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333 S.W.2d 387 (1960)
W. A. EVANS, Appellant,
v.
STATE of Texas, Appellee.
No. 31538.
Court of Criminal Appeals of Texas.
February 24, 1960.
*388 J. W. Reid, of Reid & Reid, Abilene, W. E. Martin, Houston, for appellant.
Leon B. Douglas, State's Atty., Austin, for the State.
MORRISON, Presiding Judge.
The information was in three counts, only two of which were submitted to the jury, charging sale of beer in a dry area and possession of beer for the purpose of sale in a dry area; the punishment, 12 months in jail and a fine of $1,650. This prosecution was before the effective date of Article 408a, Vernon's Ann.C.C.P.
The jury assessed appellant's punishment under count one at 12 months in jail and a fine of $650, and in count three at 12 months in jail and a fine of $1,000. The trial court, however, in his judgment made no effort to cumulate the jail sentences, and we construe the same to assess the total punishment at 12 months in jail and a fine of $1,650. McCurdy v. State, 159 Tex. Crim. 477, 265 S.W.2d 600, and Bristow v. State, 160 Tex. Crim. 111, 267 S.W.2d 415.
Inspector Monk of the Liquor Control Board, while operating undercover on November 12, went to a place known as the Workmen's Club east of the city of Abilene and, posing as truck driver, paid appellant $10 as a membership fee and $2.10 for six "chits", one of which he surrendered to appellant for a can of beer. This is the transaction covered by count one of the information which charged the unlawful sale of beer in a dry area. On November 19, Monk again returned to the club, gave appellant a "chit" for another beer and participated in the raid conducted by a number of officers in which a huge quantity of beer was seized. This is the transaction covered by count three which charged the unlawful possession of beer for the purpose of sale in a dry area.
Appellant did not testify in his own behalf, but called other witnesses who testified that the Workmen's Club was restricted to members only, that the beer which was served belonged to the members, and that the "service charge" was for cooling and serving the beer. The jury rejected this defense, and we find the evidence sufficient to support the conviction.
Appellant's brief is principally addressed to the question of the cumulation of the jail sentences, which we have above decided. He next contends that the court erred in permitting the witness Monk to testify that on November 17 he went to the same place and gave appellant still another "chit" for a bottle of beer. At the time of the introduction of such testimony and in his charge, the court was careful to instruct the jury that they might consider the evidence as to the November, 17 transaction, if at all, only on the question of the intent of appellant in possessing the beer which was seized on November 19. In Morrison v. State, 155 Tex. Crim. 106, 230 S.W.2d 808, 809, this Court said:
"* * * in a prosecution for the possession of intoxicating liquor for the purpose of sale, proof of sales made by the accused at a time not too remote is admissible as throwing light *389 upon the purpose for which the liquor was possessed."
By bills of exception Nos. 5 and 6, complaint is made as to argument. The court qualified each bill and certified that the remarks of the prosecutor were in reply to remarks made by defense counsel and set forth the portion of defense counsel's argument to which he referred. Appellant accepted such bill as qualified, and we agree with the court's qualification.
Finding no reversible error, the judgment of the trial court is affirmed.
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10 F. Supp. 2d 74 (1998)
COMMONWEALTH OF MASSACHUSETTS, by its DIVISION OF MARINE FISHERIES, Plaintiff,
v.
William M. DALEY, in his official capacity as Secretary of Commerce of the United States, United States Department of Commerce, James Baker, in his official capacity as Under Secretary and Administrator for the National Oceanic and Atmospheric Administration, National Oceanic and Atmospheric Administration, Rolland A. Smitten, in his official capacity as Director of the National Marine Fisheries Service, National Marine Fisheries Service, and the United States of America, Defendants.
No. 97-11400-JLT.
United States District Court, D. Massachusetts.
June 24, 1998.
*75 Douglas S. Brown, Attorney General's Office, Administrative Law Division, Boston, MA, for Plaintiff.
Warigia Bowman, U.S. Department of Justice, Wildlife and Marine Resources, Washington, DC, for Defendants.
David Farrell, Jr., John H. Sweeney, Connors & Farrell, South Chatham, MA, for Movants.
MEMORANDUM
TAURO, Chief Judge.
Plaintiff, the Commonwealth of Massachusetts, by its Division of Marine Fisheries, petitions for judicial review of a final rule promulgated by the Secretary of Commerce, Defendant William M. Daley. The rule amends a portion of the Fishery Management Plan for the Summer Flounder, Scup, and Black Sea Bass Fisheries, 50 C.F.R. § 648.120. Among other things, the amendment revises the method for allocating, among the states, the commercial quotas for summer scup fishing.
Plaintiff seeks this review, alleging that the regulatory amendment is "arbitrary, capricious, [and] an abuse of discretion," in that it is based upon unreliable and outdated data. See 5 U.S.C. § 706(2)(A)(1996). Moreover, Plaintiff claims that the amendment is unlawful, because it is contrary to the national standards for fishery conservation and management, as set forth at 16 U.S.C. § 1851 et seq.
According to Plaintiff, the result of these deficiencies is a quota system that unfairly discriminates against residents of the Commonwealth of Massachusetts, as well as all "inshore" fishermen. Plaintiff prays for declaratory and injunctive relief.
I.
FACTUAL BACKGROUND
A. Scup
Scup are a schooling, continental shelf species common from Cape Cod, Massachusetts to Cape Hatteras, North Carolina. Scup have supported an important commercial fishery since colonial times.
Scup migrate seasonally, at least partially in response to changes in water temperature. In the winter months, scup reside in the deep offshore waters from southern New Jersey to Cape Hatteras. As the water temperature rises, they migrate north and inshore to spawn. Scup appear off the southern coast of New England in early May.
In accordance with this migratory pattern, winter commercial scup fishing is concentrated offshore at the southern end of the scup's range and is done mostly by large otter-trawling vessels. In contrast, the commercial *76 scup fishing that occurs during the summer months is done inshore, using smaller trawlers, pots, and rods-and-reels.
B. The Contested Regulation
The regulation being challenged allocates, on a state-by-state basis, the summer commercial fishing quota for scup. Notably, this regulation was not developed overnight. The effort to develop a fishery management plan ("FMP") for the scup fishery actually began in 1978. After being abandoned intermittently, an earnest development effort began in 1995, when the National Marine Fisheries Service ("NMFS") concluded that scup were an overexploited species. Finally, in July of 1996, the Secretary of Commerce adopted a FMP that set overall goals for reducing the annual scup catch.
By the time the 1996 regulation was approved, NMFS was already at work revising it. There were concerns that a coastwide quota would create "derby-like" fishing by the larger otter-trawling vessels and would cause the season to close before the scup ever migrated north. As a consequence, the season was divided into three periods, with each period receiving an allotment of the overall annual quota. This 1997 regulatory amendment, furthermore, apportioned the summer allotment among particular states. It is this latter allocation that is at the center of this controversy.
Massachusetts claims that these state-by-state quotas were established on the basis of outdated and unreliable data, resulting in a discriminatory system of allocation. Specifically, the state-by-state quotas were developed using a NMFS database for 1983-1992 scup landings by federally permitted boats.[1] Each state was allotted a share of the total quota for the summer season based on its historical landings of scup as reflected in the database. Massachusetts contends not only that this data is outdated, but also that the resulting quota is discriminatory, because the database includes catch information from only those vessels which were federally permitted.
A boat needs a federal permit to fish anywhere from 3 to 200 nautical miles offshore (i.e., in the "exclusive economic zone"). The administrative record shows, however, that, on average, 88% of the scup landed in Massachusetts were caught in state waters (i.e., "inshore" or within 3 nautical miles of the coastline) by boats that did not require a federal permit. Massachusetts claims, therefore, that the NMFS's database does not accurately reflect the scup caught and landed in Massachusetts.
II.
ANALYSIS
A. Standard of Review
As always, in conducting a review of an agency's actions, the court must decide whether the regulation in question is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A) (1996); 16 U.S.C. § 1855(d) (1985)(incorporating the Administrative Procedures Act by reference).
In conducting this analysis with respect to a regulation promulgated pursuant to the Magnuson-Stevens Act (the "Act"), a court must be particularly cognizant of the ten national standards contained in the Act.[2]See 16 U.S.C. § 1851(a)(1)-(10) (1985 & Supp. 1997). Of those standards, two are especially relevant in this case.
National Standard # 2, 16 U.S.C. § 1851(a)(2), requires that "[c]onservation and management measures ... be based upon the best scientific information available." Id. And, National Standard # 4, 16 *77 U.S.C. § 1851(a)(4), provides, "Conservation and management measures shall not discriminate between residents of different States. If it becomes necessary to allocate or assign fishing privileges among various ... fishermen, such allocation shall be (A) fair and equitable to all fishermen; (B) reasonably calculated to promote conservation; and (C) carried out in such a manner that no particular individual, corporation, or other entity acquires an excessive share of such privileges." Id. Massachusetts claims that the 1997 regulatory amendment violates both of these standards.
B. National Standard # 2
The premise underlying Massachusetts' first argument is that NMFS had an "affirmative obligation" to collect landing data for scup caught in "inshore" waters before setting state-by-state quotas. By failing to do so, Massachusetts claims that NMFS violated National Standard # 2. The court finds, however, that this argument is based on an overly broad reading of the word "available" as it is used in National Standard # 2.
Notably, the Magnuson-Stevens Act does not define the phrase "best scientific information available."[3] In the absence of any express statutory language imposing an affirmative duty on an agency, courts have been reluctant to impose one. Compare Dubois v. Thomas, 820 F.2d 943, 947 (8th Cir.1987)(applying this idea in the context of a citizen's suit provision). More particularly, the case law interpreting National Standard # 2 seems to imply that it does not mandate any affirmative obligation on the agency's part. See Washington Crab Producers v. Mosbacher, 924 F.2d 1438, 1444 (9th Cir.1990). Indeed, in certain situations, the Secretary is free to act before the information on which he intends to rely is even "complete." See, e.g., National Fisheries Institute v. Mosbacher, 732 F. Supp. 210, 225 (D.D.C.1990). Consequently, the court declines to overturn the regulation on this basis.
C. National Standard # 4
The discretion afforded the Secretary in developing regulations on the basis of imperfect or incomplete information does not, however, give the Secretary the right to ignore data that already exists. See 50 C.F.R. § 600.315(b)(1), (c)(3). This is particularly true if doing so would result in a regulation that unfairly discriminates between fishermen from different states. See 16 U.S.C. § 1841(a)(4). Massachusetts' second, and more persuasive, argument is that the Secretary did just that, ignored existing data, when he approved the 1997 regulatory amendment. More fundamentally, in ignoring that data, the Secretary promulgated a regulation that he knew, or should have known, would allocate fishing privileges in an inequitable manner.
Specifically, Massachusetts complains that NMFS developed the 1997 regulatory amendment on the basis of data that it knew grossly underrepresented historic scup landings in the state. Massachusetts contends that, by focusing almost exclusively on scup landings by federally permitted vessels, the NMFS database understates Massachusetts' scup catch by, on average, 88%. Substantial evidence in the record validates Massachusetts' claim. Not only was NMFS generally aware of the scup's migratory pattern and its effect on its data collection efforts, but, in at least one instance, NMFS actually quantified the amount by which its database underrepresented Massachusetts' historic scup catch.
In formulating the original FMP for the scup fishery, NMFS maintained that its "weighout system records c[ould] be used to estimate the number of vessels landing scup." NMFS admitted, however, that "the data d[id] not constitute a complete census." Pl.'s Memo, Ex. A, at p. 34. More particularly, in responding to comments in the Federal Register, NMFS further conceded that the data "lacking" was for a "certain element[] of this fishery notably landings from some states' inshore handline fisheries." R. 576 (emphasis added); see also Memorandum for Rolland Schmitten (April 14, 1997), at R. 556 *78 ("There is no estimate on the number of vessels taking part in the inshore fishery, as they could be, for the most part, state licensed and may not be completely represented in the database.")(emphasis added). This concession, in conjunction with NMFS's knowledge that scup migrate inshore during the summer months to spawn, warrants the court's finding that, by relying on its incomplete database, NMFS discriminated against Massachusetts' fishermen.[4]
More detrimental to NMFS's position, however, is the data contained in Table 17. Table 17, NMFS' own data, shows that, on average, 88% of the scup landed in Massachusetts were caught in state waters. Pl.'s Memo, Ex. A, at p. 101-02. In other words, NMFS knew that the data it was using underestimated Massachusetts' historic scup catch by, on average, 88%, and, yet, it chose to base the state-by-state quotas exclusively on this data. It was this decision that violated National Standard # 4.
NMFS' willingness to overlook the data contained in Table 17 was only compounded by the fact that Massachusetts continually objected to the use of this data throughout the rulemaking process and even provided NMFS with 1994 and 1995 data showing the inadequacies in its database.[5] For example, in a letter dated May 9, 1997, then-Governor William Weld complained that "the federal records used to determine the inshore quota share for Massachusetts may ... result in a gross underestimation of actual commercial [scup] landings." R. 563. He added, "This management approach will slash Massachusetts inshore scup landings from a current annual rate of 2-3 million pounds to about 360,000 pounds." Id.; see also Letter from Philip G. Coates to Andrew Rosenberg (March 5, 1997), at R. 536-42.
Data subsequently published in the Federal Register substantiate Governor Weld's concern. If Massachusetts fishermen had limited their scup catch to their 1997 quota, their overall catch would have been reduced by approximately 75%, whereas Rhode Island fishermen were allowed to land approximately 32% more scup in 1997, than they have historically landed. As it turns out, Massachusetts fisherman disregarded the new regulation and caught 1,428,183 pounds of scup in 1997, whereas Rhode Island fisherman failed to reach their allotment, falling short by over one million pounds. Adjustments to the 1998 Quotas, 63 Fed.Reg. 3478, 3479 (Jan. 23, 1998). There could be no better evidence than this of the disparate impact of NMFS's decision to use flawed data.[6]
In sum, although NMFS had no "affirmative obligation" to collect data on the inshore fishery, see supra, and although selecting the data on which to rely in developing a regulation is within the Secretary's discretion, see Associated Fisheries of Maine, Inc. v. Daley, 127 F.3d 104, 110 (1st Cir.1997), the Secretary cannot choose to use data that he knows is seriously flawed. This is particularly true when doing so will have a discriminatory effect. Such a choice, the court finds, was arbitrary and capricious.
*79 D. Treatment of Bycatch
Massachusetts makes a third argument, which the court considers briefly only to note that NMFS's treatment of the "bycatch" issue does not violate either National Standard # 2 or National Standard # 4.[7] The 1997 regulatory amendment treats bycatch in the following manner: (1) Based on observations made by NMFS scientists placed on otter-trawling vessels as compliance officers, NMFS estimated that the mortality rate for scup caught and discarded to be near 100%; (2) the 1997 regulatory amendment, therefore, requires NMFS to estimate the total annual scup bycatch and to subtract this entire amount from the annual scup quota before beginning to allocate it across the three fishing periods and the various states within the summer season.
Massachusetts contends that this approach to bycatch is discriminatory and out of line with the "best scientific information available," because it provided NMFS with evidence that the mortality rate for the bycatch of pot and rod-and-real fishermen is much lower than 100%, and treating all states alike penalizes states like Massachusetts where the primary means of catching scup is not by using large otter-trawling vessels. But, by its own admission, the "evidence" that Massachusetts provided was either "anecdotal" or based on "assumptions" drawn from the study of other fisheries. Pl. Memo, p. 52. To the extent that Massachusetts presented any direct evidence of the mortality rate in the scup fishery, that evidence pertained only to recreational fishing. Id. (citing R. 5).
Although NMFS may need to develop a better understanding of bycatch morality rates in the scup fishery as it fine-tunes its regulations, the court finds no evidence in the record that NMFS failed to employ what, in its judgment, was the "best scientific information available." Massachusetts points to no such evidence, and NMFS's cautious approach to preserving the vitality of this fishery strikes the court as a reasonable one. See Southern Offshore Fishing Association v. Daley, 995 F. Supp. 1411, 1432 (M.D.Fla. 1998). Moreover, in the absence of better scientific information, the court fails to see how treating all states alike could violate National Standard # 4. The court, therefore, rejects Massachusetts' third argument.
III.
CONCLUSION
For the foregone reasons, the court finds that NMFS abused its discretion, but only in developing the state-by-state allocation of the summer commercial scup fishing quota and, accordingly, voids only that portion of the regulation. As ordered on April 27, 1998, the Secretary shall not seek to enforce the voided portion of the regulatory amendment, including the calculation of "overages," and shall, in due course, promulgate a new regulation that is consistent with National Standard # 4.
AN ORDER WILL ISSUE.
NOTES
[1] Note that the new quotas apply to both state and federally permitted vessels.
[2] The Magnuson-Stevens Act established eight regional fishery management councils composed largely of members representing the regions' costal states. See 16 U.S.C. § 1852 (1985). In the normal course of events, each council prepares a FMP for each fishery within its jurisdiction, see 16 U.S.C. § 1853 (1985), and submits it to the Secretary of Commerce for final approval. See 16 U.S.C. § 1854 (1985). The Secretary must evaluate the FMP for consistency with the Act's ten national standards. See 16 U.S.C. § 1851(a)(1)-(10) (1985 & Supp.1997). Once it is approved, the FMP becomes a valid final regulation. See 16 U.S.C. § 1855(d) (Supp.1997).
[3] In fact, even the regulation interpreting the phrase, quoted extensively in Plaintiff's brief, does not seem to imply any "affirmative obligation." See 50 C.F.R. § 600.315(b)(1)-(2), (c)(2)-(3).
[4] As the record shows, NMFS was also well aware that, by the time scup migrate north to the waters off the coast of New England, they reside in inshore waters. In describing the problem to be solved by the regulatory amendment, NMFS wrote, "A coastwide quota fails to recognize the seasonal fishing patterns in the commercial scup fishery, i.e., larger vessels operating offshore in the winter and smaller vessels and fixed gear operating inshore during the summer months." R. 262 (emphasis added).
[5] Note that the court does not think that the mechanism provided in the regulation for seeking an adjustment to a state's quota is a sufficient remedy. A state may only seek to have its quota amended on the basis of 1983-1992 data, much of which no longer exist. R. 539, 576.
[6] The court recognizes that "[i]nherent in an allocation is the advantaging of one group to the detriment of another," 50 C.F.R. § 600.325(c)(3)(i), and that "[a]n allocation of fishing privileges may impose a hardship on one group if it is outweighed by the total benefits received by another group or groups." 50 C.F.R. § 600.325(c)(3)(ii); see also United Boatmen of New Jersey v. Mosbacher, 1992 WL 13197, at *5 (D.N.J. Jan.24, 1992). Title 16, Section 1851(a)(4) still requires, however, that fishing privileges be allocated in a "fair and equitable" manner. See 16 U.S.C. § 1851(a)(4). Relying on data that the agency knows will skew the allocation is certainly not "fair and equitable."
[7] "Bycatch" are those fish that are caught when a fisherman is pursuing a different species, but that are discarded, for whatever reason, and not sold for commercial gain.
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255 P.3d 516 (2011)
242 Or. App. 127
STATE of Oregon, Plaintiff-Respondent,
v.
Jason Perry HAGSTROM, Defendant-Appellant.
C072014CR; A140120.
Court of Appeals of Oregon.
Submitted March 4, 2011.
Decided April 13, 2011.
Peter Gartlan, Chief Defender, and Anne Fujita Munsey, Senior Deputy Public Defender, Office of Public Defense Services, filed the brief for appellant.
John R. Kroger, Attorney General, Mary H. Williams, Solicitor General, and Leigh A. Salmon, Assistant Attorney General, filed the brief for respondent.
Before HASELTON, Presiding Judge, and BREWER, Chief Judge, and ARMSTRONG, Judge.
HASELTON, P.J.
Defendant appeals a judgment of conviction for one count of second-degree assault, ORS 163.175, and two counts of fourth-degree assault, ORS 163.160. On appeal, he *517 contends, inter alia, that the trial court erred in allowing "defendant to proceed pro se without obtaining a valid waiver of counsel" and in denying his motion for judgment of acquittal (MJOA) on the count of second-degree assault. An extended recitation of the facts would not benefit the bench, the bar, or the public. For the reasons stated below, we reverse and remand.
"[B]ecause the relief for an erroneously denied MJOAentry of a judgment of acquittalis more complete than the remedy of remanding for a new trial[,]" State v. Lavadores, 230 Or.App. 163, 165 n. 2, 214 P.3d 86 (2009), we begin by addressing defendant's contention that the trial court erred in denying his MJOA on the count of second-degree assault. As pertinent to that count, a person commits second-degree assault if the person "knowingly causes physical injury to another by means of a * * * dangerous weapon[.]" ORS 163.175(1)(b). In turn, a "dangerous weapon" is defined as "any weapon, device, instrument, material or substance which under the circumstances in which it is used, attempted to be used or threatened to be used, is readily capable of causing death or serious physical injury." ORS 161.015(1).
At trial, the victim testified, in part:
"Somehow I got up and he pushed me back down and he grabbed the back of my headwell, my hair, because I usually wear like a ponytail, and thenso, he grabbed that and was holding me around my waist and then threw me back down on the ground.
"At first, you know, it wasit was like a rock or a log orI didn't know what it was. It was justand there was repetitious. Just over and over. I think there was alater they found, you know, like a big bald spot where he had ripped out some of my hair because it'sthe force of it.
"* * * * *
"Of pulling on my hair and pulling it back and forth as he was lifting my body up and down with it.
"[DISTRICT ATTORNEY:] Okay. And as your body would come down, what was your face making contact with?
"[VICTIM:] Later I found out it was the log."
Defendant moved for an MJOA, contending that the state had failed to adduce sufficient evidence from which a jury could find that he used a "dangerous weapon." Relying on the victim's testimony, the trial court denied the motion, reasoning that, when viewed in the light most favorable to the state, "there is sufficient evidence from which a reasonable trier of fact could conclude beyond a reasonable doubt that that element has been met."
On appeal, defendant contends that the trial court erred in denying the MJOA. Specifically, defendant argues:
"Defendant was charged with assault in the second degree for causing physical injury by means of a dangerous weapon. The alleged weapon was a log. However, defendant did not use the log in a manner that could cause serious physical injury because he did not deliberately strike the victim's face against the log; rather, the victim's face hit the log as defendant repeatedly pushed the victim's body into the ground."
We disagree with defendant's contention. The victim's testimony was sufficient evidence from which a factfinder could conclude that the log was a "dangerous weapon." See State v. Reed, 101 Or.App. 277, 790 P.2d 551, rev. den., 310 Or. 195, 795 P.2d 554 (1990) (reasoning that a concrete sidewalk was a "dangerous weapon" when the defendant struck the victim's head against it). Accordingly, the trial court did not err in denying defendant's MJOA concerning the count of second-degree assault.
Defendant also contends that the trial court erred in allowing him to proceed pro se without obtaining a waiver of counsel. The state concedes that "the trial court committed reversible error by allowing defendant to proceed pro se without first obtaining a valid waiver of counsel."[1] We agree and accept *518 the state's concession. Accordingly, defendant is entitled to a new trial on all three counts.[2]
Reversed and remanded.
NOTES
[1] See State v. Miller, 214 Or.App. 494, 504, 166 P.3d 591 (2007), adh'd to as modified on recons., 217 Or.App. 576, 176 P.3d 425, rev. den., 345 Or. 95, 189 P.3d 750 (2008), adh'd to as modified on recons., 228 Or.App. 742, 209 P.3d 380 (2009) ("Under Article I, section 11, of the Oregon Constitution and the Sixth Amendment to the United States Constitution, a criminal defendant has the right to representation by counsel, and, when a trial court allows a criminal defendant to represent himself at trial, the court must ensure that the defendant voluntarily and intelligently waives his right to counsel. A waiver of the right to counsel is valid only if the defendant understands that (1) he or she has the right to counsel; and (2) there are risks inherent in self-representation. The state can establish a valid waiver by showing that the trial court engaged the defendant in a colloquy that verified the defendant's understanding of the risks of self-representation." (Citations and footnotes omitted.)).
[2] Our disposition obviates the need to address defendant's other assignments of error concerning various trial-related rulings and the failure of the trial court to merge certain convictions.
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773 S.W.2d 749 (1989)
Patrick Terry COOPER, Appellant,
v.
The STATE of Texas, Appellee.
No. 13-88-374-CR.
Court of Appeals of Texas, Corpus Christi.
June 22, 1989.
Ronald N. Hayes, Houston, for appellant.
John D. Holmes, Jr., Dist. Atty., Houston, for appellee.
Before NYE, C.J., and KENNEDY, and DORSEY, JJ.
OPINION
NYE, Chief Justice.
This is an appeal from a conviction upon a non-negotiated plea of guilty to the felony offense of injury to a child. Tex.Penal Code § 22.04 (Vernon 1989). The trial court found appellant guilty and assessed punishment at forty-five years of confinement. The court also found that appellant used a deadly weapon in the commission of the offense. By one point of error, appellant contends the evidence is insufficient to support the trial court's affirmative finding that appellant used a deadly weapon. We affirm the judgment of the trial court.
The State, relying on King v. State, 687 S.W.2d 762 (Tex.Crim.App.1985), contends that appellant waived all non-jurisdictional defects because he signed a waiver of constitutional rights, an agreement to stipulate, and a judicial confession, and he entered a plea of guilty to the offense without an agreed recommendation. However, the complained of error occurred subsequent to the entry of the guilty plea; therefore, appellant retained the right to appeal. King, 687 S.W.2d at 767 (concurring opinion); Polson v. State, 709 S.W.2d 751, 753 (Tex.App.Austin 1986, pet. ref'd); see also Shallhorn v. State, 732 S.W.2d 636, 639 (Tex.Crim.App.1987) (concurring opinion); Lerma v. State, 758 S.W.2d 383, 384 (Tex.App.Austin 1988, no pet.).
After a punishment hearing, the trial court made an affirmative finding that appellant used a deadly weapon, his hands, in *750 committing the offense. Appellant contends the evidence is insufficient to support the trial court's finding. "Deadly weapon" is defined as "anything that in the manner of its use or intended use is capable of causing death or serious bodily injury." Tex.Penal Code Ann. § 1.07(a)(11)(B) (Vernon 1974). "Serious bodily injury" means bodily injury that creates a substantial risk of death or that causes death, serious permanent disfigurement, or protracted loss or impairment of the function of any bodily member or organ. Tex.Penal Code Ann. § 1.07(a)(34) (Vernon 1974).
A fist or hand is not a deadly weapon per se, but it can become a deadly weapon in the manner used depending upon the evidence shown. Turner v. State, 664 S.W.2d 86 (Tex.Crim.App.1983). Therefore, the hands could become a deadly weapon if in the manner of use, the hands are capable of causing death or serious bodily injury. See Gilbert v. State, 759 S.W.2d 535 (Tex.Crim.App.1989). The trial court can make an affirmative finding of use of a deadly weapon if employment of the deadly weapon facilitates the associated felony. Patterson v. State, 769 S.W.2d 938 (Tex.Crim.App.1989).
The facts show that the appellant was living with a couple, John and Kelly Kier, and their two children. One evening, John Kier went to his son's bedroom to check on him. Kier found appellant holding the child, an eighteen month old infant, upside down. Appellant explained that the child was choking, and he was trying to dislodge something from the child's throat. Appellant and the child's father tried, unsuccessfully, to revive the child. An emergency team arrived and took the child to the hospital where he was later pronounced dead.
Appellant was questioned by the police. He claimed he tried to get the child to stop crying so he threw the child in the air and as the child came down he caught the child by the leg, but the child's head struck the floor.
At trial, appellant stipulated that he "intentionally and knowingly engaged in conduct that caused serious bodily injury (to the complainant), a child younger than fifteen years of age by throwing the complainant and by dropping the complainant on his head." The medical examiner testified that the cause of death was a skull fracture and laceration of the liver with hemoperitoneum due to blunt trauma. Some of the injuries suffered by the child were consistent with a severe blow to the abdomen, pinching of the victim, covering the victim's mouth and nose, and breaking the victim's leg with two opposing forces.
The medical examiner further testified that the skull fracture occurred from a strong force consistent with dropping the child from a height of approximately five feet. He stated that this injury to the child's head could have caused the child's death absent any other injury. He agreed that adult hands could be used in such a way, such as dropping a child the age of the victim, that the hands would be capable of causing serious bodily injury or death.
We conclude that the evidence does support the trial court's affirmative finding that appellant's hands were a deadly weapon as used in the commission of the offense. Butler v. State, 769 S.W.2d 234 (Tex.Crim.App.1989). Kirkpatrick v. State, 747 S.W.2d 521, 524 (Tex.App.Fort Worth 1988, pet. ref'd); see also Gilbert, 769 S.W.2d 535; Turner v. State, 664 S.W.2d 86. The judgment of the trial court is AFFIRMED.
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773 S.W.2d 314 (1989)
Roy Lee REESE, Appellant,
v.
The STATE of Texas, Appellee.
No. 270-87.
Court of Criminal Appeals of Texas, En Banc.
June 21, 1989.
*315 Phillip W. Swisher, Conroe, for appellant.
Peter C. Speers, III & J. Lynn Martin, Asst. Dist. Atty., Conroe, Robert Huttash, State's Atty. & Alfred Walker, First Asst. State's Atty., Austin, for the State.
Before the court en banc.
OPINION ON STATE'S PETITION FOR DISCRETIONARY REVIEW
W.C. DAVIS, Judge.
Appellant was convicted in a single trial for the offenses of sexual assault of a child, V.T.C.A. Penal Code § 22.011, and compelling prostitution, V.T.C.A. Penal Code § 43.05.[1] The jury assessed punishment at twenty years confinement in the Texas Department of Corrections. Appellant appealed the compelling prostitution conviction to the Ninth Court of Appeals.[2] The lower court reversed, finding the trial court erred in failing to comply with Articles 37.04 and 37.05, V.A.C.C.P.[3]Reese v. State, 725 S.W.2d 793 (Tex.App.Beaumont 1987).
We granted the State Prosecuting Attorney's petition for discretionary review to determine the correctness of the lower court's opinion. We will reverse the Court of Appeals.
The complainant, M.C., was fifteen years old at the time of the offense.[4] Her mother, Frankie Jean Conner was appellant's co-defendant at trial. The young girl lived with her maternal grandmother and did not live with her mother or visit her on a regular basis. The evidence adduced at trial reflects that close to Christmas in 1984, M.C.'s mother approached the girl with the idea of having sex with appellant for money. The complainant refused. On at least three occasions, Conner "tricked" her daughter by making plans with the girl ostensibly to go shopping or visiting friends. After Conner had picked up her daughter and they were traveling in the car, Conner would then pick appellant up. The two would take the girl to a remote location and force her to disrobe and engage in sexual intercourse with appellant. *316 Appellant gave money to Conner who then later gave money to her daughter. The instant case concerns the incident which occurred on January 17, 1985.
On this particular occasion, Conner invited M.C. to accompany her to the store. Once the two women were traveling in the vehicle, Conner then picked up appellant further down the road and drove to the dump. At this location, Conner exited the vehicle and appellant had M.C. get into the back seat. Appellant wanted M.C. to disrobe and she refused. M.C. was crying and kept pushing appellant away. Conner told her daughter to quit crying and to cooperate so that they could go home. After the assault was completed, Conner took appellant to work and her daughter to the girl's friend's house. Conner told M.C. not to tell anyone because appellant didn't want any trouble and that M.C. "would be in trouble, too." This incident constituted the instant offense.
At trial, there were two different verdict forms submitted to the jury. One form contained blanks for answering "guilty" or "not guilty" for the offense of compelling prostitution. The lesser included offense of prostitution was submitted on the same form with blanks for "guilty" and "not guilty".[5] A separate form for the sexual assault offense was also submitted.
The record reflects apparent confusion among the jurors as to the verdict forms. Upon returning to the courtroom, the jury announced they had reached a verdict. The trial court noticed that only the verdict form in the sexual assault case had been signed by the jury; they had neglected to return any verdict in the compelling prostitution case. The trial court informed the jury that "You forgot to sign a verdict on one and all the jury needs to go back in there a minute". The jury again returned from deliberation having found appellant "guilty" of the compelling prostitution charge, but "not guilty" of the lesser included charge of prostitution. The trial court admonished the jury as follows:
Well, sir, I am going to ask you to go back in there one more time and read the Court's Charge with regard to the offense of compelling prostitution and whether or not you consider the lesser-included offense of prostitution. I will have to ask that you go back there one more time.
We note that appellant did not object to the jury being sent back to deliberate at any time.
The jury returned after having deliberated a third time and submitted a verdict which found appellant "guilty" of the offense of compelling prostitution. The original finding of "not guilty" of the lesser charge of prostitution had been lined through and initialed by the foreman, and the "guilty" verdict blank had been signed. The verdict was read aloud, and defense counsel asked to examine the verdict. The court explained to both attorneys that he sent the jury back because he thought there was a conflict with the verdict of "guilty" of compelling prostitution and "not guilty" of the lesser charge of prostitution. Counsel for the defense objected to the form of the verdict, claiming that a finding of "not guilty" on the lesser charge of prostitution precluded a finding of "guilty" of the greater offense of compelling prostitution. The trial court overruled the objection.
Appellant alleged on direct appeal that the trial court erred in not following Arts. 37.04 and 37.05, supra. He claimed that the trial court erred in sending the jury back to the jury room for further deliberations without having read the verdict aloud in open court and also erred in not giving defense counsel an opportunity to poll the jury after having received the verdict and before sending the jury back for further deliberations.
The Court of Appeals agreed with appellant and held that the trial court erred in the procedure employed in receiving the verdict. The court stated:
TEX.CODE CRIM.PROC. ANN. arts. 37.04, 37.05 (Vernon 1977) dictate the method to be used in receiving a jury verdict. If a trial judge thinks the verdict *317 is not reduced to its proper form, he should bring this to the attention of the parties prior to directing the jury to retire and further deliberate. White v. State, 492 S.W.2d 281 (Tex.Cr.App.1973). While the procedure utilized in the instant case does not parallel that used in Hay v. State, 472 S.W.2d 157, 160 (Tex. Cr.App.1971), the procedures set out in art. 37.04 and art. 37.05 were not utilized and, therefore, reversible error was committed. White, supra. Points of error three and four are sustained.
Reese, 725 S.W.2d at 795.
The State contends in its petition that the Court of Appeals erred in its holding. We agree with the State.
The Court of appeals relied on White, supra, to support its holding. In that case, the jury returned only one verdict; one of "not guilty". Written somewhere on the charge was the word "guilty". However, on the face of the verdict there was no conflict as to the verdict. The trial court ordered the jury back to its chambers without offering any explanation to the parties. This action however, was over the objection of defense counsel. The jury subsequently returned a verdict of "guilty". This Court held that such action was improper because the verdict finding the defendant "not guilty" should have been read aloud in open court so that the defendant could have been afforded an opportunity to have the jury polled.
The White case is distinguishable from the instant case in two ways. First, defense counsel in the White case objected to the jury being retired for further deliberations. Here, appellant did not object to the jury being retired. Instead, counsel waited until after the jury had been sent back twice to object and then only objected to the form of the verdict. Second, only one verdict in the White case was returned; that being one of "not guilty". The verdict was complete and there was no conflict on its face. In the instant case, the first time the jury was sent back it was due to one verdict form not being answered at all. This fact was announced in open court and defense counsel did not object. The second time the jury was sent back the court did not specifically point out the problem in the verdict; however, appellant did not object. Neal v. State, 689 S.W.2d 420 (Tex.Cr.App. 1984), cert. denied, 474 U.S. 818, 106 S. Ct. 65, 88 L. Ed. 2d 53 (1985). Moreover, a poll of the jury was never requested by appellant at any time. A poll of the jury must be requested or it is waived. Mathis v. State, 471 S.W.2d 396 (Tex.Cr.App.1971). The White case is therefore not dispositive of the issues appellant presents.
A verdict must be certain, consistent, and definite. It may not be conditional, qualified, speculative, inconclusive, or ambiguous. Eads v. State, 598 S.W.2d 304 (Tex.Cr.App.1980). An incomplete or unresponsive verdict should not be received by the court. Id. It is not only within the power, but it is the duty of the trial judge, to reject an informal or insufficient verdict, call to the attention of the jury the informality or insufficiency, and have the same corrected with their consent, or send them out again to consider their verdict. Neal and Eads, both supra.
In Jones v. State, 511 S.W.2d 514 (Tex. Cr.App.1974), a fact situation similar to the instant case arose wherein the jury became confused due to the submission of two verdict forms in two different cases. The jury was asked to retire for further deliberation after the foreman dissented to the answer given on one form. It appears the form did not reflect the jury's unanimous verdict. We held in that case that the trial court properly requested further deliberation by the jury. We found there was no objection to the procedure in sending the jury back for further deliberation. Id. at 516-517. There we also distinguished White, supra, noting there was no dissent to the verdict in the White case, while in the Jones case it was apparent that a mistake had been made. Id. Therefore, we found there was no error in the procedure employed by the trial court in the Jones case.
In the instant case it is obvious that the jury was confused by the forms and the numerous blanks. Jones, supra. The first time the jury returned from deliberation, *318 no verdict was answered in the compelling prostitution offense at all. The second time the jury returned from deliberations, the trial judge found the forms to be in conflict and insufficient. Eads and Neal, both supra. Cf. Arts. 37.08 and 37.10, V.A. C.C.P. Due to this conflict, the trial court not only had the power to send the jury back for further deliberations but it was his duty to do so. Neal, supra. Appellant did not object to the jury being retired for further deliberation without any explanation from the bench, nor did he request a jury poll at any point. Neal and Mathis, supra. Once an unambiguous verdict for both offenses was returned, the trial court then read the verdicts aloud. Art. 37.04, supra. Cf. Hay v. State, 472 S.W.2d 157 (Tex.Cr.App.1971).
We hold that the trial judge was correct in sending the jury back for further deliberation, and did not err in the procedure employed in accepting the verdict. Neal and Mathis, both supra. The judgment of the Court of Appeals is reversed, the conviction is affirmed.
*319
*320 CLINTON, Judge, concurring.
In reversing the judgment of the court of appeals, the majority finds "confusion among the jurors" and faults counsel for appellant for failures to object. Yet it is clear enough to me that a verdict finding appellant guilty of compelling prostitution and not guilty of prostitution is not a product of "confusion," and, further assuming counsel was even aware of that verdict, that he had any ground for objecting.
After all, the whole contretemps arose when the judge of the trial court unilaterally determined that the first signed verdict form for prostitution offenses was, as the State Prosecuting Attorney characterizes it, "not suitable to the trial judge." PDR, at 4. As a consequence there is a jury verdict finding appellant guilty of both compelling prostitution and the lesser included offense of prostitution.
And, we are given to understand, thereafter judge and counsels discussed the incident and in retrospect concluded that consistently with the charge of the court the jury never should have reached the lesser included offense. Bingo!
Considering that the jury assessed punishment for the sexual assault offense at twenty years confinement, Reese v. State, 725 S.W.2d 795 (Tex.App.Beaumont 1987), this cause is practically much ado about nothing, so I join only the judgment of the Court.
NOTES
[1] Appellant's co-defendant was the victim's mother. On appeal the cause was severed into two separate cases. Our disposition concerns only appellant and the instant case.
[2] Appellant also appealed the sexual assault conviction. That appeal was disposed of separately and is not the focus of this opinion. See Reese v. State, 725 S.W.2d 795 (Tex.App.Beaumont 1987) (no pet.).
[3] Art. 37.04 provides: When the jury agrees upon a verdict, it shall be read aloud by the judge, the foreman, or the clerk. If in proper form and no juror dissents therefrom, and neither party requests a poll of the jury, the verdict shall be entered upon the minutes of the court. Art. 37.05 provides: The State or the defendant shall have the right to have the jury polled, which is done by calling separately the name of each juror and asking him if the verdict is his. If all, when asked, answer in the affirmative, the verdict shall be entered upon the minutes; but if any juror answers in the negative, the jury shall retire again to consider its verdict.
[4] The Court of Appeals incorrectly stated that complainant was seventeen years old at the time of the offense. The record reflects that complainant's birthdate is April 11, 1969. She was fifteen years of age on January 17, 1985, the date of the offense.
[5] See appendix A.
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773 S.W.2d 103 (1989)
28 Ark.App. 175
Marion ALDRIDGE, Appellant,
v.
Betty ALDRIDGE, Appellee.
No. CA 89-2.
Court of Appeals of Arkansas, Division I.
June 14, 1989.
Dan Dane, Forest City, for appellant.
Butler, Hicky & Long by Fletcher Long, Jr., Forest City, for appellee.
ROGERS, Judge.
The parties to this litigation were divorced by decree of October 25, 1988, after seventeen years of marriage. The chancellor *104 found that certain bank accounts were marital property, and thus equally divided the proceeds therefrom between the parties. The chancellor also awarded appellee a portion, based on a percentage formula, of appellant's retirement fund, as well as alimony in the amount of $350 per month. At a subsequent hearing on appellee's motion for contempt alleging the non-payment of alimony, the chancellor found that the award of alimony had not been superseded by a previously entered order of supersedeas staying other provisions of the decree during the pendency of this appeal. In addition, the chancellor held, in any event, that an award of alimony could not be stayed pending appeal. From the decree of divorce with regard to the above-mentioned dispositions, and the ruling of the chancellor as to his lack of authority to stay the award of alimony comes this appeal. We affirm with modification.
As his first issue on appeal, the appellant contends that the chancellor erred in failing to consider the bank account of the appellant as premarital property. The appellant testified that the bank account in question was held in his name only, existed prior to the marriage, and that as of the time of the marriage the balance of the account was $18,317.20. The appellant maintains that these facts in conjunction with the appellee's not having made any contributions to the account, required the chancellor to trace the funds and declare the account to be his separate, premarital property. We disagree.
The chancellor found that over the seventeen year marriage that the accounts had been commingled. It is undisputed that at the time of divorce, the account contained $12,086.79, and there was evidence that the balance could have at times dipped as low as $8,000. Presumably, the funds were used by the parties over the course of the marriage, and marital funds were utilized to replace any amounts that had been withdrawn. The appellant argues that no facts were developed to support the chancellor's finding that the funds withdrawn were intermingled with marital property. However, the converse of this argument is of equal import in that the appellant had failed to show that the funds maintained their separate character, perhaps because of the difficulty of tracing such funds over the course of a seventeen year marriage. In Canady v. Canady, 290 Ark. 551, 721 S.W.2d 650 (1986), the supreme court recognized:
Unquestionably the tracing of money or other property into different forms may be an important matter, but tracing is a tool, a means to an end, not an end in itself.... We have no doubt that the tracing of funds and even the acquisition of property before the marriage or by gift during the marriage might be inconsequential when considered at the dissolution of a marriage that had lasted for many years and had left the parties with decidedly unequal means for supporting themselves in the future.
See also, Jackson v. Jackson, 298 Ark. 60, 765 S.W.2d 561 (1989). It has also been stated "that where transactions result in great difficulty in tracing the manner in which nonmarital and marital property have been commingled, the property acquired in the final transaction may be declared marital property." Boggs v. Boggs, 26 Ark.App. 188, 761 S.W.2d 956 (1988).
The burden is on the party who asserts an interest in property to establish that it is in fact separate property not subject to division. Gorchik v. Gorchik, 10 Ark.App. 331, 663 S.W.2d 941 (1984). Chancery cases are tried de novo on appeal, but the trial court's findings of fact will not be disturbed unless they are clearly against the preponderance of the evidence. Bone v. Bone, 12 Ark.App. 163, 671 S.W.2d 217 (1984); Ark.R.Civ.P. 52(a). We cannot say that the chancellor's finding that the balance of the account at the time of divorce was marital property, and thus subject to equal division, was clearly against the preponderance of the evidence.
The second issue raised by the appellant is his contention that the trial court erred in awarding appellee alimony. In the decree, the chancellor ordered the appellant to pay alimony in the amount of $350 per month until the appellee either reaches the *105 age of 62 at which time she would be entitled to draw social security, or until she applies for and receives social security disability benefits. The evidence showed that appellee was 58 years of age and in ill-health, that she had not worked since the time of their marriage, and that she would have no means of providing for her own support since her poor health rendered her unable to seek employment. While on the other hand, the appellant, who was retired, and receiving disability benefits had a combined income of $1,162.55 per month.
An award of alimony lies within the sound discretion of the chancellor, whose decision will not be reversed absent a clear abuse in the exercise of that discretion. Boggs v. Boggs, supra. There are numerous factors that have a bearing on the determination of whether to award alimony. See, Boyles v. Boyles, 268 Ark. 120, 594 S.W.2d 17 (1980); Weathers v. Weathers, 9 Ark.App. 300, 658 S.W.2d 427 (1983). The primary factors to be considered are the need of one spouse and the ability of the other spouse to pay. Harvey v. Harvey, 295 Ark. 102, 747 S.W.2d 89 (1988). When all the evidence in this case is considered, we cannot say that the chancellor abused his discretion in awarding alimony, particularly in light of the contingencies placed on the award, which will cause it to terminate when the appellee begins to receive income from these independent sources.
Although it is undisputed that the appellant's interest in his retirement fund was vested and was currently distributable at the time of the divorce, and thus properly subject to division upon divorce, the appellant argues that the trial court made an error in calculating the monthly amount that the appellee was entitled to receive. We agree.
The evidence was that appellant was receiving in monthly installments the sum of $453.55 in retirement from AP & L, based upon twenty-seven years of employment. The parties were married for thirteen of the twenty-seven years that his benefits were accruing. The chancellor sought to divide the monthly retirement income based on a percentage formula which was approved of by the supreme court in Addis v. Addis, 288 Ark. 205, 703 S.W.2d 852 (1986). In doing so, he awarded appellee the sum of $271 per month, which is 13/27 of the total monthly amount. However, the chancellor failed to consider that the appellee should share in the distribution of this fractional amount if this asset were to be divided equally. Thus the chancellor misapplied the percentage formula in failing to further divide the 13/27 fractional amount by multiplying the fraction by one-half.
Since we agree that the chancellor miscalculated the appellee's interest in the retirement fund, we may enter here the order that should have been entered by the chancellor, since the record has been fully developed, making remand on this issue unnecessary. See Ferguson v. Green, 266 Ark. 556, 587 S.W.2d 18 (1979). Therefore, we modify the amount that appellee is entitled to receive monthly from appellant's retirement fund to one-half of $271, or $135.50.
As his final argument on appeal, the appellant challenges the chancellor's conclusion that the award of alimony could not be stayed by an order of supersedeas during the pendency of the appeal. Inasmuch as we have affirmed the chancellor's decision to award alimony to the appellee, the question raised by appellant is now moot. Therefore, we need not and decline to address this issue. See Arkansas Dep't of Human Servs. v. M.D.M. Corp., 295 Ark. 549, 750 S.W.2d 57 (1988).
AFFIRMED AS MODIFIED.
CORBIN, C.J., and MAYFIELD, J., agree.
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438 F. Supp. 2d 438 (2006)
Reuvan TENAMEE, Plaintiff,
v.
Martin SCHMUKLER, et al., Defendants.
No. 05 CIV.7661.
United States District Court, S.D. New York.
July 13, 2006.
*439 *440 *441 Reuven Tenamee, Reuvan & Eyal Tenamee, Brooklyn, NY, pro se.
Martin L. Schmukler, Gould Reimer Walsh Goffin & Cohn, New York, NY, pro se.
Frederick Harvey Cohn, Naness, Chaiet & Naness, LLC, Jericho, NY, Martin D. Novar, New York, NY, for Defendants.
DECISION AND ORDER
MARRERO, District Judge.
Pro se plaintiff Reuvan Tenamee ("Tenamee") commenced this action, naming as defendants Martin L. Schmukler individually and the Law Firm of Martin L. Schmukler, P.C. (collectively "Schmukler"), Ruthi Tenamee, a/k/a Ruthi R. Nass ("Nass") and Nava Tenamee a/k/a Nava Izak ("Izak"). His complaint contains allegations of fraud, negligent misrepresentation and legal malpractice, as well as civil claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961.
*442 Schmukler[1] moved to dismiss the complaint on the grounds that: the fraud and malpractice claims are barred by the applicable statutes of limitations; this Court lacks subject matter jurisdiction because diversity of citizenship is not established as between Tenamee and Nass and Izak; the RICO claim fails to state a cause of action with sufficient specificity to satisfy the requirements of Fed.R.Civ.P. 9(b) and does not satisfy the substantive elements of the RICO statute. For the reasons discussed below, the motion is granted.
I. BACKGROUND[2]
1. FACTS AND PROCEDURAL HISTORY
Tenamee states that Nass and Izak, who are his sisters, allegedly represented by and under the guidance of Schmukler, testified falsely against Tenamee before a New York State grand jury proceeding in 1987 and again in 1990, at the criminal trial of Nass on drug charges in a federal court in Maryland. As a result of these accusations, Tenamee claims he was indicted and arrested on federal drug distribution and conspiracy charges in 1990, while he was in Brazil. According to Tenamee, Schmukler represented him during discussions with government agents at that time regarding his extradition to the United States, but did not disclose his prior representation of Nass and Izak at the proceedings where the alleged false testimony was given by them under Schmukler's direction.
In 2000, Tenamee was arrested in the Netherlands as a fugitive under a warrant from the Drug Enforcement Administration. While in the Netherlands, he was interviewed by federal agents in a proffer session allegedly arranged by Schmukler. He was returned to the United States in 2001 to face the charges against him pending in the federal district court of Maryland. Tenamee pleaded guilty in February 2001 to one count of distribution of drugs, pursuant to a plea agreement that he asserts was arranged by Schmukler. Tenamee alleges that Schmukler told him that under the plea agreement he would be sentenced to only 18 months in prison. In March of 2002, Tenamee was sentenced to 70 months of incarceration, rather than the 18 months he claims Schmukler represented to him he would receive. Tenamee alleges that on this occasion as well he was not aware of Schmukler's prior representation of Nass and Izak, nor their false accusations against Tenamee that prompted his arrest.
Schmukler argues that the complaint must be dismissed on jurisdictional grounds because it fails to establish complete diversity of citizenship insofar as it contains no allegations regarding the residences of Nass and Izak. As regards the statute of limitations, Schmukler points out the three-year period applicable to the legal malpractice claim and the four-years as to the RICO claim both have expired, as these claims accrued as of the date of Tenamee's guilty plea in February 2001. Finally, Schmukler contends that Tenamee's RICO claim is deficient in that if fails to sufficiently plead the course of conduct and criminal enterprise elements necessary to a RICO cause of action.
Tenamee filed a response addressing Schmukler's motion to dismiss. However, in a subsequent filing on June 5, 2006, *443 characterizing the objections asserted by Schmukler as "minor technicalities," he moved for leave to amend his original complaint so as to cure the deficiencies described in Schmukler's motion. ("Request for Permission to Amend Complaint Pursuant to Fed. Rule Civil Proc. 15", filed June 5, 2006.) Alternatively, Tenamee requested that if dismissal is appropriate, he be granted permission to refile an amended complaint. Tenamee did not file a proposed amended complaint as provided for by Fed.R.Civ.P. 15.
The Court does not consider the grounds Schmukler asserts in support of dismissal as mere technicalities. As Tenamee himself tacitly acknowledges, the motion does point to substantial deficiencies in the original complaint with respect to the statute of limitations and the pleading prerequisites of RICO. These deficiencies warrant dismissal.
II. DISCUSSION
A. STATUTE OF LIMITATIONS
1. Malpractice
Under New York law, the statute of limitations for commencing an action to recover damages for non-medical professional malpractice is three years. See New York Civil Practice Laws and Rules ("CPLR") § 214(6) (1996). The limitations period begins to run at the time the malpractice occurs, not when the client discovers it. See Hoffenberg v. Hoffman & Pollok, 288 F. Supp. 2d 527, 536 (S.D.N.Y.2003) (citing De Carlo v. Ratner, 204 F. Supp. 2d 630, 634 (S.D.N.Y.2002) and Shumsky v. Eisenstein, 96 N.Y.2d 164, 726 N.Y.S.2d 365, 750 N.E.2d 67 (N.Y.2001)).
In his complaint, Tenamee alleges that Schmukler committed malpractice by advising him to sign a plea agreement on February 16, 2001. Tenamee does not claim to have had any contact with Schmukler after that date, and indeed at his sentencing he was represented by a different attorney. Thus, under CPLR § 214(6), Tenamee had only until February 16, 2004 to commence a malpractice suit. His complaint in this action was filed on August 30, 2005, more than a year and a half after the statute of limitations had run.
Nonetheless, Tenamee urges that his malpractice claim is still timely under the doctrines of equitable tolling and equitable estoppel.[3] Specifically, he asserts that he could not have brought his suit in a timely manner because he was in prison throughout the limitations period and because Schmukler fraudulently concealed his conflict of interest, which made it impossible to establish the malpractice claim before the statute had run. The Court, however, disagrees that justice requires applying equitable tolling or equitable estoppel in this case.
a. Equitable Tolling
Under the doctrine of equitable tolling, the statute of limitations is extended "as a matter of fairness where a plaintiff has been prevented in some extraordinary way from exercising his rights." Johnson v. Nyack, 86 F.3d 8, 12 (2d Cir. *444 1996) (internal citation omitted). It applies only in "rare and exceptional circumstances," where the plaintiff has acted with due diligence but some egregious conduct by defendant or a third party, or some other exceptional circumstance beyond his control makes a timely filing impossible. Smith v. McGinnis, 208 F.3d 13, 17 (2d Cir.2000) (quoting Turner v. Johnson, 177 F.3d 390, 391-92 (5th Cir.1999)).
Tenamee has not alleged any extraordinary conditions that justify his delay in filing the malpractice claim. Although he was in prison throughout the limitations period, incarceration, in itself, does not rise to the level of the "rare and exceptional circumstances" that would move the Court to toll the statute of limitations. Smith, 208 F.3d at 17-18; see also Doe v. Menefee, 391 F.3d 147, 178-79 (2d Cir.2004).[4] Thus, equitable tolling is not applicable here.
b. Equitable Estoppel
Under New York's doctrine of equitable estoppel, a defendant can be barred from raising a statute of limitations defense if he fraudulently induces a plaintiff to refrain from filing suit in a timely manner. See Kaufman v. Cohen, 307 A.D.2d 113, 760 N.Y.S.2d 157, 167 (App. Div. 1st Dep't 2003) (citing Simcuski v. Saeli, 44 N.Y.2d 442, 406 N.Y.S.2d 259, 377 N.E.2d 713, 716 (1978)). The doctrine derives from the maxim that no party should benefit from its own wrong. See Arbutina v. Bahuleyan, 75 A.D.2d 84, 428 N.Y.S.2d 99, 100 (App. Div. 4th Dep't 1980) (citing Glus v. Brooklyn E. Dist. Terminal, 359 U.S. 231, 232-33, 79 S. Ct. 760, 3 L. Ed. 2d 770 (1959)).
Equitable estoppel can apply when a defendant either affirmatively makes a false statement that plaintiff relies upon in not filing a complaint, or deliberately conceals facts underlying a claim which he is under a duty to disclose. Jordan v. Ford Motor Co., 73 A.D.2d 422, 426 N.Y.S.2d 359, 361 (App. Div. 4th Dep't 1980) (citing Simcuski, 406 N.Y.S.2d 259, 377 N.E.2d at 716 and General Stencils v. Chiappa, 18 N.Y.2d 125, 272 N.Y.S.2d 337, 219 N.E.2d 169, 170 (1966)). For example, in Arbutina, defendant hospital delayed delivering medical records critical to plaintiff's case for more than a year. The court held that an unreasonable delay in delivering hospital records to an attorney consulted in a suspected case of malpractice may result in defendants being estopped from later asserting the statute of limitations if *445 the delay prevented the timely commencement of an action. See 428 N.Y.S.2d at 101. Even if plaintiff establishes that he was prevented from bringing a suit by defendant's fraudulent misrepresentation or concealment, he must further demonstrate that he commenced his suit within a reasonable time after the fraud has ceased to be operational. Simcuski, 406 N.Y.S.2d 259, 377 N.E.2d at 717.
Here, Tenamee asserts that he learned of Schmukler's concealed conflict of interest sometime after August of 2004 and that this concealment prevented Tenamee from timely filing his malpractice claim. He further claims that Schmukler had a duty as his former attorney to disclose this information and thus should be estopped from raising a statute of limitations defense. The Court, however, declines to apply equitable estoppel in this case.
New York law is clear that the same act of non-disclosure cannot underlie both the argument for estoppel and the related cause of action. See Kaufman, 760 N.Y.S.2d at 167 (stating that "equitable estoppel does not apply where the misrepresentation or act of concealment underlying the estoppel claim is the same act which forms the basis of plaintiffs underlying cause of action"); Chesrow v. Galiani, 234 A.D.2d 9, 650 N.Y.S.2d 158, 160 (App. Div 1st Dep't) (citing Rizk v. Cohen, 73 N.Y.2d 98, 538 N.Y.S.2d 229, 535 N.E.2d 282, 285 (1989)). Rather, equitable estoppel applies only when a defendant covers up an earlier wrongdoing to prevent plaintiff from suing on the initial wrong. See Smith v. Smith, 830 F.2d 11, 13 (2d Cir.1987). Moreover, in order to demonstrate a basis for the application of equitable estoppel, a plaintiff must allege more than that the defendant remained silent regarding the initial wrong. See Abercrombie v. Andrews College, 438 F. Supp. 2d 243, 265-66, 2006 WL 1716857, *16, 2006 U.S. Dist. LEXIS 39671, *64 (S.D.N.Y. June 13, 2006); see also Jordan, 426 N.Y.S.2d at 361 ("A party against whom a claim exists is not, without more, under a duty to inform the injured party thereof, and such failure to inform does not constitute the kind of fraudulent concealment which gives rise to an estoppel."). Schmukler's alleged failure to disclose a conflict of interest is the initial wrongdoing that forms the basis for Tenamee's malpractice claim and thus cannot also serve as ground to invoke equitable estoppel.
Since the doctrines of equitable tolling and equitable estoppel do not apply in this case, Tenamee's malpractice claim is timebarred.
2. Tenamee's Fraud Claims
a) Fraud Claims Against Nass and Izak
Tenamee alleges that Nass and Izak committed fraud when they falsely testified against him at the 1987 grand jury proceeding and the 1990 drug trial. The essential elements for a fraud claim in New York are (1) a misrepresentation (2) known to the defendants to be false and made for the purpose of inducing reliance and (3) justifiable reliance by the plaintiff which causes (4) harm. See Van Kleeck v. Hammond, 25 A.D.3d 941, 811 N.Y.S.2d 452, 454 (App. Div. 3rd Dep't 2006) (citing Mora v. RGB, Inc., 17 A.D.3d 849, 794 N.Y.S.2d 134, 137 (App. Div. 3rd Dep't 2005)).
Even assuming that Nass and Izak lied during their testimony, and even if those falsehoods led to Tenamee's arrest, Tenamee still has not alleged the elements of a fraud claim against his sisters because he did not rely upon their testimony to his detriment. Indeed, by his own admission he was not even aware of the allegedly *446 false testimony until well after his plea agreement. Without an allegation as to his own detrimental reliance on the asserted false statement of these two defendants, Tenamee has failed to state a claim for fraud against them.
b) Fraud Claim Against Schmukler
The statute of limitations for fraud in New York is the longer of six years after the fraud occurs, or two years after it is discovered. See Monaco v. N.Y. Univ. Med. Ctr., 213 A.D.2d 167, 623 N.Y.S.2d 566, 568 (App. Div. 1st Dep't 1995). See also CPLR § 213(8); CPLR § 203(g). However, New York courts require that fraud claims be distinct from other causes of action to benefit from the longer statute of limitations period. See Cottonaro v. Southtowns Industries, Inc., 213 A.D.2d 993, 625 N.Y.S.2d 773 (App. Div. 4th Dep't 1995); New York Seven-Up Bottling Co. v. Dow Chemical Co., 96 A.D.2d 1051, 466 N.Y.S.2d 478, 480 (App. Div. 2nd Dep't 1983).
In the instant case, Tenamee's fraud claim is based on Schmukler's failure to disclose an alleged conflict of interest, which Tenamee says affected how Schmukler represented him. This allegation amounts to nothing but a thinly disguised claim for legal malpractice. Since the Court must "look for the reality, and the essence of the action and not its mere name," Brick v. Cohn-Hall-Marx Co., 276 N.Y. 259, 11 N.E.2d 902, 904 (1937), Tenamee cannot benefit from the longer fraud statute of limitations when he is asserting what is actually a legal malpractice claim.
3. Negligent Misrepresentation
Tenamee further asserts that Schmukler is liable for negligent misrepresentation because he falsely promised an 18-month sentence if Tenamee signed the plea agreement.[5] The statute of limitations for negligent misrepresentation or constructive fraud is six-years, although unlike the case of actual fraud the two year discovery rule does not apply. See Fandy Corp. v. Lung-Fong Chen, 262 A.D.2d 352, 691 N.Y.S.2d 572, 573 (App. Div. 2nd Dep't 1999). However, as with actual fraud, a plaintiff cannot invoke the longer statute of limitations by bringing a negligent misrepresentation suit that would more properly be brought under another cause of action. See Rosenbach v. Diversified Group, Inc., No. 602463 CV 2005, 2006 WL 1310656, *3 (N.Y.Sup.2006). Since Tenamee's negligent misrepresentation claim at its core is a legal malpractice claim, he cannot benefit from New York's longer statute of limitations for negligent misrepresentation.
B. RICO
The Court finds that Tenamee's RICO claim must be dismissed on the ground that the pleadings do not assert facts that sufficiently establish the essential elements of a RICO cause of action under 28 U.S.C. § 1962. To state a private claim for damages under RICO, a plaintiff must satisfy two burdens. First, he must establish that the defendant has violated the substantive RICO statute, that is, the criminal provisions of the statute. To satisfy this test, the plaintiff must allege the existence of seven requisite elements identified by the Second Circuit in *447 Moss v. Morgan Stanley, Inc., 719 F.2d 5 (2d Cir.1983), cert. denied sub nom. Moss v. Newman, 465 U.S. 1025, 104 S. Ct. 1280, 79 L. Ed. 2d 684 (1984). Those factors are:
(1) that the defendant (2) through the commission of two or more acts (3) constituting a "pattern" (4) of "racketeering activity" (5) directly or indirectly invests in, or maintains an interest in, or participates in (6) an "enterprise" (7) the activities of which affect interstate or foreign commerce . . .
Id. at 17 (quoting 18 U.S.C. § 1962(a)-(c) (1976)).
The Circuit Court elaborated that, before analysis of the second burdeni.e., satisfying requirements for RICO's civil remedies of treble damages, attorneys fees and costsa plaintiff must adequately allege defendant's violation of § 1962. With regard to this latter standard, a plaintiff must allege that he was "injured in his business or property by reason of a violation of section 1962." Id.
More specifically, §§ 1962(a)-(d) prohibit particular acts committed from or through a pattern of racketeering activity: (1) the use of income so derived to acquire an interest in, or the establishment or operation of, an enterprise engaged in or whose activities affect interstate commerce; (2) the acquisition of an interest in or control of such an enterprise; (3) the conduct or participation in the conduct of such an enterprise's affairs, and (4) conspiring to do any of the above. See 18 U.S.C. § 1962(a)-(d).
Tenamee does not specify in his complaint the particular substantive provisions of RICO he alleges Schmukler violated. Nonetheless, the Court finds the pleadings here deficient to state a claim under any of the provisions of § 1962.
Each subsection of § 1962 shares two constituents as required elements to establish a claim for damages: that the wrongful conduct the defendant allegedly engaged in occurred (1) through "a pattern of racketeering activity," (2) conducted by an "enterprise." In this case, Tenamee's RICO action cannot be sustained under any of the four subsections because, at the outset, his pleadings fail to demonstrate that the injuries he claims to have suffered derived from acts by Schmukler that sufficiently establish the RICO statute's definition of a "pattern of racketeering activity" or of an "enterprise." To satisfy the "pattern of racketeering" requirement a RICO claimant must show at least two racketeering predicates, that "the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity." H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239, 109 S. Ct. 2893, 106 L. Ed. 2d 195 (1989) (emphasis in original). As so defined, a sufficient "pattern" must meet several criteria. First, the plaintiff must show the occurrence of at least two predicate acts of "racketeering." Second, the specific instances of qualifying criminal conduct must have taken place within ten years of each other. See 18 U.S.C. § 1961(5). Third, the alleged acts must be related and must amount to a threat of continuing specified unlawful conduct. See H.J. Inc., 492 U.S. at 238-44, 109 S. Ct. 2893.
Thus, separate, discreet acts that are unrelated or that would not qualify as criminal conduct would not suffice. See id., 492 U.S. at 241-50, 109 S. Ct. 2893; United States v. Indelicato, 865 F.2d 1370, 1376-1, 1384 (2d Cir.1989) (en banc), cert. denied, 493 U.S. 811, 110 S. Ct. 56, 107 L. Ed. 2d 24 (1989). Rather, the continuity standard must be met by factual assertions demonstrating either a "closed-ended" pattern of past criminal activities occurring over an extended period of time, or an *448 "open-ended" pattern of such past activities combined with a threat of continuation into the future. See H.J. Inc., 492 U.S. at 241-42, 109 S. Ct. 2893; United States v. Alkins, 925 F.2d 541, 551 (2d Cir.1991).
Even under a lenient reading of Tenamee's pleadings in the light most favorable to him, the complaint demonstrates no factual assertions satisfying the "pattern of racketeering" requirement as to Schmukler. The only claim of unlawful conduct on the part of Schmukler that Tenamee's RICO claim specifies relates to Schmukler's alleged failure to disclose a conflict of interest in having represented Tenamee as well as Nass and Izak in connection with somewhat related criminal proceedings, while inducing Tenamee to plead guilty to allekedly false accusations by Nass and Izak. In this regard, Tenamee's complaint contains nothing more than a conclusory assertion that Schmukler on two occasions communicated with government agents by mail and facsimile about matters pertaining to him.
There is no indication in the complaint that Schmukler's alleged conflict of interest constitutes criminal conduct or a threat of continuing criminal activity. Rather, the claimed RICO offense begins and ends with Schmukler's alleged undisclosed conflict of interest, and every violation of law and RICO predicate act Tenamee suggests arose uniquely out of such conduct. Tenamee asserts nothing that establishes a pattern of alleged racketeering acts demonstrating closed-ended continuity sufficient to satisfy this element of a viable RICO claim.
Tenamee's pleadings also fail to demonstrate facts sufficient to satisfy the "enterprise" element common to all subsections of § 1962. The allegations of the complaint do not sufficiently establish that Tenamee's asserted injuries derived from Schmukler's direct or indirect investment in, or maintaining an interest or control over, or participating in the operation or management of the affairs of a qualifying "enterprise." See Moss, 719 F.2d. at 17; see also Reyes v. Ernst & Young, 507 U.S. 170, 179, 113 S. Ct. 1163, 122 L. Ed. 2d 525 (1993); Ouaknine v. MacFarlane, 897 F.2d 75, 82-83 (2d Cir.1990); Discon Inc. v. NYNEX Corp., 93 F.3d 1055, 1062 (2d Cir.1996), vacated on other grounds, 525 U.S. 128, 119 S. Ct. 493, 142 L. Ed. 2d 510 (1998). As enunciated by the Supreme Court, the existence of a RICO enterprise is established by evidence of "an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit." United States v. Turkette, 452 U.S. 576, 583, 101 S. Ct. 2524, 69 L. Ed. 2d 246 (1981). The Supreme Court has also held that a RICO plaintiff must prove the existence of two distinct entities: (1) a "person"; and (2) an "enterprise" "that is not simply the same `person' referred to by a different name." Cedric Kushner Promotions Ltd. v. King, 533 U.S. 158, 161, 121 S. Ct. 2087, 150 L. Ed. 2d 198 (2001).
Tenamee suggests that the RICO enterprise he asserts consisted of Schmukler and his law firm. However, other than conclusory allegations, nothing in the complaint addresses the relationships among Schmukler and the other defendants in a manner that distinguishes between the "enterprise" and the "person" who conducted the affairs of the enterprise through a pattern of racketeering. See id.; see also Bennett v. U.S. Trust, 770 F.2d 308, 315 (2d Cir.1985); Riverwoods Chappaqua Corp. v. Marine Midland Bank, 30 F.3d 339, 344 (2d Cir.1994). Nor do Tenamee's pleadings indicate sufficient evidence of an "enterprise's hierarchy, organization and activities," or that the alleged members functioned as an integrated unit. United States v. Coonan, 938 F.2d *449 1553, 1560-61 (2d Cir.1991), cert. denied, 503 U.S. 941, 112 S. Ct. 1486, 117 L. Ed. 2d 628 (1992); Goldfine v. Sichenzia, 118 F. Supp. 2d 392, 401 (S.D.N.Y.2000).
Here, as stated above, rather than indicating that Schmukler functioned with others as a continuing unit that conducted and furthered the affairs of an "enterprise," Tenamee's pleadings describe a series of discrete events involving Schmukler that occurred first in 1987 and later 1990 relating to representation of Nass and Izak before a grand jury and subsequently at a trial that implicated Tenamee in the criminal activity `for which he was later convicted, as well as Schmukler's representation of Tenamee in 1990, 2000 and 2001 in the related criminal case against him. There is no sufficient pleading that in carrying out the activities Tenamee alleges, Schmukler and any other defendants were carrying out the affairs of an unlawful enterprise as defined by RICO, rather than their own affairs or those of their institutional employers, principals or partners. See Reves, 507 U.S. at 185, 113 S. Ct. 1163.
Accordingly, for the reasons discussed above, the Court finds Tenamee's pleadings insufficient to state a RICO claim and grants the Schmukler's motion to dismiss the complaint.
III. ORDER
For the reasons stated above it is here by
ORDERED that the motion (Docket No. 11) of defendant Martin L. Schmukler and the Law Firm of Martin L. Schmukler P.C., to dismiss the Complaint of plaintiff Reuvan Tenamee ("Tenamee") is granted; and it is hereby
ORDERED that Tenamee's motion to file an Amended Complaint (Docket No. 21) is denied.
The Clerk of Court is directed to close this case.
SO ORDERED.
NOTES
[1] By separate letters, Schmukler's co-defendants,, Nass and Izak, joined in Schmukler's motion to dismiss.
[2] The factual summary presented herein derives from Tenamee's Complaint and supporting exhibits, Tenamee v. Schmukler, et al., No. 05 CV 7661, filed on August 30, 2005 (the "Complaint").
[3] Tenamee does not distinguish between these doctrines when making his argument. This lack of precision is understandable as the doctrines are similarindeed, equitable estoppel is sometimes used interchangeably with the term "equitable tolling" in New York case law. Federal courts distinguish between the two. See Abercrombie v. Andrew College, No. 04-CV-7717, 2006 WL 1716857, 2006 U.S. Dist. LEXIS 39671 (S.D.N.Y. June 13, 2006) (citing Coleman & Co. Sec. Inc. v. Giaquinto Family Trust, 236 F. Supp. 2d 288, 299 (S.D.N.Y.2002)). The Court will separately analyze the applicability of either doctrine in this case.
[4] Tenamee also asserts that his claim should be equitably tolled because he was not able to obtain documents relating to the underlying criminal cases pertaining to him and his sisters until August of 2004 and thereafter. He argues that he diligently attempted to obtain the necessary documentation to establish the claims asserted in the instant action, and that this information was "absolutely needed to establish the facts." (Pl. Reply at 7n. 3.) In support of this argument he attaches an Order from the District of Maryland denying his request for documents (dated September 2004), as well as a September 2004 letter that he sent to the Assistant United States Attorney assigned to the case, seeking certain documents and mentioning Tenamee's prior requests for certain materials. These documents are insufficient to establish Tenamee's claim for equitable tolling. Tenamee signed his plea agreement in February 2001. Even assuming that he made his initial requests for documents six months prior to the correspondence he attached to his Reply, those requests would still have been made after the February 2004 expiration of the statute of limitations. Tenamee has not demonstrated that he exercised diligence in his efforts to obtain documents prior to the expiration of the statute of limitations, nor has he made any further showing as to why his claim should tolled. Cf. Walker v. Jastremski, 274 F.3d 652 (2d Cir.2001) (tolling statute of limitations for prisoner where statute of limitations expired while prisoner was waiting for documents that were necessary to establish his claim).
[5] In his complaint, Tenamee states a claim for "negligent representation," on the basis that "Schmukler failed to exhibit reason or competence in communicating information surrounding the existing conflict of interest." (Compl. at 13.) In support of this point, Tenamee cites case law concerning the tort of negligent misrepresentation, which is how the Court construes his claim.
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2466494/
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438 F. Supp. 2d 1328 (2006)
Richard PHILLIPS and Deda Phillips, Plaintiffs,
v.
AMERICAN HONDA MOTOR CO., INC., et al., Defendants.
No. CIV.A.04-00634 CG B.
United States District Court, S.D. Alabama. Southern Division.
January 26, 2006.
*1329 James R. Reeves, Lumpkin & Reeves, Biloxi, MS, Joseph Allan Brown, McCormick & Brown, Mobile, AL, for Plaintiffs.
Alfred H. Perkins, Jr., Joshua H. Threadcraft, Starnes & Atchison, LLP, Birmingham, AL, Richard S. Manley, Dempolis, AL, Thomas C. Howard, Bowman & Brooke LLP, Phoenix, AZ, W. Michael Atchison, George Matthew Keenan, Anthony C. Harlow, Starnes & Atchison, LLP, Birmingham, AL, for Defendants.
MEMORANDUM OPINION AND ORDER
GRANADE, Chief Judge.
This cause is before the court on the motions of defendants, American Honda Motor Co., Inc., Honda Motor Co., Ltd., Honda R & D Americas, Inc., Honda of America Mfg., Inc., and Honda North America, Inc., for summary judgment (Doc. 124), to strike the testimony of Dr. Judy Cooke Travis, Dr. Donald Charles Gross, Dr. William Debell, Dr. Thomas D. McDermott, and Don Sprewell (Doc. 141), *1330 to exclude the testimony of Michael A. Burleson (Doc. 143), to strike plaintiffs' evidentiary submissions (Doc. 146), and to strike plaintiffs' statements of disputed fact (Doc. 147), plaintiffs' responses to the above motions, (Does. 135, 149, 150, 151, 154), and defendants' replies (Does. 140, 155, 156, 157, 163). For the reasons stated below, defendants' motions to strike expert testimony are due to be GRANTED, defendants' motion to strike plaintiffs' evidentiary submissions are due to be GRANTED IN PART and DENIED IN PART, defendants' motion to strike plaintiffs' statement of disputed facts is MOOT, and defendants' motion for summary judgment is due to be GRANTED.
BACKGROUND
This case arises from injuries plaintiff Richard Phillips alleges he sustained while riding and operating a 1998 Honda TR300 Four-Wheeler. (Complaint). Specifically, plaintiff alleges that he sustained serious burns to his feet from exposure to unsafe temperatures generated by the four-wheeler. Plaintiff had previously been diagnosed with type 2 diabetes and sustained peripheral neuropathy resulting in the loss of sensation in his feet and ankles. (Phillips Depo. pp. 104-06, 114-116). Plaintiff also had experienced complications from diabetic neuropathy. For instance, he suffered an ulcer on his left heel from wearing rubber boots while hunting. (Krauss Depo. p. 32-34). He had also had problems with cuts, ulcers and/or blisters on his feet, and had endured several surgeries and the removal of at least two toes and additional bone as a result. (Phillips Depo. pp. 110-113, 123-125, Krauss Depo. pp. 26-83).
On September 7, 2001, plaintiff borrowed the ATV in question from a friend in order to mow a field by pulling a GT42 Bush Hog mower behind the ATV. (Phillips Depo. pp. 95-96). Mr. Phillips was aware that the engine of an ATV is hot, but he has considerable experience riding ATVs and had never been burned before. (Philips Depo. pp. 77-78, 91-92, 95-96). On September 7, 2001, plaintiff operated the ATV for about an hour and a half. (Phillips Depo. p. 151). That evening, plaintiff noticed some sores on his feet. (Phillips Depo. p. 166-70).
LEGAL ANALYSIS
I. Treating Physicians: Dr. Judy Cooke Travis, Dr. Donald Charles Gross, Dr. William Debell, Dr. Thomas D. McDermott, and Don Sprewell
Defendants seek to strike the testimony of plaintiff's treating physicians and treating physical therapist primarily because they were not timely identified as expert witnesses. The scheduling order required plaintiffs to disclose expert testimony as required by Fed.R.Civ.P. 26(a)(2) on or before June 30, 2005. (Doc. 33). However, as plaintiffs correctly argue, treating physicians are not treated as experts to the extent their testimony is based on observations during the course of treatment unless their testimony was acquired or developed in anticipation of litigation or for trial. Brown v. Best Foods, A Division of CPC Intern., Inc., 169 F.R.D. 385, 387 (N.D.Ala.1996) (quoting Richardson v. Consolidated Rail Corp., 17 F.3d 213, 218 (7th Cir.1994)). However, as fact witnesses, their opinions must be based on facts of which they have personal knowledge. Id. In addition, testimony regarding causation will not be allowed unless the determination of causation was necessary for treatment and their opinions are helpful to a clear understanding of the witnesses' testimony. U.S. v. Henderson, 409 F.3d 1293, 1300 (11th Cir.2005) (citations omitted). If the physicians and physical therapist, testifying as fact witnesses, did not need to determine how plaintiff was injured to administer treatment, then their *1331 testimony concerning causation is inadmissible.
The testimony from these witnesses indicates that their conclusions that plaintiff was burned was based not on personal knowledge acquired from their observations, but from what plaintiff had told them. These witnesses testified that the injury was consistent with a burn, but that does not rule out the possibility that there was a different cause. Plaintiff had endured similar injuries to his feet in the past that were not burns. Dr. Krauss even testified, when presented with photos of the injuries to plaintiff's feet, that the injuries appeared to be "heel ulcerations" similar to ulcerations plaintiff had been treated for in the past. (Krauss depo. p. 19). " The testimony indicates that the treating physical therapist and doctors did not diagnose plaintiff's condition, but were merely treating him according to Dr. Travis's initial conclusions. Travis's conclusions were based not on his personal knowledge and observation, but on plaintiff's own account of what happened. Cumulatively, the testimony does not indicate that the treating professionals determined from their observations that the injuries were burns or that such a determination impacted the treatment that was administered or prescribed.
Plaintiffs contend that they timely disclosed their intent to use the treating physicians as expert witnesses in their response to defendants' first set of interrogatories. On April 14, 2004, in response to defendants' interrogatory request for the identity of each and every expert plaintiffs intend to call to testify, plaintiffs stated the following:
In response to this interrogatory Plaintiff states that discovery has just begun and is ongoing at the present time and therefore the information necessary to respond to this interrogatory completely is not available. The Plaintiff reserves the right to supplement this answer once discovery has been completed. My attorney has not determined at this time who will testify as an expert at the trial of this case. This response will be supplemented in compliance with the Court's general pretrial order. It is anticipated that the Plaintiff will or may call as experts all physicians, nurses, rehabilitation counselors, vocational counselors, or other medical or professional personnel who have treated and/or evaluated the Plaintiff as a result of the incident made the basis of this suit and the injuries sustained by the Plaintiff therein.
(Doc. 123-3, Interrogatory No. 9). While the above response indicates that plaintiffs may decide to call treating physicians as experts, it also indicates that plaintiffs had not yet made that determination and that they would identify their experts in a supplement. On June 30, 2005, the deadline for plaintiffs' expert disclosures, plaintiffs responded to another interrogatory which asked plaintiffs to identify expert witnesses as well as provide the subject matter on which they are expected to testify. Plaintiffs' response did not identify any experts, but, instead, merely stated that plaintiffs "reserve the right to supplement this response in accordance with the Court's Scheduling Order."[1] (Doc. 155, Ex. 1, Interrogatory No. 7). On that same date, plaintiffs filed their expert disclosure for Michael A Burleson, P.E., CSP, and W. Patton Culbertson, Ph.D. (Doc. 61). Also, at the deposition of Dr. Judy Cooke Travis, plaintiffs' counsel indicated that Dr. Travis was being deposed as a treating *1332 physician rather than as an expert. (Doc. 155, Travis Demo. p. 11). After due consideration, the court finds that plaintiffs did not properly identify the expert testimony of Dr. Judy Cooke Travis, Dr. Donald Gross, Dr. William Debell, Dr. Thomas D. McDermott, or Don Sprewell. Therefore, as discussed above, these witnesses may only offer factual testimony of which they have personal knowledge. As lay witnesses, their testimony regarding causation is due to be stricken because it is not based on personal knowledge and the determination of causation was not necessary for treatment or helpful to a clear understanding of the witnesses' testimony.
In addition, defendants contend that the testimony and exhibits of Dr. Travis. should be stricken as unreliable. At her deposition, Dr. Travis stated that she does not remember some of the details of plaintiffs' visit to her house the night plaintiff allegedly injured his feet on the ATV. She did not see plaintiff at her office and, thus, had no records to rely on. When asked her opinion as to whether the injury could have been something other than a burn, she responded as follows:
I think it wasit pretty much looked like a burn to me. It didn't look like anything else.
Dr. Travis was unsure about some answers because she did not have the history from plaintiffs other doctors' offices. The court notes that Dr. Travis is also not an endocrinologist or an expert in burns and did not follow Mr. Phillips' treatment as that "would have been out of [her] realm." (Travis Demo p. 58-59, 63). Dr. Travis also stated that she had "[n]ot a clue" how fast it takes a person to burn at different temperatures. (Travis Demo. p. 31). As such, the court finds her testimony is too unreliable to be allowed as expert testimony on the issue of causation of the injury and is due to be stricken on this basis, in addition to the basis discussed above regarding the failure to disclose Travis as an expert witness. However, the court finds Dr. Travis's lay factual testimony to be admissible. Dr. Travis's lay testimony is not subject to the same Daubert scrutiny as her expert testimony.[2]
II. Michael A Burleson
Defendants object to the testimony of Michael A. Burleson because they contend that the methods used by Mr. Burleson in his tests are flawed and his conclusions are unreliable. The Supreme Court, in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993), found that scientific expert testimony is admissible only if the proffered testimony is both relevant and reliable. "[A] district court judge is to act as a `gatekeeper' for expert testimony, only admitting such testimony after receiving satisfactory evidence of its reliability." Dhillon v. Crown Controls Corporation, 269 F.3d 865, 869 (7th Cir.2001); see also U.S. v. Majors, 196 F.3d 1206, 1215 (11th Cir. 1999). Under rule 702, "this Court has an obligation to screen expert testimony to ensure it stems from a reliable methodology, sufficient factual basis, and reliable application of the methodology to the facts." Whatley v. Merit Distribution Services, 166 F. Supp. 2d 1350, 1353 (S.D.Ala.2001) (citations omitted).
The Rule, in respect to all such matters, "establishes a standard of evidentiary reliability." [Daubert, 509 U.S. [579] at 590, 113 S. Ct. 2786, 125 L. Ed. 2d 469. It "requires a valid . . . connection to the pertinent inquiry as a precondition to admissibility." Id., at 592, 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed. 2d 469. And *1333 where such testimony's factual basis, data, principles, methods, or their application are called sufficiently into question, [] the trial judge must determine whether the testimony has "a reliable basis in the knowledge and experience of [the relevant] discipline." 509 U.S. at 592, 113 S. Ct. 2786, 125 L. Ed. 2d 469.
Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 149, 119 S. Ct. 1167, 1175, 143 L. Ed. 2d 238 (1999).
Tests were performed on three separate days by Mr. Burleson or under his direction. The first was a preliminary test, performed on the ATV in question by Mr. Burleson. This preliminary test was not performed according to any written protocol and entailed the use of instruments that were not calibrated or tested in any way. (Burleson Depo. pp. 94-95). Mr. Burleson purchased electronic thermometers from a store near the site where the ATV was located, placed them on the sides of the ATV and drove the ATV for 25 minutes, measuring the temperature every five minutes. (Burleson Depo. pp. 94-96, 101, Burleson Report ¶ V). Mr. Burleson admits that "there was nothing magical about the spot" he chose to place the electronic thermometers, he just "stuck them wherever was quickly appropriate" to get some idea what the temperatures were on the side of the engine. (Burleson Depo. pp. 94, 103). Clearly, any specific results from this preliminary test are not sufficiently reliable to satisfy a Daubert analysis. Mr. Burleson concedes that the data obtained from this test were preliminary results that merely led him to conclude that more in-depth testing needed to be completed. As such, the court finds that the specific preliminary results are not admissible, but that Mr. Burleson's conclusions are not flawed or unreliable on that basis. Mr. Burleson's opinions were not materially based on the preliminary testing.
On July 9, 2003, a second test was performed at Mr. Burleson's laboratory. Mr. Burleson was not present at the testing. (Burleson Depo. pp. 110, 156). A temperature measurement protocol was performed on both the ATV used by plaintiff and a 1999 Arctic Cat 400 four-wheel drive vehicle. (Burleson Report ¶ V, p. 8). Mr. Burleson's report states that each machine was operated for approximately one hour and thermocouples were used to measure temperatures inside and outside the right and left boot of an operator for approximately one hour while pulling the Bush Hog used by plaintiff. (Burleson Report ¶ V, p. 8). However, the data sheet from the test indicates that while the Arctic Cat was tested while running for 2985 seconds (approximately 50 minutes), the incident ATV was run and tested for 3585 seconds (approximately 60 minutes). (Doc. 136, Ex. 25data sheet). The thermocouple on the inside of the left boot malfunctioned during the test of both vehicles. (Burleson Report ¶ V, p. 8). Testing of the ATV indicated that the highest temperature outside the left boot, adjacent to the engine, was 232.8 degrees Fahrenheit, the highest temperature inside the right boot was 127.7 degrees Fahrenheit, and the highest temperature on the exterior of the right boot was 171.3 degrees Fahrenheit. (Burleson Report ¶ V, p. 8; Doc. 136, Ex. 31test data summary). The Arctic Cat vehicle, which had a water-cooled engine, produced exterior boot temperatures up to 130 degrees Fahrenheit and interior boot temperature on the right boot up to 111.7 degrees Fahrenheit. (Doc. 136, Ex. 31test data summary). The oil temperature light illuminated on the Arctic Cat vehicle indicating the engine had reached a high temperature. (Burleson Report ¶ V, p. 8). The court notes that the beginning ambient temperature for the incident ATV (93.8°) was more than 10 degrees higher than the beginning ambient temperature *1334 for the Arctic Cat (82.6°). The beginning temperatures for the exterior of the boots were also lower for the Arctic Cat, the largest variance being the exterior right temperature which was 15.7 degrees cooler on the Arctic Cat at the start of the test. The ambient temperature for the incident ATV fluctuated between 87.5 and 108.1, with the average being 96.7. The Arctic Cat ambient temperatures fluctuated between 80 and 102.6 with an average of 90.43.
On September 23, 2003, the testing was repeated on the incident ATV for 7320 seconds (two hours and two minutes). (Doc. 136, Ex. 25data sheet). The thermocouples showed that temperatures inside the left boot climbed to 173.3 degrees Fahrenheit, temperatures inside the right boot reached 132.6 degrees Fahrenheit, temperatures outside the left boot reached 155.9 degrees Fahrenheit and outside the' right boot reached 152.8. (Burleson Report ¶ V, p. 8). For this test the starting ambient temperature was 80.2, with the highest ambient temperature being 96.1 and the average ambient temperature of 83.6.
Defendants contend that Mr. Burleson's test data and opinions are unreliable for several reasons. Although during the test Mr. Burleson used plaintiff's boots, and socks similar to those worn by plaintiff when he was injured, instead of using a human subject he used the feet and legs of a dummy made of vinyl plastisol with a metal bar in the center of each leg. Defendants claim that the use of the dummy made the tests unreliable because Mr. Burleson offered no explanation or data as to how vinyl plastisol or the metal bar affected the way heat would be conducted, retained, transferred and/or measured. There are obvious safety reasons for using a dummy, rather than a live person to test an allegedly defective product. Using a dummy also eliminates certain potential variances, such as the possibility that a live driver might move his feet during testing. The use of a dummy may be more reliable when comparing temperatures from one machine to another. However, the court agrees that, to the extent the tests were used to determine the temperature to which plaintiffs heels were exposed, the use of a vinyl plastisol dummy with metal rods underneath the legs may have materially skewed the results. Some inquiry or research should have been conducted to determine what effect the material used had on the data obtained. Mr. Burleson has offered no evidence that the material used did not materially effect the temperature readings.
Defendants also contend that the thermocouples were not properly calibrated because they were only calibrated to the freezing point of water rather than the freezing point and the boiling point of water. (Ex. Q, Carter's Rule 26 Disclosure, pp. 6,8).
Defendants also point out that the test performed on September 23, 2003, shows that the temperature inside the left boot was higher than the temperature outside the left boot, next to the engine. Mr. Burleson explained that the reason the temperature outside the boot, next to the engine, was cooler was because:
It's a matter of BTU buildup, and there's an insulation value that keeps the heat inside there. And it's not losing heat, it's continuing to take on heat BTU's like your car keeps getting hotter and hotter and hotter. When it may not be 140 degrees outside, it can sure be inside your car.
(Burleson Depo. p. 165). However, the results from the left boot are not consistent with the results obtained that day from the right boot, or with the results from the tests performed on July 9, 2003. It is illogical for the temperature to have *1335 built up inside the left foot, but not inside the right foot during the testing of either machine.
In addition, Mr. Burleson's conclusion that the Arctic Cat produced significantly lower temperatures is not completely supported by the data. As stated above, testing of the Arctic Cat was stopped at 2985 seconds (approximately 50 minutes) with temperatures inside the right boot reaching 111.7 degrees and temperatures outside the boots reaching as high as 130.1 degrees. (Doc. 136, Ex. 25data sheet). The test of the incident ATV performed in July 2003 indicated that at 2985 seconds, the interior right foot reached 123.5 degrees and the exterior temperatures reached 156.9 on the right side and 229.6 on the left side. The test performed in September 2003 indicated that at 2985 seconds, the interior temperature of the left boot reached 127.8 degrees, the interior of right boot reached 104.8 degrees, the exterior left reached 130.1 degrees, and the exterior right reached 134.7 degrees. Thus, the tests indicate that the interior temperature of the right boot on the Arctic Cat was only about 12 degrees cooler than the incident ATV during the July 2003 test and was in fact 7 degrees warmer than the interior temperature of the right boot during the September 2003 test. There is no data from the Arctic Cat as to the temperature inside the left boot. The exterior temperature readings at 2985 seconds indicated that the right boot from the Arctic Cat was 28.1 degrees cooler than the highest temperature reading at that point of the incident ATV during the July 2003 testing, but only 5.9 degrees cooler than the highest reading of the incident ATV at that point during the September 2003 test.
The court also notes that the temperatures spiked up and down continuously during the tests, which Mr. Burleson attributed to the wind. (Burleson Depo. pp. 136, 156). For instance during the July 2003 test, the exterior left boot temperature reading at 2625 seconds was 217.18. The next reading, fifteen seconds later was 172.7a swing of 44.48 degrees. Thus, it is difficult to conclude what temperature a driver would be exposed to for any length of time simply by comparing the highest temperatures reached. Although the exterior temperature on the left side reached as high as 229.6 degrees by 2985 seconds, the average of the last 13 temperature readings, three minutes worth of readings, is 192.8 degreesalmost 37 degrees less than the highest reading.
The data from the September 2003 test indicates that the interior of the right boot did not reach 116 degrees (the temperature at which Mr. Burleson testified skin exposure for 45 minutes could result in third degree burns[3]), until 4155 seconds one hour and 9 minutes. According to Burleson, plaintiff ran the ATV for about an hour and 15 minutes on the day of the incident. (Burleson Depo. p. 160). Thus, according to the September 2003 data, plaintiff's right foot would only have been exposed to that high of a temperature for the last 6 minutes of his ride. The September 2003 data indicated that at 4500 seconds (one hour and 15 minutes) the highest temperature reached inside the right boot was 118.9 degrees, with the average temperature over the last 6 minutes being 116.8 degrees. To conclude from this evidence that Mr. Phillip's injury to his right foot was caused by the ATV is speculative. While the July 2003 test indicated that the interior right boot temperature reached as high as 127.7 degrees, that only exemplifies the unreliability of the test results and indicates the need for additional testing. Mr. Burleson offered *1336 no reason for discounting the September 2003 test over the July 2003 test. In fact, Mr. Burleson was not even present at the July 2003 testing, but viewed it on videotape and testified that his protocol was followed in July.
The court notes that Mr. Burleson concludes that there are other alternative designs, in addition to the water-cooled engine he tested, which would have prevented or lessened Mr. Phillips' injuries. Burleson concludes that "proper techniques of machine design, engine cooling, heat dissipation, and thermal guarding were available and could have reduced the temperatures present in the foot well area to safe acceptable levels." (Burleson Report, ¶ IX). However, Mr. Burleson did not test such alternatives on the incident ATV.
After a thorough review of Mr. Burleson's report and data, the court finds that Mr. Burleson's conclusions are unreliable based upon the methods used and data obtained. The court finds that, given the numerous problems and inconsistencies described above, Mr. Burleson's conclusions do not stem "from a reliable methodology, sufficient factual basis, and reliable application of the methodology to the facts." See Whatley, 166 F.Supp.2d at 1353 (citations omitted). His testimony is therefore excluded.
III. Plaintiffs' Evidentiary Submissions
The court will disregard plaintiffs' evidentiary submissions to the extent the court has found above that such evidence is due to be stricken.
IV. Plaintiffs' Statement of Disputed Facts
Defendants object to plaintiffs' separate response to defendants' statement of facts. Plaintiffs filed a statement of disputed facts in addition to their brief in opposition to summary judgment. Defendants contend that plaintiffs, by filing the statement of disputed facts, have essentially doubled their page limit allowed under the local rules. As such, defendants contend they are unable to sufficiently respond to plaintiffs' pleadings within their allotted page limit. However, the court finds that defendants have fully responded to plaintiffs' pleadings by filing, in addition to the reply, two motions to strike plaintiffs' evidence. Moreover, the court finds that striking plaintiffs' statement of disputed facts would not result in a different outcome. Therefore, the court finds that defendants' motion to strike plaintiffs' statement of disputed facts is MOOT.
V. Summary Judgment Motion
A. Summary Judgment Standard
Federal Rule of Civil Procedure 56(c) provides that summary judgment shall be granted: "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." The trial court's function is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). "The mere existence of some evidence to support the non-moving party is not sufficient for denial of summary judgment; there must be `sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.'" Bailey v. Allgas, Inc., 284 F.3d 1237, 1243 (11th Cir.2002) (quoting Anderson, 477 U.S. at 249, 106 S. Ct. 2505). "[I]f the evidence is merely colorable, or is not significantly probative, summary judgment may be *1337 granted." Anderson, at 249, 106 S. Ct. 2505. (internal citations omitted).
The basic issue before the Court on a motion for summary judgment is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." See Anderson, 477 U.S. at 251-252, 106 S. Ct. 2505. The moving party bears the burden of proving that no genuine issue of material fact exists. O'Ferrell v. United States, 253 F.3d 1257, 1265 (11th Cir.2001). In evaluating the argument of the moving party, the court must view all evidence in the light most favorable to the non-moving party, and resolve all reasonable doubts about the facts in its favor. Burton v. City of Mlle Glade, 178 F.3d 1175, 1187 (11th Cir.1999). "If reasonable minds could differ on the inferences arising from undisputed facts, then a court should deny summary judgment." Miranda v. B & B Cash Grocery Store, Inc., 975 F.2d 1518, 1534 (11th Cir.1992) (citing Mercantile Bank & Trust v. Fidelity & Deposit Co., 750 F.2d 838, 841 (11th Cir.1985)).
Once the movant satisfies his initial burden under Rule 56(c), the non-moving party "must make a sufficient showing to establish the existence of each essential element to that party's case, and on which that party will bear the burden of proof at trial." Howard v. BP Oil Company, 32 F.3d 520, 524 (11th Cir.1994)(citing Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986)). Otherwise stated, the non-movant must "demonstrate that there is indeed a material issue of fact that precludes summary judgment." See Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991). The non-moving party "may not rest on the mere allegations or denials of the [non-moving] party's pleading, but. . . . must set forth specific facts showing that there is a genuine issue for trial." FED. R. Civ. P. 56(e) "A mere `scintilla' of evidence supporting the [non-moving] party's position will not suffice; there must be enough of a showing that the jury could reasonably find for that party." Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990) (citation omitted). "[T]he nonmoving party may avail itself of all facts and justifiable inferences in the record taken as a whole." Tipton v. Bergrohr GMB Siegen, 965 F.2d 994, 998 (11th Cir.1992). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 at 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986) (internal quotation and citation omitted).
B. Plaintiff Deda Phillips
Defendants contend that summary judgment should be granted as to plaintiff, Deda Phillips, because, although she is named as a plaintiff in the style of the complaint, she has asserted no claims or injuries herself. Plaintiffs have not denied this contention. The court, after review of the complaint, likewise finds no indication that Deda Phillips is asserting any claim. Accordingly, summary judgment is due to be granted in favor of defendants as to Deda Phillips.
C. Plaintiff Richard Phillips
Plaintiff alleges that the Honda ATV "was in a defective condition and was not reasonably safe for its intended uses." (Doc. 1, ¶ 12). Such allegations would support a claim under the Alabama Extended Manufacturer's Liability Doctrine ("AEMLD"). To establish liability under AEMLD, plaintiffs must show:
"[1] that an injury was caused by one who sold a product in a defective condition that made the product unreasonably *1338 dangerous to the ultimate user or consumer; [2] that the seller was engaged in the business of selling such a product; and [3] that the product was expected to, and did, reach the user without substantial change in the condition in which it was sold." Tillman [v. R.J. Reynolds Tobacco Co.], 871 So.2d [28, 31 (Ala.2003)](emphasis omitted, quoting Bell v. T.R. Miller Mill Co., 768 So. 2d 953, 957 (Ala.2000)).
Spain v. Brown & Williamson Tobacco Corp., 363 F.3d 1183, 1193 (11th Cir.2004). The court finds that plaintiffs have not presented sufficient evidence for a jury to find that plaintiffs injury was caused by the incident ATV. Plaintiffs have offered no competent expert testimony that the alleged injury was caused by a product manufactured, designed, or sold by defendants.
Disregarding the evidence stricken above, the court finds the following facts: On September 7, 2001, plaintiff drove the incident ATV, while pulling a Bush Hog mower. That evening, while taking his boots off, plaintiff noticed some sores or ulcers on his heels and sought medical attention from a physician, Dr. Judy Travis, who lived nearby. Plaintiff told Dr. Travis that he had burned his feet while riding an ATV earlier that day. According to Dr. Travis, the sores on plaintiff's feet appeared to be consistent with what plaintiff had told her that they were burns. Plaintiff was later treated by other physicians and a therapist who also described the sores as being consistent with burns. However, plaintiff has a history of injuries to his feet which included ulcers caused from friction while wearing boots for an extended period of time. The injuries sustained on September 7, 2001, are consistent with ulcers caused by friction and the treatment of plaintiffs injured feet would have been the same regardless of the cause.
It is not known what temperature the foot area of the incident ATV reached while plaintiff rode it on September 7, 2001. Plaintiff had considerable experience riding ATVs and was aware that the engines on ATVs get hot during use. Plaintiff did not notice that day that the engine had become excessively hothe has no feeling in his feet and apparently did not notice excessive heat on his legs or any other part of his body. Plaintiff's boots were not damaged and there is no other evidence to indicate that the ATV got hot enough to burn plaintiff.
Plaintiff argues that under Goree v. Winnebago Industries, Inc., 958 F.2d 1537 (11th Cir.1992), expert testimony is not necessary for a jury to find that the injury was caused by the alleged defective product. In Goree, the plaintiff was a paraplegic who had installed hand controls on his Chieftain motor home. That plaintiff alleged that his feet were burned when the floorboard of the motor board became hot while he was driving. An expert testified as to what level of temperature would cause burn injuries to a person's foot if exposed for a sufficient amount of time. Id. at 1541. There was evidence that the temperature above the floorboard where plaintiff's feet rested was more than sixty-five degrees above that which would normally cause burn injuries. The court found that lay jurors, without the aid of additional testimony, could reasonably find that the motor home was defective; it was unnecessary for the jurors to know what caused the temperature to be so high. Id. at 1542.
The court finds that the Goree case is not analogous to the instant case. The court agrees that expert testimony is not necessary to demonstrate what caused the alleged high temperatures. However, there must be sufficient testimony to show that the ATV produced high enough temperatures *1339 for a sufficient length of time to cause the alleged injury. In this case, there is some question whether the injury suffered by plaintiff is even a burn. Mr. Phillips' treating physicians testified that the injury was consistent with a burn, but the injury could also have been caused by something other than excessive heat. "Proof which goes no further than to show an injury could have occurred in an alleged way does not warrant the conclusion that it did so occur, where from the same proof the injury can with equal probability be attributed to some other cause." Bishop v. Bombardier, Inc., 399 F. Supp. 2d 1372, 1379-80 (M.D.Ga.2005)(citing Ex parte Mobile Power & Light Co., Inc., 810 So. 2d 756, 760 (Ala.2001)).
Even if there was sufficient evidence for a jury to find that Mr. Phillips sustained an injury from the incident ATV, plaintiffs must also prove that a safer, practical, alternative design was available to the manufacturer at the time it manufactured the product. Richards v. Michelin Tire Corp., 21 F.3d 1048, 1056 (11th Cir.1994) (citations omitted). "This, is true whether plaintiffs' defective design claim arises from AEMLD, negligence or wantonness." Connally [v. Sears Roebuck & Co.], 86 F.Supp.2d [1133] at 1137 (S.D.Ala. 1999). "No matter which theory a plaintiff proceeds under, he must prove a safer alternative design." Id. (citations omitted).
The installation of a heat shield, a device which has been utilized on motorcycles, might have lessened the temperature. However, such devices were not tested on the incident ATV or similar machines under the same or similar circumstances presented here. Thus, it is unknown whether a heat shield would have significantly lowered the temperature and prevented or lessened plaintiff's injuries in this case. A fan could also have been installed on the incident ATV; however, like the heat shield, there has been no evidence presented to document its effectiveness. Likewise, there is no evidence that a water-cooled engine would have result in significantly lower temperatures by plaintiff's feet. Plaintiffs have presented no admissible evidence of an alternative design that would have significantly lowered the risk of burn to plaintiff.
Plaintiffs' AEMLD claim fails, as does plaintiffs' negligence, wantonness and warranty claims, because plaintiff has failed to present sufficient evidence for a jury to find that the ATV was defective or unreasonably dangerous, that the alleged defect caused Mr. Phillips' injuries, or that an alternative design would have alleviated the alleged defect.
CONCLUSION
For the reasons stated above, the court ORDERS as follows:
1. Defendants' motion to strike the testimony of Dr. Judy Cooke Travis, Dr. Donald Charles Gross, Dr. William Debell, Dr. Thomas D. McDermott, and Don Sprewell (Doc. 141) is GRANTED;
2. Defendants' motion to exclude the testimony of Michael A Burleson (Doc. 143) is GRANTED;
3. Defendants' motion to strike plaintiffs' evidentiary submissions (Doc. 146) is GRANTED IN. PARTthe evidence is stricken to the extent the court found that such evidence constituted the expert testimony of Dr. Judy Cooke Travis, Dr. Donald Charles Gross, Dr. William Debell, Dr. Thomas D. McDermott, Don Sprewell, and/or Mr. Michael A. Burleson; the motion is DENIED as to the remaining evidentiary submissions listed;
4. Defendants' motion strike plaintiffs' statements of disputed fact (Doc. 147) is MOOT;
*1340 5. Defendants' motion for summary judgment (Doc. 124) is GRANTED in favor of defendants.
NOTES
[1] The scheduling order required disclosure of plaintiffs' experts on or before June 30, 2005. (Doc. 28).
[2] See Daubert v. Men-ell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993), discussed below with regard to the expert testimony of Michael A. Burleson.
[3] The court notes that defendants also object to Mr. Burleson's testimony regarding the temperature and time required to cause third degree burns.
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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/6363783/
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Opinion by
Judge Blatt,
This is an appeal by the Pennsylvania Liquor Control Board (Board) from an order of the Court of Common Pleas of Payette County which reversed a Board decision denying an application for a club liquor license.
Summit Lodge No. 115 of the Improved Benevolent Protective Order of Elks (Lodge) filed an application with the Board for a club liquor license for their premises located at 94 Feather Avenue, South Union Township, Uniontown. After a hearing at which the Lodge presented evidence, the Board refused to grant the license, finding inter alia that the premises proposed to be licensed were located within 300 feet of the Payette County Housing Authority (Authority) public playground. An appeal by the Lodge to the Court of Common Pleas was sustained, that court find*528ing that the Authority had indicated that it had no objection to the granting of the license, even though the Lodge was located within 300 feet of the Authority’s public playground. This appeal followed.
Section 404 of the Liquor Code1, 47 P.S. §4-404, allows the Board in its discretion to refuse to grant a license “if such place proposed to be licensed is within three hundred feet of any church, hospital, charitable institution, school, or public playground(Emphasis added.) We have previously recognized that, by this section, the Legislature has given the Board discretion to approve or refuse license applications or applications to transfer licenses and that the function of the lower court on appeal is not to substitute its discretion for that of the Board, but merely to determine whether the Board abused its administrative discretion. Bilinsky v. Liquor Control Board, 7 Pa. Commonwealth Ct. 312, 315, 298 A.2d 698, 699 (1972). In this case we believe that the lower court did substitute its discretion for that of the Board and that its order must therefore be reversed.
The lower court noted here, of course, that the Authority had no objection to the licensing, but this was a factor properly to be considered by the Board in exercising its discretion and we have previously held that the absence of objection does not control the Board’s decision in these matters. See Home Aid Association of John C. Tressler Post v. Pennsylvania Liquor Control Board, 25 Pa. Commonwealth Ct. 271, 273, 360 A.2d 834, 835 (1976). It is uncontested here that the Authority’s playground is within 300 feet of the premises which the Lodge proposes to license, and the lower court described the playground here concerned as a public one in its findings. The Lodge *529argues that the court was mistaken in so doing, but our review of the record establishes that the playground is owned by the Authority which is a public body and also that, although the playground is intended to be used by the tenants of the Authority’s nearby housing, the use of the playground by other persons is in no way restricted. Under these circumstances, we believe the lower court correctly described the playground as a public one. And, inasmuch as one of the recognized purposes of the Liquor Code is to discourage the existence of places where alcoholic beverages are dispensed in the vicinity of playgrounds2, the Board’s decision to deny the license application was not an abuse of its administrative discretion.
The decision of the court below is reversed and the order of the Board is reinstated.
Order
And, Now, this 15th day of June, 1977, the order of the Court of Common Pleas of Fayette County dated February 26, 1976, is hereby reversed and the order of the Pennsylvania Liquor Control Board is hereby reinstated.
Act of April 12, 1951, P.L. 90, as amended, 47 P.S. §1-101 et seq.
See Board of Commissioners of Upper Darby Township v. Penn Continental Motor Inn, Inc., 10 Pa. Commonwealth Ct. 652, 314 A.2d 587 (1973) and the cases cited therein.
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01-03-2023
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06-24-2022
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https://www.courtlistener.com/api/rest/v3/opinions/2466501/
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438 F. Supp. 2d 929 (2006)
STROMAN REALTY, INC., Plaintiff,
v.
Fernando E. GRILLO, Secretary of the Illinois Department of Financial and Professional Regulation, Defendant.
No. 06 C 1187.
United States District Court, N.D. Illinois, Eastern Division.
July 18, 2006.
*930 Diana M. Schobel, Leslie A. Powell, Law Offices of Leslie A. Powell, Frederick, MD, Gerald M. Birnberg, Williams Birnberg & Andersen, Houston, TX, Jose A. Lopez, Veronica Gomez, Schopf & Weiss LLP, Chicago, IL, for Plaintiff.
Rachel Jana Fleischmann, Yolanda L. Ricks, Illinois Attorney General's Office, Chicago, IL, for Defendant.
MEMORANDUM OPINION AND ORDER
GETTLEMAN, District Judge.
Plaintiff Stroman Realty, Inc. ("Stroman"), filed a complaint in the Southern District of Texas against Defendant Fernando E. Grillo, Secretary of the Illinois Department of Financial and Professional Regulation ("Illinois"), seeking to enjoin Illinois from enforcing the Illinois Real Estate Licensing Act of 2000 ("Licensing Act"), 225 Ill. Comp. Stat. 454, and the regulations thereunder against Stroman for conducting its timeshare resale business. Stroman alleges that Illinois's enforcement of the Licensing Act, as applied *931 to Stroman, violates the Commerce Clause. U.S. Const., § 8, cl. 3.
Following a complaint from an Illinois resident, Illinois's Department of Financial and Professional Regulation ("IDFPR") sent Stroman a cease and desist letter, listing alleged activities Stroman had engaged in that required a real estate license in Illinois. Stroman subsequently filed a lawsuit in the United States District Court for the Southern District of Texas for preliminary injunctive relief against Illinois's enforcement of the Licensing Act against Stroman. Illinois then brought a formal administrative complaint against Stroman for violatirfg the Licensing Act and the Illinois Timeshare Act, 765 Ill. Comp. Stat. 101 (2006). Illinois alleged that Stroman acted as a real estate agent in the State of Illinois without a license. Stroman moved to stay the administrative action in the Texas case. That case was transferred to this court, which denied the motion to stay. Illinois has now moved to dismiss pursuant to F.R.C.P. 12(b)(6) and F.R.C.P. 12(b)(1), arguing that Stroman's allegations do not constitute a constitutional violation, and that this court should abstain from exercising jurisdiction based on the Younger doctrine. Younger v. Harris, 401 U.S. 37, 91 S. Ct. 746, 27 L. Ed. 2d 669 (1971). For the reasons discussed herein, Illinois's motion to dismiss is granted.
FACTS
Plaintiff Stroman resells property timeshare intervals on the secondary market. Timeshare intervals allow a buyer to purchase the right to use a property or unit for a specified interval of time. They are typically sold or exchanged for the use of vacation resort properties. Stroman is located in Texas and is, along with its sales associates, licensed to engage in real estate brokering by the state of Texas.
Stroman operates a computerized listing service to match potential timeshare buyers to sellers. If a seller wants to advertise and list his timeshare with Stroman, he signs an advertising agreement. Stroman charges sellers a one-time advertising fee to list their timeshare intervals in its computer system and imposes a commission fee upon the completion of a successful sale. Stroman employs 80 sales associates to handle phone calls from potential buyers and sellers. The sales associates attempt to match a potential buyer's timeshare interval preferences, such as the duration, location, and price of the timeshare interval, to a timeshare listed in the computer system. Stroman also operates an internet website which allows users to view available timeshare intervals and obtain relevant information. The internet user can submit an offer through the website or can call the company to speak with a sales associate.
Stroman's business transactions frequently involve parties and properties residing in multiple states. For example, Stroman might match a New York buyer with a Nebraska seller for a timeshare interval located in California. Stroman's sales associates field approximately 1,000 calls daily from across the country, some of which require inquiry into timeshare interval properties located in several states. To facilitate its business activities, the company solicits buyers, sellers and potential referral sources, such as real estate agencies and developers, of timeshare intervals. To do so, Stroman advertises its services nationally and internationally. Stroman places daily advertisements in national, regional, and local newspapers, as well as advertising in specialty magazines, trade publications, and on the internet. The company also conducts large amounts of direct mail solicitations. Most of Stroman's advertisements generically promote its timeshare resale services rather than individual timeshare intervals.
*932 STANDARD OF REVIEW
Rule 12(b)(1) motions are premised on either facial or factual attacks on jurisdiction. Villasenor v. Indus. Wire & Cable, Inc., 929 F. Supp. 310, 311 (N.D.Ill.1996). If the defendant makes a factual attack on the plaintiff's assertion of subject matter jurisdiction, it is proper for the court to look beyond the jurisdictional allegations in the complaint and "view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists." Capitol Leasing Co. v. F.D.I.C., 999 F.2d 188, 191 (7th Cir. 1993) (per curiam); Barnhart v. United States, 884' F.2d 295, 296 (7th Cir.1989). The Supreme Court has held that an attempt to plead a federal claim fails only where it "clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous." Bell v. Hood, 327 U.S. 678, 682-83, 66 S. Ct. 773, 90 L. Ed. 939 (1946).
DISCUSSION
Illinois has moved to dismiss arguing that: (1) Stroman's complaint, on its face, does not state a claim for a violation of the dormant Commerce Clause; and (2) this court should refrain from exercising jurisdiction under the Younger[1] abstention doctrine. Because this court finds that abstention is warranted, there is no need to discuss the merits of Stroman's dormant Commerce Clause argument. See Moses v. Kenosha County, 826 F.2d 708, 710 (7th Cir.1987) (dismissal without decision regarding constitutional claims is appropriate procedure when Younger abstention applies); Green v. Benden, 281 F.3d 661, 666 (7th Cir.2002) (merits of challenge to denial of plaintiff's request for injunctive relief not needed because Younger abstention was appropriate).
ABSTENTION
The Younger doctrine originally held that federal courts should abstain from hearing a challenge to the constitutionality of a state criminal statute when the plaintiff bringing the challenge is being prosecuted in a state court for violating that statute. Younger, 401 U.S. 37, 91 S. Ct. 746. Due to "principles of comity and federalism . . . federal courts should refrain from enjoining state criminal prosecutions." Jacobson v. Vill. of Northbrook Mun. Corp., 824 F.2d 567, 569 (7th Cir. 1987). Younger is "fully applicable to civil proceedings in which important state interests are involved," Moore v. Sims, 442 U.S. 415, 423, 99 S. Ct. 2371, 60 L. Ed. 2d 994 (1979), and has subsequently been held to apply to state administrative proceedings, Ohio Civil Rights Comm'n. v. Dayton Christian Sch., Inc., 477 U.S. 619, 627, 106 S. Ct. 2718, 91 L. Ed. 2d 512 (1986). Thus, Younger abstention "requires federal courts to abstain from enjoining ongoing state proceedings that are (1) judicial in nature, (2) implicate important state interests, and (3) offer an adequate opportunity for review of constitutional claims, (4) so long as no extraordinary circumstances exist which would make abstention inappropriate." Green v. Benden, 281 F.3d 661, 666 (7th Cir.2002) citing Middlesex County Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423, 432, 436-37, 102 S. Ct. 2515, 73 L. Ed. 2d 116; Majors v. Engelbrecht, 149 F.3d 709, 711 (7th Cir.1998). When a plaintiff in federal court, after having already filed a complaint, becomes a defendant in a state criminal proceeding, Younger abstention still applies so long as the federal court has not engaged in any "proceedings of substance on the merits." Hicks v. Miranda, 422 U.S. 332, 95 S. Ct. 2281, 45 L. Ed. 2d 223 (1975). See also Majors, 149 F.3d at 713.
*933 First, with regard to timing, Stroman argues that because the administrative action was filed after Illinois was served with Stroman's federal complaint, Younger abstention is inappropriate. After the Supreme Court's holding in Hicks, however, the timing of the filing of the state and federal court lawsuits is largely unimportant, provided the federal suit has not progressed to any "proceedings of substance on the merits." See Doran v. Salem Inn, Inc., 422 U.S. 922, 929, 95 S. Ct. 2561, 45 L. Ed. 2d 648 (1975) (abstention proper when federal suit is still in an "embryonic stage"); Ciotti v. County of Cook, 712 F.2d 312, 313 (7th Cir.1983) (decision on standing is not a decision on the merits). The instant case has clearly not progressed to the merits. In Ciotti, the Seventh Circuit cited with approval Giulini v. Blessing, 654 F.2d 189, 193 (2d Cir.1981), and Nevin v. Ferdon, 413 F. Supp. 1043, 1049 (N.D.Cal.1976), which both found abstention proper when the only action taken by the federal court was a ruling on jurisdiction or jurisdiction and abstention. This is analogous to the current case. The District Court for the Southern District of Texas transferred the case to this court after an examination of jurisdiction, but no ruling on Stroman's dormant Commerce Clause claim has been made by either court. The only action this court has taken was to deny Stroman's request to stay the state court's administrative action. The denial did not address Stroman's substantive claim. Thus, no "proceedings of substance on the merits" have occurred in this litigation.
Because the timing of the lawsuits is not an issue, the question is whether the state proceedings meet the test for Younger abstention. First, the proceedings initiated through Illinois's administrative complaint are clearly judicial in nature. "For the purposes of Younger abstention, administrative proceedings are `judicial in nature' when they are coercivei.e., state enforcement proceedings." Majors, 149 F.3d at 712 (citations omitted). "A judicial inquiry investigates, declares and enforces liabilities as they stand on present or past facts and under laws supposed already to exist." New Orleans Pub. Serv., Inc., v. Council of City of New Orleans, 491 U.S. 350, 370-71, 109 S. Ct. 2506, 105 L. Ed. 2d 298 (1989) citing Prentis v. Atl. Coast Line Co., 211 U.S. 210, 226, 29 S. Ct. 67, 53 L. Ed. 150 (1908).
In the instant case, Illinois was clearly attempting to enforce the Licensing Act when it filed the administrative complaint against Stroman. The proceedings were coercive, not remedial. Additionally, the procedures governing the hearing conform to the definition of a judicial inquiry. The Licensing Act requires an investigation of those accused of violating the act. 225 Ill. Comp. Stat. 454/20-60. The investigation is reviewed for merit and notification is given to the accused that disciplinary proceedings are to be initiated. Id. The Real Estate Administration and Disciplinary Board ("Board") of the Office of Banks and Real Estate ("OBRE") then hears the charges and the accused and complainant may be represented by counsel and present "statements, testimony, evidence and argument." Id. The Board and OBRE possess subpoena powers over "any persons or documents for the purpose of investigation or hearing . . . in the same manner as prescribed by law for judicial procedure in civil cases in the courts of [Illinois]." Id. The administrative proceeding conducted by the OBRE is clearly of an investigatory and judicial nature. It deals with prior events and applies present law. Thus, the administrative action initiated against Stroman was "judicial in nature."
Nor is there any question that regulation of the real estate profession is an important state interest. States have *934 traditionally possessed the power to regulate the conduct of professionals and implement licensing schemes. Goldfarb v. Va. State Bar, 421 U.S. 773, 792-93, 95 S. Ct. 2004, 44 L. Ed. 2d 572 (1975). States have "a legitimate and substantial interest in prescribing reasonable, in the constitutional sense, qualifications for professions or occupations which require special knowledge or skill and intimately (affect) the public health, morals, order, or safety, or the general welfare." Thompson v. Schmidt, 601 F.2d 305, 308 (7th Cir.1979) (citations and quotations omitted). Efforts by states to "preserve professional integrity" should be treated with deference. Scariano v. Justices of Supreme Court of State of Ind., 38 F.3d 920, 924 (7th Cir.1994). Although no court has considered whether licensing real estate professionals is an important state interest, courts have found regulation of other professions to meet this standard.[2] Clearly, regulating the real estate profession is a traditional and important state interest.
Stroman argues that abstention is improper because Illinois's interest in regulating the real estate profession does not outweigh the federal government's interest in preventing trade barriers in interstate commerce. Stroman cites Midwestern Gas Transmission Co. v. McCarty, 270 F.3d 536, 539 (7th Cir.2001), and Harper v. Pub. Serv. Comm'n of W. Va., 396 F.3d 348, 357 (4th Cir.2005), for support. Those cases, however, are inapplicable to the instant case.
In Midwestern Gas, the Midwestern Gas Transmission Company ("Midwestern") sought to enjoin the Southern Indiana Gas and Electric Company ("SIGECO") and Indiana Utility Regulatory Commission ("IURC") from engaging in state prosecutorial proceedings against it. SIGECO wanted the IURC to require Midwestern to receive permission before connecting its pipeline to two Indiana industrial gas users who wanted to use the pipes to transport out-of-state natural gas into Indiana. Midwestern had received approval from the Federal Energy Regulatory Commission ("FERC") prior to the initiation of the IURC proceedings. The Seventh Circuit held that Younger abstention was not appropriate because the federal Natural Gas Act created dual statefederal jurisdiction over the sale and distribution of natural gas. The Natural Gas Act granted FERC exclusive jurisdiction over the interstate transportation of natural gas. "[I]f for example [the state] is seeking to regulate activities that clearly are under exclusive federal control, then there is no basis for invoking Younger." Midwestern Gas, 270 F.3d at 539.
The regulation of those acting as real estate professionals in Illinois, however, as Illinois points out, is not an activity under either exclusive federal control or dual state-federal jurisdiction. Rather, it is an important and traditional state interest. "The [Younger] doctrine presupposes that the state has a valid interest that it is seeking to enforce" which, unlike Midwestern Gas, is present here. Id.
In Harper, Southern Ohio Disposal ("SOD") brought suit against The Public Service Commission of West Virginia ("PSC") to enjoin the PSC from barring SOD from competing with waste removal companies in West Virginia. Under West Virginia law, a common carrier such as SOD was required to obtain a "certificate of convenience and necessity" from the PSC to operate in the state. Applicants *935 for the certificate had to show that the company already providing service in the area was not "adequately serving the same territory." This requirement effectively granted a monopoly to waste haulers who already had a certificate for an area. The Fourth Circuit held that the state interest protected by the certificate requirement was "limiting access to the waste removal market" because a "limitation on market access to maintain exclusive franchises for existing enterprises" is not comparable to legitimate neutral regulation. Harper, 396 F.3d at 350, 355 citing PSC. W. Va.Code Ann, § 24A-3-3(a) (Michie 2004).
The Illinois Licensing Act, in contrast, does not create a virtual monopoly for present real estate license holders. Stroman is able to obtain a license without regard to any other license holder. 225 Ill. Comp. Stat. 454. Pointedly, the Harper court recognized that regulation of business professionals such as insurance agents and state/local housing code enforcement are important state interests. Harper, 396 F.3d at 352-53. Thus, the Harper court would no doubt view licensure of real estate professionals in the same light.
Additionally, the OBRE's administrative proceeding offers an adequate opportunity for review of Stroman's constitutional claims. "Subsequent judicial review is a sufficient opportunity." Majors, 149 F.3d at 713 citing Dayton Christian Sch., 477 U.S. at 629, 106 S. Ct. 2718. The Licensing Act states that "final administrative decisions of OBRE shall be subject to judicial review pursuant to the provisions of the Administrative Review Law." 225 Ill. Comp. Stat. Ann. 454/20-75. When reviewing an administrative agency's decision under the Administrative Review Law, 735 Ill. Comp. Stat. Ann. 5/3-101, the Appellate Court of Illinois independently reviews the agency's conclusions of law according to a de novo standard, including any constitutional issues brought on appeal. Home Interiors and Gifts, Inc. v. Dep't of Revenue, 318 Ill.App.3d 205, 209-10, 251 Ill. Dec. 820, 741 N.E.2d 998 (1st Dist.2000). Stroman thus has a definite and adequate opportunity to bring its constitutional claim in Illinois state court.
Stroman argues that it is not required to raise its constitutional claim in state court because Illinois has no compulsory counterclaim rule, citing Peregrine Fin. Group, Inc. v. Martinez, 305 Ill.App.3d 571, 238 Ill. Dec. 757, 712 N.E.2d 861, 868 (Ill.App. 1999). Peregrine involved an arbitration agreement and is not relevant with regard to a state administrative proceeding. In any case, Green counsels that it is irrelevant whether the constitutional claims are actually raised in state court, because the "federal court should assume that the state procedures will afford an adequate remedy." Green, 281 F.3d at 667 citing Pennzoil Co. v. Texaco, Inc., 481 U.S. 1, 15, 107 S. Ct. 1519, 95 L. Ed. 2d 1 (1987). Thus, it matters not whether Stroman must raise a constitutional claim; it is sufficient that it can do so.
Finally, there are no extraordinary circumstances that would make Younger abstention improper. Because the present circumstances satisfy the three Younger requirements, abstention is inappropriate only if: "(1) the state proceeding is motivated by a desire to harass or is conducted in bad faith; (2) there is an extraordinarily pressing need for immediate equitable relief; or (3) the challenged provision is flagrantly and patently violative of express constitutional prohibitions." Jacobson, 824 F.2d at 569-70 (citations and quotations omitted). The exceptions to enforcing the Younger doctrine are extremely narrow. Arkebauer v. Kiley, 985 F.2d 1351, 1358 (7th Cir.1993). None of these elements are present in this case.
*936 Illinois's administrative proceeding was not brought in bad-faith or to harass. This prong "requires more than a mere allegation and more than a `conclusory' finding." Grandco Corp. v. Rochford, 536 F.2d 197, 203 (7th Cir.1976). Stroman makes no allegation that OBRE's conduct was harassing or in bad-faith. Nor does Stroman have an extraordinarily pressing need for immediate equitable relief. Stroman has argued that it has and will continue to suffer irreparable harm as a result of Illinois's enforcement of the Licensing Act and claims it will face "continued administrative actions." Pl.'s Resp. Br., 15. Stroman does `not specify whether the actions will be from the OBRE in Illinois or from real estate licensing agencies in other states. The administrative action itself, however, will not cause Stroman irreparable injury. Although a negative outcome in the administrative hearing and state court might be adverse to Stroman, it is not for this court to say whether Stroman will succeed in those forums. Merely appearing at the administrative hearing or appealing in state court will not cause irreparable harm or injury.
Nor is the Licensing Act flagrantly and patently unconstitutional. For this requirement to be met, a statute must be "flagrantly and patently violative of express constitutional prohibitions in every clause, sentence and paragraph, and in whatever manner and against whomever an effort might be made to apply it." Pincham v. Ill. Judicial Inquiry Bd., 872 F.2d 1341, 1350 (7th Cir.1989) citing Younger, 401 U.S. at 53-54, 91 S. Ct. 746 citing Watson v. Buck, 313 U.S. 387, 402, 61 S. Ct. 962, 85 L. Ed. 1416 (1941). "[T]he possible unconstitutionality of a statute `on its face' does not in itself justify an injunction against good-faith efforts to enforce it." Id., 872 F.2d at 1350. The Licensing Act is not so flagrantly unconstitutional as to fit this description. Although Stroman claims that the Act violates the constitution as applied to it, the Act is clearly constitutional as applied to the vast majority against whom it is applied.
Finally, Stroman has also argued that abstention in this circumstance would require exhaustion before it could assert a federal claim, citing Patsy v. Bd. of Regents of State of Fla., 457 U.S. 496, 503-04, 102 S. Ct. 2557, 73 L. Ed. 2d 172 (1982). However, the Supreme Court in Dayton Christian Schools determined that the application of the Younger doctrine to state administrative proceedings is compatible with Patsy, which held that administrative remedies need not be exhausted prior to the initiation of a § 1983 lawsuit in federal court. "Unlike Patsy, the administrative proceedings [in Dayton Christian Schools] are coercive rather than remedial, began before any substantial advancement in the federal action took place, and involve an important state interest." Dayton Christian Sch., 477 U.S. at 627 (n. 1), 106 S. Ct. 2718, 91 L. Ed. 2d 512. This exactly describes the instant case.
While it is true that Younger abstention is a narrow doctrine reserved only for exceptional circumstances, when the requirements of Younger are met, "abstention is not only permissible but expected." Hogsett, 43 F.3d 290, 294 citing Younger, 401 U.S. at 37, 91 S. Ct. 746, 27 L. Ed. 2d 669 (1971). Accordingly, this court grants Defendant Illinois's motion to dismiss based on Younger abstention.
CONCLUSION
For the reasons discussed herein, the court abstains from exercising jurisdiction, and dismisses the instant case without prejudice.
NOTES
[1] Younger v. Harris, 401 U.S. 37, 91 S. Ct. 746, 27 L. Ed. 2d 669 (1971).
[2] See e.g. Trust & Inv. Advisers, Inc. v. Hogsett, 43 F.3d 290, (7th Cir.1994) (regulating securities investment); Gilbertson v. Albright, 381 F.3d 965, 969 (9th Cir.2004) (land surveyors); Van Breeman v. Zollar, 1997 WL 124266 (N.D.Ill.1997) (professional engineers); Baffert v. Cal. Horse Racing Bd., 332 F.3d 613, 618 (9th Cir.2003) (horse racing).
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438 F. Supp. 2d 1366 (2006)
Patricia M. TAUBER, Claimant,
v.
Jo Anne B. BARNHART, Commissioner of Social Security, Defendant.
No. 1:04-CV-02552-RWS.
United States District Court, N.D. Georgia, Atlanta Division.
March 31, 2006.
*1367 *1368 *1369 Charles Lee MartinOffice of Charles L. Martin, Decatur, IL, for Plaintiff.
*1370 Neeli Ben-DavidU.S. Attorney's Office, Atlanta, GA, for Defendant.
ORDER
STORY, District Judge.
Now before the Court are Claimant's "Complaint Requesting Review of an Administrative Decision under the Social Security Act" [1-1] and Defendant's Answer [3]. This matter comes before the Court for consideration of the Final Report and Recommendation [18] of United States Magistrate Joel M. Feldman. Having reviewed the record in this case, the Court adopts both the "History of the Case" and the "Evaluation of the Evidence" as set out in the Report and Recommendation [18] in Parts One and Four.
Background
Claimant filed an application for a period of Disability Insurance Benefits under §§ 216(i) and 223(a) of the Social Security Act on June 11, 1997. In that application, she alleged she had become unable to work ten years earlier, on June 3, 1987, at age fifty, due to impairments in her back, legs, feet, stomach, hands, bowel and bladder; she was not able to sit or stand for any length of time; and she could not wear dress shoes for any length of time.
Claimant's application was denied initially on October 15, 1997, and on reconsideration on October 20, 1997. Claimant received a de novo hearing before an Administrative Law Judge (ALJ) and, on January 30, 1998, a decision adverse to Claimant was rendered. As part of that decision, the ALJ found that Claimant "lacked the residual functional capacity [(RFC)] to lift and carry more than 10 pounds frequently and 20 pounds occasionally, and perform activities requiring frequent bending. She also required a sit/stand option[1]." (Tr. 20.) Claimant submitted further medical records to the Appeals Council and requested review. On August 25, 1999, the Appeals Council declined further review and thereby adopted the ALJ's decision as the final decision of the Commissioner.
Claimant appealed the Commissioner's decision and, on November 6, 2000, United States District Judge Marvin H. Shoob adopted the Report and Recommendation of Magistrate Judge Feldman and affirmed the Commissioner's decision. Claimant then appealed to the Eleventh Circuit.
On March 7, 2001, upon a joint Motion for Remand for further administrative proceedings, the Eleventh Circuit panel remanded the case, specifically adopting the parties' basis for remand-namely, to "develop the requirements of [Claimant]'s past relevant work and to hold a new administrative hearing with vocational expert testimony in order to determine what jobs, if any, [were] appropriate for [Claimant]." (Tr. 456-57.) On July 9, 2001, the District Court remanded the case to the Commissioner.
The Appeals Council remanded the case for further proceedings, and at a new hearing on December 21, 2001, the ALJ received testimony from Claimant, her husband, and Dr. John Blakeman who testified as the Agency's vocational expert. On July 26, 2002, the ALJ issued a decision denying Disability Insurance Benefits, *1371 finding that Claimant had a RFC to "perform light exertion level work with occasional restrictions against bending, stooping or crouching" and that her past relevant work did not require the performance of activities precluded by her RFC. (Tr. 451)[2] On July 22, 2004, the Appeals Council denied Claimant's request for further review, and the ALJ's second opinion, therefore, became the Commissioner's final opinion. On July 26, 2004, Claimant appealed the Commissioner's decision to this Court.
Discussion
I. Standard of Review
Under the Social Security Act, "[t]he court shall have power to enter, upon the pleadings and transcript of the record, a judgment affirming, modifying, or reversing the decision of the Commissioner of Social Security, with or without remanding the cause for a rehearing." 42 U.S.C. § 405(g). Judicial review, however, is limited to determining whether the Commissioner's findings are supported by substantial evidence in the record and whether the Commissioner applied the correct legal standards. Moore v. Barnhart, 405 F.3d 1208, 1211 (11th Cir.2005); Dyer v. Barnhart, 395 F.3d 1206, 1210 (11th Cir.2005). Substantial evidence is "more than a scintilla, but less than a preponderance," or rather "such relevant evidence as a reasonable person would accept as adequate to support a conclusion." Hale v. Bowen, 831 F.2d 1007, 1011 (11th Cir.1987).
If the Commissioner's decision is supported by substantial evidence, the Court must affirm it. Dyer, 395 F.3d at 1210; Crawford v. Comm'r of Soc. Sec., 363 F.3d 1155, 1158-59 (11th Cir.2004); Ellison v. Barnhart, 355 F.3d 1272, 1275 (11th Cir.2003). The ALJ has the exclusive power to resolve conflicts in the evidence *1372 See Wheeler v. Heckler, 784 F.2d 1073, 1075 (11th Cir.1986); Arnold v. Heckler, 732 F.2d 881, 884 (11th Cir.1984). However, the ALJ must state the weight accorded to each item of evidence and the reason for his or her conclusion. Hale, 831 F.2d at 1011; Hudson v. Heckler, 755 F.2d 781, 786 (11th Cir.1985). The court may not re-weigh the evidence or substitute its own judgment for that of the Commissioner, even if the evidence preponderates against that decision. Martin v. Sullivan, 894 F.2d 1520, 1529 (11th Cir. 1990); Baker o/b/o Baker v. Sullivan, 880 F.2d 319, 3,21 (11th Cir.1989).
The Court must further be satisfied, that the Commissioner's decision is grounded in the proper application of the appropriate legal standards. McRoberts v. Bowen, 841 F.2d 1077, 1080 (11th Cir. 1988); Graham v. Bowen, 790 F.2d 1572, 1575 (11th Cir.1986). There is no presumption that the legal standard applied by the Commissioner was valid, or that it was properly applied. Lamb v. Bowen, 847 F.2d 698, 702 (11th Cir.1988). Moreover, the application of a wrong legal standard is grounds for remand. See Moncrief v. Gardner, 357 F.2d 651 (5th Cir.1966).[3]
II. Entitlement to Benefits
A claimant is entitled to receive disability benefits when she is unable to "engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months." 42 U.S.C. § 423(d)(1)(A). In evaluating whether an individual is disabled under § 423(d)(1)(A), the Commissioner must engage in a five-part sequential evaluation[4] as set out in 20 C.F.R. § 404.1520. Phillips v. Barnhart, 357 F.3d 1232, 1237 (11th Cir.2004).
Claimant raises three issues in her request for review: (1) that the ALJ did not provide a sufficient "narrative discussion" in the RFC assessment at step four of the five-part test and did not consider a "sit/ stand option," (Claimant's Br. [9-1] at 17-24); (2) that the ALJ dismissed Dr. Clark's opinion without adequately refuting it (id. at 25-29); and (3) that the ALJ *1373 failed to address the required regulatory factors in assessing Claimant's credibility or adequately weigh Claimant's testimony (id. at 29-31). The Magistrate recommended that the decision of the ALJ be affirmed. (Final Report & Recommendation [18] at 1.) Claimant makes three specific objections to the Report and Recommendation and, "[i]nstead of repeating the arguments raised in prior briefs, . . . incorporates them by reference[,]" requesting de novo review of Claimant's initial brief. (Claimant's Objections [19] at 9.)
As an initial matter, the Court declines to consider de novo all of Claimant's arguments. A district court judge is empowered, in part to encourage efficiency, tp designate a magistrate judge to conduct hearings and submit proposed findings of fact and recommendations. 28 U.S.C. § 636(b)(1)(B); Mathews v. Weber, 423 U.S. 261, 267-68, 96 S. Ct. 549, 46 L. Ed. 2d 483 (1976); Nettles v. Wainwright, 677 F.2d 404, 406 (5th Cir.1982).[5] Parties to a dispute upon which a Report and Recommendation has been made are invited to file objections to that Report and Recommendation. 28 U.S.C. § 636(b)(1)(B) ("Within ten days after being served with a copy, any party may serve and file written objections to such proposed findings and recommendations as provided by rules of court."). Under this system, when a party makes a timely and specific objection to a portion of the Report and Recommendation, the district court is obliged to engage in a de novo review of the issues raised on objection. Id. ("A judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.") (emphasis added); United States v. Raddatz, 447 U.S. 667, 674, 100 S. Ct. 2406, 65 L. Ed. 2d 424 (1980); Nettles, 677 F.2d at 409. However, issues upon which no specific objections are raised do not so require de novo review; the district court may therefore "accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge[,]" applying a clearly erroneous standard. 28 U.S.C. § 636(b)(1); Nettles, 677 F.2d at 409 ("[T]he failure of a party to file written objections to proposed findings and recommendations in a magistrate's report . . . shall bar the party from a de novo determination by the district judge of an issue covered in the report."); see Liberty Am. Ins. Group, Inc. v. West-Point Underwriters, L.L.C., 199 F. Supp. 2d 1271, 1276 (M.D.Fla.2001) ("[T]he district court will review those portions of the R & R that are not objected [to] under a clearly erroneous standard."); Am. Charities for Reasonable Fundraising Regulation, Inc. v. Pinellas County, 278 F. Supp. 2d 1301, 1307 (M.D.Fla.2003) ("[W]hen no timely and specific objections are filed, case law indicates that the court should review the findings using a clearly erroneous standard."); Lombardo v. United States, 222 F. Supp. 2d 1367, 1369 (S.D.Fla.2002); Gropp v. United Airlines, Inc., 817 F. Supp. 1558, 1561-62 (M.D.Fla.1993); Chamblee v. Schweiker, 518 F. Supp. 519, 520 (N.D.Ga.1981) ("[W]hen [a] party is notified of [the] right to object to the magistrate's report . . . and fails to do so, he or she has waived this right to de novo consideration of the issues raised in the case . . . [and] use of a standard of review more closely akin to the rule 52 `clearly erroneous' standard is appropriate."). As *1374 such, in accord with the intent of 28 U.S.C. § 636, the portions of the Report and Recommendation to which Defendant has made no specific objections will be reviewed to determine whether they are clearly erroneous, that is "if, after viewing all the evidence, [the Court is] `left with the definite and firm conviction that a mistake has been committed.'" HGI Assocs., Inc. v. Wetmore Printing Co., 427 F.3d 867, 873 (11th Cir.2005) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S. Ct. 525, 92 L. Ed. 746 (1948)).
A. Sufficiency of the RFC assessment
Claimant makes two basic arguments concerning the insufficiency of the ALJ's RFC assessment. First, Claimant argues that the assessment itself was deficient for not following the rules set out by the Commissioner requiring a "narrative discussion" of the RFC assessment. (Claimant's Br. [9-1] at 17-24.) Second, Claimant argues that the ALJ committed error by not considering a "sit/stand option" in the RFC assessment. (Id. at 24.) These arguments will be considered in turn.
1. The RFC assessment was accompanied by an adequate narrative discussion
The RFC assessment is made prior to, and used in, steps four and five of the fivepart evaluation under 20 C.F.R. § 404.1520. See 20 C.F.R. § 404.1520(e). The Eleventh Circuit describes the RFC as "an assessment, based upon all of the relevant evidence, of a claimant's remaining ability to do work despite his impairments." Lewis v. Callahan, 125 F.3d 1436, 1440 (11th Cir.1997). The Commissioner, however, clarified the RFC assessment process in Social Security Ruling 96-8p:
The RFC assessment must include a narrative discussion describing how the evidence supports each conclusion, citing specific medical facts (e.g., laboratory findings) and nonmedical evidence (e.g., daily activities, observations). In assessing RFC, the adjudicator must discuss the individual's ability to perform sustained work activities in an ordinary work setting on a regular and continuing basis (i.e., 8 hours a day, for 5 days a week, or an equivalent work schedule), and describe the maximum amount of each work-related activity the individual can perform based on the evidence available in the case record. The adjudicator must also explain how any material inconsistencies or ambiguities in the evidence in the case record were considered and resolved.
Claimant argued before the Magistrate that the ALJ had failed to provide the required narrative discussion of Claimant's functional limitations in the RFC assessment. (Claimant's Br. [9-1] at 17-24.) The Magistrate, however, found that the ALJ properly assessed Claimant's RFC because the ALJ's decision "contain[ed] a recitation and discussion of the medical evidence of record, the state agency consultants, and the Claimant's testimony" and "[did] not make a conclusory, categorical RFC assessment (i.e., the ALJ did not make a simple, broad statement that the Claimant could perform the full range of light work[).]" (Final Report & Recommendation [18] at 30.) Claimant has filed no specific objections to the Magistrate's conclusion on this issue and therefore the Court reviews it for clear error. The Court finds that the Magistrate's Report and Recommendation concerning the RFC assessment was not clearly erroneous and that the ALJ's RFC assessment was supported by substantial evidence. Therefore, the Court specifically adopts the recommendation of the Magistrate with regard to the sufficiency of the ALJ's evaluation of Claimant's RFC *1375 as found in Part Five (B)(1) of the Magistrate's Report and Recommendation.
2. The "Sit/Stand option" on remand
In the pre-remand decision from 1998, the ALJ found that Claimant "lacked the residual functional capacity to lift and carry more than 10 pounds frequently and 20 pounds occasionally, and perform activities requiring frequent bending. She also required a sit/stand option." (Tr. 20.) After vacating the previous ALJ decision, the Appeals Council remanded the case to the Office of Hearings and Appeals, stating:
The Appeals Council agreed to remand in this case because further development regarding the demands of the claimant's past relevant work is warranted. The decision indicates that the claimant can perform a range of light work not requiring frequent bending, and providing the option to alternate between sitting and standing. The decision further indicates that such residual functional capacity would not preclude performance of the claimant's past relevant work as a video store clerk, office clerk, and apartment leasing manager, as generally performed in the national economy. There is no evidence, however, clearly indicating that any of those jobs would allow the claimant to alternate between sitting and standing. Further consideration is therefore warranted.
On remand, the Administrative Law Judge will further develop the record regarding the demands of the claimant's past relevant work, and obtain evidence from a vocational expert to clarify whether the claimant could meet the demands of such work or perform other work existing in significant numbers in the national economy.
(Tr. 458 (emphasis added).)
In the post-remand ALJ decision, the ALJ found that Claimant had a RFC "to perform light exertion level work with occasional restrictions against bending, stooping or crouching." (Tr. 451.) The ALJ did not, however, consider, or even mention, a "sit/stand option" in any portion of the post-remand decision. Claimant contends that it was error not to follow the remand order from the Appeals Council. The Court agrees.
On remand from the Appeals Council "[t]he administrative law judge shall take any action that is ordered by the Appeals Council and may take any additional action that is not inconsistent with the Appeals Council's remand order." 20 C.F.R. § 404.977(b) (emphasis added). In the instant case, the remand order noted that "fflurther consideration" was warranted to determine whether Claimant's former jobs would allow her to "alternate between sitting and standing." The ALJ was specifically tasked with "further develop[ing] the record regarding the demands of the claimant[']s past relevant work, and obtain[ing] evidence from a vocational expert to clarify whether the claimant could meet the demands of such work[.]" (Tr. 458 (emphasis added).) While the Appeals Council's statements concerning the insufficiency of the previous ALJ's decision in establishing that Claimant's past relevant work would allow her to alternate between sitting and standing could be construed as simply conveying the pertinent facts, when read in the context of the entirety of the Appeals Council's order remanding for further proceedings, the Court cannot subscribe to this view. The Appeals Council specifically mandated that "further develop[ment]" of the record was required with regard to the demands of Claimant's past relevant work. In light of the Appeals Council's statements that the previous decision was deficient because of its treatment of the "sit/stand option" and that further review was therefore required, this Court construes the Appeals Council's remand order as requiring the consideration *1376 of the "sit/stand option," even if that consideration entailed the debunking thereof. As such, because the "sit/stand option" was not considered or discussed, error has been committed. 20 C.F.R. § 404.977(b); See Thompson v. Barn/tart, 2006 WL 709795, *11-12 (E.D.Pa. March 15, 2006) ("The ALJ has . . . committed legal error by not following the mandate of the court, and by not following the regulations of the Social Security Administration itself which require adherence to the remand orders of the Appeals Council.").
B. Evaluation of Dr. Clark's opinion
On March 24, 1997, Dr. Jelunder Clark, Claimant's treating physician at that time, provided Claimant with a medical opinion letter stating, in pertinent part:
I have had the opportunity to review the records for the treatment [Claimant] received from Charles Johnson, MD. Having reviewed those records, it is my opinion that she has been disabled from any gainful employment except sedentary work since 1987. However, since 1976 Ms. Tauber has received treatment for tension headaches, lumbosacral sprain, and chronic lower back pain. Since 1979, she has received treatment for anxiety and ulcers. She also suffers from depression since 1984.
Ms. Tauber is disabled and has been since 1987.
(Tr. 423.)
The ALJ noted that "he [had] considered the opinion of Dr. Clark that Claimant [was] disabled, but [found] that Dr. Clark's opinion that Claimant [was] disabled [was] not controlling" because the "issue of `disability' is the ultimate issue which is reserved to the [ALJ]" and "involves vocational as well as medical issues." (Tr. 448.) Claimant argued before the Magistrate that the ALJ erred by failing to address Dr. Clark's opinion that Claimant was limited to sedentary work and by not attempting to "recontact Dr. Clark to clarify the reason for the disability opinion." (Claimant's Br. [9-1] at 28-29.) The Magistrate found that, although the Eleventh Circuit requires that a treating physician's opinion should be afforded great weight unless good cause exists for rejecting it, Lewis, 125 F.3d at 1440, "Dr. Clark's opinion has no evidentiary value" because her opinion was not based on her clinical findings and treatment of the Claimant, but on her evaluation of another treating physician's records. (Final Report & Recommendation [18] at 39.)
Claimant objects to this portion of the Report and Recommendation because "the court cannot provide an explanation for the ALJ's decision[; t]he Court can affirm the ALJ only if the reasoning in the decision itself is legally proper and supported by substantial evidence." (Claimant's Objections [19] at 5 (citing NLRB v. Kentucky River Cmty. Care, Inc., 532 U.S. 706, 722 n. 3, 121 S. Ct. 1861, 149 L. Ed. 2d 939 (2001)).) The Court will proceed with a de novo review of the ALJ's evaluation of Dr. Clark's opinion.
The Social Security Administration's regulations state that if a treating physician gives an opinion that is "well-supported by medically acceptable clinical and laboratory diagnostic techniques and is not inconsistent with the other substantial evidence in [Claimants] case record" it will receive "controlling weight." 20 C.F.R. § 404.1527(d)(2). If a medical opinion is not found to be controlling, the agency will still apply a set of factors to determine the weight it should receive and the agency "will always give good reasons in [its] notice of determination or decision for the weight [it gave to Claimant's] treating source's opinion." Id. The factors to be considered for both examining and nonexamining physicians, see id. at § 404.1527(f), as listed in the regulation *1377 are: (1) the length of treatment; (2) the nature and extent of the treatment; (3) the extent of evidence presented by the physician to support the opinion; (4) the consistency of the opinion with the record as a whole; (5) whether the physician is a specialist; and (6) any other factors brought to the agency's attention that would either support or contradict the opinion. Id. at § 404.1527(d). Although 20 C.F.R. § 404.1527(e) indicates that opinions as to certain issues which are "dispositive of a case," such as whether a claimant is disabled under the Act or whether a claimant maintains a specific RFC, are not "medical opinions" to which "special significance" will be attached, "opinions from any medical source about issues reserved to the Commissioner must never be ignored, and . . . the notice of the determination or decision must explain the consideration given to the treating source's opinion(s)." Social Security Ruling 96-5p (emphasis added).[6] Opinions about both an individual's RFC and whether that individual is disabled are "opinions of medical sources reserved to the Commissioner" to which "the adjudicator must apply the applicable factors in 20 C.F.R. [§] 404.1527(d)[.]" Id.
In the instant case, Dr. Clark, a physician at Kaiser Permanente, where Claimant sought medical treatment, provided an opinion, in the form of a letter, stating that Claimant was "disabled from any gainful employment except sedentary work since 1987" and that Claimant "[was] disabled and [had] been since 1987."[7] The ALJ correctly determined that Dr. Clark's opinion about Claimant's ultimate disability was not "controlling," as the "ultimate issue" of disability is an "opinion[] on [an] issue[] reserved to the Commissioner." 20 C.F.R. § 404.1527(e). Notwithstanding the apparent correctness of that determination, the ALJ was also required by Social Security Ruling 96-5p, which is binding on the ALJ, to specifically consider and discuss the factors listed in 20 C.F.R. § 404.1527(d) as to Dr. Clark's opinions on both Claimant's RFC and disability status. As such, it was error for the ALJ to dismiss Dr. Clark's opinions without consideration and discussion of the regulatory factors.
Moreover, under Eleventh Circuit jurisprudence, when examining the objective medical record, a treating physician's opinion should be afforded great weight unless good cause exists for not doing so. Lewis, 125 F.3d at 1440 (citing MacGregor v. Bowen, 786 F.2d 1050, 1053 (11th Cir.1986); Broughton v. Heckler, 776 F.2d 960, 961-62 (11th Cir.1985)). "Good cause" exists when the: "(1) treating physician's opinion was not bolstered by the evidence; (2) evidence supported a contrary finding; or (3) treating physician's opinion was conclusory or inconsistent with the doctor's own medical records." Phillips *1378 v. Barnhart, 357 F.3d 1232, 1240-41 (11th Cir.2004) (citing Lewis, 125 F.3d at 1440). Further, the ALJ must clearly articulate his or her reasons when electing to disregard the opinion of a treating physician and the failure to do so constitutes reversible error. Id. at 1241 (citing Lewis, 125 F.3d at 1440); Lewis, 125 F.3d at 1440; Jones v. Bowen, 810 F.2d 1001, 1005 (11th Cir.1986).
Here, even assuming that the ALJ has adequately dismissed the opinion of Dr. Clark as to whether Claimant was "disabled," Dr. Clark's opinion that Claimant was limited to sedentary work was not addressed. On the record before it, the Court cannot discern what weight, if any, was' attributed to Dr. Clark's RFC opinion and, as such, cannot assess whether the ALJ had "good cause" in not considering that opinion.
Without question, the Court is reticent to remand a case where, as here, the procedural history is at best confusing and, in all likelihood, the end result was not incorrect. Although, based on both the brevity of Dr. Clark's opinion and the conclusory nature thereof, the Court would likely conclude that good cause does exist, the reasons for dismissal of a physician's opinion must be clearly articulated. Because the Court concludes that the ALJ's decision was deficient in dismissing Dr. Clark's opinion under both the relevant caselaw of the Eleventh Circuit requiring "good cause," Lewis, 125 F.3d at 1440, and the relevant administrative regulations and rulings requiring the consideration and discussion of specific factors, 20 C.F.R. § 404.1527(d); Social Security Ruling 96-5p, the ALJ's decision was erroneous.
C. Assessment of Claimant's credibility
Claimant contends that, although the ALJ cited the proper standard for a credibility determination, the ALJ both failed to articulate any explicit or adequate reasons for finding that Claimant's pain testimony was not credible and failed to consider the factors set out in 20 CFR § 404.1529. (Claimant's Br. [9-1] at 29-30.) The Magistrate recommended that the ALJ's decision be upheld and Claimant objected thereto.
1. The mandatory factors were considered
Social Security Ruling 96-7p states that because "an individual's symptoms can sometimes suggest a greater level of severity of impairment than can be shown by the objective medical evidence alone," when assessing a claimant's credibility, the ALJ must consider the factors set forth in 20 C.F.R. § 404.1529 which include:
1. The individual's daily activities;
2. The location, duration, frequency, and intensity of the individual's pain or other symptoms;
3. Factors that precipitate and aggravate the symptoms;
4. The type, dosage, effectiveness, and side effects of any medication the individual takes or has taken to alleviate pain or other symptoms;
5. Treatment, other than medication, the individual receives or has received for relief of pain or other symptoms;
6. Any measures other than treatment the individual uses or has used to relieve pain or other symptoms (e.g., lying flat on his or her back, standing for 15 to 20 minutes every hour, or sleeping on a board); and
7. Any other factors concerning the individual's functional limitations and restrictions due to pain or other symptoms.
Social Security Ruling 96-7p.
Upon review of the entirety of the ALJ decision, the Court finds that the *1379 ALJ considered the factors from 20 CFR § 404.1529. The record reveals that the ALJ considered and discussed: (1) that Claimant "watches television, shops at the mall, cooks, mops some, and drives" (Tr. 449); (2) that Claimant experiences pain in her back, neck, lower abdomen, left shoulder, legs, bowels, wrists, hands and feet (id. at 446-49); (3) that bending, sitting, standing, reaching, climbing up and down a stool, and household chores aggravate Claimant's pain (id. at 449); (4) that Claimant has received treatment through Tagamet, antacids, B-12 injections, Motrin, and "Estrogens with Ogen cycling with Provera" (id. `at 446-49); (5) that Claimant's pain is alleviated by lying down frequently and sitting down after a few minutes of' work (id. at 449); and (6) that repetitive movements aggravate the pain in Claimant's left shoulder (id.). Although the ALJ did not discuss any non-medication treatments that Claimant received, Claimant points to nothing in the record to indicate that such evidence was before the ALJ. In any event, the failure to discuss this single factor was not fatal. In sum, the ALJ considered the factors set forth in Social Security Ruling 96-7p and 20 CFR § 404.1529 and, as such, the Court finds no error with that portion of the ALJ's determination.
2. The ALJ's determination of Claimant's testimony was inadequate
The ALJ is bound to consider the "subjective evidence of pain and disability as testified to by the claimant and corroborated by other observers, including family members." Bloodsworth v. Heckler, 703 F.2d 1233, 1240 (11th Cir.1983). If the ALJ decides not to credit a claimant's testimony as to pain, the ALJ must articulate explicit and adequate reasons for doing so. Walker v. Bowen, 826 F.2d 996, 1004 (11th Cir.1987); Hale, 831 F.2d at 1011; MacGregor, 786 F.2d at 1054. In making a credibility assessment, the ALJ must "consider the entire case record and give specific reasons for the weight given to the individual's statements." Social Security Ruling 96-'7p. The reasons for making the credibility finding "must be grounded in the evidence and articulated in the determination or decision." Id. Moreover, "[at is not sufficient to make a conclusory statement that the individual's allegations have been considered' or that the allegations are (or are not) credible.' It is also not enough for the adjudicator simply to recite the factors that are described in the regulations for evaluating symptoms." Id. The ALJ's decision "must contain specific reasons for the finding on credibility, supported by the evidence in the case record, and must be sufficiently specific to make clear to the individual and to any subsequent reviewers the weight the adjudicator gave to the individual's statements and the reasons for that weight." Id.
In the instant case, the ALJ found that the claimant had testified that (1) she had left her job as a video clerk because she could not be on her feet or bend and experienced pain from such activities; (2) she had back and knee problems, as well as problems with her feet; (3) "she could stand for one hour, but could not stand in one position"; (4) she had problems "getting up and down from a stool"; (5) she had problems with her left arm, for which she had received treatment; and (6) repetitive arm movements bothered her left shoulder. (Tr. 449.) The ALJ further found that Claimant had "good days and bad days," but that she "had no problems doing the mental part of her work," and that she "never quit a job due to problems with her hands." (Id.) The ALJ also noted the testimony of Claimant's husband that (1) he has seen Claimant lying down at work; (2) Claimant can vacuum for a few minutes but then has to sit down; (3) he sometimes is forced to wash the dishes *1380 because Claimant cannot stand for a long enough period; (4) when Claimant worked for the video store she could not stand or sit for any length of time; and (5) because of Claimant's pain she is "grouchy" and doesn't accept criticism very well. (Id.) The ALJ then correctly stated the requirements for making a credibility assessment, even citing to Social Security Ruling 96-7p. (Id.) In this regard, the ALJ stated:
In making this assessment, the undersigned must consider all symptoms, including pain, and the extent to which these symptoms can reasonably be accepted as consistent with the objective medical evidence and other evidence based on the requirements of 20 C.F.R. §.404.1529, and Social Security Ruling 96-7p. The undersigned must also consider any medical opinions, which are statements from acceptable medical sources, which reflect judgments about the nature and severity of the impairments and resulting limitations (20 C.F.R. § 404.1527 and Social Security Rulings 96-2p and 96-6p).
(Id.)
The ALJ's credibility finding, as to Claimant's testimony, was limited to stating that:
The claimant has impairments that are reasonably expected to produce some degree of limitation, but her complaints suggest a greater severity of impairment than can be shown by the objective medical evidence alone. Based on all of the evidence, the undersigned finds that the claimant's subjective allegations are credible to the extent that she can perform no more tha[n] light exertion level work restricted against bending, stooping or crouching. . . . The undersigned notes that the claimant testified that she watches television, shops at the mall, cooks, mops some, and drives a car, which are activities that are consistent with the assessed RFC for light exertional work.
(Tr. 449-50.)
The Court concludes that the ALJ's credibility determination, with regard to Claimant's subjective pain testimony, is deficient for failing to articulate explicit and adequate reasons for the weight given to Claimant's statements and the reason for that weight. In assessing Claimant's credibility, the ALJ stated that Claimant's subjective pain statements "suggest a greater severity of impairment than can be shown by the objective medical evidence alone." While it is apparent that the ALJ perceives a conflict between Claimant's testimony and the objective medical evidence, that conflict is not explained. In order to examine whether the ALJ's decision to discredit Claimant's testimony is supported by substantial evidence, as this Court is tasked to do, the ALJ must, at least, provide a record that indicates what the conflict is and how that conflict affected his credibility determination. Simply stating that the subjective complaints of pain "suggest a greater severity of impairment than can be shown by the objective medical evidence" does not adequately apprise the Court, or the Claimant, of the weight with which the ALJ viewed Claimant's testimony or, more importantly, why such a determination was made. As such, the ALJ's credibility assessment does not articulate the explicit and adequate reasons required by the Eleventh Circuit, see Foote v. Chater, 67 F.3d 1553, 1562 (11th Cir.1995) ("Explicit credibility findings are `necessary and crucial where subjective pain is an issue") (quoting Walden v. Schweiker, 672 F.2d 835, 839 (11th Cir.1982)); Walker, 826 F.2d at 1004, and Social Security Ruling 96-7p. The Court, therefore, concludes that the ALJ's credibility assessment of Claimant's subjective pain testimony was erroneous.
*1381 Conclusion
For the reasons set forth above, Claimant's Objections to the Magistrate's Report and Recommendation [19] are AFIRMED IN PART and OVERRULED IN PART; the Magistrate's Report and Recommendation [18] is ADOPTED IN PART and REJECTED IN PART. Pursuant to 42 U.S.C. § 405(g) his matter is hereby REMANDED to the Commissioner for further proceedings not inconsistent with this Order.
NOTES
[1] The "sit/stand option," as noted in the preremand All decision, is essentially the ability to alternate between sitting and standing. A Social Security Ruling governing the consideration of the RFC to perform sedentary work suggests that the All should consider allowing the claimant to "alternate sitting and standing." Social Security Ruling 96-9p. While the "sit/stand option" suggested by Social Security Ruling 96-9p refers to the need to stand after sitting for a period of time, it appears that in Claimant's case the "sit/stand option" refers to a need to sit after standing for a period of time.
[2] Specifically the ALJ found:
1. The claimant met the nondisability requirements for a period of disability and Disability Insurance Benefits set forth in Section 216(i) of the Social Security [Act] and was insured for benefits . . . during the period under consideration, but not thereafter. The claimant has failed to establish that she was under a disability prior to September 30, 1990, her date last insured under Title II of the Social Security Act.
2. The claimant did not engage in substantial gainful activity during the period under consideration.
3. The claimant, from June 3, 1987 to [September] 30, 1990, the period under consideration, had impairments of hypothyroidism, B 12 deficiency, and degenerative disc disease, considered "severe" based on the requirements in the Regulations 20 CFR § 404.1520(b).
4. These medically determinable impairments did not meet or medically equal one of the listed impairments in Appendix 1, Suppart P, Regulation No. 4 during the period under consideration.
5. The undersigned finds the claimant's allegations regarding her limitations during the period under consideration are not totally credible for the reasons set forth in the body of the decision.
6. The claimant had the residual functional capacity during the period under consideration to perform light exertion level work with occasional restrictions against bending, stooping or crouching.
7. The claimant's past relevant work as [a] file clerk, leasing agent/assistant apartment manager, and flower arranger did not require the performance of work-related activities during the period under consideration that were precluded by her residual functional capacity (20 CFR § 404.1565).
8. The claimant's medically determinable impairments of hypothyroidism, B12 deficiency, and degenerative disc disease from June 3, 1987 to September 30, 1990, the period under consideration, did not prevent the claimant from performing her past relevant work.
9. The claimant was not under a "disability" as defined in the Social Security Act, at any time from June 3, 1987 to September 30, 1990, the period under consideration in this decision (20 CFR § 404.1520(e)).
(Tr. 451.)
[3] The Eleventh Circuit adopted as binding precedent all Fifth Circuit decisions prior to October 1, 1981, and all Fifth Circuit Unit B decisions after October 1, 1981. See Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en bane); Stein v. Reynolds Secs., Inc., 667 F.2d 33, 33 (11th Cir.1982).
[4] The five-step sequential evaluation requires consideration of the following:
(1) If the claimant is "doing substantial gainful activity, [the Commissioner] will find that [the claimant is] not disabled." 20 C.F.R. §§ 404.1520(a)(4)(i) & (b) (2006).
(2) If the claimant does not "have a severe medically determinable physical or mental impairment that meets the duration requirement in § 404.1509, or a combination of impairments that is severe and meets the duration requirement, [the Commissioner] will find that [the claimant is] not disabled." Id. at §§ 404.1520(a)(4)(ii) & (c).
(3) "If [the claimant has] an impairment(s) that meets or equals one of [the listed disabilities] and meets the duration requirement, [the Commissioner] will find that [the claimant is] disabled." Id. at §§ 404.1520(a)(4)(iii) & (d).
(4) Considering the Commissioner's assessment of the claimant's RFC, if the claimant "can still do [his or her] past relevant work, [the Commissioner] will find that [the claimant is] not disabled." Id. at §§ 404.1520(a)(4)(iv) & (e).
(5) Considering the Commissioner's assessment of the claimant's RFC, age, education, and work experience, if the claimant "can make an adjustment to other work, [the Commissioner] will find that [the claimant is] not disabled[,]" otherwise the Commissioner will find the claimant is disabled. Id. at §§ 404.1520(a)(4)(v), (f) & (g).
[5] Although the Fifth Circuit has since overruled Nettles, see Douglass v. United Services Auto. Ass'n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc), Nettles remains binding precedent in the Eleventh Circuit because Douglass was decided after October 1, 1981 and was not a Unit B decision. Jones v. Sec'y for Dep't of Corr., 131 Fed.Appx. 164, 166 n. 3 (11th Cir.2005).
[6] Social Security Rulings are published "under the authority of the Commissioner of Social Security. They are binding on all components of the Social Security Administration. These rulings represent precedent final opinions and orders and statements of policy and interpretations that [the agency has] adopted." 20 C.F.R. § 402.35(b)(1); see Boone v. Barnhart, 353 F.3d 203, 210 n. 16 (3d Cir.2003); Wilson v. Comm'r of Soc. Sec., 378 F.3d 541, 550 n. 1 (6th Cir.2004); see also Sullivan v. Zebley, 493 U.S. 521, 531 n. 9, 110 S. Ct. 885, 107 L. Ed. 2d 967 (1990) ("Social Security Rulings are agency rulings published under the authority of the Commissioner of Social Security and are binding on all components of the Administration.") (internal quotations omitted).
[7] The Court views this, albeit short and seemingly conclusive, letter as providing two separate opinions: (1) that Claimant was unable to perform all but sedentary work since 1987; and (2) that Claimant was disabled since 1987. The first opinion is an RFC assessment and the second opinion is, a disability assessment.
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258 P.3d 145 (2011)
Joaquin CHAVEZ and Elvira Chavez, as husband and wife in their capacity as the parents of Joaquin Chavez, a minor; Santiago Valle and Yolba Valle, as husband and wife in their capacity as the parents of Yuriel Valle, a minor, Plaintiffs/Appellants/Cross-Appellees,
v.
ARIZONA SCHOOL RISK RETENTION TRUST, INC., an Arizona corporation, Defendant/Appellee/Cross-Appellant.
No. 2 CA-CV 2010-0112.
Court of Appeals of Arizona, Division 2, Department A.
May 18, 2011.
*146 Barassi, Curl & Abraham, P.L.C. By David L. Curl and Katrina M. Conway, Tucson, Attorneys for Plaintiffs/Appellants/Cross-Appellees.
Holm Wright Hyde & Hays PLC By Alan K. Hyde and J. Thomas Allen, Phoenix, Attorneys for Defendant/Appellee/Cross-Appellant.
OPINION
HOWARD, Chief Judge.
¶ 1 Appellants Elvira and Joaquin Chavez, on behalf of their minor son, and Yolba and Santiago Valle, on behalf of their minor son, challenge the trial court's grant of summary judgment in favor of appellee Arizona School Risk Retention Trust, Inc. ("the Trust") in their action seeking judicial determination of their children's status as insured parties under the underinsured motorist provision of a motor vehicle liability policy provided by the Trust. Appellants argue here that both Arizona law and the insurance policy require that the children be insured and, therefore, entitled to recovery. For the following reasons, we reverse and remand.
Factual and Procedural Background
¶ 2 We view the facts and reasonable inferences from those facts in the light most favorable to the party against whom summary judgment was granted. Andrews v. Blake, 205 Ariz. 236, ¶ 12, 69 P.3d 7, 11 (2003). But most of the facts here are undisputed. Appellants' minor children, students in the Marana Unified School District, were waiting in line to board one of its school buses when a vehicle came from behind the bus, colliding with the bus and then the students. The school district is insured with the Trust for automobile liability insurance, which includes an underinsured motorist ("UIM") provision. The Trust denied that the students were insured under the UIM provision. Appellants sued the Trust. Both parties moved for summary judgment, and the trial court ultimately granted the Trust's motion. This appeal followed.[1]
Discussion
¶ 3 Appellants contend they are entitled to UIM benefits under Arizona law. They assert that because the students were using the bus with permission, as described in A.R.S. § 28-4009(A)(2), they were insured for purposes of liability and entitled to UIM benefits according to A.R.S. § 20-259.01(B). We review de novo a grant of summary judgment. Valder Law Offices v. Keenan Law Firm, 212 Ariz. 244, ¶ 14, 129 P.3d 966, 971 (App. 2006).
¶ 4 Section 20-259.01(B) requires an insurer for automobile or motor vehicle liability to offer UIM coverage to "all persons insured under the policy." Under § 28-4009(A)(2) a motor vehicle liability policy must insure the person named in the policy and any other *147 person "using the motor vehicle ... with the express or implied permission of the named insured" against liability "arising out of the ownership, maintenance or use" of the vehicle. Thus, a UIM provision must insure a person using a vehicle with permission. See Tobel v. Travelers Ins. Co., 195 Ariz. 363, ¶¶ 39-40, n. 5, 988 P.2d 148, 155-56, 155 n. 5 (App.1999).
¶ 5 In addressing a previous version of § 28-4009, our supreme court decided the term "use" included loading and unloading the vehicle.[2]Mission Ins. Co. v. Aid Ins. Servs., 120 Ariz. 220, 221-22, 585 P.2d 240, 241-42 (1978) (negligently closing valve on storage tank during unloading oil, allowing hot oil to spray on plaintiff, within "use" of vehicle). And, the term "use" of a vehicle in an insurance liability contract included failing to close a window properly to secure a dog. Farmers Ins. Co. of Ariz. v. Till, 170 Ariz. 429, 431-32, 825 P.2d 954, 956-57 (App.1991) (putting dog in back of pickup/camper "use" of inherent design of vehicle).
¶ 6 Furthermore, when a vehicle is "intended to be used as more than a means of transportation," it is a specialized vehicle and its use may depend on the nature of the owner's business and "the specialized nature and function of the vehicle involved." Tobel, 195 Ariz. 363, ¶¶ 20, 31, 988 P.2d at 152, 154. In Tobel, the underinsured claimant was an employee of a traffic barricade company who was away from his truck carrying a barricade to another location when he was hit. Id. ¶¶ 3, 7. The court found the truck was equipped with specialized safety equipment, was intended as a safety device, and the driver was using it as such. Id. ¶ 31. Therefore, the driver was covered by the policy's UIM provision. Id. ¶¶ 1.
¶ 7 A school bus is equipped with flashing safety lights and a stop sign in order to allow school children to board or exit the bus safely and cross the street. It is intended not only to transport students but also to allow them to navigate the streets safely before and after riding the bus. Therefore, a school bus is a specialized vehicle. See id. n. 4, 988 P.2d at 154 n. 4 (implicitly relying on school bus being specialized vehicle). The Marana Unified School District, which is in the business of educating students, uses its buses to board the students safely, transport them from the bus stop to school and back, unload them, and aid them in crossing the street if necessary.
¶ 8 Here, the students were waiting in line to board the school bus when the accident occurred. The bus had the "lights and haz[]a[r]ds" on. Thus, the bus was functioning to protect the students' safety at the time of the accident, and the students were using the bus's safety functions to board it for purposes of § 28-4009(A)(2). See Tobel, 195 Ariz. 363, n. 4, 988 P.2d at 154 n. 4 (relying on Newman v. Erie Ins. Exch., 256 Va. 501, 507 S.E.2d 348 (1998)); see also Newman, 507 S.E.2d at 349, 352 (student hit crossing highway "using" school bus under UIM statute when using bus's safety equipment and intending to become passenger); cf. Georgia Farm Bureau Mut. Ins. Co. v. Greene, 174 Ga.App. 120, 329 S.E.2d 204, 208 (1985) (under liability policy "use" continues "[w]hile the bus is standing guard with its lights flashing, its stop signals on and all visual signals functioning ... [and] does not conclude until the bus stops operating as a school bus in relation to that child [and] ... until each one has crossed any immediate road and is in a place of safety in a direction towards their home"); Eden Prairie Indep. Sch. Dist. 272 v. Auto-Owners Ins. Co., 279 N.W.2d 358, 359-60 (Minn.1979) (loading under liability policy "commences when the driver properly turns on the amber prewarning signals as he approaches the boarding point ... [and] terminates when he properly retracts the stop arm and extinguishes the flashing red lights"). But see First Sec. Bank of Searcy v. Doe, 297 Ark. 254, 760 S.W.2d 863, 868 (1988) (distinguishing between "user" protected under uninsured statute and unprotected passenger).
¶ 9 The Trust argues that a vehicle's passengers are never entitled to be insured for liability purposes because "use" of the vehicle consists only of driving it. However, the *148 legislature did not limit the coverage to driving. See § 28-4009(A)(2). We presume the legislature says what it means. See Turner v. City of Flagstaff, 226 Ariz. 341, ¶ 11, 247 P.3d 1011, 1013 (App.2011). And the Trust cites to no Arizona case holding that passengers are not insured for liability purposes. To the contrary, our courts specifically have interpreted "use" to include more than merely driving. See, e.g., Tobel, 195 Ariz. 363, ¶¶ 20, 31, 988 P.2d at 152, 154; Farmers Ins. Co. of Ariz., 170 Ariz. at 431-32, 825 P.2d at 956-57; Mission Ins. Co., 120 Ariz. at 222, 585 P.2d at 242; see also, Lee R. Russ et al., Couch on Insurance § 111:31 (3d ed. 2005) ("The term use' ... is given broad meaning... [and] includes more than driving or riding in an automobile; it extends to utilizing the vehicle as an instrumental means to an end in any manner intended or contemplated by the insured."); cf. Nationwide Gen. Ins. Co. v. Gov't Employees Ins. Co., 81 Md.App. 104, 566 A.2d 1117, 1124-25 (1989) (using car under policy included "be[ing] a passenger in it"); Nationwide Mut. Ins. Co. v. Davis, 118 N.C.App. 494, 455 S.E.2d 892, 893, 895 (1995) (van in "use" under policy when driver parked it and both driver and passenger/victim walking toward supermarket). Because the students were using the bus with permission and thus were insured for liability purposes as defined in § 28-4009(A)(2), Arizona law requires they be afforded UIM benefits according to § 20-259.01(B).[3]
¶ 10 Chavez further argues that the policy would cover the students by its own terms. But the UIM statute is incorporated into every policy. See Progressive Cas. Ins. Co. v. Estate of Palomera-Ruiz, 224 Ariz. 380, ¶¶ 10-11, 231 P.3d 384, 386-87 (App.2010). Because we have concluded that §§ 28-4009(A)(2) and 20-259.01(B) required the students be covered, we need not address this argument.
¶ 11 The Trust nevertheless asserts that, even if the students were covered by other provisions of the policy, the UIM provision does not extend to these students because they were waiting to board and were not, therefore, "occupying" the bus, as the insurance policy UIM provision requires. That provision defines occupying as "being in or being in physical contact with a covered Automobile, including while getting into or getting out of that covered Automobile." We need not decide this issue because the Trust's interpretation of the policy provision would exclude the students from UIM coverage required by §§ 28-4009(A)(2) and 20-259.01(B). Courts "will not interline the UM [(uninsured motorist)] and UIM statutes to permit exclusions that have not been mentioned by the legislature." Taylor v. Travelers Indem. Co. of Am., 198 Ariz. 310, ¶¶ 21-22, 9 P.3d 1049, 1056-57 (2000); see Lowing v. Allstate Ins. Co., 176 Ariz. 101, 104, 859 P.2d 724, 727 (1993) ("Exclusions and limitations on coverage are generally invalid unless contemplated by the statute"). The Trust has not shown that the statute contemplates excluding students who are using the bus but are not in physical contact with it. Consequently, summary judgment in favor of the Trust was improper.
Attorney Fees
¶ 12 Both parties request attorney fees on appeal. Pursuant to A.R.S. § 12-341.01(A), we award attorney fees to appellants, as the prevailing party, upon their compliance with Rule 21, Ariz. R. Civ.App. P. Conversely, the Trust's request for fees is denied.
Conclusion
¶ 13 In light of the foregoing, we reverse the trial court's grant of summary judgment in favor of the Trust and remand to the trial court for further proceedings.
CONCURRING: J. WILLIAM BRAMMER, JR., Presiding Judge and PHILIP G. ESPINOSA, Judge.
NOTES
[1] The Trust filed a notice of cross-appeal challenging the trial court's denial of attorney fees, but it stated in its brief that it was abandoning this challenge.
[2] The relevant portion of the statute remains substantially the same. Compare Mission Ins. Co. v. Aid Ins. Servs., 120 Ariz. 220, 221, 585 P.2d 240, 241 (1978), with § 28-4009(A)(2).
[3] We need not determine today the extent of the liability coverage for the students or when their acts arise from "the ownership, maintenance or use" of the school bus.
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456 F. Supp. 2d 25 (2006)
James HARPER, Plaintiff,
v.
John E. POTTER, Postmaster General, United States Postal Service, Defendant.
Civil Action No. 06-161(RMC).
United States District Court, District of Columbia.
October 5, 2006.
*26 Zachary J. Wolfe, Washington, DC, for Plaintiff.
Diane M. Sullivan, United States Attorney's Office, Civil Division, Washington, DC, for Defendant.
MEMORANDUM OPINION
COLLYER, District Judge.
Plaintiff James Harper brought this suit against John E. Potter, Postmaster General, in his capacity as representative of the United States Postal Service ("USPS"), alleging a single count of retaliation in violation of Title VII, 42 U.S.C. §§ 2000e et seq. The retaliation claim arises from a 7-day suspension that was issued against Mr. Harper and that was later rescinded. USPS moves for summary judgment. Because the 7-day suspension did not involve actual time away from work or any loss of pay and because it was rescinded and expunged from Mr. Harper's personnel record, it was not "materially" adverse. Further, the suspension would not have dissuaded a reasonable employee from making or supporting a charge of discrimination. Accordingly, Mr. Harper has failed to present a prima facie case of retaliation, and USPS's motion for summary judgment will be granted.
I. FACTUAL BACKGROUND
Mr. Harper was employed as a mail processing clerk with USPS in Gaithersburg, Maryland. Pl.'s Ex. 1, Equal Employment Opportunity Office's Report of Investigation ("ROI") at 69. His supervisor was Ms. Lydia Hembry. Id. On October 4, 2002, Ms. Hembry issued a 7-day
suspension against Mr. Harper. Id. at 35. The suspension stated as follows:
On October 1, 2002 at approximately 2:20 a.m., you were observed by me standing in the work area and not performing your duties. You were assigned to work on Feeder 3 at that time, and there was mail available to you. I walked over to you and instructed you to load your ledge. At approximately 3:30 a.m., I observed you sitting at the desk filling out a form 1767 [Report of Hazard, Unsafe Condition or Practice]. I instructed you again to go to your assignment and load the mail. You state to me that you were filling out a 1767 form. Again, I emphasized to you the need for you to go to work. I asked you whether or not there was an immediate hazard or safety concern in the area in which you were assigned (Feeder 3) and you replied "No." You advised me that you would go to your assignment but would note on the 1767 that I had not allowed you time to fill it out. You [sic] continued disregard of official instructions to be gainfully employed is unacceptable and will not be tolerated.
In addition, the following elements of your past record have been considered in arriving at this decision:
07-26-02 You were issued a Letter of Warning for Failure to Follow Official Instructions.[1]
Id.
A suspension like the one issued in this case is part of the USPS's progressive discipline policy. Under the terms of the Collective Bargaining Agreement between USPS and the American Postal Workers Union, AFL-CIO, employee discipline *27 starts with an official discussion and progresses to a letter of warning, a suspension of less than fourteen days, a suspension of more than fourteen days, and finally, discharge. Def.'s Mem. at 7; Def.'s Sept. 29, 2006, Notice of Filing, Ex. 1, Collective Bargaining Agreement ("CBA"), Art. 16.1-16.5. With regard to suspensions of less than fourteen days, the CBA provides:
[T]he employee against whom disciplinary action is sought to be initiated shall be served with a written notice of the charges against the employee and shall be further informed that he/she will be suspended after ten (10) calendar days during which ten-day period the employee shall remain on the job or on the clock (in pay status) at the option of the Employer. However, if a timely grievance is initiated, the effective date of the suspension will be delayed until disposition of the grievance, either by settlement or an arbitrator's final and binding decision. The employee shall remain on the job or on the clock (in pay status) at the option of the Employer.
CBA, Art. 16.4. In other words, for a 7-day suspension like the one at issue here, the employee may remain on the job and in pay status if USPS so chooses. Here, USPS did not reduce Mr. Harper's pay nor did it require Mr. Harper to take time off.[2]
A record of discipline ordinarily remains in an employee's personnel file for two years and may serve as a justification for further discipline if the employee engages in further misconduct. The CBA provides:
The records of a disciplinary action against an employee shall not be considered in any subsequent disciplinary action if there has been no disciplinary action initiated against the employee for a period of two years.
Upon the employee's written request, any disciplinary notice or decision letter will be removed from the employee's official personnel folder after two years if there has been no disciplinary action initiated against the employee in that two year period.
Id., Art. 16.10. In this case, Mr. Harper grieved the 7-day suspension through the union, and it was rescinded in a grievance resolution on November 13, 2002. ROI at 37.
Two days prior to the issuance of the 7-day suspension, Mr. Harper had filed an EEO complaint regarding Ms. Hembry's conduct during the September 30/October 1, 2002, night shift. Id. at 69. Mr. Harper's EEO complaint alleged that Ms. Hembry treated him differently than she treated female employees, thereby discriminating against him based on his gender.[3]Id. The EEO complaint alleged that *28 Ms. Hembry "is always treating me about my work performance" and that she unfairly accused him of not keeping his feeder loaded on the flat sorter machine when other, female, employees kept their feeders loaded at all times.[4]Id.
Mr. Harper alleges that Ms. Hembry issued the 7-day suspension in retaliation for his EEO activity two days earlier. LISPS filed a motion for summary judgment arguing that the suspension was not materially adverse because Mr. Harper suffered no consequences from it and that the suspension would not have dissuaded any reasonable person from engaging in EEO activity. The motion for summary judgment was fully briefed, and the parties presented oral argument on the motion at a hearing on September 25, 2006.
II. STANDARD OF REVIEW
Under Rule 56 of the Federal Rules of Civil Procedure, 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 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, a 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.
III. ANALYSIS
Title VII prohibits an employer from retaliating against an employee because he "has opposed any practice made an unlawful employment practice by this title, or because [he] has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this title." 42 U.S.C. § 2000e-3(a). To establish a prima facie case of retaliation,[5] a plaintiff must show that: 1) he engaged in protected activity; 2) he suffered an adverse action; and 3) a causal connection exists between the protected activity and the adverse action. Holcomb v. Powell, 433 F.3d 889, 901-02 (D.C.Cir.2006).
*29 An "adverse action" supporting a retaliation claim is not limited "to those that are related to employment or occur at the workplace." Burlington Northern & Santa Fe Ry. v. White, ___ U.S. ___, ___, 126 S. Ct. 2405, 2409, 165 L. Ed. 2d 345 (2006). However, a plaintiff must show that the employer's actions "would have been materially adverse to a reasonable employee." Id. "The anti-retaliation provision protects an individual not from all retaliation, but from retaliation that produces an injury or harm." Id. at 2414. The employer's action must be "materially" adverse because the statute protects employees from significant harms and does not protect an employee from "those petty slights or minor annoyances that often take place at work and that all employees experience." Id. at 2415.
Further, to support a claim for retaliation, "an employer's actions must be harmful to the point that they could well dissuade a reasonable worker from making or supporting a charge of discrimination." Id. An objective, "reasonable person" standard applies. Id. "[T]he significance of any given act of retaliation will often depend upon the particular circumstances. Context matters." Id.; see, e.g., Gardner v. Dist. of Columbia, 448 F. Supp. 2d 70, 75, 2006 WL 2423333, at *4 (D.D.C.2006) (plaintiff s allegation that her superiors treated her "badly" did not rise to the level of adverse action under the anti-retaliation statute).
The 7-day suspension in this case was not materially adverse. Because USPS did not require Mr. Harper to be absent from work and did not reduce his pay, the 7-day suspension was not a suspension at all. Moreover, the 7-day suspension imposed upon Mr. Harper on October 4, 2002, was rescinded and expunged from Mr. Harper's employment record on November 13, 2002, just over one month later in response to his grievance. The suspension bore no consequences, and it remained part of Mr. Harper's personnel record for the briefest of periods. Under the unique circumstances of this case, no reasonable employee would have been dissuaded from making or supporting a charge of discrimination by the imposition of this 7-day suspension. Burlington, 126 S.Ct. at 2409.
IV. CONCLUSION
As explained above, USPS's motion for summary judgment [Dkt. # 15] will be granted, as Mr. Harper failed to present a prima facie case of retaliation. A memorializing order accompanies this Memorandum Opinion.
NOTES
[1] The parties agree that the July 26, 2002, Letter of Warning should not have been used as a basis for the 7day suspension because it had been rescinded on August 4, 2002. Mem. in Support of Def.'s Mot. for Summ. J. ("Def.'s Mem.") at 7; Pl.'s Mem. of Points and Authorities in Opp'n to Def.'s Mot. for Summ. J. ("Pl.'s Mem.") at 3.
[2] However, Mr. Harper never returned to work after October 4, 2002, the date of the 7-day suspension. He alleges that after he received the suspension, he experienced physical manifestations of extreme anxiety and went to the hospital. Pl.'s Mem. at 4. A doctor ordered Mr. Harper to stay away from work for two days, he was already scheduled to be out for two more, and then another doctor ordered him to stay away from work for another 10 days. Id. Since that time, he was diagnosed with severe emotional harm, and he has been unable to work. Id.
[3] Mr. Harper believes that Ms. Hembry harassed him because he is male and because he participated in "Brentwood Exposed." Pl.'s Mem. at 2. Brentwood Exposed is a group that sought to sue USPS for perceived injustices in the way USPS dealt with the anthrax crisis at the Brentwood Processing and Distribution Center. Def.'s Mem. at 2. Mr. Harper believes that postal employees, who are mostly African-American, were left to work at Brentwood as a test of the effects of anthrax on humans, while white employees on Capital Hill were evacuated from the anthrax exposure area and were provided with treatment by military doctors. Id. at 2-3; Pl.'s Mem. at 2.
[4] The parties dispute whether Ms. Hembry was aware of Mr. Harper's EEO activity. Def.'s Reply at 2 n. 2.
[5] If a plaintiff establishes a prima facie case, then the burden shifts to the defendant to "articulate some legitimate, nondiscriminatory reason" for the employer's action. Tex. Dep't of Cmty. Affairs v. Burdine, 450 U.S. 248, 252-53, 101 S. Ct. 1089, 67 L. Ed. 2d 207 (1981); McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973). If the defendant meets this burden, then the plaintiff must have the opportunity to prove, by a preponderance of the evidence, that the legitimate reasons offered by the employer were not its true reasons, but were a "pretext" for discrimination. Burdine, 450 U.S. at 253, 101 S. Ct. 1089; McDonnell Douglas, 411 U.S. at 804, 93 S. Ct. 1817.
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456 F. Supp. 2d 410 (2006)
Jose L. CRUZ, Petitioner,
v.
James BERBARY, et al., Respondents.
No. 03-CV-0596 (VEB).
United States District Court, W.D. New York.
October 16, 2006.
*411 *412 Jose L. Cruz, Collins, NY, for Petitioner.
Darren Longo, Esq., Office of the New York State, Buffalo, NY, for Respondents.
DECISION AND ORDER
BIANCHINI, United States Magistrate Judge.
INTRODUCTION
Jose L. Cruz ("Cruz") filed a pro se petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 challenging his conviction in Ontario County Court following a jury trial on charges of third degree criminal sale of a controlled substance and second degree menacing. The parties have consented to disposition of this matter by the undersigned pursuant to 28 U.S.C. § 636(c).
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Cruz was arrested in July 2000, in connection with the shooting death of Victor Omar Rivera-Gomez ("Rivera-Gomez") on January 29, 2000. An Ontario County grand jury returned an indictment charging Cruz with one count of second degree murder with respect to Rivera-Gomez's death, one count of third degree criminal sale of a controlled substance for allegedly selling heroin to Jose Rivera (a/k/a "Chucho"), and one count of second degree menacing with respect to actions allegedly taken by Cruz which placed or attempted to place Chucho in reasonable fear of serious physical injury or death.
Cruz's jury trial commenced in Ontario County Court on February 20, 2001. Chucho testified that in January 2000, Cruz gave him ten bundles of heroin to sell. (This occurred prior to the murder of Rivera-Gomez.) Chucho testified that he was a heroin addict and used eight to nine bags of heroin a day. Chuco sniffed four of the bundles given to him by Cruz and, based on his experience with using heroin, testified that the substance given to him by Cruz made him "high." Chucho also testified that there came a point in time after the murder where he began cooperating with the police and participated in a taped conversation with Cruz. The tape recording was received into evidence at trial, along with a transcript. Eduardo Alvarez-Castillo testified that in mid-January 2000, he witnessed Cruz give about ten bundles of heroin to Chucho.
Johanna Herrera ("Herrera") testified that Cruz came to her apartment on January 28, 2000, looking for Chucho, who allegedly owed him drug money. Cruz informed Herrera that Rivera-Gomez's hours were "counting" because he was a snitch. Herrera testified that Cruz asked her to sell heroin for him, in place of Rivera-Gomez, because Rivera-Gomez owed Cruz money. Arlene Gonzalez ("Gonzalez") also testified that Cruz came to Herrera's apartment on the night before Rivera-Gomez was killed and said that he *413 was looking for Chucho. Cruz said that Gonzalez would "get hers too" if she was hiding Chucho. At that time, Chucho was hiding in a closet in fear because he owed Cruz money for the heroin that Cruz earlier had given Chucho to sell.
On February 28, 2001, the jury returned a verdict acquitting Cruz of second degree murder but convicting him of the remaining two charges in the indictment alleging criminal sale of a controlled substance and menacing. He was sentenced on May 25, 2001, to a term of six to eighteen years on the criminal sale conviction and, a concurrent one-year term on the menacing conviction.
The Appellate Division, Fourth Department, of New York State Supreme Court unanimously affirmed his conviction on direct appeal. The New York Court of Appeals denied leave to appeal.
Cruz subsequently filed a pro se motion to vacate the judgment of conviction pursuant to New York Criminal Procedure Law ("C.P.L."). § 440.10 alleging that (1) the trial court "lacked subject matter jurisdiction over the second count of the indictment of Criminal Sale of a Controlled Substance" because "the accusatory instrument" did "not contain non-hearsay allegations" since "no drugs [were] confiscated"; (2) he could not be found guilty of criminal sale of a controlled substance because no drugs were confiscated and no tests were performed on them; and (3) he was denied his right to due process and equal protection because he was "charged and indicted for Criminal Sale of a Controlled Substance . . . without the recovery of any drugs." See Respondent's Exhibit 0. The motion court denied the application on the basis that "the claims asserted . . . were either previously determined on the merits upon the defendant's direct appeal from the judgment (see, CPL 440.10(2)(a); People v. Shih-Wei Su, 213 A.D.2d 502, 624 N.Y.S.2d 904), or could have been, but were not raised upon the direct appeal (see, CPL 440.10(2)(0)H" See Respondent's Exhibit P.
This timely habeas petition followed in which Cruz asserts verbatim the three grounds raised in support of his C.P.L. § 440.10 motion. See Attachment to Petition (Docket No. 1). He also alleges that an "[u]nqualified witness [i.e., Chucho] testified as [an] expert[.]" See Petition at 1122(a); Attachment to Petition (Docket No. 1). In his argument under the point heading "Was the State[']s Witness Unqualified" Cruz states that trial counsel was ineffective in failing to object to the admission of the tape-recording of Chucho's conversation with him.
For the reasons set forth below, the petition is dismissed.
DISCUSSION
Exhaustion
To satisfy the exhaustion requirement imposed by 28 U.S.C. § 2254(b) and (c), a petitioner "must have informed the state court of both the factual and the legal premises of the claim he asserts in federal court" Daye v. Attorney General, 696 F.2d 186, 191 (2d Cir.1982) (en banc) (citing Picard v. Connor, 404 U.S. 270, 276-77, 92 S. Ct. 509, 30 L. Ed. 2d 438 (1971)). Although the petitioner need not have explicitly described his claims as arising under the federal constitution, id. at 195, he must have relied on pertinent federal or state cases employing constitutional analysis, asserted the claim "in terms so particular as to call to mind a specific right protected by the Constitution," or alleged "a pattern of facts that is well within the mainstream of constitutional litigation," id. at 194.
Respondent states that petitioner's "direct appeal focused only on the assertion *414 that Chucho was not competent to identity [sic] of the substance [sic] in question at petitioner's trial." Respondent's Memorandum of Law at 5 (Docket No. 7). Respondent asserts that Cruz "made no mention in his appeal of subject matter jurisdiction, inconsistent prosecution, denial of due process and equal protection, unqualified witness, or ineffective assistance of counsel." Id. Respondent argues that, as a result, Cruz has failed to exhaust his state court remedies with respect to these claims. However, respondent then goes on to observe that Cruz actually raised the claims involving the alleged lack of subject matter jurisdiction, inconsistent prosecution, and the denial of due process and equal protection based on the state's failure to introduce the drugs at trial in his C.P.L. § 440.10 motion. Thus, contrary to respondent's contention, these three claims are exhausted.[1] The Court agrees with respondent that Cruz's claims of ineffective assistance of counsel and improper introduction of Chucho's "expert" testimony are unexhausted.
I. Ineffective assistance of counsel
As to the ineffective assistance of counsel claim premised on the failure to object to the introduction of the tape of Chucho's conversation with him, respondent is correct that this claim was not asserted in any state court proceeding by Cruz. This claim appears to have been raised for the first time on federal habeas review and therefore is unexhausted. For Cruz to return to state court to exhaust the claim, however, would be futile, for the reasons set forth in the following paragraphs.
The Court notes that Section 440.10(1)(h) of the New York Criminal Procedure Law ("C.P.L.") does provide a method by which individuals can collaterally attack their convictions even after they have used up their one direct appeal. Under C.P.L. § 440.10(2)(c), however, a New York court must deny a § 440.10 motion where the movant unjustifiably failed to raise the constitutional violation on direct appeal despite a sufficient record to have permitted such an appeal. See N.Y.Crim. Proc. Law § 440.10(2)(c); see also Reyes v. Keane, 118 F.3d 136, 139 (2d Cir.1997). Denial of a C.P.L. § 440.10 motion, pursuant to § 440.10(2)(c), will not always be appropriate in the ineffective assistance context, such as when the facts supporting the instance of ineffective assistance of counsel appeared outside the record. Reyes, 118 F.3d at 139 (citing People v. Harris, 109 A.D.2d 351, 491 N.Y.S.2d 678, 687 (1985) (holding that trial record was insufficient to require that an ineffective assistance of counsel claim relating to alleged faulty legal advice be brought on direct appeal), appeal denied, 66 N.Y.2d 919, 498 N.Y.S.2d 1034, 489 N.E.2d 779 (N.Y.1985)).
Here, however, Cruz represents that the ineffective assistance is premised on trial counsel's alleged failure to object to the prosecutor's introduction of an audiotape of an incriminating conversation between him and the state's main witness. Thus, any error by trial counsel would be contained within the trial record. Moreover, Cruz had new counsel representing him on direct appeal. There is no justifiable reason, then, why Cruz could not have raised his ineffective assistance of counsel claim on direct review, especially since he had different counsel representing him. See Reyes, 118 F.3d at 139-140 (holding that petitioner's ineffective assistance of trial *415 counsel claim-which was premised on counsel's failure to object to the reasonable doubt charge-did not fall within any of the exceptions noted by the New York courts and should be deemed exhausted because, if it were raised on a C.P.L. § 440.10 motion, the state court would deny it pursuant to C.P.L. § 440.10(2)(c)). Because there is no reason to believe that the trial record was in any way insufficient to allow the Appellate Division to hear an ineffective assistance of counsel claim based on the failure to object to the introduction of certain evidence, any attempt by Cruz to seek state court review pursuant to C.P.L. § 440.10 would be futile. See N.Y.Crim. Proc. Law § 440.10(2)(c).
Thus, Cruz's claim of ineffective assistance, although in actuality unexhausted, must be deemed exhausted since it is procedurally defaulted. The Court therefore finds that, by defaulting on that claim in state court, Cruz has forfeited that claim on federal habeas review. See Reyes, 118 F.3d at 140 ("[A] claim is procedurally defaulted for the purposes of federal habeas review where the petitioner failed to exhaust state remedies and the court to which the petitioner would be required to present his claims in order to meet the exhaustion requirement would now find the claims procedurally barred.'") (quoting Coleman, 501 U.S. at 735 n. 1, 111 S. Ct. 2546). Cruz has not attempted to show cause for the default, or prejudice resulting therefrom; indeed, neither cause nor prejudice exist on the record before this Court. Furthermore, Cruz has not made a showing of actual innocence so as to justify the "fundamental miscarriage of justice" exception. Accordingly, Cruz's ineffective assistance claim is barred from habeas review. See Reyes, 118 F.3d at 140; accord, e.g., Redd v. Quinones, No. 98 Civ. 2604 LBS, 1998 WL 702334, at *4 (S.D.N.Y. Oct.7, 1998).
2. Improper "Expert" Testimony by Prosecution Witness
Turning to Cruz's claim that the state's main witness, Chucho, was not properly qualified to testify as an expert witness regarding the identity of the substance (heroin) given to him by Cruz, respondent also claims that this is unexhausted. According to respondent, Cruz "cited no constitutional issues" and "asserted no claims calling to mind a specific constitutional right[.]" See Respondent's Memorandum of Law at 5 (Docket No. 7).
Cruz's argument on direct appeal that Chucho was not qualified to testify was made in the context of his argument that the trial court should have set aside the verdict because the evidence was insufficient as a matter of law to sustain the conviction of criminal sale of a controlled substance in the third degree. In his habeas petition, Cruz asserts that Chucho was unqualified to testify that the substance that he received from Cruz was, in fact, heroin. Cruz notes that "only this witness was used to gain conviction against petitioner[.]" Petition at 1122(A) (Docket No. 1). Cruz does not explicitly assert that the evidence used to convict him was legally insufficient.
As an initial matter, the Court notes that the test for sufficiency of the evidence to support a conviction is the same under both New York and federal law. Compare Jackson v. Virginia, 443 U.S. 307, 319, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979) (holding that, when evaluating a federal habeas petitioner's challenge to the sufficiency of the evidence the question for the court 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") with People v. Bleakley, 69 N.Y.2d 490, 515 *416 N.Y.S.2d 761, 763, 508 N.E.2d 672 (N.Y. 1987) ("For a court to conclude . . . that a jury verdict is supported by sufficient evidence, the court must determine whether there is any valid line of reasoning and permissible inferences which could lead a rational person to the conclusion reached by the jury on the basis of the evidence at trial and as a matter of law satisfy the proof and burden requirements for every element of the crime charged.") and Leha v. Yonkers General Hosp., 22 A.D.3d 809, 803 N.Y.S.2d 197 (2005) ("To conclude as a matter of law that a jury verdict is not supported by sufficient evidence, there must be 'no valid line of reasoning and permissible inferences which could possibly lead rational men to the conclusion reached by the jury on the basis of the evidence presented at trial[.]'") (quoting Fellin v. Sahgal, 296 A.D.2d 526, 745 N.Y.S.2d 565 (2002)).
The issue, however, is whether Cruz actually is asserting an insufficiency-of-the-evidence claim on habeas review. The Court has carefully reviewed Cruz's pleadings, and it appears that he is basing his argument solely on Chucho's lack of qualifications to identify the substance as heroin, simply arguing that Chucho was not competent to be qualified as an expert witness. Essentially, Cruz is asserting that the trial court erred in admitting testimony by a witness who was not competent to testify as an expert; on direct appeal, appellate counsel cited only New York case law for this proposition. Thus, I am inclined to agree with respondent that Cruz did not "fairly present" this claim in federal constitutional terms to the state court for exhaustion purposes. However, the claim must be deemed exhausted, but procedurally defaulted, because Cruz cannot return to state court to exhaust it. He has used the one direct appeal to which he is entitled, see N.Y. Court Rules § 500.10(a), and if he were to attempt to raise it in a collateral C.P.L. § 440.10 motion, the court would deny the claim since sufficient facts appeared on the record to have permitted the claim to have been raised on direct appeal. See N.Y.Crim. Proc. Law § 440.10(2)(c). Thus, the claim must be deemed exhausted but procedurally defaulted.
Even if the claim were exhausted, the Court would not find that it provides a basis for habeas relief. When a habeas corpus petitioner alleges error as to the trial court's evidentiary rulings, the task of the federal court is to determine whether the petitioner was deprived of his right to a fundamentally fair trial. Rosario v. Kuhlman, 839 F.2d 918, 924 (2d Cir.1988). Even an erroneous evidentiary ruling by a state trial court will not entitle the petitioner to habeas corpus relief unless the error was of a federal constitutional dimension. Id.; see also Smith v. Phillips, 455 U.S. 209, 221, 102 S. Ct. 940, 71 L.E d.2d 78 (1982) ("Federal courts hold no supervisory authority over state judicial proceedings and may intervene only to correct wrongs of constitutional dimension.") (citations omitted). Here, it appears that the trial court was well within its discretion as a matter of state law in admitting Chucho's testimony. See, e.g., People v. Lynch, 85 A.D.2d 126, 128-29, 447 N.Y.S.2d 549 (1982) ("To sustain a conviction for selling drugs, it is not essential that the substance be produced in court. Witnesses, through whose testimony the precise identification of the drug is sought, as in the instant case, are essentially expert witnesses. Such a witness may be qualified to speak from actual experience, from observation or from study and must be shown to be qualified as an expert on the particular subject concerning which he is called upon to testify. An expert who bases his opinion upon facts of *417 which he has personal knowledge must first testify to these facts before expressing his opinion[.]") (internal citations omitted). Chucho testified that he was a heroin addict who consumed eight to nine bags of heroin every day for about one year, that he was familiar with the effects of heroin, and that he had used heroin of different strengths. Chucho said that Cruz had given him ten bundles of heroin and that, after sniffing four of them, he got high. New York intermediate appellate courts have sustained drug convictions based on the testimony of users of illegal drugs, like Chucho, who identified the substances at issue based on their experience in using or dealing in unlawful drugs. People v. Christopher, 161 A.D.2d 896, 557 N.Y.S.2d 461 (1990) (holding that trial court correctly permitted a witness to identify a substance as heroin; witness, who testified that he had both injected and snorted heroin in the past, and he had taken other substances by injection and that the feeling produced by the substance in question was similar to that of heroin and was different from that of other substances, was competent to render an opinion regarding the identity of the substance.); People v. Lynch, 85 A.D.2d at 128-29, 447 N.Y.S.2d 549.
Whether Chucho's "expert" testimony would have been sufficient to pass muster under the Federal Rules of Evidence does not necessarily require a contrary conclusion. See Fed.R.Evid. 702 (a witness may be "qualified as an expert by knowledge, skill, experience, training, or education") (emphasis supplied). In United States v. Atkins, 473 F.2d 308, 313 (8th Cir.1973), the appellant, argued that it was error to allow two addicts to testify that the substance purchased from appellant was in fact heroin. In essence, the appellant in Atkins argued, as Cruz does here, that without this testimony the government failed to prove the substance was in fact heroin, since no heroin was introduced into evidence and no chemist testified with regard to the chemical make-up of the substance. The Eight Circuit observed that "[i]t is not inherently implausible that persons addicted to heroin, one with six years experience and the other given heroin specifically so as to be able to differentiate heroin from a similar appearing drug, might possess the necessary "experiential capacity" to testify that the substance in question, and which both had occasion to use, was in fact heroin." Id. at 313 (citing Weaver v. United States, 111 F.2d 603, 606 (8th Cir.1940) (holding that it was competent for a witness to testify that substance purchased by him was morphine)); Ewing v. United States, 386 F.2d 10, 15 (9th Cir.1967), cert. denied, 390 U.S. 991, 88 S. Ct. 1192, 19 L. Ed. 2d 1299 (1968) (upholding witness's conclusion that she had received marijuana where such was founded upon prior experience, rolling the cigarette herself, seeing what it looked like, and the fact that it made her "high"); Pennacchio v. United States, 263 F. 66 (2d Cir.) (upholding admission of a habitual opium user's testimony that the substance given to him, and which he used, was in fact opium), cert. denied, 253 U.S. 497, 40 S. Ct. 588, 64 L. Ed. 1031 (1920).
The Eighth Circuit, however, did not decide in Atkins whether the government's witnesses, who were heroin users, qualified as "experts," but rather sustained the conviction on a different basis. The Eighth Circuit noted that the Second Circuit had stated that "`[j]ust as with any other component of the crime [of violating federal drug laws], the existence of and dealing with narcotics may be proved by circumstantial evidence; there need be no sample placed before the jury, nor need there be testimony by qualified chemists as long as the evidence furnished ground for inferring that the material in question was narcotics.'" *418 Id. (quoting U.S. v. Agueci, 310 F.2d 817, 828 (2d Cir.1962), cert. denied, 372 U.S. 959, 83 S. Ct. 1016, 10 L. Ed. 2d 12 (1963) and citing United States v. Nuccio, 373 F.2d 168, 174 n. 4 (2d Cir.1967), cert. denied, 387 U.S. 906, 87 S. Ct. 1688, 18 L. Ed. 2d 623 (1967)). Relying on this precedent, the Eighth Circuit found that the testimony furnished a sufficient basis for inferring that the material in question was heroin: one witness testified that a very high price had been paid for the substance and that he sampled the substance and it gave him the same reaction he had experienced when he previously used heroin; the other witness also testified that she received no complaints about the substance she represented as being heroin when she sold it and that she became addicted to heroin by taking the substance given to her by the first witness, and a doctor told her she was addicted to heroin. The Eighth Circuit concluded that this "evidence has the tendency of proving the substance in question was in fact heroin." Id. (citing Toliver v. United States, 224 F.2d 742, 745 (9th Cir.1955) ("We find in the record, ample evidence from which the jury could conclude that heroin was involved in the absence of the witness' own opinion. The exhorbitant [sic] price paid for the small amount of substance; the fact it was a powder; that Brown had been a user and had had previous transactions in narcotics with the appellant; that Brown bought the substance as heroin; that Brown sold the substance to his customers as heroin and that none of them `kicked' or complained, supplied sufficient evidence for the jury to draw the inference that the powder was heroin."); United States v. Morello, 250 F.2d 631, 633-634 (2d Cir.1957)).
As the foregoing discussion illustrates, the admission of Chucho's testimony was not erroneous as a matter of state law, as New York courts have allowed individuals to be qualified as "experts" in drug prosecutions based on their personal use of the drug in question. Although the Court has not uncovered any federal cases in which a drug user was qualified as an expert witness under Rule 702, in the cases reviewed, the federal courts have sustained drug convictions based on the testimony of drug users where the evidence was such as to furnish ample ground for inference that the material in question was a narcotic. Consequently, even if the claim were properly exhausted, the Court would not find that the admission of Chucho's testimony amounted to an error of state law or an error of federal constitutional dimension sufficient to warrant habeas relief.
Procedural Default on Remaining Three Claims
Respondent argues that Cruz's remaining three claims (lack of subject matter jurisdiction based on the failure to confiscate drugs; inconsistent prosecution based on the failure to confiscate and test drugs; and denial of due process based on the failure to recover drugs) are procedurally defaulted because the trial court dismissed them on state procedural grounds, C.P.L. § 440.10(2)(a) and (c), when Cruz raised them in support of his motion to vacate the judgment of conviction. The Supreme Court has made clear that the "adequate and independent state ground doctrine applies on federal habeas," such that "an adequate and independent finding of procedural default will bar federal habeas review of the federal claim, unless the habeas petitioner can show 'cause' for the default and 'prejudice attributable thereto,' or demonstrate that failure to consider the federal claim will result in a 'fundamental miscarriage of justice.'" Harris v. Reed, 489 U.S. 255, 262, 109 S. Ct. 1038, 1043, 103 L. Ed. 2d 308 (1989) (citations omitted); accord, e.g., Coleman v. Thompson, 501 U.S. 722, 735, 111 S. Ct. 2546,2557, 115 L.Ed.2d *419 640 (1991); Jones v. Vacco, 126 F.3d 408, 415 (2d Cir.1997); Glenn v. Bartlett, 98 F.3d 721, 724 (2d Cir.1996), cert. denied, 520 U.S. 1108, 117 S. Ct. 1116, 137 L. Ed. 2d 317 (1997).
The cases hold that both C.P.L. § 440.10(2)(a) and C.P.L. § 440.10(2)(c)[2] can constitute "adequate and independent" state procedural grounds barring federal habeas review. See, e.g., Levine v. Commissioner of Correctional Servs., 44 F.3d 121, 126 (2d Cir.1995) (holding that C.P.L. § 440.10(2)(c) is adequate and independent state ground); Encarnacion v. Walker, No. 96CV329FJSGLS, 1998 WL 34002608, at *4 (N.D.N.Y. Aug.21, 1998) ("The state trial court's ruling rested on an adequate and independent state procedural rule, N,Y.Crim. Proc. Law § 440.10(2)(a) & (b), which provides that a court must deny a motion to vacate a judgment if the issue raised was previously determined on appeal from the judgment, or the judgment is appealable or pending on appeal and sufficient facts appear on the record to permit adequate review."); D'Alessandro v. Fischer, No. 01 Civ. 2551 LTS/DF, 2005 WL 3159674, at *19 (S.D.N.Y. Nov.28, 2005) ("[T]he trial court's express reliance on CPL § 440.10(2)(a) indicates that the court rejected Petitioner's ineffective assistance claim on an independent and adequate state procedural ground, precluding federal habeas review.").
There can be no question that the state court's unambiguous and explicit invocation of CPL § 440.10(2)(a) and § 440.10(2)(c) was "independent" inasmuch as it did not implicate or depend on any rule of federal law. See, e.g., Williams v. Goord, 277 F. Supp. 2d 309, 318 (S.D.N.Y. 2003) (holding that state court's decision denying C.P.L. § 440.10 motion was "independent" because its reliance on state law was "apparent from the face of the opinion"). In addition, the trial court "clearly and expressly state[d] that its judgment rests on a state procedural bar." Harris v. Reed, 489 U.S. at 263, 109 S. Ct. 1038 (quotation omitted).
The remaining question is therefore "whether the state ground relied upon is 'adequate' to preclude federal habeas review," Garcia, 188 F.3d at 77 ("The Supreme Court repeatedly has held that " the question of when and how defaults in compliance with state procedural rules can preclude . . . consideration of a federal question is itself a federal question."` ") (quoting Johnson v. Mississippi, 486 U.S. 578, 587, 108 S. Ct. 1981, 100 L. Ed. 2d 575 (1988) (quoting Henry v. Mississippi, 379 U.S. 443, 447, 85 S. Ct. 564, 13 L. Ed. 2d 408 (1965))). A procedural bar is "adequate" if it is based on a rule that is "`firmly established and regularly followed' by the state in question." Id. (quoting Ford v. Georgia, 498 U.S. 411, 423-24, 111 S. Ct. 850, 112 L. Ed. 2d 935 (1991)). Whether application *420 of the procedural rule is "firmly established and regularly followed" must be judged in the context of "the specific circumstances presented in the case, an inquiry that includes an evaluation of the asserted state interest in applying the procedural rule in such circumstances." Cotto v. Herbert, 331 F.3d 217, 240 (2d Cir.2003) (citing Lee v. Kemna, 534 U.S. 362, 386-87, 122 S. Ct. 877, 151 L. Ed. 2d 820 (2002)).
Here, it is clear that CPL § 440.10(2)(a) and C.P.L. § 440.10(2)(c) were "adequate" grounds for the state court's decision. First, the state court "actually relied" on the procedural bar in denying Cruz's C.P.L. § 440.10 motion. Second, a review of New York case law demonstrates that compliance was required, as New York State courts have held repeatedly that claims raised and determined on the merits on direct appeal, as well as claims that could have been raised on direct appeal but unjustifiably were not, may not subsequently be raised in a collateral proceeding under C.P.L. § 440.10. See, e.g., People v. Saunders, 301 A.D.2d 869, 870, 753 N.Y.S.2d 620 (2003); People v. Marvin, 258 A.D.2d 964, 965, 685 N.Y.S.2d 499 (1999); People v. Skinner, 154 A.D.2d 216, 220-21, 552 N.Y.S.2d 932 (1990); People v. Cooks, 67 N.Y.2d 100, 103-04, 491 N.E.2d 676, 500 N.Y.S.2d 503 (N.Y.1986). Finally, there is no indication that Cruz "substantially complied" with the procedural requirements of C.P.L. § 440.10(2)(a) or § 440.10(2)(c) as it cannot be argued-nor does Cruz argue-that these were claims that had not been raised on direct appeal or that sufficient facts do not appear on the record to have permitted the claims to be raised on direct appeal.. Indeed, the three claims all relate to the prosecution's failure to recover the drugs allegedly sold and to introduce them as evidence at trial. Thus, the Court concludes that the C.P.L. § 440.10(2)(a) and 440.10(2)(c) constituted adequate and independent state grounds. See D'Alessandro v. Fischer, 2005 WL 3159674, at *19 (adequacy of C.P.L. § 440.10(2)(a)); Aparicio v. Artuz, 269 F.3d 78, 93 (2d Cir.2001) (adequacy of C.P.L. § 440.10(2)(c)).
Because of the default on direct appeal and on collateral review, federal habeas review of these claims is barred unless Cruz can show either "cause" for the default and resultant "prejudice," or make a demonstration of "actual innocence." See Dretke v. Haley, 541 U.S. 386, 393, 124 S. Ct. 1847, 158 L. Ed. 2d 659 (2004). Cruz has not attempted to make such a showing of cause and prejudice, and neither is apparent on the record before. Furthermore, Cruz makes no showing of "actual innocence" to warrant the narrow fundamental-miscarriage-of-justice exception to the cause requirement where a constitutional violation has "probably resulted" in the conviction of one who is "actually innocent" of the substantive offense. Id. (citing Schlup v. Delo, 513 U.S. 298, 115 S. Ct. 851, 130 L. Ed. 2d 808 (1995)). Accordingly, these claims are barred from habeas review.
CONCLUSION
For the reasons stated above, Jose L. Cruz's petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 is denied, and the petition is dismissed. Because Cruz has failed to make a substantial showing of a denial of a constitutional right, I decline to issue a certificate of appealability. See 28 U.S.C. § 2253.
IT IS SO ORDERED.
NOTES
[1] However, as respondent also argues, they are procedurally defaulted due to the state court's dismissal of them based on a state procedural bar rule, as will be discussed more fully below.
[2] New York's Criminal Procedure Law § 440.10 provides in relevant part that "2. Notwithstanding the provisions of subdivision one, the court must deny a motion to vacate a judgment when:
(a) The ground or issue raised upon the motion was previously determined on the merits upon an appeal from the judgment, unless since the time of such appellate determination there has been a retroactively effective change in the law controlling such issue; or
. . .
(c) Although sufficient facts appear on the record of the proceedings underlying the judgment to have permitted, upon appeal from such judgment, adequate review of the ground or issue raised upon the motion, no such appellate review or determination occurred owing to the defendant's unjustifiable failure to take or perfect an appeal during the prescribed period or to his unjustifiable failure to raise such ground or issue upon an appeal actually perfected by him[.]"
N.Y.Crim. Proc. Law § 440.10(2)(a), (c).
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63 Ill. 2d 425 (1976)
348 N.E.2d 457
VIRGLE H. HARTGRAVES, Appellant,
v.
DON CARTAGE COMPANY, Appellee.
No. 47505.
Supreme Court of Illinois.
Opinion filed March 29, 1976.
Modified opinion filed June 24, 1976.
*426 John G. Phillips, Ltd., and Joseph M. Fasano, Ltd., both of Chicago (Sidney Z. Karasik, of counsel), for appellant.
McKenna, Storer, Rowe, White & Farrug, of Chicago (Robert S. Soderstrom, of counsel), for appellee.
Judgment affirmed.
MR. JUSTICE RYAN delivered the opinion of the court:
Plaintiff, Virgle H. Hartgraves, sued in the circuit court of Cook County for damages resulting from the negligence of defendant, Don Cartage Company. The jury *427 rendered a verdict for plaintiff and awarded $60,000 in damages. Defendant appealed and the appellate court reversed and remanded (27 Ill. App. 3d 298). We granted plaintiff's petition for leave to appeal under Rule 315 (58 Ill.2d R. 315). We affirm the appellate court.
During the course of the trial, one of the 12 jurors was injured and was unable to continue to serve on the jury. There had been no pretrial stipulation to proceed with less than 12 jurors if necessary. An in-chambers, off-the-record discussion was held, after which in open court defendant's counsel moved for a mistrial. The motion was denied. Defendant's counsel raised the denial of his motion for a mistrial in his post-trial motion, which the court, following a hearing, denied.
Prior to the hearing on the post-trial motion, plaintiff's counsel submitted an affidavit in opposition to defendant's motion. The affidavit stated that during the in-chambers discussion, defense counsel had stated that for the record he would formally object to proceeding with less than 12 jurors but requested that the judge overrule his objection, and indicated that he was willing to proceed with 11 jurors. Defendant's counsel submitted an affidavit denying that he had consented to proceeding with less than 12 jurors. At the hearing on the post-trial motion, some six months after the trial, the judge stated that he had a clear recollection of the in-chambers discussion. He stated that defendant's counsel had suggested that he overrule the motion for mistrial and agreed that the trial could proceed. The defendant's post-trial motion was denied.
The right to trial by jury is guaranteed by the 1970 Illinois Constitution (Ill. Const., art. I, sec. 13), and this court has long determined that a jury is comprised of 12 members. (People ex rel. Denny v. Traeger (1939), 372 Ill. 11, 14; People v. Kelly (1931), 347 Ill. 221, 232; Liska v. Chicago Railways Co. (1925), 318 Ill. 570, 583; Sinopoli v. Chicago Railways Co. (1925), 316 Ill. 609, 619.) The *428 parties can, however, consent in open court to a unanimous verdict of a jury of less than 12. Povlich v. Glodich (1924), 311 Ill. 149, 152; Rehm v. Halverson (1902), 197 Ill. 378, 388; People v. Chandler (1972), 7 Ill. App. 3d 949, 954.
At the time judgment was entered, the record was clear that defendant had not waived his right to a jury of 12. Plaintiff contends, however, that the trial judge's recollections became part of the record and that the record thus showed defendant had waived its right to a jury of 12. We disagree.
Generally, "an amendment of the record cannot be made by oral testimony, or from the recollection of the trial judge himself, but must be proved by the production of some note or memorandum from the record or quasi records of the court, or by the judge's minutes, or by the papers on file in the cause." (Pinkstaff v. Pennsylvania R.R. Co. (1960), 20 Ill. 2d 193, 202, citing People v. Miller (1936), 365 Ill. 56, 58.) "[A]n amendment of a record cannot be made either from the memory of a witness, from the recollection of the judge himself, or by affidavit, but the record must show the basis upon which the amendment or correction is made." People v. Townsend (1972), 5 Ill. App. 3d 924, 926, citing People v. Okulczyk (1951), 410 Ill. 115, and People v. Miller (1936), 365 Ill. 56. See In re Application of County Collector (1974), 18 Ill. App. 3d 272.
Here it is uncontroverted that no documents, minutes, records, or quasi- records existed, and that the judge relied solely on his "clear memory" in making the "correction" of the record.
Appellant argues that Supreme Court Rule 323(c) (58 Ill.2d R. 323(c)) supports his contention that the trial court's action was permissible. That rule provides:
"If no verbatim transcript of the evidence of proceedings is obtainable the appellant may prepare a proposed *429 report of proceedings from the best available sources, including recollection. * * * The court, holding hearings if necessary, shall promptly settle, certify, and order filed an accurate report of proceedings."
In the case at bar, however, there is in fact a "verbatim transcript of the * * * proceedings." Consequently, Rule 323(c) is not directly applicable.
Appellant also argues that Supreme Court Rule 329 (58 Ill.2d R. 329) supports his position. That rule states:
"The record on appeal shall be taken as true and correct unless shown to be otherwise * * *. Material omissions or inaccuracies or improper authentication may be corrected by stipulation of the parties or by the trial court * * *. Any controversy as to whether the record accurately discloses what occurred in the trial court shall be submitted to and settled by that court and the record made to conform to the truth."
Here there is no disagreement on whether the record accurately discloses what occurred in court. Nothing that was stated at trial has been omitted or improperly transcribed. Appellant does not argue that the written record is incorrect, but rather that it is somehow incomplete.
The "material omission" the supposed discussion between the parties and the trial judge was never recited in open court and is no more than an off-the-record discussion. This discussion, whatever its contents, was never intended to be a part of the record of this case. Almost immediately following the in-chambers discussion the judge and attorneys entered the courtroom and defendant's counsel moved, on the record, for a mistrial. The motion was argued at length. No reference was made to the alleged in-chambers agreement which would have rendered the proceedings that followed in court a meaningless charade. If it were to be considered part of the record it was incumbent upon the judge or plaintiff's counsel to incorporate its contents or some reference to it in the record.
*430 We find it helpful to quote at length from the proceedings. The transcript for October 16, 1972, shows that court convened at 10 a.m. and states:
"(Whereupon the following discussion was had outside the hearing and presence of the jury:)
MR. PERRIN [Defendant's counsel]: I have been advised by the bailiff that juror Mary Kronan over the weekend was involved in an accident at a shopping center involving a runaway grocery cart in which she according to the bailiff crushed her knee. She is presently in the hospital, and I wasn't advised which hospital this was. And that she has been examined by an orthopedic surgeon, I understand, and there is a possibility that the knee will require an operation in order to put it back into its original condition. And, accordingly, I understand she is unavailable.
Now there was in this case no stipulation with a jury of less than twelve members. We, on behalf of Don Cartage Company, demanded a jury of twelve members, and I would object to proceeding without twelve jurors that we picked and chose in this case.
I would now move at this time for a mistrial in this cause on the ground that we now have eleven by process of Mrs. Kronan being in the hospital and being unable to sit throughout the remainder of this case. Accordingly I move for a mistrial and ask that we start over again.
MR. FASANO [Plaintiff's counsel]: Your Honor, we have tried this case for four days last week and this is the last and final day, and as I understand it, a few more witnesses the defendant is supposed to put on and then we are to go to the jury.
I think that there is nothing in the law that says that there has to be twelve jurors. I think that eleven jurors can do a job as well as twelve, and the decision still has to be unanimous as far as the jury is concerned. And I think that these are the things that do occur as far as jurors are concerned. You can't always predict these things, and I don't think we should. That wastes the time of all the witnesses, the lawyers and the courts, when a thing like this happens, where there is a technicality of twelve instead of eleven. I think we should proceed at this time to close this case.
*431 THE COURT: Anything else, gentlemen?
MR. PERRIN [Defendant's counsel]: The only other thing that occurs to me somewhere I am not prepared for this issue this morning. I haven't had an opportunity to bring forth any case in this point. I seem to recall somewhere in the case there is a case to the effect you have an absolute right to proceed with a jury of twelve. If someone is unavailable to proceed that we could ask for a mistrial. I am unable to present a citation on this point.
THE COURT: Until this morning I was under the impression, which was perhaps a mistake, that there had been a stipulation to proceed with ten or more jurors. Mr. Perrin indicates that such a stipulation was not made, and I am not prepared to say it is incorrect. I have an impression that such agreement was made. I will defer to Mr. Perrin when he states that the record shows no such stipulation. You think the record doesn't show any stipulation?
MR. PERRIN: No, sir.
MR. FASANO: That is correct.
MR. PERRIN: That is correct, Mr. Fasano.
MR. FASANO: Yes.
THE COURT: The record does not show. I will say this, that if prior to the commencement of the trial it had been brought to my attention there was in fact no such stipulation, I would have required all of the that the jurors be selected and we would have resolved the problem which faces us now. And considering that the trial has come to the very last day, it is anticipated that this case will be submitted to the jury this afternoon, I will deny the defendant's motion for a mistrial, and we will proceed with eleven jurors and the unanimous verdict of all eleven jurors will be recorded for any verdict which is rendered in this case."
The alleged agreement contradicted these arguments of counsel and statements by the court and rendered meaningless the proceedings on the motion for a mistrial. If there was such an off-the-record agreement, then plaintiff's counsel and the court were also parties to the subterfuge, a deception designed to deprive a party to the litigation of a trial by a constitutionally constituted jury. If some off-the-record discussion was behind these arguments *432 and the ruling of the court, contrary to what was set forth in the record, which dictated the decision of the court, then either plaintiff's counsel or the judge should have incorporated some reference to it in the record prior to ruling on the motion.
The lengthy discussion during the argument on the motion for mistrial shows that the plaintiff's objections to the motion and the court's reasons for denying it were based on reasons unrelated to the defendant's alleged agreement to proceed with less than 12 jurors. This was not a pro forma objection and disposition as plaintiff later contended in the argument on the post-trial motion. Merits of the motion for mistrial were argued and passed on by the trial court.
In summary, any corrections of or additions to the record which contradict the clear and unambiguous contents of the record must be supported by something other than the "clear memory" of the trial judge. Further, it is incumbent on the judge and opposing counsel to insure that the record reflects any off-the-record agreements by which counsel contradicts his on-the-record position. Since the record here clearly shows that defendant demanded a verdict by a jury of 12, we affirm the appellate court's determination that the judge's later amendment to the record was impermissible, and that the denial of the motion for mistrial was reversible error.
The plaintiff also contends that the appellate court was correct in determining that he had not been proved contributorily negligent as a matter of law. We agree. The question of contributory negligence is normally a question of fact for the jury. The evidence in this case is not such as to authorize removing this question from the jury.
For the reasons stated above, the judgment of the appellate court, reversing the judgment of the circuit court of Cook County and remanding the cause for a new trial, is affirmed.
Judgment affirmed.
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456 F. Supp. 2d 636 (2006)
SRI INTERNATIONAL INC., a California corporation, Plaintiff,
v.
INTERNET SECURITY SYSTEMS, INC., a Georgia corporation, Symantec Corporation, a Delaware corporation, and Internet Security Systems, Inc., a Delaware corporation, Defendants.
No. 04-1199 SLR.
United States District Court, D. Delaware.
October 17, 2006.
*637 Fish & Richardson P.C., Wilmington, DE (John F. Horvath, Kyle Wagner Compton, of Counsel), Howard G. Pollack, Katherine D. Prescott, Fish & Richardson P.C., Redwood City, CA, Counsel for Plaintiff.
Potter Anderson & Corroon LLP, Wilmington ED (Richard L. Horwitz, David Ellis Moore, of Counsel), Holmes J. Hawkins III, Natasha H. Moffitt, King & Spalding LLP, Atlanta, GA, Theresa A. Moehlman, Esquire and Bhavana Joneja, King & Spalding LLP, New York, NY, Counsel for Defendants Internet Security Systems, Inc., a Delaware Corporation and Internet Security Systems, Inc., a Georgia Corporation.
Morris, James, Hitchens & Williams, LLP, Wilmington DE (Richard K. Hermann, Mary B. Matterer, of Counsel), Lloyd R. Day, Jr., Robert M. Galvin, Paul S. Grewal, Day, Casebeer Madrid & Batchelder LLP, Cupertino, CA, Michael J. Schallop, Symantec Corporation, Cupertino, CA, Counsel for Defendant Symantec Corporation.
MEMORANDUM OPINION
SUE L. ROBINSON, Chief Judge.
I. INTRODUCTION
Plaintiff SRI International, Inc. ("SRI") brought suit against defendants Symantec Corporation ("Symantec") and Internet Security Systems, Inc.[1] ("ISS") charging infringement of four patents: United States Patent Nos. 6,484,203 ("the '203 patent"), 6,708,212 ("the '212 patent"), 6,321,338 ("the '338 patent"), and 6,711,615 ("the '615 patent").[2]
Currently before the court are the defendants' motions for summary judgment of non-infringement. The court has jurisdiction over these matters pursuant to 28 U.S.C. § 1338(a). For the reasons that follow, Symantec's motion (D.I.286) shall be granted in part and denied in part. ISS's motion, as it relates to non-infringement (D.I.291), shall be denied.
*638 II. BACKGROUND
Computers are used to process and store information, some of it sensitive in nature. Once computers are made part of a network, the information shared over the network is vulnerable to unauthorized access by "intruders" (an "attack"). The field of invention of the patents in suit is intrusion detection.
A. The Patents in Suit[3]
The patents in suit relate to the monitoring and surveillance of computer networks for intrusion detection. In particular, the patents in suit teach a computerautomated method of hierarchical event monitoring and analysis within an enterprise network that allows for real-time detection of intruders. Upon detecting any suspicious activity, the network monitors generate reports of such activity. The claims of the '203 and '615 patents focus on methods and systems for deploying a hierarchy of network monitors that can generate and receive reports of suspicious network activity.
To detect attacks which do not possess deterministic signatures or to detect previously unknown (new) attacks, the patents in suit disclose the use of statistical detection methods on network data. The claims of the '338 patent are directed to a particular statistical algorithm for detecting suspicious network activity. The claims of the '212 patent combine both the use of statistical detection methods and a hierarchical architecture of network monitors.
B. The Accused Products
Symantec is in the business of selling network intrusion detection systems ("NIDS"). SRI has identified two groups of Symantec products as infringing. The first group includes Man-Hunt 3.0 software, Symantec Network Security ("SNS") 4.0 software, SNS 7100 Series security appliances, and iForce Series appliances ("the ManHunt Products"). SRI has accused the ManHunt Products of infringing all four patents in suit.
The second group comprises the combination of Symantec Gateway Security ("SGS") products, including the SGS 1600, 5400 and 5600 series of security appliances, with management productsSymantec Incident Manager 3.0 ("IM") and Symantec Security Information Manager 9500 ("SIM") series of management appliances.[4] SRI has accused SGS 5400 Series products when used in combination with one of the Manager Products as infringing the asserted claims of the '203, '212. and '615 patents. SRI has accused the SGS 5600 and 1600 Series when used in combination with one of the Manager Products as infringing the asserted claims of the '203 and '615 patents (except claim 7 of the '615 patent).
ISS also is in the business of selling NIDS. SRI accuses the configuration of ISS Sensors[5] operating in combination with SiteProtector SecurityFusion Module 2.0 ("Fusion") of infringing the '203 patent and the '615 patent. SRI also accuses the Proventia Anomoly Detection System *639 ("ADS") operating in Standalone Mode of infringing the '338 patent.
III. STANDARD OF REVIEW
A. Summary Judgment
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).
B. Infringement
A patent is infringed when a person "without authority makes, uses or sells any patented invention, within the United States . . . during the term of the patent." 35 U.S.C. 271(a). A court should employ a two-step analysis in making an infringement determination. Markman v. Westview Instruments. Inc., 52 F.3d 967, 976 (Fed.Cir.1995). First, the court must construe the asserted claims to ascertain their meaning and scope. Id. Construction of the claims is a question of law subject to de novo review. See Cybor Corp. v. FAS Techs., 138 F.3d 1448, 1454 (Fed.Cir.1998). The trier of fact must then compare the properly construed claims with the accused infringing product. Markman, 52 F.3d at 976. This second step is a question of fact. See Bai v. L & L Wings, Inc., 160 F.3d 1350, 1353 (Fed.Cir.1998). Literal infringement occurs where each limitation of at least one claim of the patent is found exactly in the alleged infringer's product. Panduit Corp. v. Dennison Mfg. Co., 836 F.2d 1329, 1330 n. 1 (Fed.Cir.1987). An accused product that does not literally infringe a claim may still infringe under the doctrine of equivalents if each limitation of the claim is met in the accused product either literally or equivalently. See Sextant Avionique, S.A. v. Analog Devices, Inc., 172 F.3d 817, 826 (Fed.Cir.1999). Occasionally, "the issue of literal infringement may be resolved with the step of claim construction, for upon correct claim construction, it may be apparent whether the accused device is within the claims." Multiform Desiccants, Inc. v. Medzam, 133 F.3d 1473, 1476 (Fed.Cir.1998). The patent owner has the burden of proving infringement and must meet its burden by a preponderance of the evidence. Smith-Kline Diagnostics, Inc. v. Helena Lab. Corp., 859 F.2d 878, 889 (Fed.Cir.1988) (citations omitted).
*640 IV. DISCUSSION
A. The '203 Patent
Claim 1 of the '203 patent is a representative claim which discloses:
A computer-automated method of hierarchical event monitoring and analysis within an enterprise network comprising:
deploying a plurality of network monitors in the enterprise network;
detecting, by the network monitors, suspicious network activity based on analysis of network traffic data selected from the following categories: {network packet data transfer commands, network packet data transfer errors, network packet data volume, network connection requests, network connection denials, error codes included in a network packet};
generating, by the monitors, reports of said suspicious activity; and
automatically receiving and integrating the reports of suspicious activity, by one or more hierarchical monitors.
('203 patent, col. 14, 11. 19-35)
Both Symantec and ISS contend in their motions that their accused products do not meet the "network monitor" limitation of the '203 patent. The court has construed "network monitor" to mean "[s]oftware and/or hardware that can collect, analyze and/or respond to data." (D.I. 468 at 2) Under the court's claim construction, the accused products meet the "network monitor" limitation. (See D.I. 287 at 30-31; D.I. 300 at 20-21)
ISS also argues that its accused products do not meet the "automatically receiving and integrating reports of suspicious activity" limitation. The court construed the "integrating" limitation to mean, "[w]ithout user intervention, receiving reports of suspicious activity and combining those reports into a different end product; i.e., something more than simply reiterating data." (D.I. 468 at 4) The court finds that there is a genuine issue of material fact with respect to this limitation. The record demonstrates that ISS's Fusion: (1) "[c]ombin[es] related IDS events into attack patterns to provide higher-level information on attacker intent" (D.I. 336, ex. Q at ISS00535786) (emphasis added); (2) the "Attack Pattern component [`APC'] uses a stored database procedure to create a site filter (or `Incident') in the Database. A site filter is a collection of criteria that group together different rolled-up event data. If subsequent events meet one of the minimum requirements for the attack pattern, the Attack Pattern component updates the site filter in the Database" (D.I. 296 at 6) (emphasis added); and (3) "Attack Correlation consists of displaying on the SiteProtector Incident Console an incident grouping that consolidates a number of Sensor events sharing the event name and/or the IP addresses reported in the event" (D.I. 336, ex. E at 11)(emphasis added). The court cannot tell from the record whether the Attack Pattern component of the accused Fusion product simply combines and reiterates data, or whether it manipulates data in some fashion to create an end product different from the inputted data. Therefore, the court will deny ISS' motion for summary judgment in this regard.[6]
*641 B. The '212 Patent[7]
SRI has accused Symantec's SGS 5400 Series and ManHunt products of infringing the asserted claims of the '212 patent. Claim 1, a representative claim, discloses a
[m]ethod for monitoring an enterprise network, said method comprising the steps of:
deploying a plurality of network monitors in the enterprise network; detecting, by the network monitors, suspicious network activity based on analysis of network traffic data, wherein at least one of the network monitors utilizes a statistical detection method;
generating, by the monitors, reports of said suspicious activity; and automatically receiving and integrating the reports of suspicious activity, by one or more hierarchical monitors.
('212 patent, col. 15, 11.2-15)
The limitation in dispute is "statistical detection method." The court has construed this limitation to read "[a] method of detecting suspicious network activity by applying one or more statistical functions in the analysis of network traffic data. This method is not a signature matching detection method." (D.I. 468 at 6) The court finds there are genuine issues of material fact as to this limitation. The record demonstrates that: (1) "ManHunt uses counter-based and statistical methods to detect flood (denial of service) attacks . . ." (D.I. 334, ex. C at SYlVLP_0049769) (emphasis added); and (2) in addition to "Protocol Anomaly Detection (PAD)" and "Stateful signatures", "ManHunt sensors also incorporate a statistical or rate counter component to identify traffic shapes that indicate DDoS or flooding attacks" (D.I. 334, ex. D at SYM_P_0531466) (emphasis added). These product descriptions are sufficient to withstand Symantec's motion for summary judgment.
C. The '338 Patent
Claim 1 of the '338 patent, a representative claim, discloses:
A method of network surveillance, comprising:
receiving network packets handled by a network entity;
building at least one long-term and at least one short-term statistical profile from at least one measure of the network packets, the at least one measure monitoring data transfers, errors, or network connections;
comparing at least one long-term and at least one short-term statistical profile; and
determining whether the difference between the short-term statistical profile and the long-term statistical profile indicates suspicious network activity.
('338 patent, col. 14, 11. 62 to col. 15, ll. 5)
The only Symantec products accused of infringing the '338 asserted claims are the ManHunt products and, in particular, the "Flowchaser subsystem" (D.I. 266, ex. F at 14)[8] In his expert report, Dr. Kesidis *642 devotes one paragraph to literal infringement:
The ManHunt Group of products build the claimed statistical profiles as part of its generation of "netflow alerts." Software processes within the ManHunt software receive packet data from one of the plurality of sensors of a ManHunt node. This packet data is used to derive "netflow statistics" that are maintained in a data store. These statistics include measures that monitor at least network connections. The ManHunt process accumulates the statistics in its data store for some period of time in order to establish a statistical baseline of activity associated with that measure. The process also develops shorter-term profiles of the same activity which it maintains in a separate data structure corresponding to the short-term profile.
(Id. at 72)
In support of his analysis, Dr. Kesidis references a single document of record, SYM_P_0136906-0136907, as well as selected portions of source code. The document is characterized as an "Architecture/Process List." The referenced pages describe the responsibilities of the "FDS (Flow Datastore)" as follows:
The database, of flow information collected by SNS sensors or Cisco routers. There exists a single database on each sensor node that has visibility into all flow data received by the node. All flow data is only stored in memory. Data is stored up to a maximum size. After the max size is reach[ed], flow data is removed based upon age.
maintains a history of recent flows
generates flow export snapshots upon request
(D.I. 334, ex. T at SYM_P_0136906) The FDS has three "external interfaces": One that "receives flow data from SNS sensors over UDP socket;" a second that "receives Netflow V5 data from Cisco routers over a UDP socket;" and a third to "access the file system to produce flow snapshots upon request from the manager command server." (Id. at SYM_P_ 0136906-0136907) Also included in the record is the "FlowChaser Data Store (FDS) Specification," where the FDS is described as "another data source from which ManHunt will accept information for its analysis and correlation engine. The FDS receives information about network flows from various devices (Cisco/Juniper routers, the sniffer, etc.) and stores the data in an optimized fashion to allow accelerated trackback, DoS protection, and advanced responsive actions." (D.I. 334, ex. W at SYM_P_0138243) The FDS has "two interfaces. One for the collection of flow data, and another to allow access to the stored flow data." (Id. at SYNLP_0138244) With respect to the design of FDS,
[t]he data store itself is a very complex structure composed of mrii (memory resident ip index; a hybrid radix4 tree and linked list data store), gcll (garbage collection linked list; a linked list kept in the order of what flows were least recently active), and individual flow records with "cookies" into each of these data stores to support the efficient destruction of the entries when they expire. The "cookies" are things like pointers to the individual list nodes so that things can be garbage collected without searching the entire list. . . .
The data structure was chosen to minimize insertion time, and to enable inexpensive search for flows based on absolute *643 or netmask-based criteria, as well as to be able to determine the overall network traffic that meets ip & mask combinations relatively cheaply. This data structure manages near-linear insertion time (including the cost of garbage collection as well) and logarithmic search times on the above mentioned characteristics.
Basically, everything points to everything so that you can search and find a record in any way and then delete it if needs be.
(Id. at SYM_P_138245) Finally, FDS was described as "a long lived process and should not leak memory or crash." (Id. at SYM P_0138244) Based on these documents, Dr. Kesidis concludes that the "FDS flow data represents the long-term statistical profile," while the "flow snapshots" represent the short-term statistical profile. (D.I. 288, ex. G (ex. F at 2))
The court construed the "statistical profile" limitation as "[g]enerating at least two separate data structures, one a statistical description representative of historical network activity, and one a statistical description of recent network activity, where the statistical descriptions are based on at least one measure of the network packets and are generated through the use of statistical analysis; i.e., something more than simply collecting and retrieving data." (D.I. 468 at 5) Although broadly construed, the court does not believe that the limitation properly encompasses the FDS function as described in the documents, as the phrase "statistical profile" has been construed to require more than that raw data has been stored in memory over time and can be discretely searched. There is no persuasive evidence of record that the FDS generates two "separate data structures" reflective of some selected measure of network packets seen by a sensor, as opined by Dr. Kesidis. (Compare D.I. 266, ex. F at 72; D.I. 288, ex. F at 13-20) The court, therefore, finds that SRI has failed to demonstrate any genuine issue of material fact as to infringement of the '338 patent by Symantec's accused products. The accused products do not literally meet the "statistical profile" limitation. The court further finds that application of the doctrine of equivalents to the facts at bar would render the limitation meaningless[9] and, therefore, grants Symantec's motion for summary judgment in this regard as well.
ISS argues that its accused product, the Proventia ADS, does not meet the "receiving/receive network packets handled by a network entity" limitation.[10] ISS acknowledges that "[a]ll network packets that are transmitted over the internet are . . . `handled by various network entities'" such as routers. (D.I. 399 at 16) ISS argues, however, that when Proventia ADS is operating in standalone or "Tap Mode," it is not linked to a network entity but, rather, receives network packets directly off the wire through its own tap. (D.I. 399 at 15-16; D.I. 294 at ¶ 8) The record indicates, however, that the "Tap Mode" is rarely used, meaning that the Proventia ADS is capable of infringing most of the time. Moreover, there is a genuine issue of material fact as to whether the traffic flowing on the wire between two network entities has been "handled" by a network entity. (See e.g., D.I. 336, ex. N at 6) Therefore, ISS's motion for summary judgment is denied in this regard.
ISS also argues that the Proventia ADS does not meet the "determining/determine" *644 step of the asserted claims, because "[i]t does not calculate a difference between a short-term and long-term profile and, therefore, cannot determine anything about such a difference. Instead, the Proventia ADS computes the difference between current traffic activity and a composite measure of three different baselinesone based on a Day, one based on a Month and one that is Continuous." (D.I. 300 at 25) ISS's analysis is based on its proposed claim construction, which required that the difference "exceeds a threshold that is empirically determined to indicate suspicious activity based on the historically adaptive deviation between two profiles, requiring no prior knowledge of suspicious network activity." (Id.) The court did not adopt ISS's claim construction and, therefore, its motion is denied in this regard.
As its final argument, ISS contends that ADS does not infringe because it neither builds nor compares long-term and shortterm statistical profiles. (D.I. 399 at 18-19) According to ISS, "[t]he values in the ADS baselines and snapshot[s] are average byte rates for the particular traffic filter. . . . These baselines and snapshots are not statistical profiles under any offered construction of profile. An average is not a statistical description. . . . Nor is the composite score calculated from these averages a statistical description . ." (Id., citing D.I. 294 at ¶ 11) The record indicates' that there are genuine issues of material fact in this regard. (See D.I. 294 at ¶ 11; D.I. 336, ex. E at 27 ("[T]he PNADS method uses a fixed threshold to compare the short-term and long-term profiles.")) Therefore, ISS's motion for summary judgment is denied in this regard.
V. CONCLUSION
For the reasons stated, Symantec's motion for summary judgment of non-infringement (D.I.286) is granted in part and denied in part. ISS's motion for summary judgment as it relates to non-infringement (D.I.291) is denied.
An order shall issue.
ORDER
At Wilmington this 17th day of October, 2006, consistent with the memorandum opinion issued this same date;
IT IS ORDERED that:
1. Defendant Symantec's motion for summary judgment of non-infringement (D.I.286) is granted in part and denied in part.
2. Defendants ISS's motion for summary judgment as it relates to non-infringement (D.I.291) is denied.
NOTES
[1] There are two defendants sharing the name "Internet Seeurity Systems, Inc.," one a Delaware corporation and one a Georgia corporation. For purposes of this opinion, they shall collectively be referred to as "ISS".
[2] SRI has accused Symantec of infringing: '203 patent, claims 1-9, 11-20, 22; '212 patent, claims 1-11, 13-22, 24; '338 patent, claims 1-2, 4, 11-13, 18-19, 24; and '615 patent, claims 1-10, 12-21, 23, 34-41, 43-51, 53. SRI has accused ISS of infringing: '203 patent, claims 1-2, 4-6, 12-13 and 15-17; '338 patent, claims 1, 4, 5, 11-13, 18, 19 and 24; and '615 patent, claims 1-2, 4-6, 13-14 and 16-18.
[3] The patents in suit claim priority from the same application, share almost identical written descriptions, and all issued without any office actions, rejections, or amendments.
[4] Symantec argues that SRI has failed to adduce sufficient evidence to prove either direct or contributory infringement of the '203, '212 and '615 patents based on combinations of the accused SGS and management products. The court finds, however, that there are genuine issues of material fact in this regard. Apparatus claims require no actual deployment. Moreover, there is circumstantial evidence of record of actual deployment. (See, e.g., D.I. 334, ex. R at SYM_P_0368994)
[5] The ISS Sensors include RealSecure sensors (Network Sensor, Guard, Server Sensor and Desktop) and Proventia sensors (A, G, M, Server and Desktop).
[6] Although ISS argued in its opening brief that SRI could not show direct infringement of the hierarchical claims, ISS apparently concedes, consistent with SRI's arguments in response, that the asserted apparatus claims can be infringed so long as Fusion APC is capable of performing the required functions.
[7] And claim 7 of the '615 patent.
[8] According to Dr. Kesidis, "ManHunt's Flowchaser subsystem communicates with network infrastructure components, such as routers and switches, as well as with ManHunt sensors, to collect data regarding network connections and network data transfers. The Flowchaser subsystem generates longterm statistical profiles regarding, for example, volumes of data transferred, numbers of network connections, and connection source and destination data. Flowchaser then generates short-term statistical profiles reflecting the same statistical measures, but over a shorter period of time. The Flowchaser subsystem generates a Flow Alert if the short-term profile differs significantly from the long-term profile, for example, in the case of an inordinately high level of traffic." (D.I. 266, ex. F at 14)
[9] Bicon, Inc. v. Straumann Co., 441 F.3d 945, 950-51 (Fed.Cir.2006); Elekta Instrument S.A. v. O.U.R. Scientific Ina, Inc., 214 F.3d 1302, 1305 and 1307 (Fed.Cir.2000).
[10] This limitation was not construed by the court, as it was not identified as a disputed limitation by the parties.
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738 F. Supp. 2d 120 (2010)
HUMAN GENOME SCIENCES, INC., Plaintiff,
v.
Hon. David J. KAPPOS, Under Secretary of Commerce for Intellectual Property & Director of the United States Patent & Trademark Office, Defendant.
Civil Action No. 10-0575 (ESH).
United States District Court, District of Columbia.
September 23, 2010.
*121 Jeremy M. Jay, Leydig, Voit & Mayer, Washington, DC, Emer L. Simic, John Kilyk, Jr., Leydig, Voit & Mayer, Ltd., Chicago, IL, for Plaintiff.
John G. Interrante, U.S. Attorney's Office, Washington, DC, for Defendant.
MEMORANDUM OPINION
ELLEN SEGAL HUVELLE, District Judge.
Plaintiff Human Genome Sciences seeks to have the patent term adjustments (PTAs) for four of its patents recalculated due to alleged miscalculations by the United States Patent and Trademark Office ("USPTO"). Plaintiff's original complaint sought recalculation for two of its patents, and its Amended Complaint added similar claims for two other patents. Defendant moved to strike the Amended Complaint on grounds that it was in fact a supplemental pleading that could not, under Fed. R.Civ.P. 15(d), be filed without the Court's permission, which plaintiff had not obtained. Defendant also moved to remand the PTA claims in the original complaint to the USPTO for partial recalculation.
As explained herein, the Court finds that plaintiff's Amended Complaint is indeed an amendment and not a supplemental pleading and therefore denies defendant's motion to strike. The Court grants defendant's motion to remand with the understanding that the Court will retain jurisdiction over the matter.
BACKGROUND
Under 35 U.S.C. § 154(b)(1), a patent's term may be extended if the USPTO causes certain delays in the prosecution process ("USPTO delay") or if the patent takes longer than three years to issue ("3-year maximum pendency delay"). A patent's term is reduced for prosecution delays caused by the applicant ("applicant delay"). Id. § 154(b)(2). The USPTO's longstanding method of calculating PTA was rejected by the Federal Circuit in Wyeth v. Kappos, 591 F.3d 1364 (Fed.Cir. 2010), in favor of a method more generous to patent holders.[1]
Plaintiff is the assignee of United States Patent Nos. 7,601,351 ("the '351 patent"), 7,605,236 ("the '236 patent"), 7,064,189 ("the '189 patent"), and 7,138,501 ("the '501 patent"). (First Am. Compl. ¶ 1.) *122 Patents '351 and '236 were issued in October 2009. (Compl. ¶¶ 36, 41). On April 9, 2010, plaintiff sued to have their PTAs recalculated to comply with Wyeth and also to correct the USPTO's allegedly erroneous measurement of prosecution delays. (See Compl. ¶¶ 61-76.) Plaintiff's suit was timely under § 154(b)(4)(A), which provides that civil actions challenging PTA determinations must be brought "within 180 days after the grant of the patent."
On July 20, 2010, plaintiff amended its complaint to seek similar recalculations for patents '189 and '501. (First. Am. Compl. ¶¶ 100-131.) These patents were issued and their PTAs determined in 2006.[2] (First. Am. Compl. ¶¶ 76, 79, 91-92.) Plaintiff alleges that these PTA claims are timely because the 180-day limitations period is either inapplicable or should be tolled under the doctrine of equitable tolling or under the discovery rule. (Id. ¶¶ 137, 144-45, 151-52.) On March 5, 2010, prior to filing its original complaint, plaintiff had petitioned defendant to reconsider these patents' PTAs in light of Wyeth. (Id. ¶¶ 77, 97.) However, defendant dismissed plaintiff's '189 petition on April 21, 2010 and to date has made no decision regarding the '501 petition. (Id.)
Defendant moves to strike the Amended Complaint on grounds that it is not an amendment under Fed. R. Civ. P. 15(a), but rather a supplemental pleading under Rule 15(d), for which plaintiff was required to obtain leave of court. (Def.'s Mot. to Strike Am. Compl. at 1.) Plaintiff opposes defendant's motion or, in the alternative, seeks leave to file the pleading nunc pro tunc. (Id. at 5.)
Defendant also moves to remand plaintiff's '351 and '236 claims to the USPTO for recalculation of the patents' PTAs in light of Wyeth and for reconsideration of plaintiff's applicant delay claims. (Def.'s Mot. to Remand at 1.) Plaintiff consents to a remand only if all of its claims relating to all four patents are remanded and the Court retains jurisdiction over the action. (Pl.'s Conditional Opp'n. to Def.'s Mot. to Remand at 2.)
ANALYSIS
I. AMENDED COMPLAINT
The parties disagree as to whether plaintiff's Amended Complaint is in fact an amendment under Fed.R.Civ.P. 15(a) or a supplemental pleading under Fed.R.Civ.P. 15(d). The significance of this distinction lies in the fact that while the rules permit amendments without leave of court under certain circumstances, supplements always require leave of court. Fed.R.Civ.P. 15(a)(1), (d).
Unlike amendments, which "typically rest on matters in place prior to the filing of the original pleading," U.S. v. Hicks, 283 F.3d 380, 385 (D.C.Cir.2002), supplements set out "transaction[s], occurrence[s], or event[s] that happened after the date of the pleading to be supplemented." Fed.R.Civ.P. 15(d). However, a pleading generally does not become a supplement merely because it references facts that occurred subsequent to the original complaint. Rather, "the appropriate bases for supplemental pleadings are new facts bearing on the relationship between the parties." Hicks, 283 F.3d at 386 (emphasis added). Thus, supplemental pleadings are used, e.g., "to set forth new facts that update the original pleading or provide the basis for additional relief; to put forward new claims or defenses based on events that took place after the original complaint or answer was filed; [and] to include new *123 parties where subsequent events have made it necessary to do so." Id. (citing 6A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1504 (3d ed. 2010)).
Here, plaintiff's new claims are based on events that occurred before the original complaint was filed. The Amended Complaint seeks PTA recalculations for patents '189 and '501 in light of Wyeth. Prior to the filing of the original complaint, both patents were issued and their PTAs calculated, Wyeth was decided, and plaintiff sought relief directly from the USPTO. (Pl.'s Opp'n. to Def.'s Mot. to Strike Am. Compl. at 2-3.)
The only events that have allegedly occurred since the original complaint was filed are that the USPTO dismissed plaintiff's '189 petition and the '501 petition remains pending. (Def.'s Mot. to Strike Am. Compl. at 3.) But, defendant fails to explain how these facts are material to plaintiff's claims. Contrary to defendant's assertion, the Amended Complaint does not challenge the USPTO's disposition of plaintiff's petitions; rather it challenges the USPTO's original determination of those patents' PTAs.[3] (Pl.'s Opp'n. to Def.'s Mot. to Strike Am. Compl. at 3-4.)
This case is therefore easily distinguished from Hall v. C.I.A., 437 F.3d 94 (D.C.Cir.2006). The plaintiff in Hall requested information from the CIA under the Freedom of Information Act (FOIA), and filed suit when the CIA failed to adequately respond. Id. at 97. Thereafter, the plaintiff made an additional FOIA request to the CIA and attempted to incorporate claims based on this request into his original complaint. Id. The Court found that plaintiff's pleading was a supplement rather than an amendment because his new claims were based on the FOIA request that occurred after the original complaint was filed. Id. at 100. Here, by contrast, plaintiff's claims are based on the USPTO's original PTA determinations, which were made well before plaintiff's original complaint was filed.
Finally, defendant does not suggest that the USPTO's dismissal of plaintiff's petition was a prerequisite to plaintiff's cause of action. Indeed, 35 U.S.C. § 154(b)(4) clearly provides for direct appeal of PTA determinations to the United States District Court for the District of Columbia. Therefore, this is not like Montgomery Env. Coal. v. Fri, 366 F. Supp. 261 (D.D.C. 1973), where the plaintiff sued under a statute which provided that no action could be commenced until sixty days after the plaintiff gave notice to certain parties. Id. at 266. The court found that because the "amended complaint" added the allegation that the sixty days had passed, the amended complaint was in fact a supplemental pleading. Id. at 265. There, unlike here, the additional allegations had legal significance because they created a cause of action where none had previously existed.
In sum, the Court finds that the material facts underlying the claims in plaintiff's Amended Complaint all occurred before the original complaint was filed. The USPTO's dismissal of one petition and continued consideration of the other do not bear on plaintiff's PTA claims, and therefore, they do not render the Amended Complaint a supplemental pleading. Therefore, defendant's motion to strike the Amended Complaint is denied.
*124 II. MOTION TO REMAND
Defendant has moved to remand the '351 and '236 patent claims to the USPTO for recalculation of their PTAs in light of Wyeth and for reconsideration of plaintiff's applicant delay claims under 35 U.S.C. § 154(b)(2)(C). (Def.'s Mot. to Remand at 1.) Plaintiff requests that the Court retain jurisdiction over these two patent claims. (Pl.'s Conditional Opp'n. to Def.'s Mot. to Remand at 3.)[4] Accordingly, defendant's motion to remand is granted with the understanding that the Court will retain jurisdiction over the matter.
CONCLUSION
For the foregoing reasons, defendant's motion to strike the Amended Complaint is denied, and its motion to remand is granted with the understanding that the Court will retain jurisdiction over the matter. This Memorandum Opinion is accompanied by a separate Order.
NOTES
[1] The USPTO had interpreted § 154(b) such that whenever a patent application was subject to both USPTO delay and 3-year maximum pendency delay, the delays overlapped and the applicant could only be awarded PTA for one of the two delays, whichever was longer. The Federal Circuit rejected this reading, holding instead that the two types of delays could only overlap if they occurred on the same calendar dates. Wyeth, 591 F.3d at 1369-70.
[2] Patent '189 was issued and its PTA determined in June 2006; patent '501 was issued and its PTA determined in November 2006. (First Am. Compl. ¶¶ 76, 79, 91-92.)
[3] Defendant tries to attach legal significance to plaintiff's failure to add patents '189 and '501 to the original complaint, suggesting that plaintiff was waiting for the USPTO to respond to one of its petitions before amending the complaint. (Def.'s Reply to Pl.'s Opp. to Def.'s Mot. to Strike Am. Compl. at 2.) However, this merely describes plaintiff's litigation strategy. The USPTO's dismissal may have prompted plaintiff's amendment, but it did not contribute to the factual basis for plaintiff's additional claims.
[4] Plaintiff also requests that remand only be granted if all of plaintiff's claims relating to all four patents are remanded. (Pl.'s Conditional Opp'n. to Def.'s Mot. to Remand at 2.) However, plaintiff offers no argument in support of this position.
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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/3095274/
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NO. 07-12-0422-CV
IN THE COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS
AT AMARILLO
PANEL D
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DECEMBER 13, 2012
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LUIS S. LAGAITE, JR.,
Appellant
v.
GREGORY BOLAND, ET AL.,
Appellees
_____________________________
FROM THE 251ST DISTRICT COURT OF POTTER COUNTY;
NO. 97,061-C; HONORABLE ANA ESTEVEZ, PRESIDING
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Memorandum Opinion
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Before QUINN, C.J., and CAMPBELL and PIRTLE, JJ.
Pending before the court is a motion filed by appellees to dismiss the appeal for lack of jurisdiction. According to the motion, appellant is appealing the trial court's finding that he is a vexatious litigant which is not a final appealable order since his lawsuit is still pending below. We agree and dismiss the appeal.
Unless a statute authorizes an interlocutory appeal, appellate courts generally have jurisdiction only over final judgments. CMH Homes v. Perez, 340 S.W.3d 444, 447-48 (Tex. 2011). Furthermore, we are to strictly apply statutes granting interlocutory appeals because they are a narrow exception to the general rule that interlocutory orders are not immediately appealable. Id.
Under Texas Civil Practice and Remedies Code § 51.014, "[a] person may appeal from an interlocutory order of a district court, county court at law, or county court that: (1) appoints a receiver or trustee; (2) overrules a motion to vacate an order that appoints a receiver or trustee; (3) certifies or refuses to certify a class in a suit brought under Rule 42 of the Texas Rules of Civil Procedure; (4) grants or refuses a temporary injunction or grants or overrules a motion to dissolve a temporary injunction as provided by Chapter 65; (5) denies a motion for summary judgment that is based on an assertion of immunity by an individual who is an officer or employee of the state or a political subdivision of the state; (6) denies a motion for summary judgment that is based in whole or in part upon a claim against or defense by a member of the electronic or print media, acting in such capacity, or a person whose communication appears in or is published by the electronic or print media, arising under the free speech or free press clause of the First Amendment to the United States Constitution, or Article I, Section 8, of the Texas Constitution, or Chapter 73; (7) grants or denies the special appearance of a defendant under Rule 120a, Texas Rules of Civil Procedure, except in a suit brought under the Family Code; (8) grants or denies a plea to the jurisdiction by a governmental unit as that term is defined in Section 101.001; (9) denies all or part of the relief sought by a motion under Section 74.351(b) [an expert report in a medical liability case], except that an appeal may not be taken from an order granting an extension under Section 74.351; (10) grants relief sought by a motion under Section 74.351(l); or (11) denies a motion to dismiss filed under Section 90.007 [claims involving asbestos and silica]." Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a) (West Supp. 2012). None mention an appeal from a vexatious litigant finding.
Appellant filed a notice of appeal from the trial court's order "declaring [him] to be a vexatious litigant on September 5, 2012 and . . . requir[ing] [him] to furnish[] . . . security" in the amount of $750.00. The trial court has indicated that the suit will be dismissed if the filing fees are not paid and no dismissal has occurred to date. Therefore, there is no final appealable order in the cause.
Accordingly, we grant appellees' motion to dismiss the appeal and dismiss the appeal for lack of jurisdiction.
Brian Quinn
Chief Justice
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01-03-2023
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10-16-2015
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https://www.courtlistener.com/api/rest/v3/opinions/2466764/
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750 F. Supp. 2d 743 (2010)
CANAL INDEMNITY COMPANY, Plaintiff,
v.
PALMVIEW FAST FREIGHT TRANSPORTATION, INC., et al., Defendants.
Civil Action No. 3:09-CV-0451-D.
United States District Court, N.D. Texas, Dallas Division.
November 10, 2010.
*745 George T. Jackson, Burch Lapidus & Lanza, Houston, TX, Ricardo L. Salinas, Ricardo Salinas Law Firm, Mission, TX, for Plaintiff/Defendants.
Marcus Cayetano Barrera, Edward P. Sanchez, Barrera Sanchez & Associates PC, McAllen, TX, for Defendant.
MEMORANDUM OPINION AND ORDER
SIDNEY A. FITZWATER, Chief Judge.
An insurer moves for summary judgment in this action seeking a declaratory judgment concerning its duties to defend and indemnify arising from a state court lawsuit. Although the insurer relies on two policy exclusions to avoid coverage, the dispositive question is whether a reasonable jury could find that defendants are entitled to recover on theories of waiver and equitable estoppel. The court concludes that a reasonable jury could not find waiver but that it could find the insurer liable to one defendant under a theory of equitable estoppel. The court therefore grants in part and denies in part the insurer's motion for summary judgment.
I
Plaintiff Canal Indemnity Company ("Canal") sues defendants Palmview Fast Freight Transportation, Inc. ("Palmview"), Flavio Salinas ("Salinas"), and Ricardo Vela ("Vela"), seeking a declaratory judgment concerning its duty to defend or indemnify with respect to a state court lawsuit.[1]See Salinas v. Palmview Fast *746 Freight Transp., Inc., No. C-041-08-J (430th Dist. Ct., Hidalgo County, Tex.) (the "Underlying Lawsuit"). In the Underlying Lawsuit, Salinas was awarded damages, to be paid by Vela, for injuries Salinas incurred during the course of employment as a trucker working for Palmview and Vela. Canal had issued a policy of insurance (the "Policy") to "RICKY VELA d/b/a PALMVIEW FAST FREIGHT" as the named insured. The Policy was amended in 2006 to replace all mention of Vela with the corporate entity, "Palmview Fast Freight Transportation, Inc." P.App. 66-67.
In 2007 Salinas was severely injured while trying to unstrap a load on a truck that he was operating while employed by Palmview and Vela. Salinas brought the Underlying Lawsuit against Palmview. He added Vela as a party in 2008. Canal tendered defenses to Palmview and Vela under reservation of rights. Canal sent three reservation of rights letters. The first two were mailed to Palmview's address on January 29, 2009 and February 20, 2009, respectively. The third was mailed to Vela's personal address on October 8, 2009 and received by Vela's brother on October 13, 2009, the day the trial of the Underlying Lawsuit was scheduled to begin.
Canal hired Michele Gonzales, Esquire ("Gonzales") as defense counsel in the Underlying Lawsuit. According to Vela, Gonzales assured him that he was going to receive unconditional, individual representation. It is not clear from the record when Gonzales began representing Vela in his individual capacity. The first mention of Gonzales on the state court's docket sheet is on January 29, 2008. Gonzales filed an answer for Palmview at that time but did not file an answer for Vela. On February 20, 2009 Gonzales entered an appearance for Palmview, then reentered the case by filing a motion for continuance that referenced "defendant," "defendant's," and "defendants." Ds. App. 13. Gonzales later conducted discovery as if representing both Palmview and Vela, sending a request for discovery on behalf of "defendants" on February 25, 2009 and filing a motion to recuse on behalf of "defendants" on April 20, 2009. Id. at 17-41. On October 7, 2009 Lynse Larence Guerra, Esquire ("Guerra"), the attorney from Gonzales' law firm who entered an appearance at the pretrial hearing, expressed lack of knowledge concerning whether her firm was representing Vela, individually, and whether an answer had been filed for Vela, even though the trial was less than one week away.
On October 8, 2009, just four days before trial, Salinas non-suited Palmview and elected to proceed against Vela. On Gonzales' advice, Vela did not appear or testify at trial.[2] Vela told Gonzales that Salinas had tested positive for cocaine immediately after the accident and that he wanted to assert this fact as a part of his defense at trial. But because Gonzales did not retain expert witnesses to testify about the test and did not authenticate the relevant medical records, the trial court excluded the evidence. The jury returned a verdict against Vela for $302,396.90. The judgment *747 in the Underlying Lawsuit is currently on appeal.
Contending there is no coverage under the Policy, Canal seeks the following declaratory judgment relief:
a. That no coverage exists under CANAL INDEMNITY COMPANY Policy No. L061223 for the claims made in and which form the basis of that particular lawsuit styled: Cause No. C-041-08-J; Flavio Salinas v. Palmview Fast Freight Transportation, Inc.; In the 430th Judicial District Court of Hidalgo County, Texas;
b. That CANAL INDEMNITY COMPANY has no duty to indemnify or any obligation to pay the Final Judgment rendered against RICARDO VELA in Cause No. C-041-08-J; Flavio Salinas v. Palmview Fast Freight Transportation, Inc.; In the 430th Judicial District Court of Hidalgo County, Texas;
c. That CANAL INDEMNITY COMPANY had no duty to defend and has no obligation to continue to appeal the Final Judgment against RICARDO VELA in Cause No. C-041-08-J; Flavio Salinas v. Palmview Fast Freight Transportation, Inc.; In the 430th Judicial District Court of Hidalgo County, Texas;
d. That CANAL INDEMNITY COMPANY is entitled to recover reasonable and necessary attorney's fees expended in the prosecution of this Complaint; and
e. That CANAL INDEMNITY COMPANY is entitled to recover all other relief, general or special, at law or in equity, to which it shows itself entitled.
P. Mot. 2-3.
The Policy contains an Employee Exclusion clause and a Workers' Compensation Exclusion clause. Canal maintains, and defendants[3] do not dispute, that the Policy excludes coverage for the damages awarded to Salinas. Instead, defendants contend that Canal can be required, based on waiver or estoppel, to pay the damages awarded to Salinas and the legal fees incurred by Vela.
Defendants maintain that Canal waived the non-coverage argument by failing to adequately inform him before trial of its reservation of rights. They also posit that, by assuming control over his defense and appointing an attorney who allegedly mishandled the trial to his prejudice, Canal is equitably estopped from avoiding financial responsibility for the defense provided.
Canal counters that waiver cannot expand the Policy in a way that adds new risks to the scope of coverage and that the elements of estoppel have not been met. Canal argues that it never intentionally concealed the potential lack of coverage from Vela and that Vela already knew or had the means of knowing that Salinas' claims would not be covered by the Policy.
II
Although Canal would normally have the burden of proof at trial of establishing its right to a declaratory judgment, in Texas, an insured generally bears the initial burden of showing that a risk comes within the policy's coverage. Ulico Cas. Co. v. Allied Pilots Ass'n, 262 S.W.3d 773, 782 (Tex.2008).[4] Moreover, in this case *748 defendants rely on theories of waiver and estoppel, on which they will have the burden of proof at trial, to establish that Canal has the duty to defend and indemnify Vela. See Ds. Br. 2 ("Defendants concede that the Employee Exclusion and the Workers Compensation Exclusion . . . would normally eliminate coverage for the claims made by Salinas. Thus, the evidentiary burden now shifts to Defendants to show the Court that any particular exceptions to non-coverage, such as the doctrines of waiver or estoppel, apply in this case."). Therefore, Canal can obtain summary judgment by pointing the court to the absence of evidence on any essential element of the claim in question. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). Once it does so, defendants must go beyond their pleadings and designate specific facts demonstrating that there is a genuine issue for trial. See id. at 324, 106 S. Ct. 2548; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc) (per curiam). An issue is genuine if the evidence is such that a reasonable jury could return a verdict for defendants. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). Defendants' failure to produce proof as to any essential element renders all other facts immaterial. Trugreen Landcare, L.L.C. v. Scott, 512 F. Supp. 2d 613, 623 (N.D.Tex.2007) (Fitzwater, J.). Summary judgment is mandatory where defendants fail to meet this burden. Little, 37 F.3d at 1076.
III
The court turns first to defendants' waiver theory.
A
"Waiver is the intentional relinquishment of a right actually known, or intentional conduct inconsistent with claiming that right." Ulico Cas. Co., 262 S.W.3d at 778. The elements of waiver are "(1) an existing right, benefit, or advantage held by a party; (2) the party's actual knowledge of its existence; and (3) the party's actual intent to relinquish the right, or intentional conduct inconsistent with the right." Id.
The parties do not disagree about whether Vela had coverage under the Policy for Salinas' claims in the Underlying Lawsuit. Nor do they dispute whether Canal actually knew that there was no coverage. In each of Canal's reservation of rights letters to Vela, regardless whether the letter was sent to Palmview's address or to Vela's residence, the subject line states "Our Insured: Palmview Fast Freight Transportation" and "Policy #: L061233," a policy that was specifically amended to replace all references to "Ricky Vela" with "Palmview Fast Freight Transportation, Inc." Although the salutations refer to "Mr. Vela" and frequently refer to him by use of a second person pronoun (e.g., "your interests" and "your behalf"), the letters do not indicate that Vela is individually insured under the Policy. See P.App. 118-19, 125-28, and 131-34. Even the October 8, 2009 reservation of rights letter, sent to Vela's residence on the same day that Palmview was non-suited, only referred to "the allegations of the complaint against Palmview Fast Freight Transportation, Inc.," id. at 132; there was no indication that Vela was insured individually.
Defendants therefore focus their waiver argument on the third element: "the party's *749 actual intent to relinquish the right, or intentional conduct inconsistent with the right." Because there is no evidence regarding Canal's intent to insure Vela individually, defendants ostensibly argue that Canal's appointment of Gonzales to represent Vela, Canal's delay in mailing a reservation of rights letter to Vela's residence address, and Gonzales' alleged promise to represent Vela "unconditionally" constitute "intentional conduct" inconsistent with preserving Canal's right not to defend Vela.
B
Defendants' argument lacks force. Under Ulico a "waiver" cannot rewrite a policy to create a completely new contractual liability. See Ulico, 262 S.W.3d at 775 (noting that "the insurer may be estopped from denying benefits that would be payable under its policy as if the risk had been covered, but the doctrines of waiver and estoppel cannot be used to re-write the contract of insurance and provide contractual coverage for risks not insured"). "In sum, if an insurer defends its insured when no coverage for the risk exists, the insurer's policy is not expanded to cover the risk simply because the insurer assumes control of the lawsuit defense." Id. at 787.[5]
In the instant case, the Policy never purported to insure Vela, individually. The Policy was in fact amended to eliminate all references to "Ricky Vela." All of the reservation of rights letters refer to "Palmview Fast Freight Transportation" as the insured and to the claims in the Underlying Lawsuit alleged against Palmview. And assuming arguendo that the last reservation of rights letter sent to Vela's residence address came too late to apprise Vela of his individual liability, the absence of a letter cannot create new rights for Vela; it can only reactivate existing provisions in the Policy by forfeiture, and no policy provision exists to support Vela's claim for individual coverage. See id. at 782 ("Thus there is no `right' of noncoverage that is subject to being waived by the insurer, even by assumption of the insured's defense with knowledge of facts indicating noncoverage and without obtaining a valid reservation of rights or non-waiver agreement.").[6] Furthermore, *750 if Canal and Gonzales induced Vela to relinquish control of his defense to his prejudice by agreeing to represent him "unconditionally," this is better analyzed as an estoppel, rather than a waiver, argument. In short, regardless whether Canal engaged in any act that could constitute waiver, Vela cannot create individual coverage under the Policy based on a theory of waiver.
IV
The court now considers defendants' theory of estoppel.
A
Estoppel is a separate argument from waiver, with separate elements. Ulico, 262 S.W.3d at 778. Unlike waiver, which is based on the insurer's intentional relinquishment of rights, estoppel is based on the insured's detrimental reliance. See Perry Homes v. Cull, 258 S.W.3d 580, 595 (Tex.2008) ("Under Texas law, waiver may not include a prejudice requirement, but estoppel does."). As stated in Ulico,
if an insurer defends its insured when no coverage for the risk exists, the insurer's policy is not expanded to cover the risk simply because the insurer assumes control of the lawsuit defense. But, if the insurer's actions prejudice the insured, the lack of coverage does not preclude the insured from asserting an estoppel theory to recover for any damages it sustains because of the insurer's actions.
Ulico, 262 S.W.3d at 787. In other words, Canal can still be held accountable under the estoppel doctrine for any prejudice it caused, even if the defense was not covered under the Policy and there was no waiver of Canal's rights under the Policy. Although courts cannot judicially rewrite the parties' agreement to create new coverage terms, estoppel does not create a new contract: it only compensates for reliance damages that the insured suffers when the insurer takes over the insured's defense. See id. at 786-87 (distinguishing Employers Casualty Co. v. Tilley, 496 S.W.2d 552 (Tex.1973), from the now-disfavored rule in Farmers Texas County Mutual Insurance Co. v. Wilkinson, 601 S.W.2d 520 (Tex.Civ.App.1980, writ ref'd n.r.e.), noting that the prejudice issue of estoppel is independent of the question whether an insurer sent a valid reservation of rights or non-waiver agreement).
The doctrine of equitable estoppel requires
(1) a false representation or concealment of material facts; (2) made with knowledge, actual or constructive, of those facts; (3) with the intention that it should be acted on; (4) to a party without knowledge or means of obtaining knowledge of the facts; (5) who detrimentally relies on the representations.
Id. at 778 (quoting Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 515-16 (Tex.1998)).
B
The court holds that a reasonable jury could not find from the summary judgment evidence that Canal is estopped from declining to cover Palmview. Canal never purported to represent Palmview unconditionally. It sent at least two reservation *751 of rights letters that specifically identified Palmview and the Policy, and it spelled out the conditions attached to its representation. A reasonable jury could not find that Canal made a false representation or that it concealed facts. Canal is entitled to summary judgment declaring that Palmview has no coverage for the claims made in the Underlying Lawsuit.
C
A reasonable jury could find, however, that Canal is liable to Vela individually based on a theory of equitable estoppel. In essence, Gonzales, as Vela's Canal-appointed lawyer, allegedly assured Vela that she would represent him individually and unconditionally. All three of Canal's reservation of rights letters identified Palmview, not Vela, as the insured, and identified by policy number an insurance policy that only covered Palmview. A reasonable jury could therefore find that Vela reasonably relied on Gonzales' personal assurances, rather than on Canal's letters regarding Palmview's representation, in deciding, to his detriment, not to seek his own counsel.
1
A reasonable jury could find that Canal made a false representation of a material fact. Although Canal sent reservation of rights letters that included only Vela's name in the salutation, and the Policy does not cover Vela individually, a reasonable jury could find that the Canal-appointed attorney assigned to defend the Underlying Lawsuit expressly assured Vela that she would be representing him unconditionally. The jury could also find that this was a false representation: a promise of Canal-sponsored legal representation for Vela individually, when Canal did not intend to provide such unconditional individual representation. A reasonable jury could also find that this false representation was of a material fact because Vela decided as a result not to obtain his own attorney to represent him in the Underlying Lawsuit.
2
A reasonable jury could also find that the Canal-appointed attorney's assurances, if made, were given knowingly, with Canal's assent, and with the intent of inducing Vela to entrust his individual defense to an attorney with Canal-defined priorities. Several facts in the summary judgment record could support such a finding. On the day that Palmview was non-suited from the Underlying Lawsuit, Canal sent its third reservation of rights letter, this time to Vela's personal address. A reasonable jury could infer from the letter, which informed Vela of continued representation, that Canal had been aware of Vela's reliance on earlier promises of representation. In fact, a reasonable jury could find that Canal bolstered Vela's reliance by reasserting its intention to investigate and defend Vela's interests in the Underlying Lawsuit after the named insured had been non-suited. Canal did not, for example, inform Vela that its provision of legal representation would be discontinued now that there was no suit pending against Palmview. In sum, a reasonable jury could conclude that Canal knew that Vela was not insured under the Policy, that Canal chose to provide representation anyway, and that Canal did so for strategic reasons. The handling of the reservation of rights form letters and the alleged defects in the quality of the defense Vela received raise a genuine issue of material fact regarding Canal's motives in permitting or failing to correct the false representations.
3
A reasonable jury could also find that Vela had no knowledge of the true facts *752 and no realistic means of obtaining the truth. Both sides admit that three reservation of rights letters were sent regarding Palmview's coveragewhether at the business address or at Vela's personal addressand that Vela's name was the one used in the salutation. All three clearly identified the Policy by number and the named insured, so that there could be no mistake that Canal's letters were referring to its services and reservation of rights regarding Palmview rather than Vela. Only the third letter is potentially ambiguous, since it still referred to Palmview as the only insured and referenced the Policy, yet the letter was sent on the day that Palmview was dropped from the case.[7] Given the clear identification of Palmview in the first two letters, and considering that the third, contextually ambiguous letter contained the same language as the second letter, a reasonable jury could find that Vela, regardless whether he knew of Canal's coverage limits with respect to Palmview, was justified in interpreting these letters as inapplicable to his individual defensea defense that Gonzales had promised him was "unconditional."[8] Despite neglecting to file an answer for Vela until the day of trial, Gonzales conducted discovery on behalf of "defendants," provided advice tailored to Vela in his individual capacity on the strategic implications of trial participation, and continued to represent Vela at trial even after the insured was non-suited. Given the circumstances, Vela's reliance on Gonzales' promises of unconditional representation could be viewed as reasonable, notwithstanding what Canal's letters stated about Palmview's representation.
A jury could also reasonably find that Vela had no reasonable means of obtaining the truth about Canal's intentions. His attorney did not advise him of the limitations of his individual representation, and even when pressed by the trial court in the Underlying Lawsuit, the attorney who entered an appearance on the defendants' behalf would not deny that Vela was receiving individual representation or clarify whether any conditions applied. Canal itself never corrected Vela's belief that he was being unconditionally represented, and it bolstered that belief by continuing to support his legal defense after Palmview was non-suited. With the lack of any indications to the contrary, and several to suggest that Canal was providing representation as Gonzales promised, Vela had no reason to rely on reservation of rights letters that referred to Palmview as the insured rather than on his Canal-appointed attorney's word.
4
Finally, a reasonable jury could find that Vela detrimentally relied on Gonzales' assurance of unconditional representation. "Texas estoppel law does not allow a party to withdraw a representation once the other party takes `action or forbearance of a definite and substantial character.'" Perry Homes, 258 S.W.3d at 595 (citing Trammel Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 636 (Tex.1997)). There must, however, be evidence of something *753 more than speculative prejudice. See Ulico, 262 S.W.3d at 785-86 (holding that mere possibility of prejudice was insufficient justification for meddling with parties' agreements, and noting that estoppel tends to be upheld in cases involving actual prejudice); Tilley, 496 S.W.2d at 561 (declaring that court is only concerned with actual events in case rather than with speculative prejudice).
"The question on which the insurer's liability should turn is whether an insured is prejudiced as a result of the conflict, an inadequate or absent disclosure, or other actions of the insurer." Ulico, 262 S.W.3d at 786-87. Defendants present two theories to support their assertion of prejudice. First, they maintain that Vela was prejudiced because he was advised not to appear at trial. This alone is not enough to constitute prejudice, however, because the alleged harm from following his counsel's good-faith advice is purely speculative. The jury in the Underlying Lawsuit may have returned a verdict against Vela regardless whether he participated in the trial.
Defendants' second contentionthat Gonzales was serving Canal's interests while representing Velapresents a more viable theory of prejudice. See id. at 782 (noting that, in Tilley, 496 S.W.2d at 561, a Texas Supreme Court case, the court held that conflict of interest constituted prejudice as a matter of law when an attorney hired by the insurer for the insured's benefit also worked on building a policy defense for the insurer, and noting that the Fifth Circuit, in Pacific Indemnity Co. v. Acel Delivery Service, Inc., 485 F.2d 1169, 1175-76 (5th Cir.1973), found prejudice because of an apparent conflict of interest where insurer did not inform insured of potential conflict before assuming insured's defense). Relying on an assurance of unconditional individual representation, Vela opted not to seek his own counsel. Forgoing the right to choose one's own counsel could constitute an "action or forbearance of a definite and substantial character"meeting Perry Homes' definition of prejudice. Given counsel's lack of preparation specific to Vela's individual defense, failure to file an individual answer before the day of trial, and failure to present an expert witness to prove up key evidence, there is sufficient evidence of conflict to make detrimental reliance a question of fact to be decided at trial.
Moreover, a reasonable jury could find that Vela's reliance was reasonable, because Canal never dispelled Vela's misunderstandings about the proper scope of Gonzales' representation, and it would have been easy enough to inform Vela that his counsel only represented Palmview, not Vela individually. Canal did send reservation of rights letters pertaining to Palmview's Policy, but a reasonable jury could find that the letters were ambiguous about whether they applied to Vela individually. The January 29 letter informed Vela that it is "your right and privilege to retain counsel, at your own expense, to protect your interest," but the February 20 letter stated that "Canal has assigned the defense of this matter to Michele Gonzales to defend and protect you in this matter," and "[The firm's] job is to defend your interest in that suit. You, and not Canal, will be their client." The letters did not specify whether, by "your interest," they meant Vela's interest in the defense of Palmview or Vela's interest in his individual defense. And the identification of Palmview as the insured at the top of the letter could have led Vela to believe that the reservation of rights applied to Palmview rather than to him individually. Although the October 8 letter could be found to have been directed to Vela individually (because Palmview was non-suited from the Underlying Lawsuit on the same date), by then *754 (five days before trial) it was too late to withdraw without prejudice or to surprise the client with an assertion that the reservation of rights attached to Palmview's representation had also applied to him individually all along. And a reasonable jury could find that the motion for leave to file second amended complaintthe November 3, 2009 document that finally stated in unambiguous terms Canal's position on Vela's representationcame too late to preclude prejudicial consequences for Vela.[9]See Pac. Indem. Co., 485 F.2d at 1174-75 (holding that withdrawal that took place less than one month before trial not only "[did] not preclude a finding of prejudice, but compel[led] it," and noting as problematic that insurer assumed insured's defense without making further inquiry about noncoverage, then tried to rely on noncoverage as justification). This is especially true given that Vela had been served as a defendant in the Underlying Lawsuit on December 5, 2008, and Canal had over one year to explain to Vela that he was not being represented individually, or that he was being represented individually but not unconditionally.
A reasonable jury could find that Vela's reliance on his insurer-appointed counsel was to his detriment. There is summary judgment evidence that Gonzales did not file an answer for Vela until the day of trial. The attorney from Gonzales' law firm who entered an appearance at the pretrial hearing admitted that she did not know whether her firm represented Vela individually, and that she was "not sure" about how Vela's individual defenses would differ from Palmview's. She was not even aware whether an answer had been filed for Vela. Although Vela had given counsel advance notice about Salinas' cocaine test results, which could have formed the basis of a comparative negligence defense, counsel failed to make basic preparations to properly admit the results into evidence, such as providing an expert witness to authenticate or interpret the results for the jury. Cf. Pac. Indem. Co., 485 F.2d at 1175 (finding prejudice where counsel did not depose a "crucial witness"). A reasonable jury could find that Vela's ability to obtain discovery or pretrial resolution of his individual interests, aside from whatever aid he could receive incident to counsel's defense of Palmview, was compromised. The jury could also reasonably find that Vela's counsel treated his individual defense as an afterthought to her services to Palmview. And it could find that neither Canal nor Gonzales informed Vela that, in receiving legal services from the Canal-appointed attorney, Vela would forfeit his rights to pursue an independent defense, or that his interests might conflict with Palmview's and therefore yield to Palmview's defense over his own.
To deny Canal's summary judgment motion, it is unnecessary to say precisely how Vela's defense might have been different had Canal not selected the same counsel to represent Palmview and Vela. See id. at 1176 (after listing several instances of neglectful representation, finding prejudice where insurer deprived claimant of the "opportunity to present a more forceful defense," but declining to speculate as to precisely how a "more forceful defense" might have been different from the one provided); see also Ulico, 262 S.W.3d at 786 ("It goes without saying that an attorney defending an insured has the obligation to fully disclose to the insured conflicts of interest, whether because of the *755 attorney's relationship with the insurer or otherwise."). A reasonable jury could find that, in inducing Vela to forgo an individual defense, Canal deprived him of the opportunity to present a more forceful one.
The court therefore holds that a reasonable jury could find in favor of Vela on a theory of equitable estoppel, and it denies Canal's motion for summary judgment except to the extent granted above concerning Palmview.
* * *
For the foregoing reasons, the court grants in part and denies in part Canal's motion for summary judgment. The court declares that, under the Policy, Palmview has no coverage for the claims made in the Underlying Lawsuit.[10] The court otherwise denies the motion.[11]
SO ORDERED.
NOTES
[1] In recounting the factual background, the court summarizes the evidence in the light most favorable to defendants as the summary judgment nonmovants and draws all reasonable inferences in their favor. See, e.g., Owens v. Mercedes-Benz USA, LLC, 541 F. Supp. 2d 869, 870 n. 1 (N.D.Tex.2008) (Fitzwater, C.J.) (citing U.S. Bank Nat'l Ass'n v. Safeguard Ins. Co., 422 F. Supp. 2d 698, 701 n. 2 (N.D.Tex.2006) (Fitzwater, J.)).
In its reply brief, Canal objected to certain statements in Vela's affidavit, contending that they are not based on personal knowledge. Because the court has not relied on any of Vela's statements that are not based on personal knowledge (e.g., the court has not relied on Vela's stated beliefs that the jury would have found in his favor had he participated at trial and that the jury would not have returned an adverse verdict for $302,396.90 had the toxicology report been properly proved up), the court overrules the objections as moot. Even disregarding this evidence, there are genuine issues of material fact that preclude summary judgment in Canal's favor.
[2] According to defendants, Gonzales gave Vela this advice for two reasons: first, he is a male who lives and dresses as a woman, and the jury would not like a cross-dressing male who lives as a female; and, second, she felt there might be a defect in service, and, if a motion to quash citation were granted, it would be better that he not appear for trial and be served at that time.
[3] In this memorandum opinion and order, the court refers to Palmview and Vela collectively as "defendants."
[4] This court applies Texas law in addressing the waiver and estoppel issues presented by Canal's motion. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80, 58 S. Ct. 817, 82 L. Ed. 1188 (1938). To determine issues of state law, a federal court looks to the final decisions of the state's highest court, and in the absence of such a decision, the court must make an Erie guess as to how the state's highest court would resolve the issue if presented with the same case. See Chaney v. Dreyfus Serv. Corp., 595 F.3d 219, 229 (5th Cir.2010) (citing Six Flags, Inc. v. Westchester Surplus Lines Ins. Co., 565 F.3d 948, 954 (5th Cir.2009)).
[5] This conclusion is not inconsistent with the court's decision in Mid-Continent Casualty Co. v. Eland Energy, Inc., 2010 WL 610713 (N.D.Tex. Feb. 22, 2010) (Fitzwater, C.J.). In Mid-Continent the court held that an insurer could waive conditions precedent intended to benefit it, tender policy limits to the insured, and terminate further obligations to the insured, id. at *1, provided the insurer was not attempting to terminate its duty to defend, id. at *2. The court did not hold that the insured could rely on a theory of waiver to provide coverage for a risk that the insurer did not assume, and it did not create a contract covering a risk not assumed by the insurer.
[6] Defendants mischaracterize the statements in the Ulico concurrence when they assert that, "an exception to the rule [that waiver cannot create new insurance coverage] exists where a liability insurer assumes the insured's defense with knowledge of facts indicating noncoverage and then waives all of its policy defenses by not declaring a timely reservation of rights or obtaining a timely nonwaiver agreement." Ds. Br. 9. Not only is that interpretation foreclosed by the majority opinion in Ulico, the concurrence to which defendants cite posits no more than that "[i]f the insurer defends without reserving its rights, and the insured shows prejudice, the insured is entitled to recover the benefits that would have been due under the policy." Ulico, 262 S.W.3d at 793. An argument based on prejudice is an estoppel argument rather than a waiver argument. The Ulico concurrence was not particularly concerned with fleshing out this distinction in the dicta, surmising that whether coverage was "created" or whether the policy benefits were won through a finding of prejudice, "a rose by any other name would smell as sweet." In the present case, however, the distinction matters, because, as discussed below, defendants could potentially prevail via the estoppel doctrine even though they cannot based on waiver. Estoppel would provide a different measure of damages than would waiver because estoppel damages would be determined based on detrimental reliance rather than on any existing terms of coverage in the Policy. Rhodes v. Chicago Insurance Co., 719 F.2d 116, 120 (5th Cir.1983), a Fifth Circuit case that predates Ulico, does not compel a contrary conclusion.
[7] Furthermore, such a letter would have arrived too late to foreclose an estoppel claim, as it would have arrived too late to prevent prejudice. Cf. Ulico, 262 S.W.3d at 782 (noting that, in Pacific Indemnity Co. v. Acel Delivery Service, Inc., 485 F.2d 1169, 1175-76 (5th Cir. 1973), the insurance company was estopped from denying coverage because, among other things, it failed to notify the insured of possible lack of coverage, and the withdrawal of counsel occurred less than one month before trial).
[8] Whether Gonzales actually gave such an assurance, and the extent of Canal's involvement, are fact questions for trial. Gonzales' actions gave no particular notice to Vela that she was not his attorney.
[9] Canal emphasizes that Vela was personally served with the first amended complaint in this action on September 14, 2009. But this pleading does not mention Canal's representation of Vela, focusing exclusively on Canal's arguments concerning Palmview. It was not until the second amended complaint that Canal sought any relief against Vela.
[10] Canal may apply for an award of attorney's fees after the court enters a final judgment, under the procedure and in accordance with the deadline prescribed by Fed.R.Civ.P. 54(d).
[11] Canal has filed a motion for leave to file a reply appendix. Because the contents of the reply appendix are either already part of the summary judgment record or do not affect the resolution of Canal's motion, the motion is denied.
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754 F. Supp. 2d 163 (2010)
Alan BROWN, Plaintiff,
v.
Antonio BUSSONE, Allesandro Verrini, Live Lobster Co., Inc., F/V Duchess II, Inc., Decapod, Inc., Perishable Packaging, Inc., Charter Seafood, Inc., Ababav, Inc., 3156334 Nova Scotia Limited (aka Cape Breton Live Lobster Co.), Kennebunk Lobster Co. LLC, Bait Man Co. LLC, Stonington Real Estate LLC, Atlantic Lobster Co. LLC, Boston Lobster Co. LLC, Knox Lobster Co. LLC, New England Lobster Co. LLC, Phippsburg Lobster Co. LLC, Rockland Lobster Co. LLC and Lobster Web Co. LLC, Defendants.
Civil Action No. 10-11059-NMG.
United States District Court, D. Massachusetts.
November 23, 2010.
*164 Cary P. Gianoulis, John F. Tocci, Tocci, Goss & Lee, PC, Boston, MA, for Plaintiff.
David M. Cogliano, Christopher J. Marino, Davis Malm & D'Agostine PC, Boston, MA, for Defendants.
MEMORANDUM & ORDER
GORTON, J.
Plaintiff Alan Brown ("Brown") brings suit against defendants Antonio Bussone ("Bussone") and Allesandro Verrini ("Verrini"), Live Lobster Co., Inc. ("Live Lobster") and various other corporate entities (together, "the Corporate Defendants") for various counts of 1) breach of contract and related claims, 2) breach of fiduciary duty, 3) violation of the Massachusetts Consumer Protection Act, Mass. Gen. Laws ch. 93A, and 4) for certain equitable remedies. Before the Court is Live Lobster's emergency motion for clarification or modification of the August 2, 2010 Order of this Court.
I. Factual Background
This dispute arises out of the fallout from the former business relationship between Brown and the Defendants. Bussone founded Live Lobster in 2001 as a wholesale vendor of live lobsters, lobster meat and other lobster products. Verrini is a seafood importer in Italy who, at about *165 the time Live Lobster was founded, invested capital in the company. Since that time, he has been a part owner without active engagement in day-to-day management.
In the fall of 2003, Bussone hired Brown to be the General Manager of Live Lobsters. Brown alleges that he brought operations experience to the company that had previously been lacking. The venture experienced considerable growth after Brown was hired. Annual sales increased from just under $20 million in 2004 to almost $50 million by 2008. Moreover, Brown alleges that, after Bussone had "botched" the relationship with the venture's previous lender, he fixed the problem by creating a strong relationship with TD Bank which became the companies' primary lender. Security for loans from TD Bank apparently included personal guaranties of over $6 million from Bussone and Brown.
Despite the venture's apparent success, Brown was fired in September, 2009. Brown claims that he was terminated without cause in violation of this employment agreement and that he has been unlawfully frozen out of the companies which he had a substantial hand in building.
II. Procedural History
Brown filed his complaint on June 22, 2010 and filed a motion for a preliminary injunction eight days later. After a Local Rule 7.1 conference, Brown voluntarily agreed to dismiss his Chapter 93A claim and filed an amended complaint. On August 2, 2010, by stipulation of the parties, the Court entered an Order ("the August, 2010 Order") which essentially prohibits the Defendants from 1) purchasing stock or other assets of any entity without notice to Brown, 2) attempting to increase Live Lobster's line of credit from TD Bank or obtaining credit by further encumbering any existing assets of the Corporate Defendants, 3) destroying records or documents relating to the case and 4) refusing to provide the plaintiff with reasonable access to unprivileged information relating to Live Lobster's finances. The August, 2010 Order was intended to protect Brown during the course of the litigation because he remains personally liable for the Corporate Defendants' debts but is not employed by Live Lobster nor is he a participant in the current operation of the business.
On November 3, 2010, Live Lobster Co., Inc. filed an emergency motion for clarification or modification of the August, 2010 Order with respect to a pending financing arrangement with TD Bank for the purchase of a new property. On November 15, 2010, the Court heard oral argument on the emergency motion for clarification. The Court directed Live Lobster to file a supplemental brief in support of its motion and to provide to the plaintiff a copy of its proposed financing agreement with TD Bank on or before November 17, 2010. The Court allowed Brown until November 19, 2010, to file a response.
III. Emergency Motion for Clarification or Modification of the August, 2010 Order
Since the August, 2010 Order was issued, Live Lobster has entered into a tentative agreement to acquire a large parcel of property in Prospect Harbor, Maine ("the Property"). Live Lobster has negotiated a $750,000 loan from TD Bank to purchase the Property ("the Proposed Financing"). The Proposed Financing is to be secured by a promissory note and a new "all asset" security agreement with TD Bank. TD Bank will not finalize the Proposed Financing until either Brown agrees to it or the Court makes the requested clarification.
*166 Before filing the motion for clarification, Live Lobster asked Brown to file a joint motion asking the Court to issue a "comfort order" declaring that the Proposed Financing would not breach the August, 2010 Order. Brown declined to do so and, instead, claims that the Proposed Financing violates the August, 2010 Order.
Live Lobster requests that the Court clarify that, under the August, 2010 Order, Live Lobster is permitted to obtain financing from TD Bank to acquire the Property, provided that the financing does not 1) increase Brown's exposure on his personal guarantee or 2) use existing assets to secure the loan. In addition, Live Lobster seeks clarification that signing a new "all asset" security agreement to replace an existing one does not constitute further encumbering of Live Lobster's existing assets. In the alternative, if the Court finds that the August, 2010 Order in fact prevents such action, Live Lobster requests that the Court modify it. Live Lobster seeks emergency relief because the closing date on the Property is scheduled for November 30, 2010. Brown opposed the motion in writing.
A. Legal Standard
As part of its responsibility to administer the injunction, the Court may clarify or limit the injunction's language. Schenck v. Pro-Choice Network of W. N.Y., 519 U.S. 357, 395, 117 S. Ct. 855, 137 L. Ed. 2d 1 (1997). The Court may modify or dissolve an injunction where there has been "a significant change in the law or facts so as to make modification equitable." Civic Ass'n of Deaf of N.Y. City, Inc. v. Giuliani, 970 F. Supp. 352, 358 (S.D.N.Y. 1997).
B. Application
Live Lobster claims that the August, 2010 Order does not prohibit the Proposed Financing because 1) it will not increase Brown's existing personal guarantee and 2) it does not further encumber any of Live Lobster's existing assets.
The primary source of contention is the new "all asset" security agreement which TD Bank will require as part of the Proposed Financing. Brown maintains that, by signing a new "all asset" security agreement, Live Lobster would violate the August, 2010 Order because that Order does not permit assets owned by Live Lobster as of August 2, 2010, to be used as collateral for a new debt. The Defendants respond that the proposed new "all asset" security agreement with TD Bank would not alter the status quo because, even without it, the Proposed Financing would be secured by the existing "all asset" security agreement.
At the Court's request, after oral argument, the Defendants submitted a copy of the original "all asset" Security Agreement between Live Lobster and TD Bank, dated June 26, 2008 ("the Original Security Agreement") and the proposed First Amendment to the Security Agreement ("the First Amendment") which is the subject of the pending motion for clarification. The First Amendment provides that the Original Security Agreement shall also secure the $750,000 Note that Live Lobster seeks to negotiate in connection with the purchase of the Property.[1] The Defendants claim that the First Amendment makes no changes to the Original Security Agreement.
The "Obligations" that are secured by the Original Security Agreement include:
*167 All obligations of the Debtor to the Secured Party of every kind and description, whether direct or indirect, absolute or contingent, primary or secondary, joint or several, due or to become due, or now existing or hereafter arising or acquired and whether by way of loan, discount, letter of credit, lease, or otherwise, including but not limited to the Promissory Note, Loan Agreement and Financing Documents.
Original Security Agreement, § 1 (emphasis added). Additionally, the "Cross Collateralization" clause provides that
In addition to being pledged as security for this loan, the collateral secured by this Security Agreement shall serve as security for any other loan now or hereafter existing between Lender and Pledgor or Guarantor.
Original Security Agreement, § 13 (emphasis added).
Thus, the language of the Original Security Agreement is clear that the assets it describes provide collateral for any loan that TD Bank extends to Live Lobster, including loans made after June 26, 2008. The Court concludes that the Defendants are, therefore, correct that the Original Security Agreement would cover the Proposed Financing even without the First Amendment.
Nonetheless, the Court finds that the Proposed Financing violates the August, 2010 Order which provides that
[Defendants] [s]hall not seek to increase the total amount of credit available to the Corporate Defendants from their lender, TD Bank.... Defendants shall not attempt to obtain credit (other than the above-referenced TD Bank line of credit) by transferring, encumbering or pledging any assets of the Corporate Defendants but this does not prevent the defendants from transferring, pledging or encumbering an asset obtained or purchased after the date of this order. Moreover, nothing herein shall preclude Defendants from executing a promissory note or otherwise agreeing to repay a loan secured by assets acquired after the date of this order.
August 2, 2010 Order, § A.2. The August, 2010 Order does not prohibit Live Lobster from acquiring new assets or from negotiating a new loan but it does prohibit Live Lobster from pledging or encumbering existing assets, i.e., using them as collateral to purchase a new property. As a result, the Proposed Financing would violate the August, 2010 Order because its security provisions would apply to existing assets as well as to the new Property.
If Live Lobster were to execute the Proposed Financing and then default on the debt, TD Bank would have the right to foreclose on Live Lobster's existing assets, including those guaranteed by Brown.[2] Thus, encumbering existing assets with a new obligation increases the risk to Brown with respect to his claims in this lawsuit.
The Court also notes that the Property is not included in the collateral securing Live Lobster's debt to TD Bank under the Original Security Agreement nor would it be under the First Amendment. Neither grants TD Bank a security interest in Live Lobster's real property. Instead, the Original Security Agreement secures Live Lobster's "Obligations" with its accounts, chattel paper, electronic chattel paper, equipment, inventory, deposit accounts, letter of credit rights, general intangibles, investment property and supporting obligations. Original Security Agreement, § 2.
*168 The Defendants contend that the Proposed Financing is consistent with the parties' negotiations with respect to the August, 2010 Order. In those negotiations, the Defendants were insistent that the August, 2010 Order's language should not prevent them from acquiring new assets or arranging for a new loan. After reviewing the correspondence submitted by the Defendants, the Court is satisfied that Brown did not agree that any new loan would become subject to the Original Security Agreement.
The Defendants also maintain that Brown is opposing the loan in bad faith to the detriment of the company. Because the Court agrees with Brown's reasoning, it finds that his opposition was not raised in bad faith. Finally, the Defendants assert that, if interpreted as Brown would have it, the August, 2010 Order forecloses Live Lobster from negotiating any loans. That does not appear to be the case. The Original Security Agreement is applicable only to loans from TD Bank. Thus, the Defendants are free to obtain financing from another source and to use the Property as collateral for such a loan.
The Court will, therefore, deny the Defendants' motion to clarify and, because the Court finds that there has not been "a significant change in the law or facts so as to make modification equitable", it will deny the motion to modify as well. See Giuliani, 970 F.Supp. at 358.
ORDER
In accordance with the foregoing, the Defendants' emergency motion to clarify or modify the Court's August 2, 2010 Order (Docket No. 80) is DENIED.
So ordered.
NOTES
[1] Brown notes that the real estate appraisal provided by the Defendants values the Property at $5 million thus rendering the First Amendment superfluous.
[2] Brown maintains that default is a real possibility here because Live Lobster's Maine operations "are in chaos", as evidenced by the fact that a senior employee in Maine resigned because he believed that Bussone was engaging in illegal conduct.
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743 F. Supp. 2d 380 (2010)
Joyce Perry WHITE, Taheerah Smart, George Danbury, Plaintiffs,
v.
RICK BUS COMPANY, Defendant.
Civil Action No. 09-5408.
United States District Court, D. New Jersey.
September 28, 2010.
*382 Frederick Coles, III, Law Offices of Frederick Coles, III, Plainfield, NJ, for Plaintiffs.
Lynda Eleanor Liebhauser, Bonner Kiernan Trebach & Crociate LLP, Parsippany, NJ, for Defendant.
OPINION
WOLFSON, District Judge.
In this putative class action, Defendant Rick Bus Company ("Rick Bus") moves to strike the class allegations in Plaintiff Joyce Perry White's, Taheerah Smart's, and George Danbury's (collectively, "Plaintiffs'") Complaint, pursuant to Federal Rule of Civil Procedure 12(f).[1] The complaint asserts Fair Labor Standard Act, 29 U.S.C. § 201, et seq. ("FLSA"), New Jersey State Wage and Hour Law ("NJWHL"), 34:11-56a1, et seq., New Jersey Wage Payment Law ("NJWPL"), N.J.S.A. 34:11-4.1, et seq., and common law breach of contract, unjust enrichment, conversion, and fraud claims.[2] In addition, Plaintiff Danbury cross-moves for conditional certification of his FLSA overtime claim. For the reasons set forth herein, the Court will deny Defendant's motion to strike without prejudice for several reasons: (1) it is not clear from Defendant's briefing whether it seeks to dismiss all of Plaintiffs' class allegations or only those related to its FLSA, NJWHL, and NJWPL claims; (2) Defendant failed to address the proper standard for striking FLSA class allegations[3]; and (3) neither party has addressed whether this Court should retain supplemental jurisdiction over the NJWHL, NJWPL, and other state law claims in accordance with the Third Circuit's directive in De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 306 (3d Cir.2003). The Court also denies Danbury's cross-motion without prejudice for the reasons expressed herein.
I. BACKGROUND
A. Facts
In their Second Amended Complaint, Plaintiffs allege that they were not paid their full wages while employed at Rick Bus. Specifically, Plaintiff White alleges that when she worked as a part-time bus driver for Rick Bus, she was subjected to the practice of "rounding," in violation of *383 FLSA regulation 29 C.F.R. § 785.48(b).[4] Second Am. Compl., ¶¶ 2-4. Plaintiff Smart similarly alleges that, as a part-time bus aide and "standby employee," she was also subjected to rounding. Id. In terms of class allegations, Plaintiffs White and Smart allege that there are other part-time drivers and aides "similarly situated" to them, and that Rick Bus engages in a "policy and practice [of] withholding and/or diverting pay owed to its current and former employees for actual time worked for which its employees are entitled to be paid." Id. at ¶ 3. According to the complaint, this practice not only violates FLSA regulation 29 C.F.R. § 785.48(b) but also gives rise to causes of action under New Jersey state law.[5] These state law causes of action include NJWHL and NJWPL statutory claims, as well as common law claims for breach of contract, conversion, fraud and unjust enrichment.
Plaintiff Danbury brings his claim against Rick Bus for failing to pay him overtime wages. Id. at ¶¶ 1, 6-7. Danbury, specifically, alleges that he is a
former ... full time bus driver who ... on behalf of himself, and other similarly situated current and former full time employees of defendant, Rick Bus Company, were routinely required on numerous occasions to work in excess of forty hours per week but were not paid for each additional hour worked in excess of forty hours during any given work week at a rate one and a half times their normal and/or regular rate of pay.
Id. a ¶ 6; see id. at ¶¶ 38-9. In terms of class composition, he alleges that the class is comprised of "full time bus drivers and full time aides, all who routinely worked forty hours per week and were paid an hourly wage rate ...." Id. at 40. Like White and Smart, he asserts that Defendant's policy and practice violates the FLSA, NJWHL, and NJWPL. He, further, asserts the same New Jersey common law claims as his co-plaintiffs. In connection with his FLSA claim, he alleges that Rick Bus' actions were willful, and that the FLSA exemption for executive, administrative, or professional employees does not apply. Id. at ¶ 56.
In a certification attached to his cross-motion for conditional certification under the FLSA, Danbury asserts that he worked for Rick Bus from 1998 through June 15, 2008, as a full time bus driver. Danbury Cert. at ¶ 3. (Prior to 1998, he worked "several stints" as a part-time driver, with the remaining time as a full-time driver.) Id. He asserts that he "inquired of defendant as to why I have never received any overtime pay and was advised that `this company does not pay overtime wages." Id. at ¶ 9. See also id. at ¶ 12 (asserting that "when I and the other Full-Time Bus Drivers complained about the discrepancies pertaining to the failure of defendant to pay overtime wages for overtime hours worked, we were all advised *384 that `if you don't like it, you can find another job.'"). He, further, contends he is
aware that none of my co-employees who are or were Full-Time Bus Drivers ever received any overtime pay for the hours that they worked in excess of forty hours during any given work week. I know this information based upon my conversations with them and in many instances, the comparison of our weekly pay checks.
Id. at ¶ 10. Danbury does not identify any of these bus drivers by name and there are no certifications or affidavits from those unnamed sources.
Also by way of certification, Danbury's counsel, Frederick Coles, III, asserts that he has "received in excess of one hundred and thirty unsolicited telephone calls from current and former employees of defendant, Rick Bus Company, who have expressly requested to be joined in this action as a result of defendant's longstanding policies and/or practices of failing to pay these individuals for all of the hours they have worked." Coles Cert. at ¶ 7. Counsel then qualifies this statement: "Admittedly, the claims of some of the individuals with whom I spoke, fall outside of the limitations period for the putative collective class action portion of this litigation as well as under the proposed class action claims pertaining to the common law claims." Id. The certification does not state how many of the one hundred and thirty unsolicited phone callers were full-time bus drivers or aides with overtime claims, as opposed to part-time employees with other sorts of claims. No names or details about the phone callers is provided in Coles' Certification.
B. Procedural History
Plaintiffs filed the instant action on October 23, 2009. After the Second Amended Complaint and Answer were filed, Defendant moved to strike Plaintiff's class action allegations, arguing solely that the allegations failed to satisfy the dictates of Rule 23. (As noted, it is not clear from Defendant's briefing whether it seeks to strike all of Plaintiffs' class action allegations or only those relating to the FLSA, NJWHL, and NJWPL claims.) Plaintiff opposed Defendant's motion to strike, and filed a cross-motion for conditional certification of Danbury's FLSA claim as a class representative of full-time bus drivers and full-time aides. Plaintiffs have not moved for conditional certification of Plaintiff White's and Smart's collective action claims under the FLSA. For the reasons that follow, both motions are denied without prejudice.
II. DISCUSSION
A. Defendant's Motion for Judgment on the Pleadings
As noted, the Court construes Defendant's motion to strike as one under Rule 12(c) for judgment on the pleadings. Similar to the standard for dismissal under Fed. R. Civ. P. 12(b)(6), Rule 12(c) requires the Court to takes all well-pled allegations in the complaint as true and to draw all reasonable inferences in favor of the plaintiff.[6]Rosenau v. Unifund Corp., *385 539 F.3d 218, 221 (3d Cir.2008); Turbe v. Government of Virgin Islands, 938 F.2d 427, 428 (3d Cir.1991). Judgment should be granted if the complaint fails to state a claim for which relief may be granted. Turbe, 938 F.2d at 428 (citing FED. R. CIV. P. 12(h)(2)).
As an initial matter, it is unclear from Defendant's briefing on its motion to strike whether it seeks to dismiss all or only some of the class allegations. Its analysis does not distinguish between any of Plaintiffs' claims, but argues solely under Federal Rule of Civil Procedure Rule 23 that Plaintiffs' claims generally should be stricken. Defendant's analysis seems to center on the allegations relating to the FLSA, NJWHL, and NJWPL claims by discussing the overtime and rounding allegations found in the Second Amended Complaint. Yet, Defendant titles its motion as a "Motion to Dismiss the Class Action Allegations," which suggests that it seeks to dismiss the non-NJWHL and NJWPL claims as well.
This failure to distinguish between Plaintiffs' claims is especially problematic with respect to Plaintiffs' FLSA claims because, as explained by the Third Circuit in De Asencio, FLSA collective action claims must be analyzed under 29 U.S.C. § 216(b)'s "similarly situated" standard not Rule 23. See 342 F.3d at 306. Rule 23 is the standard applicable to state-law based claims, such as Plaintiffs' state statutory and common law claims.[7] Hence Defendant's argument under Rule 23 sheds no light on whether Plaintiffs' FLSA claim should be dismissed.
To be clear, Defendant argues that Plaintiff Danbury cannot meet the FLSA's "similarly situated" test in its opposition to Plaintiff Danbury's cross-motion for conditional certification. But that analysis focuses on the proofs necessary for conditional certification and does not analyze Danbury's (or the other plaintiffs') FLSA allegations under Rule 12(c).[8]
Moreover, De Asencio directs courts faced with the prospect of dual certification of a FLSA class and a state-law based class to determine, on a case-by-case basis, whether to exercise supplemental jurisdiction over such state law claims. Id. at 312 (explaining nature of the inquiry courts should undertake in deciding whether to exercise supplemental jurisdiction). Neither party has acknowledged or addressed this threshold jurisdictional issue, even though several District of New Jersey opinions have declined to exercise supplemental jurisdiction over Plaintiffs' NJWHL, NJWPL, and common law claims by following De Asencio's directive. See e.g., Evancho v. Sanofi-Aventis U.S. Inc., Civil Action No. 07-2266, 2007 WL 4546100 (D.N.J. Dec. 19, 2007); Hyman v. WM Financial Services, Inc., No. 06-CV-4038, 2007 WL 1657392 (D.N.J. Jun. 7, 2007) (declining to exercise supplemental jurisdiction over NJWHL, NJWPL, and breach of contract claims); Herring v. *386 Hewitt Assocs., No. 06-267, 2006 WL 2347875, at *2 (D.N.J. Aug. 11, 2006); Himmelman v. Cont'l Cas. Co., No. 06-166, 2006 WL 2347873, at *1 (D.N.J. Aug. 11, 2006).[9] Without briefing on this dispositive issue, the Court cannot consider Defendant's motion to strike the state-law based class allegations.
Accordingly, the Court denies without prejudice Defendant's motion to strike, and grants Defendant leave to re-file its motion in thirty (30) days with briefing addressing: (1) what claims Defendant seeks to strike; (2) to the extent Defendant seeks to strike Plaintiff's FLSA claim, application of Rule 12(c) in the FLSA context; and (3) whether this Court should exercise supplemental jurisdiction over each of Plaintiffs' state law claims. As suggested by the Court's preceding comments, both parties' briefs were inadequate in several respects. When Defendant's motion is re-filed, this Court fully anticipates that those derelictions will be rectified in the parties' briefing.
B. Danbury's Cross-Motion for Conditional Certification
1. Collective FLSA Actions and Conditional Certification
Pursuant to 29 U.S.C. § 216(b), an employee who has been denied overtime compensation may bring an action "for and in behalf of himself or themselves and other employees similarly situated" who were affected by their employer's common policy. Because the term "similarly situated" is not defined in the FLSA, "district courts have developed a test consisting of two stages of analysis." Kronick v. bebe Stores, Inc., Civil No. 07-4514, 2008 WL 4546368, *1 (D.N.J. Oct. 2, 2008). These two stages consist of a conditional certification and final certification determination. Garcia v. Freedom Mortg. Corp., Civil Action No. 09-2668, 2009 WL 3754070, *2 (D.N.J. Nov. 2, 2009). See also Ruehl v. Viacom, Inc., 500 F.3d 375, 388 n. 17 (3d Cir.2007) (recognizing two stage certification process in FLSA cases).
At stage one, the "plaintiff bears the burden of satisfying the similarly situated standard, and if he or she does so, then the court grants conditional certification of the collective action for the purpose of sending notice to the potentially effected employees (or former employees) and conducting discovery concerning the opt-in plaintiffs." Garcia, 2009 WL 3754070 at *2 (quoting Herring v. Hewitt Associates, Inc., 2007 WL 2121693 at *3-4 (D.N.J. 2007) (noting a stage one finding "establishes nothing more than the right of the plaintiffs to establish a collective action.")). There is usually minimal evidence before the court at this stage. Thus, in determining whether conditional certification is appropriate, courts examine the pleadings and certifications submitted by the plaintiff. Herring, 2007 WL 2121693 at *5.
Once discovery has been completed and more evidence is available, at the second stage, "the court makes a final determination as to whether the plaintiff is similarly situated to the rest of the class." Garcia, 2009 WL 3754070 at *2 (quoting Kronick, 2008 WL 4546368 at *1). Some courts refer to this process as the reconsideration stage. See e.g., Ruehl, 500 F.3d at 388 n. 17 ("At the reconsideration phase, after potential class members have filed their *387 consents to opt in and after there has been further discovery to support the plaintiffs' allegations, a district court may revoke conditional certification if the proposed class does not meet FLSA's `similarly situated' requirement.").
2. Modest Factual Nexus
In terms of what is required for a stage one determination that potential collective action members are similarly situated, courts in the Third Circuit are divided. Some courts, particularly those in the Western Districts of Pennsylvania, employ the more lenient of the two relaxed standards. Under that case law, "preliminary certification is granted upon a mere allegation that the putative class members were injured by a single policy of the defendant employer." Id. (quoting Goldman v. RadioShack Corp., Civ. A. No. 2:03-CV-0032, 2003 WL 21250571, at *8 (E.D.Pa.2003)) (emphasis added). In contrast, other courts, including those in the District of New Jersey, "requir[e] the plaintiffs to show a modest factual nexus between their situation and that of the proposed class members." Id. (quoting Aquilino v. Home Depot, Inc., Civ. Action No. 04-CV-4100, 2006 WL 2583563 at *2 (D.N.J.2006)) (emphasis mine); Villanueva-Bazaldua v. TruGreen Lim. Part., 479 F. Supp. 2d 411 (D.Del.2007).
As explained by the district court in Kronick, "courts have increasingly adopted the more rigorous standard, often citing the persuasive reasoning of Smith [v. Sovereign Bancorp, Inc., No. Civ.A. 03-2420, 2003 WL 22701017, *3 (E.D.Pa. Nov. 13, 2003)]:"
[The substantial allegations standard] is at best, an inefficient and overbroad application of the opt-in system, and at worst it places a substantial and expensive burden on a defendant to provide names and addresses of thousands of employees who would clearly be established as outside the class if the plaintiff were to conduct even minimal class-related discovery. More importantly, automatic preliminary class certification is at odds with the Supreme Court's recommendation to "ascertain the contours of the [§ 216] action at the outset."
Kronick, 2008 WL 4546368, *2. I too find this reasoning persuasive. Thus, like my sister courts here in the District of New Jersey, I will apply the modest factual nexus standard.
By way of illustration, the district court in Dreyer v. Altchem Environ. Svcs., Inc. applied this more rigorous standard to deny conditional certification to a plaintiff who proposed a class consisting of "all present or former employees of the Defendants[] who were employed by Defendants [during the three years prior to July 7, 2004], paid by the day and did not receive overtime pay ...." Civil No. 06-2393, 2007 WL 7186177, *1 (D.N.J. Sept. 25, 2007). In addition to his allegations, the plaintiff there submitted his own affidavit and the affidavits of several other employees of the defendant. The court rejected all of the affidavits because they were not based on personal knowledge. For example, the court explained:
As evidence of an employer policy, Plaintiffs rely on each affiant's statement that "[t]o the best of my information and belief, everyone I worked with was paid the same way and treated the same away [sic]" and posit that if [Defendant] paid three of its employees the same way, then it must have had a policy affecting all its hourly employees.
Id. at *4. The court went on to explain: "Such assumptions might be tenable if the affiants had presented any amount of detail to bolster their assertions." Id. But, the court continued, "the affiants state only `my overtime was paid at a lower rate than the average wage of different rates I worked each week' and `[m]any times I *388 worked through lunch was [sic] not counted towards my overtime hours.'" Id. Characterizing these statements as "unsubstantiated assertions," the court held that they did not demonstrate a modest factual nexus. Id. Plaintiffs who rely on affidavits or certifications with similarly sparse factual support have faced rejection in other courts as well. See e.g., Krstic v. J.R. Contr. & Environ. Consul., Civil Action No. 09-CV-2459, 2010 WL 395953 (D.N.J. Feb. 4, 2010) (denying conditional certification where complaint failed to allege dates, job functions, or employee descriptions relating to plaintiff's overtime FLSA claim); Kronick, 2008 WL 4546368 at *2 ("Such general and vague assertions might be tenable if Plaintiff affiants had presented more detailed factual evidence to bolster their assertions.").
On the other end of the spectrum are Garcia and Bouder. In contrast to the evidence presented in Dreyer, the Garcia plaintiffs submitted eight affidavits detailing "their on the job duties, the over 40-hours worked in a week, particularly at the end of the month, supervisors' awareness of these extra hours worked and finally lack of compensation for overtime." 2009 WL 3754070 at *3. In terms of personal knowledge, "[e]ach Plaintiff stated they knew these facts based upon their own personal observations of both themselves and their co-workers ...." In Bouder, the plaintiff presented his own testimony that he worked between forty-five and seventy hours per week without overtime compensation. Bouder v. Prudential Financial, Inc., Civil Action No. 06-CV-4359, 2008 WL 7898281, *1 (D.N.J., Mar. 27, 2008). The plaintiff, further, presented deposition testimony from the defendant's compensation director, who testified that there was no significant difference between the plaintiff's position and the position of the other employees whom he sought to include in the collective action. Thus, the court concluded, the plaintiff demonstrated a modest factual nexus and was entitled to class certification. Id. at *4.[10]Accord Stillman v. Staples, Inc., Civil Action No. 07-849, 2008 WL 1843998, *4 (D.N.J. Apr. 22, 2008) (granting conditional certification where the plaintiff presented over fifteen deposition transcripts, affidavits, declarations, and documents to show that they were similarly situated to other co-workers employed by the defendant).
Here, Danbury has failed to demonstrate a modest factual nexus between himself and putative class members. As an initial matter, the Court notes the paucity of Danbury's allegations. In his Second Amended Complaint, he has provided mere generalizations and legal conclusions. He has not put forth any relevant facts for the Court to consider, such as the names of any similarly situated employees, the years in which those employees worked, or Rick Bus job descriptions for full-time bus drivers/full-time aides. These basic facts are readily ascertainable at the pleading stage before discovery, and their absence is noticeable.
Danbury's Certification is likewise unhelpful because it contains the same sort of blanket assertions without factual matter and, in any event, is based on hearsay. In his certification, he asserts that his conclusory statement that other similarly situated employees were denied overtime is "based upon my conversations with them and in many instances, the comparison of our weekly pay checks." Danbury Cert. at ¶ 10. On conditional certification motions, just as with summary judgment motions, courts do not consider evidence *389 that is inadmissible. See Dreyer, 2007 WL 7186177 at *3.[11] For that reason, the Court may not rely on Danbury's Certification here, which is deficient in content in any event. Likewise, Coles' Certification is based on hearsay because he recounts comments from putative class members as opposed to presenting certifications or affidavits from the individuals with whom he spoke.
Danbury suggests that additional detail is not required at this stage because he asserts a simple overtime claim. Pl. Reply at 3 (describing his claim "as not ... complex"). This argument misses the mark. The modest factual nexus standard requires a showing that Danbury and other Rick Bus employees are similarly situated, and that they were affected by Rick Bus' common policy of withholding overtime pay. His allegations and proofs fall short of this mandate. Accordingly, the Court concludes that Plaintiff Danbury has not demonstrated the modest factual nexus necessary to justify conditional class certification.[12] To be clear, the Court is not dismissing Danbury's individual FLSA claim, but denies only his cross-motion for conditional certification.
III. CONCLUSION
For the foregoing reasons, Defendant's motion for judgment on Plaintiffs' class action allegations is denied without prejudice. Defendant is granted leave to re-file its motion in thirty (30) days to address: (1) what claims Defendant seeks to have judgment rendered upon, with respect to the class allegations; (2) to the extent Defendant seeks judgment on Plaintiff's FLSA collective action claim, application of Rule 12(c) in the FLSA context; and (3) whether this Court should exercise supplemental jurisdiction over each of Plaintiffs' state law claims involving class allegations; in accordance with DeAsencio, supra. Plaintiff Danbury's cross-motion for conditional certification is denied without prejudice. An appropriate Order will follow.
NOTES
[1] Under that rule "[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter ... on motion made by a party either before responding to the pleading or, if a response is not allowed, within 21 days after being served with the pleading." Fed. R. Civ. P. 12(f). Because the pleadings were closed before Defendant filed its motion, and because Defendant is essentially arguing that Plaintiffs' class allegations fail to state claims for which relief may be granted, the Court construes Defendant's motion as brought under Federal Rule of Civil Procedure 12(c) instead. See Fed. R. Civ. P. 12(c) ("After the pleadings are closedbut early enough not to delay triala party may move for judgment on the pleadings."). The Court may not construe Defendant's motion as brought under 12(b)(6) because Defendant answered prior to filing its motion. Fed. R. Civ. P. 12(b)(6) ("A motion [under 12(b)(6)] must be made before pleading ....")
[2] Plaintiff White also brings a retaliatory discharge claim under 29 U.S.C. § 215(a)(3), but that claim does not contain any class allegations and is not related to the instant motions.
[3] FLSA claims brought on behalf of those similarly situated are referred to as a collective action claims. See Morisky v. Pub. Svc. Elec. and Gas Co., 111 F. Supp. 2d 493, 496 (D.N.J.2000). Courts, however, use "collective action" and "class action" interchangeably when referring to such FLSA claims. I will do the same.
[4] That regulation provides:
"Rounding" practices. It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees' starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.
29 C.F.R. § 785.48(b) (emphasis added).
[5] As noted, Plaintiff White also bring a retaliatory discharge claim under the FLSA. Because this claim does not contain any class allegations, the Court does not discuss it here. See Second Am. Compl. at ¶ 122.
[6] Some cases describe the Rule 12(c) standard in summary judgment terms. See e.g., DiCarlo v. St. Mary Hosp., 530 F.3d 255, 259 (3d Cir.2008) ("Judgment will only be granted where the moving party clearly establishes there are no material issues of fact, and that he or she is entitled to judgment as a matter of law."). However described, the touchstone of the analysis is whether the parties' well-plead allegations can sustain the causes of action alleged. See id. at 262-63 ("The court will accept the complaint's well-pleaded allegations as true, and construe the complaint in the light most favorable to the nonmoving party, but will not accept unsupported conclusory statements."). In contrast to a summary judgment motion, the court may not look outside the pleadings. See Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 220 (3d Cir.2005).
[7] Plaintiffs ultimately seek to certify a class comprised of all three plaintiffs. In their view, the class will consist of two subclasses one subclass linked to Plaintiffs White and Smart, for part-time bus drivers and aides, and the other to Danbury, for full-time drivers and aides. While the instant motions do not require the Court to rule upon whether such a class could be certified under the FLSA or state law, in light of the different job positions and distinct wage claims asserted in connection with the putative subclasses, the Court expresses its concern that a class of all three plaintiffs would fail the FLSA's similarly situated test and Rule 23's commonality requirement.
[8] This Court's research revealed at least one case in this circuit addressing Rule 12(c) in the FLSA ContextAnchor Motor Freight Drivers Assoc. v. Anchor Motor Freight, Inc., No. 87-115-JJF, 1988 WL 156772 (D.Del. Jan. 31, 1988).
[9] At least one District of New Jersey case has chosen to exercise supplemental jurisdiction in a hybrid FLSA/state-law based wage and hour action, where the plaintiff argued that the state-law based class action allegations could be predicated on jurisdiction under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d) ("CAFA"). See Jackson v. Alpharma Inc., 2008 WL 508664 (D.N.J. Feb. 21, 2008). The Second Amended Complaint, here, contains no similar allegation of jurisdiction under CAFA.
[10] There is no discussion in this opinion about whether the defendant had a company-wide policy to deny overtime pay.
[11] In this connection, Defendant argues that Danbury may not rely upon an unsworn certification in support of a motion. Defendant is wrong on this point. As long as a certification states it is made "under penalty or perjury, and [is] dated," it may be considered by a federal court. 28 U.S.C. § 1746; Dreyer, 2007 WL 7186177, *3 n. 3. See also Brokenbaugh v. Exel Logistics North America, Inc., 174 Fed.Appx. 39, 43 n. 2 (3d Cir.2006).
[12] Defendant additionally argues that there exists a possibility that the putative class members may be considered exempt from FLSA's overtime regulations and that proofs relating to this issue would vary amongst each class member. Because the Court holds that Danbury has failed to demonstrate that he is similarly situated to other employees, the Court need not reach Defendant's argument. Were the Court to reach that argument, the Court would reject it because the case upon which Defendant relies, Morisky, is not a conditional certification case. See 111 F.Supp.2d at 497 (noting that the case was "clearly beyond the first tier of the [certification] analysis, as over 100 potential plaintiffs ha[d] already opted into th[e] lawsuit."). The exempt status defense is typically heard at the second stage of certification where a full factual record has been developed. See Stillman, 2008 WL 1843998 at *3, n. 15.
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https://www.courtlistener.com/api/rest/v3/opinions/2466721/
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973 S.W.2d 269 (1997)
STATE of Tennessee, Appellee,
v.
Jeffery Scott SCHAFER, Appellant.
Court of Criminal Appeals of Tennessee, at Knoxville.
December 9, 1997.
*270 Larry G. Roddy, Sale Creek, for Appellant.
John Knox Walkup, Attorney General and Reporter, Michael J. Fahey, II, Asst. Attorney General, Nashville, William H. Cox, III, District Attorney General, C. Leland Davis, Asst. District Attorney General, Chattanooga, for Appellee.
No Permission to Appeal Applied for to the Supreme Court.
OPINION
PEAY, Judge.
The defendant was indicted for first-degree premeditated murder. After a jury trial, he was convicted of that offense and sentenced to life imprisonment. He now appeals, raising the following issues:
1. The sufficiency of the evidence;
2. Whether the trial court erred in admitting into evidence a photograph of the victim;
3. Whether the trial court erred in allowing a lay witness to testify about her opinion of the defendant and his actions;
4. Whether the trial court erred in its treatment of one of the State's witnesses, thereby causing the witness to change his testimony to the defendant's prejudice; and
5. Whether the trial court erred when it instructed the jury about parole eligibility dates.
Upon our review of the record, we reverse the judgment below and remand this cause for a new trial.
FACTS
On the evening of August 31, 1994, the defendant and the victim, Gary Lynn Branum, were drinking beer together in a bar called Fuzzy's Place. Kellie Denise Sherrill, who was working as a bartender that night, testified that Branum had been a regular customer but that she had never seen the defendant before. She arrived at the bar at approximately 7:00 p.m.; Branum and the defendant were already there, drinking beer.
Vicki Irene Jentry was a friend of Sherrill's and also arrived at the bar at about 7:00 p.m. She had never met either man, and while she was talking to Sherrill, Branum walked over to her and Sherrill introduced *271 them. Jentry testified that Branum had then asked her if he could sit next to her, that the defendant was "getting on [his] nerves." After Branum sat next to her, the defendant came and sat on the other side of her, continuing to talk to Branum. She testified that, each time she had moved, this scene would replay. She testified that the men had talked about the Vietnam war and her impression was that the defendant had served there. According to Jentry, right before the two men walked outside the bar,[1]
they got to talking about having to kill people when [Branum] was in Vietnam and [the defendant] said something about he understood how he felt and [Branum] looked at him and told him, he said, `You don't know what you're talking about.' He said, `You ain't never killed nobody.' He said, `If [sic] you didn't ever serve,' he said, `I can tell by the way the look in your eyes,' he said, `I've been through it.'
And [the defendant] said, `Not in the Army.'
When asked about Branum's demeanor during this conversation, Jentry testified that he had been "just calm, he never his voice never changed or anything." Following this exchange, according to Jentry, the two men rose and walked out the front door of the bar, the victim in front and the defendant following him.
Because the men left the door open and the air conditioner was on, Jentry went to close it. As she did so, she testified, she saw Branum and the defendant standing behind Branum's car. Branum was facing her and the defendant had his back to her. After closing the door, she went back to the bar and within one or two minutes heard a "pop." She and Sherrill then "screamed he shot him" and she saw the defendant walk by the window going to the side of the building. She testified that she and Sherrill had then run to the front door and saw Branum "laying there." The next time she saw the defendant, she testified, was when "[h]e come in the back door, walked around and sat at the end of the bar ... and he looked at [Sherrill] and he said, `Have you seen my checkbook?'" She testified that he had said nothing about hearing a gunshot and that "he was just as calm as he could be." She admitted on cross-examination that she had not seen the defendant with a gun.
Sherrill also testified that she had seen the two men walk out the front door of the bar, both leaving half-empty beer bottles behind and the defendant also leaving his checkbook behind. She saw Jentry shut the door and after Jentry had returned to the bar, she testified, she "heard a pop and I looked at [Jentry] and I said, `Oh, my God, he shot him.'" She further that she had "just assumed [the defendant] shot him and about the time I looked up [the defendant] walked by the side window." Like Jentry, she testified that the defendant had subsequently walked in the back door and asked her if she had seen his checkbook.
During the commotion, someone called 911 and after the defendant had reentered the bar, Sherrill received a phone call from the police department. Officer Max Edward Johnson of the Hamilton County Sheriff's Department arrived shortly thereafter. When he got there, he found the victim lying in the parking lot; he did not see anyone else outside. While he was outside, he testified, Sherrill had come to the door and told him that "[t]he guy that shot him" was still there. Johnson went into the bar, met the defendant, patted him down for weapons and put him in the patrol car. He subsequently located a shell casing underneath Branum's car and the murder weapon approximately forty feet to the right and toward the back of the building. A holster for the weapon was found on the driver's seat of Branum's car.
Officer Larry Sneed of the Hamilton County Sheriff's Department testified that he had arrived at the scene after Officer Johnson was already there. He identified the murder weapon as a "Star 388 automatic pistol" and stated that the holster found in the victim's car "appears to fit a 380." The gun was stipulated as belonging to the victim. Several hours after the murder, Officer Sneed took *272 a statement from the defendant, in which the defendant acknowledged having been talking with another man at the bar[2] and "talking about being in the service." He denied going outside with Branum to Branum's car, stating "I was inside the bar until the police came and got me." In response to Officer Sneed's question, "Where did [Branum] go?" the defendant responded "I didn't know he left." In response to the officer's question about whether he had mentioned anything about having killed someone before, the defendant stated, "That would be hard to do because I've never killed anything, you know, except a deer once, you know, and a squirrel, but ..."
Lloyd Dorn testified that he had been driving by the bar on the night in question and saw Branum, whom he knew, and another man in the parking lot of the bar. He testified that Branum had been at the back of a car with the other man about two feet behind him. He testified that he hadn't seen anyone else in the parking lot. On cross-examination, he testified that the defendant was not the other person that he had seen. An extensive jury-out hearing was then had, during which both the prosecuting attorney and the trial judge threatened Dorn with a perjury investigation. At the State's request, the trial judge declared Dorn to be a hostile witness. The next day, the State recalled Dorn and asked him, inter alia, "you can't tell the jury with any certainty whether or not you saw this man on that parking lot or not; can you?" Dorn responded, "As today I cannot." On further cross-examination, Dorn described the man he had seen as "probably 5'5", 5'6", around 150 or 160 pounds, curly hair and stuff." Although the record does not include the height and weight of the defendant, the record does indicate that the defendant's physical description varies somewhat from this.
Oakley McKinney of the Tennessee Bureau of Investigation testified that he had tested the murder weapon for latent fingerprints and did not find any. James Russell Davis, II, of the TBI testified that the results of testing for gunshot residue on the defendant's hands were "inconclusive." In other words, the residue test could neither implicate nor exclude the defendant as the person who had shot the weapon.
Dr. Frank King, a forensic pathologist and medical examiner, testified that Branum had died from a single gunshot wound "that entered the left side of the head just above the left eyeball and just below the left eyebrow." He further testified that this shot had been fired "within two feet of the body" and that the injury was "100 percent fatal."
The defendant did not offer any proof.
ANALYSIS
The defendant contends that the evidence is insufficient to support a finding that the homicide was committed with premeditation and deliberation as required for first-degree (premeditated) murder. He argues that the evidence supports no more than a second-degree murder conviction. We agree.
When a defendant challenges the sufficiency of the convicting evidence, we must review the evidence in the light most favorable to the prosecution in determining whether "any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979). We do not reweigh or re-evaluate the evidence and are required to afford the State the strongest legitimate view of the proof contained in the record as well as all reasonable and legitimate inferences which may be drawn therefrom. State v. Cabbage, 571 S.W.2d 832, 835 (Tenn. 1978).
Questions concerning the credibility of witnesses, the weight and value to be given to the evidence, as well as factual issues raised by the evidence are resolved by the trier of fact, not this Court. Cabbage, 571 S.W.2d 832, 835. A guilty verdict rendered by the jury and approved by the trial judge accredits the testimony of the witnesses for the State, and a presumption of guilt replaces the presumption of innocence. State v. Grace, 493 S.W.2d 474, 476 (Tenn. 1973).
*273 At the time this homicide was committed, first-degree premeditated murder was defined as the "intentional, premeditated and deliberate killing of another." T.C.A. § 39-13-202(a)(1) (Supp. 1994). A deliberate and premeditated killing was "one performed with a cool purpose" and "one done after the exercise of reflection and judgment." T.C.A. § 39-13-201(b)(1) & (2) (1991). Where no direct evidence of the defendant's state of mind at the time of the killing is available, "[d]eliberation and premeditation may be inferred from the circumstances where those circumstances affirmatively establish that the defendant premeditated his assault and then deliberately performed the act." State v. James Dumas, No. 02C01-9502-CR-00031, Shelby County, 1995 WL 580931 (Tenn. Crim. App. filed Oct. 4, 1995, at Jackson). However, circumstantial evidence of a defendant's state of mind will not support a jury verdict of premeditated murder unless the proof of premeditation and deliberation is "so strong and cogent as to exclude every other reasonable hypothesis save the guilt of the defendant, and that beyond a reasonable doubt." State v. Crawford, 225 Tenn. 478, 470 S.W.2d 610, 612 (1971). "A web of guilt must be woven around the defendant from which he cannot escape and from which facts and circumstances the jury could draw no other reasonable inference save the guilt of the defendant beyond a reasonable doubt." Id. at 613.
This Court has previously recognized the nature of proof which must be presented before a jury may properly infer either deliberation or premeditation:
(1) facts about how and what the defendant did prior to the actual killing which show he was engaged in activity directed toward the killing, that is, planning activity;
(2) facts about the defendant's prior relationship and conduct with the victim from which motive may be inferred; and
(3) facts about the nature of the killing from which it may be inferred that the manner of killing was so particular and exacting that the defendant must have intentionally killed according to a preconceived design.
State v. Gentry, 881 S.W.2d 1, 4-5 (Tenn. Crim. App. 1993), quoting 2 W. LaFave and A. Scott, Substantive Criminal Law § 7.7 (1986) (emphasis in original). In this case, there is simply no proof in the record which indicates that the defendant planned to murder the victim. Indeed, the evidence points instead to a spontaneous act of killing. The victim was killed with his own gun, and there is no proof whatsoever that the defendant was even aware that the victim had this gun. Nor is there any proof that the defendant might have planned to murder the victim by some other method. In short, there is no evidence of "planning activity."
As to motive, the State concedes that the proof demonstrates no argument between the two men. The proof further demonstrates little to no prior relationship between the defendant and Branum: the only evidence of any prior meeting is the defendant's statement to Officer Sneed that he had "seen the guy [he] was talking to once before" and Sherrill's testimony that Branum had said "something about he met him once before." Moreover, in his statement the defendant said that he did not even know the victim's name. The State posits the theory that the defendant took silent offense when Branum indicated his disbelief that the defendant had ever killed anyone. Yet the only proof the State offers up of this is the murder itself. As succinctly put by our Supreme Court in State v. West, 844 S.W.2d 144, 148 (Tenn. 1992), "[w]hile the states theory may be true, it remains only a theory, because the prosecution has no evidence to support it." There simply is no proof in the record of a prior relationship and/or the defendant's conduct with Branum from which a motive for premeditated murder may be inferred.
The nature of the killing supports only the inference that the defendant made a spontaneous and impulsive decision to shoot the victim. The proof demonstrates that they were outside the bar and out of sight for only moments before the victim was shot. Moreover, he was shot with his own gun: and, as pointed out above, there is absolutely no proof that the defendant was aware that the victim even had this gun, much less that he would be given an opportunity to get his *274 hands on it. The State points to the defendant's "calm demeanor and his immediate concealment of the weapon" after the shooting as "indicative of a cool, dispassionate premeditated murder." We acknowledge that "[c]almness immediately after a killing may be evidence of a cool, dispassionate, premeditated murder." West, 844 S.W.2d at 148. Under the circumstances of this case, however, we simply do not think the defendant's demeanor after the shooting establishes that he planned the murder prior to committing it. Cf. West, 844 S.W.2d at 148 ("[W]hile the defendant's behavior manifests ... indifference to the victim and fear of detection [such] that the jury might discredit his self-defense story, [his] failure to report the shooting to the police fails to establish premeditation and deliberation in advance of the murder.")
Similarly, that the defendant apparently threw the gun to the side of the building after shooting Branum is not sufficient evidence of premeditation and/or deliberation. See State v. Mason, ___ S.W.2d ___, ___, 1997 WL 311900 (Tenn. Crim. App. 1997) ("While we cannot infer premeditation and deliberation from [the defendant's] concealment of the weapon after the shooting, concealment does contradict the [defendant's] theory of self-defense by illustrating fear of detection."). See also State v. West, 844 S.W.2d at 148 ("The concealment of evidence ... may be associated with the commission of any crime and the accompanying fear of punishment.") (emphasis in original).
"The law in Tennessee has long recognized that once the homicide has been established, it is presumed to be murder in the second degree. The state bears the burden of proof on the issue of premeditation and deliberation sufficient to elevate the offense to first-degree murder." State v. Brown, 836 S.W.2d 530, 543 (Tenn. 1992) (citation omitted). In this case, the State has simply failed to meet this burden and the presumption of second-degree murder is therefore unrebutted. Accordingly, were it not for our remand of this case due to the reversible trial error set forth below, we would reduce the defendant's conviction to second-degree murder.
In his second issue, the defendant contends that the trial court erred when it admitted into evidence a photograph of the victim showing the gunshot wound. He argues that defense counsel offered to stipulate to the only fact which the photograph was offered to prove: that the shot had been fired at very close range, thereby causing powder burns to the victim's face. Moreover, he points out, there was expert testimony about the "stippling" and the nearness of the range from which the shot was fired. Accordingly, the photograph became needlessly cumulative and served merely to inflame the jury in violation of Tennessee Rule of Evidence 403 ("[a]lthough relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.")
In response, the State argues that the photograph was properly admitted as illustrative of the expert witness's testimony. See State v. Stephenson, 878 S.W.2d 530, 542 (Tenn. 1994). It also contends that defense counsel's stipulation is only one factor that the trial court must weigh in determining whether the probative value of the photograph outweighs the danger of unfair prejudice, citing State v. Norris, 874 S.W.2d 590, 597 (Tenn. Crim. App. 1993).
This Court will not overturn a trial court's decision to admit a photograph absent a clear showing of abuse of discretion. State v. Banks, 564 S.W.2d 947, 949 (Tenn. 1978). No such showing has been made here. With defense counsel participating, the photograph was selected from several as being the least gruesome.[3] The trial court determined that the probative value of the photograph outweighed "any prejudice" and that, in spite of defense counsel's offer to stipulate (to which the prosecution did not agree), "the picture is *275 worth a thousand words." We see no abuse of discretion in the trial court's ruling, and this issue is therefore without merit.
The defendant also complains that the trial court erred when it permitted Sherrill to testify that, in her personal opinion, he was "weird" and that she had "assumed" and "suspected" that he had shot Branum. He argues that her description of him as "weird" amounted to character evidence and that "If the jury accredited [her] testimony then it could have been a substitute for motive." The State responds that, following her labeling of the defendant as "weird," Sherrill testified about specific instances of his behavior which had led her to that conclusion.[4] Thus, according to the State, "Sherrill was not testifying about possible motives, she was merely giving a simple description of [the defendant's] behavior." The State also argues that Sherrill's stated suspicion helped the jury to understand why she had told the police dispatcher (who had called in response to the 911 call) that the shooter was still at the bar.
At the time of this trial in 1995, our rules of evidence provided that a lay witness could testify "in the form of opinions or inferences" only where the opinions and inferences "(1) ... do not require a special knowledge, skill, experience, or training; (2) The witness cannot readily and with equal accuracy and adequacy communicate what the witness has perceived to the trier of fact without testifying in terms of opinions or inferences; and (3) The opinions or inferences will not mislead the trier of fact to the prejudice of the objecting party." Tenn.R.Evid. 701(a) (1995). Our standard of review in determining whether the trial court erred in allowing the testimony at issue is abuse of discretion. See State v. Caughron, 855 S.W.2d 526, 540 (Tenn. 1993) ("It is well-settled that the propriety, scope, manner and control of the examination of witnesses is a matter within the discretion of the trial judge, subject to appellate review for abuse of discretion.")
In this case, we think the court abused its discretion in allowing Sherrill to testify that the defendant was "weird" and that she had suspected him of shooting Branum. Her testimony should have been limited to describing her observations of the defendant's behavior. The jury could then have drawn appropriate inferences from these observations. Instead, Sherrill was allowed to testify that she had found the defendant "weird" with very little factual basis on which to support this opinion. Worse, her assumption that the defendant had shot Branum voiced before she even saw Branum on the ground was based on no specific event or conduct or words about which she testified, other than having heard a "pop." We find that this testimony was misleading to the defendant's prejudice. Thus, this testimony did not satisfy the requirements of the applicable rule of evidence and should have been excluded.
However, that portion of Sherrill's testimony at issue was useful to the State only for proof of premeditation and/or deliberation, insofar as it may have assisted the jury in determining why the defendant killed Branum (because he was "weird") or in concluding that Sherrill suspected him because she had observed some behavior on his part that indicated his intent or plan to kill Branum: but which observation was otherwise not elicited during her testimony. In other words, the jury may have inferred from Sherrill's inferences that the defendant had in fact demonstrated some premeditation or deliberation, and that Sherrill simply did not testify about all of the specifics underlying her opinions. Yet, even with this erroneously admitted testimony, we have found the evidence to be insufficient to support a verdict of premeditated first-degree murder. Thus, it is unnecessary for this Court to determine whether its admission constituted reversible error. We caution the trial court, however, that this opinion testimony would be irrelevant in the defendant's new trial.
The defendant also contends that the trial court committed reversible error in its treatment of Lloyd Dorn. We agree. On initial cross-examination, defense counsel *276 asked Dorn, "You can't identify the other person that was there, can you tell me whether or not it was him?" apparently pointing to the defendant. Dorn responded, "No, it wasn't that guy." On redirect, the prosecuting attorney asked, "You're saying today, you see this man here [again, apparently pointing to the defendant] and you don't recognize him as the person you saw in the parking lot?" to which Dorn responded, "No, I do not recognize him." The State then asked, "Is it your testimony today that you can describe what that other person looked like or you just don't know?" and Dorn said, "The other person was shorter than this guy." The prosecutor then asked that Dorn be declared a hostile witness because he "interviewed this man on Sunday and he told me very specifically he had no idea."
The jury was removed and the State proceeded to voir dire the witness. Dorn indicated that the man he had seen on the parking was not only shorter than the defendant, but his hair was different and he was stockier than the defendant. The prosecuting attorney then reviewed with Dorn the statement that Dorn had given to Officer Sneed during the investigation in which no mention was made of the other person's build. Dorn testified that "he didn't ask me, you know, what the person looked like." The prosecutor then questioned Dorn about a conversation between Dorn, the attorney and Officer Sneed on the Sunday preceding the trial:
Q: And do you remember us asking you about him?
A: You just asked me, you know, who I seen.
Q: Yeah, I asked you a lot of things; didn't I?
A: And you asked me if I knew the other person and I said no.
Q: And I asked you what he looked like?
A: Now, I don't remember you asking me that.
Q: You don't remember, you don't remember me asking you what he looked like and you said, "I don't know, I couldn't identify him"?
A: No, I couldn't identify him because I don't I never have seen the person in my life.
Q: ... Did you or did you not tell me on Sunday that you couldn't identify the man who was on that parking lot if he was standing right there in front of you, weren't those your words?
A: No, I don't think so.
At this point, the prosecutor admonished Dorn, "I want you to think about that answer." Defense counsel objected, and the trial judge stated to Dorn, "No, I've got to caution Mr. Dorn that you know that you are under oath? ... Perjury is lying under oath... . And it carries one to six years in the penitentiary... . So just remember that when you're answering questions."
The trial court did not err in instructing the witness about the significance of his oath. However, at this point in the proceedings, defense counsel stated, "Well, Judge, I don't think there's any reason to think that this witness is lying" and the judge responded, "Well, I think there's every reason to believe that." After some further discussion with defense counsel, the trial court declared Dorn to be a hostile witness. The prosecutor subsequently stated, "I have a good faith basis to believe that this man is committing perjury and I'm on the verge of recommending that we go to the grand jury with it and I'm going to give you an opportunity to explain your answer clearly at 12 o'clock " Defense counsel then asked to state an objection to which the court responded, "No, let the Attorney General continue." Defense counsel attempted again, and the judge stated, "Mr. Roddy, sit down."
The prosecutor then continued its voir dire of Dorn, stating that he had asked Dorn on Sunday, "could you give me any description of the person who was on the lot that night?" Dorn responded, "I understand you asked me did I know the person that was there and I said no." After further fruitless questioning, the State called Officer Sneed to the stand to discuss Sunday's discussion with Dom. Officer Sneed testified that the prosecuting attorney had "asked [Dorn] about the other person and Mr. Dorn did make the statement that he didn't believe he could *277 identify that man or recognize that man if he was on the parking lot with us at that time." On cross-examination defense counsel asked Officer Sneed if he had ever asked Dorn to describe the person he had seen, and Officer Sneed responded, "No, sir." He also admitted that he had not shown Dorn any photographs. Dorn was then recalled to the witness stand and he reiterated in response to further questioning by the State that he had never seen the defendant "until this morning." The judge then questioned Dorn, asking him if he had spoken with any of the defendant's friends or family, or if he had discussed the matter with anyone other than defense counsel, to which Dorn replied no.
At this point in the proceedings, it is obvious that the State had been unpleasantly surprised by Dorn's testimony. However, stating that you could not identify or recognize someone if you saw them again is different from, but not inconsistent with, later stating that a particular person is not the person you had seen earlier. During its voir dire of both Dorn and Office Sneed, the State did not establish that Dorn had earlier refused to give a description of the man he had seen. Nor did it establish that it had provided Dorn with an opportunity to identify or recognize the defendant in which Dorn responded differently than he did at trial. Thus, the State failed to establish on the record that there was a good faith basis to suspect Dorn of perjury. Indeed, after the prosecuting attorney finished examining Dorn he stated to the court, "I think the man's offered perjured testimony, but I don't think it's strong enough to move for an indictment on it." The court responded, "No, I don't think [so] either." However, the judge then stated, in Dorn's presence, "I think that Mr. Sneed or members of the sheriff's department should investigate this case further to see if [Dorn] has had contact with anyone else and if he has then he should be indicted for perjury."
When the court reiterated its declaration of Dorn as a hostile witness, defense counsel objected. The judge responded, still in Dorn's presence, "I believe that Mr. Dorn is lying under oath. I don't think there's sufficient proof at this time, but I think he thinks that he can come into court like other witnesses do at times, unfortunately we do have too much perjury in court and I think that this man is committing perjury." In its continuing colloquy with counsel, the court went on:
I think the man is committing perjury.
...
And he may suffer the consequences if
...
the county investigates and can prove it because to me murder is extremely serious and is something that we should definitely try, but to me the second thing is perjury. Anything that corrupts the judicial process is a very serious offense and all efforts should be expended to prosecute anyone who commits perjury so they should investigate.
...
I'm a pretty good lie detector.
...
I think the man is lying under oath. It's that simple.
But as I say if he's not then nothing will happen, if he is hopefully they will be able to prosecute him for it because I do not think that treat that very lightly that anyone would come into court and lie under oath.
Defense counsel then repeated its objection to Dorn being declared a hostile witness.
The prosecutor then spoke up, and the trial judge stated to him, "But I think Mr. Davis you'd be pretty foolish to question him much further because I think he's already testified and I think the best thing you could do is move on and hope that the jury believes the other witnesse... . Because you don't want to get off on trying this man... . Because see, you know, that's always a good ploy is to try somebody else so I think it would be best if we continue trying Mr. Schafer." The jury was subsequently returned to the courtroom and the State initially passed on further questions. Defense counsel then asked Dorn, "is that the man that was out there when you drove by?" and Dorn responded, "To my best recollection, no." The State followed with a short redirect.
*278 The next day, the State again called Dorn to the stand outside the presence of the jury and established that he knew defense counsel and defense counsel's father independently of the case. Following this, Dorn asked to make a statement and the court said,
Okay. See, let me advise you of this, Mr. Dorn, you have every right to be represented by a lawyer because this Court believes that you lied under oath yesterday, just flat lied and you thought that you could get away with it and you may be able to get away with it because the State may not be able to prove that you lied under oath, but it looks like they've done a pretty good job in one evening of digging up some information about you[5] so if you want to say anything I'll let you say anything you want to say, but I want to caution you that anything you say could be used against you and everything you say is being taken down.
Dorn then explained how he had talked with his wife the night before and that he had "worried and worried and worried and run through my mind about seeing the person there." He explained that he and his wife had driven by Fuzzy's again the night before and tested his ability to recognize and remember the vehicles he saw as they drove by. He then said, "I could have made a mistake. I am only human, Judge." The following then took place:
THE COURT: Well, no, the Court just obviously thinks what you intended to do was assist Mr. Roddy. I don't accuse Mr. Roddy of doing anything improper, but I accuse you of wanting to help Mr. Roddy by saying that this man definitely wasn't the person you saw there and you never indicated that to Mr. Davis or to Detective Sneed ahead of time.
THE WITNESS: Well, I was never actually asked about that.
THE COURT: No, I think you're trying to backpedal now or something, but anyhow, you've had your say on that.
...
THE COURT: So you could have been wrong about that not possibly being him?
THE WITNESS: Yes.
The jury was then returned to the courtroom and the prosecutor asked, inter alia, "You can't tell us, you can't tell the jury with any certainty whether or not you saw this man on that parking lot or not; can you?" Dorn responded, "As today I cannot." In response to further questioning, he testified, "I'm only human and a person can be wrong... . I was wrong yesterday, yes."
Clearly, the multiple threats of prosecution by the State and the court, and the court's repeated declarations that it believed Dorn to be guilty of perjury in spite of the fact that Dorn was not on trial for same, had an effect on Dorn's testimony. Just as clearly, the change in testimony was to the defendant's detriment. While we agree that a trial court may properly advise a witness of the significance of lying under oath, the court in this case went far beyond an appropriate warning. In this case, the court went so far in threatening and intimidating the witness, with resulting prejudice to the defendant, that the defendant's right to a fair trial was compromised and the outcome of the trial brought into question. Under the circumstances of this case, the trial court's comments to the witness and the prosecution constituted reversible error. See T.R.A.P. 36(b) ("A final judgment from which relief is available and otherwise appropriate shall not be set aside unless, considering the whole record, error involving a substantial right more probably than not affected the judgment or would result in prejudice to the judicial process.") Accordingly, we reverse the judgment below and remand this matter for a new trial.[6]
Finally, the defendant contends that the trial court erred when it instructed the jury on parole eligibility dates. However, he candidly *279 concedes that he "believes the [trial court] correctly charged the jury pursuant to [T.C.A. § 40-35-201] but respectfully submits that the instruction denied him due process of law" under the fourteenth amendment to the United States Constitution. Because he cites us to no authority in support of this proposition, this issue is waived. Ct. Crim.App.R. 10(b).
The evidence being insufficient to support a conviction for first-degree premeditated murder and the court below having committed reversible error, we reverse the defendant's conviction for first-degree premeditated murder and remand this matter for a new trial on second-degree murder and any appropriate lesser offenses.
HAYES and BARKER, JJ., concur.
NOTES
[1] Elsewhere in the record it is established that the two men walked out of the bar shortly before 11:00 p.m.
[2] The defendant told Officer Sneed that he did not know the other man's name.
[3] The choice was made following defense counsel's objection and the trial court's ruling. Accordingly, counsel's participation in choosing the photograph did not waive the defendant's right to raise this issue on appeal.
[4] In response to the State's question as to what she meant by "weird," Sherrill explained that she had noticed that whenever the defendant spoke to Branum, he would look up rather than at him. She also said that the defendant had "kept bugging" Branum.
[5] The only "information" reflected in the record is the witness prior relationship with defense counsel and defense counsel's father. We are aware of nothing which establishes that such a relationship is probative of perjury.
[6] Given our ruling on the sufficiency of the evidence, the defendant's new trial is limited to second-degree murder and any appropriate lesser offenses.
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https://www.courtlistener.com/api/rest/v3/opinions/2466702/
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456 F. Supp. 2d 474 (2006)
Victor CRUZ, Petitioner,
v.
Superintendent Gary FILION, Respondent.
No. 03 Civ. 6980(VM).
United States District Court, S.D. New York.
October 5, 2006.
*476 DECISION AND ORDER
MARRERO, District Judge.
I. BACKGROUND
By Order dated March 2, 2006, Magistrate Judge Douglas Eaton, to whom this matter had been referred for habeas corpus review, issued a Report and Recommendation (the "Report"), a copy of which is attached and incorporated herein, recommending that the Court deny the petition filed by petitioner Victor Cruz ("Cruz") pursuant to 28 U.S.C. § 2254 (the "Petition"). In a motion made on May 18, 2006 Cruz sought an extension of time to submit objections to the Report. By Order dated June 6, 2006, Chief Judge Michael B. Mukasey granted the request, extending the deadline until July 7, 2006, and indicating that no further extensions would be granted and that if no timely objections were submitted the Report would be adopted, provided it is not found clearly erroneous. Cruz has not filed any objections to the Report, although his time to do so expired on July 7, 2006. For the reasons stated below, the Court adopts the Report in its entirety.
II. STANDARD OF REVIEW
A district court evaluating a Magistrate Judge's report may adopt those portions of the report to which no "specific, written objection" is made, as long as the factual and legal bases supporting the findings and conclusions set forth in those sections are not clearly erroneous. See. Fed.R.Civ.P. 72(b); Thomas v. Arn, 474 U.S. 140, 149, 106 S. Ct. 466, 88 L. Ed. 2d 435 (1985); Greene v. WCI Holdings Corp., 956 F. Supp. 509, 513 (S.D.N.Y. 1997). The Court is not required to review any portion of a Magistrate Judge's report that is not the subject of an objection. See Thomas, 474 U.S. at 149, 106 S. Ct. 466. A district judge may accept, reject, or modify, in whole or in part, the findings and recommendations of the Magistrate Judge. See DeLuca v. Lord, 858 F. Supp. 1330, 1345 (S.D.N.Y.1994); Walker v. Hood, 679 F. Supp. 372, 374 (S.D.N.Y. 1988).
III. DISCUSSION
The Court finds that the facts set forth in the Report are supported by the record and are thus incorporated herein by reference. Having conducted a review of the full record, including, among other things, the parties' respective submissions in connection with the Petition, as well as the Report and applicable law, the Court concludes that the findings of fact, and the legal reasoning and authority supporting the recommendations made in Report are not clearly erroneous.
IV. ORDER
For the reasons discussed above, it is hereby
ORDERED that the Report and Recommendation of Magistrate Judge Douglas Eaton dated March 2, 2006 (Docket No. 14) is adopted in its entirety, and the petition of Victor Cruz ("Cruz") for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 (Docket No. 2) is dismissed.
*477 As Cruz has not made a substantial showing of a denial of a constitutional right, a certificate of appealability will not issue. See 28 U.S.C. § 2253(c); Lozada v. United. States, 107 F.3d 1011, 1014-16 (2d Cir.1997), abrogated on other grounds, by United States v. Perez, 129 F.3d 255, 259-60 (2d Cir.1997).
The Clerk of Court is directed to close thus case.
SO ORDERED.
REPORT AND RECOMMENDATION TO. CHIEF JUDGE MUKASEY
EATON, United States Magistrate Judge.
The pro se habeas corpus petition of Victor Cruz challenges his conviction for Burglary in the Second Degree after a jury trial before Justice Jeffrey M. Atlas in Supreme Court, New York County. Cruz (born in 1959) had four prior felony convictions. (Tr. 39.)[1] From 1979 to 1991, he served prison terms for three burglaries, a robbery, and a battery. (Tr. 14-18.) On two occasions his parole was revoked,[2] and he absconded from a work release program in 1990. (Tr. 18, 21-22.) In the case at bar, the jury found Cruz guilty of a burglary committed on March 8, 1997. He had been on parole at that time. (Tr. 18.) On March 23, 1999, Justice Atlas ruled that Cruz was a persistent felony offender (S.10); given that status, he was sentenced to an indeterminate prison term of sixteen years to life.
Cruz was represented by attorneys from the Legal Aid SocietyMary Beth Anderson during the trial and sentencing, and Jeffrey I. Richman during appeal. On March 7, 2002, the Appellate Division unanimously affirmed the conviction. People v. Cruz, 292 A.D.2d 196, 738 N.Y.S.2d 213 (1st Dept.2002). On April 26, 2002, Associate Judge George Bundy Smith denied leave to appeal to the Court of Appeals. People v. Cruz, 98 N.Y.2d 636, 744 N.Y.S.2d 765, 771 N.E.2d 838 (Ct.App. 2002).
On November 6, 2002, Cruz filed a pro se motion to vacate the judgment pursuant to New York Criminal Procedure Law § 440.10. (Exh. F.) On February 25, 2003, the motion was denied in an opinion by Justice Altas. (Exh. G.) Cruz made an application for leave to appeal that denial to the Appellate Division (Exh. H); on June 5, 2003, his application was denied (Exh. J).
On August 5, 2003, Cruz timely filed his habeas corpus petition with our Court's Pro Se Office. On October 27, 2004, Assistant District Attorney ("ADA") Morrie I. Kleinbart served a 16-page Memorandum of Law, annexing, Exhibits A through J. On December 28, 2004, Cruz filed a two-page Reply Affirmation, which annexed a 13-page Memorandum of Law. On March 24, 2005, ADA Kleinbart filed the transcripts of the trial and the sentencing.
Raising the same two points raised on direct appeal by Legal Aid, Cruz's petition says:
Point I: Petitioner was denied his right to due process and a fair trial by the prosecutor, who, during opening and *478 summation, inflamed the passions of the jurors by appealing to their religiosity, repeatedly invoking images of the crucifix and the church. [U.S. Const., Amends. V, VI, and XIV; N.Y. Const., Art. I, § 6]
Point II: Petitioner's sentence of sixteen years to life imprisonment as a persistent violent felony offender pursuant to Penal Law § 70.08 and Criminal Procedure Law § 400.16 violates his right to notice of the charges against him, a jury trial and due process of law, since the enhanced sentence was premised upon two predicate convictions the existence of which was neither contained in an indictment nor submitted to a jury. [U.S. Const., Amends. XI, XIV; Apprendi v. New Jersey, 530 U.S. 466, 120 S. Ct. 2348, 147 L. Ed. 2d 435 (2000) ]
As a third point, Cruz repeats his § 440 motion's claim that his Legal Aid trial attorney provided ineffective assistance.
For the reasons stated below, I recommend that Judge Mukasey deny Cruz's habeas petition.
FACTUAL AND PROCEDURAL BACKGROUND
Elizabeth Klein testified as follows. She and her 14-year old son lived in an apartment on the third floor of the parish house of St. Luke's in the Fields Episcopal Church. (Tr. 422-23.) On March 8, 1997 at about 2:00 a.m., she awoke to the sound of a person rummaging through the rector's office, which was located one floor below. (Tr. 423.) She called the rector, Father Ferlo, at his nearby house, but his daughter said that he was sleeping. Ms. Klein then called 911 and said that she "thought somebody had broken in and was downstairs, and [she] gave the address." (Tr. 424-26.)
Police Officers ("P.O.") Christopher O'Hare, David Nedd, and Luigi Donofrio each testified. They and P.O. Robert Intartaglia arrived at the parish house about five minutes after the 911 call. (Tr. 385, 389, 426, 500-02, 583-84.) When the officers arrived, they buzzed Ms. Klein through the intercom and told her that they were not able to get in. Ms. Klein threw her keys down to one of the officers; she yelled that the intruder was banging on her door and apparently was trying to get inside her apartment. (Tr. 392-93, 427-28.) Officers O'Hare, Intartaglia, and Donofrio entered the building and saw a bag laying next to the front door. (Tr. 394, 504.) P.O. O'Hare heard banging coming from upstairs. He proceeded to the second-floor bathroom, where he saw a man in the process of climbing out of the window. P.O. O'Hare yelled, "Police! Don't move." The man, later identified as Cruz, continued climbing out of the window and onto the second-story roof. (Tr. 394-97, 493.) P.O. O'Hare radioed to the other officers that the man was "going out the back." (Tr. 397, 508.) P.O. O'Hare followed the man onto the roof, and he noted some stamps, coins, and religious artifacts lying on the roof. (Tr. 398-99.) The man jumped from the roof into the backyard. P.O. Nedd, who was in the backyard, yelled, "Police! Don't move." The man stopped and turned around; however, he gave P.O. Nedd "a little struggle" when the officer tried to handcuff him. After he was handcuffed, the man said several times that, "I was just taking a leak." (Tr. 400, 505-08, 511.) P.O. Nedd smelled alcohol on his breath. (Tr. 562.) The man was bleeding from his hands, and some of the blood got onto P.O. Nedd's hands. (Tr. 508-09, 511.) P.O. Donofrio came outside and asked the man, "Is there anyone else inside?" The man replied, "No." (Tr. 510, 589.) P.O. Donofrio then kept custody of the man and read him his Miranda warnings, while P.O. Nedd went inside the parish house to wash his hands. (511-12, 590-95.)
*479 From the roof, P.O. O'Hare went back into the parish house and searched for any other intruders. He found none. (Tr. 495.) Father Ferlo arrived at the parish house. (Tr. 442.) P.O. O'Hare and Father Ferlo testified as follows. The locks on several doors had been broken. (Tr. 401-04, 444-17, 455-56, 490.) The following items were out of place: (a) silverware, which had been in an unlocked safe in the parish office, was now lying next to a paper bag on the first floor near the front door; (b) a small grandfather clock had been moved; (c) a very old "oil stock" used for baptisms had been moved; (d) a clock radio, a calculator, old prayer books and Bibles, a toy golden calf,, an umbrella, clothing, and carpets had been moved to a corner of one of the second-floor offices and placed into shopping bags. (Tr. 401-06, 408, 411, 445, 447-49, 450-51, 454, 459, 479.) Blood stains were found on a file cabinet on the second floor. (Tr. 457.)
P.O. Nedd and P.O. Donofrio transported Cruz to the station house. (Tr. 519-50.) At the station house, P.O. Nedd showed Cruz a watch that P.O. O'Hare had found in the hallway outside Ms. Klein's third floor apartment. P.O. Nedd asked, "Is this your watch?" Cruz responded, "Yes, that's my watch." (Tr. 521-24.)
At trial, Officers Nedd and Donofrio identified Cruz as the man they arrested after he jumped from the second-floor roof. (Tr. 509-10, 588.)
Cruz did not testify. Ms. Anderson, Cruz's lawyer, called two witnesses on his behalf. Michelle Martinez testified that on the night in question, Cruz drank four bottles of malt liquor and took one of his brother's prescription pills, which she presumed to be Xanax. He walked out drunk at about 11:00 p.m. (Tr. 641, 645-48.) Dr. Morris Zedeck, called as an expert in pharmacology and toxicology, noted that at 6:41 a.m. (more than four hours after the arrest), Cruz's blood test showed .123 percent alcohol. Based on that test, and assuming that Cruz had been drinking a beverage containing 6% alcohol and had stopped drinking at 11:00 p.m., Dr. Zedeck testified that Cruz's blood at 2:00 a.m. would have contained .18 percent alcohol. A reading in the range of .15 to .20 typically means that the person may not be able to stand up straight. However, even at .20 a person would still be able to think and to make decisions, albeit with bad judgment. (Tr. 693, 719-25, 732-33, 741-42, 776-78.)
On summation, Ms. Anderson argued that Cruz was guilty only of trespass, because he had been so drunk that he lacked the intent to commit a crime when he entered the parish house. (Tr. 792-94, 798-820.) Justice Atlas instructed the jury on this topic at Tr. 865-68. The jury rejected her argument and found Cruz guilty of second-degree burglary. (Tr. 882.)
On March 23, 1999, Justice Atlas held a sentencing hearing. Ms. Anderson challenged one of Cruz's prior convictions (a 1986 guilty plea to burglary) on two grounds(a) that the attorney had failed to investigate and was ineffective, and (b) that Cruz had allocuted only to the elements of a petit larceny, not a felony. (See Exh. A, p. 9.) Justice Altas denied her challenge and found that Cruz was a persistent felony offender. (S.2-10.) Given that finding, the minimum sentence was sixteen years to life, and that is what Cruz received. (S.18.)
DISCUSSION
Point I. Cruz's claim that he was denied due process and a fair trial because the prosecutor's opening and summation inflamed the passions of the jurors by repeatedly invoking images of the crucifix and the church
Cruz's trial counsel did not object to any of the comments in the prosecutor's opening *480 and closing arguments. However, appellate counsel complained about the following portions.
In her opening statement, the prosecutor said:
But let me just start by saying this. This is a case about a burglar who got caught in the act. This defendant, Victor Cruz, broke into the St. Luke's of the Fields Episcopal Church's parish house. He broke into the parish house where Elizabeth Klein lived with her young son. He violated her privacy, he invaded the sanctity of her home and the church's parish house. He, a stranger, broke into the compound of the church of St. Luke's of the Fields, broke into the church's parish house, rummaged through the drawers, rummaged through a safe, played with antiques and religious artifacts all while crucifixes were hanging just above his head, while Elizabeth Klein, awakened from her sleep, listened in terror, and he was caught red-handed in the act.
. . . And again the evidence will show that it was this defendant, Victor Cruz, who violated the sanctity of the church compound and who had the audacity to try to steal from a church.
* * * * *
. . . The parish house, you will hear, is an old house where the offices for the church personnel are located. And as you might expect in the offices belonging to a church, there are crucifixes displayed on the walls of all the rooms.
(Tr. 372-73, 376.)
In her summation, the prosecutor said:
Ladies and gentlemen, as you now know, this case was about or still is about the burglary of the home of a woman, a burglary in a complex of a house of God, and a home, right here, just feet away from a church. Can't miss the church.
* * * * * *.
. . . Just like the person crosses the street to get to the other side, although it may seem like a cliche, this defendant entered the church building to st[ea]l.
* * * * * *
. . . You can believe everything Ms. Martinez told you and it doesn't absolve him of what he did that night, and it doesn't support the fact that he didn't go into the church building to steal because, despite his use of alcohol, whatever it may have been, how ever many glasses or bottles of malt liquor he drank, the evidence shows that the defendant was able to formulate intent, and the alcohol did not prevent him from choosing to do what he did and making sure that he met his goals.
(Tr. 820, 828, 831.)
The Appellate Division rejected Cruz's argument that the prosecutor's opening statement and summation violated his rights. It held:
Defendant's challenges to the prosecutor's opening statement and summation are unpreserved and we decline to review them in the interest of justice. Were we to review these claims, we would find that in this case involving the burglary of a church's parish house and the theft of property that included religious articles, the prosecutor's brief, record-based references to the religious aspect of the crime were not inflammatory and did not deprive defendant of a fair trial (see, People v. D'Alessandro, 184 A.D2d 114, 118-119, 591 N.Y.S.2d 1001, lv denied 81 N.Y.2d 884, 597 N.Y.S.2d 945, 613 N.E.2d 977).
Cruz, 292 A.D.2d 196, 738 N.Y.S.2d 213.
Pursuant to New York's contemporaneous objection rule, an objection *481 must be raised at trial to preserve it for appellate review. N.Y. CPL § 470.05(2); People v. Nuccie, 57 N.Y.2d 818, 455 N.Y.S.2d 593, 441 N.E.2d 1111 (N.Y.1982); People v. Dordal, 55 N.Y.2d 954, 956, 449 N.Y.S.2d 179, 180, 434 N.E.2d 248 (N.Y. 1982). By finding that the claim was unpreserved because trial counsel did not object to the comments, the Appellate Division based its denial on "adequate and independent state grounds." Harris v. Reed, 489 U.S. 255, 261-62, 109 S. Ct. 1038, 1042-43, 103 L. Ed. 2d 308 (1989); Simmons v. Mazzuca, 2001 WL 537086, at *11 (S.D.N.Y. May 21, 2001) (Peck, M.J.) (citing cases on this point). "Under Harris, federal habeas review is precluded `as long as the state court explicitly invokes a state procedural bar rule as a separate basis for decision.'" Velasquez v. Leonardo, 898 F.2d 7, 9 (2d Cir.1990). Hence, this issue cannot be considered on federal habeas review "unless the prisoner can demonstrate cause for the default and actual prejudice as a result of the alleged violation of federal law, or demonstrate that failure to consider the claims will result in a fundamental miscarriage of justice." Coleman v. Thompson, 501 U.S. 722, 750, 111 S. Ct. 2546, 2565, 115 L. Ed. 2d 640 (1991). To demonstrate "cause for the default," a petitioner must show that "some objective factor external to the defense impeded counsel's efforts to comply with the State's procedural rule." Gonzalez v. Sullivan, 934 F.2d 419, 422 (2d Cir. 1991), quoting Murray v. Carrier, 477 U.S. 478, 488, 106 S. Ct. 2639, 2645, 91 L. Ed. 2d 397 (1986). To show "actual prejudice," a petitioner "must demonstrate that he suffered actual prejudice because the prosecutor's comments during summation had a substantial and injurious effect or influence in determining the jury's verdict." Bentley v. Scully, 41 F.3d 818, 824 (2d Cir.1994). To establish a "miscarriage of justice," a petitioner must demonstrate that he is "actually innocent." Aparicio v. Artuz, 269 F.3d 78, 90 (2d Cir.2001). On these three procedural hurdles, Cruz fails to meet his burden.
First. Cruz admits that "the prosecutor's improper comments went unobjected" (see petition p. 5), but he does not give any explanation as to why no objection was made at trial.
Second. Cruz fails to show "actual prejudice" as a result of the prosecutor's references to the church. At the very start, during jury selection, the trial judge himself had told the venire panel that the crime occurred at the parish house of a church. At Tr. 67, he said:
This is what the District Attorney .. told me she expects the witnesses will prove, that in March of 1997 . . . there was a parish house of a church known as St. Luke In The Fields. . . . And apparently the church rents [it] out. Two floors of the church at least are devoted at least to parish purposes and parish business purposes. But there is a third floor there that apparently is rented out as an apartment .
(Tr. 67.) And at Tr. 74-76, the trial judge asked the prospective jurors:
"Do you think there is anything at all about that, about your knowledge of that church that would prevent you from being an open minded juror in this case?"
All the prospective jurors indicated that they would be open minded. It seems to have been unnecessary for the prosecutor to say that "crucifixes were hanging just above his head" (Tr. 373) and to say that the burglary occurred "in a complex of a house of God" (Tr. 820). On the other hand, it appears unlikely that these comments "had a substantial and injurious effect." This appearance is corroborated by the lack of objection from the defense attorney, who was able to hear the volume, *482 tone and intensity of these comments, and to view the jurors' reactions if any.
Third. Cruz fails to demonstrate that he is actually innocent. At page 11 of his memorandum, he claims that he "informed [defense] counsel that he had never entered the building at anytime." However, Cruz has submitted no evidence to support any notion that he had not entered the building. To the contrary, strong evidence showed that he had entered the parish house and that he was not blind drunk. The police observed him climb out the window onto the second story roof, then jump down to the backyard, and then have the wit to offer an excuse ("I was just taking a leak.").
Accordingly, Cruz cannot ask a federal court to review his Point I.
Point II. The constitutionality of New York's persistent felony offender statute
The crime in question, Burglary in the Second Degree, was a Class C felony that normally carried a maximum sentence of 15 years. However, because of Cruz's prior felony convictions, New York's Penal Law § 70.08 and Criminal Procedure Law § 400.16 exposed him to a minimum of 16 years to life and a maximum of 25 years to life. Justice Ronald Zweibel referred to this eight months before Cruz's trial:
Before we begin, I just think it's incumbent upon me to let the defendant know that he is facing 25 years to life on this count. He's offered 12 years to life although that is still an awful lot of time. He should understand that with a rather extensive record that I am told that he has, it's a good possibility that he may get significantly more than the 16 to life should he be convicted. . . .
(6/11/98 Tr. 2.) As it turned out, Justice Atlas's sentence was 16 years to life, the minimum allowed for a persistent felony offender. Subsequently, the U.S. Supreme Court decided Apprendi v. New Jersey, 530 U.S. 466, 120 S. Ct. 2348, 147 L. Ed. 2d 435 (2000). Apprendi held that certain sentence-enhancing facts must be proved to a jury beyond a reasonable doubtbut not if the enhancing facts are prior convictions. Nevertheless, Mr. Richman's appellate brief, dated July 2001, cited Apprendi and argued that Penal Law § 70.08 and Criminal Procedure Law § 400.16 were unconstitutional.
The Appellate Division ruled:
Defendant's constitutional challenge to the procedure under which he was sentenced as a persistent violent felony offender is unpreserved for appellate review and, in any event, is without merit (see People v. Rosen, 96 N.Y.2d 329, 728 N.Y.S2d 407, 752 N.E.2d 844, cert denied 534 U.S. 899, 122 S. Ct. 224, 151 L. Ed. 2d 160).
People v. Cruz, 292 A.D.2d 196, 738 N.Y.S.2d 213 (1st Dept.2002). ADA Kleinbart's memorandum of law to me, at pages 9-10, cited four Southern District decisions upholding the constitutionality of New York's statutory framework concerning prior felony offenders.
More recently, on June 3, 2005, the same result was reached by the Second Circuit in Brown v. Greiner, 409 F.3d 523, 534-35 (2d Cir.2005). In Alston v. Woods, 04 Civ. 8017(WHP)(GWG), 2005 WL 3312818 (S.D.N.Y. Dec. 8, 2005), a Report and Recommendation by Magistrate Judge Gorenstein gives a thorough analysis of Brown v. Greiner:
The Second Circuit has recently ruled . . . that a state court ruling upholding a sentence under New York's discretionary persistent felony offender statute is neither contrary to nor an unreasonable application of Apprendi. See Brown v. *483 Greiner, 409 F.3d 523, 534-35 (2d Cir. 2005); . . .
* * * * * *
. . . [T]he Brown case held that the application of the persistent felony, offender statute involves only a "vague, amorphous assessment of whether, in the court's `opinion,' `extended incarceration and life-time supervision' of the defendant `will best serve the public interest' "an inquiry Brown determined to be "something quite different from the fact-finding addressed in Apprendi." 409 F.3d at 534-35. Thus, Brown concluded that Apprendi was not implicated by the persistent felony offender statute because no judicial factfinding was involved at all. Several days after the decision in Brown, the New York Court of Appeals in People v. Rivera, 5 N.Y.3d 61, 800 N.Y.S.2d 51, 833 N.E.2d 194, cert. denied, ___ U.S. ___, 126 S. Ct. 564, 163 L. Ed. 2d 473 (2005), reached the identical conclusion and reiterated that under the persistent felony offender statute "no additional fact-finding beyond the fact of two prior felony convictions is required." 5 N.Y.3d at 70-71, 800 N.Y.S.2d 51, 833 N.E.2d 194 (emphasis in original). Instead, Rivera holds, "the requirement that the sentencing justice reach an opinion as to the defendant's history and character is merely another way of saying that the court should exercise its discretion." Id. at 71, 800 N.Y.S.2d 51, 833 N.E.2d 194.
Alston, 2005 WL 3312818, at *4.
Accordingly, Cruz's Point II has no merit.
Point III. Ineffective assistance of trial counsel
On November 6, 2002, Cruz filed a pro se § 440.10 motion alleging that he received ineffective assistance from trial counsel. (Exh. F.) In that motion, and in his papers before our Court, Cruz makes six complaints about Ms. Anderson:
(1) He disagreed with her trial strategy. In her closing statement, she used the fact that he was intoxicated to argue that he was guilty only of trespass, not burglary; he claims that he "had never entered the building at anytime," and that "counsel's theory of criminal actions . . . were made up without first consulting with the petitioner," and that they were "all lies." He also complains that she "really had no given defense and made it up as trial proceeded, because counsel had not submitted an opening statement to the jurors." (Pet. Memo. pp. 9-10, 11, 13; Exh. F, pp. 1-3, 4-5; Tr. 814-16, 820.)
(2) Her closing argument acknowledged that the defense's only "personal" (nonexpert) witness, Ms. Martinez, was nervous. He argues that this comment led the jury to conclude that Ms. Martinez's testimony was untruthful. (Pet. Memo. pp. 10-11; Exh. F, pp. 3-4; Tr. 802-07.)
(3) Ms. Anderson did not make any reference to the inconsistencies between P.O. Nedd's pre-trial and trial testimony. (Pet. Memo. p. 12, 13; Exh. F, pp. 5-6.)
(4) She convinced him not to take the stand in his own defense. (Pet. Memo. p. 13.; Exh. F, p. 2.)
(5) She "never asked for a trial order of dismissal, relating to the evidence or lack of, and only moved to set aside the verdict for failure to prove intent, being aware, that it was Counsel's closing statement alone which satisfied that element." (Pet. Memo. p. 12-13; Habeas Petition p. 6; Exh. F, p. 6; S. 2.)
(6) She failed to provide him with a copy of his hearing minutes. (Habeas Petition p. 6; Exh. F, p. 6.)
*484 In an order dated February 25, 2003, Justice Atlas denied Cruz's motion and wrote:
. . . The defendant now files a motion pursuant to CPL § 440.10(1)(h) claiming that the judgement against him was obtained in violation of his constitutional right to effective assistance of counsel due to trial counsel's: 1) employing a strategy that was at odds with his claim of innocence, And 2) convincing the defendant that he should not testify on his own behalf.
At trial, i[t] was proven that the defendant was caught in the process of burglarizing Saint Luke's parish house and apprehended by the police while still on the Church grounds. It was conceded that the defendant entered the parish house without permission, however due to his extreme intoxication, it was disputed that he had formed the requisite intent to burglarize the dwelling. . . .
As the defendant concedes in his papers, his trial counsel had a strategy. Therefore, the defendant has failed to demonstrate the absence of a strategy,, and his retrospective disagreement with trial counsel's strategy will not suffice to prevail on a claim of ineffective assistance of counsel. (People v. Rivera, 71 N.Y.2d 705, 709, 530 N.Y.S.2d 52, 525 N.E.2d 698 [1988]).
(Exh. G.)
On March 11, 2003, petitioner moved for leave to appeal to the Appellate Division. (Exh. H.) On June 5, 2003, Justice Joseph P. Sullivan denied leave. (Exh. J.)
The habeas statute, 28 U.S.C. § 2254(d), provides that habeas may not be granted with respect to any claim that was adjudicated on the merits in the State court, unless the adjudication of the claim:
(1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or
(2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding.
I find that Justice Atlas's decision was entirely reasonable, as I will now explain.
In Strickland v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984), the U.S. Supreme Court held that a claim of ineffective assistance of counsel 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 . . . resulted from a breakdown in the adversary process that renders the result unreliable.
Strickland, 466 U.S. at 687, 104 S. Ct. at 2064.
With respect to the first component, "judicial scrutiny of counsel's performance must be highly deferential.'"' Strickland, 466 U.S. at 689, 104 S. Ct. at 2065. A court deciding an ineffectiveness claim must "judge the reasonableness of counsel's challenged conduct on the facts of the particular case, viewed as of the time of counsel's conduct." Id., 466 U.S. at 690, 104 S. Ct. at 2066.
*485 With respect to the second component, "any deficiencies in counsel's performance must be prejudicial to the defense in order to constitute ineffective assistance under the Constitution." Strickland, 466 U.S. at 692, 104 S. Ct. at 2067. The defendant must show that "there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different." Id., 466 U.S. at 694, 104 S. Ct. at 2068.
Using the Strickland guidelines, I will now discuss petitioner's six complaints against Ms. Anderson. I will discuss complaints 1, 4, and 5 under my heading of "Disagreement with trial strategy"; complaint 2 under my heading "Ms. Martinez's testimony"; complaint 3 as "Failure to impeach P.O. Nedd"; and claim 6 as "Failure to provide hearing minutes."
A. Disagreement with trial strategy
Since Ms. Anderson chose not to make an opening statement, Cruz asserts that she did not have a trial strategy, and that her trial strategy evolved as she heard the evidence against him. Cruz's assertion is contradicted by the fact that Ms. Anderson had the foresight, in advance of trial, to retain an expert in pharmacology and toxicology. Dr. Zedeck eventually gave testimony that gave Cruz his best chance to avoid a felony conviction. Ms. Anderson's summation argued that Cruz was guilty of a misdemeanor trespass, not a felony burglary, because he did not have the intent to steal when he entered the premises. She argued that he entered the premises solely to try to find a bathroom. (Tr. 798-99, 809-11, 814-16, 819-20.) If the jury had accepted this argument, then there was no burglary, even if he formed an intent to steal after entering the parish house. (Tr. 866-70.) Cruz argues that if he had been told beforehand what Ms. Anderson's strategy was, then he would have testified in order to "provid[e] the jurors with an explanation for being on that property," i.e., in the courtyard but allegedly never inside the building. (Pet.Memo. p. 13.) He doesn't tell us how he would explain away the rector's testimony about the displacement of various valuable items inside the building and the testimony about the property stuffed in bags, and about his climbing out the window, and about his bleeding hand and the bloodstains on the file cabinet, and about his admission that he owned the watch found in the hallway outside Ms. Klein's third-floor apartment. (In view of all the evidence, there was no chance of obtaining a trial order of dismissal.) In short, Cruz's alleged trial strategy is absurd, and Ms. Anderson's trial strategy was smart.
On top of all this, if Cruz had testified, he would have been subjected to crossexamination by the prosecutor about his prior theft-related felony convictions. (Resp.Memo. p. 15.)
B. Ms. Martinez's testimony
Michelle Martinez's testimony gave details about Cruz's use of alcohol a few hours before the incident at the parish house. This was in addition to the test of Cruz's blood at 6:41 a.m. (more than four hours after his arrest). Accordingly, Ms. Martinez's testimony created a firmer foundation for Dr. Zedeck's opinion testimony. On the other hand, Ms. Anderson realized that some jurors might have a negative reaction to Ms. Martinez because she lived with Cruz as a woman but she had been born as a man. (Tr. 31, 46-47, 212, 642-43.) As a savvy trial lawyer, Ms. Anderson raised Ms. Martinez's background during jury selection, and hence was able to have some prospective jurors excuse themselves who might well have been pro-prosecution in their general out *486 look. (Tr. 212-14, 217, 292-94, 301, 345-50.)
In her closing argument, Ms. Anderson said:
Ms. Martinez was clearly very nervous. Yet she endeavored to answer all the questions put to her, truthfully, honestly, completely, no matter if it was a question coming from me, her husband's lawyer, or from Ms. Stein, her husband's prosecutor.
* * * * * *
You can believe Ms. Martinez's testimony, folks you can look at which she had to say, you can remember how she said it. And in spite of the fact that she was very nervous, you know that she was doing her very best to present honest, truthful testimony to you.
And the reason that you know that is because she tried very hard to listen to the questions and to give complete answers, and a few times she got confused. And she, you know, couldn't understand completely, and yet she was trying, she was trying to give the answers.
(Tr. 801-03.) This did not imply that Ms. Martinez was lying. On the contrary, it gave the jurors a reason (nervousness on the part of the witness) to excuse Ms. Martinez for her somewhat inconsistent and confusing testimony about the amount of alcohol consumed by Cruz.
C. Failure to impeach P.O. Nedd
Cruz argues that Ms. Anderson provided ineffective assistance of counsel because she "never mentioned or made any reference towards the inconsistency in [P.O. Nedd's] difference in statements made at the hearing and trial." (Pet.Memo. p. 12.) Cruz is incorrect; Ms. Anderson did indeed impeach P.O. Nedd's trial testimony by bringing out some inconsistent statements that he had made during the pretrial hearing. (Tr. 539-40, 567-72, 779-81.)
D. Failure to provide hearing minutes
Cruz argues that Ms. Anderson provided him with ineffective assistance because she "never provided [him] with a copy of his hearing minutes, even after continuous request[s], and letter[s], knowing those minutes were important to the defendant's pending appeal and later litigation[ ]." (Habeas Petition p. 6.) On this complaint, I agree with the respondent's memorandum:
. . . [C]ounsel's failure to provide petitioner with a copy of the minutes of the hearing certainly does not establish counsel's ineffectiveness. There is no requirement that counsel do so and a failure to provide a client with a copy of the minutes of a proceeding hardly falls below the level of professionalism expected of the reasonably competent attorney. Moreover, it is difficult to see how the result of the proceeding might have differed had petitioner had a copy of the minutes. Petitioner does not suggest what he might have done or suggested had he a copy of those minutes. In the absence of any such suggestion, petitioner simply cannot establish that he was prejudiced by this supposed failing.
(Resp.Memo. pp. 15-16.)
I note that Cruz is talking only about the hearing minutes. It seems clear that he had the trial minutes. In his § 440.10 motion to Judge Atlas, he says that he annexed as exhibits "the trial transcript pages relating to defendant's arguments," and he refers to those transcript pages in his § 440.10 affidavit. (Exh. F, pp. IV, 3-5.)
CONCLUSION AND RECOMMENDATION
For the reasons stated above, I recommend that Chief Judge Mukasey deny Cruz's habeas petition.
*487 Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, any party may object to this recommendation within 10 business days after being served with a copy (i.e., by March 21, 2006), by filing written objections with the Clerk of the U.S. District Court and mailing copies (a) to the opposing party, (b) to the Hon. Michael B. Mukasey, U.S.D.J. at Room 2240, 500 Pearl Street, New York, N.Y. 10007 and (c) to me at Room 1360, 500 Pearl Street. Failure to file objections within 10 business days will preclude appellate review. Thomas v. Arn, 474 U.S. 140, 106 S. Ct. 466, 88 L. Ed. 2d 435 (1985); Small v. Secretary of Health and Human Services, 892 F.2d 15, 16 (2d Cir.1989) (per curiam); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72, 6(a), and 6(e). Any request for an extension of time must be addressed to the District Judge.
NOTES
[1] will refer to the transcript of the Sandoval hearing, jury selection and trial as "Tr.", and the sentencing transcript as "S.". I will refer to Assistant District Attorney Morrie I. Kleinbart's October 27, 2004 Memorandum of Law as "Resp. Memo."; it annexes Exhibits A through J, and I will refer to certain of those exhibits as "Exh. ___."
[2] Tr. 18 says that his parole was revoked on December 30, 1994 and on October 7, 1998. I believe that the latter date was a mistake, and that the correct date was probably October 7, 1988.
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973 S.W.2d 570 (1998)
Louie L. MELLON, Appellant,
v.
Becky Sue MELLON, Respondent.
No. WD 54435.
Missouri Court of Appeals, Western District.
Submitted April 22, 1998
Decided August 18, 1998.
*571 Robert G. Harrison, Liberty, for appellant.
Theodore C. Beckett, II, Kansas City, for respondent.
Before ULRICH, C.J., P.J., and SMART and LAURA DENVIR STITH, JJ.
PER CURIAM.
The marriage of Louie L. Mellon ("Husband") and Becky Sue Mellon ("Wife") was dissolved on January 30, 1997. Husband challenges the trial court's valuation of his share of the marital real property. Because we conclude that the court's division of property was not an abuse of discretion, we affirm.
Background
Louie L. Mellon and Becky Sue Mellon were married on August 7, 1988. Wife's mother gave her ten acres of land in 1975. Wife built a home on the property. At the time of the parties' marriage, the property had an indebtedness of approximately $21,000.00. After the marriage, Wife agreed to place Husband's name on the deed to the property. In exchange, Husband was to place money he received from the sale of his house, $25,497.00, in certificates of deposit in both of their names. Husband did not put the money in certificates of deposit in his and Wife's name. Instead, he placed the money in a checking account. Some of the money, approximately $10,000 or $11,000, was used to remodel the home. Husband put the remainder of the money in certificates of deposits in his name and in the name of his son from a prior marriage. Various improvements were made to the property during the marriage, including the erection of an outbuilding at a cost of approximately $23,000.00. Both Husband and Wife contributed labor to improving the property. At the time of the dissolution, the property was valued at $97,000.00, with an indebtedness of approximately $21,000.00. The Court found that, during the marriage, the property increased in value approximately $10,000.00. Among their other assets, the parties had a 109 acre farm in which they had an equity of approximately $24,000.00. This farm was also determined to be marital property. They also had 41 head of cattle worth $13,500.00.
Husband was employed by Kansas City Power & Light. His annual salary was approximately $52,000.00. In addition, he had an annual income from crop sales of about $2,000.00. The sale of cattle also generally resulted in additional income. Wife was employed *572 by Kansas City Cold Storage. Her annual income was approximately $25,000.00.
There was evidence that Wife sought and received an Adult Abuse Order of Protection against Husband. Husband began to abuse alcohol and, on one occasion, struck Wife after he had been drinking. Husband also became suspicious of Wife and began following her. Just prior to filing for dissolution, Husband cleaned out the parties' joint checking account which contained $2,200.00.
The trial court divided the marital property, including the marital residence. It found:
The marital residence including ten acres having a fair market value of Ninety-Seven Thousand Dollars ($97,000.00) with an indebtedness thereon in the approximate value of Twenty Thousand One Hundred Twenty-Nine Dollars ($20,129.00). The residence was built by the Respondent on property that was gifted to her and was placed in joint names in 1988 with the Petitioner. The Respondent and Petitioner performed various repairs and improvements on the property including an outbuilding "shop" with a cost of approximately Twenty-Two Thousand Six Hundred Forty-Three Dollars ($22,643.00) and that during the marriage the realty increased in value approximately Ten Thousand Dollars ($10,000.00) and approximately Five Thousand Dollars ($5,000.00) in repair and improvements were made to the property during the marriage. The Court finds the Petitioner's marital interest in the residence and ten acres to be Eleven Thousand Dollars ($11,000.00).
The trial court divided the rest of the marital property and ordered that Husband pay Wife $43,000.00 because of the discrepancy in the division of the marital property. Husband appeals.
Standard of Review
Review of this court-tried case is performed under the standard established by Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). Therefore, the judgment of the trial court will be upheld unless it is against the weight of the evidence, it is not supported by substantial evidence, or it erroneously declares or applies the law. Id. Husband, as the party challenging the dissolution decree, has the burden of demonstrating error. Crews v. Crews, 949 S.W.2d 659, 663 (Mo.App.1997). The trial court may accept or reject all, part or none of a witness' testimony and the credibility of the witnesses is a matter within its sound discretion. Id. at 665.
Division of Marital Property
In his sole point, Husband contends that the trial court erred in determining that he has a marital interest in the parties' marital real estate in the amount of $11,000.00. He argues that the property in question was jointly titled after the parties' marriage and that his marital and nonmarital funds were used to improve the property. Husband believes his share in the marital residence should have been assigned a greater value. Although the trial court, in its judgment, characterizes the property in question as marital property, Husband contends that the trial court treated the property as if it were separate property in which he had a marital interest. He relies upon Cuda v. Cuda, 906 S.W.2d 757, 759 (Mo.App.1995) for the proposition that "[w]here the parties continually commingle marital assets and earnings, and treat property as communal, separate property may be transmuted into marital property."
The trial court found that the property in question was marital property. The assumption implicit in Husband's argument is that because the property is marital property it must be equally apportioned between the parties. Section 452.330, RSMo 1994, the statute that governs the division of property in dissolution cases, does not require an equal distribution. Instead, that section provides that "the court shall set apart to each spouse his nonmarital property and shall divide the marital property in such proportions as the court deems just after considering all relevant factors...." § 452.330.1, RSMo 1994. There are five factors listed in § 452.330 that the court is directed to include in its consideration: (1) the economic circumstances of each spouse; (2) the contribution of each spouse to the procurement of the marital property; (3) the set-off of nonmarital *573 property; (4) the parties' conduct during the marriage; and (5) the custodial arrangements for minor children. No rigid formula exists that sets forth the weight to be given each factor. Monsees v. Monsees, 908 S.W.2d 812, 815 (Mo.App.1995).
The trial court is endowed with great flexibility in its division of marital property. Woolridge v. Woolridge, 915 S.W.2d 372, 376 (Mo.App.1996). The division of property need not be equal, but it must be fair and equitable given the circumstances of the case. Dardick v. Dardick, 670 S.W.2d 865, 869 (Mo. banc 1984). An appellate court will interfere only where the division is so unduly favorable to one party that it constitutes an abuse of discretion. Id. We presume that the trial court's division is correct, and the party challenging it bears the burden of overcoming that presumption. Knapp v. Knapp, 874 S.W.2d 520, 524 (Mo.App.1994). We also presume that the trial court considered all of the relevant evidence in making its division of the marital property. Monsees, 908 S.W.2d at 815. The fact that one party is awarded a higher percentage of marital assets does not per se constitute an abuse of the trial court's discretion. Gremaud v. Gremaud, 860 S.W.2d 354, 356 (Mo.App. 1993).
A spouse's separate property is transmuted into marital property by the spouse's action in placing it in joint names. Woolridge, 915 S.W.2d at 376. Transmutation of separate property into marital property does not stop the trial court from considering the premarital contributions of each spouse. Although transmutation determines the character of the property (whether it is marital or separate), it does not determine the division of the property (how much should be apportioned to each spouse). Id. at 377.
In this case, the court did consider Husband's contributions to the property. The court found that the property was marital property. Having so found, the court was not obligated to value Husband's share in the property exactly the same as Wife's share. The record supports the trial court's valuation. The court's division of the property takes into consideration Wife's nonmarital contribution to the property. Wife owned the property for over a decade prior to the marriage. Prior to the marriage, she built a home on the property. The property increased in value only $10,000.00 during the marriage. If the court had elected to give Husband only half of the increase in value during the marriage, the court would have allowed Husband only $5,000.00 rather than $11,000.00. Not all of the money spent for improvements translated into increased value. It is true that the evidence suggests that Husband may have contributed more toward the $10,000.00 increase in value than Wife did. The court took Husband's contributions into account, and that, of course, is part of the reason the court allowed Husband an interest of $11,000.00 in the property.
There are also other factors that the court could have considered pursuant to § 452.330. For example, the trial court is directed to look to the economic circumstances of the parties. In this case, Husband's income is double Wife's income. The court can also examine the conduct of the parties during the marriage. There was evidence that Husband drank excessively and was abusive to Wife. Prior to filing for dissolution, Husband also cleaned out a joint checking account owned by the parties. Under all the circumstances, we are not persuaded that there was any abuse of discretion.
Conclusion
We cannot say that the trial court abused its discretion by dividing the marital property as it did. Substantial evidence supports the trial court's determination that Husband's share of the marital property could properly be valued at $11,000.00. The judgment is affirmed.
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973 S.W.2d 574 (1998)
STATE of Missouri, Respondent,
v.
Jeffrey A. GALINDO, Appellant.
No. 21848.
Missouri Court of Appeals, Southern District, Division One.
August 19, 1998.
*575 Douglas R. Hoff, Asst. Public Defender, St. Louis, for Appellant.
Jeremiah W. (Jay) Nixon, Atty. Gen., Meghan J. Stephens, Asst. Atty. Gen., Jefferson City, for Respondent.
GARRISON, Presiding Judge.
Jeffrey A. Galindo ("Defendant") was convicted by a jury of statutory sodomy in the first degree, § 566.062,[1] and was sentenced to life imprisonment. On this appeal, he contends that the trial court erred in permitting two witnesses to testify about statements made to them by K.C. (the four-year-old "victim"); in denying his motion for a mistrial because a witness violated a ruling in limine; and that it committed plain error in permitting an examining doctor to testify that her opinion of sexual abuse was based in part on what the victim told her. We affirm.
Defendant does not contest the sufficiency of the evidence to support the verdict. Viewed in the light most favorable to the verdict, the evidence is that Defendant was babysitting with the victim and two other children on September 16, 1996 in a house trailer. The victim's aunt, Katina Wayne, went to the house trailer hoping to surprise her niece. One of the other children told Ms. Wayne that the victim was in the bathroom with Defendant. When she opened the bathroom door, she found Defendant sitting on the stool with his pants around his ankles and the victim standing in front of him with her pants pulled down. Ms. Wayne took the victim to her car where the victim told her that Defendant had placed his fingers in her "Moo-mo," which victim described by pointing to her genital area, and had made her lick his "thing."
The victim was taken to Dr. Preuschoff who examined her and found red circles on her back and also red, raw looking, marks near her vagina. Defendant was subsequently arrested and gave a statement to officers admitting that he had touched the victim in her "private parts" and had placed his hand in her panties.
In the first of his three points on appeal, Defendant contends that the trial court erred in permitting Dr. Preuschoff to testify that, based on her physical findings and what the victim told her, it was her *576 opinion that the victim had been sexually assaulted. He argues that this testimony impermissibly bolstered the victim's statements given to both the doctor and Ms. Wayne, and that it invaded the province of the jury.
During trial, Dr. Preuschoff testified that K.C. told her that Defendant did "nasty stuff" to her; that he licked his finger and placed it in her "Moo-mo," pointing to her genitalia; that he made her suck his "wee-wee;" and that he told her not to tell. No objection was made to this testimony. The doctor then testified that based on the physical exam and what the victim told her, it was her conclusion, to a fair medical certainty, that the victim was sexually assaulted. Defendant objected to this testimony on the basis that the doctor had already testified that she could not make such a determination "for certain." Defendant did not, however, object to the testimony for the reasons he now argues on appeal.
An assignment of error on appeal regarding the admission of evidence at trial must be based upon the theory stated in the objection at trial, and an accused cannot expand or change on appeal the objection as made at trial. State v. Potter, 747 S.W.2d 300, 303 (Mo.App. S.D.1988). Recognizing that he did not preserve the issue for review on appeal because he failed to object on the basis now argued, Defendant requests that we review the point for plain error. Under Rule 30.20 this court has the discretion to review for plain errors affecting substantial rights. When seeking plain error review, a defendant must show that the trial court's action was erroneous and that the error had such a substantial effect upon the accused's rights that a manifest injustice or a miscarriage of justice would result if the error was not corrected. State v. Hornbuckle, 769 S.W.2d 89, 93 (Mo.banc 1989). An accused bears the burden of establishing manifest injustice. State v. DeJournett, 868 S.W.2d 527, 531 (Mo.App. S.D.1993). Plain error is not synonymous with prejudicial error, and appellate courts use the plain error rule sparingly and only in those cases where there is a strong, clear demonstration of a manifest injustice or a miscarriage of justice. State v. Varvera, 897 S.W.2d 198, 201 (Mo. App. S.D.1995).
Defendant's theory concerning this point is indicated by the following statement from his brief: "The doctor's testimony should not have been permitted because she improperly vouched for [the victim's] credibility, thus invading the province of the jury as the sole finder of fact and judge of believability of the witnesses." In support, Defendant cites State v. Taylor, 663 S.W.2d 235 (Mo.banc 1984), a rape case in which a psychiatrist testified that, based on the victim's verbal and nonverbal responses to his questions three months after the incident, in his opinion she suffered from rape trauma syndrome brought on by the rape incident described by her. Id. at 236. The Missouri Supreme Court reversed the conviction and remanded the case for retrial based on the psychiatrist's testimony. The issue in Taylor was whether evidence that a rape victim suffers from rape trauma syndrome is admissible as evidence that the intercourse was not consensual. Id. at 237. In deciding that it was error to admit the testimony, the court noted that expert opinion testimony is not admissible as it relates to the credibility of witnesses, and that the psychiatrist's testimony vouched too much for that of the victim. Id. at 239-40. The court specifically referred to the psychiatrist's testimony that his diagnosis was based on his belief of what the victim told him, and that his opinion was that she had not fantasized the rape. Id. at 240-41. The court concluded that the most the doctor could have testified to was that the victim's symptoms were consistent with a traumatic experience, even a stressful sexual experience, but that he could not say that she was raped by the defendant at the time and place alleged. Id. at 241. Significantly, the court noted that the evidence in question had repeatedly been challenged by the defendant. Id. at 240.
Taylor is distinguishable from this case. Not only are we reviewing for plain error, but here Dr. Preuschoff based her conclusion that the victim had been sexually assaulted on both what the victim said and a physical examination. In reaching her conclusion, Dr. Preuschoff did not render an opinion about *577 whether it was committed by Defendant. See State v. Silvey, 894 S.W.2d 662, 671 (Mo.banc 1995). It is also clear from the doctor's testimony that the physical findings resulting from the examination were consistent with the history given by the victim.
Expert testimony that comments directly on a particular witness' credibility should not be admitted. Taylor, 663 S.W.2d at 239; State v. Williams, 858 S.W.2d 796, 800 (Mo.App. E.D.1993). Dr. Preuschoff's testimony, however, did not constitute a direct comment on the victim's credibility. Likewise, she did not offer her opinion as to the victim's credibility or the Defendant's culpability. See Silvey, 894 S.W.2d at 671. An expert has been permitted to testify, based on his review of medical records containing historical information and physical findings, that two young girls had been subjected to sexual abuse. State v. Hendrix, 883 S.W.2d 935, 940 (Mo.App. W.D.1994). Furthermore, absent a proper objection, the admission of evidence which may have the effect of bolstering the testimony of a child is not plain error. State v. Mackey, 822 S.W.2d 933, 938 (Mo.App. E.D.1991). Under the circumstances here, we find no plain error resulting in a manifest injustice or a miscarriage of justice. The first point is denied.
In his second point, Defendant contends that the trial court erred in overruling his objections to the testimony of Dr. Preuschoff and Ms. Wayne about statements made to them by the victim. He argues that the statements were hearsay; that they did not possess a sufficient indicia of reliability to be admitted; and that because the victim was "for all intents and purposes unavailable to be cross-examined," the admission of the statements violated his rights to due process of law, to confront and cross-examine witnesses against him, and to a fair trial guaranteed by the Fifth, Sixth and Fourteenth Amendments to the United States Constitution, and Article I, Sections 10, 18(a) and 21 of the Missouri Constitution.
Section 491.075 provides, in pertinent part:
1. A statement made by a child under the age of twelve relating to an offense under chapter 565, 566 or 568, RSMo, performed with or on a child by another, not otherwise admissible by statute or court rule, is admissible in evidence in criminal proceedings in the courts of this state as substantive evidence to prove the truth of the matter asserted if: (1) the court finds, in a hearing conducted outside the presence of the jury that the time, content and circumstances of the statement provide sufficient indicia of reliability; and (2)(a) The child testifies at the proceedings; or (b) The child is unavailable as a witness; or (c) The child is otherwise physically available as a witness but the court finds that the significant emotional or psychological trauma which would result from testifying in the personal presence of the defendant makes the child unavailable as a witness at the time of the criminal proceeding.
In the instant case, after a hearing pursuant to § 491.075, the trial court held that under the factors referred to in section 1(1) of the statute, there was a sufficient indicia of reliability to make the victim's statements to Dr. Preuschoff and Ms. Wayne admissible. Defendant objected to the testimony at the time of the court's ruling, and also when Ms. Wayne and Dr. Preuschoff testified at trial.
The victim was called at trial but was not as responsive to the prosecutor's questions as she had been in talking with Ms. Wayne or Dr. Preuschoff. Much of her testimony was recorded by the court reporter as "shakes" or "nods" of her head. For instance she nodded her head when asked if she had been in the bathroom with Defendant. When asked what happened in the bathroom, she said that "he done bad things to me," and later she again said that "he done bad things to me and he didn't suppose to." When asked what Defendant did to her, the victim gave no response. The victim was also asked if she remembered talking with the doctor at the hospital and she nodded her head, and said "yes" when asked if she told the doctor what had happened. When asked again to tell what happened, she said that she "was in the bathroom with [Defendant] and, huh." There apparently was a pause after which the prosecutor asked her, "Just hard to say, isn't it?" to which she nodded her head.
*578 In response to cross-examination by Defendant's trial counsel, the victim nodded her head when told that they were talking about "what happened with you and [Defendant]," and whether she remembered that day. She shook her head when asked if "it" had ever happened before or with anybody else. Although at one point in the questioning the victim nodded her head when asked if she had ever told anybody that "it" had happened with anybody else, she explained by saying that she had told her mother, dad, and aunt. She shook her head when asked if she had told them that "it" had happened with somebody else. When asked if Defendant was the only person she had "told that on," she nodded her head. Defendant's counsel then announced that he had no further questions, and raised no issue about the availability of the victim for cross-examination.
Although it is difficult to discern precisely from the argument portion of his brief, it appears that Defendant's contention is rooted in Idaho v. Wright, 497 U.S. 805, 110 S. Ct. 3139, 111 L. Ed. 2d 638 (1990), involving an Idaho statute which, somewhat like § 491.075, would have authorized the admission of statements which would otherwise have constituted inadmissible hearsay. In that case, the defendant was charged with lewd conduct with two minors, one of whom was a 2½ year-old girl. At trial, a doctor was permitted to testify about statements made to him by the 2½ year-old girl, who all parties agreed was incapable of communicating with the jury. The issue presented was whether the state, as the proponent of evidence presumptively barred by the hearsay rule and the Confrontation Clause, had satisfied its burden of showing that the victim's statements to the doctor bore sufficient indicia of reliability to withstand scrutiny under the right of the defendant to confront the witnesses against him. Idaho v. Wright, 110 S.Ct. at 3147. The Court noted that the requirement that evidence bear a sufficient indicia of reliability could be met in either of two ways. First, evidence which falls within a firmly rooted exception to the hearsay rule satisfies the requirement because of the weight accorded to longstanding judicial and legislative experience in assessing the trustworthiness of certain types of out of court statements. Id. These firmly rooted exceptions include such traditional exceptions as an "excited utterance," and a "dying declaration." Id. at 3149. The second method of providing a sufficient indicia of reliability to satisfy the Confrontation Clause is to support the hearsay statement with a showing of particularized guarantees of trustworthiness. Id. at 3147. The Court cited Lee v. Illinois, 476 U.S. 530, 543, 106 S. Ct. 2056, 2063, 90 L. Ed. 2d 514 (1986), for the proposition that hearsay statements that do not fall within a firmly rooted hearsay exception are "presumptively unreliable and inadmissible" under the Confrontation Clause, and Ohio v. Roberts, 448 U.S. 56, 66, 100 S. Ct. 2531, 2539, 65 L. Ed. 2d 597 (1980), as authority that such statements must be excluded absent a showing of particularized guarantees of trustworthiness. Id. at 3148. In this regard, the Court noted that the Idaho statute which would have authorized the evidence was not a firmly rooted hearsay exception for Confrontation Clause purposes. Id. Therefore, it concluded that a showing of particularized guarantees of trustworthiness was required, but that it could not be satisfied by merely corroboration evidence. Id. at 3150-52.
Furthermore, in Idaho v. Wright, the Court noted that there was no issue in that case about whether the Confrontation Clause requires the prosecutor to show that a child witness is unavailable at trial before admitting the child's out-of-court statements. Id. at 3147. Rather, it assumed, without deciding, that for purposes of the Confrontation Clause, the victim was an unavailable witness. Id.
As we understand Defendant's contention here, it is that while the victim was physically present to testify, Defendant was deprived of the opportunity of cross-examining her in an effective way, and she was, therefore, "unavailable" as a witness. In support he cites State v. Jankiewicz, 831 S.W.2d 195 (Mo. banc 1992). There, the Missouri Supreme Court considered the victim to be "unavailable" for the purposes of an analysis under the Confrontation Clause because she was uncooperative, her answers were unresponsive, she gave no testimony which incriminated *579 the defendant, and she provided no "meaningful testimony that could be the subject of effective cross-examination." Id at 198. The court noted, however, that defense counsel had preserved the issue by attempting to cross-examine the victim through appropriate questioning.
In the instant case, Defendant's trial counsel did not attempt to cross-examine the victim on the matters now in issue, i.e., the trustworthiness of her statements to Ms. Wayne or Dr. Preuschoff. We, therefore, consider this case factually closer to State v. Hester, 801 S.W.2d 695 (Mo.banc 1991), where statements by the child-victim to a detective were admitted pursuant to § 491.075. The Hester court noted that, in State v. Wright, 751 S.W.2d 48 (Mo.banc 1988), § 491.075 was held constitutional against claimed violations of the Confrontation Clause of the United States Constitution where the child-victim is subject to cross-examination. Id. at 696. In Hester the defendant contended that, unlike Wright, the victim had been unavailable to testify because, although she was present and answered two or three questions, she failed to respond to additional questions posed by the prosecutor. Id. at 697. The court noted, however, that no attempt was made to cross-examine the child and "[t]he court made no finding that the child was unavailable and defense counsel sought no determination to that effect." Id. The court then concluded:
Reluctance to testify is not the equivalent of unavailability to testify. The child-victim was not shown to fall within any definition of the term "unavailable witness." Therefore, the distinction claimed by appellant between this case and [State v.] Wright does not exist. To restate the holding in [State v.] Wright, admitting a child-victim's out-of-court statements in evidence pursuant to § 491.075 is not a violation of due process, equal protection of the law or the right to confrontation under the United States Constitution in a case in which the victim is available and produced at trial.
Id.
In this case, although the victim was produced and testified, albeit somewhat timidly, she was available for cross-examination. Although she answered all but one of Defendant's questions in one form or another, Defendant made no effort to cross-examine her in any way on the contents of her statements to Ms. Wayne or Dr. Preuschoff. Instead, his cross-examination was primarily directed to whether the victim had made similar accusations against others, a concept which she denied. We do not consider, therefore, that the victim here was unavailable for Confrontation Clause purposes. Pursuant to State v. Wright and Hester, Defendant's contention is not well taken. Defendant's second point is denied.
Defendant's third and final point is directed at the trial court's failure to declare a mistrial when a witness made reference to a matter that the court had ordered excluded in ruling on a motion in limine. Prior to trial, the court granted Defendant's motion in limine in which he sought to exclude any evidence concerning the alleged finding of a pubic hair on the victim's body. Apparently, there was an indication in investigative reports that a pubic hair had been found on the victim, but subsequent lab tests demonstrated that it was actually a head hair. The State announced that it had no objection to the motion being sustained, and it agreed to remove any reference to the pubic hair from exhibits which would be introduced at trial. The State also agreed to brief Dr. Preuschoff, who had apparently found the hair, not to mention it.
A deputy sheriff testified, on direct examination by the State, that Defendant had admitted touching the victim's private parts. When asked if Defendant made any other admissions, the following occurred:
A: After he wrote the statement there were a couple of other issues based on the report from the physician at the hospital that concerned me and so I asked him, I asked him was his hand inside her panties or out and I think it was, was his hand inside and he said yes and the doctor had indicated that there was a pubic hair found in her hands
[Defendant's attorney]: Your Honor, I'm going to object to that.
Court: Sustained.
*580 [Defendant's attorney]: Your Honor, may we approach?
Court: Yes. Before you approach let me instruct the jury to disregard the last comment by the deputy. Anything else?
Further proceedings then occurred in chambers where Defendant's attorney announced that he was not only asking that the deputy's statement be stricken and the jury instructed to disregard it, but he was also asking for a mistrial. The following then occurred:
[Prosecutor]: Of course, first of all I think that the initial intent, and certainly the state complied absolutely with that, was to tell Dr. Preuschoff not to mention this. This came out of the blue to us too. I wasn't even aware that he knew what the doctor had said, but more importantly the Court I think has taken appropriate action. Court: Okay. I have already instructed them to disregard the comment. I understand and I think the state had even indicated they were not going to try to put this in. Based upon the way it came in and what I observed during testimony by the deputy I don't see any intentional intent for the state to get this in. I have instructed the jury to disregard it. Your Motion For Mistrial is denied. I think I have already granted the relief you requested and let's move on.
The trial court then again instructed the jury to disregard the last statement by the deputy.
The declaration of a mistrial is a drastic remedy which should be utilized only when there has been a grievous error that cannot be remedied otherwise. State v. Leisure, 810 S.W.2d 560, 571 (Mo.App. E.D. 1991). Whether to grant a mistrial is largely a matter for the trial court's discretion because it is in a better position to determine any prejudicial effects from the alleged error. Id. "In order to hold that the failure to grant a mistrial was reversible error, we must conclude, after reviewing the entire record, that as a matter of law the error was so prejudicial that its effect was not removed by the trial court's action." Id.
In the instant case, the testimony complained of was not responsive to the State's questions, it was an isolated occurrence and was not emphasized, the trial court promptly sustained Defendant's objection and instructed the jury to disregard the comment, and there was substantial other evidence of guilt. Additionally, the trial judge announced that he found no intent on the State's part to get the information before the jury. Under these circumstances we are unable to conclude that the trial court abused its discretion in denying the motion for a mistrial. See State v. Smith, 934 S.W.2d 318, 320-22 (Mo.App. W.D.1996). Point three is denied.
The judgment is affirmed.
PREWITT and CROW, JJ., concur.
NOTES
[1] Statutory references are to RSMo 1994, and all rule references are to Missouri Rules of Criminal Procedure (1998), unless otherwise indicated.
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973 S.W.2d 787 (1998)
Domingo Rivera HERNANDEZ, Appellant,
v.
The STATE of Texas, Appellee.
No. 03-97-00307-CR.
Court of Appeals of Texas, Austin.
August 13, 1998.
*788 David B. Fannin, Austin, for Appellant.
Ronald Earle, Dist. Atty., Lisa Dotin Stewart, Asst. Dist. Atty., Austin, for State.
Before POWERS, KIDD and B.A. SMITH, JJ.
KIDD, Justice.
A jury convicted Domingo Rivera Hernandez of aggravated sexual assault of a child, indecency with a child by contact, and indecency with a child by exposure. Tex. Penal Code Ann. §§ 22.021(a)(1)(B), 21.11(a)(1), & 21.11(a)(2) (West 1994 & Supp.1998). The court assessed punishment at terms of imprisonment of fifty, forty, and twenty years for the respective offenses. Hernandez challenges the admission of testimony from more than one outcry witness and the admission of testimony about an extraneous offense. We will affirm the judgment.
KEY TESTIMONY
Several witnesses testified at trial. The testimony disputed on appeal came from Cynthia Cantu, the Child Protective Services worker who interviewed the complaining witness, and from a boy who was not the complaining witness. In addition to their testimony, we must also review the testimony of the victim, his mother, and another boy to resolve the dispute.
The victim, who was twelve years old at the time of trial, testified that Hernandez "molested" him on numerous occasions, beginning when the victim was in third grade and lasting until he was in fifth grade. The victim testified that once, while he was urinating in Hernandez's bathroom, Hernandez put his arms around the victim, rubbed the victim's stomach, and started breathing hard. The victim asked if he could take a shower, and Hernandez joined him. Hernandez began rubbing the victim's stomach again, then stuck his penis between the victim's legs. As Hernandez rubbed his penis between the victim's legs, Hernandez's penis touched the victim's anus. Hernandez masturbated in the boy's presence more than once. The victim testified that Hernandez also drove the victim in his truck to the woods near a lake more than once; on one occasion, Hernandez masturbated while they were smoking cigarettes and on another Hernandez sucked the victim's penis. Yet another time at Hernandez's apartment, Hernandez and the victim played hide-and-seek naked, which led to other indecent acts. The victim described still other instances supporting all three charges. Hernandez gave the victim $5 after at least one incident and told the victim that if he told anyone about their activities, Hernandez would go to jail or die.
The State introduced two outcry witnesses. The victim's mother testified regarding the incident in the woods. Her recounting matched the details of the victim's story relevant to the criminal charge; she also overheard him telling a deputy that Hernandez assaulted him at his apartment. Cantu's testimony regarding the shower incident matched the details of the victim's testimony that were relevant to the charges; the victim said Cantu was the first person he told about the shower incident.
Another boy testified about playing tag with Hernandez and the victim; when Hernandez was "it," he caught the boy from behind and tried to press his penis against the boy's backside while both were clothed. The boy also testified that Hernandez had a lighter whose "flame" was a plastic penis and that Hernandez let the boys smoke at his apartment.
A third boy testified that Hernandez gave him cigarettes and gave another boy a condom and some "dirty" magazines.
DISCUSSION
Hernandez contends by point of error one that the trial court erred by allowing Cantu to testify as an outcry witness following the victim's mother's testimony as an outcry witness. Hernandez does not complain that the State failed to comply with the requirements to admit the testimony of either outcry witness, only that the State is limited to presenting one outcry witness to testify about the incident. Though the State charged Hernandez with three different offenses, it alleged that all three offenses occurred on or about February 10, 1996. Hernandez contends *789 that, once the victim's mother provided outcry testimony supporting conviction on all three counts, the State could not present a second outcry witness regarding any of these incidents.
As with other decisions regarding the admissibility of evidence, we will not reverse the trial court's admission of the testimony from the second outcry witness absent an abuse of discretion. See Garcia v. State, 792 S.W.2d 88, 91-92 (Tex.Crim.App.1990).
Because we are cited to and find no cases directly on point, we look to similar cases and statutes to determine whether the second outcry was admissible. The fact that the events described by Cantu and the victim's mother did not occur on the same day (the charged day, February 10, 1996) would not prevent either witness's testimony from supporting a conviction. See Sledge v. State, 953 S.W.2d 253, 256 (Tex.Crim.App.1997). When the indictment alleges that a crime occurred "on or about" a particular date, the State may present evidence that the offense was committed at any time before presentment of the indictment and within the statutory limitations period. Id. We note further that the State can introduce multiple acts of sexual assaults by the defendant on the child victim notwithstanding the restrictions on character evidence found in the rules of evidence. See Tex.Code Crim. Proc. Ann. art. 38.37 (West Supp.1998). Perhaps closest to our situation are the holdings by the First Court of Appeals that a victim's testimony that the defendant had committed the charged offense against the victim many different times was not excludable as describing extraneous acts. Worley v. State, 870 S.W.2d 620, 621 (Tex.App.Houston [1st Dist.] 1994, pet. ref'd) (charged act occurred "over a hundred times"); Hernandez v. State, 817 S.W.2d 744, 746 (Tex.App.Houston [1st Dist.] 1991, no pet.). Though these cases did not involve outcry witnesses, we find them instructive. The court held in Worley that the testimony did not concern extraneous offenses because the victim's testimony matched the elements of the charged offenses. 870 S.W.2d at 621-22. In a similar case, that court defined extraneous offenses as acts not shown in the charging instrument but shown to have been committed by the accused against the victim. Hernandez, 817 S.W.2d at 746. Multiple acts of the type shown in the charging instrument and shown to have been committed by the accused therefore could not be considered extraneous offenses. Worley, 870 S.W.2d at 622-23.
We conclude that multiple outcry witnesses may testify regarding discrete instances in which the defendant committed the charged conduct against the victim. Testimony about out-of-court statements offered for the truth of the matter asserted in the statement is ordinarily excluded as hearsay. Tex.R. Evid. 801, 802. State law excepts from the hearsay exclusion the first adult to whom the child makes an outcry about physical or sexual abuse. Tex.Code Crim. Proc. Ann. art. 38.072 § 2(a)(2) (West Supp.1998). By this statute, the drafters acknowledge the need for such adult testimony while guarding against the possibility that subsequent adults to whom the child makes outcry might hear a version tainted by suggestion or guidance. The concern regarding the tainting of subsequent outcries is reduced when the outcry witnesses testify about discrete occurrences of the same offenses. Indeed, if the child described one type of abuse to one witness and a different type of abuse to the second listener, the second listener could testify about that distinct offense. Turner v. State, 924 S.W.2d 180, 183 (Tex.App.Eastland 1996, pet. ref'd) (officer could testify to victim's outcry about penile penetration because victim's previous outcry to counselor was about digital penetration, not penile penetration). We believe we should take the same approach when the child describes to different witnesses discrete occurrences constituting the same offense. In this case, the victim's mother testified about the victim reporting that Hernandez sexually assaulted him at a lake and Cantu testified about the victim reporting that Hernandez sexually assaulted him at Hernandez's apartment while they showered. Though both events involve conduct comprising the charged offenses, they are discrete events occurring at different locations and times. The trial court did not err by allowing both outcry witnesses to testify. We overrule point one.
*790 By point of error two, Hernandez complains that the trial court erred by admitting testimony from another boy that Hernandez treated him similarly to the way the victim said Hernandez treated him. Evidence of other wrongs or acts is not admissible to show a defendant's bad character, but may be admissible for other purposes, such as proving motive, opportunity, identity, intent, preparation, plan, knowledge, or absence of mistake or accident. Tex.R. Evid. 404(b). The boy testified about playing tag with Hernandez and the victim; when Hernandez was "it," he caught the boy from behind and tried to press his penis against his backside while both were clothed. The boy also testified that Hernandez had a lighter whose "flame" was a plastic penis and that Hernandez let the boys smoke at his apartment. Hernandez objected to this testimony as describing inadmissible extraneous offenses that were more prejudicial than probative.
Hernandez waived his objections to evidence about his possession of the pseudo-lighter and his allowing the boys to smoke; the victim had testified without objection about these aspects already, including the fact that other children sometimes smoked with him and Hernandez.
Further, the trial court did not err by allowing this evidence and evidence of the tag game because it helped show plan and preparation to sexually assault the victim. The State's expert testified that the giving of gifts and the allowance of forbidden activities is a "grooming" technique used to equalize the perceived age of the abuser and the victim; the toys and cigarettes make the child seem older, while the game playing makes the abuser seem younger. The grooming activities can be preludes to abuse. These activities were not offered for mere character conformity, but showed a plan, preparation, and opportunity to commit the offenses. They showed the absence of mistake or misunderstanding regarding the nature of Hernandez's conduct toward the victim. Taken with the expert's testimony on grooming behavior, the boy's testimony tends to make it more likely that Hernandez assaulted the victim. The court did not abuse its discretion by allowing the testimony. We overrule point two.
CONCLUSION
Having overruled both points of error, we affirm the judgment.
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259 P.3d 489 (2011)
The PEOPLE of the State of Colorado, Plaintiff-Appellant
v.
Wayne Michael KLINCK, Jr., Defendant-Appellee.
No. 10SA361.
Supreme Court of Colorado, En Banc.
May 31, 2011.
*490 Carol Chambers, District Attorney, Eighteenth Judicial District, John Topolnicki, Deputy District Attorney, Centennial, Colorado, Attorneys for Plaintiff-Appellant.
Springer and Steinberg, P.C., Harvey A. Steinberg, Michael P. Zwiebel, Denver, Colorado, Attorneys for Defendant-Appellee.
Justice HOBBS delivered the Opinion of the Court.
In this interlocutory appeal, the prosecution challenges the trial court's suppression of statements made by the defendant, Wayne Klinck, while being questioned in connection with an assault on Klinck's girlfriend, D.B. Responding to a domestic disturbance report, police officers arrived at D.B.'s house and asked Klinck to remain on the porch while the officers interviewed D.B. Shortly thereafter, an officer spoke with Klinck and, when *491 the officer determined he had probable cause, placed Klinck under arrest.
Klinck was advised of his rights under Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966), and invoked his right to counsel. When detectives later re-contacted and interviewed Klinck in jail, he waived his Miranda rights and provided additional information. The trial court suppressed the statements made by Klinck on the porch prior to his formal arrest, finding that Klinck was in custody during the initial interview for Miranda purposes and his statements were involuntary. The trial court also suppressed the statements made by Klinck after his arrest, finding them involuntary and in violation of Miranda.
Klinck acknowledges his statements on the porch were voluntary, and the prosecution concedes Klinck's statements in jail were properly suppressed as in violation of Miranda because Klinck had invoked the right to counsel yet the police continued to interrogate him. Before us is the issue of whether the trial court properly suppressed Klinck's porch statements, and whether his post-arrest statements were voluntary and may be used for purposes of impeachment.
We hold that Klinck was not in custody for Miranda purposes during his initial interview on the porch. The trial court erred in suppressing those statements. We find that Klinck's post-arrest interview statements were made voluntarily, and despite their suppression from the prosecution's case-in-chief they are admissible at trial for impeachment purposes.
I.
On November 15, 2009, Douglas County Sheriff's Deputy Hays arrived at the home of the victim, D.B., in response to a domestic disturbance report. En route to the house, he learned from dispatch that D.B. was involved in an altercation with her boyfriend, Klinck, who had just left the house and would return shortly. As Deputy Hays approached D.B.'s house on foot, he observed a truck pull into the driveway of the house and a man exit the vehicle.
Deputy Hays followed the man into the open garage and asked him for identification. After identifying the man as Klinck, Deputy Hays asked what he was doing at the house. Klinck responded he was returning to his girlfriend's house after getting coffee. Klinck stated that, although he and D.B. had a "spat" the night before, he had no idea why the police were at the house. Deputy Hays asked to follow Klinck into the home. As they entered, he saw D.B. exit the front door and walk towards the back-up patrol car, which had pulled up in front of the house.
Klinck motioned to follow D.B. to the street, but Deputy Hays told Klinck to remain on the porch and he would be back to talk with him. Deputy Hays questioned D.B. in the patrol car for ten to fifteen minutes, during which time he learned that D.B. and Klinck had a fight the night before. D.B. said Klinck had come over to her house late at night, and she had woken up with him on top of her holding her down in bed by her wrists. She said Klinck at one point had put a pillow over her head and pushed her face into the mattress. Deputy Hays observed several red marks on D.B.'s wrists, as well as several red marks on her neck and right shoulder blade.
After speaking with D.B., Deputy Hays returned to the front porch to interview Klinck. The conversation lasted five to ten minutes. Deputy Hays maintained a conversational tone and did not touch Klinck or motion toward his weapon. Klinck reiterated he and D.B. had a "spat" the night before regarding alcohol, but, other than arguing, nothing occurred. Deputy Hays arrested Klinck on the basis of the physical evidence on D.B.'s person, which was consistent with her story.
At the jail, Deputy Hays informed Klinck, based upon D.B.'s statements, that Klinck would be charged with attempted murder, sexual assault, and burglary. Klinck responded that their sex was consensual and D.B. was trying to set him up because she thought he was cheating on her. Hays then advised Klinck of his Miranda rights, and Klinck responded, "I want to talk to my lawyer."
*492 Several hours later, Detectives Aragon and Stewart contacted Klinck and brought him into an interrogation room for questioning. Although Klinck had previously asserted his right to counsel, neither detective was aware of this fact. They read Klinck his Miranda rights.
Klinck waived his rights and spoke with the detectives for over five hours. The entire interaction was captured on video inside the police interrogation room. The detectives maintained a conversational tone, asked open-ended questions, and were courteous and relaxed in their interactions with Klinck. Klinck appeared lucid, awake, and provided narrative answers. Klinck was not handcuffed during the interview, and the detectives offered Klinck water at multiple occasions.
Almost two hours into the interview, Klinck stated "I think I've been talking too long and I'm very tired." Detective Aragon replied, "Can we just talk about a couple of more things? If you don't want to talk about it we can't make you talk about it." Detectives were non-confrontational and emphasized that they wanted to hear "his side of the story," as they has previously spoken with D.B. in the hospital and desired to understand the events of the night from Klinck's perspective. Detective Aragon told Klinck that "it's up to me to decide if I'm gonna file charges and if so what charges I'm gonna file. And that makes my job really difficult if I only have one side of the story." Klinck proceeded to describe the facts of the night in question, but denied harming D.B.
After three and a half hours, Detective Aragon told Klinck that she appreciated him talking to them, and, while she believed much of what he said to be accurate, based on medical examinations of D.B., she knew some of what he told them to be inaccurate. In particular, Detective Aragon mentioned bruising around D.B.'s neck. Detective Aragon said this was Klinck's time to "accept responsibility for what happened," and the best thing to do would be to come clean. Klinck eventually admitted to using a pillow to cover D.B.'s face and briefly wrapping his hands around D.B.'s neck. While Klinck became emotional and tearful at one point, he did not ask for the interrogation to stop. He declined the detective's requests to search his cell phone and declined to write a letter to D.B. asking forgiveness, telling the detectives he didn't want those items to be used as evidence against him.
The prosecution charged Klinck with criminal attemptmurder in the first degree;[1] first degree burglary;[2] sexual assault with force;[3] second degree burglary;[4] assault in the third degree;[5] obstruction of telephone service;[6] false imprisonment;[7] and harassment,[8] all as acts of domestic violence.
The trial court suppressed Klinck's statements to Deputy Hays on the porch because Deputy Hays intended to arrest Klinck once he spoke with D.B. The court concluded on this basis that Klinck's statements should have been preceded by a Miranda warning and were involuntary. Klinck concedes the trial court erred in finding the statements taken by Deputy Hays on the porch involuntary.
The trial court suppressed Klinck's statements during his five hour jailhouse interview with the detectives for being involuntary and in violation of Miranda. Klinck requested counsel yet the interrogation proceeded. If a defendant makes an unequivocal request for counsel, as Klinck did, that request must be fully honored and no further questioning can occur until either a lawyer is provided for the accused or the accused voluntarily reinitiates the questioning. People v. Redgebol, 184 P.3d 86, 99 (Colo.2008). The prosecution concedes a Miranda violation.
*493 As a result of the parties' concessions, there are two issues before us: 1) whether Klinck was in custody at the time he spoke to Deputy Hays on the porch of D.B.'s home, and 2) whether the five hour interview was involuntary.
II.
We reverse. We hold that Klinck was not in custody for Miranda purposes during his initial interview on the porch. The trial court erred in suppressing those statements. We find that Klinck's post-arrest interview statements were made voluntarily, and despite their suppression from the prosecution's case-in-chief they are admissible at trial for impeachment purposes.
A. Standard of Review
Whether an individual has been subjected to custodial interrogation in violation of Miranda is a question of law that we review de novo. People v. Matheny, 46 P.3d 453, 462 (Colo.2002). Whether a statement is voluntary is evaluated on the basis of the totality of the circumstances under which it is given; the ultimate determination of whether a statement is voluntary is a legal question that we review de novo. Effland v. People, 240 P.3d 868, 877-78 (Colo.2010). The prosecution bears the burden of establishing the voluntariness of a defendant's statement by a preponderance of the evidence. Id.; People v. Raffaelli, 647 P.2d 230, 235 (Colo.1982).
B. Miranda
To protect a suspect's Fifth Amendment right against self-incrimination, Miranda prohibits the prosecution from introducing any statement procured by custodial interrogation unless the police precede their questions with certain warnings. 384 U.S. at 444, 86 S. Ct. 1602. Neither party disputes that the police questioned Klinck on D.B.'s front porch; the only issue is whether or not he was in police custody at the time.
In determining whether a suspect has been subjected to custodial interrogation, the relevant inquiry is "whether a reasonable person in the suspect's position would believe himself to be deprived of his freedom of action to the degree associated with a formal arrest." Effland, 240 P.3d at 874 (quoting Matheny, 46 P.3d at 467). An officer's unarticulated plan has no bearing on the question of whether a suspect was in custody' at a particular time; the only relevant inquiry is how a reasonable man in the suspect's position would have understood his situation. Stansbury v. California, 511 U.S. 318, 323-24, 114 S. Ct. 1526, 128 L. Ed. 2d 293 (1994); Matheny, 46 P.3d at 465. We examine the circumstances surrounding the interrogation and evaluate whether, given those circumstances, a reasonable person would have felt he or she was at liberty to terminate the interrogation and leave. Thompson v. Keohane, 516 U.S. 99, 112, 116 S. Ct. 457, 133 L. Ed. 2d 383 (1995).
In the custody inquiry we analyze the totality of the circumstances, including (1) the time, place, and purpose of the encounter; (2) the persons present during the interrogation; (3) the words spoken by the officer to the defendant; (4) the officer's tone of voice and general demeanor; (5) the length and mood of the interrogation; (6) whether any limitation of movement or other form of restraint was placed on the defendant during the interrogation; (7) the officer's response to any questions asked by the defendant; (8) whether directions were given to the defendant during the interrogation; and (9) the defendant's verbal or nonverbal response to such directions. Matheny, 46 P.3d at 465-66. No single factor is determinative. Id.
In Effland, we held that the defendant was in custody at the time two plainclothes detectives interrogated him in his hospital room. 240 P.3d at 875-76. The defendant was confined to the hospital for medical reasons and was connected to an intervenous line. Id. During the interrogation, the defendant repeatedly informed the investigating officers that he did not wish to speak with them and desired to consult an attorney. The investigating officers told the defendant he was not entitled to an attorney, and the defendant was emotionally distraught and cried throughout the interview. Id. at 875. The officers sat in very close proximity to the *494 defendant and a uniformed police officer was stationed outside his hospital room. Id. While the police conducted the interrogation in a conversational tone and the defendant's mobility was limited for medical reasons unrelated to police conduct, we determined that a reasonable person would not feel free to terminate the communication and leave. Id.
In People v. Minjarez, we ruled that custodial interrogation occurred when the police questioned the defendant in a private conference room at a hospital where the defendant's daughter was receiving treatment. 81 P.3d 348, 350 (Colo.2003). That questioning occurred in a small room, the door was closed, police officers separated the defendant from the door, and the interrogation proceeded in a "highly confrontational and accusatory atmosphere." Id.
In contrast, in People v. Cowart we did not find a defendant in custody when the questioning occurred in the defendant's home and in the presence of his wife, the defendant was not physically restrained, and the tone and manner of the interrogation was non-confrontational. 244 P.3d 1199, 1204-5 (Colo.2010).
We did not find the defendant in custody in Matheny, even though the questioning took place in a secured area of a police station, because the defendant drove himself there voluntarily, was relaxed throughout the interview, and told his story in a narrative form with little prompting. 46 P.3d at 467.
A court may consider a broad range of factors in determining custody, but it is clear that a court may not rest its conclusion that a defendant is in custody for Miranda purposes upon a policeman's unarticulated plan. Minjarez, 81 P.3d at 353. In the case before us, the trial court did just that. It focused on the police officer's intent to arrest Klinck after questioning him at D.B.'s house:
the key thing for the Court at this point in time is [Deputy Hays] testified very honestly under oath that he did believe that he was going to arrest the defendant at that point in time; that he did there ask a series of question to the defendant.... Any statements made once he was on the [porch] ... any statements made at that point should have been subject to Miranda and they were not voluntary and they will be suppressed."
(emphasis added).
The trial court erred in taking Deputy Hays' subjective intent into account when determining whether Klinck's statements on the porch at D.B.'s house were subject to Miranda. See Matheny, 46 P.3d at 468. A trial court's inquiry into whether a suspect is in custody for purposes of Miranda is subject to an objective reasonable person standard. People v. Howard, 92 P.3d 445, 451 (Colo.2004). A reasonable person in Klinck's position would not have felt deprived of freedom to the degree associated with a formal arrest. See Keohane, 516 U.S. at 112, 116 S. Ct. 457.
First, the time, place, and purpose of the encounter does not support a finding of custody. See People v. Holt, 233 P.3d 1194, 1198 (Colo.2010) (noting that questioning taking place in a neutral location is inherently less coercive than a police dominated setting). Klinck was in a familiar location, his girlfriend's home, and the encounter lasted less than ten minutes. Deputy Hays used a conversational tone when speaking with Klinck, and asked non-confrontational, open-ended questions. Compare Minjarez, 81 P.3d at 356; Effland, 240 P.3d at 876 (finding custody where police officer's questions provided all the details of the incident and were designed to elicit agreement from defendant).
Although Deputy Hays did not tell Klinck he was free to leave at any time, and had previously requested that Klinck remain on the porch during the questioning of D.B., the police did not handcuff Klinck or place him under any other form of physical restraint. See Cowart, 244 P.3d at 1204 (lack of physical restraint suggests defendant is not in custody). Klinck was calm, did not appear to be emotionally distraught, and did not request termination of the interview. Compare Effland, 240 P.3d at 876 (finding custody where defendant appeared distraught and repeatedly attempted to terminate the interview, and police disregarded those requests). Ultimately, the general atmosphere and tone of the interview did not evince any attempt by the police to subjugate Klinck to the will of *495 his examiner. Matheny, 46 P.3d at 467; Miranda, 384 U.S. at 457, 86 S. Ct. 1602.
As the Supreme Court acknowledged in Oregon v. Mathiason, 429 U.S. 492, 495, 97 S. Ct. 711, 50 L. Ed. 2d 714 (1977), any interview of one suspected of a crime by a police officer will have coercive aspects to it, simply by virtue of the fact that the police officer is part of a law enforcement system which may ultimately cause the suspect to be charged with a crime. However, the consensual interview between Klinck and Deputy Hays did not exert the compulsive forces that Miranda sought to prevent. See Matheny, 46 P.3d at 468. Thus, the trial court erred in finding that Klinck was in custody on the porch at D.B.'s house for Miranda purposes before the police formally placed him under arrest.
C. Voluntariness of Statements
Under the due process clauses of the United States and Colorado Constitutions, a defendant's statements must be made voluntarily in order to be admissible into evidence. U.S. Const. amends. V, XIV; Colo. Const. art. II, § 25. Statements made by a defendant that violate the parameters of Miranda are subject to suppression, but so long as the defendant made those statements voluntarily, the prosecution may use them for impeachment purposes. Mincey v. Arizona, 437 U.S. 385, 398, 98 S. Ct. 2408, 57 L. Ed. 2d 290 (1978); Effland, 240 P.3d at 877.
To be voluntary, a statement must be the product of an essentially free and unconstrained choice by its maker. Effland, 240 P.3d at 877; Culombe v. Connecticut, 367 U.S. 568, 602, 81 S. Ct. 1860, 6 L. Ed. 2d 1037 (1961). Coercive government conduct, physical or mental, is necessary to find that a confession is not voluntary. People v. Gonzalez-Zamora, 251 P.3d 1070, 1076 (Colo.2011); People v. Gennings, 808 P.2d 839, 846 (Colo.1991) (for a confession to be involuntary, coercive governmental conduct must play a significant role in inducing the statement); Colorado v. Connelly, 479 U.S. 157, 167, 107 S. Ct. 515, 93 L. Ed. 2d 473 (1986). The inquiry's focus is on whether the behavior of the state's law enforcement officials was such as to overbear the defendant's will to resist and bring about a confession not freely self-determined. Effland, 240 P.3d at 877; Rogers v. Richmond, 365 U.S. 534, 544, 81 S. Ct. 735, 5 L. Ed. 2d 760 (1961).
Whether a statement is voluntary must be evaluated on the basis of the totality of the circumstances under which it is given. Raffaelli, 647 P.2d at 235. Factors helpful to the voluntariness determination include, but are not limited to: whether the defendant was in custody or was free to leave and was aware of his situation; whether Miranda warnings were given prior to any interrogation and whether the defendant understood and waived his Miranda rights; whether the defendant had the opportunity to confer with counsel or anyone else prior to the interrogation; whether the challenged statement was made during the course of an interrogation or instead was volunteered; whether any overt or implied threat or promise was directed to the defendant; the method and style employed by the interrogator in questioning the defendant and the length and place of the interrogation; and the defendant's mental and physical condition immediately prior to and during the interrogation, as well as his educational background, employment status, and prior experience with law enforcement and the criminal justice system. Gennings, 808 P.2d at 844.
In Gennings, we declined to uphold a trial court's order finding a defendant's statements to a polygraph examiner involuntary when the defendant was an experienced police officer, received Miranda warnings at the outset of the examination, and was fully aware of his right to leave at any time. In spite of the techniques used by the polygraph examiner, including informing the defendant that he had been deceptive on the exam, and conveying a supportive attitude toward his predicament and telling him that he would feel better if he talked to her about the problem, we could not say this conduct played so significant a role in overbearing the defendant's will as to have caused the defendant's statement to be constitutionally involuntary. 808 P.2d at 846-47.
Similarly, in People v. Valdez, we found a defendant's statements during a custodial interrogation *496 voluntary, despite the fact that the police officer was confrontational, angry, and condemning. 969 P.2d 208, 212 (Colo. 1998). The defendant was hungry and tired and the officer denied his request for rest. Id. Because the defendant did not appear intimidated by the interrogating officer's behavior, we could not say the officer's behavior rose to the level of coercion, nor did the police conduct play a significant role in inducing defendant's statements. Id.
In Effland, many of the same factors that led to a finding of custody also contributed to our determination that the defendant's statements were involuntary. 240 P.3d at 878. The defendant was in a very fragile emotional state, repeatedly told the investigators that he did not wish to speak with them and desired an attorney, and the officers failed to advise him of his Miranda rights while confronting him with evidence against him and "essentially requesting agreement." Id. at 879. Petitioner was in a weakened physical and mental state and, knowing this fact, the investigating officers persisted in disregarding his requests not to discuss the event until he had consulted with counsel. Id.; Raffaelli, 647 P.2d at 236 (interrogation conducted in conversational tone constituted coercion when considering defendant's substantial emotional stress and accusatorial nature of interrogation).
The trial court held, and the prosecution concedes, that Klinck's statements during the five hour interrogation were taken in violation of Miranda because Klinck had invoked his right to counsel yet the interrogation continued. Nevertheless, the prosecution contends that under the totality of the circumstances, the police conduct was not so coercive as to overbear Klinck's will to resist. Valdez, 969 P.2d at 212. Therefore, the statements were voluntary and are admissible for impeachment purposes. Effland, 240 P.3d at 878. We agree.
Klinck argues that he was in a weakened psychological state during the interrogation and the detectives took advantage of his weakness in procuring the statements. He also argues that Detective Aragon improperly led him into making statements by promising she would influence the charges against him. While Detective Aragon's assertion that "it's up to me to decide if I'm gonna file charges," approaches the boundary of unacceptable behavior, we cannot say police conduct played a significant role in inducing Klinck's statements. See Brady v. United States, 397 U.S. 742, 752, 90 S. Ct. 1463, 25 L. Ed. 2d 747 (1970) (a voluntary confession "must not be extracted by any sort of threats or violence, nor obtained by any direct or implied promises, however slight, nor by the exertion of any improper influence").
Like the interrogating officer in Gennings, the detectives informed Klinck that he had been deceptive in his previous statements and used a "soft technique" conveying a supportive attitude and encouraging him to admit wrongdoing. 808 P.2d at 846. In Gennings, we found these types of actions by an interrogator "psychologically coercive," but ruled they did not play such a significant role in inducing the defendant's confession as to render the confession constitutionally invalid. Id. at 847.
Upon reviewing the video of the five hour interrogation, we cannot say that the police techniques in this case played a significant role in prompting Klinck's jailhouse statements. See Valdez, 969 P.2d at 212 (finding no connection between interrogator's confrontational manner and defendant's confessional statements).
First, after the police reinitiated questioning, Klinck stated that "he wanted to get everything out in the open." While the interrogation proceeded in violation of Miranda, due to his prior invocation of the right to counsel, a fact that cuts in favor of finding the statements involuntary, Raffaelli, 647 P.2d at 235, Klinck said he wanted to speak to the detectives and was not doing so against his will.
Second, Klinck refused to allow the detectives to search his cell phone and declined to write an apology letter to D.B., stating that he did not want those items introduced as evidence. His ability to refuse the detective's requests indicates that his will was not "overborne by improper state conduct." Valdez, 969 P.2d at 212. Klinck understood the charges against him and has extensive experience *497 with the law enforcement and criminal justice system; he understood that the interrogation was being videotaped and that his statements could be used against him.
Finally, the interrogation was conducted in conversational tones, the detectives were courteous, and Klinck did not request a halt to the questioning. When Klinck became tired, the detectives asked if they could ask a few more questions before continuing to pose open-ended questions. The detectives pointed to evidence contradicting Klinck's prior statements, but did not request agreement with an alternate version of events. Compare Effland, 240 P.3d at 879. Instead, Klinck's narrative responses rambled on for so long that he apologized for "keeping [the detectives] so late."
Accordingly, we conclude that Klinck's statements were voluntary and not induced by significant coercive conduct by the detectives. These statements may be introduced at trial for impeachment purposes. Id.
III.
We reverse the suppression order regarding the statements made on the porch, and rule that the jailhouse interrogation was voluntary and admissible for impeachment purposes only. We return this case to the district court for further proceedings consistent with this opinion.
NOTES
[1] §§ 18-2-101(1), 18-3-102(1)(a), C.R.S. (2010).
[2] § 18-4-202(1), C.R.S. (2010).
[3] § 18-3-402(1)(a)(4), C.R.S. (2010).
[4] § 18-4-203(1), (2)(a), C.R.S. (2010).
[5] § 18-3-204(1)(a), C.R.S. (2010).
[6] § 18-9-306.5(1), C.R.S. (2010).
[7] § 18-3-303, C.R.S. (2010).
[8] § 18-9-111(1)(a), C.R.S. (2010).
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456 F. Supp. 2d 1160 (2006)
CENTRAL VALLEY CHRYSLER-JEEP, et al., Plaintiffs,
v.
Catherine E. WITHERSPOON,, in her official capacity as Executive Director of the California Air Resources Board, et al., Defendants.
No. CV F 04-6663 AWI LJO.
United States District Court, E.D. California.
September 25, 2006.
*1161 *1162 *1163 Andrew Brian ClubokPro Hac Vice, Derek Sterling Bentsen, Lucas Rames BlocherPro Hac Vice, Michael Edward ScovillePro Hac Vice, Stacey L. Bennett Pro Hac Vice, Stuart A.C. DrakePro Hac Vice, Kirkland & Ellis LLP, Washington, DC, Timothy Jones, Sagaser, Jones & Hahesy, Fresno, CA, for Plaintiffs.
Raymond B. Ludwiszewski, Pro Hac Vice, Charles H. Haake, Gibson, Dunn & Crutcher, LLP, Washington, DC, Jon Wallace Upton, Kimble, MacMichael & Upton, Fresno, CA, for Association of International Automobile Manufacturers.
David Bookbinder, Sierra Club, Washington, DC, Ellen Peter, California Attorney General Office, Caryn Leigh Craig, California Dept. of JusticeOffice of the Attorney General, Linda Lea Berg, Office of the Attorney General, State of California, Sacramento, CA, Marc Nathaniel Melnick, California Attorney General's Office, Oakland, CA, Kathleen A. Kenealy, Office of the California Attorney Genenal, Los Angeles, CA, for Defendants.
MEMORANDUM OPINION AND ODER (1) GRANTING IN PART AND DENYING IN PART DEFEDANT AND DEFENDANTINTEVENORS' MOTION FOR JUDMENT ON THE PLEADINGS AND (2) LIMITING DISCOVERY OF GLOBAL WARMING SCIENCE DOCUMENTS
ISHII, District Judge.
This case concerns the legality of environmental regulations imposed by a state administrative agency. Plaintiffs seek declaratory and injunctive relief on the basis that the regulations violate and are preempted by federal law. This court has federal question jurisdiction pursuant to 28 U.S.C. § 1331.
BACKGROUND
A. California Health and Safety Code § 43018.5
In 2002, the California Legislature enacted Assembly Bill Number 1493, codified at California Health and Safety Code § 43018.5. Section 43018.5(a) required the California Air Resources Board ("CARB") to "develop and adopt regulations that achieve the maximum feasible and costeffective reduction of greenhouse gas emissions from motor vehicles." Section 43018.5 only authorizes regulations that apply to vehicles manufactured in the 2009 model year or after. Cal. Health & Safety Code § 43018.5(b)(1). "Maximum feasible and cost-effective reduction of greenhouse gas emissions" refers to reductions that are "[c]apable of being successfully accomplished within the time provided by this section, taking into account environmental, economic, social, and technological factors" and are "[e]conomical to an owner or operator of a vehicle, taking into account the full life-cycle costs of a vehicle." Cal. Health & Safety Code § 43018.5(i)(2).
At a public hearing in September 2004, CARB approved regulatory amendments ("California regulations" or "regulations") adding greenhouse gas emission standards to California's existing motor vehicle standards. See FAC Ex. A. CARB, through its normal process, ultimately adopted the regulatory language in its Resolution 04-28. Id.
CARB made factual findings to support its adoption of the regulations. CARB found that "[o]ver the past century the temperatures in the northern hemisphere have changed at a rate faster than at any other time over the last millennium, and that change is because human activities are altering the chemical composition of the atmosphere through the buildup of greenhouse gases and other pollutants." FAC Ex. A at 9. CARB further noted that "the global climate is changing at a rate *1164 unmatched in the past one thousand years" and climate change is affecting California. Id. CARB found that the proposed standards would significantly reduce greenhouse gas emissions. FAC Ex. A at 14.
The regulations addressed four greenhouse gases: carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons. Cal. Code Regs. tit. 13, § 1961.1(e)(4). The regulations weight the emission of each gas based on its "global warming potential." Cal.Code Regs. tit. 13, § 1961.1(e)(6). Compliance with the regulations is based on "fleet average" greenhouse gas emissions. Cal.Code Regs. tit. 13, § 1961.1(a)(1)(A). The average is defined separately for two categories of vehicles: (1) passenger cars and light duty trucks under 3,750 pounds, and (2) light duty trucks over 3,750 pounds and medium duty passenger vehicles. Id. The standards set emissions limits beginning in model year 2009 that become more stringent each year through 2016. Id. Manufacturers who fail to comply face civil penalties. See Cal. Health & Safety Code § 43211.
Manufacturers that meet the standards for model year 2009 or surpass the standards in any later year will accrue credits. Cal.Code Regs. tit. 13, § 1961.1(b)(1). These credits may be used to offset that manufacturer's emissions in a later year, may be transferred between vehicle categories, or may be sold to another manufacturer. Id. A manufacturer who does not meet the standards may avoid the civil penalty for noncompliance by offsetting their failures within a five-year period. Cal.Code Regs. tit. 13, § 1961.1(b)(3). Manufacturers can also comply by earning credits for using alternative fuels that produce lower greenhouse gas emissions. Cal.Code Regs. tit. 13, § 1961.1(a)(1)(B).
B. The Clean Air Act
In 1963, Congress expanded its role in addressing air pollution by enacting the Clean Air Act. Pub.L. No. 88-206, 77 Stat. 392 (1963). Section 209(a) of the Clean Air Act, codified at 42 U.S.C. § 7543(a),[1] generally preempts state regulation of motor vehicle emissions. Section 209(b) provides an exemption to 209(a) for rules adopted by the State of California that receive a waiver from the Environmental Protection Agency ("EPA"). 42 U.S.C. § 7543(b)(1);[2]see Engine Mfrs. Ass'n v. EPA, 88 F.3d 1075, 1080 (D.C.Cir.1996) (noting that, under the terms of section 209(b), "California is the only state that qualifies for the waiver, because it was the only state that had adopted emissions control standards prior to March 30, 1966"). In order to receive such a waiver, the state standards must be, "in the aggregate," at least as protective as federal standards. 42 U.S.C. *1165 § 7543(b)(1). The EPA may deny a waiver if it finds that the state's determination is "arbitrary and capricious," that the state standards are not needed to meet "compelling and extraordinary conditions," or that the state standards are not consistent with 42 U.S.C. § 7521(a). Id. Though only California's regulations may receive a waiver, other states may elect to adopt such California standards under Clean Air Act section 177, rather than being governed by the federal scheme. 42 U.S.C. § 7507.
On September 8, 2003, the EPA concluded that "in light of the language, history, structure and context of the [Clean Air Act] and Congress' [s] decision to give DOT authority to regulate fuel economy under EPCA, it is clear that EPA does not have authority to regulate motor vehicle emissions of CO[2] and other [greenhouse gases] under the [Clean Air Act]." Control of Emissions from New Highway Vehicles and Engines, 68 Fed.Reg. 52,922, 52,929 (September 8, 2003). The District of Columbia Circuit upheld the EPA's decision, and the case is currently before the Supreme Court. See Massachusetts v. EPA, 415 F.3d 50 (D.C.Cir.2005), cert. granted, ___ U.S. ___, 126 S. Ct. 2960, 165 L. Ed. 2d 949 (2006).
On December 21, 2005, CARB requested that the EPA grant the California regulations a section 209(b) waiver, which the EPA has yet to provide. Defs.' RJN Ex. C.
C. The Energy Policy and Conservation Act
Enacted in 1975, the Energy Policy and Conservation Act ("EPCA") established federal fuel economy standards for new vehicles. Pub.L. No. 94-163, 89 Stat. 871 (1975). The EPCA authorizes the National Highway Traffic Safety Administration[3] ("NHTSA") to set a minimum corporate average fuel economy ("CAFE") for a manufacturer's fleet of new vehicles. 49 U.S.C. §§ 32902(a), 32902(c).
The EPCA provides that the CAFE standards must be set at the "maximum feasible average fuel economy level." 49 U.S.C. §§ 32902(a), 32902(c). In setting the maximum feasible level, NHTSA "shall consider technological feasibility, economic practicability, the effect of other motor vehicle standards of the Government on fuel economy, and the need of the United States to conserve energy." 49 U.S.C. § 32902(f). This requires NHTSA to consider the effect on fuel economy of state regulations that receive an EPA waiver under Clean Air Act section 209: EPCA § 301, 89 Stat. at 905; see Light Truck Average Fuel Economy Standard, Model Year 2004, 67 Fed.Reg. 16,052, 16,057 (April 4, 2002) (to be codified at 49 C.F.R. pt. 533) (considering the effect of California's low emission vehicle regulations in setting CAFE standard). The EPCA contains an express preemption provision:
When an average fuel economy standard prescribed under this chapter is in effect, a State or a political subdivision of a State may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards for automobiles covered by an average fuel economy standard under this chapter.
49 U.S.C. § 32919.
D. This Lawsuit
On December 7, 2004, Plaintiffs[4] filed suit against Catherine E. Witherspoon, *1166 CARB's executive director, to prevent enforcement of the California regulations.[5] In their first amended complaint ("FAC"), filed February 16; 2005, Plaintiffs seek declaratory and injunctive relief on the following claims:
1. Count IPreemption under the Energy Policy and Conservation Act of 1975 ("EPCA"), 49 U.S.C. §§ 32902-32919.
Count IIPreemption under § 209(a) of the Federal Clean Air Act, 42 U.S.C. § 7543(a).
Count IIIPreemption under the foreign policy of the United States and the foreign affairs powers of the Federal Government.
Count IVViolation of the Dormant Commerce Clause, of the United States Constitution.
Count VViolation of the Sherman Act, 15 U.S.C. § 1.
On June 1, 2006, Defendant and Defendant-Intervenors jointly filed a motion for judgment on the pleadings contending that each of Plaintiffs' and Plaintiff-Intervenor's causes of action had failed to state a claim upon which relief can be granted.[6] On July 24, 2006, Plaintiffs filed a memorandum in opposition to the motion. On the same day, Plaintiff-Intervenor filed a separate memorandum, also opposing the motion. On August 17, 2006, Defendant and Defendant-Intervenors filed a reply to the opposition. On September 7, 2006, Plaintiffs filed an ex parte motion for leave to file a surreply brief, to which Defendants objected. On September 11, 2006, the court granted Plaintiffs' ex parte motion. On September 15, 2006, the court heard the motion for judgment on the pleadings.
LEGAL STANDARD
Where Rule 12(c) is used to raise the defense of failure to state a claim, "the motion for judgment on the pleadings faces the same test as-a motion under Rule 12(b)(6)." McGlinchy v. Shell Chemical Co., 845 F.2d 802, 810 (9th Cir.1988). Dismissal of a complaint is proper 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, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957). When determining a motion for judgment on the pleadings, the court should assume the allegations in the complaint to be true and construe them in the light most favorable to the plaintiff. McGlinchy, 845 F.2d at 810. However, "conclusory allegations without more are insufficient to defeat a motion [for judgment on the pleadings]." Id. A complaint may be dismissed as a matter of law if there is a lack of a cognizable legal theory or if there are insufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988). The court must determine *1167 whether or not it appears to a certainty under existing law that no relief can be granted under any set of facts that might be proved in support of a plaintiff's claims. De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir.1978), cert. denied, 441 U.S. 965, 99 S. Ct. 2416, 60 L. Ed. 2d 1072 (1979).
DISCUSSION
A. EPCA Preemption
Plaintiffs and Plaintiff-Intervenor[7] (collectively "Plaintiffs") allege that the EPCA preempts the California regulations. They contend that the California regulations are expressly preempted because they are "related to fuel economy standards" under 49 U.S.C. § 32919(a). Plaintiffs also urge the court to find that the EPCA preempts the entire field of fuel economy regulations and that the California regulations are invalid because they fall within that field. Because Plaintiffs have stated a claim for preemption of the regulations based on their actual conflict with the EPCA, the court declines to decide at this stage whether the other theories of preemption have merit.
The Supremacy Clause, U.S. Const., art. VI, cl. 2, "invalidates state laws that `interfere with, or are contrary to,' federal law." Hillsborough County v. Automated Med. Labs., Inc., 471 U.S. 707, 712-13, 105 S. Ct. 2371, 85 L. Ed. 2d 714 (1985) (quoting Gibbons v. Ogden, 22 U.S. 1, 9 Wheat. 1, 211, 6 L. Ed. 23 (1824) Marshall, C.J.)). Congress, when acting within its constitutional limits, may preempt state law by expressly stating intent to do so. Id. at 713 (citing Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S. Ct. 1305, 51 L. Ed. 2d 604 (1977)). In the absence of such express language, a court can infer Congress's intent to preempt all state law in a particular area "where the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress `left no room' for supplementary state regulation." Id. (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S. Ct. 1146, 91 L. Ed. 1447 (1947)). "In addition to express or implied pre-emption, a state law also is invalid to the extent that it `actually conflicts with a . . . federal statute.'" Int'l Paper Co. v. Ouellette, 479 U.S. 481, 491-92, 107 S. Ct. 805, 93 L. Ed. 2d 883 (1987). Such a conflict can result in preemption where it is impossible for a private party to comply with both the state and federal requirements. English v. Gen. Elec. Co., 496 U.S. 72, 79, 110 S. Ct. 2270, 110 L. Ed. 2d 65 (1990). Conflict preemption can also be found where "the state law `stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" Int'l Paper, 479 U.S. at 491-92, 107 S. Ct. 805 (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 85 L. Ed. 581 (1941)).
In Geier v. American Honda Motor Co., 529 U.S. 861, 874-86, 120 S. Ct. 1913, 146 L. Ed. 2d 914 (2000), the Supreme Court discussed the circumstances in which a more-restrictive state law "actually conflicts" with a federal regulatory scheme. That case concerned whether a state tort law attaching liability for an automobile manufacturer's failure to install an airbag conflicted with the regulatory scheme administered by the Department of Transportation ("DOT"). Id. at 874, 120 S. Ct. 1913. Based on its authority under the *1168 National Traffic and Motor Vehicle Safety Act of 1966, the DOT had issued a safety standard that did not require airbags in every vehicle, but instead mandated a mix of several different passive restraint systems, including airbags. Id. at 878, 120 S. Ct. 1913. The Court considered the DOT's reasons for imposing a variety of restraints, rather than requiring all vehicles to use airbags. Id. at 875, 120 S. Ct. 1913. DOT had considered, among other things, the potential safety risks of employing airbags, their high cost, and public reluctance to use them. Id. at 877-78, 120 S. Ct. 1913. DOT had concluded that an "all-airbag" standard would threaten a consumer backlash over perceived or real safety risks. Id. at 879, 120 S. Ct. 1913. On the other hand "a mix of devices would help develop data on comparative effectiveness, would allow the industry time to overcome the safety problems and the high production costs associated with airbags, and would facilitate the development of alternative, cheaper, and safer passive restraint systems" while avoiding the backlash. Id. The . safety standard also provided for the gradual phase-in of passive restraints to allow the manufacturers more time to develop airbags and other devices and to develop information about the effectiveness of various systems. Id. The Court held that the state law, though it shared some of the federal standard's goals, nevertheless presented an obstacle to the accomplishment the federal objectives and was preempted. Id. at 885, 120 S. Ct. 1913; see also Gade v. Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 107, 112 S. Ct. 2374, 120 L. Ed. 2d 73 (1992) (holding that, regardless of the state statute's purposes, it is preempted if it "sufficiently interferes with federal regulation").
Plaintiffs contend that the California regulations stand as an obstacle to the accomplishment of the objectives of the EPCA. Under the EPCA, NHTSA sets CAFE standards at the "maximum feasible level" after considering various statutory factors. 49 U.S.C. §§ 32902(a), 32902(c); see 49 U.S.C. § 32902(f). The factors Congress requires NHTSA to consider provide insight into the objectives of the CAFE program. NHTSA must consider "technological feasibility, economic practicability, the effect of other motor vehicle standards of the Government on fuel economy, and the need of the United States to conserve energy." 49 U.S.C. § 32902(f). In setting its maximum feasible level, NHTSA must also consider the effect of fuel economy requirements on safety. Competitive Enter. Inst. v. NHTSA, 956 F.2d 321, 327 (D.C.Cir.1992).
The court finds that it is also appropriate to "place some weight" upon NHTSA's interpretation of the EPCA's objectives. See Geier, 529 U.S. at 883, 120 S. Ct. 1913. This is because NHTSA "is likely to have a thorough understanding of its own regulation and its objectives and is `uniquely qualified' to comprehend the likely impact of state requirements."[8]Id. According to *1169 NHTSA, one of the goals, of the CAFE program is "improving motor vehicle fuel economy." Average Fuel Economy Standards for Light Trucks Model Years 2008-2011, 71 Fed.Reg. 17,566, 17,667 (April 6, 2006) (to be codified at 49 C.F.R. pts. 523-33, 537). To do so, NHTSA must set fuel economy at the "maximum feasible level" while "avoiding serious adverse economic effects on manufacturers and maintaining a reasonable amount of consumer choice among a broad variety of vehicles." Id. Accordingly, Congress "carefully drafted" the CAFE program to require fuel economy restrictions "that do not have the effect of either `imposing impossible burdens or unduly limiting consumer choice as to capacity and performance of motor vehicles.'" Id. (quoting H. Rep. No. 94-340, at 87 (1975).)
Based on the language of the EPCA and NHTSA's statements, the court finds that among the objectives of the CAFE program are maximizing fuel economy, avoiding economic harm to the automobile industry, maintaining consumer choice, and ensuring vehicle safety. Plaintiffs' FAC alleges that the enforcement of the California regulations will have a damaging, impact on the objectives of CAFE. The FAC alleges that some manufacturers will need to improve the average fuel economy level for some of their passenger automobiles to 44 miles per gallon, whereas the current federal standard requires an average of only 27.5 miles per gallon. FAC 1178. The California regulations require a fuel economy standard "approaching" 27 miles per gallon for certain vehicles that must only meet the "light duty truck" standard of 22.2 miles per gallon under the federal scheme. FAC 1179. Plaintiffs allege in the FAC that the regulations, by requiring motor vehicles to attain substantially higher fuel economy, will result in higher retail prices to the consumer and higher costs and burdens on the industry. FAC ¶ 77. As a result, the regulations allegedly "will have an acute, clear, direct and substantial impact [on] the performance, price, and availability of vehicles that will be sold in California" and "on some manufacturers' activities to comply with the national fuel economy standards as efficiently and safely as possible, and in a manner that maximizes consumer choices and minimizes adverse effects on employment." Id.
The FAC alleges that vehicle manufacturers are currently designing their vehicles for model year 2009. FAC 1181. According to the FAC, the technologies and vehicle changes the automobile industry is currently developing cannot fully comply with the California regulations. FAC 1186. The FAC alleges that enforcement of the California regulations will force them to (1) face sanctions for noncompliance in model year 2009, (2) incur increased cost by redesigning vehicles already slated for production in model year 2009, making the sale of vehicles unprofitable in many instances, or (3) restrict the sale of the vehicles that threaten compliance, foregoing the opportunity to recover investment and production-costs and profits they anticipated for those vehicles. FAC 1181. Plaintiffs allege that, if a manufacturer chooses to redirect its engineers and developers to redesign vehicles for California, it will sacrifice its efforts to introduce new products in markets other than California, resulting in lost sales for manufacturers and lost goodwill and profits for dealers. FAC 1182. The FAC also alleges that some manufacturers will have to spend hundreds of millions of dollars to develop model year 2009 vehicles that comply. FAC 11101(c). These expenditures will allegedly result in price increases with the effect of reducing sales and goodwill for the manufacturers and the dealers. Id. The FAC alleges that the California regulations will also cause manufacturers to restrict or eliminate the sale of some types of vehicles in California. FAC ¶ 84. As a result, Plaintiffs contend, *1170 consumers will turn to the used-vehicle market or will select vehicles less suited to their needs or business demands. Id.
The FAC also alleges that enforcement of the California regulations will result in less safe automobiles and increased vehicle-related fatalities. FAC ¶¶ 87-92. According to the FAC, the regulations, once fully implemented, will "likely require the industry to produce a fleet of smaller, lighter-weight vehicles for California." FAC ¶ 90. The FAC cites a report to Congress concluding that a decrease in vehicle size, "without a concurrent upgrading of their occupant protection capability, would likely lead to an increase in the rate of highway deaths and serious injuries." FAC ¶ 88. Plaintiffs allege that, according to an analysis using NHTSA's predictive model, the California regulation will result in an increase of 258 fatalities in California in 2020, and an increase of 530 fatalities in 2030. FAC ¶ 91.
Along with NHTSA's evaluation of CAFE's objectives, the court also considers its opinion that the California regulations would disrupt the achievement of those objectives. See Geier, 529 U.S. at 883, 120 S. Ct. 1913. NHTSA concludes that a state carbon dioxide emission standard requiring better fuel economy than the CAFE level "would upset the efforts of NHTSA to balance and achieve Congress's competing goals." Standards for Light Trucks, 71 Fed.Reg. at 17,667. A state standard set above that determined by NHTSA under the statutory guidelines "would negate the agency's analysis and decisionmaking" that it arrives at "only after considering extensive technical information such as detailed product information submitted by the vehicle manufacturers and NAS' report on the future of the CAFE program and conducting analyses of potential impacts on employment and safety." Id. at 17,667-68. Accordingly,
NHTSA concludes that it is disruptive to the orderly implementation of the CAFE program, and to NHTSA's reasonable balancing of competing concerns, to have two different governmental entities assessing the need to conserve energy, technological feasibility, economic practicability, employment, vehicle safety and other concerns, and making inconsistent judgments made [sic] about how quickly and how much of that single pool of technology could and should be required to be installed consistent with those concerns.
Id. at 17,668. Thus, NHTSA has decided, echoing Plaintiffs' factual allegations, that such conflicting standards risk "serious adverse economic consequences for motor vehicle manufacturers and unduly limited choices for consumers." Id.
On a motion for judgement on the pleadings, the court accepts as true Plaintiffs' factual allegations about the effects of the California regulations. McGlinchy, 845 F.2d at 810. Defendants do not contend that Plaintiffs have failed to adequately allege facts supporting their claims that California regulations will risk higher prices, decreased choices and safety for the consumer, and decreased profitability and lost goodwill for manufacturers and dealers.[9] Defendants instead contend that Congress intended to permit the California regulations regardless of such impacts.
Defendants argue that California's regulations are permissible because the. EPCA requires NHTSA to take such regulations into account in setting the CAFE level. The EPCA provides that NHTSA, "[w]hen *1171 deciding maximum feasible average fuel economy . . . shall consider . . . the effect of other motor vehicle standards of the Government on fuel economy. . . ." 49 U.S.C. § 32902(f). Defendants point out that the phrase "other motor vehicle standards" encompasses "California standards approved by EPA under section 209(b)." Reply 9:18-19; see EPCA § 301, 89 Stat. at 905. Defendants clarify the proposition, stating that the "NHTSA is not required to consider California's standards unless EPA, another federal agency, has approved them." Reply 14:27-28. Defendants further allege that the Clean Air Act requires the EPA, when deciding whether to grant a waiver, to make determinations similar to those on which CAFE is based.[10] Plaintiffs do not dispute that, under section 32902(f), NHTSA must consider regulations that receive a waiver under 209(b).
Defendants argue that when Congress adopted the EPCA in 1975, it knew that motor vehicle emission standards affect fuel economy. See H.R.Rep. No. 94-340, at 86-87, 90-91 (1975), reprinted in 1975 U.S.C.C.A.N. 1762, 1848-49, 1852-53. Certain California emission standards then in place decreased average fuel economy. Id. at 87. The EPCA permitted manufacturers to apply for a relaxation of the average fuel economy standard if the federal standards, including those California standards granted a waiver under section 209(b), resulted in lower fuel, economy. EPCA § 301, 89 Stat. at 904-05; H.R.Rep. No. 94-340, at 90-91; see Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 & n. 12 (D.C.Cir.1986). Defendants contend that Congress integrated section 209 standards into the EPCA by requiring NHTSA to account for "other motor vehicle standards of the Government on fuel economy. . . ." 49 U.S.C. § 32902(f).
Defendants argue that state law does not stand as an obstacle to a federal statute when the federal government "contemplates coexistence between" the two regulatory schemes, citing Skysign International v. City & County of Honolulu, 276 F.3d 1109, 1117 (9th Cir.2002). In Skysign, the Ninth Circuit considered whether a municipal ordinance barring aerial advertising was preempted by the FAA regulatory scheme. Id. at 1113. After deciding that FAA regulation did not preempt the field of aerial advertising, the court addressed whether conflict preemption barred the ordinance. Id. at 1117. At the outset, the court noted that, in a conflict preemption analysis, "state law cannot by its mere existence stand as such an obstacle when the federal government contemplates coexistence between federal and local regulatory schemes." Id. (emphasis added). The court was careful to qualify that the federal government, by merely authorizing the states to act, did not immunize state regulations from conflict preemption scrutiny: "Of course, even when the federal government has evinced its intent to leave the states and localities some room in which to regulate, some local regulation may transgress those boundaries by interfering with the underlying federal purposes." Id. at 1118 n. 5. The court noted that the FAA had granted permission for the aerial advertisement with the explicit instruction that *1172 the advertiser abide by local laws and ordinances related to aerial signs. Id. at 1117-18. The FAA had also made explicit statements in public documents that its grant of permission did not supercede any "local, state, or city ordinance(s) prohibiting aerial advertising." Id. at 1118. Given the FAA's explicit deference to local ordinances prohibiting aerial advertising, the court concluded that the ordinance at issue did not "impede the federal policy or purpose" of the FAA permission scheme. Id.
Defendants' reliance on Skysign is misplaced. It does not stand for the proposition that state law does not stand as an obstacle whenever the federal government contemplates the coexistence between federal and state regulatory schemes. See id. at 1117-18 & n. 5. The holding is much more circumscribed, requiring courts to look beyond the mere fact that federal and state regulations coexist and to analyze the extent the state law "interfer[es] with the underlying federal purposes." Id. at 1118 n. 5. Here, unlike in Skysign, NHTSA has not expressly or impliedly claimed that the California regulations are permissible or can be harmonized with the EPCA scheme. Instead NHTSA has explicitly found that the challenged regulations would disrupt the CAFE program. See Standards for Light Trucks, 71 Fed.Reg. at 17,668.
Defendants also cite in support Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 414 U.S. 117, 126, 94 S. Ct. 383, 38 L. Ed. 2d 348 (1973). The Court in that case emphasized the value of protecting "the sensitive interrelationship" between federal and state regulation of securities. Id. at 126-27, 94 S. Ct. 383. Nevertheless, the Court held that conflicting state law was preempted "to the extent necessary to protect the achievement of the aims" of the federal regulatory scheme.[11]Id. at 127, 94 S. Ct. 383.
Neither Skysign or Merrill Lynch stands for the proposition that congressional authorization of a state regulation immunizes it from a conflict preemption challenge. Rather, each requires an analysis of whether the state regulation, even if authorized, is an obstacle to the objectives of the federal scheme. Skysign, 276 F.3d at 1118 n. 5; Merrill Lynch, 414 U.S. at 127, 94 S. Ct. 383.
Defendants contend that the EPCA and regulations that receive an EPA waiver under section 209(b) comprise "an overlapping federal scheme." Defs.' Reply 14:27-15:3. They point out that the EPA under the Clean Air Act, like NHTSA pursuant to the EPCA, considers the technological feasibility and economic practicability of emission standards. Defendants note that the EPA, when scheduling implementation of regulations that have received a waiver, allows such a regulation to take effect only "after such period as the Administrator finds necessary to permit the development and application of the requisite technology, giving appropriate consideration to the cost of compliance within such period." 42 U.S.C. § 7521(a)(2).
Nothing in the statutory language or the legislative history of the Clean Air Act, the EPCA, or any other statute before the court indicates Congress's intent that an EPA waiver would allow a California regulation to disrupt the CAFE program. Section 209(b) provides only that the waiver exempts the regulations from express preemption under section 209(a). See 42 *1173 U.S.C. § 7543(b)(1). ("The Administrator shall, after notice and opportunity for public hearing, waive application of this section . . ." (emphasis added)). On its face, the language, does not endorse regulations that present obstacles to the objectives of the EPCA, nor do the criteria considered by EPA in granting a waiver ensure that such interference will not occur.
Section 209(b) does not provide that the' regulations, once EPA grants a waiver, become federal law and are thereby rendered immune from preemption by other federal statutes.. Defendants point out that compliance with state standards that have been granted a waiver is treated as compliance with federal standards, giving them federal status. 42 U.S.C. § 7543(b)(3). However, the sentence to which Defendants refer indicates that "compliance with such State standards shall be treated as compliance with applicable Federal standards for purposes of this subchapter." Id. (emphasis added). Section 177 demonstrates that Congress also gave narrow effect to other states' adoption of regulations that receive a waiver. See 42 U.S.C. § 7507 (providing that "[n]otwithstanding section. 7543(a) of this title," the Clean Air Act's express preemption provision, other states may adopt standards identical to California's (emphasis added)). Hence, the statutory language explicitly disclaims any special status for the California regulations under other federal statutes. The legislative history generally emphasizing the breadth of California's discretion upon receiving an EPA waiver does not provide any reason to believe that the resulting regulations could stand as an obstacle to other federal schemes. See, e.g., H.R.Rep. No. 95-294, at 301-02 (1977), reprinted in 1977 U.S.C.C.A.N. 1077, 1380-81.
The language of the EPCA also does not evince an intent to permit state regulations that conflict with the goals of its scheme. The requirement that the Secretary "shall consider" the effect of the California regulations does not indicate congressional intent to permit regulations that are obstacles to the EPCA's goals, such as ensuring vehicle safety, the economic health of the industry, and consumer choice. See 49 U.S.C. § 32902(f). The parties do not discuss in depth the effect of the term "consider" in the language of section 32902(f). Defendants appear to read into this language a mandate that the EPCA accommodate other regulations, including those granted an EPA waiver. See also Defs.' Mot. 21:16-17 (asserting that "Congress has required that NHTSA respect California emission standards when establishing fuel economy standards" (emphasis added)). At oral argument, Defendants contended that requiring NHTSA to consider the California regulations made them "part of EPCA." Defendants urge that the requirement that NHTSA consider the California regulations amounts to Congressional authorization of such regulation, regardless of their effects on the EPCA's goals.
However, a congressional requirement that a decision maker "consider" a factor does not deserve the weight than Defendants place on it. Congress's use of the term "consider" in a statute requires an actor to merely "investigate and analyze" the specified factor, but not necessarily act upon it. City of Davis v. Coleman, 521 F.2d 661, 679 (9th Cir.1975); J.H. Miles & Co., Inc. v. Brown, 910 F. Supp. 1138, 1156 (E.D.Va.1995) (regulation requiring federal fishing officials to "consider" a statutory factor in setting fishing quota recommendations was not a "strict dictate" and suggested officials had "some discretion" in preparing their recommendation); T.S. v. Ridgefield Bd. of Educ., 808 F. Supp. 926, 931 (D.Conn.1992) (requirement under Individuals with Disabilities Education Act ("IDEA") that an independent educational evaluation "must be considered" was met *1174 where an individual who reviewed the evaluation read an summarized portions at a school meeting); G.D. v. Westmoreland Selz. Dist., 930 F.2d 942, 947 (1st Cir.1991) (report "considered" under IDEA where it was reviewed at a meeting). The language of section 32902(f) merely requires NHTSA to investigate and analyze what effect the "other" regulations will have on fuel economy.
These definitions of "consider" comport with NHTSA's interpretation of section 32902(f). Responding to suggestions that the provision prevents preemption, NHTSA concluded that the "EPCA's decisionmaking factor provision is neither a saving clause nor a waiver provision. . . . The agency interprets that provision only to direct NHTSA to consider those State standards that can otherwise be validly adopted and enforced under State and Federal law." Standards for Light Trucks, 71 Fed.Reg. at 17,669. After having investigated and analyzed all of the required factors, the agency is free to set the maximum feasible average fuel economy based on all of the information properly before it. Even if one objective of EPCA is to set fuel economy standards in a manner that takes into account the effects of California standards receiving a waiver, this does not evince Congress's intent that such a standard is permitted to impair the achievement of the EPCA's other objectives. See Geier, 529 U.S. at 885, 120 S. Ct. 1913. The court sees no reason to interpret Congress's directive as to which information NHTSA must consider as permission for a state law to disrupt the objectives of the EPCA. Nor do Defendants cite any legislative history that furthers its reading of the "shall consider" language of section 32902(f).
Because nothing before the court evinces Congress's intent to permit California regulations that stand as an obstacle to the EPCA's objectives, Plaintiffs have stated a claim for EPCA preemption and the court will not grant judgment on the pleadings on this cause of action.
B. Clean Air Act Preemption
Plaintiffs contend that the California regulations are preempted by section 209(a) of the Clean Air Act, 42 U.S.C. § 7543(a). Section 209(a) provides that a state may not "adopt or attempt to enforce any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines subject to this part." Id. Meanwhile, section 209(b) provides a means for the EPA to waive the prohibition under section 209(a) provided it makes certain findings. 42 U.S.C. § 7543(b).
Defendants do not contend that, under section 209(a), the challenged regulations are not a "standard relating to the control of emissions from new motor vehicles." 42 U.S.C. § 7543(a). Accordingly, the regulations are preempted unless the EPA issues a waiver under section 209(b). 42 U.S.C. § 7543(b). Defendants ask the court to enter judgment on the pleadings in their favor on this claim on the basis that "Plaintiffs and Plaintiff-intervenor have virtually abandoned their principal Clean Air Act claim." Defs.' Reply 4:4-5. Defendants point out that Plaintiffs have not challenged their contentions that the Clean Air Act authorizes the regulation of greenhouse gas emissions as pollutants or that the EPA has the authority to issue California a waiver. Accepting these arguments, however, does not mean that the regulations are subject to a waiver under section 209(b).[12] The EPA can still deny a *1175 waiver on the basis of a factual finding that the regulations are not needed to meet "compelling and extraordinary conditions."[13] 42 U.S.C. § 7543(b)(1)(B).
In any event, the EPA has not waived 209(a) preemption with respect to the California regulations. Nothing in the Plaintiffs' FAC, the Plaintiff-intervenor's complaint, or in any other part of the record justifies granting judgment on the pleadings by speculating that the EPA will make a future factual finding that favors Defendants, the moving parties. Thus, Defendants' motion for judgment on the pleadings on this cause of action must be denied.
C. Conflict with United States Foreign Policy
It is beyond dispute that "at some point an exercise of state power that touches on foreign relations must yield to the National Government's policy." Am. Ins. Ass'n v. Garamendi, 539 U.S. 396, 413, 123 S. Ct. 2374, 156 L. Ed. 2d 376 (2003). After all, it was out of "concern for uniformity in this country's dealings with foreign nations" that the Constitution allocated the foreign relations power to the federal government. Id. (quoting Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 427, n. 25, 84 S. Ct. 923, 11 L. Ed. 2d 804 (1964)). The "executive power" vested in Article II of the Constitution provides the President the "vast share of responsibility for the conduct of our foreign relations." Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 610-11, 72 S. Ct. 863, 96 L. Ed. 1153 (1952) (Frankfurter, J., concurring). "While Congress holds express authority to regulate public and private dealings with other nations in its war and foreign commerce powers, in foreign affairs the President has a degree of independent authority to act." Garamendi, 539 U.S. at 414, 123 S. Ct. 2374.
In Garamendi, the Supreme Court addressed whether California's Holocaust Victim Insurance Relief Act of 1999 ("HVRA") was preempted because it interfered with the federal government's conduct of foreign relations. Id. at 401, 123 S. Ct. 2374. HVIRA required insurers doing business in California to disclose details of any insurance policies issued in Europe between 1920 and 1945, which would be made public through a central registry. Id. at 409-10, 123 S. Ct. 2374. Around the time that the legislation was passed, President Clinton was attempting to negotiate with the German government to develop a coordinated approach to these claims. Id. at 405, 123 S. Ct. 2374. In 2000, President Clinton and German Chancellor Schroder signed the German Foundation Agreement, in which Germany agreed to enact legislation establishing a foundation funded by the German government and German industry to compensate those injured by German companies during the Nazi era. *1176 Id. In exchange, the President promised to attempt to shield Germany from litigation by filing Statements of Interest in the courts, encouraging judges to defer to Foundation procedure. Id. at 406, 123 S. Ct. 2374. Both nations also agreed that the Foundation would work with the International Commission on Holocaust Era Insurance Claims to establish procedures for handling claims. Id. at 407, 123 S. Ct. 2374.
The Garamendi Court, in determining whether HVIRA was preempted under the foreign affairs doctrine, considered its analysis of an Oregon probate statue in Zschernig v. Miller, 389 U.S. 429, 88 S. Ct. 664, 19 L. Ed. 2d 683 (1968). The statute in Zschernig "prohibited inheritance by a nonresident alien, absent showings that the foreign heir would take the property `without confiscation' by his home country and that American citizens would enjoy reciprocal rights of inheritance there." Id. at 417, 88 S. Ct. 664. In practice, the statute encouraged state judges in Oregon probate proceedings to disparage foreign governments and express anticommunist views. Id. Accordingly, the majority struck down the statute because it "impair[ed] the effective exercise of the Nation's foreign policy." Id. at 440, 88 S. Ct. 664. The majority concluded that the statute had "a direct impact upon foreign relations" and potentially would "adversely affect the power of the central government to deal with those problems." Id. at 441, 88 S. Ct. 664. In a concurring opinion, Justice Harlan interpreted past Supreme Court jurisprudence as establishing that "in the absence of a conflicting federal policy or violation of the express mandates of the Constitution the States may legislate in areas of their traditional competence even though their statutes may have an incidental effect on foreign relations." Id. at 458-59, 88 S. Ct. 664 (Harlan, J., concurring).
In Garamendi, the Court decided that the majority's and Justice Harlan's opinions in Zschernig represented "contrasting theories of field and conflict preemption." Garamendi, 539 U.S. at 419, 123 S. Ct. 2374. The Court declined to decide which approach is correct. Id. at 419-20, 123 S. Ct. 2374. Instead, the Court found that HVIRA was preempted under either approach because it would "produce something more than incidental effect in conflict with express foreign policy of the National Government." Id. at 420, 123 S. Ct. 2374. In deciding the propriety of state legislation in an areas of "their traditional competence," the Court noted that under Justice Harlan's view it is reason able to "consider the strength of the state interest, judged by standards of traditional practice."[14]Id.
The parties dispute the current administration's approach to reductions of greenhouse gas emissions. Plaintiffs focus on language in an EPA report describing the current administration's greenhouse gas emissions strategy:
Unilateral EPA regulation of motor vehicle GHG emissions could also weaken U.S. efforts to persuade key developing countries to reduce the GHG intensity of their economies. *1177 Considering the large populations and growing economies of some developing countries, increases in their GHG emissions could quickly overwhelm the effects of GHG reduction measures in developed countries. Any potential benefit of EPA regulation could be lost to the extent other nations decided to let their emissions significantly increase in view of U.S. emission reductions. Unavoidably, climate change raises important foreign policy issues, and it is the President's prerogative to address them.
Control of Emissions, 68 Fed.Reg. at 52,-931 (footnote omitted).[15] The report goes on to conclude that "the President's policy emphasizes international cooperation and promotes working with other nations to develop an efficient and coordinated response to global climate change." Id. at 52,933. Plaintiffs allege that the implementation of the California regulations "interferes with the ability of the United States to speak with one voice upon matters of global climate change" and "diminishes the bargaining power of the United States in negotiating multilateral reductions of greenhouse gases." FAC ¶ 130.
Plaintiffs also cite the opinion of a district court dismissing claims seeking to abate greenhouse gas emissions on a public nuisance theory as nonjusticiable political questions. See State of Connecticut v. Am. Elec. Power Co., 406 F. Supp. 2d 265 (S.D.N.Y.2005). In determining the Executive Branch's current approach to greenhouse gas reduction, the court considered the reluctance of Congress and the Executive Branch to impose formal limits on such emissions. Id. at 269-70. It noted that Congress has focused its efforts to-ward researching the effect of emissions, for instance, through the National Climate Program Act of 1978, 15 U.S.C. § 2901 et seq., and the Global Change Research Act, 15 U.S.C. §§ 2931-2938. Id. at 269. The court also mentioned that President H.W. Bush had signed, and the senate ratified, the United Nations Framework Convention on Climate Change ("UNFCCC"), "which brought together a coalition of countries to work toward a coordinated approach to address the international issue of global warming." Id. UNFCCC member nations, and President Clinton, signed the Kyoto Protocol, which called for mandatory reductions in greenhouse gas emissions. Id. The court recognized, however, that the Senate did not approve the Protocol, rather voting 95-0 in the so-called Byrd-Hagel resolution to "urge the President not to sign any agreement that would result in serious harm to the economy or that did not include provisions regarding the emissions of developing nations." Id. (citing S. 98, 105th Cong. (1997)). Congress subsequently passed legislation barring the EPA from implementing the protocol. Id. (citing Pub.L. No. 105-276, 112 Stat. 2461, 2496 (1998); Pub.L. No. 106-74, 113 Stat. 1047, 1080 (1999); Pub.L. No. 106-377, 114 Stat. 1441, 1441A-41 (2000)). The court then considered President George W. Bush's opposition to the Protocol based on its exemption of developing nations, its failure to address two major pollutants, and its negative impact on the United States. Id. The court concluded by citing the EPA report's focus on "international cooperation" and "coordinated response" as an expression of "the policy of the current administration." Id. at 270 *1178 (citing Control of Emissions, 68 Fed.Reg. at 52,933).
The recent cases in which the Supreme Court has held that a state statute is preempted based on United States foreign affairs concern an executive agreement or federal statute with which the state legislation conflicts. See Garamendi, 539 U.S. at 421, 123 S. Ct. 2374 (focusing preemption inquiry on "the national position, expressed unmistakably in the executive agreements signed by the President"); Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 375-76, 120 S. Ct. 2288, 147 L.E d.2d 352 (2000) (considering whether the challenged state law "might . . . blunt the consequences" of actions available to the President pursuant to a federal statute). Here, Plaintiffs do not contend that the United States' opposition to unilateral greenhouse gas emission or its pursuit of negotiated reductions is embodied in any particular executive agreement or federal statute. Rather, Plaintiffs point to Executive Branch statements, the absence of national greenhouse gas regulations, and the Senate's rejection of binding emissions reductions in the Byrd-Hagel resolution to establish the nature of present United States policy.
Plaintiffs contend that the Byrd-Hagel resolution amounts to "implied authorization" of the administration's position on negotiating emissions reductions under Youngstown, 343 U.S. at 635, 72 S. Ct. 863. In Youngstown, the Court held that "[w]hen the President acts pursuant to an express or implied authorization of Congress, his authority is at its maximum, for it includes all that he possesses in his own right plus all that Congress can delegate." Id. Plaintiffs point out that recent Supreme Court authority provides that the scope of the President's power under Youngstown determines the scope of foreign policy preemption. See Garamendi, 539 U.S. at 414, 123 S. Ct. 2374; Crosby, 530 U.S. at 375, 120 S. Ct. 2288.
The Byrd-Hagel resolution expressed the Senate's opposition to any protocol to or other agreement regarding the UNFCCC that would:
(A) mandate new commitments to limit or reduce greenhouse gas emissions for the Annex I Parties, unless the protocol or other agreement also mandates new specific scheduled commitments to limit or reduce greenhouse gas emissions for Developing Country Parties within the same compliance period, or
(B) would result in serious harm to the economy of the United States;. . . .
S. 98, 105th Cong. (1997). While the resolution appears to speak as to what the sort of agreements the Senate refuses to support, it also appears to implicitly support a Presidential approach of negotiating reciprocal emissions reductions with other nations.
Defendants contend that the Byrd-Hagel resolution has been countermanded by a more recent one, the Bingaman-Domenici resolution, calling for binding limits "on emissions of greenhouse gases that slow, stop, and reverse the growth of such emissions" and that "will encourage comparable action by other nations." 151 Cong. Rec. S7033 (daily ed. June 22, 2005). While this later resolution expresses the Senate's sense that Congress should enact mandatory emissions limits, it does not contravene the Byrd-Hagel resolution's approach to international agreements. Moreover, the Bingaman-Domenici resolution does not speak to the President's authority to forge international agreements, as the Byrd-Hagel resolution did. The Senate's mere statement of its own intent to impose limits does not itself interfere with or express disapproval of the President's efforts to negotiate limits with other countries.
*1179 In any event, the Bingaman-Domenici resolution does not divest the President of his "independent authority to act" on matters of foreign affairs. Garamendi, 539 U.S. at 414, 123 S. Ct. 2374.
Even if the President lacks the Senate's endorsement of his negotiation-based approach to greenhouse gas emissions, he nonetheless can act pursuant to certain independent powers of his office. See Youngstown, 343 U.S. at 637, 72 S. Ct. 863. In Garamendi, the Supreme Court acknowledged that Presidential action pursuant to such "independent authority" in foreign affairs, such as making an executive agreement, could preempt interfering state laws. 539 U.S. at 414-15, .424 n. 14, 123 S. Ct. 2374 (noting that "the President in this case is acting without express congressional authority,", but, because "the President possesses considerable independent constitutional authority to act on behalf of the United States on international issues, . . . conflict with the exercise of that authority is a comparably good reason to find preemption of state law"). If the President were " to negotiate with another nation or nations to agree to reduce greenhouse gas emissions, such an action would not be "incompatible" with the Senate's will as expressed in the Bingaman-Domenici resolution to obtain mandatory emissions reductions so as to place "his power is at its lowest ebb." See Youngstown, 343 U.S. at 637, 72 S. Ct. 863. Rather, an agreement to so reduce emissions would apparently further the Senate's expressed goals of ameliorating the risks associated with such emissions.
The Supreme Court cases do not suggest that the absence of a statute or an executive agreement is fatal to a foreign policy preemption claim. In fact, the Court's analysis suggests that such a claim is permissible. In Garamendi, though the Court addressed the preemptive effect of an executive agreement, it recognized a general "executive authority to decide what that policy should be" as well as authority to act independently of Congress. 539 U.S. at 414, 123 S. Ct. 2374. In the field of foreign policy, the President has the "lead role," which makes it appropriate to give weight to policy statements by Executive Branch officials to determine that policy. Id. at 422 & n. 12, 123 S. Ct. 2374 (considering statements of Executive Branch officials, in addition to executive agreements, to determine the nature of United States foreign policy). If Executive Branch statements are competent evidence of what our foreign policy is, the court sees no reason to limit preemption to foreign policy as expressed in statutes or executive agreements.
In Crosby, the Supreme Court has preempted state law based on its potential to interfere with future discretionary actions within the President's foreign policy power. 530 U.S. at 377, 120 S. Ct. 2288 (finding preemption where state statute "undermin[ing] the President's intended statutory authority by making it impossible for him to restrain fully the coercive power of the national economy when he may choose to take the discretionary action open to him"). In Crosby, even though the President's discretionary powers derived from a statute, the Court did not foreclose the potential preemption of a state statute interfering with a Presidential foreign policy option on which he has not yet acted. Id. Thus, so long as the President is empowered to act to benefit United States foreign policy interests, whether through express or implied congressional authorization or through his independent authority, a state statute that excessively interferes with an action "he may choose to take" in furtherance of that interest may be preempted. See id.
Defendants contend that the UNFCCC evidences a United States policy of unilateral *1180 reductions of greenhouse gas emissions, contrary to the EPA's account of current policy. Defendants contend that signing on to the UNFCCC committed the United States to unilaterally decrease its greenhouse gas emissions:
Each of these Parties shall adopt national policies and take corresponding measures on the mitigation of climate change, by limiting its anthropogenic emissions of greenhouse gases and protecting and enhancing its greenhouse gas sinks and reservoirs. These policies and measures will demonstrate that developed countries are taking the lead in modifying longerterm trends in anthropogenic emissions. . . .
Defs.' RJN Ex. D at 12. Defendants point out that the UNFCCC signatories agreed to take the lead acknowledging that, as developed countries, they were responsible for the "largest share of historical and current" greenhouse gas emissions. Id. at 2. Defendants contend that the UNFCCC obligates the United States to refrain from activities that might damage the environment beyond its borders, to "protect the climate system," and to take precautions to "anticipate, prevent or minimize the causes of climate change and mitigate its adverse effects." Defs.' RJN Ex. D at 2, 9.
Defendants assert that the CAFE program under the EPCA belies Plaintiffs contention that United States policy is to eschew unilateral greenhouse gas regulation. In support, Defendants quote the allegation in the FAC that "[b]y setting fuel economy standards, the national government has regulated the level of greenhouse gases released by cars and trucks sold in this country." FAC ¶ 4. Plaintiffs respond that the CAFE program's fuel economy regulations only functionally regulate greenhouse gas emissions to achieve the ends specified in the EPCA, which was enacted before climate change became a significant issue. Plaintiffs distinguish the indirect carbon dioxide emission restrictions inherent in fuel economy from "more direct regulation" of greenhouse gases, which the administration has decided to undertake through multilateral agreements. Pls.' Opp'n at 63 n. 46. That the CAFE program affects carbon dioxide emissions does not contradict Plaintiffs contention that current Executive Branch policy is to negotiate carbon dioxide reductions with other nations. The CAFE program very well might constrain the sort of agreement that the President might make to the extent a proposed agreement was inconsistent with Congress's intent in enacting the EPCA. See Youngstown, 343 U.S. at 637, 72 S. Ct. 863. Nevertheless, a policy of seeking out such agreements is not logically or practically inconsistent with the CAFE program.
Defendants also cite statements by members of the State Department implying that the current administration does not intend to negotiate greenhouse gas limits with developing nations. Defendants provide a transcript of remarks of Dr. Harlan L. Watson, "Senior Climate Negotiator and Special Representative and Alternate Head of the U.S. Delegation, Montreal, Canada," on November 29, 2005. Defs.' RJN Ex. E. Defendants cite language from this document in support of their characterization of United States policy: "the United States is opposed to any such discussions under the Framework Convention. . . . We see no change in current conditions that would result in a negotiated agreement consistent with the U.S. approach. . . . We are not a party to the Kyoto Protocol and we do not support any such approach under the Convention for future commitments." Mot. 29:27-30:3 (citing Defs.' RJN Ex. E). Watson appears to only be discussing the United States' opposition to certain types of negotiations, specifically negotiations by the parties to the Kyoto Protocol targeted at *1181 agreeing to a "second commitment period" beginning in 2013. Defs.' RJN Ex. E at 2. These remarks, therefore, are merely reiterating that the administration opposes binding limits modeled on the Kyoto approach, not that it opposes a negotiated strategy based on reciprocal greenhouse gas reductions.
Other parts of Watson's remarks leave open the possibility for negotiations outside of the Kyoto mold. Watson points out that currently, "through bilateral and U.S.led multilateral partnerships with nearly all major developed and developing countries, we are leading a global approach to achieving our shared commitments to address climate change." Id. at 1. Dr. Watson goes on to state that the United States "need[s] to pursue our international efforts in a spirit of collaboration, not coercion, and with a true sense of partnership. This is especially true in our relations with developing nations, which have an imperative to grow their economies and provide for the welfare of their. citizens." Id. at 2.
Defendants' position regarding United States foreign policy does not gain support from the press briefing of Dr. Paula Dobriansky, Under Secretary of State, on December 7, 2005. See Defs.' RJN Ex. F. She expresses the same skepticism as Watson about the potential for success of formalized discussions under the "Canadian proposal." Id. at 2. Dobriansky, speaking of the use of bilateral and multilateral partnerships to achieve climate change, stated that "the best way forward is through different and diversified approaches that leverage these critical partnerships." Id. at 1. Dobriansky does not enunciate a United States policy of shunning negotiations with developing nations regarding greenhouse gas emissions.
Defendants argue that, even if the California regulations interfere with the administration's policy to pursue international agreements regarding greenhouse gas emissions, they cannot be preempted in light of that policy because they have been authorized by Congress. In support, Defendants cite a case concerning California tax laws that were allegedly harmful to United States foreign policy goals. Barclays Bank PLC v. Franchise Tax Bd, 512 U.S. 298, 114 S. Ct. 2268, 129 L. Ed. 2d 244 (1994). The California tax law called for a "worldwide combined reporting" method for certain multinational enterprises. Id. at 302, 114 S. Ct. 2268. For three decades, Congress had been aware that foreign governments were displeased with such requirements. Id. at 324, 114 S. Ct. 2268. On many occasions, Congress had studied state taxation of multinational enterprises and introduced numerous bills on the subject. Id. at 324-25, 114 S. Ct. 2268. On each occasion, Congress declined to bar the worldwide combined reporting approach. Id. at 325, 114 S. Ct. 2268. The Court concluded that Congress "implicitly has permitted the States to use the worldwide combined reporting method." Id. at 326, 114 S. Ct. 2268.
Defendants contend that here Congress has explicitly granted California the power to implement emissions regulations under section 209 of the Clean Air Act, providing an even stronger case against preemption than the implicit permission the Supreme Court found in Barclays. Defendants are hard-pressed, however, to show that section 209 demonstrates Congress's intent to permit California to implement emissions regulations even if they interfere with foreign policy goals. Defendants do not contend that, as was the case in Barclays, Congress has known for decades that California would impose carbon dioxide regulations that potentially interfere with international greenhouse gas negotiations and has declined opportunities to foreclose that approach. Presumably, Congress would not be required to draft section 209 so as to explicitly preclude emissions regulations *1182 that interfere with United States foreign policy, as it could rely on well-established preemption doctrine to bar such regulations. See Crosby, 530 U.S. at 387-88, 120 S. Ct. 2288 ("A failure to provide for preemption expressly may reflect nothing more than the settled character of implied preemption doctrine that courts will dependably apply. . . . ").
In Garamendi, the Supreme Court discussed the effect of the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015, on the foreign policy preemption analysis of California's HVIRA legislation. 539 U.S. at 427-29, 123 S. Ct. 2374. The Court interpreted the McCarran-Ferguson Act as limiting congressional preemption under the commerce power. Id. at 428, 123 S. Ct. 2374. The Court concluded, nevertheless, that "a federal statute directed to implied preemption by domestic commerce legislation cannot sensibly be construed to address preemption by executive conduct in foreign affairs." Id. The scope of the section 209(b) waiver seems no broader than the McCarran-Ferguson Act's authorization of state regulation of insurance. Section 209(b) merely provides that the explicit preemption under section 209(a) of any state motor vehicle emissions shall not apply if the EPA properly grants a waiver. 42 U.S.C. § 7543(b). Defendants have pointed to no basis, either in the language or legislative history of the statute, to believe that Congress, in providing for a section 209(b) waiver, contemplated the effects of California emissions regulations on foreign policy and intended endorse such regulations even when they interfered with foreign policy goals.
Defendants do not contend that Plaintiffs, in alleging that the California regulations will impair the President's leverage in pursuing multilateral agreements, have failed to allege sufficient interference with United States foreign policy, should such a. policy exist. Instead, Defendants assert that preemption is only appropriate where the state statute concerns "laws or conduct of foreign governments" or "foreign businesses." Defs.' Reply 22:5-6. Defendants point out that the Supreme Court cases finding preemption concern state laws targeting foreign entities. See Zschernig, 389 U.S. at 430-31, 440, 88 S. Ct. 664 (probate statute affecting the rights of nonresident aliens and requiring a judicial evaluation that resulted in criticism foreign governments); Crosby, 530 U.S. at 376, 120 S. Ct. 2288 (statute exerting economic pressure on the Burmese political regime); Garamendi, 539 U.S. at 423-24, 123 S. Ct. 2374 (disclosure requirements designed to apply economic pressure to insurance companies that did business in Europe during World War II).
Defendants focus on language in Garamendi that they assert precludes preemption of a generally applicable domestic regulation: "[Quite unlike a generally applicable 'blue sky' law, HVIRA effectively singles out only policies issued by European companies, in Europe, to European residents, at least 55 years ago." Garamendi, 539 U.S. at 425-26, 123 S. Ct. 2374. Reading this sentence in context, however, indicates that it does not evince the Court's intent to exclude generally applicable laws from conflict preemption. Id. Rather, the sentence comes in the context of an analysis of the degree of the state's interest in enforcement of the statute. Id. at 425, 123 S. Ct. 2374. The state had contended that the statute's disclosure requirements merely facilitated evaluating corporate reliability. Id. at 425-26, 123 S. Ct. 2374. The Court found that the statute's limitation of the disclosure requirement to certain companies' sales to certain types of customers "raises great doubt" as to the validity of the state's expressed purpose. Id. at 426, 123 S. Ct. 2374. In other words, because HVIRA's disclosure requirements were not generally applicable, *1183 the Court questioned their furtherance of the state's interests in corporate reliability. Id. The Court did not speak to whether preemption generally turned on the breadth of the state regulation.
Nothing in the Supreme Court's foreign policy preemption jurisprudence forecloses the possibility of preemption of a generally applicable law that interferes with foreign policy. The focus is on whether the practical effect of the state law is to disturb foreign relations or impair a proper exercise of Presidential authority. See Crosby, 530 U.S. at 375, 120 S. Ct. 2288; Zschernig, 389" U.S. at 440, 88 S. Ct. 664. Plaintiffs have demonstrated that current Executive Branch policy is to negotiate with other nations to reach agreements regarding greenhouse gas emissions reductions. They have alleged that the California regulations, by unilaterally reducing such emissions, potentially undercut the Executive's ability to pursue such agreements. Accordingly, Plaintiffs have stated a claim for preemption of the regulations based on foreign policy.
D. Dormant Commerce Clause
By its terms, the Commerce Clause authorizes Congress to "regulate Commerce . . . among the several States." U.S. Const., art. 1, § 8, cl. 3. The Supreme Court has interpreted the clause to prohibit states from unduly interfering with interstate commerce absent congressional permission. See, e.g., Raymond Motor Transp., Inc. v. Rice, 434 U.S. 429, 441, 98 S. Ct. 787, 54 L. Ed. 2d 664 (1978); Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S. Ct. 844, 25 L. Ed. 2d 174 (1970). The Commerce Clause does not prohibit every exercise of state power that affects interstate commerce. Gravquick A/S v. Trimble Navigation Int?, 323 F.3d 1219, 1224 (9th Cir.2003). This is because, "[i]f the law `regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental,' then the statute must be upheld 'unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.'" Id. (quoting Pike, 397 U.S. at 142, 90 S. Ct. 844).
Plaintiffs' Dormant Commerce Clause claim does not allege that California's regulations discriminate against out-of-state interests or directly regulate interstate commerce. See Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579, 106 S. Ct. 2080, 90 L. Ed. 2d 552 (1986); NCAA v. Miller, 10 F.3d 633, 638 (9th Cir.1993). Instead, Plaintiffs allege that the regulations are impermissible because they burden "the production and sale of new motor vehicles" while providing "no local environmental benefit, or insubstantial benefits at best." FAC ¶¶ 135, 136.
Defendants argue that, if the EPA grants the California regulations a waiver, they cannot violate the Dormant Commerce Clause because they will have been congressionally authorized. Because the Commerce Clause is a grant of authority to Congress, it does not restrict Congress's authority to regulate interstate commerce as it sees fit. W. & S. Life Ins. Co. v. State Bd. of Equalization, 451 U.S. 648, 652, 101 S. Ct. 2070, 68 L. Ed. 2d 514 (1981). Accordingly, Congress may authorize states to restrict the flow of interstate commerce in a manner that they would not otherwise enjoy. Id. "If Congress ordains that the States may freely regulate an aspect of interstate commerce, any action taken by a State within the scope of the congressional authorization is rendered invulnerable to Commerce Clause challenge." Id. at 652-53, 101 S. Ct. 2070; White v. Mass. Council of Constr. Employers, 460 U.S. 204, 213, 103 S. Ct. 1042, 75 L. Ed. 2d 1 (1983) ("Where state or local government action is specifically authorized by Congress, it is not *1184 subject to the Commerce Clause even if it interferes with interstate commerce."). The Supreme Court has set a rigorous standard for finding congressional intent to authorize state laws that violate the Commerce Clause. "Congress must be `unmistakably clear' before we will conclude that it intended to permit state regulation which would otherwise violate the dormant Commerce Clause." C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 408, 114 S. Ct. 1677, 128 L. Ed. 2d 399 (1994) (O'Connor, J., concurring) (quoting SouthCentral Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 91, 104 S. Ct. 2237, 81 L.Ed2d 71 (1984)). Courts may look to the language of the relevant statute and the legislative history to find this intent. Sporhase v. Nebraska ex rel. Douglas, 458 U.S. 941, 960, 102 S. Ct. 3456, 73 L. Ed. 2d 1254 (1982). The state bears the burden of demonstrating this intent. Wyoming v. Oklahoma, 502 U.S. 437, 458, 112 S. Ct. 789, 117 L. Ed. 2d 1 (1992).
It is undisputed that, on its face, Clean Air Act section 209(b) authorizes California to implement emissions regulations upon receiving an EPA waiver. The terms of section 209(b) indicate that it only shields such regulations from "application of this section," referring to the broad preemption under section 209(a). See 42 U.S.C. § 7543. Defendants point instead to legislative history to demonstrate Congress's intent to immunize California regulations from a Dormant Commerce Clause challenge. They contend that when Congress conferred on California the authority to set standards applicable to automobile manufacturers selling cars in California, it knew that California would regulate a significant aspect of interstate commerce.
The District of Columbia Circuit summarized the history of California's Clean Air Act waiver in Motor & Equipment Manufacturers Association v. EPA, 627 F.2d 1095, 1109-10 (D.C.Cir.1979). The debate in the Senate over granting California a broad waiver "sharpened the differences between the states, which wanted to preserve their traditional role in regulating motor vehicles, and the manufacturers, which wanted to avoid the economic disruption latent in having to meet fifty-one separate sets of emissions control requirements." Id. at 1109. As the Senate Committee presenting the bill acknowledged, "[t]he auto industry . . . was adamant that the nature of their manufacturing mechanism required a single national standard in order to eliminate undue economic strain on the industry." Id. (citing S.Rep.. No. 90-403, 33 (1967)). "Thus the Committee that formulated the waiver provision understood the costs involved in making an exception" but reported that the drawbacks of the waiver were balanced by the "benefits for the Nation to be derived from permitting California to continue its experiments in the field of emissions control . . . and the benefits for the people of California to be derived from letting that State improve on `its already excellent program' of emissions control." Id. at 1109-10.
The House also considered the farreaching economic implications of the waiver provision. The House Committee was so concerned "that the separate administration of two different sets of emission regulations would unduly burden the industry," that it amended the waiver provision to make the Secretary's action permissive, rather than mandatory. Id. at 1121 (citing H.R.Rep. No. 90-728, 21-22 (1967)). On the floor of the House, the bill was amended to replace the House Committee language and revert to that of the original Senate proposal. ,Icl. (citing 113 Cong. Rec. 30975 (1967) (remarks of Rep. Moss)). The House ultimately adopted the amendment, agreeing with the Senate to place the burden on those "on those who allege, in effect, that the national program is adequate to California's needs." Id.
*1185 The legislative history makes clear that both the House and the Senate considered that the California regulations under the waiver would substantially burden interstate commerce. Nevertheless, realizing the benefits for California and for the nation from allowing the state broad authority, Congress enacted the waiver anyway. One judge in this district and a California Court of Appeal have concluded that Congress intended regulations that receive a section 209(b) waiver to be immune from Dormant Commerce Clause scrutiny. Oxygenated Fuels Ass'n v. Davis, 163 F.Supp2d 1182, 1188 (E.D.Cal.2001), aff'd, 331 F.3d 665 (9th Cir.2003) (holding that Congress's authorization of California's regulation of fuels and fuel additives upon receiving a section 209(b) waiver rendered the state law "not subject to the Commerce Clause" (quoting White, 460 U.S. at 213, 103 S. Ct. 1042)); People ex rel. State Air Res. Bd. v. Wilmshurst, 68 Cal. App. 4th 1332, 1345, 81 Cal. Rptr. 2d 221 (1999) (Congress's intent to "allow California to forge emissions standards at variance with the rest of the United States" meant that a California regulation receiving an EPA waiver was not vulnerable to a Commerce Clause challenge (citing Motor and Equip. Mfrs. Ass'n, 627 F.2d at 1128.)).
Plaintiffs do not take issue with Defendants' characterization of the legislative history of section 209(b). Plaintiffs do not dispute that, at the time Congress passed the waiver provision, it intended to permit California, with EPA approval, to implement regulations burdening interstate commerce. Plaintiffs contend instead that, in deciding whether Congress intended to permit the California regulations even if they burden interstate commerce, the court should also consider the extent to which the EPCA demonstrates a congressional intent to protect interstate commerce in vehicle production from state fuel economy regulation. Plaintiffs point to the express preemption provision, 49 U.S.C. § 32919(a), as well as other provisions requiring administration of the CAFE program in a manner that does not economically harm the automobile manufacturing sector. See 49 U.S.C. §§ 32913, 32916. Plaintiffs contend that the holdings of S. Life Ins. Co. and White do not apply where there is "no clear expression of Congressional intent to approve any type of state regulation." Pls.' Opp'n 66:9-11.
Because they do not dispute the District of Columbia Circuit's interpretation of the legislative history of the Clean Air Act, Plaintiffs must find in the EPCA Congress's intent to revoke the permission to burden interstate commerce that it had previously given California. The EPCA sections to which Plaintiffs cite do not evince such congressional intent. Plaintiffs point to 49 U.S.C. § 32913, which concerns civil penalties for failing to comply with requirements under the EPCA. It authorizes the Secretary of Transportation to reduce such a penalty to the extent "necessary to prevent a substantial lessening of competition." 49 U.S.C. § 32913. Plaintiffs also cite a requirement that the Secretary, after providing a manufacturer an exemption from "the requirement of separate calculations" should evaluate the economic effect of such an exemption. 49 U.S.C. § 32916. Neither of these provisions illuminates Congress's intent regarding the economic effects of regulations waived under Clean Air Act section 209(b). Nor does the EPCA's express preemption provision, 49 U.S.C. § 32919(a), explicitly or implicitly bear on Congress's belief that the benefits of more stringent California emissions regulations justify a burden on commerce.[16] Taken together in light of *1186 the legislative history of section 209(b), the EPCA provisions that Plaintiffs cite do not contravene Congress's "unmistakably clear" permission to California to burden interstate commerce. See C & A Carbone, 511 U.S. at 408, 114 S. Ct. 1677. Accordingly, Plaintiffs do not state a claim under the Dormant Commerce Clause, making judgment on the pleadings for Defendants appropriate.
E. Sherman Act
In their opening brief, Defendants moved for judgment on the pleadings on Plaintiffs' claim under the Sherman Act on the basis that they had failed to state a facial preemption challenge. In their opposition brief, Plaintiffs concede that they have not stated a claim for a facial challenge to the California regulations. Pls.' Opp'n 67:21-22. Instead, they seek to "prove specific anticompetitive effects that trigger preemption under the Sherman Act." Id. In their reply, Defendants contend that Plaintiffs have failed to state a claim for such an as-applied challenge and, in the alternative, `that such a claim is unripe.
Under section 1 of the Sherman Act, "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations," is illegal. 15 U.S.C. 1. To establish a section 1 violation, a plaintiff must demonstrate three elements:
(1) an agreement, conspiracy, or combination among two or more persons or distinct business entities; (2) which is intended to harm or unreasonably restrain competition; and (3) which actually causes injury to competition, beyond the impact on the claimant, within a field of commerce in which the claimant is engaged (i.e., "antitrust injury").
McGlinchy, 845 F.2d at 811. Where two parties to an alleged conspiracy actually constitute a "single entity," they are immune from section 1 liability, as the "company cannot conspire with itself." Freeman v. San Diego Ass'n of Realtors, 322 F.3d 1133, 1147 (9th Cir.2003) (citing Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 769, 104 S. Ct. 2731, 81 L. Ed. 2d 628 (1984)). "Where there is substantial common ownership, a fiduciary obligation to act for another entity's economic benefit or an agreement to divide profits and losses, individual firms function as an economic unit and are generally treated as a single entity." Id.
The FAC alleges that the California regulations may lead to price fixing. FAC ¶ 143. This is because the regulations, in some cases, require companies with a ten percent or greater overlap in ownership, but which are not one economic unit, to jointly demonstrate compliance with the greenhouse gas emissions limits. Id. The FAC alleges that manufacturers control the mix of vehicles sold by raising and lowering prices to influence demand for particular vehicle groups or models. Id. In order to control the aggregate emissions of the vehicles sold, the FAC alleges, "the two manufacturers will need to coordinate the sale of vehicles according to their fuel economy." Id. This will require, according to the FAC, the exchange of production, supply, and price information, which could ultimately result in price fixing. Id.
Generally, the Sherman Act does not constrain "a state or its officers or agents from activities directed by its legislature." Parker v. Brown, 317 U.S. 341, 350-51, 63 S. Ct. 307, 87 L. Ed. 315 (1943). This is because the Sherman Act does not evince Congress's intent to "nullify a state's control over its officers and agents." Id. at 351, 63 S. Ct. 307. Consequently, *1187 the Parker Court decided, based on principles of federalism and state sovereignty, that the acts of a state's legislative power or "official action directed by a state" are not subject to Sherman Act scrutiny. Id. A state statute may, however, be preempted where "there exists an irreconcilable conflict between the federal and state regulatory schemes." Rice v. Norman Williams Co. (Rice), 458 U.S. 654, 659, 102 S. Ct. 3294, 73 L. Ed. 2d 1042 (1982).
Rice concerned the enforceability of a state scheme involving licensing of beverage importers. Id. at 656-57, 102 S. Ct. 3294. The Court held that it was irrelevant to the inquiry into the validity of the statute whether it "might have an anticompetitive effect when applied in concrete factual situations." Id. A consideration of the effects of a state statute may be relevant to determining whether a private individual is entitled to the "state action" exemption to Sherman Act liability. See Cat Retail Liquor Dealers Ass'n v. Midcal Aluminum, 445 U.S. 97, 103, 100 S. Ct. 937, 63 L. Ed. 2d 233 (1980) (citing Parker, 317 U.S. at 351, 63 S. Ct. 307). Plaintiffs do not present any authority, and the court is aware of none, suggesting that anticompetitive effects short of "irreconcilable conflict" are grounds for preemption of a state statute.[17]See Rice, 458 U.S. at 659, 102 S. Ct. 3294. To the contrary, only "[w]hen the plaintiff challenges the facial validity of a statute or ordinance, preemption principles come into play. Where, however, the plaintiff alleges that action taken pursuant to legislation constitutes an antitrust violation, preemption principles are not implicated, while the state action doctrine can provide protection." 3 Julian O. von Kalinowski et al., Antitrust Laws and Trade Regulation § 49.06[2] (2d ed.2004).
Preemption based on "irreconcilable conflict" under Rice represents an exception to the well-established rule that a state's actions are exempt from section 1 scrutiny. See 458 U.S. at 659, 102 S. Ct. 3294. Plaintiffs do not point to any other grounds to invalidate the California regulations. Thus, while, "specific anticompetitive effects" of the California regulations might ameliorate the liability of manufacturers forced to engage in anticompetitive activities to comply with them, principles of federalism and state sovereignty preclude invalidating all or part of the statute based on such effects. Because Plaintiffs concede that Rice preemption of the regulations is inappropriate and no other grounds for Sherman Act preemption are before the court, the court grants judgment on the pleadings for Defendants on this claim.
F. Global Warming Science Discovery
In its order issued September 11, 2006, the court granted Defendants' motion for reconsideration with respect to certain discovery orders of the Magistrate Judge. The court concluded, in the section entitled "Global Warming," that certain document requests[18] were permissible because they were likely to lead to the production of evidence relevant to Plaintiffs' Dormant Commerce Clause challenge, *1188 on which judgment on the pleadings has now been granted. See Fed.R.Civ.P. 26(b)(1); Fed.R.Evid. 401. In opposing the motion for reconsideration, Defendants had also contended that the document requests were permissible to seek evidence refuting MAM's claim that EPA cannot find, under 42 U.S.C. § 7543(b)(1)(B), "compelling and extraordinary conditions" justifying a waiver. See AIAM Compl. ¶ 62. As Judge Coyle made clear in his order of October 21, 2005, whether EPA will ultimately decide to grant the California regulations a waiver is not properly before this court. Accordingly, the court finds that, notwithstanding any prior order, document requests that seek evidence about the science of global warming are not, on that basis, reasonably calculated to lead to evidence admissible in this action.
CONCLUSION AND ORDER
For the reasons stated in the above Memorandum Opinion, IT IS HEREBY ORDERED that:
1. Defendants' motion for JUDGMENT ON THE PLEADINGS is DENIED with respect to the claims for EPCA preemption, EPA preemption, and foreign policy preemption;
2. Defendants' motion for JUDGMENT ON THE PLEADINGS is GRANTED with respect to the Dormant Commerce Clause and Sherman Act claims; and
3. Notwithstanding any prior order of this court, Plaintiffs need not produce documents responsive to re quests designated GM 22/DCC 21/ AAM 20, GM 23/DCC 22/AAM 21, GM 25/DCC 24, GM 26/DCC 25/ AAM 24, GM-DCC-AAM 8, 9, 10 and 11, GM 20/DCC-AAM 19, GM 14, and GM 15/DCC-AAM 14.
IT IS SO ORDERED.
NOTES
[1] In relevant part, 42 U.S.C. § 7543(a) provides as follows: "No State or any political subdivision thereof shall adopt or attempt to enforce any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines subject to this part."
[2] In full, 42 U.S.C. § 7543(b)(1) provides as follows:
The Administrator shall, after notice and opportunity for public hearing, waive application of this section to any State which has adopted standards (other than crankcase emission standards) for the control of emissions from new motor vehicles or new motor vehicle engines prior to March 30, 1966, if the State determines that the State standards will be, in the aggregate, at least as protective of public health and welfare as applicable Federal standards. No such waiver shall be granted if the Administrator finds that
(A) the determination of the State is arbitrary and capricious,
(B) such State does not need such State standards to meet compelling and extraordinary conditions, or
(C) such State standards and accompanying enforcement procedures are not consistent with section 7521(a) of this title.
[3] The EPCA expressly provided that the Secretary of Transportation would administer the program. See, e.g., 49 U.S.C. § 32902(a). The Secretary delegated these responsibilities to the National Highway Traffic Safety Administration. 49 C.F.R. § 1.50(f).
[4] Plaintiffs in the FAC include the following automobile dealerships located in Modesto, Turlock, Merced, Madera, Lemoore, Tulare, and Porterville: Central Valley Chrysler-Jeep, Inc.; Kitahara Pontiac GMC Buick, Inc.; Madera Ford Mercury, Inc.; Madera Chevrolet; Frontier Dodge, Inc.; Tom Fields Motors, Inc.; Pistoresi Chrysler Dodge Jeep; Bob Williams Chevrolet; Courtesy Oldsmobile Cadillac, Inc.; Merle Stone Chevrolet, Inc.; Merle Stone Porterville, Inc.; Sturgeon and Beck Incorporated; and Swanson Fahrney Ford, Inc. General Motors Corporation, DaimlerChrysler Corporation, the Tulare County Farm Bureau, and the Alliance of Automobile Manufacturers are also plaintiffs. The Association of International Automobile Manufacturers ("AIAM" or "Plaintiff-Intervenor") has intervened as a plaintiff.
[5] Sierra Club, Bluewater Network, Global Exchange, Rainforest Action Network, and Natural Resources Defense Council have intervened as defendants.
[6] States that have adopted California's emission standards, along with the City of New York, have collectively filed briefs as amici arguing in favor of judgment on the pleadings. The amici are the States of New York, Connecticut, Maine, New Jersey, Oregon, Rhode Island, Vermont, Washington, the Commonwealth of Massachusetts, and the City of New York.
[7] AIAM's Complaint in Intervention alleges that the California regulations are preempted under both the EPCA and the Clean Air Act. Defendants do not provide any basis to grant judgment on the pleadings with respect to AIAM's claims distinct from its arguments for dismissal of Counts I and II of the FAC. Accordingly; the court's analysis of EPCA and Clean Air Act preemption applies to both Plaintiffs' FAC and Plaintiff-Intervenor's Complaint in Intervention.
[8] At oral argument, Defendants pointed out that the Supreme Court in Geier acknowledged that it would have reached the same result "even without giving DOT's own view special weight," making the language endorsing consideration of the agency's view of its goals dicta. 529 U.S. at 886, 120 S. Ct. 1913. The Ninth Circuit has nevertheless cited Geier for the proposition that preemption can turn on an agency's opinion. See Oxygenated Fuels Ass'n v. Davis, 331 F.3d 665, 672 (9th Cir.2003) (holding that Geier was distinguishable and preemption was inappropriate because, among other reasons, EPA had not interpreted its governing statute to preempt the state regulation). In any event, the Supreme Court's rationale for considering the agency's view of its goals and the effect of a state statute is convincing. The court therefore gives weight to these opinions of NHTSA without ceding its duty to decide the issue of preemption de novo. See Smiley v. Citibank (S.D.), NA., 517 U.S. 735, 744, 116 S. Ct. 1730, 135 L. Ed. 2d 25 (1996); Ass'n of Civilian Technicians v. Fed. Labor Relations Auth., 200 F.3d 590, 592 (9th Cir.2000).
[9] In their reply brief, Defendants contend that the California regulations are consistent with the EPCA's "primary purpose": improving fuel economy. Defs.' Reply 17 n. 3. They do not dispute, however, that maximizing safety, consumer choice, and the economic well-being of the automobile industry are also among the EPCA's goals.
[10] Plaintiffs construed this line of argument as a contention that the EPA would only grant a waiver if it decided that the EPCA did not preempt the regulations and filed a surreply brief refuting that argument. See Pls.' Ex Parte Mot. for Leave to File Surreply 1:7-12. Defendants disclaim making any contention that the EPA would consider whether the EPCA preempted the California regulations or consider whether the regulations affect the "goals and purposes" of the EPCA. Defs.' Objection to Pls.' Surreply Brief 3:12-18. Defendants concede that the EPA's review of the regulations is limited by the criteria in section 209(b). Id. at 3:18-20.
[11] Merrill Lynch appears to suggest that when possible, the state statute should be preempted only to the extent that it stands as an obstacle to the federal schemes goals. 414 U.S. at 127, 94 S. Ct. 383. Defendants do not argue that some severable portion of the California regulations does not impede achieving the EPCA's goals.
[12] In the alternative, Defendants ask the court to enter judgment against Plaintiffs' contention that the "EPA may not issue a waiver under section 209(b)(1)(C)." Defs,' Reply 4:11-13. At oral argument, Defendants proposed that the court also decide at this stage that EPA's authority extends regulation of greenhouse gases. Defendants urge that such holdings are proper under the rule that a motion to dismiss "may be granted as to part of a complaint and denied as to the remainder." See Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 115 (2d Cir.1982) (affirming the dismissal of certain claims, against defendants and reversing the district court's dismissal of other claims). Here, the. court has concluded Plaintiffs have stated a claim for preemption under the Clean Air Act, regardless of whether the EPA has the power to issue a waiver authorizing the California regulations. Accordingly, the court declines at this stage to decide the scope of the EPA's power.
[13] AIAM's complaint explicitly alleges that no factual basis exists for such a finding. AIAM Compl. ¶ 62. As Judge Coyle decided in his order of October 21, 2005, the issue before the court on the Clean Air Act claim is whether section 209(a) preemption applies, not whether the EPA will deem a waiver of the California regulations appropriate under section 209(b) criteria, such as whether "compelling and extraordinary conditions" justify the regulations.
[14] The Court also suggested, but did not adopt, a complementary application of Justice Harlan's and the Zschernig majority's approach. Garamendi, 539 U.S. at 419 n. 11, 123 S. Ct. 2374. Such an approach would call for field preemption when the state legislation addressed a matter that was not a "traditional state responsibility." Id. On the other hand, a court should strike down legislation within the state's "traditional competence" only upon a finding of a conflict with foreign affairs of sufficient "clarity or substantiality" based on "the strength or the traditional importance of the state concern asserted." Id.
[15] Defendants contend that, if the Supreme Court ultimately decides that the EPA may not consider the effect of a state regulation on foreign affairs when it grants a waiver, then Plaintiffs foreign policy preemption claim fails. Regardless of the Supreme Court's ultimate holding on this issue, the statement remains an expression by an executive agency of the President's foreign policy strategy.
[16] Of course, it is undisputed that should the California regulations be subject to the EPCA's preemption provision, they will be barred.
[17] Plaintiffs' attempts to resuscitate this claim, both in their opposition brief and at oral argument, centered on presenting authority indicating that a preenforcement asapplied challenge to a state statute is generally permissible. See Compassion in Dying v. Washington, 79 F.3d 790, 798 (9th Cir.1996). Such authority is unhelpful to Plaintiffs as they have not demonstrated any statutory basis for preemption of the California regulations under the Sherman Act.
[18] These requests include those designated GM 22/DCC 2I/AAM 20, GM 23/DCC 22/AAM 21, GM 25/DCC 24, GM 26/DCC 25/AAM 24, GM-DCC-AAM 8, 9, 10 and 11, GM 20/DCCAAM 19, GM 14, and GM 15/DCC-AAM 14.
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456 F. Supp. 2d 1115 (2006)
CENTER FOR FAMILY MEDICINE, a South Dakota Corporation, and the University of South Dakota School of Medicine Residency Corporation, a South Dakota Corporation, Plaintiffs,
v.
UNITED STATES of America, Defendant.
Civ. No. 05-4049-KES.
United States District Court, D. South Dakota, Southern Division.
August 17, 2006.
*1116 Cheryle Wiedmeier Gering, Davenport, Evans, Hurwitz & Smith, Sioux Falls, SD, Robert B. Frieberg, Thomas H. Frieberg, Frieberg Nelson Ask LLP, Beresford, SD, for Plaintiffs.
Robert D. Metcalfe, U.S. Department of Justice, Washington, DC, for Defendant.
ORDER DENYING UNITED STATES OF AMERICA'S MOTION FOR SUMMARY JUDGMENT
KAREN E. SCHREIER, Chief Judge.
Plaintiffs, Center for Family Medicine and University of South Dakota School of Medicine Residency Program (collectively referred to as plaintiffs) filed a complaint seeking a refund of FICA[1] taxes. Defendant, United States of America, moves for summary judgment. Plaintiffs oppose the motion. For the reasons discussed below, the court denies United States' motion for summary judgment.
BACKGROUND
Plaintiffs operate accredited medical residency programs. (Docket 31-1, at ¶ 2). A medical resident has received his or her medical degree and is obtaining further medical training. (Docket 29, at ¶ 3). Plaintiffs provide their residents stipends as well as additional benefits. (Docket 31-1, at ¶¶ 5, 8; Docket 24-1, at 22; Docket 29). Plaintiffs have withheld FICA contributions from the stipends paid to their residents. (Docket 31-1, at ¶ 12; Docket 24-1, at ¶ 36; Docket 29). Plaintiffs filed a complaint seeking a refund of the FICA taxes paid on the stipends given to their residents for the taxable years ending December 31, 1995, through December 31, 2003. (Docket 1).
STANDARD OF REVIEW
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith 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. Only disputes over facts that might affect the outcome of the case under the governing substantive law will properly preclude summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). Summary judgment is not appropriate if a dispute about a material fact is genuine, that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id.
The moving party bears the burden of bringing forward sufficient evidence to establish that there are no genuine issues of material fact and that the movant is entitled to judgment as a matter of law. Celo-tex *1117 Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The nonmoving party is entitled to the benefit of all reasonable inferences to be drawn from the underlying facts in the record. Vette Co. v. Aetna Cas. & Sur. Co., 612 F.2d 1076, 1077 (8th Cir.1980). The nonmoving party may not, however, merely rest upon allegations or denials in its pleadings, but must set forth specific facts by affidavits or otherwise showing that a genuine issue exists. Forrest v. Kraft Foods, Inc., 285 F.3d 688, 691 (8th Cir. 2002).
DISCUSSION
Plaintiffs seek refund of the FICA taxes paid on the stipends that plaintiffs provided their medical residents during their residency program. Plaintiffs allege that these stipends fit within the "student exception," and thus, are not subject to FICA taxes. United States responds by arguing that, as a matter of law, medical residents can never fit within the "student exception."
To support the social security system, the United States collects FICA taxes on "wages" that a person earns as a result of "employment." 26 U.S.C.`§ 3101; see also United States v. Mayo Found. for Med. Educ. & Research, 282 F. Supp. 2d 997, 999 (D.Minn.2003). Section 3121(b) defines employment for FICA tax purposes. Section 3121(b) also includes several statutory exceptions for services that do not qualify as employment, and thus are not subject to FICA taxes. As pertinent here, section 3121(b)(10) contains a "student exception," which states:
service performed in the employ of
(A) a school, college, or university, or
(B) an organization described in section 509(a)(3) if the organization is organized, and at all times thereafter is operated, exclusively for the benefit of, to perform the functions of, or to carry out the purposes of a school, college, or university and is operated, supervised, or controlled by or in connection with such school, college, or university, unless it is a school, college, or university of a State or a political subdivision thereof and the services performed in its employ by a student referred to in section 218(c)(5) of the Social Security Act are covered under the agreement between the Commissioner of Social Security and such State entered into pursuant to section 218 of such Act;
if such service is performed by a student who is enrolled and regularly attending classes at such school, college, or university;
26 U.S.C. § 3121(b)(10). If the student exception applies, then wages earned by the student are not subject to FICA taxes. See Mayo Found., 282 F.Supp.2d at 1010.
United States argues that plaintiffs' medical residents do not qualify for the "student exception" as a matter of law. United States relies on United States v. Mount Sinai Medical Center of Florida, Inc., 353 F. Supp. 2d 1217 (S.D.Fla.2005), as well as the amendment history of § 3121 to argue that Congress intended to subject all earnings of medical residents to FICA taxes. Based thereon, United States seeks a bright line rule stating that medical residents never qualify for the "student exception." The court finds, however, that the law in the Eighth Circuit prohibits such a bright line rule. See Minnesota v. Apfel, 151 F.3d 742, 748 (8th Cir.1998); see also Mayo Found., 282 F.Supp.2d at 1006-07.
In Minnesota v. Apfel, the state of Minnesota filed suit against the Commissioner of Social Security (Commissioner) seeking a redetermination of the amount of FICA taxes that Minnesota owed as a result of the stipends paid to medical residents enrolled in the University of Minnesota's medical residency program. Based on two alternative holdings, the trial court *1118 held that the medical residents' stipends were exempt from FICA taxes. The Court of Appeals for the Eighth Circuit affirmed on both bases.
Explanation of the first holding requires a little background. Initially, employees of state governments were excluded from coverage from the Social Security Act and their wages were not subject to FICA taxes. Id. at 744. In 1950, however, Congress enacted legislation permitting states to voluntarily subject their employees to the social security system by executing an agreement with the Commissioner. Id.; see also 42 U.S.C. § 418(a)(1). States were only required to collect FICA taxes on the wages of, and social security benefits were only provided for, employees covered by the § 418 agreements.
Minnesota argued that medical residents were not "employees" covered by its § 418 agreement with the Commissioner. The trial court held that the § 418 agreement was contractual in nature, and thus, had to be interpreted to give effect to the parties' intent. The Eighth Circuit agreed and held that the parties did not intend for the term "employees" to include medical residents. See Apfel, 151 F.3d at 747. Thus, the Eighth Circuit held that Minnesota did not owe FICA taxes on the stipends paid to medical residents engaged in the University of Minnesota's residency program.
In an alternative holding, the trial court held that even if medical residents qualified as "employees," they were explicitly excluded from coverage based upon an exclusion for work performed by a "student." The Eighth Circuit also affirmed this alternative holding. It is this holding that is pertinent to the case here.
Minnesota's § 418 agreement explicitly excluded services performed by a student. Section 418(c)(5) permits states to exclude services performed by students from their § 418 agreements. Student services are only excludable, however, if the services qualify for the "student exception" contained in 42 U.S.C. § 410(a)(10). See 42 U.S.C. § 418(c)(5). Thus, the Eighth Circuit had to interpret the "student exception" contained in 42 U.S.C. § 410(a)(10) in order to determine whether medical residents fit within the student services exclusion in Minnesota's § 418 agreement.
The Commissioner sought the adoption of a bright line rule holding that medical residents never qualify as students. The Eighth Circuit disagreed. The Eighth Circuit noted that regulations implementing the student exception state: "`Whether you are a student for purposes of this section depends on your relationship with your employer. If your main purpose is pursuing a course of study rather than earning a livelihood, we consider you to be a student and your work is not considered employment.'" Apfel, 151 F.3d at 747 (quoting 20 C.F.R. § 404.1028(c)). Based on this regulation, the court held that determining whether someone, including a medical resident, qualifies as a "student" requires a "case-by-case examination to determine if an individual's relationship with a school is primarily for educational purposes or primarily to earn a living." Id. at 748.
The Eighth Circuit's decision in Apfel prohibits adoption of United States' argument that medical residents never qualify for the "student exception" contained in 26 U.S.C. § 3121(b)(10)[2] because this court is *1119 bound by the Eighth Circuit precedent. This conclusion is further supported by Mayo Found., 282 F. Supp. 2d 997. In Mayo Foundation, the United States filed an action seeking to recover past-due FICA taxes from a private, medical school. In that case, United States argued that stipends previously paid to medical residents were subject to FICA taxes. The medical school argued that the medical residents were students within the "student exception" contained in 26 U.S.C. § 3121.
Based on the same amendment history argument offered here, the United States in Mayo Found. argued that medical residents, as a matter of law, never qualify for the "student exception." The district court for the District of Minnesota disagreed. Relying on the Eighth Circuit's decision in Apfel, the district court held that "determining whether medical residents are exempt as `students' from paying FICA contributions must be done through a case-by-case examination of the residents' relationship with their schools." Mayo Found. at 1007.
This court adopts the rationale in Mayo Found. and rejects United States' argument for a bright line rule stating that medical residents can never qualify for the "student exception." Mayo Found. is factually and analytically identical to this case. In addition, the court agrees with the district court for District of Minnesota's interpretation of the Eighth Circuit's ruling in Apfel. Accordingly, the court finds that the determination of whether plaintiffs' medical residents are "students" requires a case-by-case inquiry into the relationship between plaintiffs and their medical residents.
United States argues that the court should not follow the case-by-case approach required by Apfel because the Eighth Circuit's interpretation of the "student exception" was dictum. Relying on Mount Sinai Medical Center of Florida, Inc., 353 F. Supp. 2d 1217, United States argues that this alternative holding was dictum because the Eighth Circuit could have disposed of the case without reaching this issue. The court disagrees and finds that the Eighth Circuit's interpretation of the "student exception" was a binding, alternative holding. See Brazzell v. United States, 788 F.2d 1352, 1357 n. 4 (8th Cir. 1986) (stating that a binding, alternative holding is not dicta). The Eighth Circuit in Apfel held that there were two independent bases for finding that the medical residents enrolled in the residency program at the University of Minnesota were not subject to FICA tax. The court did not choose one argument over the other or suggest that the court should have considered one argument before reaching the other. And the Eighth Circuit's interpretation of the "student exception" is no more dictum than the Eighth Circuit's holding that the residents were not "employees" covered by the § 418 agreement. See Sutton v. Addressograpk-Multigraph Corp., 627 F.2d 115, 117 (8th Cir.1980) ("When two independent reasons support a decision, neither can be considered obiter dictum, each represents a valid holding of the court.").
In sum, the court finds that the law of the Eighth Circuit requires a case-by-case determination of whether a medical resident qualifies for the "student exception," and thus, is exempt from the collection of FICA taxes. Based thereon, the court rejects United States' argument that medical residents are never students as a matter of law. To determine whether plaintiffs' *1120 medical residents in fact qualify for the "student exception," a factual inquiry into the relationship between plaintiffs and their medical residents is required.
Based on the foregoing, it is hereby
ORDERED that United States' motion (Docket 21) for summary judgment is denied.
NOTES
[1] FICA taxes refer to taxes collected pursuant to the Federal Insurance Contributions Act.
[2] Although Apfel involved 42 U.S.C. § 410(a)(10), the Eighth Circuit's interpretation applies to the "student exception" contained in 28 U.S.C. § 3121(b)(10) as well. Section 410(a)(10)'s "student exception" uses identical statutory language as the "student exception" in 26 U.S.C. § 3121(b)(10). Compare 42 U.S.C. § 410(a)(10), with 26 U.S.C. § 3121(b)(10). Additionally, courts interpret the statutory exclusions in 42 U.S.C. § 410(a), which defines employment for the benefit side of the social security system, identically to the statutory exclusions in 26 U.S.C. § 3121(b), which defines employment for the taxing side of the social security system. See Amidon v. Flemming, 285 F.2d 718, 720 n. 4 (1st Cir. 1960).
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456 F. Supp. 2d 64 (2006)
UNITED STATES of America, Plaintiff,
v.
ALL FUNDS ON DEPOSIT IN SUNTRUST ACCOUNT NUMBER XXXXXXXXX8359, IN the NAME OF GOLD AND SILVER RESERVE, INC., et al., Defendants.
Civil Action No. 05-2497(RMC).
United States District Court, District of Columbia.
October 12, 2006.
Laurel Loomis Rimon, United States Attorney's Office, Criminal Division, William Rakestraw Cowden, U.S. Attorney's Office, Kimberly Kiefer Peretti, U.S. Department of Justice, Washington, DC, for Plaintiff.
Andrew S. Ittleman, Rodriguez O'Donnell Ross Fuerst, Miami, FL, for Defendants.
ORDER GRANTING PLAINTIFF'S MOTION FOR A STAY
COLLYER, District Judge.
This is a civil forfeiture case in which the Government asks the Court to stay the *65 litigation during the investigation of a companion criminal case. Gold & Silver Reserve, Inc. ("G & SR"), whose assets were seized from two bank accounts in December 2005, opposes the stay. G & SR insists that the parties could stipulate to the necessary facts so that the Court can determine whether its business activities constitute an unlicensed money transmitting business in violation of 18 U.S.C. § 1960, as alleged by the Government. The Government has refused to accept any proposed stipulations because they have been drafted as hypotheticals and are allegedly incomplete. The present question does not concern the nature of G & SR's business but whether the Government has met the requirements of 18 U.S.C. § 981(g)(1), by demonstrating that continuation of the civil case could interfere with the criminal investigation.
A little background is in order. The Complaint in Forfeiture alleges that the defendant properties are subject to forfeiture under 18 U.S.C. § 981(a) because they constitute property involved in an unlicensed money transmitting business, in violation of 18 U.S.C. § 1960. G & SR has filed Claims of Ownership and an Answer to the Complaint; it maintains that it does not need to be licensed or registered because it is not in the business of transmitting money. Although they have made some efforts, the parties have been unable to agree to stipulations of fact as to how the business operates. G & SR's counsel has indicated that, given the existence of the criminal investigation, he would not permit G & SR's controlling officials to be deposed in the civil case. The United States says that it cannot proceed with the civil case when discovery is so curtailed and, therefore, it requests a stay.
The Civil Asset Forfeiture Reform Act of 2000, Pub.L. No. 106-185, § 8, 114 Stat. 202 (codified at 18 U.S.C. § 981 (2000)), anticipated this very issue. Section 981(g)(1) provides:
Upon the motion of the United States, the court shall stay the civil forfeiture proceeding if the court determines that civil discovery will adversely effect the ability of the Government to conduct a related criminal investigation or the prosecution of a related criminal case.
18 U.S.C. § 981(g)(1). Two things are obvious from this language: 1) the Government must satisfy the court that civil discovery would adversely affect the criminal case; if so, then 2) the court must grant the stay. Indeed, "civil discovery may not be used to subvert limitations on discovery in criminal cases, by either the government or by private parties." McSurely v. McClellan, 426 F.2d 664, 671-72 (D.C.Cir. 1970). However, the government must make an actual showing that civil discovery will adversely affect the investigation or prosecution of a related criminal case. U.S. v. GAF Financial Servs., Inc., 335 F. Supp. 2d 1371, 1373 (S.D.Fla.2004); cf. U.S. v. All Funds ($357,311.68) Contained in N. Trust Bank of Fla. Account, No. 04-1476, 2004 WL 1834589, at *3-4 (N.D.Tex. Aug. 10, 2004) (motion to stay denied because government did not show that civil discovery would adversely affect its criminal investigation). The parties and the facts of the civil and criminal cases need not be identical but must be similar. GAF Financial Servs., 335 F.Supp.2d at 1373. Where a criminal investigation and a civil forfeiture action have common facts, similar alleged violations and some common parties, the actions are clearly related. Id. Where civil discovery would subject the government's criminal investigation to "early and broader civil discovery than would otherwise be possible in the context of the criminal proceeding," a stay should be granted. U.S. v. One Assortment of *66 Seventy-Three Firearms, 352 F. Supp. 2d 2, 4 (D.Me.2005).
The Government has shown that proceeding with civil discovery would adversely affect its criminal investigation.[1] If the civil case continued, the Government would be subject to the breadth of civil discovery from GS & R. Such discovery could compromise any existing confidential informants and/or interfere with the Government's ability to obtain confidential information from others. The Government also states that responding to civil discovery would burden law enforcement officials who are otherwise conducting a contemporaneous criminal investigation.
In response, G & SR presents a host of arguments that assail the way the Government has, and is, pursuing this case. None of them has any bearing on whether civil discovery could interfere with the criminal investigation. For this reason, the Court does not believe oral argument would be helpful to its determination and denies the G & SR request for oral argument. See LCvR 7(f) (oral hearing is within court's discretion).
Accordingly, it is hereby ORDERED that GS & R's motion for a hearing [Dkt. # 33] is DENIED; and it is
FURTHER ORDERED that the Government's motion to stay this case [Dkt. # 29] is GRANTED; and it is
FURTHER ORDERED that this civil forfeiture case is STAYED for a period of six months from the date of this Order. On or before April 12, 2007, the Government shall file a status report.
SO ORDERED.
NOTES
[1] The Government's argument that the refusal of officials of GS & R to be deposed would interfere with its civil case is not relevant.
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270 S.W.2d 923 (1954)
WINFREY & CARLILE
v.
NICKLES.
ST. PAUL-MERCURY INDEMNITY CO.
v.
NICKLES.
Nos. 5-54 & 5-455.
Supreme Court of Arkansas.
June 28, 1954.
Rehearing Denied October 4, 1954.
*924 G. Byron Dobbs, Ft. Smith, Goodwin & Riffel, Little Rock, for appellants.
Rose, Holland, Holland & Smith, Ft. Smith, Robinson & Edwards, Van Buren, John H. Lookadoo, Arkadelphia, Hardin, Barton, Hardin & Garner, Ft. Smith, for appellee.
GEORGE ROSE SMITH, Justice.
These are two companion appeals, one from a circuit court judgment reversing an order of the Workmen's Compensation Commission and the other from an allied circuit court order distributing certain funds in the registry of the court. The only issue is whether the court was correct in directing that from the funds in question the sum of $3,031.35 be paid to the firm of Hardin, Barton & Hardin as an attorney's fee.
On August 4, 1952, Will Roy Nickles, an employee of Winfrey & Carlile, was killed in a traffic collision while acting in the scope of his employment. In due course his employers and their compensation insurance carrier, St. Paul-Mercury Indemnity Company, admitted liability under the Workmen's Compensation Act and began making weekly payments to the dependent parents of the decedent.
Jennings J. Stein and his wife, occupants of the car which collided with the truck being driven by Will Roy Nickles, were both injured in the collision. Shortly after the accident they brought suit for damages against the appellee Bill Nickles, as administrator of the estate of his son, Will Roy Nickles. Bill Nickles employed the Hardin law firm to defend the case and to file a cross-complaint against Stein for damages for the death of Will Roy. The contract provided for a contingent fee of fifty per cent of any amount recovered, after the payment of court costs and other expenses.
The Workmen's Compensation Act provides that when a tort action for the injury or death of an employee is brought against a third person, the employer or his compensation insurance carrier may intervene and assert a lien, up to two thirds of the net recovery, for amounts paid and to be paid as workmen's compensation. Ark.Stats.1947, § 81-1340. Accordingly St. Paul, as insurance carrier for Will Roy Nickles' employer, retained attorney G. Byron Dobbs to file an intervention in the Stein-Nickles litigation for the purpose of claiming a lien upon any recovery obtained by Bill Nickles as administrator.
It happened that St. Paul had also issued an automobile liability policy to Stein and was thereby obligated to defend the crosscomplaint for him and to pay any adverse judgment, up to the policy limit. Thus St. Paul was asserting a lien upon the proceeds of Bill Nickles' cause of action and at the same time was required to defend against that cause of action. In an effort to be impartial St. Paul employed another law firm, Shaw, Jones & Shaw, to defend the case for Stein. The Shaw firm and St. Paul's other attorney, Dobbs, did not exchange information or make their files available to each other.
The case was tried on March 23, 1953, and resulted in a verdict for Nickles in the sum of $6,433.10. Dobbs took no active part *925 in the trial, the case being handled by the Shaw firm for Stein and by the Hardin firm for Nickles. Judgment having been entered upon the verdict, St. Paul, as Stein's liability insurer, paid the amount of the judgment into the registry of the court.
There then arose the question of the correct distribution of the money. All parties agreed to a court order by which this question was referred to the Workmen's Compensation Commission for determination. After taking testimony the Commission delivered an opinion holding that the contract between Nickles and the Hardin firm was binding only as to that part of the recovery that belonged to Nickles. The opinion further indicated that the Hardin firm could have applied to the Commission for a reasonable fee to be taxed against St. Paul's two-thirds interest in the recovery, but since no such application had been made the Commission did not charge any attorney's fee against St. Paul. Upon this reasoning the Commission first deducted the court costs and other trial expense incurred by Nickles and then directed that two thirds of the remaining net recovery be paid to §t. Paul and that the other one third be divided equally between Nickles and his counsel.
Upon appeal from the Commission's order the circuit court set aside the Commission's action and held that, after the deduction of costs and expenses, the Hardin firm was entitled to half of the entire net recovery, with the other half to be distributed in the ratio of two thirds to St. Paul and one third to Nickles. Thus it will be seen that the appellee Nickles has no pecuniary interest in the present controversy, for both the Commission and the circuit court awarded him exactly one sixth of the net proceeds. The issue is whether the Hardin firm is entitled to share in St. Paul's part of the net recovery.
This question centers entirely upon a construction of § 40 of the Compensation Act, Ark.Stats. § 81-1340, and really involves three distinct inquiries. First, was the Hardin-Nickles contract binding upon St. Paul? We agree with the Commission's view that it was not. In a third-party action of this kind § 40 quite plainly recognizes separate causes of action in the compensation beneficiary and in the compensation carrier. By subsection (a) the compensation beneficiary is permitted to institute the action, with notice to the carrier so that it may intervene. By subsection (b) the carrier itself may institute the action, joining the compensation beneficiary so that all issues may be settled in one case. There is nothing in the Act to indicate that either plaintiff may force his own attorney upon the other. As a practical matter we know that the beneficiary is apt to have a lawyer of his own and that an insurance company almost always has counsel that are regularly retained. Hence the Hardin firm, in making its contract with Nickles, must be taken to have known that it did not thereby assume a contractual relationship with St. Paul. The Commission was correct in concluding that Hardin, Barton & Hardin's claim against St. Paul does not rest upon the contract with Nickles.
Second, does subsection (c) of § 40 require that in a case like this one the-Commission must approve any allowance of attorney's fees or other costs of collection? It will be remembered that subsection (a) allows the beneficiary to begin the action, subject to intervention by the carrier, and that subsection (b) allows the carrier to take this initiative, subject to joinder of the beneficiary. Both these subsections provide that the beneficiary is entitled to one third of the recovery in any event, that the carrier is entitled to the other two thirds or so much thereof as does not exceed its compensation liability, and that any excess above the latter goes to the beneficiary. Both subsections provide that the division is to be made after the deduction of "reasonable costs of collection". Then follows subsection (c), which reads:
"(c) Settlement of such claims under subsections (a) and (b) of this section must have the approval of the Court or of the Commission, except that the distribution of that portion of the settlement which represents the compensation payable under this act must have the approval of the Commission *926 Where liability is admitted to the injured employee or his dependents by the employer or carrier, no cost of collection shall be deducted from that portion of the settlement under subsections (a) or (b) of this section, representing compensation, except upon direction and approval of the Commission."
St. Paul stresses the second sentence of subsection (c) in arguing that since it admitted compensation liability to the dependents of Will Roy Nickles it cannot be charged with any costs of collection except by direction of the Commission. In making this argument St. Paul insists that the word settlement, as used in the second sentence, means any recovery. The appellees answer that the word settlement means a compromise settlement, and since the Stein-Nickles case proceeded to a jury verdict subsection (c) has no application.
Our study convinces us that subsection (c) is decidedly vague, that neither construction of the word settlement leads to consequences entirely logical. But we must take the statute as we find it, and in our opinion the legislature meant compromise settlements only. In reaching this conclusion we are influenced by the legislative history of subsection (c) and by the practical results of the two differing interpretations.
In the original Compensation Law, Act 319 of 1939, § 40 contained substantially the present third-party arrangement, in that the proceeds, after the deduction of reasonable costs of collection, were divided between the compensation beneficiary and the carrier in a similar one-to-two ratio. But what is now subsection (c) of the 1948 revision of the law was originally a single sentence: "Settlement of such claims and the distribution of the proceeds therefrom must have the approval of the court or of the Commission." Ark.Stats. § 81-1340, as it read prior to the 1948 amendment.
It cannot be doubted that the 1939 statute, in the sentence quoted, referred only to compromise settlements. When a case is brought to trial and results in a verdict for the plaintiff, there is no Conceivable reason for the award to be specially approved by either the court or the Commission. There is, however, good reason to require that a compromise settlement be so approved, for it is a basic theory of workmen's compensation legislation that neither the injured employee nor his dependents are to be allowed to sacrifice their rights by improvident settlements.
Our present subsection (c) is a revision and an enlargement of the original sentence. It, too, however, requires that the settlement be approved by the court or the Commission, and for the reasons already stated we think the language refers to compromise settlements alone.
In practical effect this construction is desirable. Here we have a contested tort action, involving a trial that lasted for two days. The Commission is certainly in no position, without a hearing, to determine what is reasonable compensation for the plaintiffs' counsel. For it to make that determination in a case of this kind the record might have to be transcribed and submitted to the Commission. What began as one lawsuit might easily become two.
The circuit judge, on the other hand, is obviously the person best able to fix the fee. Not only has he presided over the trial but he is qualified by training and by experience to assess reasonable compensation for legal services. It would be manifestly illogical to require the circuit judge to surrender jurisdiction over a matter in which his own judgment is peculiarly valuable.
On the second question we conclude that subsection (c) of § 40 does not apply to a contested case. It was therefore unnecessary for the circuit court to refer the matter to the Commission, and we treat that reference as surplusage. The appeal to the circuit court merely reinstated jurisdiction that already existed, and we review the court's action without regard to the Commission's decision.
Third, was the court correct in allowing the Hardin firm fifty percent of St.Paul's *927 two-thirds interest in the net recovery? We think it was. This phase of the case is more easily understood if we disregard for the moment the fact that St. Paul was also Stein's insurer and was therefore in the position of suing itself.
Had it not been for St. Paul's dual liability the employment of counsel would have come about in this fashion: Nickles, as administrator, retained the Hardin firm as his attorneys, for an agreed fee of half of his interest in the recovery. St. Paul would then have had a genuine interest in the case, since it stood to recoup its entire compensation liability from the third-party tort-feasor. Accordingly St. Paul might either have retained the Hardin firm as its counsel, for a compensation mutually agreed upon, or have employed another attorney of its own choice. In either event the present question would not have been likely to arise, for ordinarily the court would simply have apportioned the recovery between the two plaintiffs, leaving each to pay his own counsel. Thus in the normal situation St. Paul would incur liability for an attorney's fee in the course of pursuing the tort-feasor.
Here, however, St. Paul was pursuing itself, and its pecuniary interest lay entirely in defeating Nickles' claim. That is, its compensation liability was fixed regardless of the outcome, but at least one third of any judgment against Stein would have to be paid by St. Paul to the administrator, in addition to the compensation payments. In these circumstances it was to St. Paul's interest to intervene on Nickles' side of the case, just to be certain that all of its own money did not go to Nickles, and then to resist the claim as strenuously as possible in behalf of Stein. Thus there was never any real possibility either that St. Paul would employ the Hardin firm or that St. Paul's own counsel would be of any assistance to that firm.
Accordingly it was entirely through the efforts of the Hardin firm that Nickles recovered a judgment for $6,433.10. That St. Paul stood to lose rather than to win by their services had no bearing upon the time, effort, and skill required in the preparation and trial of the case. Nor should this law firm be penalized by reason of St. Paul's unhappy predicament. Not infrequently it must happen that a casualty insurer finds itself bound to defend both sides of an automobile collision case, so that it pays one attorney for winning the case and another for losing it, in addition to paying the judgment. This a simply one of the hazards that attend the business of writing liability insurance. The circuit court was right in assessing this attorney's fee upon the basis of what would have been fair had St. Paul been a wholehearted and enthusiatic cross-complainant in the litigation, and it is not contended that in that situation the sum allowed would be excessive.
Affirmed.
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456 F. Supp. 2d 468 (2006)
METLIFE SECURITIES, INC., Petitioner,
v.
Russell and Sharon BEDFORD, Respondents.
No. 02 Civ. 3018(JES).
United States District Court, S.D. New York.
October 4, 2006.
*469 *470 Skadden, Arps, Slate, Meagher & Flom LLP, New York City, Jeffrey S. Lichtman, for Petitioner, of counsel.
Mitchell H. Cobert, Morristown, NJ, for Respondents.
MEMORANDUM OPINION AND ORDER
SPRIZZO, District Judge.
Petitioner, MetLife Securities, Inc. ("MSI" or "petitioner"), moves to vacate the arbitration award issued in favor of respondents, Russell and Sharon Bedford ("respondents" or the "Bedfords"), by the arbitration panel assigned by the National Association of Securities Dealers (the "Panel" or the "NASD Panel") in the matter of Russell and Sharon Bedford v. MetLife Securities, Inc. and Douglas Gismondi, NASD Arbitration No. 00-05072. Respondents oppose petitioner's motion and cross-move to confirm the NASD Panel's award. For the reasons set forth below, petitioner's motion is denied, and respondents' motion is granted.
BACKGROUND
Shortly after having received a substantial settlement in a personal injury lawsuit, respondent, Russell Bedford, approached Douglas Gismondi ("Gismondi"), an employee of the Metropolitan Life Insurance Company ("MetLife"), for advice on investing his settlement proceeds. See Aff. of Jeffrey S. Lichtman, dated April 18, 2002 ("Lichtman Aff."), Ex. A, Respondents' Statement of Claim ("Statement of Claim") at 1. In September 1995, upon the recommendation of Gismondi, respondents purchased from MetLife two $300,000 life insurance policies as well as a variable annuity, into which they made an initial deposit of $200,000. See id.; see also Lichtman Aff., Ex. C, Petitioner's Pre-Hrg. Br. and Mot. for Summ. J. ("Pet.Pre-Hrg. Br.") at 5.
In January and February 1996, respondents loaned Gismondi a total of $7,500 to assist him in starting his own firm, Gismondi & Associates Investments. See Statement of Claim at 2; Pet. Pre-Hrg. Br. at 6, 8. In January 1996, upon the recommendation of Gismondi, respondents also made a $50,000 investment in Aspen Total Fitness of Montgomery, Inc. ("Aspen"), a local health and fitness club. See Statement of Claim at 2; Pet. Pre-Hrg. Br. at 6-8. In March 1996, respondents made a second $50,000 investment in another Aspen club. See Statement of Claim at 2; Pet. Pre-Hrg. Br. at 8-10. Respondents were represented by an attorney in connection with both investments. See Pet. Pre-Hrg. Br. at 8-11. Aspen eventually declared bankruptcy, rendering the Bedfords' investments worthless. See Statement of Claim at 2. Gismondi never repaid the $7,500 he borrowed from the Bedfords. See id. In July 1996, Gismondi's employment with MetLife was terminated. See Pet. Pre-Hrg. Br. at 12.
In November 2000, respondents filed a complaint against MetLife Securities, Inc.[1]*471 and Gismondi with the NASD, seeking $7,500 in compensation for the loans made to Gismondi and $100,000 in compensation for losses incurred in connection with the Aspen investments. See Statement of Claim at 2. Respondents also sought $100,000 in "consequential damages, interest . . ., costs, attorneys fees, punitive damages," and any other relief deemed by the Panel to be appropriate. See id.
In responding to the Bedfords' complaint, MSI submitted a Statement of Answer, in which it denied all allegations of wrongdoing raised in the respondents' complaint, and a Pre-Hearing Brief and Motion for Summary Judgment. See Lichtman Aff., Ex. B, Statement of Answer ("Statement of Answer"); Pet. Pre-Hrg. Br. After a two-day hearing, the Panel issued an award in favor of the Bedfords in which it found petitioner and Gismondi jointly and severally liable for payments of $41,023.04 and $43,395.38, plus 9% interest and a payment of $300 to reimburse the Bedfords for the claim filing fee. See Lichtman Aff., Exh. D, the Award. The Panel also found Gismondi solely liable to the Bedfords for a payment of $6,750.00. See id.
MSI now moves this Court to vacate the award issued by the NASD Panel on the grounds that "the [a]ward manifestly disregarded the law and the facts of [the] arbitration and constituted an abuse of the [NASD] Panel's discretion." MSI's Pet. to Vacate Arbitration Award ("Pet. to Vacate") ¶ 10. Petitioner contends that the evidence presented before the. NASD Panel demonstrated that it had no involvement with Gismondi or with the investments that resulted in respondents' financial losses. See id. ¶ 11. MSI further contends that it could not have been vicariously liable for investment recommendations made to respondents by Gismondi, as Gismondi was not an MSI employee or agent and was not licensed or otherwise authorized to act on behalf of MSI. See id. Petitioner maintains that the Panel was irrational and disregarded the law and facts of the case, constituting an abuse of discretion. See id. ¶ 13. Respondents oppose petitioner's motion and cross-move for a confirmation of the Panel's award. See Respondent's Br. in Opp'n. to Petitioner's Mot. to Vacate the Arbitration Award and in Supp. Of Respondents' Cross-Mot. for J. Confirming the Award ("Resp. Br. in Opp.")
DISCUSSION
The Federal Arbitration Act (the "FAA") identifies the following grounds on which a court may vacate an arbitration award: where the award was obtained through corruption or fraud, where there was evident corruption in the arbitrators, and where any other misconduct prejudicing the rights of any party has occurred. See 9 U.S.C. § 10(a). If none of the grounds for vacatur specified in the FAA applies, an arbitration award may, nevertheless, be set aside "if it exhibits `a manifest disregard of the law.'" Goldman v. Architectural Iron Co., 306 F.3d 1214, 1216 (2d Cir.2002) (quoting DiRussa v. Dean Witter Reynolds, Inc., 121 F.3d 818, 821 (2d Cir.1997)). The Second Circuit severely limits the doctrine of manifest disregard of the law, describing it as "a doctrine of last resortits use is limited only to those exceedingly rare instances where some egregious impropriety on the part of the arbitrators is apparent, but where none of the provisions of the FAA apply." Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 389 (2d Cir.2003). Generally, the arbitrators' decisions must be granted great deference, *472 see Wallace v. Buttar, 378 F.3d 182, 189 (2d Cir.2004); DiRussa, 121 F.3d at 821, and may be vacated for manifest disregard of the law only if the Court finds both that "(1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case." Wallace, 378 F.3d at 189 (internal quotation marks and citations omitted). As the Second Circuit Court of Appeals has explained, an arbitral panel's mere "`error or misunderstanding with respect to the law'" does not itself justify vacatur; rather, it must be clear that the panel was aware of a legal principle applicable to the case and either ignored it or refused to apply it. See id. at 189-91.
MSI first contends, though addressing the point only very briefly in its papers, that the Panel's award should be vacated on grounds set forth specifically in the FAAnamely, that the Panel engaged in misbehavior which was prejudicial to the rights of MSI. See MSI's Br. in Supp. of Pet. to Vacate Arbitration Award ("Pet Br. in Supp.") at 12-13; see also 9 U.S.C. § 10(a)(3). According to MSI, the arbitrators' refusal to hear its motion for a directed verdict during the Panel's hearing was fundamentally unfair, rising to the level of misconduct by which petitioner's rights were prejudiced. See Pet. Br. in Supp. at 12-13. Having considered this argument, the Court is not convinced that, even if the arbitrators did indeed refuse to hear petitioner's motion for a directed verdict,[2] this decision would have resulted in any serious prejudice to petitioner's rights. The Court therefore finds that vacatur of the Panel's award is not warranted on this ground.
Petitioner's stronger argumentthat the Panel's arbitration award should be vacated because it constituted a manifest disregard of the lawwarrants greater consideration. MSI argues, and it is not seriously disputed, that, unlike its corporate parent MetLife, MSI did not engage in any dealings with the Bedfords, and had no relationship with Gismondi. See Pet. Br. in Supp. at 15-16. It is a basic principle of corporate law that, provided none of the special circumstances recognized by the law is present, a subsidiary cannot be held liable for the acts of its parent company based solely on the subsidiary's membership in the same corporate family.[3] The Court must therefore agree with petitioner that MetLife, and not MSI, was the proper party to the arbitration proceeding commenced by the Bedfords, and that there was no basis for holding MSI liable for the acts of MetLife or of Gismondi.
Nonetheless, this Court cannot agree with Petitioner that the Panel manifestly disregarded the law and the facts of the arbitration in incorrectly attributing to MSI the liability of its parent company, MetLife. The first prong of the "manifest disregard of the law" testthat despite *473 their knowledge of a governing legal principle the arbitrators ignored it or refused to apply ithas not been satisfied in this case. Members of an arbitration panel are not presumed to possess knowledge of corporate law principles. Rather, in applying the manifest disregard of the law test, an arbitrator "`is ordinarily assumed to be a blank slate unless educated in the law by the parties.'" Wallace, 378 F.3d at 190 (quoting Goldman, 306 F.3d at 1216).[4] Therefore, in determining what legal principles were known to the arbitrators for the purposes of applying the manifest disregard of the law test, the Court must impute to the arbitrators "only knowledge of governing law identified by the parties to the arbitration." Duferco, 333 F.3d at 390 (citing DiRussa, 121 F.3d at 823).
Having carefully reviewed petitioner's submissions to the NASD Panel, the Court finds that the NASD Panel was not made aware of the legal principles governing the recognition of affiliated corporations as separate legal entities. See Statement of Answer; Pet. Pre-Hearing Br.; Resp. Br. in Opp., Ex. M, MSI's Response to Claimants' Mem. of Law. In its submissions to the NASD Panel, petitioner repeatedly stated that it was not involved with the investments made by the Bedfords, that unlike its corporate parent Met-Life, it never employed Gismondi, that MSI and MetLife are separate companies, and that MSI does not control Metlife. See e.g., Statement of. Answer at 2, 3, 5; Pet. Hrg. Br. at 2, 3, 5 n. 1, 10. However, petitioner failed entirely to educate the Panel as to the legal principles which ought to have been applied to these facts the law governing liability of corporate affiliates, which would have apprised the Panel of the legal significance of the factual arguments made. It is well established that there is no "duty upon arbitrators to ascertain the legal principles that govern a particular claim through the conduct of independent legal research." See Wallace, 378 F.3d at 191 n. 3. The Court is therefore unable to conclude that the NASD Panel, having never been made aware of the legal principles governing liability of corporate affiliates, refused to apply or ignored a governing legal principle in finding MSI liable for the acts of its parent company, MetLife. Accordingly, the Court finds that petitioner has failed to demonstrate that the NASD Panel's award was made in manifest disregard of the law, and the decision of the NASD Panel, even if erroneous, must stand.
CONCLUSION
For the foregoing reasons, the Court denies petitioner's motion to vacate the NASD Panel's award and grants respondents' cross-motion to confirm. The Clerk of the Court is hereby directed to close the above captioned action.
It is SO ORDERED.
NOTES
[1] MSI is a subsidiary of Metlife. "MetLife and MSI are separate companies. MetLife is MSI's parent company. MSI does not control MLIC [MetLife Insurance Company]." Pet. Pre-Hrg. Br. at 5 n. 1.
[2] The parties dispute whether the Panel refused to hear petitioner's motion for a directed verdict, see Pet. Br. in Supp. at 1, 2 or simply denied the motion, see Resp. Br. in Opp. at 9.
[3] See, e.g., 1 William Meade Fletcher et al., Fletcher Cyclopedia of the Law of Corporations § 43 (perm ed., rev. vol. 1999 & 2005 Supp.) ("As a general rule, two separate corporations are regarded as distinct legal entities even if the stock of one is owned wholly or partly by, the other."); see also Murray v. Miner, 74 F.3d 402, 404 (2d Cir.1996) ("Under the doctrine of limited liability, a corporate entity is liable for the acts of a separate, related entity only under extraordinary circumstances, commonly referred to as piercing the corporate veil.") (citing Frank v. U.S. West, Inc., 3 F.3d 1357, 1362 & n. 2 (10th Cir.1993)).
[4] In fact, one need not even be an attorney in order to serve as an arbitrator. See Wallace, 378 F.3d at 190 (noting that "[t]here is certainly no requirement under the FAA that arbitrators be members of the bar"). In this case, it appears that only two out of the three members of the NASD Panel had a legal background. See Resp. Br. in Opp., Ex. M, Arbitrator Disclosure Reports of Thomas R. Farrell, Esq., James N. Baxter, and Marion Yuen.
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270 S.W.2d 345 (1954)
RHEUDASIL
v.
CLOWER.
Supreme Court of Tennessee.
July 23, 1954.
Alex Barnett, Memphis, for plaintiff in error.
Hardison, Walton & Collins, Memphis, for defendant in error.
TOMLINSON, Justice.
This was an action instituted by Rheudasil to recover damages from Clower for alienation of his wife's affections. Clower demurred to the one count declaration, as amended, on the ground that this declaration disclosed it to be a fact that the one year statute of limitations barred the action. The two questions presented by Rheudasil's appeal in error are (1) when did the cause of action arise and (2) which statute of limitations applies.
The declaration, after alleging in some detail the pursuit by Clower of Rheudasil's wife over a long period of time, then avers that the result was to separate this husband and wife. She subseqently procured a divorce and married Clower. As a result of the affair between Clower and his wife, Rheudasil left her on March 5, 1951, returned on November 23, 1951, with final separation occurring on November 25, 1951. With reference to his separation of March 5, 1951, this husband's declaration says that at that time "it was very obvious to the plaintiff that he was losing the love, affection, and consortium of his wife because of the evil designs, diabolical ways, trickery, scheming, and the connivance on the part of the defendant". This can only mean that the husband became aware not later than March 5, 1951 of the alienation of his wife's affections by defendant.
*346 The husband contends that his cause of action did not arise until the last separation, November 25, 1951. His suit was instituted about ten months thereafter. Clower insists that it arose not later than March 5, 1951, it being alleged that the husband learned not later than that date of the wrong that Clower had done him. This date is approximately eighteen months before the husband instituted his suit. This controversy must first be settled.
In Broidioi v. Hall, 188 Tenn. 236, 238, 218 S.W.2d 737, 738, it was held that the statute of limitations in a case of this character begins to run when the "spouse knows that he or she has a cause of action". In Scates v. Nailling, 196 Tenn. 508, 268 S.W.2d 561, 562, Obion Law, decided on Marsh 21, it was held that an action of this kind may be instituted "immediately after the society, affection and conjugal fellowship or consortium of the husband or wife are lost". It follows that Rheudasil's cause of action arose eighteen months before he instituted suit. Is it barred by any of our statutes of limitations?
Our various statutes of limitations for "Actions Other Than Real" are carried in the Code commencing at Section 8592. An examination of these Code sections discloses the fact that the limitation applicable to an alienation of affection suit must either fall under the one year statute carried at Section 8595 or the ten year statute providing for "all other cases not expressly provided for" carried at 8601.
Since these statutes of limitations were enacted for the "peace of society", Peck v. Bullard, 21 Tenn. 41, 46, thus, "looked upon with favor as a statute of repose" Patten v. Standard Oil Co., 165 Tenn. 438, 446, 55 S.W.2d 759, 762, it is hardly logical that the legislature, had it thought of the matter, would have intended that an alienation of affection suit might be instituted at any time within ten years after the cause of action arose. This directs consideration, then, to the question of whether such an action can logically fall under Code Section 8595 providing that:
"Actions for libel, for injuries to the person, false imprisonment, malicious prosecution, criminal conversation, seduction, breach of marriage promise, and statutory penalties, within one year after cause of action accrued."
Actions "for injuries to the person," as used in Code Section 8595, mean actions for "bodily injuries". Bodne v. Austin, 156 Tenn. 353, 357, 2 S.W.2d 100, 62 A.L.R. 1410. If, therefore, an action for alienation of affection can be brought within this Code section it must be because of the inclusion within that Code section of "criminal conversation". Both actions are "founded on the injury to the right of consortium". Darnell v. McNichols, 22 Tenn. App. 287, 291, 122 S.W.2d 808, 810.
"Criminal conversation" means adulterous relations between the defendant and the spouse of the plaintiff. Alienation of affections can be brought about without adulterous conduct. But the contrary does not reasonably seem to be true. That is, a spouse guilty of adulterous conduct with a third party has necessarily lost some of his or her affection for the innocent spouse. On the principle, therefore, that the greater includes the lesser, and because both actions are founded on the injury to the right of consortium, it is reasonable to conclude that when the Legislature provided that the one year statute of limitations should apply to an action for criminal conversation, it understood such to include an action for alienation of affections.
We conclude, therefore, that the Trial Court properly adjudged this action for alienation of affections to have been barred by the one year statute of limitations carried at Code Section 8595. The judgment will be affirmed with costs assessed to Rheudasil and his surety.
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270 S.W.2d 442 (1954)
CITY OF AUSTIN et al.
v.
SCHMEDES et al.
No. 10240.
Court of Civil Appeals of Texas, Austin.
June 23, 1954.
Rehearing Denied July 21, 1954.
*444 Touchstone & Bernays, James A. Knox, Dallas, for Robert J. McKown and others.
W. T. Williams, City Atty., Robert L. Burns, Doren R. Eskew, Asst. City Attys., for City of Austin.
Coleman Gay, Austin, for Dean Skinner.
Cofer & Cofer, Powell, Wirtz, Rauhut & McGinnis, William A. Brown, Austin, for appellees.
HUGHES, Justice.
This is a suit for damages arising out of the collision of two automobiles, one driven by appellee, Curtis O. Schmedes, and the other by Carl H. Anderson who is not a party to this suit.
Mr. Schmedes sues for himself, his wife and as next friend for his infant daughter.
Appellants, who were defendants below, are the City of Austin, Robert J., Obert B., Austin B., and Arthur L. McKown and Dean Skinner.
The collision occurred shortly before 6 p. m. December 9, 1952, at the crest of a sharp hill on the east side of East Avenue between 12th and 13th Streets, within the corporate limits of the City of Austin.
East Avenue, between these two streets, had for many years past been a divided highway, the traffic being one way on each side of the divided street. At the time of the collision, however, the west side of East Avenue between 12th and 13th Streets was closed and was undergoing changes and improvements.
These changes and improvements were being made by the McKowns as subcontractors under a general contract between the Texas Highway Department and Dean Skinner.
Liability of appellants was established below and is sought to be sustained here on findings of the jury that there was a negligent failure to erect proper warning signs at certain points which was the proximate cause of the collision and resulting injuries and damages.
We insert the following sketch for a better understanding of the facts and jury findings:
*445
*446 Carl Anderson entered East Avenue at 14th Street, driving west, East Avenue at this point being a two-way street. Turning south Mr. Anderson proceeded past barricaded 14th Street as it intersected East Avenue from the west and past the barricaded west fork of divided East Avenue and hence on the east side of such street to the point of impact at the crest of a hill.
Mr. Schmedes was driving north on the east prong of divided East Avenue.
The two cars confronted each other at the crest of a small hill and collided. After seeing each other there was nothing which either driver could do to avoid the collision.
The jury found that the failure to provide signs for directing traffic entering East Avenue from the east on 14th Street was negligence and that the failure to provide a sign warning southbound traffic not to enter the east roadway in the 1200 block of East Avenue was also negligence and that such negligence was the proximate cause of appellees' injuries.
The jury also found that the collision was not the result of an unavoidable accident and that the operation of the Anderson car at the time was not the sole proximate cause of the collision.
Based on these findings, the damage issues and failure to find Mr. Schmedes contributorily negligent, a joint and several judgment was rendered against appellants. Strangely enough no appellant asks indemnity from any other appellant.
The first point of error is directed to the failure of the court to inquire if the negligence found by the jury was the negligence of appellants or of one or more of them. The issues were not so framed. They simply inquired if the matters mentioned constituted negligence.
Appellants summarize their argument as follows:
"It is a basic rule of tort law that facts, found by a jury which connect the defendant to the situation, may give rise to a duty, the violation of which would constitute negligence on the part of the defendant. Now, if the evidence should show the defendant duly connected so as to give rise to a duty, then, perhaps a jury finding would not be absolutely essential. But, what of the situation, as in this case, where the evidence points in the other direction, then certainly it must be elementary that the plaintiff at least submit an issue inquiring as to whether the defendant is sufficiently involved in the situation that a duty might exist."
If appellants would point to any disputed material evidence regarding the proximity to or extent of involvement in the situation, out of which this lawsuit arose, as to any appellant then we would sustain this point. There is, however, no such evidence referred to by appellants nor found by us.
The facts regarding the relationship of each appellant to each other and to this controversy and all inferences to be drawn therefrom are of an undisputed nature.
The City of Austin is a municipal corporation with certain duties and responsibilities regarding its streets. Just what these duties and responsibilities are, under the facts presented, is a matter of law.
Construction of the contract between the State and Skinner is also a question of law, not fact, as is the determination of the rights, duties and obligations of independent contractors, McKowns, under the subcontract and the undisputed evidence.
We quote from Prosser on Torts, Hornbook Series, p. 280:
"The existence of a duty. In other words, whether upon the facts in evidence, such a relation exists between the parties that the community will impose a legal obligation upon one for the benefit of the otheror, more simply, whether the interest of the plaintiff which has suffered invasion was *447 entitled to legal protection at the hands of the defendant. This is entirely a question of law, to be determined by reference to the body of statutes, rules, principles and precedents which make up the law; and it must be determined only by the court."
See also City of Bryan v. Jenkins, Tex.Civ. App. Waco, 247 S.W.2d 925, writ ref. n. r. e.
Point One is overruled.
The Second Point is that Special Issues 1 and 3 commented on the weight of the evidence in assuming that "the construction job was in some manner or way involved in this lawsuit, and by further assuming that there was a failure to provide signs."
Issues Numbers 1 and 3 contained these clauses respectively: "Do you find from a preponderance of the evidence in connection with the construction job in the area of East Avenue involved in this suit that the failure to provide directing signs" and "Do you find from a preponderance of the evidence in connection with the construction work involving the portion of East Avenue involved in this suit that the failure to provide a sign, * * *"
There were no signs at the places inquired about and we do not understand appellants to dispute this fact for they say "If there is any dispute at all, it is a dispute as to how much of a surrounding area is a contractor responsible for."
Arguing from the fact that no work was being done or under contract to be done on the east side of East Avenue between 12th and 15th Streets appellants say that "the most controverted fact issue in the whole case was whether either of them was so connected with the scene of the accident by virtue of the construction job as to give rise to a duty to place directing signs at the entrance of Fourteenth Street on the east side of East Avenue."
It is undisputed that the construction job underway on the west side of East Avenue had the necessary effect of closing the west side of the street to traffic and of leaving the east side as the only means of continuous north-south travel on this street in this area, thus automatically converting, practically if not legally, a one-way street into a two-way street.
It follows that, in our opinion, these two issues did not assume any disputed facts. As indicated above the duty of appellants under conditions conclusively shown is for the court to determine.
The Third Point is that Special Issues 1 and 3 are ambiguous and misleading because they contain the words "in connection with the construction job in the area of East Avenue involved in this suit."
This point is overruled as we see nothing ambiguous or misleading in the language used when considered in the light of the record with which the jury was familiar.
Point Four complains that the jury should not have been asked if the failure to provide a sign warning southbound traffic not to enter the east roadway in the 1200 block of East Avenue was the proximate cause of appellees' injuries because, as a matter of law, the conduct of Carl H. Anderson was at least "a new and intervening cause, if not the sole proximate cause of the accident."
When Anderson entered East Avenue from 14th Street there was no warning not to enter. After entering there was no sign telling him not to turn south on East Avenue which was a two-way road. He proceeded south to the barricaded west fork of the divided street. There was no sign there ordering him to stop, to turn around, back up or do anything. There was just no sign. Mr. Anderson proceeded on down East Avenue on the east roadway which was the only route south left open for him to travel. Certainly appellants should have foreseen that the traveling public would have been very likely to do exactly what Mr. Anderson did if they were not otherwise directed.
*448 It is our opinion that the issues of proximate cause were answered by the jury upon abundant evidence and that the conduct of Mr. Anderson does not supply evidence of a new and independent cause.
The Fifth Point is that Mr. Schmedes was familiar with the locale of the accident and had the same opportunity to foresee harm as did appellants. This is not in accordance with the evidence.
Mr. Schmedes in coming to town during this period of construction traveled on East Avenue to 15th Street where he encountered a sign saying "Do not enter." He then turned west on 15th and south on Red River Streets to town. In going home he traveled on the east side of East Avenue after entering it at 5th Street. He had no occasion to know and did not know that there was no sign at 14th Street, as there was at 15th Street, advising south bound traffic not to enter East Avenue. On the contrary Mr. Schmedes had every reason to believe that if he were stopped at 15th Street going south that traffic would also be prevented from entering at 14th Street, one block nearer the construction.
The Sixth Point is to the effect that since the collision occurred on the east side of East Avenue which was not under construction that no duty rested upon any of appellants to put warning signs at the place where the jury found their absence was negligence.
The legal duty of the McKowns who actually closed the west prong of divided East Avenue and thus created the dangerous condition to which the accident is attributable is stated by the Supreme Court in Buchanan v. Rose, 138 Tex. 390, 159 S.W.2d 109, 110, as follows:
"We think it may also be said that if one by his own acts, although without negligence on his part, creates a dangerous situation in or along a public way and it reasonably appears that another in the lawful use of such way in the exercise of ordinary care for his own safety may be injured by the dangerous situation so created, the one creating the same must give warning of the danger or be responsible for the consequences."
As to the City of Austin
"`It is well-settled in this state that a municipality "is required to exercise ordinary or reasonable care to maintain its streets and sidewalks in a reasonably safe condition for travel by those using them in a proper manner. The duty of ordinary or reasonable care * * * is a continuing duty, which is not suspended while the street is being repaired."'" Shuford v. City of Dallas, 144 Tex. 342, 190 S.W.2d 721, 724.
This duty cast on the City is not delegable to an independent contractor so as to relieve the City from liability to third parties. Patterson v. City of Austin, Tex. Civ.App. Austin, 29 S.W. 1139, no writ.
Nor is the City exempt from liability on the correct premise that the control of traffic along and over its streets is a governmental function.
The duty of the City here was to stop or prevent two-way travel on a one-way street. The dangerous situation giving rise to this duty was the result of a physical obstruction of the west side of East Avenue. No governmental function is involved. The direction and control of traffic while necessarily required was merely incidental to the City's corporate function of maintaining its streets in a reasonably safe condition for public travel.
As to Dean Skinner his liability is contractual. Pertinent portions of the contract between the State and Skinner are:
"The safety of the public and the convenience of traffic shall be regarded as of prime importance during construction.
"It is the purpose of this special provision to insure the safety and convenience of the travelling public.
*449 "The Contractor shall provide for the passage of traffic in comfort and safety at all times throughout those sections of the project which are open to traffic at the present time. * * *
"The Contractor shall provide and maintain barricades as indicated on the plans. He shall also provide Class `C' barricades and appropriate signs at any road that is blocked or altered during construction.
"The Contractor shall save harmless the State from all suits, actions or claims brought on account of any injuries or damages sustained by any person or property in consequence of any neglect in safeguarding the work by the Contractor; * * * He shall not be released from such responsibility until all claims have been settled and suitable evidence to that effect furnished the Commission."
These provisions, in our opinion, reflect an intention on the part of the contracting parties to confer a cause of action upon members of the traveling public against Skinner for injuries and damages sustained as a result of nonperformance of his contractual obligation to place appropriate warning signs at the places indicated in the jury's verdict. See Restatement of Law of Contracts, Sec. 145; Eubanks v. Schwalbe, Tex.Civ.App., Amarillo, 55 S.W.2d 906, reversed in part, U. S. Fidelity & Guaranty Co. v. Eubanks, 126 Tex. 405, 87 S.W.2d 248.
The City in a supplemental brief has a point suggesting that it had no notice of the dangerous condition on East Avenue at the time of the collision and that its liability in the absence of such notice is precluded by provisions of its charter.
The City knew of the work in progress and cooperated with the State in its accomplishment. Then too, the dangerous conditions involved had existed for about two months prior to the collision. This is sufficient to support an implied finding of the trial court that the City had both actual and constructive notice of the situation which caused appellees' injuries and damages.
The judgment of the trial court is affirmed.
Affirmed.
On Motion for Rehearing
HUGHES, Justice.
All appellants have filed motions for rehearing but only Dean Skinner's motion requires further attention. He states that in holding that appellees have a cause of action against him under his contract with the State we are in conflict with Taylor v. Dunn, 80 Tex. 652, 16 S.W. 732, Grasso v. Cannon Ball Motor Freight Lines, 125 Tex. 154, 81 S.W.2d 482 and Buckner v. Colwell, Tex.Civ.App., Beaumont, 131 S.W.2d 675.
In Taylor v. Dunn the Court construed an ordinance of the City of Austin which authorized certain contractors to construct and operate a railway along College Street to the State Capitol and which provided that such contractors "shall be liable and responsible to any and all persons for any damage or injury that may result to him or them or their property from the construction, use, and maintaining of said railroad" [80 Tex. 652, 16 S.W. 733] to secure indemnity to the City and not to create a cause of action in favor of those injured by negligent operations of the railway.
We quote the first headnote in Grasso to show the inapplicability of such case:
"Surety on bond furnished by motor carrier of freight as required by statute could not be joined with insured in action by third party for injuries sustained due to insured's negligence, since statute makes surety liable for payment of all judgments recovered against insured and not liable for payment of damages resulting from insured's negligence. (Vernon's Ann.Civ.St., art. 911b, § 13.)"
Buckner v. Colwell is a venue case. Buckner was doing public work for the *450 State, under a written contract containing the following provisions [131 S.W.2d 676]:
"`The contractor shall save harmless the State from all suits, actions or claims brought on account of any injuries or damages sustained by any person or property in consequence of any neglect in safeguarding the work by the contractor.'"
The Court held that venue could not be sustained in the county where an injury occurred on the theory that this contract was for the benefit of a third party who was injured by Buckner's negligence but sustained venue in such county on other grounds. Taylor v. Dunn, supra, was cited in support of its holding as were three other cases relating to liability under statutory bonds.
Skinner agrees that the intention of the parties, as gathered from the terms of the contract, is controlling but contends that we, in applying this rule, have reached an erroneous conclusion.
In Taylor v. Dunn the City of Austin had a potential liability for damages resulting from improper construction or maintenance of the railway on its streets and it was against this hazard that the City sought protection. Under these circumstances the Court there very properly construed the ordinance as reflecting only an intention to provide indemnity to the City.
In our case there was no need for indemnity. There was no potential liability of the State against which the State might properly contract. The State is not liable for the torts of its agents or employees and to construe the contract here as reflecting an intention to provide for indemnity against a non-existent liability would do violence to the language used and would brand it as an idle waste of words. It is our duty to give effect to all the provisions of the contract and to construe each provision reasonably and so as to carry out the clear intentions of the parties as reflected by the contract. We believe that we have correctly done so in holding that this contract insured to the benefit of appellees in this case.
Skinner also contends that appellees did not declare upon the contract. We have examined the pleadings of appellees and find that the contract was alleged and that portions of it were set out in the petition.
Appellants' Motions for Rehearing are overruled.
Motions overruled.
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739 S.W.2d 157 (1987)
293 Ark. 502
LEVI STRAUSS & COMPANY, Appellant,
v.
CROCKETT MOTOR SALES, INC., Appellee.
No. 87-88.
Supreme Court of Arkansas.
November 9, 1987.
Raymond Easterwood, Little Rock, for appellant.
Frank A. Poff, Jr., Little Rock, for appellee.
GLAZE, Justice.
This conflict of laws case involves a garnishment proceeding against appellant, Levi Strauss & Co., on wages earned by one of its employees, Gloria Penn, who now lives in Tennessee. In this proceeding, appellee, Crockett Motor Sales, Inc., seeks to garnish earnings earned by Penn while working in a Levi Strauss plant located in Tennessee. Levi Strauss, a foreign corporation registered to do business in Arkansas, answered Crockett Motor's writ of garnishment, stating that Strauss's Little Rock plant, where Penn previously worked, had closed, and she now worked in its facility at Powell, Tennessee. Crockett Motor controverted Levi Strauss's answer, alleging Strauss has an agent for service of process in Arkansas, and is required to comply with the writ of garnishment. After both parties argued whether the trial court had jurisdiction to issue a writ of garnishment, the trial court held that it did and ordered Strauss to comply with the writ. There being no other issues raised concerning the garnishment proceeding, Strauss brings this appeal challenging the court's jurisdiction.[1]
Crockett Motor bases its argument that the trial court has jurisdiction upon this court's holding in Stone v. Drake, 79 Ark. 384, 96 S.W.2d 197 (1906). There, Stone garnished the Texas & Pacific Railway Company for a debt due (wages owed) its employee Drake, who worked and resided in Texas. Stone previously had obtained an Arkansas default judgment against Drake and brought the garnishment action *158 against the railway company, a Texas corporation, because it had an agent and had tracks and trains located in the state. This court sustained Stone's garnishment action. The court, quoting from Harvey v. Great Northern Railway Co., 50 Minn. 405, 52 N.W. 905 (1892), set out the rule which has been recognized by this state for the past eighty years. The court said:
While, by fiction of law, a debt, like other personal property, is for most purposes, as, for example transmission and succession, deemed attached to the person of the owner, so as to have its situs at his domicil, yet this fiction yields to laws for attaching the property of non-residents, because such laws necessarily assume that the property has a situs distinct from the owner's domicil. For such purpose a debt has situs wherever the debtor or his property can be found. Wherever the creditor might maintain a suit to recover the debt, there it may be attached as his property, provided, of course, the laws of the forum authorize it. (Emphasis supplied.)
See also London & Lancashire Insurance Co. v. Payne, 180 Ark. 638, 22 S.W.2d 165 (1929); Person v. Williams-Echols Dry Goods Co., 113 Ark. 467, 169 S.W. 223 (1914); and Kansas City, Pittsburg & Gulf Railway Co. v. Parker, 69 Ark. 401, 63 S.W. 996 (1901). In following the foregoing rule, the Stone court concluded that because the non-resident Drake, by posting a bond, could maintain an action in Arkansas against the Texas & Pacific Railway Company (see § 959, Kirby's Digest,) now Ark.Stat.Ann. § 27-2301 (Repl.1979)) (non-resident plaintiff required to give bond for costs before filing action) and because the state authorized Stone to maintain a garnishment action to recover his debt, Stone's garnishment against the Texas & Pacific Railway Company was proper.
The law in Stone basically remains intact and this court has adhered to the rule that power over the person of the garnishee confers jurisdiction on the courts of the state where the writ issues. London & Lancashire Insurance Co. v. Payne, supra. Stated in still other terms, the court in Person v. Williams-Echols Dry Goods Co., supra, held that the situs of a debt for purposes of garnishment, is not only at the domicile of the debtor, but in any state in which the garnishee may be found, provided the law of that state permits the debtor to be garnished, and provided the court acquires jurisdiction over the garnishee through his voluntary appearance or actual service of process upon him within the state.
The instant case, on its facts, has little to distinguish it from Stone. Here, Penn lived in Arkansas when she purchased an automobile from Crockett Motors and, upon defaulting on her contract, Crockett Motors obtained a judgment against her. While she still lived and worked for Levi Strauss in Arkansas, Crockett Motors garnished her wages earned in this state on two separate occasions. Levi Strauss's Little Rock plant had closed and Penn had moved to Tennessee when this third garnishment proceeding was commenced. Thus, as was the situation in Stone, the creditor is located in Arkansas, the non-resident debtor wage earner lives in another state, but the wage earner's employer is subject to suit in Arkansas, since it registered to do business and does business in this state. Accordingly, if we follow the law established in Stone and its progeny, we clearly must hold the trial court had jurisdiction of the garnishment action against Levi Strauss.
Nonetheless, Levi Strauss urges us to follow Tennessee law which is set out in Williams v. Williams, 621 S.W.2d 567 (Tenn.Ct.App.1981). There, the court held the Tennessee garnishment action must fail because a Texas resident could not obtain proper jurisdiction over his Texas employer in Tennessee for wages earned and payable in Texas, concluding the mere fact that the employer was a foreign corporation authorized to do business in Tennessee did not give Tennessee jurisdiction. In view of Arkansas' long adherence to the rule set *159 out in Stone, we see no reason to depart from it.[2]
We also note Levi Strauss's argument that Arkansas's long arm statute, more particularly Ark.Stat.Ann. § 27-2502 (Repl. 1979), has limited the state's exercise of personal jurisdiction over only those persons whose conduct conforms with those acts specified in § 27-2502(C). Of course, as is duly provided in § 27-2502(F), other bases of jurisdiction were unaffected by the enactment of § 27-2502 and the state's courts may exercise jurisdiction on any other basis authorized by law.
Even so, we do take this opportunity to view the situs of debt rule adopted by our case law in light of the Supreme Court holding in Shaffer v. Heitner, 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977). The Court in Shaffer held that quasi in rem jurisdiction as well as personal jurisdiction over an absent defendant depend on the defendant's "contacts" with the forum state so as to meet "traditional notions of fair play and substantial justice," the formula stated in International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945). See R. Leflar, American Conflicts Law § 24A (3d ed. 1977). (Professor Leflar, in analyzing the effects of Shaffer v. Heitner, supra, concluded that Harris v. Balk, 198 U.S. 215, 25 S. Ct. 625, 49 L. Ed. 1023 (1905), is no longer good law and that the garnishment of tangible property based on nothing more than service upon the obligor wherever he is found now violates the due process clause.)
In considering the situation here in view of the Shaffer holding, we have no difficulty in deciding that Penn, a non-resident defendant, had sufficient contacts with Arkansas and the litigation here to sustain the court's jurisdiction in this matter. We would first note that Crockett Motor did not initiate the garnishment action as a means by which to adjudicate a claim against Penn; it had already obtained a judgment against Penn at the time she lived and worked in Arkansas. The only changes having taken place since that judgment (and two garnishments after it was entered) were the closing of Levi Strauss's plant in Little Rock and the moving of Penn to Tennessee. Otherwise, Penn still works for Levi Strauss, albeit in Powell, Tennessee, and Strauss continues to do business in Arkansasa foreign corporation which clearly is subject to suit in this state. Crockett Motors seeks only to satisfy its judgment by reaching Penn's earnings which are under the control of Levi Strauss. Unquestionably, Penn was present in Arkansas and had sufficient contacts for Crockett to obtain the judgment against her, and due process does not require a renewal of each of those contacts with this state in order that Crockett can collect on that judgment. See Oregon ex rel. Department of Revenue v. Control Data Corp., 300 Or. 471, 713 P.2d 30 (1985). Suffice it to say, Penn's contacts, past and present, with this state are sufficient for us to sustain the trial court's exercise of jurisdiction in the garnishment proceeding below. Accordingly, we affirm.
HICKMAN, J., concurs.
PURTLE, J., dissents.
HICKMAN, Justice, concurring.
I agree that under the peculiar facts of this case, the trial court's order should be affirmed.
I am not certain I would join in such a decision if the debtor and creditor were not both residents of Arkansas at the time of the judgment. Since I don't have to make that decision, I won't at this time. I also have the same reservations regarding the issue of a convenient forum.
PURTLE, Justice, dissenting.
I am pleased that the majority has adopted the practical view that it is not necessary that an order or judgment "dismiss the parties from court, discharge them from the action, or conclude their rights to the subject matter in controversy" to be appealable. See Tapp v. Fowler, 288 Ark. 70, 702 S.W.2d 17 (1986); Fratesi v. Bond, 282 Ark. 213, 666 S.W.2d 712 *160 (1984); and ARAP Rule 2. The order appealed from in this case was an order by the trial court ordering the appellant to answer certain interrogatories. However, it is obvious that the trial court would have eventually ordered the appellant to pay into the court the attachable part of Ms. Penn's wages due under the garnishment proceedings.
I am not pleased that the majority has overreached the long arm of Arkansas law. Even though the Arkansas court had jurisdiction to issue this writ of garnishment, the court would not have the authority to compel the appellant to pay funds into the court earned by a non-resident judgment debtor in another state. The employee's wages at issue were not for services performed in Arkansas nor were they a result of her employer doing business in Arkansas.
The majority opinion essentially holds that a writ of garnishment, based upon an Arkansas judgment in favor of an Arkansas creditor, will reach the wages of a non-resident earned in another state, if the employer is doing business in both states. The effect of the holding gives the circuit courts of Arkansas jurisdiction over property located in Tennessee. I have no doubt that if the situation were reversed we would have no hesitancy in reaching the opposite result from that stated by the majority.
The United States Supreme Court in Shaffer v. Heitner, 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977), held that in rem and quasi in rem jurisdiction (as well as personal jurisdiction) over an absent defendant must be determined in light of the test found in International Shoe v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 (1945). Thus, jurisdiction over the property of an absent defendant depends on the defendant's "contacts" with the forum state, and the exercise of such jurisdiction must not offend "traditional notions of fair play and substantial justice."
I understand Dr. Leflar and Shaffer v. Heitner, 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977) to require the opposite of the holding accomplished by the majority. Dr. Leflar, in American Conflicts Law § 24 (3d ed. 1977), speaking about Shaffer states:
[Shaffer] imposes far-reaching new due process of law limitations upon the exercise of judicial jurisdiction in rem and quasi in rem. It subjects this area of jurisdiction, or at least part of it that has permitted attachment or garnishment of choses in action at the place where an absent defendant's debtor is found, to the same constitutional requirement of "fair play and substantial justice" as prescribed in International Shoe Co. v. Washington [footnote omitted] for in personam jurisdiction.
Clearly Shaffer made International Shoe applicable to in rem actions as well as in personam. As Dr. Leflar stated, it had far reaching effects. I understand it to overrule the so-called "situs of the debt" theory which Stone v. Drake, 79 Ark. 384, 96 S.W. 197 (1906) and Harris v. Balk, 198 U.S. 215, 25 S. Ct. 625, 49 L. Ed. 1023 (1905) followed. Under this theory, the situs of the debt for purposes of garnishment, is not only at the domicile of the judgment debtor, but in any state in which a garnishee may be found.
The present case is identical to the situation in Harris v. Balk, supra, which is no longer good law. In Harris v. Balk, Epstein, a resident of Maryland, had a claim against Balk, a resident of North Carolina. Harris, another North Carolina resident, owed money to Balk. When Harris happened to visit Maryland, Epstein garnished his debt to Balk. Harris did not contest the debt to Balk and paid it to Epstein's North Carolina attorney. When Balk later sued Harris in North Carolina, the Supreme Court held that the Full Faith and Credit Clause, U.S. Const. art IV, § 1, required that Harris' payment to Epstein be treated as a discharge of his debt to Balk. The Court reasoned that the location of the debt traveled with the debtor.
In Shaffer, however, the Supreme Court overruled Harris v. Balk. The Court held that in rem jurisdiction must be subjected to the test found in International Shoe. *161 In rejecting the "situs of the debt" theory, the Court stated:
We are left, then, to consider the significance of the long history of jurisdiction based solely on the presence of property in a State.... The fiction that an assertion of jurisdiction over property is anything but an assertion of jurisdiction over the owner of the property supports an ancient form without substantial modern justification. Its continued acceptance would serve only to allow state court jurisdiction that is fundamentally unfair to the defendants.
Traditional notions of fair play and substantial justice do not seem to me to have been met by the majority opinion. The appellant has no property or wages in Arkansas which belong to the employee. The employee had no substantial contacts with Arkansas at the time of this garnishment proceeding. Neither she nor her property occupied an Arkansas situs.
My chief fear is not what this decision will do to the law it is the effect it will have on employment. After all, the Arkansas law is only what we say it is on Monday mornings. But the disaster to employees, who become unemployed by plant reductions and closings, is obvious. Large employers are apt to decide to terminate an employee rather than transfer to another location. Another danger of this decision is that employers will be reluctant to hire new employees who have outstanding judgments against them. Therefore, this decision is harmful to both employers and employees.
Both sides rely on Stone v. Drake, 79 Ark. 384, 96 S.W.2d 197 (1906), and Williams v. Williams, 621 S.W.2d 567 (Tenn.App.1981). The majority states this is a conflict of laws case and then proceeds to decide the case on due process of law. I believe the Tennessee case is the more reasoned resolution of this issue.
The appellant complied with the Arkansas law relating to doing business and appointing an agent for process. However, by doing so it did not consent to jurisdiction over obligations arising out of employment in Tennessee. It has no obligation to the appellee arising out of its Arkansas activities. It should be commended and not penalized for its policy of relocation of displaced employees.
I would reverse.
NOTES
[1] In the alternative, Levi Strauss argues Arkansas was an inconvenient forum, but because that issue was never presented to or ruled upon by the trial court, we do not reach it on appeal.
[2] The Tennessee court in Williams referred to this rule as the situs of debt approach, which was a theory the court said was not followed in that state.
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739 S.W.2d 731 (1987)
David G. WISE, Plaintiff-Appellant,
v.
Mary Lee SANDS, d/b/a Town and Country Real Estate, Defendant-Respondent.
No. 15173.
Missouri Court of Appeals, Southern District, Division One.
October 27, 1987.
Motion for Rehearing Denied November 19, 1987.
*732 Sidney T. Pearson, Pearson & Carter, St. James, for plaintiff-appellant.
John Z. Williams, Williams, Smallwood & Crump, Rolla, for defendant-respondent.
GREENE, Presiding Judge.
David G. Wise sued Mary Lee Sands, d/b/a Town and Country Real Estate, alleging that he had been damaged in the sum of $9,053.51 because of the negligence of Sands, when acting as a real estate agent for Wise. Wise claimed that Sands negligently failed to obtain, as she had agreed to do, a deed of trust to secure a $10,000 promissory note given by Donald and Carol Whitworth to Wise as a partial payment on the $50,000 purchase price of Phelps County real estate owned by Wise and sold to the Whitworths. The petition alleged that after the Whitworths had paid approximately $2,000 on the $10,000 note, they made no further payments; that when Wise attempted to foreclose on the property, he found he had no deed of trust, and that when he attempted to recover the balance due on the note through a lawsuit against the Whitworths, he found they had taken bankruptcy.
In her answer to the petition, Sands denied that she had agreed, as a part of her agreement with Wise to attempt to obtain a buyer for the property, to obtain a deed of trust from the Whitworths securing their $10,000 note. (The petition also named Donald C. Sands, husband of Mary, as a codefendant, but Wise later dismissed the complaint against Donald.) Her answer further stated that "Plaintiff's petition fails to state a claim for which relief can be granted in that Plaintiff's petition does not specify or state how Plaintiff suffered damages, if any, by reason of the note referred to in Plaintiff's petition not being secured by a second Deed of Trust on the real property described in Plaintiff's petition."
Sands followed her answer with a motion for summary judgment, the relevant allegations of which are as follows: Wise sold the real estate to the Whitworths for $50,000, $40,000 of which was to be paid in cash and $10,000 of which was to be represented by a promissory note executed by the Whitworths, and payable to Wise. The $40,000 cash payment by the Whitworths was obtained by them through a loan from Central Federal Savings and Loan Association (the association), which was evidenced by a promissory note in that amount and a first deed of trust on the property sold by Wise to the Whitworths. The Whitworths defaulted on their note made payable to the association. The association then asserted their rights given them in the first deed of trust and sold the property at a foreclosure sale. At the sale, the association was the sole bidder and bought the property for the amount due on its note plus the costs of the sale.
Sands' motion also alleged that since there was no surplus as a result of the sale, even if Wise had had a second deed of trust on the property, which he did not, he would have received nothing from the sale of the property and, therefore, could not have been damaged by Sands' alleged failure to obtain the second deed of trust. The *733 motion further asserted that since Wise had suffered no damages, there was no genuine issue as to any material fact on the damage question, so that, even if the averments of Wise's petition were true, Sands was entitled to a judgment as a matter of law. The motion was accompanied by an affidavit from John D. Wiggins, trustee named in the deed of trust between the Whitworths and the association, attesting to all evidentiary allegations of the motion for summary judgment pertaining to the foreclosure sale, and confirming there were no surplus proceeds after paying off the note held by the association and the costs of the sale.
Wise did not contest any of the allegations of the motion for summary judgment. In its order sustaining the motion for summary judgment, the trial court stated as follows:
The facts necessary to the determination of this motion appear to be the following:
1. Plaintiff's petition claims he was damaged by reason of the failure of Defendant Mary Lee Sands acting as Plaintiff's real estate agent to obtain a second deed of trust securing payment of a promissory note made by purchasers of real estate sold by Plaintiff in part payment of the purchase price for such real estate sold by Plaintiff.
2. Plaintiff sold the real estate referred to in his petition to Donald L. and Carol Whitworth, husband and wife, for the total purchase price of $50,000.00, of which purchase price $40,000.00 was paid in cash and $10,000.00 was represented by a promissory note made by the purchasers payable to Plaintiff. The $40,000.00 cash payment made by the purchasers was procured by means of a loan from Central Savings & Loan Association which loan was evidenced by a promissory note and which note was secured by a first deed of trust on the real property sold by Plaintiff to the purchasers. Plaintiff claims that the $10,000.00 promissory note he received in part payment of the purchase price was to have been secured by a second deed of trust on the real property sold.
3. The promissory note made by the purchasers of the property and payable to Central Federal Savings & Loan Association which was secured by a first deed of trust on the real property sold by Plaintiff to the Whitworths was not paid by the Whitworths and in accordance with its terms, and Central Federal Savings & Loan Association thereafter caused the deed of trust securing payment of the note payable to it to be foreclosed upon, and the trustee named in the deed of trust sold the real property at foreclosure.
4. At the foreclosure sale there was but one bidder, that being Central Federal Savings & Loan Association, the holder of said promissory note, and Central Federal Savings & Loan Association bid on said property in an amount equal to the amount due it on its promissory note and the costs of sale, and there being no other or further bid said property was struck off and sold to Central Federal Savings & Loan Association.
5. The fact that the real property upon which Plaintiff claims he was to have had a second deed of trust was sold at foreclosure of the first deed of trust thereon for an amount equal to the balance due on the promissory note secured by the first deed of trust and costs of sale with their being no surplus at said sale establishes that Plaintiff was not damaged even if all of the averments contained in Plaintiff's petition are taken as true because if Plaintiff had held a second deed of trust as security for payment of the promissory note referred to in his petition, he would have received nothing in payment of his promissory note from the proceeds of the foreclosure sale.
Wise appeals from the trial court's order. In his appeal, he asserts that it was not necessary for him "to show actual damages on a case of this type, but only that a legal duty existed, and it was breached ...;" and that a genuine issue of material fact existed as to whether actual damages had been suffered by him. In his brief, Wise seems to treat his petition as an action for *734 breach of contract. It was not. The actionable allegations of the petition are contained in paragraph 11 and state:
That Defendants (Sands and her husband) were negligent in failing to procure a Deed of Trust securing said promissory note, and that as a proximate result of said negligence, Plaintiff has suffered damage in the amount of Seven Thousand Nine Hundred Ninety Dollars and Seventy Five Cents ($7,990.75) plus interest in the amount of One Thousand Sixty Two Dollars and Seventy Six Cents ($1,062.76), for a total of Nine Thousand Fifty Three Dollars and Fifty One Cents ($9,053.51).
This is a clear-cut allegation of negligence, not breach of contract. The petition was never amended to allege any theory of recovery other than damages by reason of negligence.
Actionable negligence involves three elements, which are: (1) an existent duty on the part of defendant to protect plaintiff from injury, (2) failure of defendant to perform that duty, and (3) injury to plaintiff as a result of such failure. First Nat. Bank of Sikeston v. Goodnight, 721 S.W.2d 122, 125 (Mo.App.1986). Failure of evidence to prove any one of those three elements defeats the negligence claim. In his brief, Wise contends it was not necessary for him to prove actual damages by reason of the failure of Sands to procure the second deed of trust, but that he was entitled to nominal damages, and the trial court erred in finding that actual damages was required as an element of a negligence case. Wise fails to cite in his brief any negligence case that so holds.
Even if Sands had, by her answer, admitted negligence in failing to procure the second deed of trust, which she did not, Wise would not be able to recover damages unless he could show some resulting injury as a consequence of Sands' negligent act. Wise v. Towse, 366 S.W.2d 506, 510 (Mo. App.1963).
Since damages are an element of a cause of action for negligence, nominal damages cannot be awarded in such an action. See 22 Am.Jur.2d, Damages § 8, p. 23. Wise, evidently recognizing his predicament after the adverse ruling by the trial court, seeks to turn a sow's ear into a silk purse by arguing here that his petition actually sought damages for breach of contract, not negligence, and since this was really a breach of contract action, nominal damages are awardable, thus defeating the rationale behind the summary judgment. He cannot change horses in midstream. A party is not entitled to argue his cause here on a different theory than he presented to the trial court. Turnbough v. Farmers Ins. Co., 720 S.W.2d 752, 754 (Mo.App. 1986).
In a last gasp effort to convince us of the trial court's allegedly errant ways, Wise states in his brief that if he had actually possessed a second deed of trust he could have, somehow, (1) "controlled the foreclosure sale," (2) encouraged potential buyers of the property to attend the foreclosure sale, perhaps inflating the price the property sold for, or (3) made a bid on the property himself. No alleged facts supporting these speculative claims appear in the record.
Speculative results are not a proper element of damages. Moore v. St. Louis Southwestern Railway Company, 301 S.W.2d 395, 402 (Mo.App.1957). There was no reasonable certainty that any of the enumerated probabilities by Wise would have occurred, or, if they did, that Wise's loss on the $10,000 note would have been diminished. Such speculation was not a proper element of damages.
Rule 74.04(b) gave Sands the authority to file her motion requesting summary judgment. Wise, as an adverse party, was not entitled to "rest upon the mere allegations or denials of his pleading," but was required, by a response to the motion, to set forth specific facts showing a genuine issue for trial. Rule 74.04(e). He did not do so. It was, therefore, appropriate under the facts here for the trial court to enter the summary judgment order. Brown v. Prudential Insurance Company of America, 375 S.W.2d 623, 629 (Mo.App. 1964).
*735 Since Sands has shown by unassailable proof that she is entitled to a summary judgment as a matter of law, she was entitled to a trial court order granting her that relief. The order of the trial court granting summary judgment in favor of Sands is affirmed.
CROW, C.J., and HOLSTEIN, J., concur.
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270 S.W.2d 470 (1954)
NASHVILLE TRUST CO. et al.
v.
LEBECK et al.
Supreme Court of Tennessee.
July 23, 1954.
*471 Whitworth Stokes, Nashville, for Nashville Trust Co., etc.
Waller, Davis & Lansden, Nashville, for Cain-Sloan Co.
Jay G. Stephenson, Nashville, guardian ad litem for Morton Lebeck, Jr., Annie Lebeck, Thomas Gilbert Mendel, Alice Jean Mendel and James Ira Mendel.
Charles L. Cornelius, Sr., Nashville, guardian ad litem for Morris Lebeck.
Hume, Howard, Davis & Boult, Nashville, Reich, Spitzer & Feldman and M. James Spitzer, New York City, for Harvey Co.
NEIL, Chief Justice.
The Nashville Trust Company, Herman Glick and Daniel May, as trustees under the wills of Louis Lebeck, deceased, and Michael S. Lebeck, deceased, filed their original bill in the Chancery Court of Davidson County on August 8, 1951, alleging, among other things, that they held in trust property on the north side of Church Street in the City of Nashville, known as the "Lebeck Building". This building was occupied by the Harvey Company, and for a number of years had been used as one of the large department stores in Nashville. The Harvey lease expired December 31, 1953. Michael S. Lebeck and Louis Lebeck were owners as equal tenants in common.
The bill alleged that complainants had signed a lease with the Cain-Sloan Company for a period of 25 years, the same being made an exhibit to the bill, and that it had been duly recorded in the Register's Office of Davidson County. The base consideration of the lease was $125,000 a year and an agreement to assume other obligations with reference to the property. A copy of the wills of the respective owners is also filed as an exhibit to the bill.
The bill further alleges that, "The complainant trustees, under the terms of their respective trust instruments, were specifically given the power to lease the above described property, and were expressly prohibited from selling, mortgaging, creating any lien upon, or otherwise disposing of said property". (Emphasis supplied). The italicized language is important, as will later appear in this opinion.
Under the terms of the will of Michael S. Lebeck, his undivided one-half interest was devised to trustees with directions to pay the income to decedent's wife for life and remainder to his sons, Clarence E. Lebeck and Morton S. Lebeck, during their respective lives, etc., with remainder to children or grandchildren, etc. Under the will of Louis Lebeck his undivided one-half interest in the property was devised to Herman Glick, as trustee, with directions to pay the net income to his wife, *472 Leah Lebeck, for life and at her death to certain remaindermen, naming them. It is alleged that Morris Lebeck is 67 years old, unmarried, and is of unsound mind. The will also names certain minor children as beneficiaries, to wit, Thomas Gilbert Mendel, Alice Jean Mendel and James Ira Mendel, who share in the trust property upon the death of their father.
The bill further alleges that complainants are advised that by a proper construction of the respective wills the "trustees had the power to make a lease beyond the probable duration of the trusts" including ultimate remaindermen, those in being and those not in being. The concluding paragraph to the bill is important to the issues involved, and is as follows:
"Being advised that they are entitled to the guidance and protection of this court in this matter, the complainant trustees seek the Court's construction of the respective wills; and, in the alternative, if the Court should be of the opinion that the complainant trustees under the wills did not have the power and authority to make the lease exhibited to the Court, and thereby bind the ultimate remaindermen, that the Court, nevertheless, ratify, confirm, and approve the actions of the trustees in entering into the lease agreement with The Cain-Sloan Company, as a valid and binding exercise of their discretion as trustees, the lease agreement being to the manifest best interests of the trust beneficiaries and the ultimate remaindermen."
The prayer of the bill is, "That the respective wills of Michael S. Lebeck, deceased, and Louis Lebeck, deceased, be construed by this Court, with reference to the authority and power of complainant trustees to make leases of the realty in question, and particularly as to the authority and power of the complainant trustees to enter into the aforementioned lease agreement with the defendant, The Cain-Sloan Company".
There is a prayer in the alternative to the effect that, if the trustees did not have the authority to make the lease in question and bind ultimate remaindermen without the approval of the court, "that the Court ratify, confirm and approve the action of the complainant trustees in entering into the lease agreement for the term of years mentioned, as being to the manifest best interests and advantage of the life beneficiaries of the respective testamentary trusts involved, including the ultimate remaindermen". The bill is sworn to by Herman Glick and Daniel May.
All parties in interest, including minors and the mental incompetent, were made defendants. The Chancellor appointed two able members of the Nashville Bar as guardians ad litem with full authority to act for the cestui que trustent, minors and insane defendants.
Answers were filed by all defendants. The guardians ad litem also filed a cross-bill, which was later approved by the Chancellor. The cross-bill brought to the attention of the Chancellor certain information relating to the Harvey Company's rights to remove certain fixtures if its lease was not renewed, etc. The cross-bill made Harvey's a defendant for the purpose of a discovery as to Harvey's offer to lease the building. The Harvey Company answered and exhibited its proposed renewal lease of the property, all of which was objected to by complainants. Complainants moved to dismiss the cross-bill which was denied, and thereafter application was made to Honorable Sam L. Felts of the Court of Appeals for certiorari to review and reverse the action of the Chancellor, but the petition was denied.
We pretermit any reference to the order of reference to the Clerk and Master and his report, since it is not in our view of the case of any importance.
The learned Chancellor held in a memorandum opinion that "the authorities seem to be almost unanimous in this country that such a lease as the one involved here, in order to be binding, must be ratified by the Court." Speaking further, he held: "A number of authorities hold that a lease of *473 trust property terminates with the trust, and any lease beyond its duration is void." Johnson v. Johnson, 92 Tenn. 559, 23 S.W. 114, 22 L.R.A. 179; Coffee v. Ruffin, 44 Tenn. 487; Meath v. Porter, 56 Tenn. 224; 26 R.C.L., Sec. 133 (Trusts); In re Hubbell Trust, 14 Am. & Eng. Ann. Cases 648; Bogert on Trusts and Trustees, Vol. 4, Secs. 790 & 791; and 54 Am. Jur. Sec. 473. Upon the above legal question we are in accord with the Chancellor.
It cannot be doubted but that the Cain-Sloan Company lease extends beyond the life of the trust. An examination of the Chancellor's opinion discloses that he held that the trustees were without power to execute a lease that would extend beyond the life of the trust without the court's ratification or express approval. Upon a full consideration of all the evidence the Chancellor disapproved of the Cain-Sloan lease and found that the proposal of the Harvey Company was for the best interest of the beneficiaries.
The complainants appealed to the Court of Appeals and that Court reversed the Chancellor, holding that the trustees had full power to make the lease to Cain-Sloan, which concluded and settled the rights of all parties.
The guardians ad litem petitioned this Court for certiorari, which was granted. The issues have been orally argued by counsel and elaborate briefs filed on behalf of all parties in interest.
The principal question at issue is raised in the assignments of error that the Court of Appeals erred in finding and adjudging that the trustees had full power to execute the lease, and that the same was binding upon the mentally incompetent and the minor defendants, and all remaindermen, including those in being and those not in being; it was further error to hold that the trustees had already exercised such power and authority and that the discretion of the Chancery Court could not be substituted for the discretion which the settlors of the trust gave to the trustees.
It would unduly prolong this opinion for us to respond to every contention made by counsel on this appeal, even if thought advisable to do so. At the outset we think the Court of Appeals misjudged the case by holding that the complainants sought a declaratory decree to declare the rights of the parties. Nothing is said in the bill about seeking declaratory relief, but the bill was primarily and solely to construe the wills of Michael and Louis Lebeck. While Code Section 8838 authorizes a suit to declare rights arising in the "construction of wills and other instruments", the Court will not entertain it to decide contingent interests that may never arise. U.S. Fidelity & Guaranty Co. v. Askew, 183 Tenn. 209, 191 S.W.2d 533, and cases cited therein.
We also dismiss the contention of counsel for the trustees and Cain-Sloan that the signing of the contract, and recording it, effectively closed the entire matter. If this is to be thought of as true as a matter of law, which we do not concede, then the complainant's suit should have been dismissed.
We look to the wills in a vain search to find appropriate language which confers upon the trustees the power to make the lease in question. The intention of the settlors of the trust to confer such authority must be found within the four corners of the respective wills, expressly or by clear implication, and it is not to be found. The complainants can derive no comfort from the finding of the Court of Appeals that the trustees having the right to sell the property would have the power to lease it. The basic error of this statement is found in the will of Michael Lebeck as follows: "There shall be no power in the trustees to sell, mortgage, create a lien upon, or otherwise dispose of said property, or any part of it." The major premises being false the conclusion is false.
The record before us discloses almost beyond dispute, that the complainant trustees entertained serious doubts as to their authority to make this lease. It *474 appears on the face of the bill and the prayer, "that they are entitled to the guidance and protection of this court in this matter." Why should these complainants seek "the guidance and protection of the court" if they had unquestioned authority as they contend? Moreover as further indicating doubts as to the validity of the lease the complainants sought to amend their bill to have the Chancellor approve the Cain-Sloan lease for a period that would not extend beyond the life of the trust. It was properly denied. They are not permitted to assume an unequivocal position as in the original bill, and abandon it for another in an attempt to limit the jurisdiction of the Chancery Court. The complainants' suit presents two amazing and irreconcilable contradictions, to wit, (1) the trustees craved the "protection and guidance" of the court, and at the same time deny the authority of the court to grant any protection to minors and lunatics, the cestui que trustent; (2) they have burdened the trust estate with an enormous expense, seeking a decree validating the Cain-Sloan lease and now contend that the lease was and is binding upon all parties without court approval, the plain inference being that this suit was not necessary for any purpose. In other words, the court's "advice and protection" is of value to them only if and when it suits their partisan purposes, otherwise its jurisdiction is positively disavowed.
The contention made by the trustees and Cain-Sloan that this was in fact a lease contract which had been definitely concluded, and binding upon all parties in interest, is not sustained by the record. On the contrary the parties expressly agreed that it would not be a binding obligation until it was approved by the Chancery Court. On April 26, 1951, the parties signed a preliminary agreement which provided:
"A formal lease will be drawn embodying all of the conditions and spelling out the full details of the lease. * * * the lease agreement shall be submitted to and approved by the Chancery Court of Davidson County, Tennessee, and this offer is made subject to such confirmation by the Chancery Court of Davidson County, Tennessee."
On the same day and contemporaneously with the signing of the purported lease agreement, a so-called "Collateral Agreement" was signed by the parties to the effect that the trustees, Morton Lebeck and Ira Mendel will have a bill prepared and filed seeking approval of the lease by a court of competent jurisdiction and determination that the lease is advantageous and should be approved. The foregoing agreements fully justify the conclusion that the lease was merely an offer to lease the property, or a tentative agreement, which was to be binding only when approved by the Chancery Court. The foregoing agreements were later reaffirmed by the trustees as appears in their testimony as follows:
"Q. (To Daniel May). In other words it was your understanding that there was not to be a valid lease for any period of time, unless the court approved it? A. That was my understanding.
"Q. That's what you intended when you executed the document? A. I can see no other reason why I went to court."
To the same effect was the testimony of Mr. Warner McNeilly, President of the Nashville Trust Company, as shown by the following: "I don't know anything about it being left out of the lease, but I know it was contemplated all the time that the lease would be submitted to the court, Chancery Court, for approval."
These complainant trustees, having signed the foregoing agreements, and having acknowledged them under oath, are estopped from making the contention that the Cain-Sloan lease was binding upon all parties in interest without the approval of the Chancellor. According to the testimony of May it was not valid for any period of time, and with this statement the Court agrees.
*475 The equitable doctrine of estoppel is not a new principle which we think is applicable here. It is as old as the Chancery Court itself, and is universally recognized. One of the elements of estoppel according to Gibson's Suits in Chancery is, "He is not to be heard who alleges what is contrary to his former statement." (Sec. 67, 3rd Ed.). It is further stated by the author, "The estoppel is commensurate with the thing represented, and operates to put the party entitled to its benefit in the same position as if the thing represented were true." The prejudice to the guardians ad litem and the insane and minor defendants is the effort to deprive them of the right to the protection of the Chancery Court, i.e. an investigation to determine if the lease contract of Cain-Sloan, or any contract, made on their behalf is for their best interest.
The complainant trustees invoked the jurisdiction of the Chancery Court for its "protection and guidance" and for a decree as to the validity of a particular contract, i.e. the lease proposal of Cain-Sloan. The cross-bill of the guardians ad litem prayed that another proposed lease, to wit, the Harvey Company proposal be appraised. When the complainants brought to the Chancery Court the question of their authority under the respective trusts, and craved its jurisdiction for specific purposes, the court, then and there, had jurisdiction for all purposes. The guardians ad litem naturally prayed for the protection of minors and lunatics, who had become wards of the court.
The Chancellor in this situation, having considered the issues involved, said:
"The Court being convinced that its action is necessary in the premises, it follows, as of course, that, in acting for those who are unable to act for themselves, the Court will be concerned with the question of obtaining the best contract available for those in whose interests it must act."
We think the Court of Appeals failed to give due consideration to the inherent jurisdiction of the Chancery Court in dealing with the administration of trust estates, especially where the interests of minors and lunatics are involved. With reference to the disposition of the property of infants and lunatics, i.e. the sale or lease of such property, the Chancellor stands in loco parentis, Ricardi v. Gaboury, 115 Tenn. 484, 89 S.W. 98, 100, and in authorizing "the making of a lease of the property of a minor", must consider that which "will be most beneficial to him." Ricardi v. Gaboury, supra. Regardless of the pleadings, when minors and lunatics are before the court, the protection of their property rights and interests is said to be "matters of conscience" and fall "strictly within the scope of the Chancellor's extraordinary jurisdiction." Sec. 8, Bispham Principles of Equity. In protecting their rights the Chancellor is not circumscribed and limited by technical pleadings of counsel, but stands aloof and acts within the law as parens patriae. Magevney v. Karsch, 167 Tenn. 32, 49-50, 65 S.W.2d 562, 92 A.L.R. 343, opinion by Green, C.J.
It is not controverted that where the settlor of a trust directs trustees to dispose of property by sale or lease in a specific manner, and it does not violate any positive rule of law, the trustees must act accordingly to carry out the intention of the testator. But even then the Chancellor has the inherent authority to consider if the trustees have in any way deviated from the mandate of the will to the manifest prejudice of the cestui que trustent. Ricardi v. Gaboury, supra; Restatement of the Law of Trusts, Sec. 187; Scott on Trusts, Sec. 187. In Meath v. Porter, 56 Tenn. 224, 228, it is said:
"a court of equity will watch over the administration and execution of a trust, and see that the interest of all parties is protected, as far as it can be done consistent with the rules of law and of equity, and fairness to all concerned."
The foregoing is a clear cut statement of the issue, and it is always the issue except in cases where the will, or instrument *476 creating the trust, expounds itself, and a court review is not at all necessary.
Contention is made by the trustees that the Chancellor has no authority to make a lease contract, but it rests solely within their discretion. That is true only in a qualified sense. In the instant case the Chancellor responded to the issue as to what he conceived to be the manifest interest of the parties and more especially the minors and insane cestui que trustent. He clearly indicated in his opinion that "the trustees will be under a legal and moral duty to execute the lease adjudicated to be best for the estate."
It conclusively appears that the Chancellor considered the evidence bearing upon every issue and, having done so, disapproved the proposal of Cain-Sloan and approved the Harvey Company's proposal for a renewal contract. He unmistakably pointed out wherein the latter was superior to that of the former. His finding in this regard appears in his action upon the Clerk and Master's report, and covers many pages. It would be well nigh impossible to refer to every fact. But one item in particular should be mentioned. Thus on page 29 of his opinion, he says:
"It is shown by the record that the Harvey Company had spent $686,694.00 on the Lebeck Building during its occupancy thereof up to the time of taking testimony herein, (Harvey exhibits `AA' and `BB'), and this is without taking into account what was done by Harveys' own staff of carpenters, painters, and other artisans (Dep. Todd, pp. 109, 112.).
* * * * * *
"Prudent trustees might well have foreseen that, if the present tenant, after having spent so great a sum of money in improving the property, were denied the right of renewal, litigation with respect to these improvements, on surrender of the premises, would almost inevitably follow.
* * * * * *
"It is worth much to an estate to avoid such a controversy.
* * * * * *
"On the question of percentage rental, which is a very vital part of the contract, the record shows that as of the fiscal year ending January 31, 1952, Harveys' sales had attained a level that would result in the payment of rent considerably in excess of the fixed minimum of $125,000.00 a year; whereas, the Cain-Sloan sales during the same year would not have produced any percentage rental. In fact, on the figures produced, Cain-Sloan sales for that year would fall far short of sufficient volume to produce any percentage rental. Furthermore, it is shown that Cain-Sloan sales would not result in percentage rental until they increased by almost 50% of the total sales over those for the year ending January 31, 1952."
Another important provision in the Harvey lease, and found to be superior to the Cain-Sloan lease, appears in the Chancellor's findings, as follows:
"Under the Harvey proposal, it is agreed that escalators, air-conditioning, blowers and equipment, elevators, etc., all of which were installed by Harvey prior to the execution of its proposed lease, and any replacement thereof; will be surrendered to the lessors at the end of the term, whereas, there is no requirement in the Cain-Sloan lease for the installation of escalators, air-conditioning equipment, nor is there any requirement that the property be improved."
The foregoing finding of fact cannot be brushed aside as of no importance. The fixtures and improvements at present represent an investment of $686,694.
No question is made by the trustees as to any lack of financial responsibility of the Harvey Company to fulfill its contract.
It should be noted as we conclude this opinion that the complainant trustees *477 and Cain-Sloan Company did not assign any error in the Court of Appeals to the finding of the Chancellor that the Harvey Company lease was of superior benefit to the trust estate. We think there is abundant evidence to support his decree. It results that the Court of Appeals is reversed and the decree of the Chancellor is affirmed. The cause is remanded to the Chancery Court for such further orders and decrees as may become necessary to a final adjudication of the rights of the parties.
PREWITT and BURNETT, Justices, concur.
TOMLINSON and SWEPSTON, Justices, dissent.
PREWITT, Justice (concurring).
The Chancellor found for Harvey's and the Court of Appeals reversed, upholding the lease of Cain-Sloan, Incorporated.
The property involved herein is located in the heart of the business district on Church Street in Nashville, and is now occupied by Harvey's, a department store. Immediately to the East of this property is the department store of Cain-Sloan, and the controversy is between the operators of these two department establishments, the property herein involved being known as the Lebeck Building formerly used by Lebeck Brothers as a department store.
Michael S. Lebeck and his brother, Louis Lebeck, were the owners as equal tenants in common of this Lebeck property. Michael S. Lebeck devised his one-half interest in the property to trustees and directed them to lease the property and pay the net income to certain named life beneficiaries; and upon the death of the life beneficiaries, he provided that the trust should cease "and my said undivided one-half interest in said store pass in fee simple to the heirs in law of my said two sons, per stirpes."
Louis Lebeck devised his interest in the Lebeck property to trustees and directed his trustees to lease the property and pay the net income to certain named life beneficiaries; and upon the death of the life beneficiaries, he provided that the trust should cease "and my said undivided one-half interest in the store house on Church Street, and my said lot on Broad Street, is to pass in fee simple to the heirs at law of my said three children, per stirpes."
Herman Glick and Nashville Trust Company, trustees under the Michael S. Lebeck will, and Herman Glick and Daniel May, trustees under the Louis Lebeck will, entered into a lease agreement for the Lebeck Building with Cain-Sloan Company, a corporation. This lease is dated May 1, 1951, and runs for a term of twenty-five years beginning January 1, 1954. The Cain-Sloan lease contains the following:
"All parties hereto, who sign this lease agreement in a fiduciary capacity, warrant that they are lawfully authorized and empowered to execute this agreement pursuant to the authority vested in them by operation of law or by the instrument or instruments creating the fiduciary relationship."
However, even though the above provision was in the Cain-Sloan lease, the parties thereto agreed that the trustees would file a bill in the Chancery Court of Davidson County to ascertain by a decree of that court whether the trustees had the power to execute the Cain-Sloan lease so it would be binding upon the ultimate remaindermen of the trust estates for the full lease term of twenty-five years should the trusts, or either of them, terminate before the end of the lease term.
The trustees and the competent life beneficiaries filed a bill against Morris Lebeck, a person of unsound mind and a life beneficiary under the Louis Lebeck will; the guardian of Morris Lebeck, the ultimate remaindermen of the trust estates, now born, who are minors; and the Cain-Sloan Company, lessee under the Cain-Sloan lease.
The primary purpose of the bill was to secure a decree declaring that the trustees had such authority so that they could bind the ultimate remaindermen of the trust estates, *478 even though the trusts, or either of them, should terminate before the end of the lease term.
The secondary purpose of the bill was that if the court should determine that complainant trustees did not have the authority under the respective wills to execute the lease agreement, then and in that event, the court ratify the lease hereinbefore mentioned as being for the manifest interest and advantage of the life beneficiaries of the respective testamentary trusts involved, including the ultimate remaindermen in being and those not yet in being.
Guardians ad litem were appointed for the incompetent defendants, and their defense was that the trustees did not have the power to execute the Cain-Sloan lease without court approval so as to bind their incompetent clients. The Cain-Sloan Company has the same theory of the suit that complainants have.
The Harvey Company and the incompetent defendants have the same theory of the suit, that is, that the trustees did not have any such power and authority as they undertook to exercise in the execution of the Cain-Sloan lease.
The testimony of Daniel May, one of the trustees, is as follows:
"RX 161 In other words it was your understanding that there was not to be a valid lease for any period of time unless the Court approved the lease?
"A. That was my understanding.
"RX 162 That's what you intended when you executed the document?
"A. I can see no other reason why I went to Court.
"RX 163 That's what you intended?
"A. Yes."
(Also, see May's testimony RX 137, 138, 147, 148)
To the same import is the testimony of Mr. McNeilly, President of the Nashville Trust Company. For instance, on cross-examination, question 158, he stated with reference to submission of the matter to the Chancery Court:
"I don't know anything about it being left out of the lease, but I know it was contemplated all the time that the lease would be submitted to the Court, Chancery Court, for approval."
The trustees and the Cain-Sloan Company entered into a "preliminary agreement" on April 26, 1951, preparatory to the execution of the formal lease heretofore mentioned. It should be borne in mind that this preliminary agreement was entered into by the parties several days before the formal lease was executed.
This preliminary agreement provides:
"The lease agreement shall be submitted to, and approved by, the Chancery Court of Davidson County, Tennessee, and this offer is made subject to such confirmation by the Chancery Court of Davidson County, Tennessee."
Simultaneously with the execution of the lease to Cain-Sloan Company on May 1, 1951, a "collateral agreement" was executed by the parties, which provides in part as follows:
"(b) It is understood that there is a legal question as to whether or not the lease will be binding upon the remaindermen under the will of Louis Lebeck if Ira Mendel should predecease Morris Lebeck, and upon the remaindermen under the will of Michael S. Lebeck if Morton Lebeck should die before the termination of the lease. Under these circumstances it is agreed that the trustees, together with Ira Mendel and Morton Lebeck, will apply to a court of competent jurisdiction for a determination as to whether or not the trustees have authority to make said lease for twenty-five years, to be binding upon all parties, even if the trusts, or one of them, should terminate prior to the termination of the lease (unless Morris *479 Lebeck shall have died before such determination, in which event it will be necessary to apply only as to the other half interest), and that said application will be made soon enough to afford ample time for such determination before the entry of Cain-Sloan into possession.
"The trustees and Morton Lebeck and Ira Mendel will have prepared and filed a bill, satisfactory to them, seeking approval of the lease agreement by a court of competent jurisdiction, which bill will seek, among other things, a determination that the trustees had the authority to execute the lease agreement, and that the lease agreement is advantageous and should be approved, and a declaration of the rights, status, and liabilities of the parties."
So then it appears that the trustees and the parties interested fully understood that the proposed lease, or the lease to Cain-Sloan, would be subject to Chancery Court approval.
It should be noted, and this seems to be determinative of the question, that in the "collateral agreement" just quoted from that "the trustees and Morton Lebeck and Ira Mendel will have prepared and filed a bill, satisfactory to them, seeking approval of the lease agreement by a court of competent jurisdiction, which bill will seek, among other things, a determination that the trustees had the authority to execute the lease agreement, and that the lease agreement is advantageous and should be approved * * *"
So it is evident that the parties to the "collateral agreement" not only submitted to the court the question of their power and authority to execute the lease agreement with Cain-Sloan, but whether the lease agreement would be advantageous and should be approved.
To have the court determine whether the lease agreement was advantageous to the parties (minors and incompetents) is tantamount to determining whether the lease was to the manifest interest and advantage of those under disability, and the parties by their own agreement have made the question of interest and advantage a determinative question to be submitted for decision by the court.
It is a cardinal principle of a construction of wills, deeds, leases and contracts that the entire instrument will be looked to and examined to determine the intention of the parties. McCord v. Ransom, 185 Tenn. 677, 207 S.W.2d 581, and cases therein cited.
There appears no doubt that the question of whether the lease executed to Cain-Sloan was for the advantage of those under disability was one of the primary objects of the bill, and the parties cannot be heard to say now that the primary question was one of power of authority and thus limit the inquiry.
"While the law of judicial estoppel is ordinarily applied to one who has made oath to a state of facts in a former judicial proceeding which in a later proceeding he undertakes to contradict, yet it is frequently applied, where no oath is involved, to one who undertakes to maintain inconsistent positions in a judicial proceeding." Stamper v. Venable, 117 Tenn. 557, 97 S.W. 812; Stearns Coal & Lumber Co. v. Jamestown R. Co., 141 Tenn. 203, 206, 208 S.W. 334.
It requires no citation of authority to show that the Chancery Court has plenary and broad jurisdiction to watch over and care for the interests of minors and incompetents. When the Chancery Court has jurisdiction for one purpose it will take jurisdiction for all purposes. After the Chancery Court obtains jurisdiction of a suit for the purpose of granting some distinctive equitable relief, if the circumstances of the case permit, and all the parties in interest are brought before it, it will determine the entire controversy and award full and final relief so as to do complete justice to all the litigants and so as to bring all possible litigation over the subject matter within the compass of one judicial determination. *480 Gibson's Suits in Chancery, 4th Ed., Secs. 36, 38.
Once the jurisdiction of the Chancery Court has been invoked to obtain a judicial construction of a trust instrument and directions as to the trustee's conduct, because of doubt as to the true meaning and intent of provisions of the instrument creating the trust, or as to the particular course which the trustees should pursue, the trustees must faithfully obey any directions which the court gives. Only in this way would he be relieved of personal liability, and a refusal or neglect to obey may render the trustee liable to summary punishment. Pomeroy's Equity Jurisprudence, Vol. 4, p. 179, Sec. 1064.
Under the trust agreement and the facts of the case, it appears that the trusts would terminate before the expiration of the lease, and any lease beyond its duration is void. Bogert on Trusts and Trustees, Vol. 4, Sec. 790-791, 54 Amer. Jur., Sec. 473.
In Bogert on Trusts and Trustees, Vol. 4, Sec. 790, it was said:
"Nevertheless, the trustee may be in doubt as to the precise extent of his authority or as to the soundness of his judgment to grant a lease that may extend many years beyond the termination of the trust. To protect the trust and for his own protection, it is the duty of the trustee to consult the Court before making such a lease."
This course should have been followed in the instant case, especially where the trustees themselves testified that they understood that any lease would have to be approved by the Chancery Court.
Once this case was in the Chancery Court, and that Court took jurisdiction, minors and incompetents being involved, the Chancellor considered the case with an eye to the best interests of those under disabilities, and it seems by a comparison of the offers of the two opposing parties that the Chancellor was correct in coming to the conclusion that the offer of Harvey's was for the manifest interest and advantage of those under disabilities, and we think he was correct in his decree in ordering the trustees to accept the proposition of Harvey's rather than the Cain-Sloan Company.
It results that the decree of the Court of Appeals should be reversed and that of the Chancellor affirmed.
TOMLINSON, Justice (dissenting).
Mr. Justice Swepston and I think that we should record the reasons which impel us to dissent from the scholarly opinion written for the majority of our brothers on the Court by our Chief Justice. A preliminary statement of the existing situation should, however, be made.
The owners of the Lebeck Building vested their testamentary trustees with the authority and duty of deciding the terms under which, and persons to whom, these testamentary trustees would lease that building. Pursuant to such authority and duty, they agreed with the Cain-Sloan Company upon its lease involved in this litigation. Notwithstanding this, the majority opinion directs, in effect, the issuance of a mandamus upon these trustees to scuttle the Cain-Sloan lease, and lease the building to the Harvey Company for twenty-five years in accordance with terms and conditions which were proposed by Harvey after the Cain-Sloan lease had been consummated.
The reason for the above stated action upon the part of the majority of this Court is that the three constituting that majority think, as did the Chancellor, that the lease proposed by Harvey is "superior to" the Cain-Sloan lease. Disavowing any intention to debate this collateral matter, we do observe that (1) the weight of the evidence, according to the report of the Clerk & Master, favors the Cain-Sloan lease and (2) every sui juris life tenant and remaindermen financially interested in the Lebeck Building and its rental income, including parents of interested minors, have testified that each prefers the Cain-Sloan lease.
*481 We think that the Court (1) has no authority, in connection with the leasing of the Lebeck Building, to substitute its discretion for that which the owners of that building preferred to vest in these trustees, and (2) is without authority to compel these trustees to exercise their discretionary power in a way selected and commanded by it, the Court. In addition, it is the opinion of at least the writer of this dissenting opinion that the majority opinion though I am sure it does not so intend imposes a material inequity, to speak conservatively, upon the Cain-Sloan Company in the action which it has taken. And, by the same token, has awarded Harvey that to which Harvey is not equitably entitled. This last stated assertion will be discussed first.
The Harvey Company, as assignee of a twenty odd years lease, has been occupying the Lebeck Building for some years. Anticipating the expiration on December 31, 1953, the trustees, in keeping with a sound business practice, early in 1950 initiated negotiations with Harvey for a lease commencing January 1, 1954. These negotiations continued for much more than a year. However, the only offer they could ever get from Harvey was one which they considered niggardly and financially disadvantageous in a substantial manner to the beneficiaries of the Lebeck trusts.
In this plight of the matter the trustees then initiated negotiations with the Cain-Sloan Company. That Company, after a reasonable length of time, made the proposal which finally resulted in the lease agreement which this Court today, by its majority opinion, orders the trustees to repudiate. However, before the trustees accepted the Cain-Sloan offer they again approached Harvey and inquired as to whether it had made its best offer. Its reply was that it had. Thereafter, and subsequent to the consummation of the lease agreement between the trustees and Cain-Sloan, Harvey made the proposal which the Court by today's majority decision, orders the trustees to accept.
I am of the opinion that, under the circumstances just stated, it is (1) not right, as a matter of equity, or business ethics, to deprive the Cain-Sloan Company of this lease and (2) the Harvey Company is not equitably entitled to it. In my opinion, a Court ought no more to tolerate a wrong that supposedly benefits a trust, than it should tolerate a wrong that is detrimental to that trust.
In considering the action of the Court in substituting its discretion for that of the trustees, it should be kept in mind that this action is taken only because it is thought by the majority that the Harvey lease is "the superior" of the two. There is no finding, as indeed, there could not be, that these trustees have acted in bad faith, or arbitrarily abused the discretion vested in them. Therefore, this action of the Court in substituting its discretion for that of the trustees seems to be contrary to the rule which this Court has always heretofore followed. That rule is clearly stated by our Court of Appeals in the case of Smith v. Fleisch, 4 Tenn. Appeals, 139, 147, in language approved by this Court as follows: "Unless bad faith or a gross and arbitrary abuse of discretion on the part of the trustees is shown, a court of chancery will never interfere with the performance of the duties of the trustee in carrying out the terms of the trust, * * *." The language used by Scott on Trusts, Section 187, is that "the court will not substitute its judgment for his, (meaning the trustee) * * * so long as he acts not only in good faith and from proper motives, but also within the bounds of a reasonable judgment."
Moreover, in ordering these trustees to enter into the lease agreement proposed by Harvey, the majority has, in our opinion, ignored the long recognized rule stated as far back as 1850 by our case of Deadrick v. Armour, 29 Tenn. 588, 596, to be that "where trustees have a discretionary power to consent or not, a court of equity has no power to control or enforce them." All it can do if they violate the trust is to remove them, after holding their action illegal.
*482 The departure from these rules, as well as the action taken by the majority, is rested upon a premise which, in our opinion, (1) does not in fact exist and (2) assuming its existence, does not render legally permissible the action taken.
The premise upon which the majority predicates its action is that the Cain-Sloan lease was by agreement of the parties not to become effective unless sanctioned as to all its terms and conditions by the Court. This being the supposed situation, the Court is authorized, so says the majority, to order the trustees to accept a lease with a different party because the Court thinks it the superior of the two leases.
The majority decision establishes this premise by means of the construction which it places upon the word "approved", as used by the trustees and Cain-Sloan during the course of their negotiations. The tentative offer recited that "it would probably be necessary to have Court approval of the lease". The trustees' letter of acceptance stated that it should "be approved by the Chancery Court". Another stated that it was "subject to appropriate court approval". Testimony was to the same effect. In giving so broad a construction to the word "approved", as there used, the majority opinion has, we think, failed to consider the facts and circumstances surrounding the use of that word, in these negotiations. Those circumstances will now be stated.
It is not reasonably possible to lease the Lebeck Building on advantageous terms, or to a responsible lessee, unless the lease be for a reasonably long term. All the proof in this case is that the lease of a building in Nashville of the type and location of the Lebeck Building reasonably requires a duration of between twenty and thirty years. Pursuant to this requirement, the trustees and Cain-Sloan Company agreed that the duration of this lease would be twenty-five years.
Because of the fact, however, that the Lebeck wills provided that each trust "shall cease" upon the death of certain life tenants, and fee simple title vest in remaindermen, and because the ages of some of these life tenants were such that in all probability they would die long before twenty-five years had passed, the parties were doubtful as to whether the contemplated twenty-five years provision in the lease would be of any further validity after the death of a life tenant occurring before the expiration of that twenty-five years. The sole surviving life tenant of one of the two trusts was seventy and one half years old at the effective date (January 1, 1954) of the lease.
Except as to this period of twenty-five years, there was never any doubt in the minds of any one, and could not reasonably have been, that the trustees had authority, in the absence of an abuse of discretion, to agree, without court approval, upon such terms, conditions and provisions as they saw fit in the making of the lease. Hence in the use of the word "approved" by the Court, the parties had in mind, we think, an approval as to the term of twenty-five years, if the court should first find that the wills did not give the trustees the authority to make a lease extending in time beyond the probable duration of both or either of the trusts.
The collateral agreement between the parties conclusively demonstrates, we think, that the construction we have just placed upon the word "approved", as used by these parties, is the correct construction. That collateral agreement, after reciting that "there is a legal question" as to the authority of the trustees to validly lease the building for twenty-five years, then provides that the trustees "will apply to a court of competent jurisdiction for a determination as to whether or not the trustees had authority to make said lease for twenty-five years to be binding upon all parties, even if the trusts, or one of them, should terminate prior to the termination of the lease". (Emphasis supplied.)
The trustees are expressly given the right to make such an application to the Court by Code Section 8838(c) providing that any "trustee * * * may have a declaration *483 of rights or legal relations * * * to determine any question arising in the administration of the * * * trust, including questions of construction of wills". Scott on Trusts and I know of a no more highly respected text authority on the subject says at Section 189.3, page 1015, that when the authority as to the period of time for which trustees may agree that a lease will run does not seem to them to be clearly expressed in the trust instrument, then "the trustee should seek the advice of the superior Court as to the period they may be made to run". (Emphasis supplied.) Pursuant to that right and duty the trustees filed this bill.
We think the prayers of that bill conclusively place upon the word "approved", as used by these parties, the construction which we have placed upon it. Moreover, since parties to a litigation are bound by their pleadings, it becomes immaterial as to what these parties meant by their use of the word "approved" in negotiating the Cain-Sloan lease. The bill says this lease is binding upon the trustees if they had the authority to make a lease of twenty-five years, or if the Court approves such a period of time. The answer of Cain-Sloan says identically the same thing. So, it makes no difference what meaning the parties had in mind during the course of negotiations in their use of the word "approved".
In quoting the pertinent prayers of this bill any italicizing is added. Prayer 2 of the bill is as follows:
"2. That the respective wills of Michael S. Lebeck, deceased, and Louis Lebeck, deceased, be construed by this Court, with reference to the authority and power of complainant trustees to make leases of the realty in question, and particularly as to the authority and power of the complainant trustees to enter into the aforementioned lease agreement with the defendant. The Cain-Sloan Company, so as to bind the life beneficiaries and the ultimate remaindermen, both those in being and those yet unborn, for the term of years commencing January 1, 1954, and ending December 31, 1978."
The other (third) prayer of the bill is as follows:
"3. That, in the alternative, if the Court should be of the opinion that the complainant trustees did not have the authority under the respective wills to execute the lease agreement for the period of years set out in the lease agreement so as to bind the ultimate remaindermen, those in being and those not yet in being, without obtaining approval of this Court, that the Court ratify, confirm and approve the action of the complainant trustees in entering into the lease agreement for the term of years mentioned, as being to the manifest best interests and advantage of the life beneficiaries of the respective testamentary trusts involved, including the ultimate remaindermen in being and those not yet in being."
In our opinion, the language of these prayers permits only the conclusion that the relief prayed by the bill of the trustees is that the Court construe these wills with reference to the power of the trustees to make a lease for a period of time longer than the probable duration of the trusts, and if the wills do not give that power, then that the Court approve the action of the trustees in agreeing to a lease of twenty-five years as being manifestly to the best interest of all concerned.
Therefore, we think that the premise upon which the majority rests its conclusion does not in fact exist. Moreover, had it existed, that would not, in our opinion, make legally permissible the action of the majority. In the New York case of City Bank Farmers Trust Co. v. Smith, 263 N.Y. 292, 189 N.E. 222, 223, 93 A.L.R. 598, 600, it is said that:
"In accepting a trust, the trustee assumes the duty of administering the trust with reasonable care. That duty cannot be shifted, and though, at times, a trustee, when in doubt, may ask instructions *484 of the court, the court will not, ordinarily, advise the trustee what course he shall pursue where there is room for the exercise of choice."
There is room for the exercise of choice in the making of a lease of the Lebeck Building, as demonstrated by the fact that two leases are before the Court in this case. The only thing as to which there is doubt is the period of time which the trustees are authorized to let the lease run. That, then, is the only question which these trustees have the right to ask the Court to determine; and it is the only question that the Court has the authority to determine, in our opinion, in this case where the terms and provisions which should be inserted in the lease of the Lebeck Building are matters which its owners left to the discretion of these trustees.
In my judgment, when these wills are properly construed, it must be held that each of the Lebeck brothers intended to vest his trustees with the authority to make a lease for a reasonable period of time (in this case 25 years) regardless of whether such period of time would extend beyond the probable duration of both or either of the trusts.
Each of these wills, within its four corners, demonstrates that the dominant scheme and purpose of each testator was to provide his widow and children an income during all the years of their lives from rents paid by the lessees of the Lebeck Building. They had no way of knowing the identity of those who would then become the owners of this building. It has to follow by necessary implication that each testator intended for his trustee to agree upon such a term of years in the making of the lease as would procure an advantageous lease to an acceptable lessee. To say that the testator intended to limit the power of the trustees as to the period of time to the probable duration of the trusts is to say that the testator intended to so shackle his trustees as to destroy the rentability of the property. No responsible person would lease it under such conditions.
The Wisconsin Case of In re Upham, 152 Wis. 275, 140 N.W. 5, 48 L.R.A., N.S., 1004, is so similar in its facts pertinent to the instant case on the point under discussion as to make its reference appropriate. After observing that the property involved was of such character and location as to require a lease of long duration, if its income producing character was not to be seriously impaired, the Court said this:
"So from the will itself and from it, in connection with the circumstances characterizing its origin, we are constrained to hold that the power to lease, within any reasonable limitations, * * * was given by Mr. Plankinton to his trustees, * * * unless such unqualified power as was conferred in this case `during the term of the trust' by necessary implication or by settled law, conferred no power to create a leasehold term extending beyond the termination of the trust.
"The general doctrine, applicable to the matter under discussion, is that an express power to lease given to a trustee, confers authority to make a lease for any reasonable period, considering the kind of property and the custom of the country and all the circumstances bearing on the subject.
* * * * * *
"* * * where effectuation of the purpose of the trust reasonably requires the long lease. Then the power to do so, unless expressly or by necessary implication negatived, is presumed to be conferred by the trust. The exercise of it to carry out the purposes of the trust, is as legitimate as the exercise of any power expressly conferred." 152 Wis. 275, 140 N.W. 5, at pages 11-12, 48 L.R.A., N.S., at pages 1014-1016.
The power to make this lease of twenty-five years is not negatived by either of the Lebeck wills expressly or by necessary implication. The only fact which raised a question in the minds of the trustees was that each will provides that the trust for *485 the benefit of the life tenants shall cease upon the death of the life tenants and fee simple title vest in the remaindermen.
The fact is that upon the termination of the trust by reason of the death of a life tenant, the rents from that time on to the expiration of the lease are the properties of, and will be paid directly to, these who then, as remaindermen, become the owners of the property. Except, therefore, in a strictly technical sense, that period of the lease then unexpired is not in conflict with that provision of the will directing the vesting of title in fee simple upon the death of the life tenant.
In our case of Ricardi v. Gaboury, 115 Tenn. 484, 493, 89 S.W. 98, 100, (a case in which the powers of testamentary trustees were not involved) the Court said with reference to the making of a ninety-nine year lease in which minors were interested that:
"* * * the making of a lease such as the one desired by the complainants in this cause does not deprive the parties of any interest in the property to be leased. Its effect is simply to prevent the lessors from entering upon the property and taking actual possession thereof as long as the terms of the lease are observed by the lessee. The title to the property, and the right of alienation subject to the lease, remain as if no lease had been executed."
But if there be a conflict, this provision with reference to the termination of the trust must yield to each testator's dominant scheme and intent to procure to his widow and children an income during their lives from the proceeds of the lease of the Lebeck Building. East & Collins v. Burns, 104 Tenn. 169, 181, 56 S.W. 830. When this required yielding to that dominant intent is had, it seems to follow that implicit in this dominant intent of each testator is the intent to authorize his trustees to rent the Lebeck Building under any condition for a reasonable length of time (in this case twenty-five years) without regard to the probable duration of either trust estate.
But if mistaken in the conclusion that the intent of the testators was to vest authority in the trustees to lease the property for a reasonable term of years, notwithstanding the fact that such a term will extend beyond the probable duration of the trust, nevertheless, all the Courts which have been involved in this litigation have concurred in finding that it is for the best interest of all concerned that the Lebeck Building be leased for a reasonable period of time, to wit, twenty-five years; and that, in the language of Scott on Trusts, the Court is authorized to permit, and does permit, a lease of this duration "since the Court has power to authorize or direct deviations from the terms of the trust where exigencies have arisen not contemplated by the settlor". Scott on Trusts, Section 189.3, pages 1015-1016. In our opinion the Court should have stopped right there. This would have left in full force and effect the lease which the trustees, in the exercise of the discretion that the testators clearly vested in them, had selected, to wit, the Cain-Sloan lease.
However, we think the Court has strayed far from the law of trust, as heretofore understood and practiced, in going further by substituting its discretion for that of the trustees, in a matter as to which there is a choice, and in mandamusing, in effect, these trustees to scuttle the lease which they had made and sign the one which the majority of this Court considers "superior".
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49 F. Supp. 2d 1178 (1999)
SANTA FE GAMING CORPORATION, a Nevada corporation, Plaintiff,
v.
HUDSON BAY PARTNERS, L.P., a Delaware limited partnership, and David H. Lesser, Defendants.
No. CV-S-99-00298-JBRLRL.
United States District Court, D. Nevada.
May 13, 1999.
*1179 Dean S. Kitchens, Kevin Rosen, Gibson, Christopher D. Dusseault, Marshall Sprung, Gibson, Dunn & Crutcher, LLP, Los Angeles, CA, Kirk B. Lenhard, Jones Vargas, Las Vegas, NV, for plaintiff.
Donald H. Chase, Morrison, Cohen, Singer & Weinstein, New York, NY, Dennis Kennedy, Lionel, Sawyer & Collins, Las Vegas, NV, for defendant.
ORDER
RAWLINSON, District Judge.
On April 12, 1999, Plaintiff Santa Fe Gaming ("Santa Fe") moved (# 31) for a preliminary injunction to prevent Defendants Hudson Bay Partners ("Hudson") and David Lesser from voting their shares of preferred stock to elect two new board members at the next shareholder meeting. Santa Fe claims that Defendants failed to appropriately file a Schedule 13D as required by the Securities Exchange Act of 1934. The 1934 Act was amended by the Williams Act to include Section 13(d), codified at 15 U.S.C. § 78m(d), which provides that any person, or group of persons, after acquiring more than 5% of a class of registered voting equity securities, must file within ten (10) days with the appropriate *1180 parties a Schedule 13D disclosing the identity of the person filing, the number of shares owned by them, the source of the funds used to purchase the shares, and the purpose of the purchase. Santa Fe also seeks to enjoin Defendants from purchasing any additional Santa Fe stock and from further violating Section 13(d).
On April 22, 1999, Defendants opposed (# 50) Santa Fe's motion. Defendants claim that they were not required to file a Schedule 13D. Alternatively, Defendants claim that even if they were required to file a Schedule 13D, they properly filed a Schedule 13D as a precaution. On April 26, 1999, Santa Fe replied (# 53) to Defendants' opposition. A hearing was held on the matter on April 27, 1999. Santa Fe and Defendants were both represented by counsel at the hearing.
FACTS
Plaintiff Santa Fe Gaming (Santa Fe) is a Nevada Corporation. Defendant Hudson Bay ("Hudson") is a Delaware Limited Partnership. Hudson, along with Defendant David Lesser, general partner of Hudson, owns more than 33% of Santa Fe's preferred stock.
In the fall of 1997, Lesser as an employee of Crescent Real Estate Equities Ltd., "Crescent" began exploring investment opportunities in the Las Vegas gaming industry. As a result, Crescent entered a merger agreement with Station Casinos ("Station"). In late January 1998, Lesser discussed with Station the possibility of acquiring Santa Fe. Between January 1998 and June 1998, Lesser participated in a meeting between Station and Santa Fe to discuss a potential acquisition of Santa Fe by Crescent. In the course of those negotiations, Lesser was provided with certain confidential, non-public information. In a letter dated July 23, 1998, Santa Fe rejected Crescent's acquisition offer.
At the same time Lesser was negotiating the acquisition of the Santa Fe on behalf of Crescent, Lesser and Hudson began acquiring certain bonds (the "Pioneer Bonds") that had been issued by Pioneer Finance ("Pioneer"), a subsidiary of Santa Fe. The Pioneer Bonds represented $60 million in long term debt guaranteed by Santa Fe, and were to mature on December 1, 1998.
In October and November of 1998, Pioneer sought consent of the holders of the Pioneer Bonds to forbear exercising remedies if the Pioneer Bonds were not paid by the maturity date. In a letter to Santa Fe dated January 4, 1999, Lesser disclosed that he had acquired $4.7 million of the 1998 bonds and was in contact with an entity that owned $6.5 million of the Pioneer Bonds. Lesser proposed that if Santa Fe wished to avoid bankruptcy, Santa Fe's Board would have to be reconfigured to consist of seven directors, four appointed by Hudson. On January 12, 1999, Santa Fe informed Lesser that it would take no action with respect to his proposal. Santa Fe has not paid the amount owed on the bonds. On January 14, 1999, Hudson, as holder of $4.7 million of the Pioneer Bonds, commenced an involuntary bankruptcy proceeding against Pioneer and Santa Fe.
At the same time, beginning on December 30, 1997, Defendants began to purchase preferred shares of stock in Santa Fe (the "Preferred Shares"). The rights of shareholders acquiring the Preferred Shares (the "Preferred Shareholders") are set forth in a Certificate of Designation (the "Certificate"). The Certificate provides that Preferred Stock "shall have a liquidation preference of $2.14 per share plus accrued and unpaid dividends." Certificate, p. 6, ¶ 7(a). Dividends were to be paid semi-annually at the rate per annum per share (the "Dividend Rate") initially set at 8% of $2.14 plus accrued unpaid dividends. Certificate, p. 1-2, ¶ 2(a). The Certificate also provided for increases in the Dividend Rate with a cap of 16% per annum per share. Id. Santa Fe had the option of redeeming the Preferred Shares by paying the liquidation preference. Certificate, p. 3, ¶ 3(a). Upon redemption, dividends would no longer accrue and the *1181 Preferred Shares would cease to be outstanding. Id.
Preferred Shareholders were to have no general voting rights in Santa Fe. Certificate, p.5, ¶ 5(a). The Certificate, however, provided that Preferred Shareholders could vote on certain extraordinary matters that were of special concern to Preferred Shareholders. Id. at ¶ 5(b). Preferred Shareholders could vote on changes in the number of authorized shares or proposed amendments to the articles of incorporation, when either would materially and adversely affect any preference or any right to those Preferred Shareholders. Id. Also, if at any time dividends in an amount equal to four dividend payments accrued and remained unpaid, Preferred Shareholders, as a class, would be entitled to elect two (2) special directors to the Santa Fe Board. Id. at ¶ 5(c). Upon payment of all dividends in arrearage, Preferred Shareholders would be divested of this voting right and the special directors would be thereupon terminated. Id.
Lesser in a deposition in another case testified that he purchased the stock "strictly for investment purposes." Santa Fe alleges, however, that Defendants purchased the stock as part of a plan to take control of Santa Fe. Santa Fe claims that Lesser's actions as an employee of Crescent, which is also a limited partner in Hudson, and Lesser's actions with regards to the Pioneer Bonds clearly indicate Lesser's desire to obtain control of Santa Fe.
Santa Fe further offers Lesser's copy of Santa Fe's 1997 Form 10-K (the "Form 10-K") as further proof of Lesser purpose in purchasing the Preferred Stock. In its Form 10-K, Santa Fe disclosed that if it failed to pay four consecutive semi-annual dividends, Preferred Shareholders would be able to appoint two directors to Santa Fe's board. Lesser underlined and bracketed this disclosure. The Form 10-K also disclosed that no such dividends were paid in 1997. The fourth accrual matured on September 30, 1998. Santa Fe did not pay dividends on September 30, 1998.
By September 30, 1998, Defendants owned more than 5% of the outstanding Preferred Shares. Between October 22, 1998 and January 25, 1999, Defendants acquired an additional 1,240,800 or 14% of the Preferred Shares. On January 15, 1999, Santa Fe notified Defendants that Preferred Shareholders were entitled to elect two (2) directors. Lesser, however, had become aware of Preferred Shareholders' right to elect two (2) directors from his copy of the Form 10-K. Also, in the January 4th letter from Lesser requesting restructuring of the Santa Fe Board of Directors, Lesser indicated that he was aware that Preferred Shareholders would be able to appoint two directors.
On January 25, 1999, Defendants filed their first Schedule 13D. The Securities Exchange Act of 1934 was amended by the Williams Act to include Section 13(d), codified at 15 U.S.C. § 78m(d), which provides that any person, or group of persons, after acquiring more than 5% of a class of registered voting equity securities, must file within ten (10) days with the appropriate parties a Schedule 13D disclosing the identity of the person filing, the number of shares owned by them, the source of the funds used to purchase the shares, and the purpose of the purchase. Defendants filed four amendments to their Schedule 13D, the last on March 19, 1999. In their Schedule 13D, Defendants disclosed Hudson and Lesser as the persons filing the Schedule 13D. Defendants further disclosed that Hudson used funds from its working capital and margin borrowing to acquire Hudson's Preferred Shares and that the personal funds of Mr. Lesser were used to purchase his Preferred Shares.
Defendants' Schedule 13D additionally disclosed that the Preferred Shares were purchased for investment purposes. The Schedule 13D, however, also disclosed that Defendants had discussions with Santa Fe regarding merger, reorganization, liquidation, or a change in the present board of directors. Defendants' Schedule 13D further indicated that Defendants intended to *1182 consider various alternative courses of action with respect to their stock including recommendations as to business strategies, acquisitions, dividend policies, pursing transactions involving a change in control of Santa Fe, and possibly the sale of all or a portion of Defendants shares. It also disclosed that Defendants own certain bonds guaranteed by Santa Fe and that Defendants have filed a petition to place Santa Fe in involuntary bankruptcy.
The fourth amendment to Defendant's Schedule 13D discloses that Defendants proposed a slate of four nominees for election to the board and proposed one nominee to the Board included in a slate proposed by the union representing Santa Fe's employees.
Santa Fe alleges that Defendants' Schedule 13D was untimely. Santa Fe argues that since Defendants had already acquired more than 5% of the Preferred Shares, Defendants were required to file their Schedule 13D on October 10, 1998, ten (10) days after Santa Fe failed to pay the fourth accrued dividend.
Santa Fe further alleges that Defendants' Schedule 13D was inadequate. Santa Fe claims that Defendants' Schedule 13D omitted to disclose that Defendants had an agreement with the union representing Santa Fe's employees as to how Defendants would vote their shares. Santa Fe further claims that Defendants omitted the source of Lesser's personal funds and Hudson's working capital and margin borrowing. Santa Fe also contends that Defendants omitted that the Preferred Shares were purchased to gain control of Santa Fe. Santa Fe further argues that Defendants were required to disclose the specific facts of how Defendants attempted to obtain control of Santa Fe. Santa Fe concludes that Defendants' inadequate Schedule 13D entitles Santa Fe to a preliminary injunction preventing Defendants from voting for the election of the two special directors at an upcoming shareholders' meeting. Santa Fe also seeks to enjoin Defendants from purchasing any additional Santa Fe stock and from further violating Section 13(d).
PRELIMINARY INJUNCTION
In Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 57, 59 n. 9, 95 S. Ct. 2069, 45 L. Ed. 2d 12 (1975), the Supreme Court recognized that failing to file an appropriate Schedule 13D in violation of the Williams Act could support the grant of injunctive relief to prevent a shareholder who is currently in violation from acquiring further shares, exercising voting rights, or from further violations. The Supreme Court, however, held that such injunctive relief was only available upon satisfying "the traditional prerequisites of extraordinary equitable relief by establishing irreparable harm." Id. at 61, 95 S. Ct. 2069. In Rendish v. City of Tacoma, 123 F.3d 1216, 1219 (9th Cir.1997), the Ninth Circuit determined that "[t]raditional criteria for granting a preliminary injunction include: 1) a strong likelihood of success on the merits; 2) the possibility of irreparable injury to the plaintiff; 3) a balance of hardships favoring the plaintiff; and 4) the advancement of the public interest." The party moving for a preliminary injunction has the burden of showing a combination of either 1) probable success on the merits and the possibility of irreparable injury or 2) serious questions as to the merits are raised and the balance of hardships tips sharply in the movant's favor. Id.; see also Nordyke v. Santa Clara County, 110 F.3d 707, 710 (9th Cir.1997). "These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." Baby Tam & Co. v. City of Las Vegas, 154 F.3d 1097, 1100 (9th Cir.1998). "They are not separate tests but rather outer reaches of a single continuum." Id. Santa Fe argues that it is entitled to injunctive relief because it has shown probable success on the merits and the possibility of irreparable harm.
As Santa Fe bases its request for injunctive relief on Defendants alleged violation *1183 of Section 13(d) of the Security and Exchange Act of 1934, success on the merits can only be established if Defendants are required to comply with Section 13(d). If Defendants are required to so comply, this Court must then determine whether Defendants' actions are in violation of Section 13(d).
Section 13(d) is codified at 15 U.S.C. § 78m(d) and applies to the following:
(1) Any person who, after acquiring directly or indirectly the beneficial ownership of any equity security of a class which is registered pursuant to section 781 of this title ... is directly or indirectly the beneficial owner of more than 5 percent of such class....
Under the language of Section 13(d) only beneficial owners of "equity securities" are obligated to file the required statement. The term "equity security" is defined as "any stock or similar security; or any security convertible, with or without consideration, into such a security...." 15 U.S.C. § 78c(a)(11) (1997).
Additionally, the Security and Exchange Commission ("SEC") is authorized to exempt any acquisition or proposed acquisition of a security from the requirement of filing a Schedule 13D. See 15 U.S.C. § 78m(d)(6)(D). Pursuant to 17 C.F.R. § 240.13d-1(i), the SEC provided that equity securities do "not include securities of a class of non-voting securities."
The SEC does not define the term "non-voting securities." At first glance, the Preferred Shares owned by Defendants appear to be voting securities. While Preferred Shareholders have no general voting rights, these shares provide for voting rights on extraordinary matters which would materially and adversely affect the rights, powers or privileges of Preferred Shareholders. Preferred Shareholders also are able to elect two (2) additional special directors to Santa Fe's board of directors in the event that four dividend payments have accrued but remain unpaid.
On closer examination, however, the limited voting rights given to Preferred Shareholders are not the type of voting rights that would cause the Preferred Shares to be viewed as outside the scope of "non-voting securities." The Preferred Shares, in addition to being "equity securities" must also be a "class which is registered pursuant to section 781 of this title [title 15]" to be subject to the reporting requirements of Section 13(d). 15 U.S.C. § 78m(d). Section 781 requires registration of securities that are traded on a "national security exchange." National security exchanges, such as the New York Stock Exchange ("NYSE") and the American Stock Exchange ("AMEX"), however, require that the preferred stock of listed issuers must accord its holders the right to elect at least two members to the board upon default in the payment of fixed dividends after a specified period. See Joel Seligman, Equal Protection in Shareholder Voting Rights: The One Common Share, One Vote Controversy, 54 Geo. Wash.L.Rev. 687, 691, n. 32 (1986).
The SEC intended that the requirements of Section 13(d) not apply to "non-voting securities." Securities, however, must be listed on a national exchange to be subject to those requirements. As securities listed on the major national exchanges do not permit the listing of securities without any voting rights, the term "non-voting securities" must refer to those securities that have no voting rights other than those minimum voting rights required by national exchanges. Otherwise, the term "non-voting security" would not have its intended effect of excluding a certain class of securities from the requirements of Section 13(d) because non-voting securities would already be excluded due to their inability to be registered on a national exchange.
Likewise, the Preferred Shareholders' right to vote on extraordinary matters that would materially and adversely affect their rights is a mandatory limited voting right that does not exclude the shares from the scope of "non-voting securities." Most states require that businesses that are incorporated under their laws must provide *1184 such voting rights. For example, Nevada, Santa Fe's state of incorporation, requires that any change in the number of authorized shares or proposed amendment that would alter or change any preference or any right to a class of outstanding shares must be approved by the vote of the majority of voting power of each class whose rights are affected. See N.R.S. § 78.207(3), § 78.390(3) (1997). Other states have similar requirements. See Del. Code Ann., tit. 8, § 242(b)(2) (1998); N.Y. Bus. Corp. Law § 804(a) (1999). As the securities regulated by Section 13(d) must be accorded limited voting rights due to the requirements of state law and the rules of the national exchanges, "non-voting securities," which the SEC intended to be an additional exclusion from the requirements of Section 13(d), must be those securities that have no general voting rights and are accorded only the minimum voting rights prescribed by law or the national exchanges.
The Preferred Shares held by Defendants are non-voting securities. The voting rights of Preferred Shareholders are limited to changes in the number of authorized shares or proposed amendments to the articles of incorporation, when either would materially and adversely affect any preference or any right to those Preferred Shareholders, the minimum rights required by Nevada law. Additionally, Preferred Shareholders' right to elect two (2) special directors in the event dividends remain unpaid for four dividend periods is consistent with the requirements of the national exchanges. The SEC, therefore, intended to exclude the Preferred Shares held by Defendants from the requirements of Section 13(d). As Defendants are not bound by the requirements of Section 13(d), Santa Fe cannot obtain injunctive relief on that basis. See Portsmouth Square Inc. v. Shareholders Protective Committee, 770 F.2d 866, 874 (9th Cir.1985) (no liability under Section 13(d), except to the extent that shareholder had a Section 13(d) filing obligation); Calvary Holdings v. Chandler, 948 F.2d 59, 64 n. 8 (1st Cir.1991) (if a shareholder is not required to file under Section 13(d), a precautionary filing, even if inadequate, cannot support a cause of action based on a violation of Section 13(d)).
Santa Fe agrees that the Preferred Shares initially were non-voting securities. Santa Fe argues, however, that once Defendants became entitled to vote for the special directors upon Santa Fe's failure to pay dividends, the Preferred Shares were transformed into voting securities. This argument is flawed on several grounds.
First, Santa Fe ignores the voting rights Preferred Shareholders have even if dividends are consistently paid. Preferred Shareholders are always entitled to vote on extraordinary matters that would materially and adversely their rights. If the right to vote alone were sufficient to exclude the Preferred Shares from being termed a non-voting security, Preferred Shareholders' right to vote on such extraordinary matters, which is not tied to dividend payments, would be sufficient to cause the Preferred Shares to be excluded from that category. As previously set forth, however, that conclusion would cause the exclusion "non-voting security" to be meaningless because no security would be excluded.
Next, under Santa Fe's theory, the SEC has created serious gaps in shareholder protection. Santa Fe claims that failure to pay the fourth dividend, automatically enables Preferred Shareholders to vote for the two (2) special directors. Santa Fe argues that under Section 13(d) shareholders that have acquired more than 5% of the Preferred Shares, are required to file a Schedule 13D report within ten (10) days after the fourth dividend is not paid as scheduled. As long as Santa Fe pays dividends, however, shareholders can continue to accumulate Preferred Shares, upwards to 100%, anonymously. The primary reason for requiring shareholders to report when they have only accumulated 5% of a class of stock is to inform other shareholders that someone may be attempting to control a class of stock well before it actually *1185 happens. See Portsmouth Square, 770 F.2d at 873 (Section 13(d) is primarily concerned with disclosure of potential changes in control resulting from new aggregations of stockholdings); GAF Corp. v. Milstein, 453 F.2d 709, 717 (2nd Cir. 1971) (Section 13(d) is an early warning system designed to alert investors in securities markets to potential changes in corporate control and to provide them with an opportunity to evaluate the effect of these potential changes) cert. denied, 406 U.S. 910, 92 S. Ct. 1610, 31 L. Ed. 2d 821 (1972); Bath Indus., Inc. v. Blot, 427 F.2d 97, 113 (7th Cir.1970) (the purpose of the filing and notification provisions of Section 13(d) is to give investors and stockholders the opportunity to assess the insurgents' plans before selling or buying stock in the corporation). Santa Fe's theory would prevent that notice. Additionally, Shareholders might not have any prior notice that a Preferred Shareholder would be able to control the election of the two special directors, if the shareholders' meeting is scheduled within ten (10) days after the fourth dividend is not paid.
The more likely explanation is that SEC did not overlook the aforementioned gap but rather decided that shares, such as the Preferred Shares, are not transformed into voting securities when the limited voting rights may be exercised but maintain their character as "non-voting securities." SEC regulations do not reflect the view that shareholders need to be informed about the accumulation of securities that are similar to the Preferred Shares. In Rondeau, the Supreme Court explained that the Williams Act, which includes Section 13(d), was enacted to insure that potential investors would be informed in the event of a tender offer or some other similar contest for control. 422 U.S. at 49, 95 S. Ct. 2069. Defendants, however, will not be able to take control in the same manner that one would when making a tender offer. Defendants, at most, will be entitled to elect two (2) of a total of nine (9) directors, no matter how many Preferred Shares they acquire. The right to elect those directors is also eliminated upon the payment of the outstanding dividends. There simply is no chance that Defendants could seize control of the Santa Fe without notice to the other shareholders, which is the evil Section 13(d) was designed to prevent.
Santa Fe notes that plans to influence the election of two directors is sufficient control to make those shareholders subject to Section 13(d) to report those plans. See General Aircraft Corp. v. Lampert, 556 F.2d 90, 96 (1st Cir.1977) (shareholder subject to Section 13(d) must report control intention when shareholder has elected two of his own nominees to the board, proposed drastic changes regarding the business and corporate structure; and enlisted prospective nominees for a dissident slate of directors). Santa Fe argues that if the plan to elect two directors must be reported then the power to vote for two directors should cause Defendants to be subject to the Section 13(d) reporting requirements.
In United States v. Evans, 375 F.2d 730, 731 (9th Cir.1967), the Ninth Circuit, in a tax case, held that where all the characteristics of debt are present the fact that the holder participates in management does not convert an instrument into an equity stock. It must be remembered that the securities regulated by Section 13(d) are "equity securities." The term "equity" indicates ownership or a right to share in the profits of the corporation. Id.; see also E.H.I. of Florida, Inc. v. Insurance Co. of North America, 652 F.2d 310, 314 (3rd Cir.1981)(bonds are not equity securities because holders do not have an ownership right to share in profits). An ownership interest also cannot be terminable independent of the termination of the corporation. Evans, 375 F.2d at 731.
Preferred Shareholders do not share in the corporation's profits. The dividends paid on the Preferred Shares are calculated by a predetermined percentage rate. Additionally, the Preferred Shares may be redeemed at the election of Santa Fe by paying a redemption price. Once the redemption *1186 price is paid, Preferred Shareholders' rights terminate as the Preferred Shares are no longer deemed to be outstanding. Because the Preferred Shares do not share in profits and may be redeemed at the election of Santa Fe, those shares are more akin to debt than equity. Preferred Shares are only endowed with the limited voting rights necessary to insure that their priority position as debt is not affected. Preferred Shares cannot be used to obtain control of the equity of Santa Fe. Consequently, Defendants are not required to report under Section 13(d) because the Preferred Shares do not represent an equity interest in the Santa Fe.
Since Defendants were not required to report their Preferred Share holdings under Section 13(d), Santa Fe has not demonstrated either probable success on the merits or serious questions going to the merits. Injunctive relief on that basis, is therefore unavailable. Accordingly,
IT IS ORDERED that Santa Fe's motion for a preliminary injunction (# 31) is DENIED.
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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/2467728/
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732 F. Supp. 2d 1363 (2010)
In re TYSON FOODS, INC., Fair Labor Standards Act Litigation.
Williams v. Tyson Foods, Inc.
MDL Docket No. 1854. Case Nos. 4:07-MD-1854 (CDL), 1:07-CV-93 (CDL).
United States District Court, M.D. Georgia, Columbus Division.
August 5, 2010.
*1364 Ann K. Wiggins, Candis A. McGowan, Robert F. Childs, Jr., Robert L. Wiggins, Jr., Herman N. Johnson, Jr., Wiggins, Childs, Quinn & Pantazis L.L.C., Robert J. Camp, The Cochran Firm, Birmingham, AL, David H. Moskowitz, Moskowitz & Caraway, P.C., Preyesh K. Maniklal, Deirdre M. Stephens-Johnson, Hezekiah Sistrunk, Jr., Lisa A. Schreter, Littler Mendelson PC, John T. Stembridge, Atlanta, GA, Peter Winebrake, The Winebrake Law Firm, LLC, Dresher, PA, Richard Celler, Davie, FL, George A. Hanson, Stueve Siegel Hanson, LLP, Kansas City, MO, Jairus M. Gilden, Minneapolis, MN, Roger Doolittle, Jackson, MS, Amy K. Bock, Marcus Gerardo Mungioli, Akin Gump Strauss Hauer & Feld LLP, Dallas, TX, for Plaintiffs.
ORDER
CLAY D. LAND, District Judge.
In this action, Defendant's current and former employees claim that Defendant *1365 violated certain provisions of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., at its plant in Dawson, Georgia. Defendant agreed to conditional certification of an opt-in class, and potential opt-in class members received notice and an opportunity to consent to join this action. A number of individuals filed consents to join this action. Defendant contends that twelve of the opt-in Plaintiffs ("Plaintiffs") failed to disclose their claims against Defendant during their bankruptcy proceedings and that Plaintiffs' claims are thus barred by the doctrine of judicial estoppel. Presently pending before the Court is Defendant's motion for partial summary judgment on judicial estoppel grounds (ECF No. 178). For the reasons set forth below, the motion is granted.
SUMMARY JUDGMENT STANDARD
Summary judgment may be granted only "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)(2). In determining whether a genuine issue of material fact exists to defeat a motion for summary judgment, the evidence is viewed in the light most favorable to the party opposing summary judgment, drawing all justifiable inferences in the opposing party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). A fact is material if it is relevant or necessary to the outcome of the suit. Id. at 248, 106 S. Ct. 2505. A factual dispute is genuine if the evidence would allow a reasonable jury to return a verdict for the nonmoving party. Id.
FACTUAL BACKGROUND
Unless otherwise noted, the following facts are undisputed for purposes of summary judgment.
I. All Plaintiffs
Plaintiffs are current or former hourly chicken processing employees of Defendant. Plaintiffs each received a notice that told them of the FLSA lawsuit against Defendant and explained Plaintiffs' legal rights and choices with regard to the lawsuit; the notice stated, in pertinent part, that Plaintiffs could join the FLSA lawsuit by signing a consent form and returning it by mail:
JOIN THE LAWSUITSign a consent form to join this lawsuit. Wait for the result. Be bound by the result of the lawsuit. By joining the lawsuit, you may get money if the workers win or get a settlement. If the workers lose you will get no money. If you join this case, you give up any rights to sue Tyson on your own about the same legal claims in this lawsuit, and you agree to be bound by the results in this case, win or lose.
Joint Scheduling & Case Mgmt. Order Attach. A 1, FLSA Lawsuit Notice, Jan. 2, 2008, ECF No. 29-2 in 4:07-md-1854 [hereinafter FLSA Notice]. Each Plaintiff joined the FLSA action by completing a consent form, which states:
I have been employed by Tyson Foods at its plant in Dawson as an hourly chicken processing worker. I consent to become a party plaintiff in an action against Tyson Foods under the Fair Labor Standards Act which claims that chicken processing workers were not paid by Tyson for all hours worked. By joining this lawsuit, I designate the plaintiff(s) named in the complaint, including Mary Williams, as my representatives, to the fullest extent possible under applicable laws, to make decisions on my behalf concerning the litigation, the method and manner of conducting *1366 and resolving the litigation, and all other matters pertaining to this lawsuit. I choose to be represented by class counsel Morgan & Morgan, and other lawyers they associate with. I authorize my attorneys to take any steps necessary to pursue my claims, including filing new lawsuits.
E.g., Def.'s Statement of Undisputed Material Facts Ex. 6, Bogans Consent Form, ECF No. 179-3.
II. Willie Bogans
On October 10, 2005, Willie Bogans petitioned for bankruptcy protection under Chapter 13 of the United States Bankruptcy Code. He is represented by counsel in his bankruptcy proceeding, which is pending in the United States Bankruptcy Court for the Middle District of Georgia. The Chapter 13 Schedule B-Personal Property form asked Bogans to report any contingent and unliquidated claims, and the Statement of Financial Affairs asked Bogans to list all lawsuits to which Bogans was a party at the time of the bankruptcy proceeding. Bogans's Chapter 13 bankruptcy plan was confirmed on January 31, 2006. On May 21, 2008, Bogans consented to join the FLSA litigation. Pls.' Mem. in Opp'n to Def.'s Mot. for Summ. J. Ex. H, Webber Decl. ¶ 2, ECF No. 187-3 [hereinafter Webber Decl.]. Bogans's bankruptcy case has not been closed, dismissed, or converted, and Bogans had not, as of the filing of Defendant's summary judgment motion, filed any documents in his bankruptcy case that disclosed his claims against Defendant.
III. Constance Carter
Constance Carter petitioned for Chapter 13 bankruptcy protection on August 31, 2006. She is represented by counsel in the bankruptcy proceeding, which is pending in the United States Bankruptcy Court for the Middle District of Georgia. The Chapter 13 Schedule B-Personal Property form asked Carter to report any contingent and unliquidated claims, and the Statement of Financial Affairs asked Carter to list all lawsuits to which Carter was a party at the time of the bankruptcy proceeding. In response, Carter disclosed an action brought by her against AAA Finance. Carter's Chapter 13 bankruptcy plan was confirmed on January 3, 2007. One of Carter's creditors sought relief from the bankruptcy court's automatic stay because Carter had not stayed current on her payments, and the bankruptcy court entered a consent order granting the creditor's motion for relief from the stay on June 9, 2008. Carter consented to join the FLSA litigation on June 2, 2008. Webber Decl. ¶ 2. Carter's bankruptcy has not been closed, dismissed, or converted, and Carter had not, as of the filing of Defendant's summary judgment motion, filed anything in her bankruptcy case that disclosed her claims against Defendant.
Carter stated that she "did not know or understand that, when [she] opted into the lawsuit against [Defendant] ..., [she] acquired a new asset" or that the FLSA lawsuit "might be considered property of the bankruptcy estate." Pls.' Mem. in Opp'n to Def.'s Mot. for Summ. J. Ex. C, Carter Decl. ¶¶ 7-8, ECF No. 187-3. Carter also stated that she "knew that [she] should contact [her] bankruptcy attorney if [she] had problems with [her] creditors after [her] plan was confirmed or if [she] lost [her] job, but [she] did not know or understand that [she] was required to change, update or amend any of [her] bankruptcy papers to add the lawsuit." Id. ¶ 9. Finally, Carter stated that she "was not trying to hide [her] assets from *1367 [her] creditors, the bankruptcy court, or anyone else." Id. ¶ 12.
IV. Vivian Mansfield Duncan
On September 20, 2006, Vivian Mansfield Duncan petitioned for bankruptcy protection under Chapter 13 of the United States Bankruptcy Code.[1] She is represented by counsel in the bankruptcy proceeding, which is pending in the United States Bankruptcy Court for the Middle District of Georgia. The Chapter 13 Schedule B-Personal Property form asked Duncan to report any contingent and unliquidated claims, and the Statement of Financial Affairs asked Duncan to list all lawsuits to which Duncan was a party at the time of the bankruptcy proceeding. Duncan's Chapter 13 bankruptcy plan was confirmed on January 30, 2007. Duncan consented to join the FLSA litigation on May 28, 2008. Webber Decl. ¶ 2. On June 12, 2008, the bankruptcy trustee moved to dismiss Duncan's bankruptcy plan based on Duncan's failure to stay current on her payments, though the trustee later withdrew the motion to dismiss. Def.'s Statement of Undisputed Material Facts Ex. 14, Duncan Bankr. Ct. Docket, Docs. 33-34, ECF No. 179-4. Duncan's bankruptcy has not been closed, dismissed, or converted, and Duncan had not, as of the filing of Defendant's summary judgment motion, filed any documents in her bankruptcy case that disclosed her claims against Defendant.
Duncan stated that she "did not know or understand that, when [she] opted into the lawsuit against [Defendant] ..., the lawsuit was considered a new asset" or that "the lawsuit might be considered property of the bankruptcy estate." Pls.' Mem. in Opp'n to Def.'s Mot. for Summ. J. Ex. D, Duncan Decl. ¶¶ 7-8, ECF No. 187-3. Duncan also stated that she thought her responsibility "was to make [her] payments and to let [her] bankruptcy lawyer know if [she] lost [her] job or had any other change in [her] income," and she did not know that she might need to update her bankruptcy case until Defendant filed its summary judgment motion. Id. ¶¶ 10-11. Duncan further stated that she "did not intend to hide any assets from [her] creditors, the bankruptcy court, or anyone else." Id. ¶ 12.
V. Walter Flowers
On May 9, 2007, Walter Flowers petitioned for bankruptcy protection under Chapter 13 of the United States Bankruptcy Code. He was represented by counsel in his bankruptcy proceeding, which was filed in the United States Bankruptcy Court for the Middle District of Georgia. The Chapter 13 Schedule B-Personal Property form asked Flowers to report any contingent and unliquidated claims, and the Statement of Financial Affairs asked Flowers to list all lawsuits to which Flowers was a party at the time of the bankruptcy proceeding. Flowers's Chapter 13 bankruptcy plan was confirmed on August 22, 2007. Flowers consented to join the FLSA litigation on April 30, 2008. Webber Decl. ¶ 2. On August 4, 2008, Flowers filed a notice of voluntary conversion to Chapter 7 under Section 1307(a) of the Bankruptcy Code. An order discharging Flowers from bankruptcy was entered on December 10, 2008. Flowers filed no documents in his bankruptcy case that disclosed his claims against Defendant.
*1368 VI. Elizabeth Hawkins
Elizabeth Hawkins petitioned for Chapter 13 bankruptcy protection on February 7, 2008.[2] She is represented by counsel in the bankruptcy proceeding, which is pending in the United States Bankruptcy Court for the Middle District of Georgia. The Chapter 13 Schedule B-Personal Property form asked Hawkins to report any contingent and unliquidated claims, and the Statement of Financial Affairs asked Hawkins to list all lawsuits to which Hawkins was a party at the time of the bankruptcy proceeding. Hawkins's Chapter 13 bankruptcy plan was confirmed on April 30, 2008. Hawkins consented to join the FLSA litigation on May 5, 2008. Webber Decl. ¶ 2. Hawkins's bankruptcy has not been closed, dismissed, or converted, and Hawkins had not, as of the filing of Defendant's summary judgment motion, filed any documents in her bankruptcy case that disclosed her claims against Defendant.
Hawkins stated that she "did not know or understand that, when [she] opted into the lawsuit against [Defendant] ..., the lawsuit was considered a new asset" or that "the lawsuit might be considered property of the bankruptcy estate." Pls.' Mem. in Opp'n to Def.'s Mot. for Summ. J. Ex. B, Hawkins Decl. ¶¶ 7-8, ECF No. 187-3. She further stated that she "knew to contact [her] bankruptcy lawyers about changes to [her] income and [her] car, but [she] didn't know to add the lawsuit to [her] bankruptcy filings" until Defendant filed its summary judgment motion. Id. ¶¶ 9-10. Finally, Hawkins stated that she "did not intend to hide any assets from [her] creditors, the bankruptcy court, or anyone else." Id. ¶ 12.
VII. Barbara Humphries
On September 6, 2007, Barbara Humphries petitioned for Chapter 13 bankruptcy protection. She is represented by counsel in the bankruptcy proceeding, which is pending in the United States Bankruptcy Court for the Middle District of Georgia. The Chapter 13 Schedule B-Personal Property form asked Humphries to report any contingent and unliquidated claims, and the Statement of Financial Affairs asked Humphries to list all lawsuits to which Humphries was a party at the time of the bankruptcy proceeding. Humphries's Chapter 13 bankruptcy plan was confirmed on January 2, 2008. Humphries consented to join the FLSA litigation on June 10, 2008. Webber Decl. ¶ 2. Humphries's bankruptcy has not been closed, dismissed, or converted, and Humphries had not, as of the filing of Defendant's summary judgment motion, filed any documents in her bankruptcy case that disclosed her claims against Defendant.
Humphries stated that she "did not know or understand that, when [she] opted into the lawsuit against [Defendant] ..., [she] acquired a new asset" or that the FLSA lawsuit "might be considered property of the bankruptcy estate." Pls.' Mem. in Opp'n to Def.'s Mot. for Summ. J. Ex. E, Humphries Decl. ¶¶ 7-8, ECF No. 187-3. Humphries further stated that she "did not know or understand that [she] was required to change, update or amend any of [her] bankruptcy papers to add the lawsuit" until Defendant filed its summary judgment motion. Id. ¶¶ 9-10. Humphries also stated that she "did not try to hide any assets from [her] creditors, the bankruptcy court, or anyone else." Id. ¶ 12.
*1369 VIII. Eddie Jackson
Eddie Jackson consented to join the FLSA litigation on May 5, 2008. Webber Decl. ¶ 2. Plaintiffs' counsel "calculated the lost wages that [Plaintiffs] would claim for each opt-in if [Plaintiffs] were successful at trial." Id. ¶ 8. According to Plaintiffs' counsel, "Jackson only worked two weeks during the covered time period, and in neither week did he work forty hours or more, and thus he has no damages" in the FLSA action. Id. ¶ 10. Given this admission, Defendant contends that Jackson's claims fail as a matter of law. The Court agrees and concludes that, given Plaintiffs' admission that Jackson suffered no FLSA damages, Defendant did not violate the FLSA's minimum wage or overtime provisions with regard to Jackson. See 29 U.S.C. § 206(a) (requiring that employers pay employees no less than specified minimum wage per hour); id. § 207(a)(1) (providing that employers may not employ employees for a workweek longer than forty hours unless the employee is paid at least time and a half for the overtime); id. § 216 (providing right of action for employees whose employers violate § 206 or § 207 of the FLSA). Accordingly, Defendant is entitled to summary judgment as to Jackson's FLSA claims.
IX. Elizabeth Marcus
Elizabeth Marcus petitioned for Chapter 13 bankruptcy protection on March 24, 2004. She was represented by counsel in the bankruptcy proceeding, which was filed in the United States Bankruptcy Court for the Middle District of Georgia. The Chapter 13 Schedule B-Personal Property form asked Marcus to report any contingent and unliquidated claims, and the Statement of Financial Affairs asked Marcus to list all lawsuits to which Marcus was a party at the time of the bankruptcy proceeding. Marcus's Chapter 13 bankruptcy plan was confirmed on January 4, 2005. Marcus consented to join the FLSA litigation on April 29, 2008. Webber Decl. ¶ 2. Marcus filed no documents in her bankruptcy case that disclosed her claims against Defendant. An order discharging Marcus from bankruptcy was entered on August 6, 2009.
X. Marvin Perry
On February 10, 2004, Marvin Perry petitioned for bankruptcy protection under Chapter 13 of the United States Bankruptcy Code. He was represented by counsel in his bankruptcy proceeding, which was filed in the United States Bankruptcy Court for the Middle District of Georgia. The Chapter 13 Schedule B-Personal Property form asked Perry to report any contingent and unliquidated claims, and the Statement of Financial Affairs asked Perry to list all lawsuits to which Perry was a party at the time of the bankruptcy proceeding. Perry's Chapter 13 bankruptcy plan was confirmed on June 1, 2004. Perry consented to join the FLSA litigation on April 30, 2008. Webber Decl. ¶ 2. Perry filed no documents in his bankruptcy case that disclosed his claims against Defendant. An order discharging Perry from bankruptcy was entered on January 15, 2009.
XI. Olympia Walton
Olympia Walton consented to join the FLSA litigation on May 16, 2008. Webber Decl. ¶ 2. On June 9, 2009, Walton petitioned for Chapter 13 bankruptcy protection. She is represented by counsel in the bankruptcy proceeding, which is pending in the United States Bankruptcy Court for the Middle District of Georgia. The Chapter 13 Schedule B-Personal Property form *1370 asked Walton to report any contingent and unliquidated claims, and the Statement of Financial Affairs asked Walton to list all lawsuits to which Walton was a party at the time of the bankruptcy proceeding. Walton did not include her FLSA claims against Defendant on her schedule of assets or statement of financial affairs. Walton's Chapter 13 bankruptcy plan was confirmed on September 1, 2009. Walton's bankruptcy has not been closed, dismissed, or converted, and Walton had not, as of the filing of Defendant's summary judgment motion, filed any documents in her bankruptcy case that disclosed her claims against Defendant.
XII. Juanita Williams
Juanita Williams consented to join the FLSA litigation on June 3, 2008. Webber Decl. ¶ 2. Williams petitioned for Chapter 13 bankruptcy protection on July 31, 2008.[3] She was represented by counsel in the bankruptcy proceeding, which was filed in the United States Bankruptcy Court for the Middle District of Georgia. The Chapter 13 Schedule B-Personal Property form asked Williams to report any contingent and unliquidated claims, and the Statement of Financial Affairs asked Williams to list all lawsuits to which Williams was a party at the time of the bankruptcy proceeding. In response, Williams disclosed the existence of an action brought by her against Pioneer Credit, but Williams did not include her claims against Defendant on her schedule of assets or statement of financial affairs. An order dismissing Williams from bankruptcy due to default was entered on November 13, 2008, and her bankruptcy case was terminated on February 6, 2009. Williams filed no documents in her bankruptcy case that disclosed her claims against Defendant.
XIII. Annie Wilson
Annie Wilson consented to join the FLSA litigation on May 9, 2008. Webber Decl. ¶ 2. Wilson petitioned for Chapter 13 bankruptcy protection on June 17, 2008.[4] She is represented by counsel in the bankruptcy proceeding, which is pending in the United States Bankruptcy Court for the Middle District of Georgia. The Chapter 13 Schedule B-Personal Property form asked Wilson to report any contingent and unliquidated claims, and the Statement of Financial Affairs asked Wilson to list all lawsuits to which Wilson was a party at the time of the bankruptcy proceeding. In response, Wilson disclosed the existence of actions brought by her against AAA Finance, Bank of Dawson, First Franklin Financial, and Quick Loan, but Wilson did not include her claims against Defendant on her schedule of assets or statement of financial affairs. Wilson's Chapter 13 bankruptcy plan was confirmed on December 2, 2008. Wilson's bankruptcy has not been closed, dismissed, or converted, and Wilson had not, as of the filing of Defendant's summary judgment motion, filed any documents in her bankruptcy case that disclosed to her claims against Defendant.
DISCUSSION
Defendant contends that the doctrine of judicial estoppel bars Plaintiffs' claims in this FLSA action.
*1371 I. Judicial Estoppel Principles
"Judicial estoppel is an equitable doctrine that precludes a party from `asserting a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding.'" Barger v. City of Cartersville, Ga., 348 F.3d 1289, 1293 (11th Cir.2003) (quoting Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir.2002)). The doctrine is "intended to prevent the perversion of the judicial process." Burnes, 291 F.3d at 1285 (internal quotation marks omitted). The purpose of the doctrine "`is to protect the integrity of the judicial process by prohibiting parties from deliberately changing positions according to the exigencies of the moment.'" Id. (quoting New Hampshire v. Maine, 532 U.S. 742, 749-50, 121 S. Ct. 1808, 149 L. Ed. 2d 968 (2001)). In deciding whether judicial estoppel applies, the courts consider two factors: first, the party against whom judicial estoppel is sought must have asserted a claim in a legal proceeding that is inconsistent with a position made under oath in a prior proceeding; second, "such inconsistencies must be shown to have been calculated to make a mockery of the judicial system." Id. (internal quotation marks omitted). The factors "are not inflexible or exhaustive; rather, courts must always give due consideration to all of the circumstances of a particular case when considering the applicability of this doctrine." Id. at 1286.
Here, Plaintiffs do not seriously dispute that their failure to disclose their FLSA claims to the bankruptcy court satisfies the first factor.[5] Pls.' Mem. of P. & A. in Opp'n to Def.'s Mot. for Summ. J. 6, ECF No. 188; see, e.g., Ajaka v. BrooksAmerica Mortg. Corp., 453 F.3d 1339, 1344 (11th Cir.2006) (concluding that debtor took inconsistent positions under oath when he failed to disclose Truth in Lending Act claim to bankruptcy court after his Chapter 13 plan was confirmed); Barger, 348 F.3d at 1294 (finding inconsistent positions taken under oath where debtor submitted statement of financial affairs to bankruptcy court without listing pending employment discrimination claim); Burnes, 291 F.3d at 1284-86 (determining that debtor took inconsistent positions under oath because, among other things, he failed to disclose his employment discrimination claim to bankruptcy court, even when he requested conversion from Chapter 13 to Chapter 7 bankruptcy); Roots v. Morehouse Sch. of Med., Inc., Civil Action No. 1:07-cv-00112-JOF, 2009 WL 4798217, at *5 (N.D.Ga. Dec. 8, 2009) (finding that debtors took inconsistent positions under oath when they opted in to FLSA action but did not disclose FLSA action to bankruptcy court).
The question for the Court, therefore, is whether Plaintiffs had the requisite intent for judicial estoppel to apply here. "For purposes of judicial estoppel, intent is a purposeful contradiction not simple error or inadvertence." Barger, 348 F.3d at 1294; accord Burnes, 291 *1372 F.3d at 1287. "When reviewing potential motive, the relevant inquiry is intent at the time of nondisclosure." Robinson v. Tyson Foods, Inc., 595 F.3d 1269, 1276 (11th Cir.2010). Deliberate or intentional manipulation "can be inferred from the record where the debtor has knowledge of the undisclosed claims and has motive for concealment." Barger, 348 F.3d at 1294 (internal quotation marks omitted). "[A] financial motive to secret assets exists under Chapter 13 as well as under Chapter 7 because the hiding of assets affects the amount to be discounted and repaid." De Leon, 321 F.3d at 1291.
For example, in Burnes, the record contained sufficient evidence to infer that the plaintiff in a discrimination case engaged in intentional manipulation. The plaintiff pursued his employment discrimination claim but never disclosed it to the bankruptcy court, even when he petitioned to convert from Chapter 13 to Chapter 7 bankruptcy. Burnes, 291 F.3d at 1287-88. The plaintiff had knowledge of his employment discrimination claim, and he had a motive to conceal it from the bankruptcy court because it was unlikely for him to receive a Chapter 7 conversion and a no asset discharge had his creditors and the bankruptcy court known of his pending lawsuit. Id. at 1288.
Similarly, in Barger, the plaintiff knew about her employment discrimination lawsuit when she filed her bankruptcy petition but omitted any reference to the lawsuit in her bankruptcy paperwork; she "appeared to gain an advantage when she failed to list" the discrimination claims on her bankruptcy schedule of assets because, "by omitting the claims, [the plaintiff] could keep any proceeds for herself and not have them become part of the bankruptcy estate." 348 F.3d at 1296. And, like the plaintiff in Burnes, the plaintiff in Barger received a no asset discharge. Id. at 1291. From this, the Eleventh Circuit found "sufficient evidence from which to infer [the plaintiff's] intentional manipulation" and concluded that the inference was not rebutted by the plaintiff's attempt to reopen the bankruptcy case and amend her filings to include the discrimination claims. Id. at 1296-97.
Finally, in Robinson, the Eleventh Circuit found that the plaintiff had a motive to conceal her employment discrimination claim from the bankruptcy courtdespite the fact that the plaintiff later completed her Chapter 13 bankruptcy plan, repaid her debts, and received a discharge. Robinson, 595 F.3d at 1276. The Robinson court found that "full monetary repayment does not necessarily preclude a finding of a motive to conceal." Id. at 1275. The Robinson court further noted that the "application of judicial estoppel does not require that the nondisclosure must lead to a different result in the bankruptcy proceeding. Rather, the motive to conceal stems from the possibility of defrauding the courts and not from any actual fraudulent result." Id. (internal citation omitted). The Robinson court found that, at the time of the plaintiff's nondisclosure, the plaintiff was not current on her payments to the bankruptcy trustee, so there were legitimate questions about repayment, which created a motive to conceal the employment discrimination claim. Id. at 1276. The court concluded that this factor, along with the fact that the plaintiff also failed to disclose a separate worker's compensation claim to the bankruptcy court, gave rise to an inference of intentional manipulation that the plaintiff had not rebutted. Id. But see Strauss v. Rent-A-Center, Inc., 192 Fed. Appx. 821, 823 (11th Cir.2006) (per curiam) (reversing, with minimal discussion, grant *1373 of summary judgment on judicial estoppel grounds where plaintiff was not represented by counsel in her bankruptcy proceeding).
The doctrine of judicial estoppel has been applied consistently in the bankruptcy context notwithstanding its often harsh consequences. It does not matter if the non-disclosing party later attempts to correct the failure to disclose. Where, as here, a debtor fails to disclose an asset to the bankruptcy court and that omission is later challenged by an adversary, the debtor may not "back-up, re-open the bankruptcy case, and amend his bankruptcy filings." Burnes, 291 F.3d at 1288. To hold otherwise would "suggest[] that a debtor should consider disclosing potential assets only if he is caught concealing them" and would "diminish the necessary incentive to provide the bankruptcy court with a truthful disclosure of the debtors' assets." Id. Thus, if Plaintiffs did have a motive to conceal their claims, their present promises to notify the bankruptcy court of their FLSA claims would not prevent the Court from applying judicial estoppel.
II. Application of Judicial Estoppel in this Action
Plaintiffs cannot seriously dispute that they had knowledge of their FLSA claims. They were notified that they "may get money if the [Tyson] workers win [the FLSA lawsuit] or get a settlement." FLSA Notice 1. Furthermore, in their consent forms, Plaintiffs "consent[ed] to become a party plaintiff in an action against Tyson Foods under the Fair Labor Standards Act which claims that chicken processing workers were not paid by Tyson for all hours worked." E.g., Def.'s Statement of Undisputed Material Facts Ex. 25, Flowers Consent Form, ECF No. 179-6. The question thus becomes whether Plaintiffs had a motive for concealment.
Plaintiff Flowers made an affirmative misrepresentation to the bankruptcy court when he filed his notice of voluntary conversion to Chapter 7 but did not disclose his FLSA claim. Flowers had a motive to conceal his FLSA claim from the bankruptcy court; when Flowers petitioned the bankruptcy court for a conversion to Chapter 7 and received a discharge of his debts, the bankruptcy court accepted his position that Flowers had no additional contingent assets, such as his FLSA claim. From this, the Court concludes that there is sufficient evidence to create an inference of intentional manipulation by Flowers. Flowers has not pointed the Court to any evidence that would rebut this inference, and the Court concludes that judicial estoppel should apply as to Flowers. Accordingly, Defendant is entitled to summary judgment on Flowers's FLSA claims.
Like Flowers, Plaintiffs Walton, Williams, and Wilson each made affirmative misrepresentations to the bankruptcy court when they filed their bankruptcy petitions but failed to disclose their FLSA claims. Furthermore, at the time of nondisclosure, Walton, Williams, and Wilson had a motive to conceal assets, such as their FLSA claims, "because the hiding of assets affects the amount to be discounted and repaid." De Leon, 321 F.3d at 1291; see also Robinson, 595 F.3d at 1276 (noting that the relevant inquiry in determining motive is "intent at the time of nondisclosure"). Therefore, the Court finds that there is sufficient evidence to create an inference of intentional manipulation by Walton, Williams, and Wilson.[6] These *1374 Plaintiffs have not pointed the Court to any evidence that would rebut this inference, and the Court concludes that judicial estoppel should apply to their FLSA claims. Accordingly, Defendant is entitled to summary judgment on the FLSA claims of Walton, Williams, and Wilson.
The remaining PlaintiffsBogans, Carter, Duncan, Hawkins, Humphries, Marcus, and Perryeach filed for bankruptcy before they opted in to the FLSA action. When they opted in to the FLSA action, they did not disclose the FLSA action to the bankruptcy court. At the time of nondisclosure, these Plaintiffs had a motive to conceal assets, such as their FLSA claims, "because the hiding of assets affects the amount to be discounted and repaid." De Leon, 321 F.3d at 1291. Carter and Duncan had an additional motive to conceal their FLSA claims because they had fallen behind on their payments to the bankruptcy trustee, and there were thus legitimate questions about repayment at the time when they failed to disclose their FLSA claims. Robinson, 595 F.3d at 1276 (finding motive to conceal where questions regarding repayment were coupled with expectation of monetary gain). For these reasons, the Court finds that there is sufficient evidence to create an inference of intentional manipulation by Bogans, Carter, Duncan, Hawkins, Humphries, Marcus, and Perry. Duncan and Hawkins have not pointed to any evidence to rebut this inference, and Defendant is entitled to summary judgment on their claims.
Bogans, Carter, and Humphries attempt to rebut the inference of intentional manipulation by arguing that although their potential recovery is expected to be more than $3,000 each, Webber Decl. ¶ 9, their potential recovery in the FLSA action is worth less than their available exemptions, so their FLSA claims are not significant enough to affect their bankruptcies. However, as noted above, the "application of judicial estoppel does not require that the nondisclosure must lead to a different result in the bankruptcy proceeding. Rather, the motive to conceal stems from the possibility of defrauding the courts and not from any actual fraudulent result." Robinson, 595 F.3d at 1275 (internal citation omitted). Even if the bankruptcy trustee might, in hindsight, consider these Plaintiffs' FLSA claims to be insignificant, the fact remains that Bogans, Carter, and Humphries never disclosed their claims to the bankruptcy court and thus potentially defrauded the bankruptcy court. The Court finds that Bogans, Carter, and Humphries have not rebutted the inference of intentional manipulation, and Defendant is entitled to summary judgment on their FLSA claims.
Marcus and Perry attempt to rebut the inference of intentional manipulation by arguing that they have each completed their Chapter 13 plan payments and received a discharge from the bankruptcy court. However, "full monetary repayment does not necessarily preclude a finding of a motive to conceal." Robinson, 595 F.3d at 1275. Again, "the hiding of assets affects the amount to be discounted and repaid." De Leon, 321 F.3d at 1291. Hiding assets may also affect a debtor's payment schedule. For all of these reasons, the Court is not persuaded that Marcus *1375 and Perry have rebutted the inference that they had a motive to conceal their FLSA claims from the bankruptcy court. Because Marcus and Perry have not pointed to any additional evidence that would rebut the inference of intentional manipulation, Defendant is entitled to summary judgment on their claims.
CONCLUSION
For the reasons set forth above, the Court grants Defendant's Motion for Summary Judgment (ECF No. 178).
NOTES
[1] Duncan had previously petitioned for bankruptcy under Chapter 13 in 1998 and was discharged in 2002.
[2] Hawkins had previously petitioned for bankruptcy under Chapter 7 in 1987 and was discharged in 1987.
[3] Williams had previously petitioned for bankruptcy under Chapter 13 in 1996 and was discharged in 2000.
[4] Wilson had previously petitioned for bankruptcy under Chapter 13 in 1996 and was discharged in 1998. She also previously petitioned for bankruptcy under Chapter 13 in 2000 and was discharged in 2006.
[5] A debtor is required to disclose a claim for legal relief when he petitions for bankruptcy. De Leon v. Comcar Indus., Inc., 321 F.3d 1289, 1290-91 (11th Cir.2003) (per curiam). A debtor must also disclose changes in his financial situation if he requests to convert his Chapter 13 petition to a Chapter 7 petition. Burnes, 291 F.3d at 1286. Furthermore, a bankruptcy court may, under Federal Rule of Bankruptcy Procedure 1009, "require a debtor to amend his schedule of assets to disclose a new property interest acquired after the confirmation of the debtor's plan." Waldron v. Brown (In Re Waldron), 536 F.3d 1239, 1246 (11th Cir.2008); see also Ajaka, 453 F.3d at 1344 (finding that debtor had duty to amend schedule of assets to disclose complaint filed after Chapter 13 plan was confirmed).
[6] The fact that Williams's bankruptcy case was later dismissed due to default does not mandate a different result. The evidence suggests that Williams had a motive to conceal her FLSA claim at the time of nondisclosure. Again, "the motive to conceal stems from the possibility of defrauding the courts and not from any actual fraudulent result." Robinson, 595 F.3d at 1275.
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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/2467842/
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763 F. Supp. 2d 997 (2010)
COMPETITIVE EDGE, INC., and David M. Greenspon, Plaintiffs,
v.
STAPLES, INC. and Staples the Office Superstore East, Inc., Defendants.
Case No. 08 C 0956.
United States District Court, N.D. Illinois, Eastern Division.
March 29, 2010.
*1002 Thomas David Rein, Marc Andrew Cavan, Thomas Frost Hankinson, Sidley Austin LLP, Chicago, IL, for Plaintiffs.
Thomas I. Ross, Marshall, Gerstein & Borun, Chicago, IL, Andrew T. O'connor, Barbara L. Moore, David Cotta, Edwards Angell Palmer & Dodge LLP, Boston, MA, for Defendants.
MEMORANDUM OPINION AND ORDER
VIRGINIA M. KENDALL, District Judge.
Plaintiffs Competitive Edge, Inc. ("Competitive Edge") and David M. Greenspon ("Greenspon") (collectively "Plaintiffs") filed suit against Defendants Staples, Inc. and Staples the Office Superstore East, Inc. (collectively "Staples") for design patent infringement and trade dress infringement. Specifically, Plaintiffs claim infringement of U.S. Design Patent No. D530,734 ("the '734 patent") pursuant to 35 U.S.C. § 271 (Count I). Plaintiffs also claim infringement of Plaintiffs' purported trade dress in connection with the AdVantage Bubble Calculator (Count II), pursuant to 15 U.S.C. § 1125(a). Staples now moves for summary judgment on both counts on grounds of non-infringement. For the reasons stated below, the Motion for Summary Judgment on non-infringement of the '734 patent is granted and the Motion for Summary Judgment on noninfringement of the alleged trade dress is granted. Staples's Motion to Strike Competitive Edge's Rule 56.1 Statements is denied. Staples's Motion to Exclude the Testimony of Dr. Eldon Little is granted.
STATEMENT OF UNDISPUTED FACTS[1]
I. Staples's Motion to Strike Plaintiffs' Rule 56.1 Statements
Staples has moved to strike those portions of Plaintiffs' 56.1 statements that exceed forty facts in violation of Local Rule 56.1. (R. 76 at 2.) District courts are "entitled to expect" that parties will strictly comply with the Rule. See Ammons v. Aramark Uniform Servs., Inc., 368 F.3d 809, 817 (7th Cir.2004) (citing Bordelon v. Chi. Sch. Reform Bd. of Trustees, 233 F.3d 524, 527 (7th Cir.2000)).
Local Rule 56.1 allows a party opposing summary judgment to file a response including no more than "40 separately-numbered statements of additional facts." L.R. 56.1(b)(3)(C). The Court does not find that each and every separate sentence that Staples has labeled as separate fact does, in fact, constitute a separate "statement[] of additional fact[ ]" for the purposes *1003 of L.R. 56.1; some, as argued by Plaintiffs, represent only attempts to present complex information in an understandable and readable format. (See R. 80 at 6.) However, even a lenient review shows that Plaintiffs have clearly submitted more than forty separate statements of fact in both of their Rule 56.1 statements. While this is a technical violation of Local Rule 56.1, the Court's review of the multi-fact paragraphs reveals that for the most part the facts within each paragraph are logically connected, are supported by reference to the same materials, and are thus compliant "with the spirit if not the letter of the Local Rule." Portis v. City of Chicago, 510 F. Supp. 2d 461, 463 (N.D.Ill.2007). Staples's Motion to Strike is therefore denied.
Plaintiffs' lengthy responses to Staples's proposed statements of undisputed facts, which often go far beyond merely disputing the fact at issue and introduce new and independent facts, violate both the letter and the spirit of Local Rule 56.1. The Court has disregarded any new facts improperly raised in Plaintiffs' responses to Staples's Local Rule 56.1 statements rather than properly raised in Plaintiffs' own statement of additional facts. See Ciomber v. Cooperative Plus, Inc., 527 F.3d 635, 643-44 (7th Cir.2008) (district court properly refused to consider responses consisting of "extremely long, argumentative paragraphs" that both disputed the moving party's statements of fact and presented new facts).
II. The Parties
Competitive Edge, a distributor of advertising specialties and promotional products, is an Indiana corporation with its principal place of business in Des Moines, Iowa. (CE TD 56.1 Resp. ¶¶ 1, 2.) Competitive Edge doing business as AdVantage Industries ("AdVantage") is a supplier of advertising and promotional products. (CE TD 56.1 Resp. ¶ 2.) Greenspon is the founder, sole owner, President, sales manager, and secretary of Competitive Edge. (CE TD 56.1 Resp. ¶ 3.)
Staples is an office supply chain with retail stores in Chicago as well as throughout the United States and Canada, a catalog and internet presence, and a contract business that serves medium-sized businesses and organizations. (CE DP 56.1 Resp. ¶ 5; CE TD 56.1 Resp. ¶¶ 4, 9.) Staples's business includes the sale of customizable products. (Staples TD 56.1 Reply ¶ 10.)
III. Competitive Edge's Bubble Calculator
Greenspon owns the '734 patent, which is entitled "Calculator." (CE DP 56.1 Resp. ¶ 10.) Greenspon has neither licensed nor assigned the rights in the '734 Patent to any other party. (CE DP 56.1 Resp. ¶ 11.) A representative drawing from the '734 patent is depicted below.
All features of the design in the '734 patent are depicted using solid, unbroken lines; there are no broken lines used in the figures of the patent. (CE DP 56.1 Resp. ¶ 27.) Among other features, the '734 patent depicts a removable I.D. plate and shows the plate in place on the calculator design when assembled. (CE DP 56.1 Resp. ¶ 25.) The patent also shows a recessed display screen, that is, a screen whose surface sits below the overall surface *1004 of the calculator's face. (CE DP 56.1 Resp. ¶ 54.) The patent shows a particular arrangement of function keys. (CE DP 56.1 Resp. ¶ 56.)
Since 2004, Competitive Edge and AdVantage Industries (a division of Competitive Edge) have supplied and distributed a product called The "Original" Silicone Bubble Calculator. (CE TD 56.1 Resp. ¶ 15; Staples TD 56.1 Resp. ¶ 1.) This calculator is also known as The AdVantage Bubble Calculator. (CE TD 56.1 Resp. ¶ 16.) Competitive Edge stamps the back of the calculator with "AdVantage Industries" and "patent pending." (Staples TD 56.1 Reply ¶ 3.) A representative example of the AdVantage Bubble Calculator is depicted below.
Competitive Edge offers the AdVantage Bubble Calculator for sale at bulk pricing. (CE TD 56.1 Resp. ¶ 41.) The purchasers of the AdVantage Bubble Calculator are customers of distributors and bulk buyers of promotional products. (CE DP 56.1 Resp. ¶ 34.) The standard available colors of the AdVantage Bubble Calculator are subject to change with changing trends and tastes in color. (CE TD 56.1 Resp. ¶¶ 46, 47.) The calculators are always sold with a color scheme in which the keys and other parts of the calculator body are "the same bright, whimsical color, with only the numbers and symbols on the keys and/or the decoration panel being a different color." (CE TD 56.1 Resp. ¶ 12.) Purchasers are able to order the calculator customized with their corporate logo or in a specific color, and Competitive Edge will customize the calculator in "any color." (CE TD 56.1 Resp. ¶¶ 42, 48.)
Competitive Edge has spent approximately $400,000 on advertising materials, such as catalogs, that include depictions of the AdVantage Bubble Calculator. (Staples TD 56.1 Resp. ¶ 38.) The AdVantage Bubble Calculator is "not a huge selling product" and Competitive Edge does not contend that its sales revenues are probative of its trade dress in the calculator having acquired secondary meaning. (CE TD 56.1 Resp. ¶¶ 39, 64.)
Distributors of the product often assign a product number to the calculator that is different from the product number that AdVantage uses. (CE TD 56.1 Resp. ¶ 40.)
IV. Staples's Calculators
Staples once imported a product called "Staples Brand Bubble Calculator" from China. (CE DP 56.1 Resp. ¶ 14; CE TD 56.1 Resp. ¶ 18.) The Staples Brand Bubble Calculator was "strikingly similar" to the design disclosed in the '734 Patent. (Staples DP 56.1 Reply ¶ 36.) Sales of the Staples Brand Bubble Calculator were "very strong" in the 2006 summer season. (Staples DP 56.1 Reply ¶ 13.)
Greenspon notified Staples through a posting on Staples's website that Competitive Edge owns the '734 Patent and noted infringement concerns. (CE DP 56.1 Resp. ¶ 15.) Staples then entered into a license agreement with Competitive Edge with respect to the calculators that Staples had ordered prior to receiving notification of the patent claims. (CE DP 56.1 Resp. ¶ 16.) Under the license agreement, Staples *1005 agreed to pay $200,000 "in consideration of the settlement of all possible legal and equitable claims." (Id.) The license agreement further authorized Staples to "manufacture, make, produce, import, develop, market, distribute, lease, transfer, convey, dispose of, and sell" a number of Staples Brand Bubble Calculators. (Id.) The current suit does not include any claims related to unlicensed sales of the Staples Brand Bubble Calculator. (CE DP 56.1 Resp. ¶ 13.)
In response to the dispute regarding the Staples Brand Bubble Calculator, Staples worked with designers and intellectual property counsel to create a new calculator product. (CE DP 56.1 Resp. ¶ 20.) The project was referred to internally as "Bubble Calculatornext generation of bubble." (Staples TD 56.1 Reply ¶ 32.) During this design process, Staples's outside counsel advised Staples that "the more you get away from the scalloped shape of the buttons, the safer you will be" with respect to avoiding infringement of the '734 patent. (Staples DP 56.1 Reply ¶ 17.) Counsel further advised that "the most significant design change you can make is to alter the scalloped shape of the buttons, such as by flattening the top surface of the buttons...." (Staples DP 56.1 Reply ¶ 19.)
Staples eventually began to import and sell a calculator called the Staples Brand Pillow Top Calculator (the "Pillow Top Calculator"), although the degree of connection between the "next generation of bubble" project and the Pillow Top Calculator is disputed. (CE TD 56.1 Resp. ¶¶ 6, 23; Staples TD 56.1 Reply ¶ 32.) Staples also has used Pillow Top Calculators for promotional and marketing purposes. (CE DP 56.1 Resp. ¶ 6; CE TD 56.1 Resp. ¶ 43.) Staples's Pillow Top Calculator is depicted below.
In addition to the Pillow Top Calculator, Staples continues to sell its remaining inventory of the Staples Brand Bubble Calculator. In at least two retail stores the Pillow Top Calculator and Staples Brand Bubble Calculators have been found mixed in the same sales bin without external packaging. (Staples DP 56.1 Reply ¶ 21, 24.)
The logo area of the Pillow Top Calculator is not removable, and Staples never imprints the calculator with any other logo than that of Staples. (CE DP 56.1 Resp. ¶ 30; CE TD 56.1 Resp. ¶ 43.) The display screen of the Pillow Top Calculator does not sit below the overall surface of the calculator's face. (CE DP 56.1 Resp. ¶ 55.) At least some Pillow Top calculators have the same functional-key layout as that shown in the '734 patent. (CE DP 56.1 Resp. ¶ 57.)
Both the design of the '734 patent and the Pillow Top Calculator have buttons that are part of a continuous contoured surface. (Staples DP 56.1 Reply ¶ 2.) Both have keys that are convex, with the highest point of each key at the center of the key. (Staples DP 56.1 Reply ¶ 3.) Both share a color scheme consisting of one solid color for the body of the calculator, excepting any visible logo, with a separate color used to mark the numbers on the keys. (Staples DP 56.1 Reply ¶ 7.) The area of the Pillow Top Calculator on which Staples's logo is displayed is the same part *1006 of the calculator as the area in which the '734 patent's removable I.D. plate is affixed. (Staples DP 56.1 Reply ¶ 9.)
In addition to the Pillow Top Calculator, Staples continues to sell its remaining inventory of the Staples Brand Bubble Calculator. In at least two retail stores the Pillow Top Calculator and Staples Brand Bubble Calculators have been found mixed in the same sales bin without external packaging. (Staples DP 56.1 Reply ¶ 21, 24.)
U.S. Design Patent No. D559,891 ("the '891 patent") was issued on January 15, 2008 with rights under the patent assigned to Staples. (CE DP 56.1 Resp. ¶ 19.) Competitive Edge disputes that the Pillow Top Calculator design is the same design as that protected by the '891 patent; Competitive Edge's expert, Dr. Eldon Little, testified that the design in the patent is not the design of the Pillow Top Calculator. (CE DP 56.1 Resp. ¶ 19; Staples DP 56.1 Reply ¶ 38.) A representative drawing from the '891 patent is depicted below.
STANDARD OF REVIEW
Summary judgment is proper when "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). In determining whether a genuine issue of fact exists, the Court must view the evidence and draw all reasonable inferences in favor of the party opposing the motion. See Bennington v. Caterpillar, Inc., 275 F.3d 654, 658 (7th Cir.2001); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). However, the Court will "limit its analysis of facts on summary judgment to evidence that is properly identified and supported in the parties' [Local Rule 56.1] statement." Bordelon v. Chicago Sch. Reform Bd. of Trustees, 233 F.3d 524, 529 (7th Cir.2000). Where a proposed statement of fact is supported by the record and not adequately rebutted, the court will accept that statement as true for purposes of summary judgment. Adequate rebuttal requires a citation to specific support in the record; an unsubstantiated denial is not adequate. See Albiero v. City of Kankakee, 246 F.3d 927, 933 (7th Cir.2001); Drake v. Minnesota Mining & Mfg. Co., 134 F.3d 878, 887 (7th Cir.1998) ("Rule 56 demands something more specific than the bald assertion of the general truth of a particular matter[;] rather it requires affidavits that cite specific concrete facts establishing the existence of the truth of the matter asserted.").
DISCUSSION
I. Staples's Motion to Exclude the Expert Testimony of Plaintiffs' Expert
Dr. Eldon Little ("Little") conducted a survey and an experiment supporting Plaintiffs' claims of patent and trade dress infringement, and prepared an expert report that Plaintiffs seek to admit into evidence. The survey consisted of asking *1007 respondents, who were primarily college students, to compare the Staples Pillow Top calculator to the '734 patented design and then with Competitive Edge's Bubble Calculator, and to answer five questions about the comparisons. (See R. 82, Pl. Reply Br. at 10-11.) Little created the survey, which was administered by Mr. Gary Lynn ("Lynn") and Mr. Hosein Fallah. (Lynn Dep. 57: 22-58: 14.) The experiment was a classroom experiment designed by Little in order to simulate the purchasing situation in which prospective consumers of the two calculators might find themselves. (See R. 82, Pl. Reply Br. at 13.) Little created and administered the experiment.
Whether scientific expert testimony is admissible is determined by reference to Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993). See Ervin v. Johnson & Johnson, Inc., 492 F.3d 901, 904 (7th Cir.2007). Plaintiffs, as the proponent of Little's testimony, bear the burden of proof with respect to whether the admissibility requirements are met. See Lewis v. CITGO Petroleum Corp., 561 F.3d 698, 704 (7th Cir.2009).
Rule 702 assigns the trial judge "the task of ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand." Daubert, 509 U.S. at 597, 113 S. Ct. 2786. The focus of this decision "must be solely on principles and methodology, not on the conclusions that they generate." Daubert, 509 U.S. at 595, 113 S. Ct. 2786. The Seventh Circuit has developed a three-step analysis for determining the admissibility of expert testimony under Rule 702. See Ervin, 492 F.3d at 904. First, "the witness must be qualified `as an expert by knowledge, skill experience, training, or education.'" Id. (quoting Fed.R.Evid. 702). Second, "the expert's reasoning or methodologies underlying the testimony must be scientifically reliable." Id. Third, the expert's testimony must be relevant, that is, it must "assist the trier of fact to understand the evidence or to determine a fact in issue." Id.
Little's proposed testimony is based on the data collected from the survey and experiment described above. The admissibility of the survey and experiment is therefore dispositive of the admissibility of the testimony itself.
Little is a professor of marketing with thirty years of experience who has authored numerous books, articles and papers in the areas of consumer behavior and survey research. Most likely recognizing this, Staples does not challenge Little's qualifications or the relevance of his proposed testimony.[2] Instead, Staples challenges Little's methodology, arguing that the methodology used in creating and administering the survey is unreliable. Survey evidence offered in support of, or in opposition to, summary judgment "must comply with the principles of professional *1008 survey research; if it does not, it is not even admissible . . . ." Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769, 776 (7th Cir.2007).
A. Little's Survey
(i) Identification of the "Universe."
The probative value of a survey depends in large part upon the "universe" of respondents, and the reliability of the survey is diminished if the universe of desired respondents is erroneous or undefined. See Spraying Sys. Co. v. Delavan, Inc., 975 F.2d 387, 394 n. 5 (7th Cir.1992) (noting that a survey designed to demonstrate secondary meaning had failed to target all relevant purchasers). Little did not define a universe when developing the survey. (Little Dep. 167:19-23.) Later, however, he defines the universe as the general purchasing public with an ability to perceive. (Little Dep. 165:17-166:5.) The reliability of the survey is diminished by Little's failure to define his target universe, and its relevance is greatly harmed by his failure to focus the survey on the consumers in the market at issue in this case. See Spraying Sys. Co., 975 F.2d at 394; see also Scott Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477, 487-88 (5th Cir.2004) (a valid survey must interview individuals who "adequately represent the opinions which are relevant to the litigation").
(ii) Selection of the Sample Population.
Once a universe is identified, a reliable survey must select a sample population that accurately represents the universe. Little's report discusses the population sampled, noting that it consisted of college students because "they are familiar with calculators" and this "was a conservative approach." (Little Rep. ¶ 19.)[3] However, the report contains no discussion of the target population, of any differences between a target population and the college students, or of any consequences resulting from this difference. The survey population of college students is underinclusive, and thus the survey's value depends on the extent to which the excluded population is likely to react differently from the included population. Little does not analyze this issue, but only states that, based on "common sense," college students represent a "conservative population" for the survey. (Little Dep. 183:14-184:20.) Without a more adequate justification, however, the underinclusive sample population seriously diminishes the reliability of the survey. See, e.g., Jaret Intern., Inc. v. Promotion in Motion, Inc., 826 F. Supp. 69, 74 (E.D.N.Y.1993) (finding a consumer confusion survey inadmissible because of, among other flaws, "its unrepresentative sample and its untrustworthy methodology.")
(iii) Clear, Precise, and Unbiased Questions.
A reliable survey should avoid the use of confusing or ambiguous questions. See, e.g., Nat'l Football League Props., Inc. v. ProStyle, Inc., 57 F. Supp. 2d 665, 668 (E.D.Wis.1999) (survey consisting of only one vague question, with no controls or comparison questions, excluded from evidence). The questions in Little's survey, however, are replete with potential ambiguities. For example, questions 4 and 5 ask whether the respondent thinks the calculators "come from a single source." (R. 82-2, exhibit H, 4.) Survey respondents could interpret "source" to mean manufacturer, retail store, country of origin, or one of many other potential *1009 sources. Lynn testified that a respondent may have been confused and asked about this language. (Lynn Dep. 60:21-61:8.) This potential confusion undermines the reliability of the survey, even though the existence of any actual confusion as to the meaning of the questions cannot be ascertained.
(iv) Filter Questions.
Some respondents to a survey will not have an opinion on a question asked, which can result in a respondent guessing as to the "right" answer. Reliable surveys address this issue through the use of filter questions and "don't know" or "no opinion" answer alternatives. See, e.g., LG Elecs. USA, Inc. v. Whirlpool Corp., 661 F. Supp. 2d 940, 954 (N.D.Ill. 2009) (finding that a survey's inclusion of a "don't know" option as an answer to an otherwise close-ended question was sufficient to mitigate concerns about its reliability). Here, the questions used in the survey allowed for only "yes" or "no" responses. (See R. 82, Exhibit H.) The survey's reliability is significantly compromised by its failure to use open-ended questions or to allow for "don't know" responses. See id.
(v) Double-Blind Study.
In order to ensure their objectivity, reliable surveys are conducted using double-blind research methodology whenever possible. See Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Cons. Pharms. Co., 290 F.3d 578, 590-91 (3rd Cir.2002) (upholding the district court's reliance on a survey "during which both the respondents and the interviewers [were] unaware of the purpose of the survey or its sponsor.") Here, the administrators knew that the survey was intended for use in a patent infringement case. (Lynn Dep. 24:13-19, 62: 17-21.) The takers also potentially knew the purpose of the survey before taking it. (Lynn Dep. 61:12-64: 18.) Failure to conduct an appropriate double-blind study limits the reliability of the survey.
(vi) Data Collection and Recording.
Steps must be taken to ensure that data are classified and recorded consistently and accurately. Little testified that he received all the survey responses from Lynn "in one batch." (Little Dep. 149:22-150:2.) Lynn, however, testified that he sent each day's results separately. (Lynn Dep. 39:15-17.) Further, two different people administered the Survey, and did not use a uniform method of administration. (Lynn Dep. 53:16-54:10.) Worse, it is possible that certain respondents took the survey more than once. (Lynn Dep. 48:12-16.) The Court's confidence in the reliability of the survey's collected data is gravely diminished by these collection and recording irregularities.
B. Little's Experiment
As Little's classroom experiment was simply another survey of potential consumer responses, conducted in a different format with a different methodology, the same standards applied to the admissibility of the survey apply to the experiment as well.
(i) Identification of the "Universe."
Little did not define a universe for the experiment. (Little Dep. 209:8-11.) This renders the reliability and relevance of the experiment highly questionable.
(ii) Selection of the Sample Population.
The sample population for the experiment was the students in Little's class. (Little Dep. 208:19-20.) There is no discussion in Little's report as to the characteristics of the target population, nor any explanation of any relevant differences between the target population and the college students, or any analysis of any consequences *1010 that may have resulted from these differences.
(iii) Other Concerns.
The experiment was conducted on two separate days, 48 hours apartthat is, certain calculators were shown to students on one day; other calculators were shown to the same students two days subsequently, and students were asked if they thought they had seen the same samples more than once. (See Little Rep. at 12.) The only rationale for the time delay is Little's belief that it "was representative of the level of involvement of a typical consumer in the purchasing situation involving a hand-held calculator." (Id.) This would be generally appropriate in the trademark context, because surveys testing consumer confusion should mimic market conditions, including the context in which purchases are made. See Coherent, Inc. v. Coherent Techs., 935 F.2d 1122, 1126 (10th Cir.1991) (rejecting survey that did not appropriately mirror market conditions); Simon Prop. Group L.P. v. mySimon, Inc., 104 F. Supp. 2d 1033, 1038 (S.D.Ind.2000) ("[A] survey to test likelihood of confusion must attempt to replicate the thought processes of consumers encountering the disputed mark or marks as they would in the marketplace."). There is no evidence here, however, that a 48-hour delay has any bearing on the conditions under which purchasers of the products at issue here, whom Plaintiffs admit to be sophisticated consumers of advertising and promotional specialities, make their buying decisions.
An additional concern about the validity of the experiment is raised by the fact that the Staples Pillow Top Calculator and the AdVantage Bubble Calculator used were both purple and were the only two purple calculators used in the experiment. (See id. at 12, Ex. 4.) Thus, there is no way to determine whether the students were remembering anything about the design of the calculator that they had previously seen as opposed to merely recalling its color.
C. Whether a Hearing is Required to Determine Admissibility
The district court is not required to conduct a hearing when considering whether proposed expert testimony should be admitted. See United States v. Ozuna, 561 F.3d 728, 737 (7th Cir.2009); Kirstein v. Parks Corp., 159 F.3d 1065, 1067 (7th Cir.1998). It is within the court's discretion to decide whether there is a sufficient basis to exclude expert testimony without holding a hearing. See Kirstein, 159 F.3d at 1067. In light of Little's failure to comply with generally-accepted principles of survey research and lack of evidence to show that he satisfies the requirements of Rule 702, the Court finds there is a sufficient basis for excluding Little's expert testimony without a hearing. Expert testimony regarding the behavior and expectations of consumers in the marketplace is usually relevant because consumer behavior is a critical factor in the consideration of trade dress infringement allegations. See Braun Inc. v. Dynamics Corp. of America, 975 F.2d 815, 828 (Fed.Cir.1992). Here, however, the Court finds that the methods used in the administration of both the survey and the experiment render the data collected of so little reliability and utility as to be irrelevant. See Evory, 505 F.3d at 776. Little's proposed testimony provides no helpful evidence as to the actual behavior of actual consumers of the products at issue in this litigation, and is therefore excluded.
Staples's Motion to Strike Little's proposed testimony is therefore granted. The Court's analysis of Staples's Motions for Summary Judgment will proceed without reference to Little's expert report.
*1011 II. Design Patent Infringement
A design patent may issue to the inventor of "any new, original and ornamental design...." 35 U.S.C. § 171. "A design patent protects the nonfunctional aspects of an ornamental design as shown in the patent." Elmer v. ICC Fabricating, Inc., 67 F.3d 1571, 1577 (Fed. Cir.1995). The patent is infringed by the application of "the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale...." 35 U.S.C. § 289. The patented and allegedly infringing designs need not be identical for infringement of a design patent to be found. See OddzOn Prods., Inc. v. Just Toys, Inc., 122 F.3d 1396, 1405 (Fed.Cir.1997).
As the Federal Circuit has recently clarified, the inquiry that governs analysis of design patent infringement is "whether an ordinary observer, familiar with the prior art, would be deceived into thinking that the accused design was the same as the patented design." Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 672 (Fed.Cir.2008). This "ordinary observer" test is to be applied with consideration of the prior art as a general frame of reference, but "without any `point of novelty' perspective." Crocs, Inc. v. Int'l Trade Comm'n, 598 F.3d 1294 (Fed.Cir.2010). "Infringement will not be found unless the accused article embodies the patented design or any colorable imitation thereof." Egyptian Goddess, 543 F.3d at 678 (internal quotations omitted).
The Court has appropriately refrained from construing the design patent claim "by providing a detailed verbal description of the claimed design," and has instead issued a claim construction order specifying that the claimed design is that "shown in the figures of U.S. Design Patent Number D530,734 . . . ." (R. 85, Order, Sept. 25, 2009) The images as contained in the patent therefore form the basis of the Court's application of the ordinary observer test.
In some cases, the patented design will be sufficiently distinct from the accused design that the dissimilarity alone will suffice to show that the patentee has failed to prove that "the two designs would appear `substantially the same' to the ordinary observer . . . ." Egyptian Goddess, 543 F.3d at 678. This is the case here, as the designs in the present case are plainly dissimilar when taken as a whole, without improper consideration of particular features in isolation. See Crocs, 598 F.3d at 1303 ("The ordinary observer test applies to the patented design in its entirety, as it is claimed.").
A side-by-side comparison shows that the two designs, taken as a whole, create overall visual impressions that would appear plainly dissimilar to the ordinary observer. See OddzOn Prods., 122 F.3d at 1405 (directing district courts to focus on the "overall ornamental visual impression" created by patented and accused designs). Here, the scalloped edges in the patented design when compared with the smooth edges of the accused design, and the hour-glass shape of the accused design when compared with the block-rectangle shape of the patented design are important aspects that dominate the overall visual appearance of the respective designs. Staples asserts that the other differences include the removable name plate of the patented design, the indented circles on each of the accused design's keys, the recessed display screen in the patented design, and the different key configurations in each design. Considering all of these asserted distinctions together in the context of the overall ornamental design, no reasonable jury could find that Competitive Edge has met its burden of showing that an ordinary observer would believe the accused design to be the same as the *1012 patented design, or even a colorable imitation of the patented design. See Egyptian Goddess, 543 F.3d at 679 ("[T]he patentee bears the ultimate burden of proof to demonstrate infringement by a preponderance of the evidence.").
When the patented design and the accused design are plainly dissimilar, as in this case, there is no need to look to the prior art, because two designs may be "sufficiently distinct that it will be clear without more that the patentee has not met its burden." Egyptian Goddess, 543 F.3d at 678. Express reference to the prior art is only helpful "when the claimed and accused designs are not plainly dissimilar. . . ." Id. Thus, if the claimed design and the accused design are sufficiently distinct, as here, no comparison with the prior art is necessary. See, e.g., Wing Shing Prods. (BVI) Co. Ltd. v. Sunbeam Prods., Inc., 665 F. Supp. 2d 357, 362 (S.D.N.Y. 2009) ([T]here are two levels to the infringement analysis: a level-one or "threshold analysis to determine if comparison to the prior art is even necessary, and a second level analysis that accounts for prior art in less obvious cases.").
The Court therefore follows the ordinary observer test and finds that the accused design and the patented design would be plainly dissimilar to an ordinary observer. As a result, the accused design does not infringe the '734 patent. Staples's Motion for Summary Judgment of Non-Infringement of U.S. Design Patent No. D530,734 is granted.
III. Trade Dress Infringement
Trade dress "refers to the total image of a product, including features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques." Computer Care v. Serv. Sys. Enters., Inc., 982 F.2d 1063, 1067 (7th Cir.1992) (internal quotations omitted). In order to succeed in an action for trade dress infringement, Plaintiffs must show that (i) their trade dress is distinctive, and (ii) consumers are likely to be confused as to the source or affiliation of the products because of the similarity between their product and that sold by Staples. See Thomas & Betts Corp. v. Panduit Corp., 138 F.3d 277, 291 (7th Cir.1998).[4]
Plaintiffs assert that their trade dress includes the following features:[5] 1) soft, pliant, bubbly keys having convex curvature that abut each other without flat sections in between; 2) a calculator top, including the keypad, that is one continuous, contoured surface with the rest of the calculator (except for one small removable rectangle that, at all times that the calculator *1013 is in view of consumer, sits flush with the contoured surface in an unobtrusive fashion), in which the keys are differentiated from each other by curved contouring, as opposed to having conventional separate keys that come up through holes in the surface; 3) a bubbly, convexly curved decoration panel spanning the width of three keys, located at the top of the keypad, with a single key on either side and a calculator display above; 4) a convexly curved top portion above the keypad with a rectangular calculator display located within it; 5) keys and other parts of the continuous calculator surface all being the same bright, whimsical color, with only the numbers and symbols on the keys and/or decoration panel being a different color; and 6) a generally curvy, bubbly three-dimensional shape whose dimensions approximate a rectangle with rounded corners. (CE TD 56.1 Resp. ¶ 44.)
A. Distinctiveness
Plaintiffs can show that their trade dress is distinctive by showing either that it is inherently distinctive or that it has acquired a secondary meaning in the minds of consumers. See Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 769, 112 S. Ct. 2753, 120 L. Ed. 2d 615 (1992). Trade marks and trade dress (the analysis and governing law is the same for both) can be (i) generic, (ii) descriptive, (iii) suggestive, (iv) arbitrary, or (v) fanciful. See id. at 768, 112 S. Ct. 2753 (citing Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9-11 (2nd Cir.1976)). Marks that are suggestive, arbitrary, or fanciful are inherently distinctive. See Two Pesos, 505 U.S. at 768, 112 S. Ct. 2753. Generic marks are not eligible for protection; descriptive marks, while not inherently distinctive, are protectible if they acquire secondary meaning. See id.
1. Inherently Distinctive
All of the features that comprise Plaintiffs' alleged trade dress are features of the Bubble Calculator's physical design, with the exception of the mutable characteristic of an unspecified "bright, whimsical color." A product's design standing alone, without a showing of secondary meaning, is not inherently distinctive. Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 216, 120 S. Ct. 1339, 146 L. Ed. 2d 182 (2000). Therefore, none of these five physical features of the alleged trade dress is inherently distinctive.
Neither may a product's color, standing alone, make a product's trade dress sufficiently distinctive as to be protectible. See Qualitex Co. v. Jacobson Products Co., 514 U.S. 159, 163, 115 S. Ct. 1300, 131 L. Ed. 2d 248 (1995) (color may be used as a trademark where it "has attained `secondary meaning' and therefore identifies and distinguishes a particular brand"). Therefore, Plaintiffs' final alleged feature, a bright whimsical color or a color scheme consisting of a single bright color for the body of the calculator and a separate color for the number of the keys, is not inherently distinctive.
Of course, it is the "overall appearance of a product" that comprises its trade dress, and not the individual features. Specialized Seating, Inc. v. Greenwich Industries, L.P., 472 F. Supp. 2d 999, 1010 (N.D.Ill.2007). However, it seems illogical that individual features, each requiring evidence of secondary meaning, can be inherently distinctive without such a showing in combination. Neither have Plaintiffs argued that these features can, in combination, be inherently distinctive.
Therefore, Plaintiffs' asserted trade dress is not inherently distinctive.
*1014 2. Secondary Meaning
A trade dress that is not inherently distinctive can become distinctive upon a showing of acquired secondary meaning, that is, if the mark has become a distinctive indicator of the identity of a plaintiff's goods in the steam of commerce. 15 U.S.C. § 1052(e), (f); see Two Pesos, 505 U.S. at 769, 112 S. Ct. 2753.
Several factors are considered in determining the existence of secondary meaning. Direct evidence of secondary meaning may be shown via direct consumer testimony or consumer surveys, while circumstantial evidence can be drawn from consideration of the exclusivity, length, and manner of use of the trade dress; the amount and manner of advertising; the amount of sales and number of customers; whether the plaintiff has an established place in the market; and whether there is any proof of intentional copying. See Spraying Sys., 975 F.2d at 393; Echo Travel, Inc. v. Travel Assoc., Inc., 870 F.2d 1264, 1267 (7th Cir.1989).
Direct Consumer Testimony
Plaintiffs argues that their expert, Dr. Eldon Little ("Little"), is a consumer of promotional products and "testifies that he would associate the Bubble Calculator's trade dress with Plaintiffs." (CE TD Brief at 8.) However, Little does not say he would make this association. At best, Little testifies that he believes that others would do so, without providing an independently admissible basis for this opinion. (Little TD Decl. ¶¶ 10-13.)
Greenspon testified that several distributors of promotional products associate the Bubble Calculator with AdVantage. (Staples TD 56.1 Reply ¶ 28.) On a motion for summary judgment, this evidence will not be discounted solely due to Greenspon's possible bias as owner of Competitive Edge. See Thomas & Betts Corp., 138 F.3d at 293. However, Greenspon's testimony on this point is unsupported by any evidence from the distributors themselves, such as affidavits, attesting to this association. Cf. Syndicate Sales, Inc. v. Hampshire Paper Corp., 2000 WL 1428665 at *13 (S.D.Ind.2000) (affidavits from wholesaler and retailers sufficient to establish at least some link between product and supplier). Greenspon's second-hand report on this matter is mere hearsay offered for the truth of the matter asserted, and would not be admissible evidence; therefore, it cannot be deemed to have established an issue of material fact on summary judgment.
Thus, Plaintiffs have not presented any admissible and probative evidence of direct consumer testimony that would weigh in favor of a finding of acquired secondary meaning.
Consumer Surveys
As discussed at length above, neither Plaintiffs nor Staples have provided admissible consumer survey evidence. Therefore this factor cannot affect the secondary meaning analysis in this case.
Exclusivity, Length and Manner of Use
Plaintiffs make no explicit claim that they have used their alleged trade dress exclusively. They do, however, claim to "vigilantly police their trade dress by finding entities that might be copying it and forcing them to stop." (CE TD Resp. Br. at 9.) However, Plaintiffs point only to one instance before Staples's alleged infringement of their trade dress in which Plaintiffs purport to have policed the use of their trade dress. Plaintiffs apparently filed a complaint in Iowa against Target Corporation, but Plaintiffs have not supported (with admissible evidence in the record) their assertion that this complaint included or in some way constituted a claim of trade dress infringement. (Staples TD 56.1 Reply ¶ 33.) There is no *1015 direct evidence, therefore, supporting Plaintiffs' claim of vigilant policing of their trade dress.
Staples contends that the License Agreement between Competitive Edge and Staples is evidence that Plaintiffs allows others to use their alleged trade dress. (Staples TD Br. at 10.) The License Agreement allowed Staples to continue selling The Staples Brand Bubble Calculator. (Staples TD 56.1 Reply ¶ 31.) The record shows that the licensing agreement was part of a settlement reached to avoid litigation. (Staples TD 56.1 Reply ¶ 31.) Finding that Plaintiffs abandoned exclusive use of its trade dress by allowing Staples to sell off its remaining inventory as part of a litigation settlement would penalize Plaintiffs for attempting to effectively and efficiently stop Staples's infringement outside of the courtroom, which the Court declines to do.
Further, Plaintiffs have been using its trade dress for nearly five years. (Staples TD 56.1 Reply ¶ 1.) This extended period of use weighs in favor of a finding of secondary meaning. See Echo Travel, 870 F.2d at 1270 (nothing that no particular period of use is required and that secondary meaning can be acquired after a brief, if intensive, period of use).
Amount and Manner of Advertisement
Competitive Edge has spent roughly $400,000 on advertising containing the alleged trade dress. (Staples TD 56.1 Reply ¶ 24.) However, this advertising is in the form of catalog placement and is shared with many other products. (CE TD 56.1 Resp. ¶ 38.) The amount of advertising expenditure is therefore shared between all of these products. This makes the actual amount of money spent on advertising for the alleged trade dress undeterminable, or at least only a fraction of the overall cost. Thus, this $400,000 aggregate figure sheds little probative light on the question of whether the alleged trade dress of the calculator has acquired secondary meaning in the eyes of its consumers. See Echo Travel, 870 F.2d at 1270 (noting that "the effect or success of the advertising, not the mere fact of advertising" is the relevant test for secondary meaning).
Amount of Sales and Number of Consumers
Plaintiffs do not contend that its sales revenues are probative of secondary meaning. (CE TD 56.1 Resp. ¶ 64.) Neither party argues that the number of customers of the Bubble Calculator is probative of secondary meaning. Therefore, this factor does not weigh either for or against a finding of acquired secondary meaning.
Established Place in the Market
Plaintiffs argue that they have tried to establish a place in the relevant market. (CE TD Resp. at 12.) However, Plaintiffs fail to provide any evidence that Competitive Edge enjoys such an established place. Competitive Edge is but one of thousands of distributers in the promotional products market. (CE TD 56.1 Resp. ¶ 65.) The large number of distributors combined with the lack of a demonstrated established place in the market weighs against a finding of secondary meaning.
Proof of Intentional Copying
Intentional copying can be probative evidence of secondary meaning. See Thomas & Betts Corp. v. Panduit Corp., 65 F.3d 654, 663 (7th Cir.1995) (copying is evidence of secondary meaning where the defendant's intent is to confuse consumers). In the present case, Plaintiffs claim that Staples intentionally copied the Bubble Calculator trade dress (CE TD Resp. Br. at 6-7) and provides evidence in the form of internal email and notes from Staples's product designers. (Staples TD 56.1 *1016 Reply ¶ 32.) Evidence of copying can be sufficiently probative to create an issue of material fact as to whether the trade dress has acquired secondary meaning. See, e.g., FASA Corp. v. Playmates Toys, Inc., 869 F. Supp. 1334, 1357 (N.D.Ill.1994). The actual evidence of copying provided here is relatively weak, however, as the internal emails cited by Plaintiffs can be read as indicating that Staples was actively trying to design a product that did not copy the intellectual property embodied in the Bubble Calculator. Taken as a whole, the circumstantial evidence that Plaintiffs have provided in support of their claim of intentional copying is insufficient to create a genuine issue of material fact with respect to this factor in the secondary meaning analysis.
The length and apparent exclusivity of Plaintiffs' use of the trade dress is therefore the sole factor weighing in favor of a finding that it has acquired secondary meaning. The lack of admissible direct consumer testimony and Competitive Edge's lack of an established place in the promotional products market weighs against a finding of secondary meaning, while the remaining factors are irrelevant or inconclusive. As a whole, the Court finds that Plaintiffs have therefore not established even a disputed issue of material fact that their asserted trade dress, which is not inherently distinctive, is nevertheless protectible because of an acquired secondary meaning. No reasonable jury could find on the basis of the evidence currently in the record that the trade dress of the Bubble Calculator has become a distinctive indicator of the identity of Plaintiffs' goods in the steam of commerce. Staples is accordingly entitled to summary judgment on the grounds that Plaintiffs do not have a protectable trade dress that it could be held liable for infringing.
Although as a general matter, "a court doesn't even reach the question of likelihood of confusion until persuaded that the putative mark is sufficiently distinctive to warrant prima facie protection as a trademark," see Spraying Sys., 975 F.2d at 387 (7th Cir.1992), and the Court is not so persuaded here, the Court will nevertheless proceed to the likelihood of confusion analysis in order to aid the parties.
B. Likelihood of Confusion
When determining likelihood of confusion, the following factors are relevant: 1) the similarity of the trade dresses, 2) the area and manner of concurrent use, 3) the degree of care likely to be used by consumers in selecting amongst similar products, 4) the strength of the plaintiff's trade dress, 5) the existence or absence of actual confusion, and 6) the intent of the defendant to pass off its product as that of the plaintiff. See Thomas & Betts, 138 F.3d at 296.
Similarity of Trade Dresses
Products are deemed to be similar for purposes of the trade dress analysis if the accused product "is one which would reasonably be thought by the buying public to come from the same source, or thought to be affiliated with, connected with, or sponsored by" the holder of the protected trade dress. See Ty, Inc. v. Jones Group, Inc., 237 F.3d 891, 900 (7th Cir.2001) (internal quotations omitted). Staples's expert witness, Michelle Elster ("Elster"), testified that many similarities exist between the Staples Pillow Top Calculator and the AdVantage Bubble Calculator. (Staples TD 56.1 Reply ¶ 40.) This does not demonstrate that the two products are similar as a matter of law, however, because Plaintiffs have presented no evidence that Staples's Pillow Top Calculator is reasonably likely to be thought by consumers of as closely related to the Bubble Calculator. Because there is no admissible evidence in *1017 the record supporting a conclusion that the buying public would believe the Pillow Top Calculator to be affiliated with, connected with, or sponsored by the producer of the Bubble Calculator, this factor weighs against a finding that confusion is likely.
Area and Manner of Concurrent Use
In considering the area and manner of concurrent use of the protected and allegedly infringing trade dress, the Court must assess whether "there is a relationship in use, promotion, distribution, or sales between the goods or services of the parties." Forum Corp. of N. Am. v. Forum, Ltd., 903 F.2d 434, 442 (7th Cir.1990). Evidence concerning the relative geographical distribution areas, the presence or absence of direct competition among the products, and whether the products are sold through the same marketing channels is relevant to this inquiry. See Ty, Inc., 237 F.3d at 900.
The parties agree that the AdVantage Bubble Calculator is used primarily as a promotional product. While Staples argues that it sells the Pillow Top Calculator in a different "stream of commerce" and appears to primarily target the education-related retail market for its sales of the Pillow Top Calculator, (Staples TD Br. at 14), there is evidence that Staples has given its products away as promotional items. (Staples TD 56.1 Reply ¶ 14.) The extent to which the area and manner of use overlaps is thus in dispute. Resolving this factor in favor of Competitive Edge, it weighs in favor of a finding of likelihood of confusion.
The Degree of Care Likely to be Used by Consumers
Plaintiffs do not dispute that "consumers of the AdVantage Bubble Calculator . . . are sophisticated buyers." (CE TD 56.1 Resp. ¶ 26.) Therefore, the degree of care used by these consumers in selecting amongst similar products is likely to be high. This factor weighs against a likelihood of confusion.
The Strength of Competitive Edge's Trade Dress
As discussed above, Plaintiffs have not demonstrated that they have a protectible trade dress. Therefore, this factor weighs against a finding of likelihood of confusion.
Instances of Actual Confusion
Plaintiffs have provided no evidence of actual confusion, but argue that evidence of mixing Bubble Calculators and Pillow Top Calculators in Staples stores is in fact such evidence. (See CE TD Resp. Br. at 15.) However, there are countless possible reasons for this mixing. Indeed, there is evidence in the record that the products are mixed in the bins not because of employee confusion, but because Staples specifically instructs its stores to mix the two products in a single bin. (Staples DP 56.1 Reply ¶ 24.) Competitive Edge points to a single reported instance in which a Staples employee purportedly rang up two Staples Brand Bubble Calculators as Pillow Top Calculators, but does not support this anecdote with any admissible evidence; even if the incident were properly documented, it would not show that the error resulted from the cashier's confusion as to the identity of the two products as opposed to a computer error or other explanation. (See Staples DP 56.1 Reply ¶ 23.) This evidence cannot be considered probative of actual confusion.
Thus, the only evidence that Plaintiffs have presented supporting an inference that consumer confusion is likely is the evidence that both Plaintiffs and Staples provide calculators for use as promotional and marketing items, and thus that there is at least some overlap in the area and manner in which the asserted and allegedly infringing trade dresses are used. Weighing against a finding of confusion are the lack of evidence showing similarity of the trade dresses (a finding consistent with, although not dependant upon, the *1018 Court's holding of non-infringement on clear dissimilarity grounds), the fact that consumers of Plaintiffs' products are highly sophisticated buyers likely to be careful in their buying choices, the weakness of Plaintiffs' trade dress, and the lack of evidence of instances of actual confusion. Even drawing all inferences in Plaintiffs' favor, no reasonable jury could find that consumers are likely to be confused as to the distinction between Plaintiffs' product and that sold by Staples. Accordingly, even if Plaintiffs had presented facts supporting their claim to having a protectible trade dress, Staples would be entitled to summary judgment on non-infringement grounds because there is no likelihood of consumer confusion.
Staples's Motion for Summary Judgment of non-infringement of Plaintiffs' alleged trade dress is therefore granted.
CONCLUSION AND ORDER
Staples's Motion in Limine to Exclude the expert testimony of Plaintiffs' expert, Dr. Eldon Little, is granted. Staples's Motion to Strike is denied as to Plaintiffs' excess statements of fact in violation of Local Rule 56.1, and dismissed as moot with respect to the testimony of Eldon Little in view of the Court's ruling on the Motion to Exclude. Staples's motion for summary judgment of non-infringement of U.S. Design Patent D530,734 is granted. Staples's motion for summary judgment of non-infringement of the Bubble Calculator trade dress is granted.
NOTES
[1] Throughout this Opinion, the Court references the Parties' Local Rule 56.1 Statements of Undisputed Material Facts as follows: citations to Plaintiffs' Response to Staples's Statement of Material Facts Regarding Plaintiffs' Design Patent have been abbreviated to "CE DP 56.1 Resp. ¶ __."; citations to Plaintiffs' Response to Staples's Statement of Material Facts Regarding Plaintiffs' Trade Dress have been abbreviated to "CE TD 56.1 Resp. ¶ ___." citations to Staples's Reply to Plaintiffs' Statement of Additional Material Facts Regarding Design Patent have been abbreviated to "Staples DP 56.1 Reply ¶ ___."; and citations to Staples's Reply to Plaintiffs' Statement of Additional Material Facts Regarding Trade Dress have been abbreviated to "Staples TD 56.1 Reply ¶ ___."
[2] However, the Court notes that in addition to the portions of his testimony that are based upon the survey and the experiment, Little's planned testimony includes analysis of the '734 patent, whether there is infringement of the '734 patent in this case, discussion of trade dress infringement, and analysis of secondary meaning with respect to trade dress doctrine. (Little Rep. 4.) Little's educational and professional background does not show expertise in the areas of patent infringement, patent claim construction or analysis, comparison of patent claims, trade dress infringement, secondary meaning, or likelihood of confusion. Further, Little states "I have been informed that determining patent infringement is a two-step process." (Little Rep. ¶ 11 (emphasis added).) This statement further indicates a lack of expertise in the area of patent infringement. The Court therefore finds that Little is unqualified to testify as an expert witness with respect to these issues.
[3] Citations to the Expert Report of Dr. Eldon L. Little, III are abbreviated as "Little Rep. ¶ ___."
[4] Staples appears to argue for an additional, preliminary requirement of proof that the asserted trade dress is of a sort that is protectable, relying upon Keystone Camera Products Corp. v. Ansco Photo-Optical Products Corp., 667 F. Supp. 1221, 1225 (N.D.Ill.1987). A more appropriate reading of Keystone Camera, however, is that it merely restates the distinctiveness requirement. See id. (explaining that a plaintiff alleging a trade dress violation "must prove initially that it has a protectable trade dress, in that its trade dress is distinctive or has acquired secondary meaning.") (emphasis added) (citation omitted).
[5] Staples argues that Plaintiffs' asserted trade dress is not protectable because the definition of what the trade dress is has changed over the course of this litigation, in violation of the rule that protectable trade dress have a stable visual appearance. However, the alleged changes are not significant amendments to the asserted trade dress, but rather represent supplemental interrogatory responses on matters as minor as the correction of typographical errors. (CE TD 56.1 Resp. ¶ 50.) Staples's argument on this point would be valid if Plaintiffs had routinely deleted or added significant items from their definition of the asserted trade dress, but the evidence in the record shows that the basic scope of the asserted trade dress has remained consistent.
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513 S.W.2d 54 (1974)
Silas WILLIAMS, Appellant,
v.
The STATE of Texas, Appellee.
No. 48621.
Court of Criminal Appeals of Texas.
July 17, 1974.
Rehearing Denied September 18, 1974.
*55 Randy Taylor, Dallas, for appellant.
Ralph Prince, Dist. Atty., Alvin G. Khoury, Asst. Dist. Atty., Longview, and Jim D. Vollers, State's Atty., Austin, for the State.
OPINION
DAVIS, Commissioner.
Appeal is taken from a conviction for murder without malice. Punishment was assessed by the jury at two years.
The record reflects that the deceased died of gunshot wounds inflicted by appellant on the night of June 9, 1972. The appellant, testifying in his own behalf, stated that deceased attacked him and that he shot deceased in self-defense. Cindy Green, girlfriend of the deceased, testified that she was present in a trailer house shared by appellant and deceased when an argument began between deceased and appellant about the rent, that she went outside and thereafter she heard the first shot fired. Upon looking into the trailer she saw appellant firing a pistol into the bathroom. Investigating officers found deceased in the bathroom of the trailer with a gunshot wound in his head.
At the outset appellant contends that the "failure of the District Attorney to bring before the court materials in his possession and matters within his knowledge which would be evidence of appellant's innocence..." requires reversal.
At the hearing on appellant's motion for new trial it was developed that the prosecutor had in his possession a sworn statement of Cindy Green made to police prior to trial which appellant urges would have aided in establishing his claim of self-defense and refuted the trial testimony of Green.
The statement in question is in the record before us and it is in accord with Green's trial testimony that she left when the argument started. It is further noted that the statement is corroborative of the testimony of appellant and his wife that Green had not seen the beginning of the fight. In her testimony at the trial Green related that on her initial reentry of the trailer (after the argument started) both appellant and deceased were bleeding from the face and that the argument had not concluded. She stated that appellant's wife started fighting deceased and said she was going outside to get a knife. When appellant's wife left the trailer for the announced purpose of getting a knife, Green followed her "to try to stop her." After they went outside, and while Green was pleading with appellant's wife that getting a knife "wouldn't solve a thing," gunshot was heard. According to Green, upon reentry of the trailer, appellant was observed "standing in front of the bathroom firing a gun inside the bathroom." The written statement of Green in possession of the prosecutor reflects the following occurred when she made her first reentry into the trailer:
"I came back in after a short while and Silas [appellant] was on the floor and Ronald [deceased] was over him with his fist doubled up and I guess that Ronald had knocked him down. I also noticed that Ronald's left ear was bleeding so he had been hit in the ear by either Tommie Jean [appellant's wife] or Silas while I was outside. Tommie Jean *56 proceeded to jump on Ronald for knocking Silas down. I stepped in between Tommie Jean and Ronald and she pushed me out of the way. Tommie Jean was telling Ronald to get his stuff and leave and Ronald was telling her to come on and he would let her have it too. I went back outside and Tommie Jean followed me outside and said she was going to get her knife out of the car."
The State's theory of the case was that deceased had gone to the bathroom for the purpose of cleaning himself up after the altercation, had no weapon and posed no danger to appellant. The court instructed the jury relative to the law regarding abandonment of difficulty.
"It is well settled that the suppression of evidence, regardless of the good faith or bad faith of the parties, is not ground for reversal unless it had a material prejudicial effect on the judgment." Esquivel v. State, Tex.Cr.App., 506 S.W.2d 613; Means v. State, Tex.Cr.App., 429 S.W.2d 490. The written statement of Green is in accord with her trial testimony that she did not see the first blow delivered in the altercation. There is no variance in her observation of what occurred after she heard the gunshot. Considering the evidence as a whole, especially the jury verdict of murder without malice, we conclude that the additional observations reflected in the statement relative to what the witness observed upon first reentering the trailer did not have a material prejudicial effect upon the verdict.
No error is shown.
As a corollary to his claim that material evidence was deliberately suppressed, appellant contends the State either knowingly relied on perjured evidence or purposefully failed to correct false testimony. The allegation rests on the premise that witness Green's trial testimony was directly contradicted by her earlier sworn statement to the police.
The knowing presentation of perjured testimony by the State violates due process. Alcorta v. Texas, 355 U.S. 28, 78 S. Ct. 103, 2 L. Ed. 2d 9 (1957); Pyle v. Kansas, 317 U.S. 213, 63 S. Ct. 177, 87 L. Ed. 214 (1942); Mooney v. Holohan, 294 U.S. 103, 55 S. Ct. 340, 79 L. Ed. 791 (1935); Means v. State, Tex.Cr.App., 429 S.W.2d 490. Cf. Miller v. Pate, 386 U.S. 1, 87 S. Ct. 785, 17 L. Ed. 2d 690 (1967). The failure to correct evidence known to be false is also error. Giglio v. United States, 405 U.S. 150, 92 S. Ct. 763, 31 L. Ed. 2d 104 (1972); Napue v. Illinois, 360 U.S. 264, 79 S. Ct. 1173, 3 L. Ed. 2d 1217 (1959); Means v. State, supra.
In the instant case the necessary fact of perjury or false evidence has not been established. As this Court said in Haywood v. State, Tex.Cr.App., 507 S.W.2d 756, perjury is a serious charge which must be clearly supported by the evidence. Appellant has not shown perjury by the witness Green and therefore the State cannot be faulted for relying on that testimony or for failing to correct it. That the trial testimony was not identical to the written pretrial statement does not make out perjury. As in Haywood, there was in the case under consideration no material misrepresentation of fact to the appellant's prejudice. No error is shown.
Appellant contends that his retained counsel in the trial court was ineffective and he was thereby deprived of a right guaranteed him by the Sixth and Fourteenth Amendments of the United States Constitution.
In support of this contention appellant makes an in-depth review of the conduct of the trial by appellant's retained counsel. In making this analysis he lists "errors of omission" and "errors of commission."
We do not deem it necessary to discuss each of the claimed faults of trial counsel since the adequacy of an attorney's services must be gauged by the totality of *57 the representation. Lee v. State, Tex.Cr. App., 505 S.W.2d 816; Coble v. State, Tex.Cr.App., 501 S.W.2d 344; Satillan v. State, Tex.Cr.App., 470 S.W.2d 677.
In examining appellant's claim of ineffective counsel we view such complaints in the light of what the Court said in Williams v. Beto, 354 F.2d 698 (5th Cir. 1965):
"As no two men can be exactly alike in the practice of the profession, it is basically unreasonable to judge an attorney by what another would have done in the better light of hindsight."
Further, it must be borne in mind that a lawyer cannot be expected to win a hopeless case; nor is he to be adjudged incompetent because he tries to do the impossible and fails. Curtis v. State, Tex.Cr. App., 500 S.W.2d 478; Morrow v. State, Tex.Cr.App., 500 S.W.2d 811.
We have reviewed the record in light of the holdings of this Court addressed to this subject and conclude that appellant received adequate representation from his retained counsel in the trial court.
Appellant, in his final ground of error, contends appellant's trial counsel was incompetent because of mental inability.
At the hearing on appellant's motion for new trial Doctor Jeffery DeWare was called as a witness by appellant and testified that appellant's trial counsel had suffered a stroke in 1965 (trial was in May, 1973). On cross-examination it was developed that appellant's trial counsel had represented Doctor DeWare in connection with a claim arising from the death of the doctor's daughters while traveling on an airline in 1968. The record reflects the following testimony relative to counsel's mental competency:
"Q. [prosecutor] ... Now, did the result of the stroke to your best medical... did it in any way affect Mr. McCasland's [appellant's trial counsel] mental capacity?
"A. [Dr. DeWare] Well, no. I don't think I would have retained him or hired him as a lawyer if I thought it. I didn't think so, no, sir."
We reject appellant's final contention relative to incompetency of trial counsel.
The judgment is affirmed.
Opinion approved by the Court.
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677 S.W.2d 171 (1984)
John Dee ANDREWS, Appellant,
v.
Cynthia Mae ANDREWS, Appellee.
No. 13981.
Court of Appeals of Texas, Austin.
August 22, 1984.
Rehearing Denied September 19, 1984.
J. Terry Weeks, Weeks, Chapman & Buford, Austin, for appellant.
*172 James M. Vogt, Coffee, Goldston & Vogt, Austin, for appellee.
Before SHANNON, EARL W. SMITH and GAMMAGE, JJ.
OPINION
SHANNON, Justice.
Appellee Cynthia Mae Andrews filed suit in the district court of Travis County seeking a divorce from appellant John Dee Andrews. By her suit, appellee sought appointment as managing conservator of their daughter, Jamie Dee Andrews, an infant, an order requiring appellant to make child support payments, and a division of the community property.
After trial to the court, judgment was rendered granting the divorce. The district court appointed Cynthia Andrews managing conservator of the child, ordered John Andrews to make child support payments of $510.00 each month, and divided the community estate. Upon request, the district court filed findings of fact and conclusions of law.
John Andrews does not fault that part of the judgment granting the divorce, naming Cynthia Mae Andrews the managing conservator of the child, or setting the child support. Rather, he challenges that part of the judgment which disposes of the parties' property.
John Andrews claimed as his separate property the house at 2800 Hubbard Circle in Austin which the parties made their residence. The undisputed community estate consisted of a greyhound dog, two automobiles, interests in employee retirement plans, household furnishings and fixtures, life insurance, bank balances and savings and loan deposits, a mineral lease, a modest stock account, and real estate located at 5010 Powder River Drive. John Andrews also held title to several other parcels of real estate in Travis County. In some of these parcels, Andrews held title with his mother, Myrtle Andrews.
Among other things, the judgment of the district court imposed a constructive trust for the benefit of Cynthia Mae Andrews for a one-half interest in the real estate comprising the residence of the parties located at 2800 Hubbard Circle. The judgment also ordered John Andrews to execute a promissory note payable to his former wife in the sum of $45,000.00, the note being secured by a lien against certain personal and real estate awarded in the judgment to John Andrews as his separate property.
John Andrews complains initially of the imposition by the district court of the constructive trust for the benefit of his former wife of a one-half undivided interest in the parties' residence at 2800 Hubbard Circle. He insists that a constructive trust was not warranted because Cynthia Mae did not contribute to the down-payment for the purchase of the residence. Appellant maintains that the Hubbard Circle residence is his separate property and, at best, the community estate has only the right to reimbursement for sums spent upon the improvement of the residence.
In the autumn of 1975, the parties were living together in Dallas and were engaged to be married. They decided to move to Austin and to jointly buy a house. The parties made numerous trips to Austin, investigating the housing market, and ultimately decided to purchase the property at 2800 Hubbard Circle. John Andrews signed an offer to purchase the residence.
The parties agreed between themselves that they would buy the residence jointly, use the property as their mutual marital homestead, borrow funds sufficient to purchase said property, using their collective borrowing power and credit reputation, and jointly repay such indebtedness from funds they would later earn.
To assist in their qualification for the necessary long-term financing of the property, Cynthia Mae Andrews signed a loan application and delivered such application to John Andrews, at his request, for delivery to the lender. However, John Andrews delivered a different loan application for Cynthia Mae Andrews, typed but not signed, to the lender. The initial documents *173 relating to the purchase of the residence reflected the names of Cynthia Mae Calvert and John Andrews as prospective co-borrowers and co-owners. Cynthia Mae did not pay any of the escrow money tendered the seller with the contract to purchase.
Before the closing of the purchase of the residence, appellant unilaterally informed the closing attorney that Cynthia Mae's name was to be stricken from such documents, and, as a result, title issued solely in the name of John Andrews. Only John Andrews signed the note and deed of trust. Appellant Andrews did not inform Cynthia of the changes directed to be made to the closing papers but did tell her that it was unnecessary for her to attend the closing, on March 2, 1976.
Upon disputed facts, the district court found that John Andrews knew that Cynthia Mae Andrews intended to be an equal, co-owner of the residence, and knew that she intended to share the cost of its debt service, maintenance and all improvements, as their marital abode. Such intent was formed before the ceremonial marriage, and long after the time when they had agreed to marry. The sale was closed on March 2, 1976, at a time when Cynthia was away from Austin.
On March 20, 1976, the parties were ceremonially married, and continued their cohabitation at 2800 Hubbard Circle, and thereafter treated it as their legal residence and it was, in fact, their domicile until separation. All sums borrowed to make the down-payment on the subject property were repaid, after their marriage, to the various lenders from community earnings of the parties.
After the parties' marriage, they jointly improved and substantially enhanced the value of 2800 Hubbard Circle with community funds and significant community labor, and in all respects treated the property as equal owners. In 1980, Cynthia Andrews, for the first time, learned that the deed of conveyance to the residence reflected only the name of her husband as grantee.
The district court concluded that John Andrews, as constructive trustee, held an undivided one-half interest in the 2800 Hubbard Circle property for the benefit of Cynthia Mae Andrews. The court reasoned that the constructive trust arose as a result of John Andrews' deliberate violation of their confidential relationship, which was likewise a fiduciary relationship, in direct fraud of Cynthia Mae Andrews' rights in the property. As a result, the district court concluded that the parties held equal undivided interests in the Hubbard Circle property as tenants-in-common.
In support of its imposition of the constructive trust, the district court reasoned that to fail to impose a constructive trust would result in an unconscionable and unjust enrichment of the husband's separate estate. The imposition of such trust and the resulting co-tenancy seemed to the district court to be the only fair and accurate way to evaluate the respective contributions of time, toil, labor and enhanced value of the residence. Any attempt to otherwise place a measure of reimbursement would be unnecessarily speculative and grounded on incomplete or disputed evidence. The district court concluded that the imposition of the constructive trust was not a divestiture of title, but instead an enforcement of the parties' agreement, made within the confidential and fiduciary relationship that existed prior to ceremonial marriage.
A constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired under such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee. Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 122 N.E. 378, 380 (1919).
Unlike an express trust, a constructive trust does not arise because of a manifestation of intention to create it; to the contrary, it is imposed by law because the person holding title to the property would profit by a wrong or would be unjustly *174 enriched if he were permitted to retain title. Omohundro v. Matthews, 161 Tex. 367, 341 S.W.2d 401, 405 (1960).
[A constructive trust] is unlike other trusts, but equity raised it up in the name of good conscience, fair dealing, honesty, and good morals. Omohundro v. Matthews, 161 Tex. 367, 341 S.W.2d 401, 405 (1960). "A constructive trust is the formula through which the conscience of equity finds expression." Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 386, 122 N.E. 378, 380 (1919). Equity provides the idea of constructive trusts as a tool to "frustrate skullduggery," 4 R. Powell, Real Property § 593 (1949), even though that kind of a trust is also grounded upon elusive principles. Such a trust is purely a creature of equity. Its form is practically without limit, and its existence depends upon the circumstances. Simmons v. Wilson, 216 S.W.2d 847, 849 (Tex.Civ. App.Waco 1949, no writ).
Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848, 851 (Tex.1980).
The district court correctly concluded that a fiduciary relationship existed. In Texas Bank & Trust Co. v. Moore, 595 S.W.2d 502, 507 (Tex.1980), the Court stated: "the term [fiduciary] includes those informal relations which exist whenever one party trusts and relies upon another, as well as technical fiduciary relations." (citing Kinzbach Tool Co., Inc. v. Corbett-Wallace Corp., 138 Tex. 565, 160 S.W.2d 509, 513 (1942)). See also Turner v. Miller, 618 S.W.2d 85, 87 (Tex.Civ.App.1981, writ ref'd n.r.e.) (close, family-like relationship between elderly woman and a younger couple was a fiduciary relationship under facts); Adickes v. Andreoli, 600 S.W.2d 939, 946 (Tex.Civ.App.1980, no writ) (Where Adickes and Andreoli were close personal friends and Adickes agreed to assist Andreoli in locating suitable real estate, and where Adickes knew that Andreoli relied on his knowledge and experience, a fiduciary relationship existed). At the time of the transactions in the case on appeal, the parties had been seeing each other for approximately seven years; they were living together and were engaged to be married. The parties agreed to purchase the Hubbard Circle house jointly for use as their marital residence.
John Andrews argues that because Cynthia Mae Andrews did not contribute to the down-payment for the purchase of the residence, she cannot be the beneficiary of a resulting trust. This may be true. Nevertheless, this Court does not understand that appellee was required to prove a contribution to the down-payment for the purchase of the house as a condition for the imposition of a constructive trust as distinguished from a resulting trust. Tolle v. Sawtelle, 246 S.W.2d 916, 918 (Tex.Civ. App.1952, writ ref'd).
By several points of error, the former husband advances the premise that the district court erred in awarding a judgment and note to the former wife in the sum of $45,000.00 since such was supported by no evidence or insufficient evidence. The probable value of the items of property assigned in the judgment to John Andrews as his separate property is about $33,570.00. John Andrews argues that there is no factual or legal justification for the eleven-thousand dollar disparity between that sum and the $45,000.00 note.
In support of his argument the former husband reminds this Court that the district court made no findings which would support the unequal distribution as "just and right, having due regard for the rights of each party....", Tex.Fam.Code. Ann. § 3.63 (Supp.1984), such as disparities in the earning capacities and incomes of the parties, education, relative health, relative financial conditions and obligations, ages, size of the separate estates, and the nature of the property. See Murff v. Murff, 615 S.W.2d 696 (Tex.1981).
Conclusion of law four, at first blush, seems to furnish the basis for the court's award of the $45,000.00 note to Cynthia Mae. That conclusion provides as follows:
IV.
As to the bulk of the community estate, owned in co-tenancy with [John Andrews'] *175 mother, whether in trust, or held in her name, or jointly with her, a manifest injustice could occur to [Cynthia Mae Andrews], to be substituted as co-tenant, with a hostile co-tenant. Accordingly, in lieu thereof, [Cynthia Mae] should have reimbursement, as requested, by way of a note to be executed by [John], as an equitable portion of the net community estate, otherwise awarded in specie to [John], together with the chattels and the incidents of her employment which were set aside to her in the Court's judgment. (Emphasis added).
It would appear from conclusion four that the court had determined that the community estate owned certain parcels of real estate as a co-tenant with John Andrews' mother and that the $45,000.00 note represented, at least in part, the value of Cynthia Mae's community interest in that real estate. However, in later filed conclusions of law, the court makes plain that no such meaning may be drawn from conclusion of law four, and in the later filed conclusions of law the court specifically determines that the mentioned parcels of real estate are neither community nor separate property of the parties. The district court must have concluded, but did not so state, that John Andrews made a gift to his mother of the community funds employed in the purchase of the parcels of real estate.
On the other hand, and in defense of the judgment, Cynthia Mae Andrews suggests that the unequal distribution of the community was warranted by her former husband's "waste, mismanagement, or outright conversion of community funds." As authority for such proposition, appellee relies upon Grothe v. Grothe, 590 S.W.2d 238 (Tex.Civ.App.1979, no writ) and Reaney v. Reaney, 505 S.W.2d 338 (Tex.Civ.App.1974, no writ).
In Grothe v. Grothe, supra, the judgment recited that the former spouse wrongfully and willfully converted substantial amounts of community funds for his own personal use with the intention of depriving the former wife of her community interest in those funds. The former spouse failed to challenge that finding. In the absence of an attack upon the finding of conversion of community funds, this Court held that the finding of conversion justified an unequal distribution of the remaining community estate. In Reaney v. Reaney, supra, the former husband admitted that he "squandered" $53,000.00 in community funds. He lost some of the money gambling, he gave some of it away, and he spent some of the money "very foolishly." As this Court understands Reaney, the husband's profligacy must have been viewed by the Court as a fraud on the community estate.
There are no facts or findings in this appeal which are similar to those in either Grothe or Reaney. Without dispute John Andrews made some poor investments of community funds. Also without doubt, he used community income to purchase with his mother some of the parcels of real estate. Cynthia Mae knew that her husband made payments on notes executed in such transactions. In fact, in at least one of the real estate transactions she wrote many of the checks for the monthly payments. Neither Grothe nor Reaney is authority for the proposition that a spouse's good faith, but unwise, investment of community funds resulting in losses to the community estate justifies an unequal distribution of remaining community property. Absent a fraud on the community, the court may not order reimbursement for gifts of community property made during the marriage to a stranger. See Geer, Gifts in Fraud of the Rights of the Wife, 26 Baylor L.Rev. 85 (1974). There are no findings by the district court that Andrews' investment of community funds in the purchase of the real estate was tantamount to a fraud on the community.
As this Court is unable to discover a factual or legal justification for the disparity in the division of the community property, we grant appellant's points of error six, seven and eight. As the district court erred in the division of the community property of the parties, this Court will reverse that part of the judgment and remand *176 that part of the cause for a division of the community property. That part of the judgment disposing of the Hubbard Circle property as separate property of the parties is affirmed. McKnight v. McKnight, 543 S.W.2d 863 (Tex.1976).
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677 S.W.2d 251 (1984)
Thomas Eugene WELLS and wife Maggie Wells, Appellants,
v.
METRO FINA COMPANY, a Texas Corporation, Appellee.
No. 08-83-00352-CV.
Court of Appeals of Texas, El Paso.
September 5, 1984.
C.R. Kit Bramblett, El Paso, for appellants.
John E. Keithly, Anthony, N.M., for appellee.
Before STEPHEN F. PRESLAR, C.J., and WARD and OSBORN, JJ.
OPINION
WARD, Justice.
Appellants characterize this action as "an interlocutory appeal from an order overruling Appellants' Plea of Privilege." *252 Because the appeal was not perfected until after September 1, 1983, we will dismiss the appeal for want of jurisdiction.
The Appellee filed suit on a sworn account in the 65th District Court of El Paso County; the Appellants filed their plea of privilege to be sued in the county of their residence, both actions occurring prior to September 1, 1983. A hearing was held June 9, 1983, on the plea of privilege. The order denying the Appellants' plea was entered on October 28, 1983. Notice of Appeal was filed November 10, 1983, and a certificate of deposit of cash in lieu of cost bond was filed November 10, 1983. This is thus, a purported appeal from an order overruling a plea of privilege which was taken and perfected after September 1, 1983. No such interlocutory appeal is now permitted. Grubbs v. Mercantile Texas Corp., 668 S.W.2d 429 (Tex.App.Eastland 1984, no writ history); Ramcon, et al. v. American Steel Building Co., Inc. 668 S.W.2d 459 (Tex.App.El Paso 1984, no writ); Boyd v. Raymondville State Bank, 668 S.W.2d 466 (Tex.App.Corpus Christi 1984, no writ history); Graue-Haws, Inc. v. The Honorable Lawrence Fuller, 666 S.W.2d 238 (Tex.App.El Paso 1984, no writ); Morrison by Morrison v. Williams, 665 S.W.2d 212 (Tex.App.San Antonio 1984, no writ history); Byrd v. Pharris, 663 S.W.2d 856 (Tex.App.San Antonio 1983, no writ). Contra: Gonzalez v. H.E. Butt Grocery, Co., 667 S.W.2d 188 (Tex. App.Corpus Christi 1983, no writ).
The appeal is dismissed.
STEPHEN F. PRESLAR, Chief Justice, dissenting.
I respectfully dissent on the basis that this case should be determined under the law existing prior to the September 1, 1983, amendments. I would interpret Senate Bill 898, 68th Legislature (1983), amending Article 1995 and repealing Article 2008, Tex. Rev.Civ.Stat.Ann. to provide that cases filed prior to September 1, 1983, are to be determined under the prior law. Poor legislative draftsmanship has created the problem of the effective date of the legislation and at least eight cases by the courts of appeals have passed on the question as presented in various procedural stages of trial with varying reasons for the conclusions each reached. To date, the Supreme Court has not had occasion to construe the statute. However, conflict exists. The case of Gonzalez v. H.E. Butt Grocery, Co., 667 S.W.2d 188 (Tex.App.Corpus Christi 1983, no writ) conflicts with the cases cited in our majority opinion.
As noted, the one act, Senate Bill 898, both amends Article 1995 and repeals Article 2008, so that when it speaks of the effective date, that includes the changes in Article 1995. Section 1 of the act makes extensive amendments to Article 1995 with its many exceptions to the general venue rule. It is followed by Sections 2 and 3, providing:
Section 2. Article 2008, Revised Civil Statutes of Texas, 1925, as amended, is repealed.
Section 3. This act takes effect September 1, 1983, and shall not apply to pending appeals on venue questions. For the purpose of appeals on venue questions pending prior to September 1, 1983, the former law is continued in effect.
It is the writer's belief that under rules of statutory construction, the interpretation to be given this act is that the former venue statute governs all cases filed prior to the effective date and all cases filed after that date are governed by the amended statute.
The effective date is stated. That is followed by additional provisions as to pending appeals. There is no mention of suits pending in the trial courts. Our question becomes, did the legislature intend that the amendment should alter the venue of pending suitsbe retroactive? The rule of construction is that an act will not be applied retrospectively unless it appears by fair implication from the language of the entire act that it was the intent of the legislature to make it applicable to both past and future transactions. Ex parte Abell, 613 S.W.2d 255 (Tex.1981); Merchants Fast Motor Lines, Inc. v. Railroad Commission of Texas, 573 S.W.2d 502 *253 (Tex.1978); Coastal Industries Water Authority v. Trinity Portland Cement Division, General Portland Cement Company, 563 S.W.2d 916 (Tex.1978). And it is held, a statutory amendment is presumed to operate prospectively only. Amplifone Corporation v. Cameron County, 577 S.W.2d 567 (Tex.Civ.App.Corpus Christi 1979, no writ). And the burden of persuasion is on the one urging retroactive construction. Considering the entire act before us, there is no "fair implication" that the legislature intended it to be retroactive. Nothing is presented to overcome the presumption against retroactivity. If the act is construed to be retroactive, then all cases filed prior to September 1, 1983, and not on appeal by that date, are without a remedy. They are too soon for the new act and too late for the old law. What was pled, how and when, under the old law cannot be used under the new, for as noted, some actions have been abolished and the requirements to qualify for relief under the new law have been so harnessed by new rules of procedure, effective September 1, 1983, that there is no possibility of carrying over into the new what was started under the old. See Rules 86 through 89, inclusive. Tex.R.Civ.P. In fact, a reading of those rules raises the belief that the Supreme Court wrote them with no thought that the act was retroactive. As to construction of venue statutes in particular, Texas courts have many times determined the applicability of an amendment of a venue statute to a case filed before the amendment's effective date. Each time, the courts have held that the law in effect at the time of the filing of suit determined venue. Beginning with Baines v. Jemison, 86 Tex. 118, 23 S.W. 639 (1983) (answering as a certified question the very question now before us). For an excellent discussion of the present amendment see McCown, The Effective Date of the Venue Amendments, State Bar Litigation Report, The Advocate, April, 1984, Vol 3, No. 2. Professor McCown cites authorities for the fact that since the case of Baines v. Jemison, "the legislature has never been found to have intended to alter the venue of a pending suit in an amendment to a venue statute."
The instant case does not qualify as an exception from that construction of legislative intent. There is no right of appeal under the amended act, but this case was filed under the old law and should be processed through the courts under that law. I would not dismiss the appeal.
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677 S.W.2d 273 (1984)
Susan Marie STUART and Lloyd Leroy Stuart, Appellants,
v.
TARRANT COUNTY CHILD WELFARE UNIT, Texas Department of Human Resources, Appellees.
No. 2-84-102-CV.
Court of Appeals of Texas, Fort Worth.
September 27, 1984.
*275 Alley & Alley and Richard Alley, Fort Worth, for appellants.
David L. Richards, Asst. Dist. Atty., Fort Worth, for appellees.
Before FENDER, C.J., and ASHWORTH and BURDOCK, JJ.
OPINION
FENDER, Chief Justice.
The Texas Department of Human Resources [hereinafter TDHR] instituted this action against Lloyd and Susan Stuart under TEX.FAM.CODE ANN. Sec. 15.02 (Vernon Supp.1984) in order to terminate their parental rights with regard to their natural son, Jeremy Duane Stuart. Violet and Freeman Gunter, the grandparents of the children and parents of Susan Stuart, intervened in the suit in order to petition the court for custody of the child in the event that the Stuarts' parental rights were terminated. Trial was to the court, which found that Lloyd and Susan Stuart had (1) been the major cause of Jeremy's failure to attend school as required by the Texas Education Code, TEX.EDUC.CODE *276 ANN. Sec. 1.01 et seq. (Vernon 1972 and Supp.1984); (2) knowingly placed and knowingly allowed Jeremy to remain in conditions and surroundings which endangered his physical and emotional well being, and (3) engaged in conduct and knowingly placed Jeremy with persons who engaged in conduct which endangered his physical and emotional well being. The trial court further found that (4) it was in Jeremy's best interest to terminate the parent-child relationship and appoint the Tarrant County Child Welfare Unit of the TDHR as managing conservator with authority to place Jeremy for adoption, and (5) it was not in Jeremy's best interest to place him in the custody of the Gunters. As a result of these findings, the court entered a decree of termination from which Lloyd and Susan Stuart appeal.
We affirm.
In points of error one through five, the Stuarts attack the sufficiency of the evidence to support the trial court's findings and judgment terminating the parent-child relationship and appointing the TDHR as managing conservator. Specifically, the Stuart's claim that there is no evidence, or alternatively insufficient evidence, to support the findings of the trial court stated above. Before we address the Stuarts' arguments, however, we must first set forth the proof requirements and the standard of review for parental rights termination cases.
Section 15.02 TEX.FAM.CODE ANN. (Vernon Supp.1984) provides in pertinent part:
A petition requesting termination of the parent-child relationship with respect to a parent who is not the petitioner may be granted if the court finds that:
(1) the parent has: ...
(D) knowingly placed or knowingly allowed the child to remain in conditions or surroundings which endanger the physical or emotional well-being of the child; or ...
(E) engaged in conduct or knowingly placed the child with persons who engaged in conduct which endangers the physical or emotional well-being of the child, or ...
(J) been the major cause of:
(i) the failure of the child to be enrolled in school as required by the Texas Education Code....
and in addition the court further finds that:
(2) termination is in the best interest of the child. The statute makes clear that in order to have parental rights involuntarily terminated, the petitioner must establish one or more of the acts or omissions listed under subdivision (1), and must additionally prove, as required under subdivision (2), that termination is in the best interest of the child. In the Interest of S.K.S., 648 S.W.2d 402 (Tex.App.San Antonio 1983, no writ). Both elements must be established and the requirements of subdivision (1) are not excused because the court is of the opinion that the subdivision (2) requirement has been proved. Wiley v. Spratlan, 543 S.W.2d 349 (Tex.1976).
The standard of proof required in order to terminate the parent-child relationship is "clear and convincing evidence," In the Interest of G.M., 596 S.W.2d 846 (Tex. 1980). This standard is defined as "that measure or degree of proof which will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established." In the Interest of G.M., supra. When the sufficiency of the evidence to support a termination is challenged, therefore, the appellate court must determine if there is "clear and convincing evidence" to support the required findings. See McAdoo v. Spurlock, 632 S.W.2d 224 (Tex.App.Austin 1982, no writ).
In light of the above standards, we now turn to a consideration of the Stuart's first five points of error in which they attack the sufficiency of the evidence to support the findings and the judgment. The Stuarts first argue in all five points that there is no evidence, or alternatively insufficient evidence, to support the trial court's conclusion that they (1) knowingly placed and knowingly allowed Jeremy to remain in *277 conditions and surroundings which endangered his physical and emotional well being, and (2) engaged in conduct and knowingly placed Jeremy with persons who engaged in conduct which endangered his physical and emotional well being. Thus, they claim, the trial court could not properly have relied on subdivision (1)(D) or (E) to establish the subdivision (1) requirement for termination under sec. 15.02.
It should be noted at this point that these sufficiency of the evidence challenges, as well as the other sufficiency of the evidence challenges contained in the first five points of error, are stated as "insufficient evidence" and "no evidence" points. As we have just discussed, however, we are bound to review the evidence using a "clear and convincing standard." In the Interest of G.M., supra. Therefore, we will uphold the trial court's findings challenged by the Stuarts only if those findings are supported by clear and convincing evidence. In order to make such a determination, we must briefly review the facts of this case.
The record in this case reveals that Lloyd Stuart is an auto mechanic and body work man by trade. For a number of years Mr. Stuart earned a living as an itinerant mechanic, moving his family weekly. Apparently six to nine months prior to the institution of this suit, however, Mr. Stuart began having eye trouble which prevented him from working as a mechanic. As a result he resorted to living with his wife and children in a camper truck, and driving the truck from town to town in order to sell tools at flea market sales. Since the filing of this action, however, Mr. Stuart's eyes have cleared and he is now employed at a stationary job.
Jeremy, the child who is the subject of this suit, is the only survivor of three children born to Lloyd and Susan Stuart. Jeremy's younger brother, Jamie, died at age ten months from what Mrs. Stuart described as "infant death syndrome." Jeremy's younger sister, Michelle, died at age three from severe burns sustained in a fire in the Stuart's camper, which was parked at "Trader's Village," a flea market located in Grand Prairie.
Much of the testimony at trial covered the events surrounding the death of Michelle Stuart. The morning after they arrived at the "Trader's Village" flea market, Lloyd and Susan Stuart left Michelle unattended in their camper while they took Jeremy out to help sell flea market goods. When the Stuarts left Michelle, she was sitting on a mattress located above a lighted gas stove. A few minutes later Jeremy returned to the camper to put away some money, and discovered a fire in the camper.
Apparently Michelle had climbed down onto the stove in an attempt to get from the mattress to the floor of the camper, and in the process caught her clothing in the stove's flame. Two paramedics were called to the scene, and they discovered that 90% of Michelle's body was covered with third degree burns. One of the paramedics also noticed a visible amount of dried blood in the child's mouth, a condition which could not have been caused by the fire. Both paramedics testified as to the visible lack of emotion on the part of Mr. and Mrs. Stuart, and one paramedic testified that Mrs. Stuart told him the child's name was "Perkins" and not Stuart.
In an effort to get Michelle to the hospital as quickly as possible, the paramedics called in a helicopter. While the paramedics were waiting for the helicopter to arrive, the Stuarts hastily began packing up their camper for a quick departure. When one of the other vendors at the flea market asked Mrs. Stuart if she wanted to ride with Michelle to the hospital, Mrs. Stuart responded "No, she won't be afraid. She can go by herself." The Stuarts then got in their camper and left the state with the intention of driving to Indiana to leave Jeremy with Mrs. Stuart's parents.
When Michelle arrived at the hospital, she was treated by a Dr. Ann Williams. Dr. Williams observed full thickness burns over the child's entire body, except under her armpits where the burns were only partial. Dr. Williams also noted that Michelle was in an extremely emaciated condition. *278 Although Michelle was three and one-half years old, she weighed only seven and a half pounds, which is at the 50th weight percentile for a nine-months-old child and not even on the scale for a three year old. Further, Dr. Williams observed that the child's teeth had been loosened, and testified that neither the poor condition of the teeth nor the emaciation could have been caused by the fire.
As a result of the severity of her burns, Michelle died several hours after being admitted to the hospital. The Stuarts never went to the hospital to check on Michelle's condition, and they did not contact the hospital until two days later when Lloyd Stuart called under an assumed name to find out what had become of Michelle. After learning of the child's death, Mrs. Stuart called Grand Prairie Police Detective Harold Rhodes from Oklahoma and asked whether it was possible for the county to bury Michelle. Detective Rhodes then persuaded the Stuarts to return to Grand Prairie to discuss the matter. When the Stuarts arrived in Grand Prairie, Jeremy was taken from them and placed in the custody of the TDHR.
Mrs. Stuart testified at trial that she and her husband did not go to the hospital because they had never enrolled Jeremy in school, and were afraid that the authorities would take Jeremy away from them. Mrs. Stuart's explanation for failure to place Jeremy in school was that the family was "travelling around the flea market circuit and were not settled in one place long enough." Mrs. Stuart also testified that she and Mr. Stuart were aware that Michelle occasionally climbed down onto the stove in order to get to the floor of the camper. Additionally, she admitted that Michelle had never been immunized, and that although Michelle could say a few words, at age three and one half she was unable to put sentences together. Mrs. Stuart denied that Michelle was unhealthy, however, and stated that she ate well and was growing.
After being taken into custody of the TDHR, Jeremy was interviewed and tested by a number of mental health professionals. Dr. Ewing Cooley, a psychologist, performed an evaluation on Jeremy, and during the testing noticed that Jeremy was a particularly fearful child. Dr. Cooley testified that he has evaluated a number of children, including abused children, and that Jeremy was more afraid of the testing than any child he had ever seen. Guidance Counselor Jerry Terhune, who engaged in a number of "play therapy" sessions with Jeremy, confirmed that Jeremy is a child very fearful of his circumstances. Terhune also noted that Jeremy feels responsible for his sister's death, and believes that he should have somehow prevented it.
Jeremy was also interviewed by TDHR social workers Kathy McGinnis and Margaret Townsend. During one interview with McGinnis, Jeremy related that his parents would punish Michelle by pinning her in a towel so that she was unable to move. He also told the same story to Dr. Cooley. Although Jeremy later retracted the statement, he did so only after a visit with his parents. During another interview, Jeremy was asked by Margaret Townsend how his parents taught Michelle that the stove was hot. According to Townsend, Jeremy became very upset at the question and said, "You'll have to ask my mama."
In support of their argument that the trial court erred in finding that they engaged in conduct and knowingly placed Jeremy with persons who engaged in conduct which endangered his physical and emotional well being, the Stuarts contend that there is no showing of an unstable or immoral family environment or that any abuse was ever directed at Jeremy or occurred in his presence. The Stuarts further claim that in order to support the termination decree, the trial court relied not on testimony concerning their treatment of Jeremy, but rather on evidence regarding the accidental death of Michelle. Such evidence, they argue, has nothing to do with Jeremy and is irrelevant to this case. We disagree, however, with the Stuarts' contentions.
*279 In general, Sec. 15.02(1)(E), which authorizes a court to terminate the parental relationship if the court finds that the parent has "engaged in conduct or knowingly placed the child with persons who engaged in conduct which endangers the physical and emotional well being of the child," requires that such conduct have been committed in the presence of the child. Lane v. Jefferson County Child Welfare Unit, 564 S.W.2d 130 (Tex.Civ. App.Beaumont 1978, writ ref'd n.r.e.). Section 15.02(1)(C) does not, however, require that the questioned conduct be directed towards the child nor cause him physical harm. Wray v. Lenderman, 640 S.W.2d 68 (Tex.App.Tyler 1982, no writ). It is enough, therefore, if an act is committed in the child's presence in such a manner as to actually endanger his physical or emotional well being. Lane, supra, at 132.
Having reviewed the record in the case at bar, we find clear and convincing evidence that the Stuarts have engaged in conduct which endangers Jeremy's physical and emotional well being. Although there is only meager evidence that Lloyd and Susan Stuart ever abused Jeremy, the record clearly reflects that the Stuarts did neglect and abuse Michelle on a continual basis. Michelle's emaciated and severely malnourished condition, her loosened teeth, and dried blood in her mouth, and Jeremy's description of how she was punished by being pinned in a towel, are all clear examples of systematic inhumane treatment of Michelle by Lloyd and Susan Stuart. The Stuarts' lack of concern for Michelle's well being is further demonstrated by their failure to immunize Michelle, their characterization of her as "normal" and "healthy," and their willingness to leave her unattended in the camper with a lighted stove when they were aware that she used the stove to climb down from the overhead mattress to the floor.
Because Jeremy was living in close association with Michelle and his parents, it is obvious that the abuse of Michelle occurred in his presence. The evidence indicates that as a result of his witnessing such abuse, Jeremy has become an abnormally fearful and anxious child, and that he blames himself in some way for his sister's death. It was certainly reasonable for the trial court to conclude that Jeremy's fears and anxieties evidenced emotional damage to him, and that if the Stuarts were allowed to continue to exercise parental rights, Jeremy's emotional well being would be further endangered. In addition, the trial court could reasonably have concluded that to leave Jeremy with parents who have shown that they are capable of abusing and neglecting a child would be endangering not only Jeremy's emotional, but also his physical well being. We hold, therefore, that the trial court did not err in concluding that the Stuarts engaged in conduct dangerous to Jeremy's physical and emotional well being, and accordingly conclude that the sec. 15.02 subdivision (1) termination requirement is satisfied under sec. 15.02(1)(E).[1]
In points of error two and five, the Stuarts argue that there is no evidence, or alternatively insufficient evidence, to support the trial court's finding that they knowingly placed and knowingly allowed Jeremy to remain in conditions or surroundings which endangered his physical and emotional well being. Although we review this argument using the clear and convincing standard, we agree that there is no evidence to support the conclusion of the trial court.
*280 In general, knowingly placing or knowingly allowing a child to remain in conditions or surroundings which endanger the child's physical or emotional well-being is prohibited by sec. 15.02(1)(D). Termination of parental rights under sec. 1(E) requires a showing, by clear and convincing evidence, that the child has been placed in a physical environment dangerous to his physical or emotional well being. Interest of T.L.H., 630 S.W.2d 441 (Tex.App.Corpus Christi 1982, writ dism'd). Thus, subsection (1)(D) refers only to the acceptability of the child's living conditions, and does not concern the conduct of the parents toward the child. Interest of T.L.H., supra, at 446. In the case at bar, there is no evidence that Jeremy's physical living conditions were at all unsanitary. We hold, therefore, that the trial court erred in finding that the Stuarts knowingly placed or allowed Jeremy to live in conditions or surroundings which endangered him.
In their next sufficiency of the evidence challenge, also contained in points of error two and five, the Stuarts argue that there is no evidence, or alternatively insufficient evidence, to support the trial court's finding that the Stuarts were the major cause of Jeremy's failure to be enrolled in school. Although the Stuarts admit that they never enrolled Jeremy in school, they argue that it was impossible for them to do so because Mr. Stuart's only source of income was that which he earned by travelling around the country on the flea market circuit. Thus, they contend that the trial court could not have relied on sec. 15.02(1)(J)(i), which provides that the subdivision (1) termination provision of sec. 15.02 is satisfied when the parents are the major cause of the child's failure to be enrolled in school, to satisfy the subdivision (1) requirement in this case.
In the alternative, the Stuarts argue that sec. 15.02(1)(J)(i) is unconstitutional as to them. They claim that sec. 15.02(1)(J)(i) discriminates on the basis of poverty because it allows the termination of parental rights of persons who are too poor to enroll their children in school. By creating different classes of persons based on wealth, the Stuarts argue, the provision denies them equal protection of the law in violation of the Texas and U.S. Constitutions. TEX. CONST. art. I, sec. 3; U.S. CONST. AMEND. XIV. We cannot agree, however, either with this constitutional argument or the sufficiency of the evidence claim.
In general, the guarantee of equal protection is not a source of substantive rights or liberties, but a right to be free from invidious discrimination in statutory classifications. Harris v. McRae, 448 U.S. 297, 100 S. Ct. 2671, 65 L. Ed. 2d 784 (1980). In order to attack a law on equal protection grounds, therefore, a challenger must demonstrate that the law classifies persons in some manner.
In the instant case, the Stuarts appear to be claiming that sec. 15.02(1)(J)(i) creates two classes of persons: (1) those with sufficient funds to enroll their children in school; and (2) those who are not wealthy enough to do so. We fail, however, to see such a classification. The requirement that a child be enrolled in school cannot classify persons on the basis of poverty because the public school system in Texas is provided to children without charge. Furthermore, the Stuarts have made no showing that they themselves were too poor to enroll Jeremy in school, or that Mr. Stuart could not have earned a living in a job which did not require such extensive travel. They have also offered no explanation as to why they did not put Jeremy in school during the time before they began their flea market travels. We hold, therefore, that the Stuarts have failed to show that sec. 15.02(1)(J)(i) is violative of their right to equal protection of the law. We further hold that the evidence clearly and convincingly demonstrates that Lloyd and Susan Stuart were the major cause of Jeremy's failure to be enrolled in school, and that the trial court did not err in so holding.
In their final challenge to the sufficiency of the evidence, the Stuarts contend in points of error two and five that there is no evidence, or alternatively insufficient evidence, *281 to support the trial court's conclusion that termination is in the best interest of the child. The Stuarts are apparently claiming, therefore, that even if the trial court properly found that the Stuarts fell within one or more of the sec. 15.02(1) termination provisions, the court nevertheless could not terminate the parent-child relationship because the sec. 15.02(2) condition that termination must be in the child's best interest has not been met. In the alternative, the Stuarts argue that even if the trial court acted properly in terminating the relationship, there is no evidence or insufficient evidence to support the court's conclusion that it was not in Jeremy's best interest to place him with the Gunters. We find no merit to any of these contentions.
In general, a number of factors which should be considered by the trial court in determining whether termination is in the best interest of the child are:
(1) The emotional and physical needs of the child now and in the future;
(2) The emotional and physical danger to the child now and in the future;
(3) The parental abilities of the individual seeking custody;
(4) The plans for the child by the individual seeking custody;
(5) The acts or omissions of the parents which may indicate that the existing parent-child relationship is not a proper one; and
(6) Any excuse for the acts or omissions of the parents.
Hellman v. Kincy, 632 S.W.2d 216 (Tex. App.Fort Worth 1982, no writ.)
In the case at bar we have found clear and convincing evidence that the Stuarts endangered Jeremy's emotional well being in the past and that danger of emotional and physical harm to Jeremy would continue if he remained with his parents. Further, there is clear evidence that it would be in Jeremy's best interest for him to be in an adoptive home rather than with his parents. Dr. Ewing Cooley testified that Jeremy's psychological tests were suggestive of (1) educational experience deprivation; (2) a language development delay; or (3) language delay caused by experience deprivation. Because of these problems, Dr. Cooley stated that Jeremy needed to be in a stable environment in which he could attend school and develop normal relationships with other children. In addition, guidance counsellor Jerry Terhune testified that Jeremy needs to be in a home environment with warm, caring parents. Finally, TDHR social worker Kathy McGinnis testified that Jeremy is very adoptable, and that he should be placed in an adoptive home. McGinnis also testified that she did not anticipate any problem in finding a home for Jeremy.
In summary, the evidence clearly and convincingly demonstrates that (1) the Stuarts' family life has traditionally been nomadic and unstable; (2) the Stuarts have engaged in conduct which presents a danger to Jeremy; (3) Jeremy needs to be in a stable family environment where he can attend school; and (4) Jeremy is readily adoptable. We hold therefore, that the trial court did not err in concluding that termination of the parent-child relationship is in Jeremy's best interest.
Although the Stuarts do assert alternatively that the trial court erred in finding that it was not in Jeremy's best interest to place him in the custody of the Gunters, we note that they have not made any argument or cited any authority in support of this claim. Accordingly, we consider it waived. Interest of T.L.H., supra.
In conclusion, we have carefully reviewed the record and find clear and convincing evidence to support the trial court's finding that Lloyd and Susan Stuart 1) engaged in conduct which endangers Jeremy's physical and emotional well being, and 2) have been the major cause of Jeremy's failure to be enrolled in school. Therefore, the Stuarts' conduct with respect to Jeremy satisfies the sec. 15.02(1) termination requirement under both subsection (E) and subsection (J)(i). We further find clear and convincing evidence to support the trial court's finding that termination is in Jeremy's best interest. Therefore, *282 sec. 15.02(2) is also satisfied, and the trial court properly terminated the parent-child relationship under sec. 15.02.
The judgment is affirmed.
NOTES
[1] We note at this point that not only did the trial court find that the Stuarts engaged in conduct which endangered Jeremy's physical and emotional well being, it also found that the Stuarts placed Jeremy with persons who endangered his physical and emotional well being. We find no evidence in the record to support this additional finding. In order for parents' conduct to fall within the sec. 15.02(1)(E) termination provision, however, the court need only find conduct by the parents themselves which endangered the child's emotional or physical well being, and additionally finding that the parents have placed the child with persons who engaged in conduct endangering the child is unnecessary. We hold, therefore, that the trial court's error in making this additional finding is harmless.
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677 S.W.2d 115 (1984)
VARIOUS OPPORTUNITIES, INC., Appellant,
v.
SULLIVAN INVESTMENTS, INC., Appellee.
No. 05-83-00904-CV.
Court of Appeals of Texas, Dallas.
July 16, 1984.
Rehearing Denied August 27, 1984.
*116 F. Ward Steinbach, Dallas, for appellant.
Bill Kuhn, Baker, Miller, Mills & Miller, Dallas, for appellee.
Before GUITTARD, C.J., and CARVER and ELLIS,[1] JJ. (Retired).
ELLIS, Justice (Retired).
This is a suit for specific performance of a contract to sell real estate. On or about June 2, 1981, Various Opportunities, Inc., as seller, entered into a contract in writing with Sullivan Investments, Inc., as purchaser, for the sale of approximately thirty-two acres of land located in Grand Prairie, Dallas County, Texas. The purchase price was set at $10,000.00 per acre with the total sum to be determined when the actual acreage was ascertained by survey. The contract of sale was twice amended: (1) on September 22, 1981, with $6,000.00 being paid by the purchaser for extension of the date for closing and establishment of the survey and acreage; and (2) on November 10, 1981, the seller and purchaser executed a second amendment, extending the closing date until January 15, 1982, with the purchaser paying to the seller an additional $35,000.00, denominated as a second extension fee. There was an agreement on the seller's part "(which covenants and agreements shall survive the closing of the transaction comtemplated by the Contract)" to pay the costs and expenses necessary to provide for 236 dwelling units water and sanitary sewer services acceptable *117 to and approved by the City of Grand Prairie, Texas, "within twelve (12) months after the date of closing." The additional details of the improvements required are set forth in the contract and/or the respective amendments.
The contract of sale did not close on January 15, 1982, as planned. The purchaser, Sullivan Investments, Inc., appellee herein, filed suit for specific performance and sought injunctive relief against Brueggemeyer, the second lienor, and his trustee from foreclosing a purported second lien against the property. The trial court enjoined the alleged second lienor and his trustee from foreclosing upon the property seeking to preserve the status quo until the basic case was finally determined. When the specific performance case was called for trial, all matters relating to the validity of the second lien were held in abeyance for a future separate trial. The case went to trial on the primary question as to whether the purchaser was entitled to specific performance of the contract and amendments. At the conclusion of the trial the jury answered the special issues favorably to the plaintiff (appellee), and the court finally awarded judgment in favor of plaintiff for specific performance against the defendant (appellant). Affirmed.
The jury found that (1) the cost of installing and completing the off-site improvements, as required by the contract, was determined prior to the closing by an engineer chosen by seller and an engineer chosen by the purchaser; (2) the plaintiff tendered its required performance on or before January 15, 1982; (3) the plaintiff, at all material times was ready, willing and able to perform its obligations under the contract upon performance by the defendant of its obligations under such contract; (4) the purchaser's engineer and seller's engineer mutually agreed on all of the items of decision that needed to be made in connection with the off-site improvements as set forth in the contract and later set forth in the escrow agreement described in the contract. The jury additionally found that (5) the amount of reasonable attorney's fees incurred in connection with prosecuting the claims for performance through the trial court was $20,000.00, through court of appeals, $7,500.00, and through appeal to the Texas Supreme Court, $5,000.00; (6) on October 6, 1981, the City Council of Grand Prairie, Texas, did not approve a water connection to the property underneath Northwest Nineteenth Street, at the intersection of Hill Street and Northwest Nineteenth Street; and (7) the installation and completion of Hill Street was not a condition precedent for the sale of the property by Various Opportunities, Inc. to Sullivan Investments, Inc., subject to the instruction that "condition precedent" is defined as a condition of fact, that, if not excused, must exist or occur before a duty of immediate performance of a promise may arise.
In accordance with the jury's findings, judgment was finally awarded to Sullivan Investments, Inc. Appellant has brought its appeal asserting twelve points of error. The appellee, Sullivan Investments, Inc., in addition to its responses to the appellant's points of error, has set forth three cross-points.
In its first and second points of error, the appellant attacks the judgment and contract of sale, incorporated therein, as being too vague, uncertain and indefinite to be enforceable. It is here pointed out that the trial court subsequently entered a post-trial enforcement order to enforce such judgment. Previously, an injunctive order had been entered against the alleged second lienor and his trustee to enjoin them from any conduct which might disturb the status of the title. Both the injunctive and enforcement orders are included in the Supplemental Transcript. The contract of sale sufficiently identifies the seller, the purchaser, the property, the escrow agent and duties thereof, and the purchase price per acre. The contract and amendments, which are definitely incorporated into the judgment, provide a specific means for resolving any future disputes as to the cost of installing the utilities. This is in the nature of third party arbitration *118 which left nothing discretionary to be accomplished or determined by either the seller or purchaser. It has been held that in the event terms of future performance are definitely set forth and not left to future negotiation between the parties, specific performance of the contract can be accomplished. Pacific Mutual Life Insurance Company v. Westglen Park, Inc., 314 S.W.2d 425 (Tex.Civ.App.Texarkana 1958), rev'd on other grounds, 160 Tex. 1, 325 S.W.2d 113 (1959). See also, Radford v. McNevy, Tex.Comm.App., 129 Tex. 568, 104 S.W.2d 472, 474 (1937). In the case at bar, the only two matters for future determination were the cost and method of installation of off-site utilities leading to the property in question. The contract provided that if the designated engineers (one chosen by each, the seller and purchaser) could not agree, a third engineer, chosen by the two designated engineers, would determine the issue. This system of arbitration was not a contract to agree in the future, but was, in fact, a binding agreement between the parties which eliminated any future decision-making on the vital subject matters by either party to the contract. The judgment incorporates the contract of sale in such a manner that the required performance appears from the judgment and contract. It is here noted that the court's order clearly specifies the acts to be accomplished by the respective parties. Additionally, our courts have held that a decree of specific performance serves to incorporate the parties' agreements into the judgment. Witte v. Barry, 16 S.W.2d 548 (Tex.Civ.App.Waco 1929, no writ); Okon v. Levy, 612 S.W.2d 938 (Tex.Civ.App.Dallas 1981, writ ref'd n.r.e.). See also, Redwine v. Hudman, 104 Tex. 21, 133 S.W. 426 (1911). Thus, the incorporation of the contract into the judgment by reference serves to adjudicate the specific rights set out therein. Future enforcement of contractual rights, so incorporated, are contemplated by Rule 308, TEX. R.CIV.P.
Rule 308. The court shall cause its judgments and decrees to be carried into execution....
Further, it has been held that the court has inherent authority at any time to direct orders not inconsistent with the adjudication, or make such orders as may be necessary to carry its judgment into execution. Reynolds v. Harrison, 635 S.W.2d 845 (Tex.App.Tyler 1982, no writ). As to specific performance, see also, Smith v. Miller, 66 Tex. 74, 17 S.W. 399 (1891). Since the judgment sets forth the essentials to be accomplished by specific performance with the consequent adjudication of contractual rights incorporated therein, together with the court's prerogatives both inherently and under Rule 308 to enter such specific orders as necessary, we hold that appellant's points numbers 1 and 2 are overruled.
In its third, fourth and fifth points of error, the appellant attacks the evidentiary support as to the performance by appellee-seller of its obligations under the contract. Appellant asserted that appellee failed to meet the "no evidence," "insufficient evidence," and "against the great weight and preponderance" standards. Appellee's pleadings generally alleged the performance of all conditions precedent to its right of recovery, which included the tender of the purchase price and the manner of accomplishment of the Hill Street extension. When the appellee's engineer agreed with the escrow estimate of appellant's engineer, and appellee tendered its check to the Title Company at the closing and signed all documents prepared for the closing, it is our opinion that the closing should have been accomplished in accordance with the contract and amendments.
The contract of sale made the provision that the Hill Street extension was a "condition." Frank Graham, the officer of the appellee, testified that it was a "condition subsequent" and that the street would be extended after the acquisition of the property. James Strode, the broker who participated in these negotiations, who should be regarded as an expert in such matters of property use and development, testified that customarily these matters were handled after the closing. The arrangement *119 for arbitration agreed upon in advance should defeat any contention that the extension should be paid for and completed before the transaction was to be closed. We find adequate evidentiary support from the testimony and circumstances that the "condition" in question was a "condition subsequent" rather than a "condition precedent." Appellant's points numbers 3, 4 and 5 are overruled.
In its sixth, seventh and eighth points of error, appellant attacks the evidentiary support as to the tender by appellee of the purchase price, asserting that the appellee failed to meet the "no evidence," "insufficient evidence," and "against the great weight and preponderance" standards. If belief is to be accorded to Frank Graham's (appellee's representative) testimony that the funds represented by appellee's check were available, and his further testimony that proper arrangements had been made with the bank to cover any insufficiency of funds which might exist at the time of presentment and the Title Company's expressed intent to issue a check from its own trust account to pay the appellant, it is clear that the condition was a condition subsequent. Jim Clement, an attorney for the Title Company, duly qualified as an expert in this field, testified that the presentment of actual cash at the closing is not required or customary in this type of transaction. Further, Dorothy Skala, an employee of the Title Company, testified that she advised the appellant that she was prepared to issue the title company's own trust account check. She further testified that appellee's representative, Frank Graham, had signed every document for appellee to accomplish the closing. Appellant had sought to disregard its own engineer's cost estimate with respect to the utilities and any other estimates approved by the City of Grand Prairie. It is here pointed out that the appellant, with knowledge of its own engineer's estimate, signed the second amendment to the contract, and accepted the sum of $35,000.00 from the appellee for extending the closing date. A review of the evidence and reasonable inferences therefrom prompts our overruling of appellant's points numbers 6, 7 and 8.
In its ninth and tenth points of error, appellant complains that the trial court erred in awarding attorney's fees to appellee because there are no pleadings or evidence and insufficient pleadings or evidence that appellee made a presentment for attorney's fees within the meaning of TEX. REV.CIV.STAT.ANN. art. 2226 (Vernon Supp.1984).
Article 2226 provides, in part:
Any person, corporation ... or other legal entity having a valid claim against a person or corporation for services rendered... or suits founded on oral or written contracts, may present the same to such ... corporation; ... and if at the expiration of 30 days thereafter, payment for the just amount owing has not been tendered, the claimant may, if represented by an attorney, also recover, in addition to his claim or costs, a reasonable amount as attorney's fees.
In this instance, the "presentment" need be neither written nor formal; and the appellant should only be apprised of the required conduct and refuse to comply for a period of thirty days. Jones v. Kelley, 614 S.W.2d 95 (Tex.1981). "Presentment" here occurred when the appellant appeared at the closing, was given the closing documents to sign, and refused to comply within thirty days. The contract itself set forth the conditions or requirements for compliance with which the appellant was or should have been quite familiar. The reason and purpose of the rule was duly accomplished and the appellant was afforded ample opportunity to avoid attorney's fees. This statute provides that it should be liberally construed to promote its underlying purpose. Jones v. Kelley, supra. The purpose of presentment under this article is to make the debtor aware that claim is being made so he can pay the claim within thirty days and avoid liability for creditor's attorney's fees. Hardin Associates, Inc. v. Brummett, 613 S.W.2d 4 (Tex.Civ.App.Texarkana 1980, no writ). Appellee affirmatively pleaded performance *120 of all preconditions to the relief he sought. Likewise, all of the evidence and circumstances with appropriate inferences therefrom support the appellee's position in this regard. Appellant's points numbers 9 and 10 are overruled.
By its eleventh and twelfth points, appellant asserts that the trial court erred in submitting special issues numbers 3 and 4 in that such issues inquire of the jury questions of law.
Question 3
Was the plaintiff Sullivan Investments, Inc. at all material times herein, ready, willing and able to perform its obligations under the contract under performance by the defendant, Various Opportunities, Inc. of its obligations under such contract?
Answer: Yes.
Question 4
Did the purchaser's engineer and seller's engineer mutually agree on all of the items of decision that needed to be made in connection with the offsite improvements as set forth in the contract in question or later set forth in the escrow agreement set forth in the contract?
Answer: Yes.
The evidence and reasonable inferences therefrom establish that the agreed plans of appellant's engineer, who was subsequently fired by appellant, were accepted by the City of Grand Prairie. No other plans were ever proposed to the City by appellant, and it is apparent that any changes in the location of the utilities as a result of a new state highway would not affect the technical requirements, costs or acceptance of the proposal by appellant's engineer. No additional ordinance was required for the City's approval after the City Engineer had approved the plans of the appellant's engineer.
It is not necessary for the jury to determine the legal effect of the contract in order to determine the appellee's factual ability and intentions to perform thereunder. It is proper for a court to inquire of a jury whether or not the acts set out in the contract occurred. Ryan Mortgage Investors v. Fleming-Wood, 650 S.W.2d 928 (Tex.App.Fort Worth 1983, no writ). In so considering a contract, the jury is not making a decision on the law. Ellis v. Waldrop, 627 S.W.2d 791, 797 (Tex.Civ. App.Fort Worth 1981, no writ).
There were only two disputed contract conditions (tender and Hill Street extension), and they were answered in appellee's favor in special issues 2 and 7. Special issues 3 and 4 were answered consistently with other issues submitted. There is no error in the submission of any special issue if the jury's findings on the remaining issues are sufficient to support the judgment, and there is no confusion by the jury or other prejudice shown by the complaining party. Texas Railroad Co. v. McGinnis, 130 Tex. 338, 109 S.W.2d 160, 163 (Tex.Comm.App.1937). Such is the case here. We hold that such submissions were, in any event, harmless, and we, therefore, overrule appellant's points of error numbers 11 and 12.
Appellee, in its brief, has submitted three cross-points. In cross-point number 1, appellee asserts that if the judgment entered by the trial court is vague, indefinite or uncertain, it should be modified by this Court of Appeals to require specific acts of compliance. In view of our holding in overruling appellant's point number 1 asserting indefiniteness of the judgment, and that the judgment incorporating the contract, as this one does, constitutes an entirety and is sufficiently clear to warrant judgment for specific performance, we overrule appellee's cross-point number 1. The original judgment of specific performance is the one being herein reviewed and the court had power under TEX.R.CIV.P. 308, as well as under the court's inherent power, to enter its enforcement order. Likewise, in cross-point number 2, it is submitted that the vagueness of the original judgment is cured by the subsequent order of enforcement. In view of our holding that the original judgment entered by the *121 trial court is sufficiently definite to award specific performance, and for appellate purposes, we overrule appellee's cross-point number 2.
As to appellee's cross-point number 3 concerning the continuation of injunctive relief against Brueggemeyer and his trustee, Brownlow, we do not consider that such enjoined parties are before this Court of Appeals in this proceeding. The trial court has previously entered its order enjoining interference with the status of the title to the property involved in this proceeding. It will be appropriate, therefore, to look to the previous injunctive order in considering any matter pertaining to the preservation of the status of the title to the property.
For all of the reasons above stated, the judgment for specific performance entered by the trial court is affirmed.
NOTES
[1] The Honorable James A. Ellis, Chief Justice, Seventh Supreme Judicial District, Retired, sitting by assignment.
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677 S.W.2d 105 (1984)
Terri L. ANDERSON, Appellant,
v.
Cleo GILLILAND, Appellee.
No. 05-82-01408-CV.
Court of Appeals of Texas, Dallas.
July 11, 1984.
Rehearing Denied August 27, 1984.
*106 Before CARVER, GUILLOT and STEWART, JJ.
STEWART, Justice.
This is an appeal from a suit by a remainder devisee, Terri L. Anderson ("Anderson"), under the will of her father, Lawrence Gilliland (the "deceased"), against Cleo Gilliland ("Gilliland"), the widow of Lawrence Gilliland and the executrix of his estate. For the reasons below, we sustain both Anderson's point of error and Gilliland's cross-point.
On a former appeal in this court, this cause was reversed and remanded to the probate court to determine the amount of reimbursement owed the deceased's estate for permanent improvements to Gilliland's separate real property that were paid for with community funds. Anderson v. Gilliland, 624 S.W.2d 243 (Tex.Civ.App.Dallas 1981, writ ref'd n.r.e.). Upon remand, the probate court found that $7,237.89 was expended by Gilliland out of her separate funds to make the down payment for a house to be constructed on her separate land. It is undisputed that the balance of construction costs was paid with $13,000 from a mortgage loan made by Gilliland and the deceased.
Further, the trial court held that enhancement in value was the correct measure of the amount of reimbursement due the community estate and, therefore, based *107 on the uncontroverted evidence that the permanent improvements enhanced the value of the separate property by $54,000, the trial court found that $34,560 should be reimbursed to the community (only sixty-four percent of the $54,000 since the court concluded that thirty-six percent of the money used for improvements, or $7,237.89, was Gilliland's separate property).
In her point of error, Anderson contends that the trial court erred in finding that the down payment for the construction of the house on Gilliland's separate real property was from the separate funds of Gilliland because Gilliland failed to overcome the presumption that all property owned by either spouse during or upon dissolution of marriage is community property. McKinley v. McKinley, 496 S.W.2d 540 (Tex. 1973); Tarver v. Tarver, 394 S.W.2d 780 (Tex.1965). On the other hand, Gilliland contends that the down payment, made in three separate installments, came from the proceeds of the sale of her separate property.
Gilliland testified that, prior to her marriage to the deceased, she owned real property in Rowlett, Texas. She sold 11.9 acres to the City of Dallas. She placed the money from the sale in a separate savings account in First National Bank of Garland. However, Gilliland failed to prove how much she received for the tract of land sold or the exact date of the sale, although she did testify that the land was sold about a year before she issued the checks in 1968 for the down payment on the house. Money from this separate savings account was transferred to a checking account when the Gillilands began the construction of their home in July, 1968. There were two checking accounts, and Gilliland deposited paychecks in both. She testified that she had transferred the funds from her separate savings account into one of the checking accounts around August of 1968. The payments made toward the down payment from the checking account, and included by the trial court in the total sum of $7,237.89, were made in July and November of 1968.
The record does not show when the separate funds were transferred, how much was transferred, or whether the checking account contained any community funds when the transfer was made. If Gilliland's paychecks were still in the checking account, they were presumably the source of the funds expended for the home because there is a presumption that community funds are paid out first. Harris v. Ventura, 582 S.W.2d 853, 855-56 (Tex.Civ.App.Beaumont 1979, no writ); Sibley v. Sibley, 286 S.W.2d 657 (Tex.Civ. App.Dallas 1955, writ dism'd).
Gilliland asserts that the findings of fact made by the trial court should be sustained if there is some evidence of probative value to support them and if they are not against the great weight and preponderance of the evidence. Anderson v. Havins, 595 S.W.2d 147 (Tex.Civ.App. Amarillo 1980, no writ). However, even under the most lenient tracing rules, Gilliland has failed to produce sufficient evidence to trace her separate property into the construction of the home; consequently, she has failed as a matter of law to overcome the presumption that community funds were used for the down payment on the house. Gibson v. Gibson, 614 S.W.2d 487 (Tex.Civ.App.Tyler 1981, no writ). Thus, we hold that the trial court erred in finding that $7,237.89 was paid from Gilliland's separate funds and sustain Anderson's point of error as to the character of the $7,237.89.
In a cross-point, Gilliland contends that the trial court erred in rendering judgment based on a theory that the amount of reimbursement due the decedent's estate is measured by the enhanced value of Gilliland's separate property at the time of decedent's death rather than by the amount of community funds actually expended in improving Gilliland's separate property. Gilliland asserts that the correct measure is the lesser of the amount of community funds expended on improvements or the amount of the enhanced value attributable to the funds. It is undisputed that the total cost of the house was $20,237.89the *108 $7,237.89 down payment (which we have held was paid from community funds) plus the $13,000.00 from a community mortgage loan. Gilliland argues that this lower figure ($20,237.89) should be used as the correct measure of the amount to be reimbursed. We hold that when, as here, enhancement value exceeds costs advanced, the community's right to reimbursement is limited to the costs of the improvements.
In this case, the right to reimbursement is not in issue. Anderson has met her burden to plead and prove that community expenditures were made and that they are reimbursable. Vallone v. Vallone, 644 S.W.2d 455, 459 (Tex.1982). When funds from the community estate are used to place permanent improvements upon the separate property of one of the spouses, those improvements become attached to the soil and are not divisible in kind because one of the joint owners of the improvements has no interest in the land upon which they have been erected. "Hence results the rule that the community estate must be reimbursed for the cost of the buildings erected by joint labors or funds upon the separate property of one of the spouses, and, in effect, this vests the improvement in that spouse, and entitle[s] the other to one-half of the cost." Dakan v. Dakan, 125 Tex. 305, 83 S.W.2d 620, 628 (1935), citing Furrh v. Winston, 66 Tex. 521, 1 S.W. 527, 529 (1886), quoting Rice v. Rice, 21 Tex. 58, 66 (1858); see also Burton v. Bell, 380 S.W.2d 561, 565 (Tex.1964).
However, the community is entitled to an accounting only if the improvement enhanced the value of the separate property, Villarreal v. Villarreal, 618 S.W.2d 99, 101 (Tex.Civ.App.Corpus Christi 1981, no writ); Gleich v. Bongio, 128 Tex. 606, 99 S.W.2d 881, 885 (Tex.Comm'n App.1937), Under the facts in Dakan, the court observed:
It is no equity to permit the surviving spouse ... to demand repayment in full of the exact amount advanced, together with interest thereon, and to be enforced by the foreclosure of a lien upon such property, perhaps to the complete sacrifice of the interest held by other heirs or devisees therein.
Dakan, 83 S.W.2d at 628. The court thereafter held that the amount recoverable for community improvements is limited to the amount by which the property's value was enhanced as a result of the improvements placed on it. Id.; see also, Clift v. Clift, 72 Tex. 144, 10 S.W. 338, 341 (1888) ("only so much should be allowed for the improvements as the value of the property has been increased thereby") (emphasis added).
In Lindsay v. Clayman, 151 Tex. 593, 254 S.W.2d 777, 781 (1952), the supreme court stated that the amount of reimbursement is measured, not by original costs, but by the enhancement in value of the property as a result of the improvements. Relying on Dakan, the court thus appears to convert the Dakan language from enhancement in value being a limitation on the right of reimbursement to its being the sole measure of reimbursement. However, in Lindsay the plaintiff had pleaded and had proved costs but had neither pleaded nor proved enhancement value, and the correct interpretation of that holding is that there is no right of reimbursement at all unless enhancement value is pleaded and proved. Lindsay is not in conflict with Dakan because both elements necessarily must be alleged and proved to determine the proper measure of reimbursement in a given case. Villarreal, 618 S.W.2d at 101.
Relying on Lindsay, the court in Harris v. Royal, 446 S.W.2d 351 (Tex.Civ.App. Waco 1969, writ ref'd n.r.e.), held that enhancement value was the proper measure of reimbursement, but in that case, enhancement value was less than costs; hence, the result is not in conflict with our holding in this case.
We recognize that our decision conflicts with the holding on this point in Cook v. Cook, 665 S.W.2d 161 (Tex.App.Fort Worth 1983, no writ), but we respectfully decline to adopt the reasoning in that case. To allow the community estate a share in the appreciation in value of separate real estate is to grant owner's rights to an estate which has no ownership interest.
*109 Whether proved enhancement value at the time of partition is the proper measure of reimbursement when it exceeds proved costs has yet to be addressed by the supreme court. We hold that when both costs and enhancement value are pleaded and proved, the lesser of the figures is the proper measure of reimbursement. Pruske v. Pruske, 601 S.W.2d 746 (Tex.Civ. App.Austin 1980, writ dism'd); Trevino v. Trevino, 555 S.W.2d 792 (Tex.Civ.App. Corpus Christi 1977, no writ); Girard v. Girard, 521 S.W.2d 714 (Tex.Civ.App. Houston [1st Dist.] 1975, no writ).
This rule is consistent with the language of Rice, that the non-owner is entitled to reimbursement of one-half of the costs of improvements, and of Dakan, that his claim for reimbursement is limited by the amount that the value of the property has been enhanced at the time of partition by the improvements. Neither of these cases has been disapproved nor overruled by the supreme court.
Under the facts in this case as pleaded and proved, because the enhanced value of the separate property due to the community improvements ($54,000) exceeds the costs of those improvements ($20,237.89), we hold that the maximum reimbursable amount to which the deceased's estate is entitled is one-half of the costs, or $10,118.95. Accordingly, Gilliland's cross-point of error is sustained.
The record reflects that the principal balance due on the house mortgage on the day of deceased's death was $10,154.00. Anderson concedes that one-half of this amount should be charged against the amount to be reimbursed for community improvements. Therefore, the judgment of the lower court is reversed and judgment is here rendered that the trial court enter $5,041.95 in the inventory of the deceased's estate as reimbursement for community improvements to Gilliland's separate real estate.
Judgment reversed and rendered with instructions. All costs in this court and in the trial court are taxed one-half to Anderson and one-half to Gilliland.
GUILLOT, Justice, dissenting.
I respectfully dissent. Although I agree with the majority's disposition of Anderson's point of error, I do not agree with the disposition of Gilliland's cross-point. The value of enhancement attributable to improvements made during the marriage to the separate property was determined to be $54,000.00. The trial court correctly decided that the value of enhancement, as opposed to cost of the improvements, should be the measure for reimbursement to the community. However, the trial court found that only $34,560.00 should be reimbursed to the estate (sixty-four percent of the $54,000.00 since thirty-six percent of the improvements or $7,237.89, the down payment, was found by the court to be separate property). The majority correctly decided that the $7,237.89 used for the down payment was community property. Thus, the entire cost of the improvements to the property ($20,237.89) was paid by the community, since the $13,000.00 loan secured by the mortgage was undisputedly community property. Gilliland argues that the cost of improvements should be reimbursed to the community since that amount is less than the amount of enhancement. I would hold that $54,000.00, the value of enhancement due to community improvements, should be reimbursed to the community estate.
The right to reimbursement is an equitable one. Vallone v. Vallone, 644 S.W.2d 455 (Tex.1982); Dakan v. Dakan, 125 Tex. 305, 83 S.W.2d 620 (1935). The value of reimbursement has been defined in various ways. The concept of recompense was first recognized in Louisiana with the amount of compensation being the value added to the separate estate by community erected improvements. Depas v. Riez, 2 La.Ann. 30 (La.1847). The court in Depas said that, if the value added to the separate estate failed to exceed the community-funded cost, the community would have, in effect, to bear the loss. The court also said that "whatever be the present value of the improvements, the recompense due the *110 community for them cannot exceed their cost." Depas, 2 La.Ann. at 44. See generally Smith, Principles of Reimbursement Among the Marital Estates, in ADVANCED FAMILY LAW COURSE (1982) (citing Baker, Reimbursement, in MARRIAGE DISSOLUTION IN TEXAS (1978)). Thus, the court in Depas took a cost or enhancement, whichever is less, approach.
Early Texas cases recognized the right to reimbursement, upon dissolution of the marriage, when the community estate had benefited the separate estate of one of the spouses. The courts measured the value in terms of cost of the particular improvements. Furrh v. Winston, 66 Tex. 521, 1 S.W. 527 (1886); Rice v. Rice, 21 Tex. 58, 66-67 (1858).
The concept of enhancement as a measure of reimbursement appeared in cotenancy cases involving partition. The opinions clearly held that enhancement was the only measure of reimbursement to the estate that had benefitted the land. Lynch v. Lynch, 130 S.W. 461 (Tex.Civ.App.1910, writ ref'd). The enhancement measure also arose in trespass to try title situations in which the parties who lost the land were still entitled to receive the value of improvements they had placed thereon. Enhancement was the measure applied. Bemrod v. Wright, 273 S.W. 938 (Tex.Civ.App. Amarillo 1925, no writ).
In the landmark case of Dakan v. Dakan, 125 Tex. 305, 83 S.W.2d 620 (1935), the Supreme Court said that, in order to adjust the equities between respective parties in the settlement of estates, "the community estate must be reimbursed for the cost of the buildings erected by joint labors or funds upon the separate property of one of the spouses...." Dakan, 83 S.W.2d at 628. The Supreme Court cited Furrh, 1 S.W. at 529. In the next paragraph, the Supreme Court went on to say that the amount of recovery to the community is limited to the amount of enhancement of the property by virtue of the improvement. Dakan, 83 S.W.2d at 628. The language in Dakan has been interpreted to mean that the measure of reimbursement is whichever is lessenhancement or cost. Hale v. Hale, 557 S.W.2d 614, 615 (Tex.Civ.App. Texarkana 1977, no writ); Trevino v. Trevino, 555 S.W.2d 792 (Tex.Civ.App.Corpus Christi 1977, no writ).
The trend since Dakan, however, has been to measure reimbursement in terms of enhancement rather than cost. Burton v. Bell, 380 S.W.2d 561 (Tex.1964); Lindsay v. Clayman, 151 Tex. 593, 254 S.W.2d 777 (Tex.1952); Cook v. Cook, 665 S.W.2d 161, 165-66 (Tex.App.Fort Worth 1983, no writ); Snider v. Snider, 613 S.W.2d 8 (Tex.Civ.App.Dallas 1981, no writ) (implicit in the holding); Harris v. Royal, 446 S.W.2d 351 (Tex.Civ.App.Waco 1969, writ ref'd n.r.e.).
I think, however, that the best rule for the trial court to apply would be the one that favors the most equitable result. The trial court sits in equity when it divides the marital estate, either upon divorce or death of a spouse. It has the power to adjust the equities and has all of the evidence before it. In the instant case, the trial court found that enhancement was the appropriate measure of reimbursementan equitable remedyand we should not disturb that ruling in absence of an abuse of discretion. Vallone v. Vallone, 644 S.W.2d 455, 459 (Tex.1982). Accordingly, I would overrule Gilliland's cross-point.
Like the majority, I would hold that the $7,237.89 spent on the down payment was community property, making the entire improvements ($20,237.89) community property. However, I would hold that the amount of reimbursement to the community estate should be $54,000.00, the amount of enhancement to the property due to community improvements. Accordingly, I would hold that one-half of $54,000.00, or $27,000.00, should be the amount of reimbursement to the decedent's estate. Since Anderson concedes that one-half of the mortgage balance due ($5,077.00) should be charged against the amount to be reimbursed for community improvements, I would reverse and render judgment that the trial court enter $21,923.00 in the inventory of decedent's estate as reimbursement *111 for community improvements to Gilliland's separate real estate.
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677 S.W.2d 786 (1984)
Arthur Roy PARSONS, as a Mentally Ill Person, Appellant,
v.
The STATE of Texas, Appellee.
No. 04-84-00298-CV.
Court of Appeals of Texas, San Antonio.
September 12, 1984.
*787 Pablo C. Uresti, San Antonio, for appellant.
Nick A. Catoe, Jr., Dist. Atty's. Office, San Antonio, for appellee.
Before CADENA, C.J., and BUTTS and REEVES, JJ.
OPINION
BUTTS, Justice.
This is an accelerated appeal from a probate court order adjudging appellant to be mentally ill and committing him to a mental hospital for a period of ninety days for "observation and/or treatment." We reverse and remand.
We have determined that this court has jurisdiction, contrary to the argument of the State that the pauper's affidavit filed by appellant is defective. The State says both the form of the affidavit and the failure of appellant to notify the State of the filing of the affidavit of indigency create the defect; consequently the appellate court has no jurisdiction of the appeal. TEX.R.CIV.P. 355 prescribed the requirements to be met when a party is unable to give security for costs of appeal. Rule 355(b) states that notice must be given the opposing party within two days; however, if no notice is given, the time to contest the affidavit begins to run when actual notice is received. Rule 355(c) sets out the procedure for the court to hear the contest. Although it is plain that appellant did not notify the State within two days, it is also plain the State received actual notice with delivery of appellant's brief in this case. The date of the order is June 14, 1984; the date of the certificate of delivery of appellant's brief is August 8, 1984; the date of the State's certificate of service displayed in its brief is August 16, 1984. The State could have requested a hearing in contest to the affidavit within ten days after actual notice.
While this court agrees the affidavit of indigency is not a model one, we hold it is sufficient, viewed in the narrow circumstances of this case, to comply with Rule 355.[1] Substantial, rather than strict, compliance with the rule, under these circumstances, will be required. As an example of liberal interpretation of the rules, see, Commercial Credit Corp. v. Smith, 143 Tex. 612, 187 S.W.2d 363, 365 (1945). Rule 355(e) provides that without a contest to the affidavit, the allegations shall be taken as true; thus, we find them to be true. Since we find the affidavit to be sufficient, this court, therefore, has jurisdiction of the appeal.
We overrule appellant's first point of error that the seventy-two hour requirement of TEX.REV.CIV.STAT.ANN. art. 5547-38 (Vernon Supp.1984) was not met. This statute requires that a "probable cause" hearing be conducted within seventy-two *788 hours after a patient is taken into protective custody, i.e., restrained of his liberty. The record clearly reflects that a hearing was conducted.
Appellant, in his fourth point of error, contends there is no evidence or insufficient evidence to prove that he is a person of unsound mind. Glover v. Texas General Indemnity Co., 619 S.W.2d 400, 401 (Tex.1981) and Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965) set out the standards of review. Article 5547-4(8) provides:
"Mental Illness" means an illness, disease, or condition which either:
(A) substantially impairs the person's thought, perception of reality, emotional process, or judgment; or
(B) grossly impairs behavior as manifested by recent disturbed behavior.
* * * * * *
The requisites for the hearing to determine whether temporary mental health services are necessary are set out in article 5547-50. The court must find, on the basis of clear and convincing proof, that the person is mentally ill. The court must further find that as a result of the mental illness the person is likely to cause serious harm to himself; or is likely to cause serious harm to others; or will, if not treated, continue to suffer severe and abnormal mental, emotional, or physical distress and will continue to experience deterioration of his ability to function independently, and further, is unable to make a rational and informed decision as to whether or not to submit to treatment.
Appellant suffered a massive cerebral infarction in 1979. The State's theory to show mental illness was proof of a condition which substantially impaired the appellant's thought, emotional process, and judgment. Article 5547-4(8), ante. Of the two doctors who testified at the hearing, the first one stated the patient had a "severe vascular insult to his brain which left him with certain cognitive dysfunctions and emotionally labile."
Q (State): Doctor, is he suffering from some illness or disease which would substantially impair his thought process or emotional process?
A: ... [I]t impairs his emotional processes. I also feel it impairs his judgment in that, given his condition and his degree of physical incapacity and his limited independence and his necessity to depend upon others for the daily activities of living ... He wants to leave the hospital, which I think is unrealistic in view of the fact that there is no viable alternative to hospitalization at this time.
The psychiatrist further stated there was "a distinct possibility" that appellant's condition would deteriorate to the point where he would be unable to function independently. He said the patient mentioned living with friends in Austin but provided no further information. "... and there is no place to go and there is no place [sic] to assist him in bathing, etc., etc., all the activities, daily living, I think it would be criminal to release him."
The doctor stated appellant came to the hospital from a nursing home because of his hostile assaultive behavior. He stated the brain damage had affected him mentally, that he "has an affective state which is characterized by emotional liability where he will blow his top and get angry when it's not called for." He further noted the patient's judgment was poor. His mental abilities affected so that he had perceptual motor difficulties. The doctor testified the patient required a structured environment.
The patient volunteered comments at the hearing, such as, "We're just getting double talk." and "We hear this bull every week..." The psychiatrist indicated that upon his release from the hospital the patient would require medical aid, both physical and mental. He reiterated the stroke had affected the patient's functioning in some parts of the brain.
The patient stated he did not recall at the moment whether he had any educational degrees. He would not name his friends who would provide his care. He told of being awakened by another patient "trying to pull my eyes out. And I mentioned it to the doctor, and he said. `I don't feel no *789 consequences to that, if there is no consequences.'"
The second doctor testified that the patient suffered from depression when he first came to the hospital and that he was still receiving antidepressant medication.
Evidence meets the "clear and convincing" standard of proof when it produces in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established. State v. Addington, 588 S.W.2d 569, 570 (Tex. 1979). Although Addington involved an indefinite commitment, the same standard of proof required in that kind of commitment is now mandated by article 5547-50(b). The Supreme Court wrote at 570:
This is an intermediate standard, falling between the preponderance standard of ordinary civil proceedings and the reasonable doubt standard of criminal proceedings. While the State's proof must weigh heavier than merely the greater weight of the credible evidence, there is no requirement that the evidence be unequivocal or undisputed.
In order to show that appellant is mentally ill the State must prove that appellant has a condition which substantially impairs his thought, emotional process, or judgment. That he does have a condition (the brain insult) which could give rise to these results is obvious. But it is the proof of the facts of the other elements which will demonstrate that appellant is mentally ill. Other than conclusive statements that appellant had impaired judgment and emotional processes, the proof consisted of his physical handicaps. That is, he is unable to care for himself physically. Another fact presented was his intense desire to leave the hospital.
Although there was some evidence that mental illness may be present in this case (the elements seem to lurk just beyond the proof presented), we hold the proof does not meet the clear and convincing standard required in a commitment proceeding, and it is therefore insufficient to establish mental illness in this case. The evidence does not furnish a factual basis to support the findings. Moss v. State, 539 S.W.2d 936, 949 (Tex.Civ.App.Dallas 1976, no writ). See Addington v. Texas, 441 U.S. 418, 99 S. Ct. 1804, 60 L. Ed. 2d 323 (1979). Point of error four is sustained.
We overrule appellant's point of error three that the probate court was without jurisdiction to hear the case. Jurisdiction is expressly conferred by article 5547-40. We further overrule point of error two which questions the compliance with article 5547-24. When the appellant requested his release as a voluntary patient by filing a letter with the hospital, and application for court-ordered mental health services during voluntary in-patient care was filed, this complied with the statute.
The ruling in this case in no way precludes further mental health proceedings as provided by law. The judgment is reversed and the cause is remanded to the probate court.
NOTES
[1] PROPOSED PATIENT'S OATH OF INABILITY
TO PAY FEES
THE STATE OF TEXAS
COUNTY OF BEXAR
BEFORE ME, THE undersigned authority, on this day personally appeared ARTHUR ROY PARSONS, who upon oath stated as follows:
"I am ARTHUR ROY PARSONS, the proposed patient in this proceeding. I desire to appeal my case to the Court of Civil Appeals, but I am unable to pay the cost of preparing a statement of testimony, or any part thereof, or to give security therefor."
[The affidavit is subscribed and sworn to before a notary public.]
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150 F. Supp. 2d 1067 (2001)
Derek R. HENKLE, Plaintiff,
v.
Ross GREGORY, in his official and individual capacity, Denise Hausauer, Loretta Rende, Joe Anastasio, Robert Floyd, Serena Robb, Arnel Ramilo, and Glen Selby, in their individual capacities; and the Washoe County School District, a political subdivision of the State of Nevada, Defendants.
No. CV-N-00-050-RAM.
United States District Court, D. Nevada.
February 28, 2001.
*1068 *1069 Kent R. Robison, Robinson, Belaustegui, Sharp & Low, Reno, NV, Michael F. Tubach, Peter Obstler, Luann L. Simmons, O'Melveny & Myers LLP, San Francisco, CA, Jon W. Davidson, Lambda Legal Defense & Education Fund, Inc., Los Angeles, CA, for Plaintiff.
C. Robert Cox, Michael E. Malloy, Christopher D. Jaime, Rick R. Hsu, Walther, Key, Maupin, Oats, Cox & LeGoy, Reno, NV, for Defendants.
MEMORANDUM DECISION AND ORDER
MCQUAID, United States Magistrate Judge.
Before this court is Defendants' Motion to Dismiss (Doc. # 27). Plaintiff has opposed the motion (Doc. # 28) and Defendants have replied (Doc. # 35).
BACKGROUND
Plaintiff, Derek R. Henkle, began his freshman year, in 1994, at Galena High School ("Galena") after skipping the eighth grade.[1] (Doc. # 22, pp. 4-5). In Fall 1995, Plaintiff appeared on the local access channel's program "Set Free" where he participated in a discussion about gay high school students and their experiences. (Id. at 5). From this point on, the alleged harassment began. Plaintiff alleges that, during school hours and on school property, he endured constant harassment, assaults, intimidation, and discrimination by other students because he is gay and male and school officials, after being notified of the continuous harassment, failed to take any action. (Id.).
One incident of alleged harassment occurred in Fall 1995. Several students approached Plaintiff, on Galena property, calling him "fag," "butt pirate," "fairy," and "homo." They lassoed him around the neck and suggested dragging him behind a truck. (Id. at 6). Plaintiff escaped to a classroom and used an internal phone to report the incident to Defendant, Assistant Vice Principal Hausauer. After waiting nearly two hours, Defendant Hausauer arrived and responded with laughter. Defendant, Principal Gregory, was also made aware of the incident, but they took no action against the alleged harassers despite knowing their identities. (Id.).
Another alleged incident occurred in Plaintiff's English class. Students in the class continuously wrote the word "fag" on the whiteboard and sent him notes calling him "fag." Students also drew sexually explicit pictures and called Plaintiff's attention to them. Defendant Rende, Plaintiff's *1070 English teacher, was allegedly aware of the harassment and identity of the harassers. Despite this knowledge, Defendant Rende chose to tell Plaintiff that his sexuality was a private matter that should be kept to himself, rather than end the harassment or discipline the harassers. Plaintiff alleges that Defendants Gregory and Hausauer also knew of this incident, yet did nothing to remedy the situation. (Id. at 6-7).
Plaintiff also faced harassment when reporting the incidents to Galena's discipline office. (Id. at 7). Several students, running by the office and shouting anti-gay epithets, threw a metal object at the Plaintiff that missed him and stuck in the wall. A school administrator witnessed this incident and a report was filed. (Id.). Again, it is alleged that no investigation was made or discipline taken, despite the fact that school administrators were aware of the incident. Plaintiff suffered an emotional breakdown because of this episode. (Id.).
At the end of the Fall 1995 semester, Plaintiff asked to leave Galena because he feared further harassment and assaults. (Id. at 8). Defendant Anastasio[2] decided to transfer Plaintiff to Washoe High School ("Washoe"), an alternative high school. Plaintiff's transfer allegedly was conditioned on the fact that he keep his sexuality to himself. (Id.). During Plaintiff's time at Galena, he wore buttons on his backpack that said "We are everywhere" and "Out," however, upon his transfer to Washoe, he removed the buttons. (Id.).
Defendant Floyd was the Principal at Washoe during Plaintiff's tenure from January 1996 to May 1996. Defendant Floyd, on several occasions, allegedly told Plaintiff to keep quiet about his sexual orientation and during one meeting with Plaintiff, Floyd told him to "stop acting like a fag." (Id.). On some occasions, Plaintiff expressed his viewpoints and identity, but for the most part kept them to himself. Finally, Plaintiff requested a transfer because of the lack of educational opportunities at Washoe. (Id. at 8-9). Plaintiff alleges that Floyd initially told him the transfer was not possible because Plaintiff was openly gay and a traditional high school would not be appropriate. (Id.).
Plaintiff was subsequently transferred to Wooster High School ("Wooster") and, once again, prior to the transfer, was told by Floyd to keep his sexuality to himself. (Id. at 9). When Plaintiff's classmates, at Wooster, learned his identity and the fact that he was gay, they allegedly harassed and intimidated him during school hours and on school property. Plaintiff reported the incidents several times, however, he alleges the administration took no action. (Id. at 10).
One particular incident of inaction occurred when Plaintiff was assaulted at Wooster. Several students approached him shouting gay epithets, and one student punched him in the face, calling him "bitch." The other students encouraged the attack. (Id.). School police, Defendants Ramilo and Selby, allegedly witnessed the attack, but did nothing. In fact, Plaintiff alleges Defendants Ramilo and Selby discouraged him from calling the assault a hate crime and from reporting it to the Reno Police Department. Furthermore, Defendants refused to arrest the attacker despite knowing the identity. (Id. at 11).
After this incident, Defendants Floyd and Anastasio agreed that Plaintiff should be transferred back to Washoe. However, Floyd later decided not to accept Plaintiff at Washoe despite having room for him. *1071 Instead, Defendants placed Plaintiff in an adult education program at Truckee Meadows Community College, thus making Plaintiff ineligible for a high school diploma because he was no longer enrolled in a public high school. (Id. at 11-12).
This lawsuit followed as a result of Defendants' actions. At issue in Defendants' 12(b)(6) Motion to Dismiss for Failure to State a Claim are: claims One and Two for violations of the Equal Protection Clause of the Fourteenth Amendment based upon sexual orientation and sex, respectively, both of which are brought pursuant to 42 U.S.C. § 1983; claims Three and Four for violations of the First Amendment based upon suppression of protected speech and retaliation for engaging in protected speech, respectively, both of which are brought pursuant to 42 U.S.C. § 1983; claims Seven, brought pursuant to 42 U.S.C. § 1983, and Eight, brought pursuant to 20 U.S.C. § 1681 et seq. (Doc. # 22, p. 23),[3] for violations of Title IX for deprivation of educational benefits on the basis of sex and for allowing peer harassment on the basis of sex, respectively; and claims for punitive damages[4]. (Doc. # 27, pp. 3-4).
For the claims at issue, Plaintiff sued Defendants Gregory, Anastasio, Floyd, Hausauer, Rende, Robb, Ramilo, and Selby in their individual capacities and also sued Gregory in his official capacity. (Doc. # 22, pp. 16-19, 22-23; Doc. # 27, p. 3). Plaintiff seeks compensatory and punitive damages from the Defendants in their individual capacities and the Washoe County School District ("WCSD") and injunctive relief from Defendant Gregory in his official capacity. (Doc. # 22, pp. 16-27).
STANDARD FOR REVIEW
"A dismissal under Fed.R.Civ.P. 12(b)(6) is essentially a ruling on a question of law." North Star Inter'l v. Ariz. Corp. Comm., 720 F.2d 578, 580 (9th Cir.1983) (citation omitted). In considering a motion to dismiss for failure to state a claim upon which relief may be granted, all material allegations in the complaint are accepted as true and are to be construed in a light most favorable to the non-moving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996) (citation omitted). For a defendant-movant to succeed, it must appear to a certainty that a plaintiff will not be entitled to relief under any set of facts that could be proven under the allegations of the complaint. Id. at 338. A complaint may be dismissed as a matter of law for, "(1) lack of a cognizable legal theory or (2) insufficient facts under a cognizable legal claim." Smilecare Dental Group v. Delta Dental Plan, 88 F.3d 780, 783 (9th Cir.1996) (quoting Robertson v. *1072 Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir.1984)).
DISCUSSION
I. Are Plaintiff's First, Second, Seventh and Eighth Claims Brought Pursuant to § 1983 Subsumed by the Title IX claims?
The issue before the court is whether a § 1983 action may be brought based upon an alleged violation of Title IX (Seventh and Eighth Claims for Relief), and, even if those claims are subsumed in Title IX, can a § 1983 action based upon a violation of equal protection (First and Second Claims for Relief) be maintained. This is a question of first impression in this court and in this circuit.
42 U.S.C. § 1983 provides a cause of action to a plaintiff when a person acting under color of state law subjects that plaintiff to "the deprivation of any rights, privileges, or immunities secured by the Constitution and laws [of the United States]." 42 U.S.C. § 1983 (1994). In 1980 the Supreme Court broadly construed the "laws" language of the statute and held that § 1983 "laws" encompassed all statutory violations of federal law. Maine v. Thiboutot, 448 U.S. 1, 100 S. Ct. 2502, 65 L. Ed. 2d 555 (1980) (specifically construing a Social Security Act violation). One year later, the court limited the Thiboutot holding in Middlesex County Sewerage Authority v. National Sea Clammers Ass'n, 453 U.S. 1, 101 S. Ct. 2615, 69 L. Ed. 2d 435 (1981), when it held that "[w]hen the remedial devices provided in a particular Act are sufficiently comprehensive, they may suffice to demonstrate congressional intent to preclude the remedy of suits under § 1983." Id. at 20, 101 S. Ct. at 2626. The court has also held that federal statutes can also preempt a § 1983 constitutionally based claim which relies on the same factual predicate as the statutory violation. Smith v. Robinson, 468 U.S. 992, 104 S. Ct. 3457, 82 L. Ed. 2d 746 (1984). "The burden to demonstrate that congress has expressly withdrawn the [§ 1983] remedy is on the defendant." Golden State Transit Corp. v. City of Los Angeles, 493 U.S. 103, 107, 110 S. Ct. 444, 449, 107 L. Ed. 2d 420 (1989).
The Ninth Circuit has recognized the National Sea Clammers preemption doctrine in construing a claim under the Education for All Handicapped Childrens Act of 1975, 20 U.S.C. § 1401 et seq. in Department of Education, State of Hawaii v. Katherine D., 727 F.2d 809 (9th Cir.1984) ("The Supreme Court has consistently indicated that the benefits of an action under 42 U.S.C. § 1983 are unavailable `where the governing statute provides an exclusive remedy for violation of its terms.' (citations omitted). Where congress has provided a comprehensive enforcement and remedial scheme in enacting a regulatory statute, the Supreme Court has held, we must read the statute `to supplant any remedy that would otherwise be available under § 1983.' (citation omitted).") Id. at 819.
The Ninth Circuit has also recognized that § 1983 actions were not available under other federal statutes. See, for example, Harper v. Federal Land Bank of Spokane, 878 F.2d 1172 (9th Cir.1989) (Agriculture Credit Act of 1987, 12 U.S.C. §§ 2001-2279aa-14); Howard v. City of Burlingame, 937 F.2d 1376 (9th Cir.1991) (Federal Communications Act of 1934, 47 U.S.C. § 151 et seq.); Associated General Contractors v. Smith, 74 F.3d 926 (9th Cir.1996) (Employment Retirement Income Security Act, 29 U.S.C. §§ 1001-1461 (1988)); Dumas v. Kipp, 90 F.3d 386 (9th Cir.1996) (Higher Education Act, 20 U.S.C. § 1078-81); Almond Hill School v. U.S. Dept. of Agriculture, 768 F.2d 1030 (9th Cir.1985) (Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.); *1073 Dittman v. California, 191 F.3d 1020 (9th Cir.1999) (Privacy Act, 5 U.S.C. § 552a); Meyerson v. State of Ariz., 709 F.2d 1235 (9th Cir.1983) (Rehabilitation Act, 29 U.S.C. § 793); Boatowners & Tenants Ass'n v. Port of Seattle, 716 F.2d 669 (9th Cir.1983) (River and Harbor Improvements Act, 33 U.S.C. §§ 540-633).
The circuits that have looked at the enforceability of Title IX through § 1983 are equally split. The Third[5], Seventh[6], and Second[7] Circuits have held that § 1983 claims are preempted by Title IX, while the Sixth[8], Eighth[9], and Tenth[10] Circuits have taken a contrary position. The court believes that the approach of the Third, Seventh and Second Circuits is persuasive.
Title IX contains a comprehensive administrative enforcement scheme which includes administrative hearings and judicial review. See 34 C.F.R. § 100.1 et seq.
In addition to this administrative scheme, the Supreme Court in 1979 held that Title IX was enforceable by an individual through an implied right of action. See Cannon v. University of Chicago, 441 U.S. 677, 99 S. Ct. 1946, 60 L. Ed. 2d 560 (1979). The court later held that an individual exercising her implied right of action under Title IX has access to all appropriate remedies, including equitable relief and damages. See Franklin v. Gwinnett County Public Schools, 503 U.S. 60, 112 S. Ct. 1028, 117 L. Ed. 2d 208 (1992).
The court in Franklin noted that after its decision in Cannon, Congress had on two occasions amended Title IX, which actions "cannot be read except as validation of Cannon's holding." 503 U.S. at 72, 112 S. Ct. 1028. Regarding the first amendment in 1986, the court noted that "A subsection of the 1986 law provides that in a suit against a state, `remedies (including remedies both at law and in equity) are available for such a violation to the same extent as such remedies are available for such a violation in the suit against any public or private entity other than a state.' 42 U.S.C. § 2000d-7(a)(2)." Id. at 72, 73, 112 S. Ct. 1028. The court noted that in the second amendment to the statute in 1987 "Congress made no effort to restrict the right of action recognized in Cannon and ratified in the 1986 Act or to alter the traditional presumption in favor of any appropriate relief for violation of a federal right. We cannot say, therefore, that Congress has limited the remedies available to a complainant in a suit brought under Title IX." Id. at 73, 112 S. Ct. 1028. "The availability of a private judicial remedy is further evidence of a congressional intent to supplant a § 1983 remedy." Bruneau, supra, at 755 (citing Wright v. City of Roanoke Redevelopment and Hous. Auth., 479 U.S. 418, 427, 107 S. Ct. 766, 93 L. Ed. 2d 781 (1987); Marshall v. Switzer, 10 F.3d 925, 930 (2nd Cir.1993)).
Given the Supreme Court decisions and the intervening congressional action, we conclude that Congress intended to create a private right of action in Title IX to secure enforcement of its provisions and that this implied right of action is part of Title IX's enforcement scheme. When combining Title IX's administrative remedies *1074 and private right of action, "the remedial devices provided in [Title IX] are sufficiently comprehensive ... to demonstrate congressional intent to preclude the remedy of suits under § 1983." National Sea Clammers, supra, at 20, 101 S. Ct. at 2626. Therefore, Plaintiff's Seventh and Eighth Claims for Relief should be dismissed.
Plaintiff claims that even if the Seventh and Eighth Claims for Relief are subsumed in Title IX, his First and Second Claims for Relief are constitutional claims based on a violation of equal protection and Title IX does not foreclose these claims under § 1983. It is acknowledged that the factual basis for the claims under Title IX and the constitutional claims are the same.
In Katherine D., supra, the Ninth Circuit recognized that "The comprehensive nature of the remedies laid out in the EAHCA evinces a congressional intent to preclude reliance on either a statutory or a constitutional cause of action under § 1983." 727 F.2d at 820, fn. 15. In Smith v. Robinson, supra, the Supreme Court held that where Congress had crafted a comprehensive scheme for enforcement of an act (The Education of the Handicapped Act, 20 U.S.C. § 1400 et seq. in that case) it would be inconsistent to allow a plaintiff to circumvent that scheme by pursuing an equal protection claim under § 1983 based upon the same set of facts.
Given our holding that § 1983 actions based on Title IX are subsumed by Title IX, it would be inconsistent and contrary to the above authority to allow Plaintiff to pursue constitutional claims through § 1983 based on the identical facts as the Title IX claims. To hold otherwise would be to create an exception to the Sea Clammers' doctrine that does not exist, Bruneau, supra, 757, 758, and would allow Plaintiff to do indirectly what he cannot do directly.
Plaintiff's First, Second, Seventh and Eighth Claims brought pursuant to § 1983 should be dismissed.
II. Violation of Plaintiff's First Amendment Rights
Plaintiff's Third and Fourth Claims for Relief allege Defendants violated his First Amendment rights by censoring, chilling, and deterring him from exercising his right to freedom of speech and by retaliating against him when he did exercise his rights. (Doc. # 22, pp. 18-19).
Protected Speech
"Students in public schools do not shed their constitutional rights to freedom of speech or expression at the schoolhouse gate." Tinker v. Des Moines Indep. Community Sch. Dist., 393 U.S. 503, 506, 89 S. Ct. 733, 736, 21 L. Ed. 2d 731 (1969). "[S]chool officials cannot suppress expressions of feelings with which they do not wish to contend." Id. at 511, 89 S. Ct. at 739 (quoting Burnside v. Byars, 363 F.2d 744, 749, (5th Cir.1966)). Thus, "[i]n the absence of a specific showing of constitutionally valid reasons to regulate their speech, students are entitled to expression of their views." Id. Students' speech may be regulated where defendants show that engaging in forbidden conduct would "materially and substantially interfere with the requirements of appropriate discipline in the operation of the school." Id. at 509, 89 S. Ct. at 738 (quoting Burnside, 363 F.2d at 744).
Defendants argue that they did not violate Plaintiff's First Amendment rights because his speech was disruptive and as such was subject to being suppressed and regulated by Defendants.
In Chandler v. McMinnville School Dist., 978 F.2d 524, 529 (9th Cir.1992), the *1075 court recognized three distinct areas of student's speech based on Supreme Court precedent: "(1) vulgar, lewd, obscene, and plainly offensive speech. (2) school sponsored speech, and (3) speech that falls into neither of these categories." The speech involved in the present case falls into the third category. As such "To suppress speech in this category, school officials must justify their decision by showing `facts which might reasonably have lead school authorities to forecast substantial disruption of or material interference with school activities.'" Id. at 529 (citing Tinker, supra, 393 U.S. at 514, 89 S. Ct. at 740).
At this stage of the proceeding, we cannot say, as a matter of law, that Plaintiff's speech caused a "substantial disruption of or material interference with school activities", or that Defendants might reasonably have believed such disruption or interference would likely occur. Although there are instances of alleged harassment set forth in the First Amended Complaint, it cannot be said, as matter of law at this stage of the proceedings, that these instances substantially or materially interfered with school activities. Thus, we cannot say at the motion to dismiss stage, that Plaintiff has failed to state a claim for relief in his third claim.
Retaliation
In examining a First Amendment retaliation claim, courts engage in yet another three part inquiry. For the first two prongs of the inquiry, plaintiff must demonstrate: (1) the speech at issue was constitutionally protected; and (2) the speech was a substantial or motivating factor in the adverse action. Moran v. State of Washington, 147 F.3d 839, 846 (9th Cir. 1998); Brewster v. Bd. of Educ., 149 F.3d 971, 978 (9th Cir.1998). If plaintiff satisfies this burden, the burden shifts to the defendants to demonstrate they would have taken the same actions against plaintiff, even in the absence of his protected conduct. Id.
In light of the previous discussion, Plaintiff satisfied element one by alleging that his speech was constitutionally protected. (Doc. # 22, p. 7-9, 11). Thus, we will turn our attention to element two.
Plaintiff alleges several actions and/or inactions by Defendants that warrant the inference that the actions and/or inactions were retaliatory in nature. See Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir.1998) (citation omitted) (stating "[c]onclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss"). He alleges that after his appearance on "Set Free" where he participated in a discussion about gay high school students and their experiences, the harassment began at Galena and, ultimately, resulted in his transfer to Washoe, an alternative high school. (Doc. # 22, p. 5). Plaintiff also alleges, rather than disciplining the harassers, Defendants treated him as the problem (Doc. # 22, p. 3) and told him numerous times to keep his sexuality to himself. (Id. at 6-9). Plaintiff further alleges, his first transfer from Galena to Washoe was conditioned on the fact that he keep his sexuality to himself. (Id. at 8). In an effort to comply with this request, he removed buttons, pertaining to his sexuality, from his backpack. (Id. at 6-9). Moreover, Defendants transferred Plaintiff, a gifted and talented student, to Washoe, and alternative education program (Doc. # 28, p. 4). Furthermore, when he asked for a transfer from Washoe because of lack of educational opportunities, Defendant Floyd told him the transfer was not possible because he was openly gay and a traditional high school was not appropriate, but was eventually transferred to Wooster. (Doc. 22, p. 9). And finally, after Plaintiff continued to express his sexuality at Wooster, he was denied a *1076 transfer back to Washoe, and instead was transferred to an adult education program where he could not receive a high school diploma because he was no longer enrolled in a public high school. (Doc. # 22, p. 11).
Thus, at this stage of the proceedings, Plaintiff has made sufficient allegations, that his constitutionally protected speech was a substantial motivating factor in adverse action directed at him. Therefore, this court cannot say as a matter of law that Plaintiff failed to state a claim for retaliation for exercising his First Amendment rights.
Qualified Immunity
Defendants assert they are entitled to qualified immunity because there was no clearly established right for a gay student to speak about or express his sexual preference in a school setting (Doc. # 27, p. 19).
Government officials enjoy qualified immunity from civil damages unless their conduct violates "clearly established statutory or constitutional rights of which a reasonable person would have known." Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S. Ct. 2727, 73 L. Ed. 2d 396 (1982); Romero v. Kitsap County, 931 F.2d 624, 627 (9th Cir.1991). "A public official is not entitled to qualified immunity when the contours of the allegedly violated right were sufficiently clear that a reasonable official would understand that what he [was] doing violate[d] that right." Osolinski v. Kane, 92 F.3d 934, 936 (9th Cir.1996) (alterations in original) (citations omitted). Determining whether a public official is entitled to qualified immunity "requires a two-part inquiry: (1) Was the law governing the state official's conduct clearly established? (2) Under that law could a reasonable state official have believed his conduct was lawful?" Browning v. Vernon, 44 F.3d 818, 822 (9th Cir.1995) (citing Act Up!/Portland v. Bagley, 988 F.2d 868, 871-72 (9th Cir.1993)).
Defendants contend that the established constitutional right must be narrowly particularized, rather than generalized. They assert that without a case which specifically concerns sexual orientation speech by students there can be no clearly established law prior to 1997. The court disagrees.
In Tinker, supra, the Supreme Court clearly established that students in public schools have the right to freedom of speech and expression. Tinker, 393 U.S. at 506, 89 S. Ct. at 736. This is a broad right that would encompass the right of a high school student to express his sexuality. In Chandler, supra, the Ninth Circuit discussed in detail categories of student's speech. The court set forth two specific categories and a third category of "speech that falls into neither of these categories". 978 F.2d at 529. This category clearly encompasses various types of speech, including the type involved with the Plaintiff. To require Plaintiff to particularize and prove the clearly established right that Defendants suggest would circumvent the right established by the Supreme Court. See Seamons v. Snow, 84 F.3d 1226, 1237 (10th Cir.1996)(quoting Hilliard v. City and County of Denver, 930 F.2d 1516, 1518 (10th Cir.), cert. denied, 502 U.S. 1013, 112 S. Ct. 656, 116 L. Ed. 2d 748 (1991)) (stating "[t]he plaintiff need not show the specific action at issue has been previously held unlawful, he need only show that the alleged unlawfulness was apparent in light of preexisting law"). If Defendants' argument were to be accepted it would allow future Defendants to abuse the "clearly established right" standard so that each time a new fact situation arose they would be entitled to qualified immunity.
Because the law was clearly established and the facts concerning what the Defendants knew or did are in dispute, "it is clear that these are questions of fact for *1077 the jury to determine." Sinaloa Lake Owners Ass'n v. City of Simi Valley, 70 F.3d 1095, 1099 (9th Cir.1995); see also Katz v. United States, 194 F.3d 962, 969 (9th Cir.1999) (holding that if disputed facts prevent the court from deciding whether excessive force was used as a matter of law, then the court cannot decide whether officials are entitled to qualified immunity for the use of that force as a matter of law either).
The Defendants are not entitled to qualified immunity as a matter of law.
III. Plaintiff's Claims for Punitive Damages
In view of the court's rulings above, the punitive damages claims at issue in Defendants' motion are the claims against the individual Defendants in the Third and Fourth Claims for Relief and the punitive damages claim against the Washoe County School District in the Fifth and Sixth Claims for Relief.
In the Third and Fourth Claims for Relief Plaintiff sues Defendant. Gregory in his official capacity and Defendants Anastasio, Gregory, Hausauer, Rende, Floyd, Robb, Ramilo and Selby in their individual capacities (Robb is not a Defendant in the Third Claim for Relief). Punitive damages are available against government officials in their individual capacities under § 1983, but not in their official capacities. Smith v. Wade, 461 U.S. 30, 103 S. Ct. 1625, 75 L. Ed. 2d 632 (1983); Ruvalcaba v. City of Los Angeles, 167 F.3d 514 (9th Cir.1999). Therefore, the Third and Fourth Claims for Relief state claims for punitive damages against all Defendants named in their individual capacity, but not Defendant Gregory in his official capacity.
Whether punitive damages are available under Title IX is not as clear. Recent decisions of the Supreme Court, however, give some guidance.
In Franklin v. Gwinnett County Public Schools, 503 U.S. 60, 112 S. Ct. 1028, 117 L. Ed. 2d 208 (1992), the court concluded that Title IX authorized a plaintiff to recover money damages from a school district.
More recently, the court held that in a case of alleged teacher-student sexual harassment "that a damages remedy will not lie under Title IX unless an official who at a minimum has authority to address the alleged discrimination and to institute corrective measures on the recipient's behalf has actual knowledge of discrimination in the recipient's programs and fails to adequately respond. We think, moreover, that the response must amount to deliberate indifference to discrimination." Gebser v. Lago Vista Independent School Dist., 524 U.S. 274, 290, 118 S. Ct. 1989, 1999, 141 L. Ed. 2d 277 (1998). In that case the plaintiff sought both compensatory and punitive damages. Id. at 279, 118 S. Ct. 1989.
The court followed Gebser in Davis v. Monroe County Bd. of Educ., 526 U.S. 629, 119 S. Ct. 1661, 143 L. Ed. 2d 839 (1999), and allowed a claim for compensatory and punitive damages to go forward and concluded "that recipients of federal funding may be liable for `subject[ing]' their students to discrimination where the recipient is deliberately indifferent to known acts of student-on-student sexual harassment and the harasser is under the school's disciplinary authority." Id. at 646-47, 119 S. Ct. 1661.
In a recent decision, the Ninth Circuit adopted the framework set out in Davis and set forth four requirements for imposition of school district liability under Title IX for student-student sexual harassment: (1) the school district "must exercise substantial control over both the harasser and the context in which the known harassment occurs", (2) the plaintiff must suffer "sexual harassment ... that is so severe, *1078 pervasive, and objectively offensive that it can be said to deprive the victims of access to the educational opportunities or benefits provided by the school", (3) the school district must have "actual knowledge of the harassment", and (4) the school district's "deliberate indifference subjects its students to harassment". Reese v. Jefferson School District No. 14J, 208 F.3d 736, 739 (9th Cir.2000) (quoting Davis, 119 S.Ct. at 1672, 1675).
Deliberate indifference is defined in this circuit as "the conscious or reckless disregard of the consequences of ones acts or omissions". See 9th Cir. Civ. Jury Instr. 11.3.5 (1997) (citing Redman v. County of San Diego, 942 F.2d 1435, 1442 (9th Cir. 1991), cert. denied, 502 U.S. 1074, 112 S. Ct. 972, 117 L. Ed. 2d 137 (1992)). Reckless or callous disregard of or indifference to the rights of others is sufficient to sustain an award of punitive damages. See Smith v. Wade, supra.
Given the requirement of actual knowledge and deliberate indifference to establish liability under Title IX, we believe, depending on the facts of a particular case, a punitive damages instruction may be warranted for violation of Title IX, and, therefore, we cannot say that, as a matter of law, Plaintiff's claims for punitive damages in his Fifth and Sixth Claims for Relief should be dismissed.
CONCLUSION
IT IS HEREBY ORDERED:
Defendants' Motion to Dismiss Plaintiff's First, Second, Seventh and Eighth Claims for Relief is GRANTED.
Defendants' Motion to Dismiss Plaintiff's Third and Fourth Claims for Relief is DENIED.
Defendants' Motion to Dismiss the punitive damages claims against Defendant Gregory in his official capacity in the Third and Fourth Claims for Relief is GRANTED.
Defendants' Motion to Dismiss Plaintiff's claims for punitive damages against the Defendants in their individual capacities in the Third and Fourth Claims for Relief and his claims for punitive damages against the Washoe County School District in the Fifth and Sixth Claims for Relief is DENIED.
NOTES
[1] Because, in a motion to dismiss, the complaint should be liberally construed in favor of the plaintiff, and its factual allegations taken as true, the recitation of facts are taken from plaintiff's first amended complaint (Doc. # 22) and opposition (Doc. # 28). See Oscar v. University Students Co-operative Ass'n, 965 F.2d 783, 785 (9th Cir.1992), cert. denied, 506 U.S. 1020, 113 S. Ct. 655, 121 L. Ed. 2d 581 (1992).
[2] Defendant Anastasio, as of the time of this motion, has not been served because it is believed that he is no longer living in the United States and Plaintiff has not been able to locate Anastasio's whereabouts for international service. (Doc. # 28, p. 1).
[3] Although Plaintiff's Eighth Claim for Relief is brought pursuant to 20 U.S.C. § 1681 et seq. (Doc. # 22, p. 23), the court believes that Plaintiff's intention was to bring it pursuant to 42 U.S.C. § 1983. Defendants, in their Motion to Dismiss, refer to Plaintiff's Eighth Claim for Relief as being brought pursuant to 42 U.S.C. § 1983 (Doc. # 27, p. 4), and Plaintiff, in his opposition, refers to the claim as being brought under 42 U.S.C. § 1983 (Doc. # 28, p. 13). Thus, the court will assume that Plaintiff meant to bring his Eighth Claim for Relief pursuant to 42 U.S.C. § 1983 and proceed in its analysis based upon this assumption.
[4] Plaintiff also brought claims, not at issue in this Motion to Dismiss, against Washoe County School District for violations of Title IX for deprivation of educational benefits on the basis of sex (Fifth Claim for Relief) and for allowing peer harassment on the basis of sex (Sixth Claim for Relief) (Doc. # 22, pp. 20-21). Plaintiff also brought various state law tort claims for Negligence (Ninth Claim for Relief), Negligent Training and Supervision (Tenth Claim for Relief), Intentional Infliction of Emotional Distress (Eleventh Claim for Relief), and Negligent Infliction of Emotional Distress (Twelfth Claim for Relief). (Id. at 24-27).
[5] Pfeiffer v. Marion Center Area School Dist., 917 F.2d 779 (3rd Cir.1990).
[6] Waid v. Merrill Area Public Schools, 91 F.3d 857 (7th Cir.1996); Boulahanis v. Board of Regents, 198 F.3d 633 (7th Cir.1999) (following Waid).
[7] Bruneau v. South Kortright Central School Dist., 163 F.3d 749 (2nd Cir.1998).
[8] Lillard v. Shelby County Bd. of Educ., 76 F.3d 716 (6th Cir.1996).
[9] Crawford v. Davis, 109 F.3d 1281 (8th Cir. 1997).
[10] Seamons v. Snow, 84 F.3d 1226 (10th Cir. 1996).
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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/2468392/
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503 F. Supp. 2d 226 (2007)
UNITED STATES of America
v.
Erick R. BROWN, and Milagros L. Morales, Defendants.
Crim. No. 07-75(CKK).
United States District Court, District of Columbia.
August 20, 2007.
Brian Mathew Heberlig, Reid Henry Weingarten, Robert A. Ayers, Steptoe & Johnson L.L.P., Danny C. Onorato, David Schertler, Schertler & Onorato, L.L.P., John Douglas Aldock, Goodwin Procter LLP, Washington, DC, for Defendants.
William F. Gould, U.S. Attorney's Office, Charlottesville, VA, for United States of America.
*227 MEMORANDUM OPINION
KOLLAR-KOTELLY, District Judge.
Presently before the Court is [58] Defendants' Motion in Limine to Use Statements of the Department of Justice as Statements of a Party-Opponent, previously held in abeyance and revised by [81] Defendants' Supplement to Their Motion in Limine to Use Statements of the Department of Justice as Statements of a Party-Opponent. An Opposition and Reply have been filed to the Supplement thereto. After considering the aforementioned filings and the relevant statutes and case law, the Court shall' GRANT IN PART [58] Defendants' Motion in Limine to Use Statements of the Department of Justice as Statements of a Party-Opponent, as revised by [81] Defendants' Supplement to Their Motion in Limine to Use Statements of the Department of Justice as Statements of a Party-Opponent. The single-underlined statements in attached Exhibits 1 and 2 may be used as party admissions (though their manner of use may still be subject to objection) if all single-underlined statements in that particular document are admitted therewith.
I. BACKGROUND
On July 25, 2007, Defendants Erick R. Brown and Milagros L. Morales filed [58] Defendants' Motion in Limine to Use Statements of the Department of Justice as Statements of a Party-Opponent, setting forth various statements to be used as party admissions as taken from two documents from United States v. Jones, Cr. No.2005FEL006847 (D.C.Super.Ct.), attached to the Motion in Limine: Exhibit 1, "Government's in Limine Motion to Preclude Mention of Conduct of Detectives Millagros [sic] Morales and Erick Brown," filed December 28, 2006; and Exhibit 2, "Government's Opposition to Defendant's Motion to Dismiss Indictment", filed November 27, 2006. In the Government's Response, filed July 30, 2007, the Government indicated that "Defendants have asked the Court to allow admission of two documents filed by Glenn Kirschner, Thomas DiBiase, and Lynn Haaland in the Jerome Jones litigation. The government does not object to the admission of these two pleadings in this matter." Gov't's Resp. at 3.
However, at the pretrial conference held on August 14, 2007, it became clear to the Court that there was not a meeting of the minds among Counsel with respect to Defendants' Motion in Limine, as Defendants intended to introduce certain statements as party admissions whereas the Government consented to the admission of the two documents in their entirety. After some discussion during the pretrial conference, during which both Defense Counsel and the Government agreed that legal arguments from the aforementioned documents should not be admitted in this case, the Court requested further briefing from the Parties in the absence of some agreement between them in which Defendants would specify precisely which statements they request to use as party admissions and the Government would specify the basis for its objections to the admission of statements as opposed to the documents in their entirety.
On August 15, 2007, Defendants filed [81] Defendants' Supplement to Their Motion in Limine to Use Statements of the Department of Justice as Statements of a Party-Opponent. Defendants propose to introduce three statements from the two Exhibits attached to their original Motion in Limine as Party Opponents. The Court shall attach the two Exhibits to this Memorandum Opinion as Exhibit 1 and Exhibit 2 (respectively), and shall indicate Defendants' proposal with a double underline. *228 However, for case of reference, these statements are as follows:
[From Exhibit 1]
Indeed, each of the witnesses stated that they did not think anything was wrong when the detectives asked them to change their testimony.
Exhibit 1 at 8, n. 6.
[From Exhibit 2]
On or about February 13, 2005, at approximately 2:45 a.m., the defendant, Jerome Jones, got into a fight at the Club U nightclub formerly located in the Reeves building at 14th and U Streets, NW, Washington, D.C. After arguing with the decedent in this case, Terrance Brown, on the dance floor, he stabbed him multiple times with a short-bladed instrument described by witnesses as a box cutter.
Exhibit 2 ¶ 1.
On February 14, 2005, the detectives interviewed W-3 on videotape and she described what she saw of the fight. She knew the defendant as Jerome through W-2 from previous occasions at the club. She was approximately 6-7 feet from the defendant when he pulled out a knife and began throwing punches at the decedent with it. . . . W-3 positively identified the defendant as the person who stabbed the decedent.
Exhibit 2 ¶ 6.
On August 15, 2007, the Government filed a Response opposing Defendants' request to introduce the three aforementioned excerpts on grounds that "the excerpts proposed by defendants are wildly inconsistent with facts presented in the two submissions when the facts of those filings are read in their entirety." Gov't's Updated Reap. at 1. However, "the government does not object to the argument sections of the two submission [sic] being edited out, as these may cause confusion for the Court's jury." Id. (citing Subsection II of Exhibit 1 and paragraphs 17-20 of Exhibit 2 as legal arguments). The Government's Response references Federal Rule of Evidence 106 for its "rule of completeness argument." Id. at 2 (citing United States v. Soures, 736 F.2d 87, 91 (3d Cir.1984) ("Under this doctrine of completeness, a second writing may be required to be read if it is necessary to (1) explain the admitted portion, (2) place the admitted portion in context, (3) avoid misleading the trier of fact, or (4) insure a fair and impartial understanding.")).
In Defendants' Reply, filed August 17, 2007, Defendants correctly state that the Government does not object to the statements at issue being admitted into evidence, but only to their admission without the surrounding documents absent legal argument.[1] Defs.' Reply at 2. Defendants specifically argue that the Court has "wide discretion in allowing material to be introduced into evidence under Rule 106," and that the Government has failed to specify why the remainder of the documents are relevant or explain portions already admitted. Id. at 3 (citing United States v. Ramos-Caraballo, 375 F.3d 797, 803 (8th Cir. 2004)).[2]
II. DISCUSSION
Pursuant to Federal Rule of Evidence 801,
*229 The statement is offered against a party and is (A) the party's own statement, in either an individual or a representative capacity or (B) a statement of which the party has manifested an adoption or belief in its truth, or (C) a statement by a person authorized by the party to make a statement concerning the subject, or (D) a statement by the party's agent or servant concerning a matter within the scope of the agency or employment, made during the existence of the relationship, or (E) a statement by a coconspirator of a party during the course and in furtherance of the conspiracy.
Fed.R.Evid. 801(d)(2). As the Government does not contest that the statements cited by Defendants may be used as party admissions, but rather objects to their use in the absence of surrounding statements included in the documents attached hereto as Exhibits 1 and 2, the Court's analysis will focus on the propriety of admitting such statements in and of themselves and the necessity (or lack thereof) of additional statements found in the Exhibits. Pursuant to Federal Rule of Evidence 106, "When a writing or recorded statement or part thereof is introduced by a party, an adverse party may require the introduction at that time of any other part or any other writing or recorded statement which ought in fairness to be considered contemporaneously with it." Fed.R.Evid. 106.
Under the rule of completeness, which is contained in Federal Rule of Evidence 106, where substantial parts of a prior statement are used in cross-examination of a witness, fairness dictates that the balance be received so that the jury will not be misled. The application of the rule of completeness is a matter for the trial judge's discretion, and the court properly exercised that discretion here by conditioning admission of the impeaching portions of the officers' prior statements on the admission of these prior Statements in their entirety.
United States v. Washington, 12 F.3d 1128, 1137 (D.C.Cir.1994), cert. denied, 513 U.S. 828; 115 S. Ct. 98, 130 L. Ed. 2d 47 (1994) (internal quotations and citations omitted).
This Court, in its discretion, concludes that the statements proposed by Defendants need not be accompanied by the documents in their entirety, but must be viewed by the jury as part of complete factual proffers rather than in isolation such that they jury will not be confused or misled. Allowing the statements offered by Defendants in their Supplemental Briefing to be admitted as partial statements or without the factual statements surrounding them, particularly in the case of Exhibit 2, would mislead the jury in failing to provide the factual context in which such statements were made. However, offering either the legal arguments set forth in the Exhibits or factual statements with respect to Defendants' actions themselves (which are at issue in the instant case) would be both confusing for the jury and prejudicial to Defendants, as their inclusion would effectively amount to the Government making its case in the context of statements made before another forum. Accordingly, the Court shall permit the statements set forth by Defendants in their Supplement to be used as party admissions[3] when accompanied by certain surrounding factual statements; the Court has attached Exhibits 1 and 2 such that Defendants' proposed statements are double-underlined and the statements that the Court requires be admitted as well if such double-underlined statements are offered are single-underlined.
*230 Finally, the Court notes that Defendants' Reply indicates that "Detectives Brown and Morales are entitled to allow the fact finder to consider the fact that the government has made inconsistent representations about the same issue in separate legal proceedings." Defs.' Reply at 4. However, upon reviewing the Second Superseding Indictment and the statements set forth in Exhibits 1 and 2, the Court, as it understands Defendants' argument, does not find conclusive inconsistencies as implied by the Defendants.
III. CONCLUSION
Based on the aforementioned reasoning, the Court shall GRANT IN PART [58] Defendants' Motion in Limine to Use Statements of the Department of Justice as Statements of a Party-Opponent, as revised by [81] Defendants' Supplement to Their Motion in Limine to Use Statements of the Department of Justice as Statements of a Party-Opponent. The double-underlined statements in attached Exhibits 1 and 2 may be used as party admissions (though their manner of use may still be subject to objection) if all single-underlined statements in that particular document are admitted therewith. An Order accompanies this Memorandum Opinion.
EXHIBIT 1
SUPERIOR COURT OF THE DISTRICT OF COLUMBIA-FELONY BRANCH
UNITED STATES OF AMERICA
vs.
JEROME JONES
Criminal Case No.2005FEL006847
Judge Herbert B. Dixon; Jr.
Trial date: January 3, 2007
GOVERNMENT'S IN LIMINE MOTION TO PRECLUDE MENTION OF CONDUCT OF DETECTIVES MILLAGROS MORALES AND ERICK BROWN
The United States of America, by and through its attorney, the United States Attorney for the District of Columbia, respectfully submits this in limine motion to preclude mention of the conduct of Detectives Millagros Morales and Erick Brown, which can only be inflammatory. The defense likely will seek to use the conduct of the two detectives to argue that the jury should not believe the trial testimony of the three eyewitnesses. This argument is not supported by the facts and would be more prejudicial than probative, and likely to cause confusion for the jury. In support of this motion, the government relies upon the following points and authorities and any other points and authorities that may be cited at a hearing on this motion.
I. BACKGROUND
1. The government expects its evidence to show as follows. On or about February 13, 2005, at approximately 2:45 a.m., the defendant, Jerome Jones, got into a fight at the Club U nightclub formerly located in the Reeves building at 14th and U Streets, NW, Washington, D.C. After arguing with the decedent in this case, Terrance Brown, on the dance floor, the defendant slashed at him multiple times with a short-bladed instrument described by witnesses as a box cutter. One other individual involved in the fight also had a knife. This man has been described by witnesses as wearing a black Coogi brand shirt. Security personnel broke up the fight by carrying the defendant and the decedent out separate entrances. They brought the, decedent out near the Industrial Bank entrance in the Reeves building lobby where he died from his wounds.
*231 2. The defendant was subsequently charged with Assault with Intent to Kill While Armed (box cutter), Possession of a Prohibited Weapon (box cutter) and Obstruction of Justice. The defendant has not been charged with the murder of the decedent.[1] The second stabber, the man in the black Coogi shirt, has yet to be charged. The defendant's trial is set for January 3, 2007.
3. The United States expects the defense to raise the issue that the two detectives initially assigned to the case interfered with three of the eyewitnesses to such an extent that the trial testimony of these witnesses can not be credited. This assertion is not only false but permitting the defense to argue this will be a distraction to the jury. The United States agrees that the actions of the detectives were inexcusable, wrong and possibly even criminal[2] However, ultimately, their actions did not interfere with the truthful testimony of the witnesses. Indeed, two of the three witnesses were videotaped by the detectives before the detectives' motive for influencing the witnesses to change their testimony (upon information and belief, to have the U.S. Attorney's Office sign the arrest warrant for the defendant as soon as possible) even arose. In other words, for two of the three witnesses, there is tangible evidence in the form of videotapes that the witnesses were not tainted, since their Grand Jury testimony matches those initial interviews and the detectives' interference comes between the two. For the third witness, although her initial interview was not taped, she too, testified in the Grand Jury consistently with her initial interview and despite the detectives' actions.
The Initial Investigation
4. On February 13, 2005, the lead detectives in the case at the time, Detective Erick Brown and Detective Milagros ("Millie") Morales, showed W-1[3] a photo array including the defendant. W-1 positively identified the defendant. On February 14, 2005, the detectives interviewed W-1 on videotape and she described what she saw of the fight. She was in the immediate vicinity with the decedent when the fight broke out. She did not see either the defendant or the decedent with a weapon. She knew the defendant as "Gerald" from previous occasions, at the club. Prior to the fight, she had seen Gerald at the bar with the black Coogi-shirted man and provided a detailed physical description of both men.
5. On February 14, 2005, the detectives also interviewed W-3 on videotape and she described what she saw of the fight. She knew the defendant as "Jerome" through W-2 (discussed below) from previous occasions at the club. She was approximately 6-7 feet from the defendant when he pulled out a box cutter and began throwing punches and slashing at the decedent with it. She provided a detailed physical description of both the defendant and the black Coogi-shirted man. That same day, Detectives Brown and Morales showed 3 the same photo array including the defendant. W-3 positively identified the defendant *232 as the person who stabbed the decedent.
6. On February 15, 2005, armed with this evidence, the detectives requested Assistant United States Attorney (AUSA) Jennifer Anderson's[4] signature on an arrest warrant for the defendant. After reviewing the affidavit in support of the arrest warrant and the case Me, AUSA Anderson refused to sign the warrant and raised a number of issues with the warrant. The detectives were unhappy with AUSA Anderson's decision and pressured her to sign the warrant, claiming that they had probable cause to arrest the defendant for the murder of the decedent. AUSA Anderson refused to do so and demanded more evidence from the detectives and also requested to speak to certain witnesses herself.
7. Later that same day after showing her the photo array the detectives again spoke with W-1 and told her to adjust her testimony in the following way: to describe the black Coogi-shirted man as punching the decedent with both hands, rather than as making a punching motion to the torso with his left while pulling the decedent down and forward with his right. Meeting with AUSA Anderson that same day, February 14, W-1 initially described the black Coogi-shirted man as punching the decedent with both hands.
8. On February 16, 2005 after showing her the photo array the detectives also spoke with W-3 and told her to adjust her testimony in the following way: 1) to describe the defendant's weapon as a shiny object rather than a box cutter; 2) to state that the defendant had made stabbing rather than slicing motions; and 3) to state that she was unsure if other . . . people jumped into the fight, when she had seen others jump in.
9. On February 17, 2005, W-3 reported events to AUSA Anderson as suggested to her by the detectives. When AUSA Anderson confronted W-3 with her videotaped statement, W-3 then told AUSA Anderson that she made those changes because the detectives told her to.
10. On February 17, 2005, the detectives, at the request of AUSA Anderson, interviewed W-2 not on videotape and she described what she saw of the fight. She stated that she was 2-4 feet away from the defendant when he pulled out a box cutter and used. It against the decedent. She knew the defendant as "Jerome" from previous occasions at the club. W-2 also reported that the day after the incident the defendant called her on the phone and admitted that he "stabbed the motherfucker." On February 17, 2005, the detectives spoke with the witness and told her to adjust her testimony by describing the defendant's weapon as a "shiny, metal object". That same day, W-2 initially told AUSA Anderson that the defendant had used a shiny, metal object, but during the same interview admitted she had changed this detail at the request of Detectives Brown and Morales. On February 18, 2005, Detectives Brown and Morales showed W-2 the same photo array including the defendant. W-2 positively identified the defendant.
11. Confronted now with two witnesses who were changing their testimony at the request of the detectives, AUSA Anderson reported both detectives to their superiors. Both were removed from the investigation.[5]
*233 Grand Jury Testimony Unaffected by Detectives' Conduct
12. In the case of all three witnesses, the interference by the detectives was exposed before she testified in the Grand Jury, however. On March 4, 2005, W-1 testified before a Grand Jury consistently with her videotaped statement. W-1 explained Detectives Brown and Morales' attempts to shape her testimony and why she first did as they suggested. The government has provided a redacted copy of this witness' Grand Jury testimony detailing these events to the defense.
13. The interference by the detectives was exposed before W-2 testified before the Grand Jury. On February 18, 2005, 2 testified before the Grand Jury consistent with her original statement. The government has provided a redacted copy of this witness' Grand Jury testimony detailing these events to the defense.
14. The interference by the detectives likewise was exposed before W-3 testified before the Grand Jury. On March 8, 2005, W-3 testified before the Grand Jury consistent with her initial videotaped interview. In the Grand Jury, W-3 explained Detectives Brown and Morales' attempts to shape her testimony. The government has provided a redacted copy of this witness' Grand Jury testimony outlining these events to the defense.
15. The defendant was arrested on November 25, 2005. He has been indicted on the following counts: Assault with Intent to Kill while Armed; Possession of a Prohibited Weapon; and Obstruction of Justice. Trial in this matter is scheduled for January 3, 2007.
16. As noted in our opposition to the defendant's motion to dismiss the indictment, the United States believes the defense will attempt to argue that Detectives Brown and Morales directed W-1, W-2 and W-3 "to shape their stories in such a way to implicate [the defendant] in the stabbing of [the decedent]" (Defendant's Motion to Dismiss Indictment ¶ 6), and that the witnesses, had their testimony not been shaped, might have provided exculpatory information. (Defendant's Motion ¶ 17). The defendant argues, therefore, that "the police misconduct in this case can be analogized to cases in which the police deliberately, in bad faith, destroy physical"
21. In each of their initial interviews with the police, all three of the witnesses who have positively identified the defendant stated that they saw the defendant in a fight with the decedent, and two out of the three saw him swinging at the decedent with a box cutter. There was never any question as to whether the defendant was involved in the attack. The U.S. Attorney's Office learned of the attempts by Detectives Brown and Morales to shape the testimony of these witnesses prior to their presentment to the Grand Jury, and each, testified fully and truthfully consistent with their original statements. Moreover, each witness is expected to testify to the same facts at trial. Thus the defense should not be permitted to argue that the conduct of Detectives Brown and Morales had any effect on the witnesses' testimony. The, record does not support that claim. To permit otherwise would confuse the jury and introduce irrelevant and prejudicial evidence into the trial.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a copy of the government's opposition to defendant's motion to suppress identifications was served, via fax and email, this 28th day of December, upon counsel for defendant as follows:
J. Christopher McKee, Esq.
Elizabeth Mullin, Esq.
*234
Public Defender Service
633 Indiana Ave, NW
Washington, DC 20004
Fax: XXX-XXX-XXXX
Tel: XXX-XXX-XXXX
LYNN E. HAALAND
ASSISTANT UNITED STATES ATTORNEY
2. On February 13, 2005, the lead detectives in the case at the time, Detective Erick Brown and Detective Milagros ("Millie") Morales, showed W-1 a photo array including the defendant. W-1 positively identified the defendant. On February 14, 2005, the detectives interviewed W-1 on videotape and she described what she saw of the fight. She was in the immediate vicinity with the decedent when the fight broke out. She did not see either the defendant or the decedent with a weapon. She knew the defendant as "Gerald" from previous occasions at the club. Prior to the fight, she had seen Gerald at the bar with the black Coogi-shirted man and provided a detailed physical description of both men. Later that same day after showing her the photo array the detectives again spoke with the witness and told her to adjust her testimony in the following way: to describe the black Coogi-shirted man as punching the decedent with both hands, rather than as making a punching motion to the torso with his left while pulling the decedent down and forward with his right. Meeting with the first prosecutor on the case, Jennifer Anderson, that same day, February 14, 1 initially described the black Coogi-shirted man as punching the decedent with both hands.
3. The interference by the detectives was exposed before W-1 testified in the Grand Jury, however. On March 4, 2005, W-1 testified before a Grand Jury consistently with her videotaped statement. W-1 explained Detectives Brown and Morales' attempts to shape her testimony and why she first did as they suggested. The government has provided a redacted copy of this witness' Grand Jury testimony detailing these events to the defense.
4. On February 13 or 14, 2005, the detectives interviewed W-2 not on videotape and she described what she saw of the fight. She stated that she was 2-4 feet away from the defendant when he pulled out a box cutter and used it against the decedent. She knew the defendant as Jerome from previous occasions at the club. W-2 also reported that the day after the' incident, as described in the Affidavit in Support of Arrest Warrant, the defendant called her on the phone and admitted that he "stabbed the motherfucker." On February 15, 2005, the detectives spoke with the witness and told her to adjust her testimony by describing the defendant's weapon as a "shiny, metal object". That same day, W-2 initially told AUSA Anderson that the defendant had used a shiny, metal object, but during the same interview admitted she had changed this detail at the request of Detectives Brown and Morales. On February 18, 2005, Detectives Brown and Morales showed W-2 the same photo array including the defendant. W-2 positively identified the defendant.
5. The interference by the detectives was exposed before W-2 testified before the Grand Jury. On February 18, 2005, W-2 testified before the Grand Jury consistent with her original statement. The government has provided a redacted copy of this witness' Grand Jury testimony detailing these events to the defense.
6. On February 14, 2005, the detectives interviewed W-3 on videotape and she described what she saw of the fight. She *235 knew the defendant as Jerome through W 2 from previous occasions at the club. She was approximately 6-7 feet from the defendant when he pulled out a knife and began throwing punches at the decedent with it. She provided a detailed physical description of both the defendant and the black Coogi-shirted man. That same day, Detectives Brown and Morales showed W-3 the same photo array including the defendant. W-3 positively identified the defendant as the person who stabbed the decedent. On February 14, 2005 after showing her the photo array the detectives spoke with the witness and told her to adjust her testimony in the following way: 1) to describe the defendant's weapon as a shiny object rather than a box cutter; 2) to state that the defendant had made stabbing rather than slicing motions; and 3) to state that she was unsure if other people jumped into the fight, when she had seen others jump in. On February 15, 2005, W-3 reported events to AUSA Anderson as suggested to her by the detectives. She then told. AUSA Anderson that she made those changes because the detectives told her to.
7. The interference by the detectives was exposed before W-3 testified before the Grand Jury. On March 8, 2005, W-3 testified before the Grand Jury consistent with her initial videotaped interview. In the Grand Jury, W-3 explained Detectives Brown and. Morales' attempts to shape her testimony. The government has provided a redacted copy of this witness' Grand Jury testimony outlining these events to the defense.
8. The defendant was arrested on November 25, 2005. He has been indicted on the following counts: Assault with Intent to Kill while Armed; Possession of a Prohibited Weapon; and Obstruction of Justice. Trial in this matter is scheduled for January 3, 2007.
9. The defendant now moves to dismiss the indictment against him, on the grounds that first, Detectives Brown and Morales directed W-1, W-2 and W-3 "to shape their stories in such a way to implicate [the defendant] in the stabbing of [the decedent]" (Defendant's Motion ¶ 6), and that the witnesses, had their testimony not been shaped, might have provided exculpatory information. (Defendant's Motion ¶ 7). The defendant argues, therefore, that "the police misconduct in this case can be analogized to cases in which the police deliberately, in bad faith, destroy physical evidence that may have been exculpatory to the defendant during the collection of the evidence." (Id.) The defendant's arguments are without merit and should be denied.
II. ARGUMENT
10. The defendant's argument misses the mark both factually and legally. As a factual matter, the interference by Detectives Brown and Morales was exposed before the Grand Jury voted to indict the defendant. Thus the Grand Jury heard the witnesses' original statements, the ways in which the detectives asked them to shape their testimony, and their live testimony in which all three testified consistent with their original statements and not according to the detectives' suggestions and it still found probable cause to indict. Given that the Grand Jury had the full story before it, the witnesses showed they were not tainted. The indictment therefore should stand.
The Defendant's Claim is Not Supported by the Facts.
11. The government makes no attempt to excuse or minimize the fact that Detectives Brown and Morales attempted to influence the witnesses in order to emphasize *236 the defendant's role in the offense here. However, they did not invent the defendant's role as he suggests. ("The police knew that the witnesses were implicating someone other than Jerome Jones and yet directed them to alter their testimony to inculpate Jerome Jones." Defendant's Motion ¶ 9.) From the very beginning, all three of these witnesses stated that they saw the defendant in a fight with the decedent, and two out of the three saw him swinging at the decedent with a box cutter. There was never any question as to whether the defendant was involved in the attack. Moreover, in each case, the detectives' interference came after the witnesses had implicated the defendant. Equally important, with respect to the validity of the indictment, in each case, the detectives' interference was exposed before the witness testified before the Grand Jury. Thus the Grand Jury was able to judge for itself the extent of the detectives' influence on the witnesses, and it still found sufficient evidence to indict.
12. The chronology of events is as follows. W-1 selected the defendant's photo, in less than one minute, on February 13, 2005. W-1 was interviewed by Detectives Brown and Morales on videotape on February 14, 2005 and described the fight between the defendant and the decedent. Later that same day after showing her the photo array the detectives again spoke with the witness and told her to adjust her testimony in the following way: to describe the black Coogi-shirted man as punching the decedent with both hands, rather than as making a punching motion to the torso with his left while pulling the decedent down and forward with his right She initially did so, and then explained everything truthfully to AUSA Anderson. She also testified consistently with her original video statement before the Grand Jury. See paragraph 3 above. This change with regard to the actions of the black Coogi-shirted man does not affect W1's implication of the defendant.
13. There is also no evidence that the interference of Detectives Brown and Morales affected W-2's implication of the defendant in the attack. On February 13 or 14, 2005, the detectives interviewed W-2 (not on videotape). She described the fight between the defendant and the decedent. On February 15, 2005, the detectives spoke with the witness and told her to adjust her testimony by describing the defendant's weapon as a "shiny, metal object". That same day, W-2 initially told AUSA Anderson that the defendant had used a shiny, metal object, but during the same interview admitted she had changed this detail at the request of Detectives Brown and Morales. W-2 identified the defendant from the photo array, in less than one minute, on February 18, 2005. That same day, W-2 testified before the Grand Jury consistent with her original statement. See paragraph 5 above. At no time did W-2 state that the defendant was not involved in the fight with the decedent.
14. W-3's implication of the defendant in the attack likewise came before Detectives Brown and Morales suggested that she testify in a way that emphasized the defendant's role. On February 14, 2005, the detectives interviewed W-3 on videotape and she described what she saw of the fight. She provided a detailed physical description of both the defendant and the black Coogi-shirted man. On February 14, 2005 after showing her the photo array the detectives spoke with the witness and told her to adjust her testimony in the following way: 1) to describe the defendant's weapon as a shiny object rather than a box cutter; 2) to state that the defendant had made stabbing rather than *237 slicing motions; and 3) to state that she was unsure if other people jumped into the fight. On February 15, 2005, W-3 reported events to AUSA Anderson as suggested to her by the detectives. She then told AUSA Anderson that she made those changes because the detectives told her to and subsequently testified truthfully before the Grand Jury. See paragraph 7 above. At no time did W-3 state that the defendant was not involved in the fight with the decedent.
15. The facts show that the full extent of the interference by Detectives' Brown and Morales became known almost immediately. All three witnesses knew the defendant prior to February 13, 2005: All of them positively identified the defendant as being involved in the attack on the decedent. There is no evidence that the detectives coerced any witness into identifying the defendant. The government submits that had the detectives coerced or attempted to coerce any witness into identifying the defendant, she would have disclosed that fact also.
16. The defendant's speculation that absent the detectives' interference, the witnesses might have provided some other vital exculpatory evidence is similarly baseless. From the beginning, all three placed the defendant at Club U and as taking part in the attack on the decedent. Since the detectives suggested that the witnesses testify to emphasize the defendant's role after their original statements and before their Grand Jury testimony, and each witness testified truthfully before the Grand Jury consistent with their original statements, there is no reason to suppose that any one of them would have exculpated the defendant. They had the opportunity to do so in the Grand Jury and did not. No evidence was "destroyed." (Defendant's Motion ¶ 11.)
The Defendant has Not Met the Legal Standard for Dismissal of the Indictment.
17. The defendant's argument also fails as a matter of law. In analogizing this case to those where police deliberately destroyed exculpatory evidence (Defendant's Motion ¶¶ 7-9), the defendant sidesteps the legal standard governing exercise of judicial supervisory power over an indictment as established by the Supreme Court in Bank of Nova Scotia v. United States, 487 U.S. 250, 108 S. Ct. 2369, 101 L. Ed. 2d 228 (1988) and United. States v. Williams, 504 U.S. 36, 112 S. Ct. 1735, 118 L. Ed. 2d 352 (1992). In Bank of Nova Scotia, the Supreme Court held that in reviewing the validity of an indictment, the harmless error inquiry applies. Id., 487 U.S. at 256, 108 S. Ct. 2369. Thus where a defendant seeks dismissal for nonconstitutional error, a court should dismiss an indictment "only if it is established that the violation substantially influenced the grand jury's decision to indict or if there is grave doubt that the decision to indict was free from the substantial influence of such violations." Id. (internal citations omitted). Moreover, the Supreme Court has held that federal courts cannot use their supervisory power to dismiss an otherwise valid indictment for failure to present even substantial exculpatory evidence to the grand jury. Williams, 504 U.S. at 53-54, 112 S. Ct. 1735.
18. The District of Columbia Court of Appeals likewise has employed this standard. In Jones v. United States, 893 F.2d 564, 566 (2006), the court held that "where false material testimony was presented to the grand jury, dismissal [of the indictment] is warranted only where it is established that the false testimony substantially influenced the grand jury's decision to indict or where there exists a grave doubt whether that decision was free from the substantial influence of the false testimony." *238 (Citing Hunter v. United States, 590 A.2d 1048, 1052, internal quotations omitted.) See also Sanders v. United States, 550 A.2d 343, 345 (1988) (finding gross negligence on the part of the prosecutor for presenting false testimony to the grand jury did not warrant dismissal of the indictment, following Bank of Nova Scotia).
19. The defendant has not met his burden here. In this case, there was no perjured or false testimony as in Jones or Hunter, where the D.C. Court of Appeals still upheld the indictments. There was no undisclosed or destroyed exculpatory evidence, which the Williams Court still denied as a basis for dismissal. The Grand Jury had the opportunity to consider the detectives' interference and" still found probable cause to indict. Thus the defendant suffered no prejudice. Without proof of harm to the defendant, the indictment should stand. Bank of Nova Scotia, 487 U.S. at 254, 108 S. Ct. 2369.
20. The case law specifically addressing police misconduct in the context of dismissal of an indictment also does not lend support to the defendant. Police misconduct may result in dismissal where the misconduct is so "outrageous" or it "shocks the conscience" to such a degree that it deprives the defendant of his due process rights. See, e.g., Rochin v. California, 342 U.S. 165, 72 S. Ct. 205, 96 L. Ed. 183 (1952) (finding that it shocked the conscience when police forced the defendant's stomach to be pumped following a warrantless search). While not condoning the detectives' conduct here, the defendant has not made a case for a deprivation of his due process rights. The Grand Jury had sufficient evidence to indict.
III. CONCLUSION
21. In each of their initial interviews with the police, all three of the witnesses who have positively identified the defendant stated that they saw the defendant in a fight with the decedent, and two out of the three saw him swinging at the decedent with a box cutter. There was never any question as to whether the defendant was involved in the attack. The U.S. Attorney's Office learned of the attempts by Detectives Brown and Morales to shape the testimony of these witnesses prior to their presentment to the Grand Jury, and each testified fully and truthfully consistent with their original statements. Thus the defendant was not prejudiced by the detectives' interference, there is no reason to believe that the witnesses had more exculpatory evidence that they did not provide, and the indictment is not flawed in any way. Neither the facts nor the law supports dismissal of the indictment here or any other sanction.
WHEREFORE, the government respectfully requests that the defendant's motion be denied.
Respectfully submitted,
JEFFREY A. TAYLOR
UNITED STATES ATTORNEY
GLENN KIRSCHNER
CHIEF, HOMICIDE SECTION
DAVID GORMAN
DEPUTY CHIEF, HOMICIDE SECTION
THOMAS A. DIBIASE
ASSISTANT U.S. ATTORNEY
LYNN E. HAALAND # 454120
ASSISTANT U.S. ATTORNEY
U.S. Attorney's Office
Homicide, Room 9439
555 Fourth St. NW
*239
Washington, DC 20530
(202) 353-8815
NOTES
[1] At a conference call on the record on August 17, 2007, the Government indicated that it may have objections as to the arguments Defendants may make as they relate to these admissions, specifically whether, there is an inconsistency in the Government's statements in the Jones case and the case at hand.
[2] Neither the Government nor Defendants cited case law from the instant circuit with respect to their main arguments.
[3] The Court withholds judgment, however, with respect to the manner of use of such statements, which is not the crux of the briefs presently before the Court.
[1] According to the medical examiner, the fatal knife wound to the heart was administered by a knife with at least a three inch blade, not a box cutter.
[2] Indeed, an investigation of the detectives actions in this case is being conducted by the United States's Attorney's Office for the Western District of Virginia. The United States Attorney's Office for the District of Columbia has recused itself from this investigation.
[3] Witnesses will be referred to in the same manner as in the arrest warrant ultimately signed by the United States.
[4] Ms. Anderson is now a Superior Court Associate Judge but at the time was a Deputy Chief in the Homicide Section.
[5] The two detectives assigned to the case now, Dean Combee and Kim Lawrence, were not involved in any of the witness tampering in this case.
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503 F. Supp. 2d 1103 (2007)
ESTATE OF Horst G. BLUME and Headache & Pain Control Center, P.C., Plaintiffs,
v.
MARIAN HEALTH CENTER and its successor-in-interest Mercy Medical Center-Sioux City, Defendants.
No. 03 CV 4117.
United States District Court, N.D. Iowa, Western Division.
March 14, 2007.
*1104 *1105 Delbert D. Rowse, Rowse Law, PC, Sioux City, IA, George T. Qualley, Qualley & Associates, Des Moines, IA, for Plaintiffs.
Maureen B. Heffernan, Berenstein Moore Berenstein Heffernan & Moeller, LLP, Sioux City, IA, Robert M. Slovek, Suzanne M. Shehan, Brian J. Alseth, Kutak Rock LLP, Omaha, NE, for Defendants.
ORDER
O'BRIEN, Senior District Judge.
I. INTRODUCTION
Plaintiffs, Estate' of Horst G. Blume and Headache & Pain Control Center, P.C. ("Dr. Blume" or "Plaintiff'), filed a claim against Defendant, Marian Health Center and its successor-in-interest Mercy Medical Center-Sioux City ("Mercy" or "Defendant") on December 2, 2003, for anti-trust activities, violation of due process, breach of contract, reckless infliction of emotional distress, tortuous interference of an existing contract, and tortuous interference with existing and future patients. All claims, except the breach of contract, were dismissed on April 19, 2005. After extensive briefing and hearings, this Court granted summary judgment on the breach of contract claim in favor of plaintiffs. On November 6, 2006 to November 9, 2006, a four day jury trial was held to determine the extent of damages, if any, plaintiffs were entitled to. The jury returned with a verdict for Dr. Blume in the total amount of $146,025.00. Following this trial, Mercy renewed their motion for judgment as a matter of law or in the alternative for a new trial. (See Docket No. 217.) This Court held a hearing on January 11, 2007, and now denies defendant's motion for judgment as a matter of law or in the alternative for a new trial.
II. APPLICABLE LEGAL STANDARDS
Federal Rule of Civil Procedure 50(b) allows a party to renew a motion for a matter of law if "for any reason, the court does not grant a motion for judgment as a matter of law at the close of all evidence. . . ." "A judgment as a matter of law is appropriate if `a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue." Canny v. Dr. Pepper/Seven-Up Bottling Group, Inc., 439 F.3d 894, 899-900 (8th Cir.2006) (quoting Fed.R.Civ.P. 50(a)(1)). In reviewing the motion, the court must "grant [the nonmoving party] all reasonable inferences and view the facts in the light most favorable to [the nonmoving party]. Id. at 900 (citing Webner v. Titan Distrib., Inc., 267 F.3d 828, 833 (8th Cir.2001)). The court must grant judgment as a matter of law "when the evidence is such that, without weighing the credibility of the witnesses, there is a complete absence of probative facts to support the verdict." Day v. Toman, 266 F.3d 831, 836 (8th Cir.2001) (citing Browning v. President Riverboat Casino-Missouri, Inc., 139 F.3d 631, 634 (8th Cir.1998)).
Federal Rule of Civil Procedure 59(a) states in pertinent part:
A new trial may be granted to all or any of the parties and on all or part of the issues (1) in an action in which there has been a trial by jury, for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States.
"[A]uthority to grant a new trial . . . is confided almost entirely to the exercise of discretion on the part of the trial court." Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. 33, 36, 101 S. Ct. 188, 66 *1106 L.Ed.2d 193 (1980). The trial court is not, however, "`free to reweigh the evidence and set aside the jury verdict merely because the jury could have drawn different inferences or conclusions or because judges feel that other results are more reasonable." Fireman's Fund Ins. Co. v. Aalco Wrecking Co., 466 F.2d 179, 186 (8th Cir.1972) (quoting Tennant v. Peoria & Pekin Union Ry. Co., 321 U.S. 29, 35, 64 S. Ct. 409, 88 L. Ed. 520 (1944)). Ultimately, "[w]hen through judicial balancing the trial court determines that the first trial has resulted in a miscarriage of justice, the court may order a new trial, otherwise not." White v. Pence, 961 F.2d 776, 780 (8th Cir.1992).
If a party fails to make a sufficient showing of an essential element of a claim with respect to which that party has the burden of proof, then the opposing party is "entitled to judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); In re Temporomandibular Joint (TMJ) Implants Prods. Liab. Litig., 113 F.3d 1484, 1492 (8th Cir.1997). Ultimately, the necessary proof that the nonmoving party must produce is not precisely measurable, but the evidence must be "such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir.1994).
III. DISCUSSION
1. Immunity Under Health Care Quality Improvement Act
A. Hospitals as Professional Review Bodies
Mercy argues it is immune from civil money damages under the Health Care Quality Improvement Act ("HCQIA"). Docket No. 217-2 at 3-14. In the brief in support of the defendant's renewed motion for judgment as a matter of law or in the alternative for a new trial, the defendant states as follows:
In three separate written opinions and for three separate reasons, the Court has rejected Mercy's claim for immunity under the Health Care Quality Improvement Act of 1986 (HCQIA). 42 U.S.C. Section 11101, et seq., which provides that a professional review body shall not be liable for damages under any law of any state with respect to a professional review action unless the opposing party overcomes a rebuttable presumption of compliance. It is contended that Mercy believes that the Court's previous opinions did not correctly consider HCQIA under the standard set forth in the plain text of the Act itself and supported by uniform case law. Docket 217 at 3.
Congress believed that effective peer review would be furthered "by granting limited immunity from suits for money damages to participants in professional review actions." Mathews v. Lancaster Gen. Hosp., 87 F.3d 624, 632 (3rd Cir.1996) (quoting H.R.Rep. No. 903, 99th Cong., 2d Sess. 2 (1986)).
Under the HCQIA, professional review bodies are granted immunity if certain procedures are followed. 42 U.S.C. § 11112(a). See Sugarbaker v. SSM Health Care d/b/a St. Marys Health Center, 190 F.3d 905, 912 (8th Cir.1999). This Court has earlier ruled that Mercy Hospital is not a professional review body and therefore not immune from suit under the HCQIA. See Docket No. 85, at 3-4. This Court stated "This Court knows of no legal precedent which would allow it to include a hospital under the word `person' in the immunity statutes and has not been provided any pertinent citation by the defendant which would persuade it to the contrary." *1107 Docket No. 85, at 4. This Court, is persuaded that it was mistaken in its earlier ruling in that it did not have appropriate precedents to consider. The Court now wishes to clarify its previous rulings.
In 42 U.S.C. § 11111(a)(1), Congress stated
If a professional review action (as defined in § 11151(9) of this title) of a professional review body meets all the standards specified in section 11112(a) of this title, except as provided by subsection (b) of this section
(A) the professional review body,
(B) any person acting as a member or staff to the body,
(C) any person under a contract or other formal agreement with the body, and
(D) ally person who participates with or assists the body with respect to the action, shall not be liable in damages under any law of the United States or of any State with respect to the action. 42 U.S.C. § 11111.
Plaintiffs did not contest that the action was a professional review action. "Professional review body" is defined as "a health care entity . . ." 42 U.S.C. § 11151(11). "Health care entity" is defined as "a hospital that is licensed to provide health care services by the State in which it is located." 42 U.S.C. § 11151(4)(A). Following this statute, a professional review body includes a hospital. Therefore, because Mercy is a hospital licensed to provide health care services by the State of Iowa, this Court clarifies it's earlier ruling and now finds the HCQIA applies to hospitals as well as to individual doctors who practice at hospitals.
B. 42 U.S.C. § 11112
Under the HCQIA, four separate and distinct steps are necessary for immunity to attach to the peer review hearings. Specifically, for there to be immunity under the HCQIA, the professional review action must be taken:
(1) in the reasonable belief that the action was in furtherance of quality health care;
(2) after a reasonable effort to obtain the facts of the matter;
(3) after adequate notice and hearing procedures are afforded to the physician involved or after such other procedures as are fair to the physician under the circumstances; and,
(4) in the reasonable belief that the action was warranted by the facts known after such reasonable effort to obtain facts and after meeting the requirement of paragraph (3). 42 U.S.C. § 11112(a).
Plaintiffs argue that Mercy is not entitled to immunity because it did not satisfy some of the objective standards of § 11112(a) set out above. It is important to remember that Mercy is presumed to have complied with the standards, and Dr. Blume bears the burden of rebutting the presumption by a preponderance of the evidence. 42 U.S.C. § 11112(a). "A professional review action shall be presumed to have met the preceding standards . . . unless the presumption is rebutted by a preponderance of the evidence." Id. This Court will address each requirement for immunity.
i. In the reasonable belief that the action was in furtherance of quality health care
Our objective inquiry focuses on whether the professional action taken against Dr. Blume was taken "in the reasonable belief that the action was in furtherance of quality health care." 42 U.S.C. § 11111(2)(a)(1). Sugarbaker, 190 F.3d at 913.
Dr. Blume alleges that the actions were not taken in the reasonable belief that the *1108 actions were in furtherance of quality health care, and instead were taken to deprive him of privileges at Mercy and thereby eliminate him as an surgical competitor. However, since there never was a hearing and Blume had no opportunity to present any evidence, these claims are unsubstantiated and this Court finds these allegations do not rebut this presumption. There is appreciable evidence on the record to show that Mercy was acting in furtherance of quality health care, as the Executive Committee initiated this peer review process after several complaints and incident reports were filed against Dr. Blume. This Court finds that Dr. Blume fails to rebut the presumption of immunity "that the actions be taken (1) In the reasonable belief that the action was in furtherance of quality health care."
ii. After a reasonable effort to obtain the facts of the matter
This Court does not find that Mercy met the second requirement, "[a]fter a reasonable effort to obtain the facts of the matter." In assessing this issue, we consider "whether the totality of the process leading up to the Board's `professional review action' . . . [evinces] a reasonable effort to obtain the facts of the matter." Mathews, 87 F.3d at 637.
There is no doubt that Mercy had some real complaints against Dr. Blume. Mercy had incident reports which laid out these complaints. However, there was quite an unreasonable delay, after Dr. Blume was suspended, before Dr. Blume was given copies of these reports.
Therefore, there was an inappropriate delay because Mercy did not allow Dr. Blume access to these incident reports, or any other precise information that would help alert Dr. Blume to what the hospital contentions were. These incident reports were one sided. There was no effort by the hospital to obtain any facts in contrast to these incident reports. Dr. Blume never had the opportunity to appear at a hearing to examine and cross examine witnesses and present evidence in response to the reports. Therefore, this Court has been and is persuaded that there was no reasonable fact finding done by the defendant.
iii. After adequate notice and hearing procedures are afforded to the physician involved or after such other procedures as are fair to the physician under the circumstances
Under the third requirement, Dr. Blume must rebut the presumption that the peer review committee action was taken "after adequate notice and hearing procedures are afforded to the physician involved or after such other procedures as are fair to the physician under the circumstances." 42 U.S.C. 11112(a)(3). Adequate notice and hearing procedures are defined in 42 U.S.C. 11112(b), which states
A health care entity is deemed to have met the adequate notice and hearing requirement of subsection (a)(3) with respect to a physician if the following conditions are met (or are waived voluntarily by the physician):
(1) Notice of proposed action. The physician has been given notice stating
(A) (i) that a professional review action has been proposed to be taken against the physician,
(ii) reasons for the proposed action,
(B) (i) that the physician has the right to request a hearing on the proposed action,
(ii) any time limit (of not less than 30 days) within which to request such a hearing, and
*1109 (C) a summary of the rights in the hearing under paragraph (3).
(2) Notice of hearing. If a hearing is requested on a timely basis under paragraph (1)(B), the physician involved must be given notice stating
(A) the place, time, and date, of the hearing, which date shall not be less than 30 days after the date of the notice, and
(B) a list of the witnesses (if any) expected to testify at the hearing on behalf of the professional review body.
(3) Conduct of hearing and notice. If a hearing is requested on a timely basis under paragraph (1)(b)
(A) subject to subparagraph (B), the hearing shall be held (as determined by the health care entity)
(i) before an arbitrator mutually acceptable to the physician and the health care entity,
(ii) before a hearing officer who is appointed by the entity and who is not in direct economic competition with the physician involved, or
(iii) before a panel of individuals who are appointed by the entity and are not in direct economic competition with the physician involved;
(B) the right to the hearing may be forfeited if the physician fails, without good cause, to appear;
(C) in the hearing the physician involved has the right
(i) to representation by an attorney or other person of the physician's choice,
(ii) to have a record made of the proceedings, copies of, which may be obtained by the physician upon payment of any reasonable charges associated with the preparation thereof,
(iii) to call, examine, and cross-examine witnesses,
(iv) to present evidence determined to be relevant by the hearing officer, regardless of its admissibility in a court of law, and
(v) to submit a written statement at the close of the hearing; and
(D) upon completion of the hearing, the physician involved has the right
(i) to receive the written recommendation of the arbitrator, officer, or panel, including a statement of the basis for the recommendations, and
(ii) to receive a written decision of the health care entity, including a statement of the basis for the decision.
A professional review body's failure to meet the conditions described in this subsection shall not, in itself, constitute failure to meet the standards of subsection (a)(3). 42 U.S.C. § 11112(b).
Mercy failed to follow the requirements of § 11112(b), specifically, the record shows delays because Dr. Blume was not allowed to bring his attorney into a hearing. However, as stated above, this does not preclude immunity in itself.
In order to rebut the presumption that the hospital met the third element of HCQIA, Dr. Blume must show that a reasonable juror looking at the facts in the light most favorable to him, would find that he has shown by a preponderance of the evidence that the professional review process used by the hospital did not pro vide him adequate notice and hearing procedures or other procedures fair to him under the circumstances. See Sugarbaker, 190 F.3d at 912. Dr. Blume has the burden of overcoming the presumption of immunity by showing that the review process was not reasonable. Meyers v. Columbia/HCA Healthcare Corp., 341 F.3d 461, 468 (6th Cir.2003).
In Sugarbaker, Dr. Sugarbaker "agreed to a full, retrospective review and concurrent *1110 monitoring of his cases." Sugarbaker, 190 F.3d at 909. St. Mary's hospital informed Dr. Sugarbaker of his right to request a hearing, and Dr. Sugarbaker properly requested a hearing. Id. at 909. The Ad Hoc Committee held a hearing permitting Dr. Sugarbaker to present evidence and expert testimony and to cross examine the executive committee's representative. Id. Thereafter, the Ad Hoc Committee unanimously voted to remove the precautionary suspension due to the lack of information. Id.
The Court stated that an executive committee later held a hearing for six (6) hours. Id. Dr. Sugarbaker was again permitted to present evidence of his own behalf to respond to questions and to cross examine adverse witnesses. Id. After this hearing, the executive committee voted to permanently terminate Dr. Sugarbaker's privileges. Id. It should be noted that Dr. Sugarbaker had every opportunity to be present at the hearing, to present witnesses and to cross examine the hospital's witnesses. This, of course, never happened or even came close to happening in Dr. Blume's case.
The Sugarbaker court thoroughly discussed the fact that there must be adequate notice and hearing procedures. Id. at 915. The court correctly sets out the requirements of the United States Code and concludes "[t]he failure to provide a physician with adequate notice and fair procedures precludes immunity under HCQIA." Id.
Under the same factor, the court concluded that because of the multiple levels of review given Dr. Sugarbaker, "the potential for ex parte contacts in one phase of the peer review process does not detract from the overall fairness of the procedures employed in this case." Id. The court concluded the hospital should be granted immunity under the HCQIA and granted, a summary judgment, stating "[w]e hold Dr. Sugarbaker has failed to satisfy his burden of producing sufficient relevant evidence that would allow a reasonable jury to conclude by a preponderance of the evidence that St. Mary's is not entitled to statutory immunity under the HCQIA." Id. at 918.
As mentioned, contrary to Sugarbaker, Dr. Blume never received an adequate notice or fair procedures during a hearing. No hearing was ever conducted. This is the main reason why this Court, while mindful of the presumption, does not conclude that fair procedures, were given to Dr. Blume or that as the defendant contends: "We admit that there was no hearing, but we provided Dr. Blume with alternative matters which accomplish the same thing." This is not factual, and there is nothing in the record to support the contention that there were' any alternative matters which accomplished the same thing.
The defendant's citation of Sugarbaker is, as has been pointed out above, far from supportive of Mercy's position. Again, Dr. Blume had no hearing, nor any opportunity to present any evidence or cross examine as the Dr. Sugarbaker did.
The defendant also cited, Wayne v. Genesis Medical Center, 140 F.3d 1145 (8th Cir.1998) in support of Mercy's position that HCQIA immunity clearly attached to hospitals. This Court, as mentioned above, has reexamined its previous position that HCQIA did not apply to hospitals. This Court stands corrected. A hospital can receive HCQIA immunity, but only by being able to show that it has complied with the relevant HCQIA sections.
Defendants cite Wayne, to demonstrate the burden of proof in the HCQIA. Specifically, defendants state "In denying or refusing to consider Mercy's motions regarding *1111 HCQIA immunity, the Court has not correctly applied this burden of proof." As discussed in this Order on page 21 and 23, the facts show that Mercy did not comply with the Fair Hearing Plan and the bylaws, therefore the presumption has been rebutted. Since there were no fair procedures as set out above in Section 11112(a)(3), immunity is precluded.
Mercy sets out that the non-occurrence of a hearing does not deprive it of its presumption of immunity under HCQIA. Mercy argues that the second clause of § 11112(a)(3) should give Mercy immunity under the HCQIA. As set out above, this clause states, "after adequate notice and hearing procedures are afforded to the physician involved or after such other procedures as were fair to the physician under the circumstances." The plaintiff has demonstrated through witness testimony and a chronological presentation of facts that there Were no other procedures presented to Dr. Blume that were fair to him under the circumstances.
The only thing that the defendant did was repeatedly ask Blume in correspondence, "when do you want a hearing?" Blume had early on `asked for a hearing. There is nothing in the rules that require a second request. The record clearly shows Blume wanted a hearing during the pertinent time periods the jury was allowed to consider.
This Court listened carefully and never heard anything from Mercy that would show that they even attempted other procedures that were fair to Dr. Blume under the circumstances. This is not incorrectly placing a burden on Mercy. As mentioned, the record shows that the plaintiff proved that Mercy did not do any "other procedures as were fair to Dr. Blume under the circumstances." Therefore, Mercy is not entitled to immunity under this clause.
iv. Wahi v. Charleston Area Medical Center
The defendants state that the Wahi Charleston Area Med. Center, 453 F. Supp. 2d 942 (S.D.W.Va.2006), is a timely decision that summarizes the case for immunity for hospitals and for all practical purposes is controlling in this case. In Wahi, it was found that the hospital was entitled to HCQIA immunity despite the fact that no hearing was held regarding the suspension of Dr. Wahi's privileges. Wahi, 453 F.Supp.2d at 954. Wahi is, of course, not binding on this Court, but is an insightful case that includes many of the same issues this Court is addressing. However, there are differences between Dr. Wahi and Dr. Blume's circumstances that this Court finds makes Wahi not as effective as Mercy urges.
First, Dr. Wahi "was informed and fully aware of his rights, the hospital policies, and the charges and evidence the hospital had against him." Id. at 954. The Court also stated "Dr. Wahi was provided with notice of upcoming committee meeting, the nature of the charges against him and outlined the rights and remedies to him." Id. at 956. As mentioned above, this was not true for Dr. Blume. Mercy, for an extended period, even refused him access to the incident reports that were the basis for his suspension.
Second, part of the Wahi decision was based on the fact that under West Virginia law, unless there is an express language to the contrary, medical staff by-laws do not constitute a contract between the hospital and the physician. This is true in West Virginia, but it is not true in Iowa. Compare Wahi, 453 F.Supp.2d at 955-56 ("The hospital is bound by The Fair Hearing Procedural provisions contained in the Medical Staff Bylaws but this does not transfer the Bylaws into a contract") and *1112 Islami v. Covenant Med. Ctr., 822 F. Supp. 1361, 1371 (N.D.Iowa 1992) ("[M]edical staff by-laws create a contractual relationship.").
Third, the Wahi, court reiterates that the doctor has the burden to overcome the presumption of immunity, and finds that the fact that there was no hearing does not preclude immunity. "Dr. Wahi must show that a reasonable jury looking at the facts in the light most favorable to him would find that he has shown by a preponderance of the evidence that the professional review process used by the hospital did not provide him adequate notice of the hearing procedures or other procedures fair to him under the circumstances." Wahi, F.Supp.2d at 953. As heretofore set out, Section 11112(a)(3) provides that a hearing is not the only way to fulfill this requirement, it can also be met by "such other procedures as are fair to the physician under the circumstances provided." Id. at 952. One means that HCQIA provides to ensure that this prong has been met is for the hospital to fulfill the requirements of the HCQIA's safe harbor provision, as previously mentioned Section 11112(b). The Wahi court noted that the failure to meet all the provisions outlined in 11112(b) does not in itself constitute a failure to meet the adequate notice in hearing standards of subsection (a)(3). Id.
The court in Wahi is in effect holding that the hospital does not have to meet all of the provisions of section 11112(a)(3) or the safe harbor provision for immunity under the HCQIA. However, Dr. Blume can rebut the presumption that Mercy did meet these requirements and demonstrate there were no other procedures that were fair to himself under the circumstances provided. This Court has found that Dr. Blume has rebutted this presumption by showing that he did not get his rights, as set out below, that this Court looked to Mercy's own By-laws and Fair Hearing Plan as to what should be considered "adequate notice and hearing procedures," or what other procedures would be "fair to the physician under the circumstances." The Fair Hearing Plan, Section 4.2, lists the rights of the parties. This states:
During a hearing, each of the parties shall have the right to:
(a) call and examine witnesses;
(b) cross-examine witnesses called by the other party;
(c) introduce exhibits;
(d) question witnesses on matters relevant to the issues; and
(e) rebut any evidence.
As heretofore set out, Dr. Blume was entitled a hearing, and he repeatedly requested documents for the hearing, including incident reports. He felt these were necessary to properly defend himself at the hearing. However, Mercy and its counsel were slow to turn any documents over, and repeatedly argued that Dr. Blume's requests were overly broad, which they were, because Dr. Blume was in the dark as to precisely what the evidence was and had to request enough to get the full picture. Because Dr. Blume did not have the documents he requested, he was not able to rebut any evidence against him. Dr. Blume was unaware of the evidence and was offered no opportunity to rebut the evidence, as required by Mercy's Fair Hearing Plan. This Court is not suggesting the peer review, proceedings need to comport like regular trials in a court of law, however, certain opportunities must be available for Dr. Blume to investigate and rebut the charges against him. For a hearing to be fair, Dr. Blume must know what evidence Mercy will attempt to use against him and be able to mount a defense to the hospital's charges. Because Dr. Blume did not have the opportunity to know about and rebut any evidence *1113 against him, this Court is persuaded that Dr. Blume did not have adequate notice and hearing procedures nor were these procedures fair to Dr. Blume under the circumstances.
This Court does not find it necessary to address the fourth requirement, as set out in full on page 8 of this ruling, as we have found that the third requirement was not met.
Mercy's failure to meet the third requirement of § 11112(a) defeats Mercy's claim for immunity under the HCQIA. No hearing or other fair procedures were afforded Dr. Blume.
2. Breach of Contract Claim
At the argument in relation to the post-trial motions, counsel for the defendant stated that he felt that this Court had not clearly set out why it had granted a summary judgment on the issue of, breach of contract.
In its Order of May 8, 2006, on page 7, the Court stated as follows:
The issue now before the Court based on its previous summary judgment ruling is that the hospital, complying with its Bylaws, said, "Dr. Blume, you are done practicing here, but we will give you a hearing." Then, later, they wrote a letter saying, "Dr. Blume, you are done performing medicine here and you do not get a hearing."
Further, on page 7, this Court then stated as follows:
What the jury will be asked to decide is, he get a timely hearing or did he not" and "if he didn't, whose fault was it?"
It should be remembered by the reviewing court that this Court sustained the defendants' motion to bar damage recovery for the first several weeks after the suspension because under the terms of the Fair Hearing Plan, it provided that there was a"fifteen day delay before a physician was "entitled" to a hearing and a thirty day delay after a request for a hearing. This Court also barred any recovery during the entire time of the "injunction", some eighteen months.
In the Fair Hearing Plan, Exhibit 18, on page 13, under Article V, it states as follows:
(b) Special Hearings. If the affected petitioner desires to be represented by an attorney at any special hearing or at any appellate review appearance pursuant to the provisions of Article IV of this Plan, the request for such hearing or, appellate review must so state. The affected Practitioner shall have an unqualified right to be represented by an attorney at any such special hearing or appellate review appearance. If the Affected Practitioner chooses to be so represented, the executive committee of the board may also be represented by an attorney at the hearing.
In this Court's Order of April 19, 2005, on page 7, in footnote 3, it states as follows:
In the letter of December 2, 1998, or in Deborah VandenBrock notified Blume of a summary suspension. The fifth paragraph states: "Should this suspension remain in effect for 15 days or more, you are entitled to special hearing procedures as outlined in the fair hearing plan, Article IV, a copy of which is enclosed."
(Dep. Exhibit 3).
The record clearly shows that Dr. Blume asked for a hearing. He was "entitled" to a hearing as set out above. There is nothing in the Fair Hearing Plan that sets out that he must ask for such a hearing more than once. The defendant, as mentioned, argues that whether or not there was a *1114 contractual breach should have been a jury issue for the very limited time periods that this Court allowed the jury to consider possible damages which were from January 14, 1998 to June 11, 1999, and during the second period which ran from December 28, 2000, to July 11, 2001.
Under The Fair Hearing Plan, Exhibit 18, entitled, "Rights of the Parties", it clearly states that each party shall have the right to: (A) call and examine witnesses; (B) cross examine witnesses called by the other party; (C) introduce exhibits; (D) question witnesses on matters relevant to the issues; and (E) rebut any evidence.
In a breach of contract claim, the complaining party must prove:
(1) the existence of a contract,
(2) the terms and conditions of the contract,
(3) that it has performed all of the terms and conditions required under the contract,
(4) the defendant's breach of the contract in some particular way, and
(5) that plaintiff has suffered damages as a result of the breach. Iowa-Illinois Gas & Elec. Co. v. Black & Veatch, 497 N.W.2d 821, 825 (Iowa 1993).
Under traditional contract principles and Iowa law, the party asserting the breach has the burden of proving the breach. Iowa-Illinois Gas & Elec. Co., 497 N.W.2d at 825.
Addressing these requirements, this Court begins by finding that there was a contract between the parties the By-Laws, and the terms of the contract are plain and clear. [Exhibit 18, The Fair Hearing Plan]. See Islami v. Covenant Medical Ctr., 822 F. Supp. 1361, 1371 (N.D.Iowa 1992) ("[M]edical staff by-laws create a contractual relationship.") Moreover, the terms and conditions of the contract are clear.
The third requirement is that Dr. Blume has performed all of the terms and conditions required under the contract. Dr. Blume properly and timely requested the hearing he was entitled to.
In the letter of December 2, 1998, Deborah VandenBroek for Mercy notified Dr. Blume of his summary suspension. The fifth paragraph states: "Should this suspension remain in effect for 15 days or more, you are entitled to Special Hearing Procedures as outlined in the Fair Hearing Plan, Article No. W, a copy of which is enclosed." Dr. Blume properly asked for the hearing he was entitled under the Fair Hearing Plan. The Fair Hearing Plan, Section 2.2 states; "The Affected Practitioner shall have thirty (30) days following the date of the receipt of such notice within which to request a hearing." The record clearly shows that Dr. Blume timely asked for a hearing. He was entitled to a hearing as set out above. There is nothing in the Fair Hearing Plan that sets out that he must ask for such a hearing more than once.
As mentioned, Mercy never gave Dr. Blume a hearing he was entitled under the Fair Hearing Plan; and as a result, Dr. Blume was damaged. During arguments before this Court, Mercy claimed they would have given Dr. Blume a hearing any time that he made a request for one. It became clear during these arguments that the contentions against Dr. Blume and that incidents reports had been made by hospital staff setting out exactly what the complaints against the plaintiff were. The defendant could have sent the plaintiff's counsel the incident reports after their first request for information. Instead, Mercy argued for many months saying that the request for the basis of why we *1115 have suspended the plaintiff is way too broad.
Dr. Blume's damages were for the period from January 14, 1999, through June 11, 1999, and the period from January 28, 2000, through July 11, 2001, when Dr. Blume was barred from using the hospital facilities. These time periods do not, by order of this Court, include the "injunction period," the approximate 18 month period during which Dr. Blume had filed an injunction preventing a hearing against Mercy in Woodbury County. Dr. Blume was also not allowed to recover for the first several weeks after the suspension began because under the terms of the Fair Hearing Plan, it provided a delay before the aggrieved physician was "entitled" a hearing.
The defendant, as mentioned, argues that whether or not there was a contractual breach should have been a jury issue for the very limited time period that this Court allowed the jury to consider possible damages. This Court, in relation to these post-trial motions, found that the Mercy, despite the entitlement to a hearing under the Fair Hearing Plan, conducted itself in a way that demonstrated that Mercy had not been reasonable under the circumstances. As mentioned, Dr. Blume had absolutely no opportunity during any stage of the proceedings to call and examine witnesses, cross examine witnesses, introduce exhibits, question witnesses on matters relevant to the issues, and rebut any evidence. The defendant clearly did not give the plaintiff any reasonable alternative to a hearing that would excuse the defendant of the failure provided the "entitled" hearing. This Court was persuaded and still is persuaded that there was no factual issue barring an award of summary judgment to the plaintiff on the issue of breach of contract.
It is clear that Mercy breached the contract. Therefore, it was appropriate for this Court to grant summary judgment finding there was a breach of contract by Mercy.
3. Sufficiency of Evidence
Mercy argues that Mercy is entitled to judgment as a matter of law because the evidence is insufficient to support the jury's verdict. This Court finds that the jury findings were appropriate and should not be changed without strong reasons. Canny, 439 F.3d at 899-900.
Mercy further alleges that the evidence is insufficient to support the jury's verdict because, as Mercy alleges, Dr. Blume's expert based his damages on unknown collection rates and speculation. However, in Olson v. Nieman's, Ltd., 579 N.W.2d 299, 309 (Iowa 1998), the Iowa Supreme Court noted,
Damages are denied where the evidence is speculative and uncertain whether damages have been sustained. Orkin Exterminating Co. v. Burnett, 160 N.W.2d 427, 430 (Iowa 1968). But "[if] the uncertainty lies only in the amount of damages, recovery may be had if there is proof of a reasonable basis from which the amount can be inferred or approximated." Id.
Thus, some speculation is acceptable. On this point, we have noted that `while it may be hard to ascertain . . . a loss with preciseness and certainty, the wronged party should not be penalized because of that difficulty.' Bangert v. Osceola County, 456 N.W.2d 183, 190 (Iowa 1990). In addition, if an expert makes some flawed assumptions in testifying, that fact goes to the weight to be given the opinion, not to its admissibility. Preferred Mktg. Assocs. v. Hawkeye Nat'l *1116 Life Ins. Co., 452 N.W.2d 389, 393 (Iowa 1990). On the other hand, overly speculative damages cannot be recovered. Jamison v. Knosby, 423 N.W.2d 2, 6 (Iowa 1988).
As noted above, Dr. Blume was damaged by Mercy's actions. However, the amount of damages for not being able to perform operations at Mercy is unknown. Mercy alleges that Dr. Blume's damage calculations are based on conjecture and best guesses. This Court is persuaded that there was a reasonable basis from which . . . the amount of damages can be inferred or approximated.
Dr. Blume's expert relied on past statistical data of Dr. Blume's practice and the testimony of Monica Ensminger, who testified to the collection rates of Dr. Blume's practice. Also, Mercy vigorously cross-examined her on this point, and presented an expert to testify to the common collection rates of physicians in Sioux City. Mercy's own expert testified that Dr. Blume's damages were roughly $30,000.00. The damage computations from each expert provided a reasonable basis for the jury to base their damage awards. The award was not overly speculative, and the weight of each expert's testimony was taken into consideration by the jury.
Mercy also contends that Dr. Blume should not be awarded any damages during the injunction period. The fact that Dr. Blume held up any hearing from January 14, 1999, to June 11, 1999, was recognized by the Court and the jury was clearly barred from awarding damages for that period.
4. Abuse of Discretion
Mercy argues the Court abused its discretion by excluding certain evidence and by failing to give Mercy's affirmative defense instructions. Mercy proposed four affirmative defenses and a mitigation of damages final jury instruction which were based on the Iowa Civil Jury Instructions.
A. Jury Instructions
i. Impossibility of Performance and Prevention of Performance
Mercy argues their impossibility of performance and prevention of performance instructions should have been included in the final jury instructions. Both jury instructions came from defendant's proposed instructions. Number 16, impossibility of performance, read
Impossibility of performance means extraordinary circumstances which:
1. Prevent a person from carrying out the terms of the contract.
2. Could not reasonably have been anticipated; and
3. Are not the fault of that party.
Performance is not excused if the party who promised to perform created the circumstances which made performance impossible, or just because performance became economically burdensome or unattractive.
The proposed instruction number 17, prevention of performance, read:
Performance under a contract is excused if the other party prevents it or makes it impossible.
As mentioned, there was a time period during which Dr. Blume made performance impossible. Dr. Blume filed an "injunction" in Woodbury County to prevent Mercy from holding a hearing[1]. The Court recognized this, and barred the jury from considering any damages for the time period during which Dr. Blume had an *1117 injunction. Dr. Blume was only allowed to recover damages from the time periods from January 14, 1999, to June 11, 1999, and December 28, 2000, to July 11, 2001. This, of course, excludes the time period of the injunction. Furthermore, there is no competent evidence that Mercy was prevented from holding a hearing during the time periods set out above.
ii. Waiver of Performance
Mercy also argues that proposed instruction number 18, waiver of performance, should have been included. This instruction read:
The right to insist on performance can be given up. This is known as a "waiver." A waiver may be shown by actions, or you may conclude from Blume's conduct and the surrounding circumstances that a waiver was intended. The essential elements of a waiver are the existence of a right, knowledge of that right, and an intention to give it up.
Mercy alleges this instruction should have been given. However, there is no evidence that Dr. Blume waived his right to a hearing. The fact that there was an injunction has been discussed above. This Court does not consider that period as a waiver. Mercy failed to present any evidence on this fact, and therefore, was not entitled an instruction on waiver.
iii. Mitigation of Damages
Mercy also argues that proposed instruction number 19, mitigation of damages, should have, been included. This proposed instruction read:
It is the duty of any person who has been injured to use reasonable diligence and reasonable means, under the circumstances, to prevent the aggravation of such injury to act in a way that brings about a recovery from such injury and to take advantage of any reasonable opportunity he may have to reduce or minimize loss or damage.
He is required to seek out or take advantage of a business or employment opportunity that was reasonably available to him under all the circumstances shown by the evidence, including timely pursuit of a fair hearing. You should reduce the amount of plaintiffs' damages, by the amount he could have reasonably realized if he had taken advantage of such business or employment opportunity or by exercising timely pursuit of a fair hearing, but did not do so.
Mercy insinuated Dr. Blume could have operated at St. Luke's Hospital in Sioux City, Iowa, and had no damages. Since Mercy contends this fact, it is their burden to call a witness from St. Luke's to say this mitigation was possible. See Schumacher v. Tyson Fresh Meats, Inc., 434 F. Supp. 2d 748, 754 (D.S.D.2006). Mercy produced no witness who testified to this fact, and therefore, Mercy was not entitled to a mitigation of damages defense.
B. Exhibits Critical of Dr. Blume
Mercy argues that the Court erred in not including any evidence that was critical of Dr. Blume. Mercy states this painted an incomplete picture for the jury, one that was void of reality. Mercy wanted to tell this jury that Dr. Blume was a bad doctor who had all kinds of violations that were being considered by the Iowa Medical Association. They also wanted to tell the jury of the bad things he had done which required Mercy to suspend him. None of these contentions were ever proved by the Iowa Medical Association or Mercy. Dr., Blume surrendered his Iowa license before any final hearing and received no damages from the jury after that date. Mercy never gave him a hearing. Their decision was a one-sided affair with no proper procedure under Mercy's "Fair Hearing Plan." Mercy cannot have the *1118 jury considering "we didn't give him a fair hearing because he is a bad doctor."
Mercy argues that they should have been able to tell the jury that if prospective patients had known all the bad publicity he was getting, they never would have come to him. He would then have had fewer patients, fewer operations and less damages. The evidence showed that many of Dr. Blume's patients came from referrals by doctors who had heard him speak at seminars and had patients who were getting no relief from "usual" operations. Many never would have seen the local papers as they were from far away locales. As mentioned, any evidence that Dr. Blume was involved in an effort by the Iowa medical authorities to terminate his right to practice medicine was unproved allegations as there had been no final decision against him. The record shows he surrendered his medical license on July 11, 2001, and the Court's instructions to the jury clearly barred any award of damages after that date.
None of these "critical of Dr. Blume" exhibits had anything to do with whether or not Mercy abided by the U.S.Code and its "Fair Hearing Plan."
IV. CONCLUSION
IT IS THEREFORE HEREBY ORDERED that defendant's renewed motion for judgment as a matter of law or in the alternative for a new trial (Docket No. 217) is denied.
NOTES
[1] The record shows that legally the injunction may not have technically been in place. However, both sides proceeded as though there was an injunction in force.
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749 S.W.2d 189 (1988)
Laura Leigh NAUMANN, et al., Appellants,
v.
WINDSOR GYPSUM, INC., Appellee.
No. 04-87-00018-CV.
Court of Appeals of Texas, San Antonio.
March 23, 1988.
Rehearing Denied April 19, 1988.
Arch B. Haston, David W. Ross, San Antonio, for appellants.
W. Wendell Hall, Fulbright & Jaworski, San Antonio, for appellee.
Before CADENA, C.J., and CANTU and REEVES, JJ.
*190 OPINION
CADENA, Chief Justice.
Laura and Ronald Naumann, plaintiffs below, appeal from a summary judgment granted in favor of Windsor Gypsum, Inc. (Windsor) and argue that there are genuine issues of material fact as to whether defendant breached its duty of care to Naumann.
On the night of October 18, 1985, a vehicle driven by Laura Naumann collided with an eighteen-wheeled tractor-trailer driven by Silas Marsh, an employee of Builder's Transport, Inc. The tractor-trailer had just been loaded with sheetrock at Windsor's plant near McQueeny, Texas. Marsh left the Windsor plant and turned right on Cypress Ridge Road where he then proceeded north 264 feet to a stop sign at F.M. 78, a two-laned highway running east and west. The accident occurred as Marsh proceeded to make a right turn onto F.M. 78. To effectuate the turn with the tractor-trailer, he was forced to block both the east and west bound lanes of the highway. Laura Naumann, driving west on F.M. 78, struck the tractor-trailer as it was making its turn.
Laura Naumann and her father, Ronald, brought suit against Builder's Transport, Marsh and Windsor Gypsum. Windsor's motion for summary judgment was granted and plaintiffs' cause of action against Windsor was severed from their suit against the remaining defendants.
Naumann's cause of action is based on Windsor's alleged negligence in designing its plant in a manner that forces tractor-trailers exiting its property to block both lanes of F.M. 78 as they enter it from Cypress Ridge Road, thereby creating a hazard to motorists on F.M. 78, and that Windsor was negligent in failing to provide warning devices, adequate lighting or guards to direct traffic at the junction of Cypress Ridge and F.M. 78.
Windsor's motion for summary judgment is based on the fact that the truck being driven by Marsh was owned and operated by Builder's Transport, an independent contractor over which Windsor had no control at the time of the accident. It is also based on the assertion that Windsor had no duty to control the traffic on F.M. 78, a public highway abutting its property.
In determining whether the summary judgment evidence establishes as a matter of law that there is no genuine issue of fact as to one or more of the essential elements of plaintiffs' cause of action, we will take as true evidence favorable to plaintiffs and indulge every reasonable inference and resolve all doubts in their favor. Wilcox v. St. Mary's University of San Antonio, 531 S.W.2d 589, 593 (Tex.1975).
Windsor's plant is situated on the southeast corner of the junction of Cypress Ridge Road and F.M. 78. Windsor's president, James P. Boone, designed the layout of the plant and the location of the gate on Cypress Ridge. Although there is a gate on F.M. 78, Windsor instructed truck drivers to use the Cypress Ridge gate to leave the plant. Boone stated in his deposition that most of the trucks turning east onto F.M. 78 from Cypress Ridge move out into the westbound lane in order to make the turn. He acknowledged that the turn is "tight" and that there is a problem with the trucks entering F.M. 78 from Cypress Ridge, but stated that wide turns by eighteen-wheelers are made all the time in every part of the United States. Marsh confirmed this and said that it is not unusual for a truck driver to cross over into the oncoming traffic lane when making a right turn onto a two-laned road. Boone did state that a truck entering the highway from the F.M. 78 gate might have been able to go east on the highway without entering the westbound lane. This was because there was some excess right of way at that point between Windsor's property line and the paved portion of the highway.
Boone's summary judgment evidence was that trucks are sent to the Cypress Ridge gate because it is the safest exit. This is due to the stop sign at F.M. 78 and to signs on the highway warning motorists of the railroad tracks crossing the highway just to the west of Cypress Ridge. He also testified that the highway department, at *191 Windsor's request, had installed a truck warning sign fifty yards east of the northeast corner of Windsor's property. The sign, which had been there on the night of the accident, faces westbound traffic, the direction plaintiff had been traveling prior to the collision. Boone said that the highway department had approved the location of his F.M. 78 gate.
The owner or occupier of premises abutting a highway has the duty to exercise reasonable care to avoid endangering the safety of persons using the highway as a means of travel, and is liable for any injury that proximately results from his negligence. Alamo National Bank v. Kraus, 616 S.W.2d 908, 910 (Tex.1981); Atchison v. Texas & P. Ry. Co., 143 Tex. 466, 186 S.W.2d 228, 229 (1945). Plaintiffs cite these and several other cases in support of the proposition that Windsor owed Naumann a duty to either design its exit so tractor-trailers could turn right onto F.M. 78 without blocking both traffic lanes or to warn her of the dangerous intersection. All of these cases are distinguishable. All but one involve the negligent release upon the highway of an agency that becomes dangerous by its very nature once upon the highway. The remaining case involves an action against the State and other landowners for negligently allowing tall vegetation to obscure the view of a highway intersection. See Kraus, 616 S.W.2d at 910 (wall of building being demolished collapsed onto public street); Atchison, 186 S.W.2d at 229 (smoke from grass fire on railroad right-of-way drifted across adjacent highway); Hamric v. Kansas City Southern Ry., 718 S.W.2d 916, 918 (Tex. App.-Beaumont 1986, writ ref'd n.r.e.) (tall stand of grass and weeds allowed to obscure the view of a highway intersection); Northwest Mall, Inc. v. Lubri-Lon International, Inc., 681 S.W.2d 797, 802 (Tex.App.-Houston [14th Dist.] 1984, writ ref'd n.r.e.) (oil leaking from container in booth onto floor of mall); Beaumont Iron Works Co. v. Martin, 190 S.W.2d 491, 495 (Tex.Civ.App.-Beaumont 1945, (ref'd w.o.m.) (windowpane fell from its frame striking a pedestrian on adjacent sidewalk); Skelly Oil Co. v. Johnston, 151 S.W.2d 863, 865 (Tex.Civ.App.-Amarillo 1941, writ ref'd) (water blown from cooling towers created slippery spot on oil-surfaced highway). In Golden Villa Nursing Home, Inc. v. Smith, 674 S.W.2d 343 (Tex.App.- Houston [14th Dist.] 1984, writ ref'd n.r.e.), a patient of the nursing home who suffered from a variety of mental disorders and who had been institutionalized for over 30 years was known by the home to have a tendency to wander. One day she wandered out onto the highway adjacent to the home and collided with a motorcyclist. The court held that the patient constituted a clear and present danger to travelers who would swerve or otherwise attempt to avoid hitting her if she was on the highway. Id., at 350. The court said that the nursing home breached its duty to the motorcyclist to exercise reasonable care not to endanger her safety while she used the highway. Id. Although the dangerous condition in Smith was not caused by the escape onto the highway of an inanimate object such as smoke, water or a falling wall, the patient in that case was known by the home to be unable to provide for her own safety and to constitute a danger to motorists if she should enter the highway.
In this case, Windsor did not discharge onto F.M. 78 an inanimate, incognizant or inherently dangerous entity. Rather, an independent contractor, hired by Windsor to deliver its sheetrock, left Windsor's property and was involved in an accident on the highway adjacent to Windsor's plant. Builder's Transport, Marsh's employer, was an independent contractor often hired by Windsor for such jobs in the past, and Marsh had been Builder's Transport's driver on several of these occasions. It is also uncontroverted that once Marsh left Windsor's property, Windsor had no control over him. Generally, a landowner does not have a duty to see that his independent contractor performs his work in a safe manner. Redinger v. Living, Inc., 689 S.W.2d 415, 418 (Tex.1985). Nor is a person bound to anticipate negligent or unlawful conduct on the part of another. DeWinne v. Allen, 154 Tex. 316, 277 S.W.2d 95, 98 (1955).
We must conclude that a landowner's duty to exercise reasonable care not to endanger the safety of persons on an *192 abutting highway does not create an obligation to guard passing motorists against the possible negligence of an independent contractor over whom the landowner exercises no control and whose competence to perform his duties the landowner has no reason to doubt.
Plaintiffs argue that because Windsor designed the layout of its plant, instructed truck drivers which exit to use and knew that they blocked both lanes of traffic when entering F.M. 78, it had a duty to make use of the alternative means of exit from its property or to warn highway users of the dangerous exit. We do not agree. Although Windsor knew of the propensity of truck drivers to block both lanes when turning east on F.M. 78, it had every right to expect them to exercise due care and to enter the highway safely. An owner or occupier of property is not an insurer of the safety of travelers on an adjacent highway and is not required to provide against the acts of third persons. Albright v. McElroy, 207 Kan. 233, 484 P.2d 1010, 1019 (1971); Safeway Stores, Inc. v. Musfelt, 349 P.2d 756, 758 (Okla.1960).
The dangerous situation here was not created by Windsor. It is not responsible for the narrowness of either F.M. 78 or Cypress Ridge Road or for the length of Builder's Transport's tractor-trailer. The same dangerous situation exists every time a tractor-trailer makes a right turn at an intersection of two-laned roads. A mere bystander who did not create the dangerous situation is not required to take action to and prevent injury to others. Abalos v. Oil Development Co. of Texas, 544 S.W.2d 627, 633 (Tex.1976); Buchanan v. Rose, 138 Tex. 390, 159 S.W.2d 109, 110 (1942).
Because the summary judgment evidence establishes as a matter of law that there is no genuine issue of fact as to the existence of a duty owed by Windsor to plaintiffs, we affirm the judgment of the trial court. See Otis Engineering Corp. v. Clark, 668 S.W.2d 307, 309 (Tex.1983).
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503 F. Supp. 2d 1097 (2007)
UNITED STATES of America, Plaintiff,
v.
Elena SCOTT, Defendant.
No. 07-CR-4.
United States District Court, E.D. Wisconsin.
August 13, 2007.
*1098 Michelle L. Jacobs, United States Department of Justice, Office of the U.S. Attorney, Milwaukee, WI, for Plaintiff.
SENTENCING MEMORANDUM
ADELMAN, District Judge.
In 1990, defendant Elena Scott began dating a man named Phillip Toliver, and the two had a child together in 1992. Toliver physically abused defendant, and she attempted to end the relationship. Toliver's violence escalated with her attempts, culminating in his kidnaping and assaulting defendant in 1999. Toliver was sent to prison, but when he got out in 2004, he began menacing defendant again. In response, defendant bought two guns, one for herself, and one for her new boyfriend, Jesse Sanders, who had previously tried to help her with Toliver. However, as defendant knew, Sanders, a felon, could not lawfully possess firearms. After police arrested Sanders on drug trafficking charges, he told police that defendant provided *1099 the gun found on his person, and the government charged her with making straw purchase under 18 U.S.C. § 922(a)(6).[1]
Defendant pleaded guilty to the charge, and the probation office prepared a presentence report ("PSR"). The PSR set defendant's base offense level at 12 under U.S.S.G. § 2K2.1 (a)(7), but then recommended an enhancement to level 18 under § 2K2.1 (b)(6) based on the allegation that defendant transferred the gun to Sanders with reason to believe he would use or possess it in connection with his drug trafficking activities. Following a 3 level reduction for acceptance of responsibility, § 3E1.1, and coupled with her criminal history category of I, the PSR recommended an imprisonment range of 18-24 months under the advisory sentencing guidelines.
Defendant opposed the § 2K2.1(b)(6) enhancement, and although the issue was close, I declined to impose it. I then sentenced defendant to three years probation with six months of home confinement on electronic monitoring. In this memorandum, I set forth the bases for these decisions.
I. SENTENCING PROCEDURE
In imposing sentence, I generally follow a two-step procedure. First, I calculate the advisory sentencing guideline range, resolving any disputes necessary to that determination. Then, I select a sentence that is sufficient but not greater than necessary given all of the factors set forth in 18 U.S.C. § 3553(a). See, e.g., United States v. Holt, 486 F.3d 997, 1004 (7th Cir.2007).
II. GUIDELINE DETERMINATION
Under § 2K2.1 (b)(6), the court must increase the offense level by 4, or to level 18 if the resulting level is less than 18, if "the defendant . . . transferred any firearm or ammunition with knowledge, intent, or reason to believe that it would be used or possessed in connection with another felony offense." The government bears the burden of proving by a preponderance of the evidence that the § 2K2.1 (b)(6) enhancement applies. United States v. Wagner, 467 F.3d 1085, 1089 (7th Cir.2006). In the case of a transfer, this requires the government to prove: (1) that the defendant knew, intended or had "reason to believe" (2) that the person to whom she transferred the gun would use or possess it "in connection with" another felony.
No one alleged that defendant gave the gun to Sanders for the purpose of facilitating his drug trafficking activities. Instead, the government argued that, given his well-known status as a dealer, defendant had "reason to believe" that Sanders would use the gun in connection with his trafficking.
The Seventh Circuit has assumed that the phrase "`reason to believe' is something of which the defendant is conscious, rather than, as in the tort law of negligence, something of which a reasonable person would be conscious whether or not this person, who may have a defective understanding, is conscious of it." United States v. Gilmore, 60 F.3d 392, 394 (7th Cir.1995). However, the government need not prove that the defendant had reason to believe that the gun would be used in a specific felony offense, see United States v. Inglese, 282 F.3d 528, 539 (7th Cir.2002) *1100 (citing United States v. Jemison, 237 F.3d 911, 918 (7th Cir.2001)), or that the defendant harbored any notion as to precisely how or when the gun would be used in connection with the other felony offense, see United States v. Messino, 55 F.3d 1241, 1256 (7th Cir.1995).
The phrase "in connection with" means that the firearm "facilitated, or had the potential of facilitating, another felony offense." U.S.S.G. § 2K2.1 cmt. n. 14(A). In other words, "the court must find that the gun had some purpose or effect in relation to that second crime." United States v. LePage, 477 F.3d 485, 489 (7th Cir.2007). "Mere contemporaneous possession while another felony is being committed is not necessarily sufficient[.]" Id. However, application note 14 further explains that the enhancement applies "in the case of a drug trafficking offense in which a firearm is found in close proximity to drugs, drug-manufacturing materials, or drug paraphernalia." U.S.S.G. § 2K2.1 cmt. n. 14(B). In such cases, the Commission assumes that "the presence of the firearm has the potential of facilitating another felony offense." Id.
In the present case, defendant stated that the firearm purchase and transfer at issue arose out of her attempt to end her abusive relationship with Toliver. She stated that in 1999 she and Sanders met with Toliver in an attempt to end the relationship. However, Toliver ended up assaulting and abducting defendant, and she jumped out of a moving car in order to escape from him, suffering serious injuries. Sanders, who was following, picked her up and took her to the hospital. The state charged Toliver with battery and recklessly endangering safety, and defendant testified against him at trial. Toliver threatened her during the trial, and the judge summoned additional deputies to subdue him. A jury convicted Toliver, and the state court sentenced to him three years in prison. Upon his release in 2004, Toliver moved into a halfway house right across the street from defendant's new residence and resumed his threats. Defendant stated that, as a result, in October 2004 she purchased two handguns, one for herself and one for Sanders. She indicated that Sanders was also concerned for his safety because he had attempted to intervene and help defendant escape Toliver. Defendant admitted that she knew Sanders was a felon and could not have a gun, but claimed that she provided the weapon to him solely for protection purposes.
The government countered that defendant well knew of Sanders's activities, as he used her residence to store drug trafficking materials. Further, witnesses indicated that Sanders carried a firearm during his drug trafficking activities. As noted, officers found on Sanders's person the firearm defendant bought for him when he was arrested. Another judge of this district sentenced Sanders to 168 months in prison for conspiracy to distribute cocaine.
Although a close call, under all the circumstances, I found that the government did not meet its burden. Defendant's fear of Toliver was legitimate given his past conduct, and I found persuasive defendant's contention that she bought the guns for protection from him. Records revealed that she obtained the guns shortly after Toliver's release, which supported her contention. Further, because Sanders was directly involved in her struggles with Toliver, defendant could, reasonably believe that he too was in danger.
Even if, as seemed likely, defendant knew or should have known about Sanders's drug activities (past and present), I found this insufficient.[2] Standing *1101 alone, a defendant's knowledge that the transferee also happens to deal drugs would not necessarily lead to a belief that the gun would be used to facilitate drug trafficking. Cf. LePage, 477 F.3d at 489 (stating that mere contemporaneous possession of a gun while a felony is committed is insufficient). Moreover, in the present case, both the transferee and transferor had a legitimate reason for acquiring firearms fear of reprisal from a violent and dangerous individual. The government presented no evidence that Sanders asked defendant to acquire the gun to aid his drug trafficking, or that he otherwise gave her any indication that he planned to use the gun in furtherance of those activities.[3]
Although § 2K2.1(b)(6) focuses on the defendant's mental state at the time of the transfer, I further noted that the gun at issue was found on Sanders's person, not with or near any drugs or drug paraphernalia in defendant's house. Officers arrested Sanders with the gun in a house located on Sixth Street, and the government presented no evidence of drugs or drug trafficking materials in that house.[4] Nor did the government offer any evidence that the gun witnesses saw Sanders carry during his drug activities was the same gun defendant provided to him. In sum, there was no evidence specifically connecting this gun to those activities.
Ultimately, while courts have recognized the general link between guns and drug trafficking, see, e.g., United States v. Strong, 485 F.3d 985, 990 (7th Cir.2007) (noting that guns are tools of the drug trade), such generalities cannot take the place of proof in making determinations of such significance. In the present case, the government presented no specific evidence that defendant knew, intended or had reason to believe that Sanders would use this particular gun to facilitate his drug activities, rather than for protection from Toliver. Even under an objective rather than subjective standard, I could not conclude that a reasonable person in defendant's shoes would have had reason to believe that Sanders would use the gun to facilitate his drug activities rather than the purpose for which defendant obtained the gun.
Therefore, I declined to apply § 2K2.1 (b)(6) and instead adopted a base offense level of 12. Following a 2 level reduction for acceptance of responsibility, I adopted a final level of 10, producing an imprisonment range of 6-12 months.
III. IMPOSITION OF SENTENCE
A. Section 3553(a) Factors
"When sentencing a defendant, a district court must consider all sentencing factors enumerated in 18 U.S.C. § 3553(a)." United States v. Harris, 490 F.3d 589, 593 (7th Cir.2007). Those factors include:
(1) the nature and circumstances of the offense and the history and characteristics of the defendant;
*1102 (2) the need for the sentence imposed
(A) to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense;
(B) to afford adequate deterrence to criminal conduct;
(C) to protect the public from further crimes of the defendant; and
(D) to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner;
(3) the kinds of sentences available;
(4) the advisory guideline range;
(5) any pertinent policy statements issued by the Sentencing Commission;
(6) the need to avoid unwarranted sentence disparities; and
(7) the need to provide restitution to any victims of the offense.
18 U.S.C. § 3553(a). The statute directs the court, after considering these factors, to impose a sentence that is sufficient but not greater than necessary to satisfy the purposes of sentencing just punishment, deterrence, protection of the public and rehabilitation of the defendant. Id.
B. Analysis
1. Nature of Offense
As the government noted, straw purchases are very serious offenses. They defeat society's attempts to keep firearms out of the hands of those who should not have them, leading to increased gun violence. The AUSA also indicated that the scenario presented in this case a woman with no record buying a gun for her felon-boyfriend represented a growing problem for law enforcement. Defendant's particular crime was mitigated somewhat, however, by her motive in acquiring the firearms, as discussed above. At sentencing, defendant expressed genuine remorse for her actions, stating that she just wanted to be safe from Toliver.
2. Defendant's Character
Aside from this offense, defendant behaved in a pro-social manner. Thirty-five years old, she had just one prior contact with the criminal justice system a theft case from when she was eighteen. Despite a difficult childhood with an abusive and alcoholic father, she graduated high school and took additional courses at MATC. She then worked as a bus driver from 1992 to 1997, and as an educational assistant at Milwaukee Public Schools ("MPS") from 1997 to the present. However, MPS suspended her during the pendency of this case, and her future there was uncertain. Nevertheless, defendant sought to further her education, studying business at Upper Iowa University, where she expected to earn her degree shortly. Defendant was fluent in French and held a state license for special education.
Defendant's son from her relationship with Toliver, now a teen, moved in with her parents until this matter concluded. The boy's grandparents indicated that defendant raised him well, as he was a respectful and well-rounded young man.
Of some concern was defendant's use of marijuana prior to her arrest. However, after some initial positives all of her screens on pre-trial release were negative. I saw no other correctional treatment needs. Obviously, her choice in men had not been the best.
3. Guidelines and Purposes of Sentencing
The guidelines recommended a prison term of 6-12 months, a range falling in Zone B of the grid and allowing a sentence of probation with home or community *1103 confinement as a substitute for imprisonment. See U.S.S.G. § 5C1.1(c)(3). Under all of the circumstances, I found such a sentence sufficient but not greater than necessary.
Although defendant committed a serious crime, the mitigating factors were such that confinement in prison was not needed to provide just punishment. See 18 U.S.C. § 3553(a)(2)(A). Defendant also suffered significant collateral consequences in the probable loss of her MPS job, which added to the punitiveness of her conviction. Nor did I find prison necessary to deter defendant from re-offending, given her lack of record, genuine expression of remorse and other positive traits. See § 3553(a)(2)(B). Further, as a convicted felon herself, defendant would now be barred from purchasing firearms. As the government noted, general deterrence is an issue in these types of cases, but under the circumstances I concluded that the prospect of a federal felony conviction, lengthy supervision and confinement in the community was sufficient to deter others similarly situated. Finally, given her lack of record' and pro-social lifestyle, I did not believe confinement in prison was necessary to protect the public. See § 3553(a)(2)(C). This was certainly an ill-advised act in passing the gun to Sanders, but I did not see any evidence that under normal circumstances and free from the influence of disreputable men defendant posed any risk.[5]
IV. CONCLUSION
Therefore, I placed defendant on probation for a period of three years. As conditions, I ordered her to serve 180 days of home confinement on electronic monitoring and participate in drug testing and treatment. Other conditions of the sentence, appear in the judgment.
NOTES
[1] Section 922(a)(6) proscribes false statements to federally licensed gun dealers. In this case, defendant falsely stated that she was the true purchaser of the second gun she gave to Sanders.
[2] Officers found packaging materials, a scale, small amounts of narcotics and other accouterments of the drug trade in defendant's house, about which defendant was less than forthcoming. However, Sanders admitted that he was responsible for those materials, and there was no evidence that defendant was personally involved in Sanders's drug trafficking.
[3] Upon his arrest, Sanders promptly identified defendant as the supplier of his gun, but he said nothing further as to the purpose of the transfer. I leave open the possibility that Sanders traded on defendant's legitimate fear to induce her to get him another gun. However, the issue under § 2K2.1 (b)(6) is defendant's belief, not Sanders's unexpressed intentions.
[4] The PSR indicated that Sanders lived in the Sixth Street house but kept his drugs elsewhere.
[5] I noted that I would impose the same sentence, even if defendant had reason to believe that Sanders might also use the gun in connection with his dealing. I accepted her contention that facilitating his dealing was not her intent in acquiring the gun, and post-Booker I can give greater effect to motive and circumstance.
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749 S.W.2d 933 (1988)
Monte Ervin WESLEY, Appellant,
v.
The STATE of Texas, Appellee.
No. 6-87-059-CR.
Court of Appeals of Texas, Texarkana.
April 26, 1988.
Jim Thompson, Atlanta, for appellant.
Neal Birmingham, Criminal Dist. Atty., Linden, for appellee.
BLEIL, Justice.
Monte Ervin Wesley appeals his conviction for aggravated assault. Wesley claims that he was denied his right to a speedy trial, that the trial court erred in proceeding to trial after acknowledging that Wesley had been absent from certain trial proceedings, and that the trial court *934 failed to require that the indictment reflect the correct spelling of his name. We affirm the conviction.
Wesley was indicted on March 19, 1986. His first trial resulted in a mistrial on June 12, 1986. On September 26, 1986, Wesley filed a motion for the transcription of testimony from this trial. He filed motions for continuance on July 23, 1986, and on October 27, 1986. The court reporter delivered the transcribed testimony to Wesley on August 21, 1987, and the second trial was held on September 21, 1987.
Wesley contends that the trial court erred in denying his motion to dismiss for violation of his right to a speedy trial as guaranteed by the Sixth Amendment to the United States Constitution and Article I, Section 10 of the Texas Constitution. In determining whether a defendant's right to a speedy trial under the United States and Texas Constitutions has been violated, this Court must consider and weigh four factors: (1) the length of delay; (2) the reason for the delay; (3) the defendant's assertion of his rights; and (4) the prejudice to the defendant. Barker v. Wingo, 407 U.S. 514, 92 S. Ct. 2182, 33 L. Ed. 2d 101 (1972); Chapman v. Evans, 744 S.W.2d 133 (Tex.Crim.App., 1988) (not yet reported).
The length of delay in this case is over fifteen months, the period of time from the date of mistrial to the second trial. The delay resulted from the time required by the court reporter to prepare the statement of facts from the first trial. Wesley desired the transcription of the testimony so that his attorney could properly represent him, and he filed two motions for continuance during this time. The time it took the court reporter to deliver the transcription of testimony was not within the State's control, and the State did not directly or indirectly cause the delay.
And, during this period Wesley failed to assert his rights. The remedy for delay in coming to trial is a request to the trial court for a speedy trial or application for writ of mandamus. Hudson v. State, 453 S.W.2d 147 (Tex.Crim.App.1970). Wesley took no action, other than asking for a continuance, during the delay in receiving the transcript. Wesley also failed to show prejudice as a result of the delay. He was not incarcerated during the period of delay and the record contains no evidence of prejudice. Therefore, we conclude that Wesley was not denied his right to a speedy trial.
Wesley also asserts that the trial court erred in proceeding with the trial when he was absent during a portion of the jury voir dire. Wesley was initially present during examination of the jury panel members. Three panel members stated reasons why they felt they should not serve on the case. The trial court required these three persons to remain for further examination and excused the rest of the jury panel for a lunch break. Apparently, Wesley left the courtroom at that time. Therefore, the remaining three panel members were examined in Wesley's absence.
Tex.Code Crim.Proc.Ann. art. 33.03 (Vernon Supp.1988) provides, in pertinent part, as follows:
In all prosecutions for felonies, the defendant must be personally present at the trial, and he must likewise be present in all cases of misdemeanor when the punishment or any part thereof is imprisonment in jail; provided, however, that in all cases, when the defendant voluntarily absents himself after pleading to the indictment or information, or after the jury has been selected when trial is before a jury, the trial may proceed to its conclusion. (Emphasis added).
Wesley argues that he could not have voluntarily absented himself during the examination of the three remaining panel members because the jury had not been selected. Wesley cites Miller v. State, 692 S.W.2d 88 (Tex.Crim.App.1985), for the proposition that an accused person may not waive his right to be present at his trial until the jury has been selected.
Wesley seeks reversal of his conviction on the basis of his absence during the *935 examination of the three remaining panel members. Wesley's attorney challenged the first of these panel members. The trial court sustained this challenge. The State challenged the second and third panel members and the trial court denied these challenges. Therefore, everything that occurred in Wesley's absence inured to his benefit.
In Mares v. State, 571 S.W.2d 303 (Tex. Crim.App.1978), the defendant moved for a mistrial on the ground that several motions were taken up by the court in chambers without the defendant's presence. The court found no error and no violation of Article 33.03, citing Cartwright v. State, 96 Tex. Crim. 230, 259 S.W. 1085 (1923), which announced the following rule: "It is not everything that takes place in the absence of a defendant upon trial for which a reversal should be ordered. There must be either an actual showing of injury or a showing of facts from which injury might reasonably be inferred." In Mares, the court found no injury to the defendant as a result of having been absent from the in-chambers conference. Wesley has failed to show any injury as a result of his absence during the brief period of time he was outside the courtroom.
Wesley also maintains that the trial court erred in failing to require the indictment to be amended to reflect the correct spelling of his name. The appellant's name is Monte Ervin Wesley, while the indictment reads Montre Ervin Wesley. Tex. Code Crim.Proc.Ann. art. 26.08 (Vernon 1966) provides as follows:
If the defendant, or his counsel for him, suggests that he bears some name different from that stated in the indictment, the same shall be noted upon the minutes of the court, the indictment corrected by inserting therein the name of the defendant as suggested by himself or his counsel for him, the style of the case changed so as to give his true name, and the cause proceed as if the true name had been first recited in the indictment. (Emphasis added).
The trial court complied with all but the emphasized portion of the article. Wesley's attorney at trial suggested Wesley's true name to be Monte instead of Montre and orally moved to amend the indictment to correctly reflect Wesley's name. Wesley spelled his name correctly for the trial court, which ordered the record changed to reflect the true spelling of Wesley's name. The style of the case reflects the corrected spelling; however, the indictment remains unchanged. Wesley argues that the indictment should have been amended and that the trial court erred in proceeding to trial without having the correct spelling of his name inserted.
Under the doctrine of "idem sonans," a variance in names, to be material, must have misled a party to his prejudice. Raven v. State, 149 Tex. Crim. 294, 193 S.W.2d 527 (1946). Wesley does not argue and there is no showing that he was misled to his prejudice by the "r" in Monte. Thus, we perceive no harm. However, we now direct the clerk of the Court of Appeals to amend the indictment by inserting the correct spelling of Wesley's name in the indictment so that it reflects his name as Monte rather than Montre.
We affirm the trial court's judgment.
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503 F. Supp. 2d 789 (2007)
RESOURCE BANK, Plaintiff,
v.
PROGRESSIVE CASUALTY INSURANCE COMPANY, Defendant.
Civil Action No. 2:07cv75.
United States District Court, E.D. Virginia, Norfolk Division.
September 4, 2007.
*790 Richard J. Conrod, Jr., Esquire, William E. Spivey, Esquire, Kaufman & Canoles PC, Norfolk, VA, George C. Werner, Esquire, Barley Snyder, Lancaster, PA, for Resource Bank.
*791 Samuel L. Hendrix, Esquire, Thompson Loss & Judge LLP, Washington, DC, for Progressive Casualty Insurance. Company.
OPINION AND ORDER
KELLEY, District Judge.
Plaintiff Resource Bank ("Resource" or the "Bank") is a defendant in two class action lawsuits that seek millions of dollars in damages for violations of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227. Resource initially failed to obtain indemnity and a defense of the lawsuits from St. Paul Mercury Insurance Company ("St.Paul"), the carrier that underwrote its general liability policy (the "GL Policy"). Resource Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 639 (4th Cir.2005) (hereinafter "Resource I"). The Bank then filed this coverage action against defendant Progressive Casualty Insurance Company ("Progressive"), which had issued a $3 million Directors and Officers Liability Insurance Policy with an Entity Errors and Omissions Endorsement (the "D & O Policy"). Because the TCPA claims asserted in the class actions are expressly excluded from the D & O Policy, the court GRANTS partial summary judgment in favor of Progressive.[1]
I. Factual and Procedural History
Resource is a banking corporation organized and existing under the laws of the Commonwealth of Virginia. It is a whollyowned subsidiary of Fulton Financial Corporation, which is headquartered in Lancaster, Pennsylvania.
In February 2002, Resource's mortgage unit began to advertise by transmitting hundreds of thousands of unsolicited faxes to individuals and businesses in twenty-two states. Approximately one month later, one of the recipients of Resource's faxes filed a class action lawsuit in Marion County, Indiana under the style Cohen & Malad, LLP v. Resource Bankshares Corporation, et at., Civil Action No. 49D070203PL000429 (Cir. Ct., Marion County., Ind., filed Mar. 8, 2002) (the "Indiana Class Action"). The lawsuit claimed that Resource's fax advertising program violated the TCPA, which prohibits the facsimile transmission of unsolicited advertising. 47 U.S.C. § 227(b)(1)(C). The TCPA creates a private right of action and authorizes the recovery of actual damages or $500 per impermissible fax, whichever is greater. Id. § 227(b)(3).
In March 2005, Resource was named as a defendant in another TCPA class action, this one filed in Missouri state court under the style J.C. Corporate Management, Incorporated v. Resource Bank, Case No. 05CC-001203 LEQ (Cir. Ct., St. Louis County., Mo., filed, Mar. 17, 2005)(the "Missouri Class Action"). The claims asserted in the Missouri Class Action are virtually identical to those in the Indiana Class Action. The two class actions are referred to collectively as the "TCPA Class Actions."
A. The GL Policy
After being served with the Indiana Class Action, Resource tendered defense of the case to St. Paul. That carrier had written the GL Policy, which covered Resource during the periods of time addressed in the lawsuit.
The GL Policy provided coverage for "Advertising Injury Liability," which it defined in pertinent part as "making known to any person or organization written or spoken material that violates a person's right to privacy." Resource I, 407 F.3d at *792 634-35. The GL Policy also covered "Property Damage." That section of the policy stated:
Bodily injury and property damage liability. We'll pay amounts any protected person is legally required to pay as damages for covered bodily injury or property damage that: happens while the agreement is in effect; and is caused by an event.
"Property damage" was defined as:
physical damage to tangible property of others, including all resulting loss of use of that property; or
loss of use of tangible property of others that isn't physically damaged.
To trigger coverage under the Property Damage provision, the loss must have been the result of an "event," which the GL Policy defined, inter alia, as an "accident." Id. at 634.
Based on the policy language quoted above, St. Paul refused to indemnify Resource for any damages that might be awarded in the TCPA Class Actions and declined even to defend the case. Resource thereafter filed a coverage action against St. Paul in the United States District Court for the Eastern District of Virginia under the style Resource Bankshares Corporation v. St. Paul Mercury Insurance Company, Civil Action No. 2:03cv764 (E.D. Va. filed Nov. 4, 2003) (the "First Coverage Action").
The First Coverage Action ultimately was decided by the United States Court of Appeals for the Fourth Circuit. The Fourth Circuit affirmed the district court's ruling that the GL Policy did not cover "property damage" of the sort claimed in the TCPA Class Actions. Resource I, 407 F.3d at 639. The Fourth Circuit also held that the "right to privacy" language in the GL Policy did not cover violations of the TCPA. Id. at 642. Distinguishing between a secrecy right to privacy (i.e., revealing confidential information to a third party) and a seclusional right to privacy (i.e., the right to be left alone), the Fourth Circuit held that the GL Policy covered only the former. Id. at 640. The TCPA Class Actions, by contrast, asserted violations of the seclusional right to privacy. Id. at 640-41.
B. The D & O Policy
Resource also sought coverage for the Indiana Class Action under the D & O Policy issued by Progressive. In June 2002, Progressive agreed to pay all of the defense costs that Resource would incur in the future after exhausting a $25,000 deductible. However, Progressive agreed to make these payments under a reservation of rights. In a "Preliminary Coverage Analysis" letter dated June 7, 2002, Progressive cited the D & O Policy's exclusions for fraud and civil penalties as possible grounds for denying coverage. Progressive also asserted that any coverage under the policy was in "excess to other available insurance." Progressive did not identify Exclusion A (Bodily Injury and Property Damage) of the D & O Policy as an applicable provision.
Resource also tendered defense of the Missouri Class Action to Progressive. In a Preliminary Coverage Analysis letter dated September 19, 2005, Progressive agreed to defend this action under a reservation of rights. Once again, Progressive stated that it might refuse to indemnify Resource if the case involved fraud or civil penalties. Progressive again failed to identify Exclusion A of the D & O Policy as a basis for denying coverage.
As promised in the two Preliminary Coverage Analysis letters, Progressive paid most of Resource's defense costs between *793 2002 and 2005.[2] However, the insurance company continued to reserve its rights. By letter dated January 9, 2006, Progressive cited Exclusion A for the first time as a potential ground for denying indemnity. Two months later, Progressive stopped reserving its rights and began asserting them. By letter dated March 29, 2006, Progressive formally denied coverage based on Exclusion A. That provision states:
A. Bodily Injury and Property Damage Exclusion: The Insurer shall not be liable to make any payment for Loss in connection with any Claim for actual or alleged bodily injury, sickness, disease, or death of any person, damage to or destruction of any tangible property including loss of use thereof, wrongful entry, eviction, false arrest, false imprisonment, malicious prosecution, assault, battery, mental anguish, emotional distress, loss of consortium, invasion of privacy, defamation, false light, libel, or slander. . . .
II Legal Standards
A. Summary Judgment
Summary judgment is appropriate only 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."[3] Fed.R.Civ.P. 56(c); see also Hunt v. Cromartie, 526 U.S. 541, 549, 119 S. Ct. 1545, 143 L. Ed. 2d 731 (1999); Celotex Carp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); Warch v. Ohio Cas. Ins. Co., 435 F.3d 510, 513 (4th Cir.2006), cert. denied, ___, U.S. ___, 127 S. Ct. 53, 166 L. Ed. 2d 21 (2006); Walton v. Greenbrier Ford, Inc., 370 F.3d 446, 449 (4th Cir. 2004). The party seeking summary judgment bears the initial responsibility of demonstrating the absence of a genuine dispute of material fact. See Celotex, 477 U.S. at 323, 106 S. Ct. 2548.
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)). Summary judgment is an appropriate disposition when the non-moving party fails to offer evidence on which a reasonable jury could find in its favor. Beall v. Abbott Labs., 130 F.3d 614, 619 (4th Cir. 1997); Evans v. Techs. Applications & Serv. Co., 80 F.3d 954, 958-59 (4th Cir. 1996).
B. Applicable Law in Contract Interpretation
Virginia choice of law principles dictate that the jurisdiction where an insurance contract is written and delivered is the jurisdiction whose laws control that *794 contract's interpretation. Seabulk Offshore, Ltd. v. Am. Home Assurance Co., 377 F.3d 408, 419 (4th Cir.2004). Virginia law governs the interpretation of the D & O Policy, because that contract was delivered to Resource at its home office in Virginia Beach.
III. Analysis
In this action, Resource challenges Progressive's denial of coverage based on Exclusion A of the D & O Policy. Resource asserts that the terms of Exclusion A do not unambiguously exclude the claims asserted in the TCPA Class Actions. Alternatively, Resource argues that Progressive waived its right to rely on Exclusion A by failing to cite that provision in its Preliminary Coverage Analysis letters of June 7, 2002 and September 19, 2005. Only the first issue (i.e., the scope and meaning of Exclusion A) is before the Court on Progressive's motion.
A. Ambiguity Arising From the Heading of Exclusion A
Resource first argues that the heading of Exclusion A ("Bodily Injury and Property Damage Exclusion") is inconsistent with the language contained therein. Resource contends that the full range of injuries itemized in the body of Exclusion A are not fully captured by the heading, thereby causing confusion and ambiguity.
The argument that Exclusion A's heading creates an ambiguity is foreclosed by the language of the D & O Policy itself, which expressly provides that:
[the] descriptions in the headings, subheadings and Table of Contents of this Policy are solely for convenience, and form no part of the terms and conditions of coverage.
General Conditions § IX.K. Moreover, even in the absence of this provision, the heading affixed to an exclusion does not have to list every harm or injury that appears in the body of the text.
Generally speaking, exclusions must be "prominently placed and clearly phrased." Daniel Maldonado et. al., 2 Couch on Insurance § 22:33 (2007). However, ambiguity does not arise merely because an exclusion appears below an imperfectly descriptive heading. See Container Storage, Inc. v. Underwriters at Lloyd's of London, 2002 WL 31430548, at *8 (S.F. City & County Super. Ct.2002) (giving effect to a coinsurance clause even though it appeared under the heading "Conditions," rather than "Exclusions" or "Limitations"). But see Md. Casualty Co. v. Turner, 403 F. Supp. 907, 911-12 (W.D.Okla.1975) (holding that an exclusion was ambiguous and not conspicuous because it was included in the section headed "Persons Insured" rather than the section headed "Exclusions"). Likewise, an exclusion is not ambiguous or nonprominent if its heading "would alert the average insured that coverage was being limited" and put them on notice that the provision should be read. Morrison v. Am. Intern. Ins. Co. of Am., 381 N.J.Super. 532, 887 A.2d 166, 173 (2005).
Here, the heading makes clear that what appears below is an exclusion. It would put the average insured on notice that he is confronting a limitation on coverage tip which he should pay special attention. Read in its entirety, the language of Exclusion A clearly sets the bounds of this limitation. A summary heading does not change the plain meaning of the exclusion as a whole or render it ambiguous. See Resource I, 407 F.3d at 636 (stating that in interpreting an insurance policy, a court should not "strain to find ambiguities") (citations omitted). This is especially true where, as here, there is no actual contradiction *795 between the heading and the text of the exclusion. As such, the heading of Exclusion A does not create an ambiguity that nullifies the substance of the, provision.
B. Ambiguity as to the Meaning of "Invasion of Privacy"
Resource also argues that the term "invasion of privacy," as used in Exclusion A, covers only secrecy privacy, rather than seclusion. Since TCPA claims involve seclusions. privacy, Resource I, 407 F.3d at 640, Resource reasons that the D & O Policy does not exclude them. Resource reaches this interpretation of the term "invasion of privacy" by construing it in light of the other excluded injuries, such as "defamation, false light, libel and slander." Resource argues that because these terms relate to secrecy, the term "right to privacy" specified in Exclusion A must also be construed as secrecy based.
Resource misconstrues Exclusion A. First, the plain meaning of "invasion of privacy" encompasses both the seclusional and secrecy variants of the right to privacy. Resource I, 407 F.3d at 640 (quoting Am. States Ins. Co. v. Capital Assocs. of Jackson County, 392 F.3d 939, 941-42 (7th Cir.2004)). Second, interpreting "invasion of privacy" in relation to the other harms listed with it in Exclusion A does not narrow its meaning. There is nothing secret about defamation, false light, libel, or slander. These harms result from falsehoods, see Restatement (Second) of Torts § 558 (defamation), § 568 (characterizing libel and slander as species of defamation), § 652E (false light), rather than the revealing of truthful confidential information. That they are included alongside "invasion of privacy" in no way suggests that the draftsman intended to narrow that term's plain meaning. Moreover, other courts have held that similar terms cover TCPA claims. See Universal Underwriters Ins. Co. v. Lou Fusz Auto. Network, Inc., 300 F. Supp. 2d 888, 895 (E.D.Mo.2004), aff'd, 401 F.3d 876 (8th Cir.2005)(holding that a policy covering "private nuisance (except pollution), [and] invasion of rights of privacy," without any qualifying terms, encompasses TCPA claims). Thus, the TCPA claims' concern with seclusional privacy places them squarely within the bounds of Exclusion A.
Alternatively, Resource argues that Exclusion A is ambiguous because it fails to specify whether "invasion of privacy" refers to secrecy privacy or seclusional privacy. However, as noted above, the plain meaning of the term includes both types of privacy. Exclusion A is hardly ambiguous simply because it uses a term that has multiple components.[4]See Gates Hudson & Assocs., Inc. v. The Fed. Ins. Co., 141 F.3d 500, 502 (4th Cir.1997) (concluding that the commonsense ordinary meaning of the word injury includes its various subsets, including personal injury, bodily injury, etc.). The D & O Policy simply does not cover any type of invasion of privacy.
C. The Scope of Exclusion A
Finally, Resource claims that for Exclusion A to apply, the name of a cause *796 of action alleged in the underlying lawsuit must appear verbatim in that exclusion. For example, counts labeled "Property Damage" or "Invasion of Privacy" would be excluded from coverage, but a count labeled "Telephone Consumer Protection Act" would not, since Exclusion A does not identify the TCPA by name.
Exclusion A excludes from coverage a "Loss in connection with any Claim" for a litany of what are clearly harms or injuries (e.g., bodily injury, sickness, and emotional distress), mixed with what might be construed as either injuries or causes of action (e.g., false imprisonment; battery, and invasion of privacy). Resource argues that this list should be interpreted as one comprised solely of causes of action. If the Court were to adopt such a construction, Resource would be entitled to coverage "since the claims asserted against it in the TCPA Class Actions are not, per se, causes of action for invasion of privacy or property damage.
The Court disagrees with Resource's argument because an insurance provision is ambiguous only if it is "susceptible to two reasonable interpretations." Bailey v. Blue Cross & Blue Shield of Va., 67 F.3d 53, 58 (4th Cir.1995) (emphasis added) (quoting Goodman v. Resolution Trust Corp., 7 F.3d 1123, 1126 (4th Cir. 1993)). In making this determination, this Court "must interpret the policy using ordinary principles of contract law." Id. at 57. These principles include the textual interpretive canon noscitur a sociis, which dictates that words or terms should be understood by reference to those that accompany them. Andrews v. Am. Health & Life Ins. Co., 236 Va. 221, 372 S.E.2d 399, 401 (1988) (quoting Turner v. Commonwealth, wealth, 226 Va. 456, 309 S.E.2d 337, 339 (1983)).
Applying this canon, the only reasonable reading of Exclusion A's list is that it catalogues harms or injuries. Viewing the list any other way e.g., as a mixed list of harms, injuries, and causes of action, or a list of causes of action exclusively does not allow the terms included therein to be grouped together coherently as a listing of like items. When given its reasonable reading, Exclusion A unambiguously addresses the TCPA claims at issue in this case, since the underlying harms or injuries alleged are species of property damage and invasion of privacy. Resource I, at 639-41.[5]
In the same vein as its first argument, Resource contends that the language of Exclusion A does not exclude all claims for property damage or invasion of privacy, but only those specifically listed in the exclusion. Relying on negative inference, Resource points out that Exclusion A omits the broad prefatory language found in other exclusions to the D & O Policy. For example, "N. ERISA Bankruptcy Exclusion," reads:
The Insurer shall not be liable to make any payment for Loss in connection with any Claim arising out of or in any way involving the bankruptcy of or suspension of payment by any bank. . . . (emphasis added)
See also "P. Failure to Maintain Insurance Exclusion," and "Q. Insider Loan Exclusion." Resource contends that the absence of the phrase "arising out of or in any way involving" reflects an intent to limit Exclusion A to specific legal claims, rather than extending it to claims that arise out of or involve a particular injury. *797 Resource interprets the phrase "any Claim for" in Exclusion A as reflecting an orientation toward excluding certain causes of action, as opposed to excluding certain injuries caused by tortious conduct.
The Court is not persuaded by Resource's negative inference argument. As noted above, the only reasonable reading of the list that follows the language "any Claim for" in Exclusion A is that it catalogues harms or injuries, rather than attempting to list all causes of action on which one could sue to redress those injuries. Even if the absence of the words "arising out of or in any way involving" somehow narrows the scope of Exclusion A, it narrows it to claims involving the harms listed in the exclusion. Because the harms alleged in the TCPA Class Actions are invasion of privacy and property damage, Resource seeks coverage of claims "for invasion of privacy" and "for property damage" that Exclusion A expressly identifies.
IV. Conclusion
Contrary to Resource's arguments, Exclusion A is neither ambiguous nor as narrowly drawn as the Bank suggests. Properly interpreted, Exclusion A can be clearly understood to exclude coverage for the injuries claimed in the TCPA Class Actions. The Court therefore GRANTS partial summary judgment in favor of Progressive. The principal issue remaining in the case is whether Progressive waived its right to rely on Exclusion A by failing to cite that exclusion in its January 7, 2002 and September 19, 2005 Preliminary Coverage Analysis letters.
The Clerk is DIRECTED to send a copy of this Opinion and Order to all counsel of record.
IT IS SO ORDERED.
NOTES
[1] Progressive filed a Motion to Dismiss (Docket No. 5), but the Court has converted it to a Motion for Partial Summary Judgment as permitted by Fed.R.Civ.P. 12(b).
[2] Resource claims that as of April 11, 2006, Progressive had not reimbursed it for $95,000 in attorney's fees.
[3] Because the principles of summary judgment are well-established, further elucidation of those principles need not be provided here. See Garrow v. Economos Props., Inc., 406 F. Supp. 2d 635, 638-39 (E.D.Va.2005) (providing detailed description of summary judgment principles), affd, 2007 WL 2032005 (4th Cir.2007); Taylor v. Wal-Mart Stores, Inc., 376 F. Supp. 2d 653, 657-58 (E.D.Va.2005) (same), aff'd, 158 Fed.Appx. 446 (4th Cir. 2005); Puckett v. City of Portsmouth, 391 F. Supp. 2d 423, 430-31 (E.D.Va.2005) (same).
[4] This proposition is self-evident. Consider, for example, a general liability insurance contract that excludes any injuries occurring at locations where alcoholic beverages are served. The term "alcoholic beverages" undoubtedly includes beer, wine, and liquor. But the failure to specify a particular type of alcoholic beverage would not render the policy ambiguous. The only reasonable reading of such a provision would be that the term, as used, includes all of its component parts. Thus, in our example, claims would be excluded from coverage if they were based on injuries that occurred at a location where beer, wine, or liquor was served.
[5] The textual interpretive canon ejusdem generis requiring that general terms used after more specific ones be confined to the same class as the specific terms could also apply here and would dictate the same result. Sellers v. Bles, 198 Va. 49, 92 S.E.2d 486, 490 (1956) (noting that noscitur a sociis and ejusdem generis are frequently discussed together and yield similar results).
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260 P.3d 37 (2010)
Jamie SNELL, Plaintiff-Appellant,
v.
PROGRESSIVE PREFERRED INSURANCE COMPANY, Defendant-Appellee.
No. 09CA0923.
Colorado Court of Appeals, Div. I.
July 22, 2010.
*38 Paul Gordon LLC, Paul Gordon, Denver, Colorado, for Plaintiff-Appellant.
Retherford, Mullen & Moore, LLC, J. Stephan Mullen, Kelly M. Telfeyan, Colorado Springs, Colorado, for Defendant-Appellee.
Opinion by Judge RICHMAN.
Plaintiff, Jamie Snell, appeals the district court's grant of summary judgment in favor of defendant, Progressive Preferred Insurance Company (insurer). We affirm.
I. Background
The parties do not dispute the following facts. In April 2006, plaintiff purchased automobile insurance from insurer. Insurer renewed the policy on or about October 27, 2007 for a six-month period to run through April 27, 2008. Although the parties have not provided us with a copy of the policy, it is undisputed that the policy included uninsured/underinsured motorist (UM/UIM) coverage with limits of $25,000 for each person and $50,000 for each accident.
When insurer issued the policy, and when insurer renewed it in October 2007, Colorado statutes defined an underinsured vehicle as one which
is insured or bonded for bodily injury or death at the time of the accident, but the limits of liability for bodily injury or death under such insurance or bonds are:
(a) Less than the limits for uninsured motorist coverage under the insured's policy; or
(b) Reduced by payments to persons other than an insured in the accident to less than the limits of uninsured motorist coverage under the insured's policy.
Ch. 413, sec. 1, § 10-4-609(4), 1983 Colo. Sess. Laws 454; cf. § 10-4-609(4), C.R.S. 2009 (effective Jan. 1, 2008).
In addition, at that time, Colorado statutes provided that the maximum liability of the insurer under UM/UIM coverage shall be the lesser of
(a) The difference between the limit of uninsured motorist coverage and the amount paid to the insured by or for any person or organization who may be held legally liable for the bodily injury; or
(b) The amount of damages sustained, but not recovered.
Ch. 413, sec. 1, § 10-4-609(5), 1983 Colo. Sess. Laws 454 (repealed effective Jan. 1, 2008).
However, in Senate Bill 07-256, the legislature amended section 10-4-609, effective January 1, 2008. Ch. 413, sec. 2, 2007 Colo. Sess. Laws 1922 (deleting former section 10-4-609(4)(a) and (b)). As amended, section 10-4-609(1)(c), C.R.S.2009, provides in relevant part, "The amount of the coverage available pursuant to this section shall not be reduced by a setoff from any other coverage, including ... other uninsured or underinsured motor vehicle insurance." The bill also removed language from section 10-4-609(2) which had permitted insurers to include policy language prohibiting "stacking" of UM/UIM limits in policies issued to an insured and resident relatives of the insured. See Ch. 413, sec. 4, § 10-4-609(2), 1992 Colo. Sess. Laws 1759.[1] Section 4 of the bill provides that it "shall take effect January 1, 2008, and shall apply to policies issued or renewed on or after the applicable effective date of this act."
The policy renewed for the period from October 27, 2007 through April 27, 2008 initially insured a 1987 Chevrolet 510 pickup *39 truck. On January 14, 2008, plaintiff added liability coverage for a 1995 Suzuki Sidekick to the policy. This resulted in a premium increase of $83 for the policy period. Plaintiff made no changes to the coverage limits or to the UM/UIM coverage on the policy.
On February 8, 2008, plaintiff was in the Suzuki when she was involved in an accident with another vehicle. The driver of the other vehicle had a policy liability limit of $50,000. With insurer's permission, plaintiff accepted the limits of the other driver's liability insurance. Because she sustained damages in excess of that amount, she also filed a claim for UIM benefits with insurer. Essentially, plaintiff asserted that the $25,000 limit of her own UM/UIM coverage should be added to the limits of the other driver's policy, resulting in coverage of up to $75,000. Insurer denied the claim, stating that the other driver was not underinsured and that plaintiff was not entitled to any additional recovery under her UM/UIM insurance.
Plaintiff filed a complaint asserting claims for breach of contract, bad faith breach of insurance contract, and improper denial of claims. She alleged that, since the amendments to the statute changed the definition of an underinsured vehicle, deleted maximum UM/UIM coverage, and became effective January 1, 2008, the former definition of an underinsured vehicle and coverage limits could not be applied to her policy.
Plaintiff moved for summary judgment based on the statutory changes, and insurer cross-moved for summary judgment, arguing that the statutory revisions do not apply to plaintiff's claims and asserting that adding the Suzuki to the policy did not constitute the issuance or renewal of a policy within the meaning of the amendments to the statute, and hence the amended statute was not applicable.
The district court granted insurer's motion, concluding: "The addition of the 1995 Suzuki Sidekick to Plaintiff's policy of insurance on January 14, 2008 resulted in neither the issuance of [a] new contract of insurance nor the renewal of Plaintiff's existing policy. Therefore the `stacking' amendment to C.R.S. Section 10-4-609 does not apply." This appeal followed.
On July 2, 2009, this court issued an order to show cause why the appeal should not be dismissed for lack of a final, appealable order. After receiving a response from plaintiff, a motions division of this court deferred ruling on the issue of whether the district court's order granting insurer's cross-motion for summary judgment was a final, appealable order. We conclude that the order is final and appealable because the ruling disposed of all of plaintiff's claims and ended the action, leaving nothing further for the district court to do to completely determine the rights of the parties. See Harding Glass Co. v. Jones, 640 P.2d 1123, 1125 n. 2 (Colo.1982).
II. Standard of Review
We review de novo an order granting summary judgment. West Elk Ranch, L.L.C. v. United States 65 P.3d 479, 481 (Colo.2002). "Summary judgment is appropriate when the pleadings and supporting documentation demonstrate that no genuine issue of material fact exists and that the moving party is entitled to summary judgment as a matter of law." Id.
Statutory interpretation involves only questions of law, which we also review de novo. Smith v. Executive Custom Homes, Inc., 230 P.3d 1186, 1189 (Colo.2010). "When interpreting a statute, we strive to give effect to the legislative purposes by adopting an interpretation that best effectuates those purposes." Id. To do so, we interpret statutory terms in accordance with their plain and ordinary meanings. Thurman v. Tafoya, 895 P.2d 1050, 1055 (Colo.1995). "In addition, a statute should be read and considered as a whole in order to give consistent, harmonious, and sensible effect to all of its parts." Id. "If the statute is ambiguous, courts may consider prior enactments of the statute as well as the statute's legislative history as indicative of legislative intent." Id.
III. Issue on Appeal
Both parties agree that under the provisions of section 10-4-609 effective before the 2008 amendments, plaintiff would not be entitled to recover under her UM/UIM coverage with insurer because either the other driver *40 was not "underinsured" according to the statutory definition then in effect or plaintiff received the maximum amount of underinsured coverage for which insurer was liable. In addition, the parties agree that the statute, as amended, applies only to policies "issued or renewed" after January 1, 2008.
Moreover, the parties do not dispute the material facts relating to their interaction after January 1, 2008. On January 14, 2008, at plaintiff's request, the Suzuki Sidekick was added to plaintiff's policy. On or about that date, insurer issued plaintiff a "Declarations Page" stating, "Your policy information has changed," and listing the change as "The 1995 Suzuki Sidekick ... has been added." The Declarations Page also stated the premium increase of $83, outlined the liability coverage applicable to each vehicle, and described the UM/UIM coverage as "$25,000 each person/$50,000 each accident." Although the record does not include the entire policy that was then in effect, the Declarations Page does not indicate that the UM/UIM coverage was changed in any manner. The Declarations Page stated that the coverage began on October 27, 2007 and expired on April 27, 2008, the same six-month period for which plaintiff was already insured. Although insurer asserts that plaintiff did not pay any part of the $83 until after the accident, when the premium was paid is not material to our analysis.
On appeal, plaintiff argues that the district court erred by concluding that these facts do not constitute the issuance of a policy so as to make the amended statute applicable to her claim. We disagree and affirm the grant of summary judgment.
IV. Analysis
The issue before us is whether the undisputed facts indicate that a policy was "issued" after January 1, 2008.[2] The bill revising section 10-4-609 did not define the term "policies issued." We conclude that these facts do not support a determination that insurer issued a policy within the meaning of the statute in January 2008.
"Policy" is elsewhere defined, in relevant part, as
an automobile insurance policy providing coverage for all or any of the following coverages ... delivered or issued for delivery in this state, insuring a single individual... as named insured, and under which the insured vehicles therein designated are of the following types only: ... [a] motor vehicle of the private passenger or station wagon type.
§ 10-4-601(10)(a), C.R.S.2009. Applying the plain meaning of this definition, we conclude the "policy" was issued to plaintiff in October 2007, as no new type of coverage akin to those listed in the definition was added in January 2008, nor was a different type of vehicle added.
What occurred in January 2008 was not the issuance of a policy, but rather an amendment or change to the terms of the existing policy. Although the change included adding liability coverage for an additional vehicle, the UM/UIM coverage did not change. See Soufi v. Haygood, 282 Ga.App. 593, 639 S.E.2d 395, 398 (2006). Indeed, as a matter of law, once plaintiff had procured UM/UIM coverage, the number of vehicles on the policy was immaterial to that coverage because under Colorado law the coverage applies to the individuals insured, not to vehicles. See DeHerrera v. Sentry Ins. Co., 30 P.3d 167, 172 (Colo.2001); Wagner v. Travelers Prop. Cas. Co., 209 P.3d 1119, 1121 (Colo. App.2008) ("DeHerrera held that [UM/UIM] coverages insure and, therefore, follow the insured and not the vehicle....").
Our conclusion that a policy was not "issued" to plaintiff in January 2008 is essentially dictated by the supreme court's decision in Allstate Insurance Co. v. Parfrey, 830 P.2d 905 (Colo.1992) (Parfrey). There, the court *41 considered nearly identical language in former section 10-4-609(2), an adjacent part of the statute, which required an insurer to offer UM/UIM coverage in amounts higher than the statutory minimums "prior to the time the policy is issued or renewed." Cf. § 10-4-609(2), C.R.S.2009.
A division of this court had held that an increase in coverage and the addition of a new vehicle to a policy constituted "material alterations to the policy, requiring the insurer to extend a new offer of UM/UIM coverage." Parfrey v. Allstate Ins. Co., 815 P.2d 959, 964 (Colo.App.1991). The supreme court disagreed, concluding that a policy was not "issued or renewed" when the insureds added a vehicle to their policy and raised the liability limits.
The court held that the statutory language imposed upon the insurer a "one-time duty" to offer UM/UIM coverage when the policy was issued. Parfrey, 830 P.2d at 913. In determining when a policy was issued for purposes of triggering the requirement to offer higher UM/UIM coverage, the court rejected "the conclusion of the court of appeals that an insurer must adhere to the mandatory offer requirements every time an insured makes a material change to an existing policy." Id. The court stated that there was nothing in the statutory text indicating that the legislature intended to incorporate a "material change" standard into the statute, and had it so intended it would not have used the language "prior to the time a policy is issued or renewed." Id.
Although Parfrey does not address the same statutory provision at issue here, it applies similar statutory language found in another subsection of the same statute. Just as Parfrey concludes the addition of a vehicle does not constitute a circumstance where a policy is "issued," so too we conclude that the addition of a vehicle does not constitute a circumstance where a policy is "issued," for purposes of the amendments to section 10-4-609, even if the addition of a vehicle were considered a material change to a policy.
Plaintiff argues that this interpretation of Senate Bill 07-256 is contrary to the public policy calling for broad UM/UIM coverage. Plaintiff correctly postulates that the purpose of the 2008 statutory amendment was to broaden UM/UIM coverage by eliminating the narrower definition of an underinsured vehicle and the maximum liability limitationboth of which denied an insured UM/UIM coverage unless the insured purchased such coverage in amounts above those of an underinsured tortfeasorand removing language from subsection 10-4-609(2), which had permitted insurers to include anti-stacking language in their policies.
However, in broadening UM/UIM coverage, the legislature made the changes effective only as to policies issued or renewed after January 1, 2008, the effective date of the statute. By including such an effective date, the statute avoids interfering with existing contracts of insurance, as required under article II, section 11 of the Colorado Constitution. And by making the changes prospective to a date several months after the passage of the legislation, insurers had the opportunity to adjust premiums based on the mandated expanded coverage when new policies were issued or existing policies were renewed.
It would be illogical to interpret the revised statute as applicable whenever any amendment or change is made to existing coverageeven changes not related to UM/UIM coverage, such as the addition of a vehicle. Because UM/UIM coverage attaches to the individual and not the vehicle, adding a vehicle, as plaintiff did, had no impact on her UM/UIM coverage. Soufi, 639 S.E.2d at 399. Assuming, without deciding, the purpose of the legislation is to broaden UM/UIM coverage, we conclude such purpose is served when a policy is changed in a manner that affects such coverage.
Plaintiff also argues that since the Suzuki was added to her policy after January 1, 2008, the UM/UIM limits do not apply to this "new vehicle." However, this argument implies that the statutory changes do not apply to the other vehicle she had already insured, the Chevrolet pickup. Thus, under plaintiff's interpretation, the policy would provide different UM/UIM coverage amounts for the two vehicles. This result is an illogical interpretation of the statute and would produce a *42 result contrary to the law as applied in DeHerrera.
Plaintiff cites cases from other jurisdictions which have concluded that adding a vehicle to an existing policy is tantamount to the issuance of a new policy. See, e.g., Fireman's Fund Ins. Co. v. Pohlman, 485 So. 2d 418, 420 (Fla.1986) (statutory amendments must be incorporated into policy because endorsement of additional vehicle constituted a "separate and severable contract"); Gulf Am. Fire & Cas. Co. v. McNeal, 115 Ga.App. 286, 154 S.E.2d 411, 416 (1967) ("While the issuance of an endorsement may not in every case constitute the issuance of a policy, nevertheless in this case the `endorsement,' together with the original policy, effected insurance as to car No. 3. Thus under the Code definition of `policy,' issuance of the endorsement here constituted issuance of a policy."); Perkins v. Guaranty Nat'l Ins. Co., 667 So. 2d 559, 563 (La.Ct.App.1995) ("[T]he addition of a vehicle to a commercial insurance policy, without changes in bodily insurance limits, is tantamount to issuing a new policy.").
By contrast, the insurer has cited cases from other jurisdictions which reach the opposite result, concluding that the addition of a vehicle to an existing policy does not result in a new policy being issued. See, e.g., Sentry Ins. A Mut. Co. v. McGowan, 425 So. 2d 98, 99 (Fla.Dist.Ct.App.1982) (discussing whether the addition of vehicles to a policy constituted a "new" policy or a "renewal" policy and concluding that "merely replacing the insured vehicle with another vehicle, where the liability limits in the amount of the premium do not change, does not constitute a material variation in the policy requiring a new rejection of uninsured motorist coverage to be made"); Vigil v. Rio Grande Ins. of Santa Fe, 124 N.M. 324, 950 P.2d 297, 302-03 (N.M.Ct.App.1997) ("Based on the automatic coverage provision in the policy and our statutory definition of `policy,' we hold that when Plaintiffs added or replaced vehicles under the policy, no new contract was created, but the change merely amounted to a continuation of the original policy."); Pierce v. Allstate Ins. Co., 316 Or. 31, 848 P.2d 1197, 1199 (1993) ("[T]he addition of a vehicle to a policy, the deletion of a described vehicle, or the replacement of one vehicle by another under the same policy does not constitute issuance of a policy in the context of uninsured and underinsured motorist coverage."); Torgerson v. State Farm Mut. Auto. Ins. Co., 91 Wash.App. 952, 957 P.2d 1283, 1286-87 (1998) ("We look to whether `the changes made to the policy [are] sufficiently material to support a conclusion that a new, as opposed to a renewal, policy was issued.' ... [T]he addition of a new car to an existing policy is no more than a renewal of, or an action supplementary to, the original policy." (quoting Koop v. Safeway Stores, Inc., 66 Wash.App. 149, 831 P.2d 777, 780 (1992))).
Notwithstanding the results in these cases, we conclude that Parfrey determines when a policy is issued under the Colorado statute, and therefore we decline to adopt the reasoning of courts from other jurisdictions.
We conclude that the district court correctly found that under the circumstances here the statutory amendments which became effective January 1, 2008 and applied only to "policies issued or renewed" on or after that date, were not incorporated into plaintiff's policy by the addition of coverage for another vehicle. Because there was no other genuine dispute of material facts, the court properly entered summary judgment for the insurer.
The summary judgment is affirmed.
Judge TAUBMAN and Judge J. JONES concur.
NOTES
[1] Based on this amendment, the parties and the district court characterize the legislative change in Senate Bill 07-256 as a "stacking amendment."
[2] Plaintiff does not contend on appeal that insurer's actions in January 2008 constitute a renewal of her policy at the end of a policy period, and we see no facts that would support a conclusion that her policy was renewed in January 2008. "Renewal" is elsewhere defined to mean "the issuance and delivery by an insurer of a policy replacing at the end of a policy period a policy previously issued and delivered by the same insurer, or the issuance and delivery of a certificate or notice extending the term of the policy beyond its policy period or term." § 10-4-601(11), C.R.S.2009.
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769 F. Supp. 2d 445 (2011)
Silva Alexander VELEZ, on behalf of himself and all others similarly situated, Plaintiffs,
v.
PERRIN HOLDEN & DAVENPORT CAPITAL CORP., Nelson Braff, Jody Eisenman and Peter Hoffman, Defendants.
No. 10 Civ. 3735(SHS).
United States District Court, S.D. New York.
February 3, 2011.
Michael Douglas Palmer, Joseph and Herzfeld, Matthew David Kadushin, Joseph, Herzfeld, Hester, & Kirschenbaum, New York, NY, for Plaintiffs.
Fred N. Knopf, Emily Anna Hayes, Wilson Elser, Moskowitz Edelman & Dicker LLP, White Plains, NY, for Defendants.
OPINION & ORDER
SIDNEY H. STEIN, District Judge.
Silva Alexander Velez brings this action alleging violations of the Fair Labor Standards Act ("FLSA") and the New York Labor Law on behalf of himself and other similarly situated stock brokers employed *446 or formerly employed by defendant Perrin Holden & Davenport Capital Corp. ("PHD Capital").[1] The individual defendants are officers and owners of PHD Capital. Specifically, plaintiff claims that defendants failed to pay him overtime, commissions, and timely wages. Velez seeks designation of this litigation as a collective action pursuant to FLSA section 216 for his FLSA claims and as a class action pursuant to Fed.R.Civ.P. 23 for his state law claims.
Defendants have now moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6) or, in the alternative, to compel arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 3, 4, on the ground that Velez agreed to arbitrate his FLSA claims at the time he was hired. Because the Court finds that a "collective action" is not encompassed within the term "class action" as that term is used in FINRA's rules, the Court compels arbitration of Velez's FLSA claims.
The FAA provides that a federal court shall stay an action pending arbitration in any suit involving "any issue referable to arbitration" pursuant to a written arbitration agreement. 9 U.S.C. § 3. In determining whether this automatic stay applies, courts consider (1) whether the parties agreed to arbitrate; (2) the scope of that agreement; (3) whether Congress intended any federal statutory claims to be nonarbitrable; and (4) if only certain of the claims are arbitrable, whether to stay the balance of the proceedings pending the outcome of the arbitration. Guyden v. Aetna Inc., 544 F.3d 376, 382 (2d Cir. 2008). Where there is a question as to whether claims are arbitrable, the federal policy favoring arbitration mandates that "any doubts . . . should be resolved in favor of arbitration." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983).
Here, it is undisputed that Velez, upon being hired by PHD Capital, signed a valid and enforceable employment agreement providing that "any disputes, differences or controversies arising under this Agreement shall be settled and finally determined by arbitration . . . according to the rules of the [Financial Industry Regulatory Authority ("FINRA")]."[2] (Account Executive At-Will Employment Agreement, Ex. A to Affidavit of Peter Hoffman dated Aug. 6, 2010.)[3] The parties further agree that, pursuant to that employment agreement, the Code of Arbitration Procedure within the FINRA rules governs whether this action is arbitrable.
FINRA Rule 13200 mandates arbitration of disputes between the parties "except as otherwise provided." (FINRA Rule 13200, Ex. B to Declaration of Matthew D. Kadushin dated Aug. 27, 2010 ("Kadushin Decl.").) Notably, FINRA Rule 13204 prohibits arbitration of "class action claims." (FINRA Rule 13204, Ex. A to Kadushin Decl.) It is thus uncontested that Velez's state law claimswhich plaintiff has asserted as a class action pursuant *447 to Fed.R.Civ.P. 23are ineligible for arbitration. The parties dispute, however, whether that exemption of class action claims from arbitration also applies to plaintiff's FLSA collective action claims. While defendants contend that collective actions are distinct from class actions and therefore subject to FINRA arbitration, Velez argues that the phrase "class action" in FINRA Rule 13204 encompasses a collective action and therefore collective action claims are not arbitrable. Velez looks to the interpretation by FINRA staff members of FINRA's rules to support his position.
Every court to address whether an FLSA collective action is arbitrable pursuant to FINRA's rules has found in favor of arbitrability. See Gomez v. Brill Securities, Inc., No. 10 Civ. 3503, 2010 WL 4455827 (S.D.N.Y. Nov. 2, 2010); Suschil v. Ameriprise Financial Servs., Inc., No. 07 Civ. 2655, 2008 WL 974045, at *5 (N.D.Ohio Apr. 7, 2008); Chapman v. Lehman Bros., Inc., 279 F. Supp. 2d 1286, 1290 (S.D.Fla.2003). This Court agrees with its sister district courts.
FINRA Rule 13204 clearly states that "[c]lass action claims may not be arbitrated" under FINRA's Code of Arbitration Procedure. However, that rule says nothing about collective action claims. Although collective and class actions have much in common, there is a critically important difference: collective actions are opt-in actions, i.e., each member of the class must take steps to opt in to the action in order to participate in it, whereas class actions are opt-out actions, i.e., class members automatically participate in a class action unless they take affirmative steps to opt out of the class action. Collective actions bind only similarly situated plaintiffs who have affirmatively consented to join the action.[4]
Velez urges the Court to defer to the opinions of FINRA staff who have issued letters construing collective actions to come within the ambit of class actions for the purposes of FINRA arbitration. (See, e.g., Letter from Jean I. Feeney, NASD Assistant General Counsel, dated Sept. 21, 1999, Ex. C. to Kadushin Decl.; Letter from George H. Friedman, NASD Executive Vice President, Dispute Resolution, Director of Arbitration, dated Oct. 10, 2003, Ex. D to Kadushin Decl.) However, those letters do not contain any substantial analysis, and the Feeney letter itself includes the disclaimer that "the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the Board of Directors of [the] NASD." Moreover, FINRA's website specifically states that "[s]taff-issued interpretive letters express staff views and opinions only and are not binding on FINRA and its Board." (FINRAInterpretive Letters, Ex. 1 to Affirmation of Emily A. Hayes dated Sept. 9, 2010). Such "staff opinion letters are not the sort of agency interpretation that is entitled to deference by this Court." Gomez, 2010 WL 4455827 at *1; see also Auer v. Robbins, 519 U.S. 452, 461, 117 S. Ct. 905, 137 L. Ed. 2d 79 (1997); Skidmore v. Swift & Co., 323 U.S. 134, 65 S. Ct. 161, 89 L. Ed. 124 (1944). If FINRA wanted to prohibit arbitration of collective action claims, FINRA is certainly able to amend its rules to do so. See FINRA Rulemaking Process, available at http:// www.finra.org/Industry/Regulation/FINRARules/RulemakingProcess (Feb. 2, 2010); see also Gomez, 2010 WL 4455827 at *2.
*448 As noted above, the parties here have agreed in writing to arbitrate certain disputes as required by FINRA. In light of other district court opinions, this Court's own interpretation of FINRA rules, and the federal policy favoring arbitration as an alternative forum in which to resolve disputes, this Court finds that FLSA collective actions are within the scope of the parties' agreement to arbitrate. In addition, no congressional intent precludes arbitration of the federal FLSA claims. See, e.g., Gomez, 2010 WL 4455827 at *2; Coheleach v. Bear, Stearns & Co., 440 F. Supp. 2d 338, 340 (S.D.N.Y.2006).
Accordingly, defendants' motion is granted to the extent that the Court compels arbitration of Velez's FLSA claims. Pursuant to section 3 of the FAA, the trial of this action is stayed until the conclusion of the arbitration. The parties shall report to the Court in writing every six months commencing August 1, 2011, as to the status of the arbitration.
SO ORDERED:
NOTES
[1] The parties agree that Perrin Holden & Davenport Capital Corp. employed plaintiff and that that entity therefore should be substituted as a defendant in the place of PHD Capital Advisory Services LLC, which was mistakenly named as a defendant. (See Def.'s Mem. of Law in Supp. of Def.'s Mot. to Dismiss the Am. Compl., at 1; Pl.'s Mem. of Law in Opp'n to Def.'s Mot. to Dismiss the Am. Compl., at 1.) The caption has been changed accordingly.
[2] FINRA is the successor to the National Association of Securities Dealers ("NASD").
[3] It is also undisputed that PHD Capital is a registered FINRA member, and plaintiff, as an employee of a registered FINRA member, is bound by FINRA's rules. See FINRA Rule 0140.
[4] The fact that plaintiff's FLSA and state labor law claims generally cover the same subject matter does not erase the distinction between collective actions and class actions and therefore establish federal jurisdiction in this case. See Gomez, 2010 WL 4455827 at *2.
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764 F. Supp. 2d 230 (2011)
UNITED STATES of America
v.
Jackie Darrel TAYLOR, Jr., Defendant.
Criminal No. 10-86-P-H.
United States District Court, D. Maine.
February 9, 2011.
*231 Craig M. Wolff, Stacey D. Neumann, Assistant United States Attorneys, Office of the United States Attorney District of Maine, Portland, ME, for United States of America.
J. Hilary Billings, Federal Defender's Office, Portland, ME, for Defendant.
DECISION AND ORDER ON MOTION TO SUPPRESS
D. BROCK HORNBY, District Judge.
The indictment charges the defendant with failure to pay child support, in violation of 18 U.S.C. § 228(a)(3). After indictment, the government obtained a search warrant for an e-mail account registered to the defendant. The defendant has filed a motion to suppress all the seized e-mails and related information on the following grounds: (1) the government failed to take adequate precautions to exclude privileged communications, (2) attorney-client information has in fact been disclosed to the government, (3) the search warrant was overly broad and insufficiently particularized, and (4) e-mails that qualified as "arguably privileged" were not isolated in the *232 review process. The motion to suppress is DENIED.
FACTS
It is undisputed that, before indictment, lawyers were appointed for the defendant in both Idaho, where he lives, and Maine, where he has been indicted, and that the government knew of their appointment. After indictment, a magistrate judge of this court issued a warrant that authorized a search of all information associated with an identified Microsoft hotmail account of the defendant, and the seizure of all information "that constitutes fruits, evidence and instrumentalities of violations of 18 U.S.C. § 228" including "[r]ecords relating to business and/or other financial and accounting matters, as well as all records relating to the purchasing and selling of goods and services."[1]
In response to the warrant, Microsoft provided a "zip drive" containing messages from the e-mail address.[2] When a government agent began searching the e-mails, he first began viewing only the header information, which revealed the sender, receiver, date, and subject.[3] In this initial review of header information, the agent saw that there was e-mail correspondence to or from the defendant's lawyer(s).[4] At that point he stopped his review and contacted the prosecuting AUSA.[5]
The government then filed a Motion for Approval of Government's Search Procedure to Protect Privileged Materials, proposing a "filter agent" procedure whereby an AUSA uninvolved with the prosecution would review the e-mail materials to cull out any potentially privileged materials before the investigating agent and the prosecuting AUSA received them.[6] Over the defendant's objection[7] and after making modifications for the defendant's benefit, the magistrate judge entered an order permitting the filter agent procedure.[8] The order identified three categories of materials: privileged, arguably privileged, and unprivileged.
Next, the filter agent reviewed the materials using the procedures prescribed in the court's order and removed eleven privileged e-mails. These privileged materials were provided to counsel for the defendant, not to the prosecuting AUSA or the investigating agent.[9] The filter agent also *233 determined that there was nothing within the category of "arguably privileged" material, and so informed the defendant's lawyer.[10] The remaining, unprivileged, materials were provided to the investigating agent and the prosecuting attorney in the case.[11]
ANALYSIS
A. Failure to Take Adequate Precautions to Exclude Privileged Communications
The defendant argues that he is entitled to suppression of all the seized evidence because "the government seized privileged and confidential communications as a result of the failure to take adequate protective measures in the drafting of the warrant and in its execution."[12] His argument is that the filter agent approach "is per se inadequate as a matter of law," that knowing he already had a lawyer the government should have realized in advance that its search warrant would produce privileged communications and have taken preventive steps accordingly, and that these failures call for suppression of all the material seized.[13]
The parties have not referred me to any First Circuit decision dealing with the use of a filter agent. Case law from the rest of the country does not yield clear answers,[14] but some themes emerge. A *234 number of cases have permitted its use.[15] At the same time, there is a healthy skepticism about the reliability of a filter agent or Chinese or ethical wall within a prosecutor's office,[16] a skepticism perhaps prompted by the famous failures of such a procedure in United States v. Noriega, 764 F. Supp. 1480 (S.D.Fla.1991).[17] Courts exhibit particular concern over use of filter agents or taint teams in searches of lawyers' offices, where privileged materials of many clients could be compromised.[18] There, judges have sometimes required alternatives such as appointment of a special master, a wholly independent third party.[19] Courts seem to recognize a distinction between circumstances where the government has not yet obtained the records on the one hand (allowing defense counsel's preliminary review),[20] and, on the other hand, what the government should do when it has already seized the records, then realizes that it may have privileged materials (allowing use of filter agent there).[21] Finally, some of the cases and some of the commentators suggest a role for judicial review.
In the circumstances of this search and this e-mail account, I have no reason to find that it was inherently negligent for the government to fail to foresee that its seizure of the defendant's e-mails would produce privileged documents simply because he had a lawyer, and I do not conclude that every warrant for an e-mail search must have at the outset a built-in privilege protection procedure, any more than there is such a requirement for every paper document search.[22] Instead, I conclude *235 that the government behaved reasonably here by immediately seeking judicial instructions once its agent noticed that e-mail headers reflected communications between lawyer and client. It is true that some cases could be read to suggest that at that point the defendant and his lawyer should have been allowed a first look at the e-mails, so as to create a privilege log and then let the government challenge it in court, rather than vice versa as here. But the defendant did not propose that procedure to the magistrate judge, and instead simply opposed the government's proposal in toto. The government sought judicial instructions, the magistrate judge modified its proposal, and then issued an order on how to proceed. I reject the argument that somehow that was per se an inappropriate way of proceeding.
Moreover, if something was seized improperly, the remedy is suppression of that item and perhaps its fruit,[23] not suppression of everything: "The remedy in the case of a seizure that casts its net too broadly is . . . not blanket suppression but partial suppression."[24] Here, there is nothing to suppress. After becoming aware of the existence of potentially privileged e-mails, the government took the appropriate steps to remove those e-mails from the materials the prosecuting attorney and case agent could obtain, and thus they cannot be used at trial.
Finally, there is no suggestion that the government has failed to comply with the procedures prescribed by the magistrate judge. During the initial review, the agent examined only the header information and not the content of the e-mail.[25] Thereafter, the government used the filter agent procedure approved by the magistrate judge. That agent removed the privileged e-mails and they were not disclosed to the prosecuting attorney or the case agent. Those assertions have not been contested, nor has the defendant requested an evidentiary hearing concerning them.[26]
*236 B. Whether Attorney-Client Information was Disclosed to the Government
The defendant asserts that because eleven e-mails were determined to be privileged, the record confirms the disclosure of attorney-client communications to the government's filter agent. Disclosure of privileged communications to any government agent, even if that individual is not involved with prosecuting the case, the defendant contends, violates the privilege and requires suppression of everything seized.
The record does not support the defendant's assertion that attorney-client information was disclosed to the filter agent or any other government representative. The magistrate judge's order states that the filter agent "will use the `header' information on the e-mails to filter out any e-mails purporting to be either to or from the defendant's current attorney, J. Hilary Billings, Esq., or his previous attorney, Dennis Charney, Esq., without reviewing the content of those e-mails. S/he will review the content of the remaining e-mails to ensure that no privileged information may be contained within them. S/he shall maintain a log detailing the disposition of each document in question."[27] There is no suggestion that the filter agent failed to follow these procedures (the government asserts the contrary[28] and the defendant has not requested an evidentiary hearing). Thus, as the record stands, not even the filter agent read any privileged communications.
C. Overbreath and Insufficient Particularity
The defendant contends that the government made no effort to limit the scope of the warrant so as to seek only "those communications likely to produce the evidence of `financial means.'"[29] The search for evidence of financial means, the defendant asserts, should have been limited to "the e-commerce sites that were [listed in the affidavit as being] linked to the e-mail address of the defendant." Id.
In cases involving a violation of 18 U.S.C. § 228(a)(3), however, the inquiry is broad: the defendant's income and financial means are relevant, as well as the defendant's voluntary failure to maintain employment.[30] Here, the search warrant permitted the government to search the e-mail account and seize "records relating to business and/or other financial and accounting matters, as well as all records relating to the purchasing and selling of goods and services."[31] This scope reasonably *237 limits the evidence to be seized. But the defendant contends that the warrant was insufficiently particularized because it permitted personal communications to be searched in order to seize this evidence. The defendant would prefer that the scope of the search had been limited to e-mails linked to specific internet e-commerce websites that he used or, in some fashion, have other limiting terms to limits its scope to communications that would produce evidence of financial means (he does not identify what those limiting terms should have been).
While there may be a degree of uncertainty as to the precise "applicability of the Fourth Amendment's particularity requirement with respect to searches of computer data,"[32] the warrant in this case was not overly broad in allowing search of this e-mail account. The agent's affidavit extensively documented the repeated use of this e-mail account in connection with various business enterprises, evidentiary support for a violation of the statute for failure to pay child support.
The Fourth Amendment does not require the government to delegate a prescreening function to the internet service provider or to ascertain which e-mails are relevant before copies are obtained from the internet service provider for subsequent searching.[33] The Supreme Court has noted that, even "[i]n searches for papers, it is certain that some innocuous documents will be examined, at least cursorily, in order to determine whether they are, in fact, among those papers authorized to be seized."[34] The First Circuit has said that "the police may look through . . . file cabinets, files and similar items and briefly peruse their contents to determine whether they are among the documentary items to be seized."[35] The same is true for the search of an e-mail account, and the search does not fail to satisfy the particularity requirement simply because the warrant does not specify a more precise e-mail search method.
D. "Arguably Privileged" E-mail
Finally, the defendant claims that the filter process did not work. As evidence, the defendant claims that "there appear to be several e-mails that contain privileged materials" that the filter agent failed to isolate as "arguably privileged."[36] Specifically, the defendant identifies six "arguably privileged" e-mails sent to law school professors at The McGeorge School of Law at the University of the Pacific. The e-mails appear on a copy of the e-mail account log and identify the recipients by the initial of their first names and their last names all sent to the domain "pacific.edu", and indicate in the header notes that the defendant is seeking help with child support issues.[37]
*238 But the defendant does not assert that he ever established an attorney-client relationship with any of these law school professors that would support excluding these communications as actually privileged. I conclude, therefore, that if the filter agent made any error here, it was harmless. Identifying such e-mails as "arguably privileged" would be simply an intermediate step in determining whether they are actually privileged. Otherwise, they are not subject to protection.
CONCLUSION
Accordingly, I conclude that the defendant has no basis for excluding the seized evidence beyond the privileged e-mails, and they have not been provided to the investigating agent or the prosecuting AUSA. The defendant's motion to suppress is therefore Denied.
So Ordered.
NOTES
[1] No. 2:10-mj-91-JHR, Search and Seizure Warrant (Docket Item 3) (incorporating Attachments A and B to the Application for Warrant and Supporting Affidavit).
[2] Mot. for Approval of Gov't's Search Procedure to Protect Privileged Materials at 1 (No. 2:10-cr-86-DBH, Docket Item 31).
[3] Id.
[4] Id.
[5] Id. The defendant does not contest the government's statement of the facts.
[6] Id. at 2.
[7] The defendant objected to the proposed procedure because he feared that his consent could be construed as a waiver of the privilege and because he argued that the motion should not be ruled upon until any suppression motion pertaining to the seized e-mails was decided. Resp. to Gov't's Mot. to Approve Search Procedure to Protect Privileged Materials at 1-2 (Docket Item 33).
[8] Mem. Decision and Order on Mot. for Approval of Search Procedure (Docket Item 35).
[9] Gov't's Opp'n to Def.'s Mot. to Suppress at 4 (Docket Item 66). In his order authorizing the filter agent, the Magistrate Judge said that he based his decision "upon the expectation and presumption that the Government's privilege team and the trial prosecutors will conduct themselves with integrity." Mem. Decision and Order on Mot. for Approval of Search Warrant Procedure at 2-3 (Docket Item 35) (quoting In re Search of 5444 Westheimer Rd. Suite 1570, Misc. Action No. H-06-238, 2006 WL 1881370, at *3 (S.D.Tex. July 6, 2006) (citation, internal quotation marks, and footnote omitted)). The defendant does not contend that there has been any sharing of information between the filter agent and the case prosecutor or investigating agent and has not asked for an evidentiary hearing on this issue.
[10] Gov't's Opp'n to Def.'s Mot. to Suppress at 4.
[11] Id.
[12] Mot. to Suppress Evidence at 1 (Docket Item 39).
[13] Id. at 2-3.
[14] For example, here is the Department of Justice's summary of the case law:
Preferred practices for determining who will comb through the files vary widely among different courts. In general, however, there are three options. First, the court itself may review the files in camera. Second, the presiding judge may appoint a neutral third party known as a "special master" to the task of reviewing the files. Third, a team of prosecutors or agents who are not working on the case may form a "filter team" or "taint team" to help execute the search and review the files afterwards. The filter team sets up a so-called "ethical wall" between the evidence and the prosecution team, permitting only unprivileged files to pass over the wall.
Because a single computer can store millions of files, judges will undertake in camera review of computer files only rarely. Instead, the typical choice is between using a filter team and a special master. Most prosecutors will prefer to use a filter team if the court consents. A filter team can usually review the seized computer files fairly quickly, whereas special masters often take several years to complete their review. On the other hand, some courts have expressed discomfort with filter teams.
Although no single standard has emerged, courts have generally indicated that evidence screened by a filter team will be admissible only if the government shows that its procedures adequately protected the defendants' rights and no prejudice occurred. One approach to limit the amount of potentially privileged material in dispute is to have defense counsel review the output of the filter team to identify those documents for which counsel intends to raise a claim of privilege. Files thus identified that do not seem relevant to the investigation need not be litigated. Although this approach may not be appropriate in every case, magistrates may appreciate the fact that defense counsel has been given the chance to identify potential claims before the material is provided to the prosecution team.
In unusual circumstances, the court may conclude that a filter team would be inadequate and may appoint a special master to review the files.
United States Department of Justice, Searching and Seizing Computers and Obtaining Electronic Evidence in Criminal Investigations, ch. 2(F)(2)(b) (3d ed.2009) (citations omitted), available at http://www.cybercrime.gov/ssmanual/02ssma.html (last visited February 9, 2011).
[15] See, e.g., United States v. Evanson, 2007 WL 4299191, * 16-17 (D.Utah Dec. 5, 2007); United States v. Winters, 2006 WL 2789864 (S.D.N.Y. Sept. 27, 2006); Hicks v. Bush, 452 F. Supp. 2d 88, 102-03 (D.D.C.2006).
[16] See, e.g., United States v. Neill, 952 F. Supp. 834, 841 (D.D.C.1997) (placing burden on government to rebut presumption that tainted material reached the prosecution team); In re Search Warrant for Law Offices, 153 F.R.D. 55, 59 (S.D.N.Y. 1994).
[17] See In re Grand Jury Subpoenas, 454 F.3d 511, 523 (6th Cir.2006).
[18] See, e.g., United States v. Stewart, 2002 WL 1300059 (S.D.N.Y. June 11, 2002); Note, The Search and Seizure of Privileged Attorney-Client Communications, 72 U. Chi. L.Rev. 729, 742-44 (2005); Note, The Department of Justice Guidelines to Law Office Searches: The Need to Replace the "Trojan Horse" Privilege Team with Neutral Judicial Review, 43 Wayne L.Rev. 1855 (1997).
[19] Stewart, 2002 WL 1300059.
[20] In re Grand Jury Subpoenas, 454 F.3d at 522-23.
[21] Id.; United States v. Mower, 2010 WL 3938265, at *3 (D.Utah Oct. 6, 2010).
[22] In such cases, there is actually a seizure, then a search, then another seizure. First the zip drive was seized from Microsoft. Then it had to be reviewed to determine which documents fit within the parameters of the warrant such that they could be finally seized. The paper analogy would be the segregation of boxes or file cabinets containing documents, then a search of the contents to determine which could be finally seized. See, e.g., United States v. Hargus, 128 F.3d 1358, 1363 (10th Cir.1997); Note, The Search and Seizure of Privileged Attorney-Client Communications, 72 U.Chi. L.Rev. at 745 n. 73 (advancing reasons why initial seizures should be allowed even though they may contain privileged materials). The Model Code of Pre-Arraignment Procedure § 220.5 (1975) suggests a procedure for such cases involving intermingled paper documents. It has been endorsed by a number of courts, see, e.g., United States v. $92,422.57, 307 F.3d 137, 154 (3d Cir.2002) (Alito, J.); United States v. Tamura, 694 F.2d 591, 595-97 (9th Cir.1982). Similar issues of intermingling arise and are dealt with by statute in electronic wire surveillance cases. See Nixon v. Administrator of General Services, 408 F. Supp. 321, 363-64 & n. 57 (D.D.C. 1976) (3-judge district court, McGowan, J.).
[23] But see United States v. Warshak, 631 F.3d 266 (6th Cir.2010) ("no court ha[s] applied the fruit-of-the-poisonous-tree doctrine to derivative evidence obtained as a result of improper access to materials covered by a nonconstitutional privilege").
[24] United States v. Falon, 959 F.2d 1143, 1149 (1st Cir.1992); Evanson, 2007 WL 4299191 at *18 (only documents covered by the privilege can be suppressed).
[25] There is no assertion that the header of the privileged e-mail contained confidential information.
[26] The defendant also asserts that United States v. Leon, 468 U.S. 897, 104 S. Ct. 3405, 82 L. Ed. 2d 677 (1984) does not apply. I disagree. In Leon the Supreme Court held that a violation of the Fourth Amendment does not justify exclusion of the resulting evidence "when an officer acting with objective good faith has obtained a search warrant from a judge or magistrate and acted within its scope." Id. at 920, 104 S. Ct. 3405. The good-faith inquiry "is confined to the objectively ascertainable question whether a reasonably well trained officer would have known that the search was illegal despite the magistrate's authorization." Id. at 922 n. 23, 104 S. Ct. 3405. The exception will not apply if the warrant is "so facially deficienti.e., in failing to particularize the place to be searched or the things to be seizedthat the executing officers cannot reasonably presume it to be valid." Id. at 923, 104 S. Ct. 3405. In this case, there was no basis for the government to know that its failure to take additional precautions in either obtaining the warrant, or in the warrant's execution, would result in a violation of the Fourth Amendment. Thus, the application of Leon would prevent suppression of any illegally-obtained evidence.
[27] Mem. Decision and Order on Mot. for Approval of Search Procedure at 3.
[28] Gov't's Opp'n to Def.'s Mot. to Suppress at 4.
[29] Reply to the Gov't's Resp. in Opp'n to Def.'s Mot. to Suppress at 2 (Docket Item 73).
[30] See e.g., United States v. Edelkind, 525 F.3d 388, 398-99 (5th Cir.2008) (approving a jury instruction that defined willfulness in section 228 in terms of whether the defendant "had money which he used to pay other expenses beyond living expenses instead of paying his child support"); United States v. Smith, 278 F.3d 33, 38-39 (1st Cir.2002) (finding no plain error in section 228 jury instruction requiring government to prove willful failure to pay by either evidence that the defendant "had access to resources beyond the basic necessities of life, disposable income" or that he "took himself out of the workforce or reduced his ability" to pay); United States v. Ballek, 170 F.3d 871, 873 (9th Cir.1999) (explaining that willful can mean "having the money and refusing to use it for child support; or, not having the money because one has failed to avail oneself of the available means of obtaining if").
[31] No. 2:10-mj-91-JHR, Attach. B to Appl. for Search Warrant at 2 (Docket Item 3-3).
[32] United States v. McDarrah, 2006 WL 1997638, at *10 (S.D.N.Y. July 17, 2006) (quoting Hensel v. Lussier, 205 F.3d 1323, at *1 (2d Cir.2000) (summary order)).
[33] See United States v. Bowen, 689 F. Supp. 2d 675, 682 (S.D.N.Y.2010); In re Search of: 3817 W. West End, 321 F. Supp. 2d 953, 958 (N.D.Ill.2004) ("[i]t is frequently the case with computers that the normal sequence of `search' and then selective `seizure' is turned on its head").
[34] Andresen v. Maryland, 427 U.S. 463, 482 n. 11, 96 S. Ct. 2737, 49 L. Ed. 2d 627 (1976).
[35] United States v. Giannetta, 909 F.2d 571, 577 (1st Cir.1990).
[36] Reply to the Gov't's Resp. in Opp'n to Def.'s Mot. to Suppress at 5.
[37] Ex. A to Reply to the Gov't's Resp. in Opp'n to Def.'s Mot. to Suppress at 5 (Docket Item 73-1).
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503 F. Supp. 2d 797 (2007)
George MERCIER and Marisa G. Mercier, Plaintiffs,
v.
Karen TANDY, Director, Drug Enforcement Agency, et al., Defendants.
Civil Action No. 1:07cv749.
United States District Court, E.D. Virginia, Alexandria Division.
September 4, 2007.
*798 George Mercier, Las. Vegas, NV, pro se.
Marisa C. Mercier, Las Vegas, NV, pro se.
DISMISSAL ORDER
GERALD BRUCE LEE, District Judge.
THIS MATTER is before the Court on the Plaintiffs' application to proceed in forma pauperis under 28 U.S.C. § 1915(a). A litigant may proceed in any federal court without prepayment of fees if he files an affidavit showing he is indigent. 28 U.S.C. § 1915(a) (2007). However, the Court may dismiss the action if it concludes that "the allegation of poverty is untrue or the action . . . is frivolous or malicious . . . [or] fails to state a claim." 28 U.S.C. § 1915(e)(2) (2007). Upon review of Plaintiffs' allegations, the Court dismisses Plaintiffs' complaint for failure to state a claim on which relief can be granted pursuant to 28 U.S.C. § 1915(e)(2)(B)(ii). The Court also dismisses Plaintiffs' complaint as frivolous under 28 U.S.C. § 1915(e)(2)(B)(i).
District courts have a duty to construe pleadings by pro se litigants liberally, however, a pro se plaintiff must nevertheless allege a cause of action. Bracey v. Buchanan, 55 F. Supp. 2d 416, 421 (E.D.Va. 1999). Whether a complaint states a claim upon which relief can be granted is determined by "the familiar standard for a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6)." Sumner v. Tucker, 9 F. Supp. 2d 641, 642 (E.D.Va.1998). Thus, the alleged facts are presumed true, and the complaint should be dismissed only when "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S. Ct. 2229, 81 L. Ed. 2d 59 (1984).
Plaintiffs filed an "Extraordinary Petition" challenging a search of his neighbor's apartment as "unlawful Clandestine Activity." (Pltfs's Pet. at 2.) Plaintiffs also allege violation of The Civil Rights Act of 1964 on the basis that the FBI portrayed Plaintiff George. Mercier as "a sloppy, ruined, run-down abuser to whatever Grand Jury they are into." [sic] (Id.)
Plaintiffs do not have standing to challenge the lawfulness of a search of their neighbor's apartment. See Rakas v. Illinois, 439 U.S. 128, 143, 99 S. Ct. 421, 58 L. Ed. 2d 387 (1978) (holding that the "capacity *799 to claim the protection of the Fourth Amendment depends . . . upon whether the person who claims the protection . . . has a legitimate expectation of privacy in the invaded place."). Therefore, Plaintiffs have failed to allege a set of facts that support their Fourth Amendment challenge. Nor have Plaintiffs alleged any facts that support their civil rights claim. Accordingly, Plaintiffs' complaint entitled "Extraordinary Petition" must be dismissed pursuant to "28 U.S.C. § 1915(e)(2)(B)(ii) for failure to state a claim on which relief may be granted.
Plaintiffs' complaint is also subject to dismissal as frivolous under 28 U.S.C. § 1915(e)(2)(B)(i). Frivolous complaints are those that are based on "inarguable legal conclusion[s]" or "fanciful factual allegation[s]." Neitzke v. Williams, 490 U.S. 319, 325, 109 S. Ct. 1827, 104 L. Ed. 2d 338 (1989). Section 1915 permits a court to "pierce the wall of the plaintiffs factual allegations and dismiss those claims whose factual contentions are clearly baseless." Id. at 327, 109 S. Ct. 1827. The determination of frivolousness is within the discretion of the Court considering the in forma pauperis application. Id.
Plaintiffs'"Extraordinary Petition" consists of, an incomprehensible narrative concerning "unlawful Clandestine Activity by the signatories" against him and his relatives with respect to unidentified criminal investigations. The Court finds Plaintiffs' unsupported allegations to be evidence of their reckless disregard for Defendants' right to be free from harassing litigation. Furthermore, the Court notes that this is the third meritless and frivolous complaint Plaintiff George Mercier has filed in the Eastern District of Virginia alleging similar claims against a variety of government officials.[1] Plaintiff George Mercier's prior complaints were each dismissed with prejudice, and in Mercier v. Fox, et al, No. 1:05cv1327 (E.D.Va. Nov. 23, 2005), the Court noted that Plaintiff George Mercier had also filed numerous meritless and frivolous lawsuits in other jurisdictions[2] Thus, the Court finds Plaintiffs' failure to state a claim on which relief could be granted, coupled with their pattern of filing meritless *800 and frivolous lawsuits, renders their complaint entitled "Extraordinary Petition" completely baseless. Consequently, the Court also dismisses Plaintiffs' complaint as frivolous pursuant to 28 U.S.C. § 1915(e)(2)(B)(I).
From the forgoing, it is hereby
ORDERED that Plaintiffs'"Extraordinary Petition" is DISMISSED WITH PREJUDICE pursuant to 28 U.S.C. § 1915(e)(2)(B)(i) & (ii). It is further
ORDERED that Plaintiffs' application to proceed in forma pauperis is DENIED as moot.
NOTES
[1] See George Mercier v. William J. Fox, Director, Financial Crimes Enforcement Network, et al, No. 1:05cv1327 (E.D.Va. Nov. 23, 2005); George Mercier v. Richard Cheney, The Vice President, et. al., No. 1:04cv248 (E.D.Va. Mar. 11, 2004).
[2] In Mercier v. Fox, the Court noted that
Since 2002, plaintiff has demonstrated a propensity for filing meritless and frivolous lawsuits in federal district courts across the country, including the District of Nevada (14 actions), the District of Utah (3 actions), the Western District of New York (3 actions), the Western District of Texas (2 actions), the Northern District of Georgia (2 actions), as well as nine other districts.
The Court also noted that
[i]n the same period, plaintiff has filed fifty complaints that were in turn either dismissed under § 1915, granted a nonsuit under Fed.R.Civ.P. 41(a), denied leave to proceed in forma pauperis, dismissed for failure to prosecute, or transferred to another court. The named defendants in plaintiff's claims included the following: President George W. Bush; Vice President Richard Cheney; French President Jacques Chirac; the Republic of France; King Albert II of Belgium; the Bureau of Alcohol, Tobacco, Firearms, and Explosives; the Equal Employment Opportunity Commission; the governors of Georgia and Colorado; the State of Georgia; the Central Intelligence Agency; the Drug Enforcement Agency; the Internal Revenue Service; Judge Charles Tejada of the New York Supreme Court; and others. Most recently, plaintiff lost his suit against Chief Justice John Roberts that stemmed from plaintiff noticing additional "government surveillance" shortly after the Chief Justice's recent investiture ceremony.
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768 F. Supp. 2d 214 (2011)
J.J., et al., Plaintiffs,
v.
The DISTRICT OF COLUMBIA, et al., Defendants.
Civil Action No. 07-1283 (RWR).
United States District Court, District of Columbia.
March 8, 2011.
Fatmata B. Barrie, Law Offices of Christopher Anwah, PLLC, Washington, DC, for Plaintiffs.
Richard Allan Latterell, Office of the Attorney General, Washington, DC, for Defendants.
MEMORANDUM OPINION
RICHARD W. ROBERTS, District Judge.
Latonia Jenkins and her minor son, J.J., brought this action under the Individuals with Disabilities Education Act, 20 U.S.C. §§ 1400 et seq., as amended by the Individuals with Disabilities Education Improvement Act, Pub. L. No. 108-446, 118 Stat. 2647 (2004) ("IDEA"), and Section *215 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 794 et seq., challenging the dismissal of their administrative complaint following a hearing officer's determination ("HOD") that the plaintiffs failed to respond to attempts by the District of Columbia Public Schools ("DCPS") to schedule a meeting and failed to work with the DCPS to advance the educational review process. The plaintiffs move for summary judgment, and the defendants cross-move for summary judgment. Because the plaintiffs have not established that the hearing officer erred, the defendants' motion for summary judgment will be granted, and the plaintiffs' motion for summary judgment will be denied.
BACKGROUND
J.J. was a student enrolled at Noyes Elementary ("Noyes"), a public school. (Compl. ¶¶ 5-6.) He was diagnosed as having a conduct disorder. On June 6, 2006, Hearing Officer Seymour DuBow ordered an independent psycho-educational evaluation and a comprehensive psychological evaluation for J.J. The hearing officer also ordered the DCPS to convene a multi-disciplinary team ("MDT") meeting within 15 business days after the receipt of J.J.'s evaluations to review the evaluations, determine J.J.'s eligibility for compensatory education, and if warranted, determine the appropriate placement and develop a compensatory and individual education plan ("IEP").[1] (A.R. 43-44.) DCPS received the evaluations on October 2, 2006, and thus was required to hold the MDT eligibility meeting by October 24, 2006. (A.R. at 38; Defs.' Stmt. of Mat. Facts Not in Dispute ("Defs.' Stmt.") ¶ 4.) However, DCPS did not do so. (Defs.' Mem. at 2; Pls.' Mem. in Supp. of Mot. for Summ. J. ("Pls.' Mem.") at 3.) Jenkins filed an administrative due process complaint alleging that DCPS failed to provide J.J. with special education services. (A.R. at 38.)
On November 8, 2006, the special education coordinator from Noyes sent the plaintiffs' counsel a letter inviting Jenkins to select one of three possible times that month for the DCPS to conduct an MDT meeting with MDT team members to review the evaluations, discuss placement, eligibility and compensatory education, and develop a student evaluation plan ("SEP").[2] (A.R. at 128; Defs.' Stmt. ¶ 6.) The plaintiffs did not respond to that letter (A.R. at 4; Defs.' Stmt. ¶ 7), and as a result, the DCPS did not hold the meeting. On December 19, 2006, a hearing officer found that the DCPS failed to comply with the June 6, 2006 HOD and ordered the DCPS to schedule that meeting for J.J. before the 2006 Winter Recess began three days later. (A.R. at 165-66; Compl. ¶ 12; Defs.' Stmt. ¶ 8.) However, no meeting occurred before the beginning of the 2006 Winter Recess. (Compl. ¶ 12.) On January 10, 2007, the DCPS sent a second letter of invitation to Jenkins' counsel proposing an additional three dates in that month on which to hold an MDT meeting with MDT team members to review the evaluations, discuss eligibility and placement, and develop an IEP. (A.R. at 125.) The plaintiffs did not respond to that letter. (Defs.' Stmt. ¶ 9.)
*216 In February 2007, Jenkins filed two administrative due process complaints, alleging that the DCPS denied J.J. a free appropriate public education ("FAPE") in part because the DCPS failed to hold the MDT eligibility meeting ordered on December 19, 2006. (A.R. at 94-98, 132-37; Defs.' Stmt. ¶ 10; Compl. ¶ 15.) DCPS in February sent another letter of invitation to Jenkins' counsel proposing three more dates for a meeting. On February 26, 2007, Jenkins responded by proposing three additional dates because she could not attend a meeting on any of the dates proposed by the DCPS. (A.R. at 4; Defs.' Stmt. ¶¶ 11-12.) The DCPS responded by fax on February 28, 2007, informing Jenkins that the dates she suggested would not work and instead proposing two additional dates. (A.R. at 4; Defs.' Stmt. ¶ 13.) Jenkins responded one week later, proposing a date in March that worked for DCPS. The next day, DCPS sent Jenkins another letter of invitation for that date to meet with MDT team members to review the evaluations, discuss placement, eligibility and compensatory education, and develop the SEP. (A.R. at 4, 117-19; Defs.' Stmt. ¶ 14.)
The parties met on March 19, 2007. To resolve the complaint, DCPS offered to hold an eligibility and SEP meeting at Jenkins' next available date, after which any educational services and compensatory education and placement could be provided if they were warranted. Jenkins and her counsel rejected that offer. (A.R. at 4, 109; Defs.' Stmt. ¶¶ 14-16; Pls.' Stmt. ¶ 10.) Jenkins "wanted a new placement... in addition to the meeting and evaluations." (Pls.' Reply at 5.) She claims that "not all issues raised by the [due process] complaint could be resolved," so Jenkins "elected to move forward with the due process hearing." (Pls.' Stmt. ¶ 10)[3].
On April 5, 2007, Hearing Officer DuBow conducted a hearing regarding the plaintiffs' February 2, 2007 due process complaint. (A.R. at 2.) On April 20, 2007, that hearing officer issued an HOD dismissing the plaintiffs' due process complaint against the defendants. (Defs.' Stmt. ¶¶ 18; Pls.' Stmt. ¶ 14.) The issue that the HOD addressed was whether "DCPS den[ied] a Free Appropriate Public Education ... to [J.J.] by failing to convene an MDT/Eligibility Meeting[.]" (A.R. at 3.) The hearing officer found, among other things, that DCPS made multiple attempts to schedule a resolution meeting for J.J. between October 2006 and the April 2007 hearing. (A.R. at 4.) The hearing officer ruled:
Counsel for the parent has not met her burden of proof that DCPS denied a FAPE to [J.J.] by failing to convene an MDT eligibility meeting. The ... DCPS tried on several occasions to convene an MDT meeting to review evaluations and determine eligibility.... [S]everal Letters of Invitation were faxed to counsel for the parent offering various dates to convene an MDT meeting.... [M]any of the delays in convening an MDT meeting were caused by a lack of response or unavailability of counsel for the parent and the parent.... This hearing officer finds that counsel for the parent engaged in the same type of troubling conduct of holding out for a hearing instead of going through the MDT educational review process that the ... federal courts [have] found further delays the educational process to the detriment of the student and fails to give the school district *217 an opportunity to rectify the situation. At this stage, it is in the best interests of the student for counsel for the parent to directly contact counsel for DCPS to arrange a mutually agreeable date to hold an MDT Eligibility Meeting at Noyes Elementary School.
(A.R. at 4-5.)
The plaintiffs filed this three-count complaint challenging the hearing officer's dismissal. They allege that the DCPS failed to provide J.J. with a FAPE in violation of the IDEA and Section 504 of the Rehabilitation Act, that DCPS' failure to comply with the three-day deadline for holding an MDT eligibility meeting set forth in the December 19, 2006 order violated the IDEA and deprived J.J. of a FAPE, and that the hearing officer erred since there was no evidence that DCPS made any attempts to comply with the December 19 order. (Compl. ¶¶ 23-28.)
Both parties have moved for summary judgment. The plaintiffs argue that the "DCPS provided no documentation" to the hearing officer to show that it attempted to convene an MDT eligibility meeting to comply with the previous HODs. The plaintiffs further argue that "courts generally find irreparable harm" when school districts fail to implement a hearing officer's decision, and therefore, because the DCPS did not provide J.J.'s mother the opportunity to participate in an eligibility and placement meeting, it denied J.J. a FAPE. (Pls.' Mem. at 9-11.) The defendants argue that the hearing officer correctly determined that the plaintiffs failed to carry their burden of proving that DCPS denied J.J. a FAPE because they failed to respond to DCPS' invitations to attend an MDT eligibility meeting and held out to J.J.'s detriment for litigating rather than advancing the educational review process. (Defs.' Mem. at 5-6.)
DISCUSSION
"Rule 56(c) provides for entry of summary judgment if ... `there is no genuine issue as to any material fact and ... the movant is entitled to a judgment as a matter of law.'" J.N. v. Dist. of Columbia, 677 F. Supp. 2d 314, 319 (D.D.C.2010) (quoting Fed.R.Civ.P. 56(c)); see also Moore v. Hartman, 571 F.3d 62, 66 (D.C.Cir.2009). "The plain language of Rule 56(c) mandates the entry of summary judgment ... 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). In an action challenging a hearing officer's decision under the IDEA where both parties move for summary judgment, the motions are treated as motions for judgment based on the evidence in the record if neither party introduces additional evidence. Stanton v. Dist. of Columbia, 680 F. Supp. 2d 201, 205 (D.D.C.2010).
The IDEA "`ensure[s] that all children with disabilities have available to them a free appropriate public education that emphasizes special education and related services designed to meet their unique needs and prepare them for further education, employment, and independent living.'" J.N., 677 F.Supp.2d at 319 (quoting 20 U.S.C. § 1400(d)(1)(A)). The statute gives parents the ability to file administrative complaints and "request due process hearings `with respect to any matter relating to the identification, evaluation, or educational placement of the child, or the provision of a free appropriate public education to such child.'" J.N., 677 F.Supp.2d at 319 (quoting Wright v. Dist. of Columbia, Civil Action No. 05-990(RWR), 2007 WL 1141582, at *2 (D.D.C. April 17, 2007) (quoting 20 U.S.C. § 1415(b)(6)(A))). A *218 court reviewing an administrative determination made in an IDEA case reviews the administrative record and may grant relief it determines to be appropriate, based upon the preponderance of the evidence. J.N., 677 F.Supp.2d at 319 (citing Wright, 2007 WL 1141582, at *2). The court must give the administrative officer's findings due weight, although less deference than would normally be accorded an administrative decision. J.N., 677 F.Supp.2d at 319 (citing Kerkam v. McKenzie, 862 F.2d 884, 887 (D.C.Cir.1988)). "The burden of proof falls upon the party challenging the administrative determination, who must `at least take on the burden of persuading the court that the hearing officer was wrong.'" Suggs v. Dist. of Columbia, 679 F. Supp. 2d 43, 48 (D.D.C.2010) (quoting Hawkins v. Dist. of Columbia, 539 F. Supp. 2d 108, 112 (D.D.C.2008)). A reviewing court's primary consideration is compliance with the procedural requirements of IDEA; reviewing courts should avoid substituting their own judgment for that of school agencies regarding the best educational interests of a student. Bd. of Educ. of Hendrick Hudson Cent. Sch. Dist. v. Rowley, 458 U.S. 176, 206-07, 102 S. Ct. 3034, 73 L. Ed. 2d 690 (1982).
"The IDEA attempts to guarantee children with disabilities a FAPE by requiring states and the District of Columbia to institute a variety of detailed procedures." D.S. v. Dist. of Columbia, 699 F. Supp. 2d 229, 233 (D.D.C.2010). The procedural safeguards present in the IDEA encourage parents to participate fully in decisions affecting their childrens' education by guaranteeing parents of disabled children the opportunity to participate in their childrens' evaluation and placement. See Rowley, 458 U.S. at 183 n. 6, 102 S. Ct. 3034; see also Holland v. Dist. of Columbia, 71 F.3d 417, 421 (D.C.Cir. 1995); LeSesne v. Dist. of Columbia, Civil Action No. 04-0620(CKK), 2005 WL 3276205, at *2 (D.D.C. July 26, 2005); 20 U.S.C. §§ 1414(f), 1415(b)(1). Procedural inadequacies that deleteriously affect parents' opportunity to participate in the IEP formulation process can result in the denial of a FAPE. See A.I. v. Dist. of Columbia, 402 F. Supp. 2d 152, 163-64 (D.D.C. 2005).
Furthermore, even where an educational entity denies a student a FAPE, "courts can nevertheless deny [relief] if a parent's own actions frustrated the school district's efforts." Dorros v. Dist. of Columbia, 510 F. Supp. 2d 97, 100 (D.D.C. 2007) (citing Loren F. v. Atlanta Indep. Sch. Sys., 349 F.3d 1309, 1312-13 (11th Cir.2003); MM v. Sch. Dist. of Greenville County, 303 F.3d 523, 533-35 (4th Cir. 2002) (finding that a child was not denied a FAPE where the school district attempted to offer the child a FAPE but was unable to because the child's parents failed to attend an IEP meeting and failed to notify the school district of a suitable time to schedule the meeting); and Doe v. Defendant I, 898 F.2d 1186, 1189 n. 1 (6th Cir.1990)).
The applicable regulations provide that an educational entity is required to involve a student's parent at an initial eligibility meeting:
Upon completion of the administration of assessments and other evaluation measures[, a] group of qualified professionals and the parent of the child determines whether the child is a child with a disability....
* * *
In interpreting evaluation data for the purpose of determining if a child is a child with a disability under § 300.8, and the educational needs of the child, each public agency must ... [d]raw upon information from a variety of sources, including *219 aptitude and achievement tests, parent input, and teacher recommendations, as well as information about the child's physical condition, social or cultural background, and adaptive behavior[.]
34 C.F.R. § 300.306(a), (c) (emphasis added). Parents must also be allowed to attend each IEP meeting:
Each public agency must take steps to ensure that one or both of the parents of a child with a disability are present at each IEP meeting or are afforded the opportunity to participate, including (1) [n]otifying parents of the meeting early enough to ensure that they will have an opportunity to attend; and (2) [s]cheduling the meeting at a mutually agreed upon time and place.
34 C.F.R. § 300.322(a). However, "[a] meeting may be conducted without a parent in attendance if the public agency is unable to convince the parents that they should attend" and the DCPS makes detailed records of the attempts to contact the student's parents. Id.
Here, the plaintiffs' argue essentially that DCPS violated the previous HODs and denied J.J. a FAPE by failing to timely convene the MDT eligibility meeting. The hearing officer dismissed the complaint upon determining that the behavior of J.J.'s parent and counsel caused much of the delay in DCPS timely convening that meeting. The hearing officer relied in part on the opinion in LeSesne. In LeSesne, the plaintiff brought a due process complaint on behalf of her son, alleging that the DCPS denied her son a FAPE because the DCPS had made no attempt to convene a meeting to develop an IEP. LeSesne, 2005 WL 3276205, at *3. The hearing officer dismissed the parent's due process complaint with prejudice "because DCPS had made reasonable efforts before the hearing to schedule an MDT meeting, and those efforts were frustrated by Plaintiff's counsel." Id. at *4.
On February 24, 2004, [a special education coordinator] faxed a Letter of Invitation to Plaintiff's counsel, proposing three dates, February 27, March 1, or March 3, for a MDT/IEP meeting. Defs.' Stmt. of Mat. Facts ¶ 20. Plaintiff's counsel rejected all dates by fax on February 26, 2004, stating that at least one week's notice was required and asked for three more dates. Id. ¶ 21. That same day, after receiving the fax, [the special education coordinator] responded by suggesting March 8, 9, or 10all of which met the timing condition set by Plaintiff's counsel. Id. ¶ 24. Plaintiff offered no response before an administrative hearing was held on March 5, 2004, by an independent H.O.
Id. (footnote omitted). The district court, stating that "[i]f there is an impetus to create an IEP on the part of the public school system, asking the district court to intervene before one exists appears premature" upheld the hearing officer's decision because of the plaintiff's uncooperative behavior, and because the plaintiff's attorney appeared to frustrate efforts to schedule the IEP meeting in order to obtain attorneys fees. Id. at *7; see also Dorros, 510 F.Supp.2d at 101 (affirming hearing officer's decision dismissing a plaintiff's complaint alleging that the DCPS denied the plaintiff a FAPE by failing to hold an eligibility meeting within the statutory deadline, where "plaintiffs, by their own conduct, delayed" the process by failing to agree on the dates for the meeting proposed by the DCPS).
The plaintiffs attempt to distinguish LeSesne by arguing that in LeSesne, the DCPS sent its invitations to convene the MDT meeting before the parent filed a due process complaint, while here the DCPS sent its meeting invitations after the plaintiffs filed due process complaints. *220 (Pls.' Mem. at 12.) It is true that the first unanswered invitation was issued fifteen days beyond the first HOD's meeting deadline, and the second unanswered invitation was issued not within the three-day period before the winter recess began as required by the second HOD, but rather was issued only in the days after the recess ended. However, the distinction raised by the plaintiffs does not undermine two core determinations of the hearing officerthat the plaintiffs interfered with the DCPS' eventual attempts, while technically belated, to schedule the eligibility meeting, and that it was in J.J.'s best interests for his counsel to directly contact DCPS to schedule an MDT meeting at that time. Plaintiffs neither dispute nor justify their failure to respond to the early invitations. Nor have plaintiffs provided any basis for this court to second-guess Hearing Officer DuBow's judgment that convening the MDT meeting that DCPS had been proposing was in J.J.'s best educational interests.
The plaintiffs also argue that the HOD was flawed because the record is "devoid of any evidence that the DCPS attempted to convene [a] meeting to determine Eligibility." (See Pls.' Reply at 9.) However, the record is otherwise. The DCPS provided to the hearing officer the meeting notes from the March 19, 2007 resolution meeting, which contained a narrative description of the efforts the DCPS made to schedule the eligibility meeting. (A.R. at 108-109.) In addition, at least three of the invitations sent to the plaintiffs' attorney contained in the administrative record clearly demonstrated DCPS' attempts to schedule an eligibility meeting. (See A.R. at 116-119, 124-129.) Lastly, while the plaintiffs argue that the hearing officer wrongly ignored their argument that J.J. should have already been deemed eligible to receive services, the plaintiffs have provided no authority showing that such a determination would have been appropriately made by the hearing officer. See Dorros, 510 F.Supp.2d at 101 (affirming hearing officer's decision that an eligibility determination was premature where the DCPS had not yet conducted an eligibility meeting).[4]
CONCLUSION
Because the plaintiffs have not demonstrated that the April 2007 HOD was contrary to law, the defendants' motion for summary judgment will be granted, and the plaintiffs' cross-motion for summary judgment will be denied. An appropriate order accompanies this Memorandum Opinion.
NOTES
[1] An MDT team, which is also referred to as an "IEP Team," see 20 U.S.C. § 1415(f)(1)(B)(i), develops an IEP for a disabled student. Stanton v. Dist. of Columbia, 680 F. Supp. 2d 201, 203 n. 1 (D.D.C.2010) (citing Jones ex rel. A.J. v. Dist. of Columbia, 646 F. Supp. 2d 62, 64 (D.D.C.2009)).
[2] This invitation letter, and at least two that followed it in January 2007 and March 2007 also bore the text "Resolution Meeting" inserted in a "Re:" line in the caption. Parties have a right to have a resolution meeting to try to resolve a filed due process complaint. (See A.R. at 95.)
[3] According to the DCPS, DCPS conducted an MDT meeting for J.J. on March 19, 2007 anyway, despite Jenkins' decision to continue with the due process complaint. (Defs.' Stmt. ¶ 17.)
[4] Judgment will be entered for the defendants on the plaintiffs' claim under Section 504 of the Rehabilitation Act. Section 504 of the Rehabilitation Act "prohibits programs and entities that receive federal funding from denying benefits to, or otherwise discriminating against, a person `solely by reason' of that individual's handicap." Robinson v. Dist. of Columbia, 535 F. Supp. 2d 38, 42 (D.D.C. 2008). "In the context of cases involving children who receive benefits pursuant to the IDEA, courts have consistently recognized that in order to establish a violation of § 504, `something more than a mere failure to provide the free appropriate education required by [the IDEA] must be shown.'" Taylor v. Dist. of Columbia, 683 F. Supp. 2d 20, 22 (D.D.C.2010) (quoting Walker v. Dist. of Columbia, 157 F. Supp. 2d 11, 35 (D.D.C.2001)). Plaintiffs may pursue a denial of a FAPE under § 504 where the plaintiffs show bad faith or gross mismanagement on behalf of the school district. Torrence v. Dist. of Columbia, 669 F. Supp. 2d 68, 72 (D.D.C.2009). The plaintiffs' complaint does not allege, nor do the motion papers present, sufficient facts to establish bad faith or gross misconduct, and thus judgment will be entered for the defendants on that claim.
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503 F. Supp. 2d 912 (2007)
Christopher TURLEY, et al., Plaintiffs
v.
UNITED STATES of America, et al., Defendants.
No. 3:07CV00205.
United States District Court, N.D. Ohio, Western Division.
September 5, 2007.
As Amended September 26, 2007.
*913 *914 Konrad Kuczak, Dayton, OH, for Plaintiffs.
Holly Taft Sydlow, Office of the U.S. Attorney, Toledo, OH, for Defendants.
ORDER
CARR, Chief Judge.
This is a suit by a former defendant in a criminal proceeding in this court and his wife. Following trial on four drug-related charges, the jury returned a verdict of not guilty as to all counts. Plaintiffs' complaint against one of the defendants, Michael Ackley, alleges that Ackley, at the time a Wood County, Ohio Deputy Sheriff assigned to a D.E.A. Task Force in Toledo, Ohio, made false statements to judicial officers in the course of applying for a search warrant and during a state bond hearing.
The defendant United States was previously, and without opposition by the plaintiffs, granted leave to be substituted for Ackley as a defendant. The gravamen of the motion to substitute was that Ackley was serving in a federal, rather than a state capacity when he committed the alleged acts.
Pending is the government's motion to dismiss. The basis for the motion is that: 1) Ackley, by virtue of his having acted in a federal, rather than state capacity is covered by the Federal Tort Claims Act, 28 U.S.C. § 2671 et seq. [FTCA]; and 2) the plaintiffs neither filed a timely claim as required by the FTCA nor perfected service on the government.
Plaintiffs oppose the motion to dismiss on several grounds: 1) prior official representations in an unrelated matter that Ackley was a state officer preclude the government from asserting that Ackley was acting as a federal officer; 2) Ackley's assignment to the D.E.A. Task Force and work in conjunction with the Task Force failed to comply with D.E.A. regulations and requirements, so that, when committing the allegedly wrongful acts leading to this suit, Ackley was working as a state officer, rather than as a federal officer; and 3) Ackley was not within the scope of his employment when he presented false information and testimony to judicial officers.
For the reasons that follow, the motion to dismiss shall be granted.
Background
Ackley has been a Deputy with the Wood County Sheriff's Department since 1991. Since 1999, he has been assigned to the Joint Federal-State Drug Task Force operating in the Toledo area. He was deputized as a federal officer, received a badge manifesting that status, and participated in the work of the Task Force under the general supervision of the D.E.A.'s Resident Agent in Toledo.
Plaintiffs contend, and for purposes of this opinion, their contentions will be deemed to be accurate, that D.E.A. regulations and requirements governing commissioning and supervision of officers were not fulfilled. Thus, according to the plaintiffs, he could not qualify as a federal officer for purposes of the FTCA or otherwise.
*915 In addition, during the period of the events giving rise to this suit, Ackley, while driving a Wood County vehicle, was involved in an accident. County officers and Ackley's D.E.A. supervisor responded to the scene. The County admitted responsibility, and paid for the damage.
Shortly after the accident, Ackley wrote a letter about it to the Sheriff referencing himself as "A Deputy Sheriff, Wood County Sheriffs Office." In addition, the Sheriff sent a letter to State authorities, as required under State law, about the accident. In that letter the Sheriff stated that Ackley was a Wood County Deputy Sheriff.
Plaintiffs claim that this incident and the resulting correspondence confirms Ackley's status as a state, rather than a federal officer.
Discussion
At the outset, I note that there appears to be no dispute that, if Ackley is covered by the FTCA, the motion to dismiss must be granted due to plaintiffs' failure to have timely filed the notice of claim required under § 2675 of the Act. The dispositive issue is, accordingly, whether Ackley is covered by the FTCA.
1. Estoppel
There is no merit to the plaintiffs' contention that the government is estopped by the events surrounding the auto accident from claiming that Ackley is a federal officer.
Plaintiffs ignore the fact that Ackley had dual status: he was a Deputy Sheriff, but he also was assigned to and worked with the D.E.A. Task Force. Failure to note Ackley's dual status in the correspondence about the accident does not amount to an estoppel. By referencing one affiliation, Ackley was not excluding or denying the other.
In any event, any estoppel effect could not affect the United States, which was not a party to the correspondence. Cf. Richards v. Jefferson County, 517 U.S. 793, 798, 116 S. Ct. 1761, 135 L. Ed. 2d 76 (1996) (estoppel cannot be invoked against one not a party to the prior proceeding).[1]
2. Deputization as Federal Officer
The government has certified Ackley's status as a federal employee entitled to the protection of the FTCA. 28 U.S.C. § 2679. This constitutes prima facie evidence of such status.
Plaintiffs seek to overcome the effect of the government's certification and contention that Ackley is a government employee by pointing to alleged defects in the process by which he was deputized and supervised as a federal officer.
That effort fails under the "de facto officer" doctrine. This doctrine, which has been recognized by the federal courts since at least 1886, provides that, "[w]here an office exists under the law, it matters not how the appointment of the incumbent is made, so far as the validity of his acts are concerned. It is enough that he is clothed with the insignia of the office, and exercises its powers and functions." Norton v. Shelby County, 118 U.S. 425, 444-45, 6 S. Ct. 1121, 30 L. Ed. 178 (1886). To be deemed a de facto officer,
all that is required when there is an office to make an officer de facto, is that the individual claiming the office is in possession of it, performing its duties, and claiming to be such officer under color of an election or appointment, as the case may be. It is not necessary *916 that his election or appointment be valid, for that would make him an officer de jure. The official acts of such persons are recognized as valid on grounds of public policy, and for the protection of those having official business to transact.
Id. at 445, 6 S. Ct. 1121 (citation omitted).
More recently, the Supreme Court has reaffirmed the de facto officer doctrine, stating that the doctrine:
confers validity upon acts performed by a person acting under the color of official title even though it is later discovered that the legality of that person's appointment or election to office is deficient. "The de facto doctrine springs from the fear of the chaos that would result from multiple and repetitious suits challenging every action taken by every official whose claim to office could be open to question, and seeks to protect the public by insuring the orderly functioning of the government despite technical defects in title to office."
Ryder v. U.S., 515 U.S. 177, 180, 115 S. Ct. 2031, 132 L. Ed. 2d 136 (1995) (citations omitted); see also Waite v. City of Santa Cruz, 184 U.S. 302, 323, 22 S. Ct. 327, 46 L. Ed. 552 (1902) (a de facto officer has "title" that "is not good in law, but who is in fact in the unobstructed possession of an office and discharging its duties in full view of the public, in such manner and under such circumstances as not to present the appearance of being an intruder or usurper").
Under this doctrine, defects in a law officer's commission does not render his acts unlawful. U.S. v. Jones, 185 F.3d 459, 462 (5th Cir.1999). Defenses are as available to him as they are to a duly appointed officer. See White by Swafford v. Gerbitz, 892 F.2d 457, 462 (6th Cir.1989) (applying de facto officer doctrine to extend judicial immunity to judge whose appointment was impaired by "procedural errors").
Thus, regardless of any defects in how Ackley became and continued to be a federal officer, those defects do not deprive him of his status as a federal employee under the FTCA.
3. Scope of Employment
The parties dispute whether Ackley can properly be viewed as having acted within the scope of his federal employment when he allegedly presented false information and testimony in judicial proceedings.
I agree with the government that the issue is not whether Ackley acted unlawfully, as plaintiffs allege; the issue, rather, is whether his acts were those customarily performed by a federal law enforcement officer. See, e.g., Figueroa v. United States Postal Service, 422 F. Supp. 2d 866, 874 (N.D.Ohio 2006), aff'd, 220 Fed.Appx. 407 (6th Cir.2007) (an employee acts within the scope of his employment if his conduct is of the kind he is employed to perform; occurs within an appropriate time and at an appropriate location; and is motivated, at least in part, by an intent to serve his employer). Getting a search warrant and testifying at a bond hearing are acts routinely performed by federal law enforcement officers, as were the other actions he was taking in the course of investigating.
An employee acts within the scope of employment in Ohio, moreover, "if the employee acts within his authority during the course of employment even though acting intentionally or maliciously." RMI Titanium Co. v. Westinghouse Elec. Corp. 78 F.3d 1125, 1143 (6th Cir.1996). Under Ohio law, the issue of scope of employment focuses not on the alleged wrongful nature of the employee's actions; the issue is, *917 rather, whether the employee's actions "are so divergent that [their] very character severs the relationship of employer and employee." Osborne v. Lyles, 63. Ohio St.3d 326, 330, 587 N.E.2d 825 (1992).
In RMI Titanium Co. the court held that a Department of Energy employee's submission of a false report to the Department did not cause the employee's actions to be outside the scope of his employment. 78 F.3d at 1144 n. 20. There is no perceptible difference between submitting a false report to a federal agency and presenting false information to a judicial officer. Consequently, Ackley, even if he presented false information during the course of acquiring a search warrant and testifying at a bond hearing remained, as a matter of law, within the scope of his employment as a federal agent. Here, like the DOE employee in RMI Titanium Co., Ackley was "acting within the course of employment and within his authority." Id. at 1144.
Conclusion
For the foregoing reasons, I conclude that the defendant Ackley was acting as a federal agent when he committed the acts giving rise to this suit. I also conclude that he was within the scope of his federal employment when he committed those acts. He is, accordingly, only amenable to suit for actions performed in his federal capacity if the plaintiffs comply with the FTCA. They have not done so.
It is, therefore,
ORDERED THAT the motion of the United States of America to dismiss [Doc. 12] be, and the same hereby is granted.
So ordered.
NOTES
[1] As the government argues, Ackley's testimony about his dual status, either during his deposition in this case or prior criminal proceedings, was neither inconsistent nor had an estoppel effect.
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915 S.W.2d 214 (1996)
Carl OWENS and Sharon Owens, Appellants,
v.
Ramon R. MEDRANO, Jr., Omar Puente, and Miguel De Los Santos, Appellees.
No. 13-94-031-CV.
Court of Appeals of Texas, Corpus Christi.
January 25, 1996.
Rehearing Overruled February 22, 1996.
*215 Christopher H. Boswell, Stapleton, Whittington & Curtis, Harlingen, for appellants.
Oscar G. Trevino, Walsh, Judge & Anderson, Austin, J. Arnold Aguilar, Willette & Aguillar, Brownsville, Eric W. Schulze, Walsh, Judge, Anderson & Underwood, Austin, Miguel Salinas, Willette & James, Brownsville, for appellees.
Before FEDERICO G. HINOJOSA, Jr., YAÑEZ, and RODRIGUEZ, JJ.
OPINION
FEDERICO G. HINOJOSA, Jr., Justice.
Appellants, Carl Owens and Sharon Owens, sued the City of San Benito, Frances Flores, Ramon Medrano, Omar Puente, the San Benito Consolidated Independent School District, and Miguel De Los Santos for defamation, false light and deprivation of privacy, infliction of emotional distress, unlawful arrest and violations of due process, malicious prosecution, and conspiracy. All of the defendants moved for summary judgment, and the trial court granted the motions of the City, Flores, and the School District.
Appellees, Medrano, Puente, and De Los Santos subsequently filed motions for summary judgment alleging that section 101.106 of the Tort Claims Act[1] barred appellants' suit against them. The trial court granted appellees' motions. By two points of error, appellants contend that the trial court erred in granting appellees' motions for summary judgment. We affirm.
A long standing athletic rivalry between Harlingen and San Benito precipitated the events that resulted in this litigation. This rivalry was particularly intense during the 1990-91 school year, and confrontations led to accusations of misconduct between the schools. The confrontations culminated on February 15, 1991, when the Harlingen High School varsity basketball team traveled to San Benito to play the last regular season game. Harlingen won the game and the district title. As a result, the Harlingen team attempted to cut down the nets as a part of their celebration. Harlingen coaches were willing to provide San Benito with replacement nets and condoned the team's actions. However, Medrano and Puente, San *216 Benito police officers, refused to allow the Harlingen team to cut the nets and ushered both teams out of the gym.
On Monday, February 18, 1991, San Benito CISD Superintendent De Los Santos filed a complaint with the University Interscholastic League (UIL) District Executive Committee claiming that Harlingen head coach, Carl Owens, incited a riot and endangered the welfare and safety of the players and fans. Owens was arrested outside the UIL meeting room on February 20, 1991, before a hearing on the issue began. Appellants contend that De Los Santos' participation in the arrest was outside the scope of his employment. Although De Los Santos denied his involvement, appellants claim that the superintendent was overheard telling officers that the arrest should have come at the end of the meeting and requesting other arrest warrants in the officers' possession. De Los Santos was also accused of exercising considerable influence over Officer Medrano's actions by meeting with him frequently after the basketball game. In addition, appellants alleged that Officers Medrano and Puente acted in bad faith by conspiring to misstate facts regarding the incident in order to obtain the arrest warrants.
By their first point of error, appellants complain that the trial court erred in granting De Los Santos' motion for summary judgment. Appellants contend 1) that there were material issues of fact precluding summary judgment and 2) that the judgment in favor of the San Benito Consolidated Independent School District does not inure to the benefit of De Los Santos when there is evidence that he acted outside the scope of his employment.
By their second point of error, appellants complain that the trial court erred in granting Medrano's and Puente's motions for summary judgment. Appellants contend 1) that there were material issues of fact precluding summary judgment and 2) that the judgment in favor of the City of San Benito does not inure to Medrano's and Puente's benefit because they acted in bad faith.
Summary judgment shall be rendered if there is no genuine issue as to any material fact, and the movant is entitled to judgment as a matter of law. TEX.R.CIV.P. 166a(c). The question on appeal of a grant of summary judgment is not whether the proof raises a fact issue with reference to essential elements of plaintiff's cause of action, but whether the summary judgment proof establishes that the movant is entitled to summary judgment as a matter of law. Gonzalez v. Mission Amer. Ins. Co., 795 S.W.2d 734, 736 (Tex.1990).
The Texas Tort Claims Act provides that "a judgment in an action or a settlement of a claim under this chapter bars any action involving the same subject matter by the claimant against the employee of the governmental unit whose act or omission gave rise to the claim." Tex.Civ.Prac. & Rem.Code Ann. § 101.106 (Vernon 1986). Section 101.106 clearly states that a judgment in an action involving a governmental unit bars any action against the employee. Thomas v. Oldham, 895 S.W.2d 352, 355 (Tex.1995). Section 101.106, unlike other provisions of the Tort Claims Act, does not say that the provision applies only when the employee is acting within the scope of his employment or in good faith. The statute only requires that the employee's act gave rise to the claim against the governmental unit under the Tort Claims Act. White v. Annis, 864 S.W.2d 127, 130 (Tex.App.-Dallas 1993, writ denied).
Appellants' claims against the City and its employees (Medrano and Puente) and the School District and its employee (De Los Santos) are identical, and they arose out of alleged employee misconduct. It is beyond dispute that a prior judgment in an action against a governmental employer bars continuation of an action against the employee that has not yet proceeded to judgment. Thomas, 895 S.W.2d at 355. In this case, the governmental entities were granted summary judgments, but the claims against their employees (appellees) continued. As a matter of law, appellees were entitled to summary judgment. We overrule appellants' two points of error.
We AFFIRM the trial court's orders granting appellees' motions for summary judgment.
NOTES
[1] TEX.CIV.PRAC. & REM.CODE ANN. § 101.106 (Vernon 1986).
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915 S.W.2d 685 (1996)
323 Ark. 421
Roger D. FLEMENS and Nancy Flemens, Appellants,
v.
Glen D. HARRIS, Appellee.
No. 94-245.
Supreme Court of Arkansas.
February 12, 1996.
*686 Don P. Chaney, Arkadelphia, for appellants.
Lynn Williams, Philip M. Clay, Hot Springs, for appellee.
ROAF, Justice.
This is the second appeal of this case involving a claim of negligence against an insurance agent; the first appeal was dismissed without prejudice pursuant to Ark. R.Civ.P. 54(b). Flemens v. Harris, 319 Ark. 659, 893 S.W.2d 783 (1995). Appellants Roger and Nancy Flemens appeal from an order granting summary judgment in favor of appellee Glen D. Harris on the basis that the Flemenses' action was barred by the running of the statute of limitations. We affirm.
Facts.
Appellee Glen Harris passed the state examination for insurance agents in June 1988 and opened a Shelter Life Insurance Company office in Dierks, Arkansas. Roger Flemens, a self-employed grocery store and gas station operator, submitted a disability insurance application through appellee's office on August 8, 1988, and was issued a policy by Shelter Life Insurance Company (Shelter). Roger Flemens' wife, appellant Nancy Flemens, was the intended third party beneficiary of the disability insurance policy.
On December 15, 1988, Roger Flemens sustained injuries as a result of a motor vehicle accident. Mr. Flemens made a claim for disability insurance benefits from Shelter and received one payment for the period December 16, 1988, through December 29, 1988. The payment was made on February 7, 1989. On March 21, 1989, Flemens was notified by Shelter that there was "a problem with this matter." Shelter Life Insurance stated that there had been a misrepresentation on the application regarding Flemens' incomethe income shown on his tax returns was significantly below that which he claimed on the application form. Subsequently, Roger Flemens' disability benefits were terminated.
Roger and Nancy Flemens filed a complaint against Shelter and Glen Harris on December 13, 1991. The complaint alleged Harris was negligent in handling Roger Flemens' application for disability insurance. The complaint further alleged that the negligence on the part of Harris was imputable to Shelter under the law of agency. In addition, *687 the complaint alleged that Flemens substantially complied with the terms of the policy and, despite demand, Shelter failed to pay benefits due under the policy.
Appellee Harris moved for summary judgment asserting that the three-year statute of limitations barred the Flemenses' action. The trial court found that the applicable statute of limitations for negligence of an insurance agent is three years and begins to run at the time the negligent act occurs, not when it is discovered. The trial court further concluded that the negligence, if any, committed by Harris occurred in August 1988 and the action against Harris was filed in December 1991. Accordingly, the trial court granted separate defendant Glen Harris' motion for summary judgment. The record reflects that Shelter entered into a settlement agreement with the Flemenses and the action against Shelter was dismissed with prejudice.
Statute of limitations.
On appeal, both parties agree that the applicable statute of limitations on actions for the negligence of an insurance agent is three years. The appellants, however, submit that the trial court erred in determining when the applicable three-year period began to run. The appellants assert that the statute of limitations did not begin to run until receipt of the March 21, 1989, letter from Shelter which terminated benefits because this letter represented their first loss, i.e. damage, which was necessary for their tort action to mature.
The appellants rely upon Midwest Mutual Ins. Co. v. Ark. Nat'l Co., 260 Ark. 352, 538 S.W.2d 574 (1976), where this Court concluded the running of the statute of limitations did not commence until an insured first learned it had no insurance coverage. The Arkansas National Company, an independent insurance agency, obtained an assigned risk liability insurance policy for Red Top Cab Company through Farm Bureau Mutual Insurance Company. Arkansas National and Red Top had a standing agreement to delete from coverage taxicabs undergoing repair and to reinstate the coverage upon request. Pursuant to that agreement, on August 11, 1970, Red Top requested one of Arkansas National's agents to reinstate a vehicle under the coverage; however, the agent neglected to reinstate the vehicle.
The vehicle was involved in a collision nine days later, and on May 24, 1971, a suit was instituted against Red Top for injuries resulting from the collision. At that time, Red Top made demand on Farm Bureau to provide it with a defense and to pay any judgment that might be entered; however, Farm Bureau refused. After judgment was entered against it on September 11, 1973, Red Top assigned to Midwest Mutual Insurance Company its "chose in action" against Arkansas National for failure to reinstate insurance coverage, and, on March 29, 1974, Midwest filed suit against Arkansas National. Arkansas National answered and asserted the suit was barred by the three-year statute of limitations.
This Court concluded that Red Top's cause of action accrued on or after May 24, 1971, when it was required to assume the cost of its own defense due to the negligence of Arkansas National. We concluded Arkansas National's negligence in failing to reinstate the insurance coverage did not become tortious as to Red Top until at least some element of damage accrued to Red Top because of the negligence. However, the summary judgment in favor of Arkansas National was affirmed because this Court held that Red Top's claim was not assignable.
In accordance with Midwest Mutual, the appellants submit that the statute of limitations in their case did not begin to run until they received the letter dated March 21, 1989, informing them benefits were terminated. The appellants assert that the statute of limitations begins to run when there is a complete and present cause of action. See Courtney v. First Nat'l Bank, 300 Ark. 498, 780 S.W.2d 536 (1989); Corning Bank v. Rice, Adm'r, 278 Ark. 295, 645 S.W.2d 675 (1983).
In response, the appellee cites a legal malpractice case, Chapman v. Alexander, 307 Ark. 87, 817 S.W.2d 425 (1991), where we stated:
*688 Since 1877, it has been our rule that the statute of limitations applicable to a malpractice action begins to run, in the absence of concealment of the wrong, when the negligence occurs, and not when it is discovered.
We held that the statute of limitations begins to run upon the occurrence of the last element essential to the cause of action. Id.; see also Wright v. Compton, Prewett, Thomas & Hickey, 315 Ark. 213, 866 S.W.2d 387 (1993). Accordingly, we concluded that the statute of limitations began to run at the time Alexander, an attorney, represented Chapman in the sale of a business. Although the Chapman case involved legal malpractice, this Court commented that under our traditional rule:
an abstractor, accountant, architect, attorney, escrow agent, financial advisor, insurance agent, medical doctor, stockbroker, or other such person will not be forced to defend some alleged act of malpractice which occurred many years ago.
(Emphasis supplied.) The appellee also relies upon Ford's Inc. v. Russell Brown & Co., 299 Ark. 426, 773 S.W.2d 90 (1989), where we held that the three-year statute of limitations commenced from the date an accountant provided erroneous tax advice even though the assessment of tax deficiency occurred more than three years later. This Court specifically rejected the appellant's contention that, until they were assessed a tax deficiency, they had not sustained an injury.
The appellants' attempt to rely upon Midwest Mutual is understandable. However, the ultimate decision in Midwest Mutual was based upon the assignability of the action. Although this Court first concluded that the action was not barred by the statute of limitations, it was not necessary to do so in order to determine that the action could not be assigned. Consequently, although the discussion of the limitation issue in Midwest Mutual is extensive, the conclusion reached regarding this issue amounts to dictum. Of equal concern is the rationale employed by the Court in reaching the conclusion that the statute of limitation did not begin to run until the client of the insurance agency had suffered some actual loss or damage. The opinion does not distinguish the work of insurance agents from others who similarly render advice and services, whether they be considered "professional" or not. Nor is there any real discussion of our traditional rule for malpractice actions, as in Chapman, although one medical malpractice case is discussed.
In fact, two cases discussed and cited in the Midwest Mutual opinion as on point, and clearly relied upon by the court in reaching its conclusion regarding the limitation issue, involved damage to adjoining land resulting from the construction of a culvert, Chicago, R.I. & P. Ry. Co. v. Humphreys, 107 Ark. 330, 155 S.W. 127 (1913), and damage to property resulting from construction of a power plant, Brown v. Arkansas Central Power Co., 174 Ark. 177, 294 S.W. 709 (1927). See Midwest Mutual, supra, (quoting Faulkner v. Huie, 205 Ark. 332, 168 S.W.2d 839 (1943)). We thus conclude that the issue raised in the instant case is not controlled by Midwest Mutual, and should not be.
The appellee's reliance upon Chapman, supra, presents a similar problem, because the comment in Chapman that its decision was applicable to insurance agents is also dictum; the running of the statute of limitations for attorney malpractice was the only issue before the court. However, in Chapman, the traditional rule that the statute of limitations applicable to malpractice actions begins to run, absent concealment of the wrong, when the negligence occurs, is thoroughly discussed, and the rationale behind it is clearly appropriate to an insurance agent. Certainly, damages resulting from the negligent acts of insurance agents, like those of accountants and attorneys, will seldom occur at the time the negligent act is committed and often will only surface upon the occurrence of some subsequent event. The injury or damage from a negligently prepared will does not arise until after the testator has died. The negligence of the insurance agent in Midwest Mutual and in the instant case did not result in damages until claims were presented and coverage denied.
The appellants seek to distinguish insurance agents from the other vocations listed in Chapman, by characterizing them as "generally not professional." Even if that be the *689 case, we are not prepared to suggest, as appellants argue, that because insurance agents are not considered "professional," and do not render "professional" services, they should therefore be subject to, in effect, a longer statute of limitations than "true" professionals. Perhaps a better argument could be made for the opposite view. Also, the cases relied upon by the appellants in support of this distinction merely hold that an insurance agent does not have a duty to advise an insured with respect to different coverages. See Scott-Huff Ins. Agency v. Sandusky, 318 Ark. 613, 887 S.W.2d 516 (1994); Stokes v. Harrell, 289 Ark. 179, 711 S.W.2d 755 (1986). Insurance agents are not characterized as professional or non-professional, nor are their services compared with or distinguished from those of any other professions in reaching the holdings in Scott-Huff and Stokes. We are not persuaded that these decisions have any utility in the analysis of the limitations issue before us.
We hold that the statute of limitations for an insurance agent commences at the time the negligent act occurs, in keeping with our traditional rule in professional malpractice cases. However, in doing so, we recognize the harshness of this rule to the clients of not only insurance agents, but also of attorneys, accountants, and others who may avail themselves of this rule in defending against malpractice actions. In the instant case, the appellant participated in the preparation of his application for insurance and knew that his income had been inaccurately stated. He further had two and one half years after suffering damage from the appellee's negligence to bring legal action against him. The facts of Ford's Inc., supra present a more dramatic example of how dire the consequences of our traditional rule can be to injured persons; there, the damages did not result until after the statute of limitations had run.
In Chapman, we discussed the "current trend" cases from other jurisdictions, which have adopted several approaches more favorable to the injured partythe "discovery rule," the "date of injury rule," and the "termination of employment rule." We suggested then that any change to our long standing rule should come from the General Assembly, and we do so once more.
Retroactive application.
The appellants submit that if this Court holds the Chapman case and its reference to insurance agents to be the controlling precedent, a retroactive application of new law will result. The Chapman opinion was issued on October 28, 1991, and appellants assert it is illogical and unfair for its application to result in the running of the three year limitation period in August, 1991, two months before Chapman was decided.
We have long held that our decisions are applied retrospectivelya decision of the court, when overruled, stands as though it had never been. See Baker v. Milam, 321 Ark. 234, 900 S.W.2d 209 (1995). Appellants, however, mistakenly rely upon the decision in Wiles v. Wiles, 289 Ark. 340, 711 S.W.2d 789 (1986), as a deviation from this practice. In Wiles, we declined to permit retroactive application of a decision allowing for division of military retirement pay as marital property to a divorce and property settlement finalized nearly four years earlier. We determined that the previous holdings which did not allow such division were justifiably relied upon, and that the doctrine of res judicata would mandate against the reopening of cases already decided, a significant consideration that is not present in the instant case. Furthermore, as we said in Chapman, our limitation rules regarding malpractice actions have been applicable since 1877. See White v. Reagan, 32 Ark. 281 (1877). It is the traditional rule that we today hold to be controlling. The case of Ford's Inc. v. Russell Brown & Co., supra, was decided in 1989 upon the same rule as Chapman, and it also conflicts with the analysis in Midwest Mutual. Indeed, the dissent in Ford's Inc. made the same argument the appellants now make in the instant case.
We find there has been no change in the applicable rule and thus no "retroactive" application, because the decision in Midwest Mutual cannot be viewed as a "line of precedents" which has been relied upon. The trial court correctly applied the decisional law of *690 the Court as it existed when it decided appellant's case. Baker v. Milam, supra.
Affirmed.
GLAZE and CORBIN, JJ., dissent.
GLAZE, Justice, dissenting.
In Midwest Mutual Ins. Co. v. Ark. Nat'l Co., 260 Ark. 352, 538 S.W.2d 574 (1976), this court concluded that, where an insurance agent neglected to reinstate the insured's vehicle coverage, the statute of limitations commenced when the insured first learned he had no coverage and not the date the agent failed to obtain it. Applying that rule to the situation now before our court, Roger and Nancy Flemens, the insureds, were first notified on March 21, 1989 that their insurance agent had failed in August 1988 to obtain the disability insurance coverage they had requested. Using the March 21, 1989 date and the three-year statute of limitations, the Flemens's complaint, alleging negligence on their agent's part, was timely filed on December 13, 1991.
The majority opinion concedes that the Flemenses, in contending their action against their insurance agent was filed timely, understandably relied on this court's decision in Midwest, but the majority court then proceeds to offer reasons why the Midwest decision should not decide this case. The majority opinion falls short of overruling that decision, but it might as well have done soat least as to the Midwest court's extensive discussion of the three-year limitations statute and its application to an insurance agent's negligent acts.
Primarily, the majority court suggests Midwest's discussion of the three-year statute of limitations issue was purely dictum and for that reason, is not precedent here. I strongly disagree! In Midwest, Arkansas National had a standing agreement to insure Red Top's taxicabs effective the same day Red Top requested coverage. Arkansas National and its agent neglected to follow Red Top's request made on August 11, 1970, and as a consequence, one of Red Top's taxicabs was uninsured when it collided with a motorcycle on August 20, 1970. Robert Bratton was driving the motorcycle which was owned by Archie Lee Lowe. On May 24, 1971, Bratton and Lowe sued Red Top for personal injuries and property damage. Red Top subsequently filed a third-party complaint against its insurance agent, Arkansas National, alleging it had negligently failed to obtain insurance per the parties' agreement and Arkansas National's negligence had forced Red Top to defend against Bratton's and Lowe's lawsuit.
The trial court in Midwest dismissed Arkansas National from the lawsuit, but the remaining claims were tried, resulting in a verdict against Red Top, with Bratton and Lowe obtaining a judgment in the sum of $6,850. Afterwards, Red Top assigned to Midwest Mutual Insurance company, its "chose in action" against Arkansas National, representing Red Top's action against Arkansas National for failing to obtain the insurance coverage Red Top had requested. Based upon that assignment, Midwest filed suit against Arkansas National and its agent for the $6,850 paid Bratton and Lowe. Arkansas National conceded its agent had been negligent, but argued (1) the statute of limitations had run and (2) Red Top's assignment to Midwest was invalid. The trial court granted Arkansas National's motion for summary judgment, holding Red Top's cause of action against Arkansas National was statutorily barred by the three-year limitations, since Red Top's action accrued on August 11, 1970the date Arkansas National negligently failed to obtain Red Top's vehicle insurance coverage.
On appeal of the trial court's ruling, this court held the trial court was wrong in concluding Midwest Mutual's cause of action was barred by the statute of limitations. In fact, the Midwest court stated that "the limitations question on appeal boiled down to when Red Top's cause of action accrued against its insurance agent." Most of the court's opinion in Midwest sets out the cases and rationale it considered when deciding the trial court erred in ruling Red Top's (and therefore its assignee's, Midwest Mutual) cause of action against Arkansas National was procedurally barred by the limitations statute. Although it rejected the trial court's statute of limitations ruling, the supreme court affirmed *691 the lower court on the second defense Arkansas National had argued at trialRed Top's assignment to Midwest Mutual was invalid.
As is readily discernable from the above, the Midwest court had before it the trial court's ruling that Midwest Mutual's cause of action was barred by the three-year statute of limitations because its action commenced on the date its insurance agent negligently failed to obtain the requested insurance coverage. That legal issue was before this court on appeal, and the court addressed it, lest that trial court's erroneous ruling on the issue be perceived as valid by that trial court and possibly other trial courts and parties. Because it was essential for the court in Midwest to decide the limitations issue, that court's holding is binding authority and controls the case now before us.
The remaining remarks in the majority opinion are largely based on the erroneous assumption that the Midwest decision is dicta and not controlling here. For that reason alone, the majority court's other points can be summarily discarded. However, I mention one matter briefly. The majority court conceives of no reason why professionals, such as attorneys, doctors and certified public accountants, should be considered differently from insurance agents when construing and applying the three-year statute of limitations. While much can be said and argued to counter the majority opinion on this point, it is sufficient to say that Midwest was decided in 1976, and the General Assembly could have changed that case law so as to treat insurance agents under the same limitations rationale or rule utilized in malpractice actions against "professionals." For two decades, the General Assembly has been silent on this subject. Nor, until today's decision, has this court refused to follow Midwest.
For the foregoing reasons, I respectfully disagree with the majority opinion, and would reverse this case.
CORBIN, J., joins this dissent.
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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/2468714/
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769 F. Supp. 2d 1267 (2011)
Juanita D. BLACKMON, Plaintiff,
v.
U.S.D. 259 SCHOOL DISTRICT, Superintendent John Allison, Robert Garner, Liz Frazier, and Ken Jantz, Defendants.
Case No. 09-2546-EFM.
United States District Court, D. Kansas.
February 15, 2011.
*1268 Juanita D. Blackmon, Wichita, KS, pro se.
Sarah J. Loquist, Wichita, KS, for Defendants.
MEMORANDUM AND ORDER
ERIC F. MELGREN, District Judge.
This civil case is brought by Juanita D. Blackmon against U.S.D. 259 School District and several individuals. She broadly alleges that she was discriminated against on the basis of her race and gender. Before the Court are Defendants' Motion to Dismiss (Doc. 17), Defendants' Motion to Strike Return of Service (Doc. 28), Plaintiff's Motion for Injunctive Relief and Restraining Order against Principal Robert Garner (Doc. 41), and Plaintiff's Motion to Amend Plaintiff's Motion for Injunctive Relief and Restraining Order against Principal *1269 Robert Garner (Doc. 44). For the following reasons, the Court grants in part and denies in part Defendants' Motion to Dismiss, grants Defendants' Motion to Strike Return of Service, and denies Plaintiff's motions.
I. Factual and Procedural Background[1]
Pro se Plaintiff Juanita D. Blackmon filed a form Complaint, with an attached twelve-page typed complaint, naming U.S.D. 259Wichita Public School District ("259"), Superintendent John Allison, Robert GarnerPrincipal, Liz FrazierHR, and Ken JantzPrincipal, as Defendants. In her form complaint, she checked that she had been discriminated against on the basis of her race, gender, age, and disability. She states that she is a female African American and her disability is "pregnancypost partum depression and post traumatic stress disorder." Plaintiff also indicates that her son, age 7, has a bonafide disability and she has caregiver responsibility.
Plaintiff alleges that in 2001, she observed inappropriate conduct among male staff members while she was eight months pregnant. Upon returning from her maternity leave, there were transfer papers, and all of her personal belongings were boxed up and a family photo was missing. Plaintiff asserts that the retaliation was dormant until her daughter was attacked at school in 2005. She contends that administrators at East High School engaged in a hostility and harassment campaign creating a hostile work environment.
In 2005, Plaintiff alleges that Human Resources Director, Mary Whiteside, called Plaintiff to a reprimand meeting after Plaintiff was falsely accused of calling a student. Plaintiff allegedly requested a union representative, and Plaintiff contends that the representative, Liz Frazier, failed to represent her interests by abandoning the collective bargaining process, and Frazier then became employed by U.S.D. 259.
In 2007, Plaintiff alleges that Principal Robert Garner threw away Plaintiff's personal belongings while Plaintiff was on short-term disability. Plaintiff contends she suffered post traumatic stress syndrome as a result.
Plaintiff asserts that the discrimination occurred from 1998 through 2009, and it was a "pattern and practice." She contends that this pattern and practice (and retaliation) includes, but is not limited to: (1) disciplinary action; (2) disparate treatment; (3) lost promotions; (4) retaliation; and (5) general deterioration of the terms, conditions, and privileges of her employment. Plaintiff also states that she filed a charge of discrimination with the Kansas State Division of Human Rights and the EEOC on "2006-2008."[2]
Plaintiff filed a Charge of Discrimination in December of 2008.[3] In the charge, she alleged discrimination on the bases of race, sex, disability, and retaliation. She named the "Respondent" as "Wichita Public Schools U.S.D. 259 and its Representatives." In this charge, she asserted she was subject to discrimination and retaliation on the basis that she is a black female suffering from a disability who previously filed complaints with the KHRC. Plaintiff received a right to sue letter, dated July 27, 2009.[4]
Plaintiff filed her Complaint on October 22, 2009. She lists these causes of action: (1) Race/Sex Discrimination (Title VII and *1270 State Act); (2) Retaliation (Title VII of the Civil Rights Act); (3) Privacy Act 1974 as Amended/Conspiracy 18 U.S.C.A. United States Code 371 Section Conspiracy to Commit Offense; (4) Hostile Environment Harassment/Pregnancy Discrimination/Age Discrimination-Title VII; (5) Title 18 U.S.C. Section 242 (Deprivation of Rights under Color of Law); (6) Negligent Retention/SupervisionEEOC Filing (7) Intentional Infliction of Emotional Distress; and (8) Negligent Infliction of Emotional Distress.
Defendants filed a motion to dismiss asserting several bases for dismissal including: (1) lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) based on diversity jurisdiction; (2) lack of subject matter jurisdiction based on failure to exhaust administrative remedies; (3) insufficient service of process, resulting in lack of personal jurisdiction over all Defendants; (4) inability of Plaintiff to enforce federal criminal statutes; (5) failure to submit K.S.A. § 12-105(b) notice prior to filing state law tort claims; (6) failure to state claim upon which relief can be granted as to Plaintiff's Privacy Act of 1974 claim; and (7) failure to comply with Fed. R.Civ.P. 10. Defendants also filed a Motion to Strike Return of Service on U.S.D. 259 on the basis that the complaint was not properly served with a summons.
Plaintiff filed a Motion for Injunctive Relief and Restraining Order against Principal Robert Garner to prevent "ongoing harassment and retaliation." She also filed a motion to amend this motion but only seeks to add an additional exhibit to her original motion.
II. Defendants' Motions
A. Legal Standard
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim for relief that is plausible on its face.'"[5] "[T]he mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims."[6] "The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted."[7]
In determining whether a claim is facially plausible, the court must draw on its judicial experience and common sense.[8] All well pleaded facts in the complaint are assumed to be true and are viewed in the light most favorable to the plaintiff.[9] Allegations that merely state legal conclusions, however, need not be accepted as true.[10]
Because Plaintiff is pursuing this action pro se, the Court must be mindful of additional considerations. "A pro se litigant's pleadings are to be construed liberally and held to a less stringent standard than formal pleadings drafted by lawyers."[11] "[The] court, however, will not supply additional *1271 factual allegations to round out a plaintiff's complaint or construct a legal theory on a plaintiff's behalf."[12] "The broad reading of the plaintiff's complaint does not relieve the plaintiff of the burden of alleging sufficient facts on which a recognized legal claim could be based."[13] Plaintiff has the burden of alleging "enough facts to state a claim to relief that is plausible on its face."[14]
B. Subject Matter Jurisdiction[15]
Plaintiff alleges that she was discriminated against in violation of Title VII,[16] the ADEA, and the ADA.[17] "It is well-established that Title VII requires a plaintiff to exhaust his or her administrative remedies before filing suit."[18] In the Tenth Circuit, exhaustion of administrative remedies is a jurisdictional prerequisite.[19] This is also true for suits brought under the Kansas Act Against Discrimination ("KAAD").[20]
Defendants argue that this Court does not have subject matter jurisdiction over Plaintiff's ADEA claim or her pregnancy discrimination claim because Plaintiff did not include these claims in her administrative charge.[21] Plaintiff concedes that she did not exhaust her administrative remedies on her age claim. She argues, however, that her pregnancy discrimination claim is proper based on an incident that allegedly occurred in November 2001 in which she observed inappropriate conduct by two male staff members while Plaintiff was eight months pregnant. Plaintiff contends she filed a grievance of unfair treatment with U.S.D. 259. However, this alleged incident was not included in Plaintiff's KHRC/EEOC charge that is currently before the Court, and Plaintiff does not appear to address the fact that it was not included in her KHRC/EEOC charge.[22] As such, Plaintiff's ADEA and *1272 pregnancy discrimination claim are dismissed.
Defendants also argue that this Court does not have subject matter jurisdiction over the individual Defendants because these Defendants were not named in the charge of discrimination filed with the KHRC/EEOC.[23] Because these Defendants were not named in the KHRC charge, Defendants contend that the identity of interest test as set forth in Romero v. Union Pacific Railroad[24] is not met, and the individual Defendants should be dismissed.
The identity of interest test requires the Court to consider four factors in evaluating whether or not the party should be dismissed for failure to name him in the administrative complaint. These factors include: (1) whether the role of the unnamed party could through reasonable effort by the complainant be ascertained at the time of the filing of the EEOC complaint; (2) whether, under the circumstances, the interests of a named party are so similar as the unnamed party's that for the purpose of obtaining voluntary conciliation and compliance it would be unnecessary to include the unnamed party in the EEOC proceedings; (3) whether its absence from the EEOC proceedings resulted in actual prejudice to the interests of the unnamed party; and (4) whether the unnamed party has in some way represented to the complainant that its relationship with the complainant is to be through the named party.[25] For substantially the reasons Defendants stated in their briefing, there does not appear to be an identity of interest of the parties because none of the individual Defendants were named as the respondent in the KHRC charge, and with the exception of Robert Gardner, there is no reference to these individuals in the KHRC charge.
Furthermore, it is well established that in the Tenth Circuit "personal capacity suits against individual supervisors are inappropriate under Title VII."[26] "The relief granted under Title VII is against the employer, not individual employees whose actions would constitute a violation of the Act."[27] Although supervisors may be named in their official capacities, this is only as a means to sue the employer and "is superfluous where, as here, the employer is already subject to suit directly in its own name."[28]
In this case, Plaintiff does not designate whether she is bringing suit against these *1273 four individual Defendants in their individual or official capacities. Indeed, in designating the parties to the lawsuit in Plaintiff's typed Complaint, she only names U.S.D. 259 as a defendant. Plaintiff simply names the individual Defendants at the top of her form Complaint, and her allegations relating to the individual defendants are extremely sparse. There are simply no allegations that these individuals could be held liable. As such, these claims are dismissed against the four individual Defendants.
In summary, Plaintiff's age and pregnancy discrimination claims are dismissed for failure to exhaust administrative remedies. In addition, all of Plaintiff's discrimination/retaliation claims against the four individual Defendants are dismissed.[29]
C. Service of Process
1. U.S.D. 259
Defendants argue that U.S.D. 259 was not served properly and the Court therefore lacks personal jurisdiction. If service of process is insufficient under Federal Rules of Civil Procedure 4, a federal court is without personal jurisdiction over that defendant.[30] The burden of proof is on the plaintiff to establish the adequacy of service of process.[31]
Federal Rule of Civil Procedure 4(j)(2) provides that a state or local government may be served either by "delivering a copy of the summons and of the complaint to its chief executive office" or by "serving a copy of each in the manner prescribed by that state's law for serving a summons or like process on such a defendant." In Kansas, K.S.A. § 60-304(d) provides that service may be had on "any other public corporation, body politic, district or authority, by serving the clerk or secretary or, if the clerk or secretary is not found, any officer, director or manager thereof." When serving by certified mail, it "must be addressed to the appropriate official at the official's governmental office."[32]
Here, the docket shows that the four individual Defendants were served by personal service on December 14, 2009, although Defendants also challenge this service.[33] One of the summons was issued to "U.S.D. 259Wichita Public Schools District SuperintendentJohn Allison." Defendants indicate that it is unclear whether Plaintiff was attempting to serve Allison or U.S.D. 259. However, the proof of service provides that the summons was for John Allison. In addition, Plaintiff concedes in her response to Defendants' Motion to Dismiss that she did not properly serve Defendant U.S.D. 259 and that she would amend her service to include U.S.D. 259.
On March 9, 2010, Plaintiff filed a Return of Service of Summons indicating that the summons and complaint were served on the Clerk of the Board for Defendant U.S.D. 259 on February 9, 2010. Defendants then filed a Motion to Strike Return of Service on Wichita Public Schools (Doc. 28) asserting that although the Clerk of the Board received two envelopes from Plaintiff by certified mail on February 9th, no summons was included in either mailing.[34]
Federal Rule of Civil Procedure 4(c)(1) provides that "[a] summons must be *1274 served with a copy of the complaint. The plaintiff is responsible for having the summons and complaint served within the time allowed by Rule 4(m) and must furnish the necessary copies to the person who makes service." "[I]f the attempted service did not include a summons, service is `not merely irregular or defective but [is] a nullity.'"[35] Here, Plaintiff did not serve a summons with the complaint on the Clerk of the Board for U.S.D. 259; therefore, the attempted service was null and void.
Furthermore, the docket sheet does not indicate that an additional summons was issued for U.S.D. 259. "Because no summons has been issued, plaintiff could not have properly served defendant with the summons and a copy of the complaint."[36] Accordingly, the Return of Service is invalid because no summons was included with the complaint, and the Court grants Defendants' Motion to Strike Service.
Because the Return of Service has now been stricken as it was invalid, Defendant U.S.D. 259 has never been served. The Court, therefore, turns to Fed.R.Civ.P. 4(m). This rule provides:
If a defendant is not served within 120 days after the complaint is filed, the courton motion or on its own after notice to the plaintiffmust dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period.
The Tenth Circuit has set forth a two-step test in evaluating the failure to effect timely service under Fed.R.Civ.P. 4(m).[37] The first inquiry is "whether the plaintiff has shown good cause for the failure to timely effect service."[38] If so, the party is entitled to a mandatory extension of time.[39] Second, even if the plaintiff fails to demonstrate good cause, the district court may exercise its discretion in either allowing a permissive extension of time for service or dismissing the case without prejudice.[40]
In this case, Plaintiff did not file a response to Defendants' Motion to Strike Service.[41] She, therefore, has not specifically addressed the issue of whether good cause exists for a mandatory extension of time. To the extent she may have addressed this issue in her "surreply" to Defendants' motion to dismiss,[42] she states that she recognized she omitted serving the Clerk of the Board but this was later corrected. She also contends in *1275 general that she attempted to correctly fill out the process papers, but she lacks familiarity with the rules and procedures as a pro se litigant. The Tenth Circuit has interpreted "good cause" narrowly, and inadvertence or ignorance of the rules is insufficient.[43] As such, Plaintiff has not demonstrated good cause for a mandatory extension of time.
The Court therefore must determine whether a permissive extension is warranted. In determining whether to grant a permissive extension, several factors are appropriate to consider, including whether defendant was on notice of the lawsuit, whether defendant has been prejudiced by delay of service, and whether the applicable statute of limitations would bar the refiling of the action.[44]
In this case, the factors favor an extension of time rather than dismissal. The statute of limitations has likely run on Plaintiff's claim.[45] Fed.R.Civ.P. 4(m) directs the court to either dismiss the case without prejudice or extend time for service. If the Court dismissed Plaintiff's case, this would effectively operate as a dismissal with prejudice. This seems overly harsh in that Plaintiff, who is pro se, attempted to serve U.S.D. 259 by sending a copy of the complaint and its exhibits by certified mail but omitted sending the summons. Furthermore, it does not appear that Defendant U.S.D. 259 would be prejudiced in defending the lawsuit as the Court is only allowing the federal claims that were previously brought against this Defendant in the KHRC/EEOC charge. As such, the Court exercises its discretion in allowing Plaintiff a permissive extension of time to properly serve U.S.D. 259. Plaintiff is directed to properly serve U.S.D. 259 by March 7, 2011. If Plaintiff fails to appropriately serve Defendant U.S.D. 259, this case will be dismissed in its entirety.
2. Individual Defendants
With respect to the individual Defendants' arguments that the Court lacks personal jurisdiction over them because they were not served properly, the Court need not reach this issue. All claims against the individual Defendants are dismissed, for one reason or another, and the Court finds it unnecessary to determine whether Plaintiff's process of service on these Defendants was in substantial compliance with federal and state law.
D. Criminal Counts (Counts 3 and 5)[46]
Defendants argue that Plaintiff's two counts alleging criminal violations must be dismissed because Plaintiff, as a private citizen, cannot enforce federal criminal statutes. Plaintiff appears to concede that she cannot enforce criminal statutes. As such, these claims are dismissed.
E. Privacy Act of 1974 (Count 3)
Defendants contend that while Plaintiff's allegations are not entirely clear in her *1276 Complaint as to this count, to the extent Plaintiff is bringing this claim, it must be dismissed because the Privacy Act applies only to federal agency actions. Plaintiff responds that Defendant's motion is invalid and that she seeks to merge this count to Invasion of Privacy.[47] Defendants' assertion is correct, and from the allegations in the complaint, the Court cannot even conclude that Plaintiff intended to assert a claim under the Privacy Act of 1974. As such, this claim is dismissed.
F. State Tort Claims (Counts 6, 7, and 8)
Plaintiff asserts three state tort claims including negligent retention and supervision, intentional infliction of emotional distress, and negligent infliction of emotional distress. Defendants argue that these claims must be dismissed because Plaintiff failed to submit the notice required by K.S.A. § 12-105b prior to filing these tort claims. Pursuant to this statute, a person who has a tort claim against a municipality must file a written notice before commencing suit.[48] School districts are covered under the Kansas Tort Claims Act.[49] This notice requirement is a mandatory prerequisite for a court to exercise jurisdiction and applies both to claims against the school district and claims against a school district's employees arising out of the course and scope of their employment.[50]
In this case, Plaintiff failed to provide notice prior to bringing suit. As such, the Court dismisses these claims. Although it is unclear whether Plaintiff brought suit against the individual Defendants in their individual or official capacities, to the extent Plaintiff was bringing these claims against the individual Defendants in their individual capacities, the Court declines to exercise supplemental jurisdiction over these claims because all federal claims against these employees have been dismissed.[51] Accordingly, Plaintiff's tort claims against all Defendants are dismissed.
In summary, Plaintiff's claims 3, 5, 6, 7, and 8 are dismissed. A portion of Plaintiff's claim 4 is dismissed, including her pregnancy discrimination and age discrimination claims All claims against the individual Defendants are dismissed.
The only remaining claims are the discrimination and retaliation claims brought under Title VII (or ADA) that were raised in Plaintiff's KHRC/EEOC charge for which she received a Right to Sue letter on July 27, 2009.[52] In addition, these claims may only be brought against U.S.D. 259. However, Plaintiff must appropriately *1277 serve U.S.D. 259 with a summons and complaint by March 7, 2011. Otherwise, Plaintiff's complaint will be dismissed in its entirety.
III. Plaintiff's Motions
Plaintiff filed a motion seeking "mandatory injunctive of relief" to prevent Robert Garner from "acts of ongoing harassment and retaliation" until the matters in this case are heard and resolved. Plaintiff generally alleges that Garner has used "disciplinary meetings" to intimidate her.
A. Legal Standard
Granting or denying a temporary restraining order or other preliminary injunction rests within the sound discretion of the trial court.[53] The purpose of a temporary restraining order or preliminary injunction is "to preserve the status quo pending the outcome of the case."[54]
The standards which govern the granting of a preliminary injunction are well settled in the Tenth Circuit. The moving party must establish: "(1) it is substantially likely to succeed on the merits; (2) it will suffer irreparable injury if the injunction is denied; (3) its threatened injury outweighs the injury the opposing party will suffer under the injunction; and (4) the injunction would not be adverse to the public interest."[55]
A movant has the burden to establish by clear proof its right to a preliminary injunction. Mere allegations are insufficient. A preliminary injunction is an extraordinary remedy that is an exception rather than the rule, and courts do not grant it as a matter of right.[56]
Plaintiff does not meet any of the criteria to obtain injunctive relief. As such, Plaintiff's motion is denied.
Plaintiff also filed a motion to amend her motion for injunctive relief to include an exhibit detailing the "disciplinary meetings." The additional exhibit does not assist Plaintiff in addressing the criteria for an injunction or temporary restraining order. Accordingly, Plaintiff's motion is denied.
IT IS ACCORDINGLY ORDERED that Defendants' Motion to Dismiss (Doc. 17) is GRANTED IN PART and DENIED IN PART. Plaintiff must appropriately serve Defendant U.S.D. 259 by March 7, 2011.
IT IS FURTHER ORDERED that Defendants' Motion to Strike Return of Service (Doc. 28) is GRANTED.
IT IS FURTHER ORDERED that Plaintiff's Motion for Injunctive Relief and Restraining Order against Principal Robert Garner (Doc. 41) is DENIED.
IT IS FURTHER ORDERED that Plaintiff's Motion to Amend Plaintiff's Motion for Injunctive Relief and Restraining Order against Principal Robert Garner (Doc. 44) is DENIED.
IT IS SO ORDERED.
NOTES
[1] For the purposes of this Order, the Court assumes the truth of these facts.
[2] Plaintiff checked both yes and no that the she filed with the EEOC.
[3] Defendants attached the discrimination charge to their Motion to Dismiss.
[4] Plaintiff attached this to her Complaint.
[5] Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)).
[6] Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir.2007).
[7] Dubbs v. Head Start, Inc., 336 F.3d 1194, 1201 (10th Cir.2003).
[8] Iqbal, 129 S.Ct. at 1950.
[9] See Zinermon v. Burch, 494 U.S. 113, 118, 110 S. Ct. 975, 108 L. Ed. 2d 100 (1990); Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir.1984).
[10] See Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir.1991).
[11] Id.
[12] Whitney v. New Mexico, 113 F.3d 1170, 1173-74 (10th Cir.1997) (citation omitted).
[13] Hall, 935 F.2d at 1110.
[14] Twombly, 550 U.S. at 570, 127 S. Ct. 1955.
[15] Defendants argue that Plaintiff has failed to clearly allege the basis for the Court's jurisdiction in her Complaint and that Plaintiff indicated in her Civil Cover Sheet that she is asserting subject matter jurisdiction on the basis of diversity. Defendants contend that the Court should dismiss the complaint for lack of subject matter jurisdiction because the parties are not diverse. Defendants' argument is without merit because the Court finds it clear that Plaintiff alleges federal claims which give rise to its jurisdiction under 28 U.S.C. § 1331. The Court is also cognizant that Plaintiff's state law claims are only covered pursuant to supplemental jurisdiction under 28 U.S.C. § 1367.
[16] Plaintiff alleges discrimination on the basis of her race and gender. Plaintiff also references "State Act." She also brings a pregnancy discrimination claim, and this would fall under Title VII.
[17] These are claims 1, 2, and 4 in Plaintiff's complaint.
[18] Shikles v. Sprint/United Mgmt. Co., 426 F.3d 1304, 1317 (10th Cir.2005). Under Rule 12(b)(1), the Court may look beyond the Complaint when the movant challenges the facts upon which subject matter jurisdiction is based. Paper, Allied-Indus., Chem. & Energy Workers Int'l Union v. Cont'l Carbon., 428 F.3d 1285, 1292 (10th Cir.2005). The Tenth Circuit has found that the exhaustion issue is not intertwined with the merits of a Title VII Complaint. Sizova v. Nat'l Inst, of Stands. & Tech., 282 F.3d 1320, 1324-25 (10th Cir. 2002). As such, although the Court is looking beyond the pleadings to determine subject matter jurisdiction, the Court is not required to convert the motion to one for summary judgment. Id.
[19] Shikles, 426 F.3d at 1317.
[20] Sandlin v. Roche Laboratories, Inc., 268 Kan. 79, 88, 991 P.2d 883, 889 (1999).
[21] These claims are included within Plaintiff's claim 4.
[22] It appears that Plaintiff previously filed two previous KHRC/EEOC charges on December 20, 2005 and June 10, 2007. Plaintiff's pregnancy discrimination allegation was also not the subject of the previous charges.
[23] The analysis as to whether the Court has subject matter jurisdiction over the individual Defendants is only applicable to Plaintiff's claims that require exhaustion prior to bringing suit, and it is not applicable to Plaintiff's claims that do not require exhaustion (i.e., her criminal counts, privacy claim, or state law tort claims). In addition, because the Court already dismissed Plaintiff's pregnancy and age discrimination claims, it is only applicable to the remaining Title VII and ADA claims (claims 1, 2, and a portion of claim 4).
[24] 615 F.2d 1303 (10th Cir. 1980).
[25] Id. at 1311-12.
[26] Haynes v. Williams, 88 F.3d 898, 901 (10th Cir. 1996); Sauers v. Salt Lake Cnty., 1 F.3d 1122, 1125 (10th Cir.1993); see also Butler v. City of Prairie Village, Kan., 172 F.3d 736, 743-44 (10th Cir. 1999) (determining that "the ADA precludes personal capacity suits against individuals who do not otherwise qualify as employers under the statutory definition.").
[27] Haynes, 88 F.3d at 899 (emphasis in original). "[W]hether supervisors are subject to suit under Title VII is a matter of jurisdiction, since it concerns who qualifies as an `employer' under the statute." Lewis v. Four B Corp., 211 Fed.Appx. 663, 665 n. 1 (10th Cir.2005) (citing Ferroni v. Teamsters, Chauffeurs & Warehousemen Local No. 222, 297 F.3d 1146, 1151 (10th Cir.2002)).
[28] Id. at 665 n. 2.
[29] This includes Plaintiff's Title VII, ADA, and state law discrimination or retaliation claims (claims 1, 2 and 4).
[30] Oltremari v. Kan. Soc. & Rehab. Serv., 871 F. Supp. 1331, 1348 (D.Kan.1994).
[31] Id. at 1349.
[32] K.S.A. § 60-304(d).
[33] The Court will address this is in a later section.
[34] One envelope contained the complaint, while the other contained exhibits to the complaint.
[35] Burnham v. Humphrey Hospitality Reit Trust, Inc., 403 F.3d 709, 716 (10th Cir.2005) (citing Cook v. Cook, 32 Kan. App. 2d 214, 222, 83 P.3d 1243, 1248 (2003)).
[36] Quarles v. Williams, 2004 WL 2378840, at *1 (D.Kan. Oct. 21, 2004).
[37] Espinoza v. United States, 52 F.3d 838, 841 (10th Cir. 1995).
[38] Id.
[39] Id.
[40] Id.
[41] A pro se litigant is not excused from complying with the rules of the Court and is subject to the consequences of noncompliance. Ogden v. San Juan Cnty., 32 F.3d 452, 455 (10th Cir.1994) (citing Nielsen v. Price, 17 F.3d 1276, 1277 (10th Cir.1994) (insisting that pro se litigants follow procedural rules and citing various cases dismissing pro se cases for failure to comply with the rules)). When a party fails to timely file a response, the Court will consider and decide the motion as an uncontested motion, and ordinarily, will grant the motion without further notice. D. Kan. R. 7.4(b). In this case, the Court will address the merits of Defendants' motion to strike return of service as it has a bearing on Defendants' Motion to Dismiss.
[42] Plaintiff's "surreply" to Defendants' Motion to Dismiss was filed after Defendants' Motion to Strike Service.
[43] In re Kirkland, 86 F.3d 172, 174 (10th Cir. 1996).
[44] Mehus v. Emporia State Univ., 295 F. Supp. 2d 1258, 1273-74 (D.Kan.2004) (citing Espinoza, 52 F.3d at 842 (quoting Fed. R.Civ.P. 4(m) advisory committee's note (1993))); see also Searles v. Werholtz, 2010 WL 4861123, at *3 (D.Kan. Nov. 16, 2010) (citations omitted).
[45] With respect to Plaintiff's Title VII and/or ADA claims, a plaintiff must bring suit within 90 days of receiving a Right to Sue Letter. In this case, Plaintiff filed her lawsuit within this timeframe, but the time has run for her to bring suit if she were to file her complaint now.
[46] Count 3 appears to contain two claims: "Privacy Act 1974 as Amended" and Conspiracy 18 U.S.C.A. United States Code 371 Section Conspiracy to Commit Offense."
[47] To the extent Plaintiff tried to assert additional or different claims in her response to Defendant's motion to dismiss, these claims are not allowed.
[48] See K.S.A. § 12-105b(d).
[49] K.S.A. § 75-6102(b); Jackson v. U.S.D. 259, 268 Kan. 319, 322-23, 995 P.2d 844, 847 (2000).
[50] Orr v. Heiman, 270 Kan. 109, 112, 12 P.3d 387, 389 (2000) (citations omitted).
[51] See, e.g., 28 U.S.C. § 1367(c).
[52] Defendants contend that if the Court does not dismiss the complaint in its entirety that Plaintiff should be required to file an amended complaint because her complaint fails to comply with Fed.R.Civ.P. 10(b). That rule provides that "[a] party must state its claims or defenses in numbered paragraphs, each limited as far as practicable to a single set of circumstances." The Court declines to require Plaintiff to submit an amended complaint. In this order, the Court has set forth the claims that are remaining in Plaintiff's complaint against U.S.D. 259. Although Plaintiff's complaint is not entirely clear, the allegations (as well as the KHRC charge) put Defendant on notice as to the claims she is bringing.
[53] Beltronics USA, Inc. v. Midwest Inventory Distrib., LLC, 562 F.3d 1067, 1070 (10th Cir. 2009).
[54] Tri-State Generation & Transmission Ass'n., Inc. v. Shoshone River Power, Inc., 805 F.2d 351, 355 (10th Cir.1986).
[55] Beltronics, 562 F.3d at 1070.
[56] Beltronics, 562 F.3d at 1070.
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915 S.W.2d 118 (1996)
In the Matter of M.C., a Minor.
No. 04-94-00584-CV.
Court of Appeals of Texas, San Antonio.
January 10, 1996.
Allen F. Cazier, Law Offices of Allen Cazier, San Antonio, TX, for Appellant.
Daniel Thornberry, Assistant Criminal District Attorney, San Antonio, TX, for Appellee.
Before LÓPEZ, GREEN and DUNCAN, JJ.
OPINION
LÓPEZ, Justice.
Our opinion dated November 8, 1995 is withdrawn and the following is issued pursuant to appellant's motion for rehearing.
M.C., a sixteen year old pregnant juvenile, challenges a trial court order denying her writ of habeas corpus from temporary detention in the Bexar County Juvenile Detention Center. In her habeas writ, M.C. alleged that she should be immediately released because the detention center had not been properly certified in 1994. M.C. also contended that she was being confined illegally because the facility was not in compliance with the minimum standards set forth by the Texas Juvenile Probation Commission. We affirm the decision of the trial court to deny relief pursuant to M.C.'s writ of habeas corpus.
*119 The State responded to M.C.'s assertions, first with questions regarding this court's jurisdiction to hear the appeal, and then requesting we uphold the trial court's ruling on the merits of the habeas corpus.
Although a detention order under section 54.01 of the Texas Family Code is an interlocutory order and not appealable, In re J.L.D., 704 S.W.2d 395, 396 (Tex.App.-Corpus Christi 1985, no writ), M.C. is appealing the trial court's ruling after a hearing in which the merits of her habeas corpus petition were fully addressed. See Ex parte Hargett, 819 S.W.2d 866, 868-69 (Tex.Crim. App.1991); Ex parte Martell, 901 S.W.2d 754, 755 (Tex.App.-San Antonio 1995, n.w.h.). Under these circumstances, this court has jurisdiction to address the merits of the habeas ruling.
Because M.C. was no longer being detained when the appeal was perfected, the State contends that the issue is moot. Appellant admitted, in response to a show cause order issued by this court that the issue was indeed moot and that she probably did not have standing to bring an appeal. Our role does not include delivering advisory opinions in cases that are moot or where there is no present, live controversy. Camarena v. Texas Employment Comm'n, 754 S.W.2d 149, 151 (Tex.1988); Firemen's Ins. Co. v. Burch, 442 S.W.2d 331, 333 (Tex.1968). However, there are two exceptions to the mootness doctrine: 1) capable of repetition but evading review, and 2) collateral consequences doctrine. General Land Office v. OXY U.S.A., Inc., 789 S.W.2d 569, 571-72 (Tex.1990). The first exception applies when an action is of such short duration that review cannot be obtained before the issue becomes moot. Id.
The issues raised in the habeas petition are recurring for a class of juveniles and review would be continually evaded because each detention decision only lasts for a period of ten days. Because M.C. is on probation and she could again find herself in the exact situation, these circumstances fall under the "capable of repetition but evading review" exception to the mootness doctrine. See Id. Therefore, we find that this court has jurisdiction to hear the appeal.
In point of error one, M.C. asserts that the trial court erred in finding that the detention center was properly certified. The certification document in evidence was to approve the facility in 1994 and included the signatures of the juvenile court judge and thirteen of the other nineteen Bexar County district judges. M.C. contends that the signature of each of the twenty judges was required for proper certification.
In ruling on a writ of habeas corpus, the trial court is presumed to have acted correctly. Ex Parte Huddleston, 149 Tex. Crim. 388, 194 S.W.2d 401, 405 (1946) (opinion on rehearing). The applicant must affirmatively show entitlement to the requested relief. Ex Parte Hightower, 877 S.W.2d 17, 20 (Tex. App.-Dallas 1994, writ dism'd w.o.j.). The trial court held a hearing on the habeas petition and denied relief, concluding that the detention center was properly certified and that the overcrowded conditions were unavoidable.
Detention for juveniles is governed by section 51.12 of the Texas Family Code, requiring certification annually that a facility is appropriate:
(c) In each county, the judge of the juvenile court and the members of the juvenile board shall personally inspect the detention facilities at least annually and shall certify in writing to the authorities responsible for operating and giving financial support to the facilities that they are suitable or unsuitable for the detention in accordance with:
. . . . .
(3) recognized professional standards for the detention of children deemed appropriate by the board, which may include minimum standards promulgated by the Texas Juvenile Probation Commission. The juvenile board shall annually provide to the Texas Juvenile Probation Commission a copy of the standards used under this section.
TEX.FAM.CODE ANN. § 51.12 (Vernon 1986). Appellant argues that this statute requires each board member, individually, to inspect the facility and certify that it is appropriate. Appellant points us to no authority that specifies *120 this interpretation. The only authority cited deals with a case where habeas relief was granted by the appellate court when the juvenile was held in an adult county jail and no juvenile facility had been certified for the county. See In re G.T.H., 541 S.W.2d 527, 527 (Tex.App.-Eastland 1976, no writ).
"Juvenile board" is defined as "a body established by law to provide juvenile probation services to a county." TEX.HUM.RES. CODE ANN. § 141.002(4) (Vernon 1990). Public bodies or entities often act by majority vote and in fact, are given statutory authority to do so. See TEX.GOV'T CODE ANN. § 311.013 (Vernon 1988).
We find that M.C.'s interpretation of the certification statute contradicts legislative intent to have a juvenile board act as an entity. See TEX.GOV'T CODE ANN. § 311.013 (Vernon 1988). Furthermore, we distinguish In re G.T.H. from the circumstances before us, and refuse to extend the reasoning in that case, as doing so would lead to an absurd result. A finding that the facility was not properly certified would have required the release of all juveniles being detained while the 1994 certification order was in effect. Furthermore, the certification document for 1995, included in the record, does include all twenty signatures.
Although we agree with appellant that the most appropriate process is to have the written approval of all Board members, without a clear statutory requirement, we decline to assert the suggested interpretation of the statute. Therefore, we uphold the trial court's finding that the Bexar County Juvenile Detention Center was properly certified. Point of error one is overruled.
M.C. next contends, in point of error two, that the detention center did not meet the minimum requirements to detain juveniles.
The minimum standards adopted by the Bexar County Juvenile Board are set forth in 37 Texas Administrative Code § 343. The physical facilities requirement includes:
(4) Population. The population in housing and living units does not exceed the rated capacity of the facility. Written policies specify procedures to be followed in case the maximum capacity is unavoidably exceeded. The superintendent reviews these plans annually and updates them as necessary.
37 TEX.ADMIN.CODE § 343.8 (West 1995).
There is no dispute that the detention center was overpopulated during the time M.C. was detained. The statute does not, however, provide for release of a juvenile due to overcrowding. In certifying the detention center, the Board found the facility was operated "in accordance with recognized professional standards for the detention of children...." Furthermore, there is no evidence in the record that M.C. met her burden of showing that the overcrowding was not unavoidable and that written policies for coping with the situation were not followed. Therefore, M.C. did not establish that habeas relief was warranted due to overcrowding. See Ex Parte Hightower, 877 S.W.2d at 20. We find that the trial court acted correctly in denying habeas relief based on the overcrowded condition of the detention center. Point of error two is overruled.
The order of the trial court is affirmed.
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915 S.W.2d 562 (1995)
Robert J. TOLLETT, et ux, Patricia Tollett, Relators
v.
The Honorable Frank T. CARMONA, Judge, 122nd Judicial District, Galveston County, Texas, Respondent.
No. 14-95-01196-CV.
Court of Appeals of Texas, Houston (14th Dist.).
December 21, 1995.
*563 Kenneth C. Kaye, League City, for appellants.
Charles A. Daughtry, Houston, for appellee.
Before LEE, HUDSON and EDELMAN, JJ.
OPINION
EDELMAN, Justice.
Relators seek a mandamus on the grounds that the trial court abused its discretion in appointing a master in this case. We conditionally grant the writ.
In 1990, relators sued the real party in interest, The Wharf at Clear Lake Maintenance Association, for damages allegedly caused to the foundation of relators' residence by a bulkhead failure. Judge Henry G. Dalehite presided over this case as Judge of the 122nd District Court until his retirement on December 31, 1994. Respondent, Judge Frank T. Carmona, then succeeded Judge Dalehite as Judge of the 122nd District Court.
On April 18, 1995, this case was set for trial on October 23, 1995. On April 25, Judge Carmona appointed Judge Dalehite as visiting judge in this case. Relators objected to this appointment on May 24,[1] and Judge Dalehite did not act as visiting judge.
At a hearing on August 30, Judge Carmona announced either that he might appoint a master or would appoint a master,[2] without specifying whom, to which neither party objected. On September 27, Judge Carmona sua sponte appointed Judge Dalehite as master for discovery in this case with costs to be split between the parties. That same day, the court's trial coordinator advised relators of this appointment by phone.
A hearing on various discovery matters was thereafter set on October 6, then reset by agreement to October 12.[3] On October 11, relators filed a motion to reconsider the appointment of Judge Dalehite as master. This motion asserted, among other things, that the requirements of Texas Rule of Civil Procedure 171 for appointment of a master had not been satisfied.[4] At a hearing that day, the trial court denied this motion.
On October 12, relator filed a motion for leave to file petition for writ of mandamus in this Court. See Tex.Gov't Code Ann. § 22.221 (Vernon 1988). We granted leave and stayed the appointment of Judge Dalehite as master until final decision of this court on relator's petition for writ of mandamus.
Relators claim that the appointment of Judge Dalehite was improper because (1) it did not meet the requirements of Texas Rule of Civil Procedure 171, and (2) the appointment of Judge Dalehite as master, in effect, "side-stepped" their objection to him as a visiting judge. In the alternative, relators *564 contend that if the appointment was proper, the master's fees should be taxed as costs.
The real party in interest asserts that mandamus should be denied because (1) relators were guilty of laches in delaying to object to the appointment of the master, (2) relators actually objected only to Judge Dalehite, not to the appointment of a master generally, and Rule 171 does not provide for objection to the person appointed as master, and (3) assessing the cost of the master's fees can be remedied on appeal.
The appointment of a master lies within the sound discretion of the trial court and should not be reversed except for a clear abuse of that discretion. Simpson v. Canales, 806 S.W.2d 802, 811 (Tex.1991). As demonstrated by Simpson, the appointment of a master is reviewable by mandamus.
Trial courts may appoint masters only "in exceptional cases, for good cause." TEX. R.CIV.P. 171. In Simpson after reviewing the legal history concerning appointment of masters, the Texas Supreme Court stated that "[c]enturies of experience counsel against the use of masters except in limited circumstances. We therefore conclude that every referral to a master, unless authorized by statute or consented to by the parties,[[5]] must comply with Rule 171." 806 S.W.2d at 810. Rule 171 is not satisfied merely by showing that a case is "complicated or time-consuming or that the court is busy." Id. at 811.
Simpson was a toxic tort case involving one plaintiff and eighteen defendants. Id. Although eight discovery motions had been filed in the first ten months of the case, none were especially complex, and the trial court had not heard any of them before appointing a master. Id. Moreover, although the case was undoubtedly more complicated than many on the trial court's docket, it was not exceptional or even uncommon among the trial courts of the state. Id.
Even if the case had been exceptional, a blanket delegation of all discovery in a case to a master is much more difficult to justify than reference of a single issue, and would be warranted only in a truly exceptional case. Id. at 811-12. Absent a showing that future discovery would justify supervision by a master rather than the court, the parties in Simpson had been ordered to pay for resolution of issues by a master that litigants in other cases could obtain from the court without such expense. Id. at 812. Therefore, finding that the case was not exceptional and that good cause was not shown, the Texas Supreme Court held that the trial court abused its discretion in referring all discovery matters to a master, and granted the writ of mandamus. Id. at 812; see also Academy of Model Aeronautics, Inc. v. Packer, 860 S.W.2d 419 (Tex.1993).
The present case is even less complicated than Simpson. It involves two plaintiffs, who are husband and wife, and one defendant. Relators sued the defendant for damage allegedly caused to the foundation of their residence by a bulkhead failure. There are six pending discovery motions. Neither party argues that the case or the discovery motions are especially complicated.[6] Under these circumstances and pursuant to Rule 171 and Simpson, we conclude that this case is not exceptional, and that good cause was not shown to refer discovery matters to a master.
As to the claim that relators' delay in objecting to the appointment, in effect, waived any error, we first observe that, unlike Section 74.053 of the Texas Government Code, which limits the time in which an objection must be made to assignment of a visiting judge, Rule 171 does not specify a time period for objecting to appointment of a master. The First Court of Appeals has held, by reference to relevant federal decisions,[7]*565 that a party may object to appointment of a master either before participating in any proceedings before the master, or before the parties, master and trial court have acted in reliance on the appointment.[8]See Owens-Corning Fiberglas Corp. v. Caldwell, 830 S.W.2d 622, 625 (Tex.App.-Houston [1st Dist.] 1991, orig. proceeding).
In light of the Texas Supreme Court's statement in Simpson that "every referral to a master, unless authorized by statute or consented to by the parties, must comply with Rule 171,"[9] it is not certain that a failure to comply with Rule 171 can be waived.[10] However, to the extent that waiver is possible, we agree with the rule articulated by the First Court, and would only clarify that, in order to effect waiver, reliance must be reasonable and justified.
In applying this rule to the present case, it is clear that relators objected to the appointment before participating in any proceeding before the master. However, the real party in interest asserts that the trial judge's reliance on the appointment of the master rendered relators' objection untimely. In his affidavit in support of the real party in interest's response, Judge Carmona stated that (a) since neither party objected to appointment of a master when he announced his intention to do so on August 30 or when he specifically appointed Judge Dalehite as master on September 27, he assumed that the master's handling of the discovery disputes would enable the five-year-old case to proceed to trial, as scheduled, on October 23, and that he could thus turn his attention to other matters, and (b) when relators' objection was eventually made on October 11, he was in the midst of a death penalty trial, and, thus, could not consider the discovery matters himself in time for the case to be tried on October 23.
Unlike an objection to a visiting judge, which is an absolute disqualification,[11] an objection to a special master is within the trial judge's discretion to grant or deny. Simpson, 806 S.W.2d at 811. In a particular case, an objection to the appointment of a master might be based on non-compliance with Rule 171, or on the particular characteristics of the individual appointed to serve, such as qualifications or conflict of interest.
In this case, it is arguable that when the trial judge announced on August 30 his intention to appoint an unnamed master, the relators were obliged to promptly assert any objection they had based on Rule 171, since that issue was unrelated to the identity of the master. It is further arguable that by September 27, when the master was named, the relators, having theretofore waived any objection based on Rule 171, were limited to objecting only to the particular master chosen. In addition, because the master was named less than 30 days before trial, and the first hearing before him would be even closer to trial, their two-week delay in objecting to him arguably also waived that objection.
However, because the law strongly disfavors the use of masters, we do not believe that masters can be imposed upon parties in such a circuitous manner. Because the appointment of a master in this case was made in two steps, on August 30 and September 27, because the trial court's August 30 pronouncement *566 was not confirmed in writing and no indication was given when the master would be named, because the appointment was completed so close to the date of trial, and because the trial judge, parties and master all knew of the relators' objection to Judge Dalehite's further participation in the case based on their objection to him as a visiting judge, we do not believe that any reliance on the master's appointment in this case was reasonable or justified. We therefore conclude that relators' objection to the appointment of the master was not waived.
Because we have concluded that Rule 171 was not satisfied in this case and that the relators timely objected to the appointment of the master on that basis, we need not address the other points raised by the parties. We conditionally grant relators' petition for writ of mandamus, and direct Judge Carmona to vacate his order of September 27, 1995, appointing Judge Dalehite as master of discovery in this case. We are confident Judge Carmona will promptly do so, and a writ will issue only if he does not.
NOTES
[1] See TEX.GOV'T CODE ANN. § 74.053 (Vernon Supp. 1995).
[2] The parties differ as to what Judge Carmona stated in this regard, and it is not reflected in an order, docket entry or otherwise in the record.
[3] It is not indicated in the record when relators learned that Judge Dalehite would preside over this hearing, although this might have been apparent from the circumstances when they were informed on October 4 of the October 6 hearing.
[4] Although designated as a motion to reconsider, it was, in substance, an objection to the appointment. See TEX.R.CIV.P. 171.
[5] Since the issue was not raised in Simpson, the opinion in that case does not indicate whether such consent must comply with Texas Rule of Civil Procedure 11 to be enforceable, or whether mere acquiescence by the parties, i.e., of the type alleged in this case, would suffice.
[6] Based on the age of this case and the fact that it was set for trial on October 23, the lack of a showing that future discovery would justify the expense of supervision by a master rather than the court is not a material consideration here.
[7] See, e.g., Burlington N.R.R. v. Washington Dep't of Revenue, 934 F.2d 1064, 1069 (9th Cir.1991); Cruz v. Hauck, 515 F.2d 322, 331 (5th Cir.1975), cert. denied, 424 U.S. 917, 96 S. Ct. 1118, 47 L. Ed. 2d 322 (1976); First Iowa Hydro Elec. Coop. v. Iowa-Illinois Gas & Elec. Co., 245 F.2d 613, 627 (8th Cir.), cert. denied, 355 U.S. 871, 78 S. Ct. 122, 2 L. Ed. 2d 76 (1957); United States v. Conservation Chem. Co., 106 F.R.D. 210 (W.D.Mo.1985).
[8] Such reliance was present, for example, in Conservation Chemical where the master had taken leave of absence from a teaching position, the court had set its civil and criminal dockets, extensive timetables had been created for motion practice before the master, and the master was to hold continuous hearings. See 106 F.R.D. at 229.
[9] 806 S.W.2d at 810 (emphasis added).
[10] Policy considerations would favor the application of waiver to prevent parties from withholding objections to gain tactical advantage, such as disruption of trial settings or scheduling orders. Similarly, no useful purpose would be served in allowing objections to appointment of masters to be made for the first time on appeal.
[11] See TEX.GOV'T CODE ANN. § 74.053(c) (Vernon Supp.1995).
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16 So. 3d 142 (2009)
ZAKHARY
v.
GIAMMARCO.
No. 2D08-2822.
District Court of Appeal of Florida, Second District.
March 27, 2009.
Decision without published opinion Affirmed.
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915 S.W.2d 384 (1996)
Christian G. EBERSPACHER, Appellant,
v.
STATE of Missouri, Respondent.
No. WD 51612.
Missouri Court of Appeals, Western District.
February 13, 1996.
*385 Emmett D. Queener, Office of the State Public Defender, Columbia, for appellant.
Jeremiah W. (Jay) Nixon, Atty. Gen., Kurt U. Schaefer, Asst. Atty. Gen., Jefferson City, for respondent.
Before FENNER, C.J., P.J., and LOWENSTEIN and HANNA, JJ.
FENNER, Chief Judge.
On May 6, 1994, Christian Eberspacher was charged by information with three counts of rape, § 566.030, RSMo 1994. On July 14, 1994, he entered a plea of not guilty and not guilty by reason of mental disease or defect, and a mental examination was ordered. The mental examination report was filed with the trial court on September 1, 1994.
On October 21, 1994, the trial court determined from the report that Eberspacher did not have a mental disease or defect and declared him competent to proceed. Eberspacher withdrew his previous plea and entered *386 a plea of guilty to one count of rape.[1] On November 16, 1994, the court sentenced him to life imprisonment.
On January 9, 1995, Eberspacher filed a pro se Rule 24.035 motion for post-conviction relief. An amended motion was filed on his behalf by appointed counsel alleging that trial counsel was ineffective. The motion court denied Eberspacher's motion for post-conviction relief without an evidentiary hearing on July 25, 1995, and this appeal followed.
In his sole point on appeal, Eberspacher claims that the motion court erred in denying his Rule 24.035 motion without an evidentiary hearing. He contends that his counsel was ineffective in failing to investigate witnesses in preparation for his defense.
Appellate review of a motion court's denial of a Rule 24.035 motion is limited to a determination of whether the findings of fact and conclusions of law of the court were clearly erroneous. Yoakum v. State, 849 S.W.2d 685, 687 (Mo.App.1993); Rule 24.035(j). The motion court's findings and conclusions will be deemed clearly erroneous only if a review of the entire record leaves the reviewing court with a firm and definite impression that a mistake has been made. Id.
To establish an ineffective assistance of counsel claim, a convicted defendant must show that (1) his attorney's performance was deficient in that he failed to exercise the customary skill and diligence that a reasonably competent attorney would perform under similar circumstances and (2) the deficient performance prejudiced the defense. Strickland v. Washington, 466 U.S. 668, 687, 104 S. Ct. 2052, 2064, 80 L. Ed. 2d 674 (1984). For a defendant convicted as a result of a guilty plea to satisfy the prejudice requirement, he must prove that, but for the errors of counsel, he would not have pleaded guilty and would have demanded a trial. Hill v. Lockhart, 474 U.S. 52, 58, 106 S. Ct. 366, 370, 88 L. Ed. 2d 203 (1985). When a conviction results from a plea of guilty, any claim of ineffective assistance of counsel is immaterial except to the extent that it impinges upon the voluntariness and knowledge with which the plea was made. Hagan v. State, 836 S.W.2d 459, 463 (Mo. banc 1992).
Generally, the entry of a plea of guilty waives any future complaints a defendant may have regarding counsel's failure to investigate. Yoakum, 849 S.W.2d at 688. To prevail on a claim of ineffective assistance of counsel for failure to investigate, a defendant must specifically describe the information counsel failed to discover, allege that a reasonable investigation would have lead to the discovery of the information, and prove that the information would have aided his defense. Id. A defendant who repeatedly assures the court at his guilty plea and sentencing hearings that he is satisfied with his counsel's performance is barred from obtaining post-conviction relief based on ineffective assistance of counsel. Hamilton v. State, 865 S.W.2d 374, 375 (Mo.App.1993). Furthermore, if the ineffective assistance of counsel claim is refuted by the record, the defendant is not entitled to an evidentiary hearing on his postconviction motion. Id.
In this case, the record clearly indicates that Eberspacher's plea was knowingly and voluntarily made. His own testimony refutes his claim of ineffective assistance of counsel. At the sentencing hearing, Eberspacher testified that he was satisfied with his counsel's performance and that she had done everything he had asked her to do. At the plea hearing, Eberspacher testified that he agreed with the result of the mental examination and desired to withdraw his previous plea and enter a plea of guilt to Count I. He admitted his guilt to the charge of rape contained in Count I and agreed with the factual basis of the case presented by the State. He testified that he was not threatened, coerced, or forced to plead guilty and that his plea was voluntary. He understood his rights, the effect of his waiver of those rights, and the consequences of his guilty plea. Eberspacher further specifically stated at the plea hearing that he understood that *387 by entering a plea of guilty that he waived his right to call witnesses on his behalf. Such a statement is specific enough to refute conclusively Eberspacher's allegation of ineffective assistance for failing to investigate witnesses. Counsel could not have been ineffective for failing to investigate witnesses that Eberspacher did not wish to present. See State v. Driver, 912 S.W.2d 52 (Mo. banc 1995).
Additionally, Eberspacher failed to specifically describe the information his attorney failed to discover or how this information would have aided his defense. In his amended motion, he alleged that his supervisor, co-workers, family, and friends had knowledge of his character, the victim's character, and the relationship between him and the victim. He, however, failed to specifically describe this information or to allege how this information would have resulted in his choosing to proceed to trial instead of pleading guilty. The motion court, therefore, did not err in denying Eberspacher's motion for post-conviction relief without an evidentiary hearing.
The judgment of the motion court is affirmed.
All concur.
NOTES
[1] Upon his plea of guilty to Count I, the State agreed to dismiss the remaining two counts of the information.
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320 F.Supp.2d 454 (2004)
Jagdev S. BAJWA, Plaintiff,
v.
SUNOCO, INC. Defendant.
No. CIV. 1:03CV1085.
United States District Court, E.D. Virginia, Alexandria Division.
May 26, 2004.
*455 *456 W. MacCauley Arnold, Fairfax, VA, for Plaintiff.
Michael Lockerby, Richmond, VA, for Defendant.
MEMORANDUM OPINION
CACHERIS, District Judge.
Plaintiff Bajwa, a gas station franchisor, brought this action against Defendant Sunoco, Inc. for an alleged breach of a franchise agreement and for compensation in connection with the Commonwealth's purchase of the property. This matter comes before the Court on Defendant's Renewed Motion for Summary Judgment. The issue is whether the sale price paid by Commonwealth to Sunoco contained a "separate award" for the value of Bajwa's leasehold. The Court concludes that it did not and and will grant the Defendant's motion.
I. Background
The Court will briefly review the facts giving rise to this case. On April 11, 2001, Bajwa and Sunoco entered into a Dealer Franchise Agreement (the "Agreement"), under which Bajwa would operate a Sunoco gas station at 5928 Richmond Highway, Alexandria, VA 22303 (the "Property"). (Def.Ex. 1.) The term of the contract extended from May 22, 2001 to May 21, 2004. (Id.) At all times relevant to this action, Bajwa operated the gas station in compliance with the terms of the lease.
The Agreement contained a condemnation clause. Part III, paragraph 3.06 of the Agreement provides:
a. Should Premises in whole or in part, be condemned or otherwise taken pursuant to power of eminent domain, Company may terminate this Franchise at any time thereafter upon notice to Dealer
b. Dealer shall have no claim to any portion of a condemnation award payable to Company arising from any such taking or from damages to Premises resulting therefrom however Dealer may be entitled to any separate award payable to Dealer for taking of Dealer's leasehold interest, loss of business opportunity, or goodwill.
(Def. Ex. 1 at 13.)[1]
On July 10, 2002, the Virginia Department of Transportation ("VDOT"), through its contractor, the Terra Company, Inc.,[2] notified Sunoco that the property would be "affected by the widening of the right of way" for the Woodrow Wilson Bridge. (Def. Ex. 2.) By letter of December 16, 2002, Terra offered to buy the property for $1,650,000. (Def. Ex. 3.) The letter informed Sunoco that its property was in the "fee take area" and the state's acquisition constituted a "total take of the property." (Id.)
On January 8, 2003, Terra notified Bajwa and Sunoco that the property was "being acquired by [VDOT]." (Def. Ex. 4.) Bajwa and Sunoco were notified to vacate the premises by April 8, 2003. (Id.) On *457 February 3, 2003, Sunoco received a letter from Terra, stating that the property had to be vacated by April 7, 2003. (Def. Ex. 5.) Furthermore, the letter reported that the discussions regarding the property acquisitions had been "inconclusive" and that it "appeared that this matter will not be resolved in the near future." (Id.) Therefore, Terra declared that it would "begin the process of acquiring title through eminent domain proceedings with the court." (Id.) Terra stated that it would notify Sunoco when the certificate of eminent domain was filed with the court. (Id.)
On January 9, 2003, Sunoco notified Bajwa that it was terminating the Agreement, because of VDOT's taking of the property. (Def. Ex. at 6.) Sunoco stated that the taking would occur on April 8, 2003. (Id.)
On March 5, 2003, Sunoco granted the Commonwealth of Virginia an option to purchase the property for $1,750,000. (Def.Ex. 7.) The option extended for a period of one year. (Id.) On April 8, 2003, the Commonwealth acquired the property from Sunoco for $1,750,000. Bajwa received none of the proceeds. Bajwa's franchise terminated that same day, and Sunoco removed its signs, pumps, and gasoline from the premises.
VDOT paid Bajwa $50,000 pursuant to the Relocation Assistance Program. This program was intended to provide benefits to businesses displaced by the Woodrow Wilson Bridge project. (Donahue Dep. Ex. 8.) Plaintiff received a fixed payment of $50,000 instead of actual cost reimbursement for relocating his business. (Donahue Dep. Tr. at 33-34.)
Bajwa filed suit in Fairfax Count Circuit Court on July 25, 2003. The Defendant removed the matter to this Court on August 6, 2003. Both parties moved for summary judgment. On January 16, 2004, the Court granted in part and denied in part the Defendant's Motion for Summary Judgment. The Court held that Sunoco did not wrongfully terminate Plaintiff's franchise, because the sale of the property to the state was a "taking" within § 2802 of the PMPA and ¶ 3.06(a) of the Agreement.[3] The Court also denied Defendant's Motion for Summary Judgment in part, holding that there were outstanding issues of material fact with regards to (1) the inclusion of the value of Bajwa's leasehold interest in the sale price of the property; and (2) the value of that leasehold interest. Plaintiff's Motion for Partial Summary Judgment was denied in its entirety.
On February 19, 2004, Sunoco renewed its motion for Summary Judgment. This matter came before the Court for oral argument on March 5, 2004.
II. Standard of Review
Summary judgment is appropriate only if the record shows 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); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Evans v. Techs. Apps. & Serv., Co., 80 F.3d 954, 958-59 (4th Cir.1996) (citations omitted). In reviewing the record on summary judgment, "the court must draw any inferences in the light most favorable to the non-movant" and "determine whether the record taken as a whole could lead a reasonable trier of fact to find for the non-movant." Brock v. Entre Computer Ctrs., 933 F.2d 1253, 1259 (4th Cir.1991) (citations omitted).
The very existence of a scintilla of evidence or of unsubstantiated conclusory allegations, *458 however, is insufficient to avoid summary judgment. Anderson, 477 U.S. at 248-52, 106 S.Ct. 2505. Rather, the Court must determine whether the record as a whole could lead a reasonable trier of fact to find for the non-movant. Id. at 248, 106 S.Ct. 2505.
III. The Court's Opinion of January 16th
Having reviewed the submissions of the parties, there seems to be some confusion as to the Court's earlier opinion. In the January 16th opinion, the Court resolved two issues: "(A) Did Sunoco violate either the PMPA or the Agreement in terminating Bajwa's franchise; and (B) If Sunoco did not wrongfully terminate the franchise, is Bajwa owed compensation under the lease, the PMPA, or state law." (Mem. Op. at 5.) The Court held that Sunoco did not wrongfully terminate Bajwa's franchise. (Id. at 16.) The Court went on to hold that Bajwa may be entitled to recover a "separate award" under Virginia law and the Agreement, but there were material issues of fact as to whether the value of Bajwa's leasehold was included in the sale price to Sunoco. (Id. at 20.)
There are two unresolved issues in this case. (Id.) The first issue is whether the sale price of the property included the value of Bajwa's leasehold interest. The second is what the value of that leasehold interest would be were the Court to find that the sale price included compensation for the leasehold. (Id.)
Bajwa's Opposition to Sunoco's Renewed Motion for Summary Judgment reveals a number of misunderstandings of the Court's opinion. Bajwa misinterprets the Court's description of the parties' arguments as holdings: The Court did not rule that "Bajwa is entitled to compensation." (Pl. Mem. at 1.) The part of the January 16th opinion cited by Bajwa simply does not support that proposition. The Court ruled that "Bajwa, under the contract, would only be entitled to a separate award...." (Mem. Op. at 20.) The Court also did not rule that "Bajwa did not waive his right to compensation in the event of condemnation." (Pl. Mem. at 2.). The Court only held that the agreement "specifically states that Bajwa did not waive any right to a separate award for the taking of the leasehold interest." (Mem. Op. at 19.) Bajwa waived any right to a portion of the general condemnation award. The Court will discuss the waiver issue in section IV:F, infra.
IV. Analysis
Bajwa contends that 5 sources of law entitle him to compensation: (1) the Virginia and United States constitutions; (2) the PMPA; (3) the Virginia Condemnation Statutes; (4) the Option agreement between the Commonwealth and Sunoco; and (5) the Agreement between the parties. The Court will discuss each in turn.
A. The Constitutions of the United States and Virginia
The Takings Clause of the Fifth Amendment to the United State Constitution prohibits a taking of private property for "public use, without just compensation." U.S. Const. amend. V. This prohibition equally applies to the states through the Fourteenth Amendment.[4]Multi-Channel *459 TV Cable Co. v. Charlottesville Quality Cable Corp., 65 F.3d 1113, 1123 (4th Cir.1995) (citing Chicago Burlington & Quincy R.R. Co. v. City of Chicago, 166 U.S. 226, 17 S.Ct. 581, 41 L.Ed. 979 (1897)). Governmental action is required to trigger the application of this clause; it does not apply to private parties who are not state or governmental actors. See Flagg v. Yonkers Sav. & Loan Ass'n, FA, 307 F.Supp.2d 565, 585 (S.D.N.Y.2004); N.Y., N.H. & H.R. Co., First Mortgage 4% Bondholders' Comm. v. United States, 305 F.Supp. 1049, 1055 (S.D.N.Y.1969), vacated on other grounds sub. nom., New Haven Inclusion Cases, 399 U.S. 392, 90 S.Ct. 2054, 26 L.Ed.2d 691 (1970).
The Takings clause of the Fifth Amendment, as applied to Virginia through the Fourteenth Amendment, does not entitle Bajwa to compensation. Bajwa has not shown the required governmental action. Sunoco is a private entity; the takings clause does not provide for a cause of action against a private party. Moreover, the Option agreement between Sunoco and the state does not permit Bajwa to sue a private entity for a cause of action properly against the Commonwealth. As the Court previously held "the option does not confer upon Bajwa any substantive rights." (Mem. Op. at 20.) The indemnification clause in the option provides that Sunoco will compensate Bajwa "for his/her interests and any and all legally compensable damages said tenant(s) may suffer and sustain by reason of the conveyance." (Def. Ex. 7 at 2.) While the option agreement requires Sunoco to indemnify the Commonwealth, it does not require Sunoco to answer for constitutional claims properly brought against the Commonwealth.
B. PMPA
The PMPA does not entitle Bajwa to compensation. As stated in the prior opinion, Sunoco complied with the PMPA; it properly terminated Bajwa's franchise. (See Mem. Op. at 16.) The PMPA does not entitle a franchisee to compensation from the owner for his leasehold in the event of a condemnation; the act only requires that "the franchisor shall fairly apportion between the franchisor and the franchisee compensation, if any, received by the franchisor based upon any loss of business opportunity or good will." 15 U.S.C. § 2802(d)(1). Virginia law does not compensate the property owners for loss of business opportunity or good will. See State Highway & Transp. Comm'r of Va. v. Lanier Farm, Inc., 233 Va. 506, 357 S.E.2d 531, 533 (1987). The sale price received by Sunoco, therefore, could not have contained compensation for business opportunity or good will. Accordingly, the PMPA does not require that Sunoco share the sale price with Bajwa. No other provision of the PMPA provides for compensation to Bajwa.
C. Virginia Law
1. Condemnation Statutes
Plaintiff asserts that §§ 25.1-234, 25.1-241 of the Virginia Condemnation Act entitle Bajwa to compensation. Sections 25.1-231, 25.1-232, and 25.1-233 set forth the initial proceedings to determine "just compensation" under Virginia law. A tenant may intervene in these proceedings to determine just compensation, but may not "offer any evidence in the proceedings to determine just compensation concerning the value of his leasehold interest in the *460 property involved." Va.Code Ann. 25.1-234(C). Section 25.1-241 sets forth the procedure for hearing the case and determining the rights and claims of all persons entitled to the fund or to any interest or share of the condemnation award. See Va.Code Ann. § 25.1-241. At the hearing pursuant § 25.1-241, a court would determine the value of the tenant's leasehold interest.
Bajwa's attempts to rely upon these provisions of the Condemnation Act rely upon a flawed premise: there are no pending condemnation or other proceedings to determine just compensation. Furthermore, Bajwa has not demonstrated how these sections entitle him to compensation. Both sections set forth the procedures that a Virginia court must follow to determine the compensation due the interested parties to an eminent domain taking. These sections do not provide the tenant any substantive rights to compensation. Section 25.1-234 permits the tenant to intervene in the proceeding to determine the value of the fee simple interest. The tenant, however, has no right to offer any evidence concerning the value of the leasehold. Va.Code Ann. § 25.1-234(C). Section 25.1-241 only requires that once the value of the fee simple interest has been determined, a court must hold another hearing to determine if the tenant is entitled to a portion of the condemnation award.[5] These section does not confer upon Bajwa any right to compensation, but merely a procedural right once a condemnation proceeding has begun. Since no condemnation proceedings have been initiated, Bajwa has no enforceable rights under these statutes.
2. Virginia Common Law
Bajwa argues that the sale price of the property must have included the value of his leasehold. Bajwa's argument may be summarized by the rhetorical question: "Where did the leasehold go?" Plaintiff contends that the Commonwealth purchased the entire fee simple, and, as a matter of property law, the fee simple includes the right to occupy the property. Since a tenant holds the right to occupy the property, Bajwa contends that VDOT must have purchased his leasehold, including the right to occupy. This syllogism is simple, initially compelling, but ultimately incorrect.
As the Court stated in its prior Opinion, under Virginia law, lessees of property are entitled to compensation for the value of their leasehold interest. Exxon Corp. v. M & Q Holding Corp., 221 Va. 274, 269 S.E.2d 371 (1980); see also Lamar Corp. v. City of Richmond, 241 Va. 346, 402 S.E.2d 31, 34 (1991) (stating that once title to the property passes to the condemner, the lessee becomes entitled to a share of the total award and to a subsequent proceeding to determine the appropriate amount of that share). Both the landlord and the tenant have a constitutionally protected "property" interest when leased property is taken in eminent domain. United States v. Gen. Motors Corp., 323 U.S. 373, 377-78, 65 S.Ct. 357, 89 L.Ed. 311 (1945); Kohl v. United States, 91 U.S. 367, 377, 1 Otto 367, 23 L.Ed. 449 (1875). When the condemned property is subject to a lease, the value of the lessee's interest should first be determined and deducted from the award, and the balance then allocated to the landowner. Exxon, 269 S.E.2d. at 375.
*461 In support of his argument, Bajwa offers testimony from the cross-examination of Donahue:
Plaintiff's Counsel: ... from your experience in the real estate industry, do you have a clear definition of what fee simple estate is?
Donahue: Yeah.
Plaintiff's Counsel: And does that include the right to occupy the property?
Donahue: Correct.
. . . . .
Plaintiff's Counsel: And a person who has a lease on a piece of property, the tenant, has the right to occupy the property; do they not?
Donahue: Yes.
Plaintiff's Counsel: All right. So, [the appraiser's] assignment was to value the property as a fee simple estate, which would include the right of occupancy; that is, the value of the lease; would it not?
Donahue: I don't think that's inconsistent. Yes.
. . . . .
Plaintiff's Counsel: have you ever bought a piece of property subject to a lease?
Donahue: Maybe ina no. We've always bought a fee simple interest.
(Donahue Dep. at 41-43.)
The flaw in Bajwa's argument is that when the Commonwealth purchased the property it was no longer subject to a lease; Sunoco had already terminated the lease pursuant to 15 U.S.C. § 2802(c)(5) and the condemnation clause in the Agreement. (See Def. Ex. 6.) It is well established that leases may contain clauses allowing for termination upon the condemnation of the premises. See United States v. Petty Motor Co., 327 U.S. 372, 375, 66 S.Ct. 596, 90 L.Ed. 729 (1946); Heir v. Delaware River Port Auth., 218 F.Supp.2d 627, 638 (D.N.J.2002) ("the right to compensation extends only as far as a party's contractual rights permit"); Norfolk S. Ry. Co. v. American Oil Co., 214 Va. 194, 198 S.E.2d 607, 609 (1973) ("Of course, if the lease itself includes a provision in respect of the rights of the parties in the event of the condemnation of the leased premises, such provision is valid and controlling.") (citing 27 Am.Jur.2d, Eminent Domain § 250 at 22-23).
Once franchisees have contracted away their rights to the continuation of their franchise beyond the condemnation of the premises, they have no claim to the value of the leasehold. For example, in Petty Motor Co., the United States initiated proceedings to condemn a building occupied by a number of tenants. Id. at 373-74, 66 S.Ct. 596. One of the leases "included a clause for its termination on the Federal Government's entry into possession of the leased property for public use."[6]Id. at 375, 66 S.Ct. 596. The Court held that the lessee "had contracted away any rights that it might otherwise have had." Id. at 376, 66 S.Ct. 596. The Court went on to state that "[w]ith this type of clause, at least in the absence of a contrary state rule, the tenant has no right which persists beyond the taking and can *462 be entitled to nothing." Id.; see also United States v. The Right to Use and Occupy 3.38 Acres of Land, 484 F.2d 1140, 1144 (4th Cir.1973) (holding that a termination clause in the contract precluded the tenant from recovering the "the market rental value of the premises"); Heir, 218 F.Supp.2d at 639 (holding that franchisees had no right to compensation for loss of their business where they had contracted away their right to the continuation of their franchise beyond the condemnation of the premises); Norfolk S. Ry. Co., 198 S.E.2d at 609 ("Where it appears that the lessor has given the tenant adequate notice of its intention to cancel, the lease is deemed terminated and the tenant is precluded from sharing in the lessor's condemnation award.")
In paragraph 3.06(a) Bajwa contracted away his right to the continuation of his franchise beyond the condemnation of the property. Such a clause is "expressly countenanced by [section 2802(c)(5) of the] PMPA." Heir, 218 F.Supp.2d at 638-39. Moreover, Plaintiff in paragraph 3.06(b) waived his right to recover any portion of the general condemnation award from the state. Bajwa could, however, recover a separate award for the value of his leasehold. Like the termination clause in Petty Motor Co., paragraph 3.06 provides that Sunoco could terminate the franchise in the event of a taking pursuant to the power of eminent domain. (Def.Ex. 1.) A taking did occur, and as the notice of termination stated, Sunoco properly terminated the agreement between the parties on April 8, 2003.[7] (Id.) The Commonwealth purchased the property pursuant to the option on the same day. As in Petty Motor Co., Heir, and Norfolk S. Ry. Co., the Agreement between the parties, not the forced sale to the Commonwealth, terminated Bajwa's leasehold. See The Right to Use and Occupy 3.38 Acres of Land, 484 F.2d at 1144 (holding the contract and not the condemnation terminated the leasehold).
Having terminated the lease under the PMPA, Sunoco obtained Bajwa's right to occupy the property. As the fee simple owner, Sunoco sold its interest in the property to the Commonwealth. Bajwa agreed to paragraph 3.06, the condemnation clause, and Sunoco had every right to enforce it.[8] The Court holds that Bajwa's leasehold ended upon Sunoco's termination of the Dealer Franchise Agreement. While the sale price included the right to occupy the premises, Sunoco as the fee simple owner, having extinguished Bajwa's franchise and leasehold pursuant to paragraph 3.06(a) and 15 U.S.C. § 2802(c)(5), was entitled to its value.
Bajwa contends that the Court's ruling would allow landowners to avoid paying a portion of a condemnation award to "anyone else who had an interest in the property, such as a judgment creditor, a secured trust, or a mechanic's lien claimant." (Pl. Mem. at 8.) All of these interests are distinguishable, however, from Bajwa's rights under the Agreement, because Sunoco had the right to unilaterally terminate the franchise upon the occurrence of certain conditions. When the Commonwealth decided to obtain the property through the power of eminent domain, a condition precedent *463 to the termination of the Agreement occurred. Sunoco always held the right under the Agreement and the PMPA to terminate the franchise if a condemnation or "other taking" occurred. Judgment debtors, for example, may not unilaterally terminate the creditors' interests in their property. Sunoco properly terminated Bajwa's franchise and sold the fee simple interest in the property to the Commonwealth. The Court's holding does not permit landowners to avoid payments to their creditors upon a condemnation by the Commonwealth.
D. The Option Agreement
Bajwa is incorrect that the option agreement between the Commonwealth and Sunoco entitles him to relief. The Court previously held that "the option does not confer upon Bajwa any substantive rights." (Mem. Op. at 20.) The language in the option, however, is ambiguous; prior to discovery, the Court could not determine whether the sale price included a payment for Bajwa. The Court's concern was that VDOT had earmarked or otherwise apportioned part of the sale price as compensation for the tenant. As stated above, this is not the case; the Commonwealth did not value or otherwise include a separate award in the payment to Sunoco. Since the option agreement does not confer upon Bajwa any substantive right to compensation, the Court will grant summary judgment to the Defendant on this issue.
E. The Dealer Franchise Agreement
Although Sunoco terminated the franchise, the Agreement provided for some compensation to Bajwa in the event of a condemnation or other taking. The Agreement between Bajwa specifically provides that Bajwa did not waive any right to a separate[9] award for the taking of the leasehold interest. (Mem. Op. at 19.) Previously, the Court could not determine whether the sale price included a "separate award" for Bajwa's lease. Following discovery, the answer to that question is clear: the sale price of property did not include a separate award for Bajwa's leasehold.
During discovery, Sunoco deposed VDOT's contractor responsible for condemnation of the Sunoco Property, John J. Donahue. Donahue testified that VDOT's acquisition of the Sunoco Property was performed in accordance with the state guidelines addressing the appraisal and acquisition process including the "fair market value" and that the components of such fair market value are land, building, and other improvements. (See Donahue Dep. Tr. at 12-17.) The appraisal that VDOT obtained for the Sunoco Property did not attach any value to the leasehold interest. (See Donahue Dep. Ex. 2.) Donahue stated that Terra did "not offer to make any payment for the value of the leasehold interest." (Donahue Dep. Tr. at 19.) He testified that the Appraisal Report did not "evaluate whether or not there was any value to the leasehold interest," (id. at 19), because the appraiser "was not hired to do so," (id. at 17). Donahue elaborated as to why the appraiser did not value the leasehold: "that's not part of the typical process that the State follows when they acquire property. They acquire the property from the landowner, the owner of the fee interest in the property." (Id. at 19.) The appraisal calculated *464 the $1,650,000 valuation in the following manner:
Land $1,100,000
Buildings $ 185,500
Other Improvements $ 364,500
Total Property $1,650,000
(Id. Ex. 2 at 1.) Sunoco contends that this resolves the outstanding issue of material fact and establishes that the sale price did not include a separate award for the price of Bajwa's leasehold.
The Court finds that there is no genuine issue of material fact on the issue of whether the sale price included a separate award for Bajwa's leasehold. Donahue's testimony establishes that the appraiser only valued the fee simple interest of the property as a whole. The appraiser did not allocate or earmark any portion of the total price of the property to the leasehold interest. The offer made to Sunoco did not attach any value for Bajwa's leasehold. Bajwa, moreover, has not offered any evidence that the appraiser attached any value to the leasehold or allocated any part of the fee simple interest to the leasehold interest.[10] Bajwa received a "separate award": the $50,000 Relocation Assistance Program payment. (Donahue Dep. at 33-34, Ex. 8.) This payment was distinct from the general award, and the Agreement protected Bajwa's right to receive this payment. The Court finds, however, that the $1,650,000 appraisal or the $1,750,000 payment did not include a separate award for Bajwa's leasehold.
F. Waiver: 15 U.S.C. § 2805(f)
At oral argument, Bajwa asked to renew its argument from the prior summary judgment motion that the Agreement's waiver provision violates 15 U.S.C. § 2805(f). Section 2805(f) of the PMPA provides that "(1) No franchisor shall require, as a condition of entering into or renewing the franchise relationship, a franchisee to release or waive (A) any right that the franchisee has under this subchapter or other Federal law; or (B) any right that the franchisee may have under any valid and applicable State law." Bajwa contends that this section renders paragraph 3.06 of the Agreement void, because it requires Bajwa to give up his right to share in the general condemnation award under Virginia law.
Courts have upheld waivers of condemnation awards similar to the one in this case. It is well established that, in cases of condemnations, the landlord and tenant may modify the division of any condemnation award through their own private agreement. See Petty Motor Co., 327 U.S. at 376, 66 S.Ct. 596; The Right to Use and Occupy 3.38 Acres of Land, 484 F.2d at 1144. Tenants may contract away any and all of their rights to compensation upon condemnation. Petty Motor Co., 327 U.S. at 376, 66 S.Ct. 596. A tenant's right to compensation extends only as far as his or her contractual rights permit. Heir, 218 F.Supp.2d at 638; see also Victor P. Goldberg, et al., Bargaining in the Shadow of Eminent Domain: Valuing and Apportioning Condemnation Awards Between Landlord and Tenant, 34 U.C.L.A. L.Rev. 1083, 1087 (April 1987) ("[T]he tenant has a constitutionally protected property right absent language in the lease to the contrary.")
Bajwa argues that 15 U.S.C. § 2805(f) prevents franchisors from conditioning the granting or renewal of a franchise upon the agreement by the franchisee to waive a right under state law. He claims that his right to be compensated for the value of his leasehold is a right under Virginia law. Therefore, according to Bajwa, paragraph *465 3.06(b) is invalid, because it requires him to waive his right to be compensated from the general award for his leasehold.
Bajwa's argument misstates his "right" under Virginia law: Bajwa has a right to be compensated for the value of his leasehold interest absent any contractual provision to the contrary. Under Virginia law, the lessees are free to contract away their right recover in the case of a condemnation. See Norfolk S. Ry. Co., 198 S.E.2d at 610 ("The lease could have provided for cancellation by [lessor] without liability to [lessee] in event of the property leased was taken in a condemnation or similar proceeding.") (emphasis added). Moreover, once Sunoco terminated the contract, Bajwa had no right to recover the value of his leasehold. The Court has never indicated that Bajwa was not owed any separate award for the value of his leasehold; however, there has been no separate award. He contracted away his right to participate in the general award.
Moreover, Bajwa has not cited any cases striking down a waiver provision like the one in paragraph 3.06. On the contrary, all of the cases found by the Court specifically enforce these provisions. In a New Jersey case, State by Comm'r of Transp. v. Hess Realty Corp., the court held that although a franchisee might be entitled to participate in allocation proceedings to obtain a share of the award, the plaintiff had, as part of its agreement, contracted away any right to share in the compensation award. 226 N.J.Super. 256, 543 A.2d 1050, 1053 (N.J.Super.A.D.1988). In Jersey City Redev. Agency v. Exxon Corp., another New Jersey court upheld a contractual waiver of condemnation award, stating: "Neither the PMPA nor [New Jersey law] prohibits such waivers. They are commercially common and normally enforceable." 208 N.J.Super. 53, 504 A.2d 1207, 1209-10 (1986).
The Court declines to hold that condemnation clauses in franchise agreements governed by the PMPA violate 15 U.S.C. § 2805(f) when the franchisee waives his right to participate in the general condemnation award. As the court in Jersey City Redev. Agency noted these clauses are commercially common. Furthermore, the Court agrees with the primary rationale behind condemnation clauses: the elimination of "costly strategic behavior that leaves both landlord and tenant worse off." Goldberg et al., supra, at 1125. The Court will not attempt to administer "after-the-fact justice" and allow Bajwa engage in strategic behavior, but will enforce the contract as agreed to by the parties. Accordingly, the Court will grant summary judgment to the Defendant.
V. Conclusion
For the above stated reasons, the Court will grant Sunoco's Renewed Motion for Summary Judgment. An appropriate Order will issue.
ORDER
For the reasons stated in the accompanying Memorandum Opinion, it is hereby ORDERED that:
(1) Sunoco's Renewed Motion for Summary Judgment is GRANTED;
(2) the Clerk of the Court shall forward copies of this Order to all counsel of record.
This Order is final.
NOTES
[1] The abbreviation "Def. Ex." refers to Defendant's exhibits to the initial motion for summary judgment. The exhibits submitted with the instant motion will be referred to a "Donahue Ex.," because all of the new material are exhibits to the deposition of John Donahue, the principal owner and Vice President.
[2] VDOT hired Terra "to acquire the necessary rights of way in connection with the expansion of the Woodrow Wilson Bridge." (Def. Ex. 2.)
[3] The Court also held that the sale price was the equivalent of a just compensation award by the Commonwealth. Sunoco could not invoke the benefit of the condemnation clause in the Agreement without having the sale price treated as a condemnation award. (Mem. Op. at 17.)
[4] Article I, § 11 of the Virginia Constitution provides that the General Assembly shall not pass any law ... whereby private property shall be taken or damaged for public uses, without just compensation...." Although the protection provided by Article I, § 11 of the Virginia Constitution is more expansive than that furnished by its federal counterpart for example, the state clause protects private property from being "taken or damaged," see Bartz v. Bd. of Supervisors of Fairfax County, 379 S.E.2d 356, 361 n. * (Va.1989) (Whiting, J. dissenting) the Supreme Court of Virginia has "cited to and sought guidance from cases involving takings under the Fifth Amendment." City of Virginia Beach v. Bell, 255 Va. 395, 498 S.E.2d 414, 417 (1998); see, e.g., City of Virginia Beach v. Virginia Land Invest., 239 Va. 412, 389 S.E.2d 312, 314 (1990); Commonwealth ex rel State Water Control Bd. v. County Util. Corp., 223 Va. 534, 290 S.E.2d 867, 872 (1982). Since the taking in this case involves the condemnation of the entire property, the analyses under the Virginia and Federal constitutions are identical.
[5] This is the type of hearing that the Court envisioned would occur during the trial in this case. The Defendant, however, has shown that it is entitled to judgment as a matter of law and that there are no genuine issues of material fact requiring a trial.
[6] Specifically, the lease provided:
If the whole or any part of the demised premises shall be taken by Federal, State, county, city, or other authority for public use, or under any statute, or by right of eminent domain, then when possession shall be taken thereunder of said premises, or any part thereof, the term hereby granted and all rights of the Lessee hereunder shall immediately cease and terminate, and the Lessee shall not be entitled to any part of any award that may be made for such taking, nor to any damages therefor except that the rent shall be adjusted as of the date of such termination of the Lease.
Petty Motor Co., 327 U.S. at 375 n. 4, 66 S.Ct. 596.
[7] VDOT's notice to vacate the property required that "the property must be vacated and cleared of all personal property by April 7, 2003." (Donahue Dep. Ex. 5.) The Court previously held that the sale of property to the potential condemner, where it would have otherwise obtained the property through eminent domain, constitutes an "other taking ... pursuant to the power of eminent domain" under 15 U.S.C. § 2802(c)(5) and the Agreement between the parties.
[8] Even if the Agreement was silent as to the grounds for termination, the PMPA would still apply.
[9] The Court has not found, nor has any party cited, any case defining a "separate award." Based upon the common definition of "separate" the Court interprets this phrase to mean an award set aside from or distinct from the general award paid by the Commonwealth to the fee simple owner of the property. See Webster's II New Riverside Dictionary 619 (Rev. ed.1996).
[10] Even if the award did include the value of the leasehold, the Court finds that such an award would not be "separate." Therefore it would be part of the general award, which Bajwa has waived any right to.
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320 F.Supp.2d 741 (2004)
Sam J. WINGER, et al., Plaintiffs,
v.
Jo Anne B. BARNHART, Commissioner of Social Security, Defendant.
No. 03-3111.
United States District Court, C.D. Illinois.
May 19, 2004.
*742 Jason R. Craddock, Springfield, IL, for Plaintiffs.
James A. Lewis, Assistant U.S. Attorney, Springfield, IL, for Defendant.
ORDER
EVANS, United States Magistrate Judge.
This matter comes before the Court on Plaintiffs', Sam J. Winger and Aaron L. Winger, Motion For Summary Judgment (d/e 9) (Plaintiffs' Motion), and Defendant's, Jo Anne B. Barnhart, Commissioner of Social Security, (Commissioner) Motion For Summary Affirmance (d/e 13) (Commissioner's Motion), pursuant to Federal Rule of Civil Procedure 56 and 42 U.S.C. § 405(g).[1] The parties have filed *743 cross motions for summary judgment in accordance with Local Rule 8.1, and have consented to proceed before the U.S. Magistrate Judge pursuant to 28 U.S.C. § 636(c). For the reasons set forth below, the Commissioner's Motion is allowed, and Plaintiffs' Motion is denied. The Commissioner's decision as to Plaintiffs', Sam J. Winger and Aaron L. Winger, (the Wingers) appeal is affirmed.
BACKGROUND
Arvenia L. Winger (Arvenia) was born on November 4, 1944, and married Sam J. Winger (Sam) on January 29, 1964. Together they had three children, one of whom is Aaron M. Winger (Aaron), a co-plaintiff in this case. In September 1995, Arvenia suffered a severe heart attack that put her into a coma for six weeks. She was left with 20% heart capacity, and died on April 29, 1998.
On May 13, 1998, Sam and Aaron applied for survivor's Social Security benefits based on their kinship with Arvenia. Sam applied for Father's Insurance Benefits, see 42 U.S.C. §§ 402(g), 416(d), and Aaron applied for Child's Insurance Benefits, see'42 U.S.C. §§ 402(d), 416(e). Throughout her life, however, Arvenia worked only intermittently outside the home. Her primary work was as a homemaker for her family. She earned Social Security credits for work outside the home in the years 1965-1969, 1983-1984, 1992-1995. Using the standard set forth in 42 U.S.C. § 414 to determine Arvenia's insured status for survivor's insurance benefits, the Commissioner calculated that Arvenia had earned 23 quarters of coverage throughout her life, and only 3 quarters of coverage in the last 13 quarters of her life. Based on this work history, the Commissioner concluded that Arvenia was neither "currently insured," under 42 U.S.C. § 414(b)(1), nor "fully insured," under 42 U.S.C. § 414(a).[2] Accordingly, the Commissioner denied the Wingers benefits on May 19, 1998.
On July 14, 1998, the Wingers appealed the initial decision of the Commissioner by letter, arguing that Arvenia likely would have drawn social security benefits the last two years of her life, but her health had been too impaired for her to complete the application process. One year passed before the Wingers' appeal was heard. On August 11, 1999, the Commissioner denied the Wingers' appeal.
On September 23, 1999, the Wingers sent the Commissioner a letter asking, in the alternative, for the return of Arvenia's Social Security contributions. Neither the Wingers nor the Commissioner say whether this letter was ever answered. On November 5, 1999, the Wingers requested a hearing to appeal the Commissioner's benefits decision. On December 5, 2000, a hearing was held before an administrative law judge (ALJ), who denied the Wingers' claims on April 26, 2001. On July 29, 2001, the Wingers requested a review of the *744 ALJ's decision by the Appeals Council. On March 13, 2003, the Appeals Council affirmed the ALJ's denial of benefits. The Wingers' appeal to this Court followed.
The Wingers bring four arguments in furtherance of their claim for benefits. They argue that the Commissioner's denial of benefits: (1) effects a taking under the Fifth Amendment of the U.S. Constitution; (2) violates procedural due process under the Fifth Amendment because it was based on an arbitrary and irrational classification system (the quarters of coverage system); and (3) violates equal protection under the Fifth Amendment because it discriminates against homemakers. Finally, the Wingers also allege that their Fifth Amendment due process rights were violated because they were not granted a hearing on the Commissioner's denial of benefits in a timely manner.
The parties' dispute is confined to legal arguments there are no genuine issues of material fact in dispute. Accordingly, this Court reviews those issues de novo. Sample v. Shalala, 999 F.2d 1138, 1144 (7th Cir.1993) ("We review de novo the questions of law, including whether additional evidence is new and material.").
ANALYSIS
I. FIFTH AMENDMENT TAKINGS CLAIM
The Takings Clause of the Fifth Amendment states: "nor shall private property be taken for public use, without just compensation." U.S. Const. amend. V. The Wingers argue that the Commissioner's denial of benefits constitutes a taking because Arvenia paid Social Security taxes, but neither she nor her family were allowed to receive benefits. Plaintiffs' Motion, pg. 4, ¶ 1.
As the constitutional text makes clear, however, before a claim for a taking can be made, the claimant must demonstrate a private right to the property at issue. It is here that the Wingers' Takings Clause claim fails. The Supreme Court has held that those taxed to support the Social Security system have no property right to Social Security benefits. Flemming v. Nestor, 363 U.S. 603, 610, 80 S.Ct. 1367, 4 L.Ed.2d 1435 (1960) ("To engraft upon the Social Security system a concept of `accrued property rights' would deprive it of the flexibility and boldness in adjustment to everchanging conditions which it demands."); Richardson v. Belcher, 404 U.S. 78, 80, 92 S.Ct. 254, 30 L.Ed.2d 231 (1971); Wright v. Califano, 587 F.2d 345, 354 (7th Cir.1978); Social Security Law and Practice, § 1:39 (2004). Arvenia had no property right to her Social Security tax payments, and no property right to benefits. Accordingly, the Wingers Takings Clause claim has no merit.
As the sole support for their claim, the Wingers' cite to Eastern Enterprises v. Apfel, 524 U.S. 498, 522, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998), essentially arguing that Eastern Enterprises has overturned Flemming. A review of Eastern Enterprises proves that conclusion false. First, the Eastern Enterprises Court issued a plurality opinion, with only four Justices concluding that a violation of the Takings Clause of the Fifth Amendment had occurred in that case. See Eastern Enterprises, 524 U.S. at 528, 118 S.Ct. 2131 (O'Connor, J., joined by Rehnquist, C.J., and Scalia and Thomas, JJ.). Although he concurred in the judgment, Justice Kennedy stated, "the case is controlled not by the Takings Clause but by well-settled due process principles respecting retroactive laws." Id. at 547, 118 S.Ct. 2131 (Kennedy, J., concurring in the judgment, and dissenting, in part). Justices Breyer, Ginsburg, Souter, and Stevens, JJ., dissented from the judgment, finding no taking or due process violation at all. Id. at 554, 118 S.Ct. 2131 (Breyer, J., dissenting, *745 joined by Ginsburg, Souter, and Stevens, JJ.). Accordingly, Eastern Enterprises cannot be said to have changed the Court's Takings Clause precedent, and the Wingers' citation to the case can have nothing more than persuasive appeal.
In addition, the Wingers' attempt to analogize the facts of Eastern Enterprises to their situation cannot be sustained. Eastern Enterprises concerned the liability of a corporation for health benefits for coal miners and their dependents, based on collective bargaining agreements between the coal industry and the miners' unions in 1950 and 1974. Under the Coal Act of 1992, Congress attempted to shore up a failing benefits system for coal miners and their dependents by merging the benefits plans established by the 1950 and 1974 collective bargaining agreements into a new United Mine Workers of America Combined Benefit Fund (Fund). The Fund was to be supported by coal operators who signed either the 1950 or 1974 agreement. Id. at 514, 118 S.Ct. 2131. The Court found that Congress could not exact benefits contributions from Eastern Enterprises, however, because Eastern was not a party to the 1974 collective bargaining agreement at issue. Id. at 528, 547, 118 S.Ct. 2131. Accordingly, the Court found that Congress unconstitutionally overreached its authority with the Coal Act of 1992.
In contrast, the present action concerns mandatory Social Security taxes, not collective bargaining agreements. The Supreme Court has written that, "[t]he design of the system requires support by mandatory contributions from covered employers and employees. This mandatory participation is indispensable to the fiscal vitality of the social security system." United States v. Lee, 455 U.S. 252, 258, 102 S.Ct. 1051, 71 L.Ed.2d 127 (1982). Therefore, Eastern Enterprises provides no support for the Wingers' position. The Commissioner's denial of benefits in no way violated the Wingers' rights under the Takings Clause of the Fifth Amendment.
II. FIFTH AMENDMENT DUE PROCESS RATIONAL BASIS CLAIM
The Due Process Clause of the Fifth Amendment requires that the government not deprive any citizen of "life, liberty, or property, without due process of law." U.S. Const. amend. V. The Wingers argue that the Commissioner violated this right when she denied their claims for Social Security benefits because they were deprived "of their property (social security taxes taken from Arvenia) and such deprivation [was] based on an arbitrary and irrational classification (the quarter system)."[3]Plaintiffs' Motion, pg. 4, ¶ 2.
As an initial matter, the Wingers have no private property right to Arvenia's Social Security taxes, as set forth above. In addition, the Wingers have not met their burden of proof to show that the Social Security quarters of coverage system violates the Due Process Clause. To show that a statute providing for payment of monetary benefits violates the Due Process Clause, the Wingers must overcome a strong presumption of rationality. Califano v. Gautier Torres, 435 U.S. 1, 5, 98 S.Ct. 906, 55 L.Ed.2d 65 (1978) (per curiam). They must show that "the statute manifests a patently arbitrary classification, *746 utterly lacking in rational justification." Flemming, 363 U.S. at 611, 80 S.Ct. 1367. The Supreme Court, in upholding 42 U.S.C. § 424a of the Social Security Act against a similar Due Process challenge, noted, "[i]f the goals sought are legitimate, and the classification adopted is rationally related to the achievement of those goals, then the action of Congress is not so arbitrary as to violate the Due Process Clause of the Fifth Amendment." Richardson, 404 U.S. 78, 84, 92 S.Ct. 254, 30 L.Ed.2d 231 (1971).
The Wingers confine their attempt to show that the quarter system is arbitrary and irrational to two sentences. In sum, they state:
... there is no connection between Arvenia and those who profit from her earnings. Yet, the quarter system takes money from individuals like Arvenia and then operates in such a manner as to deny those who are truly entitled [to] the benefits of her investment, namely her surviving dependents.
Plaintiffs' Memorandum of Law In Support of Plaintiffs' Motion For Summary Judgment (d/e 10) (Plaintiffs' Memorandum), pg. 7. The remainder of the Wingers' case is spent proposing a "more rational and less arbitrary system" to replace the current scheme. Id.
First, the Wingers are mistaken when they refer to Arvenia's Social Security tax payments as an "investment." Id. The Supreme Court rejected this notion when it stated that "[i]t is apparent that the noncontractual interest of an employee covered by the Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments." Flemming, 363 U.S. at 610, 80 S.Ct. 1367. Second, the Wingers' showing fails to carry their heavy burden of proof of the system's arbitrary or irrational nature. For example, the Wingers fail to identify any of the goals of the Social Security system, or demonstrate how the quarters of coverage system is incapable of achieving those goals. In contrast, the Commissioner identifies two goals of the Social Security program that are both furthered by the quarters of coverage system. The Commissioner notes that the quarters of coverage system: (1) makes the Social Security program self-supporting, and (2) creates a method of limiting Social Security benefits for those who have been dependent on their earnings. Commissioner's Memorandum, pg. 14. Courts have previously recognized that both of these goals are rationally related to the legislative purpose underlying the Social Security system. See Geduldig v. Aiello, 417 U.S. 484, 496, 94 S.Ct. 2485, 41 L.Ed.2d 256 (1974); Tuttle v. Sec'y of Health, Ed., & Welfare, 504 F.2d 61, 63 (10th Cir.1974). Therefore, the quarters of coverage scheme set forth by 42 U.S.C. § 414 does not violate the Due Process Clause of the Fifth Amendment.
III. FIFTH AMENDMENT EQUAL PROTECTION CLAIM
The Fifth Amendment to the U.S. Constitution has no Equal Protection Clause, however, the Supreme Court has interpreted the Due Process Clause as prohibiting federal action from discriminating in a way that "is so unjustifiable as to be violative of due process." Schlesinger v. Ballard, 419 U.S. 498, 500 n. 3, 95 S.Ct. 572, 42 L.Ed.2d 610 (1975). The Supreme Court's treatment of equal protection claims premised on the Fifth Amendment is the same as those posed under the Fourteenth Amendment. Weinberger v. Wiesenfeld, 420 U.S. 636, 638 n. 2, 95 S.Ct. 1225, 43 L.Ed.2d 514 (1975).
The Wingers argue that the Commissioner's denial of benefits constitutes unconstitutional discrimination *747 against homemakers because the Social Security scheme treats homemakers differently than non-homemakers who work outside the home. See Plaintiffs' Motion, pgs. 4-5, ¶ 3. The Court notes that this supposed discrimination is not sex-based 42 U.S.C. § 414 applies equally to both men and women who, like Arvenia, were employed outside the home intermittently. The Wingers present no evidence that homemakers are a suspect class entitled to either strict scrutiny or heightened scrutiny.[4] Accordingly, to find an equal protection violation under the Due Process Clause of the Fifth Amendment it is the Wingers' burden to show that there is no rational basis for the classification under review.
The Supreme Court has held that "a classification must be upheld against [an] equal protection challenge if there is any reasonably conceivable state of facts that could provide a rational basis for the classification." Tuan Anh Nguyen v. I.N.S., 533 U.S. 53, 77, 121 S.Ct. 2053, 150 L.Ed.2d 115 (2001) (internal quotations omitted). In addition, "[u]nder rational basis scrutiny, the means need only be rationally related to a conceivable and legitimate state end." Id. (internal quotations omitted).
As shown in the previous section, supra, there is a rational basis for the means employed (the quarters of coverage system), to achieve the intended purpose (determining applicants' eligibility for Social Security benefits, while allowing the program to be self-supporting, and assuring that those receiving benefits were primarily dependent on their lost wages). Therefore, the Wingers cannot show that 42 U.S.C. § 414 violates the equal protection principles inherent in the Due Process Clause.
IV. FIFTH AMENDMENT DUE PROCESS DELAY OF HEARING
The Wingers argue that their Due Process rights under the Fifth Amendment were violated when they had to wait over one year for a response to their appeal of benefits (from their July 14, 1998 letter until the Commissioner's August 11, 1999, response), and over one and one-half years for a hearing before an ALJ (from their November 5, 1999 letter requesting a hearing until the December 5, 2000, hearing before the ALJ).[5]See Plaintiffs' Memorandum, pg. 10; Commissioner's Memorandum, pgs. 2-3.
Administrative delay can violate due process, however, "[s]ince administrative efficiency is not a subject particularly suited to judicial evaluation, the courts should be reluctant to intervene in the administrative adjudication process, absent clear congressional guidelines or a threat to a constitutional interest." Wright v. Califano, 587 F.2d 345, 353-354 (7th Cir.1978). A reviewing court may only find a due process violation if "the delays are arbitrary or the result of some other inexcusable circumstance." Id. at 354.
The Wingers provide no evidence that the delay in their case was arbitrary or otherwise the product of inexcusable circumstances. In contrast, the Commissioner *748 notes that, "[i]n 2003, the Agency received over 3.3 million applications for disability benefits alone." Commissioner's Memorandum, pg. 17. In fact, problems with delay in adjudication at the Social Security Administration have been long-standing, as demonstrated by the 1978 opinion, Wright v. Califano, supra. The Commissioner states that the delay in the Wingers' case was due to case load and resource imbalance, not bad faith. Commissioner's Memorandum, pgs. 18-19. Without more, the Court cannot conclude that the Wingers' due process rights were violated by the delays they note.
CONCLUSION
THEREFORE, Defendant's, Jo Anne B. Barnhart, Commissioner of Social Security's Motion For Summary Affirmance (d/e 13) is ALLOWED, and Plaintiffs', Sam J. Winger and Aaron L. Winger, Motion For Summary Judgment (d/e 9) is DENIED. The decision of the Social Security Administration is AFFIRMED. This case is closed.
IT IS THEREFORE SO ORDERED.
NOTES
[1] The Commissioner notes that Arvenia Winger, who was listed as a plaintiff in the Complaint (d/e 1), is deceased. Accordingly, she does not have standing to participate in the present action.
[2] To be "currently insured," one must work at least six quarters during the last thirteen-quarter period ending with the quarter in which the person dies. 42 U.S.C. § 414(b)(1). To be "fully insured," one must have at least: (1) one quarter of coverage for every calendar year from the year in which she attains age 21 to the year before she dies, 42 U.S.C. § 414(a)(1); (2) 40 quarters of coverage total, 42 U.S.C. § 414(a)(2); or (3) six quarters of coverage, if deceased prior to 1951, 42 U.S.C. § 414(a)(3).
Arvenia was not "currently insured" because she earned only three quarters of coverage in the last thirteen quarters of her life, and was not "fully insured" because she earned only 23 quarters of coverage total between the year when she turned 21 and the year before her death. Commissioner's Memorandum In Support For Summary Affirmance (d/e 14) (Commissioner's Memorandum), pg. 3. The Wingers do not dispute the Commissioner's calculation of Arvenia's quarters of coverage. Plaintiffs' Motion, pgs. 2-3, ¶¶ 9-10.
[3] To determine eligibility for Social Security benefits, the Social Security Administration looks to the "quarters of coverage" accumulated by the employee. 20 C.F.R. § 404.101. As defined, a "quarter" consists of "a period of three calendar months ending March 31, June 30, September 30, or December 31 of any year." 20 C.F.R. § 404.102. Accordingly, an employee has the opportunity to earn four quarters of coverage for work done in any given year January 1 to March 31, April 1 to June 30, July 1 to September 30, and October 1 to December 31.
[4] In fact, the Court doubts whether the Wingers have shown that the Commissioner classifies applicants by their status as homemakers at all. The Commissioner does not contest this point. Accordingly, the Court gives the Wingers the benefit of the doubt.
[5] The Court notes that the Wingers exaggerate when they claim that "the hearing was one and one-half years after Plaintiffs requested it." Plaintiffs' Memorandum, pg. 10. In fact, the Wingers first requested a hearing in their November 5, 1999, letter, and received a hearing one year, and one month later, on December 5, 2000.
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320 F.Supp.2d 297 (2004)
Oleg KANIVETS, Petitioner
v.
William RILEY et al., Defendants.
No. Civ.A.03-5377.
United States District Court, E.D. Pennsylvania.
June 1, 2004.
*298 Lawrence H. Rudnick, Philadelphia, PA, for Petitioner.
Richard M. Bernstein, Philadelphia, PA, for Respondents.
MEMORANDUM & ORDER
KATZ, District Judge.
Oleg Kanivets filed a petition for a writ of habeas corpus under 28 U.S.C. § 2241 et seq. seeking a declaration that he merits asylum and withholding of removal. On October 3, 2003, this court granted Kanivets' request for a stay of deportation pending resolution of the petition. After a review of the petitioner's Brief in Support of the Writ, the Government's Brief in Opposition to the Petition, and the petitioner's Reply Brief and careful consideration of the issues, the court grants the petition for a writ of habeas corpus and remands the case for reconsideration of Kanivets' asylum application.
Petitioner Kanivets is ethnically Russian, a practicing Jew, and a citizen of the Kyrgyz Republic, also known as Kyrgyzstan. Kanivets left Kyrgyzstan for the United States on January 21, 1998 and applied for asylum on July 9, 1999. Kanivets claims that he had a well-founded fear of persecution in Kyrgyzstan based on his Jewish ancestry and religion. In his application for asylum, he described several incidents that supported his fear of religious persecution: being physically assaulted by a group of Kyrgyzs on two occasions; being threatened several other times if he did not move to Israel; having his apartment vandalized with antisemitic graffiti; and being fired from his job out of religious discrimination. On November 29, 2000, an Immigration Judge ("IJ") denied Kanivets' application for asylum, finding that Kanivets was a victim of "societal violence" targeted against Russians rather than a victim of widespread societal discrimination or violence against Jews. Although he found Kanivets' testimony as to his experiences in Kyrgyzstan credible, the IJ concluded that Kanivets had not established that he faced a reasonable possibility of future persecution due to his Jewish religion and ancestry. Kanivets appealed to the Board of Immigration Appeals on December 29, 2000, but the Board dismissed his appeal on October 28, 2002. On September 11, 2003, the Immigration and Customs Enforcement issued a Notice to Kanivets to surrender on October 8, 2003 to be deported. This court stayed his deportation pending resolution of his habeas petition.
This court has jurisdiction to hear Kanivets' habeas petition. See INS v. St. Cyr, 533 U.S. 289, 121 S.Ct. 2271, 150 L.Ed.2d 347 (2001) (holding that neither Antiterrorism and Effective Death Penalty Act nor Illegal Immigration Reform and Immigrant Responsibility Act repealed district court jurisdiction to review aliens' habeas petitions filed under 28 U.S.C. § 2241(c)); Ogbudimkpa v. Ashcroft et al., *299 342 F.3d 207 (3d Cir.2003) (holding that Foreign Affairs Reform and Restructuring Act limits judicial review of final orders of removal, but a district court retains jurisdiction to review habeas corpus petition claiming that removal would violate Convention Against Torture). The Third Circuit has held that under St. Cyr, district courts have jurisdiction over habeas petitions filed by both criminal and non-criminal aliens. See Chmakov v. Blackman, 266 F.3d 210, 213 (3d Cir.2001) (noting that Supreme Court presented two rationales for preserving habeas for aliens: the strong presumption in favor of judicial review of administrative decisions and the longstanding requirement of a clear statement of congressional intent before repealing habeas jurisdiction).
The government argues that because Kanivets objects to quintessentially factual determinations in the IJ opinion, this court has no jurisdiction under Section 2241 based on a recent Third Circuit decision, Bakhtriger v. Elwood, 360 F.3d 414 (3d Cir.2004). In Bakhtriger, the INS ordered removal of a lawful permanent resident previously granted asylum after he was convicted of a felony controlled substances offense. Bakhtriger applied for asylum and withholding of removal and relief from removal under the Convention Against Torture. See Bakhtriger, 360 F.3d at 416. Bakhtriger and his mother presented testimony to the IJ about past religious persecution, pervasive antisemitism in their country, and several incidents where Bakhtriger was physically attacked. Although the INS had presented sufficient proof of changed country conditions to rebut the presumption that Bakhtriger had a well-founded fear of persecution, the IJ ordered a discretionary grant of asylum due to Bakhtriger's compelling reasons for not wanting to return to his country of origin. The INS appealed and the BIA overturned the IJ's discretionary grant of asylum. Bakhtriger filed a petition for a writ of habeas corpus, claiming that the factual record did not support the IJ's finding that changed country conditions negated his fear of persecution and that the BIA erred in reversing the IJ's discretionary grant of asylum. See Bakhtriger at 417. The district court dismissed the petition on grounds that the scope of review of immigration proceedings under Section 2241 is limited to constitutional claims or legal errors. See id. The Third Circuit affirmed, holding that in criminal alien habeas removal proceedings, federal courts should not review the exercise of discretion or the sufficiency of the evidence. See id. at 420 (noting that such an "APA-style of review" is only afforded when non-criminal aliens file direct appeals from BIA decisions to the courts of appeal).
Petitioner Kanivets responds that the Bakhtriger decision did not deprive this court of jurisdiction over his case because he is not challenging any factual findings or discretionary decisions by the IJ or BIA. Instead, Kanivets claims that the IJ committed a legal error in applying law to undisputed facts. In Ogbudimkpa v. Ashcroft, 342 F.3d 207, 222 (3d Cir.2003), the Third Circuit held that "the erroneous application or interpretation of statutes" was within the scope of habeas review. Kanivets notes that whether an alien meets the definition of a refugee as defined in 8 U.S.C. § 1101(a)(42)(A) is not a discretionary decision, although once this determination is made, it is discretionary whether asylum is granted. See Reply Brief at 2, citing Matter of Pula, Interim Dec. 3033 (BIA 1987). The court agrees that Kanivets' primary challenges to the IJ's decision concern legal as opposed to factual issues and finds that it has jurisdiction to review this habeas petition.
Upon review of the parties' briefs and the record, the court finds that the IJ *300 made at least two legal errors in denying petitioner's application for asylum. First, the IJ erred in requiring Kanivets to present objective evidence showing that there was a clear-cut tradition of antisemitism in Kyrgyzstan. The IJ relied on a report by the U.S. Department of State that there was no such evidence of widespread societal discrimination against Jews in Kyrgyzstan in order to refute credible testimony of Kanivets and his mother as to their own experiences with antisemitic violence and harassment. An applicant for asylum bears the burden of showing a "well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion." 8 U.S.C. § 1101(a)(42)(A); 8 C.F.R. § 208.13(a). An applicant's credible testimony as to his persecution "may be sufficient to sustain the burden of proof without corroboration." 8 C.F.R. § 208.13(a). When an alien demonstrates past persecution, a presumption arises that he or she has a well-founded fear of future persecution. The burden then shifts to the government to prove by a preponderance of the evidence that conditions in the country of origin have changed such that petitioner no longer has a reasonable fear of persecution if he or she were to return. See 8 C.F.R. § 208.13(b)(1)(i). The IJ found credible Kanivets' testimony about being threatened and assaulted by persons who told him that they would harm him further if he did not leave for Israel, receiving similar threatening letters and phone calls, and finding the apartment that he shared with his mother vandalized with antisemitic graffiti. See Oral Decision and Order of the Immigration Judge at 2. Although he accepted this testimony, the IJ found that Kanivets' account of religious persecution in Kyrgyzstan was not corroborated by objective evidence from the U.S. Department of State, Amnesty International, or news sources. See id. at 3-4. This application of the law defining who qualifies as a "refugee" was improper. Credible testimony by Kanivets and his mother about the religious nature of the harassment, assault, and discrimination is objective evidence. Kanivets had also produced an expert witness who testified as to instances of Islamic fundamentalism in Kyrgyzstan, evidence that Jews are leaving Kyrgyzstan in steady numbers for Israel, and an article from 1991 about antisemitic violence in Central Asia. Therefore, it was error for the IJ to state that "there is no objective basis for the respondent's subjective claim that he has been the victim of persecution in Kyrgyzstan because of his Jewish ethnicity" and shift the burden to Kanivets to refute the Department of State report that there was no clear-cut tradition of antisemitism in Kyrgyzstan. See id. at 6. See, e.g., Li Wu Lin v. I.N.S., 238 F.3d 239 (3d Cir.2001) (holding that the BIA improperly relied on a letter from the State Department in refuting an alien's testimony as to his persecution).
Second, the IJ erred in holding that Kanivets was time barred from applying for asylum. See Oral Decision of the Immigration Judge at 7. The Illegal Immigration Reform and Immigrant Responsibility Act imposed a one-year statute of limitations for filing an application for asylum, however if circumstances in the country that affect eligibility for asylum change, the period of application may be extended and "delayed awareness" of such changes can be considered in evaluating what is a reasonable period for filing a late application. See 8 U.S.C. § 1158(a)(2)(B); 8 C.F.R. § 208.4(a)(4)(ii). Although the time limitation is not reviewable under INA § 208(a)(3), application of the "changed circumstances" exception is a legal issue reviewable on writ of habeas corpus, as preserved by the Supreme Court in St. Cyr. In his opinion, the IJ did not consider Kanivets' arguments that *301 there were changed circumstances that materially affected his eligibility for asylum in that conditions in Kyrgyzstan had deteriorated since he left the country in January 1998. Kanivets stated that it was not until his mother joined him in the United States in April 1999 and apprised him of developments that Kanivets decided that he could not return to Kyrgyzstan and that he would apply for asylum. It was legal error not to consider these arguments in favor of tolling the statute of limitations for changed country conditions.
An appropriate Order follows.
ORDER
AND NOW, this 1st day of June, 2004, upon consideration of the Petition to Issue a Writ of Habeas Corpus and the response thereto, it is hereby ORDERED that the Petition is GRANTED. The case is remanded to the Board of Immigration Appeals for further proceedings consistent with this opinion.
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320 F. Supp. 2d 889 (2004)
John DELCASTILLO and Lois Diane Delcastillo, Plaintiffs,
v.
ODYSSEY RESOURCE MANAGEMENT, INC., a Texas corporation, 1st Odyssey Group, Inc., a Texas corporation, Defendants.
No. 8:01CV342.
United States District Court, D. Nebraska.
June 11, 2004.
*890 *891 *892 Christopher D. Curzon, Dwyer, Smith Law Firm, Omaha, NE, for Plaintiffs.
Kevin S. Dunagan, Robert C. Rice, Rice Law Firm, Houston, TX, Craig F. Martin, Lamson, Dugan Law Firm, Omaha, NE, for Defendants.
AMENDED MEMORANDUM AND ORDER
BATAILLON, District Judge.
This matter was tried to the court on August 4 and 5, 2003. The following are the court's findings of fact and conclusions of law.
This is an action for damages and equitable relief brought pursuant to the Employee Retirement Income Security Act, 29 U.S.C. § 1132(a)(1)(B). Plaintiffs John and Lois Delcastillo contend that defendants Odyssey Management Company and Odyssey Resource Co. (hereinafter referred to collectively as "Odyssey" or "the Odyssey defendants") failed to provide plaintiffs with adequate notice of their rights under COBRA and breached fiduciary duties with respect to health benefits coverage. Plaintiffs seek compensation for their medical expenses as well as statutory penalties. In defense, the Odyssey defendants argue that they had no duty to provide either benefits or COBRA notice because Odyssey was not the plan's sponsor at the time of a "qualifying event" that would have triggered such a duty, and that plaintiff John Delcastillo was not an employee eligible for coverage under the plan.
FINDINGS OF FACT
Plaintiff John Delcastillo was sixty-five years old at the time of trial, and plaintiff Lois Delcastillo was fifty-eight years old at the time of trial. The evidence adduced at trial shows that Mr. Delcastillo was hired on January 5, 1994, by Houston J-M Corporation d/b/a GLNX. On August 12, 1996, Mr. Delcastillo fell from a railcar, severely injuring himself. He was unable to work after that date and began to collect workers' compensation benefits. Trial Exhibit ("T.Ex.") 59. GLNX continued to provide his health insurance benefits. T. Ex. 100. GLNX was sold to Integrated Rail Products ("IRP") on October 15, 1997. T. Ex. 116.
On June 11, 1997, IRP entered into a Staff Servicing Agreement with Odyssey Management Company to provide employment and human resource services. T. Ex. 26. Odyssey Management Services is a "professional employer organization" that characterizes itself as a "co-employer." On January 1, 1999, IRP entered into another Staff Servicing Agreement with Odyssey Resource Management, Inc., to provide employment and human resource services. T. Ex. 27. Carl Kleimann, President of both 1st Odyssey Group and Odyssey Resource Management, testified that Odyssey had a plan sponsor role in connection with the employment benefits *893 plans it offered. Under the 1999 Staff Servicing Agreement with IRP, Odyssey was responsible for processing and administering claims and also assumed a contractual obligation to provide appropriate ERISA and COBRA notice to IRP employees "as to any employee benefit plans" it administered. Id. IRP chose to switch its employees from United Healthcare to the Odyssey health insurance policy, and on February 1, 1999, the change became effective. 1st Odyssey in turn contracted with Reliance Insurance Company ("Reliance") to provide health insurance coverage and W. Loomis Co. ("Loomis") to administer the plan. T. Ex. 29, 30. Mr. Kleimann testified that an eligibility determination was the duty of Loomis, as administrator. During the period from the date of his injury through February 1999, John Delcastillo's health insurance "Explanation of Benefits" forms, paystubs, W-2 forms, W-4 forms, employee handbook, and employee safety guide listed his employer as Odyssey Resource Management, Odyssey Management Services or 1st Odyssey Group. T. Exs. 49, 50, 51, 61, 62, 63, 64, 81, 97, 98, and 99.
Both Odyssey Resource Management and 1st Odyssey Group operate under the umbrella of the same holding company, Supreme Enterprises, Inc. ("Supreme"). Supreme and its subsidiaries, including Odyssey Resource Management and 1st Odyssey Group, Inc. share the same headquarters address and phone number. 1st Odyssey Group is owned by Carl Kleimann, Patricia Fry, and David Williams. T. Ex. 105. The headquarters building is owned by Mr. David Williams and Ms. Patricia Fry. The building is leased only to 1st Odyssey Group, Inc., yet, Supreme and its subsidiaries, including Odyssey Resource Management, are also tenants. Williams Dep. 20:23-21:13; Fry Dep. 23:9-13. Ms. Fry testified that she did not know what 1st Odyssey Group paid for rent.
David Williams testified that he is the major shareholder and CEO of 1st Odyssey Group, but has turned the day-to-day operations over to its President, Karl Kleimann. He further testified that neither Supreme Enterprises nor Odyssey Resource Management has any employees. Odyssey Resource Management ceased doing business as a professional employer organization because its license was not renewed by the state of Texas. Williams testified that several Odyssey entities went through several more changes over the years, but the ownership never changed. 1st Odyssey Group was also known as ENS Management, Inc. at one time. 1st Odyssey Group was created "to purchase workers' compensation insurance and continue to operate." Williams Dep. 36:1-2, Odyssey Resource Management entered into an agreement with 1st Odyssey Group "to be able to service the clients that were that had contracts with Resource Management." Williams Dep. 39:15-17. Pursuant to that agreement, 1st Odyssey Group pays Supreme Enterprises $300,000 per month. Mr. Williams is paid $20,000 per month, from 1st Odyssey, through ENS Management, for consulting.
Mr. Kleimann testified that he serves as president of 1st Odyssey Group and as Senior Vice-President of Odyssey Resource Management. He characterized Odyssey Resource Management as a "dormant" corporation. He testified that 1st Odyssey Group acquired certain of Odyssey Resource Management's contracts and paid for them. Deposition testimony admitted at trial shows that employees were transferred from Odyssey Resource Management to 1st Odyssey Group, Inc. (Williams Dep. 40:16-24; Kleimann Dep. 18:17-23) and that 1st Odyssey Group, Inc. uses the same computer system that Odyssey Resource Management and all the other subsidiary companies also use. Kleimann Dep. 95:15-20. Additionally, a *894 review of the deposition testimony of Mr. Kleimann, David Williams, Patricia Fry, Perry Galium and Mark Turner shows little regard for corporate formalities. The corporate officers demonstrated little understanding of the corporate structure, operations and ownership of the various Supreme subsidiaries and their relationships to each other. Ms. Patricia Fry, Vice President of 1st Odyssey Group, testified that she has been employed by 1st Odyssey Group or Odyssey Management Company since 1989. Although she testified that she did not know whether or not she served on the board of 1st Odyssey Group, Texas franchise reports show her to be an officer of Supreme Enterprises, Inc. and 1st Odyssey Group. She testified that she is compensated through Supreme Enterprises at the rate of $20,000 per month. Mr. Williams testified that Supreme Enterprises derives its only income from fees it received from 1st Odyssey Group, amounting to $300,000 per month. The names "Odyssey Group," "Odyssey Resource Management," "Odyssey Management Services," "Odyssey Management, Inc.," "Odyssey Resource Management II," "Odyssey Services," and "Odyssey Services II" were used interchangeably on various corporate documents and communications.
When he was injured in the work-related injury in August 1996, Mr. Delcastillo suffered a broken pelvis in four places, a brain hemorrhage, a shattered arm and several broken vertebrae in his back. T. Ex. 59. He later suffered a blood clot. GLNX continued to provide him with medical benefits after his injury. T. Ex. 100. He testified that he regarded himself as an employee who was injured. There is no evidence that shows or suggests that Mr. Delcastillo was no longer an employee after his injury. To the contrary, numerous documents show that Mr. Delcastillo continued to be regarded by the Odyssey defendants and GLNX, and later IRP, as an employee. See T. Ex. 15, 17, 35, 36, 37, and 134.
At the time GLNX was purchased by Integrated Rail Products in November 1997, the benefits manger at Integrated Rail Products wrote to Mr. Delcastillo, stating that GLNX-Omaha had ceased to exist on October 15, 1997, and that all GLNX employees had been terminated at that time. T. Ex. 116. In the letter, Mr. Delcastillo was assured that "Houston J-M Corp. will pay your health coverage until you have reached MMI [maximum medical improvement]." Id. As noted, the Delcastillos continued to receive health insurance benefits without incident through February 1999. Explanation of benefits forms show health coverage was provided by GLNX until October 1997, and then was provided by IRP until Feb. 1, 1999. T. Ex. 100. Mr. Delcastillo's continued status as an employee is also confirmed by IRP's employee list. T. Ex. 18. The evidence further shows that Mr. Delcastillo received workers' compensation checks from an Odyssey entity. Mr. Delcastillo was never informed that it was necessary to take any action in order to continue health insurance coverage nor was he informed that the coverage would terminate.
Mr. Delcastillo was the primary wage-earner for his family. His wife, Lois Diane Delcastillo, was not employed outside the home; she cared for the Delcastillos' son, who had juvenile diabetes. Mrs. Delcastillo has had diabetes since 1953 and is an insulin-dependent, type 1, juvenile-onset diabetic. Because of complications of her diabetes, Mrs. Delcastillo has had two heart attacks and an iliac artery bypass, and suffers from vascular disease, diabetic retinopathy, and hypothyroidism. She was blind in one eye, but that condition was corrected by surgery, and she presently needs surgery in her other eye.
*895 In March 1999, Mrs. Delcastillo first became aware of a problem with health benefits coverage when a pharmacy refused to fill a prescription, stating that she had no coverage. Mrs. Delcastillo testified that she immediately called IRP. An IRP employee informed her that IRP's United Healthcare Plan had been terminated, but that insurance would be provided through a new plan. IRP later realized that John Delcastillo's name had been inadvertently left off a list of employees that had been sent to Odyssey. Mrs. Delcastillo later received a call from Linda Reyna, an Odyssey employee, who confirmed that there had been a mistake but that a health insurance packet would be mailed to the Delcastillos.
On March 18, 1999, the Delcastillos received a fax containing a Reliance Insurance Company enrollment form. T. Ex. 4. The completed form was returned by the Delcastillos and was received by defendant Odyssey on March 29, 1999. T. Ex. 2. On March 20, 1999, the Delcastillos received two health insurance cards and health plan documents. T. Ex. 5. The cards are imprinted "Reliance Insurance Company, Odyssey Resource Management, Inc." Id. The employee benefits explanation packet is labeled "1st Odyssey Group." T. Ex. 4. In response to a request, the Delcastillos received a PPO Preferred Provider Directory via Federal Express, on April 7, 1999. T. Exs. 6 & 7. In August 1999, the Delcastillos received a "Certificate of Coverage" showing Odyssey Resource as employer. T. Ex. 9.
The Delcastillos attempted to use the health insurance cards but were informed by health care providers that there was no coverage. Mrs. Delcastillo made multiple calls to Odyssey and to Reliance and Loomis, the insurer and administrator of the plan, and was repeatedly assured that a health care policy covering the Delcastillos was in existence. No medical services were ever reimbursed and furthermore, no denials of benefits were ever sent to the Delcastillos. In early June 1999, the Delcastillos filed a complaint with the Nebraska Department of Insurance. The complaint was forwarded to Reliance Insurance Company. Reliance responded to the Department of Insurance, stating that insurance existed. T. Exs. 10 & 11. On August 9, 1999, Loomis sent the Delcastillos a certificate of coverage, identifying Reliance as the insurance carrier and Odyssey as the employer. T. Ex. 9. On October 22, 1999, John Delcastillo received a letter from Carl H. Kleimann, Senior Vice-President of Odyssey Resource Management, stating that, although Delcastillo did not have coverage, Odyssey would offer coverage, retroactive to February 1, 1999, until December 31, 1999. The offer was contingent upon a review of claims and a utilization review of future claims exposure as well as the Delcastillos' agreement not to seek COBRA continuance coverage. T. Ex. 12. Mr. Delcastillo did not respond to the letter. He testified that he had been assured that he was already covered and believed that he was. He thought Odyssey's offer did not give him anything. In March 2000, the Delcastillos received a notice from 1st Odyssey Group addressed to them, as "Reliance Insurance participants," that Odyssey's Reliance health and dental plan premiums could increase. T. Ex. 13. On July 20, 2000, the Delcastillos received a letter dated July 17 informing them that their medical coverage was terminated effective June 30, 2000. T. Ex. 14. This letter included notice of Delcastillo's right to elect continuation coverage under COBRA. Id. The correspondence states John Delcastillo's "affiliation date" was January 5, 1994; his "qualifying event" date was June 30, 2000; the "date coverage began" was February 1, 1999; and *896 the "date coverage ended" was June 30, 1999. Id.
Meanwhile, Mrs. Delcastillo encountered numerous health problems for which she was unable to obtain any insurance payment or reimbursement. Correspondence from health care providers indicates that neither Reliance, Loomis or Odyssey responded to claim submissions. T. Ex. 75, 76, 77, & 78. Submission of claims resulted in neither approval nor denial, only inaction. Id. The evidence shows that Loomis, at the direction of PRS, Reliance Insurance Company's program manager, had placed a "hold," or "pended" the claims, due to a dispute over eligibility. T. Ex. 35, 36, & 37. The Delcastillos were never informed of this fact.
Mrs. Delcastillo underwent treatment and ultimately surgery for a sight-threatening eye condition that was paid for by donations from her church and charitable foundations. T. Ex. 104. The evidence further shows that the Delcastillos incurred over $27,026.11 in actual medical expenses during this time. T. Ex. 139 through 158. Ultimately, the Delcastillos divorced so that Mrs. Delcastillo could qualify for public assistance. T. Exs. 124 & 125. The Delcastillos provided evidence that Mrs. Delcastillo is "uninsurable," that is, she cannot obtain private health insurance at any price. She testified that she could not afford the premiums to pay for insurance under the State of Nebraska Comprehensive Health Insurance Plan that provides health insurance for those who cannot obtain coverage elsewhere. T. Ex. 74.
CONCLUSIONS OF LAW
I. Alter Ego
The evidence shows that the two defendant companies are alter egos of each other and of other entities owned by the parent holding company. Courts evaluating alter ego claims under ERISA should use corporate law principles. Greater Kansas City Laborers Pension Fund v. Superior General Contractors, Inc., 104 F.3d 1050, 1055 (8th Cir.1997). This is a mixed question of law and fact. Id. at 1054. Those principles provide that the legal fiction of the separate corporate entity may be rejected in the case of a corporation that (1) is controlled by another to the extent that it has independent existence in form only; and (2) is used as a subterfuge to defeat public convenience, to justify wrong, or to perpetuate a fraud. Id. The essence of the alter ego test is whether, under all the circumstances, the transaction carries the earmarks of an arm's length bargain if it does not, equity will set it aside. In re B.J. McAdams, Inc., 66 F.3d 931, 937 (8th Cir.1995). In this case, the court finds that it is clear that the defendant corporations do not exist independently of each other; the entities were used to perpetuate the denial of Mr. Delcastillo's notice and benefits and to create confusion about the Delcastillos' recourse and remedies. The interrelationship of the Odyssey defendants and their parent corporation and its other subsidiaries suggests that Supreme and its subsidiaries are a single entity that hides behind legalistic corporate identities and formalities to elude responsibilities for corporate acts. The court finds that to the extent liability is found, it attaches to both defendants as alter egos of each other.
II. ERISA and COBRA
ERISA, as amended by COBRA, imposes a statutory duty on a "plan sponsor" to provide continuation coverage identical to that provided to its current employees. See 29 U.S.C. §§ 1002(16)(B), 1161(a), 1162(1); Fink v. Dakotacare, 324 F.3d 685, 690 (8th Cir.2003). The fact that a plan sponsor switches its plan from one group health provider to another may modify but not eliminate this duty. Id. It *897 is not a beneficiary's obligation to sort out who provides the coverage. Id. A plan sponsor and plan administrator, as ERISA fiduciaries, are responsible to "discharge [their] duties with respect to a plan solely in the interest of the participants and beneficiaries ... (A) for the exclusive purpose of: (I) providing benefits to participants and their beneficiaries," 29 U.S.C. § 1104(a)(1); see Fink, 324 F.3d at 690 n. 3. An ERISA fiduciary must exercise its duties "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use," 29 U.S.C. § 1104(a)(1)(B). ERISA beneficiaries may obtain appropriate equitable relief to redress a fiduciary's breach of these duties. See 29 U.S.C. § 1132(a)(3); Fink, 2003 324 F.3d at 690 n. 3.
As noted, Odyssey is a professional employer organization, known as a co-employer. Under this arrangement, a co-employing company "provides co-employment services to its client employers designating itself on employees' W-2 forms as the employer, paying employee wages, and providing all employee benefits". See, e.g., Employers Resource Management Co., Inc. v. Shannon, 65 F.3d 1126, 1128 (4th Cir.1995). "The primary employer is relegated, in effect, to the status of an on-site director of day-to-day operations." Id. A co-employer or professional employer organization can be either the plan administrator and/or ERISA fiduciary of the employee welfare benefit plans that it establishes for the employees of its client co-employers in these circumstances. Id. The co-employer generally finances the plans through fees paid by the client co-employers and through employee contributions. See id.
Through COBRA, Congress amended ERISA to require that covered group health plans "provide ... that each qualified beneficiary who would lose coverage ... as a result of a qualifying event is entitled ... to elect ... continuation coverage under the plan." 29 U.S.C. § 1161(a). COBRA contains provisions that give certain former employees the right to temporary continuation of health coverage for themselves and their families at group rates. Hartley v. Dillard's Inc., 310 F.3d 1054, 1063 n. 4 (8th Cir.2002). "COBRA was enacted in 1986 as a legislative response to `reports of the growing number of Americans without any health insurance coverage and the decreasing willingness of our Nation's hospitals to provide care to those who cannot afford to pay."' McGee v. Funderburg, 17 F.3d 1122, 1124 (8th Cir.1994) (quoting H.R.Rep. No. 241, 99th Cong., 2d Sess. 44, reprinted in 1986 U.S.C.C.A.N. 42, 579, 622). In an effort to provide continued access to affordable private health insurance for some of these individuals, COBRA compels employers who sponsor certain group health plans to provide qualified beneficiaries with the option of receiving self-paid continuation coverage for eighteen or thirty-six months after a qualifying event which would otherwise result in termination of coverage. Id. ERISA, as amended by COBRA, is remedial legislation that should be liberally construed to effectuate Congressional intent to protect employee participants in employee benefit plans. Id.
The continuation of health insurance coverage is an important concern when a person's employment status changes. See Chesnut v. Montgomery, 307 F.3d 698, 700 (8th Cir.2002). Thus, providing appropriate notice of COBRA continuation coverage rights is a key requirement under COBRA. McDowell v. Krawchison, 125 F.3d 954, 957 (6th Cir.1997). Notice is necessary "to allow the qualified beneficiary to make an informed *898 decision whether to elect coverage." Id. at 958. COBRA first requires that "the group health plan shall provide, at the time of commencement of coverage under the plan, written notice to each covered employee and spouse of the employee (if any) of the rights provided under [COBRA]." 29 U.S.C. § 1166(a)(1) (emphasis added). COBRA also requires that a plan administrator notify any qualified beneficiary of such beneficiary's rights under COBRA on the occurrence of a qualifying event. 29 U.S.C. § 1166(a)(4).
The term "qualifying event" is any of several events, including death, divorce, termination or reduction of hours, that, "but for the continuation coverage required under [COBRA], would result in the loss of coverage of a qualified beneficiary." 29 U.S.C. § 1163. The employer of an employee under a plan is charged with the duty of notifying the administrator of the qualifying events of death, termination, a covered employee's entitlement to Social Security benefits or the employer's bankruptcy, within thirty days of the qualifying event. 29 U.S.C. § 1166(a)(2). Correspondingly, the employee must notify the administrator of the qualifying events of divorce or a dependent child ceasing to be dependent, within thirty days of the qualifying event. 29 U.S.C. § 1166(a)(3). Under COBRA, an ERISA fiduciary must provide written notice to the employee when coverage under a group plan commences, but oral notice can suffice in the case of notice after a qualifying event. See 29 U.S.C. § 1166(a)(1) & (4); Chesnut, 307 F.3d at 700. Ordinarily, when a qualifying event occurs, the covered employee has already received an initial written notice of the right to continuation coverage and the second notice is merely a reminder of that right. Id. at 701. A plan fiduciary can satisfy its notice obligation by providing information that adequately informs the qualified beneficiary of the coverage he or she was entitled to receive and the money that he or she owed in order to maintain this coverage. Id. The notice given must be sufficient to allow the qualified beneficiary to make an informed decision whether to elect coverage. Id. The plan fiduciary bears the burden of proving that he provided sufficient oral notice. Stanton v. Larry Fowler Trucking, Inc., 52 F.3d 723, 727-29 (8th Cir.1995). Whether the notice is sufficient in a particular case is an issue of fact. Chesnut, 307 F.3d at 700.
The plain language of the statute defining "qualifying events" limits qualifying events to those events for which there would be a loss of health insurance but for the provision of COBRA coverage. See 29 U.S.C. § 1163; Williams v. Teamsters Local Union, 2003 WL 22424726, *4 (N.D.III. Oct. 23, 2003) (noting a termination that does not result in a loss of benefits does not constitute a qualifying event and does not trigger the notice requirements of § 1166). After John Delcastillo's injury and resultant inability to return to work, the Delcastillos continued to receive health insurance coverage for over two years. Thus, even if the occurrence of the injury could somehow be characterized as a termination, it would not be a qualifying event. It would defy logic to impose a duty to notify an employee of the right to obtain continuation coverage, generally at a higher price, when coverage remains available for a lesser amount. Accordingly, John Delcastillo's injury in August 1996 cannot be a qualifying event under COBRA. Similarly, the ostensible "termination letter" that John Delcastillo received in November 1997 could not amount to a qualifying event since, by its terms, the letter extended coverage, rather than ended it. See, e.g., DiGiovanni v. the Guardian Life Ins. Co. of Amer., 2002 WL 1477175, *7 n. 4 (D.Ma. June 28, 2002) (finding ERISA fiduciary bound by its provision *899 of benefits to a disabled employee who met policy definition of "terminated"). There is no evidence that Odyssey ever provided any written notice at the inception of coverage. Similarly, Odyssey did not provide sufficient notice, written or oral, in the case of any qualifying event at any time until it notified John Delcastillo in July 2000 that coverage had terminated. Accordingly, the court finds Odyssey liable for failure to provide the Delcastillos with notice of their rights under COBRA.
The Delcastillos also premise liability on breach of fiduciary duties in connection with Odyssey's handling of the Delcastillos' health care benefits. In response, Odyssey contends that it has no fiduciary relationship with the Delcastillos since the Delcastillos were never eligible under the plan because in order to be eligible, John Delcastillo would have had to work more than thirty hours a week and he did not work at all. The court finds this argument specious. See DiGiovanni, 2002 WL at 1477175, *7 (rejecting similar argument). Odyssey contracted to provide human resource and benefits service for IRP's employees. Under the terms of the contract, IRP was to have forwarded a list of covered employees to Odyssey. At least as of the time Mrs. Delcastillo was first assured of coverage, Odyssey was informed that IRP regarded John Delcastillo as an employee. Whatever responsibility IRP bears for this debacle remains to be sorted out between IRP and Odyssey. It is not the beneficiary's obligation to sort this out. See Fink, 324 F.3d at 690. Odyssey ignores its status as "co-employer," with resultant duties as employer under ERISA to notify plan administrators. Moreover, Odyssey admits that it is the "Plan Sponsor." Odyssey's attempt to transfer responsibility for its fiduciary duties to Loomis, Reliance, or PRS ignores the evidence that these entities operated as Odyssey's agents in connection with the health insurance plan that Odyssey sponsored as co-employer. In exchange for the payments under the contract administering its client co-employers' health benefits plans, Odyssey assumed the risk of, and liability for, malfeasance in connection with administration of those plans vis-a-vis employee beneficiaries. Accordingly, the court finds that plaintiffs have shown that Odyssey breached its fiduciary duties in connection with the administration of the plan.
Alternatively, the court finds this case an appropriate candidate for application of the doctrine of equitable estoppel. An employer can be liable in its fiduciary capacity under ERISA for making affirmative misrepresentations on both breach of fiduciary duty and on equitable estoppel theories. See, e.g., Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226 (8th Cir.1994) (finding an equitable estoppel authorized under ERISA pursuant to § 1132(a)(3)(B)); see also Bixler v. Central Pa. Teamsters Health & Welfare Fund, 12 F.3d 1292, 1298 (3d Cir.1993) (holding that § 1132(a)(3)(B) authorizes the award of appropriate equitable relief to a beneficiary for violations of ERISA). To succeed under this theory of relief, an ERISA plaintiff must establish (1) a material representation, (2) reasonable and detrimental reliance upon the representation, and (3) extraordinary circumstances. Curcio, 33 F.3d at 227. The determination of an equitable estoppel claim is a mixed question of law and fact. Id. Odyssey does not dispute the essential facts of this case. The Delcastillos have shown that the Odyssey defendants, through either their agents or client co-employers, represented to the Delcastillos that the Delcastillos were covered under a policy of health insurance, when, in fact, they were not. This misrepresentation was, of course, material in that it affected an important component of their employer-sponsored *900 health plan, in fact the central or only component coverage for health care. The Delcastillos, in reliance on Odyssey's representations, forewent opportunities to obtain insurance elsewhere. Because the Delcastillos had continued to be covered for more than two years after John Delcastillo's disabling accident, in spite of the fact that he had not worked at all, it was reasonable for them to assume such coverage would remain in effect. Undeniably, the Delcastillos relied to their detriment. Had they not been assured of coverage through Odyssey, they could have attempted to provide for it in John Delcastillo's workers' compensation settlement. The court has no difficulty concluding that the Delcastillos have suffered an injury in giving up an opportunity to accommodate their insurance needs through other means, albeit difficult, because of their reasonable reliance on Odyssey's representations. Lastly, the Delcastillos have established the existence of extraordinary circumstances. See, e.g., Curcio, 33 F.3d at 227-28 (finding extraordinary circumstances in case presenting far less egregious actions in connection with denial of life insurance benefits after a "roller-coaster" of repeated assurances of coverage).
The court thus finds defendants jointly and severally liable for breach of fiduciary duty, failure to provide written notice of COBRA benefits and rights at the time of commencement of coverage under the plan as required by 29 U.S.C. § 1166(a)(1), and failure to notify the Delcastillos on the occurrence of a qualifying event as required by 29 U.S.C. § 1166(a)(4).
III. Damages
COBRA provides that "the court may in its discretion order such other relief as it deems proper." 29 U.S.C. § 1132(c)(3). Courts have interpreted "other relief" as an award of medical expenses minus deductibles and premiums. See Jones v. Officemax, Inc., 38 F. Supp. 2d 957, 960 (D.Utah 1999). ERISA remedies include a provision that an administrator who breaches this duty "may in the court's discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day." 29 U.S.C. § 1132(c); Geissal, 338 F.3d 926, 933 (8th Cir.2003). The issue under 29 U.S.C. § 1132(c) is whether the plan administrator gave a proper notice, not whether the employee was improperly denied COBRA continuation coverage. Id. Damages for failure to give notice can be measured in this case in two ways: damages for failure to give notice of rights and benefits at the commencement of the plan, and failure to give notice on the occurrence of a qualifying event. Although an "employer's good faith and the absence of harm are relevant in deciding whether to award a statutory penalty," neither a defendant's good faith nor the absence of actual injury to the plaintiff precludes the award of a statutory penalty. Chesnut, 307 F.3d at 703-04. The correspondence of July 17 was the first document to provide COBRA coverage.
There is some evidence that Odyssey's initial failure to provide coverage or notice was the result of a "mix-up" or failure of communication, and not bad faith; nevertheless, its failure to act to remedy the situation, in spite of the Delcastillos' repeated phone calls, as well as its continued reluctance to admit any responsibility for the Delcastillos' predicament, could be considered bad faith. See, e.g., Brown v. Aventis Pharmaceuticals, Inc., 341 F.3d 822, 829 (8th Cir.2003). Additionally, the Delcastillos have shown not only the loss of health benefits, but significant hardship and disruption in their personal and family lives as a result of Odyssey's lapses. Accordingly, the court finds that an award of statutory penalties is appropriate in this case.
*901 Odyssey argues, in connection with damages, that the Delcastillos are not entitled to damages since they cannot show that they could have afforded COBRA continuation coverage even if they had been notified of their right to elect coverage. The court rejects Odyssey's invitation to engage in an after-the-fact, speculative inquiry as to whether the plaintiff could have afforded COBRA coverage. See Smith v. Rogers Galvanizing Co., 128 F.3d 1380, 1385 (10th Cir.1997) (stating "[i]t is entirely conceivable that, faced with the choice of paying the premiums or going without medical insurance altogether, plaintiffs could have borrowed money, sold assets, or found some other way to pay premiums"). Id. at 1385. The court's concern rests with whether the plaintiffs were provided an opportunity to elect coverage based upon having been fully informed of their COBRA rights. See id. The Delcastillos clearly were not provided any such opportunity. A plaintiff does not need to demonstrate harm to be entitled to damages under 29 U.S.C. § 1132(c). See, e.g., Gillis v. Hoechst Celanese Corp., 4 F.3d 1137, 1148 (3d Cir.1993) (involving the analogous area of reporting and disclosure requirements and noting that Congress' purpose in enacting the ERISA disclosure provisions was to ensure that an individual participant knows exactly where he stands with respect to the plan).
The amount of statutory penalties, and the appropriate period of time for which they should be assessed remains to be determined. Plaintiffs have proposed twelve different scenarios, with requested damages amounts varying from $27,026.11 (representing actual medical expenses) to $624,000 (representing actual damages plus maximum statutory penalty damages for the longest period of time that COBRA benefits would arguably be available). The court finds that damages for breach of fiduciary duty and failure to give COBRA notice are the same. Thus, a single damage award will remedy both violations. The court finds an award of damages in the amount of $306,866.11 is appropriate under the circumstances of this case. That amount represents plaintiffs' special damages plus statutory penalties in the amount of $110.00 per day for each plaintiff for either breach of fiduciary duty or failure to provide COBRA notice measured from February 1, 1999, until July 19, 2000, when the Delcastillos received the delayed notice, and for 18 months thereafter, plus statutory penalties in the amount of $110.00 per day for each plaintiff for failure to provided notice of COBRA rights measured from February 1, 1999, until August 10, 1999.
COBRA's civil enforcement statute also provides for an award of attorney fees and costs. The court "in its discretion may allow reasonable attorney fee and costs of the action to either party." 29 U.S.C. § 1132(g). The court finds attorney fees in this case are appropriate and will enter an order assessing fees on a proper showing.
Accordingly,
IT IS ORDERED:
1. The court finds defendants Odyssey Management Co. and Odyssey Resource Co. jointly and severally liable to plaintiffs John Delcastillo and Lois Delcastillo for breach of fiduciary duty under ERISA and for failure to provide notice under COBRA, in the amount of $306,866.11. Judgment will be entered in a separate order after resolution of attorney fees.
2. Plaintiffs are granted until June 7, 2004, to submit a motion for attorney fees.
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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/2468909/
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320 F. Supp. 2d 1307 (2003)
UNITED STATES of America, Plaintiff,
v.
16 PARCELS OF REAL PROPERTY, Defendant.
No. 00-10064-CIV.
United States District Court, S.D. Florida. Miami Division.
September 16, 2003.
*1308 William C. Healy, AUSA, Miami, FL, for U.S.
Juan Luis Quintana, Quintana & Associates, Coral Gables, FL, for Fabio Quinones, Nereida U. Quinones.
Andrea Shaye Margalli, Esq., Jiulio Frank Margalli, Esq., The Margalli Law Office, P.A., Key West, FL, for Beth Fernandez.
Andrea Shaye Margalli, Esq., The Margalli Law Office, P.A., Key West, FL, for Jose Ramon Fernandez.
Andrea Shaye Margalli, Esq., Jiulio Frank Margalli, Esq., The Margalli Law Office, P.A., Key West, FL, Montgomery Blair Sibley, Washington, DC, for Olga Fernandez.
Bruce Allan Alter, Esq., Miami, FL, Andrea Shaye Margalli, Esq., Jiulio Frank Margalli, Esq., The Margalli Law Office, P.A., Key West, FL, for Ramon Fernandez.
ORDER AFFIRMING REPORT AND RECOMMENDATION
JAMES LAWRENCE KING, District Judge.
THIS CAUSE is before the Court upon Magistrate Judge John O'Sullivan's September 3, 2003, Report and Recommendation *1309 ("R & R") recommending that the Motion to Dismiss Plaintiff's Claim[1] be denied, and that Plaintiff's Motion for Summary Judgment be granted. On September 9, 2003, the Representatives filed their Objections. On September 10, 2003, Plaintiff filed its Response.
Section 636(b)(1) of the Federal Magistrate's Act requires this Court to make a de novo determination of those parts of the Magistrate Judge's R & R to which objection is made. 28 U.S.C. § 636(b)(1); United States v. Raddatz, 447 U.S. 667, 673, 100 S. Ct. 2406, 65 L. Ed. 2d 424 (1980); Jeffrey S. v. State Bd. of Educ., 896 F.2d 507, 512-13 (11th Cir.1990).
The Court concludes that the R & R contains a thorough and well-reasoned recommendation that satisfactorily addresses all the arguments the Representatives raised in their Objections. The Motion to Dismiss must be denied, and Plaintiff's Motion for Summary Judgment must be granted, because the Representatives lack standing to move for dismissal or contest Plaintiff's case. The Representatives lack standing because their predecessor in interest failed to become a party. The Court sympathizes with the Representatives, because their predecessor in interest failed to become a party solely because an attorney failed to submit a timely verified claim. However, the attorney's negligence does not affect the Representatives' status. When would-be parties seek to claim an interest in the subject property and join an in rem case, courts require strict compliance with Rule C(6)(a)(i)(A) of the Supplemental Rules for In Rem Actions. Courts have permitted belated claims under certain extreme circumstances, but courts have not allowed an attorney's negligence to excuse an untimely claim. E.g., U.S. v. Commodity Account No. 549 54930 at Saul Stone & Co., 219 F.3d 595, 598 (7th Cir.2000).
Accordingly, after a careful review of the record and the Court being otherwise fully advised, it is
ORDERED and ADJUDGED that Magistrate Judge O'Sullivan's September 3, 2003, R & R be, and the same is hereby, AFFIRMED and ADOPTED. It is further
ORDERED and ADJUDGED that the Representatives' Motion to Dismiss be, and the same is hereby, DENIED. It is further
ORDERED and ADJUDGED that Plaintiff's Motion for Summary Judgment be, and the same is hereby, GRANTED.
REPORT AND RECOMMENDATION
O'SULLIVAN, United States Magistrate Judge.
THIS CAUSE came before the Court on defendant 16 Parcels of Real Property Motion to Dismiss (DE # 82 9/17/01) and plaintiff's Motion for Summary Judgment (DE # 83, 9/18/01). The motions were referred to the undersigned by the Honorable James Lawrence King pursuant to 28 U.S.C. § 636. The undersigned heard oral argument on these motions on September 2, 2003. Upon a review of the motions' pleadings, oral argument, and applicable law, the undersigned respectfully RECOMMENDS that defendant's motion to dismiss be DENIED and that summary judgment be GRANTED in favor of plaintiff. All other pending motions should be DENIED as moot.
*1310 I. INTRODUCTION
Plaintiff, the United States of America, seeks forfeiture of defendant properties identified as numbers 1-16, pursuant to 21 U.S.C. § 881(a)(6), properties numbered 1-7 and 9-16 pursuant to 21 U.S.C. § 2461(a)(6), and property number 8 pursuant to 21 U.S.C. § 881(a)(7). On August 2, 2000, Ramon Fernandez ("Fernandez") was charged in a six count indictment for allegedly violating various provisions of the Controlled Substances Act, 21 U.S.C. § 841 et seq. On February 21, 2001, Fernandez entered a plea of guilty as to counts one, five, and six of the indictment. On April 22, 2001, Fernandez died while incarcerated at the Monroe County Corrections Center. He was awaiting sentencing pursuant to his plea of guilty at the time of his death.
The instant action was filed on August 22, 2000 alleging that Fernandez must forfeit the defendant property because the defendant property constitutes a thing of value furnished or intended to be furnished in exchange for controlled substances, or proceeds traceable thereof, and/or was used, or intended to be used, in any manner or part, to commit or facilitate the commission of a violation of 21 U.S.C. § 801 et seq. Fernandez was the owner of record for defendant property. The Honorable Norman C. Roettger ordered the Clerk of the Court to issue a summons in rem for each of the 16 Parcels on September 5, 2000 (DE # 20). Return of service of summons on each of the 16 Parcels was executed in November, 2000 (DE # 37-48, 52-55). On November 17, 2000 Fernandez, through his attorney, filed an answer to the complaint (DE # 50) but did not file a verified claim.
Plaintiff filed its proof of notice of this action on January 25, 2001 (DE # 57-58). The notice was published in the Miami Daily Business Review. On June 7, 2001 counsel for Fernandez filed a "Suggestion on Record of Party's Death of Ramon Fernandez" with the Clerk of the Court (DE # 62). On February 4, 2002 counsel for the personal representatives of Fernandez filed a "Motion for Leave to File Verified Claim of Ramon Fernandez and to Treat Same as Timely Filed" (DE # 113).
II. MOTION TO DISMISS
Fernandez requests the Court to dismiss the cause pursuant to F.R. Civ. P. 25(a).[1] On June 7, 2001 counsel for Fernandez filed a Suggestion of Fernandez's death (DE # 62). The personal representatives of Fernandez, who have brought forth the instant motion, assert that they "are not claimants" in the instant motion.
At the outset, the Court notes that counsel for Fernandez and his estate state that they represent defendant 16 Parcels of Real Property. A civil forfeiture cause of action, however, is an "`in rem action brought against seized property pursuant to the legal fiction that the property itself is guilty of facilitating a crime."' United States v. One (1) 1983, Fifty-Seven Foot (57') Gulfstream Vessel, etc., 640 F. Supp. 667, 672 (S.D.Fla.1986); see also United States v. Two Parcels of Real Property Located at 101 N. Liberty St. and 105 *1311 Liberty Street in Clanton, Chilton County, Ala., 80 F. Supp. 2d 1298, 1304 (M.D.Ala.2000). While counsel indicates that "defendant" filed the instant motion, the property itself is not bringing forth the requested relief. Rather, counsel representing Ramon Fernandez and the successors and representatives of Fernandez's estate petition the Court for the relief sought.
Fernandez and his successors assert that the instant action should be dismissed because plaintiff did not file a motion for substitution of parties within 90 days of the suggestion of death of Ramon Fernandez. See F.R. Civ. P. 25(a)(1). They claim that since the suggestion of death was docketed on June 7, 2001 and 90 days had passed without a motion for substitution of party being filed by plaintiff, the lawsuit must be dismissed. See Hofheimer v. McIntee et al., 179 F.2d 789, 791 (7th Cir.1950) (court held that Federal Rules of Civil Procedure mandate that substitution of deceased party must be made within period of time stated in the rules or the court shall dismiss the action as to the deceased party); see also Cheramie v. Orgeron, 434 F.2d 721, 725 (5th Cir.1970) (estate and heirs not parties to litigation were not required to act affirmatively to file a motion to substitute parties or to intervene to seek dismissal of case as to decedent).
The circumstances in the instant case, however, can be distinguished from those in Cheramie and Hofheimer. As discussed more thoroughly below, the defendant in this case is real property. Fernandez, as the owner of record for the property, failed to follow the requisite procedures to become a claimant in the case. In Cheramie, the Fifth Circuit addressed the issue of whether the district court should enter an order substituting for the deceased defendant those parties representing deceased defendant's interests. Cheramie, 434 F.2d at 724-25. The court already had jurisdiction over the deceased defendant, as a judgment had been entered against him in a patent infringement case. See id. at 723. Similarly, in Hofheimer, the Seventh Circuit addressed the issue of whether the lower court appropriately dismissed the lawsuit when "no action of any kind" occurred for more than two years after plaintiff's death. Hofheimer, 179 F.2d at 790. Plaintiff's standing to bring forth the cause of action to recover preferred and common stock from a company was not at issue.
Here, questions as to forfeiture procedural rules and claimant's standing are at issue. Fernandez and his successors fail to consider that they are not entitled to more than what Fernandez would have been entitled to as the owner of record for defendant property were he still alive. The burden of establishing standing is on the claimant, and a "claimant must provide some evidence of ownership beyond his mere allegation that he has an interest in the property." U.S. v. One Parcel of Real Estate at 3850 S.W. 126th Court, Miami, 39 F. Supp. 2d 1370, 1371 (S.D.Fla.1997). Courts have consistently required claimants to follow the language of the Supplemental Rules governing forfeitures to the letter. See United States v. $38,000.00 in United States Currency, 816 F.2d 1538, 1547 (11th Cir.1987); see also U.S. v. Three Parcels of Real Property, 43 F.3d 388, 391 (8th Cir.1994) ("district courts may require claimants in forfeiture proceedings to comply strictly with Rule C(6) in presenting their claims to the court").
Fernandez, as the owner of defendant property, was required to file a "verified statement identifying his interest" in the property within "20 days after the earlier of (1) the date of service of the Government's complaint or (2) completed publication of notice under Rule C(4)." See Supp. *1312 R. For In Rem Actions C(6)(a)(i)(A).[2] Although a prior attorney filed an answer on Fernandez's behalf (DE # 50), he did not file a verified claim. As Fernandez has failed to strictly comply with the language of the Supplemental Rules, Fernandez and his successors lack standing to contest the instant action.
Likewise, it is difficult to understand how the successors and representatives, who allege that they are not claimants in ¶ 2 of the instant motion, have standing to contest this action. If Fernandez himself attempted but failed to acquire standing in this action, then surely his successors and representatives, who do not dispute that they are not claimants, fail to have the requisite standing to proceed in a forfeiture case. Therefore, for the foregoing reasons, it is RECOMMENDED that the motion to dismiss be DENIED.
III. MOTION FOR SUMMARY JUDGMENT
1. Summary Judgment Standard
Summary judgment is appropriate only where there is no genuine issue as to any material fact and where the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). A party who moves for summary judgment must demonstrate that there are no genuine disputes as to any material facts with respect to issues for which that party bears the burden of proof at trial. As to issues for which the non-moving party bears the burden, the movant need only establish that, after adequate time for discovery, there is an absence of evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
In determining whether the movant has met these burdens, the court must view the evidence and all permissible factual inferences in a light most favorable to the non-moving party. Matsushita Elec. Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). The non-movant, for its part, "must do more than simply show that there is some metaphysical doubt as to the material facts." Id. at 586, 106 S. Ct. 1348; Samples v. City of Atlanta, 846 F.2d 1328, 1331 (11th Cir.1988). Rather than merely alleging the existence of some factual dispute, the non-moving party must rebut any facts properly presented by way of affidavits or other evidence demonstrating the existence of a genuine and material 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).
Ultimately, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir.1997). Thus, to survive a motion for summary judgment, the non-moving party must come forward with specific evidence of every element material to his case so as to create a genuine issue for trial. Celotex, 477 U.S. at 323, 106 S. Ct. 2548.
2. Discussion
The government asserts that summary judgment should be granted because Fernandez never filed a verified claim in this matter. Verification of a claim is an "essential element" due to the substantial danger of false claims. See United States v. Commodity Account No. 549 54930, 219 F.3d 595, 597 (7th Cir.2000) (internal quotations omitted). By requiring an oath or *1313 affirmation in the verification of a claim, the claimant places himself at "risk for perjury for false claims." Id. As discussed above, courts have strictly enforced the procedural requirements in civil forfeiture proceedings. See supra p. 1311; see also United States v. One (1) 1979 Mercedes 450SE Vehicle ID No. 116032-12-081839 License No. MKS 706, 651 F. Supp. 351, 353 (S.D.Fla.1987) (court may grant motion to strike an answer which is not preceded by a properly filed claim). Counsel for the personal representatives of Fernandez do not dispute that Fernandez has not complied with the verified claim requirements.
Rather, the unusual situation has occurred where prior counsel for Fernandez filed an affidavit after the instant motion was fully briefed. The affidavit states that Fernandez indeed executed a document entitled "Ramon Fernandez's Verified Claim of Property" and that due to an "oversight," the verified claim was "inadvertently" not filed along with Fernandez's November 7, 2000 answer. See Affidavit ¶¶ 4 & 5 (DE # 115). The personal representatives of Fernandez now argue that the Court should not grant plaintiff's motion for summary judgment on the lack of verified claim grounds and assert that the Court should consider the verified claim as timely filed since Fernandez allegedly timely executed the document on November 7, 2000. See Supp. R. For In Rem Actions C(6)(a)(i)(B).[3]
As counsel for Fernandez's personal representatives illustrate, this district has permitted claimants to file their verified claims outside the timeline provided in the forfeiture procedural rules. See One Mercedes, 651 F.Supp. at 354. In that case, the court looked at several factors, including prejudice to the government, whether claimant timely petitioned for an enlargement of time, the time at which the claimant became aware of the seizure, and the reasons for the delay. See id. at 353. Ultimately, the Court concluded, with "great reluctance," that an extension for filing the verified claim should be granted since the defendant property was a "wasting asset," the parties engaged in discovery, a trial date was set, and the government had not "specifically shown prejudice resulting from the untimely revelation." Id. at 354-55.
The same cannot be said for the facts and circumstances in the present case for at least several reasons. Unlike One Mercedes, where the Court stated that "the Government has not specifically shown prejudice..." plaintiff has demonstrated prejudice because the government is unable to confront Fernandez. One Mercedes, 651 F.Supp. at 354-55. Fernandez is the essential witness in this forfeiture action, and plaintiff's inability to question him due to his death causes the government substantial prejudice. Next, unlike an automobile, real property cannot be said to be a wasting asset. Further, prior counsel is listed on the certificate of service attached to plaintiff's motion for summary judgment which was filed in September, 2001. Having received the motion for summary judgment in September, the verified claim was not brought to the Court's attention until more than four months later.
Counsel for Fernandez's personal representatives also point to United States v. $347,542.00. etc., 2001 WL 335828 (S.D.Fla.2001) as a more recent example where this district has permitted claimants to file their verified claims outside the timeline provided in the forfeiture procedural rules. In that case, the Court allowed the claimant additional time to file his verified claim because the claimant "promptly" corrected *1314 his original deficient claim by filing an amended claim out of time.[4]Id. at *2. Unlike $347,542.00, where the motion to file an amended claim was filed six days after the government filed its motion to dismiss, Fernandez's personal representatives did not file their Motion for Leave to File Verified Claim until more than four months later. Additionally, the $347,542.00 court did not discuss the factors set forth in One Mercedes.
Due to Fernandez's death, the government would incur substantial prejudice if the verified claim was to be allowed to be filed at this late date. The prejudice does not necessarily emanate from the late filing of the verified claim but rather from Fernandez's death which occurred subsequent to the time the verified complaint should have been timely filed. The government is now without the ability to depose Fernandez and obtain evidence which only he may have regarding his purchase and usage of the subject property. The Court is satisfied that the facts here are dissimilar from those in One Mercedes and $347,542.00. The undersigned declines to extend the time allowed for filing a verified claim. As it is undisputed that Fernandez failed to comply with the procedural rules governing forfeitures, he lacks standing to contest this action.
It is RECOMMENDED that plaintiff's motion to for summary judgment be GRANTED in favor of plaintiff.
CONCLUSION
In accordance with the foregoing it is hereby
1. RECOMMENDED that the motion to dismiss (DE # 82) be DENIED.
2. RECOMMENDED that plaintiff's motion for summary judgment (DE # 83) be GRANTED.
3. All other pending motions should be DENIED as moot. Normally, the parties may serve and file written objections to this Report and Recommendation with the James Lawrence King, United States District Judge, within ten (10) days of receipt. See 28 U.S.C. § 636(b)(1)(c); United States v. Warren, 687 F.2d 347, 348 (11th Cir.1982). However, the instant matter is set as the number two case on Judge King's trial calendar beginning September 8, 2003. Due to the upcoming trial date, the parties shall file any objections on or before 5:00 p.m. on Thursday, September 4, 2003. Copies of any objections shall be hand delivered or faxed to Judge King's chambers and opposing counsel.
NOTES
[1] The only true Defendant in this case is the 16 Parcels of Real Property. Plaintiff's underlying claim is a forfeiture action brought against those properties, which were formerly owned by Ramon Fernandez, who is now deceased. It was Mr. Fernandez's personal representatives and successors in interest ("the Representatives") who moved to dismiss Plaintiff's claim and objected to the R & R.
[1] Rule 25(a)(1) states "If a party dies and the claim is not thereby extinguished, the court may order substitution of the proper parties. The motion for substitution may be made by any party or by the successors or representatives of the deceased party and, together with the notice of hearing, shall be served on the parties as provided in Rule 5 and upon persons not parties in the manner provided in Rule 4 for the service of a summons, and may be served in any judicial district. Unless the motion for substitution is made not later than 90 days after the death is suggested upon the record by service of a statement of the fact of the death as provided herein for the service of the motion, the action shall be dismissed as to the deceased party." F.R. Civ. P. 25(a)(1).
[2] The 2002 Amendment to this rule change the time for filing a verified statement to 30 days. The local rules for this district require an "oath or solemn affirmation by a party." for a verified claim. See Local Rules for the Southern District of Florida C(1) and A(5).
[3] Verified statement may be filed "within the time that the court allows."
[4] Even so, the Court noted that "[w]here a party disregards the requirement of Supp. Rule C(6), dismissal of the claim by the district court is normally the result." United States v. $347,542.00, etc., 2001 WL at *2.
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320 F. Supp. 2d 1362 (2004)
Alejandro VACA-ORTIZ, Petitioner,
v.
UNITED STATES of America, Respondent.
Civil Action No. 2:04-CV-024-WCO. Criminal Action No. 2:02-CR-030-04-WCO.
United States District Court, N.D. Georgia, Gainesville Division.
May 27, 2004.
*1363 Alejandro Vaca-Ortiz, Big Spring, TX, pro se.
ORDER
O'KELLEY, Senior District Judge.
The captioned case is before the court for consideration of petitioner's pro se motion [313-1] to vacate his sentence pursuant to 28 U.S.C. § 2255. Petitioner pled guilty in this court to possessing with the intent to distribute marijuana and was sentenced to a term of seventy months in prison and a three-year term of supervised release, which is to be suspended while petitioner is outside of the United States due to deportation. Furthermore, petitioner was ordered to pay a fine of $2,000.00 and a special assessment of $100.00.
As part of his plea agreement, petitioner waived the right to appeal his sentence and the right to collaterally attack his sentence in any post-conviction proceeding. That waiver contained two exceptions; petitioner retained the right to file a direct appeal of an upward departure from the otherwise applicable sentencing guidelines and the right to appeal in the event that the government chose to file a direct appeal. It is undisputed that neither of those events occurred. This court did not *1364 upwardly depart, and the government did not file a direct appeal.
Petitioner makes two arguments in his brief in support of his motion to vacate his sentence. He contends that his counsel was ineffective for failing to discuss and explain the presentence report prior to sentencing and ineffective for failing to seek an offense-level reduction for petitioner's minor role in the offense. Because the court finds that those claims were waived, it is unnecessary to discuss the factual allegations surrounding petitioner's assertions in any further detail.
Petitioner's Waiver
The seminal case from the Eleventh Circuit addressing a criminal defendant's ability to waive the right to appeal or collaterally attack[1] his sentence is United States v. Bushert, 997 F.2d 1343 (11th Cir.1993). In Bushert, the court held that waivers of the right to appeal a sentence would generally be enforced if the district court finds that the defendant made a knowing and voluntary decision to waive his right to appeal. Id. at 1350. The court went to great lengths to make clear that this did not mean that a waiver of the right to appeal a sentence would forever foreclose appellate review; to the contrary, the court noted that to enforce such an agreement, the government must show that either "(1) the district court specifically questioned the defendant concerning the sentence appeal waiver during the Rule 11 colloquy, or (2) it is manifestly clear from the record that the defendant otherwise understood the full significance of the waiver." Id. at 1351. In most circumstances, the government will need to show that the district court discussed the sentence appeal waiver at the Rule 11 hearing. Id.
Here, a review of the colloquy between petitioner and the magistrate judge before whom he tendered his plea of guilty reveals that his waiver of the right to challenge his sentence, by either a direct appeal or a collateral attack, was made knowingly and voluntarily. At the plea hearing, petitioner indicated that he had reviewed the plea agreement with his lawyer, that he understood the terms of the agreement, that the plea agreement represented the entirety of his deal with the government, that nobody had coerced him to sign the agreement or made any promises not contained in the agreement, that he understood that the sentencing judge would not be bound by any recommendations made in the agreement, and that he understood that the district judge could impose a sentence greater than petitioner might anticipate. [Tr. of Oct. 29, 2003 Plea Hearing at 22-24]. Furthermore, petitioner told the magistrate judge that he understood he was waiving the right to appeal except if the sentencing judge upwardly departed or if the government chose to appeal. [Id. at 22]. The court finds that petitioner entered a knowing and voluntary plea of guilty and that the magistrate judge specifically questioned him about the sentence appeal waiver during the Rule 11 colloquy, as required by Bushert.
Whether Petitioner's Waiver Applies to this Motion
Petitioner's motion to vacate his sentence, filed pro se, makes no mention of the waiver contained in his plea agreement. The government, however, argues that the motion should be denied on the grounds that petitioner waived the right to collaterally challenge his sentence. The *1365 question facing this court is whether a criminal defendant, through the plea process, can knowingly and voluntarily waive the right to bring a claim for ineffective assistance of counsel.
As an initial matter, the court notes that a criminal defendant could not waive the right to bring a claim for ineffective assistance of counsel in which he alleges ineffectiveness at the time he was entering the plea or ineffectiveness related to advice he received regarding the waiver. Ineffective assistance of counsel at those critical times would require a finding that the plea was not entered knowingly and voluntarily, which would in turn mean that a court could not enforce a waiver contained within that plea agreement. Bushert, 997 F.2d at 1350-51. See also United States v. White, 307 F.3d 336, 343 (5th Cir.2002) (holding that "an ineffective assistance of counsel argument survives a waiver of appeal only when the claimed assistance directly affected the validity of that waiver or the plea itself"); United States v. Cockerham, 237 F.3d 1179, 1184 (10th Cir.2001) (noting that a claim of ineffective assistance of counsel in connection with the negotiation of a plea agreement cannot be barred by the agreement itself); Jones v. United States, 167 F.3d 1142, 1145 (7th Cir.1999) (same). The claims raised in petitioner's section 2255 motion do not challenge the effectiveness of counsel during the plea process or in any way relate to the advice he received in reaching the decision to plead guilty and agree to a waiver of the right to challenge his sentence. Rather, he challenges only the effectiveness of his counsel during the sentencing process. Accordingly, the court must decide whether those claims, for ineffective assistance of counsel at sentencing, are foreclosed by the waiver contained in his plea agreement.
The majority of circuits that have addressed this question have found that, as part of a plea agreement, a criminal defendant may waive the right to bring a claim for ineffective assistance of counsel that might arise at sentencing. White, 307 F.3d at 343-44; Cockerham, 237 F.3d at 1187; Davila v. United States, 258 F.3d 448, 451 (6th Cir.2001); United States v. Nunez, 223 F.3d 956, 959 (9th Cir.2000) (addressing the issue on direct appeal); Mason v. United States, 211 F.3d 1065, 1069 (7th Cir.2000); United States v. Djelevic, 161 F.3d 104, 106-07 (2d Cir.1998) (addressing the issue on direct appeal). The Eighth Circuit reached a similar result in an unpublished, non-binding opinion. Allen v. United States, No. 01-2670, 2002 WL 857567 (8th Cir. May 7, 2002). At least one circuit appears to part company from the majority position noted above. See United States v. Attar, 38 F.3d 727, 732 (4th Cir.1994) (noting that a general waiver of appeal cannot include a subsequent collateral challenge based on a violation of the Sixth Amendment's right to counsel because "a defendant's agreement to waive appellate review of his sentence is implicitly conditioned on the assumption that the proceedings following entry of the plea will be conducted in accordance with constitutional limitations").[2]
The court agrees with the majority of the circuits that have found that a waiver of the right to appeal or mount a collateral attack on one's sentence can serve to *1366 bar a subsequent claim for ineffective assistance of counsel during sentencing. A holding to the contrary would allow a defendant to bring nearly any substantive challenge to his sentence, which would otherwise be barred by his appeal waiver, by asserting that his lawyer was somehow ineffective with regard to that sentencing issue. See Djelevic, 161 F.3d at 107. As noted by the Djelevic court, if this court were to allow petitioner to bring "a claim of ineffective assistance of counsel at sentencing as a means of circumventing plain language in a waiver agreement, the waiver of appeal provision would be rendered meaningless." Id. See also White, 307 F.3d at 344 (noting that "[i]f all ineffective assistance of counsel claims were immune from waiver, any complaint about the process could be brought in a collateral attack by merely challenging the attorney's failure to achieve the desired result"). The plea agreement is too important a tool to both the United States and a criminal defendant to permit such an easy end run around a waiver provision agreed to by both parties.
In addition to the practical problems that would arise from a judicial unwillingness to enforce knowing and voluntary plea agreements, there is a constitutional basis for the notion that a criminal defendant should be able to waive the right to bring a claim that he received ineffective assistance of counsel at sentencing. By choosing to forego a trial and enter a plea agreement, a defendant inherently decides to give up many of his statutory and constitutional rights. Indeed, a brief review of Federal Rule of Criminal Procedure 11(b) reveals that a district court must advise a defendant that he waives the following rights by tendering a plea of guilty: the right to plead not guilty, the right to a jury trial, the right to be represented by counsel, the right at trial to confront adverse witnesses, the right to be protected from compelled self-incrimination, the right to testify and present evidence, and the right to compel the attendance of witnesses. Fed.R.Crim.P. 11(b). As Rule 11 implicitly makes clear, and as the Supreme Court has explicitly made clear, the Sixth Amendment right to effective assistance of counsel may be waived. See Johnson v. Zerbst, 304 U.S. 458, 58 S. Ct. 1019, 82 L. Ed. 1461 (1938). Accordingly, this court sees no reason to treat that right any differently than it would treat the others that a defendant might choose to waive by agreeing to enter a plea of guilty. See White, 307 F.3d at 343 (holding that "we see no need to except ineffective assistance of counsel claims from the general rule allowing defendants to waive their statutory rights so that they can reach a plea agreement if they wish"). As previously noted, that holding is necessarily limited by the understanding that a defendant can never waive the right to later argue that the very agreement containing the waiver was procured under circumstances where he was receiving ineffective assistance of counsel. That obvious exception notwithstanding, the court sees no reason why a defendant at the plea stage should be prevented from waiving his right to effective assistance of counsel at sentencing, just as he is permitted to waive his right to effective assistance of counsel at trial.
The court notes that even this holding, preventing petitioner from raising a claim for ineffective assistance of counsel at sentencing, would not have left petitioner without redress if this court had imposed a sentence beyond what was permitted by law. As previously noted, the agreement specifically allowed petitioner to appeal or collaterally attack any upward departure, thereby providing an avenue of relief if this court had imposed a sentence greater than the statutory maximum as established *1367 by Congress. Furthermore, the Eleventh Circuit has noted in dicta that "there are certain fundamental and immutable legal landmarks within which the district court must operate regardless of the existence of sentence appeal waivers," opining that a court could not impose a sentence in excess of the maximum penalty permitted by statute or sentence a defendant based upon an unjustifiable standard such as race or religion. Bushert, 997 F.2d at 1350 n. 18. Accordingly, even a defendant who did not have the benefit of the exceptions noted in this waiver agreement could have sought relief. Nevertheless, this court has no occasion to further expound upon those principles because they are not at issue in this case; defendant did not receive a sentence in excess of what is permitted by statute or the sentencing guidelines, and there is no allegation that any unjustifiable consideration such as race or religion played a role in his sentencing. Rather, it is sufficient to hold that a waiver of the right to appeal or collaterally attack a sentence can include waiver of the right to raise a claim of ineffective assistance of counsel at sentencing. In this case, petitioner's motion pursuant to section 2255 is barred because it raises no claims other than those related to the sufficiency of his counsel during the sentencing process.
The court further notes that this holding is not contrary to the Eleventh Circuit's instructions in Bushert. In Bushert, the court noted in dicta that
[e]ven judicially enforced, knowing and voluntary sentence appeal waivers as broad as Bushert's which include a waiver of collateral appeal of his sentence would not prevent a collateral § 2255 action concerning certain subjects. See United States v. Abarca, 985 F.2d 1012, 1014 (9th Cir.1993) (allowing, despite the existence of a sentence appeal waiver, § 2255 proceedings "such as a claim of ineffective assistance of counsel or involuntariness of waiver.") (citations omitted).
Bushert, 997 F.2d at 1350 n. 17. That footnote was dicta because the defendant in Bushert was found to have not entered a knowing and voluntary waiver, thereby rendering unnecessary any discussion of what the proper analysis would have been if the court had found to the contrary regarding the voluntariness of the waiver. Furthermore, the reasoning espoused in that footnote gives little guidance as to which "certain subjects" might be raised in a section 2255 proceeding despite the existence of a waiver of the right to raise a collateral attack on one's sentence. The case law in other circuits has developed well beyond the general principle espoused in Bushert, by reference to a parenthetical notation, that claims of ineffective assistance of counsel may be raised in a section 2255 proceeding despite the existence of an otherwise valid waiver. Indeed, the Ninth Circuit, upon which the Bushert court relied, has expanded upon the reasoning of Abarca by holding that "one waives the right to argue ineffective assistance of counsel at sentencing on direct appeal when one waives the right to appeal the sentence." Nunez, 223 F.3d at 959. Accordingly, the court finds footnote seventeen in Bushert to be non-binding dicta that is even questionable as persuasive authority in light of the advances in this area of the law as noted by the other circuits, including the one relied upon in that footnote.
In conclusion, the court finds that petitioner entered into a knowing and voluntary waiver of his right to directly appeal or collaterally attack his sentence. Petitioner's claims in this section 2255 proceeding, which relate solely to the effectiveness of his counsel during the sentencing process, are barred by that waiver. Accordingly, his motion [313-1] *1368 pursuant to 28 U.S.C. § 2255 is hereby DENIED.
IT IS SO ORDERED, this __ day of May, 2004.
NOTES
[1] The legal discussion in Bushert refers to the right to "appeal." However, the waiver in Bushert referred to that defendant's right to "appeal or contest, directly or collaterally, his sentence on any ground." Bushert, 997 F.2d at 1345. This court is of the opinion that the discussion regarding "appeals" in Bushert is equally applicable to collateral attacks.
[2] It should be noted that the waiver in Attar specifically excluded challenges based on ineffective assistance of counsel not known to the defendants at the time they entered in to the agreement. Although the court did not explicitly rely on that provision, it does serve as a distinguishing feature not contained in the waiver presented by the case at bar. See Cockerham, 237 F.3d at 1186, 1186 n. 3 (distinguishing Attar on those grounds and noting that the appeal waivers in the Fourth Circuit frequently contain language reserving the right to raise claims for ineffective assistance of counsel).
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376 F.Supp.2d 849 (2005)
The FLAG CO., Plaintiff,
v.
Bill MAYNARD, Steve Adams, And Ronald Thomas a/k/a Ronald Rothstein, Defendants.
No. 04 C 7984.
United States District Court, N.D. Illinois, Eastern Division.
July 8, 2005.
*850 *851 Daniel A. Edelman, Cathleen M. Combs, Heather Piccirilli, James O. Latturner, for Henry Repay.
Daniel A. Edelman, Edelman, Combs, Latturner & Goodwin, LLC, Chicago, IL, for Flag Co.
Howard William Foster, Johnson & Bell, Ltd., Chicago, IL, Daniel A. Edelman, Edelman, Combs, Latturner & Goodwin, LLC, Chicago, IL, for Flag Co., Inc.
Griswold L. Ware, George N. Vurdelja, Jr., John M. Heaphy, Vurdelja & Heaphy, Chicago, IL, Daniel A. Edelman, Edelman, Combs, Latturner & Goodwin, LLC, Chicago, IL, for Ronald Rothstein, Ronald Thomas.
Mary Ann L. Wymore, Greensfelder, Hemker and Gale, P.C., St. Louis, MO, Marion B. Adler, Rachlis Durham Duff & Adler, Chicago, IL, Daniel A. Edelman, Edelman, Combs, Latturner & Goodwin, LLC, Chicago, IL, for Bill Maynard, Steve Adams.
MEMORANDUM OPINION AND ORDER
GETTLEMAN, District Judge.
Plaintiff, The Flag Company ("Flag"), filed its first amended complaint[1] under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) and § 1962(d), alleging that Bill Maynard, Steve Adams, and Ronald Rothstein[2] conspired to induce Flag to purchase "blast faxing"[3] services through fraudulent interstate wire transmissions. Defendants Maynard and Adams have moved to dismiss Flag's complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) and for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). In addition, defendant Rothstein has joined the 12(b)(6) motion, and has moved to transfer this matter for improper venue pursuant to 28 U.S.C. § 1406. For the reasons discussed below the court concludes that it has personal jurisdiction over defendants Adams and Maynard, but also *852 concludes that this case must be transferred for improper venue.
FACTUAL SUMMARY
On February 5, 2004, Flag alleges that Rothstein, an independent contractor for Protus, arranged for a fax to be sent to Flag, a Georgia corporation, offering Protus's "broadcast faxing" services.[4] Michael Lawrence, the vice president of Flag, then called Rothstein to request the faxing service, to which Rothstein agreed. Rothstein then contacted Protus, a Canadian corporation, regarding the Flag contract.
On March 5, 2004, Adams, the vice president of marketing for Protus, sent an email from Canada to Flag confirming the agreement to provide the blast fax services. This email contained the statement that "Over 90% of users are happy with our service..."[5] Thereafter, Protus sent the blast fax to thousands of businesses in the United States advertising Flag's products.[6] On April 1, 2004, Maynard, Sales Director for Protus Solutions, sent Lawrence an email confirming that the blast campaign had concluded.
As a result of the March 2004, blast fax campaign, Henry Repay brought a class action in Illinois state court against Flag for violating the Telephone Consumer Protection Act (TCPA). Flag removed the class action to this court, but it was remanded on July 2, 2004. Flag then filed a third party complaint against Maynard, Adams, and Rothstein under RICO, which was removed.
DISCUSSION
I. PERSONAL JURISDICTION
Although § 1962(d) of the RICO statute does not have extraterritorial application, Fed.R.Civ.P. 4(k)(2) provides a mechanism for federal courts to assume jurisdiction over alien defendants. Central States, Southeast and Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934 (7th Cir.2000). Rule 4(k)(2) provides: "If the exercise of jurisdiction is consistent with the Constitution and laws of the United States, serving a summons or filing a waiver of service is also effective, with respect to claims arising under federal law, to establish personal jurisdiction over the person of any defendant who is not subject to the jurisdiction of the courts of general jurisdiction of any state." Thus, three conditions must be met to satisfy the requirements of Rule 4(k)(2): (1) the plaintiff's claims must be based on federal law; (2) no state court could exercise jurisdiction over the defendants; (3) the exercise of jurisdiction must not offend the Constitution or other federal laws. Central States, 230 F.3d at 940; see also United States v. Swiss American Bank, Ltd., 191 F.3d 30, 40-42 (1st Cir.1999).
The plaintiff bears the burden of proving personal jurisdiction. Central States, 230 F.3d at 939. The court may receive and consider affidavits from both parties when evaluating personal jurisdiction. Interlease Aviation Investors II L.L.C. v. Vanguard Airlines, 262 F.Supp.2d 898, 905 (N.D.Ill.2003). "Any conflicts in the pleadings and affidavits are *853 to be resolved in the plaintiffs' favor, but the court accepts as true any facts contained in the defendants' affidavits that remain unrefuted by the plaintiffs." Id.
A. The Claims are Based on Federal Law.
Defendants allege that Flag has failed to adequately state a claim arising under federal law, and thus has not met the first requirement Rule 4(k)(2). Despite the fact that this court has bifurcated the issue of whether Flag has stated a claim under RICO from the issues of jurisdiction and venue, defendant still maintains that Flag is unable to satisfy the first requirement of Rule 4(k)(2). The defendants contend that Flag's claim is so feeble that it does not even involve a federal question under the holding of Williams v. Aztar Indiana Gaming Corp., 351 F.3d 294 (7th Cir.2003) and Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946). However, the Supreme Court has held that an attempt to plead a federal claim fails only where it "clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous." Bell, 327 U.S. at 682-83, 66 S.Ct. 773.
The court in Williams found the plaintiff's theory was so feeble that it did not arise under federal law because plaintiff's counsel virtually admitted that he lacked a good faith basis for bringing a RICO claim and could not cite to any case law to support the suit. Williams, 351 F.3d at 300. The court concluded that the case was "exactly the type of bootstrapping use of RICO that federal courts abhor." Id. Unlike the plaintiff in Williams, the allegations in the instant case do not appear to have been made in bad faith solely to obtain federal court jurisdiction.
In addition, the complaint in the instant case is not so wholly insubstantial so as to preclude this court from analyzing personal jurisdiction under Rule 4(k)(2). The determination that a claim is "wholly insubstantial" must involve more than the fact that the claim is of "doubtful or questionable merit." Winslow v. Walters, 815 F.2d 1114, 1118 (7th Cir.1987). This inquiry into substantiality has been interpreted extremely narrowly such that a claim is "wholly insubstantial" to deprive a court of jurisdiction "only if prior decisions inescapedly render the claims frivolous." Id. (citations omitted). Unlike the plaintiff in Williams, Flag's claims here do not appear to be completely feeble or implausible on their face, and the defendants have not cited to any case that inescapably renders similar allegations frivolous. Therefore, this court will accept Flag's complaint as "federal" solely for the purposes of jurisdictional analysis under Rule 4(k)(2).[7]
B. No State Has Personal Jurisdiction Over the Alien Defendants.
According to the pleadings in the instant case, the second requirement of Rule 4(k)(2) is satisfied since the foreign defendants, Adams and Maynard, are "not subject to the jurisdiction of the courts of general jurisdiction of any state." A plaintiff is not required to prove that the defendants are not subject to the jurisdiction of any state. ISI International, Inc. v. Borden Ladner Gervais, LLP, 256 F.3d 548, 552 (7th Cir.2001). Instead, it is defendant's burden to name another state in which the suit could proceed if he wishes to preclude the use of Rule 4(k)(2). Id. If the defendant does not name another state where the suit could go forward, the second requirement of Rule 4(k)(2) is satisfied. Id. Because defendants in this case *854 have not named another jurisdiction within the United States in which Adams and Maynard are amenable to suit, the second prong of Rule 4(k)(2) is met.
C. Exercising Jurisdiction is Consistent with the Constitution and the Laws of the United States.
To establish jurisdiction under Rule 4(k)(2) a defendant must have sufficient contacts with the United States as a whole to satisfy the due process requirements of the Fifth Amendment. This is the same "minimum contacts" test that the Seventh Circuit applies in all federal question cases. Pyrenee, Ltd. v. Wocom Commodities, Ltd., 984 F.Supp. 1148 (N.D.Ill.1997). This test is used to ensure that the exercise of jurisdiction comports with "traditional notions of fair play and substantial justice." International Shoe v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). In addition, the analysis of this requirement varies depending on whether a forum asserts specific or general jurisdiction. RAR, Inc. v. Turner Diesel, 107 F.3d 1272 (7th Cir.1997).
In the instant case, Flag has alleged only specific jurisdiction over the defendants. The court can assert specific jurisdiction over a defendant when the cause of action arises out of a defendant's minimum contacts with the forum. Purdue Research Found. v. Sanofi-Synthelabo, 338 F.3d 773, 787 (7th Cir.2003). These contacts must demonstrate that a defendant purposely availed himself of the privilege of conducting business in the United States such that he should reasonably anticipate being hailed into court there. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-76, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985); Central States, 230 F.3d at 943.
In addition to minimum contacts, the court must examine other factors to assure that exercising jurisdiction would be reasonable and not offend "notions of fair play and substantial justice." Burger King, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528. These factors include the burden on the defendant to litigate in the forum, the forum's interest in settling the dispute, the plaintiff's interest in obtaining convenient and effective relief, the plaintiff's burden to litigate elsewhere, and the interstate judicial system's interest in efficient resolution of disputes. Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102, 105, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987). The court must assess each defendant's contacts with the forum individually. Keeton v. Hustler Magazine, 465 U.S. 770, 781 n. 13, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984).
i. Adams and Maynard have sufficient minimum contacts with the United States.
Under Rule 4(k)(2), plaintiff must show that each defendant had minimum contacts with the United States as a whole, that the cause of action relates to these contacts, and that exercising jurisdiction over them would be reasonable. Allegations of participation in a conspiracy may satisfy the minimum contacts test. Textor v. Board of Regents of Northern Illinois University, 711 F.2d 1387, 1392 (7th Cir.1983).[8] To satisfy the requirements of due process, *855 the plaintiff "must allege both an actionable conspiracy and a substantial act in furtherance of the conspiracy performed in the forum." Id. The evidence relating to the conspiracy may be direct or circumstantial. United States v. Hickok, 77 F.3d 992, 1005 (7th Cir.1996).
Adams
Flag has provided reasonable allegations of Adams' participation in an alleged RICO conspiracy to establish minimum contacts with the United States. As the Vice President of Marketing for Protus, Adams was in contact with Rothstein, an independent contractor in Oregon, regarding the contract with Flag, in the United States. Rothstein informed Adams that Flag wanted to purchase Protus' services. Subsequently, Adams sent an email to Flag's president confirming the agreement on March 5, 2004. Flag alleges that this email knowingly misrepresented that "Over 90% of users are happy with [Protus'] service..." In addition, Flag alleges that Adams sent emails March 5, March 23, and March 31, 2004, finalizing Flag's bill.[9] Although the faxes were sent before these emails, they were still in furtherance of the alleged conspiracy because they helped to assure that Protus would be paid for its services. Therefore, with the knowledge that some of Protus's customers, such as Flag, were in the United States, Adams' telephone and email correspondence in the United States regarding the Flag contract were acts in furtherance of the alleged RICO conspiracy and suffice to show that he purposely availed himself of the laws of the United States.
Maynard
Flag has provided reasonable allegations of Maynard's participation in the alleged RICO conspiracy to establish minimum contacts with the United States. On April 1, 2004, Maynard sent an email to Flag confirming that the blast fax campaign had concluded.[10] Defendants argue that since Maynard sent this email after the faxes were sent, his action was not in furtherance of the RICO scheme "to deceive innocent business owners throughout the U.S. to purchase their services and omitting to telling customers that sending unsolicited fax advertisements violates federal law." The fact that the faxes were sent prior to Maynard's email, however, does not automatically preclude the relationship between his contact with the United States and the alleged conspiracy. In the confirmation email he neglected to inform Flag about the liability associated with blast faxes, and thus his act could be interpreted to be in furtherance of a conspiracy to deceive.[11] Flag alleges that as Sales Director *856 of Protus, Maynard had knowledge of the illegality of the enterprise, and thus his email was in furtherance of the scheme to assure Flag regarding the services provided. Therefore, Maynard's alleged involvement in the alleged RICO conspiracy suffices to show that he purposely availed himself of the laws of the United States and could have reasonably expected being haled into court here.[12]
ii. Exercising jurisdiction over defendants Maynard and Adams is reasonable.
The exercise of jurisdiction must comport with notions of fair play and substantial justice under International Shoe. This determination includes: the burden on the defendant to litigate in the forum, the state's interest in settling the dispute, the plaintiff's interest in obtaining convenient and effective relief, the plaintiff's burden to litigate elsewhere, and the interstate judicial system's interest in efficient resolution of disputes. Asahi, 480 U.S. at 105, 107 S.Ct. 1026. In the instant case, Flag is a Georgia corporation with an interest in litigating this matter in the United States. The burden on the Canadian defendants to travel to the United States is not so large as to outweigh Flag's interest.
iii. The Fiduciary Shield Doctrine does not apply under Rule 4(k)(2).
In their motion to dismiss, defendants argue that they are protected by the fiduciary-shield doctrine. The Seventh Circuit has held, however, that when analyzing jurisdiction under Rule 4(k)(2), there is no fiduciary-shield doctrine. ISI, 256 F.3d at 553. Therefore, defendants may not rely on this doctrine to avoid personal jurisdiction.
II. VENUE
Defendant Rothstein has filed a motion to transfer for improper venue pursuant to 28 U.S.C. § 1406. He argues that Oregon is the only proper venue for this suit under both the venue provision of RICO, 18 U.S.C. § 1965, and the federal venue provision, 28 U.S.C. § 1391.
Venue Under RICO § 1965(a)
According to RICO, a civil action may be instituted against any person "in the district court of the United States for any district in which such person resides, is found, has an agent, or transacts his affairs." § 1965(a). While the venue provisions of this section are intended to be more expansive than the general federal venue provisions of 28 U.S.C. § 1391, venue must still be properly asserted as to each defendant, from his own contacts rather than those of a co-defendant. First Financial Leasing Corp. v. Hartge, 671 F.Supp. 538, 542 (N.D.Ill.1987); Payne v. Marketing Showcase, Inc., 602 F.Supp. 656 (N.D.Ill.1985). When a defendant challenges venue, it is the plaintiff who has the burden of proving that venue is proper in this district. Id.
Flag has not sufficiently alleged that each defendant meets the requirements set forth under § 1965(a). There is no evidence in Flag's first amended complaint that Rothstein resides, has an agent, or transacts his affairs in Illinois. Therefore, Flag has not met its burden of showing that venue is appropriate under § 1965(a) with respect to each of the defendants.
*857 Venue Under § 1391
Where a case involves a federal question, venue is analyzed under 28 U.S.C. § 1391(b). Under this section, venue is appropriate in: (1) a district where the defendants reside, if all defendants reside in the same state; (2) a district where the substantial events giving rise to the claim occurred; or (3) "a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought." "Venue must be properly laid as to each defendant." Payne, 602 F.Supp. at 658. Under § 1391(d), venue for alien defendants is appropriate in any district. Where aliens and non-aliens are joined as defendants, venue for the entire action is proper in any district where it is correct as to non-alien defendant. Japan Gas Lighter Assoc. v. Ronson Corp., 257 F.Supp. 219, 225 (D.N.J.1966).
Flag mistakenly argues that Illinois is the only proper venue in this case. Flag claims Maynard and Adams are subject to personal jurisdiction only in Illinois because they have not consented to jurisdiction in Georgia or Oregon. This argument is inaccurate. The court premises jurisdiction over Adams and Maynard under Rule 4(k)(2), which allows a plaintiff to bring a claim against a foreign defendant in any district court of the United States, where no one particular district has personal jurisdiction over the defendant. Thus, defendants would be subject to jurisdiction in Georgia or Oregon regardless of their "consent." In addition, given that § 1391(d) provides that any venue is appropriate for alien defendants, it is clear that jurisdiction and venue for Maynard and Adams would be proper in any district court.
Given that Maynard and Adams may be sued in any district court, this court must analyze the proper venue with respect to defendant Rothstein. Rothstein does not reside in Illinois and none of the alleged events in this case occurred in Illinois.[13] Rothstein, however, can be "found" in Oregon under § 1391(b)(3). Since he is the only defendant who can be "found" in the United States, venue is proper only in Oregon. Accordingly, Rothstein's motion to transfer pursuant to 28 U.S.C. § 1406 is granted.
CONCLUSION
For the reasons discussed above, defendants' Adams and Maynard's motion to dismiss is denied. Defendant Rothstein's motion to transfer for improper venue is granted. This case is transferred to the District of Oregon.
NOTES
[1] Flag filed this claim as a third party complaint in state court. The third party complaint has been removed to this court.
[2] Ronald Rothstein is also referred to as Ronald Thomas.
[3] "Blast faxing" involves sending large numbers of unsolicited facsimile advertisements to potential consumers.
[4] Rothstein worked for RT, Inc. in New York, and maintains that the fax came from the RT, Inc. office in New York. In addition, Rothstein resides in Oregon, not in California as alleged by Flag.
[5] Flag alleges that three additional emails were sent by Rothstein and Adams on March 5, 2004, March 23, 2004, and March 31, 2004, finalizing the billing for the blast fax services. However, Adams claims that he does not recall these emails and claims that investigations are continuing regarding this matter.
[6] Flag alleges that all three defendants sent this fax; however, Maynard and Adams deny that they personally sent the fax.
[7] This decision does not address defendants' motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim. As stated above, this issue will be decided by the transferee court.
[8] In a case involving jurisdiction under Rule 4(e), the Seventh Circuit has held that the analysis in Textor applies to the Illinois long-arm statute only and that there is not an "independent federal `civil co-conspirator' theory of personal jurisdiction." Davis v. A.J. Electronics, 792 F.2d 74 (7th Cir.1986). However, this case was decided before the 1993 amendments to Rule 4, and did not involve the application of Rule 4(k)(2).
In addition, Davis was decided before the Illinois long-arm statute was amended to extend to the constitutional limits of due process. Zivitz v. Greenburg, 1999 WL 984397 (N.D.Ill. Oct.25, 1999). After this extension, multiple decisions in this district have found the conspiracy theory of jurisdiction to comport with due process. Zivitz, 1999 WL 984397, at *6; United Phosphorus, Ltd. v. Angus Chemical Co., 43 F.Supp.2d 904, 910 (N.D.Ill.1999); Kohler Co. v. Kohler International, Ltd., 196 F.Supp.2d 690 (N.D.Ill.2002). This theory has also been upheld by a number of other district courts, and has not yet been declared unconstitutional by any controlling authority. See, In re Vitamins Antitrust Litig., 2001 U.S. Dist. LEXIS 25073, *5 (D.D.C. Oct. 30, 2001).
[9] Adams recalls sending only one email, but claims that the investigation into these allegations is "continuing."
[10] Neither Flag nor defendants have provided the court with a copy of the April 1, 2004, email.
[11] Flag alleges that Maynard called Lawrence after the commencement of this suit. In that phone call, Maynard asked, "Did you get the $500 letter or the $1500 letter?" Flag maintains that this statement proves that Maynard knew that blast faxes were a violation of the TCPA. This statement, however, is insufficient to prove jurisdiction because it occurred after the commencement of this suit. United Phosphorus, 43 F.Supp.2d at 910.
[12] While defendants maintain that they were not the individuals who physically sent the faxes, the resolution of this allegation is not necessary for this court to have personal jurisdiction over them. Because Flag alleges that defendants had knowledge of the blast fax campaign, they are still alleged co-conspirators regardless of whether they physically sent the fax or aided the persons who did.
[13] It appears that Flag prefers to prosecute this case in Illinois because that is where it was originally sued by Mr. Repay and continues to litigate that suit in the Illinois state court.
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2469144/
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376 F.Supp.2d 1285 (2005)
Sonja S. REEVES, Plaintiff,
v.
UNUM LIFE INSURANCE COMPANY OF AMERICA, a Foreign Insurance Company, Defendant.
No. CIV-04-745-C.
United States District Court, W.D. Oklahoma.
June 28, 2005.
*1286 Jay R. Bond, Walter M. Bower, Oklahoma City, OK, for Plaintiff.
Amy J. Pierce, Ryan Whaley Coldirion & Shandy, Oklahoma City, OK, for Defendant.
MEMORANDUM OPINION AND ORDER
CAUTHRON, District Judge.
Plaintiff, Sonja S. Reeves (Reeves), was denied long-term disability benefits by her employee benefit plan (the Plan). She brought suit against Defendant, Unum Life Insurance Company of America (UNUM), in the District Court of Oklahoma County, State of Oklahoma, to recover benefits under the Plan. Defendant removed the case pursuant to 28 U.S.C. §§ 1331, 1441, and 29 U.S.C. § 1132(e)(1). In accordance with the briefing schedule imposed by the Court, the parties have fully briefed the issue of whether Plaintiff was wrongfully denied benefits under the Plan. Therefore, the matter is now at issue.
I. Background
Plaintiff was employed as an account executive with Household International, *1287 Inc. (Employer). (Administrative Record (AR), Dkt. No. 39, at 13.) The Employer provided a long-term disability benefit plan issued by UNUM for eligible employees. (AR at 729.) Under the terms of the policy, an eligible employee who provides proof that she is disabled because of sickness or injury and requires the regular attendance of a doctor is entitled to a monthly benefit. (AR at 718.) An employee is disabled if, because of illness or disease, she "cannot perform each of the material duties of [her] regular occupation; and after benefits have been paid for 12 months,... cannot perform each of the material duties of any gainful occupation for which [s]he is reasonably fitted by training, education or experience," or is working part-time and earning less than 20% of her pre-disability earnings. (AR at 720.)
After collapsing at work on October 18, 2002, Reeves applied for and received short-term benefits for the period of October 24, 2002, through November 26, 2002. (AR at 21-22.) Her claim was then transferred for consideration of long-term benefits under the Plan. (AR at 40.) UNUM set the date for determining Reeves' disability as October 19, 2002, a date Reeves does not contest. (AR at 22.)
Towards the end of her six-month elimination period, UNUM contacted Reeves through her counsel, Mr. Bower, and requested "detailed information regarding her restrictions and limitations" and instructed Reeves to execute a medical release form. (AR at 75-76.) UNUM also quoted the policy definition of "disabled" and indicated that, under the policy, Reeves had 45 days to provide proof of her claim, which must cover: (1) the date the disability started; (2) the cause of the disability; and (3) the seriousness of the disability. (Id.)
Almost immediately, Mr. Bower faxed UNUM a February 25, 2003, letter from Dr. Griffith Miller, in which the doctor offers the following opinions:
Mrs. Reeves suffers from several disorders. The main disorder is Fibromyalgia. She also suffers from heavy metal intoxication.... In addition, she has Candida, which is a yeast.... She has a viral infection of Epstein-Barr....
As far as her ability to work is concerned, it is my medical opinion that Mrs. Reeves cannot do the following: She cannot sit for over an hour at a time, ... she has to recline frequently; She cannot lift more than 5 pounds; She cannot walk for distances of over a[sic] 100 feet without extreme fatigue and pain. She is so fatigued and has such headaches that it is extremely difficult for her to concentrate for over 15 minutes at a time.
(AR at 78.)
Mr. Bower also mailed several other sets of Reeves' medical records. These records documented treatment by Dr. Joseph Fletcher in November and December 2002 for a suspected irritable bowel syndrome (AR at 83-90), and chiropractic treatment by Dr. William Ellis from December 2001 through August 2002 (AR at 91-104). Also submitted were hospital records for the Mayo Clinic where Reeves received treatment in 1988 (AR at 105-20), and chiropractic records for Spring 2001 of Dr. Jennifer Sheppard (AR at 121-23). Medical records of Dr. Mukesh Saraiya from Reeves' hospitalization in December 2000 for unexplained weight loss indicated a discharge diagnosis of "severe fibromyalgia with marked generalized weakness and muscle spasms." (AR at 124-32.) Medical records from 1997-99 indicated that Dr. Carnahan diagnosed and treated *1288 Reeves for fibromyalgia. (AR at 133-42.) Also included in the packet were copies of toxic metal tests conducted in 2001 and 2002. (AR at 162-65.)
Additionally, Mr. Bower sent UNUM copies of Reeves' medical records from the Wellness Clinic of Southern Oklahoma, where she was treated for chronic pain by Dr. Benjamin Fore and P.A. Robert Oldham. (AR at 145-66.) These records indicate that she was seen by Dr. Fore approximately ten times in a six-to seven-month period in mid-to-late 2002. (Id.) The records indicate that beginning in July 2002, Reeves began complaining of not being able to sleep, being unable to get out of bed in the morning because of pain, and suffering from severe work stress. (Id.) Reeves apparently commented that she didn't "know how long I can work I have to work until I can get disability." (AR at 215.) Dr. Fore noted that Reeves should change jobs for health reasons and referred to her to another doctor for chronic pain management. (AR at 215-17.)
Shortly thereafter, Mr. Bower submitted Reeves' medical release and an updated letter from Dr. Miller. (AR at169-74.) In the letter, Dr. Miller indicates that Reeves "cannot sit at a work-station.... She cannot stand in one place for more than 2-3 minutes at a time without having to sit down.... She can walk ... a minute to two minutes at a time" and could do repetitive motions such as entering data into a computer for only a minute or two at a time. (AR at 173.) According to Dr. Miller, these restrictions are caused by fibromyalgia. (Id.) Dr. Miller indicates that laboratory tests and the objective findings from examination confirm the diagnosis of fibromyalgia. (Id. at 172-73.)
After receiving copies of Reeves' executed medical releases, UNUM requested medical records from her doctors. (AR at 179-86.) Prior to reviewing Reeves' records, however, UNUM commenced payment of monthly benefits to Reeves under a reservation of rights. (AR at 190-91.) UNUM cautioned that the payment should not be construed as an admission of liability. (Id.)
UNUM received the medical records as requested. From Dr. Ellis, UNUM received additional medical records, a completed Physical Residual Functional Capacity Questionnaire (Ellis RFC Questionnaire), and electrophysiological study (including a range-of-motion test) performed on Reeves at the request of Dr. Ellis. (AR at 206-30, 384-402.) The Ellis RFC Questionnaire indicates Reeves' symptoms or pain would "constantly" interfere with her attention and concentration, Reeves would be "severely limited" in her ability to deal with work stress, she could sit for less than two hours in an eight-hour work day, and would likely miss work more than three days per month because of her "impairments or treatment." (AR at 398-401.) Additionally, it indicated that Reeves could occasionally lift "less than 10 pounds" and could bend or twist at the waist for 10-15% of an eight-hour day. (Id.) UNUM also received a letter, RFC Questionnaire (McKown RFC Questionnaire) and medical records from another chiropractor, Dr. Alan McKown, for treatments from 1995 through 2001. (AR at 231-383.) The McKown RFC Questionnaire also indicates Reeves' symptoms or pain would "constantly" interfere with her attention and concentration, Reeves would be "severely limited" in her ability to deal with work stress, she would likely miss work more than three days per month because of her "impairments or treatment," and that she could occasionally lift less than *1289 ten pounds (5 lbs. maximum), but that she could sit for two hours in an eight-hour work day and could not bend or twist at the waist at all. (AR at 376-81.) Finally, UNUM received copies of medical records and tests performed or requested by Dr. Miller. (AR at 409-28.)
Nurse Linda Pendergrass of UNUM reviewed Reeves' medical records. (AR at 444-447.) Nurse Pendergrass indicated that it was unclear whether the information provided was consistent with the medical records. (AR at 445.) Additionally, Reeves' work capacity was also unclear. (Id.) Nurse Pendergrass referred Reeves' file for review by Dr. Stephen Jacobson, UNUM's Vice President and Medical Director. (Id.; AR at 449-51.)
Dr. Jacobson also reviewed Reeves' medical information in an attempt to answer the questions presented: "Do the medical records support the claimant's diagnosis of influenza with respiratory manifestations[1] mercury poisoning and fibromyalgia? Do the records provide[d] support work capacity impairment?" (AR at 451.) Dr. Jacobsen answered both questions in the negative. (Id.)
Dr. Jacobson found that the record did not support a finding of mercury poisoning at or around the date of Reeves' disability. (AR at 450.) After reviewing the laboratory tests documenting the presence of metals in Reeves' urine, Dr. Jacobson noted that these tests were conducted post-provocation with a provoking agent (DMPS). (AR at 451.) Although Reeves' tests indicated that the presence of potentially toxic metals in her urine was above the normal reference range, the reference ranges were representative of a healthy population under "non-provoked" conditions. (AR at 165, 451.) Thus, Dr. Jacobson indicated that the tests were not reliable for a conclusion of heavy metal poisoning. (AR at 451.) Dr. Jacobson noted that although Reeves' prior occupation as a dental hygienist could result in mercury exposure, Reeves had been out of that occupation for several years. (AR at 450.) Dr. Jacobson also noted that Reeves had her dental amalgams, a known source of mercury, removed in January 2001. (Id.) Dr. Jacobson opined that the file did not contain any documentation to support the conclusion that Reeves was suffering from heavy metal poisoning at or around the date of disability. (Id.)
Dr. Jacobson also concluded that the medical records submitted did not support a diagnosis of fibromyalgia. (AR at 450.) Specifically, Dr. Jacobson noted the absence of a documentation of 11 of 18 tender points to fulfill the ACR criteria for fibromyalgia. (Id.) According to Dr. Jacobson, Reeves' treatment was not consistent with that "recommended by Kelly's Textbook of Rheumatology," which consists of "education, antidepressants, stress management, cognitive behavioral therapy, aerobic exercise, and pain management." (Id.)
Finally, Dr. Jacobson concluded that the file did not support Reeves' claim that she was unable to work. (AR at 449.) Dr. Jacobson noted a lack of "documentation of clinical findings or tests to support a conclusion that [Reeves'] condition changed at or around the [date of disability]." (Id.) Dr. Jacobson references a portion of a statement made by Reeves to Dr. Ellis on August 27, 2002, in which she said "I have *1290 to work until I can get disability."[2] (Id.; AR at 215 ("I don't know how long I can work I have to work until I can get disability.")) Finally, Dr. Jacobson indicates that the file lacks any "formal physical or cognitive functional testing," thus concluding that Reeves has not presented proof that she was "unable to perform at a functional level after the [date of disability] that she was able to perform prior to the [date of disability]." (AR at 449.)
Prior to Dr. Jacobson completing his initial report, Reeves submitted two Fibromyalgia Residual Functional Capacity Questionnaires, one from Dr. Ellis and one from Dr. Fore.[3] (AR at 456-63; 472-88.) Both doctors indicate that Reeves meets the American Rheumatological criteria for fibromyalgia and report Reeves' prognosis as poor or very poor. (AR at 463, 488.) Dr. Jacobson did not review these additional records before issuing his initial report.
In the additional submission, Dr. Ellis indicated that the following clinical findings, laboratory, and test results demonstrated Reeves' impairments: physical exam of the tender areas; a tender points fibromyalgia diagnostic exam (dated June 27, 2003); and an EMJ scan (dated Dec. 17, 2001). (AR at 463, 456-57.) Dr. Ellis indicated that Reeves has fourteen of the possible twenty-four symptoms of fibromyalgia. (AR at 462.) According to Dr. Ellis, Reeves' symptoms were severe enough to frequently to constantly interfere with her attention and concentration. (AR at 461.) Dr. Ellis considered Reeves to be severely limited in her ability to deal with work stress. (AR at 460-61.) Dr. Ellis also identified the following functional limitations: (1) ability to continuously sit for 30-45 minutes for "less than 2 hours" per day; (2) a need to take unscheduled breaks throughout the day for 15 minutes to one hour at a time; (3) an inability to lift or carry anything over ten pounds (Dr. Ellis opined that Reeves could lift and carry less than ten pounds "frequently"); and Reeves could bend or twist at the waist no more than 10% of an eight-hour day. (AR at 458-60.)
Dr. Fore identified the following findings as demonstrating Reeves' impairments: "tender points, weakness, fibrous muscle changes, elevated mercury level (8.1), poor range of motion, difficulty ambulating poor balance, shortness of breath, generalized weakness + easily fatigued." (AR at 488.) Dr. Fore identified sixteen of the possible twenty-four symptoms of fibromyalgia. (AR at 487.) Consistent with Dr. Ellis, Dr. Fore found that Reeves' symptoms would frequently to constantly interfere with her attention and concentration and that Reeves would be severely limited in her ability to deal with work stress. (AR at 485-86.) Dr. Fore also concluded that Reeves could sit for only thirty minutes at a time, for less than two hours in an eight-hour day, and would need to take unscheduled breaks every 15-30 minutes for one to two hours where she could recline. (AR at 484-85.) Dr. Fore indicated that Reeves could never lift anything over five pounds and could do no bending or twisting at the waist. (AR at 483-84.)
Dr. Jacobson later reviewed these questionnaires, but did not change his conclusions. *1291 ( AR at 490-91.) Dr. Jacobson noted that the "tender points" examination conducted by Dr. Ellis was completed in June, almost eight months after the date of Reeves' alleged disability. (AR at 491.) Dr. Jacobson also pointed out that while Reeves was receiving frequent treatment around the time of her collapse, the records do not indicate a marked change in treatment or reported symptoms around this time. (AR at 491, 475.) Dr. Jacobson also compared the fibromyalgia questionnaires from Drs. Ellis and Fore, and noted that Dr. Ellis indicates Reeves could lift and carry less than ten pounds frequently, Dr. Fore indicated Reeves could never lift and carry "less than 10 pounds" but was limited to five pounds. (AR at 490.) Dr. Ellis also indicated Reeves could bend and twist at the waist 10% of a work day, where Dr. Fore indicated she could not bend and twist at the waist at all. (Id.) Finally, Dr. Jacobson criticized what the doctors relied on as objective evidence, indicating that the "tender points examination" is "a self-report of a patient's response to pressure applied to a point and does not represent functional impairment" and the two most recent reports from Dr. Fore (3/29/03 and 6/28/03 visits) do not support Dr. Fore's "clinical findings." (Id.) Dr. Jacobson declined to alter his conclusion stating that "[n]either doctor references formal functional testing as a basis for determining Ms. Reeve's [sic] functional abilities and limitations." (Id.) Jacobson does note, however, that the "tender points" examination fulfills "the ACR criteria for [fibromyalgia] on 6/27/03." (Id.)
Relying on the Dr. Jacobson's findings, UNUM denied Reeves' claim. The denial centers on (1) lack of evidence of heavy metal poisoning at the time of disability, (2) no clinical findings of fibromyalgia around the date of disability, (3) inconsistencies in the doctors' reports regarding Reeves' functional capacity, and (4) lack of formal functional testing. (AR at 500-02.)
With the assistance of Mr. Bower, Reeves appealed the decision denying her benefits. (AR at 663.) Reeves requested, and was granted, a thirty-day extension to submit additional medical documentation for her appeal. (Id.; AR at 664.)
UNUM never issued a final decision on Reeves' appeal. In a letter dated April 27, 2004, UNUM indicated that it had misplaced Reeves' file and would need up to 45 days to make a decision regarding the appeal, but "barring no additional complications," it should have the review completed within thirty days. (AR at 685.) Mr. Bower claims he received this letter on May 10, 2004. (AR at 757.) While the letter was allegedly "in transit," Mr. Bower faxed a letter indicating his opinion that the appeal time had run and no extension had been requested and threatening suit if a final decision was not made within a week. (AR at 754-55.) However, upon receipt of the letter from UNUM requesting an extension, Mr. Bower sent another letter indicating that he expected to file suit sometime after May 17. (AR at 757.) Reeves filed her petition on May 19, 2004. (Docket Sheet from Dist. Ct. of Okla. Co., Dkt. No. 1 Exh. B.)
Standard of Review
A denial of benefits challenged under 29 U.S.C. § 1132(a)(1)(B) is reviewed de novo unless the benefit plan gives the administrator discretionary authority to determine a participant's eligibility for benefits. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). If such discretionary authority is granted, the review of an administrator's *1292 denial of benefits is measured by the "arbitrary and capricious" standard. Gilbertson v. Allied Signal, Inc., 328 F.3d 625, 630 (10th Cir.2003).
Where an administrator acts under a conflict of interest, the Court gives less deference to its decision. Fought v. Unum Life Ins. Co. of Am., 379 F.3d 997, 1003 (10th Cir.2004), cert. denied, ___ U.S. ___, 125 S.Ct. 1972, 161 L.Ed.2d 872 (2005). Where a party acts as both the insurer and administrator, it has an "inherent conflict of interest" and "an appropriate reduction in deference is appropriate." Id. at 1006. In such cases, the burden shifts to the administrator to "`justify the reasonableness of its decision'" by demonstrating that its denial is supported by substantial evidence. Id. (quoting Kathryn J. Kennedy, Judicial Standard of Review in ERISA Benefit Claim Cases, 50 Am. U.L.Rev. 1083, 1174 (2001)). "Substantial evidence is such evidence that a reasonable mind might accept as adequate to support the conclusion reached by the [decisionmaker]. Substantial evidence requires more than a scintilla but less than a preponderance." Sandoval v. Aetna Life & Cas. Ins. Co., 967 F.2d 377, 382 (10th Cir.1992) (internal quotation marks and citations omitted) (alteration in original).
Further, in cases where "substantial violations of ERISA deadlines result in the claim's [sic] being automatically deemed denied on review," the Court reviews the denial de novo. Gilbertson, 328 F.3d at 631. The reasoning for the heightened review is that there is no deference to an administrator's expertise when the administrator fails to exercise that expertise and render a reasoned decision. Id. at 632.
Previously, the Tenth Circuit has cautioned that this is not a "hair-trigger" rule where every minor violation results in de novo review. Id. at 635. The circuit court has indicated that where an administrator fails to render a timely decision that "substantially complies" with the regulatory requirements, de novo review does not apply. Id. An administrator substantially complies when the delay is either inconsequential or pursuant to an "on-going, good-faith exchange of information between the administrator and the claimant." Finley v. Hewlett-Packard Co. Emp. Ben. Org. Income Protection Plan, 379 F.3d 1168, 1174 (10th Cir.2004). Additionally, the Court will defer to an administrative decision where a claimant does not provide "`meaningful new evidence or raise significant new issues [on administrative appeal],'... and the delay does `not undermine [the court's] confidence in the integrity of [the administrator's] decision-making process.'" Id. (citations omitted) (alterations in original).
This is where the parties differ. There is no question that UNUM has discretion to determine a participant's eligibility in benefits, or that UNUM is operating under an inherent conflict of interest. Similarly, there is no question that UNUM failed to render a final decision on appeal within the time period prescribed by regulation.[4] UNUM argues that it has substantially complied with the procedural requirements and that any noncompliance was inconsequential. Although it misplaced Reeves' file, UNUM asserts that it immediately corrected the situation by proceeding with the review and by notifying Mr. Bower of the oversight and requesting an additional thirty days. Reeves *1293 counters by noting that (1) requests for extension of time should be submitted prior to the expiration of the original period, and (2) UNUM has not offered an excuse for failing to issue a final decision by May 19, 2004, the date the decision was due with the requested extension. (See Def.'s Br. n. 21.) Reeves also questions the truthfulness of UNUM's statements about what actually happened to Reeves' file, noting that UNUM's letter was dated two days before Reeves' demand letter yet it took almost two weeks for Mr. Bower to receive it.[5] Finally, Reeves asserts that she provided significant new evidence on appeal and, thus, UNUM's initial denial cannot effectively be applied to her appeal.
The parties also differ on whether the substantial compliance exception remains good law since the relevant regulations were revised in 2002. Reeves relies primarily on a footnote in Finley, where the Tenth Circuit explicitly reserved this question. Finley, 379 F.3d at 1175 n. 6.
In November 2000, the Department of Labor (Department) amended the procedural requirements for plans providing disability benefits. 65 Fed.Reg. 70246 (Nov. 21, 2000). Among the changes were revisions to the time frames permitted for resolving disability claims. Id. at 70246, 70249 (permitting a maximum 45-day review period that may be extended once for an additional 45 days if special circumstances require); 29 C.F.R. § 2560.503-1(i)(3)(i) (adopting the requirements of 29 C.F.R. § 2560.503-1(i)(1)(i)). An example of a special circumstance justifying an extension of the review time is "the need to hold a hearing." 29 C.F.R. § 2560.503-1(i)(1)(i). Where an extension is necessary, the administrator must provide written notice to the claimant "prior to the termination of the initial [45]-day period." Id. In addition, the Department eliminated the "deemed denied" provisions of the prior regulation and instead provided that "if a plan fails to provide processes that meet the regulatory minimum standards, the claimant is deemed to have exhausted the available administrative remedies and is free to pursue the remedies available under section 502(a) of the Act." 65 Fed.Reg. at 70255.
The Court agrees that the substantial compliance doctrine is not applicable under the revised regulations. In waiving the administrative exhaustion requirement for plans that fail to comply with the procedural requirements, the Department noted that "[m]any commenters ... argued that [29 C.F.R. § 2560.503-1(l)] would impose unnecessarily harsh consequences on plans that substantially fulfill the requirements of the regulation, but fall short in minor respects." Id. Notwithstanding these comments, the Department rejected two proposals that would excuse minor violations and impose some form of a substantial compliance standard. Id. at 70255-56 (rejecting a proposed good faith or actual prejudice standard). The Department concluded that:
Inasmuch as the regulation makes substantial revisions in the severity of the *1294 standards imposed on plans, we believe that plans should be held to the articulated standards as representing the minimum procedural regularity that warrants imposing an exhaustion requirement on claimants. In the view of the Department, the standards of the regulation represent essential aspects of the process to which a claimant should be entitled under section 503 of the Act. A plan's failure to provide procedures consistent with these standards would effectively deny a claimant access to the administrative review process mandated by the Act.
Id. at 70256. Thus, the Department rejected the notion of "substantial compliance" and concluded that "a decision made in the absence of the mandated procedural protections should not be entitled to any judicial deference." Id. at 70255.
The Court acknowledges the apparently contrary decision in Oman v. Intel Corp. Long Term Disability Benefit Plan, No. 03-1591-AA, 2004 WL 2384965 (D.Or. Oct.21, 2004), where that court applied the substantial compliance doctrine to the amended regulations. Id. at *4. However, the Oman court did not reference 29 C.F.R. § 2560.503-1(l) at all, nor the Department's rejection of two versions of a substantial compliance doctrine, but instead focused solely on the elimination of the "deemed denied" provision. Id. at *4-5. Thus, the Court finds Oman unpersuasive.
Concluding that the substantial compliance doctrine does not apply and noting that it is undisputed that UNUM did not comply with the procedural requirements of 29 C.F.R. § 2560.503-1(i)(1)(i) (incorporated by § 2560.503-1(i)(3)(i)) when it failed to issue a timely decision on Reeves' appeal or timely request an extension of time, the Court determines that the applicable standard of review is de novo.
Discussion
UNUM's denial of Reeve's long-term benefits claim appears to be based on two conclusions: (1) that Reeves did not provide proof that she had an illness or disease (fibromyalgia); and (2) that Reeves did not provide proof that the illness or disease prevented her from performing the material duties of her regular occupation.[6] Initially, UNUM's Dr. Jacobson concluded that Reeves had not proven she had fibromyalgia because she had not submitted documentation that she met the ACR criteria for fibromyalgia and was not participating in a coordinated treatment program for fibromyalgia. Dr. Jacobson discounted the test later submitted because it was dated eight months after the date of alleged disability.
Fibromyalgia is a controversial diagnosis because it is diagnosed entirely from a patient's self-reports of pain and reported symptoms. Moore v. Barnhart, 114 Fed.Appx. 983, 991 (10th Cir.2004) (unpublished decision). "`There are no laboratory tests for the presence or severity of fibromyalgia.'" Id. (quoting Sarchet v. Chater, 78 F.3d 305, 306 (7th Cir.1996)) (emphasis omitted); Gilbertson, 328 F.3d at 628 n. 1. Symptoms include poor sleep, anxiety, fatigue, and irritable bowel syndrome. The Merck Manual 481 (Mark. H. Beers, M.D. and Robert Berkow, M.D. *1295 eds., Merck Research Laboratories 1999) (1899). The predominant symptom, however, is chronic widespread pain in the "fibrous tissues, muscles, tendons, ligaments, and other sites," especially in the neck, shoulders, thorax, lower back, and thighs. Id. The onset of fibromyalgia is gradual and its cause is unknown. Id.; American College of Rheumatology, Fibromyalgia Fact Sheet, http://www/rheumatology.org/public/factsheets.fibromya.asp (last visited June 13, 2005). According to the American College of Rheumatology, the illness affects approximately two-percent of the United States population. Fibromyalgia Fact Sheet, supra.
In 1990, the American College of Rheumatology identified the criteria of classifying fibromyalgia. If a patient has (1) a history of widespread pain for at least three months and (2) pain in 11 of 18 tender points on digital palpation, the patient will be said to have fibromyalgia. Frederick Wolfe, et al., The American College of Rheumatology 1990 Criteria for the Classification of Fibromyalgia, 33-2 Arthritis Rheumatism, Feb. 1990, at 160; see also AR at 450.
There is no question that Reeves reported widespread pain for at least three months prior to the date of her alleged disability. Additionally, it is conceded that Reeves met the "tender points" criteria eight months after her date of alleged disability. The question is, whether the absence of an earlier "tender points" examination is fatal to Reeves' claim. The Court holds that it is not.
The "tender points" examination does not report a change in Reeves' condition, but merely confirms and supports the prior diagnosis of several other doctors. Cf. Finley, 379 F.3d at 1174 (rejecting medical evidence that the plaintiff has "retrogressed" since the doctor's prior exam because it was not relevant). Indeed, this examination can be likened to one that UNUM itself could have ordered, should it have desired an independent medical exam. (See AR at 707.) As early as 1997, Dr. Carnahan suspected fibromyalgia because of a "long standing history of chronic back pain," "intense pain to her cervical, thoracic and lumbar region," "[p]ain that radiates into both arms and legs," lack of sleep, depression, anxiety, "trigger points behind her knees and elbows." (AR at 141.) This diagnosis was confirmed by Dr. Saraiya, who noted Reeves had "severe fibromyalgia with marked generalized weakness and muscle spasms." (AR at 127.) As noted by Dr. McKown, during the first few years of treatment, Reeves' "symptoms would wax and wain [sic]." (AR at 383.) However, by 2002, every record of Reeves' treating physician, Dr. Fore, indicates that Reeves was suffering from "chronic pain," and "anxiety" and was being treated by her chiropractor and with trigger point injections.[7] (AR at 145-66.) Additionally, Dr. Miller indicated that Reeves has pain in all "10 pain points, behind the neck, 3 places in the thoracic spine, the low back, the lumbar spine, and behind the knees." (AR at 172.) Because the "tender points" examination merely clarifies and confirms what is contained in Reeves' other medical records, it is relevant to a diagnosis of fibromyalgia on the date of her alleged disability.[8] Perhaps most significantly, there is no evidence in *1296 the record to counter these doctors' findings. Accordingly, the Court finds that UNUM erred when it found that Reeves did not present proof of an illness or disease, fibromyalgia.
This conclusion does not end the inquiry, however. The more difficult question is whether the fibromyalgia prevented Reeves from performing the essential functions of her job.
The first step in making this determination requires an analysis of Reeves' limitations. In support of her claim, Reeves submitted several functional capacity questionnaires. Each indicated that Reeves' symptoms (1) constantly interfered with her concentration, (2) resulted in her being severely limited in dealing with work stress, (3) would cause her to be absent more than three times per month, (4) limited her ability to sit to 30-45 minutes at a time, with no more than two hours in an eight-hour day, and (5) required her to take frequent and unscheduled breaks. (AR at 398-401, 376-81, 456-63, 472-88.)
The doctors do differ in the amount of weight Reeves could lift and carry and whether Reeves could bend and twist at the waist. UNUM's Dr. Jacobson points out these "inconsistencies," apparently relying on them to support the denial of benefits. Although conflicting evidence is potentially relevant, see Fought, 379 F.3d at 1014-15, it does not support UNUM's position here. Any "conflict" between the reports is, on the surface, extremely minor and understandable as the perception of each doctor is bound to be slightly different. Additionally, even the evidence of functional limitations most favorable to UNUM limits Reeves to lifting ten pounds and bending and twisting no more than 10% of an eight-hour day.[9] These apparent inconsistencies could have been resolved easily with an independent medical examination. Although not always required, a capacity assessment by an independent examiner or another form of investigation could have shed light on Reeves' true limitations. See Fought, 379 F.3d at 1015. Based on the record, there is nothing about these minor differences in opinion that would undermine the doctors' reports or support the conclusion that Reeves was not functionally limited as reported.
It is not enough, however, that Reeves was limited in her functional abilities those limitations must be relevant to the essential duties of Reeves' job. Unfortunately, the record is devoid of a list of material duties or job description for Reeves' occupation.[10]
The Court must consider then, whether, in the absence of such evidence, the record *1297 nonetheless indicates that Reeves could perform her job as a loan originator. UNUM argues that there was no marked change in Reeves' fibromyalgia around the time of disability and if she could perform those functions before, she can do them now. Although this argument has some appeal, it is not supported by the record. Before her collapse, Reeves began reporting to Dr. Fore that she wasn't sleeping, she was "stressed out," "depressed," "anxious," and that she did not know how much longer she could continue working. (AR at 145-66.) Dr. Fore treated Reeves with medication and trigger point injections but noted that Reeves should consider changing jobs for health reasons. (Id.) Between October 14 and November 1, 2002, Reeves also saw Dr. Ellis for treatment seven times.[11] (AR at 475.) Finally, within days of her collapse, Reeves went back to see Dr. Miller for further treatment. (AR at 422.) Additionally, the Court notes that Reeves' non-hourly compensation in the two months preceding her collapse was significantly less than her average during the previous year. (See AR at 431-38; Pl.'s Exh. A.) Although these records do not demonstrate an overwhelming change in symptoms or treatment after Reeves' collapse, there is evidence of an escalation of symptoms and an increase in the frequency and type of treatment. (See also Gutierrez Assessment, AR at 575-82.) Thus, without any indication as to what Reeves' job duties entailed, UNUM could not have reasonably or correctly concluded that Reeves was limited in performing them.[12]
The question remains, however, whether the Court may determine that Reeves was disabled absent proof of the essential duties of her job. The Court finds that it can make such a determination. See Caldwell v. Life Ins. Co. of N. Am., 287 F.3d 1276, 1288-89 (10th Cir.2002) (remand for further fact-finding is unnecessary where there is only one reasonable result or the administrator's actions were arbitrary and capricious). Even assuming Reeves' job was sedentary, she would have been unable to sit for more than 30-45 minutes at a time, could stand for the same amount of time, would have required frequent and unscheduled breaks, and, at the most, could only sit (and thus, work) for two hours a day. Further, her symptoms would reportedly have prevented her from being able to concentrate on her work, and would have severely limited her in dealing with work stress. It defies logic that the duties of a loan officer were stress-free, required Reeves to work no more than a two-hour day (four hours if she could alternate between sitting and standing while working), permitted unscheduled and frequent breaks that may last up to two hours each, and did not require her to concentrate or pay attention. The only reasonable conclusion is that Reeves could not "perform each of the material duties of [her] regular occupation" and met the policy definition of disabled.[13] (AR at 720.)
Conclusion
The Court concludes that Reeves was wrongfully denied benefits under the long-term *1298 disability policy issued by UNUM. Although Plaintiff briefed the issue of damages in its opening brief, Defendant reserved the issue. Accordingly, the Court sets the following briefing schedule: Defendant to file its Response to Plaintiff's argument on damages by Friday, July 15. Plaintiff shall then have until Wednesday, July 27, to file a Reply. Upon a ruling on damages, the Court will issue a judgment under Rule 54(b) and remand the remaining matter to the UNUM administrator for further fact-finding pursuant to the Plan's standard for "any occupation" disability (see AR at 720 ¶ 2).
NOTES
[1] Apparently someone at UNUM had entered the wrong diagnosis code. It is conceded that Plaintiff did not have influenza. (Def.'s Br. 6 n. 11.)
[2] Presumably, Dr. Jacobson refers to this partial statement to undermine Reeves' credibility in reporting symptoms or question her motivation in seeking benefits.
[3] These reports were submitted on the 22nd and 28th of July 2003. Dr. Jacobson completed his report on July 30, 2003.
[4] Indeed, UNUM never issued a final decision at all, as Reeves filed suit on May 19 and UNUM was still conducting medical reviews in the first part of June.
[5] UNUM asserts that it misplaced Reeves' file and "triaged" her claim for medical assessment by April 19, 2004 (versus placed for final decision). (AR at 685.) The medical response by Nurse Brenda Nunn confirms that the file was indeed referred to her on April 19. (AR at 688-95.) However, UNUM did not notify Mr. Bower that the file had been misplaced, found, and referred until over a week later on April 27. (AR at 685.) The delay in notifying Mr. Bower of the misplaced file and the significant delay in Mr. Bower's receipt of this notice are highly suggestive that the April 27 letter was actually written after Mr. Bower's April 29 letter.
[6] There is quite a bit of discussion in the record about heavy metal poisoning. However, Reeves seems to attribute this as a contributing factor to the fibromyalgia, which, in turn, caused her disability. Thus, the Court focuses solely on the fibromyalgia.
[7] Trigger point injections are injections of lidocaine or hydrocortisone into the "[i]ncapacitating areas of focal tenderness." The Merck Manual, supra at 482.
[8] The Court notes that Reeves may not have been participating in a "coordinated treatment program for fibromyalgia as recommended by Kelly's Textbook of Rheumatology" (AR at 450), as asserted by UNUM, but was receiving treatment consistent for fibromyalgia including trigger point injections and anti-depressants. The Merck Manual, supra at 782. Further, the fact that she was not seeing a specialist for her fibromyalgia is not dispositive. See American College of Rheumatology, Fact Sheet http://www.rheumatology.org/public/factsheets/firbromya.asp (last viewed on June 13, 2005) (indicating that "fibromyalgia can generally be treated by your primary care physician").
[9] Although these differences appear slight, the Court acknowledges that in some circumstances, they may be material. However, as discussed further below, the Court cannot make such a determination because it has no evidence of whether lifting between five and ten pounds and bending and twisting at the waist is essential to Reeves' occupation.
[10] In a letter to Reeves in October 2002, UNUM indicated that it had requested information about Reeves' occupation from her employer. (AR at 51-52.) However, there is no request in the record, nor any indication that anything, if requested, was ever received.
[11] Reeves' records indicate that she had been seeing Dr. Ellis anywhere from twice a week to once a month. (AR at 475-78.)
[12] In making this statement, the Court is holding that, even under an arbitrary and capricious with reduced deference standard, UNUM's denial would not be reasonable.
[13] By concluding that Reeves is disabled according to the definition quoted, the Court offers no opinion regarding whether Reeves meets the criteria for disabled for "any occupation." This decision requires significantly more fact-finding and an interpretation of the Plan's terms. Accordingly, that decision must be remanded to the administrator "for a full and fair review of the record in light of the `any occupation' standard." Caldwell v. Life Ins. Co. of N. Am., 287 F.3d 1276, 1289 (10th Cir.2002).
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2469161/
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376 F.Supp.2d 21 (2005)
TIVERTON POWER ASSOCIATES LIMITED PARTNERSHIP, a Rhode Island limited partnership, Calpine Tiverton, Inc., a Delaware corporation, Rumford Power Associates Limited Partnership, a Maine limited partnership and Calpine Rumford, Inc., a Delaware corporation, Plaintiffs,
v.
THE SHAW GROUP, INC., a Louisiana corporation, Defendant.
No. CIV.A.01-10914-WGY.
United States District Court, D. Massachusetts.
June 16, 2005.
*22 Wayne F. Dennison, Brown, Rudnick, Berlack & Israels LLP, Boston, MA, for The Shaw Group, Inc., Defendant.
John R. Dingess, Kirkpatrick & Lockhart LLP, Pittsburgh, PA, for Calpine Rumford, Inc., Calpine Tiverton, Inc., Rumford Power Associates Limited Partnership, Tiverton Power Associates Limited Partnership, Plaintiffs.
William M. Dolan, III, Brown Rudnick Berlack Israels LLP, Providence, RI, for The Shaw Group, Inc., Defendant.
Charles J. Dyer, Kirkpatrick & Lockhart Nicholson Graham LLP, Boston, MA, for Calpine Rumford, Inc., Calpine Tiverton, Inc., Rumford Power Associates Limited Partnership, Tiverton Power Associates Limited Partnership, Counter Defendants.
Brian J. Lamoureux, Brown Rudnick Berlack Israels LLP, Providence, RI, for The Shaw Group, Inc., Defendant.
Andrew L. Swope, Kirkpatrick & Lockhart, LLP, Harrisburg, PA, for Calpine Rumford, Inc., Calpine Tiverton, Inc., Rumford Power Associates Limited Partnership, Tiverton Power Associates Limited Partnership, Plaintiffs.
Roger C. Zehntner, Kirkpatrick & Lockhart LLP, Boston, MA, for Calpine Rumford, Inc., Calpine Tiverton, Inc., Rumford Power Associates Limited Partnership, Tiverton Power Associates Limited Partnership, Counter Defendants.
MEMORANDUM AND ORDER
YOUNG, Chief Judge.
After a full trial by jury, this Court entered a final judgment in the amount of $314,878.78 in favor of Tiverton Power Associates Limited Partnership. Tiverton here files a motion to amend or alter the judgment of January 31, 2005, seeking to add $139,029.31 in prejudgment interest. The facts are taken from the Plaintiffs' Memorandum of Law in Support of Plaintiffs' Motion to Amend or Alter Judgment ("Pls.' Mem.") [Doc. No. 159], and Defendant's Opposition to Plaintiffs' Motion to Amend or Alter Judgment ("Def.'s Opp'n") [Doc. No. 160], as well as the Shaw Group, Inc.'s previously filed Memorandum of Law in Support of its Motion for Partial Summary Judgment filed on September 30, 2003 ("Def.'s Summ. J. Mem.") [Doc. No. 61]. The plaintiffs, Tiverton Power Associates Limited Partnership, Calpine Tiverton, Inc., Rumford Power Associates Limited Partnership, and Calpine Rumford, Inc. (together, "Tiverton") entered into an agreement with the Defendant, The Shaw Group, Inc. ("Shaw"), on July 6, 2000 (the "July 6 Agreement"). Pls.' Mem. at 1; Def.'s Opp'n at 1. Shaw acquired *23 the assets of Stone & Webster in the course of Chapter 11 bankruptcy proceedings. Under a contract dated July 6, 2000, Shaw was to satisfy certain liens and claims. Pls.' Mem. at 1-2; Def.'s Summ. J. Mem. 2-3. Such payments were to be capped at $34,000,000, and Shaw was to pay Tiverton cash for any difference between such cap and the amount paid on such liens and claims. Pls.' Mem. at 1-2; Def.'s Summ. J. Mem. 2-3. Shaw was to guaranty the $34,000,000 obligation through bonds or other guaranties. Pls.' Mem. at 2. Shaw provided Tiverton a lien discharge bond (the "Liberty Bond") in the amount of $27,100,042.51 through Liberty Mutual Insurance Company, Shaw's surety. Pls.' Mem. at 2.
On May 29, 2001, Tiverton filed a breach of contract claim and sought a declaratory judgment with respect to the July 6th Agreement. Id. Federal jurisdiction is based on diversity of citizenship and an amount in controversy in excess of $75,000. 28 U.S.C. § 1332(a); Pls.' Mem. at 2. Tiverton amended the complaint by adding a claim for an equitable accounting as well as a claim under Massachusetts General Laws chapter 93A. Pls.' Mem. at 2. The Court dismissed the chapter 93A claim and the matter proceeded to trial on the breach of contract action. Id. The dispute between the parties rested largely on the scope of the liens and claims to be paid by Shaw. Def.'s Summ. J. Mem. at 3.
On December 2, 2004, Shaw sent Tiverton a check dated November 30, 2004, Def.'s Opp'n Ex. A, in the amount of $364,078.00 comprised of $314,878.78 (the amount Shaw conceded it owed Tiverton) and $49,199.22 in interest.[1] Def.'s Opp'n at 1-2. Tiverton received Shaw's payment, but did not cash the check. Def.'s Opp'n at 2. On January 31, 2005, following a three-week trial, the jury returned a verdict in favor of Tiverton. One must recognize, however, that the jury verdict ostensibly in the amount of $314,878.78 the smallest amount permitted pursuant to this Court's instructions was, in actuality, a win for Shaw.[2] Pls.' Mem. at 2; Def.'s Opp'n at 1. This Court entered judgment for Tiverton in the amount of $314,878.78 "with interest at the statutory rate."[3] Had Tiverton cashed the check it received from Shaw, which was in principal amount the exact amount of the verdict,[4] the judgment entered by this Court would have been for $0. This becomes important as *24 this Court considers the purpose for awards of prejudgment interest.
1. DISCUSSION
a. Standard of Review
State law governs the determination of prejudgment interest. Doty v. Sewall, 908 F.2d 1053, 1063 (1st Cir.1990); Mill Pond Assocs., Inc. v. E & B Giftware, Inc., 751 F.Supp. 299, 300 (D.Mass.1990); Charles Alan Wright and Mary Kay Kane, Law of Federal Courts, § 98 at 704 (6th ed. 2002) ("Whether the judgment is to include interest from the time of the wrong to the entry of judgment is a question of the measure of damages, to be resolved by state law or by any applicable federal statute or in the discretion of the court, as the case may be."). Prejudgment interest is granted "to compensate a damaged party for the loss of use or unlawful detention of money." Conway v. Electro Switch Corp., 402 Mass. 385, 390, 523 N.E.2d 255 (1988). The award of prejudgment interest lies in the discretion of the Court. McDonough v. City of Quincy, 353 F.Supp.2d 179, 191 (D.Mass.2005) (deciding that the award of prejudgment interest was "reasonable and appropriate in order to make [plaintiff] whole"); Fleet Fin. Group, Inc. v. Advanta Corp., No. 16912-NC, 2003 WL 22707336 at *4 (Del.Ch. Nov.7, 2003) (noting that the Court has "broad discretion, subject to principles of fairness" in granting prejudgment interest). The Court also has "broad discretion" in determining the prejudgment interest rate. Cottrill v. Sparrow, Johnson & Ursillo, Inc., 100 F.3d 220, 225 (1st Cir.1996) (involving prejudgment interest in an ERISA context); Berndt v. Kaiser Aluminum & Chem. Sales, Inc., 629 F.Supp. 768, 770 (E.D.Pa.1985), aff'd 789 F.2d 253 (3d Cir.1986) ("Determination of prejudgment interest is within the court's discretion."); Stonington Partners, Inc. v. Lernout & Hauspie Speech Prods., N.V., No. 18524-NC, 2003 WL 21555325 at *5 (Del.Ch. July 8, 2003) (noting that the Court "may deviate in its sound discretion" from the applicable rate of interest); see also Radford Trust v. First Unum Life Ins. Co. of Am., 321 F.Supp.2d 226, 257 (D.Mass.2004) (quoting Cottrill, 100 F.3d at 225).
Here, the applicable Massachusetts law provides:
In all actions based on contractual obligations, upon a verdict, finding or order for judgment for pecuniary damages, interest shall be added by the clerk of the court to the amount of damages, at the contract rate, if established, or at the rate of twelve per cent per annum from the date of the breach or demand. If the date of the breach or demand is not established, interest shall be added by the clerk of the court, at such contractual rate, or at the rate of twelve per cent per annum from the date of the commencement of the action....
Mass. Gen. Laws, ch. 231, § 6C (emphasis added). "Because the Federal action commenced in the United States District Court for the District of Massachusetts was based on diversity of citizenship ... the question [is] one to be determined by the law of Massachusetts, including its conflict of laws rules." Morris v. Watsco, Inc., 385 Mass. 672, 674, 433 N.E.2d 886 (1982) (quoting Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)) (noting that "Federal Courts in diversity cases apply State law with respect to prejudgment interest" in answering a question certified from the United States Court of Appeals for the First Circuit).
b. Which State's Law Is to Govern the Determination of Pre-Judgment Interest?
Tiverton seeks a liberal award of $139,029.31 in prejudgment interest. Pls.' *25 Mem. at 2-3. It asserts that Massachusetts law should apply and that they are "entitled to an award of pre-judgment interest at the statutory interest rate of 12%, as provided by Mass. Gen. Laws ch. 231, § 6C, from the date the complaint was filed, May 29, 2001, until the date judgment was entered, January 31, 2005." Id. Tiverton further argues that as the case is before this Court based on diversity jurisdiction, the substantive law of "the state that provided the basis for the verdict with respect to determinations regarding pre-judgment interest," namely Massachusetts, is to govern. Id. at 3 (citing Blockel v. J.C. Penney Co., Inc., 337 F.3d 17, 29 (1st Cir.2003) and Commercial Union Ins. Co. v. Walbrook Ins. Co., Ltd., 41 F.3d 764, 772 (1st Cir.1994)). Tiverton argues that the principal place of contract performance was Massachusetts. Id. at 5. Tiverton asserts that the head of the team and the team resolving liens and claims was located in Boston, the spreadsheets summarizing the claims and "approved settlement amount" used by Shaw Group to resolve the liens and claims were produced n Boston, meetings to resolve the liens and claims took place in Boston, Tiverton had representatives in Massachusetts during this period of time (as did Shaw), and, what Tiverton describes as "perhaps most significantly, the checks that were used to pay the subcontractors and suppliers were issued by [Shaw] from offices located in Massachusetts.... These facts show that Massachusetts was the state where the majority of the performance took place with respect to the July 6 Agreement." Id.
Tiverton also argues that Delaware substantive law should not govern because:
[w]hile the July 6 Agreement was substantially negotiated and executed in Delaware, the parties' performance under the agreement occurred outside of Delaware. The liens and claims that were the subject of the July 6 Agreement were not addressed or resolved in Delaware .... [and] the checks that were issued by Stone & Webster/Shaw to pay the liens and claims relating to the Rumford Project were [not] issued from ... Delaware.
Id. at 4-5 (arguing also that Maine law should not apply as the checks were not issued from Maine and that bonds were never posted to remove liens filed against the Rumford project in Maine). As such, Tiverton asserts,
Since the substantive law of Delaware directs a court to look to the place where a contract is to be performed to determine a party's entitlement to pre-judgment interest and Shaw's performance predominantly took place in Massachusetts, the law of Massachusetts will determine whether and in what amount [Tiverton] are entitled to pre-judgment interest.
Id. at 6 (indicating that the determination should be controlled by chapter 231 section 6C of the Massachusetts General Laws).[5]
Shaw disagrees with Tiverton's characterization of applicable law, arguing instead that the prejudgment interest law of Delaware ought apply. Def.'s Opp'n at 3. Shaw argues that the Court must first look to Massachusetts law to determine which state's law to apply. Id. at 2 (quoting Northeast Data Sys., Inc. v. McDonnell Douglas Computer Sys. Co., No. 83-1179-Y, 1991 WL 254420 at *1 (D.Mass. Nov.29, 1991) (Collings, M.J.) (stating that the law *26 governing the contract controls to determine "whether, and at what rate, prejudgment interest" is appropriate)); Morris, 385 Mass. at 673, 433 N.E.2d 886 (noting as dicta, in a case involving an agreement by parties as to governing law in the context of the Uniform Commercial Code, that "[e]ven without an agreement concerning the governing law, it has been our practice to measure the damages recoverable for breach of contract according to foreign law where the law governs the contract." (citing Atwood v. Walker, 179 Mass. 514, 518-519, 61 N.E. 58 (1901), and Steranko v. Inforex, Inc., 5 Mass.App.Ct. 253, 270, 362 N.E.2d 222 (1977))). Shaw argues that since Delaware law governs the contract, Delaware law controls the determination of prejudgment interest. Def.'s Opp'n at 3.
Shaw further disagrees with Tiverton's argument that one must look to Delaware's choice of law provision. Id. In Cooper v. Ross & Roberts, Inc., 505 A.2d 1305, 1306 (Del.Super.Ct.1986), a case cited by Tiverton, the Delaware court explained that once a court looks to the foreign substantive law, in that case New Jersey, it does not
look to New Jersey's conflict of laws rules which, if they applied here, might cause [the Court] to look back again from New Jersey law to Delaware law, thus resulting in an application of the doctrine of renvoi. For reasons set forth at length in The Restatement, application of that doctrine is disfavored....
Def.'s Opp'n at 4 (quoting Cooper, 505 A.2d at 1307 n. 3; Northeast Data, 1991 WL 254420 at *1 (holding that the substantive law of the foreign state will apply in the determination of whether prejudgment interest is appropriate and, if so, the applicable rate) and Restatement of the Law (Second) of Conflict of Laws § 8 cmt. j ("[T]he forum will not seek to apply foreign choice-of-law rules in the area of ... contracts.")).
It should be noted that this matter was originally before the Honorable Reginald C. Lindsay. It was reassigned to this Court on July 13, 2004 [Doc. No. 86]. Tiverton in fact agrees that Judge Lindsay determined that Delaware law applied to the contract and that the substantive law of Delaware should apply "at least initially." Pls.' Mem. at 3. Tiverton then argues, however, that "Delaware courts have concluded that the subject of prejudgment interest is governed by the substantive law of the state where the contract was to be performed." Id. (quoting Cooper, 505 A.2d at 1306). Accordingly, Tiverton urges this Court to "look to the place of performance to determine a party's entitlement to pre-judgment interest." Id.; Pls.' Reply Mem. in Supp. of Pls.' Mot. to Amend or Alter J. [Doc. No. 161] at 2 ("Indeed, it would make little sense for a federal court sitting in diversity to apply Delaware law to determine a party's entitlement to pre-judgment interest when a Delaware court hearing the same case would have looked to the law of the state where performance took place."); Stentor Elec. Mfg. Co., Inc. v. Klaxon Co., 125 F.2d 820, 822-23 (3d Cir.1942) (establishing Delaware law that courts look to the place of contract performance to determine pre-judgment interest award); Pls.' Mem. at 4 (noting that the Third Circuit in Stentor stated that "when it came to the issue of damages, Delaware looked to the law of the state where the contract was to be performed. Delaware looked to the state of performance because `the obligation to pay damages for the nonperformance of a contract is a matter of substantive right, imposed by law as a substitute for performance, and should therefore, be measured by the law of the place where such performance was promised.' The court concluded that a Delaware court would consider the issue of pre-judgment interest to be a matter of *27 substantive law that was to be decided by the laws of the place where the contract was to be performed." (internal citations omitted)).
Tiverton argues that Judge Lindsay, in making the determination that Delaware law governed contract interpretation, did not consider the place of performance. Id. (noting that Judge Lindsay considered other factors in arriving at his decision). Even if this Court were to follow this path, this Court concludes that the contract was performed in multiple states. See Pls.' Mem. at 7 (conceding, seemingly, in its alternative argument that a substantial amount of performance also took place in Rhode Island). Though Rhode Island and Massachusetts have identical interest rates, namely 12%, this Court cannot simply dictate that because those two states have 12% interest rates that a 12% rate should freely be applied. Conversely, according to Delaware law as articulated by the Third Circuit, this Court must look at where the contract was made, which in Judge Lindsay's determination was Delaware. Smith v. Onyx Oil & Chem. Co., 218 F.2d 104, 111 (3d Cir.1955) (establishing that the law of the place the contract is made will govern where performance takes place in multiple states, noting that "courts, in cases where performance is called for in different states, show a strong tendency to refer the question to the law of the place of contracting.... [T]he Delaware cases discussed in our opinion in the Stentor case ... indicate pretty clearly that Delaware would be in accord with this general rule of the conflict of laws." (emphasis added)); Pls.' Mem. at 4 ("Judge Linds[a]y relied on the fact that the contract was entered into in Delaware, [and] was substantially negotiated in Delaware"); see also Def.'s Opp'n at 4 (citing Smith, 218 F.2d at 111).
The Massachusetts Supreme Judicial Court has expressly indicated that those decisions that have held that local law should govern interest payable where parties have not entered an agreement as to such interest are still good law, and that "even where the parties have not agreed on the law which governs their rights, the better rule may be in all instances to turn to the law governing rights and duties under the contract to determine the interest payable for breach of contract." Morris, 385 Mass. at 678, 433 N.E.2d 886 (citing Restatement (Second) of Conflict of Laws §§ 188 and 207, cmt. e (1971)) (emphasis added). The Supreme Judicial Court highlighted that "[e]ven without an agreement concerning the governing law, it has been [the Supreme Judicial Court's] practice to measure the damages recoverable for breach of contract according to foreign law where that law governs the contract." Id. at 675, 433 N.E.2d 886 (citing Steranko, 5 Mass.App.Ct. at 270, 362 N.E.2d 222) (explaining that "the justification for [the] rule that interest is payable according to Massachusetts law when damages are recoverable for breach of a contract governed substantively by the law of another jurisdiction finds support only in its longevity and in its convenience of application", id. at 676, 362 N.E.2d 222, and that "[t]he fact that it is convenient to apply local law ... cannot justify its application." Id. at 678, 362 N.E.2d 222.).
This Court agrees with Judge Lindsay's determination that Delaware law governs the parties' agreement. As the First Circuit indicated in Quaker State Oil Refining Corp. v. Garrity Oil Co., Inc.,
In the absence of predesignation, choice of law [i]s governed by the tenets elucidated in Travenol Labs., Inc. v. Zotal, Ltd., 394 Mass. 95, 474 N.E.2d 1070 ... (1985). Travenol involved nonpayment of invoices silent as to controlling law. The Supreme Judicial Court decided that Massachusetts law applied, relying on the Restatement view that courts should apply the "law of the state.... *28 that ... had a more significant relationship to the matters in question."
884 F.2d 1510, 1515 (1st Cir.1989) (holding the district court did not err in applying the Massachusetts statutory prejudgment interest rate where "no other state had an equally significant relationship to the transactions in question") (emphasis added).
This Court holds that Delaware substantive law, namely Delaware prejudgment interest at the Federal Discount Rate plus 5%, applies. Stonington Partners, 2003 WL 21555325 at *5 ("The legal rate of interest, which is the Federal Discount Rate plus 5%, is a benchmark from which the Court may deviate in its sound discretion.").
c. Determination of the Period of Time For Which Prejudgment Interest Should be Awarded
Tiverton argues that "[w]here the date of the breach or demand is not established, pre-judgment interest is to be assessed from the date of the commencement of the action." Pls.' Mem. at 6 (arguing that as the jury returned a general verdict and made no determination as to date of breach, interest should be granted from the date the action was commenced) (citing Mass. Gen. Laws ch. 231 § 6C and Saint-Gobain Indus. Ceramics, Inc. v. Wellons, Inc., 246 F.3d 64 (1st Cir.2001)). Shaw counters that Tiverton's calculation is "generous[]" and "erroneous[]." Def.'s Opp'n at 6. Rather than allowing interest from the date of commencement of a suit, Shaw argues that the calculation should be as of "the date payment is due (or, in some cases the subsequent date of demand)." Id. (citing Citadel Holding Corp. v. Roven, 603 A.2d 818, 826 (Del.1992) (indicating that where "the underlying obligation to make payment arises ex contractu, [the court] look[s] to the contract itself to determine when interest should begin to accrue.")).
Shaw asserts that since Shaw had to pay Tiverton the difference between $34 million and the aggregate amount it paid to settle or resolve the liens and claims relating to the projects, that the amount Tiverton was owed could not be determined "until all such liens and claims were settled or resolved. Therefore, the earliest date upon which payment was due from Shaw to Plaintiffs under the July 6 Agreement was the date of Shaw's last settlement with the subcontractors on and suppliers to Plaintiffs' Projects," namely May 10, 2002.[6]Id. at 7. Having decided that Delaware substantive law applies, this *29 Court disagrees with Tiverton's argument that prejudgment interest should be granted from the date the complaint was filed.
This Court agrees with Shaw and determines the earliest date as of which prejudgment interest would appropriately have been paid, in other words, the time from which Tiverton would have been entitled to the money, is May 10, 2002. In an esoteric sense, the statute that provides that "[i]n all actions based on contractual obligations, upon a verdict, finding or order for judgment for pecuniary damages," applies to this case. Mass. Gen. Laws, ch. 231, § 6C. Nevertheless, in reality, the verdict was not for damages and nor was there a breach by Shaw. The jury agreed with Shaw and returned a verdict accordingly.
Finally, Shaw states that the "most galling" of Tiverton's positions is its attempt to claim interest through the date of judgment when Shaw had already made a payment to them of $364,078.00 which was $314,878.78 plus $49,199.22 paid in interest. Def.'s Opp'n at 8. "[Tiverton] thus claim[s] that they are due thousands of dollars in additional interest for a period in which they had already been tendered full payment from Shaw." Id. (noting that Delaware law does not allow a party to "magnify his own loss") (citing Thompson v. State Bd. of Pension Trs., 552 A.2d 850 (Del.Super.1988)). To a certain extent, this Court agrees. While the verdict and judgment were, in a technical sense, for Tiverton, it was really Shaw that prevailed in this case at trial. But for Tiverton not cashing the check tendered by Shaw Group, the judgment in this case would have been for $0. Further, Shaw did, in fact, include $49,199.22 for interest when tendering the check based on the Delaware prejudgment interest rate from May 10, 2002. This Court, in its discretion, however, determines that Shaw calculation of the interest was flawed. Shaw used as its interest rate for the entire period the Federal Discount Rate on May 10, 2002, namely 1.25%, to arrive at the 6.25% rate. This oversimplifies the applicable Federal Discount rate, which fluctuated and increased during the applicable period, whether it be the May 10, 2002 to December 3, 2004 period determined by Shaw or, more importantly, the May 10, 2002 to January 31, 2005 time period which this Court rules is proper.
This Court determines the proper interest due, based on the applicable Federal Discount Rates as adjusted during the period from May 10, 2002 to the date of judgment, January 31, 2005,[7] based on a principal amount of $314,878.78 ($53.92 per diem), is as follows:[8]
--------------------------------------------------------------------------------------
Legal Rate
Applicable (Federal
Federal Discount Per Diem Number of Total
Time Discount Rate plus Interest Days in Interest
*30
Period Rate 5%) Owed Period Owed
--------------------------------------------------------------------------------------
May 10, 2002 to 1.25% 6.25% $53.92 180 $ 9,705.60
November 5, 2002
--------------------------------------------------------------------------------------
November 6, 2002 to 0.75% 5.75% $49.60 64 $ 3,174.40
January 8, 2003
--------------------------------------------------------------------------------------
January 9, 2003 to 2.25% 7.25% $62.54 167 $10,444.18
June 24, 2003
--------------------------------------------------------------------------------------
June 25, 2003 to 2.00% 7.00% $60.39 5 $ 301.95
June 29, 2003
--------------------------------------------------------------------------------------
June 30, 2003 to 2.25% 7.25% $62.54 407 $25,453.78
August 9, 2004
--------------------------------------------------------------------------------------
August 10, 2004 to 2.50% 7.50% $64.70 42 $ 2,717.40
September 20, 2004
--------------------------------------------------------------------------------------
September 21, 2004 to 2.75% 7.75% $66.86 50 $ 3,343.00
November 9, 2004
--------------------------------------------------------------------------------------
November 10, 2004 to 3.00% 8% $69.01 34 $ 2,346.34
December 13, 2004
--------------------------------------------------------------------------------------
December 14, 2004 to 3.25% 8.25% $71.17 49 $ 3,487.33
January 31, 2005
--------------------------------------------------------------------------------------
Total Interest Owed: $60,973.98
--------------------------------------------------------------------------------------
Total Interest Paid to Date: $49,199.22
--------------------------------------------------------------------------------------
Total Interest Outstanding: $11,774.76[9]
--------------------------------------------------------------------------------------
2. CONCLUSION
Even though the decision not to cash the check was entirely Tiverton's, in the spirit of the goal of prejudgment interest to "compensate a party for the loss of use ... of money after the date that payment is due," J.C. Higgins Co., Inc. v. Bond Bros., Inc., 58 Mass.App.Ct. 537, 539, 791 N.E.2d 367 (2003) (citation omitted), this Court holds Tiverton is entitled to prejudgment interest from the earliest date possible, May 10, 2005, to and including the date of the judgment, January 31, 2005, in the amount of $60,976.50. Giving Shaw credit for the interest payment already made by Shaw in the amount of $49,199.22 on December 2, 2004, this Court orders Shaw to pay Tiverton $11,774.76 in prejudgment interest rather than the $139,029.31 sought by Tiverton. Though Tiverton should not be penalized for defending its rights and seeking judgment, neither should Shaw be penalized for, in a manner this Court concludes to have been in good faith and as confirmed by the jury verdict, attempting to fulfill its responsibilities under the contract.
SO ORDERED.
NOTES
[1] Shaw had calculated this interest at 6.25% from May 10, 2002, as it contends Delaware law provides.
[2] Though the verdict was in favor of Tiverton, Shaw was the actual victor as the jury agreed with Shaw's calculation and interpretation of the scope of the liens and claims included in the July 6th Agreement. The jury gave Shaw credit for having paid approximately $33,700,000 on such claims to subcontractors and suppliers, returning a verdict for $314,878.78, the exact amount conceded by Shaw as the amount it owed Tiverton. Def.'s Summ. J. Mem. at 3.
[3] The Court docket initially reflected, on January 31, 2005, only the judgment in favor of Tiverton. The judgment was reentered on February 1, 2005 to read "in the amount of $314,878.78 with interest at the statutory rate."
[4] Shaw expressed disagreement at the time with this Court's instruction to the jury not to consider the check in its deliberations, despite the Court's assurance to the jury that Shaw would not be required to make duplicative payments. Def.'s Opp'n at 2; Tr. of Jury Trial, Jan. 27, 2005 [Doc. No. 154] at 49 (jury instructions). Shaw objected to such approach, "which was later mirrored in the court's general verdict form. The verdict form directed a verdict in favor of Plaintiffs in some amount irrespective of the fact that Plaintiffs had already been tendered everything that Shaw believed (and the jury found) that the Plaintiffs were owed." Def.'s Opp'n at 2 n.3.
[5] As discussed infra, Tiverton argues in the alternative that should Massachusetts law not apply, Rhode Island law, also at the rate of 12 percent a year commencing with the date the action commenced, should apply. Pls.' Mem. at 7; Fratus v. Republic W. Ins. Co., 147 F.3d 25, 30-31 & n. 6 (1st Cir.1998).
[6] Shaw argues, as reflected on its July 20, 2004 final settlement spreadsheet, an agreed-upon exhibit numbered Trial Exhibit No. 22, that May 10, 2002 was the date Shaw made its final settlement payment. Id. at 7. Shaw argues that Tiverton's "reliance on the meetings between the parties held in Massachusetts to discuss the ultimate resolution of the liens and claims is ... puzzling. Those were the meetings at which Plaintiffs refused to authorize the settlement of any of the liens and claims until Shaw acceded to Plaintiffs' erroneous interpretation of the July 6 Agreement." Id. at 6. Though this Court does not pass judgment on the delay, cf. E.M. Fleishchmann Lumber Corp. v. Resources Corp. Int'l, 114 F.Supp. 843, 845 (D.Del.1953) (noting that "fairness and justice" call for exclusion of the time during which a delay was caused by the plaintiff), it does find the May 10, 2002 date compelling. Shaw emphasizes that in the payment of money to Tiverton, Shaw paid interest on the money as of the "earliest date upon which a breach giving rise to the jury's verdict could have occurred" even though the existence of a breach was unclear. Def.'s Opp'n at 7-8. Shaw urges that "[t]o the extent that this Court deems an award on interest to Plaintiffs to be appropriate, such interest should be measured from this date May 10,2002 and not the date upon which Plaintiffs filed their now discredited complaint." Id. at 8 (footnote noting that Tiverton breached the July 6 Agreement as it "refused to settle any of the subcontractor or supplier claims" omitted).
[7] The interest to be paid from the date the check was sent to Tiverton, namely December 2, 2004, to the date of judgment, namely January 31, 2005, seems equitable to this Court as, had Tiverton cashed the check, Shaw would not rightly be entitled to such interest it has earned during this period.
[8] This Court could have used other formulas. For example, this Court could have used an average annual Federal Discount Rate, averaging the highest Federal Discount rate for the years 2002 2005 inclusive, as in Cole v. Kershaw, No. 13904, 2001 WL 379571, *3-4 (Del.Ch. Mar.30, 2001). The per diem rate of interest in such a calculation would be $63.62. This Court considers the approach it takes in this matter to be correct and appropriate.
[9] This Court concludes $11,774.76 to be an equitable award of prejudgment interest. This amount does not take into consideration, nor is it at all reduced by, any assertions of delay resulting from Tiverton refusing to authorize settlements pursued by Shaw. See Rose Hall, Ltd. v. Chase Manhattan Overseas Banking Corp., 566 F.Supp. 1558, 1581 (D.Del.1983) (noting that delay caused by a plaintiff may justify a reduction or denial of prejudgment interest). This Court does not reach that issue. Though Tiverton seeks an award far greater than this Court's determination, given the circumstances of the jury verdict and judgment, the Court's prejudgment interest determination is proper.
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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/2469162/
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776 F. Supp. 2d 886 (2011)
LASIKPLUS MURPHY, M.D., P.A., and David Murphy, M.D., individually, Plaintiffs,
v.
LCA-VISION, INC., Defendant.
No. 4:10cv00178 SWW.
United States District Court, E.D. Arkansas, Western Division.
March 4, 2011.
*890 Bradford D. Box, Todd D. Siroky, Rainey, Kizer, Butler, Reviere & Bell, Jackson, TN, David D. Wilson, Friday, Eldredge & Clark, LLP, Little Rock, AR, for Plaintiffs.
Adam C. McNeely, Marcia Voorhis Andrew, Taft Stettinius & Hollister LLP, Cincinnati, OH, Amanda K. Wofford, Amy Lee Stewart, Rose Law Firm, Little Rock, AR, for Defendant.
MEMORANDUM AND ORDER
SUSAN WEBBER WRIGHT, District Judge.
Plaintiffs LasikPlus Murphy, M.D., P.A. (LasikPlus Murphy), and David Murphy, M.D. (Dr. Murphy), individually, bring this action against defendant LCA-Vision, Inc. (LCA) for alleged breach of contract, alleged breach of fiduciary duty, and other alleged tortious and criminal conduct. Before the Court is LCA's initial partial motion to dismiss plaintiffs' complaint [doc. # 7], which this Court deems as concerning and applying to plaintiffs' first amended complaint filed on December 28, 2010 [doc.# 28], and LCA's subsequent motion to dismiss Count Ten of plaintiffs' first amended complaint [doc.# 29].[1] Plaintiffs *891 have responded in opposition to LCA's motions and LCA has filed replies to plaintiffs' responses. Having considered the matter, the Court grants in part and denies in part LCA's initial partial motion to dismiss [doc.# 7] and grants LCA's subsequent motion to dismiss Count Ten of plaintiffs' first amended complaint [doc. # 29].
I.
LCA is a Delaware corporation that provides laser vision correction services under the LasikPlus brand. Dr. Murphy is a licensed Arkansas ophthalmologist who owns and operates a private ophthalmology practice in Russellville, Arkansas.
According to the first amended complaint, LCA approached Dr. Murphy in 2007 regarding becoming affiliated as an eye surgeon to staff a new LasikPlus fixed-site laser vision correction center in Little Rock, Arkansas. At the time, Dr. Murphy had been affiliated with TLC Vision Corporation (TLC), a national competitor with LCA. Dr. Murphy agreed to affiliate with LCA and LCA arranged for Dr. Murphy to form LasikPlus Murphy, an Arkansas professional association of which Dr. Murphy was the sole shareholder. Plaintiffs state this was done in order for LCA to open a laser vision correction center in Little Rock without violating the Arkansas Corporate Practice of Medicine Laws.
On May 8, 2007, LasikPlus Murphy entered into a Master Practice Management Agreement (PMA) with LCA under which LCA provided LasikPlus Murphy with a turnkey Lasik surgery practice at LCA's Little Rock, Arkansas Center (the "Little Rock Center"). Under the PMA, LCA agreed to provide to LasikPlus Murphy, inter alia, equipment and space rental, management services, third-party payor contracting, billing, and staffing.
Also on May 8, 2007, LasikPlus Murphy entered into a Professional Services Agreement (PSA) with Dr. Murphy for Dr. Murphy to provide lasik and PRK (photorefractive keratectomy) vision correction services at the Little Rock Center. Dr. Murphy and LasikPlus Murphy began to provide such services at the Little Rock Center a few days after the parties entered into the PMA and PSA.[2]
On December 12, 2008, Dr. Murphy was informed of LCA's plans to close the Little Rock Center in a conference call with Dr. Jason Schmidt, LCA Regional Vice-President, and Kris Taylor, also an LCA corporate representative. Plaintiffs state that Schmidt and Taylor advised Dr. Murphy orally that the Little Rock Center would be closing as of December 31, 2008. LCA states that it provided Dr. Murphy with *892 both written and verbal notice that it was terminating the PMA effective February 17, 2009 and that it did not intend to staff the Little Rock Center after December 31, 2008 but that Dr. Murphy could consider performing treatments independently after that date.
Plaintiffs state that as of December 12, 2008, they had 52 patients scheduled in December and an additional 30 patients scheduled for surgery in January 2009 and that despite the scheduled closing, LCA encouraged Dr. Murphy to continue to perform eye surgery on patients scheduled between December 12, 2008 and December 31, 2008. In this respect, plaintiffs state that LCA advised them to operate on their scheduled patients the next day and not to inform patients of the Little Rock Center's closing until LCA had made the announcement public. Dr. Murphy, however, states he stopped operating as soon as he became aware of LCA's decision to close the Little Rock Center.
Plaintiffs state that they believe the decision to close the Little Rock Center was made by LCA well before December 12, 2008, and that unbeknownst to Dr. Murphy, LCA offered deeply discounted services to patients scheduled after LCA's established closing date for the Little Rock Center if patients would reschedule their procedures before the Little Rock Center closed. Plaintiffs state that LCA did not notify these patients of the closing of the Little Rock Center when making these discounted offers.
Plaintiffs state that at the conclusion of the conference call on December 12, 2008, Dr. Murphy received via email a letter from LCA purporting to give Dr. Murphy and LasikPlus Murphy 60 days' written notice of the closing of the Little Rock Center effective December 31, 2008. Plaintiffs state that Dr. Murphy was also given paperwork prepared by LCA, which he states he refused to sign, to dissolve LasikPlus Murphy and which would have effectively terminated LasikPlus Murphy and eliminated the 60-day written notice requirement for early termination under the PMA.
Plaintiffs state that following notification of LCA's intent to close the Little Rock Center, Dr. Murphy expressed his concern to LCA regarding continuity of patient care, noting that because of the nature of laser vision corrective surgery, significant post-surgical follow-up care is required for patients. In this respect, plaintiffs state they advised LCA on December 15, 2008 that they had significant concerns regarding continuity of care provided to patients, handling of post-surgical complications, fulfillment of the lifetime acuity warranty, access to medical records, and risk management issues regarding the abrupt closure of the Little Rock Center and patient abandonment claims.
Plaintiffs state that as manager of LasikPlus Murphy and Dr. Murphy's practice at the Little Rock Center, LCA represented that it would send out a patient notification letter to Dr. Murphy's patients notifying his patients of the closure of the Little Rock Center. Dr. Murphy and LasikPlus Murphy advised LCA that they wanted to review and sign off on the letter before it was sent to their patients, and that they would not approve the letter until LCA had come up with an acceptable follow-up care plan. Plaintiffs state that on December 15, 2008, Schmidt advised them that they would have the opportunity to review and approve the patient notification letter before it was sent to their patients.
On December 31, 2008, LCA sent Dr. Murphy a draft of a proposed patient notification letter. Dr. Murphy states he advised LCA that the content was unacceptable for a number of reasons, including that the proposed language of the letter purported *893 to transfer follow-up patient care to a physician affiliated with TLC even though LCA represented to him and LasikPlus Murphy that LCA had not yet reached a formal agreement with another TLC-affiliated physician in Little Rock to provide follow-up care to Dr. Murphy's patients in Little Rock. Plaintiffs state that Schmidt nevertheless authorized the letter. The patient notification letter, dated January 1, 2009, provides as follows:
Thank you for the opportunity to participate in your laser vision corrective surgery, and hopefully a terrific transformation of your life. We are glad we were able to earn your trust, and have you join the ranks of the many that enjoy the care provided by our local Little Rock staff.
It is with regret and sadness that we announce the closing of our local Little Rock office, but want to extend our commitment to your continued care. We remain available to see you at any of the remaining 75 locations nationwide for any care needed. Additionally we have made arrangements for your remaining post-operative care to be provided by a local doctor at the TLC Center, located at 10809 Executive Center Dr, Suite 201, Little Rock, AR 72211.
Your care is extremely important, and we invite you to contact our call center to facilitate any needed care at 800-334-2224 or contact TLC at 888-TLC-2020. On call or after hours services can be reached by calling our emergency number at 1-800-204-3870.
Please be advised, benefits under our lifetime assurance policy will be provided locally at the TLC Center until May 1, 2009, or any time at one of our remaining 75 facilities. If you feel you need an enhancement please contact our call center at the toll free number listed above, or visit www.lasikplus.com for a list of locations.
The January patient notification letter contains the signature of Dr. Murphy, Ronny Bowman, O.D., and Susan Brummett, Director. Dr. Murphy, however, claims his signature was a forged digital signature.
Plaintiffs state that on January 15, 2009, Dr. Murphy independently discovered that LCA had already sent out the patient notification letter on January 1, 2009 and forged his digital signature to the letter without his knowledge or consent. Plaintiffs state that as with the December 31, 2008 draft of the patient notification letter, the letter that was actually sent out to Dr. Murphy's and LasikPlus Murphy's patients and which purported to be from Dr. Murphy did not, inter alia, state that LasikPlus Murphy and/or Dr. Murphy would be available to see their patients for follow-up care or even identify the name of the physician that would provide Dr. Murphy's and LasikPlus Murphy's patients follow-up care. Moreover, state plaintiffs, at the time the January patient notification letter was sent out, LCA represented to Dr. Murphy and LasikPlus Murphy that it had not yet entered into a formal agreement with TLC for TLC-affiliated physicians to provide follow-up care to Dr. Murphy's and LasikPlus Murphy's patients in Little Rock.
Plaintiffs state that after learning of the unauthorized letter to their patients, they diligently contacted LCA and attempted to work with LCA to send out a supplemental patient notification letter containing important information to notify their patients that Dr. Murphy and LasikPlus Murphy had nothing to do with the closure of the Little Rock Center, that Dr. Murphy would be available for follow-up care in Russellville, Arkansas, that the physician to whom follow-up patient care would be *894 transferred would be identified by name, and patients would be ensured that Dr. Murphy and LasikPlus Murphy would work with TLC-affiliated physicians to provide a smooth transition of care.
Plaintiffs state that despite their diligent efforts to send a supplemental patient notification letter, LCA engaged in stalling tactics to prevent such a supplemental letter from being sent out while TLC refused to provide follow-up care to many post-surgical patients of Dr. Murphy and LasikPlus Murphy and refused to provide enhancements to other patients.
Plaintiffs state that they received numerous complaints from patients regarding the abrupt closing of the Little Rock Center and the lack of continuity of care with TLC following surgical procedures performed by Dr. Murphy and LasikPlus Murphy. As a result of LCA's unauthorized actions, state plaintiffs, one former patient of Dr. Murphy and LasikPlus Murphy filed an administrative complaint with the Arkansas State Medical Board against Dr. Murphy complaining, inter alia, that Dr. Murphy abandoned her as a patient and concealed the scheduled closing of the Little Rock Center from her to induce her to undergo surgery. Plaintiffs state the administrative complaint also alleged that Dr. Murphy lost the patient's medical records and/or refused to provide medical records to the patient, although LCA was the custodian of the records and was responsible for the lack of access to the medical records.
Plaintiffs state that pursuant to a Transitional Services Agreement (TSA), LCA referred all of their patients scheduled for surgery in January and February 2009, and thereafter, to TLC. Plaintiffs state that despite LCA's improper termination of the PMA with LasikPlus Murphy effective December 31, 2008, LCA continued to advertise in the Little Rock market in January and February 2009, and that upon information and belief, these advertisements used the likeness and/or name of Dr. Murphy.[3]
Plaintiffs state that as custodian of their patient medical records, LCA also delayed and/or denied them access to patient medical records needed for board recertification processes and for follow-up patient care provided by both Dr. Murphy and TLC.[4] Plaintiffs state that despite the fact that LCA left the Little Rock market on 19 days' notice, LCA effectively refused to waive a noncompete agreement contained in the PMA by conditioning the waiver of the noncompete on Dr. Murphy's agreement to dissolve LasikPlus Murphy as a corporate entity. Plaintiffs state that such a dissolution would have acted as a waiver and release of many of the claims asserted in the first amended complaint against LCA for its egregious and criminal conduct, and that this noncompete agreement purportedly prohibited LasikPlus Murphy from performing laser vision correction services in the Little Rock market, and purported to prevent Dr. Murphy and LasikPlus Murphy from providing follow-up care to their patients in the Little Rock area.
Plaintiffs state that after nearly three months of negotiations, LCA finally agreed to send out a supplemental patient notification letter on March 27, 2009. The letter *895 was signed by Dr. Murphy and provides as follows:
I am writing to follow-up with you regarding the closing of the LasikPlus vision center in Little Rock. As your surgeon, I am committed to ensuring that you receive all appropriate follow-up care. I want to assure you that I stopped operating as soon as I became aware of LasikPlus's decision to close the center and I would like to apologize for any inconvenience the center's closing may have caused.
Although my affiliation with LasikPlus ended with the closing of the vision center, I have not left the area and would be happy to continue any post-op care that you require in my Russellville Clinic located at 1700 W. B Street, Russellville, AR. Unfortunately, the Russellville Clinic is not currently equipped to provide laser vision correction enhancements. Please understand that services provided at my Russellville Eye Clinic office which are outside of the initial post-op care period or unrelated to your Lasik procedure will be subject to usual and customary fees.
As indicated in previous correspondence, LasikPlus has made arrangements with TLC to provide post-operative care and any needed Lasik enhancements. TLC's physician is Dr. Richard Brown. Due to TLC's existing arrangements with Little Rock physicians, I am unable to provide Lasik enhancements and follow-up care in TLC's Little Rock facility. However, I will work with Dr. Brown to ensure a smooth transition of your care from LasikPlus to TLC.
LCA Vision is currently serving as custodian of your medical records. If you wish to transfer of [sic] your complete medical record to my Russellville Clinic, please sign and date the enclosed Authorization Form and return to LCA in the enclosed, self-addressed envelope. If you have any questions or concerns regarding your procedure and/or follow-up care, please feel free to contact me (479) 968-7302.
Plaintiffs state that despite their lack of prior knowledge of the closure of the Little Rock Center and the fact that they were not involved in its closure, LCA refused to allow them to disclose these facts in the supplemental correspondence to their patients.
Plaintiffs subsequently filed this action asserting the following Counts in their first amended complaint against LCA: Count OneBreach of Contract; Count TwoBreach of Contract for Violation of State Law; Count ThreeBreach of Contract for Violation of Federal Law (Mail Fraud); Count FourCivil Recovery for Criminal Conduct; Count FiveTortious Interference with Business Expectancies and Contractual Relationships; Count SixIndemnity; Count SevenFraud; Count EightInvasion of Privacy; Count NineLibel/Libel Per Se; Count Ten Breach of Fiduciary Duty; Count ElevenPunitive Damages; and Count TwelveAttorney's Fees.
II.
LCA moves to dismiss plaintiffs' tort, statutory, and breach of fiduciary duty claims pursuant to Fed.R.Civ.P. 12(b)(6), arguing that plaintiffs have taken a simple dispute over the termination of a contract and attempted to add a litany of claims in an effort to inflate their potential recovery. LCA argues that a fundamental deficiency with plaintiffs' first amended complaint is that all of the tort and statutory claims are based upon the erroneous premise that the January patient notification letter improperly terminated physician-patient relationships, implied that Dr. Murphy was abandoning his patients, and *896 somehow impugned Dr. Murphy's reputation. LCA argues that the letter does not state or even suggest that plaintiffs were abandoning their patients or that LCA was terminating the physician-patient relationship between plaintiffs and the Little Rock Center's patients and that as plaintiffs have failed to plead a plausible basis for any of their tort, statutory, or breach of fiduciary duty claims, the following claims in plaintiffs' first amended complaint should be dismissed: Count Two Breach of Contract for Violation of State Law; Count ThreeBreach of Contract for Violation of Federal Law (Mail Fraud); Count FourCivil Recovery for Criminal Conduct; Count FiveTortious Interference with Business Expectancies and Contractual Relationships; Count SixFraud; Count EightInvasion of Privacy; Count NineLibel/Libel Per Se; Count Ten Breach of Fiduciary Duty; and Count ElevenPunitive Damages.[5]
A.
In reviewing a motion to dismiss, the Court must accept as true all factual allegations in the complaint, but is "not bound to accept as true a legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1950, 173 L. Ed. 2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 1949. "Nor does a complaint suffice if it tenders `naked assertion[s]' devoid of `further factual enhancement.'" Id. (quoting Twombly, 550 U.S. at 557, 127 S. Ct. 1955). To survive a motion to dismiss, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570, 127 S. Ct. 1955. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, ___ U.S. ___, 129 S.Ct. at 1949. "The plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 556, 127 S. Ct. 1955). A well-pleaded complaint may proceed even if it appears that actual proof of those facts is improbable and that recovery is very remote and unlikely. Twombly, 550 U.S. at 556, 127 S. Ct. 1955. A complaint cannot, however, simply leave open the possibility that a plaintiff might later establish some set of undisclosed facts to support recovery. Id. at 561, 127 S. Ct. 1955. Rather, the facts set forth in the complaint must be sufficient to nudge the claims across the line from conceivable to plausible. Id. at 570, 127 S. Ct. 1955. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has allegedbut it has not `show[n]'`that the pleader is entitled to relief.'" Iqbal, ___ U.S. ___, 129 S.Ct. at 1950 (quoting Fed.R. Civ.P. 8(a)(2)).
B.
1.
The Court will address LCA's arguments in support of its initial partial motion *897 to dismiss in the order presented, beginning first with Count FiveTortious Interference with Business Expectancies and Contractual Relationships. LCA argues this claim should be dismissed because plaintiffs fail to allege either a valid business expectancy or damages from LCA's interference.
The elements of the tort of interference are: (1) the existence of a valid contractual relationship or a business expectancy; (2) knowledge of the relationship or expectancy on the part of the interfering party; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant damage to the party whose relationship or expectancy has been disrupted. Baptist Health v. Murphy, 2010 Ark. 358, ___ S.W.3d ___, ___, 2010 WL 3835844 (2010). The conduct of the defendant must be at least "improper." K.C. Props. of N.W. Ark., Inc. v. Lowell Inv. Partners, LLC, 373 Ark. 14, 26, 280 S.W.3d 1, 11 (2008). In determining whether an actor's conduct in intentionally interfering with a contract or a prospective contractual relation of another is improper or not, consideration is given to the following factors: (a) the nature of the actor's conduct; (b) the actor's motive; (c) the interests of the other with which the actor's conduct interferes; (d) the interests sought to be advanced by the actor; (e) the social interests in protecting the freedom of action of the actor and the contractual interests of the other; and (f) the proximity or remoteness of the actor's conduct to the interference and the relations between the parties. Id. 373 Ark. at 26-27, 280 S.W.3d at 11-12. Intentional torts involve consequences which the actor believes are substantially certain to follow his actions. Baptist Health v. Murphy, 365 Ark. 115, 123-24, 226 S.W.3d 800, 808 (2006). The defendant must have either desired to bring about the harm to the plaintiff or have known that this result was substantially certain to be produced by his conduct. Id. The existence of a contractual relationship is not required to state a cause of action for tortious interference. Mid-South Beverages, Inc. v. Forrest City Grocery Co., Inc., 300 Ark. 204, 205, 778 S.W.2d 218, 219 (1989). Any prospective business relationship that would be of pecuniary value constitutes a valid business expectancy. Stewart Title Guar. Co. v. American Abstract & Title Co., 363 Ark. 530, 543, 215 S.W.3d 596, 603 (2005) (citing Restatement (Second) of Torts § 766B, cmt. C (1979)).
Plaintiffs' tortious interference claim is premised on their allegation that LCA sent the January patient notification letter without Dr. Murphy's consent and forged his signature on it as if he had authorized it, that Dr. Murphy did not agree with the content of the letter, and that the "forged" January patient notification letter represented to Dr. Murphy's and LasikPlus Murphy's patients that Dr. Murphy had abandoned them as their physician and transferred their care to an unnamed physician affiliated with TLC. Arkansas recognizes application of the tort of interference in situations involving contract or business expectancies between a physician and patient, see Baptist Health, 2010 Ark. 358, ___ S.W.3d ___, ___, 2010 WL 3835844, and the Court finds that the January patient notification letter could reasonably be construed as representing that Dr. Murphy was abandoning his patients. Indeed, plaintiffs state that Dr. Murphy and LasikPlus Murphy received numerous complaints from patients regarding the abrupt closing of the Little Rock Center and the lack of continuity of care with TLC following surgical procedures performed by Dr. Murphy and LasikPlus Murphy, and that as a result of *898 LCA's unauthorized actions, one former patient of Dr. Murphy and LasikPlus Murphy filed an administrative complaint with the Arkansas State Medical Board against Dr. Murphy complaining, inter alia, that Dr. Murphy abandoned her as a patient and concealed the scheduled closing of the Little Rock Center from her to induce her to undergo surgery. Given the nature of the January patient notification letter and the alleged forging of Dr. Murphy's signature to that letter, the Court finds that plaintiffs have alleged a facially plausible tortious interference claim and damages resulting therefrom. Accordingly, the Court denies LCA's motion to dismiss Count Five of plaintiffs' first amended complaint.
2.
LCA next moves to dismiss Count NineLibel/Libel Per Se. LCA argues this claim should be dismissed because plaintiffs have not identified the specific defamatory statements, the January patient notification letter is not defamatory, and plaintiffs have failed to allege damages from the defamatory statements.
A viable action for defamation, whether it be by the spoken word (slander) or the written word (libel), turns on whether the communication or publication tends or is reasonably calculated to cause harm to another's reputation. Faulkner v. Arkansas Children's Hosp., 347 Ark. 941, 955, 69 S.W.3d 393, 402 (2002). The following elements must be proved to support a claim of defamation: (1) the defamatory nature of the statement of fact; (2) that statement's identification of or reference to the plaintiff; (3) publication of the statement by the defendant; (4) the defendant's fault in the publication; (5) the statement's falsity; and (6) damages. Id. 347 Ark. at 955-56, 69 S.W.3d at 402. See also Boellner v. Clinical Study Centers, LLC, 2011 Ark. 83, ___ S.W.3d ___, ___, 2011 WL 661686 (2011).
Again, the Court finds that the January patient notification letter could reasonably be construed as representing that Dr. Murphy was abandoning his patients, thereby tending or reasonably calculated to cause harm to plaintiffs' reputationa necessary requirement for a viable action for defamation. Faulkner, 347 Ark. at 955, 69 S.W.3d at 402. Plaintiffs have thus stated a facially plausible claim of defamation by the written word and damages resulting therefrom. Accordingly, the Court denies LCA's motion to dismiss Count Nine of plaintiffs' first amended complaint.
3.
LCA next moves to dismiss Count SevenFraud. LCA argues this claim should be dismissed because plaintiffs have failed to plead fraud with particularity.
In Arkansas, fraud consists of five elements: (1) a false representation of a material fact; (2) knowledge that the representation is false or that there is insufficient evidence upon which to make the representation; (3) intent to induce action or inaction in reliance upon the representation; (4) justifiable reliance on the representation; and (5) damage suffered as a result of the reliance. Moss v. American Alternative Ins. Corp., 420 F. Supp. 2d 962, 965 (E.D.Ark.2006). Federal procedural law requires that allegations of fraud be pleaded with particularity. Fed.R.Civ.P. 9(b). This means the who, what, when, where and how. Great Plains Trust Co. v. Union Pacific. R. Co., 492 F.3d 986, 995 (8th Cir.2007).
As previously noted, plaintiffs allege that LCA represented to Dr. Murphy that it would not send out the January patient notification letter until he approved *899 it, that LCA sent the letter without his consent and forged his signature on it as if he had authorized it, that Dr. Murphy did not agree with the content of the letter, and that the "forged" January patient notification letter "fraudulently represented to Dr. Murphy's and LasikPlus Murphy's patients that Dr. Murphy had abandoned them as their physician and transferred their care to an unnamed physician affiliated with TLC." The Court finds, as it did with plaintiffs' tortious interference and defamation claims, that the January patient notification letter can reasonably be construed as representing that Dr. Murphy had abandoned his patients and that plaintiffs suffered damages therefrom. As plaintiffs have pleaded their allegations of fraud with particularity as required by Fed.R.Civ.P. 9(b), the Court finds that plaintiffs have pled a facially plausible fraud claim. Accordingly, the Court denies LCA's motion to dismiss Count Seven of plaintiffs' first amended complaint.[6]
4.
LCA next moves to dismiss Count EightInvasion of Privacy. LCA argues this claim should be dismissed because plaintiffs have failed to allege invasion of privacy by either false light or appropriation.
The right to recover for a false-light invasion-of-privacy claim is conditioned upon the complaining party's demonstrating that the false light in which he was placed by the publicity would be highly offensive to a reasonable person, and that the defendant had knowledge of or acted in reckless disregard as to the falsity of the publicized matter and the false light in which the plaintiff would be placed. Dodrill v. Arkansas Democrat Co., 265 Ark. 628, 638, 590 S.W.2d 840, 845 (1979). An actionable claim for an appropriation invasion-of-privacy claim, in turn, consists of use of the plaintiff's name or likeness for defendant's benefit. Milam v. Bank of Cabot, 327 Ark. 256, 263, 937 S.W.2d 653, 657 (1997). The defendant must have capitalized on the use of the plaintiff's likeness or name by selling more of a product or service. Stanley v. General Media Communications, Inc., 149 F. Supp. 2d 701, 706 (W.D.Ark.2001). "The tort of invasion of privacy-appropriation requires commercial use of a person's name or likeness." Id.
Plaintiffs premise their false light and appropriation claims on the January patient notification letter and LCA's continued running of advertisements in the Little Rock market in January and February 2009 that may have used the likeness and/or name of Dr. Murphy. The January patient notification letter with Dr. Murphy's alleged forged signature can reasonably be construed as representing abandonment by plaintiffs of their patients thereby casting plaintiffs in a false light. Additionally, given LCA's admission that advertisements placed with the media prior to December 12, 2008 may have continued to run in the Little Rock market in January and February 2009, any use at that time of Dr. Murphy's name and/or *900 likeness in advertisements and the reference in the January patient notification letter that "we remain available to see you" (the "we" including Dr. Murphy) when LCA knew that Dr. Murphy would no longer be affiliated with LCA might properly be considered a "bait and switch" whereby LCA capitalized on Dr. Murphy's likeness and/or name to sell more of a product or service, a requirement for an appropriation claim. See Stanley, 149 F.Supp.2d at 706. The Court finds that plaintiffs have pled facially plausible false light and appropriation claims and accordingly denies LCA's motion to dismiss Count Eight of plaintiffs' first amended complaint.
5.
LCA next moves to dismiss Count FourCivil Recovery for Criminal Conduct. LCA argues this claim should be dismissed because plaintiffs failed to allege either a felony under Arkansas law or damages from the alleged forgery of Dr. Murphy's name to the January patient notification letter.
Arkansas's crime victims civil liability statute, Ark.Code Ann. § 16-118-107, provides a civil cause of action to "[a]ny person injured or damaged by reason of conduct of another person that would constitute a felony under Arkansas law." The Court first notes that two of the criminal statutes upon which plaintiffs rely in support of their claim18 U.S.C. §§ 1341, 1342are federal mail fraud statutes and thus are not applicable to Ark. Code Ann. § 16-118-107 under the plain language of the statute; conduct that constitutes mail fraud under federal law does not "constitute a felony under Arkansas law" as is required for a civil action under Ark.Code Ann. § 16-118-107. Accordingly, the Court grants LCA's motion to dismiss Count Four of plaintiffs' first amended complaint insofar as it concerns federal mail fraud statutes.
Plaintiffs, however, also rely on Arkansas's forgery statute, Ark.Code Ann. § 5-37-201, which is encompassed within the rubric of Ark.Code Ann. § 16-118-107. Arkansas's forgery statute provides as follows:
(a) A person forges a written instrument if, with purpose to defraud, the person makes, completes, alters, counterfeits, possesses, or utters any written instrument that purports to be or is calculated to become or to represent if completed the act of a person who did not authorize that act.
(b) A person commits forgery in the first degree if he or she forges a written instrument that is:
(1) Money, a security, a postage or revenue stamp, or other instrument issued by a government; or
(2) A stock, bond, or similar instrument representing an interest in property or a claim against a corporation or its property.
(c) A person commits forgery in the second degree if he or she forges a written instrument that is:
(1) A deed, will, codicil, contract, assignment, check, commercial instrument, credit card, or other written instrument that does or may evidence, create, transfer, terminate, or otherwise affect a legal right, interest, obligation, or status;
(2) A public record, or an instrument filed or required by law to be filed, or an instrument legally entitled to be filed in a public office or with a public servant; or
(3) A written instrument officially issued or created by a public office, public servant, or government agent.
*901 (d) Forgery in the first degree is a Class B felony.
(e) Forgery in the second degree is a Class C felony.
Ark.Code Ann. § 5-37-201.
Plaintiffs claim that by terminating the physician-patient relationship between Dr. Murphy and his patients and transferring future care to TLC, the January patient notification letter constitutes a "written instrument that does or may evidence, create, transfer, terminate, or otherwise affect a legal right, interest, obligation, or status" under Ark.Code Ann. § 5-37-201(c)(1) and that LCA committed a felony under § 5-37-201 by forging Dr. Murphy's signature to the letter, thereby giving rise to a civil action under Ark.Code Ann. § 16-118-107. As the January patient notification letter could reasonably be construed as representing that plaintiffs were abandoning their patients or that LCA was terminating the physician-patient relationship between plaintiffs and the Little Rock Center's patients, the January patient notification letter arguably constitutes a "written instrument that does or may evidence, create, transfer, terminate, or otherwise affect a legal right, interest, obligation, or status." Accordingly, plaintiffs have pled a facially plausible claim under Ark.Code Ann. § 16-118-107 and the Court denies LCA's motion to dismiss Count Four of plaintiffs' first amended complaint insofar as it concerns Arkansas's forgery statute, Ark.Code Ann. § 5-37-201.
6.
LCA next moves to dismiss Count TwoBreach of Contract for Violation of State Law and Count ThreeBreach of Contract for Violation of Federal Law (Mail Fraud). LCA argues these claims should be dismissed because no private right of action exists for most of the laws cited and plaintiffs have failed to allege damages from LCA's violation of those laws.
Paragraph 6 of the PMA requires compliance with applicable laws, rules, and regulations:
6. Compliance with Laws and Regulations. PA [LasikPlus Murphy] and Manager [LCA] in the performance of their respective obligations hereunder shall comply with all applicable laws, rules and regulations, and do everything in their power to ensure that the conduct of the Practice at each Office (including the operation of the Laser System) is in compliance with the rules of any accrediting or regulatory body, agency or authority having jurisdiction over the Practice.
In Counts Two and Three of the first amended complaint, plaintiffs allege LCA breached paragraph 6 of the PMA by
(1) violating the Arkansas Medical Corporation Act, Ark.Code. Ann. § 4-29-305, by engaging in the practice of medicine in the State of Arkansas as a corporate entity comprised of shareholders who are not licensed to practice medicine within the State of Arkansas;
(2) violating Arkansas state law regarding the unauthorized practice of medicine, Ark.Code Ann. § 17-95-201, a total of 84,366 times by making unauthorized referrals and/or transfers of plaintiffs' patients to another treating physician and permitting such unauthorized referrals to go uncorrected for a period of 86 days;
(3) violating Arkansas state law regarding the unauthorized practice of medicine, Ark.Code Ann. §§ 17-95201, an unknown number of additional times by making unauthorized referrals and/or transfers of plaintiffs' scheduled patients *902 in January and February 2009 to another treating physician at TLC;
(4) violating Arkansas state law regarding the unauthorized practice of medicine, Ark.Code Ann. §§ 17-19201, 17-80-110, 17-80-111, 17-80-113, a total of 84,366 times by misrepresenting itself as a licensed physician and forging the name of a licensed physician to patients in the January patient notification letter regarding patient care, and permitting such misrepresentations to go uncorrected for a period of 86 days;
(5) violating the Arkansas Deceptive Trade Practices Act (ADTPA), Ark.Code Ann. §§ 4-88-101 et. seq., by fraudulently misrepresenting to Dr. Murphy's and LasikPlus Murphy's patients that its shareholders were authorized to practice medicine in the State of Arkansas;
(6) violating the ADTPA by fraudulently misrepresenting in the January patient notification letter to Dr. Murphy's and LasikPlus Murphy's patients that Dr. Murphy and LasikPlus Murphy had authorized, recommended, and/or referred their patients to an unnamed physician affiliated with TLC for follow-up care and treatment;
(7) violating the ADTPA by continuing to advertise laser corrective vision surgery at the Little Rock Center with a lifetime visual acuity warranty and free lifetime enhancements, in some cases for discounted prices if surgery was performed on or before December 31, 2008, with knowledge that it would be closing the Little Rock Center on December 31, 2008, and the closest LCA affiliated entity that could honor the lifetime visual acuity warranty would be located over four hours away in Oklahoma City, OK;
(8) violating the ADTPA by circulating fraudulent advertising to residents of Little Rock that Dr. Murphy was affiliated with LCA after December 31, 2008, following LCA's breach and early termination of the PMA;
(9) violating the ADTPA by fraudulently misrepresenting in advertising to residents of Little Rock that its shareholders were authorized to practice medicine in the State of Arkansas after December 31, 2008;
(10) violating the Arkansas Medical Corporation Act, Ark.Code Ann. § 4-29-305, by holding itself out to the public in advertisements that it was licensed to practice medicine in the State of Arkansas as a corporate entity comprised of shareholders who were not licensed to practice medicine within the State of Arkansas after December 31, 2008;
(11) violating Arkansas state law regarding the unauthorized practice of medicine, Ark.Code Ann. §§ 17-19201, 17-80-110, 17-80-111, 17-80-113, by holding itself out to the public in advertisements that it was licensed to practice medicine in the State of Arkansas as a corporate entity comprised of shareholders who were not licensed to practice medicine within the State of Arkansas after December 31, 2008;
(12) violating Arkansas state law regarding the unauthorized practice of medicine, Ark.Code Ann. § 17-95201;
(13) violating the ADTPA by fraudulently misrepresenting to 981 patients in the January patient notification letter that lifetime acuity warranties would be honored for all 981 patients at TLC in Little Rock, AR until May 1, 2009, and failing to honor acuity warranties for many patients;
(14) violating the ADTPA by fraudulently misrepresenting to 981 patients in the January patient notification letter that follow-up care would be provided at TLC when it had no formal agreement in place for TLC to provide follow-up *903 care for patients of Dr. Murphy and LasikPlus Murphy;
(15) violating the ADTPA by fraudulently misrepresenting to 981 patients in the January patient notification letter that follow-up care would be provided at TLC; at the time the correspondence was sent to Dr. Murphy's and LasikPlus Murphy's patients, LCA represented to Dr. Murphy and LasikPlus Murphy that no formal agreement was in place for TLC to provide follow-up care for patients of Dr. Murphy and LasikPlus Murphy, and certain patients of Dr. Murphy and LasikPlus Murphy were subsequently turned down for follow-up care by TLC and/or TLC-affiliated physicians;
(16) engaging in the criminal offense of false, fraudulent, and misleading advertising in violation of Ark.Code Ann. § 5-37-515;
(17) engaging in the criminal offense of forgery in violation of Ark.Code Ann. § 5-37-201;
(18) engaging in the criminal offense of criminal impersonation in violation of Ark.Code Ann. § 5-37-208;
(19) committing mail fraud in violation of 18 U.S.C. § 1341 by devising a scheme or artifice to deprive 981 patients of Dr. Murphy and LasikPlus Murphy the intangible right of honest services by virtue of the forged and fraudulent January patient notification letter that purported to refer Dr. Murphy's patients to TLC; and
(20) committing mail fraud in violation of 18 U.S.C. § 1342 by using a false, fictitious, and/or assumed name and title in the fraudulent January patient notification letter that purported to refer Dr. Murphy's patients to TLC.
First Am. Compl. ¶¶ 62-79, 85-86.
LCA argues that there is no private right of action for most of the laws being invoked but plaintiffs argue that they are not seeking to create private rights of action for violation of these laws but are only claiming that each of LCA's alleged violation of these state and federal laws constitutes a separate ground for plaintiffs' breach of contract claim with respect to paragraph 6 of the PMA.[7] The Court has considered the matter and determines that plaintiffs have stated facially plausible claims with respect to their ADTPA claims in Count Two of their first amended complaint which allege that LCA breached paragraph 6 of the PMA by
(6) violating the ADTPA by fraudulently misrepresenting in the January patient notification letter to Dr. Murphy's and LasikPlus Murphy's patients that Dr. Murphy and LasikPlus Murphy had authorized, recommended, and/or referred their patients to an unnamed physician affiliated with TLC for follow-up care and treatment;
(7) violating the ADTPA by continuing to advertise laser corrective vision surgery *904 at the Little Rock Center with a lifetime visual acuity warranty and free lifetime enhancements, in some cases for discounted prices if surgery was performed on or before December 31, 2008, with knowledge that it would be closing the Little Rock Center on December 31, 2008, and the closest LCA affiliated entity that could honor the lifetime visual acuity warranty would be located over four hours away in Oklahoma City, OK; (8) violating the ADTPA by circulating fraudulent advertising to residents of Little Rock that Dr. Murphy was affiliated with LCA after December 31, 2008, following LCA's breach and early termination of the PMA;
. . .
(13) violating the ADTPA by fraudulently misrepresenting to 981 patients in the January patient notification letter that lifetime acuity warranties would be honored for all 981 patients at TLC in Little Rock, AR until May 1, 2009, and failing to honor acuity warranties for many patients;
(14) violating the ADTPA by fraudulently misrepresenting to 981 patients in the January patient notification letter that follow-up care would be provided at TLC when it had no formal agreement in place for TLC to provide follow-up care for patients of Dr. Murphy and LasikPlus Murphy; and
(15) violating the ADTPA by fraudulently misrepresenting to 981 patients in the January patient notification letter that follow-up care would be provided at TLC; at the time the correspondence was sent to Dr. Murphy's and LasikPlus Murphy's patients, LCA represented to Dr. Murphy and LasikPlus Murphy that no formal agreement was in place for TLC to provide follow-up care for patients of Dr. Murphy and LasikPlus Murphy, and certain patients of Dr. Murphy and LasikPlus Murphy were subsequently turned down for follow-up care by TLC and/or TLC-affiliated physicians.
First Am. Compl. ¶¶ 67-69, 74-76. The Court additionally determines that plaintiffs have sufficiently alleged damages with respect to these six ADTPA claims.[8]
With respect to the remainder of plaintiffs' alleged violations of the ADTPA and other state and federal laws in Counts Two and Three of the first amended complaint, no convincing argument has been made that these laws constitute "applicable" laws under paragraph 6 of the PMA. But even if they do, the Court finds that these alleged violations may have damaged the State of Arkansas, the federal government and/or plaintiffs' patients, but they for the most part do not have a sufficient nexus to plaintiffs themselves to state facially plausible claims. For example, even if, as alleged by plaintiffs, LCA engaged in the unauthorized practice of medicine, plaintiffs have not stated a plausible connection between any such violation and any damages they suffered.
*905 In sum, the Court denies in part and grants in part LCA's motion to dismiss Counts Two and Three of plaintiffs' first amended complaint. The Court denies LCA's motion with respect to the six alleged ADTPA violations set forth above and grants LCA's motion in all other respects.
7.
LCA next moves to dismiss Count ElevenPunitive Damages on grounds that the underlying causes of action supporting punitive damages fail as a matter of law. However, because the Court today denies LCA's motion to dismiss several of plaintiffs' causes of action that would support an award of punitive damages, the Court denies at this time LCA's motion to dismiss Count Eleven of plaintiffs' first amended complaint.
8.
Finally, LCA moves to dismiss Count TenBreach of Fiduciary Duty. LCA argues this claim should be dismissed because plaintiffs have alleged nothing more than that LasikPlus Murphy was a party to a contract with LCA and that as a result, plaintiffs have failed to plead a plausible basis for the existence of a fiduciary relationship.
Breach of fiduciary duty involves betrayal of a trust and benefit by the dominant party at the expense of one under his influence. Cole v. Laws, 349 Ark. 177, 185, 76 S.W.3d 878, 883 (2002). The various aspects of the fiduciary relationship are as follows:
[A] person standing in a fiduciary relationship may be held liable for any conduct that breaches a duty imposed by the fiduciary relationship. Long v. Lampton, supra [324 Ark. 511, 922 S.W.2d 692 (1996)]. It follows that, regardless of the express terms of an agreement, a fiduciary may be held liable for conduct that does not meet the requisite standards of fair dealing, good faith, honesty, and loyalty. See Berry v. Saline Memorial Hosp., 322 Ark. 182, 907 S.W.2d 736 (1995); Texas Oil & Gas Corp. v. Hawkins Oil & Gas, Inc., 282 Ark. 268, 668 S.W.2d 16 (1984); Yahraus v. Continental Oil Co., 218 Ark. 872, 239 S.W.2d 594 (1951). The guiding principle of the fiduciary relationship is that self-dealing, absent the consent of the other party to the relationship, is strictly proscribed. See Hosey v. Burgess, 319 Ark. 183, 890 S.W.2d 262 (1995).
Id. (quoting Sexton Law Firm, P.A. v. Milligan, 329 Ark. 285, 298, 948 S.W.2d 388, 395 (1997)). Self-dealing breaches the fiduciary duty even when the action taken is innocent and unintentional. Id. 349 Ark. at 185-86, 76 S.W.3d at 883 (quoting Burgess, 319 Ark. 183, 890 S.W.2d 262). Before there can be a breach of a fiduciary duty, a fiduciary relationship or a confidential relationship must exist. West Memphis Adolescent Residential, LLC v. Compton, 2010 Ark.App. 450, ___ S.W.3d ___, ___, 2010 WL 2132003 (2010). The determination as to the existence of a fiduciary duty is a matter of law for the Court. Sexton Law Firm, 329 Ark. at 297, 948 S.W.2d at 394-95.
Plaintiffs essentially base their claim of a fiduciary relationship on the creation of a principal-agent relationship as a result of LasikPlus Murphy's and LCA's entry into the PMA. Certainly, "`a fiduciary relationship exists between principal and agent in respect to matters within the scope of the agency.'" Carpenter v. Layne, 2010 Ark.App. 364, ___ S.W.3d ___, 2010 WL 1704832 (2010) (quoting Dent v. Wright, 322 Ark. 256, 261, 909 S.W.2d 302, 304 (1995)).[9] Contracting parties, *906 however, do not necessarily owe fiduciary duties to each other. Compton, 2010 Ark.App. 450, ___ S.W.3d ___, 2010 WL 2132003 (citing Evans Industrial Coatings, Inc. v. Chancery Court of Union County, 315 Ark. 728, 870 S.W.2d 701 (1994)). See also Geovera Specialty Ins. Co. v. Graham Rogers, Inc., No. 4:08cv00163 SWW, 2008 WL 2704651, at *3 (E.D.Ark. July 07, 2008) (this Court noting that it is critical to plaintiff's claim that the existence of a fiduciary duty be established and "[t]he Court finds no authority for imposing a `fiduciary duty of good faith and fair dealing' based purely on a contractual relationship"); Evans Industrial Coatings, 315 Ark. at 734, 870 S.W.2d at 703-04 (complaint "simply alleged that [contractor and consultant] were parties to an agreement who had promised to perform certain acts," and "[n]o particular relationship of trust or confidence developed because of the agreement"). Contrary to the first amended complaint's allegations of a fiduciary relationship, the PMA provides that LasikPlus Murphy and LCA are independent contractors, see PMA ¶ 12 ("Each party is an independent contractor of the other"), and that it "is not intended, and shall not be construed, to create a relationship of employment, joint venture, partnership or association as between [LCA] and [LasikPlus Murphy] or any of [LasikPlus Murphy's] Physicians." Id. The only facts alleged in the first amended complaint in support of a fiduciary relationship are LCA's contractual obligations under the PMA. See First Am. Compl. ¶¶ 133-140. These contractual obligations, however, are insufficient to give rise to a fiduciary relationship between LCA and LasikPlus Murphy.
It is true that the PMA also provides that "[s]olely for the purpose of carrying out the billing and collection services hereunder, [LasikPlus Murphy] hereby appoints [LCA] as its agent and its true and lawful attorney-in-fact" for purposes of exercising the exclusive right to bill and collect for services provided by LasikPlus Murphy. See PMA ¶ 2(p); First Am. Compl. at ¶ 134. Plaintiffs, however, do not allege a breach of a fiduciary duty relating to LCA's billing and collection of LasikPlus's accounts receivable. The alleged misconduct that is the focus of the action is not within the scope of the fiduciary relationship set forth in the PMA. Rather, the first amended complaint only offers facts indicating violation of the contractual relationship that is not within any fiduciary obligations that LCA otherwise owed the plaintiffs. Accordingly, the Court grants LCA's motion to dismiss Count Ten of plaintiffs' first amended complaint.
III.
For the foregoing reasons, the Court grants in part and denies in part LCA's initial partial motion to dismiss [doc.# 7] and grants LCA's subsequent motion to dismiss Count Ten of plaintiffs' first amended complaint [doc.# 29].
IT IS SO ORDERED.
NOTES
[1] After LCA filed its initial partial motion to dismiss plaintiffs' complaint, plaintiffs moved for leave to amend their complaint to add an additional claim, which this Court granted by Order dated December 7, 2010 [doc.# 25]. Plaintiffs subsequently filed a second motion for leave to file a first amended complaint to correct certain clerical errors in the proposed first amended complaint, which this Court granted by Order dated December 28, 2010 [doc.# 27]. Because the substance of plaintiffs' first amended complaint is identical to their original complaint concerning the claims that are the subject of LCA's initial partial motion to dismiss, the Court, in both Orders granting plaintiffs' motion for leave to amend, informed the parties that it would not require that they rebrief their arguments for and against partial dismissal but would simply deem LCA's partial motion to dismiss as concerning and applying to plaintiffs' first amended complaint. Following the filing of plaintiffs' first amended complaint, LCA, on January 11, 2011, filed a motion [doc.# 29] to dismiss the one new claim in plaintiffs' first amended complaint, Count TenBreach of Fiduciary Duty.
[2] Because the PMA and PSA are attached to plaintiffs' first amended complaint, the Court may consider them in resolving LCA's motions to dismiss. Great Plains Trust Co. v. Union Pacific R. Co., 492 F.3d 986, 990 (8th Cir.2007).
[3] LCA admits that advertisements placed with the media prior to December 12, 2008 may have continued to run in the Little Rock market in January and February 2009.
[4] Both the PMA and the PSA provide that LCA shall cooperate and make available to Dr. Murphy to be copied any patient records or charts for patients which have been treated by Dr. Murphy prior to the termination of the agreements. PMA ¶ 2(S); PSA ¶ 12.
[5] Although the PMA and PSA contain Ohio choice of law provisions, the parties have chosen to analyze the issues under Arkansas law. Accordingly, the Court will do the same. The Court notes that LCA states that it is utilizing Arkansas law only for purposes of its motion to dismiss but the Court, in the interest of judicial economy, does not anticipate having to analyze the issues under Ohio law with respect to any motion for summary judgment after having today addressed those same issues under Arkansas law at the parties' behest.
[6] The Court notes that plaintiffs state that the alleged fraud was discovered on January 15, 2009two weeks after the date of the January patient notification letterand that on March 27, 2009, LCA sent out a supplemental patient notification letter that was approved by plaintiffs and corrected any alleged misrepresentations in the January patient notification letter. Thus, any damages from LCA's alleged fraud arguably would only have been incurred no later than in the period between the January patient notification letter and the March supplemental patient notification letter. See Moss, 420 F.Supp.2d at 965 ("When a plaintiff discovers the misrepresentation and protects his interests rather than acting in reliance on it, the misrepresentation is not actionable.").
[7] Plaintiffs state in a footnote to their response to LCA's initial partial motion to dismiss that they "do claim a private right of action pursuant to A.C.A. § 16-118-107 under Counts Two and Three of the Complaint for civil recovery for Defendant's forgery and mail fraud." See Pl.s' Resp. to Def.'s Partial Mot. to Dismiss at 22 n. 6 [doc.# 12]. To the contrary, Counts Two and Three of plaintiffs' first amended complaint make no such claim but only assert breach of contract with respect to paragraph 6 of the PMA. Plaintiffs' claim for civil recovery under Ark.Code Ann. § 16-118-107 is only set forth in Count Four of the first amended complaint and, as previously noted, is limited to Arkansas's forgery statute (Ark.Code Ann. § 5-37-201) as the two federal mail fraud statutes upon which plaintiffs rely (18 U.S.C. §§ 1341, 1342) are not applicable to Ark.Code Ann. § 16-118-107.
[8] In Mosby v. International Paper Co., Inc., No. 5:07cv00314-WRW, 2008 WL 2669148, at *2 (E.D.Ark. July 1, 2008), the court, relying on the Preamble to the ADTPA, concluded that the ADTPA does not apply to non-consumers or providers of services. However, in Electrocraft Arkansas, Inc. v. Super Elec. Motors, Ltd., No. 4:09cv00318 SWW, 2009 WL 5181854, at *7 (E.D.Ark. Dec. 23, 2009), this Court rejected the reasoning and conclusion of Mosby, determining that even though it may seem or appear at first glance that the ADTPA does not apply to non-consumers, the plain and unambiguous text of the ADTPA is controlling and makes clear that the ADTPA is meant to protect both the consumer public and the legitimate business community and that one does not have to be a consumer to recover under the ADTPA.
[9] The two essential elements of an agency relationship are (1) that an agent have the authority to act for the principal and (2) that the agent act on the principal's behalf and be subject to the principal's control. Taylor v. Gill, 326 Ark. 1040, 1043, 934 S.W.2d 919, 921 (1996).
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376 F. Supp. 2d 10 (2005)
ONEBEACON INSURANCE COMPANY, Plaintiff,
v.
GEORGIA-PACIFIC CORPORATION, Defendant.
No. CIV.A.03-11913 JLT.
United States District Court, D. Massachusetts.
June 14, 2005.
Lynda A. Bennett, Michael Dore, Lowenstein Sandler, PC, Roseland, NJ, Michelle Chassereau Jackson, Nutter, McClennen & Fish, Boston, MA, Martin C. Pentz, Foley Hoag LLP, Boston, MA, for Georgia-Pacific Corporation, Defendant.
Eric B Hermanson, Choate, Hall & Stewart, Boston, for Travelers Indemnity Company, Movant.
John E. Matosky, Prince, Lobel Glovsky & Tye LLP, Boston, MA, Rhonda L. Rittenberg, Joseph S. Sano, Prince, Lobel Glovsky & Tye LLP, Boston, MA, for One Beacon Insurance Company, Plaintiff.
MEMORANDUM
TAURO, District Judge.
OneBeacon Insurance Company ("Plaintiff") seeks a declaration that the aggregate limit of the insurance policy issued to Georgia-Pacific Corporation ("Defendant") by Plaintiff's predecessor, Employers Surplus Lines Insurance Company ("ESLIC"), is $2.5 million for the three-month period of the policy. Defendant contends that the aggregate limit for the three-month policy is $10 million. Both parties have moved for partial summary judgment.
*11 Background
On February 8, 1967, ESLIC issued a three-year excess umbrella policy ("Policy") to Defendant, with a term from January 1, 1967 to January 1, 1970.[1] The Policy indicates that "the aggregate for each annual period during the currency of this Policy" is $10 million dollars.[2] The limit for "each occurrence" is also $10 million dollars.[3] Excluding taxes and fees, Defendant paid $10,000 for the Policy.
In April of 1967, after deciding to obtain different coverage from the Insurance Company of the State of Pennsylvania ("ICSOP"), Defendant cancelled the Policy.[4] The cancellation endorsement shows that ESLIC returned $8,700 of the premium to Defendant, and the effective date of cancellation was April 1, 1967.[5] In addition, the cancellation endorsement indicates that "ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED."[6] Decades after cancelling and shortening the Policy, Defendant presented Plaintiff "with thousands of continuing occurrence asbestos products liability losses."[7]
Discussion
Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment is appropriate only if the record reveals that there is "no genuine issue as to any material fact and ... the moving party [has demonstrated an] entitle[ment] to a judgment as a matter of law."[8] Here, both parties have conceded that the Policy's language is unambiguous and that this court "needs to go no further than the four corners of the Policy" to resolve the dispute.[9]
A federal court sitting in diversity applies the choice-of-law rules of the forum state.[10] "[I]n Massachusetts, the court must apply the law of the state with the `most significant relationship' with the suit."[11] The parties have indicated that Oregon, Washington, and Massachusetts may be interested jurisdictions.[12] Yet, because the result in this case will not be *12 affected by the choice of law, this court "may simply bypass the choice."[13]
The interpretation of insurance policy language is a question of law.[14] The intent of the parties "is determined by looking to the terms and conditions of the policy."[15] The terms of the policy are afforded their plain meaning.[16] Any ambiguity is construed "against the drafter of the policy."[17]
Plaintiff argues that the $10 million aggregate coverage of the Policy should be prorated to $2.5 million to reflect Defendant's decision to cancel and limit the original one year "annual period" of the policy to three months.[18] Plaintiff insists that allowing Defendant to receive $10 million of aggregate coverage for the cancelled Policy would nullify the "annual period" language.[19] Plaintiff also asserts that prorating the aggregate coverage is consistent with the Parties' intent because Defendant replaced the remainder of the cancelled Policy with the ICSOP policy.[20] Moreover, Plaintiff contends that equity requires proration to prevent Defendant from recovering the aggregate limits for both the cancelled Policy and the ICSOP policy.[21]
Although Plaintiff's arguments are reasonable, the Policy's plain and unambiguous language does not support its interpretation. The Policy's language provides Defendant with $10 million of aggregate coverage "for each annual period during the currency of this Policy."[22] Defendant paid $10,000 for three annual periods of coverage from January 1, 1967 to January 1, 1970.[23] When Defendant decided to cancel and shorten the Policy, the cancellation endorsement documented the change. The Policy's original period, January 1, 1967 to January 1, 1970, was changed to January 1, 1967 to April 1, 1967.[24] Plaintiff also returned $8,700 of the premium to Defendant for the cancelled coverage.[25] Other than these changes, the cancellation endorsement indicates that "ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED."[26] The Policy's $10 million aggregate coverage, therefore, remains "unchanged." Defendant, however, may only recover for occurrences within the Policy's shortened period.
This holding also avoids the internal inconsistency, which Plaintiff's interpretation would create, of having a policy with an occurrence limit of $10 million, but an aggregate limit of only $2.5 million. Like the other terms and conditions, the occurrence limit remains unchanged following Defendant's cancellation of the Policy. Plaintiff is simply being held to its contract.[27]
*13 Conclusion
Plaintiff's motion for partial summary judgment is DENIED. Defendant's motion for summary judgment on the limits issue is ALLOWED. The aggregate limit for the cancelled Policy is $10 million.
AN ORDER WILL ISSUE.
NOTES
[1] Def.'s Statement of Material Facts Ex. B. ("Policy") at INS0771, INS0775.
[2] See id. at INS0772, INS0774.
[3] See id.
[4] See Statement of Undisputed Material Facts in Supp. of OneBeacon's Mot. for Partial Summ. J. Ex. 1 at INS0002 ("Cancellation Endorsement"); Def.'s Statement of Material Facts ¶ 15. The term of Defendant's ICSOP umbrella policy is April 1, 1967 to January 1, 1970. Def.'s Statement of Material Facts ¶ 15.
[5] Cancellation Endorsement.
[6] Id. (capitalization in original).
[7] Statement of Undisputed Material Facts in Supp. of OneBeacon's Mot. for Partial Summ. J. ¶ 28.
[8] Fed.R.Civ.P. 56(c). "In the lexicon of Rule 56, `genuine' connotes that the evidence on the point is such that a reasonable jury, drawing favorable inferences, could resolve the fact in the manner urged by the nonmoving party, and `material' connotes that a contested fact has the potential to alter the outcome of the suit under the governing law if the controversy over it is resolved satisfactorily to the nonmovant." Blackie v. Maine, 75 F.3d 716, 721 (1st Cir.1996).
[9] OneBeacon's Opp'n to Georgia-Pacific's Mot. to Strike at 1; Mem. Supp. Def.'s Mot. for Summ. J. at 3.
[10] Lexington Ins. Co. v. Gen. Accident Ins. Co. of Am., 338 F.3d 42, 46 (1st Cir.2003) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 491, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941)).
[11] Brennan v. Carvel Corp., 929 F.2d 801, 806 (1st Cir.1991).
[12] Mem. Supp. Def.'s Mot. for Summ. J. at 3-4; OneBeacon's Opp'n to Georgia-Pacific's Mot. for Summ. J. at 3 n. 3.
[13] Lexington Ins. Co., 338 F.3d at 46.
[14] B&T Masonry Constr. Co. v. Pub. Serv. Mut. Ins. Co., 382 F.3d 36, 38 (1st Cir.2004) (applying Massachusetts law).
[15] N. Pacific Ins. Co. v. Hamilton, 332 Or. 20, 22 P.3d 739, 741 (2001).
[16] N. Pacific Ins. Co. v. Christensen, 143 Wash.2d 43, 17 P.3d 596, 598 (2001).
[17] Hamilton, 22 P.3d at 741.
[18] Mem. Supp. OneBeacon's Mot. for Partial Summ. J. at 6-7.
[19] OneBeacon's Opp'n to Georgia-Pacific's Mot. for Summ. J. at 3.
[20] Mem. Supp. OneBeacon's Mot. for Partial Summ. J. at 8-9.
[21] Id. at 10-11.
[22] See Policy at INS0772, INS0774.
[23] Id. at INS0771.
[24] Cancellation Endorsement.
[25] Id.
[26] Id. (capitalization in original).
[27] See Stonewall Ins. Co. v. Nat'l Gypsum Co., No. 86 Civ. 9671, 1992 U.S. Dist. LEXIS 11093, at *3 (S.D.N.Y. July 22, 1992).
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376 F. Supp. 2d 3 (2005)
SOVEREIGN BANK, Successor by Merger with First Essex Bank, F.S.B., Plaintiff,
v.
BOWDITCH BOAT HOLDINGS, LLC, et al. Defendants.
No. CIV.A.05-10668-NMG.
United States District Court, D. Massachusetts.
May 31, 2005.
*4 Michael J. Calabro, Brian P. Flanagan, Flangan & Hunter, Boston, MA, for Bowditch Boat Holdings, LLC, Defendant.
Meegan B. Casey, Riemer & Brainstein, Boston, MA, for Sovereign Bank, Plaintiff.
Stephen M. Ouellette, Cianciulli & Ouellette, Beverly, MA, for Robert J. Salem, Defendant.
MEMORANDUM & ORDER
GORTON, District Judge.
Plaintiff, Sovereign Bank ("Sovereign"), brings this action against defendant Bowditch Boat Holdings, LLC ("Bowditch") to enforce a commercial promissory note ("the Note") made by it and against related guarantors of that Note. As discussed below, this Court lacks subject matter jurisdiction over the action and it will be remanded to state court.
Plaintiff's complaint was filed on March 16, 2005, in Massachusetts state court. It sought only to enforce the Note and the Guaranties and did not allege any federal claims. Complete diversity of the parties is not present.
On April 5, 2005, Bowditch removed the action to this Court, with the assent of all defendants, pursuant to 46 U.S.C. § 31325(c), a statute which confers upon district courts jurisdiction over claims brought to enforce preferred mortgage liens on vessels. Defendants contend, and plaintiff does not dispute, that as additional security for the Note, Bowditch granted Sovereign a First Preferred Mortgage on the M/V Manisee ("the Mortgage"). Defendants assert that the existence of the Mortgage permits this Court to exercise jurisdiction over this dispute. Plaintiff, however, responds that it does not seek (nor is it required) to foreclose upon the Mortgage, which was not mentioned in its complaint. It contends that federal question jurisdiction is, therefore, lacking.
Neither party has moved to remand this action to state court based upon this Court's lack of subject matter jurisdiction. However, several memoranda filed by plaintiff include arguments that this Court *5 lacks subject matter jurisdiction and urge remand to state court. Conscious that the issue of subject matter jurisdiction may not be waived or forfeited by the parties and that a federal court has a duty to inquire, sua sponte, into its jurisdiction, In re Sheridan, 362 F.3d 96, 100 (1st Cir.2004), this Court instructed the parties to brief the subject and, after consideration of such submissions, finds that it lacks subject matter jurisdiction and therefore remands the matter to state court.
III. Analysis
A civil action filed in state court may be removed to federal court if the claim is one "arising under the Constitution, treaties or laws of the United States". 28 U.S.C. § 1441(b). To determine whether a claim arises under federal law, courts look to the "well pleaded" allegations of the complaint. Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6, 123 S. Ct. 2058, 156 L. Ed. 2d 1 (2003). Absent diversity jurisdiction and unless certain limited exceptions apply, a case is not removable if the complaint does not affirmatively allege a federal claim. Id. The Supreme Court has explained the requirement that a federal claim be apparent from the plaintiff's complaint as follows:
The presence or absence of federal-question jurisdiction is governed by the "well-pleaded complaint rule," which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint. The rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law.
Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S. Ct. 2425, 96 L. Ed. 2d 318 (1987) (citation omitted).
An exception to the well-pleaded complaint rule is the "complete pre-emption" doctrine. Id. at 393, 107 S. Ct. 2425. Pursuant to that doctrine, a complaint that states only state law claims may be removed to federal court if the court concludes that
the pre-emptive force of a [federal] statute is so extraordinary that it converts an ordinary state common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule. Once an area of state law has been completely pre-empted, any claim purportedly based on that pre-empted state law is considered, from its inception, a federal claim, and therefore arises under federal law.
Id. (quotations and citations omitted). Complete preemption has been found under the Labor Management Relations Act, 1947, the Employee Retirement Income Security Act of 1974 and the usury provisions of the National Bank Act. See Beneficial Nat'l Bank, 539 U.S. at 7-8, 10-11, 123 S. Ct. 2058 (1999).
Courts have also recognized an exception to the well-pleaded complaint rule when Congress expressly so provides. For example, the Price-Anderson Act contains an "unusual" pre-emption provision, 42 U.S.C. § 2014(hh), which expressly provides for removal of actions relating to nuclear accidents even when the complaint asserts only state law claims. El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 484, 119 S. Ct. 1430, 143 L. Ed. 2d 635 (1999). Relying upon Congress's "unmistakable preference for a federal forum, at the behest of the defending party" in such suits, Courts allow defendants to remove such actions to federal court even if the complaint does not assert any federal claims. Id.
The Supreme Court has recently confirmed that, unless the basis for federal jurisdiction is apparent from the face of the well-pleaded complaint,
*6 a state claim may be removed to federal court in only two circumstances when Congress expressly so provides, such as in the Price-Anderson Act, or when a federal statute wholly displaces the state-law cause of action through complete pre-emption.
Beneficial Nat'l Bank, 539 U.S. at 8, 123 S. Ct. 2058.
In this case, plaintiff's complaint does not raise an issue of federal law. Although, as defendant notes, an affidavit submitted by plaintiff in support of its motion for a real estate attachment makes reference to the first preferred mortgage on a vessel, a fact that may provide federal jurisdiction pursuant to 46 U.S.C. § 31325, that document was not incorporated by reference into the complaint and the complaint does not mention that mortgage or raise any issues of federal law. The statute pursuant to which defendant removed the action to this Court, 46 U.S.C. § 31325, does not expressly provide for removal to federal court as does the Price-Anderson Act. The statute by which this case was removed also does not wholly displace the state law causes of action brought by plaintiff in its complaint: the complaint brings claims to enforce the Note and related Guaranties, claims which are not displaced or preempted by the federal statute.
Furthermore, a federal court's jurisdiction pursuant to 46 U.S.C. § 31325 is not exclusive, indicating that Congress did not intend that all actions involving mortgages on vessels be resolved in federal court and providing further reason why this Court should not create an exception to the well-pleaded complaint rule in this case.
Plaintiff brought this action in state court and, based upon its well-pleaded complaint, the action should be resolved there. Plaintiff elected not to foreclose upon the Mortgage or to avail itself of federal jurisdiction and defendant may not, by citing facts beyond the complaint or federal statutes upon which the complaint could have been based, transform this action into one over which this Court has jurisdiction.
ORDER
Based on the foregoing, this case is REMANDED to state court.
So ordered.
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915 S.W.2d 166 (1996)
O'Neil DOUGLAS, Appellant,
v.
The STATE of Texas, Appellee.
No. 13-94-178-CR.
Court of Appeals of Texas, Corpus Christi.
January 18, 1996.
*167 Michael Sheppard, Cuero, for appellant.
Wiley L. Cheatham, Cuero, Robert C. Lassmann, Cuero, for appellee.
Before SEERDEN, C.J., and DORSEY and FEDERICO G. HINOJOSA, Jr., JJ.
OPINION
DORSEY, Justice.
Appellant O'Neil Douglas appeals his conviction for aggravated assault on a peace officer by threat. The appellant was indicted and tried for attempted capital murder. By a single point of error, the appellant argues that aggravated assault by threat was improperly included in the jury charge as a lesser included offense of attempted capital murder. We agree, reversing the judgment of the trial court and remanding for entry of an order of acquittal.
Background
On February 19, 1992, the appellant suffered an apparent psychotic episode in Yoakum, Texas. He ran through the streets of Yoakum carrying an ice pick, but was eventually subdued and arrested. While the police were attempting to subdue the appellant, he tried to stab one of the officers with the ice pick. The officer was forced to shoot the appellant in the leg in order to protect himself and to subdue the appellant. Once in custody, the appellant was given psychiatric care.
The Grand Jury in DeWitt County returned an indictment charging the appellant with attempted capital murder of a peace officer. See Tex.Penal Code Ann. §§ 15.01, 19.02, 19.03 (Vernon 1989 & Supp.1992)[1]. The indictment specifically alleged that
O'NEIL DOUGLAS ... did ... unlawfully, intentionally and knowingly, with the specific intent to commit the offense of capital murder, attempt to cause the death of an individual, to-wit: Charles Ferrell, by attempting to stab the said Charles Ferrell with an ice pick, and the said Charles Ferrell was then and there a peace officer who was acting in the lawful discharge of an official duty; and the said O'NEIL DOUGLAS then and there knew the said Charles Ferrell to be peace officer; said attempt and act amounted to more than mere preparation that tended but failed to effect the commission of the offense intended; against the peace and dignity of the State.
Over the appellant's objection, the trial court included in the jury charge an instruction on the lesser included offense of aggravated assault. The instruction stated that "a person commits an assault if he intentionally or knowingly threatens another with imminent bodily injury," and that such an assault is aggravated if it is on a peace officer. The instruction further stated that
if you find from the evidence beyond a reasonable doubt that ... the Defendant, O'Neil Douglas, did intentionally or knowingly commit an assault on Charles Ferrell by threatening [him] with imminent bodily injury and did threaten [him] with a deadly weapon or did threaten to cause [him] bodily injury ... you will find the Defendant guilty of the included offense of Aggravated Assault.
*168 The instruction went on to state that if the jury found that Douglas was guilty of aggravated assault, they should then determine whether he was guilty of aggravated assault by threat with a deadly weapon or aggravated assault by threat to cause bodily injury.
The jury returned a verdict acquitting the appellant of attempted capital murder, but finding him guilty of "Aggravated Assault By Threatening With A Deadly Weapon, an included offense of that alleged in the indictment."
Argument on Appeal
In appellant's sole point of error, he argues that the trial court erred in including instructions in the jury charge regarding aggravated assault by threat, in that aggravated assault by threat is not properly a lesser included offense of attempted capital murder. Appellant argues specifically that aggravated assault by threat requires proof of an element, threatening the victim, that is not required in proving attempted capital murder. The State argues in response that "any attempt to commit murder with a weapon that is capable of causing death or serious bodily injury automatically contains the threat with a deadly weapon," and that "[y]ou cannot have an attempt to cause the death of an individual with a deadly weapon without a threat."
The State cites no authority that directly supports its argument that attempted murder with a deadly weapon automatically includes the element of threat. We agree with the appellant that the Texas Court of Criminal Appeals has repeatedly held that bodily injury crimes and crimes involving threats are two different categories of crimes, requiring different proof.
In Tullos v. State, 698 S.W.2d 488 (Tex. App.-Corpus Christi 1985, pet. ref'd), the defendant was indicted for aggravated assault as a result of an incident in which he approached a man from behind and, without warning, stabbed him in the back with a scratchawl. The indictment charged the defendant with aggravated assault by using a deadly weapon to threaten the victim with imminent bodily injury. Id. at 490. The evidence, however, did not show that the defendant threatened the victim at all, although there was ample evidence that the defendant had stabbed the victim. Id. This court noted that evidence of actual bodily injury is insufficient to support the threat allegation in the indictment, citing McGowan v. State, 664 S.W.2d 355 (Tex.Crim.App. 1984). We further noted in Tullos that, although the defendant had pled guilty to the indicted aggravated assault, he had never in fact admitted to threatening the victim, only to stabbing him. Even if a defendant admits his guilt, the admission must conform to the allegations in the indictment. Thornton v. State, 601 S.W.2d 340 (Tex.Crim.App.1979).
The Texas Code of Criminal Procedure defines a lesser included offense as follows:
An offense is a lesser included offense if:
(1) it is established by proof of the same or less than all the facts required to establish the commission of the offense charged;
(2) it differs from the offense charged only in the respect that a less serious injury or risk of injury to the same person, property, or public interest suffices to establish its commission;
(3) it differs from the offense charged only in the respect that a less culpable mental state suffices to establish its commission; or
(4) it consists of an attempt to commit the offense charged or an otherwise included offense.
TEX.CODE CRIM.PROC.ANN. art. 37.09 (Vernon 1981).
Only the applicability of subparagraph (1) of art. 37.09 is in question here. The other provisions of that article are clearly inapplicable in that aggravated assault by threats is not different from attempted capital murder only because a less serious injury or risk of injury resulted, or that a less culpable mental state was involved, or it consisted of an attempt to commit the offense of attempted capital murder.
The Court of Criminal Appeals recently discussed the first element of the art. 37.09 test in Jacob v. State, 892 S.W.2d 905 (Tex. Crim.App.1995). In Jacob, the appellant was indicted for burglary with the intent to commit *169 aggravated assault and burglary with the intent to commit murder. Id. at 907. The trial court found the appellant guilty of aggravated assault. Id. The court of appeals reversed the conviction on the basis that aggravated assault is not a lesser included offense of burglary of a habitation with intent to commit aggravated assault, and the Court of Criminal Appeals agreed. Id. at 909.
The Court of Criminal Appeals in Jacob noted that
a lesser included offense is determined by looking at (1) the elements of the offense actually charged, (2) the statutory elements of the offense sought as a lesser included offense, and (3) the proof presented at trial to show the elements of the charged offense.
Id. at 907-08 (citing Cunningham v. State, 726 S.W.2d 151 (Tex.Crim.App.1987); Bell v. State, 693 S.W.2d 434 (Tex.Crim.App.1985); Broussard v. State, 642 S.W.2d 171 (Tex. Crim.App.1982); Hazel v. State, 534 S.W.2d 698 (Tex.Crim.App.1976)). The Court rejected the State's argument in Jacob that the evidence it presented in court in the appellant's trial supported the conviction of aggravated assault, holding that the State's argument changed the language of art. 37.09(1) from "the facts required to establish the commission of the offense charged" to "the facts presented." See Jacob, 892 S.W.2d at 908. The Court held that the "facts required" language of art. 37.09(1) "means the evidence legally required to prove the elements." Id. As the Court stated:
The constitutional validity of Article 37.09 rests in part on its reference to the offense charged and to the restricted or reduced culpability of the lesser included offense as compared to the offense charged. [citation omitted]. Otherwise a defendant could be convicted of offenses not subsumed in the charged offense but shown by the evidence presented. That is why a lesser included offense is defined with reference to the facts "required" to establish the charged offense rather than to facts presented at trial.
Id.
In the case at bar, looking at the first element of the Jacob test (i.e. the elements of the offense actually charged in the indictment), the "facts required to establish" attempted capital murder, the offense with which appellant was charged, are that appellant, with the specific intent to commit capital murder, attempted to cause the death of a police officer by attempting to stab him with an ice pick. Nowhere is a requirement that a threat be proved. See Jacob, 892 S.W.2d at 909. As charged in the indictment, threat was not an element of the attempted capital murder.
Aggravated assault by threat, the asserted lesser included offense, requires proof of a threat, thereby requiring proof of matter not required by the indictment, rather than requiring less proof than the crime charged, as per art. 37.09(1). Said another way, a lesser included offense must be established by less or the same proof; not additional matters not alleged.
The indictment returned against the appellant charged him with attempted capital murder. That is the crime for which he was tried, and the crime for which he defended himself in court. Including aggravated assault by threat in the jury charge allowed the jury to convict appellant of a crime for which he was not charged or tried. We hold that the trial court erred when it included the instruction for aggravated assault by threat in the jury charge. Appellant's point of error is sustained.
Appellant's judgment of conviction is REVERSED. Because appellant was acquitted of the crime for which he was tried, and he cannot be tried again for that offense, he is ordered ACQUITTED.
NOTES
[1] The crime for which appellant was convicted was committed before September 1, 1994, the effective date of the revised Penal Code. See Acts 1993, 73rd Leg., Ch. 900, Sec. 1.18(b). Therefore, all references to the Penal Code are to the Code in effect at the time the crime was committed.
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915 S.W.2d 152 (1996)
Ruth SUTTON and William Sutton, Appellants,
v.
Ronald M. MANKOFF; Durant, Mankoff, Davis, Wolens & Francis, P.C.; Mankoff & Hill, P.C.; and Mankoff, Hill, Held & Goldburg, P.C., Appellees.
No. 2-95-064-CV.
Court of Appeals of Texas, Fort Worth.
January 11, 1996.
Rehearing Overruled February 22, 1996.
*153 Art Brender, Fort Worth, for appellant.
C.J. Muller, Farley P. Katz, Anthony E. Rebollo, Matthews & Branscomb, San Antonio, for appellee.
Before CAYCE, C.J., and RICHARDS and HOLMAN, JJ.
OPINION
HOLMAN, Justice.
This is a summary judgment case. Ruth and William Sutton filed suit alleging damages from deceptive trade practices and the intentional infliction of emotional distress. The defendants included Ronald M. Mankoff, three lawfirms in which he is a principal, and eight others. The trial court severed the plaintiffs' cause against Mankoff and his three lawfirms, granting those defendants a summary judgment on the ground that all causes of action the plaintiffs asserted against the Mankoff defendants were barred by the statute of limitations. We affirm.
The Suttons present nine points of error, but two are dispositive of the appeal. The first point attacks the trial court's ruling that this suit is barred by statutes of limitations, and the ninth point objects to some of the summary judgment evidence considered by the trial court.
In a summary judgment case, the issue on appeal is whether the movant met his summary judgment burden by establishing that no genuine issue of material fact exists and that movant is entitled to judgment as a matter of law. See TEX.R.CIV.P. 166a(c); Cate v. Dover Corp., 790 S.W.2d 559, 562 (Tex.1990); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex.1979). The burden of proof is on the movant, Acker v. Texas Water Comm'n, 790 S.W.2d 299, 301-02 (Tex.1990), and all doubts about the existence of a genuine issue of material fact are resolved against movant. Cate, 790 S.W.2d at 562; Great Am. Reserve Ins. Co. v. San Antonio Plumbing Co., 391 S.W.2d 41, 47 (Tex.1965). Therefore, we must view the evidence and its reasonable inferences in the light most favorable to the nonmovant. Great Am., 391 S.W.2d at 47.
In deciding whether there is a material fact issue precluding summary judgment, all conflicts in the evidence will be disregarded and the evidence favorable to the nonmovant will be accepted as true. Harwell v. State Farm Mutual Auto Ins. Co., 896 S.W.2d 170, 173 (Tex.1995). Evidence that favors the movant's position will not be considered unless it is uncontroverted. Great Am., 391 S.W.2d at 47.
The summary judgment will be affirmed only if the record establishes that the movant has conclusively proved all essential elements of movant's cause of action or defense as a matter of law. City of Houston, 589 S.W.2d at 678. A defendant is entitled to summary judgment if the summary judgment evidence establishes, as a matter of law, that at least one element of a plaintiff's cause of action cannot be established. Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex.1995); Rosas v. Buddies Food Store, 518 S.W.2d 534, 537 (Tex.1975). To accomplish this, the defendant-movant must present summary judgment evidence that negates an element of the plaintiff's claim. Once this element is presented, the burden shifts to the plaintiff to put on competent controverting evidence that proves the existence of a genuine issue of material fact with regard to the element challenged by the defendant. Centeq Realty, 899 S.W.2d at 197.
*154 Background
The summary judgment evidence is that in 1982, Coral Sociedade Brasileira de Pesquisase Desenvolvimento Limitada, a Brazilian company, was engaged in activities known as monoclonal antibody research or "MAB." This included the manufacture of monoclonal antibody conjugates. Coral received income from fees charged for this work under various medical research contracts and began selling the contracts to investors in 1981 or 1982. The equity ownership of Coral was held by a Netherlands company known as "Inpro Holding Company, B.V.," which was owned by Allen F. Campbell, a promoter of the Coral venture. In 1982, he sought legal advice for the Brazilian company from Texas attorney Ronald M. Mankoff. On behalf of Coral, Campbell engaged Mankoff and the lawfirm known as Durant, Mankoff, Davis, Wolens & Francis, to advise the Brazilian company about federal income tax deductions available to United States residents who might invest in Coral.
The investment concept was that United States residents would want to invest in partnerships created for the purpose of buying medical research contracts from Coral. Each research contract would sell for a price of $600,000. The selling price would be payable by a down payment of 1/8 cash ($75,000), plus a promissory note for the other 7/8 of the cost ($525,000). The proposal was that the promissory note would be payable in a specified number of Brazilian monetary units (cruzeiros) equal to a predetermined United States dollar value. Interest would be payable at ten percent per annum, without monetary correction or other indexing mechanism. The investor would promise to pay annually twenty-five percent of the note balance, but the initial payment would not become due until the end of the seventh year after the origin of the note. The plan was to allow time for the investors' own marketing of the medical contracts to generate funds for use in paying these notes.
A seventeen-page opinion of the Durant, Mankoff, Davis, Wolens & Francis lawfirm was issued on its letterhead, dated June 28, 1982, addressed to Coral at its Rio de Janeiro, Brazil, office.
Ruth Sutton contends she relied on that opinion in 1982, when deciding to invest in the Coral venture. The Suttons say the opinion contained misrepresentations that violated subsections (2), (5), (7) and (12) of section 17.46 of the Deceptive Trade Practices Act. Specifically, they complain of its following paragraphs:
a. the company [investor's name] should be entitled to treat the amounts which will be paid or incurred to Coral pursuant to the [investor's] Agreement as deductible expenses in the year paid or incurred, under Section 174 of the Code; and
b. the Company [investor's name] should be entitled to include in its deductible expenses under Section 174 of the Code the equivalent sum in United States Dollars of the full amount of the Research Fee which will be payable to Coral pursuant of the [investor's] Agreement.
A disclaimer in the opinion's final paragraph says:
This letter is intended for the internal use of Coral and, accordingly, it is not intended to be, and should not be, relied upon by any person or entity other than Coral.
Despite the lawfirm's disclaimer, the Suttons say the Mankoff defendants were an integral part of the plan for marketing the Coral contracts and knew the opinion would be furnished to potential investors.
The Suttons became investors in December 1982. On the recommendation of Ruth Sutton's brother, the Suttons sought advice from Donald Spear, an Arlington, Texas, financial planner, about lawful ways to reduce their federal income tax liability, and Spear suggested Coral's program as a "tax shelter" investment. Spear and his nephew, Steve Wisdom, were associated in the financial planning business, and on December 14, 1982, Wisdom went to the Suttons' store to discuss investments. Wisdom recommended that Ruth Sutton invest, by cash and promissory note, in an entity known as "R & D Partners82," which was to enter into a medical research contract with Coral. Ruth Sutton alleges Wisdom told her the Brazilian *155 cruzeiro had a history of devaluation, so her actual liability on the note would be minimal by the time the note matured. She wrote a $3,269.00 check and signed a $25,500.00 demand promissory note, both payable to R & D Partners82.
The summary judgment evidence includes Ruth Sutton's affidavit dated October 20, 1993, in which she makes the following statement:
Mr. Wisdom represented that a prestigious Dallas law firm had issued a statement representing that the Coral program was legitimate and R & D Partners82 could deduct its expenses and fees related to the medical research contract with Coral. I relied on the validity of the legal opinion described to me by Mr. Wisdom in making my decision to become a partner....
After she invested, Donald Spear mailed her a copy of the June 28, 1982 opinion letter of the Durant, Mankoff, Davis, Wolens & Francis lawfirm.
On their 1982 federal income tax return, prepared by a certified public accountant, the Suttons deducted $24,221.70 as their share of R & D Partners82's tax deductions. Early in 1983, Ruth Sutton was visited by an Internal Revenue Service agent who copied her documents relating to Coral and R & D Partners82. On January 25, 1985, the I.R.S. issued a notice to R & D Partners82 proposing to disallow the partnership's 1982 and 1983 tax losses and impose penalties. I.R.S. mailed the notice to Donald Spear, requesting that he furnish responses from the individual partners.
Objections to Summary Judgment Evidence
Before turning to the trial court ruling that statutes of limitations bar the Suttons' claims, we will address their ninth point of error which attacks part of the summary judgment evidence.
In 1985, Ruth Sutton gave her deposition in the case of United States v. Campbell, 704 F. Supp. 715 (N.D.Tex.1988). The federal government had brought the suit against Campbell to enjoin the marketing of the Coral investment.
In point nine, the Suttons protest that the deposition is not proper summary judgment evidence because it was taken in a lawsuit other than this one and the Mankoff parties in this suit did not present a certified copy of the deposition with their motion for summary judgment. We reject that contention, because Ruth Sutton's entire deposition from the federal suit against Campbell is attached as Exhibit G to the Mankoff defendants' motion for summary judgment in this suit and is properly authenticated by an attorney present at the deposition.
On the same rationale, we reject the ninth point of error's assertion that Ruth Sutton's testimony from a United States Tax Court trial involving Coral and R & D Partnership 82 was not properly certified and therefore is not competent summary judgment evidence. That case is Agro Science Co., Bavaro Inv. Co., Tax Matters Partner, et al. v. Commissioner, 58 T.C.M. 1093, 1989 WL 155518 (1989), cert. denied, 502 U.S. 907, 112 S. Ct. 300, 116 L. Ed. 2d 243 (1991). A copy of the trial transcript of Ruth Sutton's testimony is attached as Exhibit H to the Mankoff defendants' motion for summary judgment in this suit and properly authenticated by an attorney present at that trial.
Point of error number nine is overruled. See TEX.R.CIV.P. 166a(c); TEX.R.CIV.EVID. 901(a); McConathy v. McConathy, 869 S.W.2d 341, 341-42 (Tex.1994) (authentication of deposition excerpts submitted with a motion for summary judgment is neither necessary nor required); which supersedes Deerfield Land Joint Venture v. Southern Union Realty Co., 758 S.W.2d 608, 610 (Tex. App.-Dallas 1988, writ denied) (attorneys may authenticate any portion of a deposition used as exhibit to motion for summary judgment).
Statutes of Limitations
The Suttons argue that the summary judgment evidence fails to disclose that they received from the I.R.S. any documents regarding tax deficiencies or adjustments, except a seven-page attachment to Ruth Sutton's affidavit in support of their reply to the Mankoff defendants' motion for summary *156 judgment. However, the defendants' First Set of Written Interrogatories to Ruth Sutton asked her to:
Interrogatory No. 9:
Describe the terms of any final, proposed or potential settlement with the Internal Revenue Service relating to or arising out of your investment in R & D Partners82.
In a sworn answer signed on February 27, 1992, she stated that she and her husband:
received correspondence from the Internal Revenue Service dated November 15, 1985 and April 11, 1986 instructing [the Suttons] to sign and return a form 870-P, attached to the correspondence, if [we] desired to enter into a binding settlement to treat partnership items consistently with the treatment of the items on the partnership return as modified by the FPAA.
The answer shows that, at some time prior to April 11, 1986, the Suttons had received the FPAA, a "Final Partnership Administrative Adjustment," which is a deficiency notice to investment partners. See I.R.C. §§ 6223, 6226, 6231 (West 1989 & Supp.1995). The summary judgment evidence further is that in June, 1986, R & D Partners82 had filed a petition in the United States Tax Court to protest and seek readjustment of the I.R.S. disallowance of partners' deductions for 1982 and 1983. A prerequisite to the Tax Court's jurisdiction over that type partnership action is that a timely petition is filed after an FPAA has been issued. See Seneca Ltd. v. Commissioner, 92 T.C. 363, 1989 WL 11484 (1989), aff'd without op., 899 F.2d 1225 (9th Cir.1990).
While both Agro Science and the federal government's suit against Campbell were pending, the Suttons hired attorney Art Brender to represent them. On March 18, 1988, he wrote a letter on their behalf to Ronald M. Mankoff, Donald Spear, and Allen Campbell, stating that the I.R.S. had determined that the Suttons' partnership investment was a fraudulent tax shelter. Brender's letter demanded that Mankoff, Spear, and Campbell pay the Suttons $500,000 in damages, plus attorney fees, else the Suttons would sue them for deceptive trade practices and mental anguish and suffering.
Campbell's federal trial resulted in that court's September 19, 1988 memorandum opinion finding as facts that no meaningful biomedical research ever took place in Brazil, that the research actually conducted lacked scientific intent, and the cruzeiro [debt] was a sham which, because it was totally devoid of economic substance, could not be deductible. The court enjoined Campbell's further promotion of the investment.
On October 15, 1990, the I.R.S. sent the Suttons a statement of change indicating they owed the I.R.S. an additional $26,574.52 in taxes and interest for the 1982 tax year. They now contend this was their first knowledge that they had been damaged by the acts they attribute to the Mankoff defendants. On November 20, 1991, the Suttons filed the present lawsuit against the Mankoff defendants and others.
The statute of limitations applicable to actions for deceptive trade practices is section 17.565 of the Texas Business & Commerce Code. TEX.BUS. & COM.CODE ANN. § 17.565 (Vernon 1987). It bars any suit not brought within two years after the date on which the false, misleading, or deceptive act or practice occurred or within two years after the consumer discovered or in the act of reasonable diligence should have discovered the occurrence. The statute provides an extension of 180 days beyond the two years upon proof that the defendant knowingly engaged in conduct solely calculated to induce the plaintiff to refrain from or postpone suit.
The statute of limitations applicable to actions for intentional infliction of emotional distress is section 16.003 of the Texas Civil Practice & Remedies Code. TEX.CIV.PRAC. & REM.CODE ANN. § 16.003 (Vernon 1986 & Supp.1996). It bars any suit brought later than two years after the day the cause of action accrues.
Point of error number one is that the trial court erred in granting the Mankoff defendants' summary judgment on the ground that the Suttons' causes of action were barred by limitations. They contend their cause of action against the Mankoff defendants did not accrue until the Suttons suffered a legal injury; and legal injury did not occur until September 21, 1990, when the I.R.S. sent the *157 Suttons form 4549-A which notified them of adjustments to their federal income tax return.
The Suttons cite Atkins v. Crosland, 417 S.W.2d 150 (Tex.1967) for the proposition that no cause of action accrues until a tort actually causes injury, and that the statute of limitations does not start to run until a cause of action has accrued. Id. at 152-53. However, the holding of Atkins was unique to its facts and an exception to the general rule. The general rule is that a cause of action sounding in tort accrues, in the absence of a statute to the contrary or fraudulent concealment, when the tort is committed. Id.; Ponder v. Brice & Mankoff, 889 S.W.2d 637, 641 (Tex.App.-Houston [14th Dist.] 1994, writ denied).
Atkins had sued the person who prepared his income tax return for negligently basing tax liability on the accrual method of accounting instead of the cash method. The Atkins court reasoned that the accountant's method was not unlawful in itself; therefore, injury to Atkins was not inevitable; thus the tort was not completed and no cause of action accrued until the commissioner of internal revenue actually assessed a deficiency; and the statute of limitations did not start to run until the assessment created a cause of action. Atkins, 417 S.W.2d at 153.
The Atkins court carefully limited its opinion to the facts of the case presented, by citing another principle:
If, however, the act of which the injury is the natural sequence is of itself a legal injury to plaintiff, a completed wrong, the cause of action accrues and the statute begins to run from the time the act is committed, even where little, if any, actual damage occurs immediately on commission of the tort. See Tennessee Gas Transmission Co. v. Fromme, 153 Tex. 352, 269 S.W.2d 336 (1954).
Atkins, 417 S.W.2d at 153 (emphasis added).
In our case, the Suttons attribute their damages to knowing and unconscionable misrepresentations by the Mankoff defendants, which, if proven, are deceptive trade practices and inherently unlawful at inception. The Suttons characterize that conduct as intentionally inflicting emotional distress upon them. We hold that each of the Suttons' causes of action ask damages for acts that were completed wrongs that caused legal injury to the claimants when the acts occurred.
The Mankoff parties argue that as a general rule in cases where a taxpayer seeks damages for wrongs alleged to have caused increased income tax liability, the taxpayer's cause of action accrues on a fact specific basis when he discovers a risk of harm to his economic interests, whether that be at the time of assessment or otherwise. We agree. See Ponder, 889 S.W.2d at 642-43; Hoover v. Gregory, 835 S.W.2d 668, 671 (Tex.App.-Dallas 1992, writ denied).
We hold that on the summary judgment evidence, the Suttons discovered, or should have discovered, on or before March 18, 1988, that they had a cause of action against the Mankoff defendants for deceptive trade practices and related conduct. The Suttons' attorney asserted those grievances by letter on March 18, 1988 and demanded monetary damages, but they did not file suit until November 20, 1991. When they filed suit, its prosecution was barred by the statutes of limitations. See Ponder, 889 S.W.2d at 637.
The Suttons' argument that the statutes of limitations were tolled until the resolution of Agro Science is not persuasive. The Suttons contend that R & D Partners82 contributed money to a medical research legal defense fund which was used to underwrite the cost of litigating Agro Science; that Ruth Sutton was an investor in the partnership; that the Mankoff defendants were attorneys for the fund; that an attorney-client relationship existed between the partnership and the Mankoff defendants; therefore, the Suttons are entitled to assert an attorney-client relationship between themselves and the partnership attorneys.
We recognize that a lawyer hired to represent an entity, represents the organization, not its members individually. TEX.DISCIPLINARY R.PROF.CONDUCT 1.12(a), (e) (1989), reprinted in TEX.GOV'T CODE ANN., tit. 2, subtit. G app. (Vernon Supp.1996) (STATE BAR RULES art. X, § 9). The summary judgment *158 evidence is that in June 1986, Ruth Sutton engaged the services of attorney Art Brender to represent her and her husband in the Coral matters, because she did not want to be represented by the partnership's attorney, William Bailey.
We take judicial notice that Agro Science was filed in the United States Tax Court on June 23, 1986. See Ponder, 889 S.W.2d at 644 n. 3. The Suttons argue that the purpose of the suit was to test the I.R.S. denial of tax deductions by the investors in R & D Partners82. They say the existence of that suit prevented them from exercising their legal remedies against the Mankoff defendants. They contend Agro Science was a claim underlying their right to assert a lawyer malpractice claim against the Mankoff defendants, and the Suttons rely on Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1991) as authority for the principle that tolls a statute of limitations on a lawyer malpractice claim until the underlying litigation is completed, including all appeals. Id. at 157.
But, Hughes makes clear that the principle does not impose tolling unless the lawyer malpractice has occurred in the prosecution or defense of a claim and the underlying litigation is on that claim. Id.; Ponder, 889 S.W.2d at 644. The claim the Suttons assert against the Mankoff defendants is one alleged to have arisen prior to and at the time of Ruth Sutton's 1982 investment in the Coral program. It is not a claim for lawyer malpractice that occurred during the prosecution and appeal of Agro Science, which began in 1986 and ended in 1991. The summary judgment evidence supports the conclusion that, as a matter of law, neither Mankoff nor his lawfirms were attorneys for the Suttons. We hold that the statutes of limitations were not tolled for the Suttons' claims.
There is no summary judgment evidence that the Mankoff parties fraudulently concealed their conduct from the Suttons or that the Mankoff parties knowingly engaged in conduct solely calculated to induce the Suttons to refrain from or postpone suit. We hold the summary judgment evidence presents no genuine issue of material fact on the applicability of the statutes of limitations, and that the Mankoff parties conclusively established their affirmative defense of limitations in the trial court. As a matter of law, the Mankoff defendants were entitled to summary judgment that prosecution of the Suttons' claims against them is barred by statutes of limitations.
Point of error one is overruled, so we need not address points two through eight. The judgment is affirmed.
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915 S.W.2d 107 (1996)
Lawrence P. BOUCHET, Appellant/Appellee,
v.
The TEXAS MEXICAN RAILWAY COMPANY, Appellee/Appellant.
No. 04-93-00421-CV.
Court of Appeals of Texas, San Antonio.
January 10, 1996.
Rehearing Overruled February 12, 1996.
*109 Robert E. Valdez, Linda Daniels, Robert E. Valdez, P.C., San Antonio, for Appellant.
Guy H. Allison, Leonard Bucklin, Rose Rivera Vela, Allison & Huerta, Corpus Christi, Donato D. Ramos, Person, Whitworth, Ramos, Borchers & Morales, Laredo, for Appellee.
Before CHAPA, C.J., and HARDBERGER and PEEPLES, JJ.[1]
OPINION
HARDBERGER, Justice.
The first issue in this appeal is whether a wrongful discrimination question pursuant to Labor Code Sec. 451.001 (formerly Article 8307c of the Texas Workers' Compensation Act) can be given in a case arising under the FELA. The second issue is, if the jury question is procedurally proper, was the discrimination proven as a matter of law, or in the alternative, was there sufficient evidence to uphold the jury's finding of no discrimination. The appellant has limited this appeal pursuant to Texas Rule of Appellate Procedure 40(a)(4) to these issues. The Railroad files a cross-point contesting the rectitude of giving a wrongful discrimination question to the jury.
Facts
Bouchet was injured on June 29, 1987 while in the course and scope of his employment with the Texas-Mexican Railway Company (Railroad). He timely reported the injury, but continued to work without missing time but with some back complaints. Eventually though in January of 1990, he had to have back surgery. It was the policy of the railroad to provide certain benefits to employees injured in an on-the-job accident. These included a salary continuation, paying the medical bills and travel expenses from Laredo to San Antonio to see the appropriate medical specialists. The Railroad did so in this case until Bouchet filed a lawsuit on December 23, 1991 under the Federal Employers Liability Act (FELA) for personal injuries. After the filing of the lawsuit, the Railroad stopped the salary continuation and stopped paying the travel expenses for Bouchet to see his doctors in San Antonio. Interestingly, the Railroad continued to pay all medical expenses though. On September 4, 1992, Bouchet amended his complaint and asserted that the Railroad had violated Labor Code § 451.001 by terminating company provided benefits after he filed the FELA lawsuit.
After a trial on the merits, the jury found that Bouchet was injured in the course and scope of employment. The jury also found that Bouchet was 80% responsible for his injury; the remaining 20% of fault being assigned to the Railroad. The court submitted a jury issue on violation of Labor Code § 451.001 over the Railroad's objection. The jury found no violation of the Labor Code provision. Bouchet appeals from the trial court's failure to find as a matter of law that the Railroad violated the wrongful discrimination statute. The Railroad's response is that the issue cannot be considered in an FELA claim, and even if it could, the jury found against Bouchet.
*110 Section 451.001 and FELA
The first issue to be determined is whether a Labor Code § 451.001 question on wrongful discrimination is proper in an FELA case. The Railroad alleges that it is not.
The wrongful discrimination statute provides in part:
A person may not discharge or in any other manner discriminate against an employee because the employee has:
(1) filed a workers' compensation claim in good faith;
(2) hired a lawyer to represent the employee in a claim;
(3) instituted, or caused to be instituted in good faith a proceeding under Subtitle A; or
(4) testified, or is about to testify in a proceeding under Subtitle A.
TEX.LAB.CODE ANN. § 451.001 (Vernon Supp. 1995) (former law at TEX.REV.CIV.STAT.ANN. art. 8307c, § 1).
Article 8307c was enacted in 1971 to give protection to workers, who were sometimes discriminated against, for exercising their rights under the Texas Workmen's Compensation Act. This discrimination most often happened when the injured worker made a claim, or hired an attorney, or instituted a proceeding to recover damages for his/her injury. The legislature, through Art. 8307c, said that "a person ... may not discriminate against an employee" for doing these things. In 1989 the legislature completely rewrote the workers compensation laws of Texas in its S.B. 1. S.B. 1, Acts of the 71st Legislature, 2nd called sess., 1989.
S.B. 1 does not contain a wrongful discrimination clause, nor was 8307c rewritten. It remained intact, and was expressly deleted from the bill that did pass and moved to the Labor Code as Section 451.001. Most authorities since that time conclude that the wrongful discrimination statute, § 451.001 is no longer tied to the workers' compensation scheme or statute, but is a separate cause of action. "Discharging an employee for filing a workers' compensation claim is an independent statutory wrong. Rather than being part of a workers' compensation claim, a retaliatory discharge action arises from acts by an employer in the labor-management relation." Chatman v. Saks Fifth Avenue of Texas, Inc., 762 F. Supp. 152, 154 (S.D.Tex. 1991).
Chatman also points out that, while federal courts are divided over whether to characterize a retaliatory discharge claim as falling under the workers' compensation laws of the State, "The Western District of Texas also has held that retaliatory discharge claims do not arise under the workers' compensation laws of Texas...." Id. "A retaliatory discharge claim differs procedurally and substantively from a workers' compensation claim ... A claim for benefits is filed with the Texas Workers' Compensation Commission, while a claim for retaliatory discharge is brought against the employer for her having filed the claim for benefits." Id. at 155.
If § 451.001 is not tied to the Workers' Compensation Act, then it applies to subscribing employers and non-subscribing employers alike. There is no philosophical or rational reason to prohibit retaliatory wrongful discrimination by a subscribing employer, but to let all other employers discriminate with impunity. The wrong is the same and the injury to the employee is the same.
Our Supreme Court has not ruled on whether employees of non-subscribers are protected by § 451.001, but it has pointed to a court of appeals opinion where the writ was denied which held that 451.001 applies to subscribers and non-subscribers alike. "We have assumed because we need not decide in this case, that employees of non-subscribers are protected by section 451.001. One court of appeals has suggested they are. Hodge v. BSB Invs, Inc., 783 S.W.2d 310, 312-13 (Tex. App.-Dallas 1990, writ denied)." Gunn Chevrolet v. Hinerman, 898 S.W.2d 817, 819 (Tex.1995).
The Hodge opinion, referred to by the Supreme Court, is squarely on point: "The use of the broad term "person" by the legislature indicates a purposeful intent not to limit the statute to any one class of employers... We conclude that article 8307c applies equally to employees of subscribers and *111 nonsubscribers." Hodge, 783 S.W.2d at 312-13.
Section 451.001 is written in broad terms. It says in pertinent part, (emphasis supplied): "A person may not discharge or in any other manner discriminate against an employee ..." The language does not limit the class of employers that may not discharge or discriminate. The Railroad's construction of this statute would have the court impliedly add the words to "A person" to say "unless the suit is being brought under federal statute." Whether looking at the literal language, or the policy behind the anti-discrimination statute, such an interpretation is not justified. The idea is to protect all injured employees from discrimination because they were hurt or chose to seek legal redress for their injuries.
It has already been held that the antidiscrimination statute applies to subscriber and non-subscriber alike. See Hodge, 783 S.W.2d at 313. That would seem to be all employers in much the same way that it can be said that the world may be divided into those that play the fiddle and those that do not. It is this court's belief that subscriber and non-subscriber describes all employers, even when the injured employee seeks redress under a federal statute.
Granted a federal statute, such as this, may preempt all state law. If the FELA had an express preemption clause, or even if it impliedly preempted section 451.001, we would have no hesitation to so find. Federal law may supersede state law in three ways. First, Congress may explicitly state its intent to preempt in the language of the statute itself. Second, preemption may be implied when the federal law is so pervasive that there is no room for state law. Third, state law is preempted if it conflicts with federal law. If it is impossible to comply with both laws, it conflicts. Moore v. Brunswick, 889 S.W.2d 246, 247-48 (Tex. 1994). As this court has recently stated: "Preemption by the federal government is a serious inroad into the right of a state to make its own law, whether it be legislative enactment or common law. Therefore the preemption cases are interlaid with admonitions against an overeagerness to find preemption." Alvarado v. Hyundai Motor Co., 908 S.W.2d 243, 245 (Tex.App.-San Antonio 1995). We find no preemption, either express or implied, dealing with remedies for prohibited discrimination. We also find no conflict between federal and state law designed to prohibit discrimination against injured workers.
The rest of Section 451.001 describes what acts are covered under the anti-discrimination umbrella applying to all persons. An injured worker may not be discriminated against because the employee has: (1) filed a workers' compensation claim in good faith; (2) hired a lawyer to represent the employee in a claim; (3) instituted or caused to be instituted in good faith under Subtitle A; or (4) testified or is about to testify in a proceeding under Subtitle A. See TEX.LAB.CODE ANN. § 451.001 (Vernon Supp.1995).
There is no question that § 451.001 was originally written to principally correct abuse occurring under the Texas workers' compensation scheme. Subscribers were discriminating against injured employees. But when the question of non-subscribers came before the courts it was held that the law was applicable to non-subscribers as well. See Hodge, 783 S.W.2d at 313. Why? Because the rationale of the law and the injured employee's plight was the same. He or she should be able to get the benefits of whatever compensation was due without being penalized. FELA is the exclusive remedy for railroad workers. See New York C. & H.R.R.R. v. Tonsellito, 244 U.S. 360, 361-62, 37 S. Ct. 620, 620-21, 61 L. Ed. 1194 (1917); Dixon v. CSX Transportation, Inc., 990 F.2d 1440, 1442 n. 2 (4th Cir.1993). An injured worker should not be penalized for bringing a claim under FELA when that is the only choice the worker had. While it can be argued that the FELA should be in a class by itself and the employer not considered a subscriber, or non-subscriber, we see no persuasive reason to do this. The fact that FELA applies to railroads and is federal in nature does not change anything. The person is still a worker and is filing in good faith for an on the job injury, and should not lose his rights to seek peaceful, legal redress for his injuries. Surely this is as true for a *112 railroad injury as an oil field injury, or a construction injury.
To the degree there is any question of interpretation about a "workers' compensation claim", there can be none as to the antidiscrimination provision of hiring "a lawyer to represent the employee in a claim." When Bouchet hired Robert Valdez, attorney, he was doing what is described in subsection (2). Mr. Valdez was a lawyer representing the injured employee, Bouchet, in pursuing a claim. Bouchet had the right to do this without being discriminated against. We hold that the trial court acted in accordance with Texas law in submitting this question to the jury.
The Jury's Answer
Having disposed of the correctness of the giving of the question, we go to the finding of the jury. Question No. 5 asked if the Railroad wrongfully discriminated against Bouchet. Unfortunately for Bouchet, they answered "No." Question No. 7 asked if the Railroad acted "willfully or maliciously in discriminating" against Bouchet. Having found no discrimination earlier, they logically answered this "No" also. The issue before this court is whether the answer to question number 5 goes against the great weight and preponderance of the evidence, or even should be determined as a matter of law in favor of Bouchet.
Great Weight and Preponderance
Courts of appeal should use restraint in overturning jury verdicts, lest they simply function as jury number two, which is anathema to our jury system as the ultimate arbiters of fact. See Wal-Mart Stores, Inc. v. Seale, 904 S.W.2d 718, 722 (Tex.App.-San Antonio 1995, no writ); Carr v. Jaffe Aircraft Corp., 884 S.W.2d 797, 799 (Tex.App.-San Antonio 1994, no writ). The Railroad argued, with fine advocacy and remarkable candor, the following:
1. If an employee, who suffers an on-the-job injury, works with the Railroad in reaching a peaceful settlement, the Railroad will:
(a) pay his salary while he's off work;
(b) pay whatever travel expenses are involved in getting appropriate medical care including travel from Laredo to medical specialists in San Antonio;
(c) pay all medical expenses.
2. However if the injured employee makes a claim, files a lawsuit or hires a lawyer:
(a) his salary won't be paid;
(b) his travel expenses for medical treatment won't be paid;
(c) but his medical bills will still be paid and were in this case to the tune of $23,135.00.
The Railroad argued, and the jury accepted, that they had a right to stop the salary and the travel expenses because there were "special benefits." They said that no one required them to do these things and they were done only for the good of the employee. They also describe the salary as simply an advance on the settlement proceeds, something like a loan. However, no papers were signed and there was really no requirement that the "loan" be repaid. Travel expenses should be treated similarly, the Railroad says. In short, what is voluntarily given can be voluntarily taken away and if the litigious employee and the compliant employee are treated differently, well, it is the employees' choosing. The Railroad admitted freely this was their policy and this is what happened in this case.
From a streetwise point of view, this carrot and stick philosophy makes some sense. Cooperate or be spanked. The plaintiff didn't cooperate because he chose to hire a lawyer and file a claim. Therefore, the majority of his benefits were yanked. Had Bouchet been willing to forego exercising his legal rights he would have been paid salary until a settlement was made and his traveling expenses would have continued to be paid. None of these facts are disputed. The problem with this philosophy, though, is that it is directly contrary to the Texas Labor Code, § 451.001.
The Code says that "a person may not ... discriminate against an employee" who hires a lawyer and institutes his claim, yet there is substantial evidence that the *113 Railroad did just this against Bouchet. No one contests Bouchet was injured on the job and his only sin is that he enlisted the legal system to get proper benefits for his injury. We acknowledge that the Railroad's position is that the FELA prohibits Texas laws from applying to it, but we cannot agree with this position.
Our legislature has passed a law which, in effect, says that an injured worker in Texas should not be put to the hard choice of accepting whatever benefits his employer may give him, or face severe repercussions if he tries to exercise his legal rights. Bouchet is a Texas citizen, working in Texas, injured in Texas, and undergoing treatment in Texas. We see no reason why Texas law should not apply. His compensation scheme is that of FELA. But the wrongful discrimination is controlled by Texas law. They are not contradictory. They are simply separate claims.
As all of the Railroad representatives agree that the Railroad treated people differently according to whether they exercised their legal rights or didn't we must conclude that the great weight and preponderance of the evidence is contrary to the jury's finding of no discrimination in question number 5.
We acknowledge that there is some evidence that the railroad did not discriminatei.e., they paid all of his medical bills and there was disputed testimony over whether he still had his job (the Railroad said he did), but we must conclude the jury's answer to question 5 is against the great weight and preponderance of the evidence.
Discrimination as a Matter of Law
We are asked by Bouchet to hold as a matter of law that there was "wrongful discrimination." We are reluctant to do that. Bouchet argues that the trial court should have granted his motion for new trial because the jury's failure to find that the railroad wrongfully discriminated against him is without any support in the evidence and that discrimination was proved as a matter of law. When reviewing a "matter of law" challenge, this court must employ a two part test. We first examine the record for evidence that supports the finding, while ignoring all evidence to the contrary. If there is no evidence to support the finding, we then examine the entire record to determine if the contrary proposition was established as a matter of law. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex.1989). Furthermore, the jury's failure to find a fact need not be supported by any evidence, since the jury is free to disbelieve the witnesses of the party bearing the burden of proof. Yap v. ANR Freight Sys., Inc., 789 S.W.2d 424, 425 (Tex.App.-Houston [1st Dist.] 1990, no writ); see also W. Wendall Hall, Revisiting Standards of Review in Civil Appeals, 24 ST. MARY'S L.J. 1045, 1136 (1993).
Having reviewed the record we find that there is some evidence of no discrimination. The evidence supporting the verdict shows that after Bouchet was injured on the job in 1987, he continued in his employ with the Railroad and may have still been employed with them at the time of trial. From the date he was injured until the time of trial, the Railroad paid Bouchet's medical expenses. Bouchet filed suit in December 1991 and received full salary until March of 1992 when his doctor did not release him for work. In December of 1992, Bouchet's salary was restored sixteen days before trial. Therefore, we find that there was enough evidence to prevent this court from finding discrimination as a matter of law.
We do agree with Bouchet that the jury's finding of no discrimination is against the great weight and preponderance of evidence. Therefore, we reverse that portion of the judgment dealing with wrongful discrimination and remand for a new trial on that issue.
NOTES
[1] Justice David Peeples not participating.
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915 S.W.2d 751 (1996)
CATERPILLAR, INC., Appellant,
v.
Gary W. BROCK, Appellee.
No. 95-SC-426-CL.
Supreme Court of Kentucky.
February 22, 1996.
Leslie W. Morris, II, Lexington, William F. Maready, Robinson, Maready, Lawing & Comerford, Winston-Salem, North Carolina, Joel D. Zakem, Labor Cabinet-Special Fund, Louisville, for Appellant.
Asa P. Gullett, Gullett & Combs, Hazard, Phyllis L. Robinson, Hyden, for Appellee.
Robert E. Sanders, The Charles H. Fisk House, Covington, Amicus Curiae.
REYNOLDS, Justice.
The United States Court of Appeals for the Sixth Circuit has requested certification of the law as to the following question:
DID KENTUCKY REVISED STATUTE 411.182(1) NEGATE AND/OR OVERRULE KENTUCKY REVISED STATUTE 411.320(1)?
We hold the question which has been certified is answered in the affirmative. KRS 411.182(1) negated KRS 411.320(1).
The basis of the challenge arises from the following statement of facts and nature of the case.
Brock is a long-time bulldozer operator for Nally & Hamilton ("N & H"), a reclamation company doing work in coal mining areas in mountainous Harlan County, Kentucky. In June of 1990, plaintiff began work on a "high wall" where strip mining had taken place. Brock normally operated a Caterpillar model D8L bulldozer, but on this particular day, N & H assigned him a model D9H, which Caterpillar also manufactured in 1978. While Great Western Coal Company ("Great Western") owned this particular bulldozer, N & H borrowed it on the day in question because it was already located at the work site. In order to reach the top of the fill, Brock had to push dirt up an access road near the top of the mountain. The slope was approximately a two-to-one grade, an angle of about 27 degrees. Brock testified that as he proceeded up the access road the bulldozer suddenly lost its prime or hydraulic fluid pressure, *752 which caused the bulldozer to lose its braking power on this slope. Brock attempted to slow the bulldozer's precipitate backward fall by dragging its blade and manually applying the brakes. As the bulldozer spun out of control, it left the access road, twisted sideways, and tumbled down the reclaimed high wall, throwing Brock from the cab of the vehicle. Brock allegedly suffered various physical and mental injuries.
In 1991, Brock, a citizen of Kentucky, brought a timely diversity action against Caterpillar, an Illinois corporation, alleging that Caterpillar defectively designed the braking system on the D9H bulldozer and that the defective design made the product unreasonably dangerous. Brock further alleged that the defective design was the proximate cause of his injuries. After Brock filed his complaint, Old Republic Insurance Company ("Old Republic"), the workers' compensation carrier for N & H, intervened as a plaintiff, asserting a claim for recovery of the cost of medical attention and other benefits already dispersed to Brock. The Trustee for the workers' compensation Special Fund also intervened as a plaintiff, seeking the recovery of any benefits paid to Brock. The two intervening plaintiffs did not actively participate in the trial nor are they participating in this appeal. In addition, Caterpillar brought a third-party claim against Great Western, claiming that, if the accident occurred as Brock alleged, Great Western was responsible because it failed to observe routine care and maintenance of the bulldozer. The magistrate judge dismissed Great Western on the basis of its postbankruptcy discharge and stay. The parties agreed, however, that should the evidence warrant, Great Western would be included in the jury's apportionment of fault.
Before trial, Caterpillar requested an instruction from the court advising the jury that if it found that any other party performed an unauthorized alteration or modification of the D9H, it must return a verdict for Caterpillar. Furthermore, Caterpillar asked the magistrate judge to instruct the jury that an unauthorized alteration or modification includes the failure of the owner or operator to observe routine maintenance and care. The magistrate judge, however, declined to give Caterpillar's proffered instructions. He found that there was insufficient evidence for the jury to conclude that Great Western or N & H altered or modified the bulldozer by means of inadequate maintenance and care. The magistrate judge instructed the jury instead that it could apportion fault between Caterpillar, Great Western, N & H, and Brock if it found that any of those parties' conduct was a "substantial cause" of Brock's injuries. The magistrate judge submitted the following interrogatories to the jury, with the jury's responses:
Interrogatory 1: Are you satisfied from a preponderance of the evidence that at the time Caterpillar sold the D9H bulldozer in 1978, the braking system was in a defective condition that created such a risk of an accident of the general nature of the one in question that an ordinarily prudent company engaged in the manufacture of bulldozers, being fully aware of the risk, would not have put it on the market?
ANSWER: X YES ____ NO
Interrogatory 2: Are you satisfied from a preponderance of the evidence that the defective condition was a substantial cause of the accident and the plaintiff's injuries?
ANSWER X YES ____ NO
Interrogatory 3: Are you satisfied from a preponderance of the evidence that Great Western Coal Inc. failed to use ordinary care to properly inspect, maintain, and service the D9H bulldozer in question, and that such failure was a substantial cause of the accident and the Plaintiff's injuries?
ANSWER X YES ____ NO
Whether you have answered "Yes" or "No" to Interrogatory 3, you shall proceed to Interrogatory 4.
Interrogatory 4: Are you satisfied from a preponderance of the evidence that Nally & Hamilton failed to use ordinary care to provide a safe working environment for the Plaintiff, which in this action not only included inspection, maintenance, and service of the D9H bulldozer in question, but proper instruction and training regarding the use of the D9H bulldozer as well, and *753 that such failure was a substantial cause of the accident and the Plaintiff's injuries?
ANSWER X YES ____ NO
Whether you have answered "Yes" or "No" to Interrogatory 4, you shall proceed to Interrogatory 5.
Interrogatory 5: Are you satisfied from a preponderance of the evidence that the Plaintiff failed to use ordinary care for his own safety in the operation of the D9H bulldozer in question, and that such failure was a substantial cause of the accident and the Plaintiff's injuries?
ANSWER X YES ____ NO
Whether you have answered "Yes" or "No" to Interrogatory 5, you shall proceed to Interrogatory 6.
The jury declined to award punitive damages but found compensatory damages of $950,000 and apportioned fault as follows: 60% against Caterpillar, 20% against Great Western, and 15% against N & H. The jury also assigned 5% fault to plaintiff Brock. Accordingly, the magistrate entered a $570,000 judgment against Caterpillar.
Repeal by implication finds no favor within the courts. However, we conclude the two statutes may not be completely harmonized without doing violence or creating exceptions within either. Ex Parte Lawrence, 204 Ky. 568, 265 S.W.287 (1924); City of Henderson v. Connell, 156 Ky. 730, 161 S.W. 1121 (1914).
The development of comparative fault has impetus by judicial fiat pronounced in Hilen v. Hays, Ky., 673 S.W.2d 713, 720 (1984). However, the comparative fault rule was initially determined inapplicable to products liability litigation. Reda Pump Co., A Div. of TRW, Inc. v. Finck, Ky., 713 S.W.2d 818 (1986). However, at the following legislative session, the Kentucky legislature enacted the comparative fault statute, KRS 411.182 (effective July 15, 1988) and specifically drafted a provision to include products liability actions. Ingersoll-Rand Co. v. Rice, Ky.App., 775 S.W.2d 924 (1988). The proposed apportionment statute is adverse to the purpose of the products liability statute to such an extent that the apportionment statute negates the products liability statute enunciated in KRS 411.320(1).
The language of the comparative fault statute, KRS 411.182, is straightforward and admits, with ease, to only one construction: that in all tort actions, including products liability actions, fault is to be apportioned among all parties to each claim. The chosen language of the legislature is plain and direct rather than circumferential. The date of enactment and the legislative history intone negation of KRS 411.320(1).
Demonstratively, by implication, KRS 411.182(1) has repealed KRS 411.320(1), and this result exemplifies the concept of fundamental fairness enunciated in Hilen v. Hays, supra.
The law is so certified.
STEPHENS, C.J., GRAVES, LAMBERT, REYNOLDS, STUMBO and WINTERSHEIMER, JJ., and EDWIN I. BAER, Special Justice, sitting.
All concur.
Prior to his death on January 27, 1996, REYNOLDS, J., wrote the majority opinion herein. Rendition was delayed only by normal administrative procedures.
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915 S.W.2d 104 (1996)
Andrew JACKSON a/k/a Hayward Jackson, Jr., Appellant
v.
The STATE of Texas, Appellee
No. 04-95-00579-CR.
Court of Appeals of Texas, San Antonio.
January 10, 1996.
*105 Alex J. Scharff, Campion & Campion, San Antonio, for appellant.
Catherine Torres-Stahl, Assistant Criminal District Attorney, San Antonio, for appellee.
Before CHAPA, C.J., and HARDBERGER and GREEN, JJ.
OPINION
CHAPA, Chief Justice.
This is an appeal from an order revoking appellant's probation. On March 12, 1987, appellant entered a plea of guilty to the offense of burglary of a habitation with intent to commit aggravated assault. Punishment was assessed at ten years' confinement, fully probated. On July 27, 1995, the trial court entered an order revoking appellant's probation and sentencing him to ten years confinement. The basis of the revocation was appellant's failure to make several monthly supervisory fee payments, a violation of the terms and conditions of his probation. The sole issue before this court is whether the trial court abused its discretion in revoking appellant's probation. We affirm the decision of the trial court.
In a probation revocation proceeding, the trial court is the sole trier of the facts, the credibility of the witnesses, and the weight to be given to the evidence presented. Naquin v. State, 607 S.W.2d 583, 586 (Tex. *106 Crim.App. [Panel Op.] 1980); Battle v. State, 571 S.W.2d 20, 21 (Tex.Crim.App. [Panel Op.] 1978). Consequently, appellate review of a trial court's order revoking probation is limited to a determination of whether the trial court abused its discretion. Jackson v. State, 645 S.W.2d 303, 305 (Tex.Crim.App.1983); Lloyd v. State, 574 S.W.2d 159, 160 (Tex. Crim.App. [Panel Op.] 1978).
Appellant contends that his probation was improperly revoked because he satisfied his burden of showing that he was unable to pay the supervisory fees which were assessed as a condition of his probation. In a proceeding to revoke probation where the grounds for revocation are the probationer's failure to pay fees assessed as a condition of probation, the inability of the probationer to pay the enumerated fees is an affirmative defense. TEX.CODE CRIM.PROC. ANN. art. 42.12 § 21(c) (Vernon Supp.1995); Stanfield v. State, 718 S.W.2d 734, 737-38 (Tex.Crim.App.1986). As such, the probationer must prove his inability to pay by a preponderance of the evidence. Id. In reviewing the trial court's decision to revoke probation, we must consider all of the evidence in the light most favorable to the trial court's finding, and determine whether any rational trier of fact could have found that appellant proved his inability to pay the fees at issue by a preponderance of the evidence. Jones v. State, 589 S.W.2d 419, 421 (Tex. Crim.App. [Panel Op.] 1979); Hill v. State, 721 S.W.2d 953, 957 (Tex.App.-Tyler 1986, no pet.).
As a condition of his probation, appellant was required to pay $30.00 on or about the twelfth day of every month. He initially made regular payments. However, appellant made no payment from October, 1993, through December, 1993. In both January and February of 1994, appellant paid $5.00. In March, 1994, appellant was arrested and incarcerated on an unrelated charge and his obligation to make supervisory payments ceased. Smith v. State, 790 S.W.2d 366, 368 (Tex.App.-Houston [1st Dist.] 1990, pet. ref'd).
At the hearing on the State's motion to revoke appellant's probation, appellant's probation officer, Linda Valdez, was the only witness to testify. Ms. Valdez testified that from October, 1993, through March, 1994, when appellant would report for their meetings, he would typically state, "I don't have money today". Ms. Valdez' testimony revealed that appellant was not permanently employed from October, 1993, through March, 1994, but that he was doing contract/day laborsomething he had been doing for several years. Ms. Valdez acknowledged that she had attempted to persuade appellant to take advantage of a job counseling service provided by the probation department; however, she had no record of appellant ever doing so. Ms. Valdez had no knowledge of whether appellant owned property that he could sell or whether he could obtain a loan. Appellant did not testify.
Appellant contends that Ms. Valdez' testimony presents uncontroverted evidence of his inability to pay the supervisory fees at issue. Appellant mistakenly relies on Friedl v. State, 773 S.W.2d 72 (Tex.App.-Houston [1st Dist.] 1989, no pet.), Reyes v. State, 752 S.W.2d 591 (Tex.App.-Corpus Christi 1987, no pet.), and Hill, 721 S.W.2d at 953 to support his position that the trial court abused its discretion in revoking his probation. Although each of these cases contain facts similar to those of the present case, they are easily distinguishable by virtue of the fact that the appellant in each of those cases testified as to his or her inability to pay the probationary fees at issue. Friedl, 773 S.W.2d at 74; Reyes, 752 S.W.2d at 592; Hill, 721 S.W.2d at 957. In Friedl, Reyes, and Hill, each of the appellants had testified extensively as to his or her living expenses, living arrangements, other sources of income, and outstanding debts. Id. Moreover, the probation officer in each of those cases testified only that the defendant had not paid the requisite fees and gave no further information regarding the appellants' life styles. Id.
We find the facts of this case more analogous to those in Jones v. State, 589 S.W.2d 419 (Tex.Crim.App. [Panel Op.] 1979). In Jones, the appellant did testify regarding his living expenses, but only by vague references. Jones, 589 S.W.2d at 421. Jones' probation officer testified that Jones would arrive at their meetings saying he had no *107 money and no job. Id. However, the probation officer also presented evidence that Jones was working sporadically and occasionally brought in partial payments. Id. The court found that there was a "complete failure to prove the affirmative defense of inability to pay by a preponderance of the evidence." Id.
In the present case, appellant did not testify at all regarding his inability to pay. There is no evidence of appellant's living expenses or other obligations that may have prevented him from satisfying the conditions of his probation. Instead, appellant relied on his cross-examination of the State's witness to prove his affirmative defense. Yet, the evidence presented by Ms. Valdez indicates that appellant was doing the same work he had been doing on and off for several years with no apparent inability to pay his supervisory fees. While the record reflects that appellant may have been unemployed, it is void of any evidence that he was unable to satisfy the conditions of his probation by paying his supervisory fees. Accordingly, we find that appellant has wholly failed to satisfy the burden of proving his inability to pay by a preponderance of the evidence.
Appellant correctly notes that even when the issue of inability to pay is raised by the probationer, the State must carry the ultimate burden of proving that the alleged failure to pay fees was intentional. Stanfield, 718 S.W.2d at 738; Washington v. State, 731 S.W.2d 648, 650 (Tex.App.-Houston [1st.Dist.] 1987, no pet.). It is well settled that the facts and circumstances surrounding an act or omission may reveal intent. Stanfield 718 S.W.2d at 738. Given that the only evidence presented in this case indicates that appellant was working sporadically, and that appellant did not testify to rebut that evidence or present any other justification for his non-payment, an inference of intentional non-payment exists. When viewed in the light most favorable to the trial courts decision, we find that the evidence before us is sufficient to show appellant's intentional failure to pay by a preponderance of the evidence. Arterberry v. State, 800 S.W.2d 580, 582 (Tex.App.-Tyler 1990, no pet.). Therefore, the trial court did not abuse its discretion in revoking appellant's probation. Cardona v. State, 665 S.W.2d 492, 494 (Tex.Crim.App.1984).
The judgment of the trial court is affirmed.
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728 F. Supp. 2d 896 (2010)
State of LOUISIANA, Plaintiff,
v.
ROWAN COMPANIES INC., Defendant.
Civil Action No. H-08-1682.
United States District Court, S.D. Texas, Houston Division.
July 28, 2010.
*899 Francis I. Spagnoletti, David S. Toy, Spagnoletti & Co. Anthony G. Buzbee, The Buzbee Law Firm, Houston, TX, for Plaintiff.
Steven L. Roberts, John Daniel Johnson, Rachel Giesber Clingman, Sutherland Asbill & Brennan LLP, Houston, TX, for Defendant.
OPINION AND ORDER
MELINDA HARMON, District Judge.
Pending before the Court are Defendant Rowan Companies, Inc.'s ("Rowan") Motions for Summary Judgment (Docs. 48, 67), as well as Plaintiff State of Louisiana's ("Louisiana") responses (Docs. 55, 73), Rowan's replies (Docs. 60, 74), and Louisiana's surreply (Doc. 77). Upon review and consideration of these motions, the responses, replies, and surreply thereto, the relevant legal authority, and for the reasons explained below, the Court finds Defendant Rowan's motions for summary judgment should be granted.
I. Background and Relevant Facts
This is a tort action in federal court pursuant to admiralty jurisdiction. 28 U.S.C. § 1333(1). Defendant Rowan is a Delaware corporation with its principal place of business in Houston, Texas. (Doc. 41 at 3.) Rowan drills offshore oil and gas wells. (Doc. 48 at 1.) On December 2, 2003, Robert D. Marcy ("Marcy"), an employee of Rowan, filed a qui tam action in the U.S. District Court for the Eastern District of Louisiana alleging violations of federal environmental regulations on the Rowan Midland ("Midland") drilling rig. (Doc. 48, exh. A.) In his qui tam complaint, Marcy alleged that the crew on the Midland concealed violations of federal environmental regulations. (Id. at ¶ 2.)
Federal authorities investigated the allegations, revealing that the Midland's crew conducted abrasive blasting activities to clean the rig while in Port Fourchon, Louisiana from January to May 2004. (Doc. 55, exh. 5 at 16.) During the blasting activities, the Midland's crew failed to take containment measures to minimize the discharge of spent blast media into the navigable waters of the United States in violation of the Clean Water Act ("CWA"), 33 U.S.C. § 1319(c)(2)(a). (Id.) Similar blasting also occurred at a terminal in Sabine Pass, Texas on several occasions in 2002 and 2004, causing pollutants to leak into the Sabine River. (Id., exhs. 7-9.)
The government's investigation further revealed that the Midland's crew had, on multiple occasions from 2002 through 2004, discharged a mixture of hydraulic oil and water into U.S waters. (Id., exh. 5 at 16.) The crew failed to report the discharge to the appropriate federal agency in violation of the CWA, 33 U.S.C. § 1321(b)(5). (Id.) The government learned that crew members *900 discharged the oil and water mixture into the Gulf of Mexico at night to avoid detection. (Id., exhs. 1-4, 6.) Moreover, the Midland's crew discharged garbage in violation of the Act to Prevent Pollution from Ships ("APPS"), 33 U.S.C. § 1908(a). (Doc. 55, exh. 5 at 16.)
On August 16, 2007, the government prosecuted Rowan. (Doc. 48, exh. 11.) Rowan subsequently admitted to violations of the CWA, 33 U.S.C. §§ 1319 and 1321, APPS, 33 U.S.C. § 1908(a), and pleaded guilty to Failing to Notify of Waste Discharge into U.S. Waters, Discharging Garbage into U.S. Waters, and Knowingly Discharging a Pollutant into U.S. Waters. (Doc. 48 at 2-3, exh. C.) On November 19, 2007, the U.S. District Court for the Eastern District of Texas entered judgment against Rowan. (Id.) The judgment indicated that Rowan's last offense ended on December 31, 2004. (Id.) Rowan paid $7,000,000 in criminal fines, $1,000,000 to five state government organizations for environmental training concerning CWA violations, and $1,000,000 to the National Marine Sanctuaries Foundation for preservation projects off the coasts of Louisiana and Texas. (Doc. 55, exh. 14.)
On January 3, 2008, the State of Louisiana, acting in its sovereign capacity and as parens patriae on behalf of the general welfare and economy of her citizens, initiated this suit against Rowan. (Doc. 1.) Louisiana sues for damages on Rowan's admitted violations of federal environmental laws that ended in 2004. (Doc. 41 at ¶ 1.1.) Specifically, Louisiana brings claims for negligence, trespass, public nuisance, and unjust enrichment arising from Rowan's commission of maritime torts and violations of federal environmental regulations. Rowan moves for summary judgment.
II. Summary Judgment Standard
A party moving for summary judgment must inform the court of the basis for the motion and identify those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, that 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); Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The substantive law governing the suit identifies the essential elements of the claims at issue and therefore indicates which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). The initial burden falls on the movant to identify areas essential to the nonmovant's claim in which there is an "absence of a genuine issue of material fact." Lincoln Gen. Ins. Co. v. Reyna, 401 F.3d 347, 349 (5th Cir.2005). If the moving party fails to meet its initial burden, the motion must be denied, regardless of the adequacy of any response. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc). Moreover, if the party moving for summary judgment bears the burden of proof on an issue, either as a plaintiff or as a defendant asserting an affirmative defense, then that party must establish that no dispute of material fact exists regarding all of the essential elements of the claim or defense to warrant judgment in his favor. Fontenot v. Upjohn, 780 F.2d 1190, 1194 (5th Cir.1986) (the movant with the burden of proof "must establish beyond peradventure all of the essential elements of the claim or defense to warrant judgment in his favor" (emphasis in original)).
Once the movant meets its burden, the nonmovant must direct the court's attention to evidence in the record sufficient to *901 establish that there is a genuine issue of material fact for trial. Celotex, 477 U.S. at 323-24, 106 S. Ct. 2548. The non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric Indust. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986) (citing U.S. v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 8 L. Ed. 2d 176 (1962)). Instead, the non-moving party must produce evidence upon which a jury could reasonably base a verdict in its favor. Anderson, 477 U.S. at 248, 106 S. Ct. 2505; see also DIRECTV Inc. v. Robson, 420 F.3d 532, 536 (5th Cir.2005). To do so, the nonmovant must "go beyond the pleadings and by [its] own affidavits or by depositions, answers to interrogatories and admissions on file, designate specific facts that show there is a genuine issue for trial." Webb v. Cardiothoracic Surgery Assoc. of N. Tex., P.A., 139 F.3d 532, 536 (5th Cir.1998). Unsubstantiated and subjective beliefs and conclusory allegations and opinions of fact are not competent summary judgment evidence. Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir.1998); Grimes v. Tex. Dept. of Mental Health and Mental Retardation, 102 F.3d 137, 139-40 (5th Cir.1996); Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.1994), cert. denied, 513 U.S. 871, 115 S. Ct. 195, 130 L. Ed. 2d 127 (1994); Topalian v. Ehrman, 954 F.2d 1125, 1131 (1992), cert. denied, 506 U.S. 825, 113 S. Ct. 82, 121 L. Ed. 2d 46 (1992). Nor are pleadings summary judgment evidence. Wallace v. Tex. Tech Univ., 80 F.3d 1042, 1046 (5th Cir.1996) (citing Little, 37 F.3d at 1075).
The nonmovant cannot discharge his burden by offering vague allegations and legal conclusions. Salas v. Carpenter, 980 F.2d 299, 305 (5th Cir.1992); Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 889, 110 S. Ct. 3177, 111 L. Ed. 2d 695 (1990). Nor is the court required by Rule 56 to sift through the record in search of evidence to support a party's opposition to summary judgment. Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir.1998) (citing Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915-16 & n. 7 (5th Cir.1992)). Nevertheless, all reasonable inferences must be drawn in favor of the nonmoving party. Matsushita, 475 U.S. at 587-88, 106 S. Ct. 1348; see also, Reaves Brokerage Co. v. Sunbelt Fruit & Vegetable Co., 336 F.3d 410, 412 (5th Cir.2003). The party opposing a motion for summary judgment does not need to present additional evidence, but may identify genuine issues of fact extant in the summary judgment evidence produced by the moving party. Isquith v. Middle S. Utils., Inc., 847 F.2d 186, 198-200 (5th Cir.1988). The nonmoving party may also identify evidentiary documents already in the record that establish specific facts showing the existence of a genuine issue. Lavespere v. Niagara Mach. & Tool Works, Inc., 910 F.2d 167, 178 (5th Cir.1990).
III. Discussion
A. Laches and the Statute of Limitations
Rowan argues that the doctrine of laches bars Louisiana's maritime negligence claim. (Doc. 48 at 5-8.) Laches is an equitable doctrine that, once proved, serves as a complete defense to an action irrespective of whether the analogous state statute of limitations has run. Mecom v. Levingston Shipbuilding Co., 622 F.2d 1209, 1215 (5th Cir.1980). A laches defense consists of three elements: (1) delay on the part of the plaintiff in filing suit; (2) that is not excused; and (3) that results in undue prejudice to the defendant's ability to present an adequate defense. Nat'l Ass'n of Gov't Employees v. City Pub. Serv. Bd. of San Antonio, Texas, 40 F.3d 698, 708 (5th Cir.1994) (citing Geyen v. *902 Marsh, 775 F.2d 1303, 1310 (5th Cir.1985)); see also West Wind Africa Line, Ltd. v. Corpus Christi Marine Servs., Co., 834 F.2d 1232 (5th Cir.1988) (applying the three elements to an admiralty case).
The Fifth Circuit applies an analogy rule to determine which party bears the burden of proof with regard to unreasonable delay and prejudice. Mecom v. Levingston Shipbuilding Co., 622 F.2d 1209, 1215 (5th Cir.1980). Under this rule, the Court must determine which statute of limitations period is most analogous to the claim at hand. Id. Where the plaintiff files a claim within the analogous statute of limitations, the defendant bears the burden of proving unreasonable delay and prejudice to maintain a viable laches defense. Id. If, however, the plaintiff files suit after the analogous statute has run, then the plaintiff must prove the absence of prejudice or provide an excuse for the delay to defeat a laches defense. Id.
Rowan asserts that laches bars Louisiana's maritime negligence claim. Louisiana argues that the defendant shoulders the burden to prove unreasonable delay and prejudice because its claim was filed within the six year statute of limitations applicable to actions under the Federal Water Pollution Control Act, which it says is most analogous to the maritime tort claims at issue here. (Doc. 55 at 10.) In U.S. v. P/B STCO 213, however, the Fifth Circuit held that the federal statute of limitations period is six years for contract claims and three years for tort. 756 F.2d 364, 366 (5th Cir.1985). Here, because Louisiana seeks to recover in tort, the federal statute of limitations for contract claims is not the most analogous, and a tort statute of limitations must apply. The alleged maritime torts in this case occurred on or before December 31, 2004 and Louisiana filed suit on January 3, 2008. Whether the court applies the three-year federal statute of limitations for torts or the one-year state statute of limitations for torts, Louisiana's maritime tort claim is untimely. Therefore, Louisiana bears the burden of showing that its delay was either excusable or non-prejudicial to quash the laches defense.
Rowan argues that the delay is inexcusable because Louisiana waited over three years from the last date of any underlying act to file suit. (Doc. 48 at 7.) However, Louisiana did not have actual notice of the alleged tortious activity until October 9, 2007, when the Department of Justice released information regarding the criminal action, and filed suit three months later, on January 3, 2008. (Doc. 55, exh. 14.) Because Louisiana sued soon after receiving actual notice, the delay is excusable. Rowan further argues that Louisiana had constructive notice of the alleged torts when the government initiated criminal proceedings in August 2007. Because Louisiana was not a party to those proceedings, this argument is unpersuasive. Rowan also claims that Louisiana had constructive notice because a Louisiana State Trooper participated in the government's investigation in 2004. (Doc. 77, exh. 4.) The actions and knowledge of one state employee, however, are insufficient to put Louisiana on constructive notice of the alleged tortious activity. Therefore, because Louisiana filed suit within three months of receiving actual notice of the underlying acts, its delay in filing suit is excusable.
Negligence claims in Louisiana have a one year prescriptive period. La. Civ.Code Ann. art. 3492. Trespass and nuisance claims are possessory actions. La.Code Civ. Proc. Ann. art. 3655. The prescriptive period for a possessory action is also one year. Id. at art. 3658. Louisiana recognizes a discovery rule that tolls the statute of limitations until the owner of immovable property acquires, or should have acquired, knowledge of the alleged *903 damage. La. Civ.Code Ann. art. 3493. The Fifth Circuit analyzes the discovery rule in article 3493 as congruent with the doctrine of contra non valentem, so that the prescription period does not run against a party who is unable to act. Terrebonne Parish School Bd. v. Mobil Oil Corp., 310 F.3d 870, 884 & nn. 36-37 (5th Cir.2002). The prescriptive period is suspended when the cause of action is not known or reasonably knowable by the plaintiff, even though the ignorance is not induced by the defendant. Id. Because Louisiana did not know or have reason to know of the alleged torts until October 9, 2007, this discovery rule applies. Louisiana filed suit on January 3, 2008, three months after discovering the cause of action and therefore it is not barred by the prescriptive period.
B. Negligence
Maritime negligence requires the plaintiff to demonstrate that (1) the defendant owed a duty to plaintiff; (2) the defendant breached that duty; (3) the plaintiff sustained an injury; (4) and defendant's conduct was the actual and proximate cause of plaintiff's injury. In Re: Cooper / T. Smith, 929 F.2d 1073, 1077 (5th Cir.1991) (citing Thomas v. Express Boat Co., 759 F.2d 444, 448 (5th Cir. 1985)). Actual cause is "but for" causation. Thomas, 759 F.2d at 448. To establish proximate cause, the plaintiff must prove that the negligence was a substantial factor in bringing about the alleged harm. Id. Louisiana has provided an undisputed factual record showing that Rowan polluted in and around Louisiana. (Doc. 55, exhs. 5, 7-9.) Although pollution is inherently harmful, Louisiana fails to establish actual or proximate cause of any damage. In its First Amended Complaint, Louisiana asserts generally that as the direct and proximate result of Rowan's tortious conduct Louisiana suffered damage to its environment, wildlife, natural resources, and public land. (Doc. 39 at 5.) Louisiana establishes that Rowan owed it a duty of care and that Rowan breached that duty. Louisiana, however, cannot establish that breach of that duty was the actual and proximate cause of the harm alleged without providing some proof of actual harm.[1] Accordingly, Louisiana fails to present a viable maritime negligence claim.
In Louisiana, there are five elements of a negligence claim: (1) the defendant had a duty to conform its conduct to a specific standard of care; (2) the defendant failed to conform its conduct to that specific standard of care; (3) the substandard conduct of the defendant was a cause in fact of plaintiff's injuries; (4) the defendant's substandard conduct was the legal cause of the plaintiff's injuries; and (5) the plaintiff suffered actual damages. Westchester Fire Ins. Co. v. Haspel-Kansas Inv. Partnership, 342 F.3d 416, 419 (5th Cir.2003) (citing Pinsonneault v. Merchants & Farmers Bank & Trust Co., 816 So. 2d 270, 275-76 (La.2002)). The fifth element requiring actual damages augments the standards of general maritime negligence. Under Louisiana law, the plaintiff has the burden of proving its actual damages. See Andrus v. Trailers Unlimited (Roadmaster Custom Div.), 647 F.2d 556, 559 (5th Cir.1981). That is, the plaintiff must prove the loss it suffered. Id. Louisiana has offered no evidence of specific damage. General and conclusory statements about the harm that pollution causes are insufficient to establish the particular *904 harm that Louisiana suffered. See U.S. v. Dixie Carriers, Inc., 736 F.2d 180, 186 n. 11 (5th Cir.1984) (citing California v. S.S. Bournemouth, 307 F. Supp. 922, 928-29 (C.D.Cal.1969)). In fact, Louisiana all but concedes this fact in its response to Rowan's motion for summary judgment.[2] Without evidence of damages, Louisiana cannot establish that Rowan's conduct was an actual and proximate cause of the alleged damage.
C. Unjust Enrichment
The equitable principle underlying unjust enrichment is that no party should be enriched at the expense of another. Corbello v. Iowa Prod., 850 So. 2d 686, 712 (La.2003). Maritime unjust enrichment claims are cognizable when based on a maritime contract. See Exxon Corp. v. Central Gulf Lines, Inc., 500 U.S. 603, 610, 111 S. Ct. 2071, 114 L. Ed. 2d 649 (1991). A quasi-contract arises when there is a duty imposed by law in the absence of a promise. P/B STCO 213, 756 F.2d at 371. The Fifth Circuit recognizes that the primary duty to clean up pollution rests with the polluter. Id. at 369. As such, unjust enrichment claims based on quasi-contractual principles are a legitimate means to secure restitution for the cost of cleaning up another's pollution. Id. at 371 (explaining that "[t]he idea here is that if money be expended by one person on behalf of another the law will impose a duty to compensate on the person thereby benefited, if on general principles of equity the money should have been paid in the first instance, in whole or in part, by him rather than by the plaintiff."). Where the plaintiff seeks restitutionary damages, a maritime unjust enrichment claim based on quasi-contractual principles is cognizable. Id. (recognizing "[a] quasi contractual obligation to reimburse a plaintiff, who has performed a duty, at his own expense . . . where the performance of the duty was necessary to preserve the public's welfare and safety.").
Louisiana argues that Rowan was unjustly enriched by its clean up of Rowan's unlawful pollution. In Louisiana, unjust enrichment claims must meet five prerequisites: (1) there must be an enrichment; (2) there must be an impoverishment; (3) there must be a connection between the enrichment and the resulting impoverishment; (4) there must be an absence of "justification" or "cause" for the enrichment and impoverishment; and (5) the action will only be allowed when there is no other remedy at law, i.e., the action is subsidiary or corrective in nature. Gallant Investments, Ltd. v. Illinois Cent. R. Co., 7 So. 3d 12, 18 (La.App.Ct.2009) (citing Minyard v. Curtis Products, Inc., 251 La. 624, 651-52, 205 So. 2d 422 (1968)). The availability of a remedy at law precludes recovery in equity. Id. Delictual causes of action such as intentional misconduct and negligence are examples of at law remedies that bar an action in equity. Mouton v. State, 525 So. 2d 1136, 1143 (La.App.Ct. 1985).
Because the at law remedies Louisiana asserts are not viable, an at law remedy does not bar recovery in equity. Louisiana, however, cannot establish that Rowan's actions caused it any impoverishment. Louisiana does not claim that it ever performed Rowan's duties or paid for the clean up costs of Rowan's pollution. *905 As evidence that Rowan was enriched, Louisiana provides one expert's opinion on how much money Rowan saved by polluting. (Doc. 48, exh. D.) That opinion, however, does not establish that Louisiana was impoverished. The maritime unjust enrichment claim is not viable.
Louisiana also asserts that water contamination, degradation of water quality, and general harm to the environment counts as impoverishment. (Doc. 55 at 24.) Other than relying on the tautology that water pollution is harmful, Louisiana does not provide any specific evidence of actual environmental impact capable of establishing a causal connection between its impoverishment and Rowan's enrichment.
Moreover, it is unclear whether Rowan was enriched. Rowan paid $7,000,000 in criminal fines, $1,000,000 to five state government enforcement organizations, and $1,000,000 to the National Marine Sanctuaries Foundation and the Stetson Banks National Marine Sanctuary. (Doc. 55, exh. 15.) Some of the fines that Rowan paid went to nonprofit organizations that benefit Louisiana. The unjust enrichment claim is not viable.
D. Public Nuisance
A nuisance is a nontrespassory invasion that impairs the use and enjoyment of another's land. Cox v. City of Dallas, Tex., 256 F.3d 281, 289 (5th Cir. 2001). A public nuisance involves an unreasonable interference with a right common to the general public. Id. (citing Restatement (Second) of Torts § 821B). To determine whether a defendant's conduct amounts to a public nuisance, courts consider whether the conduct involves a significant interference with public health, safety, peace, comfort, or convenience. After establishing a public nuisance, a plaintiff can obtain an injunction or damages. Id. at 291 (citing Restatement (Second) of Torts § 821C). To recover damages, a plaintiff must have suffered significant harm different in kind from that suffered by the general public. Id. Recovery, then, is available to a plaintiff who has sustained particular damages, defined at common law as substantially greater than the presumed-at-law damages suffered by the general public. Louisiana, ex rel. William J. Guste, Jr. v. M/V TESTBANK, 752 F.2d 1019, 1030 (5th Cir.1985).[3]
Although pollution is a significant interference with public health and safety, Louisiana fails to establish that it suffered significant harm different in kind from the general public. Louisiana's assertion that pollution is inherently harmful does not reach the particular damages threshold that common law public nuisance requires. Because Louisiana cannot establish that it suffered any actual harm, it cannot establish that its territory or citizens suffered any particular damages substantially greater than the general public.
E. Trespass
Trespass requires the unlawful physical invasion of the property or possession of another. Lacombe v. Carter, 975 So. 2d 687, 689 (La.App.Ct.2009). In an action for trespass, a plaintiff must show damages flowing from the act of trespass with either direct or circumstantial *906 evidence. Id. Moreover, one who is wronged by a trespass may recover general damages suffered, including mental and physical pain, anguish, distress, and inconvenience. Id. Louisiana provides one expert's opinion on how much money Rowan saved by polluting. (Doc. 48, exh. D.) That opinion, however, does not establish that Louisiana either performed Rowan's duties or paid for the cleanup costs of Rowan's pollution. Louisiana also asserts that the trespass caused damage to the natural resources and environmental interests of the State of Louisiana. (Doc. 39 at ¶ 5.8.) Other than arguing that water pollution is harmful, Louisiana does not provide any specific evidence of the actual environmental impact of Rowan's pollution. Because it is unable to show actual harm, Louisiana also cannot establish any inconvenience or damages flowing from the trespass.
IV. Conclusion
Louisiana asserts that Rowan intentionally broke the law and polluted the waters in and around Louisiana and asks that Rowan be held accountable. Rowan was, however, held accountable through a criminal prosecution resulting in millions of dollars in fines. Though criminal penalties do not absolve civil liability, the elements of a criminal violation of the CWA are not the same as those for the civil causes of action, which must be met here. Because Louisiana fails to show that Rowan's actions resulted in any actual harm or impoverishment to Louisiana, the Court must grant Rowan's motions for summary judgment.
Accordingly, it is hereby ORDERED that Defendant Rowan's motions for summary judgment are GRANTED.
NOTES
[1] The criminal charges to which Rowan pleaded guilty did not require proof of any actual harm to the environment and therefore the plea does not satisfy the damages requirement of the negligence claim in this civil action. 33 U.S.C. §§ 1319, 1321, and 1908(a).
[2] Louisiana states, "[T]here is no "practical" remedy available to [Louisiana] because of [Rowan's] intentional and successful efforts to conceal the full nature and extent of the contamination they caused . . . [T]he contaminant plumes have long since moved from their original location, precluding [Louisiana] from being able to prove the traditional damages available[.]" (Doc. 55 at 24-25.) A spoliation argument is inapplicable because, as Louisiana points out, the contaminant moved naturally from its original location.
[3] Rowan asserts that Louisiana's claim for public nuisance fails because it does not fit within the requirements of Louisiana Revised Statutes 13:4713. (Doc. 48 at 14.) That statute, however, is not applicable to Louisiana's cause of action. While the statute uses the term public nuisance, it deals exclusively with the procedures to enjoin specific criminal activity. See La.Rev.Stat. § 13:4711 (listing the following as criminal activity: crimes of violence, weapons charges, drug charges, obscenity, and prostitution). Here, Louisiana clearly seeks damages based on a common law theory of public nuisance.
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https://www.courtlistener.com/api/rest/v3/opinions/2469760/
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776 F. Supp. 2d 215 (2011)
AMERICAN INTERNATIONAL SPECIALTY LINES, et al.
v.
George BLAKEMORE, et al.
Civil Case No. 1:06-00600.
United States District Court, W.D. Louisiana, Alexandria Division.
March 3, 2011.
*216 Patrick Manning Wartelle, Leake & Andersson, Lafayette, LA, George D. Fagan, Marc Edward Devenport, Leake & Andersson, New Orleans, LA, for Plaintiffs.
Charles L. Dirks, III, Avant & Falcon, Kevin Paul Landreneau, Seale & Ross, Baton Rouge, LA, Thomas Glenn Buck, Brett Tweedel, David B. Parnell, Jr., John C. Henry, *217 Blue Williams, Metairie, LA, for Defendants.
RULING AND JUDGMENT
JAMES D. KIRK, United States Magistrate Judge.
Before the court are competing motions for summary judgment regarding insurance coverage. One motion was filed by plaintiffs, Chartis Specialty Insurance Company, Insurance Office of America, LLC and Martin H. Jones, who contend coverage should be provided by First Financial Insurance Company ("FFIC") for the allegations made in the lawsuit as to Haynes Industries, LLC, Haynes Industries, HI Insulation, LLC, HI Insulation, Lee Haynes, Sr., Lee Haynes, Jr. and their employees (Doc. 147).[1] The other motion was filed by First Financial Insurance Company ("FFIC") who contends coverage does not exist under the policy as to any of the properly named defendants in this action (Doc. 156). Both the plaintiffs and FFIC filed an opposition to the other's motion for summary judgment (Doc. 169 and 174, respectively). Thereafter, the undersigned sought additional briefs from both parties regarding the issue of reformation (R. 207) and each filed a supplemental memorandum and a reply brief (R. 210, 212, 215, 218).
Facts
This case revolves around property damage which occurred as a result of a fire in April 2005, at 400 Rifle Point Plantation in Ferriday, Louisiana.
The home at 400 Rifle Point Plantation is one of several structures located on a hunting and fishing ranch known as Rifle Point Plantation. The land and structures are owned by SRM Properties, LLC which was established by Paul Meng for the sole purpose of acting as Rifle Point Plantation's owner. The construction of the various structures took place in and around 2003 and SRM Properties, LLC, Scenic Homes, Inc. and M & R Equipment Company, Inc. were the general contractors. Paul Meng's brother, Jim Meng, oversaw the day to day construction of these homes.
In April of 2003, Jim Meng contacted "HI Insulation" and spoke to Lee Haynes, Jr. about performing the insulation work for the houses on Rifle Point Plantation. It is unknown as to the exact date the insulation work was performed at 400 Rifle Point Plantation, but insulation was installed in various structures in approximately April 2003 and September thru November 2003.
In April 2005, the structure located at 400 Rifle Point Plantation caught fire and sustained both fire and smoke damage.[2] The owner, SRM Properties, LLC, presented a claim to its insurer for damages, losses and other relief. A determination was made that the building and its contents were destroyed and, therefore, were totally useless.
Having paid for the fire damage pursuant to an insurance policy they issued, plaintiffs entered into an agreement with SRM Properties, LLC, Scenic Homes, Inc. and M & R Equipment Company, Inc. whereby the aforementioned entities fully and completely set over, transferred and assigned their claims, interests, privileges and rights for the prosecution and recovery of all damages, losses, costs, expenses and any other relief of any and every kind *218 resulting from, in connection with or arising out of the fire to the plaintiffs.
On April 9, 2006, plaintiffs filed this suit against various defendants who performed work at 400 Rifle Point Plantation and who plaintiffs alleged caused the fire via defects in construction. The named defendants who remain in the case today are: 1) HI Insulation, LLC, 2) Lee Haynes, Jr. d/b/a HI Insulation, 3) Haynes Industries, LLC, 4) Lee Haynes, Sr. and 5) First Financial Insurance Company.
It is important for the reader to note that despite the fact Lee Haynes, Jr. d/b/a HI Insulation is a defendant named in this case, there is no evidence that HI Insulation ever operated as a d/b/a of Lee Haynes, Jr. It is also important to note that though they are not named as defendants, other entities (or purported entities) which play a role in this case are Haynes Investments, LLC d/b/a HI Insulation and Haynes Industries. Haynes Investments, LLC was formed in 1998 and established HI Insulation as a d/b/a the following year. HI Insulation was operated this way until it formed an LLC in December 2004.
The facts of the case are confusing and complicated because of the similarity in names of both the entities and those who own them.[3] Lee Allen Haynes is the name of both the father and son who are alleged to own the company which performed the insulation work at 400 Rifle Point Plantation. There is no legal distinction between the father's and the son's names; however, for the sake of clarification, the father will be referred to as "Lee Haynes, Sr." and the son will be referred to as "Lee Haynes, Jr.".
Additional confusion lies in the names of the Haynes' companies. Lee Haynes, Sr. formed Haynes Investments, LLC and it operated HI Insulation as a d/b/a from 1999 through December of 2004. In August of 2003, Haynes Industries, LLC was established and its shareholders included Lee Haynes, Sr. and Lee Haynes, Jr.[4] It was not until December of 2004, long after the work that is subject of this case was performed, that HI Insulation itself became an LLC.
Lee Haynes, Sr. was responsible for seeking and obtaining insurance coverage for Haynes Investments, LLC d/b/a HI Insulation and in fact secured a commercial general liability ("CGL") policy for the policy period March 23, 2003 through March 23, 2004. The policy, which was placed through Strickland General Agency of La, Inc. was an FFIC occurrence policy and the named insured was Haynes Investments, LLC d/b/a HI Insulation.[5]
In May 2004, Lee Haynes, Jr. sought insurance for Haynes Industries, through his agent, Blumberg and Associates, Inc. The Commercial Insurance Application which sought insurance on behalf of Haynes Industries and was signed by Lee Haynes, Jr., indicated Haynes Industries was an individual business which performed insulation installation. The application read, "this is the son of another [i]nsulation company and he is going out on his own. He has 10 years experience." A Contractor Supplemental Application, dated the same date and arriving at Southern General AgencySouth on the same day as the Commercial Insurance Application, *219 sought coverage for HI Insulation. This application was completed and signed by Lee Haynes, Jr. and in it, he advised the company was in the insulation business for six years and was owned by two people.
Based upon the aforementioned applications, FFIC issued a Commercial General Liability policy for the policy period May 6, 2004 through May 6, 2005 which includes the dates of the occurrence of the fire in April 2005. The named insured as set forth in the Common Policy Declarations page was "Haynes Industries" and that name was amended by endorsement in July of 2004 to "Haynes Industries, HI Insulation Investments". The policy makes clear that the amendment to the named insured was effective May 6, 2004 and there was no change in the premium charged. Other than the commercial general application which lists Haynes Industries as the individual business enterprise for whom insurance was sought, no evidence either documentary or testimonial, exists to show that Haynes Industries ever existed. The record is entirely devoid of evidence that HI Insulation Investments was ever an entity and no argument to the contrary has been asserted.
The Law of Summary Judgment
Rule 56 of the Federal Rules of Civil Procedure was recently amended to provide "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[6] A dispute regarding a material fact is "genuine" "if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). The court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986); Washburn v. Harvey, 504 F.3d 505, 508 (2007).
Additionally, Local Rule 56.2W provides that all material facts set forth in a statement of undisputed facts submitted by the moving party will be deemed admitted for purposes of a motion for summary judgment unless the opposing party controverts those facts by filing a short and concise statement of material facts as to which that party contends there exists a genuine issue to be tried.
If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record contains insufficient proof concerning an essential element of the nonmoving party's claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See Celotex, 477 U.S. at 324, 106 S. Ct. 2548. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue exists for trial. See id. at 325, 106 S. Ct. 2548; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994); Austin v. Will-Burt Company, 361 F.3d 862 (5th Cir.2004). This burden is not satisfied with "some metaphysical doubt as to the material facts," by "conclusory allegations," by "unsubstantiated *220 assertions," or by only a "scintilla" of evidence. Little, 37 F.3d at 1075.
All evidence must be considered, but the court does not make credibility determinations. If the movant fails to meet its initial burden, summary judgment should be denied. Id.
Discussion
Coverage
Louisiana Civil Code article 2045 provides: "[i]nterpretation of a contract is the determination of the common intent of the parties." "When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent." La.C.C. art. 2046. The contract must be "construed according to the entirety of its terms and conditions as set forth in the policy, and as amplified, extended, or modified by any rider, endorsement, or application attached to or made a part of the policy." LA.REV.STAT.ANN. § 22:654 (2004). Whether the application is part of the insurance contract is determined by the parties' intent and the intent must be expressed on the face of the policy. Peterson v. Schimek, 729 So. 2d 1024 (La.1999). Failure to do so renders the application and its representations to have no contractual force as they are not considered part of the contract.[7]Id.
If an insurance policy is found to be ambiguous after an examination of the policy as a whole, use of extrinsic evidence is proper. Fontenot v. Diamond B. Marine Services, Inc., 937 So. 2d 425 (La.App. 4 Cir.2006). Extrinsic evidence is also admissible to show mutual error even where the terms of the policy are not ambiguous. Samuels v. State Farm Mut. Auto. Ins., 939 So. 2d 1235 (La.2006).
As previously stated, the named insureds are "Haynes Industries, HI Insulation Investments". Lee Haynes, Jr. is designated as an individual on the Common Policy Declarations page. Under the section "Who is an Insured", it is clear that if you are designated as an individual in the Declarations, you and your spouse are insureds "but only with respect to the conduct of a business of which you are a sole owner." Additionally, "no person or organization is an insured with respect to the conduct of any current or past partnership, joint venture or limited liability company that is not shown as a Named Insured in the Declarations." Thus the policy makes it clear that, neither Haynes Investments, LLC nor Haynes Industries, LLC nor any person (Lee Haynes, Sr. or Lee Haynes, Jr.) or organization (HI Insulation) affiliated with them is afforded coverage under the policy.[8] Further, Lee Haynes, Jr. is not an insured with respect to any of the conduct of either Haynes Investments, LLC nor Haynes Industries, LLC because he is not the sole owner of either corporation. Thus, coverage is not afforded for any of the named defendants.
The court recognizes that it is unlikely that Lee Haynes, Jr. intended to procure and pay for insurance on two non-existent businesses (neither Haynes Industries nor HI Insulation Investments ever existed or conducted business). However, it is unclear in this case which entity(s) Lee Haynes, Jr. sought to insure. Despite the fact this question of intent exists, it does preclude the court from determining coverage does not exist and granting FFIC's *221 motion for summary judgment. Even if we knew the parties' intent, procedurally, the only means by which the error could be corrected is reformation and plaintiffs have no such right of action.
Reformation
Reformation of a contract is proper where the agent who issues the policy acts in a negligent, mistaken or fraudulent manner. Sherlock v. Ocean Salvage Corp., 785 So. 2d 932 (La.App. 4 Cir.2001), citing Hebert v. Breaux, 285 So. 2d 829 (La.App. 1 Cir.1973). "If the agent knows the true intention of the policyholder as to the coverage desired, the insurance company is bound by the agent's knowledge, and the policy erroneously issued will be reformed so as to conform to the original intention." Hebert, 285 So.2d at 830, citing Maggio v. State Farm Mutual Automobile Ins. Co., 123 So. 2d 901 (La.App. 1 Cir.1960); Richard v. United States Fidelity and Guaranty Co., 247 La. 943, 175 So. 2d 277 (1965): Urania Lumber Co. v. Insurance Co. Of North America, 177 So. 2d 640 (La.App. 3 Cir.1965).
Plaintiffs cite several cases from the 1950s, 60s and 70s in support of their argument that they have standing to seek reformation of the policy at issue. For example, they cite Maggio v. State Farm Mut. Auto Ins. Co., 102 So. 2d 505 (La.App. 1st Cir.1958)[9] for the proposition that the Louisiana Direct Action Statute allows an injured party to sue the insurer directly; thus providing the injured party with a right of action to seek reformation. Additionally, they cite Bonadona v. Guccione, 362 So. 2d 740 (La.1978) and Perry v. Law, 334 So. 2d 523 (La.App. 1st Cir.1976) in which the courts allowed an injured person to seek and ultimately obtain reformation of a contract to which they were not a party.
The court is not persuaded by these cases for several reasons. First, more recent case law does not allow for reformation unless the party seeking reformation is an insured, a party to the contract or a third party beneficiary. See Gardner v. State Farm Mut. Auto. Ins. Co., 817 So. 2d 398, 400 (La.App. 4 Cir.2002) (a plaintiff who is neither an insured nor a party to the contract has no right of action for reformation); Haddad v. Elkhateeb, 46 So. 3d 244 (La.App. 4th Cir.2010) ("In Louisiana, a plaintiff may sue under an insurance policy when he is a named insured, additional insured, or third-party beneficiary of the contract ... Under Louisiana law, "absent a contrary statutory provision, actions ex contractu cannot be maintained against a party by an individual who is not a party thereto." citing Randall v. Lloyd's Underwriter's at London, 602 So. 2d 790, 791 (La.App. 4th Cir.1992)). Second, the third party here is an insurance company who stands in the shoes of its insured (but not in the shoes of the insured in the policy sought to be reformed) in order to recoup losses it has already paid. It is not (as in the cited cases) an individual who was a victim of a tort and seeks damages. Third, none of the cases specifically address standing to seek reformation. Rather, the court either implied a right of action existed by allowing the case to proceed or it noted that there was no real issue but if there was, the Direct Action Statute should apply.[10]
As the plaintiffs are neither a party to the contract, an insured nor a third party beneficiary, they lack standing to *222 pursue reformation of the policy.[11] The court recognizes this decision is harsh because it is obvious that Lee Haynes, Jr. intended to insure an existing company(s) and FFIC received the benefit of premiums paid despite insuring two non-existent entities. Nevertheless, the result is, as explained above, mandated by the rules governing reformation of insurance contracts.
Duty to Defend
Neither Haynes Industries nor HI Insulation Investments performed the work at Rifle Point and neither are defendants named in this lawsuit. Thus, there is no duty to defend with respect to these insureds.
Though Lee Haynes, Jr., a properly named defendant, is considered an insured with respect to the conduct of a business of which he is the sole owner, there is no evidence that the conduct in question was performed by a business of which he is the sole owner. Thus, he is not entitled to a defense by FFIC to this lawsuit.
Late Notice
FFIC argues coverage should not be afforded because it was not put on notice until two years after the lawsuit was filed. However, in light of the findings made above, there is no need to address this argument.
Alter Ego
Plaintiffs argue that Haynes Industries, LLC, Haynes Industries, HI Insulation, LLC and HI Insulation were alter egos of Lee Haynes, Sr. and Lee Haynes, Jr. Even if the argument is a valid one, it does nothing to establish coverage for any of the aforementioned entities, purported entities or individuals under the policy as it stands today. As stated several times, Haynes Industries and HI Insulation Investments never existed so they could not be an alter ego of anyone or anything. Further, neither Haynes Industries, LLC, HI Insulation, LLC nor HI Insulation are insureds under the policy as written so even if they are alter egos of the Haynes, coverage still would not be afforded.
Accordingly, in light of the foregoing
IT IS HEREBY ORDERED that FFIC's motion for summary judgment (Doc. 156) is GRANTED and plaintiffs' partial motion for summary judgment (Doc. 147) is DENIED.
NOTES
[1] Though plaintiffs seek coverage for allegations made in the suit as to Haynes Industries, Haynes Industries is not named as a defendant in the lawsuit.
[2] Plaintiffs contend the fire was a result of insulation being installed too close to a hot water heater flue pipe.
[3] By Lee Haynes, Sr.'s own admission, the confusion between entities was intended. (Doc. 156-6, p. 7).
[4] Though Lee Haynes, Sr. denied any ownership in Haynes Industries, LLC, the articles of incorporation provided by the Louisiana Secretary of State shows he held 90% of the stock and Lee Haynes, Jr. held the remaining 10% at the time of its formation.
[5] The broker was Employer's Insurance Representatives.
[6] Rule 56 was amended effective December 1, 2011. The comments to the amendment indicate the intent was "to improve the procedures for presenting and deciding summary-judgment motions and to make procedures more consistent with those already used in most courts. The standard for granting summary judgment remains unchanged."
[7] The policy at issue fails to state that the application is made a part of the contract.
[8] It appears that the work was performed by HI Insulation as a d/b/a of either Haynes Investments, LLC or Haynes Industries, LLC but the determination of this issue is not necessary to decide whether or not summary judgment should be granted as to coverage.
[9] Affirmed after remand by Maggio v. State Farm Mutual Automobile Ins. Co., 123 So. 2d 901 (La.App. 1 Cir.1960).
[10] Maggio, a 1958 case, is the only Louisiana case which even mentions the Direct Action Statute as providing a third party a right of action to seek reformation.
[11] If plaintiffs were deemed to have standing, a genuine issue of material fact regarding whether there was a mutual mistake would have to be resolved. The record is devoid of evidence as to which entity(s) Lee Haynes, Jr. intended to insure and what, if anything, Blumberg & Associates, Southern General AgencySouth or FFIC knew regarding his intent. The reader should also be reminded that the plaintiff is not subrogated to the rights of the insured under the contract sought to be reformed.
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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/2469763/
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753 F. Supp. 2d 1297 (2010)
TRUMPF MEDICAL SYSTEMS, INC., Plaintiff,
v.
UNITED STATES, Defendant.
Slip Op. 10-123. Court No. 07-00316.
United States Court of International Trade.
October 27, 2010.
*1299 Simons & Wiskin, New York, NY (Philip Yale Simons and Jerry P. Wiskin), for Plaintiff.
Tony West, Asst. Atty. Gen., Barbara S. Williams, Atty. in charge, Intern. Trade Field Office, U.S. Dept. of Justice, (Mikki Cottet), for Defendants.
OPINION AND ORDER
POGUE, Judge.
This case concerns the proper tariff classification of certain surgical light systems imported into the United States by Trumpf Medical Systems, Inc. ("Trumpf" or "Plaintiff"). U.S. Customs and Border Protection ("Customs") liquidated Trumpf's merchandise as lamps or light fittings under various Subheadings of Heading 9405 of the Harmonized Tariff Schedule of the United States ("HTSUS").[1] Trumpf argues that its merchandise is properly classified as surgical instruments or appliances under HTSUS Heading 9018.[2] Plaintiff and the United Court No. 07-00316 Page 3 States ("Defendant" or the "Government") both move for summary judgment.
The court has jurisdiction pursuant to 28 U.S.C. § 1581(a). Because the common meaning of the terms of Heading 9018 does not support the government's narrow interpretation of the Heading's scope, the court grants, in part, the Plaintiff's motion.
BACKGROUND
I. Undisputed Facts
Certain relevant facts are undisputed.
A. Surgical Lights
Plaintiff's undisputed evidence identifies six characteristics particular to surgical lightsHigh Illumination/Brightness, Color Rendition of Tissue, Light Field Diameter, Shadow Reduction, Limited Heat/Irradiance and Depth of Illuminationand a category of factors related to their purchase and sale.[3]
*1300 B. Trumpf's Surgical Lights
The parties also agree to certain background facts related to the surgical light systems that Trumpf imported into the United States. Specifically, between November 2003 and July 2005 Trumpf imported its "Helion" and "Xenion" surgical light systems.[4] (Pl.'s Stmt. of Uncontested Material Facts ("Pl.'s Stmt.") ¶ 4(citing McArver Aff. ¶ 3).)[5]
These surgical light systems "consist of a surgical light and a ceiling mounted moveable arm to which the surgical light is attached." (Compl. ¶ 6.) The movable arm allows "the surgeon to position the surgical lamp in the most favorable position during surgery." (Id.)
Among other various parts, the system includes:
a surgical light or lights with a support boom and cardanic joint[6] (Ex. C to McArver Aff.)
ceiling mounts (Ex. C to McArver Aff.; McArver Aff. ¶ 4)
a central axis with (1) extension arms, (2) suspension arms, or (3) tracking arms (Ex. C to McArver Aff. See also McArver Aff. ¶ 5)[7]
spring (or "sprung") arms (McArver Aff. ¶ 5; Helion Surgical Light User Manual ("Helion"), Ex. B to McArver Aff, 12; Xenion, Ex. B to McArver Aff, 12; Ex. C to McArver Aff.)
transformer(s) (McArver Aff. ¶ 6)[8]
a control panel (Helion, Ex. B to McArver Aff, 12; Xenion, Ex. B to McArver Aff, 12; McArver Aff. ¶ 5,) and
for Helion lights, a switch box (McArver Aff. ¶ 9; Helion, Ex. B to McArver Aff, 12.)
Some of the systems also include accessories such as cameras, flat panel screens, and various electrical and electronic components.[9] (Compl. ¶ 6.) Trumpf imports the *1301 light systems in an unassembled condition. (Id. ¶ 7; McArver Aff. ¶ 10.) However, the systems themselves are complete, that is, they need no additional parts in order to function. (Compl. ¶ 7; McArver Aff. ¶ 10.) Indeed, the customer assembles the system
by simply screwing the surgical lights to the suspension arms, screwing the suspension arms to the extension arms and attaching the unit to the ceiling of an operating room with a mounting bracket which is welded to the top of the central axis.
(Pl.'s Stmt. ¶ 8. See also McArver Aff. ¶ 10.)
Trumpf normally manufactures these systems in accordance with its customers' specifications.[10] (Pl.'s Stmt. ¶ 9; McArver Aff. ¶ 7.) Moreover, Trumpf's surgical lights "are specially manufactured to have specific properties to provide the surgeon and the operating team with optimal illumination in an operating theater[,]" that is, "to provide a certain light intensity, low heat generation, control of shadows and depth of focus."[11] (Pl.'s Stmt. ¶ 15 (citing McArver Aff. ¶ 15; Moore Aff. ¶ 11; Stauffer Aff. ¶ 10; Grattan Aff. ¶ 10).) Regarding the trueness of light color, Trumpf claims to approximate "daylight on a bright day" by using a color temperature of 4300 K (Ex. A to McArver Aff. 5; Helion, Ex. B to McArver Aff., 27; Xenion, Ex. B to McArver Aff., 25,) and a CRI of 93. (Helion, Ex. B to McArver Aff., 27; Xenion, Ex. B to McArver Aff., 25.) Moreover, users can adjust the luminous intensity, diameter of luminous field, and position of luminous field. (Helion, Ex. B to McArver Aff., 18-20; Xenion, Ex. B to McArver Aff., 17.) Finally, the lights are equipped with a sterile handle.[12] (Ex. A to McArver Aff. 5, 7; Helion, Ex. B to McArver Aff., 24; Xenion, Ex. B to McArver Aff., 18, 22-23.)
Trumpf sells its products only to hospitals and physicians and only "for use in office surgical suites and clinics." (McArver Aff. ¶ 13. See also Grattan Aff. ¶ 4; Moore Aff. ¶ 3; Stauffer Aff. ¶ 3; Burgess Aff. ¶ 3.) Neither Trumpf nor its competitors sell their lights to distributors or other sellers of home or commercial lights.[13]*1302 (McArver Aff. ¶ 13.) Purchasing agents with which Trumpf's sales staff interact "do not purchase lamps or lighting fittings which provide illumination in an office setting." (Grattan Aff. ¶ 9; Moore Aff. ¶ 8; Stauffer Aff. ¶ 8. See also Burgess Aff. ¶ 8.) Trumpf and its competitors similarly do not describe their surgical lights as "lamps" or "lighting fittings." (Burgess Aff. ¶¶ 5, 6. See also Grattan Aff. ¶ 7; Moore Aff. ¶¶ 5, 6; Stauffer Aff. ¶ 6.) Trumpf's competitors consist of other manufacturers and sellers of surgical light systems; Trumpf does not compete with manufacturers, sellers, or wholesalers "of lamps and lighting fittings used in a house or office building." (Burgess Aff. ¶ 6. See also Grattan Aff. ¶ 8; Moore Aff. ¶ 7; Stauffer Aff. ¶ 7.)
Trumpf has obtained approval for U.S. sale of its surgical light systems from the U.S. Food and Drug Administration ("FDA"), and Trumpf's surgical lights meet the requirements of the Medical Device Directive. (Burgess Aff. ¶ 4; Grattan Aff. ¶ 5; Moore Aff. ¶ 4; Stauffer Aff. ¶ 4. See also Helion, Ex. B to McArver Aff., 8; Xenion, Ex. B to McArver Aff., 8.)[14]
II. Disputed Facts
Although both parties claim there are no material facts at issue, they present differing descriptions of the use of Trumpf's merchandise and of the composition of some specific entries at issue.
A. Use of Surgical Lights
Trumpf states that its surgical light systems "are used for intra-operative diagnostic purposes as well as providing proper illumination for a surgical procedure." (Blessing Aff. ¶ 4; Cobbs Aff. ¶ 4. See also Helion, Ex. B to McArver Aff., 8; Xenion, Ex. B to McArver Aff., 8 (The lights are "intended for local illumination of the part of the patient being examined or operated upon in a hospital or in a doctor's surgery.").) The subject lights "allow proper visualization intraoperatively of anatomic structures such as nerves, arteries, veins, intestines, and other glandular structures in order that vital structures are not unintentionally injured." (Blessing Aff. ¶ 4. See also Cobbs Aff. ¶ 4.)
The above-described use, Trumpf states, is the lights' only use. (Grattan Aff. ¶ 13 surgical light systems "are only used to illuminate a portion of a patient's body during surgery or for diagnostic purposes. . . I have never seen or heard of [ ] surgical light systems being used for another non-surgical related purpose"). (Accord Stauffer Aff. ¶ 11.) Manuals for Helion and Xenion lights specifically state that the surgical lamps "may only be operated by surgeons, doctors or specially[-] trained personnel" and "[a]ny other use of the surgical light [besides the medical uses listed in the manual] is regarded as improper use." (Helion, Ex. B to McArver Aff., 8; Xenion, Ex. B to McArver Aff., 8.) Moreover, health professionals consider Trumpf's surgical lights as "surgical appliance[s] or instrument[s]" and not as lamps or lighting fittings. (See Burgess Aff. ¶ 5; Grattan Aff. ¶ 6; Moore Aff. ¶ 5; Stauffer Aff. ¶ 5. See also Blessing Aff. ¶ 5 ("I consider a surgical light as a diagnostic instrument or appliance."). Accord Cobbs Aff. ¶ 5.) Trumpf insists that a "standard lamp or lighting fixture," such as those "used in an office setting or a house," are not used for illumination during a surgical procedure. (See Blessing Aff. ¶ 7; Cobbs Aff. ¶ 6.)
The government does not agree that Trumpf's lights are specifically designed for diagnostic purposes. See HQ967747 *1303 (Mar. 21, 2006). Instead, the government describes Trumpf's lights as specialized spotlights. See id. (citing HQ 967159 (Nov. 17, 2004)). The government presents evidence that a surgical lighthead from another company, STERIS Corp. ("STERIS"),[15] has been used in art conservation laboratories. (See Rosenfeld Decl. ¶ 8 ("[T]he type of illumination provided by the STERIS lighthead is also desirable in the art conservation environment.").) According to the government, the qualities of a STERIS lamp that provide illumination "that does not distort color and high intensity without heat, are also properties of lamps used in museum and art exhibition environments." (Id. at ¶ 9.) "[T]he ability to increase and decrease the pattern size of illumination is a feature found in spotlights, including theater spotlights and display spotlights used in museum and retail stores." (Id. at ¶ 4).
Trumpf does not contest the qualities of a STERIS light or a spotlight, but asserts that these qualities are not necessarily those of a surgical light. Trumpf does not offer specific evidence to this effect but nonetheless asserts that a STERIS light is not mentioned as a surgical light in the affidavit, essentially relying on the lack of the word "surgical light". (Pl.'s Resp. to Def.'s Additional Stmt. of Material Facts to which No Genuine Issue Exists ¶ 8.) Trumpf also notes that their light systems are not comparable to STERIS lamp heads in that Trumpf's surgical light systems are only used in a surgical setting. See Pl.'s Resp. to Questions at 3.
B. Unassembled Surgical Light System
Trumpf describes some of the entries at issue as parts of its surgical light systems. These entries are listed in Appendix B.[16]
The parties agree that the imports in these entries can be used as part of surgical light systems.[17] Moreover, there appears *1304 to be no dispute as to the actual contents of the entries. However, the parties do dispute whether the entries were entered as "`complete,' `unassembled'" surgical light systems or discrete items also entered for other potential uses. The government argues that Trumpf has not presented evidence that the individual components are parts of surgical light systems, (see Def.'s Resp. to Pl.'s Stmt. of Material Fact Not in Dispute ¶ 4; Def.'s Additional Stmt. of Material Fact ¶ 3-4 (claiming certain entries are not in fact complete "surgical light systems.")), noting that neither the entry papers nor the commercial invoices make reference to surgical light systems. (See Def's Mem. in Opp'n to Pl.'s Mot. for Summ. J and in Supp. of Def's Cross-mot. for Summ. J. 24. See also, e.g., Def.'s Resp. to Pl.'s Stmt. of Material Facts not in Dispute ¶ 4.) Trumpf avers that the entries listed in Appendix A contained components of their surgical light systems.
III. The Instant Litigation
Trumpf timely protested Customs' classification of the merchandise at issue, and Customs denied in part and granted in part these protests. See HQ 967747 (Mar. 21, 2006). Having paid all liquidated duties, Trumpf subsequently commenced this action on August 28, 2007.
Customs liquidated the merchandise under two types of headings. See HQ 967747 (Mar. 21, 2006). First, Customs liquidated certain of Trumpf's entries under HTSUS 9033.0033,[18] as parts and accessories of "ceiling mounted equipment platforms know as `booms' or `orbiters' which are intended to be used in hospital operating and recovery rooms, and intensive care environments." (Id.) However, after protest by Trumpf, Customs reconsidered and entered Court No. 07-00316 Page 14 these items under HTSUS 9402.90.00.20 as "medical furniture."[19] (Id.) Articles imported under Heading 9402.90.00.20 are duty free and, as a result, Trumpf does not contest this classification.
Second, HQ 967747 classified the surgical lamps under heading 9405.10.6020 as opposed to Heading 9018.90.60. In making this determination, Customs relied heavily on an earlier ruling, HQ 967159, which addressed the classification of HSLVS lights, like the STERIS lights, i.e., "overhead light used in surgical suites by surgeons." HQ 967159 (Nov. 17, 2004). Using identical language as in HQ 967159, Customs in HQ 9967747 determined that the lights in contention here were better classified under 9405 rather than 9018. Customs stated that:
Lamps which `are specially designed for diagnostic, probing irradiation etc. purposes' are included in Heading 9018, HTSUS. However the instant HSLVS parts can not be said to have been designed for a lamp used in probing or irradiation. Lamps so designed are those that are part of an instrument which probes the body, such as an endoscope, which enables the clinician to see the internal organ and take a cell sample so as to diagnose a disease. Lamps used for irradiation are those which employ *1305 radiation to reveal, most commonly, skin diseases.
See HQ 967747.
Before Customs, Trumpf argued that its lights are used for diagnostic purposes, namely that these lights have "certain temperature and lighting features which will not harm the patient during a surgical procedure . . . [and] attachment of visualization equipment during certain surgical procedures and a handle to position it during surgery." Id.; (see also Blessing Aff. ¶ 4.) The government did not find Trumpf's argument persuasive, stating:
Precision overhead room lighting is necessary for the surgeon to do his or her job. But the instant merchandise is not used in direct contact or even in close proximity with the patient for the sole benefit of diagnosis of disease. While it is specialized lighting to be sure, it is more akin to the explicitly excluded spotlight of heading 9405, HTSUS, than it is to the included lamps attached to endoscopes and the like, that are used in intimate contact with the patient.
HQ 967747. In response to Customs' ruling, Trumpf brought the instant action, contending that the surgical lights described are better classified to under HTSUS 9018 rather than 9405.
STANDARD OF REVIEW
The court's review of Customs classification is twofold. "The proper scope and meaning of a tariff classification term is a question of law[,] . . . determining whether the goods at issue fall within a particular tariff term as properly construed is a question of fact." Franklin v. United States, 289 F.3d 753, 757 (Fed.Cir. 2002) (citations omitted).
In classification cases, genuine issues of material fact only arise when there is a dispute over the use, characteristics, or properties of the merchandise being classified, see Brother Int'l Corp. v. United States, 26 CIT 867, 869, 248 F. Supp. 2d 1224, 1226 (2002), or where commercial meaning is in question. See Russell Stadelman & Co. v. United States, 242 F.3d 1044, 1048 (Fed.Cir.2001). This follows from the familiar summary judgment standard: summary judgment is appropriate "if the pleadings, 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 judgement as a matter of law." USCIT R. 56(c) (emphasis added). Material issues only arise concerning "facts that might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
On questions of law, a customs' classification is subject to de novo review as to the meaning of the tariff provision, pursuant to 28 U.S.C. § 2640, but may be accorded a "respect proportional to its `power to persuade.'" United States v. Mead Corp., 533 U.S. 218, 220, 121 S. Ct. 2164, 150 L. Ed. 2d 292 (2001) (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S. Ct. 161, 89 L. Ed. 124 (1944)).
In interpreting and applying the HTSUS, the court looks to the General Rules of Interpretation ("GRI"), as well as the Additional United States Rules of Interpretation ("ARI"). See Orlando Food Corp. v. United States, 140 F.3d 1437, 1439 (Fed.Cir.1998); Faus Group Inc. v. United States, 28 CIT 1879, 358 F. Supp. 2d 1244, 1250 (2004). GRI (1) states that
[F]or legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the following provisions.
GRI (1) is "intended to make it quite clear that the terms of the headings and any relative Section or Chapter Notes are paramount, *1306 i.e., they are the first consideration in determining classification." 1 World Customs Org., Harmonized Commodity Description & Coding Sys., Explanatory Notes 1 (3 ed. 2002) ("Explanatory Notes").[20] Thus, interpretation of tariff headings, and the court's analysis, originate in the language of the Headings, Subheadings, Section Notes and Chapter Notes of the relevant parts of the HTSUS, in this case, Chapters 90, and 94.[21]
ANALYSIS
As noted above, the government contends that the Trumpf lighting systems are to be classified under Heading 9405. ("Lamps and lighting fittings including searchlights and spotlights and parts thereof, not elsewhere specified or included."). But the Explanatory Notes to chapter 94, subpart (II)(l) specifically exclude from Heading 9405 "[m]edical diagnostic, probing, irradiation, etc., lamps (Heading 90.18)." Id. 9405(II)(l). Thus, if Trumpf's merchandise is properly classified under Heading 9018, it cannot be classified under Heading 9405. Therefore, the court will first consider the language of Heading 9018, and the Chapter Notes thereto, to determine their application here.[22]
I. HTSUS Heading 9018[23][24]
A. Merchandise Included in Heading 9018[25]
1. "Appliance" or "instrument"
The Chapter Notes to Heading 9018 do not define "appliance" or "instrument," *1307 though dictionaries use these terms somewhat interchangeably. These dictionary definitions indicate that an "appliance" constitutes a "device,[[26]] apparatus[[27]], or instrument for performing or facilitating the performance of a particular function." Dorland's Illustrated Medical Dictionary 116 (27th ed.1988). See also 1 Oxford English Dictionary 575 ("[A] thing applied as a means to an end" or an "apparatus"); Academic Press Dictionary of Science and Techonology 140 ("[I]n general, any tool or machine that is used to carry out a specific task or produce a desired result."). Similarly, an "instrument" is "any tool, appliance, or apparatus." Dorland's Illustrated Medical Dictionary 842. See also 7 Oxford English Dictionary 1050 ("a tool[] or implement"[28]); Webster's Third New International Dictionary 1172 (2002) (A "utensil"[29] or a surgical "implement"); Academic Press Dictionary of Science and Technology 1117 ("[A] mechanical tool or device, especially one designed for precise operations"); Webster's II New Riverside University Dictionary 633 ("A means by which something is accomplished"). These definitions are broad in nature. An appliance, device or machine, need only accomplish one "simple task" or serve a "particular function" in providing "useful work."[30]
Trumpf's light systems qualify under the broad common meaning of these terms because the light systems perform a specific task.
2. Professional Use
The Explanatory Notes instruct that Heading 9018 covers a "wide range of instruments and appliances which in [the] vast majority of cases are used only in professional practice." Explanatory Notes 9018 (emphasis added). For example, the Heading includes articles used by *1308 doctors, surgeons, and dentists "either to make a diagnosis, to prevent or treat an illness or to operate." Id.[31] As stated above, Trumpf claims that its surgical light systems have but "one commercial use and that is assisting surgeons during an operation in an operating theater." (Compl. ¶ 8).
Arguing to the contrary, the government states that STERIS lightheads, though another brand of surgical lightheads, are used in art conservatories. Through the affidavit of a lighting designer, the government claims that the use of a STERIS lighthead in an art conservatory confirms that these types of light systems are used in forums outside of the medical industry. See Rosenfeld Decl.
To the court, however, even assuming that a lighthead similar to Trumpf's has another potential use, the Explanatory Notes for Heading 9018 provide some flexibility. The phrase "in the vast majority of cases" indicates an understanding that a single example of an appliance used outside of the medical profession does not preclude coverage under this heading.
While the parties do not agree that Trumpf's surgical light systems are used solely for medical and surgical purposes, all of the evidence submitted indicates that the light systems' design is still "clearly identifiable" as for medical use; moreover, there is no dispute that these lights are commonly seen only in the medical setting. See Pl.'s Resp. To Questions Exhibit A. Accordingly, the court cannot conclude that the government has raised a material issue of fact on the issue of professional use.
3. "Diagnostic"
Of particular significance here, the Explanatory Notes state that Heading 9018 includes "[l]amps which are specially designed for diagnostic, probing, irradiation etc. purposes." Id. (I)(R) (emphasis added).[32] The parties dispute the meaning of the term "diagnostic," and whether the illumination[33] that Trumpf's surgical light systems provide constitutes a "diagnostic purpose."
Unsurprisingly, "diagnostic" denotes "relating to or based on a diagnosis." Academic Press Dictionary of Science and Technology 625. "Diagnosis" specifically means "the identification of a disease or condition on the basis of its signs and symptoms." Id. In medical terms, "diagnostic" "pertain[s] to or subserv[es] diagnosis; [or is] distinctive of or serving as a criterion of a disease, as signs and symptoms." Dorland's Illustrated Medical Dictionary 461. Thus, a light system that is configured in such a way as to assist a health professional to detect the "signs and symptoms" of a condition or disease has a diagnostic use.
In its classification ruling, Customs stated that because Trumpf's surgical lights do not come in "direct contact . . . or [ ] close proximity with the patient for the sole benefit of diagnosis of disease" HQ 967747 (Mar. 21, 2006), they cannot be defined as a diagnostic tool. Trumpf claims that this *1309 idea of proximity is not necessary to assist a physician in diagnosis. In addition, Trumpf claims that the lights are within "several feet" of the patient during operations and are thus in close proximity to the patient. Trumpf further claims that surgery is often required for diagnosis, and that the surgical lights assist in examination, probing and observation of a patient. (Pl.'s Mem. At 22-23).
The notion of spacial proximity is not included in the definition of "diagnostic," the meaning of which turns upon the role the instrument plays in assisting a physician to identify and determine diseases and conditions. Surgical lighting is, of course, not the only factor in diagnosis. When a variety of diagnostic tools are required, lighting may not even be the main tool used in a diagnosis. However, a surgical light does assist in diagnosis by providing proper and specific illumination, without which operations and exploration into a patient's condition would be extremely difficult.
Rules of statutory interpretation support this view. Specifically, under the rule of noscitur a sociis, if the language of a statute is ambiguous, "the meaning of an unclear word or phrase should be determined by the words immediately surrounding it." Black's Law Dictionary (9th ed.2009) 1160-61; See also X-Acto Crescent Products Co., Inc. v. United States 27 Cust. Ct. 190, 190-191, Not Reported in F.Supp., WL 6228 (1951). Therefore, the meanings of the words "probing" and "irradiation" should shed light upon the meaning of "diagnostic," and provide clues about what may be included in the "etc." in this list.
"Probing" is "exploring or searching with the aid of a probe." Webster's II New Riverside University Dictionary 937; medically, a probe is a "slender, flexible instrument designed for introduction into a wound, cavity or sinus tract for purposes of exploration." Dorland's Illustrated Medical Dictionary 1355. Further, to "irradiate" is "[t]o send forth in a way analogous to the emission of light." Webster's II New Riverside University Dictionary 644. In medical terms, "irradiation" is "treatment by photons, electrons, neutrons, or other ionizing radiations . . . the application of rays, such as ultraviolet rays, to a substance to increase its vitamin efficiency" Dorland's Illustrated Medical Dictionary 856.
It follows that the act of irradiation is similar to illumination in that, in both cases, rays are emitted. Even though irradiation provides treatment for a patient, proper illumination assists a doctor to explore a field (similar to a probe), in order to diagnose a disease or condition. Thus, in context, the term diagnostic is broad enough to include Trumpf's surgical lighting systems.
Because the Defendant presents no evidence to dispute Trumpf's evidence that its surgical light's "chief use" is "as an aid to physicians in identifying a disease or illness from its signs and symptoms" Instrumentation Associates, Inc. v. United States 58 Ct. Cust. 471, 479, 58 Ct. Cust. 471, 269 F. Supp. 777, 783 (1967), the light systems can be considered a diagnostic tool.
CONCLUSION
For the foregoing reasons, the court concludes that Plaintiff's entries of complete surgical light systems are correctly classified under HTSUS 9018.90.60 and not under Heading 9405.10.6020, as classified by Customs. The parties are directed to review the descriptions and components of the entries identified in Appendix B and to determine how these entries should be classified consistent with this Opinion. A draft judgment shall be submitted by November 29, 2010, provided that if the parties *1310 cannot agree to the terms of said judgment, they shall submit statements of their positions with regard to all of the entries at issue.
It is SO ORDERED.
APPENDIX A
Characteristics of surgical light systems:
1. High Illumination/Brightness
Illumination is "the act of adding light to a surface" (Ex. B to Pl.'s Mot. Summ. J. 6) and is measured, internationally, in "lux."[34] (Id.) Industry standards[35] dictate that surgical lights should produce a minimum illuminance of 100,000 lux or 100 klux. (Ex. A to Pl.'s Mot. Summ. J. 2. Accord Ex. B to Pl.'s Mot. Summ. J. 6.) Peak central illuminance should not exceed 160 klux, as this light level will cause glare and increase irradiation. (Ex. A to Pl.'s Mot. Summ. J. 8. Accord Ex. B to Pl.'s Mot. Summ. J. 12.) Illumination from a surgical light must be consistent (Ex. B to Pl.'s Mot. Summ. J. 10,) intense, and uniform. (Ex. A to Pl.'s Mot. Summ. J. 2.)
2. Color Rendition of Tissue
A surgical light must carefully calibrate the color of the emitted light such that surgeons are able to view, in true color, tissue, organs, and skin. The emitted light must be as close to white as possible, mimicking that of noon sunlight. (Ex. B to Pl.'s Mot. Summ. J. 7. See also Ex. A to Pl.'s Mot. Summ. J. 2.) One way of ensuring faithful color is to manipulate color temperature.[36] Color temperature is measured in degrees of Kelvin. (Ex. B to Pl.'s Mot. Summ. J. 7.) According to industry standards, color temperature should range from 3500 to 6700 Kelvin; surgeons prefer a color temperature of approximately 4500 Kelvin. (Id.)
Another measure of true color uses the Color Rendering Index ("CRI"). (Ex. A to Pl.'s Mot. Summ. J. 7.) The CRI "measures the effect of the light on the color appearance of the objects being seen." (Ex. B to Pl.'s Mot. Summ. J. 9.) CRI values anywhere from 85% to 100% are acceptable. (Ex. A to Pl.'s Mot. Summ. J. 7.) A surgical light rating of 94% is considered "good." (Ex. B to Pl.'s Mot. Summ. J. 9.) As a comparison, florescent lights have a CRI of around 70%. (Ex. A to Pl.'s Mot. Summ. J. 7.)
3. Light Field Diameter
The light pattern[37] diameter of the light field is also important; if the diameter is too large, glare can be a problem, but, if a surgeon needs diffuse light, a small diameter can also pose problems. (Id. 3.) The light field must be large enough to illuminate the particular surgery involved. (See id. 7.) Given the diversity of types of surgeries, surgical lights should allow for adjustment of the light pattern size. (Id. 3.) In any event, industry standards dictate that the light pattern diameter should not *1311 be smaller than eight inches. (Ex. B to Pl.'s Mot. Summ. J. 13.)
4. Shadow Reduction
In order to ensure optimal illumination of the surgical site, the light must minimize contrast shadows.[38] (Ex. A to Pl.'s Mot. Summ. J. 2.) The light, therefore, must have the ability to beam light around obstacles located between the light and the wound. (Ex. B to Pl.'s Mot. Summ. J. 9.) The light's design can involve lighthead diameter,[39] the number of lighthead lamps, the type of lens, or the type of refraction system. (Id.)
5. Limited Heat/Irradiance
While providing for optimal lighting, a surgical light must nonetheless limit its radiated energy, or its irradiance. (Id. 8; Ex. A to Pl.'s Mot. Summ. J. 7.) This is because heat will both dessicate tissue and make the surgical team uncomfortable. (Ex. A to Pl.'s Mot. Summ. J. 2-3.) Unfortunately, irradiance increases with increased illumination. (See Ex. B to Pl.'s Mot. Summ. J. 8.) For this reason, many surgical lights attempt to limit heat emission by using light filters, lenses, reflectors, reflector coatings, and sealed light designs (id. 11,) and/or by designing the light in such a way that it releases the heat behind the lighthead, (id.8-9.)
6. Depth of Illumination[40]
A surgical light must provide sufficient depth of field, that is, sufficient range of illumination in order to reach tissue on surgery tables located a certain distance away from the light. (Ex. A to Pl.'s Mot. Summ. J. 8. See also Ex. B to Pl.'s Mot. Summ. J. 9 ("depth of field ... indicates the length of the range within the focused, usable light that is projected").) Depth of field is measured as "the depth below the one-metre level reference point at which the central illumination falls to 20% of its initial value." (Ex. A to Pl.'s Mot. Summ. J. 8.) Ideally, the light should be positioned such that the surgical site is within the light's focal length, that is, positioned so that "the area where the [light] pattern is at its brightest and most focused" shines on the surgical cavity. (Ex. B to Pl.'s Mot. Summ. J. 9.)
7. Other Factors
Other factors hospitals consider when purchasing surgical lamps include: abilities to "transfer video signal and power to multiple flat panel monitors," "incorporate video camera systems," and "integrate into endoscopic automation systems"; conventional illumination of the operating room; "flexibility" and "maneuverability"; stability that is, the light will not drift away; sterile control; and ease of cleaning. (Id. 9-10.)
APPENDIX B
1. Entry No. 233-3416935-8
Trumpf describes this entry as containing "70 examination lights, Helion ® S light[s] specially configured to mount on TRUMPF's critical care nursing booms." (McArver Aff. Dated June 2, 2010 ¶ 3.)[41] Trumpf further contends that these are "examination lights" used for "medical diagnostic uses." (Pl.'s Resp. to Questions *1312 at 4). Defendant contests that these lights are imported for use with the booms, not the surgical light systems, and that Plaintiff should not now be able to bring an action for lights not part of the surgical light systems at issue. Def.'s Resp. to Questions at 7.
2. Entry No. 233-3302102-2
Trumpf's evidence states that "Entry [No.][]XXX-XXXXXXX-X contain[ed] seven flat panel display mounts on separate pendants." (McAver Aff. Dated June 2, 2010 ¶ 3-f.) The commercial invoice number for this entry provides an identical description. (Id. ¶ 2-3 (Invoice, Ex. F to McArver Aff. Dated June 2, 2010, 28.))[42] The government asserts that this entry simply contained pendants and flat panel mounts. (Def.'s Resp. to Pl.'s Stmt. of Material Facts not in Dispute ¶ 4.) According to the government, "pendants" are "suspension systems which are suspended from the ceiling with display monitors and no lights[.]" (See id.)
3. Entry No. 233-3257991-3
Trumpf describes the contents of Entry No. 233-3257991-3 as; "three flat panel display mounts on separate pendants" or three systems of Helion® L+/L lights with flat panel mounts. (McArver Aff. Dated June 2, 2010 ¶ 3-d.) The government argues that these entries simply contained pendants with flat panel display mounts and "several numerous articles not identified as being components of complete unassembled surgical lights." (Def's Resp. to Pl's Stmt. of Material Facts not in Dispute ¶ 4.)[43]
4. Entry No. 233-5554827-4
The government asserts that Entry No. 233-5554827-4 contained flat panel mounts with separate pendant systems that are suspended from the ceiling, with neither lights nor display monitors. (Def's Resp. to Pl's Stmt. of Material Facts not in Dispute ¶ 4.) The government claims that these articles are not part of Trumpf's surgical lighting system. (Def's Resp. to Questions at 7). Trumpf states that this entry contains "six surgical light systems and six flat panel display mounts on separate pendants" (Pl.'s Resp. to Questions at 4), as well as "six flat panel mounts on separate pendants." (Id. at 5.) The entry also includes eighteen transformers for use with Xenion® L/L lights.
5. Entry No. 233-3302107-1
Plaintiff claims that Entry No. 233-3302-107-1 contained two Helion® systems and two flat panel display mounts. (McArver Aff. Dated June 2, 2010 ¶ 3-e.) According to Trumpf, the systems consisted of pendants and surgical lights in two configurations. (Id.) One configuration is a Helion® L+ "with a flat panel display and including the transformer boxes and control units." (Id.) The other is a "Helion® M+ light system with a flat panel display and including the transformer boxes and control units." (Id.) The entry also included "two flat panel display mounts on separate pendants." (Id.)
6. Entry No. 233-3247748-0
Plaintiffs cite invoices indicating that this entry contained "12 individual systems *1313 with Xenion® L/L lights, handles, identified as `side rails,' wall controls and transformers." (Id.¶ 3-g.) The pendants and the surgical lights were also included. (Id.) "In addition, this entry also contain[ed] 12 flat panel display mounts on separate pendants, which are identified on the commercial invoice." (Id.)
7. Entry No. 233-3317874-9
Entry No. 233-3317874-9 "contain[ed] eight systems with Helion® L + lights, their transformers and controls." (Id. at ¶ 3-h.) The systems included the pendants and the lights. (Id.) The entry, moreover, "contain[ed] eight flat panel display mounts on separate pendants." (Id.) The government claims that this entry contained no lights (Def's Resp. to Questions at 7). Trumpf contends "that these components constitute surgical light systems." (Pl.'s Resp. to Questions at 6).
8. Entry No. 233-5510440-9
Trumpf asserts that Entry No. 233-5510440-9 consisted of pendants, surgical lights, and a "flat panel mount on a separate pendant." (McArver Aff Dated June 2, 2010 ¶ 3-c.) Specifically, the imported systems in this entry contained "two Xenion lights: Xenion® L/ Xenion® M +." (Id.) This entry also included transformers used with the Xenion® L/ Xenion® M + light systems. (Id.) The government again contends that this entry "contain[ed] several [] articles not identified as being the components of the complete unassembled surgical lights system contained in the entry." (Def's Resp. to Pl.'s Statement of Material Fact Not in Dispute ¶ 4.)
NOTES
[1] The government points to Subheading 9405.10.6020:
Lamps and lighting fittings including searchlights and spotlights and parts thereof, not elsewhere specified or included; illuminated signs, illuminated nameplates and the like, having a permanently fixed light source, and parts thereof not elsewhere specified or included:
Chandeliers and other electric ceiling or wall lighting fittings, excluding those of a kind used for lighting public open spaces or thoroughfares:
Of base metal:
Other.[]
Items falling under this Subheading are charged an ad valorem duty of 7.6 percent. Provisions like Heading 9405.10.6020 are referred to as basket or residual provisions. See E.M. Indus., Inc. v. United States, 22 CIT 156, 165, 999 F. Supp. 2d 1473, 1480 (1998). "`Classification of imported merchandise in a basket provision, however, is appropriate only when there is no tariff category that covers the merchandise more specifically.'" Chevron Chem. Co. v. United States, 23 CIT 500, 506, 59 F. Supp. 2d 1361, 1368 (1999).
[2] Specifically, Plaintiff argues that its merchandise falls under HTSUS Subheading 9018.90.60:
Instruments and appliances used in medical, surgical, dental or veterinary sciences. . . parts and accessories thereof:
Other instruments and appliances and parts and accessories thereof:
Other:
Electro-medical instruments and appliances and parts and accessories thereof:
Electro-surgical instruments and appliances,. . .; all the foregoing and parts and accessories thereof.
Items falling under this Subheading enter duty-free
[3] These characteristics and categories are further detailed in Appendix A.
[4] Trumpf uses different light bulbs to provide specific levels of illumination while limiting heat emission. Instead of using the traditional incandescent light bulb, the surgical light systems either use halogen gasthe Helion modelor xenon gasthe Xenion model. (McArver Aff. ¶ 3.) According to Trumpf, its Xenion lights have many advantages over halogen. Xenion lights "provide brighter illumination tha[n] halogen lights, are more cost efficient and tend to last longer[,]" (id.) and emit less heat. (Xenion Surgical Light User Manual ("Xenion"), Ex. B to McArver Aff., 13.)
"Halogen" is "[a]ny of a group of five chemically related nonmetallic elements including flourine, chlorine, bromine, iodine, and astatine." Webster's II New Riverside University Dictionary 560 (1988). A halogen is "electronegative," that is, it has a "negative electric charge." Academic Press Dictionary of Science and Technology 728, 983 (1992). "Xenon" is "noble," that is, inert, gas. See id. 1471, 2384.
[5] The parties appear to agree that the following entries are composed of Trumpf's light systems: XXX-XXXXXXX-X, XXX-XXXXXX-X, XXX-XXXXXXX-X, XXX-XXXXXXX-X, XXX-XXXXXXX-X, XXX-XXXXXXX-X, XXX-XXXXXXX-X, XXX-XXXXXXX-X, XXX-XXXXXXX-X.
[6] The court understands this to be a fixed point joint around which shafts/arms rotate.
[7] The number of extension or suspension arms depends upon the number of surgical lights and/or flat panel displays included in the system, as there is one suspension or extension arms per surgical light or flat panel display. (McArver Aff. ¶ 8.)
[8] The system requires one transformer per surgical light. (McArver Aff. ¶ 6.)
[9] Specific options available to customers include laser guided focusing, which "simplifies the precise positioning of the luminous field on very small areas" (Helion, Ex. B to McArver Aff., 15; Xenion, Ex. B to McArver Aff., 14,) fittings for MedTV camera systems (Helion, Ex. B to McArver Aff., 15; Xenion, Ex. B to McArver Aff., 15,) external brightness controllers (Helion, Ex. B to McArver Aff., 15,) and anti-drift systems. (Id.)
[10] Once the axis of the light is manufactured with the chosen number of arms to accommodate the requested number of lights, cameras, and flat panel displays, extra arms cannot be added, even at time of assembly. (McArver Aff. ¶¶ 7-8, 11.) Moreover, arms wired for surgical lights cannot be used as arms for cameras or flat panel displays and vice versa. (McArver Aff. ¶ 8.) Therefore, if a customer cancels its order, Trumpf cannot easily resell its surgical lights. (McArver Aff. ¶ 12.)
[11] Customers can also select light type, size, control type (electronic or mechanical), camera and/or flat panel display, axis type, and arm types. (McArver Aff. ¶ 7.)
[12] This handle is detachable in order to allow for cleaning and disinfection. (Helion, Ex. B to McArver Aff., 24; Xenion, Ex. B to McArver Aff., 18, 22-23.)
[13] The "normal" or "standard" practice in the industry to sell surgical lights is as follows. (Burgess Aff. ¶ 9; Grattan Aff. ¶ 11; Moore Aff. ¶ 9.) The sales consultant meets with the hospital purchasing agent, the operating room business manager, and the operating room manager. (Id. See also Grattan Aff. ¶¶ 10, 11; Moore Aff. ¶ 10; Stauffer Aff. ¶ 9.) These hospital personnel discuss with the surgeons the preferred surgical light specifications. (Burgess Aff. ¶ 9. See also Grattan Aff. ¶ 10, 11; Moore Aff. ¶ 10; Stauffer Aff. ¶ 9.) These from hospital personnel as to these specifications, Trumpf installs in the operating suite a demonstration surgical light and surgeons, for two weeks, use the lights in actual surgical procedures. (Burgess Aff. ¶ 9. See also Grattan Aff. ¶¶ 10, 11; Moore Aff. ¶ 10; Stauffer Aff. ¶ 9.) If the surgeons consider the light satisfactory, the hospital personnel place an order with Trumpf and Trumpf will install a completely new light system. (Burgess Aff. ¶ 9. See also Grattan Aff. ¶¶ 10, 11; Moore Aff. ¶ 10; Stauffer Aff. 11 9.)
[14] It does not appear that traditional lamps used in homes or office settings require FDA approval. (Moore Aff. ¶ 4.) issue.
[15] STERIS manufactures surgical lights. Its lights are called Harmony Surgical Lighting and Visualization System ("HSLVS").
The government classifies STERIS's lights under HTSUS 9405. See HQ 967159 (Nov. 17, 2004). STERIS light include "1) a central axis, composed of carbon steel, that allows the lights and apparatus to move in circular motion around the patient to assist the surgeon during the surgical process. 2) the spring loaded arms, composed of carbon steel, that extend from the central axis and allow for either the lights or equipment to be mounted. 3) flat panel monitor adapters, composed of carbon steel, that connect with a spring load arm to mount a flat LCD monitor to the lighting system. 4) ceiling sets that allow for the lighting system to be mounted into the ceiling and consist of mounting components (nuts, bolts and clamp rings) to attach to the ceiling; a carbon steel suspension tube to which the lighting assembly is attached and which houses the system cables and wires; and a plastic ceiling hood or cover. 5) lighting heads of carbon steel that provide the essential lighting function of the HSLVS." Id.
[16] Trumpf has dropped its claims regarding Entry No. 233-3185814-4. (See Pl.'s Resp. to Def.'s Additional Stmt. of Material Fact as to which no Genuine Issue Exists ¶ 2.)
[17] Trumpf surgical light system components may include: ceiling mounts, an axis to attach suspension arms which rotates on a horizontal axis, the suspension arms, spring arms which move on a vertical axis and attach to the suspension arms, mounts for attaching a camera, mounts for attaching a flat panel monitor, a flat panel monitor(s). (See Ex. C to McArver Aff., 2.) These components in various configurations and including some or all of the aforementioned parts are for the purposes of litigation referred to as "pendants" by the parties. Trumpf surgical light systems also may included: surgical lights with a support boom and a universal joint for rotating on both a horizontal and vertical axis. (See Ex. C to McArver Aff., 2.) Depending on the configuration: transformers, a control panel, and switch boxes may also be necessary for the surgical light system. (McArver Aff. ¶ 9.) The actual surgical lights which are part of the system consist of the light source (incandescent quartz bulb containing xenon or halogen gas) and the housing. (McArver Aff. ¶¶ 3, 6.)
[18] "Parts and accessories (not specified or included elsewhere in this chapter) for machines, appliances, instruments or apparatus of chapter 90."
[19] These items were ceiling mounted booms and orbiters which move on gas or electric power. The booms are set up to hold shelving and receptacles "designed to accept and hold monitoring devices." See HQ 967747 (Mar. 21, 2006).
[20] The Explanatory Notes are not "controlling legislative history but nonetheless are intended to clarify the scope of [the] HTSUS [ ] and to offer guidance" in the court's interpretation. Mita Copystar Am. v. United States, 21 F.3d 1079, 1082 (Fed.Cir.1994).
[21] Relevant to the entries in Appendix A, GRI (2) states that an article may be entered in an unfinished state and still fall under a particular heading. However, that article must have the same "essential character" as the finished article. GRI (3) Explanatory Note VIII provides: "The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods."
[22] The court notes that Heading 9018 is a "use" provision. See ARI 1 ("In the absence of special language or context which otherwise requires"
(a) a tariff classification controlled by use (other than actual use) "is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use . . .")
[23] Heading 9018 falls under Chapter 90: "optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof."
[24] The court notes that the language of the HTSUS for all relevant years remains unchanged.
[25] Merchandise under Chapter 90 also includes "parts and accessories" of such "instruments and apparatus"; Chapter Note 2 instructs that "parts and accessories for machines, apparatus, instruments or articles of [Chapter 90] are to be classified according to the following rules":
(a) Parts and accessories which are goods included in any of the headings of [Chapter 90] or of [C]hapter 84[ ][or] 85 (other than headings 8485, 8548 or 9033) are in all cases to be classified in their respective headings;
(b) Other parts and accessories, if suitable for use solely or principally with a particular kind of machine, instrument or apparatus, or with a number of machines, instruments or apparatus of the same heading (including a machine, instrument or apparatus of heading 9010, 9103 or 9103) are to be classified with the machines, instruments or apparatus of that kind;
(c) All other parts and accessories are to be classified in heading 9033.
Moreover, components of a machine that work together to perform a certain function are classified in the heading appropriate to that function. See Chapter Note 3 (Incorporating by reference Section XVI Note 4 ("Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by. . . by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in [Chapter 90], then the whole falls to be classified in the heading appropriate to that function.")). See also Explanatory Notes Heading 9018 ("Subject to the provisions of Notes 1 and 2 to [Chapter 90], parts and accessories of apparatus or appliances of this heading remain classified here.").
[26] A "device" is "[s]omething constructed or devised for a particular purpose, [especially] a machine used to perform one or more relatively simple tasks." Webster's II New Riverside University Dictionary 370 (1988).
A "machine" is "a device or system along with its source of power and auxiliary equipment" or, more broadly, "[a] system, [usually] of rigid bodies, constructed and connected to change, transmit, and direct applied forces in a predetermined way to accomplish a particular objective, as performance of useful work." Id. 712. See also Academic Press Dictionary of Science and Technology 1289 (a machine is "any device that transmits or modifies energy. . . [or is] an assembly of interrelated parts, each with a definite motion and separate function; used to perform a specific task.")
[27] An "apparatus" is a "machine" or "group of machines used together or in succession to accomplish a task." Webster's II New Riverside University Dictionary 118.
[28] The term "implement" includes "tool[s], utensil[s], or instrument[s] for doing a task." Webster's II New Riverside University Dictionary 614.
[29] A "utensil" is "[a]ny useful tool. . . ." Webster's II New Riverside University Dictionary 1272.
[30] Further, in our case law, "there is no `judicial determination' of what a machine is. It remains simply a question of common meaning. . . ." Victoria Distributors, Inc. v. United States 56 Ct. Cust. 284, 288, (1966).
[31] Heading 9018 will also cover a number of medical tools, such as "hammers, mallets, saws . . . or articles of cutlery (scissors, knives, shears etc.) . . . only when they are clearly identifiable as being for medical or surgical." Id.
[32] Torches such as those in the shape of a pen are excluded (heading 85.13) as are other lamps which are not clearly identifiable as being for medical or surgical use (heading 94.05). Id. (I)(R)
[33] Both parties agree that Trump's surgical lights provide illumination (See Def.'s Resp. to Pl.'s Stmt. of Material Facts not in Dispute ¶ 10; Def.'s Resp. to Questions at 4; Pl.'s Mem. at 10; Cobbs ¶ 4; Blessing ¶ 4; 21 C.F.R. § 878.4580 (citing the Food and Drug Administration ("FDA")).
[34] One lux is "equal to the illumination of a surface all of which is one metre from a uniform point source of light of unit intensity. . . ." 9 Oxford English Dictionary (2nd 1989) 127.
[35] Industry standards come from Illuminating Engineering Society and the International Electrotechnical Commission. (Ex. B to Pl.'s Mot. Summ. J. 11-12.) The U.S. Food and Drug Administration ("FDA") mandates that companies must follow either of these guidelines. (Id. 11.)
[36] If the color temperature is too low, emitted light appears pink or red, whereas if the color temperature is too high, emitted light appears blue. (Ex. A to Pl.'s Mot. Summ. J. 2; Ex. B to Pl.'s Mot. Summ. J. 7.) The surgical light color temperature should fall between these two hues. (Ex. A to Pl.'s Mot. Summ. J. 2; Ex. B to Pl.'s Mot. Summ. J. 7.)
[37] The light pattern is "an area in which the level of illumination tapers from the center to the periphery so that illumination at the edge is no less than 20% of that at the center." (Ex. B to Pl.'s Mot. Summ. J. 13.)
[38] Contrast shadows "result from obstructions cast by hands or instruments" whereas contour shadows "help the surgeon differentiate between fine tissue striations and vasculature." (Ex. A to Pl.'s Mot. Summ. J. 2.) Thus, a good surgical light must limit contrast shadows but maintain contour shadows. (Id.)
[39] The larger the lighthead diameter, the better the shadow control.
[40] In the literature before the court regarding surgical lights, depth of illumination is sometimes also referred to as depth of field, focal length, or depth of focus. (Ex. B to Pl.'s Mot. Summ. J. 9; McArver Aff. ¶ 15.)
[41] The government asserts that this entry simply included light bulbs. (See Def.'s Resp. to Pl.'s Stmt. of Material Facts not in Dispute ¶ 4.)
[42] See also McAver Aff. Dated June 2, 2010 ¶ 2 ("There are no price lists which identify the components contained in each of TRUMPF's surgical light products contained in these entries."). The court interprets Trumpf to claim that all products mentioned in the affidavit are part of surgical light systems and therefore do not have their own price lists as separate parts.
[43] The invoices also appear to suggest a difference in size and a difference between flat panel display mounts and flat panel displays.
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Opinion issued April 21, 2015
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-15-00100-CV
———————————
IN THE INTEREST OF S.Z.L., S.E.L., A.S.L. AKA A.L., AND Z.E.N.B.L.
AKA Z.L., CHILDREN
On Appeal from the 309th District Court
Harris County, Texas
Trial Court Case No. 2011-18283
MEMORANDUM OPINION
Appellant, K.E.S.-L., attempts to appeal from the trial court’s final decree
terminating her parental rights to her minor children. We dismiss the appeal.
An appeal from a judgment terminating parental rights is an accelerated
appeal. TEX. FAM. CODE ANN. §§ 109.002(a), 263.405(a) (West 2014). In an
accelerated appeal, absent a motion to extend time under Texas Rule of Appellate
Procedure 26.3, “the deadline for filing a notice of appeal is strictly set at twenty
days after the judgment is signed, with no exceptions . . . .” In re K.A.F., 160
S.W.3d 923, 927 (Tex. 2005); see TEX. R. APP. P. 26.1(b). If a motion for
extension of time to file the notice of appeal is timely filed, the deadline for filing a
notice of appeal is extended by fifteen days, to thirty-five days after the judgment
is signed. See TEX. R. APP. P. 26.3; Doe v. Brazoria Cnty. Child Protective Servs.,
226 S.W.3d 563, 570 (Tex. App.—Houston [1st Dist.] 2007, no pet.).
Because the trial court signed the final decree for termination on November
17, 2011, appellant’s notice of appeal was due by December 7, 2011, or by
December 22, 2011, with a fifteen-day extension. 1 See TEX. R. APP. P. 26.1(b),
26.3. Appellant, proceeding pro se, untimely filed her notice of appeal on January
30, 2015, more than four years after the decree was signed. Without a timely filed
notice of appeal, this Court lacks jurisdiction over the appeal. See TEX. R. APP. P.
25.1.
1
Appellant’s notice of appeal also states that she appeals from a judgment or order
signed on July 26, 2012. The clerk’s record filed in this Court does not include a
trial court judgment or order signed on that date. This Court’s records indicate that
the judgment or order signed on that date refers to this Court’s opinion and
judgment issued on July 26, 2012. See In the Matter of Z.E.K.B.L. aka Z.L., No.
01-11-01097-CV, 2012 WL 3060097 (Tex. App.—Houston [1st Dist.] July 26,
2012, no pet.) (mem. op.) (dismissing appeal for failure to pay fees or establish
indigence).
2
On March 10, 2015, we notified appellant that her appeal was subject to
dismissal for want of jurisdiction unless by March 24, 2015, she filed a written
response showing how this Court has jurisdiction over this appeal. See TEX. R.
APP. P. 42.3(a) (allowing involuntary dismissal of case after notice). Appellant
failed to file an adequate response.
Accordingly, we dismiss the appeal for want of jurisdiction. See TEX. R.
APP. P. 42.3(a), 43.2(f); see K.A.F., 160 S.W.3d at 927 (holding that untimely
notice of appeal failed to invoke jurisdiction of appellate court); In re R.B.M., 338
S.W.3d 755, 758 (Tex. App.—Houston [14th Dist.] 2011, no pet.) (dismissing
appeal in parental termination case for want of jurisdiction when notice of appeal
was untimely).
PER CURIAM
Panel consists of Justices Jennings, Higley, and Huddle.
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10-16-2015
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https://www.courtlistener.com/api/rest/v3/opinions/2469751/
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103 F. Supp. 2d 1051 (2000)
Guillermo PONCE, Plaintiff,
v.
NORTHEAST ILLINOIS REGIONAL COMMUTER RAILROAD CORPORATION, d/b/a Metra/Metropolitan Rail, Defendant.
No. 98 C 7976.
United States District Court, N.D. Illinois, Eastern Division.
June 5, 2000.
*1052 John Michael Dugan, J. Dillon Hoey, Richard A. Haydu, James Louis Farina, George T. Brugess, Daniel J. Downes, Robert J. Drummond, James Timothy Foley, Hoey, Farina & Downes, Chicago, IL, for Guillermo Ponce.
David R. Schmidt, Mai Lin Petrine Noffke, Lord, Bissell & Brook, Chicago, IL, Ellen Kornichuk Emery, Chicago, IL, for Northeast Illinois Regional Commuter Railroad Corp.
MEMORANDUM OPINION AND ORDER
SCHENKIER, United States Magistrate Judge.
The parties in this case have filed cross motions for partial summary judgment (doc. 12-1, 18-1), which seek resolution of a single, legal issue central to this case: whether the claims raised by the plaintiff, Guillermo Ponce, for injuries he allegedly suffered on company property when, as he was leaving work, he boarded a train owned and operated by his employer, defendant Northeast Illinois Commuter Railroad Corporation ("METRA"), fall within the scope of Federal Employer's Liability Act ("FELA" or "the Act"), 45 U.S.C. § 51 et seq. For the reasons discussed below, the Court finds that plaintiff's injuries fall within the scope of the FELA.[1]
*1053 I.
Summary judgment is proper if the record shows 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 Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir. 1999). A genuine issue for trial exists only when the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). If the evidence is merely colorable or is not significantly probative, summary judgment may be granted. See Liberty Lobby, 477 U.S. at 249-50, 106 S. Ct. 2505; Flip Side Prods., Inc. v. Jam Prods. Ltd., 843 F.2d 1024, 1032 (7th Cir.1988).
Local Rule 56.1(a) requires a party moving for summary judgment to file a statement of material facts as to which the moving party contends there is no genuine issue. All properly supported material facts set forth in such a statement are deemed admitted unless properly controverted by the opposing party. See id.; see also Corder v. Lucent Techs., Inc., 162 F.3d 924, 927 (7th Cir.1998); Flaherty v. Gas Research Inst., 31 F.3d 451, 453 (7th Cir.1994); Waldridge v. American Hoechst Corp., 24 F.3d 918, 921-22 (7th Cir.1994). Mere denials of a properly supported factual statement are not sufficient to show that a genuine issue of material fact exists. See Shermer v. Illinois Dep't of Transp., 171 F.3d 475, 477 (7th Cir.1999) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986)). Rather, a party must "come forward with appropriate evidence demonstrating that there is a pending dispute of material fact." Waldridge, 24 F.3d at 921; see also Vector-Springfield Properties, Ltd. v. Central Illinois Light Co., Inc., 108 F.3d 806, 809 (7th Cir.1997). To meet this burden, a party contesting a motion for summary judgment must counter the affidavits and documents submitted with materials of "evidentiary quality" (e.g., depositions or affidavits) that create a genuine factual issue. Adler v. Glickman, 87 F.3d 956, 959 (7th Cir.1996). While the evidence offered need not be in a form that would be admissible at trial, see Liu v. T & H Mach., Inc., 191 F.3d 790, 796 (7th Cir. 1999), the evidence must identify a specific, genuine issue for trial. See Shermer, 171 F.3d at 477.
Where cross motions for summary judgment have been submitted, the Court is not required to grant judgment as a matter of law for one side or the other. Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir.1993). Rather, the Court must evaluate each party's motion on its own merits, resolving factual uncertainties and drawing all reasonable inferences against the party whose motion is under consideration. Id.; Buttitta v. City of Chicago, 803 F. Supp. 213, 217 (N.D.Ill.1992), aff'd, 9 F.3d 1198 (7th Cir.1993). Where motions involve requests for partial summary judgment on the single legal issue of subject matter jurisdiction, Rule 56(c) contemplates that if subject matter jurisdiction is found to exist, the rest of the case will go forward. See U.S.EEOC v. Warshawsky and Co., 768 F. Supp. 647, 657 (N.D.Ill.1991) (in case involving cross motions for partial summary judgment, court found subject matter jurisdiction existed and denied defendant's motion). See also Capitol Records, Inc. v. Progress Record Dist., Inc., 106 F.R.D. 25, 29 (N.D.Ill.1985) (Rule 56(c) allows filing of motion for summary judgment as to single claim).
Both parties have filed motions for summary judgment and, as required, both Mr. Ponce and METRA have filed statements of material, undisputed facts which properly include "references to the affidavits, parts of the record, and other supporting materials relied upon to support the facts set forth in that paragraph." UNITED STATES DIST. COURT, N. DIST. OF *1054 ILL. LR 56.1. After careful review, the Court finds that there is no genuine dispute regarding the following material facts necessary to establish FELA coverage.
II.
A. The Parties.
Guillermo Ponce began working for the Illinois Central Railroad in 1976 as a trackman (Def.'s Facts ¶ 1). He transferred out of the track department and became a coach cleaner in 1981 (Def.'s Facts ¶ 2). Mr. Ponce worked as a coach cleaner for the Illinois Central at its 18th Street facility until the line was taken over by METRA in 1987 (Def.'s Facts ¶ 3), and he continued to work in the same job as a coach cleaner for METRA in the same location at 18th Street up to and beyond the day of his accident on January 8, 1997 (Def.'s Facts ¶¶ 4, 59).
B. The 18th Street Facility.
METRA owns and operates the 18th Street facility where Mr. Ponce worked (Def.'s Facts ¶ 3). The coach cleaners work in the buildings shown in Exhibits 1G and 1H (Def.'s Facts ¶ 5). On January 8, 1997, Mr. Ponce worked the 8:15 a.m. to 4:15 p.m. shift cleaning coaches at the 18th Street facility. Mr. Ponce punched out on the time clock in the building at the left side of Exhibit 1G (Def.'s Facts ¶ 20), prior to the scheduled end of his shift at 4:15 p.m.; METRA had a practice of setting its clocks ahead, so that employees who wished to utilize the train could arrive early and punch out early (Pl.'s Add'l Facts ¶ 75), and Mr. Ponce made use of this practice on the day of the alleged accident.[2]
After he punched out on the clock, Mr. Ponce went outside to wait for a METRA train he used to travel to and from work (Def.'s Facts ¶ 21). As was his custom, Mr. Ponce walked out of the building where he was working (shown on the far left side of the picture in Exhibit 1G), walked into a parking lot area, and then came onto the blacktop, crossing the tracks (Def.'s Facts ¶ 22). Normally, he would cross over one or two sets of tracks, depending on what track the METRA train he would be riding arrived on, in order to reach the boarding area for the train (Def.'s Facts ¶ 23).
C. The METRA Train and The Boarding Area.
The blacktop area is located within the 18th Street facility; this facility is METRA property which is not open to the general commuting public, but is only accessible to METRA employees (Def.'s Facts ¶¶ 27, 30; Pl.'s Add'l Facts ¶¶ 61-64, 74). In other words, the 18th Street facility and the blacktop area within it where Mr. Ponce and other METRA employees boarded and exited the METRA train is not a regular commuter stop for the METRA Electric Line (Def.'s Facts ¶ 10; Pl.'s Add'l Facts ¶ 65), but rather is used only for the benefit of METRA employees (Def.'s Facts ¶¶ 10, 30, 31, 35, 43; Pl.'s Add'l Facts ¶ 63). As such, the means by which METRA employees boarded and exited the train at the 18th Street facility differed from the means available at regular commuter stops.
The 18th Street facility does not have a platform for employees to use when boarding the METRA train (Pl.'s Add'l Facts *1055 ¶ 67), such as those provided for commuters at regular commuter stops (Pl.'s Add'l Facts ¶¶ 70-74). Instead, employees must board the train by using steps which lead up into the vestibule of the train (Def.'s Facts ¶ 37). Those steps are located beneath a trap door which is latched to the right side of the doorway leading up into the train (Def.'s Facts ¶¶ 38, 41). The trap door performs a different function at the 18th Street facility than at regular commuter stops. When the train picks up employees at the 18th Street facility, the trap door is lifted to allow entry into the train (Def.'s Facts ¶ 39). By contrast, when the train makes stops for commuters at elevated platforms, the trap door is closed or lowered so that it is sitting over the top of the steps, and commuters can walk on top of the trap door as they enter or exit the train (Def.'s Facts ¶¶ 40, 41, 42; Pl.'s Add'l Facts ¶¶ 71-74). Thus, at a regular commuter stop, there is no need to lift the trap door (Pl.'s Add'l Facts ¶ 69).
The METRA train that arrives at the 18th Street facility is not "a special train" operated only for METRA employees, but instead is one that makes stops at regular commuter stations open to the general public (Def.'s Facts ¶¶ 7, 9, 12). However, the general commuting public does not have access to the 18th Street facility. When the train stops at the 18th Street facility in the morning and evening, it is for the sole purpose of allowing METRA employees to board and exit when reporting to or departing from work (Def.'s Facts ¶¶ 10-12). When the train stops at the 18th Street facility, the METRA employees board at the head of the train on the first car (Def.'s Facts ¶ 31). The front end of the train stops on the blacktop, so that employees can step up into the train by way of steps leading up into the vestibule (Def.'s Facts ¶ 35, 37). When the train arrives at the 18th Street facility, it is both within and on METRA property (Pl.'s Add'l Facts ¶ 74; Def.'s Resp. ¶ 74).
D. The Alleged Accident.
On January 8, 1997, Mr. Ponce and George Johnson, a fellow coach cleaner, punched out on the time clock, came out of the building shown in the upper left of Exhibit 1G, and then walked across the blacktop and waited for a train (Def.'s Facts ¶ 25). Three other METRA employees were already on the blacktop waiting for the train (Def.'s Facts ¶ 26). When the commuter train stopped to pick up the employees, the employees opened the outside door of the train and the first employee to go up lifted the trap door and secured it to the latch on the side (Def.'s Facts ¶ 44). Three employees boarded the train before Mr. Ponce (Def.'s Facts ¶ 45). Mr. Ponce had his left foot on the first step, and Mr. Johnson, the fifth employee, was on the blacktop behind him (Def.'s Facts ¶ 46). The employee directly in front of Mr. Ponce, Mr. O'Neill, released the latch on the trap door and it came down on Mr. Ponce (Def.'s Facts ¶¶ 47, 48). Mr. Ponce lifted his right hand to try and hold up the door (Def.'s Facts ¶ 49), but it struck him on his right hand and shoulder (Def.'s Facts ¶ 50). As the trap door came down, Mr. Ponce stepped back off the train, onto the blacktop (Def.'s Facts ¶ 51). At the time of his accident, Mr. Ponce and the other employees were still within the 18th Street yard where they worked (Pl.'s Add'l Facts ¶ 74).
III.
FELA provides, in relevant part, as follows:
Every common carrier by railroad while engaging in commerce ... shall be liable in damages to any person suffering injury while he is employed by such carrier in such commerce, ... for such injury ... resulting in whole or in part from the negligence of any of the officers, agents, or employees of such carrier, or by reason of any defect or insufficiency, due to its negligence, in its cars, engines, appliances, machinery, ... or other equipment.
Any employee of a carrier, any part of whose duties as such employee shall be the furtherance of interstate ... commerce; *1056 ... shall ... be considered as being employed by such carrier in such commerce and shall be considered as entitled to the benefits of this chapter.
45 U.S.C. § 51 (emphasis added).
The parties' cross-motions for partial summary judgment do not seek a ruling at this time on the issues of whether METRA was negligent, or whether any of Mr. Ponce's alleged injuries resulted in whole or part from such negligence, or the extent of any injuries Mr. Ponce suffered. Rather, the cross-motions raise the threshold issue of whether FELA applies at all to Mr. Ponce's claims. That issue turns on whether Mr. Ponce was engaged in the course of his employment at the time his accident occurred, a question that the Seventh Circuit has treated as involving subject matter jurisdiction. See Caillouette v. Balt. & Ohio Chicago Terminal R. Co., 705 F.2d 243, 245-46 (7th Cir.1983).
The scope of employment under FELA is broadly construed by the federal courts and has been for more than 80 years. In the seminal FELA case of Erie Railroad Company v. Winfield, 244 U.S. 170, 37 S. Ct. 556, 61 L. Ed. 1057 (1917), the Supreme Court held that an employee who leaves the railroad carrier's yard "at the close of his day's work" is engaged in a "necessary incident of his day's work," and thus is "but discharging a duty of his employment." Id. at 173.
A decade later, in Bountiful Brick v. Giles, 276 U.S. 154, 48 S. Ct. 221, 72 L. Ed. 507 (1928), the Court further explained the parameters of "scope of employment," in a case arising under the Utah's Workman's Compensation Act:
... employment includes not only the actual doing of the work, but a reasonable margin of time and space necessary to be used in passing to and from the place where the work is to be done. If the employee be injured while passing, with the express or implied consent of the employer, to or from his work by a way over the employer's premises, or over those of another in such proximity and relation as to be in practical effect a part of the employer's premises, the injury is one arising out of and in the course of the employment as much as though it had happened while the employee was engaged in his work at the place of its performance.
Id. at 158, 48 S. Ct. 221. See also Cudahy Packing Co. v. Parramore, 263 U.S. 418, 426, 44 S. Ct. 153, 68 L. Ed. 366 (1923) (in a case arising under Utah Workman's Compensation Act, explained that employment contemplates entry upon and departure from the premises as much as it contemplates working there and must include reasonable interval of time for that purpose).
Although Giles was decided under Utah's Workman's Compensation Act, rather than FELA, the Supreme Court's discussion of the scope of employment in that case has been cited with approval by the Seventh Circuit in Caillouette, a FELA case. In Caillouette, the Court of Appeals distinguished cases, on the one hand, where the claimed injuries occurred while the employee was commuting to and from work, from cases where, on the other hand, the claimed injuries occurred on the employer's own premises while the employee was "traversing the work site on [the] way to or from work." 705 F.2d at 245-46. The appeals court explained that "commuter cases" are excluded from coverage because the employees are not required to use the employer's trains while traveling to and from work, and when they do so, "they are in no greater danger than any other member of the commuting public." Id. at 246. By contrast, the policies underlying the exclusion of coverage in commuter cases do not apply to employees traversing the employer's work site. When crossing the work site, an employee is in an area "not open to the public," and thus is "subject to dangers beyond those experienced by the commuting public." Id. Moreover, traversing the work site "is a necessary incident of the day's work." Id. (citing Winfield, 244 U.S. at 173, 37 S. Ct. 556).
*1057 A review of cases decided both before and after Caillouette reveals that the "commuter" cases generally occur off the work site, usually on the employer's train or other property some distance from the work site. In these cases, as a general rule, courts have held that an employee injured while commuting to and from work is not covered by FELA. See Quirk v. New York, C. & St. L. R.R., 189 F.2d 97 (7th Cir.1951) (no FELA coverage where railroad foreman took company car to travel home and on journey collided with fellow employee using another company car). See also Sassaman v. Pennsylvania R. Co., 144 F.2d 950, 952-53 (3rd Cir.1944) (no FELA coverage where train dispatcher riding employer's intrastate train home after work injured alighting from train on commuter station platform nine miles from normal place of work); Metropolitan Coal Co. v. Johnson, 265 F.2d 173, 178 (1st Cir.1959) (no FELA coverage where freight train flagman who chose to ride employer's express passenger train to work injured when train ran over steel cable); Getty v. Boston & Maine Corp., 505 F.2d 1226 (1st Cir.1974) (no FELA coverage where railroad carman slipped on ice that accumulated on commuter station platform); Thompson v. National Railroad Passenger Corp., 774 F. Supp. 1087, 1088 (N.D.Ill.1991) (no FELA coverage where AMTRAK waiter commuting from Michigan home to Chicago work site on employer's train with free pass collided with truck).
The "traversing" cases, on the other hand, generally occur on the employer's work site while the employee is attempting to report to or leave the job within a reasonable time of his or her shift, and is exposed to risks not confronted by the public generally. In such cases, courts generally have held that FELA provides coverage. See Winfield, 244 U.S. 170, 37 S. Ct. 556; Caillouette, 705 F.2d 243. See also Lukon v. Pennsylvania R. Co., 131 F.2d 327, 329 (3rd Cir.1942) (FELA covered injuries sustained by member of railroad gang when train hit him on his way to return employer's tools to employer's tool house); Schneider v. National Railroad Passenger Corp., 854 F.2d 14 (2d Cir.1988) (FELA covered injuries sustained by railroad ticket agent from attacker in company parking lot where she parked car).[3]
These cases underscore what the Seventh Circuit observed in Caillouette: that whether a case falls within the "commuter" rule or the "traversing" rule is driven by the facts of that particular case. 705 F.2d at 246. In general, however, the two lines of cases teach that whether an injury is the result of commuting or traversing turns principally on (1) whether the employee is on the work site itself, and thus is exposed to risks to which the general public is not subject, and (2) whether he or she is within reasonable proximity both in terms of time and space to where the actual work was performed that day. See Schneider, 854 F.2d at 17 ("[a]n employee still on the employer's property who is leaving work within a reasonable time after the work day is over is certainly within the protection of [FELA]"). Cf. Goldwater v. Metro-North Commuter Railroad, 101 F.3d 296, 298 (2d Cir.1996) (citing Young v. New York, N.H. & H.R. Co., 74 F.2d 251 (2d Cir.1934), for the proposition that employment does not necessarily require an employee to be "going to or coming away from the place where the job is carried on .... employment may begin before [one] reaches the [employer's] premises" so long as the activity engaged in by the employee at the time of injury is "reasonably necessary" for the employee *1058 to do the job). The locus of the injury is critical to determining whether an employee is within the scope of employment, because the policy behind FELA is to protect railway workers from the dangers associated with railway work, not the risks of commuting to which all passengers are exposed. See Caillouette, 705 F.2d at 246.
IV.
METRA claims that it is entitled to summary judgment against Mr. Ponce because the "judicially-developed `commuter rule' bars recovery under FELA for injuries sustained while commuting to or from work" (Def.'s Mem. at 2). Conversely, Mr. Ponce claims that he is entitled to summary judgment against METRA on the issue of subject matter jurisdiction because FELA covers injuries that, like his alleged injuries, occur while an employee is leaving the employer's premises at the end of a workday. Although the Court is not required to grant summary judgment for one side or the other simply because cross motions have been filed, the Court agrees the undisputed facts allow this Court to determine that, as a matter of law, FELA applies and vests this Court with subject matter jurisdiction. The Court holds that the undisputed material facts establish that this case falls within the "traversing" doctrine of Caillouette: Mr. Ponce was injured on METRA property, in close proximity to his actual work site, shortly after he punched out of his shift, as he boarded his employer's commuter train at a stop and through an entrance not generally available to commuters.
In Caillouette, the plaintiff was a railroad switchman who regularly worked "at locations all over the yard" but who reported to work at one of two work sites each day. Mr. Caillouette was dropped off at work by a friend on a side of the yard opposite to where he was to report to work. Intending to request an engine to take him to his work site, Mr. Caillouette headed toward a carmen's shanty, an unfamiliar terrain, when he tripped over some rusty wire lying on the ground and permanently injured his knee. The Court of Appeals found that Mr. Caillouette's injuries were covered by FELA under the "traversing" cases. In particular, the Caillouette Court found that the plaintiff was not a "commuter" because he was (1) "in an area not open to the public" and "was subject to dangers beyond those experienced by the commuting public"; and (2) "[h]e was on his employer's premises at his work site, though not yet at the exact location where he was to report[,]" and "had to, of necessity, cross some portion of the work site to reach the place where he was to report." 705 F.2d at 246.
In this case, as in Caillouette, Mr. Ponce was injured in the time and space necessary for him to use the train to leave his work site and begin his commute home. The commute had not begun yet because Mr. Ponce was still on METRA property when he was injured; the METRA train actually came into the employee work site (the property boundaries of the 18th Street facility) to pick up employees after their work shift had ended, and Mr. Ponce was injured as he boarded the train at that location. And while METRA did not require its employees to use the train, METRA actively facilitated employee use of the train by adjusting the employees' time clocks so they could board the train at 18th Street as the train made its way to the regular commuter stops farther down the line.
Moreover, as in Caillouette, Mr. Ponce allegedly was injured due to a hazard to which the regular commuting public was not exposed, namely, the method in which Mr. Ponce was required by his employer to board the train. Mr. Ponce and other METRA employees boarded the train by stairs leading up into the vestibule through a trap door; and Mr. Ponce claims he was injured by the trap door falling on him as he attempted to board the train. Although METRA claims that some commuters are required to use steps that lead through the trap door, that claim is not supported by evidentiary materials sufficient to create a genuine fact dispute. See *1059 Adler, 87 F.3d at 959.[4] Thus, the Court deems as admitted Mr. Ponce's factual assertion that the use of stairs and the trap door is only required for employees who board the train at 18th Street. See Pl.'s Add'l Facts ¶¶ 68, 70; Cf. Pl.'s Add'l Facts ¶¶ 71-73. Based on this and the other undisputed facts, the Court concludes that Mr. Ponce's claims fall with the coverage of FELA.
METRA makes four arguments in its attempt to distinguish this case from the "traversing" cases that fall within FELA coverage.[5] We address each of those arguments in turn.
A.
METRA contends that Mr. Ponce was outside the scope of his employment because his pay period ended when he punched out on the time clock and his shift was done for the day. In other words, METRA argues that because Mr. Ponce was not being compensated at the time of his injury, he cannot be considered within the scope of his employment for FELA purposes (Def.'s Mem. at 4). This argument is unpersuasive, as FELA covers employee injuries that occur within a reasonable time before or after the employee's regular work hours even if the employee is not being paid at the time. See Erie R. Co., 244 U.S. at 173, 37 S. Ct. 556 (leaving work at the end of the day is a "necessary incident" of a day's work).
Here, the undisputed facts establish that Mr. Ponce's regular work shift was scheduled to end at 4:15 p.m. each day, and that METRA changed the time on its clocks to allow employees to punch in early and to punch out early so that they could use the commuter train. Given these facts, the Court concludes that under the applicable authorities, Mr. Ponce's injury occurred within the scope of his employment. E.g., Erie Railroad Co., 244 U.S. at 173-74, 37 S. Ct. 556; Young v. New York, N.H. & H.R. Co., 74 F.2d 251, 252 (2d Cir.1934); Caillouette, 705 F.2d at 246; Schneider, 854 F.2d at 16-17. The case relied upon by METRA, Parker v. Long Island R.R., 425 F.2d 1013, 1014-15 (2d Cir.1970), is not to the contrary. Parker merely mentions that if an employee is compensated for time spent traveling home, that fact may be considered in the overall analysis on scope of employment. Parker does not establish that the absence of compensation precludes a finding that an injury occurred in the scope of employment.
B.
METRA argues that Mr. Ponce was not "traversing" the premises of the 18th Street yard because he was injured while boarding a METRA commuter train (Def.'s Reply at 3). METRA contends that once Mr. Ponce stepped on board the METRA train, he was a "commuter" under the line of cases where the employee *1060 was injured on the employer's train while commuting to or from work (Def.'s Reply at 3, citing Getty, 505 F.2d at 1227-28; Metropolitan Coal Co., 265 F.2d at 178; Sassaman, 144 F.2d at 952-53; and Thompson, 774 F.Supp. at 1088). However, the cases cited by METRA do not support its sweeping assertion. METRA's argument also ignores that while the METRA train was open generally to commuters, at the 18th Street yard it was not generally open to commuters: at that stop the train could be boarded only by METRA employees, and the means of boarding exposed METRA employees to risks not generally presented to commuters. Under the foregoing case law, those facts are central to the analysis.
Equally unavailing is METRA's attempt to categorize the "fact that the train itself had not yet left 18th Street" as "irrelevant to this case" (Def.'s Reply at 3). The fact that the train had not left the 18th Street yard is a central difference between this case and the commuter cases. See Young, 74 F.2d at 252 (employee still within scope of employment when he has not yet left the premises); Schneider, 854 F.2d at 17 (FELA coverage appropriate where facts establish that employee's injuries occurred in close physical and temporal proximity).
C.
METRA argues that Mr. Ponce's injury occurred outside the scope of his employment because METRA did not compel him to use the train; rather, Mr. Ponce chose to take the train to his job rather than some other form of transportation. In support of this argument, METRA cites cases which refused to extend FELA coverage to employees who sustained injuries "en route to or from work unless the employer required the employee to use that route" or that "mode of travel." (Def.'s Mem. at 5, citing Kress v. Long Island R.R., 526 F. Supp. 856, 859 (S.D.N.Y.1981); Quirk v. New York, C. & St. L.R.R., 189 F.2d 97, 100 (7th Cir.1951); and Metropolitan Coal Co. v. Johnson, 265 F.2d 173, 178 (1st Cir.1959)). That argument is a non-starter: in each of those cases, the employee's injury occurred on a part of the employer's premises (e.g., the train or a commuter station platform or stairway) that was not located on the employee's work site but rather some distance away. "Although the test is not merely one of geography, the fact that a commuting employee is a substantial distance away from his actual work site when injured is a key factor." 854 F.2d at 17. By contrast, when Mr. Ponce allegedly was injured, he was still on the work site and near to where he performed his duties.
What's more, although he was not required to take the train, Mr. Ponce was required to leave his job site as an "incident" of his work. And it was certainly expected by METRA that its employees would use the train METRA facilitated (if not encouraged) its use by adjusting the punch out time. The trap door on the METRA train, like the rusty wire lying on the ground in Caillouette, was located on the employer's work site and served as the means by which the injury occurred. As in Caillouette, Mr. Ponce's alleged injury occurred while he was traversing the work site, and is covered by FELA.[6]
D.
Finally, METRA makes the related, but equally unavailing argument that Mr. Ponce "was not required to traverse the area of the yard where the train stopped *1061 to pick him up, let alone the inside of the train where he was actually injured" (Def.'s Mem. at 7). METRA contends that Sassaman v. Pennsylvania R. Co., 144 F.2d 950 (3d Cir.1944) and Erie Railroad Co. v. Winfield, 244 U.S. 170, 37 S. Ct. 556, 61 L. Ed. 1057 (1917), stand for the proposition that FELA does not apply unless the injuries are the result of conditions or instrumentalities inherent to the premises or a "necessary incident" to the discharge of the employee's work duties (Id.).
We believe that METRA misreads the holdings of these cases. The "necessary incident" language of Erie refers to what the employee was doing when injured, and not the instrumentality that caused the injury. In Parramore, 263 U.S. 418, 44 S. Ct. 153, 68 L. Ed. 366, and Giles, 276 U.S. 154, 48 S. Ct. 221, 72 L. Ed. 507 (1928), the Supreme Court held that the scope of employment may begin before an employee reaches or after the employee leaves the premises, so long as the way or method traveled is one that the employer gives the employee consent to use in "passing to and from the place where the work is to be done." Giles, 276 U.S. at 158, 48 S. Ct. 221. Cf. Young, 74 F.2d at 252 (noting extension of employment scope articulated in Parramore and Giles). And, the fact that it was not "necessary" for Mr. Ponce to use the train is of no moment. We do not read these cases to require that the "means of ingress and egress" to the work site used by employees "with the express or implied consent of the employer" be the only means available in order to fall within the scope of employment, as METRA suggests (METRA Mem. at 8; METRA Reply Mem. at 2-3). Here, even if Mr. Ponce had other ways to reach or depart 18th Street facility, other than the METRA commuter train, METRA's affirmative invitation to use the train, evidenced by its facilitation of the time clock (i.e., advancing the time for punching in and out to coordinate employee schedules with the commuter train's schedule) more than adequately serves as the basis for consent.[7]
CONCLUSION
The Court concludes that the undisputed material facts establish that Mr. Ponce was within the scope of his employment on January 8, 1997, when he allegedly was injured as he attempted to board the METRA commuter train that stopped at the 18th Street facility. Accordingly, the Court enters summary judgment in favor of Mr. Ponce and against METRA on the issue of this Court's subject matter jurisdiction under FELA. On that issue, the plaintiff's motion for summary judgment (doc. # 18-1) is granted, and the defendant's motion for summary judgment (doc. # 12-1) is denied. The Court's summary judgment ruling leaves for another day the remaining issues of liability and damages on Mr. Ponce's claims.
NOTES
[1] By the parties' consent, on February 9, 2000, this case was reassigned to this Court, pursuant to 28 U.S.C. § 636(c)(1) and Northern District of Illinois Local Rule 73.1(b), for this Court to conduct any and all proceedings in this case, and to enter final judgment (see doc. ## 6, 7 and 8).
[2] There is a dispute between the parties regarding whether Mr. Ponce was recalled to duty (i.e., "asked to return to the yard") after he punched out but before he boarded the train, both on the day of the accident and as a matter of course (Def.'s Facts ¶¶ 18-19). This dispute, however, is not material to the issue of FELA coverage in this case, because the case law recognizes that "an employer's potential FELA liability is not cut off as soon as a shift concludes ....", and "[a]n employee does not lose his character as an employee at the very moment his working time ends. An employee still on the employer's property who is leaving work within a reasonable time after the work day is over is certainly within the protection of the Federal Employers' Liability Act." Powers v. New York Cent. Railroad, 251 F.2d 813, 816 (2d Cir.1958) (abrogated on grounds not applicable here). See also infra discussion at 1055-58 (and cases cited therein).
[3] Courts also have held FELA applies to situations where a railroad requires the employee to use a special conveyance to and from work. See Metropolitan Coal Co., 265 F.2d at 178 (noting that an injury on an employer's train when the employee is required to use that train is equivalent to a traversing injury where the employee is required to report to or leave the job site); see also Thompson v. National Railroad Passenger Corp., 774 F. Supp. 1087, 1088 (N.D.Ill.1991) (noting the standard articulated in Metropolitan Coal). That particular factual scenario is not presented here.
[4] METRA has attached a complaint from another pending state court case as an exhibit to its Reply Memorandum to support its position that regular commuters sometimes use steps leading through the trap door to board METRA trains (Def.'s Reply 3-4, Ex. A). That submission which recites only an unproven allegation does not constitute the evidentiary materials contemplated by Local Rule 56.1, which are necessary to create a genuine factual issue. And even if METRA's submission were sufficient to show that commuters sometimes used the trap door, that would not show that commuters generally use the trap door.
[5] At the outset, the Court rejects METRA's contention that the traversing cases are an "exception" and commuter cases the "rule." The case that METRA cites for that proposition, Goldwater v. Metro-North Commuter Railroad, 906 F. Supp. 173 (S.D.N.Y.1995) (Def.'s Mem. at 3-4), is not persuasive authority: it was reversed on appeal by the Second Circuit Court of Appeals on the ground that factual disputes precluded summary judgment on the issue of whether the plaintiff was within the scope of her employment at the time of her injury. More fundamentally, we do not find it helpful to characterize commuter or traversing cases as either an exception or a rule, as those labels tend to obscure the critical question for this Court: whether the facts of this case show that an alleged injury occurred within the "scope of employment," as that term has been interpreted by the Supreme Court in Erie Railroad and the Seventh Circuit in Caillouette.
[6] We are not persuaded by METRA's attempt to distinguish Caillouette on the ground that the rusty wire that caused the injury there was an "inherent" condition of the premises because it lay upon the ground of the work site, whereas the trap door was on the train which was not always on the work site (Def.'s Mem. at 9-10). The Court sees no material difference between the trap door on the train and the rusty wire lying on the ground. Both were encountered by the plaintiffs while performing the "necessary incident" of employment of reporting to or leaving work; both were alleged hazards encountered on the work site (and the train clearly was brought onto the site by the employer); both were hazards not generally encountered by persons other than the defendant's employees.
[7] METRA claims that if "Mr. Ponce had chosen to commute to work in a co-worker's automobile, rather than take the train," and "cut his hand on a piece of metal protruding from the door frame" then "no liability under ... FELA would attach ... even though the co-worker's car was still in the employee parking lot" (Def.'s Mem. at 10). This hypothetical is unpersuasive, because it is squarely answered by Schneider v. National Railroad Passenger Corp., 854 F.2d 14 (2d Cir.1988). Schneider answers METRA's hypothetical argument by making an unarticulated, but important distinction between a hazard on the employer's premises that the employee brings with him or her from home and one that the employee merely encounters there (i.e., the unknown attacker, the rusty wire or the METRA train that the employer sends to the work site to pick the employee up for the day). See id. at 16, 18 (Amtrak police officers were assigned to parking lot areas used by Amtrak employees for the very purpose of protecting employees on Amtrak premises from being accosted). METRA's argument also ignores that the hazard Mr. Ponce allegedly encountered was not one that he or a co-employee brought to work: it was a METRA train that METRA itself brought to the work site.
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103 F. Supp. 2d 74 (2000)
UNITED STATES
v.
KAYSER-ROTH CORP., INC.
C.A. Nos. 98-160T, 88-325B.
United States District Court, D. Rhode Island.
June 22, 2000.
*75 *76 Terrence P. Donnelly, U.S. Attorney's Office, Providence, RI, Donald G. Frankel, U.S. Dept. of Justice, Environmental Enforcement Section, Newton Corner, MA, for Plaintiff.
William S. Eggeling, Ropes & Gray, Providence, RI, J. Daniel Berry, Ropes & Gray, Washington, DC, for Defendant.
MEMORANDUM AND ORDER
TORRES, Chief Judge.
Background.........................................................77
The 1988 Case .................................................77
The Appeal ....................................................78
The 1998 Case and Bestfoods ...................................78
The Rule 60(b) Standard ...........................................78
Discussion ........................................................79
I. Prospective Application ..................................79
II. Inequity .................................................80
III. Futility .................................................81
A. Operator Liability ....................................81
B. Owner Liability .......................................82
1. Law of the Case ....................................82
2. Bestfoods ..........................................84
Conclusion ........................................................85
Kayser-Roth Corp., Inc. ("Kayser-Roth" or "KR") has moved, pursuant to Fed.R.Civ.P. 60(b)(5), for relief from that portion of a 1990 judgment (the "declaratory judgment") entered by Judge Boyle[1] in C.A. No. 88-325-B (the "1988 case") declaring KR liable for the future cost of remediating a hazardous waste site in Forestdale, *77 R.I. (the "Site"). That motion was prompted by the commencement of another action (C.A. 98-160T or the "1998 case") in which the United States seeks to recover some of those costs.
The issues presented are whether the declaratory judgment has "prospective application" within the meaning of Rule 60(b)(5); and, if so, whether Kayser-Roth is entitled to relief from that judgment on the ground that the Supreme Court's intervening decision in United States v. Bestfoods, 524 U.S. 51, 118 S. Ct. 1876, 141 L. Ed. 2d 43 (1998) represents a material change in the law governing a parent corporation's liability under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601-9675 ("CERCLA") as the "operator" or "owner" of a hazardous waste facility.
I find that although, in this case, the United States seeks to apply the declaratory judgment prospectively, relief may not be obtained under Rule 60(b)(5) because Bestfoods does not render continued application of that judgment inequitable. Accordingly, Kayser-Roth's motion for relief from judgment is denied.
Background
The 1988 Case
In 1990, Judge Boyle entered judgment against Kayser-Roth in C.A. No. 88-325-B requiring Kayser-Roth to pay some of the costs previously incurred by the United States Environmental Protection Agency ("EPA") in remediating the Site. The judgment also declared Kayser-Roth liable under CERCLA for any future remediation costs incurred by EPA. See United States v. Kayser-Roth Corp., 724 F. Supp. 15, 16-19 (D.R.I.1989). The facts underlying the declaratory judgment are recited in Judge Boyle's written opinion, see generally id., and may be summarized briefly as follows.
From 1952 to 1975, Stamina Mills Inc., a wholly-owned subsidiary of Kayser-Roth, operated a textile mill in Forestdale. In 1969, Stamina Mills installed a system that used trichloroethylene ("TCE") to clean its equipment. A few months later, a tanker truck that was delivering TCE accidentally spilled an indeterminate quantity of the chemical at the site. Apparently, additional quantities of TCE also leached into the soil from empty TCE containers that were discarded in a landfill on Stamina Mills's property.
Several years later, studies by EPA and the Rhode Island Department of Health determined that TCE from the site had contaminated nearby wells. Consequently, the site was added to the Superfund list, and cleanup efforts began. Stamina Mills then ceased doing business, and EPA brought a CERCLA action against Kayser-Roth seeking reimbursement for the costs it had incurred and for a declaration that Kayser-Roth would be liable for any additional costs incurred in the future.
Although EPA presented six theories on which it claimed that Kayser-Roth was liable, Judge Boyle found it necessary to address only two of them. He determined that Kayser-Roth was an "operator" of the site within the meaning of 42 U.S.C. § 9601(20) because it exercised "pervasive control over Stamina Mills," including control "with regard to environmental matters." Kayser-Roth, 724 F.Supp. at 22. More specifically, Judge Boyle found that:
Kayser-Roth had the power to control the release or threat of TCE, had the power to direct the mechanisms causing the release, and had the ultimate ability to prevent and abate damage. Kayser-Roth knew that Stamina Mills employed a scouring system that used TCE; indeed, Kayser-Roth approved the installation of that system after mandating that a cost-benefit study be made by Stamina Mills.
Id.
Judge Boyle also determined that Kayser-Roth was an "owner" of the site within the meaning of § 9601(20) because, in effect, Stamina Mills was merely Kayser-Roth's alter ego. More specifically, Judge Boyle found that Stamina Mills's corporate *78 veil should be pierced "not only because public convenience, fairness, and equity dictate such a result, but also due to the all encompassing control which Kayser-Roth had over Stamina Mills as, in fact and deed, an owner." Id. at 24.
Accordingly, judgment was entered against Kayser-Roth for $846,492.33 in response costs previously incurred by EPA, plus interest of $111,928. In addition, a declaratory judgment was entered stating that "defendant Kayser-Roth Corporation is liable to the United States, pursuant to 42 U.S.C. § 9607(a)(2), for all further response costs incurred by the United States related to the Stamina Mills Site."
The Appeal
Kayser-Roth appealed from the 1990 judgment, but the appeal was unsuccessful. See United States v. Kayser-Roth Corp., 910 F.2d 24 (1st Cir.1990). In affirming the District Court's judgment, the First Circuit stated:
Without deciding the exact standard necessary for a parent to be an operator, we note that it is obviously not the usual case that the parent of a wholly owned subsidiary is an operator of the subsidiary. To be an operator requires more than merely complete ownership and the concomitant general authority or ability to control that comes with ownership. At a minimum it requires active involvement in the activities of the subsidiary.
Id. at 27.
The Court went on to find that the degree of control described in the "district court's excellent opinion," id., was "more than sufficient" to impose "operator" liability on Kayser-Roth. Id. at 28. Since the imposition of operator liability was dispositive, the Court of Appeals did not reach the "veil-piercing" issue.
The 1998 Case and Bestfoods
In March of 1998, EPA commenced C.A. 98-160T to recover additional response costs of $4.1 million incurred after the period covered by the 1990 judgment, plus $2.3 million in interest.
Three months later, the Supreme Court issued its decision in United States v. Bestfoods, 524 U.S. 51, 118 S. Ct. 1876, 141 L. Ed. 2d 43 (1998) in which it held, inter alia, that the test for determining whether a parent corporation may be held directly liable as the operator of a hazardous waste facility run by its subsidiary "is not whether the parent operates the subsidiary, but rather whether it operates the facility." 524 U.S. at 67, 118 S. Ct. 1876. That decision prompted Kayser-Roth to file its Rule 60(b)(5) motion for relief from the 1990 judgment. Kayser-Roth argues that imposing "operator" liability on it is inconsistent with Bestfoods because both Judge Boyle and the First Circuit focused on whether Kayser-Roth controlled Stamina Mills rather than on whether Kayser-Roth controlled operations at the site. Kayser-Roth also argues that Bestfoods rejected the standard utilized by Judge Boyle in piercing Stamina Mills's corporate veil and holding Kayser-Roth derivatively liable as an "owner" of the facility.
The Rule 60(b) Standard
Rule 60(b) represents an effort to strike a balance between two competing and equally important objectives of our legal system. It seeks to reconcile the strong public policy interest in recognizing the finality of judgments with the equally strong policy interest in attempting to ensure that disputes are decided on their merits and that justice is done. See Cotto v. United States, 993 F.2d 274, 276 (1st Cir.1993); Teamsters, Chauffeurs, Warehousemen & Helpers' Union, Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 19 (1st Cir.1992). In attempting to strike that balance, courts, generally, are "disinclined to disturb judgments under the aegis of Rule 60(b)" unless the party seeking relief can demonstrate: (1) that its motion was timely filed; (2) the existence of exceptional circumstances justifying extraordinary relief; (3) the absence of unfair prejudice to the opposing party; and (4) *79 that there is reason to believe that vacating the judgment will not be an empty exercise. See Teamsters, Chauffeurs, Warehousemen & Helpers Union, 953 F.2d at 19.
Discussion
In this case, Kayser-Roth relies on that portion of Rule 60(b) that provides for relief from a final judgment when "it is no longer equitable that the judgment should have prospective application." Fed. R.Civ.P. 60(b)(5). More specifically, Kayser-Roth argues that it would be inequitable to continue to apply what it describes as the "discredited" declaratory judgment.[2]
EPA argues that:
(1) the 1990 judgment does not have any "prospective application;" but, rather, it is, in essence, a money judgment in which only the amount of damages remains unliquidated;
(2) requiring Kayser-Roth to pay the additional response costs will not "result in a hardship to Kayser-Roth ... of sufficient magnitude to overcome the overriding interest in the finality of judgments;" and
(3) in any event, vacating the declaratory judgment would be an empty exercise because Bestfoods does not and would not alter the result.
I. Prospective Application
A judgment has "prospective application" within the meaning of Rule 60(b)(5) when it "is `executory' or involves `the supervision of changing conduct or conditions.'" Twelve John Does v. District of Columbia, 841 F.2d 1133, 1139 (D.C.Cir.1988)(citing United States v. Swift & Co., 286 U.S. 106, 52 S. Ct. 460, 76 L. Ed. 999 (1932); Pennsylvania v. Wheeling & Belmont Bridge Co., 59 U.S. (18 How.) 421, 15 L. Ed. 435 (1856)). The terms "prospective" and "executory" connote something that will not take full effect or become fully operative until sometime in the future. See Black's Law Dictionary 592, 1238 (7th ed.1999). A judgment may be deemed to have "prospective application" or to be "executory" if it does not fix all of the rights and liabilities of the parties and leaves some of those rights and liabilities to be determined on the basis of future events. Thus, a declaratory judgment establishing liability but deferring the question of damages until a later time is prospective within the meaning of Rule 60(b)(5), at least with respect to the issue of damages.
Here, although the 1990 judgment declared Kayser-Roth liable for future response costs, it did not identify which costs would qualify as response costs under CERCLA or what amounts would be recoverable. Those matters necessarily were left to be determined on the basis of future events. Therefore, in claiming damages determined after entry of the 1990 declaratory judgment, EPA is seeking to apply that judgment prospectively.
Accepting EPA's argument that a judgment has "prospective application" only when it requires a party to "take or refrain from taking, any action in the future," (EPA's Supp. Mem. at 7), would effectively nullify Rule 60(b)(5). It is difficult to imagine any judgment, with the possible exception of one granting injunctive relief, that would fit within EPA's definition. That definition would preclude relief from the application of declaratory judgments to future events, and would render Rule 60(b)(5) meaningless.
The cases relied upon by EPA are clearly distinguishable from this case. In each of those cases, the judgment in question fully and finally adjudicated the rights and obligations of all of the parties and relief was sought not from any prospective application of the judgment itself but rather *80 from its collateral consequences. See, e.g., DeWeerth v. Baldinger, 38 F.3d 1266 (2d Cir.1994) (judgment barring claim of ownership of painting on statute of limitations grounds does not have prospective application merely because it precludes future litigation of claim); Cincinnati Ins. Co. v. Flanders Elec. Motor Serv., 131 F.3d 625 (7th Cir.1997) (declaratory judgment that potentially responsible party under CERCLA was not covered by insurance policy does not have prospective application merely because, as a result of that judgment, the insured is later required to defend itself in a CERCLA action).
EPA's reliance on the provision in CERCLA that makes a declaratory judgment with respect to liability binding in a subsequent action to recover further response costs (42 U.S.C. § 9613(g)(2)) also is misplaced. That section was designed to permit successive actions to recover response costs that, otherwise, might be barred by the doctrine of res judicata and the prohibition against splitting a cause of action. See, Thomas v. F.A.G. Bearings Corp., 50 F.3d 502, 506 n. 10 (8th Cir.1995). The statute does not sanction prospective application of a discredited judgment.
In short, to the extent that the 1990 declaratory judgment provides the basis for determining liability for the post-judgment expenses that are the subject of C.A. 98-160T, it would have "prospective application" within the meaning of Rule 60(b)(5).
II. Inequity
Because of the strong policy interest in preserving the finality of judgments, a change in the law, by itself, does not justify granting relief under Rule 60(b). See United States v. Woods, 986 F.2d 669, 674 (3rd Cir.1993). New judicial decisions are not applied retroactively "without substantial justification." Id.
The burden is on the party seeking relief under Rule 60(b) to show compelling equitable factors that overcome the "overriding interest in the finality and repose of judgments." Mayberry v. Maroney, 558 F.2d 1159, 1163 (3rd Cir.1977). This "requires not only that circumstances have changed, but that unexpected hardship and inequity have resulted." W.L. Gore & Assoc. v. C.R. Bard, Inc., 977 F.2d 558, 561 (Fed.Cir.1992). The requirement is especially strong in CERCLA cases where Congress has expressly provided that declaratory judgments with respect to liability for response costs "will be binding on any subsequent action or actions to recover further response costs or damages." 42 U.S.C. § 9613(g)(2). While this provision does not preclude relief in appropriate cases, it underscores the need to present a compelling reason for disregarding the judgment.
EPA's argument that requiring Kayser-Roth to pay the additional response costs at issue would not impose a hardship great enough to render it inequitable warrants little discussion. As already noted, those costs exceed $4 million, and EPA seeks an additional $2.3 million in interest. Moreover, it is likely that more will be sought as the remediation work progresses. Although Kayser-Roth may be a company with considerable resources, this Court does not accept EPA's rather cavalier assertion that payment of those sums would not result in a hardship of sufficient magnitude to trigger Rule 60(b)(5).
Nor is this Court persuaded by EPA's argument that any hardship imposed on Kayser-Roth is outweighed by the possibility that granting relief might set a precedent that "could unravel two decades of litigation and consent decree negotiations" upon which clean-up operations in progress at numerous Superfund sites are based. (EPA Mem. at 25-26.) Since Kayser-Roth seeks relief only from prospective application of the 1990 judgment, granting that relief would not undo anything that already has been done.
EPA suggests that, even a strictly prospective application of the 1990 judgment would deprive EPA of any further benefit *81 of that judgment and that such deprivation, also, would outweigh any hardship suffered by Kayser-Roth. However, if the 1990 judgment is inconsistent with Bestfoods, accepting EPA's argument would be tantamount to adopting a "two wrongs make a right" policy. It also would be imputing to Congress an intention to carve out an exception from Rule 60(b)(5) applicable only to discredited CERCLA judgments. This Court declines to do either.
III. Futility
A party seeking relief under Rule 60(b)(5) must provide "reason to believe that vacating the judgment will not be an empty exercise." Teamsters, Chauffeurs, Warehousemen & Helpers Union, 953 F.2d at 20. Accordingly, Kayser-Roth must establish both that Bestfoods changed the law regarding a parent corporation's liability under CERCLA and that, because of that change, it should be relieved from any further liability.
In determining whether the required showing has been made, it is important to distinguish between "operator" liability and "owner" liability because the 1990 judgment rests on findings that Kayser-Roth was both an owner and an operator.
A. Operator Liability
Kayser-Roth contends that Bestfoods rejected the test employed by both Judge Boyle and the First Circuit in holding it liable as an operator of the facility. It argues that Judge Boyle and the First Circuit focused on Kayser-Roth's relationship with and control over Stamina Mills rather than on whether Kayser-Roth controlled operations at the facility.
Under Bestfoods, a parent corporation's direct liability as an "operator" of a facility maintained by its subsidiary turns on whether the parent "actively participated in, and exercised control over[ ] the operations of the facility itself," Bestfoods, 524 U.S. at 55, 118 S. Ct. 1876 (emphasis added) and the parent's participation in and control over "the operations of [the] subsidiary," without more, are insufficient to impose operator liability. Id.
It is true that in finding operator liability, both Judge Boyle and the First Circuit cited Kayser-Roth's "pervasive control over Stamina Mills." See Kayser-Roth, 910 F.2d at 27 (quoting Kayser-Roth, 724 F.Supp. at 22). However, Judge Boyle found that such general control encompassed specific control over environmental matters including the operation of the hazardous waste facility. More specifically, Judge Boyle found that:
Kayser-Roth essentially was in charge in practically all of Stamina's operational decisions, including those involving environmental concerns. Kayser-Roth made the ultimate decision to acquire the dry cleaning process using TCE. Moreover, Kayser-Roth issued a directive requiring Stamina Mills to notify the Kayser-Roth Legal Department of any correspondence with courts or governmental agencies regarding environmental matters. The only autonomy given the officers of Stamina Mills was that absolutely necessary to operate the facility on-site from day to day such as hiring and firing hourly employees and ordering inventory. Stamina was in fact and effect the serf of Kayser-Roth.
Kayser-Roth, 724 F.Supp. at 19.
Judge Boyle also found that "Kayser-Roth not only had the capacity to determine the use of TCE but also was able to direct Stamina Mills on how the TCE should have been handled," id. at 22-23, and that "when Stamina Mills was sued in 1974 by the United States for an illegal waste water discharge into the Branch River, the final decision on settlement was made by Kayser-Roth's directors." Id. Accordingly, Judge Boyle concluded: "[a]lthough not singularly determinative on the issue of operator liability, these factors along with Kayser-Roth's other acts of pervasive control over Stamina Mills, warrant a finding that Kayser-Roth was an *82 `operator' for CERCLA purposes within the provisions of 42 U.S.C. 9607." Id.
That conclusion is entirely consistent with Bestfoods' holding that to be an "operator," one "must manage, direct, or conduct operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations." Bestfoods, 524 U.S. at 66-67, 118 S. Ct. 1876.
Bestfoods also makes clear that the imposition of operator liability does not require a finding that the parent directly participated in the day-to-day activities at the hazardous waste facility. Bestfoods recognizes that operator liability may be imposed when the parent controls the manner in which a subsidiary manages the facility. As the Supreme Court so aptly put it: "[T]he verb `to operate' ... obviously mean[s] something more than mere mechanical activation of pumps and valves, and must be read to contemplate `operation' as including the exercise of discretion over the facility's activities." 524 U.S. at 71, 118 S. Ct. 1876.
Nor is there any doubt that, under Bestfoods, indirect or derivative operator liability, as well as owner liability, may be predicated on a parent's control over a subsidiary, itself, if that control is sufficiently pervasive and wielded for an improper purpose. Id. at 63-64, 118 S. Ct. 1876. As the Supreme Court stated:
"Some courts and commentators have suggested that this indirect, veil-piercing approach can subject a parent corporation to liability only as an owner, and not as an operator.... We think it is otherwise, however. If a subsidiary that operates, but does not own, a facility is so pervasively controlled by its parent for a sufficiently improper purpose to warrant veil piercing, the parent may be held derivatively liable for the subsidiary's acts as an operator."
Id. at n. 10.
Here, Judge Boyle expressly found that Kayser-Roth directed Stamina Mills's activities with respect to environmental matters, in general, and operation of the facility utilizing TCE, in particular. Judge Boyle also found that Kayser-Roth had directed activities at the site. Consequently, Bestfoods would not alter his determination of "operator" liability as affirmed by the First Circuit.
B. Owner Liability
Even if there were reason to believe that Bestfoods would alter the finding of "operator" liability, vacating the 1990 judgment would be "an empty exercise" because Judge Boyle also found Kayser-Roth liable as an "owner" of the facility.
Kayser-Roth argues that the portion of Judge Boyle's decision finding "owner" liability is not binding because it never was affirmed by the First Circuit and, that, in any event, the test of owner liability that Judge Boyle utilized was rejected in Bestfoods. Neither of those arguments is persuasive.
1. Law of the Case
The fact that the First Circuit did not reach the issue of "owner" liability adds little to the analysis of whether the 1990 declaratory judgment should be vacated. Kayser-Roth correctly points out that, when a district court judgment is based on alternative grounds and the Court of Appeals affirms on one ground but does not address the second ground, the second ground has no preclusive effect for res judicata purposes. However, Kayser-Roth overlooks the fact that the district court's decision with respect to the second ground remains the law of the case; and, therefore, may not simply be ignored.
Under the law of the case doctrine, "when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages of the same case." Christianson v. Colt Indus., 486 U.S. 800, 816, 108 S. Ct. 2166, 100 L. Ed. 2d 811 (1988).
*83 The law of the case doctrine is "grounded in important considerations related to stability in the decisionmaking process, predictability of results, proper working relationships between trial and appellate courts, and judicial economy." United States v. Rivera-Martinez, 931 F.2d 148, 151 (1st Cir.1991). Therefore, although the doctrine is not an absolute bar to reconsidering issues previously decided, "as a rule courts should be loathe to do so in the absence of extraordinary circumstances." Christianson, 486 U.S. at 817, 108 S. Ct. 2166. See also American Title Ins. Co. v. East West Fin. Corp., 817 F. Supp. 251, 257 (D.R.I.1993)(stating that re-litigating matters previously decided, without a compelling reason, "would be inconsistent with the `law of the case' doctrine and the objectives of judicial economy and finality that it serves."), rev'd in part on other grounds, 16 F.3d 449 (1st Cir.1994).
Extraordinary circumstances exist when the decision was "clearly erroneous and would work a manifest injustice." Christianson, 486 U.S. at 817, 108 S. Ct. 2166. A material change in controlling legal authority or the discovery of new evidence likely to alter the result may create extraordinary circumstances. See Rivera-Martinez, 931 F.2d at 151; American Title Ins., 817 F.Supp. at 257 (citing United States v. Bell, 988 F.2d 247, 251 (1st Cir.1993)). See also 18 J. Moore et al, Moore's Federal Practice § 134.21[1], at 134-49 (3d ed.1997).
The decision regarding whether or not to revisit a previously decided issue also is affected by the stage of the case at which the request is made and the extent to which the opposing party may be prejudiced. For example, ordinarily, reluctance to re-examine rulings is less at the pretrial stage when the interest in finality is less compelling and the opposing party has ample opportunity to deal with the change than it is after the entry of a judgment upon which the parties may have relied when it may be too late for them to adjust. See Prisco v. A & D Carting Corp., 168 F.3d 593, 607 (2d Cir.1999). In this case, since relief is being sought several years after judgment was entered, Kayser-Roth bears a heightened burden of demonstrating extraordinary circumstances.
Some confusion regarding the contours of the law-of-the-case doctrine arises from the fact that the doctrine is applied in a variety of different circumstances. It may refer to such disparate obligations as a trial court's duty to adhere to rulings of an appellate court made in the same case; the deference due from one judge to rulings made in the same case by another judge of the same court or a judge of a coordinate court; or the responsibility to promote stability and efficiency by refusing to reconsider its own rulings absent a compelling reason for doing so. See 18 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure, § 4478, at 788-801, 874-973 (1981 & 1999 supp.); Johnson v. Burken, 930 F.2d 1202, 1207 (7th Cir.1992).
Generally, "when a higher court reverses [on] one ground and remands a case without disturbing other determinations made by a lower court, the determinations not reversed continue to be the law of the case." American Title Ins., 817 F.Supp. at 257 (citation omitted). That is precisely the situation presented in this case.
The fact that the determination of "owner" liability was made by Judge Boyle is immaterial because the law of the case doctrine applies to decisions of other judges on the same court and judges of coordinate courts to the same extent as it applies to a court's own decisions. See Williams v. Commissioner of Internal Revenue, 1 F.3d 502, 503 (7th Cir.1993)(stating that "[l]itigants have a right to expect that a change in judges will not mean going back to square one."); Moore § 134.22[1][c]. A judge should revisit issues previously decided by another judge only for reasons that would warrant *84 revisiting his or her own rulings and not "merely because he has a different view of the law or the facts from the first judge." Williams, 1 F.3d at 503.
Thus, the issue is whether Kayser-Roth has made a showing of extraordinary circumstances sufficient to overcome the law-of-the-case doctrine. More specifically, the question is whether, under Bestfoods, Judge Boyle's finding of "owner" liability can be described as one that is "clearly erroneous and would work a manifest injustice."
2. Bestfoods
CERCLA, itself, provides little guidance for determining "owner" or "operator" liability. As the Supreme Court has noted, the "phrase `owner or operator' is defined only by tautology ... as `any person owning or operating' a facility." Bestfoods, 524 U.S. at 56, 118 S. Ct. 1876 (quoting 42 U.S.C. § 9601(20)(A)(ii)), a definition that the Court described as a "bit of circularity." 524 U.S. at 56, 118 S. Ct. 1876.
Here, Judge Boyle's finding of "owner" liability was based on a determination that Stamina Mills' corporate veil should be pierced. The doctrine of piercing the corporate veil is one of the most amorphous doctrines in the law because it is multifaceted and serves a variety of purposes that vary from case to case. See Doe v. Gelineau, 732 A.2d 43 (R.I.1999); Miller v. Dixon Indus. Corp., 513 A.2d 597, 604 (R.I.1986).
One ground for piercing the corporate veil is that "the corporation is something less than a bona fide independent entity." United States v. Northeastern Pharm. & Chem. Co., 810 F.2d 726, 744 (8th Cir. 1986). For example, when the principals, themselves, fail to treat the corporation as a separate and distinct entity by not adequately capitalizing it, failing to hold directors' and shareholders' meetings and/or co-mingling corporate and non-corporate assets, the corporate form may be disregarded. See 1 William Meade Fletcher et al., Fletcher Cyclopedia of the Law of Private Corporations § 41.30 (perm. ed. rev. vol.1999).
Similarly, the corporate veil between a parent corporation and its subsidiary may be pierced if it is "demonstrated that the parent dominated the finances, policies and practices of the subsidiary." Miller, 513 A.2d at 604. In the parent-subsidiary context, the test is whether stock ownership was "not for the purpose of participating in the affairs of the corporation in the normal and usual manner but for the purpose ... of controlling a subsidiary company so that it may be used as a mere agency or instrumentality of the owning company." Bestfoods, 524 U.S. at 62, 118 S. Ct. 1876 (citing Chicago, M. & St. P.R. Co. v. Minneapolis Civic & Commerce Ass'n., 247 U.S. 490, 501, 38 S. Ct. 553, 62 L. Ed. 1229 (1918)).
Fraud is another ground recognized at common law for piercing the corporate veil. See R & B Elec. Co. v. Amco Constr. Co., 471 A.2d 1351, 1354 (R.I.1984). Thus, the corporate form may be disregarded when it is "misused to accomplish certain wrongful purposes, most notably fraud, on the shareholders' behalf." Bestfoods, 524 U.S. at 62, 118 S. Ct. 1876.
Although failure to treat a corporation as a bona fide independent entity or using it to perpetrate a fraud are the two most common and easily defined grounds for piercing the corporate veil, they are not the only grounds. It has been held that the corporate form also may be disregarded when it is used to "defeat public convenience, justify wrong, protect fraud or defend crime." R & B Elec. Co., 471 A.2d at 1354, or when it is "unjust and inequitable to consider the subject corporation a separate entity." Gelineau, 732 A.2d at 48 (quoting R & B Elec. Co., 471 A.2d at 1354).
Judge Boyle's decision to pierce Stamina Mills's veil rested on two factors: (1) Kayser-Roth's pervasive control over Stamina Mills which rendered Stamina *85 Mills something less than a "bona fide independent entity," especially with respect to environmental matters; see 724 F.Supp. at 23; and (2) considerations of "public convenience, fairness and equity," including the desire to further CERCLA's remedial purpose by liberally construing its provisions. Id. at 24.
Kayser-Roth asserts that Bestfoods rejected those criteria and that, under Bestfoods, a corporate veil may be pierced only when there is evidence that the corporate form has been abused to accomplish fraud or some other wrongful purpose. That assertion represents an apparent misreading of Bestfoods.
Kayser-Roth relies on a statement in Bestfoods that a corporate veil may be pierced "when, inter alia, the corporate form would otherwise be misused to accomplish certain wrongful purposes, most notably fraud, on the shareholder's behalf." 524 U.S. at 62, 118 S. Ct. 1876 (emphasis added). However, Kayser-Roth ignores the fact that the term "inter alia" is a term of inclusion and not a term of limitation. It means "among other things," Black's Law Dictionary 815, and connotes an illustrative example rather than an exhaustive list. Consequently, in using that term, the Supreme Court indicated that fraud was only one of the grounds for piercing a corporate veil and not a sine qua non.
Moreover, in making the statement relied upon by Kayser-Roth, the Supreme Court cited Chicago M. & St. P.R. Co. v. Minneapolis Civic and Commerce Ass'n., a case in which a subsidiary corporation's veil was pierced because the parent exercised such control that the subsidiary was its "mere agency or instrumentality." See Bestfoods, 524 U.S. at 62, 118 S. Ct. 1876 (quoting Chicago M., 247 U.S. at 501, 38 S. Ct. 553).
Indeed, Bestfoods expressly recognizes that, while general control over a subsidiary is not, by itself, sufficient to make a parent corporation directly liable as the "operator" of a facility run by its subsidiary, "[c]ontrol of the subsidiary, if extensive enough, gives rise to indirect liability under piercing doctrine." 524 U.S. at 67, 118 S. Ct. 1876 (emphasis added). See also id. at 64 n. 10, 118 S. Ct. 1876.
In short, Bestfoods did not, as Kayser-Roth claims, reject the veil-piercing criteria utilized by Judge Boyle. On the contrary, it specifically recognized that veil piercing may be justified where a parent corporation exercises the nature and degree of control over a subsidiary that Judge Boyle supportably found to exist in this case. Therefore, Judge Boyle's determination of owner liability remains the law of the case.
Conclusion
For all the foregoing reasons, Kayser-Roth's motion for relief from judgment pursuant to Rule 60(b)(5) is denied.
IT IS SO ORDERED,
NOTES
[1] Judge Boyle has since taken senior inactive status.
[2] Kayser-Roth does not seek to recover any amounts previously paid to EPA pursuant to the 1990 judgment. It seeks relief only from the declaratory judgment that imposes liability for future response costs.
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2469824/
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731 F.Supp.2d 1028 (2010)
The LANDS COUNCIL, Plaintiff,
v.
Jane COTTRELL, Acting Regional Forester of Region One of the U.S. Forest Service; Ranotta McNair, Supervisor of the Idaho Panhandle National Forest; and United States Forest Service, an agency of the U.S. Department of Agriculture, Defendants.
Case No. CV 09-164-N-EJL-REB.
United States District Court, D. Idaho.
July 2, 2010.
*1032 Karen S. Lindholdt, Spokane, WA, Rebecca Kay Smith, Missoula, MT, for Plaintiff.
Beverly F. Li, Marissa Ann Piropato, U.S. Department of Justice, Washington, DC, for Defendants.
REPORT AND RECOMMENDATION
RONALD E. BUSH, United States Magistrate Judge.
Currently pending before the Court are Plaintiff's Motion for Summary Judgment (Docket No. 24) and Defendants' Motion for Summary Judgment (Docket No. 27).[1] Having carefully reviewed the record, considered oral arguments, and otherwise being fully advised, the Court enters the following Report and Recommendation:
I. SUMMARY OF RECOMMENDATION
The undersigned finds that Defendants violated the National Forest Management Act ("NFMA"), 16 U.S.C. § 1601, et seq., and the National Environmental Policy Act ("NEPA"), 42 U.S.C. § 4321, et seq., in authorizing the Bussel 484 Project by failing to ensure the viability of old growth forest dependent, sensitive, and management indicator species. Accordingly, the undersigned recommends that the district judge: (1) set aside the decision authorizing the Bussel 484 Project and remand to the agency and (2) enjoin any logging authorized under the Project unless and until the agency has conducted an analysis of species viability in the Project Area that satisfies NFMA and NEPA standards.
II. BACKGROUND AND PROCEDURAL HISTORY
This is a civil action seeking review of a decision by the Unites States Forest Service approving the Bussel 484 Project ("Project") in the St. Joe Ranger District of the Idaho Panhandle National Forest ("IPNF"). Second Amended Complaint, ¶ 2 (Docket No. 17).
A. The Parties
Plaintiff, the Lands Council, is a nonprofit corporation dedicated to the long-term community and biological stability of the Greater Columbia River Ecosystem. *1033 Id. at ¶ 15. Plaintiff's members and staff use and enjoy the IPNF, including the area in which the Project will take place. Id. at ¶ 10. Defendants include: (1) Jane Cottrell, Acting Regional Forester for the Northern Region of the Forest Service; (2) Ranotta K. McNair, the Forest Supervisor for the IPNF; and (3) the USFS, an administrative agency within the Department of Agriculture (collectively referred to hereinafter as "Forest Service") entrusted with management of the national forests.
B. The Project Area
The Bussel 484 Project Area is located within the Bussel Creek Watershed, a tributary of Marble Creek, and is located eight miles northeast of Clarkia, Idaho, Shoshone County in the IPNF. (AR 3:1). The Project Area covers 14,646 acres, 83% of which is Forest Service land. Id. The remaining 2,454 acres are privately owned. Id.
The Project Area is composed of subalpine fir, spruce, western red cedar, western hemlock, and grand fir forests located entirely within the IPNF's Old Growth Management Unit ("OGMU") Eight. See Second Amended Complaint, ¶ 29 (Docket No. 17); (AR 2:163). Both parties agree that the quality of old growth habitat in the Project Area has degraded over time due to fire and past logging activity. (AR 2:147-48); See First Amended Complaint, ¶¶ 29-34 (Docket No. 17).[2]
C. Project Development
From the outset, beginning in August 2003, the Forest Service involved interest groups, individuals, tribes, and agencies in the development of the Project. (AR 3:30, 2:7).[3] Early on in the process, the purpose and need for the Project were identified as follows: (1) maintain or improve resilience of the vegetative resources to disturbances such as insects, disease, and fire; (2) provide wood products for local communities; (3) work toward full support of designated beneficial uses in the Bussel Creek Watershed; and (4) manage access to provide for multiple uses. (AR 2:4-5, AR 3:1-2).
In April 2005, the Forest Service issued a scoping notice and also published in the Federal Register a notice of intent to prepare an environmental impact statement. (AR 3:30, AR 2:7). After several years of work, study, and collaboration, a draft environmental impact statement ("DEIS"), was made available for public comment on the IPNF website on February 21, 2008. (AR 3:30, AR 144). A related Notice of Availability appeared in the Federal Register on March 7, 2008. (AR 3:30, AR 156).
The DEIS identifies three possible alternative actions in the Project Area: Alternative A: no action, Alternative B: proposed logging and related road construction activities, and Alternative C: logging with no road construction. (AR 1:3). In May 2008, the Forest Service issued a final environmental impact statement ("FEIS") (AR:2) and a Record of Decision ("ROD") (AR:3) approving Modified Alternative B, the commercial logging and road construction projectthe Bussel 484 Project.
Modified Alternative B involves the harvest of approximately 2,137 acres using a variety of silvicultural prescriptions (1,486 acres of commercial thin, 521 acres of group shelterwood, 53 acres of seedtree, and 78 acres of clearcut with reserves). *1034 (AR 3:5). The ROD indicates that Alternative B was selected, in part, because "it best meets the need to improve vegetative conditions through reducing stand density, changing species composition, and promoting larger trees in the future." (AR 3:27). By reducing stand density, the Forest Service intends to "decrease the competition for water, nutrients, and sunlight in stands and promote increased growth and yield." (AR 3:27). The goal is to remove the smaller trees and focus growth on the larger diameter, more vigorous trees. (AR 3:28).
To facilitate the harvest activities, Modified Alternative B also involves road construction. The road activity authorized by the Project includes: (1) constructing 4.5 miles of system road and .5 miles of temporary road; (2) improving or reconstructing 5.4 miles of existing road; and (3) removing 10.7 miles of existing roads and placing 20.2 miles of existing roads into "long term storage."[4] (AR 3:4).
The ROD provides that the Project will not harvest any timber or construct any roads within old growth stands. (AR 3:14, 45). However, it is undisputed that the Project will have an effect on the habitat of old growth dependent species. The FEIS states that the Project will eliminate the following habitat: (1) one of eight home ranges modeled for the pileated woodpecker (AR 2:272); (2) three of 19 nesting stands modeled for the goshawk (AR 2:275); (3) 100 acres of habitat modeled for the threatened Canada lynx (AR 2:279); (4) and 256 acres of habitat modeled for the fisher and marten (AR 2:288). Nevertheless, evaluating the over-all impact of the Project on wildlife habitat, the Forest Service determined that the Project would not contribute towards federal listing or loss of viability for any of the wildlife species in the Project Area. (AR 2:292).[5]
With regard to cumulative impacts, both the DEIS and FEIS identify "fire and fuels" as having an environmental effect on the Project Area. (AR 1:82-88), (AR 2:129-42). The DEIS analyzes the effect of fire under the general direction of Forest Plan. (AR 1:82). The FEIS analyzes the effect of fire under the now-withdrawn forest-wide, 2008 IPNF Fire Management Plan ("2008 Fire Plan"). (AR 129). Consistent with the 2008 Fire Plan, the logging aspect of the Project is intended to mimic the effects of fires of low to moderate intensity. (AR 2:141-42, AR 3:39-40). However, fire itself will be suppressed throughout the Project Area. (AR 2:61) ("Consistent with current policy, efforts will be made to suppress all fires which occur in the project area.").
D. Procedural History
Plaintiff filed an administrative appeal of the decision approving Modified Alternative B, and the Forest Service denied the appeal on July 31, 2008, constituting the final administrative action in this matter. On April 9, 2009, Plaintiff filed the instant action arguing that the Project violates NFMA, NEPA, and the Administrative Procedures Act ("APA"). Plaintiff seeks injunctive and declaratory relief arguing that the Project, if implemented, will eliminate habitat for old growth dependent, sensitive, threatened, and management indicator species, including the pileated *1035 woodpecker, goshawk, Canada lynx, fisher, and marten. Plaintiff's Memorandum in Support of Motion for Summary Judgment, p. 2 (Docket No. 25).
Plaintiff also asserts claims related to a proposed action, the 2008 Fire Plan. On March 18, 2008, the Forest Service implemented a Fire Plan for the IPNF. (AR 1037). At one time, Plaintiff claimed that approval of the 2008 Fire Plan violated NEPA and the Endangered Species Act. First Amended Complaint (Docket No 11). However, when the Forest Service later withdrew the 2008 Fire Plan, Plaintiff withdrew these claims. See Docket No. 16. Nonetheless, Plaintiff continues to contend that the Project EIS is flawed, in part, because the analysis of the cumulative environmental impacts of fire and fire management is based on the implementation of the now-withdrawn 2008 Fire Plan. Second Amended Complaint (Docket No. 17).
E. Status of Project Implementation
Two timber sales authorized as part of the Project, the Bussel Peak and Tole Booth sales, have been awarded. Plaintiff represents that logging activity in the Project area may begin as soon as August 1, 2010. See Second Declaration of Jeff Juel, ¶ 8 (Docket No. 47-1).
III. STANDARD OF REVIEW
The APA provides the authority for judicial review of agency decisions under NFMA and NEPA. Pit River Tribe v. U.S. Forest Serv., 469 F.3d 768, 778 (9th Cir.2006). The APA states, in relevant part, that a reviewing court "shall . . . hold unlawful and set aside agency action, findings, and conclusions found to bearbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). The arbitrary and capricious standard is deferential and an agency action will be reversed as arbitrary and capricious "only if the agency relied on factors Congress did not intend it to consider, entirely failed to consider an important aspect of the problem, offered an explanation that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." Ecology Ctr. v. Castaneda, 574 F.3d 652, 656 (9th Cir.2009) (quotations and citations omitted).
Nevertheless, the Court must review the administrative action to ensure that the agency has "examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a `rational connection between the facts found and the choice made.'" 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) (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962)). In reviewing that explanation, the court must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Id. (quoting Bowman Transp. Inc. v. Arkansas-Best Freight System, 419 U.S. 281, 285, 95 S.Ct. 438, 42 L.Ed.2d 447 (1975); Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971)).
IV. DISCUSSION AND HOLDINGS
Plaintiff claims that the Forest Service violated NFMA by failing to ensure viability of old growth dependent, sensitive, and management indicator species ("MIS") in the Project Area. Because no such species have recently been seen in the Project Area, Plaintiff alleges that the Forest Plan's old growth standards are either invalid or not being met. Plaintiff's NEPA claims include allegations that the Forest Service: (1) failed to ensure the scientific integrity of the Forest Plan old growth *1036 standard; (2) failed to assess the cumulative impacts of the IPNF fire management policy; (3) improperly tiered the Project EIS to the now-withdrawn Fire Plan; and (4) failed to prepare a supplemental EIS when the Fire Plan was withdrawn.
In addition to opposing Plaintiff's substantive claims, the Forest Service also contends that Plaintiff's claims should be dismissed because they are not ripe, are not properly pleaded, and are barred under the doctrine of collateral estoppel.
A. Plaintiff's Claims are Properly Before the Court
The Court has jurisdiction to consider Plaintiff's claims, all of which are ripe, properly pleaded, and not otherwise barred under the doctrine of collateral estoppel.
1. Ripeness
Claims regarding a Forest Plan are not ripe for challenge without site-specific action. Ohio Forestry Ass'n v. Sierra Club, 523 U.S. 726, 732, 118 S.Ct. 1665, 140 L.Ed.2d 921 (1998). Before then, the alleged harm is speculative. Id. Once a site-specific action takes place, the Forest Plan is subject to challenge but only if the Forest Plan "plays a causal role" with respect to the challenged action. Id. Further, only those aspects of the Forest Plan that are related to the challenged action are properly subject to the suit. Id.
The Forest Service contends that Plaintiff's allegations concerning the Forest Plan's old growth standards are not ripe, because the Project will not harvest any old growth. In making this argument, Plaintiff relies upon the following language from Lands Council v. Powell, 395 F.3d 1019 (2005) ("Lands Council I"):
[B]ecause no old growth forest is to be harvested under the selected alternative, we reject the contention that the Project will be impermissible if, thereafter, the `allocated old growth' within the Forest is less than the Forest Plan requirement. If that requirement would not be met after this Project, then it must be that the requirement is not met now, for the proposed timber harvest cuts no old growth. If we were to accept the Lands Council's argument on this score, it would prevent any project from taking place. We do not think this is a sensible reading of the NFMA. Because no old growth forest is to be harvested under the Project, we hold that it cannot be said that the Project itself violates the IPNF Plan's requirement to maintain ten percent of the forest acreage as old growth forest.
Id. at 1036.
However, while Plaintiff in Lands Council I was not permitted to challenge whether the site-specific action would impact the ten-percent old growth rule, Plaintiff was permitted to challenge the old growth forest analysis as it relates to the population and viability of species that require old growth habitat. Id. (determining that Forest Service violated NFMA by failing to monitor population trends).
Here, Plaintiff does not challenge the Project on the basis that it will preclude the Forest Service from meeting old growth standards. Instead, Plaintiff challenges the Project on the basis that the Forest Service failed to adequately address the Project's effect on the MIS and other old growth dependent and sensitive species in the Project Area. The old growth standards are at issue because the Forest Service relied upon the old growth standards as a proxy to ensure that it is meeting its species viability and monitoring requirements. Moreover, regardless of whether the Project will actually harvest old growth, it is undisputed that the Project will eliminate some habitat for the old growth dependent species in the Project *1037 Area. In short, Plaintiff's claims are ripe because the old growth standards at issue are being challenged in the context of a species viability claim that does not depend on the harvesting of old growth.
2. Sufficiency of Pleading
The Forest Service argues that the Court should not entertain arguments regarding the validity of the Forest Plan in the context of a challenge to a site-specific Project if the Forest Plan is not the subject of any claim in the Complaint. Defendants' Opposition to Plaintiff's Motion for Summary Judgment, p. 2 (Docket No. 35).
The Court finds that Plaintiff's NFMA claim sets forth a direct and appropriate challenge to the Forest Plan old growth standards. In the Second Amended Complaint, Plaintiff alleges that the habitat in the Project Area has degraded significantly over time and that the Forest Service's analyses of old growth and species viability are flawed. Second Amended Complaint, ¶¶ 39-43, ¶¶ 55-81, ¶¶ 97-100, and ¶¶ 123-43. (Docket No. 17). In addition, Plaintiff alleges that there are "responsible opposing scientific viewpoints" challenging the old growth standards. Id. at ¶¶ 137-43. The old growth standards and species viability requirements stem from the Forest Plan.
In addition, in the Second Claim for Relief, the NFMA violation claim, Plaintiff further states "[t]he inadequacy of the Forest's old growth standard is illustrated by the lack of old growth dependent and management indicator species found in the Project area" and "without a valid and implemented old growth standard, the Forest Service also violates the Forest Plan's more general mandate to ensure the viability of old growth dependent and management indicator species on the Forest." Id. at ¶¶ 116, 166 (Docket No. 17). Moreover, an NFMA violation occurs either when the site-specific action is inconsistent with the Forest Plan's standards or the Forest Plan's standards are invalid, see Idaho Sporting Congress, Inc. v. Rittenhouse, 305 F.3d 957, 966 (9th Cir.2002).
Based on the allegations and the NFMA claim in the Second Amended Complaint, the Court is satisfied that Plaintiff's pleading is sufficient. It is clear that Plaintiff is challenging the old growth standards on the basis that they are an inadequate tool to gauge species viability.
3. Collateral Estoppel
The Forest Service argues that Plaintiff is collaterally estopped from bringing the Forest Plan claims because this federal district court has already determined that the IPNF old growth standards are valid, the Forest Inventory and Analysis ("FIA") database and the Timber Stand Management Record system ("TMRS") are reliable, and the habitat-as-proxy approach meets the Forest Service's requirements for maintaining species viability and monitoring MIS population trends. Defendants' Opposition to Plaintiff's Summary Judgment, p. 5 (Docket No. 35). "Under collateral estoppel, once a court has decided an issue of fact or law necessary to its judgment, the decision may preclude relitigation of the issue in a suit on a different cause of action involving a party to the first case." Dodd v. Hood River County, 59 F.3d 852, 863 (9th Cir. 1995). "[C]ollateral estoppel applies only where . . .:(1) the issue necessarily decided at the previous proceeding is identical to the one which is sought to be relitigated; (2) the first proceeding ended with a final judgment on the merits; and (3) the party against whom collateral estoppel is asserted was a party or in privity with a party at the first proceeding." Hydranautics v. FilmTec Corp., 204 F.3d 880, 885 (9th Cir.2000).
*1038 In the previous lawsuit, Plaintiff challenged the Mission Brush Project on the IPNF on the basis that the Forest Plan's old growth standards were not being met and the proxy on proxy approach to species viability is unreliable and insufficient to satisfy NFMA's requirements. Lands Council v. McNair, 2009 WL 3199641 (D.Idaho Sept. 30, 2009) ("Mission Brush"). More specifically, with regard to the Forest Plan's old growth standards, Plaintiff challenged the Forest Service's finding that the IPNF, as a whole, met Standard 10(b), requiring ten percent old growth throughout the IPNF forested land. Id. at *5. Judge Lodge upheld the agency's finding because it was based on two separate, independent and reliable tools to monitor old growth in the IPNF: the FIA and TMRS databases. Id. at *6-7. Judge Lodge also determined that the "the use of habitat as a proxy in the Mission Brush case was not arbitrary and capricious," because both: (1) the underlying methodologies for determining the quantity and quality of habitat necessary to sustain the viability of native species and (2) the methodology used for measuring habitat were reasonably reliable. Id. at *13-14.
While these same issues are raised herein with regard to the Bussel 484 Project, collateral estoppel does not apply, fundamentally because the cases concern two different, site-specific projects. See Idaho Sporting Congress v. Rittenhouse, 305 F.3d at 965 (holding res judicata did not apply where challenges concerned different timber sales). First, the old growth standards are potentially subject to the challenge of more recent research, as well as site-specific information concerning the well-being of the species in the project area.[6] Second, the percentage of old growth is not an immutable constant but changes over time, as does the information in the FIA and TMRS databases, which is updated to reflect site-specific surveys. Third, the validity of the habitat-as-proxy approach, which depends on the reliability of the old growth standards and the methodology for measuring old growth standards, must be determined on a case-by-case and site-specific basis. Accordingly, collateral estoppel does not bar Plaintiff from bringing any of the claims alleged in the instant lawsuit.[7]
B. Plaintiff's NFMA Challenges
Plaintiff argues that the Forest Service violated NFMA by failing to consider the Project's impact on species viability as required under the IPNF Forest Plan. The Forest Service responds that it met its statutory obligations to ensure species viability and monitor the MIS by relying upon the Forest Plan's old growth standards.
1. Legal Framework
NFMA's legal framework consists of three central components: (1) the statute; (2) the Forest Service implementing regulations; and (3) the Forest Plans implementing the regulatory and statutory directives that govern site-specific actions at the forest level.
a. General Statutory Framework
The Forest Service manages the national forests under "a number of interconnected congressional directives." Idaho Conservation League v. Mumma, 956 F.2d *1039 1508, 1511 (9th Cir.1992). The general administrative philosophy of the Forest Service is expressed in the Multiple-Use Sustained Yield Act ("MUSYA") of 1960, 16 U.S.C.A. §§ 528-531, which requires a careful balancing of often competing resources, including "outdoor recreation, range, timber watershed, and wildlife and fish purposes." 16 U.S.C. § 528.
NFMA incorporates this multiple use philosophy, adding "wilderness" as an additional management philosophy within the multiple use framework.[8] 16 U.S.C. § 1604(e). In addition, NFMA provides a two-step process for forest planning and management. Native Ecosystems Council v. U.S. Forest Serv., 428 F.3d 1233, 1249 (2005).
The first step of the NFMA process is the development of a Land Resource Management Plan ("Forest Plan") for each unit of the National Forest System. 16 U.S.C. § 1604(f)(1). NFMA contains substantive and procedural requirements for these Forest Plans, including a directive that they be "revised . . . from time to time when the Secretary finds conditions of a unit have significantly changed, but at least every fifteen years." 16 U.S.C. § 1604(f)(5).
The second step of the NFMA process requires that all "individual management actions within a forest unit, all relevant plans, contracts, or permits must be consistent with each forest's overall management plan." Native Ecosystems Council, 428 F.3d at 1249 (citing 16 U.S.C. § 1604(i)). A site-specific decision inconsistent with the Forest Plan violates NFMA. Id.
b. Regulations Governing Forest Plans
NFMA directs the Forest Service to promulgate regulations consistent with the MUSYA "that set out the process for the development and revision of the [Forest Plans.]" 16 U.S.C. § 1604. The regulations must ensure that Forest Plans, among other things, "provide for diversity of plant and animal communities based on the suitability and capability of the specific land area in order to meet overall multiple-use objectives. . . ." 16 U.S.C. § 1604(g) (3)(B).
The IPNF Forest Plan, issued in 1987, was developed under Forest Plan regulations promulgated in 1982. The 1982 rules require that Forest Plans provide the habitat necessary to support viable populations of existing native and desired non-native vertebrate species:
Fish and wildlife habitat shall be managed to maintain viable populations of existing native and desired non-native vertebrate species in the planning area. For planning purposes, a viable population shall be regarded as one which has the estimated numbers and distribution of reproductive individuals to insure its continued existence is well distributed in the planning area. In order to insure that viable populations will be maintained, habitat must be provided to support, at least, a minimum number of reproductive individuals and that habitat must be well distributed so that those individuals can interact with others in the planning area.
36 C.F.R. § 219.19 (1982). This species viability requirement applies to all "existing native and desired non-native vertebrate species in the planning area." Id.
*1040 The 1982 rules also define "management indicator species" that must be selected by the Forest Service, as to which "population changes are believed to indicate the effects of management activities." Id. (1). The Forest Service must monitor the population trends of these species and evaluate management alternatives "in terms of both amount and quality of habitat and of animal population trends of the management indicator species." Id. (2), (6) (1982).
In the instant case, the 1982 regulations apply only to the extent that they were incorporated into the IPNF Forest Plan. The 1982 regulations were superceded in 2000 and do not provide an independent source of legal authority governing the Forest Service's decision to authorize the Project.[9]
c. Forest Plan Standards
Consistent with the 1982 NFMA regulations, the IPNF Forest Plan identifies certain species as management indicator species and establishes a process for monitoring these species. Also generally consistent with NFMA, the Forest Plan contains objectives for species diversity and viability in the IPNF and permits the Forest Service to rely upon its compliance with old growth standards to meet the species viability requirements.
i. Management Indicator Species
A number of different guidelines were used to select the MIS for the IPNF. (AR 942: L2). However, the Forest Plan recognizes that "[t]he key characteristic of management indicator species is that they are sensitive to management activities" and "[e]ndangered, threatened, sensitive species were automatically included." (AR 942: L-1, L-2).
Ultimately, the Forest Plan identified thirteen management indicator species with a documented presence in the IPNF. These species fall within three broad categories:
(1) threatened or endangered species: bald eagle, grizzly bear, woodland caribou, and gray wolf;
(2) "species commonly hunted, fished, or trapped animals whose habitat needs are affected by planned management activities:" white-tailed deer, moose, marten, cutthroat trout, rainbow trout, and bull trout; and
(3) species whose population changes are believed to indicate effects of management activities on a major biological group or on water quality: pileated woodpecker and goshawk.
(AR 942: L-3).
The Forest Plan requires that forest management "[m]aintain at least minimum viable populations of these management indicator species distributed throughout the Forest." (AR 942: II-28). In addition, the Forest Plan provides guidance for monitoring and evaluating "[p]opulation trends of indicator species." (AR 942:IV-7-11). While the Forest Plan calls for annual MIS monitoring, it also contemplates that such monitoring may not be accomplished as indicated in the plan due to funding limitations and suggests that an *1041 analysis of "potential effects" is sufficient in those situations. (AR 942: IV-9, 11).
ii. Old Growth Standards
The Forest Plan also establishes minimum old growth standards, in part to meet the habitat needs of the MIS. The old growth standards are:
(1) "Maintain at least 10 percent of the forested portion of the IPNF as old growth." ("Old Growth Standard 10(b)").
(2) "Select and maintain at least five percent of the forested portion of those old-growth units that have five percent or more existing old growth." ("Old Growth Standard 10(c)").
(3) "One or more old growth stands per old-growth unit should be 300 acres or larger. Preference should be given to a contiguous stand; however, the stand may be subdivided into stands of 100 acres or larger if the stands are within one mile. The remaining old growth management stands should be at least 25 acres in size. Preferred size is 80 plus acres." ("Old Growth Standard 10(f)").
(AR 942: II-29).
iii. The Proxy-on-Proxy Approach
The IPNF Forest Plan relies upon a socalled "proxy-on-proxy" approach to both MIS monitoring and species viability requirements. In that approach, the indicator species serve as a proxy for other species and, in turn, the habitat requirements for the indicator species serve as a proxy for monitoring the indicator species. Accordingly, by maintaining the habitat requirements of the indicator species, through the old growth requirements, the Forest Service assumes it will satisfy both the indicator species monitoring and species viability requirements.
The interconnection between habitat, management indicator species, and species viability requirements is fundamental to the wildlife management direction in the Forest Plan. For example, the Forest Plan states, "[t]o help provide for a diversity of plant and animal communities, habitats, and species, standards for old growth maintenance will be established." (AR 942: II-5). See also AR 942: V-3 ("The MMR for old growth is to maintain minimum viable populations of old-growth dependent species."). The Forest Plan further provides:
Habitat for vertebrate populations, other than threatened, endangered and sensitive species, will be managed to maintain viable populations (greater than 40 percent of maximum potential). In order to maintain viable populations of all species, the habitat will be managed for selected indicator species.
(AR 94: II-5).
2. On the Facts of this Case, the Forest Service Acted Arbitrarily and Capriciously by Relying Upon the Old Growth Standards to Meet the Forest Plan Species Viability Requirements in the Project Area
The parties agree that the Forest Service has a duty to ensure the viability of species throughout the IPNF. The Forest Service relies upon the old growth standards in order to meet that duty and its related requirements, following a habitat-as-proxy approach. Consistent with that approach, the Forest Service analyzed the Bussel 484 Project's impact on species viability with regard to the old growth standards.
Plaintiff argues that relying upon the old growth standards to meet those requirements is agency error, because both the standards and the methods used for measuring old growth are unreliable. Plaintiff further argues that population trend monitoring data is especially important here *1042 because the Project Area has experienced significant habitat degradation and the Forest Service has not been able to confirm that old growth dependent species are still living in the Project Area.
As explained more fully below, the Court finds that the general approach to old growth standards and the method for measuring habitat using such standards are reasonably reliable. Nonetheless, relying upon the old growth standards to ensure species viability in the context of the Bussel 484 Project was an abuse of discretion in this case because (1) the Forest Service has no confirmation that any of the MIS actually exist in the Project Area and (2) it is undisputed that the old growth habitat in the Project Area has significantly degraded over time. Despite scientifically reliable habitat standards and methods for measuring habitat, the record contains no evidence that any management indicator species actually inhabit the Project Area. Under these circumstances, it was an abuse of discretion for the Forest Service to rely solely on the habitat-as-proxy approach to conclude that the Project will not threaten species viability because even if the assumptions underlying the habitat as proxy theory for the IPNF are sound in the abstract, the use of habitat-as-proxy for the Project Area fails its fundamental purpose.
Further, in relying upon habitat-as-proxy, the Forest Service failed to reconcile an important aspect of the problem and offered an explanation that runs counter to the evidence. The end result is so implausible that it cannot be defended as a difference in view or the product of agency expertise. See Citizens of Overton Park, Inc. v. Volpe, 401 U.S. at 415, 91 S.Ct. 814. Hence, that end result, even coming as it does after extensive effort by well-meaning scientists and Forest Service professionals, cannot withstand even a deferential judicial review. It sits on a foundation of sand. While the Court defers to the agency in matters of scientific expertise, the issue here is a matter of logicit is a mistake to rely upon a theory when the evidence reflects that the theory is not working.
a. Legal Standard for Habitat as Proxy Approach
Courts have allowed the Forest Service to rely upon the habitat as proxy approach to MIS monitoring. "The `proxy on proxy' approach to studying MIS population trends operates on the assumption that, as long as a species' habitat is maintained, the species will likewise be maintained. Thus, analysis of trends in the species habitat is, in essence, an indirect measurement of the species population trends." Lands Council I, 395 F.3d at 1036, n. 23. Importantly, however, use of the habitat-as-proxy approach may be applied "only where both the Forest Service's knowledge of what quality and quantity of habitat is necessary to support the species and the Forest Service's method for measuring the existing amount of that habitat are reasonably reliable and accurate." Native Ecosystems Council v. U.S. Forest Service, 428 F.3d 1233, 1250 (9th Cir.2005); see also Oregon Natural Resources Council Fund v. Goodman, 505 F.3d 884, 890 (9th Cir.2007).
b. Reliability of the Old Growth Standards.
Plaintiff contends that the Forest Service "has never provided scientific support for its old growth habitat standard" and has never actually determined how much habitat is necessary to maintain viable populations of old growth dependent and management indicator species on the IPNF. Memorandum in Support of Plaintiff's Motion for Summary Judgment, p. 12 (Docket No. 25). This is an overstatement. The old growth standards have a rational, scientific basis.
*1043 As stated in the Final EIS for the Forest Plan (AR: 1024a: 120), the rationale for the old growth standards is found in Planning Record 28, entitled "Old-Growth Management on the IPNF." (AR: 1024b). The old growth recommendations contained in the report are based on the minimum viable populations for two species: caribou and pileated woodpecker. (AR 1024b: 32-37). Based on the minimum viable population for these two species, the Forest Service developed habitat requirements and, based on these habitat requirements, developed the forest-wide old growth standards. While the Forest Service admitted at that time that its knowledge regarding the habitat requirements of the old growth dependent species was somewhat limited (AR 1024b: 13), there is no evidence in the record to suggest that the conclusions were unreasonable.
Plaintiff further contends that "[e]ven if the standard was scientifically acceptable at the time of Forest Plan enactment, more recent science has indicated that the standard used for this project is no longer scientifically acceptable." Memorandum in Support of Plaintiff's Motion for Summary Judgment, p. 12 (Docket No. 25). There is no getting around the fact that the IPNF old growth standard is now 25 years old and, therefore, potentially subject to the challenge of 25 years of additional scientific research. However, as discussed more fully below, Plaintiff has not effectively demonstrated to this Court that subsequent science has so undermined the reliability of the old growth standards as to render them invalid. In other words, based on the Administrative Record before it, the Court does not find that the Forest Service acted arbitrarily or capriciously by relying upon these standards.
i. The Scientific Integrity of the Ten Percent Rule
Plaintiff challenges Old Growth Standard 10(a), the ten percent, forest-wide old growth standard, based on a 1996 study prepared by research scientist, Peter Lesica, of the University of Montana Division of Biological Sciences. Plaintiff's Memorandum in Support of Motion for Summary Judgment, p. 17 (Docket No. 25). Lesica theorizes that "old growth occupied 20-50% of the presettlement forest landscape in low- and many mid-elevation habitats" and "[a] reduction from 20-50% to less than 10% in old growth in low- to mid-elevation forests may well cause extirpation of many old-growth dependent species." (AR 1035: 5).
The Ninth Circuit has previously considered whether the Lesica study presents a viable challenge to a similar ten percent old growth standard applicable to the Kootenai National Forest ("KNF") in Montana. See Ecology Ctr. v. Castaneda, 574 F.3d at 659. The KNF ten percent rule, like that on the IPNF, was developed to comply with the 1982 rules requiring that the Forest Service maintain habitat capable of supporting "viable populations" of old growth dependent species. Id. Accordingly, the Ninth Circuit did not consider the Lesica study a direct challenge to the ten percent old growth rule. "Lesica's conclusion does not bear directly on the `viable population' standard. The fact that levels of old-growth forest were significantly higher prior to European settlement in no way disproves the conclusion that ten percent is enough to support `viable populations.'" Id.
The decision in Ecology Center is persuasive. Moreover, an independent review of the Lesica study reveals that it does not present a direct challenge to the IPNF Old Growth Standard 10(a) because it does not directly address the reasoning behind the ten percent rule. Indeed, Lesica's mention of the ten percent rule is not a central premise to, or finding of, his study. His statement that "a reduction *1044... to less than 10% in old growth ... may well cause extirpation of many old-growth dependent species" is essentially a hypothesis in need of further scientific support. Accordingly, Plaintiff has not demonstrated that the ten percent rule is arbitrary and capricious.
ii. The Scientific Integrity of the 25-Acre Minimum Stand
Old Growth Standard 10(f) provides that old growth management stands should be at least 25 acres in size, but the preferred size is 80-plus acres:
One or more old growth stands per old-growth unit should be 300 acres or larger. Preference should be given to a contiguous stand; however, the stand may be subdivided into stands of 100 acres or larger if the stands are within one mile. The remaining old growth management stands should be at least 25 acres in size. Preferred size is 80 plus acres.
(AR 942: II-29).
Plaintiff relies upon two studies to support its argument that this standard is no longer valid. First, Plaintiff cites to a Forest Service study authored by Jennifer Purvine ("Purvine Report"), indicating that stands as large as 80 acres would be considered far too small to meet the needs of most old forest dependent species. The Purvine Report is not part of the administrative record here. However, it was cited in a recent Idaho federal district court decision granting a preliminary injunction on the Salmon National Forest, in part, because it appeared that "the decision to designate old growth stands in blocks as small as 80 acres is no longer scientifically acceptable." See Alliance for the Wild Rockies v. Wood, CV 07-452, 2008 WL 2152237, at *3 (D.Idaho May 21, 2008).
Generally, in conducting an APA review of agency action, the district court is limited to the administrative record as it existed at the time of the agency decision. Southwest Ctr. for Biological Diversity v. U.S. Forest Serv., 100 F.3d 1443, 1450 (9th Cir.1996). Nonetheless, there are exceptions to this general rule that provide for "extra-record evidence" in the following situations: (1) if admission is necessary to determine whether the agency has considered all relevant factors and has explained its decision, (2) if the agency has relied on documents not in the record, (3) when supplementing the record is necessary to explain technical terms or complex subject matter, or (4) when plaintiffs make a showing of agency bad faith. Id.
Emphasizing that the Purvine Report was written by a Forest Service biologist, Plaintiff suggests that the Purvine Report is properly considered here because it speaks to whether the agency considered all relevant factors in explaining its decision. However, this Court finds that it would be inappropriate to consider the Purvine Report for the purpose of determining whether the Forest Service erred by relying upon the 25-acre minimum standard. The record is silent as to whether the IPNF management team had access to or knowledge of the Purvine Report, which was developed on the Salmon National Forest and was not brought forward during the public comment period. It is incumbent upon Plaintiff to raise these issues before the agency and allow the agency the opportunity to consider the challenge in the administrative process.
Second, Plaintiff relies upon a second reportthe Patla Report[10]as evidence that the 25-acre minimum stand requirement *1045 is not reasonable. According to the Patla Report, goshawks (one of the sensitive species identified by the IPNF) require stands of at least 180 acres for nesting areas. See Ex. 1, Plaintiff's Opposition to Defendants' Summary Judgment (Excerpt of Patla Report (1997)) (Docket No. 33-1). The Patla Report was submitted as part of Plaintiff's administrative appeal; however, it was cited at that time for the proposition that "[r]egeneration cuts will ... impact goshawk foraging, because younger forest stands were identified as poor goshawk foraging habitat." AR 169:30. The Forest Service responded to the Patla report in connection with the foraging issue. The Forest Service did not act capriciously by failing to anticipate some other objection ostensibly supported by the Patla Report, but never mentioned by the Plaintiff in the decision making process.
Moreover, in opposition to Plaintiff's arguments that subsequent science has seriously undermined the reliability of the Forest Plan old growth standards, the Forest Service cites to more recent research indicating that the standards are reliable. (AR 901:38-40, 69-70) ("A Conservation Assessment of the Northern Goshawk, Black-backed Woodpecker, Flammulated Owl, and Pileated Woodpecker in the Northern Region, USDA Forest Service") ("Samson Study"). In the face of this conflicting evidence, the Court defers to the agency on the issue of the scientific integrity of the minimum 25-acre minimum stand. Based on the record before the agency, it was entirely reasonable to conclude that the science behind the 25-acre minimum stand is reasonably reliable.
In sum, in light of the evidence in the Administrative Record, the Court finds no reason not to defer to the agency in this matter of technical expertise. The initial old growth standards appear to be based on a thoughtful consideration of the habitat needs of the caribou and pileated woodpecker and there is nothing in the administrative record to indicate that the standards are no longer reasonably valid. Moreover, even if a dispute existed, the Forest Service has pointed to evidence to support its conclusion that the old growth standards are still valid. Accordingly, the Court will defer to the agency and finds no error in the scientific integrity or reliability of the old growth standards.
c. Reliability of Defendants' Methods for Measuring Existing Habitat
The Forest Service has concluded that the IPNF satisfies the Forest Plan's old growth standards and the Project will not affect any old growth stands. Plaintiff generally contends that the Forest Service's method for measuring the existing amount of old growth habitat was not reasonably reliable and accurate. More specifically, Plaintiff contends: (1) the Timber Stand Management Recording System ("TSMRS") database may provide inaccurate records of logging activities and, in some cases, may not record logging activities at all; (2) the majority of the stand data used was at least seven years old (38 of 64 stands), and some of the data was 20 years old (ten stands); and (3) the flaws in the habitat model were apparent upon field review of the model's projections. Memorandum in Support of Plaintiff's Motion for Summary Judgment, pp. 13-14 (Docket No. 25). According to Plaintiff, the field reviews indicated a modeling error rate of 68-70%. (AR 463:8).
Nonetheless, the Court is satisfied that the Forest Service's methodology for measuring habitat was reasonably reliable. As Judge Lodge noted less than a year ago in Lands Council v. McNair, CV 06-425, 2009 WL 3199641 (D.Idaho Sept. 30, *1046 2009), the TSMRS database has been through a recent, comprehensive upgrade to ensure it provides accurate records and was subject to further site-specific review in the context of the instant project. Here, the Court is satisfied that the data used was relatively recent and also subject to site verification. The record reflects that the majority of the old growth stand data used was based on exams conducted between 2002 and 2006 (AR 2:151-52) and 355 individual stands were reviewed for habitat suitability. (AR 2:119, 131, 132, 244, 245, 258, 270-71, 275).
Moreover, with regard to Plaintiff's claim concerning the error rate of site verification, the parties interpret the same data in a different manner. The Forest Service explains that it reviewed 319 stands in the wildlife analysis area and determined, from aerial photos and other information sources, that 33 of these stands required field verification. (AR 462:1). In reviewing these stands, and considering both "suitable habitat" and "marginally or possibly suitable habitat" in its determination, the Forest Service determined that the databases were fairly accurate with regard to what stands "could provide some level of habitat." See Defendants' Opposition to Plaintiff's Summary Judgment, p. 8 (Docket No. 35) (citing AR 463). Based on the record before it, the Court finds that it was reasonable for the Forest Service to incorporate "marginally or possibly suitable habitat" in its calculation of old growth habitat.
Given recent case law concerning the quality of the databases upon which the Forest Service relies, the site-specific verification process, and what appears to be a reasonable interpretation of the data, the Court concludes that the Forest Service's general methodology for calculating old growth is reasonably reliable. Moreover, as explained more fully below, the Forest Service's findings with regard to each of the old growth standards challenged here were supported by substantial evidence in the record.
i. Evidence Supports Defendants' Conclusion that the IPNF Satisfies Forest Plan Standard 10(b): the Ten Percent Rule
The Forest Service cites to four reports and a field verification study in support of the conclusion that the over-all 10% old growth standard is being met. First, the 2004 IPNF Forest Planning report, relying upon the FIA database, determined that 12.8% of the forested acres on the IPNF met the old growth criteria. (AR 287: 1, 9). Second, using the same FIA database but with a more conservative method for estimating tree age, an April 2006 assessment of the IPNF reported that approximately 11.8% of forested lands on the IPNF met the old growth criteria. (AR 288: 3). Third, two subsequent reports, dated July 2006 and May 2007, both confirmed the FIA-derived estimate of approximately 11.8% old growth on IPNF's forested lands. (AR 290: 6, AR 291:6). In addition, the Forest Service conducted reviews of the individual forest stands in 2004 and 2006 and confirmed that the IPNF has mapped and allocated 12.1% of its forested lands for management as old growth. (AR 287:6, 290:6). This evidence is sufficient to support the Forest Service's conclusion that the ten percent, forest-wide rule is being met.
ii. Sufficient Evidence Supports Defendant's Conclusion that OGMU Eight Satisfies Forest Plan Standard 10(c): the Five Percent Rule
Plaintiff argues that the Forest Service's most reliable habitat database, the FIA database, indicates that there is only 4.3 % old growth in the Project Area.[11]Plaintiff's *1047 Memorandum in Support of Motion for Summary Judgment, p. 18 (Docket No. 25). However, Standard 10(c) does not refer to the Project Area; it refers to old growth management units, and the FIA database reflects that OGMU Eight has 19% existing old growth, thus satisfying Standard 10(c). (AR 284, AR 2: 152, 154).
iii. Sufficient Evidence Supports Defendant's Conclusion that OGMU Eight Satisfies Forest Plan Standard 10(f): the Minimum 25-Acre stand Rule.
Plaintiff argues that the TSMRS/FSVeg database reflects that 0% of the existing old growth stands in OGMU Eight are at least 80 acres. However, the Forest Service relies on this same database to support their conclusion that OGMU Eight contains nine patches larger than 80 acres; eight patches larger than 100 acres; and a single patch of 595 acres (AR 2:154), thus satisfying Old Growth Standard 10(f). In so doing, the Forest Service decided that, in calculating the size of old growth stands in an OGMU, it is appropriate to patch together old growth stands partially within OGMU Eight with adjacent or nearby stands and to give credit for "potential old growth[12]." (AR 292,93). See Defendants' Opposition to Plaintiff's Motion for Summary Judgment, p. 9 (Docket No. 35). The Forest Service defends this approach, saying that it "reflects the direction in the Forest Service's old growth criteria to use landscape ecology considerations, as well as individual stand attributes, in selecting land to be allocated as old growth." Id.
On balance, the record indicates that the Forest Service made a rational decision based on "landscape ecology considerations." Hence, the Court concludes that the Forest Service, the agency with the technical expertise and charged with implementing NFMA, the NFMA regulations, and the IPNF Forest Plan, has appropriately interpreted Old Growth Standard 10(f) to allow it to include "patches" of old growth partially contained within the OGMU and "potential old growth" for the purpose of determining the old growth stand sizes within a single OGMU.
In short, the Court is satisfied with the methods used for analyzing the stand data. Accordingly, the Forest Service has demonstrated that OGMU Eight satisfies Old Growth Standard 10(f). See also Alliance for the Wild Rockies v. Wood, 2008 WL 2152237, *3 & n. 3 (D.Idaho May 21, 2008) (permitting Forest Service to count verified old growth and potential old growth in determining whether Salmon National Forest was meeting its old growth standards).
d. Relying on the Habitat-as-Proxy Approach Here Is An Abuse of Discretion, Because It Is Contradicted by Site-Specific Evidence.
As discussed above, on the record of this case, the Forest Service's old growth standards and methods for measuring habitat are reasonably reliable in theory. Nonetheless, the Forest Service erred by relying exclusively upon the habitat-as-proxy approach here because it did not address the uncontroverted evidence in the record that the old growth standards have not adequately ensured species viability in the Project Area.
In authorizing the Project, the Forest Service determined that "[v]iable populations *1048 of management indicator species (elk, marten, moose, goshawk, and pileated woodpecker) will be maintained." (AR 3:55). However, neither the DEIS, FEIS, or ROD contains evidentiary support for the conclusion that there are any populations, much less viable populations, of old growth MIS in the Project Area to maintain. There are no populations estimates nor are there suggestions as to what a viable population might be. In addition, the last MIS monitoring report in the record is from 1993 (AR 949:33-34), and the Forest Service did not know the population trends of any of its MIS when it planned the Project. (AR 976:38). Instead, the Forest Service relies solely upon the old growth standards to meet its species monitoring and viability requirements.
A decision to continue to rely upon a habitat-as-proxy approach against such facts is either a Panglossian view that all will be well with the management indicator species despite the lack of any non-hypothetical evidence to support such a view, or it is the archetypical illustration of what can happen when form is exalted over substance. Whichever it might be, in this setting it is an abuse of discretion by the agency. The complete absence of old growth management indicator species in the Project Area renders implausible the assumption that the habitat-as-proxy approach satisfies the Forest Service's species monitoring and viability requirements set forth in the Forest Plan. Without any indication that there are viable populations in the Project Area or what might constitute viable populations for these species, the Forest Service lacked any evidentiary support for its conclusion that viable populations of MIS will be maintained after the Project is implemented.
i. No Evidence of Old Growth MIS in the Project Area
The old growth standards on the IPNF were developed based upon the habitat needs of the MIS pileated woodpecker and endangered woodland caribou. However, neither of these species is found within the Project Area. This is true even though Forest Service modeling suggests eight hypothetical pileated woodpecker ranges in the Project Area. (AR 2:269, 279).
Similarly, fisher, marten, goshawk, and Canada lynx are all sensitive species associated with old growth but have been detected only outside the Project Area. (AR 2:284-287). Based on modeling, the Forest Service assumed 19 hypothetical nesting areas for the northern goshawk within the Project Area (AR 2:275), yet after five days of field study, there was no sign that goshawks inhabit the area.[13][14] (AR 482: 1-5).
The Forest Service contends that the lack of sightings of certain species does not indicate that the Forest Service has failed to meet its species monitoring and viability requirements, because the argument "relies on the incorrect premise that the habitat as proxy approach cannot be used on the IPNF...." Defendants' Opposition to Plaintiff's Summary Judgment, p. 13 (Docket No. 35). This is not true. The habitat as proxy approach is premised upon the assumption that, by taking care of old growth habitat needs of the MIS, *1049 the Forest Service can ensure the viability of all species. This theory has a rational basis and should work where, as here, the habitat model underlying the old growth standards and the method for measuring habitat are reasonably reliable. Nonetheless, the ultimate test for whether the habitat as proxy approach is permissible is "whether it `reasonably ensures that the proxy results mirror reality.'" See Gifford Pinchot Task Force v. United States Fish & Wildlife Serv., 378 F.3d 1059, 1066 (9th Cir.2004) (quoting Idaho Sporting Cong., Inc. v. Rittenhouse, 305 F.3d at 972-73). Here, the most compelling evidence suggests that the theory, applied in this Project Area, does not match reality. The lack of species sightings, otherwise ignored and unexplained by the Forest Service, undermines the assumption that by taking care of habitat, the IPNF can ensure species viability.
The Forest Plan requires that the Forest Service ensures the existence of viable populations of species, not the theoretical possibility that the species should be present. Moreover, without any indication that there are viable populations of MIS in the Project Area before the Project, it is unclear how the Forest Service could conclude that viable populations of MIS will be maintained after the Project.
Put another way, there is evidence in the record that effectively rebuts the presumption that the habitat-as proxy-approach is taking care of the species viability in the Project Area. The Forest Service has failed to adequately address or explain this evidence or describe more adequately the potential reasons why the MIS have not been located in the Project Area. Hence, the Forest Service has failed to consider an important aspect of the problem, offered an explanation that runs counter to the evidence, and relied upon a theory that, as applied, is so implausible that it cannot be ascribed to a difference in view or the product of agency expertise. Accordingly, the decision to rely exclusively upon the old growth standards to meet the Forest Plan requirements for MIS monitoring and ensuring species viability in the Project Area was in error and the decision authorizing the Project must be set aside, because the Project's effect on species viability has not been addressed.
This analysis is consistent with the Ninth Circuit's recent decision in Native Ecosystems Council v. Tidwell, 599 F.3d 926, 935 (9th Cir.2010) (holding nonexistent MIS cannot serve as proxy).[15] In Tidwell, a Ninth Circuit panel reversed a Montana district court decision upholding the Forest Service's use of a proxy-on-proxy approach to species viability requirements. The Ninth Circuit held that the proxy-on-proxy approach was not reliable, because the MIS used to determine appropriate habitat, the sage grouse, did not exist in the area being analyzed and there was evidence in the record suggesting that the sage grouse population in the larger geographic area was trending downward. On that record, the Ninth Circuit said "[i]t is unfathomable how the Forest Service could meet its responsibility to maintain existing species by selecting as a proxy a species that is virtually non-existent in the targeted area." Id.
In contrast, there is no indication here that the population trends of the MIS have been diminishing. However, the Administrative Record reflects that MIS have not been monitored on the IPNF since 1993 (AR 949:33-34). Thus, there is no recent evidence concerning the MIS population trends at all.
*1050 Moreover, there is evidence in the record that the old growth habitat in the area has degraded over time, despite compliance with old growth standards, and that the old growth standards, though reasonably reliable, are based on relatively stale science. This provides further support for the conclusion that the old growth standards alone may not be ensuring species viability in the Project Area and renders the Forest Service reliance upon such standards an abuse of discretion.
ii. Habitat degradation
There is no dispute that there has been a "substantial reduction of older forest structures compared to historic structures" throughout the region. (AR 2:147). This trend is reflected in the IPNF. "There are fewer stands typified by an old, open overstory of large early-seral species with an understory of mixed species of varying shade tolerances. Stands typified by small and medium-sized young trees have increased." (AR 2:147). It is also reflected in the Project Area, where "[t]here is a trend away from mature/old and old growth forest structure, toward smaller trees." (AR 2:147). The Forest Service acknowledges that this trend results in a loss of habitat for old growth dependent species. (AR 2: 148).
Ironically, the Project was designed, in large part, to address this downward trend in old growth and habitat degradation. One central component of the Project is to "[m]aintain or improve resilience of the vegetative resources to disturbances such as insects, disease and fire." (AR 3:5). The same conditions that create a higher risk of disturbance as the result of insects, disease, and fire are, in large part, the same conditions causing a degradation of habitat. As the ROD describes, the Project is intended, in part, to "[p]romote or maintain large-diameter trees, snags, coarse woody debris, and stands dominated by large diameter trees." (AR 3:5).
Significantly, the degradation of habitat is further evidence suggesting that there are challenges to old growth species viability in the Project Area that are unaccounted for by the old growth standards. When it is undisputed that the habitat has been altered and there is no evidence of MIS in the Project Area, it is unreasonable for the Forest Service to continue to argue that the old growth standards alone are ensuring species viability.
iii. Stale Science
The 1982 regulations assumed that each Forest's plan would be updated every 15 years. There is no indication that this happened, at least with regard to the old growth standards. In addition, at the time the old growth standards were developed, the Forest Service admitted that its knowledge regarding "the relationships of ... animals to old-growth ecosystems [was] somewhat limited." (AR 1024b:13). Further, the Forest Plan indicated that more research was necessary to determine "to what extent" wildlife species "depend on old-growth systems." AR 942: 43-44. While the Forest Service has not erred by relying upon the science behind the old growth standards, the time that has elapsed since that admittedly uncertain science was applied to the IPNF undermines its persuasiveness.
In sum, while the science behind the old growth standard may be sound (i.e. based on a rational determination of what habitat should support species viability) and the methods for measuring habitat reasonably reliable, it was unreasonable to rely upon habitat alone to meet Forest Plan species monitoring and viability requirements and properly analyze the Project's effect on MIS and other old growth dependent species in the Project Area. The evidence here suggests that the habitat as proxy approach applied to the Project Area is hollow at its core.
*1051 C. Plaintiff's NEPA Challenges to the Project
"NEPA was passed by Congress to protect the environment by requiring that federal agencies carefully weigh environmental considerations and consider potential alternatives to the proposed action before the government launches any major federal action." Lands Council I, 395 F.3d at 1026. NEPA is a procedural statute; it does not contain additional substantive provisions or mandate particular results. Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 350, 109 S.Ct. 1835, 104 L.Ed.2d 351 (1989). The goal of NEPA is two-fold: (1) to ensure the agency will have detailed information on significant environmental impacts when it makes its decisions; and (2) to guarantee that this information will be available to a larger audience. Id. at 349, 109 S.Ct. 1835.
Pursuant to NEPA, the Forest Service must prepare an environmental impact statement ("EIS") for "every recommendation or report on ... major Federal actions significantly affecting the quality of the human environment." 42 U.S.C. § 4332(C). When determining the sufficiency of an EIS, courts generally employ a "rule of reason [standard] to determine whether the [environmental impact statement] contains a `reasonably thorough discussion of the significant aspects of the probable environmental consequences.'" Kern v. United States Bureau of Land Mgmt., 284 F.3d 1062, 1071 (9th Cir.2002) (internal citation omitted). Essentially, the rule of reason standard is applied in the same manner as the arbitrary and capricious standard. See Neighbors of Cuddy Mountain v. U.S. Forest Serv., 137 F.3d 1372, 1376 (9th Cir.1998).
Plaintiff contends that The Forest Service violated NEPA by: (1) failing to ensure the scientific integrity of the Forest Plan's old growth standard; (2) failing to assess the cumulative impacts of the fire management policy; (3) illegally tiering the Project to the IPNF's now withdrawn Fire Plan; and (4) failing to prepare a supplemental EIS for the Project after the Fire Plan had been withdrawn.
1. Scientific Integrity of the Forest Plan Old Growth Standard
Plaintiff claims that the EIS does not: (1) disclose the underlying hard data and scientific analysis that supports its old growth standards; (2) disclose that the standards are "controversial and uncertain," or (3) discuss the responsible opposing viewpoints. Plaintiff's Memorandum in Support of Summary Judgment, pp. 21-22 (Docket No. 25).
First, NEPA regulations require that:
Agencies shall insure the professional integrity, including scientific integrity, of the discussions and analyses in environmental impact statements. They shall identify any methodologies used and shall make explicit reference by footnote to the scientific and other sources relied upon for conclusions in the statement. An agency may place discussion of methodology in an appendix.
40 C.F.R. § 1502.24. Second, NEPA requires the disclosure of scientific controversies and uncertainties. See Seattle Audubon v. Espy, 998 F.2d 699, 704 (9th Cir.1993); 40 C.F.R. § 1502.22 (agency must disclose incomplete or unavailable information relevant to evaluation of reasonably foreseeable adverse effects). Third, agencies must respond to any responsible opposing scientific viewpoint that undermines the assumptions or assertions that are fundamental to the agency's analysis. Center for Biological Diversity v. U.S. Forest Serv., 349 F.3d 1157, 1167 (9th Cir. 2003); 40 C.F.R. 1502.9 (final environmental impact statements must respond to public comments and discuss responsible opposing views).
*1052 The Forest Service argues that it conducted the appropriate environmental analysis of the old growth standards when the Forest Plan was adopted and there was no need for the Forest Service to repeat or revisit its analysis in the Project EIS, especially because the Project does not propose to harvest any old growth. This is short-sighted and falls short of the NEPA requirements. If the Forest Service is made aware of a reasonable scientific challenge to the old growth standards set forth in the 1987 Forest Plan, then the Forest Service must address the challenge in the NEPA process applicable to site-specific action taken in reliance upon the old growth standards. To hold otherwise would allow the Forest Service to rely upon science that lacks the requisite integrity to ensure that the agencies take a "hard look" at the environmental effects of proposed federal action. See Robertson v. Methow Valley Citizens Council, 490 U.S. at 352, 109 S.Ct. 1835.
The Court has concluded that the scientific evidence put forward by Plaintiff did not create a legitimate dispute upon the old growth standards. The Lesica study does not address the science behind the ten percent rule so much as to leapfrog it, drawing from assumptions made about the nature of the forest prior to the Westward Expansion. The Purvine Report was not part of the administrative record, and the Patla Report was cited for a different proposition. Therefore, on the record before the agency at the time of the decision, the Forest Service did not err by failing to disclose these scientific challenges.
Nonetheless, because the Forest Service failed to consider the Project's effects on species viability, the EIS violates NEPA. The EIS contains an incomplete analysis of the Project's impact on old growth dependent, MIS, and sensitive species. See Seattle Audubon v. Espy, 998 F.2d at 704-05.
2. Assessing Cumulative Impacts of the 2008 Fire Plan
To provide sufficient analysis of environmental impacts under NEPA, an EIS must consider cumulative impacts applicable to the agency action under consideration. See Neighbors of Cuddy Mountain v. U.S. Forest Serv., 137 F.3d at 1379. "NEPA requires that where several actions have a cumulative ... environmental effect, this consequence must be considered in an EIS." Id. (quoting City of Tenakee Springs v. Clough, 915 F.2d 1308, 1312 (9th Cir.1990)). "`Cumulative impact' is the impact on the environment which results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions...." 40 C.F.R. § 1508.7.
Plaintiff argues that the Project EIS is contrary to law because it implements the direction of the now-withdrawn 2008 Fire Plan without assessing the cumulative impacts of the Fire Plan at the forest-wide level. Plaintiff's Memorandum in Support of Summary Judgment, p. 22 (Docket No. 25). Plaintiff's argument is unavailing. The Fire Plan has been withdrawn; therefore, there is no need to analyze its impact on a forest-wide scale either in the context of a Fire Plan EIS or in the Project EIS.
3. Improperly Tiered to Fire Plan
Plaintiff argues that the forest-wide 2008 IPNF Fire Plan is illegally tiered to the Project EIS. As the NEPA regulations provide:
Tiering refers to the coverage of general matters in broader environmental impact statements (such as national program or policy statements) with subsequent narrower statements or environmental analyses (such as regional or basinwide program statements or ultimately site-specific statements) incorporating *1053 by reference the general discussions and concentrating solely on the issues specific to the statement subsequently prepared.
40 C.F.R. § 1508.28. Generally, tiering is appropriate in two situations. First, tiering may be used "[f]rom a program, plan, or policy environmental impact statement to a program, plan, or policy statement or analysis of lesser scope or to a site-specific statement or analysis." Id. Second, tiering may be used:
From an environmental impact statement on a specific action at an early stage (such as need and site selection) to a supplement (which is preferred) or a subsequent statement or analysis at a later stage (such as environmental mitigation). Tiering in such cases is appropriate when it helps the lead agency to focus on the issues which are ripe for decision and exclude from consideration issues already decided or not yet ripe.
Id.
Again, because the Fire Plan has been withdrawn, Plaintiff's argument is unavailing. Moreover, while the FEIS considered the impact of fire under the direction of the Fire Plan, there is no indication that the FEIS was somehow tiered to the 2008 Fire Plan and even if the 2008 Fire Plan relied upon the Project EIS analysis, it has been withdrawn
4. Preparation of a Supplemental EIS
NEPA imposes on federal agencies a continuing duty to supplement existing environmental impact statements in response to significant new circumstances or information relevant to environmental concerns and bearing on the proposed action or its impacts. 40 C.F.R. § 1502.9(c)(1)(ii); see Klamath Siskiyou Wildlands Center v. Boody, 468 F.3d 549, 561 (9th Cir.2006). Here, the question is whether the cumulative impact of fire and fire management is a "significant new circumstance" relevant to the Project EIS analysis of the cumulative impact of fire and fire management on the Project Area.
Plaintiff argues that the Forest Service must conduct a supplemental EIS, because withdrawal of the 2008 Fire Plan following the FEIS and ROD constitutes a significant change in circumstances. Plaintiff further argues that the current "fire management plan," though unwritten, requires a full EIS for the "Forest Service to consider the Forest-wide cumulative impacts of its fire management policy." Plaintiff's Reply in Support of Summary Judgment, p. 15 (Docket No. 15).
The issue of whether the current, unwritten fire management plan requires an EIS is not a proper subject of this suit as it is not clearly relevant to any of the claims or defenses set forth in the pleadings. In addition, the Court has already determined that the decision authorizing the Project violated both NFMA and NEPA for failure to consider properly the Project's impact on species viability. Accordingly, and as discussed more fully below, the decision authorizing the Project must be set aside and the matter remanded to the Forest Service, so the Forest Service can decide how next to proceed. To the extent a supplemental EIS is prepared, this EIS must address the current IPNF fire management policy in its analysis of cumulative impacts.
The Forest Service contends that no supplemental NEPA analysis is required, because the withdrawn 2008 Fire Plan and current fire management direction are both consistent with the Forest Plan. Therefore, the change in fire policy did not cause a change in management direction or a "significant new circumstance."
Nonetheless, just because the 2008 Fire Plan and current fire plan are consistent with the Forest Plan does not necessarily *1054 mean that the change in policy cannot constitute a "significant new circumstance." Within the Forest Plan's general fire standards, there is room for the Forest Service to manage fire in different ways with different priorities and environmental impacts. For example, under the Fire Plan, the IPNF was divided into different fire management units and all fires within the "wildland-urban interface" were deemed unwanted events that would be suppressed. (AR1037:32-33). In contrast, the current fire policy does not require that all fires be suppressed but allows for a cost-benefit analysis to fire suppression. (AR 942: 69, 85, 106). These are significant changes in policy permitted under the general Forest Plan fire management guidance.
In addition, the FEIS was updated to account for a change in management direction from the standards in the Forest Plan to the standards in the 2008 Fire Plan. "Fire management plan direction was updated to include direction from the 2008 IPNF Fire Management Plan." (AR 2:129). If that change required an updated analysis of fire, then it must be presumed that a change back to the Forest Plan standards also requires an updated analysis. Accordingly, to the extent the Forest Service decides to move forward with this Project, any future analysis of the Project's environmental impact must address the cumulative impact of fire and fire management under whatever policy is in place at the time the environmental impact statement is drafted.
D. Injunctive Relief
The undersigned recommends that the Court grant summary judgment on Plaintiff's claims that the Forest Service violated NFMA and NEPA by failing to consider adequately the Project's effect on the viability of old growth dependent, sensitive, and management indicator species. For relief, Plaintiff seeks a declaratory judgment and asks that the Court: (1) set aside the agency's decision; (2) enjoin the Forest Service from awarding any further timber sales pursuant to the Project; (3) enjoin any logging pursuant to the Project timber sales already awarded; and (4) award Plaintiff its costs, expenses, expert witness fees, and reasonable attorneys' fees. For the reasons set forth below, it is recommended that the district court set aside the agency's decision authorizing the Project and either issue a permanent injunction prohibiting all future sales and logging authorized by the Project or hold a hearing to determine whether such an injunction should issue. See Monsanto Co. v. Geertson Seed Farms, ___ U.S. ___, 130 S.Ct. 2743, 177 L.Ed.2d 461 (2010). A decision concerning attorneys' fees and costs should be made at a later date upon a separate motion.
The Supreme Court has recently made clear that, even in environmental cases, Plaintiff has the burden of establishing the following four factors before the Court may issue injunctive relief: "`(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.'" Id. at 2756 (quoting eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006)). "The court's decision to grant or deny injunctive or declaratory relief under [the] APA is controlled by principles of equity." National Wildlife Fed'n v. Espy, 45 F.3d 1337, 1343 (9th Cir.1995). Accordingly, "[a]n injunction should issue only where the intervention of a court of equity `is essential in order effectually to protect property rights *1055 against injuries otherwise irremediable.'" Weinberger v. Romero-Barcelo, 456 U.S. 305, 311-12, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982) (quoting Cavanaugh v. Looney, 248 U.S. 453, 456, 39 S.Ct. 142, 63 L.Ed. 354 (1919)).
When determining whether an injunction should issue, the Court must conduct a traditional "balance of harms" analysis. "The district court must weigh `the competing claims of injury ... and the effect on each party of the granting or withholding of the requested relief.'" National Wildlife Fed'n v. Espy, 45 F.3d at 1343 (quoting Amoco Production Co., 480 U.S. at 542, 107 S.Ct. 1396). Moreover, any injunction issued must be narrowly tailored to give only the relief to which plaintiffs are entitled. Orantes-Hernandez v. Thornburgh, 919 F.2d 549, 558 (9th Cir.1990).
Here, Plaintiff generally contends that the injunction should issue in order to protect the environment from irreparable harm and ensure that the Forest Service complies with applicable law. According to Plaintiff, the harm the Forest Service alleges is economic in nature and compensable; whereas, the harm Plaintiff alleges, to the environment and species relying upon that environment, is irreparable.
The Forest Service contends that an injunction should not issue, because the Project, in the long term, will reduce the potential for high severity or intensity fires, insect infestation, drought and disease. The Forest Service also contends that the Project will manage access to provide for multiple uses and provide economic benefits to the local economy.
On balance, the equities here weigh in Plaintiff's favor. First, Plaintiff has demonstrated that irreparable injury is likely in the absence of an injunction. See Winter v. Natural Resources Defense Council, ___ U.S. ___ (2008). It is undisputed that no MIS have been found in the Project Area and the Project will further affect the species' habitat, even though the Project does not propose to harvest old growth. In addition, the threatened harm, the failure to provide for species viability, is irreparable. Although it is difficult to determine how "likely" the harm would be absent an injunction, the Court is ultimately swayed by the fact that the MIS have not been found in the Project Area, thus indicating, according to the Forest Service's species proxy approach, that the other species are probably not doing well. Thus, the further elimination of MIS habitat occasioned by the logging and road construction authorized by the Project is of grave concern. Because it is undisputed that the Project will have a negative impact on the MIS species, and there is no indication that they are otherwise doing well in the Project Area, the Court must conclude that there is a likely risk of irreparable injury absent an injunction.
Second, remedies available at law, such as money damages, cannot compensate for the alleged threat to species viability. The value of the presence of sensitive and desired species in a woodland environment is immeasurable. Even though that value can be weighed against competing values, it is a value that does not lend itself to monetary equivalency.
Third, on balance, the weight of harms tilts in Plaintiff's favor. In making this determination, the Court is highly aware and sensitive to the needs of the local communities and lumber companies who depend upon timber sales upon the public land. These interests are extremely valuable to our society and the rural communities surrounding our federal forests. Nonetheless, weighing the potential for irreparable harm against harms that are primarily monetary and, thus, compensable in nature, the Court must find that, on *1056 balance, Plaintiff's alleged harms carry more weight.
Fourth, the public interest also weighs in Plaintiff's favor. There are competing public interests involved here, as there so often are in the multiple-use management context. Defendants contend that the Project will further the public interest in providing jobs and logging contracts to the local community; reducing the risk of fire, insects, drought and disease; and providing for multiple use access. However, as previously stated, the potential economic harm is largely compensable. Moreover, any of the current risks of fire, insects, drought, and disease existing in the Project Area has existed for some time and allowing the sales to move forward despite their unlawfulness is no guarantee that these risks will be reduced. In addition, there is no indication that the access provided for multiple uses would differ significantly depending upon the issuance or denial of injunctive relief. Thus, the public interest in sustaining wildlife and ensuring that federal agencies comply with federal law has to outweigh the competing interests in providing economic benefits to the local community; reducing risks of fire, insects, drought, and disease; and providing access for multiple use.
For these reasons, the undersigned finds that Plaintiff has demonstrated that an injunction should issue. Accordingly, it is recommended that the district judge: (1) set aside the Forest Service's decision authorizing the Project; (2) remand the matter to the agency; and (3) issue a permanent injunction prohibiting any future activity under the current lumber sales and any future lumber sales authorized under the Project until and unless the Forest Service has undertaken a proper review of the Project's impact on species viability in the Project Area.
Alternatively, if the district judge is not satisfied with the evidence in the record relevant to establishing injunctive relief, it is recommended that the district judge order a show cause hearing. Prior to the Supreme Court's decision in Monsanto Co. v. Geertson Seed Farms, ___ U.S. ___, 130 S.Ct. 2743, 177 L.Ed.2d 461, there was a line of Ninth Circuit decisions suggesting that an injunction is the proper remedy for a NEPA violation[16] absent unusual circumstances. See Idaho Watersheds Project v. Hahn, 307 F.3d 815, 833 (9th Cir. 2002); National Parks & Conservation Ass'n v. Babbitt, 241 F.3d 722, 737, n. 18 (9th Cir.2001). The Supreme Court has now made clear that even where Plaintiff is successful on the merits of a NEPA claim, Plaintiff still has the burden of demonstrating all four factors necessary to establish a right to injunctive relief. See Geertson Seed Farms, ___ U.S. ___, 130 S.Ct. 2743, 2756-58, 177 L.Ed.2d 461. Therefore, given what appears to be a slight remodeling of the prior law within the Ninth Circuit resulting from the ruling in Geertson Seed Farms, the district judge may choose to hold a show-cause hearing before deciding upon injunctive relief. Nevertheless, the undersigned finds the evidence sufficient to award injunctive relief in this case.
V. RECOMMENDATION
In light of the foregoing, the undersigned United States Magistrate Judge recommends that the Court grant summary judgment to Plaintiff with regard to Counts Two and Five of the Second Amended Complaint because Defendants violated both NFMA and NEPA in their *1057 failure to ensure species viability in the Project Area. It is further recommended that the agency action be set aside and any action authorized by the Project be enjoined unless and until the Forest Service has conducted an analysis of the Project's impact on species viability that meets NFMA and NEPA standards.
NOTES
[1] Also pending is Plaintiff's Motion for Preliminary Injunction (Docket No. 47). However, resolving the cross-motions for summary judgment effectively renders this motion moot.
[2] Plaintiff contends that the habitat has also been degraded due to fire suppression activity, but the Forest Service contests that allegation. Defendants' Opposition to Plaintiff's Summary Judgment, p. 7, n. 5 (Docket No. 35).
[3] See generally AR 4-73 (project development) and AR 74-180 (public involvement).
[4] The roads are put into "long term storage" by removing culverts and erecting barriers with no foreseeable plans to put the roads back into use for 15-20 years. (AR 3:9).
[5] The FEIS considered the Project's impact on the following species: pileated woodpecker (AR 2:269-72), northern goshawk (AR 272-76), elk (AR 2:276-78), Canada lynx (AR 2:279-83), gray wolf (AR 2:284-86), fisher and marten (AR 2:286-88), wolverine (AR 2:288-89), black-backed woodpecker (AR 2:289-90), Coeur d'Alene salamander (AR 290-91), and western toad (AR 2:291-92).
[6] The old growth standards, which are based on the habitat requirements of the MIS, may ensure species viability in one area but not in another due to a variety of factors.
[7] Nonetheless, the decision contains persuasive authority, as it was issued by the presiding judge within the last year and provides a very recent analysis of the methodologies and databases used to inventory and monitor old growth in the IPNF.
[8] This reference to "wilderness" reflects the passage and applicability of the Wilderness Act, "aimed at protecting areas `where the earth and its community of life are untrammeled by man, where man himself is a visitor who does not remain.'" See Idaho Conservation League v. Mumma, 956 F.2d at 1511 (quoting 16 U.S.C. § 1311(c)).
[9] Since 1982, the Forest Service has issued three new rules governing Forest Plans, all of which have been subject to legal challenge. See Citizens for Better Forestry v. U.S. Dep't of Agriculture, 341 F.3d 961, 967 (9th Cir.2003) (finding plaintiffs had standing to challenge 2000 rule and remanding to district court where plaintiffs dismissed case upon stipulation when USDA announced intent to issue new rule); Citizens for Better Forestry v. U.S. Dept. of Agriculture, 481 F.Supp.2d 1059 (N.D.Cal.2007) (issuing nation-wide injunction prohibiting application of 2005 rule); Citizens for Better Forestry v. U.S. Dept. of Agriculture, 632 F.Supp.2d 968, n. 1 (N.D.Cal. 2009) (declaring 2008 rule invalid and remanding to agency to determine whether 1982 or 2000 rules should be reinstated).
[10] Susan M. Patla, Nesting Ecology and Habitat of the Northern Goshawk in Undisturbed and Timber Harvest Areas on the Targhee National Forest, Greater Yellowstone Ecosystem, (unpublished M.S. thesis Idaho State University).
[11] The Forest Service also contends that Plaintiff's data refers not to the Project Area, but to the much larger Landscape Area. Defendants' Opposition to Plaintiff's Summary Judgment, p. 7 (docket No. 35). Either way, the correct geographic focus should be the OGMU as directed by Old Growth Standard 10(c).
[12] The Forest Service further contends that "potential old growth" includes stands with more than enough large trees to meet old growth criteria, but the trees are not quite old enough (AR 287:5).
[13] The Forest Service points to evidence of a possible goshawk nesting area; nonetheless, the record reflects that no goshawks or goshawk nests have been seen in the Project Area. (AR 505, AR 2:262).
[14] Plaintiffs have also pointed to evidence in the administrative record that red tailed hawks have been sighted in the areas, an indication that the habitat is no longer suitable for the goshawk. See Ex. 1, Plaintiff's Memorandum in Support of Summary Judgment, La Sorte et al, "Habitat Associations of Sympatric Red-Tailed Hawks and Northern Goshawks on the Kaibab Plateau" (2004) (Docket No. 26-1).
[15] The Forest Service has petitioned the Ninth Circuit for a rehearing en banc, see Defendants' Supplemental Response to Plaintiff's Notice of Supplemental Authority (Docket No. 50).
[16] While this analysis addresses the issue of injunctive relief flowing from a NEPA violation, it would appear that the same analysis is true for other, similar environmental law violations brought pursuant to the APA.
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https://www.courtlistener.com/api/rest/v3/opinions/2469831/
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103 F.Supp.2d 97 (2000)
Iva WOODFORD, Plaintiff,
v.
COMMUNITY ACTION OF GREENE COUNTY, INC.; Board of Directors of Community Action of Greene County, Inc.; Edward J. Daly; Rosemary Blois; Robert C. Schrock; Anne Yon; William Reich; Rudolph Monteleone; Laurette Sudds; Thomas Yandeau; Penny Friedrich; Eleanor Van Schaack; Donna Rummo-Faulkner; Karlene Schnur; Andrew Dresser; Elaine Farley, Defendants.
No. 98-CV-220 LEK/RWS.
United States District Court, N.D. New York.
February 3, 2000.
Kernan, Kernan Law Firm, Utica, NY (Kevin G. Martin, of counsel), Office of James F. Keefe, Cairo, NY (Patricia G. Schneider, of counsel), for plaintiff.
Office of James T. Towne, Jr., P.C., Albany, NY (James T. Towne, Jr., of counsel), Donohue, Sabo Law Firm, Albany, NY (Alvin O. Sabo, of counsel), for the defendants.
*98 MEMORANDUM DECISION AND ORDER
KAHN, District Judge.
The Court must here determine whether Plaintiff Ms. Iva Woodford was an eligible employee for purposes of the Family and Medical Leave Act. This requires an assessment of the relevance of Plaintiff's time sheets to the question of whether she worked the minimum number of hours required to qualify under the act. The Court must also determine whether Defendants may have improperly interfered with Plaintiff's rights when they suspended her from work, and whether they provided her with timely notice, when she sought leave, that they might not restore her to her job at the end of her leave. Finally, the Court must determine whether Plaintiff may be liable to Defendants for any false or defamatory statements she has made in prosecuting this action.
I. Background
Plaintiff in this action claims that Defendants violated her rights under the Family and Medical Leave Act ("FMLA"), 29 U.S.C. §§ 2601 to 2654, and also asserts a supplemental state law claim for intentional infliction of emotional distress, based on Defendants' conduct pursuant to their purported violations of the FMLA. Defendants have made a counterclaim for defamation in the form of libel, alleging false and defamatory statements made in connection with this action.
Plaintiff Ms Woodford was employed by Defendant Community Action of Greene County, Inc. ("CAGC") from March 1985 to 15 January 1998. She was a teacher until 1987, and then was promoted to day care Director. She was promoted to Head Start Director in 1988, and held that job until her employment with CAGC ended. The individual Defendants are or were members of the CAGC Board of Directors.
Disputes related to the present action arose in 1996. Plaintiff alleged improper conduct on the part of one the Defendants; Defendants instituted disciplinary actions against Plaintiff. Plaintiff claims that stress arising from these incidents led to extreme mental and physical problems, and on that basis she sought leave under the FMLA in November 1997. Defendants initially rejected her application for leave, and required that she return to work. Defendants subsequently granted leave, but told her she had no right under the FMLA to be restored to her position once her leave ended. As the dispute over Plaintiff's application for FMLA leave continued, and Plaintiff remained away from work, Defendants hired an interim Head Start Director. Eventually, in January 1998, Defendants denied Plaintiff's request to be restored to her position as Director pursuant to the FMLA.
Plaintiff filed this action 9 February 1998. The Court has jurisdiction under 28 U.S.C. § 1331. Plaintiff seeks damages, punitive damages, and such other relief as the Court may deem just and proper. Defendants in their counterclaim seek damages and such other relief as the Court may deem just and proper.
II. Motions
Now before the Court are Defendants' motions for summary judgment and Plaintiff's cross motion to dismiss Defendants' counterclaim.
A. Standards of Decision
1. Dismissal
A motion to dismiss pursuant to Fed. R.Civ.P. 12(b)(6) for "failure to state a claim upon which relief can be granted," must be denied "unless 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). (Black, J.) In assessing the sufficiency of a pleading, "all factual allegations in the complaint must be taken as true," LaBounty v. Adler, 933 F.2d 121, 123 (2d Cir.1991), and all reasonable inferences must be construed in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); see also Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1099 (2d Cir.1988), (applying the principle of construing inferences in *99 favor of plaintiff) cert. denied sub nom. Soifer v. Bankers Trust Co., 490 U.S. 1007, 109 S.Ct. 1642, 104 L.Ed.2d 158 (1989).
[C]onsideration is limited to the factual allegations in [the] complaint, which are accepted as true, to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiffs' possession or of which plaintiffs had knowledge and relied on in bringing suit.
Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir.1993).
The Rules do not require the plaintiff to set out in detail the facts upon which the claim is based, but only that a defendant be given "fair notice of what the ... claim is and the grounds upon which it rests." Conley, 355 U.S. at 45-46, 78 S.Ct. 99. Individual allegations, however, that are so baldly conclusory that they fail to give notice of the basic events and circumstances of which the plaintiff complains are meaningless as a practical matter and, as a matter of law, insufficient to state a claim. See Barr v. Abrams, 810 F.2d 358, 363 (2d Cir.1987) (applying this standard to a complaint relying on civil rights statutes).
2. 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 summary 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); Lang v. Retirement Living Pub. Co., 949 F.2d 576, 580 (2d Cir.1991). The moving party carries the initial burden of demonstrating an absence of a genuine issue of material fact. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Thompson v. Gjivoje, 896 F.2d 716, 720 (2d Cir.1990). Facts, inferences therefrom, and ambiguities must be viewed in a light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) (per curiam)); Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir.1983). A genuine issue is an issue that, if resolved in favor of the non-moving party, would permit a jury to return a verdict for that party. R.B. Ventures, Ltd. v. Shane, 112 F.3d 54, 57 (2d Cir.1997) (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505).
When the moving party has met the burden, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.Ct. 1348. At that point, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(c); Anderson, 477 U.S. at 250, 106 S.Ct. 2505; Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. 1348. To withstand a summary judgment motion, evidence must exist upon which a reasonable jury could return a verdict for the nonmovant. Anderson, 477 U.S. at 248-49, 106 S.Ct. 2505; Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. 1348. Thus, summary judgment is proper where there is "little or no evidence ... in support of the non-moving party's case." Gallo v. Prudential Residential Servs., 22 F.3d 1219, 1223-24 (2d Cir.1994).
The Court addresses the motions on the basis of these standards.
III. Discussion
A. Defendant's Motions for Summary Judgment
Defendants have divided into two groups, and submitted separate motions. They do not, however, raise different issues, and the second group essentially joins the arguments the first makes. (See Sabo Aff. at 2 (Doc. 38, 9 Aug. 1999).) The Court will refer to these motions as one, for the purpose of this discussion.
Defendants argue that Plaintiff is not an eligible employee under the FMLA's provision that an employee must have been employed "for at least 1,250 hours of service *100 with [her] employer during the previous 12-month period." 29 U.S.C. § 2611(2)(A)(ii). If she is not eligible, then she would not have a right to reinstatement under the FMLA. Defendants' evidence indicates that Plaintiff worked a total of 852.5 hours in the twelve-month period before she requested FMLA leave. Plaintiff argues that that evidence understates her hours worked, and that even if she had not reached the requisite 1250 hours Defendants' wrongful actions prevented her from accumulating the necessary numbers of hours, and she is thus entitled to FMLA protection.
Plaintiff asserts that Defendants' records of her hours are not accurate, because the records were, in essence, simply a checkoff verifying that Plaintiff, as an "exempt" employee, had worked the minimum of 35 hours per week required. (See Mem. Law Opp'n to Defs.' Mot. for Summ.J. and in Supp. of Pl.'s Mot. Dismiss (hereinafter "Pl.'s Mem.Law") at 3-4 (Doc. 41, 9 Aug. 1999).) That assertion, however, is not consistent with the evidence before the Court. Plaintiff's time sheet is the basis for Defendants' claim that she worked 852.5 hours in the twelve months prior to her request for leave.[1] (See Blois Aff., Ex. E (Doc. 35, 9 Aug. 1999).) Plaintiff's argument would be consistent with a record showing a series of two-week periods listing precisely 70 hours worked. A good number of the periods listed, to the contrary, show less than 70 hours worked; two periods that do show over 70 hours worked (for the period ending 7 February 1997, 96 hours worked) belie Plaintiff's position that the worksheet was simply for checking off the minimum number of hours worked. Plaintiff has not set forth evidence on which a jury could find that in the twelve months prior to 14 November 1997 she worked the 1250 hours necessary to be an "eligible" employee for purposes of the FMLA.
Plaintiff notes that the FMLA forbids "any employer to interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided under this subchapter." 29 U.S.C. § 2615; see also Lacoparra v. Pergament Home Ctrs., Inc., 982 F.Supp. 213, 219-20 (S.D.N.Y.1997). An extended suspension of Plaintiff from work during 1997 may have prevented her from accumulating the hours necessary for FMLA eligibility. Nonetheless, Plaintiff has not set forth evidence upon which a jury could conclude that Defendants' suspension of Plaintiff from April to August 1997 was contrary to law.
Plaintiff also argues that Defendants did not provide proper and timely notice to her, at the commencement of her leave, that they might deny her restoration to her position at the expiration of her leave, because she was a "key employee." An employer must provide a key employee under the FMLA with written notice of "the employee's status as a `key employee' and the potential consequence that restoration may be denied following FMLA leave, explaining the conditions required for such denial." 29 C.F.R. § 825.301(b)(1)(vi).[2]
An employer who believes that reinstatement may be denied to a key employee must give written notice to the employee at the time the employee gives notice of the need for FMLA leave (or when FMLA leave commences, if earlier) that he or she qualifies as a key *101 employee.... If such notice cannot be given immediately because of the need to determine whether the employee is a key employee, it shall be given as soon as practicable after being notified of a need for leave (or the commencement of leave, if earlier).
29 C.F.R. § 825.219(a). Plaintiff requested placement on family leave under the FMLA in a letter dated Tuesday, 18 November 1997, asking that her leave be effective one day earlier. (See Blois Aff. Ex. B.) In response to this request Defendant Rosemarie Blois filled out an Employer Response to Employee Request for FMLA Leave (Department of Labor form WH-381), dated Wednesday, 19 November 1997. (See id. Ex. C.) Defendant Edward Daly sent Plaintiff a letter dated Friday, 21 November 1997 officially informing her that CAGC had determined that she was a key employee, and that though CAGC could not deny her FMLA leave, it did intend to deny her restoration to employment on completion of her FMLA leave. (See id. Ex. D.)
Thus, there was an interval of two or three days between Plaintiff's request for leave and written notice from Defendants that reinstatement would be denied. That interval is not so great as to place Defendants in violation of the C.F.R.'s requirement that the employer give written notice "as soon as practicable" after the request for leave. See also the requirement that the employer "advise the employee whether the employee is eligible as soon as practicable (i.e., two business days absent extenuating circumstances) after the date employee eligibility is determined." 29 C.F.R. § 825.110(d) (emphasis added). But cf. Miller v. Defiance Metal Prods., Inc., 989 F.Supp. 945, 948-49 (N.D.Ohio 1997) (finding incorrectly, in the view of this Court that, when employee gave two days' notice in advance of taking leave, 29 C.F.R. § 825.110(d) required employer to notify employee that it had determined she was ineligible "within two business days of receiving the employee's notice" (emphasis added)).
Therefore, Plaintiff was not eligible under the FMLA for a right of restoration to her position following leave, Defendants did not interfere with her rights under the FMLA, and Defendants gave her proper and timely notice of their intent to deny restoration. Accordingly, the Court must GRANT Defendants' motion for summary judgment with respect to Plaintiff's claim under the FMLA.
Because the Court has granted summary judgment against Plaintiff's federal question cause of action, the Court lacks supplemental jurisdiction over Plaintiff's state law claim for intentional infliction of emotional distress. Accordingly, the Court will DISMISS that state law claim. See 28 U.S.C. § 1367(c)(3).
C. Plaintiff's Motion to Dismiss Defendants' Counterclaim for Defamation by Libel
Plaintiff properly points out that the Federal Rules require 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). Defendants have quoted no libelous statements by Plaintiff, but merely made summary characterizations of her purported accusations. (See Am. Answer at 6-7 (Doc. 13, 31 Mar. 1998).) More importantly, courts are rightly reluctant to impose any impediment to the strong public policy favoring filing of complaints for the vindication of one's rights under the law, and to the candid and forthright pleading of causes of action. "By an almost unbroken line of authority in this country and England, a party who files a pleading or affidavit in a judicial proceeding has absolute immunity, though his statements are defamatory and malicious, if they relate to the subject of inquiry." Sacks v. Stecker, 60 F.2d 73, 75 (2d Cir. 1932) (A. Hand, J.) (citing Andrews v. Gardiner, 224 N.Y. 440, 121 N.E. 341, 343 (1918) (Cardozo, J.) (quoting with approval *102 The King v. Skinner, Lofft 55, 56, 98 Eng. Rep. 529, 530 (K.B.1772) (Lord Mansfield, C.J.) ("[N]either party, witness, counsel, jury, or Judge, can be put to answer, civilly or criminally, for words spoken in office."))); see also Towne Ford v. Marowski,[3] 251 A.D.2d 1075, 674 N.Y.S.2d 213, 215 (N.Y.A.D. 4th Dept.1998) (finding "an absolute privilege conferred on parties for statements made in the course of judicial proceedings").[4] Defendants have set forth no evidence or arguments suggesting that Plaintiff's statements were unrelated to her claims, nor have they indicated what statements Plaintiff made apart from the submissions in this action that might sustain their counterclaim. The Court finds Defendants' counterclaim utterly without merit, and GRANTS Plaintiff's motion to dismiss.
CONCLUSION
For the reasons stated above, it is hereby:
ORDERED that Defendants' motions for summary judgment are GRANTED; and
IT IS FURTHER ORDERED that Plaintiff's motion to dismiss Defendants' counterclaim for defamation in the form of libel is GRANTED; and
IT IS FURTHER ORDERED that Plaintiff's suit is DISMISSED IN ITS ENTIRETY; and
IT IS FURTHER ORDERED that THIS CASE IS HEREBY CLOSED; and
IT IS FURTHER ORDERED that the Clerk of the Court shall serve copies of this order by regular mail upon the parties to this action.
IT IS SO ORDERED.
NOTES
[1] Defendants state that the relevant time period is between 15 November 1996 and 14 November 1997. (See Mem.Law in Supp. Defs.' Mot.Summ.J. (hereinafter "Defs.' Mem. Law") at 5 (Doc. 34, 9 Aug. 1999).) Their calculations from Plaintiff's time sheet, however, include the period ending 15 November 1996. Presumably, that period represents two weeks of hours worked prior to the twelve-month period. Excluding the thirty-six hours' work recorded for that period, Plaintiff's total recorded hours worked for the twelve-month period before her request for leave was 816.5.
[2] Plaintiff erroneously cited this provision as "29 C.F.R. § 825.301(c)(6)" a provision that does not exist. (See Pl.'s Mem.Law at 7.)
[3] Party name incorrectly cited by the present Plaintiff as "Marwski," see Pl.'s Mem.Law at iv, and as "Marawski." see id. at 10.
[4] Of course, this absolute privilege applies only to damages liability; parties remain subject to prosecution for perjury if they knowingly
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103 F.Supp.2d 850 (2000)
David A. SCHOLL, on behalf of himself and all others similarly situated, Plaintiff,
v.
QUALMED, INC., QualMed Plans for Health, and the United States Office of Personnel Management, Defendants.
No. CIV.A. 99-1744-JJF.
United States District Court, E.D. Pennsylvania.
June 29, 2000.
*851 *852 Kenneth A. Jacobsen, Media, PA, for Plaintiff David A. Scholl.
Stephen A. Madva and Craig E. Ziegler, Montgomery McCracken Walker & Rhoads LLP, Philadelphia, PA, for Defendants QualMed, Inc. and QualMed Plans for Health.
David W. Ogden, Acting Assistant Attorney General, Susan K. Rudy, Assistant Branch Manager and David O. Buchholz,Trial Attorney, of the United States Department of Justice, Washington, DC, for Defendant United States Office of Personnel Management.
MEMORANDUM OPINION
FARNAN, Chief Judge.[1]
Presently before the Court is Defendant United States Office of Personnel Management ("OPM's") Motion to Dismiss (D.I. 14) and Defendants QualMed, Inc. and QualMed Plans for Health's Motion to Dismiss (D.I. 11) in this putative class action. For the reasons set forth below, the Court will grant the applications.
I. Background
Plaintiff David A. Scholl is the beneficiary of a health insurance plan provided by Defendants QualMed, Inc. and QualMed Plans for Health, Inc. (collectively "QualMed"). (D.I. 1, ¶ 11.) Under the plan, the Plaintiff is entitled to coverage for drugs approved by the Food and Drug Administration ("FDA") that have been prescribed by a licensed physician as medically necessary to treat a condition. (D.I. 1, ¶ 22.) Scholl has been diagnosed with erectile dysfunction by his physician. (D.I. 1, ¶ 12.) As part of the treatment, the physician prescribed the drug known as Viagra. (D.I. 1, ¶ 21.) Viagra is an FDA approved medication. (D.I. 1, ¶ 13.)
On May 3 and May 24, 1998, Scholl filled his Viagra prescriptions at local pharmacies. (D.I. 1, ¶ 21.) QualMed, however, denied coverage for the prescriptions. (D.I. 1, ¶ 21.) After Scholl inquired, QualMed informed him that it would make a coverage decision by "early summer" 1998. (D.I. 1, ¶ 27.) Scholl called again in early June, 1998, but QualMed still had not made a decision. (D.I. 1, ¶ 27.) Consequently, Scholl filed a written appeal of the denial of coverage on June 26, 1998. (D.I. 1, ¶ 27.) QualMed responded by letter dated August 3, 1998, denying coverage for the Viagra prescriptions. (D.I. 1, ¶ 27.)
Scholl appealed this decision to OPM in accordance with the administrative review procedures set forth in 5 C.F.R. § 890.105(a)(1). (D.I. 1, ¶ 28.) OPM determined that Viagra "is a covered benefit subject to contractual limitations and co-pays" and so informed Scholl by letter dated January 11, 1999. OPM's letter also told Scholl that OPM had asked QualMed to contact Scholl and resolve the dispute. (D.I. 1, ¶ 29.)
QualMed sent Scholl a letter, also dated January 11, 1999, indicating that it would retroactively apply a new Viagra policy, limiting coverage to four pills per month and limited reimbursement for past prescriptions. (D.I. 1, ¶ 30.) It is Scholl's contention that QualMed adopted this position without regard to the physician's determination as to the appropriate number of pills necessary to treat Scholl's condition. Furthermore, Scholl contends that this decision was limited only to him, thereby not providing any relief for members of the putative class.
Scholl responded by letter dated January 14, 1999 to QualMed (copied to OPM) *853 stating that QualMed's proposed resolution was inadequate. Scholl did not receive a response. (D.I. 1, ¶ 31.) Scholl instituted this action on April 7, 1999.
II. Standard of Review
The purpose of a motion to dismiss is to test the sufficiency of a complaint, not to resolve disputed facts or decide the merits of the case. See Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.1993). Thus, when considering a motion to dismiss, a court must accept as true all allegations in the complaint and must draw all reasonable factual inferences in the light most favorable to the plaintiff. See Neitzke v. Williams, 490 U.S. 319, 326, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989); Piecknick v. Pennsylvania, 36 F.3d 1250, 1255 (3d Cir.1994). However, the court is "not required to accept legal conclusions either alleged or inferred from the pleaded facts." Kost, 1 F.3d at 183 (citation omitted). Dismissal is only appropriate when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claims which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
III. Discussion
A. OPM's Motion to Dismiss
The Complaint asserts the subject matter jurisdiction of the Court under 28 U.S.C. § 1331 because the claim arises under the Federal Employee Health Benefits Act, 5 U.S.C. § 8901 et seq. ("FEHBA"). FEHBA was enacted by Congress to establish a comprehensive program to provide federal employees and retirees with subsidized health care benefits. See Kobleur v. Group Hospitalization & Med. Services, 954 F.2d 705, 709 (11th Cir.1992). Under FEHBA's provisions, OPM is given the responsibility of contracting with private carriers and, critically for the instant dispute, interpreting the plans to determine carrier liability in an individual case. See id. Congress delegated authority to OPM to promulgate regulations implementing FEHBA. See 5 U.S.C.A. § 8913 (West 1996).
OPM regulations require that a plaintiff exhaust administrative remedies as a predicate to bringing a FEHBA action. See 5 C.F.R. § 890.105; Negron v. Patel, 6 F.Supp.2d 366, 372 (E.D.Pa.1998). Recently, the Court of Appeals for the Third Circuit held that failure to exhaust contentions should be reviewed under the standard of Rule 12(b)(6) (failure to state a claim) and not Rule 12(b)(1) (lack of subject matter jurisdiction). See Anjelino v. The New York Times Co., 200 F.3d 73, 87-88 (3d Cir.1999) The Third Circuit described the exhaustion requirement as akin to a statute of limitations defense, where, in certain circumstances, a court may look past the bar under the doctrine of equitable tolling. See id. at 87. The Court of Appeals further described the exhaustion requirement as a practical rule designed to provide courts with the benefit of an agency's expertise, and serve judicial economy by having the administrative agency compile the factual record. Id.
In the instant case, the Court concludes that Scholl has failed to exhaust his administrative remedies. The essence of Scholl's Complaint is:
(1) his doctor issued a prescription for medication covered by his medical insurance;
(2) QualMed refused to reimburse him;
(3) Scholl appealed to QualMed in writing, who again refused;
(4) Scholl then appealed to OPM, who agreed with him that the medication was a covered benefit;
(5) QualMed informed Scholl that it would comply with the decision of OPM. However, it decided only to reimburse him for a certain number of pills, not, as Scholl phrases it, "full coverage;"
*854 (6) Scholl wrote to QualMed and expressed his disagreement with QualMed's decision. This letter was copied to OPM.[2]
In the Court's view, the proper next step was not to bring an action in federal court. Rather, Scholl should have appealed to OPM about what he considered an improper, unilateral limitation on his prescription. In reaching this conclusion, the Court places particular emphasis on the key role played by OPM in the FEHBA regulatory scheme. OPM is not a rubber stamp for the insurance company. QualMed could not provide insurance under FEHBA without agreeing first that it would abide by OPM's interpretation of its insurance plans. See 5 U.S.C.A. § 8902(j) (West 1996) (stating "[e]ach contract under this chapter shall require the carrier to agree to pay for or provide a health service or supply in an individual case if [OPM] finds that the employee ... is entitled thereto under the terms of the contract.") (emphasis added). An appeal by Scholl to OPM at this stage could result in one of two possibilities: an affirmance of QualMed's limitation[3] or a determination that no such limitation applies under the terms of the insurance plan. This type of determination is not only a statutory duty of OPM, but it also is a question well within the agency's expertise. See Anjelino, 200 F.3d at 87.
Furthermore, resort to the administrative process is not futile. First, the Court observes that Scholl's initial recourse to OPM was successful and resulted in an immediate reversal of position by QualMed despite its earlier contention that Viagra was not a covered medication. Thus, Scholl was aware that the statutory and regulatory machinery was working as intended. He was unhappy with the limitation imposed by QualMed, but did not directly appeal the alleged improper limitation. Second, as discussed, QualMed must abide by the determinations of OPM, an independent agency. An insurance carrier who disputed the decision of OPM could violate an express provision of FEHBA and jeopardize its future as a carrier. Accordingly, the Court concludes that the administrative process is not futile and is a necessary predicate to judicial relief.
Because the Court will dismiss this action for failure to exhaust administrative remedies, it will not address the standing issues raised by OPM in its Motion (D.I. 14 at 7.)
B. QualMed Motion to Dismiss (D.I. 2.)
In the Motion, Defendant's QualMed, Inc. and QualMed Plans for Health (collectively "QualMed") argue that Scholl's suit against them should be dismissed for three reasons.
First, QualMed contends that FEHBA regulations prohibit suit against the carrier. See 5 C.F.R. § 890.107. Second, QualMed argues that the only count asserted against it in the complaint is a state law breach of contract claim which is preempted under the terms of FEHBA. Finally, QualMed, Inc. argues separately that it is not a proper party to a breach of contract claim because it is not a party to the applicable contract. (D.I. 2 at 10.)
In response, Scholl contends that the FEHBA regulations barring suit against the carrier do not apply to the facts of this case, that his breach of contract claim is brought under federal common law and not the law of any state, and that dismissal of QualMed, Inc. would be premature. (D.I. 7 at 5-10.)
1. FEHBA Regulations and Suit Against the Carrier
Scholl argues that section 890.107 only prohibits suit against the carrier where the *855 OPM has affirmed the denial of benefits by the carrier. Scholl contends that OPM took his side in the dispute, but QualMed improperly flouted that decision by a unilateral limitation on the number of pills for which Scholl would receive reimbursement[4]. (D.I. 7 at 6.) Scholl makes the policy argument that adoption by the Court of QualMed's position would permit QualMed and all other FEHBA carriers to freely deny benefits expressly provided by the insurance contracts as well as ignore OPM determinations that a claimant was entitled to benefits, without fear of court action. (D.I. 11 at 3.)
The Court's view is that this argument does not recognize the pivotal role OPM plays in the FEHBA scheme. A carrier that "freely denies" express benefits and ignores OPM determinations would risk finding itself out of the federal health insurance business. As stated previously, a carrier that desires to provide health insurance under FEHBA must agree to be bound by the OPM's interpretations of their insurance plans. See 5 U.S.C. § 8902(j). In the Court's view, the regulatory language "[a] legal action to review final action by OPM involving such denial of health benefits must be brought against the OPM and not against the carrier" by implication reveals an understanding that in the event that OPM finds in favor of coverage, it will do battle on behalf of the claimant against a carrier[5] and resort to the courts should not be necessary.
However, the Court need not reach that question, because even if Scholl were correct that a claimant should be entitled to sue a rampaging carrier in view of a helpless OPM, that scenario is not the case here. As discussed, OPM affirmed that Viagra was a covered benefit. Scholl's lawsuit did not permit OPM the opportunity to pass on the extent of that coverage, and accordingly, the Court cannot agree that QualMed is illegally ignoring a final agency determination. Accordingly, the Court concludes that Scholl has failed to state a claim on which relief can be granted against the QualMed Defendants.
2. Federal Common Law Breach of Contract and the Status of QualMed, Inc.
Because the Court will dismiss the action for failure to exhaust, the Court does not reach the question of the claim for breach of contract under federal common law or the propriety of QualMed, Inc. as a party to the suit.
IV. Conclusion
Although the Court will grant the motions to dismiss with prejudice, the parties should understand that the dismissal does not preclude a future lawsuit on the same claim. Furthermore, the dismissal does not preclude litigation on any issue raised in this action other than the question of whether the Plaintiff exhausted his administrative remedies on the facts presented. The decision here is not an adjudication of the merits of the claim, but rather a refusal to hear it on the current record. See 18 James Wm. Moore, et al. Moore's Federal Practice, § 130[b][3] (3d ed.2000) (detailing collateral estoppel and res judicata effects of a dismissal for failure to comply with the prerequisites to a lawsuit).
An appropriate Order will be entered.
NOTES
[1] Honorable Joseph J. Farnan, Jr., Chief Judge, United States District Court for the District of Delaware, sitting by designation.
[2] The January 14, 1999 letter reflects Scholl's dissatisfaction with QualMed's resolution. Although copied to OPM, it contains no language indicating it was intended as an appeal to OPM of the QualMed decision.
[3] Whereupon, Scholl could bring suit in federal court against OPM pursuant to 5 C.F.R. § 890.107(c).
[4] As discussed, the Court's view is that OPM decided that Viagra was a covered benefit, but has not yet addressed the question of the extent of the coverage. As the question of the extent of coverage is the heart of this action, OPM must be afforded the opportunity to render a final decision prior to litigation.
[5] A battle it should win with ease given the provision of section 8902(j).
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754 F. Supp. 2d 707 (2010)
Louis DALOISIO, Plaintiff,
v.
LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant.
Civil Action No. 10-3748.
United States District Court, D. New Jersey.
December 9, 2010.
*708 Law Offices of Jonathan Wheeler, by Jonathan Wheeler, Philadelphia, PA, for Plaintiff.
Jaffe & Asher LLP, by Fred H. Bicknese, New York, NY, for Defendant.
OPINION
IRENAS, Senior District Judge:
This matter appears before the Court on Defendant's Motion to Dismiss the Third Count of the Amended Complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6).[1] Defendant also seeks to dismiss Plaintiff's claims for punitive damages and attorney's fees. For the reasons sets forth below, the Court will grant the Motion as to the Third Count of the Amended Complaint and as to Plaintiff's claim for attorney's fees under the First and Second Count of the Amended Complaint, and deny the Motion as to Plaintiff's claim for punitive damages under the Second Count of the Amended Complaint.
I.
The following facts are alleged in the Complaint. Defendant, Liberty Mutual Fire Insurance Company, issued in its regular course of business a policy of homeowners insurance (the "Policy") to Plaintiff, Louis Daloisio, covering Plaintiff's premises. (Amended Complaint ¶ 4) On April 11, 2008, Plaintiff suffered direct physical loss to the insured premises as a result of a fire. (Id. at 5) The Policy was in full force and effect as of that date. (Id.)
Plaintiff promptly notified Defendant of the loss, and performed all other of his other obligations under the Policy. (Id. at 6) Defendant has refused to pay benefits due and owing under the Policy to Plaintiff. (Id. at 7)
Plaintiff filed the original Complaint on July 9, 2010, in the Superior Court of New Jersey, Burlington County. Defendant removed to federal court on July 26, 2010. Defendant filed its first Motion to Dismiss under Fed.R.Civ.P. 12(b)(6) on September 10, 2010.
Plaintiff filed his Amended Complaint on September 30, 2010. In response, Defendant withdrew its first Motion to Dismiss, and filed the present Motion to Dismiss under Rule 12(b)(6) on November 5, 2010.
The First Count of the Amended Complaint alleges that as a result of Defendant's failure to pay benefits, Plaintiff has suffered loss and damage and has been deprived of the benefits of his bargain with Defendant. (Id. at 8)
The Second Count of the Amended Complaint alleges that Defendant breached its duty of good faith and fair dealing under the Policy, with malicious and reckless disregard for Plaintiff's rights. (Id. at 10)
The Third Count of the Amended Complaint alleges that Defendant "purposely misrepresented the benefits which is purported to offer under" the Policy, and demonstrated by its conduct that Defendant "had never intended to pay the benefits promised" by the Policy. (Id. at 17) *709 Plaintiff further alleges that Defendant misrepresented its "policy, terms and provisions in obtaining justifiable reliance upon such representation for the purpose of financial gain by Defendant," all in violation of the New Jersey Consumer Fraud Act ("CFA"), N.J.S.A. § 56:8-1 et seq. (Amended Complaint ¶ 18)
Plaintiff is seeking counsel fees, costs, prejudgment interest, compensatory damages, punitive damages and such other relief as this Court may deem equitable and just.
II.
Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a complaint "for failure to state a claim upon which relief can be granted." In order to survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must allege facts that raise a right to relief above the speculative level. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007); see also Fed.R.Civ.P. 8(a)(2). While a court must accept as true all allegations in the plaintiff's complaint, and view them in the light most favorable to the plaintiff, Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir.2008), a court is not required to accept sweeping legal conclusions cast in the form of factual allegations, unwarranted inferences, or unsupported conclusions. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). The complaint must state sufficient facts to show that the legal allegations are not simply possible, but plausible. Phillips, 515 F.3d at 234.
III.
The Third Count of the Amended Complaint alleges that Defendant made fraudulent misrepresentations in violations of the CFA when issuing the Policy. Plaintiff seeks punitive damages under the Second Count and Third Count of the Amended Complaint, and attorney's fees under all Counts.
A.
The CFA provides, in pertinent part, that the "act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice. . . ." N.J.S.A. § 56:8-2.
Claims under the CFA are required to meet the particularity requirement of Fed.R.Civ.P. 9(b). See Palmeri v. LG Electronics USA, Inc., 2008 WL 2945985, *3 (D.N.J. July 30, 2008). The purpose of Rule 9(b) is to "place the defendants on notice of the precise misconduct with which they are charged." Seville Industrial Machinery Corp. v. Southmost Machinery Corp., 742 F.2d 786, 791 (3d Cir. 1984). Rule 9(b) "requires plaintiffs to plead the who, what, when, where, and how: the first paragraph of any newspaper story." In re Advanta Corp. Sec. Litig., 180 F.3d 525, 534 (3d Cir.1999)(internal citations and quotations omitted). Besides the conclusory allegation that Defendant made misrepresentations prior to issuing the Policy, Plaintiff has not plead any particular facts that Defendant acted fraudulently with regards to the Policy. Plaintiff has not plead who made the fraudulent misrepresentations, when they made them and what the fraudulent misrepresentations were. The Third Count of the Amended Complaint fails to meet the *710 heightened pleading requirements of Rule 9(b).
Plaintiff may argue that the failure of an insurer to pay an insurance claim can serve as a basis for a claim under the CFA. Such a claim, though, is a claim for breach of contract, and the breach of an enforceable contract does not constitute a violation of the CFA. See Richardson v. Standard Guar. Ins. Co., 371 N.J.Super. 449, 470, 853 A.2d 955 (App.Div.2004) (claims for breach of a contract do not constitute violations of the CFA); Kuhnel v. CNA Ins. Companies, 322 N.J.Super. 568, 581, 731 A.2d 564 (App.Div.1999) (disputes which involve the receipt of benefits, and not the marketing or sale of policies, are beyond the scope of the CFA); Pierzga v. Ohio Cas. Group of Ins. Companies, 208 N.J.Super. 40, 46, 504 A.2d 1200 (App. Div.1986) (a no-pay decision by an insurer is not a legal basis for a CFA claim); Van Holt v. Liberty Mut. Fire Ins. Co., 163 F.3d 161, 168 (3rd Cir.1998) ("The mere denial of insurance benefits to which the plaintiffs believed they were entitled does not comprise an unconscionable commercial practice.").
Because Plaintiff has not met the heightened pleading requirements necessary for a claim under the CFA, the Third Count of the Amended Complaint must be dismissed as a matter of law.
B.
Under New Jersey law, punitive damages may be available when an insured brings suit against his insurer to enforce coverage. Polizzi Meats, Inc. v. Aetna Life & Cas. Co., 931 F. Supp. 328, 335 (D.N.J.1996). The burden to sustain a claim for punitive damages is heavythe insured must show egregious circumstances and wantonly reckless or malicious conduct on the part of the insurer. Id. Whether the Defendant's actions were egregious, wantonly reckless or malicious is a fact-specific inquiry requiring examination of Defendant's intent and knowledge. As such, it is a judgment that is ill-suited for a motion to dismiss. Therefore, the Court will deny Defendant's motion to dismiss Plaintiff's claim for punitive damages without prejudice.
C.
Attorney's fees are not available when an insured brings suit against his insurer to enforce coverage. Eagle Fire Prot. Corp. v. First Indem. of Am. Ins. Co., 145 N.J. 345, 363, 678 A.2d 699 (1996). See also Enright v. Lubow, 215 N.J.Super. 306, 311-312, 521 A.2d 1300 (App.Div. 1987).[2] Because this is an action by an insured against his insurer, attorney's fees are not available to Plaintiff, and the Court will grant Defendant's motion to dismiss Plaintiff's claim for attorney's fees.
IV.
For the reasons set forth herein, the Court will grant Defendant's Motion to Dismiss as to the Third Count of the Amended Complaint and as to Plaintiff's claim for attorney's fees under the First and Second Counts of the Amended Complaint; and deny without prejudice Defendant's Motion to Dismiss as to Plaintiff's claim for punitive damages under the Second Count of the Amended Complaint. However, Plaintiff will be granted leave to file a Motion to Amend the Complaint within 30 days insofar as he wishes to assert claims not considered in this opinion or claims that would not be barred by the *711 legal holdings the Court has made herein. See Phillips v. County of Allegheny, 515 F.3d 224, 245 (3d Cir.2008) (providing that plaintiffs whose claims are subject to a Rule 12(b)(6) dismissal should be given an opportunity to amend their complaints unless amendment would be inequitable or futile). An appropriate Order accompanies this Opinion.
ORDER GRANTING IN PART AND DENYING IN PART DEFEDANT'S MOTION TO DISMISS PURSUANT TO FED.R.CIV.P. 12(b)(6) (DKT. NO. 21) AND GRANTING PLAINTIFF LEAVE TO MOVE TO AMEND THE AMENDED COMPLAINT
This matter having appeared before the Court upon Defendant's Motion to Dismiss under Fed.R.Civ.P. 12(b)(6) (Dkt. No. 21), the Court having considered the submissions of the parties, for the reasons set forth in an Opinion issued by this Court on even date herewith, and for good cause appearing;
IT IS on this 9th day of December, 2010,
ORDERED THAT:
(1) Defendant's Motion to Dismiss is hereby GRANTED with respect to the Third Count of the Amended Complaint and with respect to Plaintiff's claim for attorney's fees under the First and Second Counts of the Amended Complaint, and DENIED WITHOUT PREJDICE with respect to Plaintiff's claim for punitive damages under the Second Count of the Amended Complaint.
(2) Plaintiff is hereby GRANTED LEAVE to file a Motion to Amend the Amended Complaint within 30 days of the date of this order. The motion shall have attached to it the proposed Second Amended Complaint in its entirety.
NOTES
[1] The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332.
[2] Attorney's fees are available under New Jersey Court Rule 4:42-9(a)(6) in "those situations in which an insured was constrained to bring suit to enforce the provisions of a liability or indemnity policy whereby the carrier was obliged to defend and indemnify." Kistler v. New Jersey Mfrs. Ins. Co., 172 N.J.Super. 324, 331, 411 A.2d 1175 (App.Div. 1980).
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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/2469856/
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610 F. Supp. 2d 1247 (2009)
Timothy McCOLLOUGH, Plaintiff,
v.
JOHNSON, RODENBERG & LAUINGER, Defendant.
No. CV-07-166-BLG-CSO.
United States District Court, D. Montana, Billings Division.
January 8, 2009.
*1249 John C. Heenan, Heenan Law Firm, Billings, MT, for Plaintiff.
Fred Simpson, John E. Bohyer, Bohyer Simpson & Tranel, Missoula, MT, for Defendant.
ORDER
CAROLYN S. OSTBY, United States Magistrate Judge.
Plaintiff Timothy McCollough ("McCollough") alleges that Defendant Johnson, Rodenberg & Lauinger ("JRL") violated federal and Montana law in its debt collection activities against him. Pending before the Court are:
(1) JRL's Motion for Partial Summary Judgment (Court's Doc. No. 65),
(2) McCollough's Motion for Partial Summary Judgment on JRL's bona fide error defense (Court's Doc. No. 69); and
(3) Portions of McCollough's earlier Motion for Partial Summary Judgment (Court's Doc. No. 36) on which the Court previously reserved decision. See Order (Court's Doc. No. 75) at 10-14.
I. BACKGROUND
The parties and Court are familiar with the factual background, which is set forth in the record and summarized in the Court's Order of November 21, 2008. Court's Doc. No. 75. In that Order, the Court found the following facts to be established under Fed.R.Civ.P. 56(d)(1):
(1) On April 17, 2007, JRL filed a timebarred lawsuit against McCollough.
(2) By August 6, 2007, JRL had information from its client demonstrating that the lawsuit was time-barred.
(3) JRL prosecuted the time-barred lawsuit against McCollough until December 7, 2007.
Court's Doc. No. 75 at 14. Additional facts are repeated below as necessary to explain the Court's opinion.
II. PARTIES' ARGUMENTS
A. JRL's Motion
JRL moves for partial summary judgment on four issues: (1) that service of discovery during a lawsuit does not violate the FDCPA; (2) that there is no businessconsumer relationship between JRL and McCollough for purposes of Montana's Unfair Trade Practices and Consumer Protection Act ("UTPA/CPA"); (3) that McCollough's malicious prosecution claim fails; and (4), that no abuse of process occurred. Court's Doc. No. 65.
JRL argues, first, that serving requests for admission does not violate the FDCPA because it does not involve a false or misleading representation. Br. in Support of MSJ (Court's Doc. No. 66) at 6-7. McCollough was free to deny any inaccurate requests for admission. Id. at 7. The discovery's purpose was simply to obtain information. Id. at 8.
Second, JRL argues it did not violate the UTPA/CPA because McCollough never purchased goods or services from JRL, *1250 and thus is not a consumer as defined by that act. Id. at 8-10.
Third, JRL argues that McCollough cannot establish two elements of a malicious prosecution claim. McCollough cannot show lack of probable cause because JRL had a reasonable belief, when it sued McCollough, in the truth of its information indicating McCollough owed a debt within the statute of limitations. Id. at 10-14. McCollough also cannot show that JRL was actuated by malice, because JRL's only intent was to collect a credit card debt for its client. Id. at 14-15.
Finally, JRL argues that McCollough cannot establish an abuse of process claim because he cannot show that JRL had an ulterior purpose or committed a willful act in the use of process not proper in the regular conduct of the proceeding. Id. at 15-19.
McCollough responds, first, that the breadth of the FDCPA's general prohibition on deceptive or unfair collection practices proscribes JRL's use of false requests for admission in this specific context. Response to Defs MSJ (Court's Doc. No. 76) at 3-8.
Second, McCollough argues that under the UTPA/CPA, the consumer need not purchase goods or services from the defendant, and that two courts of this district have recently rejected the same argument JRL makes with respect to this act. Id. at 8-10.
Third, McCollough responds that his malicious prosecution claim is well-stated. JRL did not have probable cause to initiate its lawsuit because CACV's information was unverified and its accuracy was specifically disclaimed. Id. at 11-15. JRL also continued to prosecute the lawsuit after CACV retracted its claim that McCollough made a payment on the debt in 2004. Id. at 15. JRL's conduct was malicious because JRL showed deliberate indifference to the high probability of injury to McCollough. Id. at 15-16.
Finally, McCollough argues that JRL's lawsuit against him, and JRL's acts in furtherance of that lawsuit, provide sufficient fact issues to avoid summary judgment on his abuse of process claim. Id. at 17-20.
B. McCollough's Motion
McCollough argues that, under the Ninth Circuit's recent decision on the bona fide error defense, Reichert v. National Credit Systems, Inc., 531 F.3d 1002, 1007 (9th Cir.2008), JRL must show both: (1) that it reasonably relied on its client; and (2) that it maintained reasonable preventive measures to avoid FDCPA violations. Br. in Support of Pl's MSJ (Court's Doc. No. 70) at 5-6. JRL can show neither.
McCollough first asserts that JRL did not reasonably rely on CACV's information. CACV disclaimed any warranty as to accuracy. Id. at 6-7. Second, JRL's only procedures to avoid FDCPA violations are checking that the unsubstantiated information on its computers match up with the information asserted on the complaint to be filed. Id. at 8-9.
JRL responds that Reichert requires a showing of procedures used by the debt collector which are designed to catch the particular error at issue. JRL's Response Opposing Pl's MSJ (Court's Doc. No. 87) at 10. Thus, the focus is on JRL's procedures, not whether JRL could rely on information from CACV. Id. JRL argues that the FDCPA does not require an independent investigation of the debt referred for collection. Id. at 10-13.
JRL argues it is not liable for filing a time-barred lawsuit because its pre-litigation procedures include several steps designed to prevent filing time-barred lawsuits. Id. at 13-15. Additionally, JRL is *1251 not liable for maintaining a time-barred lawsuit. JRL had procedures in place to catch such errors, and there is at least a question of fact as to whether JRL should have known its lawsuit against McCollough was time-barred in August 2007. Id. at 15-18.
III. SUMMARY JUDGMENT STANDARD
Summary judgment "should be rendered 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). Material facts are those which may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id.
The party moving for summary judgment bears the initial burden of identifying those portions of the pleadings, discovery, and affidavits that 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). Where the moving party will have the burden of proof on an issue at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. But on an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out "that there is an absence of evidence to support the nonmoving party's case." Id.
Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, "set out specific facts showing a genuine issue for trial." Fed. R.Civ.P. 56(e). If the nonmoving party fails to make this showing, "the moving party is entitled to judgment as a matter of law." Celotex Corp., 477 U.S. at 323, 106 S. Ct. 2548.
IV. DISCUSSION
The Court first addresses below the portions of JRL's motion concerning state law, and then addresses the remainder of JRL's motion and McCollough's motion, which concern the FDCPA.
A. JRL's Motion on McCollough's State Law Claims
1. Montana UTPA/CPA
The Montana UTPA/CPA prohibits "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce[.]" Mont.Code Ann. § 30-14-103. The UTPA/CPA defines "consumer" as "a person who purchases or leases goods, services, real property, or information primarily for personal, family, or household purposes." § 30-14-102(1). It defines "trade" and "commerce" as:
the advertising, offering for sale, sale, or distribution of any services, any property, tangible or intangible, real, personal, or mixed, or any other article, commodity, or thing of value, wherever located, and includes any trade or commerce directly or indirectly affecting the people of this state.
§ 30-14-102(8).
The Montana Supreme Court has stated that statutes like the UTPA/CPA have been interpreted as "broad in scope and flexible in application so as to respond to human inventiveness." Baird v. Norwest Bank, 255 Mont. 317, 326, 843 P.2d 327, 333 (1993) (citing In re Smith, 866 F.2d 576 (3rd Cir.1989)). Accordingly, Montana's statute "should be liberally construed *1252 with a view to effect its object and to promote justice." Id. at 327, 843 P.2d 327, 843 P.2d at 333. In Baird, the court relied on these principles to find that the UTPA/CPA applied to the lending and collecting of consumer loans by banks. Id. at 328, 843 P.2d at 334.
Two recent decisions of courts in this District have held that the UTPA/CPA applies to debt collection. In Kunda v. CBB Collections, Inc., the Kundas sued CBB over actions it took, as the assignee of Billings Clinic, to collect a debt for medical services provided to the Kundas. CV-08-44-BLG-RFC, Order of August 15, 2008 (Court's Doc. No. 6) at 2, 5. Chief Judge Cebull denied CBB's motion to dismiss, finding that the UTPA/CPA could apply to debt collection. Id. (citing Baird).
This case differs from Kunda because JRL is not an assignee of McCollough's alleged debt. In Cole v. Portfolio Recovery Associates, LLC, however, the court denied JRL's motion to dismiss a UTPA/CPA claim without mention of JRL being an assignee of the debt. CV-08-36-GFRKS, Order of September 12, 2008 (Court's Doc. No. 37) at 4-5. Judge Strong found Cole's allegations that JRL was "in the business of debt collection as part of its legal practice and includes litigation as part of its debt collection business," at the pleading stage placed JRL "well within" the UTPA/CPA. Id. at 4-5.
The court rulings from this District are persuasive. The Court recognizes that both Kunda and Cole were decided on motions to dismiss, where the plaintiff has a lower burden than in opposing this summary judgment motion. The burden of proof, however, does not affect the threshold legal question of whether the UTPA/CPA applies to debt collection. Likewise, though the debt collector was an assignee of the debt in Kunda, the critical fact was that the debt collector engaged in the collection of debt, rather than any contractual relationship. Finally, contrary to JRL's contention, the liberal construction given the UTPA/CPA does not require McCollough to have a consumer relationship with JRL. See also Gibbons v. J.Nuckolls, Inc., 216 S.W.3d 667, 670 n. 13 (Mo.2007) (en banc) ("Privity of contract is not required under similar [consumer protection] statutes of numerous other states"); National Consumer Law Center, Unfair and Deceptive Acts and Practices Manual § 2.2.3.2 (6th ed. 2004) ("One is a consumer not by one's relation to the defendants, but by the terms of the original transaction.").
Under the Montana law, JRL is not entitled to a ruling that its debt collection activities were outside the scope of Montana's UTPA/CPA. JRL's motion will be denied on this issue.
2. Malicious Prosecution
A plaintiff in a civil action for malicious prosecution must prove six elements:
(1) a judicial proceeding was commenced and prosecuted against the plaintiff;
(2) the defendant was responsible for instigating, prosecuting or continuing such proceeding;
(3) there was a lack of probable cause for the defendant's acts;
(4) the defendant was actuated by malice;
(5) the judicial proceeding terminated favorably for the plaintiff; and
(6) the plaintiff suffered damage.
Hughes v. Lynch, 2007 MT 177, ¶ 12, 338 Mont. 214, ¶ 12, 164 P.3d 913, ¶ 12.
JRL argues that McCollough has not shown sufficient evidence on elements (3) and (4) to defeat summary judgment. The Court concludes that he has.
*1253 a. Probable Cause
In a civil suit, a party has probable cause to initiate, continue, or procure, civil proceedings against another "if [the party] reasonably believes in the existence of the facts upon which the claim is based, and... correctly or reasonably believes that under those facts the claim may be valid under the applicable law[.]" Id., ¶ 16 (quoting Restatement (Second) of Torts § 675 (1977)).
Probable cause is an objective standard, determined "on the basis of the facts known to the party initiating the legal action." Plouffe v. Mont. Dept. of Health & Human Services, 2002 MT 64, ¶ 18, 309 Mont. 184, ¶ 18, 45 P.3d 10, ¶ 18. Thus, the existence of probable cause "must be submitted to the jury for resolution when direct and circumstantial evidence related to the defendant's knowledge is susceptible to different conclusions by reasonable persons." Id. (citing Reece v. Pierce Flooring (1981), 194 Mont. 91, 96, 634 P.2d 640, 643). "Only when no evidentiary conflict exists and uncontroverted evidence admits only one conclusion does the existence of probable cause become a question of law." Id.
In Plouffe, the state's complaint in the underlying action alleged that Plouffe violated water quality and public swimming pool statutes by failing to submit water samples for testing, illegal water discharge, the pool's failure to meet bacteriological standards on seven dates, and other violations. Plouffe, ¶ 21. The state eventually dismissed the complaint. Id., ¶ 9. The Montana Supreme Court reversed the district court's determination that probable cause for the state's prosecution existed as a matter of law. Id., ¶ 26. The court reversed even though Plouffe admitted that he did not submit all water samples within required time frames and he refused to obtain wastewater discharge permits. Id., ¶ 25.
Here, there was a paucity of information supporting JRL's lawsuit against McCollough. CACV expressly made "no warranty as to the accuracy or validity of the data provided ..." and required JRL to determine its "legal and ethical ability to collect" the account. Court's Doc. No. 39-5. These facts could lead a reasonable person to conclude that JRL lacked probable cause to initiate legal action against McCollough. Accordingly, JRL has failed to show an absence of evidence supporting McCollough's case in this respect. Whether probable cause existed is a fact question for the jury.
b. Defendant Actuated by Malice
Under Montana malicious prosecution law, malice includes: (a) "a wish to vex, annoy, or injure another person or an intent to do a wrongful act," or (b) when a "defendant has knowledge of facts or intentionally disregards facts that create a high probability of injury to the plaintiff and ... deliberately proceeds to act in conscious or intentional disregard of the high probability of injury to the plaintiff; or ... deliberately proceeds to act with indifference to the high probability of injury to the plaintiff." Plouffe, ¶¶ 28-29.
In Plouffe, based on the standards above, the court concluded that "the plaintiff is not required to prove the subjective intent of the defendant to establish a prima facie case for malicious prosecution." Id., ¶ 30. Additionally, there is a rebuttable presumption of malice if the jury finds the absence of probable cause. Id., ¶ 31. Thus, Plouffe was entitled to trial on the merits of the malice allegations. Id.
McCollough has cited sufficient evidence to defeat summary judgment on malice. Under the Plouffe standard, there is sufficient evidence to establish a fact question as to whether JRL knew of facts or intentionally disregarded facts creating a high *1254 possibility of injury to McCollough and nonetheless deliberately acted with conscious or intentional disregard of, or indifference to, the high probability of injury to McCollough. Whether JRL was actuated by malice is a fact question for the jury.
3. Abuse of Process
Under Montana law, the elements of an abuse of process claim are "[1] an ulterior purpose and [2] a willful act in the use of process not proper in the regular conduct of the proceeding." Seipel v. Olympic Coast Investments, 2008 MT 237, ¶ 20, 344 Mont. 415, ¶ 20, 188 P.3d 1027, ¶ 20. In Seipel, the Montana Supreme Court concluded that a defendant was not entitled to summary judgment where there was evidence that the defendant had no valid claim in the underlying lawsuit, knew it, and filed the action anyway. Id., ¶ 25. The court also rejected the defendant's argument that there must be evidence the defendant used process to coerce the plaintiff to do a collateral thing the plaintiff could not legally and regularly be compelled to do. Id., ¶ 24.
Here, JRL's primary argument is that there is no evidence it filed suit to compel McCollough to do some collateral thing which could not be obtained through ordinary legal proceedings. Though Montana law has required this showing, see Hughes, ¶ 21, the Montana Supreme Court most recently squarely rejected this argument in a case where the underlying claim was invalid, and apparently limited the "collateral" coercion requirement to cases where the underlying lawsuit was valid. Seipel, ¶¶ 24-25; ¶ 33 (Warner, J. concurring and dissenting).
Here, it is uncontroverted that JRL filed and prosecuted a time-barred lawsuit, including service of discovery requests upon the pro se defendant after JRL's own file clearly indicated that the suit was time-barred. There is evidence that JRL knew its claim was invalid yet continued to prosecute the case. Court's Doc. No. 75 at 3. JRL has not shown an absence of evidence supporting McCollough's abuse of process claim. JRL's motion will be denied in this regard.
B. The FDCPA Motions
The FDCPA was enacted to "eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e). Under the FDCPA, "[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." Id. at § 1692e. Additionally, "[a] debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt." Id. at § 1692f.
Under the FDCPA, a debt collector's behavior is measured according to an objective "least sophisticated debtor" standard. Clark v. Capital Credit & Collection Services, Inc., 460 F.3d 1162, 1171 (9th Cir.2006). This standard "ensures that the FDCPA protects all consumers, the gullible as well as the shrewd ... the ignorant, the unthinking and the credulous." Id. (quoting Clomon v. Jackson, 988 F.2d 1314, 1318-19 (2d Cir.1993)).
1. JRL's Motion On Serving Requests for Admission
The Court reserved ruling on McCollough's partial summary judgment motion, that JRL's serving requests for admission containing false information violated the FDCPA, until JRL's related motion was fully briefed. Court's Doc. No. 75 at 15. As JRL argues, this Court cannot say that serving requests for admission in *1255 the course of a debt-collection lawsuit is a per se FDCPA violation. The Court concludes, however, that JRL's serving of the requests for admission under the facts of this case violated the FDCPA as a matter of law.
The FDCPA broadly limits false, deceptive, misleading, unfair, or unconscionable means of debt collection. 15 U.S.C. §§ 1692e, f. The FDCPA is broad in scope, and proscribes improper debt collection conduct even if such conduct is not specifically enumerated. See Clark, 460 F.3d at 1170 n. 4 (9th Cir.2006) (list of prohibited practices is non-exhaustive); Senate Report No. 95-382 (bill prohibits in general terms unfair or deceptive collection practices to allow courts to apply the statute to improper conduct not specifically addressed).
In Heintz v. Jenkins, 514 U.S. 291, 299, 115 S. Ct. 1489, 131 L. Ed. 2d 395 (1995), the Supreme Court held that the FDCPA applies to lawyers regularly engaging in debt collection activities, "even when that activity consists of litigation." The Court rejected Heintz's argument that litigation activities should be exempted. The Court reasoned that, "[i]n ordinary English, a lawyer who regularly tries to obtain payment of consumer debts through legal proceedings is a lawyer who regularly `attempts' to `collect' those consumer debts." Id. at 294, 115 S. Ct. 1489. The Court also rejected Heintz's position that applying the FDCPA to litigation activities would cause anomalous results, such as any lawyer who lost a claim against a debtor being automatically liable under the FDCPA. Id. at 295, 115 S. Ct. 1489. The Court noted that the bona fide error defense could apply, and also that losing a lawsuit would not, "by itself, make the bringing of it an `action that cannot legally be taken.'" Id. at 296, 115 S. Ct. 1489 (quoting 15 U.S.C. § 1692e(5)).
Heintz is instructive here. JRL's argument that requests for admission are not a factual representation focuses only on the word "representation" in § 1692e and ignores the word "means". Thus, even if JRL is correct that a request for admission is not a "representation", a "representation" is only one prohibited debt collection practice.[1] The purpose of the FDCPA is "to eliminate abusive debt collection practices[.]" § 1692(e). The FDCPA proscribes "unfair or unconscionable means to collect or attempt to collect any debt." § 1692(f). There can be little doubt that JRL's use of requests for admission, in this factual context, falls within the plain meaning of abusive, unfair, or unconscionable. Approximately three months after JRL's own file reflected that McCollough had not made a payment on the account in 2004 (and thus that the claim was timebarred), JRL asked McCollough to admit the following: "Defendant Tim M. Mccollough (sic) made a payment on said Chase Manhattan Bank credit card account on or about June 30, 2004 in the amount of $75.00." Req. for Admission 21, Court's Doc. No. 67-8. And after McCollough filed his pro se answer in June 2007, explaining his defense that the statute of limitations had expired, the October 2007 request for admission 14 asked him to admit: "There are no facts upon which *1256 Defendant Tim M. Mccollough (sic) relies as a basis for any defense in this action." Id. Charles Dendy admits that he reviewed the answer when it came into JRL's office. See Statement of Genuine Issues # 2, Court's Doc. No. 88, at Exhibit C (C. Dendy Depo. p. 34, ll 14-16). The inescapable conclusion is that Mr. Dendy asked a pro se defendant to admit false information. He either did so knowingly, or neglected to review his minimal file before signing the requests. He served the requests with no ostensible reason to believe that the defendant would understand their import. The requests for admission appear to be designed to conclusively establish each element of JRL's case against McCollough and to use the power of the judicial process against a pro se defendant to collect a time-barred debt. This conduct is abusive, unfair and unconscionable. The Court's conclusion in this regard is strengthened when one considers that JRL's behavior is measured by the objective "least sophisticated debtor" standard.[2]
JRL's contention, that legitimate discovery will be punished if requests for admission are held to violate the FDCPA, is unpersuasive. The Court's conclusion does not prevent discovery in a valid lawsuit, or even well-grounded discovery in an invalid one. Also, as the Supreme Court noted in Heintz, a debt collector can rely on the bona fide error defense, if applicable. JRL neither asserts that its lawsuit against McCollough was valid, nor that the bona fide error defense applies to the requests for admission it served.
JRL's contention that the requests for admission were a legitimate attempt at discovery is unpersuasive. Requests for admission numbers 1 and 2 refer to "attached" documents (Court's Doc. No. 39-7), but under oath McCollough states that no documents were attached. Court's Doc. No. 67-10. Indeed, JRL could not have attached documents concerning the debt because it had no such documents in its possession.[3] Obviously, McCollough could not admit or deny these incomplete requests, without seeing the documents referenced.
There are no material facts in dispute, and no reasonable fact-finder could find *1257 that JRL's requests for admission did not violate the FDCPA. Based on the undisputed facts above, and the plain language of the FDCPA, the Court concludes as a matter of law that JRL's requests for admission served on McCollough were an abusive, unfair, and unconscionable means to attempt to collect a time-barred debt, and thus an FDCPA violation. McCollough's motion will be granted in this respect, and JRL's motion denied.
2. McCollough's Motion On the Bona Fide Error Defense
The FDCPA imposes strict liability on debt collectors: "A plaintiff need not prove an error was intentional." Reichert v. National Credit Systems, Inc., 531 F.3d 1002, 1004 (9th Cir.2008). The FDCPA's bona fide error defense provides a narrow exception to this strict liability:
A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of the evidence that the violation was not intentional and resulted from bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.
15 U.S.C. § 1692k(c). "The bona fide error defense is an affirmative defense for which the debt collector has the burden of proof." Reichert v. National Credit Systems, Inc., 531 F.3d 1002, 1006 (9th Cir. 2008).
a. Filing a Time-barred Lawsuit
As the Court recognized in its earlier order, a debt collector violates the FDCPA by using the courts to attempt to collect a time-barred debt. See Martinez v. Albuquerque Collection Services, 867 F. Supp. 1495, 1506 (D.N.M.1994)("A collection agency's attempts to collect on time-barred accounts violate the FDCPA."); Beattie v. D.M. Collections, Inc., 754 F. Supp. 383, 393 (D.Del.1991)("[T]he threatening of a lawsuit which the debt collector knows or should know is unavailable or unwinnable by reason of a legal bar such as the statute of limitations is the kind of abusive practice the FDCPA was intended to eliminate."). See also Kimber v. Federal Financial Corp., 668 F. Supp. 1480, 1487 (M.D.Ala.1987). In Thompson v. D.A.N. Joint Venture III, L.P., 2007 WL 1625926, *2 (M.D.Ala.), the court held that the defendant's failure to move to set aside the underlying state court default judgment after a summary judgment ruling that the underlying state court action violated the FDCPA because it was time-barred constituted an additional FDCPA violation.
Here, the Court determined that JRL, on April 17, 2007, filed a time-barred lawsuit against McCollough, and that by August 6, 2007, JRL had information from CACV demonstrating that the lawsuit was time-barred, but nonetheless prosecuted the time-barred lawsuit until December 7, 2007. JRL is strictly liable under the FDCPA for filing a time-barred lawsuit, and for maintaining a time-barred lawsuit, unless it can prevail on its bona fide error defense. The issue is whether there are genuine issues of material fact and whether McCollough is entitled to judgment as a matter of law on the bona fide error defense.
The bona fide error defense requires the defendant to prove that it maintains "reasonable preventative procedures." Reichert, 531 F.3d at 1006. The bona fide error defense does not protect a debt collector whose reliance on its creditor's representations is unreasonable. Id. In Reichert, the Ninth Circuit found that the debt collector failed to establish the bona fide error defense where the debt collector, after erroneously adding an attorney's fee to the debt based on the creditor's information, argued that the creditor had never previously given incorrect information. Id. at 1006-07. The court stated:
*1258 [The debt collector] did not give reason to justify its reliance on the creditor for the erroneous premise that the attorney's fee could properly be added. As a result, [the debt collector] failed to carry its burden of establishing that its reliance upon the creditor was reasonable.
Id. at 1007.
In Reichert the Ninth Circuit cited approvingly the procedures maintained by a debt collector as outlined in Jenkins v. Heintz, 124 F.3d 824 (7th Cir.1997). These "elaborate procedures" included:
a requirement that the creditor verify under oath that each charge was accurate, as well as `the publication of an in-house fair debt compliance manual, updated regularly and supplied to each firm employee; training seminars for firm employees collecting consumer debts; and an eight-step, highly detailed pre-litigation review process to ensure accuracy and to review the work of firm employees to avoid violating the Act.'
Reichert, 531 F.3d at 1006 (citing Jenkins, 124 F.3d at 834).
McCollough must establish the absence of a genuine issue of material fact by pointing out "an absence of evidence" supporting JRL's case. Celotex Corp., 477 U.S. at 323, 106 S. Ct. 2548. McCollough argues that JRL has failed to show it reasonably relied on CACV's information. CACV's contract with JRL states that CACV makes "no warranty as to the accuracy and validity of the data," provided to JRL, and that JRL has the responsibility "to determine [JRL's] legal and ethical ability to collect these accounts." Court's Doc. No. 39, Ex. 4. JRL's file reflects that McCollough's account was part of a "collect America Batch that [JRL] was having problems with." Court's Doc. No. 39, Ex. 5 at 2.
McCollough also argues that JRL has not shown reasonable procedures to avoid the error in question. JRL received no documentation from CACV prior to filing suit. Court's Doc. No. 39, ¶ 8; Ex. 5. McCollough asserts JRL's procedures are merely "spell-checking" of the undocumented information from CACV.
The Court concludes that McCollough has met his burden to show an absence of facts supporting JRL's bona fide error defense. The burden thus shifts to JRL to set out specific facts showing a genuine issue for trial. Fed.R.Civ.P. 56(e).
JRL sets forth the following facts. JRL receives from CACV electronic information including charge-off amount, last payment date, credit card number, name of original creditor, the name, address and phone number of the debtor, interest date, and sometimes the amount of last payment. JRL Statement of Genuine Issues, Court's Doc. No. 51, ¶ 7. JRL does not require that CACV provide any particular documents before JRL files suit. Id., ¶ 8. JRL has the following procedures to avoid filing a time-barred lawsuit. The staff person setting up accounts calculates the statute of limitations based on last payment date. Id., ¶ 9. If there is a potential statute of limitations problem, the staff person will diary the file for the account manager's review. Id. The file then goes to JRL attorney Lisa Lauinger, who reviews the information from CACV, checks that information against the information in the file, and makes sure the statute of limitations is accurately calculated. Id. Before signing a complaint, JRL attorney Charles Dendy checks that a demand letter has been sent, for any FDCPA dispute, to make sure the case caption information is correct, that the creditor name is correct, that the complaint is within the statute of limitations, and that account number and balance information in the complaint are correct and match the information from CACV. Id., ¶¶ 10-11.
*1259 JRL does not maintain documents on protocol to be followed to avoid FDCPA violations. Id. ¶ 12. JRL does not indicate that either its attorneys or its staff had procedural manuals to follow, or any regularly scheduled training on proper debt collection practices. It indicates only that its lawyers "acquire and maintain familiarity with the FDCPA through treatises, case research, continuing legal education seminars, conferences and the practice of law." Id.
JRL has failed to set out specific facts showing a genuine issue for trial. JRL sets forth procedures that consist only of ensuring that the information in JRL's files and pleadings is consistent with the information supplied electronically by CACV. JRL's reliance on CACV's information is entire. JRL did not seek documentation of McCollough's debt until McCollough obtained a lawyer, months after JRL filed suit, months after McCollough asserted the statute of limitations in his answer, weeks after it served discovery on McCollough. See Order (Court's Doc. No. 75) at 3-4. JRL did less than did the debt collector in Reichert. There, the debt-collector stated the creditor's information had been accurate in the past. Here, JRL makes no such assertion. CACV expressly disclaimed the accuracy of its information, and JRL knew McCollough's alleged debt was from a problematic batch. JRL simply had no basis upon which is could reasonably rely on the information provided by CACV.
Additionally, JRL's procedures are not reasonably adapted to avoid the specific error in question here. The contrast with the procedures cited in Jenkins is stark. JRL took no steps to assure accurate information from its client. It reviewed no documentation of the debt or of the payments allegedly made by McCollough. JRL had no formal written procedures to avoid FDCPA violations. The Court thus must conclude that McCollough is entitled to summary judgment on this issue.
b. Maintaining a Time-barred Lawsuit
McCollough also asserts that he is entitled to partial summary judgment because JRL maintained the lawsuit after receiving facts from its client that proved the suit was time-barred. While reserving ruling on this issue, the Court previously stated:
A JRL employee was put on actual notice, on August 6, 2007, that McCollough had not made a payment on his account in 2004 as the client had previously indicated. Pl's SUF, Ex. 1 at 8-9 (Grace Lauinger Depo). Nonetheless, JRL continued to prosecute its lawsuit against McCollough for four months. JRL does not address these facts in its brief.
Maintaining a time-barred lawsuit has been held to violate the FDCPA. Thompson, 2007 WL 1625926, * 2. In Thompson, the Court noted that the bona fide error defense is not available where there is actual notice of an FDCPA violation and the FDCPA violation continues. The uncontroverted evidence presented to the Court indicates that Grace Lauinger, a JRL employee, had actual notice that the lawsuit was time-barred. She does not remember whether she passed this information along to Mr. Dendy, the attorney of record in the case. Nonetheless, there is no doubt that JRL had knowledge in August 2007 that the action was timebarred. Knowledge of the employee can likely be imputed to the lawyers in the firm. See Rest. 2nd Agency § 9.
A debt collector answers for its employees' violations of the FDCPA. The principles of vicarious liability provide an incentive for the debt collection agency to properly instruct and train its employees to avoid actions that might impose liability. Fox v. Citicorp Credit *1260 Services, Inc., 15 F.3d 1507, 1516 (9th Cir.1994); Pettit v. Retrieval Masters Creditor Bureau, Inc., 211 F.3d 1057, 1059 (7th Cir.2000). Furthermore, no evidence has been presented to the Court regarding the maintenance of any procedures by JRL to ensure that its employees properly handle such information received from a client. The problem is magnified because JRL's own file reflects that two months earlier, in June 2007, McCollough had filed an answer stating that he had not had any dealings with any credit card company for over 8½ years. Pl's SUF, Court's Doc. No. 39-6 at 4. No evidence has been offered as to JRL's procedures to investigate this allegation. It is JRL's burden to come forward with evidence that the violation can be excused. See Reichert v. National Credit Systems, Inc., 531 F.3d 1002, 1004 (9th Cir.2008).
Court's Doc. No. 75 at 12-14.
Based on the facts outlined in the preceding section, McCollough has met his burden to show an absence of evidence to support JRL's case in this regard.
Attempting to meet its burden to show a genuine issue for trial, JRL sets forth that employee Grace Lauinger reviewed McCollough's answer and forwarded a copy to Charles Dendy who reviewed it. Court's Doc. No. 88, ¶ 4. On August 6, 2007, CACV informed Grace Lauinger that McCollough had not made a 2004 payment on his account as previously reported. Grace Lauinger does not recall if she relayed this information to Dendy, but she did scan the e-mail into a paperless file accessible to Dendy. Id., ¶ 5.
The Court concludes that JRL has failed to meet its burden of proving a bona fide error in maintaining the lawsuit. JRL's did not implement procedures reasonably adapted to avoid maintaining a timebarred suit. Rather, the record indicates JRL's FDCPA violation resulted from systemic problems. JRL had numerous warnings: McCollough's alleged debt was part of a problematic batch; McCollough asserted the statute of limitations in his answer on June 13, 2007 (Court's Doc. No. 39, ¶ 9); on August 6, 2007, CACV e-mailed JRL, informing it that McCollough had not made a payment on his account in 2004, and this e-mail was saved in McCollough's file at JRL. Despite these numerous red flags, JRL did not seek to verify the debt through documentation until December 7, 2007, shortly after McCollough retained counsel. Court's Doc. No. 39-3 at 6-7. This indicates strongly that JRL lacks procedures reasonably adapted to avoid the error in question. The procedures JRL cites which directly pertain to the problem of maintaining a time-barred lawsuit consist primarily of rechecking unverified information for consistency; it had no process for verifying that the information was accurate. As McCollough's case illustrates, this proofreading could not address or prevent this FDCPA violation. McCollough is entitled to summary judgment on this issue. See Clomon v. Jackson, 988 F.2d 1314, 1317-18 (2d Cir.1993) (affirming summary judgment against lawyer who did not review each debtor's file before misleading collection letters were sent).
V. CONCLUSION
Based on the foregoing, IT IS ODERED that JRL's motion for partial summary judgment (Court's Doc. No. 65) is DENIED in its entirety. McCollough's motion for summary judgment on the bona fide error defense (Court's Doc. No. 69) is GRANTED.
IT IS FURTHER ORDERED that those portions of McCollough's motion for partial summary judgment on which ruling was reserved (Court's Doc. No. 36), are now hereby GRANTED as to FDCPA liability *1261 under Count I of the Amended Complaint.
NOTES
[1] JRL's argument implies that, under Mont. R.Civ.P. 36, an attorney may serve a written request "for the admission ... of the truth" of matters the attorney knows to be false. But Rule 36 must be read in conjunction with Rule 11 which provides that "the signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; [and] that to the best of the signer's knowledge, information, belief formed after reasonable inquiry it is well grounded in fact...." In other words, an attorney may not file a request for admission unless that attorney, after reasonable inquiry, believes that it is well grounded in fact.
[2] JRL, replying to McCollough's arguments, correctly notes that the Preamble to the Montana Rules of Professional Conduct states that those rules are not designed to be a basis for civil liability. Court's Doc. No. 89 at 3. The preamble also states:
A lawyer shall always pursue the truth. [¶ 1]
* * *
A lawyer, as a member of the legal profession, is ... an officer of the legal system ... having special responsibility for the quality of justice. [¶ 2]
* * *
A lawyer should use the law's procedures only for legitimate purposes and not to harass or intimidate others. A lawyer should demonstrate respect for the legal system and for those who serve it, including judges, other lawyers and public officials. [¶ 6]
* * *
A lawyer should be mindful of deficiencies in the administration of justice and the fact that the poor, and sometimes persons who are not poor, cannot afford adequate legal assistance. [¶ 7]
* * *
Trust in the integrity of the system and those who operate it is a basic necessity of the rule of law; accordingly truthfulness must be the hallmark of the legal profession, and the stock-in-trade of all lawyers. [¶ 14]
[3] JRL had no cardmember agreement for McCollough in its file and it had never been represented to JRL that the agreement existed in anyone else's file. Dendy Depo. at p. 32, ll. 18-24. When JRL sought documents confirming the McCollough debt, by issuing a subpoena to the Chase Bank after McCollough retained a lawyer, JRL learned that Chase Bank had no credit card account for McCollough. Id. at 45, ll. 18-25. JRL was unable to obtain any documents regarding the alleged debt. Id.
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610 F. Supp. 2d 1078 (2009)
Jose Tello RAMON, Plaintiff,
v.
Michael J. ASTRUE, Commissioner of Social Security, Defendant.
No. EDCV 07-1541-RC.
United States District Court, C.D. California.
February 19, 2009.
*1080 Bill LaTour, Bill LaTour Law Offices, Loma Linda, CA, for Plaintiff.
Assistant US Attorney LA-SSA, Office of the General Counsel for Social Security Adm., San Francisco, CA, Sharla Cerra, AUSA-Office of US Attorney, Los Angeles, CA, for Defendant.
OPINION AND ORDER
ROSALYN M. CHAPMAN, United States Magistrate Judge.
Plaintiff Jose Tello Ramon filed a complaint on December 7, 2007, seeking review of the Commissioner's decision denying his application for disability benefits. The Commissioner answered the complaint on April 21, 2008, and the parties filed a joint stipulation on June 11, 2008.
BACKGROUND
I
On February 18, 2003 (protective filing date), plaintiff applied for disability benefits under the Supplemental Security Income program ("SSI") of Title XVI of the Social Security Act ("the Act"), 42 U.S.C. § 1382(a), claiming an inability to work since January 1, 2000, due to hypothyroidism, diabetes mellitus, vision difficulties, and back pain. Certified Administrative Record ("A.R.") 71-74, 84. The plaintiff's application was initially denied on June 13, 2003, and was denied again on July 23, 2003, following reconsideration. A.R. 28-38. The plaintiff then requested an administrative hearing, which was held on September 1, 2005, before Administrative Law Judge F. Keith Varni ("the ALJ"). A.R. 39-41, 49-51, 160-71. On November 3, 2005, the ALJ issued a decision finding plaintiff is not disabled.[1] A.R. 11-19. The plaintiff appealed this decision to the Appeals Council, which denied review on February 2, 2006. A.R. 6-10.
The plaintiff then filed a civil complaint challenging the Commissioner's decision: Ramon v. Astrue, case no. EDCV 06-0191-RC ("Ramon I").[2] On September 7, 2006, pursuant to the parties' stipulation, judgment was entered remanding the application for further proceedings under sentence four, 42 U.S.C. § 405(g). A.R. 203-09. On July 25, 2007, the ALJ held a new administrative hearing,[3] A.R. 478-84, and on August 29, 2007, the ALJ issued a decision again finding plaintiff is not disabled. A.R. 172-84.
II
The plaintiff, who was born on November 5, 1939, is currently 69 years old. A.R. 72, 225, 231. He has a third-grade education and cannot read, write or speak English. A.R. 83, 87. He has previously worked repairing pallets. A.R. 84-85, 90-92.
Since March 25, 2003, plaintiff has received treatment at the Rialto Clinica Medica Familiar, where Ruben Ruiz, M.D., diagnosed plaintiff with lower back pain, renal insufficiency, diabetes mellitus, hypothyroidism, hypertension, and peripheral *1081 neuropathy, among other conditions. A.R. 115-46, 366-449. On December 8, 2005, plaintiff's diabetes was uncontrolled, and he was placed off work through December 31, 2005. A.R. 410. On July 31, 2006, Dr. Ruiz opined plaintiff was permanently incapacitated due to congestive heart failure,[4] diabetes mellitus complicated by congestive heart failure, retinopathy,[5] and hypertension. A.R. 409.
On June 12, 2003, Bahaa B. Girgis, M.D., examined plaintiff and diagnosed him with type II diabetes mellitus with no evidence of diabetic retinopathy or neuropathy, decreased right eye visual acuity, which was 20/200 due to glaucoma, and a history of hypertension and chronic liver disease. A.R. 112-14. Dr. Girgis opined plaintiff can occasionally lift and/or carry up to 50 pounds, frequently lift and/or carry up to up to 25 pounds, and can stand/walk and sit for 6 hours each in an 8-hour day. A.R. 114.
On June 23, 2004, Alvin Chang, M.D., examined plaintiff at the Arrowhead Regional Medical Center, where he diagnosed plaintiff with Type II diabetes mellitus under moderate control, stable congestive heart failure, stable hypertension, stable hypothyroidism and obesity, among other conditions, and referred plaintiff to a podiatrist. A.R. 308-10. On June 29, 2004, Sang D. Lee, D.P.M., a podiatrist, examined plaintiff and diagnosed him as having diabetes mellitus with neuropathy and ankle joint pain. A.R. 307. Dr. Lee continued to treat plaintiff, diagnosing him at various times with degenerative joint disease, left foot cellulitis, plantar fasciitis, gout, and Morton's neuroma,[6] among other conditions. A.R. 293-306, 355-65. Nerve conduction velocity studies obtained on January 15, 2007, were consistent with mild sensory peripheral neuropathy and demyelination pathology consistent with a history of diabetes mellitus. A.R. 355-60.
On February 21, 2006, Kimberley R. Clements, M.D., examined plaintiff and diagnosed him with complaints of back, knee and feet pain and bad vision. A.R. 280-85. Plaintiff's vision without correction was less than 20/200 in his right eye and 20/30 in his left eye, but with pinhole correction, it was 20/100 in his right eye and 20/40 in his left eye. A.R. 286. Dr. Clements opined plaintiff can occasionally lift 50 pounds, frequently lift 25 pounds, sit without limitation, stand and walk for 6 hours in an 8-hour day, and push and pull without limitation. A.R. 284.
On December 28, 2006, Nicholas N. Lin, M.D., examined plaintiff and concluded plaintiff can: occasionally lift and/or carry up to 50 pounds; frequently lift and/or carry up to 25 pounds, bend, stoop, crouch, kneel, and climb stairs; stand or walk for 6 hours in an 8-hour workday with appropriate breaks; and sit for 6 hours in an 8-hour workday. A.R. 320-26. A visual acuity test was 20/100 in both eyes, less than 20/200 in both eyes tested individually and in the right eye with pinhole correction, and 20/200 in the left eye with pinhole correction. A.R. 326.
*1082 On April 6, 2007, Sean S. To, M.D., an internist, examined plaintiff and diagnosed him as having advanced diabetes with evidence of retinopathy, peripheral neuropathy, nephropathy and leg ulcers, back pain with marked tenderness in the lumbosacral area and decreased range of motion, and mild joint pain. A.R. 450-61. Plaintiff's visual acuity was 20/100 in both eyes, 20/200 in the right eye and 20/100 in the left eye, both before and after pinhole correction. A.R. 455. Dr. To concluded plaintiff: can never lift and/or carry greater than 20 pounds; can occasionally lift and/or carry up to up to 20 pounds; can frequently lift and/or carry up to 10 pounds; can sit for 4 hours at a time and 6 hours in an 8-hour day; can stand for two hours at a time and 4 hours in an 8-hour day; can walk for 1 hour at a time and 2 hours in an 8-hour day; can continuously use his hands and arms; can occasionally operate foot controls, climb stairs, balance, stoop, kneel, crouch, crawl, work in humidity and wetness, work around dust, odors, fumes and pulmonary irritants, work in extreme cold or heat, and work around vibrations; can never work at unprotected heights, around moving mechanical parts, or operate a motor vehicle; and can tolerate exposure to moderate noise.[7] A.R. 456-61.
DISCUSSION
III
The Court, pursuant to 42 U.S.C. § 405(g), has the authority to review the Commissioner's decision denying plaintiff disability benefits to determine if his findings are supported by substantial evidence and whether the Commissioner used the proper legal standards in reaching his decision. Sam v. Astrue, 550 F.3d 808, 809 (9th Cir.2008) (per curiam); Vasquez v. Astrue, 547 F.3d 1101, 1104 (9th Cir.2008).
The claimant is "disabled" for the purpose of receiving benefits under the Act if he is unable to engage in any substantial gainful activity due to an impairment which has lasted, or is expected to last, for a continuous period of at least twelve months. 42 U.S.C. § 1382c(a)(3)(A); 20 C.F.R. § 416.905(a). "The claimant bears the burden of establishing a prima facie case of disability." Roberts v. Shalala, 66 F.3d 179, 182 (9th Cir.1995), cert. denied, 517 U.S. 1122, 116 S. Ct. 1356, 134 L. Ed. 2d 524 (1996); Smolen v. Chater, 80 F.3d 1273, 1289 (9th Cir.1996).
The Commissioner has promulgated regulations establishing a five-step sequential evaluation process for the ALJ to follow in a disability case. 20 C.F.R. § 416.920. In the First Step, the ALJ must determine whether the claimant is currently engaged in substantial gainful activity. 20 C.F.R. § 416.920(b). If not, in the Second Step, the ALJ must determine whether the claimant has a severe impairment or combination of impairments significantly limiting him from performing basic work activities. 20 C.F.R. § 416.920(c). If so, in the Third Step, the ALJ must determine whether the claimant *1083 has an impairment or combination of impairments that meets or equals the requirements of the Listing of Impairments ("Listing"), 20 C.F.R. § 404, Subpart P, App. 1. 20 C.F.R. § 416.920(d). If not, in the Fourth Step, the ALJ must determine whether the claimant has sufficient residual functional capacity despite the impairment or various limitations to perform his past work. 20 C.F.R. § 416.920(f). If not, in Step Five, the burden shifts to the Commissioner to show the claimant can perform other work that exists in significant numbers in the national economy. 20 C.F.R. § 416.920(g).
Applying the five-step sequential evaluation process, the ALJ found "no credible evidence that [plaintiff] ever ceased engaging in substantial gainful activity[,]" but nevertheless did not deny the claim based on substantial gainful activity. (Step One). The ALJ then found plaintiff has the severe impairments of: diabetes; glaucoma; hypertension; and a degree of renal insufficiency (Step Two); however, he does not have an impairment or combination of impairments that meets or equals a Listing. (Step Three). The ALJ next determined plaintiff can perform his past relevant work as a recycling helper or pallet maker; therefore, he is not disabled. (Step Four).
IV
A claimant's residual functional capacity ("RFC") is what he can still do despite his physical, mental, nonexertional, and other limitations. Mayes v. Massanari, 276 F.3d 453, 460 (9th Cir.2001); Cooper v. Sullivan, 880 F.2d 1152, 1155 n. 5 (9th Cir.1989). Here, the ALJ found plaintiff has the RFC to perform a full range of medium work.[8] A.R. 181. However, plaintiff contends the ALJ's RFC determination is not supported by substantial evidence because, among other things, the ALJ erroneously rejected the opinions of examining physician Dr. To. The plaintiff is correct.
The ALJ must provide "clear and convincing" reasons for rejecting the uncontradicted opinion of an examining physician, Widmark v. Barnhart, 454 F.3d 1063, 1066 (9th Cir.2006), and "[e]ven if contradicted by another doctor, the opinion of an examining doctor can be rejected only for specific and legitimate reasons that are supported by substantial evidence in the record." Regennitter v. Comm'r of the Soc. Sec. Admin., 166 F.3d 1294, 1298-99 (9th Cir.1999).
As set forth above, Dr. To opined, among other things, that plaintiff cannot perform medium work, as he can: never lift and/or carry greater than 20 pounds; occasionally lift and/or carry up to up to 20 pounds; frequently lift and/or carry up to 10 pounds; sit for 4 hours at a time and 6 hours in an 8-hour day; stand for two hours at a time and 4 hours in an 8-hour day; and walk for 1 hour at a time and 2 hours in an 8-hour day. A.R. 456-61. Here, the ALJ failed to explicitly address Dr. To's opinions, and in determining plaintiff has the RFC to perform medium work, implicitly rejected his opinions. This was clear legal error. Lingenfelter v. Astrue, 504 F.3d 1028, 1038 n. 10 (9th Cir.2007); Smolen, 80 F.3d at 1286.
Nevertheless, the Commissioner contends the ALJ's error was harmless because Dr. To rendered his opinions after plaintiff turned 65 and was no longer eligible for SSI disability benefits. Jt. Stip. at 4:9-6:1. The Court disagrees. For an error to be harmless, it must be "clear from the record that the ALJ's error was *1084 inconsequential to the ultimate nondisability determination." Tommasetti v. Astrue, 533 F.3d 1035, 1038 (9th Cir.2008) (citations and internal quotation marks omitted). Here, because "the ALJ's error in rejecting [Dr. To's] opinion ultimately led to an adverse disability finding, it was not harmless." Widmark v. Barnhart, 454 F.3d 1063, 1069 n. 4 (9th Cir.2006). In other words, due to the ALJ's legal error, plaintiff may have been deprived of SSI disability benefits for a period of time before he turned 65;[9] thus, the ALJ's legal error clearly is not harmless error. Cf. Lingenfelter, 504 F.3d at 1033-34 n. 3 ("`[R]eports containing observations made after the period for disability are relevant to assess the claimant's disability.'" (citation omitted)). Since it was "legal error for the ALJ to discount the opinions of [Dr. To] without providing specific and legitimate reasons for doing so[,]" the ALJ's RFC assessment, and Step Four determination, are not supported by substantial evidence. Lingenfelter, 504 F.3d at 1038 n. 10; Aukland v. Massanari, 257 F.3d 1033, 1037 (9th Cir.2001).
V
When the Commissioner's decision is not supported by substantial evidence, the Court has authority to affirm, modify, or reverse the Commissioner's decision "with or without remanding the cause for rehearing." 42 U.S.C. § 405(g); McCartey v. Massanari, 298 F.3d 1072, 1076 (9th Cir.2002). "Remand for further administrative proceedings is appropriate if enhancement of the record would be useful." Benecke v. Barnhart, 379 F.3d 587, 593 (9th Cir.2004). Here, remand is appropriate so the ALJ can properly consider Dr. To's opinions.[10]Widmark, 454 F.3d at 1070; Bunnell v. Barnhart, 336 F.3d 1112, 1116 (9th Cir.2003).
ORDER
IT IS ORDERED that: (1) plaintiff's request for relief is granted and defendant's request for relief is denied; and (2) the Commissioner's decision is reversed, and the action is remanded to the Social Security Administration for further proceedings consistent with this Opinion and Order, pursuant to sentence four of 42 U.S.C. § 405(g), and Judgment shall be entered accordingly.
NOTES
[1] On November 23, 2005, plaintiff reapplied for SSI benefits, claiming disability since March 13, 2003, due to cirrhosis, diabetes, thyroid problems, and high blood pressure. A.R. 225-28, 231-37. This application was denied on March 9, 2006, and was denied again on January 22, 2007, following reconsideration. A.R. 213-24.
[2] Pursuant to Fed.R.Evid. 201, this Court takes judicial notice of all documents in Ramon I.
[3] The new administrative hearing addressed both plaintiff's initial application and his 2005 application. A.R. 178-84.
[4] Congestive heart failure is "a clinical syndrome due to heart disease, characterized by breathlessness and abnormal sodium and water retention, often resulting in edema [the presence of abnormally large amounts of fluid in the intercellular tissue spaces of the body]. The congestion may occur in the lungs or peripheral circulation or both, depending on whether the heart failure is right-sided or general." Dorland's Illustrated Medical Dictionary at 567, 650.
[5] Diabetic retinopathy is a degenerative condition of the retina associated with diabetes mellitus. Id. at 1567.
[6] Morton's neuroma is "the neuroma [a tumor growing from a nerve or made up largely of nerve cells and nerve fibers] that results from Morton's neuralgia[,]" which is "a form of foot pain, metatarsalgia caused by compression of a branch of the plantar nerve by the metatarsal heads...." Id. at 1206, 1211.
[7] The medical record also contains a "Medical Opinion Re: Ability to Do Work-Related Activities," dated January 9, 2007, which sets forth several severe limitations for plaintiff. A.R. 475-77. Unfortunately, the signature on this form is illegible, and neither plaintiff nor the ALJ identified who signed the form. A.R. 184, 474. The ALJ gave the form "no weight" because: it is a "check-list form [that] is not accompanied by a physical examination"; "there is no way to tell who signed the statement"; "[t]he form is no more than a parroting of the claimant's subjective complaints"; and the form "is not consistent with the treatment record or the findings of the medical sources...." A.R. 184. Since plaintiff does not challenge the ALJ's findings, the Court will not further discuss this document.
[8] Under Social Security regulations, "[m]edium work involves lifting no more than 50 pounds at a time with frequent lifting or carrying of objects weighing up to 25 pounds." 20 C.F.R. § 416.967(c).
[9] At the most recent administrative hearing on July 25, 2007, plaintiff's attorney stated plaintiff, who was then more than 65, was receiving SSI old-age benefits. A.R. 480-81; see also Ly v. Sec'y of Health & Human Servs., 629 F. Supp. 1181, 1182 (E.D.Mich. 1986) ("Under the Social Security Act, an individual who reaches the age of 65 and [meets the] income [and residency requirements] is entitled to supplemental security income.").
[10] Having reached this conclusion, it is unnecessary to reach the other claims plaintiff raises, none of which warrant any further relief than herein granted.
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184 F. Supp. 2d 1227 (2002)
Steven J. SEGURA, Plaintiff,
v.
HUNTER DOUGLAS FABRICATION COMPANY, Defendant.
No. 8:01-CV-2346-T-30TGW.
United States District Court, M.D. Florida, Tampa Division.
February 4, 2002.
Craig L. Berman, Berman Law Firm, P.A., Bankers Financial Center, St. Petersburg, FL, for Steven J. Segura, plaintiff.
John W. Campbell, Michael Dennis Malfitano, Angelique Groza Lyons, Constangy, Brooks & Smith, LLC, Tampa, FL, for Hunter Douglas Fabrication Company, defendant.
ORDER DENYING DEFENDANT'S MOTION TO DISMISS
MOODY, District Judge.
This cause is before the Court upon Defendant's Motion to Dismiss (Dkt.# 4). Having reviewed the Motion, response, supporting and opposing memoranda, and being otherwise advised of the premises, the Court finds the Motion to Dismiss should be denied.
Plaintiff in this action brings claims under Title I of the Americans with Disabilities Act, 42 U.S.C. § 12101 ("ADA"), the *1228 Florida Civil Rights Act, §§ 760.06-760.11. Fla.Stat. ("FCRA"), and the Family and Medical Leave Act, 29 U.S.C. § 2601 ("FMLA"). In Count I of the complaint, Plaintiff alleges he was discriminated against on the basis of disability in violation of the ADA and FCRA. Plaintiff alleges he jointly filed a complaint with the Equal Employment Opportunity Commission ("EEOC") and with the Florida Commission on Human Relations ("FCHR"). Defendant moves to dismiss Plaintiff's FCRA claim for failure to timely request an administrative hearing as required by the FCRA.
The FCHR and the EEOC have established a "work sharing" agreement[1] by which the two agencies need not undertake two independent investigations of a claim. If a claim is jointly filed with the FCHR and the EEOC, the investigation of the Plaintiff's claims may be investigated by only one agency. The record does not reflect that the FCHR made any determination regarding Plaintiff's Complaint. It is the decision of the EEOC under the joint filing arrangement on which the Defendant bases his Motion to Dismiss.
To make a claim under the FCRA, a plaintiff must file a charge of discrimination with the FCHR. See § 760.11(1) Fla. Stat. (2001). According to the work sharing agreement and the Administrative Code, the charge may be filed with the FCHR or with the EEOC which has been designated as the agent of the FCHR for the purposes of filing. See Fla.Admin.Code Ann.R. 60Y-5.001(1) (2001) and work sharing agreement between FCHR and EEOC for the year 2001, Section IIA.
Once a charge is filed, the Florida Legislature contemplated that the FCHR would, within 180 days, determine whether or not there was reasonable cause to believe that a discriminatory practice had occurred. The relevant portion of the FCRA, found at § 760.11, Fla.Stat., provides:
(3) Except as provided in subsection (2), the commission shall investigate the allegations in the complaint. Within 180 days of the filing of the complaint, the commission shall determine if there is reasonable cause to believe that discriminatory practice has occurred in violation of the Florida Civil Rights Act of 1992. When the commission determines whether or not there is reasonable cause, the commission by registered mail shall promptly notify the aggrieved person and the respondent of the reasonable cause determination, the date of such determination, and the options available under this section.
(4) In the event that the commission determines that there is reasonable cause to believe that a discriminatory practice has occurred in violation of the Florida Civil Rights Act of 1992, the aggrieved person may either:
(a) Bring a civil action against the person named in the complaint in any court of competent jurisdiction; or
(b) Request an administrative hearing under §§ 120.569 and 120.57.
The election by the aggrieved person of filing a civil action or requesting an administrative hearing under this subsection is the exclusive procedure available to the aggrieved person pursuant to this act.
* * * * * *
(7) If the commission determines that there is not reasonable cause to believe that a violation of the Florida Civil *1229 Rights Act of 1992 has occurred, the commission shall dismiss the complaint. The aggrieved person may request an administrative hearing under §§ 120.569 and 120.57, but any such request must be made within 35 days of the date of determination of reasonable cause and any such hearing shall be heard by an administrative law judge and not by the commission or a commissioner. If the aggrieved person does not request an administrative hearing within the 35 days, the claim will be barred. If the administrative law judge finds that a violation of the Florida Civil Rights Act of 1992 has occurred, he or she shall issue an appropriate recommended order to the commission prohibiting the practice and recommending affirmative relief from the effects of the practice, including back pay. Within 90 days of the date the recommended order is rendered, the commission shall issue a final order by adopting, rejecting, or modifying the recommended order as provided under §§ 120.569 and 120.57. The 90-day period may be extended with the consent of all the parties. In any action or proceeding under this subsection, the commission, in its discretion, may allow the prevailing party a reasonable attorney's fee as part of the costs. It is the intent of the Legislature that this provision for attorney's fees be interpreted in a manner consistent with federal case law involving a Title VII action. In the event the final order issued by the commission determines that a violation of the Florida Civil Rights Act of 1992 has occurred, the aggrieved person may bring, within 1 year of the date of the final order, a civil action under subsection (5) as if there has been a reasonable cause determination or accept the affirmative relief offered by the commission, but not both.
(8) In the event that the commission fails to conciliate or determine whether there is reasonable cause on any complaint under this section within 180 days of the filing of the complaint, an aggrieved person may proceed under subsection (4), as if the commission determined that there was reasonable cause.
The case before the Court raises two issues which have been causing courts considerable problems since the work sharing agreement between the FCHR and the EEOC was instituted. The first is whether a determination by the EEOC constitutes a determination by the FCHR and, if so, which statutory procedures are triggered by that determination.
As to the first issue, courts in some earlier cases have concluded that a complaint dual-filed with the EEOC was not sufficient to constitute filing with the FCHR. See Weaver v. Florida Power and Light, 1996 WL 479117 (S.D.Fla.1996), aff'd, 124 F.3d 221 (11th Cir.1997); Thompson v. Nassau County Department of Transportation, 1999 WL 1427715 (M.D.Fla.1999). Since those cases, the wording of the work sharing agreement has been changed.[2]
At the time of the filing of the complaint in the case at bar, the work sharing agreement specifically provided that the EEOC was the agent of the FCHR for the purpose of both receiving "and filing charges." (Section IIA of the work sharing agreement.) The agreement further provides that once an agency begins an investigation, it normally will resolve the charge. (Section IIC of the work *1230 sharing agreement.) But, the agreement provides that the EEOC determination is not the FCHR determination. Section IIG of the work sharing agreement states:
The EEOC agrees to provide the FEPA with notice of its final actions on all dual-filed charges. The FEPA agrees to timly (sic) issue its final action and Notice of Right to Sue, as appropriate, upon receipt of each of EEOC's acceptable final action notices.
While it has not yet released its opinion for publication (and perhaps is still considering its opinion before making it final), the Second District has concluded that language in the work sharing agreement makes it clear that a determination by the EEOC is not a determination by the FCHR. Jones v. Lakeland Regional Med. Ctr., 2001 WL 1386595 (Fla. 2d DCA Nov.9, 2001). This Court reaches the same conclusion. Since the EEOC determination is a not a determination by the FCHR, Plaintiff is not required to file for an administrative hearing within thirty-five days of the EEOC letter as a prerequisite to this lawsuit and Defendant's Motion to Dismiss should be denied on this ground.
While the Court's conclusion that an EEOC determination is not equivalent to an FCHR determination, it will nevertheless address the second issue which provides further support for the Court's conclusion. That is, if the EEOC determination is construed as a final determination by the FCHR, then what procedural requirements are invoked under the Florida statutory scheme? Much of the confusion on this issue stems from the wording of the EEOC form which was not designed to fit neatly within only one of the three categories of determinations under the FCRA: (1) § 760.11(4) reasonable cause (referred to by some as a "cause" finding), (2) § 760.11(7) not reasonable cause (referred to by some as a "no cause" finding), and (3) § 760.11(8) a failure to determine whether or not there is reasonable cause within 180 days of the filing of the complaint (which this Court will refer to as the "failed to determine" category).
The EEOC's form has ten different boxes which may be checked as reasons for a dismissal. In the case at bar, the EEOC issued Plaintiff a "Dismissal and Notice of Rights" letter which gave the "unable to conclude"[3] reason for the dismissal. (Dkt.4, Exh. 2). Many courts have struggled to fit this wording into the FCRA. The "unable to conclude" reason states:
The EEOC issues the following determination: Based upon its investigation, the EEOC is unable to conclude that the information obtained establishes violations of the statutes. This does not certify that the respondent is in compliance with the statutes. No finding is made as to any other issues that might be construed as having been raised by this charge.
Defendant argues that this determination by the EEOC is a "no cause" determination, that would require the charging party under FCRA to request an administrative hearing within thirty-five days. It is undisputed that, in the instant case, Plaintiff did not request the administrative hearing. Instead, upon receipt of the EEOC's determination, the Plaintiff apparently[4] waited for the 180 days to expire *1231 and then filed the present action. Plaintiff contends that the "unable to conclude" reason fits within § 760.11(8) the "failed to determine" category, which allows suit to be filed after the expiration of 180 days without first requesting an administrative hearing.
The Court first looks to state law to resolve this issue. It is well established that, when exercising jurisdiction over a party's state law claims, a federal court should apply the law of the state. See Erie R. Co. v. Tompkins 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938). A federal court should not substitute its own interpretation of state law for that which exists within the body of state law. Id. Unfortunately, a conflict currently exists between the Second and Third District Courts of Appeal in Florida regarding whether the "unable to conclude" finding by the EEOC is a "no cause" finding within the wording of § 760.11(7), Fla.Stat. See Cisko v. Phoenix Medical Products, Inc. 797 So. 2d 11 (Fla. 2d DCA 2001); Woodham v. Blue Cross and Blue Shield of Fla., 793 So. 2d 41 (Fla. 3d DCA 2001). This conflict has been certified in Woodham to the Supreme Court of Florida.
The facts of both Cisko and Woodham are sufficiently close to the case at bar as to be controlling were there not a conflict. This conflict is the result of differing statutory interpretations the Third District Court of Appeal finds the wording of the statute to be clear that the "unable to conclude" reason falls within the "no cause" category, while the Second District Court of Appeal finds the "unable to conclude" reason to be confusing and not within the "no cause" category. Specifically, the Second District concluded that it could "reasonably be interpreted as indicating that the EEOC did not have sufficient information from which to make a determination." Cisko, 797 So.2d at 13.
A review of the statute reveals a legislative scheme that requires the FCHR to, within 180 days, make a determination "if there is reasonable cause to believe that discriminatory practice has occurred." The legislature envisioned three possible outcomes from a filed charge: 1) a finding of reasonable cause, 2) a finding that no reasonable cause existed, or 3) the FCHR failed to make a determination within 180 days. Problematically, by employing a technical use of the English language, the second category is broader than intended and includes all possible outcomes other than a reasonable cause finding. The Florida Legislature used "reasonable cause" to describe the first category and "not reasonable cause" to describe the second category. "Not reasonable cause" is the negative of "reasonable cause." That is, "not reasonable cause" is every response other than a finding of reasonable cause.[5]
Other responses on the EEOC form would also come within the "not reasonable cause" category such as "you failed to provide information, failed to appear or be available for interviews/conferences, or otherwise failed to cooperate to the extent that it is not possible to resolve your charge" (box 5 on the EEOC form), and "while reasonable efforts were made to locate you, we were not able to do so" (box 6 on the EEOC form), and the "unable to conclude" response (box 8 on the EEOC form). But, these responses, other than a specific finding of "no reasonable cause," also fit within the third category, the *1232 "failed to determine" category. Therein lies the problem.
The EEOC's statement that it is "unable to conclude that the information obtained establishes violations of the statutes" can reasonably be interpreted to be a failure to "determine whether there is reasonable cause on" the complaint under § 760.11(8). Accordingly, this Court concludes that the "unable to conclude" language used by the EEOC falls within both the "not reasonable cause" category (§ 760.11(7)) as well as the "failed to determine" category (§ 760.11(8)) of the FCRA. Since it falls under both categories, the one that provides the more permissive procedural requirements in favor of Plaintiff is to be applied, according to the FCRA. § 760.01(3) Fla.Stat. (2001). The more permissive category is the "failed to determine" category which does not require an administrative hearing prior to suit being filed. Therefore, the Motion to Dismiss should be denied on this ground as well.
Having concluded that the Motion to Dismiss should be denied on both grounds, it is hereby ORDERED and ADJUDGED that Defendant's Motion to Dismiss (Dkt.# 4) is hereby DENIED.
DONE and ORDERED in Tampa, Florida on this 1st day of February, 2002.
WORKSHARING AGREEMENT
BETWEEN
The Florida Commission of Human Relations
and the
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION
FOR FISCAL YEAR 1994
I. INTRODUCTION
A. The Florida Commission of Human Relations, hereinafter referred to as the FEPA, has jurisdiction over allegations of employment discrimination filed against employers of fifteen (15) or more employees occurring within the State of Florida based on race, color, religion, sex, national origin, age, handicap or marital status pursuant to the Florida Civil Rights Act of 1992, as amended (Sections 760.01-760.11, Florida Statutes).
The Equal Employment Opportunity Commission, hereinafter referred to as EEOC, has jurisdiction over allegations of employment discrimination occurring throughout the United States where such charges are based on race, color, religion, sex, or national origin, all pursuant to Title VII of the Civil Rights Act of 1964, as amended (42 U.S.C. § 2000(e)) (hereinafter referred to as Title VII). EEOC has jurisdiction to investigate and determine charges of discrimination based on age (40 or older) under the Age Discrimination in Employment Act (ADEA) of 1967, as amended (29 U.S.C. § 621 et. seq.), for unequal wages based on sex under the Equal Pay Act of 1963 (29 U.S.C. § 206), and over allegations of employment discrimination based on disability pursuant to Title I of the Americans with Disabilities Act of 1991,(42 U.S.C. § 12101).
B. In recognition of, and to the extent of the common jurisdiction and goals of the two (2) Agencies, and in consideration of the mutual promises and covenants contained herein, the FEPA and the EEOC hereby agree to the terms of this Worksharing Agreement, which is designed to provide individuals with an efficient procedure for obtaining redress for their grievances under appropriate state or Federal laws.
*1233 II. FILING OF CHARGES OF DISCRIMINATION
A. In order to facilitate the filing of charges of employment discrimination, the EEOC and the FEPA each designate the other as its agent for the purpose of receiving and drafting charges.
B. The FEPA shall take all charges alleging a violation of Title VII, ADEA, EPA, or the ADA where the parties have mutual jurisdiction and refer them to the EEOC for dual filing, so long as the allegations meet the minimum requirements of those Acts.
C. Each Agency will inform individuals of their rights to file charges with the other Agency and or assist any person alleging employment discrimination to draft a charge in a manner which will satisfy the requirements of both agencies to the extent of their common jurisdiction. As part of the intake duties, investigators are to verify with the charging parties if they have filed a charge of discrimination with other agencies prior to filing the charge.
D. For charges that are to be dual-filed, each Agency will use EEOC Charge Form 5 (or alternatively, an employment discrimination charge form which within statutory limitations, is acceptable in form and content to EEOC and the FEPA) to draft charges. When a charge is taken based on disability, the nature of the disability shall not be disclosed on the face of the charge.
E. Each Agency will make every effort to forward all dual filed charges to the other Agency within two working days of receipt. The Agency which initially takes the charge will provide notice of the charge to the Respondent within ten calendar days of receipt. Each agency will use EEOC form 212-A, Charge Transmittal, to transmit charges to each other.
F. Each Agency will also forward all other relevant data obtained at time of intake. Specifically, each agency will forward an Affidavit taken at the time of intake and a copy of the Charge Information form.
G. Each Agency agrees that it will notify both the Charging Party and Respondent of the dual-filed nature of each such charge it receives for initial processing and explain the rights and responsibilities of the parties under the applicable Federal, State, or Local statutes.
H. The delegation of authority to receive charges contained in Paragraph II. a. does not include the right of one Agency to determine the jurisdiction of the other Agency over a charge.
III. DIVISION OF INITIAL CHARGE-PROCESSING RESPONSIBILITIES
In recognition of the statutory authority granted to the FEPA by Section 706(c) and 706(d) of Title VII as amended; and by Title I of the Americans with Disabilities Act, and the transmittal of charges of age discrimination pursuant to the Age Discrimination in Employment Act of 1967, the primary responsibility for resolving dual-filed charges between the FEPA and the EEOC will be divided as follows:
A. EEOC and the FEPA will process all Title VII, ADA, and ADEA charges that they originally receive with the following exceptions:
1. EEOC will initially process and the FEPA hereby waives its right to initially process:
All Title VII charges received by the FEPA 240 days or more after the date of violation;
*1234 Concurrent Title VII/EPA charges;
All charges against the FEPA or its parent organization where such parent organization exercises direct or indirect control over the charge decision making process;
All charges filed by EEOC Commissioners;
Charges also covered by the Immigration Reform and Control Act;
Complaints referred to EEOC by the Department of Justice, Office of Federal Contract Compliance, or Federal fund-granting agencies under 29 CFR § 1640, 1641, and 1691 and class complaints retained by these agencies for action;
Any charge where EEOC is a party to a Conciliation Agreement or a Consent Decree which, upon mutual consultation and agreement, is relevant to the disposition of the charge. The EEOC will notify the FEPA of all Conciliation Agreements and Consent Decrees which have features relevant to the disposition of subsequent charges;
Any charge alleging retaliation for filing a charge with EEOC or for cooperating with EEOC; and
All charges against Respondents which are designated for initial processing by the EEOC in a supplementary memorandum to this Agreement.
2. The FEPA will process:
Any charge alleging retaliation for filing a charge with the FEPA or cooperating with the FEPA;
Any charge where the FEPA is a party to a Conciliation Agreement or a Consent Decree which, upon mutual consultation and agreement, is relevant to the disposition of the charge. The FEPA will provide the EEOC with an on-going list of all Conciliation Agreements and Consent Decrees which have features relevant to the disposition of subsequent charges;
All charges which allege more than one basis of discrimination where at least one basis is not covered by the laws administered by EEOC but is covered by the FEPA Ordinance, or where EEOC is mandated by federal court decision or by internal administrative EEOC policy to dismiss the charge, but FEPA can process that charge.
All charges against Respondents which are designated for initial processing by FEPA in a supplementary memorandum to this Agreement;
All disability based charges against Respondents over which EEOC does not have jurisdiction; and,
All Title VII, up to 10% of ADA charges and up to 28 ADEA charges against Respondents which are State agencies.
EEOC will refer to the FEPA inquiries that are more than 300 days from the date of violation and therefore non-jurisdictional with the Commission.
B. Notwithstanding any other provision of the Agreement, the FEPA or the EEOC may request to be granted the right to initially process any charge. Such variations shall not be inconsistent with the objectives of this Worksharing Agreement or the Contracting Principles.
C. Each Agency will on a quarterly basis notify the other of all cases in litigation and will notify each other when a new suit is filed. As charges are received by one Agency against a Respondent on the other Agency's litigation *1235 list, a copy of the new charge will be sent to the other Agency's litigation unit within 10 working days.
D. EEOC will not defer or refer any charge for the FEPA to process that is not jurisdictional on its face with both Agencies. If it is apparent that one Agency might have jurisdiction when another does not, then the charging Party will be referred to the appropriate Agency.
IV. EXCHANGE OF INFORMATION
A. Both the FEPA and EEOC shall make available for inspection and copying to appropriate officials from the other Agency any information which may assist each Agency in carrying out its responsibilities. Such information shall include, but not necessarily be limited to, investigative files, conciliation agreements, staffing information, case management printouts, charge processing documentation, and any other material and data as may be related to the processing of dual-filed charges or administration of the contract. The Agency accepting information agrees to comply with any confidentiality requirements imposed on the agency providing the information. With respect to all information obtained from EEOC, the FEPA agrees to observe the confidentiality provisions of Title VII, ADEA, EPA, and ADA.
B. In order to expedite the resolution of charges or facilitate the working of this Agreement, either Agency may request or permit personnel of the other Agency to accompany or to observe its personnel when processing a charge.
V. RESOLUTION OF CHARGES
A. Both agencies will adhere to the procedures set out in EEOC's Order 916, Substantial Weight Review Manual, and the State and Local Handbook. If there are procedural changes at any point during the contract year, the Agencies agree to renegotiate the terms of this section, as appropriate.
B. For the purpose of according substantial weight to the FEPA final finding and order, the FEPA must submit to the EEOC copies of all documents pertinent to substantial weight review; the evaluation will be designed to determine whether the following items have been addressed in a manner sufficient to satisfy EEOC requirements; including, but not limited to:
1. jurisdictional requirements,
2. investigation and resolution of all relevant issues alleging personal harm with appropriate documentation and using proper theory,
3. relief, if appropriate,
4. mechanisms for monitoring, and enforcing compliance with all terms of conciliation agreements, orders after public hearing or consent orders to which the FEPA is a party.
C. In order to be eligible for contract credit and/or payment, submissions must meet all the substantive and administrative requirements as stipulated in the 1994 Contracting Principles.
D. For the purposes of determining eligibility for contract payment, a final action is defined as the point after which the charging party has no administrative recourse, appeal, or other avenue of redress available under applicable State and Local statutes.
As stipulated in the 1994 Contracting Principles, the FEPA will manage its inventory and work process to effect an overall reduction in the age of its dual-filed inventory. In accordance *1236 with the requirements of Attachment A of the FY 1994 Contracting Principles, the FEPA will receive credit for accepted charge resolutions which fall within the resolution mix outlined below:
A. CHARGES 270 DAYS OLD
OR LESS: 60.77 %
B. CHARGES 271 to 360 DAYS
OLD: 6.75 %
C. CHARGES 361 to 540 DAYS
OLD: 11.25 %
D. CHARGES 541 to 720 DAYS
OLD: 11.58 %
E. MORE THAN 720 DAYS OLD: 9.65 %
VI. IMPLEMENTATION OF THE WORKSHARING AGREEMENT
A. Each agency will designate a person as liaison official for the other agency to contact concerning the day-to-day implementation for the Agreement. The liaison for the FEPA will be the Agency's Contract Manager. The liaison official for the EEOC will be the State and Local Coordinator.
B. The agencies will monitor the allocation of charge-processing responsibilities as set forth in the Agreement. Where it appears that the overall projection appears inappropriate, the appropriate portions of this Agreement will be modified to ensure full utilization of the investigation and resolution capacities of the FEPA and rapid redress for allegations of unlawful employment discrimination.
C. EEOC will provide original forms to be copied by the FEPA, in accordance with the Regulations and the Compliance Manual to be used by the FEPAs in correspondence with Charging Parties and Respondents.
D. If a dispute regarding the implementation or application of this agreement cannot be resolved by the FEPA and District Office Director, the issues will be reduced to writing by both parties and forwarded to the Director of the Office of Program Operations for resolution.
E. This Agreement shall operate from the first (1st) day of October 1993 to the thirtieth (30th) day of September 1994 and may be renewed or modified by mutual consent of the parties.
I have read the foregoing Worksharing Agreement and I accept and agree to the provisions contained therein.
Memorandum of Understanding (MOU), between Miami District Office (MMDO) and Florida Commission on Human Relations (FCHR)
In order to better handle the flow of charges between the FCHR and the MMDO and utilizing case management principles in expediting the resolutions of charges and in order to enhance the opportunity to reduce the age and pending inventory count, the Florida Commission on Human Relations agrees:
To waive initial processing of all charges filed in Pasco, Hernando, Citrus and Hillsborough counties.
Workload Distribution
In order to accommodate the workload between the agencies, it is agreed that the Florida Commission will process only those Title VII charges which arise in the following counties:
Alachua
Baker
Bay
Bradford
Brevard
Calhoun
Nassau
Volusia
Walton
Escambia
Jefferson
Flagler
Franklin
Gadsden
Gilchrist
Gulf
Hamilton
Union
Columbia
Dixie
Jackson
Lake
Leon
Levy
Liberty
Madison
Marion
Clay
Holmes
Orange
Putnam
St. Johns
Santa Rosa
Seminole
Sumter
Suwannee
Taylor
Okaloosa
Wakulla
Washington
Lafayette
This Memorandum of Understanding, when signed by both parties, will remain in effect until the FCHR Director notifies the EEOC District Director in writing that the Agency has reduced the age and size of its *1237 dual filed pending inventory to (9) nine months.
The provisions of this MOU may be modified or extended by mutual consent.
WORKSHARING AGREEMENT
BETWEEN
FLORIDA COMMISSION ON HUMAN RELATIONS
and the
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION
FOR FISCAL YEAR 1999
I. INTRODUCTION
A. The Florida Commission on Human Relations, hereinafter referred to as the FEPA, has jurisdiction over allegations of employment discrimination filed against employers of Fifteen (15) or more employees occurring within the State of Florida based on age, race, sex, color, marital status, religion, national origin and handicap pursuant to the Florida Civil Rights Act of 1992, as amended (Sections 760.01-760.11, Florida Statutes).
The Equal Employment Opportunity Commission, hereinafter referred to as EEOC, has jurisdiction over allegations of employment discrimination occurring throughout the United States where such charges are based on race, color, religion, sex, or national origin, all pursuant to Title VII of the Civil Rights Act of 1964, as amended (42 U.S.C. § 2000(e)) (hereinafter referred to as Title VII). EEOC has jurisdiction to investigate and determine charges of discrimination based on age (40 or older) under the Age Discrimination in Employment Act (ADEA) of 1967, as amended (29 U.S.C. § 621 et. seq.), for unequal wages based on sex under the Equal Pay Act of 1963 (29 U.S.C. § 206), and over allegations of employment discrimination based on disability pursuant to Title I of the Americans with Disabilities Act of 1991, (42 U.S.C. § 12101).
B. In recognition of, and to the extent of the common jurisdiction and goals of the two (2) Agencies, and in consideration of the mutual promises and covenants contained herein, the FEPA and the EEOC hereby agree to the terms of this Worksharing Agreement, which is designed to provide individuals with an efficient procedure for obtaining redress for their grievances under appropriate State and Federal laws.
II. FILING OF CHARGES OF DISCRIMINATION
A. In order to facilitate the assertion of employment rights, the EEOC and the FEPA each designate the other as its agent for the purpose of receiving drafting, and filing charges, including those that are not jurisdictional with the agency that initially receives the charges. EEOC's receipt of charges on the FEPA's behalf will automatically initiate the proceedings of both EEOC and the FEPA for the purposes of Section 706(c) and (e)(1) of Title VII. FEPA's receipt of charges on the EEOC's behalf will automatically initiate the proceedings of both the EEOC and the FEPA for the purpose of Section 760.6(10), Florida Statutes. This delegation of authority to receive charges does not include the right of one Agency to determine the jurisdiction of the other Agency over a charge. Charges can be transferred from one agency to another in accordance with the terms of this agreement or by other mutual agreement.
*1238 B. The FEPA shall take all charges alleging a violation of Title VII, ADEA, EPA, or the ADA where both the FEPA and EEOC have mutual jurisdiction, or where EEOC only has jurisdiction, so long as the allegations meet the minimum requirements of those Acts, and for charges specified in Section III.A.1. below, refer them to the EEOC for initial processing.
C. Each Agency will inform individuals of their rights to file charges directly with the other Agency and or assist any person alleging employment discrimination to draft a charge in a manner which will satisfy the requirements of both agencies to the extent of their common jurisdiction. As part of the intake duties, Investigators are to verify with the Charging Parties if they had filed a charge of discrimination with other agencies prior to filing the charge.
Normally, once an agency begins an investigation, it resolves the charge. Charges may be transferred between the EEOC and the Florida Commission on Human Relations within the framework of a mutually agreeable system. Each agency will advise Charging Parties that charges will be resolved by the agency taking the charge except when the agency taking the charge lacks jurisdiction or when the charge is to be transferred in accordance with Section III (DIVISION OF INITIAL CHARGE-PROCESSING RESPONSIBILITIES).
D. For charges that are to be dual filed, each Agency will use EEOC Charge Form 5 (or alternatively, an employment discrimination charge form which within statutory limitations, is acceptable in form and content to EEOC and the FEPA) to draft charges. Specifically, each agency will forward an Affidavit taken at the time of intake and a copy of the Charge Information Form. When a charge is taken based on disability, the nature of the disability shall not be disclosed on the face of the charge.
1. With respect to the ADA, the Florida Commission on Human Relations (FCHR) law is similar to the ADA, but has the following important differences:
a. The statute does not enunciate a standard for evaluating safety requirements.
b. The statute contains no restrictions on disability related inquires and medical Examinations of applicants and employees and no confidentiality provisions. The statue expressly allows employers to require examinations of applicants and employees to determine fitness for jobs.
c. The statute does not contain a provision prohibiting discrimination through a contract.
d. The statute does not contain a provision prohibiting discrimination on the basis of a relationship or association with an individual with a disability.
2. Recognizing the differences set forth above, the FCHR the EEOC agree to the following:
a. For each FCHR ADA charge resolution that involves one or more of the issues identified in 1. above, the FCHR will provide the EEOC with a statement that identifies which of the above issues were addressed in resolving the charge.
b. The FCHR will transfer to the EEOC for initial processing each disability charge it originally receives where it will not receive and resolve all alleged issues in a manner consistent with all requirements, *1239 standards, prohibitions, and restrictions set forth in the ADA.
E. Within ten calendar days of receipt, each Agency agrees that it will notify both the Charging Party and Respondent of the dual-filed nature of each such charge it receives for initial processing and explain the rights and responsibilities of the parties under the applicable Federal, State, or Local statutes. Each Agency will use EEOC Form 212. Charge Transmittal to transmit charges to each other.
F. The FEPA agrees to provide the EEOC with notice of its final actions on all dual-filed charges. The EEOC agrees to timely issue its Notice of Right to Sue upon receipt of each of the FEPA's acceptable final notices.
G. The EEOC agrees to provide the FEPA with notice of its final actions on all dual-filed charges. The FEPA agrees to timely issue its final action and Notice of Right to Sue, as appropriate, upon receipt of each of EEOC's acceptable final action notices.
III. DIVISION OF INITIAL AGENCY CHARGE-PROCESSING AND INVESTIGATIVE RESPONSIBILITIES
In recognition of the statutory authority granted to the FEPA by Section 706(c) and 706(d) of Title VII as amended and by Title I of the Americans with Disabilities Act, and the transmittal of charges of age discrimination pursuant to the Age Discrimination in Employment Act of 1967, the primary responsibility for resolving charges between the FEPA and the EEOC will be divided as follows:
A. EEOC will initially process/investigate all Title VII, ADA, and ADEA charges that they originally receive. FEPA will initially process all TITLE VII, ADA and ADEA charges that they originally receive pursuant to the divisions of Section III.A.2.
1. For charges originally received by the EEOC and/or to be initially processed by the EEOC, the FEPA waives its right of exclusive jurisdiction to initially process such charges for a period of 60 days for the purpose of allowing the EEOC to proceed immediately with the processing of such charges before the 61st day.
In addition, the EEOC will initially process the following charges:
All Title VII, ADA and concurrent Title VII/ADA charges jurisdictional with the FEPA and received by the FEPA 240 days or more after the date of violation;
All concurrent Title VII/EPA charges;
All charges against the FEPA or its parent organization where such parent organization exercises direct or indirect control over the charge decision making process;
All charges filed by EEOC Commissioners;
Charges also covered by the Immigration Reform and Control Act;
Complaints referred to EEOC by the Department of Justice, Office of Federal Contract Compliance Programs, or Federal fund-granting agencies under 29 CFR § 1640, 1641, and 1691.
Any charge where EEOC is a party to a Conciliation Agreement or a Consent Decree which, upon mutual consultation and agreement, is relevant to the disposition of the charge. The EEOC will notify the FEPA of all Conciliation Agreements and Consent Decrees which *1240 have features relevant to the disposition of subsequent charges;
Any charge alleging retaliation for filing a charge with EEOC or for cooperating with EEOC; and
All charges against Respondents which are designated for initial processing by the EEOC in a supplementary memorandum to this Agreement.
2. The FEPA will initially process the following types of charges:
Any charge alleging retaliation for filing a charge with the FEPA or cooperating with the FEPA;
Any charge where the FEPA is a party to a Conciliation Agreement or a Consent Decree which, upon mutual consultation and agreement, is relevant to the disposition of the charge. The FEPA will provide the EEOC with an on-going list of all Conciliation Agreements and Consent Decrees which have features relevant to the disposition of subsequent charges;
All charges which allege more than one basis of discrimination where at least one basis is not covered by the laws administered by EEOC but is covered by the FEPA Statute, or where EEOC is mandated by federal court decision or by internal administrative EEOC policy to dismiss the charge, but FEPA can process that charge.
All charges against Respondents which are designated for initial processing by FEPA in a supplementary memorandum to this Agreement; and
All disability-based charges against Respondents over which EEOC does not have jurisdiction.
EEOC will refer to the FEPA inquiries that are more than 300 days from the date of violation and therefore non-jurisdictional with the Commission.
Workload Distribution
It is agreed that the Florida Commission will process only those Title VII, ADA and ADEA charges which arise in the following counties:
Alachua
Baker
Bay
Bradford
Brevard
Calhoun
Nassau
Volusia
Walton
Escambia
Jefferson
Flagler
Franklin
Gadsden
Gilchrist
Gulf
Hamilton
Union
Columbia
Dixie
Jackson
Polk
Lake
Leon
Levy
Liberty
Madison
Marion
Clay
Holmes
Orange*
Putnam
St. Johns
Santa Rosa
Seminole
Sumter
Suwannee
Taylor
Okaloosa
Wakulla
Washington
Lafayette
* Exclusive of The City of Orlando
These provisions may be modified or extended by mutual consent.
B. Notwithstanding any other provision of the Agreement, the FEPA or the EEOC may request to be granted the right to initially process any charge subject to agreement of the other agency. Such variations shall not be inconsistent with the objectives of this Worksharing Agreement or the Contracting Principles.
C. Each Agency will on a quarterly basis notify the other of all cases in litigation and will notify each other when a new suit is filed. As charges are received by one Agency against a Respondent on the other Agency's litigation list a copy of the new charge will be sent to the other Agency's litigation unit within 10 working days.
IV. EXCHANGE OF INFORMATION
A. Both the FEPA and EEOC shall make available for inspection and copying to appropriate officials from the other Agency any information which may assist each Agency in carrying out its responsibilities. Such information shall include, but not necessarily *1241 be limited to, investigative files, conciliation agreements, staffing information, case management printouts, charge processing documentation, and any other material and data as may be related to the processing of dual-filed charges or administration of the contract. The Agency accepting information agrees to comply with any confidentiality requirements imposed on the agency providing the information. With respect to all information obtained from EEOC, the FEPA agrees to observe the confidentiality provisions of Title VII, ADEA, and ADA.
B. In order to expedite the resolution of charges or facilitate the working of this Agreement, either Agency may request or permit personnel of the other Agency to accompany or to observe its personnel when processing a charge.
V. RESOLUTION OF CHARGES
A. Both agencies will adhere to the procedures set out in EEOC's Order 916. Substantial Weight Review Manual, and the State and Local Handbook as revised.
B. For the purpose of according substantial weight to the FEPA final finding and order, the FEPA must submit to the EEOC copies of all documents pertinent to conducting a substantial weight review; the evaluation will be designed to determine whether the following items have been addressed in a manner sufficient to satisfy EEOC requirements; including, but not limited to:
1. jurisdictional requirements,
2. investigation and resolution of all relevant issues alleging personal harm with appropriate documentation and using proper theory,
3. relief, if appropriate,
4. mechanisms for monitoring and enforcing compliance with all terms of conciliation agreements, orders after public hearing or consent orders to which the FEPA is a party.
C. In order to be eligible for contract credit and/or payment, submissions must meet all the substantive and administrative requirements as stipulated in the Contracting Principles.
D. For the purposes of determining eligibility for contract payment, a final action is defined as the point after which the charging party has no administrative recourse, appeal, or other avenue of redress available under applicable State and Local statutes.
VI. IMPLEMENTATION OF THE WORKSHARING AGREEMENT
A. Each agency will designate a person as liaison official for the other agency to contact concerning the day-to-day implementation for the Agreement. The liaison for the FEPA will be Agency's Executive Director. The liaison official for the EEOC will be the State and Local Coordinator.
B. The agencies will monitor the allocation of charge-processing responsibilities as set forth in the Agreement. Where it appears that the overall projection appears inappropriate, the appropriate portions of this Agreement will be modified to ensure full utilization of the investigation and resolution capacities of the FEPA and rapid redress for allegations of unlawful employment discrimination.
C. EEOC will provide original forms to be copied by the FEPA, in accordance with the Regulations and the Compliance Manual to be used by the FEPAs in correspondence with Charging Parties and Respondents.
*1242 D. If a dispute regarding the implementation or application of this agreement cannot be resolved by the FEPA and District Office Director, the issues will be reduced to writing by both parties and forwarded to the Director of the Office of Program Operations for resolution.
E. This Agreement shall operate from the first (1st) day of October 1998 to the thirtieth (30th) day of September 1999 and may be renewed or modified by mutual consent of the parties.
I have read the foregoing Worksharing Agreement and I accept and agree to the provisions contained therein.
FY 2000 EXTENSION OF WORKSHARING AGREEMENT
Inasmuch as there have been no substantive changes in the processes, procedures, statutes, policies or regulations that would adversely affect or substantially alter the Worksharing arrangement between the EEOC-Miami-District Office and the Florida Commission on Human Relations, or that would affect the processing of charges filed under the pertinent Federal, state or local statutes, the parties agree to extend the current worksharing agreement that was executed on October 1, 1998 through the FY 2000 Charge Resolution Contract Option Period. This agreement, as well as the attendant Worksharing Agreement may be reopened and amended by mutual consent of the parties.
NOTES
[1] A copy of the work sharing agreement in effect in 2001, the relevant time period, is judicially noticed pursuant to F.R.E. 201 and attached to this opinion. Bryant v. Avado Brands, Inc., 187 F.3d 1271 (11th Cir.1999).
[2] Weaver concerned a claim under the 1994 work sharing agreement. That document did not specifically provide that the EEOC was the agent of the FCHR for the filing of the charge and was unclear on whether the EEOC determination was intended to also be the FCHR determination. See 1994 work sharing agreement attached to this Order. The Court takes judicial notice of this document. See n. 1 infra.
[3] This is the eighth box on the EEOC "Dismissal and Notice of Rights" form. This Court will refer to this language as the "unable to conclude" reason.
[4] The Court uses the word "apparently" here because the dual filing date of the complaint with the EEOC is unclear on the Court's copy and the Complaint fails to allege the date. And, Defendant's Motion to Dismiss did not challenge Plaintiff's right to bring this action for not waiting 180 days before filing.
[5] In mathematical terms, "reasonable cause" is a subset of possible determinations by the FCHR while "not reasonable cause" is another subset, one including all responses other than a "reasonable cause" determination. "No reasonable cause" is one response among others that comes within "not reasonable cause."
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761 F. Supp. 2d 282 (2010)
T-MOBILE NORTHEAST LLC, Plaintiff,
v.
FREDERICK COUNTY BOARD OF APPEALS and Frederick County Board of County Commissioners, Defendant.
Civil No. JFM-10-1037.
United States District Court, D. Maryland.
December 30, 2010.
*283 Leslie Gallagher Moylan, T. Scott Thompson, Davis Wright Tremaine LLP, Washington, DC, for Plaintiff.
Michael J. Chomel, Office of the Frederick County Attorneys Office, Frederick, MD, for Defendant.
MEMORANDUM
J. FREDERICK MOTZ, District Judge.
Plaintiff T-Mobile Northeast LLC ("T-Mobile"), a wireless telecommunications service provider, applied to the Frederick County Board of Appeals ("the Board")[1] for a special use exception to install a cell tower in Frederick County, Maryland in order to close a gap in T-Mobile's service coverage. Following the Board's denial of the application, T-Mobile filed this action seeking an injunction directing the Board to grant its application, as well as any ancillary permits necessary to construct the cell site; and an award of costs, including attorney's fees, for violations of the Federal Communications Act, as amended, 47 U.S.C. § 332 (the "Communications Act") and Maryland law. Now pending is T-Mobile's Motion for Summary Judgment pursuant to Fed.R.Civ.P. 56. Upon review of the papers filed, this Court finds a hearing in this matter unnecessary. See Local Rule 105.6 (D. Md. 2010). For the following reasons, T-Mobile's Motion for Summary Judgment will be granted.
I.[2]
In order to remedy a gap in coverage identified through dropped-call data, customer *284 complaints, and research analysis conducted by radio frequency engineers, T-Mobile designated a one-mile radius "search ring" inside of which a cell site would need to be located in Frederick County.[3] (Pl.'s Mem. 4.) T-Mobile identified one existing structure within the search ring upon which collocation of the cell site would be possible: an existing unipole installed by AT & T Wireless. (Id.) AT & T Wireless, however, would only permit T-Mobile to attach at 40 feet above ground level. (Id.) After T-Mobile's radio frequency engineer determined that 40 feet was too low to close the gap in coverage, T-Mobile made the decision to construct a new facility. (Id. 4-5.) T-Mobile identified 3857 South Mountain Road in Knoxville, Maryland (the "Property") as a suitable site for closing the gap in coverage. (Id. 5.)
The proposed cell site is a 150-foot stealth telecommunications unipole.[4] (Id.) The Property is zoned "A" (Agricultural), allowing for the construction of a new cell tower as a special exception under the Frederick County Code of Ordinances.[5] (Id. at 6.) Section 1-19-8.332 of the Zoning Ordinance details the necessary components of a successful special exception application, providing, in part:
(B) All applications for a special exception shall include:
(1) Computer modeling information used in selecting the site;
(2) Listing of alternative sites considered and why not selected;
(3) Photographs of the existing conditions of the site and area;
(4) Photo documentation that a balloon test has taken place at the proposed site location.
Frederick County Code, § 18.332(B). Additionally, § 1-19-8.420.2 sets forth the design criteria that applies to all communication towers in the A District, providing, in part:
(E) All applications for approval of communications towers shall include:
(1) Justification from the applicant as to why the site was selected;
(2) Propagation studies showing service area and system coverage in the county;
(3) Photo simulations of the tower and site, including equipment areas at the base from at least 2 directions and from a distance of no more than 1 mile.
Id. § 1-19-8.420(E). T-Mobile's application supplied information regarding each criterion and the documents required by both § 1-19-88 and § 18. (See Ex. A, Pl.'s Mem.; Pl.'s. Mem. 7.)
On January 28, 2010, the Board held a public hearing on T-Mobile's application that was continued on February 1, 2010. (Pl.'s Mem. 7.) At the January 28, 2010 hearing, T-Mobile was permitted twenty *285 minutes to present evidence in support of its application for a special exception. T-Mobile, represented by Gregory Rapisarda, introduced five witnesses with expertise as to T-Mobile's cell site location process, as well as general expertise in the areas of site acquisition, zoning, wireless project management, radio frequency engineering, wireless network design, site development, environmental science, and real estate values. (Id.; see also Ex. B, Pl.'s Mem. 3-5.) T-Mobile described the proposed facility, the need for more coverage in the area, and its method for identifying the Property as an ideal location for a cell site. (Pl.'s Mem. 8; see also Ex. B, Pl.'s Mem. 5-7.) T-Mobile also testified as to the stealth nature of the proposed unipole, as well as the photo simulations and the balloon tests T-Mobile conducted, demonstrating its efforts to minimize the visual impact of the proposed cell site. (Pl.'s Mem. 9; Ex. B, Pl.'s Mem. 8.) Additionally, T-Mobile submitted a petition signed by thirty-three community members supporting the installation of the unipole. (Pl.'s Mem. 8; Ex. B, Pl.'s Mem. 8.) T-Mobile's expert witnesses testified that the unipole would not negatively affect property values (Ex. B, Pl.'s Mem. 9-13), and that the unipole would not negatively affect historic properties or the Appalachian Trail (id. 15-16). Several community members also spoke in favor of T-Mobile's application, citing concerns over their current cell phone reception and their inability to make phone calls in emergency situations. (See id. 17-18.)
In opposition to T-Mobile's application for a special exception, several community members and the Executive Director of Harper's Ferry Conservancy testified at the January 28, 2010 hearing. The community members spoke in general terms about their concerns over the impact a unipole would have on the rural character of the area and on the mountain views (id. 32-36) and gave their opinion that there were other locations more suitable to the placement of the unipole (id. 42-43). In addition, one community member in opposition presented the Board with an appraisal of his property, predicting that the T-Mobile proposed unipole would cause a decrease in his property value by ten percent. (Id. 40.) Another community member testified that he had used his T-Mobile cell phone to conduct several test calls from areas surrounding the proposed cell site and was able to receive strong signals and make successful calls. (Id. 38.) A third community member submitted to the Board a petition with over sixty signatures opposing the proposed location for the unipole. (Id. 36.) The Executive Director of Harper's Ferry Conservancy, Paul Rosa, testified as to the deficiencies he found in T-Mobile's application, including the unipole's incongruence with the county's comprehensive plan and T-Mobile's failure to consider more sites for the installation of the unipole. (Id. 21.) Mr. Rosa proposed specific alternative locations for the cell site (id. 22-23), although he was unaware of the zoning restrictions in those areas (id. 28), had not spoken with the private landowners about their willingness to lease land to T-Mobile (id. 23; 27), and had not conducted radio frequency tests at these suggested alternative locations (id. 29).
T-Mobile was allowed five minutes to rebut the opposition testimony at the end of the January 28, 2010 hearing. Mr. Rapisarda proffered that T-Mobile's radio frequency engineer had determined that a unipole was needed within a one-mile ring in order to close a gap in coverage. (Id. 46.) He conceded that while a unipole cannot be hidden, T-Mobile had taken steps to make the unipole stealth and that the Property is an ideal location because of the deep set-back. (Id.) After Mr. Rapisarda's presentation, the record of the January *286 28, 2010 hearing was closed, and the hearing continued until February 1, 2010.
On February 1, 2010, the Board voted to deny T-Mobile's special exception application by a vote of 3-2. (Pl.'s Mem. 11.) The vote was in response to a Board member's motion that the Board "make a finding that on the evidence presented, there was insufficient evidence to satisfy the requirements of the Frederick County Code Section 1-19-88.332(b)(2) and Section 1-19-88.420.2(e)(1) which deal with the requirement to show efforts to locate alternate sites for the particular tower and to show justification why the site in particular was selected." (Ex. D, Pl.'s Mem. 25.) The Board issued its written Findings and Decision regarding the denial of the application on March 25, 2010. (Ex. E, Pl.'s Mem.) The Board summarized the testimony provided at the January 28, 2010 hearing and stated its reason for denying the application:
The requirement that the Applicant include justification as to why the site was selected and that the Applicant provide a listing of alternative sites considered and why they were not selected is intended to elicit a meaningful effort to locate such towers in locations which will serve the needs of the Applicant while, at the same time, minimize the impact on surrounding properties. In light of the nature of the area ultimately selected by the Applicant in this case, and its location within, among others, a Rural Legacy area, this Board is of the view that more evidence was required to answer the inquiry as to what other sites were considered and why they were not selected.
(Id. 6.) The instant appeal followed.
II.
T-Mobile claims that the Board's decision violates Section 332(c)(7)(B)(iii) of the Telecommunications Act ("TCA") because it is not supported by "substantial evidence." (Pl.'s Mem. 13). T-Mobile also claims that the Board violated Maryland law concerning special exceptions to zoning ordinances. The two claims merge because courts require that in order for a zoning board decision to satisfy the TCA's substantial evidence test, the challenged decision accord with applicable local zoning law. See, e.g., T-Mobile Cent., LLC v. Wyandotte County, 546 F.3d 1299, 1307 (10th Cir.2008); MetroPCS, Inc. v. City & County of San Francisco, 400 F.3d 715, 723-724 (9th Cir.2005); Cellular Tel. Co. v. Town of Oyster Bay, 166 F.3d 490, 495 (2d Cir.1999). In other words, if a zoning board's decision violates a state's zoning law, as a matter of law it is not supported by substantial evidence.[6]
The TCA, 47 U.S.C. § 301 et seq., enacted by Congress in 1996, aims to reduce impediments imposed by local governments upon the installation of facilities *287 for wireless communications, such as cell towers. See City of Rancho Palos Verdes v. Abrams, 544 U.S. 113, 115, 125 S. Ct. 1453, 161 L. Ed. 2d 316 (2005). The TCA amended the Communications Act of 1934 to include § 332(c)(7), which requires that local governments act on requests for authorization to locate wireless facilities "within a reasonable period of time," § 332(c)(7)(B)(ii), and each decision denying such a request must "be in writing and supported by substantial evidence contained in a written record," § 332(c)(7)(B)(iii).
The Court of Appeals of Maryland has explained that "[t]he special exception use is a part of the comprehensive zoning plan sharing the presumption that, as such, it is in the interest of the general welfare, and therefore, valid." Schultz v. Pritts, 291 Md. 1, 11, 432 A.2d 1319 (Md. 1981). Where the local legislature has determined that as part of its comprehensive plan certain uses are appropriate in a zone by way of special exception, the local legislature has, in effect, declared that such uses, if they satisfy the other specific requirements of the ordinance, promote the health, safety and general welfare of the community. See Anderson v. Sawyer, 23 Md.App. 612, 624, 329 A.2d 716 (Md.Ct. Spec.App.1974). Importantly, though, "[a] special exception ... is merely deemed prima facie compatible in a given zone. The special exception requires a case-by-case evaluation by an administrative zoning body or officer according to legislatively-defined standards. That case-by-case evaluation is what enables special exception uses to achieve some flexibility in an otherwise semi-rigid comprehensive legislative zoning scheme." People's Counsel for Baltimore County v. Loyola College in Md., 406 Md. 54, 956 A.2d 166, 176 (2008).
With these background principles in mind, the Court of Appeals of Maryland has held that once a special exception applicant has introduced facts and documents that satisfy the specific criteria for a special exception set forth in the zoning ordinance, "the appropriate standard to be used in determining whether a requested special exception use ... should be denied is whether there are facts and circumstances that show that the particular use proposed at the particular location proposed would have any adverse effects above and beyond those inherently associated with such a special exception use irrespective of its location within the zone." Schultz, 291 Md. at 22-23, 432 A.2d 1319.
The Board made no finding in this case that the granting of the special exception at the proposed location would have adverse effects that are not inherently associated with cell towers. Therefore, if T-Mobile satisfied the specific criteria set forth in the Frederick County Zoning Ordinance for obtaining a special exception,[7]*288 the Board's decision was not in accord with controlling Maryland law.
The County argues that T-Mobile's application did not satisfactorily respond to Section 1-19-88.332(B)(2), which requires a "[l]isting of alternative sites considered and why not selected." In response to this requirement T-Mobile's application stated, "T-Mobile considered the existing AT & T telecommunications flagpole located on Cemetery Circle in Knoxville. However, AT & T stated that they are not leasing additional space on the flagpole. No other sites were located." (Ex. A at 3, Pl.'s Mem.) Additionally, T-Mobile's response to Section 1-19-88.420.2(E), "[j]ustification from the applicant as to why the site was selected," was "[t]his site was selected only after an existing telecommunications flagpole could not accommodate T-Mobile antennas. Coverage is necessary in the area around Route 340/Jefferson National Pike, South Mountain Road and the surrounding residential areas. T-Mobile's goal is to provide additional coverage and fill in gaps in coverage in this area." (Ex. A at 5, Pl.'s Mem.)
The Board found that T-Mobile's submission of its attempt to collocate on the AT & T tower only, without any information on attempts to find alternative sites for the unipole within the one mile search ring, was "inadequate." (Ex. E at 5, Pl.'s Mem.) The Board stated in its Findings and Decision, "[t]here was no specific evidence presented as to any effort made by the Applicant to locate other land, developed or otherwise, upon which the Applicant might at least negotiate with a landowner (as it did with the owners of the site for which it seeks the special exception) to acquire an easement or lease space on which to construct a tower." (Id.) The Board stated that the purpose behind Section 1-19-88.332(B) and Section 1-19-88.420.2(E) was "to elicit a meaningful effort to locate such towers in locations which will serve the needs of the Applicant while, at the same time, minimize the impact on surrounding properties." (Id. 6.) The Board concluded that "simply stating that the only existing structure in the area was inadequate, without any evidence that there was no other land which may have been available, and without more, fails to sustain Applicant's burden of either production or persuasion on this critical element." (Id.)
T-Mobile responds that the Board's decision imposes upon special exception applicants a requirement that does not exist in the Frederick County Code. (Pl.'s Mem. 24.) T-Mobile asserts that "[t]he Zoning Ordinance does not contain any requirement that the applicant list every potentially conceivable alternative site and demonstrate why each one of those hypothetical sites was inadequate. The Zoning Ordinance requires only that T-Mobile list the alternatives that it actually considered and why those were not selected, which T-Mobile unquestionably did." (Id.) Indeed, in its reply memorandum T-Mobile goes a step further, arguing that "[f]undamentally, Section 1-19-88.332(B)(2) does not require that the applicant consider any alternatives. The applicant is required only to identify those alternative sites that were considered." (Pl.'s Reply Mem. 6.)
While T-Mobile's argument may seem extreme, it may well be correct. By its terms, Section 1-19-88.332(B)(2) simply does not require an applicant to consider any alternatives at all. Of course, if an applicant does not consider any alternatives, this might be a factor that the Board could take into account in deciding whether to grant a special exception. If no suitable alternative has been considered, the Boardparticularly if opponents to the granting of the special exception have presented evidence that an alternative site *289 is availablemight conclude that a special exception should not be granted because the special exception "at the particular site proposed would have ... adverse effects above and beyond those inherently associated with such a special exception irrespective of its location within the zone." Schultz, 291 Md. at 22-23, 432 A.2d 1319. Here, however, the opponents to the special exception sought by T-Mobile presented no evidence of a suitable alternative site, and the alternative that T-Mobile had considered self-evidently was a reasonable one. Under these circumstances Section 1-19-88.332(B)(2) imposed no obligation upon T-Mobile to identify other potential sites and negotiate with the owners of those sites before seeking a special exception.
Accordingly, I find that T-Mobile did satisfy the criteria established by the Frederick County Zoning Ordinance for obtaining a special exception. Because it did so, in order for the Board to deny the special exception sought by T-Mobile, under Schultz the Board would have had to find that the installation of a cell tower on the proposed site had adverse effects not inherent in cell towers themselves. The lack of such a finding invalidated the Board's decision both under Maryland law and the TCA. Therefore, T-Mobile is entitled to the summary judgment it seeks.
A separate order effecting the ruling made in this memorandum is being entered herewith.
ORDER
For the reasons stated in the accompanying Memorandum, it is, this 30th day of December 2010.
ORDERED Plaintiff's Motion for Summary Judgment (document 14) granted.
NOTES
[1] Defendant Frederick County Board of County Commissioners is the governing body of Frederick County, in accordance with Article XI-A of the Maryland Constitution. The Board of County Commissioners formed Defendant Frederick County Board of Appeals ("the Board"), pursuant to Section 1-19-2.150 of the Frederick County Code. The Board is responsible for conducting hearings on special exception applications, pursuant to Section 1-19-3.210 of the Frederick County Code. Where appropriate, the Defendants are referred to jointly as "the County."
[2] The facts are contained in the record that was before the Board and are undisputed.
[3] In order to provide reliable wireless service, T-Mobile installs a network of cell sites in a grid pattern resembling a honeycomb. (Pl.'s Mem. 4.) Coverage from the cell sites must overlap to avoid gaps in service. (Id.)
[4] The proposed cell site is described as "stealth" because all antennas will be completely enclosed within the unipole. (Pl.'s Mem. 5.) Additionally, the proposed unipole (or monopole) will be brown in order to blend into the surroundings, and all related equipment will be inside a wooden fenced compound surrounded by a 10-foot-wide landscaping buffer. (Id. 5-6.)
[5] The Property is also located within an area subject to the Rural Legacy Program, which allows landowners to sell or grant development rights to the State and/or County in order to protect rural areas from sprawl development. The Property itself, however, is not under a Rural Legacy easement. (See Pl.'s Mem. 5.)
[6] Because I find that the Board's decision was not in accord with Maryland zoning law, I need not decide whether it otherwise was not supported by substantial evidence. I note, however, that although the TCA does not define the term "substantial evidence," the legislative history demonstrates Congress's intent that the term hold the same meaning as in administrative law. See H.R. Conf. Rep. No. 104-458, at 208 (1996), reprinted in 1996 U.S.C.C.A.N. 124, 223 ("the phrase `substantial evidence contained in a written record' is the traditional standard used for judicial review of agency actions."). "[S]ubstantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." AT & T Wireless PCS v. City Council of Va. Beach, 155 F.3d 423, 430 (4th Cir.1998) (quoting Universal Camera v. NLRB, 340 U.S. 474, 488, 71 S. Ct. 456, 95 L. Ed. 456 (1951)). Significantly, "substantial evidence," while more than a scintilla, is also less than a preponderance. Id. (citing NLRB v. Grand Canyon Mining Co., 116 F.3d 1039, 1044 (4th Cir.1997)).
[7] Again, the relevant requirements come from Section 1-19-88.332(B):
(B) All applications for a special exception shall include:
(1) Computer modeling information used in selecting the site;
(2) Listing of alternative sites considered and why not selected;
(3) Photographs of the existing conditions of the site and area;
(4) Photo documentation that a balloon test has taken place at the proposed site location.
and Section 1-19-88.420.2(E):
(E) All applications for approval of communications towers shall include:
(1) Justification from the applicant as to why the site was selected;
(2) Propagation studies showing service area and system coverage in the county;
(3) Photo simulations of the tower and site, including equipment areas at the base from at least 2 directions and from a distance of no more than 1 mile.
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184 F. Supp. 2d 1379 (2002)
UNITED STATES of America,
v.
Julian Lamont BRISBON, a.k.a. Korede Akinbami, Defendant.
No. CR400-66.
United States District Court, S.D. Georgia, Savannah Division.
January 24, 2002.
*1380 *1381 Harry D. Dixon, U.S. Attorney and Joseph D. Newman, Assistant U.S. Attorney, Southern District of Georgia, Savannah, GA, for Plaintiff.
Michael G. Schiavone of Jackson & Schiavone, Richard L. Roble of R.L. Roble, PC, Savannah, GA, for Defendant.
ORDER
MOORE, District Judge.
Before the Court is Government's Motion for Sentence Reduction Pursuant to Fed.R.Crim.P. 35(b). (Doc. 33). For the following reasons, the Government's motion to reduce sentence is DENIED.
BACKGROUND
Pursuant to a plea agreement, Defendant pled guilty on August 23, 2000, to charges of possession of a firearm by a convicted felon and possession with intent to distribute marijuana. Defendant was sentenced on October 24, 2000, to 74 months for possession of a firearm, and 60 months for possession with intent to distribute marijuana, to be served concurrently.
After sentencing, Defendant assisted the Government by "making a public service TV spot to assist with the Project Ceasefire Program."[1] On December 13, 2001, the Government filed a motion to reduce Defendant's sentence pursuant to Fed.R.Crim.P. 35(b). The Government contends that Defendant's assistance in making the TV spot constitutes substantial assistance to the cause of law enforcement, warranting a reduction under Rule 35(b).
On December 14, 2001, the Court ordered the Government to submit a brief "which cites additional authority, explaining to the Court how it has power under Rule 35(b) to reduce sentence in this case." On January 3, 2002, the Court received the Government's brief. In addition, a response to the Government's motion to reduce sentence was filed by Defendant on January 7, 2002.
ANALYSIS
Federal Rule of Criminal Procedure 35(b) provides in part:
REDUCTION OF SENTENCE FOR CHANGED CIRCUMSTANCES. If the Government so moves within one year after the sentence is imposed, the court may reduce a sentence to reflect a defendant's subsequent substantial assistance in investigating or prosecuting another person, in accordance with the guidelines and policy statements issued by the Sentencing Commission under 28 U.S.C. § 994.
Fed.R.Crim.P. 35(b). Under the terms of the Rule, a reduction in sentence is only allowed if the defendant's substantial assistance relates to either the investigation of another person or the prosecution of another person. Indeed, the Eleventh Circuit has acknowledged that Rule 35(b) reductions are allowed only in such cases. See United States v. Chavarria-Herrara, 15 F.3d 1033, 1037 (11th Cir.1994) (citing United States v. Valle, 929 F.2d 629, 633 n. 4 (11th Cir.1991)). Therefore, it is important to understand the meaning of the terms investigation and prosecution.
*1382 An investigation exists when the authorities are engaged in a systematic inquiry into the criminal activity of a subject. See BLACK'S LAW DICTIONARY 830 (7th ed.1999). An investigation, by definition, always entails a target, and if Rule 35(b) is to apply, the target must be another person. For example, Rule 35(b) would apply if the authorities were investigating a suspected drug dealer, and Defendant provided information regarding the time and place of drug sales by that individual.
A prosecution, on the other hand, is a "criminal proceeding in which an accused person is tried" for crimes they allegedly committed. BLACK'S LAW DICTIONARY 1237 (7th ed.1999). Like an investigation, a prosecution necessarily entails a target, which under the terms of Rule 35(b) must be another person. Building on the previous example, Rule 35(b) would apply if the authorities prosecuted the suspected drug dealer, and Defendant testified on behalf of the authorities at trial.
Here, Defendant has failed to satisfy either prong of Rule 35(b). First, there is no evidence that Defendant's assistance in producing the TV spot substantially assisted the Government in an investigation. In other words, the TV spot did not assist the Government in a systematic inquiry into the criminal activity of another person. In fact, there is no indication that the TV spot was in any way related to an investigation. Therefore, the investigation prong of Rule 35(b) is not satisfied.
Second, there is no evidence that Defendant's actions substantially assisted the Government in criminal proceedings against another person. Again, there is no evidence that the TV spot was in any way related to a criminal prosecution. Therefore, the prosecution prong of Rule 35(b) has not been satisfied either.
This Court acknowledges the possible benefit of the production of a TV spot to assist in the Project Ceasefire Program. Too often, the Court is faced with the task of sentencing individuals convicted of being a felon in possession of a weapon. Inevitably, these individuals receive a sentence of several years imprisonment. The Court is encouraged by this attempt to increase community awareness and reduce the carrying of weapons by convicted felons.
The Court also finds Defendant's willingness to assist in the production of the TV spot to be commendable. By taking part in the TV spot, Defendant is giving publicity to the fact that he is a convicted felon in order to help society correct a serious problem. The unique nature of this assistance has not gone unnoticed by the Court.
However, despite the value of Defendant's actions, aiding in the production of the TV spot does not constitute substantial assistance in the investigation or prosecution of another person. Therefore, the requirements set forth in Rule 35(b) have not been satisfied. As a result, this Court cannot reduce Defendant's sentence pursuant to Rule 35(b).
Both the Government and Defendant state that they can find no case law supporting the proposition that Rule 35(b) can be applied in this case.[2] Nonetheless, the Government and Defendant still request that the Court grant a reduction in Defendant's sentence pursuant to Rule 35(b). Both sides present arguments for the Court's application of Rule 35(b). As the following paragraphs indicate, the Court is not persuaded by these arguments.
*1383 In support of its motion, the Government cites § 5K1.1 of the Sentencing Guidelines. Section 5K1.1 addresses departures from the Sentencing Guidelines based on a defendant's substantial assistance to authorities. The Government focuses on Application Note 3, which states that "[s]ubstantial weight should be given to the government's evaluation of the extent of the defendant's assistance, particularly where the extent and value of the assistance are difficult to ascertain." U.S.S.G. § 5K1.1, cmt. n. 3 (1999). Here, the Government contends that the extent and value of Defendant's assistance is difficult to ascertain. Therefore, the Government argues that substantial weight should be given to the Government's determination that the Defendant has rendered substantial assistance, and the request for reduction of sentence under Rule 35(b) should be granted.
The Government's argument is not persuasive for two reasons. First, § 5K1.1 of the Sentencing Guidelines is not applicable at this stage in Defendant's case. "Section 5K1.1 is used at sentencing to reflect substantial assistance rendered up until that moment." United States v. Alvarez, 115 F.3d 839, 842 (11th Cir.1997) (emphasis in original) (citing United States v. Howard, 902 F.2d 894, 896 (11th Cir. 1990)). In contrast, "Rule 35(b) is used after sentencing to reflect substantial assistance after sentencing." Id. (emphasis in original) (citation omitted). Therefore, § 5K1.1 is inapplicable in this case, where Defendant's assistance was rendered after sentencing.[3]
Second, like Rule 35(b), § 5K1.1 also requires that the substantial assistance provided by a defendant relate to the prosecution or investigation of another person. Section 5K1.1 states that "[u]pon motion of the government stating that the defendant has provided substantial assistance in the investigation or prosecution of another person who has committed an offense, the court may depart from the guidelines." U.S.S.G. § 5K1.1. Therefore, even if § 5K1.1 were applicable in this case, a reduction would be inappropriate because Defendant's assistance does not relate to the investigation or prosecution of another person.
In support of the Government's motion to reduce sentence, Defendant asserts that a reduction should be granted because both sides have agreed to a reduction, leaving no party to appeal this Court's reduction of Defendant's sentence. The Court finds Defendant's argument to be offensive. The parties propose that the Court violate the clear terms of Rule 35(b) because neither the Government nor the Defendant will object to such action, leaving no avenue for appeal of the Court's decision. However, it is the duty of the Court to apply the law to the cases brought before it, regardless of any agreements made by the parties. See Empire Life Ins. Co. of America v. Valdak Corp., 468 F.2d 330, 334 (5th Cir.1972) (holding that agreement by parties cannot force court to abdicate duty to "enunciate law on record facts."). This Court will not abandon that duty simply because no one will be able to appeal its decision.
Defendant also argues that the Government's motion for reduction of sentence under Rule 35(b) should be granted because the "unspoken consideration is that the traditional methods of fighting criminal activity and world terrorism have not generally worked and with the change in the world environment, different assistance's [sic] are going to be needed to meet the new challenges that were neither contemplated *1384 by nor specifically drafted in any criminal codes." Ultimately, Defendant claims that the criminal laws and the Sentencing Guidelines, as they exist today, are ineffective and in need of change. Based on this claim, Defendant argues that the Court should grant the Government's motion to reduce sentence, essentially rewriting Rule 35(b).
Defendant's argument conflicts with one of the most fundamental aspects of our system of government, namely separation of powers. See Mistretta v. United States, 488 U.S. 361, 380, 109 S. Ct. 647, 659, 102 L. Ed. 2d 714 ("the separation of powers into three coordinate Branches is essential to the preservation of liberty."). The principle of separation of powers is codified in the United States Constitution, which vests the legislative power in the Congress, the executive power in the President, and the judicial power in the Courts. See U.S. Const. art I-III. Based on "unspoken considerations," Defendant now requests that the Court subvert this fundamental principle of the Constitution and act as the legislature.
This Court lacks both the power and the desire to grant Defendant's request. The Constitution is the "fundamental and paramount law of the nation," and the ultimate binding authority on this Court. See Marbury v. Madison, 5 U.S. 137, 1 Cranch 137, 177, 2 L. Ed. 60 (1803). Even in the face of Defendant's "unspoken considerations" the Court will not act in a manner contrary to the mandates of the Constitution. The Court offers no opinion as to what changes, if any, need be made to the criminal laws and Sentencing Guidelines. However, if changes are to be made, those changes must be made by Congress or the Sentencing Commission, rather than through a judicial decision handed down by a Federal District Court in the Southern District of Georgia.
CONCLUSION
The language of Rule 35(b) is clear. Under the terms of the Rule, a reduction in sentence is appropriate only when the defendant has provided substantial assistance in the investigation or prosecution of another person. Here, Defendant's assistance in the production of a TV spot does not qualify as substantial assistance in the investigation or prosecution of another person. Therefore, the Court DENIES the Government's motion for reduction of Defendant's sentence pursuant to Rule 35(b).
NOTES
[1] The TV spot is intended to increase community awareness of the federal government's program to target and prosecute felons found in possession of a weapon. (Gov.Resp.¶ 5). Another goal of the TV spot is to deter those convicted of a felony from carrying firearms. (Id.) The TV spot will be broadcast within the Southern District of Georgia.
[2] In addition, the Court's own research located no cases supporting application of Rule 35(b) under these circumstances.
[3] The Court notes that § 5K2.0 is also applicable only at the sentencing phase, and cannot, despite Defendant's contentions, be used to justify a post-sentence reduction under Rule 35(b).
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/2470633/
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184 F. Supp. 2d 360 (2002)
BGL DEVELOPMENT, INC., d/b/a The Bristol Group, Plaintiff,
v.
XPEDITE SYSTEMS, INC., Defendant.
No. 00 CIV. 8395(MGC).
United States District Court, S.D. New York.
January 28, 2002.
*361 Miller & Wrubel P.C., by Martin D. Edel, Dana B. Zimmerman, New York City, for Plaintiff.
Alston & Bird LLP, by John A. Jordak, Jr., Jessica L. Perry, Atlanta, GA, for Defendant.
OPINION AND ORDER
CEDARBAUM, District Judge.
BGL Development, Inc. ("BGL") sues Xpedite Systems, Inc. ("Xpedite") for breach of contract, claiming that Xpedite failed to pay commissions that BGL was entitled to receive. Plaintiff contends that a letter, signed by defendant and sent to plaintiff with an "Agency Marketing Agreement" ("Agreement"), modified plaintiff's obligations under the Agreement. Defendant now moves for summary judgment on the grounds that the letter did not modify the Agreement and that plaintiff has failed to fulfill its obligations under the Agreement.
"Under New York law a written contract may be formed from more than one writing. Relevant writings creating a contract may consist of letters bearing the signature of only one party or even memoranda unsigned by either party." Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 572-73 (2d Cir.1993) (citations omitted). The contents of the letter and the Agreement show that the two documents were intended to be read together. The letter was part of the same transaction as the Agreement, was signed on the same date as the Agreement by the person who signed the Agreement, and sent to plaintiff with the Agreement. The letter expressly refers to the Agreement ("Per our agreement") and refers to the same transaction as the Agreement. When the intention of the parties may be gathered from the "four corners of the instrument," interpretation of the contract is a question of law for the court. See Rudman v. Cowles Comm., 30 N.Y.2d 1, 13, 280 N.E.2d 867, 330 N.Y.S.2d 33 (1972); Pharmaceutical Soc. of New York, Inc. v. Cuomo, 856 F.2d 497, 501 (2d Cir.1988). The intention of the parties, as manifested by the contents of the letter, was for the two documents to be read together.
The letter states that "we pay commission to you for Xpedite accounts that send traffic because of your direct action." Defendant argues that the terms of the Agreement and the letter are inconsistent, because the Agreement allows Dealer to receive commissions only "for orders for [Xpedite] products and services it forwards to Xpedite...." When, as in this case, resolution of a contract claim turns on the interpretation of both a standard form agreement and a document drafted specifically for the transaction in question, the latter controls as to any inconsistent provisions in the two documents. See Trade Bank & Trust Co. v. Goldberg, 330 N.Y.S.2d 69, 71, 38 A.D.2d 405 (1st Dept. 1972). See also Aramony v. United Way of America, 254 F.3d 403 (2d Cir.2001) (citations omitted) (noting that "specific terms and exact language are given greater weight than general language"). Therefore, even if the general terms of the Agreement could be read to impose obligations on plaintiff beyond the one contained in the letter, the letter controls.
Plaintiff has raised a genuine issue of material fact as to whether Morgan Stanley's Central Engineering Group sent traffic through Xpedite because of BGL's direct action. Therefore, summary judgment is denied.
SO ORDERED.
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