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Harvard Library Innovation Lab 43

[ "328 S.W.3d 816" ]

[ { "author_str": "Per Curiam", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\n328 S.W.3d 816 (2010)\nSTATE of Missouri, Respondent,\nv.\nRonald D. CHRISTIAN, Appellant.\nNo. WD 70718.\nMissouri Court of Appeals, Western District.\nDecember 30, 2010.\nSusan L. Hogan, Appellate Defender, Kansas City, MO, for Appellant.\nChris Koster, Attorney General, John M. Reeves, Assistant Attorney General, Jefferson City, MO, for Respondent.\nBefore Division II: JAMES EDWARD WELSH, Presiding Judge, and MARK D. PFEIFFER and KAREN KING MITCHELL, Judges.\n\nOrder\nPER CURIAM:\nThis is a self-incrimination case. The issue is whether, despite an otherwise valid waiver of his rights after having received the Miranda warnings, the defendant was compelled to be a witness against himself by virtue of the police informing him that (1) it would be better for him to tell his side of the story and (2) telling the truth would not hurt him. We hold that the subject statements were not coercive and that therefore the defendant was not compelled to incriminate himself. Accordingly, we affirm. Rule 30.25(b).\n", "ocr": false, "opinion_id": 2273040 } ]

[ "284 F.2d 155" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/284/284.F2d.155.8129_1.html", "author_id": null, "opinion_text": "284 F.2d 155\n Frank CARPENTER as Trustee in Bankruptcy of the Estate ofGreenvill Paper Stock Company, Ine., Bankrupt, Appellant.v.UNION INSURANCE SOCIETY OF CANTON, LIMITED, NorthernInsurance Company, American Aviation & General InsuranceCompany, Assurance Company of America, Home InsuranceCompany, Pacific Fire Insurance Company, Maryland CasualtyCompany, Buffalo Insurance Company, Merchants Fire AssuranceCorporation, Travelers Fire Insurance Company, North RiverInsurance Company, Insurance Company of North America,Fireman's Fund Insurance Company and National Fire InsuranceCompany, Appellees.\n No. 8129.\n United States Court of Appeals Fourth Circuit.\n Argued Oct. 10, 1960.Decided Nov. 18, 1960.\n \n Ray R. Williams, Greenville, S.C. (J. A. Henry, Hubert E. Nolin, Greenville, S.C., and Williams & Henry, Greenville, S.C., on brief), for appellant.\n Bert Cotton, New York City, and Wesley M. Walker, Greenville, S.C. (Leatherwood, Walker, Todd & Mann, Greenville, S.C., and Rein, Mound & Cotton, New York City, on brief), for appellees.\n Before SOPER and BOREMAN, Circuit Judges, and STANLEY, District Judge.\n BOREMAN, Circuit Judge.\n \n \n 1\n The plaintiff, Trustee in Bankruptcy for the Greenville Paper Stock Company, Inc., hereinafter referred to as 'Greenville,' brought this action on fire insurance policies issued by the defendants to recover the amount of a fire loss sustained by Greenville in a fire occurring at its plant in Greenville, South Carolina, on January 13, 1956. The finding in favor of the defendants on their third affirmative defense of arson, by the Special Master appointed to hear the case, was sustained on review by the District Court for the Western District of South Carolina. We conclude the evidence was sufficient to sustain this defense.\n \n \n 2\n At the time of the fire, Greenville was wholly owned by one Alvin Garblik, hereinafter referred to as 'Garblik,' and by members of his family. Prior to Garblik's acquisition, Greenville had traded as the Piedmont Scrap and Metal Company at a location on the New Buncombe Road outside of the corporate limits of Greenville, South Carolina. When Garblik and his family purchased the company in May 1955 Garblik became the new president and sole manager. In late 1955 Garblik sought to locate the plant in a larger structure, selecting a location at 2-6 Rutherford Street, within the corporate limits of the City of Greenville. City Fire Department objections to the processing of Greenville's flammable goods within the city limits interrupted the lease negotiations, but were overruled by the City Building Commission upon agreement by Greenville's lessor to install a sprinkler system and make other improvements on the premises. Greenville subsequently occupied the Rutherford Street building and commenced operations on or about December 1, 1955.\n \n \n 3\n At this time Greenville was engaged solely in the processing, sorting and packing of textile remnants. The principal types of fabrics handled by Greenville included acetates, rayon acetates, orlons, dacron and cotton blends, nylon and viscose blends, viscose and acetate blends, acetate and cotton, viscose and cotton, and cotton. To prepare the textile remnants for sale, the defective and soiled parts were torn or cut away from the merchantable fabric, and the remaining pieces, along with the nondefective remnants, were sorted into bins according to their general types and grades. When the bins became sufficiently full, they were removed and the fabric was then either packed in paper cartons or more generally baled in power presses. When Baled, paper was wrapped around the outer sides of the remnants, and a burlap covering was secured about the outside with metal bands.\n \n \n 4\n The Rutherford Street plant was built on three levels. The first, which faced Rutherford Street, contained the offices. The second, which was several feet lower and behind the first level, consisted of a large room approximately seventy by eighty feet in size, equipped with twenty-three large bins for use in the sorting operation. The third level, which dropped several feet behind the second, measured approximately twenty-one by forty-two feet in area, was equipped with a scale and two baling presses, and was used for the packing and storage of the remnants. There was a brick wall separating the second and third levels with three openings therein measuring, respectively, twelve by twelve, nine by nine, and nine by four feet. A wooden ramp connected the second and third levels at the largest opening in the brick wall, and wooden steps connected the various levels at all other passageways.\n \n \n 5\n On the day of the fire, January 13, 1956, the third level storage area was filled to within fifteen bales of capacity with bales stacked end on end, one against the other, from the wall out into the work area. An aisle of about six feet in width was left in the center of the third level, and an area of approximately twelve square feet was open around the baling presses and the scales. Boxes of recently received rayon remnants were stacked on top of the bales lining the aisleway. Throughout the day three men worked in this area, and on the second level the women employees sorted and processed remnants under the supervision of one Alfred D'Ambrosio. On the first level Garblik worked along with his secretary and the bookkeeper. At five o'clock that evening the employees left work, with Garblik and D'Ambrosio being the last to depart. Garblik was to drive D'Ambrosio home and, on leaving the plant, the two walked to the parking lot on the north side of the building and entered Garblik's automobile. Deciding to have a beer after they had gotten into the car, Garblik then drove around the plant and parked in a small lot on the south side of the building, from which point they walked to an establishment across the street from the plant. After finishing their beer they returned to the car, but before entering it D'Ambrosio walked down an alley behind the plant allegedly to investigate a shed adjacent to the building. After D'Ambrosio returned to the car, the two men proceeded to a service station located approximately ninetenths of a mile from the plant in the opposite direction from D'Ambrosio's home. After the car had been serviced, Garblik and D'Ambrosio drove back towards the plant, stopping and parking in front of another restaurant across from the plant where they had a coffee. After the coffee was finished, the day being rather cold and windy, Garblik, accompanied by D'Ambrosio, re-entered the plant building so that Garblik might obtain his overcoat. When this was done they departed for D'Ambrosio's home at approximately five-thirty or five-thirty-five, the time by their own reckoning being based on their prior activities.\n \n \n 6\n Within approximately ten minutes of their final departure from the plant, one Henry Irby, a grocery delivery boy, noticed a small white fire in the third level as he walked down the alley behind the plant. Irby immediately proceeded up the alley to report the fire to his employer Philip Howard. Rushing to the back of his store, Howard saw the rear of the Greenville plant enveloped in an explosion which shattered its windows with a 'whooshing noise' and shot flames forty to fifty feet into the air and out onto the ground. Howard telephoned the City Fire Department and, on receipt of the alarm at five-fifty-four, fifty to sixty firemen were dispatched to the site. When they arrived the entire third level was enveloped in flames, the fire billowing out of the windows and coming from between and under the stored bales. The fire in this area burned out of control for thirty to forty minutes. All of the doors and windows of the plant were securely locked and entrance in every instance had to be obtained forcibly. After approximately twenty minutes, one fireman attempted to enter the third level through a broken doorway but was shortly overcome by the unusual fumes. Although the main part of the conflagration was in the third level, a separate and distinct fire was burning in the bottom of a sorting bin in the second level, adjacent to the partition wall of the first level. A blackened and burned trail was discovered on the floor leading from the second level down the ramp into the third level.\n \n \n 7\n Garblik had just arrived at the D'Ambrosio home when he heard the car radio announcement of the fire, and he immediately returned to the plant. Later that evening he returned to the plant and his office to retrieve a 'valuable paper' assertedly left about his desk and worth fifteen thousand dollars. This document was never identified or explained.\n \n \n 8\n As a result of the fire, Greenville's entire remnant inventory was either burned or severely damaged. The building's wooden overhead beams, the wooden ramp from the second to the third level, some of the wooden partitions, and the skylights and the roof had to be replaced, and the metal baling presses were so damaged as to have only junk value. Six months after the fire, a petition in bankruptcy was filed against Greenville and on July 25, 1956, Greenville was adjudged bankrupt, the plaintiff being duly elected trustee. The insurance policies upon which the plaintiff then brought this action covered a risk in the aggregate amount of $150,000.\n \n \n 9\n By an order of the District Court and with the consent of all parties, the cause was referred to a Special Master for the taking of testimony and the determination of all issues of law and fact. The trial commenced before the Master on January 14, 1959, and continued through February 5, 1959. After this trial and the transcription of testimony, the filing of briefs and presentation of oral arguments, the Master filed his report sustaining the affirmative defenses of fraud and false swearing and of arson. The plaintiff filed objections thereto and, after the submission of briefs and argument to the District Court, judgment was entered for the defendants sustaining the defense of arson. The plaintiff has appealed therefrom to this court.\n \n \n 10\n The principal assignment of error on appeal is the insufficiency of evidence to support the Master's findings of arson. The trial of this cause before the Master consumed sixteen full days and was concerned almost entirely with issues of fact. On the basis of the nearly twenty-five hundred pages of recorded testimony and the several hundred exhibits, the Master found 'clear and convincing proof' that the loss was occasioned by an incendiary fire for which Garblik, and hence Greenville, was responsible. In its confirmation of this finding on review, the District Court said:\n \n \n 11\n 'After a review of the evidence and consideration of oral arguments by counsel, as well as written briefs submitted by them, I cannot say that the Finding of Facts of the Special Master as to the third affirmative defense of the defendants (i. e. arson) is clearly erroneous, and for this reason this finding by the Special Master should be, and it is hereby confirmed.'\n \n \n 12\n The plaintiff's objections and exceptions to the findings of the Master therefore received a full and adequate review in the District Court. While that court is not bound by the findings of such a Master, nevertheless the Master's findings are entitled to special weight, and though they are not to be given the effect of a jury verdict the rule for the exercise of the discretion vested in the District Court on review is that such findings shall be accepted unless clearly erroneous. United States v. Twin City Power Co., 4 Cir., 1957, 248 F.2d 108.\n \n \n 13\n The extensive evidence upon which these findings were based is conflicting in almost every aspect. In respect to the scope of review vested in this Court on appeal from the findings of a Master as affirmed and embodied in the conclusion of a District Court, a standard similar to that below applies. As this Court stated in Stonega Coke & Coal Co. v. Price, 4 Cir., 1939, 106 F,2d 411, 417, speaking through Judge Parker:\n \n \n 14\n 'It is provided by Rule 52(a) of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, that findings of fact shall not be set aside unless clearly erroneous, and that the findings of a master, to the extent that the court adopts them, shall be considered as findings of the court. This rule is grounded in wisdom and is but the formulation of practice long prevailing in courts of equity. Guilford Const. Co. v. Biggs, 4 Cir., 102 F.2d 46. It is a rule to be followed in all cases but particularly in one like this where there is a great volume of highly conflicting testimony, and where the master who had the advantage of seeing and hearing the witnesses is a highly trained lawyer of wide experience * * *. After findings by such a master have been reviewed and affirmed by the judge below, who is himself a lawyer of wide knowledge and experience in this sort of litigation, it must be indeed a very clear case of error which would justify an appellate court in disturbing them.'\n \n \n 15\n Accord, Crimmins v. Woodson, 4 Cir., 1949, 177 F.2d 788; N.L.R.B. v. Standard Trouser Co., 4 Cir., 1947, 162 F.2d 1012.\n \n \n 16\n In light of these principles it is unnecessary and would be of little avail for this Court to attempt a complete and exhaustive interpretation of the great body of evidence in this case. A summary review of the important aspects of the evidence will demonstrate the substantial basis present in support of the conclusions of the Master as affirmed by the District Court.\n \n \n 17\n The evidence, beyong the fact of the burning itself, was almost wholly circumstantial. In an arson case the corpus delicti consist of two elements: (1) The burned structure and (2) the criminal act of some person in causing the burining. By the very clandestine nature of the act, it is generally incapable of direct proof and the evidence is necessarily often of a negative character. State v. Edwards, 1934, 173 S.C. 161, 175 S.E. 277. The weight of authority is undoubtedly to the effect that the opportunity for the commission of, and the motive inducing the arson may be established by circumstantial evidence. State v. Jones, 1939, 215 N.C. 660, 2 S.E.2d 867, State v. Brown, 1915, 103 S.C. 437, 88 S.E. 21, L.R.A.1916D, 1295. The question upon review is whether the inferences drawn from this evidence were reasonable, and whether in the face of alternative inferences, they were clearly erroneous.\n \n The Motive for Arson\n \n 18\n There was evidence from which it could be found that during the period immediately preceding the fire, Greenville was at the very least in a highly disturbed and precarious financial condition, if not in fact on the bring of bankruptcy. There was evidence of indebtedness to a factor in late 1955 of approximately $87,927.01 against which this factor held accounts receivable of only $52,342.57; of the procurement of a June 30, 1955, inventory audit which proved unacceptable for the arrangement of a desired bank loan; of the presentation of invoices to a new factor following November 4, 1955, in the amount of $21,000 which invoices were at the time offset by the indebtedness of Greenville to the customers for whom they were issued of $34,000; that the new factor additionally received invoices for a sale and repurchase agreement with one McCarter Textile Company which was financed by a continuing cycle of further sales and repurchases, Garblik himself being uncertain whether physical delivery was made on any of these purported transactions; of the presentation to the factor of invoices for purported sales to an exporter which, in fact, were only 'bill and hold' reserve orders; of a net operating loss of approximately $65,000 for the last half of 1955; of a three to four-week delay in the performance of a purchase of materials agreement which was consummated only by the endorsement by a local merchant of an otherwise insufficiently funded Greenville check; of the dishonor of the January 6, 1956, payroll checks; of an offer to pay twenty per cent interest for a loan on January 9, 1956, which offer was refused on January 12; of a total checking account balance in both a South Carolina and a New York bank on January 13, 1956, of only $1,817.05 which included a deposit in the South Carolina bank of $1,000 by means of a check which had not yet cleared the New York bank account, and which was offset by the previously dishonored payroll checks, a $15,000 check for purchase of materials negotiated only on the endorsement of a third person, overdue fire insurance premium checks for $1,225.67, and a check for the overdue payment for the June 30, 1955, audit in the amount of $269.60.\n \n \n 19\n There was further evidence of the arrangement of Greenville's affairs immediately before the fire which could reasonably be construed as in preparation for a contemplated arson. There was evidence of a much smaller inventory than that claimed as destroyed. There was evidence that Garblik deposited his salary and personal expense checks for the prior five weeks on January 11, 1956, only two days before the fire; that payment for the June 31, 1955, audit, which was subsequently asserted as proof of the inventory loss, was made by check on the very day of the fire; that the long overdue premiums on the fire insurance policies, some due and unpaid as far back as May 1955, were not paid until the week of the fire; that within the week preceding the fire, the insurance coverage was increased from $125,000 to $150,000; and that the fire occurred on the eve of the day when the premises were surveyed for installation of the sprinkler system, and shortly before the fire preventive improvements were to be installed.\n \n \n 20\n These various circumstances appear to us sufficient to warrnat the inference of motive for the commission of the alleged arson. We now consider the evidence as it tended to show the opportunity for and the act of incendiarism by Garblik.\n \n The Commission of the Arson\n \n 21\n Garblik's continuous presence on or about the premises on the day and evening of the fire clearly discloses the opportunity for the commission of the arson. After having worked in the plant throughout the day, Garblik and D'Ambrosio were the last to leave, securely locking the premises. Although Garblik was then to have driven D'Ambrosio home, they first drove Garblik's automobile from one side of the plant to the other, then walked across the street to have a beer; upon returning to the automobile, D'Ambrosio first walked behind the plant to investigate the rear alley; they then drove some several blocks in the opposite direction from D'Ambrosio's home, allegedly to get gasoline and have the car serviced; they next returned to park the car across the street from the plant, going into another restaurant, this time for coffee even though on the way home for dinner; then they returned to the plant building to obtain Garblik's overcoat, which until this time he had allegedly forgotten even though it was a cold day. By their own testimony, Garblik and D'Ambrosio had in this manner hovered about the plant until approximately five-thirty or five-thirty-five, which was only about ten minutes before the discovery of the fire. Throughout this time the building was securely locked so as to have precluded the entry of any other person. Garblik's admitted activities prior to the fire thus placed him in sufficient proximity to the premises to have afforded him the opportunity to have caused the fire. The circumstances surrounding his contact with the building do more than excite suspicion; they exclude any rational conclusion that if a fire were set, it could have been set by some unknown third person. See State v. Jones, 1939, 215 N.C. 660, 2 S.Ed.2d 867.\n \n \n 22\n Next we proceed to the final and crucial inquiry involving the evidence relating to the act of incendiarism itself. Within approximately ten minutes of Garblik's final departure, Henry Irby noticed a small white fire, apparently on the floor of the third level. By the time he had covered the short distance up the alley to notify his employer, the entire third level of the plant erupted in a violent explosion, igniting a fire which rapidly enveloped the entire level and burning out of control for approximately one-half hour. The evidence further disclosed that while Greenville's goods were highly inflammable, the phenomenon of the sudden explosion occurred in the level containing the baled material, in spite of the fact that the burlap covering of these bales was characteristically slow burning or smoldering; that this covering must necessarily have burned away before the enclosed synthetics could have ignited; that spot fires were burning from under and between the tightly packed bales; that there was two distinct fires, one burning from the bottom of a bin in the front section of the second level, apart from the fire in the third level; and that the fire emitted a peculiar odor and fumes which eventually overcame one of the firemen. Additional evidence negated the presence of faulty electrical or gas fixtures, paint or rags, or, due to the short period of operation and the constant moving of the goods, of an accumulation of lint sufficient to have allowed for spontaneous combustion or any other accidental source of ignition. In the absence of any evidence of an accidental cause, the reasonable inference therefore arises that Garblik, with his special knowledge of textile chemistry, could have strategically deployed portions of his synthetics which, by their inherently highly inflammable character, could themselves have been set as the fuse to kindle the explosion. In the absence of any proof of any other substance used to ignite the fire, the Master, considering the fact that many of the inventory materials, when burned, were totally consumed without leaving a trace, adopted the inference, stating:\n \n \n 23\n '* * * it is quite clear that the active agent in this fire was a volatile inflammable material not normally to be found in the building in question and not inherent in the materials we knew to have been in the building, certainly when strongly packed in bales or enclosed in cartons.\n \n \n 24\n 'I find that there is no other explanation of the cause of this fire than that of the presence of a volatile inflammatory material and though I would like to report its name and formula, nevertheless, without such knowledge the material was no less effective for the purpose that it was used.'The plaintiff urges as an additional assignment of error the admission at the hearing of the testimony of firemen as to the cause of the fire when they admitted a lack of experience with fires involving the types of synthetics contained in Greenville's inventory. While these witnesses were familiar with the burning qualities of the burlap coverings on the bales destroyed goods, and even though the Master expressly stated that his conclusion was reached 'independent of these opinions,' the expert testimony of firemen is admissible to explain the phenomenon of a sudden and violent fire of unascertainable origin. For an excellant discussion see First Nat'l Bank v. Fire Ass'n, 1898, 33 Or. 172, 50 P. 568, 53 P. 8.\n \n \n 25\n The plaintiff contends that the Master erred in that he followed the rule applicable in the ordinary civil action and based his decision upon a preponderance of the evidence; that here, the defense was based upon the alleged criminal act of arson thus requiring the application of a different true. On the record this contention is without merit as the Master very clearly stated:\n \n \n 26\n 'Now if this was an incendiary fire for the purpose of collecting insurance it was a fraudulent fire. Fraud is never presumed and must be proven by evidence clear and convincing. Metropolitan Life Inc. Co. vs. Stuckey, (1940), 194 S.C. 469, 10 S.E.2d 3; Able vs. Equitable Life, etc., (1938), 186 S.C. 381, 195 S.E. 652; 26 C.j. 542.'\n \n \n 27\n This is fully in accord with the general principle that the burden of proof of an act of a criminal nature asserted as a defense in a civil action is somewhere in between the standard requirement of proof beyond a reasonable doubt in a criminal case and the preponderance of evidence requirement in the ordinary civil case. The proper test is that such defense be established by clear and convincing proof; that it be shown by 'clear and satisfactory evidence to a reasonable certainty.' Ziegler v. Justisford Farmers Mut. Ins. Co., 1941, 238 Wis. 238, 298 N.W. 610; 7 Wigmore, Evidence 2498(3)(3d ed. 1940). The correct evidentiary test as to the defense of arson was here applied.\n \n \n 28\n The decision of the Master as approved and confirmed by the District Court is\n \n \n 29\n Affirmed.\n \n ", "ocr": false, "opinion_id": 252368 } ]

[ "254 F. App'x 410" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": 22, "download_url": "http://www.ca5.uscourts.gov/opinions\\unpub\\06/06-60885.0.wpd.pdf", "author_id": null, "opinion_text": " IN THE UNITED STATES COURT OF APPEALS\n FOR THE FIFTH CIRCUIT United States Court of Appeals\n Fifth Circuit\n\n FILED\n November 19, 2007\n\n No. 06-60885 Charles R. Fulbruge III\n Clerk\n\nDONALD E HARRIS\n\n Plaintiff-Appellee\nv.\n\nGEORGE PAYNE, Harrison County Sheriff, Individually and in His Official\nCapacity as Sheriff of Harrison County, Mississippi\n\n Defendant-Appellant\n\n\n Consolidated with\n No. 06-60967\n\n\nDONALD E HARRIS\n\n Plaintiff-Appellant\nv.\n\nHARRISON COUNTY MISSISSIPPI; SHARON WALDRUP; JAMES ZUGG;\nRHONDALYN ROGERS\n\n Defendants-Appellees\n\n\n Appeals from the United States District Court\n for the Southern District of Mississippi\n USDC No. 2:03-CV-604\n\n\nBefore DENNIS, CLEMENT, and PRADO, Circuit Judges.\n\f No. 06-60885 c/w No. 06-60967\n\nPER CURIAM:*\n Before the court are consolidated appeals regarding the liability of a\ncounty and several of its employees for the erroneous four-month incarceration\nof Plaintiff Donald E. Harris (“Harris”). Although it is clear that Harris should\nnever have been incarcerated, there is no evidence that the actions of the\nindividual defendants amounted to more than negligence. As a result, Harris\ncannot establish a constitutional violation, and Mississippi law bars his tort\nclaims. Consequently, we AFFIRM in part and REVERSE in part.\n I. FACTUAL BACKGROUND\n On September 28, 2002, Harris was arrested in Forrest County,\nMississippi, on a felony charge for driving under the influence. Harris posted\nbond after spending approximately three days in jail. However, before releasing\nhim, the Forrest County Sheriff’s Office contacted the Harrison County Sheriff’s\nOffice to find out if Harrison County wanted to place a hold on Harris. It seems\na grand jury in Harrison County had indicted a “Donald Harris” for shoplifting,\nand an alias capias warrant had been issued for his arrest. In response to\nForrest County’s inquiry, Jeannie Carlisle (“Carlisle”), an employee in the\nHarrison County Sheriff’s Office, faxed a letter and the alias capias warrant to\nForrest County on September 30, 2002, confirming the detainer on Harris. The\nletter identified “Donald Harris” as a black male and listed his social security\nnumber and date of birth. Harris is a white male with a different social security\nnumber and date of birth.\n That same day, Harrison County Prisoner Transport Deputies James Zugg\n(“Zugg”) and Sharon Waldrop (“Waldrop”), who are Defendants-Appellees in this\ncase, were in route to Harrison County after picking up another inmate in\n\n\n *\n Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not\nbe published and is not precedent except under the limited circumstances set forth in 5TH CIR.\nR. 47.5.4.\n\n 2\n\f No. 06-60885 c/w No. 06-60967\n\nRankin County. The Harrison County Adult Detention Center (“HCADC”)\ncontacted Zugg and Waldrop by cell phone and instructed them to pick up Harris\nfrom the Forrest County jail. Typically, the HCADC would provide Zugg and\nWaldrop with paperwork identifying the individual they were to pick up;\nhowever, because Zugg and Waldrop were already on the road, the HCADC was\nunable to fax the paperwork to them.\n When Zugg and Waldrop arrived at the Forrest County jail, Waldrop\nexplained that they did not have any paperwork on Harris. A Forrest County\nemployee informed her that Forrest County had received all the necessary\npaperwork. Zugg then retrieved Harris and placed him in handcuffs. Harris\nprotested once to Zugg and Waldrop that they were detaining the wrong person,\nand Zugg told Harris to address the matter with the HCADC booking officer.\nZugg and Waldrop turned Harris over to the booking officer upon arrival at the\nHCADC, but Harris made no further protest at that time.\n Normal procedure at the HCADC called for Defendant-Appellee Deputy\nRhondalyn Rogers (“Rogers”), an inmate records clerk, to receive advance notice\nof an inmate’s arrival. Rogers would then create a Uniform Custody Report\n(“Report”) for the inmate using the biographical information from the\nindictment, warrant, and other paperwork. After the inmate was booked, she\nwould compare the information in the Report to the information entered into the\ncomputer by the booking officer. In such circumstances, the discrepancies in\nHarris’s information would have been apparent, as the Report would have\nindicated that Harris was black based on his paperwork while the booking officer\nwould have noted that he was white. However, when an inmate arrived after\nnormal working hours, Rogers would not be present and the transport officer\nwould fill out the Report. Rogers testified that it was not unusual for a transport\nofficer to fill out the Report by asking the inmate for his biographical\ninformation, instead of relying on the paperwork. Rogers stated that her job the\n\n\n 3\n\f No. 06-60885 c/w No. 06-60967\n\nnext morning was to compare the Report with the information entered into the\ncomputer by the booking officer, checking to make sure it was complete and free\nof typographical errors.\n In this case, Harris arrived at 6:15 p.m., which was after normal working\nhours, and Rogers was not present. Zugg testified that Waldrop filled out the\nReport by asking Harris for his biographical information. During her review the\nnext day, Rogers did not notice any discrepancy between the Report and the\ninformation entered by the booking officer, and Harris admits he has no evidence\nto the contrary.\n Harris’s only other protest of innocence came two or three days after he\narrived at the HCADC. On or around October 2, 2002, Harris claims that\nDefendant-Appellant George Payne (“Payne”), Sheriff of Harrison County,\nwalked through Harris’s cell block. Harris approached Payne and told him that\nhe (Harris) was the “wrong person.” Payne then allegedly told Harris that\neverybody says that and that Harris needed to sit down and shut his mouth.\nPayne does not recollect this conversation and asserts that had Harris told him\nhe was the wrong person, he would have looked into the matter, as was his usual\npractice.\n Harris had no further personal contact with Payne until his release on\nJanuary 29, 2003. Harris also made no further protest of mistaken identity to\nany government actor during that time. However, his mother, Helen Christine\nHarris (“Ms. Harris”) testified that she repeatedly contacted various Harrison\nCounty officials by phone to explain her son’s innocence. She does not claim to\nhave spoken to Payne, and Payne has no recollection of speaking to her.\n Around January 28, 2003, the Harrison County District Attorney’s Office\nnotified Captain Rick Gaston that the Harris in custody might not be the Donald\nHarris identified in the alias capias warrant. Further investigation confirmed\n\n\n\n 4\n\f No. 06-60885 c/w No. 06-60967\n\nthis, and Harrison County released Harris on January 29, 2003, after four\nmonths of incarceration.\n II. PROCEDURAL HISTORY\n Harris filed suit on December 12, 2003, against Forrest County, Harrison\nCounty, Payne, and the sheriff of Forrest County. Harris subsequently amended\nhis complaint to add as defendants various Forrest County and Harrison County\nofficials, including Zugg, Waldrop, and Rogers. Harris’s claims included\nviolations of the Fourth, Fifth, Eighth, and Fourteenth Amendments to the\nUnited States Constitution, brought pursuant to 42 U.S.C. § 1983, and\nnumerous Mississippi state law claims. The Forrest County defendants settled,\nand the remaining defendants filed motions for summary judgment.\n The district court granted summary judgment on Harris’s federal claims\non the ground of qualified immunity to all of the individual defendants except\nPayne. The district court also granted summary judgment to all of the\nindividual defendants except Payne on Harris’s state law claims pursuant to the\nMississippi Tort Claims Act. Further, the district court granted summary\njudgment to Harrison County, ruling that Harris did not show his erroneous\nincarceration was the result of a policy or custom of the county.\n Payne now appeals the denial of his motion for summary judgment. We\nhave jurisdiction over Payne’s appeal pursuant to the collateral order doctrine.\nSee Gobert v. Caldwell, 463 F.3d 339, 344 (5th Cir. 2006). Harris appeals the\ngrant of summary judgment to Zugg, Waldrop, Rogers, and Harrison County.\nWe granted Harris leave to appeal under 28 U.S.C. § 1292(b).\n III. STANDARD OF REVIEW\n With respect to Harris’s appeal, we review grants of summary judgment,\nincluding grants based on qualified immunity, de novo, applying the same\nstandard as the district court. Turner v. Baylor Richardson Med. Ctr., 476 F.3d\n337, 343 (5th Cir. 2007); Stidham v. Tex. Comm’n on Private Sec., 418 F.3d 486,\n\n 5\n\f No. 06-60885 c/w No. 06-60967\n\n490 (5th Cir. 2005). Summary judgment is appropriate when, after considering\nthe pleadings, depositions, answers to interrogatories, admissions on file, and\naffidavits, “there is no genuine issue as to any material fact and . . . the moving\nparty is entitled to a judgment as a matter of law.” FED. R. CIV. P. 56(c); Bulko\nv. Morgan Stanley DW Inc., 450 F.3d 622, 624 (5th Cir. 2006).\n Our consideration of Payne’s appeal of the denial of qualified immunity is\nmore limited, however. See Gobert, 463 F.3d at 344-45. When reviewing the\ndenial of qualified immunity on summary judgment, we are permitted to decide\nonly whether issues of fact are material, which is a question of law. Reyes v. City\nof Richmond, 287 F.3d 346, 351 (5th Cir. 2002); Bazan ex rel. Bazan v. Hidalgo\nCounty, 246 F.3d 481, 490 (5th Cir. 2001). We are not permitted to decide, and\nindeed we lack jurisdiction to decide, whether fact issues are genuine. Reyes, 287\nF.3d at 351; Bazan, 246 F.3d at 490. Therefore, we must accept the district\ncourt’s decision regarding which fact issues are genuine and review de novo the\npurely legal question of whether those genuine fact issues are also material. See\nGobert, 463 F.3d at 345; see also Kinney v. Weaver, 367 F.3d 337, 348 (5th Cir.\n2004) (en banc) (stating that the court may “consider only whether the district\ncourt erred in assessing the legal significance of the conduct that the district\ncourt deemed sufficiently supported for purposes of summary judgment”).\n IV. DISCUSSION\n On appeal, Harris contends that the district court erred in determining\nthat Zugg, Waldrop, and Rogers were entitled to the defense of qualified\nimmunity with respect to Harris’s federal claims and that the Mississippi Tort\nClaims Act barred Harris’s Mississippi law claims. Harris also asserts that the\ndistrict court incorrectly granted summary judgment to Harrison County. In his\nappeal, Payne contends that the district court erred in denying his motion for\nsummary judgment on Harris’s federal and state law claims. We will first\n\n\n\n 6\n\f No. 06-60885 c/w No. 06-60967\n\naddress Harris’s federal claims against all of the individual defendants—Zugg,\nWaldrop, Rogers, and Payne.\nA. Individual Defendants - Federal Claims\n With respect to Harris’s federal claims, we must decide whether the\ndistrict court properly determined that Zugg, Waldrop, and Rogers were entitled\nto qualified immunity on Harris’s constitutional claims, but that Payne was not\nso entitled. Harris’s complaint makes claims against the individual defendants\nunder the Fourth, Fifth, Eighth, and Fourteenth Amendments; however, he only\npresents arguments on the Fourth and Fourteenth Amendments on appeal.\nTherefore, we will confine our analysis to his claims under those amendments.\nSee Robinson v. Guarantee Trust Life Ins. Co., 389 F.3d 475, 481 n.3 (5th Cir.\n2004) (“Failure adequately to brief an issue on appeal constitutes waiver of that\nargument.”).\n 1. Qualified Immunity\n Qualified immunity shields government officials from both liability and\nsuit when they are acting within their discretionary authority and their conduct\ndoes not violate clearly established statutory or constitutional law of which a\nreasonable person would have known. Wallace v. County of Comal, 400 F.3d\n284, 289 (5th Cir. 2005); see also Saucier v. Katz, 533 U.S. 194, 200-01 (2001)\n(“Qualified immunity is an entitlement not to stand trial or face the other\nburdens of litigation.”) (internal quotation marks omitted). It is a defense that\nmust be pleaded by the government official and should be addressed at an early\nstage in the litigation. Saucier, 533 U.S. at 200-01; Siegert v. Gilley, 500 U.S.\n226, 231 (1991).\n We employ a two-step test to analyze claims of qualified immunity.\nMeadours v. Ermel, 483 F.3d 417, 422 (5th Cir. 2007). The first question we\nmust answer is whether the plaintiff’s allegations, if true, demonstrate the\nviolation of a clearly established right. Wallace, 400 F.3d at 289; see also\n\n 7\n\f No. 06-60885 c/w No. 06-60967\n\nSaucier, 533 U.S. at 201 (defining the threshold question as “[t]aken in the light\nmost favorable to the [plaintiff], do the facts alleged show the officer’s conduct\nviolated a constitutional right?”). A right is “clearly established” when its\ncontours are “sufficiently clear that a reasonable official would understand that\nwhat he is doing violates that right.” Wooley v. City of Baton Rouge, 211 F.3d\n913, 919 (5th Cir. 2000) (internal quotation marks omitted). If the plaintiff has\nalleged the violation of a clearly established right, we proceed to the second step\nof the analysis and determine whether the defendant’s conduct was objectively\nreasonable under the law at the time of the incident. Michalik v. Hermann, 422\nF.3d 252, 258 (5th Cir. 2005).\n In the context of a summary judgment motion, the government official\nneed only plead qualified immunity, which then shifts the burden to the\nplaintiff. Id. at 262. The plaintiff must rebut the defense by establishing that\nthe government official’s allegedly wrongful conduct violated clearly established\nlaw and that genuine issues of material fact exist regarding the reasonableness\nof the government official’s conduct. Id. We now analyze Harris’s claims using\nthis framework.\n 2. Fourth Amendment Claim\n We turn first to Harris’s claims under the Fourth Amendment, which are\ntwo-fold. He first asserts that Zugg and Waldrop violated his Fourth\nAmendment rights by arresting him without probable cause. He then claims\nthat Payne violated his Fourth Amendment rights by not presenting him to a\njudicial officer within forty-eight hours of his arrest.1\n\n\n\n\n 1\n Although Harris includes mention of Rogers in his Fourth Amendment claim, he\nmakes no allegations that she was involved in the decision to arrest Harris. Her actions, thus,\nwill be analyzed under Harris’s Fourteenth Amendment claims.\n\n 8\n\f No. 06-60885 c/w No. 06-60967\n\n a. Zugg and Waldrop\n To survive the first step of the qualified immunity analysis, Harris must\nallege facts that demonstrate that Zugg and Waldrop violated his Fourth\nAmendment rights. See Wallace, 400 F.3d at 289. Harris has asserted that Zugg\nand Waldrop arrested him without probable cause, violating several policies of\nthe sheriff’s office in the process, and that they should have verified his identity\nby looking at the paperwork. The undisputed facts are that Zugg and Waldrop\npicked up Harris from Forrest County and transported him to the HCADC\nwithout ever receiving any paperwork regarding Harris.\n The Fourth Amendment requires that probable cause exist before the\ngovernment may arrest an individual. U.S. CONST. amend. IV; Freeman v. Gore,\n483 F.3d 404, 411 (5th Cir. 2007). Here, probable cause was present, as Harris\nwas arrested pursuant to a warrant that had been issued following a grand jury\nindictment. “A warrant of arrest can be based upon an indictment because the\ngrand jury’s determination that probable cause existed for the indictment also\nestablishes that element for the purpose of issuing a warrant for the\napprehension of the person so charged.” Giordenello v. United States, 357 U.S.\n480, 487 (1958); Campbell v. City of San Antonio, 43 F.3d 973, 976 (5th Cir.\n1995) (noting that an arrest warrant may be based on a grand jury indictment\nwhich establishes probable cause). Harris has not argued that the warrant was\nnot based on probable cause or that it was faulty or improperly obtained.\nConsequently, probable cause existed to arrest Harris.\n That Harris was not the “Donald Harris” named in the warrant does not\ncreate a Fourth Amendment violation. The Supreme Court has stated that\n“[w]hen the police have probable cause to arrest one party, and when they\nreasonably mistake a second party for the first party, then the arrest of the\nsecond party is a valid arrest.” Hill v. California, 401 U.S. 797, 802 (1971)\n(internal quotation marks omitted). The Fifth Circuit has followed this rule,\n\n 9\n\f No. 06-60885 c/w No. 06-60967\n\nstating that “[t]he Fourth Amendment is not violated by an arrest based on\nprobable cause, even if the wrong person is arrested, if the arresting officer had\na reasonable, good faith belief that he was arresting the correct person.”\nBlackwell v. Barton, 34 F.3d 298, 303 (5th Cir. 1994). Under this standard, the\nuse of the alias capias warrant to detain Harris does not violate the Fourth\nAmendment as long as Zugg and Waldrop’s actions were reasonable.\n Harris asserts that Zugg and Waldrop’s actions were not reasonable\nbecause they did not verify his identity before taking him into custody. This\ncourt encountered a similar situation in Blackwell, 34 F.3d at 300-04. In that\ncase, a police officer arrested Mindy Blackwell, who had the same first name and\ngeneral appearance as a person described in a warrant. Id. at 300. Blackwell\ngave the officer her driver’s license, which showed she had a different last name\nthan the warrant described, but the officer did not look at it. Id. On appeal, we\nstated that the critical question was “not whether a reasonable officer would\nhave looked at the driver’s license to confirm the name and other identifying\ninformation” but rather whether a reasonable officer could believe Blackwell was\nthe suspect. Id. at 304. We ruled that the officer was entitled to qualified\nimmunity, even if in hindsight he could have taken other reasonable actions to\ndetermine Blackwell’s identity. Id.\n Here, the HCADC told Zugg and Waldrop that they needed to retrieve\nHarris, and the Forrest County Sheriff’s Office told Zugg and Waldrop that\nForrest County had all the necessary paperwork. Zugg and Waldrop’s reliance\non these statements to establish that Harris was the proper individual is\nreasonable, even if they could have taken other reasonable actions to verify his\nidentity. See United States v. Walker, 960 F.2d 409, 416 (5th Cir. 1992) (“The\narresting officer does not have to have personal knowledge of all the facts\nconstituting probable cause; it can rest upon the collective knowledge of the\npolice when there is communication between them.”) (internal quotation marks\n\n 10\n\f No. 06-60885 c/w No. 06-60967\n\nomitted); see also United States v. Holland, 438 F.2d 887, 888 (6th Cir. 1971)\n(“The fact that the officers did not have physical possession of the warrant at the\ntime of the arrest is of no consequence to the validity of the arrest.”).\n Harris also makes much of the fact that Zugg and Waldrop violated\nseveral general orders of the Sheriff’s office by not having the paperwork with\nthem and ensuring that they had the correct individual. The violation of a\ngeneral order, however, is not the same as a violation of the Constitution. See\nFraire v. City of Arlington, 957 F.2d 1268, 1276 (5th Cir. 1992) (stating that\n“even a negligent departure from established police procedure does not\nnecessarily signal violation of constitutional protections”); see also United States\nv. De Leon-Reyna, 930 F.2d 396, 399-400 (5th Cir. 1991) (en banc) (finding no\nFourth Amendment violation when officer did not use “code word” policy when\nreading license plate to dispatcher, resulting in mistaken detention of vehicle).\nTherefore, Harris’s allegations that Zugg and Waldrop violated general orders\ndo not necessarily state a constitutional claim. As shown above, Zugg and\nWaldrop’s actions were reasonable and do not create a right to relief under the\nFourth Amendment. That Zugg and Waldrop also violated internal policies does\nnot transform Harris’s claim into one of constitutional dimension.\n Harris further argues that Cozzo v. Tangipahoa Parish Council-President\nGovernment, 279 F.3d 273 (5th Cir. 2002), supports his claim that Zugg and\nWaldrop were required by the Fourth Amendment to verify his identity. In\nCozzo, a deputy evicted the plaintiff from her home on the basis of a TRO that\ndid not actually require her eviction. Id. at 279. The deputy conceded he had\nviolated the Fourth Amendment, and the court’s analysis concerned the second\nprong of the qualified immunity test. Id. at 284-85. There, the court ruled that\nthe jury was permitted to find that the deputy violated the plaintiff’s rights,\nbecause the plaintiff actually pointed out to the deputy where he was misreading\nthe TRO. See id. at 285. Here, unlike Cozzo, Zugg and Waldrop did not have\n\n 11\n\f No. 06-60885 c/w No. 06-60967\n\nany exculpatory paperwork with them that would have exonerated Harris had\nthey considered it.\n In sum, and taking Harris’s factual allegations as true, Harris has not\nalleged that Zugg and Waldrop violated a clearly established constitutional\nright. Probable cause existed for Harris’s arrest because Zugg and Waldrop\nacted pursuant to a facially valid warrant and did not act unreasonably in doing\nso, even though Harris was not ultimately the man named in the warrant.\nTherefore, the district court correctly determined that Zugg and Waldrop were\nentitled to qualified immunity on this claim, and we affirm that portion of the\ndistrict court’s decision.\n b. Payne\n With respect to Payne, Harris contends that Payne’s failure to present him\nto a judicial officer within forty-eight hours of his arrival at the HCADC\nconstitutes a violation of the Fourth Amendment. The district court did not\nspecifically address this claim, but because it denied summary judgment to\nPayne, we consider the claim on appeal.\n To establish his Fourth Amendment claim against Payne, Harris relies on\nRule 6.03 of Mississippi’s Uniform Rules of Circuit and County Court Practice,\nwhich states, in part:\n Every person in custody shall be taken, without unnecessary delay\n and within 48 hours of arrest, before a judicial officer or other\n person authorized by statute for an initial appearance.\n Upon the defendant’s initial appearance, the judicial officer or other\n person authorized by statute shall ascertain the defendant’s true\n name and address, and amend the formal charge if necessary to\n reflect this information. The defendant shall be informed of the\n charges against him/her and provided with a copy of the complaint.\nHarris asserts that by not taking him to a judicial officer after his arrival at the\nHCADC, Payne violated the Fourth Amendment. We disagree.\n\n\n\n 12\n\f No. 06-60885 c/w No. 06-60967\n\n The Mississippi Supreme Court has held that a violation of Rule 6.03 does\nnot necessarily equate to a Fourth Amendment violation. Lawrence v. State, 869\nSo. 2d 353, 355-56 (Miss. 2003) (en banc) (ruling that because arrest warrant\nwas issued within forty-eight hours of defendant’s arrest, failure to provide\ninitial appearance did not amount to Fourth Amendment violation). This\nholding accords with Supreme Court precedent on the issue of initial\nappearances. In Gerstein v. Pugh, the Court held that the Fourth Amendment\nrequires a state to “provide a fair and reliable determination of probable cause\nas a condition for any significant pretrial restraint of liberty, and this\ndetermination must be made by a judicial officer either before or promptly after\narrest.” 420 U.S. 103, 124-25 (1975) (footnotes omitted). The Court has also\nstated that “since the probable cause standard for pretrial detention is the same\nas that for arrest, a person arrested pursuant to a warrant issued by a\nmagistrate on a showing of probable[ ]cause is not constitutionally entitled to a\nseparate judicial determination that there is probable cause to detain him\npending trial.” Baker v. McCollan, 443 U.S. 137, 143 (1979).\n Under these cases, the allegation that Payne did not provide Harris with\nan initial appearance in violation of Rule 6.03 does not state a claim under the\nFourth Amendment. The grand jury determined that there was probable cause\nthat Donald Harris committed a crime when it indicted Donald Harris, and the\nalias capias warrant was based on the indictment. As a result, probable cause\nfor Harris’s pretrial detention existed, and Harris was not constitutionally\nentitled to a second determination of probable cause. Consequently, Harris’s\nFourth Amendment claim against Payne does not state a claim for a violation of\nclearly established law, and the district court erred when it denied qualified\nimmunity to Payne on this claim. Therefore, we reverse that portion of the\ndistrict court’s decision.\n\n\n\n 13\n\f No. 06-60885 c/w No. 06-60967\n\n 3. Fourteenth Amendment\n Harris next asserts that Zugg, Waldrop, Rogers, and Payne violated his\nrights under the Fourteenth Amendment by depriving him of his liberty without\ndue process of law. The district court determined that Zugg, Waldrop, and\nRogers were entitled to qualified immunity on this claim, but that Payne was\nnot.\n The Supreme Court confronted a situation in which a plaintiff brought suit\nfor the violation of his due process rights after he was erroneously incarcerated\nin Baker v. McCollan, 443 U.S. 137 (1979). In Baker, Leonard McCollan\nobtained a duplicate of his brother Linnie’s driver’s license that was identical to\nLinnie’s in all respects except that Leonard’s picture was on it. Id. at 140.\nLeonard was then arrested on narcotics charges, but was booked and released\nas Linnie. Id. at 140-41. Linnie was later stopped for running a red light. Id.\nat 141. The police ran a routine warrant check and discovered the warrant for\nLinnie. Id. Linnie spent three days in custody before the police compared his\nappearance to the file photograph of Leonard and released him. Id. Linnie\nbrought suit for the violation of his rights under the Fourteenth Amendment.\nId. The Fifth Circuit determined that T.L. Baker, the sheriff, was not entitled\nto qualified immunity because there was a question as to whether the procedures\nthat Baker instituted to identify detainees were reasonable. Id. at 141-42.\n On appeal, the Supreme Court did not reach the issue of the\nreasonableness of Baker’s procedures, instead holding that Linnie failed the first\nstep of the qualified immunity analysis by not alleging the violation of a clearly\nestablished right under the United States Constitution. Id. at 143-44. Linnie\nclaimed that Baker deprived him of his liberty by intentionally failing to\ninvestigate and determine that the wrong man had been imprisoned. Id. at 143.\nThe Supreme Court, however, stated that the Fourteenth Amendment does not\nprotect against all deprivations of liberty, but rather only those accomplished\n\n 14\n\f No. 06-60885 c/w No. 06-60967\n\n“without due process of law.” Id. at 145 (internal quotations marks omitted).\nThe Court went on to explain:\n Given the requirements that arrest be made only on probable cause\n and that one detained be accorded a speedy trial, we do not think a\n sheriff executing an arrest warrant is required by the Constitution\n to investigate independently every claim of innocence, whether the\n claim is based on mistaken identity or a defense such as lack of\n requisite intent. Nor is the official charged with maintaining\n custody of the accused named in the warrant required by the\n Constitution to perform an error-free investigation of such a claim.\n The ultimate determination of such claims of innocence is placed in\n the hands of the judge and the jury.\nId. at 145-46.\n The Court, however, did not entirely shut the door on the possibility that\nthe erroneous detention of an innocent person could result in a constitutional\nclaim. Instead, the Court stated, “[o]bviously, one in [Linnie]’s position could not\nbe detained indefinitely in the face of repeated protests of innocence even though\nthe warrant under which he was arrested and detained met the standards of the\nFourth Amendment.” Id. at 144. The Court further stated, “[w]e may even\nassume, arguendo, that, depending on what procedures the State affords\ndefendants following arrest and prior to actual trial, mere detention pursuant\nto a valid warrant but in the face of repeated protests of innocence will after the\nlapse of a certain amount of time deprive the accused of ‘liberty . . . without due\nprocess of law.’” Id. at 145. The Court, however, did not elaborate further on\nwhat circumstances might give rise to a due process violation.\n The Court in Baker originally granted certiorari to determine whether an\nallegation of negligence was sufficient to state a claim under § 1983, but it\nultimately did not reach that issue. Id. at 139-40. In a subsequent case, the\nCourt concluded that “the Due Process Clause is simply not implicated by a\nnegligent act of an official causing unintended loss of or injury to life, liberty, or\nproperty.” Daniels v. Williams, 474 U.S. 327, 328 (1986). The Fifth Circuit has\n\n 15\n\f No. 06-60885 c/w No. 06-60967\n\nhad occasion to apply the principles in Baker and Daniels with respect to due\nprocess claims arising from erroneous detentions or incarcerations.\n In Sanchez v. Swyden, this court considered the case of Oscar Sanchez,\nwho was detained by police for twenty-six hours because his name and general\ndescription matched those on a warrant from Tennessee. 139 F.3d 464, 465 (5th\nCir. 1998). Although the police were faxed further information several hours\nafter Sanchez’s detention that indicated that Sanchez was not the individual\nsought, the police took no action until the judge at Sanchez’s probable cause\nhearing ordered the police to confirm Sanchez’s identity, at which time he was\nreleased. Id. at 465-66. We held that Sanchez’s allegations amounted to no\nmore than mere negligence and thus did not state a claim for the violation of a\nclearly established constitutional right. Id. at 469.\n Similarly, in Simmons v. McElveen, the plaintiff spent eight months in jail\nafter being identified as the assailant in an armed robbery, even though his\nfingerprints did not match those of the assailant. 846 F.2d 337, 338-39 (5th Cir.\n1988). This court held that, in hindsight, the police should have looked at the\nfingerprints; however, the allegations of police misconduct did not exceed mere\nnegligence, which was not actionable. Id. at 339.\n This court reached the opposite result in Sanders v. English, 950 F.2d\n1152 (5th Cir. 1992). In Sanders, Floyd Sanders was arrested after being\nidentified as the assailant in an armed robbery. Id. at 1155-56. Curtis McCoy,\nthe arresting officer, subsequently received credible information that Sanders\nwas not the assailant but did not bring the information to the attention of the\npolice chief or the prosecutor. Id. at 1156-57. Sanders remained incarcerated\nfor fifty days as a result. Id. at 1158. We held that McCoy was not entitled to\nqualified immunity on summary judgment because there was a fact issue as to\nwhether McCoy “failed to release [Sanders] even after [McCoy] knew (or should\nhave known) that Sanders had been misidentified.” Id. at 1162 (characterizing\n\n 16\n\f No. 06-60885 c/w No. 06-60967\n\nthe facts as demonstrating that the officer “knowingly and willfully ignored\nsubstantial exculpatory evidence”). We distinguished Baker by reasoning that\nBaker dealt with the failure to take affirmative steps to investigate the suspect’s\ninnocence, rather than the failure to act on known information. Id. We held,\nhowever, that Sheriff English, whose involvement in the case consisted of\nhearing a few witnesses claim that Sanders was innocent, was entitled to\nqualified immunity, as his actions in failing to investigate Sanders’s innocence\nwere at most negligent. Id. at 1159-60.\n Taking all of these cases into account, allegations that an officer had\nexculpatory information in his possession but did not take the affirmative step\nof reviewing it are not sufficient to state a due process claim. See Sanchez, 139\nF.3d at 469 (“That law enforcement officials were in possession of information\nthat exculpated Sanchez does not change [the qualified immunity] result.”)\nInstead, as in Sanders, the plaintiff must demonstrate that the officer knew or\nshould have known that the plaintiff was wrongly detained.\n This idea is consistent with the cases cited by Harris. In Gay v. Wall, the\nFourth Circuit held that claims that the officer had actual knowledge of the\ndefendant’s innocence, but continued to detain him, fall outside the limitation\nof Baker and are actionable. 761 F.2d 175, 178-79 (4th Cir. 1985). Similarly, in\nCozzo, the officer who erroneously evicted the plaintiff pursuant to a TRO was\nactually shown by the plaintiff that the TRO did not call for her eviction. 279\nF.3d at 285. Therefore, the cases cited by Harris stand only for the proposition\nthat an officer’s actual knowledge of a suspect’s innocence can overcome the\nlimitation of Baker, which is consistent with the Fifth Circuit cases cited above.2\n\n\n 2\n Harris also relies on Jones v. City of Jackson, 203 F.3d 875, 880-81 (5th Cir. 2000), in\nwhich this court denied qualified immunity to a sheriff and his deputy when an individual was\nwrongly incarcerated for nine months. While Jones does provide support for Harris’s\narguments, we find that the majority of precedent in the Fifth Circuit and Supreme Court\nmilitates toward granting qualified immunity. The Jones opinion does not cite any of the\n\n 17\n\f No. 06-60885 c/w No. 06-60967\n\n Using the principles described above, we must conclude that Harris has\nfailed to state a claim against any of the individual defendants for the violation\nof a clearly established constitutional right. As described in Baker, the\nConstitution does not require police officers to “investigate independently every\nclaim of innocence . . . .” 443 U.S. at 145-46. Further, Harris’s one protest of\ninnocence to Zugg and Waldrop and one protest to Payne are not sufficient to fall\nunder the exception created in Baker for individuals who make “repeated\nprotests” of innocence.\n Harris has also not alleged that any act by Zugg, Waldrop, Rogers, or\nPayne rises beyond the level of negligence. See Sanchez, 139 F.3d at 469 (“[W]e\nhave required proof that the official’s actions went beyond mere negligence\nbefore th[e] tort [of false imprisonment] takes on constitutional dimensions.”).\nWhile all of the individuals had access to information that would have\nexonerated Harris, none of them was aware of it, nor has Harris shown that any\nof the individuals should have been aware of it. Under our precedent, these\nallegations are insufficient to state a claim for the violation of a constitutional\nright. As a result, all of the individual defendants, including Payne, are entitled\nto qualified immunity. Therefore, we affirm the district court’s ruling as to\nZugg, Waldrop, and Rogers, but we reverse as to Payne.\nB. Individual Defendants - State Claims\n We now turn to Harris’s state law claims of negligence, gross negligence,\nnegligent infliction of emotional distress, intentional infliction of emotional\ndistress, malicious prosecution, assault and battery, false imprisonment and\narrest, defamation and slander, wrongful detention, and mistaken identity. The\ndistrict court granted summary judgment on the basis of the Mississippi Tort\nClaims Act (“MTCA”) to Zugg, Waldrop, and Rogers, but not to Payne.\n\n\nrelevant precedent described above regarding due process and makes no attempt to explain or\ndistinguish it. Therefore, the Jones opinion is not persuasive in this instance.\n\n 18\n\f No. 06-60885 c/w No. 06-60967\n\n Pursuant to the MTCA,\n (1) A governmental entity and its employees acting within the\n course and scope of their employment or duties shall not be liable\n for any claim:\n ***\n (c) Arising out of any act or omission of an employee of a\n governmental entity engaged in the performance or execution of\n duties or activities relating to police or fire protection unless the\n employee acted in reckless disregard of the safety and well-being of\n any person not engaged in criminal activity at the time of\n injury . . . .\nMISS. CODE ANN. § 11-46-9. As used in this statute, “reckless disregard” has\nbeen described by the Mississippi Supreme Court as “more than ordinary\nnegligence, but less than an intentional act.” City of Jackson v. Brister, 838 So.\n2d 274, 280 (Miss. 2003); see also Titus v. Williams, 844 So. 2d 459, 468 (Miss.\n2003) (stating that reckless disregard encompasses “willful and wanton” actions).\nTo meet this standard, the officer’s conduct must “evince[] not only some\nappreciation of the unreasonable risk involved, but also a deliberate disregard\nof that risk and the high probability of harm involved.” Maldonado v. Kelly, 768\nSo. 2d 906, 910-11 (Miss. 2000). The Mississippi Supreme Court has further\ndefined reckless disregard as a “conscious indifference to consequences,\namounting almost to a willingness that harm should follow.” Titus, 844 So. 2d\nat 468 (internal quotation marks omitted). To avoid summary judgment, a\nplaintiff must create a genuine issue of material fact that the officers “took\naction that they knew would result or intended to result” in injury. Id.\n On appeal, the parties do not dispute the definition of reckless disregard,\nbut instead argue over whether the actions of the individual defendants\nconstitute reckless disregard. As described above, the conduct of Zugg, Waldrop,\nRogers, and Payne, as alleged by Harris, does not rise above the level of\nnegligence. Under Mississippi law, the reckless disregard standard is not\n\n\n 19\n\f No. 06-60885 c/w No. 06-60967\n\nsatisfied by conduct that is merely negligent. See City of Jackson, 838 So. 2d at\n280. Consequently, the MTCA precludes a finding that the individual\ndefendants are liable for any state tort claims. Therefore, we affirm the grant\nof summary judgment to Zugg, Waldrop, and Rogers, and we reverse the denial\nof summary judgment to Payne.\nC. Harrison County\n Finally, Harris appeals the grant of summary judgment to Harrison\nCounty. The district court dismissed Harris’s claims against Harrison County\nbecause Harris had not set forth evidence of a policy or custom of Harrison\nCounty that caused the deprivation of his rights. Harris does not contest that\nhe did not establish a policy or custom of Harrison County, but instead argues\nthat Harrison County is liable for Payne’s actions because he is a policymaker\nfor the county.\n Normally, a governmental entity is not liable under § 1983 unless the\nevidence establishes that a policy or custom of the government caused the\nconstitutional violation, and a single act by a government employee is often\ninsufficient to establish the requisite policy or custom. See Gelin v. Hous. Auth.\nof New Orleans, 456 F.3d 525, 527 (5th Cir. 2006); Piotrowski v. City of Houston,\n237 F.3d 567, 581 (5th Cir. 2001). However, the Fifth Circuit’s cases are clear\nthat “[a] single decision may create municipal liability if that decision [is] made\nby a final policymaker responsible for that activity.” Woodard v. Andrus, 419\nF.3d 348, 352 (5th Cir. 2005) (internal quotation marks omitted); see also Jett v.\nDallas Indep. Sch. Dist., 7 F.3d 1241, 1246 (5th Cir. 1993). Further, this court\nhas held that “[s]heriffs in Mississippi are final policymakers with respect to all\nlaw enforcement decisions made within their counties.” Brooks v. George\nCounty, 84 F.3d 157, 165 (5th Cir. 1996). Therefore, Harrison County is liable\nfor Payne’s acts as Sheriff, because he is a final policymaker for Harrison\nCounty, regardless of the existence of a policy or custom. Consequently, the\n\n 20\n\f No. 06-60885 c/w No. 06-60967\n\ndistrict court did err in dismissing Harrison County while leaving Payne in the\ncase. However, as noted above, Harris’s allegations against Payne do not state\na claim for the violation of a constitutional right. Payne’s actions were, at most,\nnegligent, and therefore do not give rise to a constitutional claim. As a result,\nthere is no misconduct by Payne for which Harrison County can be held liable.\nTherefore, we affirm the grant of summary judgment to Harrison County.\n V. CONCLUSION\n In sum, it is clear that the Harrison County system failed Harris at every\npoint, and the fact that a clearly innocent individual can be held for four months\nwithout a court appearance or verification of his identity gives us great concern.\nHowever, the actions of the individual defendants sued by Harris and involved\nin this appeal amounted to no more than negligence, which is insufficient to\ncreate a constitutional claim or to fall outside the protection of the MTCA.\nTherefore, we AFFIRM the district court’s decision granting summary judgment\nto Zugg, Waldrop, Rogers, and Harrison County. We REVERSE the denial of\nsummary judgment as to Payne.\n AFFIRMED in part and REVERSED in part.\n\n\n\n\n 21\n\f No. 06-60885 c/w No. 06-60967\n\nDENNIS, Circuit Judge, concurring in the judgment:\n I respectfully concur in the judgment. The majority reached\n\nthe right result in granting qualified immunity to all defendants.\n\nI disagree with the majority in that the defendants did violate the\n\nFourth and Fourteenth Amendment rights in several respects as the\n\nplaintiff alleges, but I agree with the majority in granting of\n\nqualified immunity to all defendants, because those rights were not\n\nclearly established at the time of the violations.\n\n\n\n\n 22\n\f", "ocr": false, "opinion_id": 54586 }, { "author_str": "Per Curiam", "per_curiam": false, "type": "020lead", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nPER CURIAM: *\nBefore the court are consolidated appeals regarding the liability of a county and several of its employees for the erroneous four-month incarceration of Plaintiff Donald E. Harris (“Harris”). Although it is clear that Harris should never have been incarcerated, there is no evidence that the actions of the individual defendants amounted to more than negligence. As a result, Harris cannot establish a constitutional violation, and Mississippi law bars his tort claims. Consequently, we AFFIRM in part and REVERSE in part.\n*412I. FACTUAL BACKGROUND\nOn September 28, 2002, Harris was arrested in Forrest County, Mississippi, on a felony charge for driving under the influence. Harris posted bond after spending approximately three days in jail. However, before releasing him, the Forrest County Sheriffs Office contacted the Harrison County Sheriffs Office to find out if Harrison County wanted to place a hold on Harris. It seems a grand jury in Harrison County had indicted a “Donald Harris” for shoplifting, and an alias capias warrant had been issued for his arrest. In response to Forrest County’s inquiry, Jeannie Carlisle (“Carlisle”), an employee in the Harrison County Sheriffs Office, faxed a letter and the alias capias warrant to Forrest County on September 30, 2002, confirming the detainer on Harris. The letter identified “Donald Harris” as a black male and listed his social security number and date of birth. Harris is a white male with a different social security number and date of birth.\nThat same day, Harrison County Prisoner Transport Deputies James Zugg (“Zugg”) and Sharon Waldrop (“Waldrop”), who are Defendants-Appellees in this case, were in route to Harrison County after picking up another inmate in Rankin County. The Harrison County Adult Detention Center (“HCADC”) contacted Zugg and Waldrop by cell phone and instructed them to pick up Harris from the Forrest County jail. Typically, the HCADC would provide Zugg and Waldrop with paperwork identifying the individual they were to pick up; however, because Zugg and Waldrop were already on the road, the HCADC was unable to fax the paperwork to them.\nWhen Zugg and Waldrop arrived at the Forrest County jail, Waldrop explained that they did not have any paperwork on Harris. A Forrest County employee informed her that Forrest County had received all the necessary paperwork. Zugg then retrieved Harris and placed him in handcuffs. Harris protested once to Zugg and Waldrop that they were detaining the wrong person, and Zugg told Harris to address the matter with the HCADC booking officer. Zugg and Waldrop turned Harris over to the booking officer upon arrival at the HCADC, but Harris made no further protest at that time.\nNormal procedure at the HCADC called for Defendant-Appellee Deputy Rhondalyn Rogers (“Rogers”), an inmate records clerk, to receive advance notice of an inmate’s arrival. Rogers would then create a Uniform Custody Report (“Report”) for the inmate using the biographical information from the indictment, warrant, and other paperwork. After the inmate was booked, she would compare the information in the Report to the information entered into the computer by the booking officer. In such circumstances, the discrepancies in Harris’s information would have been apparent, as the Report would have indicated that Harris was black based on his paperwork while the booking officer would have noted that he was white. However, when an inmate arrived after normal working hours, Rogers would not be present and the transport officer would fill out the Report. Rogers testified that it was not unusual for a transport officer to fill out the Report by asking the inmate for his biographical information, instead of relying on the papeiwork. Rogers stated that her job the next morning was to compare the Report with the information entered into the computer by the booking officer, checking to make sure it was complete and free of typographical errors.\nIn this case, Harris arrived at 6:15 p.m., which was after normal working hours, and Rogers was not present. Zugg testified that Waldrop filled out the Report by *413asking Harris for his biographical information. During her review the next day, Rogers did not notice any discrepancy between the Report and the information entered by the booking officer, and Harris admits he has no evidence to the contrary.\nHarris’s only other protest of innocence came two or three days after he arrived at the HCADC. On or around October 2, 2002, Harris claims that Defendant-Appellant George Payne (“Payne”), Sheriff of Harrison County, walked through Harris’s cell block. Harris approached Payne and told him that he (Harris) was the “wrong person.” Payne then allegedly told Harris that everybody says that and that Harris needed to sit down and shut his mouth. Payne does not recollect this conversation and asserts that had Harris told him he was the wrong person, he would have looked into the matter, as was his usual practice.\nHarris had no further personal contact with Payne until his release on January 29, 2003. Harris also made no further protest of mistaken identity to any government actor during that time. However, his mother, Helen Christine Harris (“Ms. Harris”) testified that she repeatedly contacted various Harrison County officials by phone to explain her son’s innocence. She does not claim to have spoken to Payne, and Payne has no recollection of speaking to her.\nAround January 28, 2003, the Harrison County District Attorney’s Office notified Captain Rick Gaston that the Harris in custody might not be the Donald Harris identified in the alias capias warrant. Further investigation confirmed this, and Harrison County released Harris on January 29, 2003, after four months of incarceration.\nII. PROCEDURAL HISTORY\nHarris filed suit on December 12, 2003, against Forrest County, Harrison County, Payne, and the sheriff of Forrest County. Harris subsequently amended his complaint to add as defendants various Forrest County and Harrison County officials, including Zugg, Waldrop, and Rogers. Hams’s claims included violations of the Fourth, Fifth, Eighth, and Fourteenth Amendments to the United States Constitution, brought pursuant to 42 U.S.C. § 1983, and numerous Mississippi state law claims. The Forrest County defendants settled, and the remaining defendants filed motions for summary judgment.\nThe district court granted summary judgment on Han'is’s federal claims on the ground of qualified immunity to all of the individual defendants except Payne. The district court also granted summary judgment to all of the individual defendants except Payne on Harris’s state law claims pursuant to the Mississippi Tort Claims Act. Further, the district court granted summary judgment to Harrison County, ruling that Harris did not show his erroneous incarceration was the result of a policy or custom of the county.\nPayne now appeals the denial of his motion for summary judgment. We have jurisdiction over Payne’s appeal pursuant to the collateral order doctrine. See Gobert v. Caldwell, 463 F.3d 339, 344 (5th Cir.2006). Harris appeals the grant of summary judgment to Zugg, Waldrop, Rogers, and Harrison County. We granted Harris leave to appeal under 28 U.S.C. § 1292(b).\nIII. STANDARD OF REVIEW\nWith respect to Harris’s appeal, we review grants of summary judgment, including grants based on qualified immunity, de novo, applying the same standard as the district court. Turner v. Baylor Richard*414son Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007); Stidham v. Tex. Comm’n on Private Sec., 418 F.3d 486, 490 (5th Cir.2005). Summary judgment is appropriate when, after considering the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c); Bulko v. Morgan Stanley DW Inc., 450 F.3d 622, 624 (5th Cir.2006).\nOur consideration of Payne’s appeal of the denial of qualified immunity is more limited, however. See Gobert, 463 F.3d at 344—45. When reviewing the denial of qualified immunity on summary judgment, we are permitted to decide only whether issues of fact are material, which is a question of law. Reyes v. City of Richmond, 287 F.3d 346, 351 (5th Cir.2002); Bazan ex rel. Bazan v. Hidalgo County, 246 F.3d 481, 490 (5th Cir.2001). We are not permitted to decide, and indeed we lack jurisdiction to decide, whether fact issues are genuine. Reyes, 287 F.3d at 351; Bazan, 246 F.3d at 490. Therefore, we must accept the district court’s decision regarding which fact issues are genuine and review de novo the purely legal question of whether those genuine fact issues are also material. See Gobert, 463 F.3d at 345; see also Kinney v. Weaver, 367 F.3d 337, 348 (5th Cir.2004) (en banc) (stating that the court may “consider only whether the district court erred in assessing the legal significance of the conduct that the district court deemed sufficiently supported for purposes of summary judgment”).\nIV. DISCUSSION\nOn appeal, Harris contends that the district court erred in determining that Zugg, Waldrop, and Rogers were entitled to the defense of qualified immunity with respect to Harris’s federal claims and that the Mississippi Tort Claims Act barred Harris’s Mississippi law claims. Harris also asserts that the district court incorrectly granted summary judgment to Harrison County. In his appeal, Payne contends that the district court erred in denying his motion for summary judgment on Harris’s federal and state law claims. We will first address Harris’s federal claims against all of the individual defendants-Zugg, Waldrop, Rogers, and Payne.\nA. Individual Defendants—Federal Claims\nWith respect to Harris’s federal claims, we must decide whether the district court properly determined that Zugg, Waldrop, and Rogers were entitled to qualified immunity on Harris’s constitutional claims, but that Payne was not so entitled. Harris’s complaint makes claims against the individual defendants under the Fourth, Fifth, Eighth, and Fourteenth Amendments; however, he only presents arguments on the Fourth and Fourteenth Amendments on appeal. Therefore, we will confine our analysis to his claims under those amendments. See Robinson v. Guarantee Trust Life Ins. Co., 389 F.3d 475, 481 n. 3 (5th Cir.2004) (“Failure adequately to brief an issue on appeal constitutes waiver of that argument.”).\n1. Qualified Immunity\nQualified immunity shields government officials from both liability and suit when they are acting within their discretionary authority and their conduct does not violate clearly established statutory or constitutional law of which a reasonable person would have known. Wallace v. County of Comal, 400 F.3d 284, 289 (5th Cir.2005); see also Saucier v. Katz, 533 U.S. 194, 200-01, 121 S.Ct. 2151, 150 L.Ed.2d 272 (2001) (“Qualified immunity is an entitle*415ment not to stand trial or face the other burdens of litigation.”) (internal quotation marks omitted). It is a defense that must be pleaded by the government official and should be addressed at an early stage in the litigation. Saucier, 533 U.S. at 200-01, 121 S.Ct. 2151; Siegert v. Gilley, 500 U.S. 226, 231, 111 S.Ct. 1789, 114 L.Ed.2d 277 (1991).\nWe employ a two-step test to analyze claims of qualified immunity. Meadours v. Ermel, 483 F.3d 417, 422 (5th Cir.2007). The first question we must answer is whether the plaintiffs allegations, if true, demonstrate the violation of a clearly established right. Wallace, 400 F.3d at 289; see also Saucier, 533 U.S. at 201, 121 S.Ct. 2151 (defining the threshold question as “[t]aken in the light most favorable to the [plaintiff], do the facts alleged show the officer’s conduct violated a constitutional right?”). A right is “clearly established” when its contours are “sufficiently clear that a reasonable official would understand that what he is doing violates that right.” Wooley v. City of Baton Rouge, 211 F.3d 913, 919 (5th Cir.2000) (internal quotation marks omitted). If the plaintiff has alleged the violation of a clearly established right, we proceed to the second step of the analysis and determine whether the defendant’s conduct was objectively reasonable under the law at the time of the incident. Michalik v. Hermann, 422 F.3d 252, 258 (5th Cir.2005).\nIn the context of a summary judgment motion, the government official need only plead qualified immunity, which then shifts the burden to the plaintiff. Id. at 262. The plaintiff must rebut the defense by establishing that the government official’s allegedly wrongful conduct violated clearly established law and that genuine issues of material fact exist regarding the reasonableness of the government official’s conduct. Id. We now analyze Harris’s claims using this framework.\n2. Fourth Amendment Claim\nWe turn first to Harris’s claims under the Fourth Amendment, which are twofold. He first asserts that Zugg and Waldrop violated his Fourth Amendment rights by arresting him without probable cause. He then claims that Payne violated his Fourth Amendment rights by not presenting him to a judicial officer within forty-eight hours of his arrest.1\na. Zugg and Waldrop\nTo survive the first step of the qualified immunity analysis, Harris must allege facts that demonstrate that Zugg and Waldrop violated his Fourth Amendment rights. See Wallace, 400 F.3d at 289. Harris has asserted that Zugg and Waldrop arrested him without probable cause, violating several policies of the sheriffs office in the process, and that they should have verified his identity by looking at the paperwork. The undisputed facts are that Zugg and Waldrop picked up Harris from Forrest County and transported him to the HCADC without ever receiving any paperwork regarding Harris.\nThe Fourth Amendment requires that probable cause exist before the government may arrest an individual. U.S. Const. amend. IV; Freeman v. Gore, 483 F.3d 404, 411 (5th Cir.2007). Here, probable cause was present, as Harris was arrested pursuant to a warrant that had been issued following a grand jury indictment. “A warrant of arrest can be based upon an indictment because the grand *416jury’s determination that probable cause existed for the indictment also establishes that element for the purpose of issuing a warrant for the apprehension of the person so charged.” Giordenello v. United States, 357 U.S. 480, 487, 78 S.Ct. 1245, 2 L.Ed.2d 1503 (1958); Campbell v. City of San Antonio, 43 F.3d 973, 976 (5th Cir. 1995) (noting that an arrest warrant may be based on a grand jury indictment which establishes probable cause). Harris has not argued that the warrant was not based on probable cause or that it was faulty or improperly obtained. Consequently, probable cause existed to arrest Harris.\nThat Harris was not the “Donald Harris” named in the warrant does not create a Fourth Amendment violation. The Supreme Court has stated that “[w]hen the police have probable cause to arrest one party, and when they reasonably mistake a second party for the first party, then the arrest of the second party is a valid arrest.” Hill v. California, 401 U.S. 797, 802, 91 S.Ct. 1106, 28 L.Ed.2d 484 (1971) (internal quotation marks omitted). The Fifth Circuit has followed this rule, stating that “[t]he Fourth Amendment is not violated by an arrest based on probable cause, even if the wrong person is arrested, if the arresting officer had a reasonable, good faith belief that he was arresting the correct person.” Blackwell v. Barton, 34 F.3d 298, 303 (5th Cir.1994). Under this standard, the use of the alias capias warrant to detain Harris does not violate the Fourth Amendment as long as Zugg and Waldrop’s actions were reasonable.\nHarris asserts that Zugg and Waldrop’s actions were not reasonable because they did not verify his identity before taking him into custody. This court encountered a similar situation in Blackwell, 34 F.3d at 300-04. In that case, a police officer arrested Mindy Blackwell, who had the same first name and general appearance as a person described in a warrant. Id. at 300. Blackwell gave the officer her driver’s license, which showed she had a different last name than the warrant described, but the officer did not look at it. Id. On appeal, we stated that the critical question was “not whether a reasonable officer would have looked at the driver’s license to confirm the name and other identifying information” but rather whether a reasonable officer could believe Blackwell was the suspect. Id. at 304. We ruled that the officer was entitled to qualified immunity, even if in hindsight he could have taken other reasonable actions to determine Blackwell’s identity. Id.\nHere, the HCADC told Zugg and Waldrop that they needed to retrieve Harris, and the Forrest County Sheriffs Office told Zugg and Waldrop that Forrest County had all the necessary paperwork. Zugg and Waldrop’s reliance on these statements to establish that Harris was the proper individual is reasonable, even if they could have taken other reasonable actions to verify his identity. See United States v. Walker, 960 F.2d 409, 416 (5th Cir.1992) (“The arresting officer does not have to have personal knowledge of all the facts constituting probable cause; it can rest upon the collective knowledge of the police when there is communication between them.”) (internal quotation marks omitted); see also United States v. Holland, 438 F.2d 887, 888 (6th Cir.1971) (“The fact that the officers did not have physical possession of the warrant at the time of the arrest is of no consequence to the validity of the arrest.”).\nHarris also makes much of the fact that Zugg and Waldrop violated several general orders of the Sheriffs office by not having the paperwork with them and ensuring that they had the correct individual. The violation of a general order, however, is *417not the same as a violation of the Constitution. See Fraire v. City of Arlington, 957 F.2d 1268, 1276 (5th Cir.1992) (stating that “even a negligent departure from established police procedure does not necessarily signal violation of constitutional protections”); see also United States v. De Leon-Reyna, 930 F.2d 396, 399-400 (5th Cir. 1991) (en banc) (finding no Fourth Amendment violation when officer did not use “code word” policy when reading license plate to dispatcher, resulting in mistaken detention of vehicle). Therefore, Harris’s allegations that Zugg and Waldrop violated general orders do not necessarily state a constitutional claim. As shown above, Zugg and Waldrop’s actions were reasonable and do not create a right to relief under the Fourth Amendment. That Zugg and Waldrop also violated internal policies does not transform Harris’s claim into one of constitutional dimension.\nHarris further argues that Cozzo v. Tangipahoa Parish Council-President Government, 279 F.3d 273 (5th Cir.2002), supports his claim that Zugg and Waldrop were required by the Fourth Amendment to verify his identity. In Cozzo, a deputy evicted the plaintiff from her home on the basis of a TRO that did not actually require her eviction. Id. at 279. The deputy conceded he had violated the Fourth Amendment, and the court’s analysis concerned the second prong of the qualified immunity test. Id. at 284-85. There, the court ruled that the jury was permitted to find that the deputy violated the plaintiffs rights, because the plaintiff actually pointed out to the deputy where he was misreading the TRO. See id. at 285. Here, unlike Cozzo, Zugg and Waldrop did not have any exculpatory paperwork with them that would have exonerated Harris had they considered it.\nIn sum, and taking Harris’s factual allegations as true, Harris has not alleged that Zugg and Waldrop violated a clearly established constitutional right. Pi’obable cause existed for Harris’s arrest because Zugg and Waldrop acted pursuant to a facially valid warrant and did not act unreasonably in doing so, even though Harris was not ultimately the man named in the warrant. Therefore, the district court correctly determined that Zugg and Waldrop were entitled to qualified immunity on this claim, and we affirm that portion of the district court’s decision.\nb. Payne\nWith respect to Payne, Harris contends that Payne’s failure to present him to a judicial officer within forty-eight hours of his arrival at the HCADC constitutes a violation of the Fourth Amendment. The district court did not specifically address this claim, but because it denied summary judgment to Payne, we consider the claim on appeal.\nTo establish his Fourth Amendment claim against Payne, Harris relies on Rule 6.03 of Mississippi’s Uniform Rules of Circuit and County Court Practice, which states, in part:\nEvery person in custody shall be taken, without unnecessary delay and within 48 hours of arrest, before a judicial officer or other person authorized by statute for an initial appearance.\nUpon the defendant’s initial appearance, the judicial officer or other person authorized by statute shall ascertain the defendant’s true name and address, and amend the formal charge if necessary to reflect this information. The defendant shall be informed of the charges against him/her and provided with a copy of the complaint.\nHarris asserts that by not taking him to a judicial officer after his arrival at the HCADC, Payne violated the Fourth Amendment. We disagree.\n*418The Mississippi Supreme Court has held that a violation of Rule 6.03 does not necessarily equate to a Fourth Amendment violation. Lawrence v. State, 869 So.2d 353, 355-56 (Miss.2003) (en banc) (ruling that because arrest warrant was issued within forty-eight hours of defendant’s arrest, failure to provide initial appearance did not amount to Fourth Amendment violation). This holding accords with Supreme Court precedent on the issue of initial appearances. In Gerstein v. Pugh, the Court held that the Fourth Amendment requires a state to “provide a fair and reliable determination of probable cause as a condition for any significant pretrial restraint of liberty, and this determination must be made by a judicial officer either before or promptly after arrest.” 420 U.S. 103, 124-25, 95 S.Ct. 854, 43 L.Ed.2d 54 (1975) (footnotes omitted). The Court has also stated that “since the probable cause standard for pretrial detention is the same as that for arrest, a person arrested pursuant to a warrant issued by a magistrate on a showing of probable! jcause is not constitutionally entitled to a separate judicial determination that there is probable cause to detain him pending trial.” Baker v. McCollan, 443 U.S. 137, 143, 99 S.Ct. 2689, 61 L.Ed.2d 433 (1979).\nUnder these cases, the allegation that Payne did not provide Harris with an initial appearance in violation of Rule 6.03 does not state a claim under the Fourth Amendment. The grand jury determined that there was probable cause that Donald Harris committed a crime when it indicted Donald Harris, and the alias capias warrant was based on the indictment. As a result, probable cause for Harris’s pretrial detention existed, and Harris was not constitutionally entitled to a second determination of probable cause. Consequently, Harris’s Fourth Amendment claim against Payne does not state a claim for a violation of clearly established law, and the district court erred when it denied qualified immunity to Payne on this claim. Therefore, we reverse that portion of the district court’s decision.\n3. Fourteenth Amendment\nHarris next asserts that Zugg, Waldrop, Rogers, and Payne violated his rights under the Fourteenth Amendment by depriving him of his liberty without due process of law. The district court determined that Zugg, Waldrop, and Rogers were entitled to qualified immunity on this claim, but that Payne was not.\nThe Supreme Court confronted a situation in which a plaintiff brought suit for the violation of his due process rights after he was erroneously incarcerated in Baker v. McCollan, 443 U.S. 137, 99 S.Ct. 2689, 61 L.Ed.2d 433 (1979). In Baker, Leonard McCollan obtained a duplicate of his brother Linnie’s driver’s license that was identical to Linnie’s in all respects except that Leonard’s picture was on it. Id. at 140, 99 S.Ct. 2689. Leonard was then arrested on narcotics charges, but was booked and released as Linnie. Id. at 140-41, 99 S.Ct. 2689. Linnie was later stopped for running a red light. Id. at 141, 99 S.Ct. 2689. The police ran a routine warrant check and discovered the warrant for Linnie. Id. Linnie spent three days in custody before the police compared his appearance to the file photograph of Leonard and released him. Id. Linnie brought suit for the violation of his rights under the Fourteenth Amendment. Id. The Fifth Circuit determined that T.L. Baker, the sheriff, was not entitled to qualified immunity because there was a question as to whether the procedures that Baker instituted to identify detainees were reasonable. Id. at 141-42, 99 S.Ct. 2689.\n*419On appeal, the Supreme Court did not reach the issue of the reasonableness of Baker’s procedures, instead holding that Linnie failed the first step of the qualified immunity analysis by not alleging the violation of a clearly established right under the United States Constitution. Id. at 143-44, 99 S.Ct. 2689. Linnie claimed that Baker deprived him of his liberty by intentionally failing to investigate and determine that the wrong man had been imprisoned. Id. at 143, 99 S.Ct. 2689. The Supreme Court, however, stated that the Fourteenth Amendment does not protect against all deprivations of liberty, but rather only those accomplished “without due process of law.” Id. at 145, 99 S.Ct. 2689 (internal quotations marks omitted). The Court went on to explain:\nGiven the requirements that arrest be made only on probable cause and that one detained be accorded a speedy trial, we do not think a sheriff executing an arrest warrant is required by the Constitution to investigate independently every claim of innocence, whether the claim is based on mistaken identity or a defense such as lack of requisite intent. Nor is the official charged with maintaining custody of the accused named in the warrant required by the Constitution to perform an error-free investigation of such a claim. The ultimate determination of such claims of innocence is placed in the hands of the judge and the jury.\nId. at 145-46, 99 S.Ct. 2689.\nThe Court, however, did not entirely shut the door on the possibility that the erroneous detention of an innocent person could result in a constitutional claim. Instead, the Court stated, “[ojbviously, one in [Linniej’s position could not be detained indefinitely in the face of repeated protests of innocence even though the warrant under which he was arrested and detained met the standards of the Fourth Amendment.” Id. at 144, 99 S.Ct. 2689. The Court further stated, “[w]e may even assume, arguendo, that, depending on what procedures the State affords defendants following arrest and prior to actual trial, mere detention pursuant to a valid warrant but in the face of repeated protests of innocence will after the lapse of a certain amount of time deprive the accused of ‘liberty ... without due process of law.’ ” Id. at 145, 99 S.Ct. 2689. The Court, however, did not elaborate further on what circumstances might give rise to a due process violation.\nThe Court in Baker originally granted certiorari to determine whether an allegation of negligence was sufficient to state a claim under § 1983, but it ultimately did not reach that issue. Id. at 139-40, 99 S.Ct. 2689. In a subsequent case, the Court concluded that “the Due Process Clause is simply not implicated by a negligent act of an official causing unintended loss of or injury to life, liberty, or property.” Daniels v. Williams, 474 U.S. 327, 328, 106 S.Ct. 662, 88 L.Ed.2d 662 (1986). The Fifth Circuit has had occasion to apply the principles in Baker and Daniels with respect to due process claims arising from erroneous detentions or incarcerations.\nIn Sanchez v. Swyden, this court considered the case of Oscar Sanchez, who was detained by police for twenty-six hours because his name and general description matched those on a warrant from Tennessee. 139 F.3d 464, 465 (5th Cir.1998). Although the police were faxed further information several hours after Sanchez’s detention that indicated that Sanchez was not the individual sought, the police took no action until the judge at Sanchez’s probable cause hearing ordered the police to confirm Sanchez’s identity, at which time he was released. Id. at 465-66. We held that Sanchez’s allegations amounted *420to no more than mere negligence and thus did not state a claim for the violation of a clearly established constitutional right. Id. at 469.\nSimilarly, in Simmons v. McElveen, the plaintiff spent eight months in jail after being identified as the assailant in an armed robbery, even though his fingerprints did not match those of the assailant. 846 F.2d 337, 338-39 (5th Cir.1988). This court held that, in hindsight, the police should have looked at the fingerprints; however, the allegations of police misconduct did not exceed mere negligence, which was not actionable. Id. at 339.\nThis court reached the opposite result in Sanders v. English, 950 F.2d 1152 (5th Cir.1992). In Sanders, Floyd Sanders was arrested after being identified as the assailant in an armed robbery. Id. at 1155-56. Curtis McCoy, the arresting officer, subsequently received credible information that Sanders was not the assailant but did not bring the information to the attention of the police chief or the prosecutor. Id. at 1156-57. Sanders remained incarcerated for fifty days as a result. Id. at 1158. We held that McCoy was not entitled to qualified immunity on summary judgment because there was a fact issue as to whether McCoy “failed to release [Sanders] even after [McCoy] knew (or should have known) that Sanders had been misidentified.” Id. at 1162 (characterizing the facts as demonstrating that the officer “knowingly and willfully ignored substantial exculpatory evidence”). We distinguished Baker by reasoning that Baker dealt with the failure to take affirmative steps to investigate the suspect’s innocence, rather than the failure to act on known information. Id. We held, however, that Sheriff English, whose involvement in the case consisted of hearing a few witnesses claim that Sanders was innocent, was entitled to qualified immunity, as his actions in failing to investigate Sanders’s innocence were at most negligent. Id. at 1159-60.\n■ Taking all of these eases into account, allegations that an officer had exculpatory information in his possession but did not take the affirmative step of reviewing it are not sufficient to state a due process claim. See Sanchez, 139 F.3d at 469 (“That law enforcement officials were in possession of information that exculpated Sanchez does not change [the qualified immunity] result.”) Instead, as in Sanders, the plaintiff must demonstrate that the officer knew or should have known that the plaintiff was wrongly detained.\nThis idea is consistent with the eases cited by Harris. In Gay v. Wall, the Fourth Circuit held that claims that the officer had actual knowledge of the defendant’s innocence, but continued to detain him, fall outside the limitation of Baker and are actionable. 761 F.2d 175, 178-79 (4th Cir.1985). Similarly, in Cozzo, the officer who erroneously evicted the plaintiff pursuant to a TRO was actually shown by the plaintiff that the TRO did not call for her eviction. 279 F.3d at 285. Therefore, the cases cited by Harris stand only for the proposition that an officer’s actual knowledge of a suspect’s innocence can overcome the limitation of Baker, which is consistent with the Fifth Circuit cases cited above.2\n*421Using the principles described above, we must conclude that Harris has failed to state a claim against any of the individual defendants for the violation of a clearly established constitutional right. As described in Baker, the Constitution does not require police officers to “investigate independently every claim of innocence----” 448 U.S. at 145-46, 99 S.Ct. 2689. Further, Harris’s one protest of innocence to Zugg and Waldrop and one protest to Payne are not sufficient to fall under the exception created in Baker for individuals who make “repeated protests” of innocence.\nHarris has also not alleged that any act by Zugg, Waldrop, Rogers, or Payne rises beyond the level of negligence. See Sanchez, 139 F.3d at 469 (“[W]e have required proof that the official’s actions went beyond mere negligence before th[e] tort [of false imprisonment] takes on constitutional dimensions.”). While all of the individuals had access to information that would have exonerated Harris, none of them was aware of it, nor has Harris shown that any of the individuals should have been aware of it. Under our precedent, these allegations are insufficient to state a claim for the violation of a constitutional right. As a result, all of the individual defendants, including Payne, are entitled to qualified immunity. Therefore, we affirm the district court’s ruling as to Zugg, Waldrop, and Rogers, but we reverse as to Payne.\nB. Individual Defendants—State Claims\nWe now turn to Harris’s state law claims of negligence, gross negligence, negligent infliction of emotional distress, intentional infliction of emotional distress, malicious prosecution, assault and battery, false imprisonment and arrest, defamation and slander, wrongful detention, and mistaken identity. The district court granted summary judgment on the basis of the Mississippi Tort Claims Act (“MTCA”) to Zugg, Waldrop, and Rogers, but not to Payne.\nPursuant to the MTCA,\n(1) A governmental entity and its employees acting within the course and scope of them employment or duties shall not be liable for any claim:\n^ ^\n(c) Arising out of any act or omission of an employee of a governmental entity engaged in the performance or execution of duties or activities relating to police or fire protection unless the employee acted in reckless disregard of the safety and well-being of any person not engaged in criminal activity at the time of injury....\nMiss.Code Ann. § 11-46-9. As used in this statute, “reckless disregard” has been described by the Mississippi Supreme Court as “more than ordinary negligence, but less than an intentional act.” City of Jackson v. Brister, 838 So.2d 274, 280 (Miss. 2003); see also Titus v. Williams, 844 So.2d 459, 468 (Miss.2003) (stating that reckless disregard encompasses “willful and wanton” actions). To meet this standard, the officer’s conduct must “evince[ ] not only some appreciation of the unreasonable risk involved, but also a deliberate disregard of that risk and the high probability of harm involved.” Maldonado v. Kelly, 768 So.2d 906, 910-11 (Miss.2000). The Mississippi Supreme Court has further defined reckless disregard as a “conscious indifference to consequences, amounting almost to a willingness that harm should follow.” Titus, 844 So.2d at 468 (internal quotation marks omitted). To avoid summary judgment, a plaintiff must create a genuine issue of material fact that the officers “took action that they knew would result or intended to result” in injury. Id.\n*422On appeal, the parties do not dispute the definition of reckless disregard, but instead argue over whether the actions of the individual defendants constitute reckless disregard. As described above, the conduct of Zugg, Waldrop, Rogers, and Payne, as alleged by Harris, does not rise above the level of negligence. Under Mississippi law, the reckless disregard standard is not satisfied by conduct that is merely negligent. See City of Jackson, 838 So.2d at 280. Consequently, the MTCA precludes a finding that the individual defendants are liable for any state tort claims. Therefore, we affirm the grant of summary judgment to Zugg, Waldrop, and Rogers, and we reverse the denial of summary judgment to Payne.\nC. Harrison County\nFinally, Harris appeals the grant of summary judgment to Harrison County. The district court\" dismissed Harris’s claims against Harrison County because Harris had not set forth evidence of a policy or custom of Harrison County that caused the deprivation of his rights. Harris does not contest that he did not establish a policy or custom of Harrison County, but instead argues that Harrison County is liable for Payne’s actions because he is a policymaker for the county.\nNormally, a governmental entity is not liable under § 1983 unless the evidence establishes that a policy or custom of the government caused the constitutional violation, and a single act by a government employee is often insufficient to establish the requisite policy or custom. See Gelin v. Hous. Auth. of New Orleans, 456 F.3d 525, 527 (5th Cir.2006); Piotrowski v. City of Houston, 237 F.3d 567, 581 (5th Cir.2001). However, the Fifth Circuit’s cases are clear that “[a] single decision may create municipal liability if that decision [is] made by a final policymaker responsible for that activity.” Woodard v. Andrus, 419 F.3d 348, 352 (5th Cir.2005) (internal quotation marks omitted); see also Jett v. Dallas Indep. Sch. Dist. 7 F.3d 1241, 1246 (5th Cir.1993). Further, this court has held that “[s]heriffs in Mississippi are final policymakers with respect to all law enforcement decisions made within their counties.” Brooks v. George County, 84 F.3d 157, 165 (5th Cir.1996). Therefore, Harrison County is liable for Payne’s acts as Sheriff, because he is a final policymaker for Harrison County, regardless of the existence of a policy or custom. Consequently, the district court did err in dismissing Harrison County while leaving Payne in the case. However, as noted above, Harris’s allegations against Payne do not state a claim for the violation of a constitutional right. Payne’s actions were, at most, negligent, and therefore do not give rise to a constitutional claim. As a result, there is no misconduct by Payne for which Harrison County can be held liable. Therefore, we affirm the grant of summary judgment to Harrison County.\nV. CONCLUSION\nIn sum, it is clear that the Harrison County system failed Harris at every point, and the fact that a clearly innocent individual can be held for four months without a court appearance or verification of his identity gives us great concern. However, the actions of the individual defendants sued by Harris and involved in this appeal amounted to no more than negligence, which is insufficient to create a constitutional claim or to fall outside the protection of the MTCA. Therefore, we AFFIRM the district court’s decision granting summary judgment to Zugg, Waldrop, Rogers, and Harrison County. We REVERSE the denial of summary judgment as to Payne.\n*423AFFIRMED in part and REVERSED in part.\n\n Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.\n\n\n. Although Harris includes mention of Rogers in his Fourth Amendment claim, he makes no allegations that she was involved in the decision to arrest Harris. Her actions, thus, will be analyzed under Harris's Fourteenth Amendment claims.\n\n\n. Harris also relies on Jones v. City of Jackson, 203 F.3d 875, 880-81 (5th Cir.2000), in which this court denied qualified immunity to a sheriff and his deputy when an individual was wrongly incarcerated for nine months. While Jones does provide support for Harris’s arguments, we find that the majority of precedent in the Fifth Circuit and Supreme Court militates toward granting qualified immunity. The Jones opinion does not cite any of the relevant precedent described above regarding due process and makes no attempt to explain or distinguish it. Therefore, the Jones opinion is not persuasive in this instance.\n\n", "ocr": false, "opinion_id": 9414926 }, { "author_str": "Dennis", "per_curiam": false, "type": "030concurrence", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nDENNIS, Circuit Judge,\nconcurring in the judgment:\nI respectfully concur in the judgment. The majority reached the right result in granting qualified immunity to all defendants. I disagree with the majority in that the defendants did violate the Fourth and Fourteenth Amendment rights in several respects as the plaintiff alleges, but I agree with the majority in granting of qualified immunity to all defendants, because those rights were not clearly established at the time of the violations.\n", "ocr": false, "opinion_id": 9414927 } ]

[ "793 P.2d 1025" ]

[ { "author_str": "Compton", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\n793 P.2d 1025 (1990)\nSTATE of Alaska, DEPARTMENT OF REVENUE, Appellant,\nv.\nAngela GAZAWAY, Jennifer Gazaway, and Andrea Gazaway, Appellees.\nNo. S-3120.\nSupreme Court of Alaska.\nJune 1, 1990.\nJames Forbes, Asst. Atty. Gen., Anchorage, and Douglas B. Baily, Atty. Gen., Juneau, for appellant.\nHal P. Gazaway, Anchorage, and Richard Gazaway, Anchorage, for appellees.\nBefore MATTHEWS, C.J., and RABINOWITZ, COMPTON and MOORE, JJ.\n\nOPINION\nCOMPTON, Justice.\nThis is an appeal from a reversal by the superior court of a decision of the Commissioner of Revenue (Commissioner). The Commissioner denied permanent fund dividends to Angela, Andrea and Jennifer Gazaway (collectively \"children\") for the year 1982, and to Andrea and Jennifer for 1985. The Commissioner ruled that the childrens' absences from Alaska were not allowable absences under the applicable regulations and thus they did not satisfy the residency requirements for receiving fund dividends. The superior court reversed, holding that the children had established their residency. We conclude that the children's absences from the state were not temporary and were therefore not allowable absences entitling the children to fund dividends. We reverse.\n\n\n*1026 I. FACTUAL AND PROCEDURAL BACKGROUND\nThe children, minors at the time of these proceedings, resided in Alaska with their parents Hal and Cheryl Gazaway until September 1981. After filing for divorce, Cheryl took the children to Oklahoma in September, 1981, doing so, according to Hal, without his consent. The children returned to Alaska for June, July and part of August 1982 in compliance with a child custody agreement approved by the superior court.\nThe custody agreement provided that the children would spend their summer vacations and alternating Christmas and spring vacations with Hal in Alaska. The remainder of the year would be spent with their mother in Oklahoma.\nIn September 1982 Hal submitted permanent fund dividend applications[1] for the children. The Department of Revenue (DOR) initially distributed dividends to the children, but later determined that their absences from the state were not allowable absences, and demanded that the dividends be returned.\nHal also submitted permanent fund dividend applications for the children for 1985. The applications for two of the children were denied for the same reason as the 1982 dividends. The DOR determined that the oldest child was absent from the state for an allowable reason and approved her application.[2]\nFollowing an appeal by the children, the DOR upheld both denials. The children then appealed to the superior court, pursuant to Alaska Appellate Rule 601, which reversed the DOR's decision.\nThe superior court held that the children had established their Alaska residency by \"overwhelming evidence.\" The court further held that the children's Alaska residency was not forfeited by their absence from the state pursuant to a divorce decree. The DOR appealed to this court.\n\nII. DISCUSSION\n\nA. THE ABSENCE OF THE CHILDREN WAS NOT TEMPORARY IN NATURE OR DURATION AND THUS DID NOT CONSTITUTE AN ALLOWABLE ABSENCE.\nTo be eligible for dividends, 15 AAC 23.450[3] (applicable to 1982 dividends) and 15 AAC 23.655[4] (applicable to 1985 dividends) require that any absences from the state during the six months prior to the date of application be for one of twelve enumerated reasons. 15 AAC 23.460 (1982); 15 AAC 23.665 (1983). The only allowable absence for which the children might arguably qualify authorizes the department to find an absence to be allowable if it is of a temporary nature and duration. 15 AAC 23.460(j) (1982)[5]; 15 AAC 23.665(j) (1983).[6] Thus, a threshold consideration *1027 regarding the children's entitlement to dividends is whether their absence from the state was temporary.\nIn the formal hearing following the denial of the children's dividends, the DOR found that the children's absences were not allowable under 15 AAC 23.460(j) or 15 AAC 23.665(j). Since this conclusion is the result of an agency's interpretation of its own regulations, the \"reasonable basis\" standard of review is appropriate. Rose v. Commercial Fisheries Entry Comm'n, 647 P.2d 154, 161 (Alaska 1982). The DOR interpreted its regulation permitting absences from Alaska that are temporary in nature and duration to include only absences that are not longer in duration than the time actually spent in Alaska. We conclude that this is a reasonable interpretation of the regulation.\nTemporary is defined as \"[t]hat which is to last for a limited time only.\" Black's Law Dictionary 1312 (5th ed. 1979). It is evident from the facts that the children were present in Alaska for only a limited time every year.[7]\nThe children were in Alaska for less than a third of the years in question. Their absences from the state were regular and of longer duration than their presence in the state. In effect, the children were temporarily present in Alaska, not temporarily absent.\nThe children also claim that the distinction made by AS 43.23.095(7)(B)[8] between secondary and elementary education violates their right to equal protection. We decline to reach this issue.\nArguments are considered on appeal if raised explicitly in the superior court, or if the issue is \"1) not dependent on any new or controverted facts; 2) closely related to the appellant's trial court arguments; and 3) could have been gleaned from the pleadings,\" or if failure to address the issue would propagate \"plain error.\"\n(Citations omitted). Sea Lion Corp. v. Air Logistics of Alaska, 787 P.2d 109, 115 (Alaska 1990). In this case, the children did not raise this issue at the administrative hearing or on appeal to the superior court. In addition, there is no record concerning the legislative intent behind the statute or the purpose behind the children's attending school in Oklahoma. The children's argument at the administrative hearing alleging that the durational residency requirement infringed their right to travel is not closely related to this challenge of AS 43.23.095(7)(B), nor may this argument be gleaned from their pleadings. We therefore deem the children's equal protection argument waived. State v. Northwestern Constr., Inc., 741 P.2d 235, 238-39 (Alaska 1987).\n\nB. THE CHILDREN DID NOT RETAIN THEIR ALASKA RESIDENCY FOR DIVIDEND PURPOSES AS A RESULT OF THEIR ABSENCE FROM THE STATE PURSUANT TO A DIVORCE DECREE.\nThe children contend, and the superior court held, that since their absences from the state were in compliance with a divorce decree, they did not lose their Alaska residency. In support of its holding, the superior court cited In re Yarina, 73 F. Supp. 688 (N.D. Ohio 1947). Yarina involved an immigrant to the United States who, while living on United States soil in order to become naturalized, was captured by the Japanese in the early days of World War II. Following Yarina's release at the *1028 end of the war, he was denied citizenship because he had not lived on United States soil for the required period of time. The court held that the statute denying citizenship to an alien absent for more than one year during his naturalization contemplated a voluntary absence. Id. at 689. Yarina's capture and removal by enemy forces, the court held, was involuntary and that for purposes of naturalization Yarina had never left American soil. Id.\nYarina bears little resemblance to the case at hand. Although Hal claims that the children were originally taken to Oklahoma by his wife without his consent, it is not claimed that they were abducted, kidnapped, or taken by force. The superior court ordered the children to spend part of the year in Oklahoma for the sole reason that it was agreed to by their parents in a custody agreement.\n\nC. THE CHILDREN ARE NOT ENTITLED TO ATTORNEY'S FEES.\nA prevailing public interest litigant may be entitled to an award of full, reasonable attorney's fees. The superior court so ordered. In view of our disposition of the case, the children are no longer the prevailing parties in the superior court and thus they are not entitled to attorney's fees. The award is vacated.\n\nIII. CONCLUSION\nThe children's absences from the state were not of a temporary nature or duration. Therefore, they were not entitled to dividends during the relevant period. The children waived any objection to an alleged unconstitutionality of AS 43.23.095, by failing to raise the issue before the administrative tribunal or the superior court. Finally, because the children are no longer prevailing public interest litigants, they are not entitled to attorney's fees. Accordingly, we REVERSE the judgment, and REMAND to the superior court for proceedings consistent with this opinion.\nBURKE, J., not participating.\nNOTES\n[1] The \"permanent fund\" is an account established by the Alaska Constitution into which is placed a portion of the money paid to the state by developers of Alaska's natural resources. Each year a portion of the earnings of the fund is distributed as \"dividends\" to qualified Alaska residents who apply to receive them. See AS 37.13.020.\n[2] Although the DOR did distribute a dividend to Angela Gazaway in 1985 upon her entering high school, the DOR does not concede the propriety of this payment. We have not been requested to review the propriety of that action.\n[3] 15 AAC 23.450(a) reads in pertinent part:\n\nAn individual may not claim a dividend payment if during the six months immediately preceding his or her application the individual was absent from the state for one or more reasons not included as an allowable absence under 15 AAC 23.460.\n[4] 15 AAC 23.655(a) reads in pertinent part:\n\nAn individual may not claim a dividend payment if during the six-month period described in 15 AAC 23.615(a)(2) the individual was absent from the state for one or more reasons not included as an allowable absence under 15 AAC 23.665.\n[5] 15 AAC 23.460(j) reads in pertinent part:\n\nAn absence for any other purpose will, in the department's discretion, be allowed by the department of the nature and duration of the absence are temporary and are consistent with an intent to return to the state and remain permanently in the state.\n[6] 15 AAC 23.665(j) reads in pertinent part:\n\nAn absence ... will, in the department's discretion, be allowed by the department [DOR] if the nature and duration of the absence are temporary and are consistent with an intent to return to the state and remain permanently in the state.\n[7] The children urge that since they regularly return every summer and every other Christmas and spring vacation to Alaska, their absences must be temporary. This argument, however, does not withstand analysis. The fallacy in the argument is apparent if, for example, the children returned regularly to Alaska for only Christmas Day. Although present in Alaska for only one day a year, the children would have us hold that such an absence from Alaska is temporary since they return every year. This is not a reasonable construction of \"temporary.\"\n[8] AS 43.23.095(7)(B) reads as follows:\n\n(7) \"state resident\" means an individual who is physically present in the state with the intent to remain permanently in the state or, if the individual is not physically present in the state, intends to return to the state and is absent only for any of the following reasons:\n... .\n(B) secondary or postsecondary education;\n\n", "ocr": false, "opinion_id": 2608796 } ]

[ "37 F.2d 279" ]

[ { "author_str": "Hicks", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\n37 F.2d 279 (1930)\nKENTUCKY ROCK ASPHALT CO.\nv.\nFIDELITY & CASUALTY CO. OF NEW YORK.\nNo. 5287.\nCircuit Court of Appeals, Sixth Circuit.\nJanuary 18, 1930.\nJoseph S. Laurent, Robert G. Gordon and Squire R. Ogden, all of Louisville, Ky., for appellant.\nFred Forcht and Ben F. Washer, both of Louisville, Ky., for appellee.\nBefore MOORMAN and HICKS, Circuit Judges, and KILLITS, District Judge.\nHICKS, Circuit Judge.\nAppeal from an order sustaining a demurrer to plaintiff's second amended petition and dismissing the suit. So far as is relevant here, the amended petition avers that the Sutton Construction Company, hereinafter called Construction Company, contracted with the city of Louisa, Ky., for paving certain streets with asphalt. The pertinent provisions of the contract are as follows:\n\"The party of the second part further agrees that it will furnish the said city with satisfactory evidence that all persons who have done work or furnished material under this agreement and are entitled to a lien therefor under any laws of the state of Kentucky have been fully paid or are no longer entitled to such lien.\n\"Said party of the second part further agrees that it will execute a bond in the sum of said contract secured by a responsible guaranty satisfactory to the said city for the faithful performance of this contract and in accordance with the terms of said ordinance.\" (Italics used for the purpose hereinafter indicated.)\nThe petition alleges that pursuant to the above quoted condition of the contract the Construction Company executed a bond to the city with the defendant, the Fidelity & Casualty Company of New York, surety thereon. The essential provisions of the *280 bond, in addition to the general obligation to perform, are as follows:\n\"Shall keep and save the obligee [city of Louisa] harmless and indemnify it from and against any and all claims, demands, judgments or expenses of every description incurred or caused or growing out of the prosecution or construction of said work according to the terms of said contract and shall repay all sums of money which the said obligee may pay to other persons on account of the work or labor done or materials furnished on said contract, and if the principal shall pay to the said obligee all damages which may be sustained by it resulting from nonperformance on the part of said principal of any of the covenants, conditions, stipulations and agreements of said contract.\"\nThe petition avers that plaintiff sold and delivered asphalt to the Construction Company which was used by it in the construction of the streets of Louisa under its contract; that the Construction Company failed to pay in full for this asphalt; that its failure was a breach of its contract with the city, wherefore plaintiff sued the defendant as surety upon the Construction Company's bond for the balance due.\nWe think the District Judge was right. The bond read in connection with the contract was a common-law obligation. There are no inconsistent provisions which would justify the court in adopting that one favorable to plaintiff upon the principle of liberal construction as against a compensated surety. The meaning of the contract is plain and in such case the surety, even though it be a bonding company for profit, is entitled to have it interpreted according to ordinary principles. Hooper-Mankin Fuel Co. v. C. & O. Ry. Co., 30 F.(2d) 500, 502 (C. C. A. 4); Gilmore & P. R. Co. v. U. S. Fid. & Guar. Co., 208 F. 277, 279 (C. C. A. 3); Bench Canal Drain. Dist. v. Md. Cas. Co., 278 F. 67, 80 (C. C. A. 8). The bond and contract, read together, were for the protection of the obligee, the city of Louisa. The bond indemnified the city against any breach of the Construction Company's contract and its failure to pay the resultant damages. The bond, read with the contract, protected the city from the failure of the Construction Company to furnish satisfactory evidence that any possible liens created under Kentucky laws had been discharged. It also protected the city from claims of any character against it growing out of the improvement. There is no suggestion of any intent to pay this particular claim of plaintiff or for that matter any other of the Construction Company's debts. Plaintiff was neither a party to the bond and contract nor mentioned therein. The case is controlled, therefore, by the common-law rule that no one can maintain an action in his own name upon a contract to which he is not a party. Warner v. Conn. Mut. Life Ins. Co., 109 U.S. 363, 3 S. Ct. 221, 27 L. Ed. 962; First M. E. Church v. Isenberg, 246 Pa. 221, 224, 92 A. 141; Brick & Tile Co. v. Fid. & Guar. Co., 108 Kan. 21, 23, 194 P. 316; Trust Co. v. Constr. Co., 191 N. C. 664, 665, 132 S.E. 804; Roofing Co. v. Gaspard, 89 Ohio St. 185, 193, 106 N.E. 9, L. R. A. 1915A, 768, Ann. Cas. 1916A, 745; Pankey v. Nat. Sur. Co., 115 Or. 648, 651, 239 P. 808. The contract to do the paving with asphalt was not an agreement to pay for the asphalt. United States v. Stewart (C. C. A.) 288 F. 187, 189; Hardison v. Yeaman, 115 Tenn. 639, 648, 91 S.W. 1111.\nCitizens' T. & G. Co. v. Peebles Paving Brick Co., 174 Ky. 439, 192 S.W. 508, and the cases cited therein, to wit, Albin Co. v. Commonwealth, 128 Ky. 295, 108 S.W. 299, and Matheny v. Chester, 141 Ky. 790, 133 S.W. 754, fall, not within the general rule, but within the exception, that one for whose benefit a bond is given may enforce it. [Maumee Valley Elec. Co. v. City of Toledo (C. C. A.) 13 F.(2d) 98, 104], and therefore are not controlling here. It is clear that the bond in suit was not executed for plaintiff's benefit or protection.\nFinally, it is said that the italicized portions of the contract provisions above quoted are meaningless; that in Kentucky there is no lien for material furnished for street improvements; that these phrases should therefore be stricken; and that when they are eliminated the remaining portions will reflect an agreement binding the Construction Company and its surety, the defendant, to pay plaintiff. But (1) it is at least doubtful as a matter of law whether the language used is meaningless (Ky. St. § 2492); and (2) in any event we are not authorized to strike the questioned provisions as meaningless in fact. The parties were competent to choose their own language and it must be assumed that they wrote the contract as they intended and that they intended that the city be protected against even a possible though probably doubtful lien. To eliminate these provisions would be to write a new obligation for the parties into which they had not entered, or, in other words, to reform the contract, a relief permitted neither by the pleadings nor by the facts.\nAffirmed.\n", "ocr": false, "opinion_id": 1569292 } ]

[ "156 F. App'x 107" ]

[ { "author_str": "Per Curiam", "per_curiam": false, "type": "010combined", "page_count": 8, "download_url": "http://www.ca11.uscourts.gov/unpub/ops/200511788.pdf", "author_id": null, "opinion_text": " [DO NOT PUBLISH]\n\n IN THE UNITED STATES COURT OF APPEALS\n\n FOR THE ELEVENTH CIRCUIT FILED\n ________________________\n U.S. COURT OF APPEALS\n ELEVENTH CIRCUIT\n No. 05-11788 October 12, 2005\n Non-Argument Calendar THOMAS K. KAHN\n ________________________ CLERK\n D. C. Docket No. 03-00701-CV-CC-1\n\nHOWARD LITSKY,\n\n Plaintiff-Appellee,\n\n versus\n\nG.I. APPAREL, INC.,\n\n Defendant-Appellant.\n\n ________________________\n\n No. 05-12351\n Non-Argument Calendar\n ________________________\n\n D. C. Docket No. 03-00701-CV-CC-1\n\nHOWARD LITSKY,\n\n Plaintiff-Appellant,\n\n versus\n\nG.I. APPAREL, INC.,\n\n Defendant-Appellee.\n\f ________________________\n\n Appeals from the United States District Court\n for the Northern District of Georgia\n _________________________\n\n (October 12, 2005)\n\nBefore BIRCH, BARKETT and MARCUS, Circuit Judges.\n\nPER CURIAM:\n\n After a six-day bench trial, the district court entered final judgment in favor of\n\nHoward Litsky in his lawsuit, based on diversity jurisdiction, 28 U.S.C. § 1332,\n\nagainst G.I. Apparel, Inc. (“GI”), alleging claims for breach of contract and fraud,\n\ncontrary to Georgia law. In these consolidated appeals, (1) GI, a major supplier of\n\nimprinted T-shirts and sports apparel, asserts the district court erred by awarding\n\nLitsky damages based on quantum meruit and statutory attorneys’ fees, pursuant to\n\nO.C.G.A. § 13-6-11; and (2) Litsky challenges the district court’s failure to award\n\nhim additional damages for breach of contract based on the parties’ “Atlantika”\n\ntransaction.\n\n On appeal following a bench trial, we review a district court’s conclusions of\n\nlaw de novo, and its findings of fact for clear error. See A.I.G. Uruguay Compania\n\nde Seguros, S.A. v. AAA Cooper Transp., 334 F.3d 997, 1003 (11th Cir. 2003) (citing\n\n\n\n\n 2\n\fMiTek Holdings, Inc. v. Arce Eng’g Co., 89 F.3d 1548, 1554 (11th Cir. 1996)).\n\nAfter thorough review, we affirm.1\n\n The parties are familiar with the underlying proceedings and we only\n\nsummarize the relevant facts here. Litsky sued GI, under Georgia law, for breach of\n\ncontract and fraud based on GI’s failure to pay Litsky commissions for his brokerage\n\nservices, which included taking GI’s orders for certain manufactured goods and then\n\nlocating those goods, or the necessary components for the manufacture of the\n\nrequested goods, in the marketplace. The lawsuit concerned commissions on three\n\npre-employment transactions between Litsky and GI -- Atlantika, Roochi, and Haiti --\n\nas well as recovery pursuant to an employment agreement that was never\n\nmemorialized.\n\n At the bench trial, the district court considered and weighed the testimony of\n\n14 witnesses and reviewed extensive documentary evidence.2 The district court found\n\nLitsky’s testimony about the terms of both the pre-employment agreement and the\n\noral employment agreement more credible than the testimony presented by GI,\n\nincluding that of Anthony Prisco, the President and sole shareholder of GI. The court\n\n 1\n We GRANT Litsky’s Motion in 05-12351 to Adopt GI’s Record Excerpts in 05-11788.\nWe DENY Litsky’s Motion in 05-11788 for Frivolous Appeal.\n 2\n In the parties’ pretrial submissions, submitted pursuant to the district court’s Pretrial Order,\nLitsky enumerated 100 items of documentary or physical evidence to be tendered at trial, and GI\nlisted another 10 items, four of which were described as composite exhibits.\n\n 3\n\fdetermined that because Litsky provided “a significant amount of value and other\n\nsubstantial benefits both in the present and in the future,” Litsky was entitled to\n\nrecover under Georgia law based on quasi-contract, quantum meruit, and unjust\n\nenrichment. In calculating the amount of damages, the court noted that GI “never\n\noffered any probative, credible, or persuasive evidence with respect to the mitigation\n\nof this amount in any manner.” The court further found that GI engaged in “bad faith,\n\nwas stubbornly litigious, and caused [Litsky] unnecessary trouble and expense,” thus\n\nwarranting an award of statutory attorneys’ fees to Litsky. This appeal followed.\n\n First, Litsky challenges the district court’s decision, after allowing for recovery\n\nof a commission for the Roochi transaction, to deny recovery for commissions on the\n\nHaiti and Atlantika transactions. In the Roochi transaction, unlike in the other two\n\ntransactions, GI never took possession of the goods, which, in the case of the Haiti\n\ntransaction, were non-conforming to the purchase order. The district court rejected\n\nLitsky’s argument that his procurement of a “ready, willing, and able” purchaser\n\nsufficed for recovery, where there was no delivery of the goods. The district court\n\nconcluded that the pre-employment agreement required consummation of the sale,\n\nwhich never occurred for the Atlantika and Haiti transactions. Based on our review\n\nof the record and consideration of the parties’ arguments, we find no clear error in the\n\ndistrict court’s factual findings on this point, nor can we discern legal error in the\n\n 4\n\fdistrict court’s analysis of Litsky’s rights under the pre-employment arrangement\n\nbetween the parties and its conclusion that Litsky could not recover his commission\n\nfor the unconsummated Atlantika and Haiti transactions.\n\n Turning to GI’s arguments, we likewise find no error in the district court’s\n\njudgment in favor of Litsky for damages pursuant to quantum meruit. Under Georgia\n\nlaw, where, as here, no express contract exists between the parties, a party may\n\nrecover under the theory of liability for quantum meruit, which requires the plaintiff\n\nto establish the following elements: (1) the provider performed as agent services\n\nvaluable to the recipient; (2) either at the request of the recipient or knowingly\n\naccepted by the recipient; (3) the recipient’s receipt of which without compensating\n\nthe provider would be unjust; and (4) the provider had an expectation of\n\ncompensation at the time of rendition of services. See Artrac Corp. v. Austin Kelley\n\nAdvertising, Inc., 399 S.E.2d 529, 533-34 (Ga. Ct. App. 1990) (internal quotation\n\nmarks and citation omitted); see also O.C.G.A. § 9-2-7.3\n\n\n 3\n Given the numerous terms on which the parties had no agreement, the district court\ncorrectly found that there was no meeting of the minds under Georgia law and, thus, no formal\ncontract of employment. The unresolved terms included, among others, the following essential\nterms: (1) whether Litsky was an employee or an independent contractor; (2) whether the contract\nwas indefinite as to its duration; (3) the structure, terms, and amount of Litsky’s bonus; and (4) the\ngrounds for termination. In short, we are unpersuaded by GI’s various challenges to the district\ncourt’s conclusion that there was no express contract of employment here and thus Litsky could\nrecover pursuant to quantum meruit. Cf. Kwickie/Flash Foods, Inc. v. Lakeside Petroleum, Inc., 541\nS.E.2d 699, 700 (Ga. Ct. App. 2005) (holding that neither quantum meruit nor unjust enrichment\nallow recovery where there is an express contract). Because we find that recovery pursuant to\n\n 5\n\f The district court made the following findings of fact pertaining to Litsky’s\n\nrecovery of quantum meruit damages:\n\n [T]he Court concludes that Plaintiff conferred substantial economic\n benefits to Defendant for which Plaintiff expected to be compensated,\n amounting to an implied promise to pay at the time he conferred the\n economic and other substantial benefits. The conferred economic\n benefits consisted of value Defendant has already received and value\n Defendant will receive in the future as a direct result of Plaintiff’s\n efforts on Defendant’s behalf. The economic and other substantial\n benefits include, but are not limited to, money Defendant saved due to\n Plaintiff’s contacts, Plaintiff’s educating Defendant on how to do cost\n analysis, and Plaintiff’s exposing Defendant to his substantial business\n contacts and sources.\n\nOn this record, we are satisfied the evidence, which the district court carefully\n\nconsidered over the course of a six-day bench trial, fully supports the district court’s\n\nfactual findings, which meet the elements of quantum meruit under Georgia law.4\n\n\nquantum meruit was proper, we need not, and do not, reach the issue of whether Litsky could recover\nunder the theory of unjust enrichment.\n 4\n We also find no error in the district court’s computation of the award, which was based on\nthe cost savings achieved through Litsky’s efforts on GI’s behalf. The measure of damages in\nquantum meruit is the reasonable value of the services rendered to the recipient. Centre Pointe Invs.\nv. Frank M. Darby Co., 549 S.E.2d 435, 439 (Ga. Ct. Ap. 2001); see also Zampatti v. Tradebank\nInt’l Franchising Corp., 508 S.E.2d 750, 757 (Ga. Ct. App. 1998) (providing that measure of\ndamages is “based upon the benefit conferred upon the defendant and not upon the cost to render the\nservice of cost of the goods (citation omitted)). In Georgia, the “reasonable value” to the recipient\nis a question for the finder of fact to resolve. See Watson v. Sierra Contracting Corp., 485 S.E.2d\n563, 570 (Ga. Ct. App. 1997) (“The value of services from the perspective of the recipient is\nuniquely that of opinion and is for jury determination as to value, if any.”). As the district court put\nit, GI offered no evidence to rebut the figure Litsky requested, which was based on Litsky’s savings\nto GI -- or the benefit GI reaped from Litsky’s work -- for goods received from the following\nsuppliers, all of whom were found through Litsky: Alstyle ($371,597); Shavin Textiles ($41,781);\nInlink ($86,436); Ameritech ($48,900); Network Sourcing ($46,976); The Greene Company\n\n 6\n\f Finally, GI challenges the district court’s award of statutory attorneys’ fees,\n\npursuant to O.C.G.A. § 13-6-11, which provides the following, inter alia: “[t]he\n\nexpenses of litigation generally shall not be allowed as a part of the damages; but .\n\n. . where the defendant has acted in bad faith, has been stubbornly litigious, or has\n\ncaused the plaintiff unnecessary trouble and expense, the jury may allow them.” In\n\nsupport of its award, the district court found that GI acted in bad faith, was stubbornly\n\nlitigious, and caused Litsky unnecessary trouble and expense, thus warranting an\n\naward of statutory fees.\n\n GI’s argument that the existence of a bona fide controversy precluded the fee\n\naward is misplaced. While it is true Georgia courts have interpreted § 13-6-11 not to\n\napply where bad faith is not at issue and the fee award is based solely on stubborn\n\nlitigiousness or the causing of unnecessary trouble and expense, this limitation does\n\nnot apply here because the district court expressly made a finding of bad faith, which,\n\nalone, supports the award. See Daniel v. Smith, 597 S.E.2d 432, 436 (Ga. Ct. App.\n\n2004)(“ When bad faith is not an issue and the only asserted basis for a recovery of\n\nattorney fees is either stubborn litigiousness or the causing of unnecessary trouble and\n\nexpense, there is not any evidence to support an award pursuant to OCGA § 13-6-11\n\nif a bona fide controversy clearly exists between the parties.” (internal quotation\n\n\n($377,520); and Casual Knit ($19,424). Simply put, the record supports the amount awarded.\n\n 7\n\fmarks and citation omitted)); cf. Marshall v. King & Morgenstern, 613 S.E.2d 7, 13\n\n(Ga. Ct. App. 2005)(“When a bona fide controversy exists between the parties, a\n\nplaintiff cannot cite stubborn litigiousness or unnecessary trouble and expense as\n\nproper grounds for awarding attorney fees.”).5 Given the district court’s finding of\n\nbad faith, the exception GI urges us to apply simply is not implicated.\n\n AFFIRMED.\n\n\n\n\n 5\n The district court’s finding of bad faith also supports not apportioning the fee award to fees\nattributable to claims on which Litsky prevailed. See Crocker v. Stevens, 435 S.E.2d 690, 698 (Ga.\nCt. App. 1993) (holding that § 13-6-11 fee award based on bad faith is not apportioned between fees\nattributable to successful claims and fees attributable to losing claims (internal quotation marks and\ncitation omitted)).\n\n 8\n\f", "ocr": false, "opinion_id": 42253 } ]

[ "793 P.2d 222", "117 Idaho 990" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": 7210, "opinion_text": "\n793 P.2d 222 (1990)\n117 Idaho 990\nCOMSTOCK INVESTMENT CORPORATION, a Washington corporation, Plaintiff-Respondent,\nv.\nKANIKSU RESORT, Howard H. Gatlin and Jane Doe Gatlin, husband and wife, John Doe Peterson and Jane Doe Peterson, husband and wife, Defendants-Appellants.\nNo. 17245.\nCourt of Appeals of Idaho.\nMay 2, 1990.\n*223 Thomas E. Cooke, Cooke, Lamanna, Smith & Cogswell, Priest River, for defendants-appellants.\nJames H. Paulsen, Sandpoint, for plaintiff-respondent.\n\nSUBSTITUTE OPINION\nThe Court's prior opinion, dated September 11, 1989, is hereby withdrawn.\nBURNETT, Judge.\nThis appeal arises from a sale of personal property to satisfy a lien for services under I.C. § 45-805. The statute provides that a lienholder must pay the property owner any difference between the \"proceeds of the sale\" and the debt (including costs) secured by the lien. In this case, however, the district court has entered a judgment requiring the lienholder to pay a difference based not upon the \"proceeds of the sale\" but upon the full market value of the property. For reasons explained below, we vacate the judgment and remand the case.\n\nI\nThe facts are complex. We state them essentially as the district court found them. For several years, Comstock Investment Corporation moored a boat at a marina operated by the Kaniksu Resort. As a bailee, Kaniksu charged the boat owner $200 per year for moorage services. In 1975, some equipment on the boat was discovered to be missing. The bailee acknowledged responsibility for the equipment. The parties did not reach a monetary settlement, *224 nor did they agree on a credit or offset against moorage services. Rather, the boat owner and the bailee's marina manager informally agreed, in the district court's words, that \"no more storage charges would be made for the [boat] until the equipment was replaced or returned.\" The parties did not specify how long this arrangement would last if the equipment was not found. The boat remained at the marina. The equipment never was located.\nOn December 8, 1978, after management at the marina had changed hands, the bailee sent the boat owner a bill for charges accruing since 1975. The boat owner did not respond. On February 12, 1979, the bailee sent the boat owner a letter requesting payment on the bill. The boat owner did not respond. On March 29, 1979, the bailee sent the boat owner a certified letter, with return receipt requested, stating that the boat would be advertised for sale and that the proceeds would be applied to storage charges. The return receipt showed that the letter was received no later than April 11, 1979. The boat owner still did not respond. On April 17, 1979, the bailee placed the following notice in \"The Sandpoint Bee,\" a newspaper published in Bonner County, where the boat was moored:\nNOTICE OF PUBLIC SALE\nPursuant to the provisions of Idaho Code 45805, KANIKSU RESORT at Priest Lake, Idaho, will on the 28th day of April, 1979, at the hour of 6:00 p.m., sell at public auction, to the highest bidder for cash, the following described personal property:\n1 Model LD Houseboat, Serial No. 623-2982, blue and white in color, manufactured by Teria Marina Company, Houston, Texas, with 40 h.p. motor.\nSaid personal property will be sold pursuant to said statute in satisfaction of unpaid storage charges of $1,016.68 plus interest accrued since January 1, 1979, plus costs of sale.\n KANIKSU RESORT\n By: -s- Thomas E. Cooke\n Thomas E. Cooke,\n Its Attorney\nA sale was conducted on April 28, 1979, as advertised. No representative of the boat owner appeared. A principal in the bailee's business purchased the boat with a bid of $1,208.46 — an amount the bailee claimed for storage charges plus sale costs.\nAfter the sale, the boat owner sent the bailee a letter containing the following statement:\nI do not understand your letter of March 29th. It is my understanding ... that the boat is at the resort under an agreement with the past manager. That such agreement was one wherein you exchanged unimproved and unmaintained mooring privileges in exchange for the use by your employees of various items of equipment of Comstock.\n.....\nSuch agreement has been in effect on an annual basis currently expiring on July 1 this year.\nAlthough this letter carried a date of April 27, 1979, it was not actually postmarked until May 7, 1979. In June, 1979, a representative of the boat owner came to the marina, inquired about the boat, and was informed that it had been sold. The boat owner then sued, alleging that the bailee had committed a tortious conversion of the boat. The bailee answered that it simply had foreclosed a lien for services in accord with I.C. § 45-805.\nThe case languished in court for several years, finally being tried after the judge issued a notice of proposed dismissal. Following a bench trial, the judge determined that the informal agreement to suspend storage charges had been limited to a \"reasonable\" period of one year. He further determined that since the missing equipment had not been replaced or returned during that time, the agreement was in breach — obligating the bailee to pay for the equipment. The judge found the equipment to be worth $800.00. The judge also determined that the bailee was entitled to collect unpaid and prorated charges for *225 moorage services. The judge fixed the proper charges at $716.69, rather than $1,016.68 as the bailee had claimed.[1] The judge also awarded the bailee $191.78 in sale costs, bringing its total recovery on the lien to $908.47. The judge specifically rejected the boat owner's contention that it did not owe any debt to the bailee. The judge held that \"the parties had mutual debts against each other.\"\nThe judge then made an additional ruling that precipitated this appeal. Finding the fair market value of the boat to be $3,000.00, he ordered the bailee to pay the boat owner the difference between this sum and the lien recovery of $908.47, thereby compelling the bailee to pay $2,091.53 in addition to $800.00 for the missing equipment. The judge did not predicate this ruling upon any finding of an invalid sale, upon a tortious conversion or upon any other improper conduct by the bailee. To the contrary, the judge's only reference to improper conduct was directed at the boat owner. He said the owner should be \"estopped to complain about the conduct of the foreclosure sale\" because it had \"fail[ed] to reasonably and timely respond to the billings and letters of the [bailee].\"\nFrom the bailee's perspective, however, the court's judgment was the equivalent of a damage award for a tortious conversion. The bailee was forced, in effect, to buy the boat at full market value in order to satisfy its lien under I.C. § 45-805. This appeal followed.\n\nII\nThe boat owner now appears to concede that I.C. § 45-805 contains no requirement that a lienholder make a payment based on the property's full market value. The statute allows a lienholder to conduct a sale, at which it may bid the amount claimed for services rendered, plus sale costs. If the property is sold for a sum greater than the debt (including costs) secured by the lien, the lienholder must tender the excess proceeds to the property owner.[2]\nDespite this clear statutory scheme, the boat owner argues that the district court was right in ordering the bailee to pay the difference between its lien recovery and the property's full market value. The owner's argument is three-pronged: (a) that there really was a tortious conversion, notwithstanding the judge's failure to so hold; (b) that I.C. § 45-805 is unconstitutional, nullifying any sale conducted under its provisions; and (c) that even if the boat sale was authorized by a valid statute, it was not conducted in a commercially reasonable manner. We will address these points in turn.\n\nA\nThe boat owner contends that there was a tortious conversion. The theory underlying this contention is that the boat owner owed no debt to the bailee. If no debt existed, the theory goes, there was no lien; if there was no lien, the sale was not authorized by I.C. § 45-805; and if the sale was not authorized by the statute, then it was a *226 tortious conversion. Like any theory, of course, this theory is no better than the premise from which it starts. The premise that no debt existed is factually flawed. The district court specifically found, as we have noted, that the parties owed \"mutual debts\" — the bailee for the missing equipment, and the boat owner for moorage services. But the boat owner's position is not grounded in fact. Rather, it is based on an assertion — that no legally cognizable debt ever existed because the storage charges eventually allowed by the court ($716.69) turned out to be less than the equipment value ultimately fixed by the court ($800.00), thereby creating a complete offset.\nThis approach, too, is flawed. It confuses a potential offset at the time of a lien sale with an offset subsequently asserted and adjudicated during a post-sale lawsuit. The two are not the same. Unlike an adjudicated offset, a potential offset may not be fully known to the lienholder or it may not be timely asserted by the debtor. Even when a potential offset is eventually asserted, it may fail on its merits or it may be adjudicated at a lesser sum than the debt owed to the lienholder. In this case, for example, the boat owner did not question the existence of a moorage debt until the sale had occurred. No offset was asserted until this lawsuit was filed. Even then, it was not until the judge ultimately quantified the equipment value and the allowable moorage charges that a complete offset was established.\nIt is true, of course, that a lien cannot exist without an underlying debt. However, the mere existence of a potential offset does not automatically extinguish the debt and cancel an otherwise valid lien. The lien is valid, and can be exercised lawfully, until the debt is extinguished by payment or tender. See RESTATEMENT OF SECURITY § 78 (1941). Alternatively, § 79 of the Restatement provides that the lien may be terminated by judicial determination of an offset:\n(1) Where a possessory lienor is liable to the bailor for harm to or conversion of the chattel upon which a lien exists, the amount for which the lien is security is not automatically reduced except in the case of the common carrier, but the bailor can set off in an action on the debt by the lienor, any claim he may have against the lienor arising out of the lienor's conduct in respect of the chattel. [Emphasis added.]\nThe Restatement approach relieves a lienholder (other than a common carrier) of the risk that exercising its lien — even by simply retaining possession under a common law lien — might be deemed a tortious conversion if an offset were determined later to exceed the debt. The Restatement encourages timely assertion of offsets against lienholders, and it recognizes that debts and offsets may be determined in the same judicial proceeding under modern court rules.\nThis approach also commends itself to us as a matter of policy. It would be palpably unfair, and would undermine the remedial purpose of lien statutes such as I.C. § 45-805, if a debtor could stand silent, allowing a sale to occur without objection, and then obtain tort damages in a subsequent lawsuit if the debt were ultimately found to have an offset. The law does not, and should not, countenance such a retroactive tort.\nIn advancing its tort theory, the boat owner has invited our attention to Dawson v. Eldredge, 89 Idaho 402, 405 P.2d 754 (1965). In Dawson, a materialman sought judicial foreclosure of a lien under I.C. § 45-501. Foreclosure was denied when the trial court found that the debt owed the materialman was subject to a complete offset in favor of the property owner. A claim for attorney fees under the lien statute was denied for the same reason. The Supreme Court ultimately affirmed, holding that lien remedies were unavailable in light of the adjudicated offset. This holding, with which we have no quarrel, is inapposite to the instant case. The issue presented here, and not in Dawson, is one of retroactivity. The offset in this case was not asserted, much less adjudicated, until a lien sale had occurred under I.C. § 45-805. In Dawson the offset was asserted *227 and adjudicated before any sale. Therefore, nothing in Dawson supports the boat owner's theory of a retroactive tort in this case.[3]\nNeither is this case similar to Gunnell v. Largilliere Co., 46 Idaho 551, 269 P. 412 (1928). There, our Supreme Court upheld an award of tort damages for improper sale of property under a chattel mortgage. The Court held that the mortgagee had no right to sell because the underlying loan was not in default. The case presented no issue of an offset; a fortiori, it presented no issue of a retroactive tort based upon adjudication of an offset after a lien sale. Gunnell is not apposite here.\nWe conclude that the bailee in this case did not commit a tort by collecting its debt in the manner provided by I.C. § 45-805. The boat owner, having been notified of the debt and of an impending sale, could have asserted its offset before the sale occurred. Instead, it elected to remain silent. In this circumstance, the sale of the boat cannot be deemed a conversion.[4]\n\nB\nWe next address the constitutionality of I.C. § 45-805. The boat owner contends that the statute is infirm because it authorizes a sale without expressly requiring \"actual\" notice to the property owner, or a judicial hearing. The version of the statute applicable here simply requires that a notice of sale be published in a newspaper in the county where the property is located. This was done. The boat owner argues that such notice is inadequate — that it denies procedural due process in violation of the Fourteenth Amendment to the United States Constitution.\nThe argument is not persuasive, legally or factually. From a legal standpoint, it runs afoul of the axiom that a due process issue must be framed by state action. The lien sale procedure authorized by I.C. § 45-805 is a self-help remedy. The *228 United States Supreme Court has held, in Flagg Brothers, Inc. v. Brooks, 436 U.S. 149, 98 S. Ct. 1729, 56 L. Ed. 2d 185 (1978), that the self-help provision of a statute creating a warehouseman's lien does not constitute state action. Similarly, the Idaho Supreme Court has determined in Massey-Ferguson Credit Corp. v. Peterson, 102 Idaho 111, 626 P.2d 767 (1980), that self-help repossession under Article 9 of the Uniform Commercial Code does not constitute state action invoking the Fourteenth Amendment. We find these cases to be controlling.\nThe factual weakness in the boat owner's argument is that the published notice was not the owner's sole source of information about a sale. As noted previously, the bailee billed the owner, wrote to the owner about the bill, and then sent the owner a certified letter specifically warning that the boat would be \"advertise[d] for sale\" to collect storage charges. Although the letter did not specify a date of sale, as did the published notice, the letter clearly was \"enough to excite the attention of a man of ordinary prudence and prompt him to further inquiry....\" Farrell v. Brown, 111 Idaho 1027, 1033, 729 P.2d 1090, 1096 (Ct.App. 1986) (discussing adequacy of pleaded notice of claim to land, and quoting Hill v. Federal Land Bank, 59 Idaho 136, 141, 80 P.2d 789, 791 (1938)).[5]\nThus, in this case, the property owner has demonstrated no actual prejudice flowing from any perceived inadequacy in the notice mandated by I.C. § 45-805. Unless an individual has been adversely affected by a statute, he or she \"will not be heard to argue that [the] statute is constitutionally deficient because it lacks due process guarantees.\" Pine Creek Ranches, Inc. v. Higley, 101 Idaho 326, 327, 612 P.2d 1173, 1174 (1980).\n\nC\nFinally, we consider the boat owner's argument that I.C. § 45-805 should be construed, by analogy to Article 9 of the Uniform Commercial Code, as requiring a lienholder to conduct a \"commercially reasonable\" sale. The boat owner asserts that the bailee in this case acted unreasonably by advertising the sale only in a local newspaper. In addition, the owner would have us go a step beyond the Uniform Commercial Code by holding that a commercially unreasonable sale will be treated as though it were a sale at the property's entire market value, as ultimately determined by a court, thereby obligating the lien creditor to pay the owner the difference between this postulated market value and the debt (including sale expenses). In contrast, Article 9 simply precludes recovery of a deficiency judgment if a sale is found to be commercially unreasonable. See Mack Financial Corp. v. Scott, 100 Idaho 889, 606 P.2d 993 (1980).\nWe decline the boat owner's invitation to adopt Article 9 by analogy, to enlarge upon its remedies, and to engraft the enlarged remedies upon I.C. § 45-805. Liens for services relating to property have a long history in Idaho. Idaho Code § 45-805 applies to a wide range of service providers, ranging from sophisticated businesses to shoe repair shops and laundries. The Idaho Legislature has not seen fit to impose upon such service providers the same burdens Article 9 places on secured parties under the Uniform Commercial Code. Neither has the Legislature determined that service providers must, in effect, sell (or buy) property at full market value in order to collect the debts owed to them. We leave these policy decisions to the Legislature. We decline to make them by judicial fiat.\nIn summary, we vacate the district court's judgment, which in effect compelled the bailee to purchase the boat at full market value in order to collect a moorage debt. This case is remanded for entry of *229 an amended judgment awarding the boat owner the value of the missing equipment, together with the difference between the actual proceeds of the sale and the amount eventually allowed by the district court as moorage charges and sale costs. The amended judgment will bear interest from the date of the original judgment. See Dursteler v. Dursteler, 112 Idaho 594, 733 P.2d 815 (Ct.App. 1987). Costs (exclusive of attorney fees, which have not been requested) are awarded to the appellant, Kaniksu Resort.\nSMITH, J. Pro Tem., concurs.\nSWANSTROM, Judge, dissenting.\nI dissent because I believe the judgment is legally sound and should be affirmed.\nThe district court found that the boat owner had paid all moorage fees due the bailee to September 1, 1975. About that time the owner learned that certain boat equipment was missing from storage. Apparently, employees of Kaniksu Resort had used the equipment without the owner's knowledge or permission. The owner and the bailee agreed, orally, that \"no more storage charges would be made for the houseboat until the equipment was replaced or returned\" by the bailee. Although the parties placed no time limit on performance, the district court later found that one year \"would certainly be an adequate and reasonable time\" for the bailee to return or replace the equipment. The bailee never replaced or returned the equipment its employees had borrowed. Therefore, as the district court found, the agreement was \"in a state of breach\" after one year.\nMoreover, the breach of the agreement by the bailee was material. As the court later found, the missing equipment was worth $800, four times the annual moorage fees. When the breach occurred, around September 1, 1976, the owner owed nothing for storage charges and, obviously, the bailee had no lien to foreclose.\nClearly, the oral agreement altered the lien rights of the bailee marina. Under I.C. § 45-805 a caretaker of property \"has a special lien ... for the compensation, if any, which is due him from the owner, for such [safekeeping] service.\" (Emphasis added.) Significantly, for more than three years after the oral agreement was made, the bailee gave no notice to the boat owner that any moorage fees were payable. The district court noted that billing of the boat owner was renewed only after new managers — who had no knowledge of the oral agreement — took over management of the marina.\nThe lead opinion does not say when the compensation became due from the boat owner to the marina. I suggest that following the bailee's breach of the oral agreement and up until the time the bailee \"sold\" the boat for storage fees, there was never a time when the bailee could have demanded payment from the boat owner without first correcting its breach of the agreement. See Nelson v. Hazel, 89 Idaho 480, 406 P.2d 138 (1965).\nEven assuming that the bailee had a lien for caretaker services after September 1, 1976, the lien was eliminated by an offset. The majority refuses to follow the holding of our Supreme Court in Dawson v. Eldredge, 89 Idaho 402, 405 P.2d 754 (1965). According to the lead opinion, Dawson should no longer be considered authority for the proposition that a complete offset eliminates a lien because Dawson relied upon a now repealed statute, former I.C. § 5-615. However, the same principle of this statute is now embodied in the language of I.R.C.P. 54(b). This rule says in part:\nIf any parties to an action are entitled to judgments against each other such as on a claim and counterclaim, or upon crossclaims, such judgments shall be offset against each other and a single judgment for the difference between the entitlements shall be entered in favor of the party entitled to the larger judgment.\nHere, after both sides had an opportunity to fully present their evidence, a judicial determination was made that the earned moorage fees of the bailee ($716.68) were less than the amount the bailee owed to the boat owner ($800) for equipment the bailee *230 had lost or appropriated. Applying Dawson to the facts as they existed when the bailee sold the boat to satisfy its lien, the bailee's moorage fees were completely set off and its lien was eliminated. The Rule 54(b) language quoted above supports this result.\nThe lead opinion chooses to abandon Dawson in favor of § 79 of the RESTATEMENT OF SECURITY (1941). In doing so, the majority will give this Court the distinction of being the only appellate court in the country to have relied upon § 79 in the past forty-nine years. I am not persuaded that we should narrowly focus upon two words in one unrecognized section of the RESTATEMENT to change the outcome of this case.\nThe majority does not like the bailee's unjustified sale of the bailor's property under I.C. § 45-805 being treated as a \"conversion.\" Thus, the majority degrades this approach by characterizing it as the \"retroactive tort\" theory. Of course, the lead opinion ignores the fact that the sale was preceded by the bailee's conversion of the owner's equipment and by the bailee's breach of an oral agreement to return or replace the equipment within a reasonable time. Ignored also is the fact that the district judge — not the parties — \"retroactively\" determined that the owner should pay additional storage charges even though the bailee never performed its agreement to return or replace the equipment. I am satisfied that the district judge did this only to achieve an overall equitable result.[1]\nThe majority takes the position that once the foreclosure sale has occurred it is too late to rectify the injustice of taking a person's property for a debt the amount of which is less than the bailee's related debt to the owner. It is one thing to say that contemporaneous adjudication of the owner's related offset is preferred. It is quite another thing to announce that without prior adjudication of the offset no self-help sale made under I.C. § 45-805 can ever be set aside. If, instead of a self-help lien foreclosure, this had been a default judgment obtained by the bailee for $1,016.68, the owner could have filed a motion or an independent action to have the default set aside. I.R.C.P. 60(b). Essentially, that is what occurred here.\nThe case of Gunnell v. Largilliere Co., 46 Idaho 551, 269 P. 412 (1928), is instructive. There, the holder of a chattel mortgage foreclosed by notice and sale of the property. As it was shown later, the secured note had been extended by renewal and the debt was not due when the foreclosure action was taken. Some of the mortgaged chattels had been sold when the mortgagor succeeded in stopping further proceedings. Some chattels were not returned to him. He brought a claim and delivery action against the mortgagee. He recovered a verdict for the return of the chattels or their value, compensatory damages and punitive damages.\nThe Supreme Court upheld all but the punitive damages. The Court said:\nWhere a chattel mortgage is foreclosed by notice and sale, when no legal right to do so existed because the debt was not due, a cause of action in conversion arises... . The measure of damages in such case is the value of the property at *231 the time of the conversion, plus special damages caused by the taking, if specially pleaded, and interest... . The measure of damages for detention of the property is the value of its use up to the time defendant became entitled to its possession... . [Citations omitted.]\n46 Idaho at 559, 269 P. at 415. The Court went on to say:\nThe defendant, in attempting to foreclose its mortgage, under its construction of the terms of the contract, failed to bring itself within the rules governing such procedure, and prematurely brought its foreclosure proceeding. The evidence does not show that its action was wanton, malicious or gross and outrageous, nor do the facts imply that it acted from motives of malice or oppression. The record shows that appellant was attempting to apply a remedy it deemed itself entitled to, and fails to show wilful fraud, malice or gross negligence.\n46 Idaho at 560, 269 P. at 415. Thus, in Gunnell the Supreme Court upheld the owner's right to recover the value of his property if it could not be returned to him. Here, the bailee has not shown or even contended that the district court had the option to order the houseboat to be returned to its owner. Neither has the bailee provided us with a complete transcript of the trial and other proceedings below. Yet, in spite of these facts, the majority takes issue with \"forcing\" the bailee to pay the owner the fair market value of the boat as of the time of sale.\nWhile my opinion does not reach the question of whether I.C. § 45-805 is constitutional, I will note the lack of adequate notice here. As the majority observed, the statute \"simply requires that a notice of sale be published in a newspaper in the county where the property is located.\" The notice appeared one time in a weekly newspaper. The published notice did not clearly state where the sale was to take place. It did not name the owner of the boat to be sold. The bailee knew the owner had a Spokane, Washington address. Yet the bailee did not even mail a copy of the notice to that address, although, as the majority recognizes, the bailee knew that one letter it had sent to a representative of the owner was delivered. Because the owner's name was not given in the published notice it would be highly unlikely that anyone seeing the notice would contact the owner about the sale. Certainly, there is no reason to believe that the out-of-state owner would see the notice. As a result, the owner had no opportunity to have a representative appear at the sale. It is hardly surprising that the only persons to attend the sale were Mr. and Mrs. Gatlin, who were the owners of the Kaniksu Resort, and their attorney. Of course, the only bid received was from Mr. Gatlin in the amount of his claim.\nThe district court recognized that while the owner was not without fault in protecting his rights, the owner was not deprived of a remedy. The court's decision was based on sound legal precedent and reached an equitable result. I would affirm.\nNOTES\n[1] The bailee mistakenly had included a charge for another boat in its calculation of the amount owed. No charge was due on the other boat. In any event, no attempt was made to sell the other boat; rather, the boat in question here simply was sold for more than the amount actually secured by the bailee's lien. As we explain in today's opinion, the boat owner is entitled to receive the excess proceeds of the sale. The bailee's miscalculation of the amount owed does not affect the validity of its lien for the correct amount. See, e.g., Guyman v. Anderson, 75 Idaho 294, 271 P.2d 1020 (1954).\n[2] At common law, a bailee's lien was possessory only. Under I.C. § 45-805, a lienholder is entitled to possession and sale. The statute gives these rights to any person, such as a bailee, who performs services in relation to personal property. It provides in pertinent part as follows:\n\nIf the liens as herein provided are not paid ... the person in whose favor such special lien is created may proceed to sell the property at public auction... . The proceeds of the sale must be applied to the discharge of the lien and costs; the remainder, if any, must be paid over to the owner.\nAfter this lawsuit was filed, I.C. § 45-805 was amended. The present version of the statute combines the foregoing provisions with verbiage relating to care, boarding and feeding of livestock. 1982 Idaho Sess. Laws, ch. 262, § 1, p. 673. The result is a confusing alchemy of language, but it does not affect the case now before us.\n[3] We further note that Dawson cited I.C. § 5-615, which then provided as follows:\n\nWhen cross demands have existed between persons under such circumstances that, if one had brought an action against the other, a counterclaim could have been set up, the two demands shall be deemed compensated, so far as they equal each other... . [Emphasis added.]\nThe Dawson court thereby underscored the importance of adjudicated offsets. The phrase \"deemed compensated\" was never intended to countenance the retroactive destruction of a lien after foreclosure.\nToday, I.C. § 5-615 has been repealed and replaced by court rules. Idaho Rules of Civil Procedure 13(a), 13(g) and 54(b) provide that any conflicting demands presented to a court are resolved in a single judgment. This efficient procedure carries no implication that the adjudication retroactively destroys a prior lien, changing an otherwise valid prelitigation sale into a tortious conversion.\n[4] In his dissenting opinion, Judge Swanstrom apparently draws no distinction between a potential offset and an adjudicated offset. For that reason he perceives no difficulty in giving retroactive effect to the adjudicated offset in this case, thereby \"eliminating\" the moorage debt and invalidating the lien after the sale. With all due respect to our colleague, we think such after-the-fact destruction of liens is unsound in policy and is an evil which the Restatement was designed to prevent.\n\nThe dissenting opinion also suggests that no debt existed because the bailee, having breached an obligation to return or replace the missing equipment within a year, had no right at any time thereafter to demand payment of moorage charges. The district court obviously did not ascribe to this view. In any event, the dissent confuses a possible defense to collection of a debt with existence of the debt itself. Here, the debt arose from continued mooring of the boat at the marina. The bailee's right to collect that debt by a lien sale might have been subject to a timely challenge, but in fact it was not challenged until the sale had occurred.\nFinally, the dissenting opinion contends that the district court's judgment, forcing the bailee to pay a sum based on the boat's full market value, represents an \"equitable result\" in the case. The district court did not invoke equity to reach its result. Indeed, the court's only mention of an equitable principle was the statement, noted above, that the boat owner should be estopped to complain about conduct of the lien sale because it disregarded prior communications from the bailee about the moorage charges. But even if equitable arguments could be made for and against both parties, we must recognize that equity does not have free rein here. This is a statutory lien case. The rights of the lienholder are legislatively prescribed. It would be inappropriate for us to obscure the statute's application in this case, and perhaps to impair its application in future cases, by searching for an equitable rationale to achieve a particular result.\n[5] The dissenting opinion correctly observes that the boat owner had two boats moored at the bailee's marina, and that the letter warning of a sale did not describe a particular boat. However, it does not appear that the owner has claimed confusion on this point as a reason for failing to respond to the letter. (As noted above, the boat was fully described in the notice subsequently published.)\n[1] The bailee's published notice of sale stated $1,016.68 was due for storage charges. At trial, it was shown that this amount included $150 for a Crestliner boat which had been kept at the marina until Comstock removed it sometime in 1975. All storage charges on this boat were paid by Comstock four years before the sale. The bailee's claim also included $200 for moorage of the houseboat to September 1, 1975. Comstock had paid this fee also four years before the sale. Thus, the district judge disallowed $350 of the bailee's claim. (Not only was the bailee's claim excessive, but even if Comstock had owed storage on the Crestliner boat, the bailee would have had no right to assert a lien against the houseboat for the separate storage charges on the Crestliner.)\n\nOf the $1,016.68 claimed by the bailee, the district judge found only $666.68 to be valid. By prorating the $200 annual storage fee, he allowed another $50 for the three months in 1979 preceding the sale. Thus, the judge found that at the time of sale the bailee was entitled to a total of $716.68. The majority fails to note that even this figure includes $200 for the period from September 1, 1975 to September 1, 1976, the year the majority says the charges were to be \"suspended\" unless the owner's missing equipment was returned.\n\n", "ocr": false, "opinion_id": 2608877 }, { "author_str": "Burnett", "per_curiam": false, "type": "020lead", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nSUBSTITUTE OPINION\nThe Court’s prior opinion, dated September 11, 1989, is hereby withdrawn.\nBURNETT, Judge.\nThis appeal arises from a sale of personal property to satisfy a lien for services under I.C. § 45-805. The statute provides that a lienholder must pay the property owner any difference between the “proceeds of the sale” and the debt (including costs) secured by the lien. In this case, however, the district court has entered a judgment requiring the lienholder to pay a difference based not upon the “proceeds of the sale” but upon the full market value of the property. For reasons explained below, we vacate the judgment and remand the case.\nI\nThe facts are complex. We state them essentially as the district court found them. For several years, Comstock Investment Corporation moored a boat at a marina operated by the Kaniksu Resort. As a bailee, Kaniksu charged the boat owner $200 per year for moorage services. In 1975, some equipment on the boat was discovered to be missing. The bailee acknowledged responsibility for the equipment. The parties did not reach a monetary settle*992ment, nor did they agree on a credit or offset against moorage services. Rather, ihe boat owner and the bailee’s marina manager informally agreed, in the district court’s words, that “no more storage charges would be made for the [boat] until the equipment was replaced or returned.” The parties did not specify how long this arrangement would last if the equipment was not found. The boat remained at the marina. The equipment never was located.\nOn December 8, 1978, after management at the marina had changed hands, the bailee sent the boat owner a bill for charges accruing since 1975. The boat owner did not respond. On February 12, 1979, the bailee sent the boat owner a letter requesting payment on the bill. The boat owner did not respond. On March 29, 1979, the bailee sent the boat owner a certified letter, with return receipt requested, stating that the boat would be advertised for sale and that the proceeds would be applied to storage charges. The return receipt showed that the letter was received no later than April 11, 1979. The boat owner still did not respond. On April 17, 1979, the bailee placed the following notice in “The Sandpoint Bee,” a newspaper published in Bonner County, where the boat was moored:\nNOTICE OF PUBLIC SALE\nPursuant to the provisions of Idaho Code 45805, KANIKSU RESORT at Priest Lake, Idaho, will on the 28th day of April, 1979, at the hour of 6:00 p.m., sell at public auction, to the highest bidder for cash, the following described personal property:\n1 Model LD Houseboat, Serial No. 623-2982, blue and white in color, manufactured by Teria Marina Company, Houston, Texas, with 40 h.p. motor.\nSaid personal property will be sold pursuant to said statute in satisfaction of unpaid storage charges of $1,016.68 plus interest accrued since January 1, 1979, plus costs of sale.\nKANIKSU RESORT By: -s- Thomas E. Cooke Thomas E. Cooke, Its Attorney\nA sale was conducted on April 28, 1979, as advertised. No representative of the boat owner appeared. A principal in the bailee’s business purchased the boat with a bid of $1,208.46 — an amount the bailee claimed for storage charges plus sale costs.\nAfter the sale, the boat owner sent the bailee a letter containing the following statement:\nI do not understand your letter of March 29th. It is my understanding ... that the boat is at the resort under an agreement with the past manager. That such agreement was one wherein you exchanged unimproved and unmaintained mooring privileges in exchange for the use by your employees of various items of equipment of Comstock.\nSuch agreement has been in effect on an annual basis currently expiring on July 1 this year.\nAlthough this letter carried a date of April 27, 1979, it was not actually postmarked until May 7, 1979. In June, 1979, a representative of the boat owner came to the marina, inquired about the boat, and was informed that it had been sold. The boat owner then sued, alleging that the bailee had committed a tortious conversion of the boat. The bailee answered that it simply had foreclosed a lien for services in accord with I.C. § 45-805.\nThe case languished in court for several years, finally being tried after the judge issued a notice of proposed dismissal. Following a bench trial, the judge determined that the informal agreement to suspend storage charges had been limited to a “reasonable” period of one year. He further determined that since the missing equipment had not been replaced or returned during that time, the agreement was in breach — obligating the bailee to pay for the equipment. The judge found the equipment to be worth $800.00. The judge also determined that the bailee was entitled to collect unpaid and prorated charges for *993moorage services. The judge fixed the proper charges at $716.69, rather than $1,016.68 as the bailee had claimed.1 The judge also awarded the bailee $191.78 in sale costs, bringing its total recovery on the lien to $908.47. The judge specifically rejected the boat owner’s contention that it did not owe any debt to the bailee. The judge held that “the parties had mutual debts against each other.”\nThe judge then made an additional ruling that precipitated this appeal. Finding the fair market value of the boat to be $3,000.00, he ordered the bailee to pay the boat owner the difference between this sum and the lien recovery of $908.47, thereby compelling the bailee to pay $2,091.53 in addition to $800.00 for the missing equipment. The judge did not predicate this ruling upon any finding of an invalid sale, upon a tortious conversion or upon any other improper conduct by the bailee. To the contrary, the judge’s only reference to improper conduct was directed at the boat owner. He said the owner should be “es-topped to complain about the conduct of the foreclosure sale” because it had “fail[ed] to reasonably and timely respond to the billings and letters of the [bailee].”\nFrom the bailee’s perspective, however, the court’s judgment was the equivalent of a damage award for a tortious conversion. The bailee was forced, in effect, to buy the boat at full market value in order to satisfy its lien under I.C. § 45-805. This appeal followed.\nII\nThe boat owner now appears to concede that I.C. § 45-805 contains no requirement that a lienholder make a payment based on the property’s full market value. The statute allows a lienholder to conduct a sale, at which it may bid the amount claimed for services rendered, plus sale costs. If the property is sold for a sum greater than the debt (including costs) secured by the lien, the lienholder must tender the excess proceeds to the property owner.2\nDespite this clear statutory scheme, the boat owner argues that the district court was right in ordering the bailee to pay the difference between its lien recovery and the property’s full market value. The owner’s argument is three-pronged: (a) that there really was a tortious conversion, notwithstanding the judge’s failure to so hold; (b) that I.C. § 45-805 is unconstitutional, nullifying any sale conducted under its provisions; and (c) that even if the boat sale was authorized by a valid statute, it was not conducted in a commercially reasonable manner. We will address these points in turn.\nA\nThe boat owner contends that there was a tortious conversion. The theory underlying this contention is that the boat owner owed no debt to the bailee. If no debt existed, the theory goes, there was no lien; if there was no lien, the sale was not authorized by I.C. § 45-805; and if the sale was not authorized by the statute, then it was a *994tortious conversion. Like any theory, of course, this theory is no better than the premise from which it starts. The premise that no debt existed is factually flawed. The district court specifically found, as we have noted, that the parties owed “mutual debts” — the bailee for the missing equipment, and the boat owner for moorage services. But the boat owner’s position is not grounded in fact. Rather, it is based on an assertion — that no legally cognizable debt ever existed because the storage charges eventually allowed by the court ($716.69) turned out to be less than the equipment value ultimately fixed by the court ($800.00), thereby creating a complete offset.\nThis approach, too, is flawed. It confuses a potential offset at the time of a lien sale with an offset subsequently asserted and adjudicated during a post-sale lawsuit. The two are not the same. Unlike an adjudicated offset, a potential offset may not be fully known to the lienholder or it may not be timely asserted by the debtor. Even when a potential offset is eventually asserted, it may fail on its merits or it may be adjudicated at a lesser sum than the debt owed to the lienholder. In this case, for example, the boat owner did not question the existence of a moorage debt until the sale had occurred. No offset was asserted until this lawsuit was filed. Even then, it was not until the judge ultimately quantified the equipment value and the allowable moorage charges that a complete offset was established.\nIt is true, of course, that a lien cannot exist without an underlying debt. However, the mere existence of a potential offset does not automatically extinguish the debt and cancel an otherwise valid lien. The lien is valid, and can be exercised lawfully, until the debt is extinguished by payment or tender. See RESTATEMENT OF SECURITY § 78 (1941). Alternatively, § 79 of the Restatement provides that the lien may be terminated by judicial determination of an offset:\n(1) Where a possessory lienor is liable to the bailor for harm to or conversion of the chattel upon which a lien exists, the amount for which the lien is security is not automatically reduced except in the case of the common carrier, but the bail- or can set off in an action on the debt by the lienor, any claim he may have against the lienor arising out of the lienor’s conduct in respect of the chattel. [Emphasis added.]\nThe Restatement approach relieves a lien-holder (other than a common carrier) of the risk that exercising its lien — even by simply retaining possession under a common law lien — might be deemed a tortious conversion if an offset were determined later to exceed the debt. The Restatement encourages timely assertion of offsets against lienholders, and it recognizes that debts and offsets may be determined in the same judicial proceeding under modem court rules.\nThis approach also commends itself to us as a matter of policy. It would be palpably unfair, and would undermine the remedial purpose of lien statutes such as I.C. § 45-805, if a debtor could stand silent, allowing a sale to occur without objection, and then obtain tort damages in a subsequent lawsuit if the debt were ultimately found to have an offset. The law does not, and should not, countenance such a retroactive tort.\nIn advancing its tort theory, the boat owner has invited our attention to Dawson v. Eldredge, 89 Idaho 402, 405 P.2d 754 (1965). In Dawson, a materialman sought judicial foreclosure of a lien under I.C. § 45-501. Foreclosure was denied when the trial court found that the debt owed the materialman was subject to a complete offset in favor of the property owner. A claim for attorney fees under the lien statute was denied for the same reason. The Supreme Court ultimately affirmed, holding that lien remedies were unavailable in light of the adjudicated offset. This holding, with which ’ we have no quarrel, is inapposite to the instant case. The issue presented here, and not in Dawson, is one of retroactivity. The offset in this case was not asserted, much less adjudicated, until a lien sale had occurred under I.C. § 45-805. In Dawson the offset was as*995serted and adjudicated before any sale. Therefore, nothing in Dawson supports the boat owner’s theory of a retroactive tort in this case.3\nNeither is this case similar to Gunnell v. Largilliere Co., 46 Idaho 551, 269 P. 412 (1928). There, our Supreme Court upheld an award of tort damages for improper sale of property under a chattel mortgage. The Court held that the mortgagee had no right to sell because the underlying loan was not in default. The case presented no issue of an offset; a fortiori, it presented no issue of a retroactive tort based upon adjudication of an offset after a lien sale. Gunnell is not apposite here.\nWe conclude that the bailee in this case did not commit a tort by collecting its debt in the manner provided by I.C. § 45-805. The boat owner, having been notified of the debt and of an impending sale, could have asserted its offset before the sale occurred. Instead, it elected to remain silent. In this circumstance, the sale of the boat cannot be deemed a conversion.4\nB\nWe next address the constitutionality of I.C. § 45-805. The boat owner contends that the statute is infirm because it authorizes a sale without expressly requiring “actual” notice to the property owner, or a judicial hearing. The version of the statute applicable here simply requires that a notice of sale be published in a newspaper in the county where the property is located. This was done. The boat owner argues that such notice is inadequate — that it denies procedural due process in violation of the Fourteenth Amendment to the United States Constitution.\nThe argument is not persuasive, legally or factually. From a legal standpoint, it runs afoul of the axiom that a due process issue must be framed by state action. The lien sale procedure authorized by I.C. § 45-805 is a self-help remedy. The\n*996United States Supreme Court has held, in Flagg Brothers, Inc. v. Brooks, 436 U.S. 149, 98 S.Ct. 1729, 56 L.Ed.2d 185 (1978), that the self-help provision of a statute creating a warehouseman’s lien does not constitute state action. Similarly, the Idaho Supreme Court has determined in Massey-Ferguson Credit Corp. v. Peterson, 102 Idaho 111, 626 P.2d 767 (1980), that self-help repossession under Article 9 of the Uniform Commercial Code does not constitute state action invoking the Fourteenth Amendment. We find these cases to be controlling.\nThe factual weakness in the boat owner’s argument is that the published notice was not the owner’s sole source of information about a sale. As noted previously, the bailee billed the owner, wrote to the owner about the bill, and then sent the owner a certified letter specifically warning that the boat would be “advertise[d] for sale” to collect storage charges. Although the letter did not specify a date of sale, as did the published notice, the letter clearly was “enough to excite the attention of a man of ordinary prudence and prompt him to further inquiry____” Farrell v. Brown, 111 Idaho 1027, 1033, 729 P.2d 1090, 1096 (Ct.App.1986) (discussing adequacy of pleaded notice of claim to land, and quoting Hill v. Federal Land Bank, 59 Idaho 136, 141, 80 P.2d 789, 791 (1938)).5\nThus, in this case, the property owner has demonstrated no actual prejudice flowing from any perceived inadequacy in the notice mandated by I.C. § 45-805. Unless an individual has been adversely affected by a statute, he or she “will not be heard to argue that [the] statute is constitutionally deficient because it lacks due process guarantees.” Pine Creek Ranches, Inc. v. Higley, 101 Idaho 326, 327, 612 P.2d 1173,1174 (1980).\nC\nFinally, we consider the boat owner’s argument that I.C. § 45-805 should be construed, by analogy to Article 9 of the Uniform Commercial Code, as requiring a lienholder to conduct a “commercially reasonable” sale. The boat owner asserts that the bailee in this case acted unreasonably by advertising the sale only in a local newspaper. In addition, the owner would have us go a step beyond the Uniform Commercial Code by holding that a commercially unreasonable sale will be treated as though it were a sale at the property’s entire market value, as ultimately determined by a court, thereby obligating the lien creditor to pay the owner the difference between this postulated market value and the debt (including sale expenses). In contrast, Article 9 simply precludes recovery of a deficiency judgment if a sale is found to be commercially unreasonable. See Mack Financial Corp. v. Scott, 100 Idaho 889, 606 P.2d 993 (1980).\nWe decline the boat owner’s invitation to adopt Article 9 by analogy, to enlarge upon its remedies, and to engraft the enlarged remedies upon I.C. § 45-805. Liens for services relating to property have a long history in Idaho. Idaho Code § 45-805 applies to a wide range of service providers, ranging from sophisticated businesses to shoe repair shops and laundries. The Idaho Legislature has not seen fit to impose upon such service providers the same burdens Article 9 places on secured parties under the Uniform Commercial Code. Neither has the Legislature determined that service providers must, in effect, sell (or buy) property at full market value in order to collect the debts owed to them. We leave these policy decisions to the Legislature. We decline to make them by judicial fiat.\nIn summary, we vacate the district court’s judgment, which in effect compelled the bailee to purchase the boat at full market value in order to collect a moorage debt. This case is remanded for entry of *997an amended judgment awarding the boat owner the value of the missing equipment, together with the difference between the actual proceeds of the sale and the amount eventually allowed by the district court as moorage charges and sale costs. The amended judgment will bear interest from the date of the original judgment. See Dursteler v. Dursteler, 112 Idaho 594, 733 P.2d 815 (Ct.App.1987). Costs (exclusive of attorney fees, which have not been requested) are awarded to the appellant, Kaniksu Resort.\nSMITH, J. Pro Tern., concurs.\n\n. The bailee mistakenly had included a charge for another boat in its calculation of the amount owed. No charge was due on the other boat. In any event, no attempt was made to sell the other boat; rather, the boat in question here simply was sold for more than the amount actually secured by the bailee’s lien. As we explain in today’s opinion, the boat owner is entitled to receive the excess proceeds of the sale. The bailee’s miscalculation of the amount owed does not affect the validity of its lien for the correct amount. See, e.g., Guyman v. Anderson, 75 Idaho 294, 271 P.2d 1020 (1954).\n\n\n. At common law, a bailee’s lien was possessory only. Under I.C. § 45-805, a lienholder is entitled to possession and sale. The statute gives these rights to any person, such as a bailee, who performs services in relation to personal property. It provides in pertinent part as follows:\nIf the liens as herein provided are not paid ... the person in whose favor such special lien is created may proceed to sell the property at public auction____ The proceeds of the sale must be applied to the discharge of the lien and costs; the remainder, if any, must be paid over to the owner.\nAfter this lawsuit was filed, I.C. § 45-805 was amended. The present version of the statute combines the foregoing provisions with verbiage relating to care, boarding and feeding of livestock. 1982 Idaho Sess.Laws, ch. 262, § 1, p. 673. The result is a confusing alchemy of language, but it does not affect the case now before us.\n\n\n. The dissenting opinion correctly observes that the boat owner had two boats moored at the bailee’s marina, and that the letter warning of a sale did not describe a particular boat. However, it does not appear that the owner has claimed confusion on this point as a reason for failing to respond to the letter. (As noted above, the boat was fully described in the notice subsequently published.)\n\n\n. We further note that Dawson cited I.C. § 5-615, which then provided as follows:\nWhen cross demands have existed between persons under such circumstances that, if one had brought an action against the other, a counterclaim could have been set up, the two demands shall be deemed compensated, so far as they equal each other____ [Emphasis added.]\nThe Dawson court thereby underscored the importance of adjudicated offsets. The phrase \"deemed compensated” was never intended to countenance the retroactive destruction of a lien after foreclosure.\nToday, I.C. § 5-615 has been repealed and replaced by court rules. Idaho Rules of Civil Procedure 13(a), 13(g) and 54(b) provide that any conflicting demands presented to a court are resolved in a single judgment. This efficient procedure carries no implication that the adjudication retroactively destroys a prior lien, changing an otherwise valid prelitigation sale into a tortious conversion.\n\n\n. In his dissenting opinion, Judge Swanstrom apparently draws no distinction between a potential offset and an adjudicated offset. For that reason he perceives no difficulty in giving retroactive effect to the adjudicated offset in this case, thereby \"eliminating\" the moorage debt and invalidating the lien after the sale. With all due respect to our colleague, we think such after-the-fact destruction of liens is unsound in policy and is an evil which the Restatement was designed to prevent.\nThe dissenting opinion also suggests that no debt existed because the bailee, having breached an obligation to return or replace the missing equipment within a year, had no right at any time thereafter to demand payment of moorage charges. The district court obviously did not ascribe to this view. In any event, the dissent confuses a possible defense to collection of a debt with existence of the debt itself. Here, the debt arose from continued mooring of the boat at the marina. The bailee’s right to collect that debt by a lien sale might have been subject to a timely challenge, but in fact it was not challenged until the sale had occurred.\nFinally, the dissenting opinion contends that the district court’s judgment, forcing the bailee to pay a sum based on the boat’s full market value, represents an \"equitable result” in the case. The district court did not invoke equity to reach its result. Indeed, the court’s only mention of an equitable principle was the statement, noted above, that the boat owner should be estopped to complain about conduct of the lien sale because it disregarded prior communications from the bailee about the moorage charges. But even if equitable arguments could be made for and against both parties, we must recognize that equity does not have free rein here. This is a statutory lien case. The rights of the lienholder are legislatively prescribed. It would be inappropriate for us to obscure the statute’s application in this case, and perhaps to impair its application in future cases, by searching for an equitable rationale to achieve a particular result.\n\n", "ocr": false, "opinion_id": 9791291 }, { "author_str": "Swanstrom", "per_curiam": false, "type": "040dissent", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nSWANSTROM, Judge,\ndissenting.\nI dissent because I believe the judgment is legally sound and should be affirmed.\nThe district court found that the boat owner had paid all moorage fees due the bailee to September 1, 1975. About that time the owner learned that certain boat equipment was missing from storage. Apparently, employees of Kaniksu Resort had used the equipment without the owner’s knowledge or permission. The owner and the bailee agreed, orally, that “no more storage charges would be made for the houseboat until the equipment was replaced or returned” by the bailee. Although the parties placed no time limit on performance, the district court later found that one year “would certainly be an adequate and reasonable time” for the bailee to return or replace the equipment. The bailee never replaced or returned the equipment its employees had borrowed. Therefore, as the district court found, the agreement was “in a state of breach” after one year.\nMoreover, the breach of the agreement by the bailee was material. As the court later found, the missing equipment was worth $800, four times the annual moorage fees. When the breach occurred, around September 1,1976, the owner owed nothing for storage charges and, obviously, the bailee had no lien to foreclose.\nClearly, the oral agreement altered the lien rights of the bailee marina. Under I.C. § 45-805 a caretaker of property “has a special lien ... for the compensation, if any, which is due him from the owner, for such [safekeeping] service.” (Emphasis added.) Significantly, for more than three years after the oral agreement was made, the bailee gave no notice to the boat owner that any moorage fees were payable. The district court noted that billing of the boat owner was renewed only after new managers — who had no knowledge of the oral agreement — took over management of the marina.\nThe lead opinion does not say when the compensation became due from the boat owner to the marina. I suggest that following the bailee’s breach of the oral agreement and up until the time the bailee “sold” the boat for storage fees, there was never a time when the bailee could have demanded payment from the boat owner without first correcting its breach of the agreement. See Nelson v. Hazel, 89 Idaho 480, 406 P.2d 138 (1965).\nEven assuming that the bailee had a lien for caretaker services after September 1, 1976, the lien was eliminated by an offset. The majority refuses to follow the holding of our Supreme Court in Dawson v. Eldredge, 89 Idaho 402, 405 P.2d 754 (1965). According to the lead opinion, Dawson should no longer be considered authority for the proposition that a complete offset eliminates a lien because Dawson relied upon a now repealed statute, former I.C. § 5-615. However, the same principle of this statute is now embodied in the language of I.R.C.P. 54(b). This rule says in part:\nIf any parties to an action are entitled to judgments against each other such as on a claim and counterclaim, or upon cross-claims, such judgments shall be offset against each other and a single judgment for the difference between the entitlements shall be entered in favor of the party entitled to the larger judgment.\nHere, after both sides had an opportunity to fully present their evidence, a judicial determination was made that the earned moorage fees of the bailee ($716.68) were less than the amount the bailee owed to the boat owner ($800) for equipment the bailee *998had lost or appropriated. Applying Dawson to the facts as they existed when the bailee sold the boat to satisfy its lien, the bailee’s moorage fees were completely set off and its lien was eliminated. The Rule 54(b) language quoted above supports this result.\nThe lead opinion chooses to abandon Dawson in favor of § 79 of the RESTATEMENT OF SECURITY (1941). In doing so, the majority will give this Court the distinction of being the only appellate court in the country to have relied upon § 79 in the past forty-nine years. I am not persuaded that we should narrowly focus upon two words in one unrecognized section of the RESTATEMENT to change the outcome of this case.\nThe majority does not like the bailee’s unjustified sale of the bailor’s property under I.C. § 45-805 being treated as a “conversion.” Thus, the majority degrades this approach by characterizing it as the “retroactive tort” theory. Of course, the lead opinion ignores the fact that the sale was preceded by the bailee’s conversion of the .owner’s equipment and by the bailee’s breach of an oral agreement to return or replace the equipment within a reasonable time. Ignored also is the fact that the district judge — not the parties — “retroactively” determined that the owner should pay additional storage charges even though the bailee never performed its agreement to return or replace the equipment. I am satisfied that the district judge did this only to achieve an overall equitable result.1\nThe majority takes the position that once the foreclosure sale has occurred it is too late to rectify the injustice of taking a person’s property for a debt the amount of which is less than the bailee’s related debt to the owner. It is one thing to say that contemporaneous adjudication of the owner’s related offset is preferred. It is quite another thing to announce that without pri- or adjudication of the offset no self-help sale made under I.C. § 45-805 can ever be set aside. If, instead of a self-help lien foreclosure, this had been a default judgment obtained by the bailee for $1,016.68, the owner could have filed a motion or an independent action to have the default set aside. I.R.C.P. 60(b). Essentially, that is what occurred here.\nThe case of Gunnell v. Largilliere Co., 46 Idaho 551, 269 P. 412 (1928), is instructive. There, the holder of a chattel mortgage foreclosed by notice and sale of the property. As it was shown later, the secured note had been extended by renewal and the debt was not due when the foreclosure action was taken. Some of the mortgaged chattels had been sold when the mortgagor succeeded in stopping further proceedings. Some chattels were not returned to him. He brought a claim and delivery action against the mortgagee. He recovered a verdict for the return of the chattels or their value, compensatory damages and punitive damages.\nThe Supreme Court upheld all but the punitive damages. The Court said:\nWhere a chattel mortgage is foreclosed by notice and sale, when no legal right to do so existed because the debt was not due, a cause of action in conversion arises____ The measure of damages in such case is the value of the property at *999the time of the conversion, plus special damages caused by the taking, if specially pleaded, and interest____ The measure of damages for detention of the property is the value of its use up to the time defendant became entitled to its possession____ [Citations omitted.]\n46 Idaho at 559, 269 P. at 415. The Court went on to say:\nThe defendant, in attempting to foreclose its mortgage, under its construction of the terms of the contract, failed to bring itself within the rules governing such procedure, and prematurely brought its foreclosure proceeding. The evidence does not show that its action was Wanton, malicious or gross and outrageous, nor do the facts imply that it acted from motives of malice or oppression. The record shows that appellant was attempting to apply a remedy it deemed itself entitled to, and fails to show wilful fraud, malice or gross negligence.\n46 Idaho at 560, 269 P. at 415. Thus, in Gunnell the Supreme Court upheld the owner’s right to recover the value of his property if it could not be returned to him. Here, the bailee has not shown or even contended that the district court had the option to order the houseboat to be returned to its owner. Neither has the bailee provided us with a complete transcript of the trial and other proceedings below. Yet, in spite of these facts, the majority takes issue with “forcing” the bailee to pay the owner the fair market value of the boat as of the time of sale.\nWhile my opinion does not reach the question of whether I.C. § 45-805 is constitutional, I will note the lack of adequate notice here. As the majority observed, the statute “simply requires that a notice of sale be published in a newspaper in the county where the property is located.” The notice appeared one time in a weekly newspaper. The published notice did not clearly state where the sale was to take place. It did not name the owner of the boat to be sold. The bailee knew the owner had a Spokane, Washington address. Yet the bailee did not even mail a copy of the notice to that address, although, as the majority recognizes, the bailee knew that one letter it had sent to a representative of the owner was delivered. Because the owner’s name was not given in the published notice it would be highly unlikely that anyone seeing the notice would contact the owner about the sale. Certainly, there is no reason to believe that the out-of-state owner would see the notice. As a result, the owner had no opportunity to have a representative appear at the sale. It is hardly surprising that the only persons to attend the sale were Mr. and Mrs. Gatlin, who were the owners of the Kaniksu Resort, and their attorney. Of course, the only bid received was from Mr. Gatlin in the amount of his claim.\nThe district court recognized that while the owner was not without fault in protecting his rights, the owner was not deprived of a remedy. The court’s decision was based on sound legal precedent and reached an equitable result. I would affirm.\n\n. The bailee’s published notice of sale stated $1,016.68 was due for storage charges. At trial, it was shown that this amount included $150 for a Crestliner boat which had been kept at the marina until Comstock removed it sometime in 1975. All storage charges on this boat were paid by Comstock four years before the sale. The bailee’s claim also included $200 for moor-age of the houseboat to September 1, 1975. Comstock had paid this fee also four years before the sale. Thus, the district judge disallowed $350 of the bailee’s claim. (Not only was the bailee’s claim excessive, but even if Com-stock had owed storage on the Crestliner boat, the bailee would have had no right to assert a lien against the houseboat for the separate storage charges on the Crestliner.)\nOf the $1,016.68 claimed by the bailee, the district judge found only $666.68 to be valid. By prorating the $200 annual storage fee, he allowed another $50 for the three months in 1979 preceding the sale. Thus, the judge found that at the time of sale the bailee was entitled to a total of $716.68. The majority fails to note that even this figure includes $200 for the period from September 1, 1975 to September 1, 1976, the year the majority says the charges were to be \"suspended\" unless the owner’s missing equipment was returned.\n\n", "ocr": false, "opinion_id": 9791292 } ]

[ "530 P.2d 803" ]

[ { "author_str": "Crockett", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": 5850, "opinion_text": "\n530 P.2d 803 (1975)\nDarwin D. BUHLER, Plaintiff and Appellant,\nv.\nEdwin GOSSNER et al., Defendants and Respondents.\nNo. 13598.\nSupreme Court of Utah.\nJanuary 7, 1975.\n*804 William J. Cayias, Salt Lake City, for plaintiff and appellant.\nRaymond M. Berry of Worsley, Snow & Christensen, Salt Lake City, for defendants and respondents.\nCROCKETT, Justice:\nDarwin D. Buhler sued for wrongful death of his 15 year old son, Robert Lee Buhler, who met his death while working in a grain silo on defendants' dairy farm in Cache County. Defendants had arranged Workmen's Compensation coverage for their employees; and they claim the protection of the statute which provides that is the exclusive remedy for injury or death to an employee.[1] Plaintiff counters that defendants are not entitled to that protection for two reasons: that no notice of such coverage was posted on the premises; and that Robert as a minor was illegally being permitted to work near machinery. Upon the basis of the pleadings, interrogatories, and the depositions, the trial court rejected plaintiff's contention and granted defendants' motion for summary judgment against the plaintiff; and the latter appeals.\nThe tragedy of the loss of this young boy's life in the unfortunate accident could not be overstated. However regrettable, and whatever it may now seem from hindsight might have been done to avoid it, those matters are of no assistance to the *805 solution of the legal problem confronted here: whether plaintiff is entitled to maintain this action for damages for the death of his son.\nPlaintiff's son Robert, age 15 years, 10 months, at the time of his death, was employed doing general farm work on defendants' farm during the summer of 1970. On August 17, 1970, he was inside a grain silo placing sideboards, and a belting lining, around the sides to contain the dry barley as it poured into the silo. When his older brother David Buhler, who was running a grain grinder nearby, came to the silo for more grain, he observed Robert's shoes in the grain. He and others extricated Robert, but he had suffocated. Pursuant to the Workmen's Compensation coverage there has been paid to the plaintiff: reimbursement of $14.20 for ambulance service and $525 for funeral and burial expenses; and there has been paid into the special fund the amount provided for by statute, where a deceased employee has no dependents.[2]\nIn preface to our consideration of the plaintiff's contentions, we make certain general observations which are applicable to his arguments about the Workmen's Compensation Act. It is undoubtedly true that the purpose of the Act is to benefit employees by affording a measure of economic security for themselves and their families, and other benefits ramifying therefrom, without the risks and uncertainties involved in attempting to prove that it was negligence on the part of the employer, and without fault on the employee's own part, which caused the injury or disability.[3] But the thrust of this liberal construction of the Act means to find coverage of employees in accordance with those purposes. It does not mean that the Act should be applied liberally to provide such coverage when it best suits the employee's (or his dependents') desire or purpose, but reverse that policy and apply it strictly to find no coverage when that would best suit the employee's (or his dependents') desire or purpose.\nAlso to be considered is the fact that the Act has a correlated purpose in its benefit to the employer. The proposition seems self-evident that the objective to be desired, of doing equal justice to both parties, requires that the announced policy of liberality in finding coverage for employees should be followed consistently; and if upon a fair and realistic appraisal of the total fact situation, it appears that the employer has complied with the act and provided coverage for his employees, he should be entitled to the protections from lawsuits and possible judgments it expressly grants him.[4]\nThe applicable statutes are in harmony with the conclusion just stated. As noted above, Section 35-1-60, U.C.A. 1953, provides that where there is Workmen's Compensation it shall be the exclusive remedy. The only provision in the Act which deprives an employer of that protection is Section 35-1-57 which states that:\nEmployers who shall fail to comply with the provisions of section 35-1-46 shall not be entitled to the benefits of this title during the period of noncompliance, but shall be liable in a civil action... .\nWe have heretofore had occasion to observe that Section 35-1-46 referred to, which provides for insurance coverage in one of three ways, should be regarded as an integrated whole; and that if the employer has provided coverage in any one of the three ways, that will clothe him with the immunity from suit.[5]\n*806 Plaintiff makes the argument that notwithstanding the provisions of the statutes just discussed, the defendants can claim immunity from suit only by strict compliance with all of the provisions of the Act, specifically, that the defendants failed to qualify for such protection because they did not meet the requirement of Section 35-1-56 which requires the employer to:\n... post in conspicuous places about his place of business typewritten or printed notices stating, that he has complied with the provisions of this title and... .\nWe are neither unaware nor unappreciative of the plaintiff's argument based on what this court said in Murray v. Strike,[6] concerning the requirement of posting notice so that employees may be aware of their status in regard to being insured, or being left to their remedy against the employer. However, despite what has been said about the matter in business or industrial establishments, we do not see how it can be gainsaid that the purpose of giving such a notice is to inform the notice of the facts contained therein. Correlated to this, it seems a sound enough proposition that the failure to post such a notice on the farm should not deprive the defendants of their rights unless it could affect the insurance coverage, or in some conceivable way adversely affect the other party entitled to notice, i.e. the plaintiff.\nIn that regard it appears without dispute that Robert Buhler was present when his brother David suffered an injury to his hand a few weeks previously, for which he received medical treatment, was laid off and received Workmen's Compensation. There can be no question but that both Robert and his father, the plaintiff here, knew of the Workmen's Compensation coverage on the employees. Consequently, under these circumstances the lack of posted notice on the farm could not have had any practical effect in the situation and it should not deprive the defendants of the protection they had arranged and paid for.\nSupplementing the foregoing, the trial court also ruled that in accepting the $525 for Robert's burial and $14.20 for ambulance service from the State Insurance Fund he should be deemed to have elected his remedy and for this reason should be precluded from maintaining this suit.\nOur agreement with the rejection of the plaintiff's asserted cause of action on the ground that the benefits provided in the Workmen's Compensation Act is the exclusive remedy for the death of his son, renders it unnecessary and inadvisable to extend our discussion to other points he raised concerning defendants' alleged negligence and/or improper conduct in allowing Robert to work near machinery,[7] and the latter's possible contributory negligence, all of which would be pertinent only if this lawsuit proceeded to the issue of the defendants' liability for wrongful death of the son Robert.\nAffirmed. The parties to bear their own costs.\nCALLISTER, C.J., and HENRIOD, ELLETT and TUCKETT, JJ., concur.\nNOTES\n[1] Section 35-1-60, U.C.A. 1953, provides that for an employee so covered the right to compensation as specified in the act \"... for injuries sustained by an employee ... shall be the exclusive remedy against the employer... .\"\n[2] See Sec. 35-1-68, U.C.A. 1953.\n[3] Cook v. Peter Kiewit Sons Co., 15 Utah 2d 20, 386 P.2d 616; M & K Corp. v. Industrial Comm., 112 Utah 488, 189 P.2d 132; Spencer v. Industrial Comm., 4 Utah 2d 188, 290 P.2d 692.\n[4] Ibid.; see also Smith v. Alfred Brown Co., 27 Utah 2d 155, 493 P.2d 994.\n[5] Lovato v. Beatrice Foods, 22 Utah 2d 371, 453 P.2d 692 (1969).\n[6] 76 Utah 118, 287 P. 922 (1930).\n[7] As to that charge the applicable statute as it read at the time in question, Sec. 34-23-1(3), U.C.A. 1953 (as amended 1969), provided: \"No minor under 16 years of age shall at any time be employed, permitted ... to work on or in connection with any power-driven machinery ... except a minor 14 years of age or older may be employed in the first processing of agricultural products and other nonhazardous occupations and may be permitted to operate power-driven farm machinery ... with consent of the minor's parent, guardian or custodian.\" These facts appear to be uncontrovertible: that there was no machinery in the silo itself, nor adjunctive thereto, from which it could be classified as either machinery, or a dangerous instrumentality; and further, that the son Robert did in fact have the permission of his parents to work on the dairy farm with knowledge that he would be working with the farm machinery.\n\n", "ocr": false, "opinion_id": 2608939 } ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": 3, "download_url": "http://courts.ms.gov/Images/Opinions/Conv10435.pdf", "author_id": null, "opinion_text": " IN THE COURT OF APPEALS\n OF THE\n STATE OF MISSISSIPPI\n NO. 1999-KA-01729-COA\nFRED FEAZELL A/K/A JOHN EARL FEAZELL APPELLANT\nv.\nSTATE OF MISSISSIPPI APPELLEE\n\nDATE OF TRIAL COURT 09/11/1998\nJUDGMENT:\nTRIAL JUDGE: HON. ROBERT G. EVANS\nCOURT FROM WHICH APPEALED: COVINGTON COUNTY CIRCUIT COURT\nATTORNEY FOR APPELLANT: JOHN M. COLETTE\nATTORNEY FOR APPELLEE: OFFICE OF THE ATTORNEY GENERAL\n BY JOHN R. HENRY JR.\nDISTRICT ATTORNEY: DEWITT L. FORTENBERRY JR.\nNATURE OF THE CASE: CRIMINAL - FELONY\nTRIAL COURT DISPOSITION: TRANSFER OF COCAINE; SENTENCED TO SERVE 7\n YEARS IN THE MDOC\nDISPOSITION: AFFIRMED - 05/15/2001\nMOTION FOR REHEARING FILED: 5/25/2001; denied 7/31/2001\nCERTIORARI FILED: 8/13/2001; denied 12/13/2001\nMANDATE ISSUED: 1/3/2002\n\n BEFORE SOUTHWICK, P.J., BRIDGES, AND LEE, JJ.\n\n SOUTHWICK, P.J., FOR THE COURT:\n\n¶1. Fred Feazell was convicted of a transfer of cocaine. On appeal he alleges that he was denied effective\nassistance of counsel, that it was error for an audiotape to be played to the jury, and that the evidence was\ninsufficient to establish identity. We find no error and affirm the conviction.\n\n FACTS\n\n¶2. On June 18, 1996, law enforcement officers with the Southeast Mississippi Drug Task Force met to\ndiscuss plans for an attempted drug buy. Officer Boutwell was designated as the person who would\nparticipate in the transaction. The target was Fred Feazell. Following normal procedure, Boutwell was\nsearched, wired for transmission of sound, and provided marked bills for the attempted drug purchase.\nBoutwell and a confidential informant then proceeded to Feazell's trailer.\n\n¶3. Upon arrival, Officer Boutwell noticed that Feazell was outside at the rear of the trailer. Boutwell\napproached Feazell, handed him forty dollars and asked for two pieces of crack cocaine. Feazell then\n\fhanded the officer what later was proven by laboratory analysis to be two pieces of crack cocaine. The\nofficer then returned to his vehicle and drove to the designated location for meeting the other members of\nthe drug task force.\n\n¶4. At trial an audiotape of the transaction was played for the jury. Officer Boutwell testified that the tape\nwas an accurate recording of the transaction with Feazell and that the tape had not been altered. Although\nthere was no explicit mention of drugs on the tape, Boutwell identified two statements on the tape as having\nbeen made by Feazell during the drug transaction.\n\n¶5. Feazell testified that he was not the person who sold the drugs to Boutwell. He alleged that a relative\nwho often used his name was actually the one who sold the drugs. The defendant Feazell alleged that he\nwas at a hospital taking care of his mother when the sale took place. That relative testified and stated that he\nhad never represented himself as \"Fred Feazell.\" The jury did not accept Feazell's explanation and found\nhim guilty of transfer of cocaine.\n\n DISCUSSION\n\n I. Ineffective assistance of counsel\n\n¶6. Feazell alleges that he was denied effective assistance of counsel. Seven separate errors are identified as\nhaving been committed by his trial counsel, which Feazell claims prejudiced the defense in such a manner as\nto arise to ineffective assistance of counsel. None of these errors are supported by any evidence in the\nrecord. For example, Feazell states that no independent investigation was conducted, that no pretrial\nmeeting between attorney and client occurred to plan the defense, and that a potential alibi existed that was\nnot explored. The remaining claims are similar. Regardless of the factual validity of any of these arguments,\nthere are no facts presented to us in support of them.\n\n¶7. An appellate court \"must decide each case by facts shown in the record, not assertions in the brief . . .\n.\" Robinson v. State, 662 So. 2d 1100, 1104 (Miss. 1995). Feazell has failed to provide us with any\nfactual basis for these allegations. Therefore, we decline to address the issue.\n\n II. Audiotape\n\n¶8. During the testimony of Officer Boutwell, the State introduced the tape of the drug transaction. The trial\ncourt did not allow the tape itself into evidence, but did, over defense counsel's objection, permit the State\nto play the portion purporting to represent this sale. Feazell argues that the playing of the tape for the jury\nwas improper because the recording was neither relevant nor properly authenticated. Specifically he alleges\nthat his voice could not be identified.\n\n¶9. In order to be admissible the State must prove that what is heard on the recording is relevant as well as\nauthentic. Ragin v. State, 724 So. 2d 901, 903 (Miss. 1998). Rule 401 of the Mississippi Rules of\nEvidence requires that in order to be relevant a piece of evidence must have a \"tendency to make the\nexistence of any fact that is of consequence to the determination of the action more probable or less\nprobable than it would be without the evidence.\" M. R. E. 401. Even though the tape does not capture a\nconversation about drugs, the undercover officer testified what was on the tape accurately represented what\nhappened at the time of the purchase. The tape is relevant because it demonstrates Feazell's presence at the\ntime and place of the drug transaction.\n\f¶10. The second requirement for admissibility of what is heard from a tape recording is that it be proven\nauthentic. Rule 901 requires that evidence be introduced which is \"sufficient to support a finding that the\nmatter in question is what the proponent claims.\" M. R. E.. 901(a). The State properly proved that the tape\nhad recorded Feazell's voice by \"opinion based upon hearing the voice at any time under the circumstances\nconnecting it with the alleged speaker.\" M.R.E. 901(b)(5). Officer Boutwell specifically identified two\nstatements from the tape as what Feazell had said during the drug transaction. Officer Boutwell testified that\nhe had heard the voice during the transaction itself and that this recording played for the jury accurately\nrepresented the transaction that occurred between himself and Feazell on June 18, 1996. There was no\nproblem with authentication.\n\n III. Sufficiency of the evidence\n\n¶11. Feazell's defense at trial was that he was not the person who sold the cocaine. He claimed that a\nrelative had been using his name, that it was the relative who sold the cocaine, and that Officer Boutwell\nwas confused as to the identity of the person who sold him the cocaine. The jury was entitled to accept that\ntestimony, though there was compelling evidence to the contrary.\n\n¶12. At trial, Officer Boutwell positively identified Feazell as the man who sold him the cocaine on June 18,\n1996. This was not the first time that Boutwell had seen Feazell, as he testified that he knew him from being\nat his residence on prior occasions. The alleged imposter denied having been posing as Feazell. It is the\nfunction of the jury to resolve questions of credibility of witnesses. Gandy v. State, 373 So. 2d 1042,\n1045 (Miss. 1979). From the evidence presented at trial, a reasonable and fair minded juror could certainly\nhave determined that Feazell was the man who sold cocaine to Officer Boutwell.\n\n¶13. THE JUDGMENT OF THE CIRCUIT COURT OF COVINGTON COUNTY OF\nCONVICTION OF TRANSFER OF COCAINE AND SENTENCE OF SEVEN YEARS IN THE\nCUSTODY OF THE MISSISSIPPI DEPARTMENT OF CORRECTIONS IS AFFIRMED. ALL\nCOSTS OF THIS APPEAL ARE ASSESSED TO THE APPELLANT.\n\n McMILLIN, C.J., KING, P.J., PAYNE, BRIDGES, THOMAS, LEE, IRVING, MYERS\n AND CHANDLER, JJ., CONCUR.\n\f", "ocr": false, "opinion_id": 863654 } ]

[ "793 P.2d 1189", "8 Haw. App. 86" ]

[ { "author_str": "Heen", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\n793 P.2d 1189 (1990)\nMaher AZER, individually, as successor in interest to SGM Partners, and as assignee of Ezzat W. Wassef, Plaintiff/Counterclaim-Defendant-Appellant/Cross-Appellee,\nv.\nMichael S. MYERS, et al., Defendants/Cross-Claim Defendants-Appellees/Cross-Appellants, and\nBen Gromet, Defendant/Counterclaimant/Cross-Claimant-Appellee/Cross-Appellant, and\nMargaret T. Cameron, Defendant/Counterclaimant/Cross-Claimant/Cross-Claim Defendant-Appellee/Cross-Appellant, and\nAlfred Shaheen, Defendant/Counterclaimant/Cross-Claimant/Cross-Claim Defendant-Appellee.\nMichael S. MYERS, et al., Third-Party Plaintiffs-Appellees/Cross-Appellants, and\nBen Gromet and Margaret T. Cameron, Third-Party Plaintiffs-Appellees/Cross-Appellants, and\nAlfred Shaheen, Third-Party Plaintiff-Appellee,\nv.\nEzzat W. WASSEF, Third-Party Defendant-Appellant/Cross-Appellee.\nSGM PARTNERS and Maher Azer, Plaintiffs/Counterclaim-Defendants-Appellants/Cross-Appellees,\nv.\nThe PROFIT COMPANY, LIMITED, dba Pizza Time Theatre, Defendant/Counterclaimant-Appellee.\nSGM PARTNERS and Maher Azer, Third-Party Plaintiffs-Appellants/Cross-Appellees,\nv.\nMichael S. MYERS, et al., Third-Party Defendants-Appellees/Cross-Appellants, and\nBen Gromet and Margaret T. Cameron, Third-Party Defendants-Appellees/Cross-Appellants, and\nAlfred Shaheen, Third-Party Defendant-Appellee.\nMichael S. MYERS, et al., Fourth-Party Plaintiffs/Counterclaim-Defendants-Appellees/Cross-Appellants, and\nBen Gromet and Margaret T. Cameron, Fourth-Party Plaintiffs/Counterclaim-Defendants-Appellees/Cross-Appellants, and\nAlfred Shaheen, Fourth-Party Plaintiff/Counterclaim-Defendant-Appellee,\nv.\nEzzat W. WASSEF, Fourth-Party Defendant/Counterclaimant-Appellant/Cross-Appellee.\nNos. 12578, 12629-12634.\nIntermediate Court of Appeals of Hawaii.\nFebruary 14, 1990.\nAs Amended March 12, 1990.\n*1198 William Meheula, Nadine Y. Ando, McCorriston, Miho & Miller, Wesley W. Ichida, Case & Lynch, Honolulu, for Michael S. Myers, Grubb and Ellis Commercial Brokerage Co., and Grubb and Ellis Co.\nSusan Oki Mollway, Anne L. Sylvester, Cades, Schutte, Fleming & Wright, Honolulu, for SGM Partners, Maher Azer, and Ezzat W. Wassef.\nJames J. Bickerton, Bickerton, Ramos-Saunders & Dang, Honolulu, for Ben Gromet and Margaret T. Cameron.\nGary Shigemura, Randall N. Harakal, Shigemura & Harakal, Honolulu, for Alfred Shaheen.\nThomas P. Dunn, Honolulu, for The Profit Co.\nBefore BURNS, C.J., HEEN, J., and Circuit Judge WENDELL K. HUDDY in place of Associate Judge TANAKA, recused.\nHEEN, Judge.\nThese appeals are from the amended judgment in the consolidated jury trial of Civil Nos. 85-1801 and 85-3466, which were filed by SGM Partners (SGM), Maher Azer (Azer) and Ezzat Wassef (Wassef).[1] On September 1, 1987, judgment on the jury's special verdict was rendered as follows:\n(1) In favor of defendant The Profit Company, Limited (Profit), for $600,000 against SGM and Azer;\n(2) In favor of Azer for $2,000,000 against defendants Michael S. Myers (Myers) and Grubb and Ellis Commercial Brokerage Company and Grubb and Ellis Company;[2]\n(3) In favor of defendant Alfred Shaheen (Shaheen) on all claims against him by Azer;\n(4) In favor of Azer and Wassef on the abuse of process claims against them by Defendants Ben Gromet (Gromet) and Margaret T. Cameron (Cameron);[3]\n(5) In favor of Gromet on all claims against him; and\n(6) In favor of Gromet for $164,558.12 against Azer on Azer's promissory note.[4]\nThe judgment also dismissed all other claims by or against any of the parties. On *1199 October 21, 1987, the court entered an amended judgment, discussed below, which does not affect the above provisions.\nIn subsequent orders the lower court held that Shaheen and G & C were entitled to attorney's fees and costs from Azer, but that Azer was not entitled to attorney's fees and costs from G & C and Brokers.\nOn November 30, 1987, SGM, Azer, and Wassef filed a notice of appeal. Thereafter Brokers and G & C filed cross-appeals. An order setting the amount of fees and costs awarded to G & C was filed on January 5, 1988. The court did not set the amount of fees to be recovered by Shaheen.\nWe (1) vacate the directed verdicts in favor of Gromet on Azer's negligence and offset claims against him; (2) reverse the denial of Azer's request for attorney's fees from Brokers; and (3) remand for (a) a retrial of Azer's negligence and offset claims against Gromet; and (b) a determination of attorney's fees and costs recoverable from Azer by Shaheen and G & C, and by Azer from Brokers. In all other respects we affirm.\n\nFACTS\nOn March 7, 1980, Alfred Shaheen, Ltd., a Hawaii corporation, Gromet, and Myers formed SGM for the purpose of, inter alia, managing and developing certain real property at 1680 Kapiolani Boulevard.[5] In a September 21, 1981 amendment to the partnership agreement, Gromet and Myers were named \"managing partners for the day-to-day operation of the partnership.\" By that time Shaheen had replaced Alfred Shaheen, Ltd., as a partner, and Azer and Wassef had become partners.\n\nThe Courthouse Lease and Certification Agreement\nOn June 17, 1980, SGM leased space in a building constructed on the property to Courthouse Racquetball Corporation (Courthouse), a Hawaii corporation.[6] Under the lease Courthouse had \"[t]he right to the use of\" 51 parking stalls on the property designated by SGM. On May 19, 1982, SGM and Courthouse amended the Courthouse lease in an Agreement and Certification of Rents (Certification Agreement), which was negotiated and signed by Myers for SGM. The Certification Agreement reads in pertinent part as follows:\n(2) Landlord and Tenant may each have twenty five reserved parking stalls from 6:00 a.m. to 5:00 p.m. and [sic] which Landlord shall not have more than five reserved stalls on the second deck. Between 5:00 p.m. and 6:00 a.m. Landlord shall have 35 and tenant shall have 51 reserved parking stalls of which Landlord may not reserve any of the second deck. For each parking stall Landlord reserves on the premises day or evening in addition to those listed above, Tenant shall receive a like number of additional reserved parking stalls.\n\nThe Profit Lease\nOn May 1, 1983, SGM appointed Grubb and Ellis as SGM's exclusive leasing agent. Myers, who was also employed by Grubb and Ellis, negotiated on behalf of SGM to lease another portion of the building to Profit (Profit Lease). The lease was executed by Myers and Gromet on May 10, 1983. At that time Grubb and Ellis also acted as Profit's broker.\nThe provision of the Profit Lease pertinent to this opinion reads as follows:\n\nParking: Tenant is guaranteed the use of ninety-two (92) parking stalls. Twenty-five of said 92 stalls are located on the street level. Landlord and Tenant acknowledge that there are a total of 205 parking stalls available for all tenants of the building. From the hours of 5:00 p.m. to 12:00 midnight 42 of said 92 stalls are located on the street level and Tenant shall have the exclusive use of an additional *1200 72 parking stalls (or a total of 164) as well as all available parking stalls not used by The Courthouse Racquetball Club (51 stalls).\nAfter it had made alterations to its leased premises to accommodate its pizza parlor, Profit opened for business on December 12, 1983.[7] However, from the start of business SGM failed to provide Profit with either exclusive use of 92 parking stalls during the day or 164 parking stalls after 5:00 p.m. as the Profit Lease provided. Consequently, Profit began withholding rent.\nAt the time the Profit Lease was executed, Cameron and her husband had acquired a percentage of Gromet's partnership interest.\n\nThe Gromet Purchase\nOn June 4, 1983, Azer and Wassef purchased all of Gromet's and the Camerons' interest in SGM under one written agreement (Gromet Purchase).[8] After making a down payment, Azer and Wassef executed a promissory note for $165,000. The Gromet Purchase apportions the proceeds of the sale between Gromet and the Camerons, and provides:\n5. Indemnification/Release. Buyers shall indemnify and hold Sellers free and harmless from any loss or liability directly or indirectly related to any act or omission of the Partnership, which act or omission occurs after the Closing, including, but not limited to, any contract or tort claims, demand, loss or liabilities, taxes, or any other obligations or liabilities relating to the Partnership.\nThe Gromet Purchase was closed on June 13, 1983.\n\nThe Parking Agreement\nOn December 1, 1983, just prior to Profit's opening, SGM and Courthouse entered into an agreement (Parking Agreement) negotiated by Wassef and Shaheen, and signed by them and Azer on behalf of SGM.[9] The Parking Agreement reads in part:\n1. Pursuant to the terms of [the Certification Agreement, SGM and Courthouse] agreed upon an allocation of reserved parking in the [building] in the event that [SGM] desired to reserve portions of the common parking area. [SGM] and [Courthouse] now desire to allocate all of the parking in the [building] from 5 p.m. to 6 a.m. each day. [SGM] and [Courthouse] therefore agree such parking shall be allocated during such hours as set forth in this agreement.\nWassef testified that under the Parking Agreement Courthouse was allotted 112 spaces for its use after 5:00 p.m., leaving 93 parking stalls available for Profit and other tenants of the building.[10]\n\nThe Shaheen Purchase\nEffective December 30, 1983, Azer and Wassef purchased Shaheen's partnership interest (Shaheen Purchase).[11] Azer and Wassef made a down payment of $100,000 and executed a promissory note for $617,000. The provision of the Shaheen Purchase pertinent to this appeal reads:\n7. \"As-Is\" Condition. Buyers acknowledge that the property owned by the Partnership is accepted by Buyers in *1201 an \"as-is\" condition without representation or warranty. Seller represents and warrants that, as of the Closing, it owns the Partnership Interest free and clear of any encumbrance or security interest not disclosed herein.\n\nThe Profit Accord\nOn June 3, 1985, SGM's attorney wrote to Profit's attorney confirming the terms of an agreement (Profit Accord) between their clients purportedly resolving their differences over the parking and the withheld rent. Wassef negotiated the Profit Accord for SGM. The Profit Accord states that \"[it] has been made necessary by the discrepancy between the number of parking stalls presently available and the provision for parking stalls in [the Profit Lease],\" and establishes, inter alia, detailed arrangements for allotting parking stalls to Profit and the other tenants of the building, according to various time periods during the days of the week and the location of the spaces within the building's parking areas.[12] Profit surrendered some of its leased premises in exchange for a reduced rental and agreed to execute an amended lease reflecting those changes. SGM waived $250,000 of the delinquent rents and Profit agreed to make periodic payments to liquidate the balance of the delinquent rents. SGM failed to furnish Profit with the agreed parking and Profit refused to comply with the Profit Accord.\n\nPROCEDURE BELOW\n\nCivil No. 85-1801\nMeanwhile, on May 9, 1985, SGM, Azer, and Wassef filed Civil No. 85-1801 against Shaheen, Gromet, the Camerons, Myers, and Grubb and Ellis.[13] At that time SGM consisted of Azer and Wassef. On April 1, 1986, Azer filed an amended complaint individually, as successor in interest to SGM, and as assignee of Wassef, alleging that Azer had purchased Wassef's interest in SGM and the partnership had been dissolved. The amended complaint sought (1) an accounting from Shaheen, Gromet, Myers, and Cameron, as the former partners of SGM; (2) compensatory and punitive damages from Gromet and Myers, as former managing partners, for breach of fiduciary duties and negligence; (3) compensatory and punitive damages from Brokers for (a) breach of their fiduciary duties; (b) negligence; (c) misrepresentation; and (d) unfair and deceptive trade practices; (4) a return of the commission paid to Brokers; (5) a return of the monies Azer paid to G & C and Shaheen or, in the alternative, to offset any damages Azer might recover from them against the balances due under their respective purchase agreements; and (6) contribution and/or indemnification from all defendants for any damages Azer might be liable for as a result of the \"misallocation of parking stalls.\"\nBrokers filed a third party complaint against Wassef for contribution or indemnification, alleging that by negotiating the Profit Accord he had caused whatever damage SGM might have suffered.\nG & C counterclaimed against Azer and Wassef for, inter alia, the unpaid balance of their promissory note, and damages for malicious prosecution and abuse of process.[14] G & C also cross-claimed against Brokers and Shaheen, for indemnification or an apportionment of any damages for which they might be held liable.\nShaheen counterclaimed against Azer and Wassef for, inter alia, the balance *1202 owed on their promissory note.[15] Shaheen also cross-claimed against Myers, Cameron and Grubb and Ellis for indemnification.\n\nCivil No. 85-3466\nOn September 10, 1985, SGM filed Civil No. 85-3466 against Profit. In Count I SGM alleged that (1) Profit had breached the Profit Lease by failing to pay the rent; and (2) had breached the Profit Accord by (a) refusing to execute the lease amendment and (b) failing to make the required payments. SGM prayed for a writ of possession, monies payable under the Profit Accord, unpaid rents under both the Profit Lease and the Profit Accord, damages, interest, costs, and attorney's fees. In Count II SGM alleged that, on account of Profit's breach of the Profit Accord, SGM had the election to rescind the Profit Accord prior to trial and to recover the premises and all the unpaid rents under the Profit Lease, together with damages, interest, costs, and attorney's fees. On November 15, 1985, the circuit court issued a writ of possession, and SGM recovered the Profit premises.\nProfit answered and alleged that the dispute arose because of SGM's failure to provide parking according to the Profit Lease. Profit admitted that it had executed the Profit Accord, but alleged that SGM had again failed to provide the agreed upon parking. Profit counterclaimed for damages for SGM's breach of the Profit Lease.\nOn April 10, 1986, upon SGM's motion, Azer was joined as a real party in interest,[16] and on December 5, 1986, Civil Nos. 85-1801 and 85-3466 were consolidated.\nOn December 9, 1986, Azer,[17] as counterclaim-defendant filed a third-party complaint against Myers, Grubb and Ellis, Shaheen, Gromet, and Cameron, alleging that they were responsible for any breach of the Profit Lease. The third-party defendants in turn filed fourth-party complaints against Wassef alleging that he was at fault for any damages incurred by Azer. Wassef in turn counterclaimed against the fourth-party plaintiffs, alleging that they were responsible for any damages suffered by any of the parties.\nAfter a jury trial, judgment was entered on the special verdict. Azer appealed from the amended judgment and Brokers and G & C cross-appealed.\n\nTHE APPEALS\nAzer asserts as error:\n(1) the denial of his motion to amend the judgment;\n(2) the denial of his motion for sanctions for abuse of discovery against Brokers and their counsel;\n(3) the amended judgment;\n(4) the summary judgment in favor of Cameron on all of his claims against her;\n(5) the granting of Gromet's motion for a directed verdict on Azer's claims against him;\n(6) the giving of Shaheen's instruction regarding construction of the \"as-is\" clause in the Shaheen Purchase, and the denial of Azer's instruction on that issue;\n(7) the award to Profit of prejudgment interest and denial of prejudgment interest to him; and\n(8) the award of attorney's fees and costs to G & C and Shaheen; the denial of his request for attorney's fees and costs from G & C and Brokers; and the supplemental order setting the amount of fees awarded to G & C.\nIn their cross-appeal, Brokers assert as error:\n(1) the denial of their motion for new trial; and\n(2) the denial of their motion for mistrial.\n*1203 In their cross-appeal, G & C assert as error:\n(1) the refusal of their instruction on abuse of process and the giving of Azer's; and\n(2) the court's decision to allow Azer to present a \"rebuttal\" witness.\nWith the exception of the question of attorney's fees and costs, which will be treated separately, we discuss the appeals in the following order: first, Azer; second, Brokers; third, G & C.\n\nAZER'S APPEAL\n\n1.\n\na.\n\nThe Denial of Azer's Motion to Amend the Judgment\nAzer appeals from the order denying his motion to amend the judgment by striking the $600,000 award to Profit, arguing that the jury's verdict is internally inconsistent. We find no error.\nAzer attacks the following interrogatories and answers:\n\nSECTION I\n\nClaims Between SGM Partners and The Profit Company\n1. Was there an enforceable settlement agreement between SGM Partners and The Profit Company on June 3, 1985? Yes x No ___\nIf \"no,\" please do not answer question nos. 2 and 3, but go on to question no. 4.\nIf \"yes,\" please answer question no. 2.\n2. Was there an unexcused breach of the settlement agreement by The Profit Company? Yes ___ No x\nIf \"no,\" please do not answer question no. 3, but go on to question no. 4.\nIf \"yes,\" please answer question no. 3.\n3. State the amount of damages to SGM Partners (Azer and Wassef) resulting from the breach of the settlement agreement by The Profit Company. $ ____\nIf you answered \"yes\" to question no. 1, please do not answer question nos. 4, 5, 6 and 7, but go on to question no. 8.\nIf you answered \"no\" to question no. 1, please answer question no. 4.\n4. Was there an unexcused breach by SGM Partners of the lease with The Profit Company (\"The Profit Company Lease\")? Yes x No ___\nIf \"no,\" please do not answer question no. 5, but go on to question no. 6.\nIf \"yes,\" please answer question no. 5.\n5. State the amount of damages to The Profit Company resulting from the breach of The Profit Company Lease by SGM Partners. $600,000\nIf your answer to question no. 4 was \"no,\" please answer question no. 6.\nIf your answer to question no. 4 was \"yes,\" please do not answer question nos. 6 and 7, but go on to question no. 8.\n6. Was there an unexcused breach by The Profit Company of The Profit Company Lease with SGM Partners? Yes ___ No ___\nIf \"no,\" please do not answer question no. 7, but go on to question no. 8.\nIf \"yes,\" please answer question no. 7.\n7. State the amount of damages to SGM Partners (Azer and Wassef) resulting from the breach of The Profit Company Lease by The Profit Company. $ ____\nPlease go on to question no. 8 of Section II.[18]\n(Footnote added.)\nCiting Vieau v. City and County of Honolulu, 3 Haw. App. 492, 653 P.2d 1161 (1982), Azer argues that the jury's answers to questions 1, 4, and 5 render the verdict internally inconsistent. Consequently, Azer contends the trial court should have disregarded the answers to questions 4 and 5 as surplusage and not entered the $600,000 judgment in favor of Profit. Azer urges this court to strike the jury's award to Profit or, alternatively, to remand the dispute between SGM and Profit for a new trial. Azer also argues that the question of whether the Profit Accord was a settlement *1204 or an accord was not presented to the jury. We find no merit in the arguments.\nThe crux of Azer's appeal is that the Profit Accord was a substituted contract which extinguished any claim that SGM and Profit had against each other for violations of the Profit Lease.[19] Consequently, Azer argues, when the jury found the Profit Accord enforceable, question nos. 4, 5, 6, and 7 were irrelevant and the jury should not have answered them.\nProfit, on the other hand, asserts that the Profit Accord was not a substituted contract but was merely an accord which SGM had breached. Profit further asserts that it could elect to sue on either the Profit Lease or the Profit Accord. Under Profit's theory, the jury correctly answered the special verdict questions.\nAzer does not challenge any of the jury instructions relating to the dispute between him and Profit.[20] Consequently, he has not preserved any error in those instructions for review. See Chambers v. City and County of Honolulu, 48 Haw. 539, 406 P.2d 380 (1965). Moreover, we think the instructions correctly presented the law governing both Azer's and Profit's theory of the legal effect of the Profit Accord.\nThe Restatement (Second) of Contracts (1979) (Restatement) clarifies the distinction between a substituted contract and an accord. The Restatement § 279 states that:\n(1) A substituted contract is a contract that is itself accepted by the obligee in satisfaction of the obligor's existing duty.\n(2) The substituted contract discharges the original duty and breach of the substituted contract by the obligor does not give the obligee a right to enforce the original duty.\nComment a to § 279 explains that:\nA substituted contract is one that is itself accepted by the obligee in satisfaction of the original duty and thereby discharges it. A common type of substituted contract is one that contains a term that is inconsistent with a term of an earlier contract between the parties. If the parties intend the new contract to replace all of the provisions of the earlier contract, the contract is a substituted contract.\nOn the other hand the Restatement § 281 states:\nAccord and Satisfaction\n(1) An accord is a contract under which an obligee promises to accept a stated performance in satisfaction of the obligor's existing duty. Performance of the accord discharges the original duty.\n(2) Until performance of the accord, the original duty is suspended unless there is such a breach of the accord by the obligor as discharges the new duty of the *1205 obligee to accept the performance in satisfaction. If there is such a breach, the obligee may enforce either the original duty or any duty under the accord.\n(3) Breach of the accord by the obligee does not discharge the original duty, but the obligor may maintain a suit for specific performance of the accord, in addition to any claim for damages for partial breach.\nThe question for the jury really was whether the Profit Accord was a substituted contract or an accord and satisfaction. However, neither party demanded that the special verdict form present that question to the jury. Nevertheless, the omission is not fatal to the verdict.\nRule 49(a), Hawaii Rules of Civil Procedure (HRCP) (1980), provides:\nIf [in submitting a question to the jury in a special verdict form] the court omits any issue of fact raised by the pleadings or by the evidence, each party waives his right to a trial by jury of the issue so omitted unless before the jury retires he demands its submission to the jury. As to an issue omitted without such demand the court may make a finding; or, if it fails to do so, it shall be deemed to have made a finding in accord with the judgment on the special verdict.\nWhere the parties have failed to demand the submission of a fact question to a jury, \"it will be presumed on appeal that [the trial judge] made whatever finding was necessary in order to support the judgment that he entered.\" 9 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 2507 (1971). Thus, the lower court is presumed in this case to have found that the Profit Accord was an accord and satisfaction which SGM had materially breached prior to any breach by Profit.\nClose analysis of the special verdict in the light of the parties' claims supports the Rule 49(a) presumption. Profit had waived any claim for damages for SGM's breach of the Profit Accord. Profit's counterclaim asserted damages only for SGM's breach of the Profit Lease. It did not claim any damages for a breach of the Profit Accord. If the jury had found a substituted contract, it would not have awarded any damages to Profit. Since the jury awarded damages to Profit for SGM's breach of the Profit Lease, it must have found (1) an accord and satisfaction; (2) that SGM materially breached the Profit Accord; and (3) that SGM's breach preceded and excused Profit's breach.\nIt follows from the above that the affirmative answer to question no. 1 did not, as Azer argues, render questions 4, 5, 6, and 7 irrelevant. Question no. 1 only determined that the Profit Accord was an enforceable agreement; it did not per se establish whether the agreement was a substituted contract or an accord.\n\nb.\nAzer did not show in his opening brief's statement of points \"where in the record the alleged error occurred and where it was objected to\" as required by Rule 28(b)(4), Hawaii Rules of Appellate Procedure (1987). Consequently, we will not consider his argument that, since the jury had answered question no. 1 in the affirmative, the instruction following question no. 3 required the jury to skip question no. 4.\n\nc.\nAzer argues further that the court erred in awarding judgment to Profit because Profit did not assert a compulsory counterclaim for breach of the Profit Accord as required by Rule 13(a), HRCP (1980).[21] We disagree.\nPleadings should be construed liberally and not technically, Au v. Au, 63 *1206 Haw. 210, 626 P.2d 173 (1981), and to do justice. Rule 8(f), HRCP. In its answer Profit admitted signing the Profit Accord, but alleged that SGM failed to fulfill its conditions. Under Profit's theory it waived all claims for SGM's breach of the Profit Accord and, therefore, it did not need to counterclaim for damages resulting from that breach. Profit chose instead to seek damages for SGM's breach of the Profit Lease. Moreover, in its counterclaim Profit alleged that it negotiated in good faith to resolve the parking dispute but that SGM continued to fail to furnish the parking provided for under the Profit Accord. That is sufficient in our view to satisfy the requirement of Rule 13(a).\n\n2.\n\nDenial of Azer's Motion for Sanctions Against Brokers and Their Counsel\nOn the day before trial, Azer, while being deposed in another case, Azer v. The Courthouse Racquetball Corp., First Circuit Court Civil No. 87-0562, learned of a letter to Profit from Courthouse's attorney, Edward E. Case (Case), written on November 23, 1983, before Profit opened for business. Case was a member of the law firm of Carlsmith, Wichman, Case, Mukai, and Ichiki, which also represented Brokers below. The letter advised Profit that Courthouse intended to assert its rights to reserved parking under the Certification Agreement and questioned whether there was adequate parking for Profit. Profit denied receiving the letter. Although Azer had requested that Brokers produce all documents relating to the dispute, the letter was not produced, apparently because it was not in Brokers' possession. It was in Brokers' lawyers' possession, but in their file for Courthouse, not for SGM.[22]\nBrokers moved before trial to exclude the letter from evidence. The court granted the motion, finding that the letter's contents and the fact that it was written by a lawyer would have been prejudicial. Azer then filed a motion to add Case as a witness, which the court denied. On August 19, 1987, after the verdict was entered, Azer moved the court to sanction Brokers and/or their counsel by requiring them to pay his attorney's fees and costs for all proceedings relating to the letter, and to pay any damages awarded to Profit from Azer. The motion was denied.\nAzer contends that the letter was relevant to Profit's claim that it was not aware of parking problems before it opened for business, and should have been produced in response to his discovery request for documents, even though it was not in Brokers' possession. He contends that the letter was deliberately withheld and the court erred in denying his motion for sanctions. Alternatively, Azer argues that, since the substance of the letter was relevant to Profit's defense, his dispute with Profit should be remanded for a new trial after he has had sufficient opportunity for discovery regarding the letter. We find no merit in Azer's arguments.\nThe question of sanctions for abuse of discovery is within the discretion of the trial court, and the exercise of that discretion will not be overturned on appeal absent a clear showing of abuse. Lothspeich v. Sam Fong, 6 Haw. App. 118, 711 P.2d 1310 (1985). A trial court abuses its discretion when it clearly exceeds the bounds of reason or disregards rules or principles of law or practice to the substantial detriment of one of the parties. Bloudell v. Wailuku Sugar Co., 4 Haw. App. 498, 669 P.2d 163 (1983). Azer has failed to carry his burden of convincing us that the trial court abused its discretion. Johnson v. Robert's Hawaii Tour, Inc., 4 Haw. App. 175, 664 P.2d 262 (1983).\n*1207 Even assuming, but not deciding, that Brokers' attorneys abused discovery, as SGM argues, Azer was not prejudiced by the trial court's exclusion of either the letter or Case's testimony. During trial, apparently for the reason that its subject matter was relevant, the court read a stipulation to the jury stating that Case wrote the letter, that it was placed in the hands of a messenger for delivery, and that Case's firm's records indicate the letter had been hand delivered. Azer also put on proof that the letter was delivered to Profit. Additionally, Courthouse's director of operations, Patrick Nolan, testified that he discussed the letter with Profit's agent, Bruce Gee.\n\n3.\n\nThe Amended Judgment\nOn September 11, 1987, Brokers moved to alter or amend (Motion to Amend) the judgment to state that the Profit Accord was no longer enforceable. The thrust of the Motion to Amend was that SGM could not enforce the Profit Accord. Azer asserts that the lower court erred in granting the Motion to Amend.\nIn a review of a trial court's decision on a motion under Rule 59(e), HRCP, to alter or amend a judgment, the question is whether the court abused its discretion. Cabral v. McBryde Sugar Co., 3 Haw. App. 223, 647 P.2d 1232 (1982). We find no abuse of discretion.\nBrokers made the Motion to Amend because on August 31, 1987, Azer, alleging to be the assignee under the Profit Accord of Profit's claims relating to the allocation of parking spaces,[23] had filed a separate suit in circuit court against Brokers (Civil No. 87-2809-08) for damages on account of those claims. The thrust of the complaint in Civil No. 87-2809-08 is that, since the jury found in this case that the Profit Accord was enforceable, Azer is entitled, as Profit's assignee, to seek damages from Brokers for breach of their duties as Profit's agent in negotiating the Profit Lease.\nIn advancing the Motion to Amend Brokers argued that, since the jury found that the Profit Accord was enforceable, but that Profit had not committed an unexcused breach, the jury must have found that SGM breached the Profit Accord first. Thus, Brokers asserted, the Profit Accord was no longer enforceable. In granting the motion the court stated that the clear inference from the jury verdict was that SGM breached the Profit Accord. The judgment was amended to read in pertinent part as follows:\nIT IS HEREBY ORDERED, ADJUDGED AND DECREED that in... Civil No. 85-3466, there was an enforceable settlement agreement on June 3, 1985 between SGM Partners and The Profit Company, Limited, of which there was no unexcused breach by The Profit Company, Limited, and therefore the settlement agreement is no longer enforceable, and that, in addition, judgment be entered in favor of The Profit Company, Limited, on its claim for breach of lease[.]\nThe underscored language is the language added to the original judgment by the lower court. As discussed above the amended judgment is in accord with the special verdict form.\nAlthough he cites no cases to support the proposition, Azer also argues that the court's action violated his right to a jury trial on the issue. We disagree.\nUnder Rule 49(a), supra, when Azer failed to demand that the question be *1208 submitted to the jury, he waived his right to a jury trial on the issue. However,\n[r]ule 59(e) does not authorize the court to alter or amend a judgment entered upon a jury's verdict in any manner that would constitute a re-examination of the facts found by the jury in contravention of the Seventh Amendment.\n6A Moore's Federal Practice, ¶ 59.12[1], at 59-271 (2d ed. 1989); see 11 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 2817 n. 32, at 111 (1973).\nThe Seventh Amendment to the United States Constitution, which preserves the right to a jury trial, is not binding on the states.[24]Harada v. Burns, 50 Haw. 528, 445 P.2d 376 (1968). Nevertheless, \"respect for the jury's assessment of the evidence is constitutionally mandated\" by Article I, § 13 of the Hawaii State Constitution.[25]Harkins v. Ikeda, 57 Haw. 378, 381, 557 P.2d 788, 791 (1976) (footnote omitted). Consequently, the question remains whether the court invaded the province of the jury when it amended the judgment. We hold it did not.\nAs outlined above, the jury decided that SGM inexcusably and materially breached the Profit Accord. Therefore, no \"further factual inquiry\" was required to determine that the agreement was no longer enforceable by Azer. 6A Moore's Federal Practice, supra, § 59.12 n. 45, citing McGee v. United States, 17 F.R. Serv.2d 1093, 1097, 62 F.R.D. 205 (D.Pa. 1972), and Azer's right to a jury trial was not violated.\n\n4.\n\nSummary Judgment in Favor of Cameron\nPrior to trial Cameron moved for summary judgment (SJ Motion). Cameron argued below that since the claims against her were based on events that took place after the closing of the Gromet Purchase, the provisions of the Gromet Purchase quoted above required Azer to indemnify her for any liability caused by those events. The SJ Motion was granted and Azer appealed.[26]\nThe question is whether there is no genuine issue of material fact and Cameron is entitled to judgment as a matter of law. Bidar v. AMFAC, Inc., 66 Haw. 547, 669 P.2d 154 (1983). Azer argues that the indemnity provision of the Gromet Purchase is ambiguous and, therefore, questions of fact exist regarding the meaning of the terms used therein.\nContrary to Azer's argument, the indemnity agreement is clear, and the construction of its terms is a question of law. Stewart v. Brennan, 7 Haw. App. ___, 748 P.2d 816 (1988). The indemnity agreement requires Azer to hold Cameron free from all liability related to any act or omission of the partnership as constituted after the date of closing, June 13, 1983.\nAzer's argument that the act or omission occurred on May 10, 1983, when the Profit Lease was signed is without merit. It is clear from the record, even viewing the evidence in the light most favorable to Azer, Bidar, supra, that the act or omission of SGM, the breach of the Profit Lease, occurred on December 12, 1983, when Profit opened for business. The Profit Lease provided that its term began when Profit first opened for business or six months from the date of execution, whichever occurred first. The delayed *1209 start of the term was to allow Profit time to prepare its premises for business. Until the lease term began, Profit could not demand, and Azer was not required to provide, parking. The mere execution of the Profit Lease did not create liability.\nWe find no genuine issue of material fact and the SJ Motion was properly granted.\n\n5.\n\nDirected Verdict in Favor of Gromet\nAt the end of Azer's case-in-chief Gromet filed motions for directed verdicts on Azer's claims against him for negligence, offset, breach of fiduciary duties as managing partner, and for a partnership accounting. Azer argues that the court erred in granting the motions. In our view the court erred only in granting Gromet's motion for directed verdict on Azer's claims for negligence and offset. Azer's claims as outlined herein will be discussed seriatim.\nOn a motion for directed verdict the evidence and reasonable inferences therefrom must be considered in the light most favorable to the non-moving party and if from the evidence a jury can reasonably conclude that the non-movant's claim is sustainable, the motion must be denied. Shannon v. Waterhouse, 58 Haw. 4, 563 P.2d 391 (1977), cert. denied, 440 U.S. 911, 99 S. Ct. 1223, 59 L. Ed. 2d 460, reh'g denied, 441 U.S. 917, 99 S. Ct. 2020, 60 L. Ed. 2d 390 (1979).\n\na.\nMyers testified that Gromet had a small part in negotiating the Profit Lease. Viewing that evidence in the light most favorable to Azer, a jury could reasonably find that Gromet was negligent in negotiating a lease which contained parking provisions that created a conflict with the Certification Agreement.\nGromet argues, however, that the directed verdict on his alleged negligence can be sustained because the indemnification clause in the Gromet Purchase entitled him to the same freedom from liability as Cameron. We disagree. Gromet's alleged negligence antedated the closing of the Gromet Purchase. Moreover, the indemnification clause applies to acts or omissions of the partnership, not to Gromet's individual negligence while acting for the partnership. The cases cited by Gromet are inapplicable to the circumstances of this case.\n\nb.\nIn view of the possibility that Azer might recover some damages on his negligence claim, it was error to grant a directed verdict on his offset claim.\n\nc.\nAzer's claim that Gromet breached his fiduciary duties as a managing partner is without merit. The evidence shows that, although Azer and Wassef had orally agreed to purchase Gromet's partnership interest, Gromet was still a managing partner of SGM when he signed the Profit Lease.[27] However, under the amended partnership agreement Gromet and Myers were only \"managing partners for the day-to-day operation of the partnership,\" and none of the partners could execute any lease without the written consent of the other partners. Clearly, Gromet did not sign the Profit Lease as a managing partner.\n\nd.\nWe find no merit in Azer's accounting claim against Gromet. Under HRS § 425-122 (1985), a partner is entitled to an accounting of partnership affairs where\n(a) the partner has been wrongfully excluded by his or her co-partners from the partnership's business or property;\n(b) he or she is accorded the right to an account by an agreement;\n*1210 (c) HRS § 425-121 (1985) so requires; or\n(d) it is just and reasonable under the circumstances.\nHRS § 425-121 provides that a partner is accountable as a fiduciary for any benefits or profits he or she derives without the consent of the other partners from a transaction connected with the partnership's affairs or its property.\nAzer has not indicated how his accounting claim comes within any of the statutory provisions, or how he may otherwise be entitled to an accounting.\n\n6.\n\nThe Lower Court's Instruction Regarding the Agreement Between Azer and Shaheen\nShaheen asserted below that the \"as is\" clause in the Shaheen Purchase relieved him of liability to Azer. Azer asserted that the clause applied only to the condition of the land and the building. Shaheen, however, contended that the clause related to both the partnership property and his partnership interest, and that when Azer entered into the Shaheen Purchase, he waived any claims against Shaheen.\nAzer argues on appeal that the court erred in instructing the jury that,\n[an] \"As Is\" provision in any sale puts the buyers on notice that the seller makes no warranties about the quality or condition of the thing sold[,]\nbecause the instruction was incomplete.[28] Azer argues that the instruction should have included language advising the jury that such a clause is subject to the same principles of construction governing contracts generally. The argument is without merit.\nJury instructions must be considered as a whole, and a refusal to give an instruction that correctly states the law is not error if another instruction expressing a substantially similar principle is given. State v. Pioneer Mill Co., Ltd., 64 Haw. 168, 637 P.2d 1131 (1981).\nThe jury charge in this case includes instructions advising the jury of the principles to apply in the construction of contract language to the same extent as Azer contends the challenged instruction should have done. Viewed in the context of the entire charge, the instruction complained of was neither incorrect nor prejudicial. Eastern Star, Inc. v. Union Bldg. Materials Corp., 6 Haw. App. 125, 712 P.2d 1148 (1985).\n\n7.\n\nPre-Judgment Interest\nAzer argues that the trial court abused its discretion when it granted Profit's motion for pre-judgment interest from February 3, 1984, and awarded Azer interest only from the date of the verdict, July 21, 1987.\nAs stated above, the breach of the Profit Lease occurred on December 12, 1983, when Profit opened for business and SGM by its own admission failed to provide the agreed upon parking. Accordingly, Profit's motion requested that prejudgment interest on its $600,000 award start on that date. However, Profit acceded to Azer's argument below that the earliest date that SGM could have breached the lease was February 3, 1984, when the Shaheen purchase was executed. Consequently, the court established that date for beginning Profit's pre-judgment interest. Azer argues on appeal that there is no valid reason for treating his request for pre-judgment interest differently from Profit's.[29] We disagree.\nThe award of pre-judgment interest is solely within the discretion of the *1211 trial court. HRS § 636-16 (1985); McKeague v. Talbert, 3 Haw. App. 646, 658 P.2d 898 (1983). One of the purposes of pre-judgment interest is to cut delays in litigation, and to undo substantial injustice caused by such delays. Id.\nIn its oral ruling on Azer's motion for prejudgment interest, the trial court noted that the Defendants had made good faith efforts to settle the claims. The lower court apparently felt that Azer's recalcitrance contributed to delaying the proceedings. Azer has failed to convince us that the court abused its discretion.\nFinally, Azer argues that the fact that the jury's award to him was greater than the settlement offer below, indicated he was correct in not settling the dispute. However, we do not deem that to indicate an abuse of discretion.\n\nBROKERS' CROSS-APPEAL\nBrokers argue that the court erred in denying their motions for new trial and for mistrial. We find no error.[30]\n\n1.\n\nNew Trial\nBrokers argue that, since the evidence was insufficient to support the jury's verdict on liability and damages, the lower court erred in denying their motion for new trial. We disagree.\nWhen reviewing a trial court's denial of a motion for new trial based upon insufficient evidence, the appellate court will review the record on appeal and if it contains substantial evidence, more than a scintilla, to support the jury's verdict the reviewing court will not upset the verdict. Lovell Enters., Inc. v. Campbell-Burns Wood Prods., Inc., 3 Haw. App. 531, 654 P.2d 1361 (1982).\n\na.\n\nLiability\nThe dispute between Azer and Brokers was whether Azer's inability to supply Profit with adequate parking was caused by a conflict between the Certification Agreement which was negotiated by Myers and the Profit Lease, or a conflict between the Profit Lease and the Parking Agreement, which was negotiated for SGM by Wassef and Shaheen. The Profit Lease was negotiated for SGM by Myers and, according to Myers' testimony, Gromet. Brokers contend that the Certification Agreement and the Profit Lease were unambiguous and Courthouse was entitled to an increased number of parking stalls only if the Profit Lease specifically designated any parking stalls for Profit. They assert that the Profit Lease does not operate to reserve parking stalls for Profit and, consequently, the \"add on\" clause of the Certification Agreement was not triggered. Therefore, they contend it was Azer's own contributory negligence in negotiating and entering into the Parking Agreement that caused Profit's parking problems. We hold that the evidence was sufficient to support the verdict.\n\ni.\n\nAmbiguity of the Certification Agreement and the Profit Lease\nBrokers argue that the trial court erred when it concluded that, although considered *1212 separately the Certification Agreement and the Profit Lease were unambiguous, considered together they created an ambiguity. We find no error.\nThe question is whether the words \"guaranteed\" and \"exclusive,\" although unambiguous in the context of the Profit Lease, have the same meaning as the word \"reserved\" in the Certification Agreement. We hold that they do, and construe the court's conclusion of ambiguity to mean that the Certification Agreement and the Profit Lease are in conflict.\nThe terms of a contract should be interpreted according to their plain, ordinary and accepted use in common speech, unless the contract indicates a different meaning. Maui Land and Pineapple Co. v. Dillingham Corp., 67 Haw. 4, 674 P.2d 390 (1984).\nGuarantee is defined as:\n[A]n agreement by which one person undertakes to secure another in the possession or enjoyment of something.\nWebster's Third New International Dictionary 1007 (1981).\nExclusive is defined as:\n[E]xcluding or having the power to exclude (as by preventing entrance or debarring from possession, participation or use); limiting or limited to possession, control, or use (as by a single individual or organization or by a special group or class).\nId. at 793. Reserve means to set aside or apart. Id. at 1930.\nIn our view, the words reserved, guaranteed, and exclusive, in their common usage, are synonymous. In the Profit Lease the plain, ordinary and accepted meaning of guaranteed and exclusive is that Profit will have access to certain parking stalls to the exclusion of everyone else.[31] The parking provisions of the Profit Lease are meaningless without such a construction. Consequently, the Certification Agreement and the Profit Lease conflict. That conflict supports the jury's finding that Brokers were negligent and that Azer was not contributorily negligent.\nBrokers further argue that the only admissible evidence of the intent of the parties to the Certification Agreement came from the testimony of Myers and Don Dymond (Dymond), who represented Courthouse in negotiating the Certification Agreement. They testified that only in the event SGM \"reserved\" parking stalls in addition to those allocated to it under the Certification Agreement would Courthouse be entitled to additional parking. Consequently, Brokers contend, there is no evidence to support the finding of negligence. The argument is without merit.\nDymond also testified that,\nif another parking stall was taken out of the pool and we were expressly prohibited from parking in that stall then yeah, we would be entitled to another one. * * * If it's taken out of the pool it would be reserved. It wouldn't be available for open parking.\nThe record contains sufficient evidence for the jury to determine that a parking space guaranteed to Profit for its exclusive use was taken out of the pool and reserved within the meaning of the Certification Agreement.\n\nii.\n\nAzer's and Wassef's Testimony\nAt trial, Azer and Wassef testified as to their understanding of the Certification Agreement and the Profit Lease. At that time Brokers requested the court to instruct the jury that it could not consider Azer's and Wassef's testimony in construing the documents. Brokers argue that the court erred in denying their request. *1213 The argument is without merit. Although there are sound reasons for the court to instruct the jury at the time testimony is received that it is to be considered for a limited purpose, 1 J. Weinstein and M. Berger, Weinstein's Evidence ¶ 105[05] at 105-44 (1989), it is not error for the court not to do so where the same instruction is given as part of the general charge. State v. Perez, 64 Haw. 232, 638 P.2d 335 (1981). Here, the jury was instructed that it could not use the testimony of persons who had not negotiated and drafted the contract provisions to determine the intent of the parties to the contract.\n\nb.\n\nDamages\n\ni.\n\nLost Rents\nAzer calculated his lost rents by using the basic contract rent in the Profit Lease, which was $1.50 per square foot ($1.50 rate). He testified that when Profit surrendered portions of its premises pursuant to the Profit Accord, the surrendered areas remained vacant until other tenants of the building occupied them at the same $1.50 rate.[32] Those tenants, in turn, vacated premises they had been occupying. Azer further testified that new tenants moving into the building during that period paid that same rent.[33] Azer calculated his lost rents by applying the $1.50 rate to the periods when Profit's surrendered premises and the premises the other tenants vacated remained vacant.[34] Azer calculated his damages through June, 1987, when trial started, to be $1,939,951, and future damages as $973,100.[35]\nBrokers assert that the $1.50 rate does not properly measure Azer's damages, without proof that another tenant with knowledge of the inadequate parking would have paid the same rent as Profit. They contend that the proper measure of damages was the fair rental value of the premises, which required expert testimony. We disagree.\nIn Uyemura v. Wick, 57 Haw. 102, 551 P.2d 171 (1976), the supreme court held that a party to a contract who sustains a loss on account of a breach of that contract by the other contracting party is entitled to compensation commensurate with his loss, but the extent of loss must be shown with reasonable certainty and cannot be based upon mere speculation or guess. In Uyemura, the plaintiff had produced no evidence of damages.\nThe evidence in this case shows Azer's loss with reasonable certainty and *1214 eliminates speculation. Ferreira v. Honolulu Star Bulletin, Ltd., 44 Haw. 567, 356 P.2d 651, reh'g denied, 44 Haw. 581, 357 P.2d 112 (1960). Azer testified that he was actively engaged in managing the rental of the building when he recovered Profit's premises. He had direct knowledge of his losses. The jury did not need expert testimony to assist them in assessing damages. See Rule 702, Hawaii Rules of Evidence (1981).\n\nii.\n\nOut-of-Pocket Damages\nBrokers assert that the evidence of SGM's out-of-pocket expenses was insufficient because it consisted only of Azer's oral testimony.[36] They contend that Azer should have produced business records to substantiate his claims. We disagree.\nAt the time of trial, Azer was the sole remaining owner of SGM. He had personal knowledge of the expenses occasioned by the failure of the Profit Lease. While Azer may have made a stronger case by putting its business records in evidence we do not believe they were essential to prove the extent of damages in these circumstances. The evidence showed Azer's loss with reasonable certainty, Uyemura v. Wick, supra, and was sufficient, if believed by the jury, for them to assess Azer's damage.\n\niii.\n\nEvidence of the Building's Value\nWe reject Brokers' argument that the trial court erred in granting Azer's motion in limine to exclude evidence of the value of the building at 1680 Kapiolani Boulevard at the time of trial. The value of the building at the time of trial was simply irrelevant to the issues.\n\n2.\n\nDenial of Mistrial Motion\nOn the third day of trial, the court noted for the record the presence of the jury, the parties, and all counsel. Thereupon, Azer's counsel stated:\nI'd like the record also to reflect the presence of Wesley Ichida sitting in the courtroom[.] I believe he's an attorney for some of the insurance carriers for Mr. Myers and Grubb and Ellis.\nShortly thereafter, Brokers moved for a mistrial on the basis of that remark. The trial court denied the motion. Brokers argue that the statement was prejudicial and the trial court erred in denying the mistrial motion.\nThe record shows that Myers himself had already raised the issue of insurance by testifying that Azer brought this action to recover money from Brokers' insurance company. At that time the court instructed the jury to consider the fact that Brokers were insured only for the purpose of determining Azer's motive. Brokers do not indicate how Azer's counsel's remark prejudiced them. We find no abuse of discretion in the denial of the motion. Johnson v. Robert's Hawaii Tour, Inc., supra.\n\nGROMET'S AND CAMERON'S APPEAL\nOn May 9, 1985, Azer, Wassef, and SGM filed Civil No. 85-1801. On July 1, 1985, Gromet wrote to Azer and Wassef demanding payment of $133,080.12 as the balance, including interest, due on the Gromet Purchase promissory note. On July 19, 1985, the attorney who then represented Azer and Wassef, Stephen B. MacDonald (MacDonald), replied to Gromet informing him that Civil No. 85-1801 had been filed but that MacDonald was withholding service of the complaint on Gromet in order to avoid litigation with him. MacDonald offered to dismiss Civil No. 85-1801 against Gromet if Gromet would postpone collection until Azer and Wassef resolved their claims against Brokers, and if Gromet would assign to Azer any potential claims he might have against Brokers. Gromet testified that Wassef orally offered the same arrangement to Cameron. When G & C rejected *1215 the proposals, they were served with the complaint and summons nearly six months after the action was filed.\nG & C filed counterclaims for malicious prosecution and abuse of process. The parties stipulated to dismissal of the malicious prosecution claims prior to trial. However, the court denied Azer's motion to dismiss the abuse of process claims.\nThe thrust of G & C's argument on appeal is that Civil No. 85-1801 was filed for the ulterior motives of coercing Gromet to testify against Myers, and compelling G & C to postpone collection on their promissory notes. They contend that the court erred in refusing their instruction no. 68 defining the term \"process\"[37] and giving Azer's instruction no. 148.[38] They also assert that instruction no. 148 improperly restricted their final argument. Finally, they contend the court erred when it allowed MacDonald, as a \"rebuttal witness,\" to testify on the reasons for the delay in service. We find no error.[39]\n\n1.\n\nAdequacy of Instructions\nIn Myers v. Cohen, 5 Haw. App. 232, 687 P.2d 6, rev'd on other grounds, 67 Haw. 389, 688 P.2d 1145 (1984), we stated that it is the purpose for which the process is used rather than the nature of the process that creates the abuse of process claim. In Wong v. Panis, 7 Haw. App. ___, 772 P.2d 695 (1989), we held that process is abused when it is used primarily for an improper ulterior motive. Also, in Myers, supra, we stated that settlement is includable in the goals of proper process.\nTaken as a whole and in light of all the evidence, the jury instructions correctly stated the applicable law. Agee v. Kahului Trucking & Storage, Inc., 67 Haw. 365, 688 P.2d 256 (1984); Adair v. Hustace, 64 Haw. 314, 640 P.2d 294 (1982).\n\n2.\n\nMacDonald's Testimony\nG & C argue that the lower court reversibly erred in allowing MacDonald to testify, since he was not listed as a witness in Azer's pre-trial statement as required by Rule 18(a)(1), Rules of the Circuit Court (1971).[40] We disagree.\nWe have held that the rule should be scrupulously observed and have affirmed the trial court's barring of an unlisted witness. Nature Conservancy v. Nakila, 4 Haw. App. 584, 671 P.2d 1025 (1983). Nevertheless, the rule does not pose an absolute bar to the testimony of undisclosed witnesses. See Cozine v. Hawaiian Catamaran, Ltd., 49 Haw. 77, 412 P.2d 669 (1966). In Cafarella v. Char, 1 Haw. App. 142, 615 P.2d 763 (1980), we stated that:\nWe do not condone the practice of calling unlisted \"rebuttal\" witnesses except in cases where there has been genuine surprise *1216 arising out of an unexpected turn in the testimony or the interests of justice so require.\nId. at 148, 615 P.2d at 768. In this case, we think the interests of justice support the trial court's decision to allow MacDonald to testify.\nThe thrust of G & C's malicious prosecution claim was that the filing of Azer's action against them was per se an abuse of process, because it was filed for ulterior motives. That was the focus of their opening statement and their evidence. When G & C had ended their case-in-chief, Azer moved for a directed verdict. The lower court, after oral argument from counsel, indicated it was inclined to grant the motion based on its understanding that the law required a showing that Azer had committed an act, other than the mere filing of suit, that constituted abuse of the court's process.[41] At that point G & C's counsel asserted that he should be allowed to argue to the jury that the delay in service was an act of abuse of process. It was then that Azer's counsel informed the court that he would call MacDonald to explain the delay.\n\nATTORNEY'S FEES AND COSTS\nThe court made the following dispositions of the parties' requests for attorney's fees and costs:\nOctober 9, 1987: Shaheen's motion was granted; however, Shaheen had \"the right to submit detailed reasonable billings allowing AZER opportunity to respond to the reasonableness of the fees[.]\"\nOctober 14, 1987: G & C's request for fees and costs in defending against Azer's claims was granted. The court granted G & C's request for fees on the promissory note action, not to exceed 25% of $164,558.12, the amount recovered. However, it deferred final determination of the dollar amount of the fee to give Azer the opportunity to examine G & C's counsel's affidavit regarding fees and to present further argument on reasonableness.\nOctober 15, 1987: Azer's motion for attorney's fees and costs from G & C was denied.\nOctober 21, 1987: The court awarded attorney's fees and costs to Profit; however, it held that Profit should submit a supplemental affidavit and Azer could respond as to the reasonableness of Profit's request.\nNovember 30, 1987: The court denied Azer's motion for recovery of attorney's fees and costs from Brokers.\nJanuary 5, 1988: In a \"supplemental order,\" the court, over Azer's objection awarded attorney's fees of $93,965.85 to Gromet and $19,223.40 to Cameron.[42]\n\n1.\nWe note, first, that Azer questions whether we have appellate jurisdiction over the awards to Profit and Shaheen, and the October 14, 1987 award to G & C, since those awards did not finally dispose of the amount of the fee.[43]\nThe award of attorney's fees involves two questions: (1) whether attorney's fees are awardable, and (2) the reasonableness of the award. See Horst v. Horst, 1 Haw. App. 617, 623 P.2d 1265 (1981). An order awarding attorney's fees to the prevailing party but not setting the *1217 amount of the fee, does not fully adjudicate the attorney's fee issue; however, the decision that the prevailing party is entitled to attorney's fees is reviewable separately from the question of the reasonableness of the award. Memphis Sheraton Corp. v. Kirkley, 614 F.2d 131 (6th Cir.1980); cf. Security Pacific Mortgage Corp. v. Miller, 71 Haw. 65, 783 P.2d 855 (1989). Consequently, notwithstanding the fact that the lower court in this case must still set the amount of the fees, the determination that fees are awardable is properly included in the appeal from the final judgment. See Kahalewai v. Rodrigues, 4 Haw. App. 446, 667 P.2d 839 (1983).\n\n2.\nAttorney's fees are awardable to the prevailing party only where authorized by statute, agreement, or rule of law. Smothers v. Renander, 2 Haw. App. 400, 633 P.2d 556 (1981). In this jurisdiction, where a promissory note or written agreement provides for attorney's fees, HRS § 607-17 (1985) governs the amount awarded.[44] HRS § 607-14 (1985) provides for an award of attorney's fees in actions in the nature of assumpsit.[45] The nature of the action as determined from the substance of the entire pleading, the nature of the grievance, and the relief sought, is dispositive of the issue whether attorney's fees must be awarded under HRS § 607-14. Schulz v. Honsador, Inc., 67 Haw. 433, 690 P.2d 279 (1984).\n\na.\n\nAward of Attorney's Fees to G & C\nThe court awarded attorney's fees to G & C for their successful defense of Azer's action and for their counterclaim recovery on Azer's promissory note. We hold that they were entitled to attorney's fees for both actions. Smothers v. Renander, supra.\nAzer sued G & C for an accounting, failure of consideration, offset, and for contribution and indemnification. He lost. The question is whether Azer's action was in the nature of assumpsit. We answer that part of it was.\nIn Hong v. Kong, 5 Haw. App. 174, 683 P.2d 833 (1984), we held that an action *1218 for rescission and recovery of money paid under an agreement is an action in the nature of assumpsit within the meaning of HRS § 607-14, supra, and attorney's fees are taxable against the losing party in such an action. An action based upon failure of consideration for the recovery of money paid on a contract is, in effect, an action for rescission. See 17 Am.Jur.2d Contracts § 397 (1964).\nHRS § 607-14, supra, provides for attorney's fees for the defense of the failure of consideration claim. On remand the court must determine what part of G & C's attorney's fees are allocable to the failure of consideration claim.\nAdditionally, Azer's promissory note provides for a reasonable attorney's fee incurred in collection. Consequently, the lower court correctly decided that G & C were entitled to attorney's fees under HRS § 607-17, supra, for their counterclaim.\n\nb.\n\nAward of Attorney's Fees to Shaheen\nAzer's claim against Shaheen was based on the same grounds as his claim against G & C. For the reasons already expressed as to G & C's award, Shaheen is entitled to attorney's fees on Azer's failure of consideration claim. HRS § 607-14, supra. Moreover, the Shaheen Purchase provides for an attorney's fee in an action for its enforcement or interpretation.\n\nc.\n\nProfit's Attorney's Fees\nProfit counterclaimed against Azer for breach of the Profit Lease. Profit won. The lease provides for attorney's fees, and the award was proper under HRS § 607-17, supra.\n\nd.\n\nDenial of Azer's Request for Attorney's Fees from G & C\nAzer argues that the lower court erred in denying his request for attorney's fees from G & C. We find no error.\nG & C's action against Azer sounded in tort for abuse of process, for which the prevailing party may not recover attorney's fees. See DeMund v. Lum, 5 Haw. App. 336, 690 P.2d 1316 (1984).\n\ne.\n\nDenial of Azer's Request for Attorney's Fees and Costs from Brokers\nAzer's action against Brokers was based on negligence and breach of fiduciary duty arising from the Exclusive Authorization of Lease. The jury found for Azer on both claims but awarded lump sum damages.\nThe Exclusive Authorization of Lease authorizes recovery of a reasonable attorney's fee by a party who commences litigation for its enforcement. Azer brought his fiduciary breach action to compel Brokers to answer in damages for breach of the agreement. It constituted an action \"instituted on a contract.\" Therefore, he is entitled to attorney's fees for the fiduciary breach count under HRS § 607-17, supra. See Bibo v. Jeffrey's Restaurant, 770 P.2d 290 (Alaska 1989) (action against corporate directors for breach of fiduciary duty sounds in contract). The lower court erred in not awarding fees for Azer's recovery on that count. Schulz v. Honsador, Inc., supra. Brokers' argument that a breach of a fiduciary duty under a contract does not constitute a breach of an \"express term\" of the contract is without merit.\nThe lower court also erred in denying Azer's request for costs. Rule 54(d), HRCP.\nAzer is not entitled to attorney's fees and costs on his negligence claim. DeMund v. Lum, supra.\n\nCONCLUSION\nWe vacate the orders directing verdicts in Gromet's favor on Azer's claims of negligence and offset, and remand those claims for retrial. We vacate the order denying Azer's request for attorney's fees and *1219 costs from Brokers and remand for an award of fees and costs in accordance with this opinion. Also, on remand the court should determine and award reasonable attorney's fees to G & C and Shaheen in accordance with this opinion. In all other respects, we affirm the judgment.\nNOTES\n[1] Although the appeals were consolidated on February 3, 1988, we note that nos. 12578, 12629, 12630, 12631, and 12632, all filed by Azer, were interlocutory appeals which were not authorized by the lower court under Hawaii Revised Statutes (HRS) § 641-1 (1985), or properly certified under Rule 54(b), Hawaii Rules of Civil Procedure (HRCP) (1980). Appeal no. 12634, also filed by Azer, challenges an order awarding attorney's fees to defendants Ben Gromet and Margaret T. Cameron. The order appealed from in no. 12634 was a nullity, having been entered after the notice of appeal in no. 12633. See footnote 42, infra. The dispositive appeal is no. 12633.\n[2] Michael S. Myers, Grubb and Ellis Commercial Brokerage Company, and Grubb and Ellis Company were represented by the same attorneys below and in their joint appeals. Where appropriate those three parties will be referred to jointly in the opinion as Brokers. Grubb and Ellis Commercial Brokerage Company and Grubb and Ellis Company will collectively be referred to as Grubb and Ellis.\n[3] Gromet and Cameron were represented by the same attorneys at all times in these proceedings. Hereinafter, where appropriate, Gromet and Cameron will be referred to jointly as G & C.\n[4] Although the judgment is entered in Gromet's name only, the record shows that Cameron is entitled to a portion of the recovery.\n[5] The property was originally leased to Alfred Shaheen, Ltd. SGM purchased the fee title to the property on December 27, 1983.\n[6] The Courthouse lease actually names Alfred Shaheen, Ltd., as \"Landlord.\" The record does not indicate that the Courthouse lease was assigned to SGM; however, the parties do not dispute that for all pertinent times in this litigation SGM was the lessor under the Courthouse lease.\n[7] The record is not entirely clear as to when Profit began doing business. The December 12, 1983 date is stated in Profit's motion for pre-judgment interest, and appears to be the most definitive date.\n[8] The record indicates that Azer and Wassef also purchased Myers' partnership interest on June 4, 1983, in a separate instrument.\n[9] Wassef became SGM's managing partner on June 8, 1983.\n[10] From the copy of the Parking Agreement in evidence, it appears that Courthouse was allotted all of the parking stalls on the second parking deck and approximately half of those on the third deck; however, we cannot tell precisely how many stalls are allocated to Courthouse and SGM. The exhibit contains only a diagram on which sections of the parking areas are designated for the parties. Consequently, we use Wassef's testimony, which is not disputed, to determine the allocation of parking stalls.\n[11] The Shaheen Purchase in evidence is unsigned; however, the record indicates it was signed on February 3, 1984, and was effective as of December 30, 1983.\n[12] The Profit Accord provided for Courthouse and Profit to split the parking stalls on the third parking deck with the number of spaces allocated to each varying according to the times of the day and the days of the week, and on holidays. Profit could not use any parking stalls on the second parking deck or on the ramps leading to the parking decks, but was allotted parking stalls on the grounds next to the building's loading docks. SGM also agreed to pay for the cost of parking in the \"Pan Am Building next door[,]\" for up to 46 of Profit's customers who might be unable to park on the premises.\n[13] When suit was filed, Cameron's husband had died. The action against him was voluntarily dismissed without prejudice.\n[14] In light of the fact that the amended complaint is by Azer as assignee of Wassef, the \"counterclaim\" against Wassef by G & C is really a third-party complaint.\n[15] Shaheen's \"counterclaim,\" also, is really a third-party complaint against Wassef.\n[16] As noted in the discussion of the procedural facts in Civil No. 85-1801, SGM had been dissolved.\n[17] Hereinafter, in discussing procedural matters below and on appeal, we will refer to SGM and Azer, collectively, as Azer.\n[18] Section II of the special verdict form deals with Brokers' alleged negligence.\n[19] We find no merit in Profit's argument that Azer raises this issue for the first time on appeal. It was one of Azer's theories of action below.\n[20] The instructions pertinent to the dispute between Azer and Profit regarding their rights to enforce the Profit Accord are as follows:\n\nIn order to prevail on the breach of the settlement agreement claim, Azer has the burden of establishing by a preponderance of the evidence all the facts necessary to prove the following issues, one, that SGM Partners and Profit entered into a settlement agreement in settlement of SGM Partners' claims against Profit for failure to pay rent and Profit's claims against SGM Partners for failure to provide the number of parking stalls indicated in the lease. Two, that SGM Partners was ready, willing and able to perform. Three, that Profit was the first to materially breach the settlement agreement. Four, the nature and extent of SGM Partners' damages.\nIn order to prevail on the claim for breach of lease, Azer has the burden of establishing by a preponderance of the evidence all the facts necessary to prove the following issues: One, that SGM Partners and Profit entered into a lease contract for Profit's rent of space at 1680 Kapiolani Boulevard. Two, that SGM Partners has performed all the terms and conditions the lease required it to perform. Three, that Profit breached the lease contract by failing to pay SGM Partners rent. And four, the nature and extent of the damages.\nAn accord is a new contract under which a party promises to accept certain performance in satisfaction of the original contract. If the new contract is breached, the other party may enforce either the original contract or the new contract, and may seek recovery for alleged damages suffered as a result of the breach.\n[21] Rule 13(a), HRCP (1980) provides in pertinent part:\n\nRule 13. COUNTERCLAIM AND CROSS-CLAIM.\n(a) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.\n[22] Under Rule 35(a), HRCP (1980), a party may request an opposing party to produce documents \"which are in the possession, custody or control of the party upon whom the request is served[.]\"\n[23] Paragraph 12 of the Profit Accord reads as follows:\n\n12. The Profit Company will assign to SGM Partners or its designee all claims that The Profit Company had, presently has, or may have in the future to damages or other relief arising out of the allocation of parking stalls in the Building, rental disputes related to such allocation, and other consequential damages, losses, or injuries resulting from such allocation.\n[24] The Seventh Amendment reads as follows:\n\nIn suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.\n[25] Article I, § 13 of the Hawaii State Constitution reads in pertinent part as follows: \"In suits at common law where the value in controversy shall exceed one thousand dollars, the right of trial by jury shall be preserved.\" When Harada v. Burns, 50 Haw. 528, 445 P.2d 376 (1968), was decided, the provision was numbered article I, § 10.\n[26] Gromet also filed a summary judgment motion on the same grounds. Gromet's motion was denied on the ground that Gromet's alleged negligence in negotiating and signing the Profit Lease occurred prior to the indemnity agreement. Gromet has not appealed that issue.\n[27] The record shows that Gromet signed the Profit Lease during the period when the Gromet Purchase had been orally agreed to but not yet closed. Gromet signed at Wassef's request, since Azer and Wassef resided on the mainland.\n[28] Shaheen's argument that the issue was not preserved for appeal because Azer did not register an objection after the instructions were read is specious. Azer had earlier registered written objections to the instruction. It was not necessary to object again when the instructions were read. See Rule 51, HRCP (1980).\n[29] In the lower court Azer suggested separate dates for calculating his requested pre-judgment interest on various items of damages based on when the losses occurred.\n[30] We find no merit in Brokers' argument that the trial court erred in denying their motions for directed verdict on damages, made at the close of Azer's case-in-chief, and for judgment non obstante veredicto, made at the end of trial. When, after their motion for directed verdict was denied, they proceeded to present a defense they waived any error in that denial. See 9 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 2534 (1971). Additionally, the record does not show that Brokers renewed their motion for directed verdict at the close of the case. Consequently, they were precluded from filing the motion for judgment non obstante veredicto, and cannot raise the latter's denial as error on appeal. Vieau v. City and County of Honolulu, 3 Haw. App. 492, 653 P.2d 1161 (1982). However, Brokers' motion for new trial allows them to raise the issue of the sufficiency of the evidence on appeal. Id.\n[31] The fact that the Profit Lease guarantees exclusive use of a prescribed number of stalls rather than specifically designated stalls does not, in our view, detract from our interpretation. In either case, it is clear that SGM did not provide Profit with the promised number of parking stalls, at the times prescribed, under the Profit Lease.\n[32] Azer testified that parts of the Profit Lease premises were taken over by a liquor store and Shaheen, Ltd., a clothing manufacturer.\n[33] In Brokers' opening brief they assert that Azer did not testify that \"replacement tenants\" for the premises vacated by Profit were paying $1.50 per square foot, because in calculating future losses Azer testified that \"[t]here is a difference in rents between Profit Company lease and current leases of approximately $2,000.00 per month.\" The argument is specious. Azer's testimony does not refer to a reduced rental rate, but to a loss of $2,000.00 per month occurring because of vacancies arising from the dispute with Profit.\n[34] In Marco Kona Warehouse v. Sharmilo, Inc., 7 Haw. App. ___, 768 P.2d 247 (1989), we held that a landlord whose tenant had wrongfully abandoned its leased warehouse bays was obligated to mitigate damages and could not hold the abandoning tenant liable for rents it lost on warehouse bays vacated by other tenants who, with the lessor's consent, moved into the wrongfully abandoned bays, where the wrongfully abandoning tenant had not consented to be so liable. Azer's recovery, here, includes such lost rents as part of his damages. However, Brokers do not raise Azer's method of calculating his damages as a point on appeal, and did not challenge it below.\n[35] Azer calculated his future losses on the basis that 9,054 square feet of the Profit space would remain vacant through August 1, 1987, and 7,850 square feet would remain vacant through November 30, 1987; that a portion of the liquor store premises would be vacant through September 30, 1987; the Profit Lease dispute created long term vacancies; and he would have to pay interest on loans he was required to take out for building expenses he could not pay because of his lost income.\n[36] Azer testified that his out-of-pocket expenses amounted to $567,520.\n[37] G & C's instruction no. 68 reads as follows:\n\nThe term \"process\" as used in the term \"abuse of process\" includes the entire range of procedures incident to the litigation process, including serving a complaint, noticing depositions, utilization of motions, and filing of an entire lawsuit.\n[38] Azer's instruction no. 148 reads as follows:\n\nThe mere institution of an action by the filing and service of a summons or complaint does not amount to an abuse of process. The commencement of a lawsuit for the purpose of obtaining a settlement (which may include the payment of money or insurance proceeds) is included in the goals of proper process and, therefore, does not by itself give rise to liability for abuse of process.\n[39] In his answering brief Azer argues that we should sanction G & C for bringing a frivolous appeal. We disagree. We do not find G & C's appeal to be manifestly and palpably without merit. Harada v. Ellis, 4 Haw. App. 439, 667 P.2d 834 (1983).\n[40] Rule 18(a)(1), Rules of the Circuit Court (1971) provides:\n\nEach party shall disclose the theory of his case, including the basic facts that he intends to prove and the names and addresses of all witnesses that he intends to call.\n[41] We do not decide whether or not the court's understanding of the law was correct.\n[42] The January 5, 1988 supplemental order was entered after the November 30, 1987 notice of appeal from the amended judgment, and the lower court did not have jurisdiction to make it. Wisdom v. Pflueger, 4 Haw. App. 455, 667 P.2d 844 (1983). Consequently, that order is not before us. G & C's argument that the court orally set the amount of the fees on November 30, 1987, is without merit. The dispositive act is the written order. Naki v. Hawaiian Elec. Co., 50 Haw. 85, 431 P.2d 943 (1967).\n[43] Shaheen also challenges jurisdiction on the same ground.\n[44] HRS § 607-17 (1985) provides in pertinent part:\n\nAttorney's fees when provided for in promissory notes, etc. Any other law to the contrary notwithstanding, where an action is instituted in the district or circuit court on a promissory note or other contract in writing which provides for an attorney's fee the following rates shall prevail and shall be awarded to the successful party, whether plaintiff or defendant:\n(1) Where the note or other contract in writing provides for a fee of twenty-five per cent or more, or provides for a reasonable attorney's fee, not more than twenty-five per cent shall be allowed;\n(2) Where the note or other contract in writing provides for a rate less than twenty-five per cent, not more than the specified rate shall be allowed;\nprovided that the fee allowed in any of the above cases shall not exceed that which is deemed reasonable by the court.\n[45] HRS § 607-14 (1985) provides:\n\nAttorneys' fees in actions in the nature of assumpsit. In all the courts, in all actions in the nature of assumpsit there shall be taxed as attorneys' fees, in addition to the attorneys' fees otherwise taxable by law, to be paid by the losing party and to be included in the sum for which execution may issue, a fee which the court determines to be reasonable but which shall not exceed the amount obtainable under the following schedule:\n25 per cent on first $1,000 or fraction thereof.\n20 per cent on second $1,000 or fraction thereof.\n15 per cent on third $1,000 or fraction thereof.\n10 per cent on fourth $1,000 or fraction thereof.\n5 per cent on fifth $1,000 or fraction thereof.\n2.5 per cent on any amount in excess of $5,000.\nThe above fees shall be assessed on the amount of the judgment exclusive of costs and all attorney's fees obtained by the plaintiff, and upon the amount sued for if the defendant obtains judgment. The fees provided for by this section shall not be taxed in any action where the plaintiff obtains a judgment which includes attorneys' fees upon a promissory note or other evidence of indebtedness, when the promissory note or other evidence of indebtedness contains a provision for the recovery of costs of collection or attorneys' fees.\n\n", "ocr": false, "opinion_id": 2608916 } ]

[ "260 U.S. 427", "43 S. Ct. 154", "67 L. Ed. 332", "1922 U.S. LEXIS 2383" ]

[ { "author_str": "Sutherland", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": 3140, "opinion_text": "\n260 U.S. 427 (1922)\nCOX\nv.\nHART.\nNo. 71.\nSupreme Court of United States.\nArgued November 16, 1922.\nDecided December 11, 1922.\nAPPEAL FROM THE CIRCUIT COURT OF APPEALS FOR THE NINTH CIRCUIT.\n*428 Mr. Charles R. Pierce, with whom Mr. John M. Sutton was on the briefs, for appellant.\nMr. Eugene W. Britt, with whom Mr. George H.P. Shaw and Mr. William J. Hunsaker were on the brief, for appellee.\n*429 MR. JUSTICE SUTHERLAND delivered the opinion of the Court.\nThis case involves conflicting claims to a tract of 160 acres of land in Imperial County (formerly San Diego County), State of California. The facts, so far as necessary to be stated, are as follows:\nAbout the years 1854-1856 the body of public lands, which includes the tract in controversy, was surveyed under the authority of the United States. No settlements upon these lands of any consequence were made until the year 1900. In the interval the marks of the survey had so far disappeared as to render it practically impossible to locate the lines which the survey had established. None of the section or township corners originally placed upon or in the vicinity of the land here involved was in place, and it was impossible to determine by reference to that survey in what section it was located.\nOn July 1, 1902, Congress provided for a resurvey of this body of public lands, by an act (32 Stat. 728) as follows:\n\"That the Secretary of the Interior be, and he is hereby, authorized to cause to be made a resurvey of the lands in San Diego County, in the State of California, embraced in and consisting of the tier of townships thirteen, fourteen, fifteen, and sixteen south, of ranges eleven, twelve, thirteen fourteen, fifteen, and sixteen east, and the fractional township seventeen south, of ranges fifteen and sixteen east, all of San Bernardino base and meridian; and all rules and regulations of the Interior Department requiring petitions from all settlers of said townships asking for resurvey and agreement to abide by the result of the same so far as these lands are concerned are hereby abrogated: Provided, That nothing herein contained shall be so construed as to impair the present bona fide claim of any actual occupant of any of said lands to the lands so occupied.\"\n*430 The resurvey thus authorized was made and the approved plats filed in 1909.\nOn March 28, 1908, Congress passed an act to limit and restrict the right of entry and assignment under the desert land law and to authorize an extension of the time within which to make final proof (35 Stat. 52). Section 1 of that act is as follows:\n\"That from and after the passage of this Act the right to make entry of desert lands under the provisions of the Act approved March third, eighteen hundred and seventy-seven, entitled `An Act to provide for the sale of desert lands in certain States and Territories' as amended by the Act approved March third, eighteen hundred and ninety-one, entitled `An Act to repeal timber-culture laws, and for other purposes' shall be restricted to surveyed public lands of the character contemplated by said Acts, and no such entries of unsurveyed lands shall be allowed or made of record: Provided, however, That any individual qualified to make entry of desert lands under said Acts who has, prior to survey, taken possession of a tract of unsurveyed desert land not exceeding in area three hundred and twenty acres in compact form, and has reclaimed or has in good faith commenced the work of reclaiming the same, shall have the preference right to make entry of such tract under said Acts, in conformity with the public land surveys, within ninety days after the filing of the approved plant of survey in the district land office.\"\nThe appellee (plaintiff below), during the year 1906, being then of age and qualified, began the work of reclaiming a tract of three hundred and twenty acres, including the lands here in controversy. Previously, and shortly before she was of age, her father, acting in her behalf, had caused a furrow to be plowed around the entire three hundred and twenty acre tract, and had posted a notice claiming if for the appellee. During the year 1906 appellee caused about eighty acres of that portion of *431 the tract lying east of the lands in controversy to be levelled, cleared and seeded to barley, and ditches for irrigating the same to be constructed. All the lands at that time were unoccupied desert lands, within the meaning of the land laws of the United States. The barley was irrigated several times during the year. After the crop had matured and during the year 1906 the appellee fenced the land upon which it had been grown, and also during the year seeded to barley about 5 acres of the 160 acres in controversy. This crop however did not mature. Early in November, 1906, the appellee constructed a head ditch along the east line of the specific tract in controversy and did some work in preparation for the irrigation of the south half thereof, and also put up stakes upon the south half to mark the lines. She also caused borders to be made along the east line in preparation for the construction of a head ditch. This was the state of things on November 8, 1906, when the appellant put up a tent house upon the land, established a residence and claimed the one hundred and sixty acre tract. Appellant saw the plowed furrows along the east and south sides of the land and was notified by appellee's father that one hundred and sixty acre tract was included within appellee's three hundred and twenty acre claim. Appellant remained on the tract until he was ejected, in March, 1909, as the result of a judgment obtained by appellee against him in a state court. Hart v. Cox, 171 Cal. 364. Appellant during his occupancy constructed a ditch one-half mile in length and did some other work on the land.\nAppellant, in July, 1907, filed an application for the land in the local land office, but his application was rejected for the reason that the description was defective. Later in the same month appellee filed an application for the entire three hundred and twenty acre tract, but her application was rejected.\nIn March, 1909, after the resurvey had been completed, appellant filed a new application and shortly thereafter *432 and within ninety days after the filing of the survey plat, appellee also filed a new application, both applications describing the lands with reference to the resurvey. Decision was rendered in the local land office in favor of appellant. The Commissioner of the General Land Office reversed this decision but the Secretary of the Interior reversed the Commissioner and affirmed the local land office in favor of appellant. Subsequently, on October 24, 1918, a patent was issued to the appellant for the land in controversy.\nAppellee thereupon brought suit against the appellant in the United States District Court for the Southern District of California, and prayed a decree declaring that appellant held the land in trust and requiring appellant to convey the legal title to her. That court rendered a decree in favor of appellant and the case was carried by appeal to the Circuit Court of Appeals for the Ninth Circuit, where, after hearing, the decree of the District Court was affirmed. 270 Fed. 51. The case is here upon appeal from the Circuit Court of Appeals.\nThe rights of the parties turn upon the meaning and effect of the proviso to § 1 of the Act of March 28, 1908, heretofore quoted. That proviso is, in substance, that where a qualified entryman has prior to survey taken possession of a tract not exceeding three hundred and twenty acres of unsurveyed desert land and has reclaimed or in good faith commenced the work of reclaiming the same he shall have the preference right to make entry of such tract within ninety days after the filing of the plat of survey in the local land office. Two questions are, therefore, presented for solution:\n(1) Did appellee take possession of the lands and reclaim or in good faith commence the work of reclaiming the same prior to the attempted appropriation by appellant?\n(2) Were the lands at the time unsurveyed desert lands, to which upon the facts the statutory preference *433 right to make entry attached? Appellant denies that the lands were unsurveyed and contends, moreover, that, in any event, appellee is not within the terms of the proviso since whatever she did was prior to the passage of the act which is not to be given retrospective operation.\n1. Prior to appellant's occupation on November 8, 1906, appellee had entered upon and exercised and was than exercising the acts of dominion herein set forth over the 320 acre tract under a claim of right. Then appellant entered upon the land all these evidences of appellee's claim and possession were open and visible and in addition appellant was specifically notified that the claim included the land in controversy.\nWhat will constitute possession of land largely depends upon its character, condition and the use to which it is adapted. Here appellee went upon the land for the purpose of reclaiming it from its desert character. The whole of it obviously could not be reclaimed at once. The building of ditches, the securing of a water supply, the plowing and preparation of the land and the planting of crops were all steps requiring time. Residence upon the land was not required as a prerequisite to securing title under the desert land laws. Having in view all the conditions we are of opinion that the facts sufficiently establish appellee's actual possession of the entire tract at the time appellant sought to make his appropriation. Ellicott v. Pearl, 10 Pet. 412, 442; Ewing v. Burnet, 11 Pet. 41, 53; Hart v. Cox, 171 Cal. 364; Booth & Graham v. Small & Small, 25 Iowa, 177, 181; Illinois Steel Co. v. Bilot, 109 Wis, 418, 443, 446. It is not necessary to constitute actual possession that there should be an enclosure or any physical or visible occupancy of every part of the land. As well said by the Supreme Court of Iowa in Booth & Graham v. Small & Small, supra:\n\"Possession of land is the holding of and exclusive exercise of dominion over it. It is evident that this is not, *434 and cannot be, uniform in every case, and that there may be degrees in the exclusiveness even of the exercise of ownership. The owner cannot occupy literally the whole tract, — he cannot have an actual pedis possessio of all, nor hold it in the grasp of his hands. His possession must be indicated by other acts. The usual one is that of inclosure. But this cannot always be done, yet he may hold the possession in fact of uninclosed land, by the exercise of such acts of ownership over it as are necessary to enjoy the ordinary use of which it is capable, and acquire the profits it yields in its present condition, — such acts, being continued and uninterrupted, will amount to actual possession, and, if under color of title, or claim of right, will be adverse.\" That appellee, in addition to taking possession of the entire 320 acres before appellant's occupancy, had in good faith commenced the work of reclaiming the same does not admit of doubt. Indeed she had actually reclaimed more than one-fourth of the entire area, which included five acres of the tract in controversy.\n2. It remains to determine whether the lands at the time appellee took possession of them were unsurveyed lands and whether appellee was entitled to the preference right granted by the proviso heretofore quoted.\nWe first dispose of the contention that, even if the lands were unsurveyed, it cannot be held that appellee was within the terms of the proviso because that would be to give the proviso a retroactive effect and there is nothing to show that Congress so intended. The rule is, of course, well settled that unless the contrary plainly appear a statute operates prospectively only. Does the application of the proviso here proposed contravene this rule?\nPrior to the Act of March 28, 1908, 35 Stat. 52, unsurveyed lands, as well as surveyed lands, came within the purview of the Desert Land Laws (19 Stat. 377). That act, however, from and after its passage restricted \"the right to make entry of desert lands . . . to surveyed *435 public lands\" and expressly declared that \"no such entries of unsurveyed lands shall be allowed or made of record.\" Then follows the proviso now being considered. The office of a proviso is well understood. It is to except something from the operative effect, or to qualify or restrain the generality, of the substantive enactment to which it is attached. Minis v. United States, 15 Pet. 423, 525. Although it is sometimes misused to introduce independent pieces of legislation. Georgia Railroad & Bankind Co. v. Smith, 128 U.S. 174, 181; White v. United States, 191 U.S. 545, 551. Here, however, the proviso is plainly employed in its primary character. The effect of the substantive enactment was to forbid the entry of unsurveyed lands. But the law theretofore had been otherwise and one purpose of the proviso evidently was to exclude from the operative effect of the new rule cases which might have arisen under the prior law, — that is cases of persons who had taken possession of and undertaken to reclaim unsurveyed lands at a time when the law conferred the right to do so. Any such person, no less than one who acted subsequently, is within the words of the proviso. He is literally \"a person who has, prior to survey, taken possession,\" etc. The proviso so construed impairs no vested right and brings into existence no new obligation which affects any private interest. No reason is perceived why the words employed should not be given their natural application and so applied the case of appellee is included. Indeed, this does not give the proviso a retroactive operation. The language in terms applies to one who at the time of the enactment occupied a particular Statue, viz: the status of a person who has done the things enumerated. A statute is not made retroactive merely because it draws upon antecedent facts for its operation. Regina v. Inhabitants of St. Mary, Whitechapel, 12 Q.B. Rep. 120, 127; United States v. Trans-Missouri Freight Association, 166 U.S. 290, 342.\n*436 Passing this point, however, it is contended that the lands in question were in fact surveyed. It is true the lands had been surveyed in 1854-1856, but the lines of that survey by the year 1900 had disappeared to such a degree that for practical purposes they had become nonexistent. A survey of public lands does not ascertain boundaries; it creates them. Robinson v. Forrest, 29 Cal. 317, 325; Sawyer v. Gray, 205 Fed. 160, 163. Hence the running of lines in the field and the laying out and platting of townships, sections and legal subdivisions are not alone sufficient to constitute a survey. Until all conditions as to filing in the proper land office and all requirements as to approval have been complied with, the lands are to be regarded as unsurveyed and not subject to disposal as surveyed lands. United States v. Morrison, 240 U.S. 192, 210; United States v. Curtner, 38 Fed. 1, 10. It follows that although the survey may have been physically made, if it be disapproved by the duly authorized administrative officers the lands which are the subject of the survey are still to be classified as unsurveyed. In other words, to justify the application of the term \"surveyed\" to a body of public land something is required beyond the completion of the field work and the consequent laying out of the boundaries, and that something is the filing of the plat and the approval of the work of the surveyor. If, pending such approval or, still more, if after disapproval of the survey, the lands in contemplation of law are unsurveyed, it is difficult to see why the same result may not follow when the survey originally approved and platted is subsequently annulled or abandoned because the lines and marks established have become obliterated. A purpose to annual or abandon such survey we think may be disclosed by an act of Congress directing a resurvey plainly based upon the fact of such obligation.\nTurning now to the record in the case under consideration it appears that the lines and marks of the original *437 survey of 1854-1856 had for all practical purposes ceased to be. This is apparent not only from a consideration of the record but is in accord with repeated declarations of the land department. See In re Peterson, 40 L.D. 562, 566, 570, where it is said not only that all the corners which had been established north of the fourth standard parallel were missing, but that the survey itself was \"grossly inaccurate,\" that in making the resurvey an attempt to retrace the old original survey had failed \"and it is now a physical impossibility to identify on the ground sections 16 and 36, according to the original surveys. . . . All vestiges of that survey have been wiped away.\" See also Stephenson v. Pashgian, 42 L.D. 113, 114. In the land office contest between the parties hereto for the land in controversy the Secretary of the Interior, although ruling in favor of appellant, stated that the description of the land by reference to the lines of the old survey \"was an impossible condition.\" Hart v. Cox, 42 L.D. 592, 594. Both courts below reached the same conclusion.\nThe District Court said: \"The evidence of the survey of 1856 upon the ground in that vast area, covered by said act had become useless, by reason of the fact that the lines of the survey were obliterated, and all that was left were some prominent monuments. This act [the resurvey act] recognized that the survey of 1856 was of no practical use and that the lands were, for all practical purposes, unsurveyed lands. It was impracticable to dispose of these lands by congressional subdivision according to the survey of 1856.\"\nThe Circuit Court of Appeals, after referring to the original survey and the fact that no settlement was made until nearly fifty years later, said:\n\"It was then found that the marks of the survey had so far been obliterated that it was practically impossible to locate the lines thereof.\" Cox v. Hart, 270 Fed. 51.\nFrom the foregoing it results and we hold that the Resurvey Act of 1902 was in effect and intent a legislative *438 declaration that the lands therein described were, when the act was passed and for all purposes of settlement and sale, unsurveyed lands. With the disappearance of the physical evidences the old survey survived only as an historical event. As a tangible, present fact it ceased to exist and a new survey became necessary to reestablish the status of the area over which it had extended as surveyed lands of the United States.\nThe decree below is\nAffirmed.\n", "ocr": false, "opinion_id": 100081 } ]

[ "141 B.R. 315" ]

[ { "author_str": "King", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\n141 B.R. 315 (1992)\nIn re Bryan Lee RANKIN, Individually and d/b/a Rankin Oil Company, Debtor.\nBankruptcy No. 87-70439-RBK.\nUnited States Bankruptcy Court, W.D. Texas, Midland-Odessa Division.\nMay 28, 1992.\n*316 Neal R. Allen, Stubbeman, McRae, Sealy, Laughlin & Browder, Inc., Midland, Tex., for Hydrogen Energy Corp.\nFay Cliett Gillham, Calame, Linebarger & Graham, Austin, Tex., for the Taxing Authorities.\n\nOPINION\nRONALD B. KING, Bankruptcy Judge.\nThe question in this case is whether certain ad valorem tax claims should be reconsidered as to amount and class treatment under a Chapter 11 plan of reorganization. Finding that the claims are entitled to different treatment under the plan of reorganization than previously ordered, the motion to reconsider will be granted, in part.\n*317 Bryan Lee Rankin, d/b/a Rankin Oil Company (\"Rankin\"), filed a voluntary Chapter 11 bankruptcy case on November 2, 1987. The Second Modified Plan of Liquidation (the \"Plan\") was confirmed on October 18, 1989. The movants are eleven local ad valorem taxing authorities (the \"Taxing Authorities\"), who filed a motion to reconsider the eleven orders regarding their claims. The Taxing Authorities initially resisted their treatment under the Plan, which was filed by creditor and Plan proponent, Hydrogen Energy Corporation (\"HEC\"), by casting ballots on October 12, 1989, rejecting the Plan.[1] One day prior to the rejections, David W. Copeland, attorney for HEC, sent a letter by facsimile to counsel for the Taxing Authorities, Fay Gillham, proposing a \"Modification to the Second Modified Plan of Liquidation\" (the \"Modification\"), which purportedly would allay her concerns regarding the treatment of her clients' claims under the Plan.[2] In the letter, Mr. Copeland stated \"[the Modification] I believe addresses your principal concerns and leaves the claims of your clients unimpaired.\" The Modification added language to the section of the Plan which dealt with the payment of Class 2 creditors, and provided, in relevant part:\nA. Article 5, Treatment of Claims, shall be modified as follows:\n1. Section 5.2, Class 2, shall be deleted and amended to read as follows:\n5.2 Class 2. Class 2 is unimpaired. Holders of allowed Class 2 Claims will receive on account of such Claims deferred cash payments, over a period not exceeding six years (6) after the date of assessment of said of [sic] Claims, of a value, as of the Effective Date, equal to the allowed amount of Claims, pursuant to Section 1129(a)(9)(C), together with per annum interest thereon at the statutory rate; the first payment to be made one hundred twenty (120) days after the Effective Date, with subsequent payments made monthly thereafter. All liens held by Class 2 Creditors shall remain in full force and effect until such time as the amount of each respective Claim has been paid in full. Any sale of all or any portion of the Property subsequent to Confirmation will be subject to any applicable lien of the respective Class 2 Creditor.\n\nAll taxes incurred by the Debtor subsequent to the Petition Date, together with penalties and interest thereon, shall be treated as Class 1 Claims under the Plan. No Tax Claims are included or includable in Class 7 under the Plan.\n(Emphasis added). The italicized language was added by the Modification. The intent of the Modification was apparently to satisfy specific concerns of Class 2 creditors by providing post-petition interest and a guaranty of lien retention. Sections 2.2 and 2.7 of the Plan described Class 2 as \"[c]reditors holding allowed Tax Claims,\" and Class 7 as \"[c]reditors holding statutory liens.\"\nThe final sentence of the Modification was particularly noteworthy. It appeared to state that \"Tax Claims\" were not included in Class 7 under the Plan. According to the Taxing Authorities' memorandum in support of their motion to reconsider, under the Plan, \"[c]lass 7 receives a pro rata portion of a small amount of cash, and stock for the remainder of the claims.\" Because the Taxing Authorities' claims appear facially to be \"Tax Claims,\" it would seem that they were not included in Class 7, based on the last sentence of the Modification. The Taxing Authorities contend that this additional language placed their claims in Class 2, and the representations contained within Mr. Copeland's letter induced them to withdraw their votes against the Plan. The Plan was confirmed on October 18, 1989, after an attorney for the Taxing Authorities withdrew their rejections.\nOn January 16, 1990, HEC, as successor to Rankin under the Plan, filed objections to claims of each of the Taxing Authorities *318 and other claimants. Responses were filed thereafter, but the parties sought and obtained a number of continuances, based ostensibly on settlement negotiations, which delayed the hearing until January 14, 1991. At that hearing, an agreed order was submitted concerning the claims of Andrews Independent School District (\"AISD\"), an entity not represented by counsel for the Taxing Authorities. The order as submitted by the attorneys for the Debtor and AISD provided for payment of AISD's claim over fourteen months.[3] With regard to the Taxing Authorities' claims, a hearing was again reset for February 13, 1991. After the February 13, 1991 hearing on each individual claim, HEC's counsel was responsible for submitting eleven orders reflecting the amount allowed by the Court on each claim. After being notified by the Clerk's office in June, 1991 that the orders had not been submitted, HEC's attorney submitted the orders in September, 1991. The orders were entered on September 19 and 20, 1991. Specifically, the orders provided the following disposition with respect to each claim:[4]\n\n\n Claim Amount Treatment\nAndrews County $19,855.61 Class 7\nBuena Vista I.S.D. 57.18 Class 7\nCrane County 16.98 Class 7\nCrane County I.S.D. 36.30 Class 7\nCrane County Water District .76 Class 7\nEctor County 558.12 Class 7\nKermit I.S.D. 5,470.82 Class 7\nPecos-Barstow-Toyah I.S.D. Disallowed\nReeves County Disallowed\nWinkler County 1,892.47 Class 7\nWink-Loving I.S.D. Disallowed\n\nThe orders provided that each allowed claim be accorded Class 7 treatment.\nOn September 30, 1991, the motion to reconsider was timely filed by the Taxing Authorities. At the hearing, counsel for the Taxing Authorities orally requested the following alterations to the Court's orders:\n1. Treatment of the claims in Class 2, instead of Class 7;\n2. Provision for post-petition, pre-confirmation interest;\n3. Provision for post-confirmation interest; and\n4. Recomputation and entry of new amounts attributable to the Taxing Authorities' claims.\n\nISSUES\nThe motion to reconsider and the \"Memorandum in Support\" cite no statutes, rules or case law as authority. Without any guidance from the Taxing Authorities as to the legal basis for the requested relief, the issues appear to be as follows:\n1. Whether the request for relief is allowable under the Federal Rules of Bankruptcy Procedure and the Federal Rules of Civil Procedure.\n2. Whether claimants are entitled to relief if a plan which has been confirmed for more than two years treats their claims in an improper manner.\n3. Whether HEC is estopped to assert a position contrary to previous representations made to the Taxing Authorities and the Court.\n4. Whether a creditor can gain more favorable treatment than the other members of its class through an agreed order.\n5. Whether the proper amounts were allowed to the Taxing Authorities based on the evidence at the hearing.\n\nDISCUSSION\nI. Procedural Basis for Motion.\nIn the motion to reconsider, the Taxing Authorities request that they receive the same preferential payout given to AISD or, in the alternative, a change in their treatment under the Plan from Class 7 to Class 2. This Court has the power to reconsider the allowance or disallowance of the Taxing Authorities' claims \"for cause\" and may readjust the claims \"according to the *319 equities of the case.\" 11 U.S.C. § 502(j) (1988); Fed.R.Bankr.P. 3008.\nA. The \"Cause\" Requirement.\nBankruptcy Rule 9024 incorporates Rule 60 of the Federal Rules of Civil Procedure in all cases under the Bankruptcy Code.[5] The Fifth Circuit has interpreted Rule 9024 to provide that:\n[W]hen a proof of claim has in fact been litigated between parties to a bankruptcy proceeding, the litigants must seek reconsideration of the bankruptcy court's determination pursuant to the usual Rule 60 standards if they elect not to pursue a timely appeal of the original order allowing or disallowing the claim.\nIn re Colley, 814 F.2d 1008, 1010 (5th Cir. 1987), cert. denied, 484 U.S. 898, 108 S. Ct. 234, 98 L. Ed. 2d 193 (1987). Thus, a party seeking reconsideration of a bankruptcy court's order regarding a claim should explicitly or implicitly assert one of the grounds delineated in Rule 60(b). In other words, pursuant to Bankruptcy Rule 9024, the presence of the grounds set forth in Rule 60(b) \"constitute sufficient `cause' or `equities' to render it appropriate for a bankruptcy court to reconsider a decision allowing or disallowing a proof of claim.\" United States v. Motor Freight Express (In re Motor Freight Express), 91 B.R. 705, 710 (Bankr.E.D.Pa.1988); accord, In re International Yacht & Tennis, Inc., 922 F.2d 659, 662-663 (11th Cir.1991). Such grounds include mistake, inadvertence, fraud and misrepresentation. Fed. R.Civ.P. 60(b).\nAlthough the Taxing Authorities' motion to reconsider does not cite any applicable Bankruptcy Rules, Rule 60(b), or even a general assertion of \"cause\" for reconsideration, it does implicitly allege mistakes in the orders (Taxing Authorities treated in Class 7 instead of Class 2) and misrepresentations made by the opposing counsel (letter from counsel assuring that Taxing Authorities' claims would be unimpaired and statements in court regarding Class 2 treatment). Thus, under the standard enunciated in Colley, the Taxing Authorities have alleged sufficient grounds to constitute \"cause\" for the purposes of section 502(j) and Rule 60(b).\nB. Scope of Court's Power to Adjust Reconsidered Claims.\nSection 502(j) provides that a \"reconsidered claim may be allowed or disallowed according to the equities of the case.\" The Advisory Committee Note to Bankruptcy Rule 3008 states that, upon reconsideration, \"the court may allow or disallow the claim, increase or decrease the amount of a prior allowance, accord the claim a priority different from that originally assigned it, or enter any other appropriate order.\" (Emphasis added.) Thus, this Court may change the treatment of the Taxing Authorities' claims if it finds sufficient \"equities\" to do so.\nII. Res Judicata Effect of \"Improper\" Confirmation Order.\nIn their memorandum in support of their motion to reconsider, the Taxing Authorities argue that their claims could not legally be placed in Class 7 because \"[t]he court could not have confirmed a Plan which provided that the secured ad valorem tax creditors be forced to take a small amount of cash plus stock in the reorganized debtor in full satisfaction of their claims.\"[6] This argument ignores controlling authority to the contrary.\nIn Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir.1987), the Court of Appeals for the Fifth Circuit considered the issue of the res judicata effect of a bankruptcy court's final and unappealed order of confirmation of a plan which, by its express terms, provided a party with rights which were beyond the statutory grant of the Code. Specifically, the plan in Shoaf provided for the release of a non-debtor guarantor from his guaranty of the debtor's promissory note. The holder of the note sued to enforce the guaranty on the ground that the Code does not affect the *320 liability of any other entity for the debt of a bankruptcy debtor. 11 U.S.C. § 524(e). The court held that res judicata barred the creditor's suit where the creditor did not object to the release provision of the plan prior to confirmation, and did not appeal the confirmation order. The court noted:\nRegardless of whether that provision [of the plan] is inconsistent with the bankruptcy laws or within the authority of the bankruptcy court, it is nonetheless included in the Plan, which was confirmed by the bankruptcy court without objection and was not appealed.\n. . . . .\n[A]ccordingly, Republic's cause of action for enforcement of the guaranty is barred by the bankruptcy court's order confirming the Plan.\n815 F.2d at 1050 & 1054 (footnote omitted); see also Stoll v. Gottlieb, 305 U.S. 165, 59 S. Ct. 134, 83 L. Ed. 104 (1938).\nIn this case, the Taxing Authorities made no objection to the classification of their claims under the Plan prior to confirmation, and did not appeal the confirmation order. Thus, they are barred from now claiming that their classification under the Plan is inconsistent with the provisions of the Bankruptcy Code or outside the authority of the bankruptcy court.\nThis analysis, however, does not take into account the fact that the Plan did not list the Taxing Authorities' claims as being within any specific class. If the Taxing Authorities were led to believe that their claims were included in Class 2, there would have been no reason to object to the Plan because it would have complied with the Code mandated treatment of the Taxing Authorities' claims. Thus, it is necessary to analyze the preconfirmation intent and conduct of the parties.\nIII. Estoppel.\nIn their motion to reconsider, the Taxing Authorities assert that the attorney for HEC expressed his clear intent in the ballot summary filed with the Court and in the letter sent by facsimile that ad valorem tax claims were included within Class 2 of the Plan. Conversely, HEC argues that the Taxing Authorities' claims were properly treated as Class 7 claims based upon the express language of the Plan. Specifically, HEC calls attention to section 3.2 of the Plan, as modified, which set forth the legal treatment of Class 2. The final sentence of that section stated: \"No Tax Claims are included or includable in Class 7 under the Plan.\" HEC states that the term \"Tax Claim\" was a defined term under Article 1 of the Plan, which incorporated the definitions contained in the Second Modified Disclosure Statement. Section 1.28 of the Second Modified Disclosure Statement provided:\n1.28 Tax claim — Any Claim of a governmental unit for taxes described in Section 507(a)(7).\nBecause section 507(a)(7) of the Code is limited to unsecured claims of governmental units, and the Taxing Authorities' claims were secured, HEC asserts that secured tax claims were not \"Tax Claims\" under the Plan. Thus, such claims were includable in Class 7 statutory lien claims because, although they were claims for taxes, they did not meet the Plan's definition of \"Tax Claims.\" As such, HEC argues, the Taxing Authorities' claims belonged in Class 7.\nA. Representations by HEC's Counsel.\nIn order to resolve this issue, it is necessary to analyze representations made by the attorney for HEC in open court or by filed pleading which might constitute grounds for estoppel.\nOn October 18, 1989, the confirmation hearing was held concerning the Plan. Significantly, HEC filed a Report of Balloting on the same date which provided, in relevant part:\nClass 2\nClass 2 consists of Tax Claims. Fourteen (14) Class 2 Creditors, having aggregate claims of $121,069.69, cast Ballots. The Plan was accepted by three (3) Class 2 Creditors having claims of $6,450.00, and rejected by eleven (11) Class 2 Creditors having claims of $114,619.69, representing 95% of the Class. Class 2 is *321 deemed to have rejected the Plan pursuant to 11 U.S.C. § 1126(c).\nCoincidentally, the Taxing Authorities' ballots rejecting the Plan showed claims aggregating $114,619.69. Clearly, HEC's attorney placed the Taxing Authorities' claims in Class 2 at the time of the confirmation hearing.\nAs further evidence of the classification of the Taxing Authorities' claims, the tape transcript of the confirmation hearing reveals the following dialogue, in relevant part:[7]\nDC: Mr. McInturff is in the courtroom today and he has advised me that his clients are all of those that filed rejections in class 2, and they will withdraw those rejections.\nCt: Withdraw them and do what? Vote in favor of the plan or just withdraw them?\nDC: Okay, he [McInturff] does not have a ballot; I assume if I gave him . . . Be that as it may, whether they're withdrawn or not, we would submit to the court that the plan satisfies the provisions of the bankruptcy code. . . .\n. . . . .\nNo objections were filed to the plan other than one by the State of Texas. We filed a modification to the plan, your honor, on October 12, I believe.\n. . . . .\nThe only objection filed was that by the State of Texas; and I have with me a letter from a lawyer with the attorney general's office advising me that I have the authority to tell you that [the] objection will be withdrawn as the modification to the Plan that provides taxing authorities will keep their liens and be paid interest at the statutory rate, all of that complies with their concerns.\n. . . . .\nCt: And what does this modification change?\nDC: It only changes the treatment of class 2; provides that those creditors, which are taxing authorities, would retain liens, would be paid at the statutory rate of interest, that their liens would remain intact if the property would have been . . . any of the sale of property would be subject to those liens. . . .\n. . . . .\nAnd then class 2 is that of Mr. McInturff's clients and some other taxing authorities who did vote for the plan; that class rejected the plan by 95%, but with Mr. McInturff's withdrawals of those ballots, then that class is deemed to have accepted the plan. . . .\n[Emphasis added]. The reference to \"Mr. McInturff\" was to Mr. Russell N. McInturff, an attorney with the law firm of Calame, Linebarger & Graham. Ms. Gillham was also employed by that firm, and she has represented the Taxing Authorities in most matters in this case. Mr. McInturff appeared on behalf of the Taxing Authorities at the confirmation hearing. As such, it is clear that Mr. McInturff's \"clients,\" whom HEC's counsel mentioned as being in Class 2, were the Taxing Authorities. It is also clear that HEC's modification of the treatment of Class 2 claimants induced a confirmation-day withdrawal of both the rejections by the Taxing Authorities and the objection to the Plan by the Attorney General's office. Thus, HEC's counsel clearly represented to the Court that the Taxing Authorities' claims were in Class 2 at the time of confirmation.\nB. The Doctrine of Judicial Estoppel.\nJudicial estoppel is a common law doctrine which prohibits a party who has assumed one position, whether by pleading or in open court, from later asserting an inconsistent position. Brandon v. Inter-First Corp., 858 F.2d 266, 268 (5th Cir. 1988). This equitable doctrine \"preserves the integrity of the courts by preventing a party from abusing the judicial process through cynical gamesmanship, achieving success on one position, then arguing the opposite to suit an exigency of the moment.\" Teledyne Indus., Inc. v. NLRB, *322 911 F.2d 1214, 1218 (6th Cir.1990). The doctrine is generally applied when a party attempts to contradict his own sworn statements made in prior litigation. Brandon at 268 (citing USLIFE Corp. v. U.S. Life Ins. Co., 560 F. Supp. 1302, 1304-05 (N.D.Tex.1983)). It is not necessary that the prior statements be made under oath, however, because \"the doctrine may be invoked [solely] to prevent a party from manipulating the court for self serving reasons.\" Phillips v. FDIC (In re Phillips), 124 B.R. 712, 720 (Bankr.W.D.Tex.1991) (citing Konstantinidis v. Chen, 626 F.2d 933, 937 (D.C.Cir.1980)).\nBefore the doctrine of judicial estoppel may be applied, the party to be estopped must have taken an affirmative position that was accepted by the court. United States ex rel. American Bank v. C.I.T. Constr., Inc., 944 F.2d 253, 258-259 (5th Cir.1991) (citing Moore v. United Serv. Automobile Ass'n, 808 F.2d 1147, 1153 n. 6 (5th Cir.1987)); Phillips at 720. Without judicial acceptance of an inconsistent position, \"application of the rule is unwarranted because no risk of inconsistent results exists. Thus, the integrity of the judicial process is unaffected.\" Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th Cir. 1982). The Fifth Circuit has approved the requirement of a judicial acceptance of a prior inconsistent position \"as a method to safeguard the judicial process.\" American Bank at 258-259. This does not imply, however, that a judicial acceptance occurs only when the party against whom judicial estoppel is applied ultimately prevailed on the merits in a prior proceeding. \"Rather, judicial acceptance means only that the first court has adopted the position urged by the party, either as a preliminary matter or as part of a final disposition.\" Teledyne at 1218; Phillips at 720 (quoting Edwards at 599 n. 5).\nIn this case, the attorney for HEC clearly represented to the Taxing Authorities and this Court that the Taxing Authorities' claims were in Class 2 of the Plan through the filing of the Modification to Class 2 and accompanying letter, the Report of Balloting filed with the Court and through oral representations made at the confirmation hearing. This Court accepted HEC's representations and confirmed the Plan based on the fact that the Taxing Authorities (whose claims the Court was led to believe were in Class 2) withdrew their rejections, and the Attorney General's office withdrew its objection. HEC's prior representation to this Court that the Taxing Authorities' claims were in Class 2, and its later assertion that the claims were in Class 7, were fundamentally inconsistent, and the prior representations were relied upon by the Taxing Authorities and the Court. Accordingly, HEC should be judicially estopped to deny that the proper classification of the Taxing Authorities' claims was in Class 2.[8]\nIV. Favorable Treatment.\nIn their memorandum in support of their motion to reconsider, the Taxing Authorities note that Andrews Independent School District (\"AISD\") obtained more favorable treatment for its claims through an agreement made with HEC's attorney at the January 14, 1991 hearing. Specifically, this agreed order settled HEC's objections to AISD's claims, and provided for the agreed amount to be paid over fourteen months. The Taxing Authorities note that this payment term is better than the six-year payout provided to the Class 2 claims under the Plan. The Taxing Authorities assert that such an arrangement is \"not fair to the other taxing authorities who are members in the same class,\" and that \"[i]t is impossible to think that [HEC] should wish to discriminate so blatantly in favor of one member of the same class while simultaneously seeking to demean all other members of the same class and deprive them of their proper treatment under the Plan of Reorganization.\"\nThis argument is without merit. Ms. Gillham was present at the January 14, *323 1991 hearing when HEC announced its agreement with AISD in open court. Ms. Gillham made no objections to this agreement. The AISD order was entered over seven months prior to the filing of the motion to reconsider. In addition, the motion to reconsider was targeted at only the eleven orders relating to the Taxing Authorities' claims, and did not request relief relating to the order allowing the AISD claim. The Taxing Authorities cannot now protest and ask the Court to confer upon them the same benefits AISD obtained through the diligence and negotiating skill of its counsel.\nV. Proper Amounts Attributable to Claims.\nAt the February 13, 1991 hearing, the Court heard evidence relating to each of the Taxing Authorities' claims, and asked HEC's counsel to submit orders in conformity with the Court's ruling on each claim. The orders provided as follows:\n\n\n Claim Amount\nAndrews County $19,855.61\nBuena Vista I.S.D. 57.18\nCrane County 16.98\nCrane County I.S.D. 36.30\nCrane County Water District .76\nEctor County 558.12\nKermit I.S.D. 5,470.82\nPecos-Barstow-Toyah I.S.D. Disallowed\nReeves County Disallowed\nWinkler County 1,892.47\nWink-Loving I.S.D. Disallowed\n\nAt the November 13, 1991 hearing on the motion to reconsider, Ms. Gillham stated:\nFinally, your Honor, I still have reservations that the amounts [in the orders] are correct and I cannot present any evidence to the Court that they're wrong. I have Mr. Kelton's notes which indicate some differences with those amounts. I've had some difficulty understanding those notes, and those would simply have to be looked at by some other person.\nLater in the hearing, the following exchange occurred:\nFG: And we've only received a copy of Mr. Floyd's calculations today. Mr. Kelton's calculations differ in the amounts and I'd like a chance to compare those two. That sounds to me like the sort of thing that can be worked out quickly between parties; it's just a matter of applying correct math and Mr. Kelton initially said that he thought there was some incorrect math done. . . .\nCt: I think what I'm going to do is take this under advisement and if you want to submit your calculations to me of what you think is correct, you can do that; and you can do the same, Mr. Allen. We'll take your exhibits and we'll listen to the tapes, I'll have my law clerk listen to the tapes and I'll listen to the tapes and whatever the ruling was that day, that's what I'm going to do in the order. If there's a difference of opinion as to the calculation—arithmetic or percentages, or whatever — tell me what that is and I'll try to sort that out. But I'm not going to change my ruling. . . .\nThis Court then asked the attorneys how much time they needed to submit exhibits or calculations. Ms. Gillham asked for two weeks, and this time period was agreed to by the attorney for HEC. According to HEC's response, that time period was later extended to December 3, 1991. On that date, HEC filed a detailed set of calculations. The Taxing Authorities did not submit any additional calculations or exhibits. HEC's calculations included a spreadsheet prepared by its witness, Wayne Floyd, which contained a corrected version of the calculations used in the eleven Orders entered previously by this Court. According to HEC, the new calculations were made by Wayne Floyd \"after reviewing the tapes of the hearing.\" The corrected amounts were as follows:\n\n\nTaxing Authority Corrected Amount\nAndrews County $16,173.89\nBuena Vista I.S.D. 62.41\nCrane County 18.99\nCrane County I.S.D. 40.47\nCrane County Water District .87\nEctor County 306.24\nKermit I.S.D. 6,256.90\nPecos-Barstow-Toyah I.S.D. 0.00\nReeves County 0.00\nWinkler County 5,858.45\nWink-Loving I.S.D. 0.00\n\n*324 The corrected amounts reflected, among other things, the inclusion of interest.\nAs stated in In re Fidelity Holding Co., Ltd., 837 F.2d 696, 698 (5th Cir.1988):\nUnder Bankruptcy Rule [3001(f)], a party correctly filing a proof of claim is deemed to have established a prima facie case against the debtor's assets. In re WHET, Inc., 33 B.R. 424, 437 (Bankr. D.Mass.1983). The objecting party must then produce evidence rebutting the claimant or else the claimant will prevail. . . . If, however, evidence rebutting the claim is brought forth, then the claimant must produce additional evidence to \"prove the validity of the claim by a preponderance of the evidence.\" The ultimate burden of proof always rests upon the claimant. . . . This burden does not shift even where the claimant is a state or federal tax authority.\nThe Taxing Authorities did not submit calculations or exhibits despite being afforded the opportunity to do so by this Court. Additionally, they presented no evidence at the hearing to substantiate their contention that the calculations were wrong. Thus, HEC's calculations were the only evidence before the Court and must be accepted because the Taxing Authorities failed to carry their burden of proof.\nVI. Conclusion.\nThe Taxing Authorities' claims will be allowed as Class 2 claims in the corrected amounts submitted by HEC. Separate orders will be rendered for each claim. This Opinion constitutes the findings of fact and conclusions of law of this Court pursuant to Bankruptcy Rules 7052 and 9014.\nNOTES\n[1] Taxing Authorities' Exhibit \"1.\"\n[2] Taxing Authorities' Exhibit \"2.\"\n[3] Taxing Authorities' Exhibit \"3.\"\n[4] HEC's Exhibit \"3.\"\n[5] 11 U.S.C. §§ 101-1330 (1988).\n[6] Taxing Authorities' Memorandum in Support at 5.\n[7] \"DC\" is David Copeland, attorney for HEC; \"Ct\" is the Court.\n[8] In addition, if Class 2 consisted only of unsecured ad valorem tax claims, why did the Modification to the Plan state that \"[a]ll liens held by Class 2 Creditors shall remain in full force and effect until . . . paid in full\"?\n\n", "ocr": false, "opinion_id": 1873540 } ]

[ "56 F.3d 224", "312 U.S. App. D.C. 260" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F3/56/56.F3d.224.94-1064.html", "author_id": null, "opinion_text": "56 F.3d 224\n 149 L.R.R.M. (BNA) 2530, 312 U.S.App.D.C. 260,130 Lab.Cas. P 11,350\n LARO MAINTENANCE CORPORATION, Petitionerv.NATIONAL LABOR RELATIONS BOARD, Respondent,Service Employees International Union, AFL-CIO, Intervenor.\n No. 94-1064.\n United States Court of Appeals,District of Columbia Circuit.\n Argued March 2, 1995.Decided June 9, 1995.Suggestion for Rehearing In Banc Denied Aug. 16, 1995.\n \n Petition for Review and Cross-Petition for Enforcement of a Decision and Order of the National Labor Relations Board.\n Clifford P. Chaiet, Jericho, NY, argued the cause and filed the briefs, for petitioner.\n Joseph A. Oertel, Senior Litigation Atty., N.L.R.B., Washington, DC, argued the cause, for respondent. With him on the brief were Linda R. Sher, Acting Associate Gen. Counsel, Aileen A. Armstrong, Deputy Associate Gen. Counsel, and Howard E. Perlstein, Deputy Asst. Gen. Counsel, N.L.R.B., Washington, DC.\n Ira A. Sturm, New York City, entered an appearance, for intervenor.\n Before WALD, RANDOLPH, and ROGERS, Circuit Judges.\n Dissenting opinion filed by Circuit Judge RANDOLPH.\n ROGERS, Circuit Judge:\n \n \n 1\n Laro Maintenance Corporation petitions for review of the decision and order of the National Labor Relations Board finding that Laro had violated Secs. (8)(a)(1) and (3) of the National Labor Relations Act, 29 U.S.C. Secs. 158(a)(1) and (3), by discriminating against certain applicants for employment based on their union membership. Laro Maintenance Corp., 312 N.L.R.B. 155, 1993 WL 371437 (1993). Specifically, Laro contends that the Board impermissibly presumed anti-union animus and lacked substantial evidence to support its finding of discriminatory intent. Because the Board applied the appropriate legal standard and substantial evidence in the record considered as a whole supports its determination that Laro's failure to hire any of the thirteen applicants was based on their union membership, we deny the petition for review and grant the Board's cross-petition for enforcement.\n \n I.\n \n 2\n For about six years ending on September 30, 1990, Prompt Maintenance Services, Inc. cleaned and maintained the federal government building at 225 Cadman Plaza in Brooklyn, New York under a contract with the General Services Administration (\"GSA\"). Prompt employees performed this work under a collective bargaining agreement between Prompt and Local 32B-32J, Service Employees International Union, AFL-CIO (\"Local 32B\"). In April 1990, the GSA solicited bids for a new cleaning contract at Cadman Plaza. The bid solicitation required the new contractor to pay the same wages as Prompt and to have an initial work force of which at least fifty percent comprised experienced cleaners. Laro was awarded the contract to begin October 1, 1990.\n \n \n 3\n On or about September 17, 1990, Local 32B requested that Laro hire Prompt's Cadman Plaza employees. On September 18, Laro's President, Robert Bertuglia, toured the Cadman Plaza building. A GSA official mentioned the names of various employees as being \"good workers,\" and Bertuglia observed two Prompt employees sleeping. Bertuglia did not take note of the names of either the good workers or the sleeping workers. After the inspection, the building manager (another GSA employee) informed Bertuglia that the GSA had taken deductions from Prompt's fee, presumably for deficient performance.1 Bertuglia told the building manager that he did not intend to hire any of Prompt's employees because of the deductions and the two employees he had seen sleeping on the job. The building manager informed Bertuglia that certain judges whose chambers were in the Cadman Plaza building wanted Laro to retain the Prompt employees who cleaned their chambers. The building manager also advised Bertuglia to interview all Prompt employees and stated that it would be advantageous for Laro to hire as many of them as possible. Several days later, the GSA official who conducted the inspection gave Bertuglia a list of ten \"better cleaners from Prompt Maintenance,\" and urged Laro to hire them.\n \n \n 4\n Despite Bertuglia's stated desire not to hire any Prompt employees, Laro agreed to hire the ten Prompt employees on the GSA's list. Laro accepted applications from other Prompt employees but had already decided that it would not hire any of them; consequently Laro asked the Prompt employees who were not on the GSA's list virtually no questions about their background or experience and did not seek information about individual Prompt employees who had good work records and had worked at Cadman Plaza for a number of years for Prompt and its predecessor. Instead, to complete its Cadman Plaza work force, Laro hired eight workers who had not previously worked for Prompt. Laro had previously employed four of these workers. Two had good work records and requested transfers to Cadman Plaza. Laro transferred the other two to Cadman Plaza at least in part because of their poor performance at Laro's Jamaica, New York site: Laro had discharged one for poor attendance and insubordination three weeks before it hired her to work at Cadman Plaza, and transferred the other because he required constant supervision, did not get his work done, made frivolous excuses for his failure to complete tasks, and constantly complained. Laro also hired four workers who had not previously been employed by either Prompt or Laro. Laro admitted that three of them had no relevant work experience, and although the fourth worker listed factory and office cleaning as relevant experience on his application, he did not list any positions at which he would have gained such experience. On September 28, 1990, just before commencing work at Cadman Plaza under its contract with GSA, Laro entered into a supplemental agreement with Amalgamated Local Union 355 (\"Local 355\")--with which Laro had a collective bargaining agreement (August 1, 1990, through July 1, 1993) for its employees in Jamaica, New York--covering its employees at Cadman Plaza.\n \n \n 5\n Thereafter, Local 32B filed an unfair labor practice charge against Laro. The Board's General Counsel filed a complaint, alleging violations of Secs. 8(a)(1), (2), (3), and (5) of the Act on the ground that Laro had bargained with Local 355 knowing that it represented a minority of the workers at Cadman Plaza and that it had refused to consider employing Prompt employees, other than those on the GSA's list, because of their union membership. When these charges came before an Administrative Law Judge (\"ALJ\") for a hearing, Laro admitted that it had recognized Local 355 although Local 32B represented a majority of the employees at Cadman Plaza; the Board entered into an informal settlement agreement with Laro whereby Laro agreed to recognize Local 32B for its Cadman Plaza employees, thus disposing of the alleged violations of Secs. 8(a)(2) and (5). Following a hearing on the remaining complaint allegations, the ALJ concluded that Laro violated Secs. 8(a)(1) and (3) upon finding that Laro had declined to consider any Prompt employees who were not on the \"better cleaners\" list in order to recognize and bargain with Local 355 rather than Local 32B. The Board adopted the ALJ's findings and conclusions with minor modifications and ordered Laro to offer employment and back pay to the Prompt employees it had refused to consider.2 Laro petitioned for review under 29 U.S.C. Sec. 160(f), and the Board cross-petitioned for enforcement under 29 U.S.C. Sec. 160(e).\n \n II.\n \n 6\n Section 8(a)(3) of the Act makes it an unfair labor practice for an employer \"to encourage or discourage membership in any labor organization,\" \"by discrimination in regard to hire or tenure of employment or any term or condition of employment....\" 29 U.S.C. Sec. 158(a)(3).3 Under this section, a successor employer not the alter ego of its predecessor is not obligated to hire its predecessor's employees. Howard Johnson Co. v. Hotel & Restaurant Employees Int'l Union, 417 U.S. 249, 259 n. 5, 261, 94 S.Ct. 2236, 2242 n. 5, 2243, 41 L.Ed.2d 46 (1974) (quoting NLRB v. Burns Int'l Sec. Servs., 406 U.S. 272, 280 n. 5, 92 S.Ct. 1571, 1579 n. 5, 32 L.Ed.2d 61 (1972)). However, \"a new owner [can]not refuse to hire the employees of [its] predecessor solely because they were union members or to avoid having to recognize the union.\" Id. at 262 n. 8, 94 S.Ct. at 2243 n. 8; see Great Lakes Chem. Corp. v. NLRB, 967 F.2d 624, 627 (D.C.Cir.1992).\n \n \n 7\n When a violation of Sec. 8(a)(3) is alleged, the Board applies the two-stage causation test established in Wright Line, 251 N.L.R.B. 1083, 1980 WL 12312 (1980), enf'd, 662 F.2d 899 (1st Cir.1981), cert. denied, 455 U.S. 989, 102 S.Ct. 1612, 71 L.Ed.2d 848 (1982), and approved by the Supreme Court in NLRB v. Transportation Mgt. Corp., 462 U.S. 393, 103 S.Ct. 2469, 76 L.Ed.2d 667 (1983).4 Under Wright Line, the Board's General Counsel bears the initial burden to \"make a prima facie showing sufficient to support the inference that protected [i.e., legitimate, union-related] conduct was a 'motivating factor' in the employer's decision\" to take adverse employment action. Wright Line, 251 N.L.R.B. at 1089. The employer may then rebut the inference by showing by a preponderance of the evidence that \"the same action would have taken place even in the absence of the protected conduct.\" Id.; see Transportation Mgt., 462 U.S. at 399, 103 S.Ct. at 2473; Power Inc. v. NLRB, 40 F.3d 409, 417 (D.C.Cir.1994).5\n \n \n 8\n Laro contends that the Board violated the legal standard articulated in Howard Johnson Co. by presuming anti-union animus from the fact that Laro decided not to consider any Prompt employee who was not on the \"better cleaners\" list. If applied, such a presumption would be contrary to the Howard Johnson Co. rule allowing a subsequent employer to refuse to hire its predecessor's employees, and involve a misapplication of Sec. 8(a)(3). However, no fair reading of the Board's decision indicates that the Board applied such a presumption. To the contrary, the Board concluded that Laro violated Sec. 8(a)(3) not simply because Laro failed to consider any of the thirteen Prompt employees, but because its motive in doing so was \"to avoid an obligation to bargain with Local 32B.\" Laro Maintenance Corp., 312 N.L.R.B. at 155 n. 2. The Board based this finding in part on Laro's refusal to consider these Prompt employees, but also on additional evidence of Laro's antipathy to Local 32B, including the poor quality of workers Laro actually did hire, Laro's hiring practices at other union and non-union sites, and Laro's admitted unfair labor practice of recognizing Local 355 instead of Local 32B at the Cadman Plaza site. The Board also conducted the second prong of the Wright Line analysis and rejected Laro's position that it would have refused to hire these predecessor employees regardless of its antipathy to Local 32B because of what Laro viewed as poor performance by Prompt and a need to start fresh with new employees. This analysis would have been unnecessary had the Board embraced the erroneous legal premise attributed to it by Laro, namely that the Act prohibited Laro from refusing to consider hiring Prompt employees, regardless of its motive for doing so. Instead, the Board correctly recognized that it had to determine Laro's motivation for its action, based on the action itself and other evidence.\n \n III.\n \n 9\n Laro's second contention presents a closer question, at least for the Board if not the court. Laro contends that the Board's finding of a prima facie case, that Laro's failure to hire any of the thirteen Prompt employees was motivated by its desire to avoid bargaining with Local 32B, is unsupported by substantial evidence. Similarly Laro contends that substantial evidence does not support the Board's rejection of Laro's claim under the second prong of Wright Line that it would have hired the same employees regardless of the Prompt employees' union membership. The court's review of the Board's factual conclusions is highly deferential, upholding a decision if it is supported by substantial evidence considering the record as a whole. Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 465, 95 L.Ed. 456 (1951); Power Inc., 40 F.3d at 417; Union-Tribune Publishing Co. v. NLRB, 1 F.3d 486, 491 (7th Cir.1993); 29 U.S.C. Sec. 160(e). \"So long as the Board's findings are reasonable, they may not be displaced on review even if the court might have reached a different result had the matter been before it de novo.\" Clark & Wilkins Indus., Inc. v. NLRB, 887 F.2d 308, 312 (D.C.Cir.1989), cert. denied, 495 U.S. 934, 110 S.Ct. 2177, 109 L.Ed.2d 505 (1990); see Universal Camera, 340 U.S. at 488, 71 S.Ct. at 465; Birch Run Welding & Fabricating, Inc. v. NLRB, 761 F.2d 1175, 1179 (6th Cir.1985).\n \n \n 10\n The court's review of the Board's determination with respect to motive is even more deferential. Motive is a question of fact that may be inferred from direct or circumstantial evidence. Power Inc., 40 F.3d at 418; Davis Supermarkets, Inc. v. NLRB, 2 F.3d 1162, 1168 (D.C.Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 1368, 128 L.Ed.2d 45 (1994); Great Lakes Chem. Corp., 967 F.2d at 627. In most cases only circumstantial evidence of motive is likely to be available. NLRB v. Ship Shape Maintenance Co., 474 F.2d 434, 439 (D.C.Cir.1972); NLRB v. Vought Corp.--MLRS Sys. Div., 788 F.2d 1378, 1382 (8th Cir.1986); Intermountain Rural Elec. Ass'n v. NLRB, 732 F.2d 754, 759 (10th Cir.), cert. denied, 469 U.S. 932, 105 S.Ct. 327, 83 L.Ed.2d 264 (1984); Abilene Sheet Metal, Inc. v. NLRB, 619 F.2d 332, 339 (5th Cir.1980); NLRB v. Warren L. Rose Castings, Inc., 587 F.2d 1005, 1008 (9th Cir.1978). Drawing such inferences from the evidence to assess an employer's hiring motive invokes the expertise of the Board, and consequently, the court gives \"substantial deference to inferences the Board has drawn from the facts,\" including inferences of impermissible motive. Gold Coast Restaurant Corp. v. NLRB, 995 F.2d 257, 263 (D.C.Cir.1993); Sheet Metal Workers' Int'l Ass'n AFL-CIO v. NLRB, 989 F.2d 515, 521 (D.C.Cir.1993); Lippincott Indus., Inc. v. NLRB, 661 F.2d 112, 116 (9th Cir.1981); Pay'n Save Corp. v. NLRB, 641 F.2d 697, 702 (9th Cir.1981).\n \n \n 11\n The Board relied principally on three factual findings for its determination that Laro's motive for failing to hire any of the thirteen Prompt employees was its desire to avoid bargaining with Local 32B: (1) Laro's admitted unfair labor practice of recognizing Local 355 as the representative of employees at Cadman Plaza when a majority of those employees were members of Local 32B; (2) Laro's hiring practices at other sites that reveal anti-union bias; and (3) the pretextual nature of Laro's explanations for its actions. Because there is substantial evidence of record to support these findings and the Board's inference is reasonable, the court has no basis to conclude that the Board erred.\n \n \n 12\n From the time Laro took over the Cadman Plaza site until the hearing before the ALJ--a period of nineteen months--Laro engaged in an unfair labor practice by recognizing Local 355 as the collective bargaining representative of the Cadman Plaza workers even though Laro knew that a majority of Laro's Cadman Plaza employees (ten of eighteen) were members of Local 32B. In addition, the Board adopted the ALJ's finding that Laro knowingly engaged in this unfair labor practice and actively attempted to conceal it. The Board found that a Laro supervisor told one of Laro's employees at the Jamaica site, Sebatine Acosta, that Laro was being sued by another union and needed two Jamaica employees to tell the Board that they also worked at Cadman Plaza. Laro instructed Acosta to inform the Board that he had worked at Cadman Plaza for an entire month when, in fact, he had only worked there one night. Laro's bad faith recognition of Local 355 rather than Local 32B, followed by Laro's attempt to conceal its unfair labor practice, presented the Board with substantial evidence that Laro's motive in failing to hire any of the Prompt employees was to avoid bargaining with Local 32B. The Board could properly consider this unfair labor practice in determining Laro's motive for its contemporaneous failure to hire the Prompt employees. See Microimage Display Div. of Xidex Corp. v. NLRB, 924 F.2d 245, 252 (D.C.Cir.1991); NLRB v. Q-1 Motor Express, Inc., 25 F.3d 473, 478 (7th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct. 729, 130 L.Ed.2d 633 (1995).\n \n \n 13\n Laro's contention that once it hired former Prompt employees as a majority of its Cadman Plaza work force, it had no further incentive to discriminate against Local 32B members, is undermined by its own action. Because the majority of Local 32B members at Cadman Plaza was so small (ten of eighteen), the addition of two individuals to the unit would destroy Local 32B's majority status, and Laro attempted, through Acosta and his supervisor, to accomplish this goal. Had Laro hired additional former Prompt employees, it could not as easily conceal the Local 32B majority. The instant case is thus similar to Great Lakes Chem. Corp., where the employer unsuccessfully made the same argument based on having hired a \"core group\" of incumbent employees and then attempting to fill the remaining positions with unskilled trainees. 967 F.2d at 627-28. In rejecting the employer's contention that its hiring of union members belied any impermissible motive on its part, the court noted circumstances similar to those in the instant case, namely that the employer had attempted to keep the union out and had succeeded in delaying the recognition of the union as the bargaining representative. Id. at 628. The fact that the employer in Great Lakes Chem. Corp., like Laro, hired enough members of the union to constitute a majority of the work force did not establish the absence of impermissible motive. Id. at 629.\n \n \n 14\n As further evidence of impermissible motive, the Board relied on Laro's employment decisions at other cleaning contract sites. Of the three sites where Laro acquired the cleaning contract, including Cadman Plaza, two were unionized under the previous employer and one was not. Laro attempted to avoid hiring any of the incumbent employees at both unionized locations but willingly hired one-third of the incumbent employees at the non-union location.6 These actions undermine Laro's claim that its reasons for limiting its hires of Prompt employees were related to performance; there is no performance-based rationale for the disparate treatment of incumbent employees at unionized and non-unionized sites in the absence of record evidence regarding employee quality. The Board's inference that this disparate treatment was based on union membership is thus based on substantial evidence and provides further evidence of unlawful motive for Laro's refusal to hire any of the thirteen Prompt employees. See Gold Coast, 995 F.2d at 264-65 (disparate treatment of individuals similarly situated except for protected activity may constitute substantial evidence of violation of Secs. 8(a)(1) and (3)).\n \n \n 15\n Finally, the Board determined that Laro's explanation for its refusal to consider the applications of the thirteen Prompt employees was pretextual. Although Laro was not obliged to offer any explanation for its actions, see Howard Johnson Co., 417 U.S. at 261-62, 94 S.Ct. at 2242-43, the Board has held that a \"case of discriminatory motivation may be supported by consideration of the lack of any legitimate basis for a respondent's actions.\" Weco Cleaning Specialists, Inc., 308 N.L.R.B. 310, 310 n. 4, 1992 WL 206968 (1992); Wright Line, 251 N.L.R.B. at 1088 n. 12. This is especially true when the employer presents a legitimate basis for its actions which the factfinder concludes is pretextual. In such cases, the factfinder may not only properly infer that there is some other motive, but \"that the motive is one that the employer desires to conceal--an unlawful motive--at least where ... the surrounding facts tend to reinforce that inference.\" Shattuck Denn Mining Corp. v. NLRB, 362 F.2d 466, 470 (9th Cir.1966); see also Q-1 Motor Express, 25 F.3d at 479; Union-Tribune, 1 F.3d at 490-91; Holo-Krome v. NLRB, 954 F.2d 108, 113 (2d Cir.1992); cf. Union-Tribune, 1 F.3d at 491 (\"A finding of pretext, standing alone, does not support a conclusion that a[n employment action] was improperly motivated.\") (emphasis added).\n \n \n 16\n Laro maintains that it refused to consider employing any Prompt employees who were not on the GSA's recommended list for two related legitimate reasons. First, Laro claims that it wanted to start work with \"fresh\" employees, untainted by different methods that may have been used by Prompt or bad habits acquired during previous employment at Cadman Plaza. Second, Laro points out that it knew that Prompt employees had performed inadequately based on the deductions from Prompt's fees and Bertuglia's observation of two Prompt employees sleeping on the job. Laro correctly maintains that the Board, albeit on distinguishable records where the factfinder credited the proffered explanation, has previously found similar reasons sufficient defenses to allegations of discriminatory actions. See Wolf Street Supermarkets, Inc., 264 N.L.R.B. 1124, 1129-30, 1982 WL 23783 (1982) (failure to hire any of predecessor's employees justified by predecessor's negative cash flow and poor appearance as well as the desire to present a new image to customers); Great Plains Beef Co., 241 N.L.R.B. 948, 972-73, 1979 WL 8981 (1979) (preference for inexperienced employees is not, in and of itself, unreasonable or indicative of an unlawful motive). However, assertions of a legitimate business reason for preferring inexperienced workers can be overcome by evidence that an anti-union motive influenced the decision to exclude experienced employees. Power Inc., 40 F.3d at 419, 420; Inland Container Corp., 275 N.L.R.B. 378, 385-87, 1985 WL 45679 (1985); Great Plains, 241 N.L.R.B. at 973.\n \n \n 17\n The Board's rejection of Laro's proffered business reasons for refusing to consider any of the thirteen Prompt employees is supported by substantial evidence. Both proffered reasons stem from Laro's alleged desire to hire workers who would perform best. Yet the record and Laro's actions belie such an intent on Laro's part. Laro transferred one worker from Jamaica to Cadman Plaza because of his poor work and need for constant supervision, and it hired another worker who had recently been fired from the Jamaica site for absenteeism and insubordination. Laro also hired at least three workers for Cadman Plaza with no relevant experience, rather than attempting to determine who among Prompt's experienced employees were sleeping on the job or responsible for the deductions (whose nature, extent and causes were unknown to Laro). None of these actions comports with a desire to employ only the most productive workers.\n \n \n 18\n Most telling is Laro's treatment of two individuals who sought employment during the week before Laro took over the Cadman Plaza contract. One former Prompt employee, Luis Quebrada, requested his old job back at Cadman Plaza, while a former Laro employee, Yonette Mathurin, who had been fired by Laro, requested her old job back at the Jamaica site. Laro hired both, but instead of giving them their requested assignments, it told Quebrada that no positions were left at Cadman Plaza and he would have to work at the Jamaica site, while informing Mathurin precisely the opposite, that no job was available at the Jamaica site but she could work at Cadman Plaza.\n \n \n 19\n Based on this evidence, the Board drew the reasonable inference that Laro's explanations for not hiring any of the thirteen Prompt employees were pretextual. A desire for better quality employees does not explain Laro's hiring of demonstrably poor employees, rather than making any attempt to determine the quality of Prompt's experienced employees. Nor does Laro's explanation elucidate why Laro would allow the former Prompt employee, Quebrada, to work only at the Jamaica site, while permitting the former Laro employee, Mathurin, to take a job only at Cadman Plaza. Laro's desire to exclude Prompt employees from the Cadman Plaza site because of their union membership explains all of these actions.\n \n \n 20\n Laro has offered the ALJ, the Board, and the court innocent explanations for virtually all of the evidence from which the Board inferred impermissible motive. For example, Laro explained that it assigned its two previous employees with poor records to Cadman Plaza because one would do better work for the supervisor at Cadman Plaza than he did for the supervisor at Jamaica and the other, who had been fired, repeatedly entreated her supervisor for reinstatement until he agreed to give her a second chance. However, the Board was not required to credit these explanations, see Power Inc., 40 F.3d at 419, 420; Davis Supermarkets, 2 F.3d at 1167-68, 1170; Great Lakes, 967 F.2d at 629; Inland Container, 275 N.L.R.B. at 386, and specifically declined to overturn the ALJ's evaluations because it was not convinced by \"the clear preponderance of all the relevant evidence ... that they [were] incorrect.\" Laro Maintenance Corp., 312 N.L.R.B. at 155 n. 1. One component of the Board's determination that Laro's explanation for its actions was pretextual is the Board's view of Bertuglia's credibility. See, e.g., id. at 161, 162. \"[T]he ALJ's credibility determinations, as adopted by the Board, will be upheld unless they are patently insupportable.\" Gold Coast, 995 F.2d at 265; Williams Enterprises, Inc. v. NLRB, 956 F.2d 1226, 1232 (D.C.Cir.1992); see also Power Inc., 40 F.3d at 418. Consistent with the applicable standard of review, even if the court concluded that Laro's explanations were reasonable, the court would nevertheless uphold the Board's inferences as supported by substantial, if not overwhelming, evidence. See Universal Camera, 340 U.S. at 477, 71 S.Ct. at 459 (substantial evidence is \"more than a mere scintilla\"; it means \"such evidence as a reasonable mind might accept as adequate to support a conclusion\") (citation omitted). We therefore conclude that the first prong of Wright Line was satisfied; substantial evidence supports a prima facie case that Laro failed to consider or hire any of the thirteen Prompt employees because of its desire to avoid recognizing and bargaining with Local 32B in violation of Secs. 8(a)(1) and (3).\n \n \n 21\n Laro fares no better under the Wright Line test's second prong. See Transportation Mgt., 462 U.S. at 399, 400, 402, 103 S.Ct. at 2473, 2474; Wright Line, 251 N.L.R.B. at 1089. Laro asserted the affirmative defense that even in the absence of impermissible motivation, it would have made the same hiring decisions and declined to hire any of the thirteen Prompt employees. Specifically, Laro maintains that it would have hired the eight non-incumbent employees whom it did hire because of its legitimate desire for workers who had experience working for Laro or who were recommended by a person with such experience. The ALJ concluded that Laro failed to prove that any of the thirteen Prompt employees would not have been hired absent Laro's impermissible motivation. The Board agreed, noting that Laro had failed to offer any legitimate reason for refusing to interview or consider the pool of experienced employees. The Board's rejection of Laro's argument is based on substantial evidence. As noted, the Board rejected Laro's claim that it legitimately preferred workers previously employed by Laro because two of those workers had demonstrated their inability to work under Laro's system. Similarly, the Board rejected Laro's claim that it legitimately preferred inexperienced workers recommended by Laro employees because the Board found that this preference was applied disparately to union members and was therefore a pretext for discrimination based on union membership.\n \n \n 22\n Thus, the Board's determination that Laro refused to hire any of the thirteen former Prompt employees because of their union membership is supported by substantial evidence in the record considered as a whole, including Laro's predetermination not to hire any more Prompt employees than GSA required, its disparate treatment of union-represented employees, its admitted contemporaneous unfair labor practice, and the absence of a legitimate reason for refusing to consider or make inquiries about the thirteen Prompt employees while hiring inexperienced employees and employees with poor work records. Accordingly, we deny the petition for review and grant the Board's petition for enforcement.\n \n RANDOLPH, Circuit Judge, dissenting:\n \n 23\n The Board's decision in this case makes no sense. Prompt's 23 employees had been doing a lousy job cleaning Cadman Plaza and Laro knew it, not only from GSA's report but also from observing two of Prompt's employees sleeping on the job. When Laro took over, it decided to streamline operations, thinking it could do a better job with 5 fewer workers. Yet according to the Board, Laro had a legal obligation to fill its 18 slots with the former Prompt employees. Why? Because, according to the Board, the only reason Laro did not hire all its employees from the Prompt pool was Laro's anti-Local 32B animus. There is no substantial evidence, indeed there is no evidence whatever, to support the Board's conclusion--a conclusion that entails the utterly ridiculous proposition that but for the Prompt employees' membership in Local 32B, Laro would have hired them.\n \n \n 24\n Too bad for Laro that it did not stick to its initial plan of not hiring any of Prompt's 23 employees. Had Laro done so in light of what it learned from GSA, no unfair labor practice charge could possibly have stuck. The labor laws do not require new employers to keep any of their predecessor's workers on board, so long as the new employer does not refuse to hire them \"solely\" because they belong to a union. Howard Johnson Co. v. Hotel & Restaurant Employees Int'l Union, 417 U.S. 249, 262 n. 8, 94 S.Ct. 2236, 2243 n. 8, 41 L.Ed.2d 46 (1974); NLRB v. Burns Int'l Sec. Servs., 406 U.S. 272, 280 n. 5, 92 S.Ct. 1571, 1579 n. 5, 32 L.Ed.2d 61 (1972). But at GSA's urging, Laro caved in and retained 10 Prompt employees, designated by GSA as the best of the bunch. The remaining 13 Prompt employees were thus necessarily the worst of the lot, or at least Laro was entitled to so believe. Laro harbored no anti-union animus in filling 10 of its 18 positions--a majority--with Prompt workers, all of whom were members of Local 32B. How then can it be that Laro violated Sec. 8(a)(3), 29 U.S.C. Sec. 158(a)(3), by not hiring more? (Actually, Laro did hire one more former Prompt employee and set him to work at another site. When he quit two days later, complaining that he had been \"overworked,\" he fell back into the pool of the unhired 13.)\n \n \n 25\n The ALJ's answer to this question, adopted by the Board, is irrational: Laro \"did not want to hire any more of Prompt's incumbent employees than it believed it was required to by GSA, in an effort to avoid a bargaining obligation with Local 32B.\" Laro Maintenance Corp., 312 N.L.R.B. 155, 162 (1993). It is tempting to place a couple of exclamation points and a few question marks at the end of the ALJ's statement, a statement upon which the entire case turns. Why in the world would Laro think it could \"avoid a bargaining obligation\" by not hiring more Prompt employees? A \"bargaining obligation\" arises from a union's majority status. See Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 46-47, 107 S.Ct. 2225, 2237-38, 96 L.Ed.2d 22 (1987); Burns Int'l Sec. Servs., 406 U.S. at 277-81, 92 S.Ct. at 1577-79; Elastic Stop Nut Div. of Harvard Indus. v. NLRB, 921 F.2d 1275, 1282 (D.C.Cir.1990). Local 32B was already over the top at Cadman Plaza. Ten of 18 is a majority. A bigger majority is still a majority. Are we supposed to believe that Laro could not do simple arithmetic?\n \n \n 26\n The truth is that Laro's refusal to recognize Local 32B was not on the basis that the union lacked a majority at Cadman Plaza. Laro refused to bargain with Local 32B because Laro considered--incorrectly it turned out--the Cadman Plaza operation an accretion to the bargaining unit in Jamaica, Queens, where Laro cleaned another federal office building pursuant to a GSA contract. A different union, Local 355, represented Laro's Jamaica employees. The number of employees represented by Local 355 exceeded 18. Hence, no matter how many more former Prompt employees Laro hired at Cadman Plaza, the unit as Laro viewed it would still have had a majority of Local 355 members.\n \n \n 27\n The fact that Laro hired a majority of its Cadman Plaza work force from the pool of Prompt employees gives the lie to the ALJ's--and the Board's--notion that Laro's alleged intent to avoid bargaining with Local 32B was a \"motivating factor\" behind the company's hiring decisions. Had Laro been thinking the thoughts the ALJ placed in its head it would have pared down GSA's list to 8 or less.\n \n \n 28\n The rest of the ALJ's reasoning is makeweight, and just as nonsensical. Two examples should suffice. Consider first what the ALJ deduced from Laro's take-over of two other cleaning operations. When the company succeeded to the cleaning contract at the federal facility in Jamaica, Laro hired one-third of the incumbent employees, who were not then unionized. Upon taking over operations at Dowling College, Laro initially decided not to hire any incumbent employees, but wound up hiring all of them at the college's insistence; the incumbent employees were unionized. According to the ALJ, what happened at Jamaica and Dowling College shows that Laro did not really \"like[ ] to 'start fresh' with a new complement of employees\" unless a union represented the incumbent workers. Laro Maintenance Corp., 312 N.L.R.B. at 160-61. Nonsense again. There is no evidence whatever that Laro's initial desire at Dowling stemmed from anti-union sentiments. If Laro is so anti-union, how can one account for the fact that the Jamaica employees became organized without Laro's committing any unfair labor practices? All we know, all the Board and the ALJ knew, is that on one occasion Laro hired some incumbents and on another occasion it did not want to, but did. About the only thing to be gleaned from this bit of history is a common fact of business life having nothing to do with anti-union animus: sometimes there are good workers in the group of incumbents; sometimes there are not; and sometimes it is not worth trying to sort out the good from the bad.\n \n \n 29\n Consider last the ALJ's \"reasoning\" that because Laro hired some unexperienced workers, anti-union bias must have moved it not to hire any of the 13 experienced Prompt employees. Laro Maintenance Corp., 312 N.L.R.B. at 162-63. This too crosses the boggle threshold. In the ALJ's mind, experience must equal competence. Nonsense again. If you were in the cleaning business would you prefer an experienced Prompt employee, experienced that is in sleeping on the job, over a fresh face willing to work and eager to learn how to run a vacuum cleaner and empty a trash can?\n \n \n 30\n My colleagues deeply bow in deference to the Board when they should be furrowing their brows at what the Board offered. More can be said, but this is enough to indicate why I respectfully dissent.\n \n \n \n 1\n Apparently, Bertuglia was neither informed of, nor inquired about, the reasons for or extent of the deductions or which employees were responsible\n \n \n 2\n The ALJ found that Laro failed to hire thirteen Prompt employees because of their union affiliation. Because Laro used a smaller workforce than Prompt, the Board left to the compliance stage of the proceedings the issue of which unemployed employees are entitled to reinstatement and back pay. See Great Lakes Chem. Corp. v. NLRB, 967 F.2d 624, 630 (D.C.Cir.1992)\n \n \n 3\n Such conduct also violates Sec. 8(a)(1) of the Act because it \"interfere[s] with, restrain[s], or coerce[s] employees in the exercise of\" their labor rights. 29 U.S.C. Sec. 158(a)(1); see Power Inc. v. NLRB, 40 F.3d 409, 417 n. 3 (D.C.Cir.1994)\n \n \n 4\n See Director, Office of Workers' Compensation Programs v. Greenwich Collieries, --- U.S. ----, ---- - ----, 114 S.Ct. 2251, 2257-58, 129 L.Ed.2d 221 (1994) (rejecting footnote in Transportation Mgt. while reaffirming its holding)\n \n \n 5\n The instant appeal differs from Wright Line and Transportation Mgt. to the extent that those cases involved discriminatory discharges, rather than failures to hire. Transportation Mgt., 462 U.S. at 394, 103 S.Ct. at 2470; Wright Line, 251 N.L.R.B. at 1089. The same legal principles are no less applicable to failures to hire, however, because Sec. 8(a)(3) forbids any \"discrimination in regard to hire or tenure of employment or any term or condition of employment.\" 29 U.S.C. Sec. 158(a)(3); see Howard Johnson Co., 417 U.S. at 262 n. 8, 94 S.Ct. at 2243 n. 8; Power Inc., 40 F.3d at 417, 419-20\n \n \n 6\n In both union locations, Laro was either strongly encouraged or required to hire incumbent workers, and it did so. However, this does not negate the evidence of animus apparent in Laro's desire to hire no incumbents at these locations, compared with its uncoerced decision to hire one-third of the incumbent employees at the non-union site\n \n \n ", "ocr": false, "opinion_id": 697245 }, { "author_str": "Rogers", "per_curiam": false, "type": "020lead", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nDissenting opinion filed by Circuit Judge RANDOLPH.\nROGERS, Circuit Judge:\nLaro Maintenance Corporation petitions for review of the decision and order of the National Labor Relations Board finding that Laro had violated §§ (8)(a)(l) and (3) of the National Labor Relations Act, 29 U.S.C. §§ 158(a)(1) and (3), by discriminating against certain applicants for employment based on their union membership. Laro Maintenance Corp., 312 N.L.R.B. 155, 1993 WL 371437 (1993). Specifically, Laro contends that the Board impermissibly presumed anti-union animus and lacked substantial evidence to support its finding of discriminatory intent. Because the Board applied the appropriate legal standard and substantial evidence in the record considered as a whole supports its determination that Laro’s failure to hire any of the thirteen applicants was based on their union membership, we deny the petition for review and grant the Board’s cross-petition for enforcement.\nI.\nFor about six years ending on September 30, 1990, Prompt Maintenance Services, Inc. cleaned and maintained the federal government building at 225 Cadman Plaza in Brooklyn, New York under a contract with the General Services Administration (“GSA”). Prompt employees performed this work under a collective bargaining agreement between Prompt and Local 32B-32J, Service Employees International Union, AFL-CIO (“Local 32B”). In April 1990, the GSA solicited bids for a new cleaning contract at Cad-man Plaza. The bid solicitation required the new contractor to pay the same wages as Prompt and to have an initial work force of which at least fifty percent comprised experienced cleaners. Laro was awarded the contract to begin October 1, 1990.\nOn or about September 17, 1990, Local 32B requested that Laro hire Prompt’s Cad-man Plaza employees. On September 18, Laro’s President, Robert Bertuglia, toured the Cadman Plaza building. A GSA official mentioned the names of various employees as being “good workers,” and Bertuglia observed two Prompt employees sleeping. Bertuglia did not take note of the names of either the good workers or the sleeping workers. After the inspection, the building manager (another GSA employee) informed Bertuglia that the GSA had taken deductions from Prompt’s fee, presumably for deficient performance.1 Bertuglia told the building manager that he did not intend to hire any of Prompt’s employees because of the deductions and the two employees he had seen sleeping on the job. The building manager informed Bertuglia that certain judges whose chambers were in the Cadman Plaza building wanted Laro to retain the Prompt employees who cleaned their chambers. The building manager also advised Bertuglia to interview all Prompt employees and stated that it would be advantageous for Laro to hire as many of them as possible. Several days later, the GSA official who conducted the inspection gave Bertuglia a list of ten “better cleaners from Prompt Maintenance,” and urged Laro to hire them.\nDespite Bertuglia’s stated desire not to hire any Prompt employees, Laro agreed to hire the ten Prompt employees on the GSA’s list. Laro accepted applications from other Prompt employees but had already decided that it would not hire any of them; consequently Laro asked the Prompt employees who were not on the GSA’s list virtually no questions about their background or experience and did not seek information about individual Prompt employees who had good work records and had worked at Cadman Plaza for a number of years for Prompt and its predecessor. Instead, to complete its Cadman Plaza work force, Laro hired eight workers who had not previously worked for Prompt. *227Laro had previously employed four of these workers. Two had good work records and requested transfers to Cadman Plaza. Laro transferred the other two to Cadman Plaza at least in part because of their poor performance at Laro’s Jamaica, New York site: Laro had discharged one for poor attendance and insubordination three weeks before it hired her to work at Cadman Plaza, and transferred the other because he required constant supervision, did not get his work done, made frivolous excuses for his failure to complete tasks, and constantly complained. Laro also hired four workers who had not previously been employed by either Prompt or Laro. Laro admitted that three of them had no relevant work experience, and although the fourth worker listed factory and office cleaning as relevant experience on his application, he did not list any positions at which he would have gained such experience. On September 28, 1990, just before commencing work at Cadman Plaza under its contract with GSA, Laro entered into a supplemental agreement with Amalgamated Local Union 355 (“Local 355”) — with which Laro had a collective bargaining agreement (August 1, 1990, through July 1, 1993) for its employees in Jamaica, New York — covering its employees at Cadman Plaza.\nThereafter, Local 32B filed an unfair labor practice charge against Laro. The Board’s General Counsel filed a complaint, alleging violations of §§ 8(a)(1), (2), (3), and (5) of the Act on the ground that Laro had bargained with Local 355 knowing that it represented a minority of the workers at Cadman Plaza and that it had refused to consider employing Prompt employees, other than those on the GSA’s list, because of their union membership. When these charges came before an Administrative Law Judge (“ALJ”) for a hearing, Laro admitted that it had recognized Local 355 although Local 32B represented a majority of the employees at Cad-man Plaza; the Board entered into an informal settlement agreement with Laro whereby Laro agreed to recognize Local 32B for its Cadman Plaza employees, thus disposing of the alleged violations of §§ 8(a)(2) and (5). Following a hearing on the remaining complaint allegations, the ALJ concluded that Laro violated §§ 8(a)(1) and (3) upon finding that Laro had declined to consider any Prompt employees who were not on the “better cleaners” list in order to recognize and bargain with Local 355 rather than Local 32B. The Board adopted the ALJ’s findings and conclusions with minor modifications and ordered Laro to offer employment and back pay to the Prompt employees it had refused to consider.2 Laro petitioned for review under 29 U.S.C. § 160(f), and the Board cross-petitioned for enforcement under 29 U.S.C. § 160(e).\nII.\nSection 8(a)(3) of the Act makes it an unfair labor practice for an employer “to encourage or discourage membership in any labor organization,” “by discrimination in regard to hire or tenure of employment or any term or condition of employment.... ” 29 U.S.C. § 158(a)(3).3 Under this section, a successor employer not the alter ego of its predecessor is not obligated to hire its predecessor’s employees. Howard Johnson Co. v. Hotel & Restaurant Employees Int’l Union, 417 U.S. 249, 259 n. 5, 261, 94 S.Ct. 2236, 2242 n. 5, 2243, 41 L.Ed.2d 46 (1974) (quoting NLRB v. Burns Int’l Sec. Servs., 406 U.S. 272, 280 n. 5, 92 S.Ct. 1571, 1579 n. 5, 32 L.Ed.2d 61 (1972)). However, “a new owner [canjnot refuse to hire the employees of [its] predecessor solely because they were union members or to avoid having to recognize the union.” Id. at 262 n. 8, 94 S.Ct. at 2243 n. 8; see Great Lakes Chem. Corp. v. NLRB, 967 F.2d 624, 627 (D.C.Cir.1992).\n*228When a violation of § 8(a)(3) is alleged, the Board applies the two-stage causation test established in Wright Line, 251 N.L.R.B. 1083, 1980 WL 12312 (1980), enf'd, 662 F.2d 899 (1st Cir.1981), cert. denied, 455 U.S. 989, 102 S.Ct. 1612, 71 L.Ed.2d 848 (1982), and approved by the Supreme Court in NLRB v. Transportation Mgt. Corp., 462 U.S. 393, 103 S.Ct. 2469, 76 L.Ed.2d 667 (1983).4 Under Wright Line, the Board’s General Counsel bears the initial burden to “make a prima facie showing sufficient to support the inference that protected lie., legitimate, union-related] conduct was a ‘motivating factor’ in the employer’s decision” to take adverse employment action. Wright Line, 251 N.L.R.B. at 1089. The employer may then rebut the inference by showing by a preponderance of the evidence that “the same action would have taken place even in the absence of the protected conduct.” Id.; see Transportation Mgt., 462 U.S. at 399, 103 S.Ct. at 2473; Power Inc. v. NLRB, 40 F.3d 409, 417 (D.C.Cir.1994).5\nLaro contends that the Board violated the legal standard articulated in Howard Johnson Co. by presuming anti-union animus from the fact that Laro decided not to consider any Prompt employee who was not on the “better cleaners” list. If applied, such a presumption would be contrary to the Howard Johnson Co. rule allowing a subsequent employer to refuse to hire its predecessor’s employees, and involve a misapplication of § 8(a)(3). However, no fair reading of the Board’s decision indicates that the Board applied such a presumption. To the contrary, the Board concluded that Laro violated § 8(a)(3) not simply because Laro failed to consider any of the thirteen Prompt employees, but because its motive in doing so was “to avoid an obligation to bargain with Local 32B.” Laro Maintenance Corp., 312 N.L.R.B. at 155 n. 2. The Board based this finding in part on Laro’s refusal to consider these Prompt employees, but also on additional evidence of Laro’s antipathy to Local 32B, including the poor quality of workers Laro actually did hire, Laro’s hiring practices at other union and non-union sites, and Laro’s admitted unfair labor practice of recognizing Local 355 instead of Local 32B at the Cadman Plaza site. The Board also conducted the second prong of the Wright Line analysis and rejected Laro’s position that it would have refused to hire these predecessor employees regardless of its antipathy to Local 32B because of what Laro viewed as poor performance by Prompt and a need to start fresh with new employees. This analysis would have been unnecessary had the Board embraced the erroneous legal premise attributed to it by Laro, namely that the Act prohibited Laro from refusing to consider hiring Prompt employees, regardless of its motive for doing so. Instead, the Board correctly recognized that it had to determine Laro’s motivation for its action, based on the action itself and other evidence.\nIII.\nLaro’s second contention presents a closer question, at least for the Board if not the court. Laro contends that the Board’s finding of a prima facie case, that Laro’s failure to hire any of the thirteen Prompt employees was motivated by its desire to avoid bargaining with Local 32B, is unsupported by substantial evidence. Similarly Laro contends that substantial evidence does not support the Board’s rejection of Laro’s claim under the second prong of Wright Line that it would have hired the same employees regardless of the Prompt employees’ union membership. The court’s review of the Board’s factual conclusions is highly deferential, upholding a decision if it is supported by substantial evidence considering the record *229as a whole. Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 465, 95 L.Ed. 456 (1951); Power Inc., 40 F.3d at 417; Union-Tribune Publishing Co. v. NLRB, 1 F.3d 486, 491 (7th Cir.1993); 29 U.S.C. § 160(e). “So long as the Board’s findings are reasonable, they may not be displaced on review even if the court might have reached a different result had the matter been before it de novo.” Clark & Wilkins Indus., Inc. v. NLRB, 887 F.2d 308, 312 (D.C.Cir.1989), cert. denied, 495 U.S. 934, 110 S.Ct. 2177, 109 L.Ed.2d 505 (1990); see Universal Camera, 340 U.S. at 488, 71 S.Ct. at 465; Birch Run Welding & Fabricating, Inc. v. NLRB, 761 F.2d 1175, 1179 (6th Cir.1985).\nThe court’s review of the Board’s determination with respect to motive is even more deferential. Motive is a question of fact that may be inferred from direct or circumstantial evidence. Power Inc., 40 F.3d at 418; Davis Supermarkets, Inc. v. NLRB, 2 F.3d 1162, 1168 (D.C.Cir.1993), cert. denied, - U.S. -, 114 S.Ct. 1368, 128 L.Ed.2d 45 (1994); Great Lakes Chem. Corp., 967 F.2d at 627. In most cases only circumstantial evidence of motive is likely to be available. NLRB v. Ship Shape Maintenance Co., 474 F.2d 434, 439 (D.C.Cir.1972); NLRB v. Vought Corp.—MLRS Sys. Din, 788 F.2d 1378, 1382 (8th Cir.1986); Intermountain Rural Elec. Ass’n v. NLRB, 782 F.2d 754, 759 (10th Cir.), cert. denied, 469 U.S. 932, 105 S.Ct. 327, 83 L.Ed.2d 264 (1984); Abilene Sheet Metal, Inc. v. NLRB, 619 F.2d 332, 339 (5th Cir.1980); NLRB v. Warren L. Rose Castings, Inc., 587 F.2d 1005, 1008 (9th Cir.1978). Drawing such inferences from the evidence to assess an employer’s hiring motive invokes the expertise of the Board, and consequently, the court gives “substantial deference to inferences the Board has drawn from the facts,” including inferences of impermissible motive. Gold Coast Restaurant Corp. v. NLRB, 995 F.2d 257, 263 (D.C.Cir.1993); Sheet Metal Workers’Int’l Ass’n AFL-CIO v. NLRB, 989 F.2d 515, 521 (D.C.Cir.1993); Lippincott Indus., Inc. v. NLRB, 661 F.2d 112, 116 (9th Cir.1981); Pay’n Save Corp. v. NLRB, 641 F.2d 697, 702 (9th Cir.1981).\nThe Board relied principally on three factual findings for its determination that Laro’s motive for failing to hire any of the thirteen Prompt employees was its desire to avoid bargaining with Local 32B: (1) Laro’s admitted unfair labor practice of recognizing Local 355 as the representative of employees at Cadman Plaza when a majority of those employees were members of Local 32B; (2) Laro’s hiring practices at other sites that reveal anti-union bias; and (3) the pretextual nature of Laro’s explanations for its actions. Because there is substantial evidence of record to support these findings and the Board’s inference is reasonable, the court has no basis to conclude that the Board erred.\nFrom the time Laro took over the Cadman Plaza site until the hearing before the ALJ — a period of nineteen months— Laro engaged in an unfair labor practice by recognizing Local 355 as the collective bargaining representative of the Cadman Plaza workers even though Laro knew that a majority of Laro’s Cadman Plaza employees (ten of eighteen) were members of Local 32B. In addition, the Board adopted the ALJ’s finding that Laro knowingly engaged in this unfair labor practice and actively attempted to conceal it. The Board found that a Laro supervisor told one of Laro’s employees at the Jamaica site, Sebatine Acosta, that Laro was being sued by another union and needed two Jamaica employees to tell the Board that they also worked at Cadman Plaza. Laro instructed Acosta to inform the Board that he had worked at Cadman Plaza for an entire month when, in fact, he had only worked there one night. Laro’s bad faith recognition of Local 355 rather than Local 32B, followed by Laro’s attempt to conceal its unfair labor practice, presented the Board with substantial evidence that Laro’s motive in failing to hire any of the Prompt employees was to avoid bargaining with Local 32B. The Board could properly consider this unfair labor practice in determining Laro’s motive for its contemporaneous failure to hire the Prompt employees. See Microimage Display Div. of Xidex Corp. v. NLRB, 924 F.2d 245, 252 (D.C.Cir.1991); NLRB v. Q-1 Motor Express, Inc., 25 F.3d 473, 478 (7th Cir.1994), cert. denied, — U.S. -, 115 S.Ct. 729, 130 L.Ed.2d 633 (1995).\n*230Laro’s contention that once it hired former Prompt employees as a majority of its Cad-man Plaza work force, it had no further incentive to discriminate against Local 32B members, is undermined by its own action. Because the majority of Local 32B members at Cadman Plaza was so small (ten of eighteen), the addition of two individuals to the unit would destroy Local 32B’s majority status, and Laro attempted, through Acosta and his supervisor, to accomplish this goal. Had Laro hired additional former Prompt employees, it could not as easily conceal the Local 32B majority. The instant case is thus similar to Great Lakes Chem. Corp., where the employer unsuccessfully made the same argument based on having hired a “core group” of incumbent employees and then attempting to fill the remaining positions with unskilled trainees. 967 F.2d at 627-28. In rejecting the employer’s contention that its hiring of union members belied any impermissible motive on its part, the court noted circumstances similar to those in the instant case, namely that the employer had attempted to keep the union out and had succeeded in delaying the recognition of the union as the bargaining representative. Id. at 628. The fact that the employer in Great Lakes Chem. Corp., like Laro, hired enough members of the union to constitute a majority of the work force did not establish the absence of impermissible motive. Id. at 629.\nAs further evidence of impermissible motive, the Board relied on Laro’s employment decisions at other cleaning contract sites. Of the three sites where Laro acquired the cleaning contract, including Cadman Plaza, two were unionized under the previous employer and one was not. Laro attempted to avoid hiring any of the incumbent employees at both unionized locations but willingly hired one-third of the incumbent employees at the non-union location.6 These actions undermine Laro’s claim that its reasons for limiting its hires of Prompt employees were related to performance; there is no performance-based rationale for the disparate treatment of incumbent employees at unionized and non-unionized sites in the absence of record evidence regarding employee quality. The Board’s inference that this disparate treatment was based on union membership is thus based on substantial evidence and provides further evidence of unlawful motive for Laro’s refusal to hire any of the thirteen Prompt employees. See Gold Coast, 995 F.2d at 264-65 (disparate treatment of individuals similarly situated except for protected activity may constitute substantial evidence of violation of §§ 8(a)(1) and (3)).\nFinally, the Board determined that Laro’s explanation for its refusal to consider the applications of the thirteen Prompt employees was pretextual. Although Laro was not obliged to offer any explanation for its actions, see Howard Johnson Co., 417 U.S. at 261-62, 94 S.Ct. at 2242-43, the Board has held that a “case of discriminatory motivation may be supported by consideration of the lack of any legitimate basis for a respondent’s actions.” Weco Cleaning Specialists, Inc., 308 N.L.R.B. 310, 310 n. 4, 1992 WL 206968 (1992); Wright Line, 251 N.L.R.B. at 1088 n. 12. This is especially true when the employer presents a legitimate basis for its actions which the factfinder concludes is pretextual. In such cases, the factfinder may not only properly infer that there is some other motive, but “that the motive is one that the employer desires to conceal — an unlawful motive — at least where ... the surrounding facts tend to reinforce that inference.” Shattuck Denn Mining Corp. v. NLRB, 362 F.2d 466, 470 (9th Cir.1966); see also Q-1 Motor Express, 25 F.3d at 479; Union-Tribune, 1 F.3d at 490-91; Holo-Krome v. NLRB, 954 F.2d 108, 113 (2d Cir.1992); cf. Union-Tribune, 1 F.3d at 491 (“A finding of pretext, standing alone, does not support a conclusion that a[n employment action] was improperly motivated.”) (emphasis added).\nLaro maintains that it refused to consider employing any Prompt employees who were not on the GSA’s recommended list for two related legitimate reasons. First, Laro claims that it wanted to start work with *231“fresh” employees, untainted by different methods that may have been used by Prompt or bad habits acquired during previous employment at Cadman Plaza. Second, Laro points out that it knew that Prompt employees had performed inadequately based on the deductions from Prompt’s fees and Bertug-lia’s observation of two Prompt employees sleeping on the job. Laro correctly maintains that the Board, albeit on distinguishable records where the factfinder credited the proffered explanation, has previously found similar reasons sufficient defenses to allegations of discriminatory actions. See Wolf Street Supermarkets, Inc., 264 N.L.R.B. 1124, 1129-30, 1982 WL 23783 (1982) (failure to .hire any of predecessor’s employees justified by predecessor’s negative cash flow and poor appearance as well as the desire to present a new image to customers); Great Plains Beef Co., 241 N.L.R.B. 948, 972-73, 1979 WL 8981 (1979) (preference for inexperienced employees is not, in and of itself, unreasonable or indicative of an unlawful motive). However, assertions of a legitimate business reason for preferring inexperienced workers can be overcome by evidence that an anti-union motive influenced the decision to exclude experienced employees. Power Inc., 40 F.3d at 419, 420; Inland Container Corp., 275 N.L.R.B. 378, 385-87, 1985 WL 45679 (1985); Great Plains, 241 N.L.R.B. at 973.\nThe Board’s rejection of Laro’s proffered business reasons for refusing to consider any of the thirteen Prompt employees is supported by substantial evidence. Both proffered reasons stem from Laro’s alleged desire to hire workers who would perform best. Yet the record and Laro’s actions belie such an intent on Laro’s part. Laro transferred one worker from Jamaica to Cadman Plaza because of his poor work and need for constant supervision, and it hired another worker who had recently been fired from the Jamaica site for absenteeism and insubordination. Laro also hired at least three workers for Cadman Plaza with no relevant experience, rather than attempting to determine who among Prompt’s experienced employees were sleeping on the job or responsible for the deductions (whose nature, extent and causes were unknown to Laro). None of these actions comports with a desire to employ only the most productive workers.\nMost telling is Laro’s treatment of two individuals who sought employment during the week before Laro took over the Cadman Plaza contract. One former Prompt employee, Luis Quebrada, requested his old job back at Cadman Plaza, while a former Laro employee, Yonette Mathurin, who had been fired by Laro, requested her old job back at the Jamaica site. Laro hired both, but instead of giving them their requested assignments, it told Quebrada that no positions were left at Cadman Plaza and he would have to work at the Jamaica site, while informing Mathurin precisely the opposite, that no job was available at the Jamaica site but she could work at Cadman Plaza.\nBased on this evidence, the Board drew the reasonable inference that Laro’s explanations for not hiring any of the thirteen Prompt employees were pretextual. A desire for better quality employees does not explain Laro’s hiring of demonstrably poor employees, rather than making any attempt to determine the quality of Prompt’s experienced employees. Nor does Laro’s explanation elucidate why Laro would allow the former Prompt employee, Quebrada, to work only at the Jamaica site, while permitting the former Laro employee, Mathurin, to take a job only at Cadman Plaza. Laro’s desire to exclude Prompt employees from the Cadman Plaza site because of their union membership explains all of these actions.\nLaro has offered the ALJ, the Board, and the court innocent explanations .for virtually all of the evidence from which the Board inferred impermissible motive. For example, Laro explained that it assigned its two previous employees with poor records to Cadman Plaza because one would do better .work for the supervisor at Cadman Plaza than he did for the supervisor at Jamaica and the other, who had been fired, repeatedly entreated her supervisor for reinstatement until he agreed to give her a second chance. However, the Board was not required to credit these explanations, see Power Inc., 40 F.3d at 419, 420; Davis Supermarkets, 2 F.3d at 1167-68, 1170; Great Lakes, 967 F.2d at 629; Inland Container, 275 N.L.R.B. at 386, and specifi*232cally declined to overturn the ALJ’s evaluations because it was not convinced by “the clear preponderance of all the relevant evidence ... that they [were] incorrect.” Laro Maintenance Corp., 312 N.L.R.B. at 155 n. 1. One component of the Board’s determination that Laro’s explanation for its actions was pretextual is the Board’s view of Bertuglia’s credibility. See, e.g., id. at 161, 162. “[T]he ALJ’s credibility determinations, as adopted by the Board, will be upheld unless they are patently insupportable.” Gold Coast, 995 F.2d at 265; Williams Enterprises, Inc. v. NLRB, 956 F.2d 1226, 1232 (D.C.Cir.1992); see also Power Inc., 40 F.3d at 418. Consistent with the applicable standard of review, even if the court concluded that Laro’s explanations were reasonable, the court would nevertheless uphold the Board’s inferences as supported by substantial, if not overwhelming, evidence. See Universal Camera, 340 U.S. at 477, 71 S.Ct. at 459 (substantial evidence is “more than a mere scintilla”; it means “such evidence as a reasonable mind might accept as adequate to support a conclusion”) (citation omitted). We therefore conclude that the first prong of Wright Line was satisfied; substantial evidence supports a prima facie case that Laro failed to consider or hire any of the thirteen Prompt employees because of its desire to avoid recognizing and bargaining with Local 32B in violation of §§ 8(a)(1) and (3).\nLaro fares no better under the Wright Line test’s second prong. See Transportation Mgt., 462 U.S. at 399, 400, 402, 103 S.Ct. at 2473, 2474; Wright Line, 251 N.L.R.B. at 1089. Laro asserted the affirmative defense that even in the absence of impermissible motivation, it would have made the same hiring decisions and declined to hire any of the thirteen Prompt employees. Specifically, Laro maintains that it would have hired the eight non-incumbent employees whom it did hire because of its legitimate desire for workers who had experience working for Laro or who were recommended by a person with such experience. The ALJ concluded that Laro failed to prove that any of the thirteen Prompt employees would not have been hired absent Laro’s impermissible motivation. The Board agreed, noting that Laro had failed to offer any legitimate reason for refusing to interview or consider the pool of experienced employees. The Board’s rejection of Laro’s argument is based on substantial evidence. As noted, the Board rejected Laro’s claim that it legitimately preferred workers previously employed by Laro because two of those workers had demonstrated their inability to work under Laro’s system. Similarly, the Board rejected Laro’s claim that it legitimately preferred inexperienced workers recommended by Laro employees because the Board found that this preference was applied disparately to union members and was therefore a pretext for discrimination based on union membership.\nThus, the Board’s determination that Laro refused to hire any of the thirteen former Prompt employees because of their union membership is supported by substantial evidence in the record considered as a whole, including Laro’s predetermination not to hire any more Prompt employees than GSA required, its disparate treatment of union-represented employees, its admitted contemporaneous unfair labor practice, and the absence of a legitimate reason for refusing to consider or make inquiries about the thirteen Prompt employees while hiring inexperienced employees and employees with poor work records. Accordingly, we deny the petition for review and grant the Board’s petition for enforcement.\n\n. Apparently, Bertuglia was neither informed of, nor inquired about, the reasons for or extent of the deductions or which employees were responsible.\n\n\n. The ALJ found that Laro failed to hire thirteen Prompt employees because of their union affiliation. Because Laro used a smaller workforce than Prompt, the Board left to the compliance stage of the proceedings the issue of which unemployed employees are entitled to reinstatement and back pay. See Great Lakes Chem. Corp. v. NLRB, 967 F.2d 624, 630 (D.C.Cir.1992).\n\n\n. Such conduct also violates § 8(a)(1) of the Act because it \"interfere[s] with, restraints], or coerce[s] employees in the exercise of” their labor rights. 29 U.S.C. § 158(a)(1); see Power Inc. v. NLRB, 40 F.3d 409, 417 n. 3 (D.C.Cir.1994).\n\n\n. See Director, Office of Workers' Compensation Programs v. Greenwich Collieries, - U.S. -, -, 114 S.Ct. 2251, 2257-58, 129 L.Ed.2d 221 (1994) (rejecting footnote in Transportation Mgt. while reaffirming its holding).\n\n\n. The instant appeal differs from Wright Line and Transportation Mgt. to the extent that those cases involved discriminatory discharges, rather than failures to hire. Transportation Mgt., 462 U.S. at 394, 103 S.Ct. at 2470; Wright Line, 251 N.L.R.B. at 1089. The same legal principles are no less applicable to failures to hire, however, because § 8(a)(3) forbids any \"discrimination in regard to hire or tenure of employment or any term or condition of employment.\" 29 U.S.C. § 158(a)(3); see Howard Johnson Co., 417 U.S. at 262 n. 8, 94 S.Ct. at 2243 n. 8; Power Inc., 40 F.3d at 417, 419-20.\n\n\n. In both union locations, Laro was either strongly encouraged or required to hire incumbent workers, and it did so. However, this does not negate the evidence of animus apparent in Laro’s desire to hire no incumbents at these locations, compared with its uncoerced decision to hire one-third of the incumbent employees at the non-union site.\n\n", "ocr": false, "opinion_id": 9488121 }, { "author_str": "Randolph", "per_curiam": false, "type": "040dissent", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nRANDOLPH, Circuit Judge,\ndissenting:\nThe Board’s decision in this case makes no sense. Prompt’s 23 employees had been doing a lousy job cleaning Cadman Plaza and Laro knew it, not only from GSA’s report but also from observing two of Prompt’s employees sleeping on the job. When Laro took over, it decided to streamline operations, thinking it could do a better job with 5 fewer workers. Yet according to the Board, Laro had a legal obligation to fill its 18 slots with the former Prompt employees. Why? Because, according to the Board, the only reason Laro did not hire all its employees from the Prompt pool was Laro’s anti-Local 32B animus. There is no substantial evidence, indeed there is no evidence whatever, to support the Board’s conclusion — a conclusion *233that entails the utterly ridiculous proposition that but for the Prompt employees’ membership in Local 32B, Laro would have hired them.\nToo bad for Laro that it did not stick to its initial plan of not hiring any of Prompt’s 23 employees. Had Laro done so in light of what it learned from GSA, no unfair labor practice charge could possibly have stuck. The labor laws do not require new employers to keep any of their predecessor’s workers on board, so long as the new employer does not refuse to hire them “solely” because they belong to a union. Howard, Johnson Co. v. Hotel & Restaurant Employees Int’l Union, 417 U.S. 249, 262 n. 8, 94 S.Ct. 2236, 2243 n. 8, 41 L.Ed.2d 46 (1974); NLRB v. Burns Int’l Sec. Servs., 406 U.S. 272, 280 n. 5, 92 S.Ct. 1571, 1579 n. 5, 32 L.Ed.2d 61 (1972). But at GSA’s urging, Laro caved in and retained 10 Prompt employees, designated by GSA as the best of the bunch. The remaining 13 Prompt employees were thus necessarily the worst of the lot, or at least Laro was entitled to so believe. Laro harbored no anti-union animus in filling 10 of its 18 positions — a majority — with Prompt workers, all of whom were members of Local 32B. How then can it be that Laro violated § 8(a)(3), 29 U.S.C. § 158(a)(3), by not hiring more? (Actually, Laro did hire one more former Prompt employee and set him to work at another site. When he quit two days later, complaining that he had been “overworked,” he fell back into the pool of the unhired 13.)\nThe ALJ’s answer to this question, adopted by the Board, is irrational: Laro “did not want to hire any more of Prompt’s incumbent employees than it believed it was required to by GSA, in an effort to avoid a bargaining obligation with Local 32B.” Laro Maintenance Corp., 312 N.L.R.B. 155, 162 (1993). It is tempting to place a couple of exclamation points and a few question marks at the end of the ALJ’s statement, a statement upon which the entire case turns. Why in the world would Laro think it could “avoid a bargaining obligation” by not hiring more Prompt employees? A “bargaining obligation” arises from a union’s majority status. See Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 46-47, 107 S.Ct. 2225, 2237-38, 96 L.Ed.2d 22 (1987); Burns Int’l Sec. Servs., 406 U.S. at 277-81, 92 S.Ct. at 1577-79; Elastic Stop Nut Div. of Harvard Indus, v. NLRB, 921 F.2d 1275, 1282 (D.C.Cir.1990). Local 32B was already over the top at Cadman Plaza. Ten of 18 is a majority. A bigger majority is still a majority. Are we supposed to believe that Laro could not do simple arithmetic?\nThe truth is that Laro’s refusal to recognize Local 32B was not on the basis that the union lacked a majority at Cadman Plaza. Laro refused to bargain with Local 32B because Laro considered — incorrectly it turned out — the Cadman Plaza operation an accretion to the bargaining unit in Jamaica, Queens, where Laro cleaned another federal office budding pursuant to a GSA contract. A different union, Local 355, represented Laro’s Jamaica employees. The number of employees represented by Local 355 exceeded 18. Hence, no matter how many more former Prompt employees Laro hired at Cadman Plaza, the unit as Laro viewed it would still have had a majority of Local 355 members.\nThe fact that Laro hired a majority of its Cadman Plaza work force from the pool of Prompt employees gives the lie to the ALJ’s — and the Board’s — notion that Laro’s alleged intent to avoid bargaining with Local 32B was a “motivating factor” behind the company’s hiring decisions. Had Laro been thinking the thoughts the ALJ placed in its head it would have pared down GSA’s list to 8 or less.\nThe rest of the ALJ’s reasoning is makeweight, and just as nonsensical. Two examples should suffice. Consider first what the ALJ deduced from Laro’s take-over of two other cleaning operations. When the company succeeded to the cleaning contract at the federal facility in Jamaica, Laro hired one-third of the incumbent employees, who were not then unionized. Upon taking over operations at Dowling College, Laro initially decided not to hire any incumbent employees, but wound up hiring all of them at the college’s insistence; the incumbent employees were unionized. According to the ALJ, what happened at Jamaica and Dowling College shows *234that Laro did not really “like[ ] to ‘start fresh’ with a new complement of employees” unless a union represented the incumbent workers. Laro Maintenance Corp., 312 N.L.R.B. at 160-61. Nonsense again. There is no evidence whatever that Laro’s initial desire at Dowling stemmed from anti-union sentiments. If Laro is so anti-union, how can one account for the fact that the Jamaica employees became organized without Laro’s committing any unfair labor practices? All we know, all the Board and the ALJ knew, is that on one occasion Laro hired some incumbents and on another occasion it did not want to, but did. About the only thing to be gleaned from this bit of history is a common fact of business life having nothing to do with anti-union animus: sometimes there are good workers in the group of incumbents; sometimes there are not; and sometimes it is not worth trying to sort out the good from the bad.\nConsider last the ALJ’s “reasoning” that because Laro hired some unexperienced workers, anti-union bias must have moved it not to hire any of the 13 experienced Prompt employees. Laro Maintenance Corp., 312 N.L.R.B. at 162-63. This too crosses the boggle threshold. In the ALJ’s mind, experience must equal competence. Nonsense again. If you were in the cleaning business would you prefer an experienced Prompt employee, experienced that is in sleeping on the job, over a fresh face willing to work and eager to learn how to run a vacuum cleaner and empty a trash can?\nMy colleagues deeply bow in deference to the Board when they should be furrowing their brows at what the Board offered. More can be said, but this is enough to indicate why I respectfully dissent.\n", "ocr": false, "opinion_id": 9488122 } ]

[ "63 So. 3d 1017" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\n63 So.3d 1017 (2011)\nIn re APPEAL OF the DECISION OF the DISCIPLINARY BOARD No. 10-PDB-111.\nNo. 2011-OB-0785.\nSupreme Court of Louisiana.\nJune 3, 2011.\nLeave to appeal denied.\n", "ocr": false, "opinion_id": 2496693 } ]

[ "485 F.2d 881", "158 U.S. App. D.C. 102" ]

[ { "author_str": "MacKINhfON", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/485/485.F2d.881.23958.html", "author_id": null, "opinion_text": "485 F.2d 881\n 158 U.S.App.D.C. 102\n D. C. TRANSIT SYSTEM, INC., a corporation, Petitioner,v.WASHINGTON METROPOLITAN AREA TRANSIT COMMISSION, Respondent.\n No. 23958.\n United States Court of Appeals,District of Columbia Circuit.\n Argued Sept. 17, 1970.Decided June 28, 1973.\n \n Harvey M. Spear, New York City, for petitioner.\n Douglas N. Schneider, Jr., Gen. Counsel, Washington Metropolitan Area Transit Commission, Washington, D. C., for respondent.\n Before ROBINSON and MacKINNON, Circuit Judges, and DAVIS,* Judge, U. S. Court of Claims.\n MacKINNON, Circuit Judge:\n \n \n 1\n This case arises from a petition filed by D. C. Transit System, Inc. (Transit) for review of certain orders of the Washington Metropolitan Area Transit Commission (the Commission). The petition was filed pursuant to section 17(a) of Title II, Article XII of the Washington Metropolitan Area Transit Regulation Compact (the Compact),1 which permits judicial review of Commission orders either by this court or by the United States Court of Appeals for the Fourth Circuit.\n \n \n 2\n Transit filed new tariffs with the Commission on May 29, 1969, which sought Commission approval to accomplish various increases in the fares charged by Transit for transportation by bus within the Washington Metropolitan Area. Under the authority of section 6(a) of the Compact, the Commission suspended the effectiveness of the proposed fares pending public hearings before the Commission on their lawfulness. Following the hearings, where numerous intervening parties participated, the Commission served its Order No. 984 (unreported), which is the principal focus of the complaints now leveled by Transit against the Commission. In Order No. 984, the Commission concluded generally that Transit was entitled to a fare increase but that the amount of the increase was excessive, and accordingly the Commission itself proceeded to fix Transit's fares at a level found to be just and reasonable. Transit applied to the Commission for reconsideration of Order No. 984, but any further relief was denied in Commission Order No. 1001 (unreported), which thus technically is also challenged by Transit at this time.\n \n \n 3\n By its petition for review of the Commission's action, Transit assails Orders No. 984 and 1001 for two reasons. First, assertedly the Commission erred in declining to include within Transit's projected operating expenses for the future annual period during which the proposed fares were to apply,2 an amount to cover increased wage and related expenses expected to result as a consequence of what Transit contended would be predictable increases in the cost-of-living index. Second, Transit suggests the Commission erred in setting Transit's fares at a level which, according to the Commission's own calculations, was designed to produce a net operating income of $1,590,340, after the Commission had previously determined that a somewhat higher return of $1,696,926 would be just and reasonable. These contentions will be treated separately.\n \n I. Labor Costs and the Cost-of-Living Index\n \n 4\n At the time of the proceedings before the Commission leading up to Order No. 984, Transit's contract with the union which is the collective bargaining agent for the majority of Transit's employees included a clause which required automatic wage increases periodically whenever the cost-of-living index for Washington, D. C. rose. In its presentation in the hearings before the Commission, Transit introduced expert testimony as to what increases could be expected in the cost-of-living index during the future annual period to which the new fares, if approved by the Commission, would apply. The Commission, however, chose not to allow Transit to include within its projected operating expenses any amount to cover increased labor costs which might arise from changes in the cost-of-living index. Transit now seeks reversal of this holding of the Commission.\n \n \n 5\n The underlying principle which governs the treatment of possible increased labor costs attributable to changes in a cost-of-living index is simple to state and not really in dispute. Anticipated expenses of this character are properly to be taken into account whenever they can be predicted with reasonable accuracy. See Williams v. Washington Metropolitan Area Transit Commission, 134 U.S.App.D.C. 342, 394, 415 F.2d 922, 974 (en banc 1968), cert. denied, 393 U.S. 1081, 89 S.Ct. 860, 21 L.Ed.2d 773 (1969); cf. D. C. Transit System, Inc. v. Washington Metropolitan Area Transit Commission, 121 U.S.App. D.C. 375, 401, 350 F.2d 753, 779 (en banc 1965) (Transit I). Implicit in this principle is the realization that all such predictions involved in the process of ratemaking are necessarily imbued with \"the uncertainty that attends all prophesy . . . .\" Williams v. WMATC, supra, 134 U.S.App.D.C. at 393, 415 F.2d at 973. It is only where anticipated expenses of this type are \"too remote or speculative to be forecast with any reasonable degree of certainty\" that they are properly not to be considered. Id., 134 U.S.App.D.C. at 394, 415 F.2d at 974.\n \n \n 6\n It is not clear from the Commission's order that this principle was properly understood and applied. In Order No. 984, the Commission said:\n \n \n 7\n In recent times, and particularly during the last two years, the company has faced constant escalation of wages due to the cost-of-living clause. Therefore, we must consider very carefully the possibility that the additional cost-of-living wage adjustments forecast in Company Exhibit No. 3, in the amount of $169,960 will, in fact, materialize during the future annual period involved in this rate case. If we were to look only at past experience, we could be forced to conclude that these cost-of-living increases will actually occur. However, we are acutely aware that their occurrence, vel non, is dependent upon national and local economic conditions. (J.A. 11-12) (Emphasis supplied).\n \n In Order No. 1001, the Commission added:\n \n 8\n We said in Order No. 984 that we would not allow those costs because of the difficulty in anticipating with any degree of certainty that those costs would actually be incurred. . . . Our refusal to allow future cost-of-living increases is based upon our total inability to predict what will materialize. We are not relying specifically upon the views of any public or private person as to what will take place. (J.A. 65-66) (Emphasis supplied).\n \n \n 9\n The emphasized portions of these orders seem to imply that the Commission sought a greater degree of certainty in the estimates of the cost-of-living index than is required. In order to include these costs the Commission need not \"conclude that these cost-of-living increases will actually occur,\" for as the Supreme Court has observed, \"[t]here is left in every case a reasonable margin of fluctuation and uncertainty.\" Dayton Power & Light Co. v. Public Utilities Commission, 292 U.S. 290, 310, 54 S.Ct. 647, 657, 78 L.Ed. 1267 (1934).\n \n \n 10\n Keeping in mind our doubts concerning the propriety of the standard applied by the Commission, we turn to the record and the Commission's order to ascertain whether there is substantial evidence from which the Commission might have concluded that these expenses were \"too remote or speculative to be forecast with any reasonable degree of certainty.\" The record is not as helpful as it might have been; the thrust of Transit's expert testimony was largely to the effect that the index would in fact rise, with little testimony devoted to specific estimates or a discussion of the accuracy with which such changes could be predicted. But there are two wholly uncontradicted facts that stand out: (1) Transit's expert testified that, whatever the increase in the cost-of-living index might be, there was absolutely no chance that the index would fail to rise in some amount. J.A. 114; and (2) Transit's exhibit showing changes in the index for the preceding ten-year period revealed that, without exception, the index had risen some amount in each of those years. J.A. 145.\n \n \n 11\n The Commission countered this evidence in two ways. First, the problem was posed by the Commission in Order No. 984 as follows:\n \n \n 12\n We are squarely presented, therefore, with the need to determine whether to continue our past policy of recognizing only those cost-of-living increases which are required by conditions as of the date of our order.\n \n \n 13\n J.A. 11. With the problem thus framed, and presented with record evidence which, at the very least, casts doubt on the validity of that policy, the Commission in Order No. 1001 nonetheless referred to its \"policy in the past . . . to disallow those costs\" while ostensibly basing its refusal to allow these expenses on \"our total inability to predict what will materialize.\" J.A. 65-66. We are not told what role the policy played in reaching that conclusion, nor are we told the result of the Commission's determination \"whether to continue [the] past policy.\" The Commission cannot properly refuse to come to grips with this problem. With its prior policy squarely under attack, the Commission must either justify or disavow that policy. Justification there may be, but it does not appear, and without it the Commission must find support for its rejection of Transit's otherwise uncontradicted evidence elsewhere.\n \n \n 14\n Official notice of extra-record materials provided the Commission with its other source of information with which to counter Transit's evidence. These materials included the widely divergent economic forecasts published in \"[t]he newspapers, periodicals and journals coming to our attention on a daily basis,\" (J.A. 12) and the prevalent governmental aspirations to check the steadily accelerating inflation in the nation's economy. But neither divergent public forecasts nor the aspirations of important governmental decisionmakers necessarily lead to the conclusion that increases in the cost-of-living are too remote or speculative to be forecast with reasonable certainty. Divergent forecasts might result from considering various extremes of economic theory which are offset by a strong consensus among a significant segment of respected economists; and even aspiring decisionmakers are generally pressed by the responsibility of their positions to support their optimism with reasonably attainable economic objectives. But here again the Commission's orders are devoid of any explanation of the factual bases or the rationale for its conclusion that \"to assume the continuation of an upward trend in the cost of living\" would be to engage in an impermissible conjecture J.A. 12.\n \n \n 15\n In short, the Commission's treatment of the cost-of-living index question fails to measure up to its obligation either to make an intelligent estimate of a permissible item of expense, or to provide a factually supported reasonable explanation why such an estimate cannot be made. The Commission's orders in this regard are ambiguous as to the standard applied and as to the role played in the decision by a disputed policy. Their deliberations and conclusions on the matter fail to evidence the thoughtful inquiry and careful reasoning to a rational conclusion required of the Commission. Williams v. WMATC, supra, 134 U.S.App.D.C. at 380, 394, 415 F.2d at 960, 974. As to this aspect of Orders No. 984 and 1001, the Commission must be reversed and the case remanded for reconsideration in accordance with this opinion.\n \n \n 16\n II. The Fare Schedule Established by the Commission\n \n \n 17\n After lengthy calculations based on the record made at the hearings, the Commission concluded that a net operating income to Transit of $1,696,926 would be just and reasonable. For purposes of deciding the present issue, that determination by the Commission is not questioned. However, the Commission proceeded to establish a fare schedule which, by its own calculations, the Commission initially anticipated would produce a net operating income of only $1,590,340. Transit argues that the Commission was in error in not setting a fare schedule designed to return to Transit the full $1,696,926 in net operating income.\n \n \n 18\n The Commission's approach in arriving at a new fare schedule, once it had determined what would be a just and reasonable net operating income, was one of trial and error. In Order No. 984, the Commission first calculated the net operating income which it was expected would result if the fares proposed by Transit, which incorporated a general three cent increase, were made effective, and arrived at a figure of $2,313,250. J.A. 39. This was concluded to exceed what was just and reasonable. As a next step, the Commission calculated the net operating income with a two cent increase in intra-District of Columbia, intra-Maryland, and all interstate trip fares, and a five cent increase in the Capital Hill express service. The result was a predicted net operating income of $1,541,984. J.A. 39. As the Commission noted, this indicated that a fare structure incorporating something between a general two cent and a general three cent increase was required. The Commission thus proposed an increase of two cents in intra-District of Columbia, intra-Maryland and interstate local service fares, coupled with an increase of five cents in both interstate express service and Capital Hill express service fares. The same calculation then gave a result of $1,590,340 in net operating income, which the Commission thought acceptable although it was still somewhat short of the $1,696,926 figure. J.A. 41.\n \n \n 19\n In passing on the validity of the Commission's approach to setting fares, it must be remembered that the requirement is only a fare structure which will give Transit an opportunity to earn a just and reasonable net operating income. 1 A. Priest, Principles of Public Utility Regulation 46 (1969). Further, there is nothing sacrosanct about the figure $1,696,926. It is itself only an approximation, and of course there need be no guarantee that net operating income will actually equal this amount. See Payne v. WMATC, 134 U.S.App.D.C. 321, at 330, 415 F.2d 901 at 920. The Commission is certainly not required to juggle around various combinations of fares until at length it arrives at a combination which it anticipates will produce exactly $1,696,926.\n \n \n 20\n Perhaps the Commission could have, without undue further effort, arrived at a fare combination which would have returned to Transit something slightly in excess of $1,696,926. But at least in the context of the situation as it faced the Commission, neither was this obligatory. First, the Commission noted that its calculations of anticipated net operating income were based in part on certain very conservative estimates. Thus, the Commission thought it very possible that the net operating income actually achieved by Transit would somewhat exceed what the Commission calculated for any particular fare structure. The Commission's observance of the significance of this point is entirely consistent with the principle that fares need only be set so as to provide an opportunity for Transit to earn the just and reasonable dollar amount of net operating income. Second, the Commission indicated that if subsequent experience showed that Transit would not earn the just and reasonable amount, the Commission would be receptive to making up the deficit by a credit from a court-ordered reserve previously set up by Commission Order No. 981 (unreported). A similar approach by the Commission has previously received that approval of this court, see Transit I, supra, 121 U.S.App.D.C. at 389-390, 350 F.2d at 767-768, and no reason appears why that approach is not a reasonable one here.\n \n \n 21\n The fare schedule established by the Commission thus provides Transit with all that it is entitled to, and the Commission's reasoning in arriving at the schedule impresses us as being entirely rational. Orders No. 984 and 1001 are thus affirmed in this particular.\n \n III. Disposition\n \n 22\n Our companion cases today set forth at ample length the relevant principles of restitution and the proper roles of the Commission and this court respectively. For reasons extensively detailed therein it is clear that there can be no retroactive ratemaking and that in light of the recent public takeover of Transit, the WMATC no longer has any prospective ratemaking authority anyway. Therefore the remedy in this case must operate on and in harmony with the restitutional remedies prescribed in those companion cases.\n \n \n 23\n It would be an exercise in futility to require the Commission to place itself in the unrealistic hypothetical position of determining what, at the time Order No. 984 was issued, the Commission's estimate of the cost of living index increase would have been for the relevant period of time. Now we have the benefit of hindsight and it seems manifestly appropriate to make use thereof. Therefore, assuming that the Commission cannot come forward with a compelling justification for its policy as discussed in Part I, supra, the Commission is directed to compute the incremental amount Transit would have received during the time Order No. 984 was in effect, had it been allowed a fare increase in light of the increases in labor costs under the cost of living index escalation clause in its bargaining agreement. This amount should then be set off against whatever amounts that are determined to be necessary to restore to the farepayers through the equitable restitutional remedies mandated by today's companion cases. And, just as in those cases, our jurisdiction over this case is retained in full.\n \n \n 24\n So ordered.\n \n \n \n *\n Sitting by designation pursuant to 28 U.S.C. Sec. 293(a)\n \n \n 1\n The Compact is incorporated into Pub. L. 86-794, 74 Stat. 1031 (1960), and is set forth in full following D.C.Code Sec. 1-1410 (1967). Amendments to the Compact appear as a part of Pub.L. 87-767, 76 Stat. 765 (1962), and are set forth following D.C.Code Sec. 1-1410(a) (1967). All citations to the Compact are to Title II, Article XII\n \n \n 2\n July 1, 1969 to June 30, 1970\n \n \n ", "ocr": false, "opinion_id": 313982 } ]

[ "485 F.2d 886" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/485/485.F2d.886.24398.24415.24428.html", "author_id": null, "opinion_text": "485 F.2d 886\n 158 U.S.App.D.C. 107\n DEMOCRATIC CENTRAL COMMITTEE OF the DISTRICT OF COLUMBIA, etal., Petitionersv.WASHINGTON METROPOLITAN AREA TRANSIT COMMISSION, Respondent,D. C. Transit System, Inc., Intervenor.DISTRICT OF COLUMBIA, Petitioner,v.WASHINGTON METROPOLITAN AREA TRANSIT COMMISSION, Respondent,D. C. Transit System, Inc., Intervenor.v.BLACK UNITED FRONT, Petitioner,v.WASHINGTON METROPOLITAN AREA TRANSIT COMMISSION, Respondent,D. C. Transit System, Inc., and WashingtonConstruction Area Industry Task Force,Intervenors.\n Nos. 24398, 24415 and 24428.\n United States Court of Appeals,District of Columbia Circuit.\n Argued Sept. 17, 1970.Decided June 28, 1973.Rehearing Denied Sept. 25, 1973.\n \n Landon G. Dowdey, Washington, D. C., with whom S. David Levy and Neil J. Cohen, Washington, D. C., were on the brief, for petitioners in No. 24398.\n C. Beldon White, II, Asst. Corp. Counsel, Washington, D. C., for the District of Columbia, with whom Hubert B. Pair, Acting Corp. Counsel, Washington, D. C., at the time the brief was filed, and George F. Donnella, Asst. Corp. Counsel, Washington, D. C., at the time the brief was filed, were on the brief for petitioner in No. 24415.\n Jean Camper Cahn, Washington, D. C., for petitioner in No. 24428 and intervenor Washington Construction Area Industry Task Force.\n Douglas N. Schneider, Jr., Gen. Counsel, Washington Metropolitan Area Transit Commission, Washington, D. C., for respondent.\n Harvey M. Spear, New York City, for intervenor D. C. Transit System, Inc.\n Gilbert Hahn, Jr., Washington, D. C., Chairman of the City Council of the District of Columbia at the time the brief was filed, pro se, with whom Louis F. Oberdorfer, Washington, D. C., was on the brief, as amicus curiae.\n Before ROBINSON and MacKINNON, Circuit Judges, and DAVIS,* Judge, United States Court of Claims.\n SPOTTSWOOD W. ROBINSON, III, Circuit Judge:\n \n \n 1\n By these three petitions, we are summoned to review aspects of Order No. 10521 of the Washington Metropolitan Area Transit Commission authorizing increases in the fares chargeable by D. C. Transit System, Inc. (Transit) for bus transportation in the District of Columbia and adjacent areas in Maryland and Virginia.2 Having done so through careful consideration of the parties' contentions and painstaking examination of the administrative record, we find that we must set Order No. 1052 aside and remand the case to the Commission for further proceedings.\n \n \n 2\n In brief summary, our review discloses that in its analysis of Transit's presentation underlying allowance of the increases the Commission mishandled three factors bearing vitally on the propriety of raising the fares. The first of these is the appreciation in market value of certain parcels of unimproved real estate which occurred while they were employed in Transit's operations. The second factor is the efficiency of Transit's service, as to which an investigation is prerequisite to setting higher fares. The final factor is the concept of reasonable rate of return which should have guided the Commission in its fare determinations. We conclude that the Commission did not adequately take into account the first two factors and labored under a misunderstanding of the third.\n \n \n 3\n Our opinion is divided into five parts. Part I recites the history and content of Order No. 1052 and the evolution of this litigation. Part II defines the role which value-appreciation of properties in operating status should have played in the fare-setting process under review. Part III concerns the need, which the Commission should have sufficiently met, to evaluate the efficiency of Transit's service in resolving its claim for increased fares. Part IV discusses the concept of reasonable return on a utility's investment as that concept is elucidated in Market Street Railway Company v. Railroad Commission3 and as the Commission should have applied it when fashioning Order No. 1052. The concluding section, Part V, summarizes our holdings and our directions to the Commission for remedying these defects on remand.\n \n I. BACKGROUND OF THE LITIGATION\n \n 4\n On March 13, 1970, Transit filed new tariffs and an application with the Commission seeking authority to raise certain of its fares for transportation of passengers within the District of Columbia and between the District and points in nearby Maryland and Virginia.4 In the main, the application requested an increase in the basic District of Columbia and Maryland fares from 32 cents to 40 cents and increments to the Maryland zone fares.5 In addition to this application, Transit filed a motion for an interim increase in the basis District of Columbia and Maryland fares to 35 cents and slight interim increases in the Maryland zone fares. Transit urged an interim order as a means of lessening its alleged financial difficulties6 at a date earlier than expiration of the 150-day period legislatively specified and traditionally necessary for processing new fare applications.7\n \n \n 5\n Because, in its view, the request for interim relief presented issues essentially identical with and as deserving of public comment as those inherent in the regular application, the Commission decided that the better procedure would be to consider the regular application on an expedited basis,8 deferring action on the interim motion to such point in the proceedings at which it might become unavoidably required.9 Accordingly, and pursuant to the Washington Metropolitan Area Transit Regulation Compact,10 the Commission suspended Transit's proposed fares11 and ordered public hearings.12\n \n \n 6\n After completion of the hearings, the Commission promulgated Order No. 1052. It found that in the historical twelve-month period immediately preceding November 30, 1969,13 Transit had a net operating income, after adjustments to operating revenue,14 of $862,005 which, however, when offset by interest charges of $1,293,651, was transformed into a net loss of $431,64615 and a reduction of retained earnings to $1,241,203.58.16 The Commission's conclusion that Transit's fares were too low was reached by a series of estimates. It reasoned that if the basic District of Columbia and Maryland fares were maintained at 32 cents, if loss of ridership continued at the rate anticipated by Transit officials,17 if the Commission staff's projection of income from charter revenues were accepted,18 if the sum expected by Transit from school subsidies were likewise accepted,19 if the company's reserve for injuries and damages were increased from $1.3 million to $1.9 million,20 if maintenance costs were adjusted upward by another half-million,21 if profits of $620,000 were channeled to bus purchases,22 if management salaries were reduced by $15,000,23 and if deduction of $526,177.03 for track removal expenses were made,24 Transit would during the ensuing twelve months lose $2,676,115 which, after inclusion of interest charges, would build up to $3,974,990. \"These facts,\" the Commission declared, \"make adjustments in the fares not only necessary, but imperative. . . .\"25\n \n \n 7\n The Commission then turned to the question of the fares to be allowed. It found that if the fares proposed by Transit were inaugurated, they would generate net operating income of $2,440,284.26 Interest expenses of $1,198,875 were projected, to which the Commission added new interest charges of $234,263 incidental to bus purchases and $100,000 to meet interest payments on a $1 million loan acquired to settle Transit's debt to its employees' pension fund.27 After payment of the aggregate interest cost of $1,533,138, then, there would be a dollar return of $907,146, or a return on equity of 52.10 percent;28 and with the required purchase of 85 buses, the rate of return on operating revenue would be 7 percent, an operating ratio of 107 percent.29 Since the rate of return had been thoroughly discussed at two recent fare proceedings,30 the Commission considered that new testimony thereon was unnecessary, so instead it stipulated that official notice of all rate-of-return testimony in those proceedings would be taken.31\n \n \n 8\n The Commission noted that the projected return would theoretically permit payment of a dividend which would probably attract investors, but admonished that, given the record of operating losses which Transit had incurred in past years, it would be imprudent to distribute any of the return to Transit's investors.32 It was the Commission's expectation, rather, \"that the cash flow represented by return on equity would, for the time being, be used in the company's financial recovery, rather than for the payment of dividends.\"33 This return, the Commission felt, would provide the internally-generated capital needed to meet down payments on new buses, improve Transit's credit-thereby facilitating other purchases of new equipment-and aid in settling some of Transit's current liabilities of more than $10 million.34 In the opinion of the Commission, the return allowed would thus contribute to the company's recovery without imposing an undue burden on the fare-paying public.35 The increases, the Commission thought, would be sufficient to offset reduction in ridership which the company may not have adequately taken into account,36 and to permit the inauguration of reduced fares in off-peak hours for senior citizens.37\n \n \n 9\n By the Commission's estimate, the new fare structure would produce an abnormally high return on equity of 52.10 percent.38 Adverting to that fact, the Commission observed:\n \n \n 10\n This figure must be carefully assessed. The losses incurred by the company in recent years have reduced retained earnings from $2,890,848 in 1966 to $1,241,204 as of November 30, 1969. Were it not for special adjustments to retained earnings in the net amount of $605,008 during the past three years, the balance in retained earnings account would have stood at $636,196.\n \n \n 11\n We believe that this factor must be heavily weighed in considering the significance of the percentage return on equity. In these circumstances, the percentage return is an unreliable indicator of adequacy. The central fact is that the dollar return which is our target has remained essentially the same for several years. Circumstances have prevented the company from earning that return, with a consequent effect on the level of retained earnings. We believe that the factors which made the dollar level appropriate at a time when those dollars meant 38.54 per cent return on equity are equally valid today. Thus, since we are allowing a dollar return on equity which is only slightly higher than the levels we have found to be reasonable in other recent orders, and since we think that there are sound reasons for that slight extra allowance in this proceeding, we do not regard the percentage return on equity which that dollar return now represents as being an obstacle to our allowance here.39\n \n \n 12\n The Commission did, to some extent at least, take into consideration alternatives to raising the fares. One such alternative was the possibility of cost reductions through service cutbacks. Testimony adduced at the hearings indicated that to offset the increase which the Commission felt necessary, a service cutback of approximately 16 percent would be required, and that, the Commission said, \"would mean tremendous reductions in service.\"40 The alternative most attractive to Commission members -a federal appropriation-was deemed most unlikely in view of the fact that Congress traditionally linked federal non-school subsidies for transit in the District of Columbia to public ownership of the transit operation.41 In any event, the Commission believed that it was without power to stay the fare raises until such time as legislation for public acquisition might be enacted. \"Both the Compact and the case law,\" said the Commission, \"require us to supply sufficient revenues so that the Company can recover its expenses and have an adequate return.\"42 And, the Commission added, \"[w]e think that subjecting the community to the reality, or even the substantial risk, of a cessation of service would not be in the public interest, even for a laudable goal of achieving legislation which would alleviate the problem of rising fares.\"43 Thus, although, as the Commission recognized, a 25 percent increase in the basis fares would impose a tremendous hardship upon the poor, the Commission reasoned that the public interest would be ill-served by fares which threatened to put a stop to transit service altogether.44\n \n \n 13\n Order No. 1052 authorizing the increases was released on June 26, 1970, and was scheduled to take effect at 12:01 a. m. on June 28.45 On June 27, however, we stayed operation of the order pending disposition by the Commission of applications for reconsideration tendered by petitioners.46 On July 1, 1970, the Commission issued Order No. 1057 by which it denied reconsideration for the asserted reason that no new grounds warranting a different order were advanced.47 The Commission opined that all ramifications of relevant public interest had already been adequately examined as required by Section 6(a)(3) of the Compact.48 Those considerations were not reflected dollarwise, however, in the final determination because the Commission believed that when Section 6(a)(3) was read in conjunction with Section 6(a)(4),49 Transit was entitled to a tariff structure which would enable it to meet its expenses and provide a fair return to its investors.50 The Commission felt that since the record contained no facts suggesting that Transit's management was inefficient or dishonest, a diminished return was not justified on a theory of uneconomical operation.51 In the Commission's view, the rate of return which it had approved was fair and roughly equivalent, despite its exceedingly high percentage of investors' equity,52 to margins of profit allowed and held lawful in previous fare cases.53 Further delay in instituting the new fares pending the outcome of further litigation was rejected as directly contrary to the Compact's proscription of administrative suspensions of fare tariffs for a period of more than 150 days.54 The Commission reiterated that in Order No. 1052, as in previous orders, it had recognized the socio-economic hardship which a fare increase would precipitate, but that, absent congressional action, revenues would have to be produced through larger fares in order to offset Transit's rising expenses, including particularly its growing labor costs.55 The effective date of Order No. 1052 was reset-July 11, 1970, at 12:01 a. m.-and subsequent petitions for reconsideration were denied.56\n \n \n 14\n Upon the filing of the petitions in this court, petitioners moved for a stay of Order No. 1052 pending judicial review. On balance of the competing considerations in light of the criteria guiding action on such applications, that motion was denied on July 10, 1970.57 Now, of course, Order No. 1052 is before us for a full examination on the merits, and to that task we proceed.\n \n II. APPRECIATION IN LAND VALUES\n \n 15\n A major contention advanced by some petitioners,58 similar to the one tendered in Democratic Central Committee v. Washington Metropolitan Area Transit Commission,59 decided today, is that in passing on Transit's application for higher fares, the Commission should have considered the appreciation in the value of certain of Transit's landholdings occurring while the lands were in service and prior to their transfer from operating to nonoperating status. A related contention60 is that in revising Transit's fares, the Commission improperly ignored income which Transit had received from its subsidiaries, to some of which certain of the nonoperating properties had been conveyed.61 The Commission and Transit vigorously oppose both arguments on the merits. Transit urges additionally that neither argument was made to the Commission as a ground for reconsidering Order No. 1052, and that for that reason neither can now be made a subject of judicial review.62 We examine first the jurisdictional challenge.\n \n A. Jurisdiction to Consider\n \n 16\n By the terms of the Compact,63 anyone affected by a final Commission order may seek its reconsideration, in whole or in part.64 This can be done by \"an application in writing requesting a reconsideration of the matters involved, and stating specifically the errors claimed as grounds for such reconsideration.\"65 The Compact expressly provides, however, that \"[n]o person shall in any court urge or rely on any ground not so set forth in such application.\"66 Only recently we had occasion to advert to these provisions and the policy underlying them,67 and even today we have occasion to apply them.68 It is Transit's position that both of the aforesaid contentions are thus intercepted.\n \n \n 17\n Following the issuance of Order No. 1052, each of the petitioners presented to the Commission one or more applications for reconsideration. Only one,69 however, in any way mentioned land transfers as a ground for disturbing the order. That was a request that the Commission vacate Order No. 1052 and postpone further consideration of a fare increase until final determination by this court, in Democratic Central Committee,70 of the credit properly to be allowed bus riders for the appreciation in value of Transit's \"land\" withdrawn from public use.\n \n \n 18\n While, to be sure, this assignment of error might have been drawn more artfully, we deem it sufficient to preserve the point for judicial review. It sets forth, though succinctly, the kernel of the complaint, and the reference to Democratic Central Committee, then fully briefed and awaiting oral argument in this court, makes the scope and content of the complaint unmistakable. For, as today's opinion in that case discloses, the only viable issue there is the allocation, as between Transit's investors and its farepayers, of the appreciation in value of properties while used in its operations.71 The Commission does not suggest that it misunderstood the thrust of this assignment,72 nor do we see how it could.73 We conclude that the issue of participation by Transit's consumers in value-appreciation of transferred land74 is properly presented for review.75\n \n \n 19\n Transit's other position-as to the propriety of our review of the Commission's failure to include income from its subsidiaries in its computation of the new fares-rests, however, on solid ground. Nowhere in the several applications for Commission reconsideration in the record before us are we able to discern anything \"stating specifically\"76- or otherwise-that particular objection as a basis for reexamining Order No. 1052. Indeed, none of the petitioners has even responded to Transit's argument that the issue of income from subsidiaries cannot now be raised here. For the omission of a step essential to our jurisdiction, we hold that that issue is not open on this review.77\n \n B. The Issue on the Merits\n \n 20\n Having confirmed our jurisdiction to review the question of allocation of the in-service value-appreciation in lands withdrawn from operations by Transit, we proceed to deal with the issue on the merits. In considering Bebchick v. Washington Metropolitan Area Transit Commission78 and Democratic Central Committee v. Washington Metropolitan Area Transit Commission,79 both decided today, we pointed out that Transit has, since 1956, transferred certain properties, which it had acquired from its predecessor, out of operating status- \"below the line,\" in the convenient shorthand expression80 -and we hold in Bebchick that, at least for the depreciable part of those withdrawn assets, the difference in value between the book figure at which the items were transferred and their fair market value at the time of transfer should be considered reimbursement to Transit's investors for the depreciation deficiency with which Bebchick was concerned.81 In Democratic Central Committee, we treat both the depreciable and the nondepreciable portions of the transferred assets, and conclude that gains from the appreciation in value of either should have been credited to Transit's farepayers82 -except, of course, for those gains which Bebchick requires as compensation to Transit's investors for the aforementioned depreciation deficiency.83\n \n \n 21\n As we have said, the issue in the present cases can extend no further than value-appreciation of land,84 and the extent to which in-service appreciation of Transit's below-the-line lands may be depleted by the response to today's holding in Democratic Central Committee cannot be pin-pointed at the moment. But since we cannot assume that proper handling of the problem in Democratic Central Committee, when that litigation was before the Commission, would have completely exhausted the in-service appreciation of Transit's lands now held below the line, it is appropriate to inquire, at the instance of some of the petitioners, whether Order No. 1052 is invalid for failure to take the residue of such appreciation into account.\n \n \n 22\n There can be no doubt as to the answer to that question. The discussion in Democratic Central Committee and its amplification in Bebchick make plain the Commission's obligation to consider appreciation-allocation when it undertook to revise transit fares. In the proceeding under review, we have held that this responsibility, as respects land appreciation, was suitably invoked,85 but it is evident that in no way was it discharged. Indeed, nowhere in Order No. 1052 nor in any of the several orders denying its reconsideration is the problem even mentioned. We hold, then, that as a result of this omission. Order No. 1052 is fatally defective.86\n \n \n 23\n In lieu of another discourse on the problem here, it suffices to refer our readers to the comprehensive treatment in Democratic Central Committee. Made here, however, are additional arguments by which Transit and the Commission endeavor to support this aspect of Order No. 1052, and we will comment specifically on these. What follows is some elaboration on points encompassed within the much broader discussion in Democratic Central Committee.\n \n \n 24\n The Commission's position has continued to be that an increase in the value of nondepreciable property-land in this instance-dropped below the line belongs entirely to investors, and that consumers have no right to that gain or any share in it.87 We reiterate our assertion in Democratic Central Committee that we find no basis in regulatory law or logic for this absolute principle, to which the Commission mechanically adheres.88 The agency's theory is that, since the farepayers did not contribute to the cost of such property through absorption of depreciation charges, they ought not to participate in any profit, which should go solely to the investors, who alone have borne the capital cost of the asset.89 The Commission stresses, too, that if there had been a decrease in the value of this real estate, the consumers would not have borne any part of the loss, nor would they have been expected to, under the accounting system followed by the Commission.90 Whatever may be the merit of that overall position in other circumstances, for other pieces of property or for other companies, there are a number of reasons-some articulated in Democratic Central Committee,91 and some here-why we do not think it is appropriate for this utility and for the particular assets we are now considering.\n \n \n 25\n To begin with, we do not share the Commission's theory that simply by virtue of having paid the cost of an asset, Transit's investors are automatically entitled to the gain in its market value. As we point out in Democratic Central Committee, this correlation between ownership of the asset and entitlement to its value-appreciation has faded with the demise of fair value as the standard for setting either a rate or a depreciation base.92 The viable concept today is that \"the investor's legally protected interest resides in the capital he invests in the utility rather than in the items of property which that capital purchases for provision of utility service.\"93 That thesis refutes the notion that investors inexorably become entitled to appreciation in value of operating assets as inseparable and inviolable incidents of their investments.94\n \n \n 26\n The investment-in-capital concept has particular relevance to Transit's circumstances in view of the fact that these were not properties added to the existing transportation system in the District of Columbia by Transit out of its own assets or acquisitions. Rather, Transit acquired them, as integral parts of the District's transit system, in 1956 from Capital Transit Company at the time the former received the franchise.95 Thus, it is evident that we are not dealing with the same kind of situation, as the Commission seemingly supposed, that would have existed had the properties been originally purchased outright by Transit's investors with a view to deployment as they pleased. What the investors bought was an ongoing masstransportation system with physical components, including the lands in question, long since dedicated to public service. We do not mean to imply that had that not been the case, value-appreciations would necessarily have been immune to claims of farepayers. We do say that since that was the case, it makes those appreciations more susceptible to those claims.\n \n \n 27\n When it gave Transit the franchise, Congress knew that these properties were being taken over from the predecessor operator,96 and Congress also knew that Transit paid Capital some $10 million less than the net original cost to Capital-some $10 million less than the book value at which these items were transferred below the line Congress knew, too-because that was a requirement of the franchise-that Transit would have to convert from a bus-and-trolley operation to an all-bus system,97 and that a good part of these same properties would, as a consequence, no longer be needed for transportation purposes. And Congress must have known-this was common knowledge-that there was no real possibility that the value of these pieces of land would decline below book value.98 On the contrary, the known fact was that they had already increased in worth, and the very high probability was that they would continue to do so, or at least would not suddenly decline below the 1956 book value.\n \n \n 28\n Nothing in the Franchise Act99 nor its historical context, then, suggests that Congress intended that Transit's investors would automatically pocket, at the expense of the farepayers, the expectable increment in value which had and would come to properties forming an integral part of the existing transit system in 1956, and which would necessarily and shortly become nonoperating in large part as a result of the mandatory dropping of the trolley service. Under such conditions, we cannot believe that Congress contemplated such an outright gift to Transit's investors, who would not have done anything to earn or deserve it, nor would they have borne any risk of loss on those pieces of land. It is not sensible to suppose that a Congress intent on fair terms for the farepayer contemplated such a bonanza. Congress did give certain advantages to Transit-with respect to taxes, for instance100-but we cannot see that an automatic right to this increase was one of them. On the contrary, we think it rather obvious that as to these properties the Commission was left the responsibility of determining what should properly be done with the increase in value, and that it could not mechanically or rigidly follow some assumed general rule plainly inappropriate to these specific circumstances.\n \n \n 29\n It is said, however, that it would be unfair to Transit to force it to share or to pass on this gain when it could not, under the Commission's system of accounts, receive reimbursement from the riding public for a decrease in the value of the properties. We are not nearly so confident that utility investors cannot recoup capital losses on nondepreciable assets where they are actually sustained,101 but we need not debate the point. For, as we have pointed out,102 the consideration that the lands in question might have fallen in value during the period of Transit's franchise is wholly illusory. From the beginning, there was never any real risk of such a loss to Transit, only the probability of a profit. In that situation, it cannot be the law that Transit's right to retain the profit flows from the absence of formal inclusion by the Commission in its uniform system of accounts of a provision that the farepayers would bear or share in such a loss-that the consumers would be entitled if the accounting system so provided, but not if such a clause were omitted. Since the inclusion or non-inclusion of that provision would in all events be wholly academic and nonoperative for these particular properties, to make the issue turn on that technical point would be in effect to give the Commission carte blanche arbitrarily to hand over the gain to Transit, or to deny it in advance, without consideration of the substantive merits or demerits of what it was doing.103 There being no real possibility of loss, the Commission could not justly say, if it omitted a provision for the consumers to carry the loss, that the company was entitled to the gain because it alone shouldered the nonexistent risk of loss. Conversely, if the agency did happen to incorporate such a provision in its system of accounts, it could not justly say that because of that fact alone, the consumers should receive the profits because they would bear the nonexistent risk of loss. With respect to these specific properties, because of the special circumstances to which we have referred, no proper judgment could be made on that unrealistic basis.\n \n \n 30\n In Democratic Central Committee,104 we discuss at some length the principle -applied in that case-that benefit should follow burden, and gain should follow risk of loss.105 But the foregoing discussion here illustrates the limits to that principle where, as a practical fact of the matter, there is no risk of loss. What the Commission was called upon to do here, and what it utterly failed to do, was to exercise its judgment instead of blindly applying a rule inappropriate to the situation presented. The only sound foundation for such a judgment, we think, is to look to see whether it would be fair, in the total situation, to save this gain wholly for the investors-and, if not, what proportion should be passed on to the farepayers, and in what form and at what time.106 In other words, the problem was one for the exercise of informed reason and discretion on the specific and individual facts and circumstances.107 This court has taken this approach in similar cases,108 and there is no good reason for failing to utilize it here.\n \n \n 31\n We may briefly consider three other objections to rejecting the rule that investors are automatically entitled to retain all the gain on the land transferred out of operations. The first is that investors had the right to believe that they would be able to keep these profits, and that is unjust now to act against that assumption. We think, however, that no such belief was warranted. As we have said, the Franchise Act, correctly interpreted, gives no foundation for that belief with respect to these properties.109 Insofar as there may be a rule of thumb allocating to the investors both gain or loss on such nondepreciable assets, there is no showing that such a rule has been mechanically applied where, as here, there is no risk of loss at all but only of gain.110 Even the course of regulation by this Commission and its predecessor would not give adequate footing for the assumption. Though it dealt with different facets of the same general problem, our opinion in Washington Gas Light\n \n \n 32\n Company v. Baker,111 decided in 1950 before Transit received its franchise, alerted all those concerned with utility regulation in the District of Columbia that the realities of the particular situation would govern, not formal rules of principles applied in a vacuum.112 That was also the attitude of the regulatory agencies and of this court in other cases.113\n \n \n 33\n Acting on that very basis, this Commission in 1966 adopted Regulation 61 treating of gain on depreciable property put below the line and discussed in detail in our opinion in Bebchick.114 That regulation provides that when depreciable property is transferred below the line, the company must file a fair market valuation of the property, and the excess of fair market value, determined by appraisal, over the unrecovered cost must be deducted from the depreciation expense in the transfer years, so that the farepayers will receive the benefit of the increase in value.115 We are not advised of any prior rule or regulation of the Commission or its predecessor agency governing specifically the allocation of property value appreciations as between investors and consumers.116 There was no such promise, then, in 1956, or at the time these properties were put below the line, that gain on land placed in nonoperating status would go automatically to the investors.\n \n \n 34\n Next there is the argument, also discussed in Bebchick, that nothing can possibly be done about the gain until there is an actual sale or disposition. Aside from the fact that the properties in question have now been disposed of, albeit involuntarily,117 most of the reasons given in Bebchick for turning down that unqualified position118 likewise apply with equal force here. In particular, the same grounds which moved the Commission to adopt Regulation 61 for depreciable property pertain as well to these below-the-line land properties. Though the Commission might, on a proper showing, have decided that this gain in land value should not be utilized for ratemaking purposes until it was actually realized by the investors, the agency could not refuse, simply because of lack of realization, to consider the possibility of using the profit before that time.119\n \n \n 35\n Finally, we do not think that it would be a denial of due process or of just compensation to require, in proper circumstances, that all or some of the gain from these properties be passed on to the riders, any more than Regulation 61 is unconstitutional with respect to depreciable property.120 In the special situation in which these pieces of real estate were acquired by Transit in 1956, Congress could have said explicitly, when it granted the franchise, that gain accrued and accruing on them would not necessarily redound to the investors' benefit. That would certainly have been a reasonable legislative requirement,121 and the fact that Congress did not state it does not make it any less reasonable. In view of the special situation of these properties, we need not consider whether the same principle would control for other assets not acquired in comparable circumstances.\n \n \n 36\n Resting as it does solely upon considerations we have rejected as reasons for holding that investors are entitled to all the gain on the transferred properties, the Commission has failed to address itself, under the correct standards to the problem of how this gain should be used. Order No. 1052 is therefore invalid on this ground, in addition to others which we later discuss.122 We hold today in Democratic Central Committee123 that the appreciation in the value of Transit's assets-depreciable and nondepreciable-when moved into nonoperating status must be credited to the benefit of the bus riders.124 Our holding in the cases at bar, though necessarily narrower,125 adheres firmly to that decision. Moreover, since the Commission's failure to do that in formulating Order No. 1052 cannot be cured by retroactive ratemaking126- particularly in light of the recent public takeover of Transit127-it is left to implement the restitutionary remedy which we hereinafter describe more fully in our consideration of the disposition to be made.128\n \n III. EFFICIENCY OF MANAGEMENT\n \n 37\n We turn now to the question whether the Commission adequately considered the level of efficiency of Transit's management in determining its right to the fare increase granted in Order No. 1052. All petitioners contend that the order must be set aside because the Commission did not follow the command of Section 6(a)(3) of the Compact, which provides:\n \n \n 38\n In the exercise of its power to prescribe just and reasonable fares and regulations and practices relating thereto, the Commission shall give due consideration, among other factors, to the inherent advantages of transportation by such carriers; to the effect of rates upon the movement of traffic by the carrier or carriers for which the rates are prescribed; to the need, in the public interest, of adequate and efficient transportation service by such carriers at the lowest cost consistent with the furnishing of such service; and to the need of revenues sufficient to enable such carriers, under honest, economical, and efficient management, to provide such service.129\n \n \n 39\n In particular, petitioners say that the Commission failed to \"give due consideration\" to the efficiency of Transit's management. The Commission, and Transit, stand on what was said in its fare orders themselves. There the Commission refused to make any findings on efficiency, or to give it any weight in reaching its decision, because, it said, \"neither [the Commission's] staff nor the protestants have presented facts indicating that the company's basic problems lie in adequate management.\"130 We hold that in failing to investigate the caliber of the company's management on the ground that the formal parties had not produced evidence of bad management, the Commission violated the Compact. But since there is no need to do so, we do not decide whether this error, standing alone, would require setting aside Order No. 1052.131\n \n \n 40\n Simply reading Section 6(a)(3) makes clear that in setting transit fares the Commission was obligated to consider, among other factors, the efficiency of the carrier's management. The criteria by which efficiency was to be measured, and the weight to be given it as a factor, lay, of course, within the judgment of the Commission in the first instance.132 But the Compact required that efficiency be duly considered,133 and the Commission obviously did not take efficiency into account at all when it set fares in Order No. 1052.134 The reason given for this failure was that neither the staff nor the protestants brought forward evidence of mismanagement at the hearings. This reason is insufficient. The Commission cannot be said to have given \"due consideration\" to the efficiency factors where, as here, it declares that it would not consider it, and in any event there is so little evidence in the record that the Commission could not make any relevant findings.\n \n \n 41\n The role of efficient management in Commission decisions in fare-increase applications was delineated in D.C. Transit System, Inc. v. Washington Metropolitan Area Transit Commission,135 the most recent pronouncement of this court on that subject. There we were called upon by Transit to review the Commission's denial in Order No. 1216136 of Transit's request for a fare raise. Underlying Order No. 1216 was an extensive study of Transit's operations and financial condition carried out by a consultant employed by the Commission for that purpose.137 On the basis of the consultant's report, the Commission concluded that Transit's seriously unstable and risky financial situation bred such an uneconomical and inefficient transportation operation138 that merely to increase fares would not cure either of those conditions.139 The Commission, on that basis, denied Transit's proposed increase, and held that a prerequisite to any future elevation in fares was Transit's compliance with a group of Commission directives aimed at putting the company's financial house in order.140\n \n \n 42\n On review of Order No. 1216, we upheld the Commission's findings and conclusions, and affirmed its refusal to revise the fares.141 We found the Commission's view, as articulated in Order No. 1216-that it was required by the Compact to consider and weigh the interests of the public, including the public's right to economical, efficient and adequate transportation service142-to be \"eminently correct,\"143 and we went on to state that\n \n \n 43\n The parties to the Compact could hardly have more plainly mandated the well settled principle that rate-making appropriately encompasses an examination and evaluation of the economy and efficiency of a public utility's operations and the adequacy of its service.144\n \n \n 44\n Accordingly, we affirmed the power of the Commission to precondition a fare raise upon terms calculated to safeguard the public interest in the caliber of the transportation provided.145\n \n \n 45\n In the instant cases, the failure of the staff and the protestants to produce evidence of mismanagement certainly does not support an assumption that Transit was efficiently managed, and that was too vital a matter to be simply assumed away.146 The Compact placed an obligation upon the Commission to develop the record on important matters when it was unsatisfied with the record produced by the parties. The Commission, like other agencies charged with the protection of the public interest, was not created simply to \"provide a forum for the\" proceeding.147 The Commission was not at liberty to sit back and place \"the responsibility for initiating or carrying through essential inquiries\" on \"private parties;\"148 instead, it had \"an affirmative duty to assist the development of a meaningful record.\"149 \"[T]he Commission's primary raison d'etre is furtherance of the public interest,\" we have said;150 and it could not fulfill that function if it did not assure, by its own efforts, that its decision would be based on a full record.\n \n \n 46\n We do not mean to suggest that the Commission could not rely on its staff. It certainly was not required that the Commission employ the services of a consulting firm every time it made an examination of Transit's efficiency. But the Commission could not base a decision on the silence of either the staff or the protestants, especially where there was no indication that anyone's attention was directed to the question at hand. The fact of the matter is that the staff in this very proceeding brought to the Commission's attention certain matters bearing upon Transit's efficiency. For instance, on the staff's suggestion, the Commission disallowed some executive salary increases,151 and reinstated its previous command that Transit purchase new buses.152 And the staff also pointed to a number of serious service problems, which the Commission commented upon.153 But this was not the same thing as an inquiry directed to the staff concerning the efficiency of Transit's management. Such an inquiry presumably would have brought a response which, for example, could have pointed to innovations which Transit had or had not made to reduce expenses or to increase revenues. Once this sort of evidence was in the record, the Commission could rationally have taken Transit's efficiency into account in setting fares. In short, while the Commission, of course, could have depended on its staff for this task, it still should have put the evidence on which it relied into the record and provided a sufficient articulation of its views for us to discern \"the path which it followed\"154 to its conclusion about a just and reasonable return.\n \n \n 47\n We will add, though it hardly seems necessary, that Transit bore a large share of the unfulfilled responsibility for producing a record on which findings as to its efficiency could have been made. Indeed, this should have been clear to Transit since its very first fare case, where the Public Utilities Commission, predecessor to the respondent Commission, said:\n \n \n 48\n It is the opinion of the commission that when the earnings position of a public utility necessitates an increase in rates, that such position requires proof of economical management as well as provident control of expenditures.155\n \n \n 49\n Of all the parties, Transit, of course, was in the best position to present facts which might have demonstrated the efficiency of its management, yet it hardly met that sort of standard.156\n \n \n 50\n The Commission's failure to assure that an adequate record was prepared, and to give explicit consideration in setting rates to Transit's efficiency, is particularly disturbing because that was a matter which went to the heart of the Commission's duty. Like all public utility regulators, the Commission was designed to provide a substitute for competition for a monopoly affected with the public interest.157 If the Commission had performed its task well, the company would have made a reasonable profit, not a monopoly profit, and resource allocation would not have been distorted.158 But the Commission was not a substitute for competition unless it inquired into efficiency, for in a competitive market only an efficient company could make a reasonable profit.159 If the Commission refused to perform its statutory duty to make such an inquiry, then Transit had no incentive to discover and utilize cost-saving devices.160 The alternative to an inquiry into efficiency, then, was to turn Transit into a high-cost plus company, and that plainly was not in the public interest.\n \n \n 51\n We note, in this connection, that some serious questions about Transit's efficiency were raised. For example, petitioners point out, and we had previously noted,161 that one of Transit's chronic problems was cash flow, a matter which the Commission had regularly considered in raising rates.162 But there was no inquiry here, so far as we are aware, into methods, other than a fare increase, which Transit might have employed to eliminate this problem. Thus while the Commission assumed for ratemaking purposes that Transit had been paid the value of services it performed for a related corporation,163 it never addressed the question whether an efficient management with a cash flow problem would have let the debt remain uncollected. As another example, it is alleged that Transit had the highest operating costs per mile among a group of major urban transportation companies.164 If this is true, it raised obvious questions about efficiency. To take a third example, the Commission stated that Transit's \"maintenance program has been deficient and that, as a result, the number of buses available for service has been inadequate.\"165 But this inadequacy did not spark an inquiry into management's efficiency, nor did it have any apparent effect on the rate of return allowed.166 Finally, and without trying to be exhaustive, we note that while the Commission thought it \"crystal clear . . . that the financial problem of the company is due to a declining ridership and increasing labor costs,\"167 it made no investigation into what the company was doing to increase ridership,168 or to reduce labor costs.\n \n \n 52\n In sum, the Commission, in allowing the increase here, fell far short of what it later claimed in Order No. 1216 to be the required degree of concern with Transit's efficiency of management.169 While we commended the improvement in the Commission's study of Transit's efficiency in Order No. 1216,170 that cannot save the inadequate showing in Order No. 1052, which, together with other defects,171 vitiates the fares set by that order.\n \n IV. VIABILITY OF TRANSIT'S BUSINESS\n \n 53\n We must now consider the final argument challenging the validity of Order No. 1052-the argument that the Commission, in granting Transit the increases permitted by that order, acted on the erroneous premise that a public utility is entitled to a return on its investment although its fiscal status may be so precarious that it would be unlikely to obtain any return if it were forced to compete on the open market.\n \n \n 54\n Braided into Order No. 1052 is the cardinal assumption that the case law,172 the Compact,173 the Franchise Act,174 and particularly the Constitution,175 required the Commission to set the fares at a level which would insure Transit an adequate return after costs and expenses. Amicus curiae and the District of Columbia challenge this postulate. Since both the Compact and the Franchise Act demand, in addition to efficient and economical service, that Transit's rates remain reasonable,176 and since a rash of recent fare increases has failed to solve Transit's financial plight,177 it was error, they claim, for the Commission to grant another increase without a separate, prior determination as to whether at any fare level Transit was capable of consistently earning a profit and attracting investment capital.\n \n \n 55\n Amicus curiae has shouldered the burden of this facet of the cases and the argument he constructs can be sketched roughly as follows. From January, 1968, to June, 1970, Transit was allowed four fare increases, raising the basic District of Columbia cash fare from 25 cents to 40 cents178-an overall increase of 60 percent. If increases in such rapid succession and in such proportions were necessary to keep the company in business, it follows that a serious question existed as to whether the business was or could be made viable. It was improper, the argument continues, for the Commission to decline to investigate the cause of Transit's near-deficit operation, for such an investigation might have revealed that Transit was unable to maintain itself financially without an endless chain of fare elevations. In that event, the argument concludes, neither the Constitution, the Compact, the Franchise Act nor the case law would require or justify the increase in question; on the contrary, an unreasonable burden would fall on farepayers if fares were set at an artificially high level only to theoretically provide a return to the company. For precedent to support this position, amicus draws heavily on the Supreme Court's decision in Market Street Railway Company v. Railroad Commission.179\n \n \n 56\n It is clear from the terms of the Compact180 and the Franchise Act181 that there are at least some circumstances in which Transit would not necessarily be entitled to an adequate return after costs and expenses. Section 6(a)(1) of the Compact requires the Commission, in deciding whether to suspend a fare change, to give consideration, among other things, to \"whether the carrier is being operated economically and efficiently.\"182 Section 6(a)(3) provides that, in prescribing just and reasonable fares, the agency shall take into account, inter alia, \"the need, in the public interest, of adequate and efficient transportation service by such carriers at the lowest cost consistent with the furnishing of such service,\" as well as \"the need of revenue sufficient to enable [the] carrier[] under honest, economical, and efficient management, to provide such service.\"183 Similarly, Section 4 of the Franchise Act, promises that \"if [Transit] does provide the Washington Metropolitan Area with a good public transportation system, with reasonable rates, Congress will maintain a continuing interest in the welfare of the Corporation [Transit] and its investors.\"184 It follows from these of return contemplated by the Compact portions of the Compact and the Franchise Act that, if Transit were not run economically, efficiently, and honestly, then it would not be entitled to the level and Franchise Act.185 This much is contested neither by the Commission nor by Transit.\n \n \n 57\n The Franchise Act couples the continued interest of Congress in the company to the provision of \"a good transportation system,\"186 as well as the operation of such a system at \"reasonable rates.\"187 It would appear that to Congress it was important not only that the transit system be good-honest, efficient, and economical-but also that the rates be reasonable in themselves.188 The Franchise Act also states that Transit \"should be afforded the opportunity of earning such return as to make the Corporation an attractive investment to private investors.\"189 This suggests, not a guarantee of a good return, but an opening to Transit to make such a return if it could. Section 6(a)(4) of the Compact contains a similar statement, and the same implication as to the \"opportunity of earning such return as to make the carriers attractive investments to private investors.\"190\n \n \n 58\n These clauses of the Franchise Act and the Compact seem to us to embody principles not essentially dissimilar from those which found Supreme Court approval in Market Street Railway Company v. Railroad Commission.191 In Market Street, the Court upheld as non-confiscatory a fare which would not return a profit to the utility but would permit a return on the worth of the company's property valued at the price at which Market Street had agreed to sell the company to the City of San Francisco. The company's history was that of a failing enterprise to which a prior fare increase had brought, not additional revenues, but instead a steady decline in traffic; and the Court's opinion clearly distinguished between utilities which were financially healthy and those that were sick. It pointed out that\n \n \n 59\n . . . most of our cases deal with utilities which had earning opportunities, and public regulation curtailed earnings otherwise possible. But if there were no public regulation at all, this appellant [Market Street] would be a particularly ailing unit of a generally sick industry. The problem of reconciling the patrons' needs and the investors' rights in an enterprise that has passed its zenith of opportunity and usefulness, whose investment already is impaired by economic forces, and whose earning possibilities are already invaded by competition from other forms of transportation, is quite a different problem.192\n \n \n 60\n And, the Court reiterated, \"[i]t is idle to discuss holdings of cases or to distinguish quotations of this or other courts which have dealt with utilities whose economic situation would yield a permanent profit, denied or limited only by public regulation.\"193 The considerations advanced in Federal Power Commission v. Hope Natural Gas Company,194 the Court observed,\n \n \n 61\n . . . concerned a company which had advantage of an economic position which promised to yield what was held to be an excessive return on its investment and on its securities. They obviously are inapplicable to a company whose financial integrity already is hopelessly undermined, which could not attract capital on any possible rate, and where investors recognize as lost a part of what they have put in. It was noted in the Hope Natural Gas case that regulation does not assure that the regulated business make a profit. All that was held was that a company could not complain if the return which was allowed made it possible for the company to operate successfully. There was no suggestion that less might not be allowed when the amount allowed was all that the company could earn.195\n \n \n 62\n Finally, the Court noted that the Constitution does not require a regulatory agency to fix rates \"on an investment after it has vanished . . . or to maintain the credit of a concern whose securities already are impaired. The due process clause has been applied to prevent governmental destruction of existing economic values. It has not and cannot be applied to insure values or to restore values that have been lost by the operation of economic forces.\"196\n \n \n 63\n Market Street's theme, in short, is that there is no requirement that regulation be used to bolster and make profitable a company which would not otherwise be successful. That is the principle which the Commission should have followed, but did not. We do not say that, in actual fact, the circumstances of Market Street Railway were those of Transit. What we do say is that there certainly were sufficient indications that Transit might have been ailing to have alerted the Commission to have investigated (a) if and to what extent the company would have been able to make a profit if there were no regulation at all, and (b) if and to what extent Transit could then earn a sufficient return so as to make it an attractive investment at any level of fares which could have been deemed \"reasonable.\"\n \n \n 64\n We do not think it can be said, under the Compact and the Franchise Act, that any fare was \"reasonable\" no matter how high it was or how few riders were able to pay the fare, so long as Transit was able to show a technical excess of gross income over expenses.197 As we pointed out above, the Franchise Act stipulates \"a good transportation system\" as well as \"reasonable rates\";198 the fact that the system was \"good\" did not automatically endow with reasonableness any fares necessary to sustain that good system at a profit. Reasonableness entails a consideration of the value of the service to the riders, the numbers who can use the service at the fares set, and the burden of those fares upon the riding public or important segments of it. Similarly, in appraising whether an operation is economical,199 account must also be taken of the relationship between the level of the fares and the worth of services rendered to the riders. Service is not economical simply because it is honest, mechanically efficient, and as thrifty as it can be under the circumstances; it is not economical if the charge for the service must be set at inordinately high levels in order for the transit company to obtain a profit.200\n \n \n 65\n The record in these cases shows that ridership has declined considerably as the fares have risen.201 In Order No. 1052, the Commission estimated that the decline would continue with the new fare raise to 40 cents.202 Since 1966, the trends toward higher fares and lower ridership have been both steady and rapid.203 The fall in ridership has borne, of course, most heavily on the poor and those who neither have the use of automobiles nor can well afford taxis.\n \n \n 66\n The Commission has made a most conscientious effort to set Transit's fares at the proper level, and its task has been a most difficult and complex one. But we cannot avoid concluding that, performing its burdensome function, the agency has throughout acted on the erroneous postulate that it was compelled-no matter to what level it must raise the fares, how substantial the fall in ridership, and how financially sick Transit might be-to set the fares so that Transit could always earn a profit. To be sure, Transit was entitled to a reasonable opportunity to earn a fair return from its operations.204 It was not, however, for the Commission to insure a return. Neither the Compact205 nor the Franchise Act206 authorized a guarantee, nor did due process require it207 nor, as the cases make plain, was it the Commission's prerogative to afford it.208 Though the Commission has also commented that it has considered the public interest in restraining the rise in fares, we are convinced that the incorrect postulate to which we have referred has initially infected the Commission's whole thinking and its ratemaking process. Order No. 1052, in particular, cannot be judged apart from that mistaken premise, which we judge to be at its core. For this reason, as well as for the others we discuss in this opinion,209 that order cannot stand.\n \n V. DISPOSITION\n \n 67\n For three reasons we have concluded that Order No. 1052 is invalid. First, the Commission should have credited to Transit's farepayers, to the extent not exhausted by its prior similar obligation,210 the amount by which the company's lands increased in value up to the time they were removed from operating status.211 Second, in determining Transit's right to higher fares, the Commission should have inquired into the efficiency of Transit's management-a necessary prerequisite, under the terms of the Compact, to considering any fare raise.212 And finally, the Commission's decision should have been guided by the precept that Transit was entitled to an opportunity to earn a return on its investment but not to a guaranteed return, nor necessarily to a fare increase where an examination of its economic health could have revealed that it was incapable of maintaining profitable operations under any reasonable rate of return allowed.213\n \n \n 68\n Given these infirmities in Order No. 1052, we are faced with the question of the disposition mandated. Defective fare orders cannot be cured by retroactive ratemaking,214 nor is the Commission in a position to promulgate any new fares for Transit in light of the recent public takeover of its transportation assets and operations.215 Nevertheless, we cannot give legal effect to the invalid fares set in Order No. 1052 by allowing that order to stand.216 As in Democratic Central Committee,217 decided today, and as in its decisional forerunner, Williams v. Washington Metropolitan Area Transit Commission,218 we find the appropriate avenue of relief here to be restitution.219\n \n \n 69\n The Commission is in an excellent position, both by virtue of its administrative expertise and its familiarity with Transit's situation to conduct the investigations essential to ascertainment of restitution to be awarded here. For that purpose, we remand the case to the Commission.220 Necessarily, three matters, correlative to the three defects we have found in Order No. 1052, must be explored by the Commission. The first is the amount of the increase in market value over book value of lands which Transit moved below the line prior to the issuance of Order No. 1052,221 and the amount of the increase remaining after the application to be made in Democratic Central Committee.222 This is perhaps the least difficult of the three assignments since it involves essentially the same calculations required of the Commission by our opinions today in Democratic Central Committee223 and Bebchick.224\n \n \n 70\n Once ascertained, the net amount of this value-appreciation must be credited to the farepayers. The specific means by which the riders are to be benefited thereby must also be worked out by the Commission, preferably in consultation with the Washington Metropolitan Area Transit Authority, the new owner of Transit's system.225\n \n \n 71\n The other two matters which the Commission must look into relate to remedying the other two defects in Order No. 1052. One is the determination of the impact, if any, which the efficiency of Transit's management should have had on its right to fare increases at the time of the order.226 The other is the evaluation, which Market Street Railway227 required, as to whether Transit's then financial position would have enabled it to consistently maintain a profitable mass transportation system under any rate of return.228\n \n \n 72\n The Commission has the benefit now of the Loconto report229 and the other evidence adduced in the hearings on Order No. 1216230-evidence which convinced the Commission that Transit was operating inefficiently and under perilous economic circumstances two years after the faresetting in Order No. 1052.231 The Commission is free to draw upon these sources for such assistance as they may afford in the performance of these duties on remand.\n \n \n 73\n It is conceivable that after reconstructing Transit's situation at the time of Order No. 1052, and after applying itself to the factors which we have found that it neglected, the Commission might nevertheless conclude that Transit's request for higher fares was properly granted. In that event, the only infirmity in Order No. 1052 having any practical effect would be the failure to benefit the riders by the increased market value of the lands moved below the line. That would be handled as we have suggested above and in Democratic Central Committee.232\n \n \n 74\n Order No. 1052 is set aside. The case is remanded to the Commission for further proceedings consistent with this opinion. Our jurisdiction over the case is retained in full.\n \n \n 75\n So ordered.\n \n \n 76\n MacKINNON, Circuit Judge (concurring in part and dissenting in part):\n \n \n 77\n For the reasons set out in my opinion in today's companion case, Democratic Central Committee v. WMATC, No. 21865, 158 U.S.App.D.C. -, 485 F.2d 786 (hereinafter No. 21865), I concur generally in this decision, dissenting only from Part II (and Part V insofar as it necessarily directs the Commission to remedy the alleged defects delineated in Part II).\n \n \n 78\n I would just like to add that it seems odd that the majority in this case manages to find some sort of \"implicit\" legislative intent in the Franchise Act (granting Transit its charter) that mandates the result reached. This intent is apparently derived from Congress' total silence on the subject which the majority interprets as meaning that Congress could not have intended any result other than that reached in this case. It is argued, supra at 898, 902, that nothing in the Act suggested that gain should accrue to the investors. Yet since that would have been the result absent any provision to the contrary, Congress' silence on the matter would seem infinitely more supportive of an implicit acquiescence in awarding the gain to the investors rather than the converse as argued by the majority, supra at 902. This strikes me as a very weak strut to support the logic of the majority's decision and is really nothing more than a restatement of the view that the history and circumstances of Transit are such that it would be desirable to award any and all gains to the farepayers. Here the majority seeks to clothe its basic equitable arguments in the garb of congressional intent. As an indication of a desperate need to lend some legal substance to its vague equitable leanings, this tactic serves only to weaken the majority's position, rather than strengthen it.\n \n \n 79\n Transit was taken over by the public authorities on January 14, 1973 and the operating officials are already considering demands for fare increases in order to meet operating expenses. This is some indication that the past management was perhaps not as inefficient as has been contended and that the fare increases sought by Transit from time to time over the years were not as unreasonable as their opponents contended. In fact, local fares were generally not out of line with bus fares nationally. For the record there is appended in the margin fares in other comparable urban areas. (Exhibit 14, p. 1).CASH FARES, TRANSFERS AND MAXIMUM FARES IN 46\n \n LARGEST U.S. AND CANADIAN CITIES\n \n 80\n (SOURCE: A.T.A. FARE SUMMARY BOOKLET)\nCity Cash Tickets Transfer Maximum Owner-ship\n Fare or Fare\n Tokens Within\n City\n Incl.\n Transfer\n-------------------------------------------------------------------------------\nKansas City, Missouri ....... $.50 None $.05 $.65 Public\nAkron, Ohio .................. .40 5/$1.75 .02 .42 Private\nChicago, Illinois ............ .40 None .05 .45 Public\nSt. Louis, Missouri .......... .40 None .05 .45 Public\nAtlanta, Georgia ............. .35 3/$.90 .05 .40 Private\nCincinnati, Ohio ............. .35 5/$1.50 .10 .55 Private\nCleveland, Ohio .............. .35 5/$1.75 .05 .40 Public\nDenver, Colorado ............. .35 None .05 .40 Private\nHouston, Texas ............... .35 10/$3.00 Free .55 Private\nLouisville, Kentucky ......... .35 10/$3.50 .05 .40 Private\nMontreal, Canada ............. .35 3/$.90 Free .35 Public\nPittsburgh, Pennsylvania ..... .35 None .05 .45 Public\nPortland, Oregon ............. .35 None Free .35 Private\nToledo, Ohio ................. .35 5/$1.75 .05 .55 Private\nBaltimore, Maryland .......... .30 .30 .05 .35 Private\nBirmingham, Alabama .......... .30 20/$5.50 .05 .55 Private\nBuffalo, New York ............ .30 10/$3.00 .05 .35 Private\nColumbus, Ohio ............... .30 5/$1.50 Free .30 Private\nDallas, Texas ................ .30 None Free .70 Public\nDetroit, Michigan ............ .30 7/$2.00 .05 .35 Public\nFort Worth, Texas ............ .30 8/$2.00 .02 .37 Private\nIndianapolis, Indiana ........ .30 None .05 .35 Private\nLos Angeles, California ...... .30 .30 .05 * Public\nMemphis, Tennessee ........... .30 None .05 .35 Public\nMilwaukee, Wisconsin ......... .30 10/$2.75 Free .40 Private\nNew York, New York (C) ....... .30 .30 Free .55 Public\nOklahoma City, Oklahoma ...... .30 None Free .40 Public\nOmaha, Nebraska .............. .30 36/$9.00 .02 .32 Private\nPhoenix, Arizona ............. .30 None .05 .45 Private\nPhiladelphia, Pennsylvania ... .30 None .05 #.47 Public\nSan Diego, California ........ .30 4/$1.00 Free .30 Public\nToronto, Canada .............. .30 4/$1.00 Free .60 Public\nHonolulu, Hawaii ............. .25 5/$1.00 Free .35 Private\nLong Beach, California ....... .25 5/$1.00 Free .32 Public\nMiami, Florida ............... .25 None Free .25 Public\nMinneapolis-St. Paul,\n Minn........................ .25 None Free .25 Private\nNewark, New Jersey ........... .25 None .10-.20 ** Private\nNew York, New York (A) ....... .25 None Free .55 Private\nNew York, New York (B) ....... .25 None Free .55 Private\nNorfolk, Virginia ............ .25 10/$2.25 Free .40 Private\nOakland, California .......... .25 4/$1.00 Free .35 Public\nRochester, New York .......... .25 8/$2.00 .02 .27 Public\nSan Antonio, Texas ........... .25 None .02 .40 Public\nSeattle, Washington .......... .25 .25 Free .45 Public\nBoston, Massachusetts ........ .20 .20 None .20@ Public\n \n \n \n *\n Sitting by designation pursuant to 28 U.S.C. Sec. 293(a) (1970)\n \n \n 1\n D. C. Transit Sys., Inc. (Order No. 1052), 85 P.U.R.3d 1 (WMATC 1970)\n \n \n 2\n Other aspects of Order No. 1052 came under review by the court in D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, 146 U.S.App.D.C. 392, 452 F.2d 1321 (1971), and the order was affirmed in the particulars reviewed therein\n \n \n 3\n 324 U.S. 548, 65 S.Ct. 770, 89 L.Ed. 1171 (1945)\n \n \n 4\n See Franchise Act Sec. 7, 70 Stat. 598 (1956); Washington Metropolitan Area Transit Regulation Compact, tit. II, art. XII, Secs. 5(a), 6(a) (Transit Regulation Compact), incorporated into Pub.L. No. 86-794, 74 Stat. 1031 (1960), with amendments, appearing as part of Pub.L. No. 87-767, 76 Stat. 765 (1962), set forth following D.C.Code Sec. 1-1410a (1967). Title II of the Transit Regulation Compact is the Washington Metropolitan Area Transit Authority Compact (Transit Authority Compact), which is incorporated into Pub. L. No. 89-774, 80 Stat. 1324 (1966), and is set forth following D.C.Code Sec. 1-1431 (1967). In this opinion we refer to the Transit Regulation Compact and the Transit Authority Compact together as the \"Compact.\" See also D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, 151 U.S.App.D.C. 223, 233-234, 466 F.2d 394, 404-405, cert. denied, 409 U.S. 1086, 93 S.Ct. 688, 34 L.Ed.2d 673 (1972)\n \n \n 5\n The requested increases are listed in full in Order No. 1052, supra note 1, 85 P.U. R.3d at 4-5\n \n \n 6\n Transit contended that the interim fare increase was necessary to meet a shortage in operating funds, a critical situation which was intensified by the growing insufficiency of existing fares to cover day-to-day expenses\n \n \n 7\n See Compact, supra note 4, tit. II, art. XII, Secs. 5(e), 6(a). See also Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, 158 U.S.App.D.C. - at - - -, 485 F.2d 847 at 848-851 (1973); Payne v. Washington Metropolitan Area Transit Comm'n, 134 U.S. App.D.C. 321, 323 n. 3, 415 F.2d 901, 903 n. 3 (1968)\n \n \n 8\n D. C. Transit Sys., Inc. (Order No. 1031) (WMATC Mar. 26, 1970) (unreported)\n \n \n 9\n Id. The Commission was later to observe that a public hearing on the interim request would have required \"due notice to the public,\" \"an adequate period for preparation and presentation of rebuttal evidence,\" and \"time for us to deliberate on the questions presented.\" D. C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 5. As it turned out, the Commission did not reach the point at which it felt a need for an interim order\n \n \n 10\n See note 4, supra\n \n \n 11\n In accordance with the Compact, supra note 4, tit. II, art. XII, Sec. 6(a)(1), Transit's proposed tariffs were suspended on March 26, 1970. D. C. Transit Sys., Inc. (Order No. 1031), supra note 8. A further suspension was made on April 10, to terminate no later than July 10. D. C. Transit Sys., Inc. (Order No. 1035) (WMATC Apr. 10, 1970) (unreported)\n \n \n 12\n D. C. Transit Sys., Inc. (Order No. 1031), supra note 8\n \n \n 13\n The twelve-month period ending November 30, 1969, was used as the historical year furnishing the data on which forecasts for the future annual period were based. D. C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 6\n \n \n 14\n The Commission disallowed an unsupported office expense of $6,220.38 and a $10,000 legal fee for non-transit services. Id. at 6 n. 1. Total reductions in operating expenses were $24,295.67. Id. at 6\n \n \n 15\n Id. at 6\n \n \n 16\n Id\n \n \n 17\n The Commission customarily gives attention, in forecasting future revenues under raised-fare structures based on past ridership records, to the public's resistance to fare increases. To calculate the ridership figures projected in the instant proceeding, the Commission examined the actual ridership figures for the seven months preceding October, 1969, when Transit had received its last fare increase, and added thereto the actual ridership figures for the five months following that increase; and to determine the impact of the October, 1969, elevation in fares the Commission applied a .32% resistance factor to those figures. Id. at 7. In previous ratemaking proceedings the resistance factor had been estimated at .20% for each 1% increase in fares; in this proceeding the resistance factor was carried upward to .32% for each 1% increase in fares. Id. Since the Commission reached a loss-of-ridership figure higher than that calculated by Transit, it chose to accept Transit's figure, reasoning that Transit bore the burden of proving its entitlement to relief and hence the Commission would not ask the public to pay for something that Transit had not asked for. Id. at 8. See D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 2, 146 U.S.App.D.C. at 394-395, 452 F.2d at 1323-1324\n \n \n 18\n By annualizing Transit's revenues from charter operations during the three most recent quarters, the Commission arrived at a higher revenue figure than that offered by Transit. D. C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 8-9. See also D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 2, 146 U.S.App.D.C. at 396, 452 F.2d at 1325\n \n \n 19\n Transit's figure of $1,868,633 was accepted over the Commission's figure of $1,772,709 because the company had utilized more current data. D. C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 8\n \n \n 20\n See also D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 2, 146 U.S.App.D.C. at 395-396, 452 F.2d at 1324-1325. To insure that monies to accommodate claims for injuries and damages would be available, the Commission required that 70% of the $1.9 million allowed as an expense be funded at the rate of $110,833 per month. D. C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 11\n \n \n 21\n Transit requested an additional $474,073 and the Commission allowed $517,200, to be placed in escrow pending expenditure for the purpose intended. D. C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 11-12. The difference is explained by payroll fringe costs. Id. at 12\n \n \n 22\n This would enable resumption of a buspurchase program which had been temporarily suspended in D. C. Transit Sys., Inc. (Order No. 984), 81 P.U.R.3d 417, 454 (WMATC 1969)\n \n \n 23\n Salary increases of $5,000 to each of three senior officers were disallowed. D. C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 13 n. 6\n \n \n 24\n The District of Columbia Department of Highways and Traffic estimated what the expenses would be during the future annual period. Id. at 13-14. The Commission believed that this cost should be borne by the community at large rather than by the riders, but included it as a cost of service since it was improbable that Congress would assume it. Id. at 14\n \n \n 25\n Id. So, although particular items of expense and revenue were disputed, both the Commission and Transit agreed that Transit would not receive sufficient revenues under the existing fares even to cover operating expenses. Id\n \n \n 26\n Id. at 16\n \n \n 27\n Id\n \n \n 28\n Id. at 16-17\n \n \n 29\n Id. at 15\n \n \n 30\n D. C. Transit Sys., Inc. (Order No. 880) (WMATC Oct. 18, 1968) (unreported), at 23-36; D. C. Transit Sys., Inc. (Order No. 984), supra note 22, 81 P.U.R.3d at 428-34\n \n \n 31\n D. C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 15\n \n \n 32\n Id. at 16. Transit is the wholly-owned subsidiary of another corporation, but we refer throughout this opinion to Transit's \"investors\" for the sake of convenience in discussing the relevant ratemaking principles\n \n \n 33\n Id\n \n \n 34\n Id. at 15-17\n \n \n 35\n Id\n \n \n 36\n See note 20, supra\n \n \n 37\n D. C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 17\n \n \n 38\n Id\n \n \n 39\n Id. at 17-18\n \n \n 40\n Id. at 26-27\n \n \n 41\n Id. at 26\n \n \n 42\n Id. at 25-26\n \n \n 43\n Id. at 26\n \n \n 44\n Id\n \n \n 45\n The fare changes authorized by Order No. 1052 are omitted from the published report. Id. at 29. They do appear in the record before us. Proposed increases were allowed for token cost, interline fare, D. C. Stadium fare and Capitol Hill express fare -all in the District of Columbia -and in the Virginia interstate zone fare. Proposed increases were modified and allowed for Maryland zone fares, District of Columbia-Maryland interstate local fares, and District of Columbia-Mayland interstate express fares. A proposed increase for the minibus fare was disallowed. See D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 2, 146 U.S.App.D.C. at 396, 452 F.2d at 1325\n \n \n 46\n Black United Front v. Washington Metropolitan Area Transit Comm'n, 141 U.S. App.D.C. 73, 79, 436 F.2d 227, 233 (1970)\n \n \n 47\n D. C. Transit Sys., Inc. (Order No. 1057), 85 P.U.R.3d 33 (WMATC 1970)\n \n \n 48\n Compact, supra note 4, tit. II, art. XII, Sec. 6(a)(3), quoted in text infra at note 129\n \n \n 49\n The Compact, supra note 4, provides at tit. II, art. XII Sec. 6(a)(4):\n It is hereby declared as a matter of legislative policy that in order to assure the Metropolitan District of an adequate transportation system operating as private enterprises the carriers therein, in accordance with standards and rules prescribed by the Commission, should be afforded the opportunity of earning such return as to make the carriers attractive investments to private investors. As an incident thereto, the opportunity to earn a return of at least 6 1/2 per centum net after all taxes properly chargeable to transportation operations, including but not limited to income taxes, on gross operating revenues, shall not be considered unreasonable.\n \n \n 50\n D. C. Transit Sys., Inc. (Order No. 1057), supra note 47, 85 P.U.R.3d at 38-39\n \n \n 51\n Id. at 37\n \n \n 52\n Id. at 39-40\n \n \n 53\n Id\n \n \n 54\n Id. at 41\n \n \n 55\n Id. at 37, 42\n \n \n 56\n D. C. Transit Sys., Inc. (Order No. 1062) (WMATC July 8, 1970) (unreported); D. C. Transit Sys., Inc. (Order No. 1066) (WMATC July 13, 1970) (unreported); D. C. Transit Sys., Inc. (Order No. 1067) (WMATC July 14, 1970) (unreported); D. C. Transit Sys., Inc. (Order No. 1074) (WMATC July 24, 1970) (unreported); D. C. Transit Sys., Inc. (Order No. 1090), 85 P.U.R.3d 508 (WMATC 1970)\n \n \n 57\n Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, 141 U.S.App.D.C. 79, 83, 436 F.2d 233, 237 (1970)\n \n \n 58\n Petitioners in Nos. 24,398 and 24,428\n \n \n 59\n No. 21,865, 158 U.S.App.D.C. -, 485 F.2d 786 (1973)\n \n \n 60\n Presented only by petitioner in No. 24,428\n \n \n 61\n Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, at app\n \n \n 62\n See note 64, infra\n \n \n 63\n Supra note 4\n \n \n 64\n \"Any person affected by any final order or decision of the Commission may, within thirty days after the publication thereof, file with the Commission an application in writing requesting a reconsideration of the matters involved, and stating specifically the errors claimed as grounds for such reconsideration. No person shall in any court urge or rely on any ground not so set forth in such application.\" Compact, supra note 4, tit. II, art. XII, Sec. 16\n \n \n 65\n See note 64, supra\n \n \n 66\n See note 64, supra\n \n \n 67\n D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, 151 U.S.App.D.C. at 242-243, 466 F.2d at 413-414\n \n \n 68\n Powell v. Washington Metropolitan Area Transit Comm'n, 158 U.S.App.D.C. -at - nn. 39-41, 485 F.2d 1080 at 1086 nn. 39-41 (1973)\n \n \n 69\n Petitioner in No. 24,398\n \n \n 70\n Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59\n \n \n 71\n See id. at 896. See also note 74, infra\n \n \n 72\n The Commission poses no objection whatsoever to consideration of the value-appreciation issue on this review\n \n \n 73\n In D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, we pointed out that the principal consideration underlying the requirement that issues first be presented for Commission reconsideration \"is the opportunity, through precise identification of the errors alleged, for administrative reexamination and correction prior to judicial intervention in the regulatory process.\" 151 U.S.App.D.C. at 242, 466 F.2d at 413 (footnote omitted)\n \n \n 74\n The only question of value-appreciation raised for Commission reconsideration or briefed here pertains to land. The issue before us here is accordingly so limited. See text supra at notes 69-71. See also Powell v. Washington Metropolitan Area Transit Comm'n, supra, 158 U.S.App.D.C. at -, 485 F.2d at 893-894 note 68; Democratic Cent. Comm'n v. Washington Metropolitan Area Transit Comm'n, supra, 158 U.S.App.D.C. at -, 485 F.2d at 795 note 59; D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, 151 U.S.App. D.C. at 242-243, 466 F.2d at 413-414. It is thus narrower than the issue in Democratic Central Committee, which extends to depreciable as well as nondepreciable property\n \n \n 75\n Compare Williams v. Washington Metropolitan Area Transit Comm'n, 134 U.S. App.D.C. 342, 374 n. 181, 415 F.2d 922, 954 n. 181 (en banc 1968), cert. denied, 393 U.S. 1081, 89 S.Ct. 860, 21 L.Ed.2d 773 (1969)\n \n \n 76\n No explanation for not presenting the point to the Commission being offered, we do not confront the question whether the Compact requirement, see note 64, supra, relaxes in extraordinary circumstances\n \n \n 77\n See Powell v. Washington Metropolitan Area Transit Comm'n, supra 158 U.S.App. D.C. at -, 485 F.2d at 893-894 note 68; D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, 151 U.S.App.D.C. at 242-243, 466 F.2d at 413-414. See also FPC v. Colorado Interstate Gas Co., 348 U.S. 492, 501, 75 S.Ct. 467, 99 L.Ed. 583 (1955); Granite City v. Illinois Commerce Comm'n, 407 Ill. 245, 95 N.E.2d 371, 374 (1950)\n \n \n 78\n 158 U.S.App.D.C. -, 485 F.2d 858 (1973)\n \n \n 79\n Supra note 59\n \n \n 80\n See Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, at app., for a list of the transferred properties\n \n \n 81\n Bebchick v. Washington Metropolitan Area Transit Comm'n, supra note 78, 158 U.S.App.D.C. at - - -, 485 F.2d at 875-876\n \n \n 82\n Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 821-822\n \n \n 83\n See Bebchick v. Washington Metropolitan Area Transit Comm'n, supra note 78, 158 U.S.App.D.C. at -, 485 F.2d at 880\n \n \n 84\n See note 74, supra, and accompanying text\n \n \n 85\n See text supra at notes 69-75\n \n \n 86\n We deal with the consequences of this holding in Part V, infra\n \n \n 87\n See also Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 798-800, 818\n \n \n 88\n Id. at - - -, - - -, 485 F.2d at 800, 820-821\n \n \n 89\n Compare id. at - - -, 485 F.2d at 798-800\n \n \n 90\n But see id. at -, 485 F.2d at 811\n \n \n 91\n Id. at pt. IV(B)\n \n \n 92\n Id. at pt. III\n \n \n 93\n Id. at -, 485 F.2d at 801\n \n \n 94\n Id. at - - -, 485 F.2d at 802-803\n \n \n 95\n The history of Transit's acquisition of Capital's assets is detailed in id. at 811-814\n \n \n 96\n Franchise Act, Pub.L. No. 757, 70 Stat. 598, 604 (1956), tit. II, Secs. 201(a), 202, 203. See also H.R.Rep.No.2751, 84th Cong., 2d Sess. 11, 17 (1956)\n \n \n 97\n Franchise Act, Pub.L. No. 757, 70 Stat. 598, 599 (1956), tit. I, pt. 1, Sec. 7. For a more detailed discussion of the conversion requirement, see Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 812-814\n \n \n 98\n As the Commission tells us,\n . . . by any realistic view of the actual situation at Transit, its real estate holdings will not decrease in value below original cost, nor was there ever any risk that they would do so.\n Brief for Respondent at 13, Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59 (emphasis added). And see the discussion in that case at - - -, 485 F.2d at 812-814.\n \n \n 99\n Pub.L. No. 757, 70 Stat. 598 (1956)\n \n \n 100\n See Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - n. 273, 485 F.2d at 816 n. 273\n \n \n 101\n See id. at -, 485 F.2d at 821-822\n \n \n 102\n See text supra at note 98\n \n \n 103\n See Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 818-821\n \n \n 104\n Supra note 59\n \n \n 105\n Id. at - - -, 485 F.2d at 806-811\n \n \n 106\n See Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 820-822\n \n \n 107\n Id. at -, 485 F.2d at 820-821\n \n \n 108\n See, e. g., D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, 121 U.S.App.D.C. 375, 397-398, 350 F.2d 753, 775-776 (en banc 1965); D.C. Transit Sys., Inc. v. Public Utils. Comm'n, 110 U.S.App.D.C. 241, 242, 292 F.2d 734, 735 (1961); Washington Gas Light Co. v. Baker, 88 U.S.App.D.C. 115, 118-119, 188 F.2d 11, 14-15, cert. denied, 340 U.S. 952, 71 S.Ct. 571, 95 L. Ed. 686 (1950)\n \n \n 109\n See text supra at notes 99-100\n \n \n 110\n See the discussion in Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S. App.D.C. at - - -, - - -, -, 485 F.2d at 795-800, 806-808, 811\n \n \n 111\n Supra note 108\n \n \n 112\n Id. 88 U.S.App.D.C. at 118-119, 188 F.2d at 14-15\n \n \n 113\n See D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 108, 121 U.S.App.D.C. at 397-398, 350 F.2d at 775-776; D.C. Transit Sys., Inc. v. Public Utils. Comm'n, supra note 108, 110 U.S.App.D.C. at 242, 292 F.2d at 735\n \n \n 114\n Supra note 78, 158 U.S.App.D.C. at - - -, 485 F.2d at 871-873\n \n \n 115\n Id. - U.S.App.D.C. at - n. 112, 485 F.2d at 872 n. 112\n \n \n 116\n See Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 818-819\n \n \n 117\n Pursuant to the National Capital Area Transit Act of 1972, Pub.L. No. 92-517, 86 Stat. 999 (1972), the company's transportation operations and operating assets were taken over by the Washington Metropolitan Area Transit Authority on January 14, 1973. The purchase price is being determined in condemnation proceedings initiated by the Transit Authority. See id. at 86-88\n \n \n 118\n See Bebchick v. Washington Metropolitan Area Transit Comm'n, supra note 78, 158 U.S.App.D.C. at - - -, 485 F.2d at 873-874\n \n \n 119\n We hold today in Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S. App.D.C. at -, 485 F.2d at 822, that the value appreciations of depreciable and nondepreciable assets should there have been credited to bus riders in fare-setting proceedings following the removal of those assets from operation prior to realization of any actual gain by Transit from their sale\n \n \n 120\n The point on constitutionality is raised only by Transit\n \n \n 121\n As we point out in No. 21,865, Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, with the end of the fair value standard for computing rate base and depreciation, it can no longer be argued that investors possess an inalienable claim to value appreciations accruing to in-service utility assets. Id. at Part II. The allocation of such gain must be resolved by balancing the respective risks, benefits and burdens of investors and consumers. Id. at notes 183-186. A careful study of the history of Transit's operating franchise demonstrates that an equitable balance here would pass that gain on to the riders. Id. at Part IV(B). Hence, a legislative determination that the increased value of these lands should not necessarily benefit Transit's stockholders would have been eminently reasonable\n \n \n 122\n See Parts III-IV, infra\n \n \n 123\n Supra note 59\n \n \n 124\n Id. at -, 485 F.2d at 822\n \n \n 125\n See note 74, supra\n \n \n 126\n Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 823-824; Williams v. Washington Metropolitan Area Transit Comm'n, supra note 75, 134 U.S.App.D.C. at 360-361, 415 F.2d at 940-941\n \n \n 127\n See note 117, supra\n \n \n 128\n See Part V, infra\n \n \n 129\n Compact, supra note 4, tit. II, art. XII, Sec. 6(a)(3)\n \n \n 130\n D.C. Transit Sys., Inc. (Order No. 1057), supra note 47, 85 P.U.R.3d at 37, denying reconsideration of D.C. Transit Sys., Inc. (Order No. 1052), supra note 1. There is no discussion in Order No. 1052 itself concerning efficiency or any of the Section 6(a)(3) factors. That is because, as the Commission explained, it had given its view of this problem in D.C. Transit Sys., Inc. (Order No. 984), supra note 22, just eight months before. Indeed, the discussion in Order No. 1057 is, by the Commission's own statement, taken virtually in haec verba from Order No. 984. The amicus curiae suggests that this heavy reliance on a prior order, and the record which underlay it, was improper. Our resolution of the efficiency issue renders unnecessary any expression of opinion on that point\n \n \n 131\n Compare Payne v. Washington Metropolitan Area Transit Comm'n, supra note 7, 134 U.S.App.D.C. at 338-342, 415 F. 2d at 918-922\n \n \n 132\n The Commission did not indicate in either Order No. 1057 or Order No. 984 how it would judge efficiency, or what weight it would give it in deciding on the proper fares. Compare D.C. Transit Sys., Inc. (Order No. 1216) (WMATC May 19, 1972) (not yet reported), at 9-12\n \n \n 133\n See D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, 151 U.S.App.D.C. at 237, 466 F.2d at 408. See also H.R. Rep. No. 1621, 86th Cong. 2d Sess. (1960): \"Section 6(a)(3) specifies certain functions which the Commission shall take into account in administering its ratemaking powers.\"\n The requirement that an agency promulgating public utility rates take into account the efficiency of the utility's management is a common one. See, e. g., Mountain States Tel. & Tel. Co., 82 P.U.R. (n. s.) 46, 49 (Ariz.Corp.Comm'n 1949); United Fuel Gas Co., 46 P.U.R. 3d 118, 123 (W.Va.Pub.Serv.Comm'n 1962). The question of efficiency of management is often closely connected with the question of adequacy of service. See D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n supra note 4, 151 U.S.App.D.C. at 230-232, 466 F.2d at 401-403, and cases there cited; Western Light & Tel. Co., 17 P.U.R.3d 422, 428-430 (Okla.Corp. Comm'n 1957); E. Nichols & F. Welch, Rate of Return, chs. 20, 21 (1955 and Supp. A 1964).\n \n \n 134\n The section of the Commission's opinion entitled \"The Return to be Allowed,\" in Order No. 1052, supra note 1, 85 P.U.R.3d at 14-18, does not mention efficiency of management at all\n \n \n 135\n Supra note 4\n \n \n 136\n D.C. Transit Sys., Inc. (Order No. 1216), supra note 132\n \n \n 137\n See D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, 151 U.S.App.D.C. at 227, 466 F.2d at 398\n \n \n 138\n See id. at 401\n \n \n 139\n See id. at 403\n \n \n 140\n See id. at 403-404\n \n \n 141\n Id. at 423\n \n \n 142\n See text supra at note 129\n \n \n 143\n D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, 151 U.S.App.D.C. at 237, 466 F.2d at 408\n \n \n 144\n Id. (footnotes omitted.)\n \n \n 145\n Id. at 412-413\n \n \n 146\n Cf. Washington Gas Light Co. v. Baker, supra note 108, 88 U.S.App.D.C. at 120-121, 118 F.2d at 16-17\n \n \n 147\n Office of Communications of United Church of Christ v. FCC, 138 U.S.App. D.C. 112, 116, 425 F.2d 543, 547 (1969)\n \n \n 148\n Payne v. Washington Metropolitan Area Transit Comm'n, supra note 7, 134 U.S.App.D.C. at 342 n. 106, 415 F.2d at 922 n. 106\n \n \n 149\n Office of Communications of United Church of Christ v. FCC, supra note 147, 138 U.S.App.D.C. at 117, 425 F.2d at 548\n \n \n 150\n Yohalem v. Washington Metropolitan Area Transit Comm'n, 141 U.S.App.D.C. 17, 22, 436 F.2d 171, 176 (1970)\n \n \n 151\n See D.C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 13\n \n \n 152\n Id. at 12\n \n \n 153\n Id. at 28-29\n \n \n 154\n Colorado Interstate Gas Co. v. FPC, 324 U.S. 581, 595, 65 S.Ct. 829, 89 L. Ed. 1206 (1945)\n \n \n 155\n D.C. Transit Sys., Inc. (Order No. 4480), 25 P.U.R.3d 371, 378 (D.C.Pub. Utils.Comm'n 1958)\n \n \n 156\n Transit pointed to the testimony of its vice presidents as evidence of its efficient management. The most significant statement was that by its senior vice president who, when asked by Transit's counsel to comment on the company's operations, replied:\n D.C. Transit's efficiency has been favorably recognized throughout the transportation industry for many years. . . .\n D.C. Transit has consistently been granted the nationally known Maintenance Efficiency Award each year without exception since 1958 and we have been advised that this honor will again be accorded to the Company for the year 1969. . . .\n Appendix of Respondent-Intervenor at 25. The Commission nonetheless found that \"[t]here is no question that the company's maintenance program has been deficient. . . .\" D.C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 11.\n Transit also brought to light some other evidence which, it says, bears on efficiency -for example, its proposed use of computers for routing and its method of utilizing drivers whose contracts guarantee an eight-hour day. But by any reasonable measure Transit's showing was substandard, and in any event it was for the Commission, not this court, to evaluate the evidence and to take Transit's efficiency into consideration in setting fares.\n \n \n 157\n See J. Bonbright, Principles of Public Utility Rates 25 (1960), which points out that the very objective of regulation is \"to serve as a substitute for competition.\" See also Northern Natural Gas Co. v. FPC, 130 U.S.App.D.C. 220, 226, 399 F.2d 953, 959 (1968)\n \n \n 158\n See Northern Natural Gas Co. v. FPC, supra note 157, 130 U.S.App.D.C. at 226, 399 F.2d at 959\n \n \n 159\n E. g., Northern Pac. Ry. v. United States, 356 U.S. 1, 4-5, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958)\n \n \n 160\n This is particularly true for Transit, since under its franchise, Pub.L. No. 757, 70 Stat. 598 (1956), and under Section 6(a)(4) of the Compact, supra note 4, the \"primary test of the reasonableness of Transit's fares\" is the \"operating ratio method.\" D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 108, 121 U.S.App. D.C. at 400, 350 F.2d at 778. Thus if Transit's costs of service rose avoidably, any given operating ratio resulted in higher-than-necessary fares-provided, of course, it was not caught by the Commission and that the Commission did not deem the fares too high\n \n \n 161\n Yohalem v. Washington Metropolitan Area Transit Comm'n, supra note 150, 141 U.S.App.D.C. at 27, 436 F.2d at 181\n \n \n 162\n See, e. g., D.C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R. 3d at 16\n \n \n 163\n See D.C. Transit Sys., Inc. (Order No. 773), 72 P.U.R.3d 113, 124 (1968), rev'd, Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59. The amount in question-some $23,400 a year-is a \"conservative\" estimate of the value to the D.C. Examiner, a newspaper owned by the principals of Transit, of the space on its buses that Transit made available for distribution of the paper. Id\n \n \n 164\n Brief for petitioner Democratic Central Committee at 15, relying on Exhibits 5-7 in Payne v. Washington Metropolitan Area Transit Comm'n, supra note 7\n \n \n 165\n D.C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 11\n \n \n 166\n See note 130, supra\n \n \n 167\n D.C. Transit Sys., Inc. (Order No. 1057), supra note 47, 85 P.U.R.3d at 37\n \n \n 168\n Indeed, the Commission took it upon itself to remedy \"the inadequacy of the company's marketing program\" by ordering \"a soundly conceived and well-carried out program of imparting information to riders and potential riders about the specifics of the company's service. . . .\" D.C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 23-24. Significantly, the Commission commented that it \"believe[d] that [Transit's] efforts to maintain its existing ridership and to obtain new ridership have been impaired by its failure to promote adequately the use of its service.\" Id. at 23\n \n \n 169\n D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4\n \n \n 170\n Id. at 244-245, 466 F.2d at 415-416\n \n \n 171\n See Part II, supra, and Part IV, infra. See also text supra at note 131\n \n \n 172\n The Commission concluded that to compel Transit to operate without income sufficient to cover operating expenses and debt service as well as a return sufficient to attract investment capital \"is to confiscate its property without due process of law.\" D.C. Transit Sys., Inc. (Order No. 1057), supra note 47, 85 P.U.R.3d at 36, citing Bluefield Water Works & Improvement Co. v. West Virginia Pub. Serv. Comm'n, 262 U.S. 679, 690, 43 S.Ct. 675, 67 L.Ed. 1176 (1923)\n \n \n 173\n Supra note 4\n \n \n 174\n Pub.L.No.84-757, 70 Stat. 598 (1956)\n \n \n 175\n See note 172, supra\n \n \n 176\n Compact, supra note 4, tit. II, art. XII, Secs. 3, 6(a)\n \n \n 177\n See text infra at note 178\n \n \n 178\n D.C. Transit Sys., Inc. (Order No. 773), supra note 163, aff'd in part, Powell v. Washington Metropolitan Area Transit Comm'n, supra note 68, rev'd, Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59; D. C. Transit Sys., Inc. (Order No. 880), supra note 30, supplemented, D.C. Transit Sys., Inc. (Order No. 882) (WMATC Oct. 29, 1968), aff'd, Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n supra note 7; D.C. Transit Sys., Inc. (Order No. 984), supra note 22, rev'd, D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, 158 U.S.App.D.C. -, 485 F.2d 881 (1973); D.C. Transit Sys., Inc. (Order No. 1052), supra note 1\n \n \n 179\n Supra note 3\n \n \n 180\n Supra note 4\n \n \n 181\n Pub.L.No.84-757, 70 Stat. 598 (1956)\n \n \n 182\n The Compact, supra note 4, provides in relevant part at tit. II, art. XII, Sec. 6 (a)(1), that:\n The Commission, upon complaint or upon its own initiative, may suspend any fare, regulation, or practice shown in a tariff filed with it under Section 5 . . ., at any time before such fare, regulation, or practice would otherwise take effect. . . . In determining whether any proposed change shall be suspended, the Commission shall give consideration to, among other things, the financial condition of the carrier, its revenue requirements, and whether the carrier is being operated economically and efficiently. . . .\n \n \n 183\n Section 6(a)(3) is quoted in text supra at note 129\n \n \n 184\n Franchise Act, Pub.L.No.84-757, 70 Stat. 598, 599 (1956), tit. I, pt. I, Sec. 4, provides:\n It is hereby declared as matter of legislative policy that in order to assure the Washington Metropolitan Area of an adequate transportation system operating as a private enterprise, the Corporation [Transit], in accordance with standards and rules prescribed by the Commission, should be afforded the opportunity of earning such return as to make the Corporation an attractive investment to private investors. As an incident thereto the Congress finds that the opportunity to earn a return of at least 6 1/2 per centum net after all taxes properly chargeable to transportation operations, including but not limited to income taxes, on either the system rate base or on gross operating revenues would not be unreasonable, and that the Commission should encourage and facilitate the shifting to such gross operating revenue base as promptly as possible and as conditions warrant; and if conditions warrant not later than August 15, 1958. It is further declared as a matter of legislative policy that if the Corporation does provide the Washington Metropolitan Area with a good public transportation system, with reasonable rates, the Congress will maintain a continuing interest in the welfare of the Corporation and its investors.\n \n \n 185\n D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, 151 U.S.App.D.C. at 236-242, 247-252, 466 F.2d at 407-413, 418-423. See also Part III, supra. This principle had been recognized by District of Columbia regulatory agencies on at least two occasions prior to promulgation of Order No. 1052. In D.C. Transit Sys., Inc. (Order No. 984), supra note 22, the Commission warned that a return to investors would be withheld if service deficiencies were not improved:\n We also would put Transit on notice that in any future rate case if the level of service is allowed to drop below that required by the compact, the commission will consider denying any return to the equity holder so long as that condition exists.\n \n \n 81\n P.U.R.3d at 455. And on an earlier occasion, the District of Columbia Public Utilities Commission pointed to improvident expenditures and indicated that it was setting rates as if Transit were operating efficiently. D.C. Transit Sys., Inc. (Order No. 4480), supra note 155, 25 P. U.R.3d at 378\n \n \n 186\n Pub.L. No. 84-757, 70 Stat. 598-99 (1956), tit. I, pt. I, Sec. 4, quoted supra note 184\n \n \n 187\n Id\n \n \n 188\n Like other regulatory bodies, the Commission was required to balance the interests of both the consumer and the investor. The scheme presented in the Franchise Act and the Compact recognized this balance. If Transit was efficient, it was to be permitted a fair return. If it was not efficient-that is, if it did not provide good service at a reasonaby low cost-then it might be denied a return, or one which otherwise would have been higher. D.C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, 151 U.S.App.D.C. at 236-239, 446 F.2d at 407-410; Washington Gas Light Co. v. Baker, supra note 108, 88 U.S.App.D.C. at 119, 188 F.2d at 15; Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), 390 U.S. 747, 769-770, 790-798, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968); FPC v. Hope Natural Gas Co., 320 U.S. 591, 603, 610, 612, 64 S.Ct. 281, 88 L.Ed. 333 (1945); FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 606-608, 62 S.Ct. 736, 86 L.Ed. 1037 (1942) (concurring opinion)\n \n \n 189\n Pub.L. No. 84-757, 70 Stat. 598, Sec. 4 (1956), quoted supra note 184\n \n \n 190\n Compact, supra note 4, tit. II, art. XII, Sec. 6(a)(4), quoted supra note 49\n \n \n 191\n Supra note 3\n \n \n 192\n 324 U.S. at 554, 65 S.Ct. at 774\n \n \n 193\n Id. at 566, 65 S.Ct. at 779\n \n \n 194\n Supra note 188\n \n \n 195\n 324 U.S. at 566, 65 S.Ct. at 779 (citations omitted)\n \n \n 196\n Id., at 567, 65 S.Ct. at 780\n \n \n 197\n We do not mean to imply that to be reasonable a fare must necessarily be within everyone's budget. See Powell v. Washington Metropolitan Area Transit Comm'n, supra note 68, 158 U.S.App.D.C. at - - -, 485 F.2d at 1083-1085\n \n \n 198\n See text supra at notes 186-187\n \n \n 199\n See Compact, supra note 4, tit. II, art. XII, Secs. 6(a)(1), 6(a)(3), quoted supra note 182 and text supra at note 129, respectively\n \n \n 200\n Key Sys. Transit Lines, 17 P.U.R.3d 505 (Cal.Pub.Utils.Comm'n 1957) is but another variation of this approach. There the transit company refused to adopt and effectuate an improved transportation system designed to save operating expenses and to yield a 9.11% rate of return. In refusing to implement the new system, the company was \"unlawfully denying to itself a reasonable opportunity to earn a fair return upon its property reasonably devoted to public use,\" Id. at 509, and the Commission felt no constitutional compulsion to relieve the company from its 2.7% return\n \n \n 201\n That was quite expectable, owing to the phenomenon in ratemaking known as the \"resistance factor.\" See Powell v. Washington Metropolitan Area Transit Comm'n, supra note 68, 158 U.S.App.D.C. at - n. 17, 485 F.2d at 1083 n. 17 and accompanying text. This factor was discussed by the Commission in the proceeding under review. D. C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 7-8\n \n \n 202\n Id. at 8\n \n \n 203\n From 1960 through 1967, when Transit's basic District of Columbia cash fare remained at a constant 25 cents, the total number of revenue passengers changed from 134,925,430 in 1960 to 133,646,024 in 1967, with a high point of 137,771,403 in 1966 and a low point of 131,685,316 in 1963. S.Rep.No.91-760, 91st Cong., 2d Sess. 24-25. In 1970, on the basis of a 40-cent fare, the Commission projected the ridership at between 112,785,616 and 113,253,766. D. C. Transit Sys., Inc. (Order No. 1052), supra note 1, 85 P.U.R.3d at 8\n \n \n 204\n E. g., Missouri ex rel. Southwestern Bell Tel. Co. v. Public Serv. Comm'n, 262 U.S. 276, 290-291, 43 S.Ct. 544, 67 L.Ed. 981 (1923) (separate opinion). The return of which we speak would embrace, of course, reimbursement of all reasonable costs of providing the service and reasonable compensation for the public's use of the capital utilized in the enterprise\n \n \n 205\n See text supra at notes 182-90\n \n \n 206\n See text supra at notes 182-90\n \n \n 207\n Market Street Ry. v. Railway Comm'n, supra note 3, 324 U.S. at 566-567, 65 S.Ct. 770; FPC v. Hope Natural Gas Co., supra note 188, 320 U.S. at 603, 64 S.Ct. 281; FPC v. Natural Gas Pipeline Co., supra note 188, 315 U.S. at 590, 62 S.Ct. 736; Missouri ex rel. Southwestern Bell Tel. Co. v. Public Serv. Comm'n, supra note 204, 262 U.S. at 291, 43 S.Ct. 544; See also D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, 151 U.S.App.D.C. at 247-252, 466 F.2d at 418-423\n \n \n 208\n See cases cited supra note 207\n \n \n 209\n See Parts II, III, supra\n \n \n 210\n See Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 827, and text supra following note 84\n \n \n 211\n See Part II, supra\n \n \n 212\n See Part III, supra\n \n \n 213\n See Part IV, supra\n \n \n 214\n See cases cited supra note 126\n \n \n 215\n See note 117, supra\n \n \n 216\n Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 824-825; Williams v. Washington Metropolitan Area Transit Comm'n, supra note 75, 134 U.S.App.D.C. at 363, 415 F.2d at 943\n \n \n 217\n Supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 824-826\n \n \n 218\n Supra note 75, 134 U.S.App.D.C. at 362-364, 415 F.2d at 942-944\n \n \n 219\n Order No. 1052, unlike the fare orders in Democratic Central Committee and Williams, has not been superseded by later orders. But the granting of relief is, nevertheless, complicated by the recent public takeover of Transit's operations, see note 117, supra, and the consequent termination of the Commission's faresetting duties. See Compact, supra note 4, tit. III, art. IX, Sec. 41, art. XIII, Sec. 60; Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 824-827. Thus, as in Democratic Central Committee and Williams, restitution is the appropriate method of restoring to the riders any unlawful excess from fares collected under Order No. 1052\n \n \n 220\n Compare Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 826-827\n \n \n 221\n See Part II, supra\n \n \n 222\n Supra note 59, at -, 485 F.2d at 827, See text supra following note 84\n \n \n 223\n Supra note 59, at -, 485 F.2d at 827\n \n \n 224\n Supra note 78, 158 U.S.App.D.C. at - - -, 485 F.2d at 804-805\n \n \n 225\n See note 117, supra. This is the procedure we suggested in Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm'n, supra note 59, 158 U.S. App.D.C. at -, 485 F.2d at 828\n \n \n 226\n See Part III, supra\n \n \n 227\n Supra note 3\n \n \n 228\n See Part IV, supra\n \n \n 229\n See Part III, supra, at notes 136-139; D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, 151 U.S.App.D.C. at 227-230, 466 F.2d at 398-401\n \n \n 230\n See D. C. Transit Sys., Inc. v. Washington Metropolitan Area Transit Comm'n, supra note 4, 151 U.S.App.D.C. at 230-232, 466 F.2d at 401-403\n \n \n 231\n Id\n \n \n 232\n Supra note 59, 158 U.S.App.D.C. at - - -, 485 F.2d at 827-828\n \n \n ", "ocr": false, "opinion_id": 313983 } ]

[ "530 P.2d 175", "13 Cal. 3d 297", "118 Cal. Rptr. 487" ]

[ { "author_str": "Mosk", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": 3831, "opinion_text": "\n13 Cal. 3d 297 (1975)\n530 P.2d 175\n118 Cal. Rptr. 487\nLEW WARDEN, JR., Plaintiff and Respondent,\nv.\nCITY OF LOS ANGELES, Defendant and Appellant.\nDocket No. L.A. 30294.\nSupreme Court of California. In Bank.\nJanuary 13, 1975.\n*298 COUNSEL\nRoger Arnebergh and Burt Pines, City Attorneys, George J. Franscell and John T. Neville, Assistant City Attorneys, for Defendant and Appellant.\nLew Warden, Jr., in pro. per., Olney, Levy, Kaplan & Tenner and Richard Devirian for Plaintiff and Respondent.\nOPINION\nMOSK, J.\nPlaintiff filed an action against the City of Los Angeles, alleging that he had suffered personal injuries and property damage when his sailboat struck a submerged sewer pipe constructed and maintained in Santa Monica Bay by the city. The trial court, sitting without a jury, found for plaintiff and awarded him damages in the amount of $6,416. On this appeal from the ensuing judgment, the primary issue is whether the city was negligent in failing to request the Coast Guard's permission to install visible and audible aids to warn mariners of the hazard caused by the submerged pipe.\nOn June 24, 1967, plaintiff and several others were proceeding in the sailing yacht Bandido from San Francisco to Los Alamitos in heavy fog. Shortly after 2 a.m. the vessel struck the sewer pipe, which lay only 2.2 *299 feet below the surface at low tide. The Coast Guard was summoned and towed the disabled vessel to safety. The vicinity of the pipe was marked by two \"red nun\" buoys which were unlighted and had no audible signals. The pipe was not marked as an obstruction on the charts of Santa Monica Bay issued by the United States Coast and Geodetic Survey.\nThe pipe had been constructed by the city in 1949 as an outfall for the city's Hyperion Sewage Treatment Plant. Three other pipes, installed for the same purpose in 1925, 1957 and 1959, were submerged under the seabed, but the sewer pipe which caused the accident protruded into the waters of the bay. The federal government exercised jurisdiction over the navigable waters of the bay at the time the sewer pipe was installed, and the city was required to and did obtain its authorization for the installation. In connection with the construction, the city inquired of the Coast Guard whether it was advisable to provide a whistling buoy to warn mariners of the pipe. The Coast Guard specified the two unlighted and inaudible buoys, but added that when a nearby marina commenced operations, a lighted sound buoy might be required. The marina, located two miles from the sewer pipe, was constructed in 1965, and small boat traffic in the vicinity increased substantially. The city owned and maintained the buoys.\nIn May and June 1964 three small craft struck the sewer pipe. An employee of the city mentioned the incidents to the chief of the Coast Guard's navigation aids office and inquired whether lights, bells or whistles should be placed near the pipe as a warning to mariners. The officer replied that the markings then in existence were \"entirely adequate\" and that \"no benefit would result from the buoyage using lights or sound in addition to the markings of the present units.\"\nThe trial court recognized in its findings that the Coast Guard has exclusive authority to specify navigational aids and that the city had no authority to warn mariners about the danger posed by the pipe without that agency's approval. The court found, however, that the pipe and the unlighted buoys constituted a dangerous condition because of the absence of visible or audible aids, that the danger was exacerbated because the city negligently failed to formally advise the Coast Guard of the details of the damage to vessels which had previously struck the pipe or to report the inadequacies of the warning system, and had failed to seek authority to install a more comprehensive warning system. The court also found that the city should have known that the pipe was not *300 marked on the charts of the Coast and Geodetic Survey as a menace to navigation, and was negligent in failing to advise the appropriate authorities of this fact.[1]\nGovernment Code section 835, subdivision (b), provides that a public entity may be liable for injury caused by a dangerous condition of \"its property\" if it had notice of the condition and sufficient time prior to the injury to have taken measures to \"protect against\" the condition. The term \"property of a public entity\" is defined as property owned or controlled by the entity (§ 830, subd. (c)), and \"protect against\" includes warning of the dangerous condition (§ 830, subd. (b)).\n(1) The city does not deny that the sewer pipe posed a hazard or that it was aware of the danger created thereby. Indeed the record is clear that the city placed the pipe near the surface although it could have submerged it for safety purposes, as was done with other installations. This created the dangerous condition which invokes liability under section 835, subdivision (a). But, asserts the city, since it was powerless absent Coast Guard authorization to place lights or audible signals upon the buoys, it neither \"controlled\" the property which caused plaintiff's injury, nor could it \"protect against\" the dangerous condition of that property.[2] Thus, contends the city, it had no duty to notify the Coast Guard of prior strikings or defects in the warning system and that any duty to warn plaintiff was that of the federal government rather than that of the city. Furthermore, it is argued, even if it was deemed that the city had the duty to notify the Coast Guard of the inadequacies of the warning system, the Coast Guard was in fact notified by a city employee as well as by others of the prior accidents in 1964 and nevertheless advised the city that the existing warning system was entirely adequate.\nWe cannot agree that the city as a matter of law met its responsibilities in connection with the dangerous condition created by the construction of the sewer pipe. Whether or not the city made an adequate disclosure *301 of the details of the prior accidents to the Coast Guard, it is uncontradicted that after the three collisions in 1964 it merely \"asked\" a representative as to \"current Coast Guard thinking\" on the marking of the pipe and \"the advisability\" of adding lights or whistles to the existing buoys.[3] The city was aware that the Coast Guard had established procedures for the processing of applications for private aids to navigation, yet it never filed such an application nor made any definitive, affirmative request for lights or whistles on the two buoys. A representative of the Coast Guard testified that such a request would have been considered on its merits if it had been submitted.\nOur conclusion in this regard is supported by Shea v. City of San Bernardino (1936) 7 Cal. 2d 688, 692-693 [62 P.2d 365]. In that case, the plaintiff's injuries were caused by a defective grade crossing constructed on a railroad right-of-way on the streets of the defendant city. The city contended that it was powerless to remedy the condition because the railroad commission had exclusive jurisdiction to order the alteration of grade crossings. The court rejected this contention, holding that the city agencies \"may not complacently declare that they were powerless over a long period of years to take any steps to remedy a defective and dangerous condition,\" but have a duty to call upon the commission to order the condition to be corrected, and thus to remove an obvious hazard.\nThe city relies upon the fact that the Coast Guard in 1970 conducted a study of the aids to navigation in the area of the sewer pipe and did not recommend either lighting the buoys or placing audible aids upon them. Instead, it recommended larger buoys, marked with stripes and reflective material. The city appears to claim that its failure to formally and affirmatively request that it be allowed to install lighted and audible aids could not be viewed as a proximate cause of the accident because even after the accident the Coast Guard failed to specify these additional measures. We do not find this contention meritorious. The fact that the Coast Guard failed to specify lights or audible devices after its own study was not binding on the trial court on the issue of negligence and does not as a matter of law signify that an affirmative request by the city to install such devices at its own expense would have been denied by the Coast Guard.\n*302 Since we have concluded that the trial court's judgment may be supported on the grounds stated above, it is not necessary to consider whether the city was also negligent in failing to advise appropriate authorities of the fact that the sewer pipe was not marked on the charts of the Coast and Geodetic Survey as a menace to navigation.\nThe judgment is affirmed.\nWright, C.J., McComb, J., Tobriner, J., Sullivan, J., Clark, J., and Burke, J.,[*] concurred.\nNOTES\n[1] The court ordered the city to make a complete formal disclosure of prior strikings to the Coast Guard, to request permission to install such visible and audible aids as the Coast Guard deemed adequate, and to forward a copy of the court's judgment to the Coast Guard.\n[2] The city relies in this connection on Low v. City of Sacramento (1970) 7 Cal. App. 3d 826, 833-834 [87 Cal. Rptr. 173], in which the court stated, \"Where the public entity's relationship to the dangerous property is not clear, aid may be sought by inquiring whether the particular defendant had control, in the sense of power to prevent, remedy or guard against the dangerous condition; whether his ownership is a naked title or whether it is coupled with control; and whether a private defendant, having a similar relationship to the property, would be responsible for its safe condition.\"\n[3] After the 1964 accidents the city, at the request of the Coast Guard, distributed leaflets to yachtsmen in the area of the buoys pointing out the existence of the pipe and the buoys. The distribution of such a leaflet could not reasonably serve as a sufficient warning to mariners from distant ports, including this plaintiff, who was from San Francisco, and who ran afoul of the pipe three years later.\n[*] Retired Associate Justice of the Supreme Court sitting under assignment by the Chairman of the Judicial Council.\n\n", "ocr": false, "opinion_id": 2608955 } ]

[ "347 F. App'x 27" ]

[ { "author_str": "Per Curiam", "per_curiam": false, "type": "010combined", "page_count": 9, "download_url": "http://www.ca5.uscourts.gov/opinions\\unpub\\08/08-41305.0.wpd.pdf", "author_id": null, "opinion_text": " IN THE UNITED STATES COURT OF APPEALS\n FOR THE FIFTH CIRCUIT United States Court of Appeals\n Fifth Circuit\n\n FILED\n September 15, 2009\n\n No. 08-41305 Charles R. Fulbruge III\n Summary Calendar Clerk\n\n\n\nRENATA LUISA SILVA PISCETTA O’KEEFE; ISABELLA PISCETTA\nO’KEEFE; BARRY O’KEEFE; JANICE O’KEEFE,\n\n Plaintiffs–Appellants,\nv.\n\nNOBLE DRILLING CORPORATION, doing business as Noble Drilling\nServices Inc.; NOBLE DRILLING U.S. INC.; NOBLE DRILLING\nINTERNATIONAL INC.; NOBLE DRILLING EXPLORATION COMPANY;\nNOBLE DO BRASIL LTD.; NOBLE DRILLING (PAUL WOLFF) LTD.;\nNOBLE DRILLING SERVICES INC.; NOBLE INTERNATIONAL, LTD.,\n\n Defendants–Third Party Plaintiffs–Appellees,\n\nSCHLUMBERGER LIMITED,\n\n Third Party Defendants–Appellees.\n\n\n\n\n Appeal from the United States District Court\n for the Southern District of Texas\n USDC No. 3:05-CV-688\n\n\nBefore GARZA, CLEMENT, and OWEN, Circuit Judges.\nPER CURIAM:*\n\n\n *\n Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not\nbe published and is not precedent except under the limited circumstances set forth in 5TH CIR .\n\f No. 08-41305\n\n The O’Keefes, the family of an Australian national who died while working\nas a directional driller off the coast of Brazil, appeal from a district court order\ndismissing their wrongful death action for forum non conveniens. The O’Keefes\nargue that the district court erred by (1) failing to defer to a previous denial of\na motion to dismiss for forum non conveniens issued by another district court\njudge in the case; (2) granting the motion to dismiss for forum non conveniens;\nand (3) failing to include sufficient conditions in its order dismissing the case.\nFor the reasons discussed below, we affirm the district court’s order dismissing\nthe case.\n I\n Peter John O’Keefe, an Australian national and resident of Brazil, died\nwhile working as a directional driller off the coast of Brazil after allegedly\nreceiving inadequate medical care aboard the Noble Paul Wolff. The Noble Paul\nWolff is a semisubmersible drilling rig owned and operated by Paul Wolff, a\nsubsidiary of the Noble Corporation, and Noble and several of its affiliated\nBrazilian corporations are defendants in this case. Noble has brought third-\nparty claims against Schlumberger Limited, the parent company of O’Keefe’s\nemployer, Schlumberger Servicos de Petroleo Ltda., a Brazilian company.\n O’Keefe went to the infirmary aboard the rig with complaints of a sore\nthroat and was treated by Dr. Carla Bastos, a Brazilian doctor employed by\nNoble. He received medical treatment and returned to his quarters. Later that\nevening, he returned to the infirmary unable to breathe, and he went into\ncardiac arrest and passed away.\n The surviving members of O’Keefe’s family filed suit against Noble,\nalleging that O’Keefe’s death was caused by inadequate emergency care. The\ncase was first assigned to Judge Samuel B. Kent. Judge Kent denied Noble’s\n\n\n\nR. 47.5.4.\n\n 2\n\f No. 08-41305\n\nmotion to dismiss for forum non conveniens, finding that the O’Keefes’ choice of\nforum should not be upset because both parties had presented equally credible\nexpert testimony, and therefore the movants had not carried their burden of\nproving the existence of an available forum. Noble proceeded with its defense\nand filed a third-party complaint against Schlumberger based on its alleged role\nin O’Keefe’s death.1 Thereafter, this case was transferred from Judge Kent’s\ndocket to Judge Melinda Harmon’s docket.\n The parties experienced many difficulties in procuring and providing\ndiscovery located in Brazil. Noble has commenced proceedings in Brazil to\nobtain documents and the issuance of compulsory process on witnesses to secure\ntheir deposition testimony, but the Brazilian tribunal has not yet ruled as to\nwhether it will grant Noble’s request. Noble also requested documents from the\nO’Keefes through written discovery pursuant to the Federal Rules of Civil\nProcedure. After waiting for almost two years, Noble filed a motion to compel.\nThe magistrate judge recommended that the district court grant the motion to\ncompel and also suggested that if discovery was not forthcoming, the district\ncourt should reconsider the motion to dismiss for forum non conveniens.\n Schlumberger then filed a motion to dismiss for forum non conveniens and\nto reconsider the denial of Noble’s motion to dismiss for forum non conveniens.\nJudge Harmon granted the motion to dismiss, and in doing so, Judge Harmon\nrecognized that Judge Kent had previously denied Noble’s motion to dismiss for\nforum non conveniens and that Schlumberger’s current motion was very similar\nto Noble’s previous motion. Judge Harmon concluded,\n [G]iven the events in this lawsuit since it was\n transferred to this court as well as information that was\n either not presented to, not considered by, or otherwise\n not available to the predecessor court, it is the opinion\n\n\n 1\n Noble’s third-party complaint included other corporations affiliated with\nSchlumberger; however, only Schlumberger Limited is involved in this appeal.\n\n 3\n\f No. 08-41305\n\n of this court that the case should now be dismissed in\n favor of a more appropriate forum.\nThe O’Keefes appeal from this order.\n II\n The O’Keefes first argue that Judge Harmon erred in granting the motion\nto dismiss for forum non conveniens in light of Judge Kent’s previous denial of\nNoble’s motion to dismiss for forum non conveniens, and that Judge Harmon\nshould have reviewed Judge Kent’s previous denial for an abuse of discretion.\nWe review a district court’s decision to reconsider a prior judge’s interlocutory\nruling for abuse of discretion.2 Under the law of the case doctrine, “when a\ndistrict judge has rendered a decision in a case, and the case is later transferred\nto another judge, the successor should not ordinarily overrule the earlier\ndecision.” 3 However, the law of the case doctrine “is a rule of convenience and\nutility and yields to adequate reason, for the predecessor judge could always\nhave reconsidered his initial decision so long as the case remained in his court.” 4\nA judge to whom a case has been transferred has the same power to reconsider\nprior rulings as the predecessor judge.5\n Judge Harmon did not abuse her discretion in reconsidering the motion to\ndismiss for forum non conveniens. Judge Harmon noted that Schlumberger’s\nmotion was very similar to the motion previously submitted by Noble, but that\n“given the events in this lawsuit since it was transferred to this court as well as\ninformation that was either not presented to, not considered by, or otherwise not\navailable to the predecessor court,” the motion to dismiss for forum non\n\n\n 2\n Loumar, Inc. v. Smith, 698 F.2d 759, 763 (5th Cir. 1983); Gallimore v. Missouri Pac.\nR.R. Co., 635 F.2d 1165, 1171 (5th Cir. 1981).\n 3\n Loumar, 698 F.2d at 762.\n 4\n Id.\n 5\n Abshire v. Seacoast Prods., Inc., 668 F.2d 832, 837-38 (5th Cir. 1982).\n\n 4\n\f No. 08-41305\n\nconveniens should now be granted. Since the time that Judge Kent denied\nNoble’s motion to dismiss for forum non conveniens, Noble filed claims against\nSchlumberger as a third-party defendant, the parties had been unable to procure\nand provide discovery located in Brazil, and the district court learned that the\nO’Keefes had filed a motion to toll the statute of limitations in a Brazilian court.\nJudge Harmon had the same power to reconsider the motion to dismiss for forum\nnon conveniens as Judge Kent would have had, and she was not required to\ndefer to Judge Kent’s previous ruling.\n III\n The O’Keefes next argue that the district court erred in its decision to\ngrant the motion to dismiss for motion non conveniens. We review a district\ncourt’s dismissal on the basis of forum non conveniens for clear abuse of\ndiscretion.6 In reviewing forum non conveniens decisions, our duty is “to review\nthe lower court’s decisionmaking process and conclusion and determine if it is\nreasonable; our duty is not to perform a de novo analysis and make the initial\ndetermination for the district court.” 7\n In deciding whether to dismiss a case for forum non conveniens, the\ndistrict court must first determine whether an adequate alternative forum is\navailable.8 If an alternative forum is both adequate and available, the district\ncourt must then weigh various private and public interest factors to determine\nwhether dismissal is warranted.9 Ultimately, the “inquiry is where trial will\n\n 6\n Gonzalez v. Chrysler Corp., 301 F.3d 377, 379 (5th Cir. 2002) (citing Baumgart v.\nFairchild Aircraft Corp., 981 F.2d 824, 835 (5th Cir. 1993)).\n 7\n In re Air Crash Disaster Near New Orleans, La. on July 9, 1982, 821 F.2d 1147, 1167\n(5th Cir. 1987) (en banc) (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 257-58 (1981)),\nvacated on other grounds sub nom. Pan Am. World Airways, Inc. v. Lopez, 490 U.S. 1032\n(1989), opinion reinstated except as to damages, 883 F.2d 17 (5th Cir. 1989).\n 8\n Id. at 1165.\n 9\n Id.\n\n 5\n\f No. 08-41305\n\nbest serve the convenience of the parties and the interests of justice.”10 A\nplaintiff’s choice of forum is not conclusive, and “a foreign plaintiff’s selection of\nan American forum deserves less deference than an American citizen’s selection\nof his home forum.”11 The defendant has the burden of proof on all elements.12\n The O’Keefes argue that the district court erred in finding Brazil to be an\navailable and adequate alternative forum. An alternative forum is available\nwhen “the entire case and all parties can come within the jurisdiction of that\nforum.” 13 An alternative forum “is adequate when the parties will not be\ndeprived of all remedies or treated unfairly, even though they may not enjoy the\nsame benefits as they might receive in an American court.” 14\n The district court did not abuse its discretion in determining that Brazil\nis an available forum for this litigation. The O’Keefes contend that Brazilian\ncourts will not accept this case because O’Keefe died on a Panamanian-flagged\nvessel, which Brazilian courts recognize as foreign territory, and that a Brazilian\ncourt would hold that suit would be proper in the domicile of the defendant.\nHowever, the district court found that because the most directly involved parties\ncould definitely be brought before the Brazilian courts, and the parent\ncorporations could likely be brought before them, Brazil is an available forum.\nThis finding was bolstered by the fact that Noble and Schlumberger have agreed\nto a lawsuit in Brazil.\n\n\n\n\n 10\n DTEX, LLC v. BBVA Bancomer, S.A., 508 F.3d 785, 794 (5th Cir. 2007).\n 11\n In re Air Crash Disaster, 821 F.2d at 1164 (citing Piper Aircraft Co., 454 U.S. at 255-\n56).\n 12\n DTEX, 508 F.3d at 794 (citing In re Air Crash Disaster, 821 F.2d at 1164).\n 13\n In re Air Crash Disaster, 821 F.2d at 1165.\n 14\n Id. (citing Piper Aircraft Co., 454 U.S. at 255; Syndicate 420 at Lloyd’s London v.\nEarly Am. Ins. Co., 796 F.2d 821, 829 (5th Cir. 1986)).\n\n 6\n\f No. 08-41305\n\n The district court also did not abuse its discretion in determining that\nBrazil is an adequate forum. While the O’Keefes argued that the case would\ntake four years to resolve at the trial court level, the district court found that\nthis was not an unacceptable level of delay, particularly in light of the fact that\nthis case had already been pending for two-and-a-half years and was still not\nready for trial. The district court also found that the inability of Brazilian courts\nto compel extraterritorial discovery was likely inconsequential because the\naccident occurred in Brazil, the corporate entities with actual involvement in\nthis case are all Brazil-based corporations, and this litigation had repeatedly\nbeen delayed because of the inability of the parties to procure and provide\ndiscovery located in Brazil. Also, most of the witnesses located in the United\nStates are party witnesses whose compulsion will not be required. Thus, we\ncannot say that the district court abused its discretion in finding that Brazil is\nan available and adequate alternative forum.\n The O’Keefes also contend that the district court improperly weighed the\npublic and private interest factors in its decision to dismiss the case for forum\nnon conveniens. The relevant private interest factors are: (1) “the relative ease\nof access to sources of proof”; (2) the “availability of compulsory process for\nattendance of unwilling . . . witnesses”; (3) “the cost of obtaining attendance of\nwilling[] witnesses”; (4) the “possibility of [a] view of [the] premises,” if\nappropriate; and (5) any other practical factors that make trial “expeditious and\ninexpensive.”15 The district court found that the private interest factors weighed\nin favor of dismissal of the case. The parties had already experienced many\ndifficulties in obtaining access to sources of proof located in Brazil or held by\nBrazilian domiciliaries. Most of the witnesses the O’Keefes listed who live in the\nUnited States are Noble employees, and Noble has consented to jurisdiction in\n\n\n\n 15\n DTEX, 508 F.3d at 794 (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947)).\n\n 7\n\f No. 08-41305\n\nBrazil. Also, most unwilling, non-party witnesses are likely to reside in Brazil\nbeyond the reach of the district court. While the O’Keefes have stipulated that\nthey will pay the costs of counsel for Noble and Schlumberger’s counsel to go to\nBrazil to depose relevant witnesses located there, this stipulation does not\noutweigh the difficulties in obtaining access to sources of proof or the\nunavailability of compulsory process for unwilling witnesses. Therefore, the\ndistrict court did not abuse its discretion in finding that the private interest\nfactors weighed in favor of dismissal.\n Although the district court found that the private interest factors weighed\nin favor of dismissal, it also weighed the public interest factors and found that\nthey weighed strongly in favor of dismissal.16 The relevant public interest\nfactors are:\n the administrative difficulties flowing from court\n congestion; the local interest in having localized\n controversies resolved at home; the interest in having\n the trial . . . in a forum that is familiar with the law\n that must govern the action; the avoidance of\n unnecessary problems in conflicts of law, or in\n application of foreign law; and the unfairness of\n burdening citizens in an unrelated forum with jury\n duty.17\nThe district court found that because this case was governed by Brazilian law\nregarding the death of an Australian citizen while working in Brazil for a\nBrazilian company, this case has no meaningful connection to this forum other\nthan the headquarters of the parent companies of two involved parties. The\ndistrict court did not abuse its discretion in finding that the public interest\n\n\n\n 16\n See In re Air Crash Disaster, 821 F.2d at 1164 (holding that a court is required to\nexamine the public interest factors only if it cannot determine whether the private interest\nfactors weigh in favor of dismissal).\n 17\n Id. at 1162-63.\n\n 8\n\f No. 08-41305\n\nfactors weighed in favor of dismissal. Therefore, the district court did not abuse\nits discretion in granting the motion to dismiss for forum non conveniens.\n IV\n Finally, the O’Keefes argue that the district court failed to impose\nsufficient conditions on its dismissal, as required by Baris v. Sulpicio Lines,\nInc.18 In Baris, we recognized that “courts must take measures, as part of their\ndismissals in forum non conveniens cases, to ensure that defendants will not\nattempt to evade the jurisdiction of the foreign courts.” 19 Here, the district court\nsatisfied this requirement by conditioning the dismissal “on all defendants\nsubmitting to the jurisdiction of the Brazilian court.”\n * * *\n Therefore, we hold that the district court did not abuse its discretion in\ndismissing this case for forum non conveniens, and its judgment is AFFIRMED.\n\n\n\n\n 18\n 932 F.2d 1540, 1551 (5th Cir. 1991).\n 19\n Id.\n\n 9\n\f", "ocr": false, "opinion_id": 68347 } ]

[ "760 F. Supp. 1078" ]

[ { "author_str": "Haight", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": 1319, "opinion_text": "\n760 F. Supp. 1078 (1991)\nARGONAUT INSURANCE COMPANIES, Plaintiff,\nv.\nMEDICAL LIABILITY MUTUAL INSURANCE COMPANY and Wausau Insurance Companies, Defendants.\nNo. 88 Civ. 2750 (CSH).\nUnited States District Court, S.D. New York.\nMarch 13, 1991.\n*1079 Mayer, Brown & Platt (Robert C. Bata and Mark C. Van Norman, of counsel), New York City, for plaintiff.\nLaw Office of Michael A. Ellenberg (Michael A. Ellenberg, of counsel), New York City, for defendants.\n\nMEMORANDUM OPINION AND ORDER\nHAIGHT, District Judge:\nIn this diversity action presently pitting one medical malpractice insurer against another, the issue relates to the proper allocation of costs incurred in defending malpractice actions. Following extensive discovery, the parties cross-move for summary judgment under Rule 56, Fed.R.Civ.P.\n\nBACKGROUND\nSince the mid-1960's, physicians who are members of the Medical Society of the State of New York (\"MSSNY\") have received medical malpractice liability insurance coverage from three insurance companies. The initial coverage was furnished by defendant Wausau Insurance Company (\"Wausau\"). Wausau covered MSSNY members from the inception of the coverage to June 30, 1974. When Wausau stopped writing that coverage, it was succeeded by plaintiff Argonaut Insurance Companies (\"Argonaut\"), which wrote medical liability insurance for MSSNY members from July 1, 1974, to June 30, 1975. Argonaut then ceased the coverage and was succeeded by defendant Medical Liability Mutual Insurance Company (\"MLMIC\"). MLMIC commenced its coverage on July 1, 1975. It continues to the present day.\nThis type of non-overlapping coverage is known in the insurance industry as \"end-to-end\" coverage. The policies MLMIC issues to covered physicians are annual policies, so that MLMIC maintains the coverage for a particular physician by writing a new policy for that physician at the end of each policy year. For all that appears from the record, this is the industry practice in such insurance policies.\nA claim for medical malpractice may arise out of a single diagnosis or treatment, or out of a physician's allegedly negligent treatment of a patient over a number of years (for example, negligent failure to diagnose cancer). This is known as a \"continuous treatment\" medical malpractice claim. Within the parlance of medical malpractice insurance, a \"continuous treatment case\" involves allegations of malpractice spanning more than one policy period where there is a single insurer involved. An \"end-to-end case\" involves allegations of malpractice spanning more than one policy period where there are two or more insurers involved.\nBy virtue of Argonaut's relatively brief appearance on the stage of medical malpractice coverage for MSSNY physicians, it found itself involved in continuous treatment cases where the plaintiff alleged malpractice beginning during the period of Wausau's coverage, extending through Argonaut's period of coverage, and continuing *1080 into MLMIC's coverage. This put Argonaut into relationship with the other two insurance companies in respect of, inter alia, the costs of defending against the action (attorney's fees, investigation expense, and the like). As to a continuing treatment case alleging malpractice beginning during the policy year July 1, 1974 through June 30, 1975 but extending thereafter, Wausau had dropped out of the picture, and Argonaut was in relation only with MLMIC.\nA question of obvious mutual concern was how defense costs should be allocated among insurers in end-to-end cases. Until February 1987, Argonaut shared end-to-end defense costs equally with Wausau and MLMIC (or with MLMIC only, if the malpractice claimed did not arise until after Wausau's coverage had ceased). However, in February 1987 Argonaut rethought that allocation, and during that month \"put the defendants [Wausau and MLMIC] on notice that it would no longer allocate end-to-end defense costs equally when the policy periods of the respective insurers were unequal.\" Complaint at ¶ 16. Notwithstanding that notice, the two defendants maintain that Argonaut was bound by prior agreement to allocate defense costs equally, and instructed defense attorneys handling the cases to bill their fees and expenses on an equal basis among the insurance companies concerned. Since February 1987 Argonaut continued to pay on that basis, under protest and with all rights reserved, to avoid the prejudice to itself and its insureds which would result if Argonaut placed defense counsel in the center of a conflict among the insurance companies. Id. at 17. Argonaut commenced this action for declaratory and injunctive relief, and for restitution for defense costs \"paid by Argonaut under protest in excess of its pro rata share in end-to-end coverage cases.\" Complaint, prayer for relief at ¶ (4).\nSubsequently Wausau was dismissed from the action by a stipulation of settlement endorsed by the Court on May 1, 1989. Argonaut and MLMIC continued to litigate the issue, culminating in their cross-motions for summary judgment. Given plaintiff's theory as pleaded in the complaint, the malpractice cases forming the basis for this action involve only those cases where the malpractice plaintiff alleges negligence during Argonaut's one-year policy, and also alleges continued treatment and negligence during the period of two or more of the successive annual policies issued by MLMIC. That is because malpractice during the year of Argonaut's coverage and only during the first succeeding year of MLMIC's coverage would, even on Argonaut's theory, result in an even allocation of the costs of defense.\nArgonaut's claim is based primarily upon its perception of fairness. MLMIC resists anything other than equal division of the costs of defense on two grounds. First, MLMIC contends that in an exchange of correspondence beginning in 1977, Argonaut agreed to the equal division of defense costs among the insurance companies concerned. Second, MLMIC contends that the provisions in the insurance policies with respect to \"other insurance\" mandate an equal division of defense costs.\nMLMIC's conception of how these defenses relate to each other is not entirely clear. In its main brief, MLMIC argued that \"the parties' overall agreement in 1977 and their subsequent case by case agreements supersede the policy provisions ...\" 18 at n. 6. The reply brief states at 2 that if the Court determines that the \"other insurance\" clause obligates the two insurers to share defense costs equally, then I need not address the question of whether they entered into and are bound by a letter agreement to share defense costs equally.\nIt seems to me that MLMIC had the issues right the first time. Accordingly I will consider, first, the pertinent exchange of correspondence between the parties; and second, the terms of the policies.\n\nThe Correspondence\nUnder date of October 24, 1977, Marvin Kipnes, the claims supervisor for Argonaut, addressed a letter to John Andreotta, his opposite number at MLMIC. Kipnes began his letter by confirming his recent discussions with Andreotta \"with regard to *1081 the handling of claims involving overlapping coverage.\" Kipnes expressed the desire \"to take this opportunity to ratify the methods which have served us well in the past; offer some proposals for a more efficient means of accomplishing this function; and clarify certain issues which may require same.\" Kipnes expressed his objective \"to promulgate procedures\" enabling the two insurance companies to discharge their responsibilities in manners consistent with their best interests and of their mutual insureds. \"It is also hoped,\" Kipnes continued in the first paragraph of his letter, \"that by standardizing these procedures, we can eliminate any potential friction and create an atmosphere of cooperation which will facilitate the more important decisions regarding indemnification which are likely to ensue.\"\nTurning from the general to the particular, Kipnes dealt with a number of procedures. That portion of his letter most pertinent to the dispute at bar appears in the third paragraph, which I quote in full:\nIt is the consensus of opinion among the management of Argonaut and Ed Bourbeau of Employers Insurance of Wausau that the carrier with the greatest exposure should maintain the right to designate both the adjustor and the attorney and accept responsibility for originating the assignment or referral. The other carrier would then have the option of participating, on an equal basis, in the expenses associated with the investigation and defense. In the alternative, they may conduct an independent instigation and/or assign co-counsel to monitor the defense. The relative exposure would be fixed by a determination of which carrier provided coverage to the insured during the time when the treatment or surgery, which is the basis for the claims, occurred. In those instances where the exposure is not readily definable, the carrier which provided coverage to the insured for a preponderance of the time in question, would assume this role. The assignments would be subject to change if the discovery process reveals that the initial assessment was incorrect.\nKipnes concluded this pleasant missive with this paragraph:\nPlease consider these proposals and suggestions and favor us with a response at your earliest opportunity. Thank you for your time and cooperation in this matter.\nAndreotta favored Kipnes with his response in a letter dated November 4, 1977. The first three paragraphs of that letter are pertinent to the present dispute. They read as follows:\nThank you for your letter of October 24, 1977. As you pointed out, it is good to have these understandings in writing. We discussed this further on Thursday, November 3, 1977 and I would like to present in this note to you our agreement with the many points presented in your letter.\nYour presentation of the approach to be taken on cases involving end-to-end coverage between our companies is exactly that which we have discussed in the past and we are in full agreement with the approach.\nTo insure that there be no misunderstanding of our respective positions, I am preparing copies of your letter of October 24, and copies of this letter, so that all the members of our staff can have this correspondence to serve as a guideline for future activity.\nUnder date of July 25, 1979, Kipnes had occasion to write another letter to Andreotta. That letter referred to meetings between representatives of the two companies on July 10, 1979, at which they \"discussed several matters of mutual interest and explored the means through which we could promote a greater degree of cooperation.\" Kipnes then wrote:\nWe have both reaffirmed our willingness to participate jointly in the investigation and defense of cases involving end-to-end coverage, whenever possible, and share equally in the expenses associated with same.\nTo implement these procedures Argonaut's Malpractice Claims Department prepared a draft letter to be sent to MLMIC with respect to malpractice claims falling *1082 within the joint concern of the two companies. I reproduce below an example of that form letter indicating by the use of brackets the spaces left blank and to be filled in to reflect the circumstances of the particular cases:\nThis will confirm our telephone conversation of [ ]. At that time we discussed the coverage which [ ] has for the above loss.\nA review of the information reveals that the plaintiff's attorney will allege negligence from [ ], which spans your coverage period, our coverage period and [ ] coverage period. Obviously, we have an end-to-end coverage situation. As such, we have agreed to share equally in the expenses associated with the instigation and defense of this matter in his behalf. Please instruct (we have instructed) the adjustor and the attorney to forward copies of their reports to our respective offices simultaneously, and copies of their bills to both companies, with indication of the amount due from each. We have provided appropriate advices to the insured with regard to our proposed handling of this matter.\nAs alleged in its complaint, Argonaut sought to put an end to that equal division of defense costs when it gave notice to that effect to Wausau and MLMIC in February 1987.\n\nThe Provisions of the Insurance Policies\nThe Argonaut policy and the MLMIC policy contain identical \"other insurance\" clauses. That clause provides as follows:\n\nOther Insurance. If the insured has other insurance against loss or expense covered by this policy, the company shall not be liable under this policy for a greater proportion of such loss or expense than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss or expense.\nThe case for Argonaut arising out of this clause is that it expressly provides for the pro rata allocation of defense expenses (a proposition which I do not understand MLMIC to challenge); and that the proper calculation of the total applicable limits of liability against defense expenses must take into account the number of annual policies MLMIC issued with respect to the physician sued for malpractice (a proposition MLMIC strenuously resists). In its main brief at 29-30 Argonaut illustrates its calculations. It assumes 17 consecutive one-year insurance policies issued to a particular physician: four by Wausau, one by Argonaut (makes covered the risk for only one year) and the remaining twelve by MLMIC. On those facts, Argonaut made the following argument:\nAll seventeen policies are exposed to potential liability, so the total applicable limit of liability of all insurance against the defense expense in this case is 17 times the per person limit of liability per policy ($1,000,000), for a total of $17,000,000. The ratio of Argonaut's limit of liability to the total applicable limit of liability of all insurance against such expense is 1 to 17, so Argonaut is obligated to pay one-seventeenth (6%) of defense expenses. Wausau is liable for four-seventeenths (24%) of the defense expenses and MLMIC is liable for the remaining twelve-seventeenths (70%) of the defense expenses. (emphasis in original).\nMLMIC's response is that no matter how many times a policy is annually renewed, the policy limitation never exceeds $1,000,000, so that there is no difference between the liability exposure of the two companies, and defense costs should be allocated accordingly.\nArgonaut says this is not fair because MLMIC has by definition received more premiums from the physician in question. MLMIC says it is not a question of fairness but of agreement and provisions of the policies.\n\nDISCUSSION\n\nThe Correspondence\nArgonaut contends that its purported agreement to share defense costs equally with MLMIC falls within the Statute of *1083 Frauds of New York, General Obligations Law § 5-701 (McKinney's 1989).\nThe statute provides in pertinent part:\na. Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking:\n1. By its terms is not to be performed within one year from the making thereof....\nArgonaut further contends that the exchange of correspondence quoted supra is not sufficient to satisfy the statute.\nI agree with MLMIC that the alleged agreement does not fall within the Statute of Frauds. The provision upon which Argonaut relies applies to an agreement which \"by its terms\" could not be performed within one year. Unless the wording of the agreement requires that construction, the agreement does not fall within the statute. See Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458, 464, 457 N.Y.S.2d 193, 196, 443 N.E.2d 441, 444 (1982). In the case at bar, each malpractice claim falling within Argonaut's coverage could have been disposed of by motion, settlement or trial within one year. One may concede that is unlikely, but likelihood is not the issue. Application of the Statute of Frauds depends upon the explicit terms of the agreement. See Shirley Polykoff Advertising Inc. v. Houbigant, Inc., 43 N.Y.2d 921, 922, 403 N.Y.S.2d 732, 733, 374 N.E.2d 625, 626 (1978) (\"This contract is not one which by its terms can be performed within a year. If it were, it would be without the statute even if, as a practical matter, it were well nigh impossible of performance within a year.\")\nI conclude, therefore, that the agreement to share expenses which MLMIC alleges Argonaut entered into does not fall within the Statute of Frauds. But that does not end the inquiry. It must still appear that the exchange of correspondence gives rise to a binding contract.\nIn Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69 (2d Cir.1989), the Second Circuit considered whether an exchange of memoranda between the parties gave rise to a binding and enforceable contract. The Court of Appeals stated generally that a party's\nintent to be bound was revealed by (1) the language of the agreement; (2) the context of the negotiations; (3) the existence of open terms; (4) partial performance; and (5) the necessity of putting the agreement in final form, as indicated by the customary form of such transactions.\nOf those factors the first, \"the language of the agreement, is the most important.\" 884 F.2d at 72.\nIn the case at bar, Kipnes' exchange of correspondence with Andreotta clearly expresses an intent by Argonaut to be bound by the procedures Kipnes himself suggested. Kipnes characterized his suggestions, including equal division of defense costs, as \"proposals\" and recommended them to Andreotta as \"a means of standardizing these procedures\" between the insurance companies involved. That language appears in the October 24, 1977 letter. In his November 4, 1977 reply on behalf of MLMIC, Andreotta expressed his \"full agreement with the approach\" proposed by Kipnes, and even circulated copies of Argonaut's October 24, 1977 letter and copies of his response to his staff, so that they could have \"this correspondence to serve as a guideline for future activity.\" Argonaut's subsequent correspondence, including the drafting of the form letter to be used in processing claims, implements Kipnes' proposal to which Andreotta agreed. Thus \"partial performance\" of the agreement by Argonaut is evidenced; and the \"context of the negotiations\" consisted of the insurance companies attempting to work out guidelines and procedures for the prompt and efficient handling of claims. Thus a number of factors articulated by the Second Circuit in Arcadian Phosphates militate in favor of the conclusion that Argonaut and MLMIC entered into a binding agreement for the division of defense costs.\nArgonaut argues that the Kipnes letter of October 24, 1977 was too vague and preliminary to give rise to a binding agreement. *1084 I do not agree. The language Argonaut particularly relies upon is this:\nThe other carrier would then have the option of participating, on an equal basis, in the expenses associated with the investigation and defense. In the alternative, they may conduct an independent investigation and/or assign co-counsel to monitor the defense.\nAdmittedly this language gave Argonaut an option as to how to proceed, that option to be exercised on a case-by-case basis. In a given case, Argonaut could participate \"on an equal basis\" in the expenses of investigation and defense. However, with respect to any particular case Argonaut retained the option to conduct its independent investigation or assign co-counsel to \"monitor the defense.\" If Argonaut chose that option, then presumably each insurance company would bear the cost of its own investigation and defense counsel. In point of fact, Argonaut appears to have followed the equal division of costs as a matter of routine. Certainly all the cases involved in this litigation arise out of such conduct on Argonaut's part. In any event, the existence of an option Argonaut might exercise in a particular case does not undermine its agreement to equally divide defense costs if it chose not to exercise that option.\nAccordingly I conclude that this exchange of correspondence constitutes an agreement binding upon Argonaut.\n\nThe Policy Provisions\nIf I am wrong in this conclusion concerning Argonaut's express contractual agreement with MLMIC, then the case turns upon the proper construction of the \"other insurance\" clause, identical in both the Argonaut and the MLMIC policies.\nUnlike the letters exchanged between Argonaut and MLMIC, which give rise to a contract between those parties, the policies of insurance are contracts between the insuring company and their insureds. Nonetheless, the \"other insurance\" clause in the policies contemplates the existence of another insurance company involved in the same loss or claim; the clause speaks directly to allocation of \"loss or expense\" in such circumstances.\nIn their cross-motions and briefs, the parties adopt a useful and pragmatic approach to the issues that divide them. The Court is asked to decide general questions of contract and policy construction. The application of the Court's rulings to the particular facts of the case may require additional consideration or litigation. For present purposes, the briefs of counsel assume that each policy issued by Argonaut and MLMIC had an applicable limit of liability stated in the declarations of $1 million per person. See, e.g., MLMIC's main brief at 19. In the context of that assumption, Argonaut makes the argument previously noted, that its pro rata liability for defense expenses is one-seventeenth, there having been 17 consecutive one-year policies issued by Wausau, then by Argonaut, and more recently by MLMIC, with Argonaut having issued the coverage for only one year.\nMLMIC argues that in respect of any malpractice claim involving both the Argonaut policy and MLMIC policies, the proper pro rata division of defense costs is an equal division.\nMLMIC's contention is supported by two decisions of this Court: Emons Industries, Inc. v. Liberty Mutual Fire Insurance Co., 481 F. Supp. 1022 (S.D.N.Y.1979) (Duffy, J.), and Vigilant Insurance Company v. Employers Insurance of Wausau, 626 F. Supp. 262 (S.D.N.Y.) (Stanton, J.). Argonaut says these cases are distinguishable or wrongly decided. I do not agree.\nEmons involved product liability insurance. The product involved was that synthetic estrogen drug which came to be known as DES, a drug subsequently revealed to be a potential cause of cancer in women who ingested it during pregnancy, as well as in their female offspring. One insurance company, Liberty, insured Emons against product liability under a series of annual policies between 1964 through 1970. Another insurance company, Reserve, insured Emons against product liability for a one-year period from November, 1970 through November, 1971. A number *1085 of actions were commenced against Emons for damages suffered by daughters of women who had taken DES during their pregnancies. It was apparent from the pleadings that the claims might \"fall within either Liberty's coverage or that of Reserve.\" 481 F.Supp. at 1026. The issues before Judge Duffy, generated by Emons' declaratory judgment action against the two insurers and the latter's cross-motions for summary judgment, included the amount of Reserve's proper contribution to the past and future defense of Emons. On that point, Reserve made the same argument Argonaut makes in the case at bar:\nReserve argues that it owes only its proportionate share of the litigation expenses. It computes this share by use of a rather interesting, albeit self serving, formula: since the complaints in issue specify a period of exposure to DES and a manifestation of medical problems between 1947 through 1975, the amount to be contributed to litigation expenses should be fixed by the number of years a given carrier insured Emons over the liability years. Despite its facial appeal, this formula of apportionment must be rejected. 481 F.Supp. at 1025-26.\nJudge Duffy rejected that argument because \"Reserve's duty to defend Emons extends beyond its duty to indemnify\"; each complaint against Emons comprehended \"injuries potentially within the coverage of Reserve's policy despite the fact that the policy protected Emons for only a one year period\"; and\nthe disparate number of years of coverage notwithstanding, both insurance companies stand on equal footing with respect to potential liability and their concomitant duty to defend. Id. at 1026 (footnote omitted).\nIn these circumstances, Judge Duffy directed Reserve to reimburse Liberty for one half of defense costs previously incurred. As to future claims, Judge Duffy's initial opinion permitted Reserve to designate trial counsel of its own choosing to represent Emons, in which event it would have satisfied \"its obligation to defend Emons.\" Should Reserve decide to permit counsel designated by Liberty to continue to represent Emons, then Reserve was obligated to \"contribute its pro rata share of the litigation expenses.\" Id. at 1027. In an amended opinion, Judge Duffy deleted his directions for future representation, since \"there is no indication that any conflict presently exists either between the insured and the insurance companies or between the insurance companies themselves\"; nor did a future conflict of interest appear likely. Accordingly the judge concluded that \"it was inappropriate to permit Reserve to retain independent counsel to defend the plaintiff,\" that being a choice belonging only to the plaintiff. Judge Duffy concluded his amended opinion by directing Reserve \"to satisfy its duty to defend plaintiff by contributing its pro-rata share of the current defense costs.\" Id. at 1028.\nJudge Duffy did not further define \"pro rata share\" in respect of current defense costs; but there is no reason to suppose, given his prior analysis, that the division would be other than equal as between Liberty and Reserve.\nIn Vigilant Insurance Company, the two warring Insurance companies covered against malpractice claims a psychiatrist who had sexual intercourse with his patients. One insurance company, Employers, covered the psychiatrist from January 1, 1970 through June 30, 1973. Vigilant was his carrier from July 1, 1973 to May 1, 1978. The coverage was essentially identical. In addition, each policy contained an \"other insurance\" clause comparable to those at bar. See 626 F.Supp. at 269. Vigilant having settled two claims against the insured psychiatrist, the issue arose of Employer's obligation to make a pro rata contribution.\nJudge Stanton began with the general proposition that \"where two insurance policies cover the same risk, and one carrier makes payment on a loss, that carrier is entitled to a pro rata contribution from the other carrier.\" Id. at 269. In his view, \"there were two approaches for determining employers' pro rata contribution, both of which dictate the same result: Employers must contribute 50% of Vigilant's settlement costs.\" Ibid. The first approach *1086 is that relied upon by MLMIC in the case at bar. Judge Stanton said:\nThe first method looks to the \"other insurance\" clauses of both Vigilant's and Employers' policies, which are essentially identical in relevant part. Since the clauses are not repugnant, they can be considered for purposes of determining liability. Employers' policy provides that if a loss or expense covered by its policy is also covered by another policy, Employers will not be liable for \"a greater proportion of such loss or expense than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss or expense.\" Since both Vigilant's and Employers' policy limits of liability are $500,000, Employers' proportional share of liability for a loss which is also covered by Vigilant's policy is 50% ($500,000/$1,000,000 = ½ or 50%). Ibid.\n\nThe second method Judge Stanton described as one of \"simple division,\" proceeding from the facts that two carriers were involved, and \"[s]ince the acts of malpractice span both coverage periods, it is impractical to apportion the liability between periods.\" Ibid. That alternative basis of decision in Vigilant is arguably distinguishable from the case at bar, where the disparity in coverage periods is more pronounced, and accordingly lends itself (or so Argonaut contends) to an easier apportionment of liability.\nBut those circumstances do not affect Judge Stanton's first ground for decision, which seems to me right and is fully applicable to the case at bar. I also think that the disparate number of years of coverage, which lies at the heart of Argonaut's argument, has no significance in the proper apportionment between the two insurance companies. That is the conclusion Judge Duffy reached in Emons, and I think he was right. The basic flaw in Argonaut's conception is that the potential liability of the two companies — $1 million for each of them — remains the same, no matter how many times MLMIC renewed its one-year policies. Renewing a $1 million policy for ten years does not convert it into a $10 million liability coverage. No one contends that is so, not even the Argonaut witnesses who testified at deposition. This seems to me the governing reality. To be sure, MLMIC received more premiums on the risk because it renewed the coverage; but I do not think that gives Argonaut a \"fairness\" argument sufficient to overcome the provisions of the \"other insurance\" clauses, where \"loss or expense\" are treated alike for the purpose of apportionment among two policies covering the same risk.\nArgonaut relies upon Judge Weinfeld's opinion in National Grange Mutual Insurance Co. v. Continental Casualty Co., 650 F. Supp. 1404 (S.D.N.Y.1986), affirmed on rehearing slip op. 85 Civ. 5783 (Feb. 11, 1987). While in the circumstances of National Grange Judge Weinfeld required contribution \"from each insurer in proportion to the aggregate limit of its coverage under the relevant primary policies issued by it,\" opinion on rehearing at slip op., it does not appear that there was an agreement reached by letters between the insurance companies, as in the case at bar; Judge Weinfeld was apparently not presented with \"other insurance\" clauses, as in the case at bar; and to the extent Judge Weinfeld relied upon New York law, see 650 F.Supp. at 1413 n. 37, the Second Circuit has subsequently said his conclusion \"is of doubtful validity.\" Federal Insurance Company v. Cablevision Systems Development Co., 836 F.2d 54, 60 (2d Cir. 1987).\nWhile the parties raise other arguments in their briefs, I need not reach them. For the reasons stated, I conclude that MLMIC is correct, and that there must be an equal division of defense costs as between these two insurers.\nAccordingly Argonaut's motion for summary judgment is denied. MLMIC's crossmotion is granted. Counsel for MLMIC are directed to settle an order and judgment consistent with this Opinion on seven (7) days' notice not later than thirty (30) days of the date of this Opinion.\nIt is SO ORDERED.\n", "ocr": false, "opinion_id": 1420859 } ]

[ "18 So. 3d 541" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\n18 So. 3d 541 (2009)\nGIBSON\nv.\nO'REGAN.\nNo. 3D09-1877.\nDistrict Court of Appeal of Florida, Third District.\nOctober 19, 2009.\nDecision without published opinion Vol. dismissed.\n", "ocr": false, "opinion_id": 1560976 } ]

[ "493 F.2d 1170" ]

[ { "author_str": "Duniway", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/493/493.F2d.1170.73-2748.html", "author_id": null, "opinion_text": "493 F.2d 1170\n UNITED STATES of America, Plaintiff-Appellee,v.Larry Dean SHORT, Defendant-Appellant.\n No. 73-2748.\n United States Court of Appeals, Ninth Circuit.\n March 18, 1974.\n \n Steven M. Kipperman (argued) Kipperman, Shawn & Keker, San Francisco, Cal., for defendant-appellant.\n Brian B. Denton, Asst. U.S. Atty. (argued), James L. Browning, Jr., U.S. Atty., San Francisco, Cal., for plaintiff-appellee.\n Before KOELSCH and DUNIWAY, Circuit Judges, and GRAY,1 District judge.\n OPINION\n DUNIWAY, Circuit Judge:\n Short was convicted under both counts of an indictment and sentenced to three years on each count. The sentences are concurrent. Count One charged bank robbery, under 18 U.S.C. 2113(a); Count Two charged that, in committing the offense, Short assaulted or put in jeopardy the life of a teller by the use of a dangerous weapon, a handgun, 18 U.S.C. 2113(d).\n Under our decision in United States v. Faleafine, 9 Cir., 1974, in banc, 492 F.2d 18 (1974), the two counts charged but one offense, the Count One offense, aggravated by the conduct charged in Count Two. See the cases cited in Faleafine, supra, and United States v. Stroud, 9 Cir., 1973, 474 F.2d 737, 739. The sentence under Count One is void, and must be vacated.\n \n \n 1\n Short makes but one claim of error that has merit.\n \n \n 2\n Viewed in the light most favorable to the government the facts are as follows: A federally insured bank in San Francisco was robbed by one John Seymour who used a gun during the robbery. Short drove Seymour to the vicinity of the bank and parked his car a block from the bank. During the robbery the hood of Short's car was up and he was apparently repairing it. While he was waiting for Seymour, Short met one Gloria Qualls, who became the key government witness, and offered her a ride. After the robbery Seymour returned to the car, whereupon Short closed the hood and drove off with Seymour and Qualls in the car.\n \n \n 3\n Short dropped Seymour off at Seymour's residence and shortly thereafter Short and Qualls returned to the residence. After a short stay at the house during which Short and Seymour conferred privately with a third person, all four persons in the house went to a bar. Later, Short and Qualls left the bar and drove to a parking lot where they waited until the time that Short was to meet with Seymour again. At the parking lot Short complained to Qualls that he knew that he had not gotten his fair share of the money that was taken. There was no direct evidence that Short knew that Seymour had a gun or that Seymour intended to use it.\n \n \n 4\n Although Short was charged as a principal, the evidence showed that he was an aider and abettor, and the case was tried and the jury was instructed on that theory.\n \n \n 5\n After a period of deliberation the jury returned to the courtroom and asked the judge if 'the defendant ha(d) to know Seymour had a gun to be guilty on the second indictment.' The judge responded in pertinent part:\n \n \n 6\n 'Now, in light of the instructions and the government's case and status of the evidence here that Short's participation, if any, was an aider and abettor, I would further instruct you that it is not necessary that Mr. Short had to have known the exact or precise details by which Mr. Seymour was going to accomplish the bank robbery or what methods he was going to use. What is necessary is that Mr. Short knew that a bank robbery was going to be attempted or accomplished by Mr. Seymour and then that Mr. Short did some affirmative act to attempt to help, attempt to carry that conduct out with the intent that the bank robbery should be successfully accomplished and so, therefore, whatever occurred in the bank, whether or not he knew that Mr. Seymour was armed or what he was armed with or not, is not necessary, not a necessary element to the crime, if in fact Seymour did use, commit the bank robbery by the use of a weapon which would put it in the classification of being an armed bank robbery and so it is essential that you bear in mind that Seymour had to have done these acts.'\n \n \n 7\n This instruction is erroneous because it fails to require the jury to find an essential element of the crime of armed bank robbery as a prerequisite to conviction. It is the aider and abettor's state of mind, rather than the state of mind of the principal, that determines the former's liability. R. Perkins, Perkins on Criminal Law 662 (2 ed. 1969); 1 R. Anderson, Wharton's Criminal Law and Procedure 247 (1957). It is true that the prosecution is not required to prove that the aider and abettor was aware of all of the details of the planned offense, Weedin v. United States, 9 Cir., 1967, 380 F.2d 657, 660. It is also true that the aider and abettor may be liable for the natural and probable consequences of the crime that he aided and abetted.\n \n \n 8\n However, here Congress has specifically provided for an increased penalty for aggravated forms of bank robbery. An essential element of armed bank robbery as charged here is that the principal was armed and used the weapon to jeopardize the life of the teller. It is this conduct that Short must be shown to have aided and abetted. '(An) aider and abettor is made punishable as a principal . . . and the proof must encompass the same elements as would be required to convict any other principal.' Hernandez v. United States, 9 Cir., 1962, 300 F.2d 114, 123. Thus the jury must be told that it must find that Short knew that Seymour was armed and intended to use the weapon, and intended to aid him in that respect. Cf. United States v. Greer, 7 Cir., 1972, 467 F.2d 1064, 1068-1069. The trial judge's instructions specifically dispensed with this element. The government's assertion that this error is harmless is untenable. The conviction must be reversed.\n \n \n 9\n Short raises five other claims of error, none of which is sustainable.\n \n \n 10\n First, Short argues that the trial judge improperly refused to admit evidence of a prior consistent statement after the government had impeached his testimony. There are two short answers. The letter in question was not a prior consistent statement; it was written after the statement with which Short was impeached was made. The letter was not Short's statement; it was written by Short's attorney.\n \n \n 11\n Second, Short argues that the indictment should have been dismissed because the testimony before the grand jury was predominately hearsay and the government did not bring the key witness, Qualls, before the grand jury. He argues that in relying on hearsay, the government undermined the spirit and effectiveness of the Jencks Act, 18 U.S.C. 3500, by denying the defense the opportunity to impeach the key government witness with a Jencks Act statement. The failure of the government to produce key witnesses before the grand jury and its reliance upon hearsay in grand jury proceedings does substantially hinder the advancement of some of the goals of the Jencks Act, Knudsen, Pretrial Disclosure of Federal Grand Jury Testimony, 60 F.R.D. 237, 252 (1973); United States v. Arcuri, E.D.N.Y., 1968, 282 F.Supp. 347, affirmed, 2 Cir., 405 F.2d 691; cert. denied, 395 U.S. 913, 89 S.Ct. 1760, 23 L.Ed.2d 227. However, the Supreme Court has held and this circuit has consistently reaffirmed that hearsay evidence is admissible before the grand jury. Costello v. United States, 1956, 350 U.S. 359, 76 S.Ct. 406, 100 L.Ed. 397; United States v. Trenary, 9 Cir., 1973, 473 F.2d 680.\n \n \n 12\n It has been held that, where the prosecutor has deceived the grand jury into believing that it is receiving first hand information rather than hearsay, or where there is a high probability that with direct testimony the grand jury would not have indicted the defendant, a reversal is required. United States v. Estepa, 2 Cir., 1972, 471 F.2d 1132, 1137. We do not face this question here. Short does not argue that such abuses appear on this record.\n \n \n 13\n Third, Short argues that because Qualls, the key government witness, was not brought before the grand jury and thus no Jencks Act statement was required of her, she should not have been permitted to testify at the trial. There is no basis in law for this claim.\n \n \n 14\n Fourth, Short claims that the trial judge erred in not granting his motion for a mistrial on the basis of juror misconduct. We do not consider the questiion; it is not likely to arise again.\n \n \n 15\n Fifth, Short argues that the trial judge should have compelled an election by the prosecution between the two counts of the indictment. Taken together, the two counts charge but one offense. But whether the offense and the aggravating conduct are pleaded in two counts or one, it is still proper, indeed deed necessary, to require a jury to make a separate finding as to each. No 'election' is necessary or even appropriate.\n \n \n 16\n The judgment is reversed and the case is remanded for further proceedings consistent with this opinion.\n \n \n \n 1\n The Honorable William P. Gray, United States District Judge for the Central District of California, sitting by designation\n \n \n ", "ocr": false, "opinion_id": 317829 } ]

[ "587 F.2d 507" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/587/587.F2d.507.78-2610.html", "author_id": null, "opinion_text": "587 F.2d 507\n Reznerv.Fairhope Single Tax Corp.*\n No. 78-2610\n United States Court of Appeals, Fifth Circuit\n 12/12/78\n \n 1\n S.D.Ala.\n \n AFFIRMED\n \n \n *\n Summary Calendar case; Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 5 Cir., 1970, 431 F.2d 409\n \n \n ", "ocr": false, "opinion_id": 361040 } ]

[ "261 F. App'x 167" ]

[ { "author_str": "Fay", "per_curiam": false, "type": "010combined", "page_count": 19, "download_url": "http://www.ca11.uscourts.gov/unpub/ops/200616434.pdf", "author_id": null, "opinion_text": " [DO NOT PUBLISH]\n\n\n\n IN THE UNITED STATES COURT OF APPEALS\n FILED\n FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS\n ELEVENTH CIRCUIT\n ___________________________________\n JANUARY 7, 2008\n NO. 06-16434 THOMAS K. KAHN\n __________________________________ CLERK\n D.C. Docket No. 05-00621-CV-TCB-1\n\n\nWENDELL BROWN,\n Plaintiff-Appellant,\n\n versus\n\nMETROPOLITAN ATLANTA\nRAPID TRANSIT AUTHORITY,\n\n Defendant-Appellee.\n\n\n ___________________________________\n\n Appeal from the United States District Court\n for the Northern District of Georgia\n ___________________________________\n\n (January 7, 2008)\n\n\nBefore EDMONDSON, Chief Judge, CARNES and FAY, Circuit Judges.\n\nFAY, Circuit Judge:\n\f Wendell Brown (“Brown”) appeals from the decision of the district court\n\ngranting Metropolitan Atlanta Rapid Transit Authority (“MARTA”) its motion for\n\nsummary judgment. Brown, who had been working for MARTA for almost\n\ntwenty years, alleges that MARTA terminated his employment due to racial\n\ndiscrimination and retaliation based on evidence that MARTA had a practice of\n\nretaining and promoting white employees while attempting to get rid of African\n\nAmerican employees. After complaining about these practices, Brown was placed\n\non the list for termination and was not rehired, despite being told by MARTA\n\nmanagement employees and department heads that he was qualified and had an\n\nexcellent chance of being rehired. After diligent review of the record, as well as\n\ncareful consideration of the briefs and oral argument, we conclude that Brown\n\nproduced direct evidence of racial discrimination and a prima facie case for racial\n\nretaliation, and reverse and remand the matter for further proceedings.\n\n Factual Background\n\n\n Brown, a black male, began to work with MARTA in January 1984. In\n\nAugust 2001, Brown received his annual performance review from his then\n\nsupervisor, and was rated as “above standards.” In January 2002, Brown\n\ntransferred to the Quality Assurance (“QA”) department and became a QA\n\n 2\n\fEngineer. One month later, Brown’s former co-worker, Earl Dendle (“Dendle”)\n\nbecame his direct supervisor as Acting Manager and a Lead QA Engineer.1\n\nDuring Dendle’s eight month tenure as Acting Manager, he hired four people into\n\nthe Unit, all white. (Brown Aff. at ¶ 13; Berry Dep. at 303). Dendle pre-selected\n\nthem because, in his words, he wanted things back to “the good old days,”\n\nreferring to the staff that was in place before Ms. Marion Clements took over as\n\ndirector.2 (Berry Dep. at 296). This bias is further evidenced by Berry’s testimony\n\nthat Dendle assisted at least two of the QA engineers that he wanted to hire by\n\ngoing over the questions with them and providing reference materials for them to\n\nread before the interview, information which was not available to other candidates.\n\n(Berry Dep. at 299-303). In August 2002, Brown received his first annual\n\nperformance review from Dendle as a QA Engineer. Brown’s overall rating was\n\n\n\n 1\n In 1992 Brown had worked with Dendle and contends that Dendle developed a dislike\nfor him at that time, which continued after Dendle became his supervisor. (Brown Aff. at\n¶¶2,7,11). Brown alleges that Dendle’s hostility toward him was racially motivated. (Brown\nAff. at ¶11). As Acting Manager, Dendle assigned more projects and reports to Brown than to\nany other QA employee (Berry Dep. at 50; Brown Aff. at ¶9), he refused to distribute Brown’s\nreports in a timely manner which reflected negatively towards Brown (Berry Dep. at 265-266;\nBrown Aff. at ¶10) and he was overly critical of the reports submitted by Brown. After Brown’s\ntermination, Dendle was responsible for these reports, but did not know how to complete them,\ndid not submit them in a timely manner, and sometimes did not submit them at all. (Berry Dep.\nat 185-187, 189, 221, 275).\n 2\n Elayne Berry, Manager of the QA department, knew that the candidates were pre-\nselected because the date of their offer letter was before other candidates were interviewed.\n(Berry Dep. at 303).\n\n 3\n\f“meets standards.”3 Brown expressed concern to Udeozo Ogbue (“Ogbue”), who\n\nwas Dendle’s boss and Executive Director of QA and Safety. (Brown Aff. at ¶11;\n\nWilson Dep. Ex. 5 at 423; Ogbue Dep. at 42). In October 2002, Elayne Berry\n\n(“Berry”) became Manager of the QA department, taking over Dendle’s position.\n\nShe received complaints from Brown and other QA Engineers that Dendle’s\n\nevaluations had been unfair and racially biased, and thus she concluded that it was\n\nbetter for her to do all future yearly evaluations of the QA Engineers instead of the\n\nsupervisors. (Berry Dep. at 54-56, 59-60). Berry then requested that MARTA\n\ninvestigate the allegations against Dendle further, but when this was not done, she\n\nremoved Brown from Dendle’s supervision, and transferred him to work under\n\nanother Lead Quality Engineer. (Berry Dep. at 54-56). In August 2003, Berry\n\nrated Brown as “meets standard.” (Berry Dep. at Ex. 4-Performance Evaluation).\n\n In the fall of 2003, MARTA developed the Reduction in Force Committee\n\n(“RFC”) to implement a reduction in workforce (“RIF”). The first step for a\n\ndepartment head to take in determining which employees would be laid off was to\n\ndevelop a departmental proposed RIF plan. (Wright Dep., Ex. 11 at MARTA\n\n1000). Ralph Eugene Wilson, the head of the Department of Police and Safety\n\n\n\n 3\n According to Brown, this was the average of the “above standards” evaluation from his\nprevious supervisor six months earlier and the “below standards” evaluation from Dendle.\n\n 4\n\fand Quality Assurance (“the Department”) of which QA was a subset, delegated\n\nauthority to Ogbue and Berry to develop this plan. (Wilson Dep. at 17, 25, 31-32).\n\nBerry had day-to-day responsibility for the RIF process. (Id. at 47-48, 60-61;\n\nOgbue Dep. at 122). Ogbue and Berry proposed the two Lead QA Engineer\n\npositions (Grade 20) as the positions to be eliminated from QA. (Wilson Dep. at\n\n36, 59, 69; Berry Dep. at 133-134). The two Grade 20 employees holding the\n\nLead QA Engineer positions were Dendle and Ray Kassinger, both white. (Berry\n\nDep. at 134). Berry submitted these recommendations to the MARTA RIF\n\nCommittee. (Berry Dep. at 133-134; Wilson Dep. at 35).\n\n The RIF Committee has the duty: (1) to review RIF plans for compliance\n\nwith MARTA policy/procedure and any applicable laws and regulations, and (2)\n\nto concur with the proposed RIF plans from the Departments and route them to the\n\nGeneral Manager for approval, or, if the RIF Committee does not recommend\n\napproval, to return it to the Department for revision and resubmission. (Wright\n\nDep. at 153, Ex. 11 at MARTA 1000). According to Berry, David Wright,\n\n(“Wright”), chair of the RIF Committee for MARTA, told her in response to her\n\nproposed RIF recommendations that it had been expressed in the RIF Committee\n\nthat it would “not be good” to layoff two white employees from a Unit headed by\n\nan African American woman. (Berry Dep. at 146,148-149). Wright testified that\n\n 5\n\fhe could not recall such. (Wright Dep. at 199-200). However, Berry was certain.\n\n After reviewing the Department’s proposed RIF plan, the Committee\n\nconcluded that the Grade 20 Lead QA Engineer positions would be grouped into a\n\ncomparative analysis with the Grade 19 QA Engineer positions. (Wright Dep. at\n\n105-106). When she was advised of this plan, Berry informed the RIF Committee\n\nthat the Grade 19 and 20 job functions were not similar and thus should not be\n\ngrouped together. The RIF Committee overrode her concerns.4 (Berry Dep. at\n\n257, 157-158; Wilson Dep. Ex. 3 at MARTA 530-531; Wright Dep. at 113-114.)\n\nThe RIF Committee then directed the Department to do a comparative analysis of\n\nthe Grade 19 and 20 Engineers pursuant to the procedure outlined in the RIF\n\nPolicy. (Berry Dep. at 157-158). Before performing the comparative analysis,\n\nBerry informed the RIF Committee that Dendle had not objectively evaluated\n\nBrown on his 2002 yearly evaluation and suggested that all of the 2002\n\nevaluations completed by Dendle should be disregarded for RIF purposes. The\n\nCommittee refused. (Berry Dep. at 157-158, 79-80). Following the analysis, the\n\nDepartment recommended Ray Kassinger (white) and William Montgomery\n\n(black) for layoff. (Berry Dep. at 158). Brown was still not recommended for\n\n\n 4\n MARTA does not recall why the Committee disregarded this information and MARTA\nhas no documentation to evidence why MARTA decided to lump the Grade 19 and 20 engineers\ntogether. (Wright Dep. at 192-193).\n\n 6\n\flayoff.\n\n During this time, Brown had heard about lunch meetings where MARTA\n\nemployees, including Adele Clements, a manager within Brown’s department,\n\ndiscussed getting rid of African American employees. (Berry Dep. at 177; Dendle\n\nDep. at 98-100). In December 2003, Brown discussed this with Michael Sloan,\n\n(“Sloan”), MARTA’s Chief Legal Officer and Assistant General Manager.\n\n(Brown Aff. at ¶ 15; see also Dendle Dep. at 103 (testifying that he could not\n\nremember one way or the other whether such racial discussions occurred during\n\nthe lunch meetings)). Shortly, after this conversation, Sloan instructed the RIF\n\nCommittee that Brown could be added to the list for possible layoff. (Berry Dep.\n\nat 165, 256). Without any further consultation with the Department, the RIF\n\nCommittee engaged in an abridged RIF analysis and concluded that two African\n\nAmerican employees would be laid off, including Brown. (MARTA Letter to\n\nBrown at 1-2; Wilson Dep. Ex. 3 at MARTA 531; Brown Aff. at ¶ 16).\n\n Immediately after Brown’s termination, both Wilson and Berry told Brown\n\nthat they believed he would be rehired by MARTA and that he was the front\n\nrunner for a contract position with MARTA through its general contractor,\n\nRegional Transportation Partners (“RTP”). (Brown Aff. at ¶¶16, 17; Brown Dep.\n\nat 33-35). On January 9, 2004, Berry and Ogbue signed Brown’s termination\n\n 7\n\frecord specifying that he was terminated due to “Staff reduction/Lay off,” but his\n\n“Overall Job Performance” was satisfactory5, and that they would recommend him\n\nfor rehire by the Department and by MARTA. (Berry Dep. at 169; Wilson Dep. at\n\nEx. 7). On January 13, 2004, Brown met with Sloan for a second time where he\n\ndiscussed again, among other things, his concerns about the lunch meetings.\n\n(Brown Aff. at ¶ 16). The day after this meeting, Ogbue changed Brown’s\n\ntermination record from indicating Brown was “eligible for rehire” to indicating\n\nhe was “not eligible for rehire.” (Berry Dep. at 170-171). In addition, he changed\n\nBrown’s termination record from stating that Brown’s performance was\n\n“satisfactory” to stating it was “unsatisfactory.” (Id; Wilson Dep. at Exs. 7,8).\n\nThen sometime prior to discovery in this case, Brown’s termination record was\n\nchanged again to reflect that he was “eligible for rehire,” but continued to reflect\n\nthat his job performance was unsatisfactory.6 (Wilson Dep. at Ex. 9). In addition,\n\neven though MARTA had requested RTP to hire Brown for one of its positions,\n\nBerry testified that Mr. Ogbue went to RTP directly and asked that they not fill\n\n\n\n 5\n For purposes of the summary judgment, MARTA does not dispute that Brown’s\nperformance was satisfactory. (MARTA’s pleading showing authorities for summary judgment,\npg. 9).\n 6\n Wilson, Ogbue, and Berry, the MARTA employees responsible for filling out the form,\ntestified that they had never seen this third version before they were deposed. (Berry Dep. at\n173; Wilson Dep. at 121; Ogbue Dep. at 159-160).\n\n 8\n\fthat request. (Berry Dep. at 103-105).\n\n After his termination, Brown applied for eight positions with MARTA, two\n\nbefore filing his EEOC charge. As to these first two positions, Brown received\n\nnotice from MARTA that he was qualified for one (Director of Wayside\n\nMaintenance), but not the other (Superintendent-Rail Line). (Berry Dep. at 194).\n\nWith regards to the six other positions Brown applied for after filing the EEOC\n\ncharge, Brown received notice that he was qualified for two positions, Contract\n\nProfessional–Safety & Quality Assurance and Contract Employee– Safety\n\nCertification Engineer. (Brown Aff. at ¶25). On March 4, 2005, Brown filed an\n\nemployment discrimination action against MARTA claiming racial discrimination\n\nand retaliation under Title VII of the Civil Rights Act of 1964, as amended, 42\n\nU.S.C. §§ 2000e, et seq, 42 U.S.C. §1981 and 42 U.S.C. §1983, respectively, as\n\nwell as a state law claim for intentional infliction of emotional distress against\n\nMARTA. The district court granted MARTA’s motion for summary judgment\n\nbecause Brown failed to establish a prima facie case for either racial\n\ndiscrimination or retaliation. This appeal followed.\n\n Discussion\n\n “We review the trial court’s grant or denial of a motion for summary\n\njudgment de novo, viewing the record and drawing all reasonable inferences in the\n\n 9\n\flight most favorable to the non-moving party.” Patton v. Triad Guar. Ins. Corp.,\n\n277 F.3d 1294, 1296 (11th Cir. 2002).\n\n A. The Discrimination Claim\n\n\n If “a plaintiff produces direct evidence of a discriminatory motive, and the\n\ntrier of facts accepts this testimony the ultimate issue of discrimination is proven.”\n\nEvans v. McClain of Georgia, Inc., 131 F.3d 957, 962 (11th Cir. 1997); Trotter v.\n\nBoard of Trustees of Univ. Of Ala., 91 F.3d 1449, 1453 (11th Cir. 1996) (“When\n\nthere is direct evidence that discrimination was a motivating factor in the\n\nchallenged employment decision, the appropriate analysis is different from that\n\nemployed in a case where only circumstantial evidence is available.”). “[I]n cases\n\nof discrimination proved by direct evidence, it is incorrect to rely on the\n\nMcDonnell Douglas test because, while circumstantial evidence is used to create\n\nan inference of discrimination under McDonnell Douglas, no such inference is\n\nrequired in the case of direct evidence.” Bass v. Bd. of County Comm’rs, 256 F.3d\n\n1095, 1104 (11th Cir. 2001) (quoting Taylor v. Runyon, 175 F.3d 861, 867 n.2\n\n(11th Cir. 1999).\n\n Brown’s Department RIF Committee recommended two unit employees\n\nwho should be laid off. They were both white. Thereafter, Wright, the chairman\n\n\n\n 10\n\fof the RIF Committee for MARTA, told Berry, the co-chair of the RIF Committee\n\nfor the Department of Police and Safety and Quality Assurance that during a\n\nmeeting of the RIF Committee it had been expressed that it would “not be good”\n\nto layoff two white employees from a Unit headed by an African American\n\nwoman. (Berry Dep. at 146, 148-149).7 Only then did the RIF Committee\n\ndetermine that two African American employees, including Brown would be laid\n\noff instead of the two whites previously recommended. (Berry Dep. at 146, 148-\n\n149). This is strong direct evidence that racial bias was involved in MARTA’s\n\ndecision to terminate Brown’s employment. This is a discussion held between\n\nsenior employees of MARTA directly involved in the decision making process.\n\nSee Bass, 256 F.3d at 1105; Damon v. Fleming Supermarkets of Fla., Inc., 196\n\nF.3d 1354, 1358 (11th Cir. 1999) (“[O]nly the most blatant remarks, whose intent\n\ncould be nothing other than to discriminate on the basis of [race] . . . constitute\n\ndirect evidence of discrimination.”) (quotation marks omitted).\n\n\n\n 7\n This statement constitutes an admission by a party opponent because under Fed. R.\nEvid. 801(d)(2)(D), “a statement by [a] party’s agent or servant concerning a matter within the\nscope of the agency or employment, made during the existence of the relationship, . . . is deemed\nan admission by a party opponent and is excluded from the definition of hearsay.” See City of\nTuscaloosa v. Harcros Chemicals, Inc., 158 F.3d 548, 557 (11th Cir. 1998). Furthermore,\n“because Fed. R. Evid. 801(d)(2)(D) does not define the term [‘]agent,[’] we must assume that\nCongress intended to refer to general common law principles of agency when it used the term.\nAt common law, senior officers of a corporation normally are agents and servants of the\ncorporation.” Id. at 558 n.9.\n\n 11\n\f Moreover, even without that direct evidence, clearly, Brown has produced\n\nsufficient evidence, which if believed, would establish a prima facie case for\n\ndiscrimination pursuant to the McDonnell Douglas factors. “To state a prima\n\nfacie case of racial discrimination [under McDonnell Douglas], a plaintiff must\n\nshow (i) that he belongs to a racial minority; (ii) that he applied and was qualified\n\nfor a job for which the employer was seeking applicants; (iii) that, despite his\n\nqualifications, he was rejected, and (iv) that, after his rejection, the position\n\nremained open and the employer continued to seek applicants from persons of\n\ncomplainant’s qualifications.” Terry v. Cook, 866 F.2d 373, 379 (11th Cir. 1989)\n\n(quoting McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S. Ct. 1817,\n\n1824 (1973). “The burden then . . . shift[s] to the employer to articulate some\n\nlegitimate, nondiscriminatory reason for the employee’s rejection.” McDonnell\n\nDouglas, 411 U.S. at 802.\n\n The first prong of the test is clearly satisfied because Brown is an African\n\nAmerican. The second prong is also satisfied in that upon his termination both\n\nBerry and Wilson informed Brown that he had an excellent chance of being\n\nrehired by MARTA, and that he was the front runner for a contract position with\n\nMARTA through its general contractor. (Brown Aff. at ¶¶16, 17; Brown Dep. at\n\n33-35). In addition, the record evidence shows that MARTA determined Brown\n\n 12\n\fwas qualified for a position for which he had applied before filing the EEOC\n\ncomplaint–Director of Wayside Maintenance–and two positions for which he had\n\napplied after filing the EEOC complaint–Contract Professional–Safety & Quality\n\nAssurance and Contract Employee–Safety Certification Engineer. (Brown Aff. at\n\n¶25; see Escandon Aff.; Harris Aff.).\n\n Likewise, the third prong is satisfied. Brown applied for a total of eight\n\npositions after his termination and was never rehired, despite qualifying for at least\n\nthree positions. Finally, the fourth prong is satisfied because after rejecting\n\nBrown, MARTA continued to seek other applicants and ultimately hired other\n\npeople for the positions for which Brown was qualified.\n\n This record includes sufficient evidence to establish a prima facie case for\n\nracial discrimination and therefore genuine issues of material facts precluding the\n\nentry of a summary judgment.\n\n B. The Retaliation Claim\n\n To establish a prima facie showing of retaliation under Title VII,8 a plaintiff\n\nmust demonstrate: “(1) that [he] engaged in a statutorily protected expression; (2)\n\n 8\n Title VII considers it an unlawful employment practice for an employer to discriminate\nagainst an employee “because he has opposed any practice made an unlawful employment\npractice by this subchapter, or because he has made a charge, testified, assisted, or participated in\nany manner in an investigation, proceeding, or hearing under this subchapter.” 42 U.S.C. §\n2000e-3(a).\n\n 13\n\fthat [he] suffered an adverse employment action; and (3) that there is some causal\n\nrelation between the two events.” Cooper v. Southern Co., 390 F.3d 695 (11th Cir.\n\n2004).\n\n The first prong of the test is satisfied in this case. In Little v. United\n\nTechnologies, this Court held that in order to be a statutorily protected expression,\n\n“the opposition must be directed at an unlawful employment practice of an\n\nemployer, not an act of discrimination by a private individual.” 103 F.3d 956, 959\n\n(11th Cir. 1997). The district court held that Brown has not made such a showing\n\nand, thus, his complaint about the Pizza Hut meetings was not protected activity.\n\nWe disagree. In December 2003, Brown discussed with Michael Sloan,\n\nMARTA’s Chief Legal Officer and Assistant General Manager, that he had heard\n\nabout lunch meetings where MARTA employees discussed getting rid of African\n\nAmerican employees. (Brown Aff. at ¶ 15). This case, unlike Little, opposes the\n\nroutine discriminatory practice of management employees, particularly Dendle and\n\nClements’, and not action or comments from co-workers to co-workers. This\n\nevidence accounts for Brown’s state of mind9 because he was concerned that\n\n 9\n The evidence that the lunch meetings included discussions of getting rid of black\nemployees and retaining and promoting whites is Berry’s deposition testimony about what\nClements and Dendle told her. This is not hearsay because it need not be offered for the truth of\nthe matter asserted. See Fed. R. Evid. 801(c); U.S. v. Schlei, 122 F.3d 944 (11th Cir. 1997)\n(Evidence regarding witness’ testimony at her deposition was not hearsay where testimony was\noffered to demonstrate defendant’s state of mind.). Whether or not it is true, it was the reason\n\n 14\n\fdiscriminatory practices were going on. (Berry Dep. at 177).\n\n This Court in Little, stated that even if conduct complained about is not\n\nunlawful, a plaintiff can establish a prima facie case of retaliation under Title VII\n\nif he had “an objectively reasonable belief that he opposed an unlawful\n\nemployment practice.” 103 F.3d at 960. “A plaintiff must not only show that he\n\nsubjectively (that is, in good faith) believed that his employer was engaged in\n\nunlawful employment practices, but also that his belief was objectively reasonable\n\nin light of the facts and record presented.” Id.\n\n There is ample evidence to show that Brown had a reasonable basis for a\n\nsubjective good faith belief that he took part in statutorily protected expression.\n\nSee Clover v. Total Sys. Serv., Inc., 176 F.3d 1346, 1351 (11th Cir. 1999)\n\n(protected expression element satisfied where court had no reason to doubt\n\nplaintiff did not have a good faith, reasonable belief he was engaging in statutorily\n\nprotected expression). In fact, Brown submitted a supplemental affidavit\n\nexplaining that he believed he was opposing an act of unlawful racial\n\ndiscrimination. See 28 U.S.C. § 636(b)(1)(C), Fed. R. Civ. P. 72(b) (district court\n\nmay consider additional evidence upon receipt of Magistrate Judge’s\n\nrecommendation). After reviewing the facts, Brown’s good faith belief was also\n\n\nBrown went to Sloan to complain.\n\n 15\n\fobjectively reasonable because a detached individual could easily have interpreted\n\nthis cumulative evidence as an indication of an unlawful employment practice.\n\n The second prong of the test is also satisfied because Brown suffered\n\nadverse employment action after his complaint. According to the Supreme Court,\n\na “plaintiff must show that a reasonable employee would have found the\n\nchallenged action materially adverse[.]” Burlington N. & Santa Fe Ry. Co. v.\n\nWhite, 126 S. Ct. 2405, 2415, 165 L. Ed. 2d 345 (2006) (noting that the standard is\n\nphrased in “general terms because the significance of any given act of retaliation\n\nwill often depend upon the particular circumstances. Context matters.”) (emphasis\n\nadded). The Court has stated that “in this context means it well might have\n\ndissuaded a reasonable worker from making or supporting a charge of\n\ndiscrimination.” Id. (internal quotation marks omitted). Shortly after Brown’s\n\ndiscussion with Sloan, MARTA’s Chief Legal Officer and Assistant General\n\nManager, Sloan instructed the MARTA RIF Committee that Brown could be\n\nadded to the list for possible layoff. Then, a day after Brown’s second meeting\n\nwith Sloan, Ogbue changed Brown’s termination record from indicating he was\n\n“eligible for rehire” to indicating he was “not eligible for rehire.” Ogbue also\n\nchanged Brown’s termination record from stating that Brown’s performance was\n\n“satisfactory” to stating it was “unsatisfactory.”\n\n 16\n\f Taking this in context, we believe that MARTA’s changes to Brown’s\n\nemployment record constituted significant adverse action. Brown was terminated\n\nafter almost twenty years of employment with MARTA, and upon his termination\n\ntwo MARTA management employees informed him that he had an excellent\n\nchance of being rehired by MARTA and even identified a specific position for\n\nhim. (Brown Aff. at ¶¶16, 17; Brown Dep. at 33-35). We believe a jury could\n\nconclude that had Brown known that his complaint of discrimination would lead\n\nto his employment record being changed to “not eligible for rehire” and/or\n\n“performance unsatisfactory” he would have been dissuaded from making such a\n\ncomplaint, as would any other reasonable person.\n\n To satisfy the third prong for retaliation, “a plaintiff need only show that the\n\nprotected activity and the adverse action were not wholly unrelated.” Brungart v.\n\nBellSouth Telecomms., Inc., 231 F.3d 791, 799 (11th Cir. 2000) (internal quotation\n\nmarks omitted). “At a minimum, a plaintiff must generally establish that the\n\nemployer was actually aware of the protected expression at the time it took the\n\nadverse employment action.” Clover, 176 F.3d at 1354; Raney v. Vinson Guard\n\nServ., 120 F.3d 1192, 1197 (11th Cir. 1997). This awareness may be established\n\neither by direct or circumstantial evidence.” Clover, 176 F.3d at 1354; Bass, 256\n\nF.3d at 1119 (stating that to establish a causal connection, the decision maker's\n\n\n 17\n\fawareness of the protected activity might be established by circumstantial\n\nevidence, such as “close temporal proximity between the protected activity and the\n\nadverse action”); Higdon v. Jackson, 393 F.3d 1211, 1220 (11th Cir. 2004) (“[I]n\n\nthe absence of other evidence tending to show causation” a party might establish\n\ncausation by showing a very close temporal proximity between the protected\n\nactivity and the adverse action).\n\n Brown has satisfied the third prong. Brown cited record evidence that\n\nshortly after his first complaint to Sloan, Sloan instructed the MARTA RIF\n\nCommittee that Brown could be added to the list for layoff. (Berry Dep. at 165\n\nand 256). Then unfavorable changes to his employment record were made one\n\nday after Brown’s second complaint to Sloan. All of this was done after Berry and\n\nWilson had indicated to Brown that he was the front runner for a contract position\n\nwith MARTA. (Brown Aff. at ¶¶16, 17; Brown Dep. at 33-35). In addition, there\n\nis evidence that after Brown’s conversation with Sloan, MARTA, through Ogbue,\n\nconvinced its general contractor to reject Brown for a job. (Berry Dep. at 103-\n\n105). Finally, after his termination, Brown applied for a total of eight positions\n\nwith MARTA, and was never rehired. We conclude that there is a sufficient basis\n\nto find that MARTA’s refusal to rehire Brown was not “wholly unrelated” to his\n\ncomplaints of discrimination. Thus, we believe that Brown has established a\n\n\n 18\n\fprima facie case for retaliation as well.\n\n Conclusion\n\n Because Brown has established a prima facie case for both racial\n\ndiscrimination and retaliation, we REVERSE the district court’s order granting\n\nsummary judgment. The summary judgment is VACATED and the matter\n\nREMANDED for further proceedings consistent with this opinion.\n\n\n\n\n 19\n\f", "ocr": false, "opinion_id": 58803 } ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": 2, "download_url": "http://pacer.ca4.uscourts.gov/opinion.pdf/127974.U.pdf", "author_id": null, "opinion_text": " UNPUBLISHED\n\n UNITED STATES COURT OF APPEALS\n FOR THE FOURTH CIRCUIT\n\n\n No. 12-7974\n\n\nDURAN EUGENE HORSFORD,\n\n Plaintiff – Appellant,\n\n v.\n\nPAMUNKEY REGIONAL JAIL; M. N. WHITE, Major, Deputy\nSuperintendent, Pamunkey Regional Jail; WEBEL, Captain,\nInternal Affairs, Pamunkey Regional Jail; W. J. FOWLER, Lt.\nFood Supervisor, Pamunkey Regional Jail,\n\n Defendants - Appellees.\n\n\n\nAppeal from the United States District Court for the Eastern\nDistrict of Virginia, at Richmond. John A. Gibney, Jr.,\nDistrict Judge. (3:12-cv-00447-JRS)\n\n\nSubmitted: January 17, 2013 Decided: January 23, 2013\n\n\nBefore GREGORY, SHEDD, and KEENAN, Circuit Judges.\n\n\nAffirmed by unpublished per curiam opinion.\n\n\nDuran Eugene Horsford, Appellant Pro Se.\n\n\nUnpublished opinions are not binding precedent in this circuit.\n\fPER CURIAM:\n\n Duran Eugene Horsford appeals the district court’s\n\norder dismissing his 42 U.S.C. § 1983 (2006) complaint without\n\nprejudice. We have reviewed the record and find no reversible\n\nerror. Accordingly, we affirm for the reasons stated by the\n\ndistrict court. Horsford v. Pamunkey Reg’l Jail, No. 3:12-cv-\n\n00447-JRS (E.D. Va. Nov. 7, 2012). We dispense with oral\n\nargument because the facts and legal contentions are adequately\n\npresented in the materials before this court and argument would\n\nnot aid the decisional process.\n\n\n\n AFFIRMED\n\n\n\n\n 2\n\f", "ocr": false, "opinion_id": 815879 } ]

[ "384 P.2d 110", "14 Utah 2d 336" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": 5855, "opinion_text": "\n14 Utah 2d 336 (1963)\n384 P.2d 110\nIN RE STATE OF UTAH IN THE INTEREST OF DONALD EUGENE WOODWARD, AN ALLEGED DELINQUENT CHILD.\nNo. 9744.\nSupreme Court of Utah.\nAugust 1, 1963.\nRobert C. Cummings, William G. Shelton, Salt Lake City, for appellants.\nA. Pratt Kesler, Atty. Gen., Neil D. Schaerrer, Asst. Atty. Gen., Salt Lake City, for respondent.\nBrigette M. Bodenheimer, Chairman, Utah State Bar Committee, Richard H. Moffat, Henry S. Nygaard, Bruce E. Coke, Virginia Roberts, Salt Lake City, amicus curiae.\nHENRIOD, Chief Justice.\nAppeal from a juvenile court judgment committing a minor to the Industrial School conditionally. Appellant urged that the judgment was not supported by sufficient evidence, but we cannot agree, so that the judgment is affirmed.\nAppellant attacks the constitutionality of Secs. 55-10-1 and 55-10-3, Utah Code Annotated 1953, as amended, as being violative of Art. V, Sec. 1, Utah Constitution.[1] Amicus curiae supports appellant's attack, but seeks to have the court canvass the constitutionality of a number of other sections, on the same and different constitutional grounds. We review only those points raised by the litigants on appeal and not those urged by strangers thereto; hence we will review only the two sections called to our attention by the appellant.[2] Our conclusions do not affect the status of the juvenile court, its jurisdiction over the subject matter or the validity of its judgment.\nThere is no question as to the status of the juvenile court: It is a court of law and an integral part of the judicial branch of government in our tripartite system, as is the Supreme District, and inferior courts sanctioned by the legislature, and the Justice Courts. This conclusion seems to be shared by the respondent itself when it concedes in its brief that:\n\"Art. VIII, sec. 1 of the Utah Constitution provides for the creation of inferior courts as may be established by law by the legislature\" and that \"the juvenile court is such an inferior court. Salt Lake County v. Salt Lake City.\"[3]\nThe juvenile court tries cases,[4] renders decisions,[5] jails adults,[6] confines minors,[7] grants clemency or probation,[8] appoints referees,[9] receives and hears complaints and petitions,[10] issues process,[11] appoints process servers,[12] can hold persons in contempt,[13] issues search and seizure warrants,[14] determines when and where the court sits,[15] is subject to an appeal of its decisions to the Supreme Court,[16] and in some areas to the District Court,[17] convicts and penalizes adults,[18] in the same manner as is done in Justice's Court,[19] is subject to the same type of procedure and practice, payment of witness fees, summoning of and qualifying jurors and accounting for fines, forfeitures and penalties as are Justice's Court,[20] arranges bonds,[21] forfeits them,[22] and performs other strictly judicial functions.\nThese matters are those generally reserved to the judiciary. Any legislative sanction looking toward their invasion is offensive to constitutional, traditional and historical precepts.\nUnequivocally and without ambiguity, Sec. 55-10-1 says \"The * * * commission shall have the general control and supervision over juvenile courts and probation officers.\" The language is plain, simple unprovisional, and unqualified. It is plenary. It does not say \"provided, however\" or \"except as herein restricted.\" Distinction, grammatical legerdemain or judicial legislation cannot change this clear interdiction that offends against separation of power concepts. Respondent says that \"it is obvious that the general control and supervision mentioned in sec. 55-10-1 * * * is only general administrative assistance and not an exercise of judicial power.\" Difficulty with this assertion is that the section's language does not say so. Such contention is unrealistic in the light of practicality and common experience and runs afoul of the plain wording of the section, which is not chameleonic depending on varying philosophies as to whether a welfare commission should or should not noose the courts. The question is not a question of now-you-see-it-now-you-don't. You see it in plain English, and to say \"control and supervision over juvenile courts\" has no plenary connotation, simply is to be myopic.\nThe bona fides of present commission personnel, or any talk about past, present or future amours between the two branches of government, does not change the definition of \"control,\" nor take the word out of the section, nor is it an insurance policy against future rifts as to kind or quantum of power reserved to each, nor can it resolve the differences and misgivings of judicial and social thinkers as to where the fountain of power lies or into which channel the power flows, — that of the legislative, executive or judicial branch.\nAfter concluding that that part of the section purporting to delegate control and supervision \"over the juvenile courts\" offends the constitution, there would seem to be no constitutional objection to the balance of the language, and that such can be separable, as we have held before,[23] but it may be viewed with interest by the legislature, as well as the Welfare Commission as to the source of funds with which to pay salaries and operational expenses of juvenile courts.\nHaving concluded that the juvenile court definitely is an integral part of the judicial branch, it would seem inimical to common sense and to Art. VIII, sec. 11, Utah Constitution[24] having to do with removal of judges, to sanction their removal by an administrative agency of the executive branch, (as was attempted in Sec. 55-10-3). Judges, in the constitutional sense, as is the case with a juvenile court judge, are amenable only to the constitutional sanctions for removal. Consequently, we conclude that the words \"provided, that the judge may be removed by the commission for cause\" represent an effort to create an unconstitutional grant of power, — hence invalid. The remaining language in 55-10-3, U.C.A. 1953, as amended, is subject to the same observations, conclusion and authority contained in the next preceding paragraph.\nMcDONOUGH and CALLISTER, JJ., concur.\nWADE, Justice (concurring in the result).\nI agree with the prevailing opinion of Chief Justice HENRIOD that the judgment should be affirmed.\nI also agree that the juvenile court is an integral part of the judicial branch of our government in our tripartite system, and that any statute which confers supervision and control over the decisions of the juvenile court judges on the Public Welfare Commission or any other officer or department of the executive branch of the government is unconstitutional.[1] Further, I think any decision rendered by a judge acting under the supervision and control of a department or officer of the executive branch of the government, and not under his own judgment and discretion, would be void. I disagree with the prevailing opinion because I think it misconstrues Section 55-10-1, U.C.A. 1953 and fails to take into account the history and background of that section, and Section 55-10-2, and the other sections in the chapter dealing with juvenile courts. I shall express my view without particular reference to the prevailing opinion.\nIn discussing this question keep in mind: (1) That courts usually pass on a constitutional question only when it is a controlling issue in the case;[2] (2) that even though some provisions of the statutes dealing with the juvenile courts might be in some respects unconstitutional, these provisions are separable, and if the provisions delegated unconstitutional judicial powers and functions to the Public Welfare Commission only such provisions would be void. The juvenile courts, and the office of judge thereof, which were properly created and established by the statutes, absent the exercise of any unconstitutional control by the Commission, would be at least judges de facto and their decisions are valid;[3] and (3) that if by any reasonable construction of the statutes such statutes will be constitutional, we should give the statutes the construction which will render them constitutional and thereby make them valid enactments.[4]\nOn the other hand, in my opinion if the statutes must be construed to mean that the Public Welfare Commission is given power or authority to supervise or control the judicial functions of the juvenile court judges, or to exercise such judicial powers, duties or functions, or coerce, induce, persuade or influence a judge to act in accordance with the determination of the Commission and not in accordance with his own determination of the issues, such statutes would be clearly unconstitutional and void.[5] For clearly, judicial powers and functions are conferred on the juvenile judges, and if the Public Welfare Commission is authorized by statute to control, supervise or exercise such judicial powers or functions, such provisions of the statutes are unconstitutional and void.\nJudicial department powers and functions can only be exercised by the judges. Such functions involve the making of judicial decisions without interference, undue influence, or coercion. However, courts and judges are necessarily closely connected with executive officers who perform executive or quasi executive functions. Thus, the clerk of the district court, under the direction of the district judge, swears the witnesses and writes the minute entries, which are subject to correction and approval of the judge. He also is a deputy county clerk, and the court records are filed and kept in the county clerk's office. The court bailiff is a deputy county sheriff; he, under the direction of the judge, maintains order in the court, and the sheriff's office and other police officers execute the orders of the court. Court rooms and court facilities are planned, constructed, furnished and remodeled by the executive branch of our government, and sometimes these things are done with the advice and counsel of the judges involved. So it is clear that these two branches of our government are of necessity closely connected with each other, and without either exercising the powers or functions of the other, they work together.\nThe provision that the Public Welfare Commission shall have the general control and supervision over juvenile courts[6] can reasonably be construed to mean only supervision and control over the quasi executive and executive powers and functions of the juvenile courts, and does not confer power to supervise and control the juvenile court judges in their judicial function or to exercise their judicial powers.\nA study of Sections 55-10-1 and 2, U.C.A. 1953 indicates that the juvenile court statutes merely give the Public Welfare Commission control of the juvenile courts in relation to executive or quasi executive powers and functions, and do not authorize that Commission to control the judicial powers and functions of the judges of the juvenile courts. Thus, these statutes repeatedly mention that the Public Welfare Commission shall fix salaries in accordance with the standards established by the Department of Finance, the providing of court rooms, payment of costs and expenses, the appointment of the judges and their successors in accordance with the fixed standards and special qualifications, and without regard to political affiliation.[7] These statutes further provide for the appointment of a clerk and deputy clerk for each juvenile court, and the keeping of records.[8] On the other hand, the constitutional provisions deal only with judicial powers and functions of the court and judges thereof.[9] The mention of supervisory control over inferior courts[10] deals only with the jurisdiction of district courts and their appellate jurisdiction and power to issue writs, to carry into effect their orders, judgment and decrees. These provisions clearly deal only with judicial powers and functions in contrast with the statutes which deal only with executive or quasi executive functions connected with the juvenile courts.\nTo properly understand Section 55-10-2, U.C.A. 1953 we must have in mind its history, background and the meaning of the term \"Juvenile Court and Probation Commission.\" That term was the statutory name of the Commission which, from 1931 to 1941, among other things, appointed the juvenile court judges.[11] Prior to that time, from 1905 to 1931, a similar commission which appointed the juvenile judges was by statute designated \"the Juvenile Court Commission.\"[12] In 1941, the Public Welfare Commission[13] was by statute named to \"succeed to all powers and discharge all duties and perform all functions which by existing and continuing law\" was previously required of the previous Commission designated as the \"Juvenile Court and Probation Commission.\"\nThis is sometimes mistakenly construed as saying that the \"public welfare commission shall succeed to all powers and discharge all duties and perform all functions which by existing and continuing law are conferred upon and required to be discharged or performed by the juvenile court.\" The statute says \"performed by the juvenile court and probation commission.\" By omitting the last words of the sentence quoted above from Section 55-10-2, the real meaning that the statute which is merely conferring on a newly created commission the functions, powers and duties of the previously designated \"Juvenile Court and Probation Commission\" is changed, and we create the impression that the judicial functions of the juvenile court judges are being conferred on the Public Welfare Commission. If such were the meaning of this statute, it would confer on the Public Welfare Commission judicial functions and powers and would be void, but that is clearly not the true meaning of this statute, which is that the duties of the old commission are by the new statute being conferred upon a newly created commission.\nThe last part of this statute provides that: \"Whenever any existing and continuing law refers to or names the juvenile court and probation commission or any officer or employee thereof, it shall be construed to refer to and mean the public welfare commission or the corresponding officer or employee of the public welfare commission.\" Since the Public Welfare Commission succeeded to the powers, duties and functions of the previous commission, which the statute designed as the \"Juvenile Court and Probation Commission,\" this simply means that the Public Welfare Commission succeeds to the powers, duties and functions of the previously designed \"Juvenile Court and Probation Commission,\" and corresponding officers or employees of the present Commission succeed to the powers and duties and functions of such corresponding officers and employees of the previous Commission. Under this construction there is no conferring of judicial powers and functions on the new Commission, and therefore the Constitution is not violated by this statute.\nThe constitutional question was not raised in the trial court, so there can be no evidence of any pressure or undue influence by the Commission on the trial judge. The fact that the Commission appoints the judges for a six-year term and must reappoint or appoint a successor to the judge at the end of that term, does not violate the three departments clause of our Constitution. The fact that the Commission keeps records, circulates information and holds conferences to discuss the juvenile court problems merely suggests furnishing of educational opportunity to the judges rather than using undue influence, or usurpation of judicial function.\nCROCKETT, J., concurs in the concurring opinion of WADE, J.\nNOTES\n[1] \"The powers of the government of the State of Utah shall be divided into three distinct departments, the Legislative, the Executive, and the Judicial; and no person charged with the exercise of powers properly belonging to one of these departments, shall exercise any functions appertaining to either of the others, except in the cases herein expressly directed or permitted.\"\n[2] There may be some doubt as to whether we should review the two points on appeal having to do with the sections mentioned, supra, since they were raised on appeal for the first time. If what we say in this opinion would jeopardize the liberty of appellant, which it will not, so far as the two sections are concerned, there would be authority for raising a constitutional issue for the first time on appeal (3 Am.Jur. 63, sec. 293, Const. Law). Another question could be posed as to whether the rule as to appellate review would apply to many matters handled by the juvenile court, which may not be real adversary proceedings, where no legal counsel may be present to preserve rights in anticipation of a possible appeal. Any such doubt is resolved in this particular case in favor of appellant, particularly in view of the considerable public interest and concern engendered.\n[3] 42 Utah 548, 134 P. 560.\n[4] 55-10-30.\n[5] 55-10-30.\n[6] 55-10-51.\n[7] 55-10-30.\n[8] 55-10-57.\n[9] 55-10-10.\n[10] 55-10-14.\n[11] 55-10-15.\n[12] 55-10-17.\n[13] 55-10-18.\n[14] 55-10-23.\n[15] 55-10-24.\n[16] 55-10-34.\n[17] 55-10-61.\n[18] 55-10-51.\n[19] 55-10-54.\n[20] 55-10-55.\n[21] 55-10-58.\n[22] 55-10-60.\n[23] Steed v. Harvey, 18 Utah 367, 54 P. 1011 (1898).\n[24] \"Judges may be removed from office by the concurrent vote of both houses of the Legislature, each voting separately * * *\"\n[1] Article V, Sec. 1, Constitution of Utah. See Note 1 main opinion.\n[2] 11 Am.Jur., Sec. 93, p. 720.\n[3] See Mill v. Brown, 31 Utah 473, 88 P. 609.\n[4] See State v. Packer Corporation, 77 Utah 500, 297 P. 1013; Thomas v. Daughters of Utah Pioneers, 114 Utah 108, at 150, 197 P.2d 477, at 499; Critchlow v. Monson, 102 Utah 378, 131 P.2d 794; Donahue v. Warner Bros., 2 Utah 2d 256, 272 P.2d 177; State Water Pollution Control Board v. Salt Lake City, 6 Utah 2d 247, 311 P.2d 370; Gammon v. Federated Milk Producers, 11 Utah 2d 421, 360 P.2d 1018.\n[5] Zangerle v. Court of Common Pleas Cuyahoga County, 141 Ohio St. 70, 46 N.E.2d 865; State ex rel. Broughton v. Zimmerman, 261 Wis. 398, 52 N.W.2d 903; State ex rel. Watson v. Merialdo, 70 Nev. 322, 268 P.2d 922; In re Olson (Hardy v. Olson et ux.), 111 Utah 365, 180 P.2d 210; Logan City v. Ind. Comm. of Utah, 85 Utah 131, 38 P.2d 769; Citizen's Club v. Welling, 83 Utah 81, 27 P.2d 23; Taylor v. Lee, Governor et al., 119 Utah 302, 226 P.2d 531; Tite v. State Tax Comm., 89 Utah 404, 57 P.2d 734; Mill v. Brown, 31 Utah 473, 88 P. 609; Lipke v. Lederer, 259 U.S. 557, 42 S. Ct. 549, 66 L. Ed. 1061; Regal Drug Co. v. Wardell, 260 U.S. 386, 43 S. Ct. 152, 67 L. Ed. 318.\n[6] Sec. 55-10-1. Juvenile courts and probation officers — Control by public welfare commission — costs. — The public welfare commission shall have the general control and supervision over juvenile courts and probation officers. The commission shall have the power to fix the salaries of the judges of the juvenile courts, probation officers and other officers and employees, subject to the standards established by the department of finance. It shall provide, according to procedure established by the department of finance, court rooms, necessary equipment, supplies and other incidentals. The cost of maintaining said courts, and the expenses of the probation work shall be paid out of the general funds of the state or other funds available to the commission for such purposes.\n[7] See Section 55-10-1, U.C.A. 1953 and Vol. 6, 1961 Pocket Supplement Section 55-10-3 and 3.1.\n[8] See Section 55-10-4, U.C.A. 1953.\n[9] See Footnote 1.\n[10] Art. VIII, Sec. 7, Constitution of Utah. [Jurisdiction of district courts.] The District Court shall have original jurisdiction in all matters civil and criminal, not excepted in this Constitution, and not prohibited by law; appellate jurisdiction from all inferior courts and tribunals, and a supervisory control of the same. The District Courts or any judge thereof, shall have power to issue writs of habeas corpus, mandamus, injunction, quo warranto, certiorari, prohibition and other writs necessary to carry into effect their orders, judgments and decrees, and to give them a general control over inferior courts and tribunals within their respective jurisdictions.\n[11] See Laws of Utah 1931, Chapter 29, Sec. 1, and Revised Statutes of Utah 1933, Chapter 7, Section 14-7-1, and Laws of Utah 1941, Chapter 67.\n[12] See Laws of Utah 1905 and Chapter 117, Section 1, Compiled Laws of Utah 1907, Chapter 9, Section 720; and Compiled Laws of Utah 1917, Chapter 9, Section 1814.\n[13] See Laws of Utah 1941, Chapter 67, Section 2.\n\n", "ocr": false, "opinion_id": 2609152 }, { "author_str": "Henriod", "per_curiam": false, "type": "020lead", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nHENRIOD, Chief Justice.\nAppeal from a juvenile court judgment committing a minor to the Industrial 'School conditionally. Appellant urged that the judgment was not supported by sufficient evidence, but we cannot agree, so that the judgment is affirmed.\nAppellant attacks the constitutionality of Secs. 55-10-1 and 55-10-3, Utah Code Annotated 1953, as amended, as being violative of Art. V, Sec. 1, Utah Constitution.1 Amicus curiae supports appellant’s attack, but seeks to have the court canvass the constitutionality of a number of other sections, on the same and different constitutional grounds. We review only those points raised by the litigants on appeal and not those urged by strangers thereto; hence we will review only the two sections called to our attention by the appellant.2 Our conclusions do not affect the status of the juvenile court, its jurisdiction *338over the subject matter or the validity of its judgment.\nThere is no question as to the status of tlie juvenile court: It is a court of law and an integral part of the judicial branch of government in our tripartite system, as is the Supreme District, and inferior courts sanctioned by the legislature, and the Justice Courts. This conclusion seems to be shared by the respondent itself when it concedes in its brief that:\n“Art. VIII, sec. 1 of the Utah Constitution provides for the creation of inferior courts as may be established by law by the legislature” and that “the juvenile court is such an inferior court. Salt Lake County v. Salt Lake City.” 3\nThe juvenile court tries cases,4 renders decisions,5 jails adults,6 confines minors,7 grants clemency or probation,8 appoints referees,9 receives and hears complaints and petitions,10 issues process,11 appoints process servers,12 can hold persons in contempt,13 issues search and seizure warrants,14 determines when and where the court sits,15 is subject to an appeal of its decisions to the Supreme Court,16 and in some areas to the District Court,17 convicts and penalizes adults,18 in the same manner as is done in Justice’s Court,19 is subject to the same type of procedure and practice, payment of witness fees, summoning of and qualifying jurors and accounting for fines, forfeitures and penalties as are Justice’s Court,20 arranges bonds,21 forfeits them,22 and performs other strictly judicial functions.\nThese matters are those generally reserved to the judiciary. Any legislative sanction looking toward their invasion is offensive to constitutional, traditional and historical precepts.\n*339Unequivocally and without ambiguity, Sec. 55 — 10—1 says “The * * * commission shall have the general control and supervision over juvenile courts and probation officers.” The language is plain, simple unprovisional, and unqualified. It is plenary. It does not say “provided, however” or “except as herein restricted.” Distinction, grammatical legerdemain or judicial legislation cannot change this clear interdiction that offends against separation of power concepts. Respondent says that “it is obvious that the general control and supervision mentioned in sec. 55 — 10—1 * * * is only general administrative assistance and not an exercise of judicial power.” Difficulty with this assertion is that the section’s language does not say so. Such contention is unrealistic in the light of practicality and common experience and runs afoul of the plain wording of the section, which is not chameleonic depending on varying philosophies as to whether a welfare commission should or should not noose the courts. The question is not a question of now-you-see-it-now-you-don’t. You see it in plain English, and to say “control and supervision over juvenile courts” has no plenary connotation, simply is to be myopic.\nThe bona fides of present commission personnel, or any talk about past, present or future amours between the two branches of government, does not change the definition of “control,” nor take the word out of the section, nor is it an insurance policy against future rifts as to kind or quantum of power reserved to each, nor can it resolve the differences and misgivings of judicial and social thinkers as to where the fountain of power lies or into which channel the power flows, — that of the legislative, executive or judicial branch.\nAfter concluding that that part of the section purporting to delegate control and supervision “over the juvenile courts” offends the constitution, there would seem to be no constitutional objection to the balance of the language, and that such can be separable, as we have held before,23 but it may be viewed with interest by the legislature, as well as the Welfare Commission as to the source of funds with which to pay salaries and operational expenses of juvenile courts.\nHaving concluded that the juvenile court definitely is an integral part of the judicial branch, it would seem inimical to common sense and to Art. VIII, sec. 11, Utah Constitution 24 having to do with removal of judges, to sanction their removal by an administrative agency of the executive branch, (as was attempted in Sec. *34055-10-3). Judges, in the constitutional sense, as is the case with a juvenile court judge, are amenable only to the constitutional sanctions for removal. Consequently, we conclude that the words “provided, that the judge may be removed by the commission for cause\" represent an effort to create an unconstitutional grant of power, — hence invalid. The remaining language in 55-10-3, U.C.A.1953, as amended, is subject to the same observations, conclusion and authority contained in the next preceding paragraph.\nMcDonough and callister, jj., concur.\n\n. “The powers of the government of the State of Utah shall be divided into three distinct departments, the Legislative, the Executive, and the Judicial; and no person charged with the exorcise of powers properly belonging to one of these departments, shall exercise any functions appertaining to either of the others, except in the eases herein expressly directed or permitted.”\n\n\n. There may be some doubt as to whether we should review the two points on appeal having to do with the sections mentioned, supra, since they were raised on appeal for the first time. If what we say in this opinion would jeopardize the lib*338erty of appellant, which it will not, so far as the two sections are concerned, there would be authority for raising a constitutional issue for the first time on appeal (3 Am.Jur. 63, sec. 293, Const. Law). Another question could be posed as to whether the rule as to appellate review would apply to many matters handled by the juvenile court, which may not be real adversary proceedings, where no legal counsel may be present to preserve rights in anticipation of a possible appeal. Any such doubt is resolved in this partic-wlar ease in favor of appellant, particularly in view of the considerable public interest and concern engendered.\n\n\n. 42 Utah 548, 134 P. 560.\n\n\n. 55-10-30.\n\n\n. 55-10-30.\n\n\n. 55-10-51.\n\n\n. 55-10-30.\n\n\n. 55-10-57.\n\n\n. 55-10-10.\n\n\n. 55-10-14.\n\n\n. 55-10-15.\n\n\n. 55-10-17.\n\n\n. 55-10-18.\n\n\n. 55-10-23.\n\n\n. 55-10-24.\n\n\n. 55-10-34.\n\n\n. 55-10-61.\n\n\n. 55-10-51.\n\n\n. 55-10-54.\n\n\n. 55-10-55.\n\n\n. 55-10-58.\n\n\n. 55-10-60.\n\n\n. Steed v. Harvey, 18 Utah 367, 54 P. 1011 (1898).\n\n\n. “Judges may bo removed from office by the concurrent vote of both houses of the legislature, each voting separately\n\n", "ocr": false, "opinion_id": 9791396 }, { "author_str": "Wade", "per_curiam": false, "type": "030concurrence", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nWADE, Justice\n(concurring in the result) .\nI agree with the prevailing opinion of Chief Justice HENRIOD that the judgment should be affirmed.\nI also agree that the juvenile court is an integral part of the judicial branch of our government in our tripartite system, and that any statute which confers supervision and control over the decisions of the juvenile court judges on the Public Welfare Commission or any other officer or department of the executive branch of the government is unconstitutional.1 Further, I think any decision rendered by a judge acting under the supervision and control of a department or officer of the executive branch of the government, and not under his own judgment and discretion, would be void. I disagree with the prevailing opinion because I think it misconstrues Section 55-10-1, U.C.A. 1953 and fails to take into account the history and background of that section, and Section 55-10-2, and the other sections in the chapter dealing with juvenile courts. I shall express my view without particular reference to the prevailing opinion.\nIn discussing this question keep in mind: (1) That courts usually pass on a constitutional question only when it is a controlling issue in the case;2 (2) that even though some provisions of the statutes dealing with the juvenile courts might be in some respects unconstitutional, these provisions are separable, and if the provisions delegated unconstitutional judicial powers and functions to the Public Welfare Commission only such provisions would be void. The juvenile courts, and the office of judge thereof, which were properly created and established by the statutes, absent the exercise of any unconstitutional control by the Commission, would be at least judges de facto and their decisions are valid;3 and (3) that if by any reasonable construction of the statutes such statutes will be constitutional, we should give the statutes the *341■construction which will render them constitutional and thereby make them valid enactments.4\nOn the other hand, in my opinion if the statutes must be construed to mean that the Public Welfare Commission is given power or authority to supervise or control the judicial functions of the juvenile court judges, or to exercise such judicial powers, duties or functions, or coerce, induce, persuade or influence a judge to act in accordance with the determination of the Commission and not in accordance with his own determination of the issues, such statutes would be clearly unconstitutional and void.5 For clearly, judicial powers' and functions are conferred on the juvenile judges, and if the Public Welfare Commission is authorized by statute to control, supervise or exercise such judicial powers or functions, such provisions of the statutes are unconstitutional and void.\nJudicial department powers and functions can only be exercised by the judges. Such functions involve the making of judicial decisions without interference, undue influence, or coercion. However, courts and judges are necessarily closely connected with executive officers who perform executive or quasi executive functions. Thus, the clerk of the district court, under the direction of the district judge, swears the witnesses and writes the minute entries, which are subject to correction and approval of the judge. lie also is a deputy county clerk, and the court records are filed and kept in the county clerk’s office. The court bailiff is a deputy county sheriff; he, under the direction of the judge, maintains order in the court, and the sheriff’s office and other police officers execute the orders of the court. Court rooms and court facilities are planned, constructed, furnished and remodeled by the executive branch of our government, and sometimes these things are done with the advice and counsel of the judges involved. So it is clear that these two branches of our gov*342ernment are of necessity closely connected with each other, and without either exercising the powers or functions of the other, they work together.\nThe provision that the Public Welfare Commission shall have the general control and supervision over juvenile courts 6 can reasonably be construed to mean only supervision and control over the quasi executive and executive powers and functions of the juvenile courts, and does not confer power to supervise and control the juvenile court judges in their judicial function or to exercise their judicial powers.\nA study of Sections 55-10-1 and 2, U.C. A.1953 indicates that the juvenile court statutes merely give the Public Welfare Commission control of the juvenile courts in relation to executive or quasi executive powers and functions, and do not authorize that Commission to control the judicial powers and functions of the judges of the juvenile courts. Thus, these statutes repeatedly mention that the Public Welfare Commission shall fix salaries in accordance with the standards established by the Department of Finance, the providing of court rooms, payment of costs and expenses, the appointment of the judges and their successors in accordance with the fixed standards and special qualifications, and without regard to political affiliation.7 These statutes further provide for the appointment of a clerk and deputy clerk for each juvenile court, and the keeping of records.8 On the other hand, the constitutional provisions deal only with judicial powers and functions of the court and judges thereof.9 The mention of supervisory control over inferior courts 10 deals *343only with the'jurisdiction of district courts and their appellate jurisdiction and power to issue writs, to carry into effect their orders, judgment and decrees. These provisions clearly deal only with judicial powers and functions in contrast with the statutes which deal only with executive or quasi executive functions connected with the juvenile courts.\nTo properly understand Section 55-10-2, U.C.A.1953 we must have in mind its history, background and the meaning of the term “Juvenile Court and Probation Commission.” That term was the statutory name of the Commission which, from 1931 to 1941, among other things, appointed the juvenile court judges.11 Prior to that time, from 1905 to 1931, a similar commission which appointed the juvenile judges was by statute designated “the Juvenile Court Commission.” 12 In 1941, the Public Welfare Commission13 was by statute named to “succeed to all powers and discharge all duties and perform all functions which by existing and continuing law” was previously required of the previous Commission designated as the “Juvenile Court and Probation Commission.”\nThis is sometimes mistakenly construed as saying that the “public welfare commission shall succeed to all powers and dis-chai-ge all duties and perform all functions which by existing and continuing law are conferred upon and required to be discharged or performed by the juvenile court.” The statute says “performed by the juvenile court and probation commission.” By omitting the last words of the sentence quoted above from Section 55-10-2, the real meaning that the statute which is merely conferring on a newly created commission the functions, powers and duties of the previously designated “Juvenile Court and Probation Commission” is changed, and we create the impression that the judicial functions of the juvenile court judges are being conferred on the Public Welfare Commission. If such were the meaning of this statute, it would confer on the Public Welfare Commission judicial functions and powers and would be void, but that is clearly not the true meaning of this statute, which is that the duties of the old commission are by the new statute being conferred upon a newly created commission.\nThe last part of this statute provides that: “Whenever any existing and continuing law refers to or names the juvenile court and probation commission or any officer or employee thereof, it shall be con*344strued to refer to and mean the public welfare commission or the corresponding officer or employee of the public welfare commission.” Since the Public Welfare Commission succeeded to the powers, duties and functions of the previous commission, which the statute designed as the “Juvenile Court and Probation Commission,” this simply means that the Public Welfare Commission succeeds to the powers, duties and functions of the previously designed “Juvenile Court and Probation Commission,” and corresponding officers or employees of the present Commission succeed to the powers and duties and functions of such corresponding officers and employees of the previous Commission. Under this construction there is no conferring of judicial powers and functions on the new Commission, and therefore the Constitution is not violated by this statute.\nThe constitutional question was not raised in the trial court, so there can be no evidence of any pressure or undue influence by the Commission on the trial judge. The fact that the Commission appoints the judges for a six-year term and must reappoint or appoint a successor to the judge at the end of that term, does not violate the three departments clause of our Constitution. The fact that the Commission keeps records, circulates information and holds conferences to discuss the juvenile court problems merely suggests furnishing of educational opportunity to the judges rather than using undue influence, or usurpation of judicial function.\nCROCKETT, J., concurs in the concurring opinion of WADE, J.\n\n. Article V, Sec. 1, Constitution of Utah. See Note 1 main opinion.\n\n\n. 11 Am.Jur., Sec. 93, p. 720.\n\n\n. See Mill v. Brown, 31 Utah 473, 88 P. 609.\n\n\n. See State v. Packer Corporation, 77 Utah 500, 297 P. 1013; Thomas v. Daughters of Utah Pioneers, 114 Utah 108, at 150, 197 P.2d 477, at 499; Critchlow v. Monson, 102 Utah 378, 131 P.2d 794; Donahue v. Warner Bros., 2 Utah 2d 256, 272 P.2d 177; State Water Pollution Control Board v. Salt Lake City, 6 Utah 2d 247, 311 P.2d 370; Gammon v. Federated Milk Producers, 11 Utah 2d 421, 360 P.2d 1018.\n\n\n. Zangerle v. Court of Common Pleas Cuyahoga County, 141 Ohio St. 70, 46 N.E.2d 865; State ex rel. Broughton v. Zimmerman, 261 Wis. 398, 52 N.W.2d 903; State ex rel. Watson v. Merialdo, 70 Nev. 322, 268 P.2d 922; In re Olson (Hardy v. Olson et ux.), 111 Utah 365, 180 P.2d 210; Logan City v. Inch Comm. of Utah, 85 Utah 131, 38 P.2d 769; Citizen’s Club v. Welling, 83 Utah 81, 27 P.2d 23; Taylor v. Lee, Governor et al., 119 Utah 302, 226 P.2d 531; Tite v. State Tax Comm., 89 Utah 404, 57 P.2d 734; Mill v. Brown, 31 Utah 473, 88 P. 609; Lipke v. Lederer, 259 U.S. 557, 42 S.Ct. 549, 66 L.Ed. 1061; Regal Drug Co. v. Wardell, 260 U.S. 386, 43 S.Ct. 152, 67 L.Ed. 318.\n\n\n. Sec. 55-10-1. Juvenile courts and probation officers — Control by public welfare commission — costs.—The public welfare commission shall have the general control and supervision over juvenile courts and probation officers. The commission shall have the power to fix the salaries of the judges of the juvenile courts, probation officers and other officers and employees, subject to the standards established by the department of finance. It shall provide, according to procedure established by the department of finance, court rooms, necessary equipment, supplies and other incidentals. The cost of maintaining said courts, and the expenses of the probation work shall be paid out of the general funds of the state or other funds available to the commission for such purposes.\n\n\n. See Section 55-10-1, U.C.A.1953 and Vol. 6, 1961 Pocket Supplement Section 55-10-3 and 3.1.\n\n\n. See Section 55-10-4, U.C.A.1953.\n\n\n. See Footnote 1.\n\n\n. Art. VIII, Sec. 7, Constitution of Utah. [Jurisdiction of district courts.] The District Court shall have original jurisdiction in all matters civil and criminal, not excepted in this Constitution, and not prohibited by law; appellate jurisdiction from all inferior courts and tribunals, and a supervisory control of the same. The District Courts or any judge thereof, shall have power to issue writs of ha-beas corpus, mandamus, injunction, quo warranto, certiorari, prohibition and other writs necessary to carry into effect their orders, judgments and decrees, and to give, them a general control over inferior courts and tribunals within their respective jurisdictions.\n\n\n. See Laws of Utah 1931, Chapter 29, Sec. 1, and Revised Statutes of Utah 1933, Chapter 7, Section 14-7-1, and Laws of Utah 1941, Chapter 67.\n\n\n. See Laws of Utah 1905 and Chapter 117, Section 1, Compiled Laws of Utah 1907, Chapter 9, Section 720; and Compiled Laws of Utah 1917, Chapter 9, Section 1814.\n\n\n. See Laws of Utah 1941, Chapter 67, Section 2.\n\n", "ocr": false, "opinion_id": 9791397 } ]

[ "237 So. 2d 861" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": 3639, "opinion_text": "\n237 So. 2d 861 (1970)\nEx parte James C. TISDALE.\nIn re CAROLINA CASUALTY INSURANCE COMPANY, a Corporation and Stokley \"Tip\" Chambers, Individually and d/b/a Stokley Chambers & Co. Insurance Adjusters\nv.\nJames C. TISDALE.\n4 Div. 399.\nSupreme Court of Alabama.\nJuly 10, 1970.\nTipler, Fuller & Melton, Andalusia, for petitioners.\nAlbrittons & Rankin, Andalusia, for respondent.\nMADDOX, Justice.\nPetition of James C. Tisdale for certiorari to the Court of Civil Appeals to review and revise the judgment and decision in Carolina Casualty Insurance Company, a Corporation and Stokley \"Tip\" Chambers, Individually and d/b/a Stokley Chambers & Co., Insurance Adjusters v. James C. Tisdale, 46 Ala.App. 50, 237 So. 2d 855 (4 Div. 5).\nWrit denied.\nAll the Justices concur.\n", "ocr": false, "opinion_id": 1824675 } ]

[ "105 U.S. 733", "26 L. Ed. 1220", "1881 U.S. LEXIS 2184" ]

[ { "author_str": "Waite", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": 3338, "opinion_text": "\n105 U.S. 733 (____)\nRALLS COUNTY COURT\nv.\nUNITED STATES.\nSupreme Court of United States.\n\nMr. Henry A. Cunningham for the plaintiff in error.\nMr. John H. Overall, contra.\nMR. CHIEF JUSTICE WAITE delivered the opinion of the court.\nSection 29 of the act to incorporate the St. Louis and Keokuk Railroad Company, approved Feb. 16, 1857, is as follows: —\n*734 \"It shall be lawful for the county court of any county in which any part of the route of said railroad may be to subscribe to the stock of said company; and it may invest its funds in the stock of said company, and issue the bonds of said county to raise funds to pay the stock thus subscribed, and to take proper steps to protect the interest and credit of the county. Such county court may appoint an agent to represent the county, vote for it, and receive its dividends.\"\nUnder this authority the County Court of Ralls County subscribed $200,000 to the stock of the company, and, during the years 1870 and 1871, issued bonds of the county to pay the subscription. Default having been made in the payment of coupons for interest attached to some of these bonds, Douglass brought suit against the county, in the Circuit Court of the United States for the Eastern District of Missouri, for their recovery, and, on the 16th of October, 1878, obtained judgment for $17,158.43. That judgment was affirmed in County of Ralls v. Douglass, supra, p. 728.\nAfter the judgment was rendered in the Circuit Court, the present suit was begun by the United States, on his relation, to require the county court, by mandamus, to pay the amount due out of moneys in the treasury of the county; or, if that could not be done, to raise the necessary means by the levy of a special tax. In the return to the alternative writ many defences were set up which related to the validity of the coupons on which the judgment had been obtained, as obligations of the county. As to all these defences, it is sufficient to say it was conclusively settled by the judgment which lies at the foundation of the present suit, that the coupons were binding obligations of the county, duly created under the authority of the charter of the railroad company, and, as such, entitled to payment out of any fund that could lawfully be raised for that purpose. It has been in effect so decided by the Supreme Court of Missouri in State v. Rainey (74 Mo. 229), and the principle on which the decision rests is elementary.\nThe present suit is in the nature of an execution, and its object is to enforce the payment, in some way provided by law, of the judgment which has been recovered. The only defences that can be considered are those which may be presented in *735 the proper course of judicial procedure against the collection of valid coupons, executed under the authority of law and reduced to judgment. While the coupons are merged in the judgment, they carried with them into the judgment all the remedies which in law formed a part of their contract obligations, and these remedies may still be enforced in all appropriate ways, notwithstanding the change in the form of the debt.\nThis brings us to consider what may be done to enforce the judgment. The county court insists that its power of taxation is limited to the levy of an annual tax of one-half of one per cent on the taxable property in the county, and that as this tax has always been levied at the times provided by law, the duty of the court in the premises has been fully performed. The relator, on the contrary, claims that the limit of one-half of one per cent only applies to taxes to defray the general expenses of the county, and that if the fund produced in this way is not sufficient to enable the county to pay his judgment, an additional tax must be levied and collected specifically for that purpose. This presents the real controversy we have to settle.\nWhen the charter of the St. Louis and Keokuk Railroad Company was granted, when the subscription was made to its stock by the county court, and when the bonds to pay the subscription were put out, there were limitations on the powers of the county court for the levy of taxes to defray the expenses of the county which confined the tax for a year to one-half of one per cent or less. The question we have to consider is not whether this power has been reduced below that limit, but whether the limit is applicable to the obligation of the county created under the authority of the particular charter now in question.\nIt must be considered as settled in this court, that when authority is granted by the legislative branch of the government to a municipality, or a subdivision of a State, to contract an extraordinary debt by the issue of negotiable securities, the power to levy taxes sufficient to meet, at maturity, the obligation to be incurred, is conclusively implied, unless the law which confers the authority, or some general law in force at the time, clearly manifests a contrary legislative intention. *736 The power to tax is necessarily an ingredient of such a power to contract, as, ordinarily, political bodies can only meet their pecuniary obligations through the instrumentality of taxation. This general doctrine has been so many times announced, that it cannot be necessary now to do more than refer to Loan Association v. Topeka (20 Wall. 655), where the opinion was given by Mr. Justice Miller, and United States v. New Orleans (98 U.S. 381), in which Mr. Justice Field, speaking for the entire court, went elaborately over the whole subject. In United States v. County of Macon (99 id. 582), there was a special limitation on the power to tax coupled with the authority to contract, and because the legislature saw fit to say how much of a tax in addition to that otherwise provided might be levied to meet the new and extraordinary obligation which was contemplated, it was held that a prohibition against anything more was necessarily to be inferred.\nIn the present case there is no such special limitation. The defence rests entirely on the power to tax to \"defray the expenses of the county,\" which it has always been the policy of the State to restrict. The county court was, however, not only authorized to issue bonds, but to \"take proper steps to protect the interest and credit of the county.\" It would seem as though nothing more was needed. As the commercial credit of the county, in respect to its negotiable bonds, could only be protected, under ordinary circumstances, by the prompt payment of both principal and interest, at maturity, and there is nothing to show that payment was to be made in any other way than through taxation, it necessarily follows that power to tax to meet the payment was one of the essential elements of the power to protect the credit. If what the law requires to be done can only be done through taxation, then taxation is authorized to the extent that may be needed, unless it is otherwise expressly declared. The power to tax in such cases is not an implied power, but a duty growing out of the power to contract. The one power is as much express as the other. Here it seems to have been understood by the legislature that the ordinary taxes might not be enough to enable the county to meet the extraordinary obligation that was to be incurred, and so, without placing any restriction on the amount to be *737 raised, the county court was expressly empowered to do all that was necessary to protect the credit of the county. We cannot agree to the position taken by the counsel for the plaintiff in error, that this power was exhausted when the bonds were issued to pay the subscription. The faith of the county pledged by the subscription was kept when the bonds were put out, but only by transferring the credit to be protected from the subscription to the bonds. The subscription was paid by the bonds; but the obligation to pay the bonds, principal and interest, when they matured was legally substituted.\nWe have been referred to many instances in which statutes were passed authorizing special taxes to pay bonds which had long before been issued under original authority like that contained in the present charter; but this does not, in our opinion, change the case. Such legislation seems to have been procured out of abundant caution; but in none of the numerous cases in the Missouri reports, to which our attention has been directed, is it anywhere said that the requisite tax could not have been levied but for such legislation. In State v. Dallas County Court (72 Mo. 329), and some other cases before, it was held that such a provision as that contained in the charter of the St. Louis and Keokuk Railroad Company, now under consideration, was repealable; but none of the judges whose decisions have been published intimate even that if there had been no repeal there could not be a tax. It has been many times decided that county courts in Missouri, while acting as the governing bodies of their counties, which are nothing more than political subdivisions of the State, have no implied powers. Authority must be conferred on them by law to act, or they cannot act at all. This is not peculiar to the county officials of Missouri. The same principle applies to all municipal organizations in all the States, and in this respect it matters but little whether the organization exists as a full corporation or a quasi corporation. The point is that all such organizations for local government, by whatever name they may be called, have only such powers as the legislatures of their respective States see fit to delegate to them. But all powers that are delegated may be exercised in any proper way and at all proper times.\n*738 This makes it unnecessary to consider whether the power of taxation given by the general railroad laws in force when these bonds were made can be invoked in aid of the relator. It is enough that we find sufficient power in the charter of the company itself, without looking elsewhere. We ought, perhaps, to say, however, that the remark in the opinion in United States v. County of Macon (99 U.S. 582, 591), to the effect that the power of taxation granted by the general railroad laws was confined to subscriptions authorized by them, should be construed as made in a case where a special limitation on the power to tax was contained in the charter which authorized the issue of the bonds then in question, and that it was only necessary to decide that the railroad laws did not enlarge that power. The language there used may be broader than on further consideration we shall be willing to agree to. That case is authority on this point only to the extent it was necessary then to decide.\nIt follows from this that all laws of the State which have been passed since the bonds in question were issued, purporting to take away from the county courts the power to levy taxes necessary to meet the payments, are invalid, and that, under the well-settled rule of decision in this court, the Circuit Court had authority by mandamus to require the county court to do all the law, when the bonds were issued, required it to do to raise the means to pay the judgment, or something substantially equivalent. The fact that money has once been raised by taxation to meet the payment, which has been lost, is no defence to this suit. The claim of the bondholders continues until payment is actually made to them. If the funds are lost after collection, and before they are paid over, the loss falls on the county and not the creditors. The writ as issued was properly in the alternative to pay from the money already raised, or levy a tax to raise more. It will be time enough to consider whether the command of the writ that the court cause the tax to be collected is in excess of the requirements of the law, when the justices of the court are called on to show why they have not obeyed the order. The same may be said of the order to draw the warrant on the treasurer. As at present informed, we see no irregularity in anything that has been done.\n*739 The judgment of the Circuit Court will be affirmed, and the cause remanded, with leave to the court to make such changes in the order originally entered as may have become necessary by reason of the time that has elapsed since the writ of error was brought; and it is\nSo ordered.\nMR. JUSTICE BLATCHFORD did not sit in this and the case mentioned in the following note.\nNOTE. — Lincoln County Court v. United States, error to the same court, was argued at the same time and by the same counsel as the preceding case.\nMR. CHIEF JUSTICE WAITE, on behalf of the court, remarked that the cases differed only in one particular. Here the bonds were not actually delivered until after the statute requiring registration went into effect, though they were in the hands of the agent for delivery before. It is contended that on this account no special tax can be levied for their payment, notwithstanding the judgment that has been recovered upon them. In our opinion this is a defence that cannot be taken advantage of after judgment. As has been said in the Ralls County case, it was conclusively settled by the judgment, which this proceeding is to carry into execution, that the coupons sued on were binding obligations of the county, duly created under the authority of law, and as such are entitled to payment out of any fund that can lawfully be created for that purpose.\nJudgment affirmed and the cause remanded, with the same order as in that case.\n", "ocr": false, "opinion_id": 90635 } ]

[ "503 F.2d 660" ]

[ { "author_str": "Carter", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/503/503.F2d.660.72-2760.html", "author_id": null, "opinion_text": "503 F.2d 660\n 74-2 USTC P 9710\n A.J. INDUSTRIES, INC., Plaintiff-Appellant,v.UNITED STATES of America, Defendant-Appellee.\n No. 72-2760.\n United States Court of Appeals, Ninth Circuit.\n Sept. 12, 1974.\n \n Jack R. White (argued), of Hill, Farrer & Burrill, Los Angeles, Cal., for plaintiff-appellant.\n Ernest J. Brown (argued), U.S. Dept. of Justice, Washington, D.C., for defendant-appellee.\n Before ELY and CARTER, Circuit Judges, and EAST,* District Judge.\n OPINION\n JAMES M. CARTER, Circuit Judge:\n \n \n 1\n In this tax case, plaintiff taxpayer appeals from a district court judgement denying it a refund for taxes and interest paid in the sum of $1,291,445.79 for the taxable years 1957 through 1961. The central question is whether taxpayer is entitled to a loss deduction under either the 1939 or 1954 Internal Revenue Codes and applicable regulations for the years 1956 or 1957, in connection with an abandoned gold mining venture in Juneau, Alaska.\n \n \n 2\n On its return in 1958, taxpayer claimed a loss deduction which it carried back to 1957 and carried forward through 1961 in order to reduce taxes in those five years. The Commissioner of Internal Revenue disallowed the deduction, assessing a deficiency. Taxpayer paid the deficiency and filed a suit for refund in the United States Court of Claims, claiming a deduction for a loss in 1958. The Court of Claims ruled that the loss had occurred sometime prior to 1958, and thus denied the claim. A.J. Industries, Inc. v. United States, 388 F.2d 701, 181 Ct. Cl. 1017 (1967).\n \n \n 3\n Taxpayer then brought this action in the district court for a refund, claiming that the loss occurred in 1956 or 1957. It is not disputed that plaintiff, following the Court of Claims' decision regarding the year 1958, had right to bring another action claiming that the loss occurred in earlier years. Nor is it disputed that, if the loss occurred prior to 1956, the loss deduction was barred by the applicable statute of limitations. The district court, ruling that the loss occurred prior to 1956, denied the refund. The question on appeal is whether the district court applied the proper criterion under the Regulations and case law in determining when the loss occurred.\n \n \n 4\n There is no dispute as to facts-- the case was tried on a stipulated record. The taxpayer does not challenge the findings of fact but only the conclusions of law and the judgment of the district court.\n \n \n 5\n In the district court, the government disputed the amount of loss claimed, $2,028,515, but conceded at least $1,158,622 would be deductible if plaintiff was entitled to claim a loss. The question of the proper amount of the claimed loss was not reached by the district court and is not before us. However, we should note that there was no claim by the government that the claimed amount of loss was fictitious or false or in any other way not a legitimate claim except for its proper calculation under the facts and the law.\n \n THE SPECIFIC QUESTIONS RAISED\n \n 6\n (1) Did the district court disregard Treasury Regulation 118, 39.23(e)-3, 1939 Code?\n \n \n 7\n (2) Did the district court erroneously rely on Boehn v. Commissioner, 326 U.S. 287, 66 S. Ct. 120, 90 L. Ed. 78 (1945)?\n \n THE FACTS\n \n 8\n The facts, which are not in dispute, are set forth in detail in the findings of the Commissioner in A.J. Industries, Inc. v. United States, 388 F.2d 701, 181 Ct. Cl. 1017, 1035-1063, from which findings the stipulated pretrial order was prepared. Some of the findings of fact are set forth in footnotes to the subsequent text; particularly Findings 60, 65, 77 and 78.\n \n \n 9\n In summary, the Alaska mine was a profitable gold mining venture from 1897 until 1942. It lost money in 1943 and 1944, owing to higher wages brought about by the war. The War Labor Board ordered a 14-cent an hour retroactive increase in May 1944, and with increased costs for labor and material the taxpayer's president, pursuant to prior authorization for the board of directors, ordered a shutdown of the mine, which occurred in April 1944.\n \n \n 10\n The taxpayer's management, believing until 1956 that the shutdown was temporary, were confident the mine could be reopened after the end of World War II. The management sought to protect the mining equipment, supplies and facilities, and to carry out repairs and reconstruction. They also engaged in exploratory work seeking new ore bodies in the mine, to the extent possible with a shutdown crew.\n \n \n 11\n The shutdown force was composed of 'key' men, primarily power plant employees, mine shaft bosses, crew foremen and heads of departments, who would be valuable on reopening. At the shutdown there were 44 such employees. Over the years the number of the crew decreased. At the end of 1955 there were 29. When the general manager retired in 1956 there were 22 or 23 men left.\n \n \n 12\n In 1949 the taxpayer had spent $22,513.39 for shutdown expenses. In 1956 it spent $20,365.45 for the same purposes.\n \n \n 13\n The old management, in control until mid-1956, believed the mine could eventually be again operated. As a result of a proxy fight, a new management took over in June 1956. They decided to abandon the mine and in 1956 gave an option for salvage of the machinery and equipment. In 1957 the option was exercised and a contract made for the salvage process. The money from the option and the contract was spent by the new management toward the purchase of an operating company, the Reynolds Mfg. Company.\n \n \n 14\n It is important to note that the loss claimed is not for machinery or equipment or for diminution in value of the mine itself. It is instead for the adjusted basis of plaintiff's capitalized development costs in preparing the underground tunnels and workings of the mine.\n \n \n 15\n While the mine was still in use, the method of extracting gold was the 'caving' system, which required development work to prepare specific areas that could be 'caved in' economically and safely. This required construction of tunnels and shafts, winzes and raises for the general purpose of hauling, drainage, ventilation and safety. The development costs which benefitted the entire mine were listed in the books as 'Mine Development Costs,' and the development costs in preparing specific areas for 'cave ins' were listed as 'Preparatory Mining Costs.' Together they made up the capitalized amount for which the loss is claimed.\n \n \n 16\n Thus the asset for which the loss is claimed is an intangible asset. It is not the mine or the real estate, and no question of legal title to the land is involved. It is an amount separable and identifiable from the land itself. It is not disputed that such intangible assets are capable of being discarded and abandoned by a taxpayer and are subject to a claim for a deductible loss.\n \n THE DISTRICT COURT'S CONCLUSIONS OF LAW\n \n 17\n In its Conclusions of Law the district court held:\n \n \n 18\n '6. In order to be entitled to a loss deduction as the result of the Juneau mine having become worthless, plaintiff has the burden of demonstrating, by a preponderance of the evidence, that the property had something of value at the beginning of the year for which the loss is claimed.' Boehm v. Commissioner, 326 U.S. 287, 66 S. Ct. 120 (1945).\n \n \n 19\n '7. Under the internal revenue laws a loss deduction must be recognized in the year in which the loss actually was sustained, irrespective of the subjective recognition or predispositions of a taxpayer's management. Boehm v. Commissioner, supra; A.J. Industries, Inc. v. United States, 388 F.2d 701, 181 Ct. Cl. 1017 (1967).\n \n \n 20\n '8. Worthlessness of a mine is established when there no longer are any reasonable prospects for producing the ore in commercially profitable quantities.\n \n \n 21\n '9. The facts and circumstances existing with respect to the Juneau mine during the period 1944-1956 were such that the management did not exercise reasonable business prudence in failing to formally recognize that the mine would never again produce commercially profitable gold ore.\n \n \n 22\n '10. Under the applicable statutes, regulations (relating either to the 1939 or 1954 Internal Revenue Code), and case law, the Court concludes that plaintiff's loss was not sustained in either of the taxable years for which it was claimed and that no loss occurred to plaintiff in either 1956 or 1957.'\n \n DISCUSSION\n \n 23\n In this particular case the government concedes that the taxpayer is entitled to a refund if either the 1939 Code or the 1954 Code justifies a deduction. Both the 1954 Code, 165(a) (26 U.S.C. 165(a)) and the 1939 Code, 23(f), allow a deduction for 'any loss sustained during the taxable year and not compensated for by insurance or otherwise.'\n \n I.\n Loss Deductions Generally\n \n 24\n A loss is not sustained and is not deductible because of mere decline, diminution or shrinkage of the value of property, Reg. 1.165-1(b) and (d), 1954 Code,1 states that the loss is treated as sustained only when its occurrence is 'evidenced by closed and completed transactions and is deductible during the taxable year fixed by identifiable events occurring in such taxable year.' The case law so holds. Commissioner v. Peterman (9 Cir. 1941) 118 F.2d 973, 976; Monroe v. Beatty, 46 T.C. 835, 836 (1966); Citizens Bank of Weston, 28 T.C. 717 (1957).\n \n \n 25\n The 1954 Code provides specific guidance for determining when certain kinds of losses occur. For example, a 'theft loss' occurs by virtue of a theft and is deemed sustained and deductible when the Taxpayer discovers the theft. (165(e).) A 'disaster loss' occurs by virtue of a disaster and is accorded special treatment as to the year of deduction. (165(h).) Losses on worthless securities (165(g)) and worthless debts (166) are expressly sustained by virtue of the asset becoming 'worthless' and are expressly made deductible in the year during which they become worthless.\n \n \n 26\n However, neither the 1939 Code, 23(f), nor the 1954 Code, 165,2 provide any guidance with respect to permissible deductions for the loss of a business asset such as capitalized development costs. We must therefore look to applicable regulations and case law.\n \n II.\n \n 27\n Treasury Regulation 118, 39.23(e)-3 (1939 Code)\n \n \n 28\n The pertinent part of Treasury Regulation 118, 39.23(e)-3 (1939 Code) is set forth in the margin.3 The district court quoted Treasury Regulation 111, 29.23(e)-1 (1939 Code), in its Conclusion of Law No. 5. That regulation reads identically with Treasury Regulation 118, 39.23(e)-3 (1939 Code). Both were promulgated under the 1939 Internal Revenue Code.4 The district court correctly found in Conclusion of Law No. 3 that Treasury Regulation 1.165-1(d) (4)5 (1954 Code) allows a taxpayer the option of applying either the regulations under the 1939 Code or the 1954 Code to losses occurring on or before January 16, 1960. The government concedes this is correct. The analogous regulation under the 1954 Code, 1.165-2(a) is set forth in the margin.6\n \n \n 29\n Conclusion of Law No. 8 reads as follows: 'Worthlessness of the mine is established when there no longer are any reasonable prospects for producing the ore in commercially profitable quantities.' In this Conclusion, the district court used the wrong standard.\n \n \n 30\n Section 165(g)(1) of the 1954 Code (26 U.S.C. 165(g)(1)) expressly sets the standard of 'worthlessness' for taking a loss for securities. In 166(a)(1) of the 1954 Code (26 U.S.C. 166(a)(1)), the same standard is set for bad debts.\n \n \n 31\n But neither Treasury Regulation 118, 39.23(e)-3 (1939 Code), or Treasury Regulations 1.165-1 and 1.165-2 (1954 Code), applicable to the loss of useful value of an asset used in a trade or business, mentions worthlessness or sets that as a standard. Regulation 118, 39.23(e)-3 (1939 Code) speaks of a situation where the taxpayer 'discontinues the business or discards such assets permanently from use in such business,' and states that the loss may be claimed in the year in which 'he (the taxpayer) takes such action.'\n \n \n 32\n Regulation 1.165-1(b) (1954 Code), in defining the nature of the loss, states, 'a loss must be evidenced by closed and completed transactions, fixed by identifiable events . . ..' Regulation 1.165(d) (1954 Code), in fixing the year in which the loss occurs uses the same language but adding after '. . . fixed by identifiable events' the words 'occurring in such taxable year.' Neither the 1939 nor 1954 Regulations are considered in the district court's conclusions, although there is a general reference to the 1939 and 1954 Regulations in Conclusion No. 10.\n \n \n 33\n S. S. White Dental Mfg. Co. v. United States (1944) 55 F. Supp. 117, 102 Ct. Cl. 115, discusses a regulation under the Revenue Act of 1936, Treasury Regulation 94, Art. 23(c)-3, identical to Regulation 39.23(e)-3, and states at p. 121:\n \n \n 34\n 'We think the words 'change in business conditions' in the Regulations must mean, 'in the opinion of the managers of the business.' They cannot refer to anything more objective than that, since assets are discarded upon the basis of that opinion, and upon no other basis.\n \n \n 35\n 'The words 'the usefulness in the business of some or all of the capital assets is . . . terminated' must mean terminated in whole or in such part that, in the opinion of the managers of the business, good management calls for their being discarded. Practically never is a capital asset wholly useless when discarded. It is discarded when it becomes relatively uneconomical to continue to use it, when its use is considered in relation to one or more alternatives. This choice was here made by plaintiff's managers, and their action comes within the quoted language of the regulation.'**\n \n \n 36\n The government states that the Court of Claims rejected S.S. White in its decision in A.J. Industries, Inc., supra (388 F.2d at 710, 181 Ct. Cl. 1017) where it stated:\n \n \n 37\n 'But neither S.S. White nor Hazeltine, (170 F. Supp. 615, 145 Ct. Cl. 138) is authority for plaintiff's theory that the determination of which taxable year an asset became 'worthless' or 'loses its useful value' is solely within the discretion of the business judgment of management.'\n \n \n 38\n S. S. White did not use the word 'solely' in its discussion of a management decision. Even so, the Court of Claims was wrong in holding that taxpayer could not rely on that case. The cases discussing the type of loss we are considering speak generally in terms of abandonment. The 'abandonment' or 'discarding' of an asset would require an act and an intent, as held in S.S. White, supra, pp. 121-123, 102 Ct. Cl. 115.\n \n \n 39\n The decision of the Court of Claims in A.J. Industries, supra (388 F.2d at 703, 181 Ct. Cl. 1017) started out correctly stating and analyzing the law. It cited 165(a) of the 1954 Code (26 U.S.C. 165(a)), quoted Treasury Regulation 118, 39.23(e)-3 udner the 1939 Code, and quoted Regulation 1.165-2 of the 1954 Code. It then stated (p. 704):\n \n \n 40\n 'In order for a loss to be deductible under the pertinent statutory section, it must be shown that the loss was actually sustained during the taxable year; that the loss bacame fixed by an identifiable event in such year; and that there was an intention on the part of the owner to abandon the property. The mere non-use of the property is not enough to constitute an act of abandonment. It is not essential that legal title to the property be lost. Whether the property actually did lose its useful value in a particular year, and whether the owner actually did abandon it as an asset during that year, are questions of fact to be determined from a consideration of all the surrounding facts and circumstances. The issue as to whether the loss was actually sustained calls for a practical, not a legal test, and the standard requires a flexible approach according to the circumstances of each case. The determination as to the year an asset loses its useful value or becomes worthless is a matter of sound business judgment, and that judgment should be given effect unless it appears from the facts that the decision as to the year of loss was unreasonable or unfair at the time the decision was made. Thus, the test is whether the plaintiff has established that under all the facts and circumstances and in the exercise of reasonable business prudence, it fairly determined that its investment in its mine was lost and should be abandoned as worthless in 1958.' (Citing cases).\n \n \n 41\n The Court of Claims also quoted (388 F.2d at 709-710, 181 Ct. Cl. 1017) extensively from Minneapolis, St. Paul & Sault Ste. Marie R.R. v. United States, 164 Ct. Cl. 226 (1964), which rejected a subjective test of 'worthless,' basing its holding on Boehm v. Commissioner, supra, and held the loss must be sustained in fact, during the taxable year, in order to be deductible.\n \n \n 42\n Minneapolis was a bad debt case and Boehm was a securities case. In each category of loss the standare fixed by statute is 'worthlessness;' 166 of the 1954 Code (26 U.S.C. 166) governs bad debts, and 165(g) (26 U.S.C. 165(g)) applies to securities.\n \n \n 43\n Thus the Court of Claims has taken cases in which 'worthlessness' is recognized as the statutory test of deductibility for the loss of a bad debt or security and extended the same test to a loss of a capitalized asset.\n \n \n 44\n The basis of the Court of Claims' opinion for denying the loss in 1958 appears to be (1) the fact that the taxpayer continued to carry the mining asset, including the development costs, on its books for fear that a writeoff would cause the loss of its stock exchange listing, and (2) the fact that 1958 was the first year of profitable operation after 14 successive years of net operating loss. (388 F.2d at 712, 181 Ct. Cl. 1017).\n \n \n 45\n From our reading of Treasury Regulation 118, 39.23(e)-3 (1939 Code), these conclusions follow:\n \n \n 46\n 1. There is nothing in the regulation to indicate that the act of discarding or abandoning the asset must occur in the same year that the asset loses its useful value or in the same year the taxpayer loses the loss of value.\n \n \n 47\n 2. It cannot be construed reasonably to require or allow a loss to become deductible in the year in which the asset loses its value, if the taxpayer does not abandon it, because he reasonably thinks it still has value.\n \n \n 48\n 3. The regulation cannot mean that a loss occurs by reason of loss of value, where the taxpayer neither abandons nor intends to abandon the asset, because he reasonably thinks it still has value and should be retained.\n \n \n 49\n 4. It is the act of abandonment which is the necessary predicate for sustaining the loss. Recognition of the loss is merely the motive or reason which gives rise to the intent to abandon. The taxpayer, in addition to an intent, must take some action.\n \n \n 50\n 5. He may claim the loss 'for the year in which he takes such action,' not the year he formed the intent to abandon, nor the year the asset lost its value.\n \n \n 51\n 6. The foregoing is subject to the exception that if the taxpayer realizes the asset is without value and has no reasonable expectation that the asset will again have value, he may not postpone claiming his loss for the purpose of a claim in a later year when, for example, he would secure greater tax benefits.*** This is what the taxpayer here did when it first claimed its loss and deductions in 1958. A.J. Industries, supra, 388 F.2d at 712.\n \n \n 52\n 7. The subjective judgment of the taxpayer (here the management) as to whether the business assets will in the future have value is entitled to great weight and a court is not justified in substituting its business judgment for a reasonable, well-founded judgment of the taxpayer. A.J. Industries, supra, 388 F.2d at 704, quoted above.\n \n \n 53\n It is clear the district court did not correctly construe the regulation but rather, relying on the contentions of the government and the Boehm decision, misapplied the regulation.\n \n III.\n Additional Case Law\n \n 54\n It has been repeatedly held that in order for a loss of an intangible asset to be sustained and to be deductible, there must be (1) an intention on the part of the owner to abandon the asset, and (2) an affirmative act of abandonment. E.g., S.S. White Dental Mfg. Co. v. United States, supra, pp. 121, 122. (We note the decision was written by the late Judge Madden, who, following his retirement from the Court of Claims, sat with distinction as a Senior Judge on our court on many occasions.)\n \n \n 55\n Beus v. Commissioner (9 Cir. 1958) 261 F.2d 176, 180, states:\n \n \n 56\n 'As was held by the Tax Court and as has been held by other courts including the Idaho Supreme Court, there must be a concurrence of the act of abandonment and the intent to do so, both of which may be shown from all the surrounding facts and circumstances. Belridge Oil Co., 11 B.T.A. 127; Talache Mines v. United States, 9 Cir., 218 F.2d 491; Helvering v. Jones, 8 Cir., 120 F.2d 828, 830; Carrington v. Crandall, 65 Idaho 525, 147 P.2d 1009. The mere intention alone to abandon is not, nor is non-use alone, sufficient to accomplish abandonment. It is clear from the evidence in this case that those concurrent conditions which must necessarily exist before abandonment can be effective were not proved by the defendants to have existed in the year 1952, . . .'\n \n \n 57\n The government does not comment on Beus in its brief.\n \n \n 58\n Talache Mines v. United States (9 Cir. 1954) 218 F.2d 491, 495, 498, cert. denied, 350 U.S. 824, 76 S. Ct. 51, 100 L. Ed. 736 (1955) is further authority in this vein. The government tries to distinguish the case on various grounds and also argues that it is wrong. We think the case was correct, and is a holding requiring an act of abandonment of an asset with intent. Talache and Beus, supra, show that the necessity of an act and intent is the law of this circuit.\n \n \n 59\n Two district court cases also reflect the rule in the Ninth Circuit, Hummel v. United States (N.D.Cal.1963) 227 F. Supp. 31, 32-33 states:\n \n \n 60\n 'It has been held that, where the taxpayer has not relinquished possession of an item, he must prove an 'abandonment', i.e., a concurrence of the act of abandonment and the intent to abandon, both of which must be shown from the surrounding circumstances, of such item in order to determine that a loss has occurred in the year of deducting. Neither mere intention alone nor mere non-use alone, is sufficient to accomplish abandonment. Burke v. C.I.R., 32 T.C. 775 (1959) affirmed, 283 F.2d 487 (9th Cir. 1960); Beus v. C.I.R., 261 F.2d 176, 180 (9th Cir. 1958); Talache v. United States, 218 F.2d 491, 498 (9th Cir. 1954), cert. den. 350 U.S. 824, 76 S. Ct. 51, 100 L. Ed. 736 (1955).'\n \n \n 61\n Tanforan Co. v. United States (N.D.Cal.1970) 313 F. Supp. 796, 802-803 states:\n \n \n 62\n 'Finally, and again alternatively, the deduction is allowable under established principles relating to losses from the physical abandonment of assets.\n \n \n 63\n 'Traditionally, the loss for physical abandonment has been based on evidence establishing an intent to abandon the asset coupled with some overt act or identifiable event to which the abandonment can be related. As stated by the court in United California Bank v. Commissioner of Internal Revenue, 41 T.C. 437, 451 (1964), aff'd per curiam, 340 F.2d 320 (9th Cir. 1964): 'In order to establish actual physical abandonment, there must be an intention on the part of the owner to abandon the property coupled with an act of abandonment, both to be ascertained from all facts and surrounding circumstances.\"\n \n \n 64\n In addition, the Court of Claims stated as follows in Hazeltine Corp. v. United States (1959) 170 F. Supp. 614, 620, 145 Ct. Cl. 138:\n \n \n 65\n 'The abandonment of an asset involves an actual intent on the part of the owner to abandon it, plus an act or acts by the owner designed to carry out such intention. Saxlehner v. Eisner & Mendelson Co., 1900, 179 U.S. 19, 31, 21 S. Ct. 7, 45 L. Ed. 60. The element of intent is especially important in considering whether there has been an abandonment. Nieman v. Plough Chemical Co., 6 Cir., 1927, 22 F.2d 73, 76, certiorari denied 277 U.S. 603, 48 S. Ct. 563, 72 L. Ed. 1010.'\n \n \n 66\n The government dismisses the Hazeltine case by quoting the statement of the Court of Claims from A.J. Industries, supra, set forth above, which discussed S. S. White and Hazeltine.\n \n \n 67\n We note there is not necessarily a conflict between Hazeltine and Minneapolis, etc. R.R., supra (164 Ct. Cl. 226). Minneapolis was a bad debt case and its reliance on Boehm for a worthlessness standard was proper. Hazeltine is an asset case.\n \n \n 68\n The taxpayer also cites the following cases to support its contentions: 'Massey-Ferguson, Inc., 59 T.C. No. 22 (1972); United Calif. Bank, 41 T.C. 437, 451-452, Aff'd per curiam 340 F.2d 320 (9th Cir. 1965); George G. Ebner, T.C.Memo. 1958-108, 17 T.C.M. 550, 560-561; Citizens Bank of Weston, 28 T.C. 717 (1957).'\n \n THE GOVERNMENT'S CASES\n \n 69\n The government cites cases from the Second and Third Circuits which it asserts relied on Boehm in determining the year of loss by abandonment: James Petroleum Corp. v. Commissioner (2 Cir. 1956) 238 F.2d 678, cert. denied, 353 U.S. 910, 77 S. Ct. 667, 1 L. Ed. 2d 664 (1957) and Mine Hill & Schuylkill Haven R. Co. v. Smith (3 Cir. 1950) 184 F.2d 422. In Mine Hill, the question was the year of abandonment. The court did not say the loss was sustained because of objective worthlessness but only cited Boehm for the limited proposition that there need not be a coincidence of intention to abandon with the act of abandonment, the act alone being sufficient.\n \n \n 70\n James Petroleum, the second case, did not involve an abandonment loss. It concerned oil royalty interests, closely akin to securities. Neither the Tax Court below nor the Third Circuit discussed Treasury Regulation 118, 39.23(e)-3, for the loss was not covered by that section.\n \n \n 71\n In the event either case is contrary to our position, we decline to follow them.\n \n \n 72\n The government cites cases characterized by taxpayer as the 'Real Estate Cases.' Superior Coal Co. v. Commissioner, 2 T.C.M. 984, affirmed (7 Cir. 1944) 145 F.2d 597, cert. denied, 324 U.S. 864, 65 S. Ct. 913, 89 L. Ed. 1420 (1945); and Helvering v. Gordon (4 Cir. 1943) 134 F.2d 685. There is language in such cases to the effect that the loss can be sustained by worthlessness and that abandonment is not necessary. We agree with taxpayer that the cases are a limited exception to the general rule requiring abandonment in business loss cases.\n \n \n 73\n The rationale of the Gordon and Superior Coal cases was that loss of legal title was not prerequisite to a claim for loss from abandonment of a worthless real property asset, but that a taxpayer must not be permitted to postpone the taking of a deduction for the purpose of obtaining a larger saving in tax in later years. This rationale concerning title was adopted by the Commissioner in Revenue Ruling 54-581, 1954-2 C.B. 112, as justification for an admitted deviation from the requirement of Regulation 118, 39.23(e)-3. (See Footnote (6b)).\n \n \n 74\n But in any event, the cases involved real property and not an intangible asset as in our case. Neither case attempted to relate its rationale to the express language of 39.23(e)-3.\n \n \n 75\n The government cites C-O Two Fire Equipment Co. v. Commissioner (3 Cir. 1955) 219 F.2d 57. The case is not in point. The deduction there claimed was due to obsolescence of inventory. Such a deduction is not governed by 39.23(e)-3.\n \n \n 76\n Finally, the government cites Meyer v. Commissioner (8 Cir. 1957), 243 F.2d 262, cert. denied, 355 U.S. 862, 78 S. Ct. 94, 2 L. Ed. 2d 68 (1957), holding that a loss in promoting a patent was due to worthlessness. Section 39.23(e)-3 was not cited or discussed in the opinion, nor were the abandonment cases referred to above, cited therein. If the case is contrary to our opinion, we do not choose to follow it.\n \n SUMMARY\n \n 77\n The district court, in its Conclusions of Law, Nos. 6 through 10, supra, paid lip service to the 1939 and 1954 Regulations cited therein and did not rely on (1) an act of abandonment, and (2) an intent to abandon. Instead, the district court, accepting the government's contentions below, concluded that worthlessness was the main criterion, to be judged by objective standards irrespective of the subjective intent of management. In short, it rejected taxpayer's contention that, based on the regulations and case law, there must exist (1) some act of abandonment, and (2) an intent by the taxpayer to abandon, in order for a loss to be sustained.\n \n \n 78\n An analysis of Regulation 118, 39.23(e)-3 of the 1939 Code demonstrates the trial court did not interpret the regulation or base its decision on it. The case law shows it should be followed when a business loss of a capitalized asset is claimed. The Ninth Circuit has clearly held that for a loss by abandonment to occur there must be (1) an act and (2) an intent to abandon. The government's cases are either not in point, poorly reasoned, or from other circuits.\n \n \n 79\n Certainly, under the statutory tax scheme, the loss had to occur in a single particular year. The year 1958 was first relied on by the taxpayer, since in that year it adopted a corporate resolution directing its officers to abandon the investment in the mine and write it off its books on December 31, 1958. But the Court of Claims in A.J. Industries, Inc. v. United States, 388 F.2d 701 (1967) held that the mine became worthless prior to 1958.\n \n \n 80\n As to the years 1956 and 1957, here in issue, the government contends that Finding No. 92 defeats the taxpayer. It reads, 'The matter of abandoning the mining operation was considered by plaintiff's new management at various times after they acquired office in 1956, but no definitive action was taken until 1958 . . ..'\n \n \n 81\n The taxpayer responds that the Court of Claims' decision is only res adjudicata as to the year 1958 and that it held the loss occurred prior to 1958. The fact that 'no definitive action' was taken until 1958 is not fatal to taxpayer in view of the holding that the loss occurred prior to 1958. This left open for the district court to find the year in which (1) an act of abandonment and (2) the intent to abandon occurred.\n \n \n 82\n The taxpayer relies on Finding No. 607 to the effect that a majority of taxpayer's board of directors, from 1944 through the early part of 1956, believed that mining could eventually be resumed at the Juneau mine and that the assets should be preserved; and on Finding No. 658 setting forth a letter from the taxpayer's president, dated May 10, 1956 (during the proxy fight with the group that later took over management of plaintiff), justifying the position of the incumbent management in preserving the mine; and on Finding No. 779 showing that in late 1956 the taxpayer gave an option to Caine Steel Co. to the salvage rights to the mine equipment, replacement parts and scrap material in return for $100,000 to be used as a downpayment for the acquisition of the Reynolds Mfg. Company; and Finding No. 7810 stating that in late 1956 or early 1957, Caine Steel Co. assigned its options to Machinery Center, Inc., and that on January 28, 1957, Machinery Center entered into an agreement to salvage the mining and milling equipment, and taxpayer received an additional $100,000 to be used for the acquisition of Reynolds Mfg. Co.\n \n \n 83\n Taxpayer thus contends that the findings show the loss did not occur before 1956 but occurred in 1956 or 1957 when '. . . the loss became fixed by an identifiable event in such year; and that there was an intention on the part of the owner to abandon the property.' A.J. Industries, supra, p. 704. We think the plaintiff is correct and that there was no intent to abandon nor any identifiable event prior to mid-1956.\n \n \n 84\n The facts were stipulated. We see no need to send the case back to the district court for any further fact-finding on the issue of the year of loss. We think only one conclusion on the issue can be drawn from this record.\n \n \n 85\n In 1956 there existed only the option to salvage, which might never have been exercised. But in 1957 a contract for salvage was executed. Thus there existed in 1957 'closed and completed transactions, fixed by identifiable events,' Regulations 1.165-1(b), 'occurring in such taxable year,' Regulation 1.165-1(d) (both 1954 Code). The year 1957 was the year 'the taxpayer discontinue(d) the business or discard(ed) such assets permanently from use in such business' and 'he (the taxpayer) may claim . . . (the) loss for the year in which he (took) such action. . . .' Treasury Regulation 118, 39.23(e)-3 (1939 Code). In 1957 there existed the intent to abandon and the act of abandonment of the business asset (the capitalized development costs). See cases cited, supra.\n \n \n 86\n We conclude that the district court misapplied the applicable regulation, ignored the Ninth Circuit cases, and mistakenly relied on Boehm v. Commissioner, supra. In summary, the district court used the wrong criterion to determine the year of loss.\n \n \n 87\n The judgment is reversed and the case remanded for entry of a judgment that the loss occurred in 1957. The district court will determine the amount of that loss.\n \n \n \n *\n Honorable William G. East, Senior United States District Judge, District of Oregon, sitting by designation\n \n \n 1\n 1954 Internal Revenue Code. 'Reg. 1.165-1 Losses\n (a) Allowance of deduction . . ..\n (b) Nature of loss allowable. To be allowable as a deduction under section 165(a), a loss must be evidenced by closed and completed transactions, fixed by identifiable events, and, except as otherwise provided in section 165(h) and 1.165-11, relating to disaster losses, actually sustained during the taxable year. Only a bona fide loss is allowable. Substance and not mere form shall govern in determining a deductible loss.\n (c) Amount deductible . . ..\n (d) Year of deduction. (1) A loss shall be allowed as a deduction under section 165(a) only for the taxable year in which the loss is sustained. For this purpose, a loss shall be treated as sustained during the taxable year in which the loss occurs as evidenced by closed and completed transaction and as fixed by identifiable events occurring in such taxable year. For provisions relating to situations where a loss attributable to a disaster will be treated as sustained in the taxable year immediately preceding the taxable year in which the disaster actually occurred, see section 165(h) and 1.165-11.\n (e) Limitation on loss of individuals . . ..'\n \n \n 2\n Section 165(a), 1954 Internal Revenue Code (26 U.S.C. 165(a)):\n '(a) General rules.-- There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise.\n (b) Amount of deduction.-- . . ..\n (c) Limitation on losses of individuals.-- . . ..\n (d) Wegering losses.-- . . ..\n (e) Theft losses.-- . . ..\n (f) Capital losses.-- Losses from sales or exchanges of capital . . ..\n (g) Worthless securities.-- . . ..'\n \n \n 3\n 'Treas. Reg. 118, Sec. 39.23(e)-3. LOSS OF USEFUL VALUE.--\n (a) When, through some change in business conditions, the usefulness in the business of some or all of the assets is suddenly terminated, so that the taxpayer discontinues the business or discards such assets permanently from use is such business, he may claim as a loss for the year in which he takes such action the difference between the basis (adjusted) and the salvage value of the property. This exception to the rule requiring a sale or other disposition of property in order to establish a loss requires proof of some unforeseen cause by reason of which the property has been prematurely discarded, as, for example, where an increase in the cost or change in the manufacture of any product makes it necessary to abandon such manufacture, to which special machinery is exclusively devoted, or where new legislation directly or indirectly makes the continued profitable use of the property impossible. This exception does not extend to a case where the useful life of property terminates solely as the result of those gradual processes for which depreciation allowances are authorized. It does not apply to inventories. The exception applies to buildings only when they are permanently abandoned or permanently devoted to a radically different use, and to machinery only when its use as such is permanently abandoned . . ..'\n \n \n 4\n Treasury Regulation 111, 29.23(e)-1, is the identical predecessor to Treasury Regulation 118, 39.23(e)-3. Both were promulgated under the 1939 Code. Regulation 118, part 39, was promulgated September 26, 1953, and was made applicable to years beginning after December 31, 1951, superseding Regulation 111, part 29, as to such years. (Regulation 118, 18 F.R. 5771.)\n \n \n 5\n Reg. 1.165-1(d)(4) (1954 Code):\n '(4) The rules of this paragraph are applicable with respect to a casualty or other event which may result in a loss and which occurs after . . . (January 16, 1960.) If the casualty or other event occurs on or before such date, a taxpayer may treat any loss resulting therefrom in accordance with the rules then applicable, or, if he so desires, in accordance with the provisions of this paragraph; but no provision of this paragraph shall be construed to permit a deduction of the same loss or any part thereof in more than one taxable year or to extend the period of limitations within which a claim for credit or refund may be filed under section 6511.'\n \n \n 6\n Treasury Regulations on Income Tax (1954 Code) 26 C.F.R.--\n 'Reg. Sec. 1.165-2. OBSOLESENCE OF NON-DEPRECIABLE PROPERTY.--\n (a) ALLOWANCE OF DEDUCTION. A loss incurred in a business or in a transaction entered into for profit and arising from the sudden termination of the usefulness in such business or transaction of any non-depreciable property, in a case where such business or transaction is discontinued or where such property is permanently discarded from use therein, shall be allowed as a deduction under Section 165(a) for the taxable year in which the loss is actually sustained. For this purpose, the taxable year in which the loss is sustained is not necessarily the taxable year in which the overt act of abandonment, or the loss of title to the property, occurs.'\n Regulation 1.165-2(a) (1954 Code) was cited in the district court's Conclusion of Law No. 3. It adopted, in the second sentence, the previously unstated exception based on the 'Real Estate Cases,' supra, that delayed formal abandonment or loss of title do not prevent a loss from being sustained with respect to worthless real estate, where there has been a de facto abandonment coupled with an intent to permanently discard property recognized by the taxpayer to be of no further value. That sentence is broad enough to cover the exception referred to, supra, that a taxpayer may not delay taking a loss that has actually occurred in order to receive more favorable tax treatment in a subsequent year. (See Footnote (6b)).\n In any event the taxpayer need not rely on Regulation 1.165-2(a), since he is given the right to rely on Regulation 118, 39.23(e)-3 by virtue of the terms of Regulation 1.165-1(d)(4) (1954 Code).\n 6A The word 'suddenly' was also discussed by Judge Madden in S. S. White Dental Mfg. Co. v. United States (55 F. Supp. 117 at 121, 102 Ct. Cl. 115). The case concerned Treasury Regulation 94, Article 23(e)-3, but it read the same as Treasury Regulation 118, 39.23(e)-3.\n Judge Madden concluded, 'We think that the word 'suddenly' in the regulation is satisfied, though it seems to us to be a rather inept word to express the apparent meaning of the regulation.'\n 6B Treasury Regulation 1.165-2, 1954 Code, in its last sentence, is broad enough to cover this exception. The last sentence reads:\n 'For this purpose (a deduction for loss) the taxable year in which the loss is sustained is not necessarily the taxable year in which the overt act of abandonment or loss of title to the property occurs.' However, the genesis of the last sentence\n However, the genesis of the last sentence held real property assets which had become worthless, but were unable to divest themselves of legal title. These situations led to an exception shown by the Real Estate Cases.' A short summary may be helpful.\n In the 1939 Code, Treasury Regulation 118, 39.23(e)-3, covered both depreciable and non-depreciable assets. Following the language covering the allowable loss when 'the taxpayer discontinues the business or discards . . . (the) assets permanently from use . . .' there appears this language:\n 'This exception to the rule requiring a sale or other disposition of property in order to establish a loss requires proof of some unforeseen cause by reason of which the property has been prematurely discarded . . ..' (See Footnote (3) for text of Regulation.)\n In the 1954 Code, non-depreciable property and depreciable property were placed in separate sections. Regulation 1.165-2(a) covered non-depreciable property. (See Footnote (6).) Regulation 1.167(a)-8(4) covered depreciable property. It read:\n 'Section 1.167(a)-8(4): Where an asset is retired by actual physical abandonment (as, for example, in the case of a building condemned as unfit for further occupancy or other use), loss will be recognized measured by the amount of the adjusted basis of the asset abandoned at the time of such abandonment. In order to qualify for the recognition of loss from physical abandonment, the intent of the taxpayer must be irrevocably to discard the asset so that it will neither be used again by him not retrieved by him for sale, exchange or other disposition.'\n It retained the essence of Treasury Regulation 118, 39.23(e)-3, 1939 Code-- abandonment and intent to abandon. Regulation 1.165-2(a), 1954 Code, however, included new language: '. . . the taxable year in which the loss is sustained is not necessarily the taxable year in which the over act of abandonment, or loss of title to the property, occurs.'\n A limited exception had been spelled out before the enactment of the 1954 Code. The rule requiring loss of title ('sale or other disposition of property') referred to in Treasury Regulation 118, 39.23(e)-3, supra) worked a hardship on taxpayer whose real property had become worthless and who wanted to abandon it and claim the loss but who could not expeditiously divest himself of title. Thus the 'Real Estate' exception arose.\n In such cases the courts adopted the rule that the taxpayer could claim a loss on real estate without being required to divest himself of legal title if he proved by identifiable events that the property had become worthless and that he did not intend to hold it. See, e.g., Denman v. Brumback (6 Cir. 1932) 58 F.2d 128; Rhodes v. Commissioner (6 Cir. 1939) 100 F.2d 966; W. W. Hoffman, 40 B.T.A. 459 (1939), aff'd sub nom. Commissioner v. Hoffman (2 Cir. 1941) 117 F.2d 987; Alice v. Gordon, 46 B.T.A. 1201 (1942), aff'd sub nom. Helvering v. Gordon (4 Cir. 1943) 134 F.2d 685.\n In the Denman, Rhodes and Hoffman cases, the courts regarded the taxpayer's conduct as the practical equivalent of abandonment even though title had not been disposed of. In Gordon, the Tax Court cited those cases but held that the loss on real estate occurred by reason of the property becoming worthless and that an abandonment was not required. The taxpayer had done everything within her power to manifest an intent to divest herself of her fractional interest in the subject property, which interest was shown by identifiable events to have become worthless in the year the loss was claimed. It is apparent from the language of the Tax Court's Opinion that in holding that an abandonment was not required, the court was using that term to mean an 'irrevocable loss of title.' (46 B.T.A. at 1210.) The court did not mention the requirements of the existing regulation.\n In each of these cases, the taxpayer regarded the property as being worthless and did not intend to preserve or hold it and the court believed the taxpayer should not be denied a loss under such circumstances because of the technicalities of title. There is nothing in the decisions to suggest that the rule was meant to give the government a weapon to deny loss deductions by contending that the taxpayer should have regarded the property as worthless in an earlier year than the one claimed. They do not stand for the proposition that the loss can be sustained at a time when the taxpayer intends to hold and preserve the property because of a bona fide belief that it still has potential value or possible future use.\n The reverse of the situation is shown in the case of Superior Coal Co., 2 T.C.M. 984 (1943) aff'd sub nom. Superior Coal Co. v. Commissioner (7 Cir. 1944) 145 F.2d 597, cert. den., 324 U.S. 864, 65 S. Ct. 913, 89 L. Ed. 1420 (1945) where a taxpayer, who regarded his real estate as worthless and did not intend to preserve it for its potential value, used the retention of bare legal title as a device to postpone his intended tax deduction to a later and more favorable year.\n There, the taxpayer, an Illinois corporation, claimed a loss for the year 1939 with respect to subsurface coal lands located at two mines in Iowa. Taxpayer had mined coal on the properties until 1927, at which time the court expressly found all mining operations on the premises were 'abandoned' because the taxpayer could mine coal of superior quality more cheaply from the lands it owned in Illinois. In 1929, taxpayer sold its Iowa power plant and all machinery, cars and other equipment which could be dismantled and the equipment was removed by 1931.\n The taxpayer did not divest itself of legal title to the coal rights, however, and did not claim a loss with respect to such rights until 1939. Taxpayer contended that it had tried to sell the coal rights during the interim, but in 1939 terminated its selling effort, fixing that year as the year of loss. Accordingly, the court held that the loss was sustained in an earlier year because the coal rights had become worthless before 1939. In reaching such decision, the court did not discuss the existing Treasury Regulations dealing with abandonment losses, but rather relied upon the rule that a loss on real estate does not depend upon a disposition of legal title. The court's only discussion of the law which it applied was as follows (2 T.C.M. at 986):\n 'It is well settled that the retention of the bare legal title to property does not prevent a taxpayer from taking a deduction in the year in which the property becomes worthless. Alice v. Gordon. It is equally well settled that a taxpayer may not be permitted to postpone the taking of a deduction for a loss actually sustained until a year in which the deduction will result in a larger saving in tax.'\n Revenue Ruling 54-581, 1954-2 C.B. 112 was later issued. It acknowledged that Treasury Regulation 118, 39.23(e)-3 'requires that the taxpayer shall have discontinued the business or discarded assets permanently in order to claim an abandonment loss for the year in which he takes such action.' The ruling then goes on to hold that such is not necessarily the rule, in view of the Gordon and Superior Coal cases, supra, quoting the above paragraph from Superior Coal Co. (2 T.C.M. at 986) and concluding:\n 'Accordingly, it is held that an abandonment loss is deductible only in the taxable year in which it is actually sustained. An abandonment loss which was actually sustained in a taxable year prior to the year in which the overt act of abandonment took place is not allowable as a deduction in the latter taxable year.' (Rev. Ruling 54-581, 1954-2 C.B. 112)\n Broader language was used in the 1954 Code in Treasury Regulation 1.165-2(a) (supra, Footnote (6)).\n Thus Treasury Regulation 1.165-2(a), 1954 Code, in its last sentence, clearly arose from and refers to the 'Real Estate' exception, but, is broad enough to cover a situation where a taxpayer deliberately fails to claim his loss in the year when there was the intent and the act of abandonment, for the purpose of securing more favorable tax treatment in a later year.\n The Tax Court in Superior Coal Company expressly so stated in the excerpt, supra. In Helvering v. Gordon (4 Cir. 1943) 134 F.2d 685 (review of Alice v. Gordon decision in the Tax Court) the court stated that when the loss had taken place earlier '. . . the retention of the bare legal title becomes a circumstance without significance that should not prevent the taxpayer from taking the deduction in the year in which the loss occurs or permit him to postpone it at will to some later year when it will produce a larger reduction of tax liability.' (p. 688)\n \n \n 7\n '60. A majority of plaintiff's board of directors from 1944 through the early part of 1956 believed that the price of gold was likely to be increased, and that mining could eventually be resumed at the Juneau mine. It was their policy throughout that period that the Juneau assets should be preserved intact, as far as possible, for a further resumption of operations when conditions improved. Each year after 1944, as the laborforce available became smaller, less maintenance was accomplished and the natural deterioration of the mine increased.'\n \n \n 8\n '65. In response to the arguments and contentions of the stockholders Action Committee, incumbent management's proxy materials incuded a letter from plaintiff's president, C. A. Norris, to the stockholders, dated May 10, 1956, which contained the following statement reflecting the policy of the incumbent management:\n BACKGROUND OF YOUR COMPANY\n The major asset of your Company is the gold mine at Juneau, Alaska, from which we were extracting some 4,200,000 tons of ore annually during the pre-War years, together with a mill with a daily capacity of approximately 14,000 tons of ore. In addition, the Company owns extensive mining equipment and a power system at Juneau which now sells electricity commercially.\n During the 15 years of full-scale operation of this mine preceding our entry into World War II, operations were highly successful, and liberal dividends totaling in the aggregate over $14 million were distributed to stockholders in the 12 years ending 1941, after paying off loans of $5 million incurred in developing the mine. The mine was shut down in 1944 because of rising costs brought on by the War. The costs of mining have risen continuously and substantially ever since, while the price of gold remains fixed by government decree at its pre-War level. This has produced a state of depression for the whole gold-mining industry and has had a particularly adverse effect upon our operations, since we depend upon large volume at a low margin of profit.\n While it has been evident since the War that the mine could be operated only at a loss under the prevailing economy, nevertheless there has always been some degree of hope for an upward revision of the price of gold. With this possibility ever present, and taking into account the high cost of replacing the mining plant, your Management tenaciously has preserved the mine and mining plant for almost immediate resumption of operations, in the event of the end of the depression for gold.\n We cannot forecast when this will occur but through all of the recorded civilization gold has remained one of our most cherished and sought-after commodities. We are confident that eventually gold will come into its own again.\n In the meantime, the mine at Juneau represents an asset of little immediate but great potential value. This asset has been preserved intact for the shareholders.\n During the years since the mine was closed down dozens of other ventures have been considered to produce new sources of income. Most of these could not be acquired on terms regarded as advantageous to Alaska Juneau or were beyond the ability of your Company, with its limited capital, to finance. Our experience along these lines has convinced us that only by substantially increasing the authorized share capital can your Company be put in a position to bargain seriously for desirable new acquisitions.'\n \n \n 9\n '77. To raise the remaining $100,000 to acquire Reynolds, plaintiff, in late 1956, entered into an agreement with Caine Steel Co., of Los Angeles, giving Caine an option on the salvage rights to plaintiff's mine equipment, replacement parts and scrap materials. In return for this option, plaintiff received $100,000 in cash which was used to complete the down payment for the Reynolds acquisition.'\n \n \n 10\n '78. In late 1956 or early 1957, Caine Steel Co. assigned its option on plaintiff's salvage rights to Machinery Center, Inc., a Utah corporation. Subsequently, on January 28, 1957, plaintiff and Machinery Center entered into a written agreement appointing Machinery Center as plaintiff's 'exclusive sales agent' on a 'best efforts' basis to dismantle, salvage and sell the Juneau mining and mill equipment. Only the powerplant, dams, powerlines, and other equipment used in its power operation were excepted from this contract. In this agreement plaintiff stated that it realized that the resumption of mining in June was not economically feasible within the foreseeable future. The agreement provided for an advance of $200,000 to plaintiff on its share of the anticipated proceeds from the salvage operation The $100,000 already received by plaintiff in 1956 from Caine Steel Co. was credited against such advance. Plaintiff's purpose in selling the machinery was to raise funds for the acquisition of the Reynolds Manufacturing Company. This agreement was terminated in 1959. Plaintiff entered into negotiations for a new contract to accomplish the sale of the machinery and equipment.'\n \n \n ", "ocr": false, "opinion_id": 321859 } ]

[ "192 F. App'x 871" ]

[ { "author_str": "Per Curiam", "per_curiam": false, "type": "010combined", "page_count": 12, "download_url": "http://www.ca11.uscourts.gov/unpub/ops/200516333.pdf", "author_id": null, "opinion_text": " [DO NOT PUBLISH]\n\n\n IN THE UNITED STATES COURT OF APPEALS\n\n FOR THE ELEVENTH CIRCUIT FILED\n ________________________ U.S. COURT OF APPEALS\n ELEVENTH CIRCUIT\n August 9, 2006\n No. 05-16333 THOMAS K. KAHN\n Non-Argument Calendar CLERK\n ________________________\n\n D. C. Docket No. 04-00308-CR-4\n\nUNITED STATES OF AMERICA,\n\n\n Plaintiff-Appellee,\n\n versus\n\nCHARLES BOWE,\n\n Defendant-Appellant.\n\n\n ________________________\n\n Appeal from the United States District Court\n for the Southern District of Georgia\n _________________________\n\n (August 9, 2006)\n\nBefore MARCUS, WILSON and PRYOR, Circuit Judges.\n\nPER CURIAM:\n\n Charles Alexander Bowe appeals his convictions and sentences for\n\fconspiracy to import and importation of five kilograms or more of cocaine,\n\nconspiracy to possess with intent to distribute and conspiracy to distribute five\n\nkilograms or more of cocaine, and possession with intent to distribute five\n\nkilograms or more of cocaine. See 21 U.S.C. §§ 841(a)(1), 846, 952(a), 963.\n\nBowe argues that his convictions should be reversed because the district court\n\nerroneously admitted extrinsic evidence and hearsay testimony and erroneously\n\ndenied his second motion for a continuance of trial. He also argues that the district\n\ncourt erroneously calculated the guidelines range when it imposed his sentence.\n\nWe affirm.\n\n I. BACKGROUND\n\n On February 2, 2005, Bowe, Damian Coverley, and Omar Theophilus were\n\ncharged in a superseding indictment with conspiracy to import cocaine,\n\nimportation of cocaine, conspiracy to possess with intent to distribute cocaine, and\n\npossession with intent to distribute cocaine. After plea negotiations failed, Bowe\n\nwas scheduled to proceed to trial on July 18, 2005. On July 14, 2005, Bowe\n\nmoved to continue his trial date to complete his defense preparation. The motion\n\nwas granted, and the trial date was reset for August 1, 2005.\n\n On the morning of trial, Bowe filed a second motion for a continuance.\n\nBowe argued that the continuance was necessary to permit his counsel time to\n\n\n\n 2\n\freview extensive discovery material that was produced by the government on July\n\n26, 2005. The district court denied the motion, and trial proceeded.\n\n At trial, the government presented evidence of a conspiracy between Bowe,\n\nCoverly, and Theophilus to import cocaine to the United States from the Bahamas.\n\nCoverly testified that he met Bowe in 2001 and began a relationship in which\n\nBowe would provide money and Coverly would buy cocaine, import it to the\n\nUnited States, and sell it. Coverly then returned the proceeds to Bowe and was\n\npaid a fee. Coverly testified that he and another conspirator usually used Bahamas\n\nAir or a cruise ship to import the drugs.\n\n Coverly testified that, on one occasion, he and Bowe traveled to New York\n\nwhere they picked up seven or eight roller bags filled with cash. In New York,\n\nCoverly and Bowe met Kevin Frater, a friend of Bowe. Coverly testified that he\n\nand Bowe flew from New York to California with a stop in Kansas to refuel.\n\nCoverly testified that in California they swapped the money in the roller bags for\n\ncocaine and returned to New York, again stopping in Kansas for fuel. In New\n\nYork, Frater met Coverly and Bowe at the airport, picked up the cocaine, left and\n\nreturned in about an hour and a half. Coverly, Bowe, and Frater then returned to\n\nMiami. Bowe objected to this testimony on the ground that it was irrelevant and\n\nnot within the charged conduct. The district court overruled the objection.\n\n\n\n 3\n\f Coverly then testified regarding another drug transaction. He testified that, a\n\nshort time later, a man named Austin Williams was stopped by drug enforcement\n\nagents in Kansas with 155 kilograms of cocaine when his plane stopped to refuel.\n\nCoverly testified that Williams tried to call Frater several times while Coverly,\n\nBowe, and Frater were together. Coverly testified that he, Bowe, and Frater\n\nconsidered going to Kansas City to intercept the drugs but decided not to go\n\nbecause they were suspicious that Williams had been arrested. Frater then became\n\nnervous and decided he needed to leave the country. Coverly testified that he and\n\nBowe took Frater to the airport where Frater left on one of Bowe’s airplanes.\n\nBowe did not object to Coverly’s testimony.\n\n Coverly next testified regarding a transaction in November and December of\n\n2004. Coverly testified that in November 2004, Bowe gave him $56,000. Coverly\n\nthen concealed the money and flew to the Bahamas on one of Bowe’s planes. In\n\nthe Bahamas, Coverly gave the money to Theophilus who purchased eight\n\nkilograms of cocaine. Theophilus then transported the cocaine, on a private\n\nairplane, to Savannah where Coverly was to meet him at the airport. Coverly then\n\nplanned to sell the cocaine in South Carolina before returning the proceeds to\n\nBowe. Coverly was intercepted by DEA agents before he could sell the cocaine in\n\nSouth Carolina.\n\n\n\n 4\n\f Finally, Coverly testified about taped conversations he had with Bowe, after\n\nCoverly had been arrested and agreed to cooperate with the government. Coverly\n\ntestified that in a conversation about auto parts, he and Bowe were actually\n\ndiscussing the quality and sale price of the cocaine that Theophilus had purchased\n\nwith the $56,000 fronted by Bowe. Coverly explained that “five parts” was five\n\nkilograms of cocaine and that a reference to some parts being “aftermarket” meant\n\nthat the cocaine was not one hundred percent. Coverly explained that in other\n\nrecorded conversations he and Bowe were trying to set up a time to meet for\n\nCoverly to give Bowe the money. The money was to be transferred at the Home\n\nDepot in Weston, Florida.\n\n At the meeting to transfer the money, Coverly, who was still in the custody\n\nof the DEA, wore a recording device and a camera. Coverly testified that he and\n\nBowe discussed the amount of money he received for the cocaine. Coverly then\n\nwent to his car to retrieve a bag of money to give to Bowe. When Coverly went to\n\nBowe’s car with the bag, Bowe was arrested. Coverly also testified that he entered\n\na plea agreement with the United States and testified so that he might receive a\n\nlesser sentence.\n\n On the second day of trial, a DEA agent testified about the seizure of drugs\n\nin Kansas that Coverly had described on the previous day. After receiving a tip,\n\n\n\n 5\n\fDEA agents searched a Falcon 20 business jet that was refueling in Salina, Kansas.\n\nThe agents discovered six large roller suitcases packed with cocaine and arrested\n\nWilliams, who was on the plane. Williams agreed to cooperate with the agents and\n\nidentified Frater as a contact. Williams then called Frater numerous times at the\n\ndirection of the DEA agents to arrange a pick up of the cocaine but was not able to\n\nmake contact with Frater. Williams did not identify Bowe as a contact, although\n\nBowe’s number was listed in Williams’s telephone. Bowe did not object to this\n\ntestimony.\n\n The last witness for the government was Robert Nylund, a pilot who had\n\nflown airplanes for the Bowe family business. Nylund testified that, in December\n\n2002, he flew Frater to Havana, Cuba. Nylund testified that Frater told him that\n\nFrater needed to leave the country because a friend had been arrested for drugs in\n\nSalina, Kansas, that he was scared, and that he could not go back. Bowe objected\n\nto this testimony as hearsay, but the district court overruled the objection as an\n\nexception under the coconspirator rule. Nylund testified that in July 2004 he began\n\nto work as an informant for the DEA. After he was approached by Coverly and\n\nTheophilus to transport drugs, Nylund contacted the DEA. On cross-examination,\n\nNylund testified that Bowe had never asked him to transport drugs.\n\n After the government rested, Bowe moved to strike the testimony about the\n\n\n\n 6\n\fseizure of cocaine in Salina, Kansas, as evidence that was not an intrinsic part of\n\nthe alleged conspiracy under Federal Rule of Evidence 404(b). Bowe also moved\n\nfor a judgment of acquittal on each count and a continuance because many of his\n\nwitnesses were not yet present. The district court denied each motion.\n\n Bowe presented his defense. After calling several witnesses, Bowe renewed\n\nhis request for a continuance because several witnesses had not arrived or refused\n\nto come to the United States from the Bahamas. Bowe proffered the testimony he\n\nexpected each witness to give. The district court did not grant a continuance, and\n\nBowe rested. Bowe also moved for a mistrial on the ground that he was not able to\n\npresent a defense. The court denied the motion. The jury found Bowe guilty of all\n\ncharges.\n\n Before sentencing, the probation office prepared a presentence investigation\n\nreport. The probation officer assigned a base offense level of 38 because the\n\noffense involved 150 kilograms or more of cocaine. Two points were added for\n\nthe use of an aircraft, other than a regularly scheduled commercial air carrier, in the\n\nimportation of the cocaine, and four points were added for Bowe’s role as an\n\norganizer or leader. After a one point adjustment under chapter five of the\n\nSentencing Guidelines, Bowe’s total offense level was 43. With an offense level\n\nof 43 and a criminal history category of I, the guideline term of imprisonment for\n\n\n\n 7\n\fBowe was life.\n\n Bowe objected to the inclusion of the cocaine that was seized in Salina,\n\nKansas, as relevant conduct and to the managerial-role enhancement. Bowe also\n\nobjected to the enhancement for use of a non-commercial aircraft to import the\n\ndrugs. The district court overruled the objections and sentenced Bowe to 384\n\nmonths of imprisonment.\n\n II. STANDARD OF REVIEW\n\n The admission of evidence by the district court is reviewed for abuse of\n\ndiscretion. United States v. Arbolaez, 450 F.3d 1283, 1289 (11th Cir. 2006). The\n\ndenial of a motion for a continuance is also reviewed for abuse of discretion.\n\nUnited States v. Baker, 432 F.3d 1189, 1248 (11th Cir. 2005). “We review the\n\ndistrict court’s factual findings for clear error and the court’s application of the\n\nsentencing guidelines to the facts de novo.” United States v. McGuinness, 451\n\nF.3d 1302, 1304 (11th Cir. 2006). Issues raised for the first time on appeal are\n\nreviewed for plain error. Baker, 432 F.3d at 1202. Under the plain error standard,\n\nwe may correct an error not raised at trial if there is “(1) error, (2) that is plain, and\n\n(3) that affects substantial rights[, and] (4) the error seriously affects the fairness,\n\nintegrity, or public reputation of judicial proceedings.” Id. at 1202-03 (citation\n\nomitted).\n\n\n\n 8\n\f III. DISCUSSION\n\n On appeal, Bowe makes three arguments regarding his convictions and three\n\narguments regarding his sentence. We address Bowe’s arguments concerning his\n\nconvictions first. We then address his sentence.\n\n A. The District Court Did Not Err During Trial\n\n Bowe argues that the district court abused its discretion twice in admitting\n\nevidence and then in denying his second motion for a continuance. First, Bowe\n\nargues that the district court abused its discretion when it denied his motion to\n\nexclude Rule 404(b) evidence concerning the drugs seized in Salina, Kansas.\n\nBowe argues that the evidence linking him to the drug transaction was weak and\n\nthe evidence showed at most that Bowe was associated with a drug dealer and had\n\nknowledge of the drug transaction. Because Bowe did not preserve this objection\n\nat trial, our review is for plain error. Baker, 432 F.3d at 1202.\n\n Bowe’s argument fails. The district court did not err, plainly or otherwise,\n\nwhen it admitted the evidence of the Salina drug transaction because the evidence\n\nwas not extrinsic under Rule 404(b). “Evidence of criminal activity other than the\n\ncharged offense is not extrinsic under [Federal Rule of Evidence] 404(b) if it is . . .\n\ninextricably intertwined with the evidence regarding the charged offense” United\n\nStates v. Ramsdale, 61 F.3d 825, 829 (11th Cir. 1996). Because the Salina\n\n\n\n 9\n\fevidence was inextricably intertwined with the evidence of the conspiracy with\n\nwhich Bowe was charged, the district court did not abuse its discretion when it\n\nallowed the evidence.\n\n Second, Bowe argues that the district court abused its discretion by\n\nadmitting the hearsay statements of Frater during the testimony of Robert Nylund.\n\nNylund testified to the statements of Frater, whom Nylund flew from the Bahamas\n\nto Cuba when Frater was fleeing the United States after the drugs were seized in\n\nSalina. This argument fails. In the light of the evidence linking Frater and Bowe\n\nto a drug conspiracy, the district court did not clearly err when it concluded that\n\nFrater and Bowe were parties to the same conspiracy and that Frater’s statements to\n\nNylund were in furtherance of that conspiracy.\n\n Third, Bowe argues that the district court abused its discretion when it\n\ndenied his second motion for a continuance. We disagree. Bowe failed to\n\ndemonstrate that his proffered witnesses would testify to any material issue or that\n\nhe did not have adequate time to prepare a defense. See United States v. Wright,\n\n63 F.3d 1067, 1071 (11th Cir. 1995).\n\n B. The District Court Did Not Err When It Sentenced Bowe.\n\n As to his sentence, Bowe argues that the district court erred in determining\n\nhis relevant conduct and then in applying two enhancements. First, Bowe argues\n\n\n\n 10\n\fthat the district court erred when it included the cocaine seized in Salina as part of\n\nhis relevant conduct. This argument fails. Relevant conduct includes “all\n\nreasonably foreseeable acts and omissions of others in furtherance of the jointly\n\nundertaken criminal activity.” U.S.S.G. § 1B1.3(a)(1)(B). The defendant is\n\naccountable for “all reasonably foreseeable quantities of contraband that were\n\nwithin the scope of the criminal activity that he jointly undertook.” Id. Application\n\nn.2.\n\n The district court appropriately considered as relevant conduct the cocaine\n\nseized in Salina, Kansas. Coverley testified that, shortly before Williams was\n\napprehended, Coverly and Bowe transported drugs in the same manner as\n\nWilliams, and, after Williams was apprehended, Bowe and Frater discussed how to\n\nretrieve the cocaine. The district court did not clearly err when it found that the\n\ncocaine seized in Salina was “reasonably foreseeable” to Bowe.\n\n Second, Bowe argues that the managerial-role enhancement was improperly\n\napplied to him for three reasons: (1) Coverley operated independently;\n\n(2) Theophilus did not know Bowe; and (3) Bowe was, at best, a banker in the drug\n\ntransaction who managed only assets, not people. This argument fails.\n\nSection 3B1.1 of the Guidelines provides for a four-level enhancement when “the\n\ndefendant was an organizer or leader of a criminal activity that involved five or\n\n\n\n 11\n\fmore participants or was otherwise extensive.” U.S.S.G. § 3B1.1(a). Sufficient\n\nevidence was presented for the district court to conclude that Bowe directed the\n\nactivities of other members of the conspiracy, specifically Coverly. The district\n\ncourt did not clearly err when it found that Bowe qualified for this enhancement.\n\n Third, Bowe argues that the district court erred in applying an enhancement\n\nfor use of a non-commercial aircraft in the importation of drugs. See U.S.S.G. §\n\n2D1.1(b)(2)(A). This argument also fails. Section 2D1.1 of the Guidelines\n\nprovides for a two-level increase if the “defendant unlawfully imported or exported\n\na controlled substance under circumstances in which . . . an aircraft other than a\n\nregularly scheduled commercial air carrier was used to import or export the\n\ncontrolled substance.” U.S.S.G. § 2D1.1(b)(2)(A). It was reasonably foreseeable\n\nthat aircraft would be used to import drugs from the island of the Bahamas to the\n\nUnited States. The district court did not clearly err when it applied the\n\nenhancement.\n\n IV. CONCLUSION\n\n Bowe’s convictions and sentences are\n\n AFFIRMED.\n\n\n\n\n 12\n\f", "ocr": false, "opinion_id": 50015 } ]

[ "694 S.E.2d 578" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": 10, "download_url": "http://www.courts.state.va.us/opinions/opnscvwp/1091535.pdf", "author_id": 5920, "opinion_text": "\n694 S.E.2d 578 (2010)\nDwight Keith SMITH\nv.\nCOMMONWEALTH of Virginia.\nRecord No. 091535.\nSupreme Court of Virginia.\nJune 10, 2010.\n*579 William A. Crane, for appellant.\nPamela A. Sargent, Senior Assistant Attorney General (Kenneth T. Cuccinelli II, Attorney General; Wesley G. Russell, Jr., Deputy Attorney General, on brief), for appellee.\nPresent: HASSELL, C.J., KOONTZ, KINSER, GOODWYN, and MILLETTE, JJ., and CARRICO and LACY, S.JJ.\nOPINION BY Senior Justice HARRY L. CARRICO.\nIn this appeal in a sexually violent predator case, we decide whether the circuit court erred in holding that Dwight Keith Smith \"remains a sexually violent predator and remains in need of secure inpatient hospitalization.\" This holding was made in Smith's fifth annual review hearing as required by Code § 37.2-910, he having been declared a sexually violent predator in 2004. The hearing resulted in an order that Smith \"be committed to the custody of the Commissioner of the Department of Mental Health, Mental Retardation and Substance Abuse Services\" for treatment and confinement in a secure facility.\nThis Court awarded Smith an appeal on two assignments of error, (1) that the circuit court erred in considering evidence containing inadmissible and hearsay opinions; and (2) that the evidence was insufficient to support the circuit court's determination that continued civil commitment was necessary.\n\nBACKGROUND\nPrior to an annual review hearing, Code § 37.2-910(B) requires a filing with the court of \"a report reevaluating the respondent's condition and recommending treatment.\" The \"report shall be prepared by a licensed psychiatrist or a licensed clinical psychologist skilled in the diagnosis, treatment and risk assessment of sex offenders.\"\nPrior to the review hearing in Smith's case, the Commonwealth filed the written report of Dr. Mario Dennis, a licensed clinical psychologist and the Clinical Director of the Virginia Center for Behavioral Rehabilitation in Burkeville, Virginia, a mental facility that houses and treats sexually violent predators. The complete file of Smith's treatment for the past year at the Center was filed along with the report. Smith objected to the introduction of the report and the treatment records on the ground they contained inadmissible hearsay and impermissible opinions. The circuit court refused the introduction of the report and excluded opinions contained in the treatment records.[1]\n\nANALYSIS\nIn oral argument before this Court, Smith stated that a sexually violent predator case is \"kind of like what can happen to you in a criminal law case,\" i.e., \"if you lose, you go into a lockup facility very much like a jail.\" Accordingly, Smith concluded, \"all of the rules of evidence of criminal law should apply.\"\nHowever, in Shivaee v. Commonwealth, 270 Va. 112, 613 S.E.2d 570 (2005), this Court considered the constitutionality of the Sexually Violent Predator Act (SVPA), formerly Code §§ 37.1-70.1 through 37.1-70.19, the forerunner of present Chapter 9 of Title 37.2, entitled \"Civil Commitment of Sexually Violent Predators,\" Code §§ 37.2-900 through 37.2-920. The two enactments contain similar provisions.\nSeveral observations this Court made in Shivaee are pertinent here:\n\n*580 The SVPA was codified by the General Assembly as a civil statute, as indicated by its placement in Title 37. Nothing in the SVPA suggests that the legislature sought to create anything other than a civil commitment scheme designed to protect the public from harm.\n. . . .\nThat the General Assembly chose to afford the procedural protections provided in the SVPA does not transform a civil commitment proceeding into a criminal prosecution. Thus, the SVPA is a non-punitive, civil commitment statute.\nId. at 125-26, 613 S.E.2d at 577-78 (citations and internal quotation marks omitted). And, as this Court said in Jenkins v. Director, Va. Ctr. for Behav. Rehab., 271 Va. 4, 624 S.E.2d 453 (2006): \"Even though involuntary civil commitment is a significant deprivation of liberty to which federal and state procedural due process protections apply, persons subject to these commitment proceedings do not enjoy the same rights attendant to a criminal proceeding.\" Id. at 15, 624 S.E.2d at 460. These principles will guide our consideration of Smith's assignments of error.\n\nInadmissible Hearsay and Opinions\nAfter the circuit court sustained Smith's objection and refused the introduction of the report required by Code § 37.2-910, the Commonwealth argued that the treatment records Dr. Dennis submitted along with the report \"should come in as official business records.\" Smith objected, stating that the treatment records \"are all hearsay [and] don't come in under the [business records] exception [to the hearsay rule].\"\nThe circuit court overruled Smith's objection, citing Commonwealth v. Wynn, 277 Va. 92, 671 S.E.2d 137 (2009), where this Court stated as follows:\nCode § 37.2-908(C) provides that an expert witness testifying at an SVPA trial may state the basis for his opinions. Similarly, pursuant to Code § 8.01-401.1, an expert witness may rely upon facts, circumstances, or data made known to . . . such witness in formulating an opinion; those facts, circumstances or data . . ., if of a type normally relied upon by others in the particular field of expertise in forming opinions and drawing inferences, need not be admissible in evidence.\nId. at 100, 671 S.E.2d at 141 (citation and internal quotation marks omitted).[2]\nFurthermore, in McDowell v. Commonwealth, 273 Va. 431, 641 S.E.2d 507 (2007), this Court stated as follows:\nAs a recognized exception to the hearsay rule, [this Court has] adopted the modern Shopbook Rule, allowing in given cases the admission into evidence of verified regular entries without requiring proof from the original observers or record keepers.\nIn many cases, . . . practical necessity requires the admission of written factual evidence based on considerations other than the personal knowledge of the recorder, provided there is a circumstantial guarantee of trustworthiness. The trustworthiness or reliability of the records is guaranteed by the regularity of their preparation and the fact that the records are relied upon in the transaction of business by the person or entities for which they are kept and they are kept in the ordinary course of business made contemporaneously with the event by persons having the duty to keep a true record. The final test is whether the documents sought to be introduced are the type of records which are relied upon by those who prepare them or for whom they are prepared.\nId. at 434-35, 641 S.E.2d at 509 (citations and internal quotation marks omitted).\nThe treatment records at issue in this case easily pass these tests. Dr. Dennis, the Commonwealth's expert witness, testified that \"department policy\" required the creation of a \"master treatment plan for everyone in our treatment program,\" which is \"updated at least annually.\" Such plans \"list the specific areas of risk and treatment needs for the individual and outline[] the *581 goals of that particular element and treatment\" and \"[w]hat the program will provide to meet those goals.\" A record is made \"of progress that the individual has made since the last master treatment plan and the objective for the treatment plan in that area.\" Dr. Dennis stated that documents are also maintained entitled \"Critical Information Report[s]\" that are marked by the therapist and contain noteworthy information. In addition, treatment notes are kept that must be completed by the therapist within twenty-four hours outlining the nature of the treatment provided.\nDr. Dennis testified further that all these records are maintained in the \"regular and ordinary course of business for all residents.\" And he stated that similar records were maintained for Smith in this case.\nNeither in the circuit court nor in this Court has Smith identified the particular matters he considers as inadmissible hearsay, apparently content with a broadside assertion that \"[i]t is almost entirely hearsay.\" That is obviously not true, but Smith may find some comfort in the fact that this was a bench trial, and \"[a] judge, unlike a juror, is uniquely suited by training, experience and judicial discipline to disregard potentially prejudicial comments and to separate, during the mental process of adjudication, the admissible from the inadmissible, even though he has heard both.\" Eckhart v. Commonwealth, 222 Va. 213, 216, 279 S.E.2d 155, 157 (1981).\n\nInsufficiency of the Evidence\n\"The burden of proof at the [annual review] hearing shall be upon the Commonwealth to prove to the court by clear and convincing evidence that the respondent remains a sexually violent predator.\" Code § 37.2-910(C). In Commonwealth v. Allen, 269 Va. 262, 609 S.E.2d 4 (2005), this Court stated as follows:\nClear and convincing evidence has been defined as that measure or degree of proof which will produce in the mind of the trier of facts a firm belief or conviction as to the allegations sought to be established. It is intermediate, being more than a mere preponderance, but not to the extent of such certainty as is required beyond a reasonable doubt as in criminal cases. It does not mean clear and unequivocal.\nId. at 275, 609 S.E.2d at 13 (citations and internal quotation marks omitted).\n\"In accordance with established principles of appellate review, we view the facts in the light most favorable to the Commonwealth, the prevailing party below.\" Shivaee v. Commonwealth, 270 Va. at 127, 613 S.E.2d at 578. When the facts of this case are so viewed, the conclusion is inescapable that the Commonwealth has carried its burden of proving by clear and convincing evidence that Smith remains a sexually violent predator.\nIndeed, Smith has made little or no progress since his last annual review. He is still in Phase I in his treatment, and he must reach Phase III before he can be considered for conditional release. At one point along the way, he moved up to Phase II but then regressed and has stayed in Phase I ever since.\nSmith is currently diagnosed, as he has been diagnosed previously, to be suffering from several conditions, including \"[p]araph[i]lia NOS, or not otherwise specified, hepoph[i]lia.\" This is described as \"a deviant sexual interest or sexual arousal to adolescents, individuals who are sexually developed, but who are under age and therefore sexual contact with them would be illegal.\" Smith acknowledges on brief that his predicate offense was for \"an aggravated sexual battery involving a 14 year old boy.\"\nSmith has a history of \"[a]lcohol dependence.\" This means that he is \"psychologically and physiologically dependent upon . . . alcohol, and withdrawal or abstinence results with some withdrawal symptoms, [or] other physical consequences.\" Smith denied that he was an alcoholic, and he resisted some \"cognitive restructuring\" that treatment personnel wanted to provide to help him cope with his alcohol dependence.\nSmith also has \"[n]arcissistic, anti-social, obsessive-compulsive traits.\" A narcissistic trait reflects \"self-[ag]grandisement,\" an anti-social trait reflects \"behavior that does not comport to the social expectations,\" and *582 an obsessive-compulsive trait reflects \"an excessive focus on details.\" Smith got \"self-[ag]grandisement\" in his sexual battery of the 14-year-old boy, his behavior did not comport to sexual expectations, and he is described in the record as being \"very focused on details.\"\nSmith has \"expressed pessimistic views on treat[ment] helping him to be conditionally released.\" Yet he has failed to take full advantage of the treatment he was offered. He has persistently refused to respond to questions from treatment personnel without the advice of his attorney, which \"get[s] in the way of making the kind of progress [treatment personnel] like to see.\" He has refused to write in a journal, the purpose of which is to \"enhance self expression,\" to help \"the individual to become more open\" about problems. He has had \"fundamental disagreement [with a] therapist about some treatment related issues.\" His primary therapist described him as \"defensive,\" as \"having built a protective wall around him[self]\" and becoming \"skilled [in] projecting blame onto others.\"\nDr. Dennis expressed the opinion that Smith's \"risk to re-offend\" is \"high\" unless he avails \"himself of all the tools\" on hand to help him \"manage [his] risk,\" that Smith \"does remain a sexually violent predator,\" and that \"he does require continued inpatient treatment.\"\nNothing in the current record disputes the accuracy of Dr. Dennis's opinions or even suggests that there has been any meaningful change in Smith's status since his last review. Accordingly, this Court affirms the judgment of the circuit court committing Smith to the custody of the Commissioner of the Department of Mental Health, Mental Retardation and Substance Abuse Services for appropriate treatment and confinement in a secure facility.\n\nCONCLUSION\nFinding no error in the actions of the circuit court, we will affirm its judgment.\nAffirmed.\nNOTES\n[1] The Commonwealth has not assigned cross-error to the circuit court's refusal to allow the introduction of the report into evidence. Accordingly, the question whether the refusal was erroneous is not before the Court at this time. Rule 5:18(b).\n[2] The circuit court correctly noted that while an expert witness may rely upon the opinions of others in forming his or her opinion, he or she may not state the content of the other opinions on direct examination. See Commonwealth v. Wynn, 277 Va. at 98-99, 671 S.E.2d at 140.\n\n", "ocr": false, "opinion_id": 1058175 } ]

[ "516 F.2d 303" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/516/516.F2d.303.27.74-1272.html", "author_id": null, "opinion_text": "516 F.2d 303\n Fed. Sec. L. Rep. P 95,015Jeff SIMON, as Custodian for Gail Nina Simon under the NewYork Uniform Gifts to Minors Act, Plaintiff-Appellant,v.The NEW HAVEN BOARD & CARTON COMPANY, INCORPORATED et al.,Defendants-Appellees.\n No. 27, Docket 74-1272.\n United States Court of Appeals,Second Circuit.\n Argued September 13, 1974.Decided March 5, 1975.\n \n Herbert L. Scharf, New York City (Alfred Olonoff, Harold Bobroff and Bobroff, Olonoff & Scharf, New York City, on the brief), for plaintiff-appellant.\n William J. Doyle, New Haven, Conn. (J. Michael Eisner and Wiggin & Dana, New Haven, Conn., on the brief), for defendants-appellees, except William B. Gumbart.\n Louis M. Winer, New Haven, Conn. (Tyler, Cooper, Grant, Bowerman & Keefe, New Haven, Conn., on the brief), for defendant-appellee William B. Gumbart.\n Before KAUFMAN, Chief Judge, and SMITH and TIMBERS, Circuit Judges.\n TIMBERS, Circuit Judge:\n \n \n 1\n On this appeal from a judgment entered January 9, 1974 after a seven day bench trial in the District of Connecticut, Jon O. Newman, District Judge, dismissing a stockholder's derivative action, the essential issue is the correctness of the district court's determination that the corporation had not been damaged. For the reasons below, we affirm.\n \n I.\n \n 2\n In view of the district court's clear and comprehensive statement of the facts, --- F.Supp. ---, it is sufficient for our purpose briefly to summarize only those facts necessary to an understanding of our ruling on the essential issue before us.\n \n \n 3\n The action in the district court was commenced April 24, 1964. It arose out of the merger earlier that year of several Florida companies into The New Haven Board & Carton Company (New Haven or the company). The Florida companies were owned by defendants Leon J. Simkins, Morton H. Simkins and Dorothy Simkins and their families (the Simkins). The Simkins were in effective control of New Haven. Leon J. Simkins was president of New Haven. The merger was accomplished by New Haven's issuance of 1,377,774 shares of its common stock to the shareholders of the Florida companies in exchange for all of the outstanding shares of the common and preferred stock of the Florida companies. On the exchange, New Haven stock was acquired at a price of $4.50 per share, pursuant to approval by the directors and stockholders of New Haven.\n \n \n 4\n Defendants Edwin W. Miller, Sterling R. Chatfield and William B. Gumbart were directors of New Haven at the time of the merger. Plaintiff is the custodian of a minor who owned stock of New Haven.\n \n \n 5\n The complaint set forth two causes of action: one, based on diversity jurisdiction, alleged that the three director-defendants had breached their fiduciary duties under Connecticut law (state law claim); the other alleged that all defendants had violated Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (1970), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5 (1974) (10b-5 claim). Plaintiff's 10b-5 claim was based on alleged misrepresentations and omissions in the proxy statement and accompanying 1963 annual report which were mailed to stockholders of New Haven prior to the stockholders meeting that approved the merger on February 28, 1964.\n \n \n 6\n Plaintiff's evidence at trial was directed chiefly at one challenged omission: the non-disclosure of an unaudited internal financial report for the first quarter of New Haven's 1964 fiscal year, the quarter ending December 31, 1963, which showed profits for that quarter of $148,590 prior to correction. Plaintiff claimed that disclosure of this information would have provided a basis for valuing the New Haven shares at the time of the merger at $8.621/2, rather than $4.50, per share, and therefore the company was damaged by the non-disclosure.\n \n \n 7\n Plaintiff also claimed non-disclosure of other matters favorable to the company, including the contracted sale of New Haven's Grand Avenue property at a profit, the discounting of a New Haven note held by the Penn Mutual Life Insurance Company, and the valuation of New Haven's interest in the Grinnell Lithographic Company, Inc. in excess of that reported in the proxy material. Plaintiff claimed that, as of the merger date, these undisclosed assets and profits amounted to $2.055 per share not reflected in the merger price of $4.50 per share.\n \n \n 8\n Plaintiff also claimed non-disclosure of facts said to entitle New Haven to a premium upon the sale of its stock which gave the purchaser control of the company.\n \n \n 9\n At trial plaintiff abandoned his claim for rescission and limited his demand for relief to a claim for damages and an accounting. There was no evidence at trial that the company's ability to attract capital through public investment or institutional financing had been impaired as a result of the ratio at which the company's shares were exchanged upon the merger. As the district court aptly put it, \"(T)he linchpin of the claim for damages is the alleged price of New Haven shares of $8.621/2, or any price above the merger price of $4.50. . . . . (P)laintiff is entitled to no judgment unless the company has been damaged by issuance of its shares at the $4.50 price.\"\n \n \n 10\n Recognizing that this is the essential issue in the case, we turn directly to the district court's determination that the corporation was not damaged.\n \n II.\n \n 11\n Our careful examination of the record satisfies us that there was substantial evidence to support the following essential findings of fact by the district court on the issue as stated.\n \n Price-Earnings Ratio\n \n 12\n In seeking to establish at trial a value in excess of $4.50 per share for the New Haven stock, plaintiff relied chiefly on the unaudited report for the first quarter of the company's 1964 fiscal year.\n \n \n 13\n The district court was not persuaded by plaintiff's expert in his attempt to project on the basis of a single quarter's earnings the earnings for a full year as a method of valuing stock according to a price-earnings ratio. The court found defendants' evidence more persuasive in establishing that New Haven stock was not undervalued at $4.50. Indeed, the court found that, if earnings were to be relied on at all as a basis for valuing the company's stock, New Haven's condition \"was too risky . . . to justify an investment at a $4.50 price per share.\"\n \n \n 14\n The court concluded that the evidence did not establish a value in excess of $4.50 per share for the shares issued to the Simkins and that disclosure of the unaudited quarterly report would have provided no basis for an increased value.\n \n Value of Control\n \n 15\n Plaintiff established that the Simkins had paid an average of $4.64 per share for their New Haven stock in July 1963. He claimed that the merger price of $4.50 in 1964 therefore was too low, particularly since some elements of control were acquired in 1964.\n \n \n 16\n The court found, however, that, while elements of control were acquired in both 1963 and 1964 by the Simkins, they actually acquired effective control of the corporation in 1963 when their purchases gave them ownership of approximately one-third of the outstanding shares and the right to elect a majority of the board of directors. The elements of control acquired in 1964 were worth a considerably smaller premium than the value of the control they had acquired in 1963. The court also noted that the July 1963 sale of stock to the Simkins was followed by continuing losses for the balance of fiscal 1963, and that these losses were reversed only by a modest profit during the first month of the first quarter of fiscal 1964.\n \n \n 17\n The court concluded that the evidence on the value of control did not establish that $4.50 per share in January 1964 (when New Haven's directors approved the merger ratio) was not a fair price.Undisclosed Profits and Assets\n \n \n 18\n Finally, the court noted plaintiff's claim \"somewhat as an afterthought\" that a price in excess of $4.50 per share was established by adding to the over-the-counter bid price of $4.50, the sum of $2.055 per share represented by undisclosed profits and assets not properly reflected in the proxy materials the so-called Grand Avenue, Penn Mutual and Grinnell matters.\n \n \n 19\n As to this belated claim, the court found, first, that there was no evidence that the $4.50 price represented a market value to which other elements of value could be added, especially absent a showing that anyone other than the Simkins had any interest in purchasing New Haven shares at $4.50; and, second, that there was no basis for plaintiff's suggestion that a price per share in excess of $4.50 could be established by net asset values plus a per share increment to be derived from plaintiff's asserted undisclosed \"profits and assets\" of $2.055 per share.\n \n \n 20\n The court concluded that plaintiff's attempt to establish a price per share in excess of $4.50 by adding a value reflecting such profits and losses must fail.\n \n \n 21\n We hold that the foregoing findings of fact by the district court are not clearly erroneous, especially when due regard is given to the opportunity of the court to judge the credibility of witnesses; that they are supported by substantial evidence; and that they adequately justify the court's conclusion that plaintiff failed to prove that the corporation had been damaged by issuance of its shares at $4.50 per share.\n \n III.\n \n 22\n We turn next to plaintiff's contention that his claim of damages should have been determined on the basis of certain \"liberal principles relating to proof of damages\", citing among other authorities Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251 (1946); Myzel v. Fields, 386 F.2d 718 (8 Cir. 1967), cert. denied, 390 U.S. 951 (1968); Janigan v. Taylor, 344 F.2d 781 (1 Cir.), cert. denied, 382 U.S. 879 (1965). We hold on the facts of the instant case that plaintiff's reliance on such authorities is misplaced.\n \n \n 23\n The Bigelow rule that uncertainty as to the amount of damages is to be cast on a wrongdoer does not extend to uncertainty as to the fact of damages. 327 U.S. at 264-65. This is made clear by the Supreme Court's predicating its holding in Bigelow upon its earlier decision in Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562 (1931), where it observed that \"(T)here is a clear distinction between the measure of proof necessary to establish the fact that petitioner had sustained some damage, and the measure of proof necessary to enable the jury to fix the amount.\" (emphasis added).\n \n \n 24\n Nor do Myzel or Janigan lead to a contrary result. To impose harsh penalties on one who might commit a mere technical violation of the securities laws (even if there were evidence of such a violation here, which there was not) to benefit one who has not been injured would not only be unjust, but would contravene Section 28 of the Securities Exchange Act of 1934, 15 U.S.C. § 78bb(a) (1970). We limit Myzel and Janigan to situations where there are present both elements described in Gerstle v. Gamble-Skogmo, Inc., 478 F.2d 1281, 1303-06 (2 Cir. 1973), namely (1) that a wrongdoer might be profiting by his own wrong, and (2) that, even if there were fraud, the defrauded party might have been in the position of earning the profits it seeks from the wrongdoer. With respect to element (1), there was no evidence whatsoever here that the alleged wrongdoers (the Simkins) might be profiting by their own wrongs. As for element (2), that could have been established here only if New Haven had had another prospective purchaser who would have paid more than $4.50 per share or if the Simkins would have paid more than $4.50 per share; but there was no such evidence in the instant case. We hold that Myzel and Janigan are completely inapplicable here.\n \n \n 25\n We have considered plaintiff's other claims of error and find them to be without merit.1\n \n \n 26\n Affirmed.\n \n \n \n 1\n Among plaintiff's other claims of error that we find to be without merit is his claim that Mills v. Electric Auto-Lite Co., 396 U.S. 375 (1970), requires that attorneys' fees be awarded whenever a violation of the securities laws has been demonstrated even absent any evidence of damage. We are hard-pressed to discern how plaintiff succeeded in vindicating the shareholder interest in \"fair and informed corporate suffrage,\" id. at 396, which was the basis of Mills. Plaintiff not only failed to establish his claim of damages, but, unlike Mills, he did not even request rescission of the merger and resubmission for a new vote. It can hardly be urged on the basis of the instant record that by instituting this litigation plaintiff rendered a benefit to New Haven shareholders which would justify award of attorney fees. Accordingly, we hold that Mills does not require such an award in this case. Cf. Isaacs Bros. Co. v. Hibernia Bank, 481 F.2d 1168, 1170 (9 Cir. 1973)\n \n \n ", "ocr": false, "opinion_id": 327659 } ]

[ "731 F.3d 50" ]

[ { "author_str": "Lipez", "per_curiam": false, "type": "010combined", "page_count": 26, "download_url": "http://media.ca1.uscourts.gov/pdf.opinions/12-2270P-01A.pdf", "author_id": null, "opinion_text": " United States Court of Appeals\n For the First Circuit\n\n\nNo. 12-2270\n\n VLADIMIR PEREZ SANTANA,\n\n Petitioner,\n\n v.\n\n ERIC H. HOLDER, ATTORNEY GENERAL,\n\n Respondent.\n\n\n PETITION FOR REVIEW OF AN ORDER OF THE\n BOARD OF IMMIGRATION APPEALS\n\n\n Before\n\n Howard, Lipez, and Kayatta,\n Circuit Judges.\n\n\n Jeffrey B. Rubin and Kathleen M. Gillespie on brief for\npetitioner.\n Trina Realmuto, with whom Beth Werlin was on brief, for\nAmerican Immigration Council, National Immigration Project of the\nNational Lawyers Guild, and Post-Deportation Human Rights Project,\namici curiae.\n Greg D. Mack, Senior Litigation Counsel, Office of Immigration\nLitigation, with whom Stuart F. Delery, Principal Deputy Assistant\nAttorney General, Civil Division, and Colin J. Tucker, Trial\nAttorney, Office of Immigration Litigation, were on brief, for\nrespondent.\n\n\n\n September 27, 2013\n\f LIPEZ, Circuit Judge. Born in the Dominican Republic in\n\n1987, Vladimir Perez Santana immigrated to the United States and\n\nbecame a lawful permanent resident (\"LPR\") in 1997. In March 2010,\n\nPerez Santana pled guilty in state court to one charge of\n\npossession of a controlled substance with intent to distribute. He\n\nreceived a one-year probationary sentence.\n\n The Department of Homeland Security (\"DHS\") placed Perez\n\nSantana into removal proceedings and found him both removable and\n\nineligible for discretionary relief. After the agency ordered his\n\nremoval, Perez Santana sought vacatur of his criminal conviction on\n\nconstitutional grounds. Successful in this effort, he then filed\n\na motion to reopen his proceedings before the Board of Immigration\n\nAppeals (\"BIA\"), seeking vacatur of his order of removal as well.\n\nBy the time he sought reopening, however, Perez Santana had already\n\nbeen removed to the Dominican Republic. The BIA denied his motion,\n\ninvoking a regulation known as the \"post-departure bar,\" which\n\nprecludes a noncitizen from filing a motion to reopen \"subsequent\n\nto his or her departure from the United States.\" 8 C.F.R.\n\n§ 1003.2(d).\n\n Perez Santana petitions for our review, contending, inter\n\nalia, that the post-departure bar conflicts with the clear language\n\nof the immigration statute, which grants \"[a]n alien\" the right to\n\nfile a single motion to reopen. 8 U.S.C. § 1229a(c)(7). We agree.\n\nThe post-departure bar cannot prevent a noncitizen from invoking\n\n\n -2-\n\fhis statutory right to file a motion to reopen. We therefore grant\n\nPerez Santana's petition.\n\n I.\n\n The facts of this case are straightforward. Perez\n\nSantana was born in the Dominican Republic in 1987. When he was\n\nnine years old, he immigrated to the United States with his family\n\nas an LPR. On March 9, 2010, Perez Santana pleaded guilty in\n\nMassachusetts state court to one charge of possession with intent\n\nto distribute a class D substance, namely, marijuana. He was\n\nsentenced to one year of probation.\n\n On September 7, 2010, Perez Santana was issued a notice\n\nto appear for removal proceedings, which charged that his criminal\n\nconviction was a drug trafficking aggravated felony under the\n\nimmigration statute. See 8 U.S.C. §§ 1101(a)(43)(B),\n\n1227(a)(2)(A)(iii). Three months later, the immigration judge\n\n(\"IJ\") found Perez Santana removable on the basis of his\n\nconviction, and also determined that because the conviction\n\nconstituted an aggravated felony, he was ineligible for relief from\n\nremoval. See 8 U.S.C. § 1229b(a)(3) (requiring that applicant for\n\ncancellation of removal for LPRs must not be convicted of \"any\n\naggravated felony\"). Perez Santana sought review before the BIA,\n\nwhich applied its prior precedent on this subject and dismissed his\n\n\n\n\n -3-\n\fappeal.1 See Matter of Castro Rodriguez, 25 I. & N. Dec. 698, 702\n\n(BIA 2012). The BIA's order was entered, and Perez Santana's\n\nremoval became final on April 16, 2012.\n\n On May 23, 2012, Perez Santana filed a motion to withdraw\n\nhis plea in the Massachusetts state courts. He contended that\n\nunder the Supreme Court's then-recent decision in Padilla v.\n\nKentucky, 559 U.S. 356 (2010), his plea was taken in violation of\n\nhis Sixth Amendment right to the effective assistance of counsel\n\nbecause he was not informed of the potential immigration\n\nconsequences of his conviction.\n\n While Perez Santana sought vacatur of his criminal\n\nconviction, he also sought to stay his removal before the DHS.\n\nSometime in May 2012, DHS denied his request for a stay and\n\ndeported him to the Dominican Republic on May 29, 2012.2\n\n On July 11, 2012, after initially denying Perez Santana's\n\nmotion to withdraw his plea, the Massachusetts court reconsidered\n\n\n 1\n Although the validity of the agency's finding of\nremovability is not before us, it is noteworthy that this\ndetermination relied on our opinion in Julce v. Mukasey, 530 F.3d\n30 (1st Cir. 2008), which held that a Massachusetts conviction for\npossession of marijuana with intent to distribute was categorically\na drug trafficking aggravated felony. The Supreme Court abrogated\nJulce in Moncrieffe v. Holder, 133 S. Ct. 1678 (2013), holding that\nan analogous Georgia conviction for possession with intent to\ndistribute was not a drug trafficking aggravated felony. Id. at\n1693-94.\n 2\n Perez Santana has not identified documentation in the record\nconfirming that he sought and was denied a stay of removal, instead\nrelying on assertions from his briefs to the agency. The\ngovernment does not dispute this fact, however.\n\n -4-\n\fand granted his motion. Perez Santana immediately filed a motion\n\nto reopen his removal proceedings before the BIA, eighty-eight days\n\nafter his removal became final. He argued that because his\n\ncriminal conviction was now vacated, it could no longer serve as a\n\nground for his removal.\n\n On September 24, 2012, the BIA returned Perez Santana's\n\nmotion to the IJ without further action, concluding that the post-\n\ndeparture bar prevented him from filing a motion to reopen once he\n\ndeparted the United States. See 8 C.F.R. § 1003.2(d); see also id.\n\n§ 1003.23(b)(1). The BIA also relied on its prior opinion in\n\nMatter of Armendarez-Mendez, 24 I. & N. Dec. 646 (BIA 2008), which\n\nheld that the post-departure bar divested it of jurisdiction to\n\nconsider a motion to reopen filed by a noncitizen subsequent to his\n\ndeparture from the United States.\n\n Perez Santana timely sought review before this court of\n\nthe denial of his motion to reopen.3\n\n II.\n\n We review the BIA's denial of a motion to reopen for\n\nabuse of discretion. Bead v. Holder, 703 F.3d 591, 593 (1st Cir.\n\n2013). Under this standard, the petitioner must demonstrate that\n\n\"'the BIA committed an error of law or exercised its judgment in an\n\narbitrary, capricious, or irrational way.'\" Id. (quoting Raza v.\n\n\n 3\n Petitioner ceded his oral argument time to counsel for amici\ncuriae, whom we thank for their able presentation of the arguments\nwe address today.\n\n -5-\n\fGonzales, 484 F.3d 125, 127 (1st Cir. 2007)). Perez Santana's\n\nprimary contention is that the agency committed a legal error when\n\nit concluded that the post-departure bar divested it of the ability\n\nto consider his motion to reopen. Our review of legal questions is\n\nde novo, \"with deference given 'to the BIA's reasonable\n\ninterpretations of statutes and regulations falling within its\n\npurview.'\" Aponte v. Holder, 683 F.3d 6, 10 (1st Cir. 2012)\n\n(quoting Matos–Santana v. Holder, 660 F.3d 91, 93 (1st Cir. 2011)).\n\nA. The Motion to Reopen Statute and the Post-Departure Bar\n\n \"The motion to reopen is an 'important safeguard'\n\nintended 'to ensure a proper and lawful disposition' of immigration\n\nproceedings.\" Kucana v. Holder, 558 U.S. 233, 242 (2010) (quoting\n\nDada v. Mukasey, 554 U.S. 1, 18 (2008)). The procedure is codified\n\nin a statute, 8 U.S.C. § 1229a(c)(7)(A), which provides that \"[a]n\n\nalien may file one motion to reopen proceedings.\" The statute\n\nexpressly prescribes other requirements, including that the motion\n\n\"state the new facts that will be proven at a hearing to be held if\n\nthe motion is granted,\" id. § 1229a(c)(7)(B), that the motion \"be\n\nsupported by affidavits or other evidentiary material,\" id., and\n\nthat the motion \"be filed within 90 days of the date of entry of a\n\nfinal administrative order of removal,\" id. § 1229a(c)(7)(C)(i).\n\nImportantly, the statute does not denominate a physical presence or\n\ngeographic limitation in its general provisions.\n\n\n\n\n -6-\n\f The statute carves out certain exceptions to these\n\ngeneral requirements. Applicants for asylum, for example, are\n\nexempt from the ninety-day time limit if their application is based\n\non evidence of changed country conditions in the country to which\n\nthey are to be removed, and \"if such evidence is material and was\n\nnot available and would not have been [previously] discovered or\n\npresented.\" Id. § 1229a(c)(7)(C)(ii). There is also a special\n\nrule for battered spouses, which extends the filing deadline to one\n\nyear and waives the numerical limitation. Id. §§ 1229a(c)(7)(A),\n\n1229a(c)(7)(C)(iv). In contrast to the statute's general\n\nprovisions, the special rule for battered spouses requires the\n\nnoncitizen to be \"physically present in the United States at the\n\ntime of filing the motion.\" Id. § 1229a(c)(7)(C)(iv)(IV).\n\n In its current form, the post-departure bar comprises two\n\nseparate regulations, one of which applies to motions filed before\n\nthe BIA and the other to motions filed before the IJ. See 8 C.F.R.\n\n§ 1003.2(d) (BIA); id. § 1003.23(b)(1) (IJ). Though codified in\n\ndifferent sections, the regulations contain the same language:\n\n A motion to reopen . . . shall not be made by\n or on behalf of a person who is the subject of\n removal, deportation, or exclusion proceedings\n subsequent to his or her departure from the\n United States. Any departure from the United\n States, including the deportation or removal\n of a person who is the subject of exclusion,\n deportation, or removal proceedings, occurring\n after the filing of a motion to reopen . . .\n shall constitute a withdrawal of such motion.\n\n8 C.F.R. § 1003.2(d); see also id. § 1003.23(b)(1).\n\n -7-\n\f The BIA has published a precedential opinion upholding\n\nthe post-departure bar's validity. In Matter of Armendarez-Mendez,\n\nthe BIA construed the post-departure bar as a limitation on its own\n\njurisdiction and decided that the agency therefore lacked the power\n\nto entertain motions to reopen filed by noncitizens who had\n\ndeparted the United States. 24 I. & N. Dec. at 648-49, 660.\n\nB. Pena-Muriel and Subsequent Litigation Concerning the Post-\nDeparture Bar\n\n This case is not the first time we have addressed the\n\nvalidity of the post-departure bar. In Pena-Muriel v. Gonzales,\n\n489 F.3d 438 (1st Cir. 2007), the petitioner asserted that the\n\nIllegal Immigration Reform and Immigrant Responsibility Act of 1996\n\n(\"IIRIRA\") abrogated the regulation we now know as the post-\n\ndeparture bar. This is true, the petitioner asserted, because\n\nIIRIRA repealed statutory provision 8 U.S.C. § 1105a(c) (1994)\n\n(repealed by Pub.L. No. 104–208, Title III, § 306(b), 110 Stat.\n\n3009, 3009-612). The repealed statute precluded a federal court\n\nfrom reviewing \"[a]n order of deportation . . . if the alien . . .\n\nhas departed from the United States after the issuance of the\n\norder.\" 8 U.S.C. § 1105a(c) (1994).\n\n Pena-Muriel contended that the post-departure bar was\n\n\"inextricably linked\" with this judicial review provision, and that\n\nits deletion \"signaled [Congress's] intent\" that the government\n\nshould cease enforcing the post-departure regulation as well.\n\nPena-Muriel, 489 F.3d at 441. We disagreed, explaining that \"[t]he\n\n -8-\n\fAttorney General's authority to prohibit consideration of motions\n\nto reopen from aliens who have departed the United States did not\n\noriginally depend upon the statutory language in § 1105a(c).\" Id.\n\nThus, that provision's repeal did not, by extension, abrogate the\n\npost-departure bar. Id.\n\n Pena-Muriel petitioned for rehearing en banc, arguing\n\nthat the text of the motion to reopen statute unambiguously gave a\n\nnoncitizen the right to file a motion to reopen regardless of the\n\nnoncitizen's geographic location at time of filing. See 8 U.S.C.\n\n§ 1229a(c)(7)(A). Pena-Muriel's contention, raised for the first\n\ntime via his petition, relied on a statutory provision separate\n\nfrom the repealed judicial review provision he invoked in the\n\nmerits briefing. See Part II.C.2, infra. In our order denying the\n\npetition, we observed that \"[w]hen this case was presented to the\n\npanel, petitioner [had] presented only one statutory argument.\"\n\nPena-Muriel v. Gonzales, 510 F.3d 350, 350 (1st Cir. 2007). We\n\nadded that, \"[n]ot having been asked to do so, we did not decide\"\n\nwhether the post-departure bar conflicted with the motion to reopen\n\nstatute, and we declined to resolve the question on rehearing. Id.\n\nAs a result, the parties agree that our opinion in Pena-Muriel does\n\nnot control the outcome of this case.\n\n Since we decided Pena-Muriel, the validity of the post-\n\ndeparture bar has been the subject of substantial litigation in the\n\nfederal courts of appeals. Six of our sister circuits have held\n\n\n -9-\n\fthat the post-departure bar conflicts with the clear language of\n\nthe motion to reopen statute. See Garcia-Carias v. Holder, 697\n\nF.3d 257, 264 (5th Cir. 2012); Lin v. U.S. Att'y Gen., 681 F.3d\n\n1236, 1241 (11th Cir. 2012); Contreras-Bocanegra v. Holder, 678\n\nF.3d 811, 819 (10th Cir. 2012) (en banc) (unanimously overturning\n\nprior panel decision); Prestol Espinal v. Att'y Gen., 653 F.3d 213,\n\n217–18 (3d Cir. 2011); Reyes-Torres v. Holder, 645 F.3d 1073,\n\n1076–77 (9th Cir. 2011); William v. Gonzales, 499 F.3d 329, 332\n\n(4th Cir. 2007). Another three have struck down the regulation as\n\nan impermissible contraction of the agency's jurisdiction, holding\n\nthat the agency cannot disclaim authority that Congress has\n\nexpressly conferred upon it. See Luna v. Holder, 637 F.3d 85, 100\n\n(2d Cir. 2011); Pruidze v. Holder, 632 F.3d 234, 239 (6th Cir.\n\n2011); Marin-Rodriguez v. Holder, 612 F.3d 591, 595 (7th Cir.\n\n2010).\n\n As matters currently stand, the rule in every circuit to\n\nhave addressed the arguments petitioner raises here is that the\n\npost-departure bar either conflicts with the motion to reopen\n\nstatute, or cannot be justified as a jurisdictional limitation.\n\nC. The Chevron Analysis\n\n Against that backdrop, we now address whether the post-\n\ndeparture bar is a valid exercise of the discretion conferred upon\n\nthe agency by the immigration statute. Resolution of this question\n\nrequires that we apply the framework set forth in Chevron, U.S.A.,\n\n\n -10-\n\fInc. v. Natural Resources Defense Council, Inc., 467 U.S. 837\n\n(1984). The Chevron inquiry proceeds in two steps. First, we look\n\nto the statute to ascertain whether \"Congress has directly spoken\n\nto the precise question at issue.\" Id. at 842. If the statute is\n\nclear in its meaning, we must \"give effect to the unambiguously\n\nexpressed intent of Congress.\" Id. at 842-43.\n\n The analysis begins with the statute's language. \"In\n\ndetermining whether a statute exhibits Chevron-type ambiguity, . .\n\n. courts look at both the most natural reading of the language and\n\nthe consistency of the 'interpretive clues' Congress provided.\"\n\nSuccar v. Ashcroft, 394 F.3d 8, 22 (1st Cir. 2005) (quoting Gen.\n\nDynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 586 (2004)). We\n\nmay also look to legislative history \"to see if any 'serious\n\nquestion . . . even about purely textual ambiguity' is left.\" Id.\n\nat 23 (quoting Gen. Dynamics Land Sys., 540 U.S. at 600).\n\n Second, \"[i]f, after applying these interpretive rules,\n\nwe conclude that the statute is ambiguous,\" we move to the next\n\nstep of the analysis. Saysana v. Gillen, 590 F.3d 7, 13 (1st Cir.\n\n2009). Importantly, we take this step only \"when the devices of\n\njudicial construction have been tried and found to yield no clear\n\nsense of congressional intent.\" Gen. Dynamics Land Sys., 540 U.S.\n\nat 600. At Chevron's second step, the inquiry focuses on \"whether\n\nthe agency's answer is based on a permissible construction of the\n\nstatute.\" Chevron, 467 U.S. at 843. If so, we \"defer to an\n\n\n -11-\n\fagency's interpretive regulation unless it is 'arbitrary,\n\ncapricious, or manifestly contrary to the statute.'\" Saysana, 590\n\nF.3d at 13 (quoting Chevron, 467 U.S. at 844).\n\n Perez Santana contends that the plain language of the\n\nmotion to reopen statute forecloses the agency from adding a\n\ngeographic limitation to his ability to seek reopening of his\n\nproceedings. The government replies that the lack of an express\n\ngeographic restraint should be construed as silence about the\n\nlocation of the noncitizen at time of filing. This silence, the\n\ngovernment says, results in a statutory \"gap\" or ambiguity that the\n\ngovernment is permitted to fill with the post-departure bar.\n\n 1. The Statutory Text\n\n Looking first to the statutory text, the motion to reopen\n\nstatute states that \"[a]n alien may file one motion to reopen\n\nproceedings.\" 8 U.S.C. § 1229a(c)(7)(A). The immigration statute\n\nin turn defines \"alien\" as \"any person not a citizen or national of\n\nthe United States.\" 8 U.S.C. § 1101(a)(3). Thus, the provision\n\nunambiguously confers upon \"an alien\" the authority and the right\n\nto file a motion to reopen, in language that admits of no\n\nexceptions. See Dada, 554 U.S. 1, 15 (2008) (\"[T]he statutory text\n\nis plain insofar as it guarantees to each alien the right to file\n\n'one motion to reopen proceedings under this section.'\" (quoting 8\n\nU.S.C. § 1229a(c)(7)(A))). The relevant language nowhere\n\n\n\n\n -12-\n\fprescribes, or even suggests, a geographic restriction on an \"alien\n\n[who] may file\" the motion.4\n\n The statute does describe other limitations and\n\nrequirements on the right to file a motion to reopen, including\n\nnumeric limitations, 8 U.S.C. § 1229a(c)(7)(A), evidentiary\n\nrequirements, id. § 1229a(c)(7)(B), and time deadlines, id. §\n\n1229a(c)(7)(C)(i). Once again, these particular exceptions do not\n\ncontain restrictions based on geography or the location of the\n\nnoncitizen at the time of filing. The absence of such a\n\nlimitation, despite the explicit enumeration of others, serves as\n\na strong indication that Congress imposed the restrictions that it\n\ndeemed important and declined to impose others. Cf. United States\n\nv. Johnson, 529 U.S. 53, 58 (2000) (\"When Congress provides\n\nexceptions in a statute, it does not follow that courts have\n\nauthority to create others. The proper inference . . . is that\n\n\n\n\n 4\n The government posits that relying on the words \"an alien\"\nwould permit all sorts of noncitizens to file motions to reopen\n\"without regard to any other circumstance or condition,\" such as\n\"aliens who prevail in immigration proceedings, aliens who have\nnever been in immigration proceedings, and aliens who have never\neven been in the United States.\" This attempt to conjure a parade\nof horribles is a chimera. For one, the motion to reopen statute\nis included in a set of provisions that prescribe the procedural\nrequirements of removal proceedings. See 8 U.S.C. §§ 1229a(a)-(b).\nWhen read in context, the reopening statute clearly refers to\nnoncitizens who are or have been the subject of such proceedings,\nnot random noncitizens. We also question why noncitizens who have\nwon their proceedings, or those who have never been subject to\nremoval in the first place, would have an interest in filing\nmotions to reopen.\n\n -13-\n\fCongress considered the issue of exceptions and, in the end,\n\nlimited the statute to the ones set forth.\").\n\n Moreover, the special rule for battered spouses does\n\ncontain an explicit geographic limitation. That subsection, among\n\nother requirements, expressly requires that \"the alien is\n\nphysically present in the United States at the time of filing the\n\nmotion.\" 8 U.S.C. § 1229a(c)(7)(C)(iv)(IV). This provision shows\n\nthat Congress knew how to impose a geographic restriction when it\n\nwanted to, and further suggests that the statute's general\n\nprovisions do not contain such a limitation. See Lin, 681 F.3d at\n\n1240 (\"[W]e can draw the negative inference that 'Congress knew how\n\nto include a requirement of physical presence when it wished to do\n\nso,' and intentionally chose not to require such presence for a\n\nmotion to reopen, except in the specified circumstances.\" (quoting\n\nWilliam, 499 F.3d at 333)).\n\n The government's arguments amount to nothing less than a\n\nrequest to write words into the statute that are not there.\n\nEssentially, the contention is that we should revise the text of 8\n\nU.S.C. § 1229a(c)(7)(A) to say that \"[a]n alien may file one motion\n\nto reopen proceedings under this section, excepting other\n\nlimitations that the Attorney General may prescribe.\" The\n\nconsequence of the government's arguments is not limited to the\n\npost-departure bar. Under its theory, the government possesses the\n\ndiscretion to impose other substantive limitations on a\n\n\n -14-\n\fnoncitizen's right to file a motion to reopen that lack any\n\nfoundation in the statutory language. We decline to adopt such a\n\nconstruction.\n\n 2. The Regulation's History as the Source of the\n Statute's Ambiguity\n\n The government's primary defense of the regulation does\n\nnot focus on the statutory text. Instead, the government\n\nconstructs a narrative of the post-departure bar's long history and\n\ncontends that, when read in light of this history, the motion to\n\nreopen statute is merely silent, and thus ambiguous, as to\n\ngeographic restrictions.5\n\n a. The History of the Motion to Reopen Proceeding\n and the Post-Departure Bar\n\n The proceeding we now know as the motion to reopen\n\nappeared as a form of relief in early twentieth century cases. See,\n\ne.g., Ex Parte Chan Shee, 236 F. 579 (N.D. Cal. 1916). In 1941, the\n\nAttorney General (through the Immigration and Naturalization\n\nService), included it in the federal regulations. See New\n\nRegulations Governing the Arrest and Deportation of Aliens, 6 Fed.\n\nReg. 68, 71-72 (Jan. 4, 1941). A motion to reopen was treated \"'as\n\n\n 5\n The government cites language from Pena-Muriel that\ncharacterized Congress as \"remain[ing] silent regarding the long-\nstanding regulatory bar imposed by [the post-departure\nregulation].\" 489 F.3d at 442. As we stated earlier in the\nopinion, however,\"[t]he parties point[ed] to no statutory language\nthat explicitly addresses the issue\" in Pena-Muriel. Id. at 441.\nAny comment as to Congressional \"silence\" we made in our prior\nopinion was addressed only to the arguments before us at the time.\n\n -15-\n\fa matter for the exercise of [the government's] discretion,'\" and\n\n\"judicial interference was deemed unwarranted.\" Dada, 554 U.S. at\n\n12-13 (quoting Wong Shong Been v. Proctor, 79 F.2d 881, 883 (9th\n\nCir. 1935)). For a long time, neither the statute nor the Attorney\n\nGeneral's regulations prescribed time limits on the filing of the\n\nmotion. Id. at 13.\n\n In 1990, Congress became concerned that noncitizens were\n\nabusing the procedure by filing motion after motion in order to\n\nprolong their time in the United States. Id. The legislature\n\ntherefore directed the Attorney General to issue regulations\n\nlimiting the time period for the filing of motions to reopen, as\n\nwell as restrictions on the number of motions that could be filed.\n\nId. Although the Attorney General investigated the issue and found\n\nlittle evidence of abuse, the Department of Justice issued a\n\nregulation imposing new time limits and restrictions on filings.\n\nId. (citing Executive Office for Immigration Review; Motions and\n\nAppeals in Immigration Proceedings, 61 Fed. Reg. 18900, 18901,\n\n18905 (1996)). This new regulation imposed a ninety-day time\n\nlimit, and restricted noncitizens to the filing of a single motion.\n\nId.\n\n In 1996, Congress passed IIRIRA, which altered numerous\n\naspects of the immigration statute. One of these changes was the\n\ncodification of the motion to reopen statute. Id. at 14. In doing\n\nso, \"Congress adopted the recommendations of the DOJ with respect\n\n\n -16-\n\fto numerical and time limits,\" id., and clarified the procedure's\n\nevidentiary requirements, see 8 U.S.C. § 1229a(c)(7)(B). The\n\namendment to the statute did not similarly adopt the post-departure\n\nbar.\n\n In light of the history of Congress's interventions in\n\nthis field, the government contends that the \"emphasis\" of IIRIRA's\n\ncodification of the motion to reopen statute was the time and\n\nnumber limitations enacted by the Attorney General via the 1990\n\nregulations. According to this line of reasoning, the statute is\n\nmerely \"silent\" regarding the applicability of the post-departure\n\nbar, permitting the executive branch to \"fill the gap\" by\n\nprescribing geographic limitations on \"a[n] alien['s]\" statutory\n\nright to file a motion to reopen. In other words, the government\n\nsays that adopting petitioner's argument would require us to find\n\nthat the post-departure bar was \"impliedly repealed\" by IIRIRA,\n\nnotwithstanding the long history of the regulation and the lack of\n\nany express statutory repeal.\n\n b. Analysis\n\n The government's interpretive approach is a peculiar way\n\nto construe a statute. We have repeatedly observed that the\n\nChevron analysis begins with the statute's words. See, e.g.,\n\nSaysana, 590 F.3d at 13; Succar, 394 F.3d at 22-23. Starting\n\ninstead with an exposition of the legislative and regulatory\n\nhistory is inappropriate in this case. Although history can\n\n\n -17-\n\filluminate ambiguous language in some circumstances, relying so\n\nheavily on extra-statutory sources to read silence or ambiguity\n\ninto seemingly clear text runs counter to well-settled modes of\n\ninterpretation.\n\n The government's proposed methodology also carries\n\ncertain dangers. As the Third Circuit has pointed out, this method\n\n\"manufactures an ambiguity from Congress' failure to specifically\n\nforeclose each exception that could possibly be conjured or\n\nimagined. That approach would create an 'ambiguity' in almost all\n\nstatutes, necessitating deference to nearly all agency\n\ndeterminations.\" Prestol Espinal, 653 F.3d at 220.\n\n Moreover, the government would place upon Congress, when\n\nenacting a new statute against a background regulatory scheme, the\n\nburden of addressing each and every regulation that existed before\n\nand expressly stating whether it survives the change in the\n\nstatute. That argument is untenable. As the Tenth Circuit\n\nexplained, \"[t]o require an express repeal of a discretionary\n\nregulation in this context would upend the fundamental principle\n\nthat regulations should interpret statutes and not the other way\n\naround.\" Contreras-Bocanegra v. Holder, 678 F.3d 811, 818 (10th\n\nCir. 2012). Instead, \"when faced with [] a legislative overhaul,\n\n\n\n\n -18-\n\fagencies should recalibrate their regulations to ensure they\n\nmaintain a statutory basis.\"6 Id.\n\n To be sure, the Supreme Court has sometimes required\n\nclearer statements of Congressional intent depending on the\n\ncircumstances. To that end, the government relies heavily on\n\nCommodity Futures Trading Commission v. Schor, 478 U.S. 833 (1986),\n\nfor the proposition that \"when Congress revisits a statute giving\n\nrise to a longstanding administrative interpretation without\n\npertinent change, congressional failure to revise or repeal the\n\nagency's interpretation is persuasive evidence that the\n\ninterpretation is the one intended by Congress.\" Id. at 846\n\n(citation omitted) (internal quotation marks omitted).\n\n Leaving aside any concerns we may have about the reach of\n\nthis language, the principle articulated in Schor does not apply to\n\nthis case. Until Congress codified the motion to reopen, the\n\nproceeding was a regulatory creation, rather than a statutory one.\n\nIn codifying the right, the legislature \"transform[ed] the motion\n\nto reopen from a regulatory procedure to a statutory form of relief\n\navailable to the alien.\" Dada, 554 U.S. at 14. This\n\n\n\n 6\n The government may be in the process of reconsidering its\nposition, however. In response to a petition for rulemaking, the\nAttorney General has announced \"plans to initiate a separate\nrulemaking proceeding to address the regulatory provision known as\nthe 'departure bar.'\" 77 Fed. Reg. 59567, 59568 (Sept. 28, 2012).\nThe status of these proceedings is unclear and their outcome is\nuncertain. Thus, neither the parties nor amici assert that these\nproceedings moot this petition.\n\n -19-\n\ftransformation took a significant degree of discretion out of the\n\nagency's hands and vested a statutory right in the noncitizen. See\n\nCoyt v. Holder, 593 F.3d 902, 906 (9th Cir. 2010) (\"Congress\n\namended the Immigration and Nationality Act [] by, among other\n\nthings, granting aliens subject to a removal order the right to\n\nfile one motion to reopen.\"); cf. Pruidze, 632 F.3d at 237-38\n\n(characterizing statute as an \"empowering, not a divesting,\n\nprovision, as it grants the Board authority to entertain a motion\n\nto reopen\"). And Congress, by elevating the motion to reopen to a\n\nstatutory right and carefully delineating its contours, instituted\n\na \"pertinent change\" to any regulatory roadblock to the exercise of\n\nthis newly-created right. Cf. Prestol Espinal, 653 F.3d at 222 n.9\n\n(\"Congress' nuanced consideration of which limitations and\n\nregulations to codify offers stronger evidence of Congress' intent\n\nthan does Congress' alleged 'silence' with respect to the\n\npre-existing post-departure regulation.\"). In other words, the\n\nstatutory changes are inconsistent with the notion that Congress\n\nsimply intended to stay silent regarding so substantial a\n\nlimitation on the motion to reopen proceeding as the post-departure\n\nbar.\n\n This is all the more true given the clarity of the\n\nstatutory language. See id. (\"'[W]here the law is plain,\n\nsubsequent reenactment does not constitute an adoption of the\n\nprevious administrative construction.'\" (quoting Brown v. Gardner,\n\n\n -20-\n\f513 U.S. 115, 121 (1994))); see also Brown, 513 U.S. at 121\n\n(\"[C]ongressional silence lacks persuasive significance,\n\nparticularly where administrative regulations are inconsistent with\n\nthe controlling statute.\" (citations omitted) (internal quotation\n\nmarks omitted)). Here, Congress's intent is manifest, and we\n\ndecline to inject ambiguity into words that do not allow it.\n\n Indeed, the facts of Perez Santana's own case highlight\n\nthe folly that results from the government's attempts to conjure\n\nambiguity from the statute's plain meaning and coherent structure.\n\nAs noted, the motion to reopen statute allows the filing of a\n\nsingle motion to reopen within ninety days after the final order of\n\nremoval. 8 U.S.C. § 1229a(c)(7)(C). Not coincidentally, IIRIRA\n\nadded a provision that \"requires the Attorney General to effectuate\n\nphysical removal of petitioners subject to a final order of removal\n\nwithin ninety days of the order.\" Coyt, 593 F.3d at 907 (citing 8\n\nU.S.C. § 1231(a)(1)(A)). The post-departure bar places those\n\nstatutory provisions in tension with one another by demanding the\n\nremoval of noncitizens on or before the ninety-day clock on their\n\nability to seek reopening has run. See Contreras-Bocanegra, 678\n\nF.3d at 817 (\"If we were to uphold the regulation, the Department\n\nof Homeland Security would be permitted . . . to unilaterally cut\n\nshort the congressionally mandated filing period in almost every\n\n\n\n\n -21-\n\fcase.\"). If the post-departure regulation no longer bars the\n\nconsideration of a motion to reopen, this tension disappears.7\n\n As the Supreme Court has admonished, we should not\n\n\"adopt[] a construction of [the statute] which would, with respect\n\nto an entire class of aliens, completely nullify a procedure so\n\nintrinsic a part of the legislative scheme.\" Dada, 554 U.S. at 18-\n\n19 (second alteration in original) (quoting Costello v. INS, 376\n\nU.S. 120 127-28 (1964)). Here, Perez Santana's order of removal\n\nbecame final on April 16, 2012, when the BIA dismissed his direct\n\nappeal. Thereafter, he diligently pursued post-conviction relief\n\nbefore the Massachusetts courts. A mere two days after obtaining\n\nvacatur of his plea, he sought reopening before the BIA and\n\nasserted that the conviction that served as the basis of his\n\nremoval had been deemed unconstitutional. This motion was filed\n\neighty-eight days after his order of removal became final, and two\n\ndays before the ninety-day deadline to seek reopening.\n\n\n\n\n 7\n In Pena-Muriel, the government similarly relied on Schor to\nargue that Congress's \"silence\" as respects the post-departure bar\nshould be construed as implicit endorsement of the regulation. 489\nF.3d at 442-43. We addressed this contention in the course of\nanalyzing the reasonableness of the government's interpretation\nunder the second step of Chevron. While acknowledging that Schor\nprovided some support for the agency's exercise of discretion, we\ncautioned that the \"[t]he government's insistence that the\nAttorney General's interpretation was the one intended by Congress\nmay be overreaching.\" Id. at 443. Now that we have had a full\nopportunity to view the regulation in light of the overall\nstatutory scheme, we confirm that the government's statutory\nargument was indeed incorrect.\n\n -22-\n\f In other words, Perez Santana did everything right — he\n\nassiduously sought and obtained what relief he could before the\n\nstate courts, and timely requested that his proceedings be\n\nreopened. Unfortunately, his diligence was rendered useless due to\n\nthe government's exercise of its wholly discretionary authority to\n\nremove him from the United States. More fundamentally, that\n\nunilateral action precluded him from vindicating the right Congress\n\ngranted him. See Reyes-Torres, 645 F.3d at 1077 (observing that\n\npetitioner had been \"forcibly removed seven days after the final\n\norder of removal was entered,\" and rejecting contention that\n\ngovernment \"ha[s] the power to unilaterally reduce the time in\n\nwhich Reyes–Torres could have filed his motion to reopen from the\n\nstatutorily mandated ninety days to seven days\").\n\n Recognizing the peculiarity of its position, the\n\ngovernment suggests that a noncitizen can apply to the BIA for a\n\nstay of removal, which would theoretically allow the noncitizen\n\nenough time to seek reopening. Yet the government characterizes\n\nthe BIA's ability to grant or deny a stay as discretionary. If\n\nthat is true, then conditioning a statutory right on the\n\ngovernment's grace may be a less improper deviation from the\n\nstatute, but it is an improper one nonetheless. See Contreras-\n\nBocanegra, 678 F.3d at 819 (\"[W]e will not condition an absolute\n\nstatutory right on the vagaries of administrative discretion.\").\n\n\n\n\n -23-\n\f Once again, the facts of Perez Santana's case are\n\nillustrative. Hoping to stave off removal until the state courts\n\nresolved his motion to vacate his criminal conviction, he\n\nunsuccessfully asked DHS to stay its hand.8 The theoretical\n\npossibility of delaying his removal was certainly of little aid to\n\nPerez Santana, who was summarily shipped off to the Dominican\n\nRepublic before he could put his arguments before the BIA. Here,\n\ntoo, Perez Santana did what the agency recommended and allowed, to\n\nno avail. These facts underscore the error in the government's\n\nposition, which would preclude Perez Santana from invoking an\n\n\"intrinsic [] part of the legislative scheme.\" Dada, 554 U.S. at\n\n19.9\n\n\n 8\n Stays of removal may be sought from the IJs, the BIA, or\nDHS. See 8 C.F.R. §§ 1003.2(f), 1003.23(b)(1)(v).\n 9\n Perez Santana raises an alternative argument, claiming that\nthe post-departure bar constitutes an impermissible contraction of\nthe agency's jurisdiction. This argument focuses on Matter of\nArmendarez-Mendez, 24 I. & N. Dec. 646. There, the BIA construed\nthe post-departure bar as a limitation on the jurisdiction\nconferred upon it by the Attorney General and held that \"[r]emoved\naliens have, by virtue of their departure, literally passed beyond\nour aid.\" Id. at 656. Perez Santana responds that the agency\ncannot contract the jurisdiction conferred upon it by Congress,\nrelying on Union Pacific Railroad v. Board of Locomotive Engineers,\n558 U.S. 67, 81-82 (2009).\n With our resolution of Perez Santana's statutory argument,\nthere is no need to address the agency's view of its\n\"jurisdiction.\" But we share the intuition of several of our\nsister circuits that the statutory and so-called jurisdictional\n\"inquiries may not be altogether separate.\" Contreras-Bocanegra,\n678 F.3d at 816 (citing Prestol Espinal, 653 F.3d at 218 n.4).\nMoreover, the Supreme Court's recent opinion in City of Arlington\nv. F.C.C., 133 S. Ct. 1863 (2013) casts serious doubt on whether\nPerez Santana's arguments are truly distinguishable. See id. at\n\n -24-\n\f In sum, \"[t]he government's argument is undermined by the\n\ntext and structure of the statute as well as related provisions\" of\n\nthe statutory scheme. Taing v. Napolitano, 567 F.3d 19, 26 (1st\n\nCir. 2009). Given our conclusion that the plain meaning of the\n\nstatute controls, we need not address the reasonableness of the\n\nregulation under the second step of Chevron.\n\nD. The Limitations of Today's Holding\n\n The government asks that if we hold that the post-\n\ndeparture bar conflicts with the motion to reopen statute, we limit\n\nsuch a holding to permit only timely, first motions to reopen filed\n\nby noncitizens who have departed the United States. The government\n\nobserves that Perez Santana's arguments \"depend on the premise that\n\n[8 U.S.C. § 1229a(c)(7)] confers a statutory right to seek\n\nreopening,\" and argues that \"such a right exists only insofar as an\n\napplicant complies with the statute's requirements for filing a\n\nmotion to reopen.\" Thus, the government suggests, the post-\n\ndeparture bar remains validly applicable to motions filed after\n\nninety days, 8 U.S.C. § 1229a(c)(7)(C)(i), or second or subsequent\n\nmotions, id. § 1229a(c)(7)(A). Because such motions fall outside\n\nthe statute, the argument goes, they must be construed as an appeal\n\nto the agency's sua sponte and extra-statutory ability to reopen\n\nproceedings, which is wholly a creature of agency discretion.\n\n\n\n1868 (\"[T]he distinction between 'jurisdictional' and\n'nonjurisdictional' interpretations is a mirage.\").\n\n -25-\n\f Because the government's arguments have no effect on the\n\noutcome of this case, we decline to address them in this opinion.10\n\nHere, the parties do not dispute that Perez Santana filed his\n\nmotion within ninety days, that this is his first motion, and that\n\nhe seeks to avail himself of his statutory right to seek reopening.\n\nAccordingly, Perez Santana's appeal may be resolved by our holding\n\nthat the post-departure bar cannot be used to abrogate a\n\nnoncitizen's statutory right to file a motion to reopen. We need\n\nsay no more at this juncture.11\n\n III.\n\n For the reasons stated, we grant the petition for review,\n\nvacate the order of the BIA, and remand for further proceedings\n\nconsistent with this opinion.\n\n So ordered.\n\n\n\n\n 10\n The government raises a similar argument in this appeal's\ncompanion case, Bolieiro v. Holder, No. 12-1807, slip op. at 10-11\n(1st Cir. Sept. 27, 2013). We decline to address it in that\nopinion as well, for somewhat different reasons.\n 11\n We express no view on Perez Santana's reliance on Lin v.\nGonzales, 473 F.3d 979 (9th Cir. 2007).\n\n -26-\n\f", "ocr": false, "opinion_id": 1042417 } ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": 32, "download_url": "https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2002cv0828-639", "author_id": null, "opinion_text": " UNCLASSIFIEOIIFOR PUBLIC RELEASE.\n\n\n\n\n UNITED STATES DISTRICT COURT\n FILED WITH THE\n FOR THE DISTRICT OF COLUMBIA COURT SECURITY OFFICER\n\n CSO.~\n ) OATti4~.,\nFAWZI KHAUD ABDULLAH )\nFAHAD AL ODAH, et ai. )\n )\n Petitioners, )\n )\n v.\t ) Civil. Action No. 02-828 (CKK)\n )\nUNITED STATES, et ai., )\n )\n Respondents. )\n )\n------------- )\n CLASSIFIED MEMORANDUM OPINION\n (August 24, 2009)\n\n Petitioner Fawzi Khalid Abdullah Fahad Al Odah (\"AI Odah\") has been detained by the\n\nUnited States Government at the Guantanamo Bay Naval Base in Cuba since 2002. He admits\n\nthat he traveled to Afghanistan in August 2001 and requested to meet with a Taliban official\n\nupon his arrival; that this same Taliban official brought him to a Taliban-operated camp near\n\nKandahar, Afghanistan; that he took one day of training with an AK-47 rifle at this camp; that the\n\nTaliban official sent him to stay with an associate in Logar, Afghanistan, after September 11,\n\n2001; that he surrendered his passport and other possessions to this individual; that he met with\n\nindividuals who were armed and appeared to be fighters; that he accepted an AK-47 from these\n\nindividuals; and that he traveled with his AK-47 into the Tora Bora mountains, remained in the\n\nTora Bora mountains during the Battle ofTora Bora, and was captured shortly thereafter by\n\nborder guards while still carrying his AK-47. Based on these admissions and other evidence in\n\nthe record, most of which is undisputed, the Government asserts that it has the authority to detain\n\nAl Odah pursuant to the Authorization for the Use of Military Force, Pub. L. No.1 07-40, § 2(a),\n\n\n\n UNCLASSIFIEOIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\n115 Stat. 224, 224 (2001) (\"AUMF\"), which authorizes the use of force against certain terrorist\n\nnations, organizations, and persons. Al Odah believes he is unlawfully detained and has filed a\n\npetition for a writ of habeas corpus.\n\n This civil proceeding requires the Court to determine whether or not Al Odah's detention\n\nis lawful. In connection with this inquiry, the Court has considered the factual evidence in the\n\nrecord, the extensive legal briefmg submitted by the parties, and the arguments presented during\n\na three-day Merits Hearing held on August 11-13,2009. 1 The parties did not present any live\n\ntestimony at the Merits Hearing, but Al Odah did listen telephonically to the unclassified opening\n\nstatements by his counsel and the Government's counsel. Based on the foregoing, the Court\n\nfinds that the Government has met its burden to show by a preponderance of the evidence that Al\n\nOdah became part of Taliban and al Qaeda forces. Accordingly, the Court shall DENY Al\n\nOdah's petition for habeas corpus.\n\n I. BACKGROUND\n\n A. Procedural History\n\n Al Odah filed his petition for habeas corpus on May 1, 2002, making this case the oldest\n\nof the pending Guantanamo Bay habeas cases. After several years of litigation, this case was\n\n\n\n I The Court notes several developments pertaining to the factual record since the\n\ncompletion of the Merits Hearing in this case. First, the Government withdrew Exhibit 157D and\nsubmitted in its place a version that redacted a small amount of information that is not relevant to\nthis case. See Gov't's Notice at 1 (Aug. 17,2009). Second, the Court denied a motion filed by\nAl Odah to supplement the record with an opinion issued in Al Adahi v. Obama, because\ndecisions by other judges of this Court are not evidence and the proper method for notifying the\nCourt of new legal authority is through a Notice. See Min. Order dated Aug. 20,2009. Third,\nthe Court granted an unopposed motion by the Government to supplement the record with\nevidence associated with Al Odah's passport, which the Government submitted in response to a\nquestion the Court had asked during the Merits Hearing. See Min. Order dated Aug. 21, 2009.\n\n 2\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nstayed pending resolution of whether the Court had jurisdiction to hear Al Odah's petition. On\n\nJune 12,2008, the United States Supreme Court issued its decision in Boumediene v. Bush,\n\nclarifying that this Court had jurisdiction to consider the petition and advising this and the other\n\njudges in this District that \"[t]he detainees are entitled to [] prompt habeas corpus hearing[s].\"\n\n553 U.S. , 128 S. Ct. 2229, 2275 (2008).\n\n Following the Boumediene decision, this and most of the other judges in this District\n\nagreed to consolidate their Guantanamo Bay habeas cases before fonner Chief Judge Thomas F.\n\nHogan for issuance of an initial case management order that would expeditiously move these\n\ncases toward resolution. Judge Hogan issued a Case Management Order on November 6, 2008,\n\nwhich he amended on December 16, 2008, and which the Court adopted in this case on\n\nDecember 22, 2008. The Court has relied on the Amended Case Management Order as the\n\nbackdrop for its subsequent Scheduling Orders in this case. 2\n\n The Government filed an Amended Factual Return on September 8, 2008, and pursuant\n\nto the schedule set by the Court, Al Odah filed a Traverse on March 30, 2009. The parties\n\nengaged in extensive discovery and motions practice in the interim. Al Odah filed a Motion for\n\nAdditional Discovery on January 26, 2009, which the Court granted-in-part and denied-in-part on\n\nFebruary 12,2009, after a hearing on February 11,2009. Al Odah filed a Motion to Produce a\n\nDeclassified Factual Return on January 9, 2009, which the Government produced on February 6,\n\n2009. The Court also required the Government to provide AI Odah with certain discovery from\n\nthe Guantanamo Bay Joint Task Force database. Additionally, the parties filed six pre-hearing\n\n\n\n 2 The Court extends its gratitude to Judge Hogan for his considerable investment oftime\nand energy to produce the Case Management Order.\n\n 3\n\n\n UNCLASSIFIED/IFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nmotions, most of which sought rulings concerning the admissibility of particular evidence. By\n\nOrder dated June 16, 2009, the Court granted the parties' motions to rely on hearsay evidence at\n\nAl Odah's Merits Hearing, but held their other evidentiary motions in abeyance. 3\n\n To narrow the disputed issues presented at the Merits Hearing and to focus the parties on\n\nthe specific documents underpinning their respective arguments, the Court ordered the\n\nGovernment to file a Statement of Facts on which they intended to rely at the Merits Hearing\n\n(which narrowed the allegations presented in the Amended Factual Return), and instructed both\n\nparties to submit Witness and Exhibit Lists. The Court advised the parties that it would likely\n\nexclude from consideration any evidence at the Merits Hearing that had not been identified in the\n\nWitness and Exhibits Lists by August 3, 2009 (approximately one week prior to the scheduled\n\nMerits Hearing).4 The parties timely submitted these materials and the Court held a three-day\n\nMerits Hearing on August 11-13,2009.\n\n B. Evidentiary Approach\n\n As stated above, the Court granted the parties' motions to rely on hearsay evidence in this\n\nproceeding. The plurality in Hamdi v. Rumsfeld specifically acknowledged that \"[h]earsay\n\n... may need to be accepted as the most reliable available evidence from the Government.\" 542\n\nU.S. 507, 534 (2004). The Court finds that allowing the use of hearsay by both parties balances\n\nthe need to prevent the substantial diversion of military and intelligence resources during a time\n\n\n\n\n 3 Al Odah also filed a Motion for Sanctions against the Government for failing to timely\ndisclose exculpatory evidence. The Court does not find that sanctions are warranted on the\npresent record.\n\n 4The Court noted two exceptions for (I) documents offered for rebuttal purposes, and (2)\nexculpatory documents, as to which the Government has a continuing obligation to disclose.\n\n 4\n\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nof hostilities, while at the same time providing Al Odah with a meaningful opportunity to contest\n\nthe basis ofms detention. The Court is fully capable of considering whether a piece of evidence\n\n(whether hearsay or not) is reliable, and it shall make such detenninations in the context of the\n\nevidence and arguments presented during the Merits Hearing - including any arguments the\n\nparties have made concerning the unreliability of hearsay evidence. Cf Parhat v. Gates, 532\n\nF.3d 834,849 (D.C. Cir. 2008) (explaining, in the context of the Detainee Treatment Act, that the\n\nCourt was \"not suggest[ing] that hearsay evidence is never reliable - only that it must be\n\npresented in the fonn, or with sufficient additional infonnation, that pennits [the finder of fact] to\n\nassess its reliability\") (emphasis in original).\n\n For similar reasons, the Court shall deny the Government's motion to have its evidence\n\nadmitted with a presumption of accuracy and authenticity. Relying in part on the Supreme\n\nCourt's statement in Hamdi v. Rums/eld that \"the Constitution would not be offended by a\n\npresumption in favor of the Government's evidence, so long as that presumption remained a\n\nrebuttable one and fair opportunity for rebuttal were provided,\" 542 U.S. at 534, the Government\n\nargues that a presumption as to its evidence is both appropriate and necessary. The Court\n\ndisagrees. One of the central functions of the Court in this case is \"to evaluate the raw evidence\"\n\nproffered by the Government and to detennine whether it is \"sufficiently reliable and sufficiently\n\nprobative to demonstrate the truth of the asserted proposition with the requisite degree of clarity.\"\n\nParhat, 532 F.3d at 847. Simply assuming the Government's evidence is accurate and authentic\n\ndoes not aid that inquiry. Cf Ahmed v. Obama, 613 F. Supp. 2d 51,55 (D.D.C. 2009) (rejecting\n\na presumption of accuracy for the Government's evidence and holding that \"the accuracy of\n\nmuch of the factual material contained in [the Government's] exhibits is hotly contested for a\n\n\n 5\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nhost of different reasons ...\").\n\n The Court also finds that there are significant reasons why the Government's proffered\n\nevidence may not be accurate or authentic. Some of the evidence advanced by the Government\n\nhas been \"buried under the rubble of war,\" Hamdi, 542 U.S. at 532, in circumstances that have\n\nnot allowed the Government to ascertain its chain of custody, nor in many instances even to\n\nproduce infonnation about the origins of the evidence. Other evidence is based on so-called\n\n\"unfinished\" intelligence, infonnation that has not been subject to each of the five steps in the\n\nintelligence cycle (planning, collection, processing, analysis and production, and dissemination).\n\nBased on the Government's own declarations, its raw intelligence may not have been fully\n\nanalyzed for its \"reliability, validity, and relevance\" in the context of other intelligence where\n\n\"judgments about its collective meaning\" are made. Ex. 1 at 5 (9/19/08 Decl. o~\n Ex. I-A at 1-2 (5/29/09 Dec!. 0 (explaining that the five\n\nsteps in the intelligence cycle are not \"mechanical\" and that the process \"var[ies] by collection\n\nspecialty,\" but not disturbing the conclusion that \"unfinished\" intelligence has not undergone the\n\nsame rigorous integration and evaluation process that produces \"finished\" intelligence).' Still\n\nother evidence is based on multiple layers of hearsay (which inherently raises questions about\n\nreliability), or is based on reports of interrogations (often conducted through a translator) where\n\ntranslation or transcription mistakes may occur. In this case, for example, the Government\n\nargues that interrogators and/or interpreters included incorrect dates in three separate reports that\n\nwere submitted into evidence based on misunderstandings between the Gregorian and the Hijri\n\n\n\n S All citations to exhibits (cited as \"Ex.\") refer to the parties' joint exhibits submitted at\nthe Merits Hearing.\n\n 6\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\fcalendars. See Ex. 24 at I\n\n\n\n\n(Unclassified Swnmary of Admin. Review Board f o r _ (same). The Government never\n\nattempted to show during the Merits Hearing that these reports were ever corrected.\n\nAccordingly, the Court shall not accord a presumption of accuracy or authenticity to the\n\nGovernment's evidence, but shall consider the accuracy or authenticity of the evidence in the\n\ncontext of the entire record and the arguments raised by the parties.\n\n Finally, the Court shall use the same approach to consider Al Odah's pre-hearing\n\nevidentiary motions that sought to exclude particular pieces of evidence prior to the Merits\n\nHearing based on their alleged lack of authenticity, reliability, or relevance. Rather than exclude\n\nevidence from consideration ex ante by examining it in a vacuwn, the Court concludes that the\n\nbetter approach is to make such determinations after considering all of the evidence in the record\n\nand hearing the parties' arguments related thereto. The Court believes this approach is\n\nparticularly useful where, as here, a document viewed in isolation may appear to be irrelevant,\n\nbut when considered in the context of the other evidence in the record its importance may\n\nbecome clear. Accordingly, the Court's consideration of the evidence proffered by the parties\n\nshall encompass inquiries into authenticity, reliability, and relevance. Cf Parhat, 532 F.3d at\n\n847 (describing the Court's inquiry into whether evidence is \"'sufficiently reliable and\n\nsufficiently probative to demonstrate the truth of the asserted proposition with the requisite\n\ndegree of certainty\"') (quoting Concrete Pipe & Prods., Inc. v. Constr. Laborers Pension Trust,\n\n\n 7\n\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\n508 U.S. 602, 622 (1993».\n\n C. Standard ofDetention\n\n As Judge Reggie B. Walton accurately observed in a thoughtful opinion considering the\n\nGovernment's detention authority, ''the state of the law regarding the scope of the President's\n\nauthority to detain petitioners remains unsettled,\" Gherebi v. Obama, 609 F. Supp. 2d 43, 45\n\n(D.D.C. 2009), even though habeas petitions by individuals such as Al Odah have been pending\n\nfor over seven years. Guidance in this area is limited because the Supreme Court acknowledged\n\nbut did not clarify the uncertain \"permissible bounds\" of the Government's detention authority,\n\nsee Hamdi, 542 U.S. at 552 n.l, and the D.C. Circuit has not had occasion to address the issue.\n\nFortunately, several judges in this District have considered the scope of the Government's\n\ndetention authority and have issued well-reasoned opinions on the subject. See, e.g., Gherebi,\n\n609 F. Supp. 2d at 43; Hamlily v. Obama, 616 F. Supp. 2d 63 (D.D.C. 2009); Mattan v. Ohama,\n\n618 F. Supp. 2d 24 (D.D.C. 2009).\n\n Taking advantage of these prior decisions, the Court shall adopt the reasoning set forth in\n\nJudge John D. Bates's decision in Hamlily v. Ohama, and shall partially adopt the Government's\n\nproposed definition of its detention authority.6 The Court agrees that the President has the\n\n\n 6The Government's proposed definition for its detention authority is found in the\nMemorandwn that it submitted in this case on March 13,2009. According to the Government,\n\n [t]he President has the authority to detain persons that the President determines\n planned, authorized, committed, or aided the terrorist attacks that occurred on\n September 11, 2001, and persons who harbored those responsible for those\n attacks. The President also has the authority to detain persons who were part of,\n or substantially supported, Taliban.or al-Qaida forces or associated forces that are\n engaged in hostilities against the United States or its coalition partners, including\n any person who has committed a belligerent act, or has directly supported\n hostilities, in aid of such enemy armed forces.\n\n 8\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nauthority to detain individuals who are \"part of' the Taliban, al Qaeda, or associated enemy\n\nforces, but rejects the Government's definition insofar as it asserts the authority to detain\n\nindividuals who only \"substantially supported\" enemy forces or who have \"directly supported\n\nhostilities\" in aid of enemy forces. While evidence of such support is undoubtedly probative of\n\nwhether an individual is part of an enemy force, it may not by itself provide the grounds for\n\ndetention. Accordingly, the Court shall consider whether Al Odah is lawfully detained in the\n\ncontext of the folJowing standard:\n\n The President has the authority to detain persons that the President determines\n planned, authorized, committed, or aided the terrorist attacks that occurred on\n September 11, 2001, and persons who harbored those responsible for those\n attacks. The President also has the authority to detain persons who were part of\n Taliban or al-Qaida forces or associated forces that are engaged in hostilities\n against the United States or its coalition partners, including any person who has\n committed a belligerent act in aid of such enemy armed forces. 7\n\n In the context of this definition, the \"key inquiry\" for determining whether an individual\n\nhas become \"part of' one or more of these organizations is \"whether the individual functions or\n\nparticipates within or under the command structure of the organization - i.e., whether he receives\n\nand executes orders or directions.\" Ham/i/y, 616 F. Supp. 2d at 75.\n\n D. Burden ofPersuasion\n\n Pursuant to the Amended Case Management Order that the Court adopted in this case on\n\nDecember 22,2008, the Government bears the burden of proving by a preponderance of the\n\n\n\n 7 Al Odah submitted a response to the Government's proposed detention standard seeking\nto have the Court limit the types of organizations that may be considered an \"associated force\" or\n\"enemy armed force.\" See Pet'r's Resp. at 2-11. The Court declines to engage in a hypothetical\ninquiry concerning the types of organizations that mayor may not fall within this definition, but\nshall instead examine the facts of each case and shall further define these terms in context if\nappropriate and necessary.\n\n 9\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nevidence that Al Odah is lawfully detained. See In re Guantanamo Bay Detainee Litig., Misc.\n\nNo. 08-442, CMO § II.A (Nov. 6, 2008) (\"[t]he government bears the burden of proving by a\n\npreponderance of the evidence that the petitioner's detention is lawful\") (citing Boumediene, 128\n\nS. Ct. at 2271) (\"[T]he extent of the showing required of the government in these cases is a\n\nmatter to be detennined.\"). Accordingly, Al Odah need not prove his innocence nor testify on his\n\nown behalf. The Court has drawn no inference based on Al Odah's decision not to testify or\n\nsubmit a declaration in this case. Accord A wad v. Obama, Civ. A. No. 05-2379, Classified Slip\n\nOp. at 7 (D.D.C. Aug. 12,2009). The Government must come forward with evidence\n\ndemonstrating by a preponderance of the evidence that he is lawfully detained, and if the\n\nGovernment fails to meet this burden, the Court must grant Al Odah's petition for habeas corpus.\n\n II. DISCUSSION\n\n The Government's theory of detention is that Al Odah more likely than not became part\n\nof Taliban and al Qaeda forces in Afghanistan. The Court shall evaluate the record evidence\n\nassociated with this theory in three steps. First, the Court shaH discuss the circumstances .\n\nsurrounding Al Odah's trip from Kuwait to Afghanistan in August 2001. Second, the Court shall\n\ndiscuss Al Odah's subsequent travels and activities within Afghanistan until the time of his\n\ncapture with an AK-47 while near the Tora Bora mountains in December 2001. Although the\n\nCourt finds that the evidence in the first two categories is by itself sufficient for the Government\n\nto meet its burden in this case, the Court shall also discuss a third category of evidence\n\nestablishing that the Taliban-run camp that AI Odah admits to visiting in Kandahar, Afghanistan,\n\nis more likely than not Al Farouq, al Qaeda's primary Afghan basic training facility.\n\n\n\n\n 10\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\n A. Al Odah 's Travel to Afghanistan\n\n The evidence related to events prior to 2001 is undisputed. Al Odah was born in Kuwait\n\nCity, Kuwait, in 1977. Ex. 40 (AI Odah Civil ID Card). He received a degree in Islamic studies\n\nfrom Kuwait University in 1998. Ex. 13 at 1 (6/9/03 Interrogation of Al Odah); Ex. 101 ~~ 1-3\n\n(2/22/09 Dec!. 0 Following graduation, Al Odah worked for\"\n\n\n\n AIOdahthe~\n\n\n\n Id at 2. Prior to 2001, Al Odah frequently traveled to neighboring Saudi\n\nArabia to visit holy places or vacation with his family,\n\n_ and traveled to Pakistan in April and May 2000 to teach along the border of\n\nAfghanistan and Pakistan. Ex. 9 at 1; Ex. 10 at 1 (Al Odah Travel Activity); Ex. 99 ~~ 3, 6\n\n(2/22/09 Dec!. ofKhalid al Odah).\n\n In August 2001, Al Odah decided to travel to Afghanistan. According to Al Odah, he\n\ndecided to make this trip because his grandmother had given him money to do so, and because he\n\nbelieved the Afghan people \"would be very receptive to his teachings.\" Ex. 13 at 1 (6/9/03\n\nInterrogation of Al Odah). He took three weeks ofleave from work, Ex. 14 at 1 (6/21/03\n\nInterrogation of Al Odah), and he planned to teach poor or needy people for two weeks. Ex. 16\n\nat 7 (Al Odah's Unclassified CSRT Testimony) (\"During my official summer break, I left for\n\nAfghanistan for two weeks\"). 8\n\n\n 8The Court located one instance in the record where\n Ex. 9 at 3. This statement conflicts with his other\nstatements, including his sworn testimony at an administrative review board proceeding, about\n\n 11\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\n Al Odah began his journey to Afghanistan on\n\n Ex. 9 at 3; Ex. 106, Attach. B at 1 (AI Odah Travel Arrival and\n\nDeparture Information). Al Odah's trip to Dubai raises immediate questions about the reasons\n\nfor his travel to Afghanistan.\n\n\n\n\n Id. When asked how long he remained in Dubai,\n\nAI Odah initially said that he remained there for one week, Ex. 33 (Dec. 2001 Interrogation of Al\n\nOdah) Ex. 9 at 3. These\n\nstatements are demonstrably false. Al Odah's undisputed travel records submitted into evidence\n\nestablish that Al Odah arrived in Dubai on August 13,2001, bought a one-way ticket to Karachi,\n\nPakistan, and left on a flight to Karachi on August 14,2001. Ex. 106, Attach. B at 1 (leaving\n\nKuwait on August 13, 200 I), Ex. 9 at 3 Ex. 10 at 1\n\n(arriving in Karachi on August 14, 2001). Accordingly, Al Odah only stayed in Dubai overnight\n\ndespite his statements that he remained there for at l e a s t _ and as much as a weeki\n 9\n\n\n\n During the Merits Hearing, Al Odah's counsel did not directly address Al Odah's\n\nstatements about Dubai, but emphasized that a stop in Dubai could be understood as one part of a\n\n\nintending to teach for two weeks and taking leave from work for three weeks. During the Merits\nHearing, Al Odah's counsel did not dispute that Al Odah intended to travel to Afghanistan for\nonly two or three weeks.\n\n 9 Because Al Odah's trip to Dubai would only have been the second foreign trip he would\nhave taken by himself, it is unlikely that Al Odah would have simply forgotten how long he\nremained there.\n\n 12\n\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\ndirect route to Afghanistan from Kuwait. 8/14/01 Merits Hearing Tr. at 4 (\"I [am] simply\n\nmaking the point that if you look at a map ... the route from Kuwait, Dubai, Karachi, Quetta is a\n\npretty direct route\"). Nowhere in the record, however, did Al Odah ever explain that he bought a\n\none-way ticket to Dubai because he believed it was the most direct route to Afghanistan, as his\n\ncounsel conceded. Id. (\"I'm not basing [this explanation] on something he said\"). Accordingly,\n\nAl Odah has not offered any credible explanation based on the evidence in the record that would\n\nexplain his trip to Dubai en route to Afghanistan.\n\n\n\n\n Id at 4. Al Odah visited a mosque in Spin Buldak\n\nwhere he asked to meet someone affiliated with the Taliban \"to assist him in traveling to places\n\nto teach in Mghanistan.\" Ex. 14 at 1.\n\n Ex. 9at4;Ex. 1 6 a t 2 . _\n\n\n\nEx. 9 at 4.\n\n\n\n_Id\n\n\n\n Ex. 9 at 4.\n\n AI Odah's decision to accompany.to Kandahar on September 10,2001, directly\n\ncontradicts AI Odah's statements that he intended to teach in Mghanistan for two weeks. By the\n\n\n 13\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\ntime he traveled to Kandahar, Al Odah would have already taught in Spin Buldak for two weeks,\n\nand when combined with his journey to get to Spin Buldak, he would have already exceeded the\n\nthree weeks of leave he requested from his employer. When considered in the context of Al\n\nOdah's inability to describe any details associated with his teaching activities in Spin Buldak, the\n\nCourt concludes that Al Odah's statements concerning the circumstances of his activities upon\n\narriving in Afghanistan lack credibility.\n\n Seeking to fill the void created by Al Odah's lack of credible statements, the Government\n\nsubmitted evidence that Al Odah traveled to Afghanistan seeking to join the Taliban in its fight\n\nagainst the Northern Alliance. In addition to relying on AI Odah's admissions that he\n\nimmediately requested to meet with a Taliban official once crossing the border, as well as Al\n\nOdah's subsequent transportation through the country at the direction of this Taliban official, the\n\nGovernment submitted evidence that the route traveled by Al Odah - Dubai, Karachi, Quetta,\n\nSpin Buldak, and Kandahar - was a route followed by some individuals who were seeking to\n\nenter Afghanistan for purposes of jihad.\n\n The Government submitted the interrogation report of Mukhtar al Warafi, a Yemini who\n\nadmitted that he traveled to Afghanistan in August 200 I to train and fight with the Taliban. Ex.\n\n61 at 1-2 (5/20/02 Interrogation of Mukhtar al Warafi). AI Warafi explained that he heard two\n\nFatwas read at the Jamal Al Din Mosque in August 2001 about traveling to Afghanistan and\n\nhelping the Taliban fight against the Northern Alliance. ld. at 2. One of the Fatwas identified\n\nthe route for individuals to follow to arrive at Quetta, Pakistan, where they would be taken to a\n\nlarge \"Taliban center.\" ld. In response to these Fatwas, al Warafi traveled to Afghanistan in\n\nAugust 2001, stopping first in Dubai, then Karachi, Quetta, Spin Buldak, and finally Kandahar­\n\n\n 14\n\n\n UNCLASSIFIEDIlFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nthe same route traveled by Al Odah in the same time period. Id. The Government submitted\n\nmultiple other examples of individuals who used this route to travel to Afghanistan for the\n\npurpose ofjihad. See, e.g., Ex. 68 at I\n\n Ex. 80 at\n\n .10 Although far from conclusive, the Government's evidence suggests\n\nthat an individual using this travel route to reach Kandahar may have done so because it was a\n\nroute used by some individuals seeking to enter Afghanistan for purposes ofjihad. 11\n\n The foregoing discussion supports three conclusions. First, Al Odah has admitted that he\n\nsought to contact a Taliban official upon reaching Afghanistan and that he subsequently moved\n\naround the country at the direction ofthis official. Second, Al Odah's statements concerning his\n\ntravel route to Afghanistan and his activities after arriving in Afghanistan are not credible. Third,\n\nthere is evidence to suggest that some individuals who traveled to Afghanistan using the same\n\nroute as Al Odah did so because they were entering Afghanistan to engage in jihad. The Court\n\nfinds that this record supports a reasonable inference that Al Odah may have also been traveling\n\nto Afghanistan to engage in jihad, and not to teach the poor and needy for two weeks. While this\n\n\n 10 One of the individuals identified by the Government as using the same path of travel as\nAl Odah was Mohammed al Adahi, an individual whose petition of habeas corpus was recently\ngranted. See Adahi v. Ohama, Civ. A. No. 05-280, Classified Slip. Op. (Aug. 17, 2009). In her\nOpinion, Judge Gladys Kessler identified the same travel pattern which was\nfacilitated in that case by an individual affiliated with al Qaeda, but she reached no specific\nconclusions about the travel pattern. Jd. at 16~17.\n\n II Al Odah's counsel argued at the Merits Hearing that this evidence constitutes \"guilt by\nassociation.\" The Court disagrees. Evidence of why other individuals traveled along the same\nroute as Al Odah is appropriately considered in the context of Al Odah's admissions and his\nfailure to offer a credible explanation for his travel route. The evidence is not aimed at\ndetennining guilt or innocence - rather, it is probative of why Al Odah may have used this route\nin the absence of any other credible explanation supported by record evidence.\n\n 15\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\ninference standing alone is insufficient to find that AI Odah did, in fact, become \"part of' the\n\nforces of the Taliban or al Qaeda, the Court finds that this evidence is probative and shall be\n\nconsidered in the context of the other record evidence.\n\n B. Al Odah 's Travel and Activities in Afghanistan\n\n\n\n\n.12 Ex. 13 at 1; Ex. 9 at 4. Al Odah admitted that this camp was supervised by the Taliban\n\nand that he took one day of training on an AK-47 rifle, Ex. 16 at 2, but denied that it was a\n\n\"training camp\" and in later statements characterized it as a camp for children:\n\n\n\n\nEx. 9 at 4.\n\n June 9,2003 interrogation: At this camp where [AI Odah] spent one day, he\n taught the Koran and also shot AK-47 rifles with the children in the camp ... [AI\n Odah] stated that is [sic] was common to shoot rifles during this type of training.\n [AlOdah] described the camp as being similar to a boy scout camp. The camp\n was run by a Sheik, whose name [AI Odah] could not remember.\n\nEx. 13 at 1.\n\n September 11, 2004 testimony before Administrative Review Board: [I]t was not\n a training camp. It was just a place for learning for people age twelve to fourteen\n years old. It was being looked after or supervised by the Taliban ... The only\n thing that was taught there was shooting or aiming at targets. That was the\n training that they had. In Afghanistan, shooting a Kalashnikov is just like\n throwing stones. It is very common. When I went through the training with the\n Kalashnikov, it was just out of my wanting to learn how to shoot a Kalashnikov.\n\n\n\n\n 16\n\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nEx. 16 at 2.\n\n Al Odah was at this camp or in the Kandahar area when the September 11,2001 attacks\n\noccurred. I11III advised Al Odah that Kandahar would likely be attacked by the United States.\nEx. 14 at I (\"[AI Odah] stated that _ spoke about the September 11, 2001 [] attacks on\n\nthe United States and how he feared the Americans might attack Kandahar. _ was\n\nuncomfortable about the possibility of this\").\n\n\n\n\n Al Odah's decision not to leave Afghanistan after September II, 2001, is itself a\n\nsignificant fact in this case. Al Odah's counsel during the Merits Hearing repeatedly emphasized\n\nthat Al Odah only wanted to leave Afghanistan at this point but that he did not know how to\n\nsafely exit the country. At first blush, this argwnent appears to fmd support in the record. For\n\nexample, Al Odah stated that \"it was very dangerous for an Arab to be in Afghanistan\" because\n\n\"Afghans that were against the Taliban were looking for Arabs to tum over to the Americans.\"\n\nEx. 13 at 1-2. See also Ex. 124 (Leaflet dropped in Afghanistan by American or coalition forces\n\nindicating that Afghans would receive money for capturing Taliban leaders). Al Odah also stated\n\nthat he \"realized he would have problems and sought to leave but could not. He heard that the\n\nAfghans had closed the border.\" Ex. 33.\n\n After considering Al Odah's explanation in the context of the entire record, however, the\n\n\n\n\n 17\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nCourt finds that it lacks credibility for at least two reasons. First, AI Odah was repeatedly\n\nquestioned about this explanation during an administrative review board proceeding, and his\n\nsworn testimony suggests that, far from wanting to leave the country at that point, Al Odah was\n\nseeking to avoid detection:\n\n Tribunal Member: ... You initially went only for two weeks at the end of August.\n The September 11'\" attacks took place at the end of those two weeks. There were\n no US attacks or coalition attacks right after September 11\"'. Why would you\n have not left at the normal time?\n\n Detainee: I had a visa for Pakistan. If I would have tried to go back, they would\n have questioned me as to why I was in Afghanistan. It would have been difficult\n for me. It would have been complicated. I was afraid of being accused of\n anything I might not have done.\n\n ...... ...\n\n Tribunal Member: So, at the two-week portion, right at the very end of when you\n were originally scheduled to go back, it was too dangerous to leave the country at\n that point?\n\n Detainee: If I would have gone back to my country at that time, it would have\n been great embarrassment, or people would have looked at me strangely. I was\n just coming from Afghanistan and the United States had just accused Afghanistan,\n so it would have looked bad. I was afraid of the Kuwaiti authorities who would\n have obviously questioned me.\n\nEx. 16 at 9, 12. Thus, the explanation offered by Al Odah's counsel that he wanted to leave\n\nAfghanistan after September 11,2001, is undermined by AI Odah's sworn statements in the\n\nrecord indicating that he wanted to stay and avoid detection.\n\n Second, Al Odah' s argument that he wanted to leave Afghanistan after September 11,\n\n2001, is undermined by the geography of Afghanistan.\n\n\n\nEx. 9 at 4. There is a road that links Kandahar to Quetta, over a distance of approximately 124\n\n\n 18\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\n miles. 8/11/09 Merits Hearing Tr. at 45. Al Odah would have just traveled on this road to reach\n\n Kandahar. Rather than returning to Pakistan using the road that he had just used, Al Odah\n\n instead followed_ instructions and headed away from the border of Pakistan toward\n\n Kabul, traveling approximately 350 miles north. Id. According to Al Odah, he still would have\n\n had his Kuwaiti passport and a visa for Pakistan at that point (albeit not a visa from Afghanistan).\n\n There is no logical reason why, if Al Odah wanted to leave Afghanistan, he would not have\n\n traveled back toward Quetta instead of moving deeper into country and toward the conflict that\n\n he allegedly wanted to avoid. Accordingly, the Court does not credit Al Odah's explanation that\n\n his travels and activities after September 11,2001, were motivated by his desire to leave\n\n Afghanistan. 14\n\n As described above,\n\n Ex. 9 at 4.\n\n\n\n\n Id. at 5. While Al Odah explained that he\n\nleft his possessions with\" to avoid being viewed as an Arab and that he planned to have\n\n~end the items to him once he reached safety in Pakistan, Al Odah subsequently explained\n\n\n\n 14 The Court again emphasizes that AI Odah should not have even been in Afghanistan on\nSeptember 11,2001, according to his statements about taking three weeks ofleave from work\nand wanting to teach for two weeks. The undisputed evidence in the record reflects that Al Odah\nleft Kuwait on August 13,2001. Relying on Al Odah's statements, he should have left\nAfghanistan on August 27, 2001 (two weeks after he left Kuwait), or at the latest September 3,\n2001 (three weeks after he left Kuwait).\n\n 19\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nthat he l o s t _ address and that he could not remember any part of it. Ex. 13 at 2.\n\n The Government introduced undisputed evidence that al Qaeda followed a standard\n\noperating procedure for those entering al Qaida and Taliban-associated guesthouses. Ex. 2 at 3\n\n(9/19/08 Decl. 0 _ ) . According to these procedures, individuals were required to\n\nsurrender their passports, identification, money, or other travel documents when entering a\n\nguesthouse or safe-house, particularly if they were planning to attend a training camp. !d.; Ex. 3\n\nat 3 (9/19/08 Decl. o f _ . These procedures allowed administrators to exert control over\n\ntrainees and prevent them from easily leaving. Ex. 2 at 3. As a consequence, \"[m]any detainees\n\nwere captured without passports or other identification.\" Ex. 3 at 3. Al Odah's admission that\n\nhe surrendered his passport to _ associate is consistent with these standard operating\n\nprocedures.\n\n\n\n\n Ex. 14at2;Ex.9at5._\n\n\n\n Id. Al Odah admitted that these individuals \"carried AK-47s and appeared to\n\nbe fighters.\" Ex. 14 at 2. Al Odah admitted that_offered him an AK-47 rifle, which Al\n\nOdah accepted. Ex. 13 at 2. The Government submitted evidence that\n\n\n\n . Ex. 165 (Intelligence Report); Ex. 166 at 4 (Interrogation of\n\nISN 570).\n\n\n\n\n\n 20\n\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\n Ex. 9 at 5.\n\n\n\n_ Id Al Odah stated that going through the Tora Bora mountains was \"the only way to\n\nget from Jalalabad to Pakistan.\" Ex. 16 at 3.\n\n\n\nEx. 9 at 5. American war planes bombed the group, but Al Odah avoided injury. Ex. 13 at 2.\n\n Ex. 9 at 5. After about ten days, AI\n\nOdah and those with whom he was traveling were captured by Pakistani border guards on or\n\naround December 18,2001. Ex. 29 at I. The Government presented credible evidence that one\n\nof the persons with whom Al Odah was captured had substantial ties to al Qaeda. Ex. 56 at 1\n\n(1/3/2002 Infonnation Report) (stating that AI Odah was captured with ISN.; Ex. 48 at I\n\n\n\n Al Odah still had his AK-47 rifle at the\n\ntime of his capture. IS Ex. 29 at I.\n\n Based on the foregoing narrative, Al Odah's admissions against interest include his travel\n\nto Logar at the direction of a Taliban official, the surrender of his passport and other possessions\n\nto an individual associated with., a member of the Taliban, his meeting with individuals\n\n\n Ex. 9 at 5\n in later reports he said\nthat he \"surrendered.\" See, e.g., Ex. 16 at 4 (\"I was not captured by Pakistani forces. I\nsurrendered.\"). Although this distinction is semantic, the Court notes that the other evidence in\nthe record corroborates Al Odah's initial characterization ofa capture. See, e.g., Ex. 29 at]\n(\"had Kalashnikov when captured ... surrendered weapon to Pakistani forces\"); Ex. 56 at ]\n(\"captured by Pakistani officials\"). The Court also notes that Al Odah had nwnerous\nopportunities to travel to the border of Pakistan and surrender prior to arming himself and\ntraveling through the field of battle.\n\n 2]\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEOIIFOR PUBLIC RELEASE.\n\n\n\n\nwho appeared to be armed fighters, his acceptance of an AK-47 rifle from one of the fighters, his\n\ntravel into the Tora Bora mountains with armed men toward the armed conflict, where he\n\nremained through the Battle of Tora Bora and where he was ultimately captured while carrying\n\nhis AK-47. The other evidence surrounding these statements include the recovery of Al Odah's\n\npassport at a safehouse in Karachi, Pakistan, where someone named_ was captured (the\n\nsame name as the person who gave Al Odah his AK-47), and the fact that Al Odah was captured\n\nalong with at least one other individual with ties to al Qaeda. In addition to the foregoing, the\n\nCourt emphasizes three other aspects of the evidence warranting consideration.\n\n First, Al Odah's statements fail to account for at least one month of his time in\n\nAfghanistan following the September 11,2001 attacks. In particular, Al Odah indicates that\n\n\n\n\n Ex. 9 at 5; Ex. 16 at 9.\n\n Ex. 9at5. •\n\n\n\n Id. It is undisputed, however, that Al Odah was captured on\n\nor around December 18,2001. Ex. 29 at I; Ex. 33. Accordingly, Al Odah's statements create an\n\nalmost two month gap (between October 21,2001 and December 18,2001). The necessary\n\ninference is that Al Odah remained in a particular location or locations for at least one month\n\nlonger than he revealed in his statements.\n\n Second, the Government introduced evidence that Al Odah's travel to Jalalabad and then\n\n\n\n 16 Al Odah stated in one interview that he stayed in Logar for twenty days and not one\nmonth, Ex. 14 at 2, but this discrepancy would only create a larger gap in his story.\n\n 22\n\n\n UNCLASSIFIEOIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nto the Tora Bora mountains matched the movements ofTaliban and al Qaeda fighters after the\n\nSeptember 11,2001 attacks. Specifically, Usama bin Laden began to marshal his forces in the\n\nvicinity of Jalalabad in mid-November 2001, Ex. 98 at 97 (United States Special Operation\n\nCommand History of Operation Enduring Freedom in Afghanistan), which is approximately the\n\nsame time frame that Al Odah fails to have any explanation to account for his location and\n\nactivities. Shortly thereafter, bin Laden decided to move his forces into the Tora Bora\n\nmountains, approximately 25 miles south of Jalalabad, \"to make a stand prior to the onset of\n\nwinter and to defeat American attempts both to capture senior leaders and destroy the\n\norganization.\" [d. After as many as 2,000 fighters entered Tora Bora in December 2001,\n\ncoalition forces infiltrated the area and American warplanes began a bombing campaign that\n\nretretft!!ftoits peak between December 11,2001 to December 17,2001 (although the battle is\n\n .......\n\ncorlsmeI'&l to have lasted between December 6, 2001 through December 18,2001). 8/11/09\n\nMerits Hearing Tr. at 51,53. Significantly, Al Odah admits that he\n\n\n\n Ex. 9 at 5; Ex. 13 at 2.\n\n Third, Al Odah's explanation that he could only reach Pakistan by traveling through the\n\nTora Bora mountains is not credible. The Government introduced evidence that the shortest and\n\nsimplest route from Jalalabad to Pakistan was through the famed Kyber pass, 45 miles from\n\nJalalabad. 8/11/09 Merits Hearing Tr. at 59. In contrast, the route through the Tora Bora\n\nmountains required a difficult climb into and then through bitterly cold mountains where al\n\nQaeda and Taliban fighters were making their stand against coalition forces. Id. During the\n\nMerits Hearing, the Court asked Al Odah's counsel why Al Odah would choose to travel into the\n\n\n 23\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nTora Bora mountains instead of the traveling through the Kyber pass:\n\n THE COURT: Is your position [] that it would have been more dangerous to have\n been an Arab on what looks like a much simpler route [the Kyber pass] than to go\n towards the area where you have Taliban and al-Qaeda where they're likely to be\n attacked by the northern alliance or somebody else?\n\nId. at 66. Ultimately, Al Odah's counsel supplied the following answer:\n\n COUNSEL: [I]t [was] rational to try to stay in places where the government still\n controls rather than going to places where the government no longer controls.\n And that's basically what the evidence shows ... it's simply not surprising or\n incriminating that Mr. Al Odah or any other refugee would try to remain in places\n where the Afghani government, the de facto Afghani government, the Taliban,\n controlled. The [Government's evidence] showed that there are routes through\n the Tora Bora mountains into Pakistan, [and] that the Taliban was still in control\n ofportions of the Tora Bora mountains.\n\nId. at 79-80. This exchange encapsulates one of the most significant problems with Al Odah's\n\narguments in this case - AI Odah unquestionably had choices. A review of the evidence\n\ndemonstrates that he consciously chose to move through Afghanistan at the direction of Taliban\n\nofficials and to remain in Taliban-controlled territories (despite being advised that the Taliban\n\nwas likely to be attacked), rather than choosing to leave the country knowing that fighting was\n\nlikely to occur.\n\n Even if Al Odah's failure to explain his trip to Afghanistan and his initial choice to meet\n\nwith a Taliban official after arriving in Afghanistan could be understood as something other than\n\na decision to join the Taliban's forces, the same cannot be said about Al Odah's choices after\n\nSeptember 11, 200 I, when he is advised by a Taliban official that attacks are likely to occur.\n\nFrom that point forward, Al Odah declined numerous opportunities to leave the country using the\n\nquickest, shortest routes available to him, such as returning to Quetta from Kandahar, traveling to\n\na border town from Logar, or reaching Pakistan through the Kyber pass from Jalalabad. AIOdah\n\n\n 24\n\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\ndeclined to travel these routes to safety despite having knowledge of the border areas from his\n\ntwo months of teaching along the border in 2000, as well as knowledge of the route he used to\n\nenter Afghanistan on his August 2001 trip. Even after he separated from. his initial\n\nTaliban contact, Al Odah continued to take directions from individuals who were associated with\n\nthe Taliban and continued to meet and travel with individuals who appeared to be fighters,\n\ndespite knowing that attacks on the Taliban were either imminent or underway. He made these\n\nchoices while, at the same time, also choosing to surrender his passport, accept a weapon, and\n\ntravel with a large group of armed men into the Tora Bora mountains.\n\n At bottom, this evidence reflects that Al Odah made a conscious choice to ally himself\n\nwith the Taliban instead of extricating himself from the country. His explanation that he chose to\n\navoid the fighting in Afghanistan but mistakenly ended up carrying a weapon in the Tora Bora\n\nmountains during the Battle of Tora Bora becomes increasingly incredible each time the evidence\n\nreveals that he moved ever closer to the fighting and repeatedly accepted directions from those\n\naffiliated with the Taliban. Based on all of the evidence in the record, the Court concludes that\n\nthe only reasonable inference is that Al Odah made a conscious decision to become a part of the\n\nTaliban's forces, and not that he became innocently ensnared in fighting after unsuccessfully\n\nattempting to leave the country.\n\n • ••\n In summary, Al Odah has admitted that he sought to meet with a Taliban official upon his\n\narrival in Afghanistan; that he was subsequently brought by a Taliban official to a Taliban­\n\noperated camp near Kandahar. Afghanistan; that he took one day of training with an AK-47 rifle\n\nat this camp; that the Taliban official sent him to stay with an associate in Logar, Afghanistan,\n\n\n 25\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nafter September 11, 2001; that he surrendered his passport and other possessions to this\n\nindividual; that he met with individuals who were anned and appeared to be fighters, that he\n\naccepted an AK-47 from these individuals; and that he traveled with his AK-47 into the Tora\n\nBora mountains, remained there during the Battle of Tora Bora, and was captured shortly\n\nthereafter by border guards while still carrying his AK-47. The Government has also presented\n\nevidence raising a credible inference that Al Odah traveled to Afghanistan for the purpose of\n\nfighting with the Taliban and not for the purpose of teaching for two weeks, as well as credible\n\nevidence that Al Odah's movements throughout the country were consistent with someone who\n\nwas taking orders from the Taliban and who decided to join the fight against coalition forces. In\n\nalmost every significant respect, AI Odah has failed to provide credible explanations for his\n\ntravel to Afghanistan and the choices he made as to his movements and activities within\n\nMghanistan. Taken as a whole, the Court finds that this record makes it more likely than not that\n\nA1 Odah became part ofthe Taliban's forces. Accordingly, the Court shall deny his petition for\n\nhabeas corpus. 17\n\n C. Al Farouq\n\n As described above, the evidence supporting the Court's decision that Al Odah more\n\nlikely than not joined the forces of the Taliban is supported by, among other evidence, his\n\n\n 17The Court notes that the Government presented certain other evidence during the\ncourse of the Merits Hearing, which the Court does not reach for purposes of this decision. This\nevidence includes eye witness identifications of A1 Odah by David Hicks and\nwhich are far more attenuated and re uire far more inferences than the evidence on which the\nCourt has relied in this case.\n\n\n\n\n 26\n\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nadmission that he attended a Taliban-run camp outside of Kandahar, where he took one day of\n\nAK-47 training. While Al Odah's admission that he attended an unidentified Taliban·run camp\n\nsupports the Government's evidence (and is part of the record evidence the Court has found\n\nsufficient for the Government to meet its burden in this case), evidence that the unidentified\n\nTaliban camp was, in fact, Al Farouq, al Qaeda's primary Afghan basic training facility, would\n\nfurther strengthen the Government's evidence. In this respect, the Government presented four\n\nareas of evidence that lead the Court to conclude that the camp Al Odah attended was more likely\n\nthan not Al Farouq.\n\n First, AI Farouq was located outside of Kandahar, Ex. 3 at 3 (9/16/08 Decl. o~,\n\n . Ex. 9at4. As\n\ndiscussed above, the Government submitted evidence establishing that some individuals traveled\n\nalong the same route to Kandahar as Al Odah (Dubai, Karachi, Quetta, Spin Buldak, Kandahar).\n\n\n\n_ Ex. 68 at 2; Ex. 80 at 2.\n\n\n\nreceived training on AK-47 rifles early in the Al Farouq training program. Ex. 74 at\n\n trained at Al Farouq for two weeks .. ._\n 1_\n Second, the undisputed evidence in the record is that individuals attending Al Farouq\n\n\n\n claims\n\nthat he only trained on the Kalashnikov\"); Ex. 22 at 9 (Aug. 2002 Interrogation of John Walker\n\nLindh) (\"The training at the AI-Farouq camp lasted approximately six to seven weeks ... and the\n\ntraining was divided into courses. Weapons training lasted three weeks, and included training on\n\nthe AK-47 Kalashnikov\"); Ex. 23 at I (2121/03 Interrogation of David Hicks) (\"[a]l1 students that\n\ntake the basic training class at Al Farouq get the same type of training, [which includes] ... [t]wo\n\n\n 27\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nweeks of weapons training - students shoot approximately 40 rounds.\"}; Ex. 67 at 3_\n (\"While at the AI-Farouq camp,_ was\n\ntrained on the Kalishnikov\").\n\n . Ex. 9 at 4.\n\n Third, the undisputed evidence in the record is that Al Farouq was evacuated shortly after\n\nSeptember 11,2001 attacks, and that many ofthe individuals attending the camp did not\n\ncomplete training but were marshaled north toward Kabul, Jalalabad, and the Tora Bora\n\nmountains. Ex. 22 at 2 (Aug. 2002 Interrogation of John Walker Lindh) (\"When the attacks\n\noccurred, the Arabs conducting the training gave them three options. The first option was to go\n\nto Kabul, the second was to go to an airport outside of Kabul[,] and the third was to go to the\n\nmountains.\"); Ex. 69 at ]\n\n\n\n\n As described above, AI Odah stated that he arrived at the camp or\n\nin the Kandahar area on September 10,2001, and left after only one day of training at the camp,\n\nmoving north in response to _ instructions - matching the movements of the trainees at Al\n\nFarouq during the same time period.\n\n Fourth, the record is replete with evidence that one of the trainers at Al Farouq was\n\nnamed. Ex. 67 at 3 _ was described as the person who headed the prayers at the\n\ncamp and also one of the trainers._ was the primary trainer who instructed [the detainee]\n\n\n 28\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEOIIFOR PUBLIC RELEASE.\n\n\n\n\non the KaIishnikov\"); Ex. 68 at 2-3\n\n. ' ) ; Ex. 69 at 2\n\n\n\n '); Ex. 70 at 2\n\n_ ; Ex. 73 at ~ unit's trainer was a man whose 'code name' was~).\n\nAs described abov ,\n\n Ex. 9 at 4.\n\n During the Merits Hearing, At Odah's counsel argued that the Taliban official who\n\ntransported Al Odah to the camp outside of Kandahar was not the same person as the trainer at\n\nAl Farouq for two reasons. First, Al Odah's counsel explained that Al Odah identified someone\n\nnamed whereas the evidence in the record reflected that other detainees identified\n\nthe Al Farouq trainer as This argument fails. As an initial matter_\n\n Ex. 69 at 2\n\n\n\n\n_ and others as_ Additionally. was identified by other detainees as\n\n even though Al Odah's counsel does not claim that these\n\n\n\n_as\ndetainees are identifying different people. In fact, one interrogation report even identifies\n\n a \"code name.\" Ex. 73 at 4. Finally, the Government submitted evidence that\n\nindividuals whose true names include neither an \"al\" nor an \"abu\" may nevertheless include such\n\nterms when constructing an alias or other name variants. See Ex. 6 at 5 (9/19/08 Decl. o~\n\n . Accordingly, the Court is not persuaded that Al Odah's Taliban guide\n\nwas n o t _ because AI Odah referred to him a~\n\n\n 29\n\n\n UNCLASSIFIEOIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\nbetween the_\n The second argument made by Al Odah's counsel was that the physical descriptions differ\n\n\n\nis partially correct.\n described by Al Odah and th~ described by other detainees. This\n\n\n\n\n_ Ex. 9 at 4. There are two other descriptions o~n the record. Ex. 73 at 4\n\n. .in his late twenties, was approximately 60 inches tall with a thin build. _ was\n\nfluent in Arabic but _ was unsure of his nationality\"); Ex. 70 at 2\n\n\n\n\nrespect to_ Al Odah argues that these descriptions differ with\n\n height (tall, short, and average), and hair color (black, brownish red). While\n\nthe Court agrees that these constitute differences between the descriptions, the Court emphasizes\n\ntha~ name, national origin, beard length, and age, are consistent. The Court finds that\n\nthese consistencies (particularly name and national origin) are much more significant than the\n\ndifferences identified by Al Odah's counsel involving height and hair color, which are relative\n\ndescriptions. Based on this record, the Court finds that it is more likely than not that Al Odah\n\nand the other detainees were describing the s a m e _\n\n Finally, Al Odah's counsel argued during the Merits Hearing that Al Odah could not have\n\nattended Al Farouq because the camp he described did not match the physical description of Al\n\nFarouq. As support, Al Odah relies on the statement ofan analyst in one of Al Odah's\n\ninterrogation reports, reflected as follows:\n\n\n\n\n 30\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\n\n\n\n Al Odah's counsel is correct that the assessment\n\nby this analyst, in the context of Al Odah' s statement, must be considered in the context of the\n\nevidence in the record.\n\n Upon consideration of the entire record, the Government has submitted evidence showing\n\nthat some individuals traveled to Afghanistan using the same route as Al Odah and that they were\n\ntraveling to Al Farouq; that AK-47 training was an early part of the Al Farouq training program;\n\nthat Al Farouq was evacuated shortly after September 11,2001, when trainees were sent north\n\ntoward Kabul, Jalalabad, or the Tora Bora mountains; and that the individual who transported Al\n\nOdah from the Afghanistan-Pakistan border to a camp outside of Kandahar was likely a trainer at\n\nAl Farouq. Through Al Odah's admissions, the Government has also submitted evidence that Al\n\nOdah was brought to a camp outside of Kandahar (where Al Farouq was located) on or around\n\nSeptember 10,2001; that he received one day oftraining on an AK-47; that he was shortly\n\nthereafter evacuated and directed to travel north to Logar (a province just south of Kabul); and\n\nthat he eventually traveled to Jalalabad and the Tora Bora mountains. In contrast, AI Odah has\n\nidentified evidence in the record suggesting that the description Al Odah provided to an\n\ninterrogator of the camp that he visited did not match the physical description of AI Farouq.\n\nAfter weighing all of the evidence in the record, the Court finds that the camp to which Al Odah\n\n\n\nin the context ofAl Odah's travel north at the direction 0_,\nwas transported b y . was more likely than not Al Farouq. When this evidence is considered\n\n and Al Odah's subsequent\n\n\n 31\n\n\n UNCLASSIFIEDIIFOR PUBLIC RELEASE.\n\f UNCLASSIFIEDffFOR PUBLIC RELEASE.\n\n\n\n\nactivities described above, the Court finds that it is more likely than not that Al Odah became\n\npart ofthe forces of the Taliban and al Qaeda.\n\n In summary, the Court fmds that the Government has met its burden based on the\n\nevidence in the record without specifically identifying that the Taliban-run camp attended by Al\n\nOdah was, in fact, Al Farouq. Nevertheless, the Court also finds that it is more likely than not\n\nthat the camp was Al Farouq, which also makes it more likely than not, when combined with the\n\nother evidence in the record, that Al Odab became a part of the forces of the Taliban and al\n\nQaeda.\n\n III. CONCLUSION\n\n Because the Government has met its burden by a preponderance of the evidence in this\n\ncase, the Court shall DENY Al Odah's petition for habeas corpus.\n\nDate: August 24, 2009\n\n lsi\n COLLEEN KOLLAR~KOTELLY\n United States District Judge\n\n\n\n\n 32\n\n\n UNCLASSIFIEDffFOR PUBLIC RELEASE.\n\f", "ocr": false, "opinion_id": 2667356 } ]

[ "520 F.2d 1342" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/520/520.F2d.1342.74-1193.74-1192.html", "author_id": null, "opinion_text": "520 F.2d 1342\n 22 Wage & Hour Cas. (BN 383\n PUERTO RICO INTERNATIONAL AIRLINES, INC., Plaintiff-Appellant,v.Luis F. SILVA RECIO, Secretary of Labor of the Commonwealthof Puerto Rico, Defendant-Appellee,v.AIR LINE PILOTS ASSOCIATION, INTERNATIONAL, Applicant forIntervention, Appellant.\n Nos. 74-1192, 74-1193.\n United States Court of Appeals,First Circuit.\n June 26, 1975.\n \n Daniel B. Bickford, Boston, Mass., with whom Gaston, Snow, Ely & Bartlett, Richard J. McCarthy, Boston, Mass., Donald M. Hall and McConnell, Valdes, Kelley, Sifre, Griggs & Ruiz-Suria, San Juan, P. R., were on briefs, for Puerto Rico International Airlines, Inc.\n Roberto Armstrong, Jr., Asst. Sol. Gen., with whom Miriam Naveira De Rodon, Sol. Gen., was on brief, for Luis F. Silva Recio.\n Gary Green, Washington, D. C., with whom Daniel M. Katz, Washington, D. C., was on brief, for Air Line Pilots Ass'n, International.\n Before COFFIN, Chief Judge, ALDRICH and CAMPBELL, Circuit Judges.\n COFFIN, Chief Judge.\n \n \n 1\n Puerto Rico International Airlines, Inc. (PRINAIR) in its complaint below sought declaratory and injunctive relief against the Secretary of Labor of the Commonwealth of Puerto Rico to prevent the execution of local wage and hour laws1 asserting that the application of such laws to PRINAIR is inconsistent with federal laws regulating the aviation industry.\n \n \n 2\n Prior to the filing of the suit below was a suit brought in a Commonwealth superior court by some PRINAIR pilots in 1970 grounded on the challenged statutes and seeking a back pay award against PRINAIR. In that proceeding, PRINAIR raised in defense the claim that the statutes were in conflict with federal law and therefore invalid. The Superior Court resolved the claim in favor of the pilots and rejected the asserted claim of federal preemption. The Supreme Court of Puerto Rico refused to entertain an interlocutory appeal on this issue. PRINAIR then, in 1973, proceeded to file this claim in federal district court. The issue of damages is pending in the Commonwealth courts, proceedings having been voluntarily suspended pending resolution of this case.\n \n \n 3\n The Secretary argued that the federal courts should abstain from ruling on the matter until the Puerto Rican Supreme Court resolved the issue. The Air Line Pilots Association, which sought unsuccessfully to intervene2 argued that an injunction would be violative of 28 U.S.C. § 2283.3 The district court dismissed the complaint below, relying principally on Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), and Samuels v. Mackell, 401 U.S. 66, 91 S.Ct. 764, 27 L.Ed.2d 688 (1971). The district court indicated that it was compelled to dismiss under the law.\n \n \n 4\n On appeal, PRINAIR drops the claim for injunctive relief. Its remaining claim is for a declaration that Puerto Rican laws 289 and 379 are, as applied to airlines, preempted by federal law. PRINAIR argues that the fact of pending state litigation should not act as a bar to federal resolution because (1) the parties are not identical in the state and federal proceedings; (2) the relief sought was not interference with the pending court decision but with the future operation of the law and future liability thereunder; (3) PRINAIR is entitled to a federal court hearing on the federal issue and to federal discovery; and (4) as a defendant in the state court, PRINAIR made no voluntary choice to accept that forum and has made the requisite effort to preserve the issue for federal decision under England v. Board of Medical Examiners, 375 U.S. 411, 84 S.Ct. 461, 11 L.Ed.2d 440 (1964).\n \n \n 5\n We proceed from the same assumption as did the district court, that principles of federalism must enter into the decision whether to go forward with federal proceedings in equity when state court resolution of the vital issues in the case, the rights and obligations under the challenged statutes as well as their constitutionality is in progress. The district court relied upon the doctrine of equitable restraint articulated in Younger v. Harris, supra, and Samuels v. Mackell, supra, requiring the federal court to refrain from interference when state criminal proceedings are pending.4 The state court proceeding in question here was, however, not criminal but civil in nature, brought in reliance upon a regulatory statute. Since the district court decision, the Supreme Court has expanded the doctrine of equitable restraint to include quasi-criminal civil proceedings, Huffman v. Pursue, --- U.S. ---, 95 S.Ct. 1200, 43 L.Ed.2d 482 (March 18, 1975), in which the state defendants, there as here, went to federal court after a state lower court ruling was rendered. But we are not persuaded that the state suit in question here, brought by private individuals, not state officials, falls within the bounds of this new doctrine. For to extend so far the doctrine would require reversal of Brillhart v. Excess Ins. Co., 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942) (Frankfurter, J.), most recently reaffirmed in Provident Tradesman's Bank & Trust v. Patterson, 390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968)5 which leaves declination of federal jurisdiction as a matter of discretion for the district court.\n \n \n 6\n The district court's exercise of restraint was, therefore, not mandated. But, while what we might call the \"strong\" doctrine of equitable restraint symbolized by Younger is not applicable to this case, normal equitable principles antedating Younger do require an assessment of the countervailing interests of the parties. Declaratory relief like other equitable remedies should be granted only as a matter of judicial discretion, exercised in the public interest. Public Affairs Press v. Rickover, 369 U.S. 111, 82 S.Ct. 580, 7 L.Ed.2d 604 (1962). The court must, then, undertake a balancing of the equities and in weighing the potential harm to the claimant here, the court must take into account claimant's assertion of a right to be informed of its future liability and to federal resolution of its federal preemption claim. Should the state court resolve its claim unfavorably, it will be forced to assume a substantial financial burden a burden, we would add, that would also be assumed if the final federal decision were adverse to the claimant.6\n \n \n 7\n Appellant also has a legitimate interest in a reasonably prompt decision of the federal question. Thus far delay has been encountered in both the state and federal proceedings. The denial of interlocutory review by the Supreme Court of Puerto Rico precluded a chance for resolution before damages were ascertained. The federal proceedings thus far have not brought the issue any closer. The likelihood of a reasonably timely resolution of the preemption issue must now be weighed prospectively. Should the district court conclude that allowing the case to progress in the Commonwealth courts would involve an unreasonably greater delay in resolving the federal issue than would be experienced in the federal court, this would be a significant factor in the equitable scales.\n \n \n 8\n The equitable counterbalance includes the possibility that the Puerto Rican Supreme Court will, in following the Commonwealth case to conclusion, find the local statute inapplicable to PRINAIR or itself resolve the federal law dispute in PRINAIR's favor. And against any claim PRINAIR has to immediate federal court resolution must be weighed the unseemliness of duplicative court proceedings and the unnecessary federal-state friction that will be generated. In other words, in weighing the public interest, comity must be considered as well as plaintiff's potential harm. The fact of a previously filed and still pending proceeding in another court ought to be weighty in the balance of equities. PPG Industries, Inc. v. Continental Oil Co., 478 F.2d 674 (5th Cir. 1973); Duggins v. Hunt, 323 F.2d 746 (10th Cir. 1963). \"The fact that another action, involving substantially the same issues, is pending in a state or federal court is a potent factor in discretionary refusal to assume jurisdiction.\" 6A. Moore's Federal Practice P 57.08(3) at 57-43 (3d ed. 1974). See also Note, Availability of Declaratory Judgment When Another Suit is Pending, 51 Yale L.J. 511 (1942). This court has had occasion to apply this doctrine in the past. Western Electric Co., Inc. v. Hammond, 135 F.2d 283, 287 (1st Cir. 1944).\n \n \n 9\n Finally, if PRINAIR has in fact properly preserved the federal issue under England, at 422 n. 13, 84 S.Ct. 461, see also H. M. Hart & H. Wechsler, at 1009, or if an appeal is taken and fully reviewed by the United States Supreme Court, PRINAIR will have, at a later juncture, a federal court ruling on its claim:\n \n \n 10\n \"Even assuming, arguendo, that litigants are entitled to a federal forum for the resolution of all federal issues, that entitlement is most appropriately asserted by a state litigant when he seeks to relitigate a federal issue adversely determined in completed state court proceedings.\" Huffman v. Pursue, --- U.S. ---, 95 S.Ct. 1200, 43 L.Ed.2d 482.\n \n \n 11\n While what we have said would support the result reached below as an exercise of discretion, we cannot shortcut the process. It seems impossible for us to read the district court's opinion as anything other than a response to what it thought was the overpowering mandate of Younger, which left, in such a case as this, no room for discretion. We therefore see no alternative to a remand for the weighing of the various factors which should determine the exercise of discretion. Since the district court is fully aware of all such factors, we would not foresee that its decision would unduly extend this phase of the proceedings.\n \n \n 12\n Vacated and remanded.\n \n \n \n 1\n The complaint challenged Laws of the Commonwealth of Puerto Rico No. 96 of 1956, as amended, 29 L.P.R.A. 245 et seq.; No. 289 of 1946, as amended, 29 L.P.R.A. 295 et seq.; and No. 379 of 1948, as amended, 29 L.P.R.A. 271 et seq. Since that time airlines have been exempted from the requirements of Law 96 so that the denial of relief concerning Law 96 is not contested on appeal\n \n \n 2\n In light of our disposition of this appeal we need not pass on the district court ruling refusing intervention\n \n \n 3\n 28 U.S.C. § 2283 prohibits a federal injunction or stay of state court proceedings but as a technical matter does not apply to declaratory relief. 6A Moore's Federal Practice P 57.06 (3d ed. 1974)\n \n \n 4\n The doctrine of equitable restraint derives from an accommodation of the principle of comity and the equity principle that relief will not be granted if there is an adequate remedy at law. H. M. Hart & H. Wechsler, The Federal Courts and the Federal System, 1009-1013 (2d ed. 1973). It is distinct from the doctrine of abstention which, under certain circumstances, counsels federal deference to state courts on state issues. Id. at 985. The appellant argues that abstention, an alternate basis for the district court order, is inappropriate in this case because the statutes are not ambiguous. There remains, of course, the possibility that they might be construed as not being applicable. See, e. g., England, supra. But since the district court did not pass on the issue, we do not deal with it\n \n \n 5\n Rule 57 Fed.R.Civ.Proc. also states that \"the existence of another adequate remedy does not preclude a judgment for declaratory relief in cases where it is appropriate.\"\n \n \n 6\n PRINAIR's claim of right to federal discovery is not imposing in this basically non-factual dispute. Cf. England, supra at 416\n \n \n ", "ocr": false, "opinion_id": 329454 } ]

[ "522 F.2d 207" ]

[ { "author_str": "Per Curiam", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/522/522.F2d.207.75-2193.html", "author_id": null, "opinion_text": "522 F.2d 207\n UNITED STATES of America, Plaintiff-Appellee,v.Larry BROWN and Dwite Gene Rover, Defendants-Appellants.\n No. 75-2193Summary Calendar.*\n United States Court of Appeals, Fifth Circuit.\n Oct. 31, 1975.\n \n James D. Guess, San Antonio, Tex. (Court appointed), for Brown.\n James W. Shoff, II, San Antonio, Tex. (Court appointed), for Rover.\n John Clark, U. S. Atty., Jeremiah Handy, Asst. U. S. Atty., San Antonio, Tex., for plaintiff-appellee.\n Appeals from the United States District Court for the Western District of Texas.\n Before BROWN, Chief Judge, and GODBOLD and GEE, Circuit Judges.\n PER CURIAM:\n \n \n 1\n We have considered appellants' assignments of error relating to the insufficiency of the evidence, the jury instructions on bias and on knowledge that the victims were federal officers, the scope of cross-examination, and the sentences as abuses of discretion and as cruel and unusual punishment. After careful review of the record and applicable law, we find these assignments of error to be without merit.\n \n \n 2\n Appellants also urge that the sentencing judge committed reversible error in failing to make an explicit finding at the time of sentencing, as required by Dorszynski v. U. S., 418 U.S. 424, 94 S.Ct. 3042, 41 L.Ed.2d 855 (1974), that they would not benefit from treatment under the Federal Youth Corrections Act, 18 U.S.C. § 5005 et seq. The record indicates the judge was aware of the Act at the time of sentencing and expressly declined to apply it. Moreover, he made explicit findings in ruling on motions to modify the sentences that neither appellant would benefit from treatment under the Act. These findings were made shortly after sentencing and on consideration of the entire record.\n \n \n 3\n We do not approve of this practice, and the better practice in all cases is to enter a finding of record before imposing sentence. However, under the circumstances of this case a remand would be overly technical and useless. See U. S. v. Dover, 489 F.2d 688 (5th Cir. 1974).\n \n \n 4\n Additionally, appellant Rover is a young adult offender, over the age of 22, and the sentencing judge is not required to make explicit findings of no benefit in his case. U. S. v. Gamboa-Cano, 510 F.2d 598 (5th Cir. 1975).\n \n \n 5\n Affirmed.\n \n \n 6\n ---------------\n \n \n \n * Summary Calendar case; Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 5 Cir., 1970, 431 F.2d 409.\n \n \n ", "ocr": false, "opinion_id": 329968 } ]

[ "678 P.2d 661", "208 Mont. 482" ]

[ { "author_str": "Morrison", "per_curiam": false, "type": "020lead", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nMR. JUSTICE MORRISON\ndelivered the Opinion of the Court.\nGeorge D. McMahon (claimant) appeals from orders of the Workers’ Compensation Court denying benefits under the Occupational Disease Act and the Workers’ Compensation Act. Claimant sought benefits under both Acts simultaneously in separate proceedings. The two cases have been consolidated for purposes of appeal. We remand for further proceedings.\nClaimant worked at the Anaconda Company’s copper refinery in Great Falls from 1956 through December 6, 1978 as an inspector. During this period, claimant was continuously exposed to moderate levels of sulphuric acid, organic arsenic, zinc, lead, copper, tellurium, asbestos, silver, dust and other compounds in the refinery environment.\n*484Claimant complains of throat and lung problems secondary to the exposure to the environment at work, and resulting aggravation of psychological problems. Claimant was diagnosed as having “chronic obstructive lung disease,” “laryngeal irritation,” “leukoplakia of the vocal cords,” “severe anxiety” and other psychological problems.\nExamining physicians agree that claimant’s physical ailments result more from claimant’s one to two pack a day cigarette habit than from the exposure to fumes, etc. at his work. However, the Occupational Disease Panel concluded that the disability attributable to the physical ailments was “about 15 percent related to his occupation.”\nThe level of disability due to Claimant’s physical ailments is sketchy. With regard to the chronic obstructive pulmonary disease, panel members noted that 90% of persons with the same degree of physical impairment could nonetheless “elk hunt” and “jog” and that if claimant had been young, “he might have even got stuck in the army.” Panel members also state that claimant could return to work if he would quit smoking. Dr. French testified that claimant’s laryngeal problems would not “disable you in the conventional sense of the word that you can’t work, unless you are perhaps a singer or something.”\nThere is no testimony that claimant’s job was particularly strenuous so that the degree of physical impairment he suffered would prevent him from performing his job. There is evidence that claimant is totally disabled because of his psychological problems.\nThe following issues are dispositive of this appeal:\n1. Whether claimant’s ailments are “injuries” within the meaning of the Workers’ Compensation Act.\n2. Whether claimant is totally disabled as a result of his physical and/or psychological ailments.\n3. Whether psychological disability stemming from work-related physical diseases is compensable under the Occupational Disease Act.\n4. Whether claimant’s psychological disorders were proxi*485mately caused or contributed to by his employment and resulting physical disorders.\n\nWorkers’ Compensation Act\n\nWith regard to the Workers’ Compensation Act, we find the following issue to be determinative: Are claimant’s physical and psychological ailments, resulting from years of exposure to noxious fumes and particulates in his work environment, “injuries” as defined in Section 39-71-119, MCA?\nThe Workers’ Compensation Act only provides for liability of insurers when an employee “received an injury arising out of and in the course of his employment.” Section 39-71-407, MCA (emphasis added). Injury is defined in Section 39-71-119, MCA as “a tangible happening of a traumatic nature from an unexpected cause . . . and such physical condition as a result therefrom excluding disease not traceable to injury . . . .”\nDespite the detailed definition, it remains a difficult task to satisfactorily describe and define injury to the exclusion of disease. See LaPlant, Opp, Workers’ Compensation and Occupational Disease, 43 Mont. L.Rev. 75, 92-100(1982). Professor Larson identifies two crucial points of distinction: “unexpectedness,” and “time-definiteness.” IB A. Larson, The Law of Workmen’s Compensation Section 41.31 at 7-357. We find the second point to be the critical factor in this case. The fact that claimant’s ailments were so very gradual in onset excludes them from the definition of injury.\nWe hesitate to attempt to locate the line between long-term, gradual trauma or disease, and short-term, accidental trauma, exposure or strain. In Hoehne v. Granite Lumber Co. (Mont. 1980), 615 P.2d 863, 37 St.Rep. 1307, claimant was held to have an “injury”, though the onset of his carpal tunnel syndrome took place over a period of two months. However, we feel it is safe to conclude that where laryngeal and pulmonary disorders and resulting psychological impairment are occasioned by exposure to a hostile en*486vironment for a period of years, the disorders fall within the meaning of the legislatively defined term “disease.”\nWe uphold the Compensation Court’s conclusion that claimant has suffered no compensable injury.\n\nOccupational Disease Act\n\nThe first issue under the Occupational Disease Act is whether claimant is totally disabled, temporarily or permanently, so as to entitle him to benefits under the Act.\nSection 39-72-703, MCA provides that no compensation is payable to an employee who is “partially disabled from an occupational disease.”\nAfter reviewing all of the evidence in this matter, the Division of Workers’ Compensation of the Department of Labor and Industry found that substantial, credible and overwhelming evidence establishes that claimant is not permanently, totally disabled as a result of his physical impairment. On appeal this conclusion was found by the special master to be supported by reliable probative and substantial evidence on the record. We agree with the special master and affirm the Compensation Court’s adoption of this portion of the master’s report. Claimant may be impaired and disabled but he is certainly not totally incapacitated from performing work in the normal labor market because of his physical ailments. Section 39-72-102(3), MCA.\nThe only remaining route by which claimant would be entitled to benefits is where he is totally disabled by reason of his psychological impairment, and such disorder was caused by claimant’s employment and/or the resulting physical diseases.\nA threshold question to such a route to disability benefits is whether psychological disability, stemming from work-related physical diseases, is compensable under the Occupation Disease Act. This Court has held that psychological disability stemming from a work-related injury is compensable under the Workers’ Compensation Act. Schumacher v. Empire Steel Manufacturing Co. (1977), 175 Mont. 411, 574 P.2d 987. Whether such disorders are com*487pensable under the Occupational Disease Act is a question of first impression. This question was addressed in a Colorado case where the claimant developed a disabling emotional reaction to a mild case of silicosis. The Colorado court focused on the definition of “disablement” as “physically incapacitated by reason of an occupational disease” and concluded that the claimant did not show that he was “ ‘physically’ incapacitated.” Romero v. Standard Metals Corp. (1971), 29 Colo.App. 455, 485 P.2d 927, 928.\nProfessor Larson criticized this sort of “nineteenth-century compartmentalizing of the ‘physical’ and the ‘neurotic,’ as if the nerves and brain were less a part of the body than the bones and tissues.” IB A. Larson, The Law of Workmen’s Compensation Section 42.22, at 7-615.\nAlthough Montana has the same definition of “disablement” (Section 39-72-102(3), MCA), we agree with Larson, and refuse to follow the Colorado court. An “occupational disease” is defined as “all diseases arising out of or contracted from and in the course of employment.” Section 39-72-102(11), MCA (Emphasis added.). We specifically hold that disablement under the Occupational Disease Act includes inability to work in the normal labor market by reason of a psychological disorder stemming from an occupational disease.\nClaimant argues that he was disabled because he feared cancer would result if he continued to work at the refinery. Whether this fear is rational or not is not determinative. The question is whether or not claimant is in fact totally disabled because of his psychological impairment. Under the Occupational Disease Act, this question is to be answered by a report from the medical panel. Sections 39-72-602, 609, 610, MCA. Without such a report, the Division could not and did not determine whether claimant is totally disabled due to his psychological disorders.\nInstead, the Division found that it was unnecessary to submit the psychological disorders to the medical panel. The Division reasoned that claimant’s psychological disabil*488ity was not proximately caused by his job. On appeal, the Workers’ Compensation Court agreed, concluding that the deposition of psychologist Jones refuted any claim of causation.\nWe disagree. We find that the Jones deposition does not in any way tend to disprove that claimant’s psychological disability was caused by his employment and resulting physical ailments.\nSection 39-72-706, MCA provides that if disability from any cause not itself compensable “is aggravated, prolonged, accelerated, or in any way contributed to by an occupational disease,” then the disability is compensable in the same proportion as the cause attributable to the occupational disease bears to all the causes of such disability.\nThere is evidence in this case that claimant’s physical ailments were occupational diseases and were 15% caused by his work environment. The medical panel so concluded, and that conclusion is presumptively correct. Thus, if claimant can show that his lung and laryngeal disorders aggravated or contributed to claimant’s deteriorating psychological condition, his disability, if total, is compensable at least in part.\nHowever, the Division made procedural rulings which kept claimant from entering into the record information relevant to this issue. The Anaconda Company’s physician, Dr. Engstrom, wrote a letter dated May 23, 1980 in which he stated:\n“Because the exacerbation of his pre-existing emotional problems was a result of the onset of his physical problems, I consider it appropriate to consider that 15% of his present emotional problems are related to his occupation.”\nSubsequent to hearing, claimant’s attorney requested permission to depose Dr. Engstrom because he had believed that the Anaconda Company would place the May 23, 1980 letter into evidence. Claimant indicated that the letter itself was acceptable in lieu of the deposition. The Division treated the letter as an offer of proof and ruled:\n*4891. No post-hearing deposition would be allowed because such deposition would be without value as claimant could not establish a compensable psychological disorder in any event.\n2. The letter is hearsay and cannot be received in evidence in an administrative hearing under the Occupational Disease Act. Hert v. Newberry (1978), 178 Mont. 355, 584 P.2d 656.\nClaimant’s offer of proof clearly demonstrates that Dr. Engstrom’s testimony could establish the vital causal connection between claimant’s employment and his psychological disability. There is no evidence of record which would rebut such a prima facie showing. The Division’s failure to grant claimant’s request for a post-hearing deposition of Dr. Engstrom was a failure to attempt to correctly resolve this issue of causation. We therefore hold that the denial of claimant’s deposition request was an abuse of discretion.\nThe case is remanded to the Division of Workers’ Compensation with directions to (1) direct that claimant be examined by the medical panel to determine whether or not claimant is totally disabled due to his physical and psychological disorders and, (2) consider the deposition or testimony of Dr. Engstrom with regard to the issue of whether or not claimant’s psychological condition was caused, aggravated, or “in any way contributed to” by his work environment and resulting physical disorders.\n", "ocr": false, "opinion_id": 9507905 }, { "author_str": "Gulbrandson", "per_curiam": false, "type": "040dissent", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nMR. JUSTICE GULBRANDSON,\ndissenting.\nI respectfully dissent.\nI would affirm the orders of the Workers’ Compensation Court.\n", "ocr": false, "opinion_id": 9507906 }, { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": 10, "download_url": "http://searchcourts.mt.gov/getDocument?vid={794EC8AB-36D4-4A28-92E6-F87CA7F90C8F}", "author_id": 4991, "opinion_text": "\n678 P.2d 661 (1984)\nGeorge D. McMAHON, Claimant and Appellant,\nv.\nThe ANACONDA COMPANY, Employer, and\nThe Anaconda Company, Defendant and Respondent.\nNo. 81-34.\nSupreme Court of Montana.\nDecided March 29, 1984.\nSubmitted February 28, 1984.\n*662 Charles M. Cruikshank, III (argued), Great Falls, for claimant and appellant.\nWaite, Schuster & Larson; Richard Larson (argued), Great Falls, for defendant and respondent.\nMORRISON, Justice.\nGeorge D. McMahon (claimant) appeals from orders of the Workers' Compensation Court denying benefits under the Occupational Disease Act and the Workers' Compensation Act. Claimant sought benefits under both Acts simultaneously in separate proceedings. The two cases have been consolidated for purposes of appeal. We remand for further proceedings.\nClaimant worked at the Anaconda Company's copper refinery in Great Falls from 1956 through December 6, 1978 as an inspector. During this period, claimant was continuously exposed to moderate levels of sulphuric acid, organic arsenic, zinc, lead, copper, tellurium, asbestos, silver, dust and other compounds in the refinery environment.\nClaimant complains of throat and lung problems secondary to the exposure to the environment at work, and resulting aggravation of psychological problems. Claimant was diagnosed as having \"chronic obstructive lung disease,\" \"laryngeal irritation,\" \"leukoplakia of the vocal cords,\" \"severe anxiety\" and other psychological problems.\nExamining physicians agree that claimant's physical ailments result more from claimant's one to two pack a day cigarette habit than from the exposure to fumes, etc. at his work. However, the Occupational Disease Panel concluded that the disability attributable to the physical ailments was \"about 15 percent related to his occupation.\"\nThe level of disability due to Claimant's physical ailments is sketchy. With regard to the chronic obstructive pulmonary disease, panel members noted that 90% of persons with the same degree of physical impairment could nonetheless \"elk hunt\" and \"jog\" and that if claimant had been young, \"he might have even got stuck in the army.\" Panel members also state that claimant could return to work if he would quit smoking. Dr. French testified that claimant's laryngeal problems would not \"disable you in the conventional sense of the word that you can't work, unless you are perhaps a singer or something.\"\nThere is no testimony that claimant's job was particularly strenuous so that the degree of physical impairment he suffered would prevent him from performing his job. There is evidence that claimant is totally disabled because of his psychological problems.\nThe following issues are dispositive of this appeal:\n1. Whether claimant's ailments are \"injuries\" within the meaning of the Workers' Compensation Act.\n2. Whether claimant is totally disabled as a result of his physical and/or psychological ailments.\n3. Whether psychological disability stemming from work-related physical diseases is compensable under the Occupational Disease Act.\n4. Whether claimant's psychological disorders were proximately caused or contributed to by his employment and resulting physical disorders.\n\nWorkers' Compensation Act\nWith regard to the Workers' Compensation Act, we find the following issue *663 to be determinative: Are claimant's physical and psychological ailments, resulting from years of exposure to noxious fumes and particulates in his work environment, \"injuries\" as defined in section 39-71-119, MCA?\nThe Workers' Compensation Act only provides for liability of insurers when an employee \"received an injury arising out of and in the course of his employment.\" Section 39-71-407, MCA (emphasis added). Injury is defined in section 39-71-119, MCA as \"a tangible happening of a traumatic nature from an unexpected cause ... and such physical condition as a result therefrom excluding disease not traceable to injury... .\"\nDespite the detailed definition, it remains a difficult task to satisfactorily describe and define injury to the exclusion of disease. See LaPlant, Opp, Workers' Compensation and Occupational Disease, 43 Mont.L.Rev. 75, 92-100 (1982). Professor Larson identifies two crucial points of distinction: \"unexpectedness,\" and \"time-definiteness.\" 1B A. Larson, The Law of Workmen's Compensation § 41.31 at 7-357. We find the second point to be the critical factor in this case. The fact that claimant's ailments were so very gradual in onset excludes them from the definition of injury.\nWe hesitate to attempt to locate the line between long-term, gradual trauma or disease, and short-term, accidental trauma, exposure or strain. In Hoehne v. Granite Lumber Co. (Mont. 1980), 615 P.2d 863, 37 St.Rep. 1307, claimant was held to have an \"injury\", though the onset of his carpal tunnel syndrome took place over a period of two months. However, we feel it is safe to conclude that where laryngeal and pulmonary disorders and resulting psychological impairment are occasioned by exposure to a hostile environment for a period of years, the disorders fall within the meaning of the legislatively defined term \"disease.\"\nWe uphold the Compensation Court's conclusion that claimant has suffered no compensable injury.\n\nOccupational Disease Act\nThe first issue under the Occupational Disease Act is whether claimant is totally disabled, temporarily or permanently, so as to entitle him to benefits under the Act.\nSection 39-72-703, MCA provides that no compensation is payable to an employee who is \"partially disabled from an occupational disease.\"\nAfter reviewing all of the evidence in this matter, the Division of Workers' Compensation of the Department of Labor and Industry found that substantial, credible and overwhelming evidence establishes that claimant is not permanently, totally disabled as a result of his physical impairment. On appeal this conclusion was found by the special master to be supported by reliable probative and substantial evidence on the record. We agree with the special master and affirm the Compensation Court's adoption of this portion of the master's report. Claimant may be impaired and disabled but he is certainly not totally incapacitated from performing work in the normal labor market because of his physical ailments. Section 39-72-102(3), MCA.\nThe only remaining route by which claimant would be entitled to benefits is where he is totally disabled by reason of his psychological impairment, and such disorder was caused by claimant's employment and/or the resulting physical diseases.\nA threshold question to such a route to disability benefits is whether psychological disability, stemming from work-related physical diseases, is compensable under the Occupational Disease Act. This Court has held that psychological disability stemming from a work-related injury is compensable under the Workers' Compensation Act. Schumacher v. Empire Steel Manufacturing Co. (1977), 175 Mont. 411, 574 P.2d 987. Whether such disorders are compensable under the Occupational Disease Act is a question of first impression. This question was addressed in a Colorado case where the claimant developed a disabling emotional reaction to a mild case of silicosis. The *664 Colorado court focused on the definition of \"disablement\" as \"physically incapacitated by reason of an occupational disease\" and concluded that the claimant did not show that he was \"`physically' incapacitated.\" Romero v. Standard Metals Corp. (1971), 29 Colo. App. 455, 485 P.2d 927, 928.\nProfessor Larson criticized this sort of \"nineteenth-century compartmentalizing of the `physical' and the `neurotic,' as if the nerves and brain were less a part of the body than the bones and tissues.\" 1B A. Larson, The Law of Workmen's Compensation § 42.22, at 7-615.\nAlthough Montana has the same definition of \"disablement\" (section 39-72-102(3), MCA), we agree with Larson, and refuse to follow the Colorado court. An \"occupational disease\" is defined as \"all diseases arising out of or contracted from and in the course of employment.\" Section 39-72-102(11), MCA (emphasis added). We specifically hold that disablement under the Occupational Disease Act includes inability to work in the normal labor market by reason of a psychological disorder stemming from an occupational disease.\nClaimant argues that he was disabled because he feared cancer would result if he continued to work at the refinery. Whether this fear is rational or not is not determinative. The question is whether or not claimant is in fact totally disabled because of his psychological impairment. Under the Occupational Disease Act, this question is to be answered by a report from the medical panel. Sections 39-72-602, 609, 610, MCA. Without such a report, the Division could not and did not determine whether claimant is totally disabled due to his psychological disorders.\nInstead, the Division found that it was unnecessary to submit the psychological disorders to the medical panel. The Division reasoned that claimant's psychological disability was not proximately caused by his job. On appeal, the Workers' Compensation Court agreed, concluding that the deposition of psychologist Jones refuted any claim of causation.\nWe disagree. We find that the Jones deposition does not in any way tend to disprove that claimant's psychological disability was caused by his employment and resulting physical ailments.\nSection 39-72-706, MCA provides that if disability from any cause not itself compensable \"is aggravated, prolonged, accelerated, or in any way contributed to by an occupational disease,\" then the disability is compensable in the same proportion as the cause attributable to the occupational disease bears to all the causes of such disability.\nThere is evidence in this case that claimant's physical ailments were occupational diseases and were 15% caused by his work environment. The medical panel so concluded, and that conclusion is presumptively correct. Thus, if claimant can show that his lung and laryngeal disorders aggravated or contributed to claimant's deteriorating psychological condition, his disability, if total, is compensable at least in part.\nHowever, the Division made procedural rulings which kept claimant from entering into the record information relevant to this issue. The Anaconda Company's physician, Dr. Engstrom, wrote a letter dated May 23, 1980 in which he stated:\n\"Because the exacerbation of his pre-existing emotional problems was a result of the onset of his physical problems, I consider it appropriate to consider that 15% of his present emotional problems are related to his occupation.\"\nSubsequent to hearing, claimant's attorney requested permission to depose Dr. Engstrom because he had believed that the Anaconda Company would place the May 23, 1980 letter into evidence. Claimant indicated that the letter itself was acceptable in lieu of the deposition. The Division treated the letter as an offer of proof and ruled:\n1. No post-hearing deposition would be allowed because such deposition would be without value as claimant could not establish a compensable psychological disorder in any event.\n*665 2. The letter is hearsay and cannot be received in evidence in an administrative hearing under the Occupational Disease Act. Hert v. Newberry (1978), 178 Mont. 355, 584 P.2d 656.\nClaimant's offer of proof clearly demonstrates that Dr. Engstrom's testimony could establish the vital causal connection between claimant's employment and his psychological disability. There is no evidence of record which would rebut such a prima facie showing. The Division's failure to grant claimant's request for a post-hearing deposition of Dr. Engstrom was a failure to attempt to correctly resolve this issue of causation. We therefore hold that the denial of claimant's deposition request was an abuse of discretion.\nThe case is remanded to the Division of Workers' Compensation with directions to (1) direct that claimant be examined by the medical panel to determine whether or not claimant is totally disabled due to his physical and psychological disorders and, (2) consider the deposition or testimony of Dr. Engstrom with regard to the issue of whether or not claimant's psychological condition was caused, aggravated, or \"in any way contributed to\" by his work environment and resulting physical disorders.\nHASWELL, C.J., and HARRISON, WEBER, SHEEHY and SHEA, JJ., concur.\nGULBRANDSON, Justice, dissenting.\nI respectfully dissent.\nI would affirm the orders of the Workers' Compensation Court.\n", "ocr": false, "opinion_id": 878574 } ]

[ "189 F.2d 816" ]

[ { "author_str": "Healy", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/189/189.F2d.816.12719.html", "author_id": null, "opinion_text": "189 F.2d 816\n UNITED TRUCK LINES, Inc.v.INTERSTATE COMMERCE COMMISSION.\n No. 12719.\n United States Court of Appeals, Ninth Circuit.\n May 31, 1951.\n \n Reilly & Cael and Edward J. Reilly, all of Spokane, Wash., for appellant.\n Harvey Erickson, U. S. Atty., Spokane, Wash., Leo H. Pou, Atty., Interstate Commerce Commission, Washington, D. C., Wellington McNichols, Atty., Interstate Commerce Commission, San Francisco, Cal., for appellee.\n Before HEALY and POPE, Circuit Judges and FEE, District Judge.\n HEALY, Circuit Judge.\n \n \n 1\n The Interstate Commerce Commission had judgment below enjoining appellant, United Truck Lines, from transporting freight by motor vehicle over highway U. S. 30 between Boise, Idaho, and Pasco, Benton County, Washington. The Commission's suit for injunctive relief was grounded on the claim that no certificate of pubic convenience and necessity had been issued the carrier for such operation, and with this view the court agreed.\n \n \n 2\n United operates extensively in the northwestern states under a series of certificates granted by the Commission. In 1944 it was authorized to transport property between Seattle and Spokane, Washington, by way of Ellensburg and Davenport, and between Portland, Oregon, and Spokane by way of Vancouver and Maryhill, Washington, through Toppenish and Pasco in that state. In 1948 a certificate was issued it to transport freight between Portland and Pasco over U. S. 30, this route being to the south and east of the Columbia River between those points. In the latter year, also, it was given authority to transport between Boise, Idaho, and Spokane over what is commonly known as the North-South Highway (U. S. 95) running northerly from Boise through Grangeville and Lewiston to Moscow, Idaho, from which latter point the route to Spokane turns westerly over the interstate line and runs thence northerly over highway U. S. 195 to Spokane.1\n \n \n 3\n In April of 1949 the Commission granted United the certificate on which the latter places its reliance here. This authorized the carrier to extend service \"to and from points in Grant, Lincoln, Franklin, Adams and Benton Counties, Wash., as intermediate and off-route points in connection with said carrier's otherwise authorized regular-route operations.\" [Emphasis supplied.] It is on the basis of the italicized phraseology that United asserts its claim of right to serve Pasco over U. S. 30 from Boise. For some time prior to the institution of the Commission's suit trucks of the carrier had been routed to Pasco by diverting them at Fruitland, Idaho, onto U. S. 30 from U. S. 95, United's authorized Boise-Spokane route.\n \n \n 4\n The geography of the situation, without more, renders the carrier's construction of the certificate unconvincing. A glance at the map shows that the named counties constitute a block of territory in south-central Washington, far removed at all points from U. S. 95; whereas United's authorized route between Seattle and Spokane passes through two of these counties (Grant and Lincoln) and its route from Portland to Spokane by way of Vancouver passes through the other three, namely, Benton, Franklin, and Adams. Its other route from Portland, over U. S. 30, south and east of the Columbia, terminates at Pasco. As regards United's authorized regular-route operations Pasco is not an off-route point. It is an on-route point. The Commission stresses these considerations and interprets its certificate as having reference only to the serving of off-route points in the five counties from United's Seattle-Spokane and Portland-Spokane operations.2\n \n \n 5\n The Commission appears to have no formal rule or regulation defining the term \"off-route\" point. However, in many decisions passing on applications for operating rights the Commission has restricted the term to points reasonably close to the carrier's regular route. That, in the main, appears to have been its practice. It observed, for example, in System Arizona Express Service, Inc., 4 M.C.C. 129, 131, \"an off-route point usually is one served by line-haul equipment making a short side trip and returning as soon as possible to its regular route and schedule.\" See also Dixie Freight Lines, Inc., Extension Application, 29 M.C.C. 406; Los Angeles-Seattle M. Express, Inc., 24 M.C.C. 141, 145. The general practice of the Commission thus supports its restricted interpretation of the present certificate.3 From Fruitland, Idaho, where United's claimed route diverges from U. S. 95 to follow U. S. 30 to Pasco, the distance to the latter place is over 200 miles, and the round trip is over 400. The Commission's construction of its certificates, unless clearly wrong or arbitrary, is to be accepted by the courts. Adirondack Transit Lines, Inc. v. United States, D.C., 59 F. Supp. 503, affirmed 324 U.S. 824, 65 S. Ct. 688, 89 L. Ed. 1393.\n \n \n 6\n There is proof in the record concerning the denial by the Commission in 1949 of an application of this carrier for leave to operate between Boise and Lewiston, via Pasco, using U. S. 30 as part of the route. It is unnecessary to go into that proceeding in detail. Enough to say that the circumstances developed cast considerable doubt on the good faith of United's interpretation of the certificate it relies on here.\n \n \n 7\n Affirmed.\n \n \n \n Notes:\n \n \n 1\n United has other certificates authorizing operations on routes through northern Idaho and western Montana, none of which is involved here\n \n \n 2\n United attempts to make capital of the fact that the certificate does not designate the highways over which the off-route points in the counties are to be served. The Commission's reply, which seems to us persuasive, is that it was unnecessary and would have been impracticable to designate the highways which the carrier might use in the area\n \n \n 3\n The Commission's interpretation is evidenced by formal certification of its secretary, embodied in the record before the court\n \n \n ", "ocr": false, "opinion_id": 227352 } ]

[ "532 F.2d 1218" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/532/532.F2d.1218.74-3292.74-3291.html", "author_id": null, "opinion_text": "532 F.2d 1218\n UNITED STATES of America, Plaintiff-Appellee,v.Donald ANDERSON and Jack Smith, Defendants-Appellants.\n Nos. 74-3291 and 74-3292.\n United States Court of Appeals,Ninth Circuit.\n Jan. 23, 1976.Rehearing and Rehearing En Banc Denied March 30, 1976.\n \n 1\n Steven M. Kipperman (argued), San Francisco, Cal., for defendants-appellants in 74-3291.\n \n \n 2\n Stephen Arian (argued), San Francisco, Cal., for defendants-appellants in 74-3292.\n \n \n 3\n Michael Starrett, Asst. U. S. Atty. (argued), San Francisco, Cal., for plaintiff-appellee.\n \n OPINION\n \n 4\n Before DUNIWAY and SNEED, Circuit Judges, and PLUMMER,* District Judge.\n \n PLUMMER, Senior District Judge:\n \n 5\n Appellants were tried before a jury in the United States District Court for the Northern District of California and were convicted on both counts of a two count indictment. Count One charged a conspiracy from on or about the 22nd day of January, 1974, and continuously thereafter up to and including February 6, 1974, in the Northern District of California and elsewhere, to transport stolen stock of Flying Diamond Corporation (FDC) having a value of $405,000.00, in interstate commerce in violation of 18 U.S.C. § 371.\n \n \n 6\n Count Two charged that the defendants did transport in interstate commerce from Salt Lake City, Utah, to San Francisco, California in the Northern District of California, stolen securities, that is, 90,000 shares of stock of FDC, of the value of approximately $405,000.00, knowing the same to have been stolen in violation of Title 18, United States Code, §§ 2314 and 2.\n \n \n 7\n On appeal defendants have asserted twenty-one errors. We have considered all of them and found them to be without merit. We discuss those questions relating to the statute involved, the sufficiency of the indictment, the sufficiency of the evidence, variance, amendment of the indictment, objections to instructions, conduct of trial, post-arrest statement, Jencks Act, impeachment of witnesses, law of conspiracy, and motion for new trial.\n \n \n 8\n The Statutes.\n \n \n 9\n Paragraph 1 of Section 2314 of Title 18, United States Code, insofar as pertinent to this case provides:\n \n \n 10\n \"Whoever transports in interstate commerce . . . any . . . securities . . . of the value of $5,000 or more, knowing the same to have been stolen . . . \"\n \n \n 11\n shall be guilty of an offense against the United States.\n \n \n 12\n The purpose of Paragraph 1 of Section 2314 is precisely stated therein. No cases have been cited by defendants holding or suggesting that this portion of the statute is \"unconstitutionally vague.\"\n \n \n 13\n The definition of \"securities\" as used in Chapter 113 of Title 18, United States Code, Section 2311 of said Title provides:\n \n \n 14\n \" 'Securities' include any . . . stock certificate . . .; or any forged, counterfeited, or spurious representation of any of the foregoing; \"\n \n \n 15\n Sections 2311 and 2314 of Title 18, United States Code, refer only to tangible items which are capable of being touched and are able to be perceived as materially existing, especially by the senses of sight or touch. Since \"stock\" is an intangible interest in the capital of a corporation, it is an interest incapable of being seen, touched, or transported in interstate commerce, and is an interest which does not materially exist and is not visible or corporeal. For this reason the word \"stock\" is not mentioned in either Section 2311 or 2314 of Title 18, United States Code.\n \n \n 16\n Count Two of the indictment also charges defendants with a violation of Section 2 of Title 18, United States Code, which provides:\n \n \n 17\n \"(a) Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.\n \n \n 18\n \"(b) Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal.\"Sufficiency of the Indictment.\n \n \n 19\n Defendants challenge the sufficiency of the indictment. By technical construction they assert a claim that the indictment returned by the Grand Jury fails to sufficiently inform them of the nature of the charges for which they were indicted. However, an indictment is not to be read in a technical manner, but is to be construed according to common sense with an appreciation of existing realities. United States v. Pleasant, 469 F.2d 1121 (8th Cir. 1972); McKinney v. United States, 172 F.2d 781 (9th Cir. 1949). It must be read to include facts which are necessarily implied by the allegations made therein. United States v. Barbato, 471 F.2d 981 (1st Cir. 1973); United States v. Silverman, 430 F.2d 106 (2nd Cir. 1970). Even if an essential averment in an indictment is faulty in form, if it may by fair construction be found within the text, it is sufficient. Chargois v. United States, 267 F.2d 410, 412 (9th Cir. 1959), citing Craig v. United States,81 F.2d 816, 822 (9th Cir. 1936).\n \n \n 20\n The purpose of an indictment is to furnish the defendant with a sufficient description of the charge against him to enable him to prepare his defense, to enable him to plead double jeopardy against a second prosecution and to inform the court of the facts alleged so that it can determine the sufficiency of the charge. Russell v. United States, 369 U.S. 749, 82 S. Ct. 1038, 8 L. Ed. 2d 240 (1962); Williamson v. United States, 310 F.2d 192 (9th Cir. 1962). Fairly read this indictment does so. We see no basis for finding either count infirm. Inasmuch as the sentences imposed on both counts as to both defendants were to run concurrently, we consider only the conviction as to Count Two. United States v. Westover, 511 F.2d 1154, 1155 (9th Cir. 1974). The conspiracy count is unquestionably adequate since it charges the offense substantially in the words of the statute. United States v. Murray, 492 F.2d 178, 192 (9th Cir. 1973).\n \n \n 21\n The defendants were charged in an indictment returned by the Grand Jury. Neither the Fifth Amendment nor any constitutional provision prescribes the kind of evidence upon which Grand Juries must act. In the absence of any evidence to the contrary, the presumption of regularity which attaches to Grand Jury proceedings still exists. See United States v. Hamling, 481 F.2d 307, 313 (9th Cir. 1973).\n \n \n 22\n The Sixth Amendment requires that in all criminal prosecutions the accused shall enjoy the right to be informed of the nature and cause of the accusations. Rule 7, Fed.R.Crim.P., provides in substance that the indictment shall be a plain, concise, and definite written statement of the essential facts constituting the offense charged. It need not contain any other matter or information not necessary to such a statement. The indictment shall state for each count the official or customary citation of the statute which the defendant is alleged therein to have violated.\n \n \n 23\n Count Two of the indictment charges in pertinent part:\n \n \n 24\n \"That . . . the defendants did transport in interstate commerce from Salt Lake City, Utah, to San Francisco, California, . . ., stolen securities . . ., of the value of approximately $405,000 knowing the same to have been stolen . . . \"\n \n \n 25\n The wording of the indictment closely follows the language set forth in the statute. This is sufficient. See United States v. Hamling, supra, p. 312. The decision of this court was affirmed in Hamling v. United States, 418 U.S. 87, 94 S. Ct. 2887, 41 L. Ed. 2d 590 (1974). Cases upholding the validity of an indictment under 18 U.S.C. § 2314 where the allegations followed the language of the statute are United States v. Farabee, 411 F.2d 1210 (5th Cir. 1969) and Downing v. United States, 348 F.2d 594 (5th Cir. 1955).\n \n \n 26\n In addition to framing the indictment in the language of the statute the government in this case included in Count Two the additional matter or information that the securities alleged in the indictment were 90,000 shares of stock of Flying Diamond Corporation (FDC). Additional matter or information was provided to defendants in response to their bill of particulars in that the defendants were physically shown and were permitted to inspect and examine the evidence, the stock certificates, upon which the government based the indictment and its case.\n \n \n 27\n Defendants have totally failed to support their assertions. To the contrary, the record establishes that the requirements of Russell, supra, and Williamson, supra, were fully met by the government.\n \n \n 28\n Sufficiency of the Evidence.\n \n \n 29\n The essential elements required to be proved beyond a reasonable doubt, by the government, in order to establish the offense charged in Count Two of the indictment are as follows:\n \n \n 30\n 1. Defendants transported securities in interstate commerce as alleged in Count Two.\n \n \n 31\n 2. The securities transported were of a value of $5,000 or more.\n \n \n 32\n 3. That defendants knew the securities had been stolen.\n \n \n 33\n At the close of the government's case in chief, defendants moved for judgments of acquittal. Counsel were heard in oral argument, the motions were taken under advisement, and thereafter denied. At the close of all the evidence appellants renewed their motions and they were again considered and denied.\n \n \n 34\n The test to be applied by the trial court in deciding a motion for judgment of acquittal in a criminal case and the test to be applied by the appellate court in reviewing that decision are, as a practical matter, identical. The evidence must be considered in the light most favorable to the verdict. United States v. Nelson, 419 F.2d 1237 (9th Cir. 1969). The court must be \"satisfied that the jurors reasonably could decide that they would not hesitate to act in their own serious affairs upon factual assumptions as probable as the conclusion\" that the defendant is guilty as charged. United States v. Leal, 509 F.2d 122, 125 (9th Cir. 1975); United States v. Felix,474 F.2d 610, 612 (9th Cir. 1973); United States v. Nelson, supra, 419 F.2d at 1245.\n \n \n 35\n 1. Defendants transported securities in interstate commerce as alleged in Count Two of the indictment.\n \n \n 36\n A written stipulation was read into the record establishing that at approximately noon on February 6, 1974, the defendants left Salt Lake City, Utah, together, via Western Airlines and arrived in San Francisco, California, at approximately 1:00 p. m. The evidence establishes beyond a reasonable doubt that defendants had with them on this trip 90,000 shares of FDC stock. Shares of stock being intangible interests are incapable of being transported in interstate commerce. However, these particular 90,000 shares of FDC stock were in fact represented and evidenced by tangible physical objects, i. e. stock certificates, which were capable of being transported in interstate commerce.\n \n \n 37\n These tangible, physical stock certificates were in fact physically handed by Smith to Anderson, were placed in a briefcase, and were transported in interstate commerce by air from Salt Lake City, Utah, to San Francisco, California. In view of the defendants' previous dealings in securities, their experience in transferring FDC stock certificates as stock nominees, their negotiations and dealings with defendant George, and the fact that they were to receive a $10,000 fee for supplying the stock certificates, their assertion that they were unaware that they were transporting securities is ridiculously unbelievable.\n \n \n 38\n Had defendants' counsel read Section 2311 of Title 18, United States Code, they would, as a matter of law, have known, or should have known, that the definition of \"securities\" included any stock certificate, or any counterfeited or spurious representation thereof.\n \n \n 39\n As their primary defense, counsel for defendants by their repeated misleading assertions endeavored to convince the jury that the FDC stock certificates were nothing more than \"pieces of paper.\"In Richland Trust Co. v. Federal Insurance Co., 494 F.2d 641, 642 (6th Cir. 1974), the court, quoting Union Banking Co. v. United States Fidelity & Guaranty Co., 4 Ohio App. 2d 397, 213 N.E.2d 191 (1965) quoted as follows therefrom:\n \n \n 40\n \" 'There appears to be general agreement that the word \"counterfeit\", as used means an imitation of a genuine document having a resemblance intended to deceive and be taken for the original. (emphasis as in original).\n \n \n 41\n \" 'We would again stress that a document or writing is counterfeit if it is an imitation, i. e., if an attempt has been made to simulate another document which is genuine.' \"\n \n \n 42\n In State Bank of Poplar Bluff v. Maryland Casualty Co., 289 F.2d 544, 547-548 (8th Cir. 1961) Circuit Judge (now Mr. Justice) Blackmun, speaking for the court said:\n \n \n 43\n \" . . . the noun 'counterfeit' means 'that which is made in imitation of something with a view to deceive', and that the verb 'counterfeit' means 'to imitate'. Webster's New International Dictionary (Second Edition, 1960). The legal definitions place like emphasis . . . so far as counterfeiting is concerned, upon copying or imitating. Black's Law Dictionary (Fourth Edition, 1951); . . . 14 Am.Jur., Counterfeiting, § 2; 20 C.J.S. Counterfeiting § 1.\"\n \n \n 44\n The word \"spurious\" is defined as meaning outwardly similar or corresponding to something, without having its genuine qualities.\n \n \n 45\n In United States v. Chodor, 479 F.2d 661 (1st Cir. 1973) the court held that instruments which resembled ten dollar Federal Reserve notes in all other significant respects could properly be found to be of sufficient quality to be considered counterfeit despite the absence of two serial numbers and the Treasury Seal on their face. The court at p. 664 stated:\n \n \n 46\n \"Finally, appellant's assertion that the trial court erred in failing to rule as a matter of law that the notes in question were not counterfeit because they were lacking 'significant particular(s),' United States v. Moran, 470 F.2d 742 (1st Cir. 1972), to wit, two serial numbers and the Treasury Seal on their face, is also unavailing. The proper test for determining what constitutes a counterfeit obligation is, as stated in United States v. Lustig, 159 F.2d 798, 802 (3d Cir. 1947), rev'd on other grounds, 338 U.S. 74, 69 S. Ct. 1372, 93 L. Ed. 1819 (1949),\n \n \n 47\n 'whether the fraudulent obligation bears such a likeness or resemblance to any of the genuine obligations or securities issued under the authority of the United States as is calculated to deceive an honest, sensible and unsuspecting person of ordinary observation and care dealing with a person supposed to be upright and honest.'\n \n \n 48\n Accord, United States v. Johnson, 434 F.2d 827, 829 (9th Cir. 1970); United States v. Smith, 318 F.2d 94, 95 (4th Cir. 1963). In light of the three minor deficiencies of the notes in question, the trial court was clearly correct in submitting to the jury the question of whether these notes were of sufficient quality to be considered counterfeit. Lastly, given our endorsement of this standard and the fact that the court charged the substance of the Lustig test, even assuming that appellant requested an instruction that if the notes lacked 'any significant quality' they could not be found to be counterfeit, we cannot agree that the omission of this statement from the charge constituted prejudicial error.\"\n \n \n 49\n See United States v. Anderson, 359 F. Supp. 61 (D.C.Ark.1973) where the court \"held that incomplete bond forms were 'securities,' within the meaning of statute relating to transportation of stolen securities, even though they did not contain, at time of the transportation, the validating signatures, since the bonds were adequate similitudes of genuine bonds, and where after completion they certainly would have been calculated to deceive a reasonably prudent and intelligent investor, and statute was sufficiently broad to include incompleted bonds forms where the forms were counterfeited with an intent to defraud or where they were transported in interstate commerce with such an intent.\"\n \n \n 50\n At page 65 in Anderson one of the court's instructions appears and reads as follows:\n \n \n 51\n \" . . . if you find from the evidence beyond a reasonable doubt that these documents or bonds were printed in Memphis without the authority of Arkansas, Louisiana Gas Co. or Morgan Guaranty Trust Co., and that they were printed for the purpose on the part of some person or persons to use them as instruments of fraud or deceit, and if you further find from the evidence beyond a reasonable doubt that the bonds had a sufficient appearance of genuineness on their faces so that they might be used to defraud a person of ordinary intelligence and prudence, then you may find that the bonds were counterfeit securities even though . . . they were printed in blank as far as identification of the payee or owner was concerned and even though they did not bear the countersignatures called for by the bonds.\" (Emphasis as in opinion).\n \n At page 66 the court stated:\n \n 52\n \"In this case when the defendant transported the bonds to Brinkley, the 'counterfeiting' of the documents was complete. Those documents were adequate similitudes of genuine Arkla bonds and after completion would certainly have been calculated to deceive a reasonably prudent and intelligent investor. Cf. United States v. Webb, supra (5 Cir., 1971, 443 F.2d 308); Koran v. United States, 5 Cir., 1969, 408 F.2d 1321; United States v. Lustig, 3 Cir., 1947, 159 F.2d 798; (resemblance sufficient); and United States v. Johnson, 9 Cir., 1970, 434 F.2d 827; United States v. Smith, 4 Cir., 1963, 318 F.2d 94; United States v. Gellman, D.C.Minn.1942, 44 F. Supp. 360; (resemblance insufficient). And the Court thinks that section 2311 is sufficiently broad to include incompleted bond forms when the forms are counterfeited with intent to defraud, and when they are transported in interstate commerce with such intent.\"\n \n \n 53\n Compare United States v. Galardi, 476 F.2d 1072 (9th Cir. 1973).\n \n \n 54\n 2. The securities transported were of a value of $5,000 or more.\n \n \n 55\n Although the indictment alleged the value of the stocks to be a value of approximately $405,000, the statute requires only that the securities have a value of $5,000 or more. P 1, 18 U.S.C. 2314; United States v. Weinberg, 478 F.2d 1351, 1354 (3d Cir. 1973). \"Value\" means the face, par, or market value, whichever is the greatest, and the aggregate value of all securities referred to in a single indictment constitutes the value thereof. 18 U.S.C. § 2311.\n \n \n 56\n If defendants had, in fact, any concern over the allegation that the value of the stock was approximately $405,000 instead of the value of $5,000 or more, as required by the statute, they could have remedied this situation by a motion to strike the excess amount of $400,000 as surplusage. Rule 7(d), Fed.R.Crim.P. Defendants, for tactical, strategical, or other reasons, elected not to do so. Consequently the government, under the court's instructions, were required to prove a value of approximately $405,000. The government succeeded in proving this value beyond a reasonable doubt to the satisfaction of the jury by establishing the over-the-counter price published in the Wall Street Journal. It is unquestioned that in proving the fact of market value, accredited price-current lists and market reports including those published in trade journals or newspapers which are accepted as trustworthy, are admissible in evidence. Virginia v. West Virginia, 238 U.S. 202, 212, 35 S. Ct. 795, 59 L. Ed. 1272 (1914); VI Wigmore on Evidence, 3rd ed., 1970; Cf. Fed.Rules Evid., Rule 803(17) and Note to P (17), Notes of Advisory Committee on Proposed Rules, p. 584.\n \n \n 57\n The assertions made by defense counsel that the stock certificates were valueless pieces of paper border on the frivolous in view of the evidence which established that defendants were to receive a \"finders fee\" of $10,000, double the statutory amount required by 18 U.S.C. § 2314, for providing the FDC stock certificates.\n \n \n 58\n 3. That defendants knew that securities had been stolen.\n \n \n 59\n Applying the appropriate standards of review we find that appellee's counter statement of facts appearing on pages 2 through 8, inclusive, of appellee's opening brief filed on February 14, 1975, is adequately supported by the record as a whole. We further find after considering the evidence in its entirety that there was sufficient relevant evidence, both direct and circumstantial, from which, if considered most favorably to the government, the jury could rationally and properly find or infer beyond a reasonable doubt that at a time or times between December, 1972, and August, 1973, Jay Miller and Michael Halfhill of American Stock Transfer Company, the stock transfer agent for FDC, without authority, overissued 200,000 shares of FDC stock. These shares of stock were evidenced by genuine stock certificate forms of FDC, reflected the names of fictitious shareholders and stated the number of shares represented by the stock certificate. The stock certificates were complete except for a signature in the blank space provided for the stock transfer agent. The evidence established that the insertion of the name Jay Miller or any other signature placed in this blank by anyone would have enabled the stock certificate to be transferred. Jay Miller with the connivance of John Badger and through the use of stock nominees, including defendants Anderson and Smith, accomplished the sale or transfer of $500,000 worth of the unauthorized overissued FDC stock certificates through the brokerage office of Transamerican Securities in Salt Lake City. Sometimes prior to June, 1973, defendant Smith obtained possession of 90,000 shares of this FDC stock from Jay Miller. In approximately June of 1973 two demands were made of Smith to return the stock certificates to the stock transfer agent of FDC. Smith refused to do so, claiming on one occasion that \"they were in a safe place,\" and on the second occasion that he had destroyed them. In approximately December of 1973 defendant Anderson was contacted by defendant George with reference to obtaining collateral that he might use to raise money which he desperately needed. Anderson knew, or at that time became aware, that Smith still had in his possession the stock certificates representing 90,000 shares of FDC stock. Anderson, after being contacted by George, contacted Smith. Smith just happened to have come into contact with a \"Reed Larson\" who just happened to have stock certificates representing 90,000 shares of FDC stock, which he supposedly made available to Smith on condition that the stock was returned within ninety days. For the services rendered by Anderson and Smith they were to be paid a \"finders fee\" of $10,000. No evidence was presented by defendants that \"Reed Larson\" was to receive any money for making the stock available. There is no evidence that at the time Smith received the stock from \"Reed Larson\" that any address, information, or arrangements were made whereby the stock could be returned at the end of the ninety day period. Nor was any evidence presented at the trial by defendants that they had made any effort or attempt to locate \"Reed Larson\" to have him available as a witness to corroborate their testimony or to exculpate them.\n \n \n 60\n It is evident from the verdict that the jury did not believe, and were not required to believe, the inherently improbable and unbelievable self-serving stories of the vitally interested defendants. Their testimony could not only be disbelieved, but from the totality of the circumstances, including the manner in which they testified, a contrary inference or conclusion could properly be drawn. The jury was not gullible enough to swallow the incredible story fabricated by defendants, and properly found that the stock certificates which Smith had \"stolen\" by refusing to return them, upon demand, to the stock transfer agent of FDC, were in fact the stock certificates described in the indictment and which are the subject matter of this case. See United States v. Cisneros, 448 F.2d 298, 305, 306 (9th Cir. 1971); United States v. Castro, 476 F.2d 750 (9th Cir. 1973); United States v. Ramos, 476 F.2d 624 (9th Cir. 1973), cert. denied 414 U.S. 836, 94 S. Ct. 182, 38 L. Ed. 2d 72; United States v. Peyton, 454 F.2d 213 (9th Cir. 1971); Dyer v. MacDougall, 201 F.2d 265, 268 (2nd Cir. 1952).\n \n \n 61\n The court correctly instructed the jury that \"stolen\" means acquired or possessed, as a result of some wrongful or dishonest act or taking whereby a person wilfully obtains or retains possession of property which belongs to another, without or beyond any permission given, and with the intent to deprive the owner of the benefit of ownership. The stock certificates obtained by Smith and retained in his possession after the return thereof had been requested were \"stolen\" within the meaning of Section 2314 of Title 18, United States Code. The term \"stolen\" has no common law derivative and is usually construed broadly. United States v. Turley, 352 U.S. 407, 77 S. Ct. 397, 1 L. Ed. 2d 430 (1957); United States v. Hollinshead, 495 F.2d 1154 (9th Cir. 1974); Smith v. United States, 233 F.2d 744 (9th Cir. 1956).\n \n \n 62\n After carefully reviewing all the evidence produced at trial, considered in the light most favorable to the government, together with the reasonable inferences which may be drawn therefrom, we are convinced that there was an abundance of credible evidence, both direct and circumstantial from which the jury could find the defendants guilty as charged.\n \n \n 63\n Variance.\n \n \n 64\n A variance between the charge of the indictment and the proof offered at trial may affect the substantial rights of a defendant in a criminal case if the effect is to prevent the defendant from presenting his defense properly, or if it takes him unfairly by surprise, or if it exposes him to double jeopardy. Where, as in this case, the alleged variance does not have any of those effects it should not serve as a grounds for reversal.\n \n \n 65\n Rule 52(a), Federal Rules of Criminal Procedure, provides in pertinent part:\n \n \n 66\n \"Any . . . variance which does not affect substantial rights shall be disregarded.\"\n \n \n 67\n See United States v. Andrino, 501 F.2d 1373 (9th Cir. 1974); Heisler v. United States, 394 F.2d 692 (9th Cir. 1968); United States v. Freeman, 514 F.2d 1184 (10th Cir. 1975).\n \n \n 68\n In this case there was no variance. Count Two of the indictment charged that defendants transported securities in interstate commerce from Salt Lake City, Utah, to San Francisco, California. The proof at trial established this fact beyond a reasonable doubt. The indictment charged the value of the securities transported were of a value of approximately $405,000. The proof at trial established beyond a reasonable doubt that the market value of the securities was approximately $405,000 and that the par or face value of the securities was $90,000. The statute requires only that the securities be of a value of $5,000 or more. The indictment charged that the defendants knew the securities had been stolen. The jury found this fact to be true beyond a reasonable doubt. The government at trial proved precisely each essential element of the charge alleged in the indictment.\n \n \n 69\n There is no evidence that defendants were prevented from presenting a proper defense, if in fact they had one. Defendants cannot seriously assert that they were unfairly taken by surprise when in fact they were shown and permitted to inspect the government's evidence in advance of trial. The defendants have made no showing that they may now be exposed to double jeopardy.\n \n \n 70\n Unfortunately for defendants, the integrity of the jury prevented defense counsel from misleading, deceiving or hoodwinking them into believing their ingenious assertions that the spurious or counterfeit securities stolen by defendants were mere pieces of paper. However, the government should not be faulted for the tactics or strategy of defense counsel.\n \n \n 71\n The record as a whole reflects that no substantial rights of the defendants were affected; that defendants were fairly notified of the substance of the offenses for which they were convicted; that the relationship between the offenses charged in the indictment and the offenses proved at trial clearly establish that defendants had adequate notice of the charges against them and that they are now fully protected against possible prosecution for the same offenses. In the final analysis, the effect of the trial court's rulings and instructions required the government to assume a greater burden of proof than the law required.\n \n \n 72\n Amendment of Indictment.\n \n \n 73\n When instructing the jury the trial court charged that an element of the offense is that the stock have a value in excess of $5,000. Since the indictment stated the value of the stock at approximately $405,000.00 the defendants contend that this amended the indictment. The amount in excess of $5,000 constituted mere surplusage and was properly rejected by the court. Ford v. United States, 273 U.S. 593, 602, 47 S. Ct. 531, 71 L. Ed. 793 (1927); United States v. Dawson, 516 F.2d 796, 799-804 (9th Cir. 1975); United States v. Harvey, 428 F.2d 782 (9th Cir. 1970); United States v. Edwards, 465 F.2d 943 (9th Cir. 1972); Raymond v. United States, 376 F.2d 581 (9th Cir. 1967). There was no amendment of the indictment.\n \n \n 74\n Objections to Instructions.\n \n \n 75\n The government's instruction 24, complained of now but not properly objected to at trial, essentially required the jury to find that the documents in question were \"securities,\" a necessary element of the offense. When given the opportunity to object to this instruction the following objections were made:\n \n \n 76\n \"Object to Government's Instruction No. 24 on the grounds that it is an improper statement of the essential elements of the offense in this case.\"\n \n \n 77\n \"I object to 24 as an improper statement of the elements of the case.\"\n \n \n 78\n Federal Rules of Criminal Procedure 30 provides in part:\n \n \n 79\n \"No party may assign as error any portion of the charge or omission therefrom unless he objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which he objects and the grounds of his objection.\"\n \n \n 80\n An objection that merely alleges that the instruction was not proper law or incorrectly stated the law is not sufficient. United States v. Jansen, 475 F.2d 312, 318 (7th Cir. 1973); Friedman v. United States, 381 F.2d 155, 160 (8th Cir. 1967); Northcraft v. United States, 271 F.2d 184, 189 (8th Cir. 1959); See United States v. Machado, 457 F.2d 1372, 1375 (9th Cir. 1972). The objections made here fall into this category and accordingly raise no issue for appeal. It would have been proper to leave to the jury the issue of whether these constituted counterfeit or spurious securities. United States v. Johnson, 434 F.2d 827, 829 (9th Cir. 1970); United States v. Chodor, 479 F.2d 661, 664 (1st Cir. 1973); United States v. Anderson, 359 F. Supp. 61, 65 (D.Ark.1973).\n \n \n 81\n It is significant that defendants made no requests for, nor expressed any objection to the court's failure to give, an instruction based on Johnson, Chodor or Anderson, defining the word \"counterfeit.\" As they were undoubtedly aware, the giving of a proper instruction would have prompted closer scrutiny and comparison of the stock certificates and would have had a devastating effect on defendants' fatuous argument that the securities involved were only \"pieces of paper.\"\n \n \n 82\n The issue of \"counterfeit\" was in fact indirectly presented to the jury in the form of the value of the securities. The court instructed the jury that their value was determined by the price at which a willing buyer and a willing seller would exchange them. If the stock certificates had not been realistic enough to constitute a \"counterfeit\" then they would have had no value in the jury's mind, resulting in an acquittal. Therefore, the issue of whether the stock certificates constituted \"securities\" was submitted to the jury and decided by them adversely to the defendants. On these facts, we find that no substantial right of the defendants was affected.\n \n \n 83\n Conduct at Trial.\n \n \n 84\n Included within this topic is the reception of evidence, cautionary instructions, and comments by the judge. This is an area where trial judges have broad discretion. United States v. Campbell, 466 F.2d 529, 531 (9th Cir. 1972); United States v. Amaral, 488 F.2d 1148, 1152 (9th Cir. 1973); United States v. Wright, 160 U.S.App.D.C. 57, 489 F.2d 1181, 1186 (1973). We find no abuse thereof. One matter deserves special mention. On handling these securities the defendants violated a civil injunction that was entered in another case because of the overissue of FDC stock. This information was properly admitted to rebut claims that defendants believed that they were participating in a legitimate stock transaction. Defendants objected on the ground that the government was trying to give the impression that the violation of the injunction somehow involved a criminal action. The judge stated that he supposed that the acts could be classed as contemptuous. Defense counsel agreed. We fail to see how the occurrence of this colloquy before the jury prejudiced defendants. The judge did not raise the issue, but merely disposed of it once raised by defense counsel. The jury was not told that the acts were in fact contemptuous. They were properly informed of the violation of the injunction, however, to negate their defense. We do not think that the judge's statement amounts to comment on the evidence, but if it does, it was not improper. United States v. Murdock, 290 U.S. 389, 54 S. Ct. 223, 78 L. Ed. 381 (1933); United States v. Williams, 473 F.2d 507 (5th Cir. 1973); Schoepflin v. United States, 391 F.2d 390, 397 (9th Cir. 1968). There was no error.\n \n \n 85\n Post-arrest Statements.\n \n \n 86\n After arrest both defendants made exculpatory statements. These were introduced at trial. Their admission was not improper. The contention that arraignment was delayed so that defendants could be questioned prior to the appointment of counsel is not supported by the record. There is no Bruton problem because both defendants testified. Anderson's hearsay objection to Smith's statement was waived because he opened the door by first using it and because he failed to object when the parts of it relating to him had been read verbatim for the jury's consideration. McCormick on Evidence, 2nd ed., 57; 1 Wigmore on Evidence, 3rd ed. § 18.\n \n \n 87\n Jencks Act.\n \n \n 88\n Outside of the presence of the jury one of the government's witnesses, Secret Service Agent Miskinis, revealed that he had made a Jencks Act statement. The government agreed to produce it, but rather than delay the trial, cross examination continued. No prejudice resulted from this procedure. After reading the statement the defendants had the right to call Miskinis. Defense counsel argues that the judge informed the jury of the existence of the statement and of the right to recall Miskinis to examine him on it. He argues that this was improper under such cases as Beaudine v. United States, 414 F.2d 397, 401 (5th Cir. 1969) and Gregory v. United States,125 U.S.App.D.C. 140, 369 F.2d 185, 191 (1966), in that the subsequent failure to recall the witness after reading the statement implied to the jury that the statement confirmed the witness's testimony whereas the statement may properly be used for impeachment only. We agree that it is usually a good procedure not to inform the jury of Jencks Act statements. We do not think that any other procedure was followed here. After completing cross examination defense counsel requested that Miskinis remain available. The judge told him to be available and said \"they will look over the records and you may be recalled.\" What \"the records\" were was never disclosed to the jury. It was the defendant that first raised the matter before the jury. The trial judge's tangential remark was not an abuse of discretion.Impeachment of Witnesses.\n \n \n 89\n A third defendant in this case, Phil Georgopoulos, entered a plea bargain and testified against Anderson and Smith. On direct examination the government elicited his prior criminal record and information concerning the plea bargain. Defendants contend that this improperly permitted the government to impeach its own witness. Such a rule would allow the defense to create a false impression, or the jurors to think that the government was trying to keep something from them. United States v. Rothman, 463 F.2d 488, 490 (2nd Cir. 1972). We reject this contention.\n \n \n 90\n Law of Conspiracy.\n \n \n 91\n Many of defendants' other objections relate to the law of conspiracy. Section 2314 does not require intent to use interstate commerce. United States v. Powers, 437 F.2d 1160, 1161 (9th Cir. 1971). Nor does such a conspiracy. United States v. Greer, 467 F.2d 1064, 1071 (7th Cir. 1972). Statements of a co-conspirator are not hearsay even if made prior to the entry of the conspiracy by the party against whom it is used. United States v. Ramirez, 482 F.2d 807, 816 (2nd Cir. 1973). There was no fatal variance as to the times of the existence of the conspiracy as the indictment charged in terms of \"on or about\" and defendants were in no way prejudiced. United States v. Donner, 497 F.2d 184, 192 (7th Cir. 1974). There was no evidence justifying the giving of the requested instruction on multiple conspiracies, and so it was properly refused. United States v. Noah, 475 F.2d 688, 697 (9th Cir. 1973); United States v. American Radiator & Stand. San. Corp., 433 F.2d 174, 199 (3rd Cir. 1970). The court charged that commission of overt acts may constitute the best proof of conspiracy. Other parts of the instructions made clear that the jury must find the existence of an agreement. We feel that the instruction merely informed the jury that proof of the crime usually turns on circumstantial evidence. Blumenthal v. United States, 158 F.2d 883, 889 (9th Cir. 1946), aff'd 332 U.S. 856, 68 S. Ct. 385, 92 L. Ed. 425 (1947); United States v. Jacobo-Gil, 474 F.2d 1213, 1215 (9th Cir. 1973). The court's instructions on conspiracy were proper.\n \n \n 92\n Motion for New Trial.\n \n \n 93\n Finally, defendants argue that they are entitled to a new trial because the government inadvertently failed to disclose one of Georgopoulos' three prior felony convictions at trial. That conviction was thirteen years earlier. Besides the two other convictions Georgopoulos pleaded guilty in this case, so his credibility was already sufficiently in question. Any error was harmless. The court's refusal to grant a new trial based on newly discovered impeaching evidence was within its discretion. United States v. Cozzetti,469 F.2d 684 (9th Cir. 1972).\n \n \n 94\n Defendants' other asserted errors do not merit discussion.\n \n \n 95\n After carefully reviewing all the evidence we are convinced that defendants received a fair and impartial trial. From the evidence, considered in the light most favorable to the government, together with the reasonable inferences which could be drawn therefrom, we find that there was an abundance of credible evidence, both direct and circumstantial, from which the jury could find the defendants guilty as charged. Glasser v. United States, 315 U.S. 60, 62 S. Ct. 457, 86 L. Ed. 680 (1942); United States v. Westover, 511 F.2d 1154 (9th Cir. 1975); United States v. Celestine, 510 F.2d 457 (9th Cir. 1975); United States v. Lincoln, 494 F.2d 833 (9th Cir. 1974); United States v. Hood, 493 F.2d 677 (9th Cir. 1974); United States v. Ogden, 484 F.2d 1274 (9th Cir. 1973), cert. denied 416 U.S. 987, 94 S. Ct. 2391, 40 L. Ed. 2d 764 (1974); United States v. Munns, 457 F.2d 271 (9th Cir. 1972), cert. denied 409 U.S. 871, 93 S. Ct. 199, 34 L. Ed. 2d 121.\n \n \n 96\n The judgments of conviction are affirmed.\n \n DUNIWAY, Circuit Judge (dissenting):\n \n 97\n I dissent. I would reverse on the ground that the grand jury charged one offense but the government failed to prove it. Instead, the government proved another offense, which the grand jury did not charge.\n \n \n 98\n Section 2314 of Title 18, U.S.Code, defines a number of offenses. Even the first paragraph of the section, which is the one on which the indictment is based, defines more than one offense. It reads:\n \n \n 99\n Whoever transports in interstate or foreign commerce any goods, wares, merchandise, securities or money, of the value of $5,000 or more, knowing the same to have been stolen, converted or taken by fraud; . . .\n \n \n 100\n Depending on how it is construed, the foregoing language can be said to define at least five offenses: knowing transportation of stolen \"goods\" or \"wares\" or \"merchandise\" or \"securities\" or \"money.\" The number can be doubled by treating transportation in \"interstate\" or \"foreign\" commerce as separate. They appear in the statute in the disjunctive. Further multiplication by at least three lurks in the differences between \"stolen,\" \"converted,\" or \"taken by fraud.\" Nor is this all. \"Securities\" is defined in the fifth paragraph of § 2311.1 Again, depending on how the language of § 2311 is construed, the number of possible separate offenses is at least 30, and if we add \"forged,\" \"counterfeited,\" or \"spurious\" as separate, the number approaches 100. All of these can again be increased by tacking on one or more of the alternatives in the first paragraph of § 2314. And the foregoing leaves out for consideration the three definitions of \"value\" in § 2311: \"face, par, or market value, whichever is the greatest.\"\n \n \n 101\n I mention the number of possible offenses only to emphasize that this is not a case in which the offense can be charged in the language of the statute. More specificity is required because the defendant has a right, under the Fifth Amendment, to be charged only by a grand jury, and the grand jury has a duty under the Sixth Amendment to inform the defendant of the nature and cause of the accusation, Cf. Russell v. United States, 1962, 369 U.S. 749, 761, 763-64, 765, 82 S. Ct. 1038, 8 L. Ed. 2d 240. Nor can deficiencies in the indictment be cured by a bill of particulars. Id. at 769-70, 82 S. Ct. 1038.\n \n \n 102\n In this case the two counts of the indictment charge a conspiracy in Count I:\n \n \n 103\n To willfully and knowingly transport in interstate commerce from Salt Lake City, Utah, to San Francisco, California, 90,000 shares of stolen Flying Diamond Corporation stock with a value of approximately $405,000.00, the defendant then knowing the stock to be stolen, in violation of Title 18, United States Code, Section 2314,\n \n \n 104\n and in Count II that the defendants:\n \n \n 105\n did transport in interstate commerce from Salt Lake City, Utah, to San Francisco, California, in the Northern District of California, stolen securities, that is, 90,000 shares of stock of Flying Diamond Corporation, of the value of approximately $405,000.00, knowing the same to have been stolen; in violation of Title 18, United States Code, Sections 2314 and 2.\n \n \n 106\n I find it remarkable that neither § 2314, which mentions \"securities,\" nor § 2311, which says that \"securities\" includes about 30 different things, plus \"forged, counterfeited or spurious representations\" of any of them, mentions \"stock.\" I cannot help wondering whether the person who drew up the indictment had read the law. The nearest thing to \"stock\" that the law does mention is, in § 2311, \"stock certificate.\" Yet it surely is hornbook law that \"stock,\" which is an intangible interest in the capital of a corporation, is not the same as \"stock certificate,\" which is a piece of paper that, when genuine, represents, but is different from \"stock.\"\n \n \n 107\n The proof does not show that the defendants transported stock, or that they conspired to transport stock. What they did conspire to transport, and did transport, was stock certificates. Moreover, the stock that the certificates purported to represent had neither been authorized nor issued, and the certificates lacked the signature of an authorized officer of the transfer agent that would have made them prima facie valid and so negotiable. The evidence is that 90,000 shares of the stock would have been worth $405,000 in the over-the-counter market. But the evidence also is that the certificates in question, because they were spurious, had no value at all; they were not stock; they did not evidence stock. If ever there were a case in which the grand jury's charge was not proved, this is that case. See: Danielson v. United States, 9 Cir., 1963, 321 F.2d 441 (charge: counterfeiting United States bonds; proof: forging endorsement on genuine United States bonds. Conviction reversed); Jeffers v. United States, 9 Cir., 1968, 392 F.2d 749 (charge: fraud, representation that money received would be used to promote religion; proof: representation that moneys would be used for office supplies and expenses. Conviction reversed).\n \n \n 108\n What the proof shows is that the defendants conspired to transport and transported \"falsely made, forged, altered or counterfeited securities\" (stock certificates) in violation of the third paragraph of § 2314, or stolen securities (stock certificates) that were \"forged, counterfeited or spurious representations,\" having a \"value\" (\"par value,\" § 2311) of $90,000, not $405,000.00, in violation of the first paragraph of § 2314. This, however, is not what was charged. The court permitted proof of market value of genuine stock, which was not shown to have been involved, and it permitted the jury to find that there were 90,000 shares of stock that were stolen, when the proof showed no such thing. This is not the kind of harmless error to which Rule 52(a), F.R.Crim.P. refers. Here, the error affects substantial rights.\n \n \n 109\n I would reverse both convictions in their entirety.\n \n \n \n *\n The Honorable Raymond E. Plummer, Senior United States District Judge, District of Alaska, sitting by designation\n \n \n 1\n \"Securities\" includes any note, stock certificate, bond, debenture, check, draft, warrant, traveler's check, letter of credit, warehouse receipt, negotiable bill of lading, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of interest in property, tangible or intangible; instrument or document or writing evidencing ownership of goods, wares, and merchandise, or transferring or assigning any right, title, or interest in or to goods, wares, and merchandise; or, in general, any instrument commonly known as a \"security\", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, warrant, or right to subscribe to or purchase any of the foregoing, or any forged, counterfeited, or spurious representation of any of the foregoing;\n \n \n ", "ocr": false, "opinion_id": 334531 }, { "author_str": "Plummer", "per_curiam": false, "type": "020lead", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nOPINION\nBefore DUNIWAY and SNEED, Circuit Judges, and PLUMMER,* District Judge.\nPLUMMER, Senior District Judge:\nAppellants were tried before a jury in the United States District Court for the Northern District of California and were convicted on both counts of a two count indictment. Count One charged a conspiracy from on or about the 22nd day of January, 1974, and continuously thereafter up to and including February 6, 1974, in the Northern District of California and elsewhere, to transport stolen stock of Flying Diamond Corporation (FDC) having a value of $405,-000.00, in interstate commerce in violation of 18 U.S.C. § 371.\nCount Two charged that the defendants did transport in interstate commerce from Salt Lake City, Utah, to San Francisco, California in the Northern District of California, stolen securities, that is, 90,000 shares of stock of FDC, of the value of approximately $405,000.00, knowing the same to have been stolen in violation of Title 18, United States Code, §§ 2314 and 2.\nOn appeal defendants have asserted twenty-one errors. We have considered all of them and found them to be without merit. We discuss those questions relating to the statute involved, the sufficiency of the indictment, the sufficiency of the evidence, variance, amendment of the indictment, objections to instructions, conduct of trial, post-arrest statement, Jencks Act, impeachment of witnesses, law of conspiracy, and motion for new trial.\n\nThe Statutes.\n\nParagraph 1 of Section 2314 of Title 18, United States Code, insofar as pertinent to this case provides:\n“Whoever transports in interstate commerce . . . any . . . securities ... of the value of $5,000 or more, knowing the same to have been stolen . . . ”\nshall be guilty of an offense against the United States.\nThe purpose of Paragraph 1 of Section 2314 is precisely stated therein. No cases have been cited by defendants holding or suggesting that this portion of the statute is “unconstitutionally vague.”\nThe definition of “securities” as used in Chapter 113 of Title 18, United States Code, Section 2311 of said Title provides:\n“ ‘Securities’ include any stock certificate . . .; or any forged, counterfeited, or spurious representation of any of the foregoing; ”\nSections 2311 and 2314 of Title 18, United States Code, refer only to tangible items which are capable of being touched and are able to be perceived as materially existing, especially by the senses of sight or touch. Since “stock” is an intangible interest in the capital of a corporation, it is an interest incapable of being seen, touched, or transported in interstate commerce, and is an interest which does not materially exist and is not visible or corporeal. For this reason the word “stock” is not mentioned in either Section 2311 or 2314 of Title 18, United States Code.\nCount Two of the indictment also charges defendants with a violation of Section 2 of Title 18, United States Code, which provides:\n“(a) Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.\n“(b) Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal.”\n\n*1222\nSufficiency of the Indictment.\n\nDefendants challenge the sufficiency of the indictment. By technical construction they assert a claim that the indictment returned by the Grand Jury fails to sufficiently inform them of the nature of the charges for which they were indicted. However, an indictment is not to be read in a technical manner, but is to be construed according to common sense with an appreciation of existing realities. United States v. Pleasant, 469 F.2d 1121 (8th Cir. 1972); McKinney v. United States, 172 F.2d 781 (9th Cir. 1949). It must be read to include facts which are necessarily implied by the allegations made therein. United States v. Barbato, 471 F.2d 981 (1st Cir. 1973); United States v. Silverman, 430 F.2d 106 (2nd Cir. 1970). Even if an essential averment in an indictment is faulty in form, if it may by fair construction be found within the text, it is sufficient. Chargois v. United States, 267 F.2d 410, 412 (9th Cir. 1959), citing Craig v. United States, 81 F.2d 816, 822 (9th Cir. 1936).\nThe purpose of an indictment is to furnish the defendant with a sufficient description of the charge against him to enable him to prepare his defense, to enable him to plead double jeopardy against a second prosecution and to inform the court of the facts alleged so that it can determine the sufficiency of the charge. Russell v. United States, 369 U.S. 749, 82 S.Ct. 1038, 8 L.Ed.2d 240 (1962); Williamson v. United States, 310 F.2d 192 (9th Cir. 1962). Fairly read this indictment does so. We see no basis for finding either count infirm. Inasmuch as the sentences imposed on both counts as to both defendants were to run concurrently, we consider only the conviction as to Count Two. United States v. Westover, 511 F.2d 1154, 1155 (9th Cir. 1974). The conspiracy count is unquestionably adequate since it charges the offense substantially in the words of the statute. United States v. Murray, 492 F.2d 178, 192 (9th Cir. 1973).\nThe defendants were charged in an indictment returned by the Grand Jury. Neither the Fifth Amendment nor any constitutional provision prescribes the kind of evidence upon which Grand Juries must act. In the absence of any evidence to the contrary, the presumption of regularity which attaches to Grand Jury proceedings still exists. See United States v. Hamling, 481 F.2d 307, 313 (9th Cir. 1973).\nThe Sixth Amendment requires that in all criminal prosecutions the accused shall enjoy the right to be informed of the nature and cause of the accusations. Rule 7, Fed. R.Crim.P., provides in substance that the indictment shall be a plain, concise, and definite written statement of the essential facts constituting the offense charged. It need not contain any other matter or information not necessary to such a statement. The indictihent shall state for each count the official or customary citation of the statute which the defendant is alleged therein to have violated.\nCount Two of the indictment charges in pertinent part:\n“That . . . the defendants did transport in interstate commerce from Salt Lake City, Utah, to San Francisco, California, . . ., stolen securities ., of the value of approximately $405,000 knowing the same to have been stolen . . . ”\nThe wording of the indictment closely follows the language set forth in the statute. This is sufficient. See United States v. Hamling, supra, p. 312. The decision of this court was affirmed in Hamling v. United States, 418 U.S. 87, 94 S.Ct. 2887, 41 L.Ed.2d 590 (1974). Cases upholding the validity of an indictment under 18 U.S.C. § 2314 where the allegations followed the language of the statute are United States v. Farabee, 411 F.2d 1210 (5th Cir. 1969) and Downing v. United States, 348 F.2d 594 (5th Cir. 1955).\nIn addition to framing the indictment in the language of the statute the government in this case included in Count Two the additional matter or information that the securities alleged in the indictment were 90,000 shares of stock of Flying Diamond Corporation (FDC). Additional matter or *1223information was provided to defendants in response to their bill of particulars in that the defendants were physically shown and were permitted to inspect and examine the evidence, the stock certificates, upon which the government based the indictment and its case.\nDefendants have totally failed to support their assertions. To the contrary, the record establishes that the requirements of Russell, supra, and Williamson, supra, were fully met by the government.\n\nSufficiency of the Evidence.\n\nThe essential elements required to be proved beyond a reasonable doubt, by the government, in order to establish the offense charged in Count Two of the indictment are as follows:\n1. Defendants transported securities in interstate commerce as alleged in Count Two.\n2. The securities transported were of a value of $5,000 or more.\n3. That defendants knew the securities had been stolen.\nAt the close of the government’s case in chief, defendants moved for judgments of acquittal. Counsel were heard in oral argument, the motions were taken under advisement, and thereafter denied. At the close of all the evidence appellants renewed their motions and they were again considered and denied.\nThe test to be applied by the trial court in deciding a motion for judgment of acquittal in a criminal case and the test to be applied by the appellate court in reviewing that decision are, as a practical matter, identical. The evidence must be considered in the light most favorable to the verdict. United States v. Nelson, 419 F.2d 1237 (9th Cir. 1969). The court must be “satisfied that the jurors reasonably could decide that they would not hesitate to act in their own serious affairs upon factual assumptions as probable as the conclusion” that the defendant is guilty as charged. United States v. Leal, 509 F.2d 122, 125 (9th Cir. 1975); United States v. Felix, 474 F.2d 610, 612 (9th Cir. 1973); United States v. Nelson, supra, 419 F.2d at 1245.\n1. Defendants transported securities in interstate commerce as alleged in Count Two of the indictment.\nA written stipulation was read into the record establishing that at approximately noon on February 6, 1974, the defendants left Salt Lake City, Utah, together, via Western Airlines and arrived in San Francisco, California, at approximately 1:00 p. m. The evidence establishes beyond a reasonable doubt that defendants had with them on this trip 90,000 shares of FDC stock. Shares of stock being intangible interests are incapable of being transported in interstate commerce. However, these particular 90,000 shares of FDC stock were in fact represented and evidenced by tangible physical objects, i. e. stock certificates, which were capable of being transported in interstate commerce.\nThese tangible, physical stock certificates were in fact physically handed by Smith to Anderson, were placed in a briefcase, and were transported in interstate commerce by air from Salt Lake City, Utah, to San Francisco, California. In view of the defendants’ previous dealings in securities, their experience in transferring FDC stock certificates as stock nominees, their negotiations and dealings with defendant George, and the fact that they were to receive a $10,000 fee for supplying the stock certificates, their assertion that they were unaware that they were transporting securities is ridiculously unbelievable.\nHad defendants’ counsel read Section 2311 of Title 18, United States Code, they would, as a matter of law, have known, or should have known, that the definition of “securities” included any stock certificate, or any counterfeited or spurious representation thereof.\nAs their primary defense, counsel for defendants by their repeated misleading assertions endeavored to convince the jury that the FDC stock certificates were nothing more than “pieces of paper.”\n*1224In Richland Trust Co. v. Federal Insurance Co., 494 F.2d 641, 642 (6th Cir. 1974), the court, quoting Union Banking Co. v. United States Fidelity & Guaranty Co., 4 Ohio App.2d 397, 213 N.E.2d 191 (1965) quoted as follows therefrom:\n“ ‘There appears to be general agreement that the word “counterfeit”, as used means an imitation of a genuine document having a resemblance intended to deceive and be taken for the original. (emphasis as in original).\n“ ‘We would again stress that a document or writing is counterfeit if it is an imitation, i. e., if an attempt has been made to simulate another document which is genuine.’ ”\nIn State Bank of Poplar Bluff v. Maryland Casualty Co., 289 F.2d 544, 547-548 (8th Cir. 1961) Circuit Judge (now Mr. Justice) Blackmun, speaking for the court said:\n“ . . . the noun ‘counterfeit’ means ‘that which is made in imitation of something with a view to deceive’, and that the verb ‘counterfeit’ means ‘to imitate’. Webster’s New International Dictionary (Second Edition, 1960). The legal definitions place like emphasis ... so far as counterfeiting is concerned, upon copying or imitating. Black’s Law Dictionary (Fourth Edition, 1951); ... 14 Am. Jur., Counterfeiting, § 2; 20 C.J.S. Counterfeiting § 1.”\nThe word “spurious” is defined as meaning outwardly similar or corresponding to something, without having its genuine qualities.\nIn United States v. Chodor, 479 F.2d 661 (1st Cir. 1973) the court held that instruments which resembled ten dollar Federal Reserve notes in all other significant respects could properly be found to be of sufficient quality to be considered counterfeit despite the absence of two serial numbers and the Treasury Seal on their face. The court at p. 664 stated:\n“Finally, appellant’s assertion that the trial court erred in failing to rule as a matter of law that the notes in question were not counterfeit because they were lacking ‘significant particular^],’ United States v. Moran, 470 F.2d 742 (1st Cir. 1972), to wit, two serial numbers and the Treasury Seal on their face, is also unavailing. The proper test for determining what constitutes a counterfeit obligation is, as stated in United States v. Lustig, 159 F.2d 798, 802 (3d Cir. 1947), rev’d on other grounds, 338 U.S. 74, 69 S.Ct. 1372, 93 L.Ed. 1819 (1949),\n‘whether the fraudulent obligation bears such a likeness or resemblance to any of the genuine obligations or securities issued under the authority of the United States as is calculated to deceive an honest, sensible and unsuspecting person of ordinary observation and care dealing with a person supposed to be upright and honest.’\nAccord, United States v. Johnson, 434 F.2d 827, 829 (9th Cir. 1970); United States v. Smith, 318 F.2d 94, 95 (4th Cir. 1963). In light of the three minor deficiencies of the notes in question, the trial court was clearly correct in submitting to the jury the question of whether these notes were of sufficient quality to be considered counterfeit. Lastly, given our endorsement of this standard and the fact that the court charged the substance of the Lustig test, even assuming that appellant requested an instruction that if the notes lacked ‘any significant quality’ they could not be found to be counterfeit, we cannot agree that the omission of this statement from the charge constituted prejudicial error.”\nSee United States v. Anderson, 359 F.Supp. 61 (D.C.Ark.1973) where the court “held that incomplete bond forms were ‘securities,’ within the meaning of statute relating to transportation of stolen securities, even though they did not contain, at time of the transportation, the validating signatures, since the bonds were adequate simili-tudes of genuine bonds, and where after completion they certainly would have been calculated to deceive a reasonably prudent and intelligent investor, and statute was sufficiently broad to include incompleted bonds forms where the forms were counterfeited with an intent to defraud or where *1225they were transported in interstate commerce with such an intent.”\nAt page 65 in Anderson one of the court’s instructions appears and reads as follows:\n“ . . .if you find from the evidence beyond a reasonable doubt that these documents or bonds were printed in Memphis without the authority of Arkansas, Louisiana Gas Co. or Morgan Guaranty Trust Co., and that they were printed for the purpose on the part of some person or persons to use them as instruments of fraud or deceit, and if you further find from the evidence beyond a reasonable doubt that the bonds had a sufficient appearance of genuineness on their faces so that they might be used to defraud a person of ordinary intelligence and prudence, then you may find that the bonds were counterfeit securities even though . they were printed in blank as far as identification of the payee or owner was concerned and even though they did not bear the countersignatures called for by the bonds.” (Emphasis as in opinion).\nAt page 66 the court stated:\n“In this case when the defendant transported the bonds to Brinkley, the ‘counterfeiting’ of the documents was complete. Those documents were adequate similitudes of genuine Arkla bonds and after completion would certainly have been calculated to deceive a reasonably prudent and intelligent investor. Cf. United States v. Webb, supra [5 Cir., 1971, 443 F.2d 308]; Koran v. United States, 5 Cir., 1969, 408 F.2d 1321; United States v. Lustig, 3 Cir., 1947, 159 F.2d 798; (resemblance sufficient); and United States v. Johnson, 9 Cir., 1970, 434 F.2d 827; United States v. Smith, 4 Cir., 1963, 318 F.2d 94; United States v. Gellman, D.C.Minn.1942, 44 F.Supp. 360; (resemblance insufficient). And the Court thinks that section 2311 is sufficiently broad to include incompleted bond forms when the forms are counterfeited with intent to defraud, and when they are transported in interstate commerce with such intent.”\nCompare United States v. Galardi, 476 F.2d 1072 (9th Cir. 1973).\n2. The securities transported were of a value of $5,000 or more.\nAlthough the indictment alleged the value of the stocks to be a value of approximately $405,000, the statute requires only that the securities have a value of $5,000 or more. ¶ 1,18 U.S.C. 2314; United States v. Weinberg, 478 F.2d 1351, 1354 (3d Cir. 1973). “Value” means the face, par, or market value, whichever is the greatest, and the aggregate value of all securities referred to in a single indictment constitutes the value thereof. 18 U.S.C. § 2311.\nIf defendants had, in fact, any concern over the allegation that the value of the stock was approximately $405,000 instead of the value of $5,000 or more, as required by the statute, they could have remedied this situation by a motion to strike the excess amount of $400,000 as surplusage. Rule '7(d), Fed.R.Crim.P. Defendants, for tactical, strategical, or other reasons, elected not to do so. Consequently the government, under the court’s instructions, were required to prove a value of approximately $405,000. The government succeeded in proving this value beyond a reasonable doubt to the satisfaction of the jury by establishing the over-the-counter price published in the Wall Street Journal. It is unquestioned that in proving the fact of market value, accredited price-current lists and market reports including those published in trade journals or newspapers which are accepted as trustworthy, are admissible in evidence. Virginia v. West Virginia, 238 U.S. 202, 212, 35 S.Ct. 795, 59 L.Ed. 1272 (1914); VI Wigmore on Evidence, 3rd ed., 1970; Cf. Fed.Rules Evid., Rule 803(17) and Note to ¶ (17), Notes of Advisory Committee on Proposed Rules, p. 584.\nThe assertions made by defense counsel that the stock certificates were valueless pieces of paper border on the frivolous in view of the evidence which established that defendants were to receive a *1226“finders fee” of $10,000, double the statutory amount required by 18 U.S.C. § 2314, for providing the FDC stock certificates.\n3. That defendants knew that securities had been stolen.\nApplying the appropriate standards of review we find that appellee’s counter statement of facts appearing on pages 2 through 8, inclusive, of appellee’s opening brief filed on February 14, 1975, is adequately supported by the record as a whole. We further find after considering the evidence in its entirety that there was sufficient relevant evidence, both direct and circumstantial, from which, if considered most favorably to the government, the jury could rationally and properly find or infer beyond a reasonable doubt that at a time or times between December, 1972, and August, 1973, Jay Miller and Michael Halfhill of American Stock Transfer Company, the stock transfer agent for FDC, without authority, overissued 200,000 shares of FDC stock. These shares of stock were evidenced by genuine stock certificate forms of FDC, reflected the names of fictitious shareholders and stated the number of shares represented by the stock certificate. The stock certificates were complete except for a signature in the blank space provided for the stock transfer agent. The evidence established that the insertion of the name Jay Miller or any other signature placed in this blank by anyone would have enabled the stock certificate to be transferred. Jay Miller with the connivance of John Badger and through the use of stock nominees, including defendants Anderson and Smith, accomplished the sale or transfer of $500,000 worth of the unauthorized overissued FDC stock certificates through the brokerage office of Transamerican Securities in Salt Lake City. Sometimes prior to June, 1973, defendant Smith obtained possession of 90,-000 shares of this FDC stock from Jay Miller. In approximately June of 1973 two demands were made of Smith to return the stock certificates to the stock transfer agent of FDC. Smith refused to do so, claiming on one occasion that “they were in a safe place,” and on the second occasion that he had destroyed them. In approximately December of 1973 defendant Anderson was contacted by defendant George with reference to obtaining collateral that he might use to raise money which he desperately needed. Anderson knew, or at that time became aware, that Smith still had in his possession the stock certificates representing 90,000 shares of FDC stock. Anderson, after being contacted by George, contacted Smith. Smith just happened to have come into contact with a “Reed Larson” who just happened to have stock certificates representing 90,000 shares of FDC stock, which he supposedly made available to Smith on condition that the stock was returned within ninety days. For the services rendered by Anderson and Smith they were to be paid a “finders fee” of $10,000. No evidence was presented by defendants that “Reed Larson” was to receive any money for making the stock available. There is no evidence that at the time Smith received the stock from “Reed Larson” that any address, information, or arrangements were made whereby the stock could be returned at the end of the ninety day period. Nor was any evidence presented at the trial by defendants that they had made any effort or attempt to locate “Reed Larson” to have him available as a witness to corroborate their testimony or to exculpate them.\nIt is evident from the verdict that the jury did not believe, and were not required to believe, the inherently improbable and unbelievable self-serving stories of the vitally interested defendants. Their testimony could not only be disbelieved, but from the totality of the circumstances, including the manner in which they testified, a contrary inference or conclusion could properly be drawn. The jury was not gullible enough to swallow the incredible story fabricated by defendants, and properly found that the stock certificates which Smith had “stolen” by refusing to return them, upon demand, to the stock transfer agent of FDC, were in fact the stock certificates described in the indictment and which are the subject matter of this case. See United States v. Cisneros, 448 F.2d 298, 305, 306 *1227(9th Cir. 1971); United States v. Castro, 476 F.2d 750 (9th Cir. 1973); United States v. Ramos, 476 F.2d 624 (9th Cir. 1973), cert. denied 414 U.S. 836, 94 S.Ct. 182, 38 L.Ed.2d 72; United States v. Peyton, 454 F.2d 213 (9th Cir. 1971); Dyer v. MacDougall, 201 F.2d 265, 268 (2nd Cir. 1952).\nThe court correctly instructed the jury that “stolen” means acquired or possessed, as a result of some wrongful or dishonest act or taking whereby a person wilfully obtains or retains possession of property which belongs to another, without or beyond any permission given, and with the intent to deprive the owner of the benefit of ownership. The stock certificates obtained by Smith and retained in his possession after the return thereof had been requested were “stolen” within the meaning of Section 2314 of Title 18, United States Code. The term “stolen” has no common law derivative and is usually construed broadly. United States v. Turley, 352 U.S. 407, 77 S.Ct. 397, 1 L.Ed.2d 430 (1957); United States v. Hollinshead, 495 F.2d 1154 (9th Cir. 1974); Smith v. United States, 233 F.2d 744 (9th Cir. 1956).\nAfter carefully reviewing all the evidence produced at trial, considered in the light most favorable to the government, together with the reasonable inferences which may be drawn therefrom, we are convinced that there was an abundance of credible evidence, both direct and circumstantial from which the jury could find the defendants guilty as charged.\n\nVariance.\n\nA variance between the charge of the indictment and the proof offered at trial may affect the substantial rights of a defendant in a criminal case if the effect is to prevent the defendant from presenting his defense properly, or if it takes him unfairly by surprise, or if it exposes him to double jeopardy. Where, as in this case, the alleged variance does not have any of those effects it should not serve as a grounds for reversal.\nRule 52(a), Federal Rules of Criminal Procedure, provides in pertinent part:\n“Any . . . variance which does not affect substantial rights shall be disregarded.”\nSee United States v. Andrino, 501 F.2d 1373 (9th Cir. 1974); Heisler v. United States, 394 F.2d 692 (9th Cir. 1968); United States v. Freeman, 514 F.2d 1184 (10th Cir. 1975).\nIn this case there was no variance. Count Two of the indictment charged that defendants transported securities in interstate commerce from Salt Lake City, Utah, to San Francisco, California. The proof at trial established this fact beyond a reasonable doubt. The indictment charged the value of the securities transported were of a value of approximately $405,000. The proof at trial established beyond a reasonable doubt that the market value of the securities was approximately $405,000 and that the par or face value of the securities was $90,000. The statute requires only that the securities be of a value of $5,000 or more. The indictment charged that the defendants knew the securities had been stolen. The jury found this fact to be true beyond a reasonable doubt. The government at trial proved precisely each essential element of the charge alleged in the indictment.\nThere is no evidence that defendants were prevented from presenting a proper defense, if in fact they had one. Defendants cannot seriously assert that they were unfairly taken by surprise when in fact they were shown and permitted to inspect the government’s evidence in advance of trial. The defendants have made no showing that they may now be exposed to double jeopardy.\nUnfortunately for defendants, the integrity of the jury prevented defense counsel from misleading, deceiving or hoodwinking them into believing their ingenious assertions that the spurious or counterfeit securities stolen by defendants were mere pieces of paper. However, the government should not be faulted for the tactics or strategy of defense counsel.\nThe record as a whole reflects that no substantial rights of the defendants were *1228affected; that defendants were fairly notified of the substance of the offenses for which they were convicted; that the relationship between the offenses charged in the indictment and the offenses proved at trial clearly establish that defendants had adequate notice of the charges against them and that they are now fully protected against possible prosecution for the same offenses. In the final analysis, the effect of the trial court’s rulings and instructions required the government to assume a greater burden of proof than the law required.\n\nAmendment of Indictment.\n\nWhen instructing the jury the trial court charged that an element of the offense is that the stock have a value in excess of $5,000. Since the indictment stated the value of the stock at approximately $405,000.00 the defendants contend that this amended the indictment. The amount in excess of $5,000 constituted mere sur-plusage and was properly rejected by the court. Ford v. United States, 273 U.S. 593, 602, 47 S.Ct. 531, 71 L.Ed. 793 (1927); United States v. Dawson, 516 F.2d 796, 799-804 (9th Cir. 1975); United States v. Harvey, 428 F.2d 782 (9th Cir. 1970); United States v. Edwards, 465 F.2d 943 (9th Cir. 1972); Raymond v. United States, 376 F.2d 581 (9th Cir. 1967). There was no amendment of the indictment.\n\nObjections to Instructions.\n\nThe government’s instruction 24, complained of now but not properly objected to at trial, essentially required the jury to find that the documents in question were “securities,” a necessary element of the offense. When given the opportunity to object to this instruction the following objections were made:\n“Object to Government’s Instruction No. 24 on the grounds that it is an improper statement of the essential elements of the offense in this case.”\n“I object to 24 as an improper statement of the elements of the case.”\nFederal Rules of Criminal Procedure 30 provides in part:\n“No party may assign as error any portion of the charge or omission therefrom unless he objects thereto before the jury retires to consider its verdict, stating distinctly the matter to which he objects and the grounds of his objection.”\nAn objection that merely alleges that the instruction was not proper law or incorrectly stated the law is not sufficient. United States v. Jansen, 475 F.2d 312, 318 (7th Cir. 1973); Friedman v. United States, 381 F.2d 155, 160 (8th Cir. 1967); Northcraft v. United States, 271 F.2d 184, 189 (8th Cir. 1959); See United States v. Machado, 457 F.2d 1372, 1375 (9th Cir. 1972). The objections made here fall into this category and accordingly raise no issue for appeal. It would have been proper to leave to the jury the issue of whether these constituted counterfeit or spurious securities. United States v. Johnson, 434 F.2d 827, 829 (9th Cir. 1970); United States v. Chodor, 479 F.2d 661, 664 (1st Cir. 1973); United States v. Anderson, 359 F.Supp. 61, 65 (D.Ark. 1973).\nIt is significant that defendants made no requests for, nor expressed any objection to the court’s failure to give, an instruction based on Johnson, Chodor or Anderson, defining the word “counterfeit.” As they were undoubtedly aware, the giving of a proper instruction would have prompted closer scrutiny and comparison of the stock certificates and would have had a devastating effect on defendants’ fatuous argument that the securities involved were only “pieces of paper.”\nThe issue of “counterfeit” was in fact indirectly presented to the jury in the form of the value of the securities. The court instructed the jury that their value was determined by the price at which a willing buyer and a willing seller would exchange them. If the stock certificates had not been realistic enough to constitute a “counterfeit” then they would have had no value in the jury’s mind, resulting in an acquittal. Therefore, the issue of whether the stock certificates constituted “securities” was submitted to the jury and decided by them adversely to the defendants. On *1229these facts, we find that no substantial right of the defendants was affected.\n\nConduct at Trial.\n\nIncluded within this topic is the reception of evidence, cautionary instructions, and comments by the judge. This is an area where trial judges have broad discretion. United States v. Campbell, 466 F.2d 529, 531 (9th Cir. 1972); United States v. Amaral, 488 F.2d 1148, 1152 (9th Cir. 1973); United States v. Wright, 160 U.S.App.D.C. 57, 489 F.2d 1181, 1186 (1973). We find no abuse thereof. One matter deserves special mention. On handling these securities the defendants violated a civil injunction that was entered in another case because of the overissue of FDC stock. This information was properly admitted to rebut claims that defendants believed that they were participating in a legitimate stock transaction. Defendants objected on the ground that the government was trying to give the impression that the violation of the injunction somehow involved a criminal action. The judge stated that he supposed that the acts could be classed as contemptuous. Defense counsel agreed. We fail to see how the occurrence of this colloquy before the jury prejudiced defendants. The judge did not raise the issue, but merely disposed of it once raised by defense counsel. The jury was not told that the acts were in fact contemptuous. They were properly informed of the violation of the injunction, however, to negate their defense. We do not think that the judge’s statement amounts to comment on the evidence, but if it does, it was not improper. United States v. Murdock, 290 U.S. 389, 54 S.Ct. 223, 78 L.Ed. 381 (1933); United States v. Williams, 473 F.2d 507 (5th Cir. 1973); Schoepflin v. United States, 391 F.2d 390, 397 (9th Cir. 1968). There was no error.\n\nPost-arrest Statements.\n\nAfter arrest both defendants made exculpatory statements. These were introduced at trial. Their admission was not improper. The contention that arraignment was delayed so that defendants could be questioned prior to the appointment of counsel is not supported by the record. There is no Bruton problem because both defendants testified. Anderson’s hearsay objection to Smith’s statement was waived because he opened the door by first using it and because he failed to object when the parts of it relating to him had been read verbatim for the jury’s consideration. McCormick on Evidence, 2nd ed., 57; 1 Wigmore on Evidence, 3rd ed. § 18.\n\nJencks Act.\n\nOutside of the presence of the jury one of the government’s witnesses, Secret Service Agent Miskinis, revealed that he had made a Jencks Act statement. The government agreed to produce it, but rather than delay the trial, cross examination continued. No prejudice resulted from this procedure. After reading the statement the defendants had the right to call Miskin-is. Defense counsel argues that the judge informed the jury of the existence of the statement and of the right to recall Miskin-is to examine him on it. He argues that this was improper under such cases as Beaudine v. United States, 414 F.2d 397, 401 (5th Cir. 1969) and Gregory v. United States, 125 U.S.App.D.C. 140, 369 F.2d 185, 191 (1966), in that the subsequent failure to recall the witness after reading the statement implied to the jury that the statement confirmed the witness’s testimony whereas the statement may properly be used for impeachment only. We agree that it is usually a good procedure not-to inform the jury of Jencks Act statements. We do not think that any other procedure was followed here. After completing cross examination defense counsel requested that Misk-inis remain available. The judge told him to be available and said “they will look over the records and you may be recalled.” What “the records” were was never disclosed to the jury. It was the defendant that first raised the matter before the jury. The trial judge’s tangential remark was not an abuse of discretion.\n\n*1230\nImpeachment of Witnesses.\n\nA third defendant in this case, Phil Georgopoulos, entered a plea bargain and testified against Anderson and Smith. On direct examination the government elicited his prior criminal record and information concerning the plea bargain. Defendants contend that this improperly permitted the government to impeach its own witness. Such a rule would allow the defense to create a false impression, or the jurors to think that the government was trying to keep something from them. United States v. Rothman, 463 F.2d 488, 490 (2nd Cir. 1972). We reject this contention.\nLaw of Conspiracy.\nMany of defendants’ other objections relate to the law of conspiracy. Section 2314 does not require intent to use interstate commerce. United States v. Powers, 437 F.2d 1160, 1161 (9th Cir. 1971). Nor does such a conspiracy. United States v. Greer, 467 F.2d 1064, 1071 (7th Cir. 1972). Statements of a co-conspirator are not hearsay even if made prior to the entry of the conspiracy by the party against whom it is used. United States v. Ramirez, 482 F.2d 807, 816 (2nd Cir. 1973). There was no fatal variance as to the times of the existence of the conspiracy as the indictment charged in terms of “on or about” and defendants were in no way prejudiced. United States v. Donner, 497 F.2d 184, 192 (7th Cir. 1974). There was no evidence justifying the giving of the requested instruction on multiple conspiracies, and so it was properly refused. United States v. Noah, 475 F.2d 688, 697 (9th Cir. 1973); United States v. American Radiator & Stand. San. Corp., 433 F.2d 174, 199 (3rd Cir. 1970). The court charged that commission of overt acts may constitute the best proof of conspiracy. Other parts of the instructions made clear that the jury must find the existence of an agreement. We feel that the instruction merely informed the jury that proof of the crime usually turns on circumstantial evidence. Blumenthal v. United States, 158 F.2d 883, 889 (9th Cir. 1946), aff’d 332 U.S. 856, 68 S.Ct. 385, 92 L.Ed. 425 (1947); United States v. Jacobo-Gil, 474 F.2d 1213, 1215 (9th Cir. 1973). The court’s instructions on conspiracy were proper.\n\nMotion for New Trial.\n\nFinally, defendants-argue that they are entitled to a new trial because the government inadvertently failed to disclose one of Georgopoulos’ three prior felony convictions at trial. That conviction was thirteen years earlier. Besides the two other convictions Georgopoulos pleaded guilty in this case, so his credibility was already sufficiently in question. Any error was harmless. The court’s refusal to grant a new trial based on newly discovered impeaching evidence was within its discretion. United States v. Cozzetti, 469 F.2d 684 (9th Cir. 1972).\nDefendants’ other asserted errors do not merit discussion.\nAfter carefully reviewing all the evidence we are convinced that defendants received a fair and impartial trial. From the evidence, considered in the light most favorable to the government, together with the reasonable inferences which could be drawn therefrom, we find that there was an abundance of credible evidence, both direct and circumstantial, from which the jury could find the defendants guilty as charged. Glasser v. United States, 315 U.S. 60, 62 S.Ct. 457, 86 L.Ed. 680 (1942); United States v. Westover, 511 F.2d 1154 (9th Cir. 1975); United States v. Celestine, 510 F.2d 457 (9th Cir. 1975); United States v. Lincoln, 494 F.2d 833 (9th Cir. 1974); United States v. Hood, 493 F.2d 677 (9th Cir. 1974); United States v. Ogden, 484 F.2d 1274 (9th Cir. 1973), cert. denied 416 U.S. 987, 94 S.Ct. 2391, 40 L.Ed.2d 764 (1974); United States v. Munns, 457 F.2d 271 (9th Cir. 1972), cert. denied 409 U.S. 871, 93 S.Ct. 199, 34 L.Ed.2d 121.\nThe judgments of conviction are affirmed.\n", "ocr": false, "opinion_id": 9462610 }, { "author_str": "Duniway", "per_curiam": false, "type": "040dissent", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nDUNIWAY, Circuit Judge\n(dissenting):\nI dissent. I would reverse on the ground that the grand jury charged one offense but the government failed to prove it. Instead, *1231the government proved another offense, which the grand jury did not charge.\nSection 2314 of Title 18, U.S.Code, defines a number of offenses. Even the first paragraph of the section, which is the one on which the indictment is based, defines more than one offense. It reads:\nWhoever transports in interstate or foreign commerce any goods, wares, merchandise, securities or money, of the value of $5,000 or more, knowing the same to have been stolen, converted or taken by fraud; .\nDepending on how it is construed, the foregoing language can be said to define at least five offenses: knowing transportation of stolen “goods” or “wares” or “merchandise” or “securities” or “money.” The number can be doubled by treating transportation in “interstate” or “foreign” commerce as separate. They appear in the statute in the disjunctive. Further multiplication by at least three lurks in the differences between “stolen,” “converted,” or “taken by fraud.” Nor is this all. “Securities” is defined in the fifth paragraph of § 2311.1 Again, depending on how the language of § 2311 is construed, the number of possible separate offenses is at least 30, and if we add “forged,” “counterfeited,” or “spurious” as separate, the number approaches 100. All of these can again be increased by tacking on one or more of the alternatives in the first paragraph of § 2314. And the foregoing leaves out for consideration the three definitions of “value” in § 2311: “face, par, or market value, whichever is the greatest.”\nI mention the number of possible offenses only to emphasize that this is not a case in which the offense can be charged in the language of the statute. More specificity is required because the defendant has a right, under the Fifth Amendment, to be charged only by a grand jury, and the grand jury has a duty under the Sixth Amendment to inform the defendant of the nature and cause of the accusation, Cf. Russell v. United States, 1962, 369 U.S. 749, 761, 763-64, 765, 82 S.Ct. 1038, 8 L.Ed.2d 240. Nor can deficiencies in the indictment be cured by a bill of particulars. Id. at 769-70, 82 S.Ct. 1038.\nIn this case the two counts of the indictment charge a conspiracy in Count I:\nTo willfully and knowingly transport in interstate commerce from Salt Lake City, Utah, to San Francisco, California, 90,000 shares of stolen Flying Diamond Corporation stock with a value of approximately $405,000.00, the defendant then knowing the stock to be stolen, in violation of Title 18, United States Code, Section 2314,\nand in Count II that the defendants:\ndid transport in interstate commerce from Salt Lake City, Utah, to San Francisco, California, in the Northern District of California, stolen securities, that is, 90,000 shares of stock of Flying Diamond Corporation, of the value of approximately $405,000.00, knowing the same to have been stolen; in violation of Title 18, United States Code, Sections 2314 and 2.\nI find it remarkable that neither § 2314, which mentions “securities,” nor § 2311, which says that “securities” includes about 30 different things, plus “forged, counterfeited or spurious representations” of any of them, mentions “stock.” I cannot help wondering whether the person who drew up the indictment had read the law. The nearest thing to “stock” that the law does mention is, in § 2311, “stock certificate.” Yet it *1232surely is hornbook law that “stock,” which is an intangible interest in the capital of a corporation, is not the same as “stock certificate,” which is a piece of paper that, when genuine, represents, but is different from “stock.”\nThe proof does not show that the defendants transported stock, or that they conspired to transport stock. What they did conspire to transport, and did transport, was stock certificates. Moreover, the stock that the certificates purported to represent had neither been authorized nor issued, and the certificates lacked the signature of an authorized officer of the transfer agent that would have made them prima facie valid and so negotiable. The evidence is that 90,000 shares of the stock would have been worth $405,000 in the over-the-counter market. But the evidence also is that the certificates in question, because they were spurious, had no value at all; they were not stock; they did not evidence stock. If ever there were a case in which the grand jury’s charge was not proved, this is that case. See: Danielson v. United States, 9 Cir., 1963, 321 F.2d 441 (charge: counterfeiting United States bonds; proof: forging endorsement on genuine United States bonds. Conviction reversed); Jeffers v. United States, 9 Cir., 1968, 392 F.2d 749 (charge: fraud, representation that money received would be used to promote religion; proof: representation that moneys would be used for office supplies and expenses. Conviction reversed).\nWhat the proof shows is that the defendants conspired to transport and transported “falsely made, forged, altered or counterfeited securities” (stock certificates) in violation of the third paragraph of § 2314, or stolen securities (stock certificates) that were “forged, counterfeited or spurious representations,” having a “value” (“par value,” § 2311) of $90,000, not $405,000.00, in violation of the first paragraph of § 2314. This, however, is not what was charged. The court permitted proof of market value of genuine stock, which was not shown to have been involved, and it permitted the jury to find that there were 90,000 shares of stock that were stolen, when the proof showed no such thing. This is not the kind of harmless error to which Rule 52(a), F.R. Crim.P. refers. Here, the error affects substantial rights.\nI would reverse both convictions in their entirety.\n\n. “Securities” includes any note, stock certificate, bond, debenture, check, draft, warrant, traveler’s check, letter of credit, warehouse receipt, negotiable bill of lading, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of interest in property, tangible or intangible; instrument or document or writing evidencing ownership of goods, wares, and merchandise, or transferring or assigning any right, title, or interest in or to goods, wares, and merchandise; or, in general, any instrument commonly known as a “security”, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, warrant, or right to subscribe to or purchase any of the foregoing, or any forged, counterfeited, or spurious representation of any of the foregoing;\n\n", "ocr": false, "opinion_id": 9462611 } ]

[ "531 F.2d 892" ]

[ { "author_str": "Ross", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/531/531.F2d.892.75--1457.html", "author_id": null, "opinion_text": "531 F.2d 892\n 12 Fair Empl.Prac.Cas. 397,11 Empl. Prac. Dec. P 10,744Betty GARRETT, Appellant,v.MOBIL OIL CORPORATION, Appellee.\n No. 75--1457.\n United States Court of Appeals,Eighth Circuit.\n Submitted Jan. 12, 1976.Decided March 4, 1976.\n \n William H. Pickett, Kansas City, Mo., for appellant.\n Harry P. Thomson, Jr., Kansas City, Mo., for appellee; Fred Wilkins and Jack L. Campbell of Shughart, Thomson & Kilroy, Kansas City, Mo., on brief.\n Before MATTHES, Senior Circuit Judge, and HEANEY and ROSS, Circuit Judges.\n ROSS, Circuit Judge.\n \n \n 1\n Betty Garrett brought this action against her former employer, Mobil Oil Corporation (Mobil), under 42 U.S.C. § 2000e et seq. Garrett alleged her employment with Mobil was terminated because of her race (black) and because she asserted her rights under the statute. The district court denied relief reported at 395 F.Supp. 117 (W.D.Mo.1975). In this court Garrett has dropped the allegation that she was discharged because of her race, but appeals on the ground that she was fired for protesting racial discrimination which she in good faith believed Mobil was practicing.\n \n \n 2\n Garrett was hired on August 18, 1969, to work in Mobil's Credit Card Center in Kansas City. The Center bills and collects credit card accounts throughout the country. In October, 1969, Garrett transferred to the Center's incoming mail room.\n \n \n 3\n In early February, Garrett's supervisor, Jerry Eklund, told her that her work was not up to standard and she would have to improve. She complained about the way the mail room was being run and stated her belief that she was the victim of racial discrimination. Eklund attempted to explain the promotions of some white women whom Garrett felt should not have been promoted ahead of her. On February 13, 1970, Eklund discussed an employee appraisal with plaintiff in which he indicated that she barely met the requirements of her job.\n \n \n 4\n On March 11, 1970, she again spoke with Eklund, questioning the accuracy of her unfavorable work records and asking for better assignments. Eklund indicated that she would not be assigned to other work until her performance improved. Shortly thereafter Eklund was promoted to another department.\n \n \n 5\n On March 18, Garrett discussed her unfavorable February appraisal with her new supervisor, Beverly Lake. Lake explained to her that her work was still not satisfactory. After discussing her appraisal with Lake, and without Lake's permission or knowledge, Garrett left her work station at least twice and attempted to see Mr. Fox, the manager of the Center, and the Center Manager of Operations, Mr. Fish. Mr. Fox was not in, and on both occasions when she attempted to see Fish, Fish's secretary told her that he was in a meeting, and she should contact her supervisor. Later on the same day, Garrett left her work station a third time without her supervisor's knowledge and went to Mr. Ittel's office. Ittel was the Center's Employee Relations Manager, and was conferring with Beverly Lake, Garrett's supervisor. Ittel's secretary told the plaintiff she should return to her work station, to which Garrett replied: 'I'm not removing my ass from this office until I see Mr. Ittel.' At this point Lake came out of Ittel's office and persuaded Garrett to return to her work area. The same day Lake informed the plaintiff that the proper procedure to follow if she wished to speak to superiors in the Center was to ask her supervisor to make an appointment. Garrett said she did not realize that was the correct procedure until Lake explained it. Garrett told her supervisor that she was fed up with the way the incoming mail room was run, especially the way her supervisors watched her and picked on her. Lake discussed this complaint, and felt that Garrett was satisfied at the conclusion of their conference.\n \n \n 6\n On April 22, 1970, Betty Garrett spoke with Sandy Mitchell, Supervisor of Accounting and Office Services, during her coffee break. This was without her supervisor's knowledge. Her complaint was again about work assignments and her February evaluation. Mitchell apparently reported this to Beverly Lake. Lake met with the plaintiff, again emphasizing that this was not the proper procedure for registering grievances, and told her that she should speak to her supervisor first about any complaints. Garrett was also told by her supervisor that she was not given other work assignments because of her prior unsatisfactory appraisal, but a new one would soon be prepared.\n \n \n 7\n April 29, 1970, a new employee appraisal, prepared by Lake, was discussed with the plaintiff. It indicated she now fully met job requirements, although her 'attendance and punctuality need(ed) some improving;' but the 'factor most needing improvement' was '(t)endency to be untactful.' At this April 29 conference Garrett inquired about a raise, but was not satisfied by Lake's explanation of the criteria. At that point Lake made an appointment for the two of them to see the Manager of the Accounting and Office Services Department, who confirmed the supervisor's explanation.\n \n \n 8\n At the end of April and early in May, plaintiff began to receive other work assignments, which she had sought earlier. May 4, 1970, a raise to be effective May 25 was approved for her. She testified at trial that she knew she was up for a raise but was never told it had been approved.\n \n \n 9\n On June 3, 1970, without her supervisor's knowledge, Garrett and several other black women left the mail room and went to Mr. Ittel's office, where he was meeting with another executive of the company. Plaintiff and the others demanded to see Mr. Ittel; he came out of his office and asked them to leave. The other women left when asked but he had to repeat his request before Garrett would leave. Later that day Ittel met with Garrett and the Manager of the Accounting and Office Services Department, Frank Doan. Garrett complained that she and other blacks in the mail room were being discriminated against, and was told that this would be investigated. For the next two days Doan conducted an investigation, during which all of the other mail room employees were interviewed. As a result of his investigation Mobil concluded there was no racial discrimination in the mail room. On Monday, June 8, Garrett was not at work due to illness. After consulting with others, Doan decided to fire her. He was unable to reach her by telephone, and therefore the following telegram was sent.\n \n \n 10\n I have been unable to reach you by phone today so I as sending you this telegram. I have completed my investigation of your charges of alleged (sic) discrimination made last Wednesday, June 3 and find them unfounded. Your employment with Mobil Oil Corp. has been terminated effective 6--8--70. The reason for termination is your repeated violation of by-passing your supervisv (sic) in presenting complaints to management and disrupting work. * * *\n \n F. M. Doan--D. (sic) H. Lake\n \n 11\n At trial the defendant also stated plaintiff was fired because she repeatedly left her work area without permission.\n \n \n 12\n The case was tried without a jury, and the district judge found the facts to be as related above. He also found that plaintiff was not discharged because of race or her complaints of racial discrimination,1 but that she was properly discharged for the reasons stated by the defendant: leaving her work area, disobeying regulations in presenting her complaints to management, and disrupting operations.\n \n \n 13\n Garrett now contends the findings in the district court were clearly erroneous and that her conduct was not disruptive as a matter of law.2 She contends that her attempts to see top management were justified because her supervisors had ignored her complaints of racial discrimination and requests to see higher ranking officials. Garrett also points out that the employee handbook she was given when she began at Mobil states: 'While your immediate supervisor should be the first person you contact to resolve a problem, you may take it to higher levels of supervision if your Supervisor's decision does not satisfy you.' She denies ever being told by Lake that she would have to go through her supervisor and make an appointment to see higher ranking officials. Her second argument is that she was not disruptive because she destroyed no property, assaulted no one and broke no law.\n \n \n 14\n In a Title VII case the plaintiff must initially establish a prima facie case that defendant has violated the Act. The burden then shifts to defendant to show a valid reason for the action, and plaintiff is then afforded an opportunity to show that defendant's asserted reason is a mere pretext. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 804, 93 S.Ct. 1817, 1824, 1825, 36 L.Ed.2d 668, 677, 678 (1973). We assume for purposes of this opinion that Garrett met her initial burden of establishing a prima facie case; however, the judge's findings--that she was discharged for the reasons stated by Mobil and these reasons were not pretext are supported by substantial evidence and we cannot say they were clearly erroneous. Gillin v. Federal Paper Board Co., 479 F.2d 97, 101 (2d Cir. 1973); see Green v. McDonnell Douglas Corp., 528 F.2d 1102 (8th Cir. 1976); King v. Yellow Freight System, 523 F.2d 879, 882 (8th Cir. 1975); Naraine v. Western Electric Co., Inc., 507 F.2d 590, 593 (8th Cir. 1974); Fed.R.Civ.P. 52(a). Certainly an employer can fire a worker who refuses to obey reasonable regulations, leaves the work area without permission, and barges in on conferences and meetings of managerial personnel. The testimony of her supervisors contradicted her allegations that her complaints of racial discrimination and requests to see her superiors were ignored, and the district judge believed these witnesses instead of Garrett.\n \n \n 15\n Garrett's argument that her conduct was not disruptive as a matter of law is not persuasive. Actions which are neither illegal nor physically damaging to persons and property may be disruptive, and constitute valid reason for discharge. See, e.g., Smith v. Universal Services, Inc., 454 F.2d 154, 156 (5th Cir. 1972). We agree that plaintiff's conduct was unnecessarily disruptive to efficient operations of the defendant.\n \n \n 16\n The judgment of the district court is affirmed.\n \n \n \n 1\n Garrett no longer contends that her employment was terminated because of race, so we have not closely examined that issue. We note in passing, however, that the evidence introduced concerning the hiring, salary and promotions of blacks in the mail room compared to whites would seem to negate any inference of discrimination. See Garrett v. Mobil Oil Corp., 395 F.Supp. 117, 123 (W.D.Mo.1975)\n \n \n 2\n Garrett also contends that the case was unduly delayed. We have previously addressed this issue in Lowry v. Whitaker Cable Corp., 472 F.2d 1210, 1211 (8th Cir. 1973), and we adhere to the views expressed therein. However, the plaintiff does not show how she may have been injured by this delay, and we do not regard it as a basis for relief\n \n \n ", "ocr": false, "opinion_id": 333944 } ]

[ "897 F. Supp. 899" ]

[ { "author_str": "Bartle", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": 191, "opinion_text": "\n897 F.Supp. 899 (1995)\nPolice Officer Joy CARTER-HERMAN, et al.\nv.\nCITY OF PHILADELPHIA, et al.\nCiv. A. No. 95-4030.\nUnited States District Court, E.D. Pennsylvania.\nSeptember 15, 1995.\n*900 *901 Gilbert B. Abramson, Philadelphia, PA, for plaintiffs.\nE. Jane Hix, Philadelphia, PA, for defendants.\n\nMEMORANDUM\nBARTLE, District Judge.\nThis is a civil rights action in which a female police officer and a female police sergeant allege sexual harassment and retaliation by members of the Philadelphia Police Department (\"the Department\"). Plaintiffs have sued the City of Philadelphia, the Police Commissioner, and twelve other police officers of various ranks. At an early status conference, plaintiffs' counsel indicated his desire to interview non-party police officers without the presence of anyone representing the defendants. The City of Philadelphia opposed any ex parte interviews. To resolve the propriety of such contacts, the City has filed a motion for a protective order pursuant to Rule 26(c) of the Federal Rules of Civil Procedure.[1] The City contends that the Pennsylvania Rules of Professional Conduct preclude plaintiffs' counsel from ex parte communications with any current employee of the Department.\nPursuant to Local Rule 83.6 of the United States District Court for the Eastern District of Pennsylvania, the Rules of Professional Conduct adopted by the Supreme Court of Pennsylvania constitute the ethical rules which govern attorney conduct absent a specific rule of this court to the contrary. Rule 4.2 of those Rules provides:\nIn representing a client, a lawyer shall not communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.\nThe purpose of Rule 4.2 is to prevent lawyers from taking advantage of uncounselled lay persons and to preserve the efficacy and sanctity of the lawyer-client relationship. See G.C. Hazard, Jr., & W.W. Hodes, The Law of Lawyering 730 (2d ed. 1990); C.W. Wolfram, Modern Legal Ethics § 11.6 612-13 (1986).\nNeither the Pennsylvania Supreme Court nor the Court of Appeals for the Third Circuit has spoken on the application of Rule 4.2 to ex parte communications with current employees of a represented party. However, the Comment[2] to Rule 4.2, which is intended to guide our interpretation of the Rule, provides in relevant part:\nIn the case of an organization, this Rule prohibits communications by a lawyer for one party concerning the matter in representation with persons having a managerial responsibility on behalf of the organization, and with any other person whose act or omission in connection with that matter may be imputed to the organization for purposes of civil or criminal liability or whose statement may constitute an admission *902 on the part of the organization ... (Emphasis added).\nAccording to the Comment, counsel may not communicate with three categories of individuals who are connected with an opposing organization. First, the rule protects persons having \"managerial responsibility on behalf of the organization.\" The use of the present tense \"having\" indicates that this prohibition pertains to current employees only. Second, the rule covers any other person whose act or omission in connection with the matter may be imputed to the organization. This seems to apply to both present and former employees of the opposing party. Third, the rule applies to any other person whose statement may constitute an admission of the organization. The Federal Rules of Evidence define an \"admission\" as \"a statement made 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.\" Fed. R.Evid. 801(d)(2)(D).\nNotwithstanding the language of Rule 4.2 and the Comment, defendants rely on several decisions for the proposition that an informal interview with any individual employee of the Philadelphia Police Department, even those not individually named as parties, would constitute an ethical violation. They are Univ. Patents, Inc. v. Kligman, 737 F.Supp. 325 (E.D.Pa.1990); Niesig v. Team I, 149 A.D.2d 94, 545 N.Y.S.2d 153 (1989); and Action Air Freight, Inc. v. Pilot Air Freight Corp., 769 F.Supp. 899 (E.D.Pa.1991), appeal dismissed, 961 F.2d 207 (3rd Cir.1992).\nDefendants' reliance on Univ. Patents, Inc. is misplaced. In that case, University Patents, Inc. and the Trustees of the University of Pennsylvania sued to recover royalties from a Dr. Kligman. Plaintiff sought disqualification of Kligman's attorney because of ex parte contacts with university employees. Univ. Patents, Inc., 737 F.Supp. 325, 326 (E.D.Pa.1990). The court held that Rule 4.2's prohibition on ex parte communications with opposing party applied to deans, trustees, department chairmen, and the provost of the university and that Rule 4.2 did not apply to former employees. Id. at 328. The Court did not enter a blanket prohibition against speaking to all of plaintiffs' employees. Rather, the court only forbade defendant from using any information obtained from (a) the university's officers, directors and managers; (b) those whose acts or omissions could bind or impute liability to the university and (c) those whose statements could be used as admissions. Id. at 330.\nThe City's citation of Niesig v. Team I is likewise without merit. In that personal injury case, plaintiff's counsel sought to interview privately a corporate defendant's employees who witnessed the accident. Niesig v. Team I, 149 A.D.2d 94, 95-6, 545 N.Y.S.2d 153, 153-4 (1989). The Appellate Division of the New York Supreme Court held that direct interviews by plaintiff's counsel were barred with all current employees of the defendant corporation who witnessed the underlying accident because\"... [t]here simply is no available criterion by which to determine which corporate employees belong to any given corporation's `higher echelon,' and which employees belong to its `lower' one.\" Id. at 104-05. However, the New York Court of Appeals reversed this broad prohibition. The Court of Appeals held that only those \"employees with `speaking authority' for the corporation, and employees who are so closely identified with the interests of the corporate party as to be indistinguishable from it, are deemed `parties' for purposes of\" the prohibition on ex parte contacts. Niesig v. Team I, 76 N.Y.2d 363, 559 N.Y.S.2d 493, 498, 558 N.E.2d 1030, 1035 (1990).\nFinally Action Air Freight, Inc., is of no help to the City. There plaintiff sought to enjoin defendant's counsel from conducting ex parte contacts with its former managerial employees and non-managerial employees who were currently working for the defendant. Action Air Freight, Inc., 769 F.Supp. 899, 900 (E.D.Pa.1991). The court held that Rule 4.2 did not preclude defendant's counsel from making these ex parte contacts. Id. at 904.\nPlaintiffs rely on two cases outside this District that permit opposing counsel to conduct ex parte interviews with employees of a represented party. The first is Bouge v. Smith's Management Corp., 132 F.R.D. 560 (D.Utah 1990) in which the court, pursuant to *903 Rule 4.2, held that defendant's directive prohibiting its non-managerial employees from speaking to plaintiff's counsel was impermissible because it \"restricts the inquiry for evidence of truth and prevents ready access to information relevant to the litigation ...\" Id. at 566. This case, however, is of limited value. The court there had not adopted the Comment to Rule 4.2 and analyzed the issue differently than required here. Id. at 564.\nIn the second decision on which plaintiffs rely, Frey v. Dep't of Health and Human Services, 106 F.R.D. 32 (E.D.N.Y.1985), a sex discrimination suit against the Social Security Administration, the court defined the term \"party\" in accordance with DR-7-104(A)(1) of the Code of Professional Responsibility.[3]Id. at 35-6. It limited the definition of party to those employees who were the agency's alter ego, including high level managerial employees who participated in the decisions not to promote plaintiff. However, the court permitted contact with the remaining employees. Id.\nPlaintiffs argue that the Philadelphia Police Department is a close fraternity. They contend that many within the ranks would be willing to provide information about sex harassment but fear retribution unless they can speak privately and without attribution. According to plaintiffs, if a representative of the City were present at any interview, police officers would not talk. On the other hand, the City, while not opposed to interviews, wants the right to be present, since it claims to represent all city employees including the police, at least when they are acting within the scope of their employment. The City notes that some of those interviewed could end up as defendants in this or other lawsuits.\nWe do not accept the notion that every city employee is automatically a represented party simply by virtue of his or her employment without any initiative on the part of the employee to obtain legal help from the City. Otherwise an organization could thwart the purpose of Rule 4.2 simply by unilaterally pronouncing its representation of all its employees. On the other hand, even assuming the merits of plaintiffs' arguments about the difficulty in obtaining evidence without ex parte contacts, we cannot permit communications which violate the intent of Rule 4.2. The Rule with its Comment allows plaintiffs' counsel to contact and interview ex parte only those employees of the Philadelphia Police Department who do not have \"managerial responsibility.\" We need not deal with the other two prongs of the official comment here. The City does not argue that the act or omissions of any officers without management responsibility can be imputed as a matter of law to the City or that the statements of non-managerial police officers would constitute admissions.\nThe court has reviewed the written job descriptions of the various ranks of the Philadelphia Police Department for the purpose of determining who has managerial responsibility.[4] The Department's ranks are: Commissioner, Deputy Commissioner, Chief Inspector, Inspector, Staff Inspector, Captain, Lieutenant, Sergeant, Detective, Corporal, Officer, Officer I, and Officer Recruit. It is clear that the Commissioner, Deputy Commissioners, Chief Inspectors, Inspectors, Staff Inspectors, Captains, and Lieutenants have managerial responsibility. Captains, for example, command entire police districts or direct the work of a specialized police unit, while Lieutenants command an assigned shift in a district or a special police unit. (Letter from Hix to the Hon. Harvey Bartle III of 8/29/95). Captains and Lieutenants exercise significant individual judgment and discretion outside of established policies and procedures. Id. While those with the rank of Detective, Corporal, Officer, Officer I, and *904 Officer Recruit carry important duties for the public safety, they do not have managerial responsibility. We are left with the rank of Sergeant. Although the City argues that a Sergeant has managerial responsibilities significant enough to invoke the rule 4.2 prohibition by \"directing a squad of police officers,\" we find this contention to be unpersuasive. Id. The position of Sergeant is really analogous to that of a foreman, whose supervision of a small group of workers would not constitute a managerial position within a corporation. Id. Moreover, a Sergeant performs all work \"in accordance with departmental rules and regulations\" and receives instructions regarding assignments and procedures from a superior officer. Id.\nThe question now arises as to whether the court should impose any guidelines on the interviewers. We acknowledge the importance to the plaintiffs of being able to obtain informal discovery in support of their lawsuit. We also recognize the need to give some protection to those to be interviewed. While police officers are undoubtedly more sophisticated about the legal process than most laypersons, we believe the following guidelines provide the proper balance. Plaintiffs' counsel before conducting any interview shall advise the interviewee of:\n(1) counsel's representative capacity;\n(2) counsel's reasons for seeking the interview;\n(3) the interviewee's right to refuse to be interviewed; and\n(4) the interviewee's right to have his or her own counsel present.\nUniv. Patents, Inc. v. Kligman, 737 F.Supp. 325, 328 (E.D.Pa.1990) (citing Lizotte v. NYCHHC, 1990 WL 267421, 1990 U.S.Dist. LEXIS 2747 (S.D.N.Y.1990); Siguel v. Trustees of Tufts College, 1990 WL 29199, 1990 U.S.Dist. LEXIS 2775 (D.Mass.1990).\nAccordingly, the court will grant in part and deny in part the motion of the City for a protective order.\n\nORDER\nAND NOW, this 15th day of September, 1995, it is hereby ORDERED that defendant's motion for protective order precluding plaintiffs' counsel from ex parte communications with current employees or members of the Philadelphia Police Department is GRANTED in part and DENIED in part. Specifically, it is ORDERED that:\n1. Plaintiffs' counsel and their agents are precluded from ex parte communications with any current employee or member of the Philadelphia Police Department having managerial responsibility: namely, any Police Lieutenant, Police Captain, Police Staff Inspector, Police Inspector, Chief Police Inspector, Deputy Police Commissioner, and Police Commissioner.\n2. Plaintiffs' counsel and their agents are permitted to interview, without prior notice to or consent from defendants' counsel, current members or employees of the Philadelphia Police Department who fall below the rank of Police Lieutenant.\n3. Plaintiffs' counsel and their agents, in advance of any interview, shall advise any employee or member of the Philadelphia Police Department of: (a) counsel's representative capacity; (b) counsel's reasons for seeking the interview; (c) interviewee's right to refuse to be interviewed; and (d) the interviewee's right to have his or her own counsel present.\nNOTES\n[1] The rule reads in relevant part:\n\nUpon motion by a party or by the person from whom discovery is sought, ... and for good cause shown, the court in which the action is pending or alternatively, on matters relating to a deposition, the court in the district where the deposition is to be taken may make any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense ...\n[2] According to the \"Scope\" of the Rules, \"The comment accompanying each Rule explains and illustrates the meaning and purpose of the Rule. The Preamble and this note on Scope provide general orientation. The comments are intended as guides to interpretation, but the text of each Rule is authoritative.\n[3] DR-7-104(A)(1) of the Code of Professional Responsibility provides in relevant part:\n\n(A) During the course of his representation of a client a lawyer shall not:\n(1) Communicate or cause another to communicate on the subject of the representation with a party he knows to be represented by a lawyer in that matter unless he has the prior consent of the lawyer representing such other party or is authorized by law to do so.\n[4] This determination is based on the Department's table of organization and list of various job responsibilities supplied at the Court's request. (Letter from Hix to the Hon. Harvey Bartle III of 8/29/95).\n\n", "ocr": false, "opinion_id": 1470511 } ]

[ "536 F.2d 1126" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/536/536.F2d.1126.75-1763.html", "author_id": null, "opinion_text": "536 F.2d 1126\n Frank D. FELIX d/b/a Club Zeus, Plaintiff-Appellant,v.Coleman A. YOUNG, Mayor, City of Detroit, et al.,Defendants-Appellees.\n No. 75-1763.\n United States Court of Appeals,Sixth Circuit.\n Argued Feb. 18, 1976.Decided June 17, 1976.\n \n Stephen M. Taylor, Taylor & Rubin, Detroit, Mich., S. Richard Schneider, Schneider, Weisberg & Meisner, Southfield, Mich., for plaintiff-appellant.\n Elliott S. Hall, Maureen P. Reilly, John E. Cross, Detroit, Mich., for defendants-appellees.\n Before EDWARDS, CELEBREZZE and McCREE, Circuit Judges.\n CELEBREZZE, Circuit Judge.\n \n \n 1\n Appellant, Frank D. Felix, appeals the grant of summary judgment for Defendants in an action brought under 42 U.S.C. section 1983 (1970). Appellant owns the Club Zeus, a bar in Detroit which features \"topless\" dancing. He brought this suit against various city officials1 seeking to enjoin the enforcement of certain municipal ordinances which regulate the location of businesses providing adult entertainment.\n \n \n 2\n The Club Zeus is a Group \"D\" Cabaret as described by ordinance:\n \n \n 3\n A cabaret which features topless dancers, go-go dancers, exotic dancers, strippers, male or female impersonators, or similar entertainers.2\n \n \n 4\n As a condition to receiving a cabaret license, Appellant was required to comply with special zoning restrictions, notably a prohibition against the establishment of a Group \"D\" Cabaret within 1000 feet of two other \"regulated uses.\"3 The District Court found that there are three other regulated uses within 1000 feet of Club Zeus and that Appellant has not obtained a waiver of the restriction as provided by ordinance.4 Appellant claims that he need not seek waiver of the zoning restrictions because the municipal ordinances regulating the location of Group \"D\" Cabarets are unconstitutional, both on their face and as applied. He contends that the provisions are overbroad because they infringe on forms of expression protected by the First Amendment. He also claims that the ordinances violate the Equal Protection Clause of the Fourteenth Amendment because they classify businesses according to the content of expression offered the public.\n \n \n 5\n Appellees responded to the complaint by moving that the case be dismissed for failure to state a claim, Fed.R.Civ.P. 12(b)(6), or, in the alternative, that summary judgment be granted. Fed.R.Civ.P. 56. The District Judge, pursuant to Rule 12(b)5 treated the motion as one for summary judgment and considered the materials attached to Appellees' motion in making his ruling. See generally 6 J. Moore FEDERAL PRACTICE P 56.08 at 2104 (2d ed. 1975) (hereinafter Moore). Appellant chose to rely on his pleadings and did not submit any additional material to the Court. The District Judge found the ordinance constitutional on their face relying on the reasoning of Nortown Theatre, Inc. v. Gribbs, 373 F. Supp. 363 (E.D.Mich.1974), a case which has since been reversed on appeal under the name American Mini Theatres, Inc. v. Gribbs, 518 F.2d 1014 (6th Cir.), cert. granted 423 U.S. 911, 96 S. Ct. 214, 46 L. Ed. 2d 139 (1975). Appellant contends that the reversal of the District Court opinion in American Mini Theatres compels the same result in this case. He also charges that the Court below in granting Appellees' motion for summary judgment failed to adequately consider his claim that the ordinances were unconstitutional as applied to him.\n \n \n 6\n Summary judgment is a useful procedure for reaching the merits of a case short of conducting a full-blown trial. See generally 6 Moore P 56.15. Summary judgment is only appropriate where documents tendered to the Court disclose that no genuine issue of material fact remains to be decided.6 See United States v. Diapulse, 527 F.2d 1008, at 1011 (6th Cir. 1976). See also6 Moore P 56.04(1) at 2060. A District Judge may grant summary judgment only where the prevailing party has demonstrated as a matter of law that he is entitled to judgment on the merits. See Fed.R.Civ.P. 56(c). See also Kennedy v. Silas Mason Co., 334 U.S. 249, 252 n. 4, 68 S. Ct. 1031, 92 L. Ed. 1347 (1948). A court may not resolve disputed issues of fact in ruling on a summary judgment motion. See United States v. Diapulse, supra at 1011. If a question of fact remains, the motion for summary judgment should be denied and the case should proceed to trial. See Bohn Aluminum & Brass Corp. v. Storm King Corp., 303 F.2d 425, 427 (6th Cir. 1962). Since resolution of Appellant's challenge to the facial validity of the ordinances raised purely legal questions and did not involve disputed issues of fact, the District Court properly concluded that the issue was ripe for summary judgment.\n \n \n 7\n In ruling on the facial validity of the ordinance the District Judge adopted the legal analysis of Nortown Theatre, Inc. v. Gribbs, supra.7 However, in American Mini Theatres v. Gribbs, supra, a divided panel of this Court rejected the legal conclusions reached by the District Court and held that the Detroit ordinances regulating the location of adult theaters and adult book stores violated equal protection in that they created classifications which unduly infringed on protected First Amendment rights. The majority concluded that the ordinances in question classified businesses according to the character of the materials purveyed to the public and accordingly \" 'slip(ped) from the neutrality of time, place and circumstances into a concern about content,' \" 518 F.2d at 1020, quoting Police Dept. of Chicago v. Mosley, 408 U.S. 92, 99, 92 S. Ct. 2286, 33 L. Ed. 2d 212 (1972). If the District Court was correct that the disposition of this case should be controlled by resolution of the earlier cases, we would be compelled to reverse in light of American Mini Theatres.\n \n \n 8\n However, there is a critical distinction between this case and American Mini Theatres. This case does not concern the regulation of book stores or theaters but restrictions imposed on the location of cabarets, establishments licensed to dispense liquor.8 This crucial difference interjects an additional element into the case the power of the states under the Twenty-first Amendment to regulate the sale of alcohol. In California v. LaRue, 409 U.S. 109, 93 S. Ct. 390, 34 L. Ed. 2d 342 (1972), Justice Rehnquist writing for a majority of the Court, reversed a decision of a three-judge court and upheld the constitutionality of a regulation of the California Department of Alcoholic Beverage Control which prohibited explicitly sexual live entertainment and films in bars and other establishments licensed to dispense liquor by the drink. Justice Rehnquist noted that the regulation was promulgated \"not in the context of censoring a dramatic performance in a theater, but rather in a context of licensing bars and night clubs to sell liquor by the drink.\" 409 U.S. at 114, 93 S.Ct. at 395. He conceded that the Twenty-first Amendment does not supersede all other constitutional provisions in the area of liquor regulations, see e. g., Wisconsin v. Constantineau, 400 U.S. 433, 91 S. Ct. 507, 27 L. Ed. 2d 515 (1971), but stated that state regulations in the area of the Twenty-first Amendment are entitled to an enhanced presumption of validity. 409 U.S. at 115, 93 S. Ct. 390.\n \n \n 9\n Although the Court admitted that the California regulations on their face infringed on protected expression, the majority made it clear that traditional First Amendment standards are not appropriate guidelines for the exercise of state regulatory authority under the Twenty-first Amendment:\n \n \n 10\n We do not disagree with the District Court's determination that these regulations on their face would proscribe some forms of visual presentation that would not be found obscene under Roth and subsequent decisions of this Court. See, e. g., Sunshine Book Co. v. Summerfield, 355 U.S. 372, (78 S. Ct. 365, 2 L. Ed. 2d 352) (1958), rev'g per curiam, 101 U.S.App.D.C. 358, 249 F.2d 114 (1957). But we do not believe that the state regulatory authority in this case was limited to either dealing with the problem it confronted within the limits of our decisions as to obscenity, or in accordance with the limits prescribed for dealing with some forms of communicative conduct in O'Brien, supra. (United States v. O'Brien, 391 U.S. 367, 88 S. Ct. 1673, 20 L. Ed. 2d 672).\n \n \n 11\n 409 U.S. at 116, 93 S. Ct. at 396. The Larue majority went on to apply a rational basis test to the state regulations and found that \"(t)he Department's conclusion, embodied in these regulations, that certain sexual performances and the dispensation of liquor by the drink ought not to occur at premises that have licenses was not an irrational one.\" 409 U.S. at 118, 93 S.Ct. at 397. The Court stressed that the regulations, while facially overbroad, were not directed at the speech element of the entertainment but at the conduct of the entertainers and audience.9 Id. at 117-18, 93 S. Ct. 390. Noting that the Twenty-first Amendment affords a state \"wide latitude as to choice of means to accomplish a permissible end,\" the Court concluded that the state agency was within its power in establishing a broad prophylactic rule which prohibited \"lewd\" entertainment on licensed premises, even though some entertainment which might be termed \"lewd\" is actually protected speech and could not constitutionally be proscribed in specific instances. Id. at 116, 93 S. Ct. 390. Cf. id. at 119 n. 5, 93 S. Ct. 390. The Supreme Court also regarded as \"critical\" the fact that the state had not forbidden these performances \"across the board\" but only at establishments licensed to sell liquor by the drink. Id. at 118, 93 S. Ct. 390.\n \n \n 12\n In California v. Larue the Supreme Court recognized that the broad power of the states to regulate the sale of liquor may outweigh any First Amendment interest in nude dancing. A state may promulgate broad prophylactic rules banning sexually explicit entertainment at licensed bars and cabarets so long as the regulations represent a reasonable exercise of a state's Twenty-first Amendment authority and are rationally related to the furtherance of legitimate state interests. However, if the state's authority to control liquor traffic is not implicated in a regulatory plan which impinges on free expression, the regulation must withstand stricter scrutiny.10 See Doran v. Salem Inn, Inc., 422 U.S. 922, 932-933, 95 S. Ct. 2561, 45 L. Ed. 2d 648 (1975).\n \n \n 13\n We find that the Detroit ordinance establishing licensing requirements for Group \"D\" Cabarets was enacted by authority of the Twenty-first Amendment and so the relaxed standard of review in California v. Larue is applicable. Accord, Paladino v. Omaha, 471 F.2d 812, 814 (8th Cir. 1972). Although Michigan has a liquor control commission which is ultimately responsible for the regulation of liquor traffic in the state, its jurisdiction is not exclusive. The Michigan Supreme Court has sanctioned the enactment of municipal ordinances regulating local traffic in liquor.11 See e.g., Mutchall v. Kalamazoo, 323 Mich. 215, 35 N.W.2d 245, 248-49 (1948). The zoning restrictions on Group \"D\" Cabarets have been incorporated by reference into the requirements for a cabaret license.12 If the provisions restricting the location of Group 'D' Cabarets bear a reasonable relation to legitimate municipal interests, the facial validity of the ordinances must be upheld.\n \n \n 14\n The ordinances in question were enacted to combat a growing urban crisis the decay of residential neighborhoods into crime-infested \"no-man's lands\" where neighborhood taverns have been transformed into topless bars and apartments have deteriorated into flophouses. The Detroit Common Council, alarmed by the proliferation of businesses which attract the lowest stratum of society and the concomitant decline in the residential quality of inner city neighborhoods, enacted the challenged ordinances to control in the future the location of establishments offering adult entertainment.13 The Detroit plan was to deconcentrate the locations of cabarets offering sexually explicit entertainment and thereby diffuse the harmful impact a cluster of these establishments would have on the character of a residential neighborhood. To this end the Council enacted the prohibition against location of a Group \"D\" Cabaret within 1000 feet of two other regulated uses.14\n \n \n 15\n Attached to Appellee's motion for summary judgment were numerous affidavits from urban planners, experts on real estate values, businessmen, reporters and ordinary citizens who attested to the deleterious consequences which a high concentration of businesses offering adult entertainment could have on the character of urban neighborhoods. Appellant chose not to submit counter-affidavits. On the face of the record, we cannot conclude that the challenged ordinances regulating the location of Group \"D\" Cabarets are irrational or that they are not reasonably related to valid municipal interests. The restrictions are not imposed on adult entertainment per se but on the physical location of cabarets which feature adult entertainment. In this sense, the ordinances seek to regulate \"conduct\" and not \"expression.\"15 See California v. Larue, supra, 409 U.S. at 117-18, 93 S. Ct. 390. In light of California v. Larue, we must conclude that the restrictions are constitutional on their face and represent an appropriate exercise of the city's Twenty-first Amendment authority to regulate the location of establishments licensed to sell liquor within municipal boundaries. In fact, the Detroit ordinances are less restrictive than the regulation upheld by the Supreme Court in Larue. The California rule banned nude dancing at all locations licensed to distribute liquor by the drink whereas Detroit permits cabarets to offer adult entertainment so long as their licensees comply with the city zoning code. The District Court was correct in concluding that the ordinances restricting the location of Class \"D\" Cabarets are constitutional on their face.\n \n \n 16\n Appellant also charged in his complaint that the special licensing and zoning provisions for Group \"D\" Cabarets, even though constitutional on their face, could not constitutionally be applied to him because the entertainment provided at the Club Zeus is protected by the First Amendment and enforcement of the ordinances in this instance would unduly infringe on his right to free expression. He argues that the District Judge granted Appellees' motion for summary judgment without adequate consideration of the constitutionality of the ordinances as applied. We agree.\n \n \n 17\n An ordinance which is not overbroad on its face may nevertheless be unconstitutional as applied if it is enforced against a protected activity. Cf. Grayned v. City of Rockford, 408 U.S. 104, 106 n. 1, 114, 92 S. Ct. 2294, 33 L. Ed. 2d 222 (1972). Justice Rehnquist carefully restricted his remarks in California v. Larue to the facial validity of regulations enacted under the Twenty-first Amendment. See 409 U.S. at 119 n. 5, 93 S. Ct. 390. He admitted that the Twenty-first Amendment does not supersede other constitutional provisions in the area of liquor regulation, 409 U.S. at 115, 93 S. Ct. 390, and, while upholding the validity of the California liquor regulation on its face, he recognized the possibility \" 'that specific future applications of (the statute) may engender concrete problems of constitutional dimension. . . .' \" 409 U.S. at 119 n. 5, 93 S. Ct. at 397, quoting Seagram & Sons v. Hostetter, 384 U.S. 35, 52, 86 S. Ct. 1254, 16 L. Ed. 2d 336 (1966). Thus California v. Larue does not foreclose the argument that an otherwise valid ordinance under the Twenty-first Amendment may be applied in such a way as to infringe on rights protected by the First Amendment.16 See also California v. Larue, supra at 120 n. 1, 93 S. Ct. 390 (Stewart, J., concurring).\n \n \n 18\n Appellees argue that Appellant's failure to come forward with additional facts to support the allegations in the complaint should foreclose his right to contest the grant of summary judgment. They contend that the burden was on Appellant to come forward and respond to the affidavits they submitted and that he should not have relied solely on his pleadings to survive summary judgment. This argument, however, is misconceived because it reverses the proper burden of proof on a motion for summary judgment. Under Rule 56(c) the moving party always has the initial burden of showing the absence of a genuine issue of material fact and that he is entitled to judgment as a matter of law. See Adickes v. Kress & Co., 398 U.S. 144, 159-60, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970). See generally 6 Moore P 56.15(3). When the initial burden has been supported by additional materials, the non-moving party must then come forward with specific facts which demonstrate to the court that there is a genuine issue for trial.17 However, the fact that the movant's affidavits are uncontroverted does not necessarily mean that summary judgment should be granted the ultimate burden of proving the propriety of summary judgment remains on the moving party.18 See Adickes v. Kress & Co., supra at 159-60, 90 S. Ct. 1598; Fitzke v. Shappell, 408 F.2d 1072 (6th Cir. 1972). As the Supreme Court observed in Adickes v. Kress & Co., the Advisory Committee on the 1963 Amendments to Rule 56 expressly rejected the idea that subdivision (e) altered the ordinary standards of proof in a motion for summary judgment:\n \n \n 19\n '(w)here the evidentiary matter in support of the motion does not establish the absence of a genuine issue, summary judgment must be denied even if no opposing evidentiary matter is presented.'\n \n \n 20\n 398 U.S. at 160, 90 S. Ct. at 1610 (emphasis in original), quoting Advisory Committee Notes on 1963 Amendment to Rule 56.\n \n \n 21\n Appellees failed to meet their initial burden on the issue of the constitutionality of the ordinances as applied. The affidavits attached to the motion for summary judgment were exclusively addressed to the issue of the facial validity of the ordinances. No attempt was made to dispute Appellant's contention that the entertainment provided at Club Zeus was protected speech and that enforcement of the ordinances against him would unduly infringe on his constitutional rights. No facts were presented either by affidavit, stipulation or otherwise as to the exact nature of the entertainment provided at the cabaret. Appellant's admission that the entertainment involved topless dancing does not, by itself, remove the case from the ambit of the First Amendment since even nude dancing may, under some circumstances, be entitled to constitutional protection. See Doran v. Salem Inn, Inc., supra, 422 U.S, at 932, 95 S. Ct. 2561; California v. Larue, supra, 409 U.S. at 118, 93 S. Ct. 390. See also Salem Inn, Inc. v. Frank, 501 F.2d 18, 21 n. 3 (2d Cir. 1974), aff'd in part, rev'd in part sub nom. Doran v. Salem Inn, Inc., supra.\n \n \n 22\n As we have stated on many occasions, without an adequate factual basis in the record, a District Court should be extremely hesitant to grant summary judgment on important and complex issues. See e. g., Tee-Pak, Inc. v. St. Regis Paper Co., 491 F.2d 1193, 1196 (6th Cir. 1974). See generally 6 Moore P 1.06 at 2305. The adequacy of the record is particularly important where the court is called on to decide questions of constitutional law without benefit of a trial. See 6 (part 2) Moore P 56(10) at 56-772-77. Appellant should have been given the opportunity to prove his allegation that enforcement of the special provisions relating to Group \"D\" Cabarets in this instance would unduly infringe on protected speech. Without reliable evidence on the record as to the exact nature of the entertainment offered by Appellant, the District Court could not have adjudicated Appellant's claim that the ordinances were unconstitutional as applied. A court should be particularly vigilant in the protection of an individual's right to free expression where a municipality seeks to enforce ordinances which admittedly reach protected activities on their face.\n \n \n 23\n We find that the Detroit ordinances regulating the location of Group \"D\" Cabarets are constitutional on their face and summary judgment as to this issue was appropriate. The ordinances were enacted pursuant to authority granted by the Twenty-first Amendment and are rationally related to the legitimate municipal interest of preserving the residential character of urban neighborhoods. Summary judgment should not have been granted, however, on the issue of the constitutionality of the ordinances as applied in this case because the record was inadequate to determine whether the activities engaged in by Appellant were protected by the First Amendment and whether enforcement of the ordinances would unduly infringe on the enjoyment of Appellant's right to free expression.\n \n \n 24\n Affirmed in part, reversed in part and remanded.\n \n \n 25\n McCREE, Circuit Judge (dissenting).\n \n \n 26\n I respectfully dissent from the majority's decision holding the challenged ordinance to be facially constitutional under the Twenty-first Amendment.\n \n \n 27\n In California v. LaRue, 409 U.S. 109, 93 S. Ct. 390, 34 L. Ed. 2d 342 (1972), the Supreme Court considered regulations issued by the California Department of Alcoholic Beverage Control that prohibited performances by male or female entertainers that partook \"more of gross sexuality than of communication.\" 409 U.S. at 109, 93 S.Ct. at 391. The portions of the regulations held facially constitutional by the Supreme Court prohibited the following kinds of conduct on licensed premises:\n \n \n 28\n (a) The performance of acts, or simulated acts, of \"sexual intercourse, masturbation, sodomy, bestiality, oral copulation, flagellation or any sexual acts which are prohibited by law\";\n \n \n 29\n (b) The actual or simulated \"touching, caressing or fondling on the breast, buttocks, anus or genitals\";\n \n \n 30\n (c) The actual or simulated \"displaying of the pubic hair, anus, vulva or genitals\";\n \n \n 31\n (d) The permitting by a licensee of \"any person to remain in or upon the licensed premises who exposes to public view any portion of his or her genitals or anus\"; and, by a companion section,\n \n \n 32\n (e) The displaying of films or pictures depicting acts a live performance of which was prohibited by the regulations quoted above. Rules 143.3 and 143.4., 409 U.S. at 111-12, 93 S.Ct. at 394.\n \n \n 33\n The ordinance in the case before us affects bars or other liquor controlled businesses that feature \"topless dancers, go-go dancers, exotic dancers, strippers, male or female impersonators, or similar entertainers.\" Detroit Michigan Ordinance No. 744-G § 5-4-1, October 26, 1972.\n \n \n 34\n LaRue holds that a regulation that prohibits specific kinds of explicit sexual conduct on premises where liquor is served will not be held facially unconstitutional merely because some of the conduct that it comprehends is protected by the First Amendment. In this appeal, however, the ordinance limits the bar owner's presentation of certain categories of entertainers whose conduct may or may not involve gross sexuality more than communication in the medium of entertainment.\n \n \n 35\n Another and perhaps more important distinction exists between the Detroit ordinance and the California regulations considered in LaRue. The Detroit ordinance appears to be more concerned with regulating land use than it is with regulating the delivery and use of liquor under the Twenty-first Amendment. This is evident from the fact that the Detroit ordinance does not forbid a licensed bar from presenting the proscribed entertainers if 51% of the neighbors living or doing business within 500 feet of the proposed location approved or if there are fewer than two other uses regulated by the ordinance within 1,000 feet of the proposed location. On the other hand, the California regulations forbade the proscribed conduct at all business places, without exception, where liquor was dispensed.\n \n \n 36\n I do not read LaRue as giving blanket authority to states to regulate under the Twenty-first Amendment every kind of conduct by performers in bars. When a state seeks to control barroom performances that partake \"more of gross sexuality than of communication,\" the Twenty-first Amendment will insulate from a charge of facial unconstitutionality regulations that prohibit acts of gross sexuality on regulated premises. The Twenty-first Amendment does not, however, authorize ordinances like the one attacked here.\n \n \n 37\n In Miller v. California, 413 U.S. 15, 93 S. Ct. 2607, 37 L. Ed. 2d 419 (1973), the Supreme Court indicated that statutes designed to regulate obscenity must be carefully drawn. Indeed, the sexual conduct sought to be regulated or proscribed \"must be specifically defined by applicable state law, as written or authoritatively construed.\" 413 U.S. at 24, 93 S.Ct. at 2611. As examples of what a state statute could define for regulation, the Court suggested:\n \n \n 38\n (a) Patently offensive representations or descriptions of ultimate sexual acts, normal or perverted, actual or simulated.\n \n \n 39\n (b) Patently offensive representations or descriptions of masturbation, excretory functions, and lewd exhibition of the genitals. 413 U.S. at 25, 93 S.Ct. at 2615.\n \n \n 40\n The drafters of the regulations in LaRue appear to have been influenced by the Court's suggestions in Miller, because they tried to regulate conduct consistent with the Miller formula. Although the regulation exceeded the boundaries set down in Miller, the Supreme Court held that the slight variance was not fatal because of the state's authority to regulate dispensation of liquor.\n \n \n 41\n In this appeal, however, the City of Detroit failed to surmount the first hurdle in attempting to regulate sexual conduct. It failed to \"specifically define\" the kind of sexual conduct that was subject to regulation. Topless dancers, go-go dancers, strippers, exotic dancers and impersonators are not, without more, obscene. Although it is possible one or more of these performers might engage in obscene conduct, the ordinance is not restricted to such entertainment, nor does it afford definite standards of obscenity. The Michigan courts do not appear to have \"authoritatively construed\" the challenged ordinance so that it is limited to particular obscene conduct. Cf. Talley v. Detroit, 54 Mich.App. 328, 220 N.W.2d 778 (1974), on rehearing, 58 Mich.App. 261, 227 N.W.2d 214 (1975).\n \n \n 42\n Accordingly, I view this ordinance as being grossly facially overbroad because it attempts to regulate all forms of expression by listed entertainers. I do not read LaRue as permitting this court to uphold such an ordinance in the face of such substantial overbreadth.\n \n \n \n 1\n Named as Defendants were the present and former mayors of Detroit, the Detroit Corporation Counsel, the Commissioner of the Police Department, the Commissioner of the Department of Building and Safety, and the Director-Secretary of the City Planning Commission\n \n \n 2\n Detroit, Mich., Ordinance No. 744-G § 5-4-1, October 26, 1972. See also Ordinance No. 742-G § 32.0007\n \n \n 3\n Ordinance No. 744-G which lists the requirements for a Group \"D\" Cabaret license incorporates provisions of the city zoning code by reference:\n Sec. 5-4-2. It shall be unlawful for any person to hereafter operate any cabaret, club cabaret, Group \"D\" Cabaret, or limited cabaret in the city without having first obtained proper license therefore from the Bureau of Licenses and Permits. No license shall be issued until the applicant shall have complied with the requirements of the Official Zoning Ordinance, the provisions of this article and other applicable ordinances of the City of Detroit . . . .\n Ordinance No. 742-G includes Group \"D\" Cabarets among the uses specially regulated and prohibits the location of a Group \"D\" Cabaret within 1000 feet of two other regulated uses:\n \n \n 66\n 0000 Regulated Uses\n In the development and execution of this Ordinance, it is recognized that there are some uses which, because of their very nature, are recognized as having serious objectionable operational characteristics, particularly when several of them are concentrated under certain circumstances thereby having a deleterious effect upon the adjacent areas. Special regulation of these uses is necessary to insure that these adverse effects will not contribute to the blighting or downgrading of the surrounding neighborhood. These special regulations are itemized in this section. The primary control or regulation is for the purpose of preventing a concentration of these uses in any one area (i. e. not more than two such uses within one thousand feet of each other which would create such adverse effects). Uses subject to these controls are as follows:\n Adult\n Adult Book Store\n Adult Motion Picture Theater\n Adult Mini Motion Picture Theater\n Cabaret\n Group 'D' Cabaret\n Establishment for the sale of beer or intoxicating liquor for consumption on the premises.\n Hotels or motels\n Pawnshops\n Pool or billiard halls\n Public lodging houses\n Secondhand stores\n Shoeshine parlors\n Taxi dance halls\n \n \n 4\n The District Court initially made these findings in its order denying a preliminary injunction. The City Plan Commission may waive enforcement of the zoning restrictions against concentration of regulated uses:\n Section 66.0101.\n The Commission may waive this locational provision for Adult Book Stores, Adult Motion Picture Theatres, Adult Mini Motion Picture Theaters, Group \"D\" Cabarets, hotels or motels, pawnshops, pool or billiard halls, public lodging houses, secondhand stores, shoeshine parlors, or taxi dance halls if the following findings are made:\n a) That the proposed use will not be contrary to the public interest or injurious to nearby properties, and that the spirit and intent of this Ordinance will be observed.\n b) That the proposed use will not enlarge or encourage the development of a \"skid row\" area.\n c) That the establishment of an additional regulated use in the area will not be contrary to any program of neighborhood conservation nor will it interfere with any program of urban renewal.\n d) That all applicable regulations of this Ordinance will be observed.\n \n \n 5\n If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56\n Fed.R.Civ.P. 12(b).\n \n \n 6\n The judgment sought 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\n Fed.R.Civ.P. 56(c).\n \n \n 7\n In Nortown the District Court granted summary judgment for Defendants in a number of civil actions presenting substantially identical challenges to the facial validity of the Detroit ordinances regulating the location of adult bookstores, adult motion picture theaters and adult mini motion picture theaters. The opinion was jointly authored by Judges Kennedy and Gubow of the Eastern District of Michigan who had consolidated the cases for purposes of ruling on motions for summary judgment. Although they acknowledged that the ordinances created classifications of businesses which restrain conduct protected by the First Amendment, the District Judges upheld the facial validity of the ordinances and found that they were enacted to further the compelling governmental interest of preserving the residential quality of neighborhoods from the deleterious impact of a concentration of adult entertainment business. The District Court voided another Detroit zoning restriction which prohibited location of a regulated use within 500 feet of a single dwelling or rooming unit. The Court held that this provision imposed a greater incidental restriction on First Amendment freedoms than was essential to preserve and stabilize residential neighborhoods\n \n \n 8\n Ordinance No. 744-G defines a \"cabaret\" as:\n Any place wherein food and any type of alcoholic beverage is sold or given away on the premises and the operator thereof holds a yearly license from the state to sell such beverages by the glass and where the patrons are provided with entertainment or space for dancing.\n \n \n 9\n \"The substance of the regulations struck down prohibits licensed bars or nightclubs from displaying, either in the form of movies or live entertainment, \"performances\" that partake more of gross sexuality than of communication. While we agree that at least some of the performances to which these regulations address themselves are within the limits of the constitutional protection of freedom of expression, the critical fact is that California has not forbidden these performances across the board. It has merely proscribed such performances in establishments that it licenses to sell liquor by the drink\n Viewed in this light, we conceive the State's authority in this area to be somewhat broader than did the District Court. This is not to say that all such conduct and performance are without the protection of the First and Fourteenth Amendments. But we would poorly serve both the interests for which the State may validly seek vindication and the interests protected by the First and Fourteenth Amendments were we to insist that the sort of bacchanalian revelries that the Department sought to prevent by these liquor regulations were the constitutional equivalent of a performance by a scantily clad ballet troupe in a theater.\"\n 409 U.S. at 118, 93 S. Ct. at 397.\n \n \n 10\n Thus both the District Court in Nortown Theatre, Inc. v. Gribbs, supra at 369, and the majority and dissenting opinions in American Mini Theatres v. Gribbs, supra at 1019, 1023, applied a standard of strict scrutiny to ordinances regulating the location of adult book stores and adult theaters\n \n \n 11\n In Tally v. City of Detroit, 54 Mich.App.328, 220 N.W.2d 778 (Ct.App.1974), aff'd on rehearing 58 Mich.App. 261, 227 N.W.2d 214 (Ct.App.1975), the Michigan Court of Appeals affirmed the facial validity of Detroit Ordinance No. 744-G in the face of a First Amendment challenge to the licensing requirements for Group \"D\" Cabarets. Relying on California v. Larue, the Michigan Court found that the City derived its power of home rule from the state and that the ordinance in question was a reasonable exercise of Detroit's Twenty-first Amendment authority to regulate local liquor traffic. Id., 220 N.W.2d at 783. See also Crownover v. Musick, 9 Cal. 3d 405, 107 Cal. Rptr. 681, 509 P.2d 497 (1973); Manos v. City of Green Bay, 372 F. Supp. 40 (E.D.Wis.1974)\n \n \n 12\n See note 3 supra\n \n \n 13\n The zoning restrictions do not extend to non-conforming uses established prior to enactment of the ordinances\n \n \n 14\n See Ordinance No. 742-G § 66.0000. The Council also inserted section 66.0103 which prohibited the location of a Group \"D\" Cabaret within 500 feet of a single dwelling or rooming unit. This section was declared unconstitutional by the District Court in Nortown Theatre Inc. v. Gribbs, supra at 369-70, but has since been amended\n \n \n 15\n The motives of the Common Council in enacting the ordinances in question are largely irrelevant to our inquiry. Although we are bound by Council's statement of the legislative purpose for the acts, only the effect of the legislation is relevant to the question of its constitutionality and not the motives underlying its enactment. See American Mini Theatres, Inc. v. Gribbs, supra at 1019. As the Supreme Court stated in United States v. O'Brien, 391 U.S. 367, 383, 88 S. Ct. 1673, 1682, 20 L. Ed. 2d 672 (1968):\n It is a familiar principle of constitutional law that this Court will not strike down an otherwise constitutional statute on the basis of an alleged illicit legislative motive. As the Court long ago stated:\n \"The decisions of this court from the beginning lend no support whatever to the assumption that the judiciary may restrain the exercise of lawful power on the assumption that a wrongful purpose or motive has caused the power to be exerted.\" McCray v. United States, 195 U.S. 27, 56 (24 S. Ct. 769, 776, 49 L. Ed. 78) (1904).\n This fundamental principle of constitutional adjudication was reaffirmed and the many cases were collected by Mr. Justice Brandeis for the Court in Arizona v. California, 283 U.S. 423, 455 (51 S. Ct. 522, 75 L. Ed. 1154) (1931).\n \n \n 16\n Justice Douglas in his dissenting opinion in Larue offered a classic example of a case where a facially valid licensing provision under the Twenty-first Amendment may be unconstitutionally applied to an activity protected by the First Amendment:\n It is conceivable that a licensee might produce in a garden served by him a play Shakespearean perhaps of one in a more modern setting in which for example, \"fondling\" in the sense of the rules appears. I cannot imagine that any such performance could constitutionally be punished or restrained, even though the police power of a State is now buttressed by the Twenty-first Amendment. For, as stated by the Court, that Amendment did not supersede all other constitutional provisions \"in the area of liquor regulations.\" Certainly a play which passes muster under the First Amendment is not made illegal because it is performed in a beer garden.\n 409 U.S. at 121, 93 S. Ct. at 398 (footnote omitted). On their face, the Detroit ordinances regulating Group \"D\" Cabarets could be applied to dinner theaters licensed to dispense liquor by the drink which present performances of \"Twelfth Night\" or \"As You Like It\", two Shakespearean comedies which feature sexual impersonation, or more modern plays which contain overt sexuality, but which are nevertheless protected by the First Amendment. Conceivably, enforcement of the ordinances in these instances could present \"concrete problems of constitutional dimension\" which Justice Rehnquist alluded to in Larue. 409 U.S. at 119 n. 5, 93 S. Ct. 390.\n \n \n 17\n When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him\n Fed.R.Civ.P. 56(e).\n \n \n 18\n While there is an element of risk to the non-moving party when he fails to respond to the materials attached to a motion for summary judgment, the primary burden remains on the moving party to prove his right of judgment:\n It has always been perilous for the opposing party neither to proffer any countering evidentiary materials nor file a 56(f) affidavit. And the peril rightly continues. Yet the party moving for summary judgment has the burden to show that he is entitled to judgment under established principles; and if he does not discharge that burden then he is not entitled to judgment. No defense to an insufficient showing is required. 6 Moore P 56.22(2) at 2824-25.\n \n \n ", "ocr": false, "opinion_id": 336228 }, { "author_str": "Celebrezze", "per_curiam": false, "type": "020lead", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nCELEBREZZE, Circuit Judge.\nAppellant, Frank D. Felix, appeals the grant of summary judgment for Defendants in an action brought under 42 U.S.C. section 1983 (1970). Appellant owns the Club Zeus, a bar in Detroit which features “topless” dancing. He brought this suit against various city officials1 seeking to enjoin the enforcement of certain municipal *1129ordinances which regulate the location of businesses providing adult entertainment.\nThe Club Zeus is a Group “D” Cabaret as described by ordinance:\nA cabaret which features topless dancers, go-go dancers, exotic dancers, strippers, male or female impersonators, or similar entertainers.2\nAs a condition to receiving a cabaret license, Appellant was required to comply with special zoning restrictions, notably a prohibition against the establishment of a Group “D” Cabaret within 1000 feet of two other “regulated uses.”3 The District Court found that there are three other regulated uses within 1000 feet of Club Zeus and that Appellant has not obtained a waiver of the restriction as provided by ordinance.4 Appellant claims that he need not seek waiver of the zoning restrictions because the municipal ordinances regulating the location of Group “D” Cabarets are unconstitutional, both on their face and as applied. He contends that the provisions are overbroad because they infringe on forms of expression protected by the First Amendment. He also claims that the ordinances violate the Equal Protection Clause of the Fourteenth Amendment because they classify businesses according to the content of expression offered the public.\n*1130Appellees responded to the complaint by moving that the case be dismissed for failure to state a claim, Fed.R.Civ.P. 12(b)(6), or, in the alternative, that summary judgment be granted. Fed.R.Civ.P. 56. The District Judge, pursuant to Rule 12(b)5 treated the motion as one for summary judgment and considered the materials attached to Appellees’ motion in making his ruling. See generally 6 J. Moore FEDERAL PRACTICE 156.08 at 2104 (2d ed. 1975) (hereinafter Moore). Appellant chose to rely on his pleadings and did not submit any additional material to the Court. The District Judge found the ordinance constitutional on their face relying on the reasoning of Nortown Theatre, Inc. v. Gribbs, 373 F.Supp. 363 (E.D.Mich.1974), a case which has since been reversed on appeal under the name American Mini Theatres, Inc. v. Gribbs, 518 F.2d 1014 (6th Cir.), cert. granted 423 U.S. 911, 96 S.Ct. 214, 46 L.Ed.2d 139 (1975). Appellant contends that the reversal of the District Court opinion in American Mini Theatres compels the same result in this case. He also charges that the Court below in granting Appellees’ motion for summary judgment failed to adequately consider his claim that the ordinances were unconstitutional as applied to him.\nSummary judgment is a useful procedure for reaching the merits of a case short of conducting a full-blown trial. See generally 6 Moore 156.15. Summary judgment is only appropriate where documents tendered to the Court disclose that no genuine issue of material fact remains to be decided.6 See United States v. Diapulse, 527 F.2d 1008, at 1011 (6th Cir. 1976). See also 6 Moore K 56.04[1] at 2060. A District Judge may grant summary judgment only where the prevailing party has demonstrated as a matter of law that he is entitled to judgment on the merits. See Fed.R.Civ.P. 56(c). See also Kennedy v. Silas Mason Co., 334 U.S. 249, 252 n. 4, 68 S.Ct. 1031, 92 L.Ed. 1347 (1948). A court may not resolve disputed issues of fact in ruling on a summary judgment motion. See United States v. Diapulse, supra at 1011. If a question of fact remains, the motion for summary judgment should be denied and the case should proceed to trial. See Bohn Aluminum & Brass Corp. v. Storm King Corp., 303 F.2d 425, 427 (6th Cir. 1962). Since resolution of Appellant’s challenge to the facial validity of the ordinances raised purely legal questions and did not involve disputed issues of fact, the District Court properly concluded that the issue was ripe for summary judgment.\nIn ruling on the facial validity of the ordinance the District Judge adopted the legal analysis of Nortown Theatre, Inc. v. Gribbs, supra.7 However, in American Mini\n*1131Theatres v. Gribbs, supra, a divided panel of this Court rejected the legal conclusions reached by the District Court and held that the Detroit ordinances regulating the location of adult theaters and adult book stores violated equal protection in that they created classifications which unduly infringed on protected First Amendment rights. The majority concluded that the ordinances in question classified businesses according to the character of the materials purveyed to the public and accordingly “ ‘slip[ped] from the neutrality of time, place and circumstances into a concern about content,’ ” 518 F.2d at 1020, quoting Police Dept. of Chicago v. Mosley, 408 U.S. 92, 99, 92 S.Ct. 2286, 33 L.Ed.2d 212 (1972). If the District Court was correct that the disposition of this case should be controlled by resolution of the earlier cases, we would be compelled to reverse in light of American Mini Theatres.\nHowever, there is a critical distinction between this case and American Mini Theatres. This case does not concern the regulation of book stores or theaters but restrictions imposed on the location of cabarets, establishments licensed to dispense liquor.8 This crucial difference interjects an additional element into the case — the power of the states under the Twenty-first Amendment to regulate the sale of alcohol. In California v. LaRue, 409 U.S. 109, 93 S.Ct. 390, 34 L.Ed.2d 342 (1972), Justice Rehnquist writing for a majority of the Court, reversed a decision of a three-judge court and upheld the constitutionality of a regulation of the California Department of Alcoholic Beverage Control which prohibited explicitly sexual live entertainment and films in bars and other establishments licensed to dispense liquor by the drink. Justice Rehnquist noted that the regulation was promulgated “not in the context of censoring a dramatic performance in a theater, but rather in a context of licensing bars and night clubs to sell liquor by the drink.” 409 U.S. at 114, 93 S.Ct. at 395. He conceded that the Twenty-first Amendment does not supersede all other constitutional provisions in the area of liquor regulations, see e. g., Wisconsin v. Constantineau, 400 U.S. 433, 91 S.Ct. 507, 27 L.Ed.2d 515 (1971), but stated that state regulations in the area of the Twenty-first Amendment are entitled to an enhanced presumption of validity. 409 U.S. at 115, 93 S.Ct. 390.\nAlthough the Court admitted that the California regulations on their face infringed on protected expression, the majority made it clear that traditional First Amendment standards are not appropriate guidelines for the exercise of state regulatory authority under the Twenty-first Amendment:\nWe do not disagree with the District Court’s determination that these regulations on their face would proscribe some forms of visual presentation that would not be found obscene under Roth and subsequent decisions of this Court. See, e. g., Sunshine Book Co. v. Summerfield, 355 U.S. 372, [78 S.Ct. 365, 2 L.Ed.2d 352] (1958), rev’g per curiam, 101 U.S.App. D.C. 358, 249 F.2d 114 (1957). But we do not believe that the state regulatory authority in this case was limited to either dealing with the problem it confronted within the limits of our decisions as to obscenity, or in accordance with the limits prescribed for dealing with some forms of communicative conduct in O’Brien, supra. [United States v. O’Brien, 391 U.S. 367, 88 S.Ct. 1673, 20 L.Ed.2d 672],\n409 U.S. at 116, 93 S.Ct. at 396. The Larue majority went on to apply a rational basis test to the state regulations and found that “[t]he Department’s conclusion, embodied in these regulations, that certain sexual performances and the dispensation of liquor by the drink ought not to occur at premises that have licenses was not an irrational *1132one.” 409 U.S. at 118, 93 S.Ct. at 397. The Court stressed that the regulations, while facially overbroad, were not directed at the speech element of the entertainment but at the conduct of the entertainers and audience.9 *Id. at 117-18, 93 S.Ct. 390. Noting that the Twenty-first Amendment affords a state “wide latitude as to choice of means to accomplish a permissible end,” the Court concluded that the state agency was within its power in establishing a broad prophylactic rule which prohibited “lewd” entertainment on licensed premises, even though some entertainment which might be termed “lewd” is actually protected speech and could not constitutionally be proscribed in specific instances. Id. at 116, 93 S.Ct. 390. Cf. id. at 119 n. 5, 93 S.Ct. 390. The Supreme Court also regarded as “critical” the fact that the state had not forbidden these performances “across the board” but only at establishments licensed to sell liquor by the drink. Id. at 118, 93 S.Ct. 390.\nIn California v. Larue the Supreme Court recognized that the broad power of the states to regulate the sale of liquor may outweigh any First Amendment interest in nude dancing. A state may promulgate broad prophylactic rules banning sexually explicit entertainment at licensed bars and cabarets so long as the regulations represent a reasonable exercise of a state’s Twenty-first Amendment authority and are rationally related to the furtherance of legitimate state interests. However, if the state’s authority to control liquor traffic is not implicated in a regulatory plan which impinges on free expression, the regulation must withstand stricter scrutiny.10 See Doran v. Salem Inn, Inc., 422 U.S. 922, 932-933, 95 S.Ct. 2561, 45 L.Ed.2d 648 (1975).\nWe find that the Detroit ordinance establishing licensing requirements for Group “D” Cabarets was enacted by authority of the Twenty-first Amendment and so the relaxed standard of review in California v. Larue is applicable. Accord, Paladino v. Omaha, 471 F.2d 812, 814 (8th Cir. 1972). Although Michigan has a liquor control commission which is ultimately responsible for the regulation of liquor traffic in the state, its jurisdiction is not exclusive. The Michigan Supreme Court has sanctioned the enactment of municipal ordinances regulating local traffic in liquor.11 See e.g., Mutchall v. Kalamazoo, 323 Mich. 215, 35 N.W.2d *1133245, 248-49 (1948). The zoning restrictions on Group “D” Cabarets have been incorporated by reference into the requirements for a cabaret license.12 If the provisions restricting the location of Group ‘D’ Cabarets bear a reasonable relation to legitimate municipal interests, the facial validity of the ordinances must be upheld.\nThe ordinances in question were enacted to combat a growing urban crisis — the decay of residential neighborhoods into crime-infested “no-man’s lands” where neighborhood taverns have been transformed into topless bars and apartments have deteriorated into flophouses. The Detroit Common Council, alarmed by the proliferation of businesses which attract the lowest stratum of society and the concomitant decline in the residential quality of inner city neighborhoods, enacted the challenged ordinances to control in the future the location of establishments offering adult entertainment.13 The Detroit plan was to deconcentrate the locations of cabarets offering sexually explicit entertainment and thereby diffuse the harmful impact a cluster of these establishments would have on the character of a residential neighborhood. To this end the Council enacted the prohibition against location of a Group “D” Cabaret within 1000 feet of two other regulated uses.14\nAttached to Appellee’s motion for summary judgment were numerous affidavits from urban planners, experts on real estate values, businessmen, reporters and ordinary citizens who attested to the deleterious consequences which a high concentration of businesses offering adult entertainment could have on the character of urban neighborhoods. Appellant chose not to submit counter-affidavits. On the face of the record, we cannot conclude that the challenged ordinances regulating the location of Group “D” Cabarets are irrational or that they are not reasonably related to valid municipal interests. The restrictions are not imposed on adult entertainment per se but on the physical location of cabarets which feature adult entertainment. In this sense, the ordinances seek to regulate “conduct” and not “expression.”15 See California v. Larue, supra, 409 U.S. at 117-18, 93 S.Ct. 390. In light of California v. Larue, we must conclude that the restrictions are constitutional on their face and represent an appropriate exercise of the city’s Twenty-first Amendment authority to regulate the location of establishments licensed to sell liquor within municipal boundaries. In fact, the Detroit ordinances are less restrictive than the regulation upheld by the Supreme Court in Larue. The California rule banned nude dancing at all locations licensed to distribute liquor by the drink *1134whereas Detroit permits cabarets to offer adult entertainment so long as their licensees comply with the city zoning code. The District Court was correct in concluding that the ordinances restricting the location of Class “D” Cabarets are constitutional on their face.\nAppellant also charged in his complaint that the special licensing and zoning provisions for Group “D” Cabarets, even though constitutional on their face, could not constitutionally be applied to him because the entertainment provided at the Club Zeus is protected by the First Amendment and enforcement of the ordinances in this instance would unduly infringe on his right to free expression. He argues that the District Judge granted Appellees’ motion for summary judgment without adequate consideration of the constitutionality of the ordinances as applied. We agree.\nAn ordinance which is not over-broad on its face may nevertheless be unconstitutional as applied if it is enforced against a protected activity. Cf. Grayned v. City of Rockford, 408 U.S. 104, 106 n. 1, 114, 92 S.Ct. 2294, 33 L.Ed.2d 222 (1972). Justice Rehnquist carefully restricted his remarks in California v. Larue to the facial validity of regulations enacted under the Twenty-first Amendment. See 409 U.S. at 119 n. 5, 93 S.Ct. 390. He admitted that the Twenty-first Amendment does not supersede other constitutional provisions in the area of liquor regulation, 409 U.S. at 115, 93 S.Ct. 390, and, while upholding the validity of the California liquor regulation on its face, he recognized the possibility “ ‘that specific future applications of [the statute] may engender concrete problems of constitutional dimension. . . . 409 U.S. at 119 n. 5, 93 S.Ct. at 397, quoting Seagram & Sons v. Hostetter, 384 U.S. 35, 52, 86 S.Ct. 1254, 16 L.Ed.2d 336 (1966). Thus California v. Larue does not foreclose the argument that an otherwise valid ordinance under the Twenty-first Amendment may be applied in such a way as to infringe on rights protected by the First Amendment.16 See also California v. Larue, supra at 120 n. 1, 93 S.Ct. 390 (Stewart, J., concurring).\nAppellees argue that Appellant’s failure to come forward with additional facts to support the allegations in the complaint should foreclose his right to contest the grant of summary judgment. They contend that the burden was on Appellant to come forward and respond to the affidavits they submitted and that he should not have relied solely on his pleadings to survive summary judgment. This argument, however, is misconceived because it reverses the proper burden of proof on a motion for summary judgment. Under Rule 56(c) the moving party always has the initial burden of showing the absence of a genuine issue of material fact and that he is entitled to judgment as a matter of law. See Adickes v. Kress & Co., 398 U.S. 144, 159-60, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). See generally 6 Moore H 56.15[3]. When the initial *1135burden has been supported by additional materials, the non-moving party must then come forward with specific facts which demonstrate to the court that there is a genuine issue for trial.17 However, the fact that the movant’s affidavits are uncontroverted does not necessarily mean that summary judgment should be granted — the ultimate burden of proving the propriety of summary judgment remains on the moving party.18 See Adickes v. Kress & Co., supra at 159-60, 90 S.Ct. 1598; Fitzke v. Shappell, 408 F.2d 1072 (6th Cir. 1972). As the Supreme Court observed in Adickes v. Kress & Co., the Advisory Committee on the 1963 Amendments to Rule 56 expressly rejected the idea that subdivision (e) altered the ordinary standards of proof in a motion for summary judgment:\n‘[wjhere the evidentiary matter in support of the motion does not establish the absence of a genuine issue, summary judgment must be denied even if no opposing evidentiary matter is presented.’\n398 U.S. at 160, 90 S.Ct. at 1610 (emphasis in original), quoting Advisory Committee Notes on 1963 Amendment to Rule 56.\nAppellees failed to meet their initial burden on the issue of the constitutionality of the ordinances as applied. The affidavits attached to the motion for summary judgment were exclusively addressed to the issue of the facial validity of the ordinances. No attempt was made to dispute Appellant’s contention that the entertainment provided at Club Zeus was protected speech and that enforcement of the ordinances against him would unduly infringe on his constitutional rights. No facts were presented either by affidavit, stipulation or otherwise as to the exact nature of the entertainment provided at the cabaret. Appellant’s admission that the entertainment involved topless dancing does not, by itself, remove the case from the ambit of the First Amendment since even nude dancing may, under some circumstances, be entitled to constitutional protection. See Doran v. Salem Inn, Inc., supra, 422 U.S, at 932, 95 S.Ct. 2561; California v. Larue, supra, 409 U.S. at 118, 93 S.Ct. 390. See also Salem Inn, Inc. v. Frank, 501 F.2d 18, 21 n. 3 (2d Cir. 1974), aff’d in part, rev’d in part sub nom. Doran v. Salem Inn, Inc., supra.\nAs we have stated on many occasions, without an adequate factual basis in the record, a District Court should be extremely hesitant to grant summary judgment on important and complex issues. See e. g., Tee-Pak, Inc. v. St. Regis Paper Co., 491 F.2d 1193, 1196 (6th Cir. 1974). See generally 6 Moore 11.06 at 2305. The adequacy of the record is particularly important where the court is called on to decide questions of constitutional law without benefit of a trial. See 6 (part 2) Moore H 56[10] at 56-772-77. Appellant should have been given the opportunity to prove his allegation that enforcement of the special provisions relating to Group “D” Cabarets in this instance would unduly infringe on protected speech. Without reliable evidence on the record as to the exact nature of the entertainment offered by Appellant, the District Court could not have adjudicated Appellant’s claim that the ordinances were unconstitutional as applied. A court should *1136be particularly vigilant in the protection of an individual’s right to free expression where a municipality seeks to enforce ordinances which admittedly reach protected activities on their face.\nWe find that the Detroit ordinances regulating the location of Group “D” Cabarets are constitutional on their face and summary judgment as to this issue was appropriate. The ordinances were enacted pursuant to authority granted by the Twenty-first Amendment and are rationally related to the legitimate municipal interest of preserving the residential character of urban neighborhoods. Summary judgment should not have been granted, however, on the issue of the constitutionality of the ordinances as applied in this case because the record was inadequate to determine whether the activities engaged in by Appellant were protected by the First Amendment and whether enforcement of the ordinances would unduly infringe on the enjoyment of Appellant’s right to free expression.\nAffirmed in part, reversed in part and remanded.\n\n. Named as Defendants were the present and former mayors of Detroit, the Detroit Corporation Counsel, the Commissioner of the Police Department, the Commissioner of the Department of Building and Safety, and the Director-Secretary of the City Planning Commission.\n\n\n. Detroit, Mich., Ordinance No. 744-G § 5-4-1, October 26, 1972. See also Ordinance No. 742-G § 32.0007.\n\n\n. Ordinance No. 744-G which lists the requirements for a Group “D” Cabaret license incorporates provisions of the city zoning code by reference:\nSec. 5-4-2. It shall be unlawful for any person to hereafter operate any cabaret, club cabaret, Group “D” Cabaret, or limited cabaret in the city without having first obtained proper license therefore from the Bureau of Licenses and Permits. No license shall be issued until the applicant shall have complied with the requirements of the Official Zoning Ordinance, the provisions of this article and other applicable ordinances of the City of Detroit\nOrdinance No. 742-G includes Group “D” Cabarets among the uses specially regulated and prohibits the location of a Group “D” Cabaret within 1000 feet of two other regulated uses:\n66.0000 Regulated Uses\nIn the development and execution of this Ordinance, it is recognized that there are some uses which, because of their very nature, are recognized as having serious objectionable operational characteristics, particularly when several of them are concentrated under certain circumstances thereby having a deleterious effect upon the adjacent areas. Special regulation of these uses is necessary to insure that these adverse effects will not contribute to the blighting or downgrading of the surrounding neighborhood. These special regulations are itemized in this section. The primary control or regulation is for the purpose of preventing a concentration of these uses in any one area (i. e. not more than two such uses within one thousand feet of each other which would create such adverse effects). Uses subject to these controls are as follows:\nAdult\nAdult Book Store\nAdult Motion Picture Theater\nAdult Mini Motion Picture Theater Cabaret\nGroup ‘D’ Cabaret\nEstablishment for the sale of beer or intoxicating liquor for consumption on the premises.\nHotels or motels\nPawnshops\nPool or billiard halls\nPublic lodging houses\nSecondhand stores\nShoeshine parlors\nTaxi dance halls\n\n\n. The District Court initially made these findings in its order denying a preliminary injunction. The City Plan Commission may waive enforcement of the zoning restrictions against concentration of regulated uses:\nSection 66.0101.\nThe Commission may waive this locational provision for Adult Book Stores, Adult Motion Picture Theatres, Adult Mini Motion Picture Theaters, Group “D” Cabarets, hotels or motels, pawnshops, pool or billiard halls, public lodging houses, secondhand stores, shoeshine parlors, or taxi dance halls if the following findings are made:\na) That the proposed use will not be contrary to the public interest or injurious to nearby properties, and that the spirit and intent of this Ordinance will be observed.\nb) That the proposed use will not enlarge or encourage the development of a “skid row” area.\nc) That the establishment of an additional regulated use in the area will not be contrary to any program of neighborhood conservation nor will it interfere with any program of urban renewal.\nd) That all applicable regulations of this Ordinance will be observed.\n\n\n. If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.\nFed.R.Civ.P. 12(b).\n\n\n. The judgment sought 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.\nFed.R.Civ.P. 56(c).\n\n\n. In Nortown the District Court granted summary judgment for Defendants in a number of civil actions presenting substantially identical challenges to the facial validity of the Detroit ordinances regulating the location of adult bookstores, adult motion picture theaters and adult mini motion picture theaters. The opinion was jointly authored by Judges Kennedy and Gubow of the Eastern District of Michigan who had consolidated the cases for purposes of ruling on motions for summary judgment. Although they acknowledged that the ordinances created classifications of businesses which restrain conduct protected by the First Amendment, the District Judges upheld the facial validity of the ordinances and found that they were enacted to further the compelling governmental interest of preserving the residential quality of neighborhoods from the deleterious impact of a concentration of adult entertainment business. The District Court voided another Detroit zoning restriction which prohibited location of a regulated use within 500 feet of a single dwelling or rooming unit. The Court held that this provision imposed a greater incidental restriction on First Amendment free*1131doms than was essential to preserve and stabilize residential neighborhoods.\n\n\n. Ordinance No. 744-G defines a “cabaret” as:\nAny place wherein food and any type of alcoholic beverage is sold or given away on the premises and the operator thereof holds a yearly license from the state to sell such beverages by the glass and where the patrons are provided with entertainment or space for dancing.\n\n\n. “The substance of the regulations struck down prohibits licensed bars or nightclubs from displaying, either in the form of movies or live entertainment, “performances” that partake more of gross sexuality than of communication. While we agree that at least some of the performances to which these regulations address themselves are within the limits of the constitutional protection of freedom of expression, the critical fact is that California has not forbidden these performances across the board. It has merely proscribed such performances in establishments that it licenses to sell liquor by the drink.\nViewed in this light, we conceive the State’s authority in this area to be somewhat broader than did the District Court. This is not to say that all such conduct and performance are without the protection of the First and Fourteenth Amendments. But we would poorly serve both the interests for which the State may validly seek vindication and the interests protected by the First and Fourteenth Amendments were we to insist that the sort of bacchanalian revelries that the Department sought to prevent by these liquor regulations were the constitutional equivalent of a performance by a scantily clad ballet troupe in a theater.”\n409 U.S. at 118, 93 S.Ct. at 397.\n\n\n. Thus both the District Court in Nortown Theatre, Inc. v. Gribbs, supra at 369, and the majority and dissenting opinions in American Mini Theatres v. Gribbs, supra at 1019, 1023, applied a standard of strict scrutiny to ordinances regulating the location of adult book stores and adult theaters.\n\n\n. In Tally v. City of Detroit, 54 Mich.App.328, 220 N.W.2d 778 (Ct.App.1974), aff’d on rehearing 58 Mich.App. 261, 227 N.W.2d 214 (Ct.App. 1975), the Michigan Court of Appeals affirmed the facial validity of Detroit Ordinance No. 744-G in the face of a First Amendment challenge to the licensing requirements for Group “D” Cabarets. Relying on California v. Larue, the Michigan Court found that the City derived its power of home rule from the state and that the ordinance in question was a reasonable exercise of Detroit’s Twenty-first Amendment authority to regulate local liquor traffic. Id., 220 N.W.2d at 783. See also Crownover v. Musick, 9 Cal.3d 405, 107 Cal.Rptr. 681, 509 P.2d 497 (1974); Manos v. City of Green Bay, 372 F.Supp. 40 (E.D.Wis.1974).\n\n\n. See note 3 supra.\n\n\n. The zoning restrictions do not extend to non-conforming uses established prior to enactment of the ordinances.\n\n\n. See Ordinance No. 742-G § 66.0000. The Council also inserted section 66.0103 which prohibited the location of a Group “D” Cabaret within 500 feet of a single dwelling or rooming unit. This section was declared unconstitutional by the District Court in Nortown Theatre Inc. v. Gribbs, supra at 369-70, but has since been amended.\n\n\n. The motives of the Common Council in enacting the ordinances in question are largely irrelevant to our inquiry. Although we are bound by Council’s statement of the legislative purpose for the acts, only the effect of the legislation is relevant to the question of its constitutionality and not the motives underlying its enactment. See American Mini Theatres, Inc. v. Gribbs, supra at 1019. As the Supreme Court stated in United States v. O’Brien, 391 U.S. 367, 383, 88 S.Ct. 1673, 1682, 20 L.Ed.2d 672 (1968):\nIt is a familiar principle of constitutional law that this Court will not strike down an otherwise constitutional statute on the basis of an alleged illicit legislative motive. As the Court long ago stated:\n“The decisions of this court from the beginning lend no support whatever to the assumption that the judiciary may restrain the exercise of lawful power on the assumption that a wrongful purpose or motive has caused the power to be exerted.” McCray v. United States, 195 U.S. 27, 56 [24 S.Ct. 769, 776, 49 L.Ed. 78] (1904).\nThis fundamental principle of constitutional adjudication was reaffirmed and the many cases were collected by Mr. Justice Brandéis for the Court in Arizona v. California, 283 U.S. 423, 455 [51 S.Ct. 522, 75 L.Ed. 1154] (1931).\n\n\n. Justice Douglas in his dissenting opinion in Larue offered a classic example of a case where a facially valid licensing provision under the Twenty-first Amendment may be unconstitutionally applied to an activity protected by the First Amendment:\nIt is conceivable that a licensee might produce in a garden served by him a play— Shakespearean perhaps of one in a more modern setting — in which for example, “fondling” in the sense of the rules appears. I cannot imagine that any such performance could constitutionally be punished or restrained, even though the police power of a State is now buttressed by the Twenty-first Amendment. For, as stated by the Court, that Amendment did not supersede all other constitutional provisions “in the area of liquor regulations.” Certainly a play which passes muster under the First Amendment is not made illegal because it is performed in a beer garden.\n409 U.S. at 121, 93 S.Ct. at 398 (footnote omitted). On their face, the Detroit ordinances regulating Group “D” Cabarets could be applied to dinner theaters licensed to dispense liquor by the drink which present performances of “Twelfth Night” or “As You Like It”, two Shakespearean comedies which feature sexual impersonation, or more modern plays Which contain overt sexuality, but which are nevertheless protected by the First Amendment. Conceivably, enforcement of the ordinances in these instances could present “concrete problems of constitutional dimension” which Justice Rehnquist alluded to in Larue. 409 U.S. at 119 n. 5, 93 S.Ct. 390.\n\n\n. When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.\nFed.R.Civ.P. 56(e).\n\n\n. While there is an element of risk to the non-moving party when he fails to respond to the materials attached to a motion for summary judgment, the primary burden remains on the moving party to prove his right of judgment:\nIt has always been perilous for the opposing party neither to proffer any countering evidentiary materials nor file a 56(f) affidavit. And the peril rightly continues. Yet the party moving for summary judgment has the burden to show that he is entitled to judgment under established principles; and if he does not discharge that burden then he is not entitled to judgment. No defense to an insufficient showing is required. 6 Moore jl 56.-22 [2] at 2824-25.\n\n", "ocr": false, "opinion_id": 9462796 }, { "author_str": "McCREE", "per_curiam": false, "type": "040dissent", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\nMcCREE, Circuit Judge\n(dissenting).\nI respectfully dissent from the majority’s decision holding the challenged ordinance to be facially constitutional under the Twenty-first Amendment.\nIn California v. LaRue, 409 U.S. 109, 93 S.Ct. 390, 34 L.Ed.2d 342 (1972), the Supreme Court considered regulations issued by the California Department of Alcoholic Beverage Control that prohibited performances by male or female entertainers that partook “more of gross sexuality than of communication.” 409 U.S. at 109, 93 S.Ct. at 391. The portions of the regulations held facially constitutional by the Supreme Court prohibited the following kinds of conduct on licensed premises:\n(a) The performance of acts, or simulated acts, of “sexual intercourse, masturbation, sodomy, bestiality, oral copulation, flagellation or any sexual acts which are prohibited by law”;\n(b) The actual or simulated “touching, caressing or fondling on the breast, buttocks, anus or genitals”;\n(c) The actual or simulated “displaying of the pubic hair, anus, vulva or genitals”;\n(d) The permitting by a licensee of “any person to remain in or upon the licensed premises who exposes to public view any portion of his or her genitals or anus”; and, by a companion section,\n(e) The displaying of films or pictures depicting acts a live performance of which was prohibited by the regulations quoted above. Rules 143.3 and 143.4, 409 U.S. at 111-12, 93 S.Ct. at 394.\nThe ordinance in the case before us affects bars or other liquor controlled businesses that feature “topless dancers, go-go dancers, exotic dancers, strippers, male or female impersonators, or similar entertainers.” Detroit Michigan Ordinance No. 744-G § 5-4-1, October 26, 1972.\nLaRue holds that a regulation that prohibits specific kinds of explicit sexual conduct on premises where liquor is served will not be held facially unconstitutional merely because some of the conduct that it comprehends is protected by the First Amendment. In this appeal, however, the. ordinance limits the bar owner’s presentation of certain categories of entertainers whose conduct may or may not involve gross sexuality more than communication in the medium of entertainment.\nAnother and perhaps more important distinction exists between the Detroit ordinance and the California regulations considered in LaRue. The Detroit ordinance appears to be more concerned with regulating land use than it is with regulating the delivery and use of liquor under the Twenty-first Amendment. This is evident from the fact that the Detroit ordinance does not forbid a licensed bar from presenting the proscribed entertainers if 51% of the neighbors living or doing business within 500 feet of the proposed location approved or if there are fewer than two other uses regulated by the ordinance within 1,000 feet of the proposed location. On the other hand, *1137the California regulations forbade the proscribed conduct at all business places, without exception, where liquor was dispensed.\nI do not read LaRue as giving blanket authority to states to regulate under the Twenty-first Amendment every kind of conduct by performers in bars. When a state seeks to control barroom performances that partake “more of gross sexuality than of communication,” the Twenty-first Amendment will insulate from a charge of facial unconstitutionality regulations that prohibit acts of gross sexuality on regulated premises. The Twenty-first Amendment does not, however, authorize ordinances like the one attacked here.\nIn Miller v. California, 413 U.S. 15, 93 S.Ct. 2607, 37 L.Ed.2d 419 (1973), the Supreme Court indicated that statutes designed to regulate obscenity must be carefully drawn. Indeed, the sexual conduct sought to be regulated or proscribed “must be specifically defined by applicable state law, as written or authoritatively construed.” 413 U.S. at 24, 93 S.Ct. at 2611. As examples of what a state statute could define for regulation, the Court suggested:\n(a) Patently offensive representations or descriptions of ultimate sexual acts, normal or perverted, actual or simulated.\n(b) Patently offensive representations or descriptions of masturbation, excretory functions, and lewd exhibition of the genitals. 413 U.S. at 25, 93 S.Ct. at 2615.\nThe drafters of the regulations in LaRue appear to have been influenced by the Court’s suggestions in Miller, because they tried to regulate conduct consistent with the Miller formula. Although the regulation exceeded the boundaries set down in Miller, the Supreme Court held that the slight variance was not fatal because of the state’s authority to regulate dispensation of liquor.\nIn this appeal, however, the City of Detroit failed to surmount the first hurdle in attempting to regulate sexual conduct. It failed to “specifically define” the kind of sexual conduct that was subject to regulation. Topless dancers, go-go dancers, strippers, exotic dancers and impersonators are not, without more, obscene. Although it is possible one or more of these performers might engage in obscene conduct, the ordinance is not restricted to such entertainment, nor does it afford definite standards of obscenity. The Michigan courts do not appear to have “authoritatively construed” the challenged ordinance so that it is limited to particular obscene conduct. Cf. Talley v. Detroit, 54 Mich.App. 328, 220 N.W.2d 778 (1974), on rehearing, 58 Mich.App. 261, 227 N.W.2d 214 (1975).\nAccordingly, I view this ordinance as being grossly facially overbroad because it attempts to regulate all forms of expression by listed entertainers. I do not read LaRue as permitting this court to uphold such an ordinance in the face of such substantial overbreadth.\n", "ocr": false, "opinion_id": 9462797 } ]

[ "877 F. Supp. 1198" ]

[ { "author_str": "Bucklo", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": 453, "opinion_text": "\n877 F. Supp. 1198 (1995)\nJoseph H. KESSEN, Plaintiff,\nv.\nPLUMBERS' PENSION FUND, LOCAL 130, U.A., and James R. Belzer, Gerald M. Sullivan, Thomas J. McManus, George E. Quinn, Sr., Philip J. Hoza, Henry J. Swade, James T. Finn, James T. Sullivan, John H. Kyles and James W. Young, Trustees of The Plumbers' Pension Fund, Local 130, U.A., Defendants.\nNo. 94 C 985.\nUnited States District Court, N.D. Illinois, Eastern Division.\nFebruary 27, 1995.\n*1199 *1200 Stuart M. Widman, William N. Asnpach, Chicago, IL, for plaintiff.\nDouglas A. Lindsay, Blake T. Lynch, Chicago, IL, for defendants.\n\nMEMORANDUM OPINION AND ORDER\nBUCKLO, District Judge.\nPlaintiff, Joseph H. Kessen, was a plumber who in 1991 began receiving a pension under the Plumbers' Pension Fund, Local 130 U.A. In 1993, Mr. Kessen's pension was suspended on the ground that he was continuing to do plumbing work in violation of the terms of the Plan. After exhausting his administrative remedies, Mr. Kessen filed the present lawsuit, contending that the Trustees' interpretation of the Plan was arbitrary and capricious, that the Trustees are estopped from their interpretation of the Plan by prior inconsistent statements made to him before his retirement, and alleging a violation of fiduciary duty under ERISA. Jurisdiction is based on Section 1132(e) of the Employee Retirement Income Security Act of 1973, as amended (\"ERISA\"). 29 U.S.C. § 1132(e). Mr. Kessen has filed a motion for partial summary judgment. Defendants, including the Plumbers' Pension Fund, Local 130, U.A. (the \"Plan\"), James R. Belzer, Gerald M. Sullivan, Thomas J. McManus, George E. Quinn, Sr., Philip J. Hoza, Henry J. Swade, James T. Finn, James T. Sullivan, John H. Lyles and James W. Young, the Plan trustees, have also filed a motion for summary judgment.\n\nUndisputed Facts\nThe Fund is a multi-employer, employee benefit fund within the meaning of Section 1002(3) of ERISA and a defined pension benefit plan under Section 1002(35) of ERISA. 29 U.S.C. §§ 1002(3) and 1002(35).\nSection 5.05A of the Plan provides, in part:\n\n*1201 No retirement benefit shall be paid hereunder on account of any calendar month prior to the month next following a Participant's Normal Retirement Age to a Participant who becomes employed or self employed in the Plumbing Trade after retirement benefits have commenced.... For purposes of this Part A of Section 5.05, an individual shall be considered employed or self employed in the Plumbing Trade if he is employed or self employed in any occupation which utilizes the skill or skills possessed by a plumber.... (Emphasis added).\nUnder Section 2.19 of the Plan, \"Normal Retirement Age means the day a Participant attains age 65.\" When he retired Mr. Kessen executed a document entitled \"Important Notice\" which provides:\nA. Reemployment prior to 65th Birthday. 1. If such employment or self employment takes place within the United States, regardless of for how long, benefits are suspended until the month following the Participant's 65th birthday....\nMr. Kessen was born January 22, 1930. In 1990, Mr. Kessen was employed by the Chicago Transit Authority (\"CTA\") as a plumber. He applied for retirement benefits in December, 1990. Before doing so, he attended meetings for CTA plumbing department employees at the Union hall and at the CTA maintenance shops. These meetings were usually conducted by two of the Fund's Trustees (who according to the briefs in this case were also union officials), Thomas McManus (\"Mr. McManus\") and Gerald Sullivan (\"Mr. Sullivan\"). At these meetings, Mr. McManus and Mr. Sullivan told the group that non-licensed plumbers were permitted to rod sewer lines and catch basins, do preventive maintenance on compressors and pumps, run the Vactor truck, replace fire heads, set flappers on sprinkler system valves and do general cleanup work.[1]\nOn December 6, 1990, Mr. Kessen told John Bojan (\"Mr. Bojan\"), the Secretary of the Pension Fund, that he planned to retire on February 1, 1991, a date shortly following Mr. Kessen's 61st birthday. Mr. Bojan was authorized to discuss retirement entitlements with prospective retirees like Mr. Kessen. Mr. Kessen submitted to Mr. Bojan an application to receive pension benefits which represented that his last day of employment in the plumbing trade would be January 21, 1991. According to Mr. Kessen, he told Mr. Bojan that after retirement, he would do the work of a non-licensed plumber, as described by Mr. McManus and Mr. Sullivan. He says Mr. Bojan said that would be okay. Defendants deny this conversation. They say Mr. Kessen said only that he was going to be a member of a CTA cleaning crew, and that he would clean catch basins.\nMr. Kessen began receiving pension benefits in February, 1991. Neither the minutes of the Trustees' meeting of February 6, 1991 at which Mr. Kessen's pension benefit was approved nor the report on pension applications dated January 31, 1991, incorporated in the minutes by reference, contain any discussion of Mr. Kessen's intended post-retirement work duties at the CTA. However, Mr. Bojan was at the February, 1991 meeting at which Mr. Kessen's pension was approved. At least one trustee, James R. Belzer, testified that Mr. Kessen's post-\"retirement\" work was discussed at that meeting. (Belzer Dep., pp. 42-43). Mr. Bojan did not say anything at that meeting about his knowledge of Mr. Kessen's plans. When Mr. Kessen began receiving retirement benefits, he believed that the Trustees had approved the type of work that he was planning to do. Mr. Kessen would not have done the work which the Trustees later concluded was prohibited if he knew or believed that it would cause him to lose any benefits. Those benefits were a large part of his monthly income.\nBetween February, 1991 and September, 1994, Mr. Kessen's job duties at the CTA included rodding subway station and subway line sewers, cleaning catch basins, oiling compressors, *1202 operating the Vactor truck,[2] replacing fire sprinkler heads and resetting flappers on sprinkler system valves. Non-licensed plumbers at the CTA may perform all the duties that Mr. Kessen performed. One need not be an apprentice plumber to learn how to do these tasks.\nA letter dated August 11, 1992 from Plumbers' Pension Fund's counsel, David J. Creagan, Jr., informed Mr. Kessen that \"[i]t has been reported that on several occasions that after you commenced receiving retirement benefits from the Plumbers' Pension Fund, you did plumbing work.\" By letter dated September 30, 1992, Plumbers' Pension Fund's lawyer, Robert A. Wolz (\"Mr. Wolz\") advised Mr. Kessen that the Trustees would resolve all benefits disputes by means of written submissions. He was advised to set forth his position in writing. In a letter dated October 16, 1992 to Mr. Kelly, Mr. Kessen was reminded to provide to the Trustees in writing all details he felt relevant to his position.\nThe CTA Manager of Electrical/Mechanical Bus Systems Maintenance (the CTA department in which Mr. Kessen is employed), William Lyke, sent a letter dated September 23, 1992 to the Chicago Journeyman Plumbers' Union, Local 130 describing Mr. Kessen as a plumber and stating that his duties included maintaining fire lines, performing preventive maintenance on compressors and pumps and rodding sewers. Mr. Kessen's attorney, Mr. Kelly, submitted a letter dated December 31, 1992 to the Trustees stating that Mr. Kessen's duties with the CTA included \"rodding subway station and subway line sewer lines and cache [sic] basins.\" No correspondence described any alleged oral statements or interpretations of the Fund's suspension of benefit rules by Mr. Sullivan or Mr. McManus.\nThe Trustees considered Mr. Kessen's situation during their meeting on January 13, 1993. The minutes of that meeting state that the Trustees determined that the rodding of drains and sewers utilize the skills of a plumber within the meaning of the Fund's suspension of benefits rule in the Plan. The minutes further state that the Trustees decided that the maintenance of fire lines and the performance of preventive maintenance on compressors and pumps utilize plumbing skills within the meaning of the Plan. The Trustees did not consult any studies or other information from actuaries and did not consider the effect of their decision on the actuarial integrity of the Plan.\nOn January 25, 1993, Mr. Kessen received a letter dated January 15, 1993 from Plumbers' Pension Fund's counsel, Mr. Wolz, stating that the Trustees had determined that Mr. Kessen's employment with the CTA utilizes the skill or skills possessed by a plumber, and therefore, his monthly pension benefit would be suspended under Section 5.05A of the Plan. The letter stated that the specific tasks that Mr. Kessen was performing which utilized plumbing skills were rodding subway station and subway sewer lines and catch basins, maintaining fire lines, and performing preventive maintenance on compressors and pumps.\nAfter receiving Mr. Wolz's letter, Mr. Kessen appealed the Trustees' decision. Upon review, the Trustees upheld their prior determination that Mr. Kessen's employment with the CTA utilized the skill or skills possessed by a plumber.\n\nA. Count I: Whether the Trustees' Suspension of Mr. Kessen's Benefits Was Arbitrary and Capricious\n\nWhere a pension benefit plan gives a fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan, challenges to the fiduciary's interpretations are to be reviewed under the arbitrary and capricious standard of review. Saracco v. Local Union 786 Building Material Pension Fund, 942 F.2d 1213, 1214 (7th Cir.1991) (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S. Ct. 948, 956, 103 L. Ed. 2d 80 (1989)). The Plan document grants the Trustees the power to determine eligibility for benefits and construe the terms of the Plan. Section 6.04(e) *1203 of the Plan document grants the Trustees the power\n[t]o make determinations as to the rights of Participants applying for benefits hereunder and to afford any such Participant, or the Contractors or Contributors, or the Union, if dissatisfied with any such determination, a right to a hearing thereof, and to provide rules and procedures for the conduct of such hearings, not inconsistent herewith. The determination made after any such hearing shall be final and binding on all parties.\nSection 6.02 of the Plan further provides:\nAll decisions and actions of the Pension Benefit Trustees pertaining to the construction of the Plan or the administration of the Plan, the exercise of their powers as Pension Benefit Trustees, the payment of benefits, and all other matters germane to the administration of the Plan shall require the concurring votes of at least three Union Trustees and at least three Contractor Trustees and in every case all decisions made by such vote shall be binding upon the Plumbing Contractors' Association, the Contractors, the Contributors, the Union, the Participant, and any other persons interested in the Plan.\nSince the Plan language explicitly grants the Trustees discretionary authority to determine eligibility for benefits and to construe the terms of the Plan, this Court must review the Trustees' decision to suspend Mr. Kessen's benefits under the arbitrary and capricious standard.\nThe Seventh Circuit has observed:\nAlthough it is an overstatement to say that a decision is not arbitrary or capricious whenever a court can review the reasons stated for the decision without a loud guffaw, it is not much of an overstatement.\nRusso v. Health, Welfare & Pension Fund, Local 705, International Brotherhood of Teamsters, 984 F.2d 762, 766 (7th Cir.1993). Under the arbitrary and capricious standard of review, if the Trustees' determination was reasonable, this Court may not disturb it. Id. at 765; Lister v. Stark, 942 F.2d 1183, 1188 (7th Cir.1991).\nThe reasonableness requirement commands that I give great deference to the Trustees' interpretation. Lister v. Stark, supra, 942 F.2d at 1188. To do so, this Court must simply examine whether the Trustees' decision was based on a reasonable interpretation of the Plan's language and the evidence in the case. Russo v. Health, Welfare & Pension Fund, Local 705, International Brotherhood of Teamsters, supra, 984 F.2d at 765. If so, I will not disturb it. However, because great deference does not mean no review at all, the Trustees' interpretation of the Plan will not pass the reasonableness test if they\nentirely failed to consider an important aspect of the problem, offered an explanation for [their] decision that runs counter to the evidence before [them] or is so implausible that it could not be ascribed to a difference in view or the product of [their] expertise.\nLister v. Stark, supra, 942 F.2d at 1189.\n\n1. Whether the Trustees' Decision Was Reasonable\n\nPrior to the January, 1993 Board meeting at which the Trustees determined that Mr. Kessen's post-retirement duties at the CTA required him to use plumbing skills, the Trustees twice invited Mr. Kessen to provide in writing all information he wished the Trustees to take into account in making their decision.\nAt the January, 1993 meeting, in response to the information received from Mr. Kessen and the CTA, the Trustees noted that the rodding of sewers for the CTA has always been performed by plumbers, and since at least 1985, all the tasks performed by Mr. Kessen have been performed by Local 130 journeyman plumbers. The Trustees concluded that the rodding of drains and sewers utilizes plumbing skills and that the performance of these tasks by individuals who possess such skills enhances both the quality and efficiency of the work performed. The Trustees also concluded that the maintenance of fire lines and performance of preventive maintenance on compressors and pumps utilizes plumbing skills. As a result, the Trustees suspended payment of Mr. Kessen's *1204 retirement benefits under Section 5.05A of the Plan.\nMr. Kessen appealed the Trustees' determination. Prior to the April, 1993 meeting at which the Trustees considered Mr. Kessen's appeal, they again invited him to submit in writing all information he wished the Trustees to take into account. Mr. Kessen appeared at the meeting with his attorney, Mr. Kelly. The Trustees asked Mr. Kessen many questions about his current employment and carefully reviewed Mr. Kessen's statements and the other evidence he presented. They noted that Mr. Kessen did not contest that he performed the duties upon which the Trustees' original determination to suspend benefits was based. The Trustees upheld their prior determination that Mr. Kessen was utilizing the skill or skills of a plumber in connection with his job at the CTA, and therefore, affirmed their prior suspension of Mr. Kessen's pension benefits.\nThe undisputed facts demonstrate that the Trustees reviewed the relevant data. They did not fail to consider an important aspect of the problem and their decision neither runs counter to the evidence before them nor is so implausible that it could not be ascribed to a difference in view or the product of their expertise. Accordingly, the Trustees' decision constitutes a reasonable interpretation of the Plan language and the evidence in the case.\nMr. Kessen claims the Trustees' interpretation of the Plan was unreasonable because they did not consider important facts since he was not permitted to present evidence of certain statements by two of the Fund's Trustees, Mr. McManus and Mr. Sullivan. The statements by Mr. McManus and Mr. Sullivan that Mr. Kessen claims the Trustees unreasonably failed to consider simply informed employees at various meetings attended by Mr. Kessen that non-licensed plumbers are permitted to perform certain tasks. Mr. Kessen does not claim that Mr. McManus and Mr. Sullivan said that duties which non-licensed plumbers may perform do not use \"the skill or skills of a plumber\" under the Plan. Moreover, there is no evidence that the distinction between tasks performed by licensed and non-licensed plumbers is material to determining whether a task would \"utilize[] the skill or skills possessed by a plumber.\" Mr. McManus' and Mr. Sullivan's statements were therefore irrelevant to the Trustees' determination of whether Mr. Kessen's duties used plumbing skills.\nMr. Kessen further contends that the Trustees' determination that Mr. Kessen's job responsibilities at the CTA use plumbing skills was arbitrary and capricious because it reversed earlier \"interpretations\" of the Plan by Mr. McManus, Mr. Sullivan, Mr. Bojan and the Board itself. \"Uniform interpretation and application of plan rules are important factors in deciding whether a denial of benefits is arbitrary and capricious.\" Russo v. Health, Welfare & Pension Fund, Local 705, International Brotherhood of Teamsters, supra, 984 F.2d at 766. In this case, however, there is no evidence that Mr. Sullivan or Mr. McManus ever interpreted the Plan. All they are alleged to have said was that a non-licensed plumber could perform certain duties. Although Mr. Bojan's alleged statements must be considered in terms of Mr. Kessen's estoppel claim, see infra, there is no evidence that the Trustees interpreted the Plan in a non-uniform manner. The Trustees are therefore entitled to summary judgment on this claim.\n\n2. Mr. Kessen's Request For Summary Judgment on Count I for the Time Period Since He Turned 65\n\nMr. Kessen argues in his reply brief that because he reached his 65th birthday on January 22, 1995, he is entitled to retirement benefits beginning February, 1995. At the time the parties filed for summary judgment, Mr. Kessen was not yet 65 years old, and the Trustees had not reached a decision regarding his retirement benefits under the section applicable to persons age 65 or older. The only decision as to which Mr. Kessen exhausted his administrative remedies is the Trustees determination to suspend Mr. Kessen's early retirement benefits because his job duties utilized plumbing skills. Since Mr. Kessen has not exhausted his administrative remedies, and indeed, there has been no decision on his application for regular retirement benefits, the issue is not properly before this court.\n\n\n*1205 B. Count II: Whether the Trustees' Suspension of Mr. Kessen's Benefits Breached Their Fiduciary Duty\n\nCount II of Mr. Kessen's complaint claims that the Trustees breached their fiduciary duty to Mr. Kessen since their decision to suspend benefit payments resulted in the forfeiture of a portion of his accrued benefits in violation of ERISA. Mr. Kessen abandons this theory in his summary judgment briefs and argues instead that this Court should not grant Plumbers' Pension Fund's request for summary judgment on Count II because the Trustees breached their fiduciary duty of loyalty to him by interpreting the phrase \"skill or skills of a plumber\" in an overly broad manner in order to protect the union's jurisdiction. Mr. Kessen's change of theories is not fatal to his breach of fiduciary duty claim due to the federal system's \"forgiving\" notice pleading rules. Teumer v. General Motors Corporation, 34 F.3d 542, 545 (7th Cir.1994).[3]\nERISA permits a participant to bring an action \"for appropriate relief under section 1109.\" 29 U.S.C. § 1132(a)(2). Section 1109 makes personally liable \"[a]ny person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries.\" 29 U.S.C. § 1109(a). Under Section 1109, liability for a breach of fiduciary duty runs only to the plan and not to individual participants or beneficiaries. Anweiler v. American Electric Power Service Corporation, 3 F.3d 986, 992 (7th Cir.1993). Because Mr. Kessen's action is for individual relief rather than plan-wide relief, he cannot maintain an action under Section 1132(a)(2).\nThe only other section of ERISA which could permit Mr. Kessen to bring his breach of fiduciary duty claim against the Trustees is Section 1132(a)(3). Id. at 992, 993 n. 4. Section 1132(a)(3) allows a participant to bring a civil action \"to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or ... to obtain the appropriate equitable relief to redress such violations.\" 29 U.S.C. § 1132(a)(3). A fiduciary's breach of his or her fiduciary duties violates provisions of subchapter I of ERISA. 29 U.S.C. § 1104; Anweiler v. American Electric Power Service Corporation, supra, 3 F.3d at 992. An individual may maintain an action under Section 1132(a)(3) seeking \"appropriate equitable relief\" for a breach of fiduciary duty. Id. at 993. \"Appropriate equitable relief\" in Section 1132(a)(3) includes only typical remedies available in equity and not legal remedies such as compensatory damages or monetary relief. Id. (citing Mertens v. Hewitt Associates, ___ U.S. ___, ___, 113 S. Ct. 2063, 2069, 124 L. Ed. 2d 161 (1993)). Since Mr. Kessen seeks monetary relief, a legal remedy, a suit under Section 1132(a)(3) is unavailable to him. Accordingly, as a matter of law, Mr. Kessen may not bring his claim for breach of fiduciary duty against the Trustees, and Plumbers' Pension Fund is entitled to summary judgment on this Count II.\n\nC. Count III: Whether Plumbers' Pension Fund Was Estopped From Suspending Mr. Kessen's Benefits\n\nMr. Kessen claims that Mr. Sullivan, Mr. McManus, and Mr. Bojan made representations that Mr. Kessen's post-retirement job duties at the CTA do not utilize plumbing skills according to the Plan and therefore would not prevent Mr. Kessen from receiving pension benefits. Specifically, the interpretation by Mr. Sullivan and Mr. McManus upon which Mr. Kessen relies are the assurances (at meetings attended by Mr. Kessen prior to retiring) that non-licensed plumbers may perform certain duties, including rodding sewer lines, maintaining fire lines and doing preventive maintenance on compressors and pumps. Mr. Bojan's purported \"interpretation\" was made in January, 1991 when Mr. Kessen allegedly told him that after retirement he would do only the jobs that could be performed by non-licensed plumbers as described by Mr. Sullivan and Mr. McManus and Mr. Bojan allegedly *1206 agreed that Mr. Kessen could do that type of work and still collect his pension benefits. He argues that due to these representations, and his reliance on them in deciding to retire, the Trustees were estopped from later determining that his responsibilities at the CTA involved plumbing skills and suspending his pension benefits.\nAs discussed earlier, there is no evidence to support Mr. Kessen's argument that Mr. Sullivan or Mr. McManus ever purported to interpret the Plan document. Accordingly, the Plumbers' Pension Fund cannot be estopped to deny benefits based on their statements.\nIf Mr. Kessen's statement of what the Plan Secretary, Mr. Bojan, allegedly said is taken as true, as it must be for purposes of defendants' motion for summary judgment, the issue becomes whether ERISA permits enforcement of Mr. Bojan's statement. In this Circuit, it is still an open question whether oral interpretations of Plan documents may be given effect. E.g., Miller v. Taylor Insulation Co., 39 F.3d 755, 759 (7th Cir. 1994); Schoonmaker v. Employee Savings Plan, 987 F.2d 410, 412-13 (7th Cir.1993). (While a footnote in Thomason v. Aetna Life Ins. Co., 9 F.3d 645, 650 n. 10 (7th Cir.1993), indicates the question could be answered adversely to Mr. Kessen, I conclude that Miller still leaves the question open.) See, e.g., Lockrey v. Leavitt Tube Emp. Profit Sharing Plan, 766 F. Supp. 1510 (N.D.Ill.1991) (J. Rovner), following Kane v. Aetna Life Ins. Co., 893 F.2d 1283 (11th Cir.1990), in holding that ERISA would permit an oral interpretation that is not inconsistent with the language of a Plan document. In appropriate cases, it seems reasonable to hold that a Plan may be bound by oral interpretations of a Plan document made by an agent with authority to provide information to a Plan participant in the face of reliance by a participant on the interpretation.[4]\n\"An estoppel arises when one party has made a misleading representation to another party and the other has reasonably relied to his detriment on that representation.\" Black v. TIC Investment Corp., 900 F.2d 112, 115 (7th Cir.1990). The alleged information provided in this case was that certain work, namely work that other trustees had said could be done by someone other than a licensed plumber, would not be considered \"skills possessed by a plumber,\" as that term is used in the Plan document. There is no question that the person making the representation, the Plan Secretary, was authorized to assist participants in making applications for pension benefits and respond to questions regarding the Plan. Defendants' Answers to Interrogatories, No. 10. That does not answer the question of whether Mr. Kessen's reliance on the interpretation allegedly given him by Mr. Bojan was reasonable, either in terms of the interpretation or the fact that the information came from Mr. Bojan. Neither party has addressed this question.\nIn addition, as noted earlier, the parties do not agree on whether Mr. Bojan made the alleged representation. That is therefore a disputed issue of material fact. If a fact finder determines that Mr. Bojan did not make the statement, or that even if he did, Mr. Kessen's reliance was unreasonable, the estoppel claim falls. Mr. Kessen's claim may fail anyway because the Seventh Circuit may conclude that ERISA bars oral interpretations like the one allegedly made in this case. On this record, and on the present state of the law, however, the Plumbers' Pension Fund's motion for summary judgment will be denied. Obviously, since factual issues remain to be decided, Mr. Kessen's cross-motion must also be denied.\n\nConclusion\nFor the reasons set forth above, Plumbers' Pension Fund's motion for summary judgment is granted in part and denied in part. *1207 Mr. Kessen's cross-motion for partial summary judgment is denied.\nNOTES\n[1] The defendants assert that at the meetings Mr. McManus and Mr. Sullivan never said that these tasks would not utilize the skill or skills of a plumber. Defs.' Rule 12(n) Statement (filed 10/19/94), ¶ 4, p. 2. However, they do not contest that Mr. McManus and Mr. Sullivan stated that non-licensed plumbers may perform these tasks.\n[2] The Vactor truck uses a hose to remove dirt, grease, silt, oil spills and other debris from pits at CTA garages.\n[3] In its main brief, Plumbers' Pension Fund explains why it deserves summary judgment on Count II based on Mr. Kessen's breach of fiduciary duty claim as plead in his complaint. Mr. Kessen does not controvert Plumbers' Pension Fund's argument. Consequently, this Court does not address Mr. Kessen's breach of fiduciary duty theory alleged in his complaint.\n[4] The Seventh Circuit has noted in a different context:\n\n[L]anguage always leaves some ambiguities, whether verbal (intrinsic) or situational (extrinsic). Drafters cannot anticipate all possible interactions of fact and text, and if they could the attempt to cope with them in advance would leave behind a contract more like a federal procurement manual than like a traditional insurance policy.\nHarnischfeger Corp. v. Harbor Insurance Co., 927 F.2d 974, 976 (7th Cir.1991).\n\n", "ocr": false, "opinion_id": 1397267 } ]

[ "539 F.2d 1231" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/539/539.F2d.1231.74-3123.html", "author_id": null, "opinion_text": "539 F.2d 1231\n In the Matter of LAURENT WATCH CO., INC., dba Cascade CarWash, Debtor. Lee J. COHEN and Cohen and Freeman(an Incorporated Law Firm), Petitioners-Appellants,v.UNITED STATES of America, Amicus Curiae-Appellee.\n No. 74-3123.\n United States Court of Appeals,Ninth Circuit.\n July 12, 1976.\n \n Lee J. Cohen, in pro. per.\n J. Mark Waxman, Asst. U. S. Atty. (argued), Los Angeles, Cal., for appellee.\n OPINION\n Before BROWNING, WALLACE and SNEED, Circuit Judges.\n PER CURIAM:\n \n \n 1\n Appellant Lee J. Cohen applied for compensation for services rendered as counsel for the debtor in possession in a Chapter XI proceeding. The referee in bankruptcy denied the application on the ground that no order had been entered appointing appellant as counsel in accordance with Bankruptcy General Order 44.\n \n \n 2\n Appellant then filed a motion for entry of an order appointing appellant as counsel to the debtor in possession nunc pro tunc, and for reopening of the hearing on appellant's application for allowance of compensation. The referee found that the compensation sought by appellant was fair and reasonable, but denied the motion for an order of appointment nunc pro tunc on the sole ground that such an order was barred by Beecher v. Leavenworth State Bank, 184 F.2d 498 (9th Cir. 1950). The district court affirmed the referee's denial of appellant's motion for entry of a nunc pro tunc order of appointment.\n \n \n 3\n Beecher does not bar entry of a nunc pro tunc order. Whether the requirement of General Order 44 may be met by a nunc pro tunc order in proper circumstances was not an issue in Beecher.\n \n \n 4\n The record in this case discloses that the referee made the determinations required by General Order 44 before appellant performed the services for which he seeks compensation. A nunc pro tunc order of appointment is therefore not forbidden.\n \n \n 5\n The order of the district court is reversed. The cause is remanded for consideration of whether there should be entered a nunc pro tunc order appointing appellant counsel for the debtor in possession. Since the district court did not review the referee's finding that the compensation sought by appellant was fair and reasonable, we express no opinion on that question.\n \n \n 6\n Reversed and remanded.\n \n SNEED, Circuit Judge (dissenting):\n \n 7\n I dissent. Rules such as that embodied in General Order 44 contribute substantially to the orderly disposition of commercial affairs. Sometimes their application may appear harsh but this appearance is due in no small measure to the fact that the celerity and orderliness resulting from almost universal compliance is not visible to us when we come to consider the plight of one who \"missed the train.\" Our invocation of the magic of \"nunc pro tunc\" assists the stranded passenger before us at the expense of all who must ride in the future. By reason of our decision they know not when their next train departs.\n \n \n 8\n In addition there is no indication in Beecher v. Leavenworth State Bank, 184 F.2d 498 (9th Cir. 1950) that its refusal to countenance the payment of a fee in the absence of compliance with General Order 44 would yield to a \"nunc pro tunc\" approach. \"Nunc pro tunc\" is an incantation to permit the correction of yesterday's oversight, not yesteryear's failure on the part of experienced counsel to abide by plain and unambiguous rules. I think Beecher stands for that proposition.\n \n \n 9\n Finally, the contest here essentially is between an inattentive attorney and creditors of the bankrupt. What he gets, they do not. I see little to choose between them on equitable grounds. Both have expended more than they will receive in return. The answer to the argument that the attorney enhanced the creditors' recovery is that they contributed to the bankrupt's estate without which the work of the attorney might not have been needed.\n \n \n 10\n I would adhere to Beecher and enforce General Order 44.\n \n ", "ocr": false, "opinion_id": 338387 } ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": 6, "download_url": "https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2009cv0867-16", "author_id": 1911, "opinion_text": " UNITED STATES DISTRICT COURT\n FOR THE DISTRICT OF COLUMBIA\n\nTD INTERNATIONAL, LLC, )\n )\n Plaintiff, )\n )\n v. )\n ) Civil Case No. 09cv867 (RJL)\nSTEVEN K. FLEISCHMANN )\n )\n& )\n )\nTERTIUM DATUR )\nINTERNATIONAL, LLC a/k/a )\nTERTIUM DATUR, LLC, )\n )\n Defendants. )\n--------------------------)\n\n\n MEMORANDUt!;;INION\n (August ~, 2009)\n\n TD International, LLC (\"TDI\") seeks a preliminary injunction! to freeze one of\n\ndefendants' bank accounts pending a judgment on TDI's claims for roughly $1.2 million\n\nin damages (\"PI. Mot.\" [Dkt. # 2]). After consideration of both parties' pleadings and\n\n\n\n 1 Plaintiff also sought an ex parte temporary restraining order to freeze defendants'\nbank account while the motion for a preliminary injunction was pending. That request\nwas denied on May 19, 2009 because it did not comply with Federal Rule of Civil\nProcedure 65(b)(I)(A), which requires TRO requests be accompanied by an affidavit or a\nverified complaint containing specific facts to \"clearly show that immediate and\nirreparable injury, loss, or damage will result ... before the adverse party can be heard in\nopposition.\" Rule 65 must be strictly applied because ex parte relief runs counter to core\nvalues of notice and opportunity to be heard. See Granny Goose Foods, Inc. v. Bhd. of\nTeamsters and Auto Truck Drivers Local No. 70 ofAlameda County, 415 U.S. 423, 438\n(1974).\n\ftheir oral arguments before the Court, TDI's motion for a preliminary injunction is\n\nDENIED.\n\n BACKGROUND\n\n The focus of the parties' dispute is the terms of a partnership agreement between\n\nFleischmann and TO!. TDI is a Washington, D.C.-based business consulting firm formed\n\nin 1999. (CompI. ~ 9.) According to TDI's complaint, Fleischmann entered into a\n\nMembers Agreement in January of2004 with two principals ofTDI, William Green and\n\nRonald Slimp. Pursuant to the agreement, each of the three members held a one-third\n\nownership interest in the company in furtherance of the company's business. (Id. ~ 10.)\n\n Additionally, as a supplement to the obligations imposed by the Members\n\nAgreement, TDI claims Fleischmann was bound by a second agreement-the Third\n\nAmended and Restated Operating Agreement, dated May 1, 2004-to \"devote his best\n\nefforts and substantially all of his productive working time to TOrs business.\" (Id.) An\n\nunsigned copy of this agreement is attached to TDI's pleadings. (ld. Exh. 2.) However,\n\nthe terms of this second agreement contradict the purported terms of the first Members\n\nAgreement as it is described in plaintiffs complaint. In particular, according to the\n\nsecond agreement, there were five members of TDI who held varying ownership interests,\n\nnot three members with a one-third interest each. (ld. Exh. 2 at Exh. A.)\n\n Based on this limited set of facts, TDI seeks a preliminary injunction to freeze one\n\nof Fleischmann's bank accounts on the grounds that, contrary to the terms of his\n\n\n -2-\n\fagreements, he misappropriated some $626,401.42 in accounts receivable owed to TDI.\n\n(Id. ~ 15.) Fleischmann allegedly accomplished the misappropriation by incorporating a\n\nshell company with a name nearly identical to TDI-Fleischmann's company is named\n\nTertium Datur, International, which could also be abbreviated \"TDI\"-and instructing a\n\nclient to direct its payments to this newly created company. (Id. ~ 11-18). According to\n\nTDI, it, and not Fleischmann, held the engagement contract with the client in question,\n\nand the client unwittingly sent payments to Fleischmann's similar-sounding shell\n\ncompany on the mistaken belief it was settling up with TDI. (Id.)\n\n ANALYSIS\n\n A preliminary injunction is an \"extraordinary remedy that is never awarded as of\n\nright.\" Winter v. Natural Res. Defense Council, Inc., --- U.S. ---, 129 S. Ct. 365,376, 127\n\nL.Ed.2d 249 (2008). A movant may obtain a preliminary injunction only if it is able to\n\ndemonstrate: (1) that it is likely to succeed on the merits; (2) that it is likely to suffer\n\nirreparable harm in the absence of preliminary relief; (3) that the balance of equities tips\n\nin its favor; and (4) that an injunction is in the public interest. Id. At 374. \"If the plaintiff\n\nmakes a particularly weak showing on one factor ... the other factors may not be enough\n\nto compensate.\" Dodd v. Fleming, 223 F.Supp.2d 15, 20 (D.D.C. 2002) (citing Taylor v.\n\nResolution Trust Corp., 56 F.3d 1497, 1507 (D.C. Cir. 1995), amended on other grounds\n\non reh 'g, 66 F.3d 1226 (D.C. Cir. 1995)). In particular, a movant must show at the very\n\nleast that irreparable harm is likely to occur should an injunction not issue. See Winter,\n\n\n\n -3-\n\f129 S.Ct. at 375. The mere possibility of irreparable harm is not enough, see id., and a\n\ncourt may deny a motion for preliminary relief without considering any other factors\n\nwhen irreparable harm is not established, see CityFed Financial Corp v. DTS, 58 F.3d.\n\n738, 747 (D.C. Cir. 1995). Unfortunately for TDI, it has failed to make the requisite\n\nshowing of irreparable harm. How so?\n\n While the concept of irreparable harm may be difficult to define, it is abundantly\n\nclear that the impending harm must be \"certain and great,\" and it must be \"actual and not\n\ntheoretical.\" Wisconsin Gas Co. v. FERC, 758 F.2d 669, 674 (D.C. Cir. 1985).\n\nAdditionally, the harm must be imminent. Injunctive relief \"will not be granted against\n\nsomething merely feared as liable to occur at some indefinite time.\" Id. (citing\n\nConnecticut v. Massachusetts, 282 U.S. 660, 674 (1931 )). Finally, it is \"well settled that\n\neconomic loss does not, in and of itself, constitute irreparable harm.\" Id. The only\n\ninstance where economic loss can give rise to irreparable harm, and thus a preliminary\n\ninjunction, is when such loss \"threatens the very existence of the movant's business.\"\n\nIsong v. Apex Petroleum Corp., 273 F. Supp. 2d 1,2 (D.D.C. 2002) (citing Washington\n\nMetropolitan Area Transit Comm'n v. Holiday Tours, Inc., 559 F.2d 841,843 n. 2\n\n(D.C.Cir.1977)).\n\n TDI's sole argument with respect to irreparable harm is that it holds an \"equitable\n\ninterest\" in the funds it seeks to freeze. (PI. Mot. at 5-6.) Putting aside TDI's failure to\n\nadvance any legal or factual basis to support its claim to an \"equitable\" interest in the\n\n\n -4-\n\ffunds, it does not establish what irreparable harm will befall it if the Court does not grant\n\nthe injunction it seeks. Indeed, the mere existence of an equitable interest in the funds is\n\nnot enough on its own to warrant injunctive relief. To the contrary, TDI must\n\ndemonstrate that the likely loss of these funds threatens its business's very existence. See\n\n/song, 273 F. Supp. 2d at 2. In that regard, TDI's reliance on Ellipso v. Mann 2 is, at best,\n\nmisplaced. While an equitable interest is necessary under Ellipso to obtain an injunction\n\nto freeze assets, it is not a sufficient basis, alone, to warrant an injunction that does so.\n\nAccordingly, whether TDI's interest in the funds in Fleischmann's bank account is\n\nequitable or not, it cannot obtain injunctive relief absent the necessary showing of\n\nirreparable harm required in this Circuit. 3\n\n\n\n\n 2 480 F.3d 1153 (D.C. Cir. 2007)\n\n 3 TDI fails to even argue, let alone establish, that the damages it has allegedly\nsuffered on account of Fleischmann pose a threat to its business. Assuming arguendo\nTDI's allegations to be true, Fleischmann diverted approximately $626,401.42 in funds\nowed to TDI. (CompI. ~ 15.) In addition, TDI claims it sunk roughly $600,000 in\nunrecouped costs to service T AQA, the client whose payment Fleischmann allegedly\nmisappropriated. (Jd. ~ 18.) This alleged loss, however, is never placed in the context of\nthe financial condition ofTDI's business. Moreover, TDI's acknowledgment at the\npreliminary injunction hearing that Fleischmann had not moved any funds out of the\naccount since paying taxes in April, despite his awareness ofTDI's suit against him,\nraises additional doubts as to whether any potential harm is \"imminent.\" (H'rg Tf. at 5.)\n\n -5-\n\f CONCLUSION\n\n Thus, for all of the reasons stated above, the Court DENIES TDI's Motion for a\n\nPreliminary Injunction. An appropriate order will issue with this Memorandum Opinion.\n\n\n\n\n ~\n RICHARD. E N\n United States District Judge\n\n\n\n\n -6-\n\f", "ocr": false, "opinion_id": 2667535 } ]

[ "802 F.2d 451" ]

[ { "author_str": null, "per_curiam": false, "type": "010combined", "page_count": null, "download_url": "http://bulk.resource.org/courts.gov/c/F2/802/802.F2d.451.86-7618.html", "author_id": null, "opinion_text": "802 F.2d 451Unpublished Disposition\n NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.UNITED STATES of America, Plaintiff-Appellee,v.Thomas FEMINELLA, Defendant-Appellant.\n No. 86-7618.\n United States Court of Appeals, Fourth Circuit.\n Submitted July 23, 1986.Decided Sept. 30, 1986.\n \n Thomas Feminella, appellant pro se.\n Justin W. Williams, Office of the United States Attorney, for appellee.\n E.D.Va.\n AFFIRMED.\n Before HALL, PHILLIPS and WILKINS, Circuit Judges.\n PER CURIAM:\n \n \n 1\n A review of the record and the district court's opinion discloses that this appeal from its order refusing relief under 23 U.S.C. Sec. 2255 is without merit. Because the dispositive issues recently have been decided authoritatively, we dispense with oral argument and affirm the judgment below on the reasoning of the district court. United States v. Feminella, CR No. 85-107-A; C/A No. 86-445-A (E.D.Va., April 25, 1986).\n \n \n 2\n AFFIRMED.\n \n ", "ocr": false, "opinion_id": 477153 } ]

[ "379 P.2d 575", "233 Or. 569" ]

[ { "author_str": "Goodwin", "per_curiam": false, "type": "010combined", "page_count": null, "download_url": null, "author_id": null, "opinion_text": "\n233 Or. 569 (1963)\n379 P.2d 575\nFREEDMAN\nv.\nCHOLICK ET UX\nSupreme Court of Oregon.\nArgued February 8, 1963.\nAffirmed March 13, 1963.\n*570 Paul R. Meyer, Portland, argued the cause for appellant. With him on the briefs were Kobin & Meyer, Portland.\nThomas J. Moore, Portland, argued the cause for respondents and cross-appellants. With him on the briefs were Schedler & Moore, Portland.\nBefore McALLISTER, Chief Justice, and ROSSMAN, SLOAN, GOODWIN and LUSK, Justices.\nAFFIRMED.\nGOODWIN, J.\nThis is an action for damages for breach of contract.\nPlaintiff paid defendant $250 for an option to buy a corner lot in downtown Portland for $115,000. Plaintiff in due course elected to exercise the option. Defendant was unable to deliver possession. This action followed. Plaintiff demanded in damages the difference between $115,000 and $132,000, the alleged market value of the property at the time he exercised the option. He also demanded $250 as return of his consideration for the option and $320 as lost interest on purchase money deposited in escrow by plaintiff. The *571 jury found for plaintiff but awarded him only $570 in damages. Plaintiff appeals, and assigns error to certain rulings upon the evidence.\nExpert witnesses testified in plaintiff's case-in-chief that the market value of the land and its improvement (a parking-garage) was between $130,000 and $132,000 at the critical time. Plaintiff's witnesses swore the building could be remodeled and used as an office building. In defendant's case, his value witness testified that the land as improved was worth only $100,000. Defendant's witness gave the building virtually no value. The value of the improvement thus became the central issue before the jury.\nThe defendant's value witness stated that in his opinion the garage building could not economically be converted into a commercial office building. He conceded on cross examination that it was technically possible so to remodel. However, it was his conclusion that the building did not enhance the present market value of the land. He said that in order to develop the land to its highest and best use it would be better, in his opinion, to demolish the existing building. He acknowledged that he had based his opinion, in part at least, upon an assumption that the building was brick rather than brick facing on reinforced concrete. Plaintiff's witnesses earlier had sworn that the building was concrete with brick facing and trim.\nIn rebuttal the plaintiff asked a contractor whether the existing improvement could be converted into a modern office building. The answer was affirmative. The plaintiff then asked the contractor the cost of such conversion. This evidence was excluded. The plaintiff then made an offer of proof, and combined in his offer of proof the contractor's testimony (a) that the building could be remodeled and (b) the cost *572 thereof. Another offer of proof consisted of the testimony of a property-management expert concerning the earnings which could be expected from a modern office building on the site in dispute. By its various rulings, the court sustained objections to all of this proffered testimony. Plaintiff has assigned error to these rulings.\n1, 2. In general, rebuttal testimony will be excluded except for that made necessary by the opponent's case-in-chief. State v. Fischer, 232 Or 558, 376 P2d 418 (1962); 6 Wigmore, Evidence (3d ed) 510, § 1873. Whether such evidence is necessary is ordinarily a matter of discretion. Parmentier v. Ransom, 179 Or 17, 22, 169 P2d 883 (1946).\n3. Normally, where the vendor breaches his contract to sell land, the vendee may recover the difference between the market value of the land at the time it should have been conveyed and the contract price. Crahane et al v. Swan, 212 Or 143, 156, 318 P2d 942 (1957); McCormick, Damages 680, § 177. Present market value obviously includes the value of existing improvements on the land; e.g., Public Market Co. v. Portland, 179 Or 367, 170 P2d 586 (1946), cert. den. 330 U.S. 829, 67 S. Ct. 861, 91 L. Ed. 1278 (1947); City of Los Angeles v. Klinker, 219 Cal 198, 211, 25 P2d 826, 90 A.L.R. 148; 2 Orgel, Valuation under Eminent Domain 4, § 189. The quest for present market value also makes relevant an inquiry into the possible future uses of the land (within limitations not in issue here). Boom Co. v. Patterson, 98 U.S. 403, 408, 25 L. Ed. 206 (1878); 1 Sedgwick, Damages (9th ed) 510, § 253; 1 Orgel, Valuation under Eminent Domain, §§ 29-31. This inquiry is usually referred to as a search for the highest and best use of the land.\nIn the case at bar, the jury had heard plaintiff's *573 value witness swear that the existing building was a valuable asset. The jury had also heard the defendant's witness say that he considered the building to be of little or no value. He reached a figure $30,000 lower than that of the plaintiff's witness because he thought the building ought to be torn down. There was, then, a conflict in the testimony of the two real-estate appraisers. Plaintiff sought to rebut the defendant's expert by asking two other kinds of experts (a builder and a rental manager) to swear that there was a valuable building on the land.\nPlaintiff relies upon State Highway Com'n v. Deal et al, 191 Or 661, 233 P2d 242 (1951), as authority that his proferred testimony was admissible in rebuttal. In the Deal case, the state's witnesses had sworn in the state's case-in-chief that the land taken could not be used for subdivision purposes. The point then under inquiry was the highest and best use of certain ocean-frontage land. During the owner's case-in-chief, he put in evidence to show that the best use of the property would be for subdivision purposes. The state objected when the owner then offered to prove how the land could be subdivided into lots, and when he sought to show the price for which the lots could be sold. The state argued, correctly, that this evidence was speculative. We held, however, that although the evidence normally would have been inadmissible as too speculative, it had become admissible in that case for a limited purpose. The state had opened up the collateral question of the cost of improvements and whether these costs could be recaptured in the selling price of the lots. We held that the defendant was thus entitled to meet the state's evidence with his own evidence that the lots could be sold. The testimony was admissible solely to prove that subdivision was feasible, *574 and then only because the state had opened the inquiry.\nIn the case at bar, there is no dispute about the highest and best use of the land. Both parties agree that such use would be for a modern office building. Further, with reference to the value of the existing building and its future usefulness, it is clear that when plaintiff's witnesses testified to the market value of the property as a whole they took into account the value of the existing building as the start of a remodeled office building. Thus, when the rebuttal evidence was offered, the jury already had before it two different figures on market value, two extended explanations of how the figures had been reached, and two conflicting views on the feasibility of adapting the existing building.\nThe Deal case might give some support to the plaintiff's position in the case at bar if in the Deal case the trial court had permitted the state to come back in rebuttal with proof that the lots could not be sold at the prices sworn to by the owner. That matter, however, was never presented, and we had no occasion to pass upon it. In any event, we have been cited to no authority that would require a court to receive such evidence.\n4. That portion of the proffered testimony which the plaintiff sought to elicit from the building contractor, i.e., that the existing building could be remodeled, was cumulative. Testimony on that score had been placed before the jury in the plaintiff's case-in-chief. While there would have been no reversible error in receiving cumulative testimony on rebuttal, neither would there be error in excluding it. The matter is discretionary. The portion of the testimony which plaintiff sought to elicit from the property manager was not *575 cumulative, since it had not been touched upon before, but was so speculative, and opened up inquiry into so many collateral matters, that its relevance was outweighed by its diversionary effect. Testimony concerning rentals to be earned from a future building had not been made admissible by the mere statement of the owner's expert that he did not consider remodeling to be economically feasible. In the exercise of sound judicial discretion, the trial court properly excluded the plaintiff's offer of proof as containing only remotely relevant evidence, the probative value of which was not sufficient to overcome its essentially speculative nature.\nPlaintiff urges another ground for reversal. Plaintiff notes that the defendant's expert had relied on a supposed fact that the building was of brick. Plaintiff's witness, however, had already testified that the building was made of steel-reinforced concrete. Plaintiff then cites cases for the proposition that it is for the jury to determine whether the facts upon which an expert bases his opinion actually exist. Panko v. Grimes, 40 NJ Super 588, 596, 123 A2d 799 (1956); Thompson v. City of Bushnell, 348 Ill App 395, 109 NE2d 346 (1952). Those cases indeed support the proposition, which is unchallenged here. However, as the jury could have determined without any rebuttal that the facts upon which the defendant's expert's opinion was based were other than he thought them to be, it could have decided that his opinion was entitled to no weight. Oral argument, rather than cumulative evidence, is the method for dealing with this sort of situation.\n5. Even if we assume, however, that there would have been no error, as such, in permitting the plaintiff to contradict the defendant's witness by showing once *576 again on rebuttal the true nature of the construction, the plaintiff's offer of proof went far beyond such a modest redundancy. As noted, plaintiff sought also to prove the costs and income-potential of a proposed office building, complete with air-conditioning and rent-paying tenants. The latter testimony was inadmissible under any theory. State Highway Com'n v. Deal et al, supra. As noted in Smith v. White, 231 Or 425, 372 P2d 483 (1962), if an offer of evidence contains within it evidence that is inadmissible commingled with evidence that is admissible, it is no error to exclude the entire offer. The good falls with the bad. In the case at bar there was no error in excluding the offers of proof.\n6. Plaintiff's final assignment of error which we will notice challenges the refusal of the court to let plaintiff testify as his own witness on the value of the land. He claims that by exercising his option to buy the land he became equitable owner of the land and was, therefore, entitled to testify concerning value as an owner under the rule of Hanns v. Friedly, 181 Or 631, 641, 184 P2d 855 (1947). Plaintiff seeks comfort in noting that defendant was only an equitable owner himself (buying on a contract), but had been allowed to testify. The record reveals no objection to the defendant's value testimony, so the propriety of letting him testify is not before us. The defendant did object, however, when the plaintiff offered to testify on value. Plaintiff now says that the resulting inequality of opportunity to testify was prejudicial to him.\nThe reason for the rule which permits a nonexpert owner to testify to value is the supposed familiarity an owner-occupier has with the neighborhood and the land values therein. Moss v. Peoples Calif. Co., 134 Or 227, 293 P. 606 (1930); Hanns v. Friedly, supra at *577 642. The rule is of doubtful wisdom, and has not been extended in this state to corporate ownership. Highway Com. v. Assembly of God et al, 230 Or 167, 368 P2d 937, 942. We see no reason to extend to a person who merely exercises an option the testimonial status of an owner. There was no error in excluding the plaintiff's own opinion on value.\n7. Another assignment of error is found in the plaintiff's brief, but we decline to notice it. The plaintiff did not comply with ORS 19.074 (2) (b). When less than a total transcript is designated, the points on which an appellant intends to rely must be stated in the designation of record. As the plaintiff failed to raise the point, it is not before us.\nThe defendant has cross-appealed. The cross appeal challenges the propriety of submitting to the jury certain allegations of damages found in the complaint. One is the $250 paid by plaintiff for the option. Another is the sum of $320 in interest which plaintiff said he could have earned elsewhere on the purchase money which he put in escrow when he exercised the option. The evidence supported the submission of both items to the jury.\nThere is no merit in the cross appeal.\nAffirmed.\n", "ocr": false, "opinion_id": 2610461 } ]

[ "319 F. App'x 343" ]

[ { "author_str": "Per Curiam", "per_curiam": false, "type": "010combined", "page_count": 2, "download_url": "http://www.ca5.uscourts.gov/opinions\\unpub\\08/08-60613.0.wpd.pdf", "author_id": null, "opinion_text": " IN THE UNITED STATES COURT OF APPEALS\n FOR THE FIFTH CIRCUIT United States Court of Appeals\n Fifth Circuit\n\n FILED\n April 7, 2009\n No. 08-60613\n Summary Calendar Charles R. Fulbruge III\n Clerk\n\nKARRI APPALA SATYANARAYANA,\n\n Petitioner,\n\nv.\n\nERIC H. HOLDER, JR., U.S. ATTORNEY GENERAL,\n\n Respondent.\n\n\n Petition for Review of an Order of the\n Board of Immigration Appeals\n BIA No. A97 487 930\n\n\nBefore KING, DENNIS, and OWEN, Circuit Judges.\nPER CURIAM:*\n Karri Appala Satyanarayana petitions for review of the decision of the\nBoard of Immigration Appeals (BIA) affirming the decision of the immigration\njudge to deny his application for withholding of removal. Because he has not\nchallenged the BIA’s conclusion that his asylum application was untimely and\nthat he was not entitled to relief under the Convention Against Torture, any\nsuch claims are abandoned. See Soadjede v. Ashcroft, 324 F.3d 830, 833 (5th Cir.\n2003).\n\n *\n Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not\nbe published and is not precedent except under the limited circumstances set forth in 5TH CIR .\nR. 47.5.4.\n\f No. 08-60613\n\n Satyanarayana contends that the BIA erred in analyzing only his claims\nagainst the moneylenders who demanded repayment of his debt, without\nconsidering Satyanarayana’s fear of persecution by Colonel Singh and BJ Singh,\nwho fraudulently induced him to accept a job in the United States that did not\nmaterialize and who were the named defendants in a lawsuit brought by misled\nIndian workers, including Satyanarayana. This argument is an inaccurate\nassessment of the BIA’s ruling; the BIA included references to fraud and\nlawsuits in the definition of the pertinent “particular social group” and concluded\nthat these actions on Satyanarayana’s part were voluntary. Satyanarayana also\ncontends that the BIA misapplied its precedent in In re C-A-, 23 I. & N. Dec. 951\n(BIA 2006). He maintains that unlike the petitioner in C-A-, he did not act\nvoluntarily in coming to the United States and in attempting to obtain\ncompensation through legal action after he was defrauded by the Singhs.\nSatyanarayana has not established that the evidence compels a contrary\nconclusion from that reached by the BIA. See Chun v. INS, 40 F.3d 76, 78 (5th\nCir. 1994). Consequently, the petition for review is DENIED.\n\n\n\n\n 2\n\f", "ocr": false, "opinion_id": 65749 } ]