion for summary judgment is made and supported as provided in this Code section, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this Code section, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, *300 if appropriate, shall be entered against him.[23]
The plaintiff's renewed motion for summary judgment was supported by the affidavit of Robert Foreman, the first purchaser of a lot in the subdivision and president of the HOA. In his affidavit, Foreman testified that there had never been any discussion or vote at any HOA meeting regarding a transfer, trade, exchange or abandonment of any common area belonging to the HOA. Foreman also testified in his capacity as the president of the HOA that there is no document reflecting any agreement to transfer, trade, exchange or abandon the original common area easement. Davis did not provide any affidavits or other evidence creating an issue of fact on this issue, and the trial court did not err in granting summary judgment to the plaintiffs.
Judgment affirmed.
SMITH, P.J., and DILLARD, J., concur.
NOTES
[1] To the extent that the appellant's brief is supported by attachments that are not part of the certified record, those attachments are not considered by this Court. Court of Appeals Rule 24(g).
[2] This Court, rather than the Supreme Court, has jurisdiction of this appeal because it concerns issues involving use of and access to land rather than title to land. Ga. Const. of 1983, Art. VI, Sec. VI, Par. III(1); see Henderson v. Easters, 178 Ga.App. 867, 869(1), 345 S.E.2d 42 (1986).
[3] OCGA § 9-11-56(c); Lau's Corp. v. Haskins, 261 Ga. 491, 405 S.E.2d 474 (1991).
[4] Wynns v. White, 273 Ga.App. 209, 210, 614 S.E.2d 830 (2005).
[5] See Smith v. Bruce, 241 Ga. 133, 140(1), 244 S.E.2d 559 (1978).
[6] Foreman v. Davis, Case No. A10I0006 (Sept. 10, 2009).
[7] (Citation omitted.) Brown v. Cooper, 237 Ga.App. 348, 514 S.E.2d 857 (1999).
[8] OCGA § 9-11-56. See Gold Creek SL, LLC v. City of Dawsonville, 290 Ga.App. 807, 813(2), n. 4, 660 S.E.2d 858 (2008).
[9] Fuller v. Greenville Banking Co., 230 Ga.App. 63, 65(2), 495 S.E.2d 320 (1997).
[10] (Citation and punctuation omitted.) Continental Corp. v. Dept. of Transp., 185 Ga.App. 792, 793(1), 366 S.E.2d 160 (1988).
[11] Hook v. Bergen, 286 Ga.App. 258, 261(1), 649 S.E.2d 313 (2007).
[12] (Citation omitted.) Henderson v. Justice, 237 Ga.App. 284, 287(1), 514 S.E.2d 713 (1999).
[13] (Citation omitted.) Id.
[14] See OCGA § 9-11-56(h).
[15] (Citation omitted.) Walker v. Duncan, 236 Ga. 331, 332, 223 S.E.2d 675 (1976). Accord Higgins v. Odom, 246 Ga. 309, 271 S.E.2d 211 (1980); Patterson v. Powell, 257 Ga.App. 336, 337, 571 S.E.2d 400 (2002)
[16] (Footnote omitted.) Patterson, supra.
[17] (Citation omitted.) Smith, supra at 141(1), 244 S.E.2d 559.
[18] Id. at 144(2), 244 S.E.2d 559 (While a subdivider "may resurvey and replat the unsold portions of property shown in the first subdivision" in order to enlarge the current lot-owners' easements in areas meant for common usage, he "cannot restrict, diminish, or take away property rights ... granted by the first plat where deeds have been made with reference thereto") (citation omitted).
[19] (Citation omitted.) Hampton Ridge Homeowners Assn. v. Marett Properties, 265 Ga. 655, 656(1), 460 S.E.2d 790 (1995).
[20] Id.
[21] Id.
[22] Id.
[23] OCGA § 9-11-56(e).
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711 S.E.2d 418 (2011)
309 Ga. App. 868
The STATE
v.
COHEN.
No. A11A0102.
Court of Appeals of Georgia.
June 13, 2011.
Nicole D. Marchand, Solicitor-General, Angel W. Riley, Assistant Solicitor-General, for appellant.
Hall & Hirsh, Andrew Charles Hall, for appellee.
MILLER, Presiding Judge.
In a five-count accusation, defendant Marvin Cohen ("Cohen"), a former elementary school teacher, was accused of committing simple battery against three elementary school children. The State appeals the dismissal of the accusation predicated on the grant of Cohen's motion for immunity from criminal liability under OCGA § 20-2-1001. Finding no merit in the State's contentions that the trial court erred in dismissing the accusation, and impermissibly interfered with its duty and right to prosecute the crimes, we affirm.
OCGA § 20-2-1001 provides that:
(a) As used in this Code section, the term "educator" means any principal, school administrator, teacher, guidance counselor, paraprofessional, school bus driver, volunteer assisting teachers in the classroom, tribunal members, or certificated professional personnel.
*419 (b) An educator shall be immune from criminal liability for any act or omission concerning, relating to, or resulting from the discipline of any student or the reporting of any student for misconduct, provided that the educator acted in good faith.
Cohen was the teacher of the elementary school class which included the alleged victims. The State acknowledges that pursuant to OCGA § 20-2-1001, Cohen, as an educator, cannot be held criminally liable for any act resulting from the discipline of the students, provided Cohen acted in good faith. Additionally, the State apparently accepts the trial court's conclusion that Cohen's actions were the result of the need to discipline the students and to maintain order. The State's contentions on appeal question only whether Cohen acted in good faith.
Here, the trial court decided the question of immunity pursuant to OCGA § 20-2-1001 following a pre-trial evidentiary hearing. Cohen bears the burden of showing that he is entitled to immunity by a preponderance of the evidence. See Bunn v. State, 284 Ga. 410, 412-413, 667 S.E.2d 605 (2008) (concluding that defendant bears the burden of showing that he is entitled to immunity by a preponderance of the evidence based on a similar immunity provision under OCGA § 16-3-24.2). And, the appropriate standard of review on appeal of the trial court's findings of fact is the "any evidence" standard. See State v. Yapo, 296 Ga.App. 158, 160(2), 674 S.E.2d 44 (2009).
The State's theory that Cohen was not acting in good faith is largely predicated on evidence that Cohen had not complied with a school no-touch policy and had ignored instructions regarding that policy which he had received in his in-service training. Cohen was a new teacher at the school, and it appears that the school administration soon had concerns regarding his methods of disciplining the children.
However, the exact nature of the school policy at issue is not clear from the record. The school's principal first testified that she met with, and "shared with Mr. Cohen that under no circumstances was he ever to put his hands on a child." But, the principal also describes the proscribed conduct as "negatively touching a student," and also states that "[t]eachers are not to touch students. Now, teachers can hug a student. . . ." And, on cross-examination, the principal agreed that there are some situations in which a teacher may touch a student as part of maintaining order, although there might be disagreement as to the amount of touching that is needed.
In this case, there is undoubtedly such a disagreement as to the need for the amount of physical contact utilized by Cohen with respect to the students. Each of the allegations against Cohen charges that he grabbed or pushed one of the students. And, there is ample evidence that Cohen did in fact repeatedly grab or push a student.
Nonetheless, Cohen's testimony shows that the instances of physical contact with a student were for the purpose of maintaining discipline and order. Cohen testified that he grabbed a student and pushed him to the other side of the hall to separate two boys who were acting as though they were about to start a fight. He pushed down on the shoulder of an unruly student in order to encourage him to be seated. Cohen further stated that he sometimes placed a hand on the shoulder of a student to get his or her attention.
One of the alleged victims apparently did not remember a hand placed on his shoulder and testified that he had never been touched by Cohen. The other two alleged victims had not been hurt by Cohen. The principal who testified as to observing inappropriate touching never intervened or checked a child for injuries.
Cohen testified that, as a school teacher, he had a duty to maintain order and discipline. Specifically, Cohen stated that when he saw the beginning of a fight, he felt an obligation to step in and do something. Yet, the task of maintaining order in Cohen's class was difficult, because other teachers had transferred their students who were discipline problems to his new class, so that he had the worst behaved students.
In view of the evidence of record, the trial court was authorized to conclude that Cohen *420 acted in good faith in his role as a teacher to maintain discipline and order. State v. Yapo, supra, 296 Ga.App. at 160, 674 S.E.2d 44. Therefore, the grant of Cohen's motion for immunity and motion to dismiss is affirmed.
Judgment affirmed.
ELLINGTON, C.J., and DOYLE, J., concur.
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724 S.E.2d 430 (2012)
314 Ga. App. 412
GEORGIA DEPARTMENT OF TRANSPORTATION,
v.
SMITH et al. Smith et al. v. Georgia Department of Transportation.
Nos. A11A1579, A11A1580, A11A2017, A11A2089.
Court of Appeals of Georgia.
February 29, 2012.
*431 Samuel S. Olens, Atty. Gen., Robert Lee Bunner, Asst. Atty. Gen., Kathleen M. Pacious, Dep. Atty. Gen., Loretta L. Pinkston, Sr. Asst. Atty. Gen., for Georgia Department of Transportation.
Johnson & Ward, Clark H. McGehee, William C. Lanham, for Smith et al.
MIKELL, Presiding Judge.
Ernest F. Smith, Sr., and his wife, Irene D. Smith, lost their lives from injuries they sustained after a large oak tree fell on their vehicle as they were driving on State Route 154. Ernest F. Smith, Jr., and Robert M. Smith (the Smiths), individually and as co-executors of their parents' estates, brought the underlying wrongful death actions against the Georgia Department of Transportation (DOT), alleging that the tree in question was hazardous; that it was growing on the DOT's right of way; and that the DOT's employees were negligent in failing to discover and remove it. In each lawsuit, the DOT moved to dismiss based on sovereign immunity. The trial court denied the DOT's motion to dismiss, and the DOT appeals from these orders in Case Nos. A11A1579 and A11A1580.[1] The trial court subsequently *432 granted summary judgment in favor of the DOT and against the Smiths; the Smiths appeal from these orders in Case Nos. A11A2017 and A11A2089. For the reasons set forth below, we affirm the trial court's orders in these cases.
Case Nos. A11A1579 and A11A1580
1. In Case Nos. A11A1579 and A11A1580, the DOT argues that it is immune from suit under the Georgia Tort Claims Act ("GTCA"),[2] and therefore that the trial court lacked subject matter jurisdiction over it.[3] "We review de novo a trial court's ruling on a motion to dismiss based on sovereign immunity grounds, which is a matter of law. Factual findings are sustained if there is evidence supporting them, and the burden of proof is on the party seeking the waiver of immunity."[4]
The tree which fell and struck the vehicle driven by the decedents was located in the right-of-way maintained by the DOT. In their complaints, the Smiths alleged that the DOT was negligent in failing to inspect the tree adequately and in failing to remove it before it fell on their parents' car.
According to the affidavit of Eric Pitts, state maintenance engineer for the DOT, the DOT is responsible for maintaining approximately 18,000 linear miles of the State Highway System, including the right-of-way on both sides of the road, and has a limited budget with which to accomplish this end. The DOT's existing inspection policy for the state right-of-way includes, first, weekly "windshield" inspections by the DOT's maintenance foreman of the state routes in his or her assigned area; and second, a semi-annual written inspection by the DOT's assistant area engineer for maintenance, also conducted as a "windshield" inspection while driving. Under the DOT's tree removal policy, the district maintenance engineer decides whether to remove a tree from the right-of-way and consults with the state agronomist in the event he suspects that a tree is diseased. Although Pitts averred that DOT foremen are specifically trained to inspect "the vegetation adjacent to the paved surface" and other "issues that may affect safe travel on state routes," the DOT foreman who was responsible for weekly inspections of the area that included the subject tree testified by deposition that during his inspections, beginning in 2004, he did not inspect trees.
Under the GTCA, the state waives its sovereign immunity for the torts of state employees while acting within the scope of their official duties "in the same manner as a private individual or entity would be liable under like circumstances."[5] The waiver is subject to the exceptions set forth in OCGA § 50-21-24, and "[a] major exception to state liability under the [GTCA] is the `discretionary function' exception."[6] Under this exception, "[t]he state shall have no liability for losses resulting from ... [t]he exercise or performance of or the failure to exercise or perform a discretionary function or duty on the part of a state officer or employee, whether or not the discretion involved is abused."[7]
The DOT contends that its tree inspection "policy" falls within the "discretionary function" exception to the waiver of sovereign immunity found in the GTCA; and that therefore the Smiths' lawsuits were barred by the doctrine of sovereign immunity. We do not agree.
*433 The GTCA provides the following definition of "discretionary function": "`Discretionary function or duty' means a function or duty requiring a state officer or employee to exercise his or her policy judgment in choosing among alternate courses of action based upon a consideration of social, political, or economic factors."[8] In Ga. Dept. of Tramp, v. Miller,[9] plaintiffs alleged that the DOT failed to keep a culvert free of debris, causing rainwater to accumulate on the road where plaintiffs' decedent lost control of his vehicle and was killed in a single-car crash.[10] The DOT contended that its personnel had to make a "judgment call" as to which culverts to inspect after a storm; and that this "judgment call" was a "discretionary function" which was not subject to the waiver of sovereign immunity found in the GTCA.[11] We rejected the DOT's argument in that case, noting that a "discretionary function" within the meaning of the GTCA was one requiring the exercise of "policy judgment in choosing among alternate courses of action based upon a consideration of social, political, or economic factors."[12] We explained that "[t]he Supreme Court of Georgia has emphasized that these factors are only intended to signal `basic governmental policy decisions,' and are not to be construed overly broadly."[13] We concluded that "the day-to-day operational decision of whether and where to send out DOT personnel to inspect for road hazards on the day in question was not a basic governmental policy decision for purposes of the GTCA,"[14] and that therefore it did not fall within the "discretionary function" exception to the GTCA's waiver of sovereign immunity.[15] Similarly, in Dept. of Transp. v. Brown,[16] our Supreme Court noted that "the discretionary function exception is limited to basic governmental policy decisions,"[17] and that "[t]he key to this issue is the difference between design and operational decisions and policy decisions."[18] In that case, the Supreme Court held that the DOT's decision to open a new intersection before installing traffic lights was not a "policy decision" within the scope of the "discretionary function" exception to the immunity waiver.[19]
We conclude that the case before us is governed by our decision in Miller.[20] The DOT employees' operational inspections of the roadways, and their concomitant decisions as to whether or not to inspect and remove hazardous trees, do not constitute "basic governmental policy decisions" within the scope of the "discretionary function" exception to the waiver of immunity found in the GTCA. The trial court did not err in denying the DOT's motions to dismiss the Smiths' claims.
Case Nos. A11A2017 and A11A2089
2. In Case Nos. A11A2017 and A11A2089, the Smiths appeal from the trial court's orders granting summary judgment to the DOT on their claims. Because there is no genuine issue of material fact regarding whether the DOT knew or should have known that the tree constituted a dangerous condition, we conclude that the trial court did not err in granting summary judgment in favor of the DOT.
In order to prevail on a motion for summary judgment, the movant must demonstrate that there is no genuine issue of material fact and that the undisputed facts, *434 viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. A defendant may obtain summary judgment by demonstrating that the record contains no evidence sufficient to create a jury issue on at least one essential element of the plaintiffs case. A defendant is not required to affirmatively disprove the plaintiffs case, but may prevail by pointing to the absence of evidence to support the plaintiffs case. If the defendant does so, the plaintiff cannot rest on [his] pleadings, but must point to specific evidence giving rise to a triable issue of fact.[21]
The standard for a landowner's liability for damage resulting when a tree on his property falls on adjacent property is well established in Georgia. As this Court stated in Willis v. Maloof,[22] "In regard to liability for a defective tree[,] the ordinary rules of negligence apply. The owner of a tree is liable for injuries from a falling tree only if he knew or reasonably should have known the tree was diseased, decayed or otherwise constituted a dangerous condition."[23] Thus, a landowner who knows that a tree on his property is decayed and may fall and cause damage to another has "a duty to eliminate the danger,"[24] but "there is no duty to consistently and constantly check all ... trees for non-visible rot[,] as the manifestation of decay must be visible, apparent, and patent."[25] The following standard applies here: the landowner is only charged with knowledge of the dangerous condition of the tree if "a layman should have reasonably known the tree was diseased.... [Defendant would not be charged with the knowledge or understanding of an expert trained in the inspection, care and maintenance of trees."[26]
Here, there is no evidence that the tree at issue showed any evidence of disease or decay that would have been apparent to a layman. The Smiths' expert examined the tree at issue on February 25, 2009, three months after the tree fell on November 14, 2008. He testified that it was a white oak tree, approximately 90 feet tall before its fall, with a 24-inch diameter. He further testified that the tree was alive and still growing when it fell, with a "pretty good crown spread." His examination of the base of the tree revealed three visible defects indicating that it should have been removed: a "circling root" approximately six inches in diameter near the base of the tree, which the expert testified would inhibit the normal development of the tree's root system and root buttress area; a single "fruiting body" or fungus, also called a "mushroom bracket," located at the base of the tree adjoining the soil, indicative of root buttress decay; and discoloration, or darkening, of the tree's bark less than six inches above ground level, also indicative of root rot. The witness also testified that the tree had minimal "flare" at its base (a "telephone pole effect"), suggesting that the circling root was inhibiting normal development of the tree; and that this defect would be "suspect" to "a trained eye." The witness admitted that none of these defects could have been identified during a "drive-by" inspection. There is no evidence that the DOT was aware of, or had been alerted to, the signs of decay at the base of this tree.
Even assuming the DOT's employees should have noticed these conditions on this particular tree, no evidence was presented from which a jury could find that the DOT's employees, who were not tree experts, should reasonably have known that the tree was diseased. We conclude that this case is governed by our decision in Willis.[27] There, *435 plaintiff's expert testified to the following visible conditions on the offending tree, indicative to the expert that the tree was diseased or decayed: the bark at the tree's; base "curved under instead of outward"; a cavity or hollow was present on the side of the tree; and fungus was growing on the tree's bark.[28] We held that this evidence was insufficient as a matter of law to charge the defendant with constructive knowledge that the tree was diseased.[29] Similarly, in the case at bar, "[t]he expert witness presented testimony from which a jury could find that the tree was in fact diseased. However, the testimony of the expert witness did not establish that a layman should have reasonably known the tree was diseased."[30]
The Smiths also adduced evidence, in the form of photographs,[31] that the subject tree was leaning in the direction of the road. The Smiths argue that this evidence raises a jury issue as to whether the DOT had constructive knowledge of the tree's dangerous condition. We reject this argument for two reasons. First, "this Court has declined to use the fact that a tree may be overhanging or leaning in one direction as a basis for notice that it is in a dangerous condition."[32] Second, even assuming that the lean of the tree in this case would have given the DOT constructive notice, that constructive notice would only be notice "of what a reasonable inspection would reveal" as to the condition of the subject tree.[33] And as discussed above, the visible signs at the bottom of this treean exposed root, a single fungus growth, a darkened area of bark just above the ground, and lack of "flare" at the base were insufficient to alert a layman that this tree was diseased or decayed.
The Smiths' expert also opined that there was "a long history of tree failures in the area [of the tree at issue] evidenced by the amount of tree debris laying [sic] on the ground in various stages of decay." Relying on Wesley an College,[34] the Smiths contend that the evidence of alleged "blight" in the area gave the DOT constructive notice of the diseased condition of the tree at issue. The Smiths' reliance on Wesleyan College is misplaced. There, the evidence showed that "[t]he pines in the general area where the tree fell were blighted and many were dead, diseased, dying, or had fallen."[35] Thus, the defendant College had actual or constructive knowledge that this was a "problem area," giving rise to a duty to inspect.[36] In that reasonable inspection would have revealed that the specific tree that fell had a four-foot-long rotten cavity two feet above its base, observable to a layman.[37] Because the rotten cavity in the tree was a "visible, apparent, and patent" indication of decay,[38] and because the evidence showed that this defect had existed "for such a period of time that [the College] in the exercise of ordinary care should have discovered and removed this hazard to the users of the street,"[39] the College was held liable for failing to discover and remove the hazardous tree. In the case at bar, however, even assuming that the DOT should have made "walk-by" inspections by reason of the alleged "blight" in the area, *436 such inspections would not have alerted the DOT to problems with this particular tree. As discussed above, the tree at issue did not exhibit "visible, apparent, and patent" signs of decay or disease which would give rise to a duty to remove it.
3. Without citing any Georgia authority in support, the Smiths argue that the DOT should be held to a higher standard of care by reason of its responsibility to plan, manage, and maintain the state highway system under OCGA § 32-2-2.[40] "Sovereign immunity applies to the [s]tate and its departments and agencies except to the extent that the legislature enacts a specific waiver."[41] As discussed in Division 1 above, the waiver of sovereign immunity found in the GTCA provides that the state shall be liable for torts "in the same manner as a private individual or entity would be liable under like circumstances."[42] Therefore, we decline to impose a higher standard of care on the DOT in this case.
4. The Smiths contend that the DOT is liable for failure to comply with its own regulations regarding inspections of roadways. As discussed in Division 2 above, however, even assuming that the DOT failed to comply with its own inspection procedures in this case, the tree at issue here had no "visible, apparent, and patent" signs of disease or decay which would have been discovered in such an inspection.
We affirm the trial court's grant of summary judgment in favor of the DOT.
Judgments affirmed.
DILLARD and BOGGS, JJ., concur.
NOTES
[1] Though not final orders, the orders denying the DOT's motions to dismiss are directly appealable under the collateral order doctrine. See Bd. of Regents, etc. v. Canas, 295 Ga.App. 505, 507(1), 672 S.E.2d 471 (2009) (under collateral order doctrine, this Court has jurisdiction over direct appeal of denial of motion to dismiss, where order is based on conclusive determination that state defendant is not immune from suit by reason of sovereign immunity).
[2] OCGA § 50-21-20 et seq.
[3] See Coosa Valley Technical College v. West, 299 Ga.App. 171, 174(1), 682 S.E.2d 187 (2009) (whole court) (state defendant's motion to dismiss on ground of sovereign immunity was a motion to dismiss for lack of subject matter jurisdiction under OCGA § 9-11-12(b)(1)).
[4] (Citations omitted.) Williams v. Ga. Dept. of Tramp., 275 Ga.App. 88, 89(1), 619 S.E.2d 763 (2005). Accord Bd. of Regents, supra at 509(3), 672 S.E.2d 471.
[5] OCGA § 50-21-23(a). See Lewis v. Ga. Dept. of Human Resources, 255 Ga.App. 805, 806, 567 S.E.2d 65 (2002).
[6] Edwards v. Dept. of Children & Youth Svcs., 271 Ga. 890, 891, 525 S.E.2d 83 (2000). See OCGA § 50-21-24(2).
[7] OCGA § 50-21-24(2).
[8] OCGA § 50-21-22(2).
[9] 300 Ga.App. 857, 686 S.E.2d 455 (2009).
[10] Id. at 858, 686 S.E.2d 455.
[11] Id. at 859(1), 686 S.E.2d 455.
[12] (Footnote omitted; emphasis in original.) Id.
[13] Id., citing Brantley v. Dept. of Human Resources, 271 Ga. 679, 680, 523 S.E.2d 571 (1999).
[14] (Footnote omitted.) Miller, supra.
[15] Id. at 860(1), 686 S.E.2d 455.
[16] 267 Ga. 6, 471 S.E.2d 849 (1996).
[17] Id. at 7(1), 471 S.E.2d 849.
[18] Id.
[19] Id. See also Edwards, supra at 893, 525 S.E.2d 83 ("the decision of state employees on the type of emergency medical care to provide incarcerated juveniles does not fall within the discretionary function exception to the Georgia Tort Claims Act").
[20] Supra.
[21] (Punctuation and footnote omitted.) Klein v. Weaver, 265 Ga.App. at 390-391, 593 S.E.2d 913 (2004).
[22] 184 Ga.App. 349, 361 S.E.2d 512 (1987).
[23] Id. at 350(2), 361 S.E.2d 512. Accord Klein, supra at 392, 593 S.E.2d 913.
[24] (Citations and punctuation omitted.) Cornett v. Agee, 143 Ga.App. 55, 56(1), 237 S.E.2d 522 (1977).
[25] Id. at 57(1), 237 S.E.2d 522. Accord Wade v. Howard, 232 Ga.App. 55, 58, 499 S.E.2d 652 (1998).
[26] Willis, supra at 350-351(2), 361 S.E.2d 512.
[27] Id.
[28] id.
[29] Id. Accord Wade, supra (summary judgment to defendant affirmed where plaintiffs failed to demonstrate patent visible decay in tree before it fell).
[30] Willis, supra.
[31] It is not necessary for us to address the parties' asserted errors concerning whether the photographs from Google Earth were admissible.
[32] Wade, supra, citing Carter v. Ga. Power Co., 204 Ga.App. 77, 78(1), 418 S.E.2d 379 (1992) (city had no duty to check limbs overhanging public road for nonvisible rot); and Comett, supra at 57(1), 237 S.E.2d 522 (owner's liability was not based on fact that tree was "leaning visibly toward the neighboring yard," but on fact that tree had visible rot in its trunk and appeared "to be in a partially dead condition" (id. at 55(D)), 237 S.E.2d 522.
[33] Wesleyan College v. Weber, 238 Ga.App. 90, 94(b), 517 S.E.2d 813 (1999) (whole court).
[34] Id.
[35] Id.
[36] Id.
[37] Id. at 93(a), 517 S.E.2d 813.
[38] Id.
[39] Id. at 95(c), 517 S.E.2d 813.
[40] OCGA § 32-2-2(a)(1).
[41] Williams, supra.
[42] OCGA § 50-21-23(a).
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2509611/
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725 S.E.2d 472 (2012)
STATE
v.
RASH.
No. COA11-1327.
Court of Appeals of North Carolina.
Filed May 1, 2012.
Case Reported Without Published Opinion
No Error.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2510401/
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127 P.3d 837 (2006)
Illya D. BROWN, Appellant,
v.
STATE of Alaska, Appellee.
No. A-8793.
Court of Appeals of Alaska.
January 13, 2006.
*838 Marcia E. Holland, Assistant Public Defender, Fairbanks, and Barbara K. Brink, Public Defender, Anchorage, for the Appellant.
Kenneth M. Rosenstein, Assistant Attorney General, Office of Special Prosecutions and Appeals, Anchorage, and David W. Márquez, Attorney General, Juneau, for the Appellee.
Before: COATS, Chief Judge, and MANNHEIMER and STEWART, Judges.
OPINION
MANNHEIMER, Judge.
Probation Officer Shawn Davies was looking for one of his probationers, Richard Wolters, so that he could confront Wolters about apparent violations of probation (failure to report and use of controlled substances). Davies took up an early morning surveillance outside Wolters's residence. He saw a man emerge from the residence and get into a cab. Thinking that this man was Wolters, Davies called for police assistance in stopping the cab.
*839 A Fairbanks police officer stopped the cab, and Davies arrived on the scene moments later. But the passenger in the cab was not the sought-for Wolters, but rather Illya Brownwho, coincidentally, was a felony parolee under Davies's supervision.
Shortly after Davies arrived, Brown ran away from the scene of the traffic stop. But before he ran away, Brown dropped a bag containing packets of cocaine and items of drug paraphernalia.
Brown was indicted for possessing this cocaine with the intent to distribute (third-degree controlled substance misconduct under AS 11.71.030(a)(1)). He asked the superior court to suppress the evidence against him, arguing that the probation officer and the police officer had no authority to stop the cab. After the superior court denied this motion, Brown entered a Cooksey plea, reserving his right to renew his suppression arguments on appeal.[1]
For the reasons explained here, we conclude that all of Brown's arguments are either unpreserved or meritless. Accordingly, we affirm his conviction.
Underlying facts
In late December 2001, Probation Officer Shawn Davies was trying to make contact with one of his probationers, Richard Wolters. Wolters had apparently violated the conditions of his probation by not staying in contact with Davies and by using cocaine. (Wolters had recently submitted a urine sample that tested positive for cocaine.) Davies had been telephoning Wolters and leaving messages for him, but Wolters had not returned any of these calls.
In the early morning of December 28th (sometime after 7:00 a.m.), Davies again telephoned Wolters. A man answered the telephone, but he claimed that he was not Wolters. The man told Davies that Wolters had left for a doctor's appointment.
Despite the man's claim that he was not Wolters, Davies thought that he recognized Wolters's voice. Suspecting that he was being tricked, Davies decided to drive over to Wolters's residence to see whether Wolters was truly not at home. Davies arrived outside Wolters's residence at approximately 7:40 a.m. A few minutes later, Davies observed a man emerge from the residence and get into a cab. Davies could not see this man's face because the man was wearing a hooded outer garment and because the man was huddled over, apparently holding things in his arms. However, given the circumstances, Davies believed that this man was Wolters, and that Wolters was again trying to avoid contact with him.
Davies got into his car and began following the cab. According to his later testimony at the evidentiary hearing, Davies wished to make contact with Wolters, ask him why he was avoiding Davies, and conduct a search of his person. Davies also testified that, based on Wolters's violations of his probationWolters's failure to report to Davies, and Wolters's apparent use of cocaine (based on the test result of his urine sample)Davies would have been authorized to arrest Wolters. See AS 33.05.070(a).
While Davies was following the cab, he used his cell phone to contact the Fairbanks Police Department and request their help in stopping the cab. In response to this request, Officer Perry J. Williamson performed a traffic stop of the cab. Davies was driving right behind Williamson when the traffic stop was made, so Davies arrived on the scene only seconds later.
Almost immediately, the passenger emerged from the cab unbidden. When the passenger got out of the cab and into the light, both Davies and Williamson saw that this passenger was not Richard Wolters. (Both men were acquainted with Wolters.) Instead, Davies recognized the passenger as Illya Brown, a felony parolee under his supervision.
Brown began talking to Officer Williamson, but he also began backing up, with his right hand under his coat. Williamson directed Brown to take his hand out of his coat and to place his hands on the cab, but Brown did not obey. At this point, Williamson drew his *840 side arm and directed Brown to stand still. In response, Brown ran away.
Davies and Williamson chased Brown, but they could not catch him. However, when the two officers returned to the cab, they discovered a black knit bag containing packets of cocaine and items of drug paraphernalia.
Brown's argument in the superior court and details of the superior court's ruling
Following his indictment for controlled substance misconduct, Brown asked the superior court to suppress the black knit bag and its contents. In his memorandum in support of the suppression motion, Brown argued that even if Wolters had been the passenger in the cab, Davies would have had no authority to stop the cab (or to ask the police to stop the cab) unless Davies had a reasonable suspicion that "imminent public danger existed or [that] serious harm to persons or property ha[d] recently occurred"the justification required for investigative stops under the Alaska Supreme Court's decisions in Coleman v. State and Ebona v. State.[2]
In other words, Brown argued that Davies (a probation officer) had no greater authority to conduct an investigative stop of Wolters (a probationer under his supervision) than the authority that any police officer would possess to conduct an investigative stop of any citizen. In the words of Brown's memorandum, "Probation Officer Davies' authority to supervise ... Wolters provided him with no broader right to direct [the police to stop the] cab ... than [the right] articulated by Coleman ...." Brown further contended that if the Coleman test was applied to the circumstances of his case, there was no justification for the stop of the cab because Davies "had no suspicion that ... Wolters ... was engaged in any form of illegal conduct".
In two isolated sentences of his superior court memorandum, Brown asserted that Davies "had [no] ability to identify ... the person he saw entering the cab", and that Davies "could not have believed that the person he saw entering the cab was Richard Wolters". But in both instances, immediately after asserting this, Brown told the superior court that the accuracy or reasonableness of Davies's identification was not really the point:
But even assuming that [the] identification [was] properly made, ... the stop was not based [on] reasonable suspicion that [Wolters] was engaging in illegal conduct, [and thus] it was impermissible.
...
[N]o basis existed for stopping the cab, even assuming that [Davies] legitimately believed that Mr. Wolters was the passenger in that vehicle. As a result, all evidence obtained as a result of the traffic stop initiated at Mr. Davies' request should be suppressed.
(Brown's superior court memorandum, augmented by a later supplemental memorandum, presented two additional arguments. First, Brown argued that even if the stop of the cab was lawful, there was no justification for ordering Brown to place his hands on the cab and remain at the scene after the officers discovered that he was not Wolters. Second, Brown argued that the officers could not justify their actions by relying on Brown's own condition of probation (a condition allowing warrantless searches of his person and any vehicle under his control) because that condition of Brown's probation was unconstitutional. Brown does not renew either of these arguments in this appeal.)
Superior Court Judge Mark I. Wood held an evidentiary hearing on Brown's suppression motion. At the end of this evidentiary hearing, when the parties summarized their positions, Brown renewed his argument that the Coleman-Ebona test governed the stop of the cab, and that the stop of the cab was thus unlawful because Davies "had no independent basis to believe that any kind of crime had been committed .... [Davies] simply was exercising ... his supervisory powers to make contact with a probationer."
*841 Brown also argued, essentially for the first time, that the stop was invalid because Davies could not reasonably have mistaken Brown for Wolters:
Defense Attorney: Mr. Brown is a dark-complected black male who is 6'4" tall and weighs 235 pounds. Mr. Wolters ... is 5'7" tall and weighs 175 pounds[, and he] is a Caucasian male. The dissimilarities between [their] physical appearances ... are staggering and ... undeniable. There is no way that Mr. Brown ... and Mr. Wolters could be mistaken for one another. Certainly, there is no way that [such a mistake] could have happened ... if [Davies had made] some sort of reasonable effort ... to make an identification[.]
Finally, Brown argued that even though Wolters's conditions of probation included a clause that made him (Wolters) subject to suspicionless searches, this condition of probation did not make Wolters subject to suspicionless seizures (in this case, the traffic stop). Brown asserted that any seizure of his person had to meet the Coleman-Ebona test even if that seizure was performed by a probation officer attempting to conduct an authorized suspicionless search of Brown's person. Brown's attorney told the court:
Defense Attorney: [T]his [was] a seizure, and not a search [falling] within the scope of [Wolters's probation condition]. It goes beyond any reasonable interpretation of ... Mr. Wolters's [conditions of] probation.... [N]o authority ... to effect a seizure a traffic stop [arose] under the ... conditions of probation to which Mr. Wolters was subject.
...
The Court: Let me just ask you a question. This is just thinking [out loud], but it seems to me that the right to search [a probationer] necessarily includes the right to detain [the probationer] to accomplish the search.
Defense Attorney: Well, Judge, I think there is a ... significan[t] [difference] between [this case and] circumstances where a probation officer shows up after a stop has been effected for [an independent] reason and [the probation officer] instructs [a police] officer to conduct a search pursuant to the conditions of probation....
The Court: So you [assert] that a probation officer who wanted to search a probationer would not have the right to ask a police officer to detain the probationer under any circumstances?
Defense Attorney: Well, not unless ... the police officer had an independent basis for the initial [stop].
After hearing these arguments, Judge Wood denied Brown's suppression motion.
Judge Wood acknowledged that Wolters and Brown did not look much like each other. The judge declared that "if [the two men] were to stand directly side-by-side, [nobody] would have any trouble telling them apart." However, Judge Wood then indicated how Davies might reasonably have mistaken Brown for Wolters:
The Court: Mr. Davies was worried about Mr. Wolters ... because Mr. Wolters had ... a "hot" UA [i.e., a urine sample that tested positive for drugs] [and] because it appeared that Mr. Wolters was trying to avoid him. He was [also] worried... because he had called up [Wolters's] house, and the voice that he heard on the other end sounded similar to Mr. Wolters's.... [Davies] even called him on it, and the guy denied [being Wolters]. But Mr. Davies was convinced [that] it was Mr. Wolters, and [that] Mr. Wolters was getting ready to leave his residence. And so [Davies] changed [his] clothes, went out to Mr. Wolters's residence, and took up surveillance [from at least 50] yards away.
...
[T]he upstairs apartment [we are talking about] is covered and dark, and there's no light ... at the top of the stairs.... [A]nd remember [that] this is December 28th..., so we're talking about dark winter in Fairbanks at ... 7:40 in the morning. An individual comes out of that upstairs apartment, and ... a couple of seconds [later he's] in the cab. He's hooded and, you know, everybody [looks] stocky in the winter... because of the nature of the clothing that we wear. When you're wearing a hooded parka, everybody looks stocky.
*842 Judge Wood conceded that, had the circumstances been a little different "if [Brown] had come out [of the apartment] with somebody else, [so] there was some [point] of reference ... to measure [his] height, [or] if it [had been] summer, [so that] the man didn't have a coat on" then the judge might well have granted Brown's suppression motion. Judge Wood stated that, if these other circumstances had been present, "[the defense attorney's] excellent presentation on the differences between Mr. [Brown] and Mr. Wolters would have made a huge difference in this case."
But Judge Wood concluded that, "given the dark, the distance, the winter [clothing], the location, and the very brief time that Mr. [Brown] was observed, Mr. Davies in his mind ... thought it was Mr. Wolters coming out [of the apartment and getting into the cab]."
Judge Wood then turned to Brown's argument that, even though a probation officer might have the right to search a probationer, a probation officer has no right to stop and temporarily detain the probationer in order to perform this search:
The Court: I disagree with [the defense attorney]. I think that the right to search also involves the right to reasonably detain. [And] I think that the detention of the [cab] was reasonable under the circumstances.
That is, Judge Wood concluded that Davies had the authority to stop the vehicle in which Wolters was riding, even in the absence of particularized suspicion, simply to perform the suspicionless search authorized by Wolters's conditions of probation.
Judge Wood then held, in the alternative, that the vehicle stop was justified because Davies reasonably believed that Wolters had violated the terms of his probation:
The Court: Alternatively, I feel that Officer Davies had a more than reasonable suspicion that Mr. Wolters ... had violated the conditions of his probation. [Wolters was] a drug seller [who was convicted of] misconduct involving controlled substances in the third degree. [He had] a hot UA, [and he was] having difficulties contacting his probation officer.... [Y]ou've got a convicted felon in violation of his probation, and ... that's a serious thing. And that's the type of thing [that] we want our probation officers stopping and contacting [their] probationers about. And so I think that there's reasonable grounds to contact Mr. Wolters.
On these alternative grounds, Judge Wood concluded that the traffic stop was lawful.
(This was not the end of Judge Wood's analysis of the case, but his remaining remarks were devoted to the additional issues, described above, that Brown does not pursue on appeal.)
Brown's arguments on appeal, and our analysis of this case
To analyze the legality of the stop in this case, it is useful to begin with a hypothetical situation in which Wolters was indeed the passenger in the cab and Davies, acting without police assistance, flagged down the cab in an attempt to speak to Wolters about his recent violations of probation and to conduct the search authorized by Wolters's conditions of probation.
In his brief to this Court, Brown (now represented by a different attorney) argues that even when a probationer is subject to a probation condition that seemingly authorizes a probation officer to conduct suspicionless searches, a probation officer has no legal authority to search a probationer unless the officer has a reasonable suspicion that the probationer is currently engaged in criminal behavior.[3]
And, based on this assertion that Davies had no authority to search Wolters, Brown concludes that Davies (even if acting alone) had no authority to stop the cab in which *843 Wolters was believed to be riding: "Given that there was no clear legal authority [for Mr. Davies] to search Mr. Wolters, there certainly was no legal authority to rely on the search conditions [of Wolters's probation] to ... seize a moving vehicle [in which Wolters was riding]."
Brown is wrong about the extent of Davies's authority to search Wolters. Because Wolters's conditions of probation authorized Davies to conduct a suspicionless search, no particularized suspicion was necessary. In Soroka v. State, 598 P.2d 69 (Alaska 1979), the Alaska Supreme Court declared:
If the conditions of [a person's] probation [authorize] searches on demand . . ., no showing of probable cause [is] necessary. [Citations omitted] Searches authorized in connection with grants of probation or parole may be executed without the need for additional justification, as long as they are reasonably conducted and not made for purposes of harassment. Roman v. State, 570 P.2d [1235,] 1242 and n. 19 [(Alaska 1977)].
Soroka, 598 P.2d at 71 n. 5 (citations omitted). See also State v. James, 963 P.2d 1080, 1082 (Alaska App.1998) (recognizing and applying this aspect of the Soroka decision).
Brown insists that the federal and the Alaska constitutions prohibit suspicionless searches of probationers, even when a condition of probation purports to authorize such searches. But Brown does not mention Soroka in his opening brief, nor does he mention Soroka in his reply brief, even though the State's brief explicitly relies on the passage from Soroka that we have just quoted.
In any case, Brown's argument is not preserved because it was never made to the superior court. As explained above, Brown's trial attorney conceded that Wolters's conditions of probation authorized suspicionless searches, but he argued that the probation officer's authority to engage in suspicionless searches did not confer a corresponding authority to engage in seizures (a vehicle stop or other form of investigative stop) to conduct these searches. Judge Wood rejected this argument, ruling that "the right to search also involves the right to reasonably detain".
Following Judge Wood's ruling, Brown entered a Cooksey plea that authorized him to renew, on appeal, the arguments that he presented to Judge Wood. But Brown is not authorized to raise new arguments.
We therefore turn to the argument that Brown did preserve: the argument that even though a probation officer may be authorized by the conditions of probation to conduct a suspicionless search of a probationer, this authority does not include the right to temporarily seize and detain the probationer for the purpose of conducting the search.
For this proposition, Brown relies primarily on our decision in Reichel v. State, 101 P.3d 197 (Alaska App.2004).
In Reichel, we were confronted with a situation in which police officers, acting independently of a probation officer, performed an investigative stop of a probationer whom the officers reasonably suspected of violating (or having just violated) the conditions of his probation, but in a manner that did not constitute a new crime. (The officers observed the probationer in a bar, and they suspected that he had been drinking.)[4]
In Reichel, the State took the position that police officers have the authority (even when operating independently of a probation officer) to perform an investigative stop of a probationer if the suspected violation of probation meets the Coleman-Ebona test: that is, if the violation of probation, although not in itself a crime, nevertheless involves an imminent public danger or recent serious harm to persons or property.[5] We ultimately concluded that we did not need to decide whether to endorse the State's proposed rule of law: under the facts of Reichel, the Coleman-Ebona test was not met, and thus the State's argument was moot.[6]
*844 Brown appears to contend (particularly in his reply brief) that Reichel established the rule that police officers who are acting independently of probation officers have no authority to conduct an investigative stop of a probationer unless the police have reasonable suspicion that the probationer is violating (or has just violated) the law. (This is a mistaken interpretation of Reichel: as we explained in the preceding paragraph, Reichel does not decide this question.)
Brown then asks us to expand this purported rule so that the same requirement (the requirement of reasonable suspicion of a crime) would apply to probation officers and to police officers acting at the direction of probation officers. In other words, Brown argues that neither probation officers nor police officers acting at their behest can subject a probationer to a suspicionless investigative stop. Brown contends that even when a probationer's conditions of probation authorize a probation officer to conduct a suspicionless search of the probationer's person, neither the probation officer nor police acting at the probation officer's direction are authorized to detain the probationer in the absence of reasonable suspicion that the probationer is violating (or has just violated) the criminal law.
The Alaska Supreme Court's decision in Roman v. State, 570 P.2d 1235 (Alaska 1977), indicates that Brown is wrong and that Judge Wood was correct: a probation officer's authority to search carries with it the authority to temporarily detain the probationer in order to conduct the search.
The defendant in Roman was on parole from a conviction for possession of heroin. After Roman's parole officer received a tip that Roman had used heroin the day before, the parole officer went to the Fairbanks airport (where Roman was waiting for a flight) to obtain a urine sample from Roman. (Roman's parole conditions obliged him to provide urine samples when requested to do so by a parole officer.) Enlisting the aid of another parole officer and an airport security officer, Roman's parole officer detained Roman and took him to a restroom in an attempt to get the urine sample. After Roman declared that he was physically unable to provide the requested sample, the parole officer moved Roman from the restroom to the customs area, where the parole officer performed a search of Roman's person.[7]
The supreme court upheld the legality of these actions. In its decision, the court indicated that both the search and the detention to perform the search were proper:
The right to request specimens for urinalysis and to search [a parolee] and his quarters at reasonable times and in a reasonable manner to assure that he would not continue to possess illegal drugs is necessary to the proper functioning of the parole system. The right to perform such searches is limited to parole officers and peace officers acting under their direction. It would appear that all of these conditions were met in the search of Mr. Roman; therefore, we cannot find that the parole authorities were clearly mistaken in authorizing the search and in conducting it under these circumstances. Roman's inability to furnish a specimen for urinalysis prevented use of that means of ascertaining whether he was using drugs; and, in view of his imminent departure, it was reasonable to search his person at that time.
Roman, 570 P.2d at 1243 (emphasis added) (footnotes omitted).
Given the supreme court's decision in Roman, we conclude that if a probationer's conditions of probation authorize suspicionless searches of the probationer's person, a probation officer who wishes to exercise this authority has the concurrent right to stop and temporarily detain the probationer in order to conduct the search (subject to the limitations expressed in Roman: that the search must be conducted at a reasonable time and in a reasonable manner, and that the search must not be conducted for the purpose of harassing the probationer).[8]
Judge Wood expressly found that Davies's decision to stop the cab "was reasonable under the circumstances", and this finding is *845 supported by the record. Moreover, there is no suspicion of harassment here. Judge Wood found and Brown does not contest that Davies had reasonable grounds for believing that Wolters was in violation of his probation, both for failing to report and for using drugs (because of the "hot" urinalysis). We therefore hold that Davies could lawfully decide to conduct a temporary investigative stop of the cab.
The next issue is whether Davies could lawfully enlist the assistance of the police to help him conduct this investigative stop. Brown appears to argue that even if Davies might lawfully have conducted the investigative stop himself, the stop became unlawful when Davies asked the police to help him. That is, even if the Coleman-Ebona test would not apply to Davies's own actions, the cooperation of the police triggered the Coleman-Ebona requirement.
Brown offers no legal authority in support of this proposition (other than Reichel, a decision which we conclude is not pertinent). And Brown's argument is at odds with the accepted law in this area:
[We turn now to the question of] whether the less demanding Fourth Amendment limits [that apply to searches conducted by probation and parole officers] apply even when there was some police involvement in the activity....
Generally, ... searches of probationers and parolees [that do not conform] to usual Fourth Amendment standards have been upheld notwithstanding the fact that there was some degree of cooperation or joint participation by the police and a probation or parole [officer]. There is little reason to question this result when the facts show that [the] police participation was brought about at the instigation of the probation officer or parole officer, for [the officer] may enlist the aid of police officers in performing his duty.
Wayne R. LaFave, Search and Seizure: A Treatise on the Fourth Amendment (4th ed.2004), § 10.10(e), Vol. 5, pp. 470-71 (internal citations omitted).
As the Eighth Circuit recently declared in United States v. Brown, 346 F.3d 808 (8th Cir.2003), "[T]he Fourth Amendment does not require probation officers to choose between endangering themselves by searching alone [or, alternatively,] foregoing the search because they lacked the resources and expertise necessary to search alone safely."[9] We believe that this principle is particularly apt when the probation officer's search requires the investigative stop of a motor vehicle.
We note that, in Roman, the parole officer enlisted the aid of the airport security police; the supreme court never indicated that the participation of airport security officers altered its analysis of the case in any way.
Accordingly, we hold that Davies's decision to enlist the aid of the police in effecting the stop of the cab did not alter the legality of the stop.
Finally, Brown argues that the stop of the cab was illegal because Davies did not have probable cause to believe that it was Wolters (his probationer) who emerged from the apartment and got into the cab.
This argument was not presented to Judge Wood. From the beginning, it was obvious that Davies had made a mistake concerning the identity of the man in the cab. But, as explained above, Brown's written pleadings barely mention Davies's mistake. Only two isolated sentences of Brown's memorandum refer to this mistake and, in both instances, the reference is immediately followed by an assertion that Davies's mistake was irrelevant to the decision of Brown's suppression motion.
We acknowledge that Brown's argument changed at the close of the evidentiary hearing. When Brown's attorney argued the suppression motion orally at the end of the hearing, he expressly asserted that the stop of the cab was unjustified because Davies acted unreasonably when he concluded that Wolters was the man he had seen get into the cab. Specifically, the defense attorney told Judge Wood: "There is no way that Mr. Brown ... and Mr. Wolters could be mistaken for one another. Certainly, there is no way that [such a mistake] could have happened *846... if [Davies had made] some sort of reasonable effort ... to make an identification[.]"
But, as explained above, Judge Wood rejected the defense attorney's contention; the judge found that, under the circumstances, Davies's mistake was reasonable. Judge Wood noted that Davies reasonably expected that it would be Wolters who emerged from Wolters's residence at 7:40 in the morning. And when the man did come out of Wolters's apartment and got into the cab, Davies got a glimpse of him for only a couple of seconds. Moreover, it was dark, and Brown was wearing heavy winter clothing that hid his face and concealed his physique.
Thus, the record shows that Judge Wood found that Davies acted reasonably that Davies had at least a reasonable suspicion that the man he saw get into the cab was Wolters, the probationer who had been avoiding him and who had recently submitted a dirty urine sample.
Brown argues that, given the facts of this case, Judge Wood's resolution of this issue was erroneous. Brown asserts that Davies unreasonably jumped to the conclusion that the man who came out of Wolters's apartment was indeed Wolters. Brown argues that Davies should have done more to verify the identity of this man before he requested that the police stop the cab.
After reviewing the record, we conclude that the facts of this case (viewed in the light most favorable to Judge Wood's ruling) adequately support the judge's ruling that Davies's mistake was reasonable under the circumstances that Davies reasonably (albeit erroneously) suspected that the man who emerged from the apartment and got into the cab was Wolters.
Brown argues, in the alternative, that a reasonable suspicion was not enough to justify Davies's actions that probable cause was required. But the words "probable cause" are found nowhere in Brown's trial court pleadings or in the argument that Brown's trial attorney presented orally to Judge Wood at the close of the evidentiary hearing. Brown's trial attorney never argued that "probable cause" was the legal test to be applied to Davies's level of knowledge concerning the identity of the man in the cab. Instead, as just explained, Brown's trial attorney argued that Davies had acted unreasonably, and Judge Wood rejected that argument.
The record therefore indicates that Brown failed to preserve his argument that the proper standard is "probable cause". However, at oral argument, Brown's appellate attorney asserted that the "probable cause" argument was indeed preserved because (1) Brown's trial attorney argued to Judge Wood that the applicable standard was "absolute certainty", and thus (2) "probable cause" was merely a lesser version of this proposed standard.
There is nothing in the record to support this contention. Brown's trial attorney never argued that the State was obliged to prove that Davies was absolutely certain that the man in the cab was Wolters. (Such an argument would have been notable: we are aware of no issue of fact to which an "absolute certainty" standard of proof applies. Even criminal convictions need not be proved to an absolute certainty.) Rather, as explained above, Brown's attorney argued that Davies's mistake of fact was unreasonable.
Judge Wood was never asked to consider (much less decide) the separate contention that, even if Davies reasonably suspected that the man in the cab was Wolters, Davies's level of knowledge failed to amount to "probable cause". For this reason, we conclude that this argument was not preserved for appeal.
At oral argument, Brown's appellate attorney raised one additional contention: she asserted that Judge Wood never actually found that Davies's mistake was reasonable i.e., never found that Davies acted reasonably when he concluded that Wolters was the man he saw get into the cab.
It is true that Judge Wood never used these exact words. But when Judge Wood's remarks are read in the context of the argument to which he was responding (the argument that Davies's mistake was unreasonable), it is obvious that Judge Wood was explaining why he rejected this argument *847 and why he concluded, instead, that Davies had acted reasonably.
We further note that Brown's current argument (that Judge Wood made no such finding) is at odds with the content of Brown's opening brief. Brown's brief repeatedly adopts the view that Judge Wood did, in fact, rule that Davies's mistake was reasonable.
In Paragraph II of the "Issues Presented" section of the opening brief, Brown's appellate attorney frames the issue as whether Judge Wood erred "when [he] found that the [probation] officer had made a reasonable mistake in concluding that his [probationer] was in [the] vehicle[, given the fact that] the man in the vehicle [i.e., Brown] was a large black man [while] the person who was the target of the [probation] officer's interest [i.e., Wolters] was a small white man".
In the "Statement of the Case" section of the brief, Brown's attorney likewise declares that Judge Wood "found that the probation officer was mistaken that the individual in the cab was Mr. Wolters, but that the mistake was understandable given the [circumstances]".
And, finally, in Part II of the "Argument" section of the brief, Brown's appellate attorney states that "the trial court found that Mr. Davies's conclusion that it was Mr. Wolters in the cab, although mistaken, was nonetheless reasonable." Later in that same section, Brown's attorney declares that "[Judge Wood's] conclusion that Mr. Davies had been reasonable in his efforts to determine who was in the cab is wrong. [Davies's] actions were not reasonable."
In other words, to the extent that Brown now argues that Judge Wood never found that Davies acted reasonably when he mistook Brown for Wolters, this contention was raised for the first time at oral argument, and it is therefore waived.[10]
Conclusion
We have considered all of Brown's arguments, and we have concluded that they are either meritless or unpreserved. Accordingly, the judgement of the superior court is AFFIRMED.
NOTES
[1] Cooksey v. State, 524 P.2d 1251 (Alaska 1974).
[2] Coleman v. State, 553 P.2d 40, 46 (Alaska 1976); Ebona v. State, 577 P.2d 698, 700-01 (Alaska 1978).
[3] Brown's brief asserts: "[Judge Wood's] reliance on the ... probation conditions imposed on Mr. Wolters [is] problematic in that, even if Mr. Wolters had been personally contacted by Mr. Davies, there does not appear to be any legal authority to support a search of Mr. Wolters's person, residence, or vehicle unless there was reasonable suspicion of criminal activity. Mr. Davies had no information that Mr. Wolters was currently engaging in criminal activity on the day that Mr. Davies directed that the [cab] be stopped."
[4] Reichel, 101 P.3d at 198.
[5] Id.
[6] Id. at 202-03.
[7] Id. at 1237-38.
[8] Roman, 570 P.2d at 1242.
[9] Brown, 346 F.3d at 812.
[10] Kellis v. Crites, 20 P.3d 1112, 1114-15 (Alaska 2001); Edwards v. State, 34 P.3d 962, 969-970 (Alaska App.2001).
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101 F. Supp. 2d 948 (2000)
William G. ZUERN, Petitioner,
v.
Arthur TATE, Warden, Respondent.
No. C-1-92-771.
United States District Court, S.D. Ohio, Western Division.
June 9, 2000.
*949 *950 *951 *952 *953 Lawrence Joseph Greger, Sharon Lynn Ovington, Greger And Ovington, Dayton, OH, William Sheldon Lazarow, Assist. State Public Defender, Columbus, OH, for plaintiff.
Charles L. Wille, Assist. Atty. General, columbus, OH, for defendants.
*954 DECISION AND ENTRY SUSTAINING RESPONDENT'S OBJECTIONS (DOCS. # 321 AND # 332) TO INITIAL AND SUPPLEMENTAL REPORTS AND RECOMMENDATIONS OF MAGISTRATE JUDGE (DOCS. # 320 AND # 329); DECISION AND ENTRY SUSTAINING IN PART AND OVERRULING IN PART PETITIONER'S OBJECTIONS (DOCS. # 326 AND # 331) TO INITIAL AND SUPPLEMENTAL REPORTS AND RECOMMENDATIONS OF MAGISTRATE JUDGE (DOCS. # 320 AND # 329); INITIAL AND SUPPLEMENTAL REPORTS AND RECOMMENDATIONS (DOCS. # 320 AND # 329) ADOPTED IN PART AND REJECTED IN PART; WRIT OF HABEAS CORPUS CONDITIONALLY GRANTED; CERTIFICATE OF PROBABLE CAUSE ISSUED; LEAVE TO APPEAL IN FORMA PAUPERIS GRANTED; JUDGMENT TO BE ENTERED IN FAVOR OF PETITIONER AND AGAINST RESPONDENT ON THIRD CLAIM, IN PART, AND IN FAVOR OF RESPONDENT AND AGAINST PETITIONER ON ALL OTHER CLAIMS; TERMINATION ENTRY
RICE, Chief Judge.
The Petitioner William G. Zuern ("Petitioner" or "Zuern") was convicted of committing the offense of aggravated murder and sentenced to death by the Ohio courts. He has initiated this action, challenging the constitutionality of his conviction and the sentence imposed upon him, and seeking a writ of habeas corpus.
During portions of May and June, 1984, Petitioner was incarcerated in the Community Correctional Institute ("CCI"), located in Hamilton County, Ohio, awaiting trial on a charge of murder. On the evening of June 9, 1984, Joseph Burton ("Burton") and Phillip Pence ("Pence"), two deputy sheriffs employed at the CCI, were ordered to search Zuern's cell for weapons. After the door to that cell had been opened, the Petitioner lunged at Pence, stabbing him in the chest with a metal knife or shank that Zuern had fashioned out of a metal hook for a bucket. Pence died from the wounds inflicted by the Petitioner. Thereafter, Zuern was indicted for aggravated murder, in violation of Ohio Revised Code § 2903.01(A) (i.e., purposely causing the death of another, with prior calculation and design). The Indictment also charged the Petitioner with three death penalty specifications or aggravating circumstances under Ohio Revised Code § 2929.04(A). The case was assigned to Judge William Morrissey of the Hamilton County Court of Common Pleas. In accordance with the law in Ohio, the Petitioner's trial was bifurcated into guilt and penalty phases, with the same jury sitting on both. At the conclusion of the guilt phase, the jury found Zuern guilty of the offense charged and of the three death penalty specifications or aggravating circumstances. Before the separate punishment phase of the trial could commence, Zuern informed Judge Morrissey that he did not want to present mitigating evidence. As a result, no evidence was presented during that phase of the trial. After having received the court's instructions, the jury recommended that the death penalty be imposed. Judge Morrissey accepted that recommendation and sentenced Zuern to death.
Petitioner then appealed his conviction and the sentence imposed upon him to the Hamilton County Court of Appeals, setting forth five assignments of error, to wit:
1. The trial court had erred by overruling Petitioner's motion to dismiss for reason that the Ohio statutory scheme for the imposition of the death penalty is unconstitutional;
2. The trial court had abused its discretion by overruling Petitioner's motion for a view of the scene;
*955 3. The trial court had erred when it failed to grant Petitioner's motion for a mistrial, when a prosecution witness informed the jury that he (Zuern) had been charged with murder at the time of the offense for which he was being tried;
4. The trial court erred by not, sua sponte, dismissing Beulah Taylor from the jury, after she disclosed to the court that she had heard a news account which stated that the Petitioner was in jail on another charge of murder, at the time he had allegedly committed the offense for which he was being tried; and
5. The verdict was against the weight of the evidence.
See Doc. # 88 at Ex. D. The Hamilton County Court of Appeals rejected Zuern's assignments of error and affirmed his conviction and, after conducting its own independent review on the issue of whether the evidence established beyond a reasonable doubt that the aggravating circumstances of which the Petitioner had been found guilty outweighed the mitigating factors, also affirmed the imposition of the death penalty upon him. State v. Zuern, 1986 WL 6507 (Ohio App.1986). Zuern then appealed to the Ohio Supreme Court, setting forth five propositions of law which tracked his assignments of error in the Hamilton County Court of Appeals. Over the dissent of Justices Craig Wright and Herbert Brown, the Ohio Supreme Court affirmed both Zuern's conviction and his sentence. State v. Zuern, 32 Ohio St. 3d 56, 512 N.E.2d 585 (1987), cert. denied, 484 U.S. 1047, 108 S. Ct. 786, 98 L. Ed. 2d 872 (1988). Like the Hamilton County Court of Appeals, the Ohio Supreme Court conducted its own independent review on the question of whether the evidence established beyond a reasonable doubt that the aggravating circumstances of which the Petitioner had been found guilty outweighed the mitigating factors.
Having exhausted his direct appeals, Zuern initiated an action in the Hamilton County Court of Common Pleas, requesting post-conviction relief pursuant to Ohio Revised Code § 2953.21, and setting forth 14 claims. In particular, the Petitioner alleged that his conviction and sentence were void or voidable for the following reasons, to wit:
1. The prosecutor had suppressed evidence favorable to the Petitioner;
2. The state had used false evidence to obtain a conviction against him;
3. There was insufficient evidence to convict him of aggravated murder;
4. The prosecutor had impermissibly commented upon his right to remain silent;
5. The state had improperly introduced evidence of the sympathetic character of the victim and his family;
6. The jury was permitted to view him in shackles during his trial;
7. The prosecutor systematically used the state's peremptory challenges to exclude prospective jurors who had reservations about the death penalty;
8. The prosecutor's voir dire was impermissible;
9. In imposing the death penalty, the trial court impermissibly considered a presentence report;
10. That presentence report contained inflammatory and prejudicial information;
11. The trial court impermissibly permitted the Petitioner to waive his right to present mitigating evidence, without having first conducted a hearing to ascertain whether he was competent to do so;
12. The appellate courts were prevented from complying with their statutory duty of determining whether the evidence established beyond a reasonable doubt that the aggravating circumstances of which the Petitioner had been found guilty out-weighed the mitigating factors, since he was permitted to waive his right to present mitigating evidence.
13. He was denied effective assistance of counsel by trial counsel; and
*956 14. He was denied effective assistance of counsel by appellate counsel.
See Doc. # 90 at Ex. O. The Court of Common Pleas dismissed Petitioner's request for post-conviction relief, without affording him an evidentiary hearing. Petitioner then appealed to the Hamilton County Court of Appeals, which affirmed the decision of the trial court to dismiss the request for post-conviction relief.[1]State v. Zuern, 1991 WL 256497 (Ohio App.1991). The Ohio Supreme Court subsequently denied Petitioner's application for further review of this request for such relief. State v. Zuern, 64 Ohio St. 3d 1423, 594 N.E.2d 624 (1992). While Zuern's application for further review was pending before the Ohio Supreme Court, he filed an application for delayed reconsideration in the Hamilton County Court of Appeals. After that court had denied Petitioner's application, he appealed to the Ohio Supreme Court, setting forth propositions of law relating to ineffective assistance of counsel by the attorneys who had represented him during his direct appeal. The Ohio Supreme Court declined to hear Petitioner's appeal. See State v. Zuern, 65 Ohio St. 3d 1463, 602 N.E.2d 1172 (1992).
Zuern then initiated this action, requesting a writ of habeas corpus, alleging that his conviction and sentence violated a number of provisions of the United States Constitution. In particular, the Petitioner asserted 25 separate grounds or claims for relief. This Court referred the matter to Magistrate Judge Michael Merz for a Report and Recommendations on May 12, 1994. On December 8, 1998, after having resolved numerous discovery disputes and having conducted an evidentiary hearing, Judge Merz issued his Initial Report and Recommendations. See Doc. # 320. In particular, that judicial officer recommended that the Court deny the Petitioner's request for a writ of habeas corpus, with respect to 24 of the asserted grounds, and that the Court conditionally grant the request with respect to one of the claims.[2] Both the Respondent (Doc. # 321) and the Petitioner (Doc. # 326) filed Objections to that judicial filing. On April 19, 1999, Judge Merz filed a Supplemental Report and Recommendations, in which that judicial officer recommended that this Court overrule both the Respondent's and the Petitioner's Objections. See Doc. # 329. Once again, both the Petitioner and the Respondent filed Objections to that filing by Judge Merz. See Docs. # 331 and # 332. On September 30, 1999, this Court, after noting that the Respondent had not filed a substantive response to the Petitioner's 134-page Objections to the Magistrate Judge's Initial Report and Recommendations (Doc. # 326), established a briefing schedule, whereby the Respondent would file a responsive memorandum and the Petitioner would, thereafter, be afforded the opportunity of filing a response. The Respondent has filed such a Memorandum (see Doc. # 335), and, on December 6, 1999, the Petitioner's Reply Memorandum was filed, see Doc. # 337, bringing this matter finally to issue before this Court.
This Court now rules upon the parties' Objections to Judge Merz' Initial and Supplemental Reports and Recommendations. As a means of analysis, this Court will initially address the Petitioner's Objections, following which it will turn to that of the Respondent. However, before engaging in that analysis, the Court will briefly set forth the standard of review it must apply when ruling upon such Objections. In Flournoy v. Marshall, 842 F.2d 875 (6th Cir.1988), the Sixth Circuit reiterated that a District Court must apply a de novo standard of review to the Report and Recommendations *957 of a Magistrate Judge in a habeas corpus proceeding. Accordingly, this Court reviews both Judge Merz' factual findings and his legal conclusions de novo.
I. Petitioners' Objections (Docs. # 326 and # 331)
As is indicated, Judge Merz has recommended that this Court deny the Petitioner's request for a writ of habeas corpus, with respect to 24 of the 25 asserted grounds for relief. With his Objections, the Petitioner argues that the Magistrate Judge erroneously recommended against relief with respect to 20 of those 25 grounds.[3] In addition, the Petitioner has broadly objected to Judge Merz' application of the presumption of correctness and the rule of procedural default. In his Objections to that judicial officer's Supplemental Report and Recommendations, the Petitioner has merely incorporated his Objections to Judge Merz' Initial filing.[4]See Doc. # 331. Therefore, this Court will rule upon the Petitioner's 134-page Objections to the Magistrate Judge's Initial Report and Recommendations. See Doc. # 326. As a means of analysis, this Court will initially address the Petitioner's broad attacks, following which it will turn to his Objections to Judge Merz' recommendations that the Court deny the requested relief with respect to 20 of the grounds.
A. Presumption of Correctness and Procedural Default
Since the Petitioner filed this action before the effective date of the Anti-terrorism and Effective Death Penalty Act of 1996 ("AEDPA"), 110 Stat. 1214, the Respondent concedes that the amended version of 28 U.S.C. § 2254(d) is not applicable herein.[5]See Doc. # 335 at 3, n. 1. See also, Lindh v. Murphy, 521 U.S. 320, 117 S. Ct. 2059, 138 L. Ed. 2d 481 (1997). Thus, this Court applies the pre-amendment version of § 2254(d). Recently, the Sixth Circuit reiterated that under the pre-AEDPA version of § 2254(d), state court findings of historical facts are presumed to be correct and are rebuttable only in certain circumstances. Mapes v. Coyle, 171 F.3d 408, 413 (6th Cir.), cert. denied, ___ U.S. ___, 120 S. Ct. 369, 145 L. Ed. 2d 284 (1999). An individual seeking a writ of habeas corpus must rebut the presumption of correctness by clear and convincing evidence. Id.
In his Report and Recommendations, Judge Merz recommended that this Court hold that the Petitioner's Fifth, Eighth, Tenth through Sixteenth and Twenty-Fifth Claims are barred by a procedural default, to wit: the failure to raise the issues set forth therein on direct appeal of his conviction and sentence, thus bringing into effect the Ohio doctrine of res judicata. Petitioner has mounted a broad two-pronged attack on that recommendation, arguing that Judge Merz erroneously deferred to the factual findings by the Ohio courts, when he improperly concluded that those 10 Claims were procedurally defaulted.[6]
*958 With respect to the first such prong, the Petitioner contends that deference should not be afforded to the state court findings, because he was not given an adequate opportunity to pursue post-conviction relief in state courts. As the Petitioner points out, the pre-amendment version of § 2254(d) expressly provided that the presumption of correctness was inapplicable in instances where factual disputes were not resolved in state court proceedings (§ 2254(d)(1)), where the material facts were not adequately developed at the state court hearing (§ 2254(d)(3)), where a petitioner did not receive a full, fair and adequate hearing in the state court proceeding (§ 2254(d)(6)), where a petitioner was otherwise denied due process in the state court proceeding (§ 2254(d)(7)), and where the state court factual findings are not fairly supported by the record (§ 2254(d)(8)). According to the Petitioner, all of these exceptions to the presumption of correctness are demonstrated by the fact that, in Hamilton County, the trial courts have denied every request for post-conviction relief, filed by an individual who has been sentenced to death, by merely signing findings of fact and conclusions of law prepared by the Hamilton County Prosecutor's office, a practice which was followed with regard to Petitioner's request for post-conviction relief. Moreover, he points out that the state courts denied him both the opportunity to conduct discovery and a hearing on the claims he raised in conjunction with his request for such relief.
As is indicated, this argument is directed at Judge Merz' recommendation that this Court hold that Petitioner has procedurally defaulted on 10 of his Claims by virtue of failing to raise these claims on direct appeal, causing these claims to be foreclosed by the Ohio doctrine of res judicata. With those 10 Claims, the Petitioner asserted that his federal constitutional rights were violated by the introduction of character evidence relating to the victim during the guilt portion of his trial (Fifth Claim); by the use of his post-arrest silence to prove his guilt (Eighth Claim); by permitting members of the jury to view him during the trial, while he was in shackles (Tenth Claim); by an erroneous "acquittal first" instruction (Eleventh Claim); by improper voir dire (Twelfth Claim); by the prosecution's systematic use of peremptory challenges to exclude, from the jury, individuals who had expressed reservations about the death penalty (Thirteenth Claim); by permitting him to waive his right to present mitigating evidence, without first determining whether he was competent to do so (Fourteenth Claim); by the trial court considering a presentence report (Fifteenth Claim); by an erroneous reasonable doubt instruction (Sixteenth Claim); and by the use of an invalid death penalty specification (Twenty-Fifth Claim).
In State v. Perry, 10 Ohio St. 2d 175, 226 N.E.2d 104 (1967), the Ohio Supreme Court recognized the applicability of the doctrine of res judicata in proceedings under Ohio's post-conviction relief statute, holding in ¶ 9 of the syllabus:
9. Under the doctrine of res judicata, a final judgment of conviction bars a convicted defendant who was represented by counsel from raising and litigating in any proceeding except an appeal from that judgment, any defense or any claimed lack of due process that was raised or could have been raised by the defendant at the trial, which resulted in that judgment of conviction, or on an appeal from that judgment.
The Hamilton County Court of Appeals applied Perry to conclude that Zuern could not proceed with the contentions which *959 form the basis of the 10 Claims in question in his petition for post-conviction relief. As can be seen from ¶ 9 of the syllabus of Perry, the only possible factual findings that the Hamilton County Court of Appeals could have made, on the issue of the applicability of the doctrine of res judicata, in Petitioner's appeal from the denial of his petition for post-conviction relief concern the question of whether the Petitioner could have raised any of the 10 above-listed Claims in his direct appeals. Courts in Ohio have held that a claim could have been raised, unless it is dependent upon evidence which is dehors the record. See e.g., State v. Milanovich, 42 Ohio St. 2d 46, 325 N.E.2d 540 (1975); State v. Sullivan, 1999 WL 1249529 (Ohio App.1999). It is apparent that none of these Claims raises an issue which could not have been resolved by an examination of the record, and that, therefore, the state court findings concerning the applicability of res judicata were correct.
With the second prong of his broad attack, the Petitioner focuses upon the doctrine of procedural default, which can be traced to the decision by the United States Supreme Court in Wainwright v. Sykes, 433 U.S. 72, 97 S. Ct. 2497, 53 L. Ed. 2d 594 (1977). Therein, the Supreme Court held that, in the absence of cause and prejudice, a District Court cannot grant a writ of habeas corpus, when the state courts have refused to address the merits of a federal constitutional argument, on the ground that the defendant failed to follow a state procedural requirement. In Boyle v. Million, 201 F.3d 711, 716 (6th Cir.2000), the Sixth Circuit noted that "[w]e have consistently held that, absent cause and prejudice, `a federal habeas corpus petitioner who fails to comply with a state's rules of procedure waives his right to federal habeas corpus review.' Gravley v. Mills, 87 F.3d 779, 784-85 (6th Cir.1996)." In Carpenter v. Mohr, 163 F.3d 938 (6th Cir. 1998), cert. denied, ___ U.S. ___, 120 S. Ct. 444, 145 L. Ed. 2d 362 (1999), the Sixth Circuit wrote:
Under Maupin v. Smith, 785 F.2d 135, 138 (6th Cir.1986), the Sixth Circuit utilizes a four part analysis when a state argues that a federal habeas claim has been procedurally defaulted in state court. This court determines:
1) whether there is a procedural rule that is applicable to the petitioner's claim and whether the petitioner failed to follow this rule; 2) whether the state courts actually enforced the state procedural rule; 3) whether the state procedural rule is an adequate and independent state ground to foreclose federal relief; and if so 4) the petitioner must establish cause for his failure to follow the rule and prejudice by the alleged constitutional error. Id.
Id. at 943 n. 10. Accord, Reynolds v. Berry, 146 F.3d 345, 347-48 (6th Cir. 1998).
The Petitioner has not challenged Judge Merz' finding that the first prong of that test was met. Under that prong, there must be a state procedural rule that is applicable to the Petitioner's Claims, and he must have failed to follow that rule. Herein, such a rule does exist, to wit: the failure to raise an issue on direct appeal, resulting in the Perry rule of res judicata foreclosing the Petitioner from litigating that issue in his post-conviction proceeding. It is apparent that the Petitioner failed to follow that rule, since he did not raise the 10 Claims in question during his direct appeal. He does, however, argue that the second and third prongs of the Sixth Circuit's four-part test have not been met. In particular, the Petitioner contends that the Perry rule of res judicata is not actually enforced and, thus, is not an adequate and independent state ground, because, in death penalty cases, the Ohio Supreme Court has repeatedly addressed issues in instances where an objection was not made at trial or the issue was not presented in the intermediate court of appeals. Although the Petitioner has cited a number of decisions by the Ohio Supreme Court, in which it addressed issues under those circumstances, none of those decisions *960 involved an application of the Ohio rule of res judicata in a post-conviction proceeding. On the contrary, each of those decisions was a direct appeal from a conviction and sentence of death.[7] The Petitioner has not cited a single case in which an Ohio court has failed to apply res judicata and, thus, has permitted a defendant to raise an issue in a post-conviction proceeding which could have been raised on direct appeal. Moreover, in Mapes, supra, the Sixth Circuit rejected a similar argument. Therein, the petitioner had been convicted and sentenced to death. In his habeas corpus action in federal court, he alleged, inter alia, that the trial judge was biased against him. 171 F.3d at 420-21. He had not, however, raised that issue in his direct appeal from his conviction and sentence; rather, he raised it for the first time in a post-conviction proceeding in state court. The Ohio trial and appellate courts concluded that the judicial bias claim was barred by virtue of Perry. Before the Sixth Circuit, the petitioner argued that he should be permitted to present that claim in his federal habeas corpus proceeding, because Ohio courts do not regularly apply its procedural default rules. The petitioner also cited decisions in which Ohio courts addressed the merits of arguments, despite procedural defaults. The Sixth Circuit acknowledged that, in some instances, Ohio appellate courts have forgiven a procedural default (such as a failure to object at trial) and have addressed the merits of an assignment of error. 171 F.3d at 421. However, the Mapes court also noted that none of those cases involved a post-conviction proceeding and, further, that Ohio courts have consistently applied Perry to deny review of claims, in post-conviction proceedings, that were or could have been asserted on direct appeal. Since the petitioner had failed to present his claim concerning judicial bias on his direct appeal, he was precluded from doing so in his federal habeas corpus action in the absence of a showing of cause and prejudice. In accordance with Mapes, and pursuant to a review of the relevant Ohio law, this Court concludes that Ohio courts have consistently enforced Perry and the rule of res judicata. Given that the Petitioner merely contends that Perry and the rule of res judicata is not an adequate and independent state ground (the third prong), because it is not actually enforced, his argument with respect to the third prong of the test is without merit. Moreover, since the Sixth Circuit has repeatedly applied Perry and the rule of res judicata to preclude federal habeas review (see e.g., Mapes), the rule is an adequate and independent state ground. Accordingly, this Court concludes that the second and third prongs of the Sixth Circuit's four-part test have been met.
The Court will address the fourth prong (i.e., whether the Petitioner has demonstrated cause and prejudice for his failure to follow the Ohio procedural rule), with respect to each of the 10 Claims on which Judge Merz recommended that the Court find procedural default. However, as a general overview to the resolution of that question, it should be noted that the Petitioner contends that he can establish cause and prejudice for each of those Claims, by the failure of his trial counsel to raise the particular issue during trial and/or the failure of his appellate counsel to raise that issue on his direct appeal. The Sixth Circuit has held that constitutionally ineffective assistance of counsel can establish cause. See e.g., Lucas v. O'Dea, 179 F.3d 412, 418 (6th Cir.1999); Gravley v. Mills, 87 F.3d 779, 785 (6th Cir.1996). It bears emphasis, however, that not every error by counsel can establish cause; rather, only representation that is constitutionally ineffective under Strickland v. Washington, 466 U.S. 668, 104 *961 S.Ct. 2052, 80 L. Ed. 2d 674 (1984), can establish cause. See Coleman v. Thompson, 501 U.S. 722, 752, 111 S. Ct. 2546, 115 L. Ed. 2d 640 (1991); Murray v. Carrier, 477 U.S. 478, 106 S. Ct. 2639, 91 L. Ed. 2d 397 (1986).[8] Under Strickland, a claim of ineffective assistance of counsel is comprised of two elements, to wit: that the representation afforded by counsel was deficient and that the deficient representation prejudiced the defense. 466 U.S. at 687, 104 S. Ct. 2052. Consequently, when a habeas petitioner contends that he can establish cause and prejudice to excuse his procedural default, by virtue of his counsel's ineffective assistance, the cause and prejudice prongs are conflated, since prejudice is one of the elements of a claim of ineffective assistance. In other words, if the Petitioner can establish cause, because his counsel were ineffective under Strickland, he has also established prejudice.
Accordingly, the Court rejects the Petitioner's two broad attacks on Judge Merz' Initial Report and Recommendations.
B. First and Second Claims
With his First Claim, the Petitioner argues that his conviction for aggravated murder and resulting sentence of death violated the Eighth and Fourteenth Amendments, because he is not guilty of that offense. In particular, Zuern contends that post-trial evidence has established that he did not act with prior calculation and design. With his Second Claim, the Petitioner contends that his conviction and death sentence were obtained in violation of the Due Process Clause of the Fourteenth Amendment, because the evidence which was introduced during his trial failed to establish that he acted with prior calculation and design. Since both of these Claims challenge the sufficiency of the evidence to establish the element of prior calculation and design, this Court will address the two claims together.
Ohio Revised Code § 2903.01(A) defines aggravated murder as purposefully causing the death of another, with prior calculation and design. Murder is defined as purposefully causing the death of another. Ohio Rev.Code § 2903.02(A). Only those individuals convicted of aggravated murder are eligible for the death penalty. See Ohio Rev.Code § 2929.02. Thus, the element of prior calculation and design was necessary, not only to convict Zuern for aggravated murder but also to impose the death penalty upon him.
In Johnson v. Coyle, 200 F.3d 987, 991 (6th Cir.2000), the Sixth Circuit restated the familiar test by which claims challenging the sufficiency of the evidence are to be analyzed in habeas corpus proceedings:
When a defendant challenges the sufficiency of the evidence to support a conviction, we inquire "whether after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Bagby v. Sowders, 894 F.2d 792, 794 (6th Cir.1990) (en banc); Jackson v. Virginia, 443 U.S. 307, 319, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979).
As an initial matter, it cannot be questioned that Petitioner committed the offense of murder. The evidence was uncontradicted that Petitioner purposefully caused the death of Pence by stabbing him *962 in the heart with a shank.[9] During his closing argument, Petitioner's counsel did not contest that his client had taken the life of Pence. Rather, the Petitioner's defense centered on the assertion that he had not acted with prior calculation and design. The evidence of that element was not overwhelming. For instance, there was no evidence that Zuern and Pence had interacted in any manner before the murder occurred. Thus, Zuern could not have formed a prior calculation and design to kill Pence, as opposed to some other corrections officer,[10] before that officer arrived in front of the Petitioner's cell. Nevertheless, reviewing the evidence presented at the Petitioner's trial in the manner most favorable to the prosecution, this Court concludes that a reasonable jury could have found that the Petitioner acted with prior calculation and design, as that element has been defined by the Ohio courts. In State v. Taylor, 78 Ohio St. 3d 15, 676 N.E.2d 82, cert. denied, 522 U.S. 851, 118 S. Ct. 143, 139 L. Ed. 2d 90 (1997), the Ohio Supreme Court elaborated upon the meaning of the phrase "prior calculation and design:"
In State v. Cotton (1978), 56 Ohio St. 2d 8, 10 O.O.3d 4, 381 N.E.2d 190, at paragraph one of the syllabus, we agreed that "`prior calculation and design' is a more stringent element than the `deliberate and premeditated malice' which was required under prior law." The General Assembly's apparent intention "was to require more than the few moments of deliberation permitted in common law interpretations of the former murder statute, and to require a scheme designed to implement the calculated decision to kill." Id., 56 Ohio St.2d at 11, 10 O.O.3d at 6, 381 N.E.2d at 193. Also, in Cotton, at paragraph two of the syllabus, we held that "[i]nstantaneous deliberation is not sufficient to constitute `prior calculation and design.'"
In State v. Jenkins, 48 Ohio App.2d at 102, 2 O.O.3d at 75, 355 N.E.2d at 828, the court of appeals found three factors important in determining whether prior calculation and design exists: (1) Did the accused and victim know each other, and if so, was that relationship strained? (2) Did the accused give thought or preparation to choosing the murder weapon or murder site? and (3) Was the act drawn out or "an almost instantaneous eruption of events"?
Id. 19, 676 N.E.2d at 89. The Ohio Supreme Court also cautioned that "it is not possible to draw a bright-line that emphatically distinguishes between the presence or absence of `prior calculation and design'" and that "each case turns on the particular facts and evidence presented at trial." Id. at 20, 676 N.E.2d at 89. See also, State v. Goodwin, 84 Ohio St. 3d 331, 343-44, 703 N.E.2d 1251, 1263, cert. denied, ___ U.S. ___, 120 S. Ct. 118, 145 L. Ed. 2d 100 (1999).
With that review of the law, this Court turns to the evidence of prior calculation and design that was presented during the Petitioner's trial. Wayne Lewis ("Lewis"), a fellow inmate of Zuern at the CCI, testified on behalf of the prosecution that he had observed the Petitioner sharpening a piece of metal into a shank or knife. Doc. # 98 at 854-55. Lewis also testified that, on another occasion, the Petitioner had indicated that somebody ought to do something to the guards, because they did not permit prisoners to use all of their allotted *963 time on telephone calls. Id. at 853-54. In addition, another fellow inmate of the Petitioner, Gerald Steven Joseph ("Joseph"), testified about his conversations with the Petitioner, after Pence had been murdered. Joseph indicated that the Petitioner told him that he got his "nut" from killing. Id. at 864. Joseph also testified that the Petitioner had told him that he (Zuern) had been told by another inmate that his cell would be searched on the evening that Pence was killed. Id. at 865. According to Joseph's description of his conversation with the Petitioner, Zuern, after having been warned about the planned search, got out of his bed, put on his pants and waited for the guards to reach his cell. Id. at 866. When his cell door had been partially opened, Petitioner lunged with his shank and used his shoulder to exert additional pressure and make the shank enter Pence's body more deeply. Id. In addition, Burton, who along with Pence had attempted to search Petitioner's cell on the evening of June 9th, testified that, when the officers arrived at the cell, Pence stood in front of the cell door and directed Zuern to come to the door and to stand in front of it. Id. at 935. Petitioner complied. Id. Pence then told Zuern to come outside the door and to put his hands against the wall. Id. When the cell door was opened, Zuern lunged at Pence, and stabbed that officer in the chest with his shank. Id. at 935-37.
The foregoing evidence convinces this Court, after viewing the evidence in the light most favorable to the prosecution, that a rational jury could have found that the state proved beyond a reasonable doubt that the Petitioner acted with prior calculation and design. Applying the three factors to which the Ohio Supreme Court referred in Taylor, supra, supports that conclusion. Although the Petitioner did not know Pence, he was familiar with other guards, and there was evidence that his relationship with the guards was strained. Moreover, Judge Morrissey instructed the jury that prior calculation and design could exist where a defendant plans to kill a member of a class of persons, rather than a particular person within that class. See Doc. # 99 at 1128. There was also evidence that the Petitioner gave thought and preparation to the selection of his weapon, by sharpening a piece of metal into a shank. Finally, although the act occurred quickly, there was evidence that it was not an instantaneous eruption of events. Joseph's testimony concerning his conversations with the Petitioner could have convinced the jury of that fact. In addition, Burton's testimony, to the effect that the Petitioner complied with Pence's initial command to approach the cell door and to stand in front of it, also supports a finding that the Petitioner's acts were not an instantaneous eruption of events.
With respect to the Petitioner's contention that newly discovered evidence establishes that he is innocent of the offense for which he was convicted (because that evidence establishes that he did not act with prior calculation and design), the Supreme Court has recognized that claims of actual innocence, predicated upon newly discovered evidence, "have never been held to state a ground for federal habeas relief absent an independent constitutional violation occurring in the underlying state criminal proceedings." Herrera v. Collins, 506 U.S. 390, 400, 113 S. Ct. 853, 122 L. Ed. 2d 203 (1993). Therefore, the Petitioner's mere assertion that such evidence establishes his innocence is not cognizable in this proceeding.
Accordingly, the Court overrules the Petitioner's Objections to the Magistrate Judge's Initial and Supplemental Reports and Recommendations, as those Objections relate to the Petitioner's First and Second Claims.
C. Third Claim
With this Claim, the Petitioner contends that the state violated its obligations under Brady v. Maryland, 373 U.S. 83, 83 S. Ct. 1194, 10 L. Ed. 2d 215 (1963), and its progeny, by withholding favorable and impeaching *964 evidence from him. In particular, Zuern focuses upon three matters, to wit: a memorandum drafted by Deputy Kenneth Schweinefuss ("Schweinefuss Memorandum"), a statement that Wayne Lewis gave to officers at 1:43 a.m., on June 10, 1984, and evidence that could have been employed to impeach Lewis, a prosecution witness. Judge Merz recommended that this Court deny this Claim on its merits. As a means of analysis, this Court will briefly review the jurisprudence pertaining to Brady and its progeny, following which it will address the three matters in the above order, discussing together the Schweinefuss Memorandum and Lewis' statement.
As the Sixth Circuit has noted, Brady did not create a general constitutional right to discovery in criminal case; rather, the rule established therein "is concerned only with cases in which the government possesses information which the defendant does not, and the government's failure to disclose the information deprives the defendant of a fair trial." United States v. Mullins, 22 F.3d 1365, 1371 (6th Cir.1994). Brady imposes upon the government "an obligation `to turn over evidence in its possession that is both favorable to the accused and material to guilt ....'" United States v. Phillip, 948 F.2d 241, 249 (6th Cir.1991) (quoting Pennsylvania v. Ritchie, 480 U.S. 39, 57, 107 S. Ct. 989, 94 L. Ed. 2d 40 (1987)) (emphasis supplied by the Sixth Circuit). In Schledwitz v. United States, 169 F.3d 1003 (6th Cir. 1998), the Sixth Circuit elaborated upon the materiality requirement of Brady:
When the defendant, as in this case, asserts that the newly discovered Brady evidence is exculpatory, the defendant will be entitled to a new trial if he shows that the favorable evidence at issue was "material." United States v. Frost, 125 F.3d 346, 382 (6th Cir.1997). In Kyles v. Whitley, 514 U.S. 419, 115 S. Ct. 1555, 131 L. Ed. 2d 490 (1995), the Supreme Court clarified the "materiality" analysis. The Court explained that a showing of materiality does not require the suppressed evidence in question establish the defendant's innocence by a preponderance of the evidence. Rather, the "question is not whether the defendant would more likely than not have received a different verdict with the evidence, but whether in its absence he received a fair trial, understood as a trial resulting in a verdict worthy of confidence." Id. at 434, 115 S. Ct. 1555; Frost, 125 F.3d at 382-83. Nor does the defendant need to "demonstrate that after discounting the inculpatory evidence in light of the undisclosed evidence, there would not have been enough left to convict." Kyles, 514 U.S. at 434-35, 115 S. Ct. 1555; United States v. Smith, 77 F.3d 511, 515 (D.C.Cir.1996) (materiality requirement is not a sufficiency-of-the-evidence test).
Instead, any favorable evidence, regardless of whether the defendant has made a request for such evidence, is "material" if "there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different." Kyles, 514 U.S. at 433-34, 115 S. Ct. 1555 (quoting United States v. Bagley, 473 U.S. 667, 682, 105 S. Ct. 3375, 87 L. Ed. 2d 481 (1985)); Frost, 125 F.3d at 382. A "reasonable probability" is "a probability sufficient to undermine confidence in the outcome." Bagley, 473 U.S. at 682, 105 S. Ct. 3375; United States v. Presser, 844 F.2d 1275, 1281 (6th Cir.1988). Moreover, in determining whether undisclosed evidence is material, the suppressed evidence is considered collectively, rather than item-by-item, to determine if the "reasonable probability" test is met. Kyles, 514 U.S. at 436, 115 S. Ct. 1555; Frost, 125 F.3d at 383.
Id. at 1011-12. In addition, "Brady recognizes no distinction between evidence which serves to impeach a government witness' credibility and evidence which is directly exculpatory of the defendant. *965 Both are `evidence favorable to the accused' and must be disclosed." Mullins, 22 F.3d at 1372. See also Giglio v. United States, 405 U.S. 150, 154, 92 S. Ct. 763, 31 L. Ed. 2d 104 (1972) ("When the `reliability of a given witness may well be determinative of guilt or innocence,' nondisclosure of evidence affecting credibility falls within [Brady]"). The Sixth Circuit has said that "[n]o Brady violation exists where a defendant `knew or should have known the essential facts permitting him to take advantage of any exculpatory information.'" United States v. Clark, 928 F.2d 733, 738 (6th Cir.), cert. denied, 502 U.S. 846, 112 S. Ct. 144, 116 L. Ed. 2d 110 (1991) (quoting United States v. Grossman, 843 F.2d 78, 85 (2nd Cir.1988), cert. denied, 488 U.S. 1040, 109 S. Ct. 864, 102 L. Ed. 2d 988 (1989)). See also, Mullins, 22 F.3d at 1371-72 ("Brady is concerned only with cases in which the government possesses information which the defendant does not, and the government's failure to disclose the information deprives the defendant of a fair trial"); United States v. Todd, 920 F.2d 399, 405 (6th Cir.1990). Moreover, the Sixth Circuit has indicated that there is no violation of Brady, unless the undisclosed materials would have led directly to the discovery of admissible evidence. Phillip, 948 F.2d at 249-50.
The Schweinefuss Memorandum was drafted June 10, 1994, the day after Petitioner had killed Pence. Therein, Deputy Schweinefuss relates a conversation between himself and Loyal Hearst ("Hearst"), an inmate at the CCI, and what he did in reaction to that conversation:
On [William Zuern], at or between the hours of 1330 and 1400, I was on the second range of A-Block when inmate Loyal Hearst called me to his cell and stated that he and William Zuern had an argument on 6-8-84 and that Zuern stated he was going to kill him the first chance he got. Inmate Hearst stated that Zuern had in his possession a homemade knife which he had sharpened on his cell floor.
I then walked to the A-Block rec. area and informed Deputy Fowler of the situation and we decided to bring the matter to the attention of the second shift supervisor Deputy [Supervisor-I] Menkhaus.
Upon our belief, at approximately 1450 hrs., Deputy Fowler and myself informed [Supervisor-I] Menkhaus of the situation and he stated that he would conduct a shakedown to try and find the weapon. This statement is true and accurate to the best of my knowledge.
This incident occurred on 6-9-84.
Doc. # 90 at Ex. O.
Schweinefuss, whom the prosecution called as a witness at the Petitioner's trial, testified that an inmate (whom he did not identify) had told him that the Petitioner had a knife. He also testified how he responded, after having been informed of that fact. However, he did not tell the jury, during his direct examination, that Hearst had mentioned that the Petitioner had threatened to kill him (Hearst), and that he had memorialized this conversation in a memorandum. The sole contested issue at Zuern's trial was whether he had acted with prior calculation and design when he had killed Pence, a corrections officer.[11] It is apparent that presenting evidence that Zuern had threatened to kill another inmate could have cast doubt upon the prosecution's theory that he had acted with prior calculation and design, with respect to Pence or the class of guards to which Pence belonged, as a whole. See Footnote 10, supra. Moreover, since the *966 Petitioner had not been provided information concerning this conversation with Hearst and a copy of the Schweinefuss Memorandum, which set out this conversation, his counsel did not cross-examine the Deputy on that subject. In his statement, which was recorded and has been transcribed,[12] Lewis indicated that Hearst had told him that Zuern had threatened to kill him.[13] Nevertheless, the state argues that the failure to furnish the Schweinefuss Memorandum and Lewis' statement did not violate Brady, because the Petitioner "knew or should have known the essential facts permitting him to take advantage of any exculpatory information." Clark, 928 F.2d at 738 (internal quotation marks and citation omitted). Indeed, Judge Merz rejected the Petitioner's assertion that the state had violated its obligations under Brady, in part, because his counsel could have easily discovered the fact that he had threatened Hearst from their client. As stated above, the prosecution did not violate Brady, unless the document or the statement was "material." The Magistrate Judge concluded that the Schweinefuss Memorandum and Lewis' statement were not material, since it was possible that the Petitioner had made the knife for more than one purpose. As a means of analysis, the Court will initially address the issue of whether the Petitioner knew or should have known the essential facts contained in the Schweinefuss Memorandum and Lewis' statement, so that he could take advantage of any exculpatory information. In the event that the Court rejects the Respondent's contention that there was no violation of Brady, because Petitioner knew the essential facts necessary to permit him to take advantage of the exculpatory information contained in the Schweinefuss Memorandum and in Lewis' statement, the Court will decide whether that withheld information was "material."
Unquestionably, as the Magistrate Judge found and the state argues, assuming the truth of the Schweinefuss Memorandum, the Petitioner knew of the ongoing feud at the CCI between himself and Hearst and of the fact that he had threatened to kill Hearst. That said, however, there is no indication that Petitioner knew that Hearst had informed officers of the existence of that feud or threat. Therefore, it cannot be doubted that the Schweinefuss Memorandum contained some information of which the Petitioner was not aware (i.e., that corrections officers had been informed of the existence of the feud and threat). Moreover, there is no indication that the Petitioner knew that Lewis had provided the same information to authorities, only hours after Pence had been killed. Given that the Petitioner was aware of the feud between himself and Hearst, this Court must decide whether the fact that the information concerning those matters was contained within a document written by a corrections officer and in a recorded statement given to officers is an essential fact that was not available to him, which would have permitted him to take advantage of the exculpatory information in that document and statement. To decide that question, the Court must examine the purpose to which Petitioner could have put that document and statement, if they had been provided to him for use at trial.
The Petitioner could have used the Schweinefuss Memorandum to cross-examine its author. It will be remembered that Schweinefuss testified that an inmate (Hearst, whom he did not identify) had told him that Zuern had a weapon. That testimony was introduced for the purpose of explaining why the subsequent search of the Petitioner's cell occurred, rather than *967 for the truth of the matter asserted. Therefore, Schweinefuss' testimony in that regard was not hearsay. See Ohio R. Evid. 801(C). See also, State v. Thomas, 61 Ohio St. 2d 223, 231, 400 N.E.2d 401, 407 (1980). Similarly, Petitioner's counsel could have cross-examined Schweinefuss about the entirety of Hearst's statements (i.e., that the inmate also indicated that Zuern had threatened to kill him), in order to provide an complete explanation as to why it was decided to search the Petitioner's cell. Therefore, if Petitioner had been provided the Schweinefuss Memorandum, he could have ensured that its contents were presented to the jury by way of cross-examining its author.[14]
Additionally, production of the Schweinefuss Memorandum could have made it possible for Petitioner's counsel to call Hearst to testify. Although Petitioner knew that he had threatened Hearst, he was not aware that Hearst had so informed the authorities and that his disclosure had been incorporated into an official document. Without having been provided that document, calling Hearst to testify would have posed a grave danger to Petitioner and his counsel. Zuern had threatened to kill Hearst, and the latter, an inmate at the CCI, would obtain no benefit by providing testimony that might be favorable to an individual who had killed a guard at that facility. Thus, Hearst could not have been perceived as a potentially favorable witness to the defense. However, armed with the Schweinefuss Memorandum, Petitioner's counsel could have avoided some of the dangers posed by calling Hearst. In particular, that document would have permitted Petitioner to call Hearst as a witness and to impeach him, if he had denied that Zuern had threatened him, or to refresh his recollection, if Hearst had said he did not remember the incident. Indeed, the information therein might have caused the trial court to permit Zuern to treat Hearst as a hostile witness. Therefore, disclosure of the Schweinefuss Memorandum would have made it far less dangerous and, thus, more advantageous for Zuern to call Hearst as a witness to testify to evidence that might have cast doubt on the presence of prior calculation and design to kill a corrections officer. In addition, disclosure of Lewis' statement would have made it even more advantageous for Petitioner to call Hearst, since that statement could have provided a second source with which to impeach Hearst.
In addition, it is possible that the Schweinefuss Memorandum, itself, could have been introduced as evidence during Petitioner's trial, as evidence of the truth of the statements contained therein, under exceptions to the hearsay rule. At trial, Petitioner could have argued that the document was admissible pursuant to Rule 803(8) of the Ohio Rules of Evidence, which provides:
(8) Public records and reports. Records, reports, statements, or data compilations, in any form, of public offices or agencies, setting forth (a) the activities of the office or agency, or (b) matters observed pursuant to duty imposed by law as to which matters there was a duty to report, excluding, however, in criminal cases matters observed by police officers and other law enforcement personnel, unless offered by defendant, unless the sources of information or other circumstances indicate lack of trust-worthiness.
That Rule differs from Fed.R.Evid. 803(8), in that Ohio permits a criminal defendant to introduce police reports, while the federal rule prohibits the introduction such reports in criminal prosecutions.[15] If *968 Zuern had attempted to introduce the Schweinefuss Memorandum, the prosecution might have objected on the basis that the statements attributed to Hearst therein constitute hearsay within hearsay. See Ohio R. Evid. 805. Courts in Ohio have indicated that, for the entirety of a police report to be admitted under Rule 803(8), all of the persons contributing information to the report must be under "a duty to report," unless some other exception to the hearsay rule is applicable. See e.g., State v. Gibson, 1999 WL 74532 (Ohio App.1999); State v. Settles, 1998 WL 667635 (Ohio App.1998). For instance, in Settles, the court indicated that, although police reports are generally admissible, the statements by witnesses to a crime, contained in such a report, could not be admitted, pursuant to Rule 803(8), since such witnesses are not under an official duty to make statements to police officers conducting an investigation. Similarly, there is no indication that Hearst, the witness, was under a duty to report that Zuern had threatened to kill him. Therefore, the Court will assume that the statements attributed to Hearst in the Schweinefuss Memorandum would not have been admissible under Rule 803(8), unless some other exception to the hearsay rule is applicable. However, by refusing to produce the Schweinefuss Memorandum to the Petitioner, the state denied to the Petitioner the opportunity of arguing that another exception to the hearsay rule was applicable to the statements attributed to Hearst in that document. In particular, the Petitioner was denied the opportunity to argue that Hearst's statements constituted an excited utterance. See Ohio R. Evid. 803(2). On June 9, 1984, Hearst informed Schweinefuss that Zuern had threatened to kill him on June 8, 1984. However, the Ohio Supreme Court has held:
There is no per se amount of time after which a statement can no longer be considered to be an excited utterance. The central requirements are that the statement must be made while the declarant is still under the stress of the event and the statement may not be a result of reflective thought. Therefore the passage of time between the statement and the event is relevant but not dispositive of the question.
State v. Taylor, 66 Ohio St. 3d 295, 303, 612 N.E.2d 316, 322 (1993) (emphasis in the original). When threatened by Zuern, Hearst was an inmate at the CCI, who was without means of escaping from the danger posed by Zuern. Therefore, the stress of the threat from Zuern (an individual who was being held in the CCI on a murder charge) would not have been likely to dissipate quickly, and the passage of one day might not have meant that Hearst' statements to Schweinefuss were the result of reflective thought. Therefore, if Petitioner had been provided the Schweinefuss Memorandum, he would have had the opportunity to move and to argue for its introduction at his trial, an opportunity that was denied him by the prosecution's failure to disclose that document.[16]
While it is always difficult to devise trial strategy in objective fashion after the fact, knowledge of the Schweinefuss Memorandum (and, for that matter, of the statement that Lewis had given to the law enforcement officials) might have emboldened Zuern's counsel to call him to the stand, to testify in his own defense at trial that his anger was directed not to a nameless class of guards but to Hearst, secure in the knowledge that the Memorandum could have been utilized, along with more thorough cross-examination of Hearst, to rebut what undoubtedly would have been the prosecution's claim that his testimony of no animus toward the guards was a recent fabrication. For that matter, had Hearst admitted the feud with Zuern and Zuern's threat to kill him, if a proper foundation had been laid, the Schweinefuss Memorandum might well have been admissible, *969 for the truth of the statements by Hearst contained within that document, as a prior consistent statement of Hearst, to rebut the State's express or implied charge of recent fabrication. Such a statement would be specifically defined as non-hearsay. Ohio Evid. R. 801(D)(1)(b). Of course, that none of these hypothetical scenarios actually transpired at Petitioner's trial can be directly attributable to the fact that his counsel had no knowledge of the existence of the Schweinefuss Memorandum or of Hearst's statements therein.
Accordingly, this Court concludes that the disclosure of the Schweinefuss Memorandum would have led to the discovery of admissible evidence, would have been useful as an impeachment tool, and, under certain circumstances, might have been admissible in evidence for the truth of the statements contained therein, either by way of an exception to the hearsay rule or to rebut the State's claim of recent fabrication by Hearst. For that matter, disclosure of the Memorandum might have allowed Zuern to testify, secure in the knowledge that the document would have provided corroboration on the defense of lack of prior calculation and design to murder a guard.
Based upon the foregoing, the Court rejects the Respondent's contention that there was no violation of Brady, because Petitioner knew the essential facts necessary to permit him to take advantage of the exculpatory information contained in the Schweinefuss Memorandum. While Petitioner clearly knew the information contained within that memorandum, he did not know that the information had been included within a memorandum. It is the memorialization of facts within the memorandum that was non-disclosed and unknown to Zuern.[17] The Court now turns to the question of whether the information contained within that document was "material."
As is indicated, evidence is material under Brady, if there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different. Schledwitz, 169 F.3d at 1012. A reasonable probability is one that is sufficient to undermine confidence in the outcome of a trial. Id. The Petitioner argues that the information contained in the Schweinefuss Memorandum was material, because it could have been used to negate the element of prior calculation and design, by showing that he had manufactured a shank in order to do harm to Hearst, rather than to a guard. This Court agrees. Above, this Court has indicated that the evidence that Petitioner acted with prior calculation and design was, to say the least, not overwhelming. Therefore, the importance of any evidence that would tend to detract from the existence of that fact would tend to be magnified. The information contained in the Schweinefuss Memorandum would certainly have detracted from the existence of prior calculation and design. Thus, such evidence would have been relevant and admissible under Ohio law, since it would have made it less likely that Zuern had acted with prior calculation and design. See Ohio R. Evid. 401 (defining relevant evidence to include evidence that has a tendency to make the existence of a fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence). There was no evidence that Zuern had ever come into contact with Pence, before the night in question. However, the trial *970 court instructed the jury that it could find that prior calculation and design exists, where a defendant plans to kill any member of a certain class of persons, even though he did not know in advance the identity of the particular victim. In closing argument, the prosecution asserted, inter alia, that the jury could find prior calculation and design from the very fact that Zuern had taken time to manufacture his weapon. Doc. # 99 at 1087-88. Evidence that Zuern had threatened to kill Hearst, someone who was not in the same class of persons as Pence, would have weakened the state's theory that Zuern's act of sharpening a piece of metal evidenced his prior calculation and design to kill a guard.[18] This Court cannot disagree with Judge Merz that it is possible that Zuern made his weapon for more than one purpose; however, given the paucity of evidence concerning prior calculation and design, this Court nevertheless believes that there is a reasonable probability that the result of Petitioner's trial would have been different (i.e., he would have been convicted of murder rather than of aggravated murder), if the prosecution had disclosed the Schweinefuss Memorandum. In other words, the failure to provide that document has undermined confidence in the outcome of that trial.[19]
In sum, the Court disagrees with Judge Merz' recommendation that the Court reject the Petitioner's Claim that the prosecution violated its obligations under Brady by failing to produce the Schweinefuss Memorandum. Accordingly, the Court sustains the Petitioner's Objections to that judicial officer's Initial and Supplemental Reports and Recommendations, as those Objections relate to the non-disclosure of that memorandum.
Lewis was an inmate at the CCI, at the time that Pence was killed. He was the only witness who provided testimony that, prior to the killing of Pence, Zuern had expressed animus toward the guards. Thus, his testimony was important in establishing prior calculation and design. Petitioner contends that the state failed to provide evidence that could have impeached Lewis' testimony. In particular, Petitioner points out that, two months before Pence was killed, Lewis' probation had been revoked and he had been sentenced to a term of one to ten years. Within a matter of days after having testified for the state at Zuern's trial, the state filed a motion to mitigate Lewis' sentence. Shortly thereafter, the judge who had sentenced Lewis suspended further execution of that sentence. According to Zuern, the temporal proximity between Lewis' testimony and the suspension of his sentence demonstrates that Lewis provided that testimony pursuant to an agreement with the prosecution. Petitioner contends that evidence of such an agreement should have been disclosed. Judge Merz rejected that argument, concluding that there was no evidence that Lewis testified in exchange for his sentence being suspended. For reasons which follow, this Court agrees with Judge Merz' analysis.
Despite being permitted to engage in discovery on this point and the fact *971 that Judge Merz conducted an evidentiary hearing in this matter, the Petitioner has failed to present any testimony or documentary evidence to support his proposition that Lewis testified pursuant to an agreement with the prosecution. On the contrary, Thomas Logano, the assistant prosecutor who met with Lewis prior to his testimony and who conducted the direct examination of that witness, testified during the evidentiary hearing before Judge Merz that no promises or agreements were made with Lewis, other than, if anyone asked, the prosecutor would indicate that he had testified. III Tr. at 393. Of course, the state's obligation under Brady is not limited to instances where it has entered into an express agreement with one of its witnesses. For instance, in Alderman v. Zant, 22 F.3d 1541, 1554 (11th Cir.), cert. denied, 513 U.S. 1061, 115 S. Ct. 673, 130 L. Ed. 2d 606 (1994), the Eleventh Circuit noted that the duty of disclosure extends to "informal understandings," as well as to instances where the prosecutor has made an express promise to a witness. However, the existence of an agreement, whether informal or express, remains a predicate for the prosecution's duty to disclose. In Alderman, the Eleventh Circuit concluded that the state had not violated Brady, by failing to disclose that a witness had testified in exchange for an agreement not to seek the death penalty, since there was no evidence of such an agreement. See Id. at 1555 ("Where there is, in fact, no agreement, there is no duty to disclose"). See also, Mastrian v. McManus, 554 F.2d 813, 823-24 (8th Cir.1977) (declining to read Giglio as requiring disclosure of a witness's expectation of leniency in exchange for testimony, in the absence of evidence of an express or implied agreement). Since this Court is unable to find that the state expressly or impliedly agreed to provide lenient treatment to Lewis, in exchange for his testimony, it concludes that there was no duty of disclosure under Brady.[20]
Nevertheless, in his Objections, Petitioner takes aim at Judge Merz's conclusion that an agreement between Lewis and the prosecutor, concerning the testimony of the former, did not exist. That conclusion supported the Magistrate Judge's recommendations concerning this Claim and the Petitioner's Fourth Claim (to the extent that those Claims are predicted upon the failure to disclose an agreement between the prosecution and Lewis). That judicial officer rejected the Petitioner's assertion that, given the temporal proximity between Lewis' testimony and the suspension of the execution of his sentence, there must have been a deal, and that it was not plausible that Lewis' testimony occurred without an agreement or promise. In rejecting that contention, Judge Merz concluded that, given Lewis' experience with the criminal justice system, he would have had an expectation that favorable testimony would result in his being rewarded by the prosecution. However, such an expectation does not establish that such testimony was the product of having been explicitly promised anything. The Petitioner contends that the foregoing reasoning "countenances the formation of agreements between witnesses and the State, based on winks and nods, implicit understandings, soft words of hope imparted from the State to the witness that never set [in] concrete terms...." Doc. # 326 at 35 (emphasis added). The key word in that passage is agreement. Since the evidence fails to establish that an agreement between Lewis and the prosecution existed, there was no duty of disclosure.[21]Alderman, supra.
*972 Accordingly, the Court sustains in part and overrules in part Petitioner's Objections to the Magistrate Judge's Initial and Supplemental Reports and Recommendations, as those Objections relate to the Petitioner's Third Claim. Those Objections are sustained as they relate to the Schweinefuss Memorandum and are otherwise overruled.
D. Fourth Claim
With this Claim, Petitioner asserts that his conviction was obtained in violation of the Due Process Clause of the Fourteenth Amendment, because Lewis perjured himself. In United States v. Frost, 125 F.3d 346 (6th Cir.1997), cert. denied, 525 U.S. 810, 119 S. Ct. 40, 142 L. Ed. 2d 32 (1998), the Sixth Circuit wrote that a "Brady claim may arise when the government has introduced trial testimony which was known to be, or should have been recognized as, perjury." Id. at 872. This Claim is predicated upon Zuern's contention that Lewis perjured himself when he indicated that he was not testifying pursuant to any type of agreement with the prosecution.[22] In particular, Lewis testified on direct examination that no threats, promises or deals had been made by law enforcement officers, in exchange for his testimony. Doc. # 98 at 848. Judge Merz recommended that this Court deny this Claim on the merits, for the reason that the evidence did not establish the existence of such an agreement. Since the evidence failed to demonstrate the existence of an agreement between the prosecution and Lewis, pertaining to his testimony, this Court agrees that Petitioner's conviction was not obtained with the use of perjured testimony.
Accordingly, the Court overrules Petitioner's Objections to the Magistrate Judge's Initial and Supplemental Reports and Recommendations, as those Objections relate to the Petitioner's Fourth Claim.
E. Fifth Claim
With his Fifth Claim, Zuern asserts that he was denied a fair trial, as guaranteed by the Due Process Clause of the Fourteenth Amendment, by the prosecution's introduction of evidence and use of argument concerning Pence's good character, during the guilt phase of his trial. The Magistrate Judge recommended that the Court dismiss this claim, since it was procedurally defaulted. The Court begins its analysis by reviewing the allegedly unconstitutional evidence and argument.
Very early in his opening statement in the guilt phase of the trial, the prosecutor told the jury that the evidence would demonstrate that Pence was 25-26 years of age, that he was the sole support of his widowed mother, where he had attended school, that he was well-liked and conscientious about his job and that he was respected *973 by his community, family and fellow officers. See Doc. # 98 at 836-37.[23] During the guilt phase of the trial, Lincoln Stokes ("Stokes"), the Hamilton County Sheriff, was permitted to testify about Pence's background, over the objection of Petitioner's counsel.[24] Doc. # 98 at 993-94. In particular, Stokes testified about Pence's educational background and that he was a conscientious employee, who was unmarried and devoted to his mother. Id. During his closing argument, Zuern's counsel reviewed the testimony that had been presented by the various witnesses, including Stokes, whom Zuern's counsel indicated had been called merely to present a "eulogy." In response, the prosecutor, during the rebuttal portion of his closing argument in the guilt phase, indicated that Stokes had been called as a witness to tell the jury something about Pence, that he was the sole support of his widowed mother and that he was an educated man. Doc. # 99 at 1109. The prosecutor also told the jury, during the rebuttal portion of his closing argument, that Pence's mother and other family members cared that a police officer had been killed by someone who was incarcerated. Id. at 1114. In addition, in response to the argument by Petitioner's counsel that his client had committed a simple murder, the prosecutor told the jury not to tell that to Pence's mother. Id. at 1119.
Judge Merz found that this claim was procedurally barred by Petitioner's failure to raise it on direct appeal and the res judicata rule of Perry. Petitioner disagrees, arguing that he can establish cause and prejudice, by virtue of the ineffective assistance of his appellate counsel, their failure to raise this issue on direct appeal. To establish a claim of ineffective assistance of counsel, a petitioner must demonstrate both that the representation afforded by counsel was deficient and that said deficient representation prejudiced the defense. Strickland, 466 U.S. at 687, 104 S. Ct. 2052. For present purposes, this Court will assume that appellate counsel's failure to raise the issue on direct appeal could be classified as performance that is deficient. However, for reasons which follow, this Court concludes that he was not denied a fair trial by the foregoing evidence and argument. Therefore, Petitioner cannot establish the prejudice element of the Strickland test, and he has failed to establish cause and prejudice.
As an initial matter, this Court will assume that the introduction of the evidence in question and the argument was improper under the law of Ohio.[25] Under the law of Ohio, only relevant evidence is admissible. See Ohio R. Evid. 402. Relevant evidence is defined as "evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." Ohio R. Evid. 401. Since Pence's educational background and the fact that he was a conscientious employee and devoted to his mother were not facts of consequence in the guilt phase of Zuern's trial, evidence of those facts was not admissible under state law. However, that is not the issue before the Court. The question *974 for this Court to resolve is whether the introduction of this evidence and use of the foregoing argument concerning Pence's educational background, his devotion to his job and mother and the like constituted a violation of the Due Process Clause of the Fourteenth Amendment.
In Brown v. O'Dea, 187 F.3d 572 (6th Cir.1999), the Sixth Circuit restated the principles which are applicable to a claim by a habeas petitioner that he was denied due process by the introduction of prejudicial evidence:
Habeas petitioners are not entitled to relief unless an error "had substantial and injurious effect or influence in determining the jury's verdict." Brecht v. Abrahamson, 507 U.S. 619, 637, 113 S. Ct. 1710, 123 L. Ed. 2d 353 (1993) (quoting Kotteakos v. United States, 328 U.S. 750, 776, 66 S. Ct. 1239, 90 L. Ed. 1557 (1946)). A petitioner will prevail where "a federal judge in a habeas proceeding is in grave doubt about whether a trial error of federal law" substantially affected a jury's verdict. O'Neal v. McAninch, 513 U.S. 432, 436, 115 S. Ct. 992, 130 L. Ed. 2d 947 (1995). However, we will grant federal habeas corpus relief only where a violation of a state's evidentiary rule results in the denial of fundamental fairness, and therefore, a violation of due process. Cooper v. Sowders, 837 F.2d 284, 287 (6th Cir.1988). "The standard in determining whether the admission of prejudicial evidence constitutes a denial of fundamental fairness is whether the evidence is `material in the sense of a crucial, critical highly significant factor.'" Leverett v. Spears, 877 F.2d 921, 925 (11th Cir.1989) (quoting Redman v. Dugger, 866 F.2d 387, 390 (11th Cir.1989)).
Id. at 578. See also, Dunnigan v. Keane, 137 F.3d 117, 125 (2d Cir.) ("[N]ot all erroneous admissions of [unfairly prejudicial] evidence are errors of constitutional dimension. The introduction of improper evidence against a defendant does not amount to a violation of due process unless the evidence `is so extremely unfair that its admission violates fundamental conceptions of justice.'" (citation omitted)), cert. denied, 525 U.S. 840, 119 S. Ct. 101, 142 L. Ed. 2d 81, (1998). The Sixth Circuit has applied the same "fundamental fairness" standard when assessing claims in habeas actions challenging the actions of a prosecutor, such as allegations that he engaged in improper argument. Caldwell v. Russell, 181 F.3d 731, 736 (6th Cir.1999).
Herein, this Court cannot conclude that either the evidence of Pence's background or the arguments by the prosecution resulted in a trial which was so fundamentally unfair that it deprived the Petitioner of due process of law. With respect to the prosecutor's informing the jury about Pence's background during opening statements, the prosecutor himself told the jury, just before telling the jury about Pence, that opening statements were not evidence. Therefore, this Court cannot conclude that the mention of Pence's background during opening statements rendered the Petitioner's trial fundamentally unfair. With respect to the evidence concerning Pence's background offered during trial, it should be noted that the jury was quite aware that the victim of the crime was a sheriff's deputy who was performing his official duties, when murdered by an inmate of the institution in which that deputy worked. Given that the jury already knew that Pence was a sympathetic victim, the additional evidence concerning his background, while not relevant, could not have rendered Petitioner's trial fundamentally unfair. With respect to the prosecutor's closing argument, the Petitioner initially focuses upon the prosecutor's statements regarding Stokes' testimony. The Sixth Circuit has indicated that a prosecutor is "entitled to wide latitude in rebuttal argument and may fairly respond to arguments made by defense counsel." Beam v. Foltz, 832 F.2d 1401, 1407 (6th Cir.1987), cert. denied, 485 U.S. 980, 108 S. Ct. 1278, 99 L. Ed. 2d 489 (1988). Herein, the prosecutor was responding to the *975 statements of Petitioner's counsel concerning Stokes' testimony. However, those statements were in response to the introduction of irrelevant evidence (i.e., the testimony of Stokes). Therefore, the Court assumes that the prosecutor's rebuttal argument in that regard was not a fair response to the argument of Petitioner's counsel. Nevertheless, the Court cannot conclude that the prosecutor's rebuttal argument, pertaining to Stokes testimony, deprived Zuern of due process. There was never any question that Zuern had killed Pence. The sole issue at his trial was whether he acted with prior calculation and design. The prosecutor's argument concerning Stokes' testimony did not tend to establish that Petitioner had so acted. Finally, the prosecutor mentioned, during the rebuttal phase of his argument, that Pence's mother and other family members cared that a police officer had been killed by someone who was incarcerated and suggested that the jury not tell Pence's mother that Petitioner had committed a simple murder. This Court will assume for present purposes that those arguments were improper; however, improper arguments by a prosecutor do not necessarily render a trial fundamentally unfair. In Darden v. Wainwright, 477 U.S. 168, 106 S. Ct. 2464, 91 L. Ed. 2d 144 (1986), the Supreme Court concluded that a prosecutor's argument, although undesirable or even universally condemned, did render the defendant's trial fundamentally unfair. Id. at 178-83, 106 S. Ct. 2464. In part, the Supreme Court noted that the prosecutor's argument had not misstated or manipulated the evidence and that the argument had not implicated a specific right of the defendant (such as the right to remain silent or the right to an attorney). Id. at 181-82, 106 S. Ct. 2464. Herein, the prosecutor's allegedly improper argument did none of those things. Moreover, Judge Morrissey instructed the jury that closing arguments were not part of the evidence.
Accordingly, the Court overrules Petitioner's Objections to the Magistrate Judge's Initial and Supplemental Reports and Recommendations, to the extent that those Objections relate to his Fifth Claim.
F. Seventh Claim[26]
With this Claim, Zuern alleges that his right to a fair and impartial jury, as guaranteed by the Sixth and Fourteenth Amendments, was violated when the trial court failed to excuse a juror who, during the course of the trial, overheard a television news story describing the Petitioner's previous murder charge. Judge Merz recommended that this Court dismiss this Claim on its merits. The Court begins its analysis of this Claim by setting forth the circumstances from which it arose.
Before the afternoon session of the first day of the trial on which evidence was presented (i.e., after the lengthy voir dire had been conducted), Juror Beulah Taylor ("Taylor") was brought before the court and counsel. The following colloquy occurred:
The Court: Mrs. Taylor, I would like to determine something, are you sick?
Taylor: I am nervous. I should have told you that in the beginning. I felt I had to do it. I was willing to try.
The Court: Do you think it is too much for you?
Taylor: Yes, I think so.
The Court: Do you have any questions?
Prosecutor: Mrs. Taylor, all I want to know, are you ill?
Taylor: I am nervous. I am a nervous person. I felt that I had to serve as a juror. I would rather not.
Prosecutor: There are a lot of things we don't like to do, but you took an oath of office to do this, you qualified yourself as a juror. We are into the case now, and these are things that are kind of *976 frustrating. I understand that you are nervous. Is it just that you don't want to serve?
Taylor: I would rather not. I feel I can't. I thought that I had to, but I feel now like I can't do it.
The Court: Do you feel like you can't listen to the evidence?
Taylor: I can listen to it. I guess I can.
Prosecutor: Can you take the legal charge that the Judge gives you and apply that law to what you hear?
Taylor: I would rather not.
Prosecutor: What is the reason?
Taylor: I guess I am just too emotional.
Prosecutor: You think that would interfere with your ability to judge this case one way or the other?
Taylor: Maybe. I just don't know.
The Court: No one has called you?
Taylor: I did overhear something and I would rather
The Court: In the hallway?
Taylor: No, outside. I would rather not do it.
Prosecutor: Where did you overhear this comment or conversation?
Taylor: I overheard it on TV. I would rather not serve.
The Court: You heard something on TV?
Taylor: Yes, this morning. I just happened to overhear it. I would rather not be involved.
Prosecutor: It was just an unintentional thing, and you happened to hear something?
Taylor: I would rather not serve.
Prosecutor: You think it would interfere with your consideration of this case, to be fair and impartial?
Taylor: Not to be fair. I could be fair. I would just rather not, I'm sorry.
Prosecutor: When did you overhear this?
Taylor: This morning.
Prosecutor: At what time.
The Court: Do you know what station?
Taylor: I think it was Channel 12.
Prosecutor: Was it concerning this case?
Taylor: Yes.
Prosecutor: Was it concerning the defendant and the state?
Taylor: Yes, it mentioned him.
The Court: Mr. Wood [defense counsel] do you have any questions that you would like to ask?
Mr. Wood: I haven't heard any reason yet. I know this lady is upset.
The Court: She said that she heard something about the case on Channel 12 this morning.
Mr. Wood: But she said that it wouldn't affect her decision in this case.
Taylor: It wouldn't affect my decision.
Mr. Wood: What did you hear?
Taylor: I heard a version of what had happened, why he was in there in the first place, that he had been there previous, and that upset me, but I could be fair. I want to be fair. I am sorry. I will serve. I could be impartial, yes.
The Court: But you would rather not?
Mr. Wood: Do you think what you heard this morning about the defendant would so influence you that you couldn't serve?
Taylor: No, no. I am hoping not. What is fair I will do. I will be fair, but I also want to be honest.
Mr. Wood: Do you feel like you might have a nervous breakdown over this?
Taylor: No, no.
Mr. Wood: You are highly nervous?
Taylor: Not highly. I guess just like a lot of women.
Mr. Wood: Men get the same way.
Taylor: I am sure they do.
Mr. Wood: You are not ill?
Taylor: No, no, I am not ill, and I will do my best. I will stay.
*977 The Court: Will you give it another day's try?
Taylor: Sure, I will. I would be glad to.
Mr. Wood: We would appreciate it.
Prosecutor: We would rather that you stay.
Taylor: I will.
Doc. # 98 at 923-27. The following morning, before testimony began, Petitioner's counsel met with the court and the prosecutor. Petitioner's counsel indicated that he had reviewed the news broadcast that Taylor had inadvertently seen the previous morning, and that the broadcast was more prejudicial than he had initially believed, since that stated that Zuern's fellow inmates referred to him as a crazy killer. Id. at 975-76. Petitioner's counsel moved for a mistrial or, in the alternative, that the court excuse Taylor from the jury. Id. at 976. The prosecution objected and suggested that Taylor be brought before the court and counsel, in order that she could be asked what exactly she had heard on the news broadcast. Id. Petitioner's counsel agreed that it would be appropriate to question Taylor. Id. at 977. After having been brought before the court and counsel, Taylor indicated that the statement that Petitioner had been charged with another murder had upset her and that she had not heard anything else, including how his fellow inmates had described him. Id. at 978-79. In response to a question from Petitioner's counsel, she said that she still believed that she could be a fair and impartial juror. Id. at 979. The trial court declined either to excuse Taylor or to declare a mistrial.
It is axiomatic that "the requirement that every defendant in a criminal case receive a fair trial by a panel of impartial, indifferent jurors ... is a basic requirement of due process." United States v. Rigsby, 45 F.3d 120, 122 (6th Cir.1995) (internal quotation marks and citation omitted). Herein, the Petitioner was not deprived his right to a fair and impartial jury by the failure of the trial court either to excuse Taylor or to declare a mistrial. In United States v. Rugiero, 20 F.3d 1387 (6th Cir.), cert. denied, 513 U.S. 878, 115 S. Ct. 208, 130 L. Ed. 2d 137 (1994), the Sixth Circuit addressed an analogous issue. Therein, some of the members of the jury heard a televised report, tying the defendant's counsel to organized crime figures. The defendant argued that as a result he had been denied his right to a fair and impartial jury. After the verdict had been returned, the District Court asked each juror separately about the report. While some jurors indicated that they had heard or heard about the television reports, each juror denied that the information obtained had impacted the verdict. Based upon its questioning of the members of the jury, the District Court concluded that the exposure of the jurors to the television reports was not the basis for disturbing the jury's verdict. Upon appeal, the Sixth Circuit affirmed. Initially, that court noted that the District Court "properly made no `presumption of prejudice' from juror exposure to the television news." Id. at 1390. In addition, the Sixth Circuit indicated that the District Court was entitled to view the jurors' assurances of continued impartiality as credible. Id. Similarly, herein, the trial court questioned Taylor and, based upon her assurances, concluded that she could continue to serve as a fair and impartial juror, despite having heard a television report concerning the reason for Petitioner's incarceration in the CCI. Indeed, Taylor indicated on two separate occasions that she could be a fair and impartial juror.
Accordingly, the Court overrules the Petitioner's Objections to Judge Merz' Initial and Supplemental Reports and Recommendations, as those Objections relate to Petitioner's Seventh Claim.
G. Eighth Claim
With his Eighth Claim, Petitioner contends that his conviction and sentence violated the Fifth, Sixth and Fourteenth Amendments, as a result of the prosecutor putting forward evidence and argument *978 characterizing his (Zuern's) post-arrest silence and failure to testify as proof of his guilt. Judge Merz recommended that this Court dismiss this Claim, as being procedurally defaulted, since the issue was not raised in his direct appeal. As a means of analysis, this Court begins by reviewing the allegedly objectionable testimony and argument.
During its case-in-chief, the prosecution elicited testimony from Ronald Roeckers ("Roeckers"), a deputy employed by the Hamilton County Sheriff's Department who had investigated the murder of Pence. As part of that investigation, Roeckers attempted to interview Zuern, who, after having been given the warnings required by Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966), refused to give a statement. During the trial, the prosecutor questioned Roeckers on his attempt to interview the Petitioner:
Question: Relative to the defendant, William Zuern, what, if anything, did you and your partner, Mr. Bennett, do?
Answer: We had Mr. Zuern brought into the Supervisor's office, Supervisor Brockmeyer's office, where we attempted to interview him and get some information.
Question: Were you successful at all?
Answer: No sir.
Question: Will you describe to the ladies and gentlemen of the jury and Judge Morrissey whether or not this defendant showed any emotion during the conversation.
Defendant's counsel: We will object to that, your honor. That is subjective. He can describe him, but his subjective analysis is not proper.
The Court: Objection sustained.
Question: Describe his expressions, or lack thereof, and so forth.
Answer: There was no expression.
Question: How can you describe that, "There was no expression," by a word.
Defense Counsel: Objection. That calls for a subjective conclusion.
Prosecutor: His own idea from his personal observation.
The Court: I will allow him to testify as to what he saw.
Answer: Blank.
Doc. # 98 at 983-84. During the opening portion of his closing argument, the prosecutor argued that the lack of remorse shown by the Petitioner indicated that he had acted with purpose and intent, rather than killed Pence by accident. Doc. # 99 at 1089-90. During the closing portion of that argument, the prosecutor recounted Roeckers' testimony, including the fact that Zuern had said nothing when questioned and that his expression had been blank. Id. at 1117.
The Petitioner argues that his procedural default, the fact that the issue was not raised in his direct appeal, does not bar the Court from considering this claim, since he can establish cause and prejudice, to wit: the ineffective assistance of appellate counsel in failing to raise the issue. For the reasons that follow, as well as those set forth by Judge Merz in his Initial Report and Recommendations (Doc. # 320), this Court concludes that the Petitioner cannot establish cause and prejudice, as a result of his appellate counsel's failure to raise this issue on direct appeal. It is axiomatic that to establish a claim of ineffective assistance of counsel, a defendant must demonstrate both that the representation afforded by his counsel was deficient and that said representation prejudiced his defense. Strickland, 466 U.S. at 687, 104 S. Ct. 2052.
With respect to Roeckers' testimony that he and his partner were unable to interview Zuern, this Court concludes that he cannot establish prejudice. In Watson v. Marshall, 784 F.2d 722 (6th Cir.1985), cert. denied, 476 U.S. 1107, 106 S. Ct. 1955, 90 L. Ed. 2d 363 (1986), the Sixth Circuit addressed an analogous situation. Therein, the petitioner was convicted in state court of murdering his nine month-old grand nephew. After having *979 exhausted his state remedies, the petitioner sought habeas relief in federal court, arguing, inter alia, that his trial counsel had rendered ineffective assistance, by failing to object to testimony from investigating officers to the effect that the petitioner had declined to speak to the officers after having been read his Miranda rights. Without addressing the issue of whether trial counsel's performance had been deficient, the Sixth Circuit concluded that the petitioner had failed to demonstrate prejudice, because he had failed to establish that the results of his trial would have been different if the officer's testimony had been excluded. Therein, the questioning of the two officers concerning the petitioner's post-arrest silence was much more extensive than the one question that Roeckers was asked during Zuern's trial. The one statement by Roeckers that he and his partner were unsuccessful in attempting to elicit information from the Petitioner did not result in a trial which produced an unreliable result. Strickland, 466 U.S. at 687, 104 S. Ct. 2052. In addition, although the prosecutor mentioned in the rebuttal portion of his closing argument that the Petitioner had not said anything to Roeckers, the prosecutor did not attempt to tie that statement to the central issue of whether the Petitioner had acted with prior calculation and design.
The other pertinent aspect of Roeckers' testimony was his statement that Zuern showed no emotion or expression, other than a blank look. Petitioner claims that this testimony violated Doyle v. Ohio, 426 U.S. 610, 96 S. Ct. 2240, 49 L. Ed. 2d 91 (1976) and Wainwright v. Greenfield, 474 U.S. 284, 106 S. Ct. 634, 88 L. Ed. 2d 623 (1986). For reasons which follow, this Court concludes that appellate counsel was not deficient in failing to raise that argument on direct appeal, since the testimony in question did not violate the rule established in those cases. In Doyle, the defendants were charged with selling 10 pounds of marijuana to an informant. After having been arrested, the defendants were given their Miranda warnings and declined to make statements. During their trials, each of the defendants testified that the informant had been attempting to sell the controlled substance to him, rather than the particular defendant attempting to sell the marijuana to the informant. In an effort to impeach that testimony, the prosecutor asked each of them whether, at the time of being arrested, he had told officers that the informant had attempted to sell marijuana to him. Given that each of the defendants had invoked his Miranda right to remain silent, each was compelled to admit that he had not provided that information to the arresting officers. After the defendants' convictions had been affirmed by the Ohio appellate court, and the Ohio Supreme Court had declined their request for further review, the United States Supreme Court reversed, concluding that it was a violation of the Due Process Clause of the Fourteenth Amendment to permit a defendant to be cross-examined on his post-arrest silence, after he had invoked his Miranda right to remain silent. In Greenfield, the defendant was arrested for committing a sexual assault and, on two occasions, was given his Miranda warnings. On each instance, he stated that he understood his rights and that he would not answer the officers' questions until he had spoken to an attorney. To defend against the assault charge, the defendant entered a plea of not guilty by reason of insanity. In an effort to establish that the defendant was sane, the prosecutor introduced testimony from the officers as to what the defendant had said in response to the Miranda warnings. In his closing argument, the prosecutor recounted the officers' testimony and suggested that it demonstrated that the defendant was sane. The Supreme Court concluded that Doyle forbade the prosecution from using the defendant's post-arrest silence to establish his sanity. In reaching that conclusion, the Supreme Court rejected the state's argument that the testimony in question was necessary in order to permit it to prove that the defendant was *980 sane, since "the state's legitimate interest in proving that the defendant's behavior appeared to be rational at the time of his arrest could have been served by carefully framed questions that avoided any mention of the defendant's exercise of his rights to remain silent and to consult counsel." 474 U.S. at 295, 106 S. Ct. 634 (footnote omitted). In a footnote to the quoted passage, the Greenfield Court noted that the defendant had not raised the issue of whether a prosecutor may legitimately comment upon "purely demeanor or behavior evidence." Id. at 295 n. 13, 106 S. Ct. 634.
The fundamental principle that supports both Doyle and Greenfield is that the Miranda warnings carry an implied promise that "silence will carry no penalty." Doyle, 426 U.S. at 618, 96 S. Ct. 2240. Since Roeckers' testimony concerning Zuern's blank expression concerned physical facts, rather than relating what Zuern had said, that testimony did not implicate his right to remain silent. Consequently, Doyle and Greenfield were not violated by the introduction of that testimony. Pennsylvania v. Muniz, 496 U.S. 582, 110 S. Ct. 2638, 110 L. Ed. 2d 528 (1990), supports this Court's conclusion. Therein, the defendant was arrested for drunk driving and transported to the police station, where he was booked and forced to perform a sobriety test, which was videotaped. The defendant was not given his Miranda warnings, before those procedures occurred. After being convicted for drunk driving, the defendant appealed, arguing that the videotape of the booking procedures and the sobriety test should have been suppressed, since he had not been given his Miranda warnings before that videotape was made. The Pennsylvania appellate court agreed with the defendant and reversed his conviction. Upon further appeal, the Supreme Court reiterated that the Fifth Amendment protects an individual from being compelled to provide testimonial, rather than physical evidence. Id. at 589, 110 S. Ct. 2638. Applying that rule, the Muniz Court concluded that, with the exception of one question, the videotape would not be suppressed, despite the absence of Miranda warnings. Of particular present importance, the Supreme Court held that the slurred nature of the defendant's speech, in response to routine booking questions, did not render the videotape inadmissible, since the physical inability to articulate words in a clear manner constituted physical evidence, rather than evidence of a testimonial nature. Similarly, herein, Zuern's blank expression was physical, rather than testimonial, evidence. Therefore, the Miranda warnings given to the Petitioner did not impliedly promise that his expression or demeanor would not be used against him, and Doyle and Greenfield were not violated by the introduction of testimony or argument concerning Zuern's blank expression.[27] Consequently, the Petitioner has failed to establish that his appellate counsel rendered ineffective assistance by not raising this issue on his direct appeal (their representation was not deficient, and that representation did not cause the Petitioner to suffer prejudice). Thus, he has not demonstrated cause and prejudice, sufficient to excuse his procedural default.
Accordingly, the Court overrules the Petitioner's Objections to Judge Merz' Initial and Supplemental Reports and Recommendations, to the extent those Objections relate to the Petitioner's Eighth Claim.
H. Ninth Claim
With his Ninth Claim, the Petitioner asserts that his rights under the Sixth and Fourteenth Amendments were violated, because the trial court denied his request for a jury view of the CCI. Judge Merz recommended that this Court dismiss this claim, since any error in refusing *981 to permit a jury view did not rise to the level of a constitutional violation. In his Objections, Zuern argues that the denial of the jury view prevented him from presenting evidence on the key issue of prior calculation and design. According to the Petitioner, a view would have permitted the jury to experience the subhuman conditions at the CCI and, thus, to appreciate that, rather than his being a cold, remorseless person who enjoyed killing in cold blood, he was like a caged animal who lashed out instinctively at a possible threat to his life.
To support that argument, the Petitioner relies upon Crane v. Kentucky, 476 U.S. 683, 106 S. Ct. 2142, 90 L. Ed. 2d 636 (1986). Therein, the defendant was convicted of murder in state court. Before his trial, the defendant had moved to suppress his confession, arguing that it had been involuntary. The state court overruled that motion and permitted the confession to be introduced in evidence. The prosecutor, during his opening statement, indicated that the state would rely primarily upon the defendant's confession. In response, defendant's counsel told the jury that they should not believe the defendant's confession, because it was rife with inconsistencies and the circumstances under which it had been given cast doubt upon its credibility. In response to defense counsel's opening statement, the prosecutor moved in limine to exclude testimony concerning the circumstances of the confession, since such testimony was only relevant to its voluntariness, which was a legal issue for the court to decide in the context of a motion to suppress evidence. The trial court granted the prosecutor's motion, and the defendant was convicted. After his conviction had been affirmed by the Kentucky Supreme Court, the defendant appealed to the Supreme Court of the United States, arguing that he had been denied his constitutional right to a fair opportunity to present a defense. The Supreme Court agreed, holding that, in the absence of any justification, the state would deny a criminal defendant his right to a fair opportunity to present a defense, under the Sixth and Fourteenth Amendments, by preventing him from introducing evidence which could have cast doubt on the credibility of his confession.
Under the law of Ohio, a jury view is not evidence. See e.g., State v. Richey, 64 Ohio St. 3d 353, 367, 595 N.E.2d 915, 927 (1992); State v. Hopfer, 112 Ohio App. 3d 521, 542, 679 N.E.2d 321, 334 (1996). See also, 1Ohio Jury Instructions § 2.50 (pattern instruction to be given before jury view, to the effect that it is not evidence and that the purpose of a jury view is to help the jury better understand the evidence). Therefore, by denying the Petitioner's request for a jury view, the trial court did not prevent him from presenting evidence to support his defense. Indeed, there is no indication in the record that the Petitioner was denied the opportunity to present evidence concerning the conditions at the CCI, in order to support his defense that he had not acted with prior calculation and design. Consequently, the denial of the request for a jury view of the CCI is not remotely similar to Crane, and the Petitioner's assertion that the Supreme Court's decision therein supports this Claim is without merit.
Moreover, under the law of Ohio, the decision of whether to grant a jury view lies within the sound discretion of the trial court. State v. Lundgren, 73 Ohio St. 3d 474, 653 N.E.2d 304 (1995). Assuming for sake of argument that Judge Morrissey abused his discretion in refusing the requested jury view, a claim of abuse of discretion by a state court trial judge does not establish a federal constitutional violation. Sinistaj v. Burt, 66 F.3d 804 (6th Cir.1995).
Accordingly, the Court overrules the Petitioner's Objections to Judge Merz Initial and Supplemental Reports and Recommendations, as those Objections relate to his Ninth Claim.
*982 I. Tenth Claim
With this Claim, Zuern asserts that his conviction and sentence violate due process, because the jury was able to observe him while he was shackled. Judge Merz recommended that this Court deny this Claim, as being procedurally defaulted, since the Hamilton County Court of Appeals concluded, in Petitioner's state, post-conviction proceedings, that his shackling claim was barred by Perry and the doctrine of res judicata. The Petitioner contends that he can establish cause and prejudice, permitting the Court to address the merits of this Claim, as a result of the ineffective assistance rendered by his trial and appellate counsel. For reasons which follow, this Court concludes that the Petitioner has failed to establish cause and prejudice.
At the risk of being repetitive, a claim of ineffective assistance of counsel has two components, to wit: that counsel's performance was deficient and that said performance prejudiced the defense. Strickland, 466 U.S. at 687, 104 S. Ct. 2052. The defense is prejudiced when counsel commits errors that are "so serious as to deprive the defendant of a fair trial, a trial whose result is reliable." Id. Herein, the Petitioner has not demonstrated that he suffered prejudice as a result of the failure of counsel to raise the issue of the jury seeing him in shackles.
It bears emphasis that this is not an instance, such as in Illinois v. Allen, 397 U.S. 337, 344, 90 S. Ct. 1057, 25 L. Ed. 2d 353 (1970), where a defendant was tried while in restraints. Rather, during the evidentiary hearing conducted by Judge Merz, Jerry Charles Zapf ("Zapf"), one of the jurors in Petitioner's trial, testified that he believed that on one occasion the Petitioner was brought into the courtroom in shackles, while the jury was already seated in the jury box. Doc. # 242 at 196. Zapf testified that he also believed that he had seen deputies remove the shackles from Zuern's legs. Id. at 197.
In United States v. Moreno, 933 F.2d 362 (6th Cir.), cert. denied, 502 U.S. 895, 112 S. Ct. 265, 116 L. Ed. 2d 218 (1991), the Sixth Circuit addressed an analogous claim. Therein, the defendants were inadvertently observed by members of the jury, while they were shackled and being transported by the marshals. After that had occurred, the defendants requested a mistrial, which the District Court declined to grant. In affirming that decision, the Sixth Circuit wrote:
We have distinguished the inherent prejudice to a defendant who is shackled while in the courtroom from a defendant who has been observed in shackles for a brief period elsewhere in the courthouse. United States v. Crane, 499 F.2d 1385, 1389 (6th Cir.), cert. denied, 419 U.S. 1002, 95 S. Ct. 322, 42 L. Ed. 2d 278 (1974). Defendants are required to show actual prejudice where "[t]he conditions under which defendants were seen were routine security measures rather than situations of unusual restraint such as shackling of defendants during trial." Payne v. Smith, 667 F.2d 541, 544-45 (6th Cir.1981) (quoting United States v. Diecidue, 603 F.2d 535, 549 (5th Cir.1979), cert. denied, 445 U.S. 946, 100 S. Ct. 1345, 63 L. Ed. 2d 781 (1980)), cert. denied, 456 U.S. 932, 102 S. Ct. 1983, 72 L. Ed. 2d 449 (1982).
Id. at 368.[28] The Moreno court concluded that the defendants had failed to demonstrate actual prejudice, in part, because testimony had previously been introduced, informing the jury that the defendants were in custody. Herein, the jury was informed that Zuern had been an inmate in the CCI when Pence was killed. Moreover, during his closing arguments to the jury, the Petitioner's counsel conceded that his client had murdered Pence, focusing his efforts on attempting to convince the jury that his client had not acted with *983 prior calculation and design. Given that the jury knew that the Petitioner had been incarcerated when Pence was killed and, further, since he did not deny having killed that deputy, this Court concludes that Petitioner has failed to show that he suffered actual prejudice as a result of the jury observing him in shackles.
Since the Petitioner's rights were not violated by the jury having viewed him while he was shackled, he was not prejudiced by the failure of his appellate counsel to raise that issue in his direct appeal. Therefore, he has not demonstrated cause and prejudice to excuse his procedural default of this issue. Accordingly, the Court overrules Petitioner's Objections to Judge Merz' Initial and Supplemental Reports and Recommendations, as those Objections relate to Petitioner's Tenth Claim.
J. Eleventh Claim
With his Eleventh Claim, Petitioner contends that his rights under the Eighth and Fourteenth Amendments were violated as a result of the trial court's instructions to the jury, prior to deliberations in the guilt phase of the trial. In particular, the Petitioner contends that the trial court gave an erroneous "acquittal first" instruction. After defining the offense of aggravated murder and explaining its essential elements (as well as the specifications with which the Petitioner had been charged), Judge Morrissey told the jury:
If, and only if, however, you find that the state has failed to prove beyond a reasonable doubt the element of prior calculation and design, you must find the defendant not guilty of aggravated murder and you will proceed and consider whether the defendant is guilty of murder.
Doc. # 99 at 1130. Judge Merz recommended that this Court dismiss this Claim, as being procedurally defaulted. Zuern challenges that recommendation, arguing that cause and prejudice are demonstrated by the ineffective assistance of his appellate counsel, i.e., their failure to challenge the legality of that instruction on appeal. For reasons which follow, this Court concludes that the instruction was not erroneous under either Ohio or the United States Constitution; therefore, the failure of Petitioner's counsel to raise the issue during his direct appeal did not render their performance deficient. The Court begins its analysis by examining the law of Ohio.
In State v. Thomas, 40 Ohio St. 3d 213, 533 N.E.2d 286 (1988), the Ohio Supreme Court held, in ¶ 3 of the syllabus:
3. A jury must unanimously agree that the defendant is guilty of a particular criminal offense before returning a verdict of guilty on that offense. If a jury is unable to agree unanimously that a defendant is guilty of a particular offense, it may proceed to consider a lesser included offense upon which evidence has been presented. The jury is not required to determine unanimously that the defendant is not guilty of the crime charged before it may consider a lesser included offense. (State v. Muscatello, 57 Ohio App. 2d 231, 11 O.O.3d 320, 387 N.E.2d 627 [1977], paragraph three of the syllabus, adopted.)
The approach adopted by the Ohio Supreme Court in Thomas has been referred to the "hung jury" approach.[29]See e.g., United States v. Roland, 748 F.2d 1321, 1324 (2nd Cir.1984).[30] The Thomas court, turning to the question of whether the trial court's instructions had violated the rule set forth in ¶ 3 of the syllabus, noted that *984 the trial court had read the following instruction to the jury:
"If you find that The (sic) State has proven beyond a reasonable doubt all of the essential elements of the crime of aggravated murder, then your verdict must be that the Defendant is guilty of aggravated murder; and you will not consider the lesser offense."
"However, if you find that The (sic) State has failed to prove beyond a reasonable doubt the element of prior calculation and design, then your verdict must be that the Defendant is not guilty of aggravated murder."
"You will then proceed with your deliberations and decide whether The (sic) State has proven beyond a reasonable doubt all of the essential elements of the lesser crime of murder."
Id. at 220, 533 N.E.2d at 293. The Thomas court concluded that the quoted instruction had not violated the rule that it had established, since it was ambiguous and did not expressly require that the jury unanimously acquit on the greater offense of aggravated murder, before considering the lesser offense of murder. As with the instruction in Thomas, the instruction given during Zuern's trial did not expressly state that the jury must unanimously decide to acquit him on the charge of aggravated murder, before the jurors could consider the lesser included offense of murder. Indeed, the instruction given during Zuern's trial is nearly identical to the final two paragraphs of that given in Thomas; therefore, this Court concludes that the instruction did not violate state law.
With respect to the United States Constitution, Zuern relies upon Beck v. Alabama, 447 U.S. 625, 100 S. Ct. 2382, 65 L. Ed. 2d 392 (1980). Therein, the defendant was convicted of a capital offense and sentenced to death. During his trial he requested an instruction on the lesser included offense of felony murder (which was not a capital offense). The trial court denied the requested instruction, pursuant to an Alabama statute which had been construed by state courts to preclude any lesser included offense instructions in capital cases.[31] After the defendant's conviction and sentence had been affirmed by the state courts, the Supreme Court held that the practice did not pass constitutional muster, writing:
While we have never held that a defendant is entitled to a lesser included offense instruction as a matter of due process, the nearly universal acceptance of the rule in both state and federal courts establishes the value to the defendant of this procedural safeguard. That safeguard would seem to be especially important in a case such as this. For when the evidence unquestionably establishes that the defendant is guilty of a serious, violent offense but leaves some doubt with respect to an element that would justify conviction of a capital offense the failure to give the jury the "third option" of convicting on a lesser included offense would seem inevitably to enhance the risk of an unwarranted conviction.
Such a risk cannot be tolerated in a case in which the defendant's life is at stake.
Id. at 637, 100 S. Ct. 2382. The Supreme Court did not, however, indicate that the jury must be instructed under the "hung jury" approach, as opposed to the "acquittal first" approach or something in between. Moreover, no federal court has indicated that the United States Constitution requires that a trial court must employ the "hung jury" approach. On the contrary, the cases would seem to indicate the opposite. In United States v. Tsanas, 572 F.2d 340 (2nd Cir.), cert. denied, 435 U.S. 995, 98 S. Ct. 1647, 56 L. Ed. 2d 84 (1978), the District Court, without objection, had expressly instructed the jury that *985 it could not consider the lesser included offense until after unanimously finding the defendant not guilty of the greater offense. After the defendant had been convicted of the greater offense, he argued on appeal that the District Court had committed plain error by giving an "acquittal first" instruction. The Second Circuit noted that the "acquittal first" and the "hung jury" approaches both present advantages and disadvantages to the Government and the defendant:
The instruction given here [acquittal first] has the merit, from the Government's standpoint, of tending to avoid the danger that the jury will not adequately discharge its duties with respect to the greater offense, and instead will move too quickly to the lesser one. From the defendant's standpoint, it may prevent any conviction at all; a jury unable either to convict or acquit on the greater charge will not be able to reach a lesser charge on which it might have been able to agree. But it entails disadvantages to both sides as well: By insisting on unanimity with respect to acquittal on the greater charge before the jury can move to the lesser, it may prevent the Government from obtaining a conviction on the lesser charge that would otherwise have been forthcoming and thus require the expense of a retrial. It also presents dangers to the defendant. If the jury is heavily for conviction on the greater offense, dissenters favoring the lesser may throw in the sponge rather than cause a mistrial that would leave the defendant with no conviction at all, although the jury might have reached sincere and unanimous agreement with respect to the lesser charge.
An instruction permitting the jury to move on to the lesser offense if after all reasonable efforts it is unable to reach a verdict on the greater likewise has advantages and disadvantages to both sides the mirror images of those associated with the charge actually given here. It facilitates the Government's chances of getting a conviction for something, although at the risk of not getting the one that it prefers. And it relieves the defendant of being convicted on the greater charge just because the jury wishes to avoid a mistrial, but at the risk of a conviction on the lesser charge which might not have occurred if the jury, by being unable to agree to acquit on the greater, had never been able to reach the lesser.
Id. at 346 (footnote omitted). Noting that the opposing considerations were balanced, the Second Circuit was unable to say that "either form of instruction is wrong as a matter of law." Id. That court did indicate, however, that the District Court should give the form of instruction favored by the defendant, since his liberty is at stake in a criminal trial. Id. The Ninth Circuit reached the same conclusion in United States v. Jackson, 726 F.2d 1466 (9th Cir.1984). In United States v. Cardinal, 782 F.2d 34, 36-37 (6th Cir.1986), the Sixth Circuit held that the giving of an "acquittal first," rather than "hung jury," instruction did not constitute plain error.[32]See also Catches v. United States, 582 F.2d 453, 459 (8th Cir.1978) (failure to give "hung jury" instruction is not cognizable in post-conviction proceeding under 28 U.S.C. § 2255, because the asserted error is not of "constitutional magnitude"). Based upon the foregoing authorities, this Court concludes that the instruction employed in Zuern's trial did not violate either the Eighth or the Fourteenth Amendment.
Since the challenged instruction by the trial court did not violate either state law or the United States Constitution, arguing on direct appeal that the "acquittal first" instruction served as the basis for reversing *986 Petitioner's conviction would have been unavailing. Therefore, the performance of his counsel was not deficient, as a result of their failure to raise the issue during his direct appeal. Consequently, the Petitioner cannot establish cause and prejudice by the failure of his appellate counsel to raise the issue on such appeal. Therefore, this Court concurs with Judge Merz that the Petitioner has procedurally defaulted on this claim. Accordingly, the Court overrules the Petitioner's Objections to the Magistrate Judge's Initial and Supplemental Reports and Recommendations, as those Objections relate to the Petitioner's Eleventh Claim.
K. Twelfth Claim
With this Claim, the Petitioner argues that the prosecutor's voir dire so indoctrinated the jurors to return a death verdict that he was denied a fair and impartial sentencing proceeding in violation of the Eighth and Fourteenth Amendments. Judge Merz recommended the Court hold that the Petitioner has procedurally defaulted this Claim, since it was not raised in his direct appeal, and, thus, it was barred by the Ohio procedural rule of res judicata. The Petitioner objects, arguing that cause and prejudice have been established by the ineffective assistance of his appellate counsel, to wit: their failure to raise the issue on direct appeal.
At the Petitioner's trial, the court permitted counsel to conduct most of the voir dire. The Petitioner contends that the prosecutor used that process to indoctrinate the jury to return a death verdict. According to the Petitioner, the prosecutor impermissibly obtained commitments from the potential jurors that each would return a death sentence against him. The Petitioner has cited a number of instances of what he contends demonstrate the prosecutor's improper voir dire. For instance, when questioning prospective juror Jerry Zapf ("Zapf"), the prosecutor initially explained the bifurcated nature of a capital case (i.e., the jury would first determine guilt and, if the defendant were found guilty of aggravated murder, it would decide whether to impose the death penalty). See Doc. # 97 at 595-96. After that explanation, the following colloquy took place:
Prosecutor: On a more practical point, when you are back in the jury room, the jury must sign a verdict form, and the first time you are back there deliberating his guilt or innocence, if you find him guilty, you will sign a verdict form that he is guilty as charged of aggravated murder. Do you understand that?
Zapf: Um-hum.
Prosecutor: Likewise, when you are back for the second hearing, if you find that the aggravating circumstances surrounding this event outweigh any mitigating factors that he may present to you, you will sign another verdict form recommending death in the electric chair. O.K.?
Zapf: Yes.
Prosecutor: It will be a paper about this size, with the name of the case and the case number and some wording, and there will be 12 separate lines for each juror to sign. Let's say, for instance, that Mr. Zapf is the 12th juror over there, and you come to the conclusion that he is guilty. Have you ever seen the scales of justice, where the lady is holding out her arms?
Zapf: Yes.
Prosecutor: Visualize that. If you come to a conclusion that the aggravating circumstances outweigh any mitigating factors, and everyone has signed that recommending death in the electric chair, and it comes your turn and they hand you the paper and they say, "put your name there," and you are the last person between him and death in the electric chair, and you have taken an oath as a juror that you will follow the law and that you will do what the law says you will do, if you have found him guilty, and you then find that the aggravating circumstances outweigh the mitigating factors, you will sign that verdict form. It *987 comes to reality at this point. Will you do it?
Zapf: Yes, I will.
Doc. # 97 at 597-98. The prosecutor was able to obtain similar commitments from other prospective jurors (i.e., if they found that Zuern was guilty and that the aggravating circumstances outweighed the mitigating factors, they would be able to sign the verdict form, even if the last to sign). See Doc. # 94 at 67-68 (prospective juror Fred Bray); Id. at 112-14 (prospective juror Sandra Miklavic); Doc. # 95 at 175 (prospective juror Marylyn Rohling); Id. at 275-76 (prospective juror Lee Weiss); Id. at 319-20 (prospective juror William Heyob); Doc. # 96 at 470 (prospective juror Beulah Taylor); Id. at 484-85 (prospective juror Raymond Springer); Doc. # 97 at 621 (prospective juror Clara Smith); Id. at 678-79 (prospective juror Rava Osborne). In addition, the Petitioner has cited instances in which the prosecutor stressed to the potential jurors that the law of Ohio mandated that the jury impose the death penalty, if the prosecution proved beyond a reasonable doubt that the aggravating circumstances outweighed the mitigating factors.
As is indicated above, the Petitioner argues that the ineffective assistance rendered by his appellate counsel constitutes cause and prejudice, excusing his procedural default of this Claim. This Court does not agree. Ineffective assistance of counsel has two components, to wit: that counsel's performance was deficient and that said performance prejudiced the defense. Strickland, 466 U.S. at 687, 104 S. Ct. 2052. Since the above-discussed commitments which the prosecutor posed to the prospective jurors did not constitute improper indoctrination of those jurors, the Petitioner was not prejudiced by the failure of his counsel to raise the issue on direct appeal. Under a fair reading of the transcript of the voir dire, the prosecutor merely elicited a promise from each juror that he or she would follow the law. Under the law of Ohio, the jury must recommend that the death penalty be imposed, if it finds that the state has proved, beyond a reasonable doubt, that the aggravating circumstances outweigh the mitigating factors. See Ohio Rev. Code § 2929.03(D)(2) ("If the trial jury unanimously finds, by proof beyond a reasonable doubt, that the aggravating circumstances the offender was found guilty of committing outweigh the mitigating factors, the jury shall recommend to the court that the sentence of death be imposed upon the offender."). Moreover, there is no constitutional impediment to a state enacting a capital punishment statute which mandates the imposition of the death penalty, when the state has proved, beyond a reasonable doubt, that the aggravating circumstances outweigh the mitigating factors. See Blystone v. Pennsylvania, 494 U.S. 299, 110 S. Ct. 1078, 108 L. Ed. 2d 255 (1990); Boyde v. California, 494 U.S. 370, 110 S. Ct. 1190, 108 L. Ed. 2d 316 (1990). See also, Scott v. Anderson, 58 F. Supp. 2d 767, 796 (N.D.Ohio 1998) (rejecting constitutional challenge to Ohio's capital punishment statutes, on the basis that the death penalty is mandatory when aggravating circumstances outweigh the mitigating factors). The Ohio Supreme Court has also rejected such constitutional challenges. See e.g., State v. Jells, 53 Ohio St. 3d 22, 35-36, 559 N.E.2d 464, 477 (1990). The prosecutor merely obtained commitments from the prospective jurors that they would sign a verdict form, if they found that the Petitioner had committed the offense of aggravated murder and, further, that the aggravating circumstances outweighed the mitigating factors. In other words, the prosecutor elicited commitments from the jurors to follow the law.[33] The bias of which the Petitioner complains flows from the Ohio statutory *988 scheme, rather than from the fact that the prosecutor elicited commitments from the jurors to follow that law and reminded them of same. Indeed, the Petitioner has not cited a single case which would support the proposition that the Eighth Amendment or any other provision of the United States Constitution is violated, when a prosecutor secures such a commitment from potential jurors.[34]
Accordingly, since the Petitioner did not suffer prejudice as a result of the failure of his counsel to raise this issue during his direct appeal, he has not demonstrated that their representation constituted ineffective assistance of counsel under Strickland. Consequently, he has failed to establish cause and prejudice for the procedural default of this Claim. Therefore, the Court overrules the Petitioner's Objections to the Magistrate Judge's Initial and Supplemental Reports and Recommendations, to the extent that those Objections relate to Zuern's Twelfth Claim.
L. Thirteenth Claim
With this claim, the Petitioner argues that he was denied a fair and impartial jury, as guaranteed by the Sixth and Fourteenth Amendments, when the prosecutor systematically exercised its peremptory challenges to remove all prospective jurors who had expressed any hesitancy about imposing the death penalty. Judge Merz recommended that this Court dismiss this claim, as being procedurally defaulted, since the Petitioner had not shown cause and prejudice. In reaching his recommendation, that judicial officer analyzed the merits of this claim, and concluded that the Petitioner had not been denied his constitutional rights by the prosecution's use of peremptory challenges to exclude from the jury those individuals who had expressed any hesitancy about imposing the death penalty. Based upon that conclusion, Judge Merz held that the Petitioner had not been denied effective assistance of counsel, either during trial or on appeal, by the failure of his attorneys to raise the issue. The Petitioner argues that the ineffective assistance of his trial and appellate counsel in that regard establish cause and prejudice. Employing the same analytical framework as Judge Merz, this Court concludes that Petitioner's trial and appellate *989 counsel were not ineffective and that, therefore, this Claim must be dismissed.
With this Claim, Zuern combines the jurisprudence established by the Supreme Court in Witherspoon v. Illinois, 391 U.S. 510, 88 S. Ct. 1770, 20 L. Ed. 2d 776 (1968) and in Batson v. Kentucky, 476 U.S. 79, 106 S. Ct. 1712, 90 L. Ed. 2d 69 (1986). In Witherspoon, the Supreme Court held that the defendant was denied his right to an impartial jury, as guaranteed by the Sixth and Fourteenth Amendments, because the prosecution had been permitted to challenge for cause every potential juror who had expressed any reservations about or hesitancy to impose the death penalty.[35] Zuern argues that, if it is unconstitutional for a prosecutor to challenge, for cause, a potential juror who has expressed reservations about the death penalty, it should also be unconstitutional for a prosecutor to exercise his peremptory challenges in such a manner.[36] Although the Petitioner acknowledges that the practice he challenges is apparently commonplace,[37] he seeks to find support for that proposition in Batson, wherein the Supreme Court limited the right of prosecutors to exercise peremptory challenges. In particular, the Batson Court held that the defendant's rights under the Equal Protection Clause of the Fourteenth Amendment had been violated by the prosecutor's use of peremptory challenges to exclude African-Americans from the jury.[38]
This Court cannot agree with the Petitioner that his constitutional rights were violated by the use of peremptory challenges to exclude jurors who voiced concerns during voir dire about the death penalty. Every federal appellate court which has addressed the issue has concluded that Batson does not extend to the use of peremptory challenges in such a manner. See Pitsonbarger v. Gramley, 141 F.3d 728 (7th Cir.), cert. denied, 525 U.S. 984, 119 S. Ct. 448, 142 L. Ed. 2d 402 (1998); Brown v. Dixon, 891 F.2d 490 (4th Cir. 1989), cert. denied, 495 U.S. 953, 110 S. Ct. 2220, 109 L. Ed. 2d 545 (1990). Moreover, although the Sixth Circuit has not addressed the issue, that court has refused to extend Batson to situations other than race or gender. United States v. Maxwell, 160 F.3d 1071, 1075-76 (6th Cir.1998).[39]See also, Buchanan v. Kentucky, 483 U.S. 402, 416, 107 S. Ct. 2906, 97 L. Ed. 2d 336 (1987) ("Witherspoon-excludables are not a distinctive group for fair cross section purposes").
*990 Given that the Petitioner's constitutional rights were not violated by the prosecutor's use of peremptory challenges, his trial counsel were not ineffective, because they failed to object to that practice. For the same reason, Petitioner's appellate counsel were not ineffective, because of their failure to raise the issue on appeal. Therefore, the Petitioner has not established cause and prejudice. Accordingly, the Court overrules the Petitioner's Objections to the Magistrate Judge's Initial and Supplemental Reports and Recommendations, to the extent those Objections relate to the Thirteenth Claim.
M. Fourteenth Claim
With this Claim, the Petitioner asserts that his sentence violates the Eighth and Fourteenth Amendments, because Judge Morrissey permitted him to waive his right to present mitigating evidence. After the jury had found him guilty of aggravated murder, and before the sentencing phase of the trial commenced, the Petitioner's trial counsel read the following signed statement, which had been signed by Zuern:
"I, William G. Zuern, after conferences with my attorneys, Robert V. Wood and Thomas Stueve, and having been fully advised of all my rights under mitigation, Section 2923.03 of the Ohio Revised Code, realizing that I could request a presentence investigation and require a mental examination and reports, and further that I could offer any testimony from witnesses and that I could either testify under oath or make a statement not under oath and not be subject to cross-examination; hereby instruct my attorneys that I do not desire to do any of the foregoing.
"This is my decision alone and I am making it freely and voluntarily. It is my opinion that no testimony which I or anyone else might offer would have any effect on the decision of this jury.
"I am fully aware that if I do not offer any evidence in mitigation, the jury can come to but one decision, that being death by electrocution.
"I have no `death wish' and I do not wish to die; however, it is not my nature to beg or crawl. In light of all of the circumstances, I wish to maintain my self-respect.
"I am completely satisfied with the legal services and efforts in (sic) my behalf rendered by my attorneys, Robert V. Wood and Thomas Stueve."
Doc.# 99 at 1151-52. After that statement was read, Zuern's counsel asked his client whether he had signed the statement and whether he had made it voluntarily. Id. at 1152. Zuern answered affirmatively to each of those questions. Id. The following colloquy then occurred between Judge Morrissey and Zuern, to wit:
The Court: William Zuern, is this signature on the line indicated here for the defendant your signature?
The Defendant: Yes.
The Court: After discussing your case with your attorneys, you think it is to your best advantage to publish this statement?
The Defendant: Yes.
The Court: Has anyone made any promises to you in consideration for you making this statement?
The Defendant: No.
The Court: You understand the proceeding and procedure that is going on here?
The Defendant: Yes.
The Court: Do you understand that you have a constitutional right to defend yourself?
The Defendant: Yes.
The Court: You choose not to do so?
The Defendant: Yes.
The Court: The Court will accept this entry. I would like to tell you something Mr. Zuern. You do have the right to present a mitigation hearing. In the mitigation hearing there are seven items that I would like to let you know about *991 that could be taken into consideration: whether the victim of the offense induced or facilitated it; whether it is likely that the offense would have been committed, but for the fact that the offender was under duress, coercion or strong provocation; whether at the time of committing the offense the defendant, because of a mental disease or defect, lacked substantial capability to appreciate the criminality of his conduct or to conform his conduct to the requirements of the law; the youth of the defendant; the defendant's lack of a significant history of prior criminal convictions and delinquency adjudications; if the defendant was a participant in the offense, but not the principal offender; the degree of the defendant's participation in the offense and the degree of the defendant's participation in the acts that led to the death of the victim; and any other factors that are relevant to the issue of whether the defendant should be sentenced to death.
Now, the law of Ohio provides that you may consider all of those mitigating factors that I have just outlined. You have that right to have this mitigation hearing.
Do you waive that mitigation hearing?
The Defendant: Yes.
The Court: You wish to present no evidence in mitigation; is that a correct statement?
The Defendant: Right.
Id. 1152-54. The Petitioner contends that the trial court erred by failing sua sponte to conduct a hearing to determine whether he was competent to waive his right to present mitigation evidence.[40] Judge Merz found this claim to be procedurally defaulted, because it was not raised on his direct appeal. Although the Petitioner did not present this contention in his direct appeal, and, thus, the state courts refused to address it in his post-conviction proceedings, he contends that cause and prejudice are demonstrated by the ineffective assistance rendered by his trial and appellate counsel, to wit: the failure of his trial counsel to insist that a competency hearing be conducted before the trial court permitted Zuern to waive his right to present mitigating evidence and the failure of his appellate counsel to raise the question on direct appeal. In the absence of an indication that Petitioner was not competent to stand trial, the failure to conduct a competency hearing, before permitting him to waive his right to present mitigating evidence, did not violate either state law or the United States Constitution. Accordingly, this Court concludes that the Petitioner has not demonstrated that either his trial or appellate counsel rendered ineffective assistance of counsel; therefore, he has failed to establish cause and prejudice.
As an initial matter, the Ohio Supreme Court has indicated that, in the absence of indicia of incompetency, a court need not conduct a competency hearing before permitting a death penalty defendant to waive the right to present mitigating *992 evidence. State v. Cowans, 87 Ohio St. 3d 68, 81, 717 N.E.2d 298, 311 (1999). See also, State v. Tyler, 50 Ohio St. 3d 24, 29, 553 N.E.2d 576, 585 (mere fact that a defendant waives the right to present mitigating evidence, because he wants to die, does not call his competence into question), cert. denied, 498 U.S. 951, 111 S. Ct. 371, 112 L. Ed. 2d 334 (1990). Herein, there is no evidence that the Petitioner exhibited any indicia of incompetence during his trial. Indeed, under the law of Ohio, a criminal defendant is presumed to be competent to stand trial. See Ohio Rev.Code § 2945.37(G). See also, State v. Williams, 23 Ohio St. 3d 16, 490 N.E.2d 906 (1986) (presumption of competency can be overcome by the preponderance of the evidence).[41] If a course of action does not result in the denial of a constitutional right, the client has not been deprived of effective assistance of counsel or prejudiced by that course of action. Therefore, the failure of Petitioner's counsel to request a competency hearing or to raise the issue during his direct appeal did not constitute ineffective assistance of counsel.
In Godinez v. Moran, 509 U.S. 389, 113 S. Ct. 2680, 125 L. Ed. 2d 321 (1993), the Supreme Court addressed the question of whether different standards were applicable for ascertaining, on one hand, a death penalty defendant's competence to stand trial and, on the other, his competence to waive his right to a trial (by pleading guilty) and to the assistance of counsel. Therein, Moran was charged with multiple counts of capital murder. After having entered a plea of not guilty, he informed the trial court that he wished to discharge his counsel and to enter pleas of guilty.[42] The trial court permitted him to do so. The defendant was convicted on his guilty pleas and sentenced to death. Thereafter, Moran initiated post-conviction proceedings in state court, claiming that he had been mentally incompetent to represent himself. After the state courts had denied him relief, Moran filed a habeas action in federal court. The District Court dismissed the petition, concluding that, since Moran was competent to stand trial, he was competent to waive his right to a trial and to be represented by counsel. The Ninth Circuit, however, reversed, concluding that a heightened standard for ascertaining competency applied to waivers of the right to a trial and to be represented by counsel. Upon further appeal, the Supreme Court disagreed, holding that the same standard for determining whether an individual is competent to stand trial is applicable to the rights that Moran had waived by dismissing his counsel and pleading guilty.[43] Despite Petitioner's eloquent description of the important role which mitigation evidence plays in death penalty cases, there is no basis for concluding that a higher standard is applicable to the waiver of the right to present such evidence, than that which the Supreme Court applied in Godinez. Therein, the Supreme Court reiterated that "the standard for competence to stand trial is whether the defendant has sufficient present ability to consult with his lawyer with a reasonable degree of rational understanding and has a rational as well as factual understanding of the proceedings against him." Id. at 396, 113 S. Ct. 2680 (citation and internal quotation marks omitted).
*993 Herein, there is no evidence that the Petitioner lacked the requisite competency to stand trial. Indeed, the Petitioner has not raised that issue in any of his proceedings in state court or before this Court; nor has he presented any evidence which could have overcome the statutory presumption of competence. See Ohio Rev. Code § 2945.37(G). In the absence of some indication or evidence that the Petitioner lacked the ability to consult with his counsel and to understand the proceedings against him, this Court cannot conclude that his trial counsel were ineffective, because they failed to insist that the trial court conduct a competency examination, before permitting their client to waive his right to present evidence in mitigation. In addition, in the absence of such an indication or evidence, this Court cannot conclude that his appellate counsel were ineffective, because they failed to raise that issue on direct appeal.
Accordingly, the Petitioner has not demonstrated that either his trial or appellate counsel were ineffective, because they failed to raise the issue of his competency to waive the presentation of mitigating evidence. Consequently, he has not established cause and prejudice for the procedural default of this Claim. Therefore, the Court overrules the Petitioner's Objections to the Magistrate Judge's Initial and Supplemental Reports and Recommendations, to the extent that those Objections relate to Zuern's Fourteenth Claim.
N. Fifteenth Claim
With this Claim, the Petitioner argues that his death sentence violates the Sixth and Eighth Amendments, as well as the Due Process Clause of the Fourteenth Amendment, because the trial court relied upon an ex parte presentence investigation report that was obtained without his knowledge or consent. The Court begin its analysis of this Claim by reviewing the circumstances from which it arises.
Although the jury returned a verdict, recommending that a sentence of death be imposed upon the Petitioner, Judge Morrissey was not required to accept that recommendation. Rather, before deciding whether to sentence the Petitioner to death, he was obligated to conduct his own independent review to ascertain whether the evidence established beyond a reasonable doubt that the aggravating circumstances outweighed the mitigating factors. See Ohio Rev.Code § 2929.03(D)(3). When he imposed sentence upon the Petitioner, Judge Morrissey said, on two occasions, that he had considered all of evidence introduced at trial and the arguments of counsel, "along with the presentence report." Doc. # 99 at 1172, 1177. Under the law of Ohio, a presentence report is not prepared in a death penalty case, unless the defendant requests one. See Ohio Rev.Code § 2929.03(D)(1). The Petitioner explicitly indicated that, although he knew that he had the right to request such a report, he had instructed his counsel that he did not want one prepared. Doc. # 99 at 1151-52. Moreover, there is no indication in the record that the Petitioner was permitted to review the report, before sentence was imposed. Subsequent to the imposition of sentence, Judge Morrissey, in accordance with Ohio law, issued his sentencing opinion,[44] wherein he found that the evidence established, beyond a reasonable doubt, that the aggravating circumstances of which the Petitioner had been found guilty outweighed the mitigating factors. See Doc. # 89 at Ex. C. In that opinion, he did not mention the presentence investigation report or any information contained therein.
The Petitioner contends that he was denied due process, as a result of the trial court imposing sentence upon him, in part, on the basis of the presentence report. When the Petitioner raised this issue during his post-conviction proceedings in state *994 court, the Hamilton County Court of Appeals concluded that the issue was barred by the Ohio doctrine of res judicata. As a result, Judge Merz concluded that this Claim was procedurally barred, since the Petitioner could not demonstrate cause and prejudice for the failure of his appellate counsel to raise it during his direct appeal. The Petitioner objects, arguing that he can establish cause and prejudice, to wit: the failure of his appellate counsel to raise the issue on direct appeal.[45] In order to establish a claim of ineffective assistance of counsel, a defendant must establish both that the representation afforded by his counsel was deficient and that said representation prejudiced the defense. Strickland, supra.
The Petitioner can easily establish the first prong of that standard, since counsel was unquestionably deficient in failing to raise the issue on direct appeal. In Gardner v. Florida, 430 U.S. 349, 97 S. Ct. 1197, 51 L. Ed. 2d 393 (1977), the Supreme Court considered the nearly identical question as is presented by this Claim. Therein, the defendant had been convicted was convicted of murder by a Florida jury, which also recommended that he be sentenced to life imprisonment.[46] Before imposing sentence, the trial court ordered a presentence investigation report; however, only a portion of it was disclosed to the defendant. Thereafter, the trial court rejected the jury's recommendation and sentenced the defendant to death, indicating that the decision had been based, in part, on information contained in the presentence report.[47] A plurality of the Supreme Court concluded that the defendant had been "denied due process of law when the death sentence was imposed, at least in part, on the basis of information which he had no opportunity to deny or [to] explain." Id. at 362, 97 S. Ct. 1197.[48] Under Gardner, the Petitioner had a due process right to see the presentence report and to rebut its contents, before the sentence of death was imposed upon him. Given that, during the sentencing, Judge Morrissey indicated twice that he was relying upon such a report, the performance of Petitioner's appellate counsel was rendered deficient by their failure to raise that issue on direct appeal. Thus, the Petitioner has established the cause prong of the cause and prejudice test (i.e., that his appellate counsel rendered deficient representation).
The question becomes, therefore, whether that performance caused the Petitioner to suffer prejudice. In Strickland, the Supreme Court said that a defendant is prejudiced when "counsel's errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable." 466 U.S. at 687, 104 S. Ct. 2052. In Glenn v. Tate, 71 F.3d 1204, 1210 (6th Cir.1995), cert. denied, 519 U.S. 910, 117 S. Ct. 273, 136 L. Ed. 2d 196 (1996), the Sixth Circuit *995 indicated that, under Strickland, the petitioner must show a "reasonable probability" that, but for counsel's errors, the result would have been different. A "reasonable probability" is one that is sufficient to undermine confidence in the outcome. Id. For reasons which follow, this Court concludes that there is not a reasonable probability that the result of Petitioner's appeal would have been different, if his appellate counsel had raised this issue on his direct appeal.
As is indicated above, an Ohio jury merely recommends that a sentence of death be imposed.[49] Under the law of Ohio, the trial court is required to impose the death penalty, if it finds, by proof beyond a reasonable doubt, that "the aggravating circumstances the offender was found guilty of committing outweigh the mitigating factors." Ohio Rev.Code § 2929.03(D)(3). The Ohio statutes do not allow a trial court to sentence a defendant to death unless such a finding has been made. Herein, the jury found that the Petitioner was guilty of the three aggravating circumstances or specifications set forth in the indictment. Since the Petitioner declined to introduce any evidence of mitigating factors, the finding that the aggravating circumstances outweighed the mitigating factors was inevitable. Consequently, the information contained in the presentence investigation report cannot have affected Judge Morrissey's conclusion that the evidence proved, beyond a reasonable doubt, that the aggravating circumstances of which the Petitioner had been found guilty outweighed the mitigating factors.[50] Moreover, both the Hamilton County Court of Appeals and the Ohio Supreme Court, as required by Ohio Revised Code § 2929.05, conducted an independent review of the record and concluded that the evidence established beyond a reasonable doubt that the aggravating circumstances outweighed the mitigating factors. As the Petitioner points out, the presentence investigation report was not part of the record on appeal. Therefore, that document cannot have been considered by the two appellate courts, when they conducted their independent review.
However, assuming arguendo that the presentence report had been part of the record on appeal and that the Petitioner's counsel had raised the issue of Judge Morrissey's mention of that report on his direct appeal, the result of the Petitioner's appeal would not have been different. In State v. Bays, 87 Ohio St. 3d 15, 31, 716 N.E.2d 1126, 1143 (1999), the Ohio Supreme Court addressed an analogous situation. Therein, the defendant had raised his addiction to crack cocaine as a mitigating factor. When it conducted its own independent review of whether the state had proved beyond a reasonable doubt that the aggravating circumstances outweighed the mitigating factors, the Greene County Court of Appeals found that the defendant's addiction was not a significant mitigating factor. In large measure, the appellate court based its conclusion upon a treatise, which discussed the interplay between cocaine addiction and crime. The Ohio Supreme Court, relying upon Gardner, concluded that the appellate court had erred in relying upon that treatise, without subjecting it to adversarial testing. The remedy for that error, however, was for the Ohio Supreme Court to conduct its own, statutorily mandated, independent review, without considering the treatise. Therefore, if the Petitioner's appellate counsel had raised the issue of the presentence investigation report on his direct appeal, the Hamilton County Court of Appeals and the Ohio Supreme Court would have cured that error by conducting their statutorily mandated independent reviews, without considering the report. Given *996 that such reviews occurred, since the presentence report was not part of the record on appeal, this Court concludes that the Petitioner has failed to establish prejudice under Strickland.
Accordingly, the Court overrules the Petitioner's Objections to the Magistrate Judge's Initial and Supplemental Reports and Recommendations, to the extent that those Objections relate to Petitioner's Fifteenth Claim.
O. Sixteenth Claim
With this claim, Zuern asserts that his conviction and sentence were obtained in violation of the Due Process Clause of the Fourteenth Amendment, because the trial court's instructions on proof beyond a reasonable doubt diminished the state's burden of proof. At the conclusion of the guilt phase of the trial, the court instructed the jury on the state's burden of proof, as follows:
The plea of not guilty to aggravated murder puts in issue all essential elements of the crime charged in this indictment. The defendant, William G. Zuern, is presumed to be innocent until his guilt is established, beyond a reasonable doubt. The defendant must be acquitted unless the state produces evidence which convinces you beyond a reasonable doubt of every essential element of the crime charged in the indictment.
What is reasonable doubt? Reasonable doubt is present when, after you have carefully considered and compared all the evidence, you cannot say you are firmly convinced of the truth of the charge. Reasonable doubt is a doubt based on reason and common sense. Reasonable doubt is not a mere possible doubt, because everything relating to human affairs or depending upon moral evidence is open to some possible or imaginary doubt.
Proof beyond a reasonable doubt is of such character that an ordinary person would be willing to rely and to act upon it in the most important of his own affairs. If after full and impartial consideration of all the evidence you are firmly convinced of the truth of the charge, the state has proved its case beyond a reasonable doubt. If you are not firmly convinced of the truth of the charge, you must find the defendant not guilty.
Doc. # 99 at 1121 (emphasis added). Petitioner's counsel did not object to the instruction, nor was the issue raised on direct appeal. Judge Merz concluded that, as a result, this Claim was procedurally defaulted. The Petitioner contends that he can demonstrate cause and prejudice, excusing any procedural default, by virtue of the ineffective assistance provided by his trial and appellate counsel. Since this Court concludes that the definition of reasonable doubt given to the jury violated neither state law, nor the Due Process Clause, the Petitioner's trial counsel was not ineffective, by failing to object to the instruction, and his appellate counsel did not neglect to provide effective assistance, by failing to raise the issue on Zuern's direct appeal.
As an initial matter, the trial court's instruction concerning reasonable doubt was taken nearly verbatim from the statutory definition of that term contained in Ohio Revised Code § 2901.05(D).[51] Therefore, state law did not provide the basis for objecting to the charge. However, Zuern *997 contends that the charge violated his rights under the Due Process Clause in two particulars, to wit: because the phrase "firmly convinced" describes the burden of proving a fact by clear and convincing evidence, rather than beyond a reasonable doubt; and because the trial court explained reasonable doubt in terms of a willingness to act, rather than hesitation to act. Neither of those reasons convinces this Court that the trial court's definition of reasonable doubt violated Petitioner's right to due process.
In Victor v. Nebraska, 511 U.S. 1, 114 S. Ct. 1239, 127 L. Ed. 2d 583, (1994), the Supreme Court wrote:
The government must prove beyond a reasonable doubt every element of a charged offense. In re Winship, 397 U.S. 358, 90 S. Ct. 1068, 25 L. Ed. 2d 368 (1970). Although this standard is an ancient and honored aspect of our criminal justice system, it defies easy explication.
Id. at 5., 114 S. Ct. 1239 The Victor Court also noted that "the Constitution does not require that any particular form of words be used in advising the jury of the government's burden of proof." In Thomas v. Arn, 704 F.2d 865 (6th Cir.1983), the petitioner was convicted in an Ohio court of murder. After exhausting his state remedies, he initiated a habeas action, alleging, inter alia, that he had been deprived of due process of law by the use of the statutory definition contained in § 2901.05(D), to instruct the jury on the meaning of reasonable doubt. In particular, the petitioner had focused upon the "willing to act" language of that statutory definition. The District Court denied the requested relief, and the Sixth Circuit affirmed, concluding that the using of the "willing to act" language to instruct on reasonable doubt had not diluted the state's burden of proof so as to constitute a denial of due process.[52] With respect to Petitioner's assertion that the use of the phrase "firmly convinced" constituted a deprivation of due process, the Eighth Circuit recently considered and rejected a similar argument, writing:
[Petitioner's] challenge focuses on the use of the words "firmly convinced" to describe the concept of reasonable doubt. The relevant portion of the instruction used in Harris's case reads as follows:
Proof beyond a reasonable doubt is proof that leaves you firmly convinced of the defendant's guilt. The law does not require proof that overcomes every possible doubt. If, after your consideration of all evidence, you are firmly convinced that the defendant is guilty of the crime charged, you will find him guilty. If you are not so convinced, you must give him the benefit of the doubt and find him not guilty.
(J.A. at 272.) (emphasis added). This standard is substantially similar to a reasonable doubt instruction promulgated by the Federal Judicial Center. In relevant part, that instruction reads:
"Proof beyond a reasonable doubt is proof that leaves you firmly convinced of the defendant's guilt.... [I]n criminal cases the law does not require proof that overcomes every possible doubt. If, based upon your consideration of the evidence, you are firmly convinced that the defendant is guilty of the crime charged, you must *998 find him guilty. If on the other hand, you think there is a real possibility that he is not guilty, you must give him the benefit of the doubt and find him not guilty." Federal Judicial Center, Pattern Criminal Jury Instructions, at 17-18 (instruction 21).
Victor, 511 U.S. at 27, 114 S. Ct. 1239 (Ginsburg, J., concurring in part and concurring in the judgment).
Several of our sister circuits have endorsed the same or a similar reasonable doubt instruction. See, e.g., United States v. Brand, 80 F.3d 560, 566 & n. 8 (1st Cir.1996), cert. denied, 519 U.S. 1077, 117 S. Ct. 737, 136 L. Ed. 2d 676 (1997); United States v. Conway, 73 F.3d 975, 980 (10th Cir.1995); United States v. Williams, 20 F.3d 125, 131-32 (5th Cir.), cert. denied, 513 U.S. 891, 115 S. Ct. 239, 130 L. Ed. 2d 162 (1994). Moreover, in Victor, Justice Ginsburg described the Federal Judicial Center instruction as a "clear, straightforward, and accurate" explanation of reasonable doubt. 511 U.S. at 26, 114 S. Ct. 1239.
Harris v. Bowersox, 184 F.3d 744, 751 (8th Cir.1999), cert. denied, ___ U.S. ___, 120 S. Ct. 840, 145 L. Ed. 2d 706 (2000). This Court agrees with the rationale employed and the result reached by the Eighth Circuit, and will follow same. Accord, Scott v. Anderson, 58 F. Supp. 2d 767, 807 (N.D.Ohio 1998) (rejecting argument that jury instruction based upon § 2901.05(D) deprived petitioner of due process, because the phrase "firmly convinced" diluted the state's burden of proof).
Based upon the foregoing, the Court concludes that the Petitioner has failed to establish that his trial and appellate counsel were ineffective for failing to challenge, either at trial or upon appeal, the trial court's instruction on reasonable doubt. Therefore, he has failed to demonstrate cause and prejudice to excuse his procedural default. Accordingly, the Court overrules the Petitioner's Objections to Judge Merz' Initial and Supplemental Reports and Recommendations, to the extent that those Objections relate to the Sixteenth Claim.
P. Seventeenth Claim
With this Claim, Zuern asserts that his state post-conviction relief proceedings did not afford him an adequate corrective process, which resulted in a denial of his right to due process of law, as guaranteed by the Fourteenth Amendment. Judge Merz recommended that the Seventeenth Claim be dismissed on the merits. This Court agrees. In Kirby v. Dutton, 794 F.2d 245 (6th Cir.1986), the Sixth Circuit held that allegations that a petitioner had been denied due process and equal protection in state post-conviction proceedings were not cognizable in a habeas corpus action. To reach that conclusion, the Kirby court started from the premise that habeas corpus, under 28 U.S.C. § 2254, is only available to challenge the constitutionality of a petitioner's detention. Id. at 246. Building upon that premise, the Sixth Circuit concluded that claims of constitutional deprivations, occurring during state post-conviction proceedings, were not cognizable under § 2254, since such claims address collateral matters and not the underlying state conviction giving rise to the petitioner's incarceration. Id. at 247. Accord, Johnson v. Collins, 1998 WL 228029 (6th Cir.1998); Trevino v. Johnson, 168 F.3d 173 (5th Cir.) (and cases cited therein), cert. denied, ___ U.S. ___, 120 S. Ct. 22, 144 L. Ed. 2d 825 (1999). Therefore, this Court holds that the Petitioner's Seventeenth Claim is not cognizable in this litigation. Accordingly, the Court overrules the Petitioner's Objections to Judge Merz' Initial and Supplemental Reports and Recommendations, as those Objections relate to Zuern's Seventeenth Claim.
Q. Eighteenth Claim
With this Claim, Petitioner contends that his conviction and sentence were obtained in violation of the Sixth and Fourteenth Amendments, because the attorneys *999 representing him during his trial failed to provide effective assistance of counsel. In Strickland v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984), the Supreme Court wrote:
A convicted defendant's claim that counsel's assistance was so defective as to require reversal of a conviction or death sentence has two components. First, the defendant must show that counsel's performance was deficient. This requires showing that counsel made errors so serious that counsel was not functioning as the "counsel" guaranteed the defendant by the Sixth Amendment. Second, the defendant must show that the deficient performance prejudiced the defense. This requires showing that counsel's errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable. Unless a defendant makes both showings, it cannot be said that the conviction or death sentence resulted from a breakdown in the adversary process that renders the result unreliable.
Id. at 687, 104 S. Ct. 2052. In United States v. Fortson, 194 F.3d 730 (6th Cir. 1999), the Sixth Circuit wrote:
We "presume from the outset that a lawyer is competent, and therefore, `the burden rests on the accused to demonstrate a constitutional violation.'" Pierce, 62 F.3d at 833 (quoting United States v. Cronic, 466 U.S. 648, 658, 104 S. Ct. 2039, 80 L. Ed. 2d 657 (1984)). Moreover, in applying Strickland, "a court must indulge a strong presumption that counsel's conduct falls within the wide range of reasonable professional assistance." Strickland, 466 U.S. at 689, 104 S. Ct. 2052.
The trial process contains a myriad of complex decisions that, for strategic reasons, are sound when made, but may appear unsound with the benefit of hindsight. The defendant, thus, must "overcome the presumption that, under the circumstances, the challenged action `might be considered sound trial strategy.'" Id. (citation omitted).
Id. at 736.
The Petitioner contends that his trial counsel were deficient in the following areas, to wit: pretrial preparation, voir dire, conduct during the trial and conduct when the trial court sentenced their client. Judge Merz recommended that this claim be denied on the merits. As a means of analysis, the Court will address the four areas of allegedly deficient performance by trial counsel in the above order.
First, the Petitioner contends that his trial counsel failed to provide effective assistance during the pretrial portion of the prosecution, because they failed to file any motions. In particular, he focuses upon the failure to file a motion to suppress or a motion challenging the constitutionality of Ohio's then, newly enacted death penalty statutes. Without addressing the question of whether trial counsel's performance was deficient in those regards, the Petitioner has not shown that the failure to file either type of motion prejudiced his defense. The Petitioner has not suggested what evidence was subject to suppression. A review of the transcript of the Petitioner's trial reveals that the state did not introduce any evidence seized as a result of a search of the Petitioner or any statement he made during a custodial interrogation. Therefore, it is difficult to imagine what evidence could have been suppressed. With respect to the failure of trial counsel to file a motion challenging the constitutionality of Ohio's capital punishment statutes, this Court, infra, addresses and rejects the Petitioner's numerous constitutional challenges to those statutes. Therefore, the failure of his trial counsel to file a pretrial motion raising the same arguments cannot have prejudiced his defense.
Second, the Petitioner contends that his trial counsel provided ineffective assistance during the voir dire. This contention has two sub-parts. Initially, Zuern argues that his counsel should have objected to *1000 the prosecutor's use of peremptory challenges to excuse those jurors who expressed any type of qualms about imposing the death penalty. Above, this Court has concluded that it was not unlawful for the prosecutor to have used the state's peremptory challenges in that manner. Therefore, without addressing the question of whether the failure to object to that practice was performance that could be classified as deficient, the Court concludes that it could not have been prejudicial to the Petitioner. In addition, Zuern contends that his counsel were ineffective, because they permitted the prosecutor to indoctrinate the jury to return a sentence of death. Above, this Court has explained that the alleged indoctrination by the prosecutor was nothing more than a correct statement of the law of Ohio. Therefore, the Petitioner was not prejudiced by the failure of his counsel to object to the prosecutor's voir dire.
Third, the Petitioner contends that trial counsel provided ineffective assistance during the trial phase of his prosecution. The Petitioner contends that trial counsel was ineffective in a number of regards, including matters which form the basis of some of his other Claims, as well as in additional alleged areas. As a means of analysis, the Court will initially address the Petitioner's assertions which relate to his other Claims, following which it will turn to the additional alleged shortcomings of counsel.
The Petitioner contends that his trial counsel were ineffective, because they failed to object when evidence was introduced concerning his post-arrest silence; because they allowed the introduction of character evidence; because they failed to insist that Taylor be removed from the jury, after she had initially mentioned that she had seen the television report concerning the Petitioner; because they failed to object to the "acquittal first" instruction; because they failed to object to an invalid death penalty specification (which is the subject of the Petitioner's Twenty-Fifth Claim, discussed below); because they permitted their client to waive the presentation of mitigating evidence; and because they failed to object to the improper definition of reasonable doubt used by Judge Morrissey in the jury instructions.[53] Throughout this decision, this Court has rejected the Petitioner's Claims which incorporate the foregoing assertions. For those reasons, this Court concludes that his trial counsel did not render ineffective assistance, by failing to object to those matters. Since the Petitioner's rights were not violated by the actions which give rise to those assertions, the failure of Petitioner's trial counsel to object did not constitute deficient performance.
As is indicated, the Petitioner also raises some additional areas where his trial counsel were allegedly ineffective. Initially, he states that the failure of his trial counsel to give an opening statement constituted ineffective assistance of counsel. In Fox v. Ward, 200 F.3d 1286, 1296 (10th Cir.2000), the Tenth Circuit noted that "it is well-settled that the decision to waive an opening or closing statement is a commonly adopted strategy, and without more, does not constitute ineffective assistance of counsel." See also, Huffington v. Nuth, 140 F.3d 572, 583 (4th Cir.) (the decision to waive an opening statement "is essentially tactical in nature, and not objectively unreasonable"), cert. denied, 525 U.S. 981, 119 S. Ct. 444, 142 L. Ed. 2d 399 (1998). However, the Petitioner suggests that an opening statement was crucial in this case, because the defense theory was predicated upon contesting the element of prior calculation and design, rather than denying his *1001 involvement in the stabbing.[54] Thus, Petitioner contends that "it was essential to explain to the jury what to look for in the State's case and why no defense witnesses would be presented." Doc. # 326 at 107. Judge Merz concluded that this argument was without merit, because the function of an opening statement is to summarize the evidence one intends to introduce and defense counsel did not intend to introduce any evidence. This Court cannot conclude that trial counsel performed deficiently by failing to give an opening statement. Rather, that decision fell within the wide range of discretion afforded to counsel. Indeed, there was an acceptable reason for declining to give an opening statement, since to do so would have required that Petitioner's counsel concede to the jury that their client was a murderer. Accordingly, the Court rejects the Petitioner's assertion that the failure to give an opening statement constituted ineffective assistance of counsel.
In addition, Petitioner argues that his counsel were ineffective, because they did not cross-examine Lewis. Petitioner suggests that such cross-examination could have focused upon Lewis' status as an inmate in an attempt to diminish his credibility. This Court cannot conclude that the failure to cross-examine Lewis prejudiced the Petitioner's defense. During his direct examination, Lewis told the members of jury that he was an inmate at the CCI and informed them of his prior criminal record. The failure to cause that witness to repeat those matters on cross-examination did not deprive the Petitioner of a fair trial, i.e., one whose result was reliable. Strickland, supra. Accordingly, the Court concludes that trial counsel were not ineffective by failing to cross-examine Lewis.
Petitioner also contends that his trial counsel were ineffective, because they failed to request a brief continuance, in order to prepare for cross-examination, after Joseph had testified as a surprise witness. Without considering the question of whether trial counsel were deficient in that regard, this Court cannot conclude that any alleged deficiency caused the Petitioner to suffer prejudice. Despite having been given the opportunity to conduct discovery in this proceeding, the Petitioner has not suggested what information his counsel would have been able to obtain during a brief continuance, which would have permitted them to cross-examine Joseph more effectively. According, the Court concludes that counsel's failure to request such a brief continuance did not constitute ineffective assistance of counsel.
Fourth, the Petitioner contends that his trial counsel were ineffective, because they permitted Judge Morrissey to sentence their client, in part, on the basis of a presentence investigation report which they had neither seen nor had the opportunity to rebut. Above, this Court has concluded that the Petitioner did not suffer prejudice, as a result of Judge Morrissey's mention that he had considered that report, since the appellate courts conducted an independent review of the evidence, without reference to that report (which was not part of the record on appeal), and concluded that the evidence established beyond a reasonable doubt that the aggravating circumstances outweighed the mitigating factors. Given that a claim of ineffective assistance of counsel is based upon two factors, deficient performance and prejudice to the defense as a result of that deficient performance, the Petitioner has failed to demonstrate that he was denied effective assistance of counsel in this regard. Therefore, the Court rejects the Petitioner's contention that his counsel were ineffective in this regard.
Accordingly, the Court overrules the Petitioner's Objections to the Initial and Supplemental Reports and Recommendations of the Magistrate Judge, to the extent *1002 those Objections relate to the Eighteenth Claim.
R. Nineteenth Claim
With this Claim, the Petitioner argues that his conviction and sentence violate the Sixth Amendment, because his appellate counsel failed to render effective assistance. This Claim is predicated upon the Petitioner's Claims which were found to be procedurally defaulted, because of the failure of his appellate counsel to raise them on his direct appeal. Throughout this Decision, this Court has concluded that the Petitioner has failed to demonstrate cause and prejudice, with respect to all of those Claims, given that appellate counsel did not fail to provide effective assistance by not raising those issues during the Petitioner's direct appeal. Therefore, this Court concludes that the Petitioner has not demonstrated that his appellate counsel were ineffective in this regard. Accordingly, the Court overrules the Petitioner's Objections to the Magistrate Judge's Initial and Supplemental Reports and Recommendations, as those Objections relate to the Petitioner's Nineteenth Claim.
S. Twentieth Claim
With this Claim, Zuern asserts that Ohio's statutory provisions governing its capital punishment scheme violate the Fifth, Sixth, Eighth and Fourteenth Amendments to the United States Constitution.[55] In support of this Claim, the Petitioner has put forward a number sub-arguments. Judge Merz, after noting that the Respondent has not contended that this Claim is procedurally defaulted, recommended that this Court reject it on the merits. The Petitioner has objected to that recommendation. As a means of analysis, the Court will address the Petitioner's arguments in the order in which they appear in his Objections.
Zuern contends that the Ohio capital punishment scheme is unconstitutional, because it invests unfettered discretion in prosecutors to decide who shall be charged with capital offenses. This Court rejects that assertion. In Gregg v. Georgia, 428 U.S. 153, 96 S. Ct. 2909, 49 L. Ed. 2d 859 (1976), the Supreme Court rejected the argument that Georgia's death penalty statutes were unconstitutional, because Georgia law invested too much discretion with prosecutors to select those persons who would be so charged. See Id. at 199, 96 S. Ct. 2909 (Opinion of Stewart, Powell and Stevens); Id. at 225, 96 S. Ct. 2909 (Opinion of White, joined by Burger and Rehnquist).
Zuern argues next that the Ohio capital punishment statutes violate the substantive component of the Due Process Clause of the Fourteenth Amendment. This is a broad challenge to the constitutionality of the death penalty under any circumstances, rather than an argument that the particular circumstances of his prosecution violated substantive due process. In particular, the Petitioner contends that the right to life is a constitutionally protected, fundamental right. In addition, the Petitioner asserts that the death penalty cannot be imposed, unless the state has shown that it possesses a compelling interest and that the death penalty is the least restrictive means of achieving that interest. This Court rejects the Petitioner's substantive due process challenge to Ohio's capital punishment statutes. In Gregg, supra, and its progeny, the Supreme Court turned aside broad attacks on the constitutionality of the death penalty. Although *1003 those cases were decided under the Eighth Amendment, rather than under the Fourteenth, those decisions nevertheless support this Court's conclusion. In his concurring opinion to Furman v. Georgia, 408 U.S. 238, 92 S. Ct. 2726, 33 L. Ed. 2d 346 (1972), Justice Marshall indicated that a substantive due process challenge to the death penalty, based upon the premise that the taking of life must be supported by a compelling state interest, merges with the Cruel and Unusual Punishments Clause contained in the Eighth Amendment. Id. at 359 n. 141, 92 S. Ct. 2726. See also, In re West, 119 F.3d 295, 296 (5th Cir.1997) (summarily rejecting argument that Texas death penalty statutes violate substantive due process, because Supreme Court had previously decided that those statutes do not violate the Eighth Amendment).
The Petitioner also contends that Ohio's capital punishment statutes are unconstitutional, because the death penalty is imposed in a racially discriminatory manner. In support of that assertion, he states that 60% of the individuals on Ohio's death row are from racial minorities. In McCleskey v. Kemp, 481 U.S. 279, 107 S. Ct. 1756, 95 L. Ed. 2d 262 (1987), the Supreme Court rejected a challenge to Georgia's capital punishment scheme, a challenge which was predicated upon statistical evidence that the death penalty was most frequently imposed upon two types of defendants, to wit: African-Americans defendants and all defendants who have murdered whites. The McCleskey Court held that to prevail with such a challenge, a defendant "must prove that the decision-makers in his case acted with a discriminatory purpose." Id. at 292, 107 S. Ct. 1756 (emphasis in the original). The McCleskey Court also concluded that the statistical evidence presented therein did not meet that burden of proof. Herein, the Petitioner has neither presented evidence nor argued that the decision-makers in his case acted with such a purpose. Accordingly, this Court rejects his argument that Ohio capital punishment statutes are unconstitutional, because the death penalty is imposed disproportionately upon minorities and those who have murdered whites.
Zuern asserts that Ohio's capital punishment statutes violate the Eighth Amendment, because the death penalty is neither the least restrictive nor an effective means of deterrence. Given that the Supreme Court has repeatedly rejected that argument (see e.g., Gregg, supra), this Court declines to hold the Ohio statutory scheme unconstitutional on that basis.
Zuern argues that Ohio's capital punishment scheme is unconstitutional, because of the manner in which those statutes address the question of mitigating factors. In particular, the Petitioner challenges those statutes on the ground that they impose upon a defendant the obligation of proving the existence of a mitigating circumstance by the preponderance of the evidence. This Court rejects that argument. In Walton v. Arizona, 497 U.S. 639, 110 S. Ct. 3047, 111 L. Ed. 2d 511 (1990), the Supreme Court rejected the defendant's argument that Arizona's capital punishment scheme was unconstitutional, because it imposed upon him such an obligation. Id. at 649-50, 110 S. Ct. 3047.[56]
In addition, the Petitioner argues that Ohio's capital punishment statutes are *1004 unconstitutional, because they require a jury to decide whether aggravating circumstances exist during the guilt phase of the trial, rather than during the penalty phase. This Court cannot agree. In Tuilaepa v. California, 512 U.S., 967, 114 S. Ct. 2630, 129 L. Ed. 2d 750 (1994), the Supreme Court explained that its capital punishment cases have addressed two different aspects of the decision making process in death penalty cases, the eligibility decision and the selection decision. With respect to the eligibility decision, the Supreme Court wrote:
To render a defendant eligible for the death penalty in a homicide case, we have indicated that the trier of fact must convict the defendant of murder and find one "aggravating circumstance" (or its equivalent) at either the guilt or penalty phase. See, e.g., Lowenfield v. Phelps, 484 U.S. 231, 244-246, 108 S. Ct. 546, 98 L. Ed. 2d 568 (1988); Zant v. Stephens, 462 U.S. 862, 878, 103 S. Ct. 2733, 77 L. Ed. 2d 235 (1983).
Id. at 971-72, 114 S. Ct. 2630 (emphasis added). California, like Ohio, required the jury to find the existence of an aggravating circumstance during the guilt phase of the trial. See also Lowenfield v. Phelps, 484 U.S. 231, 108 S. Ct. 546, 98 L. Ed. 2d 568 (1988).
Zuern next takes aim at Rule 11(C)(3) of the Ohio Rules of Criminal Procedure, which provides:
If the indictment contains one or more specifications, and a plea of guilty or no contest to the charge is accepted, the court may dismiss the specifications and impose sentence accordingly, in the interests of justice.
Since Ohio law makes only those defendants who are found guilty of one or more specifications or aggravating circumstances eligible for the death penalty, Petitioner contends that this provision imposes an impermissible risk of death on capital defendants who chose to exercise their right to a jury trial, given that there is no corresponding provision applicable to defendants who so choose to exercise their right to such a trial. In support of that argument, the Petitioner relies upon Justice Blackmun's concurring opinion in Lockett v. Ohio, 438 U.S. 586, 617-19, 98 S. Ct. 2954, 57 L. Ed. 2d 973 (1978). In his concurrence, Justice Blackmun stated that Rule 11(C)(3) violated United States v. Jackson, 390 U.S. 570, 88 S. Ct. 1209, 20 L. Ed. 2d 138 (1968), because the trial court could dismiss the specifications asserted against only those defendants who plead guilty or no contest. No other member of the Court joined Justice Blackmun's analysis of Rule 11(C)(3). In Jackson, the Supreme Court held that the capital punishment provision contained in the federal kidnaping statute imposed an unconstitutional burden on the right to a jury trial. That statute authorized only the jury to return a verdict of death; therefore, a defendant charged with kidnaping who plead guilty could not be sentenced to death. In Corbitt v. New Jersey, 439 U.S. 212, 99 S. Ct. 492, 58 L. Ed. 2d 466 (1978), the Supreme Court distinguished Jackson. In Corbitt, the defendant was charged with first degree murder. The law of New Jersey separated murder into first and second degree, with the jury determining which offense the defendant had committed. If convicted of first degree murder, the mandatory sentence was life imprisonment. The punishment for second degree murder was a term of imprisonment not to exceed 30 years. Although the New Jersey statutes did not permit guilty pleas or Bench trials, a defendant was permitted to plead no contest. If such a plea was accepted, the Court had the discretion to sentence the defendant in accordance with either the first or second degree murder provisions. After having been convicted of first degree murder, Corbitt was sentenced to a mandatory term of life imprisonment. Before the Supreme Court, he argued that the New Jersey statutes violated Jackson. The Supreme Court disagreed, noting, inter alia, that a defendant could not invariably avoid a mandatory *1005 term of life imprisonment by pleading no contest, since the judge accepting the plea retained the authority to impose such a penalty. 439 U.S. at 217-18, 99 S. Ct. 492.[57] O.R.Crim. P. 11(C)(3) is similar to the New Jersey statutes in Corbitt and unlike the federal kidnaping statute in Jackson, in that Rule 11(C)(3) does not automatically prevent the imposition of the death penalty for a defendant who has plead guilty. Rule 11(C)(3) is phrased in permissive terms, providing that the court "may dismiss" the specifications. Indeed, defendants have been sentenced to death in Ohio, despite having entered guilty pleas. See e.g., State v. Ashworth, 85 Ohio St. 3d 56, 706 N.E.2d 1231, cert. denied, ___ U.S. ___, 120 S. Ct. 252, 145 L. Ed. 2d 212 (1999); State v. Fautenberry, 72 Ohio St. 3d 435, 650 N.E.2d 878, cert. denied, 516 U.S. 996, 116 S. Ct. 534, 133 L. Ed. 2d 439 (1995). Based upon the distinction recognized by the Supreme Court in Corbitt, this Court concludes that Rule 11(C)(3) does not violate the rule established in Jackson. Accord, Scott, 58 F.Supp.2d at 796.
Petitioner argues next that Ohio's capital punishment statutes are unconstitutional, because of the lack of adequate proportionality review on appeal. For instance, the Petitioner contends that such review is hampered by the fact that the Ohio statutes only require courts to report minimal information on death penalty cases. In addition, Ohio law does not require that a jury or three-judge panel which recommends life imprisonment, rather than death, to identify the mitigating factors which underlie the recommendation. According to Zuern, the proportionality review process is also flawed, because the Ohio Supreme Court has held that a court of appeals meets its statutory obligation to conduct such a review, if it reviews the cases decided by the appellate court in which the death penalty was imposed. State v. Steffen, 31 Ohio St. 3d 111, 509 N.E.2d 383 (1987), cert. denied, 485 U.S. 916, 108 S. Ct. 1089, 99 L. Ed. 2d 250 (1988). The Court rejects the Petitioner's argument that Ohio capital punishment statutes violate the Constitution, because they do not provide for adequate proportionality review upon appeal. In Pulley v. Harris, 465 U.S. 37, 104 S. Ct. 871, 79 L. Ed. 2d 29 (1984), the Supreme Court rejected the argument that the Eighth Amendment requires that the state provide such a review on appeal. Therefore, the Petitioner's assertions that Ohio's proportionality review is inadequate cannot constitute a violation of that constitutional provision.[58]
Accordingly, the Court overrules the Petitioner's Objections to the Magistrate Judge's Initial and Supplemental Reports and Recommendations, to the extent those Objections relate to his Twentieth Claim.
T. Twenty-Fifth Claim
With this Claim, the Petitioner argues that his rights under the Eighth and Fourteenth Amendments were violated, because he was charged with an invalid specification or aggravating circumstance. In particular, he focuses upon Ohio Revised Code § 2929.04(A), which provides in pertinent part:
(A) Imposition of the death penalty for aggravated murder is precluded unless one or more of the following is specified in the indictment or count in the indictment pursuant to section 2941.14 of the *1006 Revised Code and proved beyond a reasonable doubt:
* * * * * *
(6) The victim of the offense was a law enforcement officer, as defined in section 2911.01 of the Revised Code, whom the offender had reasonable cause to know or knew to be a law enforcement officer as so defined, and either the victim, at the time of the commission of the offense, was engaged in the victim's duties, or it was the offender's specific purpose to kill a law enforcement officer as so defined.
(Emphasis added). The indictment charged the Petitioner with three specifications, to wit: that he committed aggravated murder while he was under detention (Ohio Rev.Code § 2929.04(A)(4)); that the victim of the aggravated murder was a law enforcement officer, who was engaged in the performance of his duties (Ohio Rev.Code § 2929.04(A)(6)); and that the victim of the aggravated murder was a law enforcement officer and the Petitioner's specific purpose was to kill a law enforcement officer (Ohio Rev.Code § 2929.04(A)(6)). Petitioner contends that it was improper to charge him with both alternatives contained in § 2929.04(A)(6), since that statute sets forth one aggravating circumstance which may be accomplished in either of two ways. Zuern argues that submitting § 2929.04(A)(6) to the jury as two specifications or aggravating circumstances, rather than as one, skewed the weighing process required by 2929.04(D). Under that statutory provision, the death penalty can be imposed only if the state proves, beyond a reasonable doubt, that the aggravating circumstances outweigh the mitigating factors. Judge Merz recommended that the Court hold this Claim to be barred by procedural default, the failure of the Petitioner to raise it on his direct appeal. Since the Petitioner has failed to show cause and prejudice for that default, this Court concurs with that recommendation.
The Petitioner contends that he can show cause and prejudice, by the ineffective assistance of his appellate counsel in failing to raise this issue during his direct appeal. In State v. Jenkins, 15 Ohio St. 3d 164, 473 N.E.2d 264 (1984), the Ohio Supreme Court addressed an analogous situation. Therein, the trial court had instructed the jury on a number of aggravating circumstances, including two under § 2929.04(A)(7), which makes the commission of an aggravated murder during the perpetration of certain specified offenses an aggravating circumstance. In that case, the trial court had charged, as separate aggravating circumstances, that the defendant had committed aggravated murder during the course of a kidnaping and during the course of an aggravated robbery. Although the Ohio Supreme Court concluded that the charge was "unnecessarily cumulative" and, therefore, should have been merged, that court did not reverse the defendant's sentence of death, since the failure to merge the two had not had an effect on the jury's judgment. Herein, the Petitioner did not present any mitigation evidence; therefore, the failure to merge the two alternative manners of establishing the aggravating circumstance set forth in § 2929.04(A)(6) cannot have had an impact upon the sentence imposed upon the Petitioner, i.e., could not, in and of itself, have caused aggravating circumstances to outweigh mitigating factors. Consequently, if appellate counsel had raised this issue on appeal, it would not have resulted in the reversal of Petitioner's sentence. Thus, the Petitioner was not prejudiced by the allegedly defective representation by appellate counsel.
Accordingly, the Court overrules the Petitioner's Objection's to Judge Merz' Initial and Supplemental Reports and Recommendations, to the extent that those Objections relate to Petitioner's Twenty-Fifth Claim.
II. Respondent's Objections (Docs. # 321 and # 332)
In his Initial and Supplemental Reports and Recommendations, the Magistrate *1007 Judge recommended that this Court grant a conditional writ to the Petitioner on his Sixth Claim. With that Claim, Zuern argues that his conviction and sentence violated the Due Process Clause of the Fourteenth Amendment, because the trial court refused his request for a mistrial. During the direct examination of Lewis, the prosecutor questioned him about a conversation between himself (Lewis) and Officer Ron Doyle, which had occurred a mere matter of hours before Zuern killed Pence:
Question: What did you tell Officer Doyle?
Answer: I told Officer Doyle, "Officer Doyle, can we talk, could we rap? I'm telling you, you know, Zuern has a shank or a knife or whatever you want to call it." I said, "He is crazy, man, he is in here for murder, and he won't hesitate to do it again."
Doc. # 98 at 855. At that point, Petitioner's counsel moved for a mistrial, which the court denied. Id. at 856. The court did, however, instruct the jury to disregard Lewis' comment:
The Court: Members of the jury, you are admonished at this time that any testimony just offered was a gratuitous remark by the witness, and is excluded from your consideration as any part of the evidence in this matter.
Id.
In his Initial Report and Recommendations, Judge Merz reasoned that Lewis' comment was so prejudicial that the court's instruction could not alleviate that prejudice. In particular, that judicial officer noted that the only contested issue in the Petitioner's trial was whether he had acted with prior calculation and design. According to Judge Merz, the lay opinion testimony of Lewis, that Petitioner would not hesitate to murder again, was pertinent to that contested issue, and the jury would not be able to ignore that testimony, despite the trial court's instruction, since Lewis had predicted in his conversation with Doyle that which in fact occurred later that evening. In his Supplemental Report and Recommendations, Judge Merz emphasized that Lewis' testimony constituted much more than the mention that Petitioner had previously committed a murder; that testimony also indicated that Lewis had predicted approximately six hours before Pence was murdered that Petitioner was capable of murdering again.
The Respondent has presented a multi-pronged attack upon Judge Merz' recommendations relating to Petitioner's Sixth Claim. Initially, Respondent notes that habeas relief is available only when a conviction or sentence violates a federal constitutional right. He contends that the Magistrate Judge breached that rule, by improperly recommending that relief be granted on the basis of a violation of a state rule. This Court does not agree. The Sixth Circuit has held that a violation of a state evidentiary rule can also constitute a deprivation of due process.[59]Brown, 187 F.3d at 578. Moreover, Judge Merz did not ground his recommendation upon state law.
The Respondent also argues that Judge Merz' recommendation will have the effect of creating a per se rule, that a mistrial must be granted, whenever evidence that a defendant has previously committed another criminal act is improperly placed before the jury. Once again, this Court cannot agree. Lewis' testimony was not limited to the reason that Zuern was incarcerated in the CCI; rather, Lewis also testified that he had told Doyle, approximately six hours before Pence was murdered, that Petitioner would not hesitate to murder again. Indeed, Judge Merz noted such in his Reports and Recommendations.
The Respondent also argues that Judge Merz improperly applied the law, because *1008 he neglected to follow the Sixth Circuit's rule that the jury is presumed to follow the court's instructions and that, therefore, the trial court's curative instruction eliminated the prejudicial effect of Lewis' extemporaneous remark. In particular, the Respondent relies upon United States v. Forrest, 17 F.3d 916 (6th Cir.), cert. denied, 511 U.S. 1113, 114 S. Ct. 2115, 128 L. Ed. 2d 673 (1994). Therein, the Government asked one of its witnesses whether he was aware of where the defendant had been living. He blurted out that he knew that the defendant had been living at a particular address for the past five months, since the time he had been released from a penal institution for robbery. Id. at 920. The court immediately instructed the jury to disregard the witness' comment. On cross-examination, that witness once again stated that the defendant had been released from prison five months earlier. At that point, defendant moved for a mistrial, which the District Court denied. In concluding that the District Court had not abused its discretion in denying the defendant's request for a mistrial, the Sixth Circuit wrote:
This case appears similar to United States v. Hernandez, 873 F.2d 925, 928 (6th Cir.1989), in which this court determined that a mistrial was not warranted where an improper reference to an unrelated arrest of defendant was unsolicited; the government's line of questioning reasonable; the limiting instruction immediate, clear, and forceful; no bad faith evidenced by the government; and the reference itself only a small part of the evidence against defendant. [In] United States v. Bowers, 739 F.2d 1050, 1055 (6th Cir.) (per curiam), cert. denied, 469 U.S. 861, 105 S. Ct. 195, 83 L. Ed. 2d 128 (1984), [we] noted that lack of deliberateness, a clear and forceful limiting instruction, no bad faith, and testimony amounting to only a small portion of the government's case, would warrant denying a mistrial. See also United States v. Steele, 727 F.2d 580, 587-88 (6th Cir.), cert. denied, 467 U.S. 1209, 104 S. Ct. 2396, 81 L. Ed. 2d 353 (1984) (unsolicited and inadvertent statement that defendant had served time in a South American jail not grounds for mistrial where there was a clear and positive instruction to the jury to disregard the statement); United States v. Ushery, 968 F.2d 575, 580 (6th Cir.), cert. denied, 506 U.S. 946, 113 S. Ct. 392, 121 L. Ed. 2d 301 (1992) (witness's statement that defendant was a convicted felon in response to the prosecutor's request that the witness explain what he meant by his statement that defendant had "a record" not grounds for mistrial where curative instruction given and testimony only a small part of the total evidence against defendant).
Id. at 920. See also, United States v. Harris, 165 F.3d 1062 (6th Cir.1999) (holding that District Court did not abuse its discretion in refusing to grant defendant's request for a mistrial, when, in response to question by United States Attorney, police officer stated that he was able to locate the defendant by going to the address he had given when last arrested).
In addition, other Circuits have held that a District Court did not abuse its discretion in refusing to grant a mistrial, after a prosecution witness had blurted out that the defendant had engaged in other criminal activity. See United States v. Torres, 959 F.2d 858, 860 (10th Cir.) (noting that denial of mistrial was proper where Government informant stated that he knew the defendant on the street as a drug dealer, because the trial court sustained the objection, struck the characterization from the record and instructed the jury to disregard it), cert. denied, 506 U.S. 882, 113 S. Ct. 236, 121 L. Ed. 2d 171 (1992); United States v. Rodriguez, 929 F.2d 1224, 1228 (7th Cir.1991) (District Court did not abuse its discretion by denying request for a mistrial after an officer inadvertently blurted out that the defendant had previously been arrested for participating in a heroin transaction, because District Court sustained defense counsel's objection, *1009 struck the testimony and instructed the jury to disregard any mention of the arrest); United States v. Blanton, 793 F.2d 1553, 1564-65 (11th Cir.) (no error in refusing a motion for mistrial where witness inadvertently mentioned that the defendant had been charged with rape, because the District Court instructed the jury that the comment was irrelevant and could not be considered), cert. denied, 479 U.S. 1021, 107 S. Ct. 678, 93 L. Ed. 2d 728 (1986).
Based upon Sixth Circuit precedent, the Respondent argues that, to ascertain whether the denial of the request for a mistrial violated the Petitioner's due process rights, this Court must consider the following factors, to wit: 1) whether the remark was unsolicited; 2) whether the line of questioning was reasonable; 3) the clarity and forcefulness of any limiting instruction; 4) any bad faith on the part of the prosecution; and 5) whether the remark was a minor or significant part of the total evidence adduced against the Petitioner. See Doc. # 321 at 10. This Court agrees with the Respondent's reading of the Sixth Circuit cases upon which he has relied, particularly Forrest. The Petitioner has not argued to the contrary. However, it bears emphasis that those decisions set forth the factors that the Sixth Circuit has applied, when deciding on direct appeal whether the District Court abused its discretion by denying the defendant's request for a mistrial. Herein, by contrast, this Court must decide whether the Petitioner was denied due process when his request for a mistrial was overruled. Therefore, rather than deciding whether the denial of a mistrial constituted an abuse of discretion under state law, this Court must determine whether that decision resulted in a trial that was so fundamentally unfair that it constituted a deprivation of due process under the United States Constitution. See e.g., Brown, 187 F.3d at 578. The Petitioner cannot be prejudiced if the Court applies the above factors, as Respondent requests, since the standard applicable to due process violations can only be more rigorous than that set forth by the Sixth Circuit in Forrest. See Donnelly v. DeChristoforo, 416 U.S. 637, 642, 94 S. Ct. 1868, 40 L. Ed. 2d 431 (1974) (noting that "not every trial error or infirmity which might call for application of supervisory powers correspondingly constitutes a failure to observe that fundamental fairness essential to the very concept of justice") (internal quotation marks and citation omitted).
With respect to the first factor (i.e., whether Lewis' remark was unsolicited), the prosecutor did not ask Lewis whether he had told Doyle that Zuern was crazy, that he was incarcerated for murder or that he would not hesitate to murder again. Rather, the prosecutor was attempting to elicit from Lewis the fact that he had told Doyle that Zuern possessed a weapon. Therefore, while the prosecutor's open-ended question ("what did you tell Officer Doyle") may have made it easier for Lewis' answer to include the objectionable statements, it is not apparent that the prosecutor was attempting to solicit such information from Lewis. Thus, this Court cannot find that this factor supports the conclusion that Zuern suffered a deprivation of due process, because his request for a mistrial was denied. With respect to the second factor (i.e., whether the line of questioning was reasonable), Lewis testified that he had told Doyle that Zuern possessed a knife, earlier on the day that Zuern's cell was searched. Thus, the prosecution's line of questioning was completely reasonable, given that it was attempting to introduce evidence that could explain why officers attempted to search Zuern's cell later that day. The third factor, the clarity and forcefulness of any limiting instruction, unquestionably supports the conclusion that the failure to grant a mistrial did not constitute a violation of due process. After Lewis had made the remark in question, Judge Morrissey immediately gave a forceful and clear limiting instruction, telling the members of the jury that they could not consider Lewis' gratuitous remark. It bears emphasis that a jury is *1010 presumed to follow curative instructions. See e.g., United States v. Waldon, 206 F.3d 597 (6th Cir.2000). The fourth factor identified by the Sixth Circuit in Forrest also supports the conclusion that the denial of the Zuern's request for mistrial did not constitute a deprivation of due process, since there is no evidence or other indication of bad faith on the part of the prosecutor.
Therefore, the Court is left with the question of whether Lewis' remark was a minor or a significant part of the evidence against the Petitioner. To resolve that question, it is necessary to examine Lewis' remark, not in a vacuum but in the context both of the defense presented by Petitioner at trial and of the State's evidence on the crucial element of prior calculation and design. Petitioner has never challenged the fact that he killed Pence. Indeed, his counsel conceded as much during his closing argument in the guilt phase of the Petitioner's trial. See Doc. # 99 at 1092 (indicating that the only question before the jury was whether Zuern had acted with prior calculation and design and, thus, was guilty of aggravated murder, as opposed to being guilty of murder). Moreover, there was eyewitness testimony from Burton and other corrections officers who saw the Petitioner stab Pence. Thus, with respect to the question of whether Zuern killed Pence, Lewis' remark was not even a minor part of the evidence. Therefore, the failure to grant the requested mistrial could have constituted a deprivation of due process, only if Lewis' remark was probative of Zuern's prior calculation and design, the one distinguishing factor between the charge of aggravated murder and the lesser offense of murder. In other words, given the concession that Zuern killed Pence (as well as the overwhelming and uncontradicted evidence establishing that fact), this Court must focus exclusively upon the question of whether Lewis' statement was a minor or a significant part of the evidence against Petitioner on the issue of whether he acted with prior calculation and design. To resolve that question, the Court initially reviews the evidence that supports the jury's verdict that he so acted, and, then, places Lewis' objectionable remark in the context of his overall testimony.
As is indicated above, the evidence that the Petitioner acted with prior calculation and design, although sufficient to support his conviction, was not overwhelming. Lewis testified on behalf of the prosecution that the Petitioner had indicated that somebody ought to do something to the guards, because they did not permit prisoners to use all of their allotted time on telephone calls. Doc. # 98 at 853-54. Lewis also testified that, on another occasion, he had observed the Petitioner sharpening a piece of metal into a shank or knife, and that he had informed Doyle of that fact. Id. at 854-55. Lewis' testimony that Zuern had a shank was corroborated by Schweinefuss, who testified that an inmate had told him that Zuern had a knife. Id. at 888-89. In addition, Joseph testified about his conversations with the Petitioner, after Pence had been murdered. Joseph indicated that the Petitioner told him that he got his "nut" from killing. Id. at 864. Joseph also testified that the Petitioner had told him that he (Zuern) had been told by another inmate that his cell would be searched on the evening that Pence was killed. Id. at 865. According to Joseph's description of his conversation with the Petitioner, Zuern, after having been warned about the planned search, got out of his bed, put on his pants and waited for the guards to reach his cell. Id. at 866. When his cell door had been partially opened, Petitioner lunged with his shank and used his shoulder to exert additional pressure and make the shank enter Pence's body more deeply. Id. In addition, Burton, who along with Pence attempted to search Petitioner's cell on the evening of June 9th, testified that, when the officers arrived at the cell, Pence stood in front of the cell door and directed Zuern to come to the door and to stand in front of it. Id. at 935. Petitioner complied. Id. *1011 Pence then told Zuern to come outside the door and to put his hands against the wall. Id. When the cell door was opened, Zuern lunged at Pence, and stabbed that officer in the chest with his shank. Id. at 935-37.
Lewis' provided two important bits of testimony for the prosecution. He provided testimony from which the jury could infer that Zuern had an animus against guards. He also testified that he had seen Zuern sharpening a piece of metal into a shank or knife. However, it bears emphasis that Lewis did not indicate that he heard Zuern express his animus towards guards at the same time he (Lewis) saw Zuern fashioning a weapon out of a piece of metal. On the contrary, Lewis explained that, on the last Tuesday of May, 1984, he had engaged Zuern in a conversation, during which the latter had expressed his animus towards guards. According to Lewis' testimony, he saw Zuern making the weapon on either the 5th, 6th or 7th of June, 1984. Thus, the jury could not have believed that Zuern said, while he was fashioning a piece of metal into a knife, that somebody ought to do something to the guards. Moreover, the objectionable testimony by Lewis occurred when he was testifying about his conversation with Doyle concerning Zuern's weapon, and not in connection with his testimony that Zuern had indicated, on the last Tuesday of May, 1984, that something should be done to the guards. Therefore, if a link exists between Lewis' testimony that Zuern had indicated that something should be done to the guards and his objectionable testimony, such a link is tenuous at best.
With the foregoing discussion of the evidence of prior calculation and design and the context of Lewis's testimony in mind, this Court turns to the issue of whether Lewis' statement constituted a minor or a significant part of that evidence. In his Initial Report and Recommendations, Judge Merz noted that Lewis' statement to Doyle was not limited to the reason that Zuern was incarcerated in the CCI;[60] rather, he also indicated that Lewis had told Doyle, approximately six hours before Pence was murdered, that Petitioner would not hesitate to murder again. One could argue that Lewis' statement can be interpreted as his prediction, made approximately six hours before Zuern would murder Pence, that the Petitioner would kill someone. Such a prediction could have some probative force on the question of whether Zuern acted with prior calculation and design, since it might indicate that he had planned that act. Nevertheless, an examination of the language used by Lewis convinces this Court that it's probative force on that issue was minor. Lewis' statements that the Petitioner was crazy and that he would not hesitate to murder again are more logically construed to mean that the Petitioner would act on the spur of the moment, than to mean that he would act with prior calculation and design. It should be noted that Lewis did not indicate that the Petitioner was planning to kill Pence, another corrections officer or anyone else. He merely said the Petitioner would not hesitate to murder again. Even though the evidence that Petitioner had acted with prior calculation and design was not particularly strong, the lack of the probative force of Lewis' remark on that crucial, contested element convinces this Court that said remark constituted a minor part of the evidence against Petitioner on this point.[61]
*1012 In sum, the only contested issue at the Petitioner's trial was whether he acted with prior calculation and design. Given the lack of probative value of Lewis' remark on that issue, this Court concludes that said remark was a minor part of the evidence that Zuern had so acted. In addition, this Court has concluded that the prosecutor did not act with bad faith, that the area of inquiry was reasonable and that, although the question asked was broad, Lewis' remark was not directly solicited. Moreover, immediately after Lewis made the objectionable remark, Judge Morrissey clearly and forcefully told the jury that they were to disregard it, a curative instruction which the jury is presumed to have followed. Consequently, all factors identified by the Sixth Circuit in Forrest cause this Court to conclude that the denial of the requested mistrial did not constitute an abuse of discretion. However, even assuming a contrary finding, the Petitioner must go beyond demonstrating that Judge Morrissey's decision in that regard constituted an abuse of discretion. He must show that such decision constituted a deprivation of due process (i.e., a decision which rendered Petitioner's trial fundamentally unfair). Given that the due process standard is more onerous (Donnelly, supra), this Court is compelled to conclude that the failure to grant the requested mistrial did not deprive the Petitioner of due process of law. Accordingly, the Court sustains the Respondent's Objections to the Initial and Supplemental Reports and Recommendations of the Magistrate Judge as to Petitioner's Sixth Claim.
The final question to resolve is whether this Court should issue a certificate of probable cause, in accordance with the pre-AEDPA version of 28 U.S.C. § 2253. The Sixth Circuit has held, in light of Lindh v. Murphy, supra, that this version of § 2253 must be applied in cases such as the present one, which were filed before the effective date of the AEDPA. See e.g., Norris v. Schotten, 146 F.3d 314, 322 (6th Cir.), cert. denied, 525 U.S. 935, 119 S. Ct. 348, 142 L. Ed. 2d 287 (1998); Arredondo v. United States, 120 F.3d 639, 640 (6th Cir.1997). Under the post-AEDPA version of § 2253, a petitioner may appeal only if he has obtained a certificate of appealability. Such a Certificate differs from a Certificate of Probable Cause, in that the issues that can be appealed are limited to those set forth in the certificate of appealability. A certificate of probable cause, on the other hand, allows a petitioner to appeal all aspects of the District Court's judgment. In Norris, the Sixth Circuit explained:
In the pre-AEDPA world, state prisoners who were denied a writ of habeas corpus from the district court were required to obtain a certificate of probable cause from either the "justice or judge who rendered the [final] order or a circuit justice or judge" before an appeal could be taken to the court of appeals. 28 U.S.C. § 2253 (1994). More important, this court has held that "the grant of [a] certificate of probable cause by the district court, in spite of [any] limiting provision, brings before [the court of appeals] the final judgment for review in all respects." Houston v. Mintzes, 722 F.2d 290, 293 (6th Cir.1983) (emphasis added). Thus, in stark contrast to the rules prescribed under AEDPA which require an itemization of appealable issues, in the pre-AEDPA context the court could not pick and choose which issues to review.
146 F.3d at 322-23. Therefore, this Court need not decide whether the Petitioner is entitled to appeal each particular Claim, for which this Court has denied relief. Indeed, such a determination would be of no import.
In Lozada v. Deeds, 498 U.S. 430, 111 S. Ct. 860, 112 L. Ed. 2d 956 (1991), the Supreme *1013 Court restated that applicable standards for determining whether to issue a certificate of probable cause:
In Barefoot v. Estelle, 463 U.S. 880, 892-893, 103 S. Ct. 3383, 77 L. Ed. 2d 1090 (1983), we delineated the standards for issuance of a certificate of probable cause. We agreed with the Courts of Appeals that had ruled that "a certificate of probable cause requires petitioner to make a `substantial showing of the denial of [a] federal right.'" Id., at 893, 103 S. Ct. 3383 (quoting Stewart v. Beto, 454 F.2d 268, 270, n. 2 (C.A.5 1971), cert. denied, 406 U.S. 925, 92 S. Ct. 1796, 32 L. Ed. 2d 126 (1972)). We also quoted with approval Gordon v. Willis, 516 F. Supp. 911, 913 (N.D.Ga.1980) (citing United States ex rel. Jones v. Richmond, 245 F.2d 234(CA2), cert. denied, 355 U.S. 846, 78 S. Ct. 71, 2 L. Ed. 2d 56 (1957)), which explained that in order to make a substantial showing of the denial of a federal right a petitioner who has been denied relief in a district court "`must demonstrate that the issues are debatable among jurists of reason; that a court could resolve the issues [in a different manner]; or that the questions are "adequate to deserve encouragement to proceed further."'" 463 U.S. at 893, n. 4, 103 S. Ct. 3383.
Id. at 431-32, 111 S. Ct. 860. Given that Judge Merz recommended that this Court grant relief to the Petitioner on his Sixth Claim, even though this Court has chosen not to follow such recommendation, the Court concludes that Zuern has made a substantial showing of the denial of a federal right. The issues on that claim and on many (although not all) of the remaining claims are debatable among jurists of reason. Accordingly, this Court will issue a certificate of probable cause.
It is anticipated that Petitioner will seek leave to appeal in forma pauperis. Such a motion will be granted.
The Court grants Petitioner a conditional Writ of Habeas Corpus. If the Petitioner is not retried within the time permitted by the Ohio Speedy Trial Act, he must be released.
This Court directs that judgment be entered in favor of the Petitioner and against the Respondent on the Third Claim, in part (i.e., as it relates to the non-disclosure of the Schweinefuss Memorandum), and in favor of the Respondent and against the Petitioner on all other Claims.
The captioned cause is hereby ordered terminated upon the docket records of the United States District Court for the Southern District of Ohio, Western Division, at Dayton.
NOTES
[1] Before the Court of Appeals, the Petitioner also argued that the trial court had erred in dismissing his request for post-conviction relief and, further, that it had committed certain procedural errors in its handling of that request for relief.
[2] The Magistrate Judge recommended that the Petitioner be released, unless he were granted a new trial within the time governed by Ohio's Speedy Trial Act.
[3] The Magistrate Judge recommended that the Court conditionally grant the requested relief with respect to the Sixth Claim. The Petitioner has not objected to Judge Merz' recommendations that the requested relief be denied with respect to the Twenty-First through Twenty-Fourth Claims. In the absence of objections to those Claims, the Court adopts the Magistrate Judge's Initial Report and Recommendations (Doc. # 320), with regard to Petitioner's Twenty-First through Twenty-Fourth Claims. See Thomas v. Arn, 474 U.S. 140, 106 S. Ct. 466, 88 L. Ed. 2d 435 (1985); United States v. Walters, 638 F.2d 947, 949-50 (6th Cir.1981).
[4] In his Objections to the Magistrate Judge's Supplemental Report and Recommendations (Doc. # 331), the Petitioner also addresses the issue of a Certificate of Probable Cause.
[5] Not surprisingly, the Petitioner agrees. See Doc. # 326 at 1-2.
[6] The Petitioner also challenges the Ohio rule that ineffective assistance of counsel claims must be asserted on direct appeal, unless the same attorney represents a defendant both at trial and during an appeal. This Court deems it unnecessary to address the Petitioner's arguments in this regard, since Judge Merz resolved the Petitioner's Claims concerning the effectiveness of his trial and appellate counsel on their merits. This Court will do the same. Indeed, if the Respondent had argued that Petitioner's ineffective assistance of counsel claims were procedurally barred, this Court would have rejected that argument. See Combs v. Coyle, 205 F.3d 269, (6th Cir. 2000).
[7] The Petitioner has attached an appendix of decisions to his Objections (Doc. # 326) in which the Ohio Supreme Court addressed an issue when the defendant had failed to object at trial or to present the argument to the intermediate appellate court. None of those decisions involved a post-conviction proceeding.
[8] Murray is particularly instructive. Therein, the petitioner had argued that the inadvertence of his appellate counsel in failing to raise certain claims on direct appeal constituted cause, permitting federal habeas review of those claims. The Supreme Court rejected that assertion, writing "[s]o long as a defendant is represented by counsel whose performance is not constitutionally ineffective under the standard established in Strickland v. Washington, we discern no inequity in requiring him to bear the risk of attorney error that results in a procedural default." 477 U.S. at 488, 106 S. Ct. 2639. In short, one does not establish cause merely by setting out counsel's failure to raise a particular issue at a given stage of the proceedings.
[9] The evidence that Zuern murdered Pence was so uncontradicted that, had the Petitioner been involved in a civil case rather than in a criminal prosecution, the trial court could quite properly have entered summary judgment against the Petitioner.
[10] At the Petitioner's trial, the court instructed the jury that prior calculation and design could exist where a defendant plans to kill any member of a certain class of persons, even though he did not know in advance who the particular victim would be. See Doc. # 99 at 1128. The Petitioner has not challenged that statement of Ohio law in either the courts of Ohio or before this Court.
[11] Petitioner has never challenged the fact that he killed Pence. Indeed, his counsel conceded as much during his closing argument at the guilt phase of the Petitioner's trial. See Doc.# 99 at 1092 (indicating that the only question before the jury was whether Zuern had acted with prior calculation and design and, thus, was guilty of aggravated murder, as opposed to being guilty of murder). Moreover, there was eyewitness testimony from Burton and other corrections officers who saw the Petitioner stab Pence.
[12] The transcript of Lewis' statement was Petitioner's Exhibit 2, at the hearing conducted before Judge Merz.
[13] Lewis testified at Petitioner's trial; however, the defense did not attempt to cross-examine him on his statement to officers, because they had not been provided with a transcription of same.
[14] Given that the pertinent portion of Lewis' statement merely relates what he had been told by Hearst, it is doubtful that Petitioner could have used that statement to cross-examine Lewis.
[15] The Committee Notes to Ohio Rule 803(8) state that it was varied from the federal version "to make clear that police reports favorable to the defendant could be offered by him in a criminal case."
[16] The Petitioner has not suggested, nor can this Court conceive of, a manner in which Lewis' statement would have been independently admissible at Zuern's trial.
[17] Given that the only possible use of Lewis' statement would be to have made it easier to impeach Hearst, if he had denied that Zuern had threatened him, the Court will not find that the failure to disclose that statement, alone, constituted a violation of Brady. However, since this Court must consider the non-disclosed evidence collectively (Schledwitz, supra), the conclusion that the failure to disclose the Schweinefuss Memorandum constituted a violation of Brady (if the information contained therein was material) is reinforced by the non-disclosure of Lewis' statement, since that statement could have assisted in impeaching Hearst if he were to deny that Zuern had threatened to kill him.
[18] This evidence became all the more important to the defense, after Lewis had blurted out that Zuern was crazy, that he was being incarcerated for murder and that he would not hesitate to kill again. The ability of the defense to show that Zuern wanted to kill someone other than a guard could have lessened any prejudicial effect of Lewis' remark.
[19] One might argue that the prosecution should not be responsible for anticipating what a defendant's defense will be. In other words, in the absence of an indication that Zuern was defending on the basis that he had not acted with prior calculation and design, the prosecution could not have foreseen that the Schweinefuss Memorandum was exculpatory. This Court would reject such an argument. One of the elements of the offense with which the Petitioner was charged was that he had acted with prior calculation and design. The Schweinefuss Memorandum clearly cast doubt on that fact; therefore, the prosecution was aware of its exculpatory nature, even if the Petitioner had not stated that he would be defending on that basis.
[20] The Petitioner argues quite persuasively that the failure to disclose such an agreement would have constituted a violation of Brady. This Court cannot disagree with that argument; however, since the Petitioner has failed to demonstrate that such an agreement existed, there was nothing to disclose.
[21] In the absence of an agreement, which the prosecution would have been obligated to disclose, Petitioner's counsel could have attempted to impeach Lewis, by asking him whether he hoped to get a benefit from testimony favorable to the prosecution. However, nothing prevented Petitioner's counsel from conducting such a cross-examination of Lewis.
[22] Petitioner also argues that Lewis committed perjury by minimizing his criminal record during his trial testimony. Lewis testified that he was incarcerated in the CCI for three theft cases, drug abuse and a sentence to the penitentiary of one to ten years. Doc. # 98 at 848. In addition, he indicated that his criminal record included convictions for one count of felonious assault, one count of drug abuse and three counts of theft. Id. Petitioner contends that Lewis neglected to include a conviction for illegally processing a drug document. Assuming for present purposes that the prosecution knew or should have known that Lewis perjured himself by not including that conviction in his description of his criminal record, this Court cannot conclude that such an assumption entitles the Petitioner to relief. It is axiomatic that the use of perjured testimony to obtain a conviction is the basis for a new trial, only if "there is a reasonable likelihood that the false testimony could have affected the judgment of the jury." Frost, 125 F.3d at 382 n. 17 (citation and internal quotation marks omitted). Given that Lewis told the jury that he had five convictions on his record and that he was serving a term of incarceration of from one to ten years, there is no reasonable likelihood that testimony concerning an additional conviction would have affected the judgment of the jury.
[23] The prosecutor prefaced his opening statement by informing the jury that his remarks were not evidence. Doc. # 98 at 834. Zuern's counsel did not object to the prosecutor's statements concerning the victim's character.
[24] Petitioner's counsel objected on the basis of relevance. Doc. # 98 at 994. The prosecutor argued that it was important to show the jury the type of person who was the victim of the alleged offense.
[25] In Payne v. Tennessee, 501 U.S. 808, 111 S. Ct. 2597, 115 L. Ed. 2d 720 (1991), the Supreme Court overruled Booth v. Maryland, 482 U.S. 496, 107 S. Ct. 2529, 96 L. Ed. 2d 440 (1987), and South Carolina v. Gathers, 490 U.S. 805, 109 S. Ct. 2207, 104 L. Ed. 2d 876 (1989), and held that victim impact evidence was admissible at the sentencing phase of a death penalty prosecution. Herein, since the evidence was admitted and the arguments made during the guilt phase, Payne does not mandate the conclusion that no error was committed.
[26] Since Judge Merz recommended that the Court grant relief on the Petitioner's Sixth Claim, Zuern has not objected to that recommendation.
[27] Petitioner has also argued that the prosecutor violated his rights by commenting that he had not shown remorse during his trial. Since the Petitioner's expression during the trial was physical in nature, this Court rejects that assertion. Accord Maiello v. Edwards, 1998 WL 230956 (S.D.N.Y.1998), affirmed, 1999 WL 758762 (2nd Cir.1999).
[28] Petitioner has argued that the fact that the jury viewed him while he was shackled was inherently prejudicial. In accordance with Moreno, this Court rejects that argument.
[29] During the trial, Zuern's counsel requested an instruction reflecting the "hung jury" approach.
[30] In Roland, the District Court told the jury that, if it found that the Government had failed to meet its burden of proof on the greater offense, it should consider the lesser offense. The Second Circuit concluded that the District Court's instructions fell between the "acquittal first" and the "hung jury" approaches, although it was closer to the former.
[31] The state conceded that, absent the statutory prohibition on lesser included offense instructions, the defendant would have been entitled to the one he had requested.
[32] In United States v. Amey, 1995 WL 696680 (6th Cir.1995), the defendant requested a "hung jury" instruction, which the District Court declined to give. The Sixth Circuit concluded that the refusal did not constitute error, since the advantages to such an instruction were speculative.
[33] The Petitioner also points out that the prosecutor equated the imposition of a lesser penalty than death as taking "the easy way out." See Doc. # 94 at 67-68. Petitioner's counsel objected to the use of that phrase; however, that objection was overruled. The Petitioner has failed to cite a single case which would support the proposition that the prosecutor's use of that hyperbolic phrase violated his constitutional rights. Since this Court has also been unable to find any such precedent, it rejects the argument that the use of the quoted phrase by the prosecutor violated any rights of the Petitioner.
[34] To support this Claim, the Petitioner has cited Witherspoon v. Illinois, 391 U.S. 510, 88 S. Ct. 1770, 20 L. Ed. 2d 776 (1968). Therein, the Supreme Court held that the defendant was denied his right to an impartial jury, as guaranteed by the Sixth and Fourteenth Amendments, because the prosecution had been permitted to challenge for cause every potential juror who had expressed any reservations about or hesitancy to impose the death penalty. As the Petitioner points out, the Witherspoon Court noted that "a prospective juror cannot be expected to say in advance of trial whether he would in fact vote for the extreme penalty in the case before him." Id. at 522 n. 21, 88 S. Ct. 1770. The Witherspoon Court also indicated that a state "may not entrust the determination of whether a man should live or die to a tribunal organized to return a verdict of death." Id. at 522, 88 S. Ct. 1770. This Court cannot agree with the Petitioner that the quoted statements in any manner support his assertion that the prosecutor engaged in improper voir dire. When the Supreme Court decided Witherspoon, the Illinois statutes gave the jury unfettered discretion whether to impose the death penalty in capital cases. Therefore, a juror could not have been expected to state whether he would impose that penalty in the case before him. In contrast, the imposition of the death penalty is mandatory in Ohio, if the prosecution proves, beyond a reasonable doubt, that the aggravating circumstances outweigh the mitigating factors. The prosecutor was not asking the potential jurors to predict whether they would vote to impose the death penalty; rather, he was asking them whether they would follow the law and reminding them of that law. Nothing in Witherspoon remotely suggests that the prosecutor's questioning and statements herein were improper. Moreover, the Petitioner has not argued that any potential juror was excluded for cause in violation of Witherspoon.
[35] In Wainwright v. Witt, 469 U.S. 412, 105 S. Ct. 844, 83 L. Ed. 2d 841 (1985), the Supreme Court explained that, under Witherspoon, "the proper standard for determining when a prospective juror may be excused for cause because of his or her views on capital punishment ... is whether the juror's views would `prevent or substantially impair the performance of his duties as a juror in accordance with his instructions and his oath.'" Id. at 424, 105 S. Ct. 844 (quoting Adams v. Texas, 448 U.S. 38, 45, 100 S. Ct. 2521, 65 L. Ed. 2d 581 (1980)).
[36] Judge Merz found that three of the four potential jurors, whom the prosecutor had excluded with peremptory challenges, had expressed hesitancy about the death penalty. The Respondent has not challenged that finding.
[37] In Gray v. Mississippi, 481 U.S. 648, 107 S. Ct. 2045, 95 L. Ed. 2d 622 (1987), the Supreme Court refused to apply a harmless error analysis to Witherspoon violations. In its decision, the Gray Court noted that prosecutors often use peremptory challenges to exclude jurors who cannot be removed for cause under Witherspoon. Id. at 667-68, 107 S. Ct. 2045.
[38] In J.E.B. v. Alabama ex rel. T.B., 511 U.S. 127, 114 S. Ct. 1419, 128 L. Ed. 2d 89 (1994), the Supreme Court extended Batson to instances where peremptory challenges are employed to exclude individuals from a jury on the basis of their gender.
[39] In Maxwell, the defendant argued that the prosecutor had unconstitutionally used peremptory challenges to exclude two jurors, who were 18 and 21 years old. The Sixth Circuit rejected that argument, writing "[t]he practice of allowing peremptory challenges may be overridden only for the strongest constitutional reasons, which the Supreme Court has recognized in cases of race and gender discrimination." 160 F.3d at 1076.
[40] The Petitioner has cited a number of cases in which the Supreme Court has indicated that a defendant facing the death penalty has a right under the Eighth Amendment to present all manner of mitigating evidence. See e.g., Eddings v. Oklahoma, 455 U.S. 104, 102 S. Ct. 869, 71 L. Ed. 2d 1 (1982). Those cases are inapposite, since the issue raised by this Claim is not whether Ohio could have prevented the Petitioner from presenting some type of mitigating evidence. Rather, the question is whether the Petitioner could waive his right to present such evidence, without the trial court first conducting a hearing to determine whether he was competent to do so.
In addition, the Petitioner has cited decisions by state courts outside of Ohio, which have held that a death penalty defendant cannot waive the right to present mitigating evidence. The Ohio Supreme Court has rejected that proposition. See e.g., State v. Cowans, 87 Ohio St. 3d 68, 80, 717 N.E.2d 298, 310 (1999). Zuern does not argue that the Eighth Amendment prohibits states from permitting a defendant to waive that right. Given that the Supreme Court has not prohibited death penalty defendants from waiving the right to a trial (Godinez v. Moran, 509 U.S. 389, 113 S. Ct. 2680, 125 L. Ed. 2d 321 (1993)), such an argument would have been unavailing.
[41] The Supreme Court has held that a state does not violate due process by presuming that a criminal defendant is competent to stand trial and imposing upon him the obligation of proving by the preponderance of the evidence that he is not competent. Medina v. California, 505 U.S. 437, 112 S. Ct. 2572, 120 L. Ed. 2d 353 (1992).
[42] Moran informed the trial court that he wished to discharge his counsel and to enter guilty pleas, in order to prevent the introduction of mitigating evidence.
[43] Of course, the waiver of a right to trial (by pleading guilty) and to be represented by counsel must be intelligent and voluntary. 509 U.S. at 402, 113 S. Ct. 2680. Zuern has not suggested that his waiver of the right to present mitigating evidence was either unknowing or unintelligent.
[44] Under Ohio Revised Code § 2929.03(F), the sentencing court is required to state in a separate opinion its findings and reasons for imposing the death penalty.
[45] Petitioner also argues that application of the procedural bar is inappropriate with regard to this Claim, because the trial court addressed its merits during his post-conviction proceedings. This Court does not agree. The Supreme Court has indicated that, when deciding whether a claim has been procedurally defaulted, a federal court must look to the last reasoned state court decision. See Ylst v. Nunnemaker, 501 U.S. 797, 111 S. Ct. 2590, 115 L. Ed. 2d 706 (1991). The Hamilton County Court of Appeals was the last state court to pass on this Claim, and it unquestionably found it to be barred by res judicata.
[46] Under the law of Florida, a jury's recommendation of life imprisonment was not binding on the Court. Under the law of Ohio, a jury's verdict on a punishment, other than a recommendation of death, is binding on the trial court.
[47] It was unclear whether the trial court had even relied on the portion of the presentence report which had not been disclosed.
[48] Although Gardner was a plurality opinion, the Supreme Court has subsequently relied upon that decision. See e.g., Simmons v. South Carolina, 512 U.S. 154, 114 S. Ct. 2187, 129 L. Ed. 2d 133 (1994) (relying upon plurality opinion in Gardner, in holding that defendant is denied due process, when sentenced to death without being permitted to rebut state's evidence of future dangerousness with jury instruction that sentence of life imprisonment was without possibility of parole).
[49] However, a jury's recommendation of a sentence other than death is binding upon the trial court. See Ohio Rev.Code § 2929.03(D)(2).
[50] In other words, nothing in the presentence report could possibly have negated mitigating evidence presented by the Petitioner, since he declined to present such evidence.
[51] Section 2501.05(D) provides:
(D) "Reasonable doubt" is present when the jurors, after they have carefully considered and compared all the evidence, cannot say they are firmly convinced of the truth of the charge. It is a doubt based on reason and common sense. Reasonable doubt is not mere possible doubt, because everything relating to human affairs or depending on moral evidence is open to some possible or imaginary doubt. "Proof beyond a reasonable doubt" is proof of such character that an ordinary person would be willing to rely and act upon it in the most important of his own affairs.
[52] Herein, the Petitioner relies upon Holland v. United States, 348 U.S. 121, 140, 75 S. Ct. 127, 99 L. Ed. 150 (1954), wherein the Supreme Court expressed a preference for defining reasonable doubt in terms of a hesitation to act, rather than with reference to a willingness to act. That decision does not remotely support the proposition that the use of the phrase "willingness to act" constituted a deprivation of due process. Indeed, although the Holland Court expressed its preference, it also concluded that defining probable cause in terms of a willingness to act could not mislead the jury; therefore, the Supreme Court held that the use of such language was not the basis for reversing the defendant's conviction.
[53] The Petitioner also mentions Lewis' statements to the jury that the Petitioner was incarcerated in the CCI because he had committed an earlier murder and that he would not hesitate to do it again. Those statements form the basis of Petitioner's Sixth Claim, which is discussed below. Suffice it to say that counsel were not ineffective in that regard, since they immediately moved for a mistrial after those statements were made.
[54] Given the evidence presented at the Petitioner's trial, it would have been impossible to argue in a reasonable manner that the Petitioner had not stabbed Pence.
[55] In his Objections to the Initial Report and Recommendations of the Magistrate Judge, the Petitioner also cites provisions of the Ohio Constitution. See Doc. # 326 at 120-132. Since this Court is without the jurisdiction, in a habeas proceeding, to adjudicate claims predicated upon the denial of a state constitutional right, this Court does not consider the provisions of the Ohio Constitution cited by the Petitioner. See Estelle v. McGuire, 502 U.S. 62, 68, 112 S. Ct. 475, 116 L. Ed. 2d 385 (1991) (reemphasizing that "in conducting habeas review, a federal court is limited to deciding whether the conviction violated the Constitution, laws, or treaties of the United States").
[56] In support of this argument, Zuern relies upon Adamson v. Ricketts, 865 F.2d 1011 (9th Cir.1988), cert. denied, 497 U.S. 1031, 110 S. Ct. 3287, 111 L. Ed. 2d 795 (1990), wherein the Ninth Circuit concluded that Arizona's capital punishment statutes were constitutionally infirm, because they imposed the burden of proving mitigating circumstances upon the defendant. The Supreme Court agreed to hear Walton in order to resolve the conflict between the Ninth Circuit and the Arizona Supreme Court concerning the constitutionality of Arizona's death penalty. See 497 U.S. at 647, 110 S. Ct. 3047. The Supreme Court rejected the Ninth Circuit's resolution of the question of whether a state can require a defendant to prove the existence of mitigating circumstances. Therefore, Adamson does not constitute authoritative precedent in support of this argument.
[57] The Corbitt Court also noted that Jackson was distinguishable since it involved the death penalty, which is "unique in its severity and irrevocability." 439 U.S. at 217, 99 S. Ct. 492 (citation and internal quotation marks omitted). Since this case arises from the imposition of the death penalty upon the Petitioner, that distinguishing factor is not applicable.
[58] The Petitioner also contends that the imposition of the death penalty constitutes cruel and unusual punishment, in violation of the Eighth Amendment. Such an argument has been repeatedly rejected by the Supreme Court. See e.g., Gregg, supra.
[59] Of course, the question remains whether Lewis' unsolicited statement, coupled with the failure of the trial court to grant a mistrial, constituted a violation of Petitioner's due process rights. This Court considers that issue below.
[60] If Lewis' statement was limited to telling the jury the reason for Zuern's incarceration at the CCI, the issue would be rather simple. Given that the jury was quite aware of the fact that, when Pence was murdered, Lewis was being housed in an area of that facility where prisoners accused of serious offenses were kept, providing the additional information as to the precise reason for Petitioner's incarceration would have been a minor part of the evidence against him.
[61] If the question of whether Zuern had killed Pence had been contested at the trial, this Court's resolution of this Claim in all likelihood would have been different. If that issue had been contested, the statement that Zuern was being incarcerated for murder and that he would not hesitate to do it again would have carried significant probative force. However, it bears emphasis that the issue of whether Zuern killed Pence was not contested during the trial.
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101 F. Supp. 2d 463 (2000)
Shawn S. CLANCY
v.
EMPLOYERS HEALTH INSURANCE COMPANY
No. CIV.A. 99-0381.
United States District Court, E.D. Louisiana.
June 26, 2000.
*464 George R. Covert, George R. Covert, Sean Duvall Fagan, Sean Fagan, Baton Rouge, LA, for Plaintiff.
Kyle Liney Gideon, Davidson, Meaux, Sonnier, McElligott & Swift, Lafayette, LA, Brian P. Brooks, O'Melveny & Myers, Washington, DC, for Defendant.
ORDER AND REASONS
CLEMENT, District Judge.
Before the Court is Plaintiff Shawn S. Clancy's Motion for New Trial. For the following reasons, Ms. Clancy's Motion is DENIED.
A. BACKGROUND
On November 24, 1999, this Court granted Defendant Employer Health Insurance Company's ("EHIC") Motion for Summary Judgment and denied Ms. Clancy's Motion for Class Certification. See Clancy v. Employers Health Ins. Co., 82 F. Supp. 2d 589 (E.D.La.1999) (hereinafter "Clancy I"). The Court ruled that Ms. Clancy's claims for benefits, clarification of rights and bad faith damages were preempted by ERISA, that Ms. Clancy failed to exhaust her administrative remedies, and that class certification was improper. The Court contemporaneously entered judgment against Ms. Clancy in favor of EHIC. Ms. Clancy subsequently moved for a new trial under Federal Rule of Civil Procedure 59 on the grounds that the Court's decision in Clancy I was clearly erroneous and resulted in a miscarriage of justice.
B. LAW AND ANALYSIS
Because Ms. Clancy's claims were dismissed as a result of a dispositive motion, the Court shall treat her motion for a new trial as a Rule 59(e) motion to alter or amend judgment. See Ford Motor Credit Co. v. Bright, 34 F.3d 322, 324 (5th Cir. 1994) (Rule 59(e) allows a losing party to "seek the trial court's reconsideration of its order granting summary judgment if served within 10 days of the rendition of judgment.").
A district court enjoys considerable discretion in granting or denying a motion under Rule 59(e). See Edward H. Bohlin Co. v. Banning Co., 6 F.3d 350, 355 (5th Cir.1993). Courts typically consider four factors in exercising their discretion: (1) whether the judgment was based upon a manifest error of fact or law; (2) whether the movant presents newly discovered or previously unavailable evidence; (3) whether amendment is necessary to prevent manifest injustice; and (4) whether an intervening change in controlling law has occurred. See Franco v. Maraldo, 2000 WL 288378, at *2 (E.D.La. March 16, 2000); Campbell v. St. Tammany Parish Sch. Bd., 1999 WL 777720, at *2 (E.D.La. Sept.29, 1999); Fields v. Pool Offshore, Inc., 1998 WL 43217, at *2 (E.D.La. Feb.3, 1998). In addition, Courts must attempt to strike the proper balance between two competing imperatives: (1) finality, and (2) the need to render just decisions on the *465 basis of all the facts. See Edward H. Bohlin, 6 F.3d at 355. In general, "reconsideration of a judgment after its entry is an extraordinary remedy which should be used sparingly ...," Pacific Ins. Co. v. American Nat. Fire Ins. Co., 148 F.3d 396, 403 (4th Cir.1998), cert. denied 525 U.S. 1104, 119 S. Ct. 869, 142 L. Ed. 2d 771 (1999) (quoting 11 CHARLES A. WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 2810.1, at 124 (2d ed.1995)), since "courts and litigants cannot be repeatedly called upon to backtrack through the paths of litigation which are often laced with close questions." Sussman v. Salem, Saxon & Nielsen, 153 F.R.D. 689, 694 (M.D.Fla.1994). See also Pennsylvania Ins. Guar. Ass'n v. Trabosh, 812 F. Supp. 522, 524 (E.D.Pa.1992) ("Motions for reconsideration should be granted sparingly because of the interests in finality and conservation of scarce judicial resources.").
Ms. Clancy argues, for a variety of reasons, that the Court's order and judgment in Clancy I were "clearly contrary to the law" and resulted in "a miscarriage of justice." The Court disagrees. In deciding Clancy I, the Court carefully considered each of Ms. Clancy's multitudinous arguments and rendered a reasoned and reasonable opinion. Ms. Clancy's arguments failed to carry the day at the summary judgment stage of this litigation, and those arguments, which Ms. Clancy essentially re-urges in her current motion, cannot do so now.[1]
Ms. Clancy does present one new argument that could not have been considered previously. She contends that a recent case, Lewis v. Aetna U.S. Healthcare, Inc., 78 F. Supp. 2d 1202 (N.D.Okla.1999), illustrates the deficiencies in this Court's opinion. In Lewis, a federal district court in Oklahoma ruled that Oklahoma's bad-faith cause of action against insurers is saved from preemption, in part because it "serves as an integral part of the policy relationship between the insurer and the insured, and thus satisfies the second McCarran-Ferguson factor." Id. at 1214 (internal citation omitted).
In finding that ERISA preempts Louisiana Revised Statute 22:657, this Court in Clancy I relied heavily on the Louisiana Supreme Court's decision in Cramer v. Association Life Ins. Co., 569 So. 2d 533, 537 (La.1990), which squarely rejected the idea that § 657 constitutes an integral part of the policy relationship.[2] In reaching this conclusion, the Louisiana Supreme Court held that § 657 is not integral because it regulates only the procedural aspect of processing and settling claims but not the substantive provisions of the insurance contract. The Supreme Court in UNUM rejected "UNUM's suggestion that because the notice-prejudice rule regulates only the administration of insurance policies, not their substantive terms, it cannot be an integral part of the policy relationship," 526 U.S. at 375 n. 5, 119 S.Ct. at 1390 n. 5, and Ms. Clancy is, therefore, correct that UNUM casts some doubt on this aspect of the Cramer holding.[3]
*466 Importantly, however, Cramer's preemption holding did not rest entirely on this ground. Rather, after noting that "the McCarran-Ferguson test is not the sole consideration to be addressed in determining whether a particular state law is preempted by ERISA", 569 So.2d at 538, the Cramer court held that La. R.S. 22:657 is preempted because it conflicts with ERISA § 502(a), which provides the exclusive remedy for enforcing ERISA. See id. This aspect of the Cramer decision is thoroughly grounded in the Supreme Court's decision in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S. Ct. 1549, 95 L. Ed. 2d 39 (1987).
In Pilot Life, the Supreme Court stated that, in interpreting the saving clause, a court is obliged to consider not only the McCarran-Ferguson factors, "but also the role of the saving clause in ERISA as a whole." Id. at 51, 107 S.Ct. at 1555. According to the Court,
[b]ecause in this case, the state cause of action seeks remedies for the improper processing of a claim for benefits under an ERISA-regulated plan, our understanding of the saving clause must be informed by legislative intent concerning the civil enforcement provisions provided by ERISA § 502(a), 29 U.S.C. § 1132(a).
Id. at 51-52, 107 S.Ct. at 1555. The Court then held that
Congress clearly expressed an intent that the civil enforcement provisions of ERISA § 502(a) be the exclusive vehicle for actions by ERISA-plan participants and beneficiaries asserting improper processing of a claim for benefits, and that varying state causes of action for claims within the scope of § 502(a) would pose an obstacle to the purposes and objectives of Congress.
Id. at 52, 107 S.Ct. at 1555. Considered in light of the structure of ERISA's text and the legislative history, the Court concluded that
the detailed provisions of § 502(a) set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans. The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA. The six carefully integrated civil enforcement provisions found in § 502(a) of the statute as finally enacted provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly.
Id. at 54, 107 S.Ct. at 1556 (internal punctuation omitted). In the Court's opinion,
[t]he deliberate care with which ERISA's civil enforcement remedies were drafted and the balancing of policies embodied in its choice of remedies argue strongly for the conclusion that ERISA's civil enforcement remedies were intended to be exclusive.
Id. Moreover,
[t]he expectations that a federal common law of rights and obligations under ERISA-regulated plans would develop, indeed, the entire comparison of ERISA's § 502(a) to § 301 of the LMRA [Labor-Management Relations Act], would make little sense if the remedies *467 available to ERISA participants and beneficiaries under § 502(a) could be supplemented or supplanted by varying state laws.
Id. at 56, 107 S.Ct. at 1558. Thus, "[c]onsidering the common-sense understanding of the saving clause, the McCarranFerguson Act factors defining the business of insurance, and, most importantly, the clear expression of congressional intent that ERISA's civil enforcement scheme be exclusive," the Court concluded that "Dedeaux's state law suit asserting improper processing of a claim for benefits under an ERISA-regulated plan is not saved by § 514(b)(2)(A), and therefore is pre-empted by § 514(a)." Id. at 57, 107 S.Ct. at 1558 (emphasis added).
Unlike the United States Supreme Court in Pilot Life and the Louisiana Supreme Court in Cramer, the district court in Lewis did not consider the role of the saving clause in ERISA as a whole and the potential conflict between a bad faith claim and ERISA § 502(a), but instead relied entirely on the common-sense and McCarran-Ferguson tests for saving.[4] In this Court's view, however, UNUM does not change the proposition that, in considering whether a particular state law is saved from preemption, a court must consider the role of the saving clause as a whole. When this factor is considered, the Court believes that Cramer is still good law. As this Court ruled in Clancy I, UNUM did not change the proposition that § 502(a) provides the exclusive remedy for enforcing ERISA. Because of this, the Court rejects Ms. Clancy's oft-repeated claim that La. R.S. 22:657 is more like the notice-prejudice rule saved in UNUM than the common law bad faith claim preempted in Pilot Life. While La. R.S. 22:657, like the notice-prejudice rule, certainly does seem to be directed exclusively at the insurance industry and arguably forms an integral part of the insurer-insured relationship, La. R.S. 22:657, unlike the notice-prejudice rule, creates a "supplemental" state law remedy that conflicts with ERISA § 502(a)'s exclusive remedy provision.[5] This aspect of the Cramer decision is unchanged by UNUM, and the Court, therefore, rejects Ms. Clancy's contention that it clearly erred in finding La. R.S. 22:657 preempted by ERISA.[6]
*468 C. CONCLUSION
The Court finds that Ms. Clancy has failed to demonstrate that she is entitled to the extraordinary relief offered by Rule 59(e). Accordingly,
IT IS ORDERED that Ms. Clancy's Motion for New Trial is DENIED.
NOTES
[1] The Court acknowledges that, given the complexity of the ERISA jurisprudence, suits like Ms. Clancy's are often "laced with close questions." See Clancy I, 82 F.Supp.2d at 596 n. 9 (acknowledging complexity of ERISA jurisprudence). The Court simply disagrees with Ms. Clancy that it answered those questions incorrectly.
[2] The Court also relied on similar decisions by several federal district courts in Louisiana.
[3] In Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107 S. Ct. 1549, 1553, 95 L. Ed. 2d 39 (1987), the Supreme Court found that the Mississippi common law of bad-faith, upon which plaintiff's claim was premised, is not integral to the insurer-insured relationship because it does not "define the terms of the relationship between the insurer and insured", but "declares only that, whatever terms have been agreed upon in the insurance contract, a breach of that contract may in certain circumstances allow the policyholder to obtain punitive damages." Id. at 51, 107 S.Ct. at 1555. It is unclear whether UNUM overrules this aspect of the Pilot Life decision or whether UNUM simply recognizes that, in certain situations, state laws governing the administration of insurance policies can be integral to the insurer-insured relationship. A third option is that, because the bad faith law involved in Pilot Life was not specifically directed toward the insurance industry, it could not constitute an integral part of a relationship based in that industry. This third option would seem to conflate several aspects of the "saving clause" analysis, but it might have been the Supreme Court's intent. Regardless, in finding Mississippi's bad faith law preempted, the Court in Pilot Life considered factors other than the McCarran-Ferguson factors, as discussed below. Thus, resolution of this issue is unnecessary at this time.
[4] In Gaylor v. John Hancock Mut. Life Ins. Co., 112 F.3d 460 (10th Cir.1997), the Tenth Circuit held that a claim of bad faith under Oklahoma law was preempted by ERISA because the bad faith law failed the McCarran-Ferguson test and because a claim under that law would conflict with ERISA § 502(a). See id. at 466. In ruling that the Oklahoma bad faith law was actually saved from preemption, the Lewis court implied that UNUM had overruled the preemption test used by the Tenth Circuit in Gaylor. Specifically, the Lewis court stated that the Gaylor court required that all three McCarran-Ferguson factors be satisfied in order to avoid preemption, a position that was rejected in UNUM. See Lewis, 78 F.Supp.2d at 1214 n. 9 and accompanying text. The Lewis court did not, however, address whether the bad faith law was nevertheless preempted because it conflicted with ERISA § 502(a).
[5] The Court can anticipate Ms. Clancy's rejoinder: absent the notice prejudice rule, the plaintiff in UNUM would not be entitled to any benefits, and, therefore the notice prejudice rule does create a supplemental remedy. The problem with this argument is clear: the notice prejudice rule allows a claimant to recover benefits provided under the terms of the contract and thus does not conflict with ERISA § 502(a), whereas La. R.S. 22:567 adds a new remedy intentionally rejected by Congress in crafting § 502(a).
[6] Ms. Clancy argued strenuously on summary judgment that UNUM did change the proposition that § 502(a) provides the exclusive remedy for enforcing ERISA. As discussed in Clancy I, Ms. Clancy's argument was premised entirely on footnote 7 of the UNUM decision, wherein the Supreme Court set forth, but did not consider, the Solicitor General's argument that ERISA does not preempt state law conferring causes of action or affecting remedies that regulate insurance. Ms. Clancy may be correct that the Supreme Court included this argument as a forecast of a future decision. However, were the Supreme Court to adopt the Solicitor General's position on the facts of this case, it would constitute a dramatic reversal of Pilot Life's strong and unequivocal statements with respect to ERISA § 502(a)'s exclusivity. Perhaps such a reversal will occur, but this Court cannot take such a dramatic step based upon an equivocal footnote.
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127 P.3d 1207 (2006)
204 Or. App. 99
Neda LEWIS, Appellant,
v.
CARSON OIL COMPANY, an Oregon corporation, Respondent.
0302-01373; A124858.
Court of Appeals of Oregon.
Argued and Submitted October 26, 2005.
Decided February 1, 2006.
*1208 Vicki L. Smith, Portland, argued the cause for appellant. With her on the brief was Lane Powell PC.
*1209 Frank J. Susak, Portland, argued the cause and filed the brief for respondent.
Before LANDAU, Presiding Judge, and ORTEGA and ROSENBLUM, Judges.
ORTEGA, J.
Plaintiff appeals after the trial court's grant of summary judgment to defendant on plaintiff's claims for defamation and intentional infliction of emotional distress. Plaintiff assigns error to three of the trial court's rulings: (1) its grant of summary judgment on her defamation claim, (2) its order striking a portion of her affidavit in opposition to defendant's summary judgment motion, and (3) its grant of summary judgment on her claim for intentional infliction of emotional distress (IIED). We reject the second assignment of error without further discussion, and we affirm the trial court's entry of summary judgment for defendant on the defamation and IIED claims.
We affirm on summary judgment only if the record shows that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Swisher v. Albertson's, Inc., 186 Or.App. 734, 736, 64 P.3d 1212 (2003). The nonmoving party has the burden of producing evidence on any issue raised in the motion as to which that party would have the burden of persuasion at trial. ORCP 47 C. We review the record in the light most favorable to the nonmoving party. Id.
Defendant terminated plaintiff's employment for the stated reason of theft of company property, namely, rolls of toilet paper. Plaintiff had worked for defendant for about five months and was a supervisor in its credit department. At the time of her termination, plaintiff was 74 years old and disabled.
A few months before plaintiff's termination, Hunter-Anderson, a long-time employee of defendant with responsibility for maintenance of supplies, began noticing that toilet paper was disappearing from the women's restroom. On a few occasions, she noticed that facial tissue was also missing. Hunter-Anderson began monitoring the toilet paper supplies and marking paper rolls to enable her to verify her belief that the rolls were, in fact, being removed from the premises rather than being used. She also began checking the toilet paper supply when employees left the building after 5:00 p.m. She thus was able to narrow down the number of employees who could have taken the paper. One day, immediately after plaintiff left the building, Hunter-Anderson determined that three rolls had been removed from the women's restroom. Hunter-Anderson testified that she then went to a third-floor window overlooking the parking lot area, watched plaintiff in the parking lot below, and saw that plaintiff's bag contained two rolls of toilet paper.
According to plaintiff, "[a]nyone who worked at [defendant's office] would know that it would be nearly impossible to see something in someone's bag from the third floor to the parking lot" as Hunter-Anderson reported. Plaintiff maintains that she did not take anything from defendant that did not belong to her.
The day after Hunter-Anderson made her observations, she reported the incident to O'Farrell, who is the executive secretary to both Carson, defendant's CEO, and Woodbury, its president. O'Farrell orally reported Hunter-Anderson's findings to Carson, who instructed her to have Hunter-Anderson document the report. Carson then informed Woodbury and discussed the report with him. Carson and Woodbury decided to terminate plaintiff's employment. None of defendant's employees ever asked plaintiff if she had taken toilet paper.
About a week after Hunter-Anderson's oral report, Woodbury terminated plaintiff for theft of toilet paper and facial tissues. Woodbury invited O'Farrell to attend the meeting in which he informed plaintiff that she was terminated because he felt that "it was appropriate to have another female present." Plaintiff, who was upset and shaking as a result of the termination meeting, asked if she would qualify for unemployment benefits. Woodbury told plaintiff that defendant would not contest her eligibility for benefits or inform the Oregon Employment Department of the reason for plaintiff's termination; in Woodbury's notes of the meeting, he stated *1210 that if plaintiff decided to bring a claim for wrongful termination, "all avenues would be reconsidered." The reason for termination written on plaintiff's separation form was changed from "for cause" to "without cause."
Plaintiff's alleged theft of toilet paper was discussed by some of defendant's other employees. O'Farrell spoke with a company vice president regarding Hunter-Anderson's report and the appropriate response. Woodbury spoke with plaintiff's supervisor, Mohr, who was out of the office at the time of plaintiff's termination. Plaintiff also called Mohr to discuss her termination. Mohr in turn discussed plaintiff's termination with Carson, O'Farrell, and Mohr's son, an employee of defendant who reported to plaintiff. Carson, O'Farrell, Woodbury, and Mohr all submitted affidavits stating that they spoke about plaintiff's termination only to protect defendant's business interests. The record contains no admissible evidence of any other discussions by defendant's employees regarding plaintiff's termination, although plaintiff offered evidence that defendant had "a serious problem" with gossip in the workplace.
Plaintiff sued defendant for defamation and IIED, alleging that, after her termination, "defendant's agents and employees told others about the false accusations of theft." Defendant moved for summary judgment on both claims. Defendant conceded, for purposes of its summary judgment motion, that its statements concerning plaintiff constituted defamation per se, but it argued that its statements were not actionable because they were subject to a qualified privilege. Defendant also argued that it was not liable for IIED because it did not engage in the sort of outrageous conduct required to support such a claim and because, in any event, it did not intend to cause plaintiff emotional distress. The trial court granted defendant's motion.
On appeal, plaintiff argues that the trial court erred in granting defendant's motion for summary judgment. As to her defamation claim, she contends that there are genuine issues of material fact about whether defendant properly raised a qualified privilege and whether it abused and thus lost its privilege. We disagree. A qualified privilege to make a defamatory statement arises when the statement "is made to protect the interests of the plaintiff's employer or it is on a subject of mutual concern to the defendant and those to whom it is made." Benassi v. Georgia-Pacific, 62 Or.App. 698, 702, 662 P.2d 760, adh'd to as modified on recons., 63 Or.App. 672, 667 P.2d 532, rev. den., 295 Or. 730, 670 P.2d 1035 (1983) (citation omitted). Here, defendant properly raised the qualified privilege defense. The Supreme Court has recognized that "employees and their private employers have a legitimate interest in free communications on work-related matters, especially when reporting actual or suspected wrongdoing." Wallulis v. Dymowski, 323 Or. 337, 350, 918 P.2d 755 (1996). See also Lund v. Arbonne International, Inc., 132 Or.App. 87, 96, 887 P.2d 817 (1994) (affirming summary judgment on former consultant's defamation claim where "the evidence was that the publications were made to and by persons who shared a business interest" in the employer by virtue of their employment and the statements "were on a matter of mutual concern that could affect them allplaintiff's conduct" as a consultant for the employer). Defendant offered evidence that its discussion of plaintiff's termination occurred within a group of employees who were either involved in the investigation and termination of plaintiff's employment or worked directly with plaintiff in her department. Although plaintiff argues that there could be no proper business reason for telling Mohr's son, a nonmanagement employee, plaintiff herself testified that Mohr's son worked under her supervision in the credit department.
When a defendant properly raises a qualified privilege, the plaintiff has the burden of proving that the defendant lost that privilege. Walsh v. Consolidated Freightways, 278 Or. 347, 356, 563 P.2d 1205 (1977). The privilege is lost if the publisher abuses it. Benassi, 62 Or.App. at 703, 662 P.2d 760. Abuse occurs if the publisher disbelieves or lacks reasonable grounds to believe that the defamatory statement is true, if the statement is made for purposes outside the scope of the privilege, if the statement is made to someone who is not reasonably believed to be *1211 necessary to accomplish the purpose of the privilege, or if the statement includes defamatory matter that is not reasonably believed to be necessary to accomplish the purpose of the privilege. Id.
Although plaintiff argues that there was evidence from which a jury could find that defendant abused its qualified privilege, none of that evidence gives rise to a genuine issue of material fact on that point. Plaintiff argues that defendant lost the privilege by repeating the defamatory statements to persons who had no need to know them. Although plaintiff points out that defendant failed to establish that Mohr's son and the vice president did not repeat the defamatory statements, defendant was only required to establish a qualified privilege as to the statements. Plaintiff had the burden to establish that statements were published and that the qualified privilege was abused. Wallulis, 323 Or. at 343, 348, 918 P.2d 755. See also ORCP 47 C ("The adverse party has the burden of producing evidence on any issue raised in the motion as to which the adverse party would have the burden of persuasion at trial."). She failed to do so. Because the record shows only that the defamatory matter was published to a small group of employees who were involved in the termination process or worked directly with plaintiff, there was no genuine issue of material fact regarding an abuse of the privilege by unnecessary publication.
Plaintiff further contends that defendant abused its privilege by publishing statements without a belief or reasonable ground for belief in the truth of the defamatory matter, i.e., that she took toilet paper. Again, the record does not show any genuine issue of material fact regarding the issue. Although plaintiff testified that defendant's employees "would know" that it would be "nearly impossible" for Hunter-Anderson to have seen from the third floor window to the parking lot, Hunter-Anderson testified that she did, in fact, see plaintiff with the toilet paper and that she reported as much. There is no evidence in the record that Hunter-Anderson had any motive to fabricate a report against plaintiff. No reasonable juror could find on plaintiff's testimony alone that defendant's employees disbelieved or lacked a reasonable grounds to believe Hunter-Anderson's report of her actions and observations, which included marking toilet paper and monitoring when the rolls disappeared from the restroom. Whether or not Hunter-Anderson was mistaken, as plaintiff claims, there is no material issue of fact as to whether defendant lacked a reasonable basis for believing the report.
Plaintiff also argues that defendant lost its qualified privilege by acting with an improper purpose; specifically, she argues that defendant accused her of stealing toilet paper to cover up its real reason for terminating herher age and disability. As evidence, she points to the fact that the reason for termination on her separation papers was changed from "with cause" to "without cause." However, the record shows that the change was made for plaintiff's benefit. During the termination meeting, plaintiff herself raised the issue of her eligibility for unemployment insurance benefits. Woodbury then promised that defendant would not inform the Oregon Employment Department of the reason for plaintiff's termination and would not contest her eligibility for benefits.
Plaintiff argues that defendant must have had a wrongful motive for terminating her, because Woodbury stated that, if plaintiff sued defendant for wrongful discharge, it would reconsider its position on her eligibility for unemployment. Neither Woodbury's agreement not to contest plaintiff's right to unemployment insurance benefits nor defendant's threat to reveal its stated reason for plaintiff's termination constitutes evidence that defendant had improper purposes or disbelieved Hunter-Anderson's report that plaintiff had stolen toilet paper from defendant. Further, no evidence whatsoever was presented to suggest that the "real reason" behind the termination was plaintiff's age or disability. Plaintiff thus failed to establish that defendant abused its qualified privilege. The trial court did not err by granting defendant's motion for summary judgment on plaintiff's defamation claim.
We turn to plaintiff's intentional infliction of emotional distress claim. Plaintiff *1212 argues that defendant engaged in outrageous conduct by publishing defamatory statements about her and by failing to investigate Hunter-Anderson's allegations of theft. Our analysis of the defamation claim disposes of the first argument, and we conclude that defendant's failure to investigate Hunter-Anderson's report did not constitute "an extraordinary transgression of the bounds of socially tolerable conduct" as required for an IIED claim. See McGanty v. Staudenraus, 321 Or. 532, 543, 901 P.2d 841 (1995) (quoting Sheets v. Knight, 308 Or. 220, 236, 779 P.2d 1000 (1989) (identifying elements of the claim)). The trial court correctly entered summary judgment for defendant on plaintiff's intentional infliction of emotional distress claim.
Affirmed.
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127 P.3d 856 (2006)
Ben NOYAKUK, Appellant,
v.
STATE of Alaska, Appellee.
No. A-8442.
Court of Appeals of Alaska.
January 20, 2006.
*857 Gregory S. Parvin and Robert D. Lewis of Lewis & Thomas, Nome, for the Appellant.
Kenneth M. Rosenstein, Assistant Attorney General, Office of Special Prosecutions and Appeals, Anchorage, and Gregg D. Renkes, Attorney General, Juneau, for the Appellee.
Before: COATS, Chief Judge, and MANNHEIMER and STEWART, Judges.
OPINION
MANNHEIMER, Judge.
In March 2001, Ben Noyakuk shot and killed his girlfriend, Martha Butler. A jury ultimately convicted him of first-degree murder for this homicide.
At Noyakuk's trial, the State relied on various statements that Noyakuk made to *858 the state troopers about the homicide. Noyakuk made these statements during a series of interviews that took place at the Anvil Mountain Correctional Center. Noyakuk was incarcerated at this correctional center as a result of his arrest on April 12, 2001 for two misdemeanors and a probation violation, all unrelated to the homicide.
The superior court found that the troopers had violated Noyakuk's Miranda rights at the first interview, so the superior court suppressed Noyakuk's statements from that interview.[1] However, the superior court concluded that Noyakuk's statements from the subsequent interviews were not tainted by this Miranda violation because, at these subsequent interviews, Noyakuk received proper Miranda warnings and waived his rights, and because Noyakuk's statements at these subsequent interviews were voluntary. The superior court thus ruled that the State could rely on Noyakuk's statements from these subsequent interviews.
For the reasons explained here, we agree with the superior court's resolution of these questions, and we therefore affirm Noyakuk's conviction.
Underlying facts
In early 2001, Ben Noyakuk and his girlfriend, Martha Butler, were living in Nome. On April 1, 2001, Butler's father contacted the Nome police to report that his daughter was missing. Eleven days later, on April 12th, Thomas Noyakuk (Ben Noyakuk's brother) informed the police that Ben had told him that he had accidentally shot and killed Butler, and that he had hidden her body near the Penny River.
Based on this information, the Nome police called the Alaska State Troopers and, together, they began searching for Noyakuk. They found Noyakuk as he was traveling by snowmachine from Nome to Teller. Noyakuk was intoxicated, and he had a rifle with him.
Noyakuk was arrested for driving while intoxicated,[2] for possession of a firearm while intoxicated,[3] and for violating the conditions of his probation from an earlier criminal conviction (by drinking alcoholic beverages). However, Noyakuk was not charged with any crime in connection with the homicide. At the time of his arrest, Noyakuk was advised of his Miranda rights, but he was not interrogated. He was taken to the Anvil Mountain Correctional Facility.
Within an hour of his arrival at the correctional facility, Noyakuk was placed on "suicide watch" i.e., he was placed in administrative segregation, and corrections officers took away his clothing, so that he had only a mattress and a blanket in his cell. Prisoners on "suicide watch" are not allowed any visitors except for their attorney and, because Noyakuk had no attorney yet, this meant that he was being held incommunicado.
Noyakuk was still on suicide watch the next morning (April 13th), when two state troopers Jane Schied and Terry Shepherd came to the correctional center to interview Noyakuk about Martha Butler's death. Corrections officers allowed Noyakuk to dress, and then they took Noyakuk to a small room adjacent to the correctional center's booking office, where the two troopers were waiting.
The troopers informed Noyakuk that he did not have to talk to them, and that he was free to leave (i.e., terminate the interview and return to his cell) at any time. In addition, when Noyakuk asked about getting an attorney, the troopers told him that he could have an attorney present during the interview if he wished, and that they would delay the interview in that case. However, the troopers did not give Noyakuk the full set of Miranda warnings before they began to question him.
During this first interview, Noyakuk told the troopers that he had accidentally shot Butler and that, after she died, he wrapped her body in a blanket and buried her under a snowbank near the Penny River.
On the afternoon of April 13th (i.e., a few hours after Noyakuk's first interview with *859 the state troopers), Noyakuk was brought to court and arraigned on the misdemeanor charges. An attorney was appointed to represent him on those charges (as well as the probation violation).
Trooper Schied returned to the correctional center in the early evening of April 15th to conduct a second interview with Noyakuk. That is, this second interview took place a little over 48 hours after the initial interview and Noyakuk's ensuing court arraignment. This time, Schied gave Miranda warnings to Noyakuk, and he waived his rights.
At this second interview, Noyakuk presented basically the same account of the shooting (i.e., that it was an accident), but his description of events varied in some details, and Schied believed that some portions of Noyakuk's account were unlikely or did not make sense. When Schied tried to pin Noyakuk down on some of these discrepancies, Noyakuk became "shook up". He told Schied that he was going to end the interview, and Schied responded that this was his right. But before Noyakuk left the interview room, he told Schied, "You know where I am if you have any more questions." Schied understood this to mean that Noyakuk did not object to being interviewed again at a later time.
Schied's third interview with Noyakuk took place in the mid-afternoon of April 16th. Schied testified that she went to the correctional center shortly after noon on the 16th, intending to interview Noyakuk, but when she arrived, she discovered that Noyakuk had just had an interview with a mental health worker and he was emotionally upset. Even though Noyakuk told Schied that he was willing to speak to her, Schied declined to interview Noyakuk at that time. Instead, she advised Noyakuk that it would be better if he got some rest first. Schied left the prison and returned two hours later, at which time she conducted her third interview with Noyakuk. Again, she Mirandized Noyakuk, and Noyakuk waived his rights.
During this third interview, Noyakuk admitted that the shooting had not been an accident. Noyakuk told Schied that he shot Butler as she lay on a couch with her eyes closed (apparently unconscious). Noyakuk explained that he shot Butler because he believed that she was going to leave him. Noyakuk also informed Schied that he would be willing to help the troopers look for Martha Butler's body. Schied told Noyakuk that she would forward this offer to her superiors.
Schied contacted Noyakuk again on the morning of April 17th (again, with Miranda warnings). She informed Noyakuk that the troopers did want Noyakuk's assistance in searching for Martha Butler's body, and that the troopers would return to the prison the following day (April 18th) to come get him. When the troopers returned the next day, they Mirandized Noyakuk, and then they transported him by helicopter to the Penny River, where they located the body.
Two weeks later, the Nome grand jury indicted Noyakuk for first-degree murder.
Noyakuk's motion to suppress his statements to the troopers
Following his indictment, Noyakuk asked the superior court to suppress the statements he made at the initial interview on April 13th because Schied and Shepherd had not fully advised him of his Miranda rights. Noyakuk also asserted that the troopers had failed to honor his request for an attorney at the April 13th interview, and that this constituted an independent basis for suppressing his statements from that first interview under Edwards v. Arizona, 451 U.S. 477, 101 S. Ct. 1880, 68 L. Ed. 2d 378 (1981).
Noyakuk also sought suppression of the statements he made at the subsequent interviews, arguing that these subsequent interviews were all tainted by the Miranda violation and the Edwards violation at the initial interview. And, finally, Noyakuk sought suppression of all physical evidence derived from these interviews.
Following an evidentiary hearing, Superior Court Judge Ben J. Esch agreed with Noyakuk that the troopers had interrogated him in violation of Miranda at the first interview. Judge Esch therefore suppressed the statements Noyakuk made at that initial interview. However, Judge Esch concluded that Noyakuk's statements from the subsequent interviews were admissible despite the initial *860 Miranda violation. Judge Esch reached this conclusion because he found that (1) all of Noyakuk's statements were voluntary for Fifth Amendment purposes, and (2) Noyakuk was fully advised of his Miranda rights, and waived those rights, prior to each of the subsequent interviews.
With regard to the asserted Edwards violation (i.e., failure to honor a suspect's request for an attorney), Judge Esch found that Noyakuk made only an equivocal request for an attorney when Noyakuk said, "Shouldn't I just have my attorney with me, or something?" Judge Esch further found that Noyakuk was aware (at that time) of his right to the assistance of an attorney, due to his "[prior] experience with both attorneys and the justice system". As Judge Esch noted, Noyakuk was convicted several times in the 1980's of minor consuming alcohol, and was convicted once of disorderly conduct in the 1990's. Moreover, in the year preceding his arrest in April 2001, Noyakuk was convicted three times of domestic assault.
Judge Esch also found that the troopers had responded appropriately to Noyakuk's equivocal request for an attorney: they repeatedly explained to Noyakuk that it was up to him to decide whether he wished to speak to them without an attorney, and they asked Noyakuk to clarify whether he was willing to speak to them without an attorney. Only after Noyakuk expressly stated that he was willing to be interviewed without an attorney did the troopers commence their substantive questioning about the homicide. Under these facts, Judge Esch concluded, the troopers had not violated the rule of Edwards v. Arizona.
A more detailed look at the first interview
As explained above, Noyakuk was arrested and placed at the Anvil Mountain Correctional Center on April 12, 2001. However, he was not charged with any crime arising from the homicide of Martha Butler. Rather, Noyakuk was arrested on charges of driving while intoxicated and possession of a firearm while intoxicated, as well as for violating his probation (by drinking).
Troopers Schied and Shepherd came to the correctional center the next day to interview Noyakuk about the homicide. At the beginning of this interview, the following colloquy took place between Trooper Shepherd and Noyakuk:
Shepherd: Okay. Ben, you know we're here to talk to you today. Ah, we're not here to arrest you for anything else. Um, you know you you don't have to talk to us if you don't want to. Um, you know, you you can, you know, go tell the correctional officers any time that you want to go back to your cell, that you can. Okay, you understand that?
Noyakuk: Uh-huh [yes].
A few moments later, Shepherd reiterated that Noyakuk could leave the interview any time he wished:
Shepherd: Okay. Well, like I said, we're not here to talk to you about any of your charges from yesterday.
Noyakuk: Uh-huh.
Shepherd: You understand that.
Noyakuk: Uh-huh.
Shepherd: Okay. Like I said, you know, you you're not under arrest for anything here. We're not here to charge you with anything. Um, and again, we're going to talk to you about some stuff, and at any time you don't want to talk about it, you can leave. That's up to you, okay?
Noyakuk: Okay.
Trooper Schied then informed Noyakuk that she and Shepherd wanted to speak to him about Martha Butler's death. The following colloquy ensued:
Schied: So that's what we'd like to talk to you about. We know you've been through a lot with Martha.
Noyakuk: Uh-huh.
Schied: We know that, when she gets intoxicated, she can get very, very hostile very, very mad and very mean. We understand those things. But [do] you suppose you can help us out with this situation, Ben?
Noyakuk: Probably.
Schied: Okay. Can you kind of tell us what happened, so [that] we can help her parents and you, too?
*861 Noyakuk: Shouldn't I just have my attorney with me, or something?
Schied: Umh ...
Shepherd: Well, if, if that's what you feel [is] right I mean, we can't make that decision for you. You have to make that decision. Like I said, ... we're not here to talk about the [pending] charges; we're here to talk about Martha.... Like I said, you know, you don't have to talk to us if you don't want [to]. But, ah, like Trooper Schied said, we're trying to figure out what happened so that we can help her parents, you know, get over this, and adjust to it, and ...
Noyakuk: Uh-huh.
Shepherd: ... and try to find out, you know, what actually happened. Because we always know [that] there's two sides to the story.... There's your side, [and] we've been talking to a lot of people, and we've heard what they've been saying, and what you told them. But from our work, we know that there's two sides to the story, and the best place to always hear the story is from the person [who] actually... was there. So [you] know, like I said, you you can talk to us if you want. If if you want an attorney, that's fine, too.
Noyakuk: Uh-huh.
Shepherd: Ah, but that's up to you. You need to make that decision and let us know.
Noyakuk: Uh-huh.
Schied: Because that attorney can't help us find where Martha is, to help her parents. You know, he's not the one that can help you do that. He's not the one that can help us help [Martha's] parents.
Noyakuk: Uh-huh.
Schied: But if that's what you feel like Investigator Shepherd says, that's your choice.
Shepherd: So it, it's something for you to decide, before we go further with anything, [with] any questioning.
Noyakuk: I don't know; I don't know how this (indiscernible).
Schied: You don't know what to say, Ben?
Noyakuk: Huh?
Schied: Would it help if we just asked [our] questions? Would [that] make it easier for you?
Noyakuk: I don't have to answer.
Schied: So you don't have to just, just spell it out, would it help you if we just ask questions?
Noyakuk: Okay.
Schied: Are you are you willing to do that without an attorney, though? We need to know that.
Noyakuk: Yeah.
Schied: Okay. Um, were you up ... by John Ahmasuk's camp when [Martha] was shot?
Noyakuk: No, I was in my house.
Schied: You were in your house?
Noyakuk: Uh-huh [yes].
Schied: Okay. Would okay.
Noyakuk: It was accidental.
Schied: Okay. Well, those things happen, Ben.
Shepherd: Those [things] happen.
Schied: Was, was this ...
Shepherd: Ben, would you even feel better, you know, if if we read you your rights? Would you feel better if we did that first? Or ...
Noyakuk: Unh-uh [no].
Shepherd: No, it's okay? So you are willing to talk to us; it's okay? [Are] you willing to talk to us without an attorney?
Noyakuk: Uh-huh [yes].
Shepherd: I'm sorry; I couldn't hear you.
Noyakuk: Yes.
[The troopers then resumed their substantive questioning.]
Was Noyakuk in custody for Miranda purposes during the first interview (the interview on the morning of April 13th)?
When this case was first briefed, the State did not dispute that Noyakuk was in custody for Miranda purposes during the interview of April 13th and that troopers failed to give Noyakuk adequate Miranda warnings at that time. We nevertheless *862 asked the parties for supplemental briefing on the issue of whether Noyakuk was truly in custody for Miranda purposes during that April 13th interview, given the troopers' repeated statements to Noyakuk that he was not obliged to speak to them, and that he could leave the interview at any time. The parties responded with well-written briefs on this question. Having considered the matter, we agree with Judge Esch that Noyakuk was in custody for Miranda purposes.
In Beaver v. State, 933 P.2d 1178, 1185 (Alaska App.1997), we held that even when the police interrogate a prison inmate, a finding of "custody" for Miranda purposes still requires proof of coerciveness. And there is a significant body of case law from other jurisdictions supporting the view that a prison inmate who is interviewed by the police about an unrelated offense will not be deemed to be in Miranda custody if the interviewing officers make it clear that the inmate need not participate in the interview, that the inmate can choose to terminate the interview at any time, and that the inmate will suffer no adverse consequences if the inmate decides not to answer the officers' questions.[4]
But in all of these cases, the interrogated inmate had already been convicted and sentenced or, at the least, the inmate had already been incarcerated for weeks before being questioned by the police. In other words, the defendants in those cases were in their accustomed environment when the police approached them and asked them to submit to an interview and the defendants knew that if they chose to end the interview, they would be returned to that accustomed environment.
Noyakuk's case stands in sharp contrast. Noyakuk had been in jail for less than a day. He had been held incommunicado during that time. Naked in a solitary cell, and denied visitors, he had not yet appeared before a judicial officer, and he had received no legal advice. This was not a situation where a prison inmate was interviewed in their prison "home". Noyakuk was just as susceptible to the inherent coercive pressures of the interrogation process as any new arrestee. The troopers could not have interrogated Noyakuk following his arrest on the evening of April 12th without first obtaining a Miranda waiver. We conclude that the situation was no different at ten o'clock the next morning.
Because Noyakuk was in custody when the troopers came to interview him on April 13th, and because Noyakuk did not receive the complete set of Miranda warnings at that time, we uphold the superior court's decision to suppress Noyakuk's statements from that interview.
Why we conclude that the Miranda violation at the April 13th interview did not taint the statements that Noyakuk gave at the later interviews
When Judge Esch ruled on Noyakuk's suppression motion, he declared that he would have suppressed all of Noyakuk's statements if Noyakuk's case had been governed by the law as it existed before the United States Supreme Court issued its decision in Oregon v. Elstad, 470 U.S. 298, 105 S. Ct. 1285, 84 L. Ed. 2d 222 (1985). However, Judge Esch concluded that, under post-Elstad law, Noyakuk's statements at the subsequent interviews were not tainted by the *863 Miranda violation that occurred at the first interview.
In both Halberg v. State and Crawford v. State,[5] we described and examined the difference between pre- and post-Elstad law on the issue of whether a Miranda violation in one interrogation requires suppression of the statements the suspect makes in ensuing interrogations. As we explained in Crawford,
[The] two competing analyses of this question [are] the [pre-Elstad] "dissipation of taint" analysis exemplified by the United States Supreme Court's decision in Brown v. Illinois,[[6]] and the modified analysis announced in 1985 by the Supreme Court in Oregon v. Elstad.
Under Brown, even though a suspect ultimately receives proper Miranda warnings, the statements that the suspect makes after receiving those Miranda warnings are still presumptively inadmissible; to rebut this presumption, the government must show that there was a "break in the chain of events" to insulate those later statements from the taint of the suspect's initial unwarned admissions. [Brown, 422 U.S. at 603-04, 95 S.Ct. at 2261-62.] But under Elstad, the later administration of Miranda warnings presumptively negates the psychological pressures of custodial interrogation from that point forward, thus rendering the suspect's ensuing statements admissible despite the fact that the suspect had earlier made incriminating admissions. In the words of the Elstad Court, "a careful and thorough administration of Miranda warnings serves to cure the condition that rendered the [earlier] unwarned statement inadmissible", even when there has been no significant break in the stream of events as required under Brown. [Elstad, 470 U.S. at 310-11, 105 S.Ct. at 1294.]
Crawford, 100 P.3d at 441.
Judge Esch recognized that neither this Court nor the Alaska Supreme Court has yet decided whether, as a matter of state law, Alaska should follow Elstad or should instead adhere to pre-Elstad law. However, Judge Esch concluded that, because Alaska has not affirmatively adopted a contrary rule, he should follow the rule expounded in Elstad.
We do not necessarily agree with Judge Esch's conclusion that, under pre-Elstad law, Noyakuk's statements at the ensuing interviews were tainted by the Miranda violation at the first interview.
The flaw in the first interview was not a total failure to warn Noyakuk, but rather the fact that the troopers did not give Noyakuk the complete set of Miranda warnings. The most prominent omissions were (1) the troopers' failure to expressly tell Noyakuk that anything he said to them could be used against him, (2) the troopers' failure to tell Noyakuk that he had the right to have an attorney present during the questioning, and (3) the troopers' failure to expressly tell Noyakuk that, if he wanted an attorney but could not afford one, an attorney would be appointed to represent him before any questioning.
On the other hand, the troopers did tell Noyakuk (a) that they had come to speak to him about Martha Butler's death, (b) that he did not have to talk to the troopers if he did not wish to, and (c) that he could terminate the interview and return to his cell at any time he wished. Moreover, before Noyakuk answered any substantive question about the homicide, he brought up the subject of an attorney (by asking, "Shouldn't I just have my attorney with me, or something?"). At that point, the troopers expressly informed Noyakuk (d) that it was up to Noyakuk to decide whether to talk to them without the assistance of an attorney.
Judge Esch found that the troopers made a conscious decision not to give Noyakuk the complete Miranda warnings at this first interview, and this finding is supported by Trooper Schied's testimony to the grand jury. Schied testified that her (mistaken) understanding of the law was that law enforcement officers do not have to warn incarcerated suspects of their Miranda rights as long as the officers confine their questions to *864 crimes other than the ones for which the suspect has been jailed.
Judge Esch concluded that the troopers probably honestly believed that they were not obligated to Mirandize Noyakuk. However, Judge Esch also found that the troopers' decision to omit the full set of Miranda warnings was motivated by the troopers' "[fear] that if [Noyakuk] understood that he could stop [the] questioning at any time and/or consult with an attorney, they would not learn where [Martha Butler's] body was or what had happened."
This latter finding, we conclude, is clearly erroneous.[7] As we have explained, the troopers expressly told Noyakuk that he did not have to speak to them, that he could stop the questioning at any time, and that it was up to him to decide whether to seek the assistance of an attorney before proceeding with the interview. We further note that, even after Noyakuk seemingly manifested his willingness to speak to the troopers without an attorney, Trooper Shepherd offered to give Noyakuk the complete set of Miranda warnings an offer that Noyakuk declined.
For these reasons, we conclude that even though the troopers consciously decided not to give Noyakuk the complete set of Miranda warnings, their violation of Miranda was not flagrant or "purposeful" (in the sense that it stemmed from a desire to subvert Noyakuk's rights).[8]
We further note that, even though Noyakuk remained incarcerated throughout the series of interviews, his first interview (the flawed one) was separated from his second interview by more than 48 hours. (The second interview took place in the early evening of April 15th.) At the beginning of that 48-hour interlude, on the afternoon of April 13th, Noyakuk was arraigned in court on the pending misdemeanor charges, and an attorney was appointed to represent him. Thus, Noyakuk had two days to consult with counsel before the second interview took place.
At this second interview, Noyakuk was Mirandized, and he initially consented to speak to Trooper Schied. As the interview progressed, however, Noyakuk became emotional, and he exercised his right to end the conversation although he told Schied that she could return later to talk to him again.
We further note that, when Schied returned to the prison around noon the next day (April 16th) to interview Noyakuk for a third time, she declined to hold the interview because she discovered that Noyakuk was emotionally distraught even though Noyakuk told Schied that he was willing to talk to her at that time. Instead, Schied left the prison and returned two hours later.
When we evaluate these circumstances in light of the factors listed in Halberg v. State, 903 P.2d at 1098, we are not sure that Noyakuk's statements from the ensuing interviews should be suppressed even under pre-Elstad law.
However, this point is moot. In Noyakuk's brief to this Court, he does not ask us to reject Elstad and apply the pre-Elstad rule of suppression as a matter of state law. Instead, Noyakuk contends that his statements from the ensuing interviews should be suppressed even under the Elstad rule and that Judge Esch misapplied Elstad when he came to the opposite conclusion.
Noyakuk points out that, in the Elstad opinion, the Supreme Court stated that "absent deliberately coercive or improper tactics in obtaining the [suspect's] initial statement, the mere fact that a suspect has made an unwarned admission does not warrant a presumption [that the suspect's later statements *865 were compelled]." Elstad, 470 U.S. at 314, 105 S.Ct. at 1296 (emphasis added). Noyakuk argues that the troopers' approach to him in the first interview was the sort of deliberately coercive or improper tactic condemned in Elstad and that, therefore, his statements during the later interviews should be suppressed even under the Elstad rule.
But to support this contention, Noyakuk relies primarily on Judge Esch's finding that the troopers purposely violated Miranda at the first interview because they "were afraid that if [Noyakuk] understood that he could stop [the] questioning at any time and/or consult with an attorney, they would not learn where [Martha Butler's] body was or what had happened." As we explained above, this finding is clearly erroneous. The troopers repeatedly told Noyakuk that he did not have to speak to them, that he could stop the interview at any time, and that, if he wished, he could seek an attorney's assistance before speaking to them.
It may be true, as Judge Esch found, that the troopers consciously decided not to give the full set of Miranda warnings to Noyakuk, acting from the honest (but mistaken) belief that Noyakuk was not entitled to Miranda warnings as long as the troopers confined their questions to the as-yet-uncharged homicide. But the facts of Noyakuk's case do not demonstrate flagrant misconduct or purposeful overreaching by the officers.
Moreover, the federal courts have interpreted Elstad's reference to "coercive tactics" as relating to "situations in which the tactics used in the first, improper interrogation had a coercive effect that led to the [suspect's] later admissions". Brosius v. Warden, Lewisburg Penitentiary, 278 F.3d 239, 249 (3rd Cir.2002). Chief among the decisions on this point are the Supreme Court's own decision in Missouri v. Seibert, 542 U.S. 600, 615-17, 124 S. Ct. 2601, 2612-13, 159 L. Ed. 2d 643 (2004), and this Court's decision in Crawford v. State, 100 P.3d 440, 450 (Alaska App.2004).
In Noyakuk's case, there is little reason to think that the Miranda violation at the first interview, or the results of that violation, coerced Noyakuk into waiving his rights at the ensuing interviews. First, there was an interval of more than 48 hours between the flawed first interview and the second one. During that time, an attorney was appointed to represent Noyakuk on the pending misdemeanor and probation violation charges an attorney who, assumedly, was also available to give Noyakuk advice on how to deal with the troopers who wished to question him about the homicide.
Second, Noyakuk was given Miranda warnings before each of the subsequent interviews, and he does not claim that he failed to understand these warnings. In fact, the second interview (the one on April 15th) ended when Noyakuk invoked his right to terminate the interview.
Finally, Noyakuk told the troopers at the first interview that the shooting had been an accident, and he continued to assert this version of events at the second interview. It was not until the third interview (i.e., the second properly Mirandized interview) on April 16th that Noyakuk confessed to having purposely shot Butler.
For these reasons, we conclude that Noyakuk's case does not present an exception to the standard Elstad analysis.
Turning now to a standard Elstad analysis of this case, Judge Esch found that all of Noyakuk's statements to the troopers (including his statements at the initial interview on April 13th) were voluntary. The record fully supports the judge's ruling. Judge Esch also found that each of Noyakuk's ensuing interviews was preceded by a valid Miranda advisement and waiver, and Noyakuk does not dispute this. Moreover, as Judge Esch noted, the interval between Noyakuk's first flawed interview and his second interview was "a significant period" more than 48 hours. We note that, toward the beginning of this 48-hour interval, Noyakuk appeared in court and received an attorney.
Judge Esch further found that Trooper Schied was never overbearing toward Noyakuk, nor did she ever use lies or trickery to influence Noyakuk's decisions to submit to the ensuing interviews. The record supports these findings.
*866 Applying the rule of Elstad, we agree with Judge Esch that, despite the Miranda violation at the first interview, Noyakuk's statements from his subsequent interviews were admissible.
(We again note that we are not deciding whether to adopt the Elstad rule as a matter of state law. We are simply deciding the question of federal law that Noyakuk has raised.)
Why we agree with Judge Esch that the troopers did not violate Edwards v. Arizona at the first interview
Noyakuk argues in the alternative that, even if his statements from the subsequent interviews are admissible under Elstad, these statements should nevertheless be suppressed because, at the first interview, the troopers failed to honor his right to an attorney.
In Edwards v. Arizona,[9] the Supreme Court held that when a suspect in custody invokes their right to counsel, the police must stop questioning the suspect and must not re-initiate questioning until the suspect has had the opportunity to consult an attorney:
[W]hen an accused has invoked his right to have counsel present during custodial interrogation, a valid waiver of that right cannot be established by showing only that he responded to further police-initiated custodial interrogation even if he has been advised of his rights.... [A]n accused [who has] expressed his desire to deal with the police only through counsel is not subject to further interrogation by the authorities until counsel has been made available to him, unless the accused himself initiates further communication, exchanges, or conversations with the police.
Edwards, 451 U.S. at 484-85, 101 S.Ct. at 1884-85. See also our discussion of this rule in Kochutin v. State, 813 P.2d 298, 303 (Alaska App.1991).[10]
In the present case, Noyakuk did not expressly invoke his right to counsel at the first interview. However, as explained above, Noyakuk did ask the troopers whether he should have an attorney with him during the interview. Noyakuk contends that the troopers responded inappropriately to his question, by making remarks that were intended to discourage him from asserting his right to have an attorney present.
To analyze Noyakuk's claim, we return to a detailed look at this portion of the first interview. After the troopers explained that they had come to interview Noyakuk about Martha Butler's death, and that Noyakuk did not have to talk to them (and that he could end the interview at any time), Trooper Schied asked Noyakuk to describe how Martha Butler met her death:
Schied: Okay. Can you kind of tell us what happened, so that we can help her parents and you, too?
Noyakuk: Shouldn't I just have my attorney with me, or something?
Schied: Umh ...
Shepherd: Well, if, if that's what you feel [is] right I mean, we can't make that decision for you. You have to make that decision. Like I said, ... we're not here to talk about the [pending] charges; we're here to talk about Martha.... Like I said, you know, you don't have to talk to us if you don't want [to]. But, ah, like Trooper Schied said, we're trying to figure out what happened so that we can help her parents, you know, get over this, and adjust to it, and ...
Noyakuk: Uh-huh.
Shepherd: ... and try to find out, you know, what actually happened. Because we always know [that] there's two sides to the story.... There's your side, [and] we've been talking to a lot of people, and we've heard what they've been saying, and what you told them. But from our work, we know that there's two sides to the *867 story, and the best place to always hear the story is from the person [who] actually... was there. So [you] know, like I said, you you can talk to us if you want. If if you want an attorney, that's fine, too.
Noyakuk: Uh-huh.
Shepherd: Ah, but that's up to you. You need to make that decision and let us know.
Noyakuk: Uh-huh.
Schied: Because that attorney can't help us find where Martha is, to help her parents. You know, he's not the one that can help you do that. He's not the one that can help us help [Martha's] parents.
Noyakuk: Uh-huh.
Schied: But if that's what you feel like Investigator Shepherd says, that's your choice.
Shepherd: So it, it's something for you to decide, before we go further with anything, [with] any questioning.
Noyakuk: I don't know; I don't know how this (indiscernible).
Schied: You don't know what to say, Ben?
Noyakuk: Huh?
Schied: Would it help if we just asked [our] questions? Would [that] make it easier for you?
Noyakuk: I don't have to answer.
Schied: So you don't have to just, just spell it out, would it help you if we just ask questions?
Noyakuk: Okay.
Schied: Are you are you willing to do that without an attorney, though? We need to know that.
Noyakuk: Yeah.
Schied: Okay. Um, were you up ... by John Ahmasuk's camp when [Martha] was shot?
Noyakuk: No, I was in my house.
Schied: You were in your house?
Noyakuk: Uh-huh [yes].
Schied: Okay. Would okay.
Noyakuk: It was accidental.
Schied: Okay. Well, those things happen, Ben.
Shepherd: Those [things] happen.
Schied: Was, was this ...
Shepherd: Ben, would you even feel better, you know, if if we read you your rights? Would you feel better if we did that first? Or ...
Noyakuk: Unh-uh [no].
Shepherd: No, it's okay? So you are willing to talk to us; it's okay? [Are] you willing to talk to us without an attorney?
Noyakuk: Uh-huh [yes].
Shepherd: I'm sorry; I couldn't hear you.
Noyakuk: Yes.
As can be seen from this quoted exchange, when Noyakuk asked, "Shouldn't I just have my attorney with me, or something?", the troopers responded by telling Noyakuk (1) that this was Noyakuk's decision to make; (2) that if Noyakuk wanted an attorney, "that [was] fine"; and (3) that Noyakuk needed to make this decision and "let [the troopers] know" before the interview proceeded further. When the troopers asked Noyakuk whether he was willing to speak to them without an attorney, Noyakuk stated (apparently three times) that he was.
However, the troopers interspersed this conversation with comments suggesting that an attorney could not assist them in piecing together what had happened, or in locating Butler's bodyboth of which, the troopers asserted, would help Butler's parents deal with their loss.
Shepherd: [W]e're trying to figure out what happened so that we can help [Martha Butler's] parents ... get over this, and adjust to it, and ... try to find out ... what actually happened.... [W]e always know [that] there's two sides to the story.... [W]e've been talking to a lot of people, and we've heard what they've been saying, and what you told them. But from our work, we know that there's two sides to the story, and the best place to always hear the story is from the person [who] actually ... was there.
...
Schied: [An] attorney can't help us find where Martha is, to help her parents.... *868 [An attorney] is not the one that can help you do that. He's not the one that can help us help [Martha's] parents.
Noyakuk argues that these comments were intended to discourage him from asserting his right to counsel and that, by making these comments, the troopers violated Noyakuk's rights under Miranda and Edwards.
In Giacomazzi v. State, 633 P.2d 218, 222 (Alaska 1981), our supreme court held that when a suspect in custody makes an ambiguous or equivocal statement about wanting an attorney, the interrogating officers "may seek clarification of the suspect's desires", so long as the officers do not "utilize the guise of clarification as a subterfuge for coerc[ing] or intimidat[ing]" the suspect into waiving this right. Later, in Hampel v. State, 706 P.2d 1173, 1180-81 (Alaska App.1985), this Court interpreted Giacomazzi as meaning that, in the face of a suspect's ambiguous or equivocal statement about wanting an attorney, the interrogating officers must clarify the suspect's wishes, and the officers can not proceed with substantive questioning until they have done so. Moreover, Hampel holds that the Edwards rule is violated "when an interrogating officer chooses to answer a [suspect's] question [concerning the right to counsel] in a way which the officer knows or should know will be reasonably likely to discourage the accused from asserting the right to counsel."[11]
Noyakuk asserts that the troopers violated Giacomazzi and Hampel when they made the above-quoted responses to Noyakuk's question about a lawyer.
The State answers that the Hampel restriction on custodial interrogations is no longer good law, given the United States Supreme Court's decision in Davis v. United States, 512 U.S. 452, 114 S. Ct. 2350, 129 L. Ed. 2d 362 (1994).
The defendant in Davis, after receiving Miranda warnings, waived his rights and consented to be interviewed. However, about an hour and a half into the interview, the defendant said, "Maybe I should talk to a lawyer."[12] The question presented in Davis was whether the defendant's statement obliged the interrogating officers to cease their substantive questioning.
The Supreme Court recognized that many jurisdictions had adopted rules similar to the one announced in Giacomazzi and Hampel: that is, rules that obliged interrogating officers to cease their substantive questioning and to limit themselves to seeking clarification of the suspect's wishes.[13] However, the Supreme Court declared that federal law did not impose such a restriction:
[I]f a suspect makes a reference to an attorney that is ambiguous or equivocal in that a reasonable officer in light of the circumstances would have understood only that the suspect might be invoking the right to counsel, our precedents do not require the cessation of questioning.... The likelihood that a suspect would wish counsel to be present is not the test for applicability of Edwards.
Rather, the suspect must unambiguously request counsel[;] ... he must articulate his desire to have counsel present sufficiently clearly that a reasonable police officer in the circumstances would understand the statement to be a request for an attorney. If the statement fails to meet the requisite level of clarity, Edwards does not require that the officers stop questioning the suspect.
Davis, 512 U.S. at 459, 114 S.Ct. at 2355 (emphasis added) (citations omitted).
The Court acknowledged that it was "good police practice" for interrogating officers to seek clarification of a suspect's ambiguous or equivocal statement. However, the Court "decline[d] to adopt a rule requiring officers to ask clarifying questions." Instead, the Court declared: "If the suspect's statement is not an unambiguous or unequivocal request for counsel, the officers have no obligation to stop questioning [the suspect]."[14]
The State contends that Davis changed the legal landscape and undermined the rationale *869 of Giacomazzi and Hampel (both of which were apparently grounded on federal law). But as the Utah Supreme Court noted in State v. Leyva, 951 P.2d 738, 743 (Utah 1997), Davis involved an ambiguous or equivocal statement made in the middle of an interview by a suspect who had already received Miranda warnings and had already unambiguously waived his right to counsel. The United States Supreme Court explained its ruling this way:
[T]he primary protection afforded suspects subject to custodial interrogation is the Miranda warnings themselves.... A suspect who knowingly and voluntarily waives his right to counsel after having that right explained to him has indicated his willingness to deal with the police unassisted. Although Edwards provides an additional protection if a suspect subsequently requests an attorney, questioning must cease it is one that must be affirmatively invoked by the suspect.
Davis, 512 U.S. at 460-61, 114 S.Ct. at 2356.
Thus, the Davis rule (that interrogating officers need not interrupt their questioning to clarify the suspect's wishes) applies only to a post-Miranda-waiver setting. This view of Davis is endorsed by one of the major texts on criminal procedure:
Although [this] point is sometimes missed,... Davis is so limited; the Court's ruling was that "after a knowing and voluntary waiver of the Miranda rights, law enforcement officers may continue questioning until and unless the suspect clearly requests an attorney."
Wayne R. LaFave, Jerold H. Israel, and Nancy J. King, Criminal Procedure (2nd ed.1999), § 6.9(g), Vol. 2, p. 615 n. 164 (emphasis added) (quoting Davis, 512 U.S. at 461, 114 S.Ct. at 2356, and citing Utah's Leyva decision in support of this interpretation of Davis).
It may be true, as the State suggests, that the Giacomazzi and Hampel rule should no longer be applied when a suspect makes an ambiguous or equivocal post-waiver, mid-interview statement about an attorney. We leave that issue for another day. But the Davis decision has not changed the law that applies to cases like Noyakuk's cases where the question is whether a suspect ever validly waived the right to counsel to begin with.
We now return to the facts of Noyakuk's interrogation.
As we have already explained, when Noyakuk asked, "Shouldn't I just have my attorney with me, or something?", the troopers responded that stopping the interview to allow Noyakuk to obtain an attorney would not help Martha Butler's parents learn what had happened to their daughter and recover her body. On the other hand, the troopers repeatedly told Noyakuk (1) that it was his choice whether to have an attorney present, (2) that if he wanted an attorney, "that [was] fine", and (3) that he needed to make this decision before the troopers proceeded with the interview. After explaining this to Noyakuk, the troopers expressly (and repeatedly) asked Noyakuk whether he was willing to speak to them without an attorney. Three times, Noyakuk stated that he was willing to proceed without an attorney.
These facts are quite a bit different from the facts of Hampel where the interrogating officer responded to Hampel's inquiry about an attorney by "emphasiz[ing] the obstacles to obtaining one", by "focusing on the evidence [against] Hampel", and by strongly implying that Hampel "would damage his case if he delayed talking until an attorney could be present", since the police were just about to interview Hampel's cohorts.[15] It is not surprising that this Court categorized the officer's response as a tactic that was "likely to discourage [Hampel] from asserting the right to counsel".[16]
[B]y emphasizing ... the delay and bureaucratic complexity of procuring an attorney, while [at the same time] dwelling... on the evidence against Hampel, the progress of the [police] investigation, and the imminent interrogation of Hampel's companions, [the interrogating officer] created two unmistakable impressions: first, that Hampel was being given an "opportunity" to cooperate, but time was of the *870 essence; [and] second, that if Hampel elected to request counsel, a substantial delay would inevitably result[,] and he would lose that opportunity. [The officer's] answers ... thus worked more toward persuasion than clarification.
Hampel, 706 P.2d at 1182.
The troopers' statements in Noyakuk's case (the statements that an attorney could not help Martha's parents understand what had happened to their daughter or locate her body) might conceivably have worked to dissuade Noyakuk from demanding the immediate presence of counsel, but these statements were not coercive like the ones in Hampel. The troopers never stated or implied that Noyakuk's decision to request an attorney's presence would have adverse consequences for Noyakuk personally, or that any delay in the interview process would be unacceptable to the authorities or would hurt Noyakuk in any other fashion. In fact, the troopers told Noyakuk that it would be "fine" if he asked for an attorney.
We conclude that the facts of Noyakuk's case are much closer to the facts presented in State v. Varie, 135 Idaho 848, 26 P.3d 31 (2001). The defendant in Varie was questioned concerning the disappearance of her husband. When Varie noted during the interview that she did not have a lawyer, the officers asked her if she wanted a lawyer before speaking to them. Varie replied, "[A]m I supposed to have a lawyer?" At this point, the officers explained that it was Varie's choice whether to have a lawyer. The officers told Varie that they did not know if having a lawyer "would make much difference", but that "this was her opportunity to move ahead and tell [the police] what happened."[17] Upon hearing this, Varie began to speak about what had happened. The officers interrupted her to clarify her decision: "[We] guess it is your choice to go ahead and talk with us now without a lawyer?" Varie replied, "[T]hat's fine."[18]
The Idaho court noted that Varie "appeared upset and may have been vulnerable at the time of the questioning". The court further noted that the officers "[c]learly [engaged in] an effort to de-emphasize the importance of [Varie's] Constitutional rights and [to] stress Varie's opportunity to tell her story".[19] Nevertheless, the court concluded that Varie understood her rights, and that she was not coerced into waiving those rights:
Significantly, [the officers] broke the subtly persuasive atmosphere of the moment and asked very directly if Varie wished to proceed [with the interview]. She agreed to proceed.
Varie, 26 P.3d at 36.
A similar issue was presented in Mueller v. Angelone, 181 F.3d 557 (4th Cir.1999). The defendant in Mueller was being interrogated (following Miranda warnings and a waiver of rights) about a homicide. Midway through the interview, he asked the police officer, "Do you think I need an attorney here?" The officer responded by shaking his head slightly from side to side, moving his arms and hands in a "shrug-like manner", and then telling Mueller, "You're just talking to us." Six minutes later, Mueller began confessing to the murder.[20]
On appeal, Mueller argued that the officer should have ceased all questioning after Mueller inquired about an attorney. Mueller also argued that, even if his question about a lawyer did not require the officer to cease all interrogation, the officer's response to this question was improper, in that it discouraged Mueller from asserting his right to counsel. The court disagreed on both points:
Mueller can only prevail by showing that[,] under the totality of the circumstances, [the officer's] response made Mueller's continuing waiver [of counsel] the product of other than a free and deliberate choice, or that[,] after [the officer's response,] Mueller no longer understood the nature of the right to an attorney or the consequences of abandoning it.
Mueller, 181 F.3d at 575.
The court noted that Mueller was in his forties, and that he had considerable prior *871 experience with the criminal justice system and the Miranda warnings.[21] The court concluded that it was "clear from the record that Mueller, with his extensive experience in such matters, understood both his rights and the consequences of their abandonment. [The officer's] expression of his opinion on the advisability of Mueller's consulting with counsel could not change that understanding."[22]
Like the defendant in Mueller, Noyakuk was an adult who had had extensive experience with the criminal justice system. Judge Esch found that, because of Noyakuk's "[prior] experience with both attorneys and the justice system", Noyakuk was well aware of his right to an attorney. As Judge Esch noted, Noyakuk had been convicted several times in the 1980's of minor consuming alcohol, and had been convicted once of disorderly conduct in the 1990's. Moreover, in the year preceding his arrest in April 2001, Noyakuk was convicted three times of domestic assault.
Judge Esch noted that the troopers "explained several times that the decision concerning [an attorney] was up to [Noyakuk]." Judge Esch further noted that the troopers refrained from substantive questioning until Noyakuk indicated his willingness to proceed without an attorney. Based on the exchange between Noyakuk and the troopers, and based on Noyakuk's prior experience with the justice system, Judge Esch concluded that "[i]f [Noyakuk] had wished to speak with an attorney prior to further questioning, he could have done so" and that, therefore, there was no Edwards violation.
We agree with Judge Esch. As we have explained here, the facts of Noyakuk's case are significantly different from the facts of Hampel. Noyakuk was not told that it was difficult or impossible to obtain an attorney, nor was he told that a request for an attorney would hurt him or prejudice his case. Rather, he was told that the choice was up to him, and that if he wanted an attorney, "that [was] fine".
Conceivably, Noyakuk might have argued that he was so emotionally distraught over Martha Butler's death, and that he felt so compelled to remedy matters as much as possible with her parents, that the troopers exerted an unconscionable influence on Noyakuk when they commented on the need to help Butler's parents understand what had happened and to recover their daughter's body.
But this was never the focus of Noyakuk's suppression motion, and Judge Esch was never asked to make a finding on the issue of potential emotional overbearing. Rather, Noyakuk argued that it was improper for the troopers to say anything to Noyakuk, other than to ask questions that were strictly limited to ascertaining whether Noyakuk wanted an attorney before proceeding with the interview. As we have explained here, the rule is not so strict. The ultimate issue is not what the troopers said, but whether (given what the troopers said) Noyakuk knowingly and voluntarily waived his right to counsel. We agree with Judge Esch that he did.
Noyakuk's sentence appeal
We have rejected Noyakuk's challenges to the admission of the evidence against him. Accordingly, we affirm his conviction for murder. We now turn to the remaining issue in this case: Noyakuk's appeal of his sentence.
Noyakuk was convicted of first-degree murder intentionally killing another human being. This offense is an unclassified felony with a mandatory minimum sentence of 20 years' imprisonment and a maximum sentence of 99 years' imprisonment.[23] Judge Esch sentenced Noyakuk to 99 years with 24 years suspended i.e., 75 years to serve.
Noyakuk argues that his conduct was more akin to second-degree murder (i.e., an unintended homicide committed under circumstances where there is great risk of death). Thus, Noyakuk contends that he should have received a sentence more in line with the 20- to 30-year benchmark range *872 that this Court has established for first felony offenders convicted of second-degree murder.[24]
In arguing that his conduct was similar to a second-degree murder, Noyakuk points out that the killing was not premeditated, that he did not kill his victim merely for the thrill of it, and that he did not torture or engage in deliberate cruelty toward his victim. But all of these are factors that aggravate a first-degree murder. That is, if one or more of these factors had been present, this would have shown that Noyakuk's crime was more serious than the typical first-degree murder.[25] It does not follow that the absence of these factors establishes that Noyakuk's crime was less serious than a typical first-degree murder.
Noyakuk's act of murdering Martha Butler was a crime of domestic violence, since Noyakuk and Butler shared a household.[26] Judge Esch found that Noyakuk had a history of repeated assaultive conduct, including two prior assaults against Butler. In addition, Judge Esch noted that Noyakuk engaged in a "significant and protracted" effort to conceal the murder and to avoid apprehension. Judge Esch could reasonably conclude that these factors called for a sentence within the upper range of the penalties for first-degree murder.
(Compare Sakeagak v. State, 952 P.2d 278, 285 (Alaska App.1998), where we held that a defendant challenging the reasonableness of a 99-year sentence for first-degree murder was obliged to show some reason to believe that their offense was mitigated or that their background was atypically favorable.)
After independently reviewing the record in Noyakuk's case, we conclude that Judge Esch was not clearly mistaken when he sentenced Noyakuk to serve 75 years in prison.[27]
Conclusion
The judgement of the superior court is AFFIRMED.
NOTES
[1] See Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966).
[2] AS 28.35.030(a).
[3] AS 11.61.210(a)(1).
[4] Federal courts: See United States v. Chamberlain, 163 F.3d 499, 501-02 (8th Cir.1998); United States v. Menzer, 29 F.3d 1223, 1231-32 (7th Cir.1994); United States v. Turner, 28 F.3d 981, 983-84 (9th Cir.1994); Garcia v. Singletary, 13 F.3d 1487, 1492 (11th Cir.1994); United States v. Lugo, 289 F. Supp. 2d 790, 794-96 (S.D.Tex.2003); Dallio v. Spitzer, 170 F. Supp. 2d 327, 338-39 (E.D.N.Y.2001).
State courts: See Fairchild v. State, 349 Ark. 147, 76 S.W.3d 884, 890 (2002); People v. Denison, 918 P.2d 1114, 1116-17 (Colo.1996); State v. Peterson, 663 N.W.2d 417, 427-28 (Iowa 2003); State v. Deases, 518 N.W.2d 784, 789 (Iowa 1994); Commonwealth v. Larkin, 429 Mass. 426, 708 N.E.2d 674, 681 (1999), and the cases cited in footnotes 6-8 of Larkin; State v. Tibiatowski, 590 N.W.2d 305, 308-09 (Minn. 1999); State v. Ford, 144 N.H. 57, 738 A.2d 937, 943 (1999); State v. Conley, 574 N.W.2d 569, 573-74 (N.D.1998).
See also Judge Bryner's dissenting opinion in Kochutin v. State, 813 P.2d 298, 309 & n. 2 (Alaska App.1991), where he cited the "wealth of authority ... that a sentenced prisoner serving time in a correctional facility is not ipso facto in Miranda custody".
[5] Halberg v. State, 903 P.2d 1090 (Alaska App. 1995); Crawford v. State, 100 P.3d 440 (Alaska App.2004).
[6] 422 U.S. 590, 602, 95 S. Ct. 2254, 2261, 45 L. Ed. 2d 416 (1975).
[7] A finding of fact is "clearly erroneous" when it "leaves the [reviewing court] with a definite and firm conviction ... that a mistake has been made, although there may be evidence to support the finding." Geczy v. LaChappelle, 636 P.2d 604, 606 n. 6 (Alaska 1981), quoting Mathis v. Meyeres, 574 P.2d 447, 449 (Alaska 1978).
[8] Compare Lewis v. State, 862 P.2d 181, 186-87 (Alaska App.1993), and Gustafson v. State, 854 P.2d 751, 756 (Alaska App.1993), where we held that, for purposes of applying the suppression rule announced in State v. Malkin, 722 P.2d 943 (Alaska 1986), a conscious misstatement or omission in a search warrant application is "intentional" only if it was done in a "deliberate attempt to mislead" the issuing magistrate. (See also Judge Singleton's concurrence in Davis v. State, 766 P.2d 41, 47 n. 3 (Alaska App.1988), where he advocated this same interpretation of "intentional" for Malkin purposes.)
[9] 451 U.S. 477, 101 S. Ct. 1880, 68 L. Ed. 2d 378 (1981).
[10] Our original opinion in Kochutin was later vacated, see 875 P.2d 778 (Alaska App.1994), because our decision rested on the false factual premise that Kochutin had been continuously in custody between the time he invoked his right to counsel and the time the police re-interviewed him. However, our discussion of the Edwards rule remains good law.
[11] Hampel, 706 P.2d at 1181.
[12] Davis, 512 U.S. at 455, 114 S.Ct. at 2353.
[13] Davis, 512 U.S. at 456, 114 S.Ct. at 2353-54.
[14] Davis, 512 U.S. at 461-62, 114 S.Ct. at 2356.
[15] Hampel, 706 P.2d at 1181.
[16] Id.
[17] Varie, 26 P.3d at 34.
[18] Id.
[19] Id. at 36.
[20] Mueller, 181 F.3d at 573-74.
[21] Id.
[22] Id.
[23] AS 11.41.100(b); AS 12.55.125(a).
[24] See Page v. State, 657 P.2d 850, 855 (Alaska App.1983).
[25] See Hamilton v. State, 59 P.3d 760, 772 (Alaska App.2002):
We have repeatedly held that premeditated murder is among the most serious conduct within Alaska's definition of first-degree murder and that, in first-degree murder cases, a defendant's premeditation, standing alone, will support a sentence of 99 years' imprisonment. Moreover, even in cases of second-degree murder (i.e., cases in which the killing was unintended), we have repeatedly upheld sentences in the upper end of the penalty range for defendants who committed gratuitous or otherwise inexplicable acts of extreme violence.
And see Harmon v. State, 908 P.2d 434, 444 (Alaska App.1995) (holding that a first-degree murder is aggravated when the defendant tortures or inflicts gratuitous pain on the victim).
[26] Compare AS 12.55.155(c)(18)(A), which provides that crimes against household members are aggravated for purposes of presumptive sentencing.
[27] See McClain v. State, 519 P.2d 811, 813-14 (Alaska 1974) (an appellate court is to affirm a sentencing decision unless the decision is clearly mistaken).
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2510486/
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411 F. Supp. 2d 470 (2006)
PHILIPS ELECTRONICS NORTH AMERICA CORPORATION and U.S. Philips Corporation, Plaintiffs,
v.
CONTEC CORPORATION, Compo Micro Tech, Inc., Seoby Electronics Co., Ltd., Remote Solution Co., Ltd., F/K/A Hango Electronics Co., Ltd., Hango Remote Solution, Inc., Defendants.
No. Civ.A. 02-123-KAJ.
United States District Court, D. Delaware.
January 9, 2006.
*471 Richard L. Horwitz, and David E. Moore, Potter Anderson & Corroon LLP, Wilmington, DE, Sullivan & Cromwell LLP, New York, NY (Garrard R. Beeney, Marc De Leeuw, Maureen P. Sheehan, of counsel), for plaintiffs.
Jack B. Blumenfeld, and Julia Heaney, Morris, Nichols, Arsht & Tunnell, Wilmington, DE, Ostrolenk, Faber, Gerb & Soffen, LLP, New York, NY (Alfred R. Fabricant, Martin Pfeffer, and Lawrence C. Drucker, of counsel), for defendant Compo Micro Tech, Inc.
*472 David L. Finger, Wilmington, DE, for defendants Remote Solution Co., Ltd. f/k/a Hango Electronics Co., Ltd. and Hango Remote Solution, Inc.
MEMORANDUM OPINION
JORDAN, District Judge.
I. INTRODUCTION
Before me is a motion filed by plaintiffs Philips Electronics North America Corp. and U.S. Philips Corp. (collectively, "Philips"), seeking summary judgment on liability for contributory infringement and inducing infringement. (Docket Item ["D.I."] 524.) Also before me is a motion filed by defendants Remote Solution Co., Ltd., F/K/A Hango Electronics Co., Ltd. ("Remote Solution"), and Hango Remote Solution, Inc. ("Hango"; collectively, "Defendants"), seeking summary judgment of non-infringement and summary judgment for failure to prove damages. (D.I.527.) Philips has also filed a Motion for Costs, Attorneys' Fees and Other Expenses incurred in addressing new defenses raised by Hango and Remote Solution. (D.I.523.)
Jurisdiction is appropriate under 28 U.S.C. §§ 1331 and 1338. For the reasons that follow, Philips' motion for summary judgment will be granted-in-part and denied-in-part, and Defendants' motion for summary judgment will be denied. Philips' motion for attorney's fees will also be denied.
II. BACKGROUND
The factual and procedural background of this case, as well as a discussion of the relevant technology, can be found in several prior opinions and orders of this court.[1] For the purposes of these motions, the relevant factual and procedural background is as follows.
Philips is the assignee of U.S. Patent Number 4,703,359 (the "'359 patent"), which issued on October 27, 1987. (D.I. 41, Tab B at ¶¶ 15-16.) The '359 patent discloses a method for programming universal remote control units ("URCs") for controlling various appliances from different manufacturers. See '359 patent, col. 1, Ins. 15-17. This method of programming a URC, the "autoscan" method, involves the user activating the URC, and the URC sending a command in different signal structures until the appliance responds. (Claim Construction Opinion, D.I. 377 at 3.)
Philips filed an amended complaint on September 17, 2002 joining Compo Micro Tech, Inc. ("CMT"), Seoby Electronics, Remote Solution, and Hango as defendants in its patent infringement action against Contec.[2] (D.I. 41, Tab B at ¶¶ 10-13.) Remote Solution is a manufacturer of remote *473 controls based in Korea. (D.I. 528, Ex. A at ¶ 2.) Hango, which is now defunct, was owned in part by Remote Solution and was a California corporation. (Id. at ¶ 11.) Hango did the billing and collection for Remote Solution's U.S. customers. (Id.) The accused URCs manufactured by Remote Solution incorporate both the patented "autoscan" method of programming, as well as a "direct entry" method of programming, wherein a user enters a particular code that allows the appliance to respond to the URC signal. (D.I. 532 6-7.)
On October 21, 2003, Philips moved for summary judgment against CMT, Remote Solution, and Hango. (D.I.292.) Neither Remote Solution nor Hango took the trouble to advance any arguments in opposition to that motion, except to assert that they joined "in the arguments set forth by [CMT] . . . submitted in opposition to plaintiffs' motion for summary judgment on the issue of infringement." (D.I. 326 at 4; D.I. 327 at 15.) At oral argument on the summary judgment motions, counsel for CMT conceded that if Philips' proposed claim construction were adopted for a particular term in the '359 patent, that CMT "would fall within and must fall within the construction and we would be liable for infringement." (Transcript of Markman Hearing, D.I. 338 at 50:22-24.) At that same argument, counsel for Hango and Remote Solution stated that those Defendants joined CMT, and that "the papers of the Philips experts do not distinguish the methodology, the workings of the Remote Solution universal remotes from those of Compo Micro Tech and there are no distinctions." (Id. at 19:14-20.)
On February 6, 2004, CMT filed a motion to sever its trial from that against Hango and Remote Solution. (D.I.343.) On March 12, 2004, I granted that motion (D.I.352, 353), noting that Defendants admitted that their "defenses will be parallel with CMT, and [their] fortunes will rise and fall with those of CMT." After claim construction, I granted summary judgment of literal infringement of the '359 patent to Philips against CMT. Philips Electronics North America Corp. v. Contec Corp., 312 F. Supp. 2d 642, 645 (D.Del.2004). However, I did not decide the issue of whether infringement was direct or indirect, because those arguments were not raised by CMT, Remote Solution, or Hango. Therefore, following a motion for reargument, I allowed Defendants to raise the present arguments on liability for infringement. (D.I.491.)
III. STANDARD OF REVIEW
Federal Rule of Civil Procedure 56 states that summary judgment should be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The party moving for summary judgment has the burden of showing that there are no genuine issues of fact and that the movant is entitled to judgment as a matter of law. Adickes v. S.H. Kress & Co., 398 U.S. 144, 151-60, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970). The moving party also bears the responsibility of informing the court of the basis for the motion, and identifying those portions of the record which demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The burden then shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Fed. R.Civ.P. 56(e); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
A patent infringement analysis involves two steps: claim construction and application of the construed claim to the *474 accused process or product. Markman v. Westview Instruments, Inc., 52 F.3d 967, 976 (Fed.Cir.1995) (en banc), aff'd, 517 U.S. 370, 116 S. Ct. 1384, 134 L. Ed. 2d 577 (1996). The first step, claim construction, has been held to be a matter of law. See Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448, 1454 (Fed.Cir.1998) (en banc). The second step, application of the claim to the accused product, is a question of fact. See Kustom Signals, Inc. v. Applied Concepts, Inc., 264 F.3d 1326, 1332 (Fed.Cir. 2001) ("Patent infringement, whether literal or under the doctrine of equivalents, is a question of fact."). Summary judgment is appropriate in patent infringement suits when it is apparent that only one conclusion regarding infringement could be reached by a reasonable jury. See Telemac Cellular Corp. v. Topp Telecom, Inc., 247 F.3d 1316, 1323 (Fed.Cir.2001).
IV. DISCUSSION
A. Philips' Motion for Summary Judgment of Contributory and Inducing Infringement
Philips has moved for summary judgment that Defendants contribute to and actively induce infringement of the '359 patent. (D.I.524.) Because Defendants conceded that the workings of their URC were the same as the workings of CMT's URC (Transcript of Markman Hearing, D.I. 338 at 19:14-20), they cannot now contend that it does not embody the method claimed in the '359 patent, and they do not appear to make such an argument in their briefing. Instead, Defendants argue that Philips is not entitled to summary judgment of infringement because (1) there is no specific evidence of direct infringement by anyone using Defendants' URCs; (2) there is no contributory infringement because Defendants' URCs have a substantial non-infringing use; and (3) Philips cannot prove inducement to infringe. (D.I. 532 at 3.)
1. Specific Evidence of Direct Infringement
Defendants contend that Philips' claims of contributory infringement and inducement to infringe must fail because Philips cannot provide clear evidence of direct infringement of the '359 patent. Both claims of active inducement of infringement and contributory infringement claims require a patentee to show, as a predicate, that there has in fact been direct infringement of the patent in suit. See MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1378 (Fed.Cir.2005) (noting that to succeed on a claim of inducement to infringe, "the patentee must show, first that there has been direct infringement").
Defendants contend that, because their URCs embody both the patented "autoscan" method, as well as a non-infringing method of programming, Philips cannot show that any customer actually used the patented method. (D.I. 532 at 16.) However, it is a well-settled principle that "an accused product that sometimes, but not always, embodies a claimed method nonetheless infringes." Bell Communications Research, Inc. v. Vitalink Communications Corp., 55 F.3d 615, 623 (Fed.Cir. 1995). Here, there is no dispute that Defendants' URCs contain the patented method for programming the URC, as well as a non-infringing method. Thus, Remote Solutions' URCs infringe the patent, and more specific evidence of direct infringement is not necessary.
Dynacore Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263 (2004), cited by Remote Solutions in support of its position, is inapposite. In Dynacore, the patent-in-suit had claims directed to a local area network ("LAN"). Dynacore, 363 F.3d at 1266. The plaintiff alleged that a product infringed its patent if that product incorporated *475 technology that allowed a user to set up a LAN complaint with a particular technical standard. Id. at 1266-67. However, while the patent taught "the design of a specific type of LAN requiring at least three connected devices . . . the defendants' products [were] not LANs but rather individual devices containing technology conforming" to the particular technical standard. Id. The plaintiff sought to establish direct infringement based solely on the hypothetical situation where a user of one of defendants' products set up a LAN that conformed to the standard. Id. at 1274. This situation is distinguishable from the instant case. In Dynacore, direct infringement required the customer to modify the defendants' products in a particular way, and the plaintiff could not prove that such a situation had ever occurred. Id. at 1266-67. Here, in contrast, the device sold by Defendants already embodies the patented method when it reaches the customer, and requires nothing more from the end user than to use the URC without any modification. Furthermore, at least with respect to the URCs sold to Contec, Defendants provided instructions on how to use the patented method. Therefore, even though Defendants' URCs "sometimes, but not always" embody the claimed method, they infringe the '359 patent. Bell Communications Research, Inc., 55 F.3d at 623.
Thus, there are no disputes of material fact, and there is sufficient proof of direct infringement of the '359 patent, based on the fact that the URCs manufactured by Defendants embody the patented method.
2. Contributory Infringement
Defendants also contend that they cannot be held liable for contributory infringement because their URC has a substantial non-infringing use, as it incorporates a non-infringing method of programming.[3] "In order to succeed on a claim of contributory infringement, in addition to proving an act of direct infringement, plaintiff must show that defendant `knew that the combination for which its components were especially made was both patented and infringing' and that defendant's components have `no substantial non-infringing uses.'" Cross Medical Products, Inc. v. Medtronic Sofamor Danek, Inc., 424 F.3d 1293, 1312 (Fed.Cir. 2005) (quoting Golden Blount, Inc. v. Robert H. Peterson Co., 365 F.3d 1054, 1061 (Fed.Cir.2004)).
Defendants argue, in both their response to Philips' summary judgment motion, and in their brief supporting their own summary judgment motion, that Defendants' URC has substantial non-infringing uses, and thus that Defendants do not contribute to infringement of the '359 patent. (See D.I. 528 at 15-17; D.I. 532 at 11-16.) There is no genuine issue of material fact with respect to this dispute,[4] since both parties agree that Defendants' URC *476 embodies both the patented "autoscan" method of programming, as well as the unpatented "direct entry" method of programming. (D.I. 528, Ex. A at ¶¶ 7-8; see also D.I. 528 at 6-7; D.I. 532 at 6-7.) The dispute here is one of law.
Philips relies on Oak Industries v. Zenith Electronics Corp., 697 F. Supp. 988 (N.D.Ill.1988), in arguing that Defendants' addition of the "direct entry" method of programming to a URC that practices the "autoscan" method does not give that URC a substantial non-infringing use. (D.I. 525 at 15-19; D.I. 533 at 4-9.) In the Oak Industries case, the plaintiff, which owned a patent that taught a method for eliminating a particular type of interference in cable television, sued the defendant, which sold cable television converters that allegedly practiced that method. Oak, 697 F.Supp. at 989. However, in addition to practicing the patented method, the defendant's cable television converters also performed additional functions, such as expanding the number of channels received and unscrambling protected signals. Id. at 991. The court denied summary judgment of non-infringement, stating:
Additional functions in a device that practices a patented method does [sic] not diminish direct infringement and, therefore, the fact that the device sold has other functions which are performed simultaneously with the patented method does not otherwise substantiate a noninfringing use for the purposes of § 271(c). This rule flows directly from the logic of the patent laws. To hold to the contrary would allow sellers of products that are clearly intended to infringe a patented method to avert liability simply by adding functions to that device. Therefore, we do not think it enough that Zenith may have combined in the same package several devices: one to suppress VHF interference, one to unscramble signals, and one to expand channels.
Id. at 995.
The facts in Oak Industries have important similarities to the facts in the instant case. Here, Defendants argue that the addition of a noninfringing method to their URC is enough to give their device a substantial noninfringing use, even though it includes the patented method. The argument is legally flawed, for it would indeed violate the "logic of the patent laws" to allow a potential infringer to avoid liability for contributory infringement by simply adding a noninfringing function to a device that practices a patented method.
Defendants attempt both to distinguish Oak Industries on its facts and also to argue that it is not applicable to this case. However, in their attempt to distinguish the case, Defendants actually strengthen Philips' argument. Defendants quote language from a later decision in Oak Industries, wherein the court stated:
If the practice of the patented method is incidental and necessary to the practice of the unpatented methods, the device is a staple and there can be no contributory infringement. If, on the other hand, the practice of the unpatented method is not necessary or incidental to the practice of the unpatented methods, a jury could find that the device as a whole is not [a] staple and the seller could be liable for contributory infringement.
Oak Industries, Inc., 726 F. Supp. 1525, 1538-39 (N.D.Ill.1989). Here, the practice of the "autoscan" method of programming is not necessary or incidental to the practice of the "direct entry" method. Instead, those are two separate methods for programming Defendants' URC to communicate with a particular appliance.[5] Thus, *477 under the standard set out in Oak Industries, Defendants' URC is not capable of a substantial non-infringing use.[6] Defendants are therefore liable for contributory infringement of the '359 patent, because all elements of contributory infringement are met. As a result, summary judgment of indirect infringement will be granted to Philips.[7]
B. Defendants' Motion for Summary Judgment of Non-Infringement
Defendants have moved for summary judgment that (1) they do not directly infringe the '359 patent; (2) there is no *478 contributory infringement; and (3) they are not inducing infringement. Additionally, Defendants argue that they are entitled to summary judgment because, even if plaintiffs can establish liability, they have failed to prove that they are entitled to any damages.
1. Direct Infringement
Defendants have moved for summary judgment that they do not directly infringe the '359 patent. (D.I. 527; D.I. 528 at 10-15.) Philips has responded by consenting to its claim of direct infringement being dismissed. (D.I. 525 at 1 n. 1; D.I. 533 at 32.) Therefore, this claim will be dismissed, and Defendants' motion for summary judgment on this issue is denied as moot.
2. Contributory and Inducing Infringement
For the same reasons that I set forth above for granting Philips' Motion for summary judgment of indirect infringement, Defendants' Motion for summary judgment on these grounds is denied.
3. Damages
"Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer". 35 U.S.C.A. § 284. "A reasonable royalty `may be based upon an established royalty, if there is one, or if not upon a hypothetical royalty resulting from arm's length negotiations between a willing licensor and a willing licensee.'" Trell v. Marlee Electronics Corp., 912 F.2d 1443, 1445 (Fed.Cir.1990) (quoting Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078 (Fed.Cir.1983)).
In their brief, Defendants essentially challenge the sufficiency of the evidence presented by Philips through their expert, Kerry Ruoff, as to the amount of damages and the start date of the damages analysis. (D.I. 528 at 24-28.) Thus, Defendants have, at most, raised issues of fact regarding what damages Philips is entitled to receive. Simply calling an expert's report into question is not enough for a grant of summary judgment in this case. There are genuine issues of material fact with respect to the amount of damages Philips' is entitled to receive, and summary judgment must be denied.
C. Philips' Motion for Costs, Attorneys' Fees and Other Expenses
Philips has also moved for costs, attorneys' fees and other expenses in connection with reopening this case and preparing summary judgment motions. (D.I. 531.) "[A]n assessment of attorney's fees is undoubtedly within a court's inherent power". Chambers v. NASCO, Inc., 501 U.S. 32, 45-46, 111 S. Ct. 2123, 115 L. Ed. 2d 27 (1991) ("a court may assess attorney's fees when a party has `acted in bad faith, vexatiously, wantonly, or for oppressive reasons'"). However, "[b]ecause of their very potency, inherent powers must be exercised with restraint and discretion." Chambers, 501 U.S. at 44, 111 S. Ct. 2123.
Here, Philips has presented no evidence that Defendants have acted in bad faith. Philips predicates its request for fees on this court's ruling that Defendants' new defenses were presented in an untimely manner. D.I. 523 at 2. However, Philips neglects to mention that although I found that the presentation of the defenses to be untimely, I also found that "there [was] sufficient support for Defendants' arguments in the relevant case law to warrant permitting those non-infringement arguments to be raised." (D.I. 491 at 4.) As the analysis here indicates, those defenses, while ultimately unsuccessful, are not without a degree of weight. Moreover, because *479 the trial against these Defendants had already been delayed for other reasons (see D.I. 342), allowing the defenses to be raised and considered on their merits has not unduly prejudiced the plaintiffs. Defendants will therefore not be held responsible for the costs and fees associated with this motion, and Philips' motion for costs, attorneys' fees, and other expenses will be denied.
V. CONCLUSION
Accordingly, Philips' Motion for Summary Judgment (D.I.524) will be granted as to contributory infringement, and denied as moot as to inducement of infringement. Philips' claim of direct infringement will be dismissed, and Defendants' Motion for Summary Judgment (D.I.527) will be denied. Philips' Motion for Costs, Attorneys' Fees and Other Expenses (D.I. 523) will be denied. An appropriate order will follow.
ORDER
For the reasons set forth in the Memorandum Opinion of today's date in this matter,
IT IS HEREBY ORDERED that the Motion for Summary Judgment on Liability for Contributory and Inducing Infringement filed by the plaintiffs Philips Electronics North America Corp. (Docket Item ["D.I."] 524) is GRANTED as to contributory infringement, and DENIED as moot as to inducement of infringement. IT IS FURTHER ORDERED that Philips' claim of direct infringement is DISMISSED, that the Joint Motion for Summary Judgment of Non-Infringement and failure to prove damages filed by defendants Remote Solution Co., Ltd., F/K/A Hango Electronics Co. and Hango Remote Solution, Inc. (D.I. 527) is DENIED, and the Motion for Costs, Attorneys' Fees and Other Expenses filed by Philips (D.I. 523) is DENIED.
NOTES
[1] See D.I. 351 (denying Remote Solution's motion to dismiss for lack of personal jurisdiction); D.I. 352, 353 (granting Compo Micro Tech's ("CMT") motion to sever and for separate trials); D.I. 376, 377 (claim construction); D.I. 388, 389 (granting in part Philips' motion for summary judgment on infringement, and denying in part Defendants' motion for summary judgment of non-infringement); D.I. 390 (denying motion for summary judgment of invalidity); D.I. 394, 395 (granting motion for summary judgment on Defendants' affirmative defense of equitable estoppel); D.I. 400, 401 (granting in part and denying in part motion for partial summary judgment limiting Philips' damages); D.I. 446 (issuing judgment and permanent injunction against CMT); D.I. 465 (denying motion to stay injunction); D.I. 484 (denying various motions made by Hango); D.I. 486 (denying without prejudice motion for judgment as a matter of law on damages); D.I. 491, 492 (granting Defendants' motion for reargument); D.I. 493, 494 (denying CMT's motion for judgment as a matter of law, and granting Philips' motion for attorneys' fees and expenses).
[2] Philips later settled its case against Contec and Seoby. (See Consent Judgment and Order, D.I. 258.)
[3] Defendants also argue that, because their URCs have a substantial noninfringing use, Philips is required to come forward with specific instances of direct infringement. However, because, as is described more fully in the accompanying text, simply adding a nonpatented method to a device that practices a patented method does not give that device a substantial non-infringing use, this argument is without merit.
[4] In a footnote, Defendants contend that, in addition to the fact that their URC has substantial non-infringing uses, Philips is not entitled to summary judgment of infringement because there are issues of material fact as to the other elements of contributory infringement. (D.I. 528 at 16 n. 7.) However, there is proof of direct infringement of the '359 patent by Defendants' URCs (see supra 474-475). Defendants knew of the '359 patent, and knew that their URCs were infringing, at least as of September 17, 2002, the date that this lawsuit was filed. Thus, there is no genuine issue of material fact as to any of those elements of contributory infringement.
[5] Defendants also make much of the fact that in Oak Industries, the patented and unpatented methods were practiced simultaneously and automatically in the accused device, which is unlike the case here, since the autoscan and direct entry methods of programming are not used simultaneously. (D.I. 532 at 11-12.) However, the fact that the methods were practiced simultaneously and automatically actually weighed in favor of the defendant in Oak Industries, as the court noted that if the "practice of the patented method is incidental and necessary to the practice of the unpatented methods, the device is a staple and there can be no contributory infringement." Oak, 726 F.Supp. at 1538-39. Thus the simultaneous and automatic practice of the patented and unpatented methods made it more likely that the practice of the patented method was incidental and necessary to the practice of the unpatented method and therefore not a basis for finding contributory infringement. Id. at 1539-40. Here, the fact that the patented "autoscan" method is practiced separately from the unpatented "direct entry" method shows that the two are not "incidental and necessary" to each other, and militates in favor of a finding that the Defendants' URC does not have a substantial noninfringing use.
[6] Defendants also cite several cases that distinguish Oak Industries on its facts, and they attempt to analogize the present situation to those cases. (D.I. 532 at 13-15.) However, the cases cited by Defendants are inapposite. In another case involving URCs, Universal Electronics, Inc. v. Zenith Electronics Corp., 846 F. Supp. 641 (1994), the defendant's URC was capable of controlling the electronic devices of many different manufacturers, including the plaintiff's. Id. at 651. The plaintiff had a patent on the method of controlling its appliances, and alleged that defendant's device infringed that patent when it was used to control plaintiff's appliances. Id. The court in Zenith distinguished Oak Industries, saying that, while in Oak Industries the portion of the device that practiced the infringing function "may not have been necessary for the converters to practice the non-infringing functions," the defendant's URCs were capable of controlling many devices using the same technology as used to control the plaintiff's devices. The court found that the URCs had substantial non-infringing uses "in that those remotes can operate many electronic devices not manufactured by Zenith." Id. at 652. This is different from the URC at issue here. While the URC in Zenith used the same technology to control plaintiff's devices, an infringing use, and other manufacturer's devices, a non-infringing use, the Defendants' URC here contains separate and separable methods of programming a URC, only one of which infringes. Thus, Defendants cannot argue that their URC has a substantial non-infringing use based on Zenith.
Defendants further attempt to rely on C.R. Bard, Inc. v. Advanced Cardiovascular Systems, Inc., 911 F.2d 670 (Fed.Cir.1990), for the proposition that "the relevant inquiry is whether there are substantial non-infringing uses for a device, not whether a device is designed so as to allow infringement of a patented process." Universal Electronics, Inc., 846 F.Supp. at 651. However, C.R. Bard is also distinguishable on its facts, as the device in C.R. Bard could be positioned for use in three ways, only two of which potentially infringed the patent. C.R. Bard, 911 F.2d at 674. The three possible ways of positioning were inherent to the design of the device. Id. at 674-75. Again, this is different from the URC at issue here, which contains two separate methods of programming, one of which infringes. Defendants could sell a device which contained only the "direct entry" method of programming, but they chose not to. Therefore the Defendants cannot take shelter in arguing that their URCs are capable of a substantial non-infringing use.
[7] While Philips has made a credible argument that Defendants are liable for inducing infringement of the '359 patent, I decline to reach that argument, as I am granting summary judgment of indirect infringement based on Defendants' contributory infringement of that patent.
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411 F.Supp.2d 1271 (2005)
CENTER FOR BIOLOGICAL DIVERSITY, et al., Plaintiffs,
v.
Gale NORTON, in her official capacity as Secretary of the Interior, et al., Defendants.
No. CIV.03-252 LFG/LAM.
United States District Court, D. New Mexico.
December 16, 2005.
*1272 Robin Cooley, University of Denver College of Law, Neil Levine, Earthjustice, Denver, CO, David L. Plotsky, Albuquerque, NM, for Plaintiffs.
*1273 S. Jay Govindan, U.S. Department of Justice, Environment & Natural Resources Division, Washington, DC, for Defendants.
MEMORANDUM OPINION AND ORDER
GARCIA, Chief United States Magistrate Judge.
Introduction
THIS MATTER is before the Court on Plaintiffs' Petition for Review of Agency Action, filed July 2, 2004 [Doc. 29] and Plaintiffs' opposed request for evidentiary hearing on the Motion for Review, filed December 29, 2004 [Doc. 54]. On June 7, 2005, the Court ordered supplemental briefing [Doc. 64], and both parties complied. The Motion for Review is now fully briefed.
The Court has carefully considered the pertinent law, briefing by both parties, supplemental authority provided by Plaintiffs, and the Administrative Record ("AR")[1] in this case. The Court finds that an evidentiary hearing is not necessary, and Plaintiffs' request for a hearing is therefore denied. Based on its review, the Court concludes that Defendants' determination not to list the Rio Grande Cutthroat Trout ("RGCT") as endangered was not arbitrary or capricious, and is supported by the administrative record in this case. Accordingly, Plaintiffs' challenges to the Secretary's determination and their requests for relief are denied.
Background
Plaintiffs' lawsuit challenges the June 2002 finding by the United States Fish & Wildlife Service ("FWS") that listing the RGCT[2] under the Endangered Species Act ("ESA"), 16 U.S.C. §§ 1531-44 was "not warranted." [Doc. 13, IPTR, at 1]. The RGCT is native only to Colorado and New Mexico. AR 721. The RGCT is the southernmost of 14 subspecies of cutthroat trout. AR 1009. It is dark olive in color with sparsely scattered black spots. The RGCT, New Mexico's state fish, gets its name from parallel scarlet stripes on the underside of its jaw. It is native to the cold water mountain streams and lakes of Northern New Mexico and Southern Colorado. New Mexico Blue Book, 2001-2002 (Publication of the New Mexico Secretary of State); [Doc. 1 ¶ 18].
The historical distribution of the RGCT is not known with certainty. Candidate Status Review ["CSR"] for Rio Grande Cutthroat Trout, 67 Fed.Reg. 39,936 (June 11, 2002) (hereinafter cited in the format "CSR 39,936"). "[I]t is assumed that RGCT occupied all streams capable of supporting trout in the Rio Grande and Pecos basins. . . . It is unclear if RGCT were also present n the Canadian River Basin." Id.; AR 1009. Although the historical range is not known with certainty, its distribution was likely limited to cold water mountain streams.
*1274 Plaintiffs are the Center for Biological Diversity, Biodiversity Conservation Alliance, Carson Forest Watch, Center for Native Ecosystems, Pacific Rivers Council and Michael Norte. Most of the Plaintiffs are non-profit organizations. Mr. Norte is "an avid catch and release flyfisher." [Doc. 1].[3]
Plaintiffs bring their Complaint for Declaratory and Injunctive Relief alleging that Defendants violated the ESA by not listing the RGCT and violated the Administrative Procedures Act ("APA") by making a decision that was arbitrary and capricious, an abuse of discretion and/or not in accordance with law. [Doc. 1, First and Second Causes of Action]. Plaintiffs seek an injunction to vacate the "not warranted" decision and an order requiring Defendants to issue a new rulemaking and new finding on the RGCT within 60 days. Plaintiffs also request an award of costs and fees. [Doc. 1].
Plaintiffs allege inter alia that the historic range of RGCT has been drastically reduced for a number of reasons, including fragmentation, environmental events such as fire or drought, loss of genetic diversity, changes in population structure, human activities, water diversions and dams, livestock grazing and logging, pollution of streams, the spread of non-native trout and the presence of whirling disease. [Doc. 1]. As a result, Plaintiffs requested that FWS list the RGCT as threatened or endangered under the ESA.
Endangered Species Act
Congress enacted the ESA "to provide a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved, [and] to provide a program for the conservation of such endangered species and threatened species. . . ."[4] 16 U.S.C. § 1531(b). The legislative history of the ESA contains support for the proposition that Congress intended that preventive action to protect species be taken "sooner rather than later. . . . By heeding the warnings of possible extinction today, we will prevent tomorrow's crisis." Defenders of Wildlife v. Babbitt, 958 F.Supp. 670, 680 (D.D.C.1997).
A species receives the protections of the ESA when the FWS lists the species as "endangered" or "threatened." A species is deemed "endangered" when it is "in danger of extinction throughout all or a significant portion of its range[5]. . . ." 16 *1275 U.S.C. § 1532(6). A "threatened" species is defined as "likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range." 16 U.S.C. § 1532(20). A "species" includes "any subspecies of fish or wildlife or plants, and any distinct population segment of any species of vertebrate fish or wildlife which interbreeds when mature." 16 U.S.C. § 1532(16).
The ESA directs the Secretary of the Interior to determine whether to list a particular species, based on the determination of whether that species is threatened or endangered. 16 U.S.C. §§ 1533(a), 1532(15). Plaintiffs bring this lawsuit against Gail Norton, Secretary of the Interior; and Steven Williams, Director of FWS, the agency involved in making the initial decision whether to list a species as threatened or endangered. Such a listing is to be made if the Secretary determines that a species is endangered or threatened because of any one of the following factors:
(1) the present or threatened destruction, modification, or curtailment of its habitat or range;
(2) overutilization for commercial, recreational, scientific, or educational purposes;
(3) disease or predation;
(4) the inadequacy of existing regulatory mechanisms; or
(5) other natural or manmade factors affecting its continued existence.
16 U.S.C. § 1533(a)(1); 50 C.F.R. § 424.11(c).
The FWS must make listing determinations "solely on the basis of the best scientific and commercial data available," without reference to the possible economic or other impacts of such a determination. 16 U.S.C. § 1533(b)(1)(A); 50 C.F.R. § 424.11(b). "Reliance upon the best available scientific data, as opposed to requiring absolute scientific certainty, `is in keeping with congressional intent' that an agency `take preventive measures' before a species is `conclusively' headed for extinction.'" Center for Biological Diversity v. Lohn, 296 F.Supp.2d 1223, 1236 (W.D.Wash.2003) (emphasis in original). If a species is listed, various protections are engaged both as to the members of the species and the species' critical habitat. 16 U.S.C. §§ 1534-38.
Plaintiffs brought this case to the attention of the FWS through the ESA's citizen's petition provision. 16 U.S.C. § 1533(b)(3)(A). On February 25, 1998, Plaintiffs petitioned the FWS to list the RGCT as either endangered or threatened under the ESA. CSR 39,936; AR 46-89. On September 14, 1998, the FWS issued a negative 90-day finding. 63 Fed.Reg. 49,062 (Sept. 14, 1998); AR 1010. On June 9, 1999, Plaintiffs filed a lawsuit challenging this decision. CSR 39,936. The FWS subsequently determined, based on receipt of additional information, that further review of the RGCT was warranted. CSR 39,936; AR 1010. The parties, however, negotiated a settlement which resulted in dismissal of the case. Pursuant to their settlement, the FWS would conduct a "candidate status review," consisting of information gathering as to the status of the RGCT. See, AR 1006; CSR 39,936. The FWS's status review lasted approximately six months. On June 3, 2002, the FWS made its "not warranted" listing decision and, as noted above, that decision was published in the Federal Register on June 11, 2002. It is this analysis and decision (the candidate status review, or "CSR") which Plaintiffs challenge in this lawsuit.
On July 2, 2004, Plaintiffs filed their Motion for Review of Agency Action, which is sometimes likened to a motion for a summary judgment (even though the Rule 56 standard of review is not employed). In opposition to the Motion for Review, Defendants generally argue that *1276 the FWS utilized its biological expertise to assess the present status of the RGCT and that the best available scientific data[6] did not support listing the RGCT.
Standard of Review
Judicial review of administrative decisions involving the ESA is governed by the APA, 5 U.S.C. § 706. Center for Biological Diversity v. Morgenweck, 351 F.Supp.2d 1137, 1140 (D.Colo.2004), citing Friends of the Bow v. Thompson, 124 F.3d 1210, 1214-15 (10th Cir.1997). Under the APA, the reviewing court must set aside agency actions that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" or if the action failed to meet statutory, procedural, or constitutional requirements. 5 U.S.C. § 706; Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 413-14, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), overruled on other grounds by Califano v. Sanders, 430 U.S. 99, 105, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977). The Court may not substitute its judgment for that of the agency. Citizens to Preserve Overton Park, 401 U.S. at 416, 91 S.Ct. 814.
The court's limited role is to ensure that the agency's decision is based on relevant factors and not a "clear error of judgment." If the "agency's reasons and policy choices . . . conform to `certain minimal standards of rationality' . . . the rule is reasonable and must be upheld." This standard presumes the validity of agency action. Deference to an agency's scientific and technical expertise dictates that agency action must be upheld as long as the agency has "considered the relevant factors and articulated a rational connection between the facts found and the choice made." In exercising its narrowly defined duty under the APA, a court must consider whether the agency acted within the scope of its legal authority, whether the agency adequately explained its decision, whether the agency based its decision on facts in the record, and whether the agency considered the relevant factors. The court must defer to the agency's expertise, particularly with respect to decision-making which involves "a high level of technical expertise."
Defenders of Wildlife v. Babbitt, supra, at 678-79 (internal citations omitted).
Thus, under this standard of review, the Court's own view of whether or not a listing is appropriate is of no consequence. Due to their expertise and unique qualifications, administrative agencies such as the FWS have been authorized by Congress to make these determinations so long as the agencies comply with certain requirements. Stated differently, a court sets aside an agency decision as arbitrary and capricious if the agency (1) relied on factors that Congress did not intend it to consider, (2) failed entirely to consider an important aspect of the problem, (3) offered an explanation for its decision that runs counter to the evidence before the agency, or (4) is so implausible that it cannot be ascribed to a difference in view or the product of agency expertise. Sierra Club, 352 F.Supp.2d at 917, citing Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983); Friends of the Bow, 124 F.3d at 1215.
Deference is owed to an agency decision, but such deference is not without *1277 limits. Defenders of Wildlife v. Babbitt, supra, at 679. For example, an agency's decision should not be upheld if the agency failed to articulate a reasoned basis for its decision, or failed to articulate a rational connection between the facts found and choices made. Id. In addition, the deferential standard "does not shield the agency from a `thorough, probing, in-depth review.'" Lohn, supra, at 1230 The "thorough and probing" review, however, is not license for substitution of the court's judgment for that of the administrative agency. The court's inquiry "must be searching and careful, but the ultimate standard of review is a narrow one." Custer County Action Ass'n v. Garvey, 256 F.3d 1024, 1030 (10th Cir.2001), citing Marsh v. Oregon Natural Res. Council, 490 U.S. 360, 378, 109 S.Ct. 1851, 104 L.Ed.2d 377 (1989).
Discussion
A. "Significant Portion of the Range"
Before considering Plaintiffs' argument that the Secretary's application of the five listing factors was arbitrary and capricious, the Court must first address a preliminary matter which was troubling enough that the Court directed the parties to submit supplemental briefing on the issue. That is, the question of interpretation of the statutory phrase, "significant portion of the range." The Court upholds FWS's interpretation of the phrase
As noted above, the ESA requires the Secretary to determine whether a species is "endangered," which the statute defines as "in danger of extinction throughout all or a significant portion of its range . . .," 16 U.S.C. § 1532(6); or "threatened," defined as "likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range."
This definition, with the language "a significant portion of its range," has been termed "odd phraseology," "puzzling" and "enigmatic." Defenders of Wildlife v. Norton, 258 F.3d 1136, 1141 (9th Cir.2001) (hereinafter referred to as "Defenders (Lizard)")[7]:
Standing alone, the phrase "in danger of extinction throughout . . . a significant portion of its range" is puzzling. According to the Oxford English Dictionary, "extinct" means "has died out or come to an end. . . . Of a family, class of persons, a race o[r] species of animals or plants: Having no living representative." Thus, the phrase "extinc[t] throughout . . . a significant portion of its range" is something of an oxymoron. Similarly, to speak of a species that is "in danger of extinction" throughout a "significant portion of its range" may seem internally inconsistent, since "extinction" suggests total rather than partial disappearance [fn]. The statute is therefore inherently ambiguous, as it appears to use language in a manner in some tension with ordinary usage.
Defenders (Lizard), at 1141.
The language is puzzling and enigmatic. By "significant," did the drafters mean a large piece of the range in terms of size or percentage, or, rather, did they mean a piece which is biologically significant? By "range" did they mean the species' entire historic range, or its current range? If the former, how far back in time is the agency required to go to determine the species' historic range? What if the historic range expanded and contracted over time?
*1278 Due to the Court's concern, indeed its "puzzlement," over these various interpretations, it asked the parties to supply supplemental briefing on these and related questions. As the Court noted in its order directing further briefing, it would make no sense to:
require a listing in each instance in which evidence exists that a particular species no longer occupies its historic range. Thus, rather than being a factor the FWS should appropriately consider, the FWS's discretion would be virtually non-existent and a finding that a species any species no longer occupies the territory it once did, would swallow up every other consideration or determination that could be made based on the best scientific and commercial data available. In other words, present conditions or present steps to protect and manage a species, even if successful, would have no bearing on a decision if evidence supported the finding and conclusion that a significant portion of the species['] historical range has been depleted.
[Doc. 64, at 12-13].
This is one reason why the Ninth Circuit rejected the argument, made by the plaintiffs in that case, that the projected loss of 82% of the flat-tailed horned lizard's habitat constituted a significant portion:
There are two problems with Defenders' quantitative approach. First, it simply does not make sense to assume that the loss of a predetermined percentage of habitat or range would necessarily qualify a species for listing. A species with an exceptionally large historical range may continue to enjoy healthy population levels despite the loss of a substantial amount of suitable habitat. Similarly, a species with an exceptionally small historical range may quickly become endangered after the loss of even a very small percentage of suitable habitat. . . . [T]he percentage of habitat loss that will render a species in danger of extinction will necessarily be determined on a case by case basis. Furthermore, were a bright line percentage appropriate for determining when listing was necessary, Congress could simply have included that percentage in the text of the ESA.
Defenders (Lizard), at 1143.
The parties' supplemental briefing makes clear they agree that it is the species' current range which the agency is supposed to examine in making the determination. This is the extent of their agreement, however. Defendants state:
The Fish and Wildlife Service makes its determination of a species' status based on the species' current range. However, as part of the determination, a species' historic range is also considered because it helps to inform decisions on the species' status in its current range. . . . A particular geographic area can be so important to the continued existence of a species that threats to the species in that area can have the effect of threatening the viability of the species as a whole, even if some portions of the range of the species are not directly subject to those threats. . . . In other words, threats to the species in a portion of the range that is significant can drive the result of the listing analysis with respect to the entire species. . . . The Service determines whether a portion of the range is `significant' based on the biology of the species (distribution and density of the species, contribution of the area to the life history needs of the species, etc.) and the nature of the threats being analyzed. . . . [T]he Service considers all available information . . . relevant to the question of whether the species is likely to become in danger of extinction in the foreseeable future. . . . Data regarding both the current *1279 and historical ranges of the species can be relevant to that question, and must be considered. But . . . the focus of the Service's analysis is necessarily on the viability of and threats to the species as it exists now (and into the future). Range contraction, even very substantial range contraction, does not itself require a species to be listed. [Italics added].
[Doc. 66, at 2-4].
Plaintiffs state:
There is no dispute that FWS considers the entire current range of a species in deciding whether to list [it] as endangered or threatened. In addition, Plaintiffs agree with the biological factors FWS evaluates to determine whether the habitat areas that have been lost or are subject to threats are significant. However, Plaintiffs strongly object to FWS's extremely limited view of the importance of historic habitat range in making a listing decision. . . . Under FWS's interpretation, the loss of historic habitat range, alone, can never result in listing a species. This is true no matter how much habitat has been lost and regardless of the biological significance of the lost habitat. [Emphasis added].
[Doc. 69, at 3].
Plaintiffs misstate Defendants' position. Defendants do not argue that the loss of historic habitat range can never result in listing a species, regardless of the biological significance of the lost habitat. Rather, Defendants take the position that: "A particular geographic area can be so important to the continued existence of a species that threats to the species in that area can have the effect of threatening the viability of the species as a whole. . . ." Defendants further argue, however, that in this case the viability of the RGCT is not threatened in a biologically significant geographic area.
The Court is aware that the Ninth Circuit, in Defenders (Lizard), rejected FWS's interpretation of the ESA's language which considers whether "the species as a whole" is threatened:
The Secretary in her brief interprets the enigmatic phrase to mean that a species is eligible for protection under the ESA if it "faces threats in enough key portions of its range that the entire species is in danger of extinction, or will be within the foreseeable future." She therefore assumes that a species is in danger of extinction in "a significant portion of its range" only if it is in danger of extinction everywhere [fn]. If, however, the effect of extinction throughout "a significant portion of its range" is the threat of extinction everywhere, then the threat of extinction throughout "a significant portion of its range" is equivalent to the threat of extinction throughout all its range.
Id., at 1141-42. However, this Court does not agree with the Ninth Circuit's reasoning.
The purpose of a listing is to ensure that a species does not go extinct, either (1) completely extinct, so that no individuals of the species exist anymore anywhere in the world; or (2) extinct in a "significant portion" of the range. 16 U.S.C. § 1532(6). The parties in this case agree that the word "significant" here does not mean geographically significant, in the sense of a large area of land or a large percentage of the species' historical habitat, but rather implies a biologically significant portion of the range. [See, Defendants' Supplemental Brief, Doc. 66, at 3; and Plaintiffs' Supplemental Brief, Doc. 69, at 2, 3]. The Court adopts Defendants' interpretation of "biologically significant" to mean a portion that is "so important to the continued existence of a species that threats to the species in that area can have the effect of threatening the viability of the species as a whole." The Court further agrees with *1280 Defendants in this case that the RGCT is not threatened in a biologically significant portion of its range, even though its geographic and/or historic range may be significantly reduced.
This appears to be the most appropriate and logical way to view this "puzzling" phrase. This interpretation does not preclude listing a species, including a subspecies or a distinct population segment, in only a portion of its current range, which seems to have been the concern of the Ninth Circuit in the Defenders (Lizard) case. Listing in only a portion of the range may be all that is necessary to ensure the survival of the species. If the agency making the listing decision determines that a species should be protected in only a portion of its range, it may designate a subspecies in that portion or a "distinct population segment" as endangered. See, 16 U.S.C. § 1532(16).
Generally speaking, distinct population segments are groups of organisms from the same species that occupy geographically discrete areas, for example, the Alaskan bald eagle and the bald eagle in the lower 48 states. Subspecies, on the other hand, are groups that may occupy the same geographic region as the species to which they belong, but are characterized by enough genetic or evolutionary difference from other members of the species so as to require separate protection. . . . The reason Congress wrote the ESA so that it would protect subspecies and distinct population segments are straightforward. Two of the main purposes of endangered species protection are to conserve ecosystems and to protect the integrity of the evolutionary processes that are taking place in those ecosystems. Granting ESA protection to a distinct population segment serves the first purpose. For example, there may be enough grizzly bears in Alaska to make us feel comfortable that the grizzly bear species will never go extinct. However, the grizzly bear population in the Yellowstone ecosystem is dwindling and the grizzly bear is an integral part of that system. As a top predator in that system, it provides an important function in maintaining the natural balance of species there. If the goal is to protect the Yellowstone ecosystem, it is important to protect the distinct population segment of Yellowstone grizzlies. Granting ESA protection to a subspecies helps to protect the natural trajectory of evolution. A subspecies contains genetic information that distinguishes it from other members of the species. It may be that the subspecies will eventually evolve to become a new species: its genetic make-up may prove to make it more successful in persisting. Genetic diversity is the catalyst of evolution.
Stanford Environmental Law Society, The Endangered Species Act 32 (2001).
In determining whether a species, or a subspecies, or a distinct population segment is endangered, FWS is to examine several factors listed in the statute [see, supra, p. 5], only one of which is loss or degradation of the species' habitat or range. A listing may be made only if that habitat loss or degradation renders a species "endangered." Thus, it is possible to conclude that 99% of a species' historic range may be lost, yet the species will still be thriving in the 1% that is left, in sufficient numbers and sufficient health, and will still be sufficiently protected from natural and manmade threats, that no listing is necessary in order to preserve the species. Indeed, that is what the FWS found in this case.
If FWS had found that certain subspecies or distinct population segments within the range were important to maintenance of the ecosystem or for genetic diversity, *1281 nothing in the Court's interpretation of "significant portion of the range" would prevent the listing of those particular segments of the species. There is no indication on the record that any such subspecies or distinct population segments exist in the RGCT's range, however, and the ESA does not require the FWS to carve up minute portions of the range and apply protections in a scattered fashion in order to protect some smaller populations of the trout in portions of the range which are not biologically significant.
The question of "significant portion of the range" has been complicated in this case, because the FWS identified 13 "core populations" of RGCT, or those deemed most likely to persist based on the three factors of genetic purity (lack of hybridization), population stability (sufficient population size), and population security (isolation from nonnative trout), and then applied the five statutory factors to these 13 populations only.[8] Given the FWS's estimate that there are 106 populations of RGCT in New Mexico and an additional 161 in Colorado, for a total of 267, the 13 core populations (3 in Colorado and 10 in New Mexico) represent only about 5% of the total number of populations (although more than 5% of the total number of fish).[9] CSR at 39,937-39.
Some courts have questioned this method of analysis which focuses on "core populations." In Defenders of Wildlife v. Norton, 239 F.Supp.2d 9 (D.D.C.2002) ("Defenders (Lynx)"), vacated on other grounds, 89 Fed.Appx. 273 (D.C.Cir.2004), the district court found arbitrary and capricious the FWS's decision to change from "endangered" to "threatened" the status of a distinct population segment of the Canada Lynx. The FWS reasoned that, although the numbers and range of the lynx in the contiguous U.S. had been substantially reduced from historic levels, the lynx was nevertheless thriving in one portion of its historic range, the Northern Rockies/Cascades, and the other three portions the Northeast, Great Lakes, and Southern Rockies collectively "do not constitute a significant portion of the range" of the U.S. Lynx. The district court found this to be "counterintuitive and contrary to the plain meaning of the ESA phrase `significant portion of its range,'" based on the dictionary definition of "significant," which means "a noticeably or measurably large amount." Defenders (Lynx), at 19.
The Lynx case is not persuasive. The court in that case considered the word "significant" to refer to an "amount" of geographical area. But the Court and, as noted above, both parties in this case, have rejected that use of "significant" in the context of the ESA, focusing instead on the biological significance of the lost range, not its raw size. If raw size of the range were the only determinative factor, virtually every non-domestic species of wildlife in North America would be listed. Historical accounts in the Lewis and Clark journals, for example, describe abundant wildlife across the depth and breadth of the country they explored, and that historical range no longer exists in its pristine state.
*1282 In National Wildlife Federation v. Norton, 386 F.Supp.2d 553 (D.Vt.2005), the district court found arbitrary and capricious FWS's decision to downgrade two "distinct population segments" of the gray wolf from endangered to threatened status. In making this decision, the FWS limited the "significant portion" of the wolf's range to the western Great Lakes states, areas that ensure the validity of the population segments at issue. The district court found fault with this method:
The viability of this population, therefore, renders all areas outside the Western Great Lakes region insignificant, even though the FWS acknowledged in the Proposed Rule that there would be `extensive and significant gaps' in the wolf's range without a wolf population in the Northeast. . . . The Final Rule makes all other portions of the wolf's historical or current range outside of the core gray wolf populations insignificant and unworthy of stringent protection.
Id., at 566.
The Court rejects this approach to the issue. It appears that the Vermont court would require the FWS to "stringently protect" areas of land where the gray wolf once roamed and, in effect, to restore the wolf to all of its historical range, which is not the purpose of the ESA. The relevant issue in a listings case is whether the species in question is in danger of extinction throughout all or a significant portion of its range. In making this determination, the FWS must take into account the species' historical range and reductions thereto. But even with a reduction in range, and reduction in absolute numbers of fish or numbers of fish population, if the remaining core populations ensure the species' survival throughout its range or a significant portion thereof, then the species is not endangered.
In the present case, the FWS found that the 13 core populations of RGCT were not threatened with extinction in all or a significant portion of the RGCT range, due to any of the five listed factors, and that the fish is therefore not endangered. In doing so, the FWS did not ignore the trout's historical range (as discussed more fully below), nor did it find that the fact of habitat degradation or disappearance was somehow unimportant. In explaining why it decided to focus on the 13 core populations, FWS said:
It has been estimated that there are 106 populations of RGCT in New Mexico (NMDGF 2002) and 161 in Colorado (Alves et al.2002) in both streams and lakes. All of these populations contribute in some way to the overall security of the range-wide population. However, many of these populations have hybrids, some populations have an extremely low number of individuals, and some have been invaded by nonnative salmonids that either hybridize or compete with RGCT. These factors can make individual RGCT populations more vulnerable to extinction and limit the likelihood of their long-term persistence. Conservation actions can remove or reduce these threats. Because ecological factors affecting persistence vary among populations, we decided to use criteria to categorize populations based on vulnerability to threats that affect long-term persistence.
CSR 39,937.
The application of those criteria resulted in identification of the 13 core populations. In the conclusion to the CSR, FWS noted that, in addition to the 13 core populations, there are other populations which may eventually be included in the core group of "pure, stable, and secure" populations, once genetic testing has been completed. There are also additional large populations of pure RGCT which have recently been invaded by nonnatives, either because of *1283 barrier failure or illegal transplantation, but which nevertheless are located in long streams and maintain large population size. FWS noted ongoing efforts to remove the nonnatives from these populations and stated that "[t]hese populations are important components of the range-wide population." CSR 39,945-46. FWS noted as well that there are also several pure populations of RGCT in New Mexico and Colorado which do not meet the minimum population number and were therefore not included in the core group, but:
[w]hile these populations may be at greater long-term risk of extinction compared to large populations, they continue to persist. In the future these populations may be expanded downstream, and they may serve as repositories of unique genetic material. As such they also are important components of the range-wide populations, and provide additional security for the overall status of the subspecies. . . . We have determined that the 13 core populations are not threatened by any of the identified threats alone or in combination. Our finding is also based upon the other large populations of RGCT identified in Tables 1 and 2, as well as the 21 other populations discussed above. We find that these populations are likely to persist into the future because of the large numbers of individuals within these populations and the threats are adequately addressed by the ongoing management actions of the States and Federal agencies . . .
CSR 39,946.
There is neither logical nor legal error in FWS's approach. FWS focused on the core populations. The RGCT's lost habitat may be numerically or geographically large, in terms of acreage or stream miles, but not biologically significant because the species' survival is not threatened by the shrinkage in habitat. In the present case, the FWS found that the 13 core populations are sufficient to ensure the species' survival throughout all or a significant portion of the fish's range. This is consistent with the purpose of the ESA. It may be akin to evaluating how well a school is performing its educational function by considering only the brightest and most diligent students, but such a focus makes sense if one is attempting to predict how well the school would perform in, say, a national science competition where only the best, hardest-working students would be in the running. The purpose of the ESA is not to assess generally how well the ecology is performing but rather to make the best prediction possible as to a species' chance of survival. In any event, as noted above, the FWS did consider and discuss the non-core populations, CSR 39,945-46, noting that they "are important components of the range-wide population and provide additional security for the overall status of the subspecies." CSR 39,946.
In sum, the Court cannot say that FWS's interpretation of the phrase "significant portion of the range" is legally erroneous or failed to conform to minimal standards of rationality.
B. FWS's Method of Identifying the 13 Core Populations
Plaintiffs contend that, even assuming it was valid to identify 13 core populations and apply the five statutory factors to these populations, the way in which FWS went about identifying these populations was faulty. The Court's review of this methodology is limited to determining whether FWS utilized the best scientific methods in making their determination, and whether the agency's conclusion is supported by the record.
As described above, FWS used three criteria to classify 13 populations of RGCT as "core" populations that is, those with the greatest chance of persistence in the *1284 face of the various threats. Those three criteria are: (1) genetic purity (lack of hybridization); (2) population stability (sufficient population size); and (3) population security (isolation from nonnative trout).
1. Genetic Purity
With regard to genetic purity, Defendants point out that FWS identified 82 populations in New Mexico and Colorado that are genetically pure. SAR 1999, 2002. For purposes of the CSR, FWS considered "purity" to meant that there was less than 1 percent genetic mixing with other species of trout. To test for purity, FWS used either allozymes (forms of an enzyme) or nuclear DNA. They did not use mitochondrial DNA, because it is passed on only from the mother to her offspring and therefore can be used to detect hybridization only when the mother was RGCT and the father was another species. None of the identified "pure" populations included those that were tested with mitochondrial DNA, or the even less definitive "meristics" method which employs a count of body parts. CSR 39,938.
Plaintiffs argue that FWS never completed the required genetic testing in order to determine whether the 13 core populations are, in fact, genetically pure. This is not the case. FWS stated in the CSR that an additional 13 populations, beyond the 82 that were identified with allozyme or nuclear DNA testing, have been identified by use of meristics or mitochondrial DNA testing. These were not included as definitively "pure" populations, FWS said, because more testing would have to be done in order to include them. This testing is in progress and FWS expects that it will result in more "pure" populations being identified. In the meantime, these questionably pure populations were not included in the "core" populations.
In addition, FWS noted that:
The exclusion [from the core group] of populations with evidence of greater than 1 percent introgression [genetic mixing] does not imply that these populations may not be important to the species conservation or that they should be eliminated from stream systems. They provide recreational opportunities for anglers; in some watersheds they may act as a buffer between pure populations and downstream areas where nonnatives are present, and in some streams hybrids may still contain genes unique to a watershed.
CSR 39, 938.
The Court cannot find, nor have Plaintiffs pointed out, anything suspect in FWS's methodology for determining "pure" populations, and the Court cannot say that FWS hasn't used the best scientific methods in making this determination.
2. Population Stability
The second factor used to identify the 13 core populations is that of "population stability," or numbers of individual fish sufficient to maintain genetic variation and prevent inbreeding depression, that is, genetic defects caused by mating between closely related family members. FWS also pointed to studies indicating that large populations may be less susceptible to random demographic events such as alterations in the male / female ratio, and random environmental events such as fires or floods that can wipe out smaller populations. In addition, smaller populations may be more vulnerable to detrimental effects of genetic change. CSR 39,938.
FWS considered that 2,500 total fish in a populations is a number that will ensure long-term persistence, that is, will reduce the risks associated with small population size alone. Its rationale is explained at CSR 39,938-39. In evaluating population stability, and adopting a 2,500 fish population, *1285 FWS took into account not only population size, but also stream length, fish density (the number of fish in a unit area), and biomass (the weight of fish per unit area). Longer stream length creates a greater chance that the population will be able to persist. High density and biomass indicates good habitat able to support a thriving population. All of these factors were considered by FWS in assessing population stability.
Plaintiffs criticize FWS's determination that 2,500 fish constitutes a stable population. In support of this argument, Plaintiffs point to a study on the record stating that a viable population of Rio Grande cutthroat trout that is, one that has less than a 10 percent chance of extinction in 100 years and less than a 10 percent decline in any 10-year period has a "long-term effective size" of at least 500 breeding adults and a total population size of at least 5,000 fish. AR 725. This latter statement comes from a January 2002 publication of the NMDGF entitled "Long Range Plan for the Management of Rio Grande Cutthroat in New Mexico." AR 707-808. As support for this statement, the study's authors cite a 2001 report by D.E. Cowley entitled, "Defining Population Viability for Rio Grande Cutthroat Trout Management" (Report to the NMDGF). AR 737.
In the CSR, FWS referred specifically to Dr. Cowley's methodology and cited the 2002 report. The CSR noted that Dr. Cowley developed a model to determine population viability for RGCT in New Mexico, a model incorporating habitat size, population size, reproductive success, and probability of extinction. CSR 39,983. For purposes of the CSR, FWS said that it considered elements of Dr. Cowley's model, along with work done on other populations of salmonids, to evaluate the likelihood of long-term population persistence. One of these studies was a 1980 study by I.R. Franklin which set forth a rule "still used as a starting point by which to judge the viability of populations." Id. Other studies consulted include a NOAA Technical Memo authored by G.G. Thompson ("Determining Minimum Viable Populations Under the Endangered Species Act"), and studies by Nelson and Soule ("Genetical Conservation of Exploited Fishes"); Rieman and McIntyre ("Consideration of Extinction Risks for Salmonids"); and Hilderbrand and Kershner ("Conserving Inland Cutthroat Trout in Small Streams").
Plaintiffs may argue that greater weight should have been afforded Dr. Crowley's study. However, it is clear that FWS did not ignore it. To the contrary, FWS considered Dr. Crowley's model as one of many scientific works devoted to the determination of population viability. The Court cannot say that FWS ignored the Crowley study, nor that FWS should have used Dr. Crowley's figure of 5,000, rather than the 2,500 figure which it chose after reviewing the available literature. It is not the Court's function to pick and choose which model of population viability the Court prefers. That would constitute a clear substitution of judgment.
Nor does the Court sit in review of the scientific validity of these studies; its limited role is to determine whether the Service's conclusions and determinations are supported by the record and whether the agency has adequately articulated the reasons for its choices. Here, FWS considered contradictory scientific studies and articulated a sound rationale for adopting the population figure that it did. The 2,500 fish figure was not plucked from the air. In the CSR, the agency articulated the reasoning behind its choice of the 2,500 figure, including discussion of related issues such as stream length and biomass, in making the choices and conclusion it did *1286 regarding stability of populations. It explained the analysis required for determining an optimum population size, including such factors as the percent of individuals capable of breeding, the number of animals that actually breed, sex ratio, and other factors. CSR 39,938-39. The analysis is based on a reasoned and thoughtful consideration. The methodology adopted has a scientific basis. The Court does not find this analysis to be arbitrary and capricious or unsupported by scientific data. To the contrary, FWS relied on appropriate scientific methodology.
Plaintiffs also take issue with FWS's identification of the 13 stable core populations on the basis of numbers of fish, arguing that some of the 13 populations were established by stocking which has not proven to be effective over time. It is too soon to know, Plaintiffs contend, with respect to at least some of the 13 populations, whether the restocked populations will breed in the wild and maintain their numbers.
Defendants concede that translocations sometimes fail. However, they argue, the record indicates that failure rate is dependent on stream conditions, and the evidence considered by FWS shows that streams of 5.7 km or longer will provide sufficient habitat to maintain a population. AR 6565, 6568. In addition, FWS had before it record evidence that translocation attempts in streams that previously supported fish populations are more successful than those in streams that previously had no fish. AR 6568-69. Of the 13 core populations of RGCT identified for the CSR, four were established through translocation. This experience, in and of itself, refutes the contention that restocking, even over time, is ineffective. All of these four populations were found in streams which are 9.5 km or longer and which previously supported trout. SAR 1999, 2002.
3. Population Security
Regarding the third factor, population security, Plaintiffs contend that the record evidence does not support FWS's conclusion that the 13 core populations are secure from nonnative trout due to barriers, because some of the populations do not have any barriers at all, because barriers often fail, and because the strength of barrier protection relies on future voluntary measures such as regular maintenance as well as education of the public, to prevent well meaning but uninformed relocation of nonnative species into the RGCT's habitat.
Defendants take issue with Plaintiff's statement that two of the 13 core populations, Cross Creek and Canones Creek, do not have barriers at all. The record supports Defendants' assertions that Canones Creek has a natural barrier created by a rock waterfall, SAR 1026.243 (data included on floppy disk); and that Cross Creek is protected by the dewatered Jacks Creek, of which it is a tributary. AR 1026.200. Defendants state in their brief [Doc. 43, at 14 n. 7] that Plaintiffs relied on an early version of a spreadsheet, later revised, in making the assertion that these two populations had no barriers, and that they misinterpreted a statement that "no barrier was found" at Canones Creek. Plaintiffs do not dispute these assertions, and the Court accepts them.
As Defendants point out, the record includes spreadsheets which, among other things, describe the barriers protecting the 13 core populations in New Mexico and Colorado. SAR 1996-2006. All of these barriers are rated as "impassable." Although it is certainly true that barriers can fail, and that nonnatives can be introduced above barriers, the Court finds, as discussed below in section C(1), that FWS's determination that barrier condition was sufficiently secure that the core populations *1287 were not threatened, is not an arbitrary and capricious conclusion.
C. The "Not Warranted" Determination was Not Arbitrary and Capricious
As noted above, the Court must apply a deferential standard in its review of an FWS listing determination and must not substitute its judgment for that of the agency. Citizens to Preserve Overton Park, supra, 401 U.S. at 416, 91 S.Ct. 814. The FWS found that none of the five statutory factors [listed supra, at p. 5] provides a basis for listing the RGCT as endangered. Plaintiffs challenge each of these findings, with the exception of the second ("overutilization for commercial, recreational, scientific, or educational purposes"). Upon review, the Court cannot say that the FWS's conclusions with regard to the four challenged factors were arbitrary and capricious or failed to conform to "certain minimal standards of rationality." Defenders of Wildlife v. Babbitt, supra, at 678.
1. Destruction or modification of habitat or range
The first factor listed at 16 U.S.C. § 1533(a)(1) which could provide a threat to a species and make it eligible for listing is "(A) the present or threatened destruction, modification, or curtailment of its habitat or range." FWS concluded that neither the extent of reduction in the RGCT's range nor the present condition of its habitat were threats to the continued survival of the species throughout all or a significant portion of its range. Plaintiffs challenge this conclusion.
FWS began its analysis of this factor by acknowledging that "[t]he historic range of the RGCT has been greatly reduced over the last 150 years" and that "many populations have been lost or impacted by water diversions, dams, habitat degradation, changes in hydrology, hybridization with rainbow trout, or competition with brown or brook trout." CSR, at 39,940. FWS stated further that it is difficult to quantify the exact magnitude of the decline in habitat or numbers of fish, because there are no baseline data; however, studies have estimated that stream miles have been reduced by 91 to 99 percent. Id. RGCT are now restricted to headwater and "first and second order streams" that are narrow and small compared to the larger "second, third, and fourth order streams" that they once occupied. As a consequence of this habitat loss, RGCT populations that were once connected are now isolated. Id.
The causes of RGCT habitat loss are several, including diversion of water for agricultural purposes from tributaries of the Rio Grande via acequias and dams; grazing pressure from sheep, cattle, horses and mules; introduction of rainbow, brook and brown trout; and timber harvesting and associated road-building, leading to increased levels of sedimentation in streams. Id. These activities created a fragmentation of the trout's habitat, in that streams that once flowed into connecting waterways are now isolated and the fish that inhabit these streams are now restricted to disconnected, high-elevation streams. FWS pointed to studies indicating that the colder water temperature in these streams can lead to lower productivity and a negative growth rate, which may result in extinction over time. Id. However, it is also clear that the RGCT survives in the cold water climates and cannot survive in warmer water courses.
One study, FWS noted, concluded that fragmentation can accelerate extinction in that isolated fish populations are more vulnerable to demographic changes such as the random occurrence of uneven male / female ratios, environmental changes and natural catastrophes such as fires and massive flooding, and loss of genetic diversity through inbreeding. Another study *1288 posited that individuals that have migrated away from a stream segment may provide a "hedge against catastrophes" because they escape death during the catastrophic event and are then available to re-colonize the habitat once it becomes livable again. CSR at 39,940-41.
In spite of these factors, FWS stated that fragmentation is not a threat to the persistence of the 13 core populations of RGCT now or in the foreseeable future. This conclusion is based on the following considerations. First, the threats posed by habitat fragmentation can and are being alleviated by management activities. FWS noted that there are currently five pure, stable and secure populations of RGCT that are connected to at least one other tributary. Six additional large, pure, connected populations exist, but these include nonnatives. However, state and Forest Service personnel have been successful in removing nonnatives from these streams as part of ongoing management actions. CSR at 39,941.
In addition, all thirteen of the pure, stable and secure populations contain more than 2,500 fish which number, FWS stated, is sufficiently large to prevent an unacceptable rate of inbreeding and to maintain genetic variability in the populations. FWS considered also that the length of the streams (a mean of 12.4 km, or 7.7 miles) is sufficient to provide diverse habitats to meet all the life history requirements of the fish, as evidenced by the high fish density present in the core streams. Finally, FWS noted that although fragmentation of habitat raises the possibility of extirpation of particular populations from catastrophic events such as fire, state and federal agencies can replace those populations with fish transplanted from another pure population. Id.
The trout's habitat has not only been reduced in quantity, it has also suffered degradation in quality as a result of various activities including livestock grazing, timber harvesting and associated roads, and mining. Due to its sedimentation effects, livestock grazing presents the greatest threat. However, FWS concluded that habitat condition, while not perfect and while it may prevent the maximum reproductive potential in some populations, does not present a threat to the existence of any of the 13 core populations. That conclusion was based on the following considerations.
Habitat condition in streams with pure, stable and secure populations of RGCT was assessed by state and federal biologists. They rated the trout's habitat condition on a scale from 0 to 2, with "0" meaning no habitat problems; "0-1" meaning headwater reaches are in good condition with lower reaches having problems in discrete areas; "1" meaning that some problems were identified, usually such things as sedimentation, lack of pools, or warm water temperature; and "2" meaning pervasive problems are present. In most instances, the raters described the RGCT's range between 0 and 1, with very few streams in the 2 category. The agencies performing the ratings were of the opinion that habitat problems are typically localized and could be or were being addressed through improved management practices.[10] CSR at 39,941-42.
*1289 Finally, under the heading of habitat, FWS discussed fish barriers, which it said are "essential to separate RGCT from nonnative salmonids," or fish that dilute the gene pool and compete with the RGCT for habitat. FWS noted that, to be effective, barriers must be checked, repaired and maintained on a regular basis. In addition, streams above the barriers must be checked regularly for inadvertent breach by nonnative fish and the nonnatives removed on a regular basis. The FWS noted that both Colorado and New Mexico have conducted barrier inventories. In addition, the Forest Service assesses barriers as part of its stream surveys, and the Service has in recent years added biologists and technicians to its staff, thus increasing the miles of stream inventories that the agency is able to conduct. For these reasons FWS concluded that barrier failure, while it does occur, does not constitute a threat to survival in the 13 core populations. CSR at 39,942.
Plaintiffs challenge FWS's finding that habitat reduction and degradation do not pose a threat of extinction.[11] They point to the habitat assessments, which rate the trout's habitat streams from 0 to 2, and note that nine of the 13 core populations occur in streams rated 1 or 2. They state further that FWS's "dismissal" of habitat degradation as a threat was based on the claim FWS made, in broad terms with no record support, that the threats to habitat will decline in the future. Plaintiffs also argue that FWS improperly relied on declining timber harvest and the decommissioning of logging roads to support the conclusion that habitat will improve in the future, and that its statement that habitat threats are "typically localized and can be or are being addressed through habitat management practices" is unsupported by record evidence. [Doc. 30, at 18-20]. Plaintiffs also argue that the current fragmented condition of the trout's habitat, in which the individual populations are isolated from each other and restricted to stream fragments, constitutes a threat to the RGCT. [Doc. 30, at 22-24].
In response, Defendants note that "it is virtually impossible to find a stream in the western United States that is in pristine condition, and this accounts for the fact that the state and Forest Service biologists could find only three of the RGCT's streams which had no habitat problems at all". Defendants acknowledge, and the record shows, that the streams containing nine of the 13 core populations were described as having "some problems related to good stream habitat." However, Defendants argue, having "some problems" does not signify a threat to the continued existence of RGCT populations. The Court notes that, of the 13 streams with core populations, three are rated "0," eight are rated "1," one is rated at "0-1," and one is rated at "2." SAR 1999, 2002. These ratings support FWS's conclusions.
Moreover, Defendants point to record evidence that the one stream of the 13 which is identified as having extensive habitat *1290 problems (i.e., rated "2"), Rio Cebolla, nevertheless maintains a "thriving" population of RGCT, based on population numbers and biomass (i.e., weight of fish in a unit area, expressed in pounds per acre or kilograms per hectare). [Doc. 43, at 9, 17]. The record supports Defendants' statement; the Rio Cebolla population numbers are not particularly low (near the middle of the 13 populations), and the biomass statistic for this population (159 kg/ha) is the second highest of the 13 core populations. SAR 1999, 2002.
Plaintiffs criticize FWS for relying on a past and prospective decline in timber harvest and road-building for its determination regarding habitat degradation. But, as noted supra in fn. 10, FWS stated it was not relying on these factors, and the Court does not consider the declining timber harvest or the road building assertion as part of its review.
Plaintiffs' argument with regard to habitat fragmentation is based on two concerns: (1) fragmented populations cannot exchange genetic material, resulting in decreased genetic diversity and possible negative growth rates, unbalanced male / female ratios, and inability to adapt to changes in the natural environment; and (2) isolated populations can be wiped out by catastrophic events such as wildfires. [Doc. 30, at 23].
As noted above, FWS did not ignore these factors but rather discussed them in their findings. See, CSR at 39,940-41. The agency pointed to studies showing that isolation can constitute a threat, and it discussed the possible specific disadvantages to the trout's continued survival, which Plaintiffs have also noted. While recognizing fragmentation as a possible problem, FWS concluded, as discussed above, that "[h]abitat fragmentation is a threat that can be alleviated by management activities." The agency noted that the 13 core populations each contain over 2,500 fish which is sufficient to prevent an unacceptable rate of inbreeding and to maintain genetic variability; that the current stream lengths of these populations are sufficient to provide diverse habitats; and that even if one or more of the 13 core populations is killed off by an untoward catastrophic event, the population can be replaced by transplanting fish from another pure population. CSR at 39,941. Periodic translocation of individuals from one core population into another, through sound management practices, can also promote population diversity and avoid the potential for genetic inbreeding.
Plaintiffs contend that the statements as to population numbers needed to ward off inbreeding, and as to stream length being sufficient, are not supported by the record. This is incorrect. FWS discusses at length the studies it consulted and the methodology employed in determining whether population size and stream length are sufficient. See, CSR at 39,938-39. These studies are referenced in the record at SAR 1026.37-1026.41.
Plaintiffs also argue that transplantation fails more than 50 percent of the time and therefore is not a reliable method of rebuilding a population after a catastrophic event. FWS acknowledges that translocation of fish is not always successful. However, the agency pointed out in the CSR that the success of a translocated population is dependent on stream conditions, including length of the streams and whether the stream previously supported fish populations, and that the mere fact of relocation is not, in and of itself, determinative of the likelihood of survival. While translocation does not always work, it is also clear that it does not always fail. While Plaintiff may have a scientific disagreement with FWS's conclusion, that is not the test under the applicable standard of review.
*1291 In sum, FWS's analysis regarding habitat degradation is supported by the record, and the Court does not find it to be arbitrary or capricious, nor does the Court find that FWS relied on inappropriate factors or entirely failed to consider an important aspect of the problem. To the contrary, FWS considered scientific studies and carefully weighed the best scientific evidence in making its determinations.
2. Disease or predation
The ESA also lists "disease or predation" as one of the factors an agency is to consider in making the determination whether to list a species as endangered. 16 U.S.C. § 1533(a)(1)(C). Although the RGCT is susceptible to threats from whirling disease, FWS concluded that the disease did not put at risk the continued survival of the species throughout all or a significant portion of its range. Plaintiffs challenge this conclusion.
Whirling disease ("WD") was first detected in the United States in 1956, having been transmitted here in fish brought from Europe. The parasite responsible for the disease:
penetrates through the skin or digestive tract of young fish and migrates to the spinal cartilage where it multiplies very rapidly, putting pressure on the organ of equilibrium. This causes the fish to swim erratically (whirl), and have difficulty feeding and avoiding predators. . . . Fish can reproduce without passing the parasite to their offspring; however, when an infected fish dies, many thousands to millions of the parasite spores are released to the water.
CSR at 39,942-43. The parasite spores can withstand freezing and desiccation and can survive in the stream for many years. When the spore is ingested by the common aquatic worm, Tubifex tubifex, it transforms after 3.5 months into a Triactinomyon (TAM) which, when it leaves the worm, can attach to or be ingested by the fish, leading to infection. The parasite spores are easily transported by animals and humans, and most native species have little or no natural resistance to WD. Cutthroat trout, particularly RGCT, are very susceptible to the disease. Id. See also, AR at 6351-72.
WD was first detected in New Mexico in 1988 and has been confirmed in three drainages that support the RGCT. Several hatcheries in Colorado and New Mexico have tested positive for the disease (although the Seven Springs hatchery in New Mexico has been renovated and is no longer positive for WD). CSR 39, 943.
FWS acknowledged that WD is a potential threat to RGCT but concluded that the disease does not pose a risk of extinction in the 13 core populations, which are located in high-elevation, cold headwater streams with low levels of sedimentation. The secondary host worm, T. tubifex is most abundant in streams with high sedimentation, warm water and low dissolved oxygen, and exists but is not abundant in high, clear coldwater streams. Moreover, the isolation of the high elevation streams makes them less susceptible to the spread of spores on waders or landing nets by fishermen. FWS found that at the time of year when young RGCT are most susceptible, i.e., spring and early summer, the low water temperature in the trout's current habitat provides at least some protection from infection. Id.
Another source of infection is the introduction of WD infected fish into waters inhabited by uninfected RGCT. FWS noted that both Colorado and New Mexico forbid the stocking of fish in public waters without prior permission from the state, and both states legally restrict the stocking of fish by private landowners. These regulations aim to protect against the importation of undesirable species and introduction *1292 of infectious diseases, including WD. FWS noted that the states of New Mexico and Colorado are testing all their hatchery fish before stocking and are documenting instances of the disease in streams and educating the public about the disease and how to prevent its spread in the wild. Id.
FWS noted that, while WD poses risks to the RGCT, there has not been a documented loss or decline in population numbers due to WD in any wild RGCT population. It concluded that WD is not a threat to the existence of the species. Id.
Plaintiffs contend that WD remains a significant threat to RGCT. They point out that FWS concedes that RGCT have a less than one percent survival rate when infected. They note that five rivers in New Mexico, and 13 of the 15 drainages in Colorado, contain infected fish, and that in almost half of the streams containing the 13 core populations, WD is present within the population center. And, even in areas not currently infected, Plaintiffs state, both Colorado and New Mexico continue to stock infected fish throughout the RGCT's historic range, where it can easily be introduced to the 13 core populations. [Doc. 30, at 20-22].
Plaintiffs argue that FWS's conclusion that WD is not a threat is arbitrary and capricious, because it is unsupported by record evidence, because FWS's statement that the habitat streams are too cold to support the tubifex worm is not based on any analysis of the streams in question, because FWS ignored the fact that WD can be spread by nonnative trout that breach or are transported above the barriers, and because FWS says only that the disease will be "slowed" in the future, not eliminated. [Id., at 22].
Defendants acknowledge that WD remains a potential threat to RGCT populations, indeed, to all salmonids, as the tubifex worm can and does impact all species of trout. FWS argues that the risk does not presently rise to a level which would justify listing the trout as endangered. The primary fact undergirding this conclusion is a lack of documentation that any population of RGCT has been lost or declined in numbers as a result of the disease. Plaintiffs do not dispute this fact. The Court agrees with FWS. The Court cannot say that the FWS's conclusion regarding the threat posed by WD was arbitrary, capricious, or an abuse of discretion.
3. Inadequacy of existing regulatory mechanisms
Another factor the agency is to consider in deciding whether a species must be listed is whether existing regulatory mechanisms are inadequate to protect the species. 15 U.S.C. § 1533(a)(1)(D). FWS determined that the states of New Mexico and Colorado, as well as the Forest Service, have in place adequate regulatory mechanisms for the protection and enhancement of the RGCT populations and habitat. CSR at 39,943-44. This conclusion is based on the following considerations.
The New Mexico Department of Game and Fish ("NMDGF") and the Colorado Department of Wildlife ("CDOW") have responsibility for management of the RGCT on all federal, state and private land within their respective states. The capabilities of the two agencies include regulation of fishing, law enforcement, research, and conservation and educational activities related to the RGCT. CSR at 39,943.
New Mexico has in place an approved management plan for facilitation of long range conservation of RGCT. Under the plan, a population inventory was completed on 18 streams, barrier evaluations were completed on 14 streams, and genetic samples were taken from fish in 17 streams. *1293 A budget for activities under the plan for 2003-2005 was in place at the time the CSR was completed in June 2002. These activities include population inventory and monitoring, collection and analysis of genetic material, assessing barriers, habitat inventory, inventory of unexplored streams, testing for and mapping whirling disease, public education, and maintaining a database of the information gathered in these activities. CSR at 39,943-44.
In Colorado, the RGCT has been designated as a "species of special concern," and the state is implementing and revising a previous management plan for the species. Under this plan, from 1998 to 2001, 58 populations were monitored and 20 populations analyzed using molecular techniques. Efforts at removal of nonnative trout and barrier maintenance and construction projects were completed. Approximately 10,000 brochures on RGCT conservation have been distributed in Colorado. CSR at 39,944.
In addition to state efforts, the United States Forest Service also has management responsibility and authority over RGCT conservation efforts, and it assesses barriers as part of its stream surveys. The RGCT is listed as a Management Indicator Species ("MIS") in several national forests in New Mexico. MIS are "those species used as a `bellwether' for `the other species that have the same special habitat needs or population characteristics.'" Forest Guardians v. United States Forest Service, 180 F.Supp.2d 1273, 1276 (D.N.M. 2001). The MIS acts as a proxy for fulfilling viability requirements under the National Forest Management Act. The RGCT has also been listed on the Regional Forester's Sensitive Species List, which requires that the species receive special management emphasis to ensure its viability. CSR at 39,944.
Plaintiffs argue that FWS fails to point to record evidence that the regulatory measures on which it relies have been successful in removing threats to the species; in addition, the agency has not shown that the measures were in existence at the time of the listing decision nor that the measures are "regulatory" as opposed to voluntary. [Doc. 30, at 25]. Plaintiffs point to Defenders (Lizard), supra, in which the Ninth Circuit rejected the Secretary's reliance on an interagency Conservation Agreement, on grounds it is unclear how the benefits assertedly flowing from the agreement affected the lizard's habitat or mitigated threats to the species. The situation in the Lizard case differs from this, however, in that the regulatory mechanisms described with regard to the RGCT are currently in effect and being implemented. The Conservation Agreement in the Lizard case had been recently signed and had only begun to be implemented at the time of the decision in that case.
While FWS points to a similar voluntary and not-fully-implemented conservation agreement in its discussion under this heading, the agency specifically states that it is not relying on this agreement to fulfill the analysis required by section 1533(a)(1)(D), as the agreement is not finalized and any conclusion as to its prospective effectiveness would be speculative. CSR at 39,944. The Court therefore does not consider this agreement in its review of the agency action.
Plaintiffs also discount the agency's listing of the RGCT as a "sensitive species" or MIS, because, they say, the Forest Service does not properly implement these species-protective provisions. Plaintiffs cite five cases in support of this statement. However, the fact that the regulations may have been imperfectly implemented in the past does not support the broad conclusion that the regulatory mechanisms, as they relate to the RGCT, are inadequate.
*1294 Plaintiffs argue that FWS has not shown that the mechanisms discussed in the CSR have been effective. Under the statute, however, FWS is charged with examining whether existing regulatory mechanisms are inadequate. FWS looked at these mechanisms and found that both states and the Forest Service have adopted and are implementing management plans which include such activities as forbidding the stocking of nonnative trout species, testing for and mapping WD, implementing broodstock management plans, conducting population and habitat inventories, assessing and maintaining barriers, collecting and analyzing genetic samples, and educating the public on conservation and disease control. The agency concluded that these mechanisms are appropriate to meet the current threats to the RGCT's continued existence and are therefore not "inadequate." That is all that the statute requires.
4. Other natural or manmade factors
FWS identified four factors under the final catch-all heading of 16 U.S.C. § 1533(a)(1)(E), "other natural or manmade factors" affecting the species' continued existence. Those factors are wildfires, electrofishing, hatchery management, and public sentiment against the use of piscicides (fish poisons). CSR at 39, 944-45.
Plaintiffs argue in their petition that FWS should have addressed, under the catch-all heading, the problems of habitat fragmentation, poor habitat condition, and the presence of nonnative trout. Plaintiff's arguments regarding the first two of these problems were considered by the Court and discussed above under the "habitat or range" factor set forth in 16 U.S.C. § 1533(a)(1)(A).
With respect to the nonnative issue, Plaintiffs contend that the natural and manmade barriers in the RGCT's habitat frequently fail and that the 13 core populations of RGCT continue to be threatened by nonnative species who prey on young RGCT, compete for food and habitat, interbreed with the native stock, and infect the populations with WD. Plaintiffs argue that even when barriers are in good repair and function as they should, nonnative fish can be and are transported and introduced above the barriers by state agencies and well meaning but uninformed members of the public. Plaintiffs acknowledge that FWS recognizes the threat posed by nonnative species but claim the agency nevertheless determined that the 13 core populations are secure due to the presence of barriers.
It is accurate to state that FWS recognizes the threat posed by nonnative species. The agency noted in the CSR that, to be effective, barriers must be checked frequently and must be maintained. It described how a flood event can destroy a manmade barrier, permanently change the stream channel morphology, or create a temporary channel around the barrier. In addition, the CSR noted, changes in water velocity can change an impassable barrier into one that can be breached, and the problem of illegal transplantation of nonnative trout could always occur regardless of barrier condition. CSR at 39, 942.
In spite of these problems and potential problems, the agency pointed to measures currently in place to alleviate this threat, including not only the presence of barriers, but also the fact that agency personnel remove nonnatives during the course of regular stream surveys and as ongoing programs in selected streams, CSR at 38,946, and the fact that the states and the Forest Service conduct regular barrier inventories, stream surveys, and public education efforts. CSR at 38,942, 39,943. FWS concluded that, in light of these efforts, barrier failure does not constitute a threat to the continued existence of the *1295 RGCT. The agency did not discount or ignore this factor, and the conclusion is not arbitrary or capricious.
Conclusion
Plaintiffs have established neither that Defendants' decision declining to list the Rio Grande Cutthroat Trout as endangered violated the Endangered Species Act, nor that the decision should be overturned as arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, the standard under the Administrative Procedures Act. The requested declaratory and injunctive relief will therefore be denied.
Order
IT IS THEREFORE ORDERED that Plaintiff's Petition for Review of Agency Action [Doc. 29] is denied, Plaintiff's request for an evidentiary hearing [Doc. 54] is denied, and the case is dismissed with prejudice.
NOTES
[1] In the Court's review of an agency decision, the general rule requires the district court examine the "whole record" or the "full administrative record that was before all decision makers . . . at the time [the agency made] the decision." Bar MK Ranches v. Yuetter, 994 F.2d 735, 739 (10th Cir.1993). The Administrative Record in this case is massive. It includes approximately 24 large 3-ring binders containing about 9500 pages. The first 20 volumes are designated with the abbreviation "AR" in this opinion; the last four volumes are the supplemental Administrative Record and are designated with the abbreviation "SAR" in this opinion. For additional discussions of the Administrative Record and what Plaintiffs sought to have the Court review, see Court Opinions, issued July 20, 2004 and March 3, 2005 [Docs. 36 and 63].
[2] The RGCT (Oncorhynchus clarki virginalis) is closely related to two other cutthroat subspecies, the large-spotted greenback cutthroat trout and the Colorado cutthroat. AR 50.
[3] Plaintiffs are a consortium of organizations and individuals who zealously advocate for important environmental issues and are staunch defenders and protectors of wildlife and endangered species. Their tireless efforts, often unappreciated and more often criticized, have served to enhance biodiversity in this country and to protect literally hundreds of species of mammals, reptiles, fish, birds, invertebrates and plant life. While Plaintiffs did not prevail in this lawsuit, their advocacy nonetheless is valued and appreciated.
[4] One federal court described the enactment of the ESA in the following terms: "Congress enacted the ESA in 1973 out of deep concern for preservation of America's wildlife". . . . The Supreme Court found that Congress [in passing the ESA] intended `to halt and reverse the trend toward species extinction, whatever the cost.' The ESA provides an array of statutory protections to species listed as "endangered" or "threatened." If a species is listed under the ESA, the Secretary, must not merely avoid elimination of that species, but is required to bring the species back from the brink sufficiently to obviate the need for protected status. Thus, `listing is critically important because it sets in motion the Act's other provisions, including the protective regulation, consultation requirements, and recovery efforts.'" Federation of Fly Fishers v. Daley, 131 F.Supp.2d 1158, 1163 (N.D.Cal. 2000) (internal citations omitted).
[5] The Court italicized this portion of the statutory language because this language is at the heart of Plaintiffs' primary argument that FWS violated provisions of the ESA.
[6] The "best available data" standard requires "far less than `conclusive evidence.'" Defenders of Wildlife v. Babbitt, supra, at 680. The "best available data" standard was intended to give "the benefit of the doubt to the species"; in other words, the ESA does not require "certainty" before listing is warranted. Id. at 680-81. See also Lohn, 296 F.Supp.2d at 1236.
[7] Because more than one of the "listing" cases cited in this opinion is titled Defenders of Wildlife v. Norton, to avoid confusion the Court will refer to these cases as "Defenders" followed by a parenthetical notation of the species involved; for example, Defenders (Lizard).
[8] Plaintiffs' challenge to the method used to identify these 13 core populations is discussed below under heading (B).
[9] The population figures are the source of Plaintiff's statement that 95% of the remaining populations are threatened. This statement is somewhat misleading, however. While it is true that 254 populations, or 95% of the total number of populations, are those which the FWS deems more vulnerable to threats that affect long-term persistence, it is also true that the 13 core populations, by definition, are those with larger numbers of fish than the others. Therefore, those 13 populations include more than 5% of the total number of fish.
[10] FWS also refers to several watershed projects that have been initiated on private and National Forest lands and which are in "various phases of implementation," noting that habitat conditions are expected to improve as a result of these projects. In addition, FWS points to ongoing efforts by the Forest Service to restore riparian areas, the fact that timber harvests have been declining in the past 15 years, and the fact that few new roads are being built and, indeed, some roads are being decommissioned. CSR 39,941-42. The Court does not consider these factors in conducting its review of agency action, because: (1) FWS stated explicitly that it was not relying on the watershed projects as part of the status review since, "[w]hile some progress has been made, we note that a significant amount of planning and on the ground activities remain to be done [and we] . . . recognize that these projects may not come to fruition"; and (2) FWS must make its listing decisions based on the status of the species at the time the decision is made; it cannot rely on potential improvements that may never materialize. Defenders (Lizard), at 1146.
[11] Much of Plaintiffs' argument with regard to the habitat finding is included in their discussion of a different potential threat listed in the statute, i.e., whether "other natural or manmade factors" affect the species' continued existence. Because these arguments more logically fall under the first, "habitat or range" factor, the Court will address them here.
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127 P.3d 713 (2005)
129 Wash.App. 632
Jennifer D. NIESHE and Lory Dan Nieshe, Respondents, and
James M. Past and Vicki Past, Plaintiffs,
v.
CONCRETE SCHOOL DISTRICT, Appellants, and
Janis D. Schweitzer, William Giller, Gil Johnson, Concrete School Board, Defendants.
No. 54451-9-I.
Court of Appeals of Washington, Division 1.
July 5, 2005.
Publication Ordered August 9, 2005.
*715 William Coats, Daniel C. Montopoli, Tacoma, for Appellants
K. Garl Long, Mount Vernon, for Respondents.
BAKER, J.
¶ 1 We are asked to decide whether the superior court erred by sustaining a jury verdict in favor of Jennifer Nieshe on a 42 U.S.C. § 1983 claim, under which she argued that the Concrete School District denied her due process when it arbitrarily and capriciously excluded her from participating in a high school graduation ceremony. We conclude that the court erred, and reverse. Nieshe did not have a cognizable right under § 1983 because participation in a graduation ceremony is not a life, liberty, or property interest protected by the Due Process Clause of the Federal Constitution.[1]
I
¶ 2 Jennifer Nieshe (formerly Jennifer Past) became pregnant during her senior year at Concrete High School. In order to graduate, Nieshe had to pass a course called "Current World Problems" (CWP). Students needed a grade of D, or 60 percent, to pass CWP.
¶ 3 During the second half of the last semester, when Nieshe was already several months pregnant, her grade in CWP fell below her previous C minus average. The final exam consisted of two quizzes worth 50 points each. Nieshe received 22 percent on the first quiz. Her teacher, Janis Schweitzer, warned Nieshe that she was in danger of failing CWP, and told her that she needed at least a B on the final quiz in order to pass the class and graduate. Nieshe took the second quiz the day before graduation and received a C, which gave her a grade for the semester of 58.8 percent.
¶ 4 The next morning, on the day of graduation, Principal William Giller met with Nieshe, Schweitzer, and Nieshe's mother to determine whether Nieshe had been treated fairly. Giller reviewed Schweitzer's records and concluded that Nieshe's grade could not be raised to 60 percent under the class grading policy. Giller told Nieshe that she would not graduate just hours before the ceremony was scheduled to begin. Nieshe was not permitted to participate in the graduation ceremony.
¶ 5 The following month, Dr. Marie Phillips became superintendent of Concrete School District. Nieshe's parents contacted Dr. Phillips and informed her of Nieshe's situation. She met with the family and suggested that the school could use a 504 plan to increase Nieshe's grade in CWP. A 504 plan is a type of special education plan, which is applied to students with temporary or permanent disabilities. The plan is not routinely used for pregnant students, but could properly be applied. Dr. Phillips drafted an agreement using the 504 plan, under which the total points that Nieshe could have earned in CWP were reduced by participation points that she was unable to earn due to excused absences. This adjustment allowed Nieshe to graduate.
¶ 6 Almost three years after she was prevented from attending her graduation ceremony, Nieshe, her husband, and her parents filed suit against the District and three individual defendants under 42 U.S.C. § 1983, alleging discrimination and a due process violation. The superior court dismissed Nieshe's parents as plaintiffs for lack of standing and the individual defendants based on qualified immunity. The District moved *716 to exclude evidence of the 504 plan agreement, arguing that it was an offer of compromise and a subsequent remedial measure. The superior court disagreed and denied the motion.
¶ 7 Nieshe asked the superior court to sanction the District for a discovery violation. Nieshe argued that the District violated the discovery rules because it did not produce a computer disk that was in Schweitzer's possession, which contained data of grade reports for the 1999 CWP students. During discovery, Nieshe had requested from the defense "grading records or documents related to grades or grading." Although the District provided the plaintiffs hard copies of Nieshe's grading report, it did not produce the disk until the first day of trial. Schweitzer said that she found the disk while looking for a software program that she had used for grading during the 1998-1999 school year. Schweitzer did not find a copy of the program, but she decided to turn over the disk that she found. The plaintiffs were unable to access the information on the disk. The court concluded that there may have been a discovery violation because the disk was within the scope of discovery and was not produced before trial, but decided that sanctions were not warranted because the information on the disk could not be retrieved.
¶ 8 A jury found that the District violated Nieshe's right to due process by arbitrarily and capriciously violating its own policies and excluding her from the graduation ceremony. It awarded $5,000. The jury found that the District did not discriminate against Nieshe, however. Nieshe moved for entry of judgment and an award of attorney fees and the District moved for judgment as a matter of law and reconsideration. The court denied the District's motion. It entered judgment and awarded Nieshe $5000, $30,864.60 in attorney fees, and $854.60 in costs.
II.
¶ 9 The District makes three arguments on appeal: (1) Nieshe's due process claim was untimely; (2) the trial court erred by not granting the District's motion for judgment as a matter of law; and (3) the trial court erred by admitting evidence of the 504 plan agreement. On cross-appeal, Nieshe argues that the superior court erred by not sanctioning the District for violating the discovery rules.
¶ 10 Whether the statute of limitations bars a claim is a legal question, which we review de novo.[2] We also review an order on a motion for judgment as a matter of law de novo.[3] The trial court's decisions to admit evidence and not to impose discovery sanctions are reviewed for an abuse of discretion.[4]
¶ 11 The District first argues that Nieshe's claim was governed by RCW 28A.645.010, which provides that anyone aggrieved by a school official's decision must appeal the decision within 30 days. But Nieshe filed her due process claim under 42 U.S.C. § 1983, which provides that any state actor who deprives another "of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress."[5] When a person acting under the color of state law deprives an individual of due process guaranteed by the federal constitution, the individual may sue under § 1983 for damages. "Section 1983 is derived from § 1 of the Civil Rights Act of 1871," and "was intended to create `a species of tort liability' in favor of persons deprived of federally secured rights."[6] The United States Supreme Court has held that the applicable state law period for personal injury torts is the appropriate limitations period for § 1983 claims *717 arising under the Constitution.[7] Thus, the three year statute of limitations for personal injury torts under Washington law applies to a § 1983 action alleging due process violations.[8]
¶ 12 The jury was not instructed on Nieshe's claim under § 1983, however. The parties entered an agreement, in which Nieshe stipulated to simplifying the jury instructions in exchange for the defendant waiving its right to appeal issues relating to the instructions. The parties complicated matters by stipulating to the sole jury instruction on due process, which states: "To establish the due process claim, the plaintiffs have the burden of proving that the school district arbitrarily or capriciously violated its own policies and, in so doing, excluded Ms. Nieshe from her graduation ceremony."[9] The parties agreed that this instruction was adequate for both the state and federal due process claims, and that a verdict for the plaintiff on the due process claim would be regarded in every way as a verdict for the plaintiff on both the state and federal claims.[10] Additionally, the parties agreed not to instruct the jury on § 1983, stipulating that "a verdict in favor of the plaintiff will be regarded in every way as a verdict on the section 1983 claims."
¶ 13 Nieshe contends that the District thus stipulated away its right to claim that she had no valid § 1983 claim. But the District maintained its objection that the due process claim was not valid. At the point it stipulated to the jury instructions, the court had already decided that there was a cognizable § 1983 claim, and rejected the District's motion to dismiss for timeliness. The District maintained that there was no federally protected interest in a graduation ceremony, that the only due process required was that provided by state law, and therefore Nieshe's claim was necessarily governed by the 30-day statute of limitations. The District excepted to the due process instruction on the grounds that the claim was precluded because it was subject to the 30-day statute of limitations.
¶ 14 Nieshe did not have a cognizable claim under § 1983. Section 1983 only provides a cause of action when an individual has been deprived of a right secured under the laws and Constitution of the United States.[11] We conclude that attending a high school graduation ceremony is not a federally protected right.[12]
¶ 15 Nieshe's due process claim could only arise under the United States Constitution. The Due Process Clause provides *718 two kinds of protection, procedural due process and substantive due process. Procedural due process refers to the procedures that the government must follow before it deprives a person of life, liberty, or property.[13] Substantive due process generally asks whether the government abused its power by arbitrarily depriving a person of a protected interest, or by basing the decision on an improper motive.[14] "An administrative agency's failure to follow its own procedure violates the constitution only when (1) the agency violates minimal constitutional requirements [in violation of procedural due process], or (2) its resulting decision is so arbitrary and capricious that it amounts to a violation of substantive due process."[15]
¶16 Nieshe's § 1983 claim could only concern substantive due process because her arguments are grounded in an allegation of arbitrary and capricious exercise of governmental authority. Further, she has not pointed to any specific procedures that were required under the Constitution.
¶ 17 The fact that the District may have deviated from its procedures, or acted arbitrarily, is not a prima facie deprivation of constitutional due process.[16] Rather, as a threshold matter, Nieshe must establish that she was deprived of a constitutionally protected liberty or property interest.[17] A liberty right is implicated "`[w]here a person's good name, reputation, honor, or integrity is at stake because of what the government is doing to him.'"[18] Property rights are created by state law. "A protected property interest exists if there is a `legitimate claim of entitlement' to a specific benefit."[19] State procedural protections create a federally protected interest only if they are intended to be a significant substantive restriction on the decisionmaker.[20]
¶ 18 While property rights created under state law warrant certain procedural due process protections,[21] "`[t]he protections of substantive due process have for the most part been accorded to matters relating to marriage, family, procreation, and the right to bodily integrity.'"[22] The Ninth Circuit has noted that "[t]hese fields likely represent the outer bounds of substantive due process protection."[23] In a concurring opinion in Regents of the University of Michigan v. Ewing,[24] Justice Powell explained that substantive rights can only be created by fundamental interests derived from the Constitution.[25]
*719 ¶ 19 In Goss v. Lopez,[26] the Supreme Court held that Ohio law created a federally protected property interest in public education, and explained that "appellees plainly had legitimate claims of entitlement to a public education" because the Ohio Code "direct[ed] local authorities to provide a free education to all residents between five and 21 years of age, and a compulsory-attendance law requires attendance for a school year of not less than 32 weeks."[27] But the Supreme Court has refrained from deciding whether students have a substantive due process right in public education.[28] In Ewing, the Court assumed the existence of a substantive due process right in continued college enrollment free from arbitrary state action, and held that the facts presented did not establish such action.[29] The Court established a firm standard for overriding an academic decision: "[courts] may not override it unless it is such a substantial departure from accepted academic norms as to demonstrate that the person or committee responsible did not actually exercise professional judgment."[30]
¶ 20 In sum, it is unclear whether substantive due process protects a student's interest in a public education, much less her interest in a graduation ceremony. Even if it does, the standard for showing arbitrary action in terms of academic decisions is difficult to overcome.[31]
¶ 21 Nieshe cites two sources for the proposition that she had a cognizable right under § 1983. First, she argues that the Supreme Court determined that attending a high school graduation ceremony was a fundamental right in Lee v. Weisman.[32] In Lee, the Court was asked to decide whether including prayer as part of a high school graduation ceremony contravened the Establishment Clause of the First Amendment.[33] To be consistent with the Establishment Clause, the government action had to pass the Lemon test,[34] meaning that it had to: "(1) reflect a clearly secular purpose; (2) have a primary effect that neither advance[ed] nor inhibit[ed] religion; and (3) avoid excessive government entanglement with religion."[35] In analyzing whether the government involvement in religious activity was pervasive, the Court emphasized the significance of a high school graduation ceremony:
Everyone knows that in our society and in our culture high school graduation is one of life's most significant occasions. ... [I]t is apparent that a student is not free to absent herself from the graduation exercise in any real sense of the term "voluntary," for absence would require forfeiture of those intangible benefits which have motivated the student through youth and all her high school years.[36]
The Court placed great social significance on a graduation ceremony, and we do not disagree. Yet, nowhere in the Lee opinion does the Court equate a graduation ceremony with a life, liberty, or property interest protected by the Due Process Clause.
¶ 22 The large majority of jurisdictions that have been presented with the precise question we are confronted with have ruled that a student has no life, liberty, or property interest in a graduation ceremony for purposes *720 of due process.[37] The federal cases are most persuasive. A North Carolina District Court held that a plaintiff's liberty right was not infringed by school officials who denied him the opportunity to participate in a graduation ceremony because it was unreasonable to contend that the plaintiff's good name, reputation, honor, or integrity was at stake.[38] Similarly, a California District Court held that a plaintiff who received a college diploma 11 days late and was precluded from attending graduation was not deprived of liberty, noting that "his good name, reputation or honor or any future opportunities" were not infringed on because "there is nothing on his permanent record which says that he was prevented from attending commencement exercises."[39]
¶ 23 These courts also concluded right in attending a graduation ceremony.[40] To the extent that a federally protected property right exists, it is a creature of state law. We have found no Washington statute that expressly entitles students to a high school graduation ceremony. And we cannot conclude that a graduation ceremony is an extension of the property interest in a high school education and diploma. As a Pennsylvania court explained, "a graduation ceremony is not within the scope of any property right which might exist ... for the reason that commencement ceremonies are only symbolic of the educational end result, not an essential component of it."[41]
¶ 24 Nieshe's second source for her contention that she had a protected interest in attending her high school graduation ceremony is WAC 180-40-215, which guarantees that students are not deprived of the right to an equal educational opportunity without due process of law.[42] As explained, a graduation ceremony is not an "educational opportunity." *721 Regardless, the fact that the state guarantees students certain due process procedures does necessarily create a federally protected interest. State law does not expressly reference the right to attend a high school graduation ceremony, or require significant procedures and guidelines for decision makers to follow before forbidding a student to participate in a graduation ceremony. And the State certainly has not created a property interest on the same plane as "`marriage, family, procreation, and the right to bodily integrity,'"[43] thus warranting substantive due process protections.
¶25 Nieshe was not deprived of a life, liberty, or property interest protected by the United States Constitution and therefore she could not prevail on a § 1983 claim. The superior court erred by not granting the District's motion for judgment as a matter of law.[44]
¶ 26 The final issue we address is whether the superior court erred by not sanctioning the District for a discovery violation. A trial court has broad discretion on whether to issue sanctions for discovery violations.[45] We will not disturb a court's decision on appeal unless there is a clear showing of abuse of discretion; that is if it was based on untenable grounds or made for untenable reasons.[46]
¶ 27 Courts may sanction parties under CR 37(b)(2) for two reasons: (1) failure of a party to comply with an order to provide or permit discovery and (2) failure of a party to respond to a request for discovery under CR 33 or CR 34, or to appear after proper notice for a deposition.[47] This case is similar to Chen v. State Farm Mutual Automobile Insurance Company,[48] in which the plaintiff served interrogatories and requests for discovery on the defendant.[49] The plaintiff did not move to compel more complete answers. But, after the discovery deadline had passed, she filed a motion for sanctions for alleged discovery abuses concerning the interrogatory responses.[50] We held that the superior court did not abuse its discretion by not imposing sanctions, explaining that "[s]anctions are appropriate only when a party fails `to obey an order to provide or permit discovery'" and the plaintiff did not identify a discovery order that the defendant failed to obey.[51]
¶ 28 Similarly, Nieshe first alleged that the District violated a production request during trial, after Schweitzer volunteered the computer disk. During discovery, the District responded to the plaintiffs' request for production under CR 34. Nieshe did not request the court to order the District to produce additional documents under CR 37(a). Thus, sanctions were not authorized. Additionally, because the court could not find that the computer disk contained any information that Nieshe did not already have, sanctions were not warranted.
¶ 29 REVERSED
WE CONCUR: COX, C.J., and AGID, J.
NOTES
[1] U.S. Const. amend V.
[2] Bennett v. Computer Task Group, Inc., 112 Wash.App. 102, 106, 47 P.3d 594 (2002).
[3] Brown v. Superior Underwriters, 30 Wash.App. 303, 306, 632 P.2d 887 (1980).
[4] Chen v. State Farm Mut. Auto. Ins. Co., 123 Wash.App. 150, 160, 94 P.3d 326 (2004), rev. denied, 153 Wash.2d 1024, 110 P.3d 755 (2005).
[5] 42 U.S.C. A. § 1983 (West 2003).
[6] Smith v. Wade, 461 U.S. 30, 34, 103 S.Ct. 1625, 75 L.Ed.2d 632 (1983).
[7] City of Rancho Palos Verdes, Cal. v. Abrams, 544 U.S. 113, ___ n. 5, 125 S.Ct. 1453, 1460 n. 5, 161 L.Ed.2d 316 (2005).
[8] RCW 4.16.080(2); Doggett v. Perez, 348 F.Supp.2d 1169, 1173 (E.D.Wash.2004).
[9] Jury Instruction 6.
[10] It is unclear why Nieshe pled a state due process claim, either constitutional or statutory, because she did not request a remedy that the court could grant. Nieshe could not recover damages and attorney fees by means of a state claim because § 1983 only provides a cause of action when an individual has been deprived of a right secured under the laws and Constitution of the United States. See infra note 11 and accompanying text. In her complaint, Nieshe requested a declaratory judgment that the District cannot violate its own policy to inform parents when a student is failing. But the District's policy is not binding law, and the court does not have the power to legislate and declare school policy law. See Korslund v. DynCorp Tri-Cities Serv., Inc., 121 Wash.App. 295, 323, 88 P.3d 966 (2004) (explaining that policy statements are merely "general statements of company policy and, thus, not binding"). The superior court did not grant this relief, and Nieshe has not requested such relief on appeal.
[11] See Gonzaga Univ. v. Doe, 536 U.S. 273, 283, 122 S.Ct. 2268, 153 L.Ed.2d 309 (2002) ("Section 1983 provides a remedy only for the deprivation of `rights, privileges, or immunities secured by the Constitution and laws' of the United States."); Nevada v. Hicks, 533 U.S. 353, 404, 121 S.Ct. 2304, 150 L.Ed.2d 398 (2001) (explaining that § 1983 "merely provides a federal cause of action for the violation of federal rights that are independently established either in the Federal Constitution or in federal statutory law").
[12] We requested that the parties address this issue during oral argument because it was not briefed well on appeal. The District summarily raised this issue by arguing that there is no "civil right" to attend a graduation ceremony. But, in its briefs below, particularly in its motion for judgment as a matter of law, the District maintained that there was no fundamental right to participate in a graduation ceremony.
[13] McKinney v. Pate, 20 F.3d 1550, 1559 (11th Cir.1994).
[14] Indep. Enter. Inc. v. Pittsburgh Water and Sewer Auth., 103 F.3d 1165, 1179 (3rd Cir.Pa.1997); McKinney, 20 F.3d at 1558.
[15] Danielson v. City of Seattle, 45 Wash.App. 235, 244, 724 P.2d 1115 (1986), aff'd, 108 Wash.2d 788, 742 P.2d 717 (1987).
[16] Williams v. City of Seattle, 607 F.Supp. 714, 718-19 (W.D.Wash.1985).
[17] Nunez v. City of Los Angeles, 147 F.3d 867, 871 (9th Cir.Cal.1998); Indep. Enterp., 103 F.3d at 1179; Corneal v. Jackson Township, 313 F.Supp.2d 457, 465 (M.D.Pa.2003), aff'd, 94 Fed.Appx. 76 (3d Cir.2004); Scott v. City of Seattle, 99 F.Supp.2d 1263, 1269 (W.D.Wash.1999). See Lane v. Ocosta Sch. Dist. No. 172, 13 Wash.App. 697, 703, 537 P.2d 1052 (1975) (holding that "[s]ince no fundamental right [of the plaintiffs'] has been violated, the court did not have the jurisdiction to determine whether the school board's action was arbitrary or capricious"), abrogated on other grounds, Haynes v. Seattle Sch. Dist. No. 1, 111 Wash.2d 250, 758 P.2d 7 (1988).
[18] Goss v. Lopez, 419 U.S. 565, 574, 95 S.Ct. 729, 42 L.Ed.2d 725 (1975) (quoting Wisconsin v. Constantineau, 400 U.S. 433, 437, 91 S.Ct. 507, 27 L.Ed.2d 515 (1974)).
[19] Goodisman v. Lytle, 724 F.2d 818, 820 (9th Cir.Wash.1984) (quoting Bd. of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972)).
[20] Goodisman, 724 F.2d at 820.
[21] Regents of the Univ. of Michigan v. Ewing, 474 U.S. 214, 229, 106 S.Ct. 507, 88 L.Ed.2d 523 (1985) (Powell, J. concurring).
[22] Nunez, 147 F.3d at 871 n. 4 (quoting Albright v. Oliver, 510 U.S. 266, 272, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994)).
[23] Nunez, 147 F.3d at 871 n. 4.
[24] 474 U.S. 214, 106 S.Ct. 507, 88 L.Ed.2d 523 (1985).
[25] Ewing, 474 U.S. at 229-30, 106 S.Ct. 507 (Powell, J. concurring). See also McKinney, 20 F.3d at 1556 (explaining that substantive due process only protects fundamental rights implicit in the concept of ordered liberty).
[26] 419 U.S. 565, 95 S.Ct. 729, 42 L.Ed.2d 725 (1975).
[27] Goss, 419 U.S. at 573, 95 S.Ct. 729.
[28] Ewing, 474 U.S. at 222, 106 S.Ct. 507; Bd. of Curators of the Univ. of Missouri v. Horowitz, 435 U.S. 78, 91-92, 98 S.Ct. 948, 55 L.Ed.2d 124 (1978).
[29] Ewing, 474 U.S. at 223, 106 S.Ct. 507.
[30] Ewing, 474 U.S. at 225, 106 S.Ct. 507.
[31] Horowitz, 435 U.S. at 89-90, 98 S.Ct. 948. See also Lisa L. Swern, Note, Due Process Rights in Student Disciplinary Matters, J.C. & Univ. L. 359, 362 (Fall 1987) (explaining that academic dismissals require minimal procedural protection).
[32] 505 U.S. 577, 112 S.Ct. 2649, 120 L.Ed.2d 467 (1992).
[33] Lee, 505 U.S. at 580, 112 S.Ct. 2649.
[34] Lemon v. Kurtzman, 403 U.S. 602, 91 S.Ct. 2105, 29 L.Ed.2d 745 (1971).
[35] Lee, 505 U.S. at 585, 112 S.Ct. 2649. See also Lemon, 403 U.S. at 612-13, 91 S.Ct. 2105 (establishing test).
[36] Lee, 505 U.S. at 595, 112 S.Ct. 2649.
[37] Bundick v. Bay City Indep. Sch. Dist., 140 F.Supp.2d 735, 739 (S.D.Tex.2001); Swany v. San Ramon Valley Unified Sch. Dist., 720 F.Supp. 764, 774 (N.D.Cal.1989); Fowler v. Williamson, 448 F.Supp. 497, 502 (W.D.N.C.1978); Dolinger v. Driver, 269 Ga. 141, 498 S.E.2d 252, 254 (1998); Mifflin County Sch. Dist. v. Stewart by Stewart, 94 Pa.Cmwlth. 313, 503 A.2d 1012, 1013 (1986). See also Smith v. North Babylon Union Free Sch. Dist., 844 F.2d 90, 94 (2nd Cir.N.Y.1988) (holding that a plaintiff's interest in attending a graduation ceremony is not protected by the free exercise clause because the ceremony is "merely a social occasion at which students and their families and friends gather to mark an event," and not "an important benefit conferred by the state"). But see Crump v. Gilmer Indep. Sch. Dist., 797 F.Supp. 552, 554 (E.D.Tex.1992) (implying a property interest in a graduation ceremony).
[38] Fowler, 448 F.Supp. at 501.
[39] Swany, 720 F.Supp. at 775.
[40] Swany, 720 F.Supp. at 773; Fowler, 448 F.Supp. at 502. See also Bundick, 140 F.Supp.2d at 739.
[41] Mifflin County Sch. Dist., 503 A.2d at 1013. A few courts have determined that certain extracurricular activities associated with education are protected property interests. A district court held that a student was entitled to procedural due process before being suspended from a high school football team because participation was "vital and indispensable to a college scholarship and, in essence, a college education." Boyd v. Bd. of Directors of McGehee Sch. Dist. No. 17, 612 F.Supp. 86, 93 (E.D.Ark.1985). The prevailing view, however, is that participation in extracurricular activities, including school sports, is not a property interest warranting due process protection. E.g., Seamons v. Snow, 84 F.3d 1226, 1235 (10th Cir.Utah 1996); Marner ex rel. Marner v. Eufaula City Sch. Bd., 204 F.Supp.2d 1318, 1324 (M.D.Ala.2002); Farver v. Bd. of Educ. of Carroll County, 40 F.Supp.2d 323, 324-325 (D.Md.1999); James by and Through Singleton v. Tallassee High Sch., 907 F.Supp. 364, 366-67 (M.D.Ala.1995) aff'd, 104 F.3d 372 (11th Cir.Ala.1996); Brands v. Sheldon Cmty. Sch., 671 F.Supp. 627, 631 (N.D.Iowa 1987); Haverkamp v. Unified Sch. Dist. No. 380, 689 F.Supp. 1055, 1058 (D.Kan.1986); Paschal v. Perdue, 320 F.Supp. 1274, 1276 (S.D.Fla.1970); L.P.M. v. Sch. Bd. of Seminole County, 753 So.2d 130, 132 (Fl.App.2000).
[42] WAC 180-40-215(5). More specifically, state law requires that students be afforded the "right to an informal conference with the building principal or his or her designee for the purpose of resolving the grievance" when they are excluded from school activities for disciplinary reasons. WAC 180-40-240 (adopted pursuant to RCW 28A.305.160(1)). Nieshe was prevented from attending her graduation ceremony due to academic reasons-before the 504 plan was applied, she did not pass CWP and obtain the necessary credits. It is unclear whether the State provides the same due process to students who are excluded from extracurricular activities for academic reasons. See WAC 180-40-205 (providing that "`Discipline' shall mean all forms of corrective action or punishment"). Regardless, Nieshe met with her principal to resolve the grievance before the graduation ceremony.
[43] Nunez, 147 F.3d at 871 n. 4 (quoting Albright v. Oliver, 510 U.S. 266, 272, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994)).
[44] In light of our holding, we do not decide whether the superior court erred by admitting evidence of the 504 plan agreement.
[45] Burnet v. Spokane Ambulance, 131 Wash.2d 484, 494, 933 P.2d 1036 (1997) (citing Phillips v. Richmond, 59 Wash.2d 571, 369 P.2d 299 (1962)); Demelash v. Ross Stores, Inc., 105 Wash.App. 508, 530, 20 P.3d 447 (2001).
[46] Burnet, 131 Wash.2d at 494, 933 P.2d 1036 (citing Assoc. Mortgage Investors v. G.P. Kent Constr. Co., 15 Wash.App. 223, 229, 548 P.2d 558 (1976)).
[47] Pamelin Indus., Inc. v. Sheen-U. S. A., Inc., 95 Wash.2d 398, 401, 622 P.2d 1270 (1981). See CR 37(b)(2) (authorizing a court to issue sanctions for failing to abide by an order to provide or permit discovery); CR 37(d) (authorizing a court to issue CR 37(b)(2) sanctions for failure to attend a deposition or respond to interrogatories or production requests).
[48] 123 Wash.App. 150, 94 P.3d 326 (2004).
[49] Chen, 123 Wash.App. at 159, 94 P.3d 326.
[50] Chen, 123 Wash.App. at 159, 94 P.3d 326.
[51] Chen, 123 Wash.App. at 160, 94 P.3d 326 (quoting CR 37(b)(2)).
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2510449/
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127 P.3d 1204 (2006)
203 Or. App. 736
STATE of Oregon, Respondent,
v.
Buster Paul KITTEL, Appellant.
025010; A124400.
Court of Appeals of Oregon.
Argued and Submitted October 31, 2005.
Decided January 18, 2006.
Tammy W. Sun, Deputy Public Defender, argued the cause for appellant. With her on the brief were Peter A. Ozanne, Executive Director, and Peter Gartlan, Chief Defender, Office of Public Defense Services.
Julie A. Smith, Assistant Attorney General, argued the cause for respondent. With her on the brief were Hardy Myers, Attorney General, and Mary H. Williams, Solicitor General.
Before HASELTON, Presiding Judge, and SCHUMAN and ROSENBLUM,[*] Judges.
HASELTON, P.J.
Defendant appeals from a judgment of conviction for criminal mischief in the second degree (a Class A misdemeanor), ORS 164.354, and theft in the third degree (a Class C misdemeanor), ORS 164.043. He assigns error to the trial court's decision to hear closing arguments and render a verdict in his absence. Specifically, defendant argues that the statutory right to be present at trial, ORS 136.040(1),[1] applies in misdemeanor cases and that the trial court erred when it determined that defendant had waived that *1205 right. We conclude that the court erred in determining that defendant had waived his rights under ORS 136.040(1), but that the error was harmless. Accordingly, we affirm.
The facts material to our review are undisputed. On January 29, 2004, defendant was tried on two counts of second-degree criminal mischief and one count of third-degree theft. Those charges arose from defendant's alleged theft of two drift logs from a beach near Cape Perpetua and from alleged damage to public property as defendant removed the logs. Defendant was represented by counsel, and the case was tried without a jury.
Defendant was present from the beginning of trial through the presentation of all evidence, and he testified in his own behalf. At the conclusion of testimony, the trial judge and counsel made arrangements to travel to the site of the alleged illegal logging activity for a "judge view." The judge proposed, and counsel agreed, to meet at the site at 2:00 p.m. Defendant participated in those discussions.
The court and counsel met, as agreed, for the judge view. Defendant was not there. After completing the judge view, but while still at the site, the court and counsel agreed to resume trial at 3:00 p.m.[2] Neither the court nor defense counsel notified defendant that trial would resume at that time.
At 3:37 p.m., defendant had not yet reappeared in the courtroom. Defendant's attorney reminded the court that defendant had no way of knowing when the trial was to resume, and he proposed that the trial be continued at a later date when defendant would be present. The court, after reviewing ORS 136.040(1) and State v. Turner, 99 Or.App. 176, 781 P.2d 404 (1989), rejected that proposal:
"[M]y staff has not received any call from [defendant] saying, `Gosh, I got a flat tire. Gosh, when am I supposed to be there? Gosh, I got food poisoning at lunch.' We got no phone calls; he's simply not here.
"So that suggests to me he's voluntarily waiving his right to be here because even though * * * he didn't know * * * that we were reconvening at 3:00[,][h]e knew the trial was today. He knew exactly how far it is to [the site of the judge view] from here and back. And he knows that there's plenty of time for trial to resume during the same day. * * *
"So I'm going to find that he's knowingly waived the right to be here for the purpose of closing argument and verdict."
The prosecutor and defense counsel then delivered their closing arguments. After the arguments were concluded, defense counsel told the court that he had just been informed by the court's staff that defendant had contacted the court to say that he was waiting near the site of the judge view. Defense counsel told the court of that development"[j]ust for the court's information"but did not request a recess or a continuance. The court then proceeded to render its verdict, finding defendant guilty on one count of second-degree criminal mischief and one count of third-degree theft. The court subsequently imposed sentence in a separate proceeding at which defendant addressed the court.
Defendant appeals, assigning error to the court's determination that he had waived his statutory right to be present at trial, ORS 136.040(1). The state concedes that "the record does not support a finding that defendant voluntarily waived the right to be present when the court rendered its verdict." Nevertheless, the state contends that we should affirm the judgment on either of two alternative grounds: (1) ORS 136.040(1) does not require a misdemeanor defendant's presence at trial, so long as his or her counsel appearsand our holding to the contrary in Turner was wrong and must be overruled. (2) In all events, in the circumstances of this case, any violation of ORS 136.040(1) was harmless.
As explained below, we accept the state's concession as well founded. Further, we decline the state's invitation to overrule Turner. However, we agree with the state that *1206 the error here was harmless. Accordingly, we affirm.
With respect to the court's finding of waiver, there was no evidence that defendant was ever informed that the court would be reconvening for closing arguments at 3:00 p.m. Thus, there was no basis for a determination that defendant had intentionally relinquished his rights under ORS 136.040(1). See Turner, 99 Or.App. at 179, 781 P.2d 404 (court erred in proceeding to trial in the absence of the misdemeanor defendant, even when defense counsel informed court that he had told the defendant of the time and place of trial, where the court "did not permit any additional opportunity for counsel to attempt to produce [the defendant] or to discover why he failed to appear").
The state argues, however, that the sufficiency of waiver is immaterial here because ORS 136.040(1) does not require a misdemeanor defendant's presence at trial so long as the defendant "appears by counsel." Because defense counsel was present for closing arguments and the rendition of the verdict, the state reasons that the court was authorized to proceed in defendant's absence regardless of the reasons for defendant's nonappearance. The state acknowledges that Turner is squarely to the contrary but urges us to jettison our precedent. We will not overrule our own statutory interpretations unless they are "plainly wrong." Aguilar v. Washington County, 201 Or.App. 640, 648, 120 P.3d 514 (2005); Newell v. Weston, 156 Or.App. 371, 380, 965 P.2d 1039 (1998), rev. den., 329 Or. 318, 994 P.2d 123 (1999). Here, that standard is not met.
ORS 136.040(1) provides:
"If the charge is for a misdemeanor, the trial may be had in the absence of the defendant if the defendant appears by counsel; but if it is for a felony, the defendant shall appear in person."
In Turner, the defendant, who was charged with a misdemeanor, was represented by counsel. When the defendant did not appear for trial, his attorney informed the court that the defendant had been notified of the time and place of trial; nevertheless, defense counsel asked the court to continue the case until a time when the defendant could be present. 99 Or.App. at 178, 781 P.2d 404. The trial court denied the continuance request, ruling that, because the defendant knew of the time and place of trial, yet had failed to appear, the defendant had waived his right under ORS 136.040 to be present for trial. On appeal, we held that, under ORS 136.040(1), the court may "conduct a trial in the defendant's absence" in a misdemeanor case where the defendant appears by counselbut that, "[b]efore doing so, * * * the court must determine that the defendant voluntarily waived the right to be present." Id. at 178, 781 P.2d 404 (footnote omitted). In so holding, we relied, in part, on In re Jordan, 290 Or. 669, 624 P.2d 1074 (1981) (Jordan II).
In In re Jordan, 290 Or. 303, 622 P.2d 297 (1981) (Jordan I), the Supreme Court reviewed a recommendation of suspension resulting from proceedings before the Commission on Judicial Fitness. 290 Or. at 305, 622 P.2d 297. One of the commission's findings of unfitness was based on an incident in which the accused judge had, in a defendant's absence, tried and convicted the defendant of driving while suspended. Id. at 326-27, 622 P.2d 297. At that trial, the accused judge had found that the defendant had been notified of the time and place of trial, yet neither the defendant nor his attorney had appeared at the trial, and the court had proceeded to try and convict the defendant "in absentia." Id. at 328, 622 P.2d 297. The Supreme Court, in sustaining the commission's finding of misconduct, concluded that, "for a judge to commence with the trial of an absent defendant in any criminal case and to enter a finding of `guilty' at the conclusion of such a trial * * * is misconduct of a serious nature." Id. at 328-29, 622 P.2d 297.
The accused judge petitioned for a rehearing. Jordan II, 290 Or. at 669, 624 P.2d 1074. The Supreme Court denied the petition for rehearing but wrote to clarify certain aspects of its original opinion. In particular, the court rejected the accused judge's contention that "a waiver of [the] defendant's right of personal appearance" could be inferred from the failure to appear in response to a mailed notice of the scheduled trial date:
*1207 "In a criminal case involving a charge of either a felony or a misdemeanor, * * * it is improper for a judge to commence the trial of such a case in the absence of the defendant and to enter a finding of `guilty' without evidence sufficient to support a finding that he had waived his right to be present at his trial * * *."
Id. at 672-73, 624 P.2d 1074 (emphasis added).
To be sure, the court in Jordan II did not purport to construe ORS 136.040(1). Nevertheless, its language was unqualified, and we specifically relied on that aspect of Jordan II in Turner. See Turner, 99 Or.App. at 178, 781 P.2d 404. Given that languageand unless, or until, the Supreme Court qualifies its observation in Jordan IIwe decline to disavow Turner as "plainly wrong." Consequently, the trial court erred in proceeding in defendant's absence.
Finally, the state contends that that error is harmless. To affirm on that basis, we must conclude that there is "little likelihood that the * * * error affected the verdict." State v. Davis, 336 Or. 19, 32, 77 P.3d 1111 (2003); accord Ryan v. Palmateer, 338 Or. 278, 294-96, 108 P.3d 1127, cert. den., 126 S.Ct. 384 (2005) (reiterating rejection of "structural error" doctrine under Oregon law).
We conclude that the error here was harmless. As noted, defendant was present during this nonjury trial throughout the presentation of the evidenceincluding testifying in his own defense. Defendant offers no credible argumentand we perceive noneas to why, or how, his presence would have affected the presentation of closing argument or the court's ultimate determination of guilt. Although defendant contends that he was denied the opportunity to assist his attorney in the presentation of closing argument, he does not identify any meaningful contribution he could have made to that process. Cf. State v. Walton, 311 Or. 223, 249, 809 P.2d 81 (1991) (the defendant's absence from pretrial conference was not prejudicial where the defendant could not identify "what suggestions or assistance" he would have offered if present); State v. Beeson, 248 Or. 411, 414, 434 P.2d 460 (1967) (conducting a conference with the jury, judge, and attorneys outside the presence of the defendant was not error because "the defendant could have accomplished nothing by being present").
In sum, the trial court erred in proceeding in defendant's absence without a sufficient waiver of rights under ORS 136.040(1), but that error was harmless.
Affirmed.
NOTES
[*] Rosenblum, J., vice Ceniceros, S.J.
[1] ORS 136.040(1) provides:
"If the charge is for a misdemeanor, the trial may be had in the absence of the defendant if the defendant appears by counsel; but if it is for a felony, the defendant shall appear in person."
[2] The site near Cape Perpetua was, apparently, approximately a 45-minute drive from the court house.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2510450/
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411 F.Supp.2d 1326 (2005)
Brenda PENN, Plaintiff,
v.
DEPARTMENT OF CORRECTIONS, et al., Defendants.
No. CIV.A.2:04CV733T(WO).
United States District Court, M.D. Alabama, Northern Division.
December 15, 2005.
*1327 *1328 Amardo Wesley Pitters, A. Wesley Pitters, P.C., Montgomery, AL, for Plaintiff.
Andrew Weldon Redd, Alabama Department of Corrections Legal Division, Montgomery, AL, for Defendants.
OPINION
MYRON H. THOMPSON, District Judge.
Plaintiff Brenda Penn, a woman over the age of 40, filed this lawsuit claiming that the Alabama Department of Corrections (ADOC) and several of its officers denied her requests to work overtime, because of her gender and age and in retaliation for filing an administrative charge of discrimination, all in violation of Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.A. §§ 1981a, 2000e through 2000e-17; the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C.A. §§ 621-634; and the Fourteenth Amendment to the United States Constitution, as enforced through 42 U.S.C.A. § 1983. Penn names the following as defendants: ADOC, Prison Wardens Terrence McDonnell and Leeposey Daniels, and Correctional Officers Phillis Billups, John Crow, *1329 Franklin Brown, and Michelle Ellington. Jurisdiction over all claims is proper under 42 U.S.C.A. §§ 1331 (federal question) and 1343 (civil rights); jurisdiction over the ADEA claim is proper under 29 U.S.C.A. § 626, and jurisdiction over the Title VII claim is proper under 42 U.S.C.A. § 2000e-5(f)(3).
This case is currently before the court on the defendants' motion for summary judgment. The motion will be granted.
I. SUMMARY-JUDGMENT STANDARD
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The court's role at the summary-judgment stage is not to weigh the evidence or to determine the truth of the matter, but rather to determine only whether a genuine issue exists for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In doing so, the court must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in favor of that party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
II. BACKGROUND
The following facts are construed in Penn's favor as the non-moving party: Penn has worked as an ADOC correctional officer since 1976. During the times relevant to this lawsuit, she was assigned to first shift at the Kilby Correctional Facility; during 2003 and 2004, she volunteered to work overtime on third shift at Kilby, and in 2004 volunteered to work overtime at the Montgomery Community Work Center.[1]
A. Kilby Correctional Facility
On April 25, 2003, Correctional Officer Billups (who was in charge of third shift) was notified by a memorandum from Correctional Officer Crow (Penn's immediate supervisor) that Penn had been late or completely failed to show up for overtime work on Kilby's third shift on at least four occasions.[2] On April 30, Penn, Crow, and Billups met and discussed her tardiness-attendance problems. During this meeting, Penn was advised that further incidents could result in her not being allowed to work overtime. On May 1, Crow advised Billups that Penn had been late again, and Penn had another meeting to discuss her tardiness.[3]
On May 7, 2003, Crow again advised Billups that Penn had arrived to her post late. Although Penn had arrived to Kilby on-time, she did not report to her post until 2:02 a.m. (two minutes after the shift start-time). She had been told the previous day that she would work at Central Control, but when she arrived there at 1:58 a.m., she was notified for the first time that she had to work at Tower 5. Penn arrived to her post tardy that day because Crow changed her assignment without notice and delayed her in a corridor *1330 while holding his finger near her face and yelling at her for being late.[4]
The next day, Penn was advised that, because of her continued tardiness, she could not work overtime on third shift at Kilby until further notice. At Penn's request, Kilby Warden McDonnell met with Billups, Crow, Penn, and a Lieutenant Bolling to discuss the denial of overtime. McDonnell advised Penn that her removal from overtime on third shift was not permanent and she could still work overtime on first and second shifts. Penn indicated that she did not wish to work on third shift again and would get sufficient overtime on first and second shift.
On October 6, 2003, McDonnell told Billups to allow Penn to work overtime on third shift again, but to let Penn know that further tardiness would result in disciplinary action.[5] On October 14, Penn filed a charge with the Equal Employment Opportunity Commission (EEOC) claiming that she had been discriminated against because of her gender and age when ADOC refused to allow her to work overtime at Kilby.[6]
During the time in question, Correctional Officers Moore and Anderson, who are both males under the age of 40, were caught sleeping on the job, yet they were not denied the opportunity to work overtime; instead, they were suspended without pay from working their regular shifts. Officer Rowe, who is male and under 40, was in a car accident that occurred while he was driving in heavy fog while working overtime, yet he was not denied the opportunity to work overtime or suspended.[7] Correctional Officer Hartman, Walters, Armstrong, Barnes, and Jarrett, all of whom are male and under 40, arrived to overtime late, or failed to show up, on only one occasion, but none was disciplined. Officer Stafford, who is a 39-year old female, was tardy to overtime on first shift once and failed to report for scheduled overtime on second shift once; she was not suspended from overtime on either shift.[8] Finally, Jerome Turner, a male employee under the age of 40, failed to report for overtime on second shift on several occasions, received a written warning that future incidents would result in his suspension from overtime, and then failed to report for scheduled overtime; he was then suspended from overtime on second shift at Kilby.[9]
B. Montgomery Community Work Center
Penn began working overtime at the Montgomery Community Work Center in April 2004. Penn was suspended from working overtime at the center for a month, beginning mid-June 2004, because her supervisors believed that she had been tardy to scheduled overtime shifts. Correctional Officers Ellington and Brown *1331 told Work Center Warden Daniels that Penn had been late to work. Penn does not directly dispute that she was late, but rather contends that Ellington and Brown confused her with another employee named Kramer Penn, who had been tardy.[10]
When Penn learned she was denied overtime, she complained about the mistake through the chain of command, and her complaint was ultimately reviewed by ADOC Commissioner Campbell.[11] She was reinstated to overtime at the Work Center on July 7, 2004, pursuant to a memorandum from Commissioner Campbell.[12] The memo stated that "effective immediately" employees could be denied the opportunity to work overtime only if ADOC Deputy Commissioner approved of that action.[13]
The EEOC issued Penn a right-to-sue letter on May 5, 2004.[14] Penn filed this lawsuit on July 30, 2004.
III. DISCUSSION
Penn alleges that the defendants prevented her from working overtime at Kilby because of her age and gender. She also claims that she was denied overtime in retaliation for her allegations of discrimination. Under Title VII, it is illegal for an employer "to fail or refuse to hire or to discharge any individual, or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's . . . sex . . .," 42 U.S.C.A. § 2000e-2(a)(1); similarly, the Fourteenth Amendment, as enforced through § 1983, prohibits gender discrimination in employment. The ADEA prohibits an employer from failing or refusing to hire any individual or otherwise discriminating against any individual with respect to compensation, terms, conditions, or privileges of employment because of such individual's age; the protected class under the ADEA includes individuals over the age of 40. 29 U.S.C.A. § 621(a)(1). Employers are also prohibited from retaliating against employees who have made a charge of discrimination. 42 U.S.C.A. § 2000e-3(a) (Title VII); 29 U.S.C.A. § 623(d) (ADEA).
This case is governed by the familiar burden-shifting analysis of McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). Under the McDonnell Douglas approach, an employee has the initial burden of establishing a prima-facie case of unlawful employment discrimination or retaliation by a preponderance of the evidence. Id. at 802, 93 S.Ct. 1817; Young v. General Foods Corp., 840 F.2d 825, 828 (11th Cir.1988). If the employee establishes a prima-facie case, the burden then shifts to the employer to rebut the presumption by articulating legitimate, non-discriminatory and non-retaliatory reasons for its employment action. Chapman v. AI Transport, 229 F.3d 1012, 1024 (11th Cir.2000). The employer has the burden of production, not of persuasion, and thus does not have to persuade a court that it was actually motivated by the reason advanced. See, e.g., Texas Dep't of Cmty. Affairs v. Burdine, 450 U.S. 248, 253-55, 258, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981); McDonnell Douglas, 411 U.S. at 802, 93 S.Ct. 1817.
Once the employer satisfies this burden of production, "the presumption of discrimination *1332 [or retaliation] is eliminated and `the [employee] has the opportunity to come forward with evidence, including the previously produced evidence establishing the prima facie case, sufficient to permit a reasonable factfinder to conclude that the reasons given by the employer were not the real reasons for the adverse employment decision.'" Chapman, 229 F.3d at 1024 (citations omitted). The employee may meet this burden by persuading the court that a discriminatory or retaliatory reason more than likely motivated the employer or by demonstrating that the proffered reason for the employment decision is not worthy of belief. Burdine, 450 U.S. at 256, 101 S.Ct. 1089; see also Young, 840 F.2d at 828.
A. Disparate Treatment
There are multiple ways to establish a prima-facie case of gender or age discrimination. Schoenfeld v. Babbitt, 168 F.3d 1257, 1268 (11th Cir.1999); Nix v. WLCY Radio/Rahall Communications, 738 F.2d 1181, 1185 (11th Cir.1984).[15] As a general principle, "demonstrating a prima facie case is not onerous." Holifield v. Reno, 115 F.3d 1555, 1562 (11th Cir.1997). Because Penn asserts much of the same evidence in the prima-facie and pretext stages of the burden shifting framework, this court will assume, without deciding, that she has presented a prima-facie case of gender and age discrimination and proceed directly to the second and third prongs of the McDonnell Douglas test.
ADOC has articulated a legitimate, nondiscriminatory reason for suspending Penn from overtime.[16] Specifically, ADOC maintains that it suspended Penn from overtime because she was repeatedly tardy or failed to show up for overtime duty and persisted in her misconduct after being `counseled' by her supervisors that future misconduct would result in her removal from overtime on third shift at Kilby.
Penn argues that this explanation is pretextual for two reasons. First she maintains that other employees outside her protected classes engaged in similar misconduct, yet were not suspended from overtime. Second, she maintains that Officer Crow caused her to be late on May 7, 2003.[17]
*1333 1. Comparator Evidence
Penn maintains that ADOC's explanation is not worthy of belief because she was the only person suspended from overtime, even though other employees who were male or under the age of 40 also engaged in misconduct. In order to make a valid comparison of the plaintiff's treatment to that of non-protected employees, the plaintiff must show that she and those employees are similarly situated in all relevant respects. Holifield, 115 F.3d at 1562. "[T]he quantity and quality of the comparator's misconduct [must] be nearly identical to prevent courts from second-guessing employers' reasonable decisions and confusing apples with oranges." Maniccia v. Brown, 171 F.3d 1364, 1368 (11th Cir. 1999). Thus, for both the gender discrimination and age-discrimination claims, Penn must identify comparators outside the relevant protected classification whose conduct was nearly identical to hers and were not disciplined.
i. Gender
Penn contends that Officers Moore and Anderson, who are both male, were caught sleeping on the job, yet they were not denied the opportunity to work overtime. The misconduct of Officers Moore and Anderson is not identical to being repeatedly late for work or failing to show up for work, so they are not valid comparators. But more importantly, they, like Penn, were punished for their misconduct, by being suspended from work without pay, which is arguably a more severe punishment than simply being denied the opportunity to work overtime. This undermines any inference of that they were treated more favorably because of their gender or age.
Penn notes that Officer Rowe caused a car accident but was not suspended or denied overtime. First, being in a car accident is not sufficiently identical to failing repeatedly to arrive for work on time. Second, the car accident occurred in heavy fog, and there is no admissible evidence in the record to suggest that the accident was caused by any wrong-doing on Rowe's part. Because Rowe's alleged misconduct differs so profoundly from Penn's, no reasonable fact-finder could find that the failure to discipline Rowe suggests that ADOC's proffered reason for disciplining Penn is pretextual.
Penn also contends that certain male employees showed up late for overtime work or failed to show up at all, yet they were not denied the opportunity to work overtime. Officers Hartman, Walters, Armstrong, Barnes, and Jarrett, all of whom are male, arrived to overtime late, or failed to show up, on only one occasion, and no evidence in the record suggests that they persisted in their misconduct after a counseling session. Therefore, their misconduct was not of the same quantity or quality as Penn's. Because their conduct was not nearly identical, they are not valid comparators.
ii. Age
Officers Hartman, Walters, Armstrong, Barnes, Jarrett, Rowe, Moore, and Anderson are also under the age of 40. *1334 However, as described above, they are not valid comparators for Penn's age-discrimination claim because their misconduct was not sufficiently identical to that of Penn.
For the purposes of this claim, however, Penn identifies an additional comparator, Officer Stafford, who is a 39-year old female. Stafford was tardy to overtime on first shift once and failed to report for scheduled overtime on second shift once. Whereas Penn was repeatedly late for overtime on the same shift, Stafford was late only once to each shift. Even if the court ignored this distinction, Penn was late or failed to report for overtime at least six times, while Stafford was late or failed to report twice. Thus, Penn's misconduct was greater in quantity than Stafford's. Moreover, there is no evidence that Stafford was warned, yet persisted in her misconduct, whereas Penn persisted in her tardiness even after a warning. Therefore, Penn's misconduct was also more severe in its quality than Stafford's. Accordingly, Stafford is not a valid comparator.
Finally, ADOC suspended Jerome Turner, a male under the age of 40, from overtime. Tuner was late or failed to show up, was warned, and then persisted in his misconduct before he was suspended. Thus, his conduct was nearly identical to Penn's, but he was disciplined in the same manner as Penn. The fact that ADOC applied the same disciplinary procedure to another employee who had engaged in nearly identical misconduct undermines any inference that its decision to suspend Penn from overtime at Kilby was discriminatory.
2. Correctional Officer Crow's Conduct
Penn does not dispute that she was tardy or failed to report for scheduled overtime shifts on several occasions prior to April 25, 2003, that she was warned on April 30 that future tardiness would result in the denial of overtime on third shift at Kilby, and that she was tardy on May 1. However, she contends that she arrived to her post late on May 7 solely because Crow changed her assignment without notice and stopped her in the lobby.
Although Penn fails to articulate why this is relevant, the court will do its best to complete her argument. The memo that informed Penn that she had been suspended from overtime on third shift stated that she had been `counseled' on April 30 and was late again on May 7. Thus, although she was also late on May 1, the stated reason for the suspension was her tardiness on May 7. Presumably, Penn means to suggest that ADOC's explanation is pretextual because her tardiness on May 7, the stated basis for her suspension, was caused by a supervisor.
However, an "employer may [take adverse action against] an employee for a good reason, a bad reason, a reason based on erroneous facts, or for no reason at all, as long as its action is not for a discriminatory reason." Nix v. WLCY Radio/Rahall Communications, 738 F.2d 1181, 1187 (11th Cir.1984). While it certainly seems unfair to penalize someone for misconduct caused by a supervisor, Penn has advanced no evidence to suggest Crow's conduct was motivated by a discriminatory reason. The court is not suggesting that Crow did not harbor some personal ill-will against Penn.[18] However, even assuming that Crow changed the schedule and delayed Penn in order to make Penn late, Penn has presented no evidence that Crow took such actions because of her gender or age. Simply put, Penn has presented no evidence that Crow's decision to change her assignment, which did not violate ADOC *1335 policies, was motivated by a discriminatory animus.[19]See Damon v. Fleming Supermarkets of Florida Inc., 196 F.3d 1354, 1361 (11th Cir.1999) ("We are not in the business of adjudging whether employment decisions are prudent or fair. Instead, our sole concern is whether unlawful discriminatory animus motivates a challenged employment decision."). This court is not a super-personnel department that referees, or second-guesses, an employer's handling of personal disputes between employees. See Wilson v. B/E Aero., Inc., 376 F.3d 1079, 1092 (11th Cir.2004). The court's concern is ferreting out employment actions taken for discriminatory reasons. Thus, Crow's actions on May 7 do not help Penn prove that ADOC's decision to suspend her from overtime based on tardiness is pretextual.
No evidence in the record would allow a reasonable fact-finder to conclude that the defendants' proffered legitimate reason for denying Penn overtime is pretextual. Therefore, the defendants are entitled to summary judgment on Penn's disparate-treatment claims.
B. Retaliation
To establish a prima-facie case of retaliation, Penn must show (1) a statutorily protected expression; (2) an adverse-employment action; and (3) a causal link between the protected expression and the adverse action. Raney v. Vinson Guard Service Inc., 120 F.3d 1192, 1196 (11th Cir.1997). ADOC concedes for the purposes of summary judgment that Penn engaged in protected expression and that the denial of overtime was an adverse-employment action.
In order for an employee to prove a causal link, the employer must, at a minimum, be aware of the protected expression when it takes the adverse action. Raney, 120 F.3d at 1197. Because Penn was denied overtime at Kilby before she filed her EEOC charge or this lawsuit, that adverse action cannot support a claim for retaliation. See Griffin v. GTE Fla., Inc., 182 F.3d 1279, 1282 (11th Cir.1999) (noting that "the adverse employment action must follow the statutorily protected conduct" to state a prima-facie case of retaliation). Therefore, Penn can state a claim for retaliation only if she proves a causal link between her EEOC charge and her denial of overtime at the Work Center.
An "employee may prove the causal connection by showing a close time-link between the adverse-employment action and the protected activity." Johnson v. Auburn University, 403 F.Supp.2d 1101 (M.D.Ala.2005) (Thompson, J.). "The shorter the period between the two events, the stronger the inference that the adverse action was improperly motivated; conversely, a long period of time between the protected conduct and adverse-employment action will negate an inference that the adverse action was caused by the protected expression." Id.
"The cases that accept mere temporal proximity between an employer's knowledge of protected activity and an adverse employment action as sufficient evidence of causality to establish a prima facie case uniformly hold that the temporal proximity must be `very close.'" Clark County Sch. Dist. v. Breeden, 532 U.S. 268, 273, 121 S.Ct. 1508, 149 L.Ed.2d 509 (2001). The *1336 Supreme Court has cited with approval decisions in which a three- to four-month gap between the protected conduct and adverse action was insufficient to establish a causal connection. Id. (citing Richmond v. ONEOK, Inc., 120 F.3d 205, 209 (10th Cir.1997) (three-month period insufficient), and Hughes v. Derwinski, 967 F.2d 1168, 1174-75 (7th Cir.1992) (four-month period insufficient)). In Higdon v. Jackson, 393 F.3d 1211 (11th Cir.2004), the Eleventh Circuit held that, by itself, a three-month period between complaints of discrimination and an alleged assault by a supervisor was too great to allow a reasonable inference of causal relation. Id. at 1221. See also Miller v. Lectra, USA, Inc., 145 Fed. Appx. 315, 318 (11th Cir.2005) (unpublished) (holding that, by itself, a seven-month gap between complaint of discrimination and termination was insufficient to prove causal connection).[20]
Here, Penn has presented no admissible evidence of a causal relation beyond the timing of her one-month suspension relative to her filing of the EEOC charge. The court concludes that she cannot state a prima-facie case of retaliation because the filing of her EEOC charge is too far removed temporally (seven months) from the denial of overtime at the Work Center to support an inference of causal connection without any other evidence of retaliatory intent. See Clark County, 532 U.S. at 273, 121 S.Ct. 1508. This is particularly true here because Penn was allowed to continue working overtime on third shift at Kilby after she filed her EEOC charge (without any retaliation) and was initially afforded the opportunity to work overtime at the Work Center after she had filed her EEOC charge. Essentially, ADOC allowed Penn to work overtime at Kilby and even gave her additional opportunities to work overtime at the Work Center during the seven months between the EEOC charge and the Work Center incident. This contradicts any inference that the Work Center adverse action was retaliatory.[21]
*1337 Even assuming Penn could prove a prima-facie case, she cannot overcome ADOC's legitimate, non-discriminatory reason for suspending her from overtime at the Work Center. ADOC maintains that it suspended her because she reported to scheduled overtime at the Work Center late. In fact, Penn's own testimony supports ADOC's proffered non-discriminatory reason for denying her overtime. She testified that she was suspended from overtime at the Work Center because her supervisors thought she was Kramer Penn, who had been tardy and was unreliable. Thus, by her own admission, the most that she can prove is that she was denied overtime because of a mistaken identity. Just as "an employer who treats two employees differently because of a mistaken belief in the existence of a neutral reason" has not engaged in discrimination, Silvera v. Orange County Sch. Bd., 244 F.3d 1253, 1261 (11th Cir.2001), an employment action taken because of a mistaken understanding of facts will not support a claim for retaliation. Simply put, no evidence supports her contention that the denial was in retaliation for her EEOC charge, and her conclusory assertions of retaliation are not enough. See Earley v. Champion Int'l Corp., 907 F.2d 1077, 1083 (11th Cir.1990).
Because Penn has not proven a prima-facie case of retaliation or advanced any evidence that would allow a reasonable fact-finder to conclude that the defendants' proffered non-discriminatory reason for not reclassifying her was pretextual, the defendants are entitled to summary judgment on Penn's retaliation claims.[22]
IV. CONCLUSION
For the foregoing reasons, the court concludes that summary judgment is due to be granted on all of Penn's claims against all defendants.
An appropriate judgment will be entered.
NOTES
[1] Defendants' brief in support of summary judgment (Doc. No. 28), Deposition of Brenda Penn, pp. 12-13, 19-20, 82-83.
[2] Id., Affidavit of Phyllis Billups, p. 2 & attachments (April 25, 2003 Memorandum from John Crow); Affidavit of Terrance McDonnell, p. 1. Under ADOC rules, employees are tardy unless they are at their assigned post when the shift begins. Plaintiff's brief in opposition to Defendants' motion for summary judgment (Doc. No. 33), Deposition of Brenda Penn, p. 37.
[3] Defendants' brief in support of summary judgment (Doc. No. 28), Affidavit of Phyllis Billups, p. 2.
[4] Plaintiff's brief in opposition to defendants' motion for summary judgment (Doc. No. 33), Deposition of Brenda Penn, pp. 31-40. ADOC does not have a policy that requires advance notice to employees of their assignment. Id., pp. 33-36.
[5] Defendants' brief in support of summary judgment (Doc. No. 28), Affidavit of Phyllis Billups, p. 3.
[6] Id., Ex. 1, EEOC charge.
[7] Penn maintains that Rowe fell asleep at the wheel. Id., Deposition of Brenda Penn, p. 118-20. Her testimony, however, consists of inadmissible hearsay, see Fed.R.Evid. 802, so the court cannot consider it on summary judgment, see Fed.R.Civ.P. 56(e).
[8] Plaintiff's brief in opposition to defendants' motion for summary judgment (Doc. No. 33), Deposition of Brenda Penn, pp. 110-121.
[9] Defendants' brief in support of summary judgment (Doc. No. 28), Affidavit of Phyllis Billups, p. 4 & attachments (May 23, 2003 Memo to Jerome Turner and May 30, 2003 Memo to Jerome Turner).
[10] Id., Deposition of Brenda Penn, pp. 82-89.
[11] Id., pp. 89-91.
[12] Plaintiff's brief in opposition to defendants' motion for summary judgment (Doc. No. 33), Ex. H, July 7, 2004 Memo to Brenda Penn.
[13] Id., Ex. F, Minutes from July 8, 2004 Staff Meeting.
[14] Id., Ex. B, EEOC Dismissal and Notice of Rights.
[15] For example, an employee may state a prima-facie case of disparate treatment by showing (1) she belongs to a protected group, (2) she experienced an adverse employment action, (3) her employer filled her position with someone outside the protected class, and (4) she was qualified for her job. Bogle v. Orange County Bd. of County Comm'rs, 162 F.3d 653, 656-57 (11th Cir.1998). A plaintiff can also state a prima-facie case by showing (1) she belongs to a protected group, (2) she experienced an adverse employment action, (3) her employer treated similarly situated employees outside her protected group more favorably, and (4) she was qualified for the job. Holifield v. Reno, 115 F.3d 1555, 1562 (11th Cir.1997)
[16] Penn also relates an episode in February 2003 when she was required to work in the control tower with the lights off. This requirement is in accordance with the Standard Operating Procedures of ADOC. Apparently, her supervisor even found her a flashlight when she stated that she did not have one. Defendants' brief in support of summary judgment (Doc. No. 28), Deposition of Brenda Penn, pp. 53-59. To the extent this incident is relevant at all, it certainly does not support her gender or age-discrimination claims. Penn offers no evidence she was treated differently from other employees, offers no explanation why it would constitute an adverse-employment action, and offers no evidence that the episode was in any way related to her gender or age.
[17] Penn also contends that the decision to suspend her from overtime violated ADOC policies and procedures, so it must be pretextual. No evidence supports this contention. The record evidence merely reflects that the Commissioner of ADOC, in response to her complaint about being suspended from the Work Center, determined that "effective immediately" no employee could be denied approval without approval from the Commissioner's office.
Even if her contention were supported by the record, it does not help her cause. Her supervisors were just as likely to violate ADOC procedures to prevent an unreliable person from working on their shift as they were to do so because she was a woman or over 40 years old. Simply put, the fact that her supervisors may have violated ADOC procedures sheds no light on the reasons behind their decision.
Finally, ADOC suspended Jerome Turner, a male under the age of 40, from overtime for nearly identical conduct. This undermines any inference that ADOC violated its policies because of Penn's gender or age.
[18] Crow raised his voice when he confronted Penn on May 7, 2003, stuck his finger in her face, and accused Penn of thinking she was above the rules.
[19] Penn claims that Crow has a history of harassing women. In fact, his ex-wife filed two complaints alleging domestic violence. These charges were either dismissed or resulted in verdicts of acquittal. Plaintiff's brief in opposition to defendants' motion for summary judgment (Doc. No. 33), Deposition of John Crow, pp. 59-65; Ex. K. This alleged conduct occurred at home, not in the employment context, and allegedly involved a significant other, not a co-worker. Plus, none of these allegations can be substantiated. Thus, they are not sufficiently probative of Crow's relationship with women in the workplace to imply a discriminatory animus against Penn.
[20] The court notes that in Gupta v. Fla. Bd. of Regents, 212 F.3d 571, 590 (11th Cir.2000), the court held that an approximately seven-month gap between a complaint of sexual harassment (protected expression) and a denial of an extension of tenure and denial of a merit raise (adverse actions) might, by itself, be sufficient to establish causation. To the extent Gupta is still good law in light of Clark County, the denial of the extension of tenure and the denial of the merit raise were actually the first opportunity the employer had to retaliate against the employee following her protected conduct. In contrast, the employers in the Clark County and Higdon cases and in Penn's case (as well as every other case cited here) had ample opportunity to engage in the same type of alleged retaliation during the period between the protected expression and the alleged retaliation. Therefore, any inference of causal connection is undermined because the employer could have, but chose not to, retaliate during the lengthy interval.
[21] Although she does not address it in her brief, she filed a grievance with ADOC because she had difficulties scheduling overtime at the Work Center in September 2004. Apparently, she requested certain overtime shifts, but the shift supervisor did not add her to the schedule. Defendants' brief in support of summary judgment (Doc. No. 28), Deposition of Brenda Penn, pp. 92-94; Ex. 3, Grievance, ¶ 4.
It is not clear that this constitutes an adverse-employment action, particularly because Penn declined several opportunities to work overtime and did not return a phone call from the shift supervisor. Defendants' brief in support of summary judgment (Doc. No. 28), Ex. 3, Grievance, Statement of Demetrius Holstick. Even if it did constitute an adverse-employment action, Penn cannot prove a causal link between this and her EEOC charge because it is even more temporally removed than the one-month suspension.
The court notes that she might be able to prove a causal link between the unavailability of overtime and her appeal of the denial of overtime at Work Center. However, that internal grievance is not protected expression under Title VII or the ADEA because she did not claim her one-month suspension was based on age or gender or was retaliatory. By her own admission, she claimed the suspension was caused by mistaken identity.
[22] In her deposition, Penn states that another corrections officer told her that Warden Daniels, who ran the Work Center, said in a staff meeting that he did not want Penn working at the Work Center because she had "filed papers" against Billups. Plaintiff's brief in opposition to defendants' motion for summary judgment (Doc. No. 33), Deposition of Brenda Penn, p. 105. Although this would be evidence, even direct evidence, of retaliation, Penn's testimony is inadmissible hearsay, see Fed.R.Evid. 802. Thus, the court will not consider it on summary judgment. See Fed. R.Civ.P. 56(e).
Also, Penn alleges that a sergeant on duty at the Work Center cursed her out and yelled at her during a phone call. Defendants' brief in support of summary judgment (Doc. No. 28), Ex. 3, Grievance, ¶ 4. Nothing in the record suggests that this sergeant was involved in either decision to suspend Penn from overtime. Moreover, this alleged exchange occurred several months after Penn had been reinstated to overtime at the Work Center and at least a year after she had been reinstated to overtime on Kilby's third shift. Finally, Penn does not dispute that the sergeant merely said, "damn you," when complaining that Penn was trying to tell him how to set up the schedule for his shift. He never mentioned her age, gender, or her EEOC charge in conversations with her. This exchange is irrelevant.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2510456/
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411 F.Supp.2d 434 (2006)
In re GEOPHARMA, INC. SECURITIES LITIGATION
This Document Relates To: All Actions.
No. 04 Civ. 9463(SAS).
United States District Court, S.D. New York.
January 27, 2006.
*435 *436 Samuel H. Rudman, David A. Rosenfeld, Mario Alba, Jr., Lerach Coughlin Stoia Geller Rudman & Robbins LLP, Melville, NY, Jeffrey A. Berens, Kip B. Shuman, Dyer & Shuman, LLP, Denver, CO, for Plaintiffs.
Robert A. Scher, Jeremy L. Wallison, Foley & Lardner LLP, New York, NY, for Defendants.
OPINION AND ORDER
SCHEINDLIN, District Judge.
I. INTRODUCTION
This case presents a difficult but interesting question. When a defendant makes a false statement in connection with the purchase or sale of securities, that statement is only actionable if the defendant acted with a culpable state of mind. The easiest case is when a plaintiff alleges that a defendant intentionally made a demonstrably false statement. When this allegation is made, a court need not consider whether a defendant acted recklessly or was merely negligent.
Moving up the scale, a plaintiff can also maintain a securities fraud action premised on a defendant's recklessness. Courts have defined recklessness as conduct that is "highly unreasonable, representing an extreme departure from the standards of ordinary care to the extent that the danger was either known to the defendant or so obvious that the defendant must have been aware of it."[1] In such cases, intent is sufficiently pled when a plaintiff alleges that a defendant had access to information contradicting the false statement, failed to check information it had a duty to monitor, or ignored obvious signs of fraud.[2] Here, too, a court is not required to analyze whether the conduct at issue was negligent as opposed to reckless, because such allegations preclude a finding of negligence.
The issue becomes more difficult when considering a misleading statement, as opposed to a false statement. A "misleading" statement is one that is accurate and truthful but only as far as it goes. Even a literally true statement becomes misleading when it omits material information that could cause a reasonable investor to be misled about the nature of the investment in question.[3] Of course, such a statement is only actionable when the defendant acted with the requisite intent. It is entirely *437 possible for a defendant to make an honest but negligent mistake in judging how much detail needs to be included in public statements in order to avoid misleading the market. The purpose of section 10(b) and Rule 10b-5 is to punish knowing fraud or reckless behavior, not mistakes that arise from negligent or even grossly negligent behavior.[4]
Thus, in such cases it is especially important to rigorously apply the standard for pleading intent, because defendants should not be required to incur litigation expenses every time an aggrieved investor claims that an accurate statement was rendered misleading based on the absence of additional information.[5] Similarly, if courts are too quick to infer culpability whenever investors are confused by a defendant's statement, the focus of the intent inquiry could shift from that defendant's state of mind to public perceptions.
The question addressed in this Opinion, then, is how a court should determine whether the alleged failure to disclose additional information is intentional, reckless, or negligent, when the alleged misleading statement is literally true. The long answer is found by reading the entire Opinion. The short answer is that a court must consider the viability of the alleged scheme to defraud, the entire alleged misstatement (not just certain phrases), the context in which the statement was made, the public's access to additional information, the defendant's response to any market confusion resulting from the alleged misstatement, and any other indicia that the defendant acted with fraudulent intent. If all of these factors are given full consideration, the mist created by creative counsel dissipates and the intent, or lack of it, is revealed.
II. BACKGROUND
On September 30, 2005, I dismissed this putative class action brought on behalf of certain purchasers of common stock in GeoPharma, Inc. ("GeoPharma"), a publicly-traded pharmaceutical company, without prejudice.[6] Plaintiffs have now filed an Amended Complaint, again alleging violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission ("SEC").[7] All defendants again move to dismiss.
*438 This suit arises from a December 1, 2004 GeoPharma press release (the "December 1 Release"), announcing Food and Drug Administration ("FDA") approval of Mucotrol, a new product for the treatment of mucositis.[8] In pre-class period statements during the summer of 2004, GeoPharma had disclosed to investors that it was developing a "drug" to fight mucositis. However, when GeoPharma applied for FDA approval of this product, it sought approval for a less lucrative "medical device." GeoPharma obtained approval for its medical device on November 24, 2004, and disclosed this approval in the December 1 Release. But in the release, GeoPharma referred to Mucotrol as neither a drug nor a medical device, instead employing the term "prescription product."
Although Mucotrol is in fact a product available by prescription, investors apparently believed that GeoPharma obtained approval of a new drug, and immediately drove GeoPharma's stock to its highest price ever. But within hours of the December 1 Release, the FDA made clear that GeoPharma had merely obtained approval for a medical device. By the evening of December 2, GeoPharma's stock dropped back to its pre-Release price, and plaintiffs filed their first suit later that day.
III. THE AMENDED COMPLAINT
The Amended Complaint sets forth similar allegations as the previously-dismissed Complaint. The allegations were detailed in the September 30 Opinion,[9] but I will briefly outline the pertinent facts.
The putative class period is December 1, 2004 through December 2, 2004.[10] In addition to the Company, plaintiffs name three individual defendants: President Kotha S. Sckharam, CEO Mihir K. Taneja, and Chairman of the Board of Directors Jugal Taneja.[11] All three defendants held these positions during the putative class period.[12]
A. Pre-Class Period Statements Regarding Mucotrol
On June 29, 2004, GeoPharma disclosed that it was conducting "formulation work" and "preliminary double blind placebo controlled clinical studies" on a patent-pending drug to treat mucositis.[13] GeoPharma again referred to a mucositis drug in a July 13, 2004 press release, stating that it had completed a clinical study to evaluate such a drug.[14] This press release also stated that the drug's "market potential is estimated to be at $300 million to $500 million."[15]
However, on September 1, 2004, GeoPharma filed an application with the FDA seeking approval to market a medical device by the name of Mucotrol Concentrated Oral gel wafer ("Mucotrol").[16] The FDA granted approval for Mucotrol to be marketed as a medical device in a letter dated November 24, 2004 ("FDA Letter").[17] Defendants did not disclose either *439 the September application or the FDA's approval of a medical device until December 2, 2004.[18]
B. The December 1 Release
On December 1, 2004, prior to the opening of the markets, GeoPharma issued a press release entitled "GeoPharma, Inc. Receives FDA Approval for Mucotrol Manages Mucositis Caused by Radiation and Chemotherapy Required in Cancer Treatment."[19] The December 1 Release stated in pertinent part that "GeoPharma, Inc. today announced that Belcher Pharmaceuticals, Inc., a wholly-owned subsidiary of GeoPharma, Inc., has received approval from the [FDA] for Mucotrol, a prescription product for the management of oral mucositis/stomatitis."[20] The Release further stated that, given the number of people who suffer from mucositis, "oncology market potential for Mucotrol sales are between $75 million and $300 million per annum and the estimated global market is between $250 million and $1 billion per annum."[21]
Immediately after the December 1 Release, GeoPharma's stock price reached an all-time high of $11.25 per share, an increase of 153%.[22] Volume was extraordinary 42 million shares changed hands on December 1, as opposed to an average daily volume of 22,000 shares.[23]
C. Corrective Disclosures
Responding to media inquiries immediately after the December 1 Release, an FDA spokesperson erroneously stated that the agency had no record of any approval for Mucotrol.[24] After this FDA statement, the price of GeoPharma stock tumbled. When trading was halted at 1:30 p.m. on December 1, the stock had fallen to $6.81 per share.[25] The FDA then clarified that Mucotrol had received marketing approval as a medical device.[26]
The next morning, GeoPharma issued another press release to address the confusion caused by the December 1 Release, stating that:
The Company's application to the FDA requested approval for [Mucotrol] to be approved to be marketed for the mechanical action indicated for the management of pain by soothing oral lesions caused by chemotherapy or radiotherapy mucositis/stomatitis, oral irritations due to oral surgery, braces or dentures in addition to diffusing apthous ulcers. Although it is estimated that approximately 300,000 cancer patients in the U.S. suffer from mucositis, revenues from the Company's distribution of Mucotrol0 cannot be estimated at this time.[27]
*440 After the markets closed on December 2, GeoPharma and two of the individual defendants held a conference call with investors to discuss the December 1 Release. On the call, defendants Mihir Taneja and Sekharam stated that they had not yet attempted to estimate Mucotrol's potential revenues.[28] Asked why previous company releases referred to development of a drug to treat mucositis when Mucotrol was in fact a device, Sekharam stated that GeoPharma initially tried to develop a drug treatment but ended up with a device.[29] After the conference call, GeoPharma's share price fell 12.48% in after-market activity on December 2, to $6.45 per share.[30] The shares fell to $5.46 per share the next day.[31]
D. Scienter Allegations
Plaintiffs allege that in 2004, GeoPharma embarked on a strategy to transition from a producer of dietary supplements into a drug manufacturer a transition requiring capital infusions.[32] To this end, GeoPharma entered into three separate financing arrangements in the Spring of 2004. The terms of each agreement vary, but these agreements generally provide that, if GeoPharma's common stock attained a certain average closing price for at least five consecutive days, "[d]efendants could force a portion of its note holders and preferred shareholders to accept shares of [GeoPharma's] common stock in lieu of cash payments."[33] Plaintiffs allege that defendants, frustrated by GeoPharma's inability throughout 2004 to attain the required closing price, embarked on a scheme that would relieve GeoPharma of its obligation to "make expensive monthly cash payments to the Company's note holders and preferred stock owners."[34]
Plaintiffs also allege that defendants knew, or were reckless in not knowing, that the December 1 Release was materially false or misleading. Specifically, plaintiffs allege that defendants' scienter is evidenced by their failure to disclose their knowledge of (1) GeoPharma's September 2004 application for FDA approval of Mucotrol as a medical device; (2) the November 24 FDA approval of Mucotrol as a medical device; and (3) GeoPharma's use of revenue projections consistent with a new drug, rather than a medical device.[35]
IV. LEGAL STANDARD
A. Standard of Review
A motion to dismiss pursuant to Rule 12(b)(6) should be granted only if "`it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief.'"[36] When deciding a motion to dismiss, courts must accept all factual allegations in the complaint as true, and draw all reasonable inferences in plaintiff's favor.[37] Although the plaintiff's allegations are taken as true, *441 the claim may still fail as a matter of law if it appears beyond doubt that the plaintiff can prove no set of facts in support of its claim which would entitle it to relief, or if the claim is not legally feasible.[38]
B. Scienter
A prima facie case of securities fraud under section 10(b) and Rule 10b-5 requires that "the defendant, in connection with the purchase or sale of securities, made a materially false statement or omitted a material fact, with scienter, and that plaintiff's reliance on defendant's action caused injury to the plaintiff."[39] The requisite state of mind, or scienter, in an action under section 10(b) and Rule 10b-5 is "`an intent to deceive, manipulate or defraud.'"[40]
Under the Private Securities Litigation Reform Act ("PSLRA"), the complaint must "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind."[41] "Although speculation and conclusory allegations will not suffice, neither do we require `great specificity' provided the plaintiff alleges enough facts to support `a strong inference of fraudulent intent.'"[42] Facts giving rise to a strong inference of scienter can be alleged by one of two methods: the plaintiff may plead "motive and opportunity to commit fraud" or "strong circumstantial evidence of conscious misbehavior or recklessness."[43]
1. Motive and Opportunity
"Motive would entail concrete benefits that could be realized by one or more of the false statements and wrongful nondisclosures alleged," while "[o]pportunity would entail the means and likely prospect of achieving concrete benefits by the means alleged."[44] "Motives that are generally possessed by most corporate directors and officers do not suffice; instead, plaintiffs must assert a concrete and personal benefit to the individual defendants resulting from the fraud."[45] The desire "to inflate stock prices while [defendants] sold their own shares" may support a viable claim.[46] Some courts have also found that a company's desire to inflate its stock price in order to complete a stock-based acquisition can establish scienter.[47] As for opportunity, courts often assume that corporations and their officers have the opportunity to commit fraud,[48] but opportunity may not exist if the alleged scheme had no chance of succeeding.[49]
*442 2. Conscious Misbehavior or Recklessness
When plaintiffs have failed to plead motive and opportunity, "it is still possible to plead scienter by identifying circumstances indicating conscious behavior [or recklessness] by defendant, though the strength of the circumstantial allegations must be correspondingly greater."[50] To allege recklessness, the facts must "approximate an actual intent to aid in the fraud being perpetrated."[51] Plaintiff must allege facts showing that the defendants' conduct was "highly unreasonable, representing an extreme departure from the standards of ordinary care to the extent that the danger was either known to the defendant or so obvious that the defendant must have been aware of it."[52] Recklessness is often shown when plaintiff "specifically alleges defendants' knowledge of facts or access to information contradicting their public statements."[53]
V. DISCUSSION
A. Scienter
1. Motive and Opportunity
In the September 30 Opinion, I held that plaintiffs' motive allegations failed "for a fundamental reason the alleged scheme could not possibly have succeeded. The FDA approval of Mucotrol was public information, and it would have been obvious ex ante to defendants that financial reporters and/or analysts would contact the FDA immediately after the December 1 Release (which is of course what occurred)."[54] Thus, "[t]here was never the slightest chance that GeoPharma stock could be inflated by the December 1 Release for anywhere close to the five days needed to carry out the alleged scheme."[55]
Plaintiffs assert that this holding amounted to improper hindsight analysis.[56] Plaintiffs are mistaken. The September 30 Opinion did not rely on the fact that the scheme happened to fail in this case, but rather on whether a rational defendant could have expected that the alleged scheme could succeed.[57] And given that *443 the December 1 Release made a rapidly verifiable representation about FDA action already taken, plaintiffs' cases involving misrepresentations about the likelihood of future FDA action are inapposite.[58] When evaluating motive and opportunity allegations, the Second Circuit authorizes inquiry, even at the motion to dismiss stage, as to whether plaintiffs allege a scheme that has any chance of achieving its putative ends.[59]
That said, plaintiffs have clarified their allegations in a manner that merits reconsideration of this aspect of the September 30 Opinion. Plaintiffs note that the "target price that triggered the conversion feature [of one of the securities purchase agreements] was the average closing price of five consecutive trading days."[60] "Therefore, even when the full extent of the fraud was discovered after only two days, as was the actual case here, the scheme could have succeeded."[61] Given this clarification, it is conceivable, although extremely unlikely, that defendants might have expected to confuse the market for the required length of time, and thus inflate GeoPharma stock by the required amount.[62]
Even assuming arguendo that the alleged scheme could have succeeded, plaintiffs have not sufficiently addressed the independent grounds for rejecting their motive and opportunity allegations. The September 30 Opinion noted that "[c]ourts in this Circuit have consistently held that allegations that a defendant was motivated to commit securities fraud by a desire to reduce its debt burden, or otherwise reduce borrowing costs, are insufficient to raise a scienter inference."[63] "Plaintiffs' *444 allegations that GeoPharma sought to reduce its cash outlays for debt service fall squarely into this category."[64]
Plaintiffs offer two arguments, but no new allegations, to dispute this holding. Plaintiffs first repeat their argument from the first motion to dismiss that the desire to inflate the stock to activate the conversion feature of GeoPharma's financing agreements is a valid motive because it represents a "specific corporate transaction."[65] This argument is no more convincing now, given that plaintiffs again rely only on cases where motive was alleged because the defendant company intended to carry out corporate acquisitions.[66]
Plaintiffs also assert that GeoPharma's motive, properly understood, was to achieve its strategic goal of "transforming the company into a generic drug manufacturing and distribution company," not merely to reduce its debt load and maintain a sound balance sheet.[67] In response, defendants correctly note that "transforming [GeoPharma] into a generic drug manufacturing company [is an invalid motive because it] would benefit all shareholders generally, not just defendants."[68] In fact, the only tangible benefit from the alleged scheme would be lower debt service. Plaintiffs' new characterization of the same allegations cannot change the result after all, any otherwise-invalid motive can usually *445 be framed as part of some "strategic goal."[69] Moreover, the Amended Complaint itself emphasizes that it was important for GeoPharma to activate the conversion features because of its limited cash reserves.[70]
Finally, the Amended Complaint, like the earlier Complaint, is devoid of motive allegations against the individual defendants.[71] Defendants note that the alleged scheme would have harmed the individual defendants, because converting debt into equity would dilute their stock holdings.[72]
2. Conscious Misbehavior or Recklessness
Plaintiffs contend that, considered in the context created by defendants' own statements as well as surrounding suspicious circumstances, the Amended Complaint adequately pleads defendants' intent to mislead or recklessness.[73] While GeoPharma's behavior as depicted in this Complaint may be less than ideal for a publicly-traded corporation, plaintiffs have failed to meet the pleading burden imposed by the PSLRA. For the following reasons, and even considering plaintiffs' allegations as a whole,[74] I cannot conclude that defendants exhibited the "extreme departure from the standards of ordinary care" characteristic of recklessness.[75]
*446 a. Failure to Disclose FDA Letter
Plaintiffs have described the prescription product statement as an affirmative misstatement, and argued the recklessness issue through that lens. However, the prescription product statement is best analyzed as an omission. While GeoPharma disclosed its FDA approval for Mucotrol, it omitted the more detailed and specific information regarding Mucotrol's approval as a medical device. The true gravamen of plaintiffs' allegations, then, is that the prescription product statement was "misleading, though not technically false, [because it amounted] to a half-truth by omitting some material fact."[76]
Plaintiffs ask this Court to infer scienter from the fact that the December 1 Release failed to disclose the precise nature of the FDA approval obtained by GeoPharma, as embodied in the November 24 FDA Letter.[77] Defendants do not and cannot dispute that GeoPharma was under a duty to disclose sufficient detail about Mucotrol to render the December 1 Release not misleading.[78] Thus, enough detail about Mucotrol had to be disclosed in the December 1 Release to achieve that goal. In granting the initial motion to dismiss, I held that "a reasonable investor could have been misled by failing to absorb the fine distinction between the terms `drug' and `prescription product'" a conclusion reached at the pleading stage, with all reasonable inferences drawn in plaintiffs' favor.[79]
But a failure to disclose particular information, by itself, can only constitute recklessness if there was an obvious duty to disclose that information.[80] Given what defendants did disclose in the December 1 Release, there was no such obvious duty to disclose the FDA Letter. Therefore, plaintiffs must allege something more to suggest that defendants intended to confuse the market by omitting material information from the December 1 Release.[81] For several reasons, examining plaintiffs' allegations as a whole compels the conclusion that defendants did not act recklessly when they issued the December 1 Release.
First, the tenuous plausibility of the alleged scheme substantially weakens the overall strength of plaintiffs' scienter allegations.[82] Although I have now found that the alleged scheme had a marginal chance of success, plaintiffs' theory of the case is still internally inconsistent.[83] Plaintiffs assert that:
*447 In the end, it was the enormous trading volume and the unprecedented 150% stock price increase that caused reporters to take notice [of the December 1 Release] and ultimately dig deeper. Absent the one or two persistent reporters that decided to challenge Defendants' statements and to press the FDA (and presumably GeoPharma) for answers, the truth may not have become known for some time.[84]
Once again, plaintiffs are mistaken. If defendants intended to mislead the market into believing that Mucotrol was a drug, and if they hoped to inflate their share price sufficiently to convert the debt into equity, they must have also realized that any dramatic increase in share price would cause reporters to "dig deeper," check with the FDA,[85] and quickly uncover the scheme. Indeed, in this instance, the 150% increase in share price attracted sufficient media attention that the December 1 Release was clarified, and the inflated stock price dissipated, within hours.
Second, plaintiffs also allege that the use of the word "formula" to describe Mucotrol in the December 1 Release "reinforced the market's belief that Mucotrol was a drug . . . and can only lead to a stronger inference that Defendants did not merely innocently overlook the import of a single word."[86] However, as defendants note, "if the language defendants' used . . . in the December 1[] Release can be probative of intent, then surely it is conclusively exonerating that defendants also said [in the December 1 Release] that Mucotrol only `manages' mucositis a description that, on plaintiffs' [own] allegations, definitively [signals to investors] that Mucotrol could not be a drug."[87]
Indeed, the Complaint notes that "topical palliative agents, such as Mucotrol, [] are only able to help manage infections and pain resulting from mild-to-moderate oral mucositis . . . whereas a drug actually treats the oral mucositis."[88] Given the apparently clear distinction between "manage" and "treat," the use of the former term in the December 1 Release suggests that defendants were forthright in disclosing that they had not obtained approval for a drug that treats mucositis.[89]
*448 Finally, GeoPharma was not hiding anything from the market when it issued the December 1 Release, which drew the market's attention to the very source of information (the FDA) that would "unravel" the entire scheme. The true nature of the FDA approval of Mucotrol was reasonably available to the public on December 1, and for this reason as well it is difficult to find strong circumstantial evidence of recklessness, especially when GeoPharma promptly issued a new press release, and scheduled a conference call, once the confusion caused by the December 1 Release became apparent.[90]
In sum, defendants had no clear duty to disclose the information in the FDA Letter as part of the December 1 Release. Thus, without more, the failure to disclose this information cannot constitute reckless behavior.[91] Rather, the most that can be inferred from this omission is that defendants were negligent in failing to anticipate how the market would respond to the prescription product statement. To infer scienter from an arguably material omission, in the face of allegations that cut against such an inference, and in the absence of valid motive allegations, would be to expand the anti-fraud provisions of the securities laws beyond their intended scope.[92]
b. Market Potential Statement
Plaintiffs also argue that the market potential statement in the December 1 Release was false and/or misleading. In the September 30 Opinion, I held that the market potential statement was not actionable because it was either: (1) a forward-looking projection of revenues, protected by the PSLRA's safe harbor as plaintiffs failed to plead that it was made with actual knowledge of its falsity;[93] or (2) that it was a true statement of the total present *449 market for all products that address mucositis in any way. Although plaintiffs allege in their Complaint that the statement was a revenue projection,[94] they argue in their opposition to the motion to dismiss that the market projection was a statement of present fact, whether or not knowable with certainty.[95]
Whichever it is, plaintiffs argue that they have alleged that defendants acted with the requisite intent to deceive based on admissions by defendants that they had not yet attempted to estimate Mucotrol's revenues at the time they issued the December 1 Release.[96] Defendants, not surprisingly, agree that they had no basis to estimate revenues. They argue, however, that this is irrelevant because the statement is properly read not as a revenue projection, but as an accurate factual statement about the total size of the market for all mucositis products.[97]
Given the full context of the December 1 Release, and the complete transcript of the December 2 conference call provided in the Amended Complaint, plaintiffs' interpretation of the statement is not reasonable, even when viewed in the light most favorable to the plaintiffs. The market potential statement is explicitly based on the fact that "[i]t is estimated that approximately 300,000 cancer patients in the U.S. suffer from mucositis associated with cancer treatments."[98] It is unreasonable to construe the statement to mean that GeoPharma expected to derive revenue from every one of those patients. As I noted during oral argument, "Ford Motor [Company] could say `if I sold every car in the country, there are 300 million car purchasers, that's how many sales there would be, but that's not [a] revenue projection because nobody thinks everybody is going to buy a Ford."[99]
During oral argument, plaintiffs struggled to articulate exactly how they viewed the market potential statement, finally settling on "the size of the potential market for Mucotrol sales."[100] However, this is nothing more than a revenue projection by another name. Even if the potential market is a statement of present fact, plaintiffs have still not supported their allegation that this statement is either false or misleading. While plaintiffs allege that defendants lacked a reasonable basis for the *450 potential market statement,[101] the basis was provided by the Release's recitation of the total number of mucositis sufferers, a figure plaintiffs do not dispute. Because this statement is neither false nor misleading, it is not actionable.
c. Failure to Disclose Competing Medical Devices
Because plaintiffs did not amend their allegations, they simply reassert their argument that GeoPharma's failure to disclose the existence of other medical devices managing mucositis in the December 1 Release was misleading.[102] This argument was fully addressed (and rejected) in the September 30 Opinion, and there is no reason to address it again.[103]
d. Other Scienter Allegations
Plaintiffs make several other scienter allegations not covered by the foregoing discussion. These allegations do not speak directly to defendants' intent in making the prescription product statement, but instead charge defendants with generally suspicious conduct outside the putative class period. However, even these allegations do not satisfy the required pleading standard.
Plaintiffs first allege that scienter is established by defendants' failure to disclose, prior to the start of the class period on December 1, that Mucotrol had evolved from a drug into a medical device.[104] GeoPharma's last public statement regarding a mucositis product before the December 1 Release, referring to a drug, was in August 2004. In September 2004, however, GeoPharma applied to the FDA for approval as a medical device. "Defendants' decision to allow untrue and misleading information to remain in the market for at least four and a half months is probative of scienter."[105] But plaintiffs fail to explain why an alleged actionable omission prior to the class period adequately alleges scienter as to a statement during the class period.[106] Moreover, plaintiffs' related allegation that GeoPharma violated its duty to disclose the FDA Letter within four days of its receipt on November 24 is mistaken.[107] GeoPharma *451 complied with the relevant SEC regulation, which requires disclosure within four business days of a "material corporate event."[108]
Moving farther afield, plaintiffs make several allegations regarding GeoPharma's "prior history of making inaccurate representations in order to capitalize on health fears."[109] Plaintiffs also allege that a member of GeoPharma's Board of Directors resigned without explanation on December 3, 2004.[110] However, plaintiffs barely mention these allegations in their opposition brief,[111] and in light of the overall weakness of the scienter inference created by the Amended Complaint, these allegations are unavailing.
B. Group Pleading Doctrine
One issue remains which I will briefly address for the sake of completeness, although it is admittedly dicta given plaintiffs' failure to allege scienter.[112] In the first Complaint, plaintiffs failed to make any specific allegations against defendant Jugal Taneja. Rather, plaintiffs invoked the "group pleading doctrine," which allows reliance on "a presumption that statements in . . . press releases, or other group-published information, are the collective work of those individuals with direct involvement in the everyday business of the company."[113]
Although quite limited in scope, this doctrine may apply to outside directors such as Jugal Taneja, who "can fall within the group pleading presumption when, by virtue of their status or a special relationship with the corporation, they have access to information more akin to a corporate insider."[114] However, the September 30 Opinion held that "[a] bare allegation that Jugal Taneja is Chairman of the Board, in the absence of any specific allegation that he played a role in the preparation of the December 1 Release, or otherwise took part in the day-to-day operations of GeoPharma, does not justify applying the group pleading doctrine."[115]
*452 In the opposition brief to the first motion to dismiss, plaintiffs introduced several new facts regarding Jugal Taneja. Specifically, plaintiffs asserted that (1) Jugal Taneja is a large GeoPharma shareholder; (2) he is the father of defendant Mihir Taneja; (3) he signed a Form 10-K referenced in the Complaint; and (4) he had a consulting agreement with GeoPharma. While noting that a complaint cannot be amended by the opposition brief to a motion to dismiss, I opined that "it is unlikely that these new facts would establish that Jugal Taneja had a hand in the preparation of the December 1 Release, or had a special relationship with GeoPharma giving rise to an inference that he had access to information akin to a corporate insider."[116]
The facts introduced in plaintiffs' first opposition brief are now included in the amended complaint.[117] Notably, plaintiffs allege that Jugal Taneja had a consulting agreement with GeoPharma for which he was paid $200,000 per year exceeding the salaries of both of the other individual defendants, the highest officers in the company.[118] Plaintiffs also specify that Jugal Taneja owns 31% of GeoPharma common stock.[119]
On this basis, plaintiffs have now succeeded in bringing Jugal Taneja within the scope of the group pleading doctrine. In Schnall v. Annuity & Life Re (Holdings), Ltd., the court applied the group pleading doctrine to a Chairman of the Board, active in company affairs, who also had a significant consulting agreement with the company, and who often signed SEC Form 10-K's for the defendant company.[120] Now that plaintiffs have alleged that Jugal Taneja owned almost one third of GeoPharma's stock, he also can be compared to the defendant from In re Independent Energy Holdings, where I held that a co-founder and largest shareholder of the defendant company was within the group pleading doctrine.[121] While Jugal Taneja is not alleged to have taken part in the preparation of the December 1 Release, the Complaint's allegations of his large ownership share, combined with a consulting agreement that pays him more than any employee of the company, give rise to the inference that he has a sufficient special relationship to GeoPharma to apply the group pleading doctrine.[122]
C. Leave to Amend
Although plaintiffs again request leave to amend, further amendment would be *453 pointless. Having already been given the opportunity to replead, plaintiffs, who are represented by highly experienced counsel, have surely presented all relevant facts by now, and have twice failed to plead scienter.[123] Accordingly, the Amended Complaint is dismissed with prejudice.[124]
D. Rule 11
Upon final adjudication of a securities fraud action, the PSLRA requires the court to make findings regarding each attorney's compliance with Rule 11(b) of the Federal Rules of Civil Procedure.[125] As this Opinion and Order constitutes a "final adjudication" within the meaning of the PSLRA, I must make the required findings. Based on a preliminary review of the record, I do not believe that Rule 11 was violated in this case. Plaintiffs' contentions, although ultimately unsuccessful, were objectively reasonable and supported by colorable interpretations of existing precedent.[126]
Defendants may request the imposition of sanctions within ten days of the date of this Opinion and Order.[127] If such a request is made, plaintiffs need respond only if directed by the Court.
VI. CONCLUSION
For the foregoing reasons, defendants' motion to dismiss is granted, with prejudice. The Clerk of the Court is directed to close the pending motion.
SO ORDERED.
NOTES
[1] Rothman v. Gregor, 220 F.3d 81, 90 (2d Cir.2000) (citation omitted); see also Chill v. General Elec. Co., 101 F.3d 263, 269 (2d Cir. 1996) (quotation and citation omitted) (recklessness must "approximate an actual intent to aid in the fraud being perpetrated").
[2] See Novak v. Kasaks, 216 F.3d 300, 308 (2d Cir.2000).
[3] See McMahan & Co. v. Wherehouse Entm't., Inc., 900 F.2d 576, 579 (2d Cir.1990) ("[s]ome statements, although literally accurate, can become, through their context and manner of presentation, devices which mislead investors. For that reason, the disclosure required by the securities laws is measured not by literal truth, but by the ability of the material to accurately inform rather than mislead prospective buyers"); see also Fogarazzo v. Lehman Bros., 341 F.Supp.2d 274, 294 (S.D.N.Y.2004) (technically accurate statement can be actionable when material omissions render the statement a "half-truth"); cf. Halperin v. eBanker USA.com, Inc., 295 F.3d 352, 359 (2d Cir.2002) (claim of securities fraud not stated if "no reasonable investor could have been misled about the nature of the risk when he invested.") (emphasis in original).
[4] See Ernst & Ernst v. Hochfelder, 425 U.S. 185, 197-99, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976) (rejecting the view that section 10(b) and Rule 10b-5 reach negligent behavior); In re Livent, Inc. Sec. Litig., 148 F.Supp.2d 331, 349-50 (S.D.N.Y.2001) (citation omitted) (even gross negligence not covered by Rule 10b-5).
[5] See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1418 (3d Cir.1997) (Alito, J.) ("Public companies make large quantities of information available . . . as a result of both mandatory disclosure requirements and self-initiated voluntary disclosure. Large volumes of disclosure make for a high likelihood of at least a few negligent errors. To allow plaintiffs and their attorneys to subject companies to wasteful litigation based on the detection of a few negligently made errors found subsequent to a drop in stock price would be contrary to the goals" of Federal Rule of Civil Procedure 9(b), which mandates that fraud be alleged with particularity).
[6] See In re GeoPharma, Inc. Sec. Litig., 399 F.Supp.2d 432 (S.D.N.Y.2005) ("September 30 Opinion" or "GeoPharma"). Familiarity with this Opinion is assumed.
[7] See 15 U.S.C. §§ 78j(b), 78t(a); 17 C.F.R. § 240.10(b)(5).
[8] Mucositis is an inflammation of the mucosa in the mouth, caused by chemotherapy and radiation.
[9] See GeoPharma, 399 F.Supp.2d at 435-40.
[10] See Second Amended Class Action Complaint for Violations of Federal Securities Laws ("Complaint") ¶ 15.
[11] See id. ¶ 7(a)-(c).
[12] See id. ¶ 7(a).
[13] Id. ¶ 34.
[14] See id. ¶ 36.
[15] Id.
[16] See id. ¶ 40.
[17] See id. ¶ 41.
[18] See id. ¶ 54. Plaintiffs now allege that the FDA Letter was not posted on the agency's website until December 6, 2004. See id. ¶ 42.
[19] Id. ¶ 48.
[20] Id. (emphasis added) (the "prescription product statement").
[21] Id. ¶ 49 (the "market potential statement"). Plaintiffs also allege that GeoPharma had a duty to disclose the existence of competing medical devices in the December 1 Release. See id. ¶ 52(c).
[22] See id. ¶ 51.
[23] See id.
[24] See id. ¶ 53.
[25] See id.
[26] See id. Plaintiffs blame GeoPharma for the FDA's confusion: "Since GeoPharma had previously described Mucotrol as a drug, members of the media likely [initially] called the FDA's Center for Drug Evaluation and Research ("CDER") . . . [h]ence, employees at CDER had no reference to GeoPharma or Mucotrol in its databases." Id. ¶ 53 n. 3.
[27] Id. ¶ 54.
[28] See id. ¶¶ 58, 60-61.
[29] See id. ¶ 56.
[30] See id. ¶ 62.
[31] See id.
[32] See id. ¶¶ 23-24, 33, 35, 37-38.
[33] Id. ¶ 32; see also id. ¶¶ 25-31 (detailed terms of all three agreements). The lowest target average closing price was $7.19 per share. See id. ¶ 32.
[34] Id. ¶ 32.
[35] See id. ¶ 72.
[36] Nechis v. Oxford Health Plans, Inc., 421 F.3d 96, 100 (2d Cir.2005) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).
[37] See Ontario Pub. Serv. Employees Union Pension Trust Fund v. Nortel Networks Corp., 369 F.3d 27, 31 (2d Cir.2004) (citation omitted).
[38] See, e.g., Official Comm. of Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand, L.L.P., 322 F.3d 147, 158 (2d Cir.2003).
[39] Lawrence v. Cohn, 325 F.3d 141, 147 (2d Cir.2003) (quotation and citation omitted).
[40] Ganino v. Citizens Utils. Corp., 228 F.3d 154, 168 (2d Cir.2000) (quoting Ernst & Ernst, 425 U.S. at 193 n. 12, 96 S.Ct. 1375).
[41] 15 U.S.C. § 78u-4(b)(2).
[42] Ganino, 228 F.3d at 169 (quoting Stevelman v. Alias Research Inc., 174 F.3d 79, 84 (2d Cir.1999)).
[43] Kalnit v. Eichler, 264 F.3d 131, 138 (2d Cir.2001) (quotation and citation omitted). Accord Novak, 216 F.3d at 311.
[44] Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1130 (2d Cir.1994).
[45] Kalnit, 264 F.3d at 139.
[46] Id. Accord Novak, 216 F.3d at 307 (same).
[47] See Rothman, 220 F.3d at 94 (allegations that defendants inflated stock price with an eye towards acquiring another company helped support scienter inference); In re Vivendi Universal, S.A. Sec. Litig., 381 F.Supp.2d 158, 185 (S.D.N.Y.2003) ("Scienter may be imputed . . . when defendants were motivated to inflate company stock prices as a means to effectuate a specific acquisition that would not otherwise be possible.").
[48] See, e.g., In re Time Warner Sec. Litig., 9 F.3d 259, 269 (2d Cir.1993).
[49] See Shields, 25 F.3d at 1130.
[50] Kalnit, 264 F.3d at 142 (quotation and citation omitted).
[51] Chill, 101 F.3d at 269 (quotation and citation omitted).
[52] Rothman, 220 F.3d at 90 (citing Novak, 216 F.3d at 308). The Second Circuit has also noted that "[a]n egregious refusal to see the obvious, or to investigate the doubtful, may in some cases give rise to an inference of . . . recklessness." Chill, 101 F.3d at 269 (quotation and citation omitted).
[53] Novak, 216 F.3d at 308.
[54] GeoPharma, 399 F.Supp.2d at 449-50.
[55] Id. at 450.
[56] See Lead Plaintiffs' Opposition to Defendants' Motion to Dismiss the Consolidated Second Amended Class Action Complaint ("Pl. Opp.") at 1-3.
[57] See White v. H&R Block, Inc., No. 02 Civ. 8965, 2004 WL 1698628, at *8 (S.D.N.Y. July 28, 2004) (where plaintiffs alleged that defendant concealed true facts regarding pending litigation through "silence or anodyne references" to such litigation, defendant could not have profited from alleged scheme due to existence of publicly-available information on litigation); In re CDnow, Inc., Sec. Litig., 138 F.Supp.2d 624, 642 (E.D.Pa.2001) (motive allegations to conceal financial difficulties from potential merger partners fatally flawed because any concealment would not long survive due diligence scrutiny by a merger partner); In re Time Warner, Inc. Sec. Litig., 794 F.Supp. 1252, 1260 (S.D.N.Y.1992), rev'd on other grounds, 9 F.3d 259 (2d Cir.1993) (motive allegations "fatally flawed" when alleged scheme could not "rationally have been expected to succeed").
[58] See Irvins v. ImClone Sys., Inc., No. 02 Civ. 109, 2003 WL 21297285, at *1 (S.D.N.Y. June 4, 2003) (defendants knowingly made a fraudulent prediction about likelihood of future FDA approval of company's drug); In re Vicuron Pharm., Inc. Sec. Litig., No. Civ.A. 04-2627, 2005 WL 2989674, at *1, 7 (E.D.Pa. July 1, 2005) (same). Plaintiffs similarly misread Florida State Bd. of Admin. v. Green Tree Fin. Corp., 270 F.3d 645 (8th Cir.2001), because that court merely disagreed with the lower court's conclusion that, on the facts of that case, the alleged scheme was "so unlikely to succeed that the court would not infer that [defendant] tried it." Id. at 662; see also id. at 661-62 (reviewing allegations supporting inference that defendant did expect scheme to succeed).
[59] For example, in Shields, plaintiff alleged that defendant concealed a bank's poor financial condition. The court found that motive and opportunity was not adequately pleaded because the alleged scheme could not have hidden the bank's condition for very long:
It is hard to see what benefits accrue from a short respite from an inevitable day of reckoning. There is no claim here that false statements were made in an effort to sell off shares held by management, or to delay a criminal prosecution. For related reasons, the Complaint fails to allege a sufficient opportunity to derive a benefit from the alleged misstatements and nondisclosures: the ordinary course of bank business would lead to the review of the loan portfolios, as it did.
Shields, 25 F.3d at 1130.
[60] Pl. Opp. at 25 (citing Complaint ¶ 27).
[61] Id. (emphasis in original). Plaintiffs further explain that "if GeoPharma's stock had closed at $10 per share on December [first] and [second] (instead of the actual closing prices of $6.81 and $7.37, respectively), the average five day closing price would have been $7.25 per share (($10+$10+$5.46+$5.35+$5.44)/5 days) and the $7.19 target price [for one of the securities purchase agreements] reached." Id.
[62] See In re Time Warner, 9 F.3d at 269-70 (reversing district court's holding that plaintiffs' motive allegations were irrational, as record was "insufficient to preclude all possibility of developing proof that a motive in fact existed.") (emphasis added). But see infra notes 82-85 and accompanying text.
[63] GeoPharma, 399 F.Supp.2d at 450 (citing San Leandro Emergency Med. Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801, 814 (2d Cir.1996), rejecting motive allegations based on the theory that an inflated stock price would maximize marketability of debt securities issued during the class period).
[64] Id. (citing In re Duane Reade Inc. Sec. Litig., No. 02 Civ. 6478, 2003 WL 22801416, at *8-9 (S.D.N.Y. Nov.25, 2003) and Leventhal v. Tow, 48 F.Supp.2d 104, 115 (D.Conn. 1999)); see also Wilson v. Bernstock, 195 F.Supp.2d 619, 637 (D.N.J.2002) (alleged motive to ensure continued ability to borrow for operational costs insufficient); In re Crown Am. Realty Trust Sec. Litig., No. Civ.A. 95-202J, 1997 WL 599299, at *13-14 (W.D.Pa. Sept.15, 1997) (alleged motive to minimize interest rates insufficient).
[65] Pl. Opp. at 24.
[66] See In re Vivendi Universal, 381 F.Supp.2d at 185 (allegation that defendant intended to use inflated stock to "acquire and continue acquiring" several companies); Burstyn v. Worldwide Xceed Group, Inc., No. 01 Civ. 1125, 2002 WL 31191741, at *5 (S.D.N.Y. Sept. 30, 2002) (defendants' specific goal was to acquire companies). As noted in the September 30 Opinion, "the motive to acquire another company can support an inference of scienter because, unlike the motive to reduce borrowing costs, it is a motive not generally possessed by all corporations." GeoPharma, 399 F.Supp.2d at 451 (citation omitted).
Plaintiffs rely on In re Twinlab Corp. Sec. Litig., 103 F.Supp.2d 193, 206 (E.D.N.Y. 2000), noting that the court "accept[ed] motive to inflate the stock price to maximize revenue from the secondary offering, so as to provide it capital to retire debt." Pl. Opp. at 24 (quotation omitted). However, the corporate defendant in that case was attempting to inflate stock in order to (1) maximize revenue from a secondary stock offering, which would help retire debt and complete a corporate acquisition; as well as (2) to maximize the value of its stock for a stock-for-stock trade with another company. See In re Twinlab, 103 F.Supp.2d at 206. In finding these motive allegations sufficient, the Twinlab court relied on two cases involving public offerings of stock, and/or stock-for-stock trades, not the desire to reduce a company's debt load or debt service costs which is a generalized motive common to most, if not all, corporations.
[67] Pl. Opp. at 23-24.
[68] Reply Memorandum of Law in Further Support of Defendants' Motion to Dismiss the Consolidated Second Amended Class Action Complaint ("Reply Mem.") at 4 (citing Kalnit, 264 F.3d at 140, where the desire to obtain a good merger deal did not establish motive because "the shareholders themselves would benefit from a superior transaction"); cf. In re Gilat Satellite Networks, Ltd., No. CV-02-1510, 2005 WL 2277476, at *19 (E.D.N.Y. Sept. 19, 2005) (citation omitted) (motive to inflate stock in order to make company more attractive to outside investors insufficient, as desire to raise "much needed capital" is motive common to all corporations).
[69] Plaintiffs rely on an opinion in the Vivendi litigation, which held that, while defendants in that case argued that the alleged motive was merely to prop up the share price, that aim was "`merely instrumental' to the larger goal of `creating an entertainment empire.'" Pl. Opp. at 24 (quoting In re Vivendi Universal S.A. Sec. Litig., No. 02 Civ. 5571, 2004 WL 876050, at *8 (S.D.N.Y. Apr. 22, 2004)). But the method of creating the "empire" in that case was through acquiring companies. See id. (relying wholly on cases where the motive to acquire other companies raised scienter inference); see also In re Vivendi Universal, 381 F.Supp.2d at 185 (describing Vivendi's acquisitive desires).
[70] See Complaint ¶ 24 ("[a]t the start of 2004, GeoPharma had only $920,500 in cash"); id. ¶ 32 ("defendants were required to, and did, make expensive monthly payments to the Company's note holders and preferred stock holders"); id. ¶ 33 ("Faced with the expensive ongoing costs of principal, interest and dividend payments, Defendants embarked on a scheme which would enable them to reduce the Company's monthly cash payments.").
[71] No individual defendant is alleged to have sold GeoPharma stock during the class period. See id. ¶ 63 (quoting defendants Mihir Taneja and Sekharam stating that neither sold stock during class period).
[72] See Memorandum of Law in Support of Defendant's Motion to Dismiss the Consolidated Second Amended Class Action Complaint ("Def. Mem.") at 14 (citation omitted).
Plaintiffs also assert, for the first time in their opposition brief, that defendants hoped to "initially obscure the transformation of Mucotrol from a drug to a device . . . in hopes that the market would more slowly digest that distinction." Pl. Opp. at 25 n. 19. To the extent that plaintiffs seriously contend that this allegation constitutes a valid motive, I cannot consider it because a complaint cannot be amended by an opposition brief. See, e.g., GeoPharma, 399 F.Supp.2d at 445 n. 100 (citation omitted).
[73] See 1/17/06 Transcript of Oral Argument ("Tr.") at 14 (statement of Jeffrey Berens, counsel for plaintiffs) ("[defendants] can't ignore the context that they created for the market and make technically accurate statements and say, `well, it was true, I didn't mean to do anything wrong.' If the Court finds that they made a false and misleading statement . . . then it follows that defendants had a duty not to make that false and misleading statement.").
[74] See, e.g., In re WorldCom, Inc. Sec. Litig., 294 F.Supp.2d 392, 417 (S.D.N.Y.2003) (quotation and citation omitted) ("The allegations in the Complaint are entitled to be taken together to determine if the facts give rise to a strong inference of fraudulent intent.").
[75] Rothman, 220 F.3d at 90.
[76] Fogarazzo, 341 F.Supp.2d at 294.
[77] See Complaint ¶¶ 72-73; see also Pl. Opp. at 19-20 (contrasting precise language of FDA Letter with language employed in December 1 Release). Another way of describing the allegations is that plaintiffs allege that "prescription product" was a recklessly poor choice of words, but this is merely the other side of the "half-truth" coin.
[78] See, e.g., In re Time Warner, 9 F.3d at 268 (citation omitted).
[79] GeoPharma, 399 F.Supp.2d at 447 (emphasis added).
[80] See Kalnit, 264 F.3d at 143-44 (when duty to disclose letter was unclear, "defendants' recklessness cannot be inferred from the failure to disclose").
[81] Plaintiffs often plead recklessness by alleging "defendants' knowledge of facts or access to information contradicting their public statements." Novak, 216 F.3d at 308. But this option is not available here because there is not contradiction between the December 1 Release and the FDA Letter. See Def. Reply at 5-6 (quotation and citation omitted) (noting that the FDA Letter clearly states that Mucotrol is for prescription use).
[82] See In re 1993 Corning Sec. Litig., No. 93 Civ. 7015, 1996 WL 257603, at *7 (S.D.N.Y. May 15, 1996) (motive allegations substantially weakened by their intrinsic illogic).
[83] Courts often refuse to infer scienter, even on a recklessness theory, when confronted with illogical allegations. See, e.g., Davidoff v. Farina, No. 04 Civ. 7617, 2005 WL 2030501, at *11 n. 19 (S.D.N.Y. Aug. 22, 2005) (no possible inference of scienter when companies alleged to know of fraud that would cause company to fail nonetheless invested heavily in that company, because "it would have made no economic sense for defendants to invest literally billions of dollars in a venture that they knew would fail"); In re J.P. Morgan Chase Sec. Litig., 363 F.Supp.2d 595, 621-22 (S.D.N.Y.2005) (no scienter when "plaintiffs fail to allege facts explaining why, if it was aware of Enron's problems, [defendant] would have continued to lend Enron billions of dollars"); Hampshire Equity Partners II, L.P. v. Teradyne, Inc., No. 04 Civ. 3318, 2005 WL 736217, at *3 (S.D.N.Y. Mar. 30, 2005) (fundamentally illogical and contradictory scienter allegations fail as a matter of law); In re Merrill Lynch & Co. Inc., Research Reports Sec. Litig., 272 F.Supp.2d 243, 263 (S.D.N.Y.2003) (when plaintiffs' allegations contradicted the assumption that defendants would act in their own economic self-interest, "the allegations in the Complaint affirmatively refute scienter").
[84] Pl. Opp. at 27-28 (citing Complaint ¶ 70).
[85] The allegations that the November 24 FDA Letter: (1) was not available except through a FOIA request, see Complaint ¶ 41; and (2) was not available on the FDA website until December 6, see id. ¶ 70, are of no consequence. There are other ways to quickly obtain public information from government agencies, as obviously happened here.
[86] Pl. Opp. at 21.
[87] Reply Mem. at 8.
[88] Complaint ¶ 47 (citing a New England Journal of Medicine article).
[89] In addressing this issue at oral argument, plaintiffs' counsel: (1) stated that the difference between "manage" and "treat" "is a fine distinction [if] any distinction;" and (2) reiterated that "defendants [knew] the context that they [had] created" at the time of the December 1 Release. Tr. at 19-20 (Berens). But as demonstrated above, the Amended Complaint itself asserts that this is a crucial distinction.
[90] Cf. In re Nokia Corp. Sec. Litig., No. 96 Civ. 3752, 1998 WL 150963, at *13 (S.D.N.Y. Apr.1, 1998) (fact that company disclosed adverse information earlier than normal reporting schedule undercuts alleged inference of recklessness from not disclosing adverse information even sooner); Goldberg v. Freedom Fed. Savings Bank, No. 88 C 4787, 1989 WL 8503, at *3 (N.D.Ill. Jan.31, 1989) (when defendant discovered through routine audit procedures, and promptly disclosed, errors in its earlier earnings statements, "management candor vitiates any inference of willful intent" with respect to those earnings statements; at most, plaintiffs alleged negligence).
[91] See White, 2004 WL 1698628, at *9 (given availability of public information about pending litigation, "[d]efendants' failure to discuss [the litigation] at length and defendants did discuss it publicly in some detail . . . can hardly be characterized as `an extreme departure from the standards of ordinary care'"); Kalnit v. Eichler, 99 F.Supp.2d 327, 334 n. 7, 343 n. 15 (S.D.N.Y.2000) (when plaintiff "just barely" pled a material omission, that omission, standing alone, "simply cannot lead to a finding of recklessness"); L.L. Capital Partners, L.P. v. Rockefeller Ctr. Props., Inc., 921 F.Supp. 1174, 1183 (S.D.N.Y.1996) (when duty to disclose is "debatable," bare allegations that defendants were reckless in failing to disclose are insufficient).
[92] See Fogarazzo, 341 F.Supp.2d at 294 (scienter is a "distinct element of securities fraud and ought not be confused or combined" with the requirement that a statement be false or misleading); cf. Novak, 216 F.3d at 309 (violations of generally-accepted accounting principles, without indications of "corresponding fraudulent intent," do not suffice to establish strong circumstantial evidence of recklessness).
[93] See GeoPharma, 399 F.Supp.2d at 448. The PSLRA safe harbor applies because plaintiffs' failure to plead scienter demonstrates that plaintiffs have not alleged that defendants knew their statement was false or misleading. See id. at 448 n. 122 (citing High View Fund, L.P. v. Hall, 27 F.Supp.2d 420, 427 n. 3 (S.D.N.Y.1998) for the proposition that, when plaintiffs fail to plead scienter, there is no need to examine whether plaintiffs have met the "marginally higher" PSLRA standard for pleading actual knowledge of the falsity of a forward-looking statement).
[94] See Complaint ¶¶ 49, 52(d), 59-60, 72 (explicitly referring to the market potential statement as a revenue projection).
[95] See Pl. Opp. at 8-9.
[96] See Complaint ¶ 59 (quoting Mibir Taneja on the conference call: "[the market potential statement] is market opportunity. [W]e do expect . . . to get a significant [] in our mind amount of business out of this. But once again, to determine [] our total estimated revenue is still yet to be determined."). Plaintiffs rely on a case where a statement concerning the "potential market" for a drug was based on existing facts and was therefore not forward looking. However, in that case, plaintiffs alleged that the facts underlying the market potential statement were false. See In re QLT Inc. Sec. Litig., 312 F.Supp.2d 526, 532 (S.D.N.Y.2004). Here, plaintiffs do not dispute the statistics concerning the number of mucositis sufferers that formed the basis of the market potential statement. See Tr. at 20 (Berens).
[97] See Reply Mem. at 8-10; see also Tr. at 32-33 (statement of Robert Scher, counsel for defendants).
[98] Complaint ¶ 49. See Tr. at 33 (Scher) (if the market potential statement were a sales estimate, "there would be no reason in the sentence above it to say how many total sufferers there were of mucositis . . . [t]he two sentences are obviously connected.").
[99] Tr. at 21-22 (statement of the Court).
[100] Id. at 35 (Berens, agreeing with the Court's statement of plaintiffs' position).
[101] See, e.g., id. at 36 (statement of Samuel Rudman, counsel for plaintiffs) (statement is misleading because defendants "knew that [Mucotrol] was a medical device, the market didn't, and the competing medical devices had generated maybe a million or two million dollars of sales. That's why were are alleging that to say the estimated market is 75 to 300 million was materially false and misleading because they had no way of knowing they could even come close to that").
[102] See Pl. Opp. at 12-13.
[103] See GeoPharma, 399 F.Supp.2d at 448-49.
[104] See Complaint ¶¶ 42-43, 73.
[105] Pl. Opp. at 18-19. Accord Tr. at 39 (Rudman) (application "was a material event for [GeoPharma] in September and they should have issued an 8-K or a press release advising the market . . . the fact that they didn't do it is suggestive of recklessness or some type of intent").
[106] Both cases cited by plaintiffs involve omissions rendering statements made during the putative class period misleading. See In re Initial Public Offering Sec. Litig. (In re Rediff Sec. Litig.), 358 F.Supp.2d 189, 216 (S.D.N.Y.2004) (failure to disclose advertising contracts and e-mail problems that contradicted rosy statements made during the class period "could be seen as conscious misbehavior"); see also SEC v. Save the World Air, Inc., No. 01 Civ. 11586, 2005 WL 3077514, at *11-12 (S.D.N.Y. Nov. 15, 2005) (Maas, M.J.) (scienter established when statement made during class period belied by directly contradictory information in company's possession; defendant also criticized for failing to correct a statement made during class period).
[107] See Complaint ¶ 42; see also Tr. at 39-40 (Rudman) (after receiving FDA Letter, "under SEC disclosure obligations, under Rule 8-K they had four days to disclose that [] clearly [] material event, and they should have disclosed it at that point in time, yet they waited a week to do so.").
[108] See SEC Form 8-K at 2, available at http://www.sec.gov/about/forms/form8-k.pdf. November 25, 2004 was Thanksgiving, and thus December 1, 2004 was the fourth business day after GeoPharma received the FDA Letter.
[109] Complaint ¶ 64 (referencing a 1998 FDA warning letter citing defendant Sekharam for improper marketing of certain natural remedies, and a press release issued by GeoPharma in October 2001, at the height of the anthrax scare, touting a product asserted to boost the immune system and protect against, inter alia, anthrax).
[110] See id. ¶ 65. Plaintiffs made this allegation in the earlier Complaint, and cited In re Mercator Software. Inc. Sec. Litig., 161 F.Supp.2d 143 (D.Conn.2001) for the proposition that a sudden director resignation is probative of scienter. That case stands for no such broad proposition the court merely held that, under the circumstances of that case, the resignation lent added credibility to the allegations that the defendant company was having financial trouble notwithstanding its representations to the contrary. See id. at 150.
[111] Plaintiffs note as an aside that "of course, defendant Sekharam is no stranger with respect to run-ins with the government for opportunistic, overly-aggressive and misleading public claims." Pl. Opp. at 20 n. 15.
[112] The September 30 Opinion also determined that plaintiffs sufficiently alleged loss causation. See GeoPharma, 399 F.Supp.2d at 453. Defendants do not challenge loss causation on the present motion.
[113] In re BISYS Sec. Litig., 397 F.Supp.2d 430, 438 (S.D.N.Y.2005) (quotation and citation omitted). This doctrine is an exception to the general rule that "fraudulent statements must be linked directly to the party accused of the fraudulent intent." Id.
[114] In re Philip Services Corp. Sec. Litig., 383 F.Supp.2d 463, 483 (S.D.N.Y.2004) (quotation and citation omitted).
[115] GeoPharma, 399 F.Supp.2d at 445 (citation omitted).
[116] Id. at 445 n. 100 (citation omitted).
[117] See Complaint ¶ 7(a).
[118] See id.
[119] See id.
[120] See Schnall v. Annuity & Life Re (Holdings), Ltd., No. 02 CV 2133, 2004 WL 231439, at *4-5 (D.Conn. Feb. 4, 2004). I do not rely on Jugal Taneja's signing of GeoPharma's June 29, 2004 Form 10-K defendants are correct that Schnall is distinguishable on that score, as the Form 10-K's signed by the Schnall director were, unlike here, the statements on which plaintiffs were suing. See Def. Reply at 10 n. 20.
[121] See In re Independent Energy Holdings PLC Sec. Litig., 154 F.Supp.2d 741, 767-68 (S.D.N.Y.2001), abrogated on other grounds by In re Initial Public Offering Sec. Litig., 241 F.Supp.2d 281, 352 (S.D.N.Y.2003) (defendant held 3% of company stock, and was a company co-founder; plaintiffs alleged that defendant was significantly involved in company affairs).
[122] I afford no weight to plaintiffs' conclusory allegations, see Complaint ¶¶ 8-13, that all individual defendants exercised control over GeoPharma during the relevant time period. See Dresner v. Utility.com, Inc., 371 F.Supp.2d 476, 494 (S.D.N.Y.2005) (rejecting conclusory assertions that certain defendants exercised control over company for group pleading purposes).
[123] See Kalnit, 99 F.Supp.2d at 344 (citing Chill, 101 F.3d at 272) (futility is solid ground for denying leave to amend complaint).
[124] As in the first Opinion, the failure to plead a section 10(b) violation dooms plaintiffs' Section 20(a) claims. See GeoPharma, 399 F.Supp.2d at 454.
[125] See 15 U.S.C. § 78u-4(c)(1); see also Gurary v. Nu-Tech Bio-Med. Inc., 303 F.3d 212, 215 (2d Cir.2002).
[126] In fact, plaintiffs identified a material omission which rendered a statement objectively misleading, see GeoPharma, 399 F.Supp.2d at 446-47; and adequately alleged loss causation, see id. at 453. And as I noted in a similar case, a repeated failure to plead scienter, by itself, hardly renders a complaint frivolous, as "[t]he element of scienter is often the most difficult and controversial aspect of a securities fraud claim." Kalnit, 99 F.Supp.2d at 345 (finding that a plaintiff who twice failed to plead scienter did not violate Rule 11).
[127] Any such request must be made by letter, not to exceed ten double-spaced pages. In considering whether to request sanctions, defendants must bear in mind that Rule 11 sanctions are only imposed "`where it is patently clear that a claim has absolutely no chance of success.'" Caisse Nationale de Credit Agricole-CNCA v. Valcorp, Inc., 28 F.3d 259, 264 (2d Cir.1994) (quoting Healey v. Chelsea Res., Ltd., 947 F.2d 611, 626 (2d Cir.1991)).
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411 F.Supp.2d 416 (2006)
Hadassah GURFEIN, individually and on behalf of all others similarly situated, Plaintiff,
v.
AMERITRADE, INC., Ameritrade Online Holdings Corp., Knight Trading, Group, LLC, Knight Financial Products, LLC, Knight Execution Partners, LLC and American Stock Exchange, LLC, Defendants.
No. 04 Civ. 9526(LLS).
United States District Court, S.D. New York.
January 26, 2006.
*417 *418 Daniel Robert Lapinski, Olimpio Lee Squitieri, Squitieri & Fearon LLP, New York, NY, Frederick W. Gerkens, III, John Halebian, Lovell Stewart Halebian, LLP, New York, NY, for Plaintiff.
Richard John Morvillo, Mayer, Brown, Rowe & Maw, LLP, Washington, DC, John J. Calandra, McDermott, Will & Emery, LLP, New York, NY, H. Peter Haveles, Jr., Hoffman & Roth, LLP, New York, NY, Ivan O. Kline, Friedman, Wittenstein & Hochman, PC, New York, NY, for Defendants.
Richard A. Speirs, Zwerling, Schachter & Schwerling, New York, NY, for Movant.
OPINION and ORDER
STANTON, District Judge.
In this class action alleging violations of federal law, state law, and SEC Rule 10b-5, defendants[1] move to dismiss the amended complaint pursuant to Fed.R.Civ.P. 12(b)(6).
BACKGROUND
The allegations arise from activities related to options trading. The amended complaint alleges misrepresentations and manipulative acts, committed with the purpose of defrauding "direct access" on-line customers in the options market. The following allegations are taken from the amended complaint and are accepted as true on a motion to dismiss. See Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993).
The American Stock Exchange ("AMEX") is registered as a national securities exchange and provides a market-place for trading option contracts. The AMEX assigns every option traded on its exchange to a broker-dealer, or options specialist, who is responsible for maintaining a "fair and orderly market" for the option and providing bid and ask quotations. Amended Cmplt. ¶¶ 57-58. These are published to investors through electronic transfer or display systems. Id. ¶ 59. Buy and sell offers are "either matched against one another by a specialist, or are matched with counterbalancing offers from the specialist itself, who is essentially required to act as a market maker of last resort." Id. ¶ 54.
Numerous order-handling rules govern the options market, including the Firm *419 Quote Rule, which requires every responsible broker or dealer (including options specialists) to execute options transactions at prices at least as favorable as their published bids or offers at the time the orders are presented. SEC Exchange Act Rule 11Ac1-1; AMEX Rule 958A. The AMEX's regulatory duties include enforcing compliance by its member specialists with all of the order-handling rules, including the Firm Quote Rule. The SEC, in turn, monitors the AMEX's exercise of that regulatory authority.
Knight Financial Products, LLC ("Knight Financial") is an options specialist and registered broker-dealer operating on the AMEX. Ameritrade, Inc ("Ameritrade") is a broker-dealer who provides individual investors with direct online access to financial markets so they can trade securities from their personal computers. These investors are called "direct access" customers. Through Ameritrade, options quotations are displayed on a direct access customer's computer, and the customer can "click" on the price shown on the screen and thus buy or sell the listed option. The orders are then routed to the appropriate exchange. Options specialists like Knight Financial provide trade executions to services like Ameritrade. Knight Execution Partners, LLC ("Knight Execution") is the clearing house through which Knight Financial routes its orders.
In 2003, the SEC's Office of Compliance Inspections and Examinations and Office of Economic Analysis reviewed the AMEX's regulatory programs related to options order handling, and analyzed audit trail data of 10 options traded on the AMEX during the week of October 22, 2001. The staff then compiled a report[2] (the "OCIE Report") stating their findings of deficiencies in the AMEX's detection and discipline of routine violations of the Firm Quote Rule by options specialists. The staff also found that the options specialists "may" have been routinely discriminating against direct access customers in "likely" violation of the Firm Quote Rule. OCIE Report, Exhibit A of Amended Cmplt. at 9.[3] The OCIE report did not name the options specialists involved in the inspection, nor mention the Knight or Ameritrade defendants. The AMEX was the only named entity against whom concrete allegations of wrongdoing were made.
Plaintiff Hadassah Gurfein is a private investor who maintained an account with Ameritrade. On December 6, 2002 Gurfein attempted to sell Forest Labs options contracts through Ameritrade. At 8:53:34 A.M. (CST) Gurfein placed an order to sell 50 Forest Labs December 100 put contracts at $7.70. The "bid" price displayed on Gurfein's monitor at the time she prepared to place her order was $7.70, but increased to $7.80 as she placed her sell order. By 8:56:21 A.M. the order had not been executed, and Gurfein cancelled it. She attempted several more times to sell her puts, each time offering a price at or below the electronically displayed bid, and each time the order was not executed instantaneously and was cancelled by Gurfein. In order to "salvage a rapidly decreasing unrealized gain," Gurfein exercised her 50 Forest Labs December 100 put contracts by purchasing 5,000 common shares of Forest Labs, which she then immediately sold for an overall profit of approximately $20,500. Amended Cmplt. ¶ 110. Gurfein alleges that she suffered a loss of approximately $13,500, the difference *420 between the profit she would have realized if her first trade had been executed at $7.70 ($34,000) and the $20,500 profit she actually obtained.
The same day, Gurfein tried to sell 100 Forest Labs February 85 puts through Ameritrade. She submitted an order to sell all 100 contracts at $4.50, a price below the electronically displayed bid. Only 25 of the contracts were sold, and at a price of only $3.00. The remaining 75 contracts were subject to a 2-for-1 split in January 2003 and ultimately sold at a price of $.20 each, for a total of $3,000. Gurfein alleges a total loss of $34,500 on this transaction, reflecting the difference between what she would have made if all 100 options had been sold at $4.50 ($45,000) and the $10,500 she actually made. Gurfein attributed the quotations on her computer throughout her December 6th trading activity to both "defendant Knight"[4] and Ameritrade.
Gurfein claims that those transactions, coupled with the findings in the OCIE Report, show repeated misrepresentations and a scheme by defendants to defraud the options market through illegal trading. She alleges that defendants materially misrepresented both bid and ask quotations, and that orders placed by direct access customers would be executed instantaneously. As part of the scheme (1) Ameritrade intentionally routed its customers' orders to Knight, and defendants (2) refused to execute direct access orders at the quoted prices, (3) discriminated against direct access customers by not executing their orders, or executing them at less favorable prices than those given to preferred customers, (4) changed or "faded" options quotations after plaintiff clicked on them, and (5) the AMEX ignored the violations and allowed the scheme to continue. As a result, defendants reaped profits, while plaintiff lost profits and suffered losses. Amended Cmplt. ¶¶ 112 and 123.c.
DISCUSSION
On a motion to dismiss a complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief may be granted, a court must accept the factual allegations of the complaint as true, and draw all inferences in favor of the plaintiff. Mills, 12 F.3d at 1174. The court may consider exhibits annexed to the complaint or incorporated in it by reference. Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir.1993). The complaint may be dismissed only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).
I. The American Stock Exchange
The AMEX moves to dismiss counts I (for a fraudulent scheme and material misrepresentations in violation of section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5), II (for control-person liability under section 20(a) of the Securities Exchange Act of 1934), and VII (for violation of New York General Business Law § 349) on the grounds that it is entitled to absolute immunity.
The claims against the AMEX stem from two separate courses of conduct: (1) the AMEX's failure to regulate its options specialists' behavior and (2) statements made by the AMEX about its implementation of the Firm Quote Rule.
*421 The AMEX is registered with the Securities and Exchange Commission as a national securities exchange pursuant to section 6 of the Securities Exchange Act of 1934, 15 U.S.C. § 78f, and is a self-regulatory organization ("SRO") as defined in 15 U.S.C. § 78c(a)(26). As an SRO, the AMEX has a duty to "promulgate and enforce rules governing the conduct of its members" and "conducts disciplinary proceedings when a member, or a person associated with a member, is suspected of violating federal securities laws or internal Exchange rules or regulations." Barbara v. New York Stock Exchange, Inc., 99 F.3d 49, 51 (2d Cir.1996). See 15 U.S.C. §§ 78f(b), 78s(g), and 78f(d). The SEC has broad authority to oversee the AMEX's activities and to impose sanctions if it fails to carry out its responsibilities as an SRO. 15 U.S.C. §§ 78f(b), 78s(h)(1).
The AMEX argues that the doctrine of absolute immunity bars plaintiff's claims because they involve the AMEX's exercise of, or failure to exercise, its regulatory authority. Plaintiff contends that the AMEX's conduct went beyond mere failure to regulate its specialists, and amounted to fostering and supporting their misbehavior.
The Second Circuit first granted absolute immunity to an SRO in Barbara v. New York Stock Exchange, 99 F.3d 49 (2d Cir.1996). There plaintiff sought money damages from the New York Stock Exchange for misconduct associated with disciplinary proceedings it administered. The Court explained the importance of extending absolute immunity to national securities exchanges:
We think that absolute immunity is particularly appropriate in the unique context of the self-regulation of the national securities exchanges. Under the Exchange Act, the Exchange performs a variety of regulatory functions that would, in other circumstances, be performed by a government agency. Yet government agencies, including the SEC, would be entitled to sovereign immunity from all suits for money damages. As a private corporation, the Exchange does not share in the SEC's sovereign immunity, but its special status and connection to the SEC influences our decision to recognize an absolute immunity from suits for money damages with respect to the Exchange's conduct of disciplinary proceedings.
Barbara, 99 F.3d at 59 (internal citations omitted).
In D'Alessio v. New York Stock Exchange, Inc., 258 F.3d 93, 105 (2d Cir. 2001), the Second Circuit granted the NYSE absolute immunity from D'Alessio's tort and contract claims arising from being banned from the exchange's trading floor, an exercise of quasi-governmental power delegated to the NYSE:
Thus, although the immunity inquiry in Barbara was confined to the NYSE's conduct in connection with disciplinary proceedings, Barbara stood for the broader proposition that a SRO, such as the NYSE, may be entitled to immunity from suit for conduct falling within the scope of the SRO's regulatory and general oversight functions.
258 F.3d at 105. Finding that the NYSE's alleged misconduct was related to "proper functioning of the regulatory system," the Court held that "the NYSE, when acting in its capacity as a SRO, is entitled to immunity from suit when it engages in conduct consistent with the quasi-governmental powers delegated to it pursuant to the Exchange Act and the regulations and rules promulgated thereunder." Id. at 106. It stated that the NYSE "as a SRO, stands in the shoes of the SEC in interpreting the securities laws for its members and in monitoring compliance with those laws. It follows that the NYSE should be *422 entitled to the same immunity enjoyed by the SEC when it is performing functions delegated to it under the SEC's broad oversight authority." Id. at 105.
To determine the scope of the absolute immunity, "we look not at the manner in which D'Alessio casts his claims against the NYSE (i.e., tort or contract), but rather to the alleged misconduct of the NYSE as detailed in the complaint." D'Alessio, 258 F.3d at 105-06. Thus, if the alleged misconduct of the AMEX in this case relates to its regulatory and oversight functions, absolute immunity bars the claims.
Plaintiff's allegations against the AMEX include the following:
As previously alleged above, and as alleged below in greater detail, the AMEX has so egregiously failed in its regulatory mission to police and enforce options order handling by its members as to become an active, willing, and necessary participant in the actual commission of the fraudulent and deceptive practices and scheme alleged herein. (Amended Cmplt. ¶ 27.)
On April 2, 2001, the start of the Class Period, AMEX represented to investors that it was implementing the Firm Quote Rule for option purchases and sales occurring on the AMEX. In connection with the implementation of the Firm Quote Rule, the AMEX issued a notice to its traders which was publicly disseminated via the AMEX's website. . . . As detailed herein, these statements were and continue to be knowingly, or recklessly materially false and misleading due to the AMEX's serial and ongoing failures to ensure that the AMEX options Specialists comply with Online Public Customers could enter [sic] purchase and sale orders and have them executed in a fair and orderly market. (Id. ¶¶ 74-75.)
The SEC also found that the AMEX failed to enforce the Firm Quote Rule and employed incorrect or inadequate review procedures in its analysis and investigation of potential Firm Quote Rule violations. This caused the AMEX to conclude improperly that Firm Quote Rule violations had not occurred. Moreover, when the AMEX did conclude that a Firm Quote Rule violation had occurred, it failed to discipline its member(s) in any meaningful way. (Id. ¶ 89.)
In short, the AMEX: (1) ignored the requirements of the Firm Quote Rule; (2) employed grossly deficient review procedures relating to the Firm Quote Rule; (3) created illegitimate exceptions to the Firm Quote Rule; and (4) failed to identify Firm Quote Rule violations raised in customer complaints. (Id. ¶ 90.)
In addition, misstatements and omissions of material facts were made intentionally or recklessly by Defendant AMEX, in order to deceive the investing public and regulators and permit its options specialists members, including Knight, to continue the unlawful conduct. (Id. ¶ 113.)
During the Class Period, the AMEX was grossly reckless or had actual knowledge of the violations of the Firm Quote Rule and other improper practices engaged in by the AMEX Options Specialists, including Defendant Knight, through numerous customer complaints reported to the AMEX and the SEC; internal reports which the AMEX generated to show violations of Firm Quote Rule and other trading violations; its repeated failures to refer violations to its disciplinary committee or otherwise enforce disciplinary rules against its members; various SEC inspections and reports as described herein which described defendants' misconduct in detail; and its failure to implement the surveillance, investigative and enforcement *423 processes required by the Sanctions Order. (Id. ¶ 115.)
Defendant AMEX by virtue of its authority as a self-regulatory organization and by virtue of its obligation to maintain various regulatory programs such as surveillance, investigative and disciplinary programs related to options order handling that are supposed to be designed to enforce compliance not only with the AMEX's own rules and regulations but also with the federal securities laws and regulations, is a controlling person of the AMEX Options Specialists, including defendant Knight. (Id. ¶ 125.)
To the extent that the claims are based on the AMEX's alleged failure to properly monitor and discipline its specialists' behavior, duties clearly "falling within the scope of the SRO's regulatory and general oversight functions," it is protected by absolute immunity. See In re NYSE Specialists Securities Litigation, 405 F.Supp.2d 281, 303 (S.D.N.Y. 2005)(holding that plaintiffs' claims "that NYSE deliberately failed to supervise and discipline the specialist firms" were barred by the doctrine of absolute immunity).
AMEX's statements that it would implement the Firm Quote Rule are similarly protected. Promulgating rules is an essential component of the AMEX's regulatory authority. Attendant to that duty is the need to publish notices announcing the content and implementation of these rules. "For `[w]ithout the capacity to make announcements, defendants would be stripped of a critical and necessary part of their regulatory powers,'-namely, the power to inform the public of those actions it has undertaken in the interest of maintaining `a fair and orderly market' or protecting `investors and the public interest.'" DL Capital Group v. Nasdaq Stock Market, 409 F.3d 93, 98 (2d Cir.2005) (internal citations omitted)(affirming Nasdaq's absolute immunity for statements announcing the suspension of trading, despite plaintiff's argument that while the suspension of trading was a regulatory action, the announcement of it was not).
Plaintiff's argument that the AMEX's "willful undermining of the laws that it is required to enforce" precludes absolute immunity is equally unavailing. Plaint. Opp. Mem. at 51. The Second Circuit explicitly refused to recognize a fraud exception to an SRO's absolute immunity in DL Capital Group v. Nasdaq Stock Market. In response to plaintiff's argument that the Nasdaq was not entitled to absolute immunity because the suit alleged fraud, the Court held:
However, precedent, not to mention common sense, strongly militates against carving out a "fraud" exception to SRO immunity. As to precedent, this Court has already implicitly held that SROs are absolutely immune to suits alleging fraud. In D'Alessio, after all, we upheld the dismissal of all the plaintiffs' claims even though one of the claims was for "fraudulent deceit and concealment." Not only that, but this Court has, in other contexts, made clear that allegations of bad faith, malice, and even fraud all of which may be relevant to a qualified immunity analysis cannot, except in the most unusual of circumstances, overcome absolute immunity.
DL Capital Group, 409 F.3d at 98 (emphasis in original)(internal footnotes and citations omitted). There is sound reason for the Court's insistence on absolute immunity, even in the presence of charges of affirmative misconduct (such as fraud) by the exchange:
As a matter of common sense, too, it behooves the Court not to carve out a fraud exception to the absolute immunity of an SRO. It is, after all, hard to *424 imagine the plaintiff (or plaintiff's counsel) who would when otherwise wronged by an SRO but unable to seek money damages fail to concoct some claim of fraud in order to try and circumvent the absolute immunity doctrine. Thus, rejecting a fraud exception is a "matter not simply of logic but of intense practicality since [otherwise] the [SRO's] exercise of its quasi-governmental functions would be unduly hampered by disruptive and recriminatory lawsuits." See D'Alessio, 258 F.3d at 105, quoting D'Alessio v. New York Stock Exchange, Inc., 125 F.Supp.2d 656, 658 (S.D.N.Y.2000).
Id. at 99. Finally, even if it could be argued, on the factual allegations in the amended complaint, that the AMEX aided and abetted violations of the securities laws by its members, that would not impose § 10(b) liability. Central Bank of Denver, N.A. v. First Interstate Bank of Denver, 511 U.S. 164, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994).
Accordingly, the claims against the American Stock Exchange are dismissed with prejudice.
II. The Ameritrade and Knight Defendants
Claim one alleges violations of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and SEC Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5. Ameritrade and the Knight defendants move to dismiss this claim for failure to plead fraud with particularity as required by Fed.R.Civ.P. 9(b) and the Private Securities Litigation Reform Act ("PSLRA").
Section 10(b) makes it unlawful to:
use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered . . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
15 U.S.C. § 78j(b). SEC Rule 10b-5 makes it unlawful, in connection with the purchase or sale of any security:
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person
17 C.F.R. § 240.10b-5.
Plaintiff's allegations intertwine and reproduce the language of sections (a), (b) and (c) of Rule 10b-5:
During the Class Period defendants, singly and in concert, directly and indirectly, engaged in a common plan, scheme, and unlawful course of conduct, pursuant to which they knowingly or recklessly, engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit upon Plaintiff and other members of the Class, and made various deceptive and untrue statements of material facts and omitted to state material facts, in order to make the statements made, in light of the circumstances under which they were made, not misleading to Plaintiff and members of the Class.
Amended Cmplt. ¶ 121. In effect, this attempts to assert liability under each of the Rule 10b-5 subdivisions. See In re Alstom SA Securities Litigation, 406 F.Supp.2d 433, 475 (S.D.N.Y.2005)(noting that liability *425 can arise under all three subsections of Rule 10b-5 "out of the same set of facts, where the plaintiffs allege both that the defendants made misrepresentations in violations of Rule 10b-5(b), as well as that the defendants undertook a deceptive scheme or course of conduct that went beyond the misrepresentations").
To state a claim under the Rule's subdivisions (a) or (c), plaintiff must allege that the defendant "(1) committed a manipulative or deceptive act (2) in furtherance of the alleged scheme to defraud, (3) scienter, and (4) reliance." In re Global Crossing, Ltd. Securities Litigation, 322 F.Supp.2d 319, 336 (S.D.N.Y. 2004). The complaint "must specify `what manipulative acts were performed, which defendant performed them, when the manipulative acts were performed, and what effect the scheme had on the market for the securities at issue.'" S.E.C. v. U.S. Environmental, Inc., 82 F.Supp.2d 237, 240 (S.D.N.Y.2000)(quoting T.H.C., Inc. v. Fortune Petroleum Corp., 1999 WL 182593, *3, 1999 U.S. Dist. LEXIS 4039, *10 (S.D.N.Y. Mar. 31, 1999)).
The elements necessary to a claim under the Rule's subdivision (b) are that defendant "(1) made misstatements or omissions of material fact; (2) with scienter; (3) in connection with the purchase or sale of securities; (4) upon which plaintiffs relied; and (5) that plaintiffs' reliance was the proximate cause of their injury." In re IBM Corporate Securities Litigation, 163 F.3d 102, 106 (2d Cir.1998). Under Fed.R.Civ.P. 9(b), "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity."
In addition, the PSLRA requires that in allegations of misrepresentations:
the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.
15 U.S.C. § 78u-4(b)(1).
The amended complaint fails in several ways to meet those pleading requirements.
A. Basis for Claims of Fraud
Plaintiff claims that defendants made misrepresentations and engaged in "improper market practices" including "failing to execute class members' limit purchase and sell orders at specifically displayed quotes, discriminating against purchase and sell orders of On-Line Public Customers, [and] violating the Firm Quote Rule." Amended Cmplt. ¶ 2. See also Amended Cmplt. ¶ 21 ("However, Ameritrade refused to execute Plaintiff's options orders at the real time quoted prices and defendant Knight, one of the AMEX Options Specialists, refused to honor the Firm Quote Rule or executed Plaintiff's orders behind the orders of its preferred customers."); Amended Cmplt. ¶ 81 ("[T]he AMEX and the AMEX Options Specialists, including Defendant Knight, have misused order routing and execution systems to manipulate the bid or ask price on options trades placed by On-line Public Customers."). Plaintiff gives no specific instances. While she points to her frustrated trades, she offers no proof that they failed because they were held "behind the orders of" other customers or for any other reason than her cancellation of them after, e.g., three minutes. Rather, she relies on the OCIE Report to support her contention that defendants[5] defrauded the *426 market. But the OCIE Report's generalized findings about activity on the AMEX, in support of its conclusion that the AMEX was not properly carrying out its regulatory duties, do not refer to any Knight defendant, nor to Ameritrade. The OCIE Report does not carry plaintiff's burden of specifying a factual basis for her claims of securities law violations by the defendants.
The OCIE Report reflected a staff review of orders placed during the week of October 22, 2001 more than a year before plaintiff's attempted trades. The review covered ten options classes, which did not include Forest Labs, or over 1500 other options classes traded on the AMEX. It was limited to orders placed through "the three primary direct access firms," not including Ameritrade. It does not mention any Knight defendant, and they have established (in response to plaintiff's invitation) that no Knight defendant acted as a specialist for any of the options classes analyzed in the Report. (See Knight defts' Ex. O, attached to their July 29, 2005 Reply Memo.)
Since the OCIE Report's conclusions rest on different transactions by different specialists in different options classes, placed through different direct access firms, at times over a year earlier and not involving any defendant in this case, they cannot be taken as evidence of a defendant's participation in the scheme to defraud, or give rise to the "strong inference" of scienter necessary to state a securities-violation claim against the defendants. See 15 U.S.C. § 78u-4(b)(2)("the complaint shall, with respect to each act or omission alleged to violate this chapter, state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind").
Without the support she seeks from the OCIE Report, plaintiff is left without a factual basis for asserting that Ameritrade's or Knight's representations were false when made; nor do the failures of execution of her orders on December 6, 2002 support that inference. More is required in a securities fraud case. As stated in Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161, 168 (2d Cir.2005):
Any fraud must be pled with particularity, Fed.R.Civ.P. 9(b); but the rule is applied assiduously to securities fraud. This Circuit's strict pleading requirements in securities-fraud cases, see Novak v. Kasaks, 216 F.3d 300, 307-10 (2d Cir.2000), were (essentially) codified in the Private Securities Litigation Reform Act of 1995, id. at 309-11. So no claim should be filed unless and until it can be supported by specific factual allegations.
B. Group Pleading
"Where multiple defendants are asked to respond to allegations of fraud, the complaint should inform each defendant of the nature of his alleged participation in the fraud." DiVittorio v. Equidyne Extractive Industries, Inc., 822 F.2d 1242, 1247 (2d Cir.1987). "To this end, the complaint may not rely upon blanket references to acts or omissions by all of the defendants, for each defendant named in the complaint is entitled to be appraised of the circumstances surrounding the fraudulent conduct with which he individually stands charged." Red Ball Interior Demolition Corp., 874 F.Supp. at 584.
Plaintiff lumps defendants together at various points in the amended complaint, making allegations against "defendants," without specifying which defendant plaintiff is referring to:
Defendants failed to disclose to Plaintiff and members of the Class that the published prices were not truthful and accurate and that limit orders placed by Plaintiffs and members of the Class would not be executed properly pursuant *427 to AMEX and SEC regulations. (Id. ¶ 44.)
Defendants affirmatively represented to Plaintiff and other On-line Public Customers, that (1) the displayed quotes were Firm Quotes at which transactions will occur and (2) when the customer "clicks" on the represented price (either to buy or sell) that the transaction is executed instantly. (Id. ¶ 61.)
The Defendants failed to allow Plaintiff and other members of the Class to properly use their respective electronic trading systems and realize investment gains by: . . . Changing or "fading" the option price quoted through their respective electronic trading systems when "clicked" on by Plaintiff and others similarly situated. (Id. ¶ 123.b.)
During the Class Period, Ameritrade and*or Knight materially misrepresented to Plaintiff and the Subclass, its ability to execute customers' options orders. Ameritrade's representations, set forth at ¶¶ 135 and 136, and incorporated herein by reference were materially false and misleading and omitted material facts concerning Defendants' misconduct in the handling and processing of purchase and sale orders of options on the AMEX. (Id. ¶ 123.d.)
"This sort of broad-brush allegation against numerous defendants is inadequate." O & G Carriers, Inc. v. Smith, 799 F.Supp. 1528, 1538-39 (S.D.N.Y.1992). See also Three Crown Ltd. Partnership v. Caxton Corp., 817 F.Supp. 1033, 1040 (S.D.N.Y.1993)("Throughout the complaint defendants are clumped together in vague allegations regarding `some or all of the defendants.' Such wide-scale clumping is unacceptable.").
The amended complaint also fails to make any distinction between Knight Execution and Knight Financial, referring to them collectively throughout the amended complaint as "Knight," and making all allegations generally against "defendant Knight" or "Knight." Amended Cmplt. ¶ 29.a ("Knight Financial and Knight Execution are collectively are [sic] referred to as `Knight' at times herein."). See e.g. id. ¶¶ 81, 105, 110, 112, 118. Those are two separate entities, providing separate services in the options market, and the allegations against them must also be separate and specific. See Ellison v. American Image Motor Co., 36 F.Supp.2d 628, 641 (S.D.N.Y.1999)("Because the complaint fails to separate these defendants with specific allegations of wrongdoing as to each one of them, the complaint does not pass muster under Rule 9(b).").
III. Section 20(a) Claims
Plaintiff seeks to impose control person liability on Knight Trading and Ameritrade Holdings pursuant to Section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78t(a).
"In order to establish a prima facie case of liability under § 20(a), a plaintiff must show: (1) a primary violation by a controlled person; (2) control of the primary violator by the defendant; and (3) that the controlling person was in some meaningful sense a culpable participant in the primary violation." Boguslavsky v. Kaplan, 159 F.3d 715, 720 (2d Cir.1998)(internal quotation marks omitted). "In the absence of a primary violation, a plaintiff cannot state a claim for controlling person liability under § 20(a) of the Securities Exchange Act." Salinger v. Projectavision, Inc., 972 F.Supp. 222, 235 (S.D.N.Y.1997).
Because plaintiff does not adequately state a claim of Section 10(b) or Rule 10b-5 violation by Knight Financial, Knight Execution or Ameritrade, her Section 20(a) claims must be dismissed.
IV. State Law Claims
Plaintiff asserts state law claims in claims three through seven. Because the *428 defendants' motions to dismiss the federal claims are granted, the Court declines to exercise supplemental jurisdiction over these state law claims pursuant to 28 U.S.C. § 1367(c)(3)("The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if . . . the district court has dismissed all claims over which it has original jurisdiction."). Thus there is no need at this time for a determination whether those claims are barred by the Securities Litigation Uniform Standards Act, 15 U.S.C. § 78bb(f)(1).
Accordingly, the state law claims are dismissed without prejudice.
CONCLUSION
Based on the foregoing, the amended complaint is dismissed with prejudice as against the American Stock Exchange. It is dismissed without prejudice as against the other defendants, with leave to plaintiff to replead within 45 days.
So ordered.
NOTES
[1] The defendants are Ameritrade Holding Corporation (referred to in the amended complaint as Ameritrade Online Holdings Corp.), its wholly owned subsidiary Ameritrade, Inc. (collectively, the "Ameritrade Defendants"), Knight Trading Group, LLC, and its wholly owned subsidiaries, Knight Financial Products, LLC and Knight Execution Partners, LLC (collectively, the "Knight Defendants"), and the American Stock Exchange, LLC.
[2] The report reflected the views of the staff, not the Commission.
[3] The copy of the OCIE Report attached to the amended complaint did not contain page numbers. Defendant Knight Trading attached a self-paginated copy of the OCIE Report in Exhibit D to their May 11, 2005 Memorandum of Law. The page numbers cited correspond to the numbers in that exhibit.
[4] As discussed in Section II.B, plaintiff lumps Knight Financial and Knight Execution together throughout the amended complaint, referring to them both as "Knight." Any reference in this opinion to "Knight" or "defendant Knight" is a reflection of the allegations made by plaintiff.
[5] Because the AMEX is immune from liability, continued references to "defendants" refer to the Knight and Ameritrade defendants.
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969 So.2d 636 (2007)
Robert A. GRACE and Janet F. Grace, Individually and on Behalf of Their Minor Child, Elizabeth Leigh Grace
v.
Luis CRESPO and Kimberly Crespo, Individually and on Behalf of Their Minor Child, Sherrand E. Crespo, Allstate Insurance Company, and Sentry Select Insurance Company.
No. 2007-C-2010.
Supreme Court of Louisiana.
December 7, 2007.
Denied.
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106 F.Supp.2d 997 (2000)
UNITED STATES of America, Plaintiff,
v.
Kim Louis PASSWAITER, Defendant.
No. C-99-20840 JF.
United States District Court, N.D. California, San Jose Division.
July 20, 2000.
*998 Brian P. Berson, San Francisco, CA, for plaintiff.
Robert S. Mueller, III, United States Attorney, Jane H. Shoemaker, Assistant United States Attorney, San Jose, CA, for defendant.
ORDER DENYING DEFENDANT'S MOTION TO VACATE, SET ASIDE, OR MODIFY SENTENCE PURSUANT TO 28 U.S.C. § 2255
FOGEL, District Judge.
Defendant moves to vacate, set aside or modify his sentence. The Government opposes the motion. Defendant's motion was taken under submission without oral argument. For the reasons set forth below, the motion will be denied.
I. BACKGROUND
Defendant was prosecuted as part of a "boat case" in which thirty three defendants were convicted of conspiracy to import and off-load 20,000 pounds of marijuana onto a beach in Santa Cruz, California. Defendant permitted the use of his boat as a lookout or pilot boat, permitted the use of his truck, assisted in loading the marijuana once it reached the shore, and recruited an individual to help with the off-loading the night before the drugs were to arrive.
Pursuant to a plea agreement, Defendant pleaded guilty to conspiracy to import marijuana in violation of 21 U.S.C. § 963. The Pre-Sentence Report found his sentencing guideline range to be 292 - 365 months, based on a total offense level of 35 and a criminal history category of VI. The sentencing judge[1] declined to adopt all of the downward departures requested by Defendant but did sentence Defendant to 188 months rather than the 292-395 months recommended in the Pre-Sentence Report. Defendant's sentence subsequently was reduced to 166 months as a result of amendments to the guidelines. Defendant now requests a further reduction in sentence.
II. DISCUSSION
Defendant asserts that: (1) his post-sentence rehabilitative efforts should be considered as a basis for further downward departure pursuant to a recent change in the law; and (2) his Fifth Amendment rights were violated because he received a disproportionately harsh sentence compared to other more culpable offenders.
The Government contends that the instant motion should be denied because (1) Defendant has not received certification to file a second or successive motion to vacate, set aside, or correct his sentence; (2) Defendant failed to raise his claims at his first re-sentencing and thus cannot raise them for the first time in this proceeding; and (3) the statute of limitations has expired.
A. Second or Successive Motion
It is unclear from the record whether Defendant obtained his initial reduction of sentence pursuant to a motion brought under 28 U.S.C. § 2255. If so, this Court lacks jurisdiction to consider the merits of the present motion because Defendant did not obtain the requisite certification from the Court of Appeals prior filing a successive motion. However, the government has not submitted evidence establishing that Defendant obtained his initial reduction of sentence pursuant to 28 U.S.C. § 2255. Accordingly, the Court will assume for purposes of this ruling that the present motion is not a successive motion.
*999 B. Procedural Bar
1. Claim Based Upon Asserted Disparity in Sentencing
The Supreme Court has held that a claim not raised at a defendant's prior sentencing(s) or on direct appeal cannot be heard on collateral review unless the defendant (1) shows cause for each failure to raise the claim and (2) actual prejudice resulting from the alleged error, or demonstrates actual innocence. Bousley v. United States, 523 U.S. 614, 118 S.Ct. 1604, 1610, 140 L.Ed.2d 828 (1998); United States v. Frady, 456 U.S. 152, 153, 102 S.Ct. 1584, 71 L.Ed.2d 816 (1982). Defendant presents no reason why he could not have raised his Fifth Amendment claim based upon the asserted disparity in sentencing in his prior sentencing and post-sentencing proceedings. Accordingly, the Court concludes that the claim is procedurally barred.
2. Claim Based Upon Change In The Law
Defendant has not previously raised his claim based upon post-sentencing rehabilitation efforts. Because this claim is based upon an asserted intervening change in the lawUnited States v. Green, 152 F.3d 1202 (9th Cir.1998)the claim obviously could not have been raised during Defendant's last re-sentencing proceeding on October 24, 1994. As a result, this claim is not procedurally barred.[2]
C. Statute of Limitations
A one-year statute of limitations applies to motions brought under 28 U.S.C. § 2255. The one-year period runs from the latest of the dates on which: (1) the judgment of conviction becomes final;[3] (2) the impediment to making a motion created by governmental action in violation of the Constitution or laws of the United States is removed, if the movant was prevented from making a motion by such governmental action; (3) the right asserted initially was recognized by the Supreme Court, if that right has been newly recognized by the Supreme Court and made retroactively applicable to cases on collateral review; or (4) the facts supporting the claim or claims presented could have been discovered through the exercise of due diligence. 28 U.S.C. § 2255.
Defendant characterizes the Green decision as a new "fact" which could not have been discovered in the exercise of due diligence prior to the date the decision was rendered, August 27, 1998. Defendant's motion was filed less than one year later on August 19, 1999. Accordingly, Defendant argues that his motion is timely pursuant to subsection (4) of the statute.
The Court disagrees. Defendant essentially is arguing for application of a new rule of law articulated by the Ninth Circuit and requesting that the one-year statute of limitations run from the date such rule was articulated. Section 2255 explicitly addresses application of the one-year period to motions based upon a newly-recognized rule of law. Subsection (3) provides that the one-year period runs from the date upon which the United States Supreme Court recognizes a new rule of law. Expressio unius est exclusio alterius. Accordingly, this Court must conclude that Congress deliberately limited subsection (3) to new rules recognized by the Supreme Court and must decline to expand that subsection by characterizing the decision of a lower court as a new "fact" within the meaning of subsection (4).
D. Equitable Tolling
Defendant also argues that the one-year limitations period should be tolled until the *1000 date Green was decided, because the Defendant had no control over the fact that prior law precluded his claim based upon post-sentencing rehabilitation efforts. This is simply a reframing of his statutory argument and must be rejected for the same reason. To allow such an argument to succeed would eviscerate the limits which Congress has imposed upon the application of new rules of law to old convictions.
III. ORDER
For the foregoing reasons, Defendant's motion to vacate, set aside, or modify his sentence pursuant to 28 U.S.C. § 2255 is DENIED.
NOTES
[1] Defendant was sentenced by Judge William A. Ingram, who since has taken senior status.
[2] It is, however, precluded for the other reasons discussed herein.
[3] With respect to those defendants whose convictions become final before the one-year limitations provision was enacted, the one year runs from the date of enactment, April 24, 1996. See Tworivers v. Lewis, 174 F.3d 987, 996 n. 7 (9th Cir.1999).
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106 F. Supp. 2d 737 (2000)
MORTON INTERNATIONAL, INCORPORATED
v.
A.E. STALEY MANUFACTURING COMPANY, et al.
Velsicol Chemical Corporation, et al.
v.
A.E. Staley Manufacturing Company, et al.
Nos. 96-3609 KSH, 96-3610 KSH.
United States District Court, D. New Jersey.
July 19, 2000.
*738 *739 *740 Samuel Moulthrop, Riker, Danzig, Scherer, Hyland & Perretti, LLP, Morristown, NJ, for Morton International, Inc.
Lorraine Teleky-Petrella, Hackensack, NJ, for Velsicol Chemical Corp., NWI Land Management Co., Fruit of the Loom, Inc.
*741 John Ralph Holsinger, Beattie Padovano, Montvale, NJ, for A.E. Staley Mfg. Co.
Michael L. Rodburg, Lowenstein Sandler PC, Roseland, NJ, for AIRCO Indust. Gases, Allied Chemical Corp., CIBA-Geigy Corp., Becton-Dickinson & Co., Inc., E.I. DuPont De Nemours & Co., Inc., Garfield Baring Corp., Union Carbide Corp., Allied-Signal, Inc.
Michael L. Rodburg, Lowenstein Sandler PC, Roseland, NJ, for Michael Rodburg, Defendants Liaison Counsel.
Denise D. Pursley, Nixon, Hargrave, Devans & Doyle, Garden City, NJ, Bobbie Anne Flower, Nixon Peabody LLP, Garden City, NJ, for Belmont Metals, Inc.
Pamela R. Esterman, Sive, Paget & Riesel, P.C., New York City, for Crouse-Hinds Sepco Corp., Wagner Elec. Co.
Nan Astrid Bernardo, Shanley & Fisher, P.C., Morristown, NJ, for Crown Zellerbach Corp., Day & Baldwin.
Rosalind M. Dendellen, Rosalind M. Kendellen, Zucker, goldberg, Becker & Ackerman, Mountainside, NJ, for Dura Elec. Lamp Co., Inc.
Robert Gordon Rose, Pitney, Hardin, Kipp & Szuch, Morristown, NJ, for Duracell, Inc.
Jane Kozinski, Saul, Ewing, Remick & Saul, Princeton, NJ, for Eastern Smelting & Refining.
John H. Klock, Gibbons, Del Deo, Dolan, Griffinger & Vecchione, PC, Newark, NJ, for Henkel Corp.
Michael Kevin Mullen, Schenck, Price, Smith & King, Morristown, NJ, for Inmar Associates, Inc., Marvin H. Mahan.
Lynn Wright, Edwards Angell, LLP, Short Hills, NJ, for J.M. Ney Co.
Mark L. Manewitz, Grotta Glassman & Hoffman, P.A., Roseland, NJ, for Koppers.
Paul John Casteleiro, Hoboken, NJ, for Magnesium Elektron, Inc.
Harry M. Baumgartner, Shanley & Fisher, Morristown, NJ, for Marisol, Inc.
Russell Lyle Hewit, Dughi & Hewit, PC, Marlton, NJ, for Merck & Co., Inc.
Timothy Ignatius Duffy, McElroy, Deutsch & Mulvaney, Morristown, NJ, National Lead Co., Goldsmith Brothers Div.
Mark L. Czyz, Mttson & Madden, Newark, NJ, John H. Klock, Gibbons, Del Deo, Dolan, Griffinger & Vecchione, PC, Newark, NJ, for Occidental Chemical Corp.
John J. Delany, III, Voorhees, NJ, for Phillips & Jacobs, Inc.
Hugh J. Mahoney, Newark, NJ, for Public Service Elec. & Gas.
Bruce R. Rosenberg, Winne, Banta, Rizzi, Hetherington & Basralian, P.C., Hackensack, NJ, for Randolph Products Co.
Laura Farina, Law Offices of Laura Farina, Princeton, NJ, Karen A. Mignone, McGovern Noel & Benik, Inc., Milburn NJ, for Ray-O-Vac Div. of ESB.
Steven Richman, Gallagher, Brody & Butler, Princeton, NJ, for Redland Minerals Ltd.
Dante J. Romanini, Kozlov, Seaton, Romanini, Brooks & Greenberg, PC, Cherry Hill, NJ, for Scientific Chemical Processing, Inc., Scientific Chemical Treatment Co., Inc., Scientific, Inc., Transtech Industries, Inc.
Christine G. Mooney, Manko, Gold & Katcher, Bala Cynwyd, PA, for Sylvania/GTE.
David Joseph D'Aloia, Saiber Schlesinger Satz & Goldstein, Newark, NJ, for Tenneco, Inc.
Gerold C. Thompson, U.S. Dept. of Justice, Environment & Natural Resources Div., Washington, DC, for Jerold C. Thompson.
George Van Cleve, Washington, DC, pro se.
David Paul Schneider, Bressler, Amery & Ross, PC, Florham Park, NJ, for BASF Corp.
*742 Kenneth Howard Mack, Fox, Rothschild, O'Brien & Frankel, LLP, Lawrenceville, NJ, for FMC Corp.
LETTER-OPINION AND ORDER
HEDGES, United States Magistrate Judge.
Dear Counsel:
INTRODUCTION
This matter comes before me on the motion of Becton-Dickinson and Company, Inc., E.I. duPont de Nemours & Co., Inc., Garfield Refining Company, Inc., Union Carbide Corporation, Tennessee Gas Pipeline Company, the Connecticut Light and Power Company, Belmont Metals, Inc., Duracell, Inc., J.M. Ney Company, Merck & Co., Inc., and PSE & G ("site defendants") to amend their Answers. Defendant Occidental Chemical Corporation joins in the motion[1]. Plaintiffs Morton International, Inc., Velsicol Chemical Corporation, NWI Land Management Corporation and Fruit of the Loom ("plaintiffs") oppose the motion. I have considered the papers in support of and in opposition to the motion. There was no oral argument. Rule 78.
PROCEDURAL HISTORY
Plaintiffs commenced this action in August of 1996 seeking contribution under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended, 42 U.S.C. § 9601 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. § 6901, et seq., the New Jersey Spill Compensation and Control Act ("Spill Act"), N.J.S.A. 58:10-23.11 et seq., the Federal Declaratory Judgment Act, 28 U.S.C. § 2201 et seq., and under common law, for investigation and remediation costs undertaken at a former mercury manufacturing plant in Wood Ridge, New Jersey, now known as the "Ventron/Velsicol Superfund Site" (the "Site").[2] The costs were the result of significant mercury and other hazardous substance contamination.[3] The Site had been used for mercury processing operations for fifty years.[4]State v. Ventron, *743 94 N.J. 473, 503, 468 A.2d 150 (N.J. 1983).
Plaintiffs were adjudicated liable for the contamination. Ventron, 94 N.J. at 482, 468 A.2d 150. In insurance coverage litigation, plaintiffs were found to have knowingly and intentionally polluted the Site. Morton Int'l., Inc. v. General Accident Ins. Co., 134 N.J. 1, 95, 629 A.2d 831 (1993). Plaintiffs commenced this action, contending that site defendants are liable under CERCLA § 107(a)(3) and/or § 113(f) because they arranged for the disposal and/or treatment of mercury and/or other hazardous substances at the Site, therefore contributing to the Site's contamination. This action is now in its advanced stages. Discovery is closed, having resulted in the production of over 300,000 pages of documents related to Site operations, conditions, and remedial activity, and the depositions of forty witnesses were conducted. Expert disclosures were exchanged, and a Final Pretrial Order was entered on November 17, 1999.
Before me is site defendants' motion to amend their Answers to add a defense. The defense is provided for in newly enacted legislation signed into law on November 29, 1999 by President William Jefferson Clinton, three years after the commencement of this action. The legislation is a rider to the Omnibus Budget Appropriations Act of 1999 (H.R.3194), Public Law No. 106-113, 113 Stat. 1501A-598 (1999).[5] The new enactment, 42 U.S.C. § 9627 ("Section 127") provides for an exemption from liability under CERCLA § 107(a)(3) and (a)(4) for certain persons who arranged for recycling of recyclable material. 42 U.S.C. § 9627(a)(2). Section 127 includes a fee-shifting provision which provides that, "[a]ny person who commences an action in contribution against a person who is not liable by operation of this section shall be liable to that person for all reasonable costs of defending that action, including all reasonable attorneys' fees and expert witness fees." 42 U.S.C. § 9627(j). Section 127's application to pending cost recovery actions has not been addressed in this Circuit.
On December 6, 1999 and January 3, 2000, site defendants sought plaintiffs' withdrawal of their claims or consent to amend their Answers to assert the recycling defense and a claim for attorneys' fees pursuant to Section 127. The requests were denied. Site defendants now move to amend their Answers to assert the new defense and claim for attorneys' fees.
DISCUSSION
Standard of Review
Rule 15(a) provides in relevant part that,
[a] party may amend the party's pleading once as a matter of course at any time before a responsive pleading is *744 served or, if the pleading is one to which no responsive pleading is permitted and the action has not been placed upon the trial calendar, the party may so amend it at any time within 20 days after it is served. Otherwise a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice requires.
Leave to amend generally may be denied for four reasons: 1) undue delay; 2) bad faith or dilatory motive; 3) undue prejudice; or 4) futility of amendment. Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962); see Burlington Coat Factory Secs. Litig., 114 F.3d 1410, 1434 (3d Cir.1997). The federal rules reflect the "principle that the purpose of pleading is to facilitate a proper decision on the merits," and that if the underlying facts relied on by a party might be a proper subject of relief, that party should have the opportunity to test its claims on the merits. Foman, 371 U.S. at 182, 83 S. Ct. 227 (quoting Conley v. Gibson, 355 U.S. 41, 48, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957)). Therefore, courts should liberally permit amendments, and the discretion to do so rests with the trial court. See, e.g., Heyl & Patterson v. F.D. Rich Housing of Virgin Islands, 663 F.2d 419, 425 (3d Cir. 1981), cert. denied, 455 U.S. 1018, 102 S. Ct. 1714, 72 L. Ed. 2d 136 (1982); Elf Atochem North America, Inc. v. United States, 161 F.R.D. 300, 301 (E.D.Pa.1995).
Undue Delay, Bad Faith, Dilatory Motive
Site defendants did not delay in making their motion. Within one week of the enactment of Section 127, site defendants requested the consent of plaintiffs to amend their Answers. After plaintiffs refused, site defendants promptly filed their motion. Thus, there has been no undue delay, as there is no evidence of bad faith or dilatory motive given that Congress so recently enacted the legislation.
Prejudice
Plaintiffs argue that granting leave to amend would result in undue prejudice to them. Plaintiffs also argue that Section 127 raises entirely new legal and factual issues that they have not had the opportunity to investigate, and therefore, they will be prejudiced if they do not have the opportunity to address these issues before trial. Plaintiffs contend that if site defendants are permitted to assert new counterclaims against plaintiffs for Section 127 attorneys' fees, plaintiffs would suffer prejudice, as they would be denied the opportunity to investigate the nature of these claims and prepare a defense.
Site defendants contend that plaintiffs will not be prejudiced by amendment because it does not alter the issues in the action or require additional discovery. Site defendants argue that the parties should have produced every document regarding the transactions at the Site and that plaintiffs have not identified any specific discovery that they now claim to need. Furthermore, site defendants argue that the addition of this defense is not a new issue in that the enactment of this statute confirms an emerging line of case law that holds that liability under CERCLA is not created and does not arise from disposal arrangements when one generates secondary materials which are useful products.[6] Site defendants contend that Section 127's defense is not significantly different from their Eleventh Affirmative Defense in their original Answers, which provides that,
If Defendant[s] arranged for the treatment of material at the Site, that arrangement was consistent with the uses *745 and practice appropriate for those properties at all relevant times, consistent with industry practice, and otherwise was in compliance with prevailing legal requirements.
Lastly, site defendants argue that their original responsive pleadings "reserve[] the right to assert additional defenses that may arise in the course of discovery or at trial."
"[P]rejudice to the non-moving party is the touchstone for the denial of an amendment." Heyl & Patterson, 663 F.2d at 425 (quoting Cornell & Co., Inc. v. Occupational Safety & Health Review Comm'n, 573 F.2d 820, 823 (3d Cir.1978)); see Lorenz v. CSX Corp., 1 F.3d 1406, 1414 (3d Cir.1993). Incidental prejudice is not a sufficient basis for the denial of a proposed amendment. Prejudice becomes undue when a party shows that it would be "unfairly prejudiced" or deprived of the opportunity to present facts or evidence which it would have offered. Heyl & Patterson, 663 F.2d at 426. The test for prejudice is whether the non-moving party will be denied "a fair opportunity to defend and offer additional evidence" to address the amendment. Evans Prods. Co. v. West American Ins. Co., 736 F.2d 920, 924 (3d Cir.1984) (quoting Universe Tankships, Inc. v. United States, 528 F.2d 73, 76 (3d Cir.1975)). If the amendment would substantially change the theory on which the action is proceeding, and is proposed so late that a party must engage in significant new preparation, it may be found to be prejudicial. Elf Atochem, 161 F.R.D. at 301 (defense that EPA was arbitrary and capricious in remedy chosen one year after filing of complaint and after fact discovery closed was untimely and prejudicial in that it was obvious from start of litigation and trial was close). Courts have denied amendment of pleadings immediately before trial. See, e.g., Harrison Beverage Co. v. Dribeck Importers, Inc., 133 F.R.D. 463, 468 (D.N.J.1990). However, in the instance where no trial date is scheduled, less prejudice to the non-moving party will be deemed to exist.
Here, no trial date has been set. If the amendment is to be applied retroactively, I may permit the parties to do limited discovery, if warranted, on any new issues raised by the new legislation. For that reason, no party will be prejudiced and the argument fails.
Futility
Futility exists "where the proposed amendment is 1) frivolous or 2) advances a claim that is legally insufficient on its face." "If a proposed amendment is not clearly futile, then denial of leave to amend is improper." This analysis "does not require the parties to engage in the equivalent of substantive motion practice upon the proposed new claim or defense; this does require, however, that the newly asserted defense appear to be sufficiently well-grounded in fact or law that is not a frivolous pursuit." Harrison Beverage, 133 F.R.D. at 468.
Plaintiffs argue that site defendants' proposed amendment is frivolous in that 1) it is not to be applied retroactively to pending cases and 2) that even if it was retroactive, the amendment would not apply to the activities performed by site defendants in regards to the Site. Site defendants argue that the proposed amendment is retroactive to this pending action. They also argue that it would not be futile because their actions fall within the type of recycling activities intended by Congress to be exempted from CERCLA liability. The first questions before me are whether the Act applies to this action and what is its temporal reach.
CERCLA Liability and Section 127
Under CERCLA § 107(a), four categories of persons may be held liable:
(1) the owner and operator of a vessel or a facility,
(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at *746 which such hazardous substances were disposed of,
(3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances[7], and
(4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or a threatened release which caused the incurrence of response costs, of a hazardous substance, shall be liable for
(A) all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan;
(B) any other necessary costs of response incurred by any other person consistent with the national contingency plan;
(C) damages for injury to, destruction of, or loss of natural resources, including the reasonable costs of assessing such injury, destruction, or loss resulting from such a release; and
(D) the costs of any health assessment or health effects study carried out under section 9604(i) of this title.
42 U.S.C. § 9607(a); see New Jersey Turnpike Auth. v. PPG Indus., Inc., 197 F.3d 96, 103 (3d Cir.1999). Prior to the enactment of Section 127, defenses to Section 107 liability were more limited. F.P. Woll & Co. v. Fifth & Mitchell St. Corp., 1999 WL 79059, at *3 (E.D.Pa. Feb.4, 1999). A party generally escaped liability only if it showed that the release or threatened release was caused only by one or more of the following: 1) act of God; 2) act of war; or 3) the act or omission of a third party other than an employee or agent of the defendant, or than one whose act or omission occurs in connection with a contractual relationship, existing directly or indirectly, with the defendant. 42 U.S.C. § 9607(b). "Certain other limited defenses exist.[8] With the enactment of Section 127, a new defense was added to relieve certain persons qualifying as recyclers from liability under sections 107(a)(3), arranger liability, and 107(a)(4), transporter liability."[9] Section 127(a)(1). Congress set forth the purposes of this legislation:
*747 (1) to promote the reuse and recycling of scrap material in furtherance of the goals of waste minimization and natural resource conservation while protecting human health and the environment;
(2) to create greater equity in the statutory treatment of recycle versus virgin materials; and
(3) to remove the disincentives and impediments to recycling created as an unintended consequence of the 1980 Superfund liability provisions.
S.1948, § 6001(a), Nov. 29, 1999, 113 Stat. 1536, 1537. Congress intended to correct unintended consequences of CERCLA that discourage legitimate recycling by equalizing the differential between recycled and virgin materials. "Virgin materials are in direct competition with recyclables and this legislation will help to increase recycling in our nation." 145 Cong. Rec. S14986-03, S15028. Congress also acknowledged that recycling transactions are distinct from the disposal or treatment of hazardous substances and should not be treated as arranging for disposal or treatment.[10]
Under Section 127, recyclers of certain recyclable materials are exempt from CERCLA liability. "Recyclable materials" are defined as:
scrap paper, scrap plastic, scrap glass, scrap textiles, scrap rubber (other than whole tires), scrap metal, or spent lead-acid, spent nickel-cadmium, and other spent batteries, as well as minor amounts of material incident to or adhering to the scrap material as a result of its normal and customary use prior to becoming scrap ....
§ 127(b). Whether a transaction qualifies depends on the type of recyclable material. Scrap paper, plastic, glass, textiles, or rubber are covered under § 127(c), scrap metal under 127(d), and batteries under § 127(e). To qualify for the exemption, the burden falls on the arranger to show that the statutory criteria are met. §§ 127(c) (e).[11] The exemption does not apply if:
*748 (A) the person had an objectively reasonable basis to believe that the time of the recycling transaction
(i) that the recyclable material would not be recycled;
(ii) that the recyclable material would be burned as fuel, or for energy recovery or incineration; or
(iii) for transactions occurring before 90 days after the date of the enactment of this section, that the consuming facility was not in compliance with a substantive (not procedural or administrative) provision of any Federal, State, or local environmental law or regulation, or compliance order or decree issued pursuant thereto, applicable to the handling, processing, reclamation, or other management activities associated wit the recyclable material;
(B) the person had reason to believe that hazardous substances had been added to the recyclable material for purposes other than processing for recycling; or
(C) the person failed to exercise reasonable care with respect to the management and handling of the recyclable material (including adhering to customary industry practices current at the time of the recycling transaction designed to minimize, through source control, contamination of the recyclable material by hazardous substances)[12].
(2) For purposes of this subsection, an objectively reasonable basis for belief shall be determined using criteria that include (but are not limited to) the size of the person's business, customary industry practices (including customary industry practices current at the time of the recycling transaction designed to minimize, through source control, contamination of the recyclable material by hazardous substances), the price paid in the recycling transaction, and the ability of the person to detect the nature of the consuming facility's operations concerning its handling, processing, reclamation, or *749 other management activities associated with the recyclable material.
(3) For purposes of this subsection, a requirement to obtain a permit applicable to the handling, processing, reclamation, or other management activities associated with recyclable material shall be deemed to be a substantive provision.
Section 127(f).
Is Section 127 Retroactive?
Section 127's retroactivity has been addressed only by two other courts. In United States v. Atlas Lederer Co., 97 F. Supp. 2d 830 (S.D.Ohio 2000), the United States filed suit against Livingston Company under CERCLA § 107(a)(3). Livingston had sold old batteries to the United Scrap Lead Company, intending to recycle the lead contained within. United States v. Atlas Lederer Co., 85 F. Supp. 2d 828, 830 (S.D.Oh.2000). Based on Livingston's alleged liability under section 107(a)(3), other parties sought contribution from it, pursuant to CERCLA § 113(f). 97 F. Supp. 2d at 831 n. 2. The court held that Section 127 did not apply to "any pending judicial action initiated by the United States prior to" the enactment of the Act and did not "constitute a mere codification of existing case law." 97 F. Supp. 2d at 832.[13] The court concluded that the action before it constituted in its entirety "a judicial action" commenced by the United States and therefore, the defense did not apply. Therefore, a pending judicial action brought by the United States would encompass any later cross-claims and third-party claims of contribution. 97 F. Supp. 2d at 833-34. The court concluded that it would be incorrect to allow the United States to pursue a CERCLA action against some defendants, but preclude them from seeking contribution. "Such a policy would punish the Respondent Group for accepting responsibility and settling with the Government."[14] 97 F.Supp.2d at 833.
In Department of Toxic Substances Control v. Interstate Non-Ferrous Corp., 99 F. Supp. 2d 1123 (E.D.Cal.2000) ("Toxic Substances"), plaintiff State of California commenced a cost recovery action against defendants. On a summary judgment motion, the court concluded that the State is a separate entity from the United States with regard to the intent of the legislation and that the legislation would apply to the action. 99 F. Supp. 2d at 1126, 1153. The court analyzed the temporal reach of the statute and concluded that it was not retroactive in that the State did not make a sufficient showing that its rights existent at the time it acted were impaired. Furthermore, the court concluded that Section 127 would not increase liability for past conduct (remediation of the site) or would *750 impose new duties with respect to any transactions already completed. 99 F. Supp. 2d at 1140-41, 1153. The court did find, however, that the legislation was retrospective in that it would be applied to the pending action. 99 F. Supp. 2d at 1153.
Should Section 127 Apply to this Private Party Action?
When a question arises as to the temporal reach of a statute, courts wrestle with two contradictory principles. The first provides that, "a court is to apply the law in effect at the time it renders its decision." Landgraf v. USI Film Products, 511 U.S. 244, 263, 114 S. Ct. 1483, 128 L. Ed. 2d 229 (1994) (quoting Bradley v. School Bd. of City of Richmond, 416 U.S. 696, 711, 94 S. Ct. 2006, 40 L. Ed. 2d 476 (1974)). The second provides that retroactivity is disfavored in the law, in accordance with "`fundamental notions of justice' that has been recognized throughout history." Eastern Enterprises v. Apfel, 524 U.S. 498, 532, 118 S. Ct. 2131, 141 L. Ed. 2d 451 (1998) (quoting Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 855, 110 S. Ct. 1570, 108 L. Ed. 2d 842 (1990) (Scalia, J., concurring)); see Landgraf, 511 U.S. at 264, 114 S. Ct. 1483. When a statute unambiguously applies to conduct that occurred before the statute's enactment, there is no conflict because the presumption against retroactivity and principle that court should apply the law in effect at the time of its decision. Toxic Substances, at 1128.
Statutes applying to pending cases are labeled "retrospective." Not all laws that are applicable to pending cases are "retroactive." Toxic Substances, at 1127. "[A] retrospective statute is retroactive if it attaches new legal consequences to prior acts so as to justify the presumption against retrospective application." 99 F. Supp. 2d at 1127 (quoting United States v. $814,254.76, 51 F.3d 207, 210 n. 3 (9th Cir.1995)). "[E]very statute, which takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past, must be deemed retrospective...." Landgraf, 511 U.S. at 269, 114 S. Ct. 1483 (quoting Gospel v. Wheeler, 22 F. Cas. 756 (No. 13,156) (C.C.D.N.H.1814)). Courts "consider[ ] fair notice, reasonable reliance, and settled expectations" when determining if a statute is retroactive. Landgraf, 511 U.S. at 270, 114 S. Ct. 1483. Elementary considerations of fairness dictate that legislation not be retroactive so that individuals have the opportunity to be forewarned as to the law and to act accordingly. 511 U.S. at 265, 114 S. Ct. 1483. The presumption is strong that new legislation is prospective and will not have a retroactive effect unless Congress by its language clearly requires a certain result.[15] 511 U.S. at 264, 289, 114 S. Ct. 1483.
The Supreme Court has defined when statutes should be applied retrospectively. Landgraf, 511 U.S. at 280-88, 114 S. Ct. 1483 (statutes should not be applied retrospectively unless Congress has expressly commanded so or by "necessary *751 and unavoidable implication"); see Lindh v. Murphy, 521 U.S. 320, 326, 117 S. Ct. 2059, 138 L. Ed. 2d 481 (1997). The Third Circuit follows the Supreme Court's reasoning of Landgraf and Lindh:
1. First, the court must determine if Congress unambiguously expressed a directive that the statute is retroactive. If so, the inquiry is done.
2. If there is no clear statement from Congress as to the temporal reach of the statute, then the court must apply normal statutory construction rules to determine if Congress intended to apply the statute prospectively only. If no such intent is found, then the inquiry is done.
3. If Congress did not provide an unambiguous directive that the legislation is retroactive or that it should be applied only prospectively, then the court must determine the effect the statute will have. This court must inquire as to whether the statute "impair[s] rights a party possessed when he acted, increase[d] a party's liability for past conduct, or impose[d] new duties with respect to transactions already completed". The court should also determine if the "statute affect[s] only prospective relief, or change[s] procedural rules, or simply allocate[s] jurisdiction among fora."
a. if no retroactive effect is found, the court should apply statutory construction rules to determine if the statute applies to pending cases.
b. if the statute has retroactive effect, the statute cannot be applied unless Congress has provided clear intent to apply the statute retrospectively.
Mathews v. Kidder, Peabody & Co., 161 F.3d 156, 161 (3d Cir.1998), cert. denied, 526 U.S. 1067, 119 S. Ct. 1460, 143 L. Ed. 2d 546 (1999); see Lindh, 521 U.S. at 326, 117 S. Ct. 2059; Landgraf, 511 U.S. at 280, 114 S. Ct. 1483.
Applying the Test
1. Did Congress provide expressly and unambiguously that Section 127 is retroactive?
Site defendants argue that the plain meaning of Section 127 is clear in that it applies retroactively. Site defendants contend that if Congress wanted Section 127 to not apply to pending private party and State-initiated actions, it would have stated simply that Section 127 did not apply to all pending actions. Site defendants argue that under the canon of statutory construction "expressio unius established exclusio alterius," the specific carve-out for actions brought by the United States demonstrate congressional intent that the statute applies to all other pending actions.
Plaintiffs argue that Section 127 cannot apply retroactively because it does not contain a clear, unequivocal expression of congressional intent. Plaintiffs contend that the statutory language merely provides that the amendment "shall not effect any ... pending judicial action initiated by the United States prior to the enactment of the section." Plaintiffs argue that Congress's silence on how other types of actions should be addressed does not mean that Section 127 applies in all other situations. Rather, plaintiffs argue that, in Landgraf, the Supreme Court concluded that statutory language addressing one situation reflected Congress' inability to resolve all retroactivity issues, intentionally leaving other issues to be resolved by the courts. 511 U.S. at 261, 114 S. Ct. 1483. Plaintiffs further argue that denying retroactivity to a statute in one narrow situation is insufficient to create a negative inference that Congress intended the statute to apply retroactively in all other situations. Plaintiffs argue that believing otherwise would lead to the assumption that Congress indirectly conveyed an important, easily expressed intention rather than using "clear, strong, and imperative" language as required by Landgraf.
*752 The temporal reach of the exemption is covered under § 127(i) entitled "Effect on Pending or Concluded Actions". Section 127(i) provides that, "[t]he exemptions provided in this section shall not affect any concluded judicial or administrative action or any pending judicial action initiated by the United States prior to the enactment of this section." Arguably, the inquiry may end here. Section 127 does not state that it applies to all pending actions except those commenced by the United States. Rather, it states that Section 127 does not apply to any concluded administrative or judicial action, or to any pending judicial action commenced by the United States. To find that Section 127 applies to pending actions commenced by a State or private party, the court must infer that Congress intentionally omitted mention of pending cases to which Section 127 does apply, because it intended Section 127 to apply retrospectively to all such cases.
This suggests that Congress used a negative inference to express its intent. A "negative inference" may be considered during a retroactivity analysis of Section 127. Toxic Substances, at 1130-31; see United States v. Olin Corp., 107 F.3d 1506, 1513 (11th Cir.1997). Although the general rule is that if Congress intended retrospectivity, it would have expressly stated so, the Supreme Court held that "Landgraf `did not preclude all future use of a negative inference analysis in support of retroactive intent.'"[16]United States v. Olin, 107 F.3d at 1513. Therefore, it was not necessary for Congress to state that the Section 127 amendment apply to all pending actions except those initiated by the United States or specifically to private party or State-initiated actions. Toxic Substances, at 1130.
Based on the plain meaning of the statute, it appears that Congress intended the recycling exemption to apply to State-initiated and private party actions, and only not to United States-initiated actions. As plaintiffs argue, if Congress did not want Section 127 to apply to these pending actions, it could have easily provided so by stating simply that, "this legislation does not apply to any pending actions." Its choice not to do so is evidence that Congress intended that pending private party and State-initiated actions be covered by Section 127. Although Congress did not mention specifically that Section 127 applies to private party and State-initiated actions, the language of Section 127 appears to permit the exemption to apply to them.
However, a court must not find clear intent to apply a statute with retroactive effect by using nothing more than a negative inference. Mathews, 161 F.3d at 167. "[A]bsent explicit statutory language mandating retroactivity, laws may be applied retroactively if courts are able to discern `clear congressional intent favoring such a result.'" Olin, 107 F.3d at 1512-13 (quoting Landgraf, 511 U.S. at 280, 114 S. Ct. 1483). Therefore, I will proceed to legislative intent.
2. Did Congress intend that Section 127 should be applied prospectively?
Plaintiffs argue that the Act should only be applied prospectively. Site defendants argue that it should be applied both prospectively and retrospectively. The second step of the Landgraf/Lindh analysis requires me to examine Section 127 under rules of statutory construction for evidence *753 of Congress's intent to apply the statute prospectively only.
Various theories of statutory interpretation have been used by courts to determine the meaning of a statute.[17] Generally, the Supreme Court, with some influence from Justice Scalia, has held that when determining the meaning of a statute, a court should apply textualism and begin with the statutory language. Holder v. Hall, 512 U.S. 874, 914, 114 S. Ct. 2581, 129 L. Ed. 2d 687 (1994); see Landgraf, 511 U.S. at 287, 114 S. Ct. 1483 (Scalia, J., concurring). The "`authoritative source' for legislative intent [is generally] the text of the statute passed by both Houses of Congress and presented to the President, not a series of partisan statements about purposes and objectives collective by congressional staffers and packaged into a committee report. `We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there.'" Holder, 512 U.S. at 891, 114 S. Ct. 2581 (quoting Connecticut National Bank v. Germain, 503 U.S. 249, 253-54, 112 S. Ct. 1146, 117 L. Ed. 2d 391 (1992)) (Thomas, J. and Scalia, J., concurring); see Landgraf, 511 U.S. at 287, 114 S. Ct. 1483 (Scalia, J. concurring). However, when the statutory language is indecipherable, as in the case of textual ambiguity, the court should turn "to the legislative purpose as revealed by the history of the statute, for such light as it may shed." Concrete Pipe and Prods. of California, Inc. v. Construction Laborers Pension Trust for Southern California, 508 U.S. 602, 627, 113 S. Ct. 2264, 124 L. Ed. 2d 539 (1993); see Toibb v. Radloff, 501 U.S. 157, 162, 111 S. Ct. 2197, 115 L. Ed. 2d 145 (1991); Landgraf, 511 U.S. at 289, 114 S. Ct. 1483 (Scalia, J., concurring) (if a statute is unclear, the Court must restrict its application to prospective operation). Although on its face, the statute appears retrospective, I will review the legislative history for Congress's intent.
Legislative History
Plaintiffs argue that the legislative history for Section 127 is scarce because the legislation was hastily enacted as a rider to the Omnibus Budget Appropriations Act of 1999 (H.R.3194). Plaintiffs contend that the history that exists is conflicting and does not support the argument that the Act should be retroactive. Site defendants argue that, although the Act was hastily enacted without legislative history, congressional discussions and bill proposals were ongoing since 1994 by the 103rd Congress in the form of the Superfund Reform Bill of 1994, and that the history, including that of the recent enactment, support retroactivity. Site defendants argue that the previous legislative history, which includes multiple committee statements, demonstrates Congress' intent that Section 127 apply retroactively to pending actions between private parties.
It was apparent to Congress after CERCLA's enactment that unintended liability was being imposed on legitimate recyclers. In 1994, a bill was proposed which, if enacted, would have exempted recycling transactions from CERCLA liability. *754 H.R. 4916, 103rd Cong. (1994). The bill was "developed in conjunction with the recycling industry, the environmental community and the Federal Government." 141 Cong. Rec. E269-05 (daily ed. Feb. 3, 1995) (statement of Rep. Lincoln). It had significant legislative history including five reports from Congressional committees which recommended passage.[18] Two reports endorsed the bills' retroactive application to past transactions and pending private-party actions. The report from the Committee on Energy and Commerce provided that, "[t]he relief from liability provided by [the] section [on recycling transactions] is for both retroactive and prospective transactions that meet all the other applicable criteria ...." H.R. Rep. No. 103-582(I), 1994 WL 320916, at *145 (Committee on Energy and Commerce). The report from the Committee on Public Works and Transportation stated that the recycling bill "provides for relief from liability for both retroactive and prospective transaction." H. Rep. No. 103-582(II), 1994 WL 422720, at *138 (Committee on Public Works and Transportation).
Members of the Senate Committee argued that the bill should be applied to pending private-party actions: "We believe that those parties who took batteries or used motor oil to legitimate recyclers should be exempt from Superfund liability in the past as well as the future." S.Rep. No. 103-349, 1994 WL 454563, at *132 (statement of Senators Simpson, Smith, Faircloth, and Kempthorne, collectively). The 103rd Senate Report on the Superfund Reform Bill for 1994 similarly endorsed its application to past transactions: "The provisions ... are intended to permit a person to be exempt for past recycling transactions if there was no objectively reasonable basis for the person to know or suspect that the consuming facility was not in compliance [with applicable regulations]". S. Rep. 103-349, 1994 WL 454563, at *64 (Committee on Environment and Public Works).
H.R. 4916 was not enacted but, in 1998, another attempt to enact a recycling exemption was made. 105th Cong. (1998). Much of the language of the "Superfund Recycling Equity Act of 1998" S. 2180 was taken from H.R. 4916. S. 2180, 105th Cong. (1998). S. 2180 contained the exact provision regarding temporal reach as contained in enacted Section 127. This legislation also failed.
With the framework having been shaped, it is possible that Congress concluded that additional new legislative history was not necessary when it finally enacted Section 127 in 1999. The bill was significantly similar to its predecessors. This is likely the reason why there were no conference or committee reports or hearing transcripts. For significant new environmental legislation, it would be improper not to have thorough discussion.[19]
The legislative history includes three co-sponsor statements:
Senator Lott
Senator Lott's statement provides in relevant part that,
CERCLA § 127[] clarifies liability for recycling transactions ... § 127 provides *755 for relief from liability for both retroactive and prospective transactions ... Congress clearly intends that the exemptions from liability granted by § 127 shall not affect any concluded judicial or administrative action. Concluded action means any lawsuit in which a final judgment has been entered or any administrative action, which has been resolved by consent decree, which has been filed in a court of law and approved by such court. Furthermore, § 127 shall not affect any pending judicial action brought by the United States prior to enactment of this section. Any pending judicial action, whether it was brought in a trial or appellate court, by a private party shall be subject to the grant of relief from liability. For purposes of this section, Congress intends that any third party action or joinder of defendants brought by a private party shall be considered a private party action, regardless of whether or not the original lawsuit was brought by the United States. Additionally, any administrative action brought by any governmental agency but not yet concluded as set forth above, shall be subject to the grant of relief from liability set forth in this § 127.
145 Cong. Rec. S15048-15050 (daily ed. Nov. 19, 1999) (Statement of Senator Lott).
Senator Lincoln
Senator Lincoln's statement provides that,
Mr. President, we have been working to right this wrong [to the recycling industry by removing bias against recycled materials] for over six years. During the 103d Congress, I first introduced a bill to relieve legitimate recyclers of scrap metal from unintended Superfund liability. The bill was developed in conjunction with the recycling industry, the environmental community, and the Administration. We worked closely together and consistently agreed that liability relief for recyclers is necessary and right. The language in this bill is the culmination of a process that we have been working on since 1993 ... as the sponsoring member of this legislation when I was a member of the House of Representatives, I would like to make a couple of important points. First, this Superfund Recycling Equity Act is both retroactive and prospective. Slightly different standards must be met for recyclers to be relieved of Superfund liability for recycling transactions that occurred prior to the date of enactment than for those that occur after the date of enactment... Only lawsuits brought prior to enactment of this legislation directly by the United States government against a person will remain viable. All other lawsuits brought by private parties, or against third party defendants in lawsuits originally brought by the U.S. Government will no longer process under this legislation ....
145 Cong. Rec. S. 14896-03, S15028, 1999 WL 1050353, (daily ed. Nov. 19, 1999) (statement of Senator. Lincoln).
Senator Daschle
Senator Daschle issued a statement into the Congressional Record on January 26, 2000 to
correct an inadvertent but significant error in the Congressional Record of November 19, 1999 ... by Senator Lott (145 Congressional Record S15048) regarding the Superfund Recycling Equity Act ... [t]he statement erroneously was attributed to both Senator Lott and me. [T]he statement did not then and does not now reflect my understanding of the Superfund recycling amendments. I make this clarification at the earliest opportunity, in order to minimize the possibility of any mistake and reliance on the statement as the consensus view of two original co-sponsors, particularly with respect to the availability of relief in pending cases ... there is no conference report, and there are no committee reports or hearing transcripts, to guide *756 interpretation of the bill ... However, much, though not all, of the language in the recycling amendments originated in the 103d Congress. At that time, key stakeholders, including EPA, members of the environmental community and the recycling industry, agreed on recycling provisions as part of efforts to pass a comprehensive Superfund reform bill. Although Superfund reform legislation did not reach the floor in the 103d Congress, it was reported by the major Committees of jurisdiction in both the Senate (S.1834) and the House with bipartisan support. In reporting these bills in the 103d Congress, the Senate Environment and Public Works Committee, the House Energy and Commerce Committee, and the House Public Works and Transportation Committee each produced reports that include discussions of the recycling provisions.
Since the recycling provisions of S.1834 were identical in most respects to the Superfund Recycling Equity Act of 1999, and the meaning of key provisions of that bill were actively considered and discussed, the Senate Committee Report contains probably the best description of the consensus on the meaning of those provisions.
To the extent the Committee Report does not address a particular provision of the recycling amendments, the Committee may very well have chosen to be silent on the point. With respect to such provisions, the `plain language' of the statute must be our guide ... it will be for the courts to resolve questions of interpretation on a case-by-case basis.
Cong. Rec. at S76-02, S76-77 (Jan. 26, 2000 daily ed.), 2000 WL 64661 (2000) (statement of Senator Daschle).
"[S]tatements by individual legislators should not be given controlling effect, but when they are consistent with the statutory language and other legislative history, they provide evidence of Congress' intent." Brock v. Pierce County, 476 U.S. 253, 263, 106 S. Ct. 1834, 90 L. Ed. 2d 248 (1986). Moreover, a court may consider the statements of a cosponsor or committee representative when performing statutory construction if after careful evaluation, it is convinced that the sponsor is knowledgeable about the bill and not sacrificing candor to partisan interests. Southerland, Statutory Construction, Vol. 2A, § 48.15, p. 364. Moreover, statements made after the enactment of the legislation carry less weight than those made earlier.
Based on the review of the legislative history, it is clear that Congress did not intend that the Act only apply prospectively to State-initiated and private party actions. Senators Lott and Lincoln, co-sponsors of the bill, expressly stated that the recycling exemption should apply retroactively and prospectively to private parties. Senator Daschle's statement raises concern because it was made after the legislation's enactment and because it is somewhat ambiguous. He states that he does not agree with Senator Lott regarding "relief in pending cases". He does not clarify what he means. Furthermore, Senator Daschle contends that no legislative history exists to support Section 127. However, he states that Section 127 was nearly unchanged from the prior proposed 1998 bill. The 1994 bill was significantly the same as the 1998 bill and did have legislative history, including Committee reports, some of which addressed the retroactivity question and concluded that the recycling exemption should be retroactive and prospective. I do not find his statement helpful to the determination of whether Section 127 is retroactive or retrospective. Rather, I find it ambiguous. I also do not find any partisan interest here. Senator Lott is Republican from Mississippi, and his testimony agrees with that of Senator Lincoln, a Democrat from Arkansas. Senator Daschle is a Democrat from South Dakota.
After reviewing the plain language of the Act, I do not conclude that Congress intended this Act to only apply prospectively. Nor do I conclude that the legislative *757 history expresses any intent of Congress to apply Section 127 only to new cases.
3. Does Section 127 have a retroactive effect?
Plaintiffs argue that Section 127 is not retroactive to this pending private party action. Plaintiffs do not specifically argue that their rights will be impaired because Section 127 would eliminate a cause of action. Rather, plaintiffs argue that "because of basic notions of fairness and the belief that the law should not disrupt settled expectations, there is a strong presumption against retroactive application of any law that cannot be overcome without a clear statement by Congress that the law should have such an effect." Site defendants argue that Congress intended Section 127 to apply retroactively to pending contribution actions. Site defendants further argue that because CERCLA is retroactive it follows that Section 127, a defense to its liability, should also be.
A statute is retroactive if it "`would impair rights a party possessed when [the party] acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed." Landgraf, 511 U.S. at 280, 114 S. Ct. 1483 (statute has retroactive effect if it "attaches new legal consequences to events completed before its enactment"). In its consideration, a court must determine if retroactive application "results in `manifest injustice'" Toxic Substances, at 1140. However, "[a] statute is not retroactive [merely] because it applies to transactions that precede the statute's enactment or `upsets expectations based on prior law.'" 99 F. Supp. 2d at 1140 (quoting Landgraf, 511 U.S. at 269, 114 S. Ct. 1483). To qualify as retroactive by "upset[ting] settled expectations, [Congress] must do so unequivocally and in a way that assures us that it has seriously considered the consequences of such action." Mathews, 161 F.3d at 170. "[C]lear congressional intent is required to apply a statute retrospectively if doing so `altered the extent of a party's liability.'" 161 F.3d at 164 (quoting Armbruster v. Unisys Corp., 32 F.3d 768, 771 n. 3 (3d Cir.1994)). For example, depriving a defendant of a defense or a plaintiff of a claim constitutes a retroactive affect, affecting the substantive rights of the parties. Mathews, 161 F.3d at 166. Although retroactivity may not be expressly provided for by a statute, the statute may be applied retroactively if a court can conclude that congressional intent favors such a retroactive effect. Landgraf, 511 U.S. at 280, 114 S. Ct. 1483; Olin Corp., 107 F.3d at 1512-13.
In Toxic Substances, the court concluded that, "recyclers who can satisfy the requirements of Section 127 should not have been liable under the pre-127 law, and are not proper sources of recovery." Toxic Substances, at 1140. The court held that Section 127 did not impair the rights any party had when it acted. The court concluded that plaintiffs did not set forth any way in which section 127 would impose more costs or expense on them in regards to the remediation of the site. The court also concluded that because the application of Section 127 did not make any difference to a party's conduct, it was not retroactive. 99 F. Supp. 2d at 1140; see Bradley, 416 U.S. at 721, 94 S. Ct. 2006. The court observed that plaintiff did not argue that it had a vested expectation or that it undertook any conduct in reliance on section 127 that it would not have taken if Section 127 had been enacted. Rather, plaintiff argued that the amendment potentially eliminated a pre-enactment cause of action that existed and that it would be deprived of the right to seek recovery against a specific class of parties. Toxic Substances, at 1140. The court found no merit in this claim, holding that legitimate recyclers should not have been found liable under CERCLA even before the enactment of Section 127.
I agree, in part, with Toxic Substances in that permitting the retroactivity of this Section 127 recycling defense does not *758 present a retroactivity problem. No rights that plaintiffs possessed at the time that they acted namely, their actions surrounding the contamination of the Site are being impaired. Plaintiffs were held liable for the contamination at the Site, and Section 127 does not alter their remediation costs. This liability is not be increased by Section 127. Any rights that plaintiffs believed that they had at the time they acted were addressed by CERCLA and the Superfund Amendments and Reauthorization Act of 1986 ("SARA") and resulted in their liability. The same would apply to site defendants if they are found liable for contribution. It follows that Section 127's recycling exemption must be applied retroactively as well. If Congress were to hold someone liable for CERCLA liability, they should now be able to argue this recycling defense. The text and purpose of CERCLA and extensive comments by legislators indicated Congress's expectation that CERCLA would be applied retrospectively to pending actions commenced by other parties than the United States. Mathews, 161 F.3d at 170. As discussed earlier, it is possible that site defendants would not have been held liable without the recycling defense. Prior case law has held in many cases that CERCLA liability should not be imposed on legitimate recyclers. As noted, however, the case law was not always consistent.
Similarly, Section 127 does not automatically exempt site defendants from any liability. Rather, site defendants must show that they are entitled to prevail on the exemption. Even if site defendants prevail on their recycling exemption, plaintiffs will need to prove their claims against the remaining defendants. I cannot conclude that plaintiffs automatically lose a cause of action for contribution. Whether plaintiffs will prevail on their Sections 107 and 113 claims is yet to be determined. Nor do I find that there are new duties imposed on any party. Based on this, I cannot conclude that any rights have been impaired or new duties imposed or that liability has been increased based on the imposition of the recycling exemption alone.
I am concerned, however, that at this advanced stage of this litigation that plaintiffs' may be penalized by the fee-shifting provision contained within Section 127(j). Taking away the right to certain damages or creating a right to new damages, e.g., compensatory and punitives, where they did not exist "can be seen as creating a new cause of action, and its impact on parties' rights is especially pronounced." Mathews, 161 F.3d at 165 (quoting Landgraf, 511 U.S. at 282-83, 114 S. Ct. 1483); see Landgraf, 511 U.S. at 281, 114 S. Ct. 1483(imposition of punitive damages provision would present ex post facto problems). Such a change is the kind of "legal change that would have an impact on private parties' planning." Landgraf, 511 U.S. at 282-83, 114 S. Ct. 1483. This would be the type of provision that should not apply to events occurring before its enactment "in the absence of clear congressional intent." 511 U.S. at 283, 114 S. Ct. 1483.
The fee-shifting provision was not in existence at the commencement of the action, nor during discovery, at which times, plaintiffs could have assessed their claims against site defendants more fully with concern for the possibility of proceeding wrongfully against legitimate recyclers. Although prior case law has often not found liability when legitimate recycling activities were undertaken, the law does not appear to have been clearly established that recyclers would not be liable.[20] I *759 cannot conclude that plaintiffs here could have relied on prior case law to the extent that they would have been forewarned that possible recyclers would not be contribution candidates and should be penalized with the fee-shifting provision. However, Section 127(j) provides that, "any person who commences an action in contribution against a person who is not liable by operation of this section shall be liable to that person for all reasonable cost of defending that action, including all reasonable attorney's and expert witness fees". It may be that if this issue is reached in this and other similar pending actions, where there was no notice to the plaintiffs of the fee-shifting provision before the commencement of an action, the court will conclude that the award of any fees is not reasonable. Perhaps this is where the courts should resolve questions surrounding the interpretation of this provision on a case-by-case basis. See, e.g., Cong. Rec. at S76-02, S76-77 (Jan. 26, 2000 daily ed.), 2000 WL 64661 (2000) (statement of Senator Daschle).
Another argument in favor of retroactivity is that Section 127 provides different standards to those who acted before its enactment and those that acted after. Section 127(c)(5) provides that,
For transactions occurring 90 days or more after the date of enactment of this section, the person exercised reasonable care to determine that the facility where the recyclable material was handled, processed, reclaimed, or otherwise managed by another person (hereinafter in this section referred to as a `consuming facility') was in compliance with substantive (not procedural or administrative) provisions of any Federal, State, or local environmental law or regulation, or compliance order or decree issued pursuant thereto, applicable to the handling, processing, reclamation, storage, or other management activities associated with recyclable material.
That Congress provided for two separate standards also argues for the application of Section 127 retroactively. Based on the foregoing, I agree with the Toxic Substances court that Section 127 should be applied retroactively to State-initiated actions. I also conclude that subsequent private party contribution actions are also covered by Section 127. I am satisfied that Congress intended this result.
4. If Section 127 is retroactive, did Congress provide so expressly and unambiguously?
Because Section 127 has retroactive affect, Congress must have provided the clear intent to apply the new provision retrospectively. To determine if Section 127 should apply to pending cases, the court must look at the statute's text, purpose, and legislative history.[21]Mathews, 161 F.3d at 166. The Court has done this and concludes that the text, purpose and legislative history support the determination that Section 127 should be applied to pending actions between private parties. On first reading of Section 127(i), it was clear that the only pending actions excluded *760 from the statute were those that were initiated by the United States. Legitimate recyclers should not be held liable. The legislative history for this specific bill although supported by a few cosponsor statements leans strongly towards retroactivity. Prior legislative history also supports this determination. Congress provided for retroactivity of Section 127 in a manner that was sufficiently express and unambiguous.
5. If Section 127 is retrospective?
Generally, a controversy must be decided on the law that exists at the time the trial court decides the matter. State of N.J. Dep't of Env. Protection v. Gloucester Env. Mgt. Srvs., 719 F. Supp. 325, 333 (D.N.J.1989). There are exceptions to the rule in that sometimes, retrospective application of a new law has unjust consequences. There are three requisites for applying a decision only prospectively:
The holding must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, or by deciding an issue of first impression whose resolution was not clearly foreshadowed;
The merits and demerits in each case must be weighed by looking to the history of the rule, its purpose and effect, and whether retrospective operation will further or retard the rule's operation; [and]
Retrospective application must create the risk of producing substantially inequitable results.
Gloucester Env. Mgt. Srvs., 719 F.Supp. at 334 (quoting Hill v. Equitable Trust Co., 851 F.2d 691, 696 (3d Cir.1988)); see Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 92 S. Ct. 349, 30 L. Ed. 2d 296 (1971).
Section 127 clarifies CERCLA liability in regards to recyclers. It is entitled a "clarification" of prior law.[22] Congress uses this terminology when it intends to show how the legislation was intended to originally operate. I do not conclude that Section 127 is intended to change the law, but rather to clarify it. The retroactivity of Section 127 will only further Congress's goals of site remediation and increasing recycling by clearly eliminating CERCLA liability for legitimate recyclers. As CERCLA is retroactive to all pending conduct and actions, and as are its amendments contained in SARA, perhaps so should any defenses, in particular, the recycling exemption before the Court. United States v. Kramer, 757 F. Supp. 397, 431 (D.N.J.1991); see Philadelphia v. Stepan Chemical Co., 544 F. Supp. 1135, 1150-51 (E.D.Pa.1982) (sufficient congressional intent was discernible to overcome the judicial presumption against retroactive application of the act). I also do not conclude that the retrospective application of Section 127 will produce substantially inequitable results.
In summary, Section 127 should be applied retrospectively here. The language, purpose, and legislative history of Section 127 support that determination. This determination is not dispositive as a finding for any party. The defendants seeking to add the Section 127 defense must still prove by a preponderance of the evidence that they meet all requirements set forth in this amendment.
Applicability of Section 127 to transactions involving mercury in liquid or sludge form
Plaintiffs argue that even if Section 127 was found to be applicable to pending actions, the defense would be futile because the amendment does not apply to mercury in liquid or sludge form, only to transactions involving "recyclable material." Site defendants argue that the amendment is not futile because, as a defense *761 to plaintiffs' claim for contribution, site defendants are not liable under CERCLA for the recovery, reuse, and or refinement of mercury. Site defendants contend that this is not the time to argue the merits of the defense.
I have reviewed the parties' arguments regarding futility of the amendment and conclude that such disposition is proper at trial. I am not confident for the purposes of this motion that I have a full record before me and, therefore, I will not address futility. I am convinced, however, that site defendants have set forth sufficient argument to support their motion to amend.
CONCLUSION
Based on the foregoing, defendant's motion to amend its Answers to add the recycling defense provided for in CERCLA § 127 is GRANTED.
SO ORDERED.
NOTES
[1] "OxyChem" is a defendant and, like Henkel Corporation and Randolph Products, it previously owned the Diamond Shamrock Site, located adjacent to the Wood Ridge Chemical Corporation Site. OxyChem's corporate predecessor, Diamond Shamrock, is alleged to have shipped a de minimis amount of mercury to the Site for recycling from another location. OxyChem seeks to assert defenses under the Act and to counterclaim against plaintiffs for defense costs should plaintiffs' contribution lawsuit against OxyChem be unsuccessful.
[2] The "Site" refers to approximately 40 acres located in Bergen County, New Jersey in the Boroughs of Wood Ridge and Carlstadt on the western bank of Berry's Creek within the Hackensack Meadowlands. The north and south boundaries of the Site are defined as the creek from its headwaters just below Teterboro Airport down to the Hackensack River.
[3] From this forty-acre tract of land, mercury pollution seeped into Berry's Creek, the nearby tidal estuary of the Hackensack River, which flows through the Meadowlands. Below its surface, the Site was saturated by approximately 268 tons of toxic waste. "For a stretch of several thousand feet, the concentration of mercury in Berry's Creek is the highest found in fresh water sediments in the world. The waters of the creek are contaminated by the compound methyl mercury, which continues to be released as the mercury interacts with other elements. Due to depleted oxygen levels, fish no longer inhabit Berry's Creek, but are present only when swept in by the tide and, thus, irreversibly toxified." State v. Ventron, 94 N.J. 473, 481-82, 468 A.2d 150 (N.J.1983).
[4] From 1929 through 1943, F.W. Berk & Company, Inc. ("Berk U.S.A."), owned and operated by F.W. Berk & Company, Limited ("Berk U.K."), leased the Site from Carlstadt Development & Trading Co. ("CDTC"). Berk U.S.A. conducted mercury processing and other operations at a manufacturing facility at the Site, which operations resulted in the release of hazardous substance at, into, from and/or around the Site and the Berry's Creek area.
In 1943, title was transferred from CDTC to Berk U.S.A., which continued to operate the Plant, which operations continued to result in hazardous substance releases. During the 1950's, Berk U.S.A. formed a joint venture with Magnesium Elektron, Inc. and leased a portion of the Site under the name "Melberk." Melberk conducted manufacturing operations on the Site, which operations continued the release of hazardous substances. In 1956, Berk U.K. sold Berk U.S.A. to George W. Taylor. In 1960, Wood Ridge Chemical Corp, a wholly-owned subsidiary of Velsicol Chemical Corporation ("Velsicol"), purchased the Site. From 1960 until 1968, Wood Ridge Chemical Corporation owned the Site and operated the plant on seven acres of the Site. In 1967, Wood Ridge Chemical Corp. declared a land dividend to Velsicol of approximately 33 acres within the Site. In 1986, the block and lots containing this 33 acres were conveyed to NWI Land Management. In 1968, Velsicol sold all of the stock of Wood Ridge Chemical Corp. to Ventron Corporation. From 1968 until 1974, Ventron, a predecessor in interest to Morton International, Inc., owned and operated the plant on the roughly seven-acre portion of the Site previously owned by Wood Ridge Chemical Corporation.
[5] Incorporated into this Act on November 18, 1999 by cross-reference was the Intellectual Property and Communication Omnibus Reform Act of 1999 (S.1948). At the end of this bill is Section 6001, entitled "Superfund Recycling Equity", amending Section 127 of CERCLA to clarify "Liability Under CERCLA for Recycling Transactions". Pub.L. No. 106-113, § 6001, 113 Stat. 1501A-598 (1999).
[6] For example, in Pneumo Abex Corp. v. High Point, Thomasville and Denton Railroad Co., 142 F.3d 769 (4th Cir.) cert. denied, 525 U.S. 963, 119 S. Ct. 407, 142 L. Ed. 2d 330 (1998), the Fourth Circuit held that agreements between railroads sending worn bearing containing lead to a foundry to be used to produce new bearings was not transactions for disposal. The bearings were valuable products and the parties intended that the bearings be reused in their entirety in the production of new bearings. 142 F.3d at 775.
[7] CERCLA § 9601(29) defines "disposal" and "treatment" by reference to the definition of the terms as found in section 1004 of the Solid Waste Disposal Act, ("SWDA") 42 U.S.C. § 6903. The SWDA defines "disposal" as "the discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste into or on any land or water so that such solid waste or hazardous waste or any constituent thereof may enter the environment." 42 U.S.C. § 6903(3). The SWDA defines "treatment" as "any method, technique, or process ... designed to change the ... character or composition of any hazardous waste so as to neutralize such waste or so as to render such waste nonhazardous ...." 42 U.S.C. § 6903(34). Solid waste is defined as "any garbage, refuse, sludge ... and other discarded material". 42 U.S.C. § 6903(27).
In United States v. ILCO, Inc., 996 F.2d 1126 (11th Cir.1993), the court decided the question of whether lead parts reclaimed from spent batteries for recycling purposes were exempt from regulation under RCRA. The court concluded that the lead falls within the law governing the storage, disposal and treatment of hazardous waste. 996 F.2d at 1130.
[8] Other defenses include the innocent purchaser defense, Section 101(35); security interest holders defense, Section 101(20)(A); common carrier exclusion, Section 101(20)(B); application of pesticides done pursuant to FIFRA, Section 107(i); and those whose releases were federally permitted, Section 101(10).
[9] SEC. 127 RECYCLING TRANSACTIONS.
a. LIABILITY CLARIFICATION.
1. As provided in subsections (b), (c), (d), and (e), a person who arranged for recycling of recyclable material shall not be liable under sections 107(a)(3) or section 107(a)(4) with respect to such material.
Section 127(a)(1).
[10] These exemptions are provided in Sections 127(b) (e), and exclusions from these exemptions are set forth in Section 127(f). Persons who arranged for recycling under 127(b) (e), may still be held liable under CERCLA 107(a)(3) or 107(a)(4) if the party filing an action shows that they fall within one of the exclusions of Section 127(f).
[11] The two sections at issue here are Sections 127(d) and (e), which address transactions involving scrap metal and batteries which applies to the "scrap battery" and "dirty mercury" transactions in this action. As Section 127 pertains to batteries, "recyclable material" includes spent lead-acid, nickel-cadmium and other types of batteries, and in some cases, such batteries are "arrangements for recycling" and exempt from CERCLA. Transactions involving scrap metal are covered in Section 127(d), which provides that,
(1) Transactions involving scrap metal shall be deemed to be arranging for recycling if the person who arranged for the transaction (by selling recyclable material or otherwise arranging for the recycling of recyclable material) can demonstrate by a preponderance of the evidence that at the time of the transaction
(A) the person met the criteria set forth in subsection (c) with respect to the scrap metal;11
(B) the person was in compliance with any applicable regulations or standards regarding the storage, transport, management, or other activities associated with the recycling of scrap metal that the Administrator promulgates under the Solid Waste Disposal Act subsequent to the enactment of this section and with regard to transactions occurring after the effective date of such regulations or standards,11 and
(C) the person did not melt the scrap metal prior to the transaction.
(2) For purposes of paragraph (1)(C), melting of scrap metal does not include the thermal separation of 2 or more materials due to differences in their melting points (referred to as `sweating').
(3) For purposes of this subsection, the term `scrap metal' means bits and pieces of metal parts (e.g., bars, turnings, rods, sheets, wire) or metal pieces that may be combined together with bolts or soldering (e.g., radiators, scrap automobiles, railroad box cars), which when worn or superfluous can be recycled, except for scrap metals that the Administrator excludes from this definition by regulation.
Section 127(e), "Transactions Involving Batteries", which provides that:
Transactions involving spent lead-acid batteries, spent nickel-cadmium batteries, or other spent batteries shall be deemed to be arranging for recycling if the person who arranged for the transaction (by selling recyclable material or otherwise arranging for the recycling of recyclable material) can demonstrate by a preponderance of the evidence that at the time of the transaction
1. the person met the criteria set forth in subsection (c) with respect to the spent lead-acid batteries, spent nickel-cadmium batteries, or other spent batteries, but the person did not recover the valuable components of such batteries;11 and
2. (A) with respect to transactions involving lead-acid batteries, the person was in compliance with applicable Federal environmental regulations or standards, and any amendments thereto, regarding the storage, transport, management, or other activities associated with the recycling of spent lead-acid batteries;11
(B) with respect to transactions involving nickel-cadmium batteries, Federal environmental regulations or standards are in effect regarding the storage, transport, management, or other activities associated with the recycling of spent nickel-cadmium batteries, and the person was in compliance with applicable regulations or standards or any amendments thereto; or
(C) with respect to transactions involving other spent batteries, Federal environmental regulations or standards are in effect regarding the storage, transport, management, or other activities associated with the recycling of such batteries, and the person was in compliance with applicable regulations or standards or any amendments thereto.
[12] Reasonable care should be judged "based on industry practices and standards at the time of the transaction. Thus, in order to determine if a person failed to exercise reasonable care with respect to the management and handling of the recyclable material, one should look to the usual and customary management and handling practices in the industry at the time of the transaction." Cong. Rec. S.1528, Nov. 19, 1999.
[13] Courts have held on many occasions that parties that sell junk batteries to battery-breaking companies are liable as arrangers under CERCLA § 107(a)(3). In Gould Inc. v. A & M Battery & Tire Service, 933 F. Supp. 431 (M.D.Pa.1996). the court held that batteries sold to a battery recycling facility is an arrangement for disposal or treatment of a hazardous substance. The court further concluded that the sale did not constitute the sale of a useful product because it was not for its original intended purpose. 933 F. Supp. at 436. "[I]f a product has no value for the purpose for which it was manufactured and it contains a hazardous substance, then it is more likely the sale is an `arrangement' to dispose of the substance ... In the case sub judice, the products at issue were spent lead acid batteries ... the record does not indicate the batteries ... could supply electric current. Rather, the batteries only had value because of the lead they contained. Instead of dealing in a `useful' product, Defendants essentially trafficked in a hazardous substance." 933 F. Supp. at 436 (quoting Chatham Steel Corp. v. C. Brown, 858 F. Supp. 1130 (N.D.Fla. 1994)). Furthermore, purposeful ignorance of the activities occurring at the company to which a defendant sells the batteries to is not a defense. 933 F. Supp. at 437.
[14] Site defendants contend that plaintiffs' reliance on the Atlas Lederer line of cases is misplaced in that the case addressed was brought by the United States and was therefore covered by the Act, and because this action was brought by private parties, the statute applies.
[15] Certain types of legislation are prohibited. The Ex Post Facto Clause prohibits the retroactive application of penal legislation. The Contracts Clause, Article I, § 610, cl. 1, prohibits States from passing legislation that impairs contractual obligations. Art. I, §§ 9-10 prohibits Bills of Attainder, where legislatures single out disfavored persons and provide for punishment for past conduct. The Takings Clause prevents government entities from depriving private persons from vested property rights except when for public use and with just compensation. The Due Process Clause protects interests in fair notice and repose. Landgraf, 511 U.S. at 266, 114 S. Ct. 1483. Absent a constitutional restriction, "the potential unfairness of retroactive civil legislation is not a sufficient reason for a court to fail to give a statute its intended scope." 511 U.S. at 267, 114 S. Ct. 1483. This is because retroactive statutes often serve "entirely benign and legitimate purposes, [ ] to respond to emergencies, to correct mistakes ... or simply to give comprehensive effect to a new law Congress considers salutary." Regardless, Congress must make its intent clear. 511 U.S. at 268, 114 S. Ct. 1483.
[16] In Mathews, the court was faced with a negative inference and found that certain amendments were mentioned because of Congress's concern that they would be applied retrospectively in the absence of express language to the contrary because they were procedural. The court concluded that Congress intended that non-procedural amendments did not require such a statement because under that instance, the statute would not be applied retrospectively after the rules of statutory construction and presumption against retrospective application of new statutes were applied. 161 F.3d at 168. Here, there is no concern that parts of Section 127(i) is procedural and others are not. This could not have been the concern of Congress.
[17] For example, there are 1) originalist sources of the plain meaning of statutory text and structure, legislative history and purpose and 2) those of dynamic statutory interpretation, which includes a) an intentionalist approach, which "seeks to ascertain the intent of Congress in enacting the statute"; b) a "purposive approach," which "pursues an interpretation that is consistent with the purposes of the statute"; and c) a "textualist approach" which "interprets the statute according to the meaning of the statutory language alone." John Nagle, Newt Gingrich, Dynamic Statutory Interpreter, 143 U. Pa. L.Rev. 2209, 2211, 2215 (1995). Such interpretation relies on contextual constraints to perform statutory interpretation even when the statute is ambiguous. The contexts include authorities such as dictionaries and case law in existence at the time the legislature enacted the statute, the statutory text, canons including the clear statement rule, which permit construction without looking to the statutory purpose or legislative history. 143 U. Pa. L.Rev. at 2211, 2215.
[18] Site Defendants set forth the following five committee reports: S.Rep. No. 103-349 (1994) (Committee on Environment and Public Works); S.Rep. No. 103-389 (1994) (Committee on Finance); H.R.Rep. No. 103-582(I) (1994) (Committee on Energy and Commerce, recommending passage of H.R. 3800); H.R.Rep. No. 103-582(II) (1994) (Committee on Public Works and Transportation); H.R.Rep. No. 103-582(III) (1994) (Ways and Means Committee).
[19] Congress often inserts riders into annual appropriation bills that have little to do with the appropriations. In 1998, the Superfund Recycling Equity Act of 1998, a similar exemption for recyclers was almost enacted as rider to the omnibus appropriations bill for 1999. Such procedure "creates a kind of stealth legislative process that is inappropriate for reform of environmental law." Adam Babich, Dodging a Bullet: Lessons from the Failed Hazardous Substance Recycling Rider to the Omnibus Appropriations Bill, 29 Envtl. L. Rep. 10139 (Mar.1999).
[20] In Toxic Substances, the court also noted that prior case law regarding recyclers at time found them not liable under the "useful product analogy" and other theories. 99 F. Supp. 2d at 1144-45; see Prudential Ins. Co. v. United States Gypsum, 711 F. Supp. 1244, 1254 (D.N.J.1989) (no liability exists when products containing hazardous substance were part of a sale of a substance to be used in the construction of a building, rather than "an affirmative act to get rid of the [material] beyond the sale of it as part of a complete, useful product"); South Florida, 84 F.3d at 406-07 (11th Cir.1996) (chemicals in question had value and were use and their transfer was not disposal). In Toxic Substances, the court concluded that based on this, the liability of each alleged recycler should not be different based on the prior case law. Therefore, the court concluded that plaintiffs should not have other expectations and cannot say that they relied on pre-enactment law. Toxic Substances, at 1154. As stated in the main text. I respectfully cannot agree on this point with the Toxic Substances court.
[21] It is not likely that Congress would rely on a policy that it does not state in the legislation to advise the courts that a statute should be applied to pending cases. Mathews, 161 F.3d at 169. Rather, it should provide an express command of its policy goal. Here, Congress has set forth its goal in regarding to Section 127. However, "even when `retroactive application of a new statute would vindicate its purpose more fully ... [this alone] is not sufficient to rebut the presumption against retroactively'". 161 F.3d at 169 (quoting Landgraf, 511 U.S. at 285-86, 114 S. Ct. 1483). However, as I have concluded, the text and legislative history also confirm that the recycling exemption should apply retrospectively.
[22] Section 127 is entitled "CLARIFICATION OF LIABILITY UNDER CERCLA FOR RECYCLING TRANSACTIONS". "When Congress clarifies a statute, it adds language to show how the law originally was intended to operate." The Ninth Circuit has stated that when an amendment is a clarification of existing law, rather than a change, it should be used to interpret the provision retroactively. Toxic Substances, at 1133.
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2510700/
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106 F. Supp. 2d 1020 (2000)
EMPRESA CONSTRUCTORA CONTEX LIMITADA, a Chilean Partnership, Plaintiff,
v.
ISEKI, INC., a Delaware corporation, Defendant.
No. 00CV00798JLAB.
United States District Court, S.D. California.
July 28, 2000.
*1021 Robert C. Wright, Joseph T. Ergastolo, Wright & L'Estrange, San Diego, CA, for Plaintiff.
Phillip Ashman, McQueen & Ashman, LLP, for Defendant.
ORDER DENYING DEFENDANT'S REQUEST TO CONDUCT DISCOVERY FOR OPPOSITION TO ENFORCEMENT OF FOREIGN ARBITRATION AWARD
LARRY A. BURNS, United States Magistrate Judge.
I. INTRODUCTION
This matter is before the court pursuant to the Order Following Early Neutral Evaluation Conference in this case. Counsel for both parties were ordered to file briefs outlining their positions regarding whether defendant Iseki, Inc. ("Iseki") should be permitted to conduct specific additional discovery for purposes of opposing Empresa Constructora Contex Limitada's ("Contex") action to confirm and enforce a foreign arbitration award. The court finds the matter appropriate for submission on the papers and without oral argument, pursuant to Local Civil Rule 7.1(d)(1). Having carefully considered the papers submitted and relevant authority, the court DENIES Iseki's request for leave to conduct the requested additional discovery.
II. FACTS AND PROCEDURAL HISTORY
The facts pertinent to the due process discovery issue are taken from the parties' briefs and the facts recited in the arbitrator's 101-page August 1997 Final Judgment ("Final Judgment"), provided as Exhibit "A" to Contex's Complaint For Enforcement of Foreign Arbitration Award and to Contex's Opening Brief in the instant discovery dispute. Iseki is a United States corporation based in San Diego, California. Empresa de Obras Sanitarias de Valparaiso S.A. ("ESVAL"), a state-owned company headquartered in Valparaiso, Chili, had undertaken major construction on an important public works sewer main between the coastal cities of Vina del Mar and Valparaiso, Chile. ESVAL contracted with Iseki to complete the project.[1] In 1995, Iseki subcontracted *1022 portions of the work to Contex, a privately-owned Chilean company. The Iseki-Contex contract expressly provided for arbitration in Santiago, Chile of any disputes arising under the contract. The parties selected and identified by name in their contract the arbitrator to be used should arbitration become necessary.
Serious structural damage occurred to certain buildings and a street in the course of the sewer work, which gave rise to several contract and other disputes, including a dispute between Contex and Iseki after the project scope of work had expanded, permitting and other delays had caused cost overruns, and payments were delayed. Contex notified Iseki it would cease work on the project and, in September 1995, invoked the arbitration provisions of the parties' contract to recover payments allegedly owed for work performed.[2] Iseki counterclaimed. Iseki's counter claim was partially successful, but the net arbitration award was in favor of Contex, in an amount whose present value including interest is represented to be $3,200,000.
The arbitrator the parties had mutually selected conducted the arbitration proceedings in Chile, as agreed in the Iseki-Contex contract. Contex represents that the arbitration occurred "over two years, with 22 sessions and an almost 600-page record." Contex Response Brief, p. 2. "Twelve hearings were held" and Iseki "was represented by at least four attorneys." Contex Opening Brief, p. 2. Iseki describes as "glaring admissions" from Contex's Opening Brief that "the arbitrator held hearings on June 24, 25, 27, 28 and July 3, 1996...." Iseki Reply Brief, p. 2. The notoriety and gravity of the problems associated with the failed project had caused various official investigations to be initiated against Iseki and Oceanico, allegedly at the instigation of ESVAL, resulting among other things in certain criminal charges. Iseki represents criminal charges were pending against the company at the time of the arbitration. Iseki asserts this state of affairs prevented any of its company representatives from traveling to Chile to attend the arbitration proceedings for fear of detention there.
The summary of the arbitration proceedings in the Final Judgment records the evidence presented by both sides, an analysis of the law, and a reasoned decision. That record substantiates that both sides submitted briefs and responses, both sides presented witnesses, Iseki's counsel was present at all times and was permitted to cross-examine the Contex witnesses in addition to presenting witnesses on behalf of Iseki, no Iseki witness offered was refused the opportunity to testify, and no declaration or other documentary evidence Iseki offered appears to have been refused. Iseki does not dispute Contex's representation that Iseki appealed the arbitrator's ruling to the Chilean Court of Appeal and thereafter filed an unsuccessful petition for review with the Chilean Supreme Court. Contex Opening Brief, p. 2.
Iseki opposes confirmation of the arbitration award on grounds its due process rights were allegedly violated during the arbitration proceedings because "Iseki" could not "appear" and "was unable to present its defense," consequently suffering a "trial in absentia." Iseki Reply Brief, p. 2; Iseki Opening Brief, p. 3 *1023 ("Iseki was prevented from appearing in Chile and defending itself because of a criminal investigation that ultimately was found to be meritless."). Iseki contends it now needs to conduct "limited written discovery" through document requests, interrogatories, and requests for admissions in order to prove its contentions that Contex's arbitration award was obtained in violation of Iseki's due process rights (Iseki Opening Brief, p. 3):
Iseki will ask questions regarding: (1) whether Contex was aware of the criminal investigation of Iseki; (2) whether Contex was aware of the criminal investigation of Oceanico; (3) whether Contex knew that certain representatives of Oceanico had been detained and not allowed to leave the country; (4) whether Contex knew that Iseki's representatives could not appear in Chile without being arrested by Chilean authorities; (5) whether any of Iseki's representatives ever appeared in Chile during the pendency of the proceedings or at any of the many depositions and hearing held in Santiago; (6) whether Contex was aware of the congressional and executive branch investigations conducted during the project; and (7) whether Contex was aware of the other investigations undertaken by the various taxing authorities.
"In essence, Contex will be asked to admit that the project's failure became a huge scandal in Chile and Iseki was disabled from defending itself by the government's attempts to make Iseki, and the other foreign contractors, the scapegoats." Iseki Opening Brief, p. 3. Iseki believes the responses to that discovery will show Contex knew Iseki company representatives could not personally attend the arbitration proceedings in Chile because of criminal exposure, and "Contex took advantage of this disability to push through an unjust arbitration award in violation of Iseki's due process rights." Iseki Opening Brief, p. 3.
Contex disagrees that "[a]dmissions by Contex regarding the circumstances that existed at the time of the arbitration and Iseki's inability to appear and defend itself in those proceedings will allow Iseki to properly defend against Contex's motion to confirm the award." Iseki Opening Brief, p. 4. Contex opposes granting leave to conduct additional discovery on grounds the information sought is irrelevant to the award confirmation proceedings, including to a determination of Iseki's due process claim. Contex further maintains it had no influence or control over the disputes collateral to the breach of contract claims it pursued against Iseki, Iseki was at all times represented by counsel, and Iseki offers no explanation how having its representatives present at the proceedings would have affected the outcome, as Iseki was plainly aware of the proceedings and was not prevented from providing direction to its lawyers. Contex Reply Brief, pp. 1-2.
III. DISCUSSION
A. Discovery In Arbitration Enforcement Actions
The parties agree this arbitration confirmation action is controlled by the Inter-American Convention on International Commercial Arbitration, 9 U.S.C. § 301 et seq. ("Inter-American Convention"). Contex Opening Brief, p. 3; Iseki Reply Brief, p. 3. Arbitration agreements are intended to make arbitration decisions binding and enforceable and to limit how parties may challenge them. See Volt Information Sciences v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 474, 109 S. Ct. 1248, 103 L. Ed. 2d 488 (1989). "A district court's `review of a foreign arbitration award is quite circumscribed.'" Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Defense Systems, Inc., 29 F. Supp. 2d 1168, 1171 (S.D.Cal.1998) (citing Ministry of Defense of the Islamic Republic of Iran v. Gould, Inc., 969 F.2d 764, 770 (9th Cir.1992)). Absent extraordinary circumstances, a confirming court is not to reconsider an *1024 arbitrator's findings. Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 315 (2nd Cir.1998). "The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition of enforcement of the award specified in the said Convention." 9 U.S.C. § 207. The Inter-American Convention expressly provides "Sections 202, 203, 204, 205, and 207 of [Title 9, i.e. portions of the New York Convention[3]] shall apply to this chapter as if specifically set forth herein. ..." 9 U.S.C. § 302 (1999). In addition, "[t]he Inter-American Convention incorporates the FAA's [Federal Arbitration Act, 9 U.S.C. §§ 1-16[4]] terms unless they are in conflict with the Inter-American Convention's terms." Productos Mercantiles E Industriales, S.A. v. Faberge USA, Inc., 23 F.3d 41, 45 (2nd Cir.1994).
"The New York Convention and the Inter-American Convention are intended to achieve the same results, and their key provisions adopt the same standards, phrased in the legal style appropriate for each organization. It is the Committee's expectation, in view of the fact that the parallel legislation under the Federal Arbitration Act would be applied to the Conventions, that courts in the United States would achieve a general uniformity of results under the two conventions."
Id. (quoting H.R.Rep. No. 501, 101st Cong., 2d Sess. 4 (1990), reprinted in 1990 U.S.C.C.A.N. 675, 678).[5] Accordingly, authority addressing the application or interpretation of the FAA and the New York Convention regarding discovery in post-arbitration proceedings can be applied to the same issues arising under the Inter-American Convention.
The burden of proof is on the party defending against enforcement of the arbitral award. See Imperial Ethiopian Gov't v. Baruch-Foster Corp., 535 F.2d 334, 336 (5th Cir.1976); Parsons & Whittemore Overseas Co., Inc. v. Societe Generale de L'Industrie du Papier (RAKTA), 508 F.2d 969, 973 (2nd Cir.1974) (the Second Circuit's review of the legislative backdrop of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, implemented by Chapter 2 (§§ 201-208) of Title 9 of the United States Code, concluding that it "clearly shifted the burden of proof to the party defending against enforcement."). However, there is no unqualified right to any discovery a party may request, limited only by relevancy. See Imperial Ethiopian Gov't, 535 F.2d at 337 ("That position would be too broad in an ordinary civil action. It is even more clearly wrong in the summary proceeding here involved. The loser in arbitration cannot freeze the confirmation proceedings in their tracks and indefinitely postpone judgment by merely requesting discovery.") Case law addressing discovery rights in post-award proceedings under Title 9 leaves little doubt the right to obtain discovery in an action to overturn an arbitral decision is strictly limited.
The district court is empowered to act in arbitration confirmation proceedings with respect to discovery. Imperial Ethiopian Gov't, 535 F.2d at 337. To justify discovery, the party challenging the arbitration decision has the burden of showing the alleged defect, such as partiality of the arbitrators or some other fundamental defect. See Woods v. Saturn Distribution Corp., 78 F.3d 424, 427 (9th Cir.1996); *1025 Sheet Metal Workers Int'l Ass'n Local 420 v. Kinney Air Conditioning Co., 756 F.2d 742, 745 (9th Cir.1985). Unless a party presents clear evidence of impropriety, the party will not be permitted to conduct additional discovery. Woods, 78 F.3d at 430.
The Ninth Circuit, like several other circuits, looks to the allegations of impropriety in the arbitration process to determine whether a party has articulated a defect of a kind and degree sufficient to warrant discovery. See Andros Compania Maritima, S.A. v. Marc Rich & Co., 579 F.2d 691 (2nd Cir.1978) (cited with favor in Woods, 78 F.3d at 430) (finding the award challenger failed to raise a genuine issue of material fact requiring an evidentiary hearing or discovery regarding allegations of arbitrator bias and affirming the district court's denial of both discovery and an evidentiary hearing). Moreover, district courts do not abuse their discretion "in not permitting further discovery when [the] issue of [e.g.] fraud was discoverable during arbitration." Woods, 78 F.3d at 430, citing O.R. Securities, Inc. v. Professional Planning Associates, Inc., 857 F.2d 742, 749 (11th Cir.1988). Accordingly, parties are expected to exercise due diligence in protecting their rights.
B. Iseki Has Not Met Its Burden
Accepting all Iseki's representations to be true for purposes of ruling on the discovery issue, the court finds Iseki has not shown "clear evidence of impropriety" or of any other fundamental defect in the arbitration proceeding the requested discovery would substantiate. Such a showing is required before discovery in support of a challenge to an arbitral award is appropriate. See Woods, 78 F.3d at 430.
The Inter-American Convention at Article 5 presents just five possible grounds for a district court to refuse to recognize and execute the arbitral decision, portions of only two of which could be implicated by Iseki's challenge: "a. That the parties to the agreement were subject to some incapacity under the applicable law ... b. That the party against which the arbitral decision has been made was not duly notified of the appointment of the arbitrator or of the arbitration procedure to be followed, or was unable, for any other reason, to present his defense ...." 9 U.S.C. § 301, Inter-American Convention, Article 5.1. Article 5.2 further provides: "2. The recognition and execution of an arbitral decision may also be refused if the competent authority of the State in which recognition and execution is requested finds: ... b. That the recognition or execution of the decision would be contrary to the public policy (`ordre public') of that State."[6]Id.
Iseki predicates its claim of entitlement to discovery on Article 5.1.b: "That the party against which the arbitral decision has been made ... was unable, for any other reason, to present his defense." Iseki Reply Brief, p. 3. Its purported inability to "appear" at the arbitration, as demonstrated by the absence of a corporate representative in attendance during the proceedings, is the procedural infirmity Iseki claims should invalidate Contex's award. Id. at 4. Yet, neither that position, nor any of the other potential defenses articulated in the Conventions will be furthered by permitting the discovery Iseki seeks leave to propound.
Iseki's theory is that it was denied an adequate opportunity to defend itself in the underlying arbitration proceedings because no corporate representatives could be present during proceedings for fear of detention in Chile on criminal charges, a circumstance that prevented Iseki from fairly presenting its case, even though it *1026 was represented by counsel. Iseki frames its "due process" issue in traditional terms of a right to appear and to be heard, but Iseki is a corporate entity, not an individual. Moreover, this alleged defect in the proceedings was patent, not latent. This is not a nondisclosure case. Iseki does not allege fraud or arbitrator bias or similar concealable defects as the matter to be proved. Iseki fails to show how the discovery responses could reveal purported due process violations that were not evident during the course of the arbitration proceedings. The alleged defect appears to have passed without objection from Iseki.
The parties bargained for arbitration in Santiago, Chile and jointly selected the arbitrator long before this dispute arose. The criminal charges Iseki contends prevented its representatives from attending the arbitration were related to the project, but were ancillary to Contex's contract dispute with Iseki. Iseki asserts Contex took unfair advantage of that alleged disability. Yet, Iseki fails to articulate any misconduct by Contex or the arbitrator in creating that disability or any prejudice to the presentation of its case arising out of that circumstance. Iseki does not explain why it was inhibited from communicating with its lawyers in Chile throughout the process, for example by telephone, E-Mail, or facsimile transmissions. Iseki contends only that no corporate representative was physically present "to direct" its defense.[7] Iseki does not attempt to explain whether or why the declarations, other evidence, and briefs submitted by its counsel to the arbitrator were insufficient to present its case. Based on the summary of the proceedings in the Final Judgment, Iseki's attorneys raised no issue during the arbitration about any due process or other concern associated with the absence of Iseki personnel.
"The fundamental requirement of due process is the opportunity to be heard at a meaningful time and in a meaningful manner." Mathews v. Eldridge, 424 U.S. 319, 333, 96 S. Ct. 893, 47 L. Ed. 2d 18 (1976). The right to due process under the arbitration conventions does not include the complete set of procedural rights guaranteed by the Federal Rules of Civil Procedure. By agreeing to arbitration, Iseki subjected itself to the advantages and disadvantages of that dispute resolution process. See RAKTA, 508 F.2d at 975. The Final Judgment record memorializes the process Iseki received at the arbitration. Iseki points to no deficiencies in that record in support of its discovery request. The discovery Iseki seeks will contribute nothing to the record of its "day in court" or to proof whether it had ample opportunity to present its interpretation of the facts and its legal theories to the Tribunal. Iseki identifies no particular individual whose physical presence would have affected in any way the conduct or outcome of the proceedings, or whose absence prejudiced a full and fair hearing.[8] Iseki's counsel presented an apparently *1027 comprehensive defense, including documentary evidence, declarations, witnesses, cross-examination, argument, and legal briefs. Through its counsel's advocacy of its positions, Iseki actively participated in the entire process. Iseki was thus, at a minimum, "otherwise able to present [its] defense" within the meaning of Inter-American Convention Article V.1.b.
Moreover, the Final Judgment does not indicate Iseki ever raised any due process concern during the proceedings. A cursory review of the entire Final Judgment discloses Iseki does not appear to have protested or requested a continuance of the arbitration. Iseki does not appear to have drawn the criminal investigation issues and alleged effects to the attention of the arbitrator. "[I]t is well settled that a party may not sit idle through an arbitration procedure and then collaterally attack that procedure on grounds not raised before the arbitrators when the result turns out to be adverse." Marino v. Writers Guild of America, 992 F.2d 1480, 1484 (9th Cir.1993). "As a general rule, this court will not consider an issue raised for the first time on appeal even though it has discretion to do so." Woods, 78 F.3d at 430.
The discovery Iseki now seeks could have been identified and pursued at the time of the arbitration. The alleged infirmity of the proceeding was as evident then as now. If the physical absence of a company representative to assist Iseki's counsel in the preparation and presentation of Iseki's defense actually created the fundamental unfairness Iseki now claims, that effect was surely most acutely evident during the proceedings. The principles of due diligence and waiver remain factors in the analysis whether supplemental discovery should be exceptionally permitted in this context. The impediment, whatever its severity, does not appear from the briefs or on the record before this court to have prevented Iseki from fully and fairly presenting its case to the arbitrator. Absent that effect, neither public policy nor fundamental due process was compromised.
Iseki identifies no obstacle that prevented it from determining Contex's knowledge before or during the arbitration proceedings about the subject matter of the new discovery it now requests. Moreover, Iseki does not explain how Contex's knowledge of Iseki's alleged legal difficulties, the target inquiry of its proposed discovery, affected in any way the conduct of Iseki's defense by its counsel at the arbitration or the outcome or why it should affect the merits of the award confirmation hearing. Even if the discovery responses from Contex were affirmative of the premises Iseki has articulated, that evidence would not amount to a denial of an opportunity to be heard at a meaningful time and in a meaningful manner on the facts as presented. Iseki has not presented clear evidence of impropriety and is therefore not entitled to conduct additional discovery. See Woods, 78 F.3d at 430. Accordingly, in light of the nature of arbitration award confirmation proceedings and in consideration of the due process theory as articulated by Iseki, the discovery requested is not warranted.
IV. CONCLUSION
For the reasons set forth above, Iseki's request to conduct the discovery identified in its Opening Brief is DENIED.
IT IS SO ORDERED.
NOTES
[1] In 1992, ESVAL had awarded a contract to Consorcio Oceanico ("Oceanico"), a multinational company, to complete the project. Oceanico in turn contracted with Iseki, a lessor of machinery needed for new deep excavations. Oceanico's participation in the project was apparently followed by a succession of difficulties. At the end of 1994, Oceanico withdrew from the contract. As a consequence, ESVAL contracted directly with Iseki to complete the project. Iseki subcontracted with Contex to execute a portion of the work it committed to perform for ESVAL. Contex Opening Brief, Ex. "A", pp. 3-4.
[2] ESVAL apparently prevailed against Iseki in a separate arbitration arising out of the project in Chile to recover damages. Iseki Opening Brief, p. 2. From a perspective unclear to this court, Iseki characterizes the results in the ESVAL arbitration and in the Contex arbitration as "hopelessly inconsistent." Id.
[3] "[T]he Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done June 10, 1958, ... 9 U.S.C.A. § 201" et seq. Productos Mercantiles E Industriales, 23 F.3d at 44.
[4] The FAA applies to "a written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof ...." 9 U.S.C. § 2.
[5] "In proceedings under Title 9, U.S.C., relating to arbitration, ... [the Federal Rules of Civil Procedure] apply only to the extent that matters of procedure are not provided for in those statutes ...." FED.R.CIV.P. 81(a)(3).
[6] To find a public policy violation on the basis of the discovery as framed, even assuming Contex's responses would all be supportive of Iseki's assertions of what Contex knew at the time of the arbitration, would require a finding that the process and award "violate the forum state's most basic notions of morality and justice." Fotochrome, Inc. v. Copal Co., Ltd., 517 F.2d 512, 516 (2d Cir.1975).
[7] Iseki states communication difficulties existed not only due to the geographical distance of key personnel, but also from language barriers among its Spanish-speaking Chilean counsel, its Japanese-speaking officers, and its English-speaking project manager. As Iseki's own choices created the potential for such difficulties, the burden of resolving those difficulties when they allegedly arose in this case ought neither to be shifted to the other party to the arbitration nor be raised for the first time after the arbitration is concluded.
[8] Even if Iseki had made a showing that the absence of any particular corporate witness resulted in some particular adverse effect on the case Iseki presented to the arbitrator, which Iseki does not attempt to show, such exclusion would not compel additional post-result discovery: "inability to produce one's witnesses before an arbitral tribunal is a risk inherent in an agreement to submit to arbitration. By agreeing to submit disputes to arbitration, a party relinquishes his courtroom rights including to subpoena witnesses...." RAKTA, 508 F.2d at 975. "When the parties have agreed upon a particular method of dispute resolution, it should generally be presumed fair ...." Sheet Metal Workers Int'l, 756 F.2d at 746.
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106 F. Supp. 2d 1256 (2000)
Fritzthadeus MACK, Plaintiff,
v.
ALABAMA DEPARTMENT OF YOUTH SERVICES, et al., Defendants.
No. CIV.A. 99-A-607-N.
United States District Court, M.D. Alabama, Northern Division.
July 28, 2000.
*1257 Derrick K. Collins, Birmingham, AL, for Fritzthadus Mack, plaintiff.
William J. Samford, II, Alabama Department of Youth Services, Mt. Meigs, AL, Margaret L. Fleming, William H. Pryor, Jr., Attorney General, William P. Clifford, III, Office of the Attorney General, Alice Ann Byrne, Office of the Attorney General, Assistant Attorney General, Montgomery, AL, for Alabama Department of Youth Services, Walter Wood, Bill Pryor, defendants.
MEMORANDUM OPINION
ALBRITTON, Chief Judge.
I. INTRODUCTION
This cause is before the court on a Motion to Dismiss (Doc. # 33) filed by the Alabama Department of Youth Services[1] on May 31, 2000, which this court has treated as a Motion for Summary Judgment.
The Plaintiff, Fritzthadeus Mack originally filed a pro se Complaint in this case on June 14, 1999. On September 13, 1999, the Alabama Department of Youth Services ("the Department") moved to dismiss the Complaint. An Amended Complaint was filed on May 11, 2000, by an attorney now representing the Plaintiff. The Department subsequently filed a Motion to Dismiss the Amended Complaint. In arguing the merits of the Motion to Dismiss, both the Department and the Plaintiff, Fritzthadeus Mack ("Mack"), relied on evidence outside of the pleadings. Consequently, this court ordered that the Motion would be treated as a Motion for Summary Judgment and gave the parties additional time to file evidence and briefs.
II. SUMMARY JUDGMENT STANDARD
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party *1258 is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
The party asking for summary judgment "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the `pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323, 106 S. Ct. 2548. The movant can meet this burden by presenting evidence showing there is no dispute of material fact, or by showing, or pointing out to, the district court that the nonmoving party has failed to present evidence in support of some element of its case on which it bears the ultimate burden of proof. Id. at 322-324, 106 S. Ct. 2548.
Once the moving party has met its burden, Rule 56(e) "requires the nonmoving party to go beyond the pleadings and by [its] own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324, 106 S. Ct. 2548. To avoid summary judgment, the nonmoving party "must do more than show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). On the other hand, the evidence of the nonmovant must be believed and all justifiable inferences must be drawn in its favor. Anderson v. Liberty Lobby, 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
After the nonmoving party has responded to the motion for summary judgment, the court must grant summary judgment if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).
III. FACTS
The facts, viewed in a light most favorable to the non-movant, are as follows:
The Plaintiff, Fritzthadeus Mack ("Mack"), is an African-American male employed by the Department. Mack states that in February of 1995, he was charged with capital murder by the State of Alabama, and the Department placed him on administrative leave without pay. According to the allegations of Mack's Amended Complaint, the former Director of the Department, James Dupree, promised Mack that if he were acquitted of the capital murder charges, he would be granted full back-pay, benefits, and restoration of his employment status. Mack was acquitted in January of 1997. On or about January 20, 1997, Mack was reinstated as an entry-level employee and placed on a 90-day probationary period. Mack alleges that he was stripped of all benefits and promotional status upon his return to employment.
In February of 1997, Mack filed a Petition for Declaratory Judgment in the Circuit Court for Montgomery County, Alabama, naming the Alabama Department of Youth Services and its Director as defendants. Mack requested that the state court declare that he should be returned to his former position as a non-probationary employee, that any benefits to which he would have been entitled be restored, that his pay be reinstated, that the court find that the defendants acted in bad faith and/or without just cause, and that there be a permanent injunction. Mack also filed a Motion to Amend the Petition in order to amend the Petition to state a claim for denial of equal protection pursuant to 42 U.S.C. § 1983.
The state court considered together the Motion for Leave to Amend the Petition, the Petition for Declaratory Relief, and the Motion to Dismiss which had been filed by the defendants. The court denied the Petition, denied the Motion for Leave to Amend, and granted the Motion to Dismiss *1259 in a two-paragraph order which provided as follows:
These causes pending before the Court on Petition for Declaratory Judgment and Motion For Leave to Amend Petition for Declaratory Judgment filed by the petitioner, and Motion to Dismiss filed by the respondents, the same having been considered,
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that said Petition for Declaratory Judgment and Motion For Leave to Amend Petition For Declaratory Judgment filed by the petitioner, denied. Motion to Dismiss filed by the respondent is hereby granted.
Plaintiff's Exhibit 2.
Mack subsequently filed his Complaint and Amended Complaint in this court, attempting to state claims under Title VII, 42 U.S.C. § 1981, and 42 U.S.C. § 1983. The Department argues that Mack's claims are barred by res judicata.
IV. DISCUSSION
The Department has argued that all of the claims Mack seeks to bring in this court were, or could have been, litigated in the Circuit Court for Montgomery County, Alabama and are, therefore, barred under the doctrine of res judicata. Res judicata, or claim preclusion, involves prior litigation between a plaintiff and a defendant, which is decided on the merits by a court of competent jurisdiction, and then a subsequent attempt by the prior plaintiff to relitigate a different claim not previously litigated, but which arises out of the same evidence. Whisman v. Alabama Power Co., 512 So. 2d 78 (Ala.1987).
Mack argues that this court cannot give res judicata effect to the prior case because it was a declaratory judgment action and there were no reasons given for the court's action. In support of this argument, Mack cites the court to Kaspar Wire Works, Inc. v. Leco Eng'g & Mach., Inc., 575 F.2d 530 (5th Cir.1978).[2] In Kaspar, the former Fifth Circuit Court of Appeals reasoned that ordinary principles of res judicata cannot be applied automatically to prior declaratory judgment actions, and that preclusive effect should only be given to the relitigation of an issue actually litigated and necessary to the judgment entered. Id. at 537.
In response, the Department argues that this court should not apply Kaspar because the court must determine the preclusive effect of a prior Alabama judgment, and so should apply Alabama state law res judicata principles.
Under 28 U.S.C. § 1738, the judicial proceedings of a state court "shall have the same full faith and credit in every court within the United States ... as they have by law or usage in the courts of such state...." Therefore, when issues of res judicata occur because of a prior state court judgment, this court must give a prior state court judgment the same preclusive effect it would be afforded in state court. See Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 105 S. Ct. 1327, 84 L. Ed. 2d 274 (1985). In this case, there is a prior judgment of an Alabama circuit court. Accordingly, the court will apply Alabama res judicata principles to determine whether a "declaratory judgment exception" to res judicata exists under Alabama law. See also Mandarino v. Pollard, 718 F.2d 845 (7th Cir.1983)(court looked to state law in deciding whether the "declaratory judgment exception" to res judicata should apply).
Neither of the parties has cited this court to any Alabama authority which addresses whether res judicata is applied more restrictively under Alabama law within the context of the dismissal of a declaratory judgment action than otherwise. The court, however, is aware of some Alabama cases in which traditional *1260 res judicata principles were applied even though the prior action was a dismissal of a declaratory judgment action. See Robinson v. Holley, 549 So. 2d 1 (Ala.1989)(stating that claims in subsequent action were barred by dismissal of an action for an accounting and for declaratory judgment); Calhoun v. Pennsylvania Nat. Mut. Cas. Ins. Co., 676 So. 2d 1332, 1334 (Ala.Civ.App.1996)("The dismissal of Penn National's declaratory judgment action with prejudice constituted a prior judgment on the merits that barred any claim that was adjudicated or that could have been adjudicated in that action..."). Taking guidance from these cases, therefore, this court finds that traditional res judicata principles are to be applied in this case even though the former action was a declaratory judgment action.
Under traditional res judicata principles in Alabama, the elements of res judicata are (1) a prior judgment on the merits, (2) rendered by a court of competent jurisdiction, (3) substantial identity of the parties, and (4) the same cause of action presented in both suits. Hughes v. Allenstein, 514 So. 2d 858, 860 (Ala.1987). If these elements are all met, any issue that was, or could have been, adjudicated in the prior action is barred from further litigation. Hughes v. Martin, 533 So. 2d 188 (Ala.1988).
In this case, there has been no argument made that elements one, two, and three have not been satisfied. In the former action, there was a denial of the Petition for Declaratory Judgment and a grant of a Motion to Dismiss by a state court of competent jurisdiction. The state court Petition had been brought by Mack against the Department and the Director of the Department. As has been previously discussed, although two individual defendants are named in this case, Mack has made it clear in his opposition to the Department's motion that he named these individuals only in their capacities as responsible state officers for the Department, and that the Department is the defendant in this case. The only question before the court, therefore, is whether the fourth element is satisfied, that is, whether the same cause of action is presented in both cases.
Mack has contended that because only state law claims were asserted in the state court declaratory judgment action, he should be able to pursue his federal claims in this court. The Department argues in response that Mack is incorrect in his identification of the claims which were asserted in state court in the prior case. The Department submits a copy of an Amended Petition which the Department states was filed in state court. In this document, there is a § 1983 claim for violation of the Fourteenth Amendment to the United States Constitution. The Department argues, therefore, that one of Mack's claims was actually litigated in the state court suit, and that even though Mack has asserted additional federal claims in this case, those claims could have been brought in the state court case, and so all of Mack's claims are barred in this court.
Mack has filed a response stating that the amendment to the Petition upon which the Department relies was submitted along with a Motion to Amend the Petition in state court. Mack points to the state court's final order in his case in which the court denied the right to amend the Petition. Based upon this evidence, and the fact that the Department apparently overlooked that the Motion to Amend the Petition was denied, the court concludes that the state court Petition did not include a federal claim.
Even though no federal claims were asserted in the state court case, the case currently pending in this court involves an assertion of several federal claims which arise out of the same facts as the state law claims in the former action. Under the general rule of res judicata in Alabama, a prior adjudication on the merits bars any claim that was adjudicated, or that could have been adjudicated in that *1261 action. See Whisman v. Alabama Power Co., 512 So. 2d 78 (Ala.1987); see also Robinson v. Holley, 549 So. 2d 1 (Ala.1989)(an action for damages was barred by dismissal of a previous action for an accounting and a declaratory judgment in which the plaintiff could have filed an amendment to bring her fraud claim). This is true also of the claims which Mack apparently now seeks to bring under Title VII and 42 U.S.C. § 1981, since he could have included those claims in his state court suit. See Yellow Freight System, Inc. v. Donnelly, 494 U.S. 820, 110 S. Ct. 1566, 108 L. Ed. 2d 834 (1990)(state courts have concurrent jurisdiction over Title VII claims); DeHorney v. Bank of America National Trust and Savings Assoc., 879 F.2d 459, 463 (9th Cir.1989)(state courts have concurrent jurisdiction over § 1981 suits); Watkins v. Bessemer State Technical College, 782 F. Supp. 581 (N.D.Ala.1992)(same); cf. Bost v. Metropolitan Dade County, 1991 WL 333727, No. 90-1408-CIV-MORENO (S.D.Fla. March 11, 1991)(res judicata barred plaintiff's claims in federal court where could have raised the discrimination claims in state court), aff'd without op., 951 F.2d 1264 (11th Cir.1991).
As stated above, however, one of the federal claims which Mack seeks to bring in this court, made under § 1983, was also a claim that he sought to bring in an amendment to the Petition in his state court action. This court must determine, therefore, whether there is an exception to general res judicata principles under Alabama law when a plaintiff sought, but was denied the right, to amend the state court complaint to add a federal claim.
The parties have not cited this court to any Alabama precedent discussing this issue. The court is aware of one Alabama case in which res judicata was applied even though the plaintiff had been denied the right to amend a complaint. See Chandler v. Commercial Union Ins. Co., 467 So. 2d 244, 251 (Ala.1985). In Chandler, a plaintiff was denied the right to amend a complaint at trial to add a bad faith claim. The plaintiff subsequently filed a second case bringing a bad faith and fraud claim. The Alabama Supreme Court stated that the previous action was a bar to the bad faith and fraud claims because those claims could have been raised in the previous action. Id. at 250. The court stated that it recognized that the plaintiff had attempted to amend the complaint to state the claim, but the court concluded that because the plaintiff failed to preserve for appeal and to appeal that issue, the judgment in the case still acted as a bar to the claims asserted in the second action. Id. at 251. This approach to denials of amendments to complaints is also followed by other courts. See e.g., EFCO v. U.W. Marx. Inc., 124 F.3d 394, 399-400 (2nd Cir.1997)(stating that "[w]here a plaintiff's motion to amend its complaint in the first action is denied, and plaintiff fails to appeal the denial, res judicata applies to the claims sought to be added in the proposed amended complaint.")
In this case, pursuant to Federal Rule of Evidence 201, the court takes judicial notice of the records of the Circuit Court for Montgomery County, Alabama, which reflect that no appeal was taken in Mack's state court case. Cf. Kramer v. Time Warner Inc., 937 F.2d 767, 777 (2nd Cir. 1991)(a court may take judicial notice of documents filed in another court). Accordingly, even though Mack sought to bring his federal claim in the state court case, that claim is barred in this court.
The court recognizes, however, that another judge in this district has found that there is a limited circumstance under which a denial of a motion to amend does not act as res judicata in a subsequent suit. In Hrabe v. Paul Revere Life Ins. Co., 76 F. Supp. 2d 1297 (M.D.Ala.1999)(DeMent, J.), the plaintiff claimed that her federal lawsuit was not barred because the court in a previous lawsuit had denied a motion to amend her complaint to add federal claims. After analyzing several Fifth Circuit and Eleventh Circuit cases, Judge DeMent determined, stating that his conclusion would be the same under both Alabama and federal law, that res judicata will not apply in the limited circumstance *1262 where "the court itself, rather than the litigant, does the splitting and does it by reason of no default on the part of the litigant, who timely advanced all of his claims in the initial proceeding." Id. at 1302. As noted by Judge DeMent, however, the motion to amend must have been timely. Id.; see also Restatement (Second) of Judgments § 25 cmt. b (1980)("It is immaterial that the plaintiff in the first action sought to prove the acts relied on in the second action and was not permitted to do so because they were not alleged in the complaint and an application to amend the complaint came too late.").
The court need not reach the question of whether a timely motion would provide an exception to the application of res judicata under Alabama law because the Motion to Amend was not timely in this case. The documents provided to this court in Defendants' Exhibit C indicate that the state court initially set a hearing on the Department's Motion to Dismiss[3] for May 15, 1997. The hearing was continued on several occasions, with one continuance being at the request of the new attorney for Mack in August of 1997. A hearing was finally set for September 19, 1997. On September 18, 1997, Mack filed the Motion to Amend the Petition along with his response to the Department's motion. The court's Order denying the Motion to Amend, denying the Petition, and granting the Motion to Dismiss was entered on September 29, 1997. Under the circumstances of this case, that is, that the Motion to Dismiss was pending, that the Motion to Amend was filed the day before the hearing on the Motion to Dismiss, and that the amendment sought to introduce an entirely new theory, Mack's Motion to Amend was not timely filed. See Nilsen v. City of Moss Point, 701 F.2d 556 (5th Cir.1983)(motion to amend filed while motion for summary judgment was pending was untimely and therefore did not fit into the exception to res judicata). The court concludes, therefore, that even if Alabama law were to recognize an exception to the general rule that a denial of a motion to amend does not alter the preclusive effect of a final judgment on the merits, Mack's claims are barred in this court.
V. CONCLUSION
For the reasons discussed, the Motion for Summary Judgment is due to be GRANTED. A separate Order will be entered in accordance with this Memorandum Opinion.
NOTES
[1] The Plaintiff initially filed a pro se Complaint in this case naming only the Alabama Department of Youth Services as a defendant. In a subsequent amendment filed by an attorney representing the Plaintiff, the Plaintiff named Walter Wood, Director of the Alabama Department of Youth Services, and Bill Pryor, Attorney General of the State of Alabama, as defendants. The Plaintiff has, however, made it clear in his opposition to the Department's motion that the individuals were only named as the responsible state officers for the Department pursuant to Ex parte Young, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714 (1908). See Plaintiff's Memorandum, unnumbered page 2. Although the Plaintiff also refers to the State of Alabama in his Memorandum, in his allegations in the Amended Complaint, he alleges only that Bill Pryor in his official capacity has the "ultimate authority over the policies of the Defendant, Alabama Department of Youth Services." Amended Complaint at ¶ 5. For the sake of clarity, therefore, the court will refer to the only defendant against whom the Plaintiff has asserted claims in this case, namely, the Alabama Department of Youth Services.
[2] In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), the Eleventh Circuit adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to October 1, 1981.
[3] There were apparently two Motions to Dismiss filed, but the documents provided to the court indicate that both were stamped received by the state court in March of 1997.
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548 F.Supp.2d 1314 (2008)
UNITED STATES of America
v.
Johnny Lee JACKSON, Jr.
No. 3:07-cr-244-HES-MCR-2.
United States District Court, M.D. Florida, Jacksonville Division.
March 6, 2008.
*1316 Andrew Tysen Duva, U.S. Attorney's Office, Jacksonville, FL, for United States of America.
ORDER
HARVEY E. SCHLESINGER, District Judge.
On January 29, 2008, following a hearing on Defendant's First Motion to Suppress Evidence (Doc. No. 21, filed October 26, 2007), the Magistrate Judge issued a Report and Recommendation denying the Motion (Doc. No. 57). Defendant filed Objections to the Report and Recommendation (Doc. No. 73, filed February 22, 2008), and the United States filed a Response in Opposition (Doc. No. 75, filed February 26, 2008).
Pursuant to 28 U.S.C. § 636(b)(1), a party may file written objections to a Magistrate's Report and Recommendation within ten days of being served with a copy. The district court then must make a de novo *1317 determination with respect to the portions of the Report and Recommendation to which the objections are made. 28 U.S.C. § 636(b)(1); see Thomas v. Am, 474 U.S. 140, 150-151, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985).
Defendant makes five objections to the Magistrate's report, which are as follows: (1) the Magistrate erred in concluding that at the suppression hearing defense counsel had waived his argument that the police had effectuated an illegal traffic stop; (2) the Magistrate misunderstood Defense counsel's argument regarding the issue of probable cause with respect to the search of the vehicle following the traffic stop; thus, leading to a flawed legal analysis; (3) the Magistrate's findings of fact with regard to the issue of consent was erroneous and contrary to the facts; (4) the Magistrate failed to address the issue of whether officers had probable cause to seize the Defendant's vehicle following two roadside searches prompted by dog sniffs; and (5) the Magistrate erred in finding that the Defendant was not seized based on the fact that his passenger was free to leave.
Upon consideration of the Report and Recommendation, and upon conducting an independent de novo review of the entire record in this matter, including the Defendant's Objections and the transcript of the suppression hearing, it is
ORDERED, DECREED AND ADJUDGED
1. Defendant's Objections to the Magistrate's Report and Recommendation (Doc. No. 73) are OVERRULED.
2. The Court confirms the Magistrate Judge's findings of fact and conclusions of law, and the Report and Recommendation (Doc. No. 57) is ADOPTED as the opinion of the Court.
DONE AND ENTERED.
REPORT AND RECOMMENDATION[1]
MONTE C. RICHARDSON, United States Magistrate Judge.
THIS CAUSE is before the Court on Defendant's Motion to Suppress (Doc. 21) filed October 26, 2007. The Government filed a response in opposition to the Motion on November 9, 2007 (Doc. 31). An evidentiary hearing was held before the undersigned on January 15, 2008.
I. Evidence Presented at the Hearing
During the hearing, the Government presented the testimony of five law enforcement officers from the Jacksonville Sheriffs Office: Detective Linda Morgan, Detective Keith Crean, Sergeant Joel Weeks, Officer Douglas Howell and Officer Timothy Haire. First, Detective Morgan of the Narcotics Division of the Jacksonville Sheriffs Office testified that beginning in June 2006, she became involved in an investigation into a potential cocaine distribution network. (Tr. 28:6-18).[2] A wiretap investigation was undertaken and on August 1, 2006, the police obtained a wiretap on the phone of an individual named Yago Del Carmen. (Tr. 29:6-14). During the hearing, the Government played recordings of fifteen phone calls to show a pattern whereby Del Carmen would receive a phone call from a male in the Miami area and then shortly thereafter, *1318 Del Carmen would begin calling his customers in an attempt to raise money. (Tr. 34-93). From this pattern, Detective Morgan was able to determine that Del Carmen obtained his supply of cocaine from the male calling from South Florida. (Tr. 94:4-13). On August 15, 2006, Detective Morgan obtained a wiretap for the phone belonging to the suspected drug supplier. (Tr. 29:21-25, 30:1). On August 21, 2006, a phone call between the suspected supplier and Del Carmen was intercepted which led Detective Morgan to believe the supplier would be meeting Del Carmen at Del Carmen's residence in Jacksonville soon.[3] (Tr. 88-90). Detective Morgan utilized computer software to track the location of the phone used by the suspected supplier and determined that on August 24, 2008, the supplier was in Jacksonville, in the area of the apartment complex where Del Carmen and his mother resided. (Tr. 99:2-25, 100:1-9). Accordingly, Detective Morgan ordered some members of her team to conduct surveillance at the apartment complex and to identify any vehicles in the parking lot. (Tr. 104:9-11). Detective Keith Crean drove through the parking lot and noticed two vehicles parked in the vicinity of the apartment: a dark SUV and a blue Chysler minivan. (Tr. 104:12-20, 161:19-25, 162:1-11). Detective Crean noted the license plates and after running the tags determined that the dark SUV was registered in Jacksonville and the blue minivan was a rental car. (Tr. 105:1-25, 106:1-4). Detective Morgan testified that the dark SUV was eliminated because they were not expecting the supplier to be driving a car from Jacksonville. (Tr. 105:9-17). She also testified that it was common practice for drug dealers to utilize rental cars. (106:5-13). Therefore, Detective Morgan believed the blue minivan was the vehicle being used by the drug supplier to transport cocaine from South Florida to Jacksonville. (Tr. 106:14-20).
On August 28, 2006, Detective Morgan was again monitoring the calls of the supplier and Del Carmen. At 1:25 p.m. the supplier made a telephone call to an unknown male in Jacksonville Florida and made statements which led Detective Morgan to believe he would be traveling to Jacksonville that day. (Tr. 92:15-25, 93:1-7). Detective Morgan began tracking the location of the cell phone utilized by the supplier and was able to determine that he was indeed traveling up 1-95 from South Florida towards Jacksonville. (Tr. 107-113). By 7:00 p.m. the supplier had reached Jacksonville and at approximately 8:00 p.m., Detective Bates determined he was traveling on J. Turner Butler Boulevard ("JTB"). (Tr. 114-116). Earlier that evening, Detective Morgan deployed a surveillance team to the apartment complex where the supplier and Del Carmen had met previously. (Tr. 118:12-24, 169:1-21). She later gave them the description of the blue minivan along with its license number and informed them the vehicle was believed to be in the JTB area. (Tr. 170:1-18, 171:5-6). She asked the team to effectuate a traffic stop, identify the occupants and to locate the narcotics she believed would be inside. (Tr. 122:20-23). Detective Morgan further testified that she did not inform the team of the wiretap so as not to jeopardize the wiretap, which was still active. (Tr. 121:11-25, 122:1-9).
Sergeant Joel Weeks and several other JSO officers left the apartment complex and headed toward JTB. (Tr. 171:5-6, 172:9-15). Sergeant Weeks was able to locate the vehicle on JTB. (Tr. 173:9-12). He was able to confirm the license number and within one minute, observed the vehicle make an illegal U-turn. (Tr. 173:18-25, *1319 174:1-19). He then turned on his lights and effectuated a traffic stop. (Tr. 176:16-21). Within another minute, Officer Douglas Howell arrived on the scene and joined Sergeant Weeks at the driver's side window. (Tr. 179:1-5). Sergeant Weeks took the driver's license to run a check on it and Officer Howell remained with the driver. (Tr: 179:6-18). The driver was identified as Defendant, Johnny Jackson and he had a female passenger in the vehicle with him. (Tr. 177:14-15, 178:12-15).
Officer Howell testified that he asked Defendant for consent to search the vehicle. (Tr. 203:5-17). According to Officer Howell, Defendant consented and several officers began a search of the vehicle. (Tr. 204:24-25, 205:1). They found nothing and approximately ten to fifteen minutes later, Officer Timothy Haire arrived with his dog, Roscoe, to perform a K-9 sniff around the vehicle. (Tr. 205:5-17). The dog gave a positive alert on the outside rear of the vehicle. (Tr. 229:21-25, 230:1-2). The officers searched the vehicle a second time and once again, were unable to locate any drugs. (Tr. 231:17-23). Officer Haire then brought Roscoe into the vehicle to perform a sniff. (Tr. 232:1-4). This time, Roscoe aggressively alerted to the right rear passenger side of the vehicle. (Tr. 232:12-23).
After Roscoe alerted inside the vehicle, the officers suspected drugs were hidden in a secret compartment within the minivan. As none of the officers had tools which would enable them to disassemble the paneling in the minivan, Defendant and his passenger were then removed from the scene and brought to a hotel of their choosing while the minivan was removed to another location. (Tr. 208:8-16, 209:5-25, 210:1-5). The next day, in an abundance of caution, Detective Morgan applied for and obtained a search warrant to search the minivan. (Tr. 130:25, 131:1-10). After removing a speaker in the rear passenger section, three kilos of cocaine were located. (Tr. 135:8-25, 136:1-10).
In her affidavit to obtain the search warrant, Detective Morgan stated that Defendant did not provide consent to search the vehicle. (Tr. 132:15-18). During the hearing, Detective Morgan testified she mistakenly stated that consent had not been given. She assumed that because a K-9 sniff was ordered, consent had been denied because in most situations when a K-9 unit is deployed, consent is not obtained. (Tr. 133:1-21). Additionally, Detective Morgan testified that she did not include information regarding the wiretap in the affidavit for the search warrant because it was a live wiretap and because she did not want information regarding it to become a public record. (Tr. 131:12-25, 132:1-6). In his report regarding the traffic stop on August 28, 2006, Officer Haire also indicated that consent to search the vehicle had been denied. Officer Haire explained that he too assumed no consent had been obtained because a K-9 unit is ordinarily deployed in situations when consent is not given. (Tr. 233:8-18). He testified that he was not around when Officer Howell asked for consent and that he never checked with anyone as to whether consent had been obtained. (Tr. 233:19-25).
The passenger in the vehicle with Defendant, Demetria Taylor, also testified. She stated that no one asked for permission to search the car and that she and Defendant were on the side of the road while the searches were conducted for approximately two hours.[4] (Tr. 240:9-12, 25; 241:1-2). *1320 On cross examination, Ms. Taylor admitted that there was traffic on the road and that she could not hear the conversation between Defendant and the officers. (Tr. 245:5-25, 246:1-2).
Defendant now seeks to suppress the cocaine found within the minivan.
II. Argument
Defendant seeks to suppress evidence seized from the minivan on the grounds that: (1) the officers effectuating the traffic stop did not have any reasonable suspicion to detain and question Defendant beyond the purpose of the traffic stop; (2) the initial search of Defendant's vehicle was improper because Defendant did not consent and if any consent were given, it was not voluntary; (3) the K-9 alert was the fruit of the poisonous tree and therefore, officers lacked probable cause to conduct the second search of the vehicle; (4) the officers improperly seized Defendant's vehicle; (5) Defendant was impermissibly detained after the first three searches while officers prepared to and did conduct the final search; and (6) the search warrant was not supported by probable cause. (Doc. 21). Although it appeared Defendant gave up many of these arguments at the hearing, the Court will address each of them.
A. The Initial Stop of Defendant's Vehicle
Although it was not entirely clear in the original Motion, during the hearing, counsel for Defendant clarified that he was not taking the position that the traffic stop was somehow illegal. Instead, counsel for Defendant explained that he believed his client made an illegal U-turn and that he was properly stopped for such. (Tr. 258:22-24). Counsel for Defendant takes the position that the traffic stop was solely for the purpose of issuing a citation as a result of the illegal U-turn and that the multiple searches and eventual impoundment of Defendant's car exceeded the scope of the stop. The Government, on the other hand, takes the position that there was probable cause based on the wiretap and earlier surveillance to believe that the blue minivan contained cocaine and therefore, the stop and searches were permissible. Alternatively, the Government argues it had reasonable suspicion sufficient to effectuate a Terry stop and Defendant gave consent to search his vehicle. Finally, the Government claims that at the very least, Sergeant Weeks witnessed a traffic violation and was permitted to effectuate the traffic stop and Defendant gave consent to search his vehicle. The Court does not believe it is necessary to examine all of these possible scenarios because it finds the Government has established that there existed probable cause to stop and search Defendant's vehicle based on the information learned through the wiretap and earlier surveillance identifying the blue minivan at the residence of Del Carmen.
Under the automobile exception to the warrant requirement, law enforcement officers may search a readily mobile vehicle without a warrant if they have probable cause to believe that the vehicle contains evidence of a crime. United States v. Ross, 456 U.S. 798, 799, 102 S.Ct. 2157, 2160, 72 L.Ed.2d 572 (1982). "Probable cause, in turn, exists when under the totality of the circumstances, there is a fair probability that contraband or evidence of a crime will be found in the vehicle." United States v. Lindsey, 482 F.3d 1285, 1293 (11th Cir.2007) (quoting, United States v. Tamari 454 F.3d 1259, 1264 (11th Cir.2006)).
*1321 In the instant case, investigators knew that Yago Del Carmen was selling cocaine in Jacksonville. As a result of the wiretap on Del Carmen's phone, investigators were able to determine that after receiving a phone call from a male in South Florida, Del Carmen began calling his customers in an attempt to raise money. Accordingly, the investigators believed the individual calling from South Florida was the supplier. They then obtained a wiretap for the phone being used by the suspected supplier. After intercepting a phone call indicating the supplier would be coming to Jacksonville, Detective Morgan was able to trace the location of the phone being used by the supplier and confirmed that it was in Jacksonville, Florida and in the vicinity of Del Carmen's residence. Detective Morgan deployed an officer to conduct surveillance and identified a rented blue minivan in the parking lot in front of Del Carmen's apartment. Detective Morgan believed this minivan to be the vehicle used by the supplier to bring cocaine to Jacksonville.
On the day of the traffic stop, Detective Morgan knew the supplier was planning to come to Jacksonville and was able to track the location of his cell phone from South Florida to Jacksonville. She directed Sergeant Weeks to conduct a traffic stop if officers were able to locate the same blue minivan that was observed in front of Del Carmen's apartment. When the vehicle was identified and it was confirmed that it was indeed the same vehicle, Sergeant Weeks effectuated the traffic stop.
Based on the totality of the circumstances, the Court believes probable cause existed to stop and search the vehicle. Although Defendant argues the officers making the traffic stop could not have had probable cause because they were not even aware of the wiretapped conversations, as the Government points out, the collective knowledge of law enforcement officers involved in an investigation can be used to determine probable cause. Craig v. Singletary, 127 F.3d 1030, 1042 (11th Cir. 1997), cert. denied, 523 U.S. 1031, 118 S.Ct. 1323, 140 L.Ed.2d 486 (1998). Here, the collective knowledge of the officers, including Detective Morgan, is sufficient to establish "a fair probability that contraband or evidence of a crime [would] be found in the vehicle" at the time of the traffic stop. Lindsey, 482 F.3d at 1293.
Moreover, the fact that the cocaine was not located until the following day does not affect the Court's decision. After the K-9 alert inside the vehicle, the officers had reason to believe the contraband was located in a hidden compartment within the vehicle and several officers testified they did not have proper tools to disassemble the vehicle on the side of the road. (Tr. 194:20-25, 195:1, 206:22-25, 207:1-3, 208:11-16). Therefore, it was reasonable for the officers to move the vehicle and search it the following day. Notwithstanding the fact that Detective Morgan obtained a search warrant, the subsequent search was valid in that it was supported by the probable cause which existed at the time of the traffic stop and developed further through the use of the K-9 sniffs. See United States v. Mendoza Rolon, 326 F.Supp.2d 243, 248 (D.Puerto Rico 2004) (court finds warrantless search of vehicle conducted 24 hours after traffic stop and after the vehicle was moved is valid when officers had probable cause to search vehicle at time of traffic stop and had legitimate reasons to move the vehicle such as: safety of agents conducting search, safety of public who might congregate if search conducted in public, concern that other members of drug organization might be in area and belief that narcotics might be in hidden compartment and therefore search may take some time to conduct) (citing *1322 Chambers v. Maroney, 399 U.S. 42, 52, 90 S.Ct. 1975, 1981-82, 26 L.Ed.2d 419 (1970) (Court validates the search of vehicle by law enforcement agents after its removal to a police station because probable cause and exigent circumstances existed immediately after the defendants were arrested, but darkness at the location of arrest prohibited a search of the vehicle)). Accordingly, the Court finds probable cause supported the stop and subsequent searches of Defendant's vehicle.
B. Consent
Even if the Court had not found probable cause to stop and search the vehicle, the Court would not order the seized evidence suppressed. As argued by the Government, counsel for Defendant admitted during the hearing that the police made a proper traffic stop. (Tr. 258:22-24). Although Defendant attempted to argue that he did not give consent to search the vehicle, no evidence was presented to counter Officer Howell's testimony that Defendant gave consent. In an attempt to show that he did not give consent, Defendant pointed to the statements by Detective Morgan in her affidavit for the search warrant and Officer Haire in his report that Defendant did not give consent. The uncontroverted testimony by Detective Morgan and Officer Haire, however, explained that neither one was present when Officer Howell asked for consent and that they just assumed no consent was obtained because K-9 units are not normally deployed in situations where consent is obtained. (Tr. 133:1-21, 233:8-18). Additionally, while Ms. Taylor, the passenger in the vehicle, testified on direct that Defendant did not give consent, on cross examination, Ms. Taylor admitted that she could not hear the conversation between Defendant and Officer Howell.[5] (Tr. 245:5-25, 246:1-2). Accordingly, the Court finds Defendant did give consent for the first search of the vehicle.
In the alternative, Defendant argues that his consent was not voluntary. "`When a prosecutor seeks to rely upon consent to justify the lawfulness of a search, he has the burden of proving that the consent was, in fact, freely and voluntarily given.'" U.S. v. Smith, 543 F.2d 1141, 1145 (5th Cir.1976), cert. denied, 429 U.S. 1110, 97 S.Ct. 1147, 51 L.Ed.2d 564 (1977) (quoting Bumper v. North Carolina, 391 U.S. 543, 548, 88 S.Ct. 1788, 1792, 20 L.Ed.2d 797 (1968)). "Voluntariness `is a question of fact to be determined from the totality of all the circumstances.'" Id. (quoting Schneckloth v. Bustamonte, 412 U.S. 218, 227, 93 S.Ct. 2041, 2048, 36 L.Ed.2d 854 (1973)). In his Motion, Defendant argues his consent was not voluntary because he was not given an opportunity to decline consent and was not aware of his right to do so. (Doc. 21, p. 11). Additionally, Defendant contends that Sergeant Weeks was in possession of Defendant's license and vehicle information throughout the searches and as such, Defendant's consent was not voluntary. Id.
During the hearing, the Government presented the testimony of Officer Howell, who stated that he asked Defendant for permission to search the minivan. Officer Howell testified that he used a normal tone of voice, did not unholster his weapon and made no threats. (Tr. 202:19-25, 203:1-3). Additionally, Sergeant Weeks testified that he was standing on the side of the road with Defendant while the *1323 searches were being conducted and that Defendant never disavowed consent and appeared calm. (Tr. 184:11-25, 185:1-5). Defendant did not provide any testimony to the contrary nor was there any evidence that Defendant was unaware of his right to decline consent. Moreover, the mere fact that Sergeant Weeks held Defendant's license and the vehicle registration "does not vitiate [Defendant's] consent." United States v. Chhien, 266 F.3d 1, 7-8 (1st Cir.2001), cert. denied, 534 U.S. 1150, 122 S.Ct. 1114, 151 L.Ed.2d 1008 (2002) (citing United States v. Purcell, 236 F.3d 1274, 1281-82 (11th Cir.2001) (holding consent to search voluntary despite officer's retention of operator's license and registration during traffic stop), cert. denied, 534 U.S. 830, 122 S.Ct. 73, 151 L.Ed.2d 38 (2001); Florida v. Bostick, 501 U.S. 429, 435-36, 111 S.Ct. 2382, 115 L.Ed.2d 389 (1991) (explaining that consent can be voluntary even though the detainee does not feel free to leave); and United States v. Barnett, 989 F.2d 546, 554-55 (1st Cir.1993) (stating that custody alone does not create the kind of coercive atmosphere that abrogates consent)). Accordingly, based on the totality of the circumstances, the Court finds Defendant's consent was voluntarily provided.
Thereafter, as Defendant admits, the K-9 unit gave a positive alert for the presence of drugs thereby giving the officers probable cause for further searching of the vehicle.[6]United States v. Watts, 329 F.3d 1282, 1286 (11th Cir.2003) (probable cause exists to search an automobile without a warrant when a drug dog alerts to drugs in the car); United States v. Glinton, 154 F.3d 1245, 1257 (11th Cir. 1998) (probable cause existed for a warrantless vehicle search after a drug-sniffing dog was called to the scene and, upon deployment around the vehicle, began scratching and biting at the car's driverside door), cert. denied, 526 U.S. 1032, 119 S.Ct. 1281, 143 L.Ed.2d 374 (1999); United States v. Banks, 3 F.3d 399, 402 (11th Cir.1993) (same), cert. denied, 510 U.S. 1129, 114 S.Ct, 1097, 127 L.Ed.2d 410 (1994). Accordingly, even if there had not been probable cause to stop and search the vehicle, as Defendant admits, there was probable cause to believe Defendant committed a traffic violation. Thereafter, Defendant gave consent to search the vehicle and probable cause developed after the 9 gave a positive alert.
C. The K-9 Sniff
In his Motion, Defendant argues that because the first search of the minivan was illegal and without consent, the subsequent K-9 sniff and positive alert were "the fruit of the poisonous tree and *1324 cannot form the basis for probable cause." (Doc. 21, p. 12). This argument is flawed for several reasons. First, the Court has determined there existed probable cause to search the vehicle at the time the traffic stop was effectuated. Alternatively, the Court has also determined Defendant gave proper consent for the initial search of his car. However, even assuming the first search was illegal, the Court does not believe it so tainted the acquisition of the evidence that it must be excluded. "The exclusionary rule has traditionally barred from trial physical, tangible materials obtained either during or as a direct result of an unlawful invasion." Wong Sun v. United States, 371 U.S. 471, 484, 83 S.Ct. 407, 416, 9 L.Ed.2d 441 (1963). The exclusionary rule extends to evidence obtained through the exploitation of an earlier unlawful invasion or "fruit of the poisonous tree." Segura v. United States, 468 U.S. 796, 804, 104 S.Ct. 3380, 3385, 82 L.Ed.2d 599 (1984) (citing Nardone v. United States, 308 U.S. 338, 341, 60 S.Ct. 266, 268, 84 L.Ed. 307 (1939)). Evidence will not be excluded, however, if the connection between the illegal police conduct and the discovery and seizure of the evidence is "`so attenuated as to dissipate the taint.'" Segura, 468 U.S. at 805, 104 S.Ct. at 3385 (quoting, Nardone, 308 U.S. at 341, 60 S.Ct. at 268). Thus, evidence will not be excluded if police discover the evidence from a source independent from the illegal conduct. Id.
In this case, the officers did not obtain the evidence as a result of the first search. The officers located nothing in the first search. Instead, the officers had an "independent source" of probable cause to search the vehicle: the positive alert to narcotics by the canine. United States v. Moore, 329 F.3d 399, 404-05 (5th Cir.2003) (upholding denial of motion to suppress evidence recovered from vehicle and noting that officers did not obtain evidence as a result of illegal arrest but rather through "independent source" of dog sniff); United States v. Harris, 1999 WL 133134 *2 (4th Cir.1999) (upholding denial of motion to suppress drugs located in car after illegal seizure and holding that "canine sniff provided the requisite probable cause to obtain the search warrant and was an independent source from the illegal seizure of the vehicle."); United States v. Bosby, 675 F.2d 1174, 1181 (11th Cir.1982) (holding that detective's illegal search of briefcase did not taint subsequent search by FBI agent pursuant to valid search warrant when search warrant was based on information provided by defendants and did not contain any information obtained through first illegal search). Accordingly, even if the Court were to find the first search of Defendant's vehicle was illegal, the evidence seized from the minivan should not be suppressed as its discovery was not the result of any illegal police activity but rather a lawful canine sniff.
D. Seizure of the Minivan
Defendant argues it was improper for the officers to remove the minivan from the scene of the traffic stop and that by taking away his vehicle, the police improperly detained him. The Court agrees with Defendant that the officers "seized" his vehicle when they took him to the hotel and took the minivan to an alternate location. However, "the Fourth Amendment only prohibits `unreasonable searches and seizures.'" United States v. Virden, 488 F.3d 1317, 1321 (11th Cir.2007) (quoting U.S. Const. Amend. IV). "Ordinarily, the seizure of personal property is per se unreasonable unless the seizure is pursuant to a warrant issued upon probable cause." Id. (emphasis in original) (citing United States v. Place, 462 U.S. 696, 701, 103 S.Ct. 2637, 2641, 77 L.Ed.2d 110 (1983)). However, a seizure of a vehicle without a warrant is permissible when the *1325 police have probable cause to believe a vehicle contains contraband. Id. at 1322 (citing Watts, 329 F.3d at 1285 and United States v. Holloman, 113 F.3d 192, 195 (11th Cir.1997)). In the instant case, as Defendant admits, the officers had probable cause to believe the vehicle contained contraband as a result of the two K-9 sniffs resulting in positive alerts. Therefore, the Court finds the minivan was not improperly seized when it was removed to another location for further inspection.
E. Seizure of Defendant
As for Defendant's argument that he was improperly detained or seized when he was taken to a hotel of his choice, the Court finds this argument without merit. First, whether Defendant was improperly seized or detained has no bearing on whether the drugs seized from the minivan should be suppressed as they were not obtained during a search incident to arrest. In any event, the Court does not believe Defendant was improperly seized when he was taken to a hotel of his choice. To be seized in violation of the Fourth Amendment, a reasonable person, in view of all the circumstances surrounding the incident must have "believed that he was not free to leave." United States v. Mendenhall, 446 U.S. 544, 554, 100 S.Ct. 1870, 1877, 64 L.Ed.2d 497 (1980). The Supreme Court noted examples of circumstances that might indicate a seizure, such as "the threatening presence of several officers, the display of a weapon by an officer, some physical touching of the person of the citizen, or the use of language or tone of voice indicating that compliance with the officer's request might be compelled." Id. (citing Terry v. Ohio, 392 U.S. 1, 19, n. 16, 88 S.Ct. 1868, 1879, n. 16, 20 L.Ed.2d 889 (1968); Dunaway v. New York, 442 U.S. 200, 207, and n. 6, 99 S.Ct. 2248, 2253, 60 L.Ed.2d 824 (1979); 3 W. LaFave, Search and Seizure 53-55 (1978)). In the present case, Defendant's vehicle was properly seized and Defendant and his passenger were transported by the police to a hotel of their choice. Ms. Taylor, the passenger, testified that after being taken to the hotel, she left and went to a Greyhound station to catch a bus. (Tr. 242:9-14). Clearly, Defendant and Ms. Taylor felt free to leave and likewise, so too would a reasonable person. Therefore, Defendant was not unlawfully seized in violation of the Fourth Amendment.
F. The Search Warrant
Finally, Defendant argues the search warrant was not supported by probable cause. Again, the Court finds this argument without merit. Based on the Court's prior analysis regarding probable cause, the Government was not required to obtain a search warrant to conduct the final search of the car. United States v. Zucco, 860 F.Supp. 363, 370 (E.D.Tex.1994) (holding that warrantless search of vehicle after its relocation to city narcotics office did not violate the Constitution) (citing United States v. Johns, 469 U.S. 478, 484, 105 S.Ct. 881, 885, 83 L.Ed.2d 890 (1985)) ("A vehicle lawfully in police custody may be searched on the basis of probable cause to believe that it contains contraband, and there is no requirement of exigent circumstances to justify such a warrantless search.") and Michigan v. Thomas, 458 U.S. 259, 261, 102 S.Ct. 3079, 3080-81, 73 L.Ed.2d 750 (1982) (per curiam) ("[T]he justification to conduct such a warrantless search does not vanish once the car has been immobilized.").
However, in an abundance of caution, Detective Morgan applied for and obtained a search warrant. (Tr. 130:25, 131:1-10). Counsel for Defendant made much of the fact that the affidavit supporting the application for the search warrant did not mention *1326 the wiretap. However, as Detective Morgan explained, she did not include any information about the wiretap in the affidavit because wiretap was still active and she did not want to jeopardize it. (Tr. 131:12-25). Additionally, Detective Morgan testified that she did not want information regarding the wiretap to become a public record. (Tr. 132:1-6). Instead, the affidavit referenced the positive alert by the K-9, which as previously noted, provided probable cause to believe the vehicle contained controlled substances. As such, the search warrant was supported by probable cause.
In sum, the Court finds the stop and searches of Defendant's vehicle did not violate the Fourth Amendment. Accordingly, after due consideration, it is
RECOMMENDED:
Defendant's Motion to Suppress (Doc. 21) be DENIED.
NOTES
[1] Specific, written objections may be filed in accordance with 28 U.S.C. § 636 and Rule 6.02, Local Rules, United States District Court, Middle District of Florida, within ten (10) days after service of this document. Failure to file timely objections shall bar the party from a de novo determination by a district judge and from attacking factual findings on appeal.
[2] References to the transcript of the evidentiary hearing conducted on January 15, 2008, will be "Tr. Page number: line number(s)."
[3] Del Carmen resided in an apartment rented to his mother. (Tr. 89:3-16).
[4] Ms. Taylor stated that she was estimating how long the entire stop took as she did not have a watch. (Tr. 241:3-5). The JSO officers, on the other hand, testified that the entire stop took approximately 40-45 minutes. (Tr. 188:19-24, 209:17-21, 236:20-22).
[5] In any event, the Court found Ms. Taylor's testimony not credible. When asked why she was traveling to Jacksonville with Defendant, Ms. Taylor stated she was going to see a friend. (Tr. 243:23-25). However, when asked who the friend was, Ms. Taylor stated she did not know. (Tr. 244:1-4).
[6] To the extent Defendant argues it took too long for the K-9 unit to arrive, thereby causing the stop to exceed the proper duration for a traffic stop, the Court does not agree. "[A]n investigative detention must be temporary and last no longer than is necessary to effectuate the purpose of the stop." Florida v. Royer, 460 U.S. 491, 500, 103 S.Ct. 1319, 1325, 75 L.Ed.2d 229 (1983). While there is "no hard-and-fast time limit" for a permissible Terry stop, in order to determine whether a detention is too long to be justified as an investigative stop, the Court must "examine whether the police diligently pursued a means of investigation that was likely to confirm or dispel their suspicions quickly, during which time it was necessary to detain the defendant." United States v. Sharpe, 470 U.S. 675, 686, 105 S.Ct. 1568, 1575, 84 L.Ed.2d 605 (1985). The testimony at the hearing indicated that K-9 Officer Haire arrived at the scene approximately the same time as Officer Howell and waited approximately 10-15 minutes before conducting the sniff. (Tr. 181:16-18, 226:22-24, 227:21-25). The Court believes the officers diligently pursued a means of investigation that was likely to confirm or dispel their suspicions quickly. Accordingly, the detention of Defendant in order to permit the K-9 unit to perform the sniff was reasonable.
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01-03-2023
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10-30-2013
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548 F. Supp. 2d 379 (2008)
JUXTACOMM TECHNOLOGIES, INC., Plaintiff
v.
ASCENTIAL SOFTWARE CORPORATION, Business Objects SA, Business Objects America, CA, Inc., Cognos Corporation, Datamirror, Inc., Fiorano Software, Inc., Hummingbird Ltd., International Business Machines Corporation, Informatica Corporation, Information Builders, Inc., Metastorm, Inc., Microsoft Corporation, Open Text Corporation, Software AG, Inc., Sybase, Inc., Webmethods, Inc., and Intersystems Corporation, Defendants.
Case No. 2:07CV359.
United States District Court, E.D. Texas, Marshall Division.
May 2, 2008.
*380 Richard Laurence Macon, Akin Gump Strauss Hauer & Feld, San Antonio, TX, Thomas John Ward, Jr., Ward & Smith Law Firm, Longview, TX, for Plaintiff.
Eric M. Albritton, Attorney at Law, Vance Preston Freeman, Jared Ross Barrett, Kenneth Edward Shore, Matthew Steven Wolcott, Shore West Freeman, PC, Blake Charles Erskine, Erskine & McMahon, Guy N. Harrison, Attorney at Law, Longview, TX, Donald J. Curry, Marc J. Pensabene, Nicholas M. Cannella, Joseph H. Einstein, Labaton Sucharow LLP, Fitzpatrick Cella Harper & Scinto, Wayne C. Matus, Pillsbury Winthrop Shaw Pittman LLP, New York, NY, Bijal V. Vakil, Harper S. Batts, Terrence P. McMahon, McDermott Will & Emery, Palo Alto, CA, Robert Christopher Bunt, Parker, Bunt & Ainsworth, P.C., Jennifer Parker Ainsworth, Wilson Sheehy Knowles Robertson & Cornelius PC, Otis W. Carroll, Jr., Ireland Carroll & Kelley, Amanda Clare Carroll, Collin Michael Maloney, Allen Franklin Gardner, Michael Edwin Jones, Potter Minton PC, Tyler, TX, Shamita D. Etienne-Cummings, McDermott Will & Emery, Julie A. Petruzzelli, Peter J. Curtin, Rebecca G. Lombard, Venable LLP, Jon E. Wright, Mark Fox Evens, Robert Greene Sterne, Sterne Kessler Goldstein & Fox, Washington, DC, Benjamin D. Enerson, Joshua C. Krumholz, Holland & Knight LLP, James John Foster, Ilan. Barzilay, Lawrence M. Green, Wolf Greenfield & Sacks PC, Boston, MA, Michael Charles Smith, Siebman Reynolds Burg Phillips & Smith, LLP, Marshall, TX, Jessie M. Amberg, Bingham McCutchen LLP, David M. Lacy Kusters, Fenwick & West, San Francisco, CA, Ryan M. Nishimoto, Bingham McCutchen LLP, Jenna F. Leavitt, Venable LLP, Los Angeles, CA, James G. Gatto, Pillsbury Winthrop Shaw Pittman, McLean, VA, Carolyn Chang, Darren E. Donnelly, Hector Ribera, J. David Hadden, Lynn H. Pasahow, Ryan A. Tyz, Fenwick & West, Mountain Valley, CA, Jeffrey C. Morgan, Troutman Sanders, Atlanta, GA, Kelly C. Hunsaker, Fish & Richardson, Redwood City, CA, for Defendants.
MEMORANDUM OPINION AND ORDER
LEONARD DAVIS, District Judge.
Before the Court is Defendant Information Builders, Inc.'s ("IBI") Motion for Partial Judgment on the Pleadings (Docket *381 No. 219). Having considered the parties' written arguments, the Court DENIES the motion.
ANALYSIS
Juxtacomm alleges IBI's iWay Service Manager and iWay DataMigrator products infringe U.S. Patent No. 6,195,662. IBI moves for judgment because Juxtacomm did not provide separate infringement charts for each product under Patent Rule 3-1(c). Juxtacomm contends that separate charts are not necessary because iWay Service Manager "infringes the '662 patent at least to the extent that it is integrated with or uses DataMigrator."
Patent Rule 3-1(c) requires a party asserting infringement provide each defending party a "Disclosure of Asserted Claims and Infringement Contentions," which shall contain "a chart identifying specifically where each element of each asserted claim is found within each Accused Instrumentality." P.R. 3-1(c). Although the Patent Rules require separate charts for each accused product, this Court has allowed plaintiffs to use a single chart applicable to multiple products where separate charts would be identical for each product. See ConnecTel, LLC v. Cisco Sys., Inc., 391 F. Supp. 2d 526, 528-29 (E.D.Tex.2005) (Davis, J.) ("[T]he Court ORDERS ConnecTel to designate exemplar accused infringing products and compare those products to each asserted patent on a claim by claim, element by element basis."); cf. Computer Acceleration Corp. v. Microsoft Corp., 503 F. Supp. 2d 819, 823 (E.D.Tex. 2007) (Clark, J.) (striking plaintiffs infringement contentions against Vista because plaintiff had only charted the Windows XP product and it was undisputed that Vista and Windows XP are only seventy percent similar).
Juxtacomm contends iWay Service Manager infringes only to the extent that it utilizes iWay DataMigrator. Accordingly, Juxtacomm may use one chart to accuse both products. Use of one chart, however, precludes Juxtacomm from arguing that iWay Service Manager infringes in any manner differently from how iWay DataMigrator infringes. In order to argue a different infringement theory for iWay Service Manager, Juxtacomm will need to separately chart the iWay Service Manager product, which will require good cause to amend its infringement contentions.
Accordingly, the Court DENIES IBI's motion for judgment.
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234 P.3d 1229 (2010)
2010 WY 95
Rodney Gene CHRISTENSEN, Appellant (Defendant),
v.
The STATE of Wyoming, Appellee (Plaintiff).
No. S-09-0193.
Supreme Court of Wyoming.
July 2, 2010.
Representing Appellant: Michael H. Reese, Contract Appellate Counsel, Michael Henry Reese, PC, Cheyenne, Wyoming.
Representing Appellee: Bruce A. Salzburg, Wyoming Attorney General; Terry L. Armitage, Deputy Attorney General; D. Michael Pauling, Senior Assistant Attorney General; Graham M. Smith, Assistant Attorney General.
Before KITE, C.J., and GOLDEN, HILL, VOIGT[*], and BURKE, JJ.
VOIGT, Justice.
[¶ 1] In this appeal, Rodney Gene Christensen (Christensen) claims that the State breached a plea agreement that would have allowed him to enter the Wyoming Substance Abuse Treatment & Recovery Centers (WySTAR) before being sentenced. Finding that Christensen failed to show plain error, we will affirm.
ISSUE
[¶ 2] Did plain error occur in the form of the State breaching its plea agreement with Christensen?
FACTS
[¶ 3] On July 7, 2008, Christensen was charged with nine counts of burglary and seven counts of larceny. On July 24, 2008, he entered into a plea agreement with the State whereby he would plead guilty to four of the nine burglary counts and, in return, the State would dismiss the remaining *1230 counts. The State also agreed that Christensen could be released on his own recognizance to attend WySTAR, a substance abuse and recovery program, during the time between his plea hearing and sentencing hearing, if a bed became available at WySTAR. The plea agreement, which was set forth orally by defense counsel at the change-of-plea hearing, did not contain any specific sentencing recommendations.[1] The district court accepted the request that Christensen be allowed to enter WySTAR if and when a bed became available, but instructed Christensen's attorney to "come back to court either by stipulation or a subsequent hearing" at that time in order to modify Christensen's bond to allow him to enter WySTAR.
[¶ 4] Following the plea hearing, a bed apparently did become available at WySTAR. Christensen's attorney contacted the prosecutor and requested that Christensen be released and allowed to enter WySTAR. The prosecutor refused the request. The record is not clear as to when a bed became available or when Christensen's attorney contacted the prosecutor. The record does reflect, however, that Christensen never contacted the district court about the WySTAR opening prior to the sentencing hearing. The record also reflects that Christensen never entered WySTAR.
[¶ 5] Sentencing occurred on June 25, 2009. While arguing in favor of mitigation, defense counsel mentioned Christensen's need for substance abuse treatment, and mentioned that Christensen was accepted into the WySTAR program "weeks, if not months, ago." Christensen's attorney also indicated that he contacted the prosecutor and requested that Christensen "be released to go to the treatment program, and [the prosecutor] said, no." No mention was made of a plea agreement, and there was no request to continue the sentencing hearing to allow Christensen to attend the program. The district court sentenced Christensen to "not less than six nor more than eight years confinement" on each of the four counts, to run concurrently. Christensen now appeals the written judgment and sentence claiming a breach of the plea agreement.
STANDARD OF REVIEW
[¶ 6] We generally review alleged breaches of plea agreements de novo. E.g. Frederick v. State, 2007 WY 27, ¶ 13, 151 P.3d 1136, 1141 (Wyo.2007); Spencer v. State, 2005 WY 105, ¶ 12, 118 P.3d 978, 982-83 (Wyo.2005). However, when a party fails to raise the issue of breach of a plea agreement with the district court, we review the alleged breach for plain error. See Rutti v. State, 2004 WY 133, ¶¶ 40-41, 100 P.3d 394, 410 (Wyo.2004). We have repeatedly held that "[p]lain error exists when 1) the record is clear about the incident alleged as error; 2) there was a transgression of a clear and unequivocal rule of law; and 3) the party claiming the error was denied a substantial right which materially prejudiced him." Id. at ¶ 33, at 408 (quoting Sandy v. State, 870 P.2d 352, 358 (Wyo.1994)). The appellant bears the burden of proving plain error. Id.
DISCUSSION
[¶ 7] Christensen argues that the State breached the plea agreement because the agreement was that "Christensen would be released on his own recognizance to immediately go and participate in the WySTAR program ... when a bed becomes available," but when a bed did in fact become available, the prosecutor did not agree to release Christensen. Under plain error analysis, our first task is to determine whether the record is clear regarding the alleged error. Rutti, 2004 WY 133, ¶¶ 40-41, 100 P.3d at 410. Christensen claims the breach occurred during a conversation between defense counsel and the prosecutor wherein the prosecutor indicated that he would refuse to release Christensen so that he could enter WySTAR. As noted above, Christensen mentioned this conversation during the sentencing hearing, which the record reflects, and the State, in its brief, acknowledges that this conversation *1231 occurred. Consequently, we find that the record clearly reflects the alleged breach.
[¶ 8] The second prong of the plain error test requires us to determine whether "there was a transgression of a clear and unequivocal rule of law." Id. at ¶ 33, at 408 (quoting Sandy, 870 P.2d at 358). We have said the following relating to plea agreements:
A plea agreement is a contract between the defendant and the State to which the general principles of contract law are applied. "When determining whether a breach of the plea agreement has occurred we: `(1) examine the nature of the promise; and (2) evaluate the promise in light of the defendant's reasonable understanding of the promise at the time the plea was entered.'" Ford v. State, 2003 WY 65, ¶ 11, 69 P.3d 407, 410 (Wyo.2003). The prosecutor "must explicitly stand by" the terms of any agreement; and if the State is unable to carry out the terms, the correct remedy is withdrawal of the plea. Ford, ¶ 18, 69 P.3d at 412. The State may not obtain the benefit of the agreement and at the same time avoid its obligations without violating either the principles of fairness or the principles of contract law. Id.
Frederick, 2007 WY 27, ¶ 13, 151 P.3d at 1141. Moreover, we have held that
... "as in contract," a party should not be released from its obligations under a plea agreement absent another party's material or substantial breach of that agreement. A material or substantial breach is one that goes to the whole consideration of the agreement. Several factors are relevant to whether a breach is material or substantial, including the extent to which the non-breaching party will be deprived of the benefit it reasonably expected and the extent to which the breaching party's conduct comports with the standards of good faith and fair dealing. Schade v. State, 2002 WY 133, ¶ 5, 53 P.3d 551, 554 (Wyo. 2002) (citing Browning v. State, 2001 WY 93, ¶ 32, 32 P.3d 1061, [1071] (Wyo.2001)).
Gibbs v. State, 2008 WY 79, ¶¶ 10-11, 187 P.3d 862, 865-66 (Wyo.2008).
[¶ 9] The following statements occurred at the change-of-plea hearing in relation to the terms of the plea agreement:
[Defense Attorney]: Mr. Christensen has agreed to plead guilty to Counts I, III, IV, and VI for the burglary counts. In exchange the State has agreed to dismiss the remaining counts. There is no agreement regarding sentencing. There is an agreement that Mr. Christensen would be released on his own recognizance to immediately go and participate in the WySTAR treatment program in Sheridan, Wyoming, when a bed becomes available.
Your Honor, he has been accepted into that program; however, they don't currently have a bed available for him. But the agreement is that he would go there. We would waive speedy sentencing to allow him to go to that program and return to court after he completes that program for his sentencing. And that is our agreement. Obviously there is going to be restitution to pay.
THE COURT: All right. Thank you.
[Prosecutor], anything to add?
[Prosecutor]: No, Your Honor.
After dealing with some other matters, the district court then asked if the parties arrived at a bond recommendation and the following colloquy occurred:
[Defense Attorney]: We do, Your Honor. However, it is not ready to go into effect. We have an agreement for his bond to be reduced to release him on his own recognizance to participate in the WySTAR inpatient treatment program in Sheridan, Wyoming. They do not have a bed available for him yet, so I'm not sure if the Court wants us to draw up a stipulated order of release at the time a bed becomes available or how the Court wants.
THE COURT: I believe probably you should come back to court either by stipulation or a subsequent hearing. We'll take that up at that time.
[Defense Attorney]: Yes, Your Honor. I'll stay in touch with the treatment program.
There is no evidence in the record, nor does Christensen claim that he ever followed up *1232 on this request with the district court prior to the sentencing hearing.
[¶ 10] At the beginning of the sentencing hearing, nearly a year after the change-of-plea hearing, the district court, the prosecutor, and Christensen's attorney discussed the plea agreement. The district court summarized the plea agreement as an agreement by the State to drop some of the charges against Christensen in return for his guilty plea to other charges. Both the prosecutor and Christensen's attorney agreed to that characterization of the plea agreement and noted that both parties were standing by the agreement. The WySTAR part of the plea agreement was not discussed or even raised at that time. Not until the end of the hearing did defense counsel make the following statements:
He understands this is not the way he wants to live his life, and that what he did to people is wrong. And he was accepted to the WYSTAR, one of the best programs we have in the state, the WYSTAR Rehabilitation Treatment program. He was accepted weeks, if not months, ago. They reviewed his application, they reviewed his letter. They're not going to take you unless they think you're serious about getting treatment. They accepted him.
I advised [the prosecutor] of that, and asked if he could be released to go to the treatment program, and [the prosecutor] said, no. There's a punishment element that the district attorney's looking at prior to a rehabilitation element. And that he canHe hopes he gets treatment, wants him to get treatment. But said, no, I'm not going to release him to treatment, so he continued to sit in jail.
WYSTAR is still there. They know that he's going to court today. We've stayed in touch with the program. They say if today he's allowed to go to treatment, they'll have a bed for him. And so that is still available for Mr. Christensen.
[¶ 11] From the record before us, we cannot say that a clear and unequivocal rule of law was violated. Christensen points to the conversation with the prosecutor, wherein the prosecutor refused to release Christensen to allow him to enter WySTAR, as being a breach of the plea agreement. However, a review of the record, including the terms of the plea agreement and the actions of the parties, do not lead us to conclude that the conversation necessarily constituted a breach. First, although both parties agree that the prosecutor indicated to Christensen's attorney that he would not release Christensen to allow him to enter WySTAR, the context and substance of that conversation are not reflected in the record. More importantly, the State did not object to or otherwise prevent Christensen from moving the district court to release Christensen to WySTAR, as appears to have been the court's expectation when it said at sentencing that "you should come back to court." A release order would have had to come from the district court, not from the State. Finally, Christensen never directly raised before the district court the treatment issue as being a breach of the plea agreement. In fact, defense counsel stated at the beginning of the sentencing hearing that both parties were currently standing by the terms of the plea agreement. Both parties were apparently treating the plea agreement as if it had not been breached and as if both parties were complying with their respective obligations. Under these facts, we just cannot say that there was a violation of a clear and unequivocal rule of law.
CONCLUSION
[¶ 12] The record reflects the incident that Christensen points to as the alleged breach; however, the record does not clearly reflect that a violation of a clear and unequivocal rule of law occurred. The most that can be said is that the prosecutor made an out-of-court statement that he would not release Christensen to WySTAR. With or without a plea agreement, the prosecutor does not have such release authority. That authority belongs to the district court, and the record shows that Christensen never complied with the district court's instructions to "come back to court" when a bed became available at WySTAR. Furthermore, Christensen never directly raised the issue of breach with the *1233 district court. Accordingly, Christensen failed to prove plain error.
[¶ 13] Affirmed.
NOTES
[*] Chief Justice at time of expedited conference.
[1] There had been a written plea agreement, but its terms were changed just prior to the hearing, so the district court allowed Christensen's attorney to state the terms orally and submit a written copy at a later date. It does not appear from the record, however, that a written agreement was ever submitted.
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413 F. Supp. 2d 339 (2006)
BOSE CORPORATION, Bose. G.P. of Ireland, and Bose B.V., Plaintiffs,
v.
SILONSONNIC CORP. a/k/a Silonsonic Corp., Dan Sasson d/b/a www.silonsonnic.com, and Sagi Haber d/b/a www.djsagi.com, Defendants.
No. 05 CIV. 10182(CSH).
United States District Court, S.D. New York.
February 7, 2006.
*340 David R. Francescani, Fish & Richardson P.C., New York City, Kelly Rothermel Vickers, Matthew E. Yarbrough, Victor Calvin Johnson, Fish & Richardson, P.C., Dallas, TX, for Plaintiffs.
Lloyd M. Eisenberg, Eisenberg & Carton, New York City, for Defendants.
MEMORANDUM OPINION
HAIGHT, Senior District Judge.
In this case, plaintiffs Bose Corporation and certain European affiliates ("Bose" or "Plaintiffs") sought a preliminary injunction enjoining defendants Dan Sasson and Sagi Haber ("Defendants") from selling Bose home entertainment sound reproducing systems, called LIFESTYLE systems, on Ebay or various websites operated by defendants or over the phone, and from using Bose's copyright- or trademark-protected material in its advertisements of the Bose systems. Defendants generally opposed the imposition of an injunction, but seemed to concede that their websites and *341 Ebay advertisements had wrongfully used Bose's copyrighted images and/or text.
After issuing a Temporary Restraining Order and Seizure Order, the Court held an evidentiary hearing on January 24-27, 2006, on Plaintiffs' motion for a preliminary injunction. Marketing and technical witnesses from Bose testified. The testimony of the individual defendants was received in the form of sworn declarations. Numerous documentary exhibits were received. The parties submitted a useful joint stipulation of material facts.
On February 1, 2006, the Court issued a Preliminary Injunction and Order granting certain, but not all, of the relief requested by Bose. Most importantly, the Court enjoined Defendants from marketing, selling, or exporting Bose LIFESTYLE systems to third parties outside the United States and Canada. The Preliminary Injunction and Order also enjoined Defendants from making any unauthorized use of Bose's copyrights or trademarks. In this Opinion, the Court will explain the reasoning behind the Preliminary Injunction and Order.
DISCUSSION
I. Standard for Preliminary Injunction
In this circuit, "[a] party seeking a preliminary injunction must demonstrate (1) irreparable harm in the absence of the injunction and (2) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor." MyWebGrocer, LLC v. Hometown Info, Inc., 375 F.3d 190, 192 (2d Cir.2004) (internal quotation marks and citation omitted). In addition, the party seeking the injunction must satisfy a higher standard, by showing a clear or substantial likelihood of success, where (I) the injunction sought is "mandatory"i.e., it will "alter, rather than maintain, the status quo," or (ii) the injunction, whether or not mandatory, "will provide the movant with substantially all the relief sought and that relief cannot be undone even if the defendant prevails at a trial on the merits." Tom Doherty Assoc., Inc. v. Saban Entm't, Inc., 60 F.3d 27, 33-34 (2d Cir. 1995); see also Sunward Electronics, Inc. v. McDonald, 362 F.3d 17, 24 (2d Cir. 2004). In this case, however, the Court need not address which standard is more appropriate because, regardless of which standard is applied, my ultimate conclusions are the same.
II. The Trademark Infringement Claim
As noted, Plaintiffs sought an order enjoining Defendants from selling Bose LIFESTYLE systems commercially over the Internet, using websites or Ebay, or via telephone. Plaintiffs assert that Defendants' practice of selling Bose equipment is illegal in several respects,[1] but the essence of their claims in this regard, as expressed at oral argument, is that the goodwill and reputation of Bose's registered trademarks are damaged and/or diluted by Defendants' sale of Bose products to buyers in Europe, as well as in the American market (see note 3, infra).
A. European Market
The majority of counsel's oral argument focused on damage done to Bose as a *342 result of Defendants' sales to the European market. While not pressing an assertion that the LIFESTYLE systems sold by Defendants are counterfeit,[2] counsel for Bose essentially argued that Bose's trademarks (and associated goodwill) were devalued because the Bose systems sold by Defendants were inferior to the Bose systems that a European consumer would purchase from an authorized Bose dealer in Europe. That is because, Bose argued, the Bose LIFESTYLE systems that Defendants offer for resale are manufactured for the American market, while LIFESTYLE systems sold by authorized European dealers are manufactured for the European market,[3] and significant differences exist between the European and American LIFESTYLE systems. Among the differences highlighted by Bose: Europeanmarket products have voltage specifications of 220V or 240V instead of 110V;[4] RDS capabilities; different FM deemphasis; different tuner increments; remote controls and receivers that function on 40 MHZ; a different radio antenna connection; an owner's manual in wider variety of languages; a SCART adaptor for connection to European-style televisions; an "Xcode", which enables region-free DVD operation; are marked with `CE' to signify compliance with European voltage requirements; and have a two-year warranty, as compared to a one-year warranty in the U.S. Defendants, who as noted advertise for sale to European customers LIFESTYLE systems manufactured for use in the American market, attempt to adjust for some of these differences by modifying the American-market LIFESTYLE systems to function in Europe. In order to address the voltage differential, Defendants make the following modifications: for the bass module in black/silver LIFESTYLE systems, Defendants include a step-down transformer to convert the voltage from 220V or 240V to 110V (Joint Stipulation of Facts Not in Dispute ¶ 47); for the tri-voltage white systems they offer for sale, Defendants merely include in the package a European power cord, sometimes of Bose's own construction (id. ¶ 51); for the media centers, Defendants included a 115V/230V power adaptor (id. ¶ 63). In order to modify the media center portion of the American-market LIFESTYLE system to play European DVDs, Defendants unsealed the packages containing the Bose systems they purchased in the United States, attached the media center to Defendants' computer via a serial cable, and used software to change the DVD region settings. Id. ¶¶ 41-42. Defendants assert *343 that those two areas of modification, voltage/power supply and DVD region code settings, were the only areas of modification needed to allow the American-market LIFESTYLE systems to function in the European market. Sasson Decl. ¶ 16.
Plaintiffs challenged that assertion. They contended with vigor that Defendants' modifications to systems made in Mexico for use in the American market do not allow those systems to function in Europe as well as systems made in Ireland for use in the European market. Besides the possible adverse side effects of using the step-down transformer supplied by Defendants to adapt the 110-volt American system for use with European 220-volt power,[5] Bose pointed to the lack of RDS capability on American-market systems, the lack of the Bose-made special SCART adaptor,[6] and the differences in FM deemphasis,[7] remote frequencies, and warranty as clearly indicating that the use of the American-market Bose LIFESTYLE systems in Europe results in a sub-optimal audio/visual experience for European purchasers of Defendants' Bose products, depriving those purchasers of the complete benefits of the European-market products. Further, Plaintiffs asserted, and the evidence seems to support the conclusion, that Defendants' advertisements mislead European purchasers into believing that the Bose products offered for sale by Defendants would, in fact, function optimally in the European market, when that is not the case.
Based on the testimony and documentary evidence presented at the hearing, I find as a fact that, compared to what a European consumer could normally expect to experience when purchasing a European-market LIFESTYLE system, the modified American-market LIFESTYLE systems offered for sale by Defendants would be inferior.
That finding is sufficient to entitle Bose to a preliminary injunction with respect to Defendants' sales to European purchasers. Bose has a legitimate interest in keeping inferior goods passed off as optimal-performing Bose products out of the European market; doing so insures that the value of Bose's highly respected trademarks are not diluted or damaged. "One of the most valuable and important protections afforded by the Lanham Act is the right to control the quality of the goods manufactured and sold under the holder's trademark." El Greco Leather Prod. Co. v. Shoe World, Inc., 806 F.2d 392, 395 (2d Cir.1986) (citation omitted); see also Polymer Tech. Corp. v. Mimran, 37 F.3d 74, 78 (2d Cir.1994) ("[T]rademark law serves to guarantee the quality of the trademarked product, and the sale of inferior goods with a true mark will clearly undermine the value of the trademarked *344 brand as a guarantor of quality.") (internal quotation marks and citations omitted).
Defendants' counsel asserted at oral argument that Bose cannot claim to be concerned about its quality control in this case, because Bose did not act to make it publicly known that differences existed between the Bose products manufactured for the American and European markets, and, further, took no measures to ensure that its American-market products do not reach the European market. Defendants' counsel relied on Polymer, 37 F.3d 74, in support of those arguments. Neither argument is persuasive.
In the first place, the relevant holding in Polymer stands only for the proposition that, where trademark infringement is alleged based on a theory of noncompliance with a plaintiff's quality control measures, the plaintiff must actually have in place and comply internally with such quality control measures. See Polymer, 37 F.3d at 78-80.[8] I am unable to discern in Polymer or any other case the requirement that a plaintiff such as Bose would have to publicize any differences in its products intended for different markets in order to be entitled to the protection afforded by the Lanham Act in the form of a right, enforceable by the courts, to control the quality of the goods manufactured under its trademark.
Secondly, in the case at bar, Bose has several mechanisms in place for ensuring that the American-market goods, which will perform optimally for American-market consumers, are indeed sold to consumers in the American market, and that European-market goods, which will perform optimally for European-market consumers, are sold to consumers in the European market. As an initial matter, the Bose LIFESTYLE systems intended for the American market are manufactured in North America (Mexico), and the systems for the European market are manufactured in Europe (Ireland). Moreover, Bose endeavors to ensure that systems made in Mexico for the American market are sold only in that market, and systems made in Ireland for the European market are sold only in that market. For example, Bose markets and sells American-market systems to American purchasers over the Internet through the www.bose.com website, while the Bose U.K. website (www.bose.co.uk) is used to solicit business in the United Kingdom, and other European country-specific Bose websites target and sell European-market products to consumers in those countries. Further, as stated in note 5, supra, Bose technicians will assist in modifying an American-market Bose LIFESTYLE system for use in Europe, but only if the consumer who is going abroad has owned the LIFESTYLE *345 system for a minimum of one year. That temporal limitation, a Bose witness testified, is intended to prevent Bose American-market systems from being purchased, modified, and then promptly resold in the European market.
In short, the record makes it clear that Bose has in place and implements measures to ensure that consumers in each of the markets at issue in this case receive those Bose systems manufactured for use in those markets, which as a result would provide the most refined audio/visual experience for the consumer. Despite Defendants' counsel's argument, the Court has not been directed to any precedent that would support the conclusion that either these measures or the existence of differences between the LIFESTYLE systems built for the two markets need to be made publicly known. Further, Defendants did not allege, or offer any evidence, that Bose does not comply with such quality control measures intended to provide the optimal experience to consumers. Accordingly, as Bose has these quality control measures in place, and as Defendants' sales of the American-market LIFESTYLE systems to the European market are plainly inconsistent with those measures, and, further, apparently provide a sub-optimal audio/visual experience to European consumers, the strength of Bose's trademark in Europe is damaged by Defendants' practices. Plaintiffs have thus shown a clear and substantial likelihood of success on the merits, see Sunward Elec., Inc. v. Mc-Donald, 362 F.3d 17, 24 (2d Cir.2004), and irreparable harm is therefore presumed, see Dunkin' Donuts Inc. v. National Donut Restaurants of New York, Inc., 291 F. Supp. 2d 149, 152 (E.D.N.Y.2003) (citation omitted), satisfying the test for the issuance of a preliminary injunction.[9]
B. American Market
Plaintiffs also asked the Court to enjoin Defendants' sales of American-market Bose LIFESTYLE systems to purchasers in the United States. Obviously, the concerns discussed above regarding the quality-affecting differences between the systems manufactured for the American and European markets are not relevant to the analysis of this request, as Defendants are selling American-market Bose products to American-market consumers, without it being necessary to make any modifications or supply any additional accessories. An action for trademark infringement "will not arise where the goods being sold are genuine goods bearing a true mark." Polymer, 37 F.3d at 78.
However, Plaintiffs contended that the quality of the Bose systems sold by Defendants to American consumers is nonetheless compromised, and, therefore, Bose's reputation and trademark are being devalued or diluted in the American market. In support of this claim, Plaintiffs asserted that the Bose manufacturer's warranty is an integral part of any LIFESTYLE system, and, as the systems sold by Defendants are purportedly not covered by the warranty, those products are again inferior to those goods sold by Bose authorized dealers.
Assuming without deciding that the lack of an enforceable warranty standing alone is sufficient to render a product inferior for trademark infringement analysis purposes, it is by no means clear that the LIFESTYLE systems sold by Defendants to American purchasers are, in the hands of those purchasers, without warranty. The language of the Bose warranty provides *346 that the warranty is transferable if the system was originally purchased from a Bose authorized dealer (and proof of purchase can be provided), and the evidence in this case is that the Defendants frequently obtained the LIFESTYLE systems they offered for resale from Bose authorized dealers.[10] Bose has arguments available to it for the non-enforceability of the warranty in these particular circumstances, but the most that can be said for its position is that the question is a fair ground for litigation, and here the balance of hardships tips decidedly in favor of Defendants, the nonmoving party. In consequence, Plaintiffs are not entitled to a preliminary injunction with respect to Defendants' resales of LIFESTYLE systems in the American market.
III. The Copyright Infringement Claim
Plaintiffs also sought an order enjoining Defendants from using Bose's copyright- or trademark-protected images or text in Defendants' advertisements of the Bose equipment Defendants offer for sale on their websites or in their Ebay listings. Verified Complaint ¶¶ 66-69, XXII(D)(1). Defendants conceded that, in the past, they have copied copyrighted images and/or product descriptions from Plaintiffs' websites for use in advertisements on Defendants' websites and/or Ebay listings. Sasson Decl. ¶ 11; Joint Stipulation ¶ 32. Defendants offered no real defense for this use of Plaintiffs' copyrighted material, but claimed that they were unaware such use violated copyright laws. Sasson Decl. ¶¶ 13, 27. Defendants did, however, assert that they no longer use material copied from Plaintiffs' websites in their advertisements. While recognizing that that may indeed be the case, given the fact that Defendants had admittedly made unauthorized use of protected Bose material in the past, and possibly could again in the future, the Court was satisfied that the showing required for a preliminary injunction had clearly been made, and therefore granted Plaintiffs' request for a preliminary injunction enjoining Defendants from making unauthorized use of Bose's copyrights or trademarks, in any of their advertisements or otherwise. If, as Defendants have asserted, they only used the protected images and text because they were unaware such use was improper, and they ceased such use once they learned of the impropriety of that use, Defendants should have no trouble complying with such an injunction.
CONCLUSION
For the foregoing reasons, the Court issued its Preliminary Injunction and Order, dated February 1, 2006, granting in part and denying in part Plaintiffs' request for a preliminary injunction.
NOTES
[1] Plaintiffs allege tortious interference with contract, copyright infringement, federal trademark infringement and counterfeiting, federal trademark dilution, false advertising, unfair competition, New York common law unfair competition, New York common law trademark infringement, dilution under New York General Business Law § 360-L, willful false and deceptive trade practices in violation of New York General Business Law § 349, and New York common law civil conspiracy. See Verified Complaint.
[2] In fact, it appears that in many if not most instances Defendants acquired the Bose products that they offered for resale from Bose authorized sellers, mainly in and around the New York metropolitan area. See Sasson Declaration ¶¶ 10-12. Defendants reportedly acquire the systems at a discount by buying in bulk or negotiating favorable prices. Id.
[3] Bose manufactures the LIFESTYLE systems intended for the European market at a factory in Ireland, while those LIFESTYLE systems intended for the American market are manufactured at a factory in Mexico. The "European market" includes continental Europe and the United Kingdom. The "American market" includes the United States, Canada, and Puerto Rico.
[4] The LIFESTYLE system primarily consists of a media center and a bass module. Both the media center and bass module utilize their own power source. In all cases, American-market LIFESTYLE media centers are configured to operate on 110y, whether the systems are black/silver or white. However, while the majority of the LIFESTYLE systems made for the American market (the black and silver systems) have bass modules that are configured for 110V, the bass modules of certain of the American-market white LIFESTYLE systems are manufactured to be trivoltage (110y, 220V, or 240V).
[5] Bose technicians have a protocol for modifying an American-built LIFESTYLE system for use in Europe if the American purchaser has been transferred to Europe and cannot bear to leave his Bose system behind. But the Bose technicians do not simply hand the soon-to-be expatriate a transformer or suggest that he buy one at Radio Shack. Instead, they open up the back of the bass module, and replace the power supply PCB and transformer with a different, proprietary Bose part, which "allows this unit to operate at the appropriate, proper voltage level in Europe." Oral argument of counsel for Bose, at Tr. 29.
[6] The Bose SCART adaptor allows certain automatic adjustments to the aspect ratio of a DVD, i.e. wide-screen versus normal format.
[7] I understand the difference in FM deemphasis is intended to maximize the listening experience of the European consumer by matching up the receiving capabilities of the radio receiver to the signals typically broadcast in Europe. See Testimony of Bill Allen, at Tr. 202-03.
[8] In that case, the plaintiff, manufacturers of opthalmic products, including contact lens solution, distributed its products, with certain differences in packaging and labeling, to two types of entities: retail stores and professional eye-care practitioners. See Polymer, 37 F.3d at 77. The plaintiff sued the defendant for trademark infringement and counterfeiting for allegedly obtaining plaintiff's products intended and labeled for eye-care professionals and then selling those products to retailers. See id. at 76. The plaintiff asserted that the defendant's distribution of goods in such a manner violated the plaintiff's trademark rights because the solutions intended for eye-care professionals that defendants sold on the retail market did not meet the plaintiff's quality control standards for retail products. See id. at 78. The district court found, however, that the plaintiff itself failed in several respects to ensure that the products it intended for the retail market complied with the quality control standards purportedly in place. See id. at 78-79. As a result, the district court did not "accept [the plaintiff]'s theory of trademark infringement based on [the defendant]'s alleged circumvention of [the plaintiff]'s quality control efforts," and refused to issue a preliminary injunction. Id. at 80. The Second Circuit affirmed.
[9] As noted in text supra, the Court need not decide which standard for the imposition of a preliminary injunction applies, as Plaintiffs have satisfied either standard.
[10] See note 2, supra.
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234 P.3d 820 (2010)
Herman M. TERNES, Appellee,
v.
Joseph P. GALICHIA, M.D., Appellee, and
Accident Recovery Team, P.A. and James A. Cline, Appellants.
No. 101,666.
Court of Appeals of Kansas.
June 11, 2010.
*821 Christopher A. McElgunn, of Klenda, Mitchell, Austerman & Zuercher, L.L.C., of Wichita, for appellants.
Lisa A. McPherson and Marcia A. Wood, of Martin, Pringle, Oliver, Wallace & Bauer, *822 L.L.P., of Wichita, for appellee Joseph P. Galichia, M.D.
Before HILL, P.J., PIERRON, J., and BUKATY, S.J.
HILL, J.
We consider here a medical malpractice action. Herman M. Ternes dismissed his first lawsuit against Joseph P. Galichia, M.D. and then with another counsel refiled it about 4 months later. Ultimately, the district court dismissed his second lawsuit based on the 2-year statute of limitations. We reverse the district court's dismissal because Galichia never raised the affirmative defense of the statute of limitations during the 16 months he litigated the first lawsuit and also took clear, unequivocal steps, such as seeking a professional malpractice screening panel and participating in discovery, that constitute a waiver of that affirmative defense. We hold that once an affirmative defense is waived, it is gone and no longer available to the party waiving the defense.
Ternes sues Galichia for malpractice.
Dr. Galichia carried out a heart catheterization on Ternes on March 5, 2004. Afterwards, Ternes claimed Galichia negligently lacerated his left main artery, left anterior descending artery, and circumflex coronary artery. These injuries forced Ternes to undergo open heart surgery which resulted in acute renal failure and permanent renal injury.
Almost 2 years laterMarch 3, 2006 Ternes filed a medical negligence lawsuit against Galichia and an entity called The Galichia Medical Group, P.A. in Sedgwick County District Court. The record reveals service upon the corporation but no service on Galichia personally.
From the start of the lawsuit, Galichia was active. Galichia and his corporation were granted a 10-day extension to file an answer but never did file such a pleading. Counsel for Galichia entered their appearances in the lawsuit on November 28, 2006. Both parties asked the district court on June 28, 2006, to convene a medical malpractice screening panel. (It is not clear whether the screening panel actually met, but it was eventually dismissed.) Then, on January 2, 2008, Ternes dismissed his lawsuit. His attorneys on the first lawsuit were Accident Recovery Team, P.A. and James A. Cline.
A little more than 4 months after dismissing his lawsuit against Galichia, Ternes filed a second petition in Sedgwick County District Court, making the same medical negligence claims but with different lawyers. Later, in August 2008, Galichia moved to dismiss the new petition on the grounds that the statute of limitations barred the action.
Meanwhile, Ternes filed a legal malpractice lawsuit against the Accident Recovery Team, P.A. and Cline. He alleged his former counsel negligently failed to obtain service of process on Galichia in his first lawsuit and his medical negligence claim against Galichia was now time barred by the statute of limitations. Then, both the Recovery Team and Cline intervened in the second Ternes lawsuit against Galichia because they had learned Ternes planned not to oppose Galichia's motion to dismiss based on the statute of limitations.
Finally, in November 2008, the district court granted Galichia's dismissal motion. The court specifically found that Ternes' second lawsuit against Galichia was untimely and Galichia was not prevented from raising the affirmative defense of statute of limitations. The interveners bring this appeal. In turn, Galichia argues the interveners have no standing to appeal and therefore we have no jurisdiction to consider the case. He also contends the district court properly dismissed the second lawsuit due to the statute of limitations. We will address the standing to appeal issue first.
The district court properly allowed the attorneys to intervene; therefore, we have jurisdiction to decide the appeal.
Because Ternes has folded his tents and withdrawn from the field of battle by not opposing Galichia's motion to dismiss, Galichia contends his former counsel, the Recovery Team and Cline cannot intervene since there is no lawsuit remaining in which they can intervene. In other words, Ternes' acquiescence *823 in the judgment of dismissal precludes the attorneys' appeal, in Galichia's view. We do not agree. These facts illustrate the precise reason for intervention.
Our law permits parties to intervene in a pending lawsuit when they have an interest in the property or the transaction which is the subject of the action. See K.S.A. 60-224(a)(2). Courts have specifically allowed parties to intervene in a lawsuit when disposition of the action may substantially impair or impede the intervener's ability to protect that interest unless the intervener's interest is adequately represented by existing parties. Here, of course, central to Ternes' claims against his former counsel is his contention that his action against Galichia is time barred. Therefore, Ternes has no reason to oppose Galichia's motion to dismiss and certainly Galichia was using the motion as his first line of defense in the malpractice action. Clearly, no party in the lawsuit represented the interests of the Recovery Team and Cline. In our view, the court properly allowed the lawyers to enter the case as interested parties. Several cases support our conclusion.
In Pickens v. Allstate Ins. Co., 17 Kan. App. 2d 670, 674-75, 843 P.2d 273 (1992), rev. denied 252 Kan. 1093 (1993), the court decided an insurer could intervene to protect its interests in a policyholder's lawsuit against an uninsured motorist if the insurer's rights are not adequately represented by the parties, because the insurer has a financial stake in the outcome. Obviously, the Recovery Team and Cline have a financial stake in Ternes' second lawsuit that is comparable to the insurer's in Pickens.
Also, we are told in In re Petition of City of Shawnee for Annexation of Certain Lands, 236 Kan. 1, 11, 687 P.2d 603 (1984), that the factors found in the statute that permits intervention, K.S.A. 60-224(a), should be liberally construed in favor of intervention. Those factors are: (1) timely application; (2) a substantial interest in the subject matter; and (3) lack of adequate representation of the intervener's interests. This is especially true when it is necessary to protect some right which cannot otherwise be protected including the right to appeal. Without intervention of the lawyers in this case there never could have been an appellate review of the order dismissing Ternes' lawsuit against Galichia on the grounds of the statute of limitations. Ternes' acquiescence in the judgment precluded the appeal without intervention. Also, we know that interveners can appeal even if the original parties to a lawsuit do not.
To demonstrate this point, we turn to Hukle v. City of Kansas City, 212 Kan. 627, 512 P.2d 457 (1973). In Hukle, a landowner sought a zoning change in order to erect a townhouse complex. The city resisted, but finally the district court ruled the city's refusal was arbitrary and unreasonable. When a group of neighboring landowners tried to intervene in the lawsuit, the district court refused their intervention motion. Next, the city moved to dismiss its appeal of the district court's zoning ruling. The landowners tried to intervene a second time, contending the city no longer represented their interests in the zoning dispute. Again, the court denied their intervention motion. The landowners appealed. The Supreme Court, in overturning the district court's order, discussed the doctrine of merger when intervention occurs:
"`A person who intervenes in a pending action becomes a party thereto and his action is merged with the main action. Thus intervention, it is said, is the grafting of one action on another, the trying of the combined issues as one trial, and the determination of them by one judgment....' [Citation omitted.]" 212 Kan. at 632, 512 P.2d 457.
The court then explained an intervener takes on the character of an original party:
"`Intervention presupposes the pendency of a suit in a court of competent jurisdiction, and one who becomes a party thereto, implicitly, if not expressly accepts the proceedings as he finds them at the time of intervention; the intervener is, for all intents and purposes, an original party.... The intervener is as fully bound by the record and as fully entitled to avail himself of it as if he had been an original *824 party thereto.' [Citation omitted.]" 212 Kan. at 632, 512 P.2d 457.
Thus, the Supreme Court held the district court erred in denying the landowner's intervention motion and proceeded to determine the merits of the zoning appeal. In the same way, we should consider the merits of this appeal.
Correspondingly, the Recovery Team and Cline were allowed to intervene because no one in the lawsuit represented their interests. Clearly, they had a financial and professional stake in how the district court ruled on Galichia's statute of limitations motion. When it was granted, as interveners, they became as if they were original parties and could appeal the dismissal order.
We find no error in the district court allowing the lawyers to intervene. As interveners, they have standing to bring this appeal. We turn now to the merits of the matter.
Because Galichia effectively waived the affirmative defense of the statute of limitations in the first lawsuit, the court improperly dismissed the second.
The interveners, Recovery Team and Cline, contend Galichia, through his participation in the first lawsuit as well as not raising the issue at all has waived the defense of the statute of limitations. Galichia denies any waiver and insists the saving statute, K.S.A. 60-518, cannot save Ternes' second lawsuit against him because it was filed after the expiration of the period when such claims can be filed. Before we address the issue, we must review some fundamental points of law.
Basically, a civil action is commenced when the petition is filed in court if service of process is obtained within 90 days of that date. (The court can extend that time for 30 days for good cause.) See K.S.A. 60-203(a)(1). But, if there is no service within 90 days (or 120 where applicable), the action is deemed commenced on the day when process is served. K.S.A. 60-203(a)(2). An entry of appearance has the same legal effect as service of process. K.S.A. 60-203(c). In this context, Ternes was required to commence his lawsuit for medical negligence within 2 years. K.S.A. 60-513(a)(7). We must now look at the timeline of this case.
First, Galichia's medical negligence allegedly happened on March 5, 2004. This means the limitation period expired March 5, 2006. Ternes filed his first petition on March 3, 2006. This means Ternes had 90 days to obtain service on Galichia. He did serve the corporation, but Galichia was never served. We conclude Ternes' lawsuit was not commenced, within the meaning of the law, until June 26, 2006, when both parties asked the district court to convene a professional screening panel. We do not agree with the Recovery Team and Cline on this point. They argue the first lawsuit commenced on May 26, 2006, when Galichia asked for additional time to answer. But, Lindenman v. Umscheid, 255 Kan. 610, 631-32, 875 P.2d 964 (1994), holds that such requests are not an entry of appearance. See K.S.A. 60-203(c). Galichia's actual entry of appearance was filed on November 28, 2006. Obviously, the first lawsuit was commenced after the expiration of the statute of limitations. But since we are dealing with a second lawsuit, we must also take into account the statute of repose.
This statute of repose applicable in this medical negligence cause of action is 4 years. Meaning Ternes had until March 5, 2008, to commence any lawsuit arising from Galichia's negligence. Ternes' second lawsuit was filed on May 23, 2008, after the expiration of the statute of repose. See K.S.A. 60-513(c). But we must also consider the nature of an affirmative defense.
Such defenses, according to K.S.A. 60-208(c), must be pled and proved by the defendant. In fact, unless the affirmative defense of statute of limitations is pled and proved, the court entertaining the matter should assume that a petition is timely commenced. See King v. Pimentel, 20 Kan. App. 2d 579, 583, 890 P.2d 1217 (1995). But in the first lawsuit here, Galichia never filed an answer. However, that fact alone does not lead us to conclude Galichia waived his affirmative defense because a statute of limitations can be raised in a K.S.A. 60-207(a) motion for judgment on the pleadings or at *825 the trial on the merits. See Woolums v. Simonsen, 214 Kan. 722, 725-26, 522 P.2d 1321 (1974), and K.S.A. 60-212(h)(2). Galichia's failure to raise the defense for the almost 16 months the first lawsuit was pending and the actions he took while it was pending are more telling in this regard. The major step toward waiver of the defense was asking for a screening panel.
Such screening panels can be requested in medical malpractice cases under K.S.A. 2009 Supp. 60-3502. Galichia joined Ternes in making a request for a panel on June 28, 2006. In fact, on September 27, 2006, Galichia designated Dr. Thomas Estep as his screening panel member. A party cannot convene a medical malpractice screening panel when the claim is time barred by the statute of limitations. See Lawless v. Cedar Vale Regional Hosp., 252 Kan. 1064, 1065, 850 P.2d 795 (1993). A screening panel just considers whether the health care provider departed from the standard of care and injured the patient. See K.S.A. 2009 Supp. 60-3505(a). There was no reason for Galichia to join in a request for a screening panel if he intended to assert a statute of limitations defense. In addition to requesting a screening panel, Galichia took other steps that force us to conclude he waived his affirmative defense.
Following his request for a screening panel, Galichia joined in obtaining a stay order from the district court while the screening panel was working. Later, in July 2007, Galichia sought to dismiss the screening panel, not on the grounds of the statute of limitations but, instead, on the grounds that Ternes was not prosecuting the screening panel procedure in a timely manner. Then, in August 2007, Galichia asked for a discovery conference which was held in September of that year. At that conference, the court and the parties established a case schedule for discovery, disclosures, a pretrial conference, and trial. Later, in October 2007, Galichia served interrogatories and a request for production of documents on Ternes. At no time did Galichia mention the statute of limitations. To the contrary, his actions indicated a defense on the merits and both sides expended time and money accordingly. Actions can constitute a waiver of an affirmative defense.
Waiver is a voluntary and intentional relinquishment of a known right and the expression of an intention not to insist upon what the law affords. Such an intention may be inferred from conduct, and both knowledge and intent are essential elements, but knowledge may be actual or constructive. Sultani v. Bungard, 35 Kan. App. 2d 495, 498-500, 131 P.3d 1264 (2006). In Sultani, the court found the plaintiffs waived their right for a new trial about noneconomic damages when they declined to have the jury return to deliberate about noneconomic damages. They accepted the verdict, instead. By accepting the verdict of the jury, they waived any defect in the verdict.
In opposition to this, Galichia argues that even if he waived his affirmative defense of the statute of limitations, it would have no effect on this lawsuit because the saving statute, K.S.A. 60-518, is only effective if the original action is timely filed. And, of course, as we have previously noted, the first lawsuit was legally commenced after the limitation period had expired. Galichia cites a number of cases as support: Comstock v. Joplin, 31 Kan. App. 2d 410, 65 P.3d 1055, rev. denied 276 Kan. 967 (2003), Smith v. Graham, 282 Kan. 651, 664, 147 P.3d 859 (2006), Clanton v. Estivo, 26 Kan. App. 2d 340, 342, 988 P.2d 254 (1999), and Handy v. Reed, 32 Kan. App. 2d 247, 254, 81 P.3d 450 (2003), rev. denied 277 Kan. 923 (2004).
However, none of these cases support Galichia's contention that K.S.A. 60-518 does not apply when a claim is not timely commenced but the defendant waives the statute of limitations as an affirmative defense. Comstock involves application of K.S.A. 60-518 where an individual filed the original lawsuit under a different name. See 31 Kan. App. 3d at 413. Smith involved the tolling effect of a medical screening panel and held that K.S.A. 60-518 does not save a second action filed before the original action is dismissed. See 282 Kan. at 652-53, 664, 147 P.3d 859. Clanton dealt with multiplicitous dismissals and refilings. See 26 Kan. App. 2d at 342, 988 P.2d 254. In Handy, the defendant was *826 never properly served and never appeared before the original action was voluntarily dismissed. See 32 Kan. App. 2d at 249-50, 254, 81 P.3d 450. We must now turn to the saving statute.
If a lawsuit is terminated for any reason other than on the merits, and the plaintiff refiles the action within 6 months of the dismissal, the second lawsuit may proceed even if the time limit for the action has expired before the second lawsuit was filed. K.S.A. 60-518. Furthermore, Kansas law is clear that the saving statute, K.S.A. 60-518, applies to both the statute of limitations and its companion, the statute of repose. The case See v. Hartley, 257 Kan. 813, 822-23, 896 P.2d 1049 (1995), made it clear that the savings statute saved cases from the statute of repose as well as the statute of limitations. In See, the court dealt with an interlocutory appeal in a medical malpractice case. About a week before the 2-year statute of limitations expired, the plaintiff, See, asked the court to convene a screening panel. The court did so. About 9 months later the court decided the panel had been improperly constituted, set aside that panel's findings and conclusions, and convened a second panel. Two months later, the second panel reported its findings. Thereafter, See filed his first petition. About 5 months later, he dismissed that petition voluntarily and then within 6 months of the dismissal See filed his second petition which was admittedly filed outside the statute of limitations and the statute of repose. The court held, "[t]he repose provisions of 60-513(c) are not applicable to defeat the savings clause of 60-518 when the initial action was timely filed, even though the second action is not filed until more than four years after the act which gave rise to the cause of action." 257 Kan. at 822, 896 P.2d 1049. In our view then, since we hold the first lawsuit was timely commenced because Galichia waived the statute of limitations affirmative defense, the saving statute, K.S.A. 60-518, bars the dismissal of the second lawsuit for being untimely due to either the statute of limitations or the statute of repose.
We find a case from New Jersey persuasive. In White v. Karlsson, 354 N.J.Super. 284, 286-87, 292, 806 A.2d 843 (2002), the court reversed a grant of summary judgment to the defendant when the plaintiff filed his petition outside the statute of limitations because the defendant through his actions waived the defense. The court noted both parties had engaged in discovery and had expended both time and money. In fact, the defendant engaged in arbitration concerning the case but never raised the affirmative defense for a year.
That case is analogous to the facts here. Galichia's actions were inconsistent with a statute of limitations defense. His delay led to substantial discovery that misled and prejudiced Ternes. Once an affirmative defense is waived it is gone. We find no case law or statute that permits it to be "unwaived." The district court erred when it dismissed Ternes' second petition on these grounds.
Reversed and remanded.
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650 F.Supp.2d 1145 (2009)
TEMPLOY, INC., and Hard Hitters, Inc., Plaintiffs,
v.
NATIONAL COUNCIL ON COMPENSATION INSURANCE, Defendant.
Civil Action No. 08-689-KD-C.
United States District Court, S.D. Alabama, Southern Division.
August 12, 2009.
*1147 Richard L. Watters, Mobile, AL, for Plaintiffs.
Robert Austin Huffaker, Jr., Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, AL, for Defendant.
ORDER
KRISTI K. DuBOSE, District Judge.
This matter is before the Court on Defendant's motion to dismiss or in the alternative for summary judgment and supplemental motion for summary judgment (Docs. 5, 6, 28, 29), Plaintiffs' responses thereto (Docs. 12, 34) and Defendant's replies (Docs. 14, 35); and Plaintiff's motion to amend the complaint (Doc. 30), Defendant's opposition (Doc. 32) and Plaintiffs' reply (Doc. 33). For the reasons set forth herein, the Defendant's motion for summary judgment (Doc. 5) is GRANTED and Defendant's supplemental motion summary judgment (Doc. 28) is MOOT. Plaintiffs' motion for leave to amend (Doc. 30) is DENIED.
I. Background
A. Procedural
This is the second action in the Southern District of Alabama brought by the Plaintiffs concerning Temploy, Inc.'s ("Temploy") participation in the Alabama Worker's Compensation Insurance Plan ("AWCIP"), the state-sponsored assigned-risk mechanism available to Alabama employers who cannot obtain workers' compensation insurance in the voluntary market. In the first action, Temploy, Inc. and Hard Hitters, Inc. v. Companion Property and Casualty Insurance Co., CV 07-632-KD, ("the CPCI action"), the Plaintiffs sought damages due to Companion Property and Casualty Insurance Company's ("CPCI") allegedly negligent, wanton, and defamatory conduct and breach of contract, as it concerned the servicing and administration of a workers' compensation insurance policy obtained from the AWCIP in September 2002. The CPCI action was resolved in December 2008, after the Plaintiffs accepted Offers of Judgment tendered by CPCI. (Docs. 75, 76 (CV 07-632-KD)).
Subsequently, Plaintiffs filed the present action against Defendant National Council on Compensation Insurance, Inc. ("NCCI"), the administrator of the AWCIP and a non-profit licensed rating organization, alleging that NCCI should be held liable for not ensuring that CPCI abided by its obligations under the AWCIP, and asserting claims for negligence and wantonness regarding Temploy and defamation concerning Hard Hitters.[1] (Doc. 1-2). On December 4, 2008, Defendant filed a responsive pleading by filing a Motion to Dismiss (or in the alternative motion for summary judgment (Docs. 5, 6)) in response to Plaintiffs' original Complaint. Plaintiff then responded to Defendant's motion to dismiss. (Doc. 12). On May 6, 2009, at a hearing before U.S. Magistrate Judge Cassady, the merits of Defendant's motion were argued by both parties; at no time did Plaintiffs assert that they intended to file an amended complaint. At that hearing, Defendant notified Judge Cassady that it intended to supplement its motion to dismiss with an argument based on the satisfaction and discharge defense. Accordingly, the Court set forth a briefing schedule for such supplemental filing. (Doc. 27). Judge Cassady *1148 also converted the motion to dismiss to a motion for Summary Judgment. (Id.)
On May 29, 2009, Defendant filed a Supplemental Motion for Summary Judgment. (Docs. 5, 6, 28, 29, 35). On June 1, 2009 after Defendant had already filed both a motion to dismiss and motion for summary judgmentPlaintiffs sought leave of Court to file an amended complaint. (Doc. 30). Plaintiffs contend that the amendment is necessary to correct an "inadvertent omission" of claims for negligence and wantonness by Plaintiff Hard Hitters, Inc.: namely, to "make the acts of negligence and wantonness more clearly stated[]" because "[i]n the counts of Negligence and Wantonness [in the original Complaint] relief was requested by both Plaintiffs but in the allegations as to the acts of negligence and wantonness by the Defendant Hard Hitters was inadvertently omitted." (Id.) Defendant objects to this amendment on the grounds of undue prejudice and futility. (Doc. 32).
B. Factual[2]
This case arises out of a dispute stemming from an insurance contract between Plaintiff Temploy, Inc. ("Temploy") and non-party CPCI, through which CPCI contracted to provide Temploy with workers' compensation coverage for employees it leased to its clients, and then reported certain non-compliance information about Temploy, to the National Council on Compensation Insurance ("NCCI"). The NCCI subsequently provided to various entities this non-compliance information in response to inquires regarding Hard Hitters and Temploy.
Plaintiff Temploy is a temporary employment agency; Jessica Ulmer ("Ulmer") was the Vice-President (an employee), but not a shareholder. Plaintiff Hard Hitters, Inc. ("Hard Hitters") is a temporary employment agency; Ulmer is the President and Owner. Non-party CPCI was the servicing carrier for Temploy's workers' compensation coverage with NCCI in 2002 and 2003.
NCCI is the state-approved and designated administrator for the Alabama Workers' Compensation Insurance Plan ("AWCIP").[3] (Doc. 1-2). NCCI is responsible for filing with the Alabama Department of Insurance, on behalf of the assigned-risk pool, the proposed rates and procedures used to determine premiums. (Id.) NCCI also administers the rules and regulations of the AWCIP via its state-approved Basic Manual and supplemental rules, which govern every aspect of the AWCIP. (Id.)[4] The AWCIP contains detailed provisions authorizing the pool administrator *1149 to establish written performance requirements for servicing carriers regarding premium audit and collection, claims services, loss control and safety services, and resolution of complaints. (Doc. 5-13 (Section V)). See also Birmingham Hockey Club, Inc., 827 So.2d 73, 76 (Ala. 2002).
On or about August 20, 2002, Temploy applied for coverage under the AWCIP by submitting an application to NCCI. On August 29, 2002, NCCI acknowledged to Temploy that coverage was effective September 1, 2002 and that CPCI was appointed as the servicing carrier. Temploy then entered into an insurance contract with CPCI, for workers' compensation benefits for its temporary workers, and on September 10, 2002, CPCI issued a policy to Temploy, which was to be effective September 1, 2002 through September 1, 2003. On May 2, 2003, Temploy's insurance policy was cancelled due to non-payment of premiums.
In early July 2003, CPCI retained Overland Solutions, Inc. (then known as CP Commercial Specialists), to perform an independent audit in order to determine the final premium due by Temploy. Overland's auditor Jacqueline Ellis scheduled the audit of Temploy for July 24, 2003. Ellis concluded that Temploy was noncompliant with the audit, and on August 19, 2003, notified CPCI of the alleged noncompliance with a close out report. On August 27, 2003, CPCI reported to NCCI Temploy's alleged noncompliance with the audit. Plaintiffs dispute that they were non-compliant with the audit.
In April 2006, CPCI determined that Temploy owed $13,465.87 in premium payments. Temploy accepted the bill, and paid the balance effective March 6, 2007.
On March 6, 2007, Ulmer formed Hard Hitters[5] and attempted to obtain workers' compensation coverage for the company. On April 2, 2007, NCCI analyst Kathy Dowdy faxed Able & Associates a "Final Notice" letter regarding its application for insurance for Hard Hitters, stating that additional information was required by April 4, 2007 in order to determine Hard Hitters' eligibility for the Plan. (Doc. 12-3 at 2). Specifically, NCCI requested, in relevant part, the following information:
REQUESTED INFORMATION
1a. We have found an entity that Jessica Ulmer had manage/owned in the past. Temploy Inc and this entity has an outstanding noncompliance issue with a prior carrier. According to Basic Manual Rule 4-A-3 and the Assigned Risk Supplement, eligibility rules extend to any commonly manage[d] or owned interests.
*1150 1b COMPANION has advised us the related entity, Temploy Inc, has not complied with the terms of a prior policy. Coverage cannot be assigned until we receive confirmation from the carrier that this audit issue has been resolved. Please contact COMPANION at (800) 845-2724 X40005 OR X40006 and reference policy number WALO073894 to resolve.
(Id.) A handwritten note on this letter states "She did comply with audit." (Id.) An undated document created by insurance agent John Chambliss then states:
Able Insurance tried to place workers compensation insurance for our client, Hard Hitters, LLC. We were denied a quote due to the following reason: 1a. We have found an entity that Jessica Ulmer had managed/owned in the past. Temploy Inc. and this entity has an outstanding noncompliance issue with a prior carrier.
(Id. at 3 (emphasis added)).
On April 5, 2007, Kathy Dowdy, underwriting analyst at NCCI, sent a letter/notice to Shelley Nobles, an insurance agent at Able & Associates, in response to the application for insurance for Hard Hitters, stating that coverage was being denied either due to outstanding debt or noncompliance history, referencing Jessica Ulmer and noting that her company Temploy has an outstanding noncompliance issue (audit issue) with CPCI. (Doc. 12-3 at 1).
On December 7, 2007, NCCI generated a Residual Market Risk Profile[6] regarding Hard Hitters, showing in the Final Review section an uncollectible and noncompliant history and that the prior policy history showed the business name was Temploy. (Doc. 12-4). This December 2007 document also shows the Application Diary for Hard Hitters from March 26, 2007 to April 5, 2007; the March 29, 2007 entry states that Jessica Ulmer was found to be part owner of Temploy under a FEIN number and that the prior history shows noncompliance for debt and therefore, "this risk is ineligible for coverage[,]" and on April 5, 2007, the application was rejected. (Id. (emphasis added)). The Prior Policy History of the Profile reveals the history for Temploy, showing that its policy was cancelled on 5/2/03 due to nonpayment of premium and on 12/1/02 due to nonpayment of premium. (Id.)
Also on December 7, 2007, NCCI generated two Residual Market Risk Profiles regarding Temploy, for two distinct producers (Hardy Insurance Co. Inc. and Jason Scrimpsher), showing an uncollectible and noncompliant history for Temploy; the Profile for Scrimpsher noted in the Application Diary section that "[s]poke with Suzanne [Rich] at Companion on policy... for the audit information she stated that they are partial complied she is going to contact the auditor and call me back." (Docs. 12-5, 12-6).
II. Conclusions of Law
A. Relevant Law
Summary judgment should be granted only if "there is no genuine issue as to any *1151 material fact and that the movant is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c).[7] The party seeking summary judgment bears "the initial burden to show the district court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). The party seeking summary judgment always bears the "initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). If the nonmoving party fails to make "a sufficient showing on an essential element of her case with respect to which she has the burden of proof," the moving party is entitled to summary judgment. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. "In reviewing whether the nonmoving party has met its burden, the court must stop short of weighing the evidence and making credibility determinations of the truth of the matter. Instead, the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 998-999 (11th Cir.1992), cert. den., 507 U.S. 911, 113 S.Ct. 1259, 122 L.Ed.2d 657 (1993) (internal citations and quotations omitted). The mere existence of a factual dispute will not automatically necessitate denial; rather, only factual disputes that are material preclude entry of summary judgment. Lofton v. Secretary of Dep't of Children & Family Serv., 358 F.3d 804, 809 (11th Cir.2004), cert. den., 543 U.S. 1081, 125 S.Ct. 869, 160 L.Ed.2d 825 (2005).
B. Discussion
1. Negligence and Wantonness[8]
In Counts One and Two of the Complaint, Temploy alleges that NCCI breached its duties to Temploy by negligently/wantonly "failing to comply with the requirements of the AWCIP," and that as a proximate consequence of this negligence/wantonness, Temploy was damaged in that it was unable to obtain workers' compensation insurance from a reputable carrier, had to search for long periods of time to obtain coverage through employee leasing companies, was required to pay excessive amounts for coverage and suffered loss of business income due to its failure to obtain proper insurance which eventually caused it to no longer be able to do business. (Doc. 1-2 at 9-10).
*1152 Specifically, Temploy asserts that NCCI had the following duties and responsibilities: administering, managing and enforcing the Plan; requiring assigned carriers like CPCI to verify ongoing eligibility of employers under the Plan; requiring assigned carriers to complete final audits within the time frame specified by the Plan; requiring assigned carriers and employers to be in full compliance with all terms and conditions of the policy contract; resolving and responding to complaints and inquiries from employers; monitoring the performance of assigned carriers and enforcing all performance requirements of the Plan; reviewing operation reports of assigned carriers; requiring and reviewing assigned carrier self audits; conducting on-site audits; reviewing any other information that relates to the assigned carrier; requiring the assigned carriers to comply with all applicable statutory and/or regulatory requirements including statutes, regulations, codes, rules, acts, directives, bulletins, announcements, circulars, etc.; requiring the assigned carriers to comply with all mandatory electronic processing and reporting requirements of NCCI; and taking remedial action including establishing and administering a progressive discipline program for an assigned carrier that fails to comply with the Plan and all statutes, rules, regulations and performance standards. (Doc. 1-2 at 8-9). See Doc. 12-8 (listing the duties and responsibilities of the plan administrator).
Defendant moves for summary judgment alleging that no duties arise under the AWCIP that inures to Temploy's benefit and therefore plaintiff has failed to show that NCCI owed any duty to Temploy. Defendant also argues that Temploy's claim is barred by the statute of limitations.
In its response, Temploy asserts that employers and their employees are third-party beneficiaries to the agreement between the State of Alabama and NCCI through the AWCIP (i.e., that as an employer Temploy is a third-party beneficiary to that agreement). (Doc. 12 at 8-9). Temploy alleges that the duty owed by NCCI to Temploy is based on NCCI's contractual relationship with the State of Alabama through the Department of Insurance and the AWCIP. (Id. at 8). Moreover, Temploy alleges that NCCI, as Plan Administrator, "has a duty to the State of Alabama, the insurance companies in the assigned risk pool, and the employers who purchase insurance through the assigned risk pool, to comply with all of the rules and regulations for which it is responsible." (Doc. 1-2 at 7). Accordingly, Temploy's claims for negligence and wantonness, in sum, are claims against NCCI for negligently or wantonly failing to comply with the AWCIP requirements, resulting in a breach of duties to Temploy as a third-party beneficiary to that agreement. As a matter of law, summary judgment is due to be granted in favor of NCCI as to Temploy's negligence/wantonness claims.
First, the claim that Temploy is a third-party beneficiary sounds in contract, not tort. See, e.g., Cretcher Lynch & Co. v. National Council on Compensation Ins., Inc., 149 F.3d 817, 820-821 (8th Cir. 1998):
Hatcher's claim ... as he has asserted it, is that NCCI was essentially negligent in failing to bind the coverage upon receipt of his application. The argument is made that under the terms and conditions of the Plan and Handbook, NCCI had a duty to provide coverage and failed to comply with that duty. Assuming that NCCI had such a duty, it is clear to us that this duty rested solely upon the claim that the parties consensually contracted for coverage through *1153 Hatcher's application and tender of the premium, the alleged acceptance by NCCI by binding the coverage pursuant to the Plan and Handbook, and the retention of the deposit premium Hatcher's claim is simply one of non-performance of a promise. It is clear that there was no duty apart from the alleged contract to perform, and under the circumstances, Hatcher's claim for negligence must be dismissed.
The general rule in Alabama is that the mere failure to perform a contractual obligation will not sustain an action sounding in tort. See, e.g., Barber v. Business Products Center, Inc., 677 So.2d 223, 228 (Ala.1996) (providing that "a mere failure to perform a contractual obligation is not a tort"); Sims v. Etowah County Bd. of Ed., 337 So.2d 1310, 1313 (Ala.1976) (same), over'd on other grounds, Ex parte Hale Cty. Bd. Educ., 14 So.3d 844 (Ala.2009). However, Temploy did not plead a breach of contract claim in its complaint, thus the argument that it is a third-party beneficiary in unavailing.
However, even though the court rejects Temploy's third-party beneficiary argument because breach of contract was not plead, the court will consider whether there is a sufficient basis for Temploy to sustain a tort action against NCCI. Specifically, "[e]ven when a third party is not in privity with the parties to a contract and is not a third-party beneficiary to the contract, the third party may recover in negligence for breach of a duty imposed by that contract if the breaching party negligently performs the contract with knowledge that others are relying on proper performance and the resulting harm is reasonably foreseeable." QORE, Inc. v. Bradford Bldg. Co., Inc., 2009 WL 1643346 (Ala. Jun. 12, 2009) (citing Cincinnati Ins. Cos. v. Barber Insulation, Inc., 946 So.2d 441, 446-447 (Ala.2006)).
In this regard, Temploy claims in its Complaint that NCCI was negligent/wanton because NCCI failed to comply with the requirements of the AWCIP. Temploy fails to expand on this claim in its responses other than to provide a list of duties that NCCI allegedly owes under the AWCIP and then noting that the duties include monitoring the service carriers and enforcing the performance standards for such carriers. The court is left to surmise specifically how NCCI breached its monitoring and enforcement duties. Presumably Temploy is relying on their contention that CPCI failed to properly and timely audit Temploy and failed to report the true circumstances surrounding the audit of Temploy. Again, presumably, it is these activities that NCCI failed to properly monitor.
Assuming that Temploy could factually sustain its claim that NCCI negligently failed to properly monitor the auditing and reporting activities of Temploy, summary judgment is due to be granted because any negligent failure to monitor the audit and the reporting of the audit occurred more than two years prior to Temploy filing this lawsuit against NCCI. Specifically, Temploy has failed to rebut or even address NCCI's evidence that both the alleged failure of CPCI to timely audit Temploy and the alleged false reporting of the circumstances surrounding the audit occurred at the latest in 2005. Accordingly, because this lawsuit was filed on October 29, 2008, Temploy's claim of negligent failure to properly monitor CPCI's reporting and auditing activities is time barred. See, e.g., ALA. CODE § 6-2-38(l) (1975).
In an attempt to snatch its negligence claim from the jaws of the statute of limitations, Temploy attempts to expand the negligence claim to assert a claim that NCCI engaged in negligent conduct in December 2007, when NCCI sent a report *1154 to Scrimpsher and the Hardy Insurance Co. that stated that an uncollectable and non-compliant history was found for Temploy.[9] Temploy summarily states that the act of sending the reports with the alleged incorrect information is "another act of negligence." Temploy does not attempt to connect this act of negligence with the negligence alleged in the Complaint, i.e., that NCCI "negligently failed to comply with the requirements of the AWCIP." Rather, it appears that Temploy is asserting that NCCI negligently published false information. This would be a claim of defamation which Temploy did not raise in the Complaint. New claims can not be raised in response to summary judgment. Al-Amin v. Donald, 165 Fed.Appx. 733, 740 (11th Cir.2006) ("concluding that a plaintiff may not amend the complaint through argument in a brief opposing summary judgment") (unpublished); Gilmour v. Gates, McDonald, & Co., 382 F.3d 1312, 1315 (11th Cir.2004) (providing that "[a] plaintiff may not amend her complaint through argument in a brief opposing summary judgment[]").
Temploy has also asserted a claim of wantonness. NCCI's statement, that the wantonness claim is subject to a two year statute of limitations, appears to be incorrect. Although the issue of what statute of limitations is applicable to an Alabama wantonness claim has seemingly led a double life, recently in Carr v. International Refining & Mfg. Co., 13 So.3d 947, 954-55 (Ala.2009), the Alabama Supreme Court reaffirmed that the statute of limitations for wantonness claims is six years. Thus, the court will consider Temploy's claim of wantonness on the merits.
Wantonness is defined as "conduct which is carried on with a reckless or conscious disregard for the rights or safety of others." Ala.Code § 6-11-20(b)(3) (1975). Wantonness involves the "conscious doing of some act or the omission of some duty, while knowing of the existing conditions and being conscious that, from doing or omitting to do an act, injury will likely or probably result." Alfa Mut. Ins. Co. v. Roush, 723 So.2d 1250, 1256 (Ala. 1998). Temploy has not adequately addressed its claim of wantonness; nor has Temploy pointed to any evidence from which a factfinder could infer wantonness on the part of NCCI. See, e.g., Resolution Trust Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th Cir.1995) (holding that "[t]here is no burden upon the district court to distill every potential argument that could be made based upon the materials before it on summary judgment[] ... [r]ather, the onus is upon the parties to formulate arguments; grounds alleged in the complaint but not relied upon in summary judgment are deemed abandoned[]") (citations omitted). Accordingly summary judgment is due to be GRANTED.
2. Defamation
In Count Three of the Complaint, Hard Hitters alleges that when it "applied with insurance agents" to obtain coverage through the assigned risk fund of the AWCIP, NCCI falsely reported (with actual and/or common law malice) on several occasions to the insurance agents that Hard Hitters was "non-compliant with payment of premiums for workers compensation insurance that it was non-compliant in allowing audits required under workers' compensation *1155 policies and the AWCIP." (Doc. 1-2 at 10-11). Hard Hitters asserts in response to the motion for summary judgment, that on April 5, 2007, after NCCI received an application from Able & Associates Insurance for Workmen's Compensation coverage on behalf of Hard Hitters, NCCI sent a notice to an insurance agent at Able and Associates that coverage was being denied for Hard Hitters due to outstanding debt or non compliance history (Doc. 12-3); and that on December 7, 2007 a Residual Market Risk Profile was generated by NCCI showing that Hard Hitters had an uncollectible and noncompliance history and that the prior policy history showed that the business name was Temploy, Inc. (Doc. 12-4).
In order to establish a prima facie claim for defamation under Alabama law a plaintiff must allege: 1) a false/defamatory statement concerning the plaintiff; 2) an unprivileged communication of that statement to a third party; 3) fault amounting at least to negligence on the part of defendant; and 4) either actionability of the statement irrespective of special harm or the existence of special harm caused by the publication of the statement. See, e.g., Delta Health Group Inc. v. Stafford, 887 So.2d 887, 895-896 (Ala.2004); Gary v. Crouch, 867 So.2d 310, 315 (Ala. 2003); Nelson v. Lapeyrouse Grain Corp., 534 So.2d 1085, 1091 (Ala.1988). Some statements are subject to a qualified or conditional privilegethat is, unless the statement was made with actual malice, the communicator of the statement cannot be held liable for defamation. See, e.g., Ex parte Blue Cross and Blue Shield of Alabama, 773 So.2d 475, 478-479 (Ala.2000).
At the outset then, in order to establish a prima facie claim for defamation under Alabama law, Hard Hitters must show a false/defamatory statement concerning Hard Hitters. Hard Hitters has based the defamation claim on two documents, attached as exhibits A and B to Jessica Ulmer's affidavit, that allegedly contain false information concerning Hard Hitters and were published.[10] The first document is a letter sent by NCCI to an insurance agent in response to an inquiry from that insurance agency regarding Hard Hitters. (Doc. 12-3). Specifically, this April 5, 2007 letter is from Kathy Dowdy, underwriting analyst at NCCI, and is addressed to Shelley Nobles, an insurance agent at Able & Associates, and states that Hard Hitters' application for workers' compensation coverage was being rejected because "[e]ither outstanding debt or noncompliance history was found for the applicant." Id. Attached to the letter is a letter dated April 2, 2007 which explains that NCCI found an entity that Ulmer had managed/owned in the past (Temploy) and that Temploy has an outstanding noncompliance issue with a prior carrier; and that CPCI advised NCCI that Temploy has not complied. Id. There is also a handwritten note on the letter that states "she did comply with audit[]" meaning the Temploy audit. Id. Finally, attached to the allegedly defamatory letter of April 5, 2007, is an undated document from John Chambliss, of Able and Associates, which indicates that the reason Hard Hitters was denied a quote was because it was determined that Temploy has an outstanding noncompliance issue with a prior carrier. The court notes that Chambliss identifies Hard Hitters as a client for whom the entity Able and Associates was attempting to place workers compensation insurance.
*1156 While there is a factual dispute as to whether the reported information regarding Temploy is correct, Hard Hitters can not rely on that factual dispute to avoid summary judgment. As previously stated Hard Hitters claim of defamation must by supported by false information about Hard Hitters that was published to a third party. As to the April 5, 2007 letter, Hard Hitters defamation claim fails in two respects. First, when the April 5, 2007 letter is construed in conjunction with the April 2, 2007 letter, it would be unreasonable for a factfinder to infer that the non-compliant entity was Hard Hitters as opposed to Temploy. This conclusion is bolstered by Chambliss explanation that Able and Associates understood that insurance could not be placed for Hard Hitters because of Temploy's outstanding non-compliance issue. Hard Hitters cannot assert a viable defamation claim based on allegedly false statements about Temploy. No defamation claim can lie where a plaintiff cannot show that the false statement was published concerning the plaintiff, because defamation is personal to the party defamed. See, e.g., Larrimore v. Dubose, 827 So.2d 60, 61-62 (Ala.2001) (providing that "[t]he general rule precludes a person from recovering for a defamatory statement made about another, even if the statement indirectly inflicts some injury upon the party seeking recovery[]").
Further, if the statements regarding Ulmer and/or Temploy could be construed to be defamation against Hard Hitters, the only "publication" was to Hard Hitters' insurance agents which does not constitute a publication as a matter of law. In response to this statement of law Hard Hitters merely assert that "there is no proof of agency" between Hard Hitters and the Able & Associates insurance company (and its insurance agents). However, according to the NCCI Basic Manual, a Producer is the insurance agent for purposes of the AWCIP Plan who is considered to be acting on behalf of the insured or employer applying under the Plan:
A licensed insurance agent, broker, producer, or insurance representative, as defined in the state Insurance Code, whose privileges under this Plan have not been suspended or revoked; provided, however, that such producer shall, for purposes of this Plan, be considered to be acting on behalf of the insured or employer applying under this Plan and not as an agent of the Plan Administrator or of any assigned carrier for Plan business.
(Doc. 12-7 at 2). Thus, under the NCCI Basic Manual and for purposes of the AWCIP Plan, Able & Associates' insurance agents were acting on behalf of Hard Hitters when they applied to NCCI for coverage under the AWCIP Plan and invited any communications by NCCI concerning Hard Hitters' eligibility under the Plan. Moreover, as previously noted, Able and Associates identifies Hard Hitters as their client. Hard Hitters has failed to refute this evidence of agency.
Accordingly, even if the Court were to assume that a defamatory statement regarding Hard Hitters was made, it was not "published" under Alabama law. See, e.g., Reece v. Finch, 562 So.2d 195, 198 (Ala. 1990) (providing that statements to one's agent which are both authorized and invited by the principal are not deemed to have been published and without publication there can be no defamation); Hayes v. Wal-Mart Stores, 953 F.Supp. 1334, 1339 (M.D.Ala.1996) (finding that a plaintiff asserting a defamation claim must show "communication of the defamatory matter to someone other than [himself] []"). Thus, these alleged defamatory statements are not actionable because there were not "published."
Next, the Court turns to the December 7, 2007 NCCI Residual Market Risk Profile *1157 prepared by NCCI for the insurance company Able & Associates (as Producer). (Doc. 12-4). This document is an NCCI generated document regarding Hard Hitters, listing Able & Associates as the Producer, which reveals NCCI's analysis of the application, noting past history as to Ulmer and/or Temploy. This NCCI Residual Market Risk Profile appears to be an internal document and Hard Hitters has produced no evidence that it was sent or produced or "published" to anyone outside of NCCI. Assuming it was sent to Able and Associates, for reasons explained supra, it would not be considered published under Alabama law. Accordingly, summary judgment is due to be GRANTED on Hard Hitters' claim of defamation.
III. Conclusion
Based upon the foregoing, Defendant's motion for summary judgment (Doc. 5) is GRANTED, Defendant's supplemental motion for summary judgment (Doc. 28) is MOOT, and Plaintiffs' motion for leave to amend (Doc. 30) is DENIED.
NOTES
[1] Plaintiff's proposed amended complaint asserts claims for negligence and wantonness regarding Hard Hitters as well.
[2] When ruling on a motion for summary judgment, the court views "the evidence and all reasonable inferences in the light most favorable to the non-moving party." See, e.g., Battle v. Board of Regents for Ga., 468 F.3d 755, 759 (11th Cir.2006).
[3] Employers in the State of Alabama are required by law to provide worker's compensation benefits to employees injured during the course of their employment. See Ala.Code §§ 25-5-8 and 25-5-50, et seq. (Doc. 1-2). Generally, employers purchase insurance in the voluntary market from an insurer who voluntarily agrees to underwrite the employer's risk, but when an employer is unable to obtain insurance in the voluntary market, the employer may obtain coverage in the "residual" or "assigned-risk" market. (Id.) In Alabama, the state-created assigned-risk mechanism is known as the Alabama Workers Compensation Insurance Plan. (Id.)
[4] Under the AWCIP, an employer is assigned an individual insurer, or servicing carrier, from which the employer purchases a workers' compensation insurance policy. See, e.g., Birmingham Hockey Club, Inc. v. National Council on Compensation Insurance, 827 So.2d 73, 76 (Ala.2002) (providing a detailed description of the AWCIP plan). The servicing carrier then will remit the premium payments it receives from the employer to the mechanism (or pool). Id. When an injured employee makes a worker's compensation claim, the servicing carrier pays the claim and is then reimbursed from the pool by the pool-administrator for the loss payments made to the employee. Id. At the end of each quarter, any funds remaining in the pool are distributed equally among the servicing carriers forming the pool. Id. Although the servicing carriers issue policies, collect premiums, and pay losses, each servicing carrier issues the same type of policy to every employer and may charge only those rates set by the insurance commissioner. Id. The amount of insurance premiums an employer must pay to the servicing carrier is determined by several variables, including the amount of remuneration the employer pays its employees during the policy period, the experience modification factor, and the employer's classification codes. Id. The experience modification factor is determined, in part, by the dollar amount of workers' compensation claims actually submitted by an employer over a certain period of time. Birmingham Hockey Club, Inc., 827 So.2d at 76. The experience modification factors, classification codes, and other factors are set by NCCI with the approval of the ADOI.
[5] The corporate filing records that Plaintiffs submitted with their State Court Complaint show that Hard Hitters was initially formed on May 19, 2003 and dissolved on June 21, 2005.
[6] On the Profile, it states:
NOTICE TO ALL ASSIGNED CARRIERS: By receipt of the above, the assigned carrier certifies that the information provided on the risk profile shall be used for the specific purpose of providing workers compensation insurance to this applicant pursuant to, and in accordance with the state Workers Compensation Insurance Plan requirements. NCCI makes no representation or warranty, expressed or implied, as to any matter whatsoever, including but not limited to the accuracy of any information, product, or service furnished hereunder. The recipient of this material subscribes to and uses the information "as is" and is subject to any license agreement which governs the use of this information.
(Doc. 12-6 at 5). CPCI is the Carrier in this case.
[7] Rule 56(c) of the Federal Rules of Civil Procedure, provides that summary judgment shall be granted:
if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. FED.R.CIV.P. 56(c).
[8] Plaintiff Hard Hitters, through endeavoring to file an amended complaint, seeks to allege a claim for negligence/wantonness against NCCI. The motion to amend comes after the close of discovery (May 26, 2009) and after two motions for summary judgment were filed. Allowing an amendment at this stage of the litigation would prejudice the defendant because there would be no opportunity to file a dispositive motion on the new claim by Hard Hitters. Moreover, because Hard Hitters was never a plan participant and Temploy was a plan participant, a different analysis would apply to Hard Hitters' claim of negligence. Specifically, because CPCI did not provide insurance to, audit or report information on Hard Hitters, it is unlikely that Hard Hitters could show any duty owed to them by NCCI which arises out of the AWCIP. Thus, Plaintiffs' motion to amend is DENIED as untimely and futile.
[9] In their response, plaintiffs also attempt to expand the original negligence/wantonness claim to assert a claim on behalf of Hard Hitters. Specifically, that NCCI engaged in negligent/wanton conduct in April 2007 and December 2007, when NCCI reported to Able and Associates that Hard Hitters had an uncollectible and non-compliant history. For reasons explained supra, plaintiffs motion to amend the complaint to add Hard Hitters as a plaintiff in the negligence/wantonness claim, after the close of discovery, is untimely. Moreover, this claim would be subsumed in Hard Hitters claim of defamation.
[10] In its response, Hard Hitters also cites to exhibit D and summarily states that "[a]nother Profile was issued the same day to a separate provider." A review of exhibit D fails to show any statements made about Hard Hitters, rather the report appears to relate solely to Temploy. (Doc. 12-5).
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31 F. Supp. 2d 1051 (1998)
Raymond E. PAWLOWSKI, Plaintiff,
v.
NORTHEAST ILLINOIS REGIONAL COMMUTER RAILROAD CORPORATION, a public corporation, Defendant.
No. 98 C 1893.
United States District Court, N.D. Illinois, Eastern Division.
December 2, 1998.
John J. Jawor, The Jawor Law Firm, Woodridge, IL, for Raymond E. Pawlowski, plaintiff.
Sue-Ann Rosen, Raymond E. Belstner, Metra, Chicago, IL, Ellen Kornichuk Emery, Attorney at Law, Chicago, IL, Richard Capra, NIRC/Metra Chicago, IL, for Northeast Illinois Regional Commuter Railroad Corporation, a public corporation, defendant.
MEMORANDUM OPINION AND ORDER
GETTLEMAN, District Judge.
Plaintiff Raymond E. Pawlowski ("Pawlowski") has filed a complaint alleging that defendant Northeast Illinois Regional Commuter Railroad Corporation d/b/a/ Metra ("Metra") has violated the Railway Labor Act ("RLA"), 45 U.S.C. § 151 et seq., by preventing him from having a union representative present at an investigatory interview concerning an alleged violation by plaintiff of Metra's regulations concerning possession of a weapon. Defendant has filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) and 12(b)(1), arguing that the court does not have jurisdiction because the RLA does not give plaintiff the right to representation at the initial interview.
Although plaintiff argues that the RLA's plain language and legislative history demonstrate that he has a statutory right to have a union representative present at his initial disciplinary hearing, he can point to nothing in the statute or in the caselaw that supports this contention. The RLA does not prescribe disciplinary procedures for an initial hearing or otherwise interfere with a rail carrier's rights to discipline its employees. See Edwards v. St. Louis-San Francisco R. Co., 361 F.2d 946, 953 (7th Cir.1966) ("The provisions of the Railway Labor Act govern neither the procedure by which a carrier may discharge its employees nor the conduct of an investigation hearing on railroad property."). As the Seventh Circuit has held: "We can find no provision of the Railway Labor Act which gives to employees the right to a representative of their own choice at an investigation by company officials of a charge that the employee has violated company rules." Broady v. Illinois Cent. R. Co., 191 F.2d 73, 76 (7th Cir.1951).[1]
*1052 The RLA explicitly grants railroad employees the right to have a representative of their choice present during proceedings before the National Railroad Adjustment Board ("Adjustment Board"). See 45 U.S.C. § 153 First (j) (stating that when disputes reach the Adjustment Board, "[p]arties may be heard either in person, by counsel, or by other representatives, as they may respectively elect ..."). The Supreme Court has held that this explicit grant suggests that Congress did not believe that a similar right was necessary at an initial hearing. See Landers v. National R.R. Passengers Corp., 485 U.S. 652, 656, 108 S. Ct. 1440, 99 L. Ed. 2d 745 (1988) ("That Congress expressly provided railroad employees with the right to the representative of their choice in Adjustment Board proceedings, but did not do so with regard to any earlier phase of the dispute resolution process, is persuasive evidence that Congress did not believe that the participation of minority unions or other outsiders in company-level proceedings was necessary to accomplish the purposes of the Act."). Although Landers addressed a different legal issue,[3] its reasoning is applicable to this case and suggests that the RLA does not grant employees the right to representation at an initial disciplinary hearing. The Seventh Circuit has likewise noted that any right to representation does not arise until an internal investigation is complete. See Broady, 191 F.2d at 77 ("It appears to us under the above provisions of the Railway Labor Act that the employee's right to representation thereunder, when an investigation o[f] a breach of company rules is involved, would arise only when the officials of the company have completed their inquiry and entered a finding unsatisfactory to the accused employee.") (discussing 45 U.S.C. § 153 First (i), (j), (p)).
The procedure at an initial hearing is governed exclusively by the CBA between labor and management. See Edwards, 361 F.2d at 954 ("The federal courts are not the guarantors of any rights of either labor or management at the initial hearing, either by force of the Constitution or the Railway Labor Act, for, as we have said, at that stage the dispute is between private parties and the applicable procedure for settling the dispute is governed by the contract between them."). Plaintiff correctly argues that if a provision of the CBA violates an employee's statutory rights, the court has jurisdiction to invalidate the offending provision. See, e.g., Elgin, J. & E. Ry. Co. v. Burley, 325 U.S. 711, 740 n. 39, 65 S. Ct. 1282, 89 L. Ed. 1886 (1945) ("[T]he individual employee's rights cannot be nullified merely by agreement between the carrier and the union. They are statutory rights, which he may exercise independently or authorize the union to exercise in his behalf."). Because plaintiff had no statutory right to representation at the initial hearing, any such right would have to be contained in the CBA.
The court does not have jurisdiction to invalidate the procedures prescribed by the CBA absent some statutory right. See McElroy v. Terminal Railroad Ass'n of St. Louis, 392 F.2d 966, 971 (7th Cir.1968) (distinguishing cases that allege that the CBA violated a statutory right from cases that challenge the CBA's grievance procedures, and determining that the former are justiciable even if the latter are not). The Adjustment Board is the only body that can entertain plaintiff's challenge.[4] The Adjustment Board has virtually exclusive authority to interpret the CBA. See Kotakis v. Elgin, J. & E. Ry. Co., 520 F.2d 570, 575 (7th Cir.1975) ("the interpretation of railroad collective bargaining *1053 agreements is for the Adjustment Board rather than the courts"); Edwards, 361 F.2d at 952 ("[The Supreme] Court `time and again has emphasized and re-emphasized that Congress intended minor grievances of railroad workers to be decided finally by the Railway Adjustment Board.' Appellant, therefore, cannot come before this or the district court complaining that the ... Railway Adjustment Board ... incorrectly interpreted or wrongfully applied a provision of a collective bargaining agreement.") (quoting Gunther v. San Diego & A.E. Ry. Co., 382 U.S. 257, 263, 86 S. Ct. 368, 15 L. Ed. 2d 308 (1965)).[5]
Because plaintiff's claim depends on an interpretation of the CBA, over which this court has no jurisdiction, defendant's motion to dismiss is granted.
NOTES
[1] Plaintiff argues that Broady is inapposite because the case merely held that the employee had no right to insist on being represented by the minority union representative. Broady does not hold, as plaintiff contends, that the RLA itself entitles an employee to majority union representation. Rather, Broady rests on the fact that the employee's right to representation was governed by the applicable collective bargaining agreement ("CBA"). See Broady, 191 F.2d at 76 ("In the case at bar, appellee's right to representation comes from the agreement of appellant and Dining Car Employees Union, local 351.").
[3] Landers addressed the issue of whether an employee has a statutory right to be represented by the union of his choice at initial grievance or disciplinary proceedings. 485 U.S. at 653, 108 S. Ct. 1440. Because the CBA in Landers granted employees a contractual right to some union representation at the initial disciplinary hearing, id. at 654, 108 S. Ct. 1440, the Supreme Court did not reach the question of whether, absent such a provision, an employee has a statutory right to representation, the issue before the court in the present case.
[4] Plaintiff does not allege that he sought review of his dismissal before the Adjustment Board.
[5] The CBA in the instant case grants an employee who has been with the company for over one year the right to have two union representatives present at the disciplinary hearing, but says nothing about the representation rights of employees, such as plaintiff, who have been with the company for less than a year.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2512682/
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703 F. Supp. 2d 714 (2010)
Fayette L. NALE, Plaintiff,
v.
FORD MOTOR COMPANY UAW RETIREMENT PLAN, Defendant.
No. 09-cv-13401.
United States District Court, E.D. Michigan, Southern Division.
March 31, 2010.
*715 Sherry A. Wells, Royal Oak, MI, for Plaintiff.
David R. Deromedi, Sherry D. O'Neal, Dickinson Wright, Detroit, MI, for Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW REGARDING CROSS-MOTIONS FOR DECISION ON THE ADMINISTRATIVE RECORD
GERALD E. ROSEN, Chief Judge.
I. INTRODUCTION
In the present suit, Plaintiff Fayette L. Nale challenges the denial of her claim for benefits by the Defendant Ford Motor CompanyUAW Retirement Plan. The central question is whether Plaintiff's voluntary manslaughter conviction in the death of her husband disqualifies her from collecting survivorship benefits under his pension. The Court's subject matter jurisdiction over this case rests upon the fact *716 that the Defendant Plan is governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq.
Both parties have now moved for a decision on the administrative record.[1] Each of these motions has been briefed by the parties. Upon reviewing the parties' cross-motions and accompanying briefs, the pleadings, and the administrative record, the Court finds that the relevant allegations, facts, and legal arguments are adequately presented in these materials, and that oral argument would not significantly aid the decisional process. Accordingly, the Court will decide the parties' cross-motions "on the briefs." See Local Rule 7.1(e)(2), U.S. District Court, Eastern District of Michigan.
As discussed below, the Court will decide the parties' motions under the guidelines set forth by the Sixth Circuit in Wilkins v. Baptist Healthcare System, Inc., 150 F.3d 609, 619 (6th Cir.1998).[2] This opinion and order sets forth the Court's findings of fact and conclusions of law. To the extent that any findings of fact constitute conclusions of law, they are adopted as such. To the extent that any conclusions of law constitute findings of fact, they are so adopted.
II. FINDINGS OF FACT
A. The Parties
Plaintiff Fayette Lynn Nale and her husband, Michael, were married for over thirty years. Both had careers with Ford Motor Company, before retiring.[3] During his marriage to Plaintiff, Michael Nale enrolled in the Defendant Ford Motor CompanyUAW Retirement Plan and designated Plaintiff as the beneficiary under the automatic surviving spouse method of payment option. On September 13, 2007, Michael Nale died when he was stabbed by Plaintiff in the course of a domestic dispute. Plaintiff was subsequently prosecuted on second degree murder and manslaughter charges.[4] She pled not guilty, denying intentionally or negligently causing his death. On February 19, 2009, she was acquitted of the second degree murder charges, but convicted of voluntary manslaughter under Mich. Comp. Laws § 750.321. A little over a month later, she was sentenced to a minimum of 34 months and a maximum of 15 years in prison. She is currently incarcerated at a women's correctional facility in Ypsilanti, Michigan, and has not pursued an appeal of her conviction.
*717 The Defendant Retirement Plan is a pension plan governed by ERISA, which provides retirement benefits to eligible hourly UAW-represented employees of Ford Motor Company and its affiliates, pursuant to a collective bargaining agreement. Individual benefit determinations are made by a Board of Administration that consists of six members, three representing the company and three representing the union. The Board's duties and powers are set forth in the Retirement Plan document (the "Plan"). (See Admin. Record at 302-55.) Apart from the Plan, the administrative record also includes the Summary Plan Description (the "SDP") (see Admin. Record at 356-412). Both the Plan and the SDP describe participation requirements as well as circumstances that may affect retirement benefits.
B. The Pertinent Plan Provisions
Under the Plan, an eligible employee is entitled to retirement benefits upon or after reaching "his/her normal retirement age." (Plan at 76; Admin. Record at 330.) The amount of benefits is determined by reference to an employee's "Benefit Class," which in turn is determined by the date of retirement. (Plan at 76-77; Admin. Record at 330.) The plan further provides survivor's benefits for an employee's spouse if the employee dies on or after reaching retirement age. (Plan at 65; Admin. Record at 324.) The monthly survivor's benefit generally becomes automatically payable to the spouse on the first of the month following the date of the employee's death. (Plan at 89; Admin. Record at 336.) Finally, these provisions are all covered by Article IX, which provides: "Where federal law does not control, the Plan, and all rights thereunder, shall be governed, construed, and administered in accordance with the laws of the State of Michigan." (Plan at 162; Admin. Record at 353.)
The Plan is administered by a Board of Administration. Article VII provides in relevant part:
It shall be the function of the Board to administer the Plan .... The Board shall have jurisdiction to pass upon all questions concerning the application or interpretation of the provisions of the Plan which it is empowered to administer. After review of an appeal, the disputed benefits under this Plan will be paid only if the Board decides in its discretion that the employee or claimant is entitled to them under the terms of the Plan. The Board shall decide all such questions in accordance with the terms of the Plan, and all such decisions of the Board shall be final and binding upon the Company, the Union, the employees, and the beneficiaries or claimants under the Plan, subject only to the arbitrary and capricious standard of judicial review...
(Plan at 148; Admin. Record at 346.)[5]
C. Plaintiff's Claim for Benefits
Plaintiff was not paid survivorship benefits from her husband's retirement plan following his death in September 2007. The benefits administration office's case file indicates that Ford stopped payment pending investigation of Plaintiff's eligibility in light of the then on-going homicide investigation and prosecution. There is no record of a formal application for benefits from Plaintiff and no formal denial letter.[6]*718 Following her conviction of manslaughter, Plaintiff, by and through counsel, filed a claim for benefits on March 27, 2009. The request stated:
Mrs. Nale was acquitted of the charge of Second Degree Murder, and found Guilty of the Lesser Charge of Manslaughter by a Jury in the death of her husband. Manslaughter is a non-intent crime which indicates that the jury at least understood that she did not want her husband dead. Therefore, under state law and, I trust, the regulations for surviving spouse pension benefits, Mrs. Nale is eligible to receive those benefits, retroactive to the date of his death September 13, 2007.
(Admin. Record at 29.) In the months that followed, Ford treated Plaintiff's request as an appeal from denial of benefits and requested additional information from Plaintiff in an attempt to clarify the eligibility issue.
The Board finally reviewed Plaintiff's request at a meeting held on July 2, 2009. They were unable to make a determination and put the case on hold pending more research on the legal questions underpinning Plaintiff's claim. A Board of Administration employee contacted Plaintiff to inform her of the delay and to invite her to submit any additional information that may inform the Board's decision before its next planned meeting at the end of July.[7] The Board met again on July 29, 2009, where it decided to deny Plaintiff's claim.
On August 10, 2009, Ford Motor Company issued a letter denying the claim, citing Article IX of the Plan and Plaintiff's manslaughter conviction. The letter also informed Plaintiff of her rights to bring suit under ERISA. In the week that followed, Plaintiff corresponded with the Ford benefit claims administration office to obtain complete copies of the Plan and the SDP. Plaintiff's counsel wrote to say that, although she had received a copy of the plan documents prior to the Board's July 29 meeting, such copy included all portions that govern claim procedures but lacked Article IX. (Admin. Record at 6.)
Plaintiff filed this case on August 27, 2009, claiming wrongful denial of benefits because, she argues, under Michigan law the manslaughter conviction "is not considered an intentional causing of death such that [Plaintiff] should be denied survivor benefits." (Compl. ¶ 11.) On or around the same date, Plaintiff filed an appeal in a related probate proceeding in Macomb County Probate Court, challenging that court's order forfeiting and revoking Plaintiff's rights to her husband's estate and denying Plaintiff's request to remove her husband's mother as personal representative of the estate. The appeal is still pending. Defendant argues that Plaintiff was properly denied the benefits on the basis of Michigan's "slayer statute" and analogous federal common law, which are made applicable to the Plan through Article IX.
III. CONCLUSIONS OF LAW
A. Applicable Standard of Review
The Supreme Court has ruled that the standard of review in ERISA cases is de novo unless the benefit plan gives the plan administrator discretion to determine eligibility for benefits or construe plan terms:
Consistent with established principles of trust law, we hold that a denial of benefits *719 challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.
Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S. Ct. 948, 956, 103 L. Ed. 2d 80 (1989). See also Wilkins v. Baptist Healthcare System, Inc., 150 F.3d 609, 616 (6th Cir.1998). However, "where an ERISA plan expressly affords discretion to trustees to make benefit determinations, a court reviewing the plan administrator's actions should apply the arbitrary and capricious standard of review." Williams v. International Paper Co., 227 F.3d 706, 711 (6th Cir.2000).
The arbitrary and capricious standard is a highly deferential one. See Killian v. Healthsource Provident Adm'rs, Inc., 152 F.3d 514, 520 (6th Cir.1998) (quoting Yeager v. Reliance Standard Life Ins. Co., 88 F.3d 376, 380 (6th Cir.1996)). Under the arbitrary and capricious standard, a court will uphold a plan administrator's benefit determination if that determination was rational in light of the plan's provisions. Daniel v. Eaton Corp., 839 F.2d 263, 267 (6th Cir.1988), cert. denied, 488 U.S. 826, 109 S. Ct. 76, 102 L. Ed. 2d 52 (1988). See also Davis v. Kentucky Finance Cos. Retirement Plan, 887 F.2d 689, 693 (6th Cir.1989), cert. denied, 495 U.S. 905, 110 S. Ct. 1924, 109 L. Ed. 2d 288 (1990) ("[W]hen it is possible to offer a reasoned explanation, based on evidence for a particular outcome, the outcome is not arbitrary and capricious.") Although review pursuant to the arbitrary and capricious standard is thus extremely deferential, it "is not no review, and deference need not be abject." McDonald v. Western-Southern Life Ins. Co., 347 F.3d 161, 172 (6th Cir.2003) (citations and internal quotation marks omitted).
In this case, the parties concede that the arbitrary and capricious standard applies. The Plan unambiguously vests complete discretion for benefit determination in the Board of Administration. Accordingly, the Court looks only to whether "it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome." Shields v. Reader's Digest Ass'n, Inc., 331 F.3d 536, 541 (6th Cir.2003).
B. Defendant's Failure to Follow Claim Procedures
First, Plaintiff argues that Defendant failed to follow its own claim procedures as required by applicable Plan language. Specifically, Plaintiff argues that because there is no record of an initial denial of benefits, Defendant's treatment of Plaintiff's claim for benefits in March 2009 as a request for a review upon appeal was not proper. Plaintiff also argues that because she was notified eleven days after the Board's decision, rather than the requisite five, the notification of denial violated claim procedures.
Under the Code of Federal Regulations, employers subject to ERISA must establish certain procedures for review of adverse benefit determinations. See, e.g., 29 C.F.R. § 2560.503-1(b). This procedure must provide a "full and fair review" of adverse claim determinations. 29 C.F.R. § 2560.503-1(h)(1). However, the lack of an ERISA-compliant procedure or the failure to follow a plan procedure does not give rise to its own cause of action. Rather, the remedy is to treat a claimant as having exhausted the administrative remedies available under the plan. 29 C.F.R. § 2560.503-1(l). Under these circumstances, the claimant "shall be entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision *720 on the merits of the claim." Id. See also Dotson v. Arkema, Inc., No. 08-CV-13118, 2009 WL 152144, *4 (E.D.Mich. Jan. 21, 2009). Section 502(a) of ERISA, 29 U.S.C. § 1132(a), in turn permits a plan participant or beneficiary to bring a civil action to recover benefits due him under the terms of the plan, as Plaintiff has done in this case. See 29 U.S.C. § 1132(a)(1)(B).
The Defendant Plan sets out a clear procedure for benefit determinations. In the event of a denial of benefits, the Plan provides for the claimant to receive a written notification within 90 days explaining:
(i) the specific reason or reasons for the denial; (ii) specific reference to the pertinent Plan provisions on which the denial is based along with a copy of such Plan provisions or a statement that one will be furnished at no charge upon the claimant's request; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) appropriate information as to the steps to be taken if the claimant wishes to submit his or her claim for review, along with the claimant's right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.
(Plan Art. at 150-51, Admin. Record at 347.) The Plan further provides: "In the event that the Plan Administrator or an employee of the Board of Administration denies a claim ..., a claimant may (i) request a review upon appeal by written application to the full Board of Administration; (ii) review pertinent documents; and (iii) submit issues and comments in writing." (Plan Art. at 155, Admin. Record at 349.) This written notice "will be made not later than five (5) days after the decision has been made by the Board. (Id.)
Here, there is no evidence that Defendant made a formal, initial determination of denial of benefits or provided Plaintiff with a written notification explaining the denial in the two years that followed Michael Nale's death. Defendant stopped payment on the survivorship benefits immediately upon learning of Plaintiff's prosecution, pending an outcome in the homicide investigation and resolution of eligibility issues. However, the only letter in the administrative record communicating the formal denial of benefits is the letter dated August 10, 2009, which states:
This letter is to inform you that the appeal you submitted on behalf of Fayette Nale for survivor benefits was denied by the Ford Motor Company-UAW Retirement Board Committee in accordance with Article IX of the Ford-UAW Retirement Plan (Plan) as a result of Ms. Nale's Manslaughter conviction. A copy of Article IX of the Plan will be provided at no charge upon request.
Decisions of the Committee are final and conclusive, and are only subject to the arbitrary and capricious standard of judicial review.
You have the right to bring a civil action under Section 502(a) of the Employment Retirement Income Security Act (ERISA) of 1974, as amended following the denial of your appeal.
(Admin. Record at 008) (emphasis added). While it is possible that Defendant considered the two years of stopped payments as the initial denial, the fact remains that there is no evidence of a written notification given prior to August 2009 as required by the plan documents. Defendant thus failed to follow its own claim procedures. Pursuant to federal regulations, Plaintiff is "deemed to have exhausted the administrative remedies available under the plan." 29 C.F.R. § 2560.503-1(l).
*721 Nevertheless, to the extent that Plaintiff argues that Defendant failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim, the Court finds such arguments unavailing. The Board of Administration clearly worked over the course of several months following Plaintiff's March 2009 claim for benefits to fully inform itself of the underpinnings of Plaintiff's claim. Specifically, the Board sought extra time to investigate Plaintiff's eligibility to receive survivor's benefits in light of her role in her husband's death. The Board provided Plaintiff ample opportunity to present her claim and even directed Plaintiff's counsel to brief the specific issue of "intent." Based on the foregoing, the Court holds that Defendant's procedural failings did not deprive Plaintiff of a reasonable claims procedure. Rather, the record shows that the Board and its employees diligently collected information and reviewed Plaintiff's claim before reaching its final decision.[8] The Court thus turns to whether that determination was rational in light of the plan's provisions.
C. Denial of Survivor's Pension Benefits
Defendant argues that it has provided a reasoned and rational explanation for the denial of Plaintiff's claim. Specifically, under the Plan, rights and eligibility must be administered in accordance with federal law, and where federal law does not control, with Michigan law. Since both state and federal law prohibit an individual from profiting from the killing of another individual and Plaintiff was convicted of voluntary manslaughter in the death of her husband, Defendant argues that she is barred from receiving the proceeds of his retirement plan. Plaintiff counters that because the killing was not intentional, in the sense that she did not want to kill her husband, the application of Michigan's *722 "slayer statute" and analogous federal common law is not appropriate.
Michigan, like most other states, has adopted a "slayer statute" which provides: "The felonious and intentional killing of the decedent [revokes] [d]isposition or appointment of property made by the decedent to the killer in a governing instrument." Mich. Comp. Laws § 700.2803(2). The Court first considers whether ERISA preempts this statute. Generally, ERISA preempts a state law that relates tothat is, that "has a connection with or reference to"employee benefit plans. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S. Ct. 2890, 77 L. Ed. 2d 490 (1983); see 29 U.S.C. § 1144(a). Where ERISA preempts state law, but is silent or ambiguous on a particular question, the Court turns to federal common law. Muse v. International Business Machines Corp., 103 F.3d 490, 495 (6th Cir. 1996). Although it seems reasonably clear that the application of a state slayer statute may alter the distribution of benefits under an employee benefits plan, there is some debate among federal courts as to whether ERISA preempts state slayer statutes. Compare Addison v. Metropolitan Life Ins. Co., 5 F. Supp. 2d 392 (W.D.Va.1998) (recognizing that federal common law preempts), with Administrative Committee for the H.E.B. Inv. and Retirement Plan v. Harris, 217 F. Supp. 2d 759 (E.D.Tex.2002) (holding that state law "slayer's rule" persists un-preempted). Many courts have simply declined to resolve the issue because federal common law, which encompasses the equitable principle that a person should not benefit from his wrongs, see Mutual Life Ins. Co. v. Armstrong, 117 U.S. 591, 600, 6 S. Ct. 877, 29 L. Ed. 997 (1886), almost universally produces the same result as state law. See, e.g., First Nat'l Bank & Trust Co. of Mountain Home v. Stonebridge, 502 F. Supp. 2d 811, 814 (E.D.Ark.2007); Atwater v. Nortel Networks, Inc., 388 F. Supp. 2d 610, 614-15 (M.D.N.C.2005); Connecticut Gen. Life Ins. Co. v. Riner, 351 F. Supp. 2d 492, 497 (W.D.Va.2005). Neither the Sixth Circuit, nor the Supreme Court has yet ruled on whether state slayer statutes are preempted. In dicta, however, the Supreme Court stated:
In the ERISA context, these "slayer" statutes could revoke the beneficiary status of someone who murdered a plan participant. Those statutes are not before us, so we do not decide the issue. We note, however, that the principle underlying the statuteswhich have been adopted by nearly every Stateis well established in the law and has a long historical pedigree predating ERISA. See, e.g., Riggs v. Palmer, 115 N.Y. 506, 22 N.E. 188 (1889). And because the statutes are more or less uniform nationwide, their interference with the aims of ERISA is at least debatable.
Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 152, 121 S. Ct. 1322, 149 L. Ed. 2d 264 (2001). This tends to suggest that ERISA would not preempt state slayer statutes. In any event, the Court finds, as numerous other federal courts have, that it need not resolve this issue because it is not determinative of the outcome in this case. Moreover, the parties agree that whether state law or federal law applies, the dispute is limited to whether voluntary manslaughter is an intent crime.
Mich. Comp. Laws § 750.321 specifies the punishment for the crime of manslaughter. However, it is the common law that defines the crime. People v. Pouncey, 437 Mich. 382, 388, 471 N.W.2d 346 (1991). In Michigan courts, manslaughter requires a showing of the following elements: "First, the defendant must kill in the heat of passion. Second, the passion must be caused by an adequate provocation. Finally, there cannot be a lapse of time during which a reasonable *723 person could control his passions." Id. Provocation is not an element of the offense; rather provocation mitigates a homicide from murder to manslaughter by causing the defendant to act out of passion rather than reason. People v. Townes, 391 Mich. 578, 590, 218 N.W.2d 136 (1974).
Manslaughter has alternatively been defined as "murder without malice." People v. Mendoza, 468 Mich. 527, 534, 664 N.W.2d 685 (2003). Plaintiff argues that the absence of malice is tantamount to the absence of intent, and thus that, in her criminal trial, the jury's finding that Plaintiff was only guilty of the lesser crime of manslaughter was tantamount to a finding that she killed her husband without intentsuch that she is not a "slayer" under the state rule.
This is logically incorrect. As Plaintiff argued to the Board, malice is the "intentional doing of a wrongful act without just cause or excuse." (Admin. Record. at 0011) (emphasis added). Under this definition, killing without malice includes intentional killing with just cause or excuse. As discussed above, the crime of voluntary manslaughter inherently encompasses a cause or excuseacting out of passion without time to cool off. It is this element, and not the absence of intent, that reduces a wrongful killing from murder to manslaughter. The Michigan Supreme Court has confirmed this principle, explaining that "both murder and voluntary manslaughter require a death, caused by defendant, with either an intent to kill, an intent to commit great bodily harm, or an intent to create a very high risk of death or great bodily harm with knowledge that death or great bodily harm was the probable result." Id. at 540, 664 N.W.2d 685 (emphasis added). The Michigan Court of Appeals has stated more explicitly:
Voluntary manslaughter is an intentional killing committed under the influence of passion or hot blood produced by adequate provocation and before a reasonable time has passed for the blood to cool. People v. Fortson, 202 Mich.App. 13, 19, 507 N.W.2d 763 (1993). An essential element of the crime of voluntary manslaughter is the intent to kill or commit serious bodily harm. People v. Delaughter, 124 Mich.App. 356, 360, 335 N.W.2d 37 (1983).
People v. Hess, 214 Mich.App. 33, 38, 543 N.W.2d 332 (1995) (emphasis added). By contrast, involuntary manslaughter is the "catch-all" homicide crime: it is defined as "the unintentional killing of another, without malice, during the commission of an unlawful act not amounting to a felony and not naturally tending to cause great bodily harm; or during the commission of some lawful act, negligently performed; or in the negligent omission to perform a legal duty." Mendoza, 468 Mich. at 536, 664 N.W.2d 685 (emphasis added).
Because voluntary manslaughter is an intentional killing under Michigan law and because Plaintiff was convicted of voluntary manslaughter, Plaintiff is subject to both Michigan's slayer statute and the federal common law "slayer's rule." Neither state nor federal law, which are made applicable to the Plan through Article IX, allow Plaintiff to recover her husband's benefits. In light of the foregoing, the Court upholds Defendant's denial of benefits as it was clearly rational in light of the plan's provisions. That is, under the terms of the Plan, the Board of Administration was constrained to apply federal common law or Michigan law. Treating Plaintiff's manslaughter conviction as prima facie evidence of an intentional killing, the Board could reasonably conclude that Plaintiff was disqualified from collecting her husband's benefits. The decision was thus not arbitrary and capricious, nor, perhaps more importantly, was it erroneous as a matter of law.
*724 Finally, Plaintiff has provided no cognizable legal argument to refute this finding. Instead, the remainder of her brief restates the circumstances surrounding her husband's death, namely the allegedly accidental nature of the stabbing and the possible grounds for provocation, i.e., the argument that precipitated the struggle over a knife and Michael Nale's history of verbal and physical abuse. The jury in the criminal trial was presented with these facts and instructed on both of Plaintiff's defensesself-defense and accidentbefore ultimately handing down a verdict of guilty on the charge of voluntary manslaughter, an intent crime. It was not incumbent on the Board of Administration to reevaluate the trial record and sit in judgment a second time when assessing Plaintiff's claim for benefits. Nor is Plaintiff entitled to an independent determination in this Court that Plaintiff did not, in fact, intentionally kill her husband.
IV. CONCLUSION
For the reasons set forth above,
NOW, THEREFORE, IT IS HEREBY ORDERED that Defendant's Motion for Judgment Affirming the Administrative Record (Dkt. # 18) is GRANTED.
IT IS FURTHER ORDERED that Plaintiff's Motion for Judgment Reversing the Administrative Record (Dkt. # 19) is DENIED.
NOTES
[1] Defendant timely filed a Motion for Judgment Affirming the Administrative Record on January 13, 2010. Plaintiff failed to file a Cross-Motion by this deadline, clearly outlined in the Court's Scheduling Order. After consultation with the Court and by stipulation of the parties, Plaintiff filed a combined Response to Defendant's Motion and Cross-Motion for Judgment Reversing the Administrative Record, twenty-two days after Defendant filed its motion. Defendant timely filed a response to Plaintiff's motion. Plaintiff did not file a reply.
[2] Specifically, the Sixth Circuit has held that district courts generally should review challenged benefit denials "based solely upon the administrative record, and [should] render findings of fact and conclusions of law accordingly." Wilkins, 150 F.3d at 619.
[3] Plaintiff took a disability retirement and her husband took an early retirement in November 2005. Plaintiff continues to receive a monthly disability pension.
[4] Plaintiff was charged under Michigan's general "manslaughter" statute, Mich. Comp. Laws § 750.321, which states: "Any person who shall commit the crime of manslaughter shall be guilty of a felony punishable by imprisonment in the state prison, not more than 15 years or by fine of not more than 7,500 dollars, or both, at the discretion of the court." The jury was given voluntary manslaughter instructions.
[5] Defendant's brief quotes slightly different language but cites the same range of pages in the Plan. The error does not affect the Court's decision in this case.
[6] On October 15, 2007, Charlotte B. Nale, Michael Nale's mother and the special representative of his estate, made a claim to all pension and other benefits. There is no evidence in the record as to whether this request was granted or denied.
[7] Plaintiff's counsel communicated with the Ford benefits administration office throughout July 2009, submitting legal memoranda, court records and police reports, as well as jury instructions from Plaintiff's manslaughter trial. The Board was also provided a transcript of the felony preliminary examination in Plaintiff's criminal prosecution, which included testimony from the officers who responded to Plaintiff's 911 call after the stabbing and the medical examiner who performed the autopsy on Michael Nale's body.
[8] Plaintiff also makes general allegations that she was misled about the review process in the months that preceded the Board's final determination. While there is some evidence to indicate that Defendant was sloppy in executing its claim proceduresfor example, providing Plaintiff with only a partial copy of plan documents, notably omitting Article IX, during the review processthere is no evidence in the administrative record to support the allegations that Plaintiff was misled. Plaintiff's brief oddly focuses on Plaintiff's counsel's personal confusion about the review process. This, however, cannot be equated with Defendant's failure to follow its claim procedures. Rather, there is ample evidence to indicate that the Board and its employees attempted to keep Plaintiff apprised of its progress and concerns.
Moreover, the Court notes that Plaintiff is not suing for denial of her informational rights under ERISA, 29 U.S.C. § 1132(c). Plan administrators under ERISA have an obligation to give notice to an insured of his or her rights under a policy and to provide participants with copies of the plan's annual report, a statement of rights under the plan, and a statement of benefits. See 29 U.S.C. §§ 1022, 1024, 1025. Here, Plaintiff has not alleged that, as a general matter, Defendant violated these duties. Had she done so, she might be entitled to the statutory penalty for failure to provide plan documents, available under 29 U.S.C. § 1132(c). Yet the record only indicates that the documents initially provided to Plaintiff's counsel, who was acting under a power of attorney, were incomplete. A copy of the Plan, including Article IX, was delivered to Plaintiff after the Board's decision, only upon receiving a written request from Plaintiff's counsel. Ultimately, even if this conduct amounted to a breach of Defendant's obligations under ERISA, the Sixth Circuit has held "that `nothing in [ERISA's civil enforcement provision] suggests that a plan beneficiary should receive a benefit award based on a plan administrator's failure to disclose required information.'" Del Rio v. Toledo Edison Co., 130 Fed.Appx. 746, 751 (6th Cir.2005) (unpublished) (citing Lewandowski v. Occidental Chem. Corp., 986 F.2d 1006, 1009 (6th Cir. 1993)). The remedy is not an award of benefits.
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31 F.Supp.2d 351 (1998)
Linda HAMILTON, Individually and as Executrix of the Estate of George Hamilton, Plaintiff,
v.
GARLOCK, INC., et al., Defendants.
No. 94 CIV. 4397(RWS).
United States District Court, S.D. New York.
December 29, 1998.
*352 *353 Levy Phillips & Konigsberg, New York, NY (Moshe Maimon, Chris Romanelli, of Counsel), for Plaintiff.
Barry, McTiernan & Moore, New York, NY (Roger P. McTiernan, of Counsel), for Defendant Atlas Turner, Inc.
OPINION
SWEET, District Judge.
Defendant Atlas Turner Inc. ("Atlas") has brought a trio of post-trial motions in response to a jury verdict entered in favor of plaintiff Linda Hamilton ("Plaintiff") in an asbestos action. First, Atlas has moved for judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure, or in the alterative for a new trial pursuant to Rule 59(a). Second, Atlas seeks reconsideration of this Court's November 5, 1998 order that set aside the jury verdict regarding the issue of allocation of fault. Finally, Atlas has renewed its motion pursuant to Rule 12(b) for an order dismissing the complaint for lack of personal jurisdiction. For the reasons set forth below, Atlas' motion to dismiss for lack of personal jurisdiction is granted, and thus the motions for reconsideration and for judgment or a new trial need not be considered.
Parties
Plaintiff was married to George Hamilton ("Hamilton"). During his lifetime, Hamilton worked as a boilerman in the United States Navy.
Atlas was at all relevant times to this action a Canadian Corporation. It has never been authorized to conduct business in the State of New York.
Prior Proceedings and Facts
The prior proceedings and facts in this action have been set forth in a prior opinion of this Court, familiarity with which is assumed. See Hamilton v. AC and S, Inc., No. 94 Civ. 4397, 1998 WL 651049 (S.D.N.Y. Sept. 23, 1998) [hereinafter Hamilton I]. Those facts and prior proceedings relevant to the instant motion are set forth below.
Plaintiff's asbestos claim, naming several defendants including Atlas, was filed in federal court on June 15, 1994. An amended complaint was filed on December 14, 1995. This action is one of many that has been supervised by the Multidistrict Litigation Panel ("MDL") for discovery and pretrial purposes. It was originally filed in the Southern District of New York and subsequently transferred by order of the MDL to the Honorable Charles R. Weiner of the Eastern District of Pennsylvania. The action was transferred back to this Court on December 13, 1997, and thereafter consolidated by opinion dated May 7, 1998, with four other asbestos cases for trial.
Prior to the commencement of trial, Atlas brought a motion to dismiss for lack of personal jurisdiction, or in the alternative for summary judgment. The motion for summary judgment was denied, and the jurisdictional motion was denied with leave to renew upon a fuller record. See Hamilton I, 1998 WL 651049.
The claims in this action were brought by Linda Hamilton, the widow of George Hamilton. Hamilton was diagnosed with a pleural effusion in January of 1992, and with mesothelioma in January of 1993. He died from the cancer on November 4, 1994, at the age of 54. He was survived by his widow, Linda, *354 and eight children, ages 32 to 4. Testimony established that Hamilton was exposed to asbestos when he served as a boilerman in the United States Navy from 1959 to 1961. He was stationed at the Norfolk Virginia Shipyard and served in the boiler room of the U.S.S. John W. Weeks (the "Weeks").
Trial commenced on September 23, 1998. On October 20, the jury returned a verdict for Plaintiff. Judgment in the amount of $4,288,427.47 was entered on November 6, 1998. The instant motions were filed November 23, 1998. Oral arguments were held December 14, 1998, at which time Atlas' post-trial motions were deemed fully submitted.
Discussion
I. The Holding in Hamilton I
On August 3, 1998, Atlas filed a motion pursuant to Rule 12(b), dismissing the action against it for lack of personal jurisdiction. Alternatively, it moved for summary judgment. In Hamilton I, the summary judgment motion was denied as was the motion to dismiss for lack of jurisdiction. However, the denial of the jurisdictional motion was not absolute. Rather, it was "denied at this time," with leave to renew upon a fuller record. Hamilton I, 1998 WL 651049, at *3.
Equitable concerns prompted the denial of Atlas' motion in September. This Court acknowledged that Plaintiff had made a "meaningful argument for waiver," id. at *2, and that neither side had provided facts from which it could be ascertained that Atlas was "doing business" in New York at the relevant time. Given the circumstances, including the fact that the instant case had been consolidated with four other cases for trial and that in the interests of justice the cases had moved together, it seemed prudent to deny Atlas' motion until discovery was complete on the issue and the record supported a meaningful finding that jurisdiction did or did not exist over Atlas.
The trial having been completed and all the evidence having been presented, Atlas' motion to dismiss for lack of personal jurisdiction must now be granted because Plaintiff has failed to meet her burden of establishing that this Court may exercise jurisdiction over Atlas. It is significant that in Hamilton I, Plaintiff was required to make only a prima facie showing that personal jurisdiction existed. See Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981); Roth v. El Al Israel Airlines, Ltd., 709 F.Supp. 487, 489 (S.D.N.Y.1989); see also Welsh v. Servicemaster Corp., 930 F.Supp. 908, 910 (S.D.N.Y.1996); Houbigant, Inc. v. ACB Mercantile, Inc., 914 F.Supp. 964, 980 (S.D.N.Y.1995). However, the burden at this juncture is greater. Plaintiff must establish personal jurisdiction by a preponderance of the evidence. See, e.g., Marine Midland, 664 F.2d at 904; Houbigant, 914 F.Supp. at 980. She has not done so.
II. This Court Lacks Jurisdiction Over Atlas
In considering a 12(b)(2) motion to dismiss for lack of personal jurisdiction, a district court must construe the facts from the pleadings and affidavits in the light most favorable to the plaintiff. See Hoffritz for Cutlery, Inc. v. Amajac, 763 F.2d 55, 57 (2d Cir.1985); Cosmetech Int'l, LLC v. Der Kwei Enter. and Co., Ltd., 943 F.Supp. 311, 314 (S.D.N.Y.1996). Implicit is the understanding that a plaintiff bears the burden of establishing jurisdiction over a defendant; however, until "a full evidentiary hearing or a trial on the merits is held, [a plaintiff] need only set forth prima facie evidence of personal jurisdiction." Beacon Enters., Inc. v. Menzies, 715 F.2d 757, 768 (2d Cir.1983). As a trial has been held in this action, "`plaintiff must establish jurisdiction by a preponderance of the evidence.'" Kowalski-Schmidt v. CLS Mortgage, Inc., 981 F.Supp. 105, 108 (E.D.N.Y.1997) (quoting Marine Midland, 664 F.2d at 904); see Roth, 709 F.Supp. at 489.
Since this action is one based on diversity of citizenship, the law of New York will dictate whether this Court may exercise personal jurisdiction over Atlas. See Hoffritz, 763 F.2d at 57; see also Crouch v. Atlas Van Lines, Inc., 834 F.Supp. 596, 599 (N.D.N.Y. 1993). Accordingly, assessment of whether New York's Civil Practice Law and Rules ("CPLR") provides for jurisdiction must be made. See N.Y. C.P.L.R. §§ 301, 302 *355 (McKinney 1990). A two-fold inquiry is required. First, a determination must be made as to whether New York law provides a basis for exercising personal jurisdiction over the defendant. If jurisdiction is proper as a result of this analysis, the second inquiry ascends to a constitutional level, which requires an assessment of whether exercising jurisdiction over the defendant would offend due process. See International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945); see also Twine v. Levy, 746 F.Supp. 1202, 1204 (E.D.N.Y.1990). In light of the determination below that Atlas is not subject to personal jurisdiction under New York law, the due process analysis need not be conducted.
A. "Doing Business" Pursuant to § 301
CPLR § 301 tersely states that a New York court "may exercise jurisdiction over persons, property, or status as might have been exercised heretofore." The statute incorporates all grounds of jurisdiction previously recognized at common law. See Penny v. United Fruit Co., 869 F.Supp. 122, 125 (E.D.N.Y.1994). Pursuant to § 301, a foreign corporation will be subject to personal jurisdiction in New York if it is present or is "doing business" in the state. A corporation's activity rise to the level of "doing business" only when it is engaged in "such a continuous and systematic course of activity that it can be deemed present in the state of New York." Klinghoffer v. S.N.C. Achille Lauro, 937 F.2d 44, 50-51 (2d Cir.1991) (quoting Laufer v. Ostrow, 55 N.Y.2d 305, 434 N.E.2d 692, 694, 449 N.Y.S.2d 456, 458 (1982) (citations omitted)); see Mareno v. Rowe, 910 F.2d 1043, 1046 (2d Cir.1990); Frummer v. Hilton Hotels Int'l, Inc., 19 N.Y.2d 533, 536, 227 N.E.2d 851, 853, 281 N.Y.S.2d 41, 43 (1967). Under § 301 of the CPLR, a corporation's presence in New York is determined based on the time the lawsuit is filed, not when the claim arose. Penny, 869 F.Supp. at 125.
Indeed, without any physical presence in New York, a foreign corporation may be subjected to the jurisdiction of New York if the corporation conducts, or purposefully directs, business "`not occasionally or casually, but with a fair measure of permanence and continuity.'" Landoil Resources Corp. v. Alexander & Alexander Servs., 77 N.Y.2d 28, 34, 565 N.E.2d 488, 490, 563 N.Y.S.2d 739, 741 (1990) (quoting Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267, 115 N.E. 915, 917 (1917)). The test, a "simple pragmatic one," Bryant v. Finnish Nat. Airline, 15 N.Y.2d 426, 432, 208 N.E.2d 439, 441, 260 N.Y.S.2d 625, 629 (1965), is necessarily fact sensitive. See Landoil Resources Corp. v. Alexander & Alexander Servs., 918 F.2d 1039, 1043 (2d Cir.1990); Stark Carpet Corp. v. M-Geough Robinson, Inc., 481 F.Supp. 499, 504 (S.D.N.Y.1980) (citing Manchester Modes, Inc. v. Lilli Ann Corp., 306 F.Supp. 622, 624 (S.D.N.Y.1969)).
"In assessing jurisdiction under this pragmatic standard, New York courts have generally focused on the following indicia of jurisdiction: the existence of an office in New York; the solicitation of business in New York; the presence of bank accounts or other property in New York; and the presence of employees or agents in New York." Landoil, 918 F.2d at 1043; see Hoffritz, 763 F.2d at 58. However, "[s]olicitation of business alone will not justify a finding of corporate presence in New York with respect to a foreign manufacturer or purveyor of services." Laufer v. Ostrow, 55 N.Y.2d 305, 310, 434 N.E.2d 692, 694, 449 N.Y.S.2d 456, 459 (1982); see Frummer, 19 N.Y.2d at 536, 227 N.E.2d at 853, 281 N.Y.S.2d at 43. Yet if the solicitation "is substantial and continuous, and defendant engages in other activities of substance in the state, then personal jurisdiction may properly be found to exist." Landoil, 918 F.2d at 1043-44; see Beacon, 715 F.2d at 763; Aquascutum of London, Inc. v. S.S. American Champion, 426 F.2d 205, 211 (2d Cir.1970).
Here, Plaintiff concedes that Atlas has no offices or owns no real estate in New York, that it maintains no bank accounts in this state, and that it is not authorized to conduct business in New York. Moreover, Plaintiff has submitted no proof regarding any business activity of Atlas in 1994 in the State of New York. Furthermore, the only proof adduced at trial regarding Hamilton's exposure establishes that the exposure was *356 limited to the Norfolk Virginia Shipyard. Although Plaintiff did offer testimony of two workers who recalled using Atlas products in New York, these witnesses limited their testimony to the 1960's and 1970's. Thus their testimony has no relevance to 1994, the time period at issue.
Plaintiff submits that Atlas has refused to produce documents or answer interrogatories concerning its sales and/or revenues in New York. However, the answers to interrogatories filed by Atlas to which Plaintiff refers are from 1988, six years prior to the filing of this action. Significantly, Plaintiff can point to no discovery request submitted after 1994 that seeks information concerning any sales by Atlas to New York in 1994.
Upon a "fuller record," Plaintiff has not met its burden in establishing that Atlas was "doing business" in New York within the meaning of § 301 in 1994. Accordingly, § 301 does not prove a basis under which this Court may exercise jurisdiction over Atlas.
B. New York State Long Arm Jurisdiction
New York's long arm statute, CPLR § 302, provides in pertinent part:
(a) As to a cause of action arising from any acts enumerated in this section, a court may exercise personal jurisdiction over any nondomiciliary ... who in person or through an agent:
1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or
2. commits a tortious act within the state ...; or
3. commits a tortious act without the state causing injury to person or property within the state ... if he
(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or
(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce ....
N.Y. C.P.L.R. § 302(a).
The long arm statute thus requires "a strong nexus between the plaintiff's cause of action and the defendant's in state conduct." Welsh, 930 F.Supp. at 910; see McGowan v. Smith, 52 N.Y.2d 268, 272, 419 N.E.2d 321, 322-23, 437 N.Y.S.2d 643, 645 (1981) (explaining that there must be some "articulable nexus between the business transacted and the [claim]"); see also Beacon, 715 F.2d at 762.
Plaintiff has failed to establish any connection between Atlas' alleged activity in or outside of New York state and Hamilton's injuries. Additionally, as discussed below, Hamilton's injuries did not occur in New York, but in Virginia.
1. Transacting Business
Under CPLR § 302(a)(1), personal jurisdiction exists over a nondomiciliary who transacts business in New York, as long as the cause of action arises out of the subject matter of the business transacted. See N.Y. C.P.L.R. § 302(a)(1); McGowan, 52 N.Y.2d at 272, 419 N.E.2d at 322-23, 437 N.Y.S.2d at 645.
The transacting business prong of § 302(a)(1) confers jurisdiction over "a defendant who purposefully avails itself of the privilege of conducting activities within New York, thus invoking the benefits and protections of its laws." Viacom Intern., Inc. v. Melvin Simon Productions, 774 F.Supp. 858, 862 (S.D.N.Y.1991). New York courts look to the totality of circumstances to determine whether the defendant has engaged in some purposeful activity in New York in connection with the matter in controversy. Longines-Wittnauer Watch Co. v. Barnes & Reinecke, Inc., 15 N.Y.2d 443, 457, 209 N.E.2d 68, 75, 261 N.Y.S.2d 8, 18 (1965).
CPLR § 302(a)(1) authorizes the court to exercise jurisdiction over nondomiciliaries for contract and tort claims arising from a defendant's transactions of business in New York. Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 522 N.E.2d 40, 527 N.Y.S.2d 195 (1988). A single transaction of *357 business is sufficient to give rise to jurisdiction under CPLR § 302(a)(1), even where the defendant never enters the state, if the claim arises out of the transaction.
It [CPLR 302(a)(1)] is a "single act statute" and proof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never enters New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted.
Kreutter, 71 N.Y.2d at 467, 522 N.E.2d at 43, 527 N.Y.S.2d at 198-99; see also Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 256 N.E.2d 506, 308 N.Y.S.2d 337 (1970).
Plaintiff does not provide any proof that any "business" Atlas transacted in New York is substantially related to Hamilton's exposure to asbestos products in the Norfolk Virginia Shipyard. Therefore, jurisdiction cannot be obtained over Atlas under § 302(a)(1).
2. Tortious Act Committed in New York
Section 302(a)(2) provides for jurisdiction over a defendant who "commits a tortious act within the state, causing injury to person or property within the state." N.Y. C.P.L.R. § 302(a)(2). New York courts take a narrow approach in determining where the tort occurs. See Feathers v. McLucas, 15 N.Y.2d 443, 209 N.E.2d 68, 261 N.Y.S.2d 8 (1965). "For a court to assert personal jurisdiction under this subsection of the long-arm statute, the tortious act must have been committed within New York.... This is tantamount to requiring the physical presence of the defendant or his agent within the state when the tort occurs." Twine, 746 F.Supp. at 1206.
The acts at issue cannot be deemed to have been tortious acts committed within New York State. Accordingly, § 302(a)(2) is inapplicable to this case.
3. Tortious Act Committed Outside the State
Section 302(a)(3) provides personal jurisdiction over a nondomiciliary who commits a tortious act without the state, causing injury within the state, if the nondomiciliary expects or should reasonably expect the acts to have consequences in the state and derives substantial revenue from interstate or international commerce, or if the nondomiciliary regularly solicits business in the state or derives substantial revenue from services rendered or goods sold within the state. See generally Finest Fruits, Inc. v. Bertuca, 714 F.Supp. 94, 98 (S.D.N.Y.1989).
In Plaintiff's opposition to Atlas' initial motion to dismiss in August 1998, she contended that this section conferred jurisdiction over Atlas because Atlas had had contacts and solicited and transacted business within New York. Moreover, continued Plaintiff, it was reasonably foreseeable to Atlas that the sale of its asbestos products throughout the United States would have consequences within its various jurisdictions. Here, the issue is not various other jurisdictions but New York. Still, prior to reaching the issues that Plaintiff addressed, it must be found that Atlas' tortious act caused injury to Hamilton in New York. See Cosmetech, 943 F.Supp. at 319.
In the instant case, it is undisputed that Hamilton's exposure to Atlas products occurred in Virginia. The sole link to New York is the residence of the Plaintiff. Yet merely because Plaintiff is a resident of New York or because Hamilton was treated in New York is insufficient to confer jurisdiction under § 302(a)(3). See Mareno, 910 F.2d at 1046 (2d Cir.1990) (stating that injury "does not occur within the state simply because the plaintiff is a resident"); Twine, 746 F.Supp. at 1206 ("New York has strictly construed CPLR § 302(a)(3), refusing to exercise personal jurisdiction based solely on a plaintiff's residence or domicile with New York."); McGowan, 52 N.Y.2d at 274-75, 419 N.E.2d at 323, 437 N.Y.S.2d at 646 (finding that being a resident of the state is not enough under New York's long arm statute). That Plaintiff is domiciled in New York does not mean that the situs of the injury is New York. See American Eutectic Welding Alloys Sales Co. v. Dytron Alloys Corp., 439 F.2d 428 (2d Cir.1971).
Here, the locale of Hamilton's injury is not New York but Virginia. In localizing the injury, a distinction is made between the *358 situs of the injury and the place where the plaintiff suffers damages. It is well established that, for the purposes of § 302(a)(3), "`the situs of the injury is the location of the original event which caused the injury, not the location where the resultant damages are subsequently felt by the plaintiff.'" Mareno, 910 F.2d at 1046 (quoting Carte v. Parkoff, 152 A.D.2d 615, 616, 543 N.Y.S.2d 718, 719 (2d Dep't 1989)). "As applied to non-commercial tort cases, the situs rule is meant to prevent parties from carrying injuries that occurred out of state back to New York in order to bring suit." Ashley v. Abbott Labs., 789 F.Supp. 552, 570 (E.D.N.Y.1992); see, e.g., Twine, 746 F.Supp. at 1206 (noting that where malpractice suit is based on treatment in defendant's out-of-state office, injury occurred out of state).
Thus, while Hamilton may have suffered from his mesothelioma in New York or became aware of the disease in New York, his "injury" under § 302(a)(3) did not occur in New York, but in Virginia where his exposure to asbestos took place. See Diskin v. Starck, 538 F.Supp. 877, 879 (E.D.N.Y.1982) ("Plaintiffs cannot sustain jurisdiction under § 302(a)(3) merely by showing that as domiciliaries of this state, they suffered further damage (either economic or physical), on account of the earlier injuries sustained outside the state."); cf. Ashley, 789 F.Supp. at 570-71, 592 (finding that the injury-causing event in a DES action was the mothers' ingestion of DES and therefore plaintiffs' "injury" occurred where plaintiffs were exposed to DES in utero); Carrano v. Abbott Labs., 202 A.D.2d 6, 8, 615 N.Y.S.2d 882, 884 (1st Dep't 1994) (finding § 302(a)(3) satisfied where plaintiffs' mothers ingested DES in New York and plaintiffs were in utero in New York when the exposure to DES took place).
As a result, § 302(a)(3) cannot provide a basis for jurisdiction over Atlas.
III. Preservation of the Jurisdictional Defense
Lack of personal jurisdiction is a privileged defense that may be waived. As the Second Circuit recently stated:
Waiver of the defenses of insufficiency of service of process and lack of personal jurisdiction is generally governed by Fed. R.Civ.P. 12(h)(1), which establishes that
[a] defense of lack of jurisdiction over the person, ... insufficiency of process, or insufficiency of service of process is waived ... if it is neither made by motion under this rule nor included in a responsive pleading or an amendment thereof permitted by Rule 15(a) to be made as a matter of course.
Rule 12(h)(1) "advises a litigant to exercise great diligence in challenging personal jurisdiction ... or service of process. If he wishes to raise [either] of these defenses he must do so at the time he makes his first significant defensive move...."
Transaero, Inc. v. La Fuerza Aerea Boliviana, 162 F.3d 724, 729-30 (2d Cir.1998) (quoting 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1391 (1990)).
In Hamilton I, it was recognized that Atlas had literally complied with Rule 12(h)(1) by asserting the defense of lack of jurisdiction in its answer. It was further recognized that undue delay in challenging personal jurisdiction by a motion to dismiss may constitute a waiver. With regard to the question of waiver, this Court cited cases such as Datskow v. Teledyne, Inc., 899 F.2d 1298 (2d Cir.1990), all of which dealt with a defect in service of process. In distinguishing waiver of insufficiency of process as opposed to personal jurisdiction, the Datskow court explained that "this is not a case where defendant is contesting personal jurisdiction on the ground that long arm jurisdiction is not available. We would be slower to find waiver by a defendant wishing to contest whether it was obliged to defend in a distant court." Id. at 1303.
Plaintiff contended in Hamilton I that Atlas' delay in objecting to personal jurisdiction constituted waiver of that defense. While acknowledging that Plaintiff's claim had some support and that she had made a meaningful argument for waiver, the denial of Atlas' motion in Hamilton I was not based on its supposed waiver of the jurisdictional defense. If it had been, the jurisdictional *359 issue would have been closed and Atlas would not have been given leave to renew its motion.
In Hamilton I, it was noted that, despite Plaintiff's representation, Multidistrict Litigation Rule 14, which states that "[f]ailure of a party to respond to a show cause order regarding remand shall be treated as that party's acquiescence to the remand," does not act as a "waiver" of the defense of personal jurisdiction. See Hamilton I, 1998 WL 651049, at *2. Additionally, while Atlas did delay in contesting the jurisdiction of this Court, this action as well as those with which it was consolidated were in limbo for a few years in the Eastern District of Pennsylvania. Granted, Atlas should have brought its motion sooner than it did. However, the delay was not substantial enough to warrant a finding of waiver. See Datskow, 899 F.2d at 1303.
Having carefully "re"-considered the waiver issue and Plaintiff's submissions, keeping in mind that Atlas included the defense in its answer and asserted it in its first significant motion, this Court finds that Atlas did not waive its right to contest jurisdiction.
Due to the dismissal of Atlas from this case on jurisdictional grounds, the remaining issues presented in Atlas' post-trial motions need not be reached.
Conclusion
For the reasons set forth above, Atlas' motion for dismissal on the ground of lack of personal jurisdiction is hereby granted. Because of the gravity of this decision following trial, leave to reargue is granted.
It is so ordered.
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946 N.E.2d 1191 (2011)
Sean Thomas RYAN, Appellant-Petitioner,
v.
Dee Anna RYAN, Appellee-Respondent.
No. 71A03-1009-DR-453.
Court of Appeals of Indiana.
March 28, 2011.
*1192 Matthew A. Yeakey, Sanders Pianowski, LLP, Elkhart, IN, Attorney for Appellant.
Robert J. Palmer, May Oberfell Lorber, Mishawaka, IN, Attorney for Appellee.
OPINION
BROWN, Judge.
Sean Thomas Ryan ("Husband") appeals the denial of his motion for relief under Ind. Trial Rule 60(B). Husband raises three issues, which we revise and restate as whether the trial court abused its discretion in denying his motion for relief from judgment without hearing pertinent evidence. We reverse and remand.
The relevant facts follow. Husband and Dee Anna Ryan ("Wife") were married on February 28, 2000, and had children in August 2001 and June 2003. Husband filed a verified petition for dissolution of marriage on March 5, 2008. On September 19, 2008, the trial court issued a decree *1193 of dissolution of marriage which incorporated a Property Settlement Agreement (the "Settlement Agreement"). Section 5 of the Settlement Agreement set forth the parties' agreement as to the division of their real estate which included a parcel and house located in Granger, Indiana (the "Granger House"), and a parcel and house located in Union, Michigan (the "Lake House").
Section 5 of the Settlement Agreement also provided that the proceeds from the sale of the Granger House and Lake House would be divided pursuant to a private agreement. The Private Agreement provided in part that either party could bind the other to accept an offer to purchase one of the properties so long as the resulting net proceeds would equal at least $1,100,000 in the case of the Granger House or $300,000 in the case of the Lake House. Following the decree of dissolution, the parties listed the Granger House for sale at a listing price of $1,349,000 and the Lake House at a price of $349,000.
On May 14, 2010, Husband filed a motion for relief from judgment under Ind. Trial Rule 60(B)(8) and argued that the Granger House and the Lake House could not be sold under the terms of the Settlement Agreement and Private Agreement in light of housing prices in St. Joseph County, Indiana, and Cass County, Michigan, respectively, and thus the court's duty under Ind.Code § 31-15-7-4 to divide the property of the parties could not be effectuated without equitable relief. On June 16, 2010, Wife filed a memorandum in opposition to Husband's motion together with an affidavit of a real estate agent. In the memorandum, Wife argued that a property settlement agreement cannot be modified by the court under the circumstances, that Husband's motion fell under Rule 60(B)(1) rather than Rule 60(B)(8) and therefore was untimely, and that Husband's motion was unsupported by admissible evidence. The court held an initial hearing on June 16, 2010 and provided Husband time to file an additional memorandum.
On June 22, 2010, Husband filed a memorandum in support of his motion for relief from judgment and motion for evidentiary hearing together with his affidavit. In the memorandum, Husband argued that the court's non-delegable duty to achieve a final division of property cannot be accomplished without relief from the judgment and that Rule 60(B)(8) is an appropriate method to seek relief from judgment in a marital dissolution proceeding. Also on June 22, 2010, the court held a hearing and gave Wife time to file a response to Husband's memorandum.
On July 16, 2010, Wife filed a memorandum in opposition to Husband's motion for relief and motion for evidentiary hearing. On August 3, 2010, the court entered an order denying Husband's motion for relief under Rule 60(B)(8) and denying the motion to hold an evidentiary hearing. Additional facts will be provided.
The issue is whether the trial court abused its discretion in denying Husband's motion for relief from judgment without hearing pertinent evidence. Motions for relief from judgment are governed by Ind. Trial Rule 60(B), which provides in relevant part:
On motion and upon such terms as are just the court may relieve a party or his legal representative from a judgment. . . for the following reasons:
(1) mistake, surprise, or excusable neglect;
* * * * * *
(8) any reason justifying relief from the operation of the judgment, other than those reasons set forth in subparagraphs (1), (2), (3), and (4).
*1194 The motion shall be filed within a reasonable time for reasons (5), (6), (7), and (8), and not more than one year after the judgment, order or proceeding was entered or taken for reasons (1), (2), (3), and (4). A movant filing a motion for reasons (1), (2), (3), (4), and (8) must allege a meritorious claim or defense.
The burden is on the movant to establish grounds for Trial Rule 60(B) relief. In re Paternity of P.S.S., 934 N.E.2d 737, 740 (Ind.2010). A motion made under Rule 60(B) is addressed to the equitable discretion of the trial court; the grant or denial of the Rule 60(B) motion will be disturbed only when that discretion has been abused. Id. at 740-741 (citation and quotation marks omitted). An abuse of discretion will be found only when the trial court's action is clearly erroneous, that is, against the logic and effect of the facts before it and the inferences which may be drawn therefrom. Id. at 741 (citation and quotation marks omitted). A motion for relief from judgment under Rule 60(B) is not a substitute for a direct appeal. Id. at 740. Rule 60(B) motions address only the procedural, equitable grounds justifying relief from the legal finality of a final judgment, not the legal merits of the judgment. Id.
A. Basis for Relief
We initially address the parties' arguments regarding whether Husband may request and the trial court has the authority to grant relief pursuant to Trial Rule 60(B)(8) under these circumstances. The trial court's order denying Husband's Trial Rule 60(B)(8) motion states in part that Wife filed memoranda in opposition to Husband's request for relief from judgment on June 16, 2010 and July 16, 2010 and that "[a]fter reviewing all of the submitted memorand[a] and citations contained therein, the Court now respectfully denies [Husband's] motion for [Trial Rule] 60(B) relief for generally the reasons stated in [Wife's] memoranda."[1] Appellant's Appendix at 7.
Husband argues that "[i]n filing his [Trial Rule] 60(B)(8) Motion, [he] utilized an approved procedure for the trial court to effectuate a final property settlement." Appellant's Brief at 15. Husband also argues that the trial court's nondelegable duty to effectuate the statutorily required final distribution of marital property cannot be accomplished without relief from the judgment. Wife argues that "[t]here is no evidence of duress, fraud or undue influence," that she "does not consent to a modification of the [] Settlement Agreement," and that "[t]herefore, the trial court did not have authority to grant [Husband's] petition." Appellee's Brief at 8. Wife argues that "[a]ssuming the Court determines that a property settlement agreement can be modified through a Trial Rule 60(B) motion, [Husband's] motion is nevertheless untimely." Id. at 11. Wife argues that a motion for relief under Trial Rule 60(B)(1) must be filed within one year after the entry of the judgment, that "[a]lthough [Husband] characterizes his motion as a Trial Rule 60(B)(8) motion, a review of the reasons set forth in the motion establishes that it is more properly characterized as a motion under Trial Rule 60(B)(1) for mistake, surprise, or excusable neglect with respect to what the real estate would ultimately sell for," that Husband did not file his Trial Rule 60(B) motion within one year of the decree of dissolution, and that therefore his motion was untimely. Id. In his reply brief, Husband argues that at the *1195 time of the Settlement Agreement the parties listed the property based upon comparable market analyses and appraisals, that the subsequent collapse of the fair market values of the houses is uncontroverted, and that based upon the extraordinary circumstances described in his submission in support of his motion the motion was properly characterized as one under Trial Rule 60(B)(8).
Because Husband's motion for relief from judgment was filed over one year after the decree of dissolution, Husband could not seek relief under Trial Rule 60(B)(1). See Trial Rule 60(B); Brimhall v. Brewster, 864 N.E.2d 1148, 1153 (Ind.Ct. App.2007), trans. denied. Husband filed his motion pursuant to Trial Rule 60(B)(8). "The trial court's residual powers under subsection (8) may only be invoked upon a showing of exceptional circumstances justifying extraordinary relief." Id. (citation omitted). "Among other things, exceptional circumstances do not include mistake, surprise, or excusable neglect, which are set out in [Trial Rule] 60(B)(1)." This court has explained:
T.R. 60(B)(8) is an omnibus provision which gives broad equitable power to the trial court in the exercise of its discretion and imposes a time limit based only on reasonableness. Nevertheless, under T.R. 60(B)(8), the party seeking relief from the judgment must show that its failure to act was not merely due to an omission involving the mistake, surprise or excusable neglect. Rather some extraordinary circumstances must be demonstrated affirmatively. This circumstance must be other than those circumstances enumerated in the preceding subsections of T.R. 60(B).
Id. (citation and quotation marks omitted).
Wife does not point to which of Husband's assertions "for granting relief are properly characterized under Trial Rule 60(B)(1)" or develop an argument that the parties' failure to include terms or amounts other than those contained in the Settlement Agreement or the Private Agreement constituted a mistake, surprise, or excusable neglect on the part of the parties. See Appellee's Brief at 11.
In his motion requesting relief from judgment, Husband argued that the Granger House and the Lake House could not be sold under the terms of the Settlement Agreement and Private Agreement in light of housing prices in St. Joseph County, Indiana, and Cass County, Michigan, respectively. Husband alleged that the parties listed the Granger House for $1,349,000, "which was consistent with comparative market analysis of residential real estate in St. Joseph County, Indiana, on or about September 19, 2008, as well as the then most recent appraisal of the Granger [H]ouse." Appellant's Appendix at 31. Husband also alleged that the parties listed the Lake House for $349,000, "which was consistent with comparative market analysis of residential real estate in Cass County, Michigan, as of September 19, 2008, as well as the then most recent appraisal of the Lake [H]ouse." Id. Husband alleged that "subsequent to September 19, 2008 and continuing to this date, real estate values in St. Joseph County, Indiana, and Cass County, Michigan, have significantly decreased" and that "[b]oth realtors for the Granger [House] and Lake [House] have informed the parties that the current listing prices for the Granger [H]ouse and Lake [H]ouse must be significantly reduced in line with their current true market value, in order for the properties to be marketed and sold, as agreed by the parties." Id. at 32. Husband also alleged that realtors have suggested a listing price of $950,000 to $1,150,000 "with a strategy to reduce every thirty (30) days" for the Granger House and a listing price *1196 of $299,000 for the Lake House. Id. Husband alleged that Wife stated a preference to reduce the listing price of the Granger House to $1,289,500. Our review of Husband's motion reveals that he requests relief due to extraordinary circumstances and that those circumstances did not involve mistake, surprise or excusable neglect.
In addition, to the extent Wife cites to Ind.Code § 31-15-7-9.1 of the Dissolution of Marriage Act and argues that the court does not have the authority to modify or grant relief from the Settlement Agreement, we note that this court has held that "[w]hile the Act generally prohibits modification of a property settlement agreement, it does not preclude relief from judgment as provided under Trial Rule 60(B)," that "[u]pon motion by a party, and after a hearing, the trial court retains equitable jurisdiction under Rule 60(B) to modify a division of property," and that "notwithstanding statutory limitations on the modification of property settlement agreements, we must consider whether the trial court's order may be sustained under the equitable relief provisions of Trial Rule 60(B)." Dusenberry v. Dusenberry, 625 N.E.2d 458, 461 (Ind.Ct.App.1993); see also Dillard v. Dillard, 889 N.E.2d 28, 33 (Ind.Ct.App.2008) (noting that while there is no authority under the statute for the court to modify, rescind, or grant relief from the division of property under a dissolution of marriage decree, the statute does not preclude relief from judgment as provided under Trial Rule 60(B) and addressing the husband's arguments under Trial Rule 60(B) even though the wife did not agree to a modification of the disposition of the parties' property under the settlement agreement); Beike v. Beike, 805 N.E.2d 1265, 1267-1268 (Ind.Ct.App. 2004) (noting that "this court noted that a Rule 60(B) Motion for Relief from Judgment was an appropriate means with which to modify a property settlement").[2]
We observe that the court need not modify the terms of the Settlement Agreement or Private Agreement in order to effectuate relief under Trial Rule 60(B). The Settlement Agreement and Private Agreement do not contain any terms or provisions which address circumstances such as those presented when the dollar amounts set forth in the agreements make it impossible, as a practical matter, to implement the intended sale of the properties due to a sustained decline in residential housing prices.
We conclude that Husband may request and the trial court has authority to grant relief from judgment pursuant to Trial Rule 60(B)(8) under the circumstances presented in this case, and the court erred in its determination that it did not have the authority to hear Husband's Trial Rule 60(B) motion and that the motion should have been characterized as one under Trial *1197 Rule 60(B)(1).[3]See Beike, 805 N.E.2d at 1267-1269 (noting that, although the value of the pension plan marital asset at issue was not completely settled, both parties believed they understood the value of the plan at the time of the dissolution decree which contained the property settlement agreement, that a subsequent change which neither party could have predicted affected the value of the plan assets, and that the court did not abuse its discretion in granting relief from the property settlement agreement under Trial Rule 60(B)(8)); see also Dillard, 889 N.E.2d at 33 (noting that court is not precluded from granting relief under Trial Rule 60(B)); Parham v. Parham, 855 N.E.2d 722, 726-728 (Ind.Ct.App.2006) (noting that the trial court did not err in treating the wife's motion as one for relief under Trial Rule 60(B)(8) where the husband's 401(k) plan value significantly depreciated after the date of the dissolution decree), trans. denied; Dusenberry, 625 N.E.2d at 461 ("Upon motion by a party, and after a hearing, the trial court retains equitable jurisdiction under Rule 60(B) to modify a division of property.").
B. Ruling on Husband's Motion Without Hearing Pertinent Evidence
We next address whether the court abused its discretion in denying Husband's motion under Trial Rule 60(B)(8) without hearing pertinent evidence. The court's order denying Husband's motion states in part:
2.) On June 16, 2010 [Wife] filed her memorandum in opposition to [Husband's] request for relief from judgment and citing therein, among others, the January 28, 2010 Indiana Supreme Court decision of Johnson v. Johnson, 920 N.E.2d 253 [(Ind. 2010)].
* * * * * *
4.) On July 16, 2010 [Wife] filed her memorandum in opposition and motion for evidentiary hearing.
* * * * * *
6.) After reviewing all of the submitted memorandums and citations contained therein, the Court now respectfully denies [Husband's] motion for T.R. 60(B) relief for generally the reasons stated in [Wife's] memoranda. Such denial is reluctantly given not because of the presence of any legal hesitance but because of the final impact upon two people who cannot agree on most matters. As stated in Johnson supra it is probably in both parties' best interest to negotiate an agreed modification to the "private agreement."
Appellant's Appendix at 7.
Husband argues that the trial court had a nondelegable duty to divide the property. Husband argues that the decree of dissolution, Settlement Agreement, and Private Agreement "do not evidence an intention for [Husband] and [Wife] to maintain a business or financial relationship" and that "rather, the [] Settlement Agreement states that the parties are to sell the subject marital property." Appellant's Brief at 12-13. Husband argues that the decree, Settlement Agreement, and Private Agreement "are silent with respect to establishing a listing price, and modification of the listing price or a procedure to modify the listing price." Id. at 13. Husband argues that Wife, "in refusing to follow the expert advice and recommendation of the listing realtors, asserts a unilateral authority *1198 to determine the listing prices which makes it impossible to accomplish a sale of the Granger [House] and Lake [House] and to effectuate a final division of marital property." Id. at 14.
Wife argues that "[t]he present case is a proper case for the continuation of joint ownership of the real estate pending the sale of the property pursuant to the [P]rivate [A]greement incorporated into the [] Settlement Agreement." Appellee's Brief at 8. Wife argues that "the downturn in the real estate market in and around St. Joseph County, Indiana began towards the end of 2005 and the beginning of 2006" and that "[d]espite this downturn, the parties agreed to the continuation of their joint ownership of the Granger [H]ouse and Lake [House] pending a future sale." Id.
In his reply brief, Husband argues that the trial court retains a duty to achieve a final division of property when the parties enter into a property settlement agreement incorporated into a decree. Husband argues that the Granger House was listed for $1,349,000 in September 2008, and that the St. Joseph County Assessor later determined the proposed assessed value of the Granger House to be $882,000 for the year 2008 payable 2009. Husband argues that he and Wife "have been unable to execute their stated intention to sell the Granger and Lake [H]ouses because of the diminished values of those properties caused by the nationwide recession, which substantially impacted real estate values in Michiana, as illustrated by the listing broker's advice to substantially reduce the listing prices in concert with true market value." Appellant's Reply Brief at 5. Husband also argues that "[e]xtraordinary circumstances regarding the devastating decrease in true market value of the houses since the entry of the [dissolution decree] and [Settlement] Agreement, and the lack of a mechanism or procedure to reduce the listing prices in the [] Settlement Agreement warrant and compel the trial court to grant equitable relief" and that "[s]uch equitable relief would account for the risks and losses associated with the value of the marital property and would effectuate the parties' stated intention to sell the marital properties." Id. at 9.
Section 5(A) of the Settlement Agreement provides in part that the Granger House shall be sold, the mortgage encumbering the property shall be paid in full, and until the house is sold Husband shall pay seventy-five percent and Wife shall pay twenty-five percent of the mortgage, taxes, and insurance. Section 5(B) of the Settlement Agreement provides in part that the Lake House shall be sold and that until the property is sold Husband shall pay seventy-five percent and Wife shall pay twenty-five percent of the mortgage, home equity loan, taxes and insurance.
Section A of the Private Agreement provides in part with respect to the Granger House that either party can bind the other to accept an offer to purchase so long as the resulting net proceeds equal at least $1,100,000. From the net proceeds, Wife shall be reimbursed for the costs of certain repairs, Wife shall be entitled to the first $175,000 after the satisfaction of the mortgage, Husband shall be paid seventy-five percent of the reduction in the balance of the principal mortgage loan amount from the date of the decree of dissolution until the closing of the sale, and the parties shall equally divide any remaining net proceeds. Section B of the Private Agreement provides in part with respect to the Lake House that either party can bind the other to accept an offer to purchase so long as the resulting net proceeds equal at least $300,000. From the net proceeds, Husband shall be reimbursed for the costs of certain repairs, after satisfaction of the mortgage and home equity line secured by *1199 the Lake House Husband shall be paid seventy-five percent of the reduction in the balance of the mortgage and home equity line from the date of the decree of dissolution until the closing of the sale, and the parties shall equally divide any remaining net proceeds.
As of June 18, 2010, the mortgage balance on the Granger House was $858,381.85. Husband pays seventy-five percent of the monthly mortgage payment of $4,600 and seventy-five percent of the real estate taxes and insurance premiums in connection with the Granger House. As of June 2010, the mortgage balance on the Lake House was $190,730.40, and Husband pays seventy-five percent of the monthly mortgage payment of $1,230. A second mortgage with a balance of $23,970 encumbers the Lake House, and the monthly interest-only payment on that mortgage is sixty-six dollars.
Wife argues that Husband failed to support his Rule 60(B) motion with admissible evidence and that the majority of Husband's affidavit should be disregarded as hearsay. Husband argues among other things that he complied with all of the requirements of Trial Rule 60(B)(8) and that a movant is not required to submit evidence to meet the meritorious claim burden. As previously mentioned, the trial court here did not hold an evidentiary hearing. See Trial Rule 60(D) (providing that "[i]n passing upon a motion allowed by subdivision (B) of this rule the court shall hear any pertinent evidence, allow new parties to be served with summons, allow discovery, grant relief as provided under Rule 59 or otherwise as permitted by subdivision (B) of this rule.").
Trial Rule 60(D) does not expressly state that a party requesting relief must attach an affidavit or other evidence. Cf. Trial Rule 60(C) (noting that "[n]o change of venue in such cases shall be taken from the judge or county except for cause shown by affidavit"). Moreover, this court has previously stated that "it was well within the trial court's discretion to determine whether the amount and/or the nature of evidence presented in support of a motion to set aside judgment indeed satisfies the meritorious [claim] requirement of a prima facie showing," that the "acquisition and preparation of admissible evidence during such initial stages of a case is especially difficult," and that "[i]t is up to the trial court to determine on a case-by-case basis whether a movant has succeeded in making a prima facie allegation." Baker & Daniels, LLP v. Coachmen Indus., Inc., 924 N.E.2d 130, 142 (Ind.Ct. App.2010) (quoting Shane v. Home Depot USA, Inc., 869 N.E.2d 1232, 1238 (Ind.Ct. App.2007) (quotation marks omitted), trans. denied. We agree that Husband was not required to attach to his initial motion for relief under Rule 60(B), in the form of affidavits or otherwise, all of the pertinent evidence he would have or intended to present at an evidentiary hearing on the motion. Such a requirement would render the language of Rule 60(D) regarding the court hearing pertinent evidence and allowing the parties to conduct discovery and serve new parties with summons inconsequential or unnecessary. The parties may present evidence in support of or opposition to Husband's request for relief at an evidentiary hearing.
Based upon the record, we conclude that the trial court abused its discretion in denying Husband's motion under Rule 60(B)(8) without first holding an evidentiary hearing. We remand with instructions to conduct an evidentiary hearing at which the parties are given the opportunity to present evidence in support of or opposition to Husband's motion for relief from judgment and for the court to grant relief as appropriate after considering the evidence *1200 presented at the hearing. We reiterate that the court on remand need not modify the terms of the Settlement Agreement or Private Agreement in order to provide relief under Trial Rule 60(B) but may issue an order providing additional terms to the extent the Settlement Agreement and Private Agreement are silent, i.e., what steps would be taken to accomplish the intended sale of the properties under the circumstances. See Rothschild v. Devos, 757 N.E.2d 219, 224 (Ind.Ct.App. 2001) (finding that the trial court abused its discretion in denying a motion for relief from judgment without hearing pertinent evidence and allowing for discovery).
We also note that both parties request that this court remand for consideration of an award of appellate attorney fees. The parties do not request attorney fees under Ind. Appellate Rule 66(E). While the parties may request the trial court to order the other party to pay a reasonable amount for attorney fees under Ind.Code § 31-15-10-1, we decline to instruct the court to do so.
For the foregoing reasons, we reverse the court's denial of Husband's Trial Rule 60(B) motion and remand for an evidentiary hearing.
Reversed and remanded.
ROBB, C.J., and RILEY, J., concur.
NOTES
[1] In her June 16, 2010 and July 16, 2010 memoranda, Wife argued that the court lacked the power to grant a Trial Rule 60(B)(8) motion and that, assuming that a Trial Rule 60(B) motion is proper, that Husband's motion falls under Trial Rule 60(B)(1) and therefore is untimely.
[2] In support of her argument that a trial court may not consider Husband's motion under Trial Rule 60(B), Wife cites to the Indiana Supreme Court's opinion in Johnson v. Johnson, in which the Court cited in part to Ind. Code § 31-15-7-9.1 and stated that once the trial court approved the parties' settlement agreement, the court's later directive "to do more than that" constituted a modification and was impermissible. 920 N.E.2d 253, 258 (Ind.2010). The Court in Johnson did not indicate that the party requesting relief did so under Trial Rule 60(B)(8) or address whether the trial court would have been permitted to grant relief under Trial Rule 60(B)(8), and the Court did not overrule Dusenberry. Dillard. and Beike or otherwise indicate that this court's statements in those cases that a party may under certain circumstances obtain relief under Trial Rule 60(B)(8) where at least one party did not consent or agree to such relief were incorrect. We do not read Johnson to prohibit a trial court from granting relief under Trial Rule 60(B)(8) under the circumstances presented in this case.
[3] Wife does not argue on appeal that Husband's motion was not filed within a reasonable time after the judgment.
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https://www.courtlistener.com/api/rest/v3/opinions/2924936/
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NUMBER 13-06-00649-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
JOEL MOLANO, Appellant,
v.
THE STATE OF TEXAS, Appellee.
On appeal from the 92nd District Court
of Hidalgo County, Texas.
O P I N I O N
Before Justices Rodriguez, Garza, and Vela
Opinion by Justice Rodriguez
Appellee, the State of Texas, acting through the Consumer Protection and Public
Health Division of the Attorney General's Office (the State or Attorney General), sued
appellant, Joel Molano, for the unauthorized practice of law and violations of the Texas
Deceptive Trade Practices-Consumer Protection Act (DTPA) and chapter 406 of the Texas
Government Code. See Tex. Bus. & Com. Code Ann. § 17.47 (Vernon Supp. 2008); Tex.
Gov't Code Ann. § 406.016(d) (Vernon 2005) ("A notary public not licensed to practice law
in this state may not give legal advice or accept fees for legal advice."). The trial court
rendered judgment for the State, ordering permanent injunctive relief and awarding a
monetary judgment against Molano. By three issues, Molano contends that the trial court
abused its discretion in denying his motion to abate and that the trial court erred in its
interpretation of the DTPA when it awarded civil penalties, restitution, and attorney's fees
in the absence of a violation of injunctive relief. We affirm.
I. Background
The State brought the underlying lawsuit seeking injunctive relief and praying for civil
penalties in the amount of $20,000 per DTPA violation, restitution to consumers of money
or property acquired by means of Molano's acts or practices, see Tex. Bus. & Com. Code
Ann. § 17.47 (Vernon Supp.2008), and reasonable attorney's fees and court costs. See
Tex. Gov't Code Ann. § 406.006(c) (Vernon 2005). Molano filed a motion to abate alleging
that "[the State] has failed to follow the prerequisites of a class action lawsuit contained in
Rule 42 of the Texas Rules of Civil Procedure" and praying that the trial court abate the
underlying proceeding "until [the State] follows the requirements set out in the class action
provision contained in Rule 42." See Tex. R. Civ. P. 42. The trial court, after hearing
Molano's motion to abate and considering the arguments of counsel, denied the motion.
Following a bench trial, the trial court signed a final judgment ordering permanent
injunctive relief and awarding the following:
that . . . [the] State . . . have and recover from . . . Molano $10,000.00 as
restitution to consumers of money acquired by means of false, misleading,
or deceptive acts or practices of defendant; $10,000.00 as a civil penalty to
the State . . . for false, misleading, or deceptive acts or practices committed
by [Molano]; and $15,000.00 as reasonable and necessary attorney's fees
to the State . . . .
The trial court filed findings of fact and conclusions of law, (1) and this appeal ensued.
II. Motion to Abate
By his first issue, Molano contends that the trial court erred in denying his plea in
abatement because the State failed to comply with all requirements for class certification
and notification under rule 42 of the Texas Rules of Civil Procedure. See id. Molano
argues that by denying his plea the trial court forced him to proceed to trial on the merits
in violation of his due process rights and without his having an opportunity to defend
himself against potential claimants, to know what each claimant was alleging.
A. Standard of Review and Applicable Law
A motion to abate is used to challenge the plaintiff's pleadings by which the
defendant identifies a defect and asks the trial court to keep the suit from going forward
until plaintiff corrects the defect. Martin v. Dosohs I, Ltd., 2 S.W.3d 350, 354 (Tex.
App.-San Antonio 1999, pet. denied); see Am. Motorists Ins. Co. v. Fodge, 63 S.W.3d
801, 805 (Tex. 2001). As this Court has said, "[a] plea in abatement should not only show
the grounds upon which the suit is improperly brought, but should also show how it should
have been brought, and should always state facts, not conclusions of law." Bryce v.
Corpus Christi Area Convention & Tourist Bureau, 569 S.W.2d 496, 499 (Tex. Civ.
App.-Corpus Christi 1978, writ ref'd n.r.e.) (op. on reh'g). Whether to abate an action is
a matter within the trial court's sound discretion. Dolenz v. Cont'l Nat'l Bank, 620 S.W.2d
572, 575 (Tex. 1981); Dahl v. Hartmen, 14 S.W.3d 434, 436 (Tex. App.-Houston [14th
Dist.] 2000, pet. denied). On appeal, the trial court's decision on a motion to abate is
reviewed under an abuse of discretion standard. Dolenz, 620 S.W.2d at 575; Dahl, 14
S.W.3d at 436.
B. Analysis
1. The Law
Section 17.46(a) of the DTPA provides, in relevant part, as follows:
False, misleading, or deceptive acts or practices in the conduct of any trade
or commerce are hereby declared unlawful and are subject to action by the
consumer protection division [of the Attorney General's office] under section
17.47 . . . of this code.
Tex. Bus. & Com. Code Ann. §17.46(a) (Vernon Supp. 2008); Bara v. Major Funding Corp.
Liquidating Trust, 876 S.W.2d 469, 471 (Tex. App.-Austin 1994, writ denied) ("Under this
provision, the attorney general may bring an action in the public interest against an entity
it believes is engaged in conduct prohibited by the DTPA."). The DTPA, by its own terms,
authorizes the Attorney General to bring an action for injunctive relief whenever the
consumer protection division has "reason to believe" unlawful trade practices are occurring.
Tex. Bus. & Com. Code Ann. §17.47(a) (Vernon Supp. 2008). Section 17.47(a) specifically
provides for the following injunctive relief:
Whenever the consumer protection division [of the Attorney General's office]
has reason to believe that any person is engaging in, has engaged in, or is
about to engage in any act or practice declared to be unlawful by this
subchapter, and that proceedings would be in the public interest, the division
may bring an action in the name of the state against the person to restrain
by temporary restraining order, temporary injunction, or permanent injunction
the use of such method, act, or practice.
Id.; see id. § 17.47(b) (Vernon Supp. 2008) (explaining that the "court may issue temporary
or permanent injunctions to restrain and prevent violations of this subchapter . . . ."). The
DTPA also authorizes civil penalties to punish violators for their unlawful conduct; penalties
which are to be paid to the State. See Tex. Bus. & Com. Code Ann. § 17.47(c) (Vernon
Supp. 2008). In addition to the primary remedies of injunctive relief and civil penalties, the
court may order restitution on behalf of consumers. See id. § 17.47(d) (providing that a
"court may make such additional orders or judgment as are necessary . . . to restore
money or property").
Molano does not challenge the State's authority to bring an action for relief under
the DTPA when it believes unlawful trade practices are occurring. Molano does, however,
challenge the State's authority to bring such an action without following the rules of civil
procedure as they relate to the filing of class action cases, specifically class certification
and notification. See Tex. R. Civ. P. 42. Appellant argues that because other litigants are
required to follow class-action rules, so should the State. We disagree.
2. Standing as a Class Representative
In class actions, the proposed plaintiff must be a member of the class which he
claims to represent. See id. at 42(a) ("One or more members of a class may sue or be
sued as representative parties . . . ."). The Seventh Circuit has held that a state's attorney
does not have standing to bring a class action because he is not a member of the class
which he purports to represent, as required by federal law. (2) Ex rel. Bowman v. Home Fed.
Sav. & Loan, 521 F.2d 704, 707 (7th Cir. 1975); see Fed. R. Civ. P. 23(a) (providing that
"one or more members of a class may sue or be sued as representative parties").
In the present case, the Attorney General sued Molano for the unlawful services he
offered for sale to, sold to, or performed for consumers. The Attorney General did not
allege in his petition that either he or the State purchased Molano's services. The Attorney
General did not purport to sue as a representative of the class of persons who purchased
Molano's services. Under the facts of this case, neither the Attorney General nor the State
is a member of the purported class and could not have brought a class action lawsuit on
behalf of private consumers under rule 42. See Tex. R. Civ. P. 42. To hold that the
language of section 17.47(d) confers standing to the Attorney General to bring a class
action would be reading something into the provision that is simply not there.
3. Authorization by Statute
We note, however, that the State may bring a class action if it is authorized to do
so under state statute. For example, the express language of the Texas Insurance Code
authorizes the Attorney General to bring a class action. See Tex. Ins. Code Ann. §
541.251 (Vernon Supp. 2008). Section 541.251(a) of the insurance code provides that if
"a member of the insurance buying public has been damaged" by unlawful practices, the
Department of Insurance "may request the attorney general to bring a class action." Id. §
541.251(a). In holding that the prerequisites for class actions must be applied to damage
claims asserted by the Attorney General under the insurance code, the Texas Supreme
Court observed, "[t]he Legislature could have structured this remedy in various ways, but
when it authorized attorneys general to bring a 'class action,' we presume it meant what
the [Insurance] Code says." Farmers Group, Inc., v. Lubin, 222 S.W.3d 417, 426 (Tex.
2007). The DTPA, unlike the insurance code, does not provide for the use of class actions
by the Attorney General.
4. De Facto Class Action
Nonetheless, even in the absence of standing and express statutory authority,
Molano contends that cases filed by the Attorney General under section 17.47 on behalf
of a specified group of individuals must be filed as class actions because such suits qualify
as de facto (3) class actions. In support of his argument, Molano relies on Bara, 876 S.W.2d
at 472-73, and Thomas v. State, 226 S.W.3d 697, 707 (Tex. App.-Corpus Christi 2007,
pet. dism'd). While the courts in Bara and Thomas characterize suits filed by the Attorney
General under section 17.47 as de facto class actions, this characterization neither
transforms the nature of a DTPA action nor authorizes the Attorney General to sue on
behalf of private individuals.
In Bara, a case of first impression, the Austin Court of Appeals addressed the issue
of "whether an action brought by the attorney general pursuant to DTPA section 17.47 in
response to consumer complaints tolls the running of the statutes of limitations on the
consumers' individual claims." Bara, 876 S.W.2d at 471. Acknowledging that "[t]he
interests presented . . . are closely akin to the interests presented in class action litigation,"
and after examining "the body of law governing class actions" as it related to "the running
of the statute of limitations for all members of the class," the Bara court concluded that:
in situations in which the attorney general files suit under section 17.47 of the
DTPA on behalf of a specified group of individuals, that suit qualifies as a de
facto class action and the statute of limitations is tolled during the period in
which the individuals are participants in the attorney general's suit.
See id. 471-73. Thus, the Baras, who rejected the settlement offer in the attorney
general's DTPA action and filed their own lawsuit, were permitted to rely on class action
tolling principles. See id.
In Thomas, this Court considered whether the trial court violated section 17.47(d)
because it ordered restitution to "consumers" without specifying the identifiable persons
entitled to restitution and the amount of money to be paid to each. (4) See 226 S.W.3d at
705. Agreeing with the State that actions filed by the attorney general under section 17.47
qualify as de facto class actions, we concluded that "the plain language of section 17.47(d)
authorizes the trial court to order the restoration of money or property acquired by unlawful
means, without any requirement that the trial court specify "identifiable persons" or the
amount of money to be paid to each consumer." Id. at 707; see Avila v. State, 252 S.W.3d
632, 646 (Tex. App.-Tyler 2008, no pet.) (agreeing that actions filed by the Attorney
General's office pursuant to section 17.47 are de facto class actions, the court concluded
that the members of the class may be identified by the State's exhibits offered at trial).
Thomas is inapposite to Molano's argument that the State should be required, at the
inception of the lawsuit, to follow the classification and notification procedures of rule 42.
Having concluded, in Thomas, that the trial court need not specify "identifiable persons"
or the amount of money to be paid to each consumer, we will not now conclude that the
State must follow rule 42 procedures when filing suit for violation of the DTPA. See Tex.
R. App. P. Molano's reliance on Thomas is misplaced. The Attorney General sought
restitution of monies acquired by means of the alleged unlawful acts in the underlying case.
Molano provides no other authority, and we find none, to support his contention that the
exercise of this power converts the State's lawsuit into a rule 42 class action.
5. Efficient and Economical Procedures to Secure Protection
Furthermore, section 17.44(a) provides the following rule of construction for the
courts:
[The DTPA] shall be liberally construed and applied to promote its underlying
purposes, which are to protect consumers against false, misleading, and
deceptive business practices, . . . and to provide efficient and economical
procedures to secure such protection.
Tex. Bus. & Com. Code Ann. § 17.44(a) (Vernon 2002). As the State urges, to hold that
a request for restitution by the Attorney General perforce converts the DTPA action into a
class action would impede its efficient and economical procedure to secure the protection
of consumers from deceptive business practices. Requiring actions brought by the
Attorney General under the DTPA to meet the class certification and notice requirements
would impact their efficiency and economy of those actions.
Therefore, we conclude that this DTPA action against Molano was properly brought.
The trial court correctly exercised its discretion by denying Molano's motion to abate. We
overrule Molano's first issue.
III. Assessment of Civil Penalties, Restitution, and Attorney's Fees
By issues two and three, Molano contends that the trial court erred in its
interpretation of section 17.47 when it awarded a monetary judgment against him. Molano
asserts that the statute's provision for an award of civil penalties, restitution, and attorney's
fees applies only to violations of restraining orders, and because there is no evidence of
a prior temporary or permanent injunction, the trial court's assessment of civil penalties,
restitution, and attorney's fees should be set aside as a matter of law. We disagree.
A. Applicable Law and Standard of Review
In construing a statute, the primary objective is to determine and give effect to the
Legislature's intent. McIntyre v. Ramirez, 109 S.W.3d 741, 745 (Tex. 2003). The starting
point for review is with the "plain and common meaning of the statute's words." Id.; see
Tex. Gov't Code Ann. § 311.011(a) (Vernon 2005). It is a question of law for the court to
decide whether a particular remedy is available under a statute. Wal-Mart Stores, Inc. v.
McKenzie, 997 S.W.2d 278, 280 (Tex. 1999) (per curiam) (citing Johnson v. City of Fort
Worth, 774 S.W.2d 653, 656 (Tex. 1989) (per curiam) (providing that statutory construction
is a question of law)). Because the interpretation of statutes is a question of law, the
standard of review is de novo. Bragg v. Edwards Aquifer Auth., 71 S.W.3d 729, 734 (Tex.
2002).
B. Analysis
1. Civil Penalties
The pertinent language of section 17.47(c) provides the following:
In addition to the request for a temporary restraining order, or permanent
injunction in a proceeding brought under Subsection (1) of this section, the
consumer protection division may request, and the trier of fact may award,
a civil penalty to be paid to the state in an amount of:
(1) not more than $20,000 per violation . . . .
Tex. Bus. & Com. Code Ann. § 17.47(c) (Vernon Supp. 2008). Section 17.47(e) sets out
that "[a]ny person who violates the terms of an injunction under this section shall forfeit and
pay to the state a civil penalty of not more than $10,000 per violation, not to exceed
$50,000." Id. § 17.47(e) (Vernon Supp. 2008). The State concedes that section 17.47(e)
applies in circumstances in which the State seeks a civil penalty for a violation of an
injunction. However, the trial court's award of civil penalties, in this case, was based on
section 17.47(c), not section 17.47(e).
The trial court found in its second finding of fact that at least 200 persons purchased
Molano's services and that each sale transaction constituted an unlawful act or practice
and a separate violation of the DTPA. It also concluded in its fifteenth conclusion of law
that "[j]ustice requires the imposition of a civil penalty in the amount of $10,000.00 for the
violations of law committed by [Molano]." It is apparent that the trial court's reference to
"law" is to section 17.47(c) of the DTPA and the "violations" refer to the DTPA violations
stated in its finding. The trial court makes no reference to an award of civil penalties for
the violation of an injunction. We find nothing in the trial court's findings or conclusions or
in the final judgment that substantiates Molano's premise that the trial court must have
imposed civil penalties pursuant to section 17.47(e). Thus, we conclude that the trial
court's award of civil penalties for violations of the DTPA was consistent with, and
authorized under, section 17.47(c). Id. § 17.47(c) (Vernon Supp. 2008).
2. Restitution
The pertinent language of section 17.47(d), on which the trial court relied in
awarding restitution, provides that "[t]he court may make such additional orders or
judgments as are necessary . . . to restore money or property, real or personal, which may
have been acquired by means of any unlawful act or practice." Id. § 17.47(d) (Vernon
Supp. 2008). The legislative grant of judicial authority to restore money acquired by
unlawful means is the basis for the trial court's award of restitution as framed in its final
judgment. Read in context, the provision has no language or words that would condition
the availability of the restitution remedy upon a violation of an injunction, as Molano
contends. Rather, the provision is clear that the trial court is authorized to award restitution
of money "which may have been acquired by means of any unlawful act or practice." In
its findings of fact and conclusions of law, the trial court made the necessary finding and
conclusion to support that it acted within the grant of authority conferred by section
17.47(d). See id. The trial court's third finding of fact provides that Molano "solicited,
charged, and received compensation, totaling $10,000.00, from consumers for giving
advice and for rendering the services," and the court's fourteenth conclusion of law sets
out that Molano "acquired $10,000.00, by means of his unlawful acts and practices, from
consumers who are entitled to restitution." Contrary to Molano's contention, section
17.47(d) does not require a violation of an injunction before the trial court may award
restitution.
3. Attorney's Fees
In addition, the State prayed for, and the trial court granted, attorney's fees under
the Texas Government Code. Section 402.006(c) provides the following: "In a case in
which the state is entitled to recover a penalty or damages the attorney general is entitled,
on behalf of the state, to reasonable attorney's fees and court costs." Tex. Gov't Code
Ann. § 406.006(c) (Vernon 2005); see State v. Triax Oil & Gas, Inc., 966 S.W.2d 123, 127
(Tex. App.-Austin 1998, no writ); see also Merchants Fast Motor Lines v. State, 917
S.W.2d 518, 524 (Tex. App.-Waco 1996, writ denied) (concluding that the State is also
entitled to the recovery of attorney's fees when it recovers penalty or tort damages). The
State recovered a civil penalty of $10,000 from Molano. Thus, the award of attorney's fees
was within the authority granted to the trial court by section 402.006(c) of the government
code and was proper. See Tex. Gov't Code Ann. § 406.006(c) (Vernon 2005).
In summary, the plain and clear language of section 17.47 of the DTPA and section
402.006 of the government code expressly authorizes the remedies awarded by the trial
court in this action. See McIntyre, 109 S.W.3d at 745; Tex. Bus. & Com. Code Ann. §
17.47 (Vernon Supp. 2008); Tex. Gov't Code Ann. §§ 311.011(a), 402.006 (Vernon 2005).
We conclude that the trial court did not err in awarding remedies available under the
statute in this case, including civil penalties, restitution, and attorney's fees, without a
finding that Molano violated an injunction. See Wal-Mart Stores, 997 S.W.2d at 280. We
overrule Molano's second and third issues.
IV. Conclusion
We affirm the judgment of the trial court.
NELDA V. RODRIGUEZ
Justice
Opinion delivered and filed this
28th day of August, 2008.
1. The trial court made the following pertinent findings of fact:
1. On or after January 1, 2005, to May 4, 2006, [Molano] engaged in the business of
giving advice or rendering a service requiring the use of legal skill and knowledge in:
a. interviewing persons and advising them as to whether or not to file a petition
or application for divorce under state law or for immigration benefits under federal
law;
b. drafting and preparing pleadings or documents for others in judicial or
administrative proceedings relating to divorce actions or immigration to the United
States;
c. Drafting and preparing wills, contracts, agreements, powers of attorney, and
affidavits for others;
d. selecting and completing legal forms or instruments for others in divorce
actions and proceedings relating to immigration to the United States; and/or
e. preparing legal instruments affecting title to real property, such as deeds and
deeds of trust;
2. In the conduct of business, [Molano] advertised, offered for sale, and/or sold his
services to consumers of this State. At least 200 persons acquired by purchase defendant's
services, and the sale transaction with each person constitutes an unlawful act or practice
and a separate violation of the Texas Deceptive Trade Practices - Consumer Protection Act,
Tex. Bus. & Com. Code Ann. § 17.41, et seq.;
3. On or after January 1, 2005, to May 4, 2006, [Molano] solicited, charged, and
received compensation, totaling $10,000.00, from consumers for giving advice and for
rendering the services enumerated in paragraph 1 above; and,
. . . .
6. Attorney for [the State] spent 150 hours working on this case that were necessary
for the proper representation of the State, and the usual and customary rate charged by
practicing attorneys of his level of experience in Hidalgo County is $150.00 per hour.
The pertinent part of the trial court's conclusions of law are the following:
14. [Molano] acquired $10,000.00, by means of his unlawful acts and practices, from
consumers who are entitled to restitution;
15. Justice requires the imposition of a civil penalty in the amount of $10,000.00 for the
violations of law committed by [Molano];
16. A reasonable fee for the necessary services of the State's attorney of record in this
case is $15,000.00; and,
17. As a result of the conclusions of law (numbers 14, 15, and 16), [Molano] is indebted
to [the State] for the sum of $35,000.00.
2. "Class actions are governed by rule 42 of the Texas Rules of Civil Procedure, rewritten in 1977 to
mirror the class action provisions of the Federal Rules of Civil Procedure." Bara v. Major Funding Corp., 876
S.W.2d 469, 472-73 (Tex. App.-Austin 1994, writ denied) (citing Tex. R. Civ. P. 42; Thomas McElroy, Civil
Pretrial Procedure § 618 (West 1980 & Supp. 1992)). Federal case law interpreting federal rule 23 may
be relied on by Texas courts in construing similar language found in rule 42 where there are no Texas cases
interpreting the issue. See Glassell v. Ellis, 956 S.W.2d 676, 682 (Tex. App.-Texarkana 1997, writ dism'd
w.o.j.).
3. Black's Law Dictionary defines "de facto" as "[a]ctual; existing in fact; having effect even though not
formally or legally recognized." Black's Law Dictionary 353 (8th ed. 2005).
4. We also considered whether the judgment violated section 17.47(d) because it ordered restitution
in an amount that included monies paid to the Thomases beyond a point two years prior to the filing of the
lawsuit and concluded that the two-year limitations period applied only to the award of actual damages and
not to restitution. Thomas v. State, 226 S.W.3d 697, 705, 708 (Tex. App.-Corpus Christi 2007, pet. dism'd).
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387 F. Supp. 2d 1 (2005)
Mary J. LIGGINS, Plaintiff,
v.
John W. CARLIN, Archivist of the United States, Defendant.
No. CIV.A. 04-1207(JR).
United States District Court, District of Columbia.
September 2, 2005.
Lee Boothby, Boothby & Yingst, Washington, DC, for Plaintiff.
*2 Megan Lindholm Rose, Uldric L. Fiore, Jr., United States Attorney's Office, Washington, DC, for Defendant.
MEMORANDUM
ROBERTSON, District Judge.
This memorandum sets forth the reasons why the government's motion for summary judgment in this gender and age discrimination suit must be granted.
The plaintiff, Mary J. Liggins, began working at the National Archives and Records Administration (NARA) in 1986 as a utility system repair operator. She was later promoted to elevator mechanical inspector. On November 8, 2000, NARA posted a vacancy announcement for the position of facility manager. Ms. Liggins was then 56 years old. She had never held the position of facility manager, but she had acted for the facility manager at her workplace on many occasions. She applied for the open position, but her name was not referred to the selecting official.
NARA's promotion system has several stages. Candidates who meet basic eligibility criteria are first evaluated based on a "crediting plan." Crediting plan criteria vary depending on the position. In this case, five "knowledge, skills, and abilities" (KSA) elements were used in the crediting plan, although only three of them were listed on the vacancy announcement. The defendant has been unable to explain this discrepancy, and the plaintiff suggests that she may have been disadvantaged by NARA's use of two unannounced KSA's in the evaluation process. She makes no showing, however, of how her application might have been different had she known, and NARA has established by undisputed evidence that all applicants (except the man selected for the position) were evaluated using the same five KSA's. Ten applicants scored 80 or better in the crediting plan and were referred to the selecting official for further consideration. The plaintiff's score was 75, the lowest of all the applicants. Def. Ex. 3. She and another applicant, John Standish, failed to make the cut. Another female who did score above 80, Patricia Darby, was among the ten who were referred to the selecting official. Id.
The person selected for the facility manager position was Larry Watson, male, age 48. He did not participate in the crediting plan selection process, because, pursuant to a published regulation, see 5 C.F.R. § 335.103(c)(3)(v), his previous experience working as a facility manager made him eligible for "non-competitive referral" to the selecting official.
Disparate treatment
In order to establish a prima facie case of discriminatory failure to promote, Ms. Liggins had to show
that she belongs to a protected group, that she was qualified for and applied for a promotion, that she was considered for and denied the promotion, and that other employees of similar qualifications who were not members of the protected group were indeed promoted at the time the plaintiff's request for promotion was denied.
Valentino v. United States Postal Service, 674 F.2d 56, 63 (D.C.Cir.1982) (citing Bundy v. Jackson, 641 F.2d 934, 951 (D.C.Cir.1981)).
It is undisputed that Ms. Liggins is a member of two protected classes, that she submitted a timely application, that she was not selected as facility manager, and that the position went to a male eight years her junior. The two weak points in her prima facie case concern the "similar qualifications" element of proof at most, she had some experience "acting for" a *3 facility manager,[1] Def. Ex. 2, but Mr. Watson had a full year of experience as a facility manager for the United States Naval Observatory and the fact that the man selected as facility manager, at age 48, was also within the ADEA's protected class. See Murray v. Gilmore, 406 F.3d 708, 715 (D.C.Cir.2005) ("replacement within the same protected class cuts strongly against any inference of discrimination"); Dunaway v. Int'l Bhd. of Teamsters, 310 F.3d 758, 767 (D.C.Cir.2002) (reasonable jury could not find age discrimination based solely on evidence that employee was replaced by someone seven years her junior).
Even if the record is deemed sufficient to make out a prima facie case of gender discrimination, or age discrimination, or both, however, Ms. Liggins has failed to rebut NARA's assertion of a legitimate, nondiscriminatory reason for selecting Mr. Watson as facility manager, namely, that he had a year's experience working as a facility manager, while her application reflected no such experience. See Stewart v. Ashcroft, 352 F.3d 422, 428-30 (D.C.Cir.2003) (no inference of discrimination raised when plaintiff's qualifications are not superior to those of the selectee). NARA had stated its preference for such experience in the vacancy announcement, which indicated that "1 year of specialized experience at the GS-11 level is required.... Examples of creditable specialized experience would be: managing a maintenance program for an office or apartment building complexes, hospitals, recreation facilities, military, conduct surveillance activities over construction and maintenance operations, or performing maintenance or construction work." Def. Ex. 1; see Valentino, 674 F.2d at 64 (employer carried its burden where announcement stated that applicants should have experience in operations and management and selectee had longer and more varied work history than plaintiff).
Because Ms. Liggins has made no showing that NARA's prior experience criterion was pretextual, her disparate treatment claim fails as a matter of law.
Disparate impact on the basis of gender
Plaintiff's disparate impact claim is that NARA's practice of making non-competitive referrals of reassignment-eligible candidates who have prior experience in the advertised position i.e., candidates like Mr. Watson who already work in the same grade as that of the advertised position has a disparate impact upon females, because NARA has never employed a female as a facility manager. She provides no statistical evidence to support her claim, see Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 994, 108 S. Ct. 2777, 101 L. Ed. 2d 827 (1988) (to prove disparate impact case "plaintiff must offer statistical evidence of a kind and degree sufficient to show that the practice in question has caused the exclusion of applicants for jobs or promotions because of their membership in a protected group"). NARA's undisputed showing is 1) that the position in question was open to employees who were facility managers at other government agencies (Mr. Watson's experience as a facility manager, indeed, was at the U.S. Naval Observatory), and 2) in any event, that Mr. Watson was not selected solely for his prior experience, which ensured only that his application would be referred to the selecting official, and (3) that the hiring decision was also based on his application, other relevant experience, and interview. *4 Def. Reply to Pl.'s Factual Statement at 9; Def. Exs. 6-7.
NARA was not required to offer a legitimate, nondiscriminatory reason for Mr. Watson's selection, because the absence of statistical evidence is fatal to her prima facie case. NARA's showing illuminates the failure of Ms. Liggins' proof, however. What Ms. Liggins had to show was that NARA's neutral practice of automatic referral of reassignment-eligible applicants with requisite experience disproportionately impacted female applicants. See Palmer v. Shultz, 815 F.2d 84, 90 (D.C.Cir.1987). The two undisputed facts upon which she relies that NARA has never had a female facility manager, and that the one applicant exempt from the competitive referral process was a male who had worked as a facility manager for another agency are not enough.
An appropriate order accompanies this memorandum.
ORDER
For the reasons stated in the accompanying memorandum, the government's motion for summary judgment [# 3] is granted.
NOTES
[1] Plaintiff's assertion that she had experience "acting" for the facility manager at NARA is accepted for purposes of the instant motion, as it must be, but it is undisputed that her application made no mention of that experience. Def. Ex. 2.
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595 F. Supp. 2d 519 (2009)
STAR SPA SERVICES, INC., Star Spa Inc., and Stark Spencer Real Estate Partnership, Plaintiffs
v.
ROBERT G. TURANO INSURANCE AGENCY, INC., Robert G. Turano, Sherri Robbins, Nationwide Mutual Fire Insurance Co., Nationwide Flood Insurance Program, Nationwide Property & Casualty Co., and Nationwide Mutual Insurance Co., Defendants.
No. 3:07cv302.
United States District Court, M.D. Pennsylvania.
January 27, 2009.
*521 Joseph Robert Rydzewski, Spall, Rydzewski & Anderson, P.C., Leatrice A. Anderson, Law Office of John F. Spall, Hawley, PA, for Plaintiffs.
Charles E. Haddick, Jr., Grant W. Schonour, Dickie, McCamey & Chilcote, P.C., Camp Hill, PA, for Defendants.
MEMORANDUM
JAMES M. MUNLEY, District Judge.
Before the court is defendants' motion for summary judgment. (Doc. 23). Having been fully briefed, the matter is ripe for disposition.
Background
This case concerns the duties of insurers related to flood coverage. On or about June 23, 2006, a flood occurred at a property on 1250 Roosevelt Highway, Rt. 6, in Waymart Pennsylvania. (Defendants' Statement of Undisputed Facts (Doc. 24) (hereinafter "Defendants' Statement") at ¶ 5). Plaintiff Star Spa Services ("Star Spa") is a former tenant of Plaintiff Stark Spencer Real Estate Partnership ("Stark Spencer") at this address. (Id. at ¶ 3). *522 Both companies are Pennsylvania corporations. (Id. at ¶¶ 1-2). On that date, Stark Spencer maintained a standard flood insurance policy on that property in question through Defendant Nationwide Mutual Flood Insurance Company ("Nationwide"). (Id. at ¶ 6). Star Spa did not have flood insurance coverage for its property, which was stored in the structure owned by Stark Spencer. (Id. at ¶ 7).
Defendants contend that Star Spa never made a request for flood insurance coverage from them. (Id. at ¶ 8). No flood insurance policy was ever issued to Star Spa. (Id. at ¶ 9). When informed by the bank that plaintiff required flood insurance coverage for its renovated building, the plaintiff understood that this type of insurance coverage was separate from other insurance on the property. (Id. at ¶ 10). Defendant Turano Insurance Agency ("Turano") and its representatives never informed Star Spa that it was covered for its contents under a flood insurance policy. (Id. at ¶ 11). Turano also never informed Star Spa that it enjoyed flood insurance coverage under Stark Spencer's flood insurance policy. (Id. at ¶ 12). The property damaged in the flood on June 23, 2006 belonged to Star Spa. (Id. at ¶ 13). The property where the flooding took place is located in a flood zone rated "AE." (Id. at ¶ 14). Substantial improvement and construction occurred at that property after September 30, 1987. (Id. at ¶ 15).
On January 24, 2007, plaintiffs filed a complaint in the Court of Common Pleas of Wayne County, Pennsylvania. The complaint consists of four counts. Count I alleges that the Nationwide Insurance Defendants improperly denied coverage for plaintiffs' losses from the flood. Plaintiffs allege that Nationwide's improper refusal to provide coverage under the policy resulted in "direct and consequential damages" that included "additional damage to personal property and profits, substantial financial hardship and inconvenience with loss of rents and/or rental income." (Id at ¶ 11). Count II alleges that all defendants negligently misrepresented to the plaintiffs that they would obtain flood contents coverage for Star Spa. (Id. at ¶¶ 13-16). Count III contends that defendants were careless and negligent in failing to provide insurance for the property's contents and failing to notify plaintiffs about the limits of the insurance. (Id. at ¶¶ 18-19). Count IV alleges that the Turano Defendants, in failing to provide plaintiffs with contents coverage, engaged in unfair and deceptive acts or practices in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 PA. STAT. § 201-2(4).
On February 16, 2007, defendants filed a notice of removal with this court (Doc. 1). On February 22, 2007, the defendants filed their motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) (Doc. 3). Both parties then filed briefs. The court issued a decision denying in part and granting in part the motion to dismiss on September 25, 2007, 2007 WL 2821959. The parties then engaged in discovery. At the close of discovery, the defendants filed the instant motion for summary judgment, bringing the case to its present posture.
Jurisdiction
Because this case arises from a dispute over flood insurance claims under the National Flood Insurance Program, this court has jurisdiction pursuant to 42 U.S.C. § 4072. The court has supplemental jurisdiction over the plaintiff's state-law claims pursuant to 28 U.S.C. § 1367(a) ("In any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the *523 same case or controversy under Article II of the United States Constitution.").
Legal Standard
The case is before the court on the defendants' motion for summary judgment. Granting summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Knabe v. Boury, 114 F.3d 407, 410 n. 4 (3d Cir.1997) (citing FED. R. CIV. P. 56(c)). "[T]his standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986) (emphasis in original).
In considering a motion for summary judgment, the court must examine the facts in the light most favorable to the party opposing the motion. International Raw Materials, Ltd. v. Stauffer Chemical Co., 898 F.2d 946, 949 (3d Cir.1990). The burden is on the moving party to demonstrate that the evidence is such that a reasonable jury could not return a verdict for the non-moving party. Anderson, 477 U.S. at 248, 106 S. Ct. 2505 (1986). A fact is material when it might affect the outcome of the suit under the governing law. Id. Where the non-moving party will bear the burden of proof at trial, the party moving for summary judgment may meet its burden by showing that the evidentiary materials of record, if reduced to admissible evidence, would be insufficient to carry the non-movant's burden of proof at trial. Celotex v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
Discussion
Defendants move for summary judgment on several grounds. The court will address each in turn.
A. Pre-Emption of Plaintiffs' Extra-Contractual Claims
The defendants argue that all of plaintiffs' extra-contractual and tort claims, contained in Counts II-IV of the complaint, are preempted and/or barred as a matter of law. The only allegation of damages in the complaint, defendants contend, are contained in Count I. In that Count, plaintiffs contend that they suffered loss solely because of defendants' failure to make payment under the policy. All of the state-law claims are therefore "preempted" as a matter of law. Moreover, defendants insist that the National Flood Insurance Act preempts any claims for misrepresentations about coverage brought pursuant to Pennsylvania law.
"Congress created the [National Flood Insurance] Program to provide standardized insurance coverage for flood damage at or below actuarial rates." C.E.R. 1988, Inc. v. Aetna Cos. and Sur. Co., 386 F.3d 263, 266 (3d Cir.2004). Under this program, "Congress authorized [the] F[ederal] E[mergency] Management] A[gency] to `prescribe regulations establishing the general method or methods by which proved and approved claims for losses may be adjusted and paid for any damage to or loss of property which is covered by flood insurance.'" Id. at 267. Congress allows private insurance companies to write flood-insurance policies, but those companies "must strictly enforce the provisions set out by FEMA and may vary the terms of a Policy only with the express written consent of the Federal Insurance Administrator." Id "Policies written under the Act are called Standard Flood Insurance Policies." (SFIPs). Neill v. State Farm Fire *524 and Cas. Co., 159 F. Supp. 2d 770, 772 (E.D.Pa.2000).
The Act "provides subject matter jurisdiction for an insured's suits against a[n] [insurer] arising out of a disputed flood insurance claim." Van Holt v. Liberty Mut. Fire. Ins. Co., 163 F.3d 161, 166 (3d Cir.1998). Because of the federal government's interest in uniform national policies and standards in relation to flood insurance, "federal courts are the appropriate and exclusive arbiters of Policy-related disputes." C.E.R. 1988, Inc., 386 F.3d at 267. These courts must apply federal, not state, law to interpreting policies issued under the Act. Id. Moreover, a plaintiff may not plead a state-law tort claim to avoid federal law in interpreting such insurance contracts, since "a claim may sound in tort but nonetheless be one in contract." Id. at 268. Courts have therefore found that "federal common and statutory law specifically preempt state principles of contract law for purposes of the interpretations of policies issued pursuant to the N[ational] F[lood] I[nsurance] A[ct]." Messa v. Omaha Property & Cas. Ins. Co., 122 F. Supp. 2d 513, 520 (D.N.J. 2000); see also, Padalino v. Standard Fire Ins. Co., No. 08cv1553, 2008 WL 4630585 at *3 (E.D.Pa. Oct. 15, 2008) (finding that "NFIA [preempts] state law claims that are based on the handling and adjustment of a claim made under an insured's SFIP because the `application of state law would impede Congress's objectives' in reducing `fiscal pressure on federal flood relief efforts.'") (quoting C.E.R. 1988, 386 F.3d at 270).
Accordingly, if the court were to find that plaintiffs' tort claims were merely an attempt to use state law to interpret a contract issued pursuant to the NFIA, the court would find those tort claims preempted. The tort claims in question here, however, are not designed to determine whether the defendants properly interpreted the policy. Instead, they are aimed at the negotiations the parties undertook when they procured the coverage. Indeed, Plaintiff Star Spa acknowledges that the company did not purchase any flood insurance coverage before the incident in question. Courts in various jurisdictions have concluded that federal preemption does not apply to the procurement of flood insurance policies under the Act. See, e.g., Spence v. Omaha Indem. Ins. Co., 996 F.2d 793, 796 (5th Cir.1993) (finding that "tort actions based on misrepresentations concerning the SFIP, as opposed to contract claims under the SFIP itself are not preempted under the Act); Reeder v. Nationwide Mut. Fire Ins. Co., 419 F. Supp. 2d 750, 759 (D.Md.2006) (finding that "state law tort claims arising out of alleged misrepresentations made during the procurement of an SFIP are not preempted in the flood insurance context"); Padalino, 2008 WL 4630585 at *4 (finding that "state law claims against W[rite] Y[our] O[wn] companies in the context of SFIP procurement should not interfere with Congress's objective of providing affordable flood insurance to the public.").
Here, the complaint is not about the interpretation of a flood insurance policy, but the procurement of one. The denial of coverage for Star Spa came not because the claim did not qualify under the policy, but because there was no policy under which plaintiffs could make a claim. In that case, the reasons for preempting state lawto give effect to the supremacy of federal law enshrined in the Constitution and allow the efficient operation of a federally designed nationwide regulatory schemeare not applicable. No flood control policy was in place here, and there thus exists no reason to use federal law to interpret the policy. See, e.g., Padalino, *525 2008 WL 4630585 at *6 (holding that "Without a SFIP, the NFIP does not apply and the NFIA cannot extend to the relationship between the insurance company and their insureds."). If plaintiffs did not actually have a flood insurance policy, defendants should not be able to use rules applied to those who took out such a policy to short-circuit the plaintiffs' claims. Accordingly, the court will not grant summary judgment on these grounds. The court will, however, consider defendants' motion in relation to the claims themselves.
B. Negligence Claims Against Turano Agency
i. Duty
Defendants contend that plaintiffs' negligence claims against Defendant Turano Agency must fail because that defendant neither had a duty to provide flood insurance nor a duty imposed by law to secure such coverage for plaintiffs. Evidence indicates that plaintiffs were aware that Turano would not provide such coverage, and thus the defendant had no duty to do so. Those facts establish that Plaintiff Stark Spencer suffered no loss and Plaintiff Star Spa had no expectation that it would receive coverage. Further, defendants argue that Turano met its legal duty to explain the coverage available and the consequences of not accepting that coverage.
Donna M. Spencer, President of Plaintiffs Star Spa and Stark Spencer testified at her deposition about the process of insuring the property on Roosevelt Road. She first contacted Defendant Turano Insurance Agency in September or October of 2002. (Deposition of Donna M. Spencer, Exh. J to Plaintiffs' brief in opposition to defendants' motion for summary judgment (Doc. 28-3) (hereinafter "Spencer Dep.") at 32). The business had expanded and planned to move to a new location, and Spencer sought an insurance agency based closer to that business. (Id.). Her husband, the other principal in the business, knew the head of the agency, and Spencer asked for a quoted rate. (Id. at 33). She sought coverage for all of the business, except for vehicles, which were covered by State Farm. (Id). Spencer sought coverage for her businesses' operations. (Id. at 33-34). She knew that her businesses needed coverage for "fire and flood and liability," but "relied on" the Defendant Agency to provide her with "adequate coverage." (Id. at 34). She had never before purchased flood insurance. (Id.). The companies' new property, however, was located on a flood plain, and the bank that made the mortgage for that property had informed Spencer that she needed flood insurance. (Id.). In her testimony, Spencer insisted that she never told anyone at the Agency that she wanted only the "bare minimum" flood insurance. (Id. at 34-35).
Eventually, Defendant Turano wrote the plaintiffs' insurance policies. (Id. at 35). Spencer testified that in September or October of 2002 she requested "[b]uilding and contents coverage" for both Star Spa and Stark Spencer. (Id. at 39). She called up a Turano representative and told her that she wanted "building coverage for Stark Spencer and contents for Star Spa." (Id.). Spencer testified that she also requested flood insurance from the Defendant Agency. (Id. at 39-40). She did not make that request in writing, however. (Id. at 40-41). Instead, she made a verbal request for the coverage, as "[t]hat's the way we always did business with them." (Id. at 41). Stark Spencer procured a flood insurance policy through Defendant Turano in 2002. (Id. at 44). Star Spa sought flood insurance coverage for the contents of the building the companies shared, but "were told they couldn't get it." (Id. at *526 45). When the companies renewed their policies in 2003, Spencer again requested flood insurance for Star Spa to cover the building's contents. (Id. at 47). The companies were expanding the building and wanted to ensure coverage. (Id.). Again, however, the Defendant Agency informed Spencer that flood insurance coverage was not available for the building's contents. (Id.). Spencer requested such coverage for contents once more in the spring of 2004. (Id. at 48). Defendant again informed here that such coverage was not available. (Id.).
In August or September 2004, however, Spencer again requested a flood policy for Star Spa. (Id. at 49). The new building had been constructed, and Star Spa had moved a great many items to the store. (Id.). Spencer claimed that the items were not stored in a basement, and that Star Spa should thus be eligible for coverage. (Id.). Concluding that the area where the goods were stored was a basement, Defendant informed Star Spa that it could not obtain flood insurance for the goods. (Id. at 50). According to Spencer, Defendant Turano then suggested that she obtain "a blanket protector," which she took to mean would "cover contents under any circumstances." (Id.). The company never gave her specific information on that type of policy, but Spencer purchased a blanket protector nonetheless. (Id.). Spencer believed that such a policy would cover the contends "if a flood should occur." (Id. at 51). Spencer insisted that no one explained to her that the blanket protection she bought would not cover the contents in the case of a flood. (Id. at 52). Indeed, she contended that Turano Agency representatives had implied that the blanket coverage would protect the contents against flood. (Id. at 53). She had sought such coverage, been told that the flood-insurance policy could not cover contents and then the defendant had suggested she buy a blanket protector. (Id. at 54). Stark Spencer purchased the blanket protector policy to be effective from September 11, 2004 until September 11, 2005. (Id. at 55-56).
In April 2005, Stark Spencer increased the flood coverage on the building from $45,000 to $160,000. (Id. at 59). The company increased coverage because improvements to the building had been completed and the insurance was changed to reflect the value of those improvements. (Id.). When Spencer sought the insurance, she knew that the coverage was for the building and not its contents. (Id.). The Turano Agency had repeatedly informed her that flood insurance coverage was not available to Star Spa for the building's contents. (Id. at 67). Spencer testified that she did not believe that she had an agreement with the Turano Agency to obtain flood insurance coverage for the contents of the building. (Id. at 72). No one at the Agency ever told Spencer that the contents of the building were covered by Stark Spencer's flood insurance policy. (Id. at 75-76). Ron Stark, Spencer's husband and co-owner of the businesses, also testified that Star Spa had no flood insurance coverage prior to their loss. (Stark Dep. at 37-38). The only policy in place covered Stark Spencer. (Id. at 380).
Spencer testified that sometime after July 2006 she and her husband had a conversation with an insurance adjuster. (Id. at 76). After evaluating the coverage on the property, the adjuster asked Spencer whether the companies had coverage for the building's contents. (Id.). After informing the adjuster that she understood such coverage to be unavailable, Spencer and her husband spoke with agents at the Turano agency. (Id.). Soon thereafter, plaintiffs received a quote for contents coverage from the Defendant Agency. (Id.). Eventually, plaintiffs severed their business *527 relationship with the Defendant Agency. (Id. at 77). At the time of Spencer's deposition, the company had coverage for flood contents through State Farm. (Id.).
Defendant Turano testified that plaintiffs never asked him for a quote on contents insurance before the flood, but that he would have provided such information had he been asked. (Turano Dep. at 56). He could not recall conversations with either Spencer or Stark regarding contents coverage prior to the plaintiffs' loss due to flooding. (Id. at 71-72). Turano insisted that only Stark Spencer had sought flood insurance coverage, and that plaintiffs had never informed him that they kept property for which they wanted insurance in the flooded areas of the building. (Id. at 92). After the flood, his office on September 20, 2006 provided a flood insurance quote that included contents. (Id. at 74, 93). His agency provided this quote for Star Spa, not Stark Spencer. (Id. at 75, 93). That request was the only request Star Spa had ever made to him for a quote on contents coverage. (Id. at 93). The Turano agency provided Star Spa with coverage for contents in situations other than floods, but had never been requested to write flood insurance contents coverage. (Id. at 101). Turano's agency kept separate records for its dealings with Stark Spencer and Star Spa, though the agency always dealt with either of the plaintiffs, and never with a particular company. (Id. at 94-95). Still, Turano insisted that the company always clarified with the plaintiffs which company they were speaking about. (Id. at 95-96). Even after the flood, Turano retained his position that he could not write flood insurance coverage for the contents. (Id. at 89).
To make out a negligence claim, a plaintiff must allege "`the defendant had a duty to conform to a certain standard of conduct; that the defendant breached that duty; that such breach caused the injury in question; and actual loss or damage.'" Wisniski v. Brown & Brown Ins. Co. of Pennsylvania, 906 A.2d 571, 575-76 (Pa.Super.Ct.2006) (quoting Phillips v. Cricket Lighters, 576 Pa. 644, 841 A.2d 1000, 1008 (2003)). The Pennsylvania Supreme Court has held that "the legal concept of duty of care is necessarily rooted in often amorphous public policy considerations." Althaus v. Cohen, 562 Pa. 547, 756 A.2d 1166, 1169 (2000). Courts are to balance several factors in determining whether a duty exists: "(1) the relationship between the parties; (2) the social utility of the actor's conduct; (3) the nature of the risk imposed and foreseeability of the harm incurred; (4) the consequences of imposing a duty upon the actor; and (5) the overall public interest in the proposed solution." Id.
The Pennsylvania Superior Court has addressed these factors in determining the extent of an insurance agent's duty to inspect a property before advising a person seeking flood insurance coverage. See Wisniski 906 A.2d at 581 (finding that an insurance broker does not have a "duty to inspect business premises and advise clients based on that inspection."). The court found that "for ordinary negligence purposes, the relationship between the insurance broker and client is an arm'slength business relationship." Id. at 579. While the court found "social utility" in having an agent inspect a property and identify risks, the court also concluded "that insureds can also inspect their own property and come to their own reasonable conclusions about the type and scope of insurance coverage they need." Id. Next, the court concluded that the nature of the risk imposed and foreseeability of the harm incurred did not justify imposing a duty to inspect since, "[r]isk is the very *528 nature of insurance ... individuals take an intellectual gamble when purchasing insurance as they weigh the expense of purchasing insurance versus the amount of coverage they purchase. Insurance against loss does not mean the industry is 100% guarantor of protection against loss." Id. at 580. Finally, the court found the duty to inspect a property would impose an onerous risk on insurance brokers, who might well be expected to inspect every item eligible for insurance or face lawsuits after a loss occurred.[1]
The court thus finds that the duty owed by an insurance broker in this context is the same as the duty generally owed by an agent in any other insurance transaction.[2] In addressing the general nature of the duty of an insurance agent to a consumer, courts in Pennsylvania have found an insurer's duty to consist of "fair dealing and good faith ... not hand holding and substituted judgment." Kilmore v. Erie Ins. Co., 407 Pa.Super. 245, 595 A.2d 623, 627 (1991). While an insurer may have a heightened duty to a person relying on his knowledge of a specialized industry, "the relationship [between insurer and insured] is not so unique as to compel this Court to require an insurer to explain every permutation possible from an insured's choice of coverage." Id. Still, this duty of good faith and fair dealing "includes the duty of full and complete disclosure as to all of the benefits and every coverage that is provided by the applicable policy or policies." Dercoli v. Pennsylvania Nat'l Mut. Ins. Co., 520 Pa. 471, 554 A.2d 906, 909 (1989). This duty "arises from the nature of insurance contracts and the fiduciary relationship between an insurance company and its insureds." Burton v. Republic Ins. Co., 845 A.2d 889, 899 (Pa.Super.Ct.2004); Weisblatt v. Minnesota Mut. Life Ins. Co., 4 F. Supp. 2d 371 (E.D.Pa.1998). Pennsylvania courts have emphasized, however, that, despite the duty of the insurer to make the insured aware of the contents of a policy, "[e]ach insured has the right and obligation to question his insurer at the time the insurance contract is entered into as to the type of coverage desired and the ramifications desired therefrom." Kilmore, 595 A.2d at 627; see also, Treski v. Kemper Nat. Ins. Companies, 449 Pa.Super. 620, 674 A.2d 1106, 1115-16 (1996).
Evidence here exists by which a jury could conclude that the Defendant Agency and agents breached their duty of fair dealing in selling Plaintiff Spencer insurance policies. The evidence indicates that Spencer sought coverage for the contents of the building. Star Spa owned the contents of the building, and Stark Spencer owned the building. Defendant made Spencer aware of the limits of the policies *529 available to insure the contents under the flood insurance program, and thus that Stark Spencer and Star Spa could not obtain coverage that would insure the contents. Still, a jury could find that Spencer, aware that she could not obtain coverage under the flood insurance program, persisted in attempting to obtain coverage for the contents. A jury could also find that defendants breached their duty to disclose fully to Spencer the coverage provided by the blanket protector policy and suggest other policies which could provide the coverage she clearly and repeatedly sought. The situation here is complicated by the fact that two separate businesses sought insurance policies, but the same persons owned and managed those separate companies. The parties involved may not always have been clear about which entity sought what kind of coverage. The court concludes that this complicated factual situation would be best resolved by a jury and will deny summary judgment on this point.
ii. Failure to Establish Prima Facie Causation
Defendants next argue that even if plaintiffs could establish that a duty to provide coverage existed in this case, they could not establish that the failure to provide such coverage was the cause of plaintiffs' loss. Because the coverage plaintiffs here sought would not have covered the items damaged anyway, the defendants assert that their failure to provide coverage did not cause the plaintiffs' injuries.
Spencer testified that Star Spa kept many items in the bottom level of the building on Roosevelt Road, including parts, surplus water treatment products and spas. (Spencer Dep. at 38). Items stored in that part of the building at the time of the flood included "new spas ... parts, pumps, motors, water treatment products, office furniture ... computers, the office setup, the whole thing." (Id. at 78). The area also contained "a lot of used spas that we refurb[ish]." (Id. at 79). The flood damaged spas, pumps, heaters, water treatment product, files, office furniture, a refrigerator, stove, wicker furniture, spa covers, artificial plants, storage chests, stored building materials like sheetrock, literature, and dressers. (Id. at 79-81); (See also Stark Dep. at 42). More than $200,000 worth of this property was damaged in the flood. (Id. at 82; Stark Dep. at 46).
The court finds that the dispute here is not over whether defendants provided a flood insurance policy to cover this property, which belonged to Star Spa and was not covered by the existing flood-insurance policy, but instead whether the defendants failed to provide coverage for this property which had been requested. There is no dispute that the plaintiffs were informed that they could not obtain coverage for Star Spa's property by obtaining flood insurance coverage. Insurance covering the contents later proved available to the plaintiffs, and they obtained it subsequent to the flood. If the plaintiff had obtained such coverage before the incident, they would not have suffered the uncompensated damage to their property that is the subject of this lawsuit. As such, a jury could conclude that the failure of defendants to inform plaintiffs of coverage available for Star Spa's property and was the cause of Star Spa's injuries, and the court will deny the defendant's motion on this point.
C. Damages on the Breach of Contract Claim
Defendants also argue that plaintiff Stark Spencer cannot recover on its breach of contract claim because Stark Spencer did not suffer any damages associated *530 with the breach.[3] Stark Spencer had coverage only for damage to the building here in question, not for any of the contents of the property. Plaintiffs have evidence only of damage to property belonging to Star Spa, and therefore Plaintiff Stark Spencer has not suffered any damages for which they would be entitled to recover.
"A claim for breach of contract exists where it can be shown that there was a contract, a breach of duty imposed by that contract and damages that resulted from the breach." Koken v. Steinberg, 825 A.2d 723, 729 (Pa.Commw.Ct.2003). "The basic elements of a contract" include "an offer, acceptance and consideration." Hatbob v. Brown, 394 Pa.Super. 234, 575 A.2d 607, 613 (1990). Here, the deposition testimony indicates that the only damage suffered by the plaintiffs was to the contents of the building. As outlined above, all of the items damaged in the flood that precipitated the instant litigation belonged to Star Spa. (Spencer Dep. at 81). The flood insurance policy the plaintiffs held was issued to Stark Spencer, and Spencer was "never under any impression that [she] had a flood insurance policy for Star Spa Services." (Id. at 64). Spencer's husband and business partner, Ron Stark, agreed with this assessment that Star Spa never had any flood insurance. (Ron Stark Deposition, Exh. L to Doc. 28, (hereinafter "Stark Dep.") at 26). Because no evidence indicates that the defendants breached their agreement to provide coverage for the building, the court finds that no reasonable juror could conclude that defendants breached their insurance contract with Stark Spencer. The court will therefore grant summary judgment to the defendants on Stark Spencer's breach of contract claim.
D. Unfair Trade Practices and Consumer Protection Law/Reasonable Expectations Doctrine
Defendants next argue that they should be granted summary judgment on plaintiffs' claims brought pursuant to the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL") because plaintiffs have no evidence of malfeasance but only nonfeasance, and the law requires that a plaintiff establish malfeasance to prove liability. Defendants also argue that plaintiffs cannot claim that they had a reasonable expectation of insurance coverage because they knew that the policy that had purchased did not provide such coverage.
Under the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 PENN. STAT. §§ 201-1, et seq., "[i]t is well established that an insurer's refusal to pay benefits to an insured is nonfeasance, and not actionable under the CPL." Klinger v. State Farm Mutual Auto. Ins. Co., 895 F. Supp. 709, 717 (M.D.Pa.1995); see also Horowitz v. Federal Kemper Life Assurance Co., 57 F.3d 300, 307 (3d Cir. 1995) (holding that "[i]n Pennsylvania, only malfeasance, the improper performance of a contractual obligation, raises a cause of action under the Unfair Trade Practices and Consumer Protection Law [citation omitted], and an insurer's mere refusal to pay a claim which constitutes nonfeasance, the failure to perform a contractual duty, is not actionable.").
Thus, the plaintiffs would not have a claim under the UTPCPL if they had purchased a valid policy and the defendants had refused coverage on a claim. The evidence here, however, indicates that *531 plaintiffs never had a policy that would cover the contents in question. Instead, they contend that the evidence demonstrates that they sought such a policy but were negligently prevented from obtaining one. The question in this case, then, is whether the failure to procure such a policy constitutes the sort of malfeasance a jury could use to find defendants liable.
The Third Circuit Court of Appeals has concluded that "Pennsylvania law does not allow an insurer to use the explicit language of its insurance policy to defeat the reasonable expectations of an insured, at least when the insured's expectations are based on the insurer's or its agent's representations, and that it is not unreasonable for insureds to rely on the representations of the insurer's agent rather than on the contents of the insurance policy to understand the scope or cost of her coverage." Dilworth v. Metro. Life Ins. Co., 418 F.3d 345, 353 (3d Cir.2005); see also Bensalem Twp. v. Int'l Surplus Lines Ins. Co., 38 F.3d 1303, 1311 (3d Cir.1994) (noting that in Pennsylvania "we are confident that where the insurer or its agent creates in the insured a reasonable expectation of coverage that is not supported by the terms of the policy that expectation will prevail over the language of the policy."). In Dilworth, the Third Circuit Court of Appeals reversed the district court's grant of summary judgment to the defendant on plaintiff's claim under the UTPCPL. The plaintiff had purchased a life insurance policy and claimed her insurance agent had informed her that she would not have to pay premiums after nine or ten years because the policy was "self funding." Dilworth, 418 F.3d at 347. Because plaintiff had presented evidence that demonstrated that she reasonably expected her policy to include provisions which it did not, the court concluded that her claim under the UTPCPL could survive summary judgment. Id. at 353-54.
The situation here is different from Dilworth. The evidence indicates that plaintiffs did not believe that they had received coverage for contents in their flood insurance policy. Instead, the evidence demonstrates that they believed because of their agents' representations that they could not obtain such coverage because of where the contents were stored on the property. No evidence indicates that the plaintiffs ever expected the policy they had in place to cover the property that the flood damaged. As such, no reasonable expectation of coverage based on the defendants' representations occurred, and plaintiffs cannot prevail on their claim under the UTPCPL. Summary judgment will be granted the defendants on this claim.
Conclusion
For the reasons stated above, we will grant the defendants' motion for summary judgment in part and deny it in part. The court will grant the motion for summary judgment on plaintiffs' breach of contract claim and plaintiffs' claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law. The court will deny the motion on plaintiff's negligence claims contained in counts two and three. A trial date will be set to address these claims for negligence in the procurement of insurance coverage for Star Spa's contents. An appropriate order follows.
ORDER
AND NOW, to wit, this 27th day of January 2009, the Defendants' motion for summary judgment (Doc. 23) is hereby GRANTED IN PART and DENIED IN PART, as follows:
1) The motion is GRANTED with respect to plaintiffs' remaining breach of contract claims and claims under the *532 Pennsylvania Unfair Trade Practices and Consumer Protection Law; and
2) The motion is DENIED with respect to the plaintiffs' negligence claims raised in Counts II and III of the complaint.
NOTES
[1] The court quoted approvingly from an opinion by the Missouri Court of Appeals that found that creating such a duty would turn the principle of insurance on its head: "[b]y creating such a duty insureds would have the opportunity to seek coverage for a loss after it occurred merely by asserting that they would have bought additional coverage if it had been offered. This turns the entire theory of insurance on its ear as individuals, in theory, take an `intellectual gamble' when purchasing insurance as they weigh the expense of insurance versus the amount of coverage that they purchase. Allowing insureds to seek coverage, post-occurrence, allows them to completely circumvent this risk." Wisniski, 906 A.2d at 581 (quoting Farmers Ins. Co. v. McCarthy, 871 S.W.2d 82, 86 (Mo.App. E.D. 1994)).
[2] The court also notes that the complaint in this case is not about promises made about the flood insuranceall agree that no one ever represented that such flood insurance coverage applied to Star Spa's propertybut about the failure to offer other coverage that could have protected the property stored in the real estate.
[3] The court previously dismissed Plaintiff Star Spa's breach of contract claim, concluding that no contract existed between Star Spa and the defendants.
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31 F. Supp. 2d 531 (1998)
Charles Gilbert GIBBS, Sr.; Richard Lee Mann; Hyde County, North Carolina; and Washington County, North Carolina, Plaintiffs,
v.
Bruce BABBITT, U.S. Secretary of the Interior, in his official capacity; U.S. Department of the Interior; Jamie Clark, Director U.S. Fish and Wildlife Service, in her official capacity; and U.S. Fish and Wildlife Service, Federal Defendants,
and
Defenders of Wildlife, Defendant-Intervenor.
No. 4 97-CV-41-BO.
United States District Court, E.D. North Carolina, Eastern Division.
December 21, 1998.
E. Lawrence Davis, Womble, Carlyle, Sandridge & Rice, Pressly M. Millen, Womble, Carlyle, Sandridge & Rice, Christopher T. Graebe, Womble, Carlyle, Sandridge & Rice, Raleigh, Harvey W. Raynor, III, Belhaven, for Charles Gilbert Gibbs, Richard Lee Mann, III, Hyde County, North Carolina, *532 Washington County, North Carolina, plaintiffs.
R.A. Renfer, Jr., Asst. U.S. Attorney, Office of U.S. Attorney, Raleigh, Kelly E. Mofield, Trial Attorney, Environment & Natural Resource Div., Wildlife & Marine Resources Sedction, Washington, DC, for Bruce Babbitt, U.S. Fish and Wildlife Service, Defendants.
Derb S. Carter, Southern Environmental Law Center, Chapel Hill, Charles C. Carson, Environment & Natural Resource Div., Wildlife & Marine Resources Section, Washington, DC, for Secretary of the Interior, U.S. Department of the Interior, Defenders of Wildlife, Jamie Clark, defendants.
ORDER
BOYLE, Chief Judge.
This matter is before the Court on three motions for summary judgment: one each from the Plaintiffs, Federal Defendants, and Defendant-Intervenors. The underlying action, in its present form, is for relief from alleged violations of the Constitution, and especially the Tenth Amendment, by the United States Fish and Wildlife Service ("FWS"). Plaintiffs seek various forms of relief, including a declaration that all federal regulations relating to the taking of red wolves on private land are invalid, a declaration of the primacy of North Carolina laws regarding the red wolves over conflicting federal regulation, an injunction against FWS enforcement of federal regulations relating to the taking of red wolves on private land in Hyde and Washington Counties, and an award of attorney's fees and costs.
PROCEDURAL BACKGROUND
Plaintiffs filed suit against Defendants on March 3, 1997, initially presenting four claims for relief. On June 29, 1998, this Court received a stipulation of dismissal of the Plaintiffs' first, second, and third claims, leaving only one claim for relief, centering around alleged violation of the Tenth Amendment. On October 27, 1997, this Court granted a motion to intervene by the group Defenders of Wildlife, who were accordingly added as to the case as Defendant-Intervenors. A hearing was held in this matter on October 21, 1998. Discovery is complete in this matter, and the three motions for summary judgment before this Court are ripe for decision.
STATEMENT OF FACTS
The saga of the red wolf[1] in eastern North Carolina began in 1986, when the United States Fish and Wildlife Service announced that it was proposing to introduce an "experimental"[2] population of red wolves into the Alligator River National Wildlife Refuge. After a period of public comment, the FWS issued a final rule outlining its release plan for red wolves on November 19, 1986.
In the fall of 1987, the FWS released four pairs of captive red wolves into the Alligator River National Wildlife Refuge. Significant resources have been devoted to this program, and the population of red wolves in the wild has grown. As the red wolves have begun to establish themselves, they have, of course, wandered off of federal land and on to surrounding private land.
This movement of red wolves onto private land provides the basis of this case. Under the Endangered Species Act ("ESA"), as well *533 as the current rule relating to red wolves, the FWS regulates the extent to which citizens can take[3] a red wolf that has strayed off government land. See 50 C.F.R. § 17.84(c).[4] This regulation is promulgated pursuant to § 9(a)(1) of the ESA. See 16 U.S.C § 1538(a). Under this regulation, Plaintiff Richard Lee Mann was prosecuted, and after he pled guilty, fined and sentenced to perform community service building "wolfhouses" and feeding red wolves. Opposition to the red wolf project grew, and in 1992, the County Commission of Washington County, North Carolina passed a resolution opposing the red wolf program. This was followed in 1994 by a Hyde County, North Carolina, resolution requesting removal of red wolves from the County's private lands. This led to a 1994 North Carolina Department of Agriculture protest of the red wolf program.
Finally, in 1994, frustrated opponents of the red wolf program introduced "An Act to Allow the Trapping and Killing of Red Wolves by Owners of Private Land." See 1994 N.C. Sess. Laws Ch. 635. This bill, as passed into law, declared it "lawful for a private landowner or the landowner's agent at any time to trap and kill red wolves that are on the landowner's property, and that the property owner reasonably believes may be a threat to the person's own life or the lives of others, or to the life of livestock on the property," provided that the "landowner has previously requested the [FWS] to remove the red wolves from the landowner's property and that the landowner shall report the killing of a wolf to the [FWS] withing 48 hours." See 1994 N.C. Sess. Laws Ch. 635 (July 1, 1994) (law applicable only in Hyde and Washington Counties). In 1995, this law was amended to include Beaufort and Craven Counties. See 1995 N.C. Sess. Laws Ch. 83 (May 15, 1995). The FWS regulations regarding the red wolf are thus in direct conflict with the laws of the State of North Carolina.[5]
*534 As of February 1998, approximately 75 red wolves were living in the wild in eastern North Carolina.[6]
DISCUSSION
Because of the Plaintiffs' stipulation voluntarily dismissing three of their four claims for relief, this Court need only consider those issues elucidated in Plaintiffs' Fourth Claim for Relief. This claim alleges that the federal government has violated the Tenth Amendment to the United States Constitution by "exceed[ing] its constitutional power and privilege by prohibiting the take (sic) of red wolves on private land in Hyde County and Washington County." Plaintiffs request that this Court invalidate all federal regulations relating to the taking of red wolves on private land in Hyde and Washington Counties, "declare the primacy of North Carolina state law [relating to the taking of red wolves] against all conflicting federal regulation," and enjoin the Fish and Wildlife Service from enforcing regulations relating to the taking of red wolves on private land in Hyde and Washington Counties.
Due to the Plaintiffs' decision to concede all but their fourth claim for relief, the issue before this Court can be clearly stated by a single question; Does the federal government have the power under the Constitution of the United States to promulgate 50 C.F.R. § 17.84?
Plaintiffs, by dismissing with prejudice their other claims, have chosen to concede any issues relating to the propriety of the rulemaking process. Thus, this Court can analyze 50 C.F.R. § 17.84 in the same way it would had that regulation been passed by both Houses of Congress and signed by the President, as opposed to promulgated through the exercise of delegated rulemaking authority.
Thus, this Court begins its analysis by searching in the Constitution for a grant of authority to Congress to make a law regulating the taking of red wolves on private land. Upon examination, the most likely source for such authority is the Commerce Clause, which states that "The Congress shall have Power ... To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes."
Supreme Court precedent tells us that the Commerce Clause is much broader than it might appear, and that it is important to remember that "[t]he task of a court that is asked to determine whether a particular exercise of congressional power is valid under the Commerce Clause is relatively narrow." Hodel v. Virginia Surface Mining & Reclamation Ass'n, 452 U.S. 264, 276, 101 S. Ct. 2352, 69 L. Ed. 2d 1 (1981). Even after Lopez placed limits on the Commerce Clause as a grant of Congressional authority, a reviewing court need only determine "whether a rational basis existed for concluding that a regulated activity" substantially affects interstate commerce. United States v. Lopez, 514 U.S. 549, 557, 115 S. Ct. 1624, 131 L. Ed. 2d 626 (1995).[7]
*535 Lopez set forth the three broad categories of activity that Congress may regulate consistent with the Commerce Clause:
First, Congress may regulate the use of the channels of interstate commerce. Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities. Finally, Congress' commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce, i.e., those activities that substantially affect interstate commerce. 514 U.S. at 558-59, 115 S. Ct. 1624.
In this case, the nexus between the regulation at issue and interstate commerce is the red wolf. The record in this case clearly demonstrates that red wolves are "things in interstate commerce," and that they substantially affect interstate commerce through their tourism value. Under Lopez, it is irrelevant that the threat to red wolf-related commerce comes from intrastate "taking" of red wolves.[8]
Defendants in this case have demonstrated that tourists do cross state lines to see the red wolf, and that these tourists have an impact on commerce.[9] Defendants have further demonstrated that red wolves are to be found in several States,[10] and that some of the red wolves of Eastern North Carolina either have crossed state lines or may cross state lines in the future. All of these actions have economic consequences, as tourists, academics, and scientists follow the red wolves.[11] Unrestricted taking of red wolves on private land would present a clear threat to this commerce.[12]
CONCLUSION
In assessing whether Congress exceeded its authority under the Commerce Clause, this Court notes that every act of Congress is entitled to a "strong presumption of validity and constitutionality." Barwick v. Celotex Corp., 736 F.2d 946, 955 (4th Cir.1984). Since Lopez, no Circuit Court has determined that a federal statute is unconstitutional because it overreaches the Commerce Clause.[13] This Court does not find *536 that this case compels a crossing of that line. There is a clear nexus between protection of endangered red wolves from taking and interstate commerce. Thus, this Court finds that the regulation at issue in this case is a legitimate exercise of federal power under the Commerce Clause. Accordingly, Defendants' Motions for Summary Judgment are GRANTED, and Plaintiffs' Motion for Summary Judgment is DENIED.
SO ORDERED.
NOTES
[1] The red wolf (Canis Rufus) was designated an endangered species in 1967. There is some question in the scientific community as to whether the red wolf is a "species," for purposes of the ESA, or a "hybrid," a result of crossbreeding between the gray wolf and the coyote. In the 1970s the FWS trapped the last red wolves in the wild and established a number of captive breeding programs. The success of these captive breeding programs allowed the FWS to consider reintroducing the red wolf to the wild. A previous proposal to release red wolves in Kentucky and Tennessee was withdrawn due to public opposition.
[2] The "experimental" designation allows the government to introduce experimental populations of endangered or threatened species into areas unoccupied by that species. Such a release is, of course, a risk to the individual animals involved, and the government can only conduct such experiments with populations considered "nonessential" to "the continued existence of an endangered species or threatened species." See 16 U.S.C. § 1539(j).
[3] In the context of this order, "taking" is used not as a constitutional term of art, but as it is defined in the Endangered Species Act: "[T]he term `take' means to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect [an endangered species], or to attempt to engage in any such conduct." 16 U.S.C. § 1532(19).
[4] The relevant text of the regulation is as follows:
(4)(i) Any person may take red wolves found on private land in the areas defined in paragraphs (c)(9)(i) and (ii) of this section, provided that such taking is not intentional or willful, or is in defense of that person's own life or the lives of others; and that such taking is reported within 24 hours to the refuge manager (for the red wolf population defined in paragraph (c)(9)(i) of this section), the Park superintendent (for the red wolf population defined in paragraph (c)(9)(ii) of this section), or the State wildlife enforcement officer for investigation .... (iii) Any private landowner, or any other individual having his or her permission, may take red wolves found on his or her property in the areas defined in paragraphs (c)(9)(i) and (ii) of this section when the wolves are in the act of killing livestock or pets, provided that freshly wounded or killed livestock or pets are evident and that all such taking shall be reported within 24 hours to the refuge manager (for the red wolf population defined in paragraph (c)(9)(i) of this section), the Park superintendent (for the red wolf population defined in paragraph (c)(9)(ii) of this section), or the State wildlife enforcement officer for investigation.
(iv) Any private landowner, or any other individual having his or her permission, may harass red wolves found on his or her property in the areas defined in paragraphs (c)(9)(i) and (ii) of this section, provided that all such harassment is by methods that are not lethal or physically injurious to the red wolf and is reported within 24 hours to the refuge manager (for the red wolf population defined in paragraph (c)(9)(i) of this section), the Park superintendent (for the red wolf population defined in paragraph (c)(9)(ii) of this section), or the State wildlife enforcement officer as noted in paragraph (c)(6) of this section for investigation.
(v) Any private landowner may take red wolves found on his or her property in the areas defined in paragraphs (c)(9)(i) and (ii) of this section after efforts by project personnel to capture such animals have been abandoned, provided that the Service project leader or biologist has approved such actions in writing and all such taking shall be reported within 24 hours to the Service project leader or biologist, the refuge manager (for the red wolf population defined in paragraph (c)(9)(i) of this section), the Park superintendent (for the red wolf population defined in paragraph (c)(9)(ii) of this section), or the State wildlife enforcement officer for investigation.
Excerpts are taken from 50 C.F.R. § 17.84(c).
[5] After passage of the conflicting North Carolina law, the FWS revised its red wolf regulation to modify the circumstances under which red wolves could be taken by the public. This revised regulation still includes taking regulations in conflict with the North Carolina law. See 60 Fed.Reg. 18940, 18941 (1995). These changes are reflected in the excerpts from 50 C.F.R. § 17.84(c) found in footnote 4, supra.
[6] A similar program in the Great Smoky Mountains was recently abandoned due to the lack of success of the red wolves in adapting to that area.
[7] Every circuit to consider such a matter has applied the rational basis test to post-Lopez Commerce Clause challenges. See Hoffman v. Hunt, 126 F.3d 575, 583-88 (stating and applying rational basis test) (4th Cir.1997), cert. denied, ___ U.S. ___, 118 S. Ct. 1838, 140 L. Ed. 2d 1089 (1998); United States v. Knutson, 113 F.3d 27, 29 (5th Cir.1997) (same); United States v. Parker, 108 F.3d 28, 30 (3rd Cir.1997), cert. denied, ___ U.S. ___, 118 S. Ct. 111, 139 L. Ed. 2d 64 (1997) (same); United States v. Olin Corp., 107 F.3d 1506, 1509 (11th Cir.1997) (same); United States v. Bramble, 103 F.3d 1475, 1482 (9th Cir.1996) (same); Terry v. Reno, 101 F.3d 1412, 1416 (D.C.Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 2431, 138 L. Ed. 2d 193 (1997) (same); Proyect v. United States, 101 F.3d 11, 12 (2d Cir.1996) (same); United States v. McHenry, 97 F.3d 125, 128 (6th Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 992, 136 L. Ed. 2d 873 (1997) (same); United States v. Hampshire, 95 F.3d 999, 1001 (10th Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 753, 136 L. Ed. 2d 690 (1997) (same); United States v. Kenney, 91 F.3d 884, 889 (7th Cir. 1996) (same); United States v. Dinwiddie, 76 F.3d 913, 920 (8th Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 613, 136 L. Ed. 2d 538 (1996) (same).
[8] Lopez also instructs a Court engaged in Commerce Clause analysis to "consider legislative findings, and indeed even congressional committee findings, regarding effect on interstate commerce." 512 U.S. at 562, 114 S. Ct. 2396. According to Congress, the various species protected by the ESA "are of esthetic, ecological, educational, historical, recreational, and scientific value to the Nation." 16 U.S.C. § 1531(a)(3). This value, in the case of the red wolf, leads to a significant impact on interstate commerce.
[9] While it is difficult for this Court to fully assess the red wolf's impact on tourism, Defendants have presented proof that many persons have traveled from other states to attend red wolf "howling" events conducted at the Alligator River National Wildlife Refuge in North Carolina.
[10] Even after the elimination of the experimental population of red wolves in the Great Smoky Mountains National Park, red wolves may be found in North Carolina, South Carolina, Florida, and Mississippi.
[11] Plaintiffs do not dispute that tourists, scientists, and other interested individuals are presently traveling across state lines to view and study red wolves in the wild.
[12] In another case challenging the Constitutional validity of a regulation promulgated to § 9(a)(1) of the ESA, the D.C. Circuit upheld a regulation protecting the Delhi Sands Flower-loving Fly from "takings" as a valid exercise of Congress's authority to regulate interstate commerce under the Commerce Clause. See National Association of Home Builders v. Babbitt, 130 F.3d 1041, 1057 (D.C.Cir.1997). Judge Henderson, in her concurrence, based this finding on the theory that § 9(a)(1) of the ESA protects "biodiversity" and that the continued existence of said "biodiversity" substantially affects interstate commerce, thus meeting the third Lopez test. This Court need not reach the issue of whether protection of "biodiversity" itself justifies Congressional action under the Commerce Clause, as the red wolf has a much more significant impact on interstate commerce and is more clearly a "thing[] in interstate commerce" than the Delhi Sands Flower-loving Fly.
[13] Thus, it is unsurprising that "courts have resisted urgings to extend Lopez beyond § 922(q)." United States v. Wall, 92 F.3d 1444, 1448 (6th Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 690, 136 L. Ed. 2d 613 (1997) (upholding 18 U.S.C. § 1955, which prohibits inter alia intrastate illegal gambling activities). Indeed, post-Lopez, innumerable federal statutes have been challenged on Commerce Clause grounds but not a single one has been invalidated by a federal appellate court. See, e.g., Hoffman, 126 F.3d 575, 582-88 (upholding 18 U.S.C. § 248, which prohibits interference with access to reproductive health clinics); United States v. Soderna, 82 F.3d 1370, 1373-74 (7th Cir.), cert. denied, ___ U.S. ___, 117 S. Ct. 507, 136 L. Ed. 2d 398 (1996) (same); Dinwiddie, 76 F.3d at 919-21 (same); Terry, 101 F.3d at 1415-18 (same); United States v. Wright, 117 F.3d 1265, 1268-1271 (upholding 18 U.S.C. § 922(o), which prohibits intrastate possession of machine gun, and noting that every circuit to consider the question had so held) (11th Cir.1997), vacated in part on rehearing on other grounds, 133 F.3d 1412 (1998); United States v. Crump, 120 F.3d 462, 465-66 (4th Cir. 1997) (upholding 18 U.S.C.A. § 924(c)(1), which prohibits use and carrying of a firearm during and in relation to a drug trafficking crime, and noting "all of the circuits that have considered the question" had upheld the statute in the face of a Lopez challenge); Olin Corp., 107 F.3d at 1509-10 (upholding CERCLA, 42 U.S.C. §§ 9601-9675); United States v. Allen, 106 F.3d 695, 700-1 (6th Cir.1997), cert. denied, ___ U.S. ___, 117 S. Ct. 2467, 138 L. Ed. 2d 223 (1997) (upholding 21 U.S.C. § 860(a), the Drug Free School-Zones Act); United States v. Hawkins, 104 F.3d 437, 439-40 (D.C.Cir.1997), cert. denied, ___ U.S. ___, 118 S. Ct. 126, 139 L. Ed. 2d 76 (1997) (same); United States v. Wells, 98 F.3d 808, 810-11 (4th Cir.1996) (upholding 18 U.S.C. § 922(g), which prohibits possession of a firearm by a felon, and noting ten other circuits that had upheld its constitutionality under Lopez); United States v. Genao, 79 F.3d 1333, 1335-37 (2d Cir. 1996) (same); United States v. Tisor, 96 F.3d 370, 373-75 (9th Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 1012, 136 L. Ed. 2d 889 (1997) (upholding congressional authority to prohibit intrastate possession or sale of narcotics); Bramble, 103 F.3d at 1479-82 (upholding the Eagle Protection Act, 16 U.S.C. § 668); United States v. Michael R., 90 F.3d 340, 343-45 (9th Cir.1996) (upholding 18 U.S.C. § 922(x)(2), which prohibits juvenile possession of a handgun); United States v. Lomayaoma, 86 F.3d 142, 144-46 (9th Cir.), cert. denied, ___ U.S. ___, 117 S. Ct. 272, 136 L. Ed. 2d 196 (1996) (upholding the Indian Major Crimes Act, 18 U.S.C. § 1153).
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31 F. Supp. 2d 218 (1998)
INNOVATION MARKETING, et al., Plaintiffs,
v.
TUFFCARE, INCORPORATED, Defendants.
No. 98-1661 (DRD).
United States District Court, D. Puerto Rico.
November 24, 1998.
*219 Fernando L. Gallardo, Woods & Woods, San Juan, PR, for Plaintiffs.
Aryuor Negron-Garcia, Hato Rey, PR, Mirta E. Rodriguez-Mora, Montijo & Morales, Hato Rey, PR, for Defendants.
OPINION AND ORDER
DOMINGUEZ, District Judge.
The above captioned case is a cause of action of a Sales Representative against a principal, seeking damages and an interim statutory injunctive relief pending litigation duration under local Law 21 of 1990, P.R.Laws Ann. tit. 10 § 279 et seq.
Pending before the Court is Plaintiffs' motion for the issuance of a provisional statutory injunction pending litigation outcome pursuant to the Puerto Rico Sales Representatives Act, 10 L.P.R.A. § 279(e), (Docket No. 2). A hearing was held on the matter on August 4, 1998, (Docket No. 10). This Court issued an order for the parties to file corresponding memoranda of law in support and against said request for injunctive relief. Plaintiff and defendants complied with the request of the court, (Dockets nos. 8 and 9). After, carefully reviewing the parties memoranda of law and the transcripts of the hearing held before this Court, for the reasons stated below in this Opinion and Order, Plaintiffs' Motion for the issuance of a provisional statutory injunction pursuant to the Puerto Rico Sales Representatives Act, 10 L.P.R.A. § 279(e) is DENIED.
FACTUAL BACKGROUND
On or about September, 1997, co-Plaintiff, Mr. Jesus García Arce ("García") d/b/a Innovation Marketing ("Innovation"), was contacted by Mr. Carvin Chang ("Chang"), Vice President of Defendant Tuffcare, Inc., ("Tuffcare"), to explore the possibility that Innovation sell Tuffcare products in Puerto Rico, after it had terminated its business relationship with a corporation by the name of Graham Field, Inc. (Tr. p. 11). On October, 1997 García met in San Juan with Chang and his brother to discuss their future business relationship. (Tr. pp. 16-17). In that meeting, Chang and García discussed the possibility that Innovation become Tuffcare exclusive sales representative in Puerto Rico. In García's version the condition was if Innovation could meet its projected sales of two million dollars the first year. In Chang's version Innovation had to sell $6,000,000.00 dollars a year. (Tr. pp. 17, 96-97).
After discussing the details of setting up the minimum operation for the sales and marketing of Tuffcare products in Puerto Rico and the percentage commissions to be earned by Innovation, García requested that Tuffcare reduce to writing the terms and conditions of their agreement, especially the clause regarding the exclusivity of Innovation as sales representative, since according to García, in his ample experience of twenty *220 years in the field, ... "if it is an exclusive relationship ... it is always written down". (Tr. pp. 18, 22, 75).
On or around October 16, 1997, García received by fax the standard sales agreement submitted by Tuffcare to all its sales representatives in the United States, with Innovation's name and address incorporated therein. García read and signed the contract, and returned the same duly signed by fax and by mail to Tuffcare. (Tr. pp. 24, 26, 67, 103). Although García requested that the contract be returned signed, the contract was never returned signed by Tuffcare to García. (The court notwithstanding understands that the parties entered into an agreement under said unsigned document as they both performed under the same.)
García on behalf of Innovation performed the following activities for Tuffcare, for which he submitted an unitemized invoice for $5,000.00 dollars: (a) García delivered to Chang a list of local attorneys from the Yellow Pages although he did not know any of the attorneys; (b) sent information about hotels in Puerto Rico but did not make any reservations; (c) assisted Tuffcare in finding a warehouse in Caguas, Puerto Rico; (d) did a marketing research for Tuffcare and projected sales of over two million dollars during the first year although no Master Plan of Sales was ordered; (e) sold Tuffcare products and delivered them from December 1997 to March 1998 in the total amount of less than one hundred fifty thousand dollars. (Tr. pp. 67-68, 71, 79-82). Tuffcare delivered its products to Innovation for resale to clients in Puerto Rico.
Notwithstanding that Innovation's sales were consistently well below the projected expectation of Tuffcare of six million dollars a year (even below the two million sales projected by Innovation), Tuffcare did not terminate the business relationship. Rather, on March, 1998, Mr. Chang informed Mr. García that Plaintiff could remain selling Tuffcare products on a non-exclusive basis and that Innovation could direct its orders through Medex, a wholly owned subsidiary of Tuffcare Incorporated. (Tr. pp. 85, 99, 134-135).
Notwithstanding the above, Innovation voluntarily abandoned the Tuffcare line on March, 1998. (Tr. pp. 85-86). Approximately three months later, on June 10, 1998, Plaintiffs filed the complaint in the instant case, along with a petition for injunctive relief.
LEGAL STANDARD UNDER LAW 21
Plaintiffs cause of action is under local Law 21, P.R.Laws Ann. tit. 10, § 279 et seq. The statute prohibits a principal from terminating its agreement with an exclusive sales representative without just cause. P.R.Laws Ann. tit. 10, § 278 (1976). Law 21 is modeled after the Dealer's Contract Law, also known as Law 75, and it is well settled that applicable jurisprudence to Law 75 is also of application in controversies as per Law 21.[1] Law 75 was designed to protect Puerto Rican "dealers" from a manufacturer's arbitrary termination or ending their commercial relationship with the Puerto Rican distributors who had prior thereto developed a market for their products. Medina & Medina v. Country Pride Foods, Ltd., 858 F.2d 817, 820 (1st Cir.1988) (Puerto Rico Supreme Court response to certified question, 122 P.R.D. 172 (1988)). Pursuant to Law 75, a manufacturer cannot terminate its agreement with a dealer except for "just cause." P.R.Laws Ann. tit. 10, § 278a (1976). A scheme to compensate dealers terminated without just cause was enacted under Law 75, P.R.Laws Ann. tit. 10 § 278(b).
Resembling Law 75, Law 21 protects Puerto Rico sales representatives from arbitrary terminations after they create a market for their principals. An essential element of a Law 21 claim is the existence of an "exclusive sales representation contract" entered after December 5, 1990. P.R.Laws Ann. tit. 10, § 279 (1991). When the Puerto Rico Legislature enacted the Sales Representative Act of 1990 (Act 21), in the Statement of *221 Motives, Laws of Puerto Rico (infra Fn. 1), it expressed that this statute was meant to protect sales representatives who "assume all the operational costs which such representation entails, such as the cost of maintaining an office, exhibition rooms, cars, office personnel, phones, electricity, water, insurance, travel costs, representation costs, office supplies and municipal patents" from termination without just cause. Id.
Law 21 defines a sales representative as "an independent entrepreneur who establishes a sales representation contract of an exclusive nature, with a principal or grantor, and who is assigned a specific territory or market, within the Commonwealth of Puerto Rico." P.R.Laws Ann. tit. 10, § 279(a). The law fails to define when a sales representative relationship is considered "exclusive," and local courts have yet to interpret its meaning. However, when interpreting contracts pursuant to Act 75, courts have noted that exclusivity is generally apparent either from the contract or from the arrangements agreed upon between the parties. Ballester Hermanos, Inc. v. Campbell Soup, Co., 797 F. Supp. 103, 105 (D.Puerto Rico 1992); R.W. Intern. Corp. v. Welch Food, Inc., 13 F.3d 478 (1st Cir.1994).
In Triangle Trading Co., Inc. v. Robroy Industries, Inc., 952 F. Supp. 75, 78 (D.Puerto Rico 1997), the Court explained that "[t]he forgoing legal provisions clearly reflect that the determination of whether a particular plaintiff is a `dealer' under Act 75, or a sales representative under Act 21, is essentially a fact-specific one, which can rarely be rendered based on the pleadings alone." Moreover, the First Circuit Court in Borschow Hospital and Medical Supplies, Inc. v. Cesar Castillo, 96 F.3d 10 (1st Cir.1996), stated that "[a]lthough `non-exclusive distributors are entitled to protection under Law 75,' [i]t is equally true ... that Law 75, does not operate to convert non-exclusive distribution contracts into exclusive distribution contracts." Id. at 14 (citing General Office Products v. Gussco Manufacturing, Inc., 666 F. Supp. 328, 331, and Vulcan Tools of Puerto Rico v. Makita U.S.A., Inc., 23 F.3d 564, 569 (1st Cir.1994)). Furthermore, the Court in Borschow, supra at 14, citing Vulcan Tools of Puerto Rico v. Makita, 23 F.3d 564, 569 (1st Cir.1994), explained that "the `established relationship' between dealer and principal is bounded by the distribution agreement, and therefore the Act only protects against detriments to contractually acquired rights."
"If the terms of a contract are clear and leave no doubt as to the intentions of the contracting parties, the literal sense of its stipulations shall be observed." Borschow Hospital and Medical Supplies, Inc. v. Cesar Castillo, 96 F.3d 10, 14 (1st Cir.1996), P.R.Laws Ann. tit. 31, § 3471 (1991). "Under Puerto Rican law, an agreement is `clear' when it can `be understood in one sense alone, without leaving any room for doubt, controversies or difference of interpretation....'" Executive Leasing Corp. v. Banco Popular de Puerto Rico, 48 F.3d 66, 69 (1st Cir.) (quoting Catullo v. Metzner, 834 F.2d 1075, 1079 (1st Cir.1987)), cert. denied, 516 U.S. 861, 116 S. Ct. 171, 133 L. Ed. 2d 112 (1995); see also Heirs of Ramirez v. Superior Court, 81 P.R.R. 347, 351 (1959). Where contractual term providing for "non-exclusive" distributorship was clear and unambiguous, there is no need to consider extrinsic evidence of promise to limit number of distributors even absent contractual integration clause. Vulcan Tools, 23 F.3d at 564-68. It is well settled law that where a contract is unambiguous, its literal meaning must be applied. P.R.Laws Ann. tit. 31, § 3471.
Article 6 of Law 21, P.R.Laws Ann. tit. 10, § 279(e) (1990) provides a sales representative with a provisional remedy pending litigation to continue in all its terms, the relation established by the sales representative agreement and/or to abstain to conduct any act or omission in prejudice thereof. As a matter of law, trial courts under the First Circuit Court of Appeals considering granting preliminary injunctive may use in considering the injunctive relief the "quadripartite" test as established in Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 5 (1st Cir.1991): (a) likelihood of success on the merits; (b) irreparable injury; (c) injury outweighs any harm the relief could inflict respondent; (d) public interest will not be adversely affected. See generally A.M. Capen's Co., Inc. v. *222 American Trading and Production Corporation, 74 F.3d 317, 322-23 (1st Cir.1996) (authorizing the use of the test in a Law 75 claim).
DISCUSSION
The crux of the controversy at bar lies on whether Innovation and Tuffcare contracted for a "non-exclusive" or "exclusive" sales representation contract. If the former is determined, Innovation cannot prevail on its claim under Law 21 because by disposition a sales representative must be an "exclusive" representative; further Tuffcare may not be barred from distributing and selling its products to other representatives. See Vulcan Tools, 23 F.3d at 569 (Law 75 did not prevent supplier from establishing additional distributorships in Puerto Rico where nonexclusive distributor was already operating even if existing distributor suffered economic harm as result); Nike Int'l Ltd. v. Athletic Sales, Inc., 689 F. Supp. 1235, 1238-39 (D.P.R.1988) (where distributorship contract between Nike and distributor provided for notice of renewal from distributor and distributor failed to provide such notice, Law 75 did not bar termination of distributorship contract).
The aforementioned caselaw effectively rebuts Innovation's main contention of exclusivity, since the sales representation agreement clearly and unambiguously provides Innovation the opportunity to sell Tuffcare products and further, contains no term granting or even implying exclusivity. (See Appendix "A" Contract.) The agreement signed by Innovation is the standard sales representative agreement that Tuffcare executes in all 50 states of the United States, which this court interprets as a non-exclusive contract. Innovation's agent, co-plaintiff García, a sales representative with over twenty years of experience, expressed that in the industry, if the sales agreement were to be on an exclusive basis, it would be stated explicitly. García, fully aware of this, nonetheless signed the document, with full knowledge that it was as drafted a non-exclusive contract simply because there is no hint whatsoever establishing an "exclusive" arrangement. Mr. García, in fact, acknowledged the non-exclusive nature by alleging an extrinsic verbal amendment to the contract.
As expressed before, it is a well settled doctrine of Puerto Rican law that where a contract is unambiguous, its literal meaning must be applied. P.R.Laws Ann. tit. 31, § 3471. Moreover, Innovation actually requested an exclusivity clause that was not included in the contract, and its agent, García, notwithstanding the obvious absence of said clause proceeded to sign the agreement. The contract gives no support whatsoever to Innovation's claim of exclusivity. Failing to demonstrate exclusivity from the face of the contract, Innovation relies on the extrinsic testimony of Co-Plaintiff García that the terms and conditions were modified verbally by Tuffcare, through Mr. Chang. However, Mr. Chang testified that he would grant an exclusive contract to Innovation contingent upon compliance with minimum quantities of sales. When the minimum of sales was not reached, or rather the numbers were consistently and well below expectations, Tuffcare did not provide the exclusivity to Innovation and proceeded to market its products directly through Medex and through another representative.[2]
In interpreting the substantive terms of parole evidence, the Puerto Rico Supreme Court has expressly established that "[t]he strict mandate of the cited art. 1233[3] obliges us to abide by the literal meaning of the terms of the contract when, as in the present case, they leave no doubt as to the intention of the contracting parties." Marina Ind. Inc. v. Brown Boveri Corp., 114 P.R.Dec. 64 (1983) (official translation). In rejecting the same argument made today by Innovation, the Court in Borschow, supra, applied this principle stated in Executive Leasing Corp., supra, expressing that: "... to consider extrinsic evidence at all, the court must first *223 find the relevant terms of the agreement unclear." When the requirement was not met the district court went no further. 48 F.3d at 69 (excluding extrinsic evidence of exclusive dealing condition and of "actual practice" of parties); accord Hopgood, 839 F.Supp. at 106 (explaining that Marina supports the principle that under Article 1233 the clear terms of the contract are the "embodiment of the indisputable intent of the parties as they entered into the contract"). This court follows the mandate of Executive Leasing Corp., supra, and will not consider extrinsic evidence because the agreement is clear.
There is a further substantive reason for the court not to entertain verbal amendments to the contract. The relationship established under Law 75 is analogous to the relationship under Law 21 (sales representation of products and distribution of products, see Motives of Law 21 at the 4th Regular Session, 11 Legislature of 1990, p. 1496). The relationship under Law 75 is a relationship governed by the Commerce Code, Pacheco v. National Western Life Insurance Co., 122 P.R.D. 55 (1988); Vulcan Tools of Puerto Rico, 23 F.3d at 567, n. 4; it follows that the relationship of representatives and principals under Law 21 is also governed by the Commerce Code because said agreement is a commercial contract. The Commerce Code requires that essential elements of a contract be confirmed in writing. Vila & Hnos., Inc. v. Owens Ill. De P.R. 17 P.R. Official Trans. 987 997-1000 (1986); Garita Hotel Limited Partnership v. Ponce Federal, 122 F.3d 88, 89 (1st Cir.1997). The exclusivity clause is undoubtedly an essential covenant of the agreement and there is no written corroboration of said clause. Verbal evidence under the Commerce Code is insufficient at law without corroboration. Garita Hotel v. Ponce Federal Bank, F.S.B., 954 F. Supp. 438, 452-455 (D.P.R.1996), aff'd. at 122 F.3d 88 (1st Cir.1997).
In the instant case, this Court does not need to go any further, the sales agreement between Tuffcare and Innovation does not sound exclusive in nature, and the remedial provisions of Law 21 may not operate to convert non-exclusive contracts into exclusive contracts. See generally, Borschow, supra; Vulcan, supra and Gussco, supra.
Even considering the facts of this case under the more stringent quadripartite test as established in Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 5 (1st Cir.1991), reiterated at A.M. Capen's v. American Trading & Prod. Corp., 74 F.3d 317, 322 (1st Cir.1996), the likelihood of success on the merits factor is doubtful at best, since the short lived sales agreement did not provide Innovation with an explicitly right to sell Tuffcare products on an "exclusive basis." Further, even assuming that this court would accept Plaintiff's extrinsic evidence to clarify the contract, the court does not credit García's statements that the contract was modified to become "exclusive" simply because García stated that this type of covenant is usually written. The second factor of the test, the claim of irreparable injury; cannot be invoked by Innovation, as they chose to unilaterally terminate the agreement with Tuffcare out of their own volition. Law 21, as well as the traditional tort and breach of contract actions, provide ample remedy for Plaintiff to compensate for damages if it is ultimately found that the principal terminated their established relationship without just cause and if Plaintiff is deemed an "exclusive representative." In the instant case, the third factor as to whether the claimed injury outweighs any harm the relief could inflict to the respondent, requires the Court to balance the relevant equities. If the preliminary injunction is granted in the instant case the same would cause considerable harm to the defendant Tuffcare, as it would provoke noncompliance of a prior stipulation reached with another sales representative, Graham-Field, Inc., in civil case number 98-1306(DRD). (Graham-Field, Inc. was a representative of Tuffcare products in Puerto Rico prior to Plaintiff).
Finally, the relationship of Plaintiff with Defendant was short-lived, December 1997 to March 1998, barely four months, an injunctive remedy potentially lasting various months of litigation seems to the court an excessive and unwarranted remedy considering that there is at least doubts as to "exclusivity" of the relationship and further considering *224 that the prior representation, Graham-Field, Inc. and Tuffcare would be affected because they would then not be able to comply with a stipulation entered in their case prior to the filing of this case meaning that public interest would be adversely affected. Hence, the court in examining the Narrangensett criteria for entering a preliminary injunction has serious doubts as to Plaintiff's eventual success on the merits, (Plaintiff is not an "exclusive" representative), the irreparable remedy compliance (Plaintiff abandoned the line), and that granting of the remedy would adversely affect the public interest. (A court stipulation with a prior representative would be impaired.)
CONCLUSION
WHEREFORE, after careful review of the record before the court and the applicable caselaw and statutes, Plaintiffs' Motion for the issuance of a provisional statutory injunction pursuant to the Puerto Rico Sales Representatives Act, 10 L.P.R.A. § 279(e) is DENIED.
IT IS SO ORDERED.
*225 EXHIBIT 1
NOTES
[1] The statement of motives of the law, Law of P.R., Dec. 5, 1990, No. 21 at 1496, clearly states that the motive of the law is to protect sales representatives who fell short of compliance with dealership status under local law as defined by the Supreme Court in the case of Roberto Inc. and Roberto Colón v. Oxford Industries, 122 P.R.D. 115 (1988).
[2] The court was somewhat troubled with certain evidence implying potential antitrust violations (sale of the same products to resale competitors by the principal at different prices, 15 U.S.C.A. § 13).
[3] P.R.Laws Ann. tit. 31, § 3471.
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31 F. Supp. 2d 378 (1998)
GARDEN STATE AUTO PARK PONTIAC GMC TRUCK, INC., Plaintiff,
v.
ELECTRONIC DATA SYSTEMS CORPORATION, Defendant.
No. CIV. A. 94-3145(MLC).
United States District Court, D. New Jersey.
December 15, 1998.
*379 *380 Michael D. Schottland, Bettina E. Munson, Schottland, Manning, Rosen, Caliendo & Munson, Freehold, NJ, for Plaintiff.
Jonathan M. Preziosi, Jamieson Moore Peskin & Spicer, Princeton, NJ, for Defendant.
COOPER, District Judge.
This matter comes before the Court on defendant's renewed motion for attorney's fees and costs pursuant to the contract entered between plaintiff Garden State Auto Park ("GSAP") and defendant Electronic Data Systems, Inc. ("EDS"). For the reasons expressed herein, the motion for attorney's fees and costs is granted, and the Court hereby finds that the amount of $57,918.67 represents reasonable fees and costs under the circumstances of this case.
BACKGROUND
The relevant factual background has been set forth in this Court's May 31, 1996 and March 25, 1998 Memoranda and Orders and will not be repeated herein. Briefly, plaintiff GSAP initiated this lawsuit in the Superior Court of New Jersey, Law Division, Monmouth County on May 24, 1994. The Complaint alleged a breach of warranty claim against defendant EDS. EDS removed the case to this Court on June 30, 1994 and filed a counterclaim against GSAP for breach of contract and unjust enrichment.
EDS filed a motion for summary judgment, arguing that plaintiff's breach of warranty claim alleged in the Complaint was barred by the applicable statute of limitations as set forth in the parties' agreement. We granted the motion by Memorandum and Order dated May 31, 1996, finding that the claim against EDS was barred by the one-year statute of limitations provision in the parties' contract dated March 28, 1991.
GSAP filed an appeal of our May 31, 1996 Memorandum and Order to the Court of Appeals on June 24, 1996. On July 1, 1996, EDS filed its first motion for attorney's fees and costs. We denied that motion without prejudice because of the pending appeal before the Third Circuit. (Order dated 3-27-97.) On June 9, 1997, the Court of Appeals dismissed the appeal for want of jurisdiction because of EDS's pending counterclaim before this Court.
EDS filed a second motion for attorney's fees on July 14, 1997, seeking fees and costs incurred prior to May 31, 1996 as well as fees and costs incurred in litigating the appeal of our May 31, 1996 Memorandum and Order. Shortly thereafter, GSAP moved for summary judgment on EDS's counterclaim. Our March 25, 1998 Memorandum and Order: (1) denied GSAP's motion for summary judgment, and (2) granted in part and denied in part EDS's motion for attorney's fees and costs. With respect to EDS's motion for attorney's fees and costs, we held as a matter of law that EDS was a prevailing party under *381 the relevant provision of the contract.[1] We further stated, however, that the evidence EDS presented on the issue of reasonableness was insufficient at that juncture. We thus denied EDS's motion in part without prejudice.
EDS filed the instant motion for attorney's fees and costs along with supportive materials on April 14, 1998. The supportive materials include certifications of local and lead counsel stating that the amount of attorney's fees requested is, in their opinion, reasonable under the circumstances. (See Certif. of Jonathan M. Preziosi, Esq. ("Preziosi Certif."); Certif. of Franklin S. Blackstone, Esq. ("Blackstone Certif.").)
EDS requests $153,118.21 in attorney's fees and costs, which reflects $121,530.86 charged by Goodwin and Carlton, P.C. ("G & C") as lead counsel, and $31,587.35 charged by the law firm of Jamieson, Moore, Peskin & Spicer ("JMP & S") as local counsel. Plaintiff argues that the amount of fees and costs sought by EDS is unreasonable under the circumstances.
GSAP does not appear to dispute the reasonableness of the billing rates charged by the attorneys from both firms or the accuracy of the records submitted; rather, it challenges the number of hours billed by the attorneys.[2] Plaintiff argues that both law firms spent an inordinate number of hours on discovery matters prior to filing the motion for summary judgment in light of the fact that EDS prevailed on the basis of a relatively straightforward application of the one-year statute of limitations in the agreement. Plaintiff claims in that connection that attorneys for EDS began researching the possibility of asserting a limitations defense as early as November 1994. (See Preziosi Certif., Ex. A, entry dated 11-28-94.) Plaintiff further maintains that it is unfair for EDS to seek reimbursement of costs for travel time for members of G & C to travel to this Court and the Third Circuit when EDS had retained local counsel here in New Jersey. GSAP also contends that any fees relating to work performed by local counsel should be excluded because EDS had lead counsel in Texas. Finally, plaintiff points out that GSAP has included amounts in their fee application which are unrelated to the successful summary judgment motion. (See generally Certif. of Michael D. Schottland, Esq. ¶ 4; Ltr. From Michael D. Schottland, Esq. to Hon. Mary L. Cooper, U.S.D.J. dated 4-30-98; Ltr. from Bettina Munson, Esq. to Hon. Mary L. Cooper, U.S.D.J. dated 11-22-98.)
DISCUSSION
Relying upon the plain language of the 1991 agreement and the meaning of the phrase "prevailing party" under Texas law, this Court held that EDS qualifies as a prevailing party with respect to our dismissal of plaintiff's breach of warranty claim against EDS. Accordingly, our inquiry here is limited *382 to the reasonableness of the amount of fees and costs requested by EDS.
The Court must ascertain the meaning of the term "reasonableness" as it is used in the 1991 agreement. The determination of the meaning of the term "reasonableness" as it is used in the contract is governed by the law of the contract, which is Texas law in this case. We thus find it appropriate to look to Texas law for guidance in determining the reasonableness of the fee request. See Texas Comm. Bank Nat'l Ass'n v. Capital Bancshares, Inc., 907 F.2d 1571, 1575 (5th Cir. 1990) (finding that in diversity cases, state law governs the issue of attorney's fees).
The amount of attorney's fees awarded by the Court must be reasonable under the circumstances of the case and must have some reasonable relationship to the amount in controversy or to the complexity of the issue to be determined. Id.; Jerry Parks Equip. Co. v. Southeast Equip. Co., 817 F.2d 340, 344 (5th Cir.1987). In determining the reasonableness of the attorney's fees and costs requested, we must review the entire record, consider the evidence, amount in controversy and nature of the case, and use common knowledge and experience as lawyers and judges. See Argonaut Inc. Co. v. ABC Steel Products Co., 582 S.W.2d 883, 889 (Tex.App. Texarkana 1979, writ ref'd n.r.e.) (noting the relevant factors for consideration in the context of appellate review of the trial court's determination); see also Thomas v. Thomas, 917 S.W.2d 425, 436 (Tex.Ct.App.1996).
The prevailing party should present the testimony of an expert (usually the party's attorney) who can opine as to whether the amount of time and hourly rate is reasonable in light of the unique circumstances presented in the case. Murrco Agency Inc. v. Ryan, 800 S.W.2d 600, 606-07 (Tex.Ct. App.1990). The attorney may establish the reasonableness of the fee by comparing the hourly rate charged to the prevailing party to the hourly rate in the community for similar legal services.[3]Id. Other evidence of reasonableness may be gleaned from a review of the case file and customary rates if no other evidence is available. Flint & Assoc., 739 S.W.2d at 626; see also Thomas, 917 S.W.2d at 436.
The reasonableness of the application and the amount actually awarded are issues which lie within the sound discretion of the trial court. See Smith v. United Nat'l Bank-Denton, 966 F.2d 973, 978 (5th Cir. 1992). The amount of attorney's fees and costs awarded is a question of fact, the determination of which requires sufficient evidence on each element.[4]Williamsburg Nursing Home, Inc. v. Paramedics, Inc., 460 S.W.2d 168, 169 (Tex.Ct.App.1970). The party seeking to recover attorney's fees carries the burden of proof on that issue. Smith, 966 F.2d at 978. In order to recover attorney's fees, the prevailing party must provide evidence segregating attorney's fees among the various claims or responsible parties. Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1, 11 (Tex.1991).
Lead counsel G & C, by and through attorney Franklin Blackstone, Esq., submitted billing records which reflect all work done on EDS's behalf by members of the G & C firm from June 30, 1994 to December 1997. The billing records provide a description of the services rendered, the date the work was performed, the initials of the individual performing the work, the amount of time spent on each project, the amount of money billed to EDS for each project and the hourly billing rate of the individuals who performed work on EDS's behalf. Local counsel JMP & S, by and through attorney Jonathan Preziosi, Esq., also submitted detailed billing records which reflect work performed from June 1994 through December 1997. Similar details are contained in the JMP & S billing records.
*383 The Court rejects at the outset the total amount requested by EDS, as it is clear that the fee application is overinclusive and unreasonable. By our calculations, the total amount requested reflects attorney's fees and costs charged by both firms for all of the legal services performed on EDS's behalf throughout this entire litigation. However, EDS is only the prevailing party with respect to matters relating to its successful summary judgment motion. Accordingly, it cannot recover attorney's fees relating to other matters in this case. See Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 10 (Tex.1991); see also Marcotte v. American Motorists Ins. Co., 709 F.2d 378, 381 (5th Cir.1983) (applying Texas law). We find that a more reasonable fee award would reflect only those amounts billed for work performed which was related to the dismissal of the Complaint against EDS.
It is clear that the Court must undertake its own independent examination of the billing records and calculate the fee award based upon the relevant factors set forth above. See Thomas, 917 S.W.2d at 436; Argonaut, 582 S.W.2d at 889. In that connection, the Court has carefully scrutinized the attorney certifications, billing records and entries therein, relevant pleadings, discovery which is of record, briefs filed with respect to EDS's motion for summary judgment, and our May 31, 1996 Memorandum and Order granting summary judgment to EDS on GSAP's Complaint. We have also reviewed and considered the relevant factors outlined in the case law as applied to the facts in this case. Specifically we recognize that: (1) the amount in controversy in GSAP's Complaint against EDS was over $600,000; (2) the dismissal of the Complaint occurred at summary judgment, thus obviating a need for a trial on the merits; (3) EDS obtained summary judgment in its favor based upon a relatively straightforward statute of limitations defense arising out of the plain language of the contract; and (4) GSAP filed a premature appeal of our May 31, 1996 decision to the Third Circuit, as there was no disposition of the counterclaim still pending in this Court at that time.
Based upon the descriptions provided by the attorneys, we have not included in our computation any amounts which we consider to have been included in the fee request in error. First, those amounts include any fees paid by EDS for work which was unrelated to EDS's summary judgment motion.[5] Second, we have also excluded any amounts which correspond to entries so general in description that we were unable to ascertain whether or not the work was related to EDS's motion for summary judgment. For example, there were many entries which involved general tasks such as review of documents, "action items" or conferences by both *384 law firms. The Court in many instances was unable to determine how such entries related to this case.[6] Finally, we disregarded any portion of the records which was faded and illegible because of the poor quality of the photocopying, as we were unable to ascertain whether or not the entries related to EDS's summary judgment motion, appeal or attorney's fee application.[7]
Our calculation is described in detail below. However, in the interest of clarity, we will provide a summary description of our method at the outset. We have analyzed the fee requests pertaining to each law firm separately, as EDS submitted two separate billing records (one for each law firm). We separated the entries in the billing records into "litigation tasks" so as to analyze the reasonableness of the time spent (and amounts charged) on each phase of the litigation related in any way to EDS's motion for summary judgment.[8] These litigation tasks are: (1) discovery-related matters; (2) preparation, research and discussions related to EDS's summary judgment motion;[9] (3) litigation and mediation of GSAP's appeal in the Third Circuit;[10] and (4) two attorney's fee applications before this Court.[11] We then reviewed the work description for each billing entry and paired each entry with its appropriate litigation task (or disregarded the entry if unrelated or indecipherable). The entries under each category were totaled to determine as best as possible the true amount of time spent and fees charged relating to each litigation task.[12] We then decided the appropriate fee allocation for each litigation task, adjusting the amount where necessary in light of the facts and circumstances of this case and the relevant legal considerations. Finally, we considered the amount of costs to be awarded in relation to the work performed by each law firm.
A. Goodwin and Carlton
1. Discovery-Related Matters
G & C, by and through numerous attorneys, paralegals and summer associates, *385 logged approximately 328.5 hours worth of work related to discovery in this case. Typical entries describing tasks falling under this heading include but are not limited to matters such as preparation and review of any discovery materials (initial discovery and otherwise), preparing discovery requests or responses, conferences relating to discovery matters (with adversary, other members of the litigation team or the Court), and deposition scheduling and preparation. By our calculations, G & C logged approximately 328.5 hours and billed $27,272.23 to EDS in that connection.
What is readily apparent from a review of the billing records is that G & C included in its submissions all discovery-related entries in this case. Such an approach, however, is patently inappropriate. See Stewart Title, 822 S.W.2d at 11. EDS is the prevailing party only with respect to its successful summary judgment motion. While we recognize that some discovery was necessary in order to facilitate the summary judgment motion, EDS has not met its burden of demonstrating that the entire amount billed for discovery work related to the successful summary judgment motion. Moreover, EDS has not provided the Court with sufficient evidence from which we may segregate the discovery-related entries and award an amount that reflects discovery work which was necessary for the successful summary judgment motion. Accordingly, EDS is not entitled to an attorney's fee award which includes time spent on this litigation task.
2. Summary Judgment
From February 1995 to June 1996, G & C spent approximately 243.75 hours and charged $20,991.45 for work related to EDS's motion for summary judgment. Typical billing entries for such work include descriptions such as: performing legal research, discussing strategy, drafting the motion and reply briefs, gathering and organizing evidentiary materials, filing the motion, calling the court for case status update, and discussing status of the motion with local counsel. EDS argued in the motion that plaintiff's Complaint was barred by the one-year statute of limitations which was provided in the contract between the parties. (See Br. in Supp. of EDS's Mot. for Summ. J. at 10.) This Court agreed. (Mem. & Order dated 5-31-96.)
It is clear that we may consider the nature and complexity of the legal issues in determining the reasonableness of the fee request. See Parks Equip., 817 F.2d at 344 (noting that court should consider the amount sought in relation to the complexity of the issues involved); Murrco Agency, 800 S.W.2d at 606. We therefore find it appropriate to consider the complexity of the dispositive issue in our summary judgment opinion, as well as the fact that this matter was resolved by motion rather than through a trial on the merits. Our review of our Memorandum and Order as well as the parties' submissions on this point lead us to conclude that the expenditure of 243.75 hours in legal work (by lead counsel alone) is excessive in light of the relatively simple legal and factual basis for the motion. We therefore find it appropriate to reduce the fee award pertaining to this litigation task by 50%. We find that $10,495.75 is a reasonable fee for work performed on this aspect of the litigation.
3. Appeal to the Third Circuit
GSAP filed an appeal of our May 31, 1996 Memorandum and Order to the Third Circuit on June 24, 1996. The appeal was subsequently dismissed for lack of appellate jurisdiction on June 6, 1997. However, prior to dismissal, G & C spent extensive time litigating the matter before the Third Circuit. Our Court of Appeals also required the parties to attend a mediation conference before Honorable Leonard I. Garth, United States Circuit Judge, in connection with the appeal. By our calculations, from June 1996 to May 1997, G & C spent a total of 241.4 hours litigating the appeal and participating in mediation before the Third Circuit. G & C billed a total of $33,818.21 in attorney's fees in connection with its representation of EDS in that capacity.
We find that the facts of this case do not require an adjustment of the amount awarded in connection with this litigation task. First, it is clear that the appeal required not only extensive appellate briefing, but also *386 preparation and attendance at mediation prior to the disposition of the appeal. The time devoted to these tasks by lead counsel does not appear excessive in light of the myriad of issues involved.
We also find it significant that plaintiff clearly filed an interlocutory appeal before the Court of Appeals, as EDS's counterclaim against GSAP for breach of contract and unjust enrichment was pending in this Court. GSAP's appeal was subsequently dismissed by the circuit for lack of jurisdiction. GSAP's premature appeal caused EDS to incur unnecessary legal fees in connection with litigating the matter before the Third Circuit. Accordingly, we find the amount claimed in this connection to be reasonable under the circumstances.
4. Attorney's Fees Applications
From June 1996 to August 1996, G & C worked 18.25 hours preparing EDS's first motion for attorney's fees and costs. G & C billed EDS $2,901.25 for fees charged in connection with the 1996 fee application before this Court. We denied the first fee application without prejudice because of the pending appeal to the Third Circuit. (Order dated 3/27/97.)
EDS filed a second motion for attorney's fees and costs on July 14, 1997. From June to September 1997, G & C spent 9.55 hours on its renewed motion, and charged EDS $1,680.25 in fees. Thus, based upon the submissions to date, the total amount of fees charged by G & C with respect to the prosecution of the fee applications is $4,581.50.
A review of both fee applications and the submissions in support thereof leads us to the conclusion that the amount assessed in connection with these motions is unreasonable under the circumstances. A comparison of the legal papers produced with the time spent producing them reveals that 27.8 hours was clearly excessive. The very fact that this Court had to reconstruct the billing records submitted, separate the matters by litigation task, and develop a system of analysis attests to this fact. Accordingly, we will reduce the amount recoverable for this litigation task by one half, and award $2,290.75 in this connection.
5. Costs
By our calculations, from June 1994 to December 1997, G & C billed $12,619.57 in costs to EDS. Our review of the billing records confirms that EDS included in the total fee request an amount which reflected all costs incurred during the relevant time period. The costs incurred include amounts expended for necessities such as: (1) photocopying; (2) computerized legal research; (3) courier fee; (4) long-distance telephone calls; (5) postage; and (6) telecopying. Also included in EDS's request for costs are certain travel expenses from Texas to New Jersey for depositions and mediation before the Third Circuit. (See Blackstone Certif., Ex. 1, billing record dated 6-8-95 at "Itemized Disbursement Bill;" id., Ex. 1, billing record dated 9-11-95; id. Ex. 2, billing record dated 11-23-96.)[13]
The Court is certain that some of the costs were generated as a result of work performed on matters relating to the dismissal of the Complaint against EDS. However, the structure of the billing records before us prevents the Court from ascertaining which costs were incurred in furtherance of the successful summary judgment motion. This observation requires a reduction in the costs recoverable. Similarly, we find that the charges for travel expenses are unreasonable in light of the fact that EDS retained local counsel who appears from the billing records to have taken an active role in this litigation. Accordingly, we will reduce the amount of costs awarded by 75%, such that EDS may recover a total of $3,154.90 for the costs incurred in this matter.
A. Jamieson, Moore, Peskin & Spicer[14]
1. Discovery-Related Matters
JMP & S spent 52.9 hours working on discovery-related matters, including tasks *387 such as document review, preparation of discovery materials, drafting discovery motions, attending conferences, and deposition preparation. JMP & S billed EDS $7,041.30 in that connection. We decline to award EDS any fees relating to this litigation task for the same reasons expressed above in our discussion of G & C's discovery-related billing entries. See Stewart Title, 822 S.W.2d at 11.
2. Summary Judgment
JMP & S spent 55.25 hours researching, preparing, drafting, discussing and filing EDS's motion for summary judgment which we granted on May 31, 1996. In that connection, JMP & S billed EDS 6,873.75 in legal fees.
The Court finds that 55.25 hours is an excessive period of time to spend on the motion for summary judgment. Moreover, when we compared the billing records from G & C to those submitted by JMP & S, it was apparent that there was some duplication of efforts. (Compare Preziosi Certif., Ex. A, billing records for Aug. & Sept. 1995 with Blackstone Certif., Ex. 1, billing records for Aug. & Sept. 1995.) Accordingly, we will reduce the amount recoverable for this litigation task by one half, and award $3,436.88 in legal fees in this connection
3. Appeal to the Third Circuit
JMP & S spent approximately 23.7 hours researching, drafting and filing its brief and appendix before the Third Circuit. The amount charged in relation to work on the appeal is $3,152.00. GSAP points out that JMP & S also included in its fee calculation time spent researching local appellate rules, and also more tangential matters such as the background of the members of the Third Circuit panel hearing the appeal and this Court's reversal rates. (See, e.g., Preziosi Certif., Ex. A, billing entries dated 9-24-96, 10-1-96, 10-15-96, 10-16-96, 4-30-97.) GSAP argues that these amounts should be excluded from the fee award, as local counsel should be familiar with the local rules, and information concerning judges' backgrounds and reversal rates is unnecessary.
Initially, we reject GSAP's argument that EDS cannot be reimbursed for time spent by local counsel researching various local rules of this District and/or the Third Circuit. To the contrary, we think that it would be unreasonable and unrealistic to expect that an attorney would not consult the local rules, even if the attorney is a member of the bar of this state. However, we find GSAP's other objection justified. We conclude that EDS is not entitled to be reimbursed for the entire amount of fees generated in connection with JMP & S's work on this litigation task. Put simply, requiring GSAP to reimburse EDS for time spent researching this Court's reversal rates and the backgrounds of certain Third Circuit judges is beyond the realm of reasonableness. Thus, it is appropriate to subtract from $3,152.00 any amounts charged in connection with researching background information and reversal rates. The amount to be deducted is $519.00, leaving $2,633.00 as the total amount recoverable in connection with JMP & S's performance of this litigation task.
4. Attorney's Fee Applications
By our calculations, JMP & S spent 32.0 hours preparing both fee applications before this Court, and charged $3,939.50 in legal fees in that connection. The Court has reviewed the relevant billing records, certifications and supportive materials. In short, we find that 32.0 hours is clearly excessive in light of the product produced. Accordingly, we will reduce the amount recoverable by one half, permitting a recovery of $1,969.75 in relation to this litigation task.
*388 5. Costs
JMP & S incurred $477.73 in costs from June 1994 to December 1997 in litigating this case. It is clear, however, that those costs relate to fees which were incurred throughout the course of the entire litigation of this matter in this Court and the Third Circuit. Obviously, the billing records submitted do not itemize costs according to litigation task. Therefore, we find it appropriate to reduce the amount of costs recoverable by 75%, such that EDS will be reimbursed $119.43 for the costs associated with JMP & S's representation from June 1994 to December 1997.
CONCLUSION
For the foregoing reasons, we will grant EDS's motion for attorney's fees and costs, as it is clear that pursuant to the parties' 1991 agreement, EDS is entitled to an award of reasonable fees and costs in connection with our May 31, 1996 dismissal of plaintiff's breach of warranty claim against defendant. In that connection, we have thoroughly reviewed the billing records submitted, along with any certifications of counsel and other supportive materials. We find that EDS is entitled to be reimbursed for the following fees and costs generated in this matter:
Goodwin & Carlton, P.C.
Discovery-related fees: $0
Summary Judgment preparation fees: $10,495.75
Third Circuit appeal fees: $33,818.21
Attorney's Fee application fees: $2,290.75
Costs recoverable: $3,154.90
__________
Total G & C fees: $49,759.61
Jamieson, Moore, Peskin & Spicer
Discovery-related fees: $0
Summary Judgment preparation fees: $3,436.88
Third Circuit appeal fees: $2,633.00
Attorney's Fee application fees: $1,969.75
Costs recoverable: $119.43
__________
Total JMP & S fees: $8,159.06
Total Amount of Fees and Costs Recoverable $57,918.67
__________
An appropriate Order accompanies this Memorandum Opinion.
ORDER
For the reasons expressed in the accompanying Memorandum
Opinion,
IT IS on this day of December, 1998 ORDERED that the motion for attorney's fees be and hereby is GRANTED; and
IT IS FURTHER ORDERED that defendant EDS be awarded $57,918.67 in attorney's fees and costs on this motion.
NOTES
[1] Paragraph 20 of the March 28, 1991 agreement states:
Attorneys Fees: If any legal action or other proceeding is brought for the enforcement of this agreement or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this agreement, the prevailing party shall be entitled to recover reasonable attorneys fees and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled.
[2] Plaintiff GSAP requests an evidentiary hearing to determine the appropriate fee award. (See Ltr. From Bettina E. Munson, Esq. to Hon. Mary L. Cooper, U.S.D.J. dated 10-22-98 at 4.) We note first that the request was not included in plaintiff's initial submissions in opposition to the instant motion. However, assuming arguendo that we would entertain such a request in the manner that it was presented to the Court, we do not find it necessary to hold a hearing on this issue. The billing records submitted in connection with EDS's fee application provide detailed descriptions concerning the entries contained therein. From these descriptions, we have been able to segregate those amounts attributable to the issue upon which EDS has prevailed. As is evident from our analysis, where there was an ambiguous description of the services provided, we excluded the corresponding amount from our computation and reduced the amount recoverable accordingly. Cf. Marcotte v. American Motorists Ins. Co., 709 F.2d 378, 381 (5th Cir. 1983) (remanding to district court for a hearing to determine the attorney's fees recoverable for services rendered and related to plaintiff's successful breach of contract claim; evidence concerning time, costs and expenses submitted by prevailing party's attorneys did not allocate or segregate entries among various claims by plaintiff).
[3] We note that both Franklin Blackstone of G & C and Jonathan M. Preziosi of JMP & S indicated in their certifications their opinions that the amounts requested are reasonable under the circumstances of this case. (Preziosi Certif. ¶ 6; Blackstone Certif. ¶ 9.) We do not, however, find those opinions conclusive on the matter.
[4] While the issue of reasonableness is a question of fact, we find the matter ripe for resolution at this juncture, as there is no factual dispute concerning the amount of time billed by EDS's attorneys. We also note that plaintiff does not object to our deciding this issue by motion.
[5] For example, from June 1994 to June 1996, G & C billed at least $4,923.12 worth of work which was unrelated to EDS's summary judgment motion. This includes time spent answering the Complaint; drafting the counterclaim; filing and preparing the notice of removal; and researching and drafting briefs in opposition to IBM's motion for summary judgment. (See, e.g., Blackstone Certif., Ex. 1, entries dated 6-29-94, 6-30-94, 7-5-94, 7-8-94, 7-12-94, 7-14-94, 7-15-94, 7-16-94, 7-18-94, 7-22-94, 9-12-94, 9-15-94, 10-31-94, 11-1-94, 11-9-94, 11-22-94, 12-7-94, 12-8-94, 12-12-94, 12-14-94, 12-15-04, 12-16-94, 12-19-94, 2-16-95, 3-23-95, 5-8-96, 5-10-96, 5-24-96, 5-27-96, 5-28-96, 5-28-96.) Similarly, from May 1996 to August 1997, we calculated at least $786.25 which was billed for work by G & C which was unrelated to EDS's summary judgment motion. (See, e.g., Blackstone Certif., Ex. 2: entries dated 5-21-97, 5-22-97, 5-27-97, 5-28-97, 5-29-97, 5-30-97.) Finally, from June 1997 to December 1997, virtually all of the entries found in the billing records during that time period relate to work on other aspects of the litigation. By our conservative estimation, from June to December 1997, G & C spent a total of 77.35 hours working on unrelated matters and billed EDS $11,801.25 for the services rendered.
We observe the same pattern in JMP & S's billing records. For example, from June 1994 to December 1997, the JMP & S billing records submitted to the Court include amounts charged for work on matters such as, inter alia, (1) drafting and filing of Notice of Removal, Answer and counterclaim; (2) former defendant IBM's motion for summary judgment; (3) GSAP's motion for summary judgment on EDS's counterclaim, (4) depositions related to counterclaim and (5) damages research. (See, e.g., Preziosi Certif., Ex. A, entries dated 7-13-94, 7-18-94, 10-25-94, 11-8-94, 11-29-94, 12-7-94, 12-15-94, 12-19-94, 12-23-94, 2-3-95, 2-6-95, 2-28-95, 5-19-95, 7-7-95, 7-17-95, 11-22-95, 11-30-95, 5-10-96 5-17-96, 5-17-96, and 6-27-97. From July 1997 to December 1997, virtually every billing entry was unrelated to EDS's motion for summary judgment).
[6] Our review of G & C billing records from June 1994 to May 1997 reveals several entries which are in our opinion so non-descriptive so as to require us to exclude them from the fee calculation. Examples of such entries include but are not limited to entries by G & C staff on the following dates: 8-22-94, 11-22-94, 12-25-94, 1-23-95, 5-1-95, various entries occurring in 10-95, 11-9-95, 5-28-96, 5-31-96, 8-7-96, 6-2-97, 6-6-97, 6-9-97, 6-13-97, 6-16-97, 6-17-97, and 6-19-97. (Blackstone Certif., Exs. A-C.)
The JMP & S billing records also have ambiguous billing descriptions. Examples found in those records include but are not limited to entries documented on the following dates: 7-8-94, 10-19-94, 11-2-94, 5-18-95, 6-6-95, 6-27-96, 2-5-97, 5-27-97, 6-10-97, 6-12-97 and 6-15-97.
[7] We only encountered this problem with the billing records submitted by JMP & S. (See Preziosi Certif., Ex. A, billing record dated 7-15-94 at 1.)
[8] Our organization in this manner not only facilitated our analysis of the reasonableness of the time spent for each litigation task, but also was essential for determining whether there was duplication of efforts on certain pretrial matters by local and lead counsel. Of course, the Court must take both of those matters in consideration in determining the reasonableness of the fee request. See Murrco, 800 S.W.2d at 606 (trier may consider the amount of time normally required to complete tasks); see also Parks Equip. Co. v. Southeast Equip. Co., Inc., 817 F.2d 340, 344 (5th Cir.1987) (noting that court should consider the amount sought in relation to the complexity of the issues involved).
[9] These litigation tasks were performed roughly from June 1994 to June 1996 and were the subject of the first motion for attorney's fees filed in this Court during the pendency of the appeal to the Third Circuit.
[10] Billing entries relating to counsels' work on appeal related matters appear roughly from July 1996 to May 1997.
[11] Billing entries relating to the preparation and filing of the first attorney's fee motion occurred roughly from June through August 1996. Billing entries relating to the second fee application occurred from June through September 1997.
[12] We note that some entries appear to relate to two different litigation tasks, i.e., work on summary judgment motion and discovery-related issues. We have separated the time spent on each task where such information is provided. If there is no way to determine the division of time spent from the description appended to a particular entry, but it is clear from the description that the majority of the effort expended related to the preparation of the summary judgment motion, we included that entire entry in the summary judgment preparation category. Otherwise, where the description associated with a billing entry is ambiguous, we have excluded that billing entry from our calculations.
[13] These expenses include car rental, airfare, meals, lodging, mileage, and parking. (Black stone Certif., Ex. 1, billing record dated 6-8-95; id., Ex. 1, billing record dated 9-11-95.)
[14] We reject at the outset GSAP's argument that "it is fundamentally unfair for the plaintiff to be responsible to pay for both Texas and New Jersey counsel." (See GSAP's Ltr. Br. at 4.) We see no reason under the prevailing language in the contract to limit recovery of fees and costs to lead counsel. Moreover, we do not think it is unreasonable to require plaintiff to reimburse EDS for reasonable local counsel fees in light of its decision to litigate this matter in New Jersey when defendant's lead counsel is located in Texas. Plaintiff has cited no authority, and we are aware of none, that would bar EDS from recovering at least some of the fees incurred in connection with JMP & S's services as local counsel in this matter.
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31 F. Supp. 2d 457 (1998)
Ira KLINEFELTER, Plaintiff,
v.
Roger E. FAULTERSAK and Hummer Turfgrass Systems, Inc., Defendants,
v.
Paul F. Little, Third-Party Defendant.
Civil Action No. 98-909.
United States District Court, E.D. Pennsylvania.
December 8, 1998.
*458 John D. Briggs, Katherman Martz & Gailey, York, PA, for Ira Klinefelter.
Theodore P. Winicov, Philadelphia, PA, for Roger E. Faultersak and Hummer Turfgrass Systems, Inc.
Lorraine J. Zwolak, Comeau and Casey, Conshohocken, PA, for Paul F. Little.
MEMORANDUM
GAWTHROP, District Judge.
On May 3, 1997, plaintiff, a passenger in a motor vehicle driven by additional defendant Paul F. Little, was injured in a collision with another vehicle driven by defendant Roger E. Faultersak, an employee of defendant Hummer Turfgrass Systems, Inc. (collectively "defendants"). Plaintiff alleges that defendants' negligence caused the accident. Plaintiff suffered serious injuries, and was treated at numerous medical institutions, by various medical personnel.
Now before the court is defendants' Motion in Limine. Defendants move, under Pennsylvania's Motor Vehicle Financial Responsibility Law ("MVFRL"), 75 Pa.C.S. § 1701, et seq., to exclude from trial evidence of plaintiff's medical bills that were either paid or payable by other insurance. Section 1722 of the MVFRL provides:
In any action for damages against a tortfeasor ... arising out of the maintenance or use of a motor vehicle, a person who is eligible to receive benefits under the coverages set forth in this subchapter ... or any program, group contract or other arrangement for payment of benefits as defined in Section 1719 ... shall be precluded from recovering the amount of benefits paid or payable under this subchapter ... or any program, group contract or other arrangement for payment benefits as defined in Section 1719.
Defendants allege that § 1722 precludes plaintiff from recovering any medical payments that were either paid or payable by (1) St. Paul Insurance Company, the company by which the motor vehicle was insured, (2) CNA Insurance Company, issuer of plaintiff's auto policy, and (3) Medicare of Pennsylvania and/or North Carolina, issuer of plaintiff's private health insurance.
To the extent that plaintiff's bills were not paid or payable by insurance, defendants further contend that plaintiff is limited to the *459 amount of the bills allowable under 75 Pa. C.S. § 1797(a), which states:
[a] person or institution providing treatment, accommodations, products or services to an injured person for an injury covered by liability ... benefits or first party medical benefits, ... for a motor vehicle described in Subchapter B ... shall not require, request or accept payment for the treatment, accommodations, products or services in excess of 110% of the prevailing charge ... under the Medicare program for comparable services at the time the services were rendered, or the provider's usual and customary charge, whichever is less.
Plaintiff responds that, other than medical bills paid by plaintiffs first party motor vehicle insurance carrier, he is not limited by § 1722 because "the Federal liens at issue preempt the provisions of Pennsylvania Motor Vehicle Financial Responsibility Law." Pl.'s Br. at 2. Specifically, plaintiff contends that § 1722 is preempted by the provisions of the ERISA and Medicare statutes.
Section 1722 "precludes a person from recovering damages arising out of the use of a motor vehicle from a culpable tortfeasor if the claimant is otherwise eligible to receive those benefits from any program, group contract, or other arrangement." Travitz v. Northeast Department ILGWU Health and Welfare Fund, 13 F.3d 704, 707 (3d Cir.1994). ERISA's statutory provisions, however, preempt § 1722. Id. at 710 ("Section 1722 of the Pennsylvania Motor Vehicle Financial Responsibility Law or any state statute that attempts to shift the liability for medical and health care benefits to a plan, group contract or other arrangement operating within the meaning of ERISA is preempted by it.").[1] Accordingly, plaintiff is not precluded from presenting evidence at trial in an attempt to recover the costs of medical bills paid or payable by this ERISA plan.[2]
The Medicare statute requires Medicare to be a secondary payer and provides that "[p]ayment ... may not be made ... to the extent that ... payment has been made or can reasonably be expected to be made promptly ... under an automobile or liability insurance policy or plan (including a self-insured plan)." 42 U.S.C. § 1395y(b)(2)(A)(ii). Further, any payments made are subject to reimbursement. 42 U.S.C. § 1395y(b)(2)(B). The aim is clearly to make Medicare benefits secondary to automobile or liability insurance. See 42 C.F.R. § 411.32(a) ("Medicare benefits are secondary to benefits payable by a third party payer even if the State law or the third party payer states that its benefits are secondary to Medicare benefits or otherwise limits its payments to Medicare beneficiaries."). To achieve this goal, the statute preserves Medicare's right to reimbursement when and if medical benefits are paid by a private insurer. Medicare thus also preempts § 1722. See U.S. v. Rhode Island Insurers' Insolvency Fund, 80 F.3d 616, 618 (1st Cir.1996) ("holding that § 1395y preempts non duplication of recovery provision of state insolvent insurer fund."); Smith v. Travelers Indem. Co., 763 F. Supp. 554, 558 *460 (M.D.Fla.1989) (holding that § 1395y preempts state collateral insurance statute).[3] Accordingly, § 1722, to the extent it here purports to allow private automobile and liability insurance to become secondary to Medicare, does not prevent plaintiff from presenting evidence of medical bills that were paid or payable by Medicare.
For the same reasons, medical bills paid or payable by the ERISA plan or Medicare are not limited by § 1797. However, those bills that were not paid or payable by the ERISA plan or Medicare, nor paid or payable by any other applicable insurance policy or plan, are limited by § 1797.
An order follows.
ORDER
AND NOW, this 7th day of December, 1998, Defendants' Motion in Limine to preclude the introduction of plaintiff's medical bills is DENIED to the extent that the medical bills were paid or were payable by any plan governed by ERISA or Medicare.*
NOTES
[1] In Travitz, the court engaged in a preemption analysis and noted that "[s]ection 1722, by shifting ultimate liability for medical and health care benefits to the ERISA Fund, has a direct and possibly devastating effect on it. That effect implicates the relations between the principal parties the Fund and its beneficiaries-by requiring the Fund to pay [plaintiff's] medical benefits and by making less overall benefits available to the other beneficiaries of the Fund." Travitz, 13 F.3d at 710. Although, ERISA's savings clause "reserves the regulation of insurance to the states ... [t]he deemer clause ... proscribe[s] a state from regulating self-insured ERISA plans." Id.
[2] In support of its opposition to defendants' motion, plaintiff submitted both a copy of Hanover Foods Corporation Employee Health Benefit Plan (the "Plan") and the affidavit of Donald H. Evans, Jr., president of D.H. Evans Associates, Inc. a Third Party Administrator, acting as the Plan Supervisor for the Plan. Mr. Evans's affidavit states that the Plan "is a self-funded plan established and administered pursuant to the requirements of the Welfare Benefit Plan provisions of the Employee Retirement Income Security Act of 1974." Pl.'s Br., Ex. B.
The Plan itself contains a provision relating to the subrogation of rights and reimbursement. Pl.'s Br., Ex. B. at 56. Thus, to the extent that plaintiff can establish that his medical bills were paid or payable by the Plan, yet also subject to reimbursement, he can introduce evidence of them at trial.
[3] State law is preempted when "it is impossible to comply with both state and federal law ... or [when] the state law stands as an obstacle to the accomplishment of the full purposes and objectives of Congress." Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248, 104 S. Ct. 615, 78 L. Ed. 2d 443 (1984). Citing this standard, the Smith court held that "[b]ecause the collateral source rule permits private automobile insurers to become secondary sources of recovery behind Medicare, Florida's collateral source rule obstructs the Congressional purpose behind section 1395y(b)(1)." Smith, 763 F.Supp. at 558.
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31 F. Supp. 2d 565 (1997)
Lavern YODER, Jr., Plaintiff,
v.
INGERSOLL-RAND COMPANY d/b/a Ingersoll-Rand/ARO Corporation, Defendant.
No. 3:96 CV 7239.
United States District Court, N.D. Ohio, Western Division.
June 4, 1997.
*566 *567 Mark Paul Prajsner, Toledo, OH, for Avern Yoder, Jr., plaintiff.
Jennifer J. Dawson, Justice G. Johnson, Jr., Roman Arce, Marshall & Melhorn, Toledo, OH, for Ingersoll-Rand Company dba Ingersoll-Rand/ARO Corporation, defendants.
MEMORANDUM OPINION
KATZ, District Judge.
This matter is before the Court on cross motions for summary judgment. For the following reasons, Plaintiff's motion for summary judgment will be denied. Defendant's motion for summary judgment will be granted.
I. BACKGROUND
Plaintiff Lavern Yoder brings this action against his employer to recover for damages he alleged were caused as a result of Defendant's failure to keep his medical records confidential. The dispositive facts are not in dispute. Defendant Ingersoll-Rand Company is a Delaware Corporation doing business in the state of Ohio as the Aro Corporation. At all times relevant to this action, Plaintiff Lavern Yoder was employed by Defendant as a tow motor driver at Defendant's Bryan, Ohio facility. Plaintiff's mother, Judy Bowers, was also employed by Defendant.
Around November 1993, Plaintiff learned that he was HIV-positive. During the last six months of 1994, Plaintiff took two medical leaves of absence to be treated for Kaposi's Sarcoma, a rare form of cancer which affects people with AIDS. Plaintiff made every effort to keep his HIV-positive status confidential from his employer, because he was concerned that he might suffer adverse employment consequences should his employer learn of his condition.
In August 1995, Plaintiff's doctor recommended that he take a medical leave of absence because of stress-induced asthma. When an employee seeks a disability leave, the employee is given a two-sided form entitled "Disability Benefit Request" on one side and "Physician's Statement" on the other. The employee fills out the "Disability Benefit Request" side of the form, and then submits the form to his physician to fill out the "Physician's Statement" side. Customarily, Aro gives the employee, along with the form, an envelope for the physician to place the form in after it is completed. The envelope is addressed to Aro, and marked "Personal and Confidential; Attention M. Sullivan." Mary Sullivan is the Aro hourly benefits coordinator. The employee then either hand-delivers the disability benefit request form to Sullivan, or can have it mailed to Sullivan in the Aro envelope.
In late August, 1995, Plaintiff obtained a Disability Benefit Request form from Sullivan, completed the Disability Benefit Request side of the form, and then hand-delivered the form to Dr. Haig Donabedian for completion. On August 29, 1995, Dr. Donabedian partially completed the "Physician's Statement" side of the form and returned it to Sullivan. The Physician's Statement indicated diagnoses of HIV-positive/AIDS, Kaposi's Sarcoma, and SIP skin graft. This appears to be the first time that Aro had a document indicating Plaintiff's AIDS diagnosis.
Dr. Donabedian did not complete the sections of the form entitled "Date of total disability" and "Date patient able to return to work." Since Sullivan could not process the form without Plaintiff's dates of disability, she returned the form to Plaintiff to give to Dr. Donabedian for completion. The parties disagree as to whether Sullivan gave Plaintiff the standard "Personal and Confidential; Attention M. Sullivan" return envelope along with the form; Sullivan states that she gave Plaintiff the envelope; Plaintiff states that he was given only a blank envelope with Aro's return address on it. At any rate, Plaintiff sent the form to Dr. Donabedian in a blank envelope with Aro's return address on the outside. The envelope was not marked "Personal *568 and Confidential," and Plaintiff did not place either his name or Sullivan's on the outside of the envelope.
For reasons unknown to the parties, the envelope was returned to Aro undelivered, marked "RETURN TO SENDER, NO LONGER HERE." Any mail that is addressed only to Aro, with no individual name listed on the envelope, is opened by the mail clerk in the Aro mail room. Aro mail clerk Deloris Kornrumpf opened the envelope in order to determine where it should be routed, and read enough of its contents to find Plaintiff's name. Kornrumpf did not read the document further. She replaced the Disability Benefit Request form in the envelope, placed that envelope in a large goldenrod interoffice envelope, put Plaintiff's name on the interoffice envelope, and routed it to Plaintiff via his supervisor.
Plaintiff was not at work on the day that Plaintiff's supervisor, Ray Chroninger, received the interoffice envelope. Chroninger noticed that the inner envelope was addressed to the Medical College of Ohio, and thought it might contain urgent information. Since Plaintiff was not at work, Chroninger gave the envelope to Plaintiff's mother to give to him. Chroninger did not open the inner envelope.
Later that day, Plaintiff's mother opened the envelope and read its contents. She learned from the Physician's Statement that Plaintiff had AIDS. Immediately before she opened the envelope, Plaintiff's mother had known that Plaintiff was HIV-positive and had been treated for Kaposi's Sarcoma, but did not know that Plaintiff had AIDS.
Plaintiff has brought a six-count Complaint against Defendant for permitting the unauthorized disclosure of his medical condition. In Count I, Plaintiff alleges that Defendant violated the privacy provision of the Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12112(d)(3) & (d)(4), by failing to keep his medical records confidential. In Count II, Plaintiff alleges that the ADA violation alleged in Count I was made intentionally and/or with reckless indifference to Plaintiff's rights, so as to subject Defendant to punitive damages. In Count III, Plaintiff alleges that the disclosure violated his Fourteenth Amendment right to privacy under the United States Constitution. In Count IV, Plaintiff brings a pendent state common law claim for invasion of privacy. In Count V, Plaintiff alleges that Defendant violated the provisions of Ohio Rev.Code §§ 3701.241-3701.249, which generally prohibit health care providers from disclosing a patient's HIV status without his consent. In Count VI, Plaintiff alleges that the Defendant company was negligent in hiring, training, and supervising its employees with regard to the treatment of confidential medical records, and that such negligence led to the disclosure.
Both sides have moved for summary judgment. The Court discusses the parties' contentions below.
II. DISCUSSION
A. Summary Judgment Standard
As an initial matter, the Court sets forth the relative burdens of the parties once a motion for summary judgment is made. Summary judgment must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). Of course, the moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact. Id. at 323, 106 S. Ct. at 2553. The burden then shifts to the nonmoving party who "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986) (quoting Fed.R.Civ.P. 56(e)).
Once the burden of production has so shifted, the party opposing summary judgment cannot rest on its pleadings or merely reassert its previous allegations. It is not sufficient "simply [to] show that there is some *569 metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986). Rather, Rule 56(e) "requires the nonmoving party to go beyond the [unverified] pleadings" and present some type of evidentiary material in support of its position. Celotex, 477 U.S. at 324, 106 S. Ct. at 2553. Summary judgment shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).
B. ADA Confidentiality Provision
In Count I, Plaintiff alleges that Defendant violated ADA by failing to keep his medical records confidential. The specific provisions upon which Plaintiff relies appear in the section of ADA which prohibits covered employers from discriminating against qualified individuals with disabilities with regard to employment. 42 U.S.C. § 12112. That section generally prohibits employers from conducting medical examinations or inquiries of job applicants or employees, except to determine the applicant or employee's ability to perform job-related functions. 42 U.S.C. § 12112(d). Plaintiff alleges two violations of this section.
First, Plaintiff alleges that Defendant violated 42 U.S.C. § 12112(d)(3), which requires employers to keep information gained from pre-employment medical examinations "on separate forms and in separate medical files and ... treated as a confidential medical record." Since the information on Plaintiff's Disability Benefit Request form was not gained in a pre-employment medical examination, this subsection has no applicability to Plaintiff's claim. Plaintiff has not shown a violation of 42 U.S.C. § 12112(d)(3) on these facts.
Second, Plaintiff alleges that Defendant violated 42 U.S.C. § 12112(d)(4), which requires employers to treat information gained in voluntary medical examinations "which are part of an employee health program available to employees at that work site" as confidential medical records. Again, since the information on Plaintiff's Disability Benefit Request form was not gained in a voluntary, on-site medical examination, this subsection has no applicability to Plaintiff's claim. Plaintiff has not shown a violation of 42 U.S.C. § 12112(d)(4) on these facts.
Plaintiff argues, however, that the language of these two subsections evinces Congressional intent to require employers to keep all medical information, especially medical information about disabled employees, confidential. He presents no case law in support of his argument, and the plain language of the statute does not evince such a broad intent. Congress' evident intent in passing the above-cited confidentiality provisions was to protect disabled employees from job discrimination by ensuring that the results of job-related medical examinations would not be kept in their personnel files. The statute goes no further than requiring employers to keep that limited class of medical records confidential, and this Court will not engraft onto the law requirements that Congress has not made. Defendant's motion for summary judgment on Count I is granted.
C. Reckless Indifference
In Count II, Plaintiff alleges that Defendant violated ADA intentionally and/or with reckless indifference to Plaintiff's rights. As discussed above, Defendant did not violate ADA at all, let alone with reckless indifference to Plaintiff's rights. Defendant's motion for summary judgment on Count II is granted.
D. Fourteenth Amendment Privacy Right
In Count III, Plaintiff alleges that the disclosure violated his Fourteenth Amendment right to privacy under the United States Constitution. However, the Fourteenth Amendment applies only to governmental action, and Defendant is not a governmental agency. Defendant's motion for summary judgment on Count III is granted.
E. Invasion of Privacy
In Count IV, Plaintiff brings a pendent state common law claim for invasion of *570 privacy. In construing questions of state law, the District Court sits as a state court, and must apply state law in accordance with the controlling decisions of the highest court of the state. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938). If the state's highest court has not addressed the issue, the District Court must attempt to ascertain how that court would rule if it were faced with the issue. The Court may use the decisional law of the state's lower courts, other Federal Courts construing state law, restatements of law, law review commentaries, and other jurisdictions on the "majority" rule in making this determination. Grantham & Mann v. American Safety Prods., 831 F.2d 596, 608 (6th Cir.1987). A Federal Court should not disregard the decisions of intermediate appellate state courts unless it is convinced by other persuasive data that the highest court of the state would decide otherwise. Commissioner v. Estate of Bosch, 387 U.S. 456, 465, 87 S. Ct. 1776, 1782, 18 L. Ed. 2d 886 (1967).
Ohio courts recognize the tort of invasion of privacy to encompass four distinct types of wrongful acts: (1) intrusion into the plaintiff's seclusion, solitude, or private affairs; (2) public disclosure of private facts about the plaintiff with which the public has no legitimate concern; (3) publicity that places the plaintiff in a false light; and (4) appropriation of the plaintiff's name or likeness for the defendant's advantage. Piro v. Franklin Twp., 102 Ohio App. 3d 130, 144, 656 N.E.2d 1035, 1044 (1995); Killilea v. Sears, Roebuck & Co., 27 Ohio App. 3d 163, 166, 499 N.E.2d 1291, 1294 (1985).[1]
Yoder alleges an invasion of privacy under the second theory, which is also known as the "publicity" tort. In order successfully to make out a claim under the "publicity" prong, Plaintiff must show five elements:
(1) there must be publicity, i.e., the disclosure must be of a public nature, not private; (2) the facts disclosed must be those concerning the private life of an individual, not his public life; (3) the matter publicized must be one which would be highly offensive and objectionable to a reasonable person of ordinary sensibilities; (4) the publication must have been made intentionally, not negligently; and (5) the matter publicized must not be a legitimate concern to the public.
Seta v. Reading Rock, Inc., 100 Ohio App. 3d 731, 740, 654 N.E.2d 1061, 1067 (1995) (quoting Killilea at syllabus).
Plaintiff can show neither the first nor the fourth element of this test. As to the first element, Plaintiff can prevail only if he shows that the matter has been communicated to "the public at large, or to so many persons that the matter must be regarded as substantially certain to become one of public knowledge." Id. at 740, 654 N.E.2d at 1068; Killilea, 27 Ohio App.3d at 166, 499 N.E.2d at 1294. It is not enough to show merely that the matter was communicated by the defendant to a third person. The record evidence indicates that Plaintiff's HIV/AIDS status was actually communicated to only one unauthorized person. Even if the Court accepts Plaintiff's argument that mail clerk Kornrumpf and supervisor Chroninger should be treated as having received the information because they had the opportunity to read Plaintiff's medical report, the information was communicated to three people at most. Three people do not constitute "the public at large." Plaintiff cannot meet the publicity prong of the test.
As to the fourth element, Plaintiff cannot show that Defendant, or its authorized agents, made the disclosure intentionally, even as to Plaintiff's mother. It is undisputed that nothing on the outside of the envelope received in the Aro mail room indicated that it contained a confidential medical *571 record. Kornrumpf's testimony that she did not read the form beyond Plaintiff's name, and did not know that it was a confidential medical record, is undisputed. Chroninger's testimony that he did not read the form, and did not know that it was a confidential medical record, is undisputed. It is a logical impossibility for a party intentionally to disclose information that it does not know it has. Furthermore, the disclosure would not have occurred without Plaintiff's mother's intervening act of opening and reading the medical records without authorization from Defendant. Plaintiff cannot meet the intent prong of the test. Defendant's motion for summary judgment on Count IV is granted.
F. Disclosure of HIV Status by Health Care Provider
In Count V, Plaintiff alleges that Defendant violated an Ohio statute that generally prohibits the unconsented disclosure of another's HIV/AIDS status by any person "that acquires the information while providing any health care service." Ohio Rev.Code § 3701.243. Defendant has moved for dismissal of this Count on the ground that the statute does not apply to it, since it did not acquire the information while providing any health care service. Plaintiff responds that the provision of disability benefits during Plaintiff's leave of absence constitutes a "health care service."
The statute does not define "health care service," and no Ohio court has had occasion to address the issue of how broadly that term is to be construed. The definition section of the statute does, however, define a "health care provider" as "an individual who provides diagnostic, evaluative, or treatment services." Ohio Rev.Code § 3701.24(A)(11). Using that definition as a guide, the Court finds that "health care service" under the statute includes only diagnostic, evaluative, and treatment services, and does not include tangential items such as disability benefits. Since the statute, by its own terms, does not apply to Defendant, Defendant's motion for summary judgment on Count V is granted.
G. Negligent Hiring, Training, and Supervision
In Count VI, Plaintiff alleges that Defendant's negligence in hiring, training, and supervising its employees with regard to the treatment of confidential medical records caused the wrongful disclosure of his HIV/ AIDS status. Plaintiff can prevail on this claim only if he can show that some employee committed acts constituting a violation of his privacy rights. As discussed above, Plaintiff has not so shown. Defendant's motion for summary judgment on Count VI is granted.
III. CONCLUSION
For the foregoing reasons, no triable issue of fact exists and Defendant is entitled to prevail as a matter of law. Plaintiff's motion for summary judgment is denied. Defendant's motion for summary judgment is granted.
IT IS SO ORDERED.
NOTES
[1] Whether a plaintiff can bring a cause of action for "false light" publicity in Ohio is a matter of some uncertainty. In M.J. DiCorpo, Inc. v. Sweeney, 69 Ohio St. 3d 497, 634 N.E.2d 203 (1994), the Ohio Supreme Court expressly declined either to adopt or reject such a cause of action. Appellate Courts in Ohio are split on the issue. Compare Piro and Killilea (recognizing the cause of action) with Bertsch v. Communications Workers of Am. Local 4302, 101 Ohio App. 3d 186, 655 N.E.2d 243 (1995) and Rogers v. Buckel, 83 Ohio App. 3d 653, 615 N.E.2d 669 (1992) (not recognizing the cause of action). Since Plaintiff Yoder's invasion of privacy claim does not involve allegations of false light publicity, the Court need not decide this issue.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2513807/
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387 F. Supp. 2d 20 (2005)
OAO ALFA BANK et al., Plaintiffs,
v.
CENTER FOR PUBLIC INTEGRITY et al., Defendants.
No. CIV.A. 00-2208(JDB).
United States District Court, District of Columbia.
September 27, 2005.
*21 *22 Daniel Joseph, Jonathan S. Spaeth, Tobias Eli Zimmerman, Akin, Gump, Strauss, Hauer & Feld, L.L.P., Washington, DC.
Peter John Loughlin, Hunton & Williams, Washington, DC.
*23 Elizabeth C. Koch, Michael Dennis Sullivan, Chad R. Bowman, Levine Sullivan Koch & Schulz, LLP, Washington, DC.
MEMORANDUM OPINION
BATES, District Judge.
Plaintiffs are two Russian businessmen and their companies who have sued the defendants, a public interest organization and its reporters, for defamation for publishing an article alleging that plaintiffs have connections to organized crime and have engaged in narcotics trafficking. Defendants have filed a motion for summary judgment in which they argue, among other things, that plaintiffs are limited public figures, and that the evidence demonstrates as a matter of law that defendants did not publish the piece with actual malice. The Court agrees. Although defendants' actions are not beyond reproach, they do not rise to the level of actual malice that the Constitution demands in order to preserve a vibrant exchange of ideas on issues of public concern. For this reason, the Court grants defendants' motion for summary judgment on all plaintiffs' claims.
BACKGROUND
I. The Rise of the Oligarchs
This case traces its lineage to the turbulent days of the dissolution of the former Soviet Union. When Boris Yeltsin assumed power in 1991, Russia lacked many of the institutions of a market economy and was in desperate need of capital. The United States and international financial institutions such as the International Monetary Fund were willing to provide Russia with financial aid, but only on the strict condition that the country agreed to implement a series of rapid market reforms. Yeltsin turned to a group of young economists and academics to implement the necessary changes to the Russian economy.
These reformers crafted a set of radical policies designed to privatize and liberalize the Russian economy at a quick pace. As the privatization campaign went into effect, it became evident that the transition of the Russian economy had been sabotaged by corruption and collusion. A group of individuals with close political connections to the Yeltsin government amassed enormous wealth and power through the wholesale transfer of prized state assets and shady deals with government officials. These tycoons, known as "oligarchs," rose to power based in large measure on their ability to navigate and manipulate the rules of a corrupt and lawless post-Soviet Russian economy. The government evinced little desire to enforce the rule of law, and organized crime syndicates rushed to fill the void, assuming a prominent presence in the new Russia.[1] As the oligarchs grew their wealth through back-room deals, the rest of the country was thrust into a period of rampant poverty.[2]
*24 The rise of the oligarchs and the deterioration of the Russian economy was the subject of intense discussion in the United States and the rest of the world. Policy makers debated the causes and the potential cures of the various problems gripping Russia. Western intelligence agencies grew increasingly concerned that the country was becoming a haven for money laundering, arms trafficking, and gun smuggling.[3] The Director of the Federal Bureau of Investigation estimated in testimony before Congress that the Russian mafia had taken control of more than 70% of all Russian commercial enterprises and that most of the 2,000 banks in Russia were "controlled by organized crime."[4] Private investors lost billions upon the devaluation of the ruble, reports surfaced that billions more in foreign aid had been diverted to private accounts overseas, and many called for a reassessment of the United States' and the International Monetary Fund's policies regarding the country. Russia's devolution into a "criminal-syndicalist state" and the proper response from the West was at the fore of policy discussions in the White House,[5] the halls of Congress,[6] think tanks,[7] and in the press.[8]
*25 Plaintiffs Mikhail Fridman and Pyotr Aven were two of the key players in the economic transformation of Russia.[9] Fridman is the founder and Chairman of the Alfa Group, a business conglomerate that includes plaintiffs OAO Alfa Bank and ZAO Alfa Eco. Fridman was involved in the privatization of the Russian economy from the very beginning, when Alfa Bank won the first auction for a state-owned company, acquiring the Bolshevik Biscuit Factory. On the heels of Yeltsin's re-election in 1996, the Russian government placed the Tyumen Oil Company on the auction block. Alfa Group obtained 40% of Tyumen at a fraction of the company's value, allegedly relying on the company's allies at the highest levels of the Russian government.[10] Several years later, Fridman obtained the remainder of Tyumen in another auction. Fridman leveraged his Tyumen holdings in a series of deals that expanded his fortune and his power, and Alfa Group now possesses significant interests in the oil and banking sectors as well as Russia's largest television network and a series of supermarkets. Aven Bank is the single largest privately owned bank in Russia. According to Forbes magazine, Fridman is the third wealthiest man in Russia, and one of the hundred richest people in the world.[11]
Aven was one of the handful of elite academics who Yeltsin chose to steer the country on a course to privatization.[12] Yeltsin appointed Aven to be his first Minister for Foreign Economic Relations. *26 Aven Dep. at 38:8-51:7. Aven was tasked in particular with addressing the considerable problem of Russia's foreign debt, and he used his position to speak out on economic issues and the administration's reform agenda. The Russian and international press reported on his words and actions closely.[13] Following his departure from the ministry post in December 1992, Aven became the president of Alfa Bank, a position he continues to hold today. He owns a 15% ownership stake in Alfa Bank, Tyumen, and two telecommunications companies. Aven continues to write articles and speak to international bodies on economic reform in Russia, and he is approached twice a year with proposals to write a book about his time in the Yeltsin government. Aven Dep. at 62:20-63:25.
Fridman and Aven are recognized as two of the most powerful Russian oligarchs.[14] They have maintained a close relationship to the highest reaches of the Russian government, and forged a series of friendships and alliances with Russian luminaries and politicians.[15] In Fridman's words, they were "players in the oligarch games," amassing wealth and influence at an unprecedented rate.[16] At critical points in Russia's history, they have stepped forward to direct the course of the nation's events. When Yeltsin was confronted with a coup attempt in the fall of 1993, Fridman and the other oligarchs were called to the Kremlin.[17] Several years later, with privatization *27 deeply unpopular and Yeltsin in danger of losing his bid for re-election to a communist, Fridman, Aven and the remainder of the oligarchs banded together to save the Yeltsin re-election campaign, installing a new campaign manager and (it is alleged) backing the re-election bid with money and support in the media outlets owned by the oligarchs.[18] Two years later, Yeltsin recruited the oligarchs to serve as a sort of economic advisory counsel, and during a market crash several months later, the oligarchs backed the government and reassured a concerned public.[19]
In short, Aven and Fridman have assumed an unforeseen level of prominence and influence in the economic and political affairs of their nation.[20] Russian newspapers coined a name for the leading oligarchs (Aven and Fridman among them) and the power they wielded: "semibankirschina," or the "reign of the seven bankers."[21] The Financial Times in 1996 named Aven and Fridman as among the "group of seven businessmen and bankers that, according to one of their number, is now running Russia."[22] As the Moscow Times put it: "When Soviet leaders were in trouble, they turned to the Politburo for help. When President Boris Yeltsin is in dire straits, he turns to his own, updated version of the Politburo the coterie of bankers and businessmen who, by all accounts, run modern Russia." Sullivan Decl., Ex. 135 (June 3, 1998 Moscow Times article).[23]
*28 Aven and Fridman have widespread access to the media and other channels of communications. They have given numerous interviews to Russian and international press, have published articles in Russia's leading newspapers, and have spoken to international audiences on the subjects of reform, corruption, and the Russian economy. Their media presence extends to the United States. Aven and Fridman have spoken to numerous influential organizations in the United States (such as the Keenan Institute and the Carnegie Endowment for International Peace), and Aven has been interviewed by American television news outlets, including ABC's Nightlight and CNN. Phillips Decl., Ex. 226, 227. The Alfa Group has also devoted millions to developing a public relations strategy that includes in-house press departments, an external public relations agency, a litany of press releases, and an English-language web site on which plaintiffs post their own articles as well as favorable press coverage.[24]
As a result of their positions of prominence and their media strategy, plaintiffs are the subject of extensive media coverage. An October 2003 search of an online news database for English language articles revealed more than 1,100 English language articles since 1990 that mention the name Mikhail Fridman, and more than 1,400 articles that include the name Petr Aven. Likewise, Alfa Bank has been the subject of 7,900 English language articles available online during this period, and Alfa Eco is named in more than 1,200 such articles. Affidavit of Sandra E.K. Burch, May 2, 2004, ¶ 4. An April 2001 search that confined the scope only to certain United States news publications (including the Washington Post, the Los Angeles Times, the New York Times, the Chicago Tribune, TIME, Newsweek, and Business Week) revealed more than 8,500 pages of articles that contain the terms Aven, Fridman, Alfa Bank, Alfa Eco, Alfa Group, or TNK. Id. ¶ 2.
Although Alfa Bank has developed a reputation in the international community as one of the most respected Russian financial institutions,[25] Aven and Fridman have been dogged by allegations of corruption and illegal conduct. Russian newspapers have published repeated claims that Aven and Fridman have rigged the auction of state assets through government connections, threatened the lives of government officials, ordered the assassination of a mobster, and engaged in narcotics trafficking and money laundering.[26] As one Alfa executive testified, "we all know the details because they have been printed over and over again, it's the same meetings with the same cartel representatives ... crime, drugs, money laundering, all that stuff." Tolchinsky Dep. at 44:8-45:22. Plaintiffs deny the allegations, and none of *29 the allegations has been prosecuted, let alone proven true. Even Fridman has acknowledged, however, that the "rules of business" in Russia "are quite different to western standards.... To say one can be completely clean and transparent is not realistic."[27]
II. The Center for Public Integrity Article
Defendant Center for Public Integrity ("CPI") is a nonpartisan and nonprofit watchdog group founded by former "60 Minutes" producer Charles Lewis. Lewis created CPI to serve as a source for investigative and analytical reports on topics relating to government ethics and the accountability of public officials. One of the several publications that CPI operates is "The Public I," an internet report that the organization inaugurated in 1999. Publishing on the internet enabled CPI to increase its coverage of "spot news" reports, or breaking news that needs to be reported in a quick and compressed fashion. Lewis Dep. at 18:15-21:15, 340:1-10.
A. The Origins of the Article
Several days before the 2000 Republican National Convention in July of 2000, George W. Bush announced that he would select Richard B. Cheney as his vice-presidential running mate. When the news broke, Lewis assigned two reporters and two researchers to cover the announcement as a spot news report on The Public I. CPI had considerable experience in tracking the role of money and influence in politics, and so Lewis suggested that the piece focus on the ways in which Cheney's tenure as CEO of the Halliburton Company affected the relationship between the company and the federal government. Lewis Dep. at 8:18-18:14. Lewis explained that they needed to "jump on" the piece, and that time was "of the essence" because the Republican convention was a few days away. Lewis Dep. at 12:2-12:14. The two reporters assigned to cover the story were defendants Knut Royce and Nathaniel Heller.
Royce was an award-winning reporter with more than thirty years of experience who had contributed to three Pulitzer-prize winning stories. He had written extensively on international corruption issues, and possessed a number of contacts in the national security and intelligence community. Royce Dep. at 298:19-301:11; Sullivan Decl., Appendix ¶¶ 31, 33, 34. Royce recalled reading that Halliburton had connections to a Russian oil company that had obtained a high-profile loan guarantee from the United States Export-Import Bank ("Ex-Im bank"). While Heller searched public records for information on Halliburton's campaign contributions and federal contracts,[28] Royce conducted an internet search for articles regarding the Russian oil company and the Ex-Im bank loan. Sullivan Decl., Ex. 11 at 63:15-64:15, 78:2-79:13; id., Ex. 12 at 70:4-71:6 (Lewis Dep.).
One of the articles Royce found was a January 2000 Washington Post report by David Ignatius entitled "The Strange Case of Russia, Big Oil and the CIA." Sullivan Decl., Ex. 69. The report described how the Ex-Im bank had been nearing decision for some time on a $500 million loan guarantee to the Tyumen Oil Company. Although it was prepared to conclude that the loan met the bank's test of creditworthiness, the bank was facing an unusual campaign to reject the loan, led by BP *30 Amoco, which was battling Tyumen for control of the assets of the debt-ridden Sidanco oil company in Russia. The article described how BP Amoco believed that Tyumen was using "improper tactics" to acquire one of Sidanco's lucrative oil fields in a closed door bankruptcy auction, with no public bidding and at a heavily discounted price. BP Amoco hoped that it could use a delay in the Export-Import loan application as leverage in its battle with Tyumen.
According to the article, what made the lobbying campaign "unusual" was that it was "accompanied by heavy pressure" from the Clinton administration stung "by criticism that it hadn't done enough to fight Russian corruption" to "reject or delay the loan." Sullivan Decl., Ex. 69. As the bank neared a decision on the loan, the article said that the National Security Council asked the Central Intelligence Agency to examine Tyumen and make information on the company available to the Ex-Im bank's directors. The CIA provided "several analytical reports and some raw intelligence," including a 29-page investigative report on Tyumen labeled "Secret." Id. at 2. The article quoted a CIA spokesman as stating that a CIA cover letter accompanying the report explained that it had been "commissioned by an international oil company, and produced by a Russian security firm that employs former members of the Russian security service." Id. The CIA would not identify who commissioned the report, but the article reported that an "informed source outside the U.S. government" said that it was BP Amoco. Id.
The Washington Post article advised that two and a half pages of the CIA report were labeled "criminal situation," and included "some detailed allegations about Tyumen management." Id. The article did not describe the contents of this section of the document, but it quoted another anonymous senior intelligence official as stating that CIA analysts later gave Export-Import officials a briefing, at which "we gave them our take on the Tyumen report," namely that "it tracked other information the agency had gathered." Id. The article concluded with a discussion of the result of BP Amoco's lobbying campaign against Tyumen, pointing out that although the bank held its ground, the State Department ordered that the loan be halted on national interest grounds, and the next day Tyumen negotiated a settlement with BP Amoco. Id. at 2-3.
Royce reviewed other articles as well. One of these was a summary in "Banking and Exchanges Weekly" of a July 1999 article in the Russian newspaper "Versiya," that included a description of several criminal allegations against Alfa Group/Tyumen officers. The summary mentioned that Aven had met a Colombian drug cartel representative in Vienna in 1993, at which time they discussed an agreement to divert capital from offshore areas into Alfa Bank, that Fridman had a hand in organizing "drug trafficking from South East Asia to Europe via Russia," and that Fridman maintained "numerous contracts" with the "most aggressive" criminal syndicate in Moscow. Royce Dep. at 91:4-91:12, Ex. 46 (abridged Versiya article).
Another Russian newspaper article that Royce found reported that Victor Ilyukhin, Chairman of the Security Committee of the Russian Duma, had in 1997 asked the Ministry of the Interior to verify allegations that Alfa Group officials had "used criminal groups for eliminating rivals" and had been involved in "bribe taking" and "embezzlement." Sullivan Decl., Ex. 30. A second article in "Versiya" profiled ties between the Alfa Group and "the most *31 influential organized crime group in Moscow's criminal world," and said that the latter had "influence" over Alfa Bank, guarantees the protection of Fridman and Aven, and supports certain Alfa "operations." Sullivan Decl., Ex. 51 (email to Royce containing translation of Versiya article).
B. Royce's Intelligence Sources
With these articles in hand, Royce contacted one of his anonymous sources at the CIA. Royce asked the official about the report identified in the Washington Post article, and any information he possessed about Alfa Group or Tyumen independent of that report. Royce Dep. at 231:9-232:3. The source declined to give Royce a copy or summarize the contents of the report, and refused to tell Royce who had authored the report. However, the source acknowledged that the report existed and that the source had read the report, and confirmed that the criminal information described in the report "tracked what the agency had." Royce Dep. at 233:11-236:14. As Royce described it, the source "effectively confirm[ed]" what had been described in the Washington Post article. Royce Dep. at 237:16-237:20.
Royce then turned to a second source from the intelligence community, former CIA official Richard Palmer, who had been the Chief of Station in Russia in the early 1990s before working in the private sector in the Russian banking industry. Palmer Dep. at 115:8-115:22; Sullivan Decl., Ex. 47 (redacted Palmer testimony before Congress). Palmer provided Royce with a full copy of the Versiya article that Palmer had earlier read only in abridged form in Banking and Exchanges Weekly. Royce Dep. at 102:13-105:13. The article stated that the newspaper had obtained the report containing criminal allegations against Alfa Group officials that Ilyukhin had passed on to the Ministry of the Interior for investigation. The article reported in detail the allegations in the report, which included claims that Aven and Fridman had engaged in the drug trade and had ties to Russian organized crime. Sullivan Decl., Ex. 49.[29]
Royce obtained other articles at this time that contained similar charges against Aven and Fridman. Royce reviewed a December 4, 1999 article in "The Economist" that repeated claims that Tyumen officials had "intimidated judges and journalists," that "its sources of funds are unclear," and that "behind the scenes it is run by bandits." Sullivan Decl., Ex. 33 at 1 (email to Royce containing Economist article). A former high-ranking State Department official also provided Royce with several Russian news articles about the Alfa Group that contained allegations that "Fridman was friends with many leading crime bosses." Sullivan Decl., Ex. 51 at 17-18.
C. The Russian-American Specialist and the FSB Report
Royce then contacted another anonymous source, this one a Russian-American specialist on business practices in the Soviet Union who had several contacts in the Russian law enforcement community. *32 Royce Dep. at 139:17-140:6, 433:10-434:19. Royce describes the individual as "extremely knowledgeable about criminal activity" in the Russian business world. Sullivan Decl., Ex. 11 at 160:1-160:10 (Royce Dep.). Royce met with the specialist for more than an hour, during which time the specialist described the ownership and management of Alfa Group and Tyumen and the controversy regarding its privatization. The specialist explained to Royce that "no major oil company is free of criminal activity," that all of this occurred at Alfa Group and Tyumen too, including "bribery, tax evasion, [and] corruption," that he had "little doubt that [Alfa Group and Tyumen] committed crimes in numerous occasions," and that Russian organized crime money "has gone through Alfa Bank." Royce Dep. at 151:7-154:22; Ex. 52 (handwritten notes).
Royce asked the Russian-American specialist about the report that Ilyukhin had forwarded to Russian law enforcement agencies. The specialist told Royce that he had contacted a source of his at the Russia Federal Security Bureau ("FSB," the successor agency to the KGB) to ask about the report, and the source informed him that the FSB would be investigating the allegations. When the specialist asked again a couple months later, the source had told him that the inquiry had been "put away for a better day" due to political considerations. Royce Dep. at 163:8-164:22.
Some time after their meeting, the specialist faxed Royce an abridged copy of the report (the "FSB report"). Royce Dep. at 162:1-163:8. The specialist wrote a note on the fax cover sheet:
Find enclosed the open letter to Ilyukhin as discussed. It is abridged and translated. The other document that I discovered was the unabridged version in the original Russian. I would still recommend looking into the Duma Archives for further actions on Ilyukhin's part.
P.S. Please don't take this article as the gospel.
Pl.Ex. 8. Royce explains that he understood the postscript to mean that he should not "assume that every bit of information is accurate," and that "[a]s in anything that comes out of Russia, be a little careful." Royce Dep. at 192:4-192:9. Royce did not show the cover sheet to, or discuss its contents with, Lewis, Heller, the fact-checker of the piece (Peter Smith), or the copy editor (Richard Prince).[30]
The FSB report is eight pages long. The first page contains a header stating:
This memo contains excerpts from a letter, sent from an anonymous group of Federal Security Bureau agents to the head of the national security commission, Victor Ivanovich Ilyukin. Although we have been unable to determine the veracity of the allegations made in the letter, our sources confirm that they may be the basis for an ongoing investigation by the federal authorities in Moscow.
Sullivan Decl., Ex. 29 at 1. The remainder of the document goes on to describe a number of criminal allegations involving the Alfa Group, including that:
Alfa Group "cooperat[ed]" with various Russian crime groups (including the Solntsevo mob). Id. at 3.
Fridman and Aven "allegedly participated in the transit of drugs from Southeast Asia through Russia and into Europe." Id. at 3.
*33 Fridman had "secretly cooperated with operatives of the KGB" in the 1980s. Id. at 4.
The Ministry of Internal Affairs searched Alfa Eco buildings in April 1995 and found drugs and other compromising documentation in an Alfa Eco building. The search was conducted due to the fact that, at the end of March residents in the city of Khabarovsk were "poisoned, apparently with sugar"; in "the course of the investigation, it was learned that the poisoning resulted from the fact that a large dose of some narcotic substance had contaminated the sugar," and it was later established that the containers in which the sugar was transported had been leased by an Alfa Group executive. Id. at 4.
Aven "met with a representative of the Colombian drug trade, Gilberto Rorigesom Orexuel, known by the nickname the `Chessman.' The meeting was held in part to conclude an agreement about the transfer of money into Alfa Bank from off-shore zones such as the Bahamas, Gibraltar, and others." Id. at 8.
Alfa Group relied on Aven's contacts to "transport drugs on a grand scale." Id. at 8.
Sullivan Decl., Ex. 29.
The Russian-American specialist told Royce that "there was not much question in his mind that the material came from the FSB." Royce Dep. at 198:11-199:1. The specialist told Royce "that there were allegations in there that he couldn't personally substantiate and others that generally he could, given what he knew, what he himself knew." Royce Dep. at 199:2-200:2. The specialist explained that he did not have personal knowledge of Fridman and Aven "being involved in drugs," but that he did have knowledge of their "involvement" with the Solntsevo mob, and that he could attest to Alfa Group having a "business relationship" and "a close relationship" with organized crime. Royce Dep. at 155:1-157:8.
Royce left the conversation with the Russian-American specialist convinced that the FSB report was not a "phony document." Royce Dep. at 185:10-187:1. He believed there was "a high likelihood it was indeed from the Federal Security Bureau, that some agents, one or more agents, had put together the material but that they wanted to not be identified and submitted it anonymously." Royce Decl. at 198:3-199:1. Royce never identified or spoke with the anonymous officials who provided the FSB report to Ilyukhin. Pls.' Mem. Ex. 7 at ¶¶ 31, 33-36 (interrogatory responses); Royce Dep. at 201:13-18, 209:1-210:5. Royce also did not find out whether any of the officials had personal knowledge of the allegations set out therein. Pls.' Mem. Ex. 7 at ¶¶ 37-44.[31]
D. Palmer and the KGB Report
Royce then arranged to meet with Palmer and John Forbes, a United States Customs *34 officer. Royce Dep. at 244:6-249:20. Royce asked both men to search for additional information they might have about the Alfa Group. Royce Dep. at 248:12-251:9. According to Royce, Forbes told him that he knew nothing about plaintiffs outside of "what he ha[d] read in the newspapers." Royce Dep. at 251:10-252:4. Palmer, on the other hand, located in his files after the meeting a memorandum detailing information that had been given to him in the summer of 1995 by a former KGB major (the "KGB major report"). Royce Dep. at 258:10-258:20.
Palmer gave Royce a copy of the KGB major report. The report explains that it contains notes from a September 1995 meeting with a former KGB major who was close to the management of two Russian banks. The report detailed the following allegations:
"As to Alfa-Bank, there is evidence regarding its involvement with money laundering of Russian and Latin American drug cartels. Alfa was [a] KGB creation in 1987 ... eventually made into a bank to help move money." Id. at 1.
"Alfa Bank was founded with both KGB and Communist Party funds. By then, several `rogue' former members of the KGB had come into this bank often bringing their criminal world contacts with them.... They quickly determined that dealing in drugs would bring the highest profits with literally no risk in Russia." Id.
"Alfa Bank's connections with drug dealers were revealed since autumn 1991- since the moment of the appointment of Pyotr Aven as minister of foreign trade. At that time, a large channel of heroin transit was established." Id.
"Once a funny incident took place in a Siberian region. There were some cases of strange intoxication registered in local people this intoxication was caused by certain drugs. It was learned that the drugs were contained in the sugar bought by these people from a certain railway worker. The person confessed that he stole the sack of sugar from the train car. Later, it was ascertained that the `sugar' cargo belonged to the firm ALFA-ECO ... a branch of ALFA-bank. The criminal investigations were instituted but were quickly stopped." Id. at 2.
Royce asked Palmer for the identity of the KGB agent, and if Royce could talk to him, or if Palmer could get in touch with him and ask him more questions. Palmer refused to disclose the major's identity, and said that Palmer would not even know how to track him down now. Palmer Dep. at 30:11-31:14. Palmer did tell Royce that the former KGB officer had been working with two banks that were founded by the KGB when Palmer talked with him. Royce Dep. at 327:8-327:19. Royce asked Palmer if he had ever given the document to anyone else, and Palmer said that he had not. Palmer Dep. at 229:21-230:7.[32]
Royce asked Palmer if Palmer believed the KGB agent was credible. Palmer explained *35 that "based on the fact that he had given me other information, which I found to be very consistent and very accurate," that "he knew what he was talking about." Palmer added that "in all my dealings with him, I found him to be credible," and that "I had seen nothing in the information to indicate that he was anything other than who he said he was and his information was accurate." Palmer Dep. at 30:11-31:14, 114:13-114:19, 147:13-148:2; Royce Dep. at 290:1-290:15.[33]
Royce concluded that many of the allegations in the 1997 FSB report had been corroborated by the KGB major report written two years earlier. Royce Dep. at 278:10-278:15, 407:10-408:8. He explained in his deposition in this case that the "KGB and the FSB that succeeded it I believe employ hundreds of thousands of officers and agents," and the odds "were astronomic that the KGB officers would perhaps have been one of the FSB officers who had provided the report in '97." Royce Dep. at 407:12-407:17. Royce also testified that he found the information credible because it had been given to someone who "the former U.S. intelligence official deemed to be credible" and "who was not a journalist," reducing the likelihood that it was "compromat" the Russian term for the practice, common during this period, of arranging for the publication of compromising (and often false) material about one's competitors or rivals. Royce Dep. at 407:17-407:22; Tolchinsky Dep. at 45:16-45:22; Winer Dep. at 130:16-131:18.[34]
E. Preparing the Article for Press
Royce testified that, at this point, he believed the allegations of criminal conduct were credible based on the "total body of evidence" that was available at that time, which included the FSB report, the KGB major report, the multiple intelligence sources (the CIA source, the Russian-American specialist, and Palmer),[35] the Versiya and other articles, the published Washington Post and Economist articles, *36 and the fact that the CIA and BP Amoco possessed information suggesting criminality on the part of Tyumen officials. Royce Dep. at 278:12 to 279:2. Royce and Heller sought responses from the plaintiffs regarding the allegations. Heller called Tyumen's counsel at Akin Gump Strauss Hauer & Feld. One of the attorneys told Heller that CPI was "totally off the mark." When Heller mentioned that they had corroborating evidence from intelligence sources, the attorney directed Heller to Tyumen's public relations people at Fleishman-Hilliard. Heller Dep. at 241:8-12. Heller contacted the account executive, who also provided a denial, and referred Heller to Alexander Tolchinsky, a member of the Board of Directors of Alfa Bank. Heller Dep. at 203:21-204:9.
Tolchinsky dismissed the allegations as "nonsense." Tolchinsky Dep. at 64:17-65:1. Tolchinsky explained that the allegations were "not new," and that they amounted to the same "old story that had been reprinted by various obscure Russian publications from mid '90s." Royce Dep. at 42:8-43:2. He expressed the view that the entire "bag of dirt" about Alfa was "compromat," which is the term for the Russian practice of arranging for the publication (sometimes through payments) of compromising material about ones competitors or rivals. Tolchinsky Dep. at 45:16-22; Royce Dep. at 383:14-385:1; Winer Dep. at 130:16-131:18. Tolchinsky told Royce that the stories were planted by an Alfa Group competitor who he declined to identify. Tolchinsky advised Royce to ask around to learn more about the nature of compromat and the Russian "yellow press." Tolchinsky Dep. at 42:8-44:7. Royce did not contact Fridman or Aven to ask them to comment about the piece; he explained in his deposition that he did not believe that they spoke English, and that he did not hire an interpreter because they were "pressed for time at that point" to publish the piece. Royce Dep. at 388:18-390:5
The article proceeded through CPI's normal fact-checking and editing process. The article was fact-checked by a researcher named Peter Smith. Smith Dep. at 54:11-54:16. Smith read the FSB and KGB major reports, and raised with Royce and Heller an anti-Semitic tone he detected in the documents.[36] Smith Dep. at 101:7-101:18, 106:16-107:6. Royce responded that anti-Semitism was common in Russia during the period and therefore, if anything, that tone was "an indication of authenticity." Smith Dep. at 101:7-18; 106:16-107:6. Smith relates that Royce and Heller "indicated that they were persuaded that the documents were reliable, that the allegations in them were corroborated by one another and gave a solid basis for the story." Smith Dep. at 101:13-101:18. Royce pointed out to Smith "that these were two separate sources, separated in time from each other; one from the former KGB agent, one from the FSB." He explained that the "separation ... made it unlikely that it was one bad source that was feeding both of them." Smith Dep. at 101:19-102:12. Smith said that Royce was "emphatic" that the allegations were true. Smith Dep. at 102:11-102:12. Smith was left with the impression that "all the questions and issues *37 I had raised had been resolved." Smith Dep. at 109:21-110:4.
Lewis gave the final approval for the article to be published. Lewis Dep. at 59:17-60:4. Lewis remembers that Royce "felt secure" about the basis for the article. Lewis Dep. at 236:13-237:19.[37] Royce and Heller both testified that they were confident that the allegations were credible at the time the article was published. Royce Dep. at 278:7-279:11; Heller Dep. at 427:20-438:10. The period of time from the assignment to the publication of the piece was approximately a week. Lewis Dep. at 32:1-32:13. On August 2, 2000, CPI published the article online on The Public I. The article remains on the CPI web site to this day.
F. The Article
The article was titled "Cheney Led Halliburton to Feast at Federal Trough." Sullivan Decl., Ex. 1. The article reports that Halliburton has benefitted from billions of dollars in federal contracts and loans under the stewardship of Cheney, and notes as one example the loan to Tyumen guaranteed by the Export-Import bank. The article advises that Halliburton lobbied for the loan, and that it would receive $292 million of the loan to refurbish oil fields in Siberia for Tyumen. The article then notes that BP Amoco commissioned a report on Tyumen, which was provided to the CIA. The article notes that the BP Amoco report contains two and a half pages labeled "criminal situation," that the CIA passed the report on to the Ex-Im bank, and that the CIA told the bank that the report "tracked" its own information. Article at 3.
The article notes that allegations of organized crime and drug activities "involving Tyumen's parent company, the Alfa Group, had been made public in Russia last year," and that the allegations are "contained in a report delivered in 1997 by anonymous officials from the FSB (the Russian equivalent of the FBI) to the national security committee of the Duma, or lower house of parliament." Article at 3. According to the article, the Russian-American specialist explained that the allegations had been the subject of an FSB investigation that had been "put away for a better day," and that key elements of the FSB report were "virtually identical" to those provided to an American intelligence officer two years earlier by a former KGB major.
The article then describes the allegations in the FSB and KGB major reports, including that:
The KGB major report "and the FSB report claim that Alfa Bank, one of Russia's largest and most profitable, as well as Alfa Eko, a trading company, had been deeply involved in the early 1990s in laundering of Russian and Colombian drug money and in trafficking drugs from the Far East to Europe." Id. at 3.
"The former KGB major ... said that Alfa Bank was founded with party and KGB funds, and quickly attracted rogue agents who ... `quickly determined that dealing in drugs would bring the highest profits with literally no risk in Russia.'" Id. at 4.
*38 "The FSB report ... claimed that Alfa Group's top executives, oligarchs Mikhail Fridman and Pyotr Aven, `allegedly participated in the transit of drugs from Southeast Asia through Russia and into Europe.'" Id. at 4.
"Both the FSB and KGB major reports cite an event in 1995 in which residents of a Siberian town became `intoxicated,' according to the American's report, and `poisoned,' according to the FSB report, after they had eaten heroin-laced sugar that had been shipped in a rail car container leased to Alfa Eko, which specializes in the shipment of foodstuffs." Id. at 4.
"Both reports claim that Alfa bank has laundered drug funds from Russian and Colombian drug cartels. The FSB document claims that at the end of 1993, a top Alfa official met with Gilberto Rodriguez Orejuela, the now-imprisoned financial mastermind of Colombia's notorious Cali cartel, "to conclude an agreement about the transfer of money into Alfa Bank from offshore zones such as the Bahamas, Gibraltar and others." The article notes that the KGB major report "is unclear about Alfa's alleged role with Rodriguez," but reports that there was evidence "regarding [Alfa Bank's] involvement with the money laundering of ... Latin American drug cartels." Id. at 5.
"The former KGB officer claimed that the Alfa empire had its roots in a cooperative formed by KGB officers in 1987...." The FSB report claims that top officials of the Alfa Group `cooperated' with a number of Russian crime organizations," and that the Russian-American specialist, "who has a wide array of contacts inside Russia's law enforcement and intelligence communities, agreed that Alfa Bank, as well as others, are used by the Solntsevo crime family." Id. at 5.
The article notes that the KGB officer was "at the time working for two banks formed by the KGB," and that he had been a part of the Soviet spy agency's "ideological counterintelligence branch," id. at 3, but does not mention the anti-Semitic tone of the article or discuss the phenomenon of compromat. The introduction of the article emphasizes that the claims of drug trafficking and organized crime funds "are hotly disputed by the Russian oil firm's holding company." Id. at 1. The article quotes Tolchinsky as stating that the allegations are "nonsense," and "[a]nother Alfa official" that "the reports were planted by representatives of a competing company, whom he would not identify." Id. at 4. The article also quotes an unidentified Akin Gump lawyer as describing the claims as "way off the mark," and an individual from Tyumen's public relations firm as stating that the firm had performed a background check on Tyumen and that "there was no concern" about the alleged mob ties. Id.
The article closes by noting that "Tyumen could have significant access to the White House should the Bush-Cheney ticket win in the November presidential elections," noting ties between Tyumen's legal counsel and the Bush campaign, and returning to a discussion of Halliburton's campaign expenditures and lobbying endeavors. Id. at 6. The article mentions that it talked to Halliburton and the Ex-Im bank about criminal allegations tying Tyumen and its officers to Russian organized crime, and states that an Ex-Im attorney said that the bank concluded that there was "no evidence to support the allegations" in the BP-Amoco report. Id. at 6.
*39 III. Procedural History
Fridman, Aven, OAO Alfa Bank and ZAO Alfa Eco commenced this action against CPI, Royce, and Heller on September 14, 2000. The complaint seeks compensatory and punitive damages and a permanent injunction preventing defendants from continuing to publish the article. On May 3, 2004, following a lengthy period of discovery, defendants filed a motion for summary judgment (along with two accompanying motions going to the merits of plaintiffs' claims). On June 1, 2004, the Court granted plaintiffs' motion to strike defendants' motion for summary judgment for exceeding the Court's page limits, and required defendants to file a renewed motion. On June 18, 2004, defendants filed a renewed motion for summary judgment. The motion is now fully briefed, and the Court held a hearing on the motion on February 3, 2005.
STANDARD OF REVIEW
Summary judgment is appropriate when the pleadings and the evidence demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The party seeking summary judgment bears the initial responsibility of demonstrating the absence of a genuine dispute of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The moving party may successfully support its motion by "informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Id. (quoting Fed.R.Civ.P. 56(c)).
In determining whether there exists a genuine issue of material fact sufficient to preclude summary judgment, the court must regard the non-movant's statements as true and accept all evidence and make all reasonable inferences in the non-movant's favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); Lohrenz v. Donnelly, 350 F.3d 1272, 1274-75 (D.C.Cir.2003). A non-moving party, however, must establish more than the "mere existence of a scintilla of evidence" in support of its position. Anderson, 477 U.S. at 252, 106 S. Ct. 2505. By pointing to the absence of evidence proffered by the non-moving party, a moving party may succeed on summary judgment. Celotex, 477 U.S. at 322, 106 S. Ct. 2548. "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S. Ct. 2505 (internal citations omitted).
Where, as here, the Court will be the trier of fact on an issue if the case were to proceed to trial, the rules of summary judgment are altered. In such a case, the "Court is not confined to deciding questions of law, but also may ... draw a derivative inference from undisputed subsidiary facts, even if those facts could support an inference to the contrary, so long as the inference does not depend upon an evaluation of witness credibility." Cook v. Babbitt, 819 F. Supp. 1, 11 & n. 11 (D.D.C.1993); see Ramallo v. Reno, 931 F. Supp. 884, 888 (D.D.C.1996) ("Because the Court would be the ultimate trier of fact in this case if it went to trial, `[c]onflict concerning the ultimate and decisive conclusion to be drawn from undisputed facts does not prevent rendition of a summary judgment.'") (quoting Fox v. Johnson & Wimsatt, Inc., 127 F.2d 729, 737 (D.C.Cir.1942)).
*40 ANALYSIS
To preserve the "national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open," the Constitution sets a demanding bar for "public figures" to recover for acts of defamation. New York Times v. Sullivan, 376 U.S. 254, 270, 84 S. Ct. 710, 11 L. Ed. 2d 686 (1964). A public figure may prevail in a defamation suit only if he or she can produce "clear and convincing proof" that the challenged publication was made with "actual malice" i.e., with "knowledge that it was false or with reckless disregard of whether it was false or not." Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 509, 111 S. Ct. 2419, 115 L. Ed. 2d 447 (1991); Gertz v. Robert Welch, Inc., 418 U.S. 323, 342, 94 S. Ct. 2997, 41 L. Ed. 2d 789 (1974); Tavoulareas v. Piro, 817 F.2d 762, 775 (D.C.Cir.1987) (en banc) (quotation omitted).
Defendants move for summary judgment on two independent grounds. First, they maintain that the publication of the CPI article is governed by a "fair reporting privilege" that provides an absolute immunity from suit and therefore removes any need to consider the public figure and actual malice questions. Second, they contend in the alternative that plaintiffs are limited public figures concerning the issue of Russian corruption and the future of Western aid and investment, and that plaintiffs have not come forward with clear and convincing evidence that defendants published the statements in the CPI article with actual malice. The Court addresses each of these contentions in turn.
I. The Fair Reporting Privilege
Defendants contend that this case can be resolved through the application of the fair reporting privilege. This privilege "is a recognized exception to the common law rule that the republisher of a defamation is deemed to have adopted the underlying defamatory statements as its own." White v. Fraternal Order of Police, 909 F.2d 512, 527 (D.C.Cir.1990). The privilege extends to "the report of any official proceeding, or any action taken by any officers or agency of the government of the United States, or of any State or of any of its subdivisions," Restatement (Second) of Torts § 611 cmt. d (1977), and will protect an article when it is "apparent either from specific attribution or from the overall context that the article is quoting, paraphrasing, or otherwise drawing upon official documents or proceedings," and the article is a "fair and accurate" account of the document or proceeding," Dameron v. Washington Magazine, Inc., 779 F.2d 736, 739 (D.C.Cir.1985).
Defendants maintain that the fair reporting privilege protects the CPI article because practically all of the challenged statements in the piece are attributed to the "FSB report," a memorandum delivered by anonymous Federal Security Bureau agents to Victor Ilyukhin, Chairman of the Security Committee of the Russian Duma, containing various allegations of misconduct concerning the leadership of the Alfa Group. The evidence in the record shows that Ilyukhin took action on the FSB report, passing it on to the Director of the FSB and the Deputy Chairman of the Ministry of the Interior ("MVD") with the instruction that those agencies investigate the allegations.[38]See Sullivan Decl., Ex. 21, 22 (letters from Ilyukhin). The MVD reported back to Ilyukhin a month later that it had been established that Alfa Group was "being investigated in connection with a number of criminal cases," including a case in which Moscow customs officials found arms and ammunitions in a shipment addressed to Alfa Eco. Sullivan *41 Decl., Ex. 23 (letter from Vasiliev to Ilyukhin).
The Court agrees with defendants that each of the ordinary prerequisites to application of the fair reporting privilege is met in this case: the FSB report is an "official document" for purposes of the privilege,[39] the CPI article paraphrases or draws upon the FSB report,[40] and the CPI article is a substantially accurate account of the report.[41] Nevertheless, the privilege is unavailable to defendants in this case, because it does not extend to the official reports of the actions of a foreign government.
The Fourth Circuit so held in Lee v. Dong-A Ilbo, 849 F.2d 876 (4th Cir.1988), in which the court refused to extend the privilege to a United States news agency report of a South Korean government press release. Reasoning that "[w]e are familiar with the workings of our government and consider it to be open and reliable," while "[f]oreign governments, like nongovernmental sources of information, are not necessarily familiar, open, reliable, or accountable," the Fourth Circuit declined to "provide a blanket privilege to those who report the activities of foreign governments." Id. at 879-80. The court then held that applying "the privilege in a piecemeal fashion would be extremely difficult," placing the court in the untenable position of attempting to determine whether *42 a foreign state exhibits the "openness and reliability that warrant an extension of the privilege." Id. The court therefore concluded that the privilege should not apply to reports on the acts of foreign governments.
This Court agrees with and follows the reasoning of the Fourth Circuit. Indeed, the Restatement adopts the same approach, explicitly limiting the compass of the privilege to reports of the proceedings or actions of "the government of the United States, or of any State or of any of its subdivisions," Restatement (Second) of Torts § 611 cmt. d (1977), and the D.C. Court of Appeals and the D.C. Circuit have both looked to the Restatement in the past in assessing the fair reporting privilege. See White, 909 F.2d at 527; Phillips v. Evening Star Newspaper Co., 424 A.2d 78, 88 (D.C.1980). Finally, even if the better course would be to assess the application of the privilege to a foreign state on a case-by-case basis,[42] the defendants in this case allege that Russia during this period was a "corrupt system run by crony capitalists," Def. Mem. at 12-13, hardly the showing of "openness and reliability" one would presumably look for in extending the privilege. Accordingly, the Court concludes that the fair reporting privilege does not protect the CPI article.[43]
II. Public Figures and Actual Malice
Defendants argue in the alternative that plaintiffs are public figures, and that plaintiffs cannot prove actual malice as a matter of law. These issues will be assessed separately.
A. Public Figures
The Supreme Court has identified two categories of public figures. A general public figure is an individual of "general fame or notoriety in the community" who has assumed a "pervasive involvement in the affairs of society." Gertz, 418 U.S. at 352, 94 S. Ct. 2997. General public figures are limited for the most part to those well-known "celebrities" whose names have become a "household word," and who therefore can be regarded as having "knowingly relinquished [their] anonymity in return for fame, fortune, or influence." Tavoulareas, 817 F.2d at 771. Such a person has entered public life "for all purposes and in all contexts," and therefore must prove actual malice in all defamation cases. Id. at 771. Defendants do not contend that plaintiffs rise to the level of general public figures.
Far more common than the general public figure is the "limited public figure," an individual who "voluntarily injects himself or is drawn into a particular public controversy and thereby becomes a public figure for a limited range of issues." Gertz, 418 U.S. at 352, 94 S. Ct. 2997; Tavoulareas, 817 F.2d at 772. The D.C. Circuit has set out a three-part inquiry to determine whether a plaintiff is a limited public figure. Waldbaum, 627 F.2d at 1297-98. First, the court must isolate an existing "public controversy" at issue, because *43 the scope of the controversy in which the plaintiff involves himself defines the bounds of the public presence. Id. at 1297; see Tavoulareas, 817 F.2d at 772. Second, the court should assess whether the plaintiffs have achieved more than a trivial or tangential prominence in the debate. Waldbaum, 627 F.2d at 1297. Finally, the "alleged defamation must have been germane to the plaintiff's participation in the controversy." Id. at 1298.
Defendants contend that plaintiffs are limited public figures for purposes of the public controversy involving corruption in post-Soviet Russia and the future of Western aid and investment in the country. Def. Mem. at 9. The public figure question is one of law that the Court must resolve itself, looking at the facts "taken as a whole, through the eyes of a reasonable person." See Rosenblatt v. Baer, 383 U.S. 75, 88, 86 S. Ct. 669, 15 L. Ed. 2d 597 (1966); Waldbaum, 627 F.2d at 1293. Following a careful review of the parties' arguments and the entire record in this case, the Court has concluded that plaintiffs are public figures for purposes of the limited controversy identified by defendants.
First, defendants have isolated a "public controversy" within the meaning of Waldbaum. The rise of the oligarchs and the decline of the Russian economy into what one observer described as a "criminal-syndicalist state" was one of the defining foreign policy controversies of the 1990s, and the topic of intense discussion in the media, classrooms, think tanks, and the government of the United States, as well as through the rest of the world. See supra at 23-24. As the events of this period unfolded, untold millions of Russians lost their savings, millions more in the West lost their investments, and the world economy was shaken to its core. The choices made in the period, on the part of Russia and the United States, are still being debated to this day.[44] A public controversy is a "real dispute, the outcome of which affects the general public or some segment of it in an appreciable way." Waldbaum, 627 F.2d at 1296. The controversy in this case certainly qualifies, and does not differ meaningfully from the controversies found adequate in other cases. See Tavoulareas, 817 F.2d at 772 ("public controversy" exists concerning the "manner in which the United States should respond to the rise of OPEC and the ensuing energy crisis" and "whether the management and structure of the United States' private oil industry was in need of alteration or reform"); Foretich v. Advance Magazine Publishers, Inc., 765 F. Supp. 1099, 1102 (D.D.C.1991) ("public controversy" exists over "child abuse, women's rights, the intrusion of the state into private affairs, and the limits of punishment for contempt of court").
Second, plaintiffs have assumed a "special prominence" in the controversy. Waldbaum, 627 F.2d at 1297. They were two of the leading participants in the transformation of the Russian economy. The economic changes attending the fall of the Soviet Union catapulted the plaintiffs *44 into an elite class of Russian businesspeople, converting them almost overnight into two of the richest and most powerful individuals in the country. Plaintiffs not only benefitted from the economic reforms in the period, but they have influenced the course of those reforms. From the outset of the campaign of privatization (when Aven was a cabinet minister in the first Yeltsin administration) to the 1993 coup attempt, to the 1995 near-election defeat of Yeltsin, to the 1998 market crash, the plaintiffs have stepped forward to guide the political and economic direction of Russia at every turn. Further, plaintiffs have fully engaged in the worldwide debate regarding the causes and the cure for the corruption that has overcome the Russian economy, and have themselves been the repeated target of allegations of collusion and illegality. Plaintiffs have risen to positions of unprecedented influence in the political and economic affairs of their nation far from being "trivial" or "tangential" to the upheaval of the Russian economy, they are the very centerpiece of the public controversy in this case. Id. at 1297.
Finally, the challenged statements in the CPI article were "germane" to the public controversy. Id. at 1298. The statements set out detailed allegations of corruption and illegal conduct on the part of two of the Russian oligarchs. This account of plaintiff's exploits true or not is a component of the debate over the consequences of Russia's economic reforms and the corruption that most agree has gripped the post-Soviet economy. At the very least, it can safely be said that these statements are not "wholly unrelated" to this broader debate. Id. This becomes even more evident when one steps back and views the comments in relation to the rest of the article. The allegations of criminal conduct appear amid a report of a discussion of the heated debate regarding a particular form of planned United States aid to the plaintiffs' oil company, and the various factors that came to bear on that process, including allegations of corruption and the intense lobbying (according to the article) of Halliburton and BP Amoco. The entire article therefore purports to present an example of and serves to shed light on the emergence of corruption in the post-Soviet Russian economy and the ongoing debate in the West about how to confront it. This relationship more than suffices to satisfy the "germaneness" prong of the Waldbaum test. See, e.g., Tavoulareas, 817 F.2d at 773-74 (article discussing alleged nepotism at an oil company was germane to public controversy on the direction of national energy policy, "[t]he alleged nepotism by Tavoulareas was not `wholly unrelated' to a public controversy where the credibility and integrity of representatives of the oil industry had become an issue").
Several other guideposts bear on the public figure inquiry, and each of them is present in this case. First, plaintiffs have chosen paths of endeavor that "invite attention and comment." Tavoulareas, 817 F.2d at 773. They are among the richest and most influential businesspeople in Russia, if not the world. They have taken an active role in the political direction of their country, and have spoken vocally on the world stage. These choices have placed plaintiffs squarely in the public light. See, e.g., id. (fact that plaintiff is "president and chief operating officer of one of the world's largest multinational corporations" is relevant to "whether that person has `invite[d] attention and comment' with respect to public issues affecting his business dealings"); Novecon, 977 F.Supp. at 49 (plaintiff's "impressive resume is a factor in his public figure status").
*45 Second, Aven and Fridman and their companies have been the subject of widespread news coverage. See Waldbaum, 627 F.2d at 1297 (advising that courts should "look to ... the extent of press coverage" of the plaintiffs in undertaking the limited public figure analysis); Schiavone Construction Co. v. Time, Inc., 847 F.2d 1069, 1078 (3d Cir.1988) ("plaintiffs who had appeared frequently in the news could not escape limited public figure status"). An October 2003 internet search of a news database yielded more than 1,100 English language articles since 1990 that mention the name Mikhail Fridman, and more than 1,400 articles that include the name Pyotr Aven (or variations thereof).[45]See supra at 28. These articles appear in publications ranging from the New York Times to the Russian newspaper Versiya. This media footprint is far greater than those found sufficient to support public figure status in other cases. See Ellis v. Time, 1997 WL 863267, at *6 (D.D.C.1997) (plaintiff is limited public figure where he was the subject of five articles in newspapers ranging from the Washington Post to the Russian newspaper Izvestia); Bell v. Associated Press, 584 F. Supp. 128, 131 (D.D.C.1984) (plaintiff is limited public figure where "over one hundred newspaper articles have appeared concerning his various activities during the course of plaintiff's career").
Third, Aven and Fridman enjoy "access to the channels of effective communication" that enable them to respond to any defamatory statements and influence the course of public debate. Gertz, 418 U.S. at 344, 94 S. Ct. 2997; Tavoulareas, 817 F.2d at 772-73. They have written articles in Russian newspapers, given interviews to newspapers and other media outlets throughout the world (including ABC's Nightline and CNN), spoken on economic reform issues to international audiences, and developed a well-coordinated and sophisticated public relations strategy through in-house press departments, external public relations firms, and corporate websites. Plaintiffs have even given interviews in which they responded to the very allegations made in the CPI article.[46] These facts also lend strong support to the conclusion that plaintiffs are limited public figures. See Secord v. Cockburn, 747 F. Supp. 779, 784 (D.D.C.1990) ("[P]laintiff has appeared as a speaker at many political gatherings and has been interviewed on network television programs ... including *46 Nightline, Good Morning America and Cross-Fire (the latter to discuss [the allegedly defamatory publication]) and in publications... demonstrating `access to the channels of effective communication' that the Supreme Court felt characterized a public figure."); Foretich, 765 F.Supp. at 1108 (plaintiff gave statements to press and sat for an interview with a television crew, "a course of conduct that was likely to attract substantial attention").
Finally, Aven and Fridman have used their positions to influence the events of their country and the world, and have assumed a prominent role in the civic life of Russia, associating closely and openly with the Russian business elite and politicians at the highest positions of government. Such facts have been held to signify that plaintiffs are public figures who have voluntarily exposed themselves to public scrutiny and are therefore less deserving of protection than private persons. See Clyburn, 903 F.2d at 33 (one who "hobnob[s] with high officials ... runs the risk that personal tragedies that for less well-connected people would pass unnoticed may place him at the heart of a public controversy"); Tavoulareas, 817 F.2d at 773 (plaintiff corporate president "thrust himself to the forefront of the national controversy over the state of the oil industry" and "became an activist" on these issues); Matusevitch v. Telnikoff, 877 F. Supp. 1, 5 n. 3 (D.D.C.1995) (plaintiff who was a "confident to several Soviet activists such as Alexander Solzhenitsyn, Andrei Sakharov, Yelena Bonner, and Vladimir Bukovsky" was a limited public figure).
Plaintiffs raise two principal objections to the conclusion that Aven and Fridman are limited public figures. First, they contend that the issue of Russian corruption and the future of Western aid and investment is too generalized to qualify as a public controversy. Pl. Mem. at 49. However, the public controversy in this case is no more general than controversies that have been found sufficient in a host of other cases, which include "the methods and influence of lobbyists in Washington," Gray v. St. Martin's Press, Inc., 221 F.3d 243, 251 (1st Cir.2000); "drug trafficking," Marcone v. Penthouse Int'l Magazine for Men, 754 F.2d 1072, 1083 (3d Cir.1985); the "relations between the sexes" and "contemporary standards regarding nudity," Lerman v. Flynt Distrib. Co., 745 F.2d 123, 137 (2d Cir.1984); and the problem of "child abuse," Underwager v. Salter, 22 F.3d 730, 734 (7th Cir.1994).
This is not a case where the proposed controversy is so generalized that it would be "shared by most" for example, the proposed controversy of "concern about general public expenditures," which "relates to most public expenditures" and would transform into a public figure anyone receiving a public grant. See Hutchinson v. Proxmire, 443 U.S. 111, 135, 99 S. Ct. 2675, 61 L. Ed. 2d 411 (1979).[47] Plaintiffs' suggestion that treating them as public figures would convert any participant in the Russian economy into a public figure is practically a non-sequitur. Def. Mem. at 50. As already discussed at length, plaintiffs were not just any "participant" in the Russian economy, but assumed positions of unique wealth, influence and renown. See, e.g., McDowell v. Paiewonsky, 769 F.2d 942, 948 (3d Cir.1985) (concern in Hutchinson not present where the particular government grants or projects at issue have "been the subject of considerable media attention"). To qualify as a public controversy, *47 the law requires only that the issue be discussed publicly, and that the resolution of the issue affect others besides the immediate participants in the debate. Waldbaum, 627 F.2d at 1297. Those requirements are manifestly satisfied here.
Second, Aven and Fridman argue that although they may have risen to a certain level of prominence, their fame is confined to Russia hence, they have not achieved "general fame or notoriety in the community" of the United States. Gertz, 418 U.S. at 352, 94 S. Ct. 2997. At the outset, the "general fame or notoriety" formulation is the standard for a general public figure; a plaintiff need not attain that level of notoriety to be a limited public figure. Id. at 351-52, 94 S. Ct. 2997; Waldbaum, 627 F.2d at 1298 n. 32. Moreover, while it is true that the case law requires that even a limited public figure have achieved the "necessary degree of notoriety... where the defamation was published," the defamation in this case was published on the Internet. Waldbaum, 627 F.2d at 1295 n. 22 (emphasis added). The audience for the CPI article is not confined to the United States merely because that is where the authors of the piece choose to work, and it is not immediately apparent why the limited public figure inquiry should be so confined.
Even if the Court were to limit its review of the defendants' prominence to the United States, the evidence in the form of Alfa Group's promotional materials describe Aven as "an internationally recognized economist and author." Phillips Decl., Ex. 101.[48] Aven and Fridman speak to influential organizations and appear on television in the United States. Aven accompanied the acting prime minister on a diplomatic mission to the United States, where he attended meetings with senior Clinton administration officials and cabinet members. See supra at 27 n. 20. Fridman was invited to Washington D.C. to receive a prominent award alongside luminaries such as a Supreme Court Justice and United States Senators. See supra at 26 n. 15. An April 2001 search confined only to certain United States news publications (including the Washington Post, the Los Angeles Times, the New York Times, the Chicago Tribune, TIME, Newsweek, and Business Week) yielded more than 8,500 pages of newspaper articles that contain the words Aven, Fridman, Alfa Bank, Alfa Eco, Alfa Group, or TNK. Id. ¶ 2. Simply put, Aven and Fridman are players on the world stage; hence, they are limited public figures not only in Russia, but in the United States as well.[49]
B. OAO Alfa Bank and ZAO Alfa Eco
The corporate plaintiffs OAO Alfa Bank and ZAO Alfa Eco are also public figures for purposes of the defamation analysis in this case. Corporate plaintiffs are treated as public figures as a matter of law in defamation actions brought against mass media defendants involving matters of legitimate public interest. See Metastorm, Inc. v. Gartner *48 Group, Inc., 28 F. Supp. 2d 665, 669 (D.D.C.1998); Martin Marietta Corp. v. Evening Star Newspaper Co., 417 F. Supp. 947, 955 (D.D.C.1976). As a judge of this court once explained:
It is quite clear from the Court's opinion [in Gertz], however, that the values considered important enough to merit accommodation with interests protected by the first amendment are associated solely with natural persons, and that corporations, while legal persons for some purposes, possess none of the attributes the Court sought to protect.... [A] libel action brought on behalf of a corporation does not involve `the essential dignity and worth of every human being' and, thus, is not `at the root of any decent system of ordered liberty.'
Martin Marietta, 417 F.Supp. at 955 (quoting Gertz, 418 U.S. at 341, 94 S. Ct. 2997); see also Brown & Williamson Tobacco Corp. v. Jacobson, 713 F.2d 262, 273 (7th Cir.1983) ("[I]f the purpose of the public figure-private person dichotomy is to protect the privacy of individuals who do not seek publicity or engage in activities that place them in the public eye, there seems no reason to classify a large corporation as a private person.").[50] CPI is a member of the mass media, and the topics discussed in the CPI article (which include the relationship between United States politicians and Russian banks accused of engaging in corrupt activities) are a matter of legitimate public interest. Therefore, the corporate plaintiffs in this case are public figures as well.[51]
III. Actual Malice
Because plaintiffs are public figures, they may prevail on their defamation claims only if they can prove by clear and convincing evidence that defendants published the challenged statements with actual malice. Masson, 501 U.S. at 510, 111 S. Ct. 2419; New York Times, 376 U.S. at 279-80, 84 S. Ct. 710. The "standard of actual malice is a daunting one." McFarlane v. Sheridan Square Press, 91 F.3d 1501, 1515 (D.C.Cir.1996) (quotation and citation omitted). A publisher acts with "actual malice" if it "either knows that what it is about to publish is false or it publishes the information with `reckless disregard' for its truth or falsity." Id. at 1508. The test is subjective: the plaintiff must come forward with sufficient evidence to prove "that the defendant in fact entertained serious doubts" as to the truth of the publication or acted "with a high degree of awareness of ... its probable falsity." St. Amant v. Thompson, 390 U.S. 727, 731, 88 S. Ct. 1323, 20 L. Ed. 2d 262 (1968); McFarlane, 91 F.3d at 1508. To have acted with actual malice, the publisher *49 must have "come close to wilfully blinding itself to the falsity of its utterance." McFarlane, 91 F.3d at 1508 (quoting Tavoulareas, 817 F.2d at 775).
The burden of proof "imposed on public figures is significantly more onerous than the usual preponderance of the evidence standard." Tavoulareas, 817 F.2d at 776. A public figure may recover "only on clear and convincing proof" that the defamatory falsehood was made with actual malice. Gertz, 418 U.S. at 342, 94 S. Ct. 2997; McFarlane, 91 F.3d at 1508. The requirement of clear and convincing evidence "administers an extremely powerful antidote to the inducement to media self-censorship of the common-law rule of strict liability" for defamation claims. Gertz, 418 U.S. at 342, 94 S. Ct. 2997. "Few public figures have been able clearly and convincingly to prove that the scurrilous things said about them were published by someone with `serious doubts as to the truth of [the] publication.'" McFarlane, 91 F.3d at 1515 (quoting St. Amant, 390 U.S. at 731, 88 S. Ct. 1323).
Unlike the public figure inquiry, the question of actual malice is ordinarily one for the jury to decide. See Liberty Lobby v. Rees, 852 F.2d 595, 598 (D.C.Cir.1988). However, plaintiffs in this case do not request a jury trial. The Court, then, would be the ultimate fact-finder were this case to go to trial, and hence the normal summary judgment approach is altered: the Court is not limited to deciding questions of law on the basis of undisputed facts, but also may "draw a derivative inference from undisputed subsidiary facts, even if those facts could support an inference to the contrary, so long as the inference does not depend upon an evaluation of witness credibility." Cook v. Babbitt, 819 F. Supp. 1, 11 & n. 11 (D.D.C.1993). As in any defamation case involving a public figure, the question for the court at the summary judgment stage is whether plaintiffs have identified evidence that "could support a ... finding, by clear and convincing evidence, that the defendants acted with actual malice in publishing" the CPI article. Liberty Lobby, 852 F.2d at 598.
The Court notes at the outset that plaintiffs have not come forward with any direct evidence of actual malice. Each of the witnesses who was part of the decision-making process has testified that defendants believed the allegations of criminal conduct to be credible. See Royce Dep. at 279:5-279:11 (explaining that the "total body of information" available at the time led him to "believ[e] that the specific allegations indeed were credible"); Heller Dep. at 428:4-428:11 ("From the moment the article was reported, written and published, I've always been confident, entirely confident in the sources, that they were corroborated and independent, and in the truth of the reporting. That's never been of question to me, either then or now."); Lewis Dep. at 237:9-237:10 (explaining that in discussions with Royce "I do remember that he felt secure" about the piece); Smith Dep. at 101:7-101:18 (explaining that Royce and Heller said that they "were persuaded that the documents were reliable, that the allegations in them were corroborated by one another and gave a solid basis for the story" and that "all the questions and issues I had raised had been resolved"). Indeed, one of the CPI employees testified that Royce was "emphatic" that the allegations in the KGB and FSB reports were credible. See Smith Dep. at 101:19-102:1-12. Thus, plaintiffs are unable to point to any direct evidence that defendants in fact "entertained serious doubts" as to the truth of the publication or acted "with a high degree of awareness of ... its probable falsity." St. Amant, 390 U.S. at 731, 88 S. Ct. 1323; McFarlane, 91 F.3d at 1508; see *50 Herbert v. Lando, 441 U.S. 153, 169, 99 S. Ct. 1635, 60 L. Ed. 2d 115 (1979) (holding that "the relevance of answers" from the "mouth of the defendant himself" to questions regarding his awareness of falsehood "can hardly be doubted"); Foretich v. American Broad. Co., 1997 WL 669644, at *6 (D.D.C. Oct.17, 1997) ("Plaintiffs offer no direct evidence of actual malice.").
Proof of actual malice may take the form of circumstantial evidence. See Clyburn, 903 F.2d at 33. However, the "standard for actual malice is not what a reasonable person or a prudent publisher would do." Lohrenz v. Donnelly, 223 F. Supp. 2d 25, 45 (D.D.C.2002), aff'd, 350 F.3d 1272 (D.C.Cir.2002). To prevent the inquiry into the defendant's subjective state of mind from slipping into an open-ended review of the reasonableness of the defendant's investigation or his compliance with professional standards, the courts have identified only three scenarios in which the circumstantial evidence of subjective intent could be so powerful that it could provide clear and convincing proof of actual malice. These scenarios are where there is evidence that the story: (i) was "fabricated" or the product of defendants' imagination; (ii) is "so inherently improbable that only a reckless man would have put [it] in circulation"; or (iii) is "based wholly on a source that the defendant had obvious reasons to doubt, such as an unverified anonymous telephone call." McFarlane, 91 F.3d at 1512-13 (quotation omitted); see St. Amant, 390 U.S. at 732, 88 S. Ct. 1323.
No claim is made that defendants fabricated the assertions in the CPI article. Nor are the allegations of organized mob ties and drug trafficking so inherently improbable that actual malice can be presumed. It was widely reported during the period that organized crime had infiltrated the Russian marketplace; indeed, the Director of the FBI estimated in testimony before Congress that the Russian mafia had taken control of more than 70% of all Russian commercial enterprises and that most of the 2,000 banks in Russia were "controlled by organized crime." It was thus not inherently improbable that Alfa Bank the largest privately owned bank in Russia had also developed a relationship with organized crime and participated in other criminal activity during this period.
Russian officials have investigated similar criminal allegations on several occasions. The allegations of organized criminal ties and drug trafficking in the FSB report were passed on by Ilyukhin to law enforcement officials, who wrote back a month later that Alfa Group was "being investigated in connection with a number of criminal cases," including a case in which Moscow customs officials found arms and ammunitions in a shipment addressed to Alfa Eco. Sullivan Decl., Ex. 23 (letter from Vasiliev to Ilyukhin). A corruption task force once told Yeltsin that Aven was abusing his government position, and Alfa has acknowledged that Russian law enforcement officials searched the Alfa Eco offices in 1995. See Aven Dep. Vol. IIA at 126:3-130:1; Phillips Decl., Ex. 173; Sullivan Decl., App. 61.
Even as to the most fantastic of the allegations that involving heroin transported in sugar bags that led to the poisoning of a Siberian town plaintiffs' own expert explains that he read a Russian wire story report of the sugar poisoning incident while with CBS in Moscow; he found the story "intriguing" and wanted to run it down, but never got around to doing so. Sanders Dep. at 145:3-146:14. Alfa Eco is one of Russia's largest sugar dealers, and transports sugar by rail across Russia. Fain Dep. at 128:12-132:13, 140:22-143:6, 357:20-358:6, 389:12-392:4. The BP Amoco report, which surfaced in *51 the course of discovery, contains a description of the "sugar poisoning" incident; the CIA passed the information in the BP Amoco report on to the Export-Import bank, and sources have stated that the allegations in the BP Amoco report tracked other information in the possession of the CIA. This is not to say that the assertions in the CPI article are true. Indeed, there is reason to believe that at least some of them are not: for example, no credible reports have come to light indicating that an unusual number of citizens of a Siberian town ever fell ill. However, it cannot be said that the allegations were so inherently improbable that defendants' decision to publish the allegations amounted to actual malice.
Lastly, this was not a case where the defendants based their article "wholly on a source that the defendant had obvious reasons to doubt, such as an unverified anonymous telephone call." McFarlane, 91 F.3d at 1512. Defendants grounded their article on several intelligence sources, corroborating documents, and a wealth of reports in the United States and Russian media. The investigation began with a review of a Washington Post article that described the BP Amoco report and noted that it contained two and a half pages describing criminal allegations against the officers of the Tyumen oil company. The CIA believed the report serious enough to pass it on to the Export-Import bank and give the bank a briefing on the report, and the National Security Council believed the report serious enough to recommend to the State Department that it block the loan (which the State Department did). The Washington Post article quoted an unnamed CIA source as stating that the report "tracked other information the agency had gathered."
Royce also reviewed a series of Russian newspaper articles describing reports that Fridman and Aven had organized crime and drug trafficking ties. Royce then contacted a CIA source who refused to provide the BP Amoco report but confirmed that the information in the BP Amoco report in fact did track the CIA's own intelligence. Royce talked to Richard Palmer, a second source in the intelligence community who had extensive experience in the Russian business world.[52] Palmer provided Royce with an unabridged version of one of the Russian newspaper articles, which reported that Victor Ilyukhin, Chairman of the Security Committee of the Russian Duma, had passed on to Russian law enforcement agencies a dossier containing allegations of criminal activity by Fridman and Aven in 1997. The article provided a detailed discussion of the allegations in the dossier, including a description of alleged organized crime ties and drug trafficking.
Royce then turned to a third source, a Russian-American specialist on business practices in the former-Soviet Union with several contacts inside Russia's law enforcement and intelligence communities. The specialist told Royce that "no major oil company [in Russia] is free of criminal activity" and that he had "little doubt that [Tyumen] committed crimes in numerous occasions." The specialist also told Royce that the specialist "himself knew" that plaintiffs had a "close relationship" with one of the leading organized crime groups in Russia. The specialist gave Royce an abridged copy of the FSB report that Ilyukhin passed on to Russian law enforcement agencies, which matched the allegations discussed in the Russian newspaper article. The specialist explained that he had contacted a source in the FSB, and that the source had said that the law enforcement *52 agency would be investigating the allegations, but that the inquiry had been "put away for a better day."[53] The specialist included a fax cover sheet on the report with a comment as a postscript stating "Please don't take this article as the gospel," a statement Royce testified he took to mean that he should not "assume that every bit of information is accurate," and that "[a]s in anything that comes out of Russia, be a little careful." Royce Dep. at 192:4-192:9
Royce returned to Richard Palmer, looking for information that would corroborate the FSB report. Palmer searched in his files and found the KGB major report, which contained information that a former KGB major had conveyed to Palmer in 1995. The information included detailed allegations of criminal activities by Fridman and Aven that paralleled the allegations in the FSB report. Palmer vouched for the credibility of the KGB major, and noted that while Palmer himself could not confirm the allegations of drug trafficking, other information that the KGB major had provided was correct, including a great deal of information that was not public knowledge at the time. Royce pressed for more information about the KGB major, but Palmer refused to provide any more information or to allow Royce to talk with him.
At that point, Royce possessed two reports corroborating criminal wrongdoing written two years apart and attributed apparently to different individuals. Royce knew that one of his intelligence sources vouched for the credibility of the individual who gave him the information, and that one of his other sources had confirmed personal knowledge of plaintiffs' close ties to organized crime. Royce knew that more than one CIA source, including one of his own, had confirmed that the CIA possessed intelligence that tracked the still-unseen allegations in the BP Amoco report, and that other United States officials found the allegations serious enough to block the Export-Import loan to Tyumen. He knew that several Russian newspaper articles had also reported on allegations of defendants' criminal world contacts and drug trafficking. Finally, the allegations were consistent with the widespread understanding, confirmed by one of his sources, that the Russian economy and *53 the business dealings of the oligarchs were overrun with corruption and ties to organized crime.
Royce contacted several different Tyumen executives and representatives for comment, and the piece was fact-checked and edited consistent with the normal CPI procedures. As published, the article included firm denials of the allegations of criminal wrongdoing from Tyumen executives and representatives, and a reference to the denials at the very outset of the piece. The article contained an objective description of the sources and background of the reports. Finally, the piece attributed the allegations of criminal conduct to the FSB and KGB major reports, and referred to the allegations as just that allegations rather than fact.[54] The investigation of the piece was not perfect, and as indicated, several of the allegations in the final product may very well be inaccurate. But the Court cannot conclude on this record that the defendants published the article with actual malice or a reckless disregard towards its accuracy.
Plaintiffs complain that defendants failed to track down certain leads for instance, failing to pursue the line of inquiry the Russian-American recommended in the fax cover sheet of determining the status of Ilyukhin's request that Russian law enforcement authorities investigate the allegations of the FSB report, or failing to contact George Soros to attempt to obtain a copy of the BP Amoco report that Soros might have possessed. This line of argument focuses improperly on what more a reasonable reporter might have done in the circumstances, not on the defendants' state of mind. The "cases are clear that reckless conduct is not measured by whether a reasonably prudent man would have published, or would have investigated before publishing. There must be sufficient evidence to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of his publication." St. Amant, 390 U.S. at 731, 88 S. Ct. 1323; see also Herbert v. Lando, 781 F.2d 298, 308 (2d Cir.1986) ("We reiterate, however, that a finding of actual malice cannot be predicated merely on a charge that a reasonable publisher would have further investigated before publishing."). A plaintiff will always be able to point to ways in which the defendant could have pursued another lead, or sought another piece of corroborating evidence. Here, the failure to pursue this additional information does not evince a willful blindness to competing evidence, but only a desire to put a close to the investigation of a story.[55]
Plaintiffs argue that defendants could have attempted to track down the origins of the information that the FSB officers *54 provided in the FSB report or the KGB major provided to Palmer. Pl. Mem. at 27-32, 35-38. But there is "no authority for the proposition that anything short of interviewing those with first-hand knowledge amounts to `willful blindness.'" McFarlane, 91 F.3d at 1510; see also Clyburn v. News World Commc'n, Inc., 705 F. Supp. 635, 641-42 (D.D.C.1989) ("[D]efendants' reliance on the confidential sources, who, in turn, relied on informants, does not indicate actual malice."), aff'd, 903 F.2d 29 (D.C.Cir.1990). Defendants in this case obtained corroboration for the FSB report in the form of the KGB major report, and Palmer vouched for the credibility of the KGB major. The failure to investigate exactly who provided the information to the FSB officials or the KGB major is not evidence of actual malice. See Clyburn, 705 F.Supp. at 641-42 ("Even if the sources did not know the identities of the informants in the witness summaries, and the reporters were aware of that fact, the credibility of the information provided in the summaries would be bolstered by the sources' inherent reliability and experience as law enforcement officials.").
In fact, the D.C. Circuit has rejected the proposition that a publisher has a duty to corroborate even when a single source "of potentially libelous material is a person of questionable credibility." McFarlane, 91 F.3d at 1508. The court explained that to "hold that a publisher who relies upon a questionable source must ... establish through an independent source that the allegations are true" would "turn the inquiry away from the publisher's state of mind and to inquire instead whether the publisher satisfied an objective standard of care." Id. at 1509. Here, as indicated, the defendants relied on a host of corroborating evidence in publishing the piece. The fact that they could have researched even further does not itself supply evidence of actual malice.
Next, plaintiffs maintain that defendants should have known from the anti-Semitic and anti-free market language in the FSB report that the document was designed to appeal to the prejudices of Ilyukhin, a "communist and virulent anti-semite," and therefore was not credible. Pl. Mem. at 39. But there is no evidence that defendants knew Ilyukhin to be a reputed anti-semite. Royce Dep. at 309:12-311:9. Royce did know that he had communist leanings, Royce Dep. at 306:7-307:8, but the presence of communist rhetoric in the FSB report does not mean that the allegations in the FSB piece are not credible. Defendants would have done well to present these facts to the reader to allow them to reach their own judgment. However, it is far-fetched to infer from plaintiffs' failure to do so an effort to shade the truth, particularly since defendants included other caveats in the piece, such as that the KGB major was working for banks (which would presumably be defendants' rivals) and was from the "ideological counterintelligence branch."
Plaintiffs take issue with defendants' failure to contact Aven and Fridman prior to publication of the piece, noting that defendants might have discovered information from them that would have cast doubt on the reliability of the FSB and KGB major reports. Pl. Mem. at 23-28. Plaintiffs maintain that it is a clear ethical violation to fail to call the subject of a piece (at least when the piece advances charges as serious as narcotics trafficking). Kaplan Report at 23; Heller Dep. at 221:8-221:15. Royce explains that he failed to contact Aven and Fridman because he thought that he might need a translator, and that time was running short to publish the article. Royce Dep. at 238:17-238:22, 241:5-241:16. This explanation *55 is less than compelling, and might not excuse defendants' failure to contact Aven and Fridman as a matter of ethics. But it does not amount to actual malice. See McFarlane, 91 F.3d at 1509 ("Schaap's failure to contact McFarlane himself about the allegations provides even less support for a finding of actual malice."); Secord, 747 F.Supp. at 789 ("plaintiff cannot rely on the defendant's failure to consult with him prior to the publication ... as evidence of actual malice"). An inference of actual malice would be particularly inappropriate in this case given that defendants contacted several of the plaintiffs' executives and representatives, and included each of their comments in the article.[56]
Finally, plaintiffs charge defendants with several other alleged ethical and professional lapses involved in the research and publication of the piece. For instance, they complain that the article falsely suggests that two representatives of plaintiffs were contacted before the article was published when in fact only a single representative was contacted; that Royce violated an alleged pledge to Palmer not to use his information in the piece; that the article attributes a comment to the FSB report that is not in the report; and that Royce failed to take adequate notes of his discussions. The Court does not condone any ethical or professional breaches that might have occurred. However, none of them can fairly be said to bear on the defendants' subjective knowledge of the falsity of the criminal allegations in the article. That test examines the publisher's subjective state of mind, and does not turn on what more, or different, a good publisher could have done. Hence, the standard of actual malice "is not satisfied even by proof of `highly unreasonable conduct constituting an extreme departure from the standards of investigation and reporting ordinarily adhered to by responsible publishers.'" Clyburn, 903 F.2d at 33 (quoting Harte-Hanks, 491 U.S. at 666, 109 S. Ct. 2678).[57]
It follows, then, that plaintiffs cannot survive summary judgment on the shoulders of their journalism expert's opinion that defendants "violated journalism ethics" and the article does not "hold[] up to *56 normal standards of investigative reporting." Kaplan Rep. at 7, 14. Courts and commentators generally have not permitted plaintiffs to prove actual malice through expert testimony. See Lohrenz, 223 F.Supp.2d at 36 ("courts have generally disfavored expert testimony in determining actual malice, which is essentially a determination of defendants' subjective state of mind"); Harris v. Quadracci, 856 F. Supp. 513, 518-19 (E.D.Wis.1994) ("expert opinion testimony generally is not helpful when determining actual malice against a subjective standard"); Sack on Defamation § 5.5.2.4 (3d ed. 2004) ("Inasmuch as the `actual malice' test is entirely subjective, the use of journalism experts in `actual malice' cases is often puzzling ... [and][f]or a variety of good reasons, the courts have been reluctant to allow it.").
The Court cannot say that the views of an expert in the field could never be helpful in illuminating the options available to a publisher in investigating a piece an essential element of an inquiry into whether a defendant was wilfully blind is some understanding as to what he should be looking for. See Harte-Hanks, 491 U.S. at 667, 109 S. Ct. 2678 ("[A] plaintiff is entitled to prove the defendant's state of mind through circumstantial evidence ... and it cannot be said that evidence concerning motive or care never bears any relation to the actual malice inquiry."). But reliance on expert opinion as to the defendant's departure from journalistic ethics and the "standards of investigation" is unhelpful here in light of the settled law closing the door on such evidence for the actual malice inquiry. Clyburn, 903 F.2d at 33 (quoting Harte-Hanks, 491 U.S. at 666, 109 S. Ct. 2678).
For all of these reasons, the Court concludes as a matter of law that defendants did not publish the CPI article with actual malice. This is not to say that defendants or the article are without fault. Defendants likely should have researched certain points more carefully before leveling allegations as serious as drug trafficking and organized crime connections against plaintiffs. The fact that certain of defendants' sources had no information to provide should have given defendants pause. They might have painted a fuller portrait of the backdrop to the allegations for the reader (on issues such as compromat and Ilyukhin's tendencies). As for the defendants' suggestion, which surfaces in several of the depositions in this case, that further research was not pursued because of time pressures and a desire to beat their competitors to a breaking story, that is no excuse for less than thorough reporting. Nonetheless, these lapses in ethics and judgment amount at most to negligence or bad journalism, not actual malice.
The entire truth regarding the allegations of criminal conduct in the FSB and KGB major reports might never be known, but there is cause to believe that at least some of the allegations in the reports are exaggerated or inaccurate. However, serving as the target of criticism sometimes false is the burden that our system of laws quite consciously places on the shoulders of public figures. As the Supreme Court explained in a case decided not long after it crafted the actual malice standard in New York Times v. Sullivan:
It may be said that [the actual malice] test puts a premium on ignorance, encourages the irresponsible publisher not to inquire, and permits the issue to be determined by the defendant's testimony that he published the statement in good faith and unaware of its probable falsity.... New York Times and succeeding cases have emphasized that the stake of the people in public business and the conduct of public officials is so great that neither the defense of truth *57 nor the standard of ordinary care would protect against selfcensorship and thus adequately implement First Amendment policies.... [T]o insure the ascertainment and publication of the truth about public affairs, it is essential that the First Amendment protect some erroneous publications as well as true ones.
St. Amant, 390 U.S. at 731, 88 S. Ct. 1323. Plaintiffs no doubt have the wherewithal to respond to erroneous publications through persuasion rather than litigation. The First Amendment demands that they pursue that path.
CONCLUSION
For these reasons, defendants' motion for summary judgment is GRANTED, and judgment will be entered in favor of the defendants.[58] A separate order will be issued.
ORDER
Upon consideration of [# 136] defendants' renewed motion for summary judgment and the entire record herein, and for the reasons stated in the memorandum opinion issued on this date, it is hereby
ORDERED that defendants' renewed motion for summary judgment is GRANTED; and it is further
ORDERED that judgment is entered in favor of defendants.
NOTES
[1] See, e.g., Decl. of Celeste Phillips, Ex. 407 at 3, 15 (1997 Center for Strategic and International Studies report) ("The principal beneficiaries of privatization conducted at `auctions' rigged in favor of pre-selected individuals or banks have been the [organized crime] syndicates.... Russia is in danger of evolving into a criminal-syndicalist state a troika comprised of gangsters, corrupt government bureaucrats, and certain crooked and sometimes prominent businessmen who continue to accumulate vast amounts of wealth by promoting and exploiting corruption and the vulnerabilities inherent in a society in transition.").
[2] See Phillips Decl., Ex. 409 at 1 (Fall 1999 American Enterprise Institute report) ("[T]he `reform' has brought poverty, alcoholism, and health care disaster. Russia today is a handful of thieving `oligarchs' feasting amid general starvation."); Sullivan Decl., Ex. 258 at 1 (David Satter testimony before U.S. House Committee on International Relations at a Hearing, Oct. 7, 1999) ("[I]n a few months, 99 per cent of the savings of the Russian population disappeared. Persons who had put money aside to buy a car or apartment or to pay for a wedding or funeral were left with nothing.").
[3] See, e.g., Phillips Ex. 407 at 6 (1997 Center for Strategic and International Studies report) ("Western intelligence agencies believe that short and medium-range missiles have been smuggled to customers in the Middle East ... [and organized crime] groups also are facilitating narcotics trafficking along new transit routes from major heroin-producing areas in Asia.").
[4] Phillips Ex. 133 (May 30, 1998 Financial Post article).
[5] See, e.g., Phillips Decl., Ex. 270 (Oct. 2, 1998 Address of Secretary of State Madeleine K. Albright to U.S.-Russia Business Council) ("[W]e have been reexamining all our assistance programs, retargeting money where it can be used effectively to support economic and democratic reform."); Ex. 419 ¶ 29 ("I was told by senior White House staff that President Clinton and Vice President Gore became increasingly concerned about the Russian money laundering problem.... The U.S. government eventually made passage of a money-laundering law by Russia a major bilateral policy issue, raised at the highest levels of our respective governments.").
[6] See, e.g., Phillips Decl., Ex. 287 (Oct. 19, 1999 Chicago Tribune article) ("The chairman of the House International Relations Committee is demanding an accounting by Russian officials of `the fantastic and growing corruption in their country.'"); Ex. 289 (Nov. 11, 1999 Australian Financial Review) ("The U.S. Congress is largely hostile to the IMF, arguing that the Russian loans are dangerous because they encourage corruption.").
[7] See, e.g., Phillips Decl., Ex. 407 at 36 (Sept. 10, 1998 Center for Strategic and International Studies Report) ("We must ask if the IMF has even been a positive force in Russia."); Ex. 405 (April 28-30, 1999 Carnegie Endowment for International Peace Report) ("The main problem with the Russian transition to a market economy was that there was no radical reform, therefore rent-seeking became excessive, and the rent-seekers became too rich and powerful. Consequently, they have bought Russian politics.").
[8] For a sample of the dozens of articles in major United States newspapers during this period, see Phillips Decl., Ex. 138 (August 5, 1999 New York Times article titled "The Russia Devolution"); Ex. 274 (Dec. 28, 1997 Washington Post article titled "Russia's `People's Capitalism' Benefitting Only the Elite'"); Ex. 279 (Sept. 8, 1999 Washington Post article titled "Was the Looting of Russia Avoidable?"); Ex. 280 (Sept. 28, 1998 Washington Times article titled "Subsidizing the Kleptocracy"); Ex. 287 (Oct. 19, 1999 Chicago Tribune article titled "Republican chastises Russia for money schemes"); Ex. 291 (Sept. 22, 1999 Baltimore Sun article titled "Treasury Secretary Defends Financial Help to Russia").
[9] Plaintiffs do not dispute the above account of the post-Soviet economy inside this litigation, and indeed have openly described it in these terms outside this litigation. See, e.g., Phillips Decl., Ex. 21 (Aven article describing the post-Soviet economy as "negotiable" and "highly criminalized," with "material resources and money obtainable by horse-trading with the government.... The whole thing amounted to a select group of businessmen being appointed millionaires (or even billionaires), with the idea that it would become the main sources of support for the current regime."); Aven Dep. at 177:14-178:3 (describing aspects of the privatization program as "pure stealing of Russian property"); Decl. Ex. 40 (July 22, 1994 Moscow News article) ("To become a millionaire in our country, it is not necessary to have a good head and specialized knowledge.... It is enough to have active support in government, the parliament, local power structures and law enforcement agencies.... In other words, you are appointed a millionaire as someone put it very aptly."); Decl. Ex. 323 (Aug. 29, 2003 Financial Times (London) Article) (quoting Fridman: "Of course we benefitted from events in the country over the past 10 years. Of course we understand that the distribution of state property was not very objective. But we used our chance, and people are angry about it.... The rules of business are quite different to western standards.... I don't want to lie and play this game. To say one can be completely clean and transparent is not realistic.").
[10] See Phillips Decl., Ex. 215 (July 2, 1997 Moscow Times article titled "Subsidiary Attacks Tyumen Oil Sale") ("Analysts greeted accusations [of a rigged auction for Tyumen] with little surprise, saying that if true, the Tyumen sale follows a long line of staged auctions that have prevented real competition for the purchase of stakes in Russia's most attractive enterprises."); Phillips Decl., Ex. 201 (July 3, 1997 Moscow Times article titled "Privatization Isn't Getting Any Cleaner") ("The clearest case so far involves the Tyumen Oil Co., where 40 percent of shares now in state hands have been put up for auction at a so-called investment tender. The terms of this process have been encumbered with ridiculous conditions which virtually guarantee that Alpha Bank, a group with close ties to the Cabinet, will win.").
[11] See Phillips Decl., Ex. 322 (Forbes.com 2004 print-out); see also Ex. 324 (Moscow Times Sept. 5, 2003 article noting that Fridman was the world's third wealthiest man under the age of 40).
[12] Aven received a Ph.D. in economics from Moscow State University, and worked as an economic research scholar for more than a decade before assuming his post in the Yeltsin government. Decl. of Pyotr Aven ¶¶ 7-8.
[13] See Phillips Decl., Ex. 12 at 56:4-57:4 (Aven Dep.), Ex. 187-195 (sample of articles about Aven).
[14] See, e.g., Phillips Decl., Ex. 133 (May 30, 1998 Financial Post article) ("Amidst the ruins of the former Soviet state, a vast portion of the country's wealth has quickly fallen into a very few hands. Identified as `the seven boyars' or `the Magnificent Seven,' a small group has taken control of a major chunk of the Russian economy. Though not necessarily linked with organized crime, these large conglomerates have drawn the attention of law enforcement agencies around the world. The seven are: ... Mikhail Friedman of the Alfa Group (oil, tea, sugar, cement) ...."); Ex. 397 (excerpts from book titled "The Sale of the Century: Russia's Wild Ride From Communism to Capitalism" by Christia Freeland) ("Some savvy Russian businessmen got in on the privatization, too, most notably Mikhail Friedman, an aggressive hustler who would eventually become one of the oligarchs."); Ex. 204 (Nov. 7, 1998 Moscow Times article) ("Aven, a former foreign trade minister in former acting Prime Minister Yegor Gaider's 1992 government, has been named among Russia's `oligarchs,' or powerful financiers with political clout.").
[15] See, e.g., Sullivan Decl., Ex 156 (May 20, 1999 Trud article) (noting Aven is one of the Russian businesspeople "noted for their political influence"); Ex. 70 at 16072 (April 24, 2000 Kompanija article) ("If we believe some of these stories, Michail Fridman, who heads Alfa, has become ... one of the most powerful and efficient lobbyists in the Kremlin with its new master"); Sullivan Decl., Ex. 88 (Nezavisimaya Gazeta interview) (Aven acknowledged that "I am friendly with [oligarch Boris] Berezovsky"); Aven Dep. at 109:5-111:1 ("I know Mr. Putin for many years because he worked for me when I was a minister."); Sullivan Decl., Ex. 142 (Euromoney article) (reporting that Fridman's allies include "flamboyant and influential Russian banking and media tycoon Vladimir Gusinky ... [and] Logovaz chief Boris Berezovsky."). Plaintiffs also have achieved a level of prominence on the world stage. Aven has spoken on the subject of reform, corruption, and the Russian economy, to international audiences including the IMF, the World Bank, and the Carnegie Endowment for International Peace. In 2003, Fridman was invited to attend a ceremony in Washington, D.C., to receive the Golden Plate Award of the International Academy of Achievement alongside a U.S. Supreme Court Justice, two Senators, and the presidents of Chile and Colombia. Sullivan Decl., Ex. 420.
[16] Phillips Decl., Ex. 6, at 020634 (TBC TV Channel July 28, 2002 Transcript).
[17] Phillips Decl., Ex. 76 at 20634 (interview with Fridman) ("If I am not mistaken, they asked us to get together first in 93, that was on the eve of the October coup. The situation was very tense back then. And they invited to the Kremlin the future players in the oligarch games.").
[18] See, e.g., Phillips Decl., Ex. 397 (Chrystia Freeland, "The Sale of the Century: Russia's Wild Ride from Communism to Capitalism"), at 201-212.
[19] See, e.g., Phillips Decl., Ex. 150 ("The participants of the meetings in the Kremlin and in the White House do not hide the fact that they offered to perform the functions of a kind of expert council for Boris Yeltsin, which could functionally evaluate the most important economic decisions of the executive branch."); Ex. 36 (June 6, 1998 Nezavisimaya gazeta article titled "Business Elites Back Anticrisis Measures"); Fridman Dep. at 290:6-291:10. Aven describes participating in discussions at the Kremlin regarding who should serve in Yeltsin's new cabinet in the wake of the market crash. Aven Dep. at 7:11-8:14.
[20] As one of the plaintiffs' executives explained, "When a president is going to suffer some serious issues ... he invites some of the most important and respectable persons in Russia.... [H]e discusses with them issues of economic progress and production sector development, and it is always the case that a representative of the ... Alfa consortium is there.... Mostly it is Mr. Fridman who attends [the meetings]. I believe Mr. Fridman is one of the biggest ... business authorities in Russia." Phillips Decl., Ex. 13 at 300:100-302:18 (Fain Dep.). Of course, Aven himself played a prominent role in world events while serving in the Yeltsin government. On one occasion, as conditions worsened in the Russian economy, Aven accompanied the acting Prime Minister of Russia on a trip to the United States, where they attended key meetings with top United States officials including Secretary of State Madelaine Albright and Treasury Secretary Larry Summers. Phillips Decl., Ex. 12, at 170:10-172:3 (Aven Dep.).
[21] Phillips Decl., Ex. 397 at 199-201 (excerpt from book titled "The Sale of the Century: Russia's Wild Ride From Communism to Capitalism").
[22] Phillips Decl., Ex. 153 (Nov. 5, 1996 Moscow Times article) ("A leading British newspaper has named the group of seven businessmen and bankers that, according to one of their number, is now running Russia.... The group includes ... Pyotr Aven and Mikhail Fridman, of Alfa Bank....").
[23] The situation did not change when Vladimir Putin took power. "Putin, said one analyst close to the Kremlin, has had dealings with several `oligarch' groups. The closest, at the moment, is Alfa Group, led by Pyotr Aven, who as Russia's foreign trade minister in 1992 approved Putin's export contracts in St. Petersburg." Phillips Decl., Ex. 176 (Mar. 24, 2000 Boston Globe article). Aven estimates that he spoke to Putin over 10 times in the course of two-and-a-half years, and they were one of a handful of private financial companies with a special, direct line to the Kremlin. Phillips Decl., Ex. 12 Vol. I at 80:7-81:18, 153:4-155:4(Aven Dep.).
[24] Alfa Group's promotional materials, among other things, describe Aven as an "internationally recognized economist and author of many articles" and designates Aven to speak to the Western media on "various international issues and areas."
[25] Fridman Dep. at 74:3-75:5; Topper Dep. at 74:12-75:10.
[26] As early as during Aven's tenure in the Yeltsin government, a corruption task force informed Yeltsin that Aven was engaged in various misdeeds, including drug trafficking. Aven Dep. at 126:3-130:1; see Phillips Decl. Ex. 173 (Aug. 23, 1993 Times article) (noting that Aven left office under a cloud of allegations of corruption).
[27] Dep. Ex. 323 (August. 29, 2003 Financial Times article).
[28] Heller was a recent collegiate graduate who had begun working at CPI in July 1999. Sullivan Decl., Ex. 12 at 10:11-10:15.
[29] The article acknowledged that the Ilyukhin affair could be a "communist provocation aimed at three honest businessmen." Id. The abridged version of the article explains that it was written by Oleg Lurye. Royce would later ask one of his other sources about Lurye; the source would tell Royce that he had a "reputation of being a real digger who comes up with stories that others don't come up with, who did have an occasional fault, and that is sometimes he was prone to exaggerate somewhat" and there would "[s]ometimes be something of a stretch in describing material." Royce Dep. at 92:20-93:22, 95:16-95:18.
[30] See Lewis Dep. at 110:5-110:9; Smith Dep. at 106:XX-XXX-XX; Heller Dep. at 172:16-173:7; Prince Dep. at 89:11-89:18.
[31] Letters from Ilyukhin that came to light in the course of this litigation confirm that Ilyukhin in fact received the FSB report from FSB officials who were "afraid for their professional career" and therefore wanted to remain anonymous, and that Ilyukhin then referred the report to the Director of the FSB and the Deputy Chairman of the Ministry of the Interior ("MVD") with the instruction that those agencies investigate the allegations. See Sullivan Decl., Ex. 21, 22 (Nov. 26, 1997 letters from Ilyukhin); Bowman Decl., Ex. 30 (May 22, 2003 letter from Ilyukhin). The MVD reported back to Ilyukhin a month later that it has been established that Alfa Group was "being investigated in connection with a number of criminal cases," including a case in which Moscow customs officials found arms and ammunitions in a shipment addressed to Alfa Eco. Sullivan Decl., Ex. 23 (Dec. 24, 1997 letter from V. Vasiliev to Ilyukhin).
[32] Palmer explained in his deposition that when he had met with the KGB major, the major gave him a handwritten memorandum. The major told Palmer that these were his notes, and that he had received the information from some of his colleagues in Russia, which Palmer took to mean other members of the KGB. Palmer Dep. at 57:14-58:3, 105:18-107:9, 122:20-123:2. As they discussed the memorandum, Palmer asked the KGB major questions, and took notes of additional information that the KGB major had provided. Palmer then typed up the handwritten memorandum, including the notes. That document is the KGB major report. Palmer Dep. at 54:20-55:9, 63:11-63:21, 149:15-22.
[33] Palmer elaborated in his deposition that the KGB agent had provided a description of his background that "seemed to me to be very credible"; the agent "gave me information on the threats to my wife and I, which was nonpublic, which was exceedingly accurate," indicating "that he certainly had exceptional access"; the KGB agent provided "identification" and other materials that were "exceptionally accurate," and provided other intelligence information that had "at that time, never been published" and was "definitely nonpublic information." Finally, Palmer referenced the document itself, to which the KGB agent was "willing to immediately add notes" and "information on it. All these are signs to me that this person is entirely credible." Sullivan Decl., Ex. 16 at 114:9-117:21.
[34] Palmer explained that when he started talking to Royce, he set out ground rules: "I never wanted to be quoted, I never wanted to be referred to[,][and] I didn't want any of my information referred to." Palmer Dep. at 32:16-33:3. Palmer provided the information as "background material" that "would perhaps provide him a lead to other things to look for on the area." Palmer Dep. at 80:19-80:22. Palmer claims that when the article was published he called Royce to tell him that he was "surprised" to see even an oblique reference to him in the article and that he "thought we had an agreement that that was not to happen." Palmer says that Royce was apologetic and said that he believed the ground rules had changed, and that Palmer expressed anger that Royce had violated their agreement. Palmer Dep. at 80:22-81:15, 162:19-167:10. Royce disputes that this conversation occurred. Royce Dep. at 451:10-451:13, 465:2-470:14.
[35] These were not the only sources Royce contacted. At one point prior to publishing the article, Royce contacted Jeffrey Robinson, an author of a book on international organized crime. Royce asked Robinson whether he had any information tying the plaintiffs with narcotics activity or organized crime figures. Robinson told him that he did not have any material that bore on those allegations. Royce Dep. at 274:13-22, 276:3-9.
[36] The FSB report notes that Fridman and Aven were "born ... Jewish," falsely asserts that Aven's older brother is a successful Israeli businessman who works with the Mossad (Aven has no siblings), and states that while living in Vienna in the late 1980s or early 1990s, Aven met with "a certain Aizenberg" who was a representative of Israeli intelligence (Aven says that no such meeting occurred). Sullivan Decl., Ex. 29 at 424-26; Aven Decl. ¶ 18.
[37] Lewis testified that he had a conversation at one point with Royce in which Royce indicated that Soros might have had a copy of the BP Amoco report, but expressed concern that Soros was a funder of CPI. Royce Dep. at 237:2-238:16; Lewis Dep. at 150:11-21. Lewis testified that he told Royce that he should do what he needed to do to get information on the article, and that the fact that Soros funded CPI should be deemed irrelevant. Lewis Dep. at 150:11-21. Royce testified that he did not have a conversation with Lewis before deciding not to call Soros. Royce Dep. at 241:XX-XXX-XX.
[38] The FSB and the Ministry of the Interior are both Russian law enforcement agencies.
[39] See White, 909 F.2d at 512 (holding that fair and accurate reporting privilege extended to articles reporting on a series of letters a police union wrote to a mayor alleging that irregular procedures were used in the drug test of a police captain, which the mayor then passed on to the police chief, who created an investigatory commission on the issue; "it would be untenable to make a distinction between a report about an official proceeding and that which, for all purposes, is the subject matter of the proceeding") (quotation omitted); see also Reeves v. American Broadcasting Cos., 719 F.2d 602, 603-04 (2d Cir.1983) (fair reporting privilege applies to "reports of charges made to a grand jury," even though "[n]o formal charges were ever filed against any individual or corporate entity"); Medico v. Time, Inc., 643 F.2d 134, 139-40 (3d Cir.1981) (applying fair reporting privilege to magazine's report of FBI documents that "express only tentative and preliminary conclusions that the FBI never adopted as accurate").
[40] The article explains that the FSB report was "delivered in 1997 by anonymous officials from the FSB (the Russian equivalent of the FBI) to the national security committee of the Duma, or lower house of parliament," and that according to a source, the "allegations contained in the 1997 report have been the subject of an investigation by the FSB but that the probe, for unexplained reasons, had been put away for a better day." Article at 3. The article then goes on to attribute explicitly to the FSB report each of the allegations discussed in the article that are contained in the FSB report (using language such as the "FSB report ... claimed" and the "FSB report said"). This more than satisfies the attribution requirement for the privilege. See White, 909 F.2d at 528 (attribution requirement met where report describes the relevant documents and then "consistently attributed the reported facts to those documents"); Dameron, 779 F.2d at 739 (report need only be "written in such a manner that the average reader would be unlikely to understand the article (or the pertinent section thereof) to be a report on or summary of an official document or proceeding").
[41] Plaintiffs point to minor inaccuracies in the article's description of the FSB report (for instance, the article states that bags of sugar in an Alfa Eco railcar were laced with heroin, while the FSB report does not specify the nature of the drugs in the bags). However, the law requires only that the article provide a "substantially" accurate portrait of the document, and the CPI article plainly meets this standard. White, 909 F.2d at 527-28; compare Dameron, 779 F.2d at 739 (reports fall outside privilege where they were "garbled or fragmentary to the point where a false imputation is made about the plaintiff which would not be present had a full and accurate report been made").
[42] This is the approach advocated by the dissenting opinion in Lee, 849 F.2d at 881, and apparently adopted by the district court in Friedman v. Israel Labour Party, 957 F. Supp. 701, 714 (E.D.Pa.1997), which held that "[b]y everyone's standards, Israel is an open and reliable democracy," and therefore the fair reporting privilege could extend to reports on its official acts.
[43] The Court notes that the D.C. Circuit indicated in White that it is inclined to conclude that the fair reporting privilege is qualified rather than absolute, meaning that it could be overcome by a showing of actual malice. See White, 909 F.2d at 527. Therefore, even if the Court were to extend the privilege to the CPI article, the Court would nonetheless need to proceed to the actual malice inquiry.
[44] For just a few of the numerous books that have been written about the transformation of the Russian economy and the response of the Western world in this period, see Marshall I. Goldman, "The Piratization of Russia: Russian Reform Goes Awry" (2003) (excerpted in Sullivan Decl., Ex. 398); David E. Hoffman, "The Oligarchs: Wealth and Power in the New Russia" (2002) (excerpted in Sullivan Decl., Ex. 399); Stephen F. Cohen, "Failed Crusade: America and the Tragedy of Post-Communist Russia" (2001) (excerpted in Sullivan Decl., Ex. 401); Rose Brady, "Kapitalizm: Russia's Struggle to Free Its Economy" (1999) (excerpted in Sullivan Decl., Ex. 396); Chrystia Freeland, "The Sale of the Century: Russia's Wild Ride From Communism to Capitalism" (2000) (excerpted in Sullivan Decl., Ex. 397).
[45] Plaintiffs note that some of these articles are duplicates, and others concern individuals bearing those names but who are not the plaintiffs in this case. Pl. Mem. at 47-48. These are fair criticisms, but plaintiffs do not claim that this reflects more than a handful of articles. Plaintiffs also contend that a "significant" number of the articles date from after the publication of the article at issue here in August 2000, making them irrelevant. The Court doubts that one can ignore articles published so soon after the date of publication of the article at issue, unless there is some identifiable reason why those articles do not provide an accurate reflection of the extent of the media coverage of the plaintiff at the time of publication of the article. The Court cannot find such a reason in this case (plaintiffs do not claim that there was a spike in publicity as a result of the CPI article, for example). At any rate, even an April 2001 search of United States news publications revealed 8,609 pages of English language news articles stretching back to 1990 about plaintiffs and their companies, supra at 28, a showing of media coverage that lends ample support to the conclusion that plaintiffs are public figures.
[46] For example, shortly after the CPI piece was published, the New York Times conducted an interview with Fridman in which a reporter discussed the allegations of drug running and criminal ties. The reporter explains that when he "asked Fridman about it, he shrugged and said, `That stuff's always around.' "John Lloyd, "The Autumn of the Oligarchs," The New York Times, Oct. 8, 2000.
[47] This is also not a case where the issue is of private rather than public concern, such as a famous couple's marital difficulties. See Time, Inc. v. Firestone, 424 U.S. 448, 458, 96 S. Ct. 958, 47 L. Ed. 2d 154 (1976).
[48] Aven and Fridman recently acknowledged in another defamation suit that they "are well known both in Russia and abroad." Bowman Decl., Ex. 15 at 9242 (decision of arbitration court of the City of Moscow).
[49] Defendants also suggest that plaintiffs are limited public figures for purposes of a harrower public controversy involving the battle between BP Amoco and Tyumen for the assets of the bankrupt Sidanco oil company. Because the Court concludes that the involvement of the plaintiffs in the broader public controversy of corruption in the post-Soviet Russian economy meets the requirements of the limited public figure analysis, the Court need not consider the proposed narrower controversy.
[50] Plaintiff maintains that the Martin Marietta ruling is in error because it "was based upon the discredited rationale for the plurality opinion in Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 91 S. Ct. 1811, 29 L. Ed. 2d 296 (1971)," which the Supreme Court later rejected in Gertz, 418 U.S. at 346, 94 S. Ct. 2997. Pl. Mem. at 55. This argument mischaracterizes the reasoning in Martin Marietta, which discuss both Rosenbloom and Gertz, notes that Gertz rejected the plurality opinion in Rosenbloom, and then bases the corporate public figure doctrine expressly on the analysis in Gertz. See Martin Marietta, 417 F.Supp. at 954.
[51] Even if the rule discussed in the text were unsound, the corporate plaintiffs would nonetheless be public figures for the same reason as Aven and Fridman. Alfa Bank is the largest bank in Russia, and both corporate plaintiffs are components of one of the most lucrative business conglomerates in the country. The corporate plaintiffs are the subject of frequent media coverage, and the relevant documents in this case reference the corporate plaintiffs interchangeably with their officers (including Aven and Fridman). There is no reason to treat the corporate plaintiffs any differently than Aven and Fridman themselves.
[52] Plaintiffs' expert describes Palmer as an "extremely good source." Kaplan Rep. at 83.
[53] Plaintiffs contend that defendants cannot rely on Royce's description of what the Russian-American specialist told him, because defendants refused to provide his identity. Pl. Mem. at 8 n. 10. The Court has some doubt as to plaintiffs' position. The proper course for the plaintiffs if they wanted the identity of defendants' confidential source would have been to file a motion to compel his identity. See Price v. Time, Inc., 416 F.3d 1327, 1345-46 (11th Cir.2005) (considering motion to compel the identity of a confidential source in a defamation case). Were the Court to grant the motion, both parties would then have been able to use the Russian-American specialist's knowledge to their respective advantage. The Court does not see the wisdom in allowing plaintiffs to lie in the weeds until a motion for summary judgment is filed, and then spring the issue at summary judgment, denying defendants any right to use the evidence at all. See, e.g., Clyburn, 903 F.2d at 34 (noting in defamation case that "[w]e recognize that where the primary source of evidence is the reporter's own (naturally self-interested) testimony of what a confidential source told him, the combination of the burden of proof and the reporter's privilege to withhold the source's identity confront a defamation plaintiff with unusual difficulties," but allowing defendant to rely on source where plaintiff did not appeal district court's denial of motion to compel the source's identity). The Court notes that no hearsay issues are raised in this case by reliance on the confidential source's information, because the Russian-American specialist's statements are being offered not for the truth of the matter asserted, but to demonstrate defendants' state of mind and knowledge (i.e., actual malice) when they published the CPI articles.
[54] See Harte-Hanks Commc'n, Inc. v. Connaughton, 491 U.S. 657, 695, 109 S. Ct. 2678, 105 L. Ed. 2d 562 (1989) ("Under our precedents, I find significant the fact that the article in this case accurately portrayed Thompson's allegations as allegations, and also printed Connaughton's partial denial of their truth.... These differences in presentation are relevant to the question whether the publisher acted in reckless disregard of the truth: presenting the content of Thompson's allegations as though they were established fact would have shown markedly less regard of their possible falsity.") (Blackmun, J., concurring); Church of Scientology, Int'l v. Behar, 238 F.3d 168, 175 (2d Cir.2001) ("In view of the extensive research Behar conducted, and the fact that the death threat was accurately reported as an allegation, we agree with the district court that no reasonable jury could find that Behar had published the statements about the stock scam or the murder-suicide allegation with purposeful avoidance of the truth.").
[55] Had the defendants obtained the BP Amoco story, they would have found that it contained allegations consistent with those in the FSB Report and the KGB major report. Sullivan Decl., Ex. 68.
[56] Shortly after the CPI article was published, the New York Times conducted an interview with Fridman in which a reporter discussed the allegations of drug running and criminal ties. The reporter explains that when he "asked Fridman about it, he shrugged and said, `That stuff's always around.'" John Lloyd, "The Autumn of the Oligarchs," The New York Times, Oct. 8, 2000. Likewise, when the Moscow Times sought Aven's reaction to the CPI article, he issued only blanket denials. Sullivan Decl., Ex. 100 (August 3, 2000 Moscow Times article). There is little reason to believe that defendants would have elicited any more specific response than what Aven and Fridman provided in these other settings. See McFarlane, 91 F.3d at 1509 ("Nor is it clear ... that the individuals whom the defendant failed to contact would have provided any credible information.... Schaap could reasonably expect McFarlane to deny any involvement regardless of the facts.").
[57] Plaintiffs argue that an adverse inference should be drawn from defendants' failure to produce a draft of the article that Peter Smith marked up in fact-checking the piece. Pl. Mem. at 44-45. Plaintiffs do not explain precisely the issue on which they want an adverse inference, or the information they hoped would be revealed through production of Smith's mark-ups. The "party seeking an adverse inference must adduce sufficient evidence from which a reasonable trier of fact could infer that `the destroyed [or unavailable] evidence would have been of the nature alleged by the party affected by its destruction.'" Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 108-09 (2d Cir.2002). Plaintiffs have not done so here. A party cannot survive summary judgment simply on the basis that the opposing party has not retained every piece of evidence of even passing relevance to the case.
[58] Because the Court concludes that summary judgment should be granted against the plaintiffs as a matter of law, the Court need not reach defendants' contention that the complaint should be dismissed as to Alfa Eco because it is not the real party in interest in the action. See Def. Mem. at 54-58.
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245 P.3d 227 (2010)
STATE
v.
MERINO.
No. 84884-0.
Supreme Court of Washington, Department II.
November 3, 2010.
Disposition of Petition for Review Denied.
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181 S.E.2d 617 (1971)
212 Va. 13
Frank Jimmy SNIDER, Jr.
v.
James D. COX, Supt., etc.
Supreme Court of Appeals of Virginia, Richmond.
June 14, 1971.
Rehearing Denied September 1, 1971.
Harvey S. Lutins, Roanoke, for plaintiff in error.
C. Tabor Cronk, Asst. Atty. Gen. (Andrew P. Miller, Atty. Gen., on brief), for defendant in error.
Before I'ANSON, CARRICO, GORDON, HARRISON, COCHRAN and HARMAN, JJ.
PER CURIAM.
In July 1956 a jury found Frank Jimmy Snider, Jr. guilty of statutory rape and fixed his punishment at death, and he was sentenced accordingly. In this habeas corpus proceeding, the trial court held that under Witherspoon v. Illinois, 391 U.S. 510, 88 S. Ct. 1770, 20 L. Ed. 2d 776 (1968), veniremen opposed to a death sentence were improperly excluded as jurors at Snider's trial. By an order entered December 5, 1969, the trial court directed that Snider be retried on the issue of punishment alone, or be released from custody. Snider appeals, contending that he should be retried *618 on the issue of guilt as well as punishment.
Witherspoon does not dictate that Snider should be retried on the issue of guilt. Witherspoon v. Illinois, supra at 518, 88 S. Ct. 1770. The question is whether Virginia law permits that he be now tried on the issue of punishment alone. We conclude that it does.
The Virginia statutes do not forbid separate trials on the issues of guilt and punishment. They prescribe that in a court of record the accused shall be tried on a not guilty plea by a jury or, with the consent of the accused and the concurrence of the Commonwealth's attorney and the court, by the judge. And they prescribe that punishment shall be fixed by the jury or the court sitting without a jury. Code §§ 19.-1-192, -291 and -292.
In Johnson v. Commonwealth, 208 Va. 481, 158 S.E.2d 725 (1968), we recognized the established practice of one trial on guilt and punishment and left change of that general practice to the Legislature. But we are not here changing the general practice. We are sanctioning a trial to determine punishment alone where, under newly-announced constitutional principles, a felon's sentence has been set aside not because the jury that tried him could not constitutionally find him guilty, but because the jury as then constituted could not constitutionally impose the death sentence.
If the Commonwealth elects to try Snider on the issue of punishment, so much of the transcript of the evidence adduced at Snider's first trial may be read in open court as is reasonably necessary to show the nature of the offense charged and the circumstances under which it was committed. Relevant and admissible evidence may be adduced on the issue of punishment. Such trial shall be by jury or, with the consent and concurrence mentioned in the second preceding paragraph, by the court sitting without a jury.
Affirmed.
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387 F. Supp. 2d 911 (2005)
CITY OF JOLIET, an Illinois Municipal Corporation, Plaintiff,
v.
SOUTHERN TOWING COMPANY and Jeffrey Paul Overstreet, Defendants.
People of the State of Illinois, ex rel. Illinois Department of Transportation, Plaintiff-Intervenor,
v.
Southern Towing Company and Jeffrey Paul Overstreet, Defendants.
No. 04 C 3150.
United States District Court, N.D. Illinois, Eastern Division.
September 21, 2005.
*912 John Patrick Wise, Gregory Smith, Jeffrey Scott Plyman, Kimberly Ann Fladhammer, City of Joliet Legal Department, Joliet, IL, for Plaintiff.
Robert Nienhuis, Goldstein & Price, St. Louis, MO, Dion Joseph Sartorio, Tressler, Soderstrom, Maloney & Priess, Kevin R. Lovellette, Roger Joseph Kiley, Illinois Attorney General's Office, Chicago, IL, for Defendants.
MEMORANDUM OPINION AND ORDER
GETTLEMAN, District Judge.
On May 3, 2004, plaintiff City of Joliet filed a two-count complaint against defendants Southern Towing Company ("Southern") and Jeffrey Paul Overstreet ("Overstreet") concerning an allision[1] on May 2, 2003, between a tow barge owned and operated by Southern and driven by Overstreet at the time of the accident, and the Jefferson Street Bridge ("Bridge"), which spans the Des Plaines River in Joliet. Plaintiff's complaint does not identify a statutory basis for its claims, but asserts federal jurisdiction under 28 U.S.C. § 1333, which applies to admiralty and maritime claims.
Count I asserts a negligence claim against Overstreet, and Count II asserts a negligence claim against Southern. Plaintiff alleges that as a result of the damage to the Bridge caused by the allision, plaintiff incurred additional costs for traffic signal and sign modifications, and for police labor charges for traffic flow enforcement. Plaintiff is seeking damages of $45,153.45.
Defendants moved for summary judgment on both counts pursuant to Fed.R.Civ.P. 56 on June 10, 2005, arguing that plaintiff lacks a proprietary interest in the bridge and thus cannot assert a claim for economic damages under federal maritime law or state law.[2] For the reasons discussed below, defendants' motion for summary judgment is granted.
FACTS[3]
Plaintiff City of Joliet is a municipal corporation organized and existing under the laws of the State of Illinois. Defendant Southern is Tennessee corporation that operates towboats and barges, and *913 has its principal place of business in Memphis, Tennessee. Defendant Overstreet is an individual residing in Alabama. The Motor Vessel Laura Elizabeth is a river towboat that was owned and operated by Southern on May 2, 2003, when the barge in tow of the Laura Elizabeth made contact with the Bridge. At the time of the allision, Overstreet was at the controls. As a result of the allision, the Bridge was closed for approximately five months.
Plaintiff is not the owner of the Bridge, and the allision did not cause any physical damage to any property owned by plaintiff. IDOT is the owner of the Bridge. In July 6, 1995, plaintiff entered into an Agreement for Maintenance of Municipal Streets ("Agreement") with IDOT, which was in effect on May 2, 2003. Under the Agreement, plaintiff is obligated to perform all "routine surface and pothole repairs" and "snow and ice control and all other routine operational services" for certain streets "being used as extensions or parts of State highways lying within the boundaries" of Joliet. Plaintiff was paid annually for its services. The road over the Bridge is covered by the Agreement.
On January 7, 2004, John Mezera, city manager for Joliet, wrote a letter to IDOT stating that the State of Illinois had implemented an emergency detour plan for the closure of the Bridge, and that the State had requested plaintiff's assistance and cooperation. The letter states, "[Plaintiff] agreed to perform the work required for traffic control with the understanding that [plaintiff] would be reimbursed for this expense," and summarizes expenses totaling $45,153.45. The letter also states, "At the IDOT and Coast Guard Public Hearing on this subject, you indicated that you would seek reimbursement for [plaintiff]'s expenses as a part of the IDOT claim to the barge company. I would appreciate it if you would arrange for reimbursement to [plaintiff] as soon as possible." At the time the complaint was filed, IDOT had not reimbursed plaintiff or filed suit against defendants.
SUMMARY JUDGMENT STANDARD
A movant is entitled to summary judgment under Rule 56 when the moving papers and affidavits show there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); Unterreiner v. Volkswagen of America, Inc., 8 F.3d 1206, 1209 (7th Cir.1993). Once a moving party has met its burden, the nonmoving party must go beyond the pleadings and set forth specific facts showing there is a genuine issue for trial. See Fed.R.Civ.P. 56(e); Becker v. Tenenbaum-Hill Associates, Inc., 914 F.2d 107, 110 (7th Cir.1990). The court considers the record as a whole and draws all reasonable inferences in the light most favorable to the party opposing the motion. See Fisher v. Transco Services-Milwaukee, Inc., 979 F.2d 1239, 1242 (7th Cir.1992).
DISCUSSION
The only arguably disputed fact in the instant case is whether the State of Illinois agreed that it would reimburse plaintiff for expenses incurred resulting from the allision and damage to the bridge. Plaintiff asserts that IDOT agreed that it would recoup the costs from Southern and subsequently turn them over to plaintiff, while defendants state only that there was an understanding that plaintiff would be reimbursed by the State. Neither party argues that this disputed fact is material to the putative grounds for summary judgment. The only question, then, is whether the undisputed facts establish that plaintiff has a proprietary interest in the Bridge or *914 is otherwise entitled to recover damages from defendants.
Federal maritime law does not permit recovery for purely economic damages that result from a maritime tort. Complaint of Great Lakes Dredge & Dock Co., 1996 WL 210081, at *6 (N.D.Ill. Apr. 26, 1996) (citing Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 48 S. Ct. 134, 72 L. Ed. 290 (1927)). Since the Supreme Court's seminal decision in Robins, which held that a time charterer of a vessel could not recover economic damages as a result of damage to vessel because it lacked a proprietary interest in the vessel, numerous other courts, including those in the Seventh Circuit, have found that Robins bars economic damage claims of parties without a proprietary interest in the damaged property. See, e.g., Great Lakes, 1996 WL 210081 (dismissing claims by plaintiffs lacking a proprietary interest in property damaged by the "Great Chicago Flood" of April 1992); see also Louisville & Nashville R.R. v. M/V Bayou Lacombe, 597 F.2d 469 (5th Cir.1979) (claim by railroad for loss of bridge it had contract to use); General Foods Corp. v. United States, 448 F. Supp. 111 (D.Md.1978) (claims for added cost of transporting goods due to incapacitation of bridge); In re Williamson Leasing Co., 577 F. Supp. 890 (E.D.Mo.1984) (claims of railroad employees for lost wages due to a collision that caused railroad shutdown).
Under Robins, physical injury to a proprietary interest is a prerequisite to recovery of economic damages in cases of unintentional maritime tort. Reserve Mooring, Inc. v. American Commercial Barge Line, LLC, 251 F.3d 1069, 1072 (5th Cir.2001). In the instant case, plaintiff argues that even though it does not own the Bridge, its claims are not barred by Robins because it has a "proprietary interest" in the Bridge. Plaintiff, however, does not challenge defendants' statement of the elements required to establish a proprietary interest: (1) actual possession or control of the damaged property; (2) responsibility for repair of the damaged property; and (3) responsibility for maintenance of the damaged property. IMTT-Gretna v. Robert E. Lee SS, 993 F.2d 1193, 1194 (5th Cir.1993). Plaintiff admits that it is not in possession of the Bridge and does not have any responsibility for its repair. Plaintiff argues that it nonetheless has a proprietary interest in the Bridge because it "provides governmental services to the Bridge and is responsible for traffic regulation and control on roadways within [Joliet], including those providing access to the Bridge," and because under the Agreement it provides "maintenance of municipal streets that includes those locations."
Plaintiff fails to cite any case law in support of its argument that the provision of maintenance services pursuant to a contract creates a proprietary interest in the absence of the other two elements set forth in IMTT: actual ownership or control; and responsibility for repairs. Plaintiff concedes that it does not satisfy either of these elements. Plaintiff also fails to cite any case law in support of its argument that a municipality's provision of law enforcement and other routine services in response to an accident exposes a negligent tortfeasor to liability to the municipality. For example, plaintiff argues without citation that the fact that it had to reroute traffic and adjust traffic signals in the aftermath of the accident demonstrates its proprietary interest in the Bridge. Plaintiff's argument seeks to broaden the definition of ownership and expand the potential liability of tortfeasors well beyond the limits prescribed in Robins, and is unpersuasive. Accordingly, plaintiff has failed to establish that it has a proprietary interest in the Bridge.
*915 Without explaining how such arguments escape the finding that it lacks the necessary proprietary interest, plaintiff attempts unsuccessfully to distinguish the recent decision in In re American Milling Co., 270 F. Supp. 2d 1112 (E.D.Mo.2003), in which the district court rejected the City of St. Louis's claims for reimbursement for police and ambulance services and lost tax revenue caused by a river accident that damaged the property of third parties. The American Milling court denied the city's damage claims because, although the city was responsible for the repair and maintenance of the levee and wharf, the allision did not damage any property owned by the city. Id. at 1114. The court also held that "whatever costs are associated with the use of the City's emergency personnel were incurred voluntarily, and again, under Robins Dry Dock and its progeny are not recoverable as pure economic damages lacking any physical damage to property or proprietary interest." Id. To the extent that municipal response services were involved in American Milling, it is substantially similar to the instant case, and plaintiff's claims here fail for many of the same reasons expressed by the Missouri court.[4]
Finally, plaintiff attempts in vain to avoid the preclusive effect of Robins by arguing that the Supreme Court's holding "is really about a pragmatic limitation on the rule of foreseeability" in maritime torts, and that the damages to plaintiff caused by the allision were foreseeable. Although plaintiff does not cite to any such cases, some circuits have rejected the notion the Robins creates a bright-line rule, and have occasionally invoked more traditional tort factors such as foreseeability, proximate cause, and remoteness when analyzing damage claims by parties lacking a proprietary interest. See, e.g., Marine Navigation Sulphur Carriers, Inc. v. Lone Star Industries, Inc., 638 F.2d 700 (4th Cir.1981); Petitions of Kinsman Transit, 388 F.2d 821 (2nd Cir.1968). The foreseeability or "Kinsman" approach, however, has been soundly rejected by several courts. See, e.g., Louisiana ex rel. Guste v. M/V TESTBANK, 752 F.2d 1019 (5th Cir.1985) (en banc). Plaintiff does not explain why Kinsman should apply to the instant case, and fails entirely to address courts rejecting Kinsman or recent district court cases from the Seventh Circuit, such as Great Lakes, which have adhered to Robins. Robins therefore bars plaintiff's claims because plaintiff lacks a proprietary interest in the Bridge.
Accordingly, the court grants defendants' motion for summary judgment. Because the court grants defendants' motion under federal maritime law, it need not address defendant's alternative argument that plaintiff's claims are barred under Illinois law.
CONCLUSION
For the reasons stated herein, defendants' motion for summary judgment is granted. At the status hearing on September 28, 2005, at 9 a.m., the court will set a schedule regarding IDOT's intervening complaint.
NOTES
[1] Contact between a moving vessel and a stationary object is often referred to in admiralty as an "allision."
[2] On June 30, 2005, the court granted a motion by the Illinois Department of Transportation ("IDOT") to intervene, and on August 30, 2005, the court granted IDOT's motion to file an amended complaint. IDOT's complaint seeks more than $300,000 in damages resulting from the allision, including damages for "diverting traffic" while the Bridge was not passable. IDOT's intervention does not directly effect the instant motion, although the court notes that both parties appear to agree that plaintiff will be reimbursed by the State of Illinois.
[3] Unless otherwise noted, the following facts, taken from the defendants' L.R. 56.1 statement and attached exhibits, are not in dispute. Plaintiff responded to defendants' L.R. 56.1 statement, but did not file a statement of additional facts.
[4] Contrary to plaintiff's characterization, the American Milling court's holding was not based solely on the plaintiff's claims for lost tax revenues due to the bridge closure, but also addressed and rejected the plaintiff's claim for damages stemming from the provision of emergency services.
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31 P.3d 489 (2001)
176 Or. App. 258
STATE of Oregon, Appellant,
v.
Jimmy Joseph NGUYEN, Respondent.
D9801963M; A104013
Court of Appeals of Oregon.
Argued and Submitted December 23, 1999.
Decided August 29, 2001.
*490 Jennifer S. Lloyd, Assistant Attorney General, argued the cause for appellant. With her on the briefs were Hardy Myers, Attorney General, and Michael D. Reynolds, Solicitor General.
Daniel M. Carroll, Deputy Public Defender, argued the cause for respondent. With him on the brief was David E. Groom, Public Defender.
Before EDMONDS, Presiding Judge, and DEITS, Chief Judge, and ARMSTRONG, Judge.
DEITS, C.J.
The state appeals from a trial court order suppressing evidence acquired as the result of a motor vehicle stop. The state contends that the trial court erred in concluding that the deputy who performed the stop did not have reasonable suspicion to believe that defendant had committed a crime. ORS 131.615(1). We review for errors of law, ORS 138.220, and reverse.
At 2:51 a.m. on April 24, 1998, a named citizen informant telephoned the Washington County Sheriff's Office and reported a "car prowl" in progress at the parking lot of the Tapiola Manor Apartments on 180th Avenue in Aloha. She reported that she was observing two people breaking into a car and described the suspects as two 20-to 25-year-old males with dark hair, and wearing dark clothing. Deputy Branch was nearby and *491 responded to the call. As Branch was headed toward the location of the reported crime, he was advised by the dispatcher that the persons involved in the car prowl were walking from the location of the crime toward 180th Avenue. Branch arrived at the scene about two minutes later, at around 2:53 a.m., and immediately saw a car pull away from the shoulder of the road on 180th Avenue, across from the apartments, and head in his direction. The car then made a U-turn in front of Branch and began heading south on 180th Avenue. Branch, who had been driving without his headlights on, turned his headlights on and began following the car. This apparently startled defendant and his companion. Branch testified that they immediately "stiffened up." Defendant, who was driving, then made an exceptionally slow turn onto another road. Branch described the turn as not "anything remotely close to being normal." Branch testified that the two occupants matched the description of two 20-to 25-year-old dark-haired individuals wearing dark clothing[1] and that there were no other pedestrians or vehicles on the road at that time.
Branch turned on his overhead lights, and defendant pulled his vehicle to the side of the road. Branch approached the driver's side of the vehicle and told the suspects to keep their hands in sight. Branch testified that he recognized the two men in the vehicle based on his prior experience as a gang enforcement officer. He recognized defendant, in particular, because he had once arrested him. Within a short time of the stop, Deputy Obenauf arrived at the scene and walked to the passenger side of the car. The deputies, who could see into the vehicle, observed surgical gloves and various tools on the floor of both the passenger and the driver's sides of the car. Branch asked defendant to step out of the car and patted him down while Obenauf spoke with the passenger.[2] In Branch's pat-down of defendant, he discovered another pair of surgical gloves, a screwdriver and a pair of surgical scissors. The deputies then searched the car, its glove box and trunk, and discovered an amplifier, a CD changer with no serial numbers, a glasscutter, a flashlight, a "Leatherman" multi-purpose tool, and another screwdriver. At some point, a third deputy, Kisor, arrived at the scene, accompanied by the citizen informant who had reported the alleged crime. The informant identified the suspects as the men she had observed breaking into the car in the Tapiola Manor parking lot.
At trial, defendant moved to suppress the evidence that was obtained as a result of the stop, including the identification by the citizen informant, arguing that Branch did not have reasonable suspicion for the stop. The trial court granted defendant's motion, finding that Branch had a subjective belief that defendant had committed the reported crime, but that his belief was not objectively reasonable. Specifically, the court found:
"[T]here were numerous apartments and homes in the neighborhood. The court finds it was dark on the evening in question. The Court finds Dep. Branch did not get a good look at the vehicle's occupants. The Court finds Dep. Branch based his stop on the description of two young males, 20-25, with dark hair and dark clothes. However, the Court finds Dep. Branch could not have been able to tell whether the occupants were wearing dark clothing or whether they were male or female. The Court finds that the startled appearance of the suspects was not unusual under the circumstances. The court finds the suspects were the only individuals on the road at that time."
The state assigns error to the trial court's granting of defendant's motion to suppress. *492 The state contends that, under the totality of the circumstances, Branch had reasonable suspicion to stop defendant's vehicle. Because there is constitutionally sufficient evidence in the record to support the trial court's findings of historical facts on this issue, we are bound by the trial court's findings. Ball v. Gladden, 250 Or. 485, 487, 443 P.2d 621 (1968). Consequently, our review is limited to whether the trial court was correct in its legal conclusion that the officer's suspicion was not objectively reasonable. State v. Belt, 325 Or. 6, 11, 932 P.2d 1177 (1997).
A peace officer may stop a person temporarily in order to make a reasonable inquiry of that person if the officer "reasonably suspects" that the person has committed a crime. ORS 131.615(1). " 'Reasonably suspects' means that a peace officer holds a belief that is reasonable under the totality of the circumstances existing at the time and place the peace officer acts as authorized in ORS 131.605 to 131.625." ORS 131.605(5). A law enforcement officer has reasonable suspicion and, thus, is permitted to stop an individual for investigation, if the officer can point to specific and articulable facts that gave rise to the officer's suspicion that the individual committed a crime. State v. Ehly, 317 Or. 66, 80, 854 P.2d 421 (1993). Reasonable suspicion is a less demanding standard than probable cause, State v. Hammonds/Deshler, 155 Or.App. 622, 627, 964 P.2d 1094 (1998), and it is dependent on "the inferences drawn from the particular circumstances confronting the officers, viewed in the light of the officer's experience." Ehly, 317 Or. at 80, 854 P.2d 421 (quoting Terry v. Ohio, 392 U.S. 1, 21-22, 27-30, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968)). An officer need only form a belief that is objectively reasonable under the totality of the circumstances that an individual has committed a crime and may draw reasonable inferences from the circumstances based on the officer's experience. State v. Loud, 149 Or.App. 250, 255, 942 P.2d 814, rev. den. 326 Or. 58, 944 P.2d 948 (1997); see also State v. Crites, 151 Or.App. 313, 316, 948 P.2d 757 (1997), rev. den. 327 Or. 82, 961 P.2d 216 (1998) (because "there are possible lawful explanations for behavior does not mean that it does not also give rise to reasonable suspicion of criminality").
The trial court concluded that Branch was not reasonable in relying on the above facts to infer that the suspects were the same individuals that the citizen informant had observed prowling, because Branch "could not have been able to tell whether the occupants were wearing dark clothing" or "whether they were male or female," and "the startled appearance of the suspects was not unusual under the circumstances."
In reviewing the record in this case, accepting only those facts that the trial court found, we are satisfied that Branch identified specific and articulable facts that were "sufficient as a matter of law to give rise to an inference that a reasonable officer would hold the required subjective belief." State v. Belt, 325 Or. 6, 12, 932 P.2d 1177 (1997). Branch knew that criminal activity was occurring when he was notified that a named citizen informant had reported a car prowl. He knew that the witness had given a description of the suspects and indicated that they were heading across the apartment parking lot toward SW 180th Avenue. Branch arrived two minutes later at the location of the reported car break-in and saw two persons in a car on 180th Avenue across from the parking lot. This was a residential neighborhood, and it was around 3:00 a.m. Branch stated that there were no other persons or vehicles on the road. As he arrived at the location, the headlights of a car had just been turned on, and the car was leaving the scene. When Branch began following defendant's vehicle and illuminated his patrol car's headlights, the occupants of the suspect vehicle appeared startled, and the driver of the vehicle, defendant, made an unusually slow turn.
It is true that there are possible lawful explanations for defendant's behavior that Branch observed. Again, however, the fact that there are possible lawful explanations for behavior does not mean that it may not also give rise to reasonable suspicion of criminal activity. Crites, 151 Or.App. at 316, 948 P.2d 757. As noted above, the standard for establishing reasonable suspicion to justify stopping and questioning a person about possible criminal activity is less restrictive *493 than the standard for probable cause to arrest. Hammonds/Deshler, 155 Or.App. at 627, 964 P.2d 1094. We conclude that the standard for reasonable suspicion was satisfied. The police officer pointed to specific and articulable facts that supported a reasonable suspicion that defendant may have committed a crime.
Defendant argues, alternatively, that the trial court was correct in granting his motion to suppress because the citizen informant's report lacked sufficient reliability to justify the stop. Defendant is correct that, "when reasonable suspicion is based solely on a citizen informant's report, that report must contain some indicia of reliability." State v. Villegas-Varela, 132 Or.App. 112, 115, 887 P.2d 809 (1994). We have held that three factors determine whether an informant is reliable: "(1) whether the informant is exposed to civil or criminal sanctions if the report is false; (2) whether the report is based on personal observation, which may be inferred from the detail of the report; and (3) whether the officer's observations corroborate the report." State v. Cook, 163 Or.App. 24, 31, 986 P.2d 1228 (1999), rev allowed 330 Or. 138, 6 P.3d 1098 (2000). In this case, the informant gave her name, thus subjecting herself to criminal liability if the information had proved to be false, ORS 162.375. She also gave considerable detail regarding the suspects and the car break-in. Further, the information was corroborated when Branch observed two persons at the scene immediately after the call, in the location reported by the caller, and no one else was in the area. We conclude that there were adequate indicia of the reliability of the informant.
In a cross-assignment of error, defendant argues that the deputies did not have probable cause to search his person and the car that he had been driving. That deficiency, defendant contends, provides an alternative basis to affirm the trial court's grant of defendant's motion to suppress. The state responds that the deputies were permitted to search defendant as a search incident to a lawful arrest.[3]
A warrantless search is unreasonable unless it falls within one of the few recognized exceptions to the warrant requirement of Article I, section 9, of the Oregon Constitution. State v. Nagel, 320 Or. 24, 28, 880 P.2d 451 (1994). A warrantless search incident to arrest is valid under Article I, section 9,
"when it relates to a crime which there is probable cause to believe that the arrestee has committed, and when it is reasonable in all the circumstances. This probable cause requirement properly limits the objects to be sought in searches incident to arrest, and thus limits the intensity of the search."
State v. Owens, 302 Or. 196, 204, 729 P.2d 524 (1986) (citation omitted). Probable cause has both a subjective and an objective component. Id. An officer must subjectively believe that a crime has been committed and thus that a person or thing is subject to seizure, and this belief must be objectively reasonable in the circumstances. Id.
Both Branch and Obernauf testified that the citizen informant's description of the suspects, the tools and surgical gloves that the officers observed in plain view, the officers' experience, and Branch's familiarity with defendant, led them to believe that it was more probable than not that defendant had committed the crime. Evidence in the record supported the trial court's finding that Branch had subjective probable cause to arrest defendant. State v.. Corning, 157 Or.App. 379, 383, 971 P.2d 894 (1998),rev. den. 328 Or. 365, 987 P.2d 510 (1999) (subjective belief can be inferred from the totality of the circumstances). Further, we conclude that the above information and observations provided the officers with a substantial and objective basis to arrest defendant and to search his vehicle incident to a lawful arrest. See State v. McCoy, 155 Or.App. 610, 616, 964 P.2d 309 (1998); State v. Askay, 96 Or.App. 563, 566, 773 P.2d 785, rev. den. 308 Or. 197, 777 P.2d 410 (1989).
Defendant's second cross-assignment of error concerns the trial court's ruling *494 regarding the citizen informant's on-scene identification of defendant and his passenger as the persons involved in the reported crime. In defendant's motion to suppress, he sought to exclude evidence of the on-scene identification on the ground that the identification was unduly suggestive and, thus, unreliable. The trial court orally denied that part of defendant's motion to suppress, concluding that the identification procedure "was not overly suggestive or unlawful."[4]
The determination of whether an identification should be excluded as unreliable involves a two-step process:
"First, the court must determine whether the process leading to the offered identification was suggestive or needlessly departed from procedures[.] If so, then the prosecution must satisfy the court that `the proffered identification has a source independent of the suggestive confrontation' or photographic display, or that other aspects of the identification at the time it was made substantially exclude the risk that it resulted from the suggestive procedure." State v. Classen, 285 Or. 221, 232, 590 P.2d 1198 (1979) (citation and footnote omitted).
See also State v. Najibi, 150 Or.App. 194, 197, 945 P.2d 1093 (1997), rev. den. 326 Or. 464, 952 P.2d 64 (1998) (discussing the two-step analysis).
We have held, on facts analogous to those presented here, that on-scene identifications were not overly suggestive or unlawful. See State v. Ott, 54 Or.App. 309, 634 P.2d 825, rev. den. 292 Or. 334, 644 P.2d 1127 (1981). In Ott, witnesses who had observed two bank robbers at a credit union were taken to the scene of a police stop to identify the suspects. The witnesses arrived only minutes after the robbery and observed the suspects standing near three police cars and three police officers. Both witnesses were able to identify the defendant. We held that there was no indication of "impermissibly suggestive circumstances" and the "eyewitness identification evidence was properly admissible at trial." Id. at 316, 634 P.2d 825. Similarly, in State v. Engblom, 31 Or.App. 425, 428, 570 P.2d 678, rev. den. 280 Or. 521 (1977), we held that the identification of the defendant by a rape victim three hours after the crime, and with the defendant standing near the police car that had stopped him, was acceptable.
Here, there was nothing impermissibly suggestive about the identification of defendant. The witness told Deputy Kisor that she could identify the men if she saw them again. Shortly after she had reported the car prowling to the police, Kisor took her to the location where defendant was stopped. Kisor slowly drove her by the suspects. The overhead lights of the patrol cars were not illuminated. Although the suspects' hands were cuffed behind their backs, it is not clear from the record whether the witness saw the handcuffs. Branch testified that the cuffs were not visible to the witness, and that it appeared as though the men were simply standing with their hands behind their backs.[5] Similar to what occurred in Ott and Engblom, the witness observed the men standing near the patrol cars. Further, Kisor's statement to the witness did not encourage or pressure her to identify the men or suspects, nor did it carry the implication that they were the ones that she had seen. He said: "You are under no obligation at all to identify these guys as suspects, but if they are the ones that you saw, let me know." The witness then unequivocally identified the two men. We conclude that the on-scene identification was not impermissibly suggestive. *495 See Classen, 285 Or. at 232, 590 P.2d 1198. For all of the above reasons, we hold that the trial court erred in granting defendant's motion to suppress.
Reversed and remanded.
NOTES
[1] As noted below, the trial court found that Branch could not have determined whether the car's occupants were wearing dark clothing or whether they were male or female.
[2] In Obenauf's conversation with the passenger, he learned that the car belonged to defendant's mother. The deputies ultimately called defendant's mother, who spoke Vietnamese and had only a cursory understanding of English. Although she consented to a search of the car, the trial court found that her consent was invalid. The court agreed, however, with the prosecutor's alternative argument that the search was valid as a search incident to a lawful arrest. On appeal, the state concedes that defendant's mother's consent was invalid. Accordingly, we do not consider that issue.
[3] The state also argues that the search of the car was a valid warrantless search under the "automobile exception." In light our disposition, we do not address the state's alternative argument.
[4] Although the trial court orally rejected defendant's argument on this issue, the court's written order grants the motion to suppress without specifically identifying which evidence was suppressed under the order. Accordingly, although the trial court apparently did not intend to suppress this evidence, technically the written order did suppress the evidence. See, e.g., State v. Swain/Goldsmith, 267 Or. 527, 530, 517 P.2d 684 (1974); Roe v.Doe, 161 Or.App. 477, 483, 984 P.2d 344 (1999), rev. den. 329 Or. 651, 994 P.2d 133 (2000).
[5] On cross-examination, Branch adhered to his opinion that, while he might have reached the conclusion that the suspects were handcuffed, upon seeing the two men with their hands behind their backs, he did not believe that the witness would logically draw that same conclusion. It is unclear from the record whether the witness believed that the men were handcuffed.
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33 F. Supp. 2d 720 (1999)
Patricia RUPPEL, Plaintiff,
v.
Bruce RAMSEYER, Van Clayton Tedrick, John Peterson, M.D., and Covenant Medical Center of Champaign/Urbana, Defendants.
No. 98-CV-2071.
United States District Court, C.D. Illinois, Danville/Urbana Division.
January 19, 1999.
*721 Robert Kirchner, Lerner & Kirchner, Champaign, IL, for Plaintiff.
*722 Marc J. Ansel, Champaign, IL, for Defendant Bruce Ramseyer.
Richard R. Harden, Kenneth D. Reifsteick, Thomas, Mamer & Haughey, Champaign, IL, for Defendants Tedrick, Peterson & Covenant Medical Center.
ORDER
McCUSKEY, District Judge.
On March 16, 1998, Plaintiff, Patricia Ruppel, filed a 24-count Complaint (# 1) against Defendants: Bruce Ramseyer, a police officer employed by the City of Champaign; Van Clayton Tedrick, a registered nurse employed by Covenant Medical Center; John Peterson, M.D., an emergency room physician at Covenant Medical Center; and Covenant Medical Center of Champaign/Urbana. On July 1, 1998, Defendant Ramseyer filed a Motion to Dismiss (# 5). On July 2, 1998, Defendants Tedrick, Peterson and Covenant Medical Center filed their Motion to Dismiss (# 8). A Report and Recommendation was filed by the Magistrate Judge in the above cause on October 14, 1998. The Magistrate Judge recommended that Defendants' Motions to Dismiss be denied in part and the proceedings stayed with respect to the determination of probable cause. On October 27, 1998, Defendants Tedrick, Peterson and Covenant Medical Center filed an Objection to the Magistrate Judge's Report and Recommendation.
A district court must review de novo the recommendations of a Magistrate Judge to which either party timely objects. 28 U.S.C. § 636(b)(1)(C); Lexington Ins. Co. v. Rugg & Knopp, Inc., 1 F. Supp. 2d 937, 938 (E.D.Wis. 1998), aff'd. 165 F.3d 1087, 1999 WL 13425 (7th Cir.1999). In addition, the district court may review any other aspect of a recommendation as it sees fit (Lexington Ins. Co., 1 F.Supp.2d at 938), and may make a de novo determination even when no objection was made (Delgado v. Bowen, 782 F.2d 79, 82 (7th Cir.1986)). This is because, under the statute, the district court always retains the power to make the final decision. Delgado, 782 F.2d at 82. Accordingly, even though Defendant Ramseyer did not file an objection to the Report and Recommendation, this court has reviewed all aspects of the Report and Recommendation. This court now adopts the Magistrate Judge's Recommendation in part and rejects it in part.
FACTS
The following facts are drawn from Plaintiff's complaint. On March 15, 1997, Plaintiff was involved in a traffic accident in Champaign, Illinois. Plaintiff's vehicle hit "a vehicle that had stalled, restarted and began movement, and then stalled again" at an intersection at a time when the stoplight was green for Plaintiff's vehicle. After the accident, Plaintiff insisted that she sustained no injuries. However, she was persuaded to go by ambulance to Covenant Medical Center. She arrived at the emergency room at approximately 9:00 p.m. She declined treatment, but agents and employees of the Medical Center refused to let Plaintiff leave and placed a security guard outside of the treatment room. Defendant Ramseyer arrived at the emergency room between 9:10 and 9:20 p.m. He was informed that Plaintiff had declined treatment and was seeking to leave the Medical Center. Ramseyer then placed Plaintiff under arrest for driving under the influence of alcohol (DUI). According to Plaintiff's complaint, Ramseyer did not have probable cause to arrest Plaintiff.
Ramseyer advised Plaintiff that he was demanding that she undergo a blood test to determine her blood alcohol level. According to Plaintiff's complaint, Ramseyer also informed her that she had a right to refuse such testing subject to the automatic suspension of her driver's license. Plaintiff refused the testing. Ramseyer then ordered Dr. Peterson to draw Plaintiff's blood for testing. Dr. Peterson ordered Tedrick to draw Plaintiff's blood. The blood was drawn at approximately 10:20 p.m. Plaintiff alleged that Dr. Peterson and Tedrick "repeatedly grabbed the Plaintiff's arm" and drew blood from her against her will. Plaintiff was released from the Medical Center at about 10:35 p.m.
Following a jury trial, Plaintiff was found not guilty of the offense of DUI. However, she was found guilty of the offense of driving with a blood alcohol concentration greater than .10.
*723 Based upon these facts, Plaintiff alleged that Defendant Ramseyer was liable for: unlawful seizure for arresting her without probable cause under 42 U.S.C. § 1983 (Count I); unlawful search for the involuntary withdrawal of her blood under 42 U.S.C. § 1983 (Count II); unlawful search for the involuntary withdrawal of her blood in violation of the Illinois Constitution (Count III); unlawful seizure for arresting her without probable cause in violation of the Illinois Constitution (Count IV); ordering that her blood be drawn in violation of her substantive due process rights under 42 U.S.C. § 1983 (Count V); a violation of her right to privacy under the Illinois Constitution (Count VI); intentional infliction of emotional distress (Count VII); and false imprisonment/arrest (Count VIII).
Plaintiff also alleged eight counts against Dr. Peterson, to wit: breach of fiduciary duty (Count IX); unlawful search under 42 U.S.C. § 1983 (Count X); unlawful seizure under 42 U.S.C. § 1983 (Count XI); unlawful search in violation of the Illinois Constitution (Count XII); unlawful seizure in violation of the Illinois Constitution (Count XIII); false imprisonment/arrest (Count XIV); battery (Count XV); and intentional infliction of emotional distress (Count XVI).
In addition, Plaintiff alleged seven counts against Van Clayton Tedrick, the nurse. She alleged: battery (Count XVII); breach of fiduciary duty (Count XVIII); intentional infliction of emotional distress (Count XIX); unlawful seizure under 42 U.S.C. § 1983 (Count XX); unlawful search under 42 U.S.C. § 1983 (Count XXI); unlawful seizure in violation of the Illinois Constitution (Count XXII); and unlawful search in violation of the Illinois Constitution (Count XXIII). Finally, Plaintiff alleged that Covenant Medical Center was liable for false arrest and imprisonment (Count XXIV).
Defendants filed Motions to Dismiss all 24 counts of Plaintiff's complaint.
ANALYSIS
I. BACKGROUND
In considering a Motion to Dismiss, all well-pleaded factual allegations in the complaint are taken as true, with the facts viewed in the light most favorable to the plaintiff. Dismissal is proper only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957). In this case, the factual basis for all of Plaintiff's claims is that she was unlawfully detained at the Medical Center and forced to undergo a blood test against her will.
In Schmerber v. State of California, 384 U.S. 757, 86 S. Ct. 1826, 16 L. Ed. 2d 908 (1966), the United States Supreme Court addressed a claim that the State had breached the Fourth Amendment's protection of the "right of the people to be secure in their persons ... against unreasonable searches and seizures" when it compelled an individual suspected of drunken driving to undergo a blood test. In Schmerber, as in this case, the individual was arrested at a hospital after being involved in an automobile accident. Schmerber, 384 U.S. at 758, 86 S. Ct. 1826. Also, in Schmerber, as in this case, a police officer at the hospital directed a physician to take a blood sample over the individual's objection. Schmerber, 384 U.S. at 758-59, 86 S. Ct. 1826. The Court in Schmerber found that a blood test is a "search" under the Fourth Amendment. Schmerber, 384 U.S. at 767, 86 S. Ct. 1826. However, it held that the search was not unreasonable and did not violate the Fourth Amendment because the police officers had probable cause to believe the individual was driving under the influence of alcohol and because there was no time to seek out a magistrate and secure a warrant as the percentage of alcohol in the blood begins to diminish shortly after drinking stops. Schmerber, 384 U.S. at 768-72, 86 S. Ct. 1826. In finding the blood test reasonable, the Court noted that blood tests are "minor intrusions into an individual's body." Schmerber, 384 U.S. at 772, 86 S. Ct. 1826. The Court stated that such "tests are a commonplace in these days of periodic physical examinations and experience with them teaches that the quantity of blood extracted is minimal, and that for most people the procedure involves virtually no risk, trauma, *724 or pain." Schmerber, 384 U.S. at 771, 86 S. Ct. 1826. The Court also noted that the "test was performed in a reasonable manner" as it was taken "in a hospital environment according to accepted medical practices." Schmerber, 384 U.S. at 771, 86 S. Ct. 1826.
Schmerber "recognized society's judgment that blood tests do not constitute an unduly extensive imposition on an individual's personal privacy and bodily integrity" (Winston v. Lee, 470 U.S. 753, 762, 105 S. Ct. 1611, 84 L. Ed. 2d 662 (1985)) and "clearly allows a State to force a person suspected of driving while intoxicated to submit to a blood alcohol test" (South Dakota v. Neville, 459 U.S. 553, 559, 103 S. Ct. 916, 74 L. Ed. 2d 748 (1983)). A simple blood-alcohol test is so safe, painless and commonplace that a state can legitimately compel the suspect, against his will, to accede to the test. Neville, 459 U.S. at 563, 103 S. Ct. 916. Therefore, if a police officer has probable cause to arrest for DUI, he can proceed without use of excessive force in procuring a blood sample even in the face of a suspect's refusal. Field v. Hall, 1995 WL 360744, at *6 (D.Del.1995). This court notes that "grabbing" an arm is consistent with "forcing" or "compelling" a person to submit to a blood test and does not constitute excessive force.
Since Schmerber, "it is clear that a compulsory test does not violate any constitutional rights of an individual merely because he objected to such tests." People v. Todd, 59 Ill. 2d 534, 322 N.E.2d 447, 453 (1975) (emphasis added); see also People v. Yant, 210 Ill.App.3d 961, 155 Ill. Dec. 783, 570 N.E.2d 3, 4 (1991) (a blood test taken without consent does not violate any constitutional right of the donor).
Based upon this well established case law, it is clear that Plaintiff has no cause of action based upon the fact that she was forced to submit to a blood test against her will unless she can prove there was no probable cause to believe she was driving under the influence of alcohol. Accordingly, it is clear to this court that, so long as probable cause existed, the taking of Plaintiff's blood did not violate any of her constitutional rights, even though she objected to the blood test and even if Ramseyer told her she could refuse the test.
In addition, an essential predicate to any § 1983 claim for unlawful arrest is the absence of probable cause. Kelley v. Myler, 149 F.3d 641, 646 (7th Cir.1998). In order to prevail in an unlawful arrest action, the plaintiff must show lack of probable cause. Simmons v. Pryor, 26 F.3d 650, 654 (7th Cir.1993), cert. denied, 511 U.S. 1082, 114 S. Ct. 1833, 128 L. Ed. 2d 461 (1994).
II. RAMSEYER MOTION TO DISMISS
A. PROBABLE CAUSE
In his Motion to Dismiss, Defendant Ramseyer argues that Plaintiff is collaterally estopped from denying the existence of probable cause for her arrest. He notes that Plaintiff filed a Motion to Quash Arrest for Lack of Probable Cause in the circuit court of Champaign County. A hearing was held and evidence was heard on August 22, 1997. The circuit judge found that Officer Ramseyer had probable cause to arrest Plaintiff and denied her Motion to Quash Arrest.
The doctrine of collateral estoppel holds that, once a court has decided an issue of fact or law necessary to its judgment, that decision precludes relitigation of the issue in a suit on a different cause of action involving a party to the first case. Sloan v. Durkin, 1996 WL 284973, at *4 (N.D.Ill.1996); see also Guenther v. Holmgreen, 738 F.2d 879, 883 (7th Cir.1984). A federal court is required to give a judgment of a state court the same collateral effect that the judgment would be given by a state court of the state in which the judgment was rendered. 17 U.S.C. § 1738; Sloan, 1996 WL 284973, at * 4. As a consequence, determinations made in state criminal trials may estop a criminal defendant from relitigating the same issue in a civil suit. Sloan, 1996 WL 284973, at *4. For collateral estoppel to apply, there must have been a final decision of a court of competent jurisdiction, and the party to be estopped must have had a full and fair opportunity to litigate the issue. Sloan, 1996 WL 284973, at *4. In Guenther, the Seventh Circuit held that a plaintiff was collaterally estopped from alleging that his arrest was made without probable cause when the plaintiff *725 had litigated the issue of probable cause at a preliminary hearing in state court and the state court determined that probable cause existed for the arrest. Guenther, 738 F.2d at 883-89; see also Field, 1995 WL 360744, at *7. The court in Guenther specifically stated that the state court's determination of probable cause estopped the plaintiff from raising any Fourteenth Amendment due process claim based upon the general tort theories of false arrest and false imprisonment. Guenther, 738 F.2d at 889.
In this case, Plaintiff does not argue that she did not have a full and fair opportunity to litigate the issue of probable cause in the circuit court of Champaign County. Plaintiff argues, however, that collateral estoppel does not apply because she has appealed the circuit court's ruling. The appeal is currently pending in Illinois' Fourth District Appellate Court in People v. Ruppel, Case No. 4-98-0411.
In Illinois, it is unclear whether a pending appeal destroys the preclusive effect of a judgment. Rogers v. Desiderio, 58 F.3d 299, 302 (7th Cir.1995); Dwyer v. Evoy, 12 F. Supp. 2d 832, 834 (N.D.Ill.1998); Sloan, 1996 WL 284973, at *5. In Rogers, the Seventh Circuit found that the appropriate action was to stay the case pending a decision by the Illinois Appellate Court and then to proceed as appropriate in light of the final disposition of the state court action. Rogers, 58 F.3d at 302. The issue in Rogers was claim preclusion (res judicata), and the proceedings were stayed until the conclusion of "parallel" proceedings in state court based upon Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S. Ct. 1236, 47 L. Ed. 2d 483 (1976). That is not the precise situation here. The proceeding pending before the Fourth District Appellate Court is not a "parallel" proceeding. However, a final determination by the Illinois Appellate Court that probable cause existed for Plaintiff's arrest clearly would estop Plaintiff from claiming that the arrest was without probable cause in this court. See Sloan, 1996 WL 284973, at *6 ("it is a waste of court resources to hold a trial to determine facts already determined in state court"). As a result, this court agrees with the Magistrate Judge's recommendation that proceedings regarding the counts of Plaintiff's complaint which depend on proof of a lack of probable cause should be stayed pending the decision of the Fourth District Appellate Court on this issue.
This court further concludes that, if the Fourth District Appellate Court affirms the judgment of the circuit court of Champaign County that probable cause existed for Plaintiff's arrest, Plaintiff cannot state claims against Ramseyer based upon unlawful seizure, unlawful search, violation of substantive due process rights, violation of her right to privacy or false imprisonment/arrest. All of these counts must then be dismissed.
This court notes, in passing, that Plaintiff has argued that probable cause was lacking based upon the fact that she was acquitted of the DUI charge following a jury trial. This argument is not persuasive. To secure a conviction, criminal charges must be proved beyond a reasonable doubt. However, an arrest need only be supported by probable cause, facts which would warrant a prudent person in believing that the individual had committed or was committing an offense. Roby v. Skupien, 758 F. Supp. 471, 474 (N.D.Ill.1991) (citing Beck v. Ohio, 379 U.S. 89, 91, 85 S. Ct. 223, 13 L. Ed. 2d 142 (1964)). The test, an objective one, is whether a reasonable officer would have believed the person had committed a crime. Kelley, 149 F.3d at 646. Therefore, "even though the criminal charges could not be proved at trial, the officer could still have been acting constitutionally, pursuant to his lesser burden, when he performed his actions during the investigation." Roby, 758 F.Supp. at 474; see also Kelley, 149 F.3d at 647 (fact that plaintiff not actually convicted does not mean there was not probable cause for her arrest).
In addition, Plaintiff cannot necessarily prevail on her claims even if it is determined that no probable cause existed for her arrest. If a reasonable officer would have believed that probable cause existed to arrest Plaintiff for DUI, the officer is entitled to qualified immunity. Kelley, 149 F.3d at 648; Edwards v. Cabrera, 58 F.3d 290, 293 (7th Cir.1995).
*726 B. INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS
Officer Ramseyer also argues that Count VII fails to state a claim for intentional infliction of emotional distress under Illinois law because the alleged conduct is not sufficiently extreme and outrageous to be actionable under Illinois law. This court agrees.
In order to state a cause of action under Illinois law for intentional infliction of emotional distress, a plaintiff must allege that: (1) the defendant's conduct was extreme and outrageous; (2) the defendant either intended that his conduct should inflict severe emotional distress, or knew there was a high probability that the conduct would cause severe emotional distress; and (3) the defendant's conduct in fact caused severe emotional distress. Anast v. Commonwealth Apartments, 956 F. Supp. 792, 802-03 (N.D.Ill.1997). The threshold for extreme and outrageous conduct is high. Anast, 956 F.Supp. at 803. Conduct is extreme and outrageous only when reciting the facts to an average community member would arouse her resentment against the actor, and lead her to exclaim, "outrageous!" Anast, 956 F.Supp. at 803. Liability does not extend to mere insults, indignities, threats, annoyances, petty oppressions or trivialities that are part of the costs of complex society from which the law provides no protection. Anast, 956 F.Supp. at 803. Liability has been found only where the conduct is so outrageous in character, and so extreme in degree, as to go beyond all bounds of decency. Anast, 956 F.Supp. at 803. The law intervenes only when the distress inflicted is so severe no reasonable person could be expected to endure it. Whitehead v. AM Int'l, Inc., 860 F. Supp. 1280, 1291 (N.D.Ill.1994). The facts of each case are judged by an objective standard to determine whether the alleged conduct was extreme and outrageous. Harriston v. Chicago Tribune Co., 992 F.2d 697, 703 (7th Cir.1993). When the allegations of a plaintiff's complaint do not meet the high threshold necessary to state a cause of action for intentional infliction of emotional distress, dismissal is proper. See Harriston, 992 F.2d at 703; Anast, 956 F.Supp. at 803; Whitehead, 860 F.Supp. at 1290-91; Khan v. American Airlines, 266 Ill.App.3d 726, 203 Ill. Dec. 171, 639 N.E.2d 210, 215 (1994); Miller v. Equitable Life Assurance Society, 181 Ill.App.3d 954, 130 Ill. Dec. 558, 537 N.E.2d 887, 889-90 (1989).
In this case, Plaintiff's factual allegations are that she was detained at the Medical Center from approximately 9:00 p.m. to 10:35 p.m., even though she was refusing treatment. In addition, Plaintiff alleged that a blood test was taken against her will and by "repeatedly grabb[ing] the Plaintiff's arm."
This court concludes that, even assuming that Plaintiff was arrested and detained without probable cause, Plaintiff's allegations do not reach the level of extreme and outrageous conduct needed to establish a claim for intentional infliction of emotional distress. In doing so, this court again recognizes that the Supreme Court in Schmerber stated that blood tests are "minor intrusions" and stated in Winston that, in society's judgment, blood tests do not constitute an unduly extensive imposition on an individual's personal privacy and bodily integrity. In addition, a detention of approximately 1½ hours at a Medical Center cannot be considered outrageous and extreme under the circumstances here where Plaintiff was involved in an automobile accident and agreed to be taken to the Medical Center. Accordingly, this court finds that the conduct of Ramseyer, and the other Defendants, was not so severe that a reasonable person could not be expected to endure it, and did not go beyond all possible bounds of decency. See Harriston, 992 F.2d at 703. As a result, Count VII is dismissed.
III. MEDICAL CENTER DEFENDANTS' MOTION TO DISMISS
In their Motion to Dismiss, Defendants Peterson, Tedrick and Covenant Medical Center argue: (1) that the § 1983 claims against Peterson and Tedrick must be dismissed because they are private individuals and not state actors; (2) that all of the counts based upon Illinois law must be dismissed because the actions of Peterson and Tedrick were authorized by Illinois statute (625 Ill. Comp. Stat. 5/11-501.2 (West 1996); (3) the *727 state law claims must be dismissed because Illinois provides by statute for civil immunities for Defendants' conduct (625 Ill. Comp. Stat. 5/11-500.1); (4) the state law claims must be dismissed because Plaintiff failed to file an affidavit as required by 735 Ill. Comp. Stat. 5/2-622 (West 1996)); (5) the claims for breach of fiduciary duty must be dismissed because no fiduciary duty existed based upon the facts plead; and (6) Plaintiff failed to state a cause of action for intentional infliction of emotional distress.
A. INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS
For the reasons just discussed in considering Defendant Ramseyer's Motion to Dismiss, this court concludes that Counts XVI and XIX alleging claims of intentional infliction of emotional distress against Peterson and Tedrick do not reach the necessary threshold of outrageous and extreme conduct. As a result, Counts XVI and XIX are dismissed.
B. SECTION 1983 CLAIMS STATE ACTION
In Counts X, XI, XX, and XXI, Plaintiff alleges that Peterson and Tedrick are liable for damages under § 1983 based upon unlawful seizure and unlawful search. Section 1983 imposes liability only where a person acts "under color" of a state "statute, ordinance, regulation, custom, or usage." 42 U.S.C. § 1983; Richardson v. McKnight, 521 U.S. 399, 117 S. Ct. 2100, 2103, 138 L. Ed. 2d 540 (1997). However, § 1983 can sometimes impose liability upon a private individual. Richardson, 117 S.Ct. at 2103. In determining whether a private individual's action constitutes state action, courts have looked to the level of government involvement in the private individual's actions. Anast, 956 F.Supp. at 797. A state can be held responsible for a private decision only when it has exercised coercive power, or has provided such significant encouragement, that the choice must be deemed to be that of the state. Wade v. Byles, 83 F.3d 902, 905 (7th Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 311, 136 L. Ed. 2d 227 (1996); Anast, 956 F.Supp. at 797-98.
In this case, Plaintiff alleges that Ramseyer ordered Peterson to draw blood from Plaintiff and that Tedrick then performed the blood test. She also alleges that Ramseyer, Peterson and Tedrick were acting in concert to detain Plaintiff. This court concludes that Plaintiff has sufficiently alleged that Ramseyer exercised coercive power so that the actions of Peterson and Tedrick may be deemed those of the state. Accordingly, Counts X, XI, XX and XXI cannot be dismissed on this basis.
These counts, however, like the § 1983 counts against Ramseyer, cannot be maintained by Plaintiff if probable cause existed for her arrest. Accordingly, proceedings regarding these counts will also be stayed pending the outcome of Plaintiff's appeal to the Illinois Appellate Court.
This court further notes that Plaintiff cannot maintain a § 1983 cause of action against Peterson and Tedrick based upon her brief detention at the Medical Center prior to Ramseyer's arrival. Prior to Ramseyer's arrival, there was no state action. See, e.g., Copeland v. Northwestern Memorial Hosp., 964 F. Supp. 1225, 1238-40 (N.D.Ill.1997) (hospital and its staff members' actions not taken under color of state law and did not constitute arrest, interrogation or jailing of plaintiff where complaint alleged that plaintiff voluntarily went to the hospital's emergency room, a nurse and doctor interrogated plaintiff regarding his commission of a bank robbery and placed him in a locked observation room, the nurse later returned with two Chicago police officers who arrested him and the nurse told the officers that the hospital was holding plaintiff for them).
C. REMAINING STATE LAW CLAIMS
Defendants Peterson, Tedrick and Covenant Medical Center also argue that the state law claims against them must be dismissed because their actions were authorized by an Illinois statute. Section 11-501.2 of the Illinois Vehicle Code provides, in pertinent part:
Notwithstanding any ability to refuse under this Code to submit to these tests or any ability to revoke the implied consent to these tests, if a law enforcement officer *728 has probable cause to believe that a motor vehicle driven by or in actual physical control of a person under the influence of alcohol, any other drug, or combination of both has caused the death or personal injury to another, that person shall submit, upon the request of a law enforcement officer, to a chemical test or tests of his or her blood, breath or urine for the purpose of determining the alcohol content thereof or the presence of any other drug or combination of both. 625 Ill. Comp. Stat. 5/11-501.2(c)(2) (West 1996).
Defendants attached the affidavit of Michael Cloyd to their Motion to Dismiss. In his affidavit, Cloyd states that, on March 15, 1997, he was a passenger in a vehicle involved in a motor vehicle accident with a vehicle driven by Plaintiff. He also states that he was injured in the accident and was taken to Covenant Medical Center by ambulance for treatment of a bleeding head wound.
This court notes that a district court, in ruling on a motion to dismiss pursuant to Rule 12(b)(6), generally cannot consider material outside the pleadings unless it converts the motion to dismiss into a motion for summary judgment and offers the other party an opportunity to respond. Fed R. Civ. P. 12(b); Edward Gray Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 94 F.3d 363, 366 (7th Cir.1996). However, in this case, Plaintiff does not dispute that the accident caused personal injury to Cloyd and this fact is consistent with the allegations in Plaintiff's complaint. Because the parties agree on this fact, it is permissible for this court to consider this fact as stipulated in ruling on the Motion to Dismiss. See Duferco Steel Inc. v. M/V Kalisti, 121 F.3d 321, 324 n. 3 (7th Cir.1997); see also People v. Ruppel, No. 4-97-0509 (December 31, 1997) (unpublished order), leave to appeal denied, People v. Ruppel, 177 Ill. 2d 582, 232 Ill. Dec. 456, 698 N.E.2d 547 (1998) (parties stipulated an accident involving bodily injury occurred).
Plaintiff does not dispute that section 11-501.2(c)(2) of the Illinois Motor Vehicle Code applies based upon the facts of this case. However, she argues that the statute does not authorize a law enforcement officer to order a blood test under these circumstances. She contends that the statute contemplates a "request" by a law enforcement officer which a person "shall" submit to. However, she asserts that the person still does, in fact, have the ability to refuse the test subject to the fact that evidence of the refusal is admissible in a civil or criminal proceeding. See 625 Ill. Comp. Stat. 5/11-501.2(c)(1) (West 1996). The Illinois Appellate Court rejected this strained interpretation of section 11-501.2(c)(2) when Plaintiff made the argument in appealing the summary suspension of her driver's license. Ruppel, No. 4-97-0509, slip op. at 5. This court also concludes that the plain language of section 11-501.2(c)(2) authorizes a law enforcement officer to order a blood test when the suspect refuses to submit to a blood test. This interpretation is also consistent with the well established case law cited previously by this court. Accordingly, this court finds that section 11-501.2(c)(2) authorized Ramseyer to order the blood test, providing he had probable cause to believe Plaintiff was under the influence of alcohol, even if Plaintiff did not consent. See Connor v. Foster, 833 F. Supp. 727, 732 (N.D.Ill.1993).
More importantly, section 11-500.1 of the Illinois Vehicle Code provides:
(a) A person authorized under this Article to withdraw blood or collect urine cannot be civilly liable for damages when the person, in good faith, withdraws blood or collects urine for evidentiary purposes under this Code, upon the request of a law enforcement officer, unless the act is performed in a willful and wanton manner.
(b) As used in this Section, "willful and wanton manner" means a course of action that shows an actual or deliberate intention to cause harm or which, if not intentional, shows an utter indifference to or conscious disregard for the health or safety of another. 625 Ill. Comp. Stat. 5/11-500.1 (West 1996).
This section was recently enacted by the Illinois legislature and was effective December 31, 1996.
Plaintiff argues that this statute's immunity does not apply because Peterson and Tedrick's action in "[g]rabbing plaintiff's *729 arm" is "most definitely an example of willful and wanton conduct." This court cannot agree. This court concludes that Plaintiff's claim for damages against Peterson and Tedrick is exactly the type of case the Illinois legislature intended to prevent by enacting section 11-500.1. Here, a law enforcement officer ordered Defendants Peterson and Tedrick to withdraw blood from Plaintiff after Plaintiff was involved in an accident involving bodily injury and after Plaintiff had been arrested for DUI. While Plaintiff has alleged that Ramseyer did not have probable cause for the arrest, this court specifically finds that Peterson and Tedrick could not have any obligation to question the existence of probable cause. Accordingly, Plaintiff cannot hold Peterson and Tedrick liable for forcing her to submit to an unwanted medical procedure. See Connor, 833 F.Supp. at 732. Further, the fact that Peterson and Tedrick grabbed Plaintiff's arm to withdraw the blood simply cannot be considered "utter indifference to or conscious disregard for the health and safety of another." See 625 Ill. Comp. Stat. 5/11-500.1(b) (West 1996). Defendants Peterson and Tedrick are entitled to immunity under this statute for their actions in withdrawing blood from Plaintiff.
Further, this court finds that Plaintiff cannot maintain a cause of action against Peterson, Tedrick, or Covenant Medical Center based upon her brief detention of 10 to 20 minutes prior to the arrival of Ramseyer and her arrest. Based upon the allegations of her complaint, Plaintiff voluntarily was taken to the Medical Center after she was involved in an automobile accident. She was detained by Medical Center employees until Ramseyer arrived 10 to 20 minutes later and "immediately" arrested her. This brief detention is not actionable based upon the facts alleged.
This court specifically finds that it appears beyond doubt that Plaintiff can prove no set of facts in support of her state law claims against Peterson, Tedrick and Covenant Medical Center which would entitle her to relief. Accordingly, Counts IX, XII-XIX, and XXII-XXIV must be dismissed.
IT IS THEREFORE ORDERED:
(1) Defendant Ramseyer's Motion to Dismiss (# 5) is GRANTED, in part. Count VII of Plaintiff's Complaint is dismissed with prejudice.
(2) The Motion to Dismiss (# 8) filed by Defendants Peterson, Tedrick and Covenant Medical Center is GRANTED, in part. Counts IX, XII-XIX, and XXII-XXIV are dismissed with prejudice.
(3) The remaining counts of Plaintiff's complaint, Counts I-VI, VIII, X, XI, XX, and XXI are stayed pending the outcome of Plaintiff's appeal to the Fourth District Appellate Court in People v. Ruppel, Case No. 4-98-0411. This court will then proceed as appropriate in light of the disposition of the state court action. See Dwyer, 12 F.Supp.2d at 837. Plaintiff is to notify this court once the Illinois Appellate Court has rendered its decision.
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33 F. Supp. 2d 505 (1998)
SIGMON COAL COMPANY, INC. and Jericol Mining, Inc., Plaintiffs,
v.
Kenneth S. APFEL, Commissioner of Social Security, Defendant.
No. Civ.A. 96-0148-B.
United States District Court, W.D. Virginia, Big Stone Gap Division.
November 18, 1998.
*506 John R. Woodrum, W. Gregory Mott, Washington, DC, H. Ronnie Montgomery, Jonesville, VA, for plaintiff.
Stephen U. Baer, Asst.U.S.Atty., Roanoke, VA, Alonzo H. Long, Asst.U.S.Atty., Roanoke, VA, UMWA Amicus: Jonathan Sokolow/David W. Allen/Larry D. Newsome, UMWA, Washington, DC, John E. Kieffer, Bristol, VA, for defendants.
MEMORANDUM OPINION
GLEN M. WILLIAMS, Senior District Judge.
I. Introduction
Plaintiffs filed this action June 25, 1996, alleging that Defendant Kenneth S. Apfel, Commissioner of Social Security (hereinafter, "Commissioner"),[1] in the course of assigning beneficiaries in the United Mine Workers of America Combined Benefit Fund (hereinafter, "Benefit Fund") to responsible operators under the Coal Industry Retiree Health Benefit Act of 1992 (hereinafter, "Coal Act"),[2] wrongfully assigned beneficiaries to Plaintiff Jericol Mining, Inc. (hereinafter, "Jericol").[3] Discovery was had and Plaintiffs moved for summary judgment. Defendant opposed Plaintiffs' Motion for Summary Judgment and submitted its own Motion for Summary Judgment. The Trustees of the Benefit Fund filed a brief as amicus curiae, also opposing the Plaintiff's Motion for Summary Judgment.
Action on the case was stayed pending the United States Supreme Court's decision in Eastern Enters. v. Apfel, 524 U.S. 498, 118 S. Ct. 2131, 141 L. Ed. 2d 451 (1998). Thereafter, Plaintiffs filed a supplemental complaint alleging that the statute used to assign beneficiaries to responsible operators[4] was unconstitutional as applied to them. An October 22, 1998 telephone conversation between the parties, amicus curiae and the court confirmed that no additional filings would be made as to the matter of statutory interpretation and that the Motions were ripe for decision as to the statutory interpretation issue. The court exercises jurisdiction in this case under 28 U.S.C. § 1331, because the case arises under a federal statute. Venue is proper under 28 U.S.C. § 1391(e). Thus, the court will now decide both parties' Motions for summary judgment.
II. Background of the Coal Act
The Coal Act was intended to stabilize health benefits for United Mine Workers Association (hereinafter, "UMWA") retirees.[5] The Act contains a statutory scheme for determining which "signatory operator" from the coal business[6], must pay annual premiums for each beneficiary in the Benefit Fund. The assignment statute, found at 26 U.S.C. § 9706(a), also provides that a "related person" to a signatory operator may be held accountable for premiums in cases where the signatory operator is no longer in business,[7] but the related person continues in business. The Commissioner of Social Security was directed to administer this statutory scheme.[8]
Application of the statutory scheme in 26 U.S.C. § 9706(a) proceeds through three levels of priority, as found in the statute below:
*507 For purposes of this chapter, the Commissioner of Social Security shall, before October 1, 1993, assign each coal industry retiree who is an eligible beneficiary to a signatory operator which (or any related person with respect to which) remains in business in the following order: (1) First, to the signatory operator which(A) was a signatory to the 1978 coal wage agreement or any subsequent coal wage agreement, and (B) was the most recent signatory operator to employ the coal industry retiree in the coal industry for at least 2 years. (2) Second, if the retiree is not assigned under paragraph (1), to the signatory operator which(A) was a signatory to the 1978 coal wage agreement or any subsequent coal wage agreement, and (B) was the most recent signatory operator to employ the coal industry retiree in the coal industry. (3) Third, if the retiree is not assigned under paragraph (1) or (2), to the signatory operator which employed the coal industry retiree in the coal industry for a longer period of time than any other signatory operator prior to the effective date of the 1978 coal wage agreement.
After this process is completed, a beneficiary may remain unassigned.[9] In such a case, transfer payments from the Abandoned Mine Reclamation Fund (hereinafter, "AML Fund") will be made to the Benefit Fund to pay the premiums of such beneficiaries.[10] If AML Fund transfer payments are insufficient to pay those premiums, assigned operators will pay the difference on a pro rata basis.[11]
III. Facts
Plaintiff Jericol was originally formed in 1973 as Irdell Mining, Inc. (hereinafter, "Irdell"), by James and Charles Sigmon and Fred Langley (James Sigmon Affidavit at 1). Shortly after the formation of Irdell, it and The Dale Company purchased most of the operating assets, coal inventory, supplies, leases and contracts of Shackleford Coal Company, Inc. (hereinafter, "Shackleford One"). The contract for sale references several Exhibits listing the precise asssets, leases, contracts and commitments transferred. These Exhibits have not been made part of the record. Although there was common ownership between Dale and Irdell, no owner of either Dale or Irdell was an owner of Shackleford One. Irdell changed its name, operating as Shackleford Coal Company (hereinafter, "Shackleford Two") until 1977, when it again changed its name to Jericol (James Sigmon Affidavit at 2). While Shackleford One was a signatory to a coal wage agreement while it was in business, Shackleford Two was only signatory to the 1974 wage agreement.
In late 1993, Defendant notified Plaintiff Jericol that Plaintiff had been assigned responsibility for the premiums of 10 UMWA retirees and 10 of their dependents. Ten miners or dependents were assigned on the basis that Jericol was a related person to Shackleford One, a signatory operator. This assignment was based on 26 U.S.C. § 9706(a)(3).[12] Jericol challenged this decision, which was affirmed as the Commissioner found that Jericol was the "successor in interest" of Shackleford One. Shackleford One was the entity those miners had actually worked for and would have been the assigned signatory operator had it continued in business. In 1995, 49 additional retirees and 60 of their dependents were assigned to Jericol. Of these miners, 44 were assigned on the basis of their employment with Shackleford One. Jericol challenged the assignments which were based upon the Commissioner's position that Jericol was a successor in interest to Shackleford One, and thus a related person responsible for premium payments.
The following year, after this action was filed, 38 additional miners, plus dependents, were assigned to Jericol, 34 of them based upon employment with Shackleford One. Again, Jericol appealed the Commissioner's decision as it pertained to miners for whom liability for premiums was based upon *508 the Defendant's classification of Jericol as a related person to Shackleford One. No final determination was issued by the Commissioner as to the 1995 and 1996 challenges by Jericol. In 1997, eight additional miners and dependents were assigned to Jericol, with three miners being assigned on the basis of their prior work for Shackleford One. Jericol planned to appeal those assignments, but contended that it should not be required to exhaust its administrative remedies before seeking relief from this court because of the similarity of the law and facts underlying each assignment of Shackleford One's miners to Jericol. After consideration, this court agrees.[13]
In all, more than 100 retired miners plus their numerous dependents were assigned to Jericol as part of Defendant's assignment process. Of these assignments, more than 80 miners were assigned because Jericol was viewed as a successor in interest to Shackleford One. Dependents of the 80 miners thus assigned were also assigned to Jericol on the same basis. It should be clarified that Jericol does not herein appeal all assignments to it. Rather, this case only involves challenges to assignments made on the basis that it is responsible for premium payments on behalf of Shackleford One's miners.
IV. Legal Discussion
(A) Summary Judgment Standard
A party moving for summary judgment will have its motion granted if there is no genuine dispute as to any material fact, and the moving party is entitled to judgment as a matter of law. In considering a grant of summary judgment, the court may consider the pleadings, depositions, answers to interrogatories, and admissions on file, as well as any affidavits filed with the court. FED. R.CIV.P. 56(c). The court must view the evidence under consideration in the light most favorable to the non-moving party.[14]
(B) Standard of Review of Agency Action
A finding of an agency, such as the one represented by Defendant, may be set aside by this court only if the finding is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984), is the landmark case on review of agency decisions. It established a two-prong test for determining the proper amount of deference to be given.
Under the Chevron test, the court must first decide "whether Congress has directly spoken to the precise question at issue."[15] If the statute is plain on its face, the court must give effect to the expressed intent of Congress, without consideration of the agency's decision.[16] In addition to "the particular statutory language at issue," the court must consider "the language and design of the statute as a whole."[17] However, if Congress has left a gap in the statute to be filled by the agency, the court must then determine whether the agency's decision is "based on a permissible construction of the statute."[18] If it is so based, then considerable deference must be given to the agency's interpretation of the regulations it promulgates to fill that gap.[19]
(C) Legal Analysis
The matter of whether Congress has spoken clearly in enacting the Coal Act has *509 been addressed by two other district courts earlier this year, with both finding the language of the Act to be plain.[20] At least one circuit court has also held that the language of the Act is plain.[21] In particular, one of the district courts has so held with respect to 26 U.S.C. § 9701(c)(2)(A).[22] This section is the statutory law governing the issue at hand, namely whether a successor to a defunct signatory operator can be held accountable as a "related person" to that signatory operator.[23] This court agrees with the rationale and findings of the above-cited courts, and concludes that Congress has plainly and clearly expressed itself in the statutory language at issue. Therefore, for the reasons stated below, the court must give effect to the expressed Congressional intent, as set out in the statutory language, rather than deferring to the Commissioner's decision.
The classification regime of 26 U.S.C. § 9706(a) does not provide, directly or indirectly via the definition of related persons at 26 U.S.C. § 9701(c)(2), for liability to be laid at the door of successors of defunct signatory operators. Defendant and amicus curiae contend otherwise, with the former arguing both that the language is broad enough and contains gaps for its regulations to fill (Defendant's Memo. at 15), and that "the record shows that Jericol meets the statutory criteria for a successor company" (Id. at 13). However, there is no such entity as a "successor company" anywhere in the Coal Act. Amicus curiae states that a "`successor in interest' is a related person" (Amicus Memo. at 11), neglecting the last line and a half of the final sentence of 26 U.S.C. § 9701(c)(2). The language urged by Defendant and amicus curiae simply was not included by Congress when it enacted this statute. The court is also aided by the rule of statutory construction that when "`Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.' This principle obtains here ... [as] at two other points the Coal Act makes explicit reference to successors."[24]
Defendant has imposed liability on the basis of Plaintiff Jericol's supposed status as a related person. "Related persons" are defined in 26 U.S.C. § 9701(c)(2). There are four types of related persons under that statute, the first three set out in individual clauses and the last one encompassing "a successor in interest of any person described in clause (i), (ii), or (iii) of 26 U.S.C. § 9701(c)(2)(A)." The text of 26 U.S.C. § 9701(c)(2)(A) reads:
A person shall be considered to be a related person to a signatory operator if that person is(i) a member of the controlled group of corporations (within the meaning of section 52(a)) which includes such signatory operator; (ii) a trade or business which is under common control (as under section 52(b)) with such signatory operator; or (iii) any other person who is identified as having a partnership interest or joint venture with a signatory operator in a business within the coal industry, but only if such business employed eligible beneficiaries, except that this clause shall not apply to a person whose only interest as a limited partner. A related person shall also include a successor in interest of any person described in clause (i), (ii), or (iii). *510 The court finds that Congress has drafted this section in language which is very plain and clear. If an entity meets the criteria for any of these clauses, liability may attach. Additionally, a successor to persons described in the clauses may be liable.
As in R.G. Johnson, Defendant here does not claim that Jericol meets any of the requirements of clauses (i), (ii), or (iii). Neither does it contend that Shackleford One met any of those requirements (Defendant's Memo. at 15), other than the contention that a signatory operator is described in those clauses.[25] Defendant does contend that the language of the final sentence of 26 U.S.C. § 9701(c)(2) is broad enough to allow use of its successor policy regulations which treat Jericol as a related person. The court disagrees, because the plain, straight-forward statutory language contains no gap left open for filling by the Defendant's regulations and policies. It clearly states that "a related person shall also include a successor in interest of any person described in clause (i), (ii), or (iii)."
A "successor in interest" is undefined by the Coal Act. Despite the comprehensive briefs and arguments of the parties and amicus curiae on this issue, it is not necessary for the court to determine what the term means. Assuming, without deciding, that the Commissioner has the authority to interpret the term and has reasonably done so to classify Jericol as a successor in interest (Defendant's Memo. at 5), Jericol plainly did not succeed to the interest of "any person described in clause (i), (ii), or (iii)" of 26 U.S.C. § 9701(c)(2)(A).
The court finds that a signatory operator is not described by any of those three clauses. The words "signatory operator" are used in the clauses, but so are the words "limited partner." A full reading of the statute makes it clear that limited partners are in fact not to be considered related persons. There is definitely a distinction between "describing" a person and merely mentioning or naming them, and signatory operators are merely named and mentioned in the clauses. In fact, Congress demonstrated this distinction when it described signatory operators by defining them in 26 U.S.C. § 9701(c)(1).
Only through the use of its regulations is Defendant able to justify the assignments challenged by Plaintiffs. Defendant's position thus "depends upon the addition of words to a statutory provision which is complete as it stands,"[26] as several other courts have noted.[27] "Adoption of [the Defendant's view] would require amendment rather than construction of the statute, and it must be rejected here,"[28] where the plain language of the statute clearly reflects Congressional intent. There is simply no room for Defendant's successor policy regulations in this statute, because Congress has left no gaps to be filled by Defendant. Defendant's sole responsibility under this statute is to administer a very plain and simple assignment scheme, not to make regulations which correct perceived inequities.
As the court has concluded above that Congress had a clearly expressed intent in enacting the Coal Act, this court is duty-bound to give effect to that intent. Although Defendant and amicus curiae may feel that the policy underlying the Coal Act is unsound,[29] the law is as Congress has written it *511 and it is not the duty of this court to change the words of Congress.
V. Conclusion
For the foregoing reasons, the court concludes that the statutory language clearly reflects Congressional intent in enacting the Coal Act and thus the application of any gap-filling rules by Defendant is foreclosed. Thus, Plaintiff's Motion for Summary Judgment is GRANTED and Defendant's Motion for Summary Judgment is DENIED.
ORDER
For the reasons stated in the memorandum opinion entered this day, it is hereby ORDERED that Plaintiff's Motion for Summary Judgment is GRANTED and Defendants' Motion for Summary Judgment is DENIED. It is further ORDERED that Defendant withdraw the assignments challenged by Plaintiff Jericol in this case, and notify the Trustees of the United Mine Workers of America Combined Benefit Fund that such assignments have been withdrawn. Furthermore, Defendant shall be enjoined from assigning additional retirees of Shackleford Coal Company, Inc. (referred to as "Shackleford One" in the court's opinion) to Plaintiff Jericol on the basis that Plaintiff is a related person to Shackleford Coal Company, Inc. This case shall be stricken from the docket of this court.
NOTES
[1] Shirley S. Chater, then-Commissioner of Social Security, was named as Defendant when this case was filed. John J. Callahan was substituted as Defendant upon his appointment as Acting Commissioner of Social Security on March 1, 1997, pursuant to 42 U.S.C. § 405(g). Kenneth S. Apfel, current Commissioner of Social Security, was sworn into office on September 29, 1997, and thereafter was substituted as Defendant in this action, also pursuant to 42 U.S.C. § 405(g).
[2] 26 U.S.C. § 9701, et seq.
[3] Sigmon Coal Company, Inc. joins Jericol as a plaintiff in this action apparently because they are related persons under the Coal Act, see 26 U.S.C. § 9701(c)(2), and thus jointly and severally responsible for any amounts due from either of them. 26 U.S.C. § 9704(a).
[4] 26 U.S.C. § 9706(a).
[5] ___ U.S. at ___ - ___, 118 S.Ct. at 2141-42.
[6] 26 U.S.C. § 9701(c)(1).
[7] "Business" is defined broadly in the Coal Act to include "conduct[ing] or deriv[ing] revenue from any business activity, whether or not in the coal industry." 26 U.S.C. § 9701(c)(7).
[8] Originally, the Secretary of Health and Human Services bore responsibility for administering the statute (Plaintiff's Memo. at 3).
[9] See 26 U.S.C. § 9704(d).
[10] 26 U.S.C. § 9705(b).
[11] 26 U.S.C. § 9704(a)(3) and (d).
[12] This information is gleaned from the letters and attachments sent from the Social Security Administration to Jericol as part of the administrative process.
[13] See Sager Coal Co. v. Apfel, No. 96-1107, slip op. at 11-12 n. 5 (W.D.Penn. Jan. 12, 1998) (noting the futility of further administrative challenges where, as here, the Commissioner is making repeated Coal Act assignments based upon similar facts and law).
[14] Cuddy v. Wal-Mart Super Ctr., Inc., 993 F. Supp. 962, 965 (W.D.Va.1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)).
[15] Chevron, 467 U.S. 837, 842, 104 S. Ct. 2778, 81 L. Ed. 2d 694.
[16] Elliott v. Adm'r, Animal and Plant Health Inspection Serv., 990 F.2d 140, 144 (4th Cir.1993).
[17] Soc. Sec. Adm'n v. Fed. Labor Relations Auth., 956 F.2d 1280, 1283-84 (4th Cir.1992) (citing K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291, 108 S. Ct. 1811, 100 L. Ed. 2d 313 (1988)).
[18] Chevron, 467 U.S. at 843, 104 S. Ct. 2778.
[19] 467 U.S. at 843-44, 104 S. Ct. 2778.
[20] See R.G. Johnson, 994 F. Supp. 10, 14 (holding that 26 U.S.C. § 9701(c)(2)(A) has a plain meaning) and Sager Coal Co. v. Apfel, No. 96-1107, slip op. at 19 (W.D.Penn. Jan. 12, 1998) ("Section 9706(a) of the Coal Act is unambiguous").
[21] Eastern Enters. v. Chater, 110 F.3d 150, 155 (1st Cir.1997) ("[T]he first step of the Chevron pavane is fully dispositive. Section 9706(a) of the Coal Act unambiguously delineates a classification regime."), rev'd sub nom. on other grounds, Eastern Enters. v. Apfel, ___ U.S. ___, 118 S. Ct. 2131, 141 L. Ed. 2d 451 (1998).
[22] R.G. Johnson, 994 F. Supp. 10.
[23] This issue is distinct from that addressed by 26 U.S.C. § 9706(b)(2), which provides for liability to be transferred to a successor where liability has already been assigned to a signatory operator, when such succession occurs after the enactment date of the Coal Act. See R.G. Johnson Co., Inc. v. Apfel, 994 F. Supp. 10, 14 (D.D.C.1998).
[24] 110 F.3d 150, 155 (citing Brown v. Gardner, 513 U.S. 115, 120, 115 S. Ct. 552, 130 L. Ed. 2d 462 (1994)), rev'd on other grounds, ___ U.S. ___, 118 S. Ct. 2131, 141 L. Ed. 2d 451.
[25] Defendant's Memo. at 21 (stating that "... the express language of the statute `reaches forward' to impose joint and several liability on `related persons' of responsible operators, specifically including the operators' successors...." [emphasis in original]) and Amicus Memo. at 16.
[26] 481 U.S. 454, 463, 107 S. Ct. 1855, 95 L. Ed. 2d 404.
[27] Eastern Enters., 110 F.3d 150, 155, rev'd on other grounds, ___ U.S. ___, 118 S. Ct. 2131, 141 L. Ed. 2d 451 (noting the "unambiguously delineate[d] ... classification regime" of the Coal Act's assignment provisions); R.G. Johnson, 994 F. Supp. 10, 15-16; Sager Coal, No. 96-1107, slip op. at 21.
[28] 481 U.S. 454, 463, 107 S. Ct. 1855, 95 L. Ed. 2d 404.
[29] Amicus Memo. at 15-16 (alleging a "completely absurd result" is reached under the position advocated by Plaintiffs and accepted by this court, and terming the statutory requirement of a controlled group of corporations in § 9701(c)(2)(A)(i) a "wholly irrelevant factor") and Defendant's Memo. at 28 (claiming that a "literal application of the language of the Coal Act" will produce an absurd result and "could result in unreasonable situations").
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33 F. Supp. 2d 932 (1998)
PRIME MEDIA, INCORPORATED, Plaintiff,
v.
PRIMEDIA, INCORPORATED fka K-III Communications Corporation, and Primedia Intertec fka Intertec Publishing Corporation, Defendants.
No. Civ.A. 98-2349-GTV.
United States District Court, D. Kansas.
November 30, 1998.
*933 J. Nick Badgerow, Karen Kessler Cain, Spencer, Fane, Britt & Browne, Overland Park, KS, for Prime Media Inc, plaintiff.
Kirk T. May, William D. Beil, Rouse, Hendricks, German, May & Shank, Kansas City, MO, Richard S. Mandel, Cowan, Liebowitz, Latman, P.C., New York City, for Primedia Inc., Primedia Intertec, defendants.
MEMORANDUM AND ORDER
VANBEBBER, Chief Judge.
Plaintiff brings this trademark infringement, unfair competition, and trademark dilution action alleging that defendants' use of *934 the name "Primedia" infringes upon plaintiff's federal registration and common law rights. The case is before the court on plaintiff's motion for a preliminary injunction (Doc. 7). The parties presented evidence at a hearing on plaintiff's motion on September 28, 29, and October 6, 1998. For the reasons set forth below, the motion is denied.
I. FINDINGS OF FACT
Pursuant to Fed.R.Civ.P. 52(a), the court makes the following findings of fact and conclusions of law.
1. Plaintiff PRIME MEDIA, Inc., a Kansas Corporation, publishes newsletters, trade magazines, annual reports, and brochures. Plaintiff also offers custom publishing, public relations consulting, advertising campaign development, book jacket designing, and direct mailing services.
2. Plaintiff writes and publishes the magazine It's Time to. Feel Good for Saint Luke's-Shawnee Mission Health System. More than half of plaintiff's annual gross revenue comes from services provided for Saint Luke's-Shawnee Mission Health System.
3. Defendants PRIMEDIA, Inc. and PRIMEDIA Intertec publish magazines, educational programs, reference materials, and rental materials. The PRIMEDIA name appears on the masthead as the publisher. Defendants own their publications outright.
4. Fifty percent of defendants' business is publishing well-known magazines, including Seventeen, New York, Chicago, and Modern Bride.
5. Defendant PRIMEDIA Intertec, a Kansas subsidiary of defendant PRIMEDIA, does a limited amount of custom publishing. Less than one percent of defendant PRIMEDIA Intertec's annual revenue comes from custom publishing.
6. Defendant PRIMEDIA recently acquired a company in Malibu, California that provides custom publishing services for Medicare. Defendant PRIMEDIA Intertec will not be involved with the Medicare custom publishing.
7. Defendants do not provide the following services which are provided by plaintiff: web site design, brochures, public relations, graphics/logo design, or direct mail.
8. Plaintiff began using the name PRIME MEDIA at the inception of the corporation in 1991.
9. Plaintiff's founders, Frederic and Janine Hron, searched library sources, including industry and telephone directories, prior to using the name PRIME MEDIA. The Hrons chose the name PRIME MEDIA because "Prime" denotes quality and "Media" is an umbrella term.
10. Plaintiff has promoted its name through direct mail, sponsored events, and advertisements in trade publications. Plaintiff has spent approximately $40,000 on promotional materials and activities in 1998. Over the course of its existence, plaintiff has spent tens of thousands of dollars promoting the company and its name.
11. On May 28, 1997, plaintiff filed a service mark application with the Federal Patent and Trademark Office for the PRIME MEDIA name and logo design.
12. On April 21, 1998, plaintiff's application was published in the Official Gazette of the Federal Patent and Trademark Office for opposition. No opposition was filed against plaintiff's application, and plaintiff received its federal registration effective July 14, 1998.
13. While plaintiff's federal trademark application was pending, defendant PRIMEDIA changed its name from K-III Communications to PRIMEDIA on November 18, 1997.
14. Prior to changing its name, defendant PRIMEDIA hired international communications firm Siegel & Gale, headquartered in New York, to provide name-changing and corporate-identity advice.
15. Defendant PRIMEDIA's legal department conducted searches regarding the availability of various proposed names.
16. Defendant PRIMEDIA's outside counsel performed a full trademark search, including common law usages, for the proposed name PRIMEDIA. The trademark *935 search revealed several companies using PRIMEDIA or a similar name.
17. No trademark search on behalf of defendant PRIMEDIA was performed after April 10, 1997. Because plaintiff filed its trademark application on May 28, 1997, plaintiff's use of the PRIME MEDIA name was reported only in the common law section of the search.
18. When defendant PRIMEDIA determined that PRIMEDIA was the preferred name, it engaged the services of a trademark investigator to provide in-depth information regarding companies using Primedia or a similar name.
19. Upon receiving the trademark investigator's findings, defendant PRIMEDIA purchased the rights and usage of the Primedia name from certain companies. Defendant PRIMEDIA paid $25,000 to a magazine publishing company named Primedia Group Inc. in exchange for the discontinued use of the Primedia name. Defendant PRIMEDIA purchased the Primedia corporate name from Delaware corporation Primedia Inc. for $15,000. Defendant PRIMEDIA also purchased the Internet domain name primediainc.com from Indiana corporation Primedia Inc. for $10,000.
20. On July 2, 1997, defendant PRIMEDIA filed a trademark/service mark application with the Federal Patent and Trademark Office. The Federal Patent and Trademark Office refused registration because defendant PRIMEDIA's mark, in connection with its goods and services, resembled a Florida company's registration. The Federal Patent and Trademark Office determined that defendant PRIMEDIA's mark was likely to cause confusion, mistake, or to deceive.
21. On November 14, 1997, plaintiff wrote defendant PRIMEDIA a letter informing it that plaintiff had a pending service mark application for the PRIME MEDIA name and logo design. Defendant PRIMEDIA responded that it intended to continue using the PRIMEDIA name despite plaintiff's objections.
22. Defendant PRIMEDIA changed its name from K-III Communications on November 18, 1997. It substantially promoted the new name, spending $4,283,899 on various promotions, advertisements, and other direct expenses associated with changing its name.
23. Defendants' gross revenue for 1997 was $1.5 Billion, with $250 Million net before taxes.
24. After defendant PRIMEDIA changed its name, it began changing its subsidiaries' names. In June 1998, it changed Kansas subsidiary Intertec Publishing Corporation to PRIMEDIA Intertec.
25. Plaintiff filed this action on August 7, 1998, upon receiving its federal registration effective July 14, 1998.
26. Plaintiff's office manager has documented approximately eleven phone calls from persons trying to reach defendant PRIMEDIA Intertec. Plaintiff has not received any mail intended for defendants.
27. There are other companies using plaintiffs same or similar name. Prime Media, Inc. in Hartford, Connecticut is an advertising agency offering advertising, marketing, and public relations services. PriMedia, Inc. in Rhode Island is an advertising agency providing media buying and direct marketing services. Prime Spot Media Inc. in New York and Canada is engaged in the development and operation of a closed circuit television network for shopping malls in the United States and Canada. Primedia in Atlanta provides promotional and media services. PriMedia, Inc. in Williston Park, New York offers the following services: advertising, brochures and sales kits, corporate images, direct mail, marketing and public relations strategy, newsletters, and web sites. Prime 1 Media Group, Inc. in New York specializes in telecommunications between Japan and the United States. The company provides technical expertise and cultural understanding for television productions. PrimeMedia, Inc. in Aurora, Colorado designs and develops interactive multimedia and training materials. PriMedia in Tarzana, California is a video-publishing and marketing company. PriMedia in Victorville, California offers web site development, multimedia publishing, electronic *936 marketing, and Internet advertising. Primedia Industries, Inc. in Oceanside, New York supplies commercial business forms, graphics, and custom imprinted advertising items. Primedia Products, Inc. in Wheeling, West Virginia distributes computer printers and other computer compatibles. Prime Media Inc. in Smithfield, Virginia sells air time for cable commercials.
II. CONCLUSIONS OF LAW
The district court has subject matter jurisdiction over this dispute pursuant to 28 U.S.C. §§ 1331, 1338(a), and 15 U.S.C. § 1121(a). The court has supplemental jurisdiction over plaintiff's state law claims pursuant to 28 U.S.C. § 1338(b). Venue is proper in this district pursuant to 28 U.S.C. § 1391(b) and (c) because a substantial part of the events giving rise to plaintiff's claim occurred in this district and defendant PRIMEDIA Intertec can be found in this district.
The grant or denial of a preliminary injunction is within the sound discretion of the district court and will be set aside only if the ruling is based on an error of law or constitutes an abuse of discretion. See Kenai Oil & Gas v. Department of Interior, 671 F.2d 383, 385 (10th Cir.1982). A preliminary injunction is the exception rather than the rule. See GTE Corp. v. Williams, 731 F.2d 676, 678 (10th Cir.1984). "Because a preliminary injunction is an extraordinary remedy, `the right to relief must be clear and unequivocal.'" Chemical Weapons Working Group, Inc. v. United States Dept. of the Army, 111 F.3d 1485, 1489 (10th Cir.1997) (quoting SCFC ILC, Inc. v. Visa USA, Inc., 936 F.2d 1096, 1098 (10th Cir.1991)). For the court to grant a preliminary injunction, plaintiff must establish the following:
(1) it will suffer irreparable injury unless an injunction is issued; (2) its threatened injury outweighs any harm the proposed injunction may cause to the opposing party; (3) it will likely prevail on the merits of the litigation; and (4) an injunction, if issued, would not be adverse to the public interest.
Id. at 1489; Packerware Corp. v. Corning Consumer Prod. Co., 895 F. Supp. 1438, 1446 (D.Kan.1995).[1]
A. Likelihood of Success on the Merits
Plaintiff's trademark infringement claims involve "reverse confusion," as opposed to conventional trademark infringement claims. Conventional trademark infringement claims involve consumers mistakenly believing that the second, or junior, user's goods or services are connected with the first, or senior, user. See Packerware, 895 F.Supp. at 1447. On the other hand, "[r]everse confusion occurs when the junior user's advertising and promotion so swamps the senior user's reputation in the market that customers are likely to be confused into thinking that the senior user's goods [or services] are those of the junior user." Id. (quoting 3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition 23.01(5), at 21 (3d ed.1992)).
Plaintiff bases its trademark claims on sections 32(1) (trademark infringement), 43(a) (false designations and descriptions), and 43(c) (dilution of famous marks) of the Federal Trademark Act, 15 U.S.C. §§ 1114(1), 1125(a), 1125(c) (the Lanham Act). Plaintiff also asserts many of the same claims under Kansas common law.
Under section 32(1), any person, without consent of the registrant, using "in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with ... any goods or services ... with which such use is likely to cause confusion, or to cause mistake, or to deceive ... shall be liable in a civil action...."
Section 43(a) provides in pertinent part:
Any person who, on or in connection with any goods or services ... uses in commerce *937 any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact which (A) is likely to cause confusion, to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person ... shall be liable in a civil action....
Section 43(c) provides that "[t]he owner of a famous mark shall be entitled ... to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark...."
To succeed on its trademark infringement claims, plaintiff must first establish the validity and protectability of its mark. See Packerware, 895 F.Supp. at 1447. Plaintiff's certificate of registration is "prima facie evidence of the validity of the registered mark ... and of the registrant's exclusive right to use the registered mark in commerce on or in connection with the goods and services specified in the certificate ...." 15 U.S.C. § 1057(c). Plaintiff received its federal registration for its name and logo design effective July 14, 1998. Accordingly, the court assumes for purposes of this motion that plaintiff's mark is valid and protectable under the Lanham Act.
For plaintiff to prevail on its trademark claims under sections 32(1), 43(a), or 43(c), it must demonstrate that defendants' use of the PRIMEDIA name creates a likelihood of confusion on the part of an appreciable number of ordinary purchasers.[2]See Packerware, 895 F.Supp. at 1448. The likelihood-of-confusion test is also applicable to plaintiff's common law claims of unfair competition and infringement. See id. Categorizing plaintiff's claims as reverse confusion does not change its burden to prove a likelihood of confusion. See id.
"Confusion occurs when consumers make an incorrect mental association between the involved commercial products or their producers." Heartsprings, Inc. v. Heartspring, Inc., 143 F.3d 550, 554 (10th Cir.1998) (quoting Jordache Enters., Inc. v. Hogg Wyld, Ltd., 828 F.2d 1482, 1484 (10th Cir.1987) (citations omitted)). Likelihood of confusion is "considered not only in the context of confusion of source, but also in the context of confusion that results from a mistaken belief in common sponsorship or affiliation." Amoco Oil Co. v. Rainbow Snow, 748 F.2d 556, 558 (10th Cir.1984).
The Tenth Circuit has identified several factors that are relevant in determining whether a likelihood of confusion exists between the two marks: (1) the degree of similarity between the marks; (2) the strength of plaintiff's mark; (3) the intent of defendant in adopting the mark; (4) similarities and differences in the parties' services and marketing; (5) the degree of care likely to be exercised by purchasers; and (6) evidence of actual confusion. See, e.g., Heartsprings, 143 F.3d at 554 (citing Universal Money Ctrs., Inc. v. American Tel. & Tel., Co., 22 F.3d 1527, 1530 (10th Cir.1994)). "No one factor is dispositive, and the final determination of likelihood of confusion must be based on consideration of all relevant factors." Id. (citing Beer Nuts, Inc. v. Clover Club Foods Co., 805 F.2d 920, 925 (10th Cir.1986)). The key inquiry is whether the consumer is "likely to be deceived or confused by the similarity of the marks." Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 780, 112 S. Ct. 2753, 120 L. Ed. 2d 615 (1992); Heartsprings, 143 F.3d at 554.
1. Degree of Similarity of the Marks
The court evaluates the similarity of the marks as they are encountered in the marketplace and examines their similarity in sight, sound, and meaning. See Heartsprings, *938 143 F.3d at 554. "In evaluating similarity, we must not engage in a `side-by-side' comparison. Rather, the court must determine whether the alleged infringing mark will be confusing to the public when singly presented." Id. (quoting Universal Money Ctrs., 22 F.3d at 1531 (citations omitted)). While the terms PRIME MEDIA and PRIMEDIA are nearly identical in sight, sound, and meaning, that does not end the court's inquiry. See Packerware, 895 F.Supp. at 1449.
Defendants argue that substantial differences in the use and presentation of the parties' marks outweighs the similarity of the names. The court, however, finds defendants' argument unpersuasive. Defendants focus on the fact that they market their publications under prominent magazine titles with the PRIMEDIA name appearing only in the masthead to imply that they use PRIMEDIA only for identification and not for marketing. The court, however, is skeptical of defendants' contention that simply because they publish under prominent magazine titles, that they do not market the PRIMEDIA name. One of the reasons defendant PRIMEDIA changed its name was to better describe the company and to link the company's name with the services it provides. William Reilly, defendant PRIMEDIA's chairman and chief executive officer, stated the following in defendant PRIMEDIA's third quarter report record dated October 30, 1997:
There is, however, little equity in the name, K-III. It sounds like a financial holding company. So, on November 18, we are changing our name to PRIMEDIA Inc. PRIMEDIA states our strategy in just one word, a word that is also our name. It reflects the "prime" positioning our company has in more than 250 specialty media niches.
The court is unpersuaded that defendants' use and presentation of the PRIMEDIA name dispels the similarity of the parties' marks.
Defendants also contend that plaintiff's "P" logo design, used in conjunction with the PRIME MEDIA name, sufficiently distinguishes the marks. While the court agrees that plaintiff's logo design helps distinguish the parties, the logo design by itself is insufficient to negate the similarity of the marks. The court concludes that the degree of similarity of the parties' marks weighs in plaintiff's favor.
The court notes, however, that the similarity of the parties' marks is not strengthened by the Federal Patent and Trademark Office rejection of defendant PRIMEDIA's trademark/service mark application filed in July 1997. While not legally binding, the court may consider the Federal Patent and Trademark Office rejection as persuasive authority. See Packerware, 895 F.Supp. at 1449. In the instant case, however, the court concludes that the Federal Patent and Trademark Office rejection is of little probative value. See Packerware, 895 F.Supp. at 1449 (citing Accu Personnel, Inc. v. AccuStaff, Inc., 823 F. Supp. 1161, 1164-65 (D.Del.1993)). Defendant PRIMEDIA has not had the opportunity to respond to the Federal Patent and Trademark office decision, and the trademark office only determines issues of registrability, not issues of use of a trademark. See id.
2. Strength of Plaintiff's Mark
The strength of plaintiff's mark plays a significant role in the court's analysis of this case. "The stronger the mark, the more likely it is that encroachment on it will produce confusion." First Sav. Bank v. First Bank Sys., Inc., 101 F.3d 645, 653 (10th Cir.1996) (quoting Champions Golf Club, Inc. v. The Champions Golf Club, 78 F.3d 1111, 1117 (6th Cir.1996)). "A strong trademark is one that is rarely used by parties other than the owner of the trademark, while a weak trademark is one that is often used by other parties." Id. at 653 (quoting Universal Money Ctrs., 22 F.3d at 1533).
Defendants presented evidence of a dozen companies using Prime Media, Primedia, or similar names. Many of these companies offer services similar to plaintiff. The Tenth Circuit has "recognized the well-established principle that extensive third-party use of the disputed term indicates that the term itself deserves only weak protection." Id. at 654. *939 The significant third-party use of Prime Media, Primedia or a similar name, indicates the relative weakness of plaintiff's mark. This weakness suggests that defendants' use of PRIMEDIA does not create a likelihood of consumer confusion.
3. Intent of Defendants in Adopting the Term "PRIMEDIA"
With conventional trademark infringement claims, this factor examines whether the defendant "intended to deceive the public and derive benefit from a mark already established in the marketplace." Packerware, 895 F.Supp. at 1450 (citing Jordache, 828 F.2d at 1485). However, with a reverse confusion claim, "the defendant by definition is not palming off or otherwise attempting to create confusion as to the source of his product. Thus the `intent' factor of the likelihood of confusion analysis is essentially irrelevant in a reverse confusion case." Id. at 1450 (quoting Sands, Taylor & Wood v. Quaker Oats, 978 F.2d 947, 961 (7th Cir.1992)).
To the extent defendants' intent may be relevant, plaintiff has failed to proffer evidence suggesting any bad faith on the part of defendants in adopting the PRIMEDIA name. Plaintiff presented evidence of defendant PRIMEDIA's knowledge of plaintiff's then common law usage of the PRIME MEDIA name. Mere knowledge, however, is insufficient to infer bad faith. See id.
4. Similarities of the Parties' Services and Marketing
The court examines the relative similarity of the parties' services because "[t]he greater the similarity between the products and services, the greater the likelihood of confusion." Heartsprings, 143 F.3d at 556 (quoting Universal Money Ctrs., 22 F.3d at 1532). The parties' vigorously contest the degree of similarity of the parties' services. Plaintiff describes the parties as offering virtually identical services in the publishing field. Defendants, however, go to great lengths to categorize plaintiff as an advertising agency, which is distinct from defendants' publishing business.
The court finds that the similarity of the parties' services falls somewhere in between the parties' contentions. However, while both parties offer some of the same services, their marketing practices appear distinct. Defendants primarily publish well-known magazines, and educational and reference materials. Alternatively, plaintiff's market base primarily consists of businesses seeking self-promoting publications and marketing services. While there is some overlap in the parties' services, the differences in their marketing practices counsels against a likelihood of confusion.
5. Degree of Care Exercised by Consumers
Plaintiff admits that the degree of care likely to be exercised by consumers in purchasing marketing and publishing services is difficult to estimate. Plaintiff contends that because there have been instances of actual confusion, the court can infer that this factor indicates a likelihood of confusion. As fully discussed in the next section, however, plaintiff's proposed instances of actual confusion do not reflect consumer confusion with purchasing decisions. The court therefore determines that this factor does not weigh in favor of a likelihood of confusion.
6. Actual Confusion
"[E]vidence of actual confusion within the marketplace is strong evidence of a likelihood of confusion." Heartsprings, 143 F.3d at 557 (citing Universal Money Ctrs., 22 F.3d at 1533). The lack of evidence of actual confusion, however, does not necessarily indicate the absence of a likelihood of confusion. See Packerware, 895 F.Supp. at 1451. Plaintiff focuses on approximately a dozen phone calls it received from persons trying to reach defendant PRIMEDIA Intertec as instances of actual confusion establishing a likelihood of confusion. While these phone calls indicate some sort of confusion, the court must determine if this is the type of confusion the Lanham Act guards against. To be relevant, the calls "should demonstrate actual confusion among consumers within the marketplace." Heartsprings, 143 F.3d at 557.
*940 The evidence indicates that many of the phone calls were misdirected to plaintiff by Southwestern Bell Directory Assistance. The callers included persons seeking magazine subscriptions to defendants' publications, persons inquiring as to a conference sponsored by defendants, salespersons, freelance writers, and other persons seeking individual employees of defendants. "At any rate, no evidence links the confusion evinced by the calls to any potential or actual effect on consumers' purchasing decisions." Lang v. Retirement Living Publ'g, Co., 949 F.2d 576, 582 (2d Cir.1991).
Additionally, even assuming that the phone calls indicate confusion associated with purchasing decisions, the court doubts the relevancy of the calls to prove plaintiff's claim for reverse confusion. The callers "erroneously believed that the senior user [plaintiff] was the source of the junior user's [defendants'] magazine." Id. at 583. Evidence of reverse confusion, however, would involve purchasers or prospective purchasers of plaintiff's services who believed that they were affiliated with defendants. See id. Plaintiff has failed to show any such evidence, and nothing in the record indicates that the callers were prospective purchasers of plaintiff's services. See id. "In sum, there is no reason to believe that confusion represented by the phone calls could inflict commercial injury in the form of either a diversion of sales, damage to goodwill, or loss of control over reputation." Id.
7. All Relevant Factors Considered as a Whole
The Tenth Circuit has emphasized that no one factor is dispositive and that "all relevant factors must be weighed to determine the likelihood of confusion." Heartsprings, 143 F.3d at 558 (citing Beer Nuts, 805 F.2d at 925). The court has recognized the striking similarity of the two marks in sight, sound, and meaning. The court, however, finds this one factor insufficient to indicate a likelihood of confusion in light of the other relevant factors. The relative weakness of plaintiff's mark due to significant third-party use of Prime Media or similar names weighs against a finding of a likelihood of confusion. While plaintiff's mark deserves some protection because of its registered status, the fact that these third parties many offering services similar to plaintiff coexist, as well as the parties' divergent marketing practices, decreases the likelihood of confusion.
B. Irreparable Injury
Irreparable injury will be presumed upon a showing of trademark infringement because a trademark represents the intangible assets of reputation and goodwill. See Packerware, 895 F.Supp. at 1452 (citing Amoco Oil, 809 F.2d at 663-64). Because plaintiff has failed to establish a substantial likelihood of success on the merits, the court will not presume irreparable injury. See id.
Absent this presumption, the court finds that plaintiff has failed to provide sufficient evidence of specific irreparable injury. Plaintiff presented no evidence of irreparable injury at the preliminary injunction hearing. Plaintiff's speculative harm included increased employee time devoted to explaining the company's identity and difficulties in recruiting new employees. While the court recognizes that these distractions inconvenience any business, they do not amount to the irreparable injury necessary to justify the extraordinary relief of a preliminary injunction.
C. Balancing of Hardships
The court next examines whether the injury to plaintiff outweighs any harm the preliminary injunction may cause defendants. See Chemical Weapons Working Group, 111 F.3d at 1489. Plaintiff, however, has failed to provide any evidence of its estimated injury. Plaintiff has been unable to demonstrate any loss of business resulting from defendants' use of the PRIMEDIA name, or to provide the court with any other evidence of estimated actual damages. See Packerware, 895 F.Supp. at 1453.
Defendants, on the other hand, will suffer substantial hardship if the court grants the preliminary injunction. Defendants have incurred more than four million dollars in costs associated with developing and promoting the PRIMEDIA name. Enjoining defendants *941 from using the PRIMEDIA name would result in over four million dollars in sunk costs for defendants. See id. Additionally, defendant PRIMEDIA Vice President of Corporate Communications David Adler testified at the preliminary injunction hearing that if defendants were prohibited from using the PRIMEDIA name, its credibility and reputation, especially among the Wall Street financial community, would be adversely affected. The court finds that in this case, "an injunction will unfairly disadvantage a second user who has expended considerable sums to promote his [mark] before the first user raised the issue of infringement." Packerware, 895 F.Supp. at 1453 (quoting McDonald's Corp. v. McBagel's, Inc., 649 F. Supp. 1268, 1279 (S.D.N.Y. 1986)).
The court feels that the ends of justice are best served by denying the preliminary injunction pending final resolution of this case. The court is troubled by the severe burden and unnecessary expense defendants would bear if the court were to grant the preliminary injunction, only to have final resolution of the case be in defendants' favor. The court concludes that plaintiff's failure to provide evidence of estimated injury, in light of the substantial hardship a preliminary injunction would impose on defendants, prohibits the court from finding that the balance of hardships weighs in plaintiff's favor.
D. Public Interest
One of the primary purposes of the Lanham Act is to guard against consumer deception regarding the source of goods and services. See, e.g., id. (citing Ameritech, Inc. v. American Info. Techs. Corp., 811 F.2d 960, 964 (6th Cir.1987)). In trademark infringement case, public interest "is most often synonym for the right of the public not to be deceived or confused." Opticians Ass'n v. Independent Opticians, 920 F.2d 187, 197 (3d Cir.1990). Because plaintiff has failed to demonstrate a significant likelihood of confusion among an appreciable number of consumers, "the court does not believe that the public interest demands preliminary injunctive relief." Packerware, 895 F.Supp. at 1453. The court concludes that the public interest is best served by permitting defendants to continue using the PRIMEDIA name pending final resolution of this case.
In conclusion, the court finds that plaintiff has failed to present evidence sufficient to warrant a preliminary injunction. Plaintiff has failed to demonstrate that its right to relief is clear and unequivocal. See Chemical Weapons Working Group, 111 F.3d at 1489.
IT IS THEREFORE, ORDERED that plaintiff PRIME MEDIA, Inc.'s motion for a preliminary injunction (Doc. 7) is denied.
Copies of this order shall be mailed to counsel of record for the parties.
IT IS SO ORDERED.
NOTES
[1] The Tenth Circuit has adopted a modified interpretation of the likelihood-of-success requirement when the movant establishes the other three requirements. See City of Chanute v. Kansas Gas & Electric Co., 754 F.2d 310 (10th Cir. 1985). Because plaintiff has failed to satisfy the other three requirements necessary for a preliminary injunction, the court does not apply the modified interpretation to plaintiff's claims.
[2] For plaintiff to succeed on its trademark dilution claim, in addition to proving a likelihood of confusion, it must establish that its mark is a famous mark. 15 U.S.C. § 1125(c) provides factors for the court to consider in evaluating whether a mark is famous. Because plaintiff has failed to establish a likelihood of confusion, the court finds it unnecessary to determine whether plaintiff's mark is famous.
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33 F. Supp. 2d 17 (1998)
Rosemarie MARRA, et al., Plaintiffs,
v.
Vaso PAPANDREOU, et al., Defendants.
No. CIV. A. 96-1535(RMU).
United States District Court, District of Columbia.
January 5, 1998.
Mark H. Alcott, Robert W. Trenchart, Paul, Weiss, Rifkind, Wharton & Garrison, New York, NY.
Richard L. Brusca, Katharine Sexton, Rachel Mariner, Skadden, Arps, Slate, Meagher & Flom LLP.
MEMORANDUM OPINION
URBINA, District Judge.
Modifying the Magistrate Judge's Order and Granting a Stay of Discovery
I. INTRODUCTION
This matter comes before the court upon the defendants' motion for reconsideration of the magistrate judge's July 29, 1998 Order, which permitted the plaintiffs discovery for the purposes of establishing personal jurisdiction and standing. The court concludes that before permitting discovery on the issues of personal jurisdiction and standing, it will first consider the defendants' defenses that do not require discovery and could potentially dispose of the case. Because both the forum non conveniens and forum selection issues meet these criteria, the court modifies the magistrate judge's Order by granting the defendants leave to file a motion to dismiss on forum non conveniens and forum selection grounds. The court additionally grants the defendants' request to stay the discovery permitted by the magistrate judge on the personal jurisdiction and standing issues.
*18 II. BACKGROUND
The plaintiffs, a Liberian corporation and its American president and sole shareholder, brought suit in this District against the Minister of Tourism and other Greek governmental entities for breach of contract and unlawful expropriation of property rights relating to a $44 million license to operate a casino, hotel and marina in Athens, Greece. The Greek government had granted the license in January 1995 to the Athens Casino Consortium, a partnership consisting of seven companies; Plaintiff Marrecon Enterprises S.A. (the Liberian corporation) holds a nine percent interest in the consortium. The plaintiffs allege the property rights in the Athens casino project have an estimated value of over $1.6 billion.
The defendants argue that the Greek government properly revoked the casino license because it determined that the grant of license constituted an illegal administrative act under Greek law, was enacted without proper Greek legislative authority, did not comply with Greek municipal planning legislation, and was issued without the requisite opinion of Greek legislative committees. (Defs.' Mem. in Supp. of Mot. to Dismiss at 23.)
The defendants moved to dismiss the complaint on the grounds that the action is barred by (1) the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. §§ 1330, 1602-1611; (2) the Act of State Doctrine; (3) the doctrine of forum non conveniens, 28 U.S.C. § 1404; (4) standing; and (5) lack of personal jurisdiction. Subsequently, the plaintiffs moved for permission to conduct preliminary discovery relating to the grounds asserted in the motion to dismiss. The requested discovery included depositions of Minister Papandreou and of the Minister of the Economy. The court, after deciding that it must determine FSIA jurisdiction before considering the other defenses, granted the motion in part, allowing the plaintiffs discovery on the FSIA issue relating to the defendants' efforts to solicit investment funds in the United States for the Greek casino industry. The court denied the remainder of the plaintiffs' discovery motion and denied without prejudice the defendants' motion to dismiss.
The defendants sought and received mandamus relief in the United States Court of Appeals for the District of Columbia. See In re Papandreou, 139 F.3d 247 (D.C.Cir.1998). In its mandate, the District of Columbia Circuit instructed this court to explore the ease with which other (non-FSIA) potentially dispositive jurisdictional defenses could be evaluated before ordering discovery on the FSIA issue. See 139 F.3d. at 254. "[W]here a colorable claim of immunity is made, a trial court should at least if the defendant so argues normally consider other potentially dispositive jurisdictional defenses before allowing FSIA discovery, with an eye towards minimizing the total costs imposed on the defendant." Id. The D.C. Circuit also instructed the court to consider less intrusive discovery than depositions of the Greek Ministers. See 139 F.3d. at 253-54.
On remand, the defendants advised the court of their intention to file a renewed motion to dismiss based on three non-FSIA defenses (standing, forum non conveniens and personal jurisdiction), while reserving the right to move to dismiss based on the FSIA at a later date. A discovery dispute subsequently arose when the plaintiffs contended that each of these defenses involved factual issues requiring discovery prior to briefing. The court referred the matter to the magistrate judge for discovery.
After a hearing, the magistrate judge permitted the plaintiffs discovery to explore issues of personal jurisdiction and standing. The magistrate judge limited the discovery to a Rule 30(b)(6) deposition of a representative of the Greek National Tourist Organization, a Rule 30(b)(6) deposition of a representative of the Ministry of Tourism, and the deposition of Nikolaos Dandolos, the Director of the Greek Casino Directorate. The magistrate judge limited these depositions to six hours per deponent. Additionally, the magistrate judge permitted the plaintiffs to serve the defendants with no more than ten interrogatories. The magistrate judge further ordered that the defendants respond to any interrogatories propounded pursuant to the Order within twenty days. The magistrate judge made no findings on the forum non conveniens issue.
*19 At about the same time as the plaintiffs propounded interrogatories and requested the above-described depositions, the defendants moved for reconsideration of the magistrate judge's Order and for a stay of discovery pending the resolution of the motion. The defendants assert various grounds for disallowing the plaintiffs' requested discovery. The defendants urge as well that before allowing discovery relating to personal jurisdiction and standing, the court should first consider dismissal on forum non conveniens grounds.[1] The plaintiffs argue that the same discovery would be directly relevant to the forum non conveniens analysis as well.[2] (Pls.' Opp'n to Defs.' Mot. for Recons. at 12.)
III. ANALYSIS
A. Forum Non Conveniens
Local Rule 503(c) allows the court to set aside a magistrate judge's determination upon a finding that such determination is clearly erroneous or contrary to law. As discussed above, the D.C. Circuit instructed this court, in effect, to evaluate all potentially dispositive bars to litigation with the goal of initially considering those that place the least hardship, in terms of discovery and litigation costs, on the foreign sovereign. In the July 29, 1998 Order, the magistrate judge permitted the plaintiffs to take limited discovery for the purposes of establishing personal jurisdiction and standing. The magistrate judge did not, however, evaluate the impact of first considering the defendants' forum non conveniens defense.
Under the doctrine of forum non conveniens, dismissal will ordinarily be appropriate when trial in the plaintiff's chosen forum imposes a heavy burden on the defendant or the court and when the plaintiff is unable to offer any specific reasons of convenience supporting his choice. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 249, 102 S. Ct. 252, 70 L. Ed. 2d 419 (1981). The central purpose of any forum non conveniens inquiry is to ensure that the trial is reasonably convenient in light of the governing circumstances. 454 U.S. at 256, 102 S. Ct. 252.
To guide trial courts in making such a determination, the Court in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S. Ct. 839, 91 L. Ed. 1055 (1947), provided a list of private interest factors affecting the convenience of the litigants and a list of public interest factors affecting the convenience of the forum. Piper Aircraft, 454 U.S. at 241, 102 S. Ct. 252. The factors include consideration of the relative ease of access to sources of proof; availability of compulsory process; the cost of obtaining attendance of witnesses; view of the premises (if appropriate); and "all other practical problems that make trial of a case easy, expeditious and inexpensive." See Gilbert, 330 U.S. at 508, 67 S. Ct. 839.
In the court's opinion, these factors do not reveal at this time a need for the plaintiffs' requested discovery. The D.C. Circuit instructed this court to first consider the sovereign's defenses that do not require discovery. The forum non conveniens issue does not require preliminary discovery. Accordingly, the court concludes that before allowing discovery it will grant the defendants leave to file a motion to dismiss on forum non conveniens grounds. After entertaining that motion, the court may then, if appropriate, consider permitting discovery on the personal jurisdiction, standing, and FSIA defenses.
B. Forum Selection Clause
The defendants also raise the issue of the forum selection clause contained in the Greek Ministerial Decisions and Approvals No. 37 ("Resolution 37"), which awards the casino license to the consortium. Specifically, Article 7 of Resolution 37 provides that "any *20 disputes arisen between the State or the National Tourism Organization and the Consortium relating to the application or interpretation of this present shall be settled by the Greek Courts in accordance with the Greek legislation ...." (Decl. of Brusca Ex. G at p. 23.)
Because this provision also has potentially dispositive implications, the court will permit the defendants leave to file a motion to dismiss on forum selection grounds.
IV. CONCLUSION
The forum non conveniens and forum selection issues do not require discovery. In keeping with the Circuit's expressed preference that this court explore dispositive jurisdictional issues before ordering discovery, the court modifies the magistrate judge's Order by granting the defendants leave to file a motion to dismiss on forum non conveniens and forum selection grounds. The court additionally grants the defendants' request to stay the discovery permitted by the magistrate judge on the personal jurisdiction and standing issues. The court denies as moot the plaintiffs' motion for sanctions.
An appropriate Order directing the parties in a fashion consistent with this Memorandum Opinion is separately and contemporaneously executed and issued this 4 day of January, 1999.
NOTES
[1] The defendants also assert that before permitting discovery, the court should consider dismissal on the basis of a forum selection clause, which states that the casino license holder must submit to the jurisdiction of the Greek courts in Athens and waives any rights to contest forum selection and choice of law provisions. While the defendants did not raise this issue in the July 6, 1998 letter to the court, they did identify this as a potential issue in the motion to dismiss they filed at the outset of the litigation. (See Defs.' Mem. in Supp. of Mot. to Dismiss at 7.)
[2] The plaintiffs also filed a motion for contempt and sanctions, based on the defendants' refusal to comply with the requested discovery.
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33 F. Supp. 2d 581 (1998)
Sharon Yvonne HOLLAND, Plaintiff,
v.
EARL G. GRAVES PUBLISHING CO., INC., Defendant.
No. CIV. 97-40083.
United States District Court, E.D. Michigan, Southern Division.
October 21, 1998.
*582 Randall J. Gillary, Randall J. Gillary, P.C., Troy, MI, for Sharon Yvonne Holland, plaintiff.
Randolph D. Phifer, Eugene M. Holmes, Patterson, Phifer & Phillips, PC, Detroit, MI, for Earl G. Graves Publishing Company, Incorporated, defendant.
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR RECONSIDERATION OF JUDGMENT
GADOLA, District Judge.
On August 19, 1998, plaintiff, Sharon Yvonne Holland, filed a motion for reconsideration of this Court's August 5, 1998 Judgment, awarding plaintiff $54,500, including post-judgment interest to be calculated in accordance with 28 U.S.C. § 1961. The Judgment was issued pursuant to this Court's August 5, 1998 memorandum opinion and order granting plaintiff's renewed motion for summary judgment. Plaintiff directs the Court's attention to Michigan statutory provisions governing the calculation of pre-judgment interest. Specifically, plaintiff requests pre-judgment interest at the rate of 5% from August 24, 1995, the date her damages became liquidated, until February 19, 1997, the date she filed her complaint. Plaintiff also requests pre-judgment interest at the rate of 12% from the date the complaint was filed through the date of judgment. On September 16, 1998, defendant, Earl G. Graves Publishing Co., Inc., filed a response to plaintiff's motion for reconsideration. For the reasons set forth below, this Court will grant plaintiff's motion for reconsideration of judgment.
Legal Standards
In a diversity case, such as the one presently before the Court, federal law governs the rate of postjudgment interest. See Bailey v. Chattem, Inc., 838 F.2d 149 (6th Cir.1988). However, "questions of prejudgment interest in diversity actions are to be determined under state law." Diggs v. Pepsi-Cola Metropolitan Bottling Co., Inc., 861 F.2d 914, 924 (6th Cir.1988). Therefore, this Court must apply Michigan state substantive law in deciding whether or not to award plaintiff pre-judgment interest.
Michigan Compiled Laws Section 600.6013 provides that "[i]nterest shall be allowed on a money judgment recovered in a civil action," and governs the rate of interest to be applied after the filing of the complaint. *583 M.C.L. § 600.6013(1). The statute further provides that
[f]or complaints filed on or after January 1, 1987, if a judgment is rendered on a written instrument, interest shall be calculated from the date of filing the complaint to the date of satisfaction of the judgment at the rate of 12% per year compounded annually, unless the instrument has a higher rate of interest.
M.C.L. § 600.6013(5). The term "written instrument" encompasses written contracts. See Yaldo v. North Pointe Ins. Co., 217 Mich.App. 617, 619-620, 552 N.W.2d 657, aff'd 457 Mich. 341, 578 N.W.2d 274 (1998).
With respect to interest potentially accruing before the filing of the complaint, federal courts applying Michigan law have recognized that "generally, Michigan courts have included interest as an element of damages as a matter of right where the amount claimed is liquidated." Jones v. Jackson Nat'l Life Ins. Co., 819 F. Supp. 1382, 1383 (W.D.Mich.1993)(citing Banish v. City of Hamtramck, 9 Mich.App. 381, 385, 157 N.W.2d 445 (1968)). A claim for damages is defined as being "liquidated" where, as in the case at bar, "the amount thereof is fixed, has been agreed upon, or is capable of ascertainment by mathematical computation or operation of law." Robinson v. Loyola Foundation, Inc., 236 So. 2d 154, 157 (Fla.App.1970)(citing cases). As the Jones court stated, in cases where the amount claimed is liquidated, "interest has generally been allowed from the date when the claim accrued or in other words, `from the date compensation would have been due had it been paid voluntarily.'" 819 F. Supp. at 1383 (quoting Currie v. Fiting, 375 Mich. 440, 454, 134 N.W.2d 611 (1965)).
Analysis
Plaintiff argues that Michigan statutory and common law entitle her to an award of pre-judgment interest. Defendant in its response does not address plaintiff's claim of entitlement to interest accruing post-complaint and prior to judgement. Defendant attacks only plaintiff's claim for pre-complaint interest. See Defendant's Response to Plaintiff's Motion for Reconsideration of Judgment, pp. 2-4. Therefore, pursuant to Michigan Compiled Laws Section 600.6013(5), and since the issue is uncontested, this Court will award plaintiff interest payments calculated at the rate of 12%, from the date of the filing the complaint, on February 19, 1997, until the date of judgment, August 5, 1998. See M.C.L. § 600.6013(5).
The only remaining issue is whether plaintiff is entitled to pre-complaint interest. This question is not directly addressed by Michigan statutory law. However, Michigan Compiled Laws Section 438.7 governs the award of interest, and provides, in pertinent part, as follows:
[i]n all actions founded on contracts express or implied, whenever in the execution thereof any amount in money shall be liquidated or ascertained in favor of either party, by verdict, report of referees, award of arbitrators, or by assessment made by the clerk of the court, or by any other mode of assessment according to law, it shall be lawful ... to allow and receive interest upon such amount....
M.C.L. § 438.7. Courts interpreting this statutory provision have held that Section 438.7 makes the allowance or disallowance of interest a matter within the court's discretion. Cataldo v. Winshall, Inc., 3 Mich.App. 290, 295, 142 N.W.2d 28 (1966); see also Militzer v. Kal-Die Casting Corp., 41 Mich.App. 492, 200 N.W.2d 323 (1972); Feiler v. Midway Sales, Inc., 363 Mich. 105, 108 N.W.2d 884 (1961).
Defendant argues that plaintiff failed to mitigate her damages by filing the complaint more than two years after her claim had accrued. Thus, according to defendant, Ms. Holland may not recover any interest accruing before the complaint was filed. The Court is not persuaded by this argument. To determine this issue it is necessary to examine the precise time frame of events. Plaintiff's claim first accrued on August 24, 1995, the date when Ms. Holland was paid by electronic deposit her year-end compensation for the 1994-1995 fiscal year. See Memorandum Opinion and Order Granting Plaintiff's Renewed Motion for Summary Judgment, p. 6. Approximately one year thereafter, in August *584 1996, plaintiff resigned from defendant corporation after securing employment with GM. See id. On February 19, 1997, plaintiff filed her complaint.[1] Therefore, defendant's estimation that plaintiff waited two years to file her complaint is an overstatement.[2] In actuality, Ms. Holland filed her complaint approximately one year and six months after the accrual of her claim on August 24, 1995, and, more to the point, less than six months after leaving defendant's employ. Defendant has failed to show that Ms. Holland's delay was so egregious as to preclude her from receiving pre-complaint interest.
This Court may, in its discretion, award plaintiff pre-complaint interest. As the Jones court held, Michigan courts have included interest as an element of damages as "a matter of right," so long as the amount claimed is liquidated. See Jones, 819 F.Supp. at 1383. In the instant case, Ms. Holland's claim was certainly "liquidated" at the time her claim accrued because the amount had been fixed by operation of the terms of her employment contract. See Robinson v. Loyola Foundation, Inc., 236 So. 2d 154, 157 (Fla.App.1970). Ms. Holland is therefore entitled to receive interest "`from the date compensation would have been due had it been paid voluntarily.'" Jones, 819 F.Supp. at 1383 (quoting Currie v. Fiting, 375 Mich. 440, 454, 134 N.W.2d 611 (1965)). That date was August 24, 1995, when plaintiff was paid her year-end compensation for the 1994-1995 fiscal year. Michigan courts have determined that the appropriate pre-filing rate of interest is 5% per annum. See Feiler v. Midway Sales, Inc., 363 Mich. 105, 108 N.W.2d 884 (1961); see also Jones, 819 F.Supp. at 1383 n. 1. This percentage is determined by Michigan statute. See M.C.L. § 438.31.
In light of the foregoing, this Court will award plaintiff, Sharon Yvonne Holland, prejudgment interest as an element of her damages so that Ms. Holland can be fully compensated for defendant's breach of her employment contract. Specifically, Ms. Holland is entitled to pre-complaint interest calculated at the rate of 5% for the period beginning on August 24, 1995, the date when plaintiff's claim first accrued, until February 19, 1997, the date she filed her complaint. In addition, Ms. Holland is entitled to post-complaint/pre-judgment interest at the rate of 12%, for the period after the filing of the complaint until the date of judgment, August 5, 1998.
ORDER
NOW, THEREFORE, IT IS HEREBY ORDERED that plaintiff's motion for reconsideration of judgment is GRANTED.
IT IS FURTHER ORDERED that plaintiff is entitled to pre-complaint interest calculated at the rate of 5% for the period beginning on August 24, 1995, the date when plaintiff's claim first accrued, until February 19, 1997, the date plaintiff filed her complaint.
IT IS FURTHER ORDERED that plaintiff is entitled to post-complaint/pre-judgment interest at the rate of 12%, for the period after the filing of the complaint until the date of judgment, August 5, 1998.
SO ORDERED.
NOTES
[1] The complaint was originally filed in state court on February 19, 1997. Defendant subsequently removed the case to this Court by filing a notice of removal on April 9, 1997.
[2] It is also noteworthy that plaintiff filed the instant action well within the six year statute of limitations for bringing a breach of contract claim under Michigan law. See M.C.L. § 600.5807(9). In addition, defendant's argument that it was not apprised of plaintiff's allegations until after the filing of the complaint is suspect. This Court has already recognized that plaintiff expressed her dismay to Mr. Graves himself upon first learning of the quota increase and concomitant decrease in her year-end bonus. See Memorandum Opinion and Order Granting Plaintiff's Renewed Motion for Summary Judgment, pp. 5-6.
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33 F.Supp.2d 92 (1999)
Steve CONNOLLY and Paul Adao, Plaintiff,
v.
Woodrow T. HARRELSON, Defendant.
No. Civ.A. 96-12522-WGY.
United States District Court, D. Massachusetts.
January 27, 1999.
*93 *94 Lee M. Berger, Berger & Markir, Buzzards Bay, MA, for Steve Connolly, Paul Adao, Plaintiffs.
Robert D. Keefe, S.T. Miller, Hale & Dorr, Boston, MA, Richard E. Noon, E. Robert Browne, Strouse & Noon, PC, Lowell, MA, for Woodrow T. Harrelson, Defendant.
MEMORANDUM AND ORDER
YOUNG, District Judge.
This is an application for attorneys' fees under the Massachusetts Civil Rights Act, Mass. Gen. L. ch. 12, § 11I.
I. BACKGROUND
The plaintiffs, Steve Connolly ("Connolly") and Paul Adao ("Adao"), brought a number of claims against the defendant, Woodrow T. Harrelson ("Harrelson"), including counts of assault and battery, intentional tort, and violations of the Massachusetts Civil Rights Act. The claims arose from an incident among the parties that occurred at the USAirways Terminal in West Tisbury, Martha's Vineyard, Massachusetts on October 8, 1995. At that time, the parties engaged in a tussle during which Harrelson damaged Connolly's camera, struck Adao's video camera, and appropriated Connolly's film. The Court directed a verdict in favor of Connolly and Adao as to liability on the assault and battery claim, while allowing the jury to determine damages. The jury also considered liability and damages for Connolly and Adao's claim under the Massachusetts Civil Rights Act. Following the jury's verdict, judgment was entered in the amount of $2,558.15 in favor of Connolly and $1.00 in favor of Adao.
II. APPLICATION FOR FEES
On June 24, 1998, Connolly and Adao filed the instant application requesting $97,734.41 in attorneys' fees. In support of the Application, Lee M. Berger ("Berger"), Connolly and Adao's counsel, filed an affidavit detailing time spent working on the case by himself and Conni Lynn Baker ("Baker"), a paralegal in Berger's law firm. According to the affidavit, Berger devoted 355.70 hours to the case, while Baker contributed 74.70 hours. See Berger Aff., Exs. A, B. Berger's time, calculated at $200.00 per hour, comes to a total of $71,140.00; Baker's time, valued at $75.00 per hour, comes to a total of $5,602.50. See id. In addition, the affidavit contains a record of $3,206.91 in expenses incurred by counsel in pursuing Connolly and Adao's claim. See id.
Connolly and Adao argue that Berger's fees should be increased by twenty-five percent as a "lodestar" factor.[1]See Pl. Mem. at *95 3. This enhanced fee is justified, in Connolly and Adao's view, because (a) Berger handled the case on a contingency basis and therefore assumed the risk of not receiving any compensation; (b) Berger has worked on the case for more than two and a half years without receiving compensation; (c) market billing rates in Boston, where the case was tried, for attorneys comparable in skill and experience to Berger are higher than the $200.00 hourly rate Berger has requested; and (d) the results obtained in the case were "excellent." Pl. Mot. at 2. Including this upward adjustment, the plaintiffs' total request for attorneys' fees and costs is $97,734.41. See id. at 1.
Harrelson naturally opposes this enhancement of Berger's fees, arguing that such action is only justified under exceptional circumstances not present here. See Def. Mem. at 8. Moreover, for a variety of reasons, Harrelson contends that the entire fee request should be denied. First, Harrelson argues that the "nominal" amount of damages recovered in this case permits at best a "nominal fee award." Id. at 3. Second, Harrelson believes that awarding attorneys' fees in this case would "frustrate, rather than further, the purpose of the [Massachusetts Civil Rights Act]" inasmuch as "similar plaintiffs and their lawyers [would] tack on [a Massachusetts Civil Rights Act claim] to even the most routine claims ... in the hope of recovering a large fee." Id. at 7. Finally, Harrelson takes the jury's award of only $1.00 in damages to Adao as an "implicit rejection of Adao's claims," id., such that the Court should reduce any fee awarded to reflect Berger's lack of success with Adao's claims.
III. LODESTAR CALCULATIONS
In determining attorneys' fees awards under the Massachusetts Civil Rights Act, this Court is obligated to make an independent assessment of what constitutes a "reasonable" award:
Any aggrieved person ... who prevail[s] in an action authorized by this section shall be entitled to an award of the costs of the litigation and reasonable attorneys' fees in an amount to be fixed by the court.
Mass. Gen. L. ch. 12, § 11I; accord Fontaine v. Ebtec Corp., 415 Mass. 309, 324, 613 N.E.2d 881, 890 (1993) ("The amount of a reasonable attorney's fee, awarded on the basis of statutory authority .... is largely discretionary with the judge, who is in the best position to determine how much time was reasonably spent on a case, and the fair value of the attorney's services."). The starting point for such an analysis is the now-familiar "lode-star" calculation. See Stowe v. Bologna, 417 Mass. 199, 203, 629 N.E.2d 304, 307 (1994) ("The basic measure of reasonable attorney's fees is a `fair market rate for the time reasonably spent preparing and litigating a case.'") (quoting Fontaine, 415 Mass. at 326, 613 N.E.2d at 891).
"Fair market rate" is the "reasonable hourly rate of compensation prevailing in the relevant community for similar services by lawyers of reasonably comparable skill, experience, and reputation." McLaughlin, 976 F.Supp. at 60. Berger's affidavit asserts that his usual and customary hourly rate for legal services is $200.00 per hour. See Berger Aff. at 1. This figure lies within the range of rates for attorneys with his experience in Southeastern Massachusetts, which Berger reckons to be between $175.00 and $250.00 per hour.[2]See id. As pointed out in Berger's affidavit, the hourly rate of $200.00 for an attorney with over twenty-five years of membership in the Massachusetts Bar Association is likely to be on the thrifty side of rates for comparable attorneys in Boston, the place where litigation occurred. See id.; see also Guckenberger v. Boston Univ., 8 F.Supp.2d 91, 105 (D.Mass. 1998) (Saris, J.) (finding rates for "partners in trial firms with experience in civil rights cases [to be] between $200 and $275 per *96 hour" and noting that "[r]ates in excess of $300 per hour for Boston trial attorneys ... have been approved in this District"). In light of these comparisons, the Court, like Harrelson, sees no reason to challenge Connolly and Adao's proffered figure of $200.00 per hour for Berger's counsel.
With respect to hours billed, "[t]he judge should begin his inquiry with the amount of time documented by the plaintiff's attorney." Stowe, 417 Mass. at 203, 629 N.E.2d at 307. Berger provides in his affidavit a log detailing 355.70 hours of his own time, as well as 74.70 hours of Baker's time. See Berger Aff., Exs. A, B. Of this time, the Court must determine whether any was unreasonably expended.
It has become established practice in this Circuit to distinguish between "core" and "non-core" work when determining attorneys' fees awards. See Brewster v. Dukakis, 3 F.3d 488, 492 n. 4 (1st Cir.1993) ("Core work includes legal research, writing of legal documents, court appearances, negotiations with opposing counsel, monitoring, and implementation of court orders. Non-core work consists of less demanding tasks, including letter writing and telephone conversations."). Typically, non-core work is compensated at two-thirds of the hourly rate for core work. See Morgan, 915 F.Supp. at 471 (applying a "rough 3/2 ratio" for core versus non-core work).
A review of Massachusetts case law under the state Civil Rights Act and other attorneys' fee-shifting statutes, however, indicates that the Commonwealth does not follow this practice. "Where a request for attorneys' fees comprises a substantive part of the state-law remedy for a state-law cause of action, the proper rule of decision governing the award is derived from Massachusetts, rather than federal, practice." Krewson v. City of Quincy, 74 F.3d 15, 17 (1st Cir.1996). In light of this obligation, the Court will not impose upon Massachusetts practice a relatively recent federal court innovation, but will instead calculate the lodestar using an undiluted hourly rate for both core and non-core work. "This interpretation is consistent with the liberal construction which should be afforded civil rights statutes...." Batchelder v. Allied Stores Corp., 393 Mass. 819, 823, 473 N.E.2d 1128, 1131 (1985); accord Krewson, 74 F.3d at 18 ("[A]s a remedial civil rights statute, § 11I is entitled to a more liberal construction of its terms than other fee shifting statutes such as Mass. Gen. L. ch. 93A.").
After careful review of Berger and Baker's time logs, this Court, again like Harrelson, finds no reason to second-guess their submissions.
IV. FEE REDUCTION OR DENIAL
Harrelson raises three challenges to the award of attorneys' fees, each of which will be discussed in turn.
A. RESULTS OBTAINED
First, Harrelson argues that the amount of damages actually recovered in this case does not merit awarding anything beyond "nominal fees." Def. Mem. at 6. Under federal fee-shifting statutes, the degree of success obtained is generally cited as the most important factor in determining reasonable fees. See, e.g., Hensley v. Eckerhart, 461 U.S. 424, 436, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) ("[T]he most critical factor is the degree of success obtained."). It is important to note, however, that money is not the sole, or even the most important, measure of success. See, e.g., City of Riverside v. Rivera, 477 U.S. 561, 576, 106 S.Ct. 2686, 91 L.Ed.2d 466 (1986) ("[R]easonable attorney's fees ... are not conditioned upon and need not be proportionate to an award of money damages."); Lewis v. Kendrick, 944 F.2d 949, 957 (1st Cir.1991) ("[T]he fee is not limited by the size of the recovery, but may, in appropriate instances, greatly exceed it."). For this reason, the relatively modest amount of damages received by Connolly and Adao in this case should not, standing alone, bar them from receiving attorneys' fees.
While these federal cases are instructive, the view of the Massachusetts courts is controlling: "[W]here Massachusetts courts have reviewed fee awards pursuant to remedial statutes, they have held that an award of reasonable attorneys' fees should not be reduced *97 to reflect the actual amount of the jury award." Krewson, 74 F.3d at 18 (collecting cases). Because the Massachusetts Civil Rights Act is precisely such a remedial statute, the Court refuses to trim the fee award based solely on the dollar value of the recovery by Connolly and Adao.
B. PURPOSE OF THE MASSACHUSETTS CIVIL RIGHTS ACT
Harrelson contends that an award of attorneys' fees in this case would encourage spurious litigation and "lead to the creation of a `vast constitutional tort' which the courts have been vigorously avoiding since the enactment of the [Massachusetts Civil Rights Act]." Def. Mem. at 7 (quoting Bally v. Northeastern Univ., 403 Mass. 713, 718, 532 N.E.2d 49, 52 [1989]). In its proper context, however, the language of the Massachusetts Supreme Judicial Court reveals a more narrow concern:
We have also recognized that, by reaching private party actions, the Legislature did not intend to create "a vast constitutional tort," and thus explicitly limited the Civil Rights Act's remedy to situations where the derogation of secured rights occurs by threats, intimidation or coercion.
Bally, 403 Mass. at 718, 532 N.E.2d at 52 (citing Bell v. Mazza, 394 Mass. 176, 182-183, 474 N.E.2d 1111, 1115 [1985]). Thus, the Massachusetts Legislature has already provided the stopgap needed to prevent Harrelson's feared onslaught of frivolous claims: a requirement that the aggrieved person's rights be abridged by "threats, intimidation or coercion." Mass. Gen. L. ch. 12, § 11H. In this case, Harrelson's actions met that standard. The statute therefore requires that Connolly and Adao be awarded "reasonable attorneys' fees," Mass. Gen. L. ch. 12, § 11I, regardless of the purported effect the recovery may have on other litigants.
C. IMPLICIT REJECTION OF ADAO'S CLAIMS
Finally, Harrelson contends that the requested fee should be discounted "to reflect the jury's implicit rejection of Adao's claims." Def. Mem. at 7. While it is true that the jury awarded Adao the nominal amount of $1.00 for his claims, that does not alter the fact that Adao succeeded as matter of law. As noted above, the monetary magnitude of the litigation result does not determine its "success" for purposes of the attorneys' fee calculation. Thus, the short answer to Harrelson's argument is that, irrespective of the jury's determination of Adao's damages, he is still a "prevailing" plaintiff for purposes of the fee-shifting statute. See Batchelder, 393 Mass. at 822, 473 N.E.2d at 1130 ("[A] party prevails under G.L. c. 12, § 11I when he or she achieves success on a substantial question of law arising out of a common nucleus of facts that gives rise to a cause of action under the statute.") (citation omitted).
Even if one does view Adao's claims as unsuccessful, however, that would not necessarily mean that Connolly and Adao's recoverable attorneys' fees would be reduced. Counsel's time spent pursuing unsuccessful claims is generally non-compensable "unless it can be shown that the [unsuccessful and successful] claims were interconnected." Krewson, 74 F.3d at 19. The requisite degree of interconnection can be found when the "claims include[] a `common core of facts' or were `based on related legal theories.'" Lipsett v. Blanco, 975 F.2d 934, 940 (1st Cir.1992). Under those criteria, Connolly and Adao's claims were not only interconnected, they were virtually identical. Because each claim arose out of the same cluster of facts, Berger's investigatory work entailed no additional effort on account of the number of plaintiffs. Moreover, proving Connolly's claim necessitated a review of the same constellation of facts with or without Adao's inclusion in the litigation. Similarly, because each claim rested on the same legal theories, the number of compensable hours spent researching and drafting court documents would be influenced little by barring Adao's "unsuccessful" claims. Finally, the Court notes that where, as here, it would be an exercise in futility to attempt an allocation of time between successful and unsuccessful claims, "it becomes the fee-target's burden to show a basis for segregability." Id. at 941. Harrelson's bare request that the Court "discount the *98 requested fees" does not sustain that burden. Def. Mem. at 7.
V. FEE ENHANCEMENT
While Harrelson unsuccessfully contends that the attorneys' fees award should be denied or reduced, Connolly and Adao argue, also without success, that the award should be enhanced. The practice of multiplying the lodestar figure by an enhancement factor is seldom entertained in this Circuit. See, e.g., Lipsett, 975 F.2d at 942 ("[W]e have repeatedly cautioned that such enhancements will be rare. The exception is a tiny one and we will not permit it to eclipse the rule.") (citations omitted); McLaughlin, 976 F.Supp. at 63 ("[Plaintiff's counsel] has not submitted specific evidence which would overcome the strong presumption that the lodestar represents a reasonable fee."). The Commonwealth of Massachusetts shares this view of the limited appropriateness of fee enhancements. See Stowe, 417 Mass. at 203, 629 N.E.2d at 307 ("The basic measure amount, as determined by the judge, should be the amount of the award unless there are special reasons to depart from it.") (citation omitted).
The instant case presents no reason to depart from the strong presumption that a lodestar calculation fully compensates Connolly and Adao for the objective worth of Berger's legal services. Regardless of whether Berger did provide "quality representation," Pl. Mem. at 3, this Court must look further for justification to enhance his fee. "In short, the lodestar figure includes most, if not all, of the relevant factors constituting a `reasonable' attorney's fee, and it is unnecessary to enhance the fee for superior performance in order to serve the statutory purpose of enabling plaintiffs to secure legal assistance." Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 566, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986).[3] Moreover, although Berger did assume the risk of nonpayment, the Supreme Judicial Court of Massachusetts has noted that this factor alone is insufficient to justify enhancement. See Fontaine, 415 Mass. at 324, 613 N.E.2d at 890 ("In limited circumstances, statutory fee awards may be enhanced to compensate for the risk of nonpayment.") (emphasis added).[4] Similarly, the fact that Berger has experienced a delay in payment would only be relevant, if at all, in combination with other more compelling factors.[5]
There are no special factors present in this case. The issues in this litigation have been far from complex, involving largely undisputed facts and a rather unimpressive question of the law of intentional torts. Also, as Harrelson points out strenuously, the recovery obtained by Connolly and Adao was, in light of their original demands, relatively modest. Finally, the Court notes that the social dimension of this case bears little resemblance to the public interest concerns which drove the original enactment of the Massachusetts Civil Rights Act. See Batchelder, 393 Mass. at 821, 473 N.E.2d at 1130 (explaining that the legislative purpose of Mass. Gen. L. ch. 12, § 11I, was "to respond to a need for civil rights protection under State law" with particular attention to the "serious problem of racial harassment"). Although the First Amendment rights of photo-journalists are implicated peripherally by this litigation, that issue remains on the margins of what is essentially a tort case in the storied but straightforward tradition of Vosburg v. Putney, 80 Wis. 523, 50 N.W. 403 (1891).
"The statutory provision for attorney's fees aims to attract competent legal counsel for those with meritorious claims. It is not designed to provide a windfall recovery of *99 fees." Fontaine, 415 Mass. at 326, 613 N.E.2d at 892 (discussing analogous attorneys' fees provision in state anti-age discrimination statute) (citation omitted). In a case such as this, where the plaintiffs obtain modest damages for a simple tort that bears little significance for anyone beyond the parties at bar, the statutory purpose of the Massachusetts Civil Rights Act is adequately satisfied by awarding attorneys' fees based on the lodestar method, without enhancement.
VI. ORDER
In accordance with the foregoing discussion, this Court hereby ORDERS Harrelson to pay Connolly and Adao the following assessment of reasonable attorneys' fees pursuant to Mass. Gen. L. ch. 12, § 11I: attorneys' fees of $79,949.41, representing the total requested by Connolly and Adao less $17,785.00 attributable to the disallowed fee enhancement.
SO ORDERED.
NOTES
[1] While Connolly and Adao have chosen to refer to the requested multiplier as a "lodestar," to avoid confusion this Court will refer solely to a "fee enhancement." The term "lodestar" has in fact long been used to mean the product of an attorney's hours reasonably spent on litigation multiplied by a reasonable hourly rate for lawyers of comparable skill, reputation, and experience in the relevant community. See McLaughlin v. Boston Sch. Committee, 976 F.Supp. 53, 60 n. 10 (D.Mass.1997) (Garrity, J.) (providing an historical account of the term's development). The "lodestar" figure is itself subject to adjustment, upward or downward, in light of other relevant factors such as the level of success obtained. See Morgan v. Gittens, 915 F.Supp. 457, 469 (D.Mass.1996) (Garrity, J.).
[2] Harrelson has not challenged these figures.
[3] Indeed, it has even been said "that adjustments are not to be given in reward for stellar performance." Hall v. Ochs, 817 F.2d 920, 929 (1st Cir.1987) (emphasis added).
[4] The federal treatment of contingency representation as a justification for enhancement is even more restrictive. See Lipsett, 975 F.2d at 943 (holding that, under the federal Fees Act, "when a prevailing party seeks an attorneys' fee award in a civil rights case ..., enhancement of the lodestar because of counsel's risk of nonpayment is not permitted").
[5] Regardless, awarding fees based upon current billing rates, as the Court does in this case, is one accepted means of compensating for a delay in payment. See Missouri v. Jenkins, 491 U.S. 274, 283-84, 109 S.Ct. 2463, 105 L.Ed.2d 229 (1989).
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33 F.Supp.2d 1304 (1999)
Steven W. GERIG, Plaintiff,
v.
KRAUSE PUBLICATIONS, INC., a Wisconsin corporation, Defendant.
No. 98-1043-JTM.
United States District Court, D. Kansas.
January 12, 1999.
Robert W. Coykendall, Susan R. Schrag, Morris, Laing, Evans, Brock & Kennedy, Chtd., Wichita, KS, for plaintiff.
Jack Focht, Foulston & Siefkin L.L.P., Wichita, KS, Andrew Jackson Gray, IV, Simor L. Moskowitz, Jacobson, Price, Holman & Stern, PLLC, Washington, DC, for defendant.
MEMORANDUM AND ORDER
MARTEN, District Judge.
Steven W. Gerig sued Krause Publications, Inc. charging Krause with infringing Gerig's copyright in approximately 70 photographs. Gerig seeks damages sustained as a result of Krause's alleged violation of Gerig's copyrights, including statutory damages under 17 U.S.C. § 504 and attorney's fees. Gerig also brings a state claim for breach of contract. Krause moves to dismiss the claims on the grounds that the court lacks subject matter jurisdiction. In the alternative, Krause moves to strike and/or dismiss claims for statutory damages and attorney's fees.
The court has reviewed the parties' submissions and finds it unnecessary to hold a hearing on Krause's motion to dismiss; therefore, Gerig's motion for a hearing on Krause's motion to dismiss is denied.
I. Motion to Dismiss Standard
In its motion to dismiss, Krause challenges the factual basis for jurisdiction; the resolution of this question is tied closely to the merits of the case. In this situation, and because the parties have submitted affidavits and other materials outside the pleadings, the court converts the motion to dismiss to a Rule 56 motion for summary judgment. Holt v. United States, 46 F.3d 1000, 1003 (10th Cir.1995).
Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. FED.R.Civ.P. 56(c). The non-moving party's evidence is to be believed; all justifiable inferences are to be drawn in its favor; and its nonconclusory version of any disputed facts are assumed to be correct. Multistate Legal Studies, Inc. v. Harcourt Brace Jovanovich Legal and Professional Publ., Inc., 63 F.3d 1540, 1545 (10th Cir.1995), cert. denied, 516 U.S. 1044, 116 S.Ct. 702, 133 L.Ed.2d 659 (1996).
II. Facts
Collector's Mart Magazine (the "Magazine") hired Gerig on approximately 15 different occasions from 1990-1995 to take photographs, some of which they used in various issues of the Magazine. The Magazine paid Gerig an assignment fee for all of the photographs taken on each occasion. In November 1997, the Magazine's predecessor in interest, Krause Publications, published a book entitled Decorating With Collectibles (the "Book"), which included approximately 70 of Gerig's photographs taken in the magazine sessions. Three of the photographs (Image Reference #40, #53, and #60) had never *1305 appeared in the Magazine, but were published for the first time in the Book.
Gerig alleges Krause not only reproduced these images in the Book without his permission, but with knowledge of and in disregard of his copyright. Gerig seeks damages sustained as a result of Krause's violation of Gerig's copyright, including statutory damages and attorney's fees under 17 U.S.C. §§ 504 and 505.
Gerig, in a surreply to the motion to dismiss, has produced one registration certificate from the U.S. Copyright Office for the work entitled "Collectibles # 1," which lists the effective date of registration as December 2, 1997. Gerig stated in an affidavit filed with his surreply brief that the photograph covered by the certificate is one of those which is the subject of the lawsuit, but does not specify the corresponding Image Reference number of that work.[1]
Gerig also claims registration certificates are pending for the rest of the works, which is the subject of this lawsuit, but the only evidence Gerig has produced to support this is canceled checks and Federal Express Tracking reports. Gerig has not produced copies of the actual registration applications.
III. Analysis
Krause argues that the motion to dismiss should be granted because (1) the court does not have subject matter jurisdiction over the claims; and (2) Gerig's infringement claim does not arise under the Copyright Act.
At the time he filed this action, Gerig had not received copyright registration certificates for any of the photos. 17 U.S.C. § 411(a) states:
[N]o action for infringement of the copyright in any work shall be instituted until registration of the copyright claim has been made in accordance with this title. In any case, however, where the deposit, application, and fee required for registration have been delivered to the Copyright Office in proper form and registration has been refused, the applicant is entitled to institute an action for infringement if notice thereof, with a copy of the complaint, is served on the Register of Copyrights.
While the plain language of the statute appears to require registration of a copyright or refusal of a properly submitted registration packet before filing a copyright infringement action, courts have reached different conclusions on that issue. For example, the Eleventh Circuit, the U.S. Claims Court, and district courts in other circuits hold the statutory language clearly requires the receipt of an actual registration certificate or a denial of the same as a jurisdictional prerequisite to instituting an action for copyright infringement. See, e.g., M.G.B. Homes v. Ameron Homes, 903 F.2d 1486, 1488-89 (11th Cir. 1990) (Trial court properly dismissed the entire claim without prejudice to file a new complaint once the copyright registration was obtained.); Boyle v. Stephens, Inc., No. 97Civ.1351 (SAS), 1997 WL 529006, at *3 (S.D.N.Y. Aug.26, 1997) (finding no viable copyright infringement claim for plaintiff whose registration was pending, but not yet completed); Dielsi v. Falk, 916 F.Supp. 985, 994 (C.D.Cal.1996) (dismissing plaintiff's infringement claims without prejudice "Plaintiff's failure to plead that he has applied for a copyright registration deprives this court of subject matter jurisdiction over his copyright claim."); International Trade Management v. United States, 553 F.Supp. 402, 403 (Cl.Ct. 1982) (dismissing the action until the Copyright Office permitted or denied plaintiff's copyright).
However, the Fifth and Third Circuits, as well as district courts in other circuits, have found subject matter jurisdiction exists when plaintiffs have initiated the process of obtaining registration certificates. In Apple Barrel Prods., Inc. v. Beard, 730 F.2d 384 (5th Cir.1984), the Fifth Circuit allowed the plaintiffs to maintain an action for copyright infringement, although they had not received an actual registration certificate or a registration refusal from the Copyright Office. Id. at 386-87. The court held that plaintiffs' showing of payment of the required fee, depositing the work, and the Copyright Office's *1306 receipt of the application was sufficient to maintain an action for copyright infringement. Id. The Third Circuit has taken a similar position. Sebastian Intern., Inc. v. Consumer Contact Ltd., 664 F.Supp. 909, 912 (D.N.J.1987), vacated on other grounds, 847 F.2d 1093 (3d Cir.1988). See also Tang v. Hwang, 799 F.Supp. 499, 502-03 (E.D.Pa. 1992).
Another example of a court allowing matters to proceed even though the original complaint was filed without the possession of a copyright registration certificate is Demetriades v. Kaufmann, 680 F.Supp. 658 (S.D.N.Y.1988). The action for copyright infringement was instituted on February 8, 1988, but no copyright registration had been issued. Id. at 661. Soon after, however, a valid certificate was issued effective February 2 of the same year. Id. The court noted it did not have subject matter jurisdiction until the Copyright Office issued a valid certificate. Id. However, once the certificate was issued, the court allowed the plaintiff to file an amended complaint alleging possession of a registration certificate, thus curing the lack of subject matter jurisdiction. Id.
While the court favors the approach of Demetriades, the plain language of the statute controls. Therefore, Gerig's complaint will be dismissed without prejudice and he will be allowed to file a new action. Gerig may proceed with claims for which either a certificate or denial has been received on or before the filing of the new complaint. In regard to the statutes of limitations or other time-bar claims, the filing date of the newly filed complaint shall be deemed to relate back to February 9, 1998, the filing date of the original complaint, insofar as the new complaint alleges only claims alleged in the original complaint and joins only the defendant named in the original complaint or the successor of such original defendant. Any discovery done in this case will relate to and will be just as applicable to Gerig's newly filed complaint. The court recognizes there is some inconvenience in this course of action, but subject matter jurisdiction requires no less. See, e.g., GAF Building Materials Corp. v. Elk Corp., 90 F.3d 479, 483 (Fed.Cir. 1996) ("The presence or absence of jurisdiction must be determined on the facts existing at the time the complaint under consideration was filed.").
Because this court lacks subject matter jurisdiction over this action, there is no need to address Krause's argument that Gerig's infringement claim does not arise under the Copyright Act. For the same reason, Krause's alternative motion to strike and/or dismiss Gerig's claims for statutory damages and attorney's fees is denied as moot.
IT IS ACCORDINGLY ORDERED this 12th day of January, 1999, that Gerig's motion for a hearing on Krause's motion to dismiss (dkt. no. 12) is denied; Krause's motion to dismiss for lack of subject matter jurisdiction (dkt. no. 2) is granted; and Krause's motion in the alternative to strike and/or dismiss claims for statutory damages and attorney's fees (dkt. no. 2) is denied as moot. If Gerig wishes to proceed with his claims, he shall refile his lawsuit, as set forth above.
NOTES
[1] The effective date of registration of the certificate along with Gerig's affidavit testifying to when he submitted the images to the Copyright office leads to the conclusion that the image "Collectibles # 1" is either Image Reference # 40 or # 53.
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33 F.Supp.2d 1333 (1998)
GASTER MARINE RECOVERY & SALES, INC. and Bruce Gaster, Plaintiffs,
v.
M/V "THE RESTLESS I," her engines, tackle, apparel, furniture, equipment, and all other necessaries appertaining and belonging in rem and The Restless I Enterprises, Inc., a Florida corporation in personam, Defendants.
No. 98-8082-CIV.
United States District Court, S.D. Florida.
September 30, 1998.
*1334 Captain Edward R. Fink, Fort Lauderdale, FL, WMJB Marine Inc. d/b/a Palm Beach Yacht Center, by Walt Dinardo, Vice President, Hypoluxo, FL, for plaintiffs.
Douglas C. Broeker, Sweetapple, Broeker & Varkas, Miami, FL, for defendants.
ORDER OF DISMISSAL FOR LACK OF SUBJECT MATTER JURISDICTION
MORENO, District Judge.
THIS CAUSE came before the Court upon a sua sponte examination of the record. Plaintiffs' suit is for payment of the unpaid portion, $14,030.53, of a bill for ship repairs. The repairs commenced pursuant to an agreement the parties entered into (the "Brokerage Agreement") for Plaintiffs to act as broker in the sale of Defendant's ship, the "RESTLESS I." Plaintiffs assert a maritime lien against the ship in rem and a breach of contract claim against THE RESTLESS I ENTERPRISES, INC., in personam, for the unpaid repair work.
The Court, however, must forgo judgment on the merits of the suit because it is not convinced of its subject matter jurisdiction to hear the case.
In this case "jurisdiction is determined by the general rule for admiralty jurisdiction in contract: for jurisdiction to exist the subject contract must be wholly maritime in nature, or any nonmaritime elements must be either insignificant or separable." Wilkins v. Commercial Inv. Trust Corp., 153 F.3d 1273, 1276 (11th Cir.1998).
Generally, this inquiry requires a court to determine whether the "contract in general is one whose subject matter `is necessary to the operation, navigation, or management of a ship[.]'" Id. (quoting Ambassador Factors v. Rhein-, Maas-, Und See-Schiffahrtskontor GMBH, 105 F.3d 1397, 1399 (11th Cir.1997)).
Here, however, the Court is spared the variegation that results from such an ambiguous test because the Eleventh Circuit's law is "firmly established" that a contract for the sale of a vessel is not within federal courts' admiralty jurisdiction. Hatteras of Lauderdale, Inc. v. Gemini Lady, 853 F.2d 848, 850 (11th Cir.1988) (citing Jones v. One Fifty Foot Gulfstar Motor Sailing Yacht, Hull No. 01, 625 F.2d 44, 47 (5th Cir.1980) ("the well established general rule that admiralty will not entertain suits where the substantive rights of the parties flow from a contract to sell or construct a vessel.")).
In Hatteras, for example, the Eleventh Circuit affirmed the district court's dismissal for lack of admiralty jurisdiction because the customization work the plaintiff-appellant sought payment for was incidental to the contemporaneous sales transaction: "We agree with the district court that even if the alleged oral contract did exist, it was still part of the sale and/or construction of the vessel." Hatteras, 853 F.2d at 851.
Plaintiffs attempt to distinguish Hatteras on the basis that the ship in that case was new, arguing that the ship-sale rule "cannot be extended to rule that necessaries supplied to an existing vessel to enhance her saleability are not within the admiralty jurisdiction. ..." Plaintiffs misread Hatteras.
While the Hatteras court did indeed hold that "[w]e conclude that all of the work was completed as part of the sale and/or construction of a new vessel, and therefore it does not invoke the maritime jurisdiction of the federal courts[,]" Hatteras, 853 F.2d at 851, the court's use of the word "new" does not support the Plaintiffs' effort to distinguish. The word "new" in the preceding quotation relates solely to the fact that the customization work on the ship in Hatteras could arguably be taken as either part of the sale of the vessel or as part of the construction of a new ship, but that in either event admiralty jurisdiction did not lie.
The qualification "new" was necessary in addressing the construction argument because as the court explained earlier in its opinion contracts for the construction of a new vessel are not within federal admiralty *1335 jurisdiction, Hatteras, 853 F.2d at 849, while contracts for work or repairs on an existing, launched ship are within our admiralty jurisdiction. Hatteras, 853 F.2d at 850.
There is, however, no place for this new versus launched distinction in the ship-sale rule. The Hatteras court's use of the word "new" is simply inapplicable to the sale part of the court's disjunctive statement: "sale and/or construction of a new vessel." Hatteras, 853 F.2d at 851. To be sure, precedent other than Hatteras states the rule unqualifiedly: "a contract for the sale of a ship is not a maritime contract." See, e.g., S.C. Loveland, Inc. v. East West Towing, Inc., 608 F.2d 160, 164 (5th Cir.1979) (applying the rule to a launched ship).
Although ultimately unavailing, the concern underlying the Plaintiffs' attempt to escape the ship-sale rule is well-taken: the rule creates confusion in the trade because there is no intuitive reason why the same repairs that if made alone would invoke federal admiralty jurisdiction fail to do so if undertaken pursuant to a sales agreement. Indeed, the ship-sale rule is not an uncontroversial one. See, e.g., Richard Bertram & Co. v. The Yacht, Wanda, 447 F.2d 966, 967 (5th Cir. 1971) ("Although subject to some criticism, the prevailing rule has been that a contract for the sale of a ship is not a maritime contract."); Jack Neilson, Inc., v. Tug Peggy, 428 F.2d 54, 57 (5th Cir.1970) cert. denied, 401 U.S. 955, 91 S.Ct. 973, 28 L.Ed.2d 238 (1971) ("There are valid arguments in favor of the proposition that admiralty courts should take jurisdiction over claims arising out of contracts for the sale of a ship...."). Nonetheless, this Court is constrained to follow the law as it stands, not as litigants, nor even as the undersigned, might have it.
Accordingly, since contracts for the sale of a ship are specifically excluded from federal courts' admiralty jurisdiction, the Brokerage Agreement is clearly not "wholly maritime in nature" and, instead, the jurisdiction inquiry here turns on whether the Brokerage Agreement's "nonmaritime elements ... [are] either insignificant or separable." Wilkins, 153 F.3d at 1276; see also Butler Seafood, Inc. v. Gowdy, 609 F.Supp. 465, 466 (S.D.Fla. 1984) (Nesbitt, J.) ("[T]he Court examines the agreement to determine whether it is primarily a contract for sale of the vessel ... and therefore not within admiralty jurisdiction, or whether the contract also contains a lease provision which is completely separable from the sale provision, which lease provision could be a proper subject of admiralty jurisdiction.").
Although contracts for ship repair fall within federal admiralty jurisdiction, Hatteras, 853 F.2d at 850, the "nonmaritime" sale element in the instant case is neither insignificant nor separable vis-a-vis the repair work because the repairs were undertaken to advance the sale of the "RESTLESS I" pursuant to the parties' Brokerage Agreement. To be sure, the Defendants state: "The purpose of the repairs was to render the Vessel more saleable," in light of the pending listing agreement'; and the Plaintiffs admit: "The repairs simply were a modification of that contract to assist the sale."
Thus, the Plaintiffs have failed to establish that the repair work was done under an agreement independent of and separable from the "nonmaritime" sale element of the Brokerage Agreement, and thereby failed to allege a contract within federal admiralty jurisdiction capable of supporting either a maritime lien against the "RESTLESS I" in rem or a breach of contract claim against THE RESTLESS I ENTERPRISES, INC., in personam. Therefore, the case must be dismissed for lack of subject matter jurisdiction since there has been no allegation of diversity and in any event the amount in controversy does not exceed $75,000.00.
The Court is comforted in its decision by the fact that remedies at state law may still be had. Accordingly, it is
ADJUDGED that the case is DISMISSED and all pending motions are DENIED as moot.
DONE AND ORDERED.
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174 P.3d 587 (2007)
216 Or. App. 338
BOISE CASCADE CORPORATION, a Delaware corporation, Plaintiff-Appellant Cross-Respondent,
v.
STATE of Oregon, by and through BOARD OF FORESTRY, Defendant-Respondent Cross-Appellant.
932018; A126743.
Court of Appeals of Oregon.
Argued and Submitted January 4, 2007.
Decided December 5, 2007.
*588 Philip D. Chadsey argued the cause for appellant-cross-respondent. With him on the opening brief were Charles F. Adams and Stoel Rives LLP. With them on the reply brief was Michael B. Hallinan, Portland.
Denise G. Fjordbeck, Senior Assistant Attorney General, argued the cause for respondent-cross appellant. With her on the brief were Hardy Myers, Attorney General, Mary H. Williams, Solicitor General, and Brendan C. Dunn, Assistant Attorney General.
Before EDMONDS, Presiding Judge, and BREWER, Chief Judge,[*] and CARSON, Senior Judge.
BREWER, C.J.
This inverse condemnation case comes to us with a substantial procedural history, an account of which is set out below. Following trial after the latest remand, a jury determined that the state had taken Boise Cascade Corporation's property in violation of the Fifth Amendment by temporarily prohibiting logging and that Boise should be compensated in the amount of $25. Boise *589 appeals and the Oregon Board of Forestry (the state) cross-appeals. Because we agree with the state's arguments on cross-appeal, we reverse.
I. BACKGROUND
The historical and procedural facts relevant to our decision, which we take from the record and from the numerous opinions in earlier iterations of this case, are undisputed. Boise owns an approximately 65-acre parcel of timberland in Clatsop County known as the "Walker Creek Unit." Old growth timber of the kind found on the Walker Creek Unit is considered to be the best suitable habitat for northern spotted owls. In 1990, a pair of spotted owls was found nesting in a tree within the Walker Creek Unit. Also in 1990, the state adopted an administrative rule that required protection of a 70-acre core area of suitable habitat encompassing such nest sites.
In February 1992, Boise filed a proposal with the Department of Forestry to log the Walker Creek Unit; it filed an amended plan in May 1992. The state ultimately denied Boise's plan to harvest timber from a 56-acre portion of the Walker Creek Unit, but advised Boise that it could logalbeit with a temporal restrictionapproximately eight acres of the unit. Boise initiated this action for inverse condemnation in early 1993, alleging that, by failing to approve its proposed plan, the state had "taken" the timber on the regulated 56 acres in violation of Article I, section 18, of the Oregon Constitution and the Fifth Amendment to the United States Constitution. The trial court dismissed Boise's claims on the ground that it lacked subject matter jurisdiction and that Boise's complaint failed to state a claim. Boise petitioned for judicial review of the order disapproving the timber harvest and appealed the trial court's dismissal of its inverse condemnation claim.
In the administrative review case, we rejected Boise's arguments concerning the validity of the administrative rule upon which the board based its decision and affirmed the order. Boise Cascade Corp. v. Board of Forestry (A78968), 131 Or.App. 552, 886 P.2d 1041 (1994), aff'd, 325 Or. 203, 935 P.2d 422 (1997) (Boise I). In the inverse condemnation case, we held that the trial court had erred in concluding that it lacked jurisdiction, and further held that Boise's then-operative complaint did state a claim under both Article I, section 18, and the Fifth Amendment. Boise Cascade Corp. v. Board of Forestry (A79626), 131 Or.App. 538, 886 P.2d 1033 (1994) (Boise II). On review of that decision, the Oregon Supreme Court agreed with this court that the trial court had jurisdiction and that Boise had stated a claim for a regulatory taking. Boise Cascade Corp. v. Board of Forestry (S42159), 325 Or. 185, 935 P.2d 411 (1997) (Boise III).
On remand, Boise dismissed its claim under Article I, section 18, of the Oregon Constitution, choosing to pursue only its federal claim; that choice had important consequences, as will be seen below. The trial court granted Boise partial summary judgment, ruling as a matter of law that a regulatory taking under the Fifth Amendment had occurred. Around that time, one of the nesting owls died, the other left the Walker Creek Unit, and the board therefore lifted its restriction on Boise's logging of the site. Boise accordingly transformed its claim into a claim for a "temporary" taking. The issue of damages was tried to a jury, as was the question of whether a taking by "physical occupation" had occurred.[1] After a jury verdict in Boise's favor, awarding nearly $2 million in compensation, the state appealed.
In that appeal, the state argued that the trial court erred in failing to dismiss Boise's claim, in granting partial summary judgment, in striking the state's ripeness defense, and in numerous other respects. Boise Cascade Corp. v. Board of Forestry, 164 Or.App. 114, 116-18, 991 P.2d 563 (1999), rev. den., 331 Or. 244, 18 P.3d 1099 (2000), cert. den., 532 U.S. 923, 121 S. Ct. 1363, 149 L. Ed. 2d 291 (2001) (Boise IV). In Boise IV, we agreed with the state on two of its arguments. First, we agreed that the trial court had erred in submitting to the jury Boise's taking *590 by "physical occupation" theory.[2] 164 Or. App. at 126, 991 P.2d 563. Second, we agreed that the trial court had erred in striking the state's defense that Boise's claim was not ripe because it had neither attempted to obtain an "incidental take permit" (ITP) from the federal government nor shown that attempting to obtain such a permit would have been futile. Id. at 128-32, 991 P.2d 563.[3] We also rejected Boise's argument that its trial exhibits demonstrated that it would have been futile to try to obtain an ITP. Id. at 133, 991 P.2d 563. We thus reversed the judgment in favor of Boise and remanded the case. Id.
On remand, both parties sought summary judgment on the question of ripeness and futility. Most of Boise's arguments in support of summary judgment were to the effect that this court's decision concerning ripeness and futility in Boise IV was wrong. The trial court rejected those arguments. Boise also argued in its motion for summary judgment, however, that it was entitled to judgment as a matter of law on the question of futility. The state, in its motion for summary judgment, asserted that it was too late, as a matter of law, for Boise to be able to demonstrate futility. The trial court granted the state's motion and denied Boise's motion. Once more, Boise appealed.
In that appeal, we addressed whether the trial court had correctly granted the state's summary judgment motion on the issue of ripeness. Boise Cascade Corp. v. Board of Forestry, 186 Or.App. 291, 63 P.3d 598, rev. den., 335 Or. 578, 74 P.3d 112, cert. den., 540 U.S. 1075, 124 S. Ct. 940, 157 L. Ed. 2d 746 (2003) (Boise V). The state conceded that it was not entitled to summary judgment on the theory of ripeness on which the trial court had relied. It argued, however, that Boise's claim was not ripe because
"Boise, having dropped its claim under Article I, section 18, of the Oregon Constitution, cannot, as a matter of law, establish a violation of the Fifth Amendment to the United States Constitution. See generally Suess Builders Co. v. City of Beaverton, 294 Or. 254, 656 P.2d 306 (1982) (a federal takings claim does not ripen until the claim under Article I, section 18[,] has been decided)."
Boise V, 186 Or.App. at 296-97, 63 P.3d 598. We refused to address that argument, however, on the ground that it had not been preserved in the trial court. Id. at 297, 63 P.3d 598. We ultimately concluded in Boise V that Boise was not entitled to summary judgment on the state's ripeness defense and that, as discussed above, the state also was not entitled to summary judgment. Id. at 304, 63 P.3d 598. After generating five appellate opinions, the case was remanded for a third time.
Before the case went to trial on the most recent remand, the state moved for "a plenary re-trial of all jury questions, including liability and damages issues." The trial court granted the motion. Boise then filed alternative motions asking the trial court to reinstate its Article I, section 18, claim or to allow it to file an amended complaint (actually, what it called a "third supplemental amended complaint") including that claim. The trial court denied both motions, and the case went to trial.
After Boise rested, the state moved for a directed verdict; it also sought a directed verdict after it rested its own case. The trial court denied both motions. Ultimately, the jury, by special verdict, found that "it would have been futile for Boise Cascade Corporation to seek an incidental take permit from the U.S. Fish & Wildlife Service prior to February 1, 1993." That is, the jury rejected the state's ripeness defense by finding that it would have been futile for Boise to seek an ITP. The jury awarded $25 as compensation for the temporary taking of Boise's property. The state moved for a judgment notwithstanding the verdict, while Boise moved to reinstate the earlier nearly $2 million verdict *591 from 1997. The trial court denied both motions, and this appeal and cross-appeal followed.
On appeal, Boise makes three arguments presented as four assignments of error. It argues first that the trial court should not have allowed a plenary retrial of all issues after our most recent remand. More specifically, Boise asserts that the trial court erred in granting the state's motion for a plenary retrial and in denying Boise's post-trial motion to reinstate the 1997 jury verdict. Next, Boise argues that the trial court erred in not awarding simple interest at the rate of nine percent from 1993 on the fair market value of the timber that it claims was taken. Finally, Boise assigns error to the trial court's denial of its motion to reinstate its regulatory taking claim under Article I, section 18, of the Oregon Constitution before the most recent retrial.
The state, in turn, asserts four assignments of error on cross-appeal. In related assignments, the state argues that the trial court erred in denying its motions for directed verdicts on Boise's temporary taking claim and on Boise's Fifth Amendment regulatory takings claim. The state also asserts that the trial court erred in denying its motion for a directed verdict on the ground that Boise had failed to exhaust remedies provided by state law before bringing a claim under the Fifth Amendment. Finally, the state assigns error to the trial court's denial of its motion for a directed verdict on the ground that it would not have been futile for Boise to pursue its administrative remedies before seeking a judicial remedy.
II. DISCUSSION
A. Federal Regulatory Takings Principles
We begin with an overview of the legal landscape in which federal takings claims are adjudicated. The Takings Clause of the Fifth Amendment to the United States Constitution, made applicable to the states through the Fourteenth Amendment, see Chicago, B. & Q.R. Co. v. Chicago, 166 U.S. 226, 17 S. Ct. 581, 41 L. Ed. 979 (1897), provides that private property shall not "be taken for public use, without just compensation." Early in the last century, the United States Supreme Court recognized thatin addition to an actual conversion of private property for governmental usegovernmental regulation of private property could constitute a Fifth Amendment taking. Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 43 S. Ct. 158, 67 L. Ed. 322 (1922). Thereafter, in Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124, 98 S. Ct. 2646, 57 L. Ed. 2d 631 (1978), the Court explained that, in engaging in the "essentially ad hoc, factual inquires" regarding whether governmental regulation constitutes a taking, courts should consider (1) the economic impact of the regulation on the claimant; (2) the extent to which the regulation has interfered with distinct investment-backed expectations; and (3) the character of the governmental action. Id. at 124-25, 98 S. Ct. 2646.
The Court has, however, recognized two categories of regulation that do not require the individualized, factual inquiry set out in Penn Central: regulation that "compel[s] the property owner to suffer a physical `invasion' of his property" (which is not at issue in this appeal) and "regulation [that] denies all economically beneficial or productive use of land." Lucas v. So. Carolina Coastal Council, 505 U.S. 1003, 1015, 112 S. Ct. 2886, 120 L. Ed. 2d 798 (1992).[4] As the Court more recently explained, "the categorical rule in Lucas was carved out for the `extraordinary case' in which a regulation permanently deprives property of all value; the default rule remains that, in the regulatory taking context, we require a more fact specific inquiry." Tahoe-Sierra P. Council v. TRPA, 535 U.S. 302, 333, 122 S. Ct. 1465, 152 L. Ed. 2d 517 (2002).
B. The "Whole Parcel" Rule
In Penn Central, the Court set out what has come to be known as the "whole parcel rule":
*592 "`Taking' jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. * * * [T]his Court focuses rather on both the character of the action and on the nature and extent of the interference with rights in the parcel as a whole * * *."
438 U.S. at 130-31, 98 S. Ct. 2646. Although the Lucas Court appeared in dicta to question that rule, see 505 U.S. at 1016-17 n. 7, 112 S. Ct. 2886, the Court also appeared to reaffirm the rule. See 505 U.S. at 1019, 112 S. Ct. 2886 ("We think, in short, that there are good reasons for our frequently expressed belief that when the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking." (Emphasis in original.)).
In any event, as the Oregon Supreme Court has observed, the United States Supreme Court has, since Lucas, "reaffirmed the [whole parcel] rule twice." Coast Range Conifers v. Board of Forestry, 339 Or. 136, 153, 117 P.3d 990 (2005) (citing Tahoe-Sierra, 535 U.S. at 331, 122 S. Ct. 1465, and Concrete Pipe v. Pension Trust, 508 U.S. 602, 644-45, 113 S. Ct. 2264, 124 L. Ed. 2d 539 (1993)).
In fact, in Tahoe-Sierra, the Court emphasized the vitality of the whole parcel rule in regulatory takings cases, explaining that it applies both to physical and temporal aspects of the landowner's property rights. That case involved a claim that a temporary taking of the petitioners' propertyin the form of a temporary development moratoriumwas subject to the per se rule of Lucas. The Court reiterated that the "categorical rule in Lucas was carved out for the `extraordinary case' in which a regulation permanently deprives property of all value[.]" 535 U.S. at 333, 122 S. Ct. 1465 (emphasis added). In so stating, the Court rejected the petitioners' argument that a per sethat is, a Lucas-type taking could be established by a regulation that imposed only a temporary restriction on a landowner's right to use its property. See id. at 321, 122 S. Ct. 1465 ("[W]e conclude that the circumstances in this case are best analyzed within the Penn Central framework."). "[A] permanent deprivation of the owner's use of the entire area is a taking of `the parcel as a whole,'" the Court explained, "whereas a temporary restriction that merely causes a diminution in value is not." Id. at 332, 122 S. Ct. 1465.
The Tahoe-Sierra Court also reiterated the other, nontemporal aspects of the whole parcel rule. The Court repeated, for example, that "where an owner possesses a full `bundle' of property rights, the destruction of one `strand' of the bundle is not a taking." 535 U.S. at 327, 122 S. Ct. 1465 (quoting Andrus v. Allard, 444 U.S. 51, 100 S. Ct. 318, 62 L. Ed. 2d 210 (1979)). Thus, after Tahoe-Sierra, it is clear that, under the "whole parcel" rule, a per se Lucas-type regulatory taking cannot be premised on a governmental restriction that affects (1) only one portion of the owner's property, (2) only one type of interest within the property owner's "bundle" of interests, or (3) only one "temporal slice" of the property owner's fee interest.
C. Boise Neither Pleaded Nor Proved a Per Se Regulatory Taking
In its first claim for relief in its complaint, Boise asserted that the state's actions entitled it to just compensation under Article I, section 18, of the Oregon Constitution. As noted above, Boise voluntarily dismissed that claim long before the latest trial in this case. Boise's second claim, denominated a "Loretto Per Se Claim" in the complaint, sought compensation on the theory that the state had physically occupied its property. In Boise IV, as noted above, we held that Boise had "not stated a claim for a `physical occupation' taking under Loretto." 164 Or.App. at 126, 991 P.2d 563. What remains, then, is what Boise's "second supplemental complaint" itself explicitly labels a "Lucas Per Se Claim."
On appeal, the state asserts, as it did in the trial court, that Boise neither pleaded nor proved a per se regulatory taking claim under Lucas. After Boise rested its case on retrial, the state moved for a directed verdict, arguing that
*593 "the Lucas claim has to be about all economically viable use of the whole parcel of land. * * *
"* * * [The state] hasn't taken all economically viable uses of the whole parcel, which is what Lucas requires."
The state renewed its motion after it rested its own case:
"A Lucas claim has to be about the all economically viable use of the land, and in this case what we are talking about is logging, and if there is any question about that, we just need to look at * * * the Second Supplemental Complaint, paragraph 16, in which the allegation is, and it's one allegation in the Lucas claim, the Board's action in denying [Boise] the right to log its land deprived [Boise] of all economically productive use of its merchantable timber not the land, the merchantable timber and constituted a taking of [Boise's] property for a public purpose which requires the [the state] to pay [Boise] just compensation for property under the takings clause of the Fifth and Fourteenth Amendments.
"So it's not about land, it's about one strand in that bundle of rights. You can't send the State's position is you cannot send that kind of claim to the jury, Your Honor, on the evidence before it."
The state made a similar argument regarding the viability of Boise's temporary taking claim. In its initial motion for a directed verdict, the state argued that "the case should be dismissed because since Tahoe-Sierra was decided, you cannot have a Lucas per se claim, a categorical taking, that is temporary. And that's we have that's the proof that we have here is that [this is a] temporary taking under a Lucas claim." The trial court denied both motions, twice rejecting both arguments.
On appeal, citing Lucas and Tahoe-Sierra, the state asserts that the trial court erred in denying its motions for directed verdicts. The state observes that "a Lucas claim cannot be based on a portion of the property (56 of 65 or 1770 acres[[5]]), or on a single property interest (timber rather than the real property), or on a sliver of time (here, 45 months)." For the reasons discussed below, we agree thatfor three independent reasonsBoise neither pleaded nor proved a takings claim under the Fifth Amendment Takings Clause.
"Upon review of a denial of a motion for a directed verdict, we will not set aside a jury verdict `unless we can affirmatively say that there is no evidence from which the jury could have found the facts necessary to establish the elements of [the] plaintiff's cause of action.'"
Conway v. Pacific University, 324 Or. 231, 235, 924 P.2d 818 (1996) (quoting Brown v. J.C. Penney Co., 297 Or. 695, 705, 688 P.2d 811 (1984)) (brackets in Conway). In this case, because the problems with Boise's case stem from its pleadings and the legal theory on which it relied, its proof suffered accordingly. That is, because the claim that Boise sought to prove was deficient, there is no evidence from which a jury could have found the facts necessary to establish the elements of a properly pleaded claim.
We begin with the portional aspect of the whole parcel rule. In Coast Range Conifers, the Oregon Supreme Court summarily rejected the plaintiff's Lucas claim based on only a portion of the parcel: "Under the whole parcel rule, plaintiff's Lucas claim fails. Plaintiff's ability to log 31 acres of the 40-acre parcel establishes that the regulation does not deprive plaintiff's property of all its economic value." 339 Or. at 153, 117 P.3d 990. More recently, in Seiber v. Oregon Board of Forestry, 210 Or.App. 215, 149 P.3d 1243 (2006), rev. den., 342 Or. 633, 157 P.3d 788 (2007), we addressed a temporary restriction on logging 40 acres out of a 200-acre parcel. Citing Lucas and Coast Range Conifers, we stated, "The count based on Lucas also fails because, under that case, no taking occurs unless the application of the state regulation renders claimant's entire parcel devoid of all economic value." Id. at 220, 149 P.3d 1243 (emphasis added). In *594 short, because Boise did not plead or prove that the state's regulation denied it use of the entire Walker Creek Unit, the trial court should have granted the state's motion for a directed verdict on that ground.
We also agree with the state that Boise's allegations regarding only one of its interests in the Walker Creek Unit were insufficient to state a claim. As noted above, Boise pleaded and sought to prove only that the regulation "deprived [it] of all economically productive use of its merchantable timber * * *." That is, Boise sought compensation only for deprivation of one "stick" in the bundle of rights it held in the Walker Creek Unit. But, as the Oregon Supreme Court recently explained, "Under Oregon law, * * * timber is part of the underlying real property unless it is subject to a contract to be cut." Coast Range Conifers, 339 Or. at 150-51, 117 P.3d 990. Boise introduced no evidence that the timber for which it sought compensation was subject to a contract to be cut. It follows that the timber was not a property interest separate from the rest of the relevant parcel that could support an independent claim for a per se regulatory taking. See Seiber v. U.S., 364 F.3d 1356, 1369 (Fed.Cir.), cert. den., 543 U.S. 873, 125 S. Ct. 113, 160 L. Ed. 2d 122 (2004) ("No authority has been brought to our attention that holds as a matter of federal takings law that trees are a separate property interest before they are severed from their underlying land."). Under Tahoe-Sierra, a regulation that affects only one "strand" of the owner's interest in the property cannot constitute a per se regulatory taking.
Finally, we agree with the state on the third aspect of its argument: because Boise neither pleaded nor proved that it had been permanently deprived of all economic value in the Walker Creek Unit, it did not state a claim for a per se taking under Lucas. See Boise V, 186 Or.App. at 294 n. 1, 63 P.3d 598 (describing holding in Tahoe-Sierra: "a temporary restriction that merely causes a diminution in value of property is not a taking of the parcel as a whole; property is not rendered valueless by a temporary prohibition on economic use because the property will recover value as soon as the prohibition is lifted"). Indeed, the Federal Circuit, in considering a federal takings claim involving the Walker Creek Unit, although expressing some doubt about whether Tahoe-Sierra's holding went beyond temporary development moratoria, explained that whether a permanent restriction that later is revoked constitutes a temporary taking is a question that must be analyzed under Penn Central. Boise Cascade Corp. v. U.S., 296 F.3d 1339, 1347 (Fed.Cir.2002), cert. den., 538 U.S. 906, 123 S. Ct. 1484, 155 L. Ed. 2d 226 (2003). In short, the state was entitled to a directed verdict for a third reason: Boise pleaded only a temporary per se regulatory taking.
D. None of Boise's Remonstrations Has Merit
Boise makes several arguments in response. It begins with the assertion that the Oregon Supreme Court "announced a major change in Oregon property law" when it stated in Coast Range Conifers that standing timber is part of the underlying real property and not a severable interest for purposes of the whole parcel rule. It claims that the Supreme Court ignored its own holding in Hawkins v. City of La Grande, 315 Or. 57, 70-71, 843 P.2d 400 (1992), that growing crops are a separate property interest from the real property on which they grow. Boise asserts that "state courts are not free to redefine their property laws in order to avoid a regulatory taking" under the Fifth Amendment, so that this court cannot rely on the Supreme Court's pronouncement in Coast Range Conifers regarding the nonseverability of Boise's timber.
Boise's argument, regardless of its merit, is directed to the wrong court. The Supreme Court's pronouncement in Coast Range Conifers is binding on this court. Under that holding, an allegation that a state regulation has deprived a property owner of only one interest out of severalthe interest in its timber, in this casedoes not state a claim for a per se regulatory taking under the Fifth Amendment Takings Clause.
Boise next makes an argument based on the law of the case doctrine. In State v. Montez, 324 Or. 343, 347, 927 P.2d 64 (1996), *595 cert. den., 520 U.S. 1233, 117 S. Ct. 1830, 137 L. Ed. 2d 1036 (1997), the court explained:
"It is a general principle of law and one well recognized in this state that when a ruling or decision has been once made in a particular case by an appellate court, while it may be overruled in other cases, it is binding and conclusive both upon the inferior court in any further steps or proceedings in the same litigation and upon the appellate court itself in any subsequent appeal or other proceeding for review."
(Internal quotation marks omitted.) Boise asserts that, in Boise III, the Supreme Court "squarely rejected" the state's whole parcel argument and "held that Boise had stated a claim for the taking of `approximately 56 acres of merchantable timber.'" It claims that,
"even though [Coast Range Conifers] subsequently effected a dramatic change in Oregon property lawby holding that a taking of merchantable timber must be measured with respect to the `whole parcel' and not as a separate property interest the law of the case doctrine precludes that subsequent ruling from applying to this case."
Bluntly, Boise asserts that we must ignore Supreme Court precedent that is directly on pointCoast Range Conifersunder the law of the case doctrine.
We need not address that precise question, however, because the premise underlying Boise's law of the case argumentthat the court in Boise III addressed the very same legal issue before us nowis incorrect. In Boise III, under the heading "`Takings' by inverse condemnation under the Oregon Constitution," the court addressed whether Boise had stated a claim for a taking under Article I, section 18, of the Oregon Constitution. The court first explained that,
"[t]o establish a [regulatory taking under Article I, section 18,] * * * [t]he property owner must show that the application of the government's particular choice deprives the owner of all economically viable use of the property. If the owner has `some substantial beneficial use' of the property remaining, then the owner fails to meet the test."
325 Or. at 197-98, 935 P.2d 411 (emphasis in original; citations omitted). The court reasoned that Boise had met that test:
"In this case, [Boise] has alleged in both its claims for relief that the Board's application of [the regulation] to its proposed logging plans denied [Boise] all economic use of its land. With respect to the first claim for relief, [Boise] has alleged `depriv[ation] * * * of the only economically viable use of approximately 56 acres of merchantable timber.' Assuming the truth of all well-pleaded facts alleged in the complaint and giving [Boise] the benefit of all favorable inferences that may be drawn from those facts, that allegation is sufficient to meet the `deprivation of all economically viable use of the property' standard."
Id. at 198, 935 P.2d 411.
But, for two reasons, that statement is not binding in the present controversy. First, the statement was made in the context of Article I, section 18. On remand following that decision, Boise dropped its state constitutional claim, so any statement that the Supreme Court made regarding the viability of that claim is no longer at issue.[6] Second, in evaluating Boise's claim, the court had before it Boise's "supplemental complaint." That complaint, unlike the complaint at issue here, alleged a more general taking under the Fifth Amendment. That is, unlike the "second supplemental complaint" at issue nowwhich explicitly limits its allegations to a per se taking under Lucasthe complaint addressed by this court in Boise II and by the Supreme Court in Boise III included much more general allegations, allegations that could include a Penn Central claim:
"COUNT TWO
"(Inverse CondemnationU.S. Constitution)
"The Board's denial of plaintiff's amended plan also constituted a taking of plaintiff's *596 merchantable timber for a public purpose which requires just compensation under the Taking and Just Compensation Clause in the Fifth and Fourteenth Amendments to the U.S. Constitution."
Because the complaint at issue in Boise III was materially different from the complaint we now address, and because the court's statement in Boise III was limited to Boise's state constitutional claim, it is not "binding" or "conclusive" in this appeal.[7]
Boise's next argument in response to the state's arguments on cross-appeal is that the whole parcel rule applies even if only most of the parcel is taken. It asserts that,
"even if the entire 65 acres is the `whole parcel' by which the State's taking must be measured, the [state's] regulation deprived Boise of 96.7 percent of the fair market value of the entire 65-acre parcel. Moreover, the State prohibited logging of 56 of 65 acres, meaning that [Boise] was precluded from logging 86 percent of a 65-acre tract."
(Footnote omitted.) As authority for that view, Boise asserts that "Lucas recognized that deprivations that are `one step short of complete,' 505 U.S. at 1019 n. 8 [112 S. Ct. 2886], and in particular takings of 95 percent of the economic value of property, may be compensable under the Fifth Amendment. Id."
But that statement from Lucas does not help Boise here. In Lucas, the majorityin response to Justice Stevens's dissenting assertion that the whole parcel rule would have inequitable resultsreiterated that its holding applies only to per se regulatory takings. The Court emphasized that an owner deprived of the use of most of its property might have a takings claim under the usual balancing approach of Penn Central. The Court went on to defend the whole parcel rule, even in the context of a property owner whose property is reduced to five percent of its previous value by government regulation:
"It is true that in at least some cases the landowner with 95% loss will get nothing, while the landowner with total loss will recover in full. But that occasional result is no more strange than the gross disparity between the landowner whose premises are taken for a highway (who recovers in full) and the landowner whose property is reduced to 5% of its former value by the highway (who recovers nothing). Takings law is full of these all-or-nothing situations."
Lucas, 505 U.S. at 1019 n. 8, 112 S. Ct. 2886 (emphasis in original).[8] Like the property owner in Lucas, Boise has made no claim under Penn Central. With respect to categorical takings of the type that Boise has alleged, neither the United States Supreme Court nor the Oregon Supreme Court has ever applied an "almost" whole parcel rule under the Fifth Amendment.
Finally, Boise argues that Tahoe-Sierra does not support the result we reach. It asserts that the analysis and holding in Tahoe-Sierra apply only to "planning moratoria on residential construction," and that they do not govern "a situation, such as this, in which there was a permanent ban on the use of commercial income property that was subsequently rescinded." In support of that reading of Tahoe-Sierra, Boise cites Lucas and Seiber. But no authority cited by Boise can sustain that narrow view.
As noted above, in Boise V, we described the holding in Tahoe-Sierra without any suggestion that it applies only to "planning *597 moratoria on residential construction," and nothing in the Tahoe-Sierra opinion itself suggests such a crabbed reading. Nor does anything in Seiber suggest that a temporarily applicable regulation can support a per se taking under Lucas. Instead, the Federal Circuit in that case merely mentioned that temporary regulatory takings exist; it never suggested that such takings could be analyzed in any manner other than under Penn Central. Seiber, 364 F.3d at 1364. The discussion in Lucas to which Boise points is to the same effect. Lucas, 505 U.S. at 1030 n. 17, 112 S. Ct. 2886. In Tahoe-Sierra, the Court observed that "[r]ecovery under a Penn Central analysis is * * * foreclosed * * * because petitioners expressly disavowed that theory[.]" 535 U.S. at 334, 122 S. Ct. 1465. So, too, here. Boise chose to pursue only a federal claim, and only a Lucas per se takings claim, at that. Yet this is not the rare, "extraordinary case" in which a Lucas claim is appropriate, and the trial court erred in denying the state's motions for directed verdicts.
E. Boise's Arguments on Appeal
As noted, Boise makes a number of arguments on appeal. We do not address Boise's argument regarding the amount of interest on the award of compensation, as it is moot. We reject Boise's other arguments without discussion, except for one, which we address briefly. As noted above, while the state's motion for a plenary retrial was pending, Boise soughtfive weeks before trial was scheduled to beginto reinstate its state constitutional claim under Article I, section 18, a claim that it had voluntarily dismissed nearly seven years earlier. The state argued in response that (1) the claim was barred by the statute of limitations; (2) the dismissal of the claim had become final after Boise V and it could not now be revived; and (3) that it would be prejudiced by reinstatement of the claim. The trial court denied the motion, and Boise assigns error to that ruling.
On appeal, Boise presents two arguments as to why the trial court erred. First, it asserts that the statute of limitations does not bar the claim because it relates back to a timely filed claim. Second, according to Boise, the state would have suffered no prejudice had the trial court allowed the amendment. The state urges several grounds for affirmance: (1) the claim's dismissal became, as the state argued in the trial court, final after Boise V; (2) the allegations in the proffered complaint did not state a claim under Article I, section 18; (3) Boise's proposed amendment was untimely; and (4) the trial court did not, in any event, abuse its discretion in denying Boise's motion. Because we agree with the last of the state's contentions, we need not address the others.
In Ramsey v. Thompson, 162 Or.App. 139, 145, 986 P.2d 54 (1999), rev. den., 329 Or. 589, 994 P.2d 130 (2000), we identified, in the context of judicial assessment of a motion to amend a complaint,
"four considerations bearing on the appropriate exercise of discretion: (1) the nature of the proposed amendments and their relationship to the existing pleadings; (2) the prejudice, if any, to the opposing party; (3) the timing of the proposed amendments and related docketing concerns; and (4) the colorable merit of the proposed amendments."
Here, although the claim was one that the state had seen before, it had been more than six years since Boise had voluntarily dismissed the claim, and the state had no reason to suspect until Boise moved to reinstate the claim that it would have to defend against it. At that stage of the proceedings, the state would have been prejudiced by Boise's virtually last-minute request to reinstate the claim. As the state explains,
"[I]f Boise had been allowed to pursue its claim under the Oregon Constitution, that claim would have exposed the [state] to an award of attorney fees. * * * Had Boise not voluntarily dismissed its claim at the end of its first trial, the presence of that claim might have prompted the [state] to settle the case; to refrain from pursuing the appeal it pursued in Boise V; to seek increased discovery after the remand in Boise V; to invest more resources on certain potentially-dispositive motions and arguments; or to take actions that might have minimized the expenses incurred by Boise's attorneys. Because the [state] *598 tookand refrained from takinga number of actions based on circumstances that Boise created, it would be wholly unfair to now allow Boise once again to alter the legal landscape."
Furthermore, under the second and fourth factors articulated in Ramsey, the legal landscape at the time of Boise's motion also supports the conclusion that the trial court did not abuse its discretion. At that time, this court had held that, in contrast to the federal constitution, the "whole parcel rule" did not apply to regulatory takings under the Oregon Constitution. Coast Range Conifers v. Board of Forestry, 189 Or.App. 531, 550, 76 P.3d 1148 (2003), adh'd to on recons., 192 Or.App. 126, 83 P.3d 966 (2004), rev'd, 339 Or. 136, 117 P.3d 990 (2005). That difference would have required the state to litigate additional issues at trial and to appeal adverse rulings related to the applicability of the whole parcel rule under the Oregon Constitution. Additionally, the Supreme Court's subsequent holding in Coast Range Conifers that the whole parcel rule applies under Article I, section 18, casts significant doubt on the "colorable merit" of Boise's proposed claim.
Finally, the third Ramsey factorthe timing of the proposed amendmentsupports the trial court's decision not to allow the amendment. After more than a decade of litigation, Boise soughtweeks before a second retrialto reinstate a claim that it had voluntarily dismissed more than six years earlier. In opposing Boise's motion to amend, the state alternatively sought a continuance of the trial date, a request that posed obvious docket management issues for the trial court after an already lengthy procedural path to a final adjudication of the case. The trial court was entitled to rely on the late timing of Boise's request in deciding not to allow the amendment.
It is true, as Boise argues, that under ORCP 23 A, "leave [to amend] shall be freely given when justice so requires." But, "[t]he trial court has broad discretion in determining when justice requires amendment to a complaint, and its decision will not be disturbed unless it is shown that the court exceeded the bounds of its discretion." Contractors, Inc. v. Form-Eze Systems, Inc., 68 Or.App. 124, 129, 681 P.2d 148, rev. den., 297 Or. 824, 687 P.2d 797 (1984). Here, taking into account all four of the Ramsey factors, we cannot say that the trial court abused its discretion in denying Boise's motion to reinstate its state law takings claim.
Affirmed on appeal; reversed on cross-appeal.
NOTES
[*] Brewer, C.J., vice Wollheim, J.
[1] Boise added the "physical occupation" claim after remand.
[2] See Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S. Ct. 3164, 73 L. Ed. 2d 868 (1982) (describing taking by physical occupation).
[3] The administrative rule under which the state had denied Boise's harvesting plan allowed an exception to the requirement for protecting northern spotted owl nesting sites if the landowner had obtained an ITP pursuant to the federal Endangered Species Act.
[4] The Lucas Court cited Loretto for the first proposition, and Agins v. Tiburon, 447 U.S. 255, 100 S. Ct. 2138, 65 L. Ed. 2d 106 (1980), for the second. As noted, Boise purported to assert a Loretto claim in its complaint, but we previously determined that Boise had not stated a claim under Loretto. That issue is not before us now.
[5] The reference to 1,770 acres is to the larger parcel of real property that the Walker Creek Unit initially was a part of. We assume without deciding that the relevant denominator here is 56 acres.
[6] Indeed, in Coast Range Conifers, the Supreme Court explained that, in Boise III, "the state did not argue before this court that the whole parcel rule should apply, and this court did not address, much less purport to resolve, that issue." 339 Or. at 148, 117 P.3d 990.
[7] Although, in Boise II, this court asserted that Boise had stated a claim under the federal constitution, that statement referred to the more general allegations in the earlier complaint, so, for the reason stated in the text, that statement also does not constitute the law of the case under the present circumstances.
[8] In Tahoe-Sierra, the Court reiterated that, in Lucas, its "holding was limited to the extraordinary circumstance when no productive or economically beneficial use of land is permitted." 535 U.S. at 330, 122 S. Ct. 1465 (emphasis in original). The Court continued:
"The emphasis on the word `no' in the text of the opinion was, in effect, reiterated in a explaining that the categorical rule would not apply if the diminution in value were 95% instead of 100%. Anything less than a `complete elimination of value,' or a `total loss,' the Court acknowledged, would require the kind of analysis applied in Penn Central."
535 U.S. at 330, 122 S. Ct. 1465 (citations and omitted).
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2519150/
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2008 WY 6
WILLIAM L. BARNES, Appellant (Defendant),
v.
THE STATE OF WYOMING, Appellee (Plaintiff).
Case Number: 06-285, 06-286.
Supreme Court of Wyoming. OCTOBER TERM, A.D. 2007.
Decided: January 23, 2008.
Diane M. Lozano, State Public Defender, PDP; Tina N. Kerin, Appellate Counsel; Kirk A. Morgan, Assistant Appellate Counsel. Argument by Mr. Morgan, Representing Appellant.
Patrick J. Crank, Attorney General; Terry L. Armitage, Deputy Attorney General; D. Michael Pauling, Senior Assistant Attorney General; David Willms, Assistant Attorney General; Kristen Dolan, Assistant Attorney General. Argument by Ms. Dolan, Representing Appellee.
Before VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.
KITE, Justice.
[¶1] William L. Barnes pled no contest to possession of cocaine with intent to deliver, but reserved his right to appeal the district court's denial of his motion to suppress statements he made to police before his arrest. He claims the statements were inadmissible because he made them while in custody but without having been given Miranda warnings. We affirm the district court's order denying the suppression motion.
[¶2] In a consolidated appeal, Mr. Barnes claims the district court erred in concluding he was not entitled to credit for time served while he was awaiting disposition of the possession charge and another unrelated charge. The district court declined to give him credit for time served because he had violated the conditions of his parole in yet another matter and was incarcerated partly because he was awaiting a parole revocation hearing. We hold Mr. Barnes was entitled to credit for the time he served between his arrest and sentencing. We reverse the district court's sentence and remand for correction of the judgment and sentence in accordance with this opinion.
ISSUES
[¶3] Mr. Barnes states the issues as follows:
I. Did the trial court err in denying appellant's motion to suppress the statements given to police regarding his use and possession of an illegal drug when the statements were solicited by a police detective while appellant was in custody and prior to him receiving a Miranda style warning?
II. Did the trial court err when it directed that appellant not be given any credit for the time served as he was on parole, and then forwarded its decision to the Parole Board?
The State claims the district court properly denied Mr. Barnes' motion to suppress and declined to give him credit for time served while awaiting a parole revocation hearing.
FACTS
[¶4] On January 11, 2006, Detective James Eddy of the Cheyenne Police Department saw a vehicle without registration traveling westbound on Nationway in Cheyenne, Wyoming. Detective Eddy approached the vehicle in his unmarked patrol car. He observed Mr. Barnes, who was driving the vehicle, and a passenger. They looked at Detective Eddy several times and then the passenger slumped down in the seat. The detective activated his lights and siren and, after he had sounded the siren twice, the vehicle pulled over. As Detective Eddy stopped the patrol car to inquire about the vehicle registration, Mr. Barnes got out of the vehicle and ran. Detective Eddy yelled for him to stop but Mr. Barnes did not respond. Detective Eddy returned to his vehicle and pursued Mr. Barnes into an alley. He left the patrol car and went after Mr. Barnes on foot, apprehending him a few blocks away.
[¶5] Detective Eddy tackled Mr. Barnes to the ground and told him to put his hands behind his back. Instead, Mr. Barnes put his hands in his pants pockets. He appeared to be trying to remove something. Detective Eddy managed to get Mr. Barnes' hands out of his pockets and placed him in handcuffs. He sat Mr. Barnes up and, as he did so, he noticed several baggies containing white powder on the ground. He asked Mr. Barnes if the powder was methamphetamine. Mr. Barnes stated the baggies were not his property. The detective searched Mr. Barnes and in his pocket found a spoon and a needle of the type commonly used for shooting methamphetamine.
[¶6] Mr. Barnes began complaining of shortness of breath and dizziness. Detective Eddy asked him how much of the powder he had ingested. Mr. Barnes responded that methamphetamine was his drug of choice and the powder in the baggies was cocaine. Detective Eddy asked him why he had the substance if he had not been using it. Mr. Barnes stated, "Why do you think? If I'm not using it, what do you think I'm doing with it?" The officer asked him what he meant and Mr. Barnes responded that he intended to sell the cocaine. Detective Eddy placed him under arrest and took him to the detention center.
[¶7] At the detention center, Mr. Barnes complained of chest pains. Detective Eddy transported him to the hospital where he was treated and released. Back at the detention center, Mr. Barnes was charged with possession with intent to deliver cocaine. Detective Eddy subsequently weighed and tested the substance in the baggie, which proved to be cocaine, and Mr. Barnes was also charged with misdemeanor possession of cocaine.
[¶8] Prior to trial, Mr. Barnes filed a motion to suppress the statements he made to Detective Eddy prior to his arrest. He claimed that he was in custody (i.e. Detective Eddy chased him down, tackled him to the ground and placed him in handcuffs) when he made the statements; therefore, Detective Eddy was required to give him Miranda warnings prior to questioning him. The State argued Mr. Barnes' statements were not made during a custodial interrogation which is a condition precedent to the Miranda warning requirement. Under the circumstances that existed at the time, the State asserted, the seizure was best characterized as a Terry stop, in which an officer may question a detainee sufficiently to determine his identity and information confirming or dispelling the officer's suspicions without first giving Miranda warnings.
[¶9] After a hearing, the district court denied the motion. The court agreed with the State that Detective Eddy's questions were more analogous to a Terry stop than a custodial interrogation and did not, therefore, violate the Fifth Amendment to the United States Constitution. Additionally, the court concluded the detective's questions were in response to Mr. Barnes' medical complaints and were necessary for his health and safety.
[¶10] Prior to the court's ruling on the motion to suppress, the State moved for and the district court granted a dismissal of count II, misdemeanor possession of cocaine. Mr. Barnes pleaded no contest to the remaining charge of possession with intent to deliver and the district court sentenced him to four to five years imprisonment. The district court refused to give Mr. Barnes credit for time served, reasoning that at the time of his arrest for possession with intent to deliver, he was on parole and his subsequent incarceration was due in part to the parole violation. The district court ordered the sentence to be served concurrently with the sentences imposed for the parole violation and another crime with which Mr. Barnes was charged after his arrest for possession with intent to deliver. Subsequently, Mr. Barnes filed a motion to correct illegal sentence in which he argued that he was entitled to credit for 285 days served from his arrest on January 11, 2006, through his sentencing on October 23, 2006, because his detention during that time was a result solely of his inability to post bond. It is not apparent from the record whether the district court ruled on the motion.
STANDARD OF REVIEW
[¶11] The standards for reviewing a district court order denying a motion to suppress have been often repeated:
Rulings on the admissibility of evidence are within the sound discretion of the trial court. We will not disturb such rulings absent a clear abuse of discretion. An abuse of discretion occurs when it is shown the trial court reasonably could not have concluded as it did. Factual findings made by a trial court considering a motion to suppress will not be disturbed unless the findings are clearly erroneous. Because the trial court has the opportunity to hear the evidence, assess witness credibility, and draw the necessary inferences, deductions, and conclusions, we view the evidence in the light most favorable to the trial court's determination.
Negrette v. State, 2007 WY 88, ¶ 11, 158 P.3d 679, 682 (Wyo. 2007). A sentence that does not include proper credit for pre-sentence incarceration is illegal. Doolittle v. State, 2007 WY 52, ¶ 18, 154 P.3d 350, 356 (Wyo. 2007). The determination of whether a sentence is illegal is a question of law, which we review de novo. Id., ¶ 9, 154 P.3d at 354.
DISCUSSION
1. Order Denying Motion to Suppress Statements
[¶12] Mr. Barnes contends that the district court abused its discretion in denying his motion to suppress the statements he made to Detective Eddy because he made them during custodial interrogation without having been advised of his Miranda rights. He further asserts that the circumstances existing at the time he made the statements did not fall under any of the exceptions, including the public safety exception, which would relieve Detective Eddy of his obligation to give the Miranda warnings. The State argues that the district court properly denied the suppression motion because, first, Mr. Barnes made the statements during a valid investigatory stop, not a custodial interrogation, and second, Detective Eddy's questions were prompted by Mr. Barnes' medical complaints and fell within the public safety exception to the Miranda requirement. We begin by considering whether Mr. Barnes made the statements during an investigatory stop or in the course of a custodial interrogation.
a. Investigatory Stop v. Custodial Interrogation
[¶13] In Miranda v. Arizona, 384 U.S. 436, 444, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966), the Court established the rule that to be admissible in evidence any statement given by a suspect during custodial interrogation must be preceded by four warnings: a suspect has the right to remain silent; anything he says can be used against him in a court of law; he has the right to the presence of an attorney; and, if he cannot afford an attorney, one will be appointed for him prior to any questioning if he so desires. Grissom v. State, 2005 WY 132, ¶ 19, 121 P.3d 127, 135 (Wyo. 2005), citing Dickerson v. United States, 530 U.S. 428, 434, 120 S. Ct. 2326, 147 L. Ed. 2d 405 (2000), cert. denied, 535 U.S. 1106, 122 S. Ct. 2315, 152 L. Ed. 2d 1069 (2002). Statements made by a suspect during custodial interrogation after these advisements are given are admissible. Id. Statements made in response to police questioning after a suspect is in custody are generally inadmissible if these advisements have not been given. Id.
[¶14] Custodial interrogation means questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any significant way. Jelle v. State, 2005 WY 111, ¶ 14, 119 P.3d 403, 408 (Wyo. 2005). In resolving the custodial status of a suspect we consider "whether a reasonable man in [the suspect's] position would have considered himself to be in police custody." Gompf v. State, 2005 WY 112, ¶ 31, 120 P.3d 980, 988 (Wyo. 2005). General on-the-scene questioning as to facts surrounding a crime is not "custodial interrogation," nor are statements volunteered freely without compelling influences. Id. We consider the totality of the circumstances when determining whether a suspect was in custody when questioned. Id. Several factors are relevant to the determination:
Among these are: (1) whether a suspect is questioned in familiar or neutral surroundings; (2) the number of police officers present; (3) the degree of physical restraint and whether it is comparable to those associated with a formal arrest; and (4) the duration and character of the interrogation. See 2 Wayne R. LaFave, Jerold H. Israel and Nancy J. King, Criminal Procedure § 6.6(c) at 527 (2nd ed.1999); see also Wunder, 705 P.2d at 335. The nature of the interrogator, the nature of the suspect, the time and place of the interrogation, the progress of the investigation at the time of the interrogation, whether the suspect is informed that his detention would not be temporary, and the elapsed amount of time between questioning and the arrest may be important factors as well. Wunder, 705 P.2d at 335; J.F. Ghent, Annotation, What Constitutes "Custodial Interrogation" Within Rule of Miranda v. Arizona Requiring that Suspect be Informed of His Federal Constitutional Rights Before Custodial Interrogation, 31 A.L.R. 3d 565 (1970). No one factor alone will necessarily establish custody for Miranda purposes, and not all factors will be relevant to a given case.
Jelle, ¶ 14, 119 P.3d at 408. Citing these factors, Mr. Barnes emphasizes the degree of physical restraint Detective Eddy used and argues it was comparable to a formal arrest.
[¶15] As stated in Jelle, no one factor necessarily establishes custody for Miranda purposes. Rather, the totality of the circumstances must be considered. In Mr. Barnes' case, the questioning occurred in a neutral setting, only one officer was present and it appears from the record that the questioning lasted only a few moments. These factors would suggest that Mr. Barnes was not in custody for Miranda purposes.
[¶16] The difficulty arises from the fact that Mr. Barnes had been forcibly taken to the ground and placed in handcuffs when he was asked about the substance in the bags. Custody requires only that an accused be deprived of his freedom of action in any significant way. Bhutto v. State, 2005 WY 78, ¶ 15, 114 P.3d 1252, 1260 (Wyo. 2005). There is no question Mr. Barnes had been deprived of his freedom of action in a significant way. It seems likely that a reasonable person in Mr. Barnes' position would have considered himself to be in police custody. Contrary to the district court's conclusion, we conclude Mr. Barnes was in custody at the time Detective Eddy questioned him about the substance in the bags. That conclusion, however, does not end the inquiry.
b. The Public Safety Exception to Miranda
[¶17] In denying Mr. Barnes' suppression motion, the district court also concluded that the detective's questions were justified by the public safety exception to Miranda recognized in New York v. Quarles, 467 U.S. 649, 104 S. Ct. 2626, 81 L. Ed. 2d 550 (1984). In that case, the Court held admissible a statement made by a suspect in response to police questioning before Miranda warnings were given. Rather than focusing on the question of whether the suspect made the statements during custodial interrogation, the Court focused instead on whether public safety considerations justified officer questioning of a suspect without first giving Miranda warnings.
[¶18] In Quarles, a woman told police that she had been raped and the man who did it had just entered a supermarket with a gun. An officer observed a man matching the victim's description of the suspect inside the supermarket, pursued him with his gun drawn and ordered him to stop and put his hands over his head. The officer frisked the suspect and found an empty shoulder holster. After handcuffing him, the officer asked the suspect where the gun was. He responded, "The gun is over there," and pointed to some empty cartons. The officer retrieved a revolver from one of the cartons.
[¶19] The defendant moved to suppress his statement, claiming the question violated his Fifth Amendment guarantee against compulsory self-incrimination and Miranda. On the facts before it, the Court held there was a public safety exception to the Miranda requirement. The Court stated:
In a kaleidoscopic situation such as the one confronting these officers, where spontaneity rather than adherence to a police manual is necessarily the order of the day, the application of the exception which we recognize today should not be made to depend on post hoc findings at a suppression hearing concerning the subjective motivation of the arresting officer. Undoubtedly most police officers, if placed in Officer Kraft's position, would act out of a host of different, instinctive, and largely unverifiable motives their own safety, the safety of others, and perhaps as well the desire to obtain incriminating evidence from the suspect.
Whatever the motivation of individual officers in such a situation, we do not believe that the doctrinal underpinnings of Miranda require that it be applied in all its rigor to a situation in which police officers ask questions reasonably prompted by a concern for the public safety.
Quarles, 467 U.S. at 656. The Court made it clear that the exception undoubtedly extends to officers' questions necessary to secure their own safety. Id. at 659. This Court relied on Quarles in Mackrill v. State, 2004 WY 170, ¶ 14, 100 P.3d 361, 365-368 (Wyo. 2004). Mr. Mackrill was in the company of Chad Schaub when Mr. Schaub was apprehended by law enforcement on an arrest warrant for possession of pipe bombs and drugs and for questioning in connection with an attempted murder. Mr. Schaub was considered armed and dangerous. As Mr. Schaub and Mr. Mackrill were getting into Mr. Mackrill's truck, officers ordered them to the ground and handcuffed them. Mr. Mackrill was lying on the ground in handcuffs when one of the officers asked him whether he had any weapons. He responded that he had two knives. Another officer asked him if there were any weapons or contraband in his vehicle. Mr. Mackrill replied that he had a gun and a clip in his truck. When officers retrieved the gun from the truck, they found marijuana.
[¶20] Mr. Mackrill was charged with possession of marijuana with intent to deliver. He moved to suppress the statements he made before his arrest, arguing that he was handcuffed, was not free to leave the scene, and had not received the Miranda advisements at the time he made the statements in violation of his Fifth Amendment rights. This Court upheld the district court's order denying the motion on the ground that the officer's questions were reasonably related to officer and public safety and Miranda warnings were not required. Mackrill, like Quarles, relied exclusively on the officer and public safety exception and did not consider the investigatory stop/custodial interrogation distinction in holding that Miranda warnings were not required.
[¶21] In the present case, the district court held Mr. Barnes' statements admissible under the public safety exception to Miranda.
The Detective saw a substance that appeared to be an illegal drug and [Mr. Barnes] began complaining of dizziness. Detective Eddy's questioning about the substance that came out of [Mr. Barnes'] pocket was done in response to a medical emergency. It was necessary for the officer to inquire as to what the substance was and how much [Mr. Barnes] ingested. Therefore, it was not necessary for Detective Eddy to Mirandize [Mr. Barnes] before inquiring about his use of the substance.
[¶22] We agree. Once Mr. Barnes began complaining of dizziness and shortness of breath, Detective Eddy's questions were necessary to protect Mr. Barnes from harm. Given Mr. Barnes' unusual and suspicious behavior, the spoon and needles found in his pocket, and his complaints of dizziness and shortness of breath, Detective Eddy had every reason to believe Mr. Barnes was under the influence of and possibly suffering from a drug overdose. It was objectively reasonable under the circumstances for Detective Eddy to ask Mr. Barnes how much of the white powder he had taken. The district court correctly concluded Mr. Barnes' response to the question to the effect that he was a methamphetamine user, not a cocaine user, was admissible.
[¶23] Under the totality of the circumstances, Mr. Barnes' response also reasonably led the detective to inquire further. To borrow language from Quarles, 467 U.S. at 656, "in a kaleidoscopic situation such as the one confronting" Detective Eddy, "where spontaneity rather than adherence to a police manual is necessarily the order of the day," it was reasonable for him to doubt the truth of Mr. Barnes' response and attempt to discern what he had ingested. The white powder, the spoon and needle, and the complaints of dizziness and shortness of breath required Detective Eddy to obtain what information he could about Mr. Barnes' drug usage. To have ignored the factors suggesting a possible medical emergency and proceed with an arrest and Miranda warnings could have jeopardized Mr. Barnes' health and safety. Under these particular circumstances, we are not willing to say in hindsight that Detective Eddy's action in questioning him before arresting him and without Miranda warnings was unreasonable.
2. Denial of Credit for Time Served
[¶24] At the time of his arrest on January 11, 2006, for possession with intent to deliver, Mr. Barnes was on parole from a sentence imposed on a prior conviction.[1] On February 17, 2006, while in jail, he was also charged with felony larceny, in violation of Wyo. Stat. Ann. § 6-3-402(a), (c)(i) (LexisNexis 2007). The latter charge was unrelated to either his January 11, 2006, arrest or the earlier conviction for which he was on parole. As a consequence of his 2006 arrests, the Board of Parole for the State of Wyoming (parole board) apparently placed an administrative hold on Mr. Barnes while he was in jail awaiting disposition of the 2006 charges, meaning that he was not to be released from jail pending a parole revocation hearing. However, the record does not reflect the date the administrative hold was imposed.
[¶25] Mr. Barnes appeared in district court for sentencing on the two 2006 convictions on October 9, 2006. At that hearing, the district court imposed concurrent sentences of four to five years for the larceny and possession with intent to deliver convictions. The district court entered a judgment and sentence in the two cases on October 26, 2006. The judgments and sentences stated:
IT IS FUTHER ORDERED that WILLIAM L. BARNES shall be given no credit against the minimum and maximum sentences for time served in the Laramie County Detention Facility awaiting disposition of this matter, as he was on parole under Laramie County District Court Docket 26-631 at the time of his arrest.
The district court also ordered that the terms of confinement imposed be served concurrent with any sentence imposed for the parole violation.
[¶26] On November 27, 2006, the parole board held a parole revocation hearing. On December 1, 2006, the parole board entered an order revoking Mr. Barnes' parole. The parole board ordered that Mr. Barnes "not be credited with 1 year, 6 months and 2 days of the time during which he was released until he was taken into custody on October 23, 2006."
[¶27] Mr. Barnes claims the failure to give him credit for the time he served after his arrest on January 11, 2006, until his sentence was imposed on October 23, 2006, was illegal. He presents three alternative arguments to support his claim. At the very least, he contends, the district court was required to give him credit for the time he served between his arrest and the date the parole board imposed the administrative hold because that period of confinement was due solely to his inability to post bond. Given that the record does not reflect when the hold was imposed and this Court cannot consider matters upon which the record is silent, he asserts, credit is required alternatively for all of the time served between his January arrest and October sentencing. Mr. Barnes further argues that even if this Court were somehow to determine when the administrative hold was imposed, he is entitled to credit for post-sentence confinement against the original charge for which he received parole.
[¶28] The State responds that credit for time served is appropriate only when the confinement is due solely to the defendant's inability to post bond. Gomez v. State, 2004 WY 15, ¶ 13, 85 P.3d 417, 420 (Wyo. 2004). The State argues that Mr. Barnes was not entitled to credit for time served because his confinement was not due solely to his inability to post bond but rather to the administrative hold imposed as a result of his parole violations. The State points out that the district court indicated at the sentencing hearing that it would give credit for the time Mr. Barnes served between his January 2006 arrest and imposition of the administrative hold. The State then asks this Court to assume from the fact that no credit for time served was given that the district court determined the administrative hold was imposed immediately upon Mr. Barnes' January 2006 arrest. Alternatively, the State asks this Court to remand the case for purposes of determining when the administrative hold was imposed and, if necessary, correcting the sentence to reflect any credit due.
[¶29] It is well established that a defendant is entitled to credit for time spent in pre-sentence confinement against both the minimum and maximum sentence if he was unable to post bond for the offense of which he was convicted. Doolittle, ¶ 18, 154 P.3d at 356. A defendant is not, however, entitled to such credit when his confinement would have continued despite his ability to post bond. Gomez, ¶ 13, 85 P.3d at 420. A sentence that does not include proper credit for pre-sentence incarceration is illegal. Doolittle, ¶ 18, 154 P.3d at 356. An illegal sentence is one which exceeds statutory limits, imposes multiple terms of imprisonment for the same offense, or otherwise violates the constitution or the law. Manes v. State, 2007 WY 6, ¶ 7, 150 P.3d 179, 181 (Wyo. 2007).
[¶30] The difficulty with what happened in Mr. Barnes' case is that neither the district court nor the parole board gave him credit for the time he served between his January 2006 arrest and October 2006 sentencing. The result is that he was confined for 285 days more than was authorized by any of the statutes under which he was sentenced. At one proceeding or the othereither the district court sentencing hearing or the parole board revocation proceedingcredit had to be given for the time Mr. Barnes spent in jail between his arrest and his sentencing. Had the parole board given him credit for that period of confinement in its revocation order, we would uphold the district court's sentence. See Segnitz v. State, 7 P.3d 49, 52 (Wyo. 2000). The parole board's failure to do so resulted in an unlawful sentence because he was not awarded credit for time served. To cure the error, we reverse the sentence and remand to the district court with instructions to give Mr. Barnes credit for the time he served between his arrest and his sentencing.
[¶31] The district court's order denying the suppression motion is affirmed. However, the case is remanded for correction of the judgment and sentence consistent with this opinion.
NOTES
[1] Mr. Barnes was charged with felony burglary in 2000. He was sentenced to incarceration for a term of 2½ to 10 years. In January of 2005, he was released on parole.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2519152/
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174 P.3d 598 (2007)
216 Or. App. 475
STATE of Oregon, Plaintiff-Respondent,
v.
Forrest Clayton NORMAN, Defendant-Appellant.
031183 and 031199; A125399 (Control) and A125400.
Court of Appeals of Oregon.
Argued and Submitted July 2, 2007.
Decided December 12, 2007.
*599 Jesse Wm. Barton, Salem, argued the cause and filed the brief for appellant.
Susan G. Howe, Senior Assistant Attorney General, argued the cause for respondent. With her on the brief were Hardy Myers, *600 Attorney General, and Mary H. Williams, Solicitor General.
Before HASELTON, Presiding Judge, and ARMSTRONG and ROSENBLUM, Judges.
HASELTON, P.J.
This appeal arises from two cases, Tillamook County Circuit Court Nos. 031183 and 031199, which were consolidated for trial before a jury. With respect to Case No. 031183, defendant challenges his convictions and sentences on three counts of attempted first-degree assault, ORS 161.405; ORS 163.185, and one count of felony attempt to elude a police officer, ORS 811.540. Defendant contends, principally, that (1) the trial court erred in precluding testimony from an expert witness that the actions of police officers, in attempting to apprehend defendant, had not comported with proper police practice, including with respect to the use of deadly physical force and (2) the court erred in determining that, for purposes of calculating defendant's criminal history score under the sentencing guidelines, one of defendant's attempted assault convictions did not arise from the "same criminal episode" as the other two. As described below, we reject defendant's first contention, as well as his other assignments of error pertaining to his convictions, but agree with his second contention. Accordingly, we affirm defendant's convictions but reverse and remand for resentencing in that case.
With respect to Case No. 031199, defendant challenges the imposition of an upward departure sentence on his conviction for second-degree burglary, ORS 164.215. In that case, the jury convicted defendant of second-degree burglary and unauthorized use of a vehicle, ORS 164.135, based on conduct that occurred on August 9, 2003. The trial court subsequently imposed an upward departure sentence on the burglary conviction based on "persistent involvement in similar offenses." As amplified below, we agree that the court erred in imposing that sentence, see State v. Ramirez, 205 Or.App. 113, 133 P.3d 343, adh'd to on recons., 207 Or.App. 1, 139 P.3d 981 (2006), rev. allowed, 342 Or. 256, 151 P.3d 930 (2007), and, consequently, we reverse and remand for resentencing in that case.
The circumstances material to our review are undisputed, except as specifically noted below. In Case No. 031183, defendant's convictions arose from a series of events that occurred on August 19, 2003. At that time, defendant was staying with his ex-wife, Mitsi Norman, in Tillamook, helping her move into a new house. That afternoon, Norman's next-door neighbor, Lindsey Mays, telephoned her at work to tell her that he believed that defendant had broken into his house. Norman came home from work and found defendant in her home. Defendant was extremely anxious because a police officer had arrived outside of Mays's house, and he was worried that the officer suspected that he was the burglar. Norman, knowing that the police likely did suspect defendant, suggested to defendant that he leave through a bedroom window at the rear of the house. Norman then went outside and told the officer Tillamook County Sheriff's Sergeant Jonathan Zimmerman that defendant had just left her house. Tillamook City Police Officers Kurtis Wagner and Jana McCandless arrived to assist in the investigation, and the three officers began searching for defendant.
As the officers conducted their search, a man told them that he had seen a suspicious person matching defendant's description changing the tire on a truck on a nearby gravel road. Zimmerman, Wagner, and McCandless drove to the gravel road, left their cars, and walked up the road to investigate, with Zimmerman and Wagner in the lead and McCandless trailing behind at some distance to "watch the back." After walking up the gravel road "for a little bit," the officers heard a truck start up.
What happened next is a matter of sharp dispute between the state and defendant. Although the three officers' accounts varied in their details, they agreed on the substance of the following scenario: As the truck came around the corner into view, about 20 feet in front of the officers, Zimmerman and Wagner raised their hands and shouted for the driver to stop. Zimmerman could see that it was defendant who was driving the truck and, once defendant made eye contact with *601 the officers, he began to accelerate towards them, "revving" the engine higher. Believing that defendant intended to run over them, Zimmerman and Wagner moved to avoid being hit. Each officer drew his weapon, and Zimmerman fired three or four rounds at the truck as it came at and passed them.
The truck then continued a few yards down the gravel road towards McCandless, who, having heard the first shots, had unholstered her weapon. When McCandless determined that the truck was not going to stop, and would hit her if she did not move, she moved into blackberry brambles at the side of the road and fired several shots at the truck. The truck continued down the road, with the three officers running after it.
Meanwhile, a fourth officer, Tillamook County Sheriff's Deputy Mark Hannigan, was also involved in searching for defendant and began driving up the gravel road. As he did so, Hannigan saw defendant's truck coming at him from the opposite direction, about 75 yards away. At the same time, Hannigan could see the three officers running down the road behind the truck, and he heard one of them on the radio stating that the driver of the truck was the suspect. Hannigan believed that the truck was not going to stop and was "going to run over the top" of him, so he put his patrol car into reverse. At one point, defendant's truck and Hannigan's patrol car were "bumper-to-bumper" for about 15 to 20 feet, but Hannigan's car spun into a ditch, and defendant continued down the road. A high speed chase ensued, with defendant ultimately being apprehended the next day.
Defendant's account was very different. According to defendant, as he was driving down the gravel road at between five and ten miles per hour, he saw a police officer standing by the side of the road, pointing a gun at him. Defendant never saw that officer or any officer signal for him to stop. Instead, the officer just shot at him. At that point, according to defendant, he "freak[ed] out" "I'm like I didn't know what I did wrong, man" and, "lay[ing] over in the seat," accelerated with the officers shooting after him. When defendant finally "rais[ed] up," he saw a police car (Hannigan's) "backed up" "parked sideways on the road but not in the road"; defendant did not slow down but, instead, "went around him" and drove away.
Defendant denied attempting to run over the officers or driving "bumper-to-bumper" with Hannigan. At trial, as described below, defendant presented the testimony of a forensics expert, Verne Hoyer, who reconstructed what had occurred based on his investigation and analysis of bullet trajectory patterns.
Defendant was charged with, inter alia, attempted first-degree assault against each of the four officers and felony attempt to elude. Defendant was convicted, by a nonunanimous verdict, of attempted first-degree assault against Zimmerman, McCandless, and Hannigan, but was acquitted with respect to the same charge involving Wagner. The jury also convicted defendant of felony attempt to elude. The court, in imposing sentence on the conviction for attempted first-degree assault involving Hannigan (Count 9), determined that that offense was not part of the same criminal episode as the attempted assaults against Zimmerman and McCandless (Counts 6 and 7); consequently, the court used the convictions on those two counts to "reconstitute" and enhance defendant's criminal history score on Count 9 from "F" to "B." The court further imposed upward departure sentences, based on judicial findings of aggravated factors, on each of the convictions for attempted assault and felony attempt to elude.
On appeal, defendant assigns error to (1) the trial court's in limine ruling pertaining to the admissibility of certain aspects of the testimony of defendant's expert, Hoyer; (2) the trial court's refusal to give defendant's proffered "jury unanimity" instruction; (3) the court's subsequent entry of judgments of conviction based on nonunanimous verdicts; (4) the court's calculation of defendant's criminal history score on Count 9, based on its determination that the attempted assault against Hannigan did not arise from the same criminal episode as the attempted assaults against Zimmerman and McCandless; and (5) the court's imposition of upward departure sentences based on judicial findings *602 in both Case Nos. 031183 and 031199. For the reasons that follow, we reject defendant's first three assignments of error but agree with both the fourth assignment of error and with the fifth assignment of error with respect to the imposition of the departure sentence in Case No. 031199.[1]
Before addressing the particulars of the trial court's in limine ruling pertaining to the admissibility of some aspects of Hoyer's testimony, it is useful to put that matter into context. Defendant's theory of defense against the attempted assault and attempt to elude charges was that he had not attempted to run the officers down but, instead, had panicked after the officers fired at him. Central to that defense was the premise that the officers had lied about the events that took place on the gravel road and had done so in order to cover up their use of firearms in violation of departmental policies governing use of "deadly physical force." That is, defendant contended, the officers fabricated a self-defense justification to avoid being disciplined for violating official policies that regulate police use of deadly physical force.
As support for that theory of defense, defendant sought to introduce expert testimony from Hoyer. In particular, Hoyer would (1) describe his conclusions, based on analysis of bullet trajectories, the officers' locations, and the speed of defendant's vehicle, as to what had occurred on the gravel road and, particularly, testify that the officers had fired at defendant from the side of the road as he approached, passed, and was then past them; and (2) render his opinion that certain conduct by the officers in their efforts to apprehend defendant did not comport with competent police practice, including with respect to the use of deadly physical force.
The substance of Hoyer's putative testimony was set out in two letter reports that he had submitted to defense counsel. Neither of those reports referred specifically to written policies, including "deadly physical force" policies applying to Tillamook County or Tillamook City law enforcement personnel, much less expressed an opinion that any or all of the officers had, in fact, violated those particular policies. Rather, Hoyer rendered the opinion that Zimmerman, in particular, had deviated from sound police practices in several respects, including failing to secure the perimeter adequately, failing to maintain adequate communication with other officers, and employing deadly physical force without first exhausting other, less extreme measures and doing so in circumstances not warranting the use of such force. In that regard, Hoyer concluded that police conduct at the scene was "inappropriate," "demonstrated poor judgment," needlessly resulted in a dangerous high speed chase, and could have resulted in a wrongful death.
The state filed a motion in limine to exclude Hoyer's anticipated testimony in its entirety because that testimony, by focusing on the officers' conduct, as opposed to defendant's, represented an effort to "shift the blame" to the officers and, thus, "constitutes an attempt to create a special classification of victim covering law enforcement officers." The state also sought to exclude any reference to departmental policies governing the use of deadly physical force.
In the colloquy on that motion, the court addressed various aspects of Hoyer's putative testimony, as expressed in his written reports to defense counsel. The court determined that the results of Hoyer's investigation as to how many shots had been fired, where the officers had been standing "generally," and where the officers' shots struck defendant's truck would be admissible. The court further ruled that Hoyer's conclusions regarding time, distance, speed, and road condition were also admissible.
The trial court then addressed the portions of Hoyer's putative testimony pertaining to whether the officers' actions comported with sound police practice and procedure. The court concluded that Hoyer's testimony in that regard was irrelevant to the jury's consideration *603 of defendant's culpability. In so ruling, the court went to great lengths, in a series of extensive colloquies with counsel, to emphasize that it was not precluding defendant from (1) presenting evidence through Hoyer that the "on the ground" facts comported with defendant's account rather than the officers'; (2) establishing, through cross-examination of the officers, the existence of the "deadly physical force" policies and the officers' familiarity with those policies and possible sanctions for their violation; and (3) if (1) and (2) were shown, arguing to the jury that the combination of those factors established a motive to fabricate, implicating bias.
During trial, following a clarifying offer of proof, defendant did present Hoyer's incident reconstruction testimony to the jury. Hoyer rendered the opinion that, given physical and temporal constraints, Zimmerman's account was not "humanly possible" and, for the same reasons, defendant would not have had time to have formed the intent to run over the officers and to have acted on any such intent. Neither during the offer of proof that preceded that testimony, nor at any other time, did defendant adduce testimony from Hoyer that the officers' conduct did, in fact, violate their departmental policies governing use of deadly physical force.
In addition, through cross-examination of Zimmerman, Wagner, and McCandless, defendant established that those officers' departments had published "deadly physical force" policies, that they were aware of those policies, and that they were aware that violation of those policies could result in termination. Defense counsel chose, for self-described "tactical reasons," not to offer the policies themselves into evidence but, instead, inquired of the officers regarding their content.[2] In closing argument, defense counsel referred to the officers' possible motive to fabricate to avoid the "very serious repercussions" of violating the "strict" policies limiting the use of deadly physical force. The jury, as noted, convicted defendant of three of the four attempted first-degree assault charges, as well as felony attempt to elude.
Against that backdrop, we return to the particulars of the first assignment of error. Defendant frames that assignment as follows:
"Defendant assigns error to the trial court's order granting the state's motion in limine, thereby precluding defendant from presenting expert testimony to assist the jury in determining whether the police officers violated policies and thus were subject to discipline, when they fired at defendant in his moving vehicle."
There are at least two threshold defects with that assignment of error. First, to the extent that defendant suggests that the court's ruling precluded Hoyer from testifying that some or all of the officers had violated "policies" as opposed to testifying that their conduct evinced poor judgment and did not comport with competent practice the court did not so rule. That is unsurprising because nothing in Hoyer's letter reports, which framed the discussion of the in limine ruling, referred to specific policies, including, particularly, the Tillamook County and city departmental policies regarding use of "deadly physical force" that were the predicate for defendant's "fabrication" attack.
Second, in a related sense, at no point did defendant ever adduce from Hoyer, by way of an offer of proof, what his opinion, if any, would have been regarding actual violation of the pertinent policies governing use of deadly physical force. Accordingly, the matter is not preserved. OEC 103(1)(b).
Beyond those deficiencies, to the extent that defendant is now suggesting that the trial court's ruling precluded defendant from presenting testimony, by Hoyer, that the officers' physical conduct did not, in the totality of circumstances, justify the use of deadly physical force, defendant is wrong. As described above, Hoyer testified that his assessment of the physical evidence flatly contradicted the officers' accounts. That testimony, in combination with that adduced through cross-examination of the officers regarding their awareness of their departmental policies and potential sanctions for their *604 violation, permitted the jury to infer, if it so chose, that the officers had a motive to fabricate. Indeed, defense counsel so contended in closing argument. Accordingly, we reject the first assignment of error.
Defendant's second and third assignments of error pertain to the trial court's refusal to give defendant's proffered "jury unanimity" instruction and the court's subsequent entry of judgment on some counts based on nonunanimous verdicts. Those assignments of error are unpreserved. Defendant's contention that the constitutional measure by which the "jury unanimity" language was added in 1934 to Article I, section 11,[3] of the Oregon Constitution does not comport with the "separate vote" provision of Article XVII, section 1, of the Oregon Constitution[4] does not satisfy the requisites for error apparent on the face of the record, ORAP 5.45, in that it presents a matter that is "reasonably in dispute." State v. Brown, 310 Or. 347, 355, 800 P.2d 259 (1990). Further, to the extent that defendant now invokes Blakely v. Washington, 542 U.S. 296, 124 S. Ct. 2531, 159 L. Ed. 2d 403 (2004), as overruling Apodaca v. Oregon, 406 U.S. 404, 92 S. Ct. 1628, 32 L. Ed. 2d 184 (1972), sub silentio, we have previously rejected that contention in the context of a preserved assignment of error. State v. Bowen, 215 Or. App. 199, 168 P.3d 1208 (2007).
We proceed to defendant's fourth assignment of error, which challenges the court's calculation of his criminal history score on his conviction for the attempted first-degree assault against Hannigan (Count 9). The court, over defendant's objection, declined to treat that offense as part of the "same criminal episode" as the attempted assaults against Zimmerman and McCandless (Counts 6 and 7) and, consequently, used the convictions on those two counts to enhance defendant's criminal history score on Count 9 from "F" to "B." We review the trial court's sentencing decision specifically, its determination that the conviction on Count 9 did not arise from the same criminal episode as Counts 6 and 7 for errors of law. State v. Fore, 185 Or.App. 712, 716, 62 P.3d 400 (2003).
We begin by putting the asserted error in context. A defendant's criminal history score is used to calculate the sentence the court is to impose. OAR XXX-XXX-XXXX. The score is determined by several factors, including the number and character of the offender's prior convictions. Id. When multiple convictions occur in the same proceeding, ones occurring in an earlier criminal episode may be used to recalculate the defendant's criminal history score with respect to convictions stemming from a later criminal episode. State v. Bucholz, 317 Or. 309, 317, 855 P.2d 1100 (1993); State v. Allen, 151 Or.App. 281, 290-91, 948 P.2d 745 (1997). In contrast, when a defendant's multiple convictions stem from the same criminal episode, his criminal history score remains the same with respect to all of those convictions.
To determine whether convictions arise from the same criminal episode, we apply the same test that governs our double jeopardy analysis. State v. Kautz, 179 Or. App. 458, 466-67, 39 P.3d 937, rev. den., 334 Or. 327, 52 P.3d 435 (2002). Crimes arise from the same criminal episode when they are part of "continuous and uninterrupted conduct that * * * is so joined in time, place and circumstances that such conduct is directed to the accomplishment of a single criminal objective." ORS 131.505(4). As we explained in State v. Sparks, 150 Or.App. 293, 297, 946 P.2d 314 (1997) (citing State v. Boyd, 271 Or. 558, 565-66, 533 P.2d 795 (1975)), the term "criminal episode" is synonymous with the phrase "same act or transaction." The Oregon Supreme Court has explained that "two charges arise out of the same act or transaction if they are so closely linked in time, place and circumstance that a complete account of one charge cannot be *605 related without relating the details of the other charge." State v. Fitzgerald, 267 Or. 266, 273, 516 P.2d 1280 (1973).
Here, defendant argues that the three assaults (against Zimmerman and McCandless and against Hannigan) all arose from one criminal episode because the actions are so fundamentally related that a complete account of the third assault cannot be made without discussing the first two. As primary support for that argument, defendant invokes Kautz.
In Kautz, the defendant was convicted of numerous crimes, including one count of burglary and one count of robbery. 179 Or.App. at 460, 39 P.3d 937. The defendant had broken into a garage, taken various items, and attempted to leave in the victim's car. Id. As the defendant was leaving, the victim saw the defendant and attempted to stop him. Id. To prevent his capture, the defendant pointed a shotgun at the victim, told him to back off, and then fled. Id. The trial court treated the two convictions, one for unlawfully taking property (burglary) and one for overcoming resistance to the taking of property (robbery), as arising from separate criminal episodes and, based on that determination, declined to apply the "shift-to-I" rule, OAR XXX-XXX-XXXX, in imposing consecutive sentences for those crimes. Kautz, 179 Or.App. at 460, 39 P.3d 937.
On appeal, we reversed, holding that all of the defendant's acts were directed at one criminal goal and that the robbery was, in essence, simply a continuation of the burglary. Id. at 467, 39 P.3d 937. We concluded that, "[w]hile defendant may have acquired an additional criminal objective to escape when confronted by [the victim], his earlier objective to steal [the victim's] property continued during the course of all of the events." Id. Because of the continuity of purpose, and the fact that all the events took place in such a short period of time, it would be impossible to give a complete account of the robbery without first discussing the burglary. Id. In other words, the state would have needed to relate the facts of the burglary in order to explain why the defendant was using force to escape. As a result, we held that the two convictions arose from a single criminal episode. Id.
Defendant contends that his case is similar to Kautz, because the three assaults are so connected in time, place, and purpose that the circumstances of the third offense cannot properly be understood and assessed without reference to the first two. Defendant asserts that he had only one purpose throughout his interaction with the police to flee from them and, although he may have attempted to commit three assaults in the process, his actions occurred over the span of only a few hundred feet and within a few seconds, during which his goal to escape never wavered. Thus, defendant reasons, as with the two criminal acts in Kautz, it would be impossible to explain why and how he encountered Hannigan without reference to his encounter with the other officers mere seconds before. In sum, defendant asserts, everything that occurred on the gravel road was a single criminal episode.
The state counters that defendant's reliance on Kautz is misplaced for several reasons. First, the state points out that, while in Kautz there was only one victim, here, defendant assaulted three officers. Second, the state argues that the criminal acts in Kautz all transpired in one place, a garage and its driveway, whereas here, the encounters were separated by approximately 100 yards.
Further, invoking Fore, the state notes that, even assuming that the events transpired in a relatively brief time and proximate space, that is not, by itself, dispositive. In Fore, the defendant, an inmate working on a road crew in Marion County, ran away from the crew and, 20 minutes later, was seen three blocks away driving away from the area in a van. 185 Or.App. at 714, 62 P.3d 400. Later the same day, the defendant was apprehended near the same van in Josephine County. Id. The defendant was charged in Josephine County with unauthorized use of a vehicle (UUV). The defendant was also charged in Marion County with both second-degree escape and UUV. After being convicted on the Josephine County UUV charge, the defendant moved to dismiss the Marion County prosecution as being barred *606 by, inter alia, statutory former jeopardy, ORS 131.515(2),[5] arguing that the Marion County charges arose from the "same criminal episode" as the Josephine County prosecution. The Marion County court granted that motion. Fore, 185 Or.App. at 714, 62 P.3d 400.
The state appealed only the dismissal of the second-degree escape charge, arguing that the defendant's escape and his subsequent UUV were not part of the "same criminal episode" for purposes of ORS 131.515(2), "because [the] defendant's escape was complete when he ran away from the work crew and before he took the van" and because "a complete account of each crime is possible without relating the details of the other." Fore, 185 Or.App. at 715, 62 P.3d 400. The defendant responded that the two events the escape and UUV were very closely linked in time and place. We acknowledged those circumstances but concluded, nevertheless, that mere temporal and spatial proximity was "not dispositive" because, as the state contended, a complete account of the escape could be related without relating the details of the defendant's theft of the van. Id. at 718, 62 P.3d 400. The state contends that the same reasoning controls here.[6]
Finally, the state challenges defendant's theory that, because his acts were geared to one criminal objective, they are all part of one criminal episode. The state points out that the Oregon Supreme Court has held that "the test of a single criminal objective is no panacea," State v. Kessler, 297 Or. 460, 465, 686 P.2d 345 (1984), for ascertaining the contours of a criminal episode.[7]
In Kessler, the defendant was one of six inmates who escaped from prison, in the process of which they kidnapped two correctional officers and four lay ministers who were visiting the prison at the time. Id. at 462, 686 P.2d 345. The prisoners captured the six victims and stole their clothes in order to obtain disguises to effect their escape. Id. The Supreme Court upheld the trial court's decision to treat each kidnapping conviction as having arisen from a separate criminal episode, even though each act was committed within a short space of time and place and all were aimed at achieving the same purpose. Id. at 465-67, 686 P.2d 345. In so holding, however, the court cautioned that "the fact that the criminal conduct involved multiple victims was no casual coincidence." Id. at 467, 686 P.2d 345. Rather, "[e]ach of the civilian victims was summoned for a purpose, to obtain his clothing for one of the prisoners." Id. Thus, because "it mattered to the defendant or to his objective who or how many persons" were kidnapped, the court reasoned that these were all separate criminal episodes. Id. at 468, 686 P.2d 345.
The state is correct that various circumstances e.g., temporal and spatial proximity and commonality of purposes are, when considered in isolation, insufficient to compel a determination that different offenses arose from the same criminal episode. Nevertheless, where those circumstances are so interrelated that a complete account of one offense cannot be related without relating details of the other(s), the offenses must be deemed to have arisen from the same criminal episode, including with respect to calculation of criminal history score. That standard was satisfied here.
*607 We begin by emphasizing the extreme temporal (a matter of seconds) and spatial (roughly 100 yards) proximity here. Indeed, Hannigan could see the other officers running down the gravel road, chasing defendant's truck, as the truck bore down on him. In cinematographic terms, the "action" all occurred in a single "scene." Further, as defendant contends for sentencing purposes and we do not understand the state to dispute defendant's actions within that extremely limited "window" were motivated by a single, undifferentiated objective to avoid apprehension.
Most significantly, in large part as a product of those circumstances, it would have been functionally impossible for defendant to present his defense as to attempted assault against Hannigan viz., that he was crouched down behind the wheel of his truck in a panicked response to avoid being hit by the other officers' gunshots without relating details of the encounter with those officers. By the same token, those circumstances bear directly on the state's ability to prove that defendant intended to cause serious physical injury to Hannigan, as opposed to merely acting recklessly. Because of that inextricable functional intertwining, this case differs sharply from those, like Fore and Stoltz, that the state invokes. We thus conclude that, because the conviction on Count 9 arose from the same criminal episode as Counts 6 and 7, the trial court erred in its determination of defendant's criminal history score on Count 9. That error requires a remand for resentencing in Case No. 031183.
We turn, finally, to defendant's challenge to the imposition of an upward departure sentence on his conviction for second-degree burglary in Case No. 031199. Although defendant did not raise his present Blakely-based objection before the trial court, we conclude, under the reasoning of Ramirez, 205 Or.App. 113, 133 P.3d 343, that the imposition of the departure sentence was error apparent on the face of the record. ORAP 5.45(2). Further, for the reasons described in Ramirez, we exercise our discretion under Ailes v. Portland Meadows, Inc., 312 Or. 376, 823 P.2d 956 (1991), to address that error. Accordingly, we remand for resentencing in Case No. 031199.
In Case No. 031183, reversed and remanded for resentencing; otherwise affirmed. In Case No. 031199, reversed and remanded for resentencing; otherwise affirmed.
NOTES
[1] Given our disposition of the fourth assignment of error, which necessitates resentencing in Case No. 031183, we do not address the fifth assignment of error as to that case. We elect to follow that course, rather than the obverse, because of the virtual certainty that, if we did not address the fourth assignment of error on appeal, the court's ruling underlying that assignment of error would reoccur on remand.
[2] For example, Wagner testified that the Tillamook Police Department policy authorized the use of such force only if "the life or safety" of the officer or of a third person is "in jeopardy."
[3] Article I, section 11, provides, in part:
"[I]n the circuit court ten members of the jury may render a verdict of guilty or not guilty, save and except a verdict of guilty of first degree murder, which shall be found only by unanimous verdict, and not otherwise[.]"
[4] Article XVII, section 1, provides, in part:
"When two or more amendments shall be submitted in the manner aforesaid to the voters of this state at the same election, they shall be so submitted that each amendment shall be voted on separately."
[5] ORS 131.515(2) provides:
"No person shall be separately prosecuted for two or more offenses based upon the same criminal episode, if the several offenses are reasonably known to the appropriate prosecutor at the time of commencement of the first prosecution and establish proper venue in a single court."
[6] Similarly, the state refers to State v. Stolz, 106 Or.App. 144, 806 P.2d 715 (1991), which also addressed the proper application of "same criminal episode" for statutory former jeopardy purposes. In Stolz, the defendant resisted arrest after being arrested for violating a restraining order and was charged with both offenses. We concluded that the resisting arrest charge arose from a separate criminal episode from the charge (violation of the restraining order) for which the defendant was arrested, because "[d]etails of the offense underlying an arrest are not required to be shown to prove any element of resisting arrest." Id. at 148, 806 P.2d 715.
[7] Kessler addressed the closely analogous question of whether the defendant's crimes constituted a "single criminal episode" "assessing whether multiple statutory violations were meant to carry cumulative punishment * * *." 297 Or. at 465, 686 P.2d 345.
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33 F.Supp.2d 511 (1998)
Frans G. CLAASEN, M.D., Plaintiff,
v.
Jesse BROWN, et al., Defendants.
No. Civ.A. 3:96-CV-35.
United States District Court, N.D. West Virginia, Martinsburg Division.
November 17, 1998.
*512 William James Kenney, Washington, DC, Deirdre Evans, Frazer, PA, for plaintiff.
Diane M. Sullivan, Washington, DC, Roderick Lynn Thomas, Daniel W. Dickinson, Jr., Wheeling, WV, for defendant.
MEMORANDUM AND ORDER
BROADWATER, District Judge.
This is an action for judicial review pursuant to 38 U.S.C. § 7262 and 7264 of the final administration decision of the Under Secretary of Health ("Secretary"). This decision sustained the findings of the United States Veterans Administration ("VA") Disciplinary Appeals Board ("DAB") concerning disciplinary issues relating to the professional conduct of the plaintiff, Frans G. Claasen, M.D. ("Claasen"), while employed as a physician at the Veteran's Administration Medical Center ("VAMC") in Martinsburg, West Virginia. This matter is before the Court pursuant to 38 U.S.C. § 7462(f)(1), related statutes, laws and regulations, as the result of a Stipulation of Compromise Settlement ("Stipulation") (Document # 96), dated August 8, 1997, that dismissed with prejudice all but Count I, Violation of Employment Rights, of Claasen's Second Supplemental Amended Complaint ("Complaint"). Under this Stipulation, the Court allowed this case to proceed as a judicial review of the record of the DAB.
This case is presently pending on plaintiff's motion, styled as plaintiff's appeal brief in support of reversing the discharge decision of the DAB as approved by the Secretary (Document # 110), filed on April 1, 1998, and the memoranda filed in support thereof and in opposition thereto, as presented at a hearing held on August 21, 1998. For the reasons more fully set forth below, the Court DENIES plaintiff's motion in support of reversing the discharge decision of the DAB as approved by the Secretary (Document # 110) and AFFIRMS the DAB's discharge decision.
I. STATEMENT OF THE CASE
Claasen is a medical doctor who was a full-time, permanent employee of the VAMC in Martinsburg, West Virginia, appointed under 38 U.S.C. § 7401. Claasen worked at this VAMC from 1968 to April 8, 1994. On that date he was terminated pursuant to a letter dated April 1, 1994 from Thomas Weaver ("Weaver"), VAMC Director. The discharge was based on Claasen's unsatisfactory performance of his duties as a physician. (Administrative Record ("A.R.") at 193.)[1] Although he practiced internal medicine for 26 years, Claasen was not Board certified. Triggered by personnel and patient complaints, Dr. Meredith Richmond ("Richmond"), Claasen's immediate supervisor, initiated two separate Performance Improvement Plans ("PIPs") to evaluate Claasen's performance of his assigned medical responsibilities. (A.R. at 574.) The first PIP, concluded in November 4, 1992, specified nine areas of concern which needed correction and indicated that Claasen was counseled on these areas individually. (A.R. at 1964-65.) In February 1993, at the end of the first PIP period, Richmond again counseled Claasen concerning his continued poor performance and pointed out that his performance on the annual proficiency report was marginal to unsatisfactory and that issues concerning patient care and management remained a serious concern. (A.R. at 1968-69.) Richmond advised Claasen that a second three-month PIP would begin on February 5, 1993 and that Claasen's clinical competency "must be brought up to at least a satisfactory level for you to continue your *513 employment as a VA physician." (A.R. at 1949.) Richmond then outlined the six ways that Claasen would be evaluated. These included Quality Assurance/Utilization Review ("QA/UR"), Quality Assurance Program ("QAP"), telephone interviews, Self-Assessment Surveys, feedback from the Chief of Staff and Medical Center Director, number of patients requesting to change to another physician during the following three months, and continued reviews not limited to the items listed above. (A.R. at 1949.) Finally, Richmond concluded the performance improvement memorandum with a warning that the evaluation process would end on May 3, 1993, and if improvements were not brought up to at least a satisfactory level, "corrective action will be initiated, up to and including proposed discharge." Id.
On May 14, 1993, Weaver suspended Claasen's clinical privileges until further notice based upon recommendations from Francis Citro ("Citro"), Chief of Staff and Richmond's review of care. (A.R. at 1904.) Weaver assigned Claasen to administrative duties during the period of suspension. On May 25, 1993, Weaver sent a letter to Claasen, indicating that Claasen was reprimanded for four specific reasons as stated in the notice of proposed suspension. (A.R. at 2037.)[2]
Claasen filed three grievances: the first grievance filed on June 3, 1993 concerned the May 14, 1993 letter of reprimand; the second grievance filed on June 5, 1993 concerned the continuing suspension of his clinical privileges; and the third grievance filed on October 12, 1993 concerned the manner in which peer reviews were conducted. On June 8, 1993, Claasen filed two more grievances, contesting the decision that the suspension of his clinical privileges was not a major adverse action and the continued suspension of his clinical privileges.
Claasen had attempted to administratively appeal the temporary suspension of his clinical privileges as a major adverse action under 38 U.S.C. § 7462 and 7464. On May 27, 1993, Weaver informed Claasen that a temporary suspension of his clinical privileges did not constitute a major adverse action and invited Claasen to file a grievance instead.[3] Weaver also informed Claasen that if he was dissatisfied with the decision, Claasen "may present the grievance under the formal procedure" in writing within 10 calendar days after the date of receipt of the July 21, 1993 decision. On July 21, 1993, Weaver informed Claasen that his clinical privileges would remain suspended pending completion of further review of Claasen's clinical competence. (A.R. at 1878.) Claasen responded on August 5, 1993, by filing an administrative complaint alleging employment discrimination based on age.
On October 29, 1993, Citro notified Claasen of his proposed discharge from his position as a staff physician based on Claasen's unsatisfactory performance of clinical competence. (A.R. at 1979-80.) Citro informed Claasen of his right to reply to the notice of proposed discharge, to submit affidavits and other documentary evidence, and to be represented by an attorney. Id. In fact, Claasen was represented by an attorney during this administrative grievance procedure.
On December 3, 1993, the VAMC appointed Mary Ruth Buchness ("Buchness") to serve as the grievance examiner concerning Claasen's three initial grievances. On a memorandum dated February 28, 1994, Buchness conveyed her finding of Claasen's three grievances to Barbara Gallagher ("Gallagher"), Department of Veterans Affairs ("Department") Regional Director. (A.R. at 1613-24.) Buchness based her findings and recommendations on the review of more than fifty sets of documents and three hundred and sixty minutes of interviews conducted at hearings held on January 5 and 6, 1994.[4]
*514 Weaver chose to disregard Buchness' recommendations. On March 22, 1994, Weaver submitted a response to Gallagher concerning Buchness' report. Weaver did not provide a copy of the response to Claasen. On April 1, 1994, while Buchness' report was still under review by Gallagher, Weaver notified Claasen of his discharge as of April 8, 1994. (A.R. at 1627-28.) Weaver also informed Claasen that he had the right to appeal the decision to the DAB and to request a formal hearing before the DAB. By a memorandum dated April 8, 1994, Gallagher accepted some of Buchness' findings but rejected some of the recommendations, stating that they were not supported by the preponderance of the evidence or were contrary to VAMC policy.[5] (A.R. at 1610-12.)
Claasen applied for retirement effective April 8, 1994. (A.R. at 13.) On August 2, 1994, Claasen canceled his retirement request in order to be able to pursue an appeal through the DBA. (A.R. at 1609.) On September 21, 1994, Claasen filed an appeal concerning his discharge to the DAB. An amended version of the appeal was refilled on September 23, 1994. (A.R. at 106-16.) Claasen was represented by counsel throughout his DAB appeal process. A DAB panel, composed of three out-of-state VA physicians appointed by the Secretary, was convened to conduct a hearing on the discharge of Claasen.[6] The hearing started on February 22, 1995 and lasted for three days, ending on February 25, 1995. The DAB heard testimony of ten witnesses, including the testimony of Claasen and his expert witness. (A.R. at 163-68, 523-1596.) The DAB ruled on numerous motions and objections presented by Claasen's attorney. Id. The DAB sustained the charges against Claasen and concluded that the circumstances warranted discharge. (A.R. at 168.) On June 30, 1995, the Secretary, after consideration of the DAB's analysis and findings, executed the decision of the DAB, making this the final administrative action in the case. (A.R. at 1.) On May 9, 1994, Claasen filed a Complaint in the U.S. District Court for the District of Columbia, seeking, among other issues, review of the DAB's findings. On February 16, 1996, U.S. District Judge Gladys Kessler dismissed some of Claasen's claims and transferred the remaining claims to this Court.
III. STANDARD OF REVIEW
In reviewing a final decision by the DAB, the Court must determine whether the DAB's decision is: 1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; 2) obtained without procedures required by law, rule, or regulation having been followed; or 3) unsupported by substantial evidence, per 38 U.S.C. § 7462(f). Circuit courts reviewing DAB proceedings have held that the review is limited to a determination of whether the applicable procedures have been followed, whether the dismissal was supported by substantial evidence, and whether it was arbitrary and capricious. Ross v. U.S. Postal Service, 664 F.2d 191 (8th Cir.1981).
IV. DISCUSSION
Claasen offers several arguments in support of his contention that he was wrongly discharged from his position as a physician in the VA Medical Center.
First, Claasen argues that the evidence against him was improperly used because it was gathered in the QAP. On September 3, 1993, the Executive Committee of the Medical Staff continued the suspension of *515 Claasen's clinical privileges, based in part on QAP documents.[7] At the time of this action, Title 38 U.S.C. § 5705 protected from disclosure certain records and reports generated as part of a medical QAP. Section 5705(c)(5), titled "Confidentiality of medical quality-assurance records" provided that protected QA records may not be used by "Department employees as evidence, or relied upon in a matter which could require them to be treated as evidence so that they would be subject to mandatory disclosure in an administrative, statutory disclosure or judicial process."[8]
A Medical QAP is defined as "a Department systematic health-care review activity designated by the Secretary to be carried out by or for the Department for either such purpose [of improving the quality of medical care and improving the utilization of health-care resources in Department health-care facilities]." 38 U.S.C. § 5705(c)(2). The Department has further limited the use of QA records and documents related to evaluation of the care provided by VA practitioners, who may use the confidential and privileged QA records "to foster continuous quality improvement." 38 C.F.R. § 17.508(b). Accordingly, QA records protected by 38 U.S.C. § 5705, and not exempted by 38 U.S.C. § 5705(b) or restricted by 38 C.F.R. § 17.508(b) may not be used in an administrative proceeding to discharge a VA physician.
The records considered by the DAB were not QA records, and therefore not protected by 38 U.S.C. § 5705(b). Claasen initially brought up the issue of whether the documents used by the DAB were QA records at the pre-hearing conference. The Agency offered the testimony of an expert witness, Agatha Francis ("Francis"), an Enforcement Officer for Accreditation and Certification for Pathology and Laboratory Medicine Service. Francis testified that reviews conducted to assess the practice of a single physician were not QA records. The DAB excluded in the Claasen decision the QA records identified by Francis as confidential and privileged. (A.R. at 164.) Furthermore, the witness Claasen identified to testify on the issue of QA records was not called by the plaintiff. Id.
Neal Lawson, the Department's Assistant General Counsel, considered whether documents used in removing Claasen were QA records protected by 38 U.S.C. § 5705. He concluded that "as a matter of law, the documents submitted for legal review are not protected by § 5705, and that statute is not a bar to VA's use of them in proceedings before the Disciplinary Appeals Board." (A.R. at 1602.) Federal courts "accord an agency's interpretation of its own regulation a `high level of deference,' accepting it `unless it is plainly wrong.'" General Electric Co. v. United States Envtl. Protection Agency, 53 F.3d 1324, 1327 (D.C.Cir.1995) (quoting General Carbon Co. v. OSHRC, 860 F.2d 479, 483 (D.C.Cir.1988)). Therefore, the Court is of the opinion that the DAB did not employ QA records to reach a decision in Claasen's appeal.
Second, Claasen argues that peer review evaluation gathered in a QAP may not be used against an employee in a disciplinary matter. Claasen relies on 38 U.S.C. § 5705(b) and 38 C.F.R. § 17.508(b) to assert that peer review evaluations are confidential and privileged and should not be used as evidence against him in a personal matter. Again, the DAB utilized testimony and evidence *516 not classified as QA records to sustain Claasen's discharge. Claasen's arguments that public policy reasons prohibit the defendant from using evidence gathered in QA programs is without merits.[9] The Office of Veterans Counsel by a memorandum dated October 21, 1994, listed additional legal reasons why the records were not protected by § 5705(b). Under VA policy, QA records are protected by § 5705(b) when the VA specifies in advance that such records fall under the protection of the statute. Any other medical QA records generated by medical QA activities not specified in the regulations are not protected by § 5705(b).[10] (A.R. at 1599.) The Court is of the opinion that the DAB properly used the peer review evaluation gathered by the QAP because the records were not specified in advance that they would fall under the protection of 38 U.S.C. § 5705(b).
Third, Claasen argues that the Department is collaterally estopped from re-litigating issues previously litigated in prior grievance procedures. Claasen relies on Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979) to argue that the same issues that form the basis for discharge had been the subject of prior grievances filed by him. As a 38 U.S.C. § 7463(a)(1) employee, Claasen had a statutory right to appeal "an adverse personnel action" taken against him. Such an appeal proceeds through the Department's grievance procedure as provided for in 38 U.S.C. § 7463. The DAB is empowered to hear appeals from "major adverse actions" but has no jurisdiction to review an appeal from a grievance procedure. 38 U.S.C. § 7463(b)(1) and (2).
Claasen moved to strike materials from the grievance process based on his belief that the documents were provided unilaterally (ex-parte) to Gallagher. The DAB denied Claasen's motion to exclude the grievance examiner's reports from the DAB hearings, because the "grievance procedure has no bearing on the DAB hearing." (A.R. at 2.) Neither the statute, 38 U.S.C. § 7463, nor the internal VA regulations address the handling of responses by the parties to the deciding official, in this case the VA Regional Director, related to a grievance examiner's report. Here, only the defendant received the grievance examiner's report.
Claasen's reliance on collateral estoppel, or issue preclusion, to exclude evidence gathered in the grievance proceedings is misplaced. Under Parklane, collateral estoppel precludes a party against whom an issue was adversely decided in a prior final judgment from re-litigating that same position in a subsequent proceeding. Because the VA was the prevailing party in the grievance procedure, collateral estoppel does not apply. (A.R. at 1610-12.) In addition, the issue in front of the DABwhether Claasen was incompetent in his practice of medicine so that the discharge was properis not the same issue presented in the grievance procedures.[11] The Court is of the opinion that collateral estoppel does not apply to the present case. As well, Claasen pursued this argument in front of the DAB and was denied relief.
Fourth, Claasen argues that the defendant did not follow its own regulations in the manner it initially suspended and finally fired him. Claasen relies on Vitarelli v. Seaton, 359 U.S. 535, 79 S.Ct. 968, 3 L.Ed.2d 1012 (1959) which held that the Government must comply with its own employment regulations. Specifically, Claasen argues that, *517 under 38 U.S.C. § 7462(b)(1)(A)[12] and Bowman Transp. Inc. v. Arkansas-Best Freight Systems, Inc., 419 U.S. 281, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974), he was entitled to a written notice from the Secretary stating the basis for each charge and a statement of any specific law, regulation, policy, procedure, practice, or other specific instruction that was violated with respect to each charge. As an appointee under the provisions of 38 U.S.C. § 7461(b)(1), Claasen was subject to the disciplinary procedures under the statute for major adverse actions arising from "questions of professional conduct or competence." Id. A major adverse action is defined as an adverse personnel action, including discharge. 38 U.S.C. § 7461(c)(2)(E). A question of professional conduct or competence is defined as a question relating to direct patient care and/or clinical competence. 38 U.S.C. § 7461(c)(3)(A) and (B). Under this statutory scheme, Claasen is entitled to an appeal to the DAB, which has exclusive jurisdiction over Claasen's appeal. 38 U.S.C. § 7462(a) and 7462(a)(1)(A) and (B).
The proposed Notice of Discharge, dated October 29, 1993, provided Claasen the mandated 30-day advance written notice and afforded him a reasonable time to respond to the proposed adverse action. As required, the DAB allowed Claasen legal representation at all stages of his case. (A.R. at 17-18.) The Notice of Discharge also informed Claasen to contact the Human Management Service if he had questions about the reasons of his discharge. Id. Claasen has not presented any challenges to the appointment and composition of the DAB. On April 1, 1994, Thomas Weaver, VAMC Director and the deciding officer in Claasen's case, rendered his decision on the notice of proposed discharge. (A.R. at 119-20.) The letter included the reasons for his decision and informed Claasen of his rights to appeal. Therefore, the Court concludes that the Department properly followed its regulations.
Fifth, Claasen argues that an employee may not be discharged for unsatisfactory performance in the proficiency element of clinical competence where there are no allegations of negligence. Claasen also argues that corrective actions may not be taken in cases of error in professional judgment when negligence is not involved or in cases of difference of professional opinions. Claasen directs the Court's attention to the fact that there are no allegations of negligence for the period of January 3, 1993 to May 14, 1993.
When sustaining the charge in whole that Claasen's performance was unsatisfactory in the performance of his duties as a physician, the DAB specifically found that Claasen's performance "constitutes negligence." (A.R. at 5.) The DAB additionally found that the "cases described above represent examples of specific incidents when Dr. Claasen demonstrated poor clinical competency which resulted in negligent care". (A.R. at 7.) Therefore, the Court rejects this ground.
Sixth, Claasen argues that the manner in which appellant's DAB hearing was held was manifestly unfair. Claasen alleges that the hearings were too long and created added strain due to his known history of heart problems. Claasen also alleges that his request for additional time to prepare for cross examination was wrongly denied. Claasen has maintained throughout his case that the only actual charge against him was his clinical incompetence for the period of "January 1993 to May 14, 1993." (Plaintiff's Brief at 51), and therefore, all proof must come from only that period. When discharging Claasen, the DAB not only used evidence from the above-described time frame, but all other matters relevant to Claasen's unsatisfactory performance as a physician. This Court is of the opinion that Claasen and his counsel had ample opportunity to litigate these issues in front of the DAB. Therefore, the Court will *518 defer to the DAB's interpretations and decisions at the evidentiary hearing.
Finally, Claasen argues that the decision of the Secretary was untimely. Under 38 U.S.C. § 7462(c)(4), the DAB "shall render a decision in any case within 45 days of completion of the hearing, if there is a hearing, and in any event no later than 120 after the appeal has commenced." Claasen asserts that he filed the appeal on September 23, 1994, that hearings were held on February 22-24, 1995, that the DAB issued its decision on May 11, 1995, and that the Secretary issued his decision on June 30, 1995. The Secretary appointed the DAB board members on November 7, 1994 and set the hearing for January 4, 5, and 6, 1995. (A.R. at 79, 99.) However, the appointment letter plainly states that the DAB arranged "an extension of the time frames with the appellant's [Claasen's] representatives due to the difficulty of assigning board members during this time of the year and other issues [sic]. An agreement has been reached that the Under Secretary for Health will take action on the Board's recommended decision by March 17, 1995." (A.R. at 77.)
Apparently, by request of the appellant's representative, the time frame was further extended to have adequate time to review the evidence files. The new date by which the Secretary was to take action was reset to April 28, 1995. It was later discovered that this date was in error and corrected in a letter dated February 16, 1995. This letter provided that the Secretary would execute the decision of the DAB "within 90 days after the decision of the Board is received. We have been asked to notify all parties that the Under Secretary will execute a decision within 90 days after receipt of the Board's decision. The Board's decision is to be forwarded within 45 days of the completion of the hearing which should be April 10, 1995." (A.R. at 35.)
The delays that resulted by agreement of the parties, and at least one at the request of Claasen, were beneficial to him. For instance, as late as February 9, 1995, Claasen identified witnesses "which were either not yet known at the Pre-Hearing Conference or were to be selected from larger groups on the initial proposed witness list." (A.R. at 34.) Also, Claasen's counsel asked for, and was granted, reconsideration of John Yoder as a witness. Id. The ultimate decision of the Secretary, sent to Claasen on June 30, 1995, was timely because it was given within the 90-day period after receipt of the DAB's decision.
Title 38 U.S.C. § 7462 provides no remedy in the event a decision and the execution of that decision is delayed. Besides, Claasen provides no argument of harm or prejudice from the alleged delay, nor any law supporting his position that the case should be dismissed because of the delays. This Court is of the opinion that the delay, if any, of the Secretary's decision was the result of mutually agreed extensions of time and was not prejudicial to Claasen.
V. CONCLUSIONS
For the reasons expressed herein, the Court holds that the DAB's findings and conclusions are not arbitrary or capricious, were obtained with procedures required by law, and were supported by substantial evidence. Accordingly, the Court AFFIRMS the DAB's decision. Therefore, it is
ORDERED
1. That the plaintiff's motion, styled as plaintiff's appeal brief in support of reversing the discharge decision of the Disciplinary Appeals Board as approved by the Under Secretary for Health (Document # 110) be DENIED;
2. That this case be DISMISSED from the active docket of this Court.
NOTES
[1] Page numbers refer to the "Bates pagination system" that appear at the top of each page of the Administrative Record.
[2] These reasons, as specified in a February 16, 1993, letter from Richmond to Claasen, proposing to suspend him for ten calendar days from his position as a Staff Physician, are based on four separate incidents of negligence involving a patient identified as CWS. (A.R. at 2038-40.)
[3] This letter is missing from the record but is mentioned by reference in a memorandum from Weaver to Claasen dated July 21, 1993. (A.R. at 1878.)
[4] Buchness recommended that the reprimand for the care of patient WCS should be upheld (Grievance # 1), that peer review should be done prospectively, not retrospectively done outside of the VAMC (Grievance # 2), that Claasen's medical privileges should be reinstated, that the charges be dismissed, that future evaluations be conducted by objective peer, and that Claasen be removed from the supervision of Richmond and removed to another service. She also found no evidence of age discrimination. (A.R. at 1913-24.)
[5] Gallagher accepted Buchness' recommendation that the reprimand be upheld, accepted Buchness recommendation that submission of patient charts for outside peer review was valid, and rejected the recommendation that Claasen's clinical privileges be restored.
[6] The DAB was comprised of Dr. Mark Vandrunen, Chief of Radiology at the Hines, Illinois VA Medical Center; Dr. Robert Gebhart, Assistant Chief of Staff for Ambulatory Care at the Atlanta VA Medical Center, and Dr. Anthony Salem, Chief of Staff at the Sioux Falls, South Dakota VA Medical Center. (A.R. at 79-81.)
[7] The September 3, 1993 Minutes state that "this meeting was held as part of the Quality Assurance Program, and the minutes are considered confidential and privileged under Provision ... 38 C.F.R. § 17.500 - 17.540. This material shall not be transmitted to anyone without proper consent or other authorization as provided by law."
[8] In 1991, Section 5705(b) was amended and now reads: "Records and documents created by the Department as part of a medical quality-assurance program (other than reports submitted pursuant to section 7311(g) of this title) are confidential and privileged and may not be disclosed to any person or entity except as provided in subsection (b) of this section." 30 U.S.C. § 5705(a). Subsection (b) exceptions allows disclosure of medical QA records to a federal agency or private organization for licensing or accreditation; to a Federal executive agency for participation by the Department in a health-care program with such agency; to a criminal or civil law enforcement governmental agency charged with the protection of the public health and safety; and to health-care personnel to meet a medical emergency affecting the health or safety of an individual.
[9] According to Claasen, use of QA evidence would adversely affect the physician-client privilege, deter physicians from submitting accurate peer review information, and lead to more tort claims against the Government.
[10] Then-existing Agency Regulations provided for only four programs which might generate QA records protected by § 5705. These programs are: a) Systematic Internal review; b) Medical District Initiated Peer Review organization; c) Systematic External review program; and d) Tort Claim Information System. 38 C.F.R. § 17.500(b).
[11] Claasen filed several grievances, three of which were submitted to formal procedure during his late tenure: one challenging a disciplinary reprimand; one challenging the outside peer review of charts of his patients; and one alleging that he was aggrieved when his clinical privileges were revoked. The grievance examiner issued a report on these three grievances. (A.R. at 1613-24.)
[12] Section 7462(b)(1) reads in part: "In any case in which charges are brought against a section 7401(1) employee which arises out of, or includes, a question of professional conduct or competence which could result in a major adverse action, the employee is entitled to the following: (A) At least 30 days advance written notice from the Chief Medical Director or other charging official specifically stating the basis for each charge, the adverse actions that could be taken if the charges are sustained, and a statement of any specific law, regulation, policy, procedure, practice, or other specific instruction that has been violated with respect to each charge...."
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33 F.Supp.2d 995 (1998)
Molly BLALOCK Plaintiff,
v.
DALE COUNTY BOARD OF EDUCATION and Chuck Monday, individually Defendants.
No. CIV. A. 97-D-650-S.
United States District Court, M.D. Alabama, Southern Division.
October 6, 1998.
*996 Ann C. Robertson, Maury S. Weiner, Birmingham, AL, Amy Shumate, Dothan, AL, for Plaintiff.
Jack Corbitt, Ozark, AL, for Defendants.
MEMORANDUM OPINION AND ORDER
DE MENT, District Judge.
Before the court are Defendant Dale County Board of Education ("Board") and Defendant Chuck Monday's ("Monday") Motions to Dismiss, filed separately on September 8, 1997. Plaintiff Molly Blalock filed Responses to both motions separately on September 24, 1997. After careful consideration of the arguments of counsel, the case law, and the record as a whole, the court finds that Defendant Board's Motion is due to be denied, and Defendant Monday's motion is due to be granted in part and denied in part.
FACTUAL BACKGROUND
Plaintiff was hired by Defendant Board as a Physical Education teacher and athletic coach at Dale County High School in 1974.[1] Defendant Board is an agency and political subdivision of the State of Alabama. Established by state law and by § 264 of the Alabama Constitution, Defendant Board receives benefits from federal financial assistance. At all times pertinent to this matter, Defendant Monday served as Defendant Board's Athletic Director.
Plaintiff alleges that she has been discriminated against on the basis of her sex during the course of her employment, despite performing her job duties in a professional and competent manner. She contends that Defendants have willfully, maliciously, and under color of state law, made employment decisions in a discriminatory manner, and have limited and classified her in a way that has adversely affected her employment opportunities because of her sex. More specifically, Plaintiff asserts that, because of her sex and the sex of the girls on her teams, she was not paid as much as the male coaches for equivalent work, and was provided with unequal training/practice facilities, practice/game schedule times, equipment, supplies, and travel services.
On March 14, 1994, in exchange for $7,204.58, Plaintiff signed an agreement with the Board styled "Confidential Full and Final Release of All Claims" ("Release"). In the Release, Plaintiff waived all potential claims on the disparity in the salary schedule payment. Upon signing this agreement, Plaintiff's employment continued.
Plaintiff filed a charge of discrimination with the Equal Employment Opportunity Commission ("EEOC") within 180 days of the *997 last discriminatory act,[2] and received her Notice of Right to Sue on January 27, 1997. Shortly after filing with the EEOC, Defendants promptly notified Plaintiff that she was to be transferred to the Dale County school system's middle school. After protests by the Plaintiff and the intervention of friends and supporters, Defendant Board reversed its decision to transfer.
Plaintiff further alleges the original decision to transfer was in retaliation for her filing of the EEOC charge, resulting in her mental anguish, loss of enjoyment of life, and loss of educational and employment opportunities. She also contends that she has been subjected to a hostile work environment because of her sex, suffering further humiliation, embarrassment, and public ridicule.
On April 25, 1997, Plaintiff filed suit in this court. On August 15, 1997, Plaintiff filed an Amended Complaint against the Board and against Chuck Monday in both his official and individual capacities. Plaintiff seeks relief on the following grounds: Title IX of the Education Amendments of 1972, 20 U.S.C. § 1681 et seq. ("Title IX"); Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., as amended by the Civil Rights Act of 1991 ("Title VII"); the Equal Protection Clause of the Fourteenth Amendment, for which a remedy is provided by 42 U.S.C. § 1983; and the Equal Pay Act, 29 U.S.C. §§ 206, 216.
Plaintiff seeks a declaratory judgment, injunctive relief, back pay, compensatory and punitive damages, plus costs and expenses including reasonable attorney's fees. Defendants have filed separate Motions to Dismiss. Plaintiff has filed separate Responses to each Defendant's motion.
JURISDICTION & VENUE
Both Defendants contest jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1), (2), (4), and (6).[3] Because the plaintiff has brought claims under Title IX, Title VII, § 1983, and the Equal Pay Act, however, the court finds it properly exercises subject matter jurisdiction over this matter pursuant to 28 U.S.C. § 1331 (federal question), 28 U.S.C. § 1343(a)(1)-(4) (civil rights), and 28 U.S.C. § 1367 (supplemental jurisdiction). The parties do not contest venue.
MOTION TO DISMISS STANDARD
Under Fed.R.Civ.P. Rule 12(b)(6), a defendant may move to dismiss a complaint because the plaintiff has failed to state a claim upon which relief may be granted. A Rule 12(b)(6) motion questions the legal sufficiency of a complaint; therefore, in assessing the merit of a Rule 12(b)(6) motion, the court must assume that all the factual allegations set forth in the complaint are true. See, e.g., U.S. v. Gaubert, 499 U.S. 315, 327, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991); Powell v. Lennon, 914 F.2d 1459, 1463 (11th Cir.1990); Anderson-Free v. Steptoe, 970 F.Supp. 945, 953 (M.D.Ala.1997). Moreover, all factual allegations are to be construed in the light most favorable to the plaintiff. See e.g., Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Cannon v. Macon County, 1 F.3d 1558, 1565 (11th Cir. 1993); see also Brower v. County of Inyo, 489 U.S. 593, 598, 109 S.Ct. 1378, 103 L.Ed.2d 628 (1989).
On a motion to dismiss for failure to state a claim upon which relief may be granted, the movant "sustains a very high burden." In re Johannessen 76 F.3d 347, 349 (11th Cir.1996) (citing Conley v. Gibson, 355 U.S. 41, 46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)); Braden v. Piggly Wiggly, 4 F.Supp.2d 1357, 1360 (M.D.Ala.1998). The Court of Appeals for the Eleventh Circuit has held that "motions to dismiss for failure to state a claim should be denied unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of its claims." Johannessen, 76 F.3d at 349 (quoting Conley, 355 U.S. at 45, 78 S.Ct. 99); see also Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984).
*998 DISCUSSION
Defendant Board's Motion to Dismiss
Defendant Board argues that the court should dismiss Plaintiff's complaint because Plaintiff signed the Release on March 14, 1994 in exchange for monetary compensation. Defendant argues that this forever discharged Defendant Board, "the Superintendent, the Board members, employees, agents and assigns, and all other persons, firms, and corporations from any damage whatsoever arising [from the disparity in her salary schedule payment]." (Def. Board's Mot. to Dis. ¶ 1.)
In her Response, Plaintiff admits that she has waived her claims on the pay disparity issues up until the date the Release was signed. But, as Plaintiff interprets the Release, it does not waive any pay claims that have arisen thereafter. The court finds Plaintiff's argument to be persuasive.
Settlement agreements are contracts and, as such, their construction and enforcement are governed by principles of state contract law. Schwartz v. Florida Board of Regents, et al., 807 F.2d 901, 905 (11th Cir.1987); Dillard v. Crenshaw County, et al., 748 F.Supp. 819, 824 (M.D.Ala. 1990). "Words in a contract are to be given their plain ordinary meaning, and it is not for the court to add or subtract any language from the face of a clearly worded agreement." Schwartz 807 F.2d at 905 (citing Robin v. Sun Oil Co., 548 F.2d 554, 557 (5th Cir.1977)).[4] In the instant case, the language of the Release clearly limits the waiver of claims to those "in connection with the disparity in the salary payment schedule." (Def. Board's Mot. to Dis., Exh. A ¶ 1.) The court interprets the terms of the Release to limit the scope to events in connection with the pay disparity up to and including the date Release was signed, as on its face, the language does not cover any claims arising out of a disparity in pay thereafter. Thus, such claims survive Defendant's Motion to Dismiss. See Schwartz 807 F.2d at 906 (holding that settlement agreement stipulation that Plaintiff "no longer suffered from any disparity in pay" did not waive his future Equal Pay Act or Title VII claims). Thus, the court finds that Defendant Board has failed to meet its burden of proof, and its Motion to Dismiss is due to be denied.
Chuck Monday's Motion to Dismiss
Defendant Monday makes several arguments to dismiss Plaintiff's Complaint for failure to state a claim upon which relief can be granted. First, Defendant Monday argues that the Title VII claim against him in his individual capacity should be dismissed. In particular, Defendant states that individual capacity suits brought pursuant to Title VII are inappropriate under the holding in Busby v. City of Orlando, 931 F.2d 764, 772 (11th Cir.1991). The court agrees. In Busby, the Eleventh Circuit specifically held that "individual capacity suits under Title VII are ... inappropriate," and that, "[t]he relief granted under Title VII is against the employer, not individual employees whose actions would constitute a violation of the Act." Id. See also Cross v. Alabama, 49 F.3d 1490, 1504 (11th Cir.1995) (affirming the Busby holding post 1991 statutory amendment of Title VII); Hamm v. Lakeview Community Hospital, 950 F.Supp. 330, 333 (M.D.Ala. 1996); Kelley v. Troy State University, 923 F.Supp. 1494, 1499 (M.D.Ala.1996); Bahadirli v. Domino's Pizza, 873 F.Supp. 1528, 1533 (M.D.Ala.1995); Smith v. Capitol City Club of Montgomery, 850 F.Supp. 976 (M.D.Ala. 1994). Thus, Defendant Monday's motion to dismiss the Title VII claim against him in his individual capacity is due to be granted.
Although the parties failed to address whether the claims against Defendant Monday in his official capacity should be dismissed, the court decides this issue sua sponte. In Kelley v. Troy State University, 923 F.Supp. 1494 (M.D.Ala.1996), the court found that "[a] suit under Title VII brought against an agent of an employer is regarded as a suit against the employer itself." Id. at 1499 (citing Busby, 931 F.2d at 772). See also Will v. Michigan, 491 U.S. 58, 71, 109 *999 S.Ct. 2304, 105 L.Ed.2d 45 (1989) (holding cause of action against a state agency can be maintained through a named defendant in his official capacity, but the liability belongs to the agency). Under this line of reasoning, Kelley dismissed Title VII claims against the defendant employers in their official capacities as redundant, pointing out that the employer was already a named defendant. Kelley, 923 F.Supp. at 1499. Similarly, the court finds that the Title VII claim against Defendant Monday in his official capacity is due to be dismissed because Plaintiff's employer, the Dale County Board of Education, is a named defendant.[5]
Defendant Monday also moves that the Title IX claim against him in his individual capacity be dismissed. Defendant Monday argues that such claims apply only to entities that receive federal funds rather than to individual defendants. In Holt v. Lewis, 955 F.Supp. 1385 (M.D.Ala.1995), this court found that actions to enforce the provisions of Title IX can only be directed against the educational institution involved, finding "no indication in the statute" that such actions could be directed elsewhere. Id. at 1387. In Holt, the court dismissed all Title IX claims against several university officials in an action against a university. Id. The facts in the instant case are similar: Plaintiff has commenced a Title IX action, inter alia, against an educational institution (Defendant Board) and one of its officials (Defendant Monday). Thus, under Holt, Defendant Monday's motion to dismiss is due to be granted because Plaintiff's Title IX claim against Defendant Monday, individually, must be dismissed.
Although Defendant Monday failed to move the court to dismiss the Title IX claim against him in his official capacity, the court now decides this issue sua sponte. The court in Holt dismissed the Title IX claims against the university officials in both their individual and official capacities. Holt, 955 F.Supp. at 1387. Because, as previously discussed, the facts in the present case are consistent with those in Holt, the court finds no reason not to follow this precedent. Thus, the court finds that the Title IX claim against Defendant Monday in his official capacity is similarly due to be dismissed.
Next, Defendant moves to dismiss the Equal Pay Act ("EPA") claim against him, contending that he does not meet the statutory definition of "employer" under the Act. See 29 U.S.C. § 206(d). The court disagrees and finds, rather, that Defendant Monday fits squarely within the statutory definition of "employer" under the EPA. The EPA defines employer as including:
any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency, but does not include any labor organization ... 29 U.S.C. § 203(d).
In applying this statutory definition, courts have looked to several criteria, including: (1) the amount of control the alleged employer exerted on the employee; and (2) whether the alleged employer had the power to fire, hire, or modify the employment condition of the employee. See Welch v. Laney, 57 F.3d 1004, 1011 (11th Cir.1995) (citing Wirtz v. Lone Star Steel Co., 405 F.2d 668, 669-70 (5th Cir.1968)); Larry v. Board of Trustees of the University of Alabama, 975 F.Supp. 1447, 1449 (N.D.Ala.1997). The court finds that the present facts satisfy the definition of "employer." Defendant Monday served as the Athletic Director for the Dale County Board of Education. Defendant Monday was hired by Defendant Board to supervise the everyday operations of the Dale County school system's athletics program. In this capacity, Defendant Monday had direct supervision of and control over Plaintiff in her role as coach of several girls' sports teams at Dale County High School, answering directly to Defendant Board. See Harris v. Birmingham Board of Education, 712 F.2d 1377, 1379 (11th Cir.1983) (discussing the hiring and transfer powers of an Athletic Director with respect to coaching positions within the school system). Defendant Board *1000 served as Plaintiff's employer as well. As such, the performance of Defendant Monday's job inherently involved acting, at least indirectly, if not directly, in the interests of Plaintiff's employer. Contrary to his contention, Defendant Monday clearly satisfies the definition of "employer" under the Equal Pay Act, and his motion on this point is due to be denied.
Defendant Monday further argues that Plaintiff's Equal Protection § 1983 claim should be dismissed to the extent it is based upon allegations supporting her Title VII and Equal Pay Act claims. However, the court construes Plaintiff's Amended Complaint to clearly limit the scope of its § 1983 claim to the Equal Protection Clause to the Fourteenth Amendment to the United States Constitution. As such, the Defendant's motion to dismiss on these grounds presents no issue for the court to decide.
Finally, Defendant Monday moves to dismiss all claims against him based on the Release signed by the Plaintiff on March 14, 1994. Under the logic previously laid out in the discussion above, this motion is due to be denied. See "The Board's Motion to Dismiss," supra.
CONCLUSION
Accordingly, it is CONSIDERED and ORDERED that:
(1) Defendant Board's Motion to Dismiss is hereby DENIED;
(2) Defendant Monday's Motion to Dismiss is hereby GRANTED in part and DENIED in part:
(a) Defendant Monday's Motion to Dismiss the Title VII claim against him in his individual capacity be and the same is hereby GRANTED;
(b) Defendant Monday's Motion to Dismiss the Title IX claim against him in his individual capacity be and the same is hereby GRANTED;
(c) Defendant Monday's Motion to Dismiss the Equal Pay Act claim be and the same is hereby DENIED;
(3) The Title VII claim against Defendant Monday in his official capacity is hereby DISMISSED;
(4) The Title IX claim against Defendant Monday in his official capacity is hereby DISMISSED.
NOTES
[1] When ruling on a motion to dismiss for failure to state a claim, the court assumes that all factual allegations in the complaint are true. See U.S. v. Gaubert, 499 U.S. 315, 327, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991).
[2] The specific date was omitted from the Complaint.
[3] The court denies both Defendants' motions to dismiss under Fed.R.Civ.P. 12(b)(2) and (4) for lack of personal jurisdiction and insufficiency of process because Defendants have not presented any case law or factual allegations to support these claims.
[4] Decisions of the former Fifth Circuit rendered prior to October 1, 1981 constitute binding precedent in the Eleventh Circuit. Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981)(en banc).
[5] Defendant Monday argues that Plaintiff's Title VII claim should be dismissed for failure to plead that she has exhausted her administrative remedies as to him, individually. Since all Title VII claims against Defendant Monday are due to be dismissed under the reasoning above, the court need not reach this issue.
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174 P.3d 1129 (2007)
217 Or. App. 238
STATE of Oregon, Plaintiff-Respondent,
v.
Clinton James CROCKER, Defendant-Appellant.
05C46614; A129507.
Court of Appeals of Oregon.
Argued and Submitted July 31, 2007.
Decided December 26, 2007.
Joshua B. Crowther, Deputy Public Defender, argued the cause for appellant. On the opening brief were Ingrid Swenson, Executive Director, Peter Gartlan, Chief Defender, Legal Services Division, and Jamesa J. Drake, Deputy Public Defender, Office of Public Defense Services. With him on the reply brief was Peter Gartlan, Chief Defender, Legal Services Division.
Doug M. Petrina, Assistant Attorney General, argued the cause for respondent. With him on the brief were Hardy Myers, Attorney General, and Mary H. Williams, Solicitor General.
Before HASELTON, Presiding Judge, and ARMSTRONG and ROSENBLUM, Judges.
HASELTON, P.J.
Defendant, who was convicted after a jury trial of first-degree sodomy, ORS 163.405, appeals, challenging the imposition of an upward departure sentence. He argues that the aggravating factors on which the trial court predicated the upward departure sentence "prior criminal justice sanctions have not deterred defendant" and "defendant has a history of institutional or prison disciplinary problems" are unconstitutionally vague. We reject those arguments and, consequently, affirm.
*1130 The circumstances material to our review are undisputed. Defendant was convicted by a jury of first-degree sodomy of a fellow inmate at Oregon State Penitentiary. In the sentencing phase, the court submitted to the jury the determination of two sentence enhancement facts: "Prior criminal sanctions have not deterred defendant" and "defendant has a history of institutional or prison disciplinary problems." In doing so, the court rejected defendant's arguments that those factors were unconstitutionally vague.
During the sentencing phase, the state presented evidence that defendant had, as a prison inmate, committed 49 "major rule violations" in the four years preceding the trial, including 11 such violations in the year preceding the trial. The state also introduced evidence of defendant's prior convictions, including a 1988 conviction for second-degree assault, multiple convictions in 1991 for first-degree arson, and convictions in 1991 and 1997 for possession of a weapon by an inmate. Ultimately, the jury returned special verdict findings that defendant met both aggravating factors, and the court, without a determination that either factor was an independently sufficient basis, imposed an upward departure sentence of 122 months' imprisonment.
On appeal, defendant renews his arguments that the two aggravating factors applied in this case were unconstitutionally vague because they fail to afford "fair warning" to potentially affected citizens and were susceptible to arbitrary and unprincipled application.[1] The state responds that defendant's challenges are not reviewable under ORS 138.222 and, in all events, fail on the merits. We reject the state's nonreviewability arguments, see State v. Gallegos, 217 Or.App. 248, 174 P.3d 248 (2007),[2] but agree that defendant's challenges lack merit.
We understand defendant's vagueness challenges to the two aggravating factors here to be "facial" challenges.[3] With respect to provisions that do not implicate rights protected under the First Amendment to the United States Constitution, it is axiomatic that "`[o]ne to whose conduct a statute clearly applies may not successfully challenge it for vagueness.'" Hoffman Estates v. Flipside, Hoffman Estates, 455 U.S. 489, 495 n. 7, 102 S.Ct. 1186, 71 L.Ed.2d 362 (1982) (quoting Parker v. Levy, 417 U.S. 733, 756, 94 S.Ct. 2547, 41 L.Ed.2d 439 (1974)); see also Maynard v. Cartwright, 486 U.S. 356, 361, 108 S.Ct. 1853, 100 L.Ed.2d 372 (1988) (due process vagueness challenges "rest on the lack of notice, and hence may be overcome in any specific case where reasonable persons would know that their conduct is at risk").
That principle is decisive here. Even assuming, without deciding, that the operative language of the two departure factors might, as applied in some circumstances, be vague,[4] there can be no question that defendant falls within their indisputable core. Here, defendant committed his crime while incarcerated for other crimes; indeed, he had a lengthy criminal history. Given those circumstances, defendant cannot plausibly claim that he lacked fair notice that he could be subject to enhanced punishment because "[p]rior criminal justice sanctions [had] not deterred" him or that the application of that standard to him was arbitrary. Similarly, *1131 given his institutional disciplinary record nearly 50 "major rule violations" in the four years preceding the trial defendant, quintessentially, "has a history of institutional or prison disciplinary problems." In sum, the trial court properly rejected defendant's vagueness challenges and submitted the departure factors to the jury.
Affirmed.
NOTES
[1] Defendant notes, in passing, that neither of the aggravating factors at issue here is among the "enumerated" factors specifically listed in OAR XXX-XXX-XXXX(1)(b). We do not understand defendant to contend, as did the defendant in State v. Gallegos, 217 Or.App. 248, 174 P.3d 248 (2007), that the "nonexclusive" aspect of OAR XXX-XXX-XXXX(1) renders that provision unconstitutionally vague. In all events, we rejected that argument in Gallegos.
[2] The state's "nonreviewability" argument here is one of several nonreviewability arguments that the state posited in Gallegos.
[3] For example, defendant contends that "the terms `sanctions,' `deterred,' `history,' `institutional,' `disciplinary,' and `problems' are not defined by law (statute, rule, or case law), and the plain meaning of the words fails to elucidate their legal meaning." Consequently, defendant argues that those terms are, individually and collectively, vague.
[4] Again, as in State v. Schenewerk, 217 Or.App. 243, 247 n. 1, 174 P.3d 1117 (2007), we note that "textual ambiguity and unconstitutional vagueness are hardly congruent concepts."
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174 P.3d 458 (2008)
STATE
v.
SULLIVAN.
No. 96247.
Court of Appeals of Kansas.
January 11, 2008.
Decision without published opinion. Affirmed.
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14 F. Supp. 2d 437 (1998)
Rosalyn QUERRY, Plaintiff,
v.
Francis J. MESSAR, individually, Emil Cavorti, individually, Donald Christopher, individually, Oracle Management Services, Inc. and the City of Yonkers, N.Y., Defendants.
No. 98 CIV. 0019(WCC).
United States District Court, S.D. New York.
July 27, 1998.
*438 *439 *440 *441 Lovett & Gould, for Plaintiff, White Plains, NY, Lee Ann Crossley, of counsel.
William M. Mooney, Corporation Counsel of the City of Yonkers, for Defendants Francis J. Messar, Emil Cavorti, Donald Christopher and the City of Yonkers, N.Y., Yonkers, NY, Elisabeth A. Palladino, Deputy Corporation Counsel, of counsel.
Ahmuty, Demers & McManus, for Defendant Oracle Management Services, Inc., Albertson, NY, Janice Berkowitz, Christopher P. Cartier, of counsel.
OPINION AND ORDER
WILLIAM C. CONNER, Senior District Judge.
Plaintiff Rosalyn Querry brings this action against the City of Yonkers, New York, Yonkers Police Commissioner Donald Christopher, Captain Francis Messar, Lieutenant Emil Cavorti, (collectively, the "City defendants"), and Oracle Management Services, Inc. ("Oracle"), alleging discrimination based on gender and disability and tortious interference with contract in violation of the Equal Protection Clause of the Fourteenth Amendment, Title VII of the Civil Rights Act of 1964 ("Title VII"), § 2000e, et seq., the Americans with Disabilities Act (the "ADA"), 42 U.S.C. § 12101, et seq., the Civil Rights Act of 1871, 42 U.S.C. §§ 1983 and 1985 ("§ 1983" and "§ 1985," respectively) and New York law. The City defendants move for summary judgment on all claims pursuant to Fed.R.Civ.P. 56. Defendant Oracle moves to dismiss the Complaint with prejudice, as against it, pursuant to Rule 12(b)(6). For the following reasons, the City defendants' motion is granted in part and denied in part, and defendant Oracle's motion is granted to the extent that plaintiff's claims are dismissed without prejudice.
Background
Rosalyn Querry is a police officer with the Yonkers Police Department (the "Department"). From May 1987 through January 1996, she worked full-time in the Second Precinct, in the forensics lab from May 1988 to January 1995, and on patrol from January 1995 through January 1996. During this time, Querry had received numerous awards and commendations, and had achieved a near-perfect attendance record, having never missed work on account of illness or disability.
On January 31, 1996, Querry slipped and fell on the ice while working. As a result, she suffered a debilitating back injury and was absent from work between February 2, 1996 and March 29, 1996.
What happened thereafter is less clear. It appears that on or around March 30, 1996, defendant Oracle, an alleged third-party provider of medical services and an administrator of claims for the City, ordered Querry back to work. Apparently, Querry returned to work that same day, but remained on duty for only four hours, due to intense back pain. Querry was absent from work on April 2, 3, 21 and 22, and from May 6 to May 27 on account of her injuries. She was diagnosed as having "chronic low back syndrome" and a degenerative disc.
On May 28, 1996, Querry was again ordered back to work.[1] Querry worked until June 28, 1996, when she once again began suffering from "excruciating back and leg pain." Querry was then absent from work until July 2, 1996, at which time she was again ordered back. Querry then worked from July 4 until August 5, 1996, at which time she took a scheduled vacation, which was to be completed by September 2. However, *442 she did not return to work until September 24, due to continued back and leg pain.
Around this time, defendants Christopher and Oracle asked plaintiff to be examined by Michael Bardwell, a chiropractor. Bardwell determined that Querry would not be fit to return to work for at least four weeks and scheduled a follow-up visit for later that month. Querry alleges that because defendants Messar, Cavorti, and Oracle were "[u]nwilling to accept this recommendation," and wished to "forc[e Querry's] premature return to duty," they "ordered [her] to be immediately re-examined by the same chiropractor," who, upon being "pressured, bullied and intimidated" by defendants, "altered his opinion and determined that [Querry] could forthwith return to work."[2] Querry returned to work, while continuing to suffer from back pain. Defendants terminated her disability benefits on or about September 25, 1996. Querry alleges that her injuries were exacerbated on account of the City's refusal to pay for further treatment, and that she began to suffer from panic attacks, heart palpitations, anxiety, "persistent sinus tachycardia," and "hyperkinetic heart."
On January 15, 1997, Querry's treating physician, Dr. Robert Werboff, advised defendants that she could not operate a police vehicle on account of her injuries. According to Querry, defendants Cavorti and Messar "deliberately [and] falsely advised" her that her physician had forbidden her to operate her own car as well, "to upset" her, "exacerbate her psychological disability and set her up for potential disciplinary charges in the event that she used her personal vehicle" to get to work.
On or about January 21, 1997, Michael Sussman, an attorney who was then representing Querry, called defendants to discuss "Oracle's withholding of approval for treatments of [Querry's] back; the repeated harassment [she] received by reason of her disabilities, the issuance of orders to force her to return to work when that was medically contra-indicated; [and] the City's deliberate exacerbation of [Querry's] stress and heart [condition]."
Querry filed a charge with the New York district office of the Equal Employment Opportunity Commission ("EEOC") on July 9, 1997, claiming discrimination based on gender and disability in violation of Title VII and the ADA. The charge stated that she had "systematically been refused [reasonable] accommodation" for her disabilities, "targeted for retaliatory micro-managerial nit-picking," "deliberately ordered to perform work assignments with a (now successful) view towards exacerbating [her] physical and related emotional disabilities," and "threatened with disciplinary action ... for seeking to comply with [her] treating physician's instructions." Querry also alleged that "certain male supervisors" had "referred to [her] as a bitch."
In her complaint, Querry does not allege that she was threatened with disciplinary action; however, she does allege that Messar, "with the concurrence of Oracle, Cavorti and Christopher," retaliated against her in Spring of 1997 by refusing "to permit [her] to resume her police duties," and "forc[ing] her to utilize/waste otherwise accumulated sick timesince her own physician had [falsely] certified that she was not then disabled." Querry also claims that "she was punitively assigned ... to midnight tours of duty," when she had consistently worked days since 1988. Querry also alleges that Messar has called her a "bitch" and that Christopher has denied her special duty assignments "while deliberately according those assignments to male officers." Finally, Querry alleges that in or around September 1997, defendants caused Querry's physician once more to alter his medical opinion and direct Querry back to work, when she was still disabled.
Defendants deny that they discriminated against Querry or conspired to pressure her doctors into altering their opinions. Defendants point out that Querry has continued to miss work to date. According to the City defendants, Querry reported to work only 19 *443 days during 1997 and as of April 7, the date of their motion, had worked only twelve days in 1998. Moreover, the City defendants suggest that they have reasonably accommodated Querry by offering her "light duty assignments," such as the position of "Desk Officer" in the Second Precinct, and a job in the Communications Division, which required her "to take low priority police reports over the telephone." Defendants also claim to have transferred Querry from the forensics lab to patrol because of a "patrol manpower shortage." Additionally, defendant Oracle offers various legal defenses for dismissing the Complaint with respect to it, including that it is not a state actor, and that Querry has failed to allege "joint action" on its part with the City, and the existence of a valid contract between plaintiff and her medical providers.
DISCUSSION
The City defendants and Oracle have moved to dismiss the Complaint pursuant to Rules 56 and 12(b)(6) respectively. Because these defendants rely on different grounds, the Court will consider their arguments separately below.
I. Claims Against the City Defendants
A. Summary Judgment Standard
The City defendants move for summary judgment pursuant to Fed.R.Civ.P. 56.[3] Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(d). A genuine issue for trial exists if, based on the record as a whole, a reasonable jury could find in favor of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). On a motion for summary judgment, all evidence must be viewed and all inferences drawn in the light most favorable to the non-movant. D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir.), cert. denied, ___ U.S. ___, 118 S. Ct. 2075, 141 L. Ed. 2d 151 (1998). The court must be particularly cautious about awarding summary judgment to a defendant employer where intent is at issue, Gallo v. Prudential Residential Services, Ltd., 22 F.3d 1219, 1224 (2d Cir.1994), or where the non-moving party has been afforded no discovery, Meloff v. New York Life Ins. Co., 51 F.3d 372, 375 (2d Cir.1995).
B. Discrimination Based on Disability
Querry claims that her employer, defendant City of Yonkers, discriminated against her based on her disability. The ADA prohibits covered employers from "discriminat[ing] against a qualified individual with a disability because of the disability of such individual in regard to ... advancement, ... compensation, ... and other terms, conditions, and privileges of employment." 42 U.S.C. § 12112(a). A "qualified individual" under the ADA is "an individual with a disability, who with or without reasonable accommodation, can perform the essential functions of the employment position" at issue. See id., § 12111(8).
Thus, in order to state a prima facie case under the Act, a plaintiff must show (1) that the employer is subject to the ADA; (2) she is disabled: (3) she is otherwise qualified to perform the essential functions of the job with or without reasonable *444 accommodation, and (4) she has suffered an adverse employment decision because of her disability. Ryan v. Grae & Rybicki, P.C., 135 F.3d 867, 869-70 (2d Cir.1998); Stone v. City of Mt. Vernon, 118 F.3d 92, 96 (2d Cir.1997), cert. denied, ___ U.S. ___, 118 S. Ct. 1044, 140 L. Ed. 2d 109 (1998). The plaintiff bears the initial burden of showing that she can perform the essential functions of the job with or without reasonable accommodation. D'Amico, 132 F.3d at 151.[4] This burden is not a heavy one. Gilbert, 949 F.2d at 642. "It is enough for the plaintiff to suggest the existence of a plausible accommodation, the costs of which, facially, do not clearly exceed its benefits." Borkowski v. Valley Cent. Sch. Dist., 63 F.3d 131, 138 (2d Cir.1995). "Reasonable accommodation" may include adjustments to work schedules or other job restructuring. See 45 C.F.R. § 84.12(b). However, "`reasonable accommodation' does not mean elimination of any of the job's essential functions." Gilbert, 949 F.2d at 642.
The parties do not dispute that for at least part of the time in question, Querry was disabled within the meaning of the ADA and that the City is an employer subject to the ADA.[5] Rather, they contest whether Querry is a "qualified individual" under the Act. According to defendants, Querry was not "otherwise qualified" for the position of police officer because she could not perform one of the essential functions of her job regularly attending work. While it is not entirely clear from her papers, Querry seems to argue that she did not regularly appear for work because defendants did not provide her with reasonable accommodations, which exacerbated her condition, and made it impossible for her to work on a regular basis.[6]
The problem with Querry's position is that she has not suggested a plausible accommodation for her disability. Without question, her complaint does not suggest such an accommodation, which is grounds in itself for dismissing her claim. See Lincoln Cercpac v. Health and Hospitals Corp., 147 F.3d 165, 167 (2d Cir.1998); D'Amico, 132 F.3d at 152. Nor does Querry suggest such accommodation elsewhere in her papers. While her brief in opposition to defendants' motions suggests that a four-hour shift would accommodate her, Querry has not shown that she would be "otherwise qualified" for the job with such accommodation, a flaw which is fatal to her complaint.
It is undisputed that upon her return to work on March 30, 1996, Querry "was only able to work four hours due to intense back pain," after which time, she remained absent "by reason of her continuing disabilities" until May 27, 1996, when she was again "ordered back to work." Because Querry admits that she suffered "continuing" disability after working only four hours, as a matter of law, Querry cannot show that she would be "otherwise qualified" to perform her job, even when accommodated by four-hour shifts. See, e.g., Hypes v. First Commerce Corp., 134 F.3d 721, 726 (5th Cir.1998) (dismissing ADA claim on motion for summary judgment where employee could not arrive to work "on time or often enough to perform essential functions of job," even with flextime); Rochford v. Town of Cheshire, 979 F. Supp. 116, 122 (D.Conn.1997) (same, where plaintiff adduced no evidence suggesting that he could perform essential functions of job after eight-week leave); Kennedy v. Applause, Inc., No. 94 Civ. 5344, 1994 WL 740765, at *5-6 (C.D.Ca. Dec.6, 1994) (same, where plaintiff's own admission of "persistent joint and muscle pain" belied the claim that a *445 four-hour shift was a reasonable accommodation), aff'd, 90 F.3d 1477 (9th Cir.1996); Walders v. Garrett, 765 F. Supp. 303, 314 (E.D.Va.1991) (dismissing complaint where proposed accommodation offered "no real prospect that plaintiff would be able to achieve reasonably regular and predictable attendance"), aff'd, 956 F.2d 1163, 1992 WL 38168 (4th Cir.1992).
Querry has not shown that she is "otherwise qualified" to perform her job, because the last time she worked four hours, the amount of time she now proposes to work, she was unable to work thereafter for almost two months. Querry's request must be denied because in substance, she "asks for an accommodation which defeats her ability to perform a function of her job, namely attendance." Rhoads v. FDIC, 956 F. Supp. 1239, 1249 (D.Md.1997). The accommodation is therefore inherently unreasonable, and need not be considered by her employer. See Gilbert, 949 F.2d at 642 ("An accommodation that eliminates an essential function of the job is not reasonable.") (internal quotation omitted); Santiago v. Temple Univ., 739 F. Supp. 974, 979 (E.D.Pa.1990) (where plaintiff could not demonstrate ability to attend work with any degree of predictability, his handicap could not be accommodated), aff'd, 928 F.2d 396 (3d Cir.1991); see also Davis v. Bowes, No. 95 Civ. 4765, 1997 WL 655935, at *16 (S.D.N.Y. Oct.20, 1997) ("It is axiomatic that an employee who cannot show up for work cannot perform an `essential function' of her job."); Kotlowski v. Eastman Kodak Co., 922 F. Supp. 790, 798 (W.D.N.Y.1996) ("The ADA does not require an employer to accommodate an employee who cannot get to work."); Burrell v. Bentsen, No. 91 Civ. 2654, 1993 WL 535076, at *17 (S.D.N.Y. Dec.21, 1993) ("Rehabilitation Act does not protect absenteeism or employees who take excessive leave"; plaintiff was no longer qualified once she stopped reporting to work) (internal quotations omitted), aff'd, 50 F.3d 3 (2d Cir.1995).
Even if Querry could show that a four-hour shift would accommodate her disability, the City defendants would not be required to provide her with such accommodation to comply with the ADA. An employer need only offer a "reasonable accommodation"; it need not provide the employee with the accommodation of her choice. Fink v. New York City Dep't of Personnel, 855 F. Supp. 68, 72 (S.D.N.Y.1994), aff'd, 53 F.3d 565 (2d Cir.1995). By offering Querry "light duty" assignments, the City satisfied its obligations under the Act. See Hardy v. Village of Piermont, 923 F. Supp. 604, 610 (S.D.N.Y. 1996); see also Karbusicky v. City of Park Ridge, 950 F. Supp. 878, 884 (N.D.Ill.1997) (city not liable after reassigning police officer who could no longer carry gun to community service office where officer received same pay and benefits). Cf. Hardy, 923 F.Supp. at 610 (plaintiff not entitled to light duty assignment where police department had no such position available); Bey v. Bolger, 540 F. Supp. 910, 927 (E.D.Pa.1982) (government "is not required under law to offer `light duty status' positions to every person who applies"). Because we hold as a matter of law that Querry is not "otherwise qualified" to perform the job of police officer, we grant summary judgment to the City defendants on Claims 1 and 3, with respect to plaintiff's ADA and equal protection claims based on disability.
C. Discrimination Based on Gender
Querry also brings a gender discrimination claim against the City defendants under Title VII and the Equal Protection Clause of the Fourteenth Amendment, pursuant to § 1983. She alleges that the City defendants "deliberately targeted, for punitive and selective persecution, female police officers who have suffered on-the-job injuries," by
willfully subject[ing] said female targets for retaliatory action with the objective of (i) depriving them of proper medical treatment and/or disability related benefits including but not limited to compensation, (ii) exacerbating their physical and/or psychological injuries to penalize them for being disabled and, (iii) deliberately intimidating and/or threatening their private treating physicians ... into ordering their patients back to work prematurely, and inter alia deliberately forcing them to work while disabled ... with a view towards *446 coercing their involuntary resignation and/or retirement.
She claims that in accordance with this policy, defendants (1) forced her to work while she was disabled; (2) intimidated her treating physicians into falsifying their medical reports; (3) wrongfully denied her disability leave and benefits; (4) denied her "special duty assignments"; and (5) assigned her to the midnight shift in Spring of 1997, after she had worked days since 1988.
In reply, defendants make three arguments; first, that Querry has failed to allege a hostile work environment under Title VII; second, that she does not state facts sufficient to support her equal protection claim; and third, that her claim with respect to the special duty assignments is barred by the statute of limitations. We address each these arguments in turn, with respect to each one of Querry's allegations, beginning with Querry's claim that defendants violated her equal protection rights.
1. Equal Protection
Querry brings her equal protection claim under § 1983. To impose § 1983 liability against a municipal defendant, a plaintiff must show that the alleged violation resulted from an official policy, custom or practice. Monell v. Department of Soc. Serv. of City of New York, 436 U.S. 658, 690-91, 98 S. Ct. 2018, 56 L. Ed. 2d 611 (1978). She must also produce "some evidence that policymakers were aware of a pattern of [unconstitutional conduct] but failed to [respond]." Walker v. City of New York, 974 F.2d 293, 300 (2d Cir.1992).[7]
A claim for the violation of one's equal protection rights is cognizable under § 1983. See Chapman v. Houston Welfare Rights Org., 441 U.S. 600, 617, 99 S. Ct. 1905, 60 L. Ed. 2d 508 (1979). Under the Equal Protection Clause, state actors must treat similarly situated people alike. City of Cleburne v. Cleburne Living Ctr., Inc., 473 U.S. 432, 439, 105 S. Ct. 3249, 87 L. Ed. 2d 313 (1985). To state a claim for denial of equal protection, a plaintiff "must allege purposeful and systematic discrimination by specifying instances in which [she] was singled out for unlawful oppression in contrast to others similarly situated." Contractors Against Unfair Taxation Instituted on New Yorkers v. City of New York, No. 93 Civ. 4718, 1994 WL 455553, at *6 (S.D.N.Y. Aug.19, 1994) (quoting Albert v. Carovano, 851 F.2d 561, 573 (2d Cir.1988)) (internal quotation marks omitted); see also DeLoreto v. Ment, 944 F. Supp. 1023, 1033 (D.Conn.1996) (plaintiff must allege "specific conduct that violated [her] rights to equal protection, the time and place of the conduct, and the identity of the official who engaged in the conduct"). "To establish such intentional or purposeful discrimination, it is axiomatic that a plaintiff must allege that similarly situated persons have been treated differently." Gagliardi v. Village of Pawling, 18 F.3d 188, 193 (2d Cir.1994). A plaintiff need not show that a discriminatory reason was the sole reason for the disparate treatment, just that it was a substantial or motivating one. See Village of Arlington Heights v. Metropolitan Housing Dev. Corp., 429 U.S. 252, 265-66, 97 S. Ct. 555, 50 L. Ed. 2d 450 (1977).
Here, Querry alleges that female police officers who were injured on the job were singled out for specific forms of purposeful discrimination. Implicit in this allegation is that female officers who had been injured on the job were treated differently from male officers, and female officers who were not so injured, and that defendants intended to base such treatment on the officer's status as injured and/or female. Moreover, Querry alleges numerous occasions in which she was retaliated against due to her gender and claimed disability: that her disability benefits were terminated, that defendants had directed her treating physicians to alter their medical opinions, so that plaintiff could be ordered back to work, and that she was assigned to a midnight shift for discriminatory reasons. While the Complaint is not a model of clarity, plaintiff has provided sufficient facts to put defendants on notice of her claims. See Fed.R.Civ.P. 8(a). Because *447 plaintiff has had no discovery, and therefore, no opportunity to request the names of similarly situated individuals, her allegations are sufficient.[8]Accord Tester v. City of New York, No. 95 Civ. 7972, 1997 WL 81662, *6 (S.D.N.Y. Feb.25, 1997) (declining to dismiss equal protection claim prior to discovery although plaintiff had "yet to fully articulate a specific policy of the police department which treats homosexuals differently ... based upon their sexual orientation").
Defendants also challenge one of plaintiff's specific allegations under the Equal Protection Clause, their claimed failure to return Querry to her special duty assignment in the forensics laboratory. Defendants assert that Querry cannot state an equal protection claim with respect to this incident because both male and female officers were removed from special duty assignments during the "patrol manpower shortage." This argument misapprehends plaintiff's claim. Querry does not allege that she was treated differently from male officers when she was removed from the assignment but when she was not returned to it. Moreover, she submits evidence that of the eight officers who were removed from their posts due to the shortage of patrol manpower, the only three that were returned were men, and three of the five who were not returned were women. Of the remaining two, one was a man who was not returned because "he did not want to go back," and the other, because the position was "taken over" by the state. See Pl.'s Ex. 1, "Temporary Transfers." Because there exists evidence in the record suggesting that the officers were either returned, or not returned, on the basis of gender, we decline to dismiss plaintiff's equal protection claim with respect to special duty assignments.
Additionally, Cavorti and Messar move individually for summary judgment on plaintiff's equal protection claim, arguing that she "fail[s] to allege that either defendant engaged in conduct which treated [her] differently from other similarly situated males." As previously discussed, Querry's allegations are sufficient to state a claim for disparate treatment under the Equal Protection Clause pursuant to § 1983. To the extent that Cavorti and Messar move for summary judgment on this ground, their motion is denied, because as defendants admit, they are specifically named in paragraphs 23, 27 and 32a of the Complaint, in addition to paragraphs 6, 7, 16, 24 (Cavorti) and 28 (Messar), and generally named "defendants" throughout the Complaint. Cf. Alfaro Motors, Inc. v. Ward, 814 F.2d 883, 886 (2d Cir.1987) (dismissing § 1983 claim against individual officers where complaint was "entirely devoid of any allegations of their personal involvement"). To the extent that defendants would have desired a more definite statement of the Complaint, their relief was by way of Fed. R.Civ.P. 12(e) (permitting motion for more *448 definite statement prior to the filing of responsive pleadings).
2. Title VII
Querry also brings a claim for gender discrimination under Title VII. Title VII provides, "it shall be ... unlawful ... for an employer ... to discharge any individual, or otherwise to discriminate against any individual with respect to ... compensation, terms, conditions, or privileges of employment, because of such individual's ... sex...." 42 U.S.C. § 2000e-2(a). One way of stating a Title VII claim is to show that one gender has been treated differently than the other in the workplace. To make out a claim for disparate treatment under Title VII, a plaintiff must first show that (1) she belongs to a protected class; (2) she suffered an adverse employment action; and (3) the adverse employment action occurred in circumstances giving rise to an inference of discrimination. Ramseur v. Chase Manhattan Bank, 865 F.2d 460, 464 (2d Cir.1989); see also McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973). The "burden of establishing a prima facie case of disparate treatment [under Title VII] is not onerous." Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248, 253, 101 S. Ct. 1089, 67 L. Ed. 2d 207 (1981); see also Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir.1994) ("[t]o survive summary judgment, [the burden] at the prima facie stage is de minimis").
As a woman, Querry is a member of a protected class under Title VII.[9] She also has submitted evidence that she suffered adverse employment actions, namely, being forced to work while she was injured, denied disability leave and benefits, and assigned to midnight shifts, when she had worked days since 1988. See, e.g., Harris v. American Protective Servs. of N.Y., 1 F. Supp. 2d 191, 196 (W.D.N.Y. 1998); Fruchter v. Sossei, No. 94 Civ. 8586, 1996 WL 640896, at *7 (S.D.N.Y. Nov.4, 1996); Doolittle v. Ruffo, No. 88 Civ. 1175, 1996 WL 528475, at *2 (N.D.N.Y. Sept.9, 1996). Finally, Querry has presented evidence to give rise to an inference of discrimination, despite the fact that she has not been afforded discovery. First, it is undisputed that Querry has received awards and commendations for her work, and has otherwise successfully performed her job in the forensics lab prior to her injury, but was nevertheless removed and not returned to this position. Second, Querry submits evidence that while neither she nor any other qualified woman was returned to her position, each of the qualified men who was transferred from his position and who desired to return ultimately did so. At this stage in the proceedings, we cannot say that such evidence is insignificant.[10]
Once the plaintiff has established a prima facie case of disparate treatment, the burden of going forward shifts to the defendant to advance a legitimate, non-discriminatory reason for the adverse employment action. St. Mary's Honor Ctr. v. Hicks, 509 U.S. 502, 506-07, 113 S. Ct. 2742, 125 L. Ed. 2d 407 (1993). Any such reason will suffice; the employer "`need not persuade the court that it was actually motivated by the proffered reasons' in order to nullify the presumption and obligate the plaintiff to satisfy the burden of proof." Fisher v. Vassar College, 114 F.3d 1332, 1335-36 (2d Cir.1997) (quoting Burdine, 450 U.S. at 254, 101 S. Ct. 1089), cert. denied, ___ U.S. ___, 118 S. Ct. 851, 139 L. Ed. 2d 752 (1998). If the employer satisfies *449 this burden, the plaintiff may prevail only if she shows by a preponderance of the evidence that the employer's proffered reason is pretextual, "either because the pretext finding itself points to discrimination or because other evidence in the record points in that direction or both." Fisher, 114 F.3d at 1339.
Here, the City defendants claim that they made the above employment decisions in order to alleviate a "patrol manpower shortage," and because plaintiff, who had no degree in forensic science, was unqualified to work in the lab. According to defendants, plaintiff was fit for duty and they preferred to assign injured officers to non-patrol status, so as "to place more able bodied officers on patrol."
While this is a plausible, non-discriminatory reason for removing Querry from her non-patrol, forensics lab position, it does little, if anything, to explain the adverse employment actions that were taken against her during 1996-97, well after the claimed manpower shortage.[11]
We therefore conclude that Querry has presented sufficient evidence of pretext at this stage in the proceedings to withstand defendants' motion for summary judgment, except as to her "special duty assignment" claim, which, as discussed hereinafter, is barred by the statute of limitations.[12]
a. Orders to Return to Work
The City's proffered reason for ordering Querry back to work the manpower shortage is questionable in light of her injuries and lengthy absences from work during 1996-98. However, even if we considered this reason to be genuine, Querry has submitted sufficient evidence of pretext for us to decline to dismiss her claim at this stage in the proceedings. As previously noted, Querry states that she was removed from a position for which she was qualified, and in which she received awards for her work, and not returned to it, while all eligible males who were removed and desired to be returned were ultimately returned, see Querry Ex. 1. Whether Querry was unqualified for this job, as suggested by defendants, is a question of fact for the jury, in light of Querry's previous praiseworthy performance. Moreover, the evidence shows that at least one medical doctor's opinion was changed within one week, see Querry Ex. 4-5. This sudden change, together with the other circumstances discussed, suggests that the City defendants may have applied pressure on the doctor. Querry must be afforded discovery to explore defendants' motivation for directing plaintiff's multiple medical examinations within a short time period. Given the procedural posture of the case, this claim cannot be dismissed. See Meloff, 51 F.3d at 374-75; Villante, 786 F.2d at 521, 523.
b. Termination of Disability Leave and Benefits
For the same reasons, defendants' termination of her disability leave and benefits gives rise to an inference of pretext. Accordingly, defendants' motion is denied with respect to this claim.
c. Assignment to Midnight Shift
Querry alleges that she was assigned to the midnight shift, after having worked days for the preceding nine years which, at the time, accounted for 90% of her employment with the Department. Considered in light of the other adverse employment actions taken against Querry during 1996-97, there is sufficient evidence of pretext to deny defendants' motion to dismiss with respect to this claim as well.
d. Special Duty Assignments
As previously stated, Querry has alleged that defendant Christopher "deliberately denied her special duty assignments while deliberately according those assignments to male officers." From these allegations, however, it is impossible to discern to which "special duty assignments" she refers. Even *450 viewing the record in the light most favorable to plaintiff, the only "special duty assignments" we can discern are the positions of detective and forensic lab assistant. She applied for the former position in April 1994. She held that latter position until January 13, 1995, at which time she was removed "due to an alleged shortage of officers of the street."
Because Querry did not file her EEOC charge until July 9, 1997, more than two years after these incidents occurred, they are time-barred, and accordingly, we cannot consider them. See 42 U.S.C. § 2000e-5(e) (providing 300 day limitations period for charge filed with state or local EEOC office; 180 day period for charge filed with EEOC) (citing 42 U.S.C. § 2000e-5(e)); Butts v. City of New York Dep't of Housing Preservation and Dev., 990 F.2d 1397, 1401 (2d Cir.1993) (court has jurisdiction only over claims stated in EEOC charge or based on conduct that occurred after charge was filed and that is "reasonably related" to claims stated in charge).
e. Bitch Comment
Defendants also argue that plaintiff's allegation that she was called a "bitch" in the workplace does not state a claim under Title VII. We agree. See, e.g., Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57, 67, 106 S. Ct. 2399, 91 L. Ed. 2d 49 (1986) ("mere utterance of a[n] ... epithet [does] not ... violate Title VII") (internal citations omitted); Coleman v. Prudential Relocation, 975 F. Supp. 234, 243 (W.D.N.Y.1997) (dismissing claim where plaintiff solely alleged she was called a "black bitch" and a "nigger"); Flynn v. Goldman Sachs & Co., 836 F. Supp. 152, 162-63 (S.D.N.Y.1993) (same, where complaint alleged that plaintiff was called a "treacherous bitch"). But, by making this argument, defendants seem to miss the point of Querry's complaint. Querry does not allege gender discrimination in the workplace solely on account of this one remark. Rather, she maintains that the above-articulated policy, as evidenced by each of the adverse employment actions taken against her by defendants created a hostile work environment for injured female police officers, such as she. To the extent that "[a]ctionable sexual harassment must consist of more than isolated incidents or casual comments that express harassment or hostility," Querry has stated a claim. The incidents of which she complains occurred repeatedly, over a period of two and one-half years. Cf. Kotcher v. Rosa and Sullivan Appliance Ctr., Inc., 957 F.2d 59, 63 (2d Cir.1992) ("the incidents must be repeated and continuous"). This is sufficient, not only with respect to Title VII, but under § 1983. See Annis v. County of Westchester, 36 F.3d 251, 254 (2d Cir.1994) ("harassment that transcends coarse, hostile and boorish behavior can rise to the level of a constitutional tort" under § 1983).
D. Retaliation
Finally, Querry alleges that the City defendants retaliated against her for complaining about discrimination. For the following reasons, we hold that Querry has failed to state a claim for retaliation under either Title VII or the ADA.
To state a claim for discriminatory retaliation, a plaintiff must show "(1) participation in a protected activity known to the defendant; (2) an employment action disadvantaging the plaintiff; and (3) a causal connection between the protected activity and the adverse employment action." Gallagher v. Delaney, 139 F.3d 338, 349 (2d Cir.1998) (Title VII); Muller v. Costello, No. 94 Civ. 842, 1996 WL 191977, at *6 (N.D.N.Y. April 16, 1996) (ADA). A causal connection may be established either indirectly by showing that the protected activity was followed closely by adverse treatment, or through other evidence, such as disparate treatment of fellow employees who engaged in similar conduct, or directly through evidence of retaliatory animus directed against the plaintiff by the defendant. Johnson v. Palma, 931 F.2d 203, 207 (2d Cir.1991); see also Tomka v. Seiler Corp., 66 F.3d 1295, 1308 (2d Cir.1995) ("timing [of adverse action may] support[ ] inference of discrimination sufficient to establish prima facie case"). "The plaintiff's burden at this stage is slight; [she] may establish a prima facie case with de minimis evidence." Wanamaker v. Columbian Rope Co., 108 F.3d 462, 465 (2d Cir.1997). To be considered a "protected activity" under the civil rights laws, a complaint alleging discrimination *451 "`need not take the form of a formal claim filed by an administrative agency ... [it] may simply be an objection voiced to the employer,'" Barcher v. New York Univ. School of Law, 993 F. Supp. 177, 184 (S.D.N.Y.1998) (quoting Iannone v. Frederic R. Harris, Inc., 941 F. Supp. 403, 410 (S.D.N.Y.1996)); see also Sumner v. U.S. Postal Serv., 899 F.2d 203, 209 (2d Cir.1990), with or without the assistance of an attorney, Sprott v. Franco, No. 94 Civ. 3818, 1997 WL 79813, *13 (S.D.N.Y. Feb.25, 1997) (where plaintiff retained attorney "to notify defendants that she intended to file a lawsuit in federal court if they did not agree to settle her existing retaliation claim," plaintiff engaged in protected activity). The plaintiff need not establish that the conduct she opposed was in fact discriminatory; she need only show a "good faith, reasonable belief that the ... challenged actions of the employer violated the law." Manoharan v. Columbia Univ. College of Physicians & Surgeons, 842 F.2d 590, 593 (2d Cir.1988). "The reasonableness of the plaintiff's belief is to be assessed in light of the totality of the circumstances," Galdieri-Ambrosini v. National Realty & Dev. Corp., 136 F.3d 276, 292 (2d Cir.1998), including whether she was represented by counsel when the complaint was made, see Barcher, 993 F.Supp. at 185 (determination of "good faith, reasonable belief ... is based, in part, on an assessment of plaintiff's legal sophistication"; law professor held to standard of reasonable attorney); Iannone, 941 F.Supp. at 410 ("an attorney ... will be held to a higher standard of expertise ... than a layperson"); Volberg v. Pataki, 917 F. Supp. 909, 914 (N.D.N.Y.) ("good faith belief" standard is applicable to a "typical lay employee," but not to an attorney), aff'd, 112 F.3d 507, 1996 WL 601405 (2d Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 1252, 137 L. Ed. 2d 333 (1997).
To satisfy the second requirement, the plaintiff need only establish that the employer knew or should have known about her complaint, Cosgrove v. Sears, Roebuck and Co., 9 F.3d 1033, 1039 (2d Cir.1993), and that the complaint reasonably described an activity that violated the civil rights laws, see Castro v. New York City Bd. of Educ. Personnel, No. 96 Civ. 6314, 1998 WL 108004, at *8 (S.D.N.Y. March 12, 1998).
Here, Querry alleges that civil rights attorney Michael Sussman called defendants on or about January 21, 1997 to discuss "Oracle's withholding of approval for treatments of [Querry's] back; the repeated harassment [she] received by reason of her disabilities, the issuance of orders to force her to return to work when that was medically contra-indicated; [and] the City's deliberate exacerbation of [Querry's] stress and heart [condition]." While this conversation may be considered a complaint, it is inadequate to arise to a "protected activity" under Title VII or the ADA. First, Querry does not state whom Mr. Sussman called. It is therefore impossible to ascertain whether the City "knew or should have known" about the conversation. See Spurlock v. NYNEX, 949 F. Supp. 1022, 1032 (W.D.N.Y.1996) (allegations must "provide defendant with enough information whereby it can verify the existence of such a complaint"). Second, it cannot be ascertained from the allegations whether Mr. Sussman clearly articulated a violation of the civil rights laws. The allegations leave doubt as to how the City could have known that Sussman was alleging a violation of Title VII or the ADA. Cf. Brands-Kousaros v. Banco Di Napoli S.P.A., No. 97 Civ. 1673, 1997 WL 790748, at *5 (S.D.N.Y. Dec. 23, 1997) ("the protected activity must involve some sort of complaint about a type of discrimination that [the civil rights laws] forbid[ ]").
Because Querry has failed to show that this conversation constituted a "protected activity" under the civil rights laws, she has not established a prima facie case of retaliation under Title VII or the ADA. Accordingly, this claim is dismissed.
II. Claims Against Defendant Oracle
Next, Querry alleges that defendant Oracle discriminated against her based on her gender and disability in violation of the Equal Protection Clause of the Fourteenth Amendment and tortiously interfered with her relationship with her treating physicians in violation of New York law. Oracle has moved to dismiss the Complaint on the grounds that, *452 as a private corporation, it cannot violate the Fourteenth Amendment and that Querry has not pled the existence of a contract, therefore barring her tortious interference claim.
A. Motion to Dismiss Standard
Dismissal under Rule 12(b)(6) is proper only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957). Accordingly, on a motion to dismiss, the Court must accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974). However, the Court may disregard "conclusions of law or unwarranted deductions of fact." First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 771 (2d Cir.1994).
When a complaint is dismissed under Rule 12(b)(6), "the usual practice" is to allow leave to amend. Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir. 1991). "Although leave to [amend] is within the discretion of the district court, refusal to grant it without any justifying reason is an abuse of discretion." Id. Such a reason exists if a plaintiff "is unable to allege any facts sufficient to support [her] claim," id., or where "amendment[ ] would not serve any purpose," Kaster v. Modification Systems, Inc., 731 F.2d 1014, 1018 (2d Cir.1984). If a plaintiff has "at least colorable grounds for relief, justice does ... require leave to amend." Id. (internal quotation omitted).
B. Equal Protection Claim
In order to state a claim under the Equal Protection Clause against defendant Oracle, Querry must show that Oracle "acted under color of law" to violate her constitutional rights. See 42 U.S.C. § 1983; Fries v. Barnes, 618 F.2d 988, 990 (2d Cir.1980). Oracle contends that Querry's equal protection claim must fail with respect to it because she "does not contest that Oracle is a private entity, unconnected with the state; nor ... provide any basis to conclude that Oracle `acted under color of law.'" Oracle Reply at 2. Upon a review of the Complaint, we conclude that Oracle is incorrect. Nevertheless, we dismiss Querry's equal protection claim, because it is vague and conclusory.
The Court infers that in her complaint, Querry attempts to allege a conspiracy among Oracle and the City defendants to pressure her treating physicians into falsifying their medical opinions, and to use these opinions to force her back to work and terminate her disability benefits while she remained disabled. "It is ... axiomatic that a state [actor] may not induce, encourage or promote private persons to accomplish what is constitutionally forbidden to accomplish." Norwood v. Harrison, 413 U.S. 455, 465, 93 S. Ct. 2804, 37 L. Ed. 2d 723 (1973). "There is ample authority to the effect that `[j]oint interference of state agents and private parties with private rights constitutes state action attributable to ... [the] private sector participants.'" Kia P. v. McIntyre, 2 F. Supp. 2d 281, 288 (E.D.N.Y.1998) (quoting Suss v. American Soc. for Prevention of Cruelty to Animals, 823 F. Supp. 181, 186 (S.D.N.Y.1993)) (alteration in original); see also Dennis v. Sparks, 449 U.S. 24, 27-28, 101 S. Ct. 183, 66 L. Ed. 2d 185 (1980) ("to act under color of state law for § 1983 purposes does not require that the defendant be an officer of the State .... [i]t is enough that he is a willful participant in joint action with the State or its agents") (internal quotations marks omitted).[13]
However, "in order to survive a motion to dismiss [a § 1983 claim alleging a conspiracy], the complaint must contain more than mere conclusory allegations." Dwares v. City of New York, 985 F.2d 94, 99 (2d Cir.1993). It "must allege facts demonstrating *453 that the private entity acted in concert with the state to commit an unconstitutional act." Spear v. Town of West Hartford, 954 F.2d 63, 68 (2d Cir.1992). This means that the plaintiff "should make an effort to provide some `details of time and place and the alleged effect of the conspiracy.'" Id. (quoting 2A MOORE'S FEDERAL PRACTICE ¶ 8.17[6], at 8-109 to 8-110 (2d ed.1992)).
Here, Querry claims that in conspiring to force her physicians to change their medical opinions, defendants violated her equal protection rights by "target[ing], for punitive and selective persecution, female police officers who have suffered on-the-job injuries." Such allegation is conclusory and cannot withstand a motion to dismiss, because Querry does not specify who, on behalf of Oracle, took part in the conspiracy, where the conspiracy occurred, nor what was done in furtherance of the conspiracy nor when, where or how it was done. Querry's allegations are therefore insufficient to state a claim against Oracle, a private entity, under the Equal Protection Clause. Accord Humpherys v. Nager, 962 F. Supp. 347, 352 (E.D.N.Y.1997) (dismissing claim under § 1983 where complaint did "not offer a scintilla of fact that explains when, where, or how the parties reached the alleged agreement"). Accordingly, this claim is dismissed without prejudice and with leave to amend the complaint within 20 days, if the missing allegations can be supplied in compliance with Fed.R.Civ.P. 11.[14]
C. Tortious Interference with Contractual Relations
Querry also brings a claim for tortious interference with contractual relations against defendant Oracle. To state a claim for tortious interference with a contractual relationship, a plaintiff must allege (1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of the contract; (3) the defendant's intentional procurement of its breach; and (4) damages. Riddell Sports Inc. v. Brooks, 872 F. Supp. 73, 77 (S.D.N.Y. 1995). Here, Querry does not allege the existence of a contract between herself and any of her treating physicians. Therefore, her claim for tortious interference with contract cannot stand. Lutnik v. New York City Health and Hosps. Corp., No. 89 Civ. 4217, 1991 WL 66941, at *3 (S.D.N.Y. April 23, 1991) ("Without pleading the existence of a contract, a claim for intentional interference with contractual relations cannot survive" a motion to dismiss); accord Pani v. Empire Blue Cross Blue Shield, No. 93 Civ. 8215, 1996 WL 734889, at *2 (S.D.N.Y. Dec.23, 1996) (dismissing claim where plaintiff alleged that "relationship ... between himself and his patients ... ha[d] been adversely affected" because plaintiff did not plead existence of specific contract or defendant's knowledge of contract). Accordingly, this claim is dismissed without prejudice and with leave to amend the complaint within 20 days.
Conclusion
For the foregoing reasons, the Court grants the City defendants' motion for summary judgment on plaintiffs ADA and § 1983 claim, with respect to her claimed disability, on plaintiff's Title VII claim with respect to the "special duty assignments," and on plaintiff's retaliation claim; grants defendant Oracle's motion, to the extent that the Complaint, as against it, is dismissed without prejudice and with leave to amend the Complaint within 20 days of this Opinion and Order; grants the City defendants leave to renew their motion for summary judgment upon the completion of discovery.
SO ORDERED.
NOTES
[1] However, the Complaint does not state which defendants ordered her return.
[2] Additionally, by way of affidavit, Querry states that Drs. Poon, Gauhan, Gross and Edelstein were also intimidated by defendants into determining that she was fit for work. See Querry Aff. ¶¶ 34, 54-56; Querry Ex. 7. However, because these allegations are not contained in her complaint, we cannot consider them.
[3] The City defendants also move for summary judgment under Local Rule 56.1, arguing that plaintiff "fails to controvert, most, if not all, of the statements presented by [the] City defendants in their Rule 56.1[s]tatement," and therefore does not raise a genuine issue of material fact for trial. Accordingly, the City defendants ask the court to deem admitted all of the facts that plaintiff does not specifically deny in her Rule 56.1 statement. While we admonish plaintiff for failing to provide a "short and concise statement" of disputed facts in accordance with Rule 56.1(a), we decline to deem these facts admitted because plaintiff implicitly denies them by presenting her own facts in the statement, and because we have reviewed the record and determined that there are a number of material facts in dispute. Accord United States v. Barrier Indus. Inc., 991 F. Supp. 678, 679 n. 1 (S.D.N.Y.1998); Pedre Co., Inc. v. Robins, 984 F. Supp. 235, 236 (S.D.N.Y.1997); Mehtani v. Paul Revere Life Ins. Co., No. 94 Civ. 2880, 1995 WL 617229, at *2 (S.D.N.Y. Oct.20, 1995).
[4] Once the plaintiff has shown that she is otherwise able to perform the essential functions of the job with reasonable accommodation, the burden shifts to the employer to show that the accommodation is not possible or effective. See Gilbert v. Frank, 949 F.2d 637, 642 (2d Cir.1991).
[5] The ADA defines "disability" as "a physical or mental impairment that substantially limits one or more of the major life activities"; "a record of such an impairment"; or "being regarded as having such an impairment." 42 U.S.C. § 12102(2)(a-c). Because defendants regarded Querry as being disabled, she was disabled within the meaning of the Act. See id.; Johnson v. New York Med. College, No. 95 Civ. 8413, 1997 WL 580708, at *8 (S.D.N.Y. Sept. 18, 1997).
[6] Querry also maintains that defendants' failure to provide her with reasonable accommodation was a means for discriminating against her on account of her disability and gender. See infra parts II, III.
[7] Defendants do not contest that plaintiff has alleged a policy, custom or practice under § 1983.
[8] We are also mindful that plaintiff has specifically requested time for discovery by attorney affidavit pursuant to Rule 56(f). Among other things, plaintiff "intends to depose all Defendants .... serve interrogatories and document production requests ... [to] explore ... Defendants' policy regarding on-the-job injuries; Defendants' treatment of male officers who suffered such injuries; Defendants' treatment of female officers; Defendants' knowledge of Plaintiff's relationship with her treating physicians; and the actual motivation for Defendants' allegedly retaliatory acts." Crossley Aff. at ¶ 7. To the extent that plaintiff has requested additional time for discovery with respect to the equal protection claim against the City defendants, her request is granted. See Stagl v. Delta Airlines, Inc., 52 F.3d 463, 474 (2d Cir.1995) (vacating summary judgment award and reversing court's denial to compel additional discovery where plaintiff had requested discovery of individuals similarly injured by defendant); Meloff, 51 F.3d at 374-75 (reversing award of summary judgment where "no discovery deadlines [had been] set, [plaintiff] ... needed depositions .... to explore the motivations and reasons for [the adverse employment decision,] ... the ... method in which [it] was done ... [and] company policy"); Villante v. Department of Corrections of City of New York, 786 F.2d 516, 521, 523 (2d Cir.1986) (court's failure to order deposition discovery of officials in § 1983 action was abuse of discretion; "claim could only succeed upon a showing of actual or constructive knowledge ... of supervisory personnel and ... facts solely in the defendants' control"). Moreover, the attorney affidavit meets the requirements of Rule 56(f). See Hudson River Sloop Clearwater, Inc. v. Department of Navy, 891 F.2d 414, 422 (2d Cir.1989); Burlington Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919, 926 (2d Cir.1985).
[9] As previously established Querry is not "otherwise qualified" for her job as police officer, and therefore is not a member of a "disabled" class of police officers protected by the ADA. Furthermore, "injured on the job" is not a protected class. See Hazeldine v. Beverage Media Ltd., 954 F. Supp. 697, 703 (S.D.N.Y.1997) ("physical impairment, standing alone, is not necessarily a disability under the ADA"). Thus, for the purposes of determining whether Querry has stated a prima facie case of disparate treatment under the civil rights laws, we consider only her allegations of gender discrimination.
[10] The Court may consider a claim that is barred by the statute of limitations, as discussed below, as proof of discriminatory intent. See United Air Lines, Inc. v. Evans, 431 U.S. 553, 556, 97 S. Ct. 1885, 52 L. Ed. 2d 571 (1977) (time-barred acts "may constitute relevant background evidence in a proceeding in which the status of a current practice is at issue"); accord Newman v. Montefiore Med. Ctr., No. 96 Civ. 2687, 1996 WL 741599, at *3 (S.D.N.Y. Dec.27, 1996) (considering incident time-barred under 42 U.S.C. § 2000e-5(e) as evidence of employer's "discriminatory intent in its later actions").
[11] Defendants' proffered explanation could be deemed legitimate with respect to assigning Querry on patrol to the midnight shift after her injury, except that the "manpower shortage" occurred in 1995. See Christopher Reply Aff. at ¶¶ 4-5.
[12] Interestingly enough, defendants do not state that they ordered Querry back to work, terminated her benefits, or put her on sick leave because they no longer considered her disabled. If proffered, this would be a legitimate reason for defendants' adverse employment actions.
[13] We note, while not deciding because it has not been briefed by the parties that Oracle may be a state actor under the Fourteenth Amendment because it administers the City officers' disability benefits. See Catanzano v. Dowling, 60 F.3d 113, 119-120 (2d Cir.1995) (finding state action where otherwise private entities "assumed the responsibility for [the State's] mandated health care duties" in providing home health care services under Medicaid pursuant to state regulation) (alteration in original) (internal quotation omitted).
[14] To the extent that Querry brings a claim against defendants under 42 U.S.C. § 1985, this claim is also dismissed. Section 1985 prohibits two or more persons from conspiring to violate the civil rights of another on the basis of race or other class-based distinction. See 42 U.S.C. § 1985(3); Gagliardi, 18 F.3d at 194. For the reasons articulated above, Querry has failed to state facts sufficient to support a claim against any of the defendants under § 1985(3). See Frooks v. Town of Cortlandt, 997 F. Supp. 438, 456 (S.D.N.Y.1998) (dismissing § 1985 claim because municipality, "a single entity," cannot conspire with its own employees); Huntemann v. City of Yonkers, No. 95 Civ. 1276, 1997 WL 527880, at *14 (S.D.N.Y. Aug.25, 1997) (same).
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https://www.courtlistener.com/api/rest/v3/opinions/2519247/
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174 P.3d 407 (2008)
STATE of KANSAS, Appellee,
v.
Thomas E. MURRAY, Appellant.
No. 94,619.
Supreme Court of Kansas.
January 18, 2008.
*413 Sarah Ellen Johnson, capital appellate defender, argued the cause and was on the brief, for appellant.
Angela M. Wilson, assistant district attorney, argued the cause, and Charles E. Branson, district attorney, and Paul J. Morrison, attorney general, were with her on the brief, for appellee.
The opinion of the court was delivered by DAVIS, J.:
Thomas Murray appeals from his conviction of first-degree murder for killing his former wife. He contends that his conviction must be reversed based on the following claims of error: (1) Prosecutorial misconduct during the State's closing argument; (2) the admission of testimony regarding the defendant's post-Miranda silence; (3) the admission of hearsay statements of the victim concerning her relationship with the defendant; (4) cumulative error; and (5) insufficiency of the evidence to support his conviction. We conclude that no reversible error occurred and affirm.
Facts
On November 14, 2003, the Douglas County Sheriff's Department received a call from Larry Lima, who lived in California, requesting that the police conduct a welfare check on his fiancee, Carmin Ross. Carmin lived at 1860 E. 1150 Road in rural Douglas County. The home is situated about .6 miles from County Road 438 and about 500 feet from the nearest residence.
The officers arrived at Carmin's residence shortly after 1 p.m. and knocked on the front door. One of the officers looked through a window and saw what appeared to be blood and someone's knee. The officers split up and met again at the back of the home; neither officer present observed any broken windows or other signs of forced entry into the home.
After entering the home through the back door, the officers found Carmin lying on the floor in her living room. The room was in disarray, with a potted plant on its side and the coffee table partially flipped over on the couch. Blood spots were found throughout the area. There was no evidence of a sexual assault and no evidence that anything had been removed from the home.
An autopsy revealed that Carmin had suffered 11 lacerations due to blunt force injury followed by 13 stabs in the neck with a knife, as well as several defensive wounds on her arms. Neither the knife nor any other weapon was found on the premises, although a knife was missing from Carmin's knife block in the kitchen. The detectives hypothesized that Carmin's attacker had first beaten her, and, unsure whether the beatings would kill her, the attacker retrieved a knife from Carmin's kitchen and stabbed her.
Aside from the mess in the living room, Carmin's house was clean and well kept. In *414 addition, Carmin's car was still in the driveway; no windows were broken, and there was no indication that anything had been stolen.
An exhaustive investigation ensued. Officers searched the roadway and garbage from rest areas near Carmin's home and interviewed all those who knew Carmin to determine when she had last been seen alive.
The Riley County Police Department contacted the defendant at about 7:30 p.m. on November 14, 2003. The defendant and Carmin had been married until Carmin met Lima at a conference in Wichita in 2002; they divorced in the spring of 2003 and were currently in a custody struggle over their 4-year-old daughter, Ciara. When the police arrived at the defendant's home, the defendant walked into an adjacent room, picked up Ciara, and answered the door with his daughter in his arms. The defendant appeared distraught when the police informed him that Carmin had died. However, he never asked the officers how Carmin had died or whether her death had involved foul play. The defendant then drove himself to the police department for a requested interview with police.
The defendant's interview at the police department lasted approximately 9 1/2 hours, with the majority of the interview being audio- and video-recorded. The detectives noticed that during the first 2 hours of the interview, the defendant kept his right hand in his lap or under his leg. The detectives later noticed that the defendant had a cut on his little finger on his right hand and bruises along the outside of both of his wrists and on his hands and arms. The defendant explained that he cut his finger when cutting a pineapple for Ciara. Although he initially could not remember where the bruises came from, he later told the investigators he was bruised when he was playing with Ciara and bouncing her on his knees.
By 9 p.m., the defendant still had not asked how Carmin died but was voluntarily explaining in detail how he had spent his time the previous day. He also told the detectives that they would find his DNA on the carpet of Carmin's living room. At about 10 p.m., the investigators pointed out to the defendant that he had yet to ask how Carmin died; the defendant said he did not want to know the details.
At 11 p.m., investigators sought the defendant's consent to search his car and home. He signed a written consent for both searches and told the detectives, "I'll tell you what you're going to find in [the] car." The defendant explained that the detectives would find "Carmin's blood" and her fingerprints. No one had informed the defendant at that time that Carmin's death had been bloody or violent. The defendant also consented to the search of his computers both at home and at his office at Kansas State University.
The defendant went on to explain that Carmin had borrowed his car a few weeks ago when Ciara was ill so that Carmin could get medicine at Walgreens, because her car was blocked in by the defendant's vehicle when he was visiting. According to the defendant, Carmin suffered a horrible nosebleed on the way.
Although no one had informed the defendant how Carmin died, he told the police in his interview that he would not have done anything "like they were suggesting" because he was a "thinking man." He explained that if he were going to commit a homicide, he would do it with an airborne poison "or something really slick." He later stated that he was "having fun with this from a CSI perspective."
At about 12:30 a.m., the defendant agreed to provide the police with a written statement. He then asked a detective who came into the room whether there were cameras in the toll booths along I-70. When the officer answered that there were cameras, the defendant replied, "That's all I need to know."
When he completed his written statement, he told the detectives that something in the statement would cause them to look at it "with a raised eyebrow." He then stated that he failed to point out that he drove on I-70 the previous morning to look at pillow cases in Paxico.
About 3 a.m., the defendant explained that Carmin's blood would be in his house because Carmin had cut herself when trying to cut a *415 piece of candy for Ciara on Halloween. He also explained that his blood would be found in her downstairs bathroom because when he was at Carmin's home after mediation on the previous Tuesday, he had picked a callus and had caused it to bleed. The detective then informed the defendant for the first time that Carmin had been murdered and that the murder had occurred in her own home.
Following the interview, the defendant left the police department without being charged.
Further consideration and investigation of the defendant's police interview undermined many of the explanations that he provided in his statement. Specifically, several acquaintances indicated that Ciara was not the type of child who wrestled or roughhoused. Furthermore, no witness could verify the defendant's statement that Carmin was prone to nosebleeds.
Ciara's babysitter told the detectives that on the morning Carmin was murdered, the defendant had dropped off Ciara at least 30 minutes early. Furthermore, although the defendant had initially told the police officers in his interview that he was at home grading tests all morning, a number of his students at the university stated that he was grading the students' papers in class as they were turned in. The defendant's statements regarding his grading of tests were also inconsistent with his later statement during the interview that he had driven to Paxico to look at antique pillowcases.
DNA testing showed that all of the blood in Carmin's house belonged to the victim, with the exception of a drop of blood on the baseboard of Carmin's downstairs bathroom. This drop of blood contained at least two contributors Carmin and an unknown male.
While there was a blood pattern found just inside the front porch that was consistent with a work boot or shoe, no such shoe was found, either in the vicinity of Carmin's house or at the defendant's home. No other impression was found.
In addition, a number of acquaintances informed the investigators of statements made by the defendant leading up to Carmin's death. The defendant had told a neighbor that he "`would be better off if [Carmin] weren't alive.'" The defendant also made numerous statements to his best friend, GayLynn Crossley-Brubaker. Crossley-Brubaker explained that she had called the defendant on the evening of November 13 (the day Carmin was allegedly murdered) to discuss Thanksgiving plans and noted that the defendant seemed unusually upbeat.
On November 15, 2003, the defendant called Crossley-Brubaker and told her that Carmin was dead and that the police were treating him as a suspect. He also told his friend that he had cuts on his hands as if "holding a knife by the blade." He repeatedly said, "`[a]ll I see is the blood, all the blood.'"
Crossley-Brubaker also questioned the defendant's indication that he had gone to Paxico to look at pillowcases on the morning of Carmin's death, because she had not known that the defendant was interested in antiques and she did not think he would waste the gas on such a trip.
A search of the defendant's computer revealed that he had run several searches between October 8, 2003, and November 10, 2003, including"; "colorless and odorless poison"; "homicide"; "poisoning and colorless and odorless and murder and perfect and tasteless"; "murder for hire"; "how to hire an assassin"; "how to kill someone quickly and quietly"; "the best way to kill someone"; and "eyedrops and murder and csi."
On November 12, 2003, the day before Carmin's death and the day after the defendant learned at custody mediation that Lima was moving to Lawrence and that eventually Carmin wanted to move with him and Ciara to California, the defendant conducted a search for "highway 40" and "Topeka." The links that followed illustrated how to drive from Topeka to Lawrence without using the Kansas Turnpike.
Ten months after her death, the State charged Thomas Murray with first-degree murder for killing Carmin. After a 4-week trial, the jury found the defendant guilty of first-degree murder. The court sentenced him to life in prison with the possibility of parole after 25 years. Murray now appeals his conviction.
*416 I. PROSECUTORIAL MISCONDUCT DURING CLOSING ARGUMENT
The defendant argues that the State committed prosecutorial misconduct during closing argument by misstating the evidence relating to the DNA analysis of the blood spot found in Carmin's bathroom and by misconstruing testimony of GayLynn Crossley-Brubaker.
The defendant did not object to either of the prosecutor's comments that he now claims were problematic. Ordinarily, a party must make a timely and specific objection to an alleged error in order to preserve the issue for appellate review. See K.S.A. 60-404; State v. Anthony, 282 Kan. 201, 206, 145 P.3d 1 (2006). However, when a defendant's claim for prosecutorial misconduct implicates his or her right to a fair trial, an appellate court reviews the alleged misconduct under the same analysis, regardless of whether an objection was made. State v. Swinney, 280 Kan. 768, 779, 127 P.3d 261 (2006). We have found that a defendant's right to a fair trial is implicated when a prosecutor misstates facts or states facts not in evidence. See State v. Conway, 284 Kan. 37, 43-44, 159 P.3d 917 (2007); State v. Ly, 277 Kan. 386, 392-93, 85 P.3d 1200, cert. denied 541 U.S. 1090, 124 S. Ct. 2822, 159 L. Ed. 2d 254 (2004).
Standard of Review
Appellate review of an allegation of prosecutorial misconduct requires a two-step analysis. First, an appellate court decides whether the comments were outside the wide latitude that the prosecutor is allowed in discussing the evidence. Second, the appellate court decides whether those comments constitute plain error; that is, whether the statements prejudiced the jury against the defendant and denied the defendant a fair trial. Swinney, 280 Kan. at 779, 127 P.3d 261. In its plain error analysis, the appellate court considers three factors:
"(1) whether the misconduct is gross and flagrant; (2) whether the misconduct shows ill will on the prosecutor's part; and (3) whether the evidence is of such a direct and overwhelming nature that the misconduct would likely have had little weight in the minds of jurors. None of these three factors is individually controlling. Moreover, the third factor may not override the first two factors, unless the harmless error tests of both K.S.A. 60-261 [refusal to grant new trial is inconsistent with substantial justice] and Chapman [v. California, 386 U.S. 18, 87 S. Ct. 824, 17 L. Ed. 2d 705 (1967) (conclusion beyond a reasonable doubt that the error had little, if any, likelihood of having changed the result of the trial)], have been met. [Citations omitted.]" 280 Kan. at 779-80, 127 P.3d 261.
When a defendant claims that a prosecutor committed reversible misconduct, the prejudicial nature of alleged errors is analyzed in the context of the trial record as a whole. State v. Whitaker, 255 Kan. 118, 134, 872 P.2d 278 (1994).
Discussion
Comments Regarding DNA Analysis
According to the defendant, the prosecutor committed reversible misconduct when she stated during the State's initial closing argument segment that there was "[b]lood in the house. His [the defendant's] blood, her [Carmin's] bathroom. Defendant killed Carmin." The defendant asserts that this statement misrepresented the results of the DNA tests relating to the blood stain on the floorboard of the bathroom, which were inconclusive as to whether the blood belonged to the defendant.
This court has previously explained that during "closing argument, the prosecutor may draw reasonable inferences from the evidence but may not comment upon facts outside the evidence. [Citation omitted.]" (Emphasis added.) State v. McCray, 267 Kan. 339, 351, 979 P.2d 134 (1999). More recently, the court stated:
"The fundamental rule for closing arguments is that the prosecutor must confine his or her remarks to matters in evidence. It is clearly improper for the prosecutor to state facts that are not in evidence. When the prosecutor argues facts that are not in evidence, the first prong of the prosecutorial misconduct test is met, and an appellate *417 court must consider whether the misstatement of fact constitutes plain error." Ly, 277 Kan. 386, Syl. ¶ 4, 85 P.3d 1200.
The defendant argues that the prosecutor's statement during closing argument that his blood was found in Carmin's bathroom was a misstatement of the evidence. In particular, the defendant asserts that the prosecutor's statement was inconsistent with the report from the DNA analysis of the bloodstain found on the baseboard of Carmin's bathroom, which stated that no conclusion could be drawn as to whether the bloodstain matched the defendant's DNA.
The State counters that the question of whether the bloodstain in the bathroom matched Murray's DNA was a hotly contended issue of fact. The State points to testimony and other evidence indicating that the blood on the baseboard was Murray's, claiming that the prosecutor was free to argue reasonable inferences from that evidence namely, that the defendant's blood was found in the bathroom. In addition, the State claims that any possible error in the statement was cured since the court instructed the jury that the remarks of counsel in closing arguments are not evidence.
Our review of the record in this case reveals that there was evidence to support the prosecutor's statement that the defendant's blood was found in Carmin's bathroom. A drop of blood containing male DNA was found at the baseboard. After conducting a Y-STR analysis to isolate the male DNA, Dr. Sudhir Sinha, who conducted the analysis of the bloodstain, testified that according to scientific policies, the presence of one particular "peak" in the DNA of the bloodstain that did not match the defendant's sample, as well as the relatively weak nature of some of the peaks in the unknown sample, required Dr. Sinha to report that no conclusion could be drawn regarding the correlation between the unknown sample and the defendant's DNA. However, the doctor testified that the inconclusive results of the analysis were probably due to the location of the bloodstain the bathroom baseboard as a number of people would use that bathroom and the sample would be diluted and mixed over time. The doctor also testified that in his professional opinion and from his experience, the bloodstain DNA from Carmin's bathroom was consistent with the defendant's DNA:
"Q. [Prosecutor] Doctor, based on your experience, do you have an opinion with a reasonable degree of scientific certainty whether Tom Murray's DNA is consistent with the baseboard sample?
"A. [Dr. Sinha] Well, as far as our standard quality control we gave the result inconsistent, inconclusive. But as far as my experience looking at it and looking at the data and doing several times and always finding the fifteen there, and that it's my scientific opinion that, yes, he is not excluded, and the result looks consistent that out of the mixture he could be one of the person[s] there present."
In addition, the doctor testified that other DNA tests specifically excluded other men who could be connected to the bathroom, such as Lima, because the tests showed no correlation between the DNA samples. However, the defendant's sample resulted in a strong enough correlation to the unknown sample that scientific policies would not exclude Murray as a possible contributor it was just not conclusive according to scientific standards.
Moreover, in his initial interview with the police after he learned of Carmin's death, the defendant stated that he would "guarantee that you'll [the police] find a drop of my [the defendant's] blood" in Carmin's bathroom. The defendant then explained that he had cut open a callus when he was at Carmin's house on the Tuesday before her death and had cleaned up the blood with a towel in the bathroom. The record indicates that the towel rack that would have held this towel (which was not found in the bathroom when Carmin's body was discovered on Friday) was located directly above where the bloodstain was found on the baseboard.
We conclude that there was ample evidence in the record to support the prosecutor's argument that the defendant's blood was found in Carmin's bathroom. Thus, the prosecutor's comments were reasonable inferences based on the record and were within *418 the wide latitude allowed prosecutors during closing argument. See State v. Stano, 284 Kan. 126, 151, 159 P.3d 931 (2007).
Our conclusion that the prosecutor's comments regarding the bloodstain were acceptable argument based on the record is further strengthened by the later statements of both the defense and the State during closing argument in this case. We note that the comment that the defendant alleges was erroneous was made near the close of the State's initial argument before the defense's closing argument and before the State's rebuttal. Both the defense and the State argued regarding the bloodstain at length during the later portions of the argument, underscoring the factual bases on both sides of the issue. During its closing argument, the defense made the following assertions relating to the DNA and Y-STR analyses:
"DNA analysis is not a matter of guessing, DNA analysis is not a matter of a hunch. DNA analysis is not a matter of a guess. DNA analysis is not a matter of what is most convenient at the time that one is testifying about it, or arguing about it. DNA analysis is a scientific process that is used in courts across this country by jurors like yourself to make decisions of immense importance. The DNA analysis conducted by Dr. Sinha concluded in his report the following language: `Additional peaks below threshold and peak imbalance suggest the presence of more than one male DNA donor in this sample.' And it goes on to conclude, `Due to the low level nature of the sample and possible allele dropout resulting from degradation, no conclusion can be drawn regarding the suspect Thomas Murray and this sample.'"
The defense counsel then argued that the jurors should not believe Dr. Sinha's testimony where he stated that he believed the collected sample was consistent with the defendant's DNA, because this testimony was based on personal belief and not on the accepted scientific standards.
During rebuttal, the prosecutor had the opportunity to clarify his argument relating to the bloodstain and accompanying report, asserting:
"We talked about the DNA evidence. And this report's in evidence, and the Doctor told you every time they ran the tests, Murray's DNA matched here, here, one of the top spots here, here, here, here and here. The 18 was the only place it didn't match, and what he said was there is a baseboard, and that's what all the DNA people say, they say when you're swabbing the baseboard it's not unusual, doesn't mean all the DNA was deposited at the same time, when you're swabbing the baseboard, it wouldn't be unusual to get other DNA in there. That was the only marker that somebody else, the second male, was found at, that 18. All the other [markers] were Murray's, and what the doctor told you
. . . .
"Look at the markers. Time and time again, Dr. Sinha told you he cannot exclude his [Murray's] blood and guess what, it's right where he said he bleeded blood, remember? Oh, I cut my [callus] and I dripped it, I dripped it on the towel right there, the towel that's missing from the ring that sits right here. There is the waste can. It's the identical place that he predicted in his interview that we'd find it."
The extended argument by both the defense and the State regarding the DNA testing illustrates that this was a highly contested question of fact and that the prosecutor's argument consisted of reasonable inferences based on the record in this case. We conclude that the prosecutor's statement did not constitute prosecutorial misconduct.
Comments Regarding Crossley-Brubaker's Testimony
The defendant also argues that the prosecutor committed reversible misconduct by making the following statement during closing argument:
"[L]et's talk about GayLynn, who demonstrably is probably his [the defendant's] best friend. . . . His best friend, and what did the defense ask, `Did it ever cross your mind, did it ever once cross your mind, that Thomas Murray could be involved?' *419 She said, `Yes.' She does believe he's involved, that's what she told you, his best friend. His best friend thinks he's a murderer." (Emphasis added.)
The defendant argues that this statement was improper for two reasons. First, the defendant claims that the comment misstated Crossley-Brubaker's testimony. Second, the defendant argues that personal opinions regarding the guilt or innocence of a defendant should not be admitted into evidence, and for the same reason, comments on such opinion testimony are not proper for prosecutors during closing argument.
The testimony discussed by the prosecutor during closing argument was elicited during defense counsel's cross-examination of Crossley-Brubaker and the prosecutor's subsequent redirect examination of the witness. During cross-examination, defense counsel asked Crossley-Brubaker if the reason that she had never asked the defendant whether he killed Ross was because "no such thing ever even crossed [her] mind." Crossley-Brubaker responded, "I can't answer that question yes or no."
On redirect examination, the prosecutor explored the witness' answer in greater detail:
"Q. (By Mr. Bath) Did it ever cross your mind that he [the defendant] was involved in the homicide?
"A. [Crossley-Brubaker] Yes.
"Q. And what was, when was that?
"A. Um, a couple of red flags.
"Q. No, when was it?
"A. When? On the 15th.
"Q. And did you do anything as a result of your thoughts?
"A. Yes.
"Q. What did you do?
"A. I went to the viewing to talk, to try to find out more information.
"Q. And at the end of the viewing, which would have been the 22nd or 21st?
"A. 22nd.
"Q. Did you do something?
"A. Yes.
"Q. What did you do?
"A. I contacted the Sheriff's Department.
"Q. Here?
"A. At Douglas County, yes."
Defense counsel initially objected to this line of questioning by the prosecutor, but the court overruled his objection on the basis that defense counsel had asked a similar question during cross-examination and so opened the door to the issue on redirect examination. The defendant does not appeal this ruling.
"No rule governing oral argument is more fundamental than that requiring counsel to confine their remarks to matters in evidence. The stating of facts not in evidence is clearly improper." State v. Bradford, 219 Kan. 336, 340, 548 P.2d 812 (1976). Although "a prosecutor may not misstate the facts in evidence," we have already explained that "a prosecutor is permitted to draw reasonable inferences from the evidence and is given latitude in drawing those inferences." Stano, 284 Kan. at 151, 159 P.3d 931; see also State v. Pabst, 268 Kan. 501, 507, 996 P.2d 321 (2000) (stating that the law recognizes a prosecutor must be allowed "the freedom to craft an argument that includes reasonable inferences based on the evidence"). When a defendant claims that a prosecutor committed reversible misconduct, the prejudicial nature of the alleged errors is analyzed in the context of the trial record as a whole. Whitaker, 255 Kan. at 134, 872 P.2d 278.
Crossley-Brubaker testified on cross-examination that it had "cross[ed] [her] mind" that Murray was "involved in the homicide." She explained that after her concerns were not put to rest at Carmin's visitation, she contacted the Douglas County Sheriff's Department. Contrary to the defendant's contention on appeal, we find that the prosecutor's argument that Crossley-Brubaker thought Murray was "a murderer" is a reasonable inference based on the witness' testimony.
Our review of the defendant's second argument relating to the prosecutor's statement that it was improper to base closing argument on improperly admitted opinion testimony leads us to conclude that this contention is also without merit. It is notable *420 that the defendant does not appeal the trial court's determination that Crossley-Brubaker's testimony was admissible since the defense had opened the door on cross-examination. It appears that the defendant is attempting to circumvent the fact that Crossley-Brubaker's statement originated during cross-examination by asserting that even though the statement was in evidence due to actions by defense counsel, the prosecutor should be precluded from arguing that evidence since opinion testimony is unreliable. Such an argument is not supported by Kansas law.
Instead, we have held that no prejudicial error occurs including prosecutorial misconduct where the questionable statements are provoked and made in response to prior arguments or statements by defense counsel. State v. Elnicki, 279 Kan. 47, 64, 105 P.3d 1222 (2005). Although defense counsel did not (understandably) mention Crossley-Brubaker's testimony during closing argument, it was the defense's actions that introduced the witness' initial statement regarding the defendant's guilt. It was therefore not improper for the prosecutor to argue inferences based on that testimony during closing argument.
For these reasons, we conclude that the prosecutor's statement that Crossley-Brubaker thought the defendant was "a murderer" did not constitute prosecutorial misconduct.
II. TESTIMONY REGARDING THE DEFENDANT'S POST-MIRANDA SILENCE
The defendant argues that the trial court erred when it permitted the State to recall a police officer witness to testify regarding the defendant's post-Miranda silence.
Detective Patrick Pollock, a police officer who was present during the defendant's interview with police on November 14, 2003 (the night he learned that Carmin was killed), testified that although the defendant told the police during the interview that the bruises on his wrists came from roughhousing with Ciara, the detective's later investigation revealed that Ciara did not like to roughhouse. On cross-examination, the following exchange took place between defense counsel and Pollock:
"Q. [Defense counsel] . . . Now, you were asked about an injury to [sic] Ciara in the right hand of Mr. Murray, his right index, and am I correct that the investigation that you have done to determine whether or not that's happened is whether or not Ciara roughhoused with some other people?
"A. [Pollock] We asked that question of some people, yes.
"Q. Okay. Did you ever ask Tom how he played with Ciara?
"A. I don't believe we did, no.
"Q. You think that might have been instructive?
"A. It could have been."
Following Pollock's cross-examination, the State approached the court and requested whether it could recall Pollock to testify that the reason that he never asked the defendant those questions was that the defendant had declined to speak with the police on the advice of his attorney. According to the State, the phrasing of defense counsel's question on cross-examination "Did you ever ask Tom how he played with Ciara?" opened the door to this testimony, since it implied that the State had conducted a less-than-thorough investigation. (Emphasis added.) The court agreed with the State's argument, explaining:
"[T]hat question [referring to the question on cross-examination] apparently has a lot of relevance to you [defense counsel] whether or not he ever investigated anything other than talking to the baby-sitters, that was important. You ended on that just about, you thought that was a really important point. Therefore it does have significance, and whether or not the police officer was competent and did a thorough investigation is clearly an issue that you intend to I mean in opening argument, you talked about it, so I mean I think it's an issue in this trial and I think they [the State] can, as I say, very carefully crafted question, ask [why the detectives did not interview the defendant again]." *421 The trial court noted that the State would be allowed to recall Pollock later to testify on that point, as long as the line of questioning was "very limited." The court granted defense counsel a standing objection to Pollock's expected testimony.
When the State recalled Pollock as a witness several days later, the following exchange took place:
"Q. [Prosecutor] You recall when you testified you were asked by the defense whether you had ever spoken to Murray regarding injuries to his hand and whether Ciara caused them?
"A. [Pollock] Yes.
"Q. After your 11/14/03 interview of Murray, did you attempt to interview him again?
"A. Yes, we did.
"Q. And why would you want to speak with him again?
"A. Well, we had investigated some of his statements, we wanted to do a follow-up interview and go over those, the findings that we had found.
"Q. Were you successful?
"A. No.
"Q. And why not?
"A. On advice of counsel he was no longer available to be reinterviewed."
The defendant argues that this last statement"On advice of counsel he was no longer available to be reinterviewed"impermissibly referenced his post-Miranda silence in violation of the United States Constitution.
Standard of Review
Questions regarding the admission of evidence are generally reviewed for an abuse of discretion. See State v. Thomas, 252 Kan. 564, 572, 847 P.2d 1219 (1993). However, we have recently explained that judicial discretion
"`varies, depending on the character of the question presented for determination. A district court's decision is protected if reasonable persons could differ about the propriety of the decision, as long as it was made within and took into account the applicable legal standards. If, among other things, a district court's decision goes outside the legal framework or fails to properly consider statutory limitations, it constitutes an abuse of discretion.' [Citation omitted.]" State v. Miller, 284 Kan. 682, 689, 163 P.3d 267 (2007).
For this reason, the question of whether an evidentiary ruling violated the defendant's constitutional rights is reviewed de novo. See State v. White, 279 Kan. 326, 332-33, 109 P.3d 1199 (2005) ("while we have said that the admissibility of evidence is often within the discretion of the district judge, constitutional considerations still prevail"). An exercise of discretion that results in an error of constitutional magnitude is serious and may not be held to be harmless unless the court is willing to declare a belief that it was harmless beyond a reasonable doubt. State v. McCarty, 271 Kan. 510, 518, 23 P.3d 829 (2001).
Discussion
In Doyle v. Ohio, 426 U.S. 610, 619, 96 S. Ct. 2240, 49 L. Ed. 2d 91 (1976), the United States Supreme Court held that "the use for impeachment purposes of petitioners' silence, at the time of arrest and after receiving Miranda warnings, violated the Due Process Clause of the Fourteenth Amendment [to the United States Constitution]." We have further explained:
"A Doyle violation occurs when the State attempts to impeach a defendant's credibility at trial by arguing or by introducing evidence that the defendant did not avail himself or herself of the first opportunity to clear his or her name when confronted by police officers but instead invoked his or her constitutional right to remain silent. [Citation omitted.]" State v. Edwards, 264 Kan. 177, 195, 955 P.2d 1276 (1998).
In State v. Clark, 223 Kan. 83, 87-89, 574 P.2d 174 (1977), this court determined that Doyle also prohibited prosecutors from commenting on defendants' post-arrest silence even after they had already made a statement to the police. The Clark court reasoned that "[a]n accused may remain completely silent, and he is under no duty to volunteer his exculpatory story. Thus, he should be afforded the same right after some *422 discussion with the police when he remains silent as to matters later asserted at trial." 223 Kan. at 89, 574 P.2d 174. Applying this rationale, Clark held that "Doyle prohibits a state prosecutor from impeaching a defendant's alibi defense told for the first time at trial, when the defendant carried on limited discussion with police after arrest, but remained silent as to matters subsequently asserted at his trial." 223 Kan. at 89, 574 P.2d 174.
The defendant argues that Pollock's statement during his recall testimony violated the defendant's Fourteenth Amendment right by commenting on the fact that he refused to be reinterviewed on the advice of counsel after he had received Miranda warnings. It is evident that Pollock's statement on redirect examination implicates the defendant's rights under Doyle, because the statement explicitly refers to the defendant's invocation of his right to silence. See Edwards, 264 Kan. at 196, 955 P.2d 1276; Clark, 223 Kan. at 89, 574 P.2d 174. Thus, unless the State can demonstrate that the admission of the statement was otherwise warranted or that the admission was harmless beyond a reasonable doubt, the statement's admission constituted reversible error. See State v. Mims, 220 Kan. 726, 730-31, 556 P.2d 387 (1976).
The State provides two bases for its assertion that Pollock's statement did not violate the defendant's constitutional rights: (1) The defendant had already spoken at length with the police during his first interview (and therefore was not silent), and (2) the statement was made in response to defense counsel's questions that implied the State had not conducted a thorough investigation.
We note that the first basis asserted by the Statethat the defendant could not claim a Doyle violation when he had already consented to an extensive interview with the policeis directly contradicted by this court's opinion in Clark, where the court held that a defendant "should be afforded the same right [under Doyle] after some discussion with the police when he remains silent as to matters later asserted at trial." 223 Kan. at 89, 574 P.2d 174.
However, we agree with the State's second contention that defense counsel's questions during cross-examination of Pollock opened the door to the brief exchange between the prosecutor and the detective on redirect examination. The chief argument of the defense in this case was that the circumstantial nature of the State's case indicated that the State had not conducted a thorough investigation of Carmin's murder and had pinned the murder on the defendant. Defense counsel's questions during its cross-examination of Pollock carry this implication. After determining that the investigators had never asked the defendant how he played with his daughter, defense counsel asked, "You think that might have been instructive?" implying that the lack of additional questioning could be attributed to the detective's incompetence.
Furthermore, as the trial court noted below, the fact that defense counsel asked, "Did you ever ask Tom how he played with Ciara?" implied that the investigators could have (and should have) followed up their interviews of Ciara's babysitters with additional questions to the defendant concerning the nature of the roughhousing with his daughter. (Emphasis added.) Again, the implication of defense counsel's questions was that the State failed to adequately investigate all of the information relating to the defendant's involvement in the murder.
A litigant may not invite and lead a trial court into error and then complain of the trial court's action on appeal. State v. Kesselring, 279 Kan. 671, 693, 112 P.3d 175 (2005). We have previously applied this invited error analysis in a very narrow context when considering Doyle violations. See State v. Gadelkarim, 256 Kan. 671, 685-86, 887 P.2d 88 (1994), disapproved on other grounds State v. Gunby, 282 Kan. 39, 61-63, 144 P.3d 647 (2006) (disapproving of res gestae as a basis for admitting evidence of crimes or other civil wrongs independent of K.S.A. 60-455); State v. Falke, 237 Kan. 668, 682, 703 P.2d 1362 (1985), disapproved on other grounds State v. Walker, 252 Kan. 279, 297-98, 845 P.2d 1 (1993) (disapproving of language used in Falke with regard to instructions on voluntary intoxication). As the *423 court recognized in Gadelkarim, "the invited error rule cannot be used as a pretext for the violation of a defendant's constitutional rights where there is no justification for so doing. [Citation omitted.]" 256 Kan. at 685, 887 P.2d 88.
In Falke, this court reviewed the murder and kidnapping convictions of the co-defendants Falke and White. At trial, White's defense counsel asked the investigating detective during cross-examination to read from a report summarizing the detective's initial interview of White. This report indicated that White told the officer at the time of arrest that White did not remember what happened when the crime took place because he was intoxicated. White later testified on his own behalf, explaining in detail the events surrounding the murder, but claiming that he was not involved in the murder and was merely present. White made no reference to being unable to remember what happened. 237 Kan. at 681, 703 P.2d 1362.
The prosecutor asked White on cross-examination why he had not told the police this story when he first talked with them; White replied that he was "scared." 237 Kan. at 681, 703 P.2d 1362. The defense counsel objected, arguing that the prosecutor had impermissibly commented on White's post-arrest silence. 237 Kan. at 682, 703 P.2d 1362.
The Falke court examined the Doyle and Mims decisions, but concluded that the rule in those cases was inapplicable to the facts before it. The court first found that the facts did not present a Doyle issue, as the State was not impermissibly commenting on White's post-arrest silence, but was instead using White's previous statement during the initial interrogation to impeach his later testimony at trial. See Falke, 237 Kan. at 682, 703 P.2d 1362. In addition, the State found that White could not prevail on his Doyle claim because "the defendant originally introduced the statements which he later objected to when the prosecutor sought to use them to impeach the defendant. The defendant may not invite error and then complain of that error on appeal. [Citation omitted.]" 237 Kan. at 682, 703 P.2d 1362.
In Gadelkarim, defense counsel was cross-examining a police officer regarding his interrogation of the defendant and asked if the officer had determined whether the defendant could be interviewed after his arrest. The officer responded, "`Eventually he invoked Miranda. He wanted to speak with his attorney prior to answering any questions.'" 256 Kan. at 684, 887 P.2d 88. Defense counsel immediately requested a hearing outside the presence of the jury and requested a mistrial on the basis of the officer's answer; defense counsel claimed he did not anticipate that the officer would respond in a way that implicated the defendant's post-Miranda silence. The trial court denied the request for a mistrial, finding that defense counsel had a copy of the police officer's report where he indicated that the defendant had requested an attorney and also based on the State's representations that it would not address the officer's statement on redirect or during closing argument. 256 Kan. at 684, 887 P.2d 88.
This court affirmed, noting that the statement was both invited and harmless. 256 Kan. at 686, 887 P.2d 88. The court explained that the State did not rely on the officer's statement and "expressly agreed not to address the subject of Gadelkarim's silence on redirect." 256 Kan. at 686, 887 P.2d 88. In addition, the court found:
"Gadelkarim's complaint involves a single comment elicited by his own attorney on cross-examination, not by the prosecution. Evidence in the record reveals that defense counsel should have been aware of the potential of eliciting the very response of which the defendant now complains. Moreover, the strength of the evidence indicating Gadelkarim's guilt contravenes the argument that Gadelkarim was denied the right to a fair trial by the officer's statement that Gadelkarim had invoked his Miranda rights. The trial court did not err in denying Gadelkarim's motion for a mistrial." 256 Kan. at 686, 887 P.2d 88.
In Gadelkarim, we distinguished our ruling from the previous case of State v. Higgins, 243 Kan. 48, 49-52, 755 P.2d 12 (1988), disapproved on other grounds State v. Warren, 252 Kan. 169, 178, 843 P.2d 224 (1992) *424 (rejecting the Higgins court's multiplicity analysis), where we declined to find that defense counsel invited a discussion of the defendant's post-Miranda silence even though the initial testimony regarding the defendant's invocation of that right occurred during the defense's cross-examination of a State's witness. Importantly, once statements regarding the defendant's invocation of his right to silence were admitted during cross-examination, the State explored the matter again during its redirect examination and then engaged in a lengthy discussion during closing argument of the defendant's failure to assert his innocence. 243 Kan. at 49-50, 755 P.2d 12.
The Higgins court found that the prosecutor's extended discussion of the defendant's post-arrest silence violated his constitutional rights. The court noted that "[a]s a general rule, a litigant may not invite error and then complain of the error on appeal." 243 Kan. 48, Syl. ¶ 2, 755 P.2d 12. However, the court found that "[t]he invited error rule may not be used to excuse the actions by counsel during cross-examination or closing argument when such actions are ordinarily improper and erroneous, and are not a necessary or justified response to the actions of the other party in order to achieve a fair trial." 243 Kan. 48, Syl. ¶ 4, 755 P.2d 12. Higgins explained:
"In the present case, it is apparent that both the State and the trial court were aware that, ordinarily, no comment could be made regarding a defendant's post-arrest silence. Nor was there any necessity for the full exploration of the nature of the defendant's silence after his arrest and the State's comments during its closing argument. The sole motivation for the State's comments was the exploitation of the opportunity to utilize defendant's exercise of his Fifth Amendment Miranda rights against him. The present case does not involve a defendant who has invited or misled the court into error or who acquiesced in errors of the trial court. Nor did the defendant indulge in any improper or erroneous activities which required the State, in order to achieve a fair trial, to respond in kind. The cross-examination by counsel for the defendant was not an invitation to the State to violate defendant's right to due process. Rather, the State seized upon the opportunity to present evidence and arguments during closing which clearly violated the defendant's constitutional rights and were improper." 243 Kan. at 51-52, 755 P.2d 12.
We recently reached a similar conclusion to the Higgins rationale in State v. Cosby, 285 Kan. ___, ___, 169 P.3d 1128 (2007). In that case, we held that the State's introduction of testimony by a police detective that the defendant had invoked his right to silence violated the defendant's constitutional rights under Doyle. 285 Kan. at ___-___, 169 P.3d 1128. In coming to this conclusion, we rejected the State's argument in that case that it was necessary to introduce the testimony regarding the defendant's invocation of his right to silence in order for the officers "to tell the jury they did not follow up on defendant's unsolicited statements because of the invocation." 285 Kan. at ___, 169 P.3d 1128. Instead, we held that the testimony was erroneous and should not have been introduced because "there was no need for the explanation the officers gave." 285 Kan. at ___, 169 P.3d 1128. To compound the error, we found that "the State went beyond presenting the bare fact that defendant had previously invoked his rights" and "repeatedly asked about defendant's post-Miranda silence." 285 Kan. at ___, ___, 169 P.3d 1128. Under these circumstances, we held that the State's action in eliciting the testimony was erroneous and rose to the level of prosecutorial misconduct. 285 Kan. at ___, 169 P.3d 1128.
Our review of the testimony of Detective Pollock in this case leads us to conclude that this case is more akin to Gadelkarim and Falke than to Higgins and Cosby. Although the defendant did not explicitly introduce evidence relating to his refusal to be reinterviewed, defense counsel implicitly raised this issue when he asked Pollock, "Did you ever ask Tom how he played with Ciara?" (Emphasis added.) This question does not refer to a particular time frame, but instead implies that the detectives conducted a faulty investigation since they did not consult with *425 the defendant after they had come across evidence that potentially conflicted with the defendant's interview statements. In particular, we find that defense counsel's following question"You think that might have been instructive?"underscored the defendant's argument that the detectives did not conduct a complete investigation.
In light of the specific facts of this case, we hold that defense counsel's questions during cross-examination of Pollock provided sufficient justification for the State's limited questioning of Pollock on redirect to the effect that the reason the detective did not ask the defendant additional questions concerning his wrestling with Ciara was that the defendant declined to be reinterviewed. We emphasize that the State's questioning of Pollock on redirect was limited and Pollock's response was scripted so as to minimize the effect on the defendant. The State did not mention the defendant's invocation of his right to silence at any other time during the trial and did not discuss that invocation during the State's 2 hours of closing argument. Under these circumstances, we find that the detective's testimony on redirect examination merely responded to defense counsel's implications during cross-examination and thus was invited error and cannot be the basis for reversal.
We further note that even if we were to determine that the admission of Pollock's testimony regarding the defendant's post-arrest silence was erroneous under Doyle, such error was harmless.
"In determining [harmless error in the Doyle context], we consider the nature and extent of the comment in comparison with the strength of the evidence of the defendant's guilt as well as whether the evidence was manifestly intended or was of such character that the jury would naturally and necessarily take it to be a comment on the failure of the defendant to testify. [Citation omitted.]" Edwards, 264 Kan. at 196, 955 P.2d 1276.
Moreover, when considering whether a Doyle error is harmless or prejudicial, "each case must be scrutinized and viewed in the light of the trial record as a whole, not on each isolated incident viewed by itself. [Citation omitted.]" State v. Hernandez, 284 Kan. 74, 95, 159 P.3d 950 (2007).
The defendant claims that Pollock's statement cannot be harmless, because the court did not provide a limiting instruction indicating that the statement should only be viewed for the limited purpose of demonstrating the State's investigatory efforts. The defendant compares this case to Gunby, 282 Kan. at 57, 144 P.3d 647, where this court reiterated that evidence of crimes or civil wrongs admitted under K.S.A. 60-455 must be accompanied by a prophylactic limiting instruction.
We have never held that a limiting instruction is required in cases involving a defendant's post-arrest silence under Doyle. However, even if such a requirement existed, the defendant did not request such an instruction below. Thus, the trial court's failure to provide such an instruction would be reviewed for clear error. See State v. Cooperwood, 282 Kan. 572, 581, 147 P.3d 125 (2006). "`Instructions are clearly erroneous only if the reviewing court is firmly convinced that there is a real possibility the jury would have rendered a different verdict if the trial error had not occurred.' [Citations omitted.]" State v. Trotter, 280 Kan. 800, 805, 127 P.3d 972 (2006).
We note that although the court did not provide any instructions regarding the proper use of the defendant's post-arrest silence, it did provide an instruction regarding the defendant's right against self-incrimination. This instruction stated:
"A defendant in a criminal trial has a constitutional right not to be compelled to testify. You must not draw any inference of guilt from the fact that the defendant did not testify, and you must not consider this fact in arriving at your verdict."
Even though this instruction did not explicitly refer to post-arrest silence, it explains that a defendant is not compelled to testify. The reasonable inference from this statement, which was the basis of the Supreme Court's decision in Doyle, is that a defendant is not required to incriminate himself or herself at any stage in the criminal proceedings. While an additional instruction relating to a defendant's pretrial statements might have edified *426 this conclusion, one cannot say that the jury would have rendered a different verdict if such an instruction would have been included.
More importantly, we find that Pollock's testimony on redirect examination was limited to a very brief explanation of why the police originally desired an additional interview with the defendant and why that interview was not successful. Neither the prosecutor nor Pollock commented on the implications that may arise from such a refusal. In fact, on recross-examination, Pollock agreed that there was nothing wrong "with a citizen retaining counsel when he or she is being made the suspect of a first-degree murder case based on suspicion, a hunch, an intuition." Moreover, no mention was made of Pollock's redirect testimony during closing argument. The incident was therefore limited to the very brief recall of the witness by the State and the defense's single-question recross-examination. We find that Pollock's statement was not "manifestly intended or . . . of such character that the jury would naturally and necessarily take it to be a comment on" the defendant's invocation of his right to silence. Edwards, 264 Kan. at 196, 955 P.2d 1276.
Under these circumstances, it seems clear beyond a reasonable doubt that the statement "`had little, if any, likelihood of having changed the result of the trial.' [Citation omitted.]" State v. Brown, 280 Kan. 65, 77, 118 P.3d 1273 (2005).
III. ADMISSION OF HEARSAY STATEMENTS OF THE VICTIM
The defendant argues that the trial court erred by admitting previous statements made by Carmin through the testimony of Carmin's mother and of an attorney with whom Carmin consulted concerning possible custody litigation. The defendant contends that these statements were inadmissible hearsay and did not fit within any recognized exception to the hearsay rule.
Testifying as a witness for the State, Carmin's mother described an incident in 1997 when she and Carmin went shopping together. The mother explained:
"A. . . . We had gone shopping, just she and I, and I was driving the car home on the freeway and we were discussing our shopping or whatever we had done, and I said, `Seems to me that you have to justify everything that you do'; and she broke out, `Baha.' And I'm driving along and I looked at her because I didn't know what was going on, and she was actually crying, and stopped herself very quickly and said, `I'm all right,' and I didn't interfere with that information because I wasn't going to interfere with their marriage and their choices and what they did. It just surprised me a great deal.
"Q. Did she say anything to you about your observations?"
At this point, Murray's counsel objected on the basis of hearsay. The court found that the question did call for hearsay, but overruled the objection because the answer went to the "[r]elationship of the parties." The prosecutor then resumed questioning:
"Q. (Ms. Wilson) What did Carmin tell you about your comment?
"A. She indicated that I was correct."
Later in the trial, over defense counsel's objection, Anne Millera lawyer Carmin consulted regarding possible custody litigation over Ciararead at length from e-mails that Carmin had sent her regarding the ongoing custody mediation between Carmin and the defendant. Miller also testified regarding her conversation with Carmin after the last mediation session on November 11:
"She [Carmin] said that the dynamics of the communication between her and Dr. Murray had changed dramatically, that she had become much more forceful in her position of obtaining primary residential custody of Ciara, that Larry Lima was in fact going to move to Lawrence. She apparently Dr. Murray asked her if this was on a short-term or long-term basis, and she said it would be a short-term basis, and she made it clear what her plan was with respect to moving to California with Mr. Lima."
The court permitted this testimony, finding that it demonstrated "the deterioration of the *427 relationship" between Carmin and the defendant during the custody mediation.
On appeal, the defendant contends that Carmin's statements to both her mother and Miller were hearsay and that the explanation provided by the trial court for its admission of the witnesses' testimonythat it went to the "relationship of the parties"is not a recognized hearsay exception. The defendant points out that the "relationship of the parties" rationale was one of the avenues by which courts had until recently allowed parties to present evidence of crimes and civil wrongs independent of K.S.A. 60-455. This court explicitly disapproved of the "relationship of the parties" rationale for presenting K.S.A. 60-455 evidence in Gunby, 282 Kan. 39, 144 P.3d 647.
The State asserts that Carmin's previous statements were relevant and were not inadmissible hearsay. The State also contends that the defendant should not be permitted to object to the admission of these statements as hearsay since he was charged with murdering the declarant.
Standard of Review
An appellate court reviews a trial court's admission of hearsay statements for an abuse of discretion. Miller, 284 Kan. at 708, 163 P.3d 267. "`The abuse-of-discretion standard includes review to determine that the discretion was not guided by erroneous legal conclusions.'" State v. White, 279 Kan. 326, 332, 109 P.3d 1199 (2005) (quoting Koon v. United States, 518 U.S. 81, 100, 116 S. Ct. 2035, 135 L. Ed. 2d 392 [1996]).
Discussion
Before addressing the merits of the defendant's hearsay argument, we first consider the State's contention that the defendant waived any objections to the admission of Carmin's statements at trial because he was charged with her murder. In support of this assertion, the State cites State v. Meeks, 277 Kan. 609, 614-16, 88 P.3d 789 (2004), where we discussed the doctrine of forfeiture of confrontation rights by wrongdoing. There, we explained:
"`The Constitution gives the accused the right to a trial at which he should be confronted with the witnesses against him; but if a witness is absent by his own [the accused's] wrongful procurement, he cannot complain if competent evidence is admitted to supply the place of that which he has kept away. The Constitution does not guarantee an accused person against the legitimate consequences of his own wrongful acts. It grants him the privilege of being confronted with the witnesses against him; but if he voluntarily keeps the witnesses away, he cannot insist on his privilege. If, therefore, when absent by his procurement, their evidence is supplied in some lawful way, he is in no condition to assert that his constitutional rights have been violated.'" 277 Kan. at 614-15, 88 P.3d 789 (quoting Reynolds v. United States, 98 U.S. 145, 158, 25 L. Ed. 244 [1879]).
Meeks additionally found that "a waiver of the right to confrontation based upon the procurement of the absence of the witness also constitutes a waiver of any hearsay objections to prior statements of the absent witness." 277 Kan. at 615, 88 P.3d 789.
In Meeks, we noted that the doctrine of forfeiture by wrongdoing could apply to allow a victim's statements during the trial where the defendant is charged with murdering the victim or otherwise procuring his or her unavailability. 277 Kan. at 615-16, 88 P.3d 789. However, we stated that before a court could find that an accused had forfeited his or her confrontation rights and waived any hearsay objection regarding an unavailable victim's statements, the trial court must make a determination by the preponderance of the evidence that the accused brought about the unavailability. See 277 Kan. at 615-16, 88 P.3d 789. As the court explained:
"`If the trial court determines as a threshold matter that the reason the victim cannot testify at trial is that the accused murdered her, then the accused should be deemed to have forfeited the confrontation right, even though the act with which the accused is charged is the same as the one by which he allegedly rendered the witness unavailable.'" 277 Kan. at 615, 88 P.3d 789.
*428 Here, the trial court made no such determination; instead, it merely found that the statements were admissible to show the deteriorating relationship between Carmin and the defendant. The case is therefore distinguishable from Meeks, where, although the trial court did not explicitly state that Meeks killed the victim and thus waived his objection to the admission of the hearsay, it nevertheless made findings on the record indicating that it had come to such a conclusion. See 277 Kan. at 616, 88 P.3d 789.
Because the trial court did not make the requisite threshold determination in this case, we find that the defendant did not waive his hearsay objections to Carmin's statements. Nevertheless, we find that these statements were admissible under K.S.A.2006 Supp. 60-460(d)(3).
K.S.A.2006 Supp. 60-460 defines hearsay as "[e]vidence of a statement which is made other than by a witness while testifying at the hearing, offered to prove the truth of the matter stated." Such evidence is inadmissible unless it falls under a recognized hearsay exception. "The theory behind the hearsay rule is that when a statement is offered as evidence of the truth asserted in it, the credibility of the asserter is the basis for the inference, and therefore the asserter must be subject to cross-examination. 6 Wigmore on Evidence § 1766 (Chadbourn rev.1976)." State v. Harris, 259 Kan. 689, 698, 915 P.2d 758 (1996).
At oral argument, the State's counsel acknowledged that both Carmin's statement to her mother and her statements to her attorney, Anne Miller, were offered to prove the truth of the matter discussed thereinthat the defendant and Carmin's marriage was not always happy due to the defendant's controlling nature and that the ongoing custody dispute over Ciara was becoming heated, particularly after Carmin told the defendant of Lima's plans for a temporary move to Lawrence. Because the State offered these statements to prove the truth of the matter asserted, we must determine whether they were admissible under one of the exceptions to the hearsay rule provided in K.S.A.2006 Supp. 60-460.
We note at the outset that the reasoning provided by the trial court for admitting the evidence in questionto show the relationship of the partiesis not one of the exceptions to the hearsay rule listed in K.S.A.2006 Supp. 60-460. Until recently, Kansas courts recognized a "relationship of the parties" exception to K.S.A. 60-455, which deals with the proper use of evidence of crimes and civil wrongs, that allowed parties to introduce evidence of a discordant relationship independent of that statute. See Gunby, 282 Kan. at 51-57, 144 P.3d 647. Gunby explicitly abolished this exception, holding that the admission of all evidence of other crimes and civil wrongs must be analyzed under K.S.A. 60-455. See 282 Kan. at 57, 144 P.3d 647. Because the trial court in this case admitted all of Carmin's hearsay statements on the basis that they demonstrated the relationship of Carmin and the defendant, the defendant argues that our analysis in Gunby demands reversal.
We recognize that the rationale provided by the trial court regarding the admissibility of Carmin's statements was improper, as K.S.A.2006 Supp. 60-460 does not include an exception for evidence relating to marital relationships. However, the defendant's argument based on Gunby is equally incorrect. Our analysis in Gunby with regard to evidence of the relationship between the parties only applies to evidence of other crimes or civil wrongs. See Gunby, 282 Kan. at 55, 144 P.3d 647 (the "marital discord exception to K.S.A. 60-455 . . . now covers [prior to Gunby, that is] many violent relationshipsbetween husband and wife, between separated and divorced spouses, between cohabitant and noncohabitant lovers, even between neighbors who have had a sexual relationship"). The testimony of Carmin's mother and Miller did not indicate the existence of an abusive or violent relationship between Carmin and the defendant. Rather, the testimony of both women indicates that, contrary to the defense's assertions and the defendant's statements in his interview that he and Carmin were getting along very well, the relationship between Carmin and the defendant had longstanding serious rifts that were growing as the custody dispute continued. *429 This is not the type of evidence that is barred by K.S.A. 60-455.
As a preliminary matter, we note that there is no question that Carmin's statements to her mother and to Miller were relevant in this case. See Gunby, 282 Kan. at 47-48, 144 P.3d 647 ("Once relevance is established, evidentiary rules governing admission and exclusion may be applied either as a matter of law or in the exercise of the district judge's discretion, depending on the contours of the rule in question."). The defendant asserted both during his interview with the police and through his counsel's argument at trial that the relationship between him and Carmin was congenial until her death. Moreover, although he claims that the statements were inadmissible hearsay and not admissible under Gunby, the defendant acknowledges in his brief on appeal that the evidence was relevant to demonstrate the relationship and thus to demonstrate motive. The question before us is whether this relevant evidence was inadmissible hearsay.
As we have previously stated, the trial court incorrectly ruled that Carmin's hearsay statements were admissible as evidence of the relationship of the parties. Nevertheless, if a trial court reaches the right result, its decision will be upheld even if it provided an incorrect reason or engaged in an improper legal analysis. See State v. Hoge, 283 Kan. 219, 225-26, 150 P.3d 905 (2007). Thus, we consider whether the statements by Carmin were admissible under some other exception to the hearsay rule.
After reviewing the statements admitted in light of Kansas' hearsay rule, we find that Carmin's statements to her mother and to Miller were admissible under K.S.A.2006 Supp. 60-460(d)(3). This section recognizes an exception to the hearsay rule "if the declarant is unavailable as a witness, [and the statement was made] by the declarant at a time when the matter had been recently perceived by the declarant and while the declarant's recollection was clear and was made in good faith prior to the commencement of the action and with no incentive to falsify or to distort." K.S.A.2006 Supp. 60-460(d)(3).
There is no question that Carmin, as a murder victim, was unavailable as a witness at the trial for that murder. See K.S.A. 60-459(g)(3). Thus, the question with regard to both groups of statements (the statements to her mother and the statements to her attorney) is whether the statements were made "when the matter [discussed] had been recently perceived [by Carmin] . . . while [Carmin's] recollection was clear" and whether the statements were made "in good faith prior to the commencement of the action . . . with no incentive to falsify or to distort." K.S.A.2006 Supp. 60-460(d)(3).
First, with regard to Carmin's statements to her motherthat Carmin had to justify everything she did to the defendant during their marriagethese were made in response to her mother's question while they spent a day shopping. Carmin was currently married to the defendant and was thus speaking from experience with a clear recollection of their relationship. Moreover, this statement was made in 1998-5 years prior to Carmin and the defendant's divorce, and clearly long before Carmin's murder trial. We find that this statement was admissible under K.S.A.2006 Supp. 60-460(d)(3).
Likewise, with regard to Carmin's e-mails to Miller during the course of the custody dispute, we note that Carmin sent each e-mail to Miller within a day of the mediation session with the defendant, illustrating that her description of the events at the mediation and of her discussion with Miller were fresh in her mind. She provided the information to an attorney that she had been consulting in case the custody dispute went to litigation, so it does not seem that she would have an incentive to falsify or distort the information. Finally, although the last e-mail (which discussed the defendant's reaction to Carmin's news that Lima would be moving to Lawrence) did discuss her plans for obtaining custody, no custody litigation had been initiated at that time and, obviously, no murder investigation was underway. Thus, we find that Carmin's e-mails are admissible under K.S.A.2006 Supp. 60-460(d)(3).
Because all of Carmin's statements were admissible under K.S.A.2006 Supp. 60-460(d)(3), *430 we find that the trial court did not err in admitting those statements into evidence at trial. See Hoge, 283 Kan. at 225-26, 150 P.3d 905.
Finally, we note that even if we were to determine that Carmin's statements did not fall into an exception under the hearsay rule, we would find that the admission of these statements was harmless. "Errors that do not affirmatively cause prejudice to the substantial rights of the defendant do not require reversal when substantial justice has been done. [Citation omitted.]" State v. Ackward, 281 Kan. 2, 23, 128 P.3d 382 (2006); see also K.S.A. 60-261. To determine whether a trial error is harmless error or prejudicial error, each case must be scrutinized and viewed in light of the trial record as a whole, not by viewing each isolated incident by itself. State v. Abu-Fakher, 274 Kan. 584, 613, 56 P.3d 166 (2002).
In this case, Carmin's statements to her mother and to Miller were harmless. Several other witnesses testified regarding the defendant's somewhat controlling nature and how this influenced his marriage. Moreover, the information contained in Carmin's e-mails to Millerthe details regarding the custody dispute, the fact that Lima intended to move to Lawrence; and that he, Carmin, and Ciara eventually planned to move to Californiawas presented at trial through a number of other witnesses and evidence. Most importantly, the defendant discussed the potential move and his reservations about that move at length during his interview with the police. We find that the admission of that information through another channel did not violate substantial justice.
The admission by the trial court of Carmin's statements was not error.
IV. CUMULATIVE ERROR
The defendant claims that even if the errors he alleges in his brief on appeal do not individually require this court to reverse his conviction, the cumulation of the alleged errors denied him a fair trial. "Cumulative trial errors, when considered collectively, may be so great as to require reversal of the defendant's conviction." State v. Ackward, 281 Kan. at 29, 128 P.3d 382. However, we need not undergo a cumulative error analysis when we have determined that no trial errors took place. See State v. Humphery, 267 Kan. 45, 64, 978 P.2d 264 (1999). Because we find that the defendant has failed to demonstrate that the trial court or prosecutor erred at trial, his claim of cumulative error also fails.
V. SUFFICIENCY OF THE EVIDENCE TO SUPPORT THE DEFENDANT'S CONVICTION
In his final argument on appeal, the defendant asserts that the evidence presented by the State was insufficient to support his conviction. In particular, he claims that the State's case against him did not rest on "concrete evidence," but instead relied on "speculation, inference, and hunches." The crux of the defendant's argument is that because there was no direct evidence linking him to Carmin's murder, his conviction was based "solely on inferences" and must be reversed.
Standard of Review
When the sufficiency of the evidence is challenged on appeal, this court must determine whether, after a review of all the evidence, viewed in the light most favorable to the prosecution, we are convinced that a rational factfinder could have found the defendant guilty beyond a reasonable doubt. State v. Beach, 275 Kan. 603, Syl. ¶ 2, 67 P.3d 121 (2003).
This court has previously recognized that "[c]onvictions based upon circumstantial evidence . . . can present a special challenge to the appellate court" in that "`the circumstances in question must themselves be proved and cannot be inferred or presumed from other circumstances.'" State v. Williams, 229 Kan. 646, 648-649, 630 P.2d 694 (1981) (quoting 1 Wharton's Criminal Evidence § 91, pp. 150-51 [13th ed. 1972]). Nevertheless, this court has repeatedly held that "whatever type of evidence is introduced in a criminal trial (whether it be termed direct, indirect, testimonial, circumstantial or a combination) the trier of fact must apply the same test to convict the defendant " proof of guilt beyond a reasonable doubt. *431 State v. Wilkins, 215 Kan. 145, 156, 523 P.2d 728 (1974).
For this reason, we have espoused that "[a] guilty verdict in a criminal case will not be disturbed on appeal if there is substantial evidence, even though the evidence is entirely circumstantial. [Citation omitted.]" State v. Scott, 271 Kan. 103, 107, 21 P.3d 516 (2001). As we explained in Scott:
"The probative values of direct and circumstantial evidence are intrinsically similar, and there is no logically sound reason for drawing a distinction as to the weight to be assigned to each. [Citation omitted.] When a verdict is challenged for insufficiency of evidence or as being contrary to the evidence, it is not the function of this court to weigh the evidence or pass on the credibility of witnesses. [Citation omitted.]" 271 Kan. at 107-08, 21 P.3d 516.
Moreover, "if the circumstances alleged to justify a finding of premeditation are adequately proven by evidence, and are not merely suppositions themselves, there is no impermissible stacking of inferences such that reversal is required." State v. Rice, 261 Kan. 567, 587, 932 P.2d 981 (1997). We note that the trial court in this case instructed the jury regarding this distinction, stating: "You may not find an element of a crime from an inference that is based solely upon an inference. However, you may draw reasonable inferences from facts established in the evidence."
Discussion
In order to convict the defendant of first-degree murder, the State was required to prove that Murray killed Carmin intentionally, on November 13, 2003, in Douglas County, and with premeditation. See K.S.A. 21-3401(a). Appellate courts reviewing claims of insufficiency of the evidence consider all of the evidence in the light most favorable to the prosecution to determine "if the essential elements of a charge are sustained. [Citations omitted.]" State v. Pratt, 255 Kan. 767, 768, 876 P.2d 1390 (1994).
This is not the first time that we have been presented with an appeal from a first-degree murder conviction that was entirely based on circumstantial evidence. For example, in State v. Flynn, 274 Kan. 473, 485-86, 55 P.3d 324 (2002), we found that there was sufficient evidence to convict the defendant of first-degree murder, even when all of the evidence presented was circumstantial. As we explained in that case:
"The State presented evidence of Dana's opportunity to commit this crime. She left work shortly after noon on December 22, 1992, after having a telephone conversation with her lawyer, the bearer of bad news in terms of the custody battle. The evidence showed it was likely Dana knew through her attorney that Randy was home that day. Her own statements following the murder established that she had purchased fuel for her car and telephoned her mother from a payphone to arrange for someone to pick up the children. . . .
"Admittedly, there was nothing at the scene of the crime to link the murder to Dana. . . . However, the evidence of Dana's actions after the murder further strengthen the conclusion that the jury acted reasonably in convicting her. After Randy's murder, the evidence showed Dana had driven her car through an automatic carwash twice. This evidence was sufficient to allow the jury to arrive at a logical conclusion that Dana's car was soiled with either Randy's blood or dirt from the road. Further, the evidence showed that after the murder Dana stated Randy was an evil, wicked man who deserved to die.
"In considering the sufficiency of evidence to sustain a conviction, this court reviews all the evidence, viewed in the light most favorable to the prosecution. [Citation omitted.] In light of this standard, we are convinced a rational factfinder could have found, beyond a reasonable doubt, that Dana was guilty of the murder of Randy Sheridan." Flynn, 274 Kan. at 485-86, 55 P.3d 324.
Similar to Flynn, the evidence in the instant case linking the defendant to Carmin's murder is entirely circumstantial. There is no direct evidence linking Murray to the crime scene. However, the defendant clearly had the motive to commit the crime. The State introduced ample evidence of the defendant's *432 increasing desperation regarding Ciara's custody proceeding, as well as evidence that Lima would be moving to Lawrence. The defendant discussed the custody dispute and the impending move in detail with the police during his 9 1/2-hour interview the night he learned that Carmin had died, stating that he did not want Ciara to live in California or to be the kind of dad who saw his daughter every other holiday and during the summer. By his own admission in an e-mail, the defendant felt like "an animal backed into a corner." The defendant indicated to a neighbor that life would be much easier if Carmin were dead. The Internet searches also demonstrate sufficiently that the defendant was contemplating a murder.
Moreover, just as was the case in Flynn, the defendant had the opportunity to commit the crime. There is a 4-hour gap between when, according to Ciara's babysitter's testimony, the defendant dropped Ciara off the morning of Carmin's death and when the babysitter brought her to the defendant's home after noon. The State demonstrated that even driving at an easy pace, this provided the defendant with enough time to drive from Manhattan to Lawrence, commit the murder, and drive home. Notably, no one can account for the defendant's whereabouts that morning. He did not go to the university to work, but rather stated that he stayed home to grade tests. However, even this story changed, as he later stated that he drove to Paxico.
Finally, although Murray attempted to account for the injuries on his hands and arms, the State produced evidence that the cuts were consistent with holding a knife by the blade when stabbing someone and that the bruises on his wrists were consistent with a rough struggle with a blunt object. In short, the State produced evidence that the defendant suffered wounds consistent with those that would have been suffered by Carmin's attacker, who inflicted 11 blows to the victim with a blunt object, retrieved a knife from Carmin's kitchen, and stabbed her 13 times in the neck and back.
From this evidence, we find that there was sufficient evidence for a jury to find that the defendant killed Carmin Ross intentionally, that the murder was premeditated, and that the murder took place on the morning of November 13, 2003, in Carmin's home in Douglas County.
The defendant argues that because the State's case against him was based on entirely circumstantial evidence, the summary above is based only on inferences and thus cannot be used to prove his guilt. In essence, the defendant contends that because he provided exculpatory explanations for each of the pieces of evidence produced by the State, it would have been just as reasonable for the jury to infer that he was not guilty of the crime charged.
In raising this argument, the defendant applies an incorrect standard for this court's review. It is not the place of an appellate court to reassess the weight and credibility of the evidence presented at trial; that assessment is the onus of the jury. Wisker v. Hart, 244 Kan. 36, 37, 766 P.2d 168 (1988). Rather, we need only determine whether the evidence, viewed in the light most favorable to the prosecution, was sufficient to support the conviction. See Rice, 261 Kan. at 586, 932 P.2d 981.
Although all of the evidence in this case was circumstantial, we find that the evidence is sufficient to support the defendant's conviction for first-degree murder.
The defendant's conviction for first-degree murder is affirmed.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2519248/
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14 F. Supp. 2d 1135 (1998)
YANKTON SIOUX TRIBE, and its individual members, Plaintiffs,
United States of America, on its own behalf and for the benefit of the Yankton Sioux Tribe, Plaintiff-Intervenor,
v.
Matt GAFFEY, States Attorney of Charles Mix County; Herman Peters, Bruce Bakken, and Jack Soulek, Members of the Charles Mix, South Dakota, County Commission; William Janklow, Governor of South Dakota; and Mark Barnett, Attorney General of South Dakota, Defendants,
The YANKTON SIOUX TRIBE, federally recognized tribe of Indians, and its individual members, and Darrell E. Drapeau, individually, a member of the Yankton Sioux Tribe, Plaintiffs,
v.
SOUTHERN MISSOURI WASTE MANAGEMENT DISTRICT, a non-profit corporation, Defendant.
SOUTHERN MISSOURI WASTE MANAGEMENT DISTRICT, Third-Party Plaintiff,
v.
STATE OF SOUTH DAKOTA, Third-Party Defendant.
Nos. Civ. 98-4042, Civ. 94-4217.
United States District Court, D. South Dakota, Southern Division.
August 14, 1998.
*1136 Robin L. Zephier, Rapid City, SD, Michael H. Scarmon, Stickney & Groe, Elk Point, SD, James G. Abourezk, Sioux Falls, SD, for Plaintiffs.
Tommy Drake Tobin, Winner, SD, Matthew F. Gaffey, Charles Mix County State's Atty., Lake Andes, SD, for Defendants.
*1137 Kenneth W. Cotton, Wipf & Cotton, Wagner, SD, for Interested Party Southern Missouri Waste Management Dist.
Kenneth W. Cotton, Wipf & Cotton, Wagner, SD, Mr. Timothy R. Whalen, Lake Andes, SD, for amicus.
Karen E. Schreier, U.S. Attorney, Rita D. Allen, Sioux Falls, SD, for Intervenor-Plaintiff U.S.
John P. Guhin, Pierre, SD, for Defendant/Counterclaimant William Janklow.
Roxanne Giedd, John P. Guhin, Charles D. McGuigan, Pierre, SD, for State of S.D.
MEMORANDUM OPINION AND ORDER
PIERSOL, District Judge.
In South Dakota v. Yankton Sioux Tribe, ___ U.S. ___, 118 S. Ct. 789, 139 L. Ed. 2d 773 (1998), the United States Supreme Court held that the 1894 Act of Congress ratifying the 1892 Agreement with the Yankton Sioux Tribe for the sale of surplus tribal lands terminated the reservation status of those unallotted, ceded lands, resulting in the diminishment of the Yankton Sioux Reservation. The Supreme Court reached this decision with full acknowledgment that the "context of the [1894] Act is not so compelling that, standing alone, it would indicate diminishment[.]" Id. ___ U.S. ___, 118 S.Ct. at 802. Rather, the Supreme Court relied upon the surrounding circumstances of the Act to conclude that Congress intended to diminish the reservation. The issue remaining for decision in these cases consolidated following the Supreme Court's remand is whether the 1894 Act of Congress disestablished the Yankton Sioux Reservation.
Although the parties to this litigation have at times used the terms "diminishment" and "disestablishment" interchangeably, the Court in this opinion uses each word to convey a particular meaning. As noted by the United States Court of Appeals for the Eighth Circuit in its vacated opinion, Yankton Sioux Tribe v. Southern Missouri Waste Management Dist., 99 F.3d 1439, 1443 n. 4 (8th Cir.1996), the term "disestablishment" is "more precisely used to describe the relatively rare elimination of a reservation, see e.g., DeCoteau v. District County Court, 420 U.S. 425, 95 S. Ct. 1082, 43 L. Ed. 2d 300 (1975), as opposed to reduction in the size of a reservation or `diminishment.' See, e.g., Rosebud Sioux Tribe v. Kneip, 430 U.S. 584, 97 S. Ct. 1361, 51 L. Ed. 2d 660 (1977)." The Supreme Court carefully stated in Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 805, that its holding was limited to the narrow question of whether the 1894 Act diminished that is, reduced the size of the Yankton Sioux Reservation. As in Hagen v. Utah, 510 U.S. 399, 114 S. Ct. 958, 127 L. Ed. 2d 252 (1994), the Supreme Court declined to "determine whether Congress disestablished the [Yankton Sioux] reservation altogether[.]" Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 805.
The Court now answers the question left open by the Supreme Court and, for the reasons explained thoroughly below, holds that the 1894 Act of Congress ratifying the cession and sale of surplus tribal lands did not disestablish the Yankton Sioux Reservation. The 1894 Act of Congress was not one of those "relatively rare" pieces of legislation that resulted in the elimination of a reservation. Rather, by ratifying the 1892 Agreement with the Yankton Sioux Tribe, Congress, in the words of the Supreme Court, modified or reconceptualized the Yankton Sioux Reservation. See Yankton Sioux Tribe, ___ U.S. at ___, ___, 118 S.Ct. at 798, 802. The Yankton Sioux Reservation, as diminished by the 1894 Act, encompasses all of the reservation lands that were allotted pursuant to the allotment acts, as well as the lands reserved from sale for agency, school, and other tribal purposes, within the original exterior reservation boundaries established by the 1858 Treaty with the Yankton Sioux Tribe.
Federal law defines "Indian country" as "all land within the limits of any Indian reservation under the jurisdiction of the United States Government, notwithstanding the issuance of any patent, and, including rights-of-way running through the reservation." 18 U.S.C. § 1151. The Yankton Sioux Reservation, as described above, is "Indian country" within the meaning of the federal statute.
*1138 I. Treaties and the End of Treaty-Making With the Yankton Sioux
The Yanktons belong to one of fourteen tribes in the federation of Sioux, and included 32,000 people claiming use rights to approximately 100 million acres of land upon the arrival of non-Indians during the 17th century. H. Hoover, A Yankton Sioux Tribal Land History at 2 (1995). (Pl. Ex. 31.) During the 18th century, when members of the federation spread by tribes and bands to occupy the historic Sioux Country, about two thousand Yanktons took up residence over the central portion between the Des Moines and Missouri Rivers, south of the present boundary that divides North and South Dakota. Id. By the early 19th century, the Yankton Sioux exclusively controlled over 13 million acres of land. Id. The United States government formally recognized the Yankton Sioux Tribe as a political entity when the first treaty was negotiated in 1815. H. Hoover, A History of Yankton Tribal Governance at 1 (1995) (Pl. Ex. 78.) The United States negotiated subsequent treaties with the Yankton Sioux in 1830, 1836, 1837, 1851, and 1858. Id.
"After some years of earnest effort on the part of the Interior Department to induce the Yanktons to cede a portion of their territory, finally, in the fall of 1857," a military captain, with the assistance of Charles T. Picotte, a Yankton half-blood, persuaded the Yanktons to send a delegation to Washington, D.C., to confer with the Government in the early part of the winter of 1857-58. Report Of The Commissioner of Indian Affairs at 423-24 (Oct. 1, 1891). (Gov't. Ex. 18.) In the resulting April 19, 1858 Treaty, 11 Stat. 743, (Pl. Ex. 1), the Yankton Sioux Tribe ceded and relinquished to the United States:
all the lands now owned, possessed, or claimed by them, where ever situated, except four hundred thousand acres thereof, situated and described as follows, to wit Beginning at the mouth of the Naw-izi-wakoo-pah or Chouteau River and extending up the Missouri River thirty miles; thence due north to a point; thence easterly to a point on the said Chouteau River; thence down said river to the place of beginning, so as to include the said quantity of four hundred thousand acres.
The Yankton Sioux were to have exclusive occupation of the reservation lands, along with unrestricted use of the red pipestone quarry in the State of Minnesota. A land survey later conducted revealed that 430,495 acres were included in the land mass described by the 1858 Treaty and reserved to the Yankton Sioux. S. Exec. Doc. No. 27, 53rd Cong., 2d Sess., at 5 (1894). (Pl. Ex. 5.) The land comprising the 1858 Yankton Sioux Reservation is located in the central to southeastern portion of Charles Mix County, South Dakota.
In the 1858 Treaty, the Yankton Sioux relinquished and abandoned all claims and complaints growing out of any and all treaties previously made by them or other Indian Tribes, except for their claim to annuity rights under the September 17, 1851 Treaty of Laramie. In return for the cession of land and release of claims, the United States agreed to protect the Yankton Sioux in their "quiet and peaceable possession" of the tract reserved to them. Article 10 of the Treaty provided that "[n]o white person," with certain exceptions, "shall be permitted to reside or make any settlement upon any part of the tract herein reserved for said Indians, nor shall said Indians alienate, sell, or in any manner dispose of any portion thereof, except to the United States." The government also agreed to pay the Yankton Sioux or to expend for their benefit, starting the year of their settlement upon the reservation, the total sum of $1.6 million in annuities over a period of fifty years, ending in 1908. The government also agreed to expend additional amounts during the first year of the Tribe's settlement on the reservation for the purchase of stock, agricultural implements, and fencing, and for the construction of houses, schools, and other buildings.
In July 1859, United States Agent Alexander Redfield founded the Yankton agency between Chouteau Creek and Fort Randall. H. Hoover, A Yankton Sioux Tribal Land History at 3 (1995). (Pl. Ex. 31.) The Yanktons' head chief, Struck By The Ree, followed, and within a few months, some 2,000 tribal members pitched tipis close to the agency. Eight band chiefs helped to settle the tribal members on the reservation. Id. The Yanktons entered a "revolution in life *1139 style as they accepted confinement on the reservation." Id.
In 1859, surveyors marked the outer boundaries of the reservation and surveyed 166 rectangular lots for family assignment, 87 of which were downstream and 79 of which were upstream from the agency. Id. at 4. By 1860, there were 2,053 Yanktons on the reservation, segregated into seven bands. Id. A "Chief Farmer" managed the 360.73-acre agency compound at Greenwood, on the Missouri River, and "supervised agricultural development and acculturation across the reservation." Id. at 5.
In the years that followed the 1858 Treaty, the federal government did not provide the Yanktons all of the financial assistance promised. Settled close to the Missouri River or in the breaks of the Missouri Hills, the Yanktons broke prairie sod, opened farms, and built log homes. Report of the Commissioner of Indian Affairs at 424 (Oct. 1, 1891). (Gov't. Ex. 18.) Drought set in and burned up the crops, followed by devastating floods. As a result, the Yanktons believed that the Great Spirit was offended at them for cultivating the soil. Id. "Their work oxen and cows were soon in the soup, farm tools and wagons were soon thrown aside to rot, their clothing was cast off, and the whole nation went off on a buffalo hunt." Id. Upon their return many months later, the Yankton Sioux "found the Santees, their old-time allies, had opened up a horrid frontier war against the whites, and that emissaries from the hostile bands were waiting to counsel with them to engage the Yanktons also in hostilities against the Government." Id.
In 1864, when the Santee Sioux were raiding and killing the settlers of Minnesota, General Sully, at Fort Randall, enlisted in the service of the United States as scouts fifty-one Yankton Indians. "They took the field at once against their own kindred in defense of the white inhabitants of Dakota and Nebraska, and drove back the hostile Santees." Report of the Commissioner of Indian Affairs at 48 (1878). (Gov't. Ex. 18.) The Yankton scouts were honorably discharged at the end of the war, but without any pay, id., a matter that would surface as a major point of contention with the Yanktons during discussions about the sale of their surplus lands in 1892. In the early 1880's, the Yankton Sioux claimed that, unlike other Indian tribes, "the blood of no white person stains their hands." Report Of The Commissioner of Indian Affairs at 61 (1881). (Gov't. Ex. 18.) The Yanktons viewed themselves as "[a]lways at peace and friendly even to taking up arms against their own relations," and believed that, as a result, they "should receive greater consideration and benefit from [the white] people and government; that on the contrary they receive less, while those who fought the government imbued their hands in white man's blood, and obtain all they ask." Id.
In 1869, Moses K. Armstrong conducted a second survey of family lots on the Yankton Sioux Reservation, marking 177 lots of 80 acres each. H. Hoover, A Yankton Sioux Tribal Land History at 5 (1995). (Pl. Ex. 31.) In 1874, J.W. Beaman surveyed additional lots of 40 acres each, to make one available for each family. While several missionaries visited the reservation, Presbyterian John P. Williamson arrived as the first resident missionary in 1869, and Episcopal Father Joseph Cook settled in Greenwood in 1870. Id. at 4. As mission and federal facilities were built, "agency personnel gradually replaced `recalcitrant' band chiefs with others more amenable to federal objectives[.]" Id. The growing population of non-Indian farmers, businessmen, and railroad men in the Upper Midwest pressured federal officials to open the surplus lands of Indian reservations for settlement.
"The decade of the 1860's was marked by an increasing volume of general Indian legislation [by Congress], coincident with a decline in the use of Indian treaties as an instrument of national policy.... The formative era of Indian relations ended with the Appropriations Act of March 3, 1871, providing for the termination of treaty making with Indian tribes." F. Cohen, Handbook of Federal Indian Law 126-27 (1982) (footnote omitted) (hereinafter Cohen). Codified at 25 U.S.C. § 71, the statute provided:
No Indian nation or tribe within the territory of the United States shall be acknowledged or recognized as an independent nation, tribe, or power with whom the United States may contract by treaty; but *1140 no obligation of any treaty lawfully made and ratified with any such Indian nation or tribe prior to March 3, 1871, shall be hereby invalidated or impaired.
At least one commentator suggests that the "end of treaty making assumes an exaggerated historic importance unless understood in light of the comprehensive nature of federal involvement in Indian affairs." Cohen at 127 (footnote omitted). In the commentator's view,
[t]he primary reason for the termination of treaty making in 1871 was political, the result of the House of Representatives' desire to have more control over Indian affairs and over the lands being ceded by the tribes. The federal-Indian relationship continued much as it had before 1871. Negotiations with tribes and land cessions resulted in "agreements" rather than treaties, and were ratified by both houses of Congress. Congress continued to establish reservations, make appropriations, and enact statutes affecting Indians. Like treaties, agreements and statutes are the "supreme law of the land," creating rights and liabilities that are virtually identical to those established by treaties.
Cohen at 127 (footnotes omitted). The prohibition on treaty-making "was a domestic political decision with little legal impact on the continuing relationship between the United States and Indian tribes[,]" and caused the federal government to look to other procedural methods in dealing with the Indian tribes. Id. at 128.
After 1871, a trend developed toward more comprehensive legislation as the government gradually moved away from the "tribe-by-tribe approach of the treaty making years. The result was a steady increase in statutory power vested in Indian service officials and a steady narrowing of the rights of individual Indians and tribes." Cohen at 128. The process of allotment of tribal lands in severalty and the assimilation of the Indians into white culture was deemed to be important for Indians and non-Indians alike. Id. Years of debate on allotment proposals followed. Id. at 131.
On February 8, 1887, Congress passed the General Allotment Act, also known as the Dawes Act, 24 Stat. 388, which mandated the allotment of land to individual tribal members on the reservations and negated the previous family assignments of land parcels. H. Hoover, A Yankton Sioux Tribal Land History at 5-6 (1995). (Pl. Ex. 31.) The Dawes Act did not expressly mandate the elimination of reservations. Senator Dawes, sponsor of the bill, had favored a voluntary program of allotments, but eventually supported compulsory allotment because he became convinced, like the humanitarian reformers, that destruction of the tribal system was inevitable if Indians were to participate fully in the American system. Cohen at 131. Allotments of land to individuals were thought to be of primary importance because the Indian concept of tribally-owned land was fundamentally different from the whites' concepts of civilization and individual land ownership, and the whites' view was considered to be superior. Id. White reformers also thought that a government patent would create greater security for the Indian allottee than would possession of land under tribal law or custom and that settling the Indians in a permanent place would end their nomadic behavior. Indians who favored allotment placed faith in the patent in fee as protection against white encroachment and removal by the government. Cohen at 132.
The Dawes Act provided:
That in all cases where any tribe or band of Indians has been, or shall hereafter be, located upon any reservation created for their use, either by treaty stipulation or by virtue of an act of Congress or executive order setting apart the same for their use, the President of the United States be, and he hereby is, authorized, whenever in his opinion any reservation or any part thereof of such Indians is advantageous for agricultural and grazing purposes, to cause said reservation, or any part thereof, to be surveyed, or resurveyed if necessary, and to allot the lands in said reservation in severalty to any Indian located thereon[.]
24 Stat. 388. Each head of a family was to receive one quarter section of land (160 acres), each single person over eighteen years of age and each orphan child under eighteen years of age was to receive one-eighth of a section (80 acres), and each single person under eighteen years of age or born *1141 prior to the date of the President's order directing allotment of the land was to receive one-sixteenth of a section (40 acres). Id. The Dawes Act further provided in section 5 that, upon approval of the allotments by the Secretary of the Interior, the Secretary would issue a patent in the name of each allottee, to be held in trust by the United States for twenty-five years for the sole use and benefit of the Indian allottee, and in the case of the allottee's death, for the sole use and benefit of the allottee's heirs. Section 5 provided that, at the end of the trust period, the United States would convey the allotment
in fee, discharged of said trust and free of all charge or incumbrance whatsoever ... And if any conveyance shall be made of the lands set apart and allotted as herein provided, or any contract made touching the same, before the expiration of the time above mentioned, such conveyance or contract shall be absolutely null and void[.]
24 Stat. at 389. Congress gave the President authority to extend the trust period in his discretion. Id.
Section 5 of the Dawes Act, significantly for this litigation, further provided:
That at any time after lands have been allotted to all the Indians of any tribe as herein provided, or sooner if in the opinion of the President it shall be for the best interests of said tribe, it shall be lawful for the Secretary of the Interior to negotiate with such Indian tribe for the purchase and release by said tribe, in conformity with the treaty or statute under which such reservation is held, of such portions of its reservation not allotted as such tribe shall, from time to time, consent to sell, on such terms and conditions as shall be considered just and equitable between the United States and said tribe of Indians, which purchase shall not be complete until ratified by Congress[.]
24 Stat. at 389-90 (emphasis added).
The Dawes Act stated in section 6 that, upon completion of the allotments and the issuance of patents to the allottees, the allottees would be subject to the civil and criminal laws of the State or Territory in which they resided. Moreover, each allottee "who has voluntarily taken up, within said limits, his residence separate and apart from any tribe of Indians therein, and has adopted the habits of civilized life, is hereby declared to be a citizen of the United States." Id. at 390.[1]
Some of the Yanktons resisted the new allotment policy, and four companies of troops were sent from Fort Randall to quell the disturbances and restore order. H. Hoover, A Yankton Sioux Tribal Land History at 6 (1995). (Pl. Ex. 31.) Allotting Agent J. G. Hatchett arrived in 1889 to parcel out the individual allotments on the Yankton Sioux Reservation. Id. Protests by the Indians hampered his work, id., but the allotments were completed that year and in 1890, Hatchett equalized the allotments, utilizing approximately one-half of the reservation. Report of the Commissioner of Indian Affairs at 428 (Oct. 1, 1891). (Gov't. Ex. 18.) Hatchett continued to refine the list of allotments, and in 1892 reported the assignment of 1,700 allotments on approximately 262,000 acres of the Yankton Sioux Reservation. H. Hoover, A Yankton Sioux Tribal Land History at 6 (1995). (Pl. Ex. 31.) Hatchett's report negated all previous land assignments, and tribal members were required to scatter on their new family farms located across the reservation. Id. at 6 & n. 15.
*1142 Of the 430,495 acres of land comprising the 1858 Yankton Sioux Reservation, 167,325 acres were allotted and patented to the Indians under the Dawes Act. By early 1894, allotments under the Act of February 28, 1891, 26 Stat. 594, had been made in the field, but those allotments had not been examined and approved. The federal government estimated that some 95,000 additional acres had been allotted after passage of the 1891 Act, leaving surplus lands of approximately 168,000 acres, which were ceded by the Yankton Sioux for $600,000, or $3.62 per acre.[2] S. Exec. Doc. No. 27, 53rd Cong., 2d Sess., at 5 (1894); (Pl. Ex. 5.)
Congress having officially ended treaty-making with the tribes in 1871, the last large-scale sale of land to the United States by the Yankton Sioux Tribe occurred as a result of an 1892 Agreement, after an 1884 government attempt to obtain the sale of the Yanktons' surplus lands failed. S. Exec. Doc. No. 27, 53rd Cong., 2d Sess., at 12 (1894); (Pl. Ex. 5.) In 1892, the Secretary of the Department of the Interior appointed three members to serve on the Yankton Indian Commission to negotiate the sale of the surplus land owned by the Yankton Sioux. (Pl. Ex. 28.) The three commissioners were John J. Cole, J. C. Adams, and Dr. W. L. Brown; however, Dr. Brown resigned from the Commission before an agreement was reached, and his replacement, L. W. French, was never qualified to act as a Commissioner and took no part in the negotiations. S. Exec. Doc. No. 27, 53rd Cong., 2d Sess. at 7-8, 34 (1894); (Pl. Ex. 5.) These discussions did not take place with tribal leaders in Washington, D.C., as had the negotiations resulting in the 1858 Treaty. The Commissioners were sent to the Yankton Sioux Reservation "to negotiate ... for the cession of their surplus lands," and "[i]f [the Yankton Sioux] are unwilling to cede all the surplus land you will endeavor to obtain the relinquishment of such part thereof as they may be willing to part with."[3] Instructions to the Yankton Indian Commission (July 27, 1892), reprinted in Yankton Sioux Tribe U.S. Supreme Court Joint Appendix Vol. I at 98-99.
Although the 1894 Congress and courts have been careful to distinguish between the 1858 "Treaty" and the 1892 "Agreement," see, e.g., S. Exec. Doc. No. 27, 53rd Cong., 2d Sess. at 1 (1894) (Pl. Ex. 5.); Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 793, the Commissioners sent to the reservation and the Yankton Sioux repeatedly mentioned during the 1892 discussions concerning the sale of surplus lands that their work would result in a "treaty" that would be ratified by Congress. Before the Commissioners left the Yankton Sioux Reservation for Washington to present the 1892 Agreement to Congress, a copy of the Agreement was left in the Yanktons' treaty book, which was turned over to Rev. Williamson for safekeeping. S. Exec. Doc. No. 27, 53rd Cong., 2d Sess. at 48-96, 97 (1894). (Pl. Ex. 5.) Moreover, then Secretary of the Interior Hoke Smith, in the first sentence of his 1894 cover letter submitting the Agreement and the reports of the work underlying it to Congress, stated that he had the honor "to submit herewith an agreement made by the commission appointed to treat with the Yankton tribe of Dakota or Sioux Indians[.]" Id. Similarly, the Acting Commissioner of Indian Affairs referred to the Agreement as a "treaty" in his report to the Secretary of the Interior, id. at 5, and those chiefs and head men of the Yankton Sioux Tribe who wrote to Congress urging ratification of the Agreement referred to it as the "treaty of December 31, 1892." S. Rep. No. 196, Committee on Indian Affairs, 53rd Cong., 2d Sess. at 2 (1894). (Pl. Ex. 7.)
These references to treaty-making by the primary participants are significant, because the references establish that the Tribe, which likely was not aware that Congress technically had ended treaty-making by statute in 1871, nonetheless continued to view its interactions with the federal government within the historic context of the political relationship *1143 that had existed between the Tribe and the federal government beginning with the Treaty of 1815. The references also confirm the commentator's view that the "federal-Indian relationship continued much as it had before 1871[,]" Cohen at 127, and that the only major difference between a "treaty" and an "agreement" was that both Houses of Congress had to ratify an "agreement," while only the Senate ratified a treaty.
II. The Sale of Surplus Lands and the 1892 Agreement
The crucial question presented is whether the 53rd Congress, legislating during the allotment era, intended by the Act of 1894, ratifying the 1892 Agreement with the Yankton Sioux, to disestablish the Yankton Sioux Reservation completely. This becomes a highly complicated question in light of the Supreme Court's Yankton Sioux Tribe decision holding that the Yankton Sioux Reservation is diminished to the extent of the surplus lands sold through the 1894 Act. Diminishment ordinarily suggests a shrinking of the land mass reserved to the tribe, with a clear demarcation between the land removed from reservation status, and the land retained in reservation status. See, e.g., Rosebud, 430 U.S. at 606-615, 97 S. Ct. at 1373-1377 (holding that congressional acts diminished boundaries of Rosebud Reservation by removing from reservation land situated in four counties of South Dakota).
Such a clear demarcation is not present here, where the Yankton Sioux allotments purposely were interspersed over the entire 1858 reservation to help ensure that the Indians would live closely with the whites who settled on the intermingled ceded lands and thereby assimilate into white culture. The Supreme Court recognized that diminishment ordinarily affects the placement of reservation boundaries, see Yankton Sioux Tribe, ___ U.S. ___, ___, ___, 118 S.Ct. at 798, 799, 800, 139 L. Ed. 2d 773, but nowhere in its opinion did the Supreme Court explain how the Yankton Sioux Reservation boundaries changed as a result of the diminishment. The court stopped short of holding the Yankton Sioux Reservation terminated or disestablished as it could have done if it thought DeCoteau was controlling, id. ___ U.S. ___, 118 S.Ct. at 805, and instead signaled at points in its opinion that perhaps the reservation is not disestablished. Id. ___ U.S. ___, 118 S.Ct. at 801, 805. The Supreme Court spoke of Congress intending by the 1894 Act "to modify the reservation," id. ___ U.S. ___, 118 S.Ct. at 798, or to work "a reconception of the reservation[.]" Id. ___ U.S. ___, 118 S.Ct. at 802. The Supreme Court did not elaborate upon how such a modified or reconceived reservation should be envisioned. If the original exterior boundaries remain, as it appears they do from the Supreme Court's opinion, then the Supreme Court has effectively created within those boundaries an "`impractical pattern of checkerboard jurisdiction,'" a result which the Supreme Court in the past has disfavored as contrary to the approach preferred by Congress and codified at 18 U.S.C. § 1151, to avoid jurisdictional confusion. See Moe v. Confederated Salish and Kootenai Tribes, 425 U.S. 463, 478, 96 S. Ct. 1634, 1643-44, 48 L. Ed. 2d 96 (1976) (quoted case omitted); Seymour v. Superintendent of Washington State Penitentiary, 368 U.S. 351, 358, 82 S. Ct. 424, 428-29, 7 L. Ed. 2d 346 (1962). Because the Supreme Court has not explained how the diminishment affected reservation boundaries, this Court "cannot assume that Congress would intend to change the reservation to an area without defined boundaries and, in addition, create a confusing checkerboard pattern of jurisdiction." United States v. Long Elk, 565 F.2d 1032, 1039 (8th Cir.1977).
The Tenth Circuit confronted an identical boundary problem following the Supreme Court's diminishment decision in Hagen. See Ute Indian Tribe of Uintah and Ouray Reservation v. Utah, 114 F.3d 1513 (10th Cir.1997), cert. denied sub nom. Duchesne County v. Ute Indian Tribe of Uintah and Ouray Reservation, ___ U.S. ___, 118 S. Ct. 1034, 140 L. Ed. 2d 101 (1998). The Hagen decision, which affirmed a judgment of the Utah Supreme Court, directly conflicted with a prior en banc decision of the Tenth Circuit that the Uintah Valley Reservation was not diminished or disestablished. After Hagen, the Tenth Circuit recalled its mandate and modified its previous decision only to the extent necessary to reconcile the opinion with Hagen. Ute Indian Tribe, 114 F.3d at 1528. The Tenth Circuit held, consistently with Hagen, *1144 that Acts of Congress between 1902 and 1905 diminished the reservation to the extent of the unallotted lands that were opened to non-Indian settlement, but that the Acts did not entirely disestablish the reservation. Id. The court concluded that the original exterior reservation boundaries remained intact and that all lands originally allotted to tribal members remained within the limits of the reservation and constituted Indian country under 18 U.S.C. § 1151(a), even though a substantial portion of those allotted lands had passed into fee status after 1905. Id. 114 F.3d at 1529-30. When given the opportunity to grant a petition for certiorari and review the Tenth Circuit's decision, the Supreme Court declined and denied the petition for a writ of certiorari.
The disestablishment question now before this Court closely mirrors the issue before the Tenth Circuit in Ute Indian Tribe, and the Court draws some guidance from that opinion. But each agreement with an Indian tribe is different and must be evaluated in light of all the circumstances attendant to its making. Hagen, 510 U.S. at 410-13, 114 S. Ct. at 965-66. Thus, the Court begins its analysis from the familiar legal premise that Congress created the Yankton Sioux Reservation in the 1858 Treaty, and only Congress can eliminate it by explicitly indicating its intent to do so. See Solem v. Bartlett, 465 U.S. 463, 470, 104 S. Ct. 1161, 1166, 79 L. Ed. 2d 443 (1984). The Supreme Court "does not lightly conclude that an Indian reservation has been terminated," DeCoteau, 420 U.S. at 443, 95 S. Ct. at 1092, and this Court likewise will not lightly reach such a determination. Once Congress has established a reservation, all tracts included within it are a part of the reservation until separated from it by Congress. Id., 420 U.S. at 443, 95 S. Ct. at 1092-93. The 1894 Act of Congress which opened the Yankton Sioux Reservation to allow non-Indians to purchase land and settle there and which, according to the Supreme Court, diminished the size of the reservation only to the extent of the ceded lands, is not inconsistent with the preservation of the 1858 Treaty boundaries. See Solem, 465 U.S. at 470, 104 S. Ct. at 1166; DeCoteau, 420 U.S. at 444, 95 S. Ct. at 1093. Ambiguities must be resolved in favor of the Yankton Sioux, see Hagen, 510 U.S. at 411, 114 S. Ct. at 965, and the Supreme Court "requires that the `congressional determination to terminate ... be expressed on the face of the Act or be clear from the surrounding circumstances and legislative history.'" DeCoteau, 420 U.S. at 444, 95 S. Ct. at 1093. Thus, to follow the disestablishment inquiry as defined in DeCoteau, the Court must consider the language of the 1894 ratification statute and the 1892 Agreement it incorporated, as well as the legislative history of the Act, and the surrounding historical circumstances.[4]
The Court believes it is helpful to begin with the historical circumstances surrounding the making of the 1892 Agreement as documented in the reports of the Yankton Indian Commission. S. Exec. Doc. No. 27, 53rd Cong., 2d Sess. at 48-97 (1894); (Pl. Ex. 5.) (hereafter "Negotiations".) These detailed reports provide clear insight into the mindset of the Commissioners and the Yankton Sioux as they negotiated for the sale of the surplus lands. These reports were included in the legislative history of the 1894 Act ratifying the 1892 Agreement, and the Senate and *1145 House Reports forwarding the Act from the Committees on Indian Affairs to the floor called special attention to the report of the Yankton Sioux Commission and all of their proceedings. S. Rep. No. 196, Committee on Indian Affairs, 53rd Cong., 2d Sess. at 1 (1894) (Pl. Ex. 7); H. Rep. No. 570, Committee on Indian Affairs, 53rd Cong., 2d Sess. at 1 (1894). (Pl. Ex. 8.)
A. The Reports of the Yankton Indian Commission
The Commissioners held ten councils which were attended by the Indian Committee of 24 named to represent the Yankton Sioux Tribe, the ten moderators, the chiefs, the head men, and varying numbers of members of the Tribe. The first two of the ten councils occurred on October 8th and 24th of 1892, and the remaining eight councils occurred between December 2nd and 17th of 1892. Very little, if any, discussion during the councils was directed to hammering out the terms of the twenty Articles that ultimately became the 1892 Agreement. Negotiations at 48-97. Tribal members generally spoke in favor of or in opposition to the sale of the surplus lands, expressing explicitly their perceived view of themselves as ignorant and inferior to the wiser, educated Commissioners. Id. at 52.[5] The Indians' speeches were laced with suspicion and distrust of the United States because of previous unhonored treaty terms, and with paramount concern for the price the United States would pay for the surplus lands. The Committee of 24 developed a list of twelve propositions, or grievances, that the Tribe wanted addressed in the agreement to sell the surplus lands. Id. at 52, 57. The Commissioners eventually agreed to incorporate as many of the propositions as their instructions from Washington would allow. Id. at 60. Along the way, however, the Commissioners attempted to convince the Indians that they could not resist the tide of change, that the President and the Secretary of the Interior were their friends, that the United States had fulfilled all terms of the 1858 Treaty, that the United States would deal fairly with the Indians, and that sale of the surplus lands was in the Tribe's best interest. Id. at 65-69.
What is clear throughout the Commissioners' reports of their councils with the Tribe is that their mission was to obtain the sale of the surplus lands, and no more. This Court, the Eighth Circuit, and the Supreme Court each acknowledged in the previous stage of this litigation that the parties, in reaching the 1892 Agreement, did not discuss the future boundaries of the reservation or the relinquishment of the entire reservation by the Tribe, but memorialized only the consent of the Tribe to sell the surplus lands remaining after the allotment process was completed. Yankton Sioux Tribe, 890 F.Supp. at 883-84; Yankton Sioux Tribe, 99 F.3d at 1453; Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 795. If the Commissioners had intended to terminate the reservation and communicated that to the Indians, that would have made their mission even more difficult.
Comments made by the Commissioners during the councils with the Yankton Sioux support the conclusion that the Commissioners and the Tribe did not perceive their work as causing a complete disestablishment of the reservation. In his earliest comments during the first council with the Tribe, Commissioner Adams stated, "We understand that you each received an allotment of land on which to make a home.... we also understand that you own, outside of your allotments, a large quantity of land in common. It is this land that you own in common that we were appointed by the Great Father to talk to you about." Negotiations at 48. Although these comments immediately bring to mind the Dawes Act and the policies behind it, what Commissioner Adams had to say to the Tribe just a few moments later is striking. He said: "It might be, after you sold your lands, you could have this reservation organized as a separate county. If this could be done I do not say it can you could govern your *1146 own people in your own way, so long as you obeyed the laws of the State. I do not say this can be done, but see no good reason why it might not be done." Id. Commissioner Adams apparently held the view that the allotment policy and tribal self-government could co-exist, and he set the tone for the negotiations by conveying such a view in his very first address to the Tribe.
Likewise, during the first council, Commissioner Cole told the Indians that the "Great White Father ... does not want you to sell your homes that he has allotted to you. He wants you to keep your homes forever. He only wants you to sell your surplus lands for which you have no use." Id. at 49. Cole assured the Indians, "[y]ou not only have a home as a tribe, but every man, woman, and child among you each now has a home which no one can take away from you and the Great White Father wants you to always keep these homes and live on them in peace and comfort like white men, and be citizens and have plenty." Id. Cole also remarked, "The Great Father and his Great Secretary [of the Interior], Mr. Noble, think you have acted wisely in selecting your homes in severalty. ... They have sent us here to buy these surplus lands for homes for white men who will settle among you; who will live peaceably and neighborly with you; who will cultivate these surplus lands and make your allotted lands much more valuable." Id. at 50. In response to the statements of Adams and Cole, Henry Stricker replied, "if you will help us we hope we will make a treaty that will be beneficial to us as a tribe." Id.
At the second council, the tribal members asked to see the form contract held by the Commissioners, which was produced. Remarkably, a question arose whether the tribal members would be permitted to make comments about the provisions contained in the form agreement, and this apparently generated extensive discussion. The Commissioners reported to Congress that "[i]t was finally agreed that [the agreement] should be translated to the council and such comments as may be made by any of the committee of 24, could not, and should not be considered final." Id. at 51. The contract was then read article by article through oral translation into the Dakota language and, at the Tribe's request, the contract was also translated in a written form for use and consideration by the Committee of 24. Id. With that, the council ended.
In the series of eight councils that occurred during the sixteen-day period from December 2 to December 17, 1892, more comments were made suggesting that the Commissioners and the tribal members thought the intent of the "Great White Father" was to open the reservation for settlement rather than to disestablish it. Robert Clarkson, a member of the Tribe, said, "White men see our surplus lands every day traveling through it. They have a lawyer sent to Congress to open this reservation and surplus land." Id. at 61. Commissioner Brown acknowledged that the 1858 Treaty "set aside for your people a reservation with certain boundaries[,]" which was supposed to contain 400,000 acres. Id. at 66. He admonished the Tribe to consider that, when the reservation was surveyed, it actually contained 430,495 acres, "more than the Government agreed to let you have." Id. He assured the Indians that "schoolhouses will be put up all over the agency[.]" Id. at 67.
To convince the Indians that the strong federal government was looking out for the interests of the poorer Tribe, Commissioner Brown gave as an example two Indians, one strong and well-looking, and one half-starved, asking the Commissioners to divide a piece of beef between them. He said "it would be natural and right to give the one who was sick more than the other ... and if we make this treaty we want to give you the biggest half." Id. at 67. Commissioner Cole named as the "principal object of the treaty" to make both the allotted and the surplus lands valuable, id. at 68, and explained potential differences in income to tribal members, to be derived primarily from land rent, "after the surplus lands have been occupied by white people." Id. at 69. A dominant theme of the Commissioners was that the government wanted the Indians to live close to the white settlers so that the Indians could emulate the non-Indians, see id. at 71-72, but the reason given was not the government's desire to eliminate the reservation. Rather, the Commissioners reminded the Indians that, with the loss of wild game and a declining *1147 ability to roam and hunt as in the past, the Indians needed to adapt to the changed conditions around them, and to learn to obtain their food, clothing, and income like white men. Id. at 71-72.
Commissioner Adams instructed the Indians as to how they might rent the uncultivated portions of their allotments to white men to generate cash income, using as an example his personal experience at the Sissetons' reservation. Id. at 72-73. The Commissioners had already told the Yanktons that the $2.50 per acre that the United States paid the Sisseton-Wahpeton Sioux Tribe for the surplus lands on the Lake Traverse Reservation in 1891, the year before, was the highest price Congress had ever paid for surplus Indian lands. Id. at 68. Despite the Sissetons' sale of all of their surplus lands, Commissioner Adams viewed the Lake Traverse Reservation as still in existence:
Here is the line of the Sisseton Reservation in my county. I live here, about 15 miles from the line of the Sisseton. Right here lives a friend of mine by the name of Vick, just outside the reservation line. Just inside of the line of the reservation lives an Indian friend of mine by the name of Chunek. He has land which has plenty of grass upon it. Vick asked Chunek to let him cut grass on his land. He agreed to and Vick was to pay 50 cents per ton for all he cut. This man cut 150 tons of hay and paid Chunek $75 for it. Chunek did not do anything but lie in the grass and see others work and got $75. It was just as if Chunek had gone out into the middle of the road and picked it up. Now, my friends, what made the grass on Chunek's farm worth money? Because his tribe had sold their surplus land and he had become a citizen of the United States and could rent his land. This he could not do until the surplus land was sold to the Government. If this Indian can do this why cannot you?
Id. at 72. Considering these remarks, and this Commissioner's earlier comments that it might be possible to "have this reservation organized as a separate county[,]" and "you could govern your own people in your own way, so long as you obeyed the laws of the State[,]" the Yankton Sioux reasonably could have concluded that, as a result of the sale of their surplus lands, the "Great Father" would, in time, make them citizens of both the State of South Dakota and the United States, and yet permit them to continue to govern themselves as a Tribe on the allotted lands.
Despite all of the efforts of the Commissioners, during the council on December 10, 1892, some tribal members reported the Indians had stayed up night and day debating the matter, but had decided not to sell their surplus lands. Id. at 73. Other tribal members disagreed, saying the Tribe was willing to sell, but the only disagreement was price. Commissioner Cole became adamant:
Now, I want you to understand that you are absolutely dependent upon the Great Father today for a living. Let the Government send out instructions to your agent to cease to issue these rations, let the Government instruct your agent to cease to issue your clothes. Let the Government instruct him to cease to issue your supplies, let him take away the money to run your schools with, and I want to know what you would do. Everything you are wearing and eating is gratuity. Take all this away and throw this people wholly upon their own responsibility to take care of themselves, and what would be the result? Not one-fourth of your people could live through the winter, and when the grass grows again it would be nourished by the dust of all the balance of your noble tribe.
* * * * * *
[The Great Father] did not send this commission until every one of you, down to the smallest baby, has a home of their own on this reservation.
Id. at 74-75 (emphasis added). From this speech and the fact that the Yanktons had lived on family allotments on the reservation for thirty-three years, the Yanktons could, and most probably did, draw the conclusion that their individually allotted lands remained in reservation status, but that the continuation of their annuities and all other forms of federal financial assistance depended upon their agreement to sell the surplus lands. Yankton Agent Foster then spoke in favor of the Agreement, but advised the *1148 Tribe not to settle on the price. Id. at 75. Felix Brunot called for a vote, which caused confusion and wrangling among the factions of the Tribe favoring and opposing the sale. Id. at 76. Commissioner Cole refused to recognize any vote because less than a majority of the adult male members of the Tribe were present. Id.
At the next council, the Commissioners asked the Committee of 24 to designate six individuals, representing the factions in the Tribe, to meet with the Commission to draft a treaty. Id. at 76-77. This proposal also met with disagreement because tribal members believed the Commission refused to recognize the stated decision of the Committee of 24, representing the Tribe, not to sell the surplus lands. Id. at 78. Cole defended his proposal of a subcommittee as necessary to work out the small details. The friends of the treaty appointed three members to the proposed subcommittee, but the opposition understandably did not present any members for such service. Id. at 78, 81.
In the last council, on December 17, 1892, Commissioner Brown resigned to eliminate any possibility that he was the cause of the Tribe's refusal to sell the surplus lands, as he had heard rumors that he was to blame. Id. at 79. Commissioner Cole then eloquently addressed the Tribe:
This reservation alone proclaims the old time and the old conditions. But even here the means of your former mode of life have vanquished. The tide of civilization is as resistless as the tide of the ocean, and you have no choice but to accept it and live according to its methods or be destroyed by it. To accept it requires the sale of these surplus lands and the opening of this reservation to white settlement.
Id. at 81 (emphasis added). The council adjourned, and approximately two weeks later, on December 31, 1892, the Commissioners announced their completion of an Agreement for the sale of the surplus lands, after their consultation with the chiefs and head men and the white missionaries considered to be friends of the Tribe. Id. at 83-84.
At no point in the Commissioners' reports is there any mention, by a Commissioner or by a Yankton Sioux, of any anticipated change in the reservation boundaries or of a disestablishment or termination of the Yankton Sioux Reservation. At no point in the Commissioners' reports is there any mention of a transfer of the Yanktons' tribal sovereignty to the United States or the State of South Dakota.
On January 3, 1893, missionary John Williamson sent a letter to Commissioner Cole, stating that he thought the terms were the most liberal the Indians would get, that he had no doubt the provisions would be faithfully carried out, and "further there is no cause for apprehension that this agreement will in any way interfere with the treaty of 1858." Id. at 84. Joseph Cook, the Episcopal missionary, concurred with Williamson that the Agreement was advantageous for the Tribe. Id. A draft of the Agreement was sent to Secretary of the Interior Noble in January 1893, and his minor suggested changes were made. Id.
There is no indication in the Commissioners' reports that the Yanktons reached a consensus to support the Agreement. To the contrary, the Commissioners' reports in early 1893 describe vehement opposition to the Agreement and hardships the Commissioners faced in obtaining signatures to the Agreement by the majority of the adult male members of the Tribe. Id. at 85-97. Councils were held to read the Agreement to the tribal members, and the Commissioners waited day after day for tribal members to come to them and sign the Agreement. The Commissioners traveled across the reservation looking for elderly and infirm signatories, and even crossed into Nebraska to take the signatures of Yankton soldiers who were not present on the Yankton Sioux Reservation during the negotiations. Id. at 92-93. By March of 1893, the Commissioners obtained a sufficient number of signatures 255 of the 458 members eligible to sign and the Commission departed for Washington. Id. at 21, 97.
Two federal investigators were sent separately to the Yankton Sioux Reservation in 1893 to investigate allegations of fraud in the procurement of signatures on the Agreement. Indian Inspector John W. Cadman reported in November 1893 that he had uncovered only one incident of possible undue influence, but that he did not believe such *1149 had occurred in that case. He also reported that some tribal members who had signed the Agreement wished to change their minds, while others wished to sign the Agreement for the first time. Id. at 35. Special Agent Cooper also found no evidence of coercion by the Commissioners in reaching the Agreement. Id. at 95.
The Report of the Commissioner of Indian Affairs dated September 16, 1893 (Pl. Ex. 10), written before Congress ratified the 1892 Agreement, stated the Indians had "not signified their assent that such reservation might be embraced within the Territory of Dakota or State of South Dakota[,]" and further,
Notwithstanding that all the Indians have accepted allotments and land patents have been issued to many of them for their lands, yet their relationship with local State authorities has not changed. The reservation has been within an organized county for many years, yet the county authorities decline to recognize the Indians or any of the residents of the reserve as entitled to the rights and privileges of citizenship. The constitution of the State of South Dakota expressly disclaims any right or title to any lands owned or held by an Indian or Indian tribe and are exempt from taxation, and this is held to disclaim any jurisdiction over the tribe, either civil or criminal, of the residents within an Indian country.
* * * * * *
It is clear, then, that the United States exercises sole and exclusive jurisdiction over the reservation except in so far as it may see fit to grant the State the right to exercise its jurisdiction.
B. The Language of the 1892 Agreement and the Legislative History of the 1894 Ratifying Act
The entire 1892 Agreement and its preamble were incorporated into the 1894 ratifying statute. (Pl. Ex. 2, hereafter "Act".) Congress stated in the Act that it "accepted, ratified, and confirmed" the 1892 Agreement and:
[t]hat the lands by said agreement ceded to the United States shall, upon proclamation by the President, be opened to settlement, and shall be subject to disposal only under the homestead and town-site laws of the United States, excepting the sixteenth and thirty-sixth sections in each Congressional township, which shall be reserved for common school purposes and be subject to the laws of the State of South Dakota[.]
Act at 6 (emphasis added). Congress' statement that the ceded lands shall be "opened to settlement" is ambiguous in that it does not make clear whether the Yankton Sioux Reservation is disestablished or whether the Reservation is diminished only to the extent of the ceded lands. Where there is an ambiguity in a statute, a preamble can be utilized to help discern the intent of Congress. See Jurgensen v. Fairfax County, 745 F.2d 868, 885 (4th Cir.1984). The preamble to the 1892 Agreement cited the 1892 appropriations act authorizing the Secretary of the Interior "to negotiate with any Indians for the surrender of portions of their respective reservations, any agreement thus negotiated being subject to subsequent ratification by Congress[.]" Act at 1 (emphasis added). The preamble also recited that the Yankton Sioux Tribe "is willing to dispose of a portion of the land set apart and reserved to said tribe, by the first article of the treaty of April (19th) nineteenth, eighteen hundred and fifty eight (1858), between said tribe and the United States, and situated in the State of South Dakota[.]" Act at 1 (emphasis added). The emphasized portions of the preamble clearly indicate congressional intent to accept the will of the Yankton Sioux Tribe to cede only a portion of the reservation established by the 1858 Treaty. Similarly, in Solem, 465 U.S. at 472-74, 104 S. Ct. at 1167-68, the Supreme Court concluded that the phrase "sell and dispose" indicated congressional intent to maintain existing reservation boundaries of the Cheyenne Reservation in South Dakota. Thus, the language of the 1894 Act of Congress contradicts any suggestion that the Yankton Sioux Reservation is disestablished.
Congress added the provision about reserving the sixteenth and thirty-sixth sections for common school purposes. The Supreme Court interpreted similar language in the Rosebud Acts as intended by Congress to conform them to the enabling legislation *1150 which admitted the State of South Dakota into the Union, and reasoned that Congress thereby intended to diminish the Rosebud Reservation. 25 Stat. 679 (1889); Rosebud Sioux Tribe, 430 U.S. at 599-601, 97 S. Ct. at 1369-70. In Yankton Sioux Tribe, the Supreme Court recognized the State's position, relying on Rosebud, that the school sections clause indicated a view that Congress meant to extinguish the reservation status of the ceded lands, ___ U.S. at ___, 118 S.Ct. at 801, but, referring to Article VIII, not Article VII, the Supreme Court concluded that "... a somewhat contradictory provision counsels against finding the reservation terminated." The Supreme Court cited its earlier conclusion in DeCoteau that the school sections clause implied nothing about the presence or absence of state civil and criminal jurisdiction over the remainder of the ceded lands, and the Supreme Court did not consider at all the effect of the school sections clause on the allotted, unceded lands. In DeCoteau, where the Lake Traverse Reservation was held to be disestablished, the Supreme Court dismissed the school sections clause in a footnote as irrelevant to the dispute before the Court. DeCoteau, 420 U.S. at 444 n. 33, 95 S. Ct. at 1093 n. 33. The Supreme Court observed that the clause was not part of the agreement sent to Congress for ratification, there was no indication Congress added the clause with the intent to qualify the terms of the cession agreement, and it was Congress' usual practice to include the clause in "opening public lands to settlement[.]" Id.
This Court concludes that the school sections clause is equally irrelevant here, as it was in DeCoteau, but even if the clause is deemed relevant, a probable interpretation of it is that Congress wanted to be sure common schools would be available for all residents, Indian and non-Indian, in the opened, assimilated Yankton Sioux Reservation. If Congress had intended to disestablish the Yankton Sioux Reservation, the common school sections would have been subject to state law in any event and such language would have been wholly unnecessary.
Nothing in the explicit language of the 1892 Agreement supports disestablishment of the Reservation. The first two Articles, which were the focus of the previous Yankton Sioux cases, ceded to the United States the surplus lands for a sum certain and diminished the size of the Reservation. Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 798, 139 L. Ed. 2d 773. Articles III, IV, and VI pertained to the method of payment to the Tribe of the principal and interest received upon the sale of the surplus lands, and those Articles do not shed any light on the disestablishment issue.
Many of the remaining Articles of the 1892 Agreement also do not further the disestablishment analysis. They provided for gifts of $20 gold pieces to males of the Tribe, Article VII; permitted leasing of uncultivated allotted land, Article IX; permitted religious societies to continue working among the Indians, Article X; prohibited payment of the land purchase price to the Indians to settle claims prior to the Agreement, Article XII; fixed the status of mixed bloods, Article XIII; prohibited Congress from alienating the allotments from the Indians before sale of the surplus lands to settlers, Article XIV; settled the claims of the Yankton scouts and the Tribe's claim to the Pipestone Reservation, Articles XV and XVI; provided for placement of a copy of the Agreement in the Yanktons' "Agreement Book," Article XIX; and bound both parties upon ratification by Congress, Article XX. Consequently, these Articles will not be discussed in any detail.
1. Article V
Article V provided for the set aside and use of the interest on the land purchase price to continue funding services for the Yanktons' most helpless members, for schools and educational purposes, and "for courts of justice and other local institutions for the benefit of said tribe[.]" The evidentiary record before the Court establishes that, years before the 1892 Agreement, Congress authorized the creation of an Indian police force and a Court of Indian Offenses on the Yankton Sioux Reservation, and that such a police force and a Court of Indian Offenses operated to govern tribal affairs at the time of the ratification. H. Hoover, Yankton Tribal Police and Court of Indian Offenses, 1859-1943 (1998). (Gov't.Ex. 16.) Article V's provision for continued funding of these and "other local institutions" signals congressional intent *1151 consistent with the continuing reservation status of the allotted lands and an intent to preserve tribal self-government within the 1858 boundaries on the allotted lands.
Section 2 of Article V solidified the understanding of the Yanktons and the Congress, consistent with the Dawes Act, that the Yanktons' land patents would be held in trust for twenty-five years, and at the end of that trust period, the Yanktons would receive from the United States a complete title to their allotted lands, and would then assume all the duties and responsibilities of citizenship. Such language indicates a congressional intent that there would be an ongoing relationship between the Yanktons and the federal government during the twenty-five year assimilation period. Because the Yanktons were not to receive patents in fee immediately, the Yanktons continued to live on land that was essentially retained in reservation status but apportioned to them individually. Such an interpretation is supported by evidence in the record showing that three U.S. Presidents Woodrow Wilson, Calvin Coolidge, and Herbert Hoover extended by Executive Order the trust period on certain of the allotted lands, and in each Executive Order, the President explicitly referred to "the trust period on the allotments of Indians on the Yankton Sioux Reservation [.]" (Gov't. Exs. 10-12.)
Acts of Congress subsequent to the 1894 Act, such as the Burke Act of 1906, facilitated the alienation of a substantial number of Indian allotments to non-Indians by 1913, through such means as allowing the Secretary of the Interior to grant patents in fee to certain "competent" Indians prior to the expiration of the trust period and through sales of heirship lands. (Pl. Exs. 21-22; Pl. Ex. 2, 1892 Agreement, Article XI.) These sales of allotments were not always the result of arms-length negotiation. The allegations of a 1921 complaint brought by the United States on its own behalf and as guardian of certain Yankton Indians and their heirs indicates that the federal government viewed the Yankton Reservation as still in existence and gives insight into the federal government's concerns about the means by which sales of allotments were obtained. United States v. Caster, 271 F. 615 (8th Cir.), appeal dismissed, 257 U.S. 666, 42 S. Ct. 93, 66 L. Ed. 425 (1921).
The United States brought the action for the purpose of obtaining a decree adjudging the United States to be the owner of the allotted lands at issue, subject to the rights of the allottees, and for the cancellation of all conveyances of the lands made by the Indian allottees to the non-Indian defendants. Id. 271 F. at 616. The lands in question had been allotted under section 5 of the Dawes Act of 1887, to be held in trust for twenty-five years. Id. On April 20, 1916, the President of the United States by Executive Order extended the trust period for ten more years as to the allotted lands at issue. Id.
The complaint alleged that, to assist the Secretary of the Interior in exercising his authority under the Burke Act of 1906, the Secretary appointed a three person commission, which included "A. W. Leech, Superintendent of the Yankton Reservation," and directed the commission to investigate the competency and capability of the "Indian allottees residing on the Yankton Reservation to manage and control their property." Id. After investigation, the commission submitted reports to the Secretary representing that a number of Indians, including the allottees at issue, were competent to manage and control their own affairs and recommending that the Secretary issue to them patents in fee for their allotments. Id. In reliance on the reports, the Secretary prepared the patents in fee, the President signed them, as did the Recorder of the United States General Land Office, and they were recorded in the appropriate books in the General Land Office. Id.
The complaint further alleged that the Secretary of the Interior decided to deliver the patents in fee in person. Upon his arrival in Greenwood, South Dakota, on May 12, 1916, the Secretary
learned that he had been grossly misled as to the competency of such allottees; that they were palpably incompetent to manage and control their respective properties and were not qualified to receive patents in fee; that, while such allottees had been represented to him as competent, some of them were wholly untutored, and each and all of them were without business experience, *1152 were incapable of protecting his or her property, or of appreciating its true value, and were easily imposed upon by the craft and design of their more astute white neighbors; and that certain of them ... before the execution of their respective fee patents in some cases and after such execution in others, but before the time for the delivery of the patents, had been unlawfully, secretly, and surreptitiously imposed upon by white men, and had entered into secret and unlawful agreements for the sale and disposition of their several allotments and had otherwise been duped and defrauded in relation thereto.
Id. 271 F. at 617. The Secretary of the Interior refused to deliver the patents in fee, took them back to Washington, and ordered them to be marked, "`Canceled.'" Id. The complaint alleged that the commissioners had likewise been misled in their investigation. Id.
Relying upon United States v. Schurz, 102 U.S. 378, 12 U.S. 378, 26 L. Ed. 167 (1880), the Eighth Circuit held that the title of the United States to the lands in controversy was divested at the time of the execution and recording of the patents in fee, that delivery of the patents by the Secretary to the allottees was not necessary to transfer title, and that the title remained in the allottees, notwithstanding the Secretary's attempt to cancel the patents in fee. Id. 271 F. at 619. The court ultimately held that the complaint failed to allege a cause of action because there was no claim of a mistake of law, but only a mistake of fact, and the allegations of fraud were too general because the complaint did not identify who made the misrepresentations to the commissioners and what the misrepresentations were. Id. 271 F. at 620. The record in this case reflects that similar practices occurred through the 1920's such that Indian land holdings drastically declined until Congress passed the Indian Reorganization Act in 1934. 48 Stat. 984, codified as amended at 25 U.S.C. § 461 et seq.
As mentioned earlier in this opinion, however, the actions of Congresses after the 1894 Act, which allowed the sales of Indian allotments before the trust period ended, "form a hazardous basis for inferring the intent of an earlier [Congress]." Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 803, 139 L. Ed. 2d 773. Congressional intent not to disestablish the Yankton Sioux Reservation is clear from the 1894 Act, the 1892 Agreement and the surrounding contemporaneous historical circumstances. The acts of Congress in later years cannot be bootstrapped to the 1894 Act to determine the intent of the 53rd Congress when it ratified the 1892 Agreement.
Even if miscellaneous, subsequent legislation is relevant to show the ultimate consequences of the allotment policy initiated by the Dawes Act, no party or amicus curiae to this consolidated litigation has identified a specific, subsequent act of Congress that expressly and unequivocally disestablished the Yankton Sioux Reservation. By 1934, Congress recognized the utter failure of its allotment policy and the role it played in forcing the Indian tribes into greater poverty and social destruction. That year, Congress passed the Indian Reorganization Act, which again placed primary focus upon reservations in Indian land policy, permitted the exchange of lands held by Indians and non-Indians within reservations in an effort to consolidate tribal lands, and extended indefinitely the trust period on allotted lands.
Since the 1894 Act, Congress has continued to refer to the Yankton Sioux Reservation as a continuing entity, even though the record is replete with contradictory references by federal, state, and county officials and citizens. See 41 Stat. 1468 (1920) (authorizing Secretary of Interior to convey to trustees of Yankton Agency Presbyterian Church, by patent in fee, premises situated within the Yankton Indian Reservation, county of Charles Mix, State of South Dakota); 47 Stat. 300 (1932) (dividing the United States District Court for the District of South Dakota into four divisions, and providing that "[t]he territory embraced ... in the counties of Aurora, Beadle, ... Charles Mix, ... Yankton, and in the Yankton Indian Reservation, shall constitute the southern division of said district."); Reclamation Projects Authorization and Adjustment Act of 1992, Pub.L. No. 102-575 2005(b) (1992) (approving water project to "irrigate not more than approximately three thousand acres of Indian-owned land in the Yankton-Sioux *1153 Indian Reservation ..."). These statutory references, if relevant to the disestablishment question at all, certainly must be construed in favor of the Yankton Sioux Tribe. As the Supreme Court recognized, "the allotment era has long since ended, and its guiding philosophy has been repudiated. Tribal communities struggled but endured, preserved their cultural roots, and remained, for the most part, near their historic lands." Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 805. Repeated congressional recognition in statute of an existing Yankton Sioux Reservation compels this Court to do nothing other than effectuate the "present-day understanding of a `government-to-government relationship between the United States and [the Yankton Sioux Tribe] [.]'" Id.
2. Article VIII
The Supreme Court characterized Article VIII of the 1892 Agreement, erroneously denominated Article VII in its opinion, as a provision that "counsels against finding the reservation terminated." Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 801, 139 L. Ed. 2d 773. Article VIII reserved from sale those surplus lands "as may now be occupied by the United States for agency, schools, and other purposes" until "they are no longer required for such purposes." Act at 3. The Supreme Court observed that in Solem it had said "with respect to virtually identical language" that "`[i]t is difficult to imagine why Congress would have reserved lands for such purposes if it did not anticipate that the opened area would remain part of the reservation.'" Id. (quoting Solem, 465 U.S. at 474, 104 S. Ct. at 1168).[6] The Supreme Court provided no further analysis of this Article VIII issue, but immediately proceeded to discuss a different Article of the Agreement. Article VIII must nonetheless have continued to trouble the court, for in closing the opinion, it identified "[t]he conflicting understandings about the status of the reservation, together with the fact that the Tribe continues to own land in common," that cautioned it to limit its holding to the narrow issue of diminishment. Id. at 805. The court said it "need not determine whether Congress disestablished the reservation altogether in order to resolve this case, and accordingly [we] decline to do so. Our holding in Hagen was similarly limited, as was the State Supreme Court's description of the Yankton reservation in ... State v. Greger, 559 N.W.2d [854,] 867 [ (S.D.1997) ]."[7]Id.
The Supreme Court's reference to "common ownership" by the Tribe must have referred to the Tribe's recent purchases of lands within the 1858 exterior boundaries that had at some earlier time passed from Indian allotment to non-Indian ownership. The Supreme Court would clearly have understood that it is not correct to refer to an Indian Tribe as "owning" reservation land in common because the right of Indians to their reservations was a right of use and occupancy, with the United States holding title in fee. Spalding v. Chandler, 160 U.S. 394, 16 S. Ct. 360, 40 L. Ed. 469 (1896). The right to use and occupancy was as sacred as the fee title of the sovereign. United States v. Cook, 86 U.S. 591, 19 Wall. 591, 22 L. Ed. 210 (1873).
*1154 Other than the allotments reserved to the Yanktons and held in trust for twenty-five years pending patent in fee, the Yanktons did not themselves reserve in the 1892 Agreement any lands to be held in common by the Tribe, but agreed that the United States would reserve from sale to settlers some of the ceded lands to be used for agency, school and other purposes to benefit the Tribe. The reservation of lands by the United States for the benefit of the Tribe was virtually equivalent, under the law, to reservation for the use and occupancy of the Tribe.
Following ratification of the 1892 Agreement, the United States reserved 1,252.89 acres for agency, church, and school purposes pursuant to Article VIII of the Agreement.[8] (Pl. Ex. 11.) As noted by the Supreme Court, there is some acreage within the original 1858 boundaries that has reverted to commonly held tribal or trust land. Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 804, 139 L. Ed. 2d 773. In the late 1920's, the United States returned to the control of the Yankton Sioux Tribe some of the lands reserved in the 1892 Agreement for school purposes because they were no longer needed. (Gov't. Ex. 13.) That land, as well as other parcels the Tribe has purchased in recent years are controlled by the Tribe in common. The record reflects that the Tribe recently has applied to the Secretary of the Interior to take into trust certain lands purchased by the Tribe within the original 1858 exterior boundaries, and that the proceeds of the Fort Randall Casino owned and operated by the Tribe will facilitate the purchase of additional lands by the Tribe in the future. This evidence of tribal control of lands within the 1858 boundaries confirms what the Supreme Court suspected: Article VIII counsels against finding the reservation terminated.
3. Articles XVII and XVIII
Finally, two other Articles of the 1892 Agreement, Article XVII, the liquor provision, and Article XVIII, the savings clause, merit discussion as supporting the conclusion that a diminished reservation remained intact. Article XVII provided (emphasis added):
No intoxicating liquors nor other intoxicants shall ever be sold or given away upon any of the lands by this agreement ceded and sold to the United States, nor upon any other lands within or comprising the reservations of the Yankton Sioux or Dakota Indians as described in the treaty between the said Indians and the United States, dated April 19th, 1858, and as afterwards surveyed and set off to the said Indians. The penalty for the violation of this provision shall be such as Congress may prescribe in the act ratifying this agreement.
In the 1894 Act, Congress set the penalty for violation of Article XVII, which it ratified as written, at imprisonment for not more than two years and a fine of not more than $300. Act at 7. The Supreme Court agreed with the State that the most reasonable inference from the inclusion of this provision was that Congress was aware the opened, unallotted areas would, in the future, not be "Indian Country," and from this, the Supreme Court discerned an intent to diminish the reservation to the extent of the ceded lands. Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 801, 139 L. Ed. 2d 773. Furthermore, the court said, the Commissioner of Indian Affairs described the provision as prohibiting "`the sale or disposition of intoxicants upon any of the lands now within the Yankton Reservation,' ... indicating that the lands would be severed from the reservation upon ratification of the agreement." Id. (emphasis added). The court reaffirmed its prior implication of diminishment, but not disestablishment, of the Yankton Sioux Reservation in Perrin v. United States, 232 U.S. 478, 34 S. Ct. 387, 58 L. Ed. 691 (1914), when it said in Yankton Sioux Tribe that Article XVII applied to ceded lands formerly included in the Yankton Sioux Reservation. Id. Thus, the Supreme Court itself noted a jurisdictional distinction between the ceded lands, which were severed from the reservation, and the allotted lands, which remained in reservation status.
*1155 The inclusion of Article XVII in the 1892 Agreement supports the view that the reservation was not disestablished. Congress outlawed the sale of intoxicating liquor in Indian Country on July 23, 1892. 27 Stat. 260. The Yankton Commissioners conducted the negotiations with the Yankton Sioux for the sale of surplus lands shortly thereafter in the fall of 1892, and there is no indication in the Commissioners' reports that either party was aware of the liquor statute when the Agreement was reached. The liquor provision was included in the list of propositions presented by the Tribe, and Article XVII as drafted and ratified prohibited liquor forever upon the ceded lands and upon "any other lands within or comprising the reservations of the Yankton Sioux." Had Congress intended to disestablish the reservation, Congress would have wanted to make clear that the 1892 liquor law did not apply to the Indian allotments or the ceded lands, as neither would remain "Indian Country" if the reservation were disestablished. Congress instead ratified Article XVII, and by approving the Article, evidenced its intent to preserve the reservation status of the allotted lands.
In 1916, the Eighth Circuit considered an appeal from a federal criminal conviction for the sale of intoxicating liquor on the lands ceded by the 1894 Act. Cihak v. United States, 232 F. 551 (8th Cir.1916). The appeals court cited Article XVII of the 1892 Agreement as the basis for the federal prosecution, noting that the defendant "was indicted, tried, convicted, and sentenced for selling intoxicating liquors upon the portion of this reservation ceded to the United States." Id. 232 F. at 552 (emphasis added). The court reversed for a new trial only because of evidentiary error. Id. 232 F. at 554-55. Thus, even in 1916, the Eighth Circuit recognized that the Yankton Sioux Reservation existed and that only a portion of it had been ceded. After 1894, there was not an act of Congress that changed the reservation status of the allotted lands, and state or private conduct directed to the lands in question is not sufficient to cause such a change. See Seymour, 368 U.S. at 354, 82 S. Ct. at 426.
Article XVIII, the savings clause, was the fulcrum of the previous Yankton Sioux Tribe litigation. Despite the fact that the first sentence of Article XVIII expressly stated the non-abrogation of the 1858 Treaty and the second sentence recognized the continuing "full force and effect" of the 1858 Treaty, the Supreme Court rejected the view of this Court and the Eighth Circuit that the savings clause existed for any other reason than to assure the Yanktons that they would continue to receive their annuities under the 1858 Treaty. Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 800, 139 L. Ed. 2d 773. The Supreme Court also ruled, in rejecting an argument of the United States, that it was not persuaded to "view the savings clause as an agreement to maintain exclusive tribal governance within the original reservation boundaries." Id. ___ U.S. at ___, 118 S.Ct. at 800 (emphasis added). Having reached the conclusion that Articles I and II of the Agreement were precisely suited to terminating reservation status of the ceded lands, it makes sense that the Supreme Court would not interpret the savings clause as an agreement to maintain the Tribe's exclusive tribal governance over the ceded lands. The court did not comment at all upon whether it would interpret the savings clause as an agreement to maintain tribal governance over the allotted lands within the original reservation boundaries. This Court concludes that the savings clause, even if limited only to the matter of preserving the Tribe's annuities under the 1858 Treaty, creates an inference that Congress contemplated that the Tribe would continue as a political entity even after the ratification of the 1892 Agreement, that its members would continue to receive the annuity benefits promised them for fifty years under the 1858 Treaty, and that tribal self-governance during the trust period was consistent with the continuation of reservation status of the allotted lands.
4. The Legislative History
Much of the legislative history of the 1894 Act already has been discussed. S. Exec. Doc. No. 27, 53rd Cong., 2d Sess. at 26 (1894); (Pl. Ex. 5.) (hereafter "Legislative History"). The letters of Secretary of the Interior Hoke Smith and Acting Commissioner of Indian Affairs Frank C. Armstrong transmitting the Agreement to Congress contain no indications that the Agreement expressly disestablished the reservation or that *1156 they had any reason to believe that disestablishment would occur. To the contrary, Acting Commissioner Armstrong flatly told Congress that the "treaty makes no provision regarding the cession or relinquishment of the reservation or any portion thereof." Legislative History at 5. Thus, Congress knew, both from Armstrong's statement and from the extensive reports of the Yankton Commissioners, that the Yanktons had not expressly consented to the relinquishment of their entire reservation, and as already shown, Congress accepted and ratified that position in the 1894 Act.
Without doubt, parts of the legislative history suggest that Congress believed the allotment of land in severalty to individual Indians would curtail "[o]ne of the greatest hindrances to the progress of these people[, which] has been their tribal mode of life and ownership of land in common, and the issue of food and clothing [given] to them by the Government." By providing "each member of the tribe a home in his own right[,]" and bringing in the "frugal, moral, and industrious" white settlers to work beside the Indians, Congress hoped to "stimulate individual effort and make their progress much more rapid than before." (Pl. Ex. 7, State Ex. 608.) Such sentiments echo the resolution of Senator Dawes and the Forty-Ninth Congress of 1887 to assimilate the Yanktons into white culture, but these comments are passing references, and they do not overcome the strong textual and contemporaneous evidence set out in this opinion establishing that the Yanktons' allotted lands retained reservation status.
III. Treatment of the Yankton Sioux Reservation after 1894
In Yankton Sioux Tribe, the Supreme Court, recognizing that the 1894 Act was "not so compelling that, standing alone, it would indicate diminishment," turned to subsequent congressional and administrative references to the reservation and demographic trends to support its conclusion that de facto diminishment had occurred. Yankton Sioux Tribe, ___ U.S. at ___ ___, 118 S.Ct. at 802-05. Even then, the court observed that the conflicting evidence was of limited interpretative value. Id., ___ U.S. at ___, 118 S.Ct. at 804, 139 L. Ed. 2d 773. In the DeCoteau disestablishment decision, the Supreme Court devoted only two paragraphs to mention of the jurisdictional history subsequent to the 1891 surplus land act, and focused its analysis entirely upon deciding whether a congressional intent to terminate the reservation was expressed on the face of the 1891 Act or was clear from the surrounding circumstances and legislative history. DeCoteau, 420 U.S. at 442-43, 95 S. Ct. at 1092. The DeCoteau approach is the one the Court has taken in this opinion, because DeCoteau does not place any emphasis on "de facto disestablishment," if there is such a thing, in a manner similar to the Supreme Court's diminishment cases.
The complete evidentiary record now before the Court contains scores of historical documents, cases, deeds, affidavits, and testimony from which no clear picture emerges as to a consistent treatment of the Yankton Sioux Reservation following passage of the 1894 Act. From the time of the Proclamation of President Grover Cleveland in 1895 opening the ceded lands of the Yankton Sioux Reservation for white settlement until today, the question of jurisdiction has presented a complicated puzzle, and the hope of many that the Supreme Court's decision would solve the puzzle once and for all did not come to fruition.
The evidence before the Court shows that, at various times, and for different reasons, some political, some fiscal, and some racial, the Yankton Sioux Tribe, the United States, the State of South Dakota, Charles Mix County, and the amicus curiae municipalities have exercised jurisdiction within the original exterior boundaries of the reservation. Much of this evidence was reviewed in the Court's previous opinion in Yankton Sioux Tribe, 890 F.Supp. at 887-88, but more evidence was admitted in this phase of the litigation. Each political entity points to the evidence establishing its exercise of jurisdiction to support its view as to whether the reservation is disestablished or not.
Thus, the Tribe emphasizes evidence that it has in the past and today maintains a tribal police force and tribal courts, that the Tribe governs itself through a Tribal Code, and that the Yankton Sioux Constitution, as amended in 1990, claims tribal jurisdiction *1157 extending to the original exterior 1858 boundaries. (Gov't. Exs. 1-2.) The State points to its law enforcement presence, the criminal and civil cases prosecuted in its courts, its exercise of jurisdiction over environmental matters, and the maps and various references indicating a former Yankton Sioux Reservation. Charles Mix County and the cities remind the Court of their vested interest in the lands at issue and their exercise of criminal and civil jurisdiction, including taxation. They point out that the Charles Mix county seat, as well as law enforcement and court facilities, lie on former allotted lands. They emphasize the justifiable expectations of the people living in Charles Mix County. The United States, like the State, highlights its law enforcement presence on the reservation immediately after the ratification of the 1892 Agreement and its longstanding involvement in the affairs of the Tribe.
The fact that any one of these political entities has exercised or continues to exercise any form of jurisdiction within the original exterior boundaries of the Yankton Sioux Reservation is only minimally helpful to the Court in determining whether such exercise of jurisdiction was or is proper under the law. In this opinion, the Court has reached a legal conclusion, based upon the 1892 Agreement, the text of the 1894 Act, its legislative history, and the circumstances surrounding the negotiations for the sale of surplus lands, that the reservation is not disestablished.
IV. The DeCoteau Result Does Not Control This Case
It is important to explain why the Court believes that the DeCoteau result does not control the outcome in this case. The most obvious reason is that, had DeCoteau controlled this case, the Supreme Court would have applied it to grant the State the relief it sought: disestablishment of the Yankton Sioux Reservation. The Supreme Court did not do so and instead signaled some concern about whether the reservation continued to exist. Throughout its opinion, the Supreme Court agreed with the broad concepts expressed in DeCoteau, but ultimately applied them to terminate only the reservation status of the Yanktons' ceded lands. Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 801.
DeCoteau is factually distinguishable from the case before the Court. In reviewing the historical context that led to the sale of all of the surplus lands in the Lake Traverse Reservation, the Supreme Court emphasized that very early on, the spokesman for the Sisseton-Wahpeton Sioux Tribe stated in the local press that "[w]e never thought to keep this reservation for our lifetime.... The Indians have taken their land in severalty. They are waiting for patents. The Indians are anxious to get patents. We are willing the surplus land should be sold. We don't expect to keep reservation.... When the reservation is open we meet as one body. We be as one." DeCoteau, 420 U.S. at 433, 95 S. Ct. at 1087.
The negotiations between the Commissioners and the Sisseton-Wahpeton Tribe for the sale of the surplus lands took two weeks and the DeCoteau opinion does not mention any disagreement that occurred among the members of the Tribe in deciding to sell their lands or any opposition registered to the agreement at all. The Indians wished to sell outright all of their surplus lands on three conditions: that each tribal member, regardless of age or sex, receive an allotment of 160 acres, that Congress settle their loyal scout claim, and that an adequate sales price per acre be paid for all of the unallotted land. Id., 420 U.S. at 434, 95 S. Ct. at 1088. The agreement departed from the strict provisions of the Dawes Act because it gave the Indians a large number of allotments, each member of the Tribe receiving 160 acres regardless of age or sex, as requested by the Tribe. This approach provided the Sissetons with far more allotted land per capita than the Yanktons, for whom only heads of families received 160 acres pursuant to the Dawes Act. Id. 420 U.S. at 434 n. 16, 95 S. Ct. at 1088 n. 16.
The Sissetons declined to reserve other portions of the reservation for future allotments and tracts then occupied by the government for agency, school, and missionary purposes because they knew some of the principal and interest from the sale of surplus lands would be used for such purposes, and they did not think it would be proper for them to also reserve a large quantity of land *1158 for such purposes. Id. The Sissetons stated during negotiations that they did not care to have an agency after the surplus lands were sold, and "[t]his little reservation is ours, and all we have left. There is nothing in our treaty that says that we must sell. It was given us as a permanent home, but now we have decided to sell[.]" Id. Thus, the Sissetons expressed their understanding that they would not retain a reservation after the sale of the surplus lands.
The Sisseton and Yankton Agreements are dissimilar in significant ways. In the Sissetons' agreement, there were no counterparts to Articles V, VIII, XI, XVII, and XVIII found in the Yanktons' Agreement.
The legislative history of the Sissetons' agreement shows that Congress had a much different understanding about the future of the Lake Traverse Reservation upon ratification of that agreement than it had regarding the Yankton Sioux Reservation. The report of the Senate Committee on Indian Affairs recognized that each Sisseton would receive 160 acres, a departure from the allotment act, but nonetheless recommended ratification in light of the fact "that the additional allotments are in lieu of any residue which, under their title, these Indians could have reserved for the future benefit of their families, and the further fact that they are soon to assume the responsibilities of citizenship[.]" Id., 420 U.S. at 438-39 n. 19, 95 S. Ct. at 1089-90 n. 19 (emphasis added). The report further explained that the reservation contained 918,780 acres, 127,887 of which had been allotted to the Indians under the Dawes Act. The additional allotments allowed by Article 4 of the agreement required 112,113 more acres, for a total of 240,002 in allotments "which [left] a surplus, including the lands occupied by the agency and missionary societies, of 678, 778 acres, the Indian title to which [was] extinguished by the terms of the agreement." Id. (emphasis added).
Such an explicit statement of congressional intent to extinguish Indian title to reservation lands cannot be found in the legislative history of the Yanktons' agreement. Moreover, the Sissetons relinquished far more acreage for settlement by non-Indians than they retained for themselves, as compared to the Yanktons who, overall, retained greater acreage for their allotments than they ceded for sale as surplus lands. Congress must have known, when it ratified the Sissetons' agreement in 1891, that the opened area would be settled by more non-Indians than Indians and that truly, the Indian character of the area would be forever changed. Three years later, when Congress ratified the Yanktons' Agreement reserving a larger portion of the reservation for the Indians' allotments, and reserving land for agency, school, and religious purposes, Congress must have known that the introduction of white settlers would change the Indian character of the Yankton Sioux Reservation to a degree, but not so dramatically as the Lake Traverse Reservation.
As the Eighth Circuit observed in its prior opinion, DeCoteau established that only 3,000 of 33,000 people, or nine percent, living within the original exterior boundaries of the Lake Traverse Reservation at the time DeCoteau was decided were Indians, while using the lower of two conflicting population figures in this record, thirty-two percent of the population within the original exterior boundaries of the Yankton Sioux Reservation is Indian. Yankton Sioux Tribe, 99 F.3d at 1457 & n. 26. The recent evidence introduced into the record shows that the population of Indians living on and adjacent to the Yankton Sioux Reservation has increased during the 1990's. (Gov't. Exs. 5a-c.) Moreover, the Bureau of Indian Affairs Superintendent at the Yankton Agency, Timothy Lake, testified that, in addition to the Indian students who attend the Marty Indian School, 176 Indian students attend the Lake Andes public elementary school as compared with 72 white students, and 225 Indian students attend the Wagner public elementary school as compared to 227 white students.
In DeCoteau, the Supreme Court emphasized that the Sisseton-Wahpeton Sioux Tribe did not establish a tribal court or legal code to exercise the jurisdiction which the Tribe claimed in a 1966 tribal constitution to extend to lands lying within the original reservation boundaries. The evidence in this case shows a tribal court operated before and after the 1894 Act and that the Yankton Sioux Tribe has adopted a legal code to *1159 exercise the jurisdiction it claims to govern its own people within the original 1858 exterior boundaries.
Under the facts presented in DeCoteau, it is understandable that the Supreme Court held the reservation was disestablished by the 1891 Act because that was the precise understanding held by the Sisseton-Wahpeton Tribe itself. In light of the far different facts presented by the Yankton Agreement, it is clear why the Supreme Court did not apply DeCoteau to hold the Yankton Sioux Reservation disestablished. In this opinion, this Court has exhaustively enumerated many reasons, based upon the strong textual and contemporaneous evidence, why the Yankton Sioux Reservation was not disestablished, and certainly, this Court will not apply the DeCoteau result to hold that the Yankton Sioux Reservation is disestablished.
V. Conclusion
The result of the Supreme Court's diminishment decision and this Court's determination in this opinion that the Yankton Sioux Reservation is not disestablished is a checkerboard pattern of jurisdiction on the reservation. The Court's decision, however, produces a stable, unchanging allocation of jurisdiction. See Ute Indian Tribe, 114 F.3d at 1530. The Yankton Sioux Tribe and the federal government exercise primary criminal and civil jurisdiction in "Indian Country," that is, the lands within the original exterior 1858 Treaty boundaries that are or were Indian allotments or lands reserved for agency purposes, even though some of those lands may now have passed into fee status. See Alaska v. Native Village of Venetie Tribal Gov't, ___ U.S. ___, ___ 118 S. Ct. 948, 952 & n. 1, 140 L. Ed. 2d 30 (1998); DeCoteau, 420 U.S. at 427 n. 2, 95 S. Ct. at 1084 n. 2. "Indian Country" also includes rights-of-way running through the allotted and reserved areas which constitute the diminished reservation. 18 U.S.C. § 1151(a); DeCoteau, 420 U.S. at 427 n. 2, 95 S. Ct. at 1084 n. 2. Even in "Indian Country," the State may have jurisdiction over some persons or types of conduct, but such jurisdiction is quite limited. See DeCoteau, 420 U.S. at 427 n. 2, 95 S. Ct. at 1084 n. 2 (and cases cited therein). As stated in Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 797-98, state and local governments exercise primary criminal and civil jurisdiction over the ceded lands opened to settlement on the Yankton Sioux Reservation as a result of the 1894 Act of Congress. Although some title searches may be necessary to determine conclusively which lands were ceded under the 1894 Act, once the status of the lands is determined, the allocation of jurisdiction can be determined and jurisdiction likely will not change in the future as lands are bought and sold. See Ute Indian Tribe, 114 F.3d at 1530. Lands purchased by the Tribe and taken into trust by the federal government pursuant to 25 U.S.C. § 465, however, even if such lands lie within the ceded areas of the reservation, are subject to tribal and federal jurisdiction. See Cass County, ___ U.S. at ___, 118 S.Ct. at 1910, 141 L. Ed. 2d 90.
With the interests of all parties carefully in mind, the Court reaches the decision warranted by law. It is incumbent upon the Yankton Sioux Tribe, the United States, the State of South Dakota, Charles Mix County, and the affected municipalities, as well as each individual who resides within the affected area, to foster a spirit of communication, cooperation, and compromise in order to accommodate, as far as possible, each of the legitimate governmental, economic, social, political, and legal interests that are at stake. For all of the reasons stated,
IT IS ORDERED:
(1) that, in Yankton Sioux Tribe v. Gaffey, CIV 98-4042, the Court enters a declaratory judgment in favor of the plaintiffs Yankton Sioux Tribe and its individual members and in favor of the plaintiff-intervenor United States of America and against the defendants Matt Gaffey, Herman Peters, Bruce Bakken, Jack Soulek, William Janklow, and Mark Barnett holding that the 53rd Congress did not disestablish the Yankton Sioux Reservation in 1894 when it ratified the 1892 Agreement with the Yankton Sioux Tribe for the sale of surplus lands.
(2) that, in Yankton Sioux Tribe v. Southern Missouri Waste Management Dist., CIV 94-4217, the Court enters a declaratory judgment in favor of the plaintiffs Yankton Sioux Tribe and Darrell Drapeau individually, and against the third-party *1160 defendant, State of South Dakota, holding that the 53rd Congress did not disestablish the Yankton Sioux Reservation in 1894 when it ratified the 1892 Agreement with the Yankton Sioux Tribe for the sale of surplus lands.
(3) that, in Yankton Sioux Tribe v. Gaffey, the Court dismisses with prejudice the counterclaims of the state defendants, William Janklow and Mark Barnett, and the county defendants, Matt Gaffey, Herman Peters, Bruce Bakken, and Jack Soulek against the plaintiffs Yankton Sioux Tribe and its individual members and the plaintiff-intervenor United States.
(4) that the Yankton Sioux Reservation, diminished by the 1894 Act only to the extent of the ceded lands, includes all of the lands within the original exterior reservation boundaries established by the 1858 Treaty with the Yankton Sioux Tribe that were later allotted to the Yanktons, as well as the lands reserved from sale for agency, school, and other tribal purposes in the 1892 Agreement.
(5) that the Yankton Sioux Reservation, as described in the preceding paragraph, is "Indian Country" within the meaning of 18 U.S.C. § 1151(a).
(6) that the Court enters a permanent injunction in favor of the Yankton Sioux Tribe, its individual members, and the United States enjoining William Janklow and Mark Barnett, in their official capacities as Governor and Attorney General of the State of South Dakota, and their officers, agents, servants, employees, attorneys, and all other persons in active concert or participation with them, from exercising criminal law enforcement jurisdiction over members of the Yankton Sioux Tribe who are alleged to have committed crimes on allotted or reserved lands, notwithstanding any patent, and including rights-of-way running through the Yankton Sioux Reservation as described in paragraph 4.
(7) that the Court enters a permanent injunction in favor of the Yankton Sioux Tribe, its individual members, and the United States enjoining Matt Gaffey, States Attorney of Charles Mix County, and Herman Peters, Bruce Bakken, and Jack Soulek, members of the Charles Mix County Commission, in their official capacities, and their officers, agents, servants, employees, attorneys, and all other persons in active concert or participation with them, from exercising criminal law enforcement jurisdiction over members of the Yankton Sioux Tribe who are alleged to have committed crimes on allotted or reserved lands, notwithstanding any patent, and including rights-of-way running through the Yankton Sioux Reservation as described in paragraph 4.
(8) that all parties will bear their own attorney's fees and costs.
NOTES
[1] In 1905, the Supreme Court interpreted section 6 of the Dawes Act "to mean that Indian allottees were subject to plenary state jurisdiction immediately upon issuance of the trust patent. See In re Heff, 197 U.S. 488, 25 S. Ct. 506, 49 L. Ed. 848 (1905)." Cass County v. Leech Lake Band of Chippewa Indians, ___ U.S. ___, 118 S. Ct. 1904, 1907, 141 L. Ed. 2d 90 (1998). Congress reversed the result of the Heff case in 1906 by passage of the Burke Act, 34 Stat. 182, 25 U.S.C. 349, et seq., providing that state jurisdiction did not attach until the end of the 25-year trust period, when the lands were conveyed in fee to the allottees. See United States v. Pelican, 232 U.S. 442, 450, 34 S. Ct. 396, 399, 58 L. Ed. 676 (1914). The Burke Act, however, also contained a proviso permitting the Secretary of the Interior, if "satisfied that any Indian allottee is competent and capable of managing his or her affairs," to authorize issuance of a fee simple patent before the end of the usual trust period, removing all restrictions as to sale, incumbrance, and taxation of the land. Cass County, ___ U.S. at ___, 118 S.Ct. at 1907. The effect of the Burke Act and other post-ratification statutes on the Yankton Sioux allotments will be addressed later in this opinion.
[2] The Court of Claims later determined that the Yankton Sioux ceded 201,110 unallotted acres in the 1892 Agreement and that those acres had a fair market value of $1,337.381.50, or about $6.65 per acre, on December 31, 1892. Yankton Sioux Tribe v. United States, 224 Ct. Cl. 62, 623 F.2d 159, 174 (1980).
[3] The Court agrees with the Eighth Circuit's earlier conclusion from these instructions that, "[h]ad the intent been the elimination of the reservation, it would have been necessary that all surplus lands be purchased." Yankton Sioux Tribe, 99 F.3d at 1452.
[4] While one might reason that subsequent acts of Congress should be examined to see if they shed any light on the meaning of the 1894 Act, the Supreme Court disapproves of such an approach, noting that "`the views of a subsequent Congress form a hazardous basis for inferring the intent of an earlier one.'" Yankton Sioux Tribe, ___ U.S. at ___, 118 S.Ct. at 803, 139 L. Ed. 2d 773 (quoted case omitted). It appears, moreover, that the Supreme Court similarly eschews giving weight to evidence explaining the actions of the President and the executive departments in implementing the intent of Congress or to evidence showing the understanding of nongovernment parties. In reaching its decision that the Yankton Sioux Reservation is diminished, the Supreme Court summarily dismissed "the scores of administrative documents and maps marshaled by the parties to support or contradict diminishment" because such evidence had "limited interpretative value." Id. ___ U.S. ___, 118 S.Ct. at 803-04. Rather, for the foundation of its decision, the Supreme Court relied upon the "strong textual and contemporaneous evidence" to find diminishment. Id. ___ U.S. at ___, 118 S.Ct. at 804. This Court likewise focuses upon the strong textual and contemporaneous evidence surrounding the 1894 Act and the making of the 1892 Agreement to determine that the Yankton Sioux Reservation was not disestablished.
[5] In deciding a dispute over the western boundary of the Yakima Indian Reservation in 1913, the Supreme Court said that its "effort must be to ascertain and execute the intention of the treaty makers, and as an element in the effort we have declared that concession must be made to the understanding of the Indians in redress of the differences in the power and intelligence of the contracting parties." Northern Pacific Ry. Co. v. United States, 227 U.S. 355, 362, 33 S. Ct. 368, 371, 57 L. Ed. 544 (1913).
[6] Article VIII also provided that, upon ratification, all ceded lands would be offered for sale through the proper land office, "to be disposed of under the existing land laws of the United States, to actual and bona fida settlers only." It is interesting to note that an Armour, South Dakota, bank official, Homer Johnson, wrote to the Secretary of the Interior in 1895, shortly before the Presidential Proclamation opening the lands to settlement, complaining that the State of South Dakota was attempting to file claim to certain of the surplus lands in violation of Article VIII's provision that all claims were to be disposed of under the land laws of the United States. Johnson reported that the South Dakota Constitution forbade the sale of state land for less than $10.00 per acre, and if the State were allowed to file claim, the lands would be unavailable to settlers indefinitely. (Pl. Ex. 56.)
[7] The question of the existence of the Yankton Sioux Reservation has been presented to the South Dakota Supreme Court four times, but it appears that the issue was not fully presented by evidence until Greger, when the parties stipulated to incorporate the record that was before this Court in Yankton Sioux Tribe v. Southern Missouri Waste Management Dist., Greger, 559 N.W.2d at 859 n. 5. As the Supreme Court noted, the South Dakota Supreme Court held in Greger that the Yankton Sioux Reservation is diminished to the extent of the ceded lands, as it did in State v. Thompson, 355 N.W.2d 349 (S.D.1984) (using term "disestablished"); State v. Williamson, 87 S.D. 512, 211 N.W.2d 182 (1973) (same); and Wood v. Jameson, 81 S.D. 12, 130 N.W.2d 95 (1964) (same).
[8] When the Commissioner of Indian Affairs wrote his instructions to the Yankton Commission on July 27, 1892, 852 acres had been reserved for government purposes. Instructions to the Yankton Indian Commission (reprinted in U.S. Supreme Court Joint Appendix at 99.)
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14 F. Supp. 2d 807 (1998)
ODETICS, INC., Plaintiff,
v.
STORAGE TECHNOLOGY CORP., et al., Defendants.
No. Civ.A. 95-881-A.
United States District Court, E.D. Virginia, Alexandria Division.
July 31, 1998.
*808 Richard A. Simpson, Ross, Dixon & Masback, Washington, DC, Vincent J. Belusko, Graham & James LLP, Los Angeles, CA, for plaintiff.
Craig C. Reilly, Richards McGettigan Reilly & West, PC, Alexandria, VA, (Nanda K. Alapati, E. Bradley Gould, Pennie & Edmonds LLP, Washington, DC, Jon R. Stark, Mark R. Scadini, Pennie & Edmonds LLP, Pala Alto, CA, George C. Summerfield, Rader Fishman & Grauer, PLLC, Bloomfield Hills, MI, Herbert F. Schwartz, Mark H. Bloomberg, Fish & Neave, New York City, of counsel), for Storage Technology, defendant.
Craig C. Reilly, Richards McGettigan Reilly & West, PC, Alexandria, VA, (Ron E. Shulman, Nina F. Locker, Roger J. Chin, Wilson Sonsini Goodrich & Rosati, PC, Pala Alto, CA, of counsel), for Visa International, defendant.
Thomas J. Scott, Jr., Scott L. Robertson, Hunton & Williams, Washington, DC, for Crestar Bank, defendant.
MEMORANDUM OPINION
ELLIS, District Judge.
This patent infringement action is yet again before the Court following a jury verdict finding wilful literal infringement and awarding $70.6 million in damages.[1] Following the verdict, defendants filed a motion for judgment as a matter of law on the issue of infringement; this motion was denied. Since then, the Federal Circuit issued its decision in Chiuminatta Concrete Concepts, Inc. v. Cardinal Industries, Inc., 145 F.3d 1303 *809 (Fed.Cir.1998), reh'g en banc denied (Fed. Cir. July 2, 1998), which counsels reconsideration of that ruling, and indeed mandates entry of judgment as a matter of law in favor of defendants.
I
Plaintiff Odetics, Inc. is the owner of United States Letters Patent No. 4,779,151, issued on October 18, 1988. The '151 patent teaches a system for transporting cassette tapes from a storage library to a tape player. By way of example, the preferred embodiment contains an octagonal housing (often referred to as a silo) inside of which are seven columns of tapes and one column of tape drives, or tape players. Within this housing is a robotic arm that retrieves the tapes from their storage bins and places them into the tape drives. Claims 9 and 14 of the '151 patent, the claims-in-suit, describe a "rotary means" that (i) allows a cassette to be loaded from outside the library, for example by a human operator, and (ii) then rotates to allow the cassette to be accessed by the robotic manipulator located inside the silo. Specifically, the rotary means, as depicted in Figure 3 of the '151 patent, consists of a set of bins to hold the cassettes, a rod around which these bins pivot,[2] and a gear that enables the bins to rotate. These rotary means components make up the bin array.
Storage Technology Corp. ("STK") manufactures and sells certain library systems that Odetics alleged infringed the '151 patent. STK's systems are used to store and play computer data tapes. The accused STK systems contain "pass-thru ports," devices that connect multiple libraries or silos to each other so that tapes can be passed from one silo to another. In STK systems that include a pass-thru port, the tapes are placed in the pass-thru port in one library, and the pass-thru port then translates and rotates to deliver the tape to a second, adjacent library. The pass-thru port consists of several bins, a stem on which the bins are mounted, cam followers (or "pins"), a cam, a ball slide, and a lead screw. Odetics's expert, Dr. McCarthy, testified that the bins, the stem, and the cam followers in the pass-thru port comprised the "bin array" in that device.
Odetics filed this patent infringement action against STK and two STK customers who use systems equipped with the pass-thru ports, Visa International and Crestar Bank.[3] The crux of Odetics's infringement allegation was that the rotary means element of claims 9 and 14, both of which are § 112, ¶ 6 means-plus-function claims,[4] read on STK's pass-thru ports. Specifically, Odetics alleged that the bin array of the pass-thru port (as defined by its expert) performed an identical function and was structurally equivalent to the bin array of the rotary means. As to structural equivalence, Odetics's expert, Dr. McCarthy, testified that the bin array in the accused device comprised of the bins, the stem, and the cam followers was structurally equivalent to the bin array disclosed in the '151 patent comprised of the bins, the rod, and the gear. Thus, the structural analysis reduced to a comparison between the gear of the rotary means and the cam followers in the pass-thru port.[5] The jury found *810 that these components were indeed structurally equivalent. Accordingly, it concluded that STK, Visa, and Crestar literally infringed the patent, determined that a 4% running royalty rate was reasonable, and awarded Odetics $70.6 million in damages for STK's manufacture and sale of the infringing products since June 29, 1995. The jury awarded no damages for Visa's and Crestar's use of the infringing devices. Finally, it found that STK, but not Visa and Crestar, wilfully infringed the patent.
Following the jury's verdict, defendants[6] filed a motion for judgment as a matter of law ("JMOL") and an alternative motion for a new trial on the issue of infringement. See Rules 50 and 59, Fed.R.Civ.P. These motions were originally denied. See Order, Odetics v. Storage Tech. Corp., No. 95-881 (E.D.Va. May 1, 1998). After denying the motions, the Court learned of the Federal Circuit's decision in Chiuminatta Concrete Concepts, Inc. v. Cardinal Industries, Inc., 145 F.3d 1303 (Fed.Cir.1998), reh'g en banc denied (Fed. Cir. July 2, 1998). Because it appeared that Chiuminatta shed additional light on, and potentially counseled a contrary result in the disposition of, the JMOL motion, the Court ordered the parties to file supplemental memoranda discussing the effect of Chiuminatta on the JMOL motion. See Order, Odetics v. Storage Tech. Corp., No. 95-881 (E.D.Va. June 8, 1998). Because the parties have submitted these memoranda, and further because the issue has been argued orally, the matter is now ripe for disposition.
II
At the threshold, Odetics asserts that the JMOL motion is procedurally barred for two reasons. First, it claims that although STK moved for JMOL at the close of Odetics's case, it did not renew that motion at the close of all the evidence. The general rule is that "if a motion for judgment as a matter of law was made at the end of one party's case but not renewed at the close of all evidence, the movant is precluded from renewing that motion after the verdict is rendered." 9 James Wm. Moore, Moore's Federal Practice § 50.05[1], at 50-21 (3rd ed.1997). There is an exception, however, to the usual rule: A party need not renew its JMOL motion at the close of all the evidence if the Court states that renewal is unnecessary. See Singer v. Dungan, 45 F.3d 823, 829 (4th Cir.1995). In this regard, the Court stated to STK's counsel in ruling on defendants' JMOL motion at the close of Odetics's case, "[Y]ou will have an opportunity to renew that motion in the event of an adverse verdict, and you'll have an opportunity to argue it orally and in writing as well at that time." March 25, 1998, Tr. at 139 (emphases added). Thus, it was unnecessary for STK to renew its JMOL motion at the close of all the evidence. Any doubt on this question is laid to rest by the Court's further statement, when the JMOL was renewed after the jury returned its verdict, that "I will deem that you've made your motion in a timely fashion." March 27, 1998, Tr. at 143.
*811 Odetics next asserts that STK's original JMOL motion addressed only functional equivalence, and therefore that arguments here about structural equivalence are not proper. Again, this argument is unpersuasive. STK did move for JMOL of noninfringement as to structural equivalence in its supplemental JMOL motion, which the Court deemed timely. Moreover, even were this not the case, STK's initial motion regarding infringement in general was sufficient to preserve the specific structural equivalence argument that it later raised in its supplemental motion, and that it argues again here. See Malta v. Schulmerich Carillons, Inc., 952 F.2d 1320, 1324-25 (Fed.Cir.1991). Finally, because there are no disputed facts, the structural equivalence can be decided by the Court as a matter of law. See Exxon Chem. Patents, Inc. v. Lubrizol Corp., 64 F.3d 1553, 1555 (Fed.Cir.1995).
III
A. The Chiuminatta Decision
Chiuminatta involved, inter alia, an apparatus patent for a rotary saw designed to cut concrete before the concrete hardens.[7] Claim 11 of the '499 patent generally describes a support surface that applies downward pressure at the point where the saw blade emerges from the concrete, thus preventing the blade from harming the concrete as it cuts. See 145 F.3d 1303, 1305. Specifically, the claim recites a "means connected to the saw for supporting the surface of the concrete adjacent to the leading edge of the cutting blade to inhibit chipping, spalling, or cracking of the concrete surface during cutting." Id. (quoting claim 11). Significantly, "the only structure disclosed [in the specification of the '499] for supporting the surface of the concrete is a skid plate." Id. Cardinal, the accused infringer, also sold a rotary saw that had a support structure to prevent chipping, spalling, and cracking. In the accused device, this support structure consisted not of a skid plate, but of "two small wheels mounted adjacent to the leading edge of the saw blade." Id. 145 F.3d at 1306. Chiuminatta alleged that the wheels in the accused device were structurally equivalent to the skid plate in the claimed invention, and therefore that Cardinal infringed claim 11. Upon the parties' cross-motions for summary judgment, the district court ruled that Cardinal infringed the '499 patent. See id. 145 F.3d at 1305-06. On appeal, the Federal Circuit reversed this ruling and directed entry of judgment in favor of Cardinal. The Federal Circuit based this holding on its conclusion that the wheels and the skid plate were not, as a matter of law, structurally equivalent. See id. 145 F.3d at 1310.
When the Federal Circuit decided Chiuminatta, it did not state, either explicitly or implicitly, that its decision announced a significant change in the proper mode of infringement analysis under § 112, ¶ 6. Yet the analytical framework established and the conclusion reached in that case certainly suggest that the scope of a means-plus-function claim is such that unless the accused structure reads very closely on the disclosed structure, the two will not be deemed equivalent under § 112, ¶ 6. And when that occurs, of course, there can be no literal infringement under § 112, ¶ 6. Chiuminatta further teaches that in such a case, doctrine of equivalents infringement is also absent, unless the technology used in the accused structure was developed after the patent issued.
1. Literal Infringement
Because Chiuminatta's claim 11 was a means-plus-function claim, the question whether Cardinal literally infringed the '499 patent was analyzed under the familiar test of Pennwalt Corp. v. Durand-Wayland, Inc., 833 F.2d 931, 934 (Fed.Cir.1987) (en banc): "To determine whether a claim limitation is met literally, where expressed as a means for performing a stated function, the court must compare the accused structure with the disclosed structure, and must find equivalent structure as well as identity of claimed function for that structure." See also Chiuminatta, 145 F.3d 1303, 1307 (quoting Pennwalt). Cardinal conceded that the wheels of *812 its saw performed the same function as the skid plate in the preferred embodiment. The question presented on summary judgment and on appeal, then, was whether the skid plate and the wheels were structurally equivalent.
The Federal Circuit concluded that they were not. Chiuminatta had contended that because the wheels in Cardinal's saw compressed to form flattened planes on each side of the saw blade, they were equivalent to the structure of the skid plate, which also provided a flat plane on either side of the blade. This comparison, noted the Federal Circuit, improperly focused solely on the function of the two structures using flattened planes to prevent damage to the concrete and not on the structures themselves. See Chiuminatta, 145 F.3d 1303, 1309. According to the Federal Circuit, Pennwalt's teaching requires a comparison of the disclosed structure (the skid plate) with the accused structure (the wheels).
In this regard, the '499 patent specification disclosed that the skid plate is "a generally rectangular strip of metal having rounded ends ... between which is a flat piece." Id. 145 F.3d at 1308 (quoting specification). Given this, the Federal Circuit held, as a matter of law, that the skid plate was substantially different from the wheels in Cardinal's accused rotary saw:
The undisputed structure that produces the concededly identical function of supporting the concrete consists of soft round wheels that are rotatably mounted onto the saw. The assertedly equivalent structures are wheels, and the differences between the wheels and the skid plate are not insubstantial. The former support the surface of the concrete by rolling over the concrete while the latter skids. The former are soft, compressible, and round; the latter is hard and predominantly flat.... Additionally, the wheels rotate as opposed to skid as the saw moves across the concrete and thus have a different impact on the concrete. Since the wheels and the skid plate are substantially different from each other, they cannot be equivalent, and no reasonable jury could so find.
Id. 145 F.3d at 1309. Based on this analysis, the Federal Circuit found there was no literal infringement, and therefore reversed the district court's summary judgment ruling.
2. Doctrine of Equivalents
Chiuminatta argued that even if there were no literal infringement, the Federal Circuit should nonetheless have affirmed the district court's ruling of summary judgment of infringement based on the doctrine of equivalents. In response, the Federal Circuit explained that a means-plus-function analysis and a doctrine of equivalents analysis pose the same question, namely whether the disclosed and accused structures are "substantially" the same. See id. 145 F.3d at 1310 (stating that the two "tests for equivalence are closely related" (citing Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 117 S. Ct. 1040, 1048, 137 L. Ed. 2d 146 (1997))). The Federal Circuit thus declined to affirm the infringement finding under the doctrine of equivalents, holding that Chiuminatta's assertion that under the doctrine of equivalents "the wheels of the accused device differ from the patented invention only insubstantially [could] not succeed given our determination regarding literal infringement under § 112, ¶ 6." Id. at 1310. Accordingly, no literal infringement in that context also meant no doctrine of equivalents infringement.
Beyond this, the Federal Circuit went on to note that there remains one factor that distinguishes doctrine of equivalents infringement from literal infringement: The doctrine of equivalents prevents an infringer from avoiding a patent by using technology that was developed after the patent issued technology, in other words, that could not have been disclosed in the patent to create a product that, while not of equivalent structure for § 112, ¶ 6 purposes, "constitute[s] so insubstantial a change from what is claimed in the patent" that it should nonetheless be deemed an infringing product. See Chiuminatta, 145 F.3d 1303, 1310. In this limited circumstance, the law permits a finding of no equivalence, and thus no literal infringement, under § 112, ¶ 6, but a simultaneous finding of equivalence, and thus infringement, under the doctrine of equivalents.
*813 Turning to the facts of the case before it, the Federal Circuit held that there could be no infringement under the doctrine of equivalents because the technology used in the accused device, a wheel, was invented before the '499 patent issued.[8]See id. 145 F.3d at 1311 (observing that the technology used in the accused device "could readily have been disclosed in the patent"). Therefore, the distinction between means-plus-function "equivalence" and doctrine of equivalents "equivalence" based on after-developed technology did not apply, and from this it followed that the finding of substantial differences that compelled summary judgment of no literal infringement also compelled summary judgment of no infringement under the doctrine of equivalents. See id. 145 F.3d at 1311.
B. Defendants' JMOL Motion
Application of Chiuminatta to the instant facts, and consideration of the record as a whole, requires reconsideration of the earlier denial of defendants' JMOL motion, and further mandates entry of judgment as a matter of law of noninfringement, both literal and under the doctrine of equivalents. This conclusion is based on the rather simple notion that, just as the skid plate and wheels were substantially different structures in Chiuminatta, so too are the rotary means and pass-thru port substantially different here.
1. Literal Infringement
As Chiuminatta and Pennwalt teach, it is not enough for infringement under § 112, ¶ 6 for the accused structure to perform the same function as the claimed invention.[9] Instead, a patentee must also show that the structure of the accused device that performs that function is the same as or equivalent to the structure disclosed in the patent's specifications. See Pennwalt, 833 F.2d at 934. Odetics did not (because it could not) claim that the accused structure was identical to the disclosed structure, for the embodiment shown in the specifications has a gear, whereas the pass-thru port does not. Instead, Odetics argued to the jury that the cam followers in the pass-thru port were equivalent to the disclosed gear. The jury accepted this argument and thus found that STK infringed the '151 patent.
Odetics's argument, however, suffers from the same flaw as did the patentee's argument in Chiuminatta. Dr. McCarthy testified, and Odetics argued to the jury, that the two structures were equivalent because they both caused the bin array to rotate from a position in which tapes could be loaded to a second position in which they could be grasped by the robotic manipulator. That is, Dr. McCarthy testified that because turning a gear and pushing on a cam follower yield the same result rotation the two structures were equivalent.[10] But as the Federal Circuit *814 has explained, just because two structures perform the same function does not make them structurally equivalent under Pennwalt and § 112, ¶ 6. See Chiuminatta, 145 F.3d 1303, 1308. To prove equivalent structure, Odetics had to prove that the bin array of the rotary means was equivalent to the bin array of the pass-thru port as identified by Dr. McCarthy; and this meant, essentially, that Odetics had to prove that the gear in the rotary means was equivalent to the cam followers in the pass-thru port.[11]
Odetics's proof in this regard ultimately fails, for the cam followers and the gear differ structurally in two substantial ways, just as the wheels differed from the skid plate in Chiuminatta. First, the two structures are physically different. In the disclosed structure, the gear is a disc or cylinder with teeth that fit with the teeth of another gear, thus enabling the disclosed gear to move in conjunction with the bin array, whereas the cam followers are smooth pins attached to the array by a stem, and turn independently from the array. Similarly, in Chiuminatta, the components were physically different. The skid plate was hard, fixed, and rectangular, whereas the wheels were soft, mobile, and round. Second, the structures, because they are physically different, perform the claimed function differently. Here the gear turns the bins about a single rod, whereas the cam followers, in conjunction with the lead screw and the ball slide, turn the bins by following the path of the cam. Similarly, in Chiuminatta, the components operated in different ways. The skid plate skidded, whereas the wheels rolled. Simply put, a gear is not a pin; they are not equivalent structures.
These comparisons demonstrate that, under the teaching of Chiuminatta, no reasonable jury could conclude that the bin structure of Figure 3 and the pass-thru port are structurally equivalent. Indeed, the Federal Circuit held in Chiuminatta that the two structures were not equivalent even though the wheels and the skid plate could be substituted for each other that is, one could be removed from its original device and placed in the other device without changing the functioning of the saw blade. In this case, Dr. McCarthy admitted that the gear and cam followers cannot be substituted for each other. A fortiori, there can be no structural equivalence here. For all of these reasons, there can be no literal infringement under § 112, ¶ 6, and judgment as a matter of law of no literal infringement must be entered in favor of STK.[12]
2. Doctrine of Equivalents
Chiuminatta holds that, in the general case, when there is no equivalence under § 112, ¶ 6, there is also no equivalence under the doctrine of equivalents. See 145 F.3d 1303, 1310. The only exception to this rule is for an accused device that uses technology that was developed after the patent issued. *815 Here, the technology used in the pass-thru port (especially the cams and cam followers) was developed well before the '151 patent issued,[13] and thus it "could readily have been disclosed in the patent." Id. 145 F.3d at 1311. Accordingly, the exception carved out in Chiuminatta for distinguishing means-plus-function equivalence from doctrine of equivalents equivalence does not apply. In the instant circumstances, then, the conclusion that there is no § 112, ¶ 6 equivalence compels the conclusion that there is no doctrine of equivalents equivalence. See id. ("[W]here the equivalence issue does not involve later-developed technologies, but rather involves technology that predates the invention itself ... a finding of non-equivalence for § 112, ¶ 6, purposes should preclude a contrary finding under the doctrine of equivalents.").
Accordingly, judgment as a matter of law of noninfringement under the doctrine of equivalents must be entered in favor of defendants.[14]
IV
One final point merits mention. Chiuminatta makes clear that the existing record provides a sufficient basis on which to award defendants judgment as a matter of law. Yet, the record as it now exists is substantially the same as the record that was before the Federal Circuit when it heard Odetics's appeal. Thus, it would appear, at least at first blush, that the Federal Circuit could have directed entry of JMOL in defendants' favor at the same time it ruled that this Court's claim construction was erroneous. Instead, of course, the Federal Circuit remanded for a determination of whether the pass-thru port and the rotary means were equivalent structures. Odetics argues that the remand on this factual issue suggests that judgment as a matter of law is inappropriate. This argument is not persuasive. The Federal Circuit's decision focused on claim construction and did not engage in any infringement analysis. Specifically, after reversing this Court's claim construction, the Federal Circuit stated:
The claim construction here went to the core of the parties' dispute over infringement. We therefore remand for a consideration of whether STK's accused Pass-Thru Ports are the same as, or equivalent to, the structure shown in Fig. 3 and described in the specification.
Odetics, 116 F.3d 1497, 1997 WL 357598, at *6. Thus, the Federal Circuit recognized that the parties' infringement arguments then before it were inadequate, in light of the new claim construction, to provide a basis for a ruling on the ultimate infringement question. Accordingly, the Federal Circuit remanded the matter so that the parties could present their new infringement arguments, consistent with the new claim construction, to this Court on summary judgment or to the jury, as appropriate. For the Federal Circuit to have decided the infringement question as a matter of law in the procedural posture of the case on appeal would have required that court to disregard the fact that the parties had not yet had the opportunity to explore and dispute the infringement issues in light of the Federal Circuit's claim construction, and thus to argue issues that went to "the core of [their] dispute." Id. In sum, the fact that the Federal Circuit did not decide the *816 infringement issue on appeal does not foreclose this Court from deciding the issue at this point, now that the parties have had an adequate opportunity to argue the matter fully in light of the new claim construction.[15]
An appropriate Order will issue.
The Clerk is directed to send a copy of this Memorandum Opinion to all counsel of record.
NOTES
[1] For other decisions chronicling this litigation, see Odetics, Inc. v. Storage Technology Corp., 906 F. Supp. 324 (E.D.Va.1995) (discussing priority of invention in infringement suits); Odetics, Inc. v. Storage Technology Corp., 919 F. Supp. 911 (E.D.Va.1996) (granting summary judgment motion on laches); Odetics, Inc. v. Storage Tech. Corp., 116 F.3d 1497, 1997 WL 357598 (Fed.Cir. June 25, 1997) (reversing claim construction and remanding for retrial); Odetics, Inc. v. Storage Technology Corp., 14 F. Supp. 2d 785 (E.D.Va. 1998) (discussing effect of laches ruling on issuance of injunction); Odetics, Inc. v. Storage Technology Corp., 14 F. Supp. 2d 800 (E.D.Va.1998) (denying motion for enhanced damages and motion to reconsider laches ruling).
[2] There are actually two rods in the rotary means, one extending from the top of the set of bins and one from the bottom. Together, they provide the single axis around which the bins rotate.
[3] The case was tried twice. The first jury found that STK's accused devices did not infringe the '151 patent. Odetics appealed this finding, and the Federal Circuit vacated the jury's verdict on the ground that this Court's original claim construction was erroneous. See Odetics, 116 F.3d 1497, 1997 WL 357598. Thus, the matter was tried to a second jury using the claim construction mandated by the Federal Circuit.
[4] "A means-plus-function limitation contemplated by 35 U.S.C. § 112, ¶ 6 (1994) recites a function to be performed rather than definite structure or materials for performing that function. Such a limitation must be construed `to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.'" Chiuminatta, 145 F.3d 1303, 1307 (quoting § 112, ¶ 6).
Although Odetics accused the entire STK system, the sole infringement dispute, as the Federal Circuit recognized, was whether STK's pass-thru port was the same as or equivalent to the rotary means described in the patent. See Odetics, 116 F.3d 1497, 1997 WL 357598, at *6 (remanding for consideration of this question).
[5] Odetics argues that such a comparison is improper, for it considers only part of the disclosed structure and part of the accused device, and not each structure in its entirety. To the contrary, the instant analysis compares the two structures in toto; such a comparison, however, reveals that the only relevant distinction is between is the gear in the claimed invention and the cam followers in the accused device.
To be sure, the infringement analysis must be conducted at the appropriate level of detail. Care must be taken not to analyze the various elements of the disclosed and accused structures at too minute a level. To do so would risk reading the term "equivalent" out of § 112, ¶ 6, for at too fine a level of detail, an accused structure would be either identical or noninfringing. On the other hand, if the analysis were conducted at too general a level of detail, almost all accused devices would be deemed equivalents. The proper level of detail for this analysis depends on the facts and circumstances of each case. In this case, the Federal Circuit has defined the appropriate level of analysis for this case in construing the rotary means element of claims 9 and 14, to include the gear as an integral element of the disclosed structure. See Odetics, 116 F.3d 1497, 1997 WL 357598, at *5. In so doing, the Federal Circuit indicated that any infringement analysis must take into account the gear and its putatively equivalent structures. And, Dr. McCarthy specifically identified the cam followers as the analogous element of the accused structure. From this it follows that the arguments at trial and on the instant JMOL motion properly focused on the equivalence vel non of the gear and the cam followers.
[6] All defendants joined in the JMOL motion; however, STK took the lead in arguing the infringement question, as Visa and Crestar had agreed with Odetics that any finding of infringement or noninfringement with respect to STK would apply equally to Visa and Crestar.
[7] Chiuminatta asserted infringement of both U.S.Patent B1 5,0556,499, the apparatus patent, and second, a method patent. Only the Federal Circuit's discussion of the apparatus patent is relevant here.
[8] And, of course, there was no need to reinvent the wheel.
[9] STK has previously argued that the two identified structures do not perform the same function. Simply put, the argument is as follows: The structure identified by Dr. McCarthy as infringing the '151 patent does not include those components, such as the cam, the ball slide, and the lead screw, that make the pass-thru port rotate, i.e., that make it perform the claimed function. And if one includes in the accused structure those components that make the pass-thru port rotate, so that one can assert identical function, there is no longer equivalent structure (as Dr. McCarthy admitted). So, the problem, according to STK, was that you had either equivalent structure but not identical function, or identical function but substantially different structure. The flaw in STK's argument is that the identical function, while performed by the accused structure, need not be actuated by that structure. In other words, the accused device can depend on components other than those that comprise the accused structure to perform the claimed function without foreclosing a finding of infringement. Indeed, the Federal Circuit adopted this same analysis in construing the claims-in-suit: that court identified the disclosed structure as Figure 3 minus the motor and one of the gears depicted in that figure, but then identified the claimed function as rotation, a movement that necessarily depends on the motor and gear for its actuation. Thus, the Federal Circuit recognized that the structure that performs the claimed function can be actuated by components that are not part of that structure. STK's argument in this regard, then, is unpersuasive.
[10] See Mar. 24, 1998, Tr. at 103. Curiously, although Dr. McCarthy testified that the structures were equivalent, he responded in the negative to the question, "Do you have to find that those two [the gear and the cam followers] are equivalent before you could find literal infringement?" Pennwalt, of course, requires that such equivalence be found before there is infringement.
[11] Both structures also contained several bins and a rod or stem, which, of course, are structurally equivalent.
[12] The fact that Dr. McCarthy, a qualified expert and one skilled in the art, testified that the structures were equivalent does not prevent entry of JMOL in favor of defendants. Although the question of structural equivalence is a factual one, there are cases in which a reasonable fact-finder can reach only one conclusion with respect to infringement. And this is one of those cases. See also Chiuminatta, 145 F.3d 1303. Odetics asserts that this conclusion is "clearly improper," as it contradicts the jury's factual determination and thus constitutes a substitution of the Court's judgment for that of the jury. Odetics is correct that the Court is substituting its own judgment for the jury's, but such a decision is not improper indeed it is required when a jury's conclusion is, as a matter of law, unreasonable. See Rule 50, Fed.R.Civ.P.
In this regard, it should be noted that the jury's conclusion is perhaps explained by the fact that it was not specifically instructed to compare the two bin array structures, component by component, as required by the Federal Circuit's claim construction. See supra note 5. Thus, the jury may erroneously have thought that it was sufficient to compare the two structures in gross, thereby leading to a conclusion contrary to law. Indeed, Odetics urges that the correct comparison is that depicted in a computer animation of the two structures, which amounts to little more than a comparison of two sets of shelves that hold the tapes. Such a comparison is inappropriate, as it trivializes, the § 112, ¶ 6 equivalence requirement and runs counter to the Federal Circuit's claim construction, which carefully defines the structure not in gross as a set of shelves, but in terms of the structure's integral components.
[13] Odetics suggests that because the pass-thru ports did not become publicly available until the latter half of 1987, after the '151 patent was filed, the exception for after-developed technology should apply. This argument is patently unpersuasive, for two reasons. First, the exception applies to technology developed after the patent issues, not after it is filed. See Chiuminatta, 145 F.3d 1303, 1310. Second, and more important, the exception applies to the availability of the technology used in the accused device (here, cams and cam followers), not the accused device itself (here, the pass-thru port). Were this not so, then the exception would swallow the rule, as accused devices are often developed after issuance of the patent, regardless of when the technology used in those devices may have been invented.
[14] This result obtains notwithstanding the fact that the jury here never reached the doctrine of equivalents question, given that it had concluded that defendants literally infringed the patent. See Chiuminatta, 145 F.3d 1303, 1311 (directing district court to enter judgment on both literal infringement and doctrine of equivalents infringement, even though district court had never reached the doctrine of equivalents question, given that it had found literal infringement).
[15] In any event, the Federal Circuit's silence on the JMOL issue is simply insufficient to provide the basis for an inference that the structural equivalence argument cannot, on these facts, be decided as a matter of law.
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14 F. Supp. 2d 533 (1998)
Roberta MOLDAWSKY, as Administratrix of the Estate of Alan M. Moldawsky, deceased, Plaintiff,
v.
SIMMONS AIRLINES, INC. and Avions de Transport Regionale, Defendants.
No. 96 Civ. 6461 (LLS).
United States District Court, S.D. New York.
September 9, 1998.
*534 Kreindler & Kreindler, New York City (Marc S. Moller, Noah H. Kushlefsky, of counsel), for plaintiff.
Johnson & Bell, LTD., Chicago, IL (Robert J. Comfort, of counsel), for defendants.
OPINION AND ORDER
STANTON, District Judge.
Defendants move for remittitur of the amounts awarded by the jury to decedent's three children for loss of parental nurture and guidance. The motion is granted to the following extent.
1.
The decedent was an active and supportive parent who, although he did not live with his children, saw them once or twice a week, helped his daughters Lara and Heather with any difficulties they experienced, and paid special attention to his developmentally disabled son Jonathan for example, he became Jonathan's Little League coach to be sure he would have a chance to play.
He took his children on vacations, attended school conferences, involved his children in projects around the house and in every way assisted their development, competence and education.
When he was killed in the airplane accident he was 51 years old, Lara was 20, Jonathan was 16, and Heather was 12. For their loss of parental guidance and nurture, the jury awarded Lara $200,000, Jonathan $550,000 and Heather $300,000 a total of $1,050,000.
2.
New York State courts, whose rulings are law in this diversity case, emphasize that each case must be decided on its merits. See cases gathered in McKee v. Colt Electronics Co., Inc., 849 F.2d 46, 51 (2d Cir.1988). Those courts have countenanced awards much higher than the verdict in this case. See Bryant v. New York City Health and Hosps. Corp., 673 N.Y.S.2d 471 (A.D.2d Dept. 1998) (total of $1.1 million for loss of past and future guidance from decedent mother of *535 "minimal education and job skills"); Garcia v. New York City Health and Hosps. Corp. 230 A.D.2d 766, 646 N.Y.S.2d 694 (2d Dept. 1996) ($850,000 to daughter and $750,000 to son where decedent was 42-year-old homemaker). In Wilson v. Chevron Chem. Co., 1988 WL 52779 (S.D.N.Y. May 18, 1988) this court let stand a verdict for $1,100,000 where the decedent father was 25 years old at death.
However, there is no indication that in any such case the children were as fully grown as those in the present case, nor the decedent parent as old; and in Wilson the award apparently included recompense for grief and suffering caused by the parent's loss, elements which are not available in this case under N.Y. Estates Powers & Trusts Law § 5-4.3, which limits recovery to pecuniary injuries. See McKee, 849 F.2d at 50.
3.
The factors to be considered include "the age, character, earning capacity, health, intelligence, and life expectancy of the decedent, as well as the degree of dependency of the distributees upon the decedent and the probable benefits they would have received but for the untimely death" (citations omitted). McKee, 849 F.2d at 52.
Since the award represents the loss of the educational and moral training and guidance that the children would have received from the parent, see Tilley v. Hudson River R.R. Co., 29 N.Y. 252, 287 (1864); DeLong v. County of Erie, 89 A.D.2d 376, 455 N.Y.S.2d 887, 893 (4th Dept.1982), aff'd, 60 N.Y.2d 296, 469 N.Y.S.2d 611, 457 N.E.2d 717 (1983), two factors tend to reduce such awards as the children grow older: they have less need for such guidance, and the life expectancy of the parent who would furnish it becomes shorter. Accordingly, Judge Scheindlin of this court stated in Mono v. Peter Pan Bus Lines, Inc., 13 F. Supp. 2d 471 (S.D.N.Y.1998):
Not surprisingly, courts reviewing jury awards for loss of parental guidance have generally reduced awards to adult children to a fraction of the amount recoverable by infant children. (Citing cases.)
In Mono, the court reduced to $75,000 an award for loss of parental guidance to a 29-year-old son who had been living across the country for six years before his mother's death, but who sometimes spoke with her four or five times a day for comfort and support in coping with his compulsive personality disorder and learning disability. Recognizing the similarity to the guidance given by a parent to a young child, the court nevertheless reduced the award because the son had established a career as a video tape editor for NBC News and because the mother was 57 years old at her death.
4.
The jury award must be reduced to the extent it "deviates materially from what would be reasonable compensation." N.Y.C.P.L.R. § 5501(c); Bryant 673 N.Y.S.2d at 473; Klos v. New York City Transit Auth., 240 A.D.2d 635, 659 N.Y.S.2d 97, 99 (2d Dept.1997) ($250,000 per infant child for loss of parental guidance from 38-year-old father).
Under the circumstances of this case, the $200,000 award to decedent's daughter Lara must be reduced to $100,000. She is a graduate of the State University of New York, currently obtaining her masters degree from Columbia University, working as an intern at American Express, and doing very well. The award of $300,000 to decedent's younger daughter Heather must be reduced to $150,000. She is currently in high school receiving "B" grades and expects to attend college as her father had planned. It is evident that both daughters have already received much of the benefit of their father's advice and guidance.
The award of $550,000 for Jonathan must be reduced to $250,000. Jonathan's situation is special because of the personality and developmental problems from which he suffers, which justify a higher award because his father's training and encouragement to him were similar to that given a younger child. Nevertheless, while his father's nurture was of great help to Jonathan in the past, it is doubtful that such efforts would be *536 as effective in the future. As Jonathan's mother testified, his capacity for college-level work would not be improved even if his father were alive.
5.
Accordingly, defendants' motion is granted to the extent that they are entitled to a new trial with respect to the issue of damages for loss of parental guidance, unless within 30 days plaintiff stipulates to reduce the verdict for such damages from $200,000 to $100,000 for Lara, from $300,000 to $150,000 for Heather and from $550,000 to $250,000 for Jonathan.
So ordered.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2519371/
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14 F. Supp. 2d 1033 (1998)
INTERNATIONAL TEST AND BALANCE, INC., Plaintiff,
v.
ASSOCIATED AIR AND BALANCE COUNCIL, and Certain Members Thereof, Whose Identities Presently are Unknown, Defendants.
No. 98 C 2553.
United States District Court, N.D. Illinois, Eastern Division.
July 15, 1998.
*1034 *1035 Richard P. Reichstein, Law Offices of Richard P. Reichstein, Chicago, IL, for plaintiff.
John Marc Peterson, Samuel John Erkonen, Jonathan T. Howe, Terrence Hutton, Howe & Hutton, Ltd., Chicago, IL, James E. Anderson, Howe Anderson & Steyer, PC, Washington, DC, for defendant.
OPINION AND ORDER
NORGLE, District Judge.
Before the court is Plaintiff's Motion for a Preliminary Injunction (Doc. No. 5). For the following reasons, Plaintiff's Motion is denied.
I. BACKGROUND
On March 27, 1998, International Test and Balance, Inc. ("International"), an Illinois corporation, filed a three-count complaint against its former trade association, Associated Air Balance Council ("AABC"), and certain unknown members of AABC, in the Circuit Court of Cook County, Illinois. Counts I and II allege conspiracy in restraint of trade and an unlawful monopoly, respectively, in violation of Section 10/3 of the Illinois Antitrust Act. See 740 ILCS 10/3. Count III alleges common law intentional interference with contract.
On April 27, 1998, AABC, a California corporation with its principal place of business in Washington, D.C., removed the case to federal court, claiming diversity of citizenship.[1] International has since amended *1036 its complaint to include a claim of "wrongful expulsion," and now moves for a preliminary injunction that would reinstate its membership in AABC pending a full-trial on the merits. At trial, International would seek a permanent injunction that would prevent AABC from unlawfully excluding International from membership in AABC. The relevant facts follow.
International provides testing and balancing services of heat, vent and air conditioning ("HVAC") equipment to mechanical contractors and others in the construction industry. Testing and balancing is the process of measuring, regulating and adjusting the HVAC system of a building to insure that it complies with performance specifications. In the course of balancing, International utilizes instruments to take readings of the air and water flow through the HVAC system. International also notes the settings of the mechanical devices, makes necessary adjustments and recommendations, and documents its findings in a balancing report to the client.
Up until its expulsion on May 1, 1998, International was a member of AABC. AABC is a non-profit trade association composed of 85 independent firms that provide testing and balancing services of HVAC systems throughout the United States. Membership in the AABC is allegedly desirable because firms must meet certain requirements evidencing competence, and because it enables firms to issue a "National Project Certification Performance Guaranty" ("Guaranty"). Issuance of the Guaranty indicates that the HVAC equipment installed during a project meets engineering expectations and is balanced in accordance with accepted trade practice and the AABC National Standards.
Additionally, the Guaranty enables a party who uses the services of a AABC member, e.g., a contractor or engineer, to file a complaint with AABC if the services performed by the member fail to meet quality specifications, are inadequate, or otherwise insufficient. AABC then initiates an investigation into the allegations of the complaint and agrees to supervise any remaining work. That turn of events is what happened here, and is what led to the eventual expulsion of International from AABC.
In 1995, International entered into a contract with Western Sheet Metal, Inc. ("Western") to provide test and balancing services at the Copper Hills School Project ("Project") for the Jordan School District in Salt Lake City, Utah. In early 1997, Olsen & Peterson ("O & P"), a mechanical engineering consulting firm working on the Project, filed two successive complaints with AABC regarding International's performance.[2] In the first complaint, dated March 25, 1997, O & P wrote a letter to AABC's executive director, Kenneth Sufka ("Sufka"), alleging that International was failing to complete its work on the Project. (See Def.'s Mem. in Opp'n, Ex. 3.) The letter also strongly expressed O & P's dissatisfaction with International and questioned how International qualified for membership in the AABC. In accordance with AABC's policies and procedures, Sufka notified International of O & P's complaint and provided International 14 days to respond. (See id., Ex. 4.) In a letter to Sufka dated April 14, 1997, International denied O & P's allegations and cited the inability *1037 of the mechanical contractor on the project to complete its own work as the reason for the subsequent delay in performance by International. (See id., Ex. 5.)
On April 22, 1997, O & P sent a second letter of complaint to AABC. (See id., Ex. 6.) In that letter, O & P alleged that a report issued by International in April 1996 was "totally unacceptable" and "in substantial noncompliance with the contract documents." (Id.) Sufka in turn notified International of the second complaint and directed International to send AABC a copy of the final balancing report and a copy of the drawings for the Project. (See id., Ex. 7.) On May 22, 1997, International sent the relevant documents to AABC. (See id., Ex. 8.) AABC then initiated an investigation into the complaints against International.
On May 30, 1997, AABC held a meeting in Salt Lake City to address O & P's complaints against International. A vice-president of AABC, Robert Conboy ("Conboy"), along with representatives of International, O & P, and other contractors on the Project, attended. After reviewing the allegations against International, the attendees (except those from O & P) conducted a walk-through at the site of the Project. Upon completion of the walk-through, it was agreed that 18 of the 25 deficiencies that International had previously claimed as stumbling blocks were no longer at issue. For the remaining seven deficiencies, however, the parties agreed to coordinate their efforts to allow prompt completion. (See id., Exs. 9, 10.)
In early August 1997, Conboy and another AABC vice-president, Mike Young ("Young"), visited the site of the Project in connection with the ongoing investigation of International's performance. The purpose of the visit was to determine the accuracy of International's most-recent report on the Project. Upon completion of the visit, Conboy issued a report criticizing the accuracy of International's report and expressing doubt on the latest deficiencies that International claimed was preventing it from completing its work. (See id., Exs. 11, 12.)
Based on the findings and conclusions in Conboy's report, the AABC Board of Directors concluded that International had failed to comply with AABC policies and standards, a condition of membership. Accordingly, on November 5, 1997, the Board voted to place International on probation. (See id., Exs. 20, 27.) International then petitioned AABC to reconsider its decision. (See id., Ex. 15.)
While International's appeal was pending, O & P and other contractors visited the site of the Project to verify the results of International's latest report. O & P determined that the air system on the Project was still not properly balanced. O & P advised International of its conclusion and stated that the Jordan School District did not want International to return to the site. O & P later persuaded the school district to allow International to return and complete its work. (See id., Exs. 16-18.)
On February 13, 1998, the Board issued a written opinion detailing the results of its investigation and rejecting International's appeal. (See id., Ex. 20.) The Board also took issue with International's challenge of the investigation results. Most notably, the Board emphasized that it was International personnel, rather than AABC representatives, who performed the investigation's test readings that indicated prior inaccuracies. "AABC representatives merely observed the procedure and compared the information obtained with the information contained in [International's] report." (Id. at p. 5.) Finally, the Board outlined the conditions of International's probation:
1) That International be placed on probation for a period of two years, beginning on January 31, 1998;
2) That International comply with the terms and conditions of the probation as described in the AABC Policies and Procedures;
3) That International pay the costs ($4,728) for the AABC investigation of the Project as required by the AABC Policies and Procedures on or before March 1, 1998;
4) That International provide a written statement concerning its views on AABC independence, the National Performance Guaranty, and the AABC Policies and Procedures no later than March 1, 1998;
*1038 5) That International return to the Project to complete the balancing in accordance with AABC standards.
(Id. at p. 6.)
The terms of the probation also meant that, pursuant to the Guaranty, International became subject to the supervision of AABC for its remaining work on the Project. (See id., Ex. 21) The Board assigned AABC's Executive Vice-President, Rick Cox ("Cox"), and another AABC representative, Herb Crask ("Crask"), to supervise International's completion of the Project. (See id., Exs. 22, 23.) In addition to his position as Executive Vice-President of AABC, Cox was employed by one of AABC's members, Technical Air Balance, Inc. ("Technical").
At a March 2, 1998, meeting of all relevant contractors on the Project, Cox iterated AABC's supervisory role, and later performed an on-site inspection with the group. Once on-site, Cox and Crask determined that nothing was preventing International from completing its balancing of the system. Gary Tarazzi ("Tarazzi"), International's President, immediately disputed that conclusion, and claimed that International had already balanced the system. As such, Tarazzi hinted that International would not be willing to complete the job. Cox then ended the meeting and stated that he would send his findings to the Board. Before leaving, however, Cox provided representatives of two contractors on the Project with the business card of Technical. (See id.)
In a letter dated March 25, 1998, the Board informed International of its intent to expel the company from its membership. (See id., Ex. 27.) The Board cited International's failure to complete its duties on the Project and its failure to comply with most, if not all, the conditions of probation. The Board invited International to present reasons against expulsion at its next meeting scheduled for April 17, 1998.
On April 17, 1998, Tarazzi appeared before the Board and asserted International's position. Finding those reasons unacceptable, the Board expelled International. As grounds for expulsion, the Board cited International's alleged inadequate performance on the Project and International's failure to comply with the terms of its probation. The Board also noted that the school district had ordered International off the site of the Project. Consequently, AABC assumed responsibility for the completion of the Project. (See id.)
According to International, its expulsion ran afoul of the Illinois Antitrust Act. See 740 ILCS 10/3. International alleges that "Unnamed Defendants and AABC, acting in concert, combined, contracted, and conspired horizontally to exclude [International] from the relevant service and geographic markets. ..." (Compl. at ¶ 26.) International seeks reinstatement in AABC, arguing that its expulsion constitutes an unlawful restraint of trade because "[m]embership in the AABC is a highly advantageous, and in some instances, a necessary credential in the marketplace for test & balance services." (Pl.'s Mem. in Supp. at 1.) Furthermore, International avers, "[r]emoval of [International] from the AABC group will significantly reduce competition...." (Id. at 2.)
II. DISCUSSION
At the outset, the court notes that neither party addresses whether AABC is exempt from liability under the Illinois Antitrust Act. The Illinois Antitrust Act "was intended to apply only to conduct relating to for-profit enterprises." O'Regan v. Arbitration Forums, Inc., 121 F.3d 1060, 1065 (7th Cir.1997) (citing 740 ILCS 10/2). Although this appears to be a crucial, and perhaps dispositive issue, "`it is not the role of [the] court to research and construct the legal arguments open to parties, especially when they are represented by counsel.'" Doherty v. City of Chicago, 75 F.3d 318, 324 (7th Cir.1996) (quoting Sanchez v. Miller, 792 F.2d 694, 703 (7th Cir.1986)). Therefore, the court will leave that issue for another day and address the merits of International's motion for a preliminary injunction.
"A preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion." Boucher v. School Bd. of Greenfield, 134 F.3d 821, 823 (7th Cir.1998) (citations and internal quotation marks omitted.). In order to prevail on a motion for a preliminary *1039 injunction, the movant must demonstrate (1) some likelihood, i.e., a better than negligible chance, of success on the merits, see Meridian Mut. Ins. Co. v. Meridian Ins. Group, Inc., 128 F.3d 1111, 1114-15 (7th Cir.1997) and (2) "`an inadequate remedy at law and irreparable harm if preliminary relief is denied.'" Brownsburg, Area Patrons Affecting Change v. Baldwin, 137 F.3d 503, 507 (7th Cir.1998) (quoting TMT North America, Inc. v. Magic Touch GmbH, 124 F.3d 876, 881 (7th Cir.1997)); see also Wisconsin Music Network, Inc. v. Muzak Limited Partnership, 5 F.3d 218, 221 (7th Cir. 1993). If the court finds either of these facts absent, then the court's analysis "ends and the preliminary injunction should not be issued." Adams v. City of Chicago, 135 F.3d 1150, 1154 (7th Cir.1998); see also Abbott Lab. v. Mead Johnson & Co., 971 F.2d at 12 (7th Cir.1992); Illinois Council on Long Term Care v. Bradley, 957 F.2d 305, 307 (7th Cir.1992). On the other hand, if the movant demonstrates these elements, "then the court considers the irreparable harm to the [non-movant] if preliminary relief is granted as balanced against the irreparable harm to [the movant] if preliminary relief is denied, and the public interests involved." Baldwin, 137 F.3d at 507 (citations omitted.); see also Boucher, 134 F.3d at 824. The court uses a sliding "scale approach" to this balancing test; that is, "the more likely it is that [the movant] will succeed on the merits, the less the balance of the irreparable harms need weigh toward its side...." Abbott Lab., 971 F.2d at 12; cf. General Leaseways, Inc. v. Nat'l. Truck Leasing Assoc., 744 F.2d 588, 590-91 (7th Cir.1984).
Before addressing the necessary elements for a preliminary injunction to issue, the court notes that International's memorandum of law is inadequate. Rather than focus on those elements, International engages in a discussion of three leading antitrust cases that it argues control here: (1) Radiant Burners, Inc. v. Peoples Gas Light and Coke Co., 364 U.S. 656, 81 S. Ct. 365, 5 L. Ed. 2d 358 (1961); (2) Indian Head, Inc. v. Allied Tube & Conduit Corp., 817 F.2d 938 (2d Cir.1987)[3] ; (3) American Society of Mech. Engineers, Inc. v. Hydrolevel Corp., 456 U.S. 556, 102 S. Ct. 1935, 72 L. Ed. 2d 330 (1982). While those cases may be relevant, International only belatedly addresses the prerequisites for a preliminary injunction. Even then, however, International's discussion is sparse, consisting of about one page. This lack of analysis certainly detracts from International's attempt to meet its burden and obtain this extraordinary remedy.
In its opening memorandum, International argues that it is likely to succeed on the merits because:
[E]jection of this company flies in the face of thousands of successful jobs, all tested & balanced to the complete satisfaction of owners, engineers and building contractors across America. The test & balance personnel employed by [International] were and are among the finest in the land. [International] was and is in full compliance with the AABC rules and regulations. Expulsion of this proud and hard working company was merely part of a plan fomented by certain directors of AABC, to manipulate the marketplace and reduce competition among the remaining AABC companies.... [International] will plead and prove that Messrs. Cox, Sufka and other unknown confederates conspired to reduce competition within AABC and the test and balance industry.
(Pl.'s Mem. in Supp. at 10-11.) Accordingly, International rests on its alleged ability to prevail on Count I of its complaint, i.e., to show that its expulsion was an unlawful restraint of trade in violation of the Illinois Antitrust Act, 720 ILCS 10/3. International does not submit any arguments with respect to Counts II through IV. Cf. Doe, By and Through G.S. v. Johnson, 52 F.3d 1448, 1457 (7th Cir.1995) (stating that "a litigant who fails to press a point by supporting it with pertinent authority, or by showing why it is sound despite a lack of supporting authority, forfeits the point.").
Before delving into the merits of International's antitrust claim, a point of clarification is necessary. International chose to *1040 bring its suit under the antitrust laws of the state of Illinois, rather than under federal law. Nonetheless, "Illinois law provides that its courts should use the construction of federal antitrust law by federal courts as a guide in the interpretation of statutes that are substantially similar to federal antitrust law." Sportmart, Inc. v. No Fear, Inc., 94 C 4890, 1996 WL 296643, at * 17 (N.D.Ill. June 3, 1996) (citing State of Illinois ex rel. Burris v. Panhandle Eastern Pipe Line Co., 935 F.2d 1469, 1479-80 (7th Cir.1991)); see also 740 ILCS 10/11 (1997) ("When the wording of [the Illinois Antitrust Act] is identical or similar to that of federal antitrust law, the courts of this State shall use the construction of the federal law by the federal courts as a guide...."); Gilbert's Ethan Allen Gallery v. Ethan Allen, Inc., 162 Ill. 2d 99, 204 Ill. Dec. 769, 642 N.E.2d 470, 472 (1994) (noting this principle, but also emphasizing that "[t]he Federal decisions are not binding on [Illinois courts]."); Polk Bros., Inc. v. Forest City Enterprises, Inc., 776 F.2d 185, 188 (7th Cir.1985); Collins v. Assoc. Pathologists, Ltd., 676 F. Supp. 1388, 1407 (C.D.Ill.1987).
Here, the Illinois Antitrust Act's prohibition of conspiracies in restraint of trade, 740 ILCS 10/3(1) & (2), was intentionally based on Section 1 of the Sherman Act, 15 U.S.C. § 1. See Laughlin v. Evanston Hosp., 133 Ill. 2d 374, 140 Ill. Dec. 861, 550 N.E.2d 986, 991 (1990); People ex rel. Scott v. College Hills Corp., 91 Ill. 2d 138, 61 Ill. Dec. 766, 435 N.E.2d 463, 469-71 (1982); Blake v. H-F Group Multiple Listing Service, 36 Ill. App. 3d 730, 345 N.E.2d 18, 24 (1976). Section 10/3 of the Illinois Antitrust Act provides, in relevant part:
Every person shall be deemed to have committed a violation of this Act who shall: (1) Make any contract with, or engage in any combination or conspiracy with, any person who is, or but for a prior arrangement would be, a competitor of such person: (a) [to price fix]; (b) [to manipulate supplies, sales or production for the purposes of price fixing];
(c) allocating or dividing customers territories, supplies, sales, or markets, functional, or geographical, for any commodity or service; or
(2) By contract, combination, or conspiracy with one or more other persons unreasonably restrain trade or commerce....
740 ILCS 10/3 (1998).
Similarly, albeit less verbose, § 1 of the Sherman Act forbids "[e]very contract, combination ... or conspiracy, in restraint of trade or commerce among the states." 15 U.S.C. § 1. Although the terms of § 1 of the Sherman Act "prohibit every agreement in `restraint of trade,' [the Supreme Court] has long recognized that Congress intended to outlaw only unreasonable restraints." State Oil Co. v. Khan, ___ U.S. ___, ___, 118 S. Ct. 275, 279, 139 L. Ed. 2d 199 (1997) (citations omitted).
One significant difference between the Illinois Antitrust Act and § 1 of the Sherman Act is that the Illinois statute codifies what restraints are illegal "per se," 740 ILCS 10/3(1)(a)-(c), versus restraints that should be analyzed under the "Rule of Reason," 740 ILCS 10/3(2). See Sportmart, Inc., 1996 WL 296643, at * 17 (citing 740 ILCS 10/3 Bar Committee Comments 1967 (1993)); Blake, 345 N.E.2d at 25-26; see generally Ethan Allen, Inc., 204 Ill. Dec. 769, 642 N.E.2d at 472 (noting the differences between § 10/3(3) of the Illinois Antitrust Act and Section 2 of the Sherman Act). Under § 1 of the Sherman Act, by contrast, courts determine, "based on the nature of the restraint," whether a per se violation exists or whether the "Rule of Reason" should apply. Denny's Marina, Inc. v. Renfro Productions, Inc., 8 F.3d 1217, 1220 (7th Cir.1993).
In cases involving § 1 of the Sherman Act, courts "apply the per se rule when `the practice facially appears to be one that would always or almost always tend to restrict competition and decrease output.'" General Leaseways, Inc. v. Nat'l. Truck Leasing Assoc., 744 F.2d 588, 595 (7th Cir. 1984) (quoting Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 19-20, 99 S. Ct. 1551, 60 L. Ed. 2d 1 (1979)). "Restraints that are per se unreasonable include agreements whose nature and necessary effect are so plainly anticompetitive that no elaborate study of the industry or restraint is needed to establish their illegality." Wilk v. American Medical Association, 895 *1041 F.2d 352, 358 (7th Cir.1990) (citing Nat'l Society of Professional Engineers v. United States, 435 U.S. 679, 692, 98 S. Ct. 1355, 55 L. Ed. 2d 637 (1978)). Examples of per se rule offenses under § 1 of the Sherman Act include: (1) horizontal price fixing conspiracies, see Arizona v. Maricopa County Medical Society, 457 U.S. 332, 348, 102 S. Ct. 2466, 73 L. Ed. 2d 48 (1982); (2) certain attempts at market allocation, see Blackburn v. Sweeney, 53 F.3d 825, 827 (7th Cir.1995) and General Leaseways, 744 F.2d at 595; and (3) group boycotts, "if used to enforce a rule or policy or practice that is itself illegal per se [e.g., illegal price-fixing]", Vogel v. American Society of Appraisers, 744 F.2d 598, 600 (7th Cir.1984). The Supreme Court recently reiterated its disfavor of applying the per se rule to "`restraints imposed in the context of business relationships where the economic impact of certain practices is not immediately obvious.'" Khan, ___ U.S. at ___, 118 S.Ct. at 279 (quoting FTC v. Indiana Federation of Dentists, 476 U.S. 447, 458-59, 106 S. Ct. 2009, 90 L. Ed. 2d 445 (1986)).
Because of the limited instances where the per se rule is applied, most antitrust claims under Section 1 of the Sherman Act are subject to the Rule of Reason. See Khan, ___ U.S. at ___, 118 S.Ct. at 279; see also Phil Tolkan Datsun, Inc. v. Greater Milwaukee Datsun Dealers' Advert. Assoc., Inc., 672 F.2d 1280, 1284 (7th Cir.1982). "[T]he rule of reason category includes agreements whose competitive effect can only be evaluated by analyzing the facts peculiar to the business involved, the particular restraints history, and the reasons it was imposed." Wilk, 895 F.2d at 358 (citing Nat'l Society of Professional Engineers, 435 U.S. at 692, 98 S. Ct. 1355); see also Khan, ___ U.S. at ___, 118 S.Ct. at 279; Wisc. Music Network, Inc. v. Muzak Limited Partnership, 5 F.3d 218, 222 (7th Cir.1993). "The test of legality under the rule of reason is whether the challenged conduct promotes or suppresses competition." Id.
In this case, International alleges that its expulsion was "unlawful per se as restraints of trade by means of horizontal market allocation or division, all within the meaning of 740 ILCS 10/3." (Compl. at ¶ 28.) Alternatively, International alleges that its expulsion "unreasonably restrain[s] trade, by means of horizontal market allocation or division, all within the meaning of 740 ILCS 10/3." (Id. at ¶ 29.) In other words, International's alternative claim seeks to invoke the Rule of Reason if the per se rule does not apply. In light of the facts supporting International's allegations, the court finds that the Rule of Reason should apply, but not based on the theory that International espouses.
Market allocation is indeed per se illegal under the Illinois Antitrust Act. See 740 ILCS 10/3(1)(c). The facts that International presents here, however, do not suggest market allocation. Cf. Blake, 345 N.E.2d at 27-28. Rather, a trade association's decision to expel one of its members is more properly described as a "concerted refusal to deal" or "group boycott." See Northwest Wholesale Stationers, Inc. v. Pacific Stationery and Printing Co., 472 U.S. 284, 290, 105 S. Ct. 2613, 86 L. Ed. 2d 202 (1985). Under the Illinois Antitrust Act, that conduct is subject to the Rule of Reason. See 740 ILCS 10/3 Bar Committee Comments 1967[4]; see also Blake, 345 N.E.2d at 27-28 (noting that those agreements not specifically listed under § 10/3(1), including concerted refusals to deal, are subject to the rule of reason).
In general, courts addressing facts similar to those at bar under § 1 of the Sherman Act share this view. See Northwest Wholesale, 472 U.S. 284, 105 S. Ct. 2613; see also Phil Tolkan Datsun, Inc., 672 F.2d at 1285 ("[M]embership arrangements in trade associations form an exception to the general rule that group boycotts constitute per se antitrust violations."); United States Trotting Assoc. v. Chicago Downs Assoc., Inc., 665 F.2d 781, 789-90 (7th Cir.1981); Martin v. American Kennel Club, 697 F. Supp. 997, 1000 (N.D.Ill.1988); Carleton v. Vermont Dairy Herd Improv. Assoc., 782 F. Supp. 926, 932-33 (D.Vt. 1991). Notably, none of International's arguments attempt in any way to show market allocation. For these reasons, the court will apply the Rule of Reason in *1042 determining whether International has a "better than negligible" chance of showing that its expulsion was an unreasonable restraint of trade.
"The Illinois Supreme Court has indicated that the rule of reason should be applied similarly under Illinois law, as it is under the Sherman Act." Sportmart, 1996 WL 296643, at * 18 (citing College Hills Corp., 61 Ill. Dec. 766, 435 N.E.2d at 471-72). "The threshold issue in any rule of reason case is market power." Wilk, 895 F.2d at 359. Without proof of market power to restrain competition substantially, "any case under the Rule of Reason collapses...." L.A.P.D., Inc. v. General Elect. Corp., 132 F.3d 402, 405 (7th Cir.1997); see also Ehredt Underground, Inc. v. Comm. Edison Co., 90 F.3d 238, 239 (7th Cir.1996). Market power "entails cutting back output in the market and thus driving up prices to consumers." Sanjuan v. American Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994). Market power can be evident where the defendant has "unique access to a business element necessary for effective competition." Northwest Wholesale Stationers, Inc., 472 U.S. at 298, 105 S. Ct. 2613.
In this case, International has not shown that AABC membership allows the exercise of market power or that it provides exclusive access to a necessary business element. See Vogel, 744 F.2d at 604 (To succeed at trial, plaintiff would have to show that association's "members as a group have a substantial share of the market...."). While International claims that membership is "highly advantageous," it concedes that membership is necessary only "in some instances." (Pl.'s Mem. in Supp. at 1.) Even those allegations are devoid of any support in the record, however. In fact, AABC points out that there are approximately 500 independent testing and balancing firms in the United States; only 85 of these firms are members of AABC. Furthermore, while there are approximately 12 independent testing and balance firms in the Chicago area, only one is a member of AABC. International did not even attempt to define the relevant market. See Vogel, 744 F.2d at 604 (stating that a plaintiff must establish the relevant market to prevail under § 1 of the Sherman Act). Therefore, with no indication to the contrary, it is clear that a testing and balancing firm can effectively compete without being a member of AABC. Put another way, the exclusion of International from AABC will not cause a decrease in output of testing and balancing services. See Sanjuan, 40 F.3d at 251 (association's refusal to certify plaintiffs did not "remove their output from the market and therefore [did] not raise prices to consumers."); see also In re Circuit Breaker Litigation, 984 F. Supp. 1267, 1281 (C.D.Cal.1997) (refusal of certification had no effect on the market).
The court also finds that the three cases that International cites in support of its motion (Radiant Burners; Indian Head; and Hydrolevel) are distinguishable to the case at bar. In general, these cases address the potential of a standard-making organization to abuse its power where "it is used to exclude competitors from a market by denying them the needed stamp of approval." See ECOS Electronics Corp. v. Underwriters Laboratories, 743 F.2d 498, 502 (7th Cir. 1984) (discussing Radiant Burners and Hydrolevel). International argues that membership in AABC and the accompanying Guaranty are comparable necessities in the testing and balancing industry. The current record, however, does not support that conclusion. Nevertheless, the court will examine each of the cases that International cites in turn.
1. Radiant Burners
In Radiant Burners, the American Gas Association ("AGA"), a standard-making organization within the gas industry, twice refused to provide its "seal of approval" on plaintiff's gas burners. 364 U.S. at 658, 81 S. Ct. 365. Because the plaintiff's gas burners did not receive the AGA's seal of approval, gas utilities refused to supply gas for use in the plaintiff's gas burners. See id. The gas burners were therefore unmarketable. See id. The plaintiff filed suit against the AGA and the gas utilities, alleging that their refusal to supply gas based on the absence of AGA approval was an unlawful restraint of trade under § 1 of the Sherman Act. See id. at 658-59, 81 S. Ct. 365. The plaintiff also alleged that the AGA's approval process was *1043 unduly influenced by its gas utility members because some of them were in competition with the plaintiff. See id. Reversing a lower court's dismissal of the complaint, the Supreme Court held that such allegations state a claim under § 1 of the Sherman Act because "[t]he alleged conspiratorial refusal to provide gas for use in [the plaintiff's gas burners] interferes with the natural flow of interstate commerce and clearly has, by its `nature' and `character', a `monopolistic tendency.'" Id. at 660, 81 S. Ct. 365.
International argues that the facts of Radiant Burners are analogous to the case at bar because, in the testing and balancing industry, "membership in AABC is desirable and sometimes even a requirement," and because the Guaranty provides "an important advantage over non-members." (Pl.'s Mem. in Supp. at 7.) Furthermore, International claims that its poor evaluations on the Project were actually the result of a conspiracy because competitors sat on AABC's Board and investigated O & P's complaints. (Id.) Accordingly, International contends that under Radiant Burners, the facts at bar are "sufficient to state a claim for relief under section 1 of the Sherman Act." (Pl.'s Mem. in Supp. at 7-8.)
International's reliance on Radiant Burners is misplaced. The Court in Radiant Burners simply held that the plaintiff's allegations survived a motion to dismiss. 364 U.S. at 660, 81 S. Ct. 365. Under federal notice pleading standards, a motion to dismiss should not be granted "unless it is impossible [for the plaintiff] to prevail under any set of facts that could be proved consistent with his allegations." Albiero v. City of Kankakee, 122 F.3d 417, 419 (7th Cir.1997); the burden is on the defendant to persuade the court that the plaintiff's allegations are wanting. Here, by contrast, the motion before the court is a motion for a preliminary injunction. Therefore, the burden was on International to show that it has "a better than negligible chance" of success on the merits. See Meridian Mut. Ins. Co., 128 F.3d at 1114-15; see also Boucher, 134 F.3d at 823. As explained above, International has not done so, to any degree. Cf. McDaniel v. Appraisal Institute, 117 F.3d 421, 423 (9th Cir.1997) (emphasizing the difference between a Rule 12(b)(6) motion and a motion for summary judgment, where "it was incumbent on the plaintiff to present evidence.").
2. Indian Head
International also relies on the Second Circuit's opinion in Indian Head, 817 F.2d 938 (2nd Cir.1987). In that case, Indian Head sued a competitor, Allied Tube & Conduit, Corp. ("Allied") under § 1 of the Sherman Act after Allied unduly prevented Indian Head's product from being approved by the National Fire Protection Association ("NFPA"), the publisher of the industry's model code. 817 F.2d at 939. The model code, which established product standards within the industry, was "the most widely disseminated and adopted model code in the world.... [A] substantial number of state and local governments adopt the [model code] as law in whole or in part." Id.
Allied was eligible to vote on whether Indian Head's product would receive model code approval. See id. at 940. Prior to the NFPA's annual meeting where the vote would be held, Allied formulated a plan to insure that Indian's product would not receive the required number of votes for approval. See id. Implementing campaign tactics that would make some precinct captains blush, Allied
arranged for 155 persons including employees, sales agents, the agents' employees, company executives, employees of two of Allied divisions, and the wife of the national sales director to join the NFPA, to register as voting members, and to attend the annual meeting to vote against [approval of the plaintiff's product]. [The defendant] also paid over $100,000 for the membership, registration, and attendance expenses of these voters.... At the annual meeting, [the defendant] instructed its personnel where to sit, based upon a detailed seating chart, and appointed group leaders to instruct voters how the discussion is progressing and how to vote. Boxed lunches were provided and the voters were told to stay nailed to their seats until the end.... Group leaders used walkie-talkies and hand signals to facilitate communication.
*1044 Id. at 940-41. Not surprisingly then, the die was cast, and when the vote was taken, Allied's confederates were responsible for the NFPA's refusal to approve Indian Head's product. See id.
At trial, the jury entered judgment in favor of Indian Head. See id. The trial court, however, granted Allied's motion for a judgment notwithstanding the verdict, holding that the Noerr-Pennington doctrine[5] required that the jury's verdict be set aside. See id. at 942. On appeal, the Second Circuit vacated the trial court's decision, holding that Noerr-Pennington immunity should not be extended "to lobbying activities directed toward a `quasi-legislative' body such as the NFPA." See id. The court of appeals also rejected Allied's cross appeal which sought a declaration that its activities were not a restraint of trade as a matter of law. See id. at 946-47. The Second Circuit held that although Allied tactics were in literal compliance with the NFPA's rules, "Allied violated the integrity of the NFPA's procedures ... for the sole purpose of achieving an anticompetitive result the exclusion of [Indian Head's product] from the market place." See id.
International argues that Indian Head controls here because the AABC Board "was packed with competitors of International, who stood to benefit personally from [its] expulsion" and because Cox, another alleged competitor of International, participated in AABC's investigation. (Pl.'s Mem. in Supp. at 8.) International's argument, based solely on conclusory allegations, is not persuasive. International has failed to show that its expulsion was the result of egregious conduct comparable to the facts in Indian Head. First, there is no evidence that AABC's Board was "packed" with competitors. With no indication to the contrary, it appears that the Board members were duly elected in compliance with AABC's by-laws and with no ulterior motives to exclude competition. International fails to even identify specific Board members and their alleged affiliation with firms that compete in International's market. Moreover, International concedes that Sufka, the Executive Director of AABC who initiated and oversaw the investigation of International, had no affiliation with any competitor. (Pl.'s Mem. in Supp. at 7.) In sum, there is no indication that International's expulsion was the result of anticompetitive bias on the part AABC's Board. Instead, it appears that International's expulsion occurred in compliance with AABC's bylaws and, more importantly, only in response to International's unreasonable conduct, both on the Project and in response to AABC's legitimate inquiries. See Pretz v. Holstein Friesian Assoc. of America, 698 F. Supp. 1531, 1540 (D.Kan.1988) (noting that procedural safeguards, though not determinative, suggest reasonableness of a defendant's restraint). International may have the opportunity to show otherwise at trial, but for now, the record does not support International's assertions.
And while the action of Cox, an alleged competitor, to distribute business cards at a meeting raises questions, that alone, especially in light of International's flouting of AABC's bylaws, is not enough to show that AABC's expulsion was tainted or violated the antitrust laws. See Havoco of America, Ltd. v. Shell Oil Co., 626 F.2d 549, 558 (7th Cir. 1980) ("a loss by the plaintiff of a single contract with a single purchaser is simply not equivalent to a deleterious effect on the market."). The court also notes that Cox swears that his firm does not directly compete with International (Def.'s Mem. in Opp'n, at Ex. 23); International's failure to even attempt to define the relevant market allows the court to not question Cox's averment. Finally, the court again emphasizes that International has failed to show that membership in AABC is essential to compete, unlike the model code approval sought in Indian Head.
*1045 3. Hydrolevel
The third case that International relies upon is Hydrolevel, 456 U.S. at 579, 102 S. Ct. 1935 (1982), a case with facts similar to those in Indian Head. In Hydrolevel, the plaintiff, Hydrolevel, Inc. ("Hydrolevel"), developed an improved fuel cutoff device for use in boilers. See id. at 559, 102 S. Ct. 1935. Based on the improved device, Hydrolevel received business from a client that had previously purchased the product of the dominant competitor in the market, McDonnell & Miller ("M & M").
M & M was a member of the American Society of Mechanical Engineers ("ASME"), which published the industry's highly-influential model code. See id. at 559-60, 102 S. Ct. 1935. The model code was adopted by federal regulations, 46 states, and all but one of the Canadian provinces. See id. at 559, 102 S. Ct. 1935. An executive of M & M sat as vice-chairman of the ASME subcommittee that wrote the segment of the model code governing fuel cutoff devices. See id. Sensing that Hydrolevel's device would intrude into M & M's market share, the M & M executive, in his capacity as vice-chairman of the subcommittee, participated in the drafting of an unsupported and inconsistent statement that condemned Hydrolevel's device as unsafe under ASME's standards. See id. at 561-62, 102 S. Ct. 1935. Based on that statement, M & M orchestrated an effective publicity campaign that said Hydrolevel's device violated ASME's model code; consequently, Hydrolevel's business suffered. See id. at 563, 102 S. Ct. 1935. In response to Hydrolevel's ensuing complaints, ASME initiated an investigation which ultimately concluded that no wrongdoing had occurred. See id. at 563-64, 102 S. Ct. 1935. Hydrolevel then filed suit against M & M and ASME, alleging violations of §§ 1 and 2 of the Sherman Act. See id. at 564, 102 S. Ct. 1935. After M & M settled the suit with Hydrolevel, the case went to trial against ASME. The jury returned a verdict in favor of Hydrolevel, which the Second Circuit subsequently affirmed. See id. at 565, 102 S. Ct. 1935.
On a writ of certiorari, the issue before the Supreme Court was whether ASME could be held liable "under the antitrust laws for the acts of its agents performed with apparent authority." See id. at 559, 102 S. Ct. 1935. The Court answered in the affirmative, concluding that "ASME's liability under a theory of apparent authority is consistent with the intent behind the antitrust laws." See id. at 570-71, 102 S. Ct. 1935. The Court reasoned that ASME's agents had the power to restrain competition because ASME was considered to be "an extra-governmental agency" based on the tremendous influence of its model code. See id. The Court also recognized that "a standard-setting organization like ASME can be rife with opportunity for anticompetitive activity" because many of ASME's officials were affiliated with members in competition. See id. at 571, 102 S. Ct. 1935. Moreover, the Court determined that whether ASME's agents intended to benefit ASME was irrelevant because they had the ability to "exercise economic power." See id. at 573-74, 102 S. Ct. 1935.
International argues that the facts in Hydrolevel are analogous to the facts at bar. Specifically, International asserts that one report which contributed to its eventual expulsion was inconsistent and generated by a competitor. (Pl.'s Mem. in Supp. at 9.) Initially, the court notes that Hydrolevel was primarily a case addressing the scope of agency under the Sherman Act. In any event, International's allegations are unsupported and insufficient in light of the substantial contravening evidence that suggests that International's overall performance received numerous complaints. International ignores those parts of the record and instead concludes that the problems incurred on the Project were all caused by conspirators seeking to eliminate competition. In fact, however, the record indicates that AABC repeatedly intervened on International's behalf in an effort to allow it to complete the Project. AABC's directive on the Project appeared to be three-fold: (1) to respond to O & P's complaints pursuant to the Guaranty; (2) to reach a resolution with O & P while acting in International's interests; and (3) to preserve the integrity of AABC. None of these aims are anticompetitive and there is no indication of covert activity by AABC in its investigation. Unlike the facts in Hydrolevel, there are no facts here suggesting: (1) that a competitor subverted any AABC procedure; or (2) that the act of expulsion by AABC *1046 would effectively paralyze International's ability to compete or frustrate overall competition.
Based on the series of Supreme Court cases involving alleged antitrust violations by trade and professional associations, it is clear that the conduct of those organizations "has some potential to violate the antitrust laws." See Sanjuan, 40 F.3d at 251 (collecting cases). On that same note, however, "a trade association is not by its nature a `walking conspiracy,'" Greater Rockford Energy and Tech. Corp. v. Shell Oil Co., 998 F.2d 391, 397 (7th Cir.1993) (citations and internal quotation marks omitted.), and "[t]he antitrust laws are not `panacea[s] for all business affronts which seem to fit nowhere else.'" ECOS Electronics Corp. v. Underwriters Laboratories, 743 F.2d 498, 501 (7th Cir.1984) (quoting Scranton Construction Co. v. Litton Industries Leasing Corp. 494 F.2d 778, 783 (5th Cir.1974)). "Animosity, even if rephrased as `anticompetitive effect,' is not illegal without illegal anticompetitive effects." Schachar v. American Academy of Ophthalmology, Inc., 870 F.2d 397, 400 (7th Cir. 1989). It is injury to the market, not injury to an individual competitor, that violates the antitrust laws. See Wigod v. Chicago Mercantile Exchange, 981 F.2d 1510, 1515 (7th Cir.1992); see also Martin, 697 F. Supp. 997, 1003; Consolidated Metal Products, Inc. v. American Petroleum Institute, 846 F.2d 284, 293 (5th Cir.1988).
International has not shown that its expulsion had an adverse impact on competition in the testing and balancing industry. See Martin, 697 F.Supp. at 1004-05. The expulsion of a noncomplying member is "the normal method by which a private association enforces its rules." Vogel, 744 F.2d at 600; see also Northwest Wholesale, 472 U.S. at 296, 105 S. Ct. 2613 (An association "must establish and enforce reasonable rules in order to function effectively."). By preventing AABC from enforcing its bylaws, an injunction would only encourage members to ignore the association's standards. See Gen'l Leaseways, 744 F.2d at 597. The integrity of AABC would consequently suffer. See Martin, 697 F.Supp. at 1004-05. "It has long been recognized that the establishment and monitoring of trade standards is a legitimate and beneficial function of trade associations." Consolidated Metal Products, Inc., 846 F.2d at 294. In light of these considerations, International has not shown the unreasonableness of AABC's action; it may yet be able to do so at trial. See Vogel, 744 F.2d at 604 (emphasizing that the denial of a preliminary injunction does not serve to "prejudge the trial."). For now, however, the court concludes that International has not met its burden to show that it will likely succeed on the merits. Accordingly, the court need not reach the remaining elements necessary for a preliminary injunction to issue. See Green River Bottling Co. v. Green River Corp., 997 F.2d 359, 361 (7th Cir.1993). International's motion for a preliminary injunction is hence denied.
III. CONCLUSION
For the foregoing reasons, International's motion for a preliminary injunction is denied.
IT IS SO ORDERED.
NOTES
[1] Because "federal courts are courts of limited jurisdiction," Matter of Application of County Collector, 96 F.3d 890, 895 (7th Cir.1996), the court has a "nondelegable duty to police the limits of federal jurisdiction with meticulous care." Market Street Assocs. Ltd. v. Frey, 941 F.2d 588, 590 (7th Cir.1991); see also Krueger v. Cartwright, 996 F.2d 928, 930 (7th Cir.1993); Fed.R.Civ.P. 12(h)(3). It does not escape the court's attention that there are jurisdictional issues in this case. First, because International's complaint includes allegations against "unknown members" of AABC, the citizenship of those members is unknown. Nonetheless, "naming a John Doe defendant will not defeat the named defendants' right to remove a diversity case if their citizenship is diverse from that of the plaintiffs." Howell v. Tribune Entertain. Co., 106 F.3d 215, 218 (7th Cir.1997); see also Salzstein v. Bekins Van Lines, Inc., 747 F. Supp. 1281, 1283 n. 4 (N.D.Ill.1990). The named party here, AABC, is, standing alone, of diverse citizenship. However, certain membership organizations "take the citizenship of each member." Indiana Gas Co., Inc. v. Home Ins. Co., 141 F.3d 314, 316 (7th Cir.1998); Nat'l Assoc. of Realtors v. Nat'l Real Estate Assoc., 894 F.2d 937, 940 (7th Cir. 1990) (citizenship of incorporated trade association was that of its members because the members were the real parties in interest); National Assoc. of Realtors v. National Real Estate Assoc., Inc., 699 F. Supp. 678, 679 n. 3 (N.D.Ill.1988). On the other hand, "for purposes of diversity jurisdiction[,] a corporation is a corporation is a corporation." Cote v. Wadel, 796 F.2d 981, 983 (7th Cir.1986). If AABC assumes the citizenship of its members, then jurisdiction may be absent because AABC has admitted in its later pleadings that it has one member in Illinois (citizenship unknown) (see Def.'s Mem. in Opp'n at 7.), the state where International is a citizen. With an abundance of caution, the court proceeds under Cote, and concludes that diversity jurisdiction exists because the citizenship of International is diverse from the citizenship of AABC. See Nat'l Assoc. of Realtors, 894 F.2d at 939-40 (concluding that for diversity purposes, the inquiry into the relevant citizenship of an incorporated trade association depends upon whether the members or the association are the real parties in interest).
[2] In at least one part of the record, there is a reference to an additional complaint filed against International prior to the complaints filed in early 1997. (See Def.'s Mem. in Opp'n at Ex. 4.). That complaint, lodged by Western in October 1996, accused International of failing to complete its work. Because neither party provides further elaboration on that complaint, the court will not deem it relevant for purposes of this discussion.
[3] In Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 108 S. Ct. 1931, 100 L. Ed. 2d 497 (1988), the Supreme Court affirmed the Second Circuit's decision. International fails to cite the Supreme Court's decision and instead limits its discussion to the Second Circuit's opinion.
[4] "Illinois courts have endorsed the Bar Committee's interpretation of the [Illinois Antitrust Act]." Sportmart, 1996 WL 296643, at * 17 (citing Ethan Allen, Inc., 204 Ill. Dec. 769, 642 N.E.2d at 474).
[5] The Noerr-Pennington Doctrine is not at issue here. Roughly speaking, the doctrine defines the boundary between an industry's concerted governmental lobbying efforts, which are legal, and "abuses of administrative or judicial processes that may result in antitrust violations." Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 500, 108 S. Ct. 1931, 100 L. Ed. 2d 497 (1988); see also Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S. Ct. 523, 5 L. Ed. 2d 464 (1961); United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S. Ct. 1585, 14 L. Ed. 2d 626 (1965); California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S. Ct. 609, 30 L. Ed. 2d 642 (1972).
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14 F. Supp. 2d 991 (1998)
COMMUNITY HEALTH PARTNERS, INC. and Reservoir Park Health Services, Inc. d/b/a Center Care Plaintiffs
v.
COMMONWEALTH OF KENTUCKY, ex rel. George NICHOLS III, Commissioner of Insurance Defendant
No. CIV.A. 1:96-CV-202-M.
United States District Court, W.D. Kentucky, Bowling Green Division.
June 2, 1998.
*992 *993 Shaun T. Orme, Julie Mix McPeak, Kentucky Dept. of Insurance, Frankfort, KY, for Commonwealth of Kentucky, George Nichols, Commissioner of Insurance.
Quinten B. Marquette, Bell, Orr, Ayres & Moore, Murry A. Raines, English, Lucas, Priest & Owsley, Bowling Green, KY, Daniel M. Mulholland, III, Harty, Springer & Matern, Pittsburgh, PA, for Community Health Partners, Inc., Reservoir Park Health Services, Inc. d/b/a Center Care.
MEMORANDUM OPINION AND ORDER
McKINLEY, District Judge.
This matter is before the Court on Cross-Motions for Summary Judgment by Plaintiffs, Community Health Partners, Inc. [hereinafter "Community Health"] and Reservoir Park Health Services, Inc. d/b/a Center Care [hereinafter "Center Care"], and Defendant, Commonwealth of Kentucky, ex rel. George Nichols III, Commissioner of Insurance [hereinafter "Defendant"]. [DN32] [DN33] Plaintiffs seek declaratory and injunctive relief based on allegations that Kentucky's "Any Willing Provider" law, KRS 304.17A-110(3), is pre-empted by the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001, et seq. [hereinafter "ERISA"]. The Court's jurisdiction over this matter is based on federal question pursuant to 28 U.S.C. § 1331.
I. STATEMENT OF FACTS
Plaintiffs, Community Health and Center Care, are networks of select health care providers physicians, hospitals and others which contract to provide health care services to beneficiaries of health care plans, either directly or through insurance companies and health maintenance organizations [hereinafter "HMOs"].[1] Community Health and Center Care contract with health care providers to participate in their networks.[2] Providers agree to provide health care services at predetermined rates, which the providers are usually willing to discount in return for the guarantee of a high volume of patients. Plaintiffs then market their provider networks to consumers either directly or through employers, insurance companies, HMOs and other groups and offer consumers economic incentives to patronize their network providers.
Enacted in 1994 as part of a comprehensive legislative effort to reform the state's health care industry, Kentucky's "Any Willing Provider" [hereinafter "AWP"] law states that
[h]ealth care benefit plans shall not discriminate against any provider who is located within the geographic coverage area of the health benefit plan and is willing to meet the terms and conditions for participation established by the health benefit plan.
*994 KRS 304.17A-110(3). As used in the statute, the term "health benefit plan" means
any hospital or medical expense policy or certificate; nonprofit hospital, medical-surgical, and health service corporation contract or certificate; a health benefit plan offered by a provider-sponsored integrated delivery network; a self-insured plan or a plan provided by a multiple employer welfare arrangement, to the extent permitted by ERISA; health maintenance organization contract; and standard and supplemental health benefit plan as established in KRS 304.17A-160.
KRS 304.17A-100(4)(a).
At the time of the AWP statute's enactment, Center Care had an exclusive agreement with an affiliate of CHA HMO, Inc. [hereinafter "CHA"] for the provision of health care providers for certain CHA products. CHA is a licensed Kentucky HMO. During the fall of 1996, Community Health attempted to negotiate an exclusive agreement with CHA for provision of a different managed care product. Community Health was unable to solidify an agreement with CHA after Defendant determined that the CHA/Community Health agreement would violate the AWP law. Defendant maintained that the CHA/Community Health agreement would violate the AWP statute by preventing an excluded provider, who was otherwise willing to accept the terms and conditions of the CHA/Community Health agreement, from providing services to CHA enrollees.
In response, Plaintiffs filed the present action. Plaintiffs maintain that Kentucky's "Any Willing Provider" law threatens their existence by effectively preventing them from contracting with any entity mentioned in KRS 304.17A-100(4) for the provision of selective provider services. Plaintiffs ask the Court to find the AWP preempted by ERISA and to enjoin Defendant from enforcing the statute.
II. STANDARD OF REVIEW
In order to grant a motion for summary judgment, the court must find that the pleadings, together with the depositions, interrogatories and affidavits, establish that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. The moving party bears the initial burden of specifying the basis for its motion and of identifying that portion of the record which demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). Once the moving party satisfies this burden, the non-moving party thereafter must produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). Since the Parties do not dispute the material facts in this case, summary judgment is an appropriate means of resolving the legal issues underlying this dispute.
III.
Enacted in 1974, ERISA is a comprehensive statute which subjects employee benefit plans, including pension and welfare plans, to federal regulation. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S. Ct. 2890, 77 L. Ed. 2d 490 (1983). Welfare benefit plans include programs providing benefits to employees for "medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability [or] death," whether these benefits are provided "through the purchase of insurance or otherwise." 29 U.S.C. § 1002(1); see also New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 651, 115 S. Ct. 1671, 131 L. Ed. 2d 695 (1995). Thus, ERISA applies both to self-insured employee health benefit plans as well as to plans that purchase health insurance for their participants.
Initially, Defendant challenges whether Plaintiffs have standing to bring the present action. Having rejected this argument in a previous Order, the Court finds no need to further address the standing issue.
A. ERISA Preemption Principles
ERISA supersedes any and all State laws insofar as they "relate to" an employee benefit plan. 29 U.S.C. § 1144(a). However, Congress imposed a limit on ERISA preemption by including a "saving" clause in the Act's provisions. The saving clause exempts from preemption "any law of any State which regulates insurance." 29 U.S.C. *995 § 1144(b)(2)(A). Therefore, the Court must first determine whether the AWP law is preempted by ERISA because the law "relates to" an employee benefit plan. If the AWP law "relates to" an employee benefit plan within the meaning of ERISA, the Court must next ascertain whether the law is "saved" from preemption as a law which regulates insurance.
1. "Relates To" Analysis
As previously mentioned, ERISA preempts any and all State laws that "relate to" an employee benefit plan. The Supreme Court has explained that a state law "relates to" an employee benefit plan for purposes of ERISA "if it has a connection with or reference to such a plan." Shaw, 463 U.S. at 97, 103 S. Ct. 2890.
a. "Reference to" an ERISA Plan
It is undisputed that the Kentucky statute makes an express reference to ERISA plans. Plaintiffs argue that this reference, in itself, is sufficient to trigger preemption. To support this argument, Plaintiffs rely on District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 129, 113 S. Ct. 580, 121 L. Ed. 2d 513 (1992). In Greater Washington Bd. of Trade, the Supreme Court considered whether ERISA preempted a state workers compensation law which provided that
[a]ny employer who provides health insurance coverage for an employee shall provide health insurance coverage equivalent to the existing health insurance coverage of the employee while the employee receives or is eligible to receive workers' compensation benefits under this chapter.
Id. at 128, 113 S. Ct. 580. Plaintiffs emphasize the statement in Greater Washington Bd. of Trade that the statute "specifically refers to welfare benefit plans regulated by ERISA and on that basis alone is pre-empted." Id. at 130, 113 S. Ct. 580.
Plaintiffs also argue that the AWP statute "refers to" employee benefit plans because it directly regulates self-insured insurance plans. Plaintiffs point out that, by its terms, the Kentucky statute applies to "self-insured or multiple employee welfare arrangements, to the extent permitted by ERISA." Plaintiffs reason that since ERISA allows for limited state regulation of multiple employee welfare arrangements[3] [hereinafter "MEWAs"] but not self-insured ERISA plans, the Kentucky legislature meant the phrase "to the extent permitted by ERISA" to apply only to MEWAs. Therefore, Plaintiffs' argument continues, the AWP statute specifically "refers to" ERISA plans because it explicitly subjects self-insured ERISA plans to its provisions.
Although Kentucky's AWP law does explicitly mention self-insured employee benefit plans and MEWAs,[4] the Court rejects that mere reference alone is sufficient to trigger preemption. First, the Sixth Circuit specifically rejected this proposition in Thiokol Corp. v. Roberts, 76 F.3d 751, 759 (6th Cir. 1996) (holding that mere reference is not enough to trigger preemption; rather, law must clearly have a significant effect on employee benefit plans), cert. denied, ___ U.S. ___, 117 S. Ct. 2448, 138 L. Ed. 2d 206 (1997). Moreover, the Supreme Court recently clarified its "reference to" analysis by articulating two situations where "reference to" an employee benefit plan is sufficient to result in preemption. See California Div. of Labor Standards Enforcement v. Dillingham Construction, N.A., Inc., 519 U.S. 316, 117 S. Ct. 832, 838, 136 L. Ed. 2d 791 (1997).
First, the Supreme Court clarified that state law makes a "reference" to ERISA *996 where the law acts "immediately and exclusively" upon ERISA plans. Id. (citing Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 829, 108 S. Ct. 2182, 100 L. Ed. 2d 836 (1988)). In Mackey, the statute at issue singled out ERISA employee welfare benefit plans for exemption from otherwise generally applicable state garnishment procedures.[5]Id. at 829, 108 S. Ct. 2182. In holding the statute preempted because it "referred to" an employee benefit plan, the Court found significant the fact that the statute solely applied to ERISA employee benefit plans. Id. In the present case, although the AWP law does explicitly mention self-insured employee benefit plans and MEWAs, it does not act "immediately and exclusively" upon employee benefit plans since not all of the plans defined in the statute are employee benefit plans. Rather, the AWP law generally affects plans or contracts of insurance offered by risk-bearing entities.
Second, the Supreme Court clarified that state law "refers to" ERISA covered plans where the "existence of ERISA plans is essential to the law's operation." Dillingham, 117 S.Ct. at 834 (citing District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 130, 113 S. Ct. 580, 121 L. Ed. 2d 513 (1992); Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111 S. Ct. 478, 112 L. Ed. 2d 474 (1990)). In Greater Washington Bd. of Trade, the statute in question provided that "any employer who provides health insurance coverage for an employee" must provide "health insurance coverage equivalent to the existing health insurance coverage of the employee" while the employee is receiving or eligible to receive workers compensation benefits. Id. at 128, 113 S. Ct. 580. In concluding that the statute was preempted because it "referred to" employee benefit plans, the Court found significant that the statute imposed requirements on employers by reference to ERISA-covered programs. Id. at 130-31, 113 S. Ct. 580. Operation of the statute was premised on the existence of an employee health benefit plan. Id. at 131, 113 S. Ct. 580.
In Ingersoll-Rand, 498 U.S. at 135, 111 S. Ct. 478, the Supreme Court considered whether ERISA preempted an employee's state law cause of action for wrongful discharge. In holding the cause of action preempted, the Supreme Court again relied heavily on the fact that the state law cause of action was premised on the existence of an employee pension plan.
[T]he cause of action `allows recovery when the plaintiff proves that the principal reason for his termination was the employer's desire to avoid contributing to or paying benefits under the employee's pension fund.' Thus, in order to prevail, a plaintiff must plead, and the court must find, that an ERISA plan exists and the employer had a pension-defeating motive in terminating the employment.... [T]here simply is no cause of action if there is no plan.
Id. at 140, 111 S. Ct. 478. [Emphasis added] [Internal citations omitted]
In the present case, on the other hand, the existence of employee benefit plans is not essential to the operation of Kentucky's AWP law. By definition, the statute applies to the contracts or "plans" by which certain entities assume financial risk for various health-related occurrences. Although ERISA self-insured employee welfare benefit plans and MEWAs are among the risk-bearing entities referenced in the statute, these ERISA plans are by no means the only entities affected by the statute. Moreover, although the non-ERISA entities such as insurance companies and HMOs defined in the statute primarily contract directly with insured ERISA plans, they also contract with private individuals and groups not affected by ERISA. See Travelers Ins. Co. v. Cuomo, 14 F.3d 708, 711 (2d Cir.1993) (noting that [88%] of non-elderly Americans have private health care insurance through [ERISA] plans), rev'd on other grounds by New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 115 S. Ct. 1671, 131 L. Ed. 2d 695 (1995). Thus, the health benefit plans defined in Kentucky's AWP law need not necessarily be ERISA plans.
*997 b. "Connection with" an ERISA Plan
A law that does not "refer to" ERISA plans may still be preempted if it has a "connection with" ERISA plans. Dillingham, 117 S.Ct. at 838. Plaintiffs argue that the AWP law has a connection with ERISA plans because the law effectively requires all health benefit plans to include in their provider panels any provider willing to accept the terms and conditions offered by the plan. Plaintiffs contend that the law thus effectively mandates the benefit structure and administration of insured ERISA plans by precluding them from structuring their plans around preferred provider arrangements. In this regard, Plaintiffs argue that Kentucky's AWP statute is similar to the mandated benefit law in Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S. Ct. 2380, 85 L. Ed. 2d 728 (1985).
In Metropolitan Life, the Court considered whether a state law mandating mental health benefits for certain types of insurance coverage "relates to" ERISA plans. Id. at 731-32, 105 S. Ct. 2380. The statute at issue specified that minimum mental health benefits be provided all Massachusetts residents insured under a general insurance policy, an accident or sickness insurance policy, or an employee health care plan covering hospital and surgical expenses. Id. at 727, 105 S. Ct. 2380. The Court held that the mandated benefit law "relates to" ERISA plans because the statute bore "indirectly but substantially" on all insured employee benefit plans by effectively requiring the plans to purchase the mental health benefits when purchasing a certain kind of common insurance policy. Id. at 739, 105 S. Ct. 2380.
Courts have applied this same rationale to hold a state law preempted if it restricts the choices of a benefit plan regarding the plan's administration, structure, or benefits. See, e.g., FMC Corp. v. Holliday, 498 U.S. 52, 60, 111 S. Ct. 403, 112 L. Ed. 2d 356 (1990) (ERISA preempts state antisubrogation statute restricting structure of ERISA plans); Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 505, 101 S. Ct. 1895, 68 L. Ed. 2d 402 (1981) (ERISA preempts state statute insofar as statute prevents ERISA plans from decreasing benefits); United Wire Metal & Machine Health & Welfare Fund v. Morristown Memorial Hosp., 995 F.2d 1179, 1193 (3rd Cir.) (state statute may be preempted if statute's effect is to "dictate or restrict the choices of ERISA plans with regard to their benefits, structure, [or] reporting and administration"), cert. denied, 510 U.S. 944, 114 S. Ct. 382, 126 L. Ed. 2d 332 (1993). "By preventing states from imposing divergent obligations, ERISA allows each employer to create its own uniform plan, complying with only one set of rules (those of ERISA) and capable of applying uniformly in all jurisdictions where the employer might operate." Rosario-Cordero v. Corwley Towing & Transp. Co., 46 F.3d 120, 123 (1st Cir.1995).
Congress intended to ensure that plans and plan sponsors would be subject to a uniform body of benefits law; the goal was to minimize the administrative and financial burden of complying with conflicting directives among States or between States and the Federal Government..., [and to prevent] the potential for conflict in substantive law ... requiring the tailoring of plans and employer conduct to the peculiarities of the law of each jurisdiction.
New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656-57, 115 S. Ct. 1671, 131 L. Ed. 2d 695 (1995) (quoting Ingersoll-Rand, 498 U.S. at 142, 111 S. Ct. 478).
In response, Defendant maintains that the AWP law does not have a "connection with" ERISA because the Kentucky statute is a law of general applicability in an area traditionally regulated by the state and has only an indirect economic effect on ERISA plans. Moreover, Defendant argues, the statute does not bind plan administrators to a particular choice regarding the core administrative functions and responsibilities of ERISA plans. To support this argument, Defendant relies primarily on more recent Supreme Court pronouncements which define the "outer limits" of ERISA preemption. The "recent Supreme Court pronouncements recognize the impossibility of extracting meaningful limits from the statutory language alone, and reject such `uncritical literalism' in favor of analyzing `the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive'... [t]hese opinions also recognize the *998 importance of analyzing the purposes of the challenged legislation and the nature of the effect of such legislation on ERISA plans." American Drug Stores, Inc. v. Harvard Pilgrim Health Care, Inc., 973 F. Supp. 60 (D.Mass.1997).
In Travelers, 514 U.S. at 650, 115 S. Ct. 1671, the Supreme Court considered whether ERISA preempted a New York statute which required hospitals to collect surcharges from patients whose services were reimbursed by commercial health insurance and which also required HMOs to pay varying surcharges based on their number of Medicaid members. The purpose of the statute was to raise the cost of commercial insurance for carriers other than Blue Cross and Blue Shield, and to shift market shares back to economically threatened Blue Cross and Blue Shield plans. Id. at 658-59, 115 S. Ct. 1671. The Supreme Court rejected that the statute directly affected plan benefits or administration. Rather, the Court's focus was on whether the statute indirectly affected the economic choices made by plan administrators to such an extent as to trigger preemption. Id. at 659, 115 S. Ct. 1671.
In holding the statute not preempted, the Supreme Court reiterated that "[p]reemption does not occur ... if the state law has only a tenuous, remote, or peripheral connection with covered plans, as is the case with many laws of general applicability." Id. at 661, 115 S. Ct. 1671 (quoting District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 129 n. 1, 113 S. Ct. 580, 121 L. Ed. 2d 513 (1992)). The Court also noted that "nothing in the language of [ERISA] or the context of its passage indicates that Congress chose to displace general health care regulation," and that "laws with only an indirect economic effect on the relative costs of various health insurance packages... are a far cry from those `conflicting directives' from which Congress meant to insulate ERISA plans." Id. at 661-62, 115 S. Ct. 1671.
Even more recently, the Supreme Court rendered two decisions further expounding on the Travelers rationale. In California Division of Labor Standards Enforcement v. Dillingham Constr., 519 U.S. 316, 117 S. Ct. 832, 136 L. Ed. 2d 791 (1997), the Supreme Court held that a California "prevailing wage" statute, which had the effect of regulating an apprenticeship plan that was an employee welfare benefit plan, did not "relate to" employee benefit plans within the meanings of ERISA. As in Travelers, the Court looked to the objectives of ERISA and the nature and effect of the state law on ERISA plans. Id. at 840-842. Again, the Court's analysis started with the assumption that the historic police powers of the state would not be superseded absent clear indication that was Congress' intent. Id. at 840. The Court found that the indirect influence of the surcharge did not "preclude uniform administrative practices or the provision of a uniform interstate benefit package if a plan wished to provide one." Id.
In De Buono v. NYSA-ILA Medical & Clinical Services Fund, 520 U.S. 806, 117 S. Ct. 1747, 138 L. Ed. 2d 21 (1997), the Supreme Court held that ERISA did not preempt New York from imposing a gross receipts tax on medical centers which were owned and operated by an ERISA-covered employee benefit plan. The Court held that the New York law did not "dictate the choices facing ... ERISA plans." Id. at 1752. Rather, the Supreme Court found that the statute was "one of `myriad state laws' of general applicability that impose some burdens on the administration of ERISA plans but nevertheless do not `relate to' them within the meaning of [ERISA]." Id.
The Court finds it significant that these recent cases defining the "outer limits" of ERISA preemption clearly establish that the Supreme Court has not disavowed its earlier decisions. As previously noted, in reaching its decision in Travelers, the Supreme Court distinguished the surcharge statute from the mandated benefit laws at issue in Metropolitan Life and from laws which preclude uniform administrative practices of ERISA plans. Id. at 657-58, 662-63, 115 S. Ct. 1671. Based on this fact, the issue presently before the Court appears to rest on whether Kentucky's AWP law can be likened to a mandated benefit law or a law which affects uniform plan administration, or whether it is more akin to the statutes at issue in Travelers, Dillingham and De Buono statutes of general applicability with only an indirect economic effect on employee benefit plans.
The only published post-Dillingham and De Buono case involving an any willing provider *999 law is American Drug Stores, Inc. v. Harvard Pilgrim Health Care, Inc., 973 F. Supp. 60 (D.Mass.1997). In American Drug, the district court held that a state AWP law prohibiting the formation of restricted pharmacy networks did not "relate to" ERISA.[6]Id. at 69. In reaching its decision, the court rejected the defendants' argument that the statute "mandates employee benefit structures or administration." In this regard, the court noted that "[there] is no question that the Act's mandates are not directly applicable to ERISA plans, that is ERISA plans are not `carriers' and so may themselves offer pharmacy networks without complying with the Act's requirements." Id.
Dismissing the argument that the AWP statute mandated benefits or plan administration, the American Drug court then proceeded with a Travelers/Dillingham/De Buono type analysis. The court started with the presumption that Congress did not intend to supplant the AWP law because the law fell within an area of traditional state regulation the health care and insurance industries. Id. at 65. The court also compared the objectives of ERISA with those of the state law to see if the state law frustrated ERISA's goal to "avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans." Id. at 66 (quoting Travelers, 514 U.S. at 657, 115 S. Ct. 1671.)
The American Drug court noted that the Massachusetts law "in no way interferes with eligibility determinations, benefit calculations, disbursements, fund monitoring or recordkeeping." Id. at 67. The court also noted that "the establishment and operation of provider networks [does not] seem the type of activity which could become `nationally uniform' absent state interference. Selection of providers is inherently a local matter which involves a variety of regional factors, and it can hardly be expected that it could achieve the same national uniformity as standards for processing claims or making disbursements." Id. Moreover, the court noted that selection of provider networks is not a traditional function of ERISA plans, and "surely was not a function Congress contemplated in enacting ERISA." Id. The American Drug Court concluded that the involvement of ERISA plans in such activities as the establishment and operation of provider networks should not extend the scope of ERISA. Id.
In the present case, despite the fact that the Court wholeheartedly agrees with American Drug's position that not every law affecting plan administration merits preemption, the Court rejects Plaintiffs' argument that Kentucky's AWP does not have a "connection with," and therefore does not "relate to," employee health benefit plans. The Court bases this decision primarily on its belief that the AWP law is more akin to the mandated benefits law at issue in Metropolitan Life than to the statutes of general applicability at issue in Travelers, Dillingham and De Buono. By restricting risk-bearing entities from offering health benefit plans with restricted provider networks, the AWP law effectively mandates the benefit structure of employee benefit plans. Under Metropolitan Life, this "mandated benefit" is sufficient to support that Kentucky's AWP statute has a "connection" with employee benefit plans sufficient to trigger preemption.
Initially, the Court relies on dicta in Metropolitan Life which refers to mandated provider laws as a type of mandated benefit law regulating the substantive terms of insurance policies. Id. at 729, 105 S. Ct. 2380; see also Stuart Circle v. Aetna Health Management, 995 F.2d 500, 504 (4th Cir.) (same), cert. denied, 510 U.S. 1003, 114 S. Ct. 579, 126 L. Ed. 2d 478 (1993). Mandated provider laws require insurers to pay for the services of a particular type of health care provider, even if the terms of the policy provide that payment will be made only to another type of provider. For instance, a typical mandated provider law may provide that, if an insurance policy provides for reimbursement of visual services, an insured entitled to reimbursement under such policy is entitled to reimbursement regardless whether such services are performed by a duly licensed physician or by a duly licensed optometrist. States have enacted these statutes to give *1000 insured's freedom of choice to seek the services of podiatrist, chiropractors, osteopaths, occupational therapists and nurse midwives, among others. See generally Larry J. Pittman, "Any Willing Provider" Laws and ERISA's Saving Clause: A New Solution For An Old Problem, 64 Tenn. L.Rev. 409, 452 & nn. 189-90 (1997).
Under the circumstances, the Court finds little practical difference between mandated provider laws and any-willing provider laws:
A mandated provider law affirmatively mandates that insurers pay specified providers at the same reimbursement as preferred providers despite the nonpreferred status of those specified providers. An any willing provider law requires that preferred status be granted to any provider willing to meet specified terms and conditions. The end result of both types of laws is that the insurer must pay certain providers who are nonpreferred at the same rate as preferred providers. Consequently, the two types of laws are basically the same .... In other words, since both types of laws require that nonpreferred providers be paid at the same rate as preferred providers, it really does not matter whether the nonpreferred provider is a member of the provider list under an any willing provider law or a nonmember under a mandated provider law.
Id. at 453 n. 190. As a result of this similarity, Professor Pittman articulates that the dicta in Metropolitan Life is strong support for the argument that AWP statutes regulate the substantive terms of insurance policies in the same way as mandated provider laws. Id. at 452-53.
Moreover, in its ERISA "relates to" analysis, the Sixth Circuit has looked at whether an allegedly offending statute affects or regulates the relationship between the traditional ERISA entities the plan, the employer, the plan fiduciaries and the plan beneficiaries. Thiokol Corp. v. Roberts, 76 F.3d 751, 755 (6th Cir.1996), cert. denied, ___ U.S. ___, 117 S. Ct. 2448, 138 L. Ed. 2d 206 (1997). Arguably, the state laws at issue in Travelers, Dillingham and De Buono did not regulate the relationship between the traditional ERISA entities. Rather, those laws were laws of general applicability not specifically designed to affect the relationship between the plan, the employer, plan fiduciaries and plan beneficiaries. On the other hand, Kentucky's AWP law regulates the relationship between the principal ERISA entities. By regulating the contracts or "plans" offered by risk-bearing entities, the statute effectively precludes employers with insured ERISA plans from restricting provider networks. This, in turn, enables plan beneficiaries to exercise greater freedom of choice in selecting a provider.
From a practical standpoint, freedom of choice in selecting a personal physician is as important to many insureds as are the policy terms relating to coverage and costs. In this regard, the AWP law differs from general health care regulation regarding provider certification or from general state contract, zoning or tort legislation. Although Kentucky's AWP law does not give plan beneficiaries a per se right to select the physician of his or her own choice, the statute does effectively preclude insurer's from arbitrarily limiting provider panels to those providers preferred by the insurer. Thus, the AWP law is aimed at giving insureds greater freedom of choice in selecting a physician. Any law which affects so fundamentally an insureds' ability to select a health care provider of his or her own choice has more than merely an indirect economic effect on the administrative choices of plan administrators. In this respect, the Court notes a qualitative difference between Kentucky's AWP law and the surcharge held not preempted in Travelers, the "prevailing wage" law held not preempted in Dillingham and the gross receipts tax held not preempted in De Buono: the latter truly are laws of general applicability, while the former focuses directly on the relationship between the insurer and the insured.[7]
Based on the foregoing, the Court sees no difference between the Kentucky AWP statute *1001 and the mandated benefits law in Metropolitan Life. Kentucky's AWP statute effectively precludes insured ERISA plans from utilizing restricted provider networks. Under the holding of Metropolitan Life, the statute thus impermissibly regulates the substantive terms of the plan that an insured ERISA plan can offer its participants. By so doing, the statute bears "indirectly but substantially" on all insured plans. For this reason, the Court holds that Kentucky's AWP statute "relates to" ERISA.
2. "Saving" Clause Analysis
Having concluded that Kentucky's AWP law "relates to" ERISA, it is preempted unless saved by the savings clause. As previously mentioned, ERISA's saving clause expressly exempts from preemption any state law "which regulates insurance." 29 U.S.C. 1144(b)(2)(A). In Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 740-43, 105 S. Ct. 2380, 85 L. Ed. 2d 728 (1985), the Supreme Court articulated a two-prong test for determining whether a law "regulates insurance" within the meaning of the saving clause. First, the Court considered whether the law fit a common-sense definition of insurance regulation. Id. at 740-42, 105 S. Ct. 2380. Second, the Court considered three criteria taken from case law interpreting the phrase "business of insurance" under the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-15:
[F]irst, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry.
Id. at 743, 105 S. Ct. 2380.
There is a split of authority among courts which have considered whether a state AWP law is "saved" from preemption as a law which "regulates insurance." The Court notes, however, that some of the AWP laws held not "saved" are distinguishable based on their wording. Furthermore, unlike other circuits, the Sixth Circuit has held that it is not necessary for a law to satisfy all three of the McCarran-Ferguson factors in order to be found a law which regulates insurance. See Davies v. Centennial Life Ins. Co., 128 F.3d 934, 940 (6th Cir.1997); accord Cisneros v. UNUM Life Ins. Co., 134 F.3d 939, 946 (9th Cir.1998) (determining that the McCarran-Ferguson factors are "simply relevant considerations or guideposts, not essential elements of a three-part test that must each be satisfied for a law to escape preemption.") Id. The Court's decision is also influenced by the fact that the AWP statute does not clearly fail any of the relevant criteria. With the foregoing in mind, it is this Court's opinion that Kentucky's AWP statute is one of those broad category of laws which "regulate insurance" and thus falls within the scope of the "saving" clause.
a. Common sense test
To satisfy the common sense test, "a law must not just have an impact on the insurance industry, but must be specifically directed toward that industry." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 50, 107 S. Ct. 1549, 95 L. Ed. 2d 39 (1987) (holding that common law action resulting from bad faith refusal to pay a claim did not pass "common sense" test because the action evolved from general principles of contract and tort law); see also Williams v. Ashland Engineering Co., Inc., 45 F.3d 588, 592 (1st Cir.1995) (concluding that law whose "impact on the insurance industry [was] happenstance" was not directed toward business of insurance).
Plaintiffs maintain that the AWP statute does not pass the common sense test because it is not aimed at the relationship between the insurance company and the policyholder; rather, Plaintiffs argue, the AWP law focuses solely on the relationship between health benefit plans and health care providers. Plaintiffs also argue that the Kentucky statute does not meet the common sense test because, by its express terms, the statute affects self-insured plans and MEWAs and, therefore, is not specifically limited to the insurance industry.[8]
*1002 Defendant argues that the AWP law passes the common sense test because the law is specifically directed toward the insurance industry. The Court agrees. To begin with, the Court rejects that the AWP law is focused on the relationship between health benefit plans and health care providers. The statute establishes that certain plans or contracts through which the regulated entities assume financial risk cannot include restricted provider networks. Therefore, although the statute affects the relationship between insurers and providers, its focus appears to be on the contractual relationship between the insurer and the policyholder. The statute affects specific terms of the insurance policies. See International Resources v. New York Life Ins. Co., 950 F.2d 294, 300 (6th Cir.1991) (statute satisfies common sense test where it affects specific terms of the insurance policy), cert. denied, 504 U.S. 973, 112 S. Ct. 2941, 119 L. Ed. 2d 565 (1992). The Court finds this fact, as a matter of common sense, sufficient to establish that the AWP regulates insurance.
Furthermore, the AWP law is located in KRS Chapter 304, which constitutes the Kentucky Insurance Code. See Stuart Circle Hospital Corp. v. Aetna Health Management, 995 F.2d 500, 503 (4th Cir.) (Virginia's AWP law satisfies "common sense" test because it is part of state's comprehensive insurance code), cert. denied, 510 U.S. 1003, 114 S. Ct. 579, 126 L. Ed. 2d 478 (1993). Other than traditional insurance companies, the entities regulated by Kentucky's AWP include 1) HMOs, which are required to get a certificate of authority in KRS 304.38-035; 2) provider-sponsored integrated health delivery networks, which are required to obtain certification pursuant to KRS 304.17A-300; and 3) MEWAs, which ERISA specifically does not exempt from state insurance laws to the extent those state laws do not conflict with ERISA. Each of these entities is regulated by the Kentucky Department of Insurance. Moreover, the regulated entities are recognized as "insurers or insurer-related entities which, for a fee, assume the risk entailed in ensuring that their customers receive health care." American Drug, 973 F.Supp. at 70.
Finally, in Metropolitan Life, 471 U.S. at 740, 105 S. Ct. 2380, the Supreme Court applied the "common sense" test in a cursory fashion, merely noting that "[t]o state the obvious, [the mandated mental health benefits law] regulates the terms of certain insurance contracts, and so seems to be saved from preemption by the saving clause as a law `which regulates insurance.'" The summary nature of the Court's analysis and the fact that this is a "common sense" test supports that this is not a determination requiring a formalistic approach. See also FMC Corp. v. Holliday, 498 U.S. 52, 61, 111 S. Ct. 403, 112 L. Ed. 2d 356 (1990) (holding that state law precluding insurers from creating a right to subrogation against a claimant's tort recovery passed common sense test because it was "aimed at" insurance industry).
b. Transferring or Spreading of Risk
The Supreme Court has explained that the term "risk," as used here, refers to the risk of injury for which the insurance company contractually agreed to compensate the insured. Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 130, 102 S. Ct. 3002, 73 L. Ed. 2d 647 (1982). Plaintiffs maintain that Kentucky's AWP law does not affect the initial apportionment of risk at the inception of the insurance contract. Instead, Plaintiffs argue, the AWP law affects only who must be able to provide services to the insured after the risk has been spread.
Defendant, on the other hand, relies primarily on Stuart Circle Hospital Corp. v. Aetna Health Management, 995 F.2d 500, 503-04 (4th Cir.1993), where the court held that a state AWP statute has a sufficient effect on the spreading of risk to satisfy the Metropolitan Life test:
If [an insurance company] unreasonably restricts the providers of treatment, even though they meet the insurer's standards, it denies an insured the choice of doctor ... that may best suit the insured's needs, unless the insured is willing and able to pay all or part of the cost of the doctor or hospital that is not preferred by the insurer. This is a restriction of the insured's benefits. By its prohibition against unreasonable restriction of providers, the Virginia *1003 statute spreads the cost component of the policyholder's risk among all the insureds, instead of requiring the policyholder to shoulder all or part of this cost when seeking care or treatment from an excluded doctor... of his or her own choice.... [T]he statute indirectly affects the insured's choice of provider and the consequent cost to the insured if he or she deems an excluded provider to be better qualified for treatment of a specific illness or accident. In this way it affects the risk that an insured must bear.
The Court agrees with this rationale. Insurance contracts containing "preferred provider" provisions commonly reimburse insureds by using higher deductibles and/or copayments at a lower percentage rate for using a provider not on the preferred list. Allowing some insureds to receive treatment from providers not originally on the preferred provider list transfers some of the cost component of the insured's risk to the insurer. In this respect, Kentucky's AWP law is akin to the mandated benefits law in Metropolitan Life. Although the statute in Metropolitan Life altered the substantive scope of coverage, whereas Kentucky's AWP statute alters a cost component relating to coverage, both statutes effectively transfer some degree of financial risk from the insured to the insurer. See Texas Pharmacy Ass'n v. Prudential Ins. Co., 105 F.3d 1035, 1041 (5th Cir.) (prior version of statute affects spreading of risk because it influenced which costs were ultimately borne by the insurer and which were borne by the beneficiary), cert. denied, ___ U.S. ___, 118 S. Ct. 75, 139 L. Ed. 2d 34 (1997); American Drug, 973 F.Supp. at 71 (statute affects spreading of risk "because, by enabling insureds to fill their prescriptions at additional pharmacies, it transfers some of the cost of treatment which is the risk insured against from the insured to the carrier").
c. Integral Part of Relationship Between the Insurer and the Insured
In Metropolitan Life, 471 U.S. at 743, 105 S. Ct. 2380, the Supreme Court articulated that mandated-benefit statutes affect the relationship between the insurer and the insured. By imposing "requirements only on insurers, with the intent of affecting the relationship between the insurer and the policyholder, ... [mandated benefit statutes relate] to the regulation of the business of insurance as defined in the McCarran-Ferguson Act." Id.
Congress was concerned [in the McCarran-Ferguson Act] with the type of state regulation that centers around the contract of insurance.... The relationship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement these were the core of the `business of insurance.' [T]he focus [of the statutory term] was on the relationship between the insurance company and the policyholder. Statutes aimed at protecting or regulating this relationship, directly or indirectly, are laws regulating the `business of insurance.' [Emphasis in original]
Id. at 743-44, 105 S. Ct. 2380 (Emphasis added) (quoting SEC v. National Securities, Inc., 393 U.S. 453, 460, 89 S. Ct. 564, 21 L. Ed. 2d 668 (1969)).
By requiring insurers to accept on their panel any provider willing to accept the terms for participation, Kentucky's AWP statute effectively dictates a substantive term in the contract between the insurer and the insured and, as a result, is integral to that relationship. See Stuart Circle, 995 F.2d at 503 ("[T]reatment and cost are important components of health insurance. Regulations governing these components... are integral parts of the relationship between insurer and insured.")
d. Limited to Entities Within the Insurance Industry
As previously discussed, Kentucky's AWP regulates traditional insurance companies as well as HMOs, provider-sponsored integrated health delivery networks and MEWAs. Each of these entities is regulated by the Kentucky Department of Insurance. For a fee, each of these entities accepts the risk and responsibility of providing health care benefits to member-insureds. Whatever difference in form or structure that exists as between traditional insurance companies and HMOs, MEWAs, and provider-sponsored integrated health delivery networks is insufficient to establish that Kentucky's AWP law is not limited to entities within the insurance industry. To hold otherwise would require *1004 the Court to recognize form over substance and to refuse to recognize the natural evolution of the health insurance industry. Cf. SEC v. Variable Annuity Life Ins. Co., 359 U.S. 65, 71, 79 S. Ct. 618, 3 L. Ed. 2d 640 (1959) (We realize that life insurance is an evolving institution. Common knowledge tells us that the forms have greatly changed even in a generation. And we would not undertake to freeze the concepts of "insurance" ... into the mold they fitted when these Federal Acts were passed.)
On balance, the Court believes that Kentucky's AWP statute is a law properly saved from ERISA preemption. In reaching this decision, the Court recognizes Plaintiffs' argument that the "saving" clause factors should be applied narrowly in accordance with the Supreme Court's analysis in Group Life & Health Insurance Co. v. Royal Drug Co., 440 U.S. 205, 99 S. Ct. 1067, 59 L. Ed. 2d 261 (1979) The Court, however, finds the present circumstances distinguishable from those in Royal Drug.
Royal Drug concerned an antitrust challenge by independent pharmacies to Blue Shield's practice requiring participating pharmacies to accept a $2 payment from insureds and be reimbursed for the remainder of the cost by Blue Shield. Unlike the present case, Blue Shield's policy essentially did not concern policyholders because it did not affect their ability to obtain reimbursement. American Drug, 973 F.Supp. at 71. The focus was on the agreement between Blue Shield and participating pharmacies and whether this agreement was part of the business of insurance. Id. Because policyholders were basically unaffected by the agreement, the challenged policy clearly did not affect the transfer of risk. Id.
In the present case, however, the AWP does affect the ability of policyholders to obtain reimbursement. There is evidence in the record that certain providers have requested admission to health benefit plans from which they have been excluded. If the excluded doctors are admitted to these plans pursuant to the AWP statute, patients who seek treatment from them will be reimbursed at a different rate. Broadening the provider network shifts certain costs of treatment from the insured to the insurer.
Notably, the Royal Drug Court "emphasized that `quite different' questions are raised by the McCarran-Ferguson Act's exemption of the business of insurance from antitrust laws and by its preservation of state regulation of the activities of insurance companies." See American Drug, 973 F.Supp. at 72 (citing Royal Drug, 440 U.S. at 218 n. 18, 99 S. Ct. 1067 (explaining that the McCarran-Ferguson Act broadly preserves the business of insurance for state regulation while narrowly exempting only "the business of insurance" from the antitrust laws)).
Moreover, commentators have suggested that the recent Supreme Court decision in United States v. Fabe, 508 U.S. 491, 113 S. Ct. 2202, 124 L. Ed. 2d 449 (1993),[9] also supports a less narrow application of the savings clause in the ERISA context. See generally Karen A. Jordan, ERISA Pre-Emption, Integrating Fabe into the Savings Clause, 27 Rutgers L.J. 273 (1996) Larry J. Pittman; "Any Willing Provider" Laws and ERISA's Saving Clause: A New Solution for an Old Problem, 64 Tenn. L.Rev. 409 (1997). Although Fabe is not an ERISA case and courts generally have not applied its holding in the ERISA context,[10] it does reiterate the *1005 Supreme Court's statements in Royal Drug and arguably suggests that the Court's present analysis, which involves a state insurance regulation, is not an overly broad application of the McCarran-Ferguson criteria.
The Court having thoroughly reviewed the matter, having set forth its views above, and being otherwise sufficiently advised,
IT IS HEREBY ORDERED:
1. That the Motion for Summary Judgment by Plaintiffs, Community Health Partner's Inc. and Reservoir Health Services, Inc. d/b/a Center Care, is denied; and
2. That the Motion for Summary Judgment by Defendant, Commonwealth of Kentucky ex rel. George Nichols III, Commissioner of Insurance is granted.
NOTES
[1] An HMO is an organization in which the HMO itself and/or physicians participating in the HMO accept contractual responsibility for the delivery of certain health care services to HMO members in exchange for an advance capitation payment. See generally Barry R. Furrow et al., Health Law § 11-11 (1995). In this manner, the HMO assumes financial risk similar to that assumed by a traditional insurance company.
[2] Community Health is operated by a for-profit corporation owned by physicians and Commonwealth Health Corporation, which operates the Medical Center in Bowling Green, Kentucky. Center Care is owned by Commonwealth Health Corporation.
[3] 29 U.S.C. § 1144(b)(6)(A)(ii) allows States to regulate certain MEWAs to the extent state law is "not inconsistent with" ERISA.
[4] The fact that the Kentucky legislature chose to allow for regulation of MEWAs and self-insured plans "to the extent permitted by ERISA" suggests that the legislature was well aware of the preemptive force of ERISA. As noted by Defendant, the phrase appears merely to restate the "deemer clause" by exempting self-insured ERISA plans from the scope of the AWP statute. The "deemer clause" prevents a state law from "deeming" an employee benefit plan to be an insurance company for the purpose of any law purporting to regulate the business of insurance. 29 U.S.C. 1144(b)(2)(B). The deemer clause thus effectively prevents states from subjecting self-insured plans to state insurance regulation. On the other hand, insured plans plans that purchase insurance are subject to state laws regulating the insurance industry. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 732, 105 S. Ct. 2380, 85 L. Ed. 2d 728 (1985).
[5] The Georgia statute barred the garnishment of "[f]unds or benefits of [an]... employee benefit plan or program subject to...[ERISA]." Id. at 828, 105 S. Ct. 2380 (quoting Ga.Code Ann. § 18-4-22.1 (1982)).
[6] The Massachusetts statute precluded an insurance carrier from "imposing any agreements terms or conditions on any non-network ... which are more restrictive than those required of any pharmacy in the carrier's restricted pharmacy network." Id. at 61.
[7] Interestingly, the American Drug court recognized that the Massachusetts' AWP law was "an integral part of the relationship between the insurer and insured because it affects the substantive terms of the policy by broadening the range of providers that an insured may choose." Id. at 71. Under the circumstances, it seems to some extent contradictory to find that an AWP law fundamentally affects the substantive terms of the policy between the insurer and insured but that the law does not impact the structure of or have a "connection with" employee health benefit plans.
[8] As previously mentioned, the Court rejects that the AWP statute applies both to self-insured plans or plans provided by a MEWA. By its plain terms, the statute is applicable to these entities only "to the extent permitted by ERISA."
[9] In Fabe, the Supreme Court considered whether a federal priority statute giving the United States first priority preempted a state statute giving the United States fifth priority to the assets of a bankrupt insurance company. Id. at 495-96, 113 S. Ct. 2202. The Court held the federal statute preempted to the extent the state law protected the interests of policyholders. Id. at 506, 113 S. Ct. 2202. In reaching its decision, the Court focused on the meaning of the phrase "business of insurance" as used in the McCarran-Ferguson Act. Id. at 505, 113 S. Ct. 2202. The Court articulated that, by its express language, the McCarran-Ferguson Act broadly reserves to the States the power to enact laws "for the purpose of regulating the business of insurance," while narrowly exempting from federal antitrust laws only those laws constituting the "business of insurance." Id.
[10] In Prudential Ins. Co. v. National Park Medical Ctr., 964 F. Supp. 1285, 1299 (E.D.Ark.1997), the court rejected the defendants argument that Fabe replaces the test for the "business of insurance." In Franklin H. Williams Ins. Trust v. Travelers Ins. Co., 50 F.3d 144, 151 (2nd Cir.1995), the appellate court noted that "Fabe, although not an ERISA case, makes clear that the [Supreme Court] continues to grant considerable deference to state regulation of insurance."
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14 F. Supp. 2d 752 (1998)
Dennis HOWELL, et al., Plaintiffs,
v.
ANNE ARUNDEL COUNTY, Maryland, et al., Defendants.
No. CIV.A. AMD 96-3787.
United States District Court, D. Maryland.
July 29, 1998.
Michael L. Marshall, Schlachman, Belsky & Weiner, Baltimore, MD, (Ober, Kaler, Grimes & Shriver, of counsel), for plaintiffs.
Phillip F. Scheibe, David Plymer, Annapolis, MD, for defendants.
*753 MEMORANDUM
DAVIS, District Judge.
The Plaintiffs are five current police officers and one retired police officer of Anne Arundel County and the Fraternal Order of Police (FOP), their union. In this action, they seek injunctive and declaratory relief against the County and several of its officials (sued in their official capacities) (referred to jointly hereinafter as "the County") in respect to recent modifications by the County Council of the officers' retirement plan, which they assert violate the Contract Clause of the federal constitution and state law. Jurisdiction exists under 28 U.S.C. § 1331. Before the court is the County's motion for summary judgment. No hearing is necessary. I conclude for the reasons stated below that there exists no dispute of material fact and that the County is entitled to judgment as a matter of law on Plaintiffs' federal claims. Fed.R.Civ.P. 56. I decline to exercise supplemental jurisdiction over the state law claims. Accordingly, the case will be dismissed with prejudice, in part, and without prejudice, in part.
(i)
On December 2, 1996, the Anne Arundel County Council enacted Bill No. 88-96, which became effective on February 1, 1997. The ordinance effected two changes to the County's Police Service Retirement Plan (hereinafter "the plan") which the Plaintiffs deem objectionable.
First, Bill No. 88-96 reduced prospectively only the maximum amount of annual increases in participants' benefits via a modification of the formula used to calculate the annual Cost of Living Adjustment (COLA) payable under the plan. Significantly, Bill No. 88-96 mandates no change in the COLA adjustment to benefits earned before its effective date. In short, therefore, cost-of-living adjustments to benefits earned prior to February 1, 1997, will continue to be calculated under the formula in place before Bill No. 88-96 became law. Thus, officers who were hired and earned qualified benefits prior to February 1, 1997, will upon retirement (and their survivors upon their deaths) have their annual COLA adjustments calculated under a bifurcated formula.[1]
Second, Bill No. 88-96 requires the plan to pay its own expenses. Before this amendment, the law defined the "pension fund" as "the assets of the fund established to pay benefits under this plan." Bill No. 88-96 changed the definition of "pension fund" to read "the assets of the fund established to pay the benefits and expenses of this plan." (emphasis supplied). As amended, the law specifies that "[t]he pension fund shall provide funding for ... the cost of administering the plan and the pension fund." Under Bill No. 88-96, then, the pension fund will pay its own administration expenses, and according to Plaintiffs, will likely have a lower fund balance available to pay benefits to pensioners.[2]
*754 Plaintiffs contend that the changes to the plan described above violate the Contract Clause of the United States Constitution and the state law doctrine of promissory estoppel.[3]
(ii)
The parties agree that in Maryland, as in most states, public employee pension plans embody contractual rights and duties between an employee and the government as employer under the well-settled Contract Clause analytical approach. The County concedes that "[i]t now is generally accepted that the retirement plans of state and local governments give rise to contractual rights within the scope of the Contract Clause." Defs.' Mem. Supp. Mot. Summ. J. at 7. Maryland law defines the scope and incidents of the "contract." See Kestler v. Bd. of Trustees of North Carolina Local Governmental Employees' Retirement System, 48 F.3d 800, 803 (4th Cir.) (construing North Carolina law), cert. denied, 516 U.S. 868, 116 S. Ct. 186, 133 L. Ed. 2d 124 (1995); Baker v. Baltimore County, Md., 487 F. Supp. 461, 466-67 (D.Md. 1980), aff'd, 660 F.2d 488 (4th Cir.1981) (table).
(iii)
The gravamen of the parties' disagreement in the case at bar is over the question when Plaintiffs' contractually enforceable rights accrue under the plan. As an initial matter, the County notes that the pension rights of several of the Plaintiffs have not vested, and it argues that those Plaintiffs have no standing to sue. Specifically, the County argues without contradiction that to qualify for retirement under the plan, a participant must complete 20 years of service with the County or reach age 50 while employed. I agree that the record is clear in this regard, and accordingly, plaintiffs Howell, Simmons and Wild lack article III standing to litigate the issues raised in this case because they have no vested benefits under the plan. See generally Burke v. City of Charleston, 139 F.3d 401, 404-05 (4th Cir.1998) ("The standing requirement, `perhaps the most important' condition of justiciability, ... ensures a litigant has a sufficient personal stake in an otherwise justiciable controversy such that the judicial process appropriately should resolve the controversy.") (citations omitted).
The County concedes, however, that plaintiffs Shaffer and Tucker have satisfied the conditions for normal retirement by accumulating 20 years of credited service. (Plaintiff Bates, having already retired, and thus being wholly unaffected by the change in the COLA formula, lacks standing to challenge it.). Thus, two of the six individual plaintiffs have a claim to "vested" pension rights. Nevertheless, as is explicated infra pp. 5-9, for purposes of my Contract Clause analysis of their claims, Plaintiffs Shaffer and Tucker, who were eligible for a full pension but not yet retired on the effective date of Bill No. 88-96, are treated as if they were retired on that date. This imperative is justified because, as with Plaintiff Bates, both factually and legally, Bill No. 88-96 will have no retroactive impact whatsoever on their vested benefits. It is this and only this potential harm retroactive diminution of vested benefits which is accorded constitutional protection by the Contract Clause. Cf. Parker v. Wakelin, 123 F.3d 1 (1st Cir.1997), cert. denied, ___ U.S. ___, 118 S. Ct. 1675, 140 L. Ed. 2d 813 (1998). Unlike Bates, however, because Shaffer and Tucker in fact have not yet retired and continue to accrue retirement "credits," they satisfy the minimum injury in fact requirements to establish article III standing.
(iv)
The Contract Clause of the United States Constitution reads: "No State shall *755 ... pass any Law impairing the Obligation of Contracts ...." U.S. CONST., art. I, § 10, cl. 1. The Clause initially applied only to state attempts to interfere with contracts between private parties. The Supreme Court gradually expanded the Clause's scope, however, and the Court has invalidated legislation which interferes with a contract between private individuals and the state.
As noted in General Motors Corp. v. Romein, 503 U.S. 181, 186, 112 S. Ct. 1105, 117 L. Ed. 2d 328 (1992), the Supreme Court has applied a settled analytical approach to analyze whether a contractual right has been violated by a state law under the Contract Clause. The First Circuit recently summarized the threshold issues in that analysis:
[T]he Supreme Court has elaborated an analysis under which a court must first ascertain whether a change in state law has resulted in "`the substantial impairment of a contractual relationship.'" General Motors Corp. v. Romein, 503 U.S. 181, 186, 112 S. Ct. 1105, 1109, 117 L. Ed. 2d 328 (1992) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244, 98 S. Ct. 2716, 2722, 57 L. Ed. 2d 727 (1978)). Next, the reviewing court must determine whether the impairment is nevertheless justified as "reasonable and necessary to serve an important public purpose." United States Trust Co., 431 U.S. at 25, 97 S. Ct. at 1519.... The first step described above can be further broken down into "three components: whether there is a contractual relationship, whether a change in law impairs that contractual relationship, and whether the impairment is substantial."
Parker, 123 F.3d at 4-5.
A straightforward application of this analytical model makes it readily evident that, under the circumstances of this case, the County's prospective reduction in the rate of increase of future pension benefits which had not yet vested does not constitute an "impairment" that entitles an employee to obtain judicial relief on the basis of a Contract Clause challenge.
Plaintiffs' Contract Clause claims fail because the pension law change complained of here applies exclusively prospectively and not retroactively to vested benefits; there is no "impairment." See Baker, 487 F.Supp. at 475 ("Herein there seemingly was no impairment because no contract rights had vested when the legislative change was made."). In Maryland State Teachers Association, Inc. v. Hughes, 594 F. Supp. 1353 (D.Md.1984), Judge Miller noted the difference between prospective and retroactive changes under a Contract Clause analysis:
A very important prerequisite to the applicability of the Contract Clause at all to an asserted impairment of a contract by state legislative action is that the challenged law operate with retrospective, not prospective effect. Ogden v. Saunders, 25 U.S. 213, 12 Wheat. 213, 6 L. Ed. 606 (1827). See also Old Wine in Old Bottles: the Renaissance of the Contract Clause, [1979] SUPREME COURT REV. 95, 99. United States Trust Co., supra, explicitly restates the existence of statutory retroactivity as a necessary predicate for the applicability of the Contract Clause. United States Trust Co., 431 U.S. at 18 n. 15, 97 S. Ct. at 1515 n. 15. The opinions in both United States Trust Co. and Spannaus strongly assert that the challenged legislation involved was retroactive and thus, inferentially, impaired the subject contracts. United States Trust Co., 431 U.S. at 14, 97 S. Ct. at 1513; Spannaus, 438 U.S. at 246, 247, 249, 98 S. Ct. at 2723, 2724, 2725. No Supreme Court decision has been found in this court's research which has invalidated a non-retroactive state statute on the basis of the Contract Clause.
Id. 594 F.Supp. at 1360-61.[4] Since the Hughes decision 14 years ago, the Supreme *756 Court has yet to declare invalid a state law with only prospective effect under the Contract Clause. As the County correctly notes, "[n]o reported case applying Maryland law has imposed any limitation on the right of a government to make prospective changes to non-vested plan benefits." Defs.' Mem. Supp. Mot. Summ. J. at 14 (emphasis in original). As stated earlier, the new COLA formula would only apply prospectively to benefits not yet earned by an employee on its effective date, and in that sense (the sense that matters for federal constitutional purposes) the employee's previously-earned benefits would remain unaffected. Of course, as explained supra, one who was already retired when Bill No. 88-96 was enacted would remain wholly unaffected by the change.
The County thus correctly argues that because Bill No. 88-96 effected no retrospective diminution of benefits, there has been no "impairment" within the meaning of the Contract Clause. The County goes further, however, to argue that this court should nevertheless conduct a state law analysis to determine whether "[p]rospective changes to vested benefits are ... `reasonably intended to preserve the integrity of the pension system by enhancing its actuarial soundness ... without serious detriment to the employee,'" quoting City of Frederick v. Quinn, 371 A.2d 724, 726 (Md.Ct.Sp.App.1977), and whether "prospective changes to [non-vested] benefits ... [are] `reasonable,'" citing Saxton v. Board of Trustees of the Fire and Police Employees Retirement System, 266 Md. 690, 296 A.2d 367, 369 (1972) (emphases added). I decline to do so.
In this respect, the County has accepted, at least in part, Plaintiffs' approach to their claims, which is rooted in the unarticulated premise that upon the commencement of their employment, there existed a constitutional barrier, as opposed to a state law "reasonableness" requirement, to any prospective modification to the plan. As Baker and Hughes strongly intimate, and as I specifically conclude, the constitutional curtain of protection simply does not extend so far in Maryland. Cf. Parker, 123 F.3d at 7-8 (discussing various states' approaches to the issue of public pension vesting rights, and recognizing the difference between state law concepts of "vesting," on the one hand, and constitutional concepts of "vested rights" subject to impairment, on the other hand.).
The law in other states might helpfully be contrasted with that in Maryland to illuminate the point. California courts, for example, have noted that California law, unlike Maryland law, generally regards pension provisions in existence at the time of the commencement of public employment, and which are adopted during public employment, to be all but unalterable; rights vest upon employment. See United Firefighters of Los Angeles City v. City of Los Angeles, 210 Cal. App. 3d 1095, 1116, 259 Cal. Rptr. 65 (1989) ("Under Maryland law, future pension benefits vest as they are proratedly earned .... This is contrary to California law.") (distinguishing Hughes) (citations omitted), cert. denied, 493 U.S. 1045, 110 S. Ct. 843, 107 L. Ed. 2d 837 (1990); and see Miller v. State, 18 Cal. 3d 808, 135 Cal. Rptr. 386, 557 P.2d 970, 974 (1977) ("[T]he right to pension benefits vests upon the acceptance of [governmental] employment.").
Hence, although it is true that state law informs the analysis of the question whether a contract exists, the question whether there has been an "impairment" is a federal question. See, e.g., Kestler, 48 F.3d at 803 ("[W]e note that the issue of whether a contract right exists is governed by state law, while federal law governs a determination that a contract has been impaired ...."). Resolution of that federal question in favor of a governmental defendant in the analysis of a Contract Clause challenge to a pension modification exhausts the federal court's federal question jurisdiction, see generally Yellow Cab Co. v. City of Chicago, 3 F. Supp. 2d 919, 922-925 (N.D.Ill.1998) (granting motion to dismiss under Fed.R.Civ.P. 12(b)(6) for failure *757 to state claim under Contract Clause; no cognizable impairment of contract alleged, merely a breach of contract), and I decline to exercise supplemental jurisdiction in this case. See also Baker, 487 F.Supp. at 464-66 & n. 10.
In sum, applying settled doctrine in the case at bar, it is clear that no further Contract Clause analysis of the change effected by Bill No. 88-96 is necessary or appropriate. See Kestler, 48 F.3d at 803 n. 5 ("We hold that there was no impairment of a contract because Kestler's rights had not vested until he retired"); Parker, 123 F.3d at 9 ("Because there is no attempt here to take away retirees' benefits, there can be no plausible contract clause claim in this case."). There has been no constitutionally cognizable "impairment" in this case because there has been no retroactive diminution of benefits or any other infringement of vested rights or entitlements. See text and n. 1 supra. Whether state law provides a remedy to Plaintiffs, as they assert, is a question as to which I express no opinion.
(v)
For the reasons set forth, I am persuaded that the County is entitled to judgment as a matter of law as to Plaintiffs' claims arising under the Contract Clause and under 42 U.S.C. § 1983. See Andrews v. Anne Arundel County, Maryland, 931 F. Supp. 1255, 1267 (D.Md.1996) (holding that Contract Clause claim may not be asserted under 42 U.S.C. § 1983), aff'd, 114 F.3d 1175, 1997 WL 321573 (4th Cir.1997), cert. denied, ___ U.S. ___, 118 S. Ct. 600, 139 L. Ed. 2d 489 (1997). The federal claims having thus been eliminated from the case, I decline to exercise supplemental jurisdiction over the state law claims. See 28 U.S.C. § 1367(c)(3).
NOTES
[1] The old formula was calculated by determining the percentage by which the average of the twelve most recent monthly Consumer Price Indexes (CPIs) exceeded the corresponding average index as of the participant's date of retirement. A retiree could not receive a COLA increase of greater than 4%.
The new formula calculates the COLA by measuring the annual percentage change in the CPI, with a yearly percentage increase in pension benefits limited to 60% of the percentage change in the CPI, or 2½%, whichever is less. The new formula, therefore, reduces a retiree's COLA adjustment to annual increases of not more than 2½ %, while under the old formula a employee could potentially receive up to a 4% COLA increase.
As stated in text, the new COLA formula applies only to benefits accrued after the date of enactment of the legislation. If an officer had already retired by that date, the new COLA provision would not ever apply. If, however, the officer was on active duty on February 1, 1997, the new COLA provision would apply only to that service the officer accumulates after the legislation's effective date.
[2] Plaintiffs' Amended Complaint also alleges that even before the enactment of Bill No. 88-96, the County began paying administrative costs directly from plan assets rather than from other county revenue. See Amended Complaint ¶¶ 20-23. Plaintiffs have not sought to explain how such a practice, with or without statutory authority, could conceivably violate the federal constitution. The County funds the great bulk of the benefits payable by the plan (employees make a contribution of 6% of their salaries), as well as the costs of administering the plan. Thus, apart from the relatively insignificant 6% employee contribution, both before and after the effective date of Bill No. 88-96, the County funds all plan expenditures, benefits and expenses alike. Manifestly, therefore, neither the claim to have such monies "returned" to the plan, nor the claim to enjoin the practice in the future, states a substantial federal question, and I shall not consider it further.
[3] In a belated supplemental memorandum, Plaintiffs attempted to inject into the case the issue whether the enactment of Bill No. 88-96 violated the FOP's collective bargaining agreement with the County. In view of the absence of any motion to amend the Amended Complaint, and in view of the dismissal of the state law claims, the request to file a supplemental memorandum is denied.
[4] Hughes rejected a constitutional challenge to a pension benefits reduction similar to that challenged here. In that case, a pension plan modification, inter alia, capped COLA increases at 3% for service rendered after the effective date of the change. Hughes, 594 F.Supp. at 1358, 1363. There, as here, benefits earned before the act's effective date would continue to be calculated under the old COLA (in Hughes, a potentially unlimited COLA; in the instant case, a CPI average, capped at 4% of retirement benefits per annum). Id. The Hughes court concluded: "In this most important sense, therefore, the 1984 Act, as contrasted with the effect of the invalid statutes in United States Trust Co .... and Spannaus ..., do not retroactively deprive the plaintiff class of benefits or rights for which they had bargained." Id. 594 F.Supp. at 1363-64; and see id. ("Without belaboring the point further, this court has concluded on the basis of the undisputed facts in the record that the purported contract rights of the plaintiff class have not been impaired by the 1984 Act.").
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14 F. Supp. 2d 271 (1998)
Esther KATZ, Plaintiff,
v.
MCI TELECOMMUNICATIONS CORPORATION, Defendant.
No. 98-CV-0812 (FB).
United States District Court, E.D. New York.
August 4, 1998.
*272 Jeffrey M. Katz, Forest Hills, New York City, for Plaintiff.
Stephen R. Reynolds, Gibbons, Del Deo, Dolan, Griffinger & Vecchione, New York City, for Defendant.
MEMORANDUM AND ORDER
BLOCK, District Judge.
Plaintiff Esther Katz ("Katz") alleges that a telemarketer employed by defendant MCI Telecommunications Corporation ("MCI") misrepresented certain features of its residential *273 telephone account program to her, inducing her to switch her service from another company, and ultimately causing her to develop "a phobia by which she mistrusts all telemarketers, whom she now believes are all fraudulent and not bona fide offerors of the services or products they purport to offer." Complaint at ¶ 20. She seeks $10 million in compensatory and $40 million in punitive damages. MCI moves to dismiss the complaint for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Despite the Court's concern that the everyday residential consumer is easy prey for telecommunications carriers soliciting new customers, it is constrained by applicable authority to conclude that Katz does not have a judicial remedy against MCI on the facts as pled here. Accordingly, the motion is granted and the complaint dismissed.
BACKGROUND
The facts are relatively straightforward. According to the allegations of the complaint, which the Court must take as true for purposes of this motion to dismiss, see Albright v. Oliver, 510 U.S. 266, 268, 114 S. Ct. 807, 127 L. Ed. 2d 114 (1994), on or about March 3, 1997, Katz, a resident of Forest Hills, Queens, was contacted by Brian Soncrant ("Soncrant"), a sales associate employed by MCI. Soncrant represented to Katz that MCI had recently instituted a new residential telephone account program and that the terms of the program would not be changed during the lifetime of the customer. Soncrant also advised Katz that she would receive reduced fares on Continental and Delta Airlines if she enrolled in the program. Katz enrolled in the program on or about March 4, 1997. Katz alleges that these representations were false, and that they exacerbated her precarious physical condition, including her spastic colitis, and caused her mental suffering and anguish. She also alleges that she sustained $70 in damages because she purchased airline tickets at an amount higher than that represented to her by Soncrant. Her complaint, which was originally filed in Supreme Court, Queens County, was subsequently removed to this Court by MCI based upon diversity of citizenship and federal question jurisdiction. 28 U.S.C. §§ 1331, 1332, 1337.[1] The complaint contains four state law claims: (1) fraudulent misrepresentation, which allegedly led Katz to develop telemarketer phobia; (2) tortious interference with contract; (3) intentional infliction of emotional distress; and (4) violation of New York General Business Law § 349.
In regard to its Rule 12(b)(6) motion to dismiss, MCI contends: (1) Katz's claims are barred by the filed rate doctrine; (2) any claim not barred by the filed rate doctrine is subject to the primary jurisdiction of the Federal Communications Commission ("FCC"); and (3) Katz's claim for intentional infliction of emotional distress is insufficient as a matter of New York law.
DISCUSSION
1. Standard on a Motion to Dismiss
The Court's function in reviewing a motion to dismiss pursuant to Rule 12(b)(6) "is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir.1980); Ricciuti v. New York City Transit Auth., 941 F.2d 119, 124 (2d Cir. 1991). A complaint will be dismissed "only if it appears that [the plaintiff] can prove no set of facts, consistent with [her] complaint, that would entitle [her] to relief." Electronics Communications Corp. v. Toshiba America Consumer Prods., Inc., 129 F.3d 240, 242-43 (2d Cir.1997). "[I]n ruling on defendant's motion, the court must accept as true all the factual allegations in the complaint and must draw all reasonable inferences in favor of the plaintiff." Hamilton Chapter of Alpha Delta Phi, Inc. v. Hamilton College, 128 F.3d 59, 63 (2d Cir.1997). In reviewing the pleadings, the Court "`must limit itself to facts stated in the complaint or in documents attached to the complaint as exhibits or incorporated in the complaint by reference.'" Newman & *274 Schwartz v. Asplundh Tree Expert Co., Inc., 102 F.3d 660, 662 (2d Cir.1996) (quoting Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2d Cir.1991)); see also Kopec v.. Coughlin, 922 F.2d 152, 155-56 (2d Cir.1991). Tariffs filed by telecommunications corporations are public records and may properly be considered in connection with a Rule 12(b)(6) motion to dismiss. See Marcus v. American Tel. & Tel. Corp., 938 F. Supp. 1158, 1164-65 (S.D.N.Y.1996), aff'd, 138 F.3d 46.
II. The Filed Rate Doctrine
MCI primarily bases its motion to dismiss upon the purported applicability of the "filed rate doctrine," which is also known as the "filed tariff doctrine." This doctrine arises out of the requirement in the Federal Communications Act that telecommunications service providers "file with the [Federal Communications] Commission and print and keep open for public inspection schedules showing all charges for itself and its connecting carriers ... showing the classifications, practices, and regulations affecting such charges...." 47 U.S.C. § 203(a) (emphasis added). The filed rate doctrine " `forbids a regulated entity to charge rates for its services other than those properly filed with the appropriate federal regulatory authority.'" Fax Telecommunicaciones, 138 F.3d at 488 (quoting Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577, 101 S. Ct. 2925, 69 L. Ed. 2d 856 (1981)); see also American Tel. & Tel. Corp. v. Central Office Tel., Inc., ___ U.S. ___, 118 S. Ct. 1956, 1962-63, 141 L. Ed. 2d 222 (1998); Marcus, 138 F.3d at 58; American Tel. & Tel. Co. v. City of New York, 83 F.3d 549, 552 (2d Cir.1996). The doctrine has a two-fold purpose: to preserve the FCC's primary jurisdiction over the reasonableness of rates (the "nonjusticiability strand"); and to prevent utilities from discriminating among customers with regard to the rates they charge for their services (the "nondiscrimination strand"). See Fax Telecommunicaciones, 138 F.3d at 489; Marcus, 138 F.3d at 58.
The practical effect of the filed rate doctrine is to preclude customers from commencing a judicial action challenging a utility's failure to provide services at a rate other than that set forth in the published tariff. As the Second Circuit made clear in Marcus:
Application of the filed rate doctrine in any particular case is not determined by the culpability of the defendant's conduct or the possibility of inequitable results..... Rather, the doctrine is applied strictly to prevent a plaintiff from bringing a cause of action even in the face of apparent inequities whenever either the nondiscrimination strand or the nonjusticiability strand of the doctrine is implicated by the cause of action the plaintiff seeks to pursue.
Marcus, 138 F.3d at 58-59; see also Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 18-19 (2d Cir.1994). Thus, the Second Circuit has specifically held that the filed rate doctrine bars an action for damages that is premised upon the utility's fraudulent misrepresentation regarding its rates. Marcus, 138 F.3d at 60-61. As the court noted in Marcus, an award of damages under such circumstances would implicate both the nondiscrimination and nonjusticiability strands of the filed rate doctrine:
First, claims for compensatory relief `undermine the congressional scheme of uniform rate regulation[] [because] [p]laintiffs who were able to prove their claims and recover damages would effectively receive a discounted rate for phone service over other ... customers.... Second, and just as important, an award of compensatory damages would violate the nonjusticiability strand of the doctrine.... [Plaintiffs] are correct that awarding these damages would not amount to judicial rate-making per se. However ... the filed rate doctrine prevents more than judicial rate-setting; it precludes any judicial action which undermines agency rate-making authority.'
Id. Accordingly, the Second Circuit in Marcus, in addition to dismissing plaintiffs' fraudulent misrepresentation claim, also dismissed all of their other state law damage claims, consisting of claims arising under §§ 349 and 350 of New York's General Business Law and a common law claim for negligent misrepresentation, because "any award of damages would ... implicate the nondiscrimination and nonjusticiability strands of the filed rate doctrine." Id. at 62.
*275 The rationale behind the Marcus decision is fatal to Katz's claims. To the extent that Katz alleges that Soncrant misrepresented MCI's residential rates in order to induce her to switch her service, the complaint falls within the paradigm application of the filed rate doctrine as most recently articulated by the Second Circuit in Marcus and Fax Telecommunicaciones, supra. Although the Second Circuit has aptly observed that the notion that residential telephone customers are aware of the provisions of their carrier's tariffs is "little more than a legal myth," Marcus, 138 F.3d at 63, Katz's claim that MCI misrepresented its rates is nonetheless barred because, as a matter of law, she is presumed to have knowledge of the filed tariff rate, and, therefore, any reliance upon Soncrant's representations must be deemed not reasonable. Marcus, 138 F.3d at 64 ("A reasonable consumer may not rely on any statements by [the carrier] that contradict the terms of its filed tariff (whether caused by carelessness or an intent to defraud), because consumers are conclusively presumed to know the legal tariffs filed with the FCC."); see also Fax Telecommunicaciones, 138 F.3d at 490.
Katz's claim that MCI tortiously interfered with her relationship with AT & T is wholly derivative of her claim that MCI did not offer the proposed rate, and is thus also barred. See American Tel. & Tel. Co. v. Central Office Tel., Inc., ___ U.S. at ___, 118 S.Ct. at 1964. However, Katz's claim that she did not receive the promised rates from Delta and Continental Airlines is somewhat different from her claim that Soncrant misrepresented MCI's rates for services under the tariff. To the extent that Katz alleges that these airlines did not honor their arrangement with MCI, her claim against MCI is barred by the tariff's limitation of liability provision, of which she is, under the rationale of Marcus and Fax Telecommunicaciones, also presumed to have knowledge. This provision clearly provides that "MCI shall not be liable for any act or omission of ... a third party, including those vendors participating in offerings made to customers under this tariff...." See Certification of Patrick C. Dunican, Jr. ("Dunican Cert."), at. Exh. "B," Tab 1. Insofar as Katz claims that Soncrant fraudulently misrepresented the fares to which she would be entitled on Delta and Continental, this claim is barred by the filed rate doctrine because the damage remedy would give her an advantage over other customers, thereby implicating the nondiscrimination strand of the filed rate doctrine.
The Court need not decide whether Katz's claim for intentional infliction of emotional distress is similarly barred by the filed rate doctrine, as it is insubstantial as a matter of New York law.[2] In New York, "`[l]iability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized society.'" Murphy v. American Home Prods. Corp., 58 N.Y.2d 293, 303, 448 N.E.2d 86, 90, 461 N.Y.S.2d 232, 236 (1983) (quoting Restatement (Second) of Torts § 46, subd. (1)); see also Howell v. New York Post Co., 81 N.Y.2d 115, 121-22, 612 N.E.2d 699, 702, 596 N.Y.S.2d 350, 353 (1993); Roach v. Stern, ___ A.D.2d ___, 675 N.Y.S.2d 133, 135 (2d Dept. 1998). "The element of outrageous conduct is `rigorous and difficult to satisfy,' and its purpose is to filter out trivial complaints and assure that the claim of severe emotional distress is genuine." Roach, at 135 (quoting Howell, 81 N.Y.2d at 122, 612 N.E.2d at 702, 596 N.Y.S.2d at 353). Courts routinely determine the outrageousness of alleged conduct as a matter of law, and, as the Court of Appeals noted in Howell, "of the intentional infliction of emotional distress claims considered by this Court, every one has failed because the alleged conduct was not sufficiently outrageous." Howell, 81 N.Y.2d at 122, 612 N.E.2d at 702, 596 N.Y.S.2d at 353. Based upon the allegations of the complaint, the Court has no difficulty in concluding that the conduct alleged falls well short of that degree of "atrocious," "intolerable" *276 conduct that will support a claim for intentional infliction of emotional distress under New York law.
Finally, the Court notes that the tariff does not limit MCI's liability for willful misconduct. See Dunican Cert. at Exh. "B," Tab 1 ("MCI's liability for willful misconduct, if established as a result of judicial or administrative proceedings, is not limited by this tariff."). The Second Circuit has defined "willful misconduct" as:
the intentional performance of an act with knowledge that the performance of that act will probably result in injury or damage, or ... the intentional performance of an act in such a manner as to imply reckless disregard of the probable consequence ... [or] the intentional omission of some act, with knowledge that such omission will probably result in damage or injury, or the intentional omission of some act in a manner from which could be implied reckless disregard of the probable consequences of the omission....
Berner v. British Commonwealth Pacific Airlines, 346 F.2d 532, 536-37 (2d Cir.1965) (omissions in original); see also Stand Buys, Ltd. v. Michigan Bell Telephone Co., 646 F. Supp. 36, 38 (E.D.Mich.1986). Katz's complaint does not contain allegations that MCI's conduct was willful, as defined by the Second Circuit in Berner, or that the "willful misconduct" clause of the tariff applies, although she does ask for punitive damages. However, in response to MCI's motion, Katz now maintains that MCI's conduct was willful and thus falls within the ambit of the willful misconduct clause. In any event, Katz's belated efforts to invoke the willful misconduct clause of the tariff are unavailing. As the Supreme Court recently noted, the willful misconduct clause cannot create a cause of action that is inconsistent with the dictates of the Communications Act. Central Office Tel., ___ U.S. at ___, 118 S.Ct. at 1965. "It is the Communications Act that renders the promise of preferences unenforceable. The tariff can no more exempt the broken promise of preference that is willful than it can the broken promise of preference that is unintentional." Id. Indeed, prior to the Supreme Court's decision in Central Office Telephone, most courts that had considered the issue had held that the "willful misconduct" clause did not revive claims otherwise barred by the filed rate doctrine, i.e., claims directly related to tariffed rates. See, e.g., Marco Supply Co. v. AT & T, 875 F.2d 434, 436 (4th Cir.1989) (willful misconduct clause does not except misrepresentation claims from the operation of the filed rate doctrine); International Tel. Ctr., Inc. v. American Tel. & Tel. Co., 1997 WL 599618, at *5 (E.D.La. Sept.16, 1997) (rejecting willful misconduct defense where plaintiff alleged that AT & T "purposely" quoted it a rate different from that contained in the tariff); Multi Communication Media Inc. v. AT&T Corp., 1997 WL 188938, at *11 (S.D.N.Y. Apr.18, 1997) ("Any action for or defense of a willful misconduct would have the same effect as a fraud action, i.e., it would require the court to inquire into the reasonableness of the rates and any damage award would result in discrimination in rates among customers."); Fax Telecommunicaciones v. AT & T, 952 F. Supp. 946, 955 (E.D.N.Y.1996), aff'd, 138 F.3d 479 (under the filed rate doctrine, "claims of willful misconduct must be barred if they would require the Court to either enforce a discriminatory rate or to assess the reasonableness of a proposed rate.");[3]MCI Corp v. Best Tel. Co., Inc, 898 F. Supp. 868, 876 (S.D.Fla.1994) (Following Marco and holding that willful misconduct clause in tariff did not permit cause of action for fraudulent misrepresentation of rates); but see American Tel. & Tel. Co. v. New York City Human Resources Admin., 833 F. Supp. 962, 979 n. 9 (S.D.N.Y. 1993) (stating in dicta that filed rate doctrine would not preclude plaintiff from bringing claim for misrepresentation of rates under willful misconduct provision of tariff). In light of the Supreme Court's decision in Central Office Telephone, the Court concludes that the willful misconduct clause contained in MCI's tariff does not revive Katz's claim that MCI fraudulently misrepresented its rates, because this claim would require the Court to enforce a discriminatory rate, and *277 as such, is squarely barred by the filed rate doctrine.
The Second Circuit has noted that the filed rate doctrine is "plainly a creature of a different time." Fax Telecommunicaciones, 138 F.3d at 491. While the doctrine prevented unfair practices and price discrimination when AT & T held a monopoly in the long-distance telephone market, "strict application of the filed rate doctrine `frustrates those same goals' in today's era of deregulation and multiple competing carriers." Id. (quoting MCI Telecomms. Corp. v. American Tel. & Tel., 512 U.S. 218, 233, 114 S. Ct. 2223, 129 L. Ed. 2d 182 (1994)). Plainly, the filed rate doctrine is a trap for today's residential telephone customer in the face of the aggressive and wide-ranging sales tactics that are symptomatic of the current highly competitive telecommunications marketplace. Indeed, the consumer has undoubtedly never heard of the doctrine. Nevertheless, the Second Circuit has made clear that "unless and until Congress or the Supreme Court re-examines the doctrine, we are bound to enforce it." Fax Telecommunicaciones, 138 F.3d at 491. Ratepayers, however, are free to file complaints with the proper regulatory agencies, including the FCC or the State Attorney General's Office, even if they cannot seek judicial redress for fraudulent misrepresentation. See Wegoland, 27 F.3d at 21. These agencies presumably would take appropriate action to curb improper sales pitches. Moreover, where appropriate, government agencies are permitted to file, and indeed have filed, suits against regulated utilities under RICO or the antitrust statutes. Id. at 21-22.
CONCLUSION
For the foregoing reasons, MCI's motion to dismiss the complaint pursuant to Federal Rule 12(b)(6) is granted, and the complaint is dismissed.
SO ORDERED.
NOTES
[1] Removal to this Court, while appropriate for reasons of diversity, would not otherwise be appropriate. See Fax Telecommunicaciones, Inc. v. AT & T, 138 F.3d 479, 486 (2d Cir.1998); Marcus v. AT&T Corp., 138 F.3d 46, 52 (2d Cir.1998).
[2] It could be argued, with some force, that since this tort does not implicate agency rate-making authority or effect consumer price discrimination, neither the nonjusticiability nor the nondiscrimination strands of the filed rate doctrine would be affected by permitting such a claim to survive.
[3] The Second Circuit's decision in Fax Telecommunicaciones does not address the district court's language regarding the scope of the willful misconduct clause.
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01-03-2023
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2519406/
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174 P.3d 25 (2007)
Cecile B. WOODS, Petitioner,
v.
KITTITAS COUNTY, a political subdivision of the state of Washington, Evergreen Meadows, LLC, and Stuart Ridge, LLC, Steele Vista, LLC, and Cle Elum's Sapphire Skies, LLC, Respondents.
No. 78331-4.
Supreme Court of Washington, En Banc.
December 20, 2007.
*28 FAIRHURST, J.
¶ 1 Petitioner, Cecile B. Woods, seeks review of a Court of Appeals ruling that the superior court lacks subject matter jurisdiction under the Land Use Petition Act (LUPA), chapter 36.70C RCW, to review a claim that a site-specific rezone application does not comply with the Growth Management Act (GMA), chapter 36.70A RCW. Woods claims the appellate court decision conflicts with our decision in Wenatchee Sportsmen Ass'n v. Chelan County, 141 Wash.2d 169, 4 P.3d 123 (2000). She also argues the Court of Appeals improperly decided other LUPA issues she raised at the superior court because she did not raise them on appeal and the superior court did not decide them.
¶ 2 Respondents, Evergreen Meadows, LLC, Stuart Ridge, LLC, Steele Vista, LLC, and Cle Elum's Sapphire Skies, LLC (hereinafter collectively referred to as CESS), and Kittitas County argue that the Court of Appeals correctly held that the superior court lacks subject matter jurisdiction to decide whether a site-specific rezone complies with the GMA. CESS further argues that the Court of Appeals properly addressed and decided Woods' remaining LUPA issues and they do not warrant further review by this court.
¶ 3 We affirm the Court of Appeals and hold that the superior court lacks subject matter jurisdiction under LUPA to decide whether a site-specific land use decision complies with the GMA. The superior court may decide only whether a site-specific land use decision complies with a comprehensive plan and/or development regulation. Because we stand in the superior court's position on review of an administrative decision, Woods' remaining LUPA issues are properly before us. We conclude that the Kittitas County Board of County Commissioners' (BOCC) decision to approve CESS's site-specific rezone application was supported by substantial evidence and was not an erroneous interpretation of the law or a clearly erroneous application of the law to the facts.
I. STATEMENT OF THE CASE
¶ 4 CESS owns 251.63 acres of land in Kittitas County. CESS's property was originally zoned forest and range (F & R). The F & R zone, which was adopted in 1974, creates areas in which natural resource management is the highest priority and where uses incompatible with resource management are discouraged. Kittitas County Code (KCC) 17.56.010. Land zoned F & R generally permits minimum lot sizes of 20 acres. Former KCC 17.56.040(A) (1992).[1] Former KCC 17.56.020 (1996) lists permitted uses in the F & R zone including single-family homes, lodges, agriculture, livestock, forestry, mining, quarry mining, and home occupations that do not produce noise. Former KCC 17.56.030 (2001) lists conditional uses in the F & R zone including airports, sawmills, firing ranges, temporary asphalt plants, feed-lots, public sanitary landfills, utility substations, and farm labor shelters.
¶ 5 In January 2004, CESS applied to the county for a site-specific rezone from F & R to Rural-3 (R-3). The purpose and intent of the R-3 zone, which was adopted in 1992, is to "provide areas where residential development may occur on a low density basis." KCC 17.30.010. A primary goal in siting R-3 zones "will be to minimize adverse effects on adjacent natural resource lands." Id. Land zoned R-3 generally permits minimum lot sizes of three acres served by individual wells and septic tanks. Former KCC 17.30.040(A) (1992). Former KCC 17.30.020 (1996) lists permitted uses in the R-3 zone including single-family homes, lodges, agriculture, forestry, home occupations that do not produce noise, and mining. Like the F & R zone, the R-3 zone includes a variety of conditional *29 uses, but the conditional uses allowed in the R-3 zone are generally less intensive than those allowed in the F & R zone. Former KCC 17.30.030 (1992) lists the conditional uses allowed in the R-3 zone including campgrounds, guest ranches, group homes, golf courses, mining, gas and oil exploration, home occupations that produce noise, and miniwarehouses.
¶ 6 Both the F & R and R-3 zones permit minimum lot sizes of one-half acre for lots within platted cluster subdivisions served by public water and sewer systems. Former KCC 17.56.040(B); former KCC 17.30.040(B). "[C]luster" subdivisions are "three or more buildable lots in which all lots are contiguous." Former KCC 17.65.020(A) (1996), repealed by Ord.2005-35 (2005). The permitted uses in a cluster subdivision "shall be those of the underlying zone and limited to single-family detached residential uses." Former KCC 17.65.030 (1996), repealed by Ord.2005-35 (2005). The maximum allowable percentage of cluster acreage is 30 percent for F & R zones and 40 percent for R-3 zones. Former KCC 17.65.040 (1996), repealed by Ord.2005-35 (2005).
¶ 7 The Kittitas County Planning Commission (KCPC) held a public meeting to discuss the site-specific rezone on April 26, 2004. The day of the public meeting, Mike Alberg, chairperson of the KCPC, received a letter from 1000 Friends of Washington (1000 Friends), which was distributed to commission members, urging denial of the rezone because it claimed the GMA requires a minimum density of five acres in rural areas and the R-3 zone allows a density of only three acres. The letter cited rulings of the Court of Appeals and the three Growth Management Hearings Boards (GMHBs) as the basis for 1000 Friends' claim that the GMA requires a five acre minimum density in rural areas.
¶ 8 After deliberation, KCPC approved the application by a vote of five-to-one. The BOCC approved the site-specific rezone by Ordinance 2004-15 on June 1, 2004.
¶ 9 In June 2004, Woods filed a LUPA petition, RCW 36.70C.070, in superior court, challenging the BOCC decision. Her petition claimed the decision (1) erroneously interpreted the law because it used incomplete findings and site-specific rezone standards and failed to include determinations regarding changed circumstances and consistency with the GMA, (2) was not supported by substantial evidence in the record, and (3) was a clearly erroneous application of the law to the facts because the environmental review was incomplete[2] and failed to disclose contemporaneous rezones in upper Kittitas County.[3] Woods argued that Wenatchee Sportsmen gave the superior court subject matter jurisdiction to decide whether a site-specific rezone complies with the GMA. Clerk's Papers (CP) at 92, 98.
¶ 10 The superior court granted Woods' petition and reversed the rezone. CP at 13-14. In its letter ruling, the trial court determined it had subject matter jurisdiction over the site-specific rezone. The court recognized, "[a]lthough the GMHB has jurisdiction to determine whether Kittitas County's RR-3 [sic] zoning ordinance violates the GMA, it does not have jurisdiction to review whether the BOCC's decision to rezone the subject property as RR-3 [sic] violates the GMA as applied by allowing urban growth (RR-3) [sic] in a rural area." CP at 11 (emphasis added). The trial court found:
Whether this RR-3 [sic] rezone is lawful depends on where the subject property is located within the county. In other words, the RR-3 [sic] ordinance may be consistent with the GMA when applied to some properties and inconsistent when applied to others. Since the property in this case is located outside of a designated UGA [urban growth area], a rezone that allows for development which is urban in nature violates the GMA. The fact that the property may never be fully built out is irrelevant to whether the application of RR-3 [sic] to this property has the potential to turn a *30 rural area into an area of urban growth density.
Id. The trial court did not explain the reasoning for its conclusion that the R-3 zone is urban in nature. Lastly, because of the trial court's decision that "BOCC erred by granting a rezone which allows for urban growth density in a rural area," it was unnecessary to reach Woods' remaining LUPA issues. Id. at 12. CESS and the county appealed the superior court's decision to Division Three of the Court of Appeals. Woods v. Kittitas County, 130 Wash.App. 573, 123 P.3d 883 (2005).
¶ 11 The Court of Appeals held that the superior court had subject matter jurisdiction to decide whether the rezone decision was consistent with the county's comprehensive plan but not whether the rezone complied with the GMA. Id. at 576-77, ¶ 2, 123 P.3d 883. It concluded Wenatchee Sportsmen held only that a party may challenge a site-specific rezone in superior court under LUPA based on incompatibility with the comprehensive plan, not noncompliance with the GMA. Id. at 583, ¶ 17, 123 P.3d 883. The appellate court declined to consider the rezone's compliance with the GMA and reviewed only the properly remaining LUPA issues. Id. at ¶ 18, 123 P.3d 883. It concluded that BOCC's decision was supported by sufficient evidence and BOCC did not clearly misapply the law when it determined that the site-specific rezone complied with the county's comprehensive plan. Id. at 588-89, ¶ 28, 123 P.3d 883.
¶ 12 Woods petitioned this court for review of the Court of Appeals reversal of the superior court decision, which we granted. Woods v. Kittitas County, 158 Wash.2d 1001, 143 P.3d 829 (2006).
II. ISSUES
A. Does the superior court have subject matter jurisdiction under LUPA to decide whether site-specific land use decisions comply with the GMA?
B. Should this court reach Woods' remaining LUPA issues and, if so, did BOCC properly approve CESS's rezone application?
III. ANALYSIS
¶ 13 We review questions of statutory interpretation de novo. Berrocal v. Fernandez, 155 Wash.2d 585, 590, ¶ 5, 121 P.3d 82 (2005). A reviewing court's primary goal is to determine and give effect to the legislature's intent and purpose in creating the statute. Am. Cont'l Ins. Co. v. Steen, 151 Wash.2d 512, 518, 91 P.3d 864 (2004); Dep't of Ecology v. Campbell & Gwinn LLC, 146 Wash.2d 1, 10-11, 43 P.3d 4 (2002). "[I]f the statute's meaning is plain on its face, then the court must give effect to that plain meaning as an expression of legislative intent." Campbell, 146 Wash.2d at 9-10, 43 P.3d 4 (citing State v. J.M., 144 Wash.2d 472, 480, 28 P.3d 720 (2001)).
A. The superior court lacks subject matter jurisdiction to decide whether a site-specific rezone complies with the GMA
¶ 14 Woods claims that in Wenatchee Sportsmen this court expressly recognized that the GMA and LUPA created two separate avenues for a petitioner to seek review of whether a land use decision complies with the GMA, and we held that the superior court has jurisdiction to determine whether site-specific land use decisions comply with the GMA. CESS disputes Woods' interpretation of our holding in Wenatchee Sportsmen. It argues the superior court lacks subject matter jurisdiction to decide any questions regarding compliance with the GMA, even where a party challenges a site-specific land use decision in a LUPA petition. CESS also argues that Woods' real target was not the rezone, but the R-3 zone in general.
¶ 15 To determine whether the superior court has subject matter jurisdiction to decide whether site-specific land use decisions comply with the GMA, we first examine the framework of the GMA and LUPA.
¶ 16 The legislature enacted the GMA in 1990 to address concerns related to "uncoordinated and unplanned growth" in the State and "a lack of common goals expressing the public's interest in the conservation and the wise use of our lands." RCW 36.70A.010. The GMA requires counties to develop a *31 "`comprehensive plan,'" which sets out the "generalized coordinated land use policy statement" of the county's governing body. Former RCW 36.70A.030(4) (1997). In essence, "[t]he comprehensive plan is the central nervous system of the GMA. It receives and processes all relevant information and sends policy signals to shape public and private behavior." Richard L. Settle, Washington's Growth Management Revolution Goes to Court, 23 Seattle U.L.Rev. 5, 26 (1999).
¶ 17 The comprehensive plan must designate an urban growth area (UGA) "within which urban growth shall be encouraged and outside of which growth can occur only if it is not urban in nature."[4] RCW 36.70A.110(1). The plan must also include a rural element, which may allow for a variety of rural densities, including clustering and density transfers. Former RCW 36.70A.070(5)(b) (2003). The rural element should foster land use that is "compatible with the use of the land by wildlife" and will "enhance the rural sense of community and quality of life," although the GMA acknowledges that "rural counties must have flexibility to create opportunities for business development." RCW 36.70A.011. The GMA also recognizes that circumstances may vary by county and allows counties to consider local circumstances when determining rural density and use patterns as long as they create a written record explaining how the rural element harmonizes with the GMA planning goals. Former RCW 36.70A.070(5)(a).
¶ 18 Along with a comprehensive plan, the GMA requires counties to adopt development regulations that are "consistent with and implement the comprehensive plan." RCW 36.70A.040(3)(d), (4)(d). "`Development regulations'" include, but are not limited to, zoning ordinances. Former RCW 36.70A.030(7) (1997). These regulations must be adopted within six months from the time of the comprehensive plan's adoption. WAC 365-195-810(1).
¶ 19 The legislature created three GMHBs in 1991 to hear petitions alleging violations of the GMA. RCW 36.70A.250, .280. GMHBs have limited jurisdiction to decide only petitions challenging comprehensive plans, development regulations, or permanent amendments to comprehensive plans or development regulations. Wenatchee Sportsmen, 141 Wash.2d at 178, 4 P.3d 123; RCW 36.70A.290(2). Petitions challenging whether a comprehensive plan or development regulation complies with the GMA "must be filed within sixty days after publication by the legislative bodies of the county or city." RCW 36.70A.290(2) (emphasis added).
¶ 20 GMHBs do not have jurisdiction to decide challenges to site-specific land use decisions because site-specific land use decisions do not qualify as comprehensive plans or development regulations. Former RCW 36.70A.030(7); RCW 36.70B.020(4); Wenatchee Sportsmen, 141 Wash.2d at 179, 4 P.3d 123. A challenge to a site-specific land use decision should be brought in a LUPA petition at superior court. Wenatchee Sportsmen, 141 Wash.2d at 179 n. 1, 4 P.3d 123.
¶ 21 LUPA grants the superior court exclusive jurisdiction to review a local jurisdiction's land use decisions, with the exception of decisions subject to review by bodies such as the GMHBs. RCW 36.70C.030(1)(a)(ii). The legislature's purpose in enacting LUPA was to "establish[ ] uniform, expedited appeal procedures and uniform criteria for reviewing [land use] decisions [by local jurisdictions],[[5]] in order to provide consistent, predictable, and timely judicial review." RCW 36.70C.010. A "`[l]and use decision'" is:
[A] final determination by a local jurisdiction's body or officer with the highest level of authority to make the determination, including those with authority to hear appeals, on:
(a) An application for a project permit or other governmental approval required by law before real property may be improved, developed, modified, sold, transferred, *32 or used, but excluding applications for permits or approvals to use, vacate, or transfer streets, parks, and similar types of public property; excluding applications for legislative approvals such as area-wide rezones and annexations; and excluding applications for business licenses.
RCW 36.70C.020(1). A site-specific rezone is a project permit, RCW 36.70B.020(4), and, thus, a land use decision.
¶ 22 Having established the statutory framework, we next examine our holding in Wenatchee Sportsmen to determine whether it supports Woods' claim that we explicitly recognized that the GMA and LUPA established two different avenues for review of a local jurisdiction's compliance with the GMA. Wenatchee Sportsmen involved Chelan County's approval of a developer's request to rezone its property and a subsequent subdivision plat application. 141 Wash.2d at 174, 4 P.3d 123. Wenatchee Sportsmen filed a LUPA petition in superior court challenging the county's approval of the subdivision, but not the earlier rezone. Id. The superior court concluded the subdivision constituted urban growth outside the county's interim UGA (IUGA)[6] under the GMA and reversed the county's approval. Id. at 174-75, 4 P.3d 123. The developer sought direct review of the superior court's decision with this court, which we granted. Id. at 175, 4 P.3d 123.
¶ 23 We addressed only the narrow question of whether the petitioner's challenge to the subdivision constituted a collateral challenge to the earlier site-specific rezone of the property. Id. at 175-77, 4 P.3d 123. In the course of our analysis, we observed that had the property owner timely challenged the earlier rezone, the superior court "could have considered whether the minimum density allowed by the [zoning ordinance] was compatible with the [county's] IUGA." Id. at 181-82, 4 P.3d 123. We also noted that having not timely challenged the rezone itself, "[t]he only issue that can be raised concerning the rezone is whether the plat application conforms to the zoning requirements." Id. at 182, 4 P.3d 123 (emphasis added). These two statements indicate that we viewed the superior court's jurisdiction as limited to determining whether the rezone complied with the applicable zoning requirements or the county's IUGA, but not the GMA.[7] The inference that we did not view the superior court's subject matter jurisdiction as extending to a review of compliance with the GMA is borne out by Justice Talmadge's vehement criticism of the majority for "ignor[ing] the GMA" in his dissenting opinion. Id. at 184, 4 P.3d 123 (Talmadge, J., dissenting).
¶ 24 However, Wenatchee Sportsmen also suggests that a superior court may have subject matter jurisdiction over whether a site-specific rezone complies with the GMA. We noted that "[i]f a GMHB does not have jurisdiction to consider a petition, it must be filed in superior court under LUPA." Id. at 178, 4 P.3d 123. More specifically, "[c]hallenges to a decision concerning a site-specific rezone should be brought by means of a LUPA petition in superior court." Id. at 179 n. 1, 4 P.3d 123. A GMHB does not have jurisdiction to hear a petition alleging that a site-specific rezone violates the GMA. See id. at 178, 4 P.3d 123. Thus, one could argue that a superior court has exclusive jurisdiction to determine whether the site-specific rezone complies with the GMA. The flaw in this reasoning is that the GMA does not explicitly apply to site-specific rezones and the GMA has no provision that it is to be liberally construed. Skagit Surveyors & Eng'rs, LLC v. Friends of Skagit County, *33 135 Wash.2d 542, 565, 958 P.2d 962 (1998).[8] Thus, the pivotal question is not whether the superior court has subject matter jurisdiction over challenges to project permits under the GMA, but whether there is statutory support for such a claim.
B. The GMA does not explicitly apply to site-specific rezones
¶ 25 It is unclear whether a site-specific rezone is statutorily required to comply with the GMA. The GMA does not directly regulate site-specific land use activities. Viking Props., Inc. v. Holm, 155 Wash.2d 112, 126, ¶ 31, 118 P.3d 322 (2005). The 13 planning goals, which include reducing sprawl, apply by their terms only to comprehensive plans and development regulations. See id. (noting that the GMA creates a "framework" that guides local jurisdictions in the development of comprehensive plans and development regulations); RCW 36.70A.020.
¶ 26 Thus, the GMA indirectly regulates local land use decisions through comprehensive plans and development regulations, both of which must comply with the GMA. See former RCW 36.70A.130(1)(a), (b) (2002). Comprehensive plans serve as "`guide[s]'" or "`blueprint[s]'" to be used in making land use decisions. Citizens for Mount Vernon v. City of Mount Vernon, 133 Wash.2d 861, 873, 947 P.2d 1208 (1997). Thus, a proposed land use decision must only generally conform, rather than strictly conform, to the comprehensive plan. Id. A comprehensive plan does not directly regulate site-specific land use decisions. Id.; Viking Props., 155 Wash.2d at 126, ¶ 31, 118 P.3d 322. Instead, local development regulations, including zoning regulations, directly constrain individual land use decisions. Viking Props., 155 Wash.2d at 126, ¶ 31, 118 P.3d 322. Such regulations must be consistent with the comprehensive plan and be sufficient in scope to carry out the goals set forth in the comprehensive plan. RCW 36.70A.040(3)(d), (4)(d); WAC 365-195-800(1).
¶ 27 A site-specific rezone authorized by a comprehensive plan is treated as a project permit subject to the provisions of chapter 36.70B RCW. RCW 36.70B.020(4). In reviewing a proposed land use project, a local government must determine whether the proposed project is consistent "with applicable development regulation, or in the absence of applicable regulations the adopted comprehensive plan." RCW 36.70B.030(1). While standards are explicitly provided for making the determination of whether a proposed project is consistent with the development regulations, or, in their absence, the comprehensive plan, there is no explicit requirement that the project permit be consistent with the GMA. See RCW 36.70B.030, .040. Instead, the land use planning choices reflected in the comprehensive plan and regulations "serve as the foundation for project review." RCW 36.70B.030(1).
¶ 28 This presents a potential problem. Assuming that a project permit must be consistent with development regulations or a comprehensive plan, there is the potential that the actual regulations or plan are not consistent with the GMA. As noted above, a comprehensive plan or development regulation's compliance with the GMA must be challenged within 60 days after publication. RCW 36.70A.290(2). Once adopted, comprehensive plans and development regulations are presumed valid. RCW 36.70A.320(1). Thus, if a project permit is consistent with a development regulation that was not initially challenged, there is the potential that both the permit and the regulation are inconsistent with the GMA. While this is problematic, the GMA does not explicitly apply to such project permits and the GMA is not to be liberally construed. Skagit Surveyors, 135 Wash.2d at 565, 958 P.2d 962. This court's "role is to interpret the statute as enacted by the Legislature . . . we will not rewrite the [GMA]." Id. at 567, 958 P.2d 962. Because the GMA does not provide for it, we hold that a site-specific rezone cannot be challenged for compliance with the GMA.
*34 C. Woods implicitly challenges the compliance of the comprehensive plan and development regulations with the GMA
¶ 29 The KCC explicitly requires that a site-specific rezone application be compatible with the comprehensive plan. Former KCC 17.98.020(E) (1996). If a zoning code explicitly requires that all proposed uses comply with a comprehensive plan, then the proposed use must comply with both the zoning code and the comprehensive plan. Cingular Wireless, LLC v. Thurston County, 131 Wash.App. 756, 770, 129 P.3d 300 (2006); see Weyerhaeuser v. Pierce County, 124 Wash.2d 26, 43, 873 P.2d 498 (1994). If a project permit is consistent with a comprehensive plan, then the only way that it could violate the GMA is if the plan itself violated the GMA. Thus, in this case, Woods' challenge to the rezone's compliance with the GMA is a disguised challenge to the adequacy of the comprehensive plan itself. This is a matter within the exclusive jurisdiction of a GMHB, not a superior court.
¶ 30 This reasoning is consistent with a Division One of the Court of Appeals case that determined that a superior court lacks subject matter jurisdiction to decide whether a project permit complied with the GMA. Somers v. Snohomish County, 105 Wash. App. 937, 21 P.3d 1165 (2001).
¶ 31 In Somers, a hearing examiner approved a developer's application for a new subdivision in Snohomish County and neighboring landowners filed a LUPA petition challenging the hearing examiner's decision, claiming the development constituted "urban growth" in violation of the GMA. 105 Wash. App. at 939, 21 P.3d 1165. The hearing examiner found that, although the proposed development was outside the county's IUGA and the ordinance establishing the IUGA did not adequately define "urban growth," the development was valid because it complied with the county's zoning ordinance. Id. at 940, 21 P.3d 1165. After determining it had subject matter jurisdiction to decide the matter, the superior court reversed the hearing examiner, holding that the subdivision constituted urban growth outside the IUGA in violation of the GMA. Id. at 941, 21 P.3d 1165. The Court of Appeals reversed, holding that although the Somerses claimed to challenge approval of the subdivision, their real claim was that the zoning ordinance violated the GMA by allowing urban growth outside the county's IUGA, a claim the superior court did not have subject matter jurisdiction to decide. Id. at 943-44, 21 P.3d 1165. CESS argues that, as in Somers, the superior court in this case did not have subject matter jurisdiction to decide that the R-3 zone allows urban growth outside the county's UGA in violation of the GMA. We agree.
¶ 32 Wenatchee Sportsmen and Somers demonstrate the hierarchical, rather than parallel, relationship between the GMA and LUPA. Comprehensive plans and development regulations provide the general structure for a local jurisdiction's site-specific decisions. The comprehensive plan and development regulations are presumed to comply with the GMA. The comprehensive plan and development regulations may be challenged for violations of the GMA before a GMHB within 60 days of publication. Subsequent site-specific land use decisions by a local jurisdiction must be generally consistent with the comprehensive plan and development regulations. An adjacent property owner must challenge a local jurisdiction's site-specific decisions by filing a LUPA petition in superior court. But a challenge to a site-specific land use decision can be only for violations of the comprehensive plan and/or development regulations, but not violations of the GMA. We affirm the Court of Appeals.
D. Woods' remaining LUPA issues are properly before us and BOCC properly approved CESS's site-specific rezone application
¶ 33 Because the superior court concluded that CESS's application for a site-specific rezone did not comply with the GMA, it declined to reach Woods' remaining LUPA issues. Although the parties put forward different reasons, both argue that this court should not reach those issues on appeal. But because we affirm the Court of Appeals holding that the superior court does not have subject matter jurisdiction to decide whether a site-specific rezone complies with the GMA, and because we stand in the superior court's *35 position on review of an administrative decision, Woods' remaining LUPA issues related to BOCC's decision to approve the site-specific rezone application are properly before us. See Wenatchee Sportsmen, 141 Wash.2d at 176, 4 P.3d 123.
¶ 34 An appellate court reviews an administrative decision under the substantial evidence standard and conclusions of law de novo. Id. "Under the substantial evidence standard, there must be a sufficient quantum of evidence in the record to persuade a reasonable person that the declared premise is true." Id.
¶ 35 Under LUPA, the party seeking relief has the burden of establishing that one of the following six standards has been met:
(a) The body or officer that made the land use decision engaged in unlawful procedure or failed to follow a prescribed process, unless the error was harmless;
(b) The land use decision is an erroneous interpretation of the law, after allowing for such deference as is due the construction of a law by a local jurisdiction with expertise;
(c) The land use decision is not supported by evidence that is substantial when viewed in light of the whole record before the court;
(d) The land use decision is a clearly erroneous application of the law to the facts;
(e) The land use decision is outside the authority or jurisdiction of the body or officer making the decision; or
(f) The land use decision violates the constitutional rights of the party seeking relief.
RCW 36.70C.130(1). "Issues raised under subsection (c) challenge the sufficiency of the evidence." Benchmark Land Co. v. City of Battle Ground, 146 Wash.2d 685, 694, 49 P.3d 860 (2002). In a challenge for sufficiency of the evidence, "`[w]e view inferences in a light most favorable to the party that prevailed in the highest forum exercising factfinding authority.'" Id. (quoting Schofield v. Spokane County, 96 Wash.App. 581, 588, 980 P.2d 277 (1999)). Therefore, we view the record and inferences in the light most favorable to CESS because they prevailed before BOCC.
¶ 36 Three basic rules apply to rezone applications: (1) they are not presumed valid, (2) the proponent of a rezone must demonstrate that there has been a change of circumstances since the original zoning, and (3) the rezone must have a substantial relationship to the public health, safety, morals, or general welfare. Citizens for Mount Vernon, 133 Wash.2d at 875, 947 P.2d 1208. Kittitas County imposes seven additional criteria for approval of a site-specific rezone application. Former KCC 17.98.020(E) (1996). The applicant must show that:
1. The proposed amendment is compatible with the comprehensive plan; and
2. The proposed amendment bears a substantial relation to the public health, safety or welfare; and
3. The proposed amendment has merit and value for Kittitas County or a sub-area of the county; and
4. The proposed amendment is appropriate because of changed circumstances or because of a need for additional property in the proposed zone or because the proposed zone is appropriate for reasonable development of the subject property; and
5. The subject property is suitable for development in general conformance with zoning standards for the proposed zone; and
6. The proposed amendment will not be materially detrimental to the use of properties in the immediate vicinity of the subject property; and
7. The proposed changes in use of the subject property shall not adversely impact irrigation water deliveries to other properties.
Id. (emphasis added).
¶ 37 In approving CESS's rezone application, BOCC found the requested zone change met all the criteria in former KCC 17.98.020(E), that is (1) the rezone was "consistent with the rural land use designation" of the county's comprehensive plan and the rural designation "has consistently been interpreted to be consistent with the Rural-3 *36 zoning designation," (2) the rezone had a "substantial relationship to the public health, safety or welfare,"[9] (3) the rezone had merit and value for the county because the potential for new tax lots will increase the county's tax base, (4) the proposed rezone was appropriate for reasonable development of the subject property given the surrounding zoning and development adjacent to the project area, which allow three acre densities,[10] (5) the property was suitable for development in conformance with R-3 zoning standards, (6) the rezone would not be materially detrimental to the use of properties in the immediate vicinity of the subject property because it limits the amount of permitted and conditional uses, and (7) proposed changes in the use of the property would not adversely impact irrigation water deliveries to other properties. CP at 174; Ex. 28.
¶ 38 Aside from Woods' GMA challenge discussed supra at pages 8-15, Woods' LUPA petition and supporting briefs challenged only findings related to criteria (1), (2), (4), and (5).
(1) The rezone is consistent with the rural land use designation in the county's comprehensive plan and the rural land use designation is consistent with the R-3 zone
¶ 39 Regarding inconsistency of the rezone with the county's comprehensive plan, Woods raised two main arguments in her briefs to the superior court.[11] First, she argued the county implemented its development regulations using preexisting zoning ordinances and individual rezones rather than implementing development regulations after adopting its comprehensive plan. Second, she argued the comprehensive plan does not provide for the R-3 zone classification in rural areas and the R-3 zone cannot qualify as rural based on rulings of the three GMHBs, which require five acre densities in rural areas.
¶ 40 CESS responded that the plan allows for the continued use of preexisting rural densities. It further contends that, although the plan acknowledges a generalization that a five acre density is associated with rural character, the topography of the county allows for a variety of lot sizes. CESS acknowledges its property is located in an area designated as rural but asserts it merely sought to rezone its property from one rural zone to another.
¶ 41 We first address Woods' claim that the rezone is invalid because the county continued to use preexisting zones and applied those zones to individual properties in rezones rather than implementing county-wide development regulations after adopting its comprehensive plan.[12]
*37 ¶ 42 Woods' premise seems to be that if a local jurisdiction does not adopt its development regulations after or in unison with its comprehensive plan, the development regulations do not implement the comprehensive plan. She implies there has been no prior opportunity to challenge whether the R-3 zone complies with the GMA. We sympathize with Woods' frustration over adjacent property owners' inability to challenge a local jurisdiction's actions, but the GMA does not provide her with the relief she seeks. We have held that the GMA does not authorize the GMHBs to review a county's preexisting development regulations for compliance with the GMA and invalidate any that do not comply. Skagit Surveyors, 135 Wash.2d at 567, 958 P.2d 962. Therefore, adjacent property owners have few alternatives to challenge a local jurisdiction's incorporation of a preexisting development regulation into its comprehensive plan under the GMA once the plan is adopted. Id.
¶ 43 Further, even if the GMHB were to determine that the comprehensive plan or development regulation is invalid, that determination is prospective in effect and would not extinguish rights that vested prior to the GMHB's order.[13] RCW 36.70A.302(2). Therefore, CESS's rezone has vested and any future invalidation of the R-3 zone or the county's comprehensive plan would have no effect on it.
¶ 44 Because we conclude the county validly adopted the R-3 zone into its comprehensive plan, the only issue before us is whether the county's comprehensive plan permits the R-3 zone to be used in rural areas. Woods argues it does not.
¶ 45 The county's comprehensive plan states that rural densities range from 3 to 20 acres and expressly refers to the creation of the R-3 zone in its discussion of rural lands. Former Kittitas County Comprehensive Plan (2001) at 178. The rural section of the comprehensive plan contains a reference to chapter two, in which the R-3 zone is included on a list of zones approved for use in the county. Id. The comprehensive plan discusses the need for rural diversity at length, stating:
The aforementioned range of rural densities and uses has created and contributed to a successful landscape which contributes to an attractive rural lifestyle. The exception to this landscape can be seen in areas where individuals have had to acquire larger lots than desired in order to obtain a building site. This has created the effect of "rural sprawl." This current mix of rural uses and densities has not increased the cost to taxpayers for road and utility improvements, police and fire protection, or the education of school populations beyond the means of the local people to finance such infrastructure. The mix of rural uses and densities have [sic] allowed rural growth to be accommodated in a variety of areas where it is appropriate. This has been compatible with both resource activities and urbanization.
Id.
¶ 46 Although, as Woods notes and CESS acknowledges, the county's plan indicates that five acre minimum lot sizes are generally viewed as preserving the rural nature of the area, the plan also expresses concern that a focus on lot size alone could lead to rural sprawl. Id. at 176. It states:
There exists a generalization that 5 acre minimum lot sizes might preserve "rural character." . . . However, over the past fifteen to twenty years Kittitas County has experienced "rural sprawl" through the adoption of 20 acre minimum lot sizes, which has caused the conversion of farm land into weed patches. Small lot zoning with conservation easements for agriculture, timber, or open space may be preferable to the wasteful "sprawl" developments of large lot zoning and could be more conducive to retaining rural character. . . . In Kittitas County there are rural settlements of all sizes and descriptions, some *38 resembling small towns and others simple "crossroads cluster." While attaining higher densities, these areas remain rural in character.
Id.
¶ 47 Woods conspicuously does not point to any language that restricts the use of the R-3 zone to urban areas. The most she can demonstrate is that the plan acknowledges a common perception that five acres is generally viewed as rural. Other language in the plan, though, plainly demonstrates that the county explicitly rejected the bright-line rule that a five acre density is required for rural land and arrived at a reasonable decision based on the county's specific needs.
¶ 48 Because the county's comprehensive plan expressly recognizes the R-3 zone as a rural zone, BOCC's approval of a rezone of rural land from F & R to R-3 did not violate the county's comprehensive plan and was not an erroneous interpretation of the law or a clearly erroneous application of the law to the facts.
(2) The rezone had a substantial relationship to the public health, safety, or welfare
¶ 49 Woods claimed next that the rezone did not have a substantial relationship to public health, safety, or welfare because she claimed the record conclusively showed there was a lack of available water on CESS's property.
¶ 50 The record indicates that the Department of Ecology (DOE) was concerned about the potential that there would be inadequate water for development on CESS's property, but potential inadequacy is a far cry from conclusive evidence. The record also shows the county took note of DOE's concerns and established mitigation measures to ensure that if and when a project development application was submitted, DOE's concerns would be addressed before any development occurred.
¶ 51 Moreover, BOCC based its decision that the rezone had a substantial relationship to the public health, safety, or welfare on the fact that F & R zone permits more intense conditional uses than those permitted in the R-3 zone. It found that while such uses might be appropriate in areas where lots are predominately 20 acres in size, much of the area surrounding CESS's property is already zoned R-3 or it is zoned F & R but contains many 3 acre lots.
¶ 52 We conclude that there is substantial evidence in the record to support BOCC's decision that the rezone to R-3 would have a substantial relationship to the public health, safety, or welfare, and BOCC's decision was not an erroneous interpretation of the law or a clearly erroneous application of the law to the facts.
(4) The proposed rezone was appropriate for reasonable development of the subject property given three acre zoning in the surrounding area
¶ 53 Woods also claimed the rezone was not valid because there had been no change in circumstances. She argued there was no change in circumstances because there was no need for additional residential property in the area. CESS argued that, although under LUPA a rezone proponent must generally show that there has been a change of circumstances since the original zoning, former KCC 17.98.020(E)(4) alternatively allows the proponent to show the rezone is appropriate for reasonable development of the subject property.
¶ 54 CESS's rezone application stated that the purpose of the rezone was to permit future residential development characteristic of the surrounding area and provide a transition zone between the F & R zone and the outlying commercial forest zone. It also stated that the property is former timberland that has since been subdivided into parcels ranging from 8 to 84 acres and is no longer appropriate for commercial forestry. Woods failed to explain why a rezone of the property to R-3 is inappropriate for reasonable development of property so described. She stated that there is already capacity for 7,483 dwelling units on existing R-3 zoned districts and there is no need for 70 additional residential lots. However, she did not explain why current capacity elsewhere in the county would preclude creation of additional capacity on, or render the rezone inappropriate for, reasonable *39 development of a particular property. Moreover, in reaching its decision, BOCC reasoned that because adjacent properties also allowed a three acre density, it was not inappropriate to approve the same density for CESS's property.
¶ 55 We conclude there is substantial evidence in the record to support BOCC's decision that because the surrounding area is already a mix of F & R and R-3, a rezone is appropriate for reasonable development, and BOCC's decision was not an erroneous interpretation of the law or a clearly erroneous application of the law to the facts.
(5) The rezone was suitable for development in conformance with R-3 zoning standards
¶ 56 Finally, Woods claimed the record established conclusively that, because there is inadequate water to support increased density and the topography of the area precluded adequate traffic capacity, the rezone was not suitable for development. Although the Kittitas County Department of Public Works and DOE expressed concerns regarding the impact of the rezone on traffic and water availability, BOCC reasoned that a determination that the property was not suitable for development is pertinent only where an application is submitted to develop the property. The county had established mitigation measures to ensure that if and when a project development application was submitted, those issues would be taken into account.
¶ 57 We conclude there is substantial evidence in the record to support BOCC's decision that the property is suitable for development. BOCC's decision was supported by substantial evidence and was not an erroneous interpretation of the law or a clearly erroneous application of the law to the facts.
IV. CONCLUSION
¶ 58 We affirm the Court of Appeals. We hold that the superior court erred in concluding that it had subject matter jurisdiction under LUPA to decide whether a site-specific rezone complies with the GMA. The superior court has jurisdiction only to determine whether a site-specific rezone complies with the county's comprehensive plan and/or development regulations. We further conclude Woods' remaining LUPA issues are properly before us and hold that BOCC's decision to approve CESS's site-specific rezone application was supported by substantial evidence and was not an erroneous interpretation of the law or a clearly erroneous application of the law to the facts.
WE CONCUR: Chief Justice GERRY L. ALEXANDER, Justice CHARLES W. JOHNSON, Justice BARBARA A. MADSEN, Justice RICHARD B. SANDERS, Justice BOBBE J. BRIDGE, Justice SUSAN J. OWENS and Justice JAMES M. JOHNSON.
BECKER, J.[*] (concurring).
¶ 59 I concur that there is no forum in which to challenge a site-specific rezone on the basis that it improperly allows urban growth to be located in a rural area. I am reluctant to hold that the superior court committed error when the court simply followed Wenatchee Sportsmen Ass'n v. Chelan County, 141 Wash.2d 169, 4 P.3d 123 (2000). But there is no statutory support for allowing a superior court to apply the Growth Management Act (GMA) (chapter 36.70A RCW) directly to a project permit. If a county's comprehensive plan and development regulations are so weak that they cannot protect rural lands from urban density rezones and therefore do not comply with the GMA, the problem must be anticipated and brought before one of the Growth Management Hearings Boards.
¶ 60 Under the GMA counties must adopt a comprehensive plan and development regulations. The development regulations must be consistent with and implement the county's comprehensive plan. RCW 36.70A.040(3). The comprehensive plan must contain certain elements, including measures to protect the rural character of rural areas. RCW 36.70A.070(5)(c). The county must *40 designate an urban growth area, outside of which growth can occur only if it is not urban in nature. RCW 36.70A.110. When a county's comprehensive plan and development regulations comply with the GMA, then project permit decisions that are consistent with the plan and regulations will also comply with the GMA.
¶ 61 Here, the Kittitas County Commissioners decided it was consistent with their comprehensive plan to reclassify some 250 acres from the Forest and Range zone (where the minimum lot size is 20 acres) to the R-3 zone (where the minimum lot size is 3 acres). The acreage in question, previously part of a timber company's holdings that were broken into smaller tracts after being harvested, is located south of Cle Elum. Cecile Woods, a neighboring landowner, brought a land use petition asserting that the rezone was unlawful because it allowed for urban density in a rural area, contrary to the GMA.
¶ 62 Woods had good reason to think that the superior court was authorized by statute to decide whether the site-specific rezone complied with the GMA. According to Wenatchee Sportsmen, a party "must initially appeal a land use decision of the kind involved here" to either a Growth Management Hearings Board or else to superior court under the Land Use Petition Act (LUPA), chapter 36.70C RCW. Wenatchee Sportsmen, 141 Wash.2d at 178, 4 P.3d 123. The growth boards only have jurisdiction to review comprehensive plans and development regulations for compliance with the GMA. They do not have jurisdiction to review site-specific rezones. Wenatchee Sportsmen, 141 Wash.2d at 178-79, 4 P.3d 123. Therefore, an argument that a particular site-specific rezone violates the GMA has to be "raised in a timely LUPA challenge to the rezone." Wenatchee Sportsmen, 141 Wash.2d at 181, 4 P.3d 123.
¶ 63 The rural land in question in Wenatchee Sportsmen was rezoned in 1996 to RR-1, which permitted density of one dwelling per acre. The Sportsmen did not challenge the 1996 rezone. In 1998, the county approved a subdivision on this land with one-acre lots. The Sportsmen brought a LUPA challenge in superior court claiming that the subdivision impermissibly authorized urban growth outside the urban growth area boundary. On that basis, the superior court reversed the subdivision. But this court agreed with the developer that the Sportsmen were barred because they had not challenged the original rezone to the RR-1 designation. Because the original rezone was a project permit decision, they could not have challenged it by a petition to the growth board, but they could have done so in a timely LUPA petition brought within 21 days of the decision.
At that time a court reviewing the rezone decision could have considered whether the minimum density allowed by the RR-1 district was compatible with the IUGA.[[1]] If there is no challenge to the decision, the decision is valid, the statutory bar against untimely petitions must be given effect, and the issue of whether the zoning ordinance is compatible with the IUGA is no longer reviewable.
Wenatchee Sportsmen, 141 Wash.2d at 181-82, 4 P.3d 123.
¶ 64 Cecile Woods did exactly what Wenatchee Sportsmen directed her to do: she challenged the site-specific rezone decision in a LUPA petition within the 21-day time limit. She did not wait until the rezone led to an actual plat approval. The trial court read Wenatchee Sportsmen and concluded, reasonably, that Woods had come to the correct forum to allege that the rezone was incompatible with the urban growth boundary.
¶ 65 The majority characterizes Wenatchee Sportsmen as having decided "only the narrow question" of whether the 1998 land use petition was a collateral challenge to the 1996 rezone decision. Majority at 13. I do not think the rest of the opinion can be so easily pushed aside. The underlying premise was that there must be some forum for reviewing county decision-making for lack of compliance with the GMA either the growth board, or if not, then the superior court. If the county decision is a development regulation such as a zoning ordinance, then the *41 appropriate forum will be the growth board. But according to Wenatchee Sportsmen, when the county decision is a site-specific rezone, the superior court is the appropriate forum because the growth board does not have jurisdiction.
¶ 66 One application of Wenatchee Sportsmen is found in Somers v. Snohomish County, 105 Wash.App. 937, 21 P.3d 1165 (2001). Like in Wenatchee Sportsmen, the issue in Somers was the lawfulness of a subdivision located outside an urban growth area. The county approved the subdivision because it was in compliance with a residential zone (R-20,000) that was already applicable to the property at the time the application vested in 1994. Somers should have petitioned the growth board for a ruling that the R-20,000 zone in a rural area is an improper development regulation under the GMA. Instead, just like in Wenatchee Sportsmen, Somers waited until the zoning led to a subdivision, then filed a LUPA petition challenging the subdivision approval. This he was not permitted to do. His LUPA petition was a collateral attack upon a zoning ordinance that could have been earlier subjected to review by the growth board. "Although the Somers LUPA petition does not expressly challenge the underlying zoning as contrary to the GMA, it does so implicitly." Somers, 105 Wash.App. at 945, 21 P.3d 1165.
¶ 67 Respondents argue that Woods likewise implicitly challenges the underlying zoning. They say her LUPA petition is a disguised attack on the R-3 zone that she should have raised earlier with the growth board. But factually, this case is not like Somers. The underlying zoning applicable to the property was Forest and Range with a minimum lot size of 20 acres. Woods was satisfied with that zoning and had no reason to challenge it as violating the GMA.
¶ 68 And she also had no reason to petition the growth board to do away with the R-3 zone. The R-3 zone in Kittitas County is merely the ordinance defining the uses and densities permitted in land zoned R-3. Woods has no objection if the county applies the R-3 zone to land in unincorporated areas within the urban growth areas. What Woods contests is the county's decision to apply the R-3 zone to the subject site, outside the urban growth area.
¶ 69 The comprehensive plan designated all lands outside the urban growth areas as "Rural." The plan's description of the Rural Lands does not identify R-3 zoning or any other zoning classification as desirable for new development in the Rural Lands. It simply recognizes R-3, along with Forest and Range and several other classifications, as among the zones represented by existing land use patterns in the Rural Lands. There is no statement in the comprehensive plan that the county planned on allowing more R-3 development to occur in the future, much less any criteria defining where it might occur. Only when the owners proposed a rezone did it become apparent that the R-3 zone had, as the trial court put it, "the potential to turn a rural area into an area of urban growth densities."[2] The rezone was the first and only time that the actual change of density on the subject site could have been challenged by adjacent property owners or the community as violating the GMA.
¶ 70 As this case demonstrates, the ad hoc nature of a site-specific rezone can make it something of a loose cannon. If Kittitas County had adopted an area-wide zoning ordinance attaching the R-3 zone to a broader area of logged-off lands in northern Kittitas County, that would have presented a situation like in Somers. Woods would have been put on notice that R-3 subdivisions would be approved on her neighboring lands, and she could have tried to prevent that from happening by asking the growth board to determine that the ordinance violated the GMA. It is anomalous that a decision to attach the R-3 zone to a single parcel of 250 acres would not also be subject to review for GMA compliance; obviously, a series of such rezones, parcel by parcel, will eventually add up and have the same effect as an area-wide zoning ordinance. In this light, it is a fair reading of Wenatchee Sportsmen that when a rezone allows urban densities that the county did not specifically plan for and neighbors had no reason to anticipate, its compliance with the *42 GMA is an issue that can be raised in a LUPA petition. Because Somers does not involve a site-specific rezone, it does not necessarily point to a different conclusion.
¶ 71 Nevertheless, I believe the majority correctly analyzes the statute. It has become increasingly clear that there simply is no statutory provision allowing the GMA to be applied directly to a specific site at the project permit level. Every time a superior court has reversed a county project permit decision on the basis of noncompliance with the GMA, our appellate courts have reinstated the county decision. See, e.g., Assoc. of Rural Residents v. Kitsap County, 141 Wash.2d 185, 4 P.3d 115 (2000); Caswell v. Pierce County, 99 Wash.App. 194, 992 P.2d 534 (2000); Somers, 105 Wash.App. at 937, 21 P.3d 1165. An allegation that a county decision violates the GMA by allowing urban growth in a rural area cannot be decided in a LUPA petition-even if, like a site-specific rezone, the decision is incapable of being appealed to the growth board. To the extent that Wenatchee Sportsmen states that the GMA issue can be raised in a LUPA petition, it is incorrect. And to the extent that such a statement in Wenatchee Sportsmen is an actual holding (as opposed to mere dicta), the court should overrule that aspect of the case as being not only incorrect but harmful.[3]
¶ 72 The harm lies in the prospect of inconsistent interpretation and application of the GMA. The harm of inconsistency may not exist here because the ruling Woods sought from the superior court, that the GMA requires a five-acre minimum lot size for rural development, can easily be recognized as consistent with decisions by all three growth boards. But in another case, nothing would prevent a LUPA petitioner from arguing, and a trial court from deciding, that to protect the rural character of a particular area the minimum lot size had to be at least 10 acres. And the two different lines of authority, one arising from the regional growth board and one from the local court, would bring chaos to a county's administration of its obligations under the GMA.
¶ 73 The eastern Washington board recently responded to a petition alleging that the Kittitas County comprehensive plan as amended in 2006 was in violation of the GMA for failing to eliminate densities greater than one dwelling unit per five acres in the rural area. Kittitas County Conservation v. Kittitas County, No. 07-1-0004c, Final Dec. and Order 6 (E. Wash. Growth Mgmt. Hr'gs Bd. Aug. 20, 2007). Relying on extensive research and study conducted by all three boards, the board found that the density allowed by the R-3 zone was an urban density. Kittitas County Conservation at 17. The board also found that Kittitas County had "failed to adopt specific, directive policies in the CP [Comprehensive Plan] . . . for determining when and where rezone applications should be approved". Kittitas County Conservation at 83. As a result, the plan has been remanded to the county with directions to solve these and other problems in a way that complies with the GMA. Kittitas County Conservation at 85.
¶ 74 Unfortunately for Woods, the board's decision is prospective in application and will not reverse the site-specific rezone to neighboring forest land that prompted the filing of her LUPA petition. But the board's decision does demonstrate that the jurisdiction of the growth boards provides an opportunity to plug what would otherwise be a big loophole undermining the intent of the GMA. While there is no forum that can overturn a site-specific rezone as being in violation of the GMA, a county with weak standards governing rezones is subject to enforcement action by the growth board for failing in its obligation to take measures protecting the rural character of its rural lands. RCW 36.70A.070(5)(c). This mechanism is not self-executing and it is not a fail-safe antidote to sprawl. But it does create an avenue for review that in the long run is likely to produce more consistent and predictable GMA case law than the alternative of review under LUPA.
NOTES
[1] Relevant sections of the Kittitas County Code were amended and renumbered in 2004. We cite to the former version of the Kittitas County Code that the parties cited to in their briefs to the superior court. See Clerk's Papers at 111-18; ch. 17 KCC, available at http://www.co.kittitas.wa.us/boc/countycode/title17.asp (last visited Dec. 18, 2007).
[2] The third claim related to Woods' argument that there is inadequate water and traffic capacity on CESS's land.
[3] Woods also raised two additional claims in her petition that are not on appeal and we do not reach.
[4] The parties agree that CESS's property was located outside the City of Cle Elum's UGA and in an area designated on the county's comprehensive plan as rural.
[5] "`Local jurisdiction[s]'" include counties, cities, and incorporated towns. RCW 36.70C.020(2).
[6] Cities and counties that were required to or that elected to plan under the GMA were required to adopt IUGAs pending completion of their comprehensive plans and development regulations and final UGAs when the comprehensive plan was adopted. RCW 36.70A.110(5).
[7] Subdivision plat applications and petitions for site-specific rezones are both "project permit applications." RCW 36.70B.020(4). Site-specific rezones authorized by a comprehensive plan are treated differently from amendments to comprehensive plans or development regulations. See id. A site-specific rezone occurs "when there are specific parties requesting a classification change for a specific tract." Cathcart-Maltby-Clearview Cmty. Council v. Snohomish County, 96 Wash.2d 201, 212, 634 P.2d 853 (1981). Unlike project permit applications, amendments to the comprehensive plan and development regulations must conform to the GMA. See RCW 36.70A.130(b).
[8] "The courts seem to recognize that . . . GMA was spawned by controversy, not consensus. The relative spheres of state mandate and local autonomy were the product of extremely difficult legislative compromise. It is no accident that the GMA contains no provision for liberal construction." Settle, supra, at 34.
[9] BOCC noted earlier in its findings that the R-3 zone did not allow high intensity uses such as asphalt plants, landfills, log sorting yards, airports, or sawmills, all of which are conditionally allowed in the F & R zone. CP at 173.
[10] BOCC noted earlier in its findings that the R-3 zoning to the north of this property and the many properties to the east are zoned F & R, but contain lots more consistent with R-3 zoning. CP at 173.
[11] Although we refer to the county's decision as a rezone, Woods referred to it alternatively as a "rezone" and an "amendment" in her briefs to the superior court. See CP at 98, 103-05, 107. Former KCC 17.98.020(E) refers to a proposed site-specific rezone as an "amendment," it is clear from the code section in which the term is used that the proposed change will affect only the zoning for a particular propertyit does not amend the zone itself, the code section or the county's comprehensive plan. A separate section of the county code addresses amendments to county plans, codes, and standards. See Title 15B KCC.
[12] We note that at oral argument before this court, Woods' counsel indicated that a suit is pending before the Eastern Washington GMHB challenging the county's reliance on preexisting zoning regulations rather than regulations implemented subsequent to adoption of its comprehensive plan. Wash. State Supreme Court oral argument, Woods v. Kittitas County, No. 78331-4 (Jan. 25, 2007), audio recording by TVW, Washington State's Public Affairs Network, available at http://www.tvw.org. During the pendency of this case, the board ruled that the county failed to adopt proper regulations for the implementation of the comprehensive plan. Kittitas County Conservation v. Kittitas County, No. 06-01-0011, Final Dec. and Order 2 (E. Wash. Growth Mgmt. Hr'g Bd.) (EWGMHB) (Apr. 3, 2007). In a subsequent case, the board noted that development regulations were adopted by the county on July 19, 2007. Kittitas County Conservation v. Kittitas County, No. 07-1-0004c, Final Dec. and Order 40 (EWGMHB) (Aug. 20, 2007).
[13] The GMHB held portions of the 2006 Comprehensive Plan to be invalid in Kittitas County Conservation, EWGMHB, No. 07-1-0004c. The board determined that the density allowed under R-3 constituted an urban density, which is prohibited by the GMA. Id. at 16. The county was found to be noncompliant in this regard and was ordered to take necessary actions to ensure compliance with the GMA. See id. at 17, 85-86. Only the portions of the comprehensive plan dealing with the de-designation of certain agricultural lands were found to be invalid. Id. at 81.
[*] Judge Mary Kay Becker is serving as a justice pro tempore of the Supreme Court pursuant to Washington Constitution article IV, section 2(a).
[1] Interim Urban Growth Area.
[2] Br. of Resp't at 37.
[3] Before a decision may be overruled, it must be shown to be both incorrect and harmful. 1000 Friends of Wash. v. McFarland, 159 Wash.2d 165, 176, 149 P.3d 616 (2006).
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14 F. Supp. 2d 1077 (1998)
Kurt KETHLEY, Petitioner,
v.
Gerald A. BERGE, Respondent.
No. 95-C-348.
United States District Court, E.D. Wisconsin.
June 18, 1998.
*1078 Kurt Kethley, Fox Lake, WI, pro se.
Gregory Posner-Weber, Asst. Atty General, Madison, WI, for Defendant.
MEMORANDUM AND ORDER
ADELMAN, District Judge.
Kurt Kethley filed this petition for a writ of habeas corpus on April 5, 1995, challenging the legality of his 1985 conviction for being a party to the crime of first degree murder. Mr. Kethley's principal claim is that he received ineffective assistance of counsel in connection with perfecting an appeal of his state court conviction, and that as a result he was denied his constitutional right to direct appeal. On July 3, 1995, an order issued by the Magistrate Judge erroneously concluded that Mr. Kethley had exhausted his state remedies. Subsequently, the file was transferred to a district judge, but no action was taken on Mr. Kethley's petition for almost three years. I received the petition in January 1998 by random reassignment.
After reviewing the file and updated information provided by the parties, it appears clear that Mr. Kethley has never filed a post-conviction motion in state court, pursuant to Wis.Stat. § 974.06. The appropriate mechanism for seeking state court review of a claim such as petitioner's is to bring a § 974.06 motion in the trial court, rather than a petition for a writ of habeas corpus in state appellate court, such as Mr. Kethley filed.[1]State ex rel. Rothering v. McCaughtry, 205 Wis. 2d 675, 680-81, 556 N.W.2d 136 (Wis.App.1996). The Magistrate Judge appears to have overlooked the § 974.06 post-conviction motion as a still-available avenue for state review. Memorandum and Order Pursuant to Rule 4 at 2-3.
The arguments that Mr. Kethley presents in his June 8, 1998 response to the court's recent order requesting additional information are precisely the arguments he should be making before a Wisconsin court in a § 974.06 proceeding.[2] If, in fact, petitioner's constitutional right to a direct appeal was impermissibly denied, he must allow Wisconsin courts a full opportunity to correct such a mistake before I can address his claim in a federal forum. Because of this, I am compelled to dismiss his habeas petition at this time.
However, I will dismiss this action without prejudice and permit Mr. Kethley to reopen this petition when his state remedies are properly exhausted. Additionally, the petitioner will retain the benefit of the present case number and original filing date when his file is reopened. I allow Mr. Kethley this option to foreclose the possibility that the present dismissal on procedural grounds will forever bar the petitioner from obtaining habeas review in a federal forum.
The 1996 Antiterrorism and Effective Death Penalty Act ("AEDPA") created a one-year statute of limitations for petitions for a writ of habeas corpus. See 28 U.S.C. § 2244(d). If Mr. Kethley were to file an entirely new federal petition after exhausting his state remedies as suggested by this order he would run afoul of the limitations period as interpreted by the Seventh Circuit. See Lindh v. Murphy, 96 F.3d 856 (7th Cir. 1996), rev'd on other grounds, ___ U.S. ___, 117 S. Ct. 2059, 138 L. Ed. 2d 481 (1997). For petitioners such as Mr. Kethley, whose "direct review" concluded prior to the passage *1079 of the AEDPA and for whom none of the other statute of limitations triggers under § 2244(d)(1) apply, the Seventh Circuit has determined that a "reasonable time" for filing expired one year from the date the AEDPA took effect on April 23, 1997. Id. at 866. The AEDPA's tolling provision allows calculation time to be suspended only while "a properly filed application for State post-conviction or other collateral review" is pending in state courts. 28 U.S.C. § 2244(d)(2). However, time is not tolled while an improperly filed federal habeas petition is gathering dust on district court shelves, as in the present case. Consequently, even if Mr. Kethley could file a procedurally-sound habeas petition tomorrow, it would be deemed untimely.
I have not found a case which speaks directly to the fact situation at issue here, although the circumstances may not be uncommon. That the petitioner should be caught in a bind not of his own making, however, violates the spirit and logic of several analogous interpretations of the AEDPA's intricate procedural rules.
First, the Supreme Court has recently held that "a prisoner whose habeas petition was dismissed for failure to exhaust state remedies, and who then did exhaust those remedies and returned to federal court" should not be barred as filing a "second or successive" petition under 28 U.S.C. § 2244(b). Stewart v. Martinez-Villareal, ___ U.S. ___, ___, 118 S. Ct. 1618, 1622, 140 L. Ed. 2d 849 (1998). "To hold otherwise would mean that a dismissal of a first habeas petition for technical procedural reasons would bar the prisoner from ever obtaining federal habeas review." Id. See also Benton v. Washington, 106 F.3d 162, 164 (7th Cir. 1996) ("The sequence of filing, dismissal, exhaustion in state court, and refiling in federal court might generate multiple docket numbers, but it would not be right to characterize it as successive collateral attacks.") Similarly, the procedural dismissal of petitioner's action in the present case should not later be construed to produce the unintended effect of barring federal habeas review under the AEDPA statute of limitations provision.
Second, the Seventh Circuit addressed the plight of a habeas petitioner in a similar statute of limitations snare in Post v. Gilmore, 111 F.3d 556 (7th Cir.1997). The state prisoner in Post had filed simultaneous actions for habeas relief under 28 U.S.C. § 2254 and for civil rights violations under 42 U.S.C. § 1983. The district court dismissed the prisoner's habeas petition as duplicative. Id. at 557. Reversing on appeal, the Seventh Circuit noted that dismissal of the habeas action "creates a substantial risk that refiling after the completion of the § 1983 case will be untimely." Id. In Post it was possible, indeed more correct given the nature of the claims, to reverse the sequence and proceed with the habeas review before addressing the civil rights action. Although the Seventh Circuit mandated precisely this approach, the court also offered the following:
When unusual circumstances make it imprudent to address the § 2254 petition immediately, the collateral attack should be stayed rather than dismissed. Relief under § 2254 is an equitable remedy ... but a district judge may not remit petitioners to their other remedies, the way a judge may decline to issue declaratory relief. Like most civil actions, a petition under § 2254 is governed by the norm that a district court must exercise its full statutory jurisdiction.
Id. Permitting petitioner to reopen the file should he choose to return to federal court is functionally similar to staying his § 2254 petition, as advocated above.
Finally, the solution of preserving the petitioner's original case number and filing date can be considered a form of equitable tolling of the AEDPA's limitations period. This, also, is not without analogous precedent. "Indeed, both the Supreme Court and [the Ninth Circuit] have repeatedly held that timing provisions even more unyieldingly phrased than AEDPA's are statutes of limitation subject to tolling." Calderon v. United States Dist. Court for Cent. Dist. of Cal., 112 F.3d 386, 390 (9th Cir.1997). See also United States v. Locke, 471 U.S. 84, 94 n. 10, 105 S. Ct. 1785, 85 L. Ed. 2d 64 (1985) ("Statutory filing deadlines are generally subject to the defenses of waiver, estoppel, and equitable tolling."); and Irwin v. Department of Veterans Affairs, 498 U.S. 89, 95-96, 111 S. Ct. 453, 112 L. Ed. 2d 435 (1990) ("[T]he same rebuttable presumption of equitable *1080 tolling applicable to suits against private defendants should also apply to suits against the United States.") Precisely because the long delay in discovering the procedural deficiency of Mr. Kethley's petition was not his fault, the time this file has been with the district court should not be held against him for statute of limitations purposes.
THEREFORE, for the reasons stated above and in the May 27, 1998 order, the court HEREBY DISMISSES this petition for a writ of habeas corpus without prejudice. The petition may be reopened once petitioner's § 974.06 motion has been finally adjudicated in Wisconsin courts.
FURTHER, IT IS HEREBY ORDERED that if petitioner chooses to reopen this federal petition when his state remedies are exhausted in accordance with 28 U.S.C. § 2254(c), he will be allowed to reopen this file under its present case number and with the benefit of the original filing date of April 5, 1995.
NOTES
[1] Mr. Kethley cites State v. Flores, 170 Wis. 2d 272, 488 N.W.2d 116 (Ct.App.1992), in claiming that a petition for a writ of habeas corpus to state court is the proper forum for his claims. Flores, however, was a limited holding, and does not upset the usual rule that when an appeal has not been taken, the first avenue of collateral review is Wis.Stat. § 974.06. Id. at 278-79, 488 N.W.2d 116 (explaining why state habeas review was appropriate under facts of case: "While we recognize that this appellate court did not "consider the appeal" because there was no appeal, we nonetheless adopt the procedural framework of Knight for this case in the interest of institutional uniformity." (emphasis added)).
[2] The petitioner appears to have a long-standing objection to the requirement that he file a § 974.06 motion before seeking further review. Contrary to what he seems to believe, constitutional claims such as ineffective assistance of trial or appellate counsel may be raised in a § 974.06 motion, and the trial court may appoint counsel for indigent defendants in these proceedings. See Wis.Stat. § 974.06(1) & (3)(b).
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174 P.3d 166 (2008)
2008 WY 1
RK, Appellant (Defendant),
v.
The STATE of Wyoming, ex rel., NATRONA COUNTY CHILD SUPPORT ENFORCEMENT DEPARTMENT, Appellee (Plaintiff).
No. S-07-0072.
Supreme Court of Wyoming.
January 8, 2008.
*167 Representing Appellant: Larry R. Clapp and Scott J. Olheiser, Clapp & Associates, PC, Casper, Wyoming. Argument by Mr. Olheiser.
Representing Appellee: Patrick J. Crank, Attorney General; Robin Sessions Cooley, Deputy Attorney General; Jill E. Kucera, Senior Assistant Attorney General; Ellen Rutledge, Assistant Attorney General. Argument by Ms. Rutledge.
Before VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.
BURKE, Justice.
[¶ 1] Appellant RK challenges the district court's order establishing his paternity of MJ. We affirm.
ISSUES
[¶ 2] RK raises the following issues:
1. Did the district court commit error in 1993 by failing to enter an order dismissing this case as required by Wyo. Stat. Ann. § 14-2-111(f) (LexisNexis Supp.1992) subsequent to a certified paternity test authenticated and filed in the record demonstrating that the appellant cannot be the biological father of the minor child?
2. Did the district court commit error by allowing this matter to be reopened as an active case subsequent to the expiration of the statute of limitations pursuant to Wyo. Stat. Ann. § 14-2-105(a)(ii) stating that "[a]n action to establish the existence of the father and child relationship . . . may be brought: [n]ot later than five (5) years after the birth of the child"?
3. Did the district court abuse its discretion in failing to require the Appellee to show that the genetic test that excluded the Appellant from paternity was rebutted by clear and convincing evidence?
*168 4. Did the district court err in applying parentage statutes currently in effect as opposed to the law in effect at the time the action was commenced?
a. Did the district court apply the incorrect statutory standard by refusing to allow evidence of another paternity test concerning the paternity of the minor child in this matter?
b. Did the district court err in failing to weigh evidence in the form of testimony from a geneticist concerning the validity of the paternity tests and the genetic markers which were tested?
FACTS
[¶ 3] DJ gave birth to MJ in October 1989, in Casper, Wyoming, and later moved to Oregon. After she filed the appropriate paperwork in the State of Oregon, that state requested the State of Wyoming to initiate proceedings to determine paternity and establish child support pursuant to the Uniform Reciprocal Enforcement of Support Act (URESA).[1] The State of Wyoming filed the URESA petition against RK in 1991.[2] The petition alleged that RK was MJ's father and requested an adjudication of paternity and an order of support. RK denied paternity of MJ.
[¶ 4] In early 1993, RK submitted to a genetic test to determine paternity. The laboratory result was filed with the district court on June 7, 1993, and excluded RK as MJ's father. We refer to the 1993 test as "Test 1." Although the test apparently excluded RK as the father, the paternity action remained pending. No significant activity occurred in the case until August 1994 when the court received a new paternity report accompanied by a letter from the laboratory revealing that it had uncovered a "discrepancy in the conclusions" in Test 1. A second letter from the laboratory explained that it had accidentally switched the genetic samples that made up the RK-DJ-MJ test with samples from a different trio. When it discovered the error, the laboratory re-ran the genetic test and concluded that RK could not be excluded as MJ's father. We refer to the 1994 test as "Test 2." Test 2 revealed a 99.99% probability of paternity.
[¶ 5] In response to the laboratory's letter and Test 2 results, the State moved to require additional genetic testing. RK filed a Motion for Protective Order and Motion for Entry of Judgment Nunc Pro Tunc.[3] RK's motion asked that the district court "enter a Judgment Nunc Pro Tunc in compliance with the Paternity Evaluation Report filed with the Court on June 7, 1993, and further, that the Court enter a Protective Order barring the State from any further proceeding against the Defendant." The district court denied RK's motion and ordered an additional genetic test to be performed at RK's option and paid for by the State.
[¶ 6] The next case activity occurred in February 1999, when the State filed a Petition to Establish Child Support and Medical Support Obligation. RK responded with his claim that he had requested the additional testing, but that it never took place. After a hearing, the district court ordered additional genetic testing pursuant to its 1995 order. RK was tested and the result was filed with the court in December 1999. The report stated that RK could not be excluded as MJ's father and that the probability of paternity was 99.99%. We refer to the 1999 test as "Test 3."
[¶ 7] Following Test 3, there was no substantive case activity in RK's paternity matter until March 2003, when the State requested a hearing. After that hearing and subsequent discovery, RK filed a "rebuttal" to the genetic test results, with a supporting affidavit from "an expert in genetic testing." In December 2003, the parties stipulated that *169 RK would be allowed to arrange for yet another genetic test using the methodology recommended by his genetic expert, at his own expense. If the 2003 genetic test took place, it is not reflected in the record.
[¶ 8] The district court held a final hearing on October 12, 2006. At that hearing, RK's general strategy was to impeach the genetic test results by introducing the testimony of an expert, Ms. Kim Gorman. The district court relied on Wyo. Stat. Ann. § 14-2-705(b) and ruled that Ms. Gorman could not testify.[4] At the conclusion of the hearing, RK presented an offer of proof by putting Ms. Gorman's proposed testimony on the record.[5] Ms. Gorman testified that Tests 2 and 3 did not adequately rebut the exclusionary results in Test 1. The reason, she explained, was that Tests 2 and 3 did not examine the same genetic marker that had initially excluded RK as MJ's father in Test 1. Ms. Gorman posited that without testing that same genetic marker, one of RK's close relatives could turn out to be MJ's father, rather than RK himself. Ms. Gorman did not discuss the laboratory's disclosure that Test 1 involved the wrong trio of subjects. After the hearing, the district court entered an order establishing RK as MJ's father. RK now appeals the district court's paternity order.
DISCUSSION
Dismissal After Test 1
[¶ 9] RK's primary contention is that the genetic testing statute in effect in 1992 required the district court, sua sponte, to dismiss the suit on receipt of the Test 1 results. Further, RK claims that the paternity suit "should have been dismissed against [RK], by operation of mandated law and without any further consideration or hearing." We disagree.
[¶ 10] RK's assertion presents an issue of statutory interpretation, which we consider de novo. Worcester v. State, 2001 WY 82, ¶ 13, 30 P.3d 47, 52 (Wyo.2001). When conducting a de novo evaluation, we afford no deference to the district court's interpretation of the statute. Id. In conducting our statutory analysis we are guided by the following standard:
The paramount consideration is to determine the legislature's intent, which must be ascertained initially and primarily from the words used in the statute. State ex rel. State Department of Revenue v. Union Pac. R.R. Co., 2003 WY 54, ¶ 12, 67 P.3d 1176, 1182 (Wyo.2003). We look first to the plain and ordinary meaning of the words to determine if the statute is ambiguous. Id. A statute is clear and unambiguous if its wording is such that reasonable persons are able to agree on its meaning with consistency and predictability. Conversely, a statute is ambiguous if it is found to be vague or uncertain and subject to varying interpretations. Id. If we determine that a statute is clear and unambiguous, we give effect to the plain language of the statute. Petroleum Inc. v. State Bd. of Equalization, 983 P.2d 1237, 1240 (Wyo.1999).
RME Petroleum Co. v. Wyo. Dep't of Rev., 2007 WY 16, ¶ 25, 150 P.3d 673, 683 (Wyo. 2007).
[¶ 11] RK relies on the language of Wyo. Stat. Ann. § 14-2-111(f), in effect in 1992 when the paternity suit was commenced. That statute states:
If the scientific evidence resulting from the genetic tests conclusively shows that the defendant could not have been the father, the action shall be dismissed, and the defendant shall be refunded all monies ordered *170 paid by him as child support from the mother of the child.
Wyo. Stat. Ann. § 14-2-111(f) (LexisNexis Supp.1992).
[¶ 12] RK contends that the phrase, "the action shall be dismissed," in section 14-2-111(f) affirmatively requires the trial court to dismiss the action, even when no litigant moves for the action's dismissal. Alternatively, he claims that the paternity action was terminated by operation of law when Test 1 was filed with the district court. RK relies on several cases in which we have accorded mandatory effect to the word "shall" when it appears in a statute. E.g., LePage v. State of Wyo., Dep't of Health, 2001 WY 26, 18 P.3d 1177, 1180 (Wyo.2001); Mayland v. State, 568 P.2d 897, 899 (Wyo.1977). In LePage, for example, we stated that "[w]here a statute uses the mandatory language `shall,' a court must obey the statute as a court has no right to make the law contrary to what is prescribed by the legislature." ¶ 11, 18 P.3d at 1180.
[¶ 13] The cases relied upon by RK do not, however, establish that the plain language of Wyo. Stat. Ann. § 14-2-111(f) mandates dismissal in the absence of an appropriate motion. The statute does not establish a timeframe for dismissal, nor does the statute require the district court to dismiss paternity cases on its own initiative. There was nothing to prevent RK from filing a motion to dismiss the paternity action, but RK did not file such a motion until after the court had received information undermining the reliability of the Test 1 results. Stated differently, at the time RK moved for dismissal, the genetic test had not "conclusively" established that RK was not the father. We also note that there is no requirement in the statute that dismissal be with prejudice. In the absence of a dismissal with prejudice, the State could have re-filed the action in August 1994 when the laboratory's error became known. In sum, RK asks this Court to read far more into the statute than is justified by its plain text. The court's failure to dismiss the action, sua sponte, did not violate the plain language of the statute. Accordingly, the paternity action was still pending at the time the laboratory revealed its mistake.
[¶ 14] RK also contends that the case was "reopened" when the laboratory admitted its error in 1994. He further claims that the five-year statute of limitations, Wyo. Stat. Ann. § 14-2-105(a)(ii) (LexisNexis Supp. 1994), barred the State from "reopening" the case. His assertion relies on the proposition that the case against him was dismissed by operation of law when Test 1 was filed. Because the case was never dismissed, there was no "reopening" of the case, and we need not further consider this claim.
Failure to Rebut Test 1
[¶ 15] RK next asserts that the State did not properly rebut Test 1. He reasons that the district court erred in relying upon the results from Test 2, and Test 3, and the laboratory's communications regarding the inaccuracy of Test 1 because "the district court inappropriately considered useless evidence." His assertion that the evidence was "useless" is founded in the proposition that Test 2 and Test 3 did not retest the two particular genetic markers from Test 1 that excluded RK. RK's position, when simply stated, is that the evidence was irrelevant. Whether evidence is relevant is a decision within the trial court's discretion. Absent an abuse of that discretion, we will not disturb the district court's determination. L.U. Sheep Co. v. Board of County Comm'rs, 790 P.2d 663, 673 (Wyo.1990).
[¶ 16] In this case, RK has failed to establish an abuse of discretion. First, RK asks this Court to hold that two genetic tests strongly indicating paternity are irrelevant to RK's paternity. Second, he asks us to hold that correspondence from the laboratory admitting that Test 1 was a mistake is also irrelevant. We are unwilling to do so because all this evidence squarely fits the definition of relevant evidence: it has a "tendency to make the existence of [RK's paternity] more probable . . . than it would be without the evidence." W.R.E. 401.
Incorrect Statute Applied
[¶ 17] For his final issue, RK asserts that it was reversible error for the *171 district court to apply the current statute concerning genetic testing rather than the one in effect in 1992, when this paternity suit was commenced. As a result, he contends, the district court improperly excluded testimony from RK's expert witness, Ms. Gorman. Ms. Gorman would have testified generally that Test 1 excluded RK as the father based on two particular genetic markers that did not match. Because Tests 2 and 3 did not examine those two particular genetic markers, she asserted, Tests 2 and 3 did not effectively refute Test 1's exclusion of RK as MJ's father.
[¶ 18] We evaluate a district court's admission of evidence under the abuse of discretion standard. E.g., Ferguson v. State, 2007 WY 157, ¶ 14, 168 P.3d 476, 480 (Wyo. 2007). Even when admission of evidence is at issue, "[a]ny error, defect, irregularity or variance which does not affect substantial rights shall be disregarded by the reviewing court." W.R.A.P. 9.04; Gabbert v. State, 2006 WY 108, ¶ 25, 141 P.3d 690, 698 (Wyo. 2006). To meet the standard of W.R.A.P. 9.04, RK must show "that the outcome of his trial would have been more favorable had the error not occurred." Gabbert, ¶ 25, 141 P.3d at 698.
[¶ 19] The State concedes that the district court should have employed the 1992 genetic testing statute rather than the current law. The difference could be significant in some situations because the 1992 statute allows admission of a broader range of evidence. The 1992 statute states that "[i]f the experts disagree in their findings or conclusions, the question [of paternity] shall be submitted upon all the evidence." Wyo. Stat. Ann. § 14-2-109(e)(ii) (LexisNexis Supp. 1992). The current statute limits options for refuting genetic tests, stating that "[a] man identified . . . as the father of the child may rebut the genetic testing results only by other genetic testing." Wyo. Stat. Ann. § 14-2-705 (LexisNexis 2007); compare Wyo. Stat. Ann. § 14-2-109(e) (LexisNexis Supp.1992). If the prior statute applies, there was no statutory bar to Ms. Gorman's testimony.
[¶ 20] Nevertheless, the error was harmless because RK's proffered evidence was insufficient as a matter of law. As the laboratory made clear, the error in Test 1 was not simply a problem with the test itself. Rather, the laboratory accidentally switched the samples with another trio of subjects. Therefore, the results reflected in Test 1 were the results of three other people, not of RK, MJ, and DJ. Test 1 and any expert opinion based on it is irrelevant to whether RK is MJ's genetic father. Ms. Gorman's testimony relied solely on the premise that Test 1 was accurate. Once Test 1 is removed from consideration, the district court was left, as are we, only with Tests 2 and 3. Both of these tests support the district court's conclusion that RK is MJ's genetic father. Accordingly, the district court's error in applying the current paternity statute was harmless.
[¶ 21] Affirmed.
NOTES
[1] URESA has since been replaced by the Uniform Interstate Family Support Act. Wyo. Stat. Ann. §§ 20-4-139 through -197 (LexisNexis 2007).
[2] Though the URESA petition was originally filed in 1991, this action is deemed commenced in 1992 because service was made in 1992, more than 60 days after the petition was filed. W.R.C.P. 3(b).
[3] An action "nunc pro tunc" is one "[h]aving retroactive legal effect through a court's inherent power." Black's Law Dictionary 1100 (8th ed.2004).
[4] Wyo. Stat. Ann. § 14-2-705(b) (LexisNexis 2007) states:
A man identified under subsection (a) of this section [describing genetic testing] as the father of the child may rebut the genetic testing results only by other genetic testing satisfying the requirements of this article which:
(i) Excludes the man as the genetic father of the child; or
(ii) Identifies another man as the possible father of the child.
[5] After the district court judge had concluded the hearing and left the courtroom, the court reporter stayed. RK's counsel then conducted what was essentially a direct examination of Ms. Gorman. The State's attorney, while present, did not ask Ms. Gorman any questions.
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174 P.3d 936 (2008)
STATE
v.
CHANCE.
No. 98227.
Court of Appeals of Kansas.
January 25, 2008.
Decision without published opinion. Affirmed.
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174 P.3d 256 (2008)
W.S., a minor, Appellant,
v.
STATE of Alaska, Appellee.
No. A-9819.
Court of Appeals of Alaska.
January 11, 2008.
*257 James M. Hackett, Fairbanks, for the Appellant.
Diane L. Wendlandt, Assistant Attorney General, Office of Special Prosecutions and Appeals, Anchorage, and Talis J. Colberg, Attorney General, Juneau, for the Appellee.
Before: COATS, Chief Judge, and MANNHEIMER and STEWART, Judges.
OPINION
MANNHEIMER, Judge.
In this appeal, we are asked to construe the provisions of law governing restitution in juvenile delinquency cases.
W.S. was adjudicated a delinquent minor for assaulting a twelve-year-old boy. As explained in more detail below, the superior court ordered W.S. and his parents to pay restitution to the victim's aunt (who was the boy's guardian and physical custodian) and to a mental health counselor who provided counseling services to the victim following the offense. W.S. argues that, in a juvenile delinquency case, the superior court lacks the authority to order restitution payments to anyone except the direct victim of the minor's offense.
In addition, W.S. argues that any restitution obligation imposed by the superior court in a delinquency proceeding should terminate when the court's disposition order is accomplishedi.e., when the term of the minor's institutionalization or probation ends.
Finally, W.S. argues that when the superior court assesses a minor's restitution obligation in a delinquency case, the court is obliged to take into account not only the amount of the victim's loss but also the minor's ability to pay.
For the reasons explained here, we conclude that the superior court had the authority to order restitution to the victim's aunt and to the mental health counselor. We further conclude that W.S.'s obligation to pay this restitution is not extinguished when the minor's term of institutionalization or probation ends. Indeed, under Alaska law, a minor's obligation to pay restitution is not extinguished even when the superior court loses its juvenile jurisdiction over the minorwhich normally occurs when the minor turns nineteen.[1]
*258 With regard to the argument that the superior court is obliged to consider a minor's ability to pay when assessing the amount of restitution, we consider this to be a close question. However, we need not resolve that question in the present case, because the record provides no reason to believe that the amount of restitution ordered in this case is beyond the means of W.S. and his parents.
Underlying facts
W.S. was accused of sexually abusing a ten-year-old boy and a twelve-year-old boy at a youth club facility in Fairbanks. The two victims stated that W.S. had penetrated them anally and had performed or attempted to perform oral sex on them.
Based on these allegations, and also based on an earlier incident in which W.S. broke into a neighbor's home and damaged a window, the State filed a delinquency petition against W.S. This petition was ultimately resolved by a plea agreement.
With respect to the incident involving the two boys, the State dropped the charges involving the younger boy, and the State reduced the charges involving the other boy, Z.L., to one count of fourth-degree assault and one count of harassment.[2] With respect to the unlawful entry into the neighbor's house, W.S. entered an admission to first-degree trespass and fourth-degree criminal mischief. Under the plea agreement, W.S. would be placed on probation, with the terms and conditions to be decided by the superior court.
At the disposition hearing, the superior court accepted the plea agreement and scheduled a later hearing where the State could present evidence on the issue of restitution. Based on the evidence presented at the restitution hearing, the superior court directed W.S. and his parents to pay restitution in the amount of $3,185.
(See AS 47.12.120(b)(4), which directs the superior court to order both the minor and the minor's parents to pay any restitution obligation.)
This restitution of $3,185 included $1,485 to reimburse Z.L.'s aunt (who was his custodian) for the hours she missed from work in order to care for Z.L. following the attack. It also included $1,300 as reimbursement for the costs of professional mental health counseling for Z.L.
Because Z.L.'s aunt could not afford the mental health counselor's normal hourly rate, the counselor agreed to provide the services at half her normal rate. Accordingly, the superior court ordered restitution of $650 to Z.L.'s aunt (for the portion of the fee that the aunt paid) and $650 to the mental health counselor herself (for the remainder of the fee, which was essentially donated).
W.S.'s argument that the superior court had no authority to order restitution in favor of Z.L.'s aunt and the mental health counselor
W.S. argues that, even though the superior court had the authority to order restitution for any loss suffered by Z.L. (the direct victim of the offense), the superior court had no authority to order restitution for the time that Z.L.'s aunt missed from her employment. W.S. further argues that the superior court had no authority to order restitution in favor of Z.L.'s aunt or the mental health counselor for the cost of Z.L.'s mental health counseling.
The superior court clearly had the authority to order restitution in favor of Z.L.'s aunt. In fact, the superior court was obliged to order restitution in favor of the aunt.
Under AS 47.12.120(b)(4), "[if] the [superior] court finds that the minor is delinquent, it shall . . . order the minor and the minor's parent to make suitable restitution". Moreover, subsection (A) of this same statute declares "the court may not refuse to make an order of restitution to benefit the victim of the [delinquent] act".
Z.L.'s aunt qualifies as a "victim" for this purpose. AS 47.12.990(16) declares that the term "victim" has the same meaning in juvenile delinquency proceedings as it does under AS 12.55.185, the statute that defines "victim" for purposes of adult criminal sentencing proceedings. And under AS *259 12.55.185(19)(B), the term "victim" includes not only the direct victim of the unlawful act, but also "a parent, . . . guardian, or custodian" of the direct victim if the direct victim is a minor.
W.S. concedes that Z.L.'s aunt was his physical custodian and primary caretaker during the pertinent time. Moreover, the superior court found that Z.L.'s aunt was effectively Z.L.'s guardianbecause she had a power of attorney authorizing her to make all parental decisions for him. Thus, not only did the superior court have the authority to order restitution in favor of Z.L.'s aunt, but the superior court was obliged to do so.
The remaining question is whether the superior court had the authority to order restitution in favor of the mental health counselor.
W.S. interprets AS 47.12.120(b)(4) as forbidding the superior court from authorizing restitution in favor of anyone who is not a "victim" of the delinquent act as defined in AS 47.12.990 and AS 12.55.185. This is an incorrect reading of the statute.
As we noted earlier, AS 47.12.120(b)(4) declares that the superior court "shall . . . order the minor and the minor's parent to make suitable restitution". In other words, if a minor is found to be delinquent, the superior court is under a duty to order "suitable restitution".
Subsection (A) of this statute then states that, in discharging this duty to order suitable restitution, the superior court "may not refuse to make an order of restitution to benefit the victim of the [delinquent] act". In other words, restitution in favor of the victim is the least that the superior court can do when discharging its more general duty to order "suitable restitution". This statute does not forbid the superior court from ordering restitution in favor of other persons, so long as the restitution falls within the rubric of "suitable restitution".
The delinquency statutes offer no further definition or explanation of "suitable restitution". However, in AS 47.12.010(b)(12), the legislature declared that one of its purposes in enacting the current version of the delinquency laws was to "ensure that [the] victims . . . of crimes committed by juveniles are afforded the same rights as [the] victims . . . of crimes committed by adults".
With respect to court-ordered restitution in adult criminal proceedings, this Court has already held that the "purpose of the restitution statutes is to make full restitution available to all persons who have been injured as a result of criminal behavior, to the greatest extent possible."[3] Because the legislature intended to authorize broad restitution in adult criminal proceedings, and because the legislature intended that the victims of juvenile delinquency should receive the same rights as the victims of adult crimes, we conclude that the phrase "suitable restitution" as used in AS 47.12.120(b)(4) should be interpreted in light of the statutes that govern restitution in adult criminal proceedings, and that "suitable restitution" in delinquency cases presumptively encompasses the types of restitution that are allowed in adult criminal cases.
(Indeed, in the past, this Court has looked to the provisions of Title 12 when interpreting the restitution provisions of the delinquency statutes.[4])
AS 12.55.045(a) authorizes restitution awards to reimburse the cost of mental health counseling in adult criminal cases. This statute says, in relevant part, that a sentencing court "shall . . . order [the] defendant . . . to make restitution":
to a public, private[,] or private nonprofit organization that has provided or . . . will be providing counseling, medical, or shelter *260 services to the victim or other person injured by the offense. . . .
We have interpreted this statute broadly as authorizing restitution not only for a victim's past mental health counseling, but also a victim's future counseling when the need for this counseling, and the projected amount of the counseling expenses, are firmly established. Peratrovich v. State, 903 P.2d 1071, 1078 (Alaska App.1995); Reece v. State, 881 P.2d 1135, 1138 (Alaska App.1994).
Given the broad authorization for counseling restitution that is codified in AS 12.55.045(a), we conclude that "suitable restitution" in delinquency cases includes mental health counseling for crime victims.
In the present case, the mental health counselor normally charged $100 per hour for her services. Because Z.L.'s aunt was unable to pay this amount, the counselor reduced her fee to $50 per hour so that Z.L. could get the counseling he needed. Thus, the counselor essentially donated half of her fee to facilitate the provision of counseling services to the victim of W.S.'s offense. It was proper for the superior court to order W.S. and his parents to reimburse the mental health counselor for this money.
W.S.'s argument that his restitution obligation should terminate when his term of probation ends
W.S. argues that any restitution obligation imposed by the superior court in a delinquency proceeding must terminate when the minor successfully completes the terms of the court's dispositionhere, the period of W.S.'s juvenile probation.
In support of his position, W.S. points to the Juvenile Justice Standards promulgated by the IJA-ABA (Institute of Judicial AdministrationAmerican Bar Association), which state that a juvenile's duty to make restitution should be of limited duration, and that the duration of this duty should in no case exceed the maximum term of custody or supervision permitted for the juvenile's offense.[5]
But AS 47.12.170(a) expressly declares that an order of restitution entered by the superior court in a delinquency proceeding under AS 47.12.120 "is a civil judgment that remains enforceable after the expiration of the court's [juvenile] jurisdiction over the minor". Because the legislature has spoken on this subject, it does not matter what position the American Bar Association endorses. For, as this Court recognized in K.L.F. v. State, 790 P.2d 708, 711-12 (Alaska App.1990), if the statutes enacted by our legislature embody a policy that is different from the policy advocated by the IJA-ABA, we are obliged to implement the intent of our legislature.
(See also State v. Wentz, 805 P.2d 962, 966 n. 5 (Alaska 1991), where our supreme court declared that if "the ABA Standards tend to conflict with the . . . sentencing scheme established by the legislature, the latter will prevail.")
In W.S.'s opening brief, he does not mention AS 47.12.170(a), much less discuss the discrepancy between this statute and the position advocated by the IJA-ABA standards. However, in his reply brief, W.S. apparently concedes that the statute controlsbecause in that brief, for the first time, W.S. argues that the statute is unconstitutional.
W.S.'s constitutional argument is premised on Alaska Delinquency Rules 1(c) and 1(d).
Delinquency Rule 1(d) states that the Delinquency Rules were promulgated under the Alaska Supreme Court's constitutional authority to enact rules of procedure (see Article IV, Section 15 of the Alaska Constitution)and that, as a consequence, the Delinquency Rules supersede any inconsistent statute enacted by the Alaska Legislature unless that statute was passed by a two-thirds' majority for the express purpose of changing the rule. And Delinquency Rule 1(c) states that the Delinquency Rules are to be construed "to promote . . . expeditious determination of juvenile matters [and] the best interests of the juvenile".
W.S. asserts that, because AS 47.12.170(a) calls for restitution obligations to be enforceable beyond the time when the superior court *261 loses its juvenile jurisdiction over the minor, this statute is inconsistent with "[the] expeditious determination of juvenile matters [and] the best interests of the juvenile". W.S. therefore concludes that the statute is inconsistent with Delinquency Rule 1(c). And, based on this conclusion, W.S. argues that the statute is unconstitutional because it is inconsistent with a delinquency rule, and because it was not passed by a two-thirds' majority for the express purpose of amending Delinquency Rule 1(c).
There are several flaws in W.S.'s argument.
First, W.S. never presented this argument to the superior court, nor did he include it in his opening brief. Rather, the argument is presented for the first time in W.S.'s reply brief. Arguments presented for the first time in a reply brief are waived.[6]
W.S. argues that we should not apply this rule of waiver to him. He asserts that his argument about the constitutionality of AS 47.12.170(a) is merely a response to the State's argument that the superior court was obliged to follow this statute, no matter what contrary position the IJA-ABA standards advocated.
It is true that a reply brief is designed to allow an appellant to respond to the arguments raised in the appellee's brief. But here, W.S.'s "response" is in fact a new constitutional claim.
In his opening brief, W.S. omitted all mention of the governing statute. He proceeded as if there were no statutory law on this point, and as if this Court were free to adopt the IJA-ABA standard if it seemed reasonable and beneficial. Then the State filed its brief, pointing out that there was indeed a statute on point, and that the courts are obliged to follow this statute despite any contradictory policy advocated by the IJA-ABA. Only then did W.S. think to level a constitutional challenge against this statute.
In a broad sense, W.S.'s constitutional argument is a "response" to the State's brief. But it is a new claim, and it is waived.
Moreover, W.S.'s claim is premised on a misreading of Delinquency Rule 1(c). This rule does not purport to give the Alaska Supreme Court the authority to review all statutes dealing with juvenile delinquency matters, and to effectively veto these statutes if, in the supreme court's view, they appear to be inconsistent with "[the] expeditious determination of juvenile matters [and] the best interests of the juvenile". Rather, Delinquency Rule 1(c) states that the Delinquency Rules themselves are to be interpreted in a manner that promotes these goals.
It remains true that, under Delinquency Rule 1(d), the legislature is not free to alter a procedure specified in the Delinquency Rules unless the legislature does so under the procedure specified in Article IV, Section 15 of our state constitution i.e., by passing a statute (by a two-thirds' majority) containing a provision that expressly declares the legislature's intention to alter one or more of the Delinquency Rules.
But none of the Delinquency Rules specifies whether a minor's restitution obligation may extend past the end of the minor's probation, or past the time when the superior court loses its juvenile jurisdiction over the minor. In fact, the word "restitution" does not appear in the Delinquency Rules. Thus, AS 47.12.170(a) is not inconsistent with any of the Delinquency Rules.
For these reasons, we reject W.S.'s contention that a minor's restitution obligation must terminate when the minor's probation ends, or even when the superior court loses its juvenile jurisdiction over the minor.
W.S.'s argument that the superior court was obliged to consider his ability to pay when fixing the amount of his restitution obligation
The superior court ordered W.S. and his parents to pay restitution in the amount of $3,185, which was the entire amount of the expenses verified by Z.L.'s aunt and the mental health counselor. W.S. argues that it was improper for the superior court to order this restitution without first inquiring whether *262 W.S. had the financial ability to pay this amount of money.
Again, W.S. relies on the IJA-ABA Juvenile Justice Standards, which declare that the amount of a restitution obligation should be directly related "to the juvenile's offense, the actual harm caused, and the juvenile's ability to pay".[7] But as we explained earlier in this opinion, the fact that the IJA-ABA standards advocate a particular policy may provide useful guidance when the statutes and rules governing delinquency proceedings are silent or ambiguous, but these standards can not be employed to supplant or override contrary policies enacted by our legislature.
In J.C.W. v. State, 880 P.2d 1067, 1072 (Alaska App.1994), this Court held that the superior court must consider the minor's ability to pay when fixing the amount of restitution in a delinquency proceeding. However, our decision was based in large measure on the fact that, at that time, the corresponding adult restitution statutes likewise required a sentencing court to consider a defendant's ability to pay. Id. In footnote 7 of our opinion in J.C.W., 880 P.2d at 1072, we noted that the legislature had recently amended the adult restitution statute to restrict and, in many instances, prohibit a sentencing court from considering a defendant's ability to pay when setting the amount of restitution. See former AS 12.55.045(f) & (g), enacted by SLA 1992, ch. 71, § 4. In this footnote in J.C.W., we stated that we intended to "express no view on whether this restriction would affect [future] juvenile delinquency proceedings". J.C.W., 880 P.2d at 1072 n. 7.
Nevertheless, as we noted earlier, when the Alaska Legislature enacted the current version of the juvenile delinquency statutes in 1996,[8] the legislature declared that one of its purposes was to "ensure that [the] victims . . . of crimes committed by juveniles are afforded the same rights as [the] victims . . . of crimes committed by adults". AS 47.12.010(b)(12).
Under the current version of AS 12.55.045(g), a court imposing restitution in a criminal case is prohibited from considering the defendant's ability to pay when assessing the amount of the restitution obligation. In other words, restitution should be awarded for the full amount of the victim's loss, regardless of the defendant's ability to pay.
This fact that the legislature has decreed that restitution in criminal cases is to be awarded without regard to the defendant's ability to pay suggests that when the legislature directed the superior court to order "suitable restitution" in delinquency cases (see AS 47.12.120(b)(4)), the legislature intended superior court judges to award restitution to the same extent that restitution would be awarded in an analogous adult criminal case under AS 12.55.045(g) in other words, restitution for the full amount of a victim's loss, regardless of the minor's ability to pay.
This Court recently upheld the constitutionality of AS 12.55.045(g) against the arguments that due process and a defendant's right to rehabilitation required a sentencing court to consider a defendant's ability to pay when the court set the amount of restitution in an adult criminal case. In Hodges v. State, 158 P.3d 864 (Alaska App.2007), we held that the legislature could lawfully direct sentencing courts to order restitution for the full amount of a victim's loss, without regard to the defendant's ability to pay although sentencing courts are still obliged to consider a defendant's ability to pay when they set the terms under which the restitution obligation will be enforced (i.e., the frequency and amount of the defendant's payments).
Given our conclusion that AS 12.55.045(g) is constitutional, and given the mandate of AS 47.12.010(b)(12) that the victims of delinquent acts are to be accorded the same rights they would receive if they were victims of a crime committed by an adult, it would seem that the superior court is not obliged to consider indeed, the superior court should not consider a delinquent minor's ability to pay when the court sets the amount of the "suitable restitution" required by AS 47.12.120(b)(4).
*263 But this tentative conclusion is clouded by events that transpired in the 2004 session of the legislature.
During the 2004 session, the legislature considered House Bill 357, a bill that again amended the restitution statutes, for the avowed purpose of "requir[ing] judges to order restitution from criminals in all cases where a victim has suffered a financial loss."[9]
During its debates on HB 357, the legislature considered amending AS 47.12.120(b), the statute that governs restitution in juvenile delinquency cases. Initially, HB 357 would have added the following provision to this statute: "The court may take into consideration the delinquent minor's ability to pay past age 19, or the age [at] which the court retains [sic: loses] jurisdiction over the minor, when determining the amount of the . . . restitution."[10] The legislature eventually decided not to add this language to the statute, because they concluded that the superior court already had the authority to take a minor's long-term ability to pay into account.[11]
This discussion obviously supports the conclusion we reached in the preceding section of this opinion: the conclusion that the legislature intended a minor's restitution obligation to continue after the minor's term of probation ended, and even after the superior court lost its juvenile jurisdiction over the minor. But this discussion is also premised on the idea that the superior court should be taking the minor's ability to pay into account when setting the amount of restitution.
Moreover, another provision of the current delinquency code, AS 47.12.120(b)(4)(C), authorizes the superior court to require the minor and the minor's parents "to submit financial information . . . for the purpose of establishing the amount of restitution or enforcing an order of restitution under AS 47.12.170". (Emphasis added) This provision likewise suggests that the superior court should be considering the minor's ability to pay when setting the amount of restitution.
(The State argues that the financial information required by AS 47.12.120(b)(4)(C) is intended only for the purpose of establishing a payment schedule or otherwise fashioning the terms under which the restitution order will be enforced, and that this financial information is to have no effect on the amount of restitution ordered. But the State's suggested reading of the statute is contradicted by the words of the statute itself, and the State cites no legislative history or other authority to support its view that the statute should be interpreted in this limited way.)
In sum, while there is some authority to support the proposition that the superior court should not consider a minor's ability to pay when setting the amount of restitution, there is also authority for the opposite proposition the view that the superior court should take the minor's ability to pay into account.
We conclude that we need not resolve this issue in W.S.'s case. Even if the superior court was obliged to consider W.S.'s ability to pay when the court set the amount of restitution, the record shows that the superior court at least implicitly found that W.S. would be able to pay the restitution. Further, the record contains no suggestion that W.S. will be unable to satisfy the restitution obligation.
As we explained earlier, the superior court ordered restitution in the amount of $3,185. Pursuant to AS 47.12.120(b)(4), the court made W.S. and his parents jointly and severally liable for this amount. Moreover, the superior court ordered both W.S. and his *264 parents to apply for the Alaska Permanent Fund Dividend if they are eligible and there is nothing in the record to suggest that they are not eligible.
At the hearing, the superior court noted that W.S. could seemingly pay the entire restitution obligation from his Permanent Fund dividends. Thus, the superior court found that the restitution obligation appeared to be within W.S.'s means.
(The restitution order in this case was entered in February 2007. We take judicial notice that the Permanent Fund Dividend for 2007 was $1,654.[12] Assuming that the amount of the dividend remains relatively constant, W.S. will be able to pay the entire restitution obligation in two years, without contribution from his parents, by using his Permanent Fund dividends.)
In addition, as this Court noted in J.C.W., the fact that a minor is made jointly liable with other people for the restitution means that the minor's share of this obligation will probably be considerably less than the whole. J.C.W., 880 P.2d at 1072-73. Here, W.S. will be responsible for the entire $3,185 only if his parents pay nothing. If, on the other hand, W.S. contributes his dividend from the current year and his parents contribute one of their dividends, this would satisfy the restitution obligation in a single year.
In other words, the record shows that the superior court at least implicitly considered W.S.'s ability to pay, and there is nothing in the record to suggest that W.S. and his parents are ineligible for the Permanent Fund Dividend, or that W.S. otherwise lacks the means to pay. Thus, even assuming that the superior court proceeded under the assumption that W.S.'s ability to pay was not relevant to the issue of how much restitution should be ordered, and even assuming that this assumption was mistaken, any error was harmless.
Conclusion
The judgement of the superior court is AFFIRMED.
NOTES
[1] See AS 47.12.160(a).
[2] AS 11.41.230(a)(3) and AS 11.61.120(a)(1), respectively.
[3] Ned v. State, 119 P.3d 438, 446 (Alaska App. 2005); Lonis v. State, 998 P.2d 441, 447 n. 18 (Alaska App.2000).
[4] See R.I. v. State, 894 P.2d 683, 685-86 (Alaska App.1995) (employing adult restitution provisions when analyzing the superior court's restitution authority in delinquency cases); J.C.W. v. State, 880 P.2d 1067, 1072 (Alaska App.1994) (likening the delinquency restitution provision to the statute governing restitution for adult offenders); J.M. v. State, 786 P.2d 923, 923 (Alaska App.1990) (noting that it was appropriate to refer to the adult criminal statutes when interpreting "suitable restitution" under the delinquency law).
[5] IJA-ABA Juvenile Justice Standards, Standards Relating to Disposition, § 3.2-(B)(1)(f).
[6] Petersen v. Mutual Life Ins. Co. of New York, 803 P.2d 406, 411 (Alaska 1990); Hitt v. J.B. Coghill, Inc., 641 P.2d 211, 213 n. 4 (Alaska 1982).
[7] IJA-ABA Juvenile Justice Standards, Standards Relating to Disposition, § 3.2(B)(1)(a).
[8] SLA 1996, ch. 59, § 46.
[9] See the Sponsor Statement for 2004 HB 357, available at:
http://www.akrepublicans.org/samuels/23/spst/samu_hb357.php.
[10] See the Minutes of the House Judiciary Committee for January 30, 2004, available at:
http://www.legis.state.ak.us/basis/get_single_ minute.asp?session=23&beg_line=00655&end_ line=&1f01132&time=1310&date=20040130& comm=JUD&house=H.
[11] Minutes of the House Judiciary Committee for February 9, 2004 (discussion between Sara Neilson, staff to Representative Ralph Samuels, and Representative Max Gruenberg), available at:
http://www.legis.state.ak.us/basis/get_single_ minute.asp?session=23&beg_line=01411&end_ line=01743&time=1304&date=20040209& comm=JUD&house=H.
[12] See the Alaska Department of Revenue's Permanent Fund Dividend home page, https://www. pfd.state.ak.us/.
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14 F. Supp. 2d 737 (1998)
AIR PRODUCTS AND CHEMICALS, INC., Plaintiffs,
v.
UNITED STATES, Defendant,
Sinopec Sichuan Vinylon Works, Defendant-Intervenor,
Guangxi Gitic Import & Export Corp. and Guangxi Vinylon Plant, Defendant-Intervenors.
No. Slip Op. 98-60. Court No. 96-06-01573.
United States Court of International Trade.
May 6, 1998.
*738 *739 Ellis & Aeschliman, Columbus, OH (David R. Busam), Wickens & Lebow, Washington, DC (Edward M. Lebow) for Plaintiff.
Frank W. Hunger, Assistant Attorney General of the United States; David M. Cohen, Director; Cynthia B. Schultz, Commercial Litigation Branch, Civil Division, United States Department of Justice; Of Counsel, Robert J. Heilferty, Office of the Chief Counsel for Import Administration, Department of Commerce, Washington, DC, for Defendant.
Williams, Mullen, Christian & Dobbins (William E. Perry), Washington, DC, for Defendant-Intervenor, Sinopec Sichuan Vinylon Works.
Aitken Irvin Lewin Berlin Vrooman & Cohn, LLP (Bruce Aitken), Washington, DC, for Defendant-Intervenors, Guangxi Gitic Import & Export Corp. and Guangxi Vinylon Plant.
OPINION
POGUE, Judge.
Plaintiff, Air Products and Chemicals Inc. ("Air Products"), challenges aspects of the U.S. Department of Commerce ("Commerce" or the "Department") final determination in Polyvinyl Alcohol From the People's Republic of China, 61 Fed.Reg. 14,057 (Dep't Commerce 1996)(final det.)("Final Determination").
This Court has jurisdiction pursuant to 28 U.S.C. § 1581(c)(1994) and 19 U.S.C. § 1516a(2)(B)(iii)(1994).
*740 Plaintiff's motion for judgment on the agency record[1] raises four issues: (1) whether Commerce's assignment of a company-specific antidumping margin was in accordance with law, and if in accordance with law, whether Commerce's finding of an absence of de jure and de facto governmental control was supported by substantial evidence; (2) whether Commerce's calculation of factory overhead, general expenses and profit rates was in accordance with law, and if in accordance with law, whether Commerce's determination that VAM Organic and Polychem are equally representative of the PVA industry in India was supported by substantial evidence; (3) whether Commerce's application of the factory overhead percentage rate to total costs in the final stage of production was supported by substantial evidence; and (4) whether Commerce's calculation of indirect labor costs was in accordance with law and was supported by substantial evidence.
Background
On March 9, 1995, Air Products filed an antidumping petition with Commerce and the United States International Trade Commission ("ITC") alleging that polyvinyl alcohol[2] ("PVA") from Japan, the People's Republic of China ("PRC"), Taiwan, and the Republic of Korea was being sold at prices below fair market value injuring the domestic industry. Commerce initiated an antidumping investigation covering entries of PVA from October 1, 1994, through March 31, 1995. See Polyvinyl Alcohol From Japan, the Republic of Korea, the People's Republic of China, and Taiwan, 60 Fed.Reg. 17,053 (Dep't Commerce 1995)(init. antidumping duty investigation).
In the course of its investigation, Commerce issued an antidumping questionnaire to the PRC's Ministry of Foreign Trade and Economic Cooperation ("MOFTEC") and the two known PRC producers of PVA, Guangxi Gitic Import and Export Corporation ("Guangxi") and Sinopec Sichuan Vinylon Works ("Sichuan"). P.R. Doc. No. 47, App. Def.'s Mem. Opp'n Pl.'s Mot. J. Agency R. 1 ("Govt.App."). In June, 1995, Commerce received responses from the respondents. See Polyvinyl Alcohol From the People's Republic of China, 60 Fed.Reg. 52,647 (Dep't Commerce 1995)(prel.det.)("Preliminary Determination"). During August and September 1995, Commerce requested clarifications of the submitted questionnaire responses.
On October 10, 1995, Commerce preliminarily determined that PVA from the PRC was being sold at less than fair value. Id. In October and November 1995, Commerce conducted on-site verification of the PRC producers. Final Determination, 61 Fed.Reg. at 14,058.
On February 14, 1996, after submission of briefs by petitioner and respondents, Commerce held a public hearing. Id. On March 29, 1996, Commerce published its final determination. Id. at 14,057. Following the ITC's affirmative determination that an industry in the United States was threatened with material injury by reason of the subject imports, an antidumping duty order was entered against PVA from the PRC. Polyvinyl Alcohol From the People's Republic of China, 61 Fed.Reg. 24,286 (Dep't Commerce 1996)(antidumping duty ord.). Commerce found a 0 percent margin for Sichuan and a 116.75 percent margin for Guangxi. Id. at 24,287.
Standard of Review
In reviewing a final antidumping determination the Court of International Trade must decide whether Commerce's determination is in accordance with law and whether Commerce's conclusions are supported by substantial evidence on the record. See Section 516a(b)(1)(B)(i) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(b)(1)(B)(1994).
Discussion
Commerce calculates an antidumping margin by comparing an imported product's price in the United States to the normal value ("NV") of comparable merchandise. Normal value typically equals the domestic price of the product in the exporting country. When the exporting country is a nonmarket *741 economy ("NME")[3], the domestic product sales may not be reliable indicators of market value. In such cases, Commerce must estimate the normal value by 1) isolating each factor of the production process in the NME country, 2) choosing a surrogate market economy country at a comparable level of economic development that produces comparable merchandise, 3) assigning a value to each factor of production equal to its cost in the surrogate country, and 4) adding to those values an estimated amount for profit and general expenses. 19 U.S.C. § 1677b(c)(1994).[4]
The purpose of the procedure established under section 1677b(c) is to construct the product's price as it would have been if the NME country were a market economy, using the best information available regarding surrogate values. Tianjin Machinery Import & Export Corp. v. United States, 16 CIT 931, 940, 806 F. Supp. 1008, 1018 (1992); Timken Co. v. United States, 16 CIT 142, 144, 788 F. Supp. 1216, 1218 (1992).[5] Commerce used the above procedure in the determination at issue, using India as the surrogate market economy.[6]
1. Company-Specific Rate v. Country-Wide Rate
In its May 23, 1995, antidumping questionnaire to the two PRC PVA producers, Commerce advised the parties of its policy with respect to "separate" company-specific rates as follows:
The Department presumes that a single antidumping margin is appropriate for all exporters in a nonmarket economy country. The Department may, however, consider requests for separate rates from individual exporters. Individual exporters requesting a separate rate must respond to the following questions in order for the Department to consider fully the issue of separate rates.
P.R. Doc. No. 47 at A-2, Govt.App. 1. The Department requested economic, industry and company-specific information. In its June 30, 1995 response, Sichuan provided Commerce with information regarding its eligibility for a separate rate. See C.R. Doc. No. 16, Govt.App. 2.
Plaintiff argues Commerce's determination that Sichuan is entitled to a separate, company-specific margin was not in accordance with law. Pl.'s Mem. Supp. Mot. J. Agency R. at 2 ("Air Product's Brief"). Plaintiff maintains Commerce improperly applied its NME methodology in determining Sichuan's independence by not requiring Sichuan to affirmatively demonstrate its independence. Therefore, Plaintiff argues, Commerce should have rejected Sichuan's submitted information and applied facts available to determine the appropriate dumping margin. Id.; see 19 U.S.C. § 1677e (1994).
For purposes of Commerce's determinations involving products from an NME country, producers and exporters in the NME country are presumed to export under the control of the central government until they affirmatively demonstrate on a de jure and de facto basis that there is an absence of government control. Sparklers From the People's Republic of China, 56 Fed.Reg. 20,588, 20,589 (Dep't Commerce 1991)(final det.). This approach has been consistently upheld by this court. Tianjin, 16 CIT at 935, 806 F. Supp. at 1013-14 (1992); Sigma Corp. v. United States, 17 CIT 1288, 1302, *742 841 F. Supp. 1255, 1266 (1993); Writing Instrument Mfrs. Ass'n v. United States, 21 CIT ___, ___, 984 F. Supp. 629, 642-43 (1997), appeals docketed, No. 98-1178 (Fed. Cir. Jan. 9, 1998), 98-1202 (Fed.Cir. Jan. 21, 1998).
Evidence supporting de jure absence of government control includes: (1) absence of restrictive stipulations on individual exporters' business and export licenses; (2) legislative enactments decentralizing control of companies; or (3) formal measures by the government decentralizing control of the companies. Tianjin, 16 CIT at 935, 806 F. Supp. at 1014; Sigma Corp., 17 CIT at 1302 n. 3, 841 F. Supp. at 1266 n. 3. Evidence supporting de facto absence of governmental control includes: (1) whether each exporter sets its own export prices independently of the government and other exporters; and (2) whether each exporter can keep the proceeds from its sales. Id.
During its on-site verification of the Sichuan manufacturing facility, Commerce officials evaluated the evidence supporting Sichuan's separate rate claim. See C.R. Doc. No. 60 at 1, App. Pl.'s Mem. Supp. Mot. J. Agency R. 1 ("Pl.App."). In the final determination, Commerce explained its analysis of both a de jure and de facto absence of governmental control. Final Determination, 61 Fed.Reg. at 14,058-60. In addition, Commerce specifically found that Sichuan acted independently from the China Petrochemical Corporation ("Sinopec"). Id.
Plaintiff's specific challenge to Commerce's determination is that the Department's analysis of governmental control should have been at the Sinopec level. Air Product's Brief at 7-8. As Sichuan was once part of Sinopec[7], Plaintiff argues, as part of Commerce's de facto standard for a separate rate entitlement, "Commerce must verify the lack of corporate control by another entity before it can consider the issue of government control." Id. at 8. In fact, despite its previous status, Commerce specifically found that Sichuan is independent from Sinopec.[8] Commerce explained:
All evidence on the record supports Sichuan's assertion that there is no current relationship between Sichuan and Sinopec.... At verification we reviewed a wide variety of sales documents including contracts, invoices, records of payments, and correspondence and found that Sichuan acted independently from Sinopec and any other entities in its day to day business activities. We found that Sichuan officials made all decisions regarding sales pricing and contracting, appointment of management personnel, and disposition of profits, and that these decisions were neither reviewed nor approved by Sinopec or any other entity.
Final Determination, 61 Fed.Reg. at 14,060.
Plaintiff also argues that Commerce's determination was not supported by substantial evidence.[9] Air Product's Brief at 8. This argument has no merit.
*743 As noted, in order to determine whether Sichuan was an independent entity, Commerce requested that the company provide economic, industry, and company-specific information. P.R. Doc. No. 47 at A-1, A-2, A-4, Govt.App. 1. In its June 30, 1995 response, Sichuan provided government regulations, the company's business license, price negotiation documents, financial statements, organization charts, sample sales documents and product sales literature. C.R. Doc. No. 16, Govt.App. 2.
During on-site verification of the Sichuan manufacturing facility, Commerce examined Sichuan's corporate structure and affiliations. C.R. Doc. No. 60 at 1, Pl.App. A-1. Commerce reviewed Sichuan's business license, its acquisition, and implications regarding ownership of the company. Id. A-1A-2. Commerce examined the steps involved in planning, development, review, approval and dissemination of Sichuan's business plan. Commerce found that there "is no restriction on the business license restricting Sichuan's business to import and export. Under [certain PRC laws], it can export without going through a trade company." Id. A-4A-5. "[T]he business license requires the company to operate within the scope of business as specified in the business license.... The license establishes that the company is an independent legal entity that is responsible for its own profits and losses." Id. A1
Sichuan also provided evidence of legislative enactments and other measures by the PRC government to decentralize control of companies. Final Determination, 61 Fed. Reg. at 14,058. Sichuan noted the various acts passed by the People's Congress which provide Chinese corporations with considerable autonomy with respect to production, price-setting, sales, investment, personnel and wages. C.R. Doc. No. 16 at A-1A-11; Govt.App. 2. In the final determination Commerce explained:
[Commerce] has reviewed these and other enactments in prior cases and has previously determined that these laws indicate that the responsibility for managing stateowned enterprises has been shifted from the government to the enterprise itself.
Final Determination, 61 Fed.Reg. at 14,058. Sichuan also submitted documents which establish that PVA is not included on the list of products that may be subject to central government export constraints. Id. The Court finds that the evidence verified by Commerce supports a finding of a de jure absence of governmental control.
The evidence reviewed by Commerce also supports a finding of a de facto absence of government control. Commerce examined how Sichuan negotiates sales, how prices are set, and the process by which Sichuan deals with convertible currency from export sales, including whether there are any restrictions on the use of foreign currency. C.R. Doc. No. 60 at 2, Pl.App. 1. Commerce also reviewed how Sichuan's management is selected. Id. at 3.
Sichuan provided evidence supporting its claim that it sets prices based upon individual negotiations with U.S. importers and that "[t]hese prices are not subject to review or guidance from any governmental organization." Id. at 2; C.R. Doc. No. 16 at A-8, App. A-3, Govt.App. 2. Commerce also reviewed Sichuan's statement that "it does not coordinate its selling and pricing activities with other exporters, and that the PRC government has no involvement in coordinating Sichuan's export activities." C.R. Doc. No. 16 at A-8. Commerce "observed no evidence that parties outside Sichuan were involved in *744 its sales decisions." P.R. Doc. No. 60 at 2, Pl.App. 1.
Commerce verifiers also "[r]eviewed the process by which Sichuan deals with convertible currency from export sales, including whether there are any restriction[s] on the use of foreign currency." Id. at 3. Sichuan provided evidence that it retains the proceeds of its export sales and makes independent decisions regarding disposition of profits or financing of losses. C.R. Doc. No. 16 at A-10, Govt.App. 2. Commerce found that Sichuan was not subject to any foreign exchange targets set by any government authority and that there were no restrictions in the use of its revenues and that it controlled its bank account.[10] C.R. Doc. No. 60 at 3, Pl.App. 1.
Further, the verification team reviewed Sichuan's report that the company did not share any managers or owners with its competitors and found no inconsistencies. Id. Sichuan also provided a list of its management and described how it was selected. C.R. Doc. No. 16 at A-4, A-9, Govt.App. 2. During its examination of Sichuan's records, Commerce found nothing to contradict Sichuan's claims. P.R. Doc. No. 60 at 3, Pl. App. 1.
In conclusion, the Court finds there is sufficient evidence on the record supporting Commerce's determination of the absence of de jure and de facto governmental control over Sichuan's export activities. Thus, Commerce properly assigned a company-specific rate to Sichuan.
2. Calculation of the Factors of Production
A. Calculation of Factory Overhead, G & A and Profit
Once Commerce determined India to be the appropriate surrogate country, it sought surrogate values for each factor of production. Commerce stated that it would select, where possible, publicly available, published information ("PAPI"). Commerce provided interested parties with the opportunity to submit PAPI for the Department to consider when valuing the factor inputs. P.R. Doc. No. 53, Govt.App. 4; P.R. Doc. No. 54, Govt.App. 5.
In its PAPI submissions, Air Products, petitioner at the administrative level, provided rates for factory overhead, general and administrative expenses ("G & A") and profit for 1992 and 1993 based upon financial statements for VAM Organic Chemicals, Ltd. ("VAM Organic"). See P.R. Doc. No. 136 at Table 1, Govt.App. 6. VAM organic is an Indian producer of PVA and vinyl acetate monomer ("VAM"), a major input into PVA. P.R. Doc. No. 145 at 7, Attachment 9, Govt. App. 7 (Preliminary Valuation Memorandum, Oct. 2, 1995). In its preliminary calculations, Commerce relied upon petitioner's PAPI, and after making certain adjustments, applied a factory overhead rate of 37.44%, a general expenses rate of 45%, and a profit rate of 4.78%. Id.
Subsequently, Sichuan provided PAPI for factory overhead, G & A, and profit values. P.R. Doc. No. 177 at 1-2, Govt.App. 8. While Sichuan argued that information from the Indian chemical industry as a whole was preferable, it also submitted data from Polychem, Ltd. ("Polychem"), a company that Sichuan alleged to be a more significant Indian producer of PVA than VAM Organic. The values submitted by Sichuan included, a factory overhead rate of 22.03%, a general expenses rate of 29.97%, and a profit rate of 0%. Id. at 3.
In its final calculations, Commerce used a simple average of the factory overhead, G & A and profit percentages reported for Polychem and VAM Organic. P.R. Doc. No. 210 at 2, Attachment 5, Govt.App. 9 (Final Valuation Memorandum, March 22, 1996). Commerce applied a rate of 29.44% for factory overhead, 37.57% for general expenses, and 2.40% for profit. Id. Attachment 5.
*745 Plaintiff challenges Commerce's calculation of factory overhead, G & A and profit, arguing that the averaging of data from both Indian producers was not in accordance with law.[11] Air Product's Brief at 25. Plaintiff argues Commerce should use VAM Organic as the sole source to calculate factory overhead, G & A and profit. Id. Plaintiff maintains VAM Organic is more representative than Polychem of the PVA industry in India. Id. In the alternative, Plaintiff contends if the Department uses information submitted by both producers, Commerce should weight-average them based on the relative proportions of PVA, VAM and VAM intermediates to total production. Id. at 26.
The antidumping statute provides that when an NME country is concerned, Commerce shall determine normal value
on the basis of the value of the factors of production utilized in producing the merchandise and to which shall be added an amount for general expenses and profit plus the cost of containers, coverings, and other expenses
19 U.S.C. § 1677b(c)(1)(1994). In valuing factors of production under this section, Commerce "shall utilize, to the extent possible, the prices or costs of factors of production in one or more market economy countries that are (A) at a level of economic development comparable to that of the nonmarket economy country, and (B) significant producers of comparable merchandise." Id. § 1677b(c)(4).
Factory overhead is one component of a product's cost of manufacturing ("COM"), which also includes material and labor. The value of factory overhead is generally calculated as a percentage of manufacturing costs. Magnesium Corp. of America v. United States, 20 CIT ___, ___, 938 F. Supp. 885, 897 (1996).
Nothing in the antidumping statute mandates that Commerce must derive normal value in an NME case exclusively from one source in the surrogate country. The statute provides simply that "valuation of the factors of production shall be based on the best available information" regarding values of such factors in the surrogate country. 19 U.S.C. § 1677b(c)(1). "If the statute is silent or ambiguous with respect to [a] specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute." Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 843, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). In this case, Commerce had information from two producers of the subject merchandise. Commerce reasonably decided to use an average of the available data from both producers. As Commerce explained:
Because there is nothing in this case to indicate that one factor (i.e. sales volume or production volume) is more important than the other in valuing factory overhead, general and administrative expenses and profit, we determine that weight-averaging the data from both companies on the basis of either factor is inappropriate. Accordingly, we have weighted the data equally between each company and calculated factory overhead, general and administrative and profit percentages using a simple average of the percentages derived from each producer....
Final Determination, 61 Fed.Reg. at 14,061. Commerce's approach comports with Congress' intent that the Department use relevant data on production of the same class or kind of merchandise. H.R. Conf. Rep. No. 576, 100th Cong., 2d Sess. 591 (1988). Accordingly, Commerce's methodology represents a permissible application of 19 U.S.C. § 1677b(c)(1).
*746 Commerce's determination also must be supported by substantial evidence. See 19 U.S.C. § 1516a(b)(1)(B)(i). After review of the available data from Polychem and VAM Organic, Commerce determined that there was "no significant difference in the quality and representativeness of the data contained in the financial statements." Final Determination, 61 Fed.Reg. at 14,061. However, Commerce failed to cite evidence to support its conclusion that VAM Organic and Polychem are "equally representative" of the PVA industry in India. "[T]he orderly functioning of the process of review requires that the grounds upon which the administrative agency acted be clearly disclosed and adequately sustained." SEC v. Chenery Corp., 318 U.S. 80, 94, 63 S. Ct. 454, 87 L. Ed. 626 (1943). Accordingly, this issue is remanded to Commerce for reconsideration.
B. Application of Factory Overhead
As noted above, Commerce calculated a factory overhead percentage using an average of the percentages derived from both Polychem and VAM Organic. To calculate a factory overhead value this percentage was applied to the COM in the last stage of PVA production. P.R. Doc. No. 145 at 7, Govt. App. 7.
Plaintiff argues the surrogate producers in India were not as "vertically integrated" as the PRC producers. Therefore, Plaintiff maintains Commerce should have applied the surrogate factory overhead percentage rate at upstream stages of PVA production in order to fully account for the factors of production. Air Product's Brief at 16. Plaintiff contends Commerce's approach understates Sichuan's production costs. Id.
Commerce has considerable discretion in the evaluation of factors of production. Nation Ford Chem. Co. v. United States, 21 CIT ___, ___, 985 F. Supp. 133, 136-37 (1997), appeal docketed, No. 98-1254 (Fed.Cir. Feb. 9, 1998). When examining Commerce's factual determinations "[i]t is not within the Court's domain either to weigh the adequate quality or quantity of the evidence for sufficiency or to reject a finding on grounds of a differing interpretation of the record." Timken Co. v. United States, 12 CIT 955, 962, 699 F. Supp. 300, 306 (1988), aff'd, 894 F.2d 385 (Fed.Cir.1990).
The purpose of the NME statutory scheme is to arrive at the best estimate of market value in the country of export. Magnesium Corp., 20 CIT at ___, 938 F.Supp. at 897 n. 64. Commerce "utilize[d], to the extent possible, the prices or costs of factors of production in one ... market economy countr[y] ... at a level of economic development comparable to that of the nonmarket economy country...." See 19 U.S.C. § 1677b(c)(4). Adhering to the statutory mandate, Commerce used factory overhead data taken from an investigation of two Indian producers, because they were deemed to reflect an experience close to that of PVA producers in the PRC.
According to Plaintiff, "irrefutable evidence" demonstrates that the surrogate producers in India are not as "vertically integrated" as PRC producers. Air Product's Brief at 16. Plaintiff asserts that Sichuan produces "virtually all" of the factors of production upstream from PVA production, while the Indian surrogates purchased most of their raw materials. Id. at 20. However, in Sichuan's questionnaire submission of July 20, 1995, the company listed twenty five material and energy inputs purchased by the company. Pl.App. 15 at App. D6 (Sichuan Section D Response, Purchased Raw Materials and Energy). Furthermore, the Indian surrogates are producers and sellers of acetic acid, the primary material for making PVA. See VAM 1992-93 Financial Statement at 25, Pl.App. 8; Polychem 1992-93 Annual Report at 29, Pl.App. Ex. 9. In contrast, Sichuan purchases acetic acid. Pl.App. 15 at App. D6.
Plaintiff also emphasizes that the Indian producers purchased such inputs as acetylene, oxygen, nitrogen, and treated water, while Sichuan manufactures or processes these materials itself. Air Product's Brief at 19. The Department responded to this argument in the final determination. Commerce stated:
[T]he Indian financial statements state only that the Indian producers consume such inputs, but contain no information as to whether or not such consumption is *747 derived from internal manufacture. Further analysis of these documents indicates that the Indian producers have considerable investment in PVA production facilities.
Final Determination, 61 Fed.Reg. at 14,060. Commerce determined that such investment may in fact represent vertical integration at the same level or close to that of the PRC producers. Accordingly, the record supports Commerce's conclusion that "[t]here is no evidence ... to indicate that the Indian producers are any less vertically integrated than the PRC PVA producers." Id.
C. Valuation of Indirect Labor Costs
Indirect labor is often accounted for in a firm's factory overhead expenses. In this case, however, upon review of the surrogate data for factory overhead, Commerce determined "indirect labor is not included in factory overhead." P.R. Doc. No. 145, at 7 n. 7, Govt.App. 7. Subsequently, Commerce calculated values for indirect labor separately based upon information provided by each producer.[12]
Sichuan calculated an indirect labor rate by dividing the amount of its indirect labor by the production total. See C.R. Doc. No. 60 at Ex. 39, Govt.App. 10 (Commerce's Valuation Report of Sichuan, Dec. 13, 1995). Commerce used the verified amounts reported by Sichuan in its factors of production calculation. Id.
At the administrative level, Plaintiff argued that a value for indirect labor should be applied to all upstream production stages. Plaintiff maintained that Commerce's methodology understated Sichuan's indirect labor costs. Pl.App. 10 at 29 (Air Product's Case Brief, Jan. 30, 1996). Commerce rejected this argument stating, "[w]e verified Sichuan's indirect labor reporting and found no basis to add additional factors for this input ... Sichuan ... reported all indirect labor factors and no further accounting for this input is warranted." Final Determination, 61 Fed.Reg. at 14,063.
Plaintiff continues to assert that Sichuan significantly underreported its indirect labor cost by reporting indirect labor only for the final stage of the production process. Air Product's Brief at 23. Plaintiff contends that Commerce must apply a value for indirect labor to all upstream production stages, as in Manganese Metal From the People's Republic of China, 60 Fed.Reg. 56,054 (Dep't Commerce 1995)(final admin. rev.). Id. at 24. Plaintiff's reliance upon Manganese Metal is misplaced as that case is inapposite.
In Manganese Metal, the Department did not request and the respondents did not report any separate factors for indirect labor. 60 Fed.Reg. at 56,050. When the Department realized in Manganese Metal that the Indian data it was using to calculate a factory overhead rate did not include indirect labor, Commerce estimated an amount for this factor, which it added to certain indirect labor information it had gathered at verification. Id. In contrast, in this case Sichuan reported indirect labor information and Commerce used the verified amounts reported by Sichuan. C.R. Doc. No. 24, at 7 n. 7; C.R. Doc. No. 60 at 12, Ex. 39, Govt.App. 10.
Plaintiff also argues that Commerce's determination "not to add additional factors for indirect labor" was not supported by substantial evidence. Air Product's Brief at 24. Plaintiff maintains "the record evidence does not support Commerce's conclusion that indirect labor costs were fully reported."[13]Id.
In addressing factual issues, "[t]he function of this court is not to reweigh the evidence, but rather to ascertain whether [Commerce's] *748 determination is `unsupported by substantial evidence on the record,....'" Matsushita Elec. Indus. Co. v. United States, 3 Fed. Cir. (T) 44, 54, 750 F.2d 927, 936 (1984). The possibility of drawing two inconsistent conclusions from the evidence does not prevent an agency's finding from being supported by substantial evidence. Consolo v. Federal Maritime Comm'n, 383 U.S. 607, 620, 86 S. Ct. 1018, 16 L. Ed. 2d 131 (1966) (citations omitted).
In its questionnaire responses for labor inputs, Sichuan reported the number of workers in each workshop or production step, multiplied these numbers by the weeks worked, and multiplied this result by 44, based on a workweek of 44 hours. This result was divided by the production total. See C.R. Doc. No. 60 at 11-12, Ex. 39, Govt. App. 10. These figures were verified by Commerce. Id. It is on the basis of this information that Commerce made its determination that Sichuan "reported all indirect labor factors." Final Determination, 61 Fed.Reg. at 14,063. Thus, Commerce's finding that there "was no basis to add additional factors for [indirect labor]" was supported by substantial evidence. That Plaintiff "can point to evidence ... which detracts from ... [Commerce's] decision and can hypothesize a ... basis for a contrary determination is neither surprising nor persuasive." Matsushita, 3 Fed. Cir. (T) at 54, 750 F.2d at 936. Commerce provided evidence demonstrating the accuracy of Sichuan's reported indirect labor information. Therefore, Commerce's decision not to add additional factors for this input was appropriate.
Conclusion
This case having been duly submitted for decision and the Court, after due deliberation, having rendered a decision herein; now, in conformity with said decision, it is hereby
ORDERED that the issue of Commerce's determination that VAM Organic and Polychem are equally representative of the Indian PVA industry is remanded for further consideration in accordance with the Court's opinion; and it is further
ORDERED that the remand results are due on Monday, July 6, 1998; comments and responses are due on Thursday, August 6, 1998; and rebuttal comments are due on Thursday, August 20, 1998; and it is further
ORDERED that Plaintiff's motion is denied in all other respects and the final determination is sustained in all other respects.
NOTES
[1] See USCIT R. 56.2.
[2] Polyvinyl alcohol is a dry, white to cream-colored, watersoluble synthetic polymer. Final Determination, 61 Fed.Reg. at 14,058.
[3] The term "nonmarket economy country" means any foreign country that the administering authority determines does not operate on market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of the merchandise. 19 U.S.C. § 1677(18)(A)(1994).
[4] As the determination before the Court was initiated after January 1, 1995, post-Uruguay Round law applies. Torrington Co. v. United States, 68 F.3d 1347, 1352 (Fed.Cir.1995), rev'd on other grounds, 73 F.3d 378, 1995 WL 723785 (Fed.Cir.1995).
[5] The cases cited by the Court regarding Commerce's NME methodology were decided under the pre-Uruguay Round version of the antidumping statute. However, this aspect of the statute was not changed by the Uruguay Round. Compare 19 U.S.C. § 1677b(c) (1988) with 19 U.S.C. § 1677b(c) (1994).
[6] No party challenges the use of India as the surrogate market economy.
[7] Sichuan was founded in 1974 with funds from the Chinese government through the Ministry of Textiles. C.R. Doc. 16 at A-4, Govt.App. 2. In 1983, it became a part of Sinopec, another stateowned company engaged in the petroleum business. Id. Throughout verification, Sichuan maintained that, under PRC decentralization laws, Sichuan is no longer part of Sinopec. C.R. Doc. No. 60 at 1, Pl.App. 1.
[8] The Court's analysis does not imply that Commerce's de facto standard requires a threshold finding of independence from another entity as argued by Plaintiff.
[9] Plaintiff also alleges Commerce "ignored evidence that demonstrated that Sichuan was controlled by the central government." Air Product's Brief at 8. Plaintiff quotes selectively from the record and mischaracterizes Sichuan's questionnaire responses in an attempt to support this argument. First, Plaintiff argues "Commerce explicitly stated that Sichuan was unable to produce any evidence which referred to its severance of ties to Sinopec." Id. at 8-9. However, the statement cited by Plaintiff, concludes "we observed no indication in any part of our verification that Sinopec was involved in any of the sales or factors of production areas examined." C.R. Doc. No. 60 at 1, Pl.App. 1.
Second, Plaintiff argues "[v]erification proved that Sichuan does, in fact, report the names of its managers to governmental authorities." Air Product's Brief at 11. The Department's questionnaire asked Sichuan to indicate whether it is required to notify any governmental authorities of who the managers are, and if so to identify which government authorities and the purpose of the notification. P.R. Doc. No. 47 at A-4, Govt.App. 1. Plaintiff contends Sichuan failed to answer these questions, therefore, "the record ... affirmatively demonstrates continued involvement by outsiders in Sichuan's business operations." Air Product's Brief at 11. The Department's questionnaire, however, required that Sichuan respond only if such notification was required. P.R. Doc. No. 47 at A-4, Govt.App. 1.
Finally, Plaintiff alleges Sichuan's maintenance of a "profits payable" account "indicates that profits sometimes may be paid to Sinopec or other government-controlled entities." Air Product's Brief at 13. Plaintiff acknowledges Commerce determined that Sichuan officials made all decisions regarding the disposition of profits. Nevertheless, Plaintiff contends the absence of payments during the period of investigation does not prove that profits are not paid to outside entities. Air Product's Brief at 13. The Court does not agree. Absent strong evidence to the contrary, it was appropriate for Commerce to rely upon verified evidence from the period of investigation as the basis for its determination. Al Tech Specialty Steel Corp. v. United States, 20 CIT ___, ___, 947 F. Supp. 510, 519 (1996).
[10] Sichuan explained that "under a January 1, 1994, law, it is required to convert its foreign exchange proceeds into RMB, but it is permitted to maintain a foreign currency account. It keeps 100 percent of its export earnings. All of the foreign exchange earnings were exchanged by Sichuan's banks into RMB, but Sichuan officials added that it is able to buy as much convertible currency as it wants." C.R. Doc. No. 60 at 3, Pl.App. 1. Commerce officials found "no evidence to contradict this description." Id.
[11] Generally, Commerce seeks to base surrogate values upon the industry experience closest to the producer under investigation. Final Determination, 61 Fed.Reg. at 14,061. In this case, given the record evidence from the two producers of the subject merchandise, Commerce determined there was no need to rely upon the experience of the Indian chemical industry as a whole. Id.
At the administrative level, Sichuan argued that Commerce should use information from the Indian chemical industry as a whole. Id. at 14,060. However, before this Court no party challenges Commerce's decision not to rely on the Indian chemical industry as a whole.
[12] No party challenges Commerce's decision to calculate values for indirect labor separately.
[13] Plaintiff argues Sichuan significantly underreported its labor costs. Plaintiff alleges there is a discrepancy between the number of workers Sichuan reported and the number of employees Sichuan has. Air Product's Brief at 24. To support this argument, Plaintiff cites an estimated number of employees that Plaintiff alleges Sichuan reported. Plaintiff extrapolated this estimate from various Sichuan questionnaire responses. Id. Plaintiff's estimated extrapolation is less than 10% of the number of employees Plaintiff alleges Sichuan has. Here, Plaintiff cites a passage from a 1988 Sichuan Company Brochure stating "[t]here are over ten thousand workers and staff members in our plant." Id.; Pl. App. 6 at 5. Thus, Plaintiff apparently claims that it has identified an inconsistency in Sichuan's reporting.
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174 P.3d 1106 (2007)
217 Or. App. 363
STATE of Oregon, Plaintiff-Appellant Cross-Respondent,
v.
Darryl Anthony BUCK, Defendant-Respondent, Cross-Appellant.
04102314, A131973.
Court of Appeals of Oregon.
Argued and Submitted September 7, 2007.
Decided December 26, 2007.
*1107 Robert M. Atkinson, Assistant Attorney General, argued the cause for appellant-cross-respondent. With him on the briefs were Hardy Myers, Attorney General, and Mary H. Williams, Solicitor General.
Jamesa J. Drake, Deputy Public Defender, argued the cause for respondent-cross-appellant. With her on the brief was Peter Gartlan, Chief Defender, Legal Services Division, Office of Public Defense Services.
Before HASELTON, Presiding Judge, and ARMSTRONG and ROSENBLUM, Judges.
ROSENBLUM, J.
Following a bench trial, the trial court convicted defendant of one count of sexual abuse in the first degree, ORS 163.427, a Measure 11 offense, see ORS 137.700(2)(a)(P). However, the court concluded that, under the circumstances, the 75-month sentence prescribed by Measure 11 would be so disproportionate to the offense that it would violate Article I, section 16, of the Oregon Constitution. Accordingly, the court imposed a sentence of 17 months. On appeal, the state assigns error to the trial court's refusal to impose the Measure 11 sentence. Defendant cross-appeals, arguing that there was insufficient evidence of sexual contact to support a conviction. We reject defendant's arguments on cross-appeal without discussion. On the state's appeal, we conclude that the trial court erred in failing to impose the Measure 11 sentence.
We take the following facts from the trial court record.[1] At the time of the offense for which defendant was convicted, he and the victim had been acquainted for several months. Defendant was 36 years old; the victim was 13. Defendant and the victim's *1108 mother had a mutual friend, Schamp, who sometimes took the victim and her sister, T, who was 15, out for various recreational activities. Defendant had met the girls on several occasions and had told them both that he thought they were beautiful and smart. T described defendant's remarks as "things that you'd tell your girlfriend to flatter her." Defendant knew how old the victim was, but he thought that she was an "early bloomer" and that she looked to be 20 or 30 years old.
In July 2004, Schamp and defendant went to Schamp's family reunion at a campground near Sweet Home. On the way, Schamp decided to stop at the victim's house to see if he and defendant could take the girls along for a camping trip. Schamp persuaded their mother to allow the girls to go. She asked Schamp and defendant to "keep an eye on [the girls]" while they were camping.
About an hour after they arrived at the campsite, all four walked to the nearby river to swim and fish. After several hours, Schamp and T left the river to collect firewood. Defendant was going to go with them, but Schamp told him that he and the victim, who was still fishing, could stay at the river and that Schamp and T would take care of the firewood.
Where the victim was fishing, the river bank consisted of steep rock walls. The victim sat on the rock wall about seven feet above the water with her lower legs dangling over the edge. She sat leaning forward so she could see the water. Defendant sat down next to her on her left side. The part of the rock that he was sitting on sloped down toward the river and to the left. To keep himself from sliding, defendant put his hands on the rock at his sides, propping himself up. His right hand was on the rock directly behind the victim. He told her again that he thought she was beautiful.
When the victim leaned back to cast her fishing line, the top part of her buttocks came into contact with the back of defendant's hand. The first time it happened, he immediately moved his hand away, but, because the victim did not flinch or react in a way that suggested that she was uncomfortable with the contact, he put his hand back where it was and allowed the contact to occur one or two more times as the victim continued to cast.
While that was occurring, defendant slid down the rock a bit. To move himself back to where he was, he put his right hand on the victim's lower back and pushed himself up, using her body for leverage. Defendant asked the victim whether he had made her uncomfortable by touching her. She said that he had and told him that he needed to know what his limits were. He said that he did, apologized, and told her, "I have nothing but love and affection for you." When the victim got up to leave, there was dirt on the back of her shorts. Defendant brushed the dirt off with two swipes of the palm of his hand. The victim walked away and returned to the campsite, where T and Schamp were. Less than 10 minutes had passed since T and Schamp had left the river to collect firewood.
T and Schamp both stated later that, when the victim approached the campsite, she was visibly upset. T described her as "all shaky" and "wobbly" and "real scared." Schamp said that the victim was "rather excited, yelling to us" as she came up the trail and that, when she reached them, she was "just starting to go into tears." The victim took T aside and told her that defendant had touched her. T then told Schamp. Schamp's father and brother were staying at a nearby campsite, so he took the girls there to spend the night. He took them back home the next day.
The police were eventually notified, and defendant was charged with first-degree sexual abuse.[2] Defendant waived the right to a jury trial, and the case was tried to the court. Defendant did not dispute that he had touched the victim's buttocks several times, that she was less than 14 years old, or that *1109 her buttocks were an intimate part. Thus, the only factual issue for the court to resolve was whether defendant had touched the victim for a sexual purpose. After hearing the evidence and closing arguments, the court stated that "[i]t may well have been, under the best of facts," that the first touching was not for a sexual purpose, but it found, beyond a reasonable doubt, that the touching that followed was for sexual gratification.
At defendant's sentencing hearing, the court made a more expansive statement of its view of the facts in response to letters and an in-court statement from defendant's father calling the verdict into question:
"The statements that [defendant] made to the police officer [who arrested him] and his description of what happened, I think [establishes that the contact was for a sexual purpose]. This was a situation where he was sitting next to her, she was leaning forward, he put his hand there, when she leaned back, he would touch her buttocks. That happened a couple, three times. He did not fondle her, he did not touch her inside her clothes, and he touchedhe touched her buttocks, my impression was, below the waist. That happened at least twice, maybe three times. And when she got up, he brushed her rump off and that was the extent of the contact.
"Now, does thatand I think the evidence clearly shows that he did ithe said he enjoyed it or he liked it, I can't remember what it was. But the point of it is, I'm convinced that's sexual contact. And so you can write me letters, but I'm not gonna respond. I'm a fact finder and that's what I found, I think the evidence shows that."
At the sentencing hearing, the court also heard statements from several other people, including the victim's guardian.[3] According to the guardian, after the abuse occurred, the victim began acting out sexually at school, made a suicide pact with a friend, attempted suicide, cut herself, and did poorly academically. She added that the trial, presentencing investigation, and sentencing caused the victim to "relive the details of that day," with the result that "we seem to fall back five steps in the progress we have fought so hard to make."
The state asked the court to apply the 75-month sentence prescribed by ORS 137.700 (Measure 11). Defendant argued that the Measure 11 sentence was disproportionate to his offense and that imposing it would violate Article I, section 16, of the Oregon Constitution.[4] The court agreed. It noted a number of circumstances surrounding defendant's offense that it found persuasive. First, the court observed that, at the time of the offense, the victim was only one month shy of her fourteenth birthday and, had she been a month older, defendant's conduct would have constituted third-degree sexual abuse, which is a misdemeanor carrying a maximum sentence of one year. See ORS 161.615(1); ORS 163.415. The court also pointed out that the contact was on the outside of the clothes, did not involve fondling, was not forced, and was "minimal as it relates to meeting the definition of the crime." Finally, it also noted that defendant had no criminal history.[5] The court did not give significant weight to the emotional distress that defendant's conduct caused the victim. The court acknowledged that her distress was real but characterized it as "disproportionate to the conduct."
The court concluded that the Measure 11 sentence would be "so disproportionate as to shock the moral sense of all reasonable persons as to what a right and proper sentence should be." It instead sentenced defendant under the sentencing guidelines, imposing a sentence of 17 months.
*1110 On appeal, the state challenges the trial court's conclusion that the Measure 11 sentence would be unconstitutional. In the state's view, the court inappropriately considered the particular circumstances of defendant's offense. The state argues that individualized circumstances are not to be considered in determining whether a sentence violates Article I, section 16. According to the state, it is only the nature of the crime, not the defendant's specific conduct, that matters. In other words, the state contends, courts should consider only the bare fact that defendant sexually abused a 13-year-old child. The state points out that, in the only two cases in which the Supreme Court has overturned a sentence under that provision, it did so because the sentence was facially disproportionatein other words, the court did not consider the surrounding circumstances. See State v. Shumway, 291 Or. 153, 630 P.2d 796 (1981); Cannon v. Gladden, 203 Or. 629, 281 P.2d 233 (1955). According to the state, the Supreme Court's jurisprudence does not permit consideration of anything but the crime itself, the punishment for that crime, and the punishment for other, related crimes. In all events, the state argues that the circumstances that the trial court relied on in this case do not warrant the conclusion that the Measure 11 sentence would be unconstitutional.
In response, defendant raises a number of arguments related to the "Solem" test, which a majority of the members of this court applied in State v. Thorp, 166 Or.App. 564, 2 P.3d 903 (2000). The defendant in State v. Rodriguez, 217 Or.App. 351, 174 P.3d 1100 (2007) (decided this date), raised essentially identical arguments, and we discussed them in some depth in that case. We explained that, although a well-established standard existed for analyzing "proportionality" sentencing challenges, the Solem test provides an analytical gloss on that standard that is useful in cases at the margins of Article I, section 16. We ultimately concluded that Rodriguez was not such a case and thus did not apply the Solem test.[6] We reach the same conclusion here and therefore apply only the unadorned traditional proportionality analysis.[7]
Under that analysis, a sentence violates Article I, section 16, if it is "so disproportionate to the offense as to shock the moral sense of all reasonable persons as to what is right and proper." State v. Isom, 313 Or. 391, 401, 837 P.2d 491 (1992). Article I, section 16, forbids only those sentences that are grossly disproportionate to the offense. Thorp, 166 Or.App. at 572, 2 P.3d 903. Oregon courts have long recognized that "establishing punishments for specific crimes is a matter reserved to the legislature, subject to constitutional limitation." Id.; see also State v. Ferman-Velasco, 157 Or.App. 415, 423, 971 P.2d 897 (1998), aff'd, 333 Or. 422, 41 P.3d 404 (2002) ("The people, as well as the legislature, are entitled to make determinations about what punishments should be imposed for crimes."). Courts have been extremely deferential to the legislature'sand the people'sprerogative in establishing punishments. State v. Meyrovich, 204 Or.App. 385, 392-93, 129 P.3d 729, rev. den., 340 Or. 673, 136 P.3d 743 (2006).
With those principles in mind, we turn to the state's contention that the trial court erred in considering the particular circumstances of defendant's offense. We acknowledge that neither we nor the Supreme Court have ever held a sentence to be invalid *1111 because the particular circumstances of the offense made the sentence disproportionate or cruel and unusual. Nevertheless, for three reasons, we reject the state's position.
First, the state's position would eliminate as-applied challenges to Measure 11 sentences, a result that is contrary to the Supreme Court's express acknowledgment of such challenges in State ex rel Huddleston v. Sawyer, 324 Or. 597, 614, 932 P.2d 1145, cert. den., 522 U.S. 994, 118 S. Ct. 557, 139 L. Ed. 2d 399 (1997).
Second, the state's position conflicts with the plain wording of the standard enunciated by the Supreme Court for determining challenges under Article I, section 16. In Sustar v. County Court for Marion Co., 101 Or. 657, 665, 201 P. 445 (1921), the court held, "In order to justify the court in declaring punishment cruel and unusual with reference to its duration, the punishment must be so proportioned to the offense committed as to shock the moral sense of all reasonable [persons] as to what is right and proper under the circumstances." (Emphasis added.) See also Cannon, 203 Or. at 632, 281 P.2d 233, ("The question presented is whether the penalty of life imprisonment for an assault with intent to commit rape under the circumstances of this case is proportioned to the offense, or is it so disproportioned to the offense as to shock the moral sense of all reasonable [persons] as to what is right and proper?" (Emphasis added.)).
Finally, as a matter of logic, the fact that neither this court nor the Supreme Court has ever overturned a sentence based on the particular circumstances does not mean that consideration of the circumstances is not permissible. It merely means that we have yet to be confronted with a case in which the circumstances were such that the prescribed sentence was grossly disproportionate to the offense.[8] Contrary to the state's assertion, it is appropriate to consider the surrounding circumstances.
Nevertheless, we agree with the state that the circumstances of this case do not warrant the conclusion that the Measure 11 sentence would violate Article I, section 16. Defendant was a 36-year-old adult who was entrusted with responsibility for a 13-year-old child. Within minutes of being left alone with that child, he sexually abused her. He continued to touch her even after she made clear that the touching was unwelcome. The victim suffered lasting emotional distress as a consequence of defendant's conduct. Even taking into account the other circumstances that the trial court relied on, we conclude that a 75-month sentence would not shock the moral sense of all reasonable people. The trial court erred in concluding otherwise.
On appeal, sentence vacated and remanded for resentencing; otherwise affirmed. On cross-appeal, affirmed.
NOTES
[1] The parties disagree as to the standard by which we are to resolve conflicts in the record as to what actually occurred. The state argues that, because the trial court convicted defendant without expressly making extensive factual findings, we must view the record in the light most favorable to the state. Defendant responds that that standard applies on review of a denial of a motion for judgment of acquittal but not on review of the trial court's sentencing decision. In his view, because the trial court ruled in his favor on the sentencing issue, we must resolve any conflicts in the evidence in his favor.
We need not resolve the parties' dispute. Although the trial court did not make extensive factual findings in rendering its verdict, at defendant's sentencing hearing, the court stated the facts that it had found pertaining to the elements of defendant's offense (which we set out in detail below). Those findings, by which we are bound, resolve at least some of the evidentiary conflicts. To the extent that other conflicts remain, they are not dispositive. That is, even assuming that the trial court resolved the remaining factual conflicts in defendant's favor, we nevertheless conclude the court erred in refusing to impose the Measure 11 sentence.
[2] ORS 163.427(1)(a)(A) provides that a person commits first-degree sexual abuse when that person "[s]ubjects another person to sexual contact and * * * [t]he victim is less than 14 years of age[.]" ORS 163.305(6) defines "sexual contact" as "any touching of the sexual or other intimate parts of a person * * * for the purpose of arousing or gratifying the sexual desire of either party." The victim testified that she regarded her buttocks as an intimate part.
[3] The victim went to live with her stepmother sometime after the abuse occurred. It is not clear from the record whether her stepmother was the guardian whose statement was heard.
[4] Defendant also argued that the Measure 11 sentence would constitute cruel and unusual punishment under the Eighth Amendment to the United States Constitution. He does not renew that argument on appeal.
[5] The court further noted that a psychological evaluation of defendant was done after he was arrested and that the evaluator did not believe that defendant needed sex offender treatment. The state pointed out that the evaluator, who was hired by defendant's attorney, also believed that defendant had not abused the victim. The court thereafter disregarded the evaluator's conclusion.
[6] As we noted in Rodriguez, 217 Or.App. at 361 n. 8, 174 P.3d 1105, the gravity of the offense and the harshness of the penaltytwo factors considered under the Solem testare central to the question whether a sentence would shock the moral sense of all reasonable persons and therefore are considered in every proportionality challenge.
[7] Defendant raises other arguments in this case that are identical to arguments made in Rodriguez. We reject them here for the same reasons that we rejected them in Rodriguez. Defendant raises one additional argument with respect to the gravity of the offense. He contends that, had the victim been one month older, the offense would have been a misdemeanor, with a sentence of no more than one year. We rejected similar reasoning in Thorp, where, had the victim been 11 days older, the defendant would have had a complete defense to the charge against him. See Thorp, 166 Or.App. at 576, 2 P.3d 903. We reject defendant's argument without further discussion.
[8] We have, on the other hand, concluded that a particular sentence was permissible precisely because of the attendant circumstances. See Rodriguez, 217 Or.App. at 361, 174 P.3d 1105; Meyrovich, 204 Or.App. at 392-93, 129 P.3d 729 (life sentence for forcibly kissing the victim on the neck was not disproportionate given the defendant's extensive history of sex offenses). We have also expressly considered surrounding circumstances and concluded that they did not render a particular sentence unconstitutional. See, e.g., State v. Melillo, 160 Or.App. 332, 336, 982 P.2d 12, rev. den., 329 Or. 438, 994 P.2d 126 (1999) ("We conclude that a 90-month mandatory sentence under the circumstances of this case does not shock the moral sense of all reasonable people as to what is right and proper.").
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174 P.3d 1190 (2007)
J & S SERVICES, INC., Appellant,
v.
WASHINGTON STATE DEPARTMENT OF LABOR AND INDUSTRIES, Respondent.
No. 35495-1-II.
Court of Appeals of Washington, Division 2.
November 14, 2007.
Publication Ordered January 15, 2008.
*1191 Aaron Kazuo Owada, AMS Law, Lacey, WA, for Appellant.
Nancy A. Kellogg, Attorney at Law, Olympia, WA, for Respondent.
HOUGHTON, C.J.
¶ 1 J & S Services, Inc. appeals a trial court order affirming a Board of Industrial Insurance Appeals (BIIA) decision and order. The BIIA order affirmed the issuance of two citations against J & S by the Washington State Department of Labor and Industries (L & I) for Washington Industrial Safety and Health Act (WISHA) violations related to fall protections and fall protection work plans. J & S argues that the BIIA and the trial court erred in affirming the fall protection citation because J & S used a permissible alternative method. We affirm.
FACTS
¶ 2 Steel contractor J & S was constructing a 90-by 120-foot commercial building in Vancouver on November 7, 2003, when L & I inspector Kent Davis observed workers exposed to a fall hazard of 10 feet or more without adequate fall protection. On that day, J & S workers were installing the building's roof deck on which they would later build the roof.[1] J & S had nearly completed construction of the roof deck at the time of the site visit.[2]
¶ 3 J & S employed two fall protection methods: a safety monitor and spray-painted lines to alert workers as they approached the roof deck edge. Workers had spray-painted lines on the 35-foot work area.
¶ 4 Davis performed his inspection from the ground but he did not dispute that J & S had spray-painted lines on the roof deck. Through an unfinished hole in the roof deck, he observed that J & S employee, Keith Delaney, was exposed to what he estimated to be a 20-foot fall. He testified that, based on the work site conditions, he expected that J & S would have implemented a fall arrest, fall restraint, or safety warning line system.
¶ 5 L & I issued J & S two citations for violations of WAC 296-155-24510 and -24505(2)(a). The WAC 296-155-24510 citation set forth that, although J & S was using a monitoring system for fall protection, "no warning line system had been erected as required by this system to protect employees from falling up to 20 feet from the unprotected sides and edges of the roof."[3] Administrative Record (AR) at 58.
¶ 6 J & S appealed the citations. L & I issued a corrective notice of redetermination affirming the citations and finding in part that a spray-painted line did not meet warning line system requirements. J & S appealed the notice to the BIIA, which affirmed the redetermination and also denied J & S's petition for review. The superior court affirmed the BIIA decision and J & S appeals.
ANALYSIS
WAC 296-155-24520
¶ 7 J & S contends that the applicable fall protection standard is WAC 296-155-24520 for leading edge work and that, because WAC 296-155-24520(1)(c) provides an exception for an "equivalent" method of fall protection, J & S complied with the regulation by spray-painting fluorescent lines six feet from the edge of the work surface.[4]
¶ 8 We review agency regulations de novo as if they were statutes. Wash. Cedar & Supply Co. v. Dep't of Labor & *1192 Indus., 137 Wash.App. 592, 598, 154 P.3d 287 (2007). When interpreting a WISHA regulation, we read it in light of WISHA legislation as a whole and avoid conflicts between different provisions. Wash. Cedar, 137 Wash.App. at 600, 154 P.3d 287.
¶ 9 We also construe WISHA regulations liberally to achieve their purpose of providing safe working conditions for every Washington worker. Inland Foundry Co. v. Dep't of Labor & Indus., 106 Wash.App. 333, 336, 24 P.3d 424 (2001). We accord substantial weight to an agency's interpretation within its area of expertise and uphold that interpretation if it reflects a plausible construction of the regulation and is not contrary to legislative intent. Roller v. Dep't of Labor & Indus., 128 Wash.App. 922, 926-27, 117 P.3d 385 (2005). But we retain ultimate responsibility for interpreting a regulation. Children's Hosp. & Med. Ctr. v. Dep't of Health, 95 Wash.App. 858, 864, 975 P.2d 567 (1999).
¶ 10 WAC 296-155-24520(1)(a) and (b) provide that, where leading edge work is being performed, a warning line system must be erected establishing a control zone at least six feet back from the leading edge to prevent falls. WAC 296-155-24520(1)(c) dictates that the warning line system "shall consist of wire, rope, or chain supported on stanchions, or a method which provides equivalent protection." (Emphasis added.) The regulation gives no examples of "equivalent protection."
¶ 11 We do not look beyond the plain meaning of a statute where it is unambiguous. Waste Mgmt. of Seattle, Inc. v. Utils. & Transp. Comm'n, 123 Wash.2d 621, 629, 869 P.2d 1034 (1994). And where a regulation uses a nontechnical term, we look to the dictionary for guidance. State v. Pacheco, 125 Wash.2d 150, 154, 882 P.2d 183 (1994). "Equivalent" means "to have equal power" or "to be equal in force or amount" or to be "virtually identical . . . in effect or function." Webster's Third New Intern'l Dictionary 769 (2002).
¶ 12 A spray-painted line is not equal or identical to a warning line in power, force, effect, or function. An erected warning line automatically alerts a worker as he nears the edge by providing physical resistance when he comes in contact with it, whereas a spraypainted line offers no resistance and requires a worker to look for the line while performing his work in order to know when he nears the edge. Flags to increase visibility can mark an erected line but not a spray-painted line. A safety monitor can more easily assess a worker's proximity to an erected line than a spray-painted line from all vantage points on the roof. Building materials or debris can also obscure a spray-painted line, but not an erected line. Thus, under WAC 296-155-24520(1)(c)'s plain language, a spray-painted line does not provide "equivalent protection" to an erected warning line.
¶ 13 This interpretation also comports with a commonsense reading of the regulation as a whole. The phrase, "or a method which provides equivalent protection," applies to terms preceding it in the same subsection, such that the protection must be equivalent to a "wire, rope, or chain supported on stanchions." WAC 296-155-24520(1)(c). Subsequent subsections of WAC 296-155-24520(1) set forth the requirements that must be met by the wire, rope, chain, or equivalent method of protection. WAC 296-155-24520(1)(d)(g). Because a spray-painted line cannot meet the requirements for height, strength, resistance, and flagging set forth at WAC 296-155-24520(1)(d)-(g), it is not an equivalent method.
¶ 14 We further accord L & I's interpretation deference because it is plausible, not contrary to legislative intent, and within the scope of its expertise in promoting workplace safety. Wash. Cedar, 137 Wash.App. at 598-99, 154 P.3d 287. Dan McMurdie, WISHA policy and technical services safety program manager, testified that examples of equivalent protection would be "warning ribbons or tapes" that are also highly visible and that meet the 200 pound breaking strength requirement. AR (McMurdie Transcript at 12). He testified that he would not consider a spray-painted line equivalent protection because it relies entirely on the worker to monitor himself in order to keep away from the edge. Finally, a strict reading of the exception is appropriate because WISHA is a *1193 remedial statute.[5]See, e.g., Mead Sch. Dist. No. 354 v. Mead Ed. Ass'n (MEA), 85 Wash.2d 140, 145, 530 P.2d 302 (1975).
¶ 15 Based on a plain reading of the regulation and its purpose, and according weight to the agency's interpretation based on its expertise in workplace safety, a spray-painted line is not "equivalent protection" for purposes of WAC 296-155-24520(1)(c). J & S did not comply with the regulation when it used a spray-painted line as a method of fall protection for leading edge work.
WAC 296-155-24515(2)(b)
¶ 16 Alternatively, J & S argues that it was permitted to use a safety monitor as the sole means of fall protection for Delaney's work area because WAC 296-155-24515(2)(b) provides that it may do so for work being performed on low-pitched roof perimeters less than 50-feet wide. We disagree that WAC 296-155-24515(2)(b) applies but even assuming that it does, J & S's argument fails.[6]
¶ 17 Under WAC 296-155-24515(2)(b), a safety monitor system may be used without a warning line where workers are engaged in "roofing on low-pitched roofs less than 50 feet wide." (Emphasis added.) The definitions for "roof" and "roofing work" explicitly differentiate roofing from construction of a roof deck. WAC 296-155-24503. No one disputes that J & S was constructing the building's roof deck at the time of the site visit and had not begun actual roofing work, so WAC 296-155-24515(2)(b) does not apply.[7]
¶ 18 Because a spray-painted line does not constitute equivalent fall protection under WAC 296-155-24520(1)(c) and because WAC 296-155-24515(2)(b) does not apply to the work that J & S was performing at the time of the site visit, the trial court and BIIA did not err in affirming J & S's citation for inadequate fall protection.
¶ 19 Affirmed.
We concur: BRIDGEWATER and PENOYAR, JJ.
NOTES
[1] The workers on the roof included Richard Sciumbato Jr., the foreman; Daniel Beyle, the safety monitor; and Keith Delaney.
[2] Davis testified that Sciumbato Jr. told him that J & S had the materials necessary to erect a warning line system. Sciumbato Jr. testified that, although warning line materials were usually onsite, J & S did not erect the warning line system until the roof decking was almost complete.
[3] The record shows that the activity prompting this citation was Delaney's leading edge work.
[4] The facts are undisputed and J & S does not expressly assign error to any BIIA conclusions of law. But it impliedly challenges the BIIA's conclusion of law 2 that the exception under WAC 296-155-24515(2)(b) does not apply because J & S was not engaged in roofing and the building's roof was more than 50-feet wide and conclusion of law 3 that it violated WAC 296-155-24510.
[5] J & S's interpretation places the burden of fall protection implementation on the worker. This conflicts with WISHA's purpose of protecting employees from harm by employer regulatory violations and to assure safe and healthful working conditions. Goucher v. J.R. Simplot Co., 104 Wash.2d 662, 672-73, 709 P.2d 774 (1985). J & S's claim that spray painting a line was the only feasible or safe alternative while performing leading edge work is not persuasive because there was testimony that workers could relocate an erected warning line as work progressed and that roof decking was typically performed by sliding pieces under a warning line. It would also be contrary to WISHA's remedial purpose for the legislature to enact a regulation explicitly requiring erection of a warning line during leading edge work, as it did with WAC 296-155-24520, if doing so made leading edge work more dangerous for workers. It is precisely because the work area involved a leading edge that specific fall protections were required.
[6] Delaney performed leading edge work. Fall protections required for leading edge work are set forth at WAC 296-155-24520.
[7] J & S also argues that because the width of the work area where Delaney was standing was less than 50 feet, WAC 296-155-24515(2)(b) applies. This argument lacks merit and conflicts with the regulation's plain meaning. WAC 296-155-24515(2)(b) applies to roofs less than 50 feet wide. Per WAC 296-155-24523(1) and Example A, where a roof is a simple rectangle, width is measured as "the lesser of the two primary overall dimensions." There is no dispute here that the building was a 90-foot-wide rectangle. The regulation states that the purpose of its examples for irregularly-shaped roofs is to provide measurement guidance for roofs that are "not simple rectangles," with the intent to "minimize the number of roof areas where safety monitoring systems alone are sufficient protection." WAC 296-155-24523(2) (emphasis added).
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535 F. Supp. 2d 485 (2008)
Jason McLEAN and Brian Coleman, Plaintiffs,
v.
COMMUNICATIONS CONSTRUCTION GROUP, LLC., Defendant.
Civ. No. 06-617-SLR.
United States District Court, D. Delaware.
March 7, 2008.
*486 *487 Ronald G. Poliquin of Young, Malmberg & Howard, P.A., Dover, DE, for Plaintiffs.
Michael P. Kelley & Daniel M. Silver of McCarter & English, LLP, Wilmington, DE, for Defendant of Counsel: Thomas Benjamin Huggett of Morgan, Lewis & Bockius, LLP, Philadelphia, PA.
MEMORANDUM OPINION
SUE L. ROBINSON, District Judge.
I. INTRODUCTION
Plaintiffs Jason McLean ("McLean") and Brian Coleman ("Coleman") (collectively "plaintiffs"), African American men, brought suit against their former employer, Communications Construction Group; LLC ("CCG" or "defendant") under Title VII of the Civil Rights Act of 1964; 42 U.S.C. §§ 2000e et seq. ("Title VII"). More specifically, plaintiffs assert three claims under Title VII against defendant: hostile work environment due to racial harassment; racial discrimination; and retaliation. Both plaintiffs and defendant have moved for summary judgment. The court has jurisdiction over these matters pursuant to 28 U.S.C. § 1331.
II. FACTS
For purposes of this motion practice, the material facts are undisputed.
CCG is a construction services company that provides services to the cable television and telephone industries. As CCG contracts with different cable and telephone providers to perform work at many different locations, CCG employees generally work at multiple job sites to which they must travel. Once CCG employees complete the work at one job site, it is typical for them to relocate to the next job ate. The general work done by CCG crews involves digging trenches for the installation of underground cable. A crew is paid by the linear foot. There are different rates of pay for different job sites. For example, when a crew is installing a main trunk line underground, the rate of pay is higher than when a crew is installing lines from the main trunk to a home (a "drop line"). The faster the crew with its digging, the more money they make. (D.I. 41, ex. 1; D.I. 45, exs. 13, 15, 16, 27)
In May 2005, CCG was performing work for Verizon in New Castle, Delaware. The work involved the underground installation of a main trunk line at a rate of $2.80 a linear foot. At the time, both McLean and Coleman were working on a crew with Brad Dodson ("Dodson"), who was the crew foreman.[1] Plaintiffs' crew reported to Mike Fender, who had the job title of field supervisor. Mike Fender, in turn, reported to Dave Dodson, who worked as the job supervisor for the New Castle job site. Brad and Dave Dodson are brothers. John Gates was the regional supervisor. (D.I.39, exs.7, 8, 10, 39).
On May 31, 2005, while McLean and Coleman were working at the New Castle job site, they were informed by a co-worker that Dodson had referred to them as *488 "dumb niggers."[2] Plaintiffs immediately confronted Dodson at the job site.[3] Coleman and Dodson got into a verbal altercation and Dodson physically contacted Coleman.[4] McLean thereafter contacted Lisa Clements, CCG's Human Resources Manager; Coleman called the police; Dodson called Dave Dodson to report the incident; Dave Dodson called Mike Fender. Mike Fender arrived at the scene and tried to defuse the situation. The police also arrived and took statements from everyone involved. (D.I. 45, exs. 4, 5, 8; D.I. 47, ex. G)
Ms. Clements, on behalf of CCG, investigated the incident. At the conclusion of her investigation, she gave written warnings to Dodson,[5] Robert Koch,[6] and plaintiffs.[7] Plaintiffs were immediately removed from Dodson's crew and never again worked under his supervision for the remainder of their employment with CCG.
Subsequent to the May 31, 2005 incident, both plaintiffs were transferred to other job sites and promoted to foremen. Dave Dodson and Jonathan Gates made these employment decisions. On July 6, 2005, plaintiffs' crew was transferred to a job site in West Chester, Pennsylvania. Although the crew was "dropping line" at a lesser rate of pay than under the New Castle contract ($1.20 per foot), plaintiffs' direct pay was comparable.
As a foreman, Coleman was assigned the use of a company truck for taking equipment from the warehouse to the job site. When it was discovered that Coleman was also using the truck to drive home to Delaware, he was directed by John Gates to stop such personal use of company equipment.[8] (D.I. 39, ex. 39; D.I. 41, ex. 13; D.I. 45, exs. 11, 13, 15, 16, 19, 25, 28; D.I. 46, ex. 3)
On October 6, 2005, seven CCG employees (including plaintiffs) were laid off due to lack of work. Of the seven, three were African American men (including plaintiffs) and four were Hispanic. The supervisor *489 signing the separation papers for these employees was William J. Grover, Jr. (D.I. 41, exs. 13, 15; D.I. 48, ex. 6)
III. STANDARD OF REVIEW
A court shall grant summary judgment only if "the pleadings, depositions, answers to interrogatories, and admissions On file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the burden of proving that no genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 n. 10, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). "Facts that could alter the outcome are `material,' and disputes are `genuine' if evidence exists from which a rational person could conclude that the position of the person with the burden of proof on the disputed issue is correct." Horowitz v. Fed. Kemper Life Assurance Co., 57 F.3d 300, 302 n. 1 (3d Cir.1995) (internal citations omitted). If the moving party has demonstrated an absence of material fact, the nonmoving party then "must come forward with `specific facts showing that there is a `genuine issue for trial.'" Matsushita, 475 U.S. at 587, 106 S. Ct. 1348 (quoting Fed.R.Civ.P. 56(e)). The court will "view the underlying facts and all reasonable inferences therefrom in the light most favorable to the party opposing the motion." Pa. Coal Ass'n v. Babbitt, 63 F.3d 231, 236 (3d Cir.1995). The mere existence of some evidence in support of the nonmoving party, however, will not be sufficient for denial of a motion for summary judgment; there must be enough evidence to enable a jury reasonably to find for the nonmoving party on that issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). If the nonmoving party fails to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof, the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). With respect to summary judgment in discrimination cases, the court's role is "to determine whether, upon reviewing all the facts and inferences to be drawn therefrom in the light most favorable to the plaintiff, there exists sufficient evidence to create a genuine issue of material fact as to whether the employer intentionally discriminated against the plaintiff." Revis v. Slocomb Indus., 814 F. Supp. 1209, 1215 (D.Del. 1993) (quoting Hankins v. Temple Univ., 829 F.2d 437, 440 (3d Cir.1987)).
IV. ANALYSIS
Plaintiffs rely on, the same set of facts to prove all of their claims, that is: (1) Dodson's racial statement and the related May 31, 2005 altercation; and (2) subsequent to May 2005, (a) plaintiffs were transferred to different job sites; (b) as foremen, they were not allowed to use a company truck for personal transportation; and (c) they were laid off in October 2005.
A. Hostile Work Environment
The determination of whether the quantity and quality of racial harassment has created a hostile work environment is made on a case-by-case basis after considering the totality of the circumstances. See Andrews v. City of Philadelphia, 895 F.2d 1469, 1482-84 (3d Cir.1990); see also 29 C.F.R. § 1604.11(b). To state a Title VII claim premised on a hostile work environment, plaintiffs must demonstrate the following: (1) they suffered intentional harassment because of their race; (2) the harassment was severe or pervasive;[9] (3) the harassment detrimentally *490 affected plaintiffs; (4) the harassment would detrimentally affect a reasonable person of the same race in that position; and (5) the existence of respondeat superior liability. See Andrews, 895 F.2d at 1482. A prima facie showing, therefore, contains both a subjective standard (that plaintiffs were in fact affected) and an objective standard (that a reasonable, similarly situated individual would have been affected). See id. at 1483.
Having reviewed the record, the court concludes that plaintiffs have failed to carry their burden of proving a prima facie case for a hostile work environment, which requires them to demonstrate that they were subject to harassment which was pervasive or severe. There simply is no evidence of record that plaintiffs were exposed to the kind of racially charged conduct that must be present to satisfy their burden of proof in this regard. Aside from Dodson's one racial statement, plaintiffs have not identified any other instances of racial harassment; nor is there evidence of record of complaints made by plaintiffs or any other employee regarding any other instances of racial harassment, discrimination or retaliation.[10] A single racially derogatory comment[11] is insufficient to withstand defendant's summary judgment challenge.[12]
B. Racial Discrimination
Claims of racial discrimination brought pursuant to Title VII are analyzed under a burden-shifting framework. Under this framework, plaintiffs must first establish a prima facie case of race discrimination by proving that: (1) they are members of a protected class; (2) they suffered some form of adverse employment action; and (3) this action occurred under circumstances that give rise to an inference of unlawful discrimination such as might occur when a similarly situated person not of the protected class is treated differently. See Boykins v. Lucent Techs., Inc., 78 F. Supp. 2d 402, 409 (E.D.Pa2000) (citing Jones v. Sch. Dist. of Phila., 198 F.3d 403, 410 (3d Cir.1999)). The Third Circuit recognizes, however, that the elements of a prima facie case may vary depending on the facts and context of the particular situation. See Pivirotto v. Innovative Sys. Inc., 191 F.3d 344, 352 (3d Cir.1999). If plaintiff succeeds in establishing his prima facie case, the burden shifts to defendant employer to proffer "legitimate non-discriminatory" reason for its actions. See Woodson v. Scott Paper Co., 109 F.3d 913, 920 n. 2 (3d Cir.1997). If defendant meets this burden, the burden again shifts to plaintiff to demonstrate, *491 by a preponderance of the evidence, that the employer's rationale is pretextual. Id. at 804. To do this, plaintiff must "point to some evidence, direct or circumstantial, from which a factfinder could reasonably either (1) disbelieve the employer's articulated legitimate reasons; or (2) believe that an invidious discriminatory reason was more likely than not a motivating or determinative cause of the employer's action." Fuentes v. Perskie, 32 F.3d 759, 764 (3d Cir.1994). If a defendant carries this burden, the presumption of discrimination drops from the case, and plaintiff Must "cast sufficient doubt" upon defendant's proffered reasons to permit a reasonable fact finder to conclude that the reasons are fabricated. See Sheridan v. DuPont de Nemours and Co., 100 F.3d 1061, 1072 (3d Cir.1996) (en banc).
Plaintiffs have failed to carry their burden of demonstrating prima facie case of racial discrimination. There is no evidence that plaintiffs' subsequent employment history was other than "business as usual," i.e., that white employees were not transferred to different job sites working at different pay rates. Plaintiffs were both moved from Dodson's crew to other crews and were promoted to foremen subsequent to the May 31, 2005 incident. Plaintiffs were transferred to new job sites along with their crews. Each job site involved different work[13] and different pay. The record does not contain any evidence that there were jobs in Delaware or jobs with better pay at the time. John Gates, Regional Manager, made the decision to transfer plaintiffs. There Is no evidence that he acted with any racial motivation in his decision-making capacity. Plaintiffs were among seven employees who were terminated due to lack of work. Again, aside from Dodson's racial statement in May 2005, there is no evidence of racial motivation in CCG's decision. Reviewing the summary judgment record as a whole, said record does not give rise to an inference of unlawful racial discrimination.
C. Retaliation
Plaintiffs claiming retaliation must first establish a prima facie case under Title VII. To establish a prima facie case, plaintiffs must demonstrate that: (1) they engaged in a protected activity; (2) the defendant took adverse employment action against them; and (3) a causal link exists between the protected activity and the ad, verse action. See Kachmar v. SunGard Data Sys., Inc., 109 F.3d 173, 177 (3d Cir.1997).
There is no question but that plaintiffs engaged in a protected activity when they complained about Dodson's racial statement on May 31, 2005. Given the nature of plaintiffs' employment with CCG, however, the record does not demonstrate the existence of genuine issues of material fact as to whether their subsequent employment history with CCG was retaliatory in any way. More specifically, as a matter of course, the composition of CCG crews was always changing, with the crews being transferred to different job sites at different rates of pay. Plaintiffs were promoted to foremen subsequent to May 2005. Although plaintiffs argue that the decisions to deny Coleman the personal use of a company truck and to terminate their employment were retaliatory, aside from the fact that both happened after May 31, 2005, there is not one shred of evidence linking these events to the complaint about Dodson's conduct. See id. at 178 ("It is important to emphasize that it is causation, *492 not temporal proximity itself, that is an element of plaintiffs prima facie case, and temporal proximity merely provides an evidentiary basis from which an inference can be drawn."). Without any evidence of a causal link, no reasonable jury could find for plaintiffs in this regard.
V. CONCLUSION
For the reasons stated, plaintiffs' motion for partial summary judgment is denied; defendant's motion for summary judgment is granted. An order shall issue.
ORDER
At Wilmington this 7th day of March, 2008, consistent with the memorandum opinion issued this same date;
IT IS ORDERED that:
1. Plaintiffs' motion for partial summary judgment (D.I.38) is denied.
2. Defendant's motion for summary judgment (D.I.40) is granted.
3. The Clerk is directed to enter judgment in favor of defendant and against plaintiffs.
NOTES
[1] By May 2005, Coleman had been working for CCG for four or five years; McLean had only started his employment with CCG in January 2005. Dodson had been an employee with CCG on and off since at least 1990. Although Dodson had a less-than-stellar employment record, there is no history of record relating to racial harassment, discrimination or retaliation. Nor had either plaintiff complained of any such conduct prior to May 2005. (D.I. 39, exs. 21, 22; D.I. 45, exs. 1, 27; D.I. 47, exs. B-E)
[2] Brad Dodson has denied making any such derogatory statement; nevertheless, CCG has assumed that plaintiffs' allegations are true in this regard for purposes of the instant motion practice. The record includes evidence that two CCG employees confirm that the statement was made, Robert Koch (who passed the statement along to plaintiffs) and Joseph Tatsch. (D.I. 39, exs. 1, 2, 24, 31, 33; D.I. 41, ex. 1; D.I. 46, ex. 3)
[3] Plaintiffs did not leave the job site to confront Dodson; however, they did leave their work area and walked approximately 150 feet to where Dodson was working. (D.I.45, exs. P4, 7)
[4] There is no dispute that Dodson contacted Coleman's chest with his fingers. Although this physical contact was described in plaintiffs' papers as "striking" Coleman in the chest, the record evidence describes this contact as "poking" Coleman in the chest. (D.I. 39, ex. 33; D.I. 45, ex. 10; D.I. 47, ex. G)
[5] For engaging in the physical altercation. (D.I.41, ex. 7)
[6] For failing to report the alleged racial statement as required by company policy and for inciting other employees by repeating the statement. (D.I.41, ex. 8)
[7] Both plaintiffs received warnings for failing to use CCG's complaint procedure provided for in the, company's "Harassment Policy" and for leaving their job site to engage in a physical confrontation with Dodson. With respect to the former, plaintiffs had received CCG's Employee Manual and had signed verifications that they had read and understood all of CCG's policies prior, to the incident. (D.I. 41, exs. 9-12; D.I. 45, exs. 4, 8)
[8] Plaintiffs assert that every foreman they had met were permitted to use a company truck for commuting. According to CCG, any foremen who were permitted to take company vehicles home had been grandfathered in under an old policy, which did not apply to Coleman.
[9] While the Andrews court stated that the discrimination in question must have been "pervasive and regular," the United States Supreme Court has employed a "severe or pervasive" standard, see Clark County Sch. Dist. v. Breeden, 532 U.S. 268, 270, 121 S. Ct. 1508, 149 L. Ed. 2d 509 (2001), which the Third Circuit recently adopted, noting that "[t]he difference is meaningful, and the Supreme Court's word controls," Jensen v. Potter, 435 F.3d 444, 449 n. 3 (3d Cir.2006), overruled in part on other grounds by Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, 126 S. Ct. 2405, 165 L. Ed. 2d 345 (2006).
[10] Indeed, Coleman admitted in his deposition that there was no similar conduct prior to the one racial statement leading to the May 31, 2005 altercation. (D.I. 39, exs. 21, 22; D.I. 45, ex. 1)
[11] Plaintiffs assert that more than just two other employees were aware of Dodson's racial statement. However, there is no evidence of such in the record aside from plaintiffs' conclusory statements. At this stage of the proceedings, with the record closed, plaintiffs have failed to identify any genuine issues of material fact in this regard.
[12] Because Dodson's racial statement is the only conduct that relates to plaintiffs' race, the court will not take into consideration any of the other conduct upon which plaintiffs rely for their claims for purposes of establishing a hostile work environment based on racial harassment.
[13] Plaintiffs always dug holes, regardless of whether the "work" was installing a main trunk line or drop lines. (D.I.45, 13)
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535 F. Supp. 2d 554 (2008)
Judith A CAPPARELLI, and Mark J. Capparelli, Plaintiffs,
v.
AMERIFIRST HOME IMPROVEMENT FINANCE CO., et al., Defendants.
No. 5:07-CV-387-D.
United States District Court, E.D. North Carolina, Western Division.
February 1, 2008.
*555 *556 Charles A. Bentley, Jr., Bentley Law Offices, Durham, NC, for Plaintiffs.
Joseph Samuel Dowdy, Matthew Patrick McGuire, Nelson Mullins Riley & Scarborough, LLP, Raleigh, NC, for Defendants.
ORDER
JAMES C. DEVER III, District Judge.
Plaintiffs Judith A. Capparelli and Mark J. Capparelli ("the Capparellis") filed this action against defendants AmeriFirst Home Improvement Finance Co., d/b/a AmeriFirst Home Improvement Finance ("AmeriFirst"), James B. Miller ("Miller"), as an AmeriFirst officer and Trustee of the Deed of Trust between the Capparellis and AmeriFirst, Tropical Pools, Inc. ("Tropical. Pools"), and First Lenders Data, Inc., d/b/a FirstClose ("FirstClose"). Plaintiffs' lawsuit concerns an August 2006 loan for building a residential swimming pool, Pursuant to Federal Rule of Civil Procedure 12(b)(6), defendant AmeriFirst moves to dismiss counts one through five and count twelve in the complaint, and defendant Miller moves to dismiss whatever relief is requested from him in the complaint. AmeriFirst does not seek dismissal of count nine. FirstClose has not filed a motion to dismiss. Tropical Pools also has not filed a motion to dismiss, apparently because Tropical Pools' alter ego, Randy Lanier, is currently in bankruptcy.
As explained below, the court dismisses non-diverse defendant Tropical Pools pursuant to the fraudulent joinder doctrine. The court also grants AmeriFirst and Miller's motion to dismiss.
I.
On or about July 25, 2006, plaintiffs entered into a written agreement with Randy Lanier and Tropical Pools for the purchase, delivery, and construction of a *557 swimming pool to be located on plaintiffs' real property in Johnston County, North Carolina. See Compl. ¶ 9. According to plaintiffs, Randy Lanier represented himself as the registered agent and owner of Tropical Pools. Id. ¶¶ 8, 16. Lanier and Tropical Pools arranged the necessary financing for the purchase and construction of the pool through AmeriFirst. Id. ¶¶ 11-13. In connection with the purchase, the Capparellis executed a Deed of Trust, staged funding agreement, and promissory note, and now allege a number of shortcomings with the documents. The Capparellis contend that Lanier had the Deed of Trust illegally notarized. Id. ¶¶ 14-16. Plaintiffs also allege that FirstClose, the mortgage settlement services provider, improperly prepared the Deed of Trust by omitting the name of the Grantee, a necessary party to the' Deed. Id. ¶¶ 17-18, 21. According to plaintiffs, FirstClose later added as Grantee James B. Miller, an officer of AmeriFirst. Id. ¶ 23. Plaintiffs also allege that on August 21, 2006, FirstClose initially recorded the Deed in Wake County, North Carolina, and on January 19, 2007, rerecorded the Deed in Johnston County, the county in which plaintiffs' real property is located. Id. ¶¶ 22-24, Exs. C, D.
In connection with the promissory note and Deed of Trust, FirstClose performed certain mortgage settlement services, the costs of which were added to the principal of the loan and are reflected on the settlement statement. See id. Ex. B. Specifically, FirstClose charged $90.00 for an "Abstract or Title Search," $57.00 for "Document Preparation," and $19.00 for an "Appraisal Fee." Id. ¶¶ 25, 29, Ex. B. Plaintiffs contend that FirstClose was not licensed to perform these services and that providing such services constituted the unauthorized practice of law or appraising, in violation of North Carolina law. Id. ¶¶ 27-28, 30-31; see N.C. Gen.Stat. §§ 84-4, 93E-1-2.1.
On August 10, 2006, AmeriFirst issued the first two checks under the staged funding agreement made payable to Tropical Pools and Mark Capparelli, jointly, in the amount of $28,590. Id. ¶¶ 83-34. Upon representations and promises of Lanier and Tropical Pools, Capparelli negotiated the checks. Id. The Capparellis received $6,979 for the construction of a fence, and Tropical Pools received the remaining amount for materials, digging, and' construction. Id. ¶ 34. Plaintiffs allege that Lanier and Tropical Pools fraudulently converted the funds they received, in, the amount of $21,611, to their own use. Id. ¶ 40. Per the staged funding agreement and promissory note. AmeriFirst issued the last two checks to Mark Capparelli and Tropical Pools, jointly, in the amounts of $14,295 and $4,765. Id. ¶ 51. Plaintiffs returned these checks to AmeriFirst without negotiating them. Id. When AmeriFirst informed the Capparellis that they were responsible for the full amount of the loan under the Deed of Trust, plaintiffs began making monthly payments on the loan. Id.
On August 29, 2007, plaintiffs filed a complaint in Johnston County Superior Court, alleging the following claims against defendants AmeriFirst: (1) that AmeriFirst charged unlawful fees in order to extract a higher rate of interest, in violation of Chapter 24 of the North Carolina General Statutes, id. ¶¶ 54-56 (i.e., count one); (2) that AmeriFirst's actions violated N.C. Gen.Stat. § 24-8 and constitute unfair and deceptive acts under N.C. Gen. Stat. § 75-1.1, id. ¶¶ 57-58 (i.e., count two); (3) that AmeriFirst breached the promissory note by charging plaintiffs excessive interest, id. ¶¶ 59-62 (i.e., count three); (4) that AmeriFirst's extraction of a higher rate of interest constitutes usury, in violation of Chapter 24 of the North Carolina General Statutes, id. ¶¶ 63-65 (i.e., count four); (5) that AmeriFirst's violation *558 of usury law constitutes unfair and deceptive acts under N.C. Gen.Stat. § 75-1.1, id. ¶¶ 66-67 (i.e., count five); (6) that AmeriFirst is jointly and severally liable with Tropical Pools under the North Carolina Retail Installment Sales Act, N.C. Gen.Stat. § 25 A. -1, et seq., id. ¶¶ 84-91 (i.e., count nine); (7) that plaintiffs are entitled to declaratory relief and reformation of the promissory note and Deed of Trust, id. ¶¶ 98-100 (i.e., count twelve); and (8) that plaintiffs are entitled to injunctive relief against AmeriFirst, id. ¶¶ 101-05 (i.e., count thirteen). Plaintiff also seeks to hold Miller jointly and severally liable for unspecified conduct. See id. Demand for Judgment.
Plaintiffs also allege the following claims against Tropical Pools: (1) that Tropical Pools breached the contract with plaintiffs to construct a swimming pool and perform related construction improvements on plaintiffs' property, id. ¶¶ 68-71 (i.e., count six); (2) that Tropical Pools fraudulently induced plaintiffs to endorse and deliver two checks to Lanier and Tropical Pools, id. ¶¶ 72-81 (i.e., count seven); and (3) that Tropical Pools' actions constitute unfair and deceptive acts under N.C. Gen. Stat. § 75-1.1, id. ¶¶ 82-83 (i.e., count eight). As for defendant FirstClose, plaintiffs assert the following claims: (1) that FirstClose charged and collected non-bona tide fees in violation of N.C. Gen.Stat. § 24-8(d), id. ¶¶ 92-94 (i.e., count ten); and (2) that FirstClose's actions in violation of N.C. Gen.Stat. § 24-8 constitute unfair and deceptive acts under N.C. Gen. Stat. § 75-1.1, id. ¶¶ 95-97 (i.e., count eleven).
On October 4, 2007, defendants AmeriFirst and Miller removed the action to federal court under 28 U.S.C. § 1441 and asserted diversity jurisdiction. On October 22, 2007, defendants AmeriFirst and Miller filed a motion to dismiss counts one through five and count twelve against AmeriFirst and to dismiss the relief requested against Miller. Plaintiffs responded, and defendants replied.
II.
Initially, the court addresses subject matter jurisdiction, including whether Tropical Pools is a proper defendant. Absent a proper basis for subject matter jurisdiction, a removed case must be remanded to state court. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94; 118 S. Ct. 1003, 140 L. Ed. 2d 210 (1998); Jones v. Am. Postal Workers Union, 192 F.3d 417, 422 (4th Cir.1999). Section 1441(a) permits defendants to remove from state to federal court "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." 28 U.S.C. § 1441(a). Federal courts have original jurisdiction of cases "where the matter in controversy exceeds the Aim or value of $75,000, exclusive of interest and costs; and is between . . . [c]itizens of different States. . . ." 28 U.S.C. § 1332(a)(1); see Roche v. Lincoln Prop. Co., 373 F.3d 610, 613 (4th Cir.2004), rev'd on other grounds by Lincoln Prop. Co. v. Roche, 546 U.S. 81, 126 S. Ct. 606, 163 L. Ed. 2d 415 (2005). Section 1332 requires "complete diversity such that the state of citizenship of each plaintiff must be different from that of each defendant." Athena Auto., Inc. v. DiGregorio, 166 F.3d 288, 290 (4th Cir.1999). Section 1441(b) further proscribes removal of civil actions unless "none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b).
Defendants AmeriFirst and Miller removed this action to federal court under 28 U.S.C. § 1441 and asserted diversity jurisdiction. In calculating the amount in controversy, defendants AmeriFirst and Miller concede that plaintiffs fail to state precisely the amount of damages sought. *559 See Defs.' Notice of Removal. Z. Defendants AmeriFirst and Miller contend that the complaint seeks a minimum of $85,770, based on the $28,590 loan amount and treble damages/attorney's fees sought under N.C. Gen.Stat. § 75-1.1.
In determining whether complete diversity exists such that the state of citizenship of each plaintiff is different from that of each defendant, defendants concede that plaintiffs Capparellis and defendant Tropical Pools are both citizens of North Carolina.[1] Defs' Notice of Removal 8. Defendants contend that Tropical Pools is a nominally non-diverse defendant in the action and should be disregarded for purposes of evaluating diversity jurisdiction under the fraudulent joinder doctrine. Id. The fraudulent joinder doctrine "permits removal when a non-diverse party is (or has been) a defendant in the case." Mayes v. Rapoport, 198 F.3d 457, 461 (4th Cir.1999). The fraudulent joinder doctrine allows a district court to assume jurisdiction over a case even if complete diversity is lacking in order to dismiss non-diverse defendants and thereby retain proper diversity jurisdiction. See id. To establish the fraudulent joinder of a named defendant, "the removing party must demonstrate either outright fraud in the plaintiffs pleading of jurisdictional facts or that there is no possibility that the plaintiff [can] establish a cause of action against the in-state defendant in state court." Hartley v. CSX Transp., Inc., 187 F.3d 422, 424 (4th Cir.1999) (quotations omitted & emphasis removed).[2]
To determine whether joinder is fraudulent, "the court is not bound by the allegations of the pleadings, but may instead consider the entire record, and determine the basis of joinder by any means available." AIDS Counseling & Testing Ctrs. v. Group W. Television, Inc., 903 F.2d 1000, 1004 (4th Cir.1990) (quotation omitted). A defendant who alleges fraudulent joinder "bears a heavy burden [because] it must show that the plaintiff cannot establish a claim even after resolving all issues of law and fact in the plaintiff's favor." Hartley, 187 F.3d at 424. "This standard is even more favorable to the plaintiff than the standard for ruling on a motion to dismiss under Fed.R.Civ.P. 12(b)(6)." Id.
Here, defendants AmeriFirst and Miller contend that plaintiffs cannot establish the three claims against Tropical Pools (i.e., counts six, seven, and eight (Compl. ¶¶ 68-88)) in state court because Tropical Pools is the corporate alter ego of Lanier, and plaintiffs already have filed an adversary proceeding against Lanier in the United States Bankruptcy Court for the Eastern District of North Carolina based on the same facts and claim theory at issue in this case. See Defs.' Notice of Removal 3-6.[3] In his bankruptcy petition, Lanier *560 lists as a name "d/b/a Tropical Pools." See In re Randy S. Lanier d/b/a Tropical Pools, Inc. and d/b/a R. Robinson & Son's Inc., No. 06-2794-8-RDD (Bankr. E.D.N.C. Sept. 8, 2006) (voluntary bankruptcy petition) [hereinafter "Lanier Bankruptcy Petition"].
Under North Carolina law, when a corporation operates as the mere instrumentality or alter ego of its sole or dominant shareholder "and a shield for his activities in violation of the declared public policy or statute of [North Carolina], the corporate entity will be disregarded and the corporation and the shareholder treated as one and the same person." Henderson v. Sec. Mortgage & Fin. Co., 273 N.C. 253, 260, 160 S.E.2d 39, 44 (1968): see Martin v. Pilot Indus., 632 F.2d 271, 276 (4th Cir.1980). Here, Lanier represented himself as the owner and registered agent of Tropical Pools. See Compl. ¶¶ 8, 16. Plaintiffs' complaint frequently refers to Tropical Pools and Lanier as though they are the same entity. See, e.g., Compl. ¶¶ 9-15, 33-40, 42, 46-47. As mentioned, Lanier's Chapter 7 voluntary bankruptcy petition lists "d/b/a Tropical Pools" as a name used by the debtor. See Lanier Bankruptcy Petition. Lanier also lists the debt owed to the Capparellis as one of the debts to be adjudicated in the Lanier Bankruptcy. See id.; Defs.' Notice of Removal 5 & Ex. F. Additionally, the Trustee in the Lanier Bankruptcy alleges that Lanier "testified that he did not delineate any difference between his personal bank account and the corporate accounts, and [in] fact used each account for corporate and personal purposes with no regard for segregation of funds." Compl. Ex. F, ¶ 5. On these facts, Tropical Pools is the corporate alter ego of Randy Lanier.
Because plaintiffs have filed an adversary proceeding against Lanier in U.S. Bankruptcy Court regarding the same transaction, alleged fraud, and resulting debt, they are precluded from filing essentially the same claim against Lanier's corporate alter ego, Tropical Pools, in state court. Upon the filing of a petition under Chapter 7 in U.S. Bankruptcy Court, an automatic stay is entered that requires all collection proceedings to stop. See 11 U.S.C. § 362(a). Prohibited actions under the automatic stay include the commencement of a judicial action against the debtor to recover a claim that arose before the commencement of the Chapter 7 action. Id. § 362(a)(1). Moreover, the commencement of a bankruptcy action under Chapter 7 creates a bankruptcy estate, which is comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case." Id. § 541(a)(1). Application of the alter ego doctrine brings the assets of a debtor's alter ego into the bankruptcy estate. See, e.g., In re Jenkins Landscaping & Excavating, Inc., 93 B.R. 84, 88 (W.D.Va.1988) (holding that property of Chapter 7 debtor rightfully includes legal and equitable interests of its alter ego under 11 U.S.C. § 541(a)(1)); see also Gibraltar Say. v. LDBrinkman Corp., 860 F.2d 1275, 1285 (5th Cir.1988); Towe v. Martinson, 195 B.R. 137, 140(D.Mont.1996); ANR Ltd. Inc. v. Chattin, 89 B.R. 898, 904 (D.Utah 1988); In re Bldgs. by Jamie, Inc., 230 B.R. 36, 43-44 (Bankr.D.N.J.1998).
By naming Tropical Pools as a defendant in this case, plaintiffs essentially filed a claim against the Lanier bankruptcy estate and violated the automatic stay entered in Lanier's Chapter 7 bankruptcy action. The automatic stay prohibits any proceeding that attempts to collect debts *561 that Lanier (or his alter ego Tropical Pools) incurred and owed before his Chapter 7 filing. Thus, there is no possibility that plaintiffs can establish the three claims against defendant Tropical Pools in state court. See Hartley, 187 F.3d at 424. Plaintiffs filed an adversary proceeding against. Lanier, which extends to his alter ego Tropical Pools, in an attempt to recover for the alleged wrongdoing. Plaintiffs fail to allege a new legal theory for recovery against Tropical Pools. Accordingly, pursuant to the fraudulent joinder doctrine, the court dismisses non-diverse, defendant Tropical Pools from the action without prejudice. See id.
III.
The court next considers whether to dismiss counts one through five and count twelve alleged against defendant AmeriFirst. The six claims which AmeriFirst seeks to dismiss arise from the same factual allegations namely, that AmeriFirst purportedly added improper finance charges to the loan principal and therefore charged a higher rate of interest than that agreed upon in the promissory note. The relevant facts for the six claims at issue in AmeriFirst's motion to dismiss are set forth in plaintiffs' complaint. AmeriFirst provided financing for the construction of the Capparellis' pool. See Compl. ¶ 12. In return for the financing, plaintiffs executed a promissory note, Deed of Trust, and staged funding agreement pursuant to which they agreed to repay a loan from AmeriFirst in the principal amount of $48,001 at an annual interest rate of 9.99%, with interest beginning to accrue at the time the first check was issued by AmeriFirst. Id. ¶¶ 21, 32, 43, Exs. C, D, E, H. Plaintiffs did not pay certain loan-related settlement fees for a title search, an appraisal, and document preparation provided by defendant FirstClose at the loan closing, so these fees were added to the principal balance and financed as part of the loan. Id. ¶¶ 25-26, 29, Ex. B. The fees in question total $166.00, and plaintiffs' claims concern the amount of interest AmeriFirst allegedly wrongfully charged on these fees.[4] Plaintiffs base their claims on the premise that these fees (and the interest charged thereon) are more akin to finance charges or excessive interest. If this premise fails, plaintiffs' claims against AmeriFirst collapse.
In analyzing a motion to dismiss a complaint under Fed.R.Civ.P. 12(b)(6) for "failure to state a claim upon which relief can be granted," a court must determine whether the complaint is legally and factually sufficient. See Bell Atl. Corp. v. Twombly, ___ U.S. ___, ___ __ ___, 127 S. Ct. 1955, 1968-70, 167 L. Ed. 2d 929 (2007); Kloth v. Microsoft, 444 F.3d 312, 319 (4th Cir.2006): accord Erickson v. Pardus, ___ U.S. ___, ___, 127 S. Ct. 2197, 2200, 167 L. Ed. 2d 1081 (2007) (per curiam). A court need not accept the legal conclusions drawn from the facts. Similarly, "[a court] need not accept as true unwarranted inferences, unreasonable conclusions, or arguments." Kloth, 444 F.3d at 319 (quotation omitted).
A.
In count one, plaintiffs allege that AmeriFirst willfully and corruptly intended to charge a greater rate of interest than that allowed under law by charging excess financing fees in violation of N.C. Gen.Stat. § 24-8, et seq. Compl. ¶¶ 55-56. Essentially, plaintiffs contend that AmeriFirst acted improperly by adding the fees *562 charged by FirstClose to the loan principal because the fees were not bona fide. Id.
N.C. Gen.Stat. § 24-8(d) states that a "lender may collect money from the borrower for the payment of . . . bona fide loan-related goods, products, and services provided or to be provided by third parties." "Loan-related goods, products, and services include fees for tax payment services, fees for flood certification, fees for pest-infestation determinations, mortgage brokers' fees, appraisal fees, inspection fees, environmental assessment fees, fees for credit report services, assessments, costs of upkeep, surveys, attorneys' fees, notary fees, escrow charges, and insurance premiums (including, for example, fire, title, life, accident and health, disability, unemployment, flood, and mortgage insurance)." N.C. Gen.Stat. § 24-8(d) (emphasis added). Based on this definition, the fees associated with preparing loan-related documents and title searches fall within the broad category of loan-related services.
Plaintiffs do not appear to contest that the fees that FirstClose charged represent loan-related services. Rather, plaintiffs contend that the fees are not legally "bona fide" because FirstClose allegedly is legally unauthorized to perform such services. Compl. ¶¶ 27-28, 30-31; Pls.' Mem. in Opp'n to Mot. to Dismiss 14-17; see N.C. Gen.Stat. §§ 84-4, 93E-1-2.1. AmeriFirst responds, however, that the court's bona fide inquiry should focus on whether the services were in fact provided. See Defs.' Mem. in Supp. of Mot. to Dismiss 6-7; Defs.' Reply in Supp. of Mot. to Dismiss 4-5.
North Carolina courts have not analyzed the phrase "bona fide" under N.C. Gen. Stat. § 24-8(d). The court therefore looks to Regulation Z, 12 C.F.R. § 226 (2007), which implements the Federal Truth in Lending Act, for guidance. Regulation Z addresses the fees a lender may charge in a transaction secured by real property and contains language similar to N.C. Gen.Stat. § 24-8(d). It states that the following fees are not finance charges "if the fees are bona fide and reasonable in mount": "(i) [f]ees for title examination, abstract of title, title insurance, property survey, and similar purposes; (ii) [f]ees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents; . . . (iv) [p]roperty appraisal fees or fees for inspections to assess the value or condition of the property if the service is performed prior to closing, including fees related to pest infestation or flood hazard determinations. . . ." 12 C.F.R. § 226.4(c)(7) (emphasis added).
"Though sparse, the cases that have addressed 12 C.F.R. § 226.4(c)(7) rely upon the plain meaning of bona fide, i.e. not made with bad faith, fraud, or deceit." In re Crisomia, No. 00-35085DVVS, 2002 WL 31202722, at *7 (Bankr.E.D.Pa. Sept. 13, 2002) (unpublished): see Therrien v. Resource Fin. Group, Inc., 704 F. Supp. 322, 327 (D.N.H. 1989); Cowles v. Bank West, 476 Mich. 1, 34-35, 719 N.W.2d 94, 112-13 (2006) (citing Webster's Dictionary). Webster's defines "bona fide" as "[p]erformed or made in good faith." Webster's Second New Riverside University Dictionary 188 (2d ed.1988). Alternatively, "bona fide" means "authentic" or "genuine." Id. Courts' inquiries therefore focus on whether the services were actually provided or whether the fee included charges for unstated services. See, e.g., Guise v. BWM Mortgage, LLC, 377 F.3d 795, 800-01 (7th Cir.2004) ("The plaintiffs did not allege in their complaint . . . that they did not receive title insurance and endorsements from [the mortgage settlement services provider], nor did the complaint allege any facts to give rise to the inference that [the mortgage settlement services provider] failed to *563 perform those services. The district court had no reason to conclude that the transaction was anything but bona fide."); Brannam v. Huntington Mortgage Co., 287 F.3d 601, 606 (6th Cir.2002) (charge is "bona" fide" if the "services for which the fees are imposed are performed"); Inge v. Rock Fin. Corp., 388 F.3d 930, 939 (8th Cir.2004) ("Plaintiff does not claim that the fee, was for something other than document Preparation, only that the fee was" excessive. Plaintiffs argument, therefore, goes to the reasonableness of the document preparation fee, not its bona fides."); Cowles, 476 Mich. at 34-35, 719 N.W.2d 94 at 112-13 ("[A] document preparation fee is not bona fide, authentic, or genuine, if it includes charges for items other than document preparation.").
Here, plaintiffs do not allege that FirstClose failed to perform the services listed on the settlement statement or that the amounts charged represented services different than those described. Indeed, plaintiffs concede that FirstClose performed the services described on lines 803, 1102, and 1105 of the settlement statement (i.e., appraisal services, title search, and document preparation). See Pls. Mem. in Opp'n to Mot. to Dismiss 15, 17. As explained above, plaintiffs' legal argument that FirstClose's loan-related service fees were not "bona fide" fails. Under N.C. Gen. Stat § 24-8(d), the services were "bona fide." Moreover, nothing in section 24-8 required AmeriFirst to ensure whether FirstClose needed or had a license under N.C. Gen.Stat. § 84.4 or § 93E-2-2.1. Accordingly, plaintiffs fail to state a claim against AmeriFirst under Rule 12(b)(6) for violations of N.C. Gen.Stat. § 24-8.
B.
In count three, plaintiffs allege that AmeriFirst breached its contractual obligations by charging plaintiffs interest in excess of the agreed-upon rate in the promissory note. See Compl. ¶¶ 59-62. "To state a claim for breach of contract, the complaint must allege that a valid contract existed between the parties, that defendant breached the terms thereof, the facts Constituting the breach, and that damages resulted from such breach." Claggett v. Wake Forest Univ., 126 N.C.App. 602, 608, 486 S.E.2d 443, 446 (1997). Where the exhibits incorporated by reference as part of the complaint reveal that there has been no breach, a claim for breach of contract should be dismissed pursuant to Rule 12(b)(6). See id. at 609, 486 S.E.2d at 446-47.
Here, the complaint alleges that plaintiffs executed a promissory note with defendant AmeriFirst whereby they agreed to repay a principal amount of $48,001 at an interest rate of 9.99%. See Compl. ¶¶ 44, 60, Ex. H. Plaintiffs base their breach of contract claim on the premise that because the amounts added to the loan principal for an appraisal, title search, and document preparation were not bona fide loan-related service fees under N.C. Gen.Stat. § 24-8, such fees represent additional finance charges or interest. See Pls.' Mem in Opp'n to Mot. to Dismiss 20. However, as discussed, the amounts added to the loan principal were bona fide loan-related service fees for which AmeriFirst Could legally charge plaintiffs. Plaintiffs fail to allege facts that show AmeriFirst charged plaintiffs a rate of interest that exceeded the agreed-upon rate in the promissory note. Thus, plaintiffs fail to state a breach of contract claim against AmeriFirst.
C.
In count four, plaintiffs allege that AmeriFirst committed usury by charging and collecting a greater rate of interest than the agreed-upon rate, in violation of the interest rate limitations imposed by Chapter 24 of the North Carolina General *564 Statutes. See Compl. ¶¶ 63-65. "To establish that an agreement is usurious, it must be shown that: (1) there was a loan, (2) there was an understanding that the money lent would be returned, (3) for the loan a greater rate of interest than allowed by law was charged, and (4) there was corrupt intent to take more than the legal rate for the use of the money." Bagri v. Desai, 83 N.C.App. 150, 151, 349 S.E.2d 309, 310 (1986). A usury claim fails as a matter of law where the rate complies with the requirements of Chapter 24 of the North Carolina General Statutes. See, e.g., Pappas v. NCNB Nat'l Bank, 653 F. Supp. 699, 706 (M.D.N.C.1987).
N.C. Gen.Stat. § 24-1.1(a)(2) states that "the parties to a loan . . . may contract in writing for the payment of interest not in excess of . . . [a]ny rate agreed upon by the parties where the principal amount is more than twenty-five thousand dollars ($25,000)." Here, plaintiffs and AmeriFirst executed a promissory note whereby AmeriFirst loaned plaintiffs $48,001 at an agreed-upon interest rate of 9.99%. See Compl. ¶¶ 44, 60, Ex. H. Under North Carolina law, the parties were free to select this rate of interest. Plaintiffs again base their usury claim on the premise that the fees charged by FirstClose and added to the loan principal by AmeriFirst were not bona fide and actually represented finance fees or additional interest. See Pls.' Mem. in Opp'n to Mot. to Dismiss 20-21. As discussed, this premise fails. Plaintiffs fail to allege facts that show AmeriFirst charged plaintiffs excessive interest in violation of the parties' agreement. Accordingly, plaintiffs fail to state a usury claim against AmeriFirst.
D.
In counts two and five, plaintiffs allege that AmeriFirst's purported violations of N.C. Gen.Stat. § 24-8 and North Carolina usury law constitute unfair and deceptive acts or practices in violation of N.C. Gen. Stat. § 75-1.1. See Compl. ¶¶ 57-58, 66-67; see Pls.' Mem. in Opp'n to Mot. to Dismiss 17-18, 21-22. Having concluded that plaintiffs fail to state a claim upon which relief can be granted under either section 24-8 or North Carolina usury law, the court also concludes that plaintiffs fail to state a claim under Rule 12(b)(6) for a violation of section 75-1.1. See, e.g., Fickling v. Burger King Corp., No. 87-1725, 1988 WL 30675, at *1 (4th Cir. Apr. 4, 1988) (per curiam) (unpublished) (dismissing unfair and deceptive trade practices claim where the underlying tort which is alleged to constitute the unfair or deceptive act cannot be established as a matter of law); Smith v. Cent. Soya of Athens, Inc., 604 F. Supp. 518, 529 (E.D.N.C.1985) (same).
E.
AmeriFirst also moves to dismiss count twelve in which plaintiffs seek declaratory relief and reformation of the promissory note and Deed of Trust. See Compl. ¶ 98-100. "Reformation is a well-established equitable remedy used to reframe written instruments where, through mutual mistake or the unilateral mistake of one party induced by the fraud of the other, the written instrument fails to embody the parties' actual, original agreement." Metro. Prop. & Cas. Ins. Co. v. Dillard, 126 N.C.App. 795, 798, 487 S.E.2d 167, 159 (1997) (quotation omitted). Plaintiffs contend that they state a valid claim for equitable relief against AmeriFirst because they assert a valid claim for fraud against Tropical Pools. See Compl. ¶¶ 72-81. Plaintiffs rely on the North Carolina Retail Installment Sales Act, N.C. Gen. Stat. §§ 25A-1, et seq., which states that "[i]n a consumer credit sale, a buyer may assert against the seller, assignee of the seller, or other holder of the instrument or instruments of indebtedness, any claims or *565 defenses available against the original seller." N.C. Gen.Stat. § 25A-25; see Compl. ¶ 91; Pls. Mem. in Opp'n to Mot. to Dismiss 22-23. Under plaintiffs' theory, AmeriFirst is, presumably a holder, of an instrument of indebtedness under the North Carolina Retail Installment Sales Act. See Compl. ¶ 91. Here, however, Plaintiffs, allege fraud only as to Tropical Pools' conduct in getting plaintiff Mark Capparelli to endorse two checks allegedly needed: to. construct the swimming pool. See Compl. ¶¶ 72-81, Ex: A. This alleged fraud is not a proper basis for reforming the promissory, note and Deed of Trust between plaintiffs and AmeriFirst. Plaintiffs fail to allege that AmeriFirst made any fraudulent misrepresentations surrounding the note or Deed, or that either plaintiffs or AmeriFirst misunderstood a material fact concerning the loan or mortgage.
Similarly, to state a claim for rescission or cancellation of a note or deed of trust, plaintiffs must allege improper inducement such as fraud, mistake based on an affirmative misrepresentation, or undue influence, or abandonment or repudiation with the acquiescence of the other party, See generally, 5 Strong's North Carolina Index, Cancellation and" Rescission §§ 12 (4th ed.2000). Plaintiffs fail to do so. Additionally, plaintiffs fail to allege Tropical Pools' involvement in FirstClose's allegedly improper recording of the Deed in Wake County as a means of recovery under N.C. Gen.Stat. §§ 25A-1, et seq. Accordingly, plaintiffs fail to state a claim in count twelve against AmeriFirst with respect to the desired declaratory relief concerning the promissory note and Deed of Trust.
IV.
As for defendant Miller, the complaint names Miller (an officer of AmeriFirst) as a defendant "in his capacity as an alleged Trustee of a Deed of Trust which purports to secure the loan that is the subject of (plaintiffs') complaint." See Compl. ¶ 3. The complaint fails to assert a specific claim against Miller, yet it seeks to hold him jointly and severally liable as a named defendant. Id. Demand for Judgment. The complaint fails to allege that Miller personally received any of plaintiffs' loan proceeds or charged plaintiffs fees or interest. In sum, the complaint fails to state a claim against Miller upon which relief can be granted. Accordingly, to the extent the complaint purports to state a claim against Miller, the court dismisses any such claim against Miller pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
V.
In sum, non-diverse defendant Tropical Pools is DISMISSED from the action without prejudice pursuant to the fraudulent joinder doctrine. Having found proper subject matter jurisdiction, defendant AmeriFirst's motion to dismiss claims one, two, three, four, five, and twelve of the complaint pursuant to Rule 12(b)(6) is GRANTED. Additionally, to the extent the complaint purports to state a claim against defendant Miller, such a claim is DISMISSED pursuant to Rule 12(b)(6).
NOTES
[1] The Capparellis are citizens and residents a Johnston County, North Carolina. See Compl. ¶ 1. Tropical Pools is a North Carolina corporation with its principal place of business in Goldsboro, North Carolina. Id. ¶ 4. For purposes of sections 1332 and 1441, "a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business. . . ." 28 U.S.C. § 1332(c)(1).
The remaining parties meet the requirement of complete diversity. Defendant AmeriFirst is a Virginia corporation with its principal place of business in Nebraska. Compl. ¶ 2. Defendant Miller is a citizen and resident of Nebraska. Id. ¶ 3. Defendant FirstClose is a Delaware corporation with its principal place of business in Texas. Id. ¶ 5.
[2] The term "fraudulent joinder" is a misnomer. The fraudulent joinder doctrine requires neither a showing of fraud nor joinder. See Mayes, 198 F.3d at 461 n. 8.
[3] See Capparelli v. Lanier, No. 06-253-8-RDD (Bankr.E.D.N.C. Nov. 3, 2006); see also Defs.' Notice of Removal Ex. C. The Lanier Bankruptcy proceeding is on-going. See In re Lanier, No. 06-2794-8-RDD (Bankr.E.D.N.C). This court may take judicial notice of the judicial records in the Lanier Bankruptcy proceeding. See, e.g., Fed.R.Evid. 201; Colonial Penn Ins. Co. v. Coil, 887 F.2d 1236, 1239 (4th Cir.1989).
[4] Over the course of the loan, the amount of interest at stake appears to be approximately $16.69.
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