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338 B.R. 422 (2006)
In re Charles R. SCHIFFMAN, Debtor.
No. 05-46152-13.
United States Bankruptcy Court, D. Oregon.
March 2, 2006.
*423 *424 Bradley O. Baker, for Creditor Aaron Thomas Plaintiff or Petitioner.
Robert J. Vanden Bos, Vanden, Bos & Chapman, Portland, OR, for Debtor Defendant or Respondent.
MEMORANDUM OPINION
RANDALL L. DUNN, Bankruptcy Judge.
This case tests the limits of a debtor's rights to alter the court's chapter 13 plan form over the objections of the chapter 13 trustee and concerned creditors. The debtor is attempting through proposed additional plan provisions to establish a right to pay off his chapter 13 plan early, without being obligated to pay all allowed unsecured claims in full and without having to go through the plan modification process. In other words, the debtor seeks the right to be able to pay off his chapter 13 plan and receive a discharge immediately after confirmation of the plan, if he chooses, without having to disclose the source of payment funds, without notice to the chapter 13 trustee, creditors and other interested parties, and without having to obtain an order of the court.
At the initial confirmation hearing in this case, I held that two paragraphs the debtor had added to the court's form chapter 13 plan were inappropriate as a matter of law and sustained objections to those provisions. After allowing the parties an opportunity to make a record of their positions with respect to my rulings, I state my reasons for disallowing the debtor's proposed plan provisions as follows:
Background
The debtor, Charles R. Schiffman ("Mr.Schiffman"), filed his chapter 13 petition on October 14, 2005. Docket No. 1. Mr. Schiffman is no "run of the mill" chapter 13 debtor. On his Schedule I, Mr. Schiffman states that he is employed as Executive Vice-President of the Jewish Federation of Portland, with monthly gross income of $10,481. Docket No. 1, Schedule I. After payroll withholdings for taxes, Social Security, insurance and charitable contributions totaling $3,984, and monthly expenses totaling $6,808, he reports "excess income" of $919 per month to fund his chapter 13 plan. Docket No. 1, Schedule J.[1]
This court's Local Bankruptcy Form ("LBF") 1300 is the chapter 13 plan form (the "Chapter 13 Plan Form"). Although LBF 1300 ultimately was approved and promulgated by all of the bankruptcy judges for the District of Oregon, it was submitted in draft form for comments to various chapter 13 constituencies prior to its approval, including debtors' counsel, creditors' counsel, the chapter 13 trustees, the Internal Revenue Service and the Oregon Department of Justice. The Chapter *425 13 Plan Form was developed to handle efficiently the high volume of chapter 13 cases in Oregon, and chapter 13 debtors are required to use LBF 1300 by Local Bankruptcy Rule ("LBR"). See LBR 3015-1.B.1.
The Chapter 13 Plan Form was drafted to treat the interests of the various parties in chapter 13 proceedings evenhandedly. It covers issues commonly faced in chapter 13 cases, with flexibility to allow for the unique circumstances of particular cases.
Mr. Schiffman's initial plan used LBF 1300 but added eight separate, nonuniform paragraphs to the form text. See Docket No. 4, pp. 2-3. The chapter 13 trustee objected to Paragraphs 10, 11 and 14 in Mr. Schiffman's plan and requested that they be stricken. See Docket No. 15. On December 2, 2005, Mr. Schiffman filed a Notice of Pre-Confirmation Modification of Plan, with a proposed amended plan (the "Amended Plan"), dated December 1, 2005, attached. See Docket No. 16. The Amended Plan used LBF 1300, but added nine separate, nonuniform paragraphs to the form text. None of the nonuniform paragraphs in the initial plan to which the chapter 13 trustee objected were removed in the Amended Plan. However, Paragraphs 10 and 11 were expanded to add more text. Compare Docket No. 16, pp. 3-4 with Docket No. 4, pp. 2-3. Creditor/claimant Aaron Thomas ("Mr.Thomas") objected to confirmation of the Amended Plan on a number of grounds, including: "The plan improperly modifies the standard language of the Chapter 13 form Plan in violation of Local rules." See Docket No. 18, pp. 1-2.
At the initial confirmation hearing, held on December 22, 2005, the court issued an order to allow discovery among the parties to proceed and adjourned the confirmation hearing to January 30, 2006, to accommodate a possible settlement conference among the parties and further scheduling. See Docket Nos. 22 and 23. In addition, the court discussed with the parties the nonuniform plan provisions included in the Amended Plan and sustained the chapter 13 trustee's and Mr. Thomas' objections to Paragraph 14, and sustained Mr. Thomas' objection to Paragraph 17. The court allowed the parties until January 20, 2006, to file their memoranda to make a further record with respect to the court's rulings. The court stated that a written opinion elaborating on the court's rationale for disallowing Paragraphs 14 and 17 in the Amended Plan would be issued thereafter. See Docket No. 22.
On January 6, 2006, the chapter 13 trustee filed his Memorandum ("Memorandum") concerning his objections to the Amended Plan and joined in the objection of Mr. Thomas to Paragraph 17. See Docket No. 28.
On January 16, 2006, Mr. Schiffman filed a second Notice of Pre-Confirmation Modification of Plan, with a proposed further amended plan (the "Second Amended Plan"), dated January 13, 2006, attached. See Docket No. 31. In the Second Amended Plan, the Paragraphs 14 and 17 provisions of the Amended Plan that I disapproved are deleted. On January 20, 2006, Mr. Schiffman filed his Memorandum in Support of Confirmation of Chapter 13 Plan Dated December 1, 2005 ("Supporting Memorandum"). Attached to the Supporting Memorandum was the Affidavit of Robert J. Vanden Bos ("Vanden Bos Affidavit"), Mr. Schiffman's counsel. See Docket No. 32. In addition, on January 20, 2006, Mr. Schiffman filed his Objection ("Objection") to certain provisions of Paragraph 1 of the Chapter 13 Plan Form. See Docket No. 33.
At the adjourned confirmation hearing on January 30, 2006, counsel for Mr. Schiffman reported that a settlement had *426 been negotiated with Mr. Thomas that might result in the dismissal of Mr. Schiffman's chapter 13 case.
Discussion
Authority has been delegated to the United States district courts and bankruptcy courts to adopt local rules and forms for the conduct of proceedings before them, but such rules and forms must be consistent with the substantive provisions of the federal Bankruptcy Code and the Federal Rules of Bankruptcy Procedure. See Fed. R. Bankr.P. 9029; In re Sunahara, 326 B.R. 768, 782 (9th 1Cir. BAP 2005); and In re Bersher Invs., 95 B.R. 126, 129 (9th Cir. BAP 1988).[2]
The target of the paragraphs in the Amended Plan that I have disallowed, as confirmed in the Objection (see Docket No. 33, p. 2) and in the Supporting Memorandum (see Docket No. 32, p. 4), is Paragraph 1 ("Paragraph 1") of the Chapter 13 Plan Form, which reads as follows:
1. The debtor shall pay to the trustee; (a) a periodic payment of $____________ every _______ (insert either month or quarter); (b) all proceeds from avoided transfers; (c) upon receipt by the debtor, all tax refunds attributable to prepetition tax years and net tax refunds attributable to postpetition tax years (i.e., tax refunds not included on Schedule I, less tax paid by debtor for a deficiency shown on any tax return for that same tax year or tax paid by setoff by a tax agency for a postpetition tax year) for: ___ the life of the plan. or ___ 36 months from the date the first plan payment is due (Check the applicable provision; if neither is checked, "for the life of the plan" applies); (d) a lump sum payment of $_____ on _______ date; and (e) _______________________. [Italics in original.]
Paragraph 1 was drafted consistent with provisions of Sections 1322(a)(1) and (b)(10), 1306(a), and 1327(b) and (c) of the Bankruptcy Code.[3]
Section 1322(a)(1), dealing with the content of chapter 13 plans, states that, "The plan shall . . . provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan. . . ." Section 1322(b)(10) provides that, "[s]ubject to subsections (a) and (c) of this section, the [chapter 13] plan may . . . include any other appropriate provision not inconsistent with . . . title [11]."
The terms "future income" and "future earnings" are not defined in the Bankruptcy Code. Paragraph 1 includes in subpart (a) a blank to insert the debtor's income, net of expenses, reflected in Schedules I and J of the debtor's schedules. However, future income and future earnings are not necessarily coextensive with the "excess" *427 or net disposable income reported on those schedules.
Section 1306(a) provides that:
Property of the estate includes, in addition to the property specified in section 541 of this title (1) all property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first; and (2) earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first.
Section 1327(b) and (c), dealing with the effects of confirmation of a chapter 13 plan, provide that:
(b) Except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor.
(c) Except as otherwise provided in the plan or in the order confirming the plan, the property vesting in the debtor under subsection (b) of this section is free and clear of any claim or interest of any creditor provided for by the plan. [Emphasis added.]
In Paragraph 1, two categories of chapter 13 estate assets are not revested in the debtor and are treated as future earnings or income and committed to funding the plan: 1) avoided transfers, including fraudulent conveyances of the debtor, that are recovered during the life of the plan; and 2) prepetition and postpetition tax refunds that are received by the debtor during the life of the plan.
The Bankruptcy Code allows and fairness concerns strongly recommend that the debtor's fraudulent conveyances and other avoided transfers recovered during the life of the plan be included as future income submitted to the chapter 13 trustee for distribution under the plan. Indeed, any debtor opposed to coughing up fraudulent conveyance recoveries arguably would have a difficult time satisfying the Section 1325(a)(3) requirement that the plan be proposed in good faith. The Paragraph 1 provision concerning avoided transfers is not in issue in this case and has not been objected to by Mr. Schiffman, even though it arguably requires payment of "actual" as opposed to "projected" future income.
The rationale for including tax refunds received by the debtor during the life of the plan as future earnings is if a debtor is regularly receiving substantial tax refunds, the debtor probably is overwithholding, and consequently underestimating future income. This assumption is subject to rebuttal based upon an appropriate evidentiary showing.
The tax refund provisions of Paragraph 1(c) of the Chapter 13 Plan Form serve the administrative convenience of debtors and the chapter 13 trustee. In their absence, alternative measures would be needed to insure that potential future income from tax refunds is adequately disclosed by debtors and included in their disposable income calculations, since tax refunds generally do not appear on Schedule I. I do not buy the idea that the chapter 13 trustee should be burdened with the responsibility for burrowing into the debtor's tax records to determine whether the debtor's withholdings are appropriate and presenting evidence in support of an objection to confirmation in order to require the debtor to alter his or her withholdings to minimize or eliminate future tax refunds. It is debtors' responsibility at the commencement of their bankruptcy cases to make full and accurate disclosures of their financial affairs.
*428 [T]he very purpose of certain sections of the [Bankruptcy Code] . . . is to make certain that those who seek the shelter of [bankruptcy] do not play fast and loose with their assets or with the reality of their affairs. The statutes are designed to insure that complete, truthful, and reliable information is put forward at the outset of the proceedings, so that decisions can be made by the parties in interest based on fact rather than fiction. Boroff v. Tully, 818 F.2d 106, 110 (1st Cir.1987).
Of course, the court could require debtors to provide evidence 1) as to how many dependents are claimed on their W-4 forms, and that the number of dependents claimed results in appropriate withholdings and will not result in material refunds, with appropriate updates during the time that their chapter 13 cases are pending, and 2) report every change in their income during the lives of their chapter 13 cases. Prior experience tends to indicate that debtors would regularly default in the performance of such reporting obligations with the potential consequence that their cases would be dismissed upon motion of the chapter 13 trustee.
In this case, the record establishes that for the three prepetition tax years of 2002, 2003, and 2004, Mr. Schiffman received the following refunds:
Agency 2002 2003 2004 Total
Federal $4,328 $4,513 $3,078 $11,919
State $1,113 $1,289 $1,248 $ 3,650
Totals: $5,441 $5,802 $4,326 $15,569
See Vanden Bos Affidavit, Docket No. 32, p. 5. Accordingly, for the three year period prior to 2005, the year in which Mr. Schiffman filed his chapter 13 petition, Mr. Schiffman's federal and state tax refunds combined averaged $5,189.67 per year.
If a debtor's tax withholdings from payroll are appropriate, the debtor likely will receive negligible or no tax refunds during the life of the chapter 13 plan, and the provision of the Chapter 13 Plan Form including tax refunds received during the life of the plan as future income or earnings will not have much, if any impact. However, the impact of including tax refunds as future earnings in each individual case is a fact-based determination over the life of each chapter 13 plan, and the history of Mr. Schiffman's tax refunds for the years preceding his bankruptcy filing tend to indicate that Mr. Schiffman's tax refunds during the life of his chapter 13 plan will be significant.
In the Objection, Mr. Schiffman objects to the inclusion of the tax refund provision in Paragraph 1 because it requires "the payment of `actual' future income as opposed to `projected' income." Leaving aside for the moment the ultimate absurdity of insisting that only a plan that uses fictional projections rather than real numbers in defining the boundaries of future income is confirmable, Mr. Schiffman relies primarily on the decision of the Ninth Circuit in In re Anderson, 21 F.3d 355 (9th Cir.1994), to support his Objection.
In Anderson, the Ninth Circuit held that a chapter 13 trustee could not require as a condition to confirmation of the debtors' chapter 13 plan that the debtors sign a "Best Efforts Certification," that in effect, required the debtors to agree, as a covenant independent of their chapter 13 plan, to pay all of their actual disposable income to the trustee during the life of the plan. Section 1325(b)(1)(B) provides that
[i]f the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan . . . the plan provides that all of the debtor's projected disposable income to be received in the three-year period beginning on the *429 date that the first payment is due under the plan will be applied to make payments under the plan. [Emphasis added.]
In light of the plain language of the statute, the Ninth Circuit determined that the condition pressed by the trustee was inconsistent with the condition to confirmation that Congress actually put in the Bankruptcy Code in Section 1325(b)(1)(B). See Id. at 357-58.
In addition, the Ninth Circuit pointed out that the trustee's proposed Certification requirement would allow the trustee to effect plan modifications in terms of periodic adjustments to plan payments, without following the procedures for plan modification set forth in Section 1329 and without a court order. The Ninth Circuit held that the trustee could not cut off the statutory rights of the debtors to request the court to disapprove plan modifications proposed by the trustee, based on the axiom, "We may not construe a statute so to make any part of it mere surplusage." Id. at 358; United States v. Mehrmanesh, 689 F.2d 822, 829 (9th Cir.1982).
"Mere surplusage" is precisely what Mr. Schiffman would have the court make of Section 1306(a), which includes pre- and postpetition tax refunds as property of the chapter 13 estate, and Section 1327(b), which revests all property of the estate in the debtor "except as otherwise provided in the plan." Mr. Schiffman cites In re Heath, 182 B.R. 557 (9th Cir.BAP1995), and In re Kuehn, 177 B.R. 671 (Bankr. D.Ariz.1995), for the argument that the language of Paragraph 1 including tax refunds received during the life of the plan as plan payments, must be stricken.
In Heath, the Bankruptcy Appellate Panel confronted two cases in which the chapter 13 plan form did not require the submission of tax refunds received by the debtors during the lives of their respective plans to the trustee for distribution to creditors. The trustee argued that all income tax refunds received during the first 36 months of the debtors' plans should be paid over to the trustee for distribution, without submitting any evidence in either case that future tax refunds could be projected or that the debtors were overwithholding. In re Heath, 182 B.R. at 559 and 560. Citing Anderson, the Bankruptcy Appellate Panel held that in the absence of some evidentiary showing as to projected tax refunds, Section 1325(b) did not require the inclusion of tax refunds received by the debtors as projected disposable income. Id. at 560-61.
In Kuehn, the bankruptcy court held that the trustee could not require the debtors to pay over all tax refunds received by the debtors during the life of their chapter 13 plan without projecting whether there would be any tax refunds. Again, the language of the form chapter 13 plan in Kuehn did not require the submission of tax refunds received by the debtors as plan payments, and the bankruptcy court, citing Anderson, determined that in the absence of evidence of projected tax refunds, requiring the submission of actual tax refunds received as a condition to confirmation would be inconsistent with the Section 1325(b)(1)(B) condition of submission of projected disposable income. In re Kuehn, 177 B.R. at 672-73.
In this case, as noted above, the record reflects that Mr. Schiffman received federal and state tax refunds for the tax years 2002 through 2004 totaling $15,569. Based on that record, Mr. Schiffman projects tax refunds of $15,569 for the first 36 months of his chapter 13 plan. See Vanden Bos Affidavit, Docket No. 32, p. 6. No future income from projected tax refunds is disclosed in Mr. Schiffman's Schedules I and J. See Schedules I and J, Docket No. 1.
*430 As opposed to the chapter 13 plan forms considered in Heath and Kuehn, the Chapter 13 Plan Form adopted in the District of Oregon generally requires that pre- and postpetition tax refunds received by the debtor during the life of the plan be included among the payments submitted to the trustee for distribution to creditors. As stated above, that provision is based on the assumption that if the debtor receives substantial tax refunds during the life of a chapter 13 plan, absent contrary evidence, the debtor likely is overwithholding, and such receipts should be included in future income or earnings dedicated to the plan under Section 1322(a)(1). Such refunds are property of the estate, as defined in Section 1306(a), and Section 1327 allows such property not to be revested in the debtor, if the plan so provides. This provision of the Chapter 13 Plan Form exists whether the trustee or any unsecured creditor with an allowed claim objects to confirmation or not. Consequently, Section 1325(b)(1)(B) may or may not be relevant to its consideration. It is consistent with the provisions of the Bankruptcy Code and is not inconsistent with the Ninth Circuit's decision in Anderson, which disapproved a condition to confirmation that was inconsistent with the plain language of the Bankruptcy Code but did not hold that a confirmable chapter 13 plan cannot be based on anything but the debtor's projected fantasies. Nothing in Anderson says that reality can never intrude on the confirmation process in chapter 13.
The Disallowed Provisions
A. Paragraph 14
Paragraph 14 of the Amended Plan reads as follows:
At the time of any proposed payoff of debtor's plan prior to 36 months after the first payment is due, Debtor(s') obligation under Paragraph 1 of the Plan to pay their projected disposable income tax refunds to the Trustee can and shall be deemed satisfied upon payment to the Trustee of an amount equivalent to the annual average of Debtor(s') tax refunds for the three calendar years immediately preceding the petition date, multiplied by three, less the amounts of tax refunds for postpetition tax years actually paid by the Debtor(s) to the Trustee.
I sustained the objections of the chapter 13 trustee and Mr. Thomas to Paragraph 14 because it would allow a premature and arbitrary determination of future income or earnings of Mr. Schiffman in terms of tax refunds, both for prepetition and postpetition periods, to be received over the life of his chapter 13 plan. It likewise is objectionable in that it introduces an undefined term, "projected disposable income tax refunds," that is not defined in the Bankruptcy Code, the FRBPs or the court's Chapter 13 Plan Form and consequently adds inappropriate ambiguity to the plan.
In his Memorandum, the chapter 13 trustee advises that "until now [he] has not sought to strictly limit withholding on debtor's pay stubs, unless the withholding was clearly excessive, to help the debtor avoid incurring additional tax liability postpetition." Memorandum, Docket No. 28, p. 2. If the provisions of Paragraph 1 relating to payment of tax refunds received during the lives of debtors' chapter 13 plans are deleted or altered as proposed by Mr. Schiffman, two results are likely: The court would require greater disclosures by debtors as to their tax withholdings and changes in income and/or withholdings during the lives of their chapter 13 plans, and it is logical to assume that the chapter 13 trustee would scrutinize more carefully and raise objections more frequently concerning debtors' tax withholdings. *431 These results would increase administrative expenses in almost all chapter 13 cases.
B. Paragraph 17
Paragraph 17 of the Amended Plan provides:
Without prejudice to the trustee's rights to assert that a payoff can not occur in the first 36 months of the plan without payment of 100% of claims, the trustee shall provide, if Debtor so requests, the amount of the payoff required to pay the plan base at the time of the intended payoff. The Trustee shall provide a payoff amount within a reasonable time after receipt of a written request from Debtor or Debtor's counsel.
I sustained Mr. Thomas' objection to Paragraph 17 for two reasons. At the time of the initial confirmation hearing in this case, the court was unaware that there were outstanding complaints that the chapter 13 trustee was not responding to reasonable requests of debtors or their counsel for information as to the status of plan payments. In fact, Mr. Schiffman's counsel confirms that:
The standard policy of the Chapter 13 trustee's office in Portland, Oregon is that request for payoffs will be responded to in approximately 2 weeks time. My experience is that the trustee's office makes good on its policy and routinely processes payoff requests in two weeks or less. Vanden Bos Affidavit, Docket No. 32, pp. 3-4.
If the purpose of Paragraph 17 is to require the chapter 13 trustee to do what he already is doing, I find that it is useless surplusage. However, Mr. Schiffman's counsel complains that if a chapter 13 plan has run less then 36 months, the chapter 13 trustee does not provide payoff information without including the amount necessary to pay off 100% of allowed unsecured claims. See Vanden Bos Affidavit, Docket No. 32, p. 4. Mr. Schiffman's counsel concedes that under Paragraph 1, as it currently stands, there may be "no way to calculate the amount which may be owed for future `actual' tax refunds. . . ." See Supporting Memorandum, Docket No. 32, p. 7. If Paragraph 17 would require the chapter 13 trustee to provide plan payoff calculations at the beck and call of debtors and their counsel that are subject to challenge as incorrect or imprecise, it places an inappropriate burden on the chapter 13 trustee that I decline to impose.
Paragraph 17 further introduces the term "plan base" without definition in the Amended Plan. "Plan base" is not used or defined in the Bankruptcy Code, the FRBPs or the court's Chapter 13 Plan Form. I do not know what it means in relation to the payments of future income and earnings provided for in Paragraph 1. In his Memorandum, the chapter 13 trustee objected to the term "plan base" as unnecessary and ambiguous, and I find that it adds inappropriate ambiguity to the Amended Plan.[4]
C. What This Really is About
The issues I confront in this case arise as fallout from the decision of the *432 Ninth Circuit Bankruptcy Appellate Panel in In re Sunahara, 326 B.R. 768 (9th Cir. BAP 2005). The panel in Sunahara answered two questions: First, does the Bankruptcy Code permit payment of a chapter 13 plan in fewer than 36 months where debtor is not paying 100% of all allowed unsecured claims? Id. at 772.
The chapter 13 plan form in issue in Sunahara included a provision requiring that "[u]nless all allowed claims are paid in full, this Plan shall not be completed in fewer than 36 months from the first payment date." Id. at 770.[5] This language builds on the terms of Section 1325(b)(1), which provides:
If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan-(A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or (B) the plan provides that all of the debtor's projected disposable income to be received in the three-year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan.
The plan form considered in Sunahara, in effect, treated the "three-year" language of Section 1325(b)(1) as imposing a temporal requirement that chapter 13 plans last for a minimum term of three years, unless the debtor pays all allowed unsecured claims in full earlier.
The general provision of the Bankruptcy Code dealing with chapter 13 plan duration is Section 1322(d), which provides:
The plan may not provide for payments over a period that is longer than three years, unless the court, for cause, approves a longer period, but the court may not approve a period that is longer than five years.
The language of Section 1322(d) compromises competing concerns reflected in the legislative history of the Bankruptcy Code: Chapter 13 was designed to allow individual debtors, with regular income, "to develop and perform under a plan for the repayment of . . . debts over an extended period." H.R.Rep. No. 95-595 to accompany H.R. 8200, 95th Cong., 1st Sess. at p. 118 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5963, 6079. [Emphasis added.] However, Congress was concerned that wage earner plans in some cases under the Bankruptcy Act had been allowed to drag on for "seven to ten years. This has become the closest thing there is to indentured servitude. . . ." Id. at p. 117, U.S.Code Cong. & Admin.News 1978, pp. 5963, 6078.
Accordingly, Section 1322(d) hedges its duration language. It discusses plan periods of from three to five years, but it does not impose them. See K. Lundin, Chapter 13 Bankruptcy § 199.1, at 199-1 (3d ed.2000 and 2004 Supp.). In practice, and considering the above cited Section 1325(b)(1), added in the 1984 amendments to the Bankruptcy Code,
most Chapter 13 debtors propose plans that are 36 months long. A plan shorter than 36 months will likely face an objection to confirmation unless the plan proposes to pay all claim holders in full. If the debtor is able to pay all claims in *433 less than 36 months, there is no duration objection to confirmation of a shorter plan. Id.
In Sunahara, the Bankruptcy Appellate Panel held that the Bankruptcy Code allows a debtor to modify a confirmed chapter 13 plan to complete the plan in less than 36 months without paying all claims in full, so long as the Bankruptcy Code requirements for plan modification are satisfied. In re Sunahara, 326 B.R. at 783-84. The Bankruptcy Appellate Panel further held that even if the chapter 13 trustee or an unsecured creditor objects to a debtor's proposed plan modification, the alternative three years of disposable income or 100% payment of allowed unsecured claims conditions of Section 1325(b)(1) do not apply.
Section 1329 governs chapter 13 plan modifications, and the Bankruptcy Appellate Panel held that "Section 1329(b) expressly applies certain specific Code sections to plan modifications but does not apply § 1325(b). Period." Id. at 781. [Emphasis in original.][6]
The second question asked by the Bankruptcy Appellate Panel in Sunahara was: Does the bankruptcy court's local rule mandating use of a model plan including payment requirements not found in the Bankruptcy Code impermissibly abridge the debtor's rights? In re Sunahara, 326 B.R. at 782. The question virtually answers itself. The requirements of the plan form considered in Sunahara, that the plan continue for a minimum duration of 36 months unless all allowed claims are paid in full, conflicted with the nonmandatory plan length provisions of Section 1322(d). The debtor could seek a waiver of the form plan provision through a postconfirmation plan modification. The Bankruptcy Appellate Panel reversed the decision of the bankruptcy court and remanded for a determination as to whether the plan modifications proposed by the debtor satisfied the requirements of Section 1329, as interpreted in the panel's decision. Id. at 783-84.
It is important in this case not to lose sight of the context in Sunahara. Sunahara was before the Bankruptcy Appellate Panel to review a post-confirmation plan modification decision. As noted in the dissenting opinion in Sunahara, FRBP 3015(g) requires that not less than 20 days notice of proposed plan modifications be sent to the debtor, the chapter 13 trustee and all creditors. See Fed. R. Bankr.P. 3015(g); In re Sunahara, 326 B.R. at 784. Moreover, as noted by the Sunahara, majority:
In determining whether to authorize a modification that reduces a [chapter 13] plan term to less than 36 months without full payment of allowed claims, the bankruptcy court should carefully consider whether the modification has been proposed in good faith. See § 1325(a)(3). Such a determination necessarily requires an assessment of a debtor's overall financial condition including, without limitation, the debtor's current disposable income, the likelihood that the debtor's disposable income will significantly increase due to increased *434 income or decreased expenses over the remaining term of the original plan, the proximity of time between confirmation of the original plan and the filing of the modification motion, and the risk of default over the remaining term of the plan versus the certainty of immediate payment to creditors. Id. at 781-82.
Mr. Schiffman and his counsel want to run with the Sunahara decision to make a further point: They want the right to pay off Mr. Schiffman's chapter 13 plan at any time after confirmation without having to go through the plan modification process and without having to pay allowed unsecured claims in full. That is the underlying objective of the provisions that I have disapproved, as admitted by counsel for Mr. Schiffman at the initial confirmation hearing and in the Supporting Memorandum. See Supporting Memorandum, Docket No. 32, pp. 5, 10.
Proposals to pay off chapter 13 plans early are relatively uncommon. It is a sad reality of chapter 13 experience that most chapter 13 plans fail, with the associated cases being dismissed or converted to chapter 7. However, early payoffs can occur in chapter 13, generally in three circumstances: First; in light of postpetition appreciation of the debtor's real property, it may be possible to sell or refinance the property to allow for early completion of chapter 13 plan payments. See, e.g., In re Sounakhene, 249 B.R. 801 (Bankr.S.D.Ca. 2000).[7]
Second, a debtor may propose an early payoff based upon an inheritance, gift or loan from friends or relatives. See, e.g., In re Smith, 237 B.R. 621 (Bankr.E.D.Tx. 1999), aff'd, 252 B.R. 107 (E.D.Tx.2000); and In re Easley, 205 B.R. 334 (Bankr. M.D.Fla.1996).
Finally, a debtor may propose to pay off his or her chapter 13 plan with funds obtained from a source not disclosed in the debtor's schedules or original chapter 13 plan. See, e.g., In re Profit, 283 B.R. 567, 571 (9th Cir. BAP 2002); and In re Forbes, 215 B.R. 183, 186 (8th Cir. BAP 1997).
In each of the foregoing situations, an early payoff of the chapter 13 plan may offer substantial advantages to creditors as well as the debtor, even if all allowed claims are not being paid in full. All risks of a plan default and failure are avoided with an early payoff, and the return to creditors may be greater. See e.g., In re Miller, 325 B.R. 539, 542 (Bankr.W.D.Pa. 2005). However, early payoff proposals also present opportunities for abuse by the less than forthcoming debtor.
Cases in which an early payoff of a chapter 13 plan has been approved outside of the context of a plan modification over the objection of the chapter 13 trustee or a concerned creditor(s) appear to involve chapter 13 plans with fixed payments over a fixed term, or fixed payment percentages to classes of creditors. The rationale for these decisions is that plan payments do not have to continue in the amounts and for the duration provided for in the plan so long as the total amount of payments provided for in the plan and/or the fixed percentage to be paid each class of creditors is paid. See, e.g., In re Smith, 237 B.R. at *435 625 n. 8 and 626; and Matter of Casper, 154 B.R. 243, 246 (N.D.Il.1993). In other words, interpreting the confirmed chapter 13 plan as the debtor's contract with creditors, a deal is a deal. See In re Miller, 325 B.R. at 543; and In re Pancurak, 316 B.R. 173, 176 (Bankr.W.D.Pa.2004).
The District of Oregon Chapter 13 Plan Form does not definitively fix the total amount of plan payments at the outset of the case, and advisedly so. Paragraph 1 payments are not fixed at confirmation. Over time, the total to be paid under an Oregon debtor's plan is dependent upon a number of factors, including the debtor's future tax refunds and proceeds from avoided debtor transfers. With the element of indefiniteness as to the total of covenanted plan payments, if the debtor wants to pay off the chapter 13 plan early, a plan modification generally is required, as the early payoff usually will alter the total amount to be paid to creditors under the plan. See, e.g., Massachusetts Housing Finance Agency v. Evora, 255 B.R. 336, 342 (D.Mass.2000).[8]
Mr. Schiffman and his counsel would have it otherwise, but there is nothing inequitable or contrary to the Bankruptcy Code in requiring that debtors go through the plan modification process in order to pay their chapter 13 plans off early without paying allowed creditor claims in full. Indeed, it is ironic that Mr. Schiffman relies so heavily on the Ninth Circuit's decision in In re Anderson to support his assault on the provisions of Paragraph 1. In Anderson, the Ninth Circuit held that the trustee could not require the debtors to sign a covenant that would cut off their rights to object to plan modifications imposed by the trustee without complying with the procedural requirements of Section 1329 and without obtaining a court order. In re Anderson, 21 F.3d at 358. Yet, Mr. Schiffman wants the right to truncate his chapter 13 plan without notice to the trustee or concerned creditors and without otherwise complying with the plan modification provisions of Section 1329.
Plan modification requires that notice and an opportunity to be heard be provided to the chapter 13 trustee and all concerned creditors. Fed.R.Bankr.P. 3015(g). The plan modification process also allows for the court to consider the debtor's good faith in proposing early payoff modifications, as well as issues as to the debtor's overall financial circumstances, future earnings and income, and the elimination of future risks of nonperformance. In re Sunahara, 326 B.R. at 781-82. What it does not allow is for the debtor to pay off a chapter 13 plan in a lump sum and present the trustee and creditors with the payoff as fait accompli, with no notice or opportunity for hearing.[9]
Paragraphs 14 and 17 proposed by Mr. Schiffman in the Amended Plan would subvert the procedures the court has adopted consistent with provisions of the Bankruptcy *436 Code and the FRBPs for implementation of chapter 13, considering the interests of all parties concerned in chapter 13 proceedings, including but not exclusively, the debtor. For the foregoing reasons, I will overrule Mr. Schiffman's Objection to provisions of Paragraph 1 of the Chapter 13 Plan Form, and I have sustained the chapter 13 trustee's and Mr. Thomas' objections to Paragraph 14, and Mr. Thomas' objection to Paragraph 17, in which the trustee joined, of the Amended Plan. I will require that Paragraphs 14 and 17 of the Amended Plan be stricken before I will confirm a chapter 13 plan in this case. Since those provisions have been eliminated in Mr. Schiffman's Second Amended Plan, the court's concerns in that regard have been addressed. A separate Order consistent with this Memorandum Opinion will be entered.
NOTES
[1] Calculating "excess income" from Mr. Schiffman's income and expense totals set forth on his Schedules I and J yields $311 per month. See Docket No. 1, Schedules I and J. To date, Mr. Schiffman has projected at least $919 "excess income" per month, in each iteration of his chapter 13 plan. See Docket Nos. 4, 16 and 31. However, using his own income and expense numbers from his Schedules I and J, Mr. Schiffman's projected net disposable income calculation clearly is wrong-high by about $1,230 per month.
[2] LBR 1001-1.C., entitled "SCOPE OF THE RULES; CONSTRUCTION," provides: "These LBRs supplement the [Federal Rules of Bankruptcy Procedure ("FRBPs")], and any amendments thereto; must be used in conjunction with, not exclusive from, the FRBPs; and shall be construed so as to be consistent with the FRBPs and to promote the just, speedy, and inexpensive determination of every case and proceeding."
[3] Unless otherwise noted, all section references are to provisions of the federal Bankruptcy Code, 11 U.S.C. §§ 101 et seq., as they existed prior to the October 17, 2005 effective date ("BAPCPA Effective Date") of most provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"). Since Mr. Schiffman's chapter 13 petition was filed prior to the BAPCPA Effective Date, BAPCPA provisions generally do not apply to this case.
[4] In the Supporting Memorandum and in the Vanden Bos Affidavit, Mr. Schiffman argues that the term "plan base" is in common use among bankruptcy professionals and indeed, is used by the chapter 13 trustee in this district. See Supporting Memorandum, Docket No. 32, pp. 15-16, and Vanden Bos Affidavit, Docket No. 32, pp. 2-3. A proposed chapter 13 plan provision that both uses and defines the term "plan base" was not before me when 1 sustained Mr. Thomas' objection to Paragraph 17. Nothing in the Supporting Memorandum or the Vanden Bos Affidavit explains exactly what the term "plan base" is supposed to mean when used in conjunction with Paragraph 1 in the Chapter 13 Plan Form.
[5] In contrast, Paragraph 8 of the Chapter 13 Plan Form provides in part as follows:
Except as otherwise explicitly provided by ¶ 10 [included for the debtor to insert nonform provisions to fit his or her particular plan circumstances], the debtor shall make plan payments for the longer of either: (a) 36 months from the date the first payment is due under the original plan, unless the debtor pays 100% of all claims with interest if required; or (b) the time necessary to complete required payments to creditors.
[6] The position of the Bankruptcy Appellate Panel in Sunahara that Section 1329 unambiguously excludes consideration of Section 1325(b) in the context of plan modification is not universally accepted, including a contrary decision of the bankruptcy court for the District of Oregon. See, e.g., In re Keller, 329 B.R. 697 (Bankr.E.D.Ca.2005); and In re McKinney, 191 B.R. 866, 869 (Bankr.D.Or. 1996). However, that issue is riot before me in this case. For purposes of this decision, assume that the Bankruptcy Appellate Panel correctly determined in Sunahara that Section 1325(b) potentially applies conditions to confirmation that do not apply in the context of plan modification.
[7] A concern in such cases is whether the debtor has placed an unreasonably low value on real estate in the schedules and chapter 13 plan at the commencement of the case to allow for an early refinance at the higher true value in order to obtain a discharge. While the record as stated by the Sunahara panel does not discuss the issue of good faith, one might reasonably question the value Mr. Sunahara placed on his real property at the outset of his chapter 13 case, when he proposed a refinance to pay off his chapter 13 plan within eight months after his case was filed and even before his chapter 13 plan was confirmed. See In re Sunahara, 326 B.R. at 770-71.
[8] Nothing prevents a debtor from proposing a plan modification, even if the term proposed to be modified is a "form" provision of the Chapter 13 Plan Form. As stated by the Panel majority in Sunahara:
Nothing in § 1329 prohibits a debtor from seeking the modification of any plan term affecting the amount of payments on claims, the time for making such payments. or the amount of distributions to creditors. That the term to be modified involves a form provision in a court-mandated model plan should be of no consequence. In re Sunahara, 326 B.R. at 771 n. 4. [Italics in original.]
[9] Is it really "better" and more consistent with the provisions of the Bankruptcy Code to have the issue of an early plan payoff resolved by "the proverbial race to the courthouse" between the debtor and the chapter 13 trustee and/or interested creditors, as recently determined by the bankruptcy court in In re Drew, 325 B.R. 765, 774 (Bankr.N.D.Ill.2005)?
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717 S.E.2d 485 (2011)
311 Ga. App. 852
HARGRAVE
v.
The STATE.
No. A11A1225.
Court of Appeals of Georgia.
October 4, 2011.
*486 Christopher John Ramig, Walker L. Chandler, Zebulon, for appellant.
Scott L. Ballard, Dist. Atty., David J. Younker, Asst. Dist. Atty., for appellee.
*487 MILLER, Presiding Judge.
A jury found Thomas Hargrave guilty of child molestation. The trial court denied Hargrave's motion for new trial. Hargrave appeals, contending that the trial court erred by (i) denying his motion for directed verdict as venue was not established beyond a reasonable doubt, and (ii) denying Hargrave's motion for new trial because Hargrave's guilt as to child molestation against the victim was not established beyond a reasonable doubt. Discerning no error, we affirm.
"On appeal from a criminal conviction, a defendant no longer enjoys the presumption of innocence, and the evidence is viewed in the light most favorable to the guilty verdict." (Punctuation and footnote omitted.) Goss v. State, 305 Ga.App. 497, 497, 699 S.E.2d 819 (2010).
We neither weigh the evidence nor assess the credibility of witnesses, but merely ascertain that the evidence is sufficient to prove each element of the crime beyond a reasonable doubt. Moreover, conflicts in the testimony of the witnesses are a matter of credibility for the jury to resolve. As long as there is some competent evidence, even though contradicted, to support each fact necessary to make out the [S]tate's case, the jury's verdict will be upheld.
(Citation omitted.) Vaughn v. State, 301 Ga. App. 391, 391, 687 S.E.2d 651 (2009).
So viewed, the evidence shows that Hargrave is the victim's uncle. During the victim's spring break in 2006, when she was nine years old, she traveled with her father from her home in Maryland to visit her relatives living in Georgia. On one evening during the visit, Hargrave came into the room where the victim was sleeping, pulled down his pants and rubbed his penis on the victim's bare buttocks.
In September 2006, the victim decided to tell her mother about what Hargrave had done to her; when the victim had trouble saying what had transpired, she decided to write it down on a piece of paper. The victim wrote that Hargrave had raped her. Although the mother verified that the victim was never in fact raped by Hargrave, the victim revealed several incidents of molestation that had occurred in Maryland prior to the 2006 incident in Georgia. At trial, the victim described these prior Maryland incidents as follows:
Usually he would do it at night, or in the morning when I was basically asleep. But he would ... push the bed to see if I was awake. And he would pull down my pants, pull up my shirt, and ... touch me with his private.
...
He would blindfold me and he would say, "Guess what's in your mouth." And he would put his private in my mouth.
Hargrave was indicted with the offense of child molestation, OCGA § 16-6-4, by "rubbing and placing his penis on the buttocks of the [victim]" in 2006.[1] Hargrave was tried before a jury. The trial court denied Hargrave's motion for a directed verdict, and Hargrave was found guilty and convicted. Hargrave subsequently filed a motion for new trial. The trial court denied Hargrave's motion for new trial, finding that "[a]fter reviewing the evidence presented at trial and during the hearing, as well as considering the arguments of counsel, ... there was sufficient evidence to authorize the jury's verdict."
1. Hargrave argues on appeal that his motion for directed verdict should have been granted, because the State failed to prove venue. We disagree.
Under our Constitution, proper venue in all criminal cases is the county in which the crime was allegedly committed and is a jurisdictional fact that must be proved by the prosecution beyond a reasonable doubt. The prosecution may prove venue by direct and circumstantial evidence. The standard of review is whether, considered in the light most favorable to the *488 prosecution, the State proved the essential element of venue beyond a reasonable doubt.
(Citation omitted.) Stegall v. State, 308 Ga. App. 666, 666-667(2), 708 S.E.2d 387 (2011). "Whether the evidence as to venue satisfied the reasonable-doubt standard is a question for the jury, and its decision will not be set aside if there is any evidence to support it." (Punctuation and footnote omitted.) Barkley v. State, 302 Ga.App. 437, 438, 691 S.E.2d 306 (2010).
Hargrave argues that venue was not proven beyond a reasonable doubt because the victim's trial testimony demonstrates her "lack of knowledge of where in Georgia any alleged molestation might have occurred." Hargrave specifically points to the following testimony:
Q. And where did you stay once you came to Georgia?
A. My aunt's house.
Q. And is that here in Fayetteville, Georgia?
A. I'm not sure.
Q. Do you know the address?
A. No.
Notwithstanding Hargrave's attempts to parse the evidence, other testimony established that the crime in 2006 occurred in Fayette County. The trial testimony showed that the victim and her father, who is also Hargrave's brother, traveled to Georgia in 2006. When they arrived in Georgia, the victim stayed at a home where her aunt, grandmother, and Hargrave all resided at the time. The testimony of the victim's aunt showed that the home was located in Fayette County, Georgia. The victim's mother testified that the victim and her father traveled to Fayetteville during the victim's spring break in 2006, at which time the victim stayed with her grandmother in Fayette County.
During trial and her forensic interview, the victim described that the molestation incident occurred in 2006 during a visit to her aunt's residence in Georgia. Two detectives likewise testified that the referenced 2006 visit and molestation incident took place at a residence in Fayette County.
This evidence sufficiently connects the location of the relevant act of child molestation to the county in which it occurred. See Stegall, supra, 308 Ga.App. at 667(2), 708 S.E.2d 387 (concluding evidence was sufficient to prove venue in Clayton County as to aggravated child molestation and aggravated sodomy where victim's family lived in Fayetteville, Clayton County; defendant lived with victim's family in Fayetteville; victim testified that defendant committed acts of oral sodomy upon her in the same room where she had been raped, which was in Fayetteville; and, victim's mother testified that victim told her defendant had committed oral sodomy upon her in Clayton County). The testimony, taken as a whole, including the victim's testimony and her statements to the forensic interviewer, "was sufficient evidence from which the jury could conclude beyond a reasonable doubt that the crimes were committed in [Fayette] County." (Citation and punctuation omitted.) Id. While Hargrave points to some confusion in the victim's trial testimony, "any conflicts in the evidence were for the jury to decide." Id.
2. Hargrave also contends that the trial court erred in denying his motion for new trial pursuant to OCGA §§ 5-5-20[2] and 5-5-21,[3] because the jury's verdict was contrary to the evidence, the principles of justice and equity, and the weight of the evidence. Again, we disagree.
"The grant or denial of a motion for new trial is a matter within the sound discretion of the trial court and will not be disturbed if there is any evidence to authorize it." (Footnote omitted.) Taylor v. State, 259 Ga.App. 457, 460(2), 576 S.E.2d 916 (2003). "Notably, where a defendant raises a claim *489 under OCGA §§ 5-5-20 and 5-5-21 in his motion for new trial, the law imposes upon the trial court an affirmative duty to exercise its discretion and weigh the evidence to determine whether a new trial is warranted." (Citations omitted.) Hartley v. State, 299 Ga.App. 534, 540(3), 683 S.E.2d 109 (2009). The trial court here exercised such discretion and weighed the evidence in determining that Hargrave was not entitled to a new trial.
Hargrave nevertheless contends that the trial court erred, relying upon alleged inconsistencies between the victim's trial testimony and interview statements, the failure of the forensic interviewer "to adequately explore elements of [the victim's] story that may weigh against the truth of her story," and conflicting testimony from the victim's family members regarding the specifics of the victim's 2006 spring break trip. On appeal, however, this Court does not "weigh evidence or resolve conflicts in trial testimony...." (Footnote omitted.) Herrington v. State, 241 Ga.App. 326, 329(2), 527 S.E.2d 33 (1999). Rather, "[t]his Court can only review a lower court's refusal to grant a motion for new trial under the standard espoused in Jackson v. Virginia to determine if the evidence, when viewed in the light most favorable to the prosecution, supports the verdict." (Footnotes omitted.) Taylor, supra, 259 Ga.App. at 460(2), 576 S.E.2d 916.
Here, the victim testified at trial that when she was in Georgia for her spring break in 2006, Hargrave pulled down her pants and touched her on her back and buttocks. The victim's videotaped forensic interview with a social worker was also played for the jury. Under the Child Hearsay Statute, OCGA § 24-3-16,[4] "the jury was entitled to consider victim's out-of-court statements as substantive evidence." (Citation omitted.) Lopez v. State, 291 Ga.App. 210, 212(1), 661 S.E.2d 618 (2008). During the interview, the victim recounted a night during her spring break trip to Georgia, when she was eight or nine years old, stating that while "[e]verybody was sleeping [Hargrave] took down my pants and he started ... raping me." When asked to further describe this incident, the victim explained that Hargrave "pulled down his pants and he started pushing himself on my back ... [and] he started touching me in the wrong places ... my chest and my arm ... and my butt." The victim also described Hargrave's actions during the spring break trip by using anatomical dolls. She told the social worker, "I woke up and [Hargrave] pulled down his pants and started ... going like that again," and she showed the male doll rubbing its genital area against the buttocks of the female doll. Moreover, when the victim was presented with anatomical drawings, she indicated on a female drawing that Hargrave had touched her on the buttocks, chest, and her "private part." She indicated on a male anatomical drawing that Hargrave used his penis when touching her.
"Viewed in the light most favorable to the prosecution, we conclude that the evidence was more than sufficient to support the conviction on each count beyond a reasonable doubt." Herrington, supra, 241 Ga. App. at 329, 527 S.E.2d 33 (aggravated child molestation). "To the extent the [victim's] testimony at trial was not entirely consistent with her former statements to the [social worker], this presented a credibility question to be resolved by the jury." Green v. State, 212 Ga.App. 250, 251(1), 441 S.E.2d 689 (1994). Likewise, "minor inconsistencies in the trial testimony go to the weight given the evidence, not to its sufficiency to support the jury's verdict." Herrington, supra, 241 Ga. App. at 329, 527 S.E.2d 33. Finally, the victim was made available at trial for confrontation and cross-examination, at which time the jury was allowed to judge the credibility of the child's accusations. See Jones v. State, 200 Ga.App. 103, 104, 407 S.E.2d 85 (1991) ("The thrust of the child witness statute is to allow the jury, which must be convinced of guilt beyond a reasonable doubt, *490 to judge the credibility of a child's accusations.") (citation and punctuation omitted). "A witness' responsiveness or unresponsiveness, evasiveness or directness, verbal skills, intelligence, memory, perception, and apparent understanding are all factors which can be assessed by the jury and may raise a reasonable doubt." (Citation and punctuation omitted.) Id. Thus, the jury was authorized to conclude that Hargrave was guilty of child molestation.
Judgment affirmed.
ELLINGTON, C.J., and DOYLE, J., concur.
NOTES
[1] OCGA § 16-6-4 provides in relevant part that "[a] person commits the offense of child molestation when such person ... [d]oes any immoral or indecent act to or in the presence of or with any child under the age of 16 years with the intent to arouse or satisfy the sexual desires of either the child or the person...." OCGA § 16-6-4(a)(1).
[2] OCGA § 5-5-20 provides that "[i]n any case when the verdict of a jury is found contrary to evidence and the principles of justice and equity, the judge presiding may grant a new trial before another jury."
[3] OCGA § 5-5-21 provides that "[t]he presiding judge may exercise a sound discretion in granting or refusing new trials in cases where the verdict may be decidedly and strongly against the weight of the evidence even though there may appear to be some slight evidence in favor of the finding."
[4] The Child Hearsay Statute currently provides:
A statement made by a child under the age of 14 years describing any act of sexual contact or physical abuse performed with or on the child by another or performed with or on another in the presence of the child is admissible in evidence by the testimony of the person or persons to whom made if the child is available to testify in the proceedings and the court finds that the circumstances of the statement provide sufficient indicia of reliability.
OCGA § 24-3-16.
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23 So.3d 711 (2009)
AFONSO
v.
LIFEMARK HOSPITALS OF FLORIDA, INC.
No. SC09-673.
Supreme Court of Florida.
November 17, 2009.
Decision Without Published Opinion Review denied.
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688 F.2d 832
Lovev.Leeke
82-6101
UNITED STATES COURT OF APPEALS Fourth Circuit
8/2/82
1
D.S.C.
AFFIRMED
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925 F.2d 490
288 U.S.App.D.C. 259
Unpublished DispositionNOTICE: D.C. Circuit Local Rule 11(c) states that unpublished orders, judgments, and explanatory memoranda may not be cited as precedents, but counsel may refer to unpublished dispositions when the binding or preclusive effect of the disposition, rather than its quality as precedent, is relevant.UNITED STATES of Americav.HERBERT BRYANT, INC., et al. Old Town Yacht BasinAssociates, Appellant
No. 90-5191.
United States Court of Appeals, District of Columbia Circuit.
Jan. 25, 1991.Order and Memorandum Denying Rehearing March 25, 1991.
Before MIKVA, Chief Judge, and RUTH BADER GINSBURG and CLARENCE THOMAS, Circuit Judges.
ORDER
PER CURIAM.
1
Upon consideration of the responses to the court's order to show cause filed October 5, 1990, and the amended notice of appeal filed November 21, 1990, it is
2
ORDERED that the order to show cause be discharged. It is
3
FURTHER ORDERED that the appeal be dismissed. An unincorporated association must be represented by counsel. See Sewer Alert Committee v. Pierce County, 791 F.2d 796 (9th Cir.1986); Donham v. USDA, 725 F.Supp. 985 (S.D.Ill.1989); First Foundation v. Village of Brookfield, 575 F.Supp. 1207 (N.D.Ill.1983).
4
Nor can the court entertain the appeal by Kathryn Barbour Lang, Richard Arrington Lang, James G. Lang, Jr., and Elizabeth L. Lang. These individuals are not represented by counsel and did not sign the notice of appeal. The signing and filing of a notice of appeal on behalf of another by a person who is not a qualified attorney is ineffective to vest an appellate court with jurisdiction and such an appeal is properly dismissed. See 28 U.S.C. Sec. 1654; see also, e.g., Elias v. Connett, 908 F.2d 521, 522 (9th Cir.1990); Therialt v. Silber, 579 F.2d 302, 302 n. 1 (5th Cir.1978), cert. denied, 440 U.S. 917 (1979); Scarella v. Midwest Federal Savings & Loan, 536 F.2d 1207, 1209 (8th Cir.) (per curiam), cert. denied, 429 U.S. 885 (1976). But cf. Lewis v. Lenc-Smith Mfg. Co., 784 F.2d 829 (7th Cir.1986).
5
Furthermore, the court lacks authority to entertain an appeal by John Chapman Gager. Mr. Gager appealed on behalf of Old Town Yacht Basin Associates and not in his individual capacity. The court may not hear the Yacht Basin's pleas absent representation of this unincorporated association by counsel. See Torres v. Oakland Scavenger, 484 U.S. 312, 318 (1988); Appeal of District of Columbia Nurses' Ass'n (Battle, et al. v. District of Columbia ), 854 F.2d 1448, 1450 (D.C.Cir.1988) (per curiam).
6
The Clerk is directed to withhold issuance of the mandate herein until seven days after disposition of any timely petition for rehearing. See D.C.Cir. Rule 15.
ORDER AND MEMORANDUM DENYING REHEARING
7
(March 25, 1991)
8
PER CURIAM.
9
Upon consideration of appellant's petition for rehearing, filed January 31, 1991, it is
10
ORDERED, by the Court, that the petition is denied for the reasons set forth in the attached memorandum.
MEMORANDUM
11
On January 25, 1991, the court dismissed Old Town Yacht Basis Associates' ("OTYBA") appeal. OTYBA now petitions for rehearing. OTYBA's arguments in support of its petition are the same as those fully examined and rejected by the court prior to entry of the order dismissing the appeal. OTYBA raises no new arguments which warrant rehearing.
12
OTYBA attached to the petition an affidavit from counsel who may be willing to represent OTYBA. OTYBA has had notice since July 16, 1990, and in three subsequent orders, that an unincorporated association must be represented by counsel. See In re: Old Town Yacht Basin Associates, No. 90-5189 (D.C. Cir. July 16, 1990); In re: Old Town Yacht Basis Associates, No. 90-5189 (D.C. Cir. Aug. 30, 1990); United States v. Bryant, et al., No. 90-5191 (D.C. Cir. Oct. 5, 1990); and United States v. Bryant, et al., No. 90-5191 (D.C. Cir.Jan. 25, 1991). In addition, despite a representation that counsel was available on October 19, 1990, OTYBA has not entered an appearance of counsel. See Affidavit of John Chapman Gager, OTYBA's Response to Show Cause Order filed October 19, 1990. Moreover, OTYBA has not provided any persuasive reason in its petition, other than stating that the effort to obtain counsel has been in "flux," why counsel has yet to appear. Finally, despite the affidavit of counsel, OTYBA remains unrepresented to date. Accordingly, the time has passed within which this court might reasonably be asked to entertain the possibility that counsel may enter an appearance in the future.
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United States Court of Appeals
For the Eighth Circuit
___________________________
No. 13-1768
___________________________
United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Jervonz L. Williams
lllllllllllllllllllll Defendant - Appellant
____________
Appeal from United States District Court
for the Western District of Missouri - Kansas City
____________
Submitted: November 21, 2013
Filed: November 29, 2013
[Unpublished]
____________
Before MURPHY, SMITH, and SHEPHERD, Circuit Judges.
____________
PER CURIAM.
Jervonz Williams appeals the sentence imposed by the district court1 after he
pleaded guilty to being a felon in possession of a firearm, in violation of 18 U.S.C. §§
1
The Honorable Beth Phillips, United States District Judge for the Western
District of Missouri.
922(g)(1) and 924(a)(2), and the court determined that he qualified as an armed career
criminal under 18 U.S.C. § 924(e). On appeal, Williams’s counsel has moved to
withdraw and has filed a brief under Anders v. California, 386 U.S. 738 (1967),
suggesting that the sentence is substantively unreasonable.
Upon careful review, we conclude that Williams’s within-Guidelines-range
sentence is not substantively unreasonable, as nothing in the record indicates that the
court failed to consider a relevant factor that should have received significant weight,
gave significant weight to an improper or irrelevant factor, or considered only
appropriate factors but in weighing those factors committed a clear error of judgment.
See United States v. Feemster, 572 F.3d 455, 461 (8th Cir. 2009) (en banc) (if
sentence is within Guidelines range, appellate court may apply presumption of
reasonableness); see also United States v. Gant, 721 F.3d 505, 511 (8th Cir. 2013) (on
substantive review, district court abuses its discretion when it fails to consider relevant
factor that should have received significant weight, gives significant weight to
improper or irrelevant factor, or considers only appropriate factors but in weighing
those factors commits clear error of judgment).
Having independently reviewed the record in accordance with Penson v. Ohio,
488 U.S. 75, 80 (1988), we find no nonfrivolous issues. We therefore affirm the
judgment of the district court and grant counsel’s motion to withdraw, subject to
counsel informing Williams about procedures for seeking rehearing or filing a petition
for certiorari.
______________________________
-2-
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793 F.2d 1416
21 Fed. R. Evid. Serv. 166, Prod.Liab.Rep.(CCH)P 11,070Beatrice REESE, Individually and as Guardian for Carol LynnReese and Jennifer Ann Reese, Minor Children, andEli Reese, Plaintiffs-Appellees,v.MERCURY MARINE DIVISION OF BRUNSWICK CORPORATION, Defendant-Appellant.
No. 85-2400.
United States Court of Appeals,Fifth Circuit.
July 11, 1986.
Arthur M. Glover, Jr., Jack M. McKinley, Houston, Tex., for defendant-appellant.
Seale, Stover, Coffield & Gatlin, March H. Coffield, Gary H. Gatlin, Jasper, Tex., for Beatrice Reese, et al.
Gilbert T. Adams, Jr., Beaumont, Tex., for Eli Reese.
Appeal from the United States District Court for the Eastern District of Texas.
Before BROWN, JOHNSON, and JOLLY, Circuit Judges.
JOHNSON, Circuit Judge:
1
Appellant, Mercury Marine Division of Brunswick Corporation (Mercury), appeals from a judgment in favor of the plaintiffs in this wrongful death action. Finding appellant's contentions on appeal to be without merit, we affirm the judgment of the district court.
I.
2
Melvin Reese was fatally injured on May 7, 1983, in a boating accident on the Neches River. At the time of the accident, Reese was operating a fourteen foot "jon boat" equipped with a twenty-five horsepower outboard motor manufactured by the defendant Mercury Marine. Reese had purchased the motor in May of 1982 from Hodge Boats and Motors in Beaumont, Texas.
3
The accident occurred while Reese was on a fishing trip with his family and friends. Reese and a companion, John Burrell, were proceeding down the Neches River when their boat hit a snag. Reese and Burrell were both thrown into the water. The unmanned boat turned in the river and circled back toward Reese and Burrell. Reese pushed Burrell under the water to avoid the boat. When Burrell resurfaced, Reese had disappeared. Reese's body was recovered from the river several days later. While the evidence regarding the precise cause of Reese's death was conflicting, several witnesses indicated that Reese was killed when struck by the unmanned boat.
4
Reese's survivors filed the instant wrongful death action against the manufacturer of the boat's motor, Mercury Marine. Plaintiffs pursued two separate strict products liability theories. According to plaintiffs, Mercury's outboard motor was defectively designed because it was not equipped with a safety device known as a "kill switch." A kill switch is a device designed to stop or slow the outboard motor operation when the boat operator is thrown or ejected from the operating position. Plaintiffs argued that any outboard motor lacking a kill switch is unreasonably dangerous because of the circling phenomenon--the tendency of an unmanned boat powered by an outboard motor to circle. Plaintiffs argued that had Reese's outboard motor been equipped with a kill switch, Reese would not have been fatally injured by the circling boat.
5
Plaintiffs also asserted that the Mercury motor was defective and unreasonably dangerous because it was not accompanied by warnings and instructions informing the user of both the circling phenomenon and the availability of a kill switch. According to plaintiffs, Mercury's failure to provide such a warning was a producing cause of Reese's death.
6
After an intensely contested three day trial, the jury returned a verdict partially in favor of the plaintiffs. The jury concluded that Mercury's failure to equip the outboard motor with a kill switch did not render the product defective and unreasonably dangerous. The jury also concluded, however, that Mercury had failed to adequately warn consumers of the benefits of kill switch use and that such failure rendered the outboard motor unreasonably dangerous. In addition, the jury attributed twenty-five percent of the fault for the accident to Melvin Reese. After the district court entered judgment in favor of plaintiffs, Mercury filed a timely notice of appeal.
7
On appeal, Mercury asserts several challenges to the district court's conduct of the trial proceedings. In particular, Mercury contends (1) that the district court erred in excluding relevant evidence regarding the retailer's responsibility to warn consumers regarding kill switch use; (2) that the district court committed reversible error by repeatedly and adversely commenting upon the behavior and motives of Mercury and its attorney; (3) that the district court erred in admitting evidence of remedial measures adopted by Mercury following Reese's accident; and (4) that Mercury is entitled to a new trial based on a "conscience of the community" argument made by plaintiffs' attorney during closing arguments. Mercury does not challenge the amount of damages awarded by the jury. For the following reasons, we find Mercury's various contentions to be without merit.
II.
8
Mercury first contends that the district court erroneously excluded evidence relevant to determining the adequacy of Mercury's warnings regarding kill switch use. In particular, Mercury challenges the district court's exclusion of evidence contained in the depositions of David Williams and Charles Anglin regarding the dealer's role in instructing customers about kill switch use. Mercury attempted to introduce the following deposition testimony of Williams, the general manager of Hodge Boats and Motors:
9
Q: Now you recognize when you sell an engine that you have certain responsibilities and that the operator has certain responsibilities; is that correct?
10
A: That's correct.
11
Record Vol. III at 676. Mercury also attempted to introduce the following deposition testimony of Anglin, the salesman who sold Reese the motor involved in the instant case:
12
Q: Now, are you familiar with the Mercury Marine manual that goes with various outboards?
13
A: Yes sir.
14
Q: And in the manual does it have a section that says 'Dealers Responsibility and Owners Responsibility?'
15
A: Yes sir.
16
* * *
17
Q: And one of your responsibilities is to tell him [the purchaser] about the various equipment you can buy with that engine.
18
A: Right.
19
* * *
20
Q: All right. Would you tell us whether or not one of the dealer's responsibilities is to see that the engine-boat combination are properly equipped?
21
A: Yes, sir.
22
Record Vol. III at 681-84.
23
The district court properly determined that the foregoing evidence was immaterial to the issue of causation. Texas law places liability on the manufacturer of a defective product if the defect is a "producing cause" of the plaintiff's injury. More than one producing cause can exist for any particular injury. Ragsdale Brothers, Inc. v. Magro, 693 S.W.2d 530, 538 (Tex.App.--San Antonio 1985). Where both a product manufacturer and a third-party owe independent duties to warn consumers regarding a product "defect," the third party's failure to warn is not a defense to the manufacturer's failure to warn. Similarly, where a manufacturer attempts to fulfill its duty to warn through a third-party intermediary, that third-party's negligence does not break the causal connection between a breach of the manufacturer's duty and the ultimate user's injury.1
24
On appeal, Mercury does not challenge the district court's conclusion that evidence regarding the dealer's responsibility to instruct customers was not material to the issue of causation. Rather, Mercury contends that the excluded evidence should have been admitted as relevant to determining the adequacy of steps taken by Mercury to instruct and warn ultimate consumers.2 Mercury concludes that the district court's ruling excluding evidence regarding dealer responsibility was reversible error entitling Mercury to a new trial.
25
For several reasons, we disagree. First, in asserting objections to a trial court's exclusion of evidence, a party is required under Fed.R.Evid. 103(a)(2) to carefully articulate every ground for which the evidence is admissible. Huff v. White Motor Corp., 609 F.2d 286, 290 n. 2 (7th Cir.1979); United States v. Edwards, 696 F.2d 1277, 1281 (11th Cir.), cert. denied, 461 U.S. 909, 103 S.Ct. 1884, 76 L.Ed.2d 813 (1983); 1 J. Weinstein & M. Berger, Weinstein's Evidence p 103 at 103-31 to 103-32 (1985); see also United States v. Garcia, 531 F.2d 1303, 1307 (5th Cir.), cert. denied, 429 U.S. 941, 97 S.Ct. 359, 50 L.Ed.2d 311 (1976). Failure to do so renders the district court's ruling reversible only upon a finding of plain error. The rationale supporting this requirement is clear. Busy trial courts should not be required to repeat trials, especially civil trials, because the trial judge has excluded evidence for lack of a clear understanding of the proponent's purpose in offering the evidence. The trial judge must be put on notice of the purpose for which the evidence is offered while there is still time to remedy the situation. It is the proponent's duty, not that of the trial court, to clearly articulate the purpose for which the evidence is offered. Robbins v. Whelan, 653 F.2d 47, 53 (1st Cir.) (Campbell, J. dissenting), cert. denied, 454 U.S. 1123, 102 S.Ct. 972, 71 L.Ed.2d 110 (1981).
26
In the instant case, Mercury never clearly articulated that it was offering the excluded evidence to show the adequacy of its warnings to inform ultimate consumers regarding kill switch use. Rather, Mercury repeatedly and consistently emphasized that it was seeking to introduce evidence of dealer negligence to establish a break in the causal chain between Mercury's failure to warn and Reese's accident. In response to the district court's exclusion of Mercury's evidence, the following dialogue occurred:
27
The Court: The objection will be sustained. There is no question about that. The Court had already reprimanded Counsel about attempting to go into the responsibility of the dealer. The dealer is not being sued.
28
Counsel: Your Honor, I have pleadings on file where I have pled the negligence of third-parties over whom we have no control, which includes the dealer.
29
The Court: The negligence of the third-party is no defense to the Defendants in this case.
30
* * *
31
Counsel: It could go to the issue of causation, Your Honor.
32
The Court: It does not go to the issue of causation and the Court would so state. Now you may have your objections if you want to, but the Court is not going to permit it.
33
Counsel: Well, for the record I would like to state that ... [w]e have pleadings on file, pleading negligence of the third-party and we would offer evidence of negligence of third-party to show that there is a reasonable causation.
34
* * *
35
The Court: [A]ny negligence on the part of the dealer does not work as a defense to the manufacturer and does not in any way effect [sic] the liability of the manufacturer.
36
Counsel: I would like to make an additional comment in the record that the offer is for ... the purpose of showing, since we already have evidence and since the manufacturer never has contact with the customer, but it is the dealer who has the responsibility of having contact with the customer. And that the only way Mercury can in fact get instructions from itself to its customers is through its dealer and therefore they have set up dealer responsibilities and matters over which the dealers have a duty to advise the customer.
37
* * *
38
The Court: But the dealer is not sued in this case and the manufacturer, which is your company, that you represent, cannot defend upon the negligence of the dealer. Now the dealer may also have responsibilities and should have warned the Plaintiff, but that doesn't help [Mercury] any.
39
Counsel: It goes to causation, Your Honor.
40
The Court: Well it doesn't help you. The Court has heard enough and I will not permit any more of this deposition at this time.
41
Record Vol. III at 490-95.
42
The district court's remarks clearly indicate that the court did not understand Mercury to be offering the evidence regarding dealer responsibility on any issue other than causation. This understanding was reasonable given Mercury's repeated assertion that the evidence "goes to causation." While at one point in the dialogue Mercury hints that the evidence was relevant to the adequacy of Mercury's efforts to warn ultimate consumers, Mercury immediately thereafter reasserted its causation theory. Thus, our painstaking and thorough review of the record fails to reveal that the trial court's attention was ever reasonably called to Mercury's now asserted theory of relevance.3
43
Even were we to conclude otherwise, Mercury would not be entitled to a new trial based on the trial court's exclusion of evidence regarding dealership responsibility. An adequate warning must be reasonably calculated to reach the ultimate user of a product. Such a warning must also convey a fair indication of the nature and extent of the danger. Lopez v. ARO Corp., 584 S.W.2d 333, 336 (Tex.Civ.App.--San Antonio 1979, writ ref'd n.r.e.). The only evidence excluded by the district court even remotely suggesting Mercury's efforts to warn simply established that Mercury's operation and maintenance manual required dealers to make sure boats were "properly equipped."4 No evidence suggests that Mercury directed its dealers to inform customers specifically regarding "kill switch" use. In fact, David Williams, the general store manager of Hodge Boats and Motors, stated during his deposition that Mercury had never even explained to him the reasons for its manufacture of a lanyard-type kill switch. Deposition of David Williams at 47.5
44
The only other evidence cited of Mercury's attempts to instruct users regarding kill switch use is evidence indicating that Mercury manufactured kill switches and supplied them to retailers. There is also evidence in the record indicating that the dealer in question in the instant case had a general knowledge of the pros and cons of kill switch use.6 On the other hand, overwhelming trial court evidence indicated that a direct, specific warning regarding kill switch use was both feasible and practical. Given the paucity of evidence suggesting that Mercury's efforts to warn consumers were adequate and Mercury's failure to reasonably articulate before the district court the relevance of the excluded "dealer responsibility" evidence, we must conclude that Mercury is not entitled to a new trial based on this exclusion.
III.
45
Mercury also contends that the district court made highly inflammatory and prejudicial comments in front of the jury entitling Mercury to a new trial. In its brief, Mercury points to numerous remarks made during the course of trial. In evaluating the effect of the district court's remarks, this Court considers the record as a whole, not merely isolated comments. See Newman v. A.E. Staley Manufacturing Co., 648 F.2d 330, 334-35 (5th Cir.1981).
46
The conduct of the trial judge must be measured by a standard of fairness and impartiality. Nordmann v. National Hotel Co., 425 F.2d 1103, 1109 (5th Cir.1970). Thus, the district court's conduct toward plaintiffs is relevant in evaluating Mercury's claim of prejudice. We further note that the role of a federal judge is not that of a mere moderator. Posey v. United States, 416 F.2d 545, 555 (5th Cir.1969). The judge presiding over a trial has a responsibility to conduct an orderly trial. In carrying out this responsibility, the trial judge is empowered to keep a case moving within the bounds of reason. Dartez v. Fibreboard Corp., 765 F.2d 456 (5th Cir.1985). "Continued questioning on matters covered in detail or on irrelevant matters may require a judicial admonition of counsel." Miley v. Delta Marine Drilling Co., 473 F.2d 856, 857 (5th Cir.), cert. denied, 414 U.S. 871, 94 S.Ct. 93, 38 L.Ed.2d 89 (1973).
47
When a timely objection is made at trial, we must determine whether the remarks impaired a substantial right of the objecting party. Newman v. A.E. Staley Manufacturing Co., 648 F.2d 330, 335 (5th Cir.1981). While the failure to make timely objection does not preclude appellate review, such failure does limit our review to review for plain error. Dixon v. International Harvester Co., 754 F.2d 573, 585 (5th Cir.1985).
48
Counsel for Mercury did object at trial to several comments of the district court now challenged on appeal. In particular, Mercury objected to those comments made by the district court during a heated discussion with Mercury's trial counsel on the admissibility of evidence regarding the dealer's responsibility to warn. Early on in the trial, during Mercury's opening statement, the district court had indicated that evidence regarding the dealer's responsibility to warn was not admissible to show the existence of an intervening cause. Record Vol. II at 16-17. Later, during the testimony of a technical representative for Mercury Marine, the district court again indicated that it would not allow testimony regarding the dealer's responsibility to warn consumers for the same reason. Record Vol. II at 469-70. Shortly thereafter, Mercury sought to introduce additional evidence of the dealer's responsibility to instruct consumers about kill switches. The district court's initial response to Mercury's offer was to simply sustain plaintiffs' objection and state: "The negligence of the third-party is no defense to the Defendants in this case." Record Vol. III at 490.
49
Counsel for Mercury nevertheless continued to press its position that the dealer's negligence was relevant to causation. Record Vol. III at 492. At this point, the district court became obviously concerned about the effect on the jury of Mercury's continuing assertions of a spurious defense. The following dialogue ensued:The Court: Are you wanting a mistrial of this case, is that what you are wanting?
50
Counsel: No, Sir, I certainly don't want a mistrial of the case.
51
* * *
52
The Court: Well, if you make that objection then you put the Court in a position where we might have to declare a mistrial.
53
Counsel: Your Honor, I have to make the objection and I apologize that I have to make the objection.
54
The Court: Well, your apology doesn't mean anything to me. It is not sincere in the least, in the Court's opinion. Now if you just want to continue on as you are doing, the Court will have no alternative but except to declare a mistrial.
55
Record Vol. III at 492-93. In spite of this admonition, Mercury's counsel persisted in asserting the admissibility of its offer of proof. A brief time thereafter additional dialogue ensued with the district court at one point stating that Mercury's "Counsel will not play by the rules." Record Vol. III at 495. Eventually, the district court excused the jury and stated:
56
I think we're going too far. I think the Court's going to have to declare a mistrial in this case. We will excuse the jury until 9:00 o'clock tomorrow morning, and we will have a definite announcement for you at that time.
57
Record Vol. III at 501.
58
After the jury had been excused, the district court met with the attorneys involved in the trial and indicated that the jury might have been unduly prejudiced by the arguments of Mercury's counsel. Noting that trial had already gone on for two days, the district court asked each attorney for his view on the need for a mistrial. The court indicated that if either the plaintiffs or the defendant asked for a mistrial the request would be granted or considered. Record Vol. III at 503. All parties thereafter agreed to go forward with the trial. Record Vol. III at 509-10. Immediately after agreeing to go forward with the trial, however, counsel for Mercury stated for the record that because of the prejudicial comments of the court, it was moving for a mistrial. Record Vol. III at 514. The district court denied Mercury's motion.
59
The following day, the district court made the following statement to the jury:
60
You will recall that Counsel for the Defendant, Mr. Glover, attempted to offer certain testimony concerning the fault or negligence of a third party, the third party being the agency or agency that sold the motor to the Plaintiff. You will recall that the Court stopped the attorney, advising him that this was not an issue for the Jury to decide, and regardless of any fault or negligence on the part of the third party, namely the agency that sold the motor would not be a defense to the Plaintiffs' claim against the manufacturer. Now while the agency might have some liability and the Plaintiff might have sued the agency, this is not for the Jury's concern because these facts do not exist. The Plaintiff chose to sue the manufacturer and any fault on the part of the agency cannot be relied upon as a defense on the part of the manufacturer, which Mr. Glover represents, the Mercury Company.
61
So you will follow the instructions of the Court and not give that any consideration or any weight or let it affect you in determining the liability, if any, that exists on the Defendant which the Plaintiff asserts in his claim for the strict liability or products liability based on the defect in the design of the motor in question and the failure to give an adequate warning.
62
Now you will recall that in the trial of the case the situation got a little heated in that the Court was of the opinion that Mr. Glover disagreed with the Court and contended that such evidence was a defense to his client, the Defendant. In other words the Court construed that this was arguing with the Court's ruling and Mr. Glover, as he should have done and as he did do, said that he was representing his client as the best he could and that he had a right to take an exception to the Court's ruling, which he did. And then this precipitated some comments by the Court concerning Mr. Glover's tactics in his effort to show liability on the part of someone else as a defense to the liability of the client that he represented. And the Court felt that this was misleading and would be misunderstood by the Jury and would in some way deceive the Jury. Now the Court will say further that Mr. Glover has a right to represent his client in any way that he feels he is justified in doing so, staying within the bounds of the rules of procedure and the rules of propriety. On the other hand the Court also has the responsibility of presiding over the Court and trial, the trial of a case and attempting to see that the evidence is fairly presented to the Jury both from the Plaintiffs' standpoint and the Defendant's standpoint. The Court can, in the heat of discussions, as was present yesterday, can be indiscrete and we do not think that perhaps under the circumstances we were indiscrete we feel that it was precipitated and caused by Mr. Glover's actions.
63
But the Court wishes to advise the Jury that you are not to give any consideration and will remove from your mind any thought that you might have concerning the discussions and the comments made by the Court, or the comments made by Mr. Glover concerning that matter. The Court certainly meant nothing personal and the Court has no hostility towards Mr. Glover. We want him to present his case in the manner in which he wants to. But we feel that if he exceeds the bounds of propriety, then we must interfere and make the rulings that we feel are necessary to make to assure a fair trial to all parties. So please do not let the fact that you feel that the Court became irritated or was intemperate and any comments that were made affect or influence you in your verdict either for or against the Defendant, or for or against the Plaintiffs. In other words, you will just forget that it happened and we will begin over and the Court will give you further instructions in regard to the duty and the obligations of the parties at the time we instruct the jury.
64
But I did want to explain these details so that you could remove from your mind any feelings that you might have that the Court holds any hostility against the Defendant or his attorney, Mr. Glover, because we do not. And we feel that he is doing an excellent job in the representation of his client.
65
Record Vol. III at 518-23.
66
Later, in instructing the jury, the district court stated:
67
Now further the Court would also instruct the jury that during the trial of the case it is necessary for the Court to sometimes reprimand counsel because we feel it is necessary to move the case along and because of some dilatory tactics or violation of the Rules of Evidence. And the Court would instruct the Jury that should not give that any consideration or let it affect your verdict in any way and the Court does not have any ill will towards any of the Counsel in this case. We have nothing but the finest feelings, so please bear in mind that any situation that might have occurred that gave you the impression that the Court was irritated or unhappy about the proceedings, do not let that affect you or influence your verdict in any way.
68
Record Vol. III at 1016.
69
Several factors persuade us that the district court's remarks during the foregoing exchange with Mercury's counsel did not "impair Mercury's substantial rights." First, the district court's admonition of counsel occurred only after repeated attempts by counsel to assert an objection already fully considered and ruled upon by the district court. It is well recognized that continued questioning on irrelevant matters may require a judicial admonition of counsel. See Miley v. Delta Marine Drilling Co., 473 F.2d 856, 857 (5th Cir.), cert. denied, 414 U.S. 871, 94 S.Ct. 93, 38 L.Ed.2d 89 (1973). Thus, the comments made by the district court were in furtherance of its responsibility to "keep the trial moving." Moreover, counsel for Mercury declined to request a mistrial in response to the district court's offer to consider or grant such a request. Finally, while some of the district court's comments went further than necessary to expedite the trial, the court on two occasions specifically and carefully instructed the jury not to allow such comments to influence their verdict. Considering this instruction as well as defense counsel's conduct at trial, the district court's remarks do not entitle Mercury to a new trial.7
70
Mercury also challenges on appeal several remarks by the district court that were not objected to at trial. Our review of these remarks, therefore, is limited to plain error. Several of the remarks came in response to Mercury's cross-examination of John Burrell regarding the speed of the boat at the time of Reese's accident. At one point, the district court apparently stated that any damned fool would know the answer to Mercury's inquiry.8 At another point, the district court intervened as Mercury's counsel introduced deposition testimony regarding the nature of Reese's injuries. The witness had testified in response to five separate inquiries that he had not carefully examined Reese's body and had no recollection or knowledge of the severity of Reese's injuries. As Mercury's counsel continued to question the witness regarding the witnesses' recollection of the injuries, the district court intervened and reprimanded counsel for continuing to question the witness on matters already covered in detail and for introducing argument in the form of questions. Despite this reprimand, Mercury's counsel immediately resumed questioning regarding the witnesses' recollection of the injuries. The district court again intervened and stated that the court did not "appreciate [counsel's] conduct in regard to insisting on this type of testimony" and that counsel was not "giving the jury any information by which they can make a fact finding as to the injuries that [Reese] had on his head." Record Vol. II at 375-81.
71
Under the plain error rule (and Mercury does not contest the applicability of the plain error standard to those district court remarks which were not objected to) we conclude that the district court's comments were not so prejudicial as to deny Mercury an opportunity for a fair and impartial trial. The district court's conduct was directed towards expediting the trial by discouraging continued questioning on matters that were either patently obvious or which had been already covered in detail. See Miley v. Delta Marine Drilling Co., 473 F.2d 856, 857 (5th Cir.), cert. denied, 414 U.S. 871, 94 S.Ct. 93, 38 L.Ed.2d 89 (1973) (in response to questioning of a witness court stated that "any five year old idiot knows that."). In carrying out its responsibility to regulate the trial, the district court's conduct was at some points something short of exemplary. Our conclusion in the instant case by no means suggests blanket approval of that conduct. Rather, our conclusion reflects reluctance under the plain error standard to reverse a jury verdict arrived at after an extensive trial. We are especially reluctant given indications that the jury carefully and dispassionately weighed the evidence. We note in this regard that the jury rejected one of plaintiffs' two theories of liability and, in addition, found Melvin Reese to have been twenty-five percent contributorily negligent. We also note that many of the complained of remarks were prompted by the less than exemplary conduct of Mercury's trial counsel.9
72
The dissent focuses in great detail on what it concludes was an excessive damage award. Mercury has not challenged the size of the damage award on appeal and we decline to determine sua sponte the propriety of that award. We note, however, that the jury rejected expert testimony in support of far greater damages than those actually awarded.10 That the jury did not calculate precisely the same numbers as the dissent in no way supports the dissent's conclusion that the jury was prejudiced by the district court's conduct.
IV.
73
During trial, Reese successfully introduced into evidence, over Mercury's objection, a 1983 Mercury operation manual for the model of outboard motor involved in Reese's accident. This 1983 manual contained warnings and instructions regarding kill switch use. Prior operation manuals had contained no similar warnings. Mercury contends that because the motor involved in Reese's accident was manufactured in 1981 and sold in 1982, the 1983 operation manual was inadmissible evidence of a subsequent remedial measure under Fed.R.Evid. 407.
74
Rule 407 provides that:When, after an event, measures are taken which, if taken previously, would have made the event less likely to occur, evidence of the subsequent measures is not admissible to prove negligence or culpable conduct in connection with the event. This rule does not require the exclusion of evidence of subsequent measures when offered for another purpose, such as proving ownership, control, or feasibility of precautionary measures, if controverted, or impeachment. (emphasis added)
75
In response to Mercury's Rule 407 objections at trial, the district court concluded that the 1983 operation manual was admissible to establish the feasibility of direct manufacturer warnings to customers. According to Mercury, however, the district court erred given that the feasibility of direct manufacturer warnings was never contested. We disagree.
76
Throughout the trial, Mercury asserted that given the many factors relevant to determining the desirability of kill switch use, the manufacturer was not appropriately situated to directly warn or instruct the ultimate consumer. For example, during its direct examination of Richard Snyder, Mercury elicited the following testimony:
77
Q: What things should you consider in determining whether or not you want to use a kill switch, you are going to or you are not going to?
78
A: I guess it would be repeating. You would consider the space within your boat as to how much room there is for people to walk around.
79
Q: All right, the style of the boat.
80
A: Yes, you consider the depth of the boat, the height of the gunnels and the sides of the boat. You would consider the speed that you intended to go. You would consider the type of water you intended to run in, things of that sort. Maybe I have named them all.
81
Q: Is there any way that Mercury, the manufacturer of this engine, can know the answer to all of those questions or any of those questions when they ship that engine out of their factory door?
82
A: No.
83
Record Vol. III at 602. See also Record Vol. II at 15-16, 239-240, 456. Similarly, during closing argument, Mercury's attorney stated:
84
Now the places where they [kill switches] are needed and they can be used on some boats, can only be found out really by one person and that is the dealer. These engines are manufactured and shipped out on trucks to different people, I mean different stores and different warehouses and the dealer sells the engine to the customer. The dealer should tell the customer what he has available, what options are there, and what use could be made of the engine and so forth. The dealer, when deposed, said he knew that and he said he recognized that he was the contact man and he said he understood what the kill switch was for, and he knew the pros and cons of it. Mercury had obviously gotten that information right down the tube and right to the place where it belonged, to the dealer, the only person who has contact with the customer. And this man knew all the answers and the pros and cons and he said he told people about it one hundred percent of the time as part of his sales pitch and he always tells them. He's the only person who can tell them. Mercury cannot tell them, Mercury is not out there selling this engine. If we had our own stores we could, but we don't. The dealer did not have one reason not to tell the truth. The dealer hasn't been sued and the salesman hasn't been sued and they are not in this litigation. They have got nothing to protect, and if they forgot to tell him or they didn't tell or sometimes he didn't say it, he has no reason at all to come in here and deceive anyone.
85
Record Vol. III at 932.
86
Whether something is feasible relates not only to physical possibility, cost and convenience, but also to ultimate utility and success in intended performance. Anderson v. Malloy, 700 F.2d 1208, 1213 (8th Cir.1983); see also American Airlines, Inc. v. United States, 418 F.2d 180, 196 (5th Cir.1969). Mercury's suggestion during trial that only the retailer could properly instruct the ultimate consumer regarding kill switch use clearly controverts the utility and likelihood of success of direct manufacturer warnings. Thus, the district court did not abuse its discretion in overruling Mercury's Rule 407 objection.
87
Mercury contends that even if not subject to exclusion under Rule 407, warnings contained in the 1983 manual should have been excluded under Rule 403 as unfairly prejudicial. Rule 403 provides that:
88
Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.
89
Mercury's Rule 403 argument is unpersuasive. The warnings contained in the 1983 manual were highly relevant to establishing a material element in Reese's case against Mercury--the advisability and feasibility of direct manufacturer warnings to consumers. While the manual was certainly prejudicial to Mercury, given the manual's relevance, the district court's decision to permit introduction of the 1983 operation manual at trial was not an abuse of discretion.
V.
90
Mercury's final contention on appeal is that during closing argument, counsel for plaintiffs made several remarks which amounted to an impermissible "conscience of the community" argument. At one point, plaintiffs' attorney mentioned Mercury's Wisconsin address. Record Vol. III at 976. At another point, plaintiffs' attorney referred to Mercury's expert witnesses as part of an act that goes around Texas and the nation defending kill switch cases. Record Vol. III at 966, 967. Plaintiffs' attorney also observed that Reese "was so highly thought of in the community that they are still carrying on events in the City of Buna that are named in his memory." Record Vol. III at 980. Mercury contends that it is entitled to a new trial based on the foregoing statements.
91
Because Mercury failed to object at trial to the allegedly improper argument, this Court may reverse only if it finds "plain error." In civil cases, a finding of plain error is "confined to the exceptional case where the error has seriously affected the fairness, integrity, or public reputation of judicial proceedings." Liner v. J.B. Talley and Co., Inc., 618 F.2d 327, 329-30 (5th Cir.1980). In applying the plain error standard, this Court has emphasized "our continued reluctance to address for the first time on review errors which the trial court was not given an opportunity to consider and correct ... [especially] when the errors assertedly lie in counsel's closing remarks." Edwards v. Sears, Roebuck & Co., 512 F.2d 276, 286 (5th Cir.1975).
92
While this Court has condemned "community conscience" arguments as unfairly prejudicial, see Westbrook v. General Tire & Rubber Co., 754 F.2d 1233, 1238-39 (5th Cir.1985), the comments cited by Mercury are not such as to require a new trial under the plain error rule. It is far from clear that the few isolated remarks cited by Mercury constituted an impermissible appeal to the conscience of the community. Nevertheless, an objection by Mercury and a precautionary instruction by the district court would have been clearly sufficient to remove whatever slight prejudice might have occurred.11
VI.
93
For the foregoing reasons, the judgment of the district court is
94
AFFIRMED.
E. GRADY JOLLY, Circuit Judge, dissenting:
95
A fair trial is fundamental. This trial was not fair. Even from the cold record, the prejudicial impact of the district court's harsh statements and unwarranted interjections can be easily discerned: in this product liability death case, the jury returned a verdict of over $2 million in non-economic losses where there was no claim for punitive or pain and suffering damages. The bias against the defense exhibited by the judge throughout the trial was followed by a closing argument appealing to the jury's prejudices against out-of-state corporations that callously make widows and orphans of Texas women and children. Such a trial atmosphere goes far toward explaining the excessive and unjustifiably penal character of the award.
96
* The majority accurately cites some of the relevant portions of the trial transcript and accurately characterizes the standards we should use to evaluate the district court's comments. This dissent therefore stems not from any quarrel with those standards, but from the belief that when the record in this case is judged by those standards, the verdict and judgment in this case, as a matter of simple justice, cannot stand.
97
The difficulty with this case is that "although there is no indication that the district judge was in fact biased, the jury could have easily concluded that the judge favored plaintiff's position. A new trial is necessary." Newman v. A.E. Staley Mfg. Co., 648 F.2d 330, 336 (5th Cir.1981). The impression of bias results from a series of remarks that characterize the whole record, not just from isolated comments.
98
In order to understand that the remarks I reproduce here related to critical issues, it is necessary to briefly state the issues and contentions that the defendant raised at trial. Mercury attempted to show that its engine was not unreasonably dangerous for lack of a kill switch, because kill switches are poor safety devices that create more risks than they prevent, and because kill switches, which require the operator to attach himself to the engine by a cord, are so cumbersome to use that engine owners would never accept them. Mercury also attempted to show that Reese was negligent because he put a more powerful engine on his boat than it was rated for, and because he drove the boat too fast in dangerous waters. Mercury had also hoped to show that it was not liable for failing to warn consumers about the need for a kill switch, because that responsibility belonged to the dealer. Finally, Mercury's different theory about how the accident had happened seemed to suggest that the engine may not have struck Reese.
99
The first of the district court's improper remarks occurred early in the trial, during cross-examination of the only eye-witness. The defense counsel asked, "You will agree the boat would go pretty fast in the current?"
100
The district court commented that "any damned fool would know that a boat went faster in the current."
101
Defense counsel had not asked the only eyewitnesses if the boat would go faster in the current, but asked if it would go "pretty fast" in the current without the engine propelling it, suggesting that the engine may have been out of the water when the boat approached Reese. Defense counsel was attempting to impeach the testimony of the only eyewitness to the accident by using his prior deposition testimony. The witness avoided the question. Defense counsel may have been attempting to establish both that the boat was going "pretty fast" even though the engine may have been out of the water as the boat came back downstream, as a defense witness later testified, and that, in the interval before the boat returned, the eyewitness could not have seen all the events to which he testified because they would have happened too fast, as a defense witness later testified. Regardless of the value of that line of cross-examination, the district court injected itself into the case as a partisan. The district court not only cut off cross-examination of the only eyewitness on the circumstances of the accident, but by its deprecating remarks conveyed to the jury that the plaintiffs' version of the accident was as unquestionable as the fact that a boat goes faster in the current.
102
The district court next improperly added a comment that amounted to testimony for the plaintiffs. Defense counsel was suggesting by his cross-examination that Reese should have worn a life jacket because a life jacket would have kept him afloat. The trial judge, without any provocation, added his personal comment for all to hear: "It could keep you afloat face down, too." There was no evidence to this effect anywhere in the record. Can the majority deny that such a comment on the evidence by the dominant figure in the courtroom destroys the impartial atmosphere that the parties are entitled to demand in our federal courts? In this trial, a crucial element of the defense was that the failure to wear a life preserver indicated a careless indifference to safety. Yet the comment gave the impression that the impartial judge clearly and unmistakably felt that there was no value to this critical contention.
103
Later in the trial, the district court plainly demonstrated its sympathy for the plaintiff-widow. The district court cut off cross-examination of the widow, already a sympathetic figure, by twice observing that she should not be imposed upon by these "unnecessary" questions counsel was asking.
104
The judge next implied that the deposition testimony of the mortician that defense counsel had just offered was of no value. Defense counsel was attempting to show that if Reese had sustained a serious head wound from the boat or engine, the mortician would have seen and remembered it, but the mortician had testified that he did not remember seeing such a wound. The district court judge commented, "With him seeing bodies every day you expect he would remember." Defense counsel responded, "Are you asking me, Your Honor?" The judge added, "I am making a statement." Later, the district judge said to defense counsel, "I don't appreciate your conduct in regard to insisting on this type of testimony because I don't think you are giving the jury any information by which they can make a fact finding as to the injuries that the man had on his head." The district court's comments could hardly have been an attempt to move the trial along because they occurred after the defense had concluded its offer of the deposition. Instead, the district judge was injecting himself as a partisan, trying to devalue the mortician's testimony.
105
Later in the trial, the district court, sua sponte, suggested in the presence of the jury that a defense witness was offering his testimony for some ulterior purpose, and suggested further that the witness was becoming an advocate in the case. The district judge made his comment after the witness had begun to explain his answer on a voir dire conducted to determine whether a videotaped reenactment should be admitted. The court said, "Well, you were trying to become an advocate, in the Court's opinion. It makes the Court feel that you have a purpose in the manner in which you are testifying." Regardless of the evidentiary issue, the district court's reflections on the motives of the witness were unnecessary and certainly prejudicial to his credibility before the jury. Furthermore, it may well have appeared to the jury that the district court felt that Mercury's defense could not be viewed as a reasonably objective presentation of the facts.
106
Finally, in an exchange reproduced in the majority opinion, the district court questioned the sincerity of defense counsel after defense counsel apologized for possibly exceeding his proper bounds in attempting to introduce the issue of dealer responsibility. The district court correctly prevented the introduction of such evidence to expedite the trial. Nevertheless, by suggesting before the jury that counsel was insincere and was deliberately attempting to obtain a mistrial, the district court went beyond merely precluding the introduction of evidence.
107
Eventually even the district court felt that a curative instruction was necessary, but the "curative" instruction, supposedly intended to remedy prejudice created by the district court's earlier comments, actually told the jury that the earlier comments were, in the light of defense counsel's conduct, justified. In the instruction which is reproduced in the majority opinion, the district court defended the propriety of its actions as a reaction to the allegedly improper conduct of defense counsel. These comments would have served a useful purpose had they been addressed to defense counsel in camera. Addressed to the jury, they merely undermined that part of the instruction that did attempt to cure the prejudice.
108
We have noted in Dartez v. Fibreboard Corp., 765 F.2d 456, 471-73 (5th Cir.1985), that the trial judge's comments are likely to carry a great deal of weight with the jury, and that he must therefore appear even-handed when he intervenes in a case. In Dartez, the same trial judge made remarks similar to those made in this case, remarks that the jury could have interpreted as reflecting negatively on defense counsel's abilities and motives. Id. at 473. As in this case, the judge apparently recognized that his remarks could have been prejudicial, and he gave essentially the same "curative" instruction that he gave here. In Dartez, we noted the ineffectiveness of the instruction:
109
Despite the admonishment in the instruction at the close of the case, these comments could be interpreted by the jury as attributing an unwarranted degree of incompetence and obfuscation of issues to defense counsel that could weigh against accepting the defense offered on behalf of their clients. Perhaps the recitation of these highlights will suffice to prevent any recurrence. (Emphasis added.)
110
Thus the majority here is at odds with our previous panel's view that the similar instruction given here could eradicate the prejudice the judge's partisan and sometimes hostile remarks created.
111
Besides the "curative" instruction, the majority also relies on the fact that defense counsel did not object to several of these remarks. Even if it is fair to hold counsel to the "plain error" standard in this case, given their experience with the judge it is understandable that the defense attorneys were reluctant to object and have their case and their representation further subjected to the court's derision. Nevertheless, I believe that these remarks rise to the level of plain error.
112
Our circuit has required a new trial for remarks that were much less prejudicial than the remarks here. Newman, 648 F.2d at 335-36. In view of Newman, I am at a loss to see how the majority would deny a new trial on this record. The only possible difference by way of mitigation between this case and Newman is that the court here did make an effort to assuage the prejudice by an instruction. This instruction, however, was clearly ineffective, as the Dartez panel concluded with respect to a similar instruction.
113
In my opinion, the numerous remarks and interjections of the district judge against one party and in favor of another, taken as a whole, demonstrated a prejudicial trial atmosphere that denied the defendant the impartial judge that our system of justice guarantees. "The influence of the trial judge on the jury is necessarily and properly of great weight and his lightest word or intimation is received with deference, and may prove controlling." Newman, 648 F.2d at 334 (quoting Quercia v. United States, 289 U.S. 466, 53 S.Ct. 698, 77 L.Ed. 1321 (1933)). I respectfully dissent from the majority's holding that it did not matter.
II
114
The plaintiffs' closing argument reinforced the unfair prejudice to the defense created by the district court's comments. Although the comments of plaintiffs' counsel may not have been the most blatant "community conscience" appeal this circuit has ever had before it, they underscored the prejudice already created, and they further support the necessity of a new trial.
115
The plaintiffs' closing argument was emotional and parochial. Counsel for Reese's father said of the family, "There is an empty chair in those folks' home and it is going to be empty for the rest of their lives, and that empty place in their heart that is going to be empty the rest of their lives because of [sic] a man was injured, not because he didn't have a life preserver on." Continuing in the same vein, he said, "And it wouldn't have mattered what he had on, and he could have had a raft tied to him and it wouldn't have mattered because when that boat came over him he was gone, and this lawyer won't tell you honestly what the facts are, but you have heard the evidence and...."
116
At this point, defense counsel objected to the statement that he would not state the facts honestly. The district court overruled the objection.
117
Counsel for Reese's father continued, referring to defense counsel's statement that he had only a few minutes to put together his closing argument.
118
Those guys are part of a dog and pony show that go around this State of Texas and go around this nation defending kill switch cases.... He knows every question he is going to ask everyone of those men [the defense witnesses] because they have rehearsed it and rehearsed it and rehearsed it.
119
And you have seen a production, Ladies and Gentlemen, and I want you to--You are going to decide this case and you are going to decide how many cases they are going to have to be presented around this country and how many widows there are going to be and how many orphans there are going to be and how many parents are going to lose their kids.
120
Defense counsel objected that this argument was outside the record, and the district court instructed the jury to ignore any arguments that went beyond the record.
121
Counsel for the rest of the Reese family did less to fan the prejudicial atmosphere, but he did make his contribution. First, he clearly pointed out that the designers of this engine all resided in Fond du Lac, Wisconsin, and asked rhetorically, "Where are they?" Then, he noted that Mercury had not advertised kill switches, nor, he claimed, advised customers about them even though one of the defense's experts used one every day. Instead, he argued, Mercury's response was,
122
And if an incident arose, get on the phone and get the expert team together and send them the depositions and they can read them while they are on the plane. That is what Mr. Langley told you, I got those depositions and I read them on the plane flying down. And we will send them to Austin and that is where one of them had them, and we will send them to San Antonio, and that is where another one had it, and we will send them to Beaumont, about this tragedy on the Neches River near the Evadale measuring station. And we will come up with something.
123
These arguments are similar to the "us-against-them" arguments condemned in Hall v. Freese, 735 F.2d 956, 960-62 (5th Cir.1984), and on which basis we reversed even though the defendant had not objected. They are improper "community conscience" arguments within the meaning of Westbrook v. General Tire and Rubber Co., 754 F.2d 1233, 1238-39, reh'g denied, 760 F.2d 269 (5th Cir.1985), which said:
124
Our condemnation of a "community conscience" argument is not limited to the use of those specific words; it extends to all impassioned and prejudicial pleas intended to invoke a sense of community loyalty, duty and expectation. Such appeals serve no proper purpose and carry the potential of substantial injustice when invoked against outsiders.
125
I believe that, despite the defendant's failure to object, these arguments contributed to the substantial injustice done to the defendant and support reversal.
III
126
The prejudicial impact of the district court's comments and the improper closing argument are clearly evident in the excessive verdict returned by the jury. At the time of his death, Reese was thirty-eight years old and was earning $25,000. The jury awarded Reese's widow $2 million, Reese's daughters $425,000 each, and Reese's father $50,000. The total for the family is $3 million. The court then reduced the awards by the twenty-five percent of the fault the jury attributed to Reese. The $3 million award includes no punitive damages nor damages for pain and suffering.
127
The plaintiffs' economist testified as to four elements of damage: lost household services, lost love and affection, lost guidance and counsel, and lost earnings. He testified that the most concrete of the damages, the lost earnings, were $770,000. Under the method suggested in Culver v. Slater Boat Co., 722 F.2d 114 (5th Cir.1983) (en banc), cert. denied, sub nom. St. Paul Fire & Marine Ins. Co. v. Culver, --- U.S. ----, 105 S.Ct. 90, 83 L.Ed.2d 37 (1984), and used by the economist here, the present discounted value of Reese's earnings is only $514,000. This figure is calculated by using a three percent discount rate, estimating that Reese's $26,0001 annual income would increase at the national average of one and one-half percent per year for the twenty-four years remaining in Reese's working life, and subtracting nothing for income taxes or Reese's personal living expenses. We are unable to determine the income tax adjustment the economist actually made, but if Reese's annual income is reduced by a reasonable percentage for income taxes of fifteen percent, the personal living allowance of $5000 suggested in the economist's testimony is deducted, and the economist's estimated fringe benefit of fifteen percent of Reese's salary is added, the present discounted value of Reese's earnings is approximately $418,000. The figure the economist supplied for the present value of Reese's lifetime earnings therefore is mystifying--by about $350,000.
128
To break out the non-economic losses represented in the jury award, we will assume that Reese provided ten hours of household services per week, and that the jury agreed with the economist's suggested figures for lost earnings and lost household services; we are then left with non-economic damages of $2,166,000 for the family for loss of love and affection, guidance and counsel.
129
The support in the record for this extravagant award for intangible losses, besides the witnesses' praise for Reese's character, again came from the economist. I am astonished by his testimony--naively so, I suppose. He testified that one could estimate the loss of love and affection by noting the benefits provided by love and affection and by using the hourly rate for services that would provide similar benefits. He testified that the average earnings of clergy, psychiatrists, social workers and counselors produced a rate of $9.50 per hour when averaged together. One hour of these services per day for the rest of Reese's life, when valued at this rate and adjusted for inflation, would produce a present value of $128,000 discounted over Reese's lifetime. Using a similar method, he testified that the value of one hour of guidance and counsel per day until their maturity would be $104,000 for Carolyn Reese and $183,000 for Jennifer Reese.
130
Stay with me. We are only beginning. The economist then testified that the value of sixteen hours per day of Reese's love and affection every day for the rest of his life would be about $2 million for each of the individual survivors, except in the case of Eli Reese, who had a shorter life expectancy. This figure simply represents one hour's value multiplied by sixteen hours per day discounted over the rest of Reese's life. Since the economist seems to have noticed that Reese would need eight hours sleep a day in order to have the energy to provide sixteen hours of professional quality love and affection to four people every day for thirty-six years, I suggest that the economist has overlooked the fact that in any one day Reese lived only twenty-four hours. The economist somehow figured that, within the sixteen hours of providing love and affection at a rate based on professional salaries, Reese could have squeezed in eight hours of work to justify the loss of earnings award. Fitting the damages into an ordinary day gets even tighter, however, when the economist must squeeze into the sixteen hours of work per day, another ten hours per week of household services and another hour per day of guidance and counsel--thirty-four-and-one-half hours stuffed into our twenty-four-hour day.
131
This circuit has already questioned this type of "unit of time" testimony to establish other intangible, non-economic damages such as pain and suffering. Westbrook, 754 F.2d at 1239-40. I must note, however, that the district court suitably cautioned the jury that love and affection were not susceptible to precise measurement. Even with such an instruction, this sort of testimony should be highly suspect as a basis for the damages awarded here.2 When the suspect nature of the "unit of time" testimony for intangible damages is coupled with the internal incoherence of the economist's testimony, there is little doubt that the damages here are insupportable.
132
We proceed further. The economist's testimony assumed that somehow Reese would provide sixteen hours of love and affection every day simultaneously for thirty-six years to his wife and two daughters, and to his father for the rest of his father's life expectancy. Since the testimony is based upon the economic hypothesis that Reese's time was worth the same amount as a professional would receive to provide the same benefits, one must assume that the economist's testimony supposed that all four family members would be in the same place every day for sixteen hours where, as in the case of the paid professional, they could simultaneously benefit from his presence. This implicit assumption is bizarre. Eli Reese already lives separately, and Reese's daughters, before thirty-six years have passed, will most likely leave home, not to mention that Reese must work, sleep and perform normal chores.
133
Let me try to make some sense of this hypothesis if the majority insists on accepting it as a basis for recovery for non-economic losses. Assuming, though in fact it would hardly be the case, that Reese had eight hours a day to give to his family as a whole for every day that remained in his life, the loss of love and affection at $128,000 per hour (present value of one hour each day for the rest of his lifetime) would be slightly more than $1 million, not the $2 million remaining in the non-economic portion of the award. Subtracting the economist's suggested amounts for guidance and counsel, we are still left with about $850,000 unaccounted for.
134
This evidence cannot justify $3 million for the family, even under its own highly dubious terms. Nor can any other evidence. Undoubtedly, Wade Reese was a fine man. Three million dollars will not replace him; $300 million would not replace him. Despite the Reese family's undeniable loss, this award far surpasses the maximum recovery that should be allowed on these facts, and it is "entirely disproportionate to the injury ... so large as to 'shock the judicial conscience,' so exaggerated as to indicate 'bias, passion, prejudice, corruption or other improper motive.' " Caldarera v. Eastern Airlines, Inc., 705 F.2d 778, 784 (5th Cir.1983) (footnotes omitted).
CONCLUSION
135
I respectfully submit that if we truly believe that the federal courts are a forum where litigants may expect impartial, objective, fair and just proceedings, this case must be reversed. Although the trial judge who conducted this case is a judge with the highest reputation for integrity and hard work, his comments in this case created an atmosphere that severly and unfairly prejudiced the defendants. The trial that they experienced was anything but impartial.
136
Furthermore, the arguments of plaintiffs' counsel were irrelevant, demagogic and inflammatory. This trial was a failure in the quest for a truthful and fair verdict. The verdict is the final proof that the conduct of this trial resulted in inexcusable prejudice to the defendant.
137
How the majority can let this verdict stand, a verdict that awards in excess of $2 million for non-economic losses, I cannot understand. Because I cannot understand, I respectfully dissent.
1
A cause of action in strict liability for failure to warn is comprised of five essential elements: (1) a risk of harm that is inherent in the product or that may arise from the intended or reasonably anticipated use of the product; (2) a reasonably foreseeable or actually foreseen risk of harm at the time the product is marketed; (3) a failure to provide any warning of the danger or a failure to provide an adequate warning (or instructions) of the danger; (4) the absence of the warning (or instruction) must render the product unreasonably dangerous; and (5) the failure to warn (or instruct) must constitute a causative nexus in the product user's injury. Sales, The Duty to Warn and Instruct for Safe Use in Strict Tort Liability, 13 St. Mary's L.J., 521, 524 (1982). While a third-party intermediary's failure to communicate a warning does not break the causal connection between a breach of the manufacturer's duty and the customer's injury, such a failure may be relevant in determining whether the manufacturer has provided an adequate warning. See Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076, 1091 (5th Cir.1973)
2
Several authorities support Mercury's contention that in some circumstances, a manufacturer can satisfy its duty to warn by warnings made through intermediaries which are reasonably calculated to reach ultimate purchasers. See Shop Rite Foods v. Upjohn Co., 619 S.W.2d 574 (Tex.Civ.App.--Amarillo 1981, writ ref'd n.r.e.); Borel v. Fibreboard Paper Products Corp., 493 F.2d 1076 (5th Cir.1973), cert. denied, 419 U.S. 869, 95 S.Ct. 127, 42 L.Ed.2d 107 (1974); Restatement (Second) of Torts Sec. 388
3
As further evidence of the basis for Mercury's trial objection, Mercury's motion for a new trial asserted the admissibility of the evidence only on the issue of causation. Specifically, Mercury stated that the district court erred "[b]y excluding evidence offered by Defendant Mercury Marine on the dealer-third-party negligence as an intervening or superseding cause of Plaintiff's injuries." Record Vol. I at 188. Mercury also stated that the district court erred "[b]y charging the jury not to consider the third-party negligence of the dealer on any issue in the case, which charge to the jury unfairly prejudiced Defendant Mercury Marine's defense as to proximate and/or producing cause." Record Vol. I at 190
4
We note that the manual containing the statement regarding dealer responsibility to ensure that boats are properly equipped was admitted into evidence as Plaintiffs' Exhibit No. 8. During closing argument, Mercury fully detailed the significance of the dealer's responsibility and the dealer's superior position to warn consumers. Record Vol. III at 932
5
In its brief, Mercury asserts that Williams would have testified at trial via deposition "that part of that equipment for which a dealer had responsibility is the after-market kill switch device available for use with the outboard motor in question." Our review of Williams' deposition reveals no such testimony
6
Mercury also presented evidence suggesting that the dealer was in a superior position to warn customers. This evidence, while relevant to determining whether an indirect warning was appropriate, fails to detail the steps taken by Mercury to provide such a warning
In its brief, Mercury suggests, citing the deposition of David Williams, that it supplied relevant safety information to the dealers involved in this case through seminars and product information bulletins. However, William's testimony does not reveal any information provided by Mercury specifically regarding kill switch use or the circling phenomenon. Williams also testified that the Mercury safety seminars addressed primarily "safety and repair of the motor and not so much its operation." Deposition of David Williams at 39-41.
7
By no means do we suggest that curative instructions such as those offered by the district court in the instant case will always suffice to dispel the prejudicial effects of improper judicial remarks. Given the particular circumstances here, however, such instructions are a factor in our decision to deny Mercury's request for a new trial
No serious claim can be made that our conclusion in the instant case is in any way inconsistent with Dartez v. Fibreboard Corp., 765 F.2d 456 (5th Cir.1985). First, the Court in Dartez never reached the issue of whether the district court's comments were sufficiently prejudicial to require a new trial. The Court stated that "[b]ecause a retrial is required by our evidentiary rulings, it is not necessary to resolve this issue." Id. at 473. Moreover, as noted above, the district court's curative instructions in the instant case were only one (and perhaps the least significant) of several factors which compel us to conclude that the district court's remarks do not entitle Mercury to a new trial. Finally, we note that examining the effect of a district judge's comments during a trial is a highly fact specific inquiry with the outcome turning on the precise nature of the comments in the particular case viewed in the context of that case.
8
Record Vol. II at 50. At the time of this incident, counsel for Mercury had asked Burrell a series of questions designed to get Burrell to admit that a boat would go "pretty fast" in the river current. Burrell had made a similar statement in an earlier deposition but could not recall the earlier statement during the trial. The district court became impatient with extensive cross-examination on a point the district court believed to be uncontested, unimportant and obvious. The record shows the district court's remark to be: "Any (expletive delete) would know that a boat went faster in the current." At oral argument, counsel for both plaintiffs and Mercury agreed as to the contents of the remark
9
The remaining remarks and evidentiary rulings complained of by Mercury similarly do not require a new trial. At one point, during Mercury's cross-examination of plaintiffs' expert witness regarding the utility of wearing a life jacket, the following colloquy occurred:
Q: It would keep you afloat, wouldn't it?
A: Well, it would prevent you from diving down to avoid it, but if you were struck it would keep you afloat. I agree.
Court: It could keep you afloat face down too.
Record Vol. II at 258. While such a comment was inappropriate, the effect of the comment during the course of a three day trial, and viewing the record as a whole, does not entitle Mercury to a new trial under the plain error standard. At the time of the foregoing colloquy, Mercury was pursuing a theory of contributory negligence. We note that the jury did in fact find that Melvin Reese was twenty-five percent contributorily negligent.
Mercury also cites the district court's reprimand of a witness for "trying to become an advocate." This reprimand occurred after the witness had volunteered evidence regarding the dealer's responsibility to warn. The district court noted that the information volunteered went beyond the scope of the question the witness had been asked. The district court also noted that it had already ruled that dealer responsibility evidence was inadmissible.
10
Plaintiffs' expert witness indicated the following figures as appropriate for each element of recovery: (1) $770,000 for lost earnings; (2) $287,000 for lost guidance and counsel (based on one hour each day for each of Reese's two daughters); (3) $64,000 for lost household services (based on ten hours of service each week); and (4) $6,704,000 for lost love and affection (based on all waking hours of each day and four individual beneficiaries of the lost love and affection). Although Mercury subjected the above testimony to strenuous cross-examination, Mercury failed to specify any alternate damage figures to assist the jury's determinations. During closing argument, plaintiffs' attorneys requested the jury to award the following amounts in damages: (1) Beatrice Reese, $2,500,000; (2) Carol Reese, $2,200,000; (3) Jennifer Reese, $2,300,000; and (4) Eli Reese, $500,000. The jury ultimately awarded the following amounts: (1) Beatrice Reese, $2,000,000; (2) Carol Reese, $425,000; (3) Jennifer Reese, $425,000; and (4) Eli Reese, $50,000. Thus, the jury actually awarded $4,600,000 less than the amount requested by plaintiffs
11
Mercury's closing was itself far from free of irrelevant and prejudicial argument. At one point Mercury's trial attorney compared his situation to that of Paul Newman in The Verdict, pointing out that he was alone against a team of lawyers on the other side. See Record Vol. III at 940. This was obviously an improper attempt to prejudice the jury by suggesting that he was the "little guy" struggling against great odds
1
The economist testified that Reese's $25,000 income at the date of his death would have increased to $26,000 by the next year
2
The Westbrook court noted that a "unit of time" argument was not reversible error per se, but also concluded that it helped establish that the damages were excessive
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454 F.Supp.2d 552 (2006)
David E. WELCH, United States of America, Plaintiffs,
v.
CARDINAL BANKSHARES CORPORATION, et al., Defendants.
Civil Action No. 7:06CV00407.
United States District Court, W.D. Virginia, Roanoke Division.
October 5, 2006.
*553 D. Bruce Shine, Donald Franklin Mason, Jr., Shine and Mason Law Offices, Kingsport, TN, Gregory Michael Stewart, Stewart Law Office, P.C., Norton, VA, Julie C. Dudley, United States Attorneys Office, Roanoke, VA, for Plaintiffs.
Joseph M. Rainsbury, Leclair Ryan Flippin Densmore, Mark E. Feldmann, Glenn Feldmann Darby & Goodlatte, Arthur Patrick Strickland, Arthur P. Strickland PC, Roanoke, VA, for Defendants.
MEMORANDUM OPINION
GLEN E. CONRAD, District Judge.
David E. Welch brings this action pursuant to 18 U.S.C. § 1514A against Cardinal Bankshares Corporation, asserting that an order of reinstatement issued by an Administrative Law Judge should be enforced by this court. The petition for enforcement was filed on July 6, 2006. The case is currently before the court on defendants' motion to dismiss.[1] For the following *554 reasons, the court will grant the defendants' motion to dismiss.
BACKGROUND
David E. Welch ("Welch") was employed as the Chief Financial Officer of Cardinal Bankshares Corporation ("Cardinal") from February of 1999 until he was terminated on October 1, 2002. Welch then filed a complaint with the Occupational Safety & Health Administration (OSHA), U.S. Department of Labor, alleging that he was terminated in retaliation for engaging in activities protected by the Corporate and Criminal Fraud Accountability Act of 2002, Title VII of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley").
OSHA denied Welch's complaint, and Welch filed an appeal with the Office of the Administrative Law Judges (ALJ), U.S. Department of Labor. After holding a hearing, the ALJ issued a "Recommended Decision and Order" (?DO) on January 29, 2004. On February 3, 2004, the ALJ issued an "Erratum," which stated that his RDO "is not, nor was it intended to be, a `final' order from which an appeal to the Administrative Review Board may be taken." (Erratum).
Two days later, Cardinal filed an appeal with the Administrative Review Board (ARB), United States Department of Labor. In its appeal, Cardinal asserted that it was appealing a "final" order of the ALJ. (Final Decision and Order Dismissing Petition for Review without Prejudice at 2). After the ARB dismissed the petition for appeal, Cardinal appealed to the United States Court of Appeals for the Fourth Circuit. That appeal was also dismissed.
On February 15, 2005, the ALJ issued a "Supplemental Recommended Decision and Order Awarding Damages, Fees, and Costs" (SRDO). That order "recommended" that Cardinal be ordered to reinstate Welch. (Supplemental Recommended Decision and Order Awarding Damages, Fee, and Costs at 25). Cardinal appealed the order to the ARB on February 25, 2005. Over eighteen months later, the parties are still awaiting the decision of the ARB.
In August of 2005, Welch filed a motion with the ALJ asking that monetary sanctions be imposed upon Cardinal for failure to comply with the preliminary reinstatement order. The ALJ declined to impose sanctions, basing his refusal on the premise that Sarbanes-Oxley whistleblower proceedings could only be enforced in the United States District Court.
Welch then filed a motion for a preliminary injunction in this court on September 14, 2005, to enforce the ALJ's order of reinstatement. Upon motion of the defendant, the court dismissed the action on January 4, 2006. The court based its ruling upon the conclusion that there were unresolved questions as to whether the ALJ's SRDO was intended as an "order" of reinstatement.[2]Welch v. Cardinal Bankshares Corp., 407 F.Supp.2d 773, 777 (W.D.Va.2006). As a result of this disposition, the court did not reach the issue of whether it would have the authority to enforce a preliminary order of reinstatement. Id. at n. 2. The court subsequently denied the plaintiffs motion to alter or amend its order, reasserting its earlier conclusions. Welch v. Cardinal Bankshares *555 Corp., 2006 WL 197039 (W.D.Va. 2006). In that opinion, the court further noted that if the ARB would review a motion to stay the effect of the SRDO, the court's order would be without prejudice to any new motion to enforce a preliminary order of reinstatement. Id.
Welch filed a motion with the ALJ for clarification of the order of reinstatement, which the ALJ denied, claiming that he lacked jurisdiction. Welch then filed a motion with the ARB to confirm that a preliminary order had been issued. On March 31, 2006, the ARB entered an order confirming that the ALJ's order was a "preliminary order of reinstatement." Cardinal's motion to stay the order was denied by the ARB on June 9.
On July 6, 2006, Welch filed a petition to enforce the order of reinstatement with this court. After the motion was filed, the United States filed a motion to intervene as co-plaintiff, which was granted. A joint motion to intervene as co-defendants was filed on behalf of individual directors of Cardinal, J. Howard Conduff, Jr.; William R. Gardner, Jr.; Kevin D. Mitchell; R. Leon Moore; A. Carole Pratt; Dorsey H. Thompson; and G. Harris Warner, Jr. That motion was also granted. In addition, the American Association of Bank Directors moved to file an amicus curiae brief, and the motion was granted.[3] The case is now before the court on the defendants' motion to dismiss, which the court will grant for the following reasons.
DISCUSSION
The case is currently before the court on the defendants' motion to dismiss. The defendants claim that this court does not have subject matter jurisdiction to enforce the ALJ's order, arguing that the order of reinstatement was a preliminary order, and this court can only enforce final orders of the Secretary of Labor.
It is undisputed that this court has jurisdiction to enforce a final order of the Secretary. See 49 U.S.C. § 42121(b)(5); 49 U.S.C. § 42121(b)(6). The first issue the court must consider is whether the order issued by the ALJ on February 15, 2005 is a preliminary order of reinstatement or a final order of the Secretary. The court agrees with the ARB's prior determination of March 31, 2006, and concludes that an order issued by the ALJ is a "preliminary order of reinstatement." (Order at 4). As noted by the ARB, the Regulations state that "the decision of the administrative law judge will be inoperative unless and until the Board issues an order adopting the decision, except that a preliminary order of reinstatement will be effective while review is conducted by the Board." 29 C.F.R. § 1980.110(b). This language clearly implies that the order of the ALJ is a "preliminary order of reinstatement." Thus, the next issue for the court is whether this court has jurisdiction to enforce such a preliminary order of reinstatement.
A federal district court has limited jurisdiction; the court can only hear a case if it has been granted jurisdiction by statute. Bell v. New Jersey, 461 U.S. 773, 777, 103 S.Ct. 2187, 76 L.E d.2d 312 (1983); see also Intl Sci. & Tech. Inst., Inc. v. Inacom Communications, Inc., 106 F.3d 1146, 1151 (4th Cir.1997). In analyzing statutory grants of jurisdiction, the court must first consider the "cardinal canon" of statutory construction: "courts must presume that a legislature says in a statute what it means and means in a statute what it says *556 there." Conn. Nat'l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992). The starting point for statutory construction is therefore the plain language of the statute itself. Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 236, 106 S.Ct. 2485, 91 L.Ed.2d 174 (1986).
To provide for whistleblower protection, the Sarbanes-Oxley Act incorporates procedures for adjudicating complaints of another whistleblower protection statute, the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR21). See 18 U.S.C. § 1514A(b)(2) (citing 49 U.S.C. § 42121(b)). Relying on these two statutes, the defendant claims that there are just three situations in which jurisdiction is conferred upon the district court. First, a person alleging discharge may file an action for de novo review in the district court if the Secretary has not issued a final decision within 180 days of the filing of the complaint. 18 U.S.C. § 1514A(b)(1)(3). Second, the Secretary of Labor may file a civil action in the district court to enforce an order entered under 49 U.S.C. § 42121(b)(3). 49 U.S.C. § 42121(b)(5). Third, a person on whose behalf an order was entered may file a civil action in the district court to enforce an order entered under 49 U.S.C. § 42121(b)(3). 49 U.S.C. 42121(b)(6). According to the defendant, jurisdiction of this court must be construed narrowly, and the jurisdictiongranting provisions do not apply to preliminary orders.
Based upon these three provisions and principles of statutory construction, the court concludes that the statutory grants of jurisdiction in 49 U.S.C. § 42121(b)(5) and 49 U.S.C. § 42121(b)(6) clearly fail to grant jurisdiction to this court over preliminary orders of the ALJ[4] These sections provide that the district court can enforce Department of Labor rulings when a person has failed to comply with an order issued under 49 U.S.C. § 42121(b)(3). That paragraph, "Final Order," provides that "[n]ot later than 120 days after the date of conclusion of a hearing under paragraph (2), the Secretary of Labor shall issue a final order providing the relief prescribed by this paragraph or denying the complaint." 49 U.S.C. § 42121(b)(3). Paragraph (2) closes with the instruction that, if a hearing is not requested within the allotted time period, "the preliminary order shall be deemed a final order that is not subject to preliminary review."[5] 49 U.S.C. § 42121(b)(2). Paragraphs (5) and (6) specifically provide for enforcement of orders issued under paragraph (3), which describe only final orders of the ARB. The statute does not instruct the district court to enforce any type of preliminary orders. Therefore, the plain language of the statute grants jurisdiction to this court solely over a final order of the ARB.
As the plaintiff has noted, this reading of the statute requires the court to disregard certain provisions of the Code of Federal Regulations. Title 29, section 1980.113 provides for judicial enforcement:
[w]henever any person has failed to comply with a preliminary order of reinstatement or a final order or the terms *557 of a settlement agreement, the Secretary or a person on whose behalf the order was issued may file a civil action seeking enforcement of the order in the United States district court for the district in which the violation was found to have occurred.
29 C.F.R. § 1980.113. The court, however, concludes that it cannot give effect to this regulation, as it conflicts with the plain language of Congress' grant of jurisdiction to this court.
In general, agency rules are entitled to some deference by the court, because Congress has given authority to an agency to administer the statute. United States v. Mead, 533 U.S. 218, 227, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001) (citing Chevron U.S.A. Inc. v. Natural Res. Del Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)). However, this deference cannot apply in situations in which the statute is granting jurisdiction to the federal courts, because "it would be inappropriate to consult executive interpretations of [the statute] to resolve ambiguities surrounding the scope of [the] judicially enforceable remedy." Murphy Exploration & Prod. Co. v. U.S. Dep't of the Interior, 252 F.3d 473 (D.C.Cir.2001) (quoting Adams Fruit Co. v. Barrett, 494 U.S. 638, 650, 110 S.Ct. 1384, 108 L.Ed.2d 585 (1990)). The instant case is factually distinguishable from Adams, which involved, an enforcement scheme providing direct recourse to federal court, but the principle that an agency does not have the power to interpret a statute establishing federal court jurisdiction is equally applicable here. Adams, 494 U.S. at 650, 110 S.Ct. 1384. In a recent decision of the United States Court of Appeals for the Second Circuit, even the judge concluding that 29 C.F.R. § 1980.113 should be enforced noted that the agency rule was "by no means authoritative over this Court." Bechtel v. Competitive. Tech., Inc., 448 F.3d 469, 486 (2d Cir.2006).[6] Due to the jurisdiction-conferring nature of 49 U.S.C. § 42121, the court finds that inconsistent agency interpretations, including 29 C.F.R. § 1980.113, cannot inform the court's interpretation of the statute.
The court's conclusion that it does not have subject matter jurisdiction to enforce the ALJ's preliminary order is further supported by the general principle that federal courts can only review the final decisions of administrative agencies. In fact, there is a "strong presumption" that judicial review is available only when an agency action is final. Bell, 461 U.S. at 780, 103 S.Ct. 2187. Under paragraph (4) of § 42121, an order issued under paragraph (3) can be reviewed by the court of appeals in the circuit in which the order was issued. 49 U.S.C. § 42121(b)(4). Therefore, an order issued under paragraph (3) must refer to the final order of the ARB, in light of the presumption that the circuit court can only review final orders *558 See Bechtel, 448 F.3d at 477 (Leval, J., concurring).
In addition, the court's conclusion is supported by the legislative history of Sarbanes-Oxley and the congressional intent underlying the statute. As the plaintiffs note, the whistleblower provisions of Sarbanes-Oxley and AIR21 were modeled on the Surface Transportation Assistance Act of 1978 (STAA), 49 U.S.C. § 2305(a), (b). See H.R.Rep. No. 108-167(I) (1999) ("There are currently over a dozen Federal laws protecting whistleblowers . . . [f]or example, section 2305 of the Surface Transportation Assistance Act of 1978 . . ."). The STAA allows the Secretary to issue orders of preliminary reinstatement upon finding reasonable cause, and those orders are not stayed by the filing of objections. In Martin v. Yellow Freight System, Inc., 983 F.2d 1201 (2d Cir.1993), the Court of Appeals for the Second Circuit held that the district court had authority to enforce an order of reinstatement by the ALJ, concluding that such a holding was consistent with the congressional intent to protect whistleblowers. Id. at 1203. The Court held that although the statute did not specifically provide for enforcement of orders issued by an ALJ, an order is contemplated by the statute "where it provides for hearings of objections to preliminary orders." Id. at 1203.
According to the plaintiff, the fact that AIR21 is based upon the STAA demonstrates that Congress intended to provide the same type of protection and enforcement of preliminary orders of reinstatement as was provided under the STAA. However, the court concludes that comparison of AIR21 and the STAA supports a contrary construction of the statute. The STAA specifically provides that the Secretary can bring a civil action in federal district court to enforce an order issued under 49 U.S.C. § 31105(b). That section includes both preliminary orders and final orders. See 49 U.S.C. § 31105(b). AIR21 provides solely for enforcement of final orders. See supra; 49 U.S.C. § 42121(b)(5), (6). Comparison of these two statutes demonstrates that Congress did not intend AIR21 to grant jurisdiction to the district court to enforce preliminary orders. Had Congress so intended, it could have made provision for the enforcement of preliminary, orders, as it did in the STAA. See Bechtel, 448 F.3d at 474 n. 7 ("In explicitly authorizing district court jurisdiction over actions brought to enforce preliminary orders, the STAA thus demonstrates that Congress knew how to provide expressly for such jurisdiction when it thought desirable.").
Furthermore, the court's conclusion that it has not been granted jurisdiction to enforce preliminary orders is consistent with the efficient administration of justice. As noted in Bechtel, a preliminary order could be overturned by the ARB or by the court reviewing the ARB's order. 448 F.3d at 474. The lack of authority of the district court to immediately enforce preliminary orders of reinstatement while an appeal is pending before the ARB ensures that appeals go through all levels of the administrative process before reaching federal court. Id. If they did not, "immediate enforcement at each level could cause a rapid sequence of reinstatement and discharge, and a generally ridiculous state of affairs." Id. As the United States Court of Appeals for the Fourth Circuit has noted, the filing of an enforcement action with the district court under 18 U.S.C. § 1514A(b) vests jurisdiction in the district court. See Stone v. Duke Energy Corp., 432 F.3d 320 (4th Cir.2005) (holding that after a complaint was filed in the district court pursuant to 18 U.S.C. § 1514A(b), ALJ. was deprived of the jurisdiction to enter an order). At that point, the ALJ before whom an appeal is pending is divested *559 of jurisdiction. Id. Similarly, the court concludes that it cannot have jurisdiction to enforce a preliminary order of reinstatement of the ALJ while a review of that order is pending before the ARB, as this procedure could lead to inconsistent and confusing result.[7]
Finally, the court acknowledges that the current situation represents a departure from the adjudication scheme envisioned by Congress. Sarbanes-Oxley was established to protect against the chilling effect of retaliation on whistleblowers by providing a remedy of reinstatement in a short amount of time. As a result, Congress set forth specific procedures to ensure that complaints would be quickly adjudicated by the Department of Labor, and that appeals within the administrative process would likewise progress quickly, taking a matter of days. Although this was the intent of Congress, the court recognizes that the Secretary has not complied with this mandate. Over eighteen months after the ALJ has issued his preliminary order of reinstatement, Welch has still not received a final administrative adjudication of his status. The court agrees that the delay in the administrative process has been inordinate.
However, even in this case, Welch has not been left without recourse. Title 18, section 1514A(b)(1) provides for a remedy to overcome delay of the Secretary. That section confers jurisdiction upon the district court to review a case de novo "if the Secretary has not issued a final decision within 180 days of the filing of the complaint and there is no showing that such delay is due to the bad faith of the claimant." 18 U.S.C. § 1514A(b)(1)(B).
Based on the plain language of the statute, the court concludes that it does not have jurisdiction to enforce the preliminary order of the ALJ. The court's construction is further supported by the general principle that federal courts can only review final agency determinations, by the comparison of AIR21 to provisions of the STAA, and by the need to promote the efficient administration of justice. Accordingly, the court will grant the defendants' motion to dismiss.
CONCLUSION
Under our constitutional scheme and Supreme Court precedent, this court is required to strictly interpret a statutory grant of subject matter jurisdiction rather than to overread a congressional enactment. It is not for the court to fashion a remedy, even in those circumstances in which principles of fairness might counsel intervention, when Congress has chosen not to provide for the form of redress sought by the plaintiff.
For the reasons stated, the defendants' motion to dismiss will be granted and the plaintiffs' petition to enforce the order of reinstatement will be denied. An order in conformity will be entered this day. The court's opinion should not be read as expressing any view as to the merits of plaintiffs claim of retaliation.
The Clerk is directed to send certified copies of this Memorandum Opinion and the accompanying Order to all counsel of record.
ORDER
This case is before the court on the defendants' motion to dismiss. For the reasons stated in a Memorandum Opinion filed this day, it is hereby
*560 ORDERED
that defendants' motion to dismiss is GRANTED and plaintiffs' petition to enforce the order of the Department of Labor is DISMISSED.
The Clerk is directed to strike the case from the active docket of the court, and to send a certified copy of this Order and the attached Memorandum Opinion to all counsel of record.
NOTES
[1] The motion to dismiss was filed by Cardinal Bankshares Corporation on August 2, 2006. Since that time, J. Howard Conduff, Jr.; William R. Gardner, Jr.; Kevin D. Mitchell; R. Leon Moore; A. Carole Pratt; Dorsey H. Thompson; and G. Harris Warner, Jr., have been joined as defendants, and counsel for these defendants presented argument on the motion to dismiss at the hearing.
[2] At the time of the court's earlier consideration of this matter, there was also some uncertainty as to whether the order should be deemed "preliminary" or "final."
[3] The American Association of Bank Directors has filed a memorandum of law in support of the motion to dismiss. While informative, the brief is primarily concerned with policy considerations and has little bearing on the court's decision based upon statutory construction.
[4] Title 18, section 1514A(b)(1)(B) is not at issue in this case, as Welch has not applied to this court seeking de novo review.
[5] The statute does not explicitly discuss orders issued by the AU. The precise procedures for appeal of orders by OSHA are set forth in 29 C.F.R. § 1980.106 et seq. The fact that the order issued by the AU is not discussed in the statute does not impact the court's conclusion, however, as the enforcement provisions in paragraphs (5) and (6) refer only to the final order issued by the ARB, and do not provide for enforcement in the district court of any preliminary orders preceding this final order.
[6] In the interim between this court's decision in Welch v. Cardinal Bankshares Corp., 407 F.Supp.2d 773, 777 (W.D.Va.2006), and the filing of the instant case, the United States Court of Appeals for the Second Circuit decided Bechtel. Although Bechtel is distinguishable from this case in a number of ways and the Court did not issue a majority opinion, this court finds portions of that opinion instructive in interpreting AIR21, SOX, and the accompanying regulations. Bechtel involved an appeal of a preliminary order of reinstatement issued by OSHA. 448 F.3d at 470-71. Judge Jacobs concluded that § 1514A did not confer judicial enforcement power over preliminary orders of reinstatement. Id. at 475. Judge Leval concurred in the judgment, finding that due process requirements were not satisfied, but failing to answer the question of whether the court had the power to enforce a preliminary order of reinstatement. Id. at 476. Judge Straub, however, concluded that the court did have jurisdiction to enforce a preliminary order of reinstatement. Id. at 490.
[7] Adding to the potential for inconsistent and confusing results is the intervening allegation by the defendant that the plaintiff would have been discharged in any event based upon other circumstances discovered after the discharge. This assertion could change the factual posture of the case.
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609 F.Supp. 863 (1985)
Rose ALDRICH, Plaintiff,
v.
Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.
Civ. No. 83-0198-B.
United States District Court, D. Maine.
May 29, 1985.
*864 Richard A. Estabrook, Bangor, Me., for plaintiff.
Timothy C. Woodcock, Asst. U.S. Atty., William H. Browder, Asst. U.S. Atty., Bangor, Me., for defendant.
ORDER GRANTING AWARD OF COUNSEL FEES
CYR, Chief Judge.
Plaintiff moves for an award of counsel fees pursuant to the Equal Access to Justice Act [EAJA], 28 U.S.C. § 2412(d)(1)(A).
Plaintiff filed an application for Supplemental Security Income benefits on February 10, 1982, alleging an inability to work since 1981 due to fainting spells, bladder dysfunction and ulcers. The application was denied initially and upon reconsideration. A de novo hearing was held on October 6, 1982, before a Social Security Administration administrative law judge [ALJ], and on December 30, 1982, the ALJ found that plaintiff did not have a "severe" impairment and that therefore she was not disabled. On March 24, 1983 the ALJ's decision became the "final decision" of the Secretary upon its affirmance by the Appeals Council.
Plaintiff timely sought judicial review pursuant to 42 U.S.C. § 1383(c)(3) and on January 27, 1984 the court remanded the case to the Secretary for further administrative proceedings. Aldrich v. Heckler, No. 83-0198-B (D.Me.1984) [unpublished order]. The court found that in deciding that plaintiff did not suffer from a severe mental impairment, the ALJ improperly rejected, without explication, uncontradicted medical evidence that plaintiff suffered from conversion hysteria with seizures of a degree that would affect her ability to work. The court rejected the ALJ's characterization of the evidence as "speculative" and observed that in light of the available evidence in the record "pointing to the possible, if not probable, presence of so many serious impairments, both physical and mental .., [and] considering the utterly destitute circumstances of this plaintiff, the failure to develop the record at the Secretary's expense ... was a dereliction of duty." Order, at 9, 11.
On March 10, 1984, prior to any further proceedings on remand, plaintiff died. On August 30, 1984 the Appeals Council vacated its prior decision denying benefits and entered its order awarding benefits from the date of application to the date of death. The parties entered into a stipulation of dismissal on September 13, 1984, formally concluding the action.
Enacted in 1980, the EAJA authorizes an award of fees and expenses to parties who prevail against the United States, unless the government's position was "substantially justified" or "special circumstances make an award unjust." 28 U.S.C. § 2412(d)(1)(A). Applicable to actions seeking judicial review of the administrative denial of social security benefits,[1]*865 see Martin v. Heckler, 754 F.2d 1262, 1264 & n. 2 (5th Cir.1985) [and cases cited], the purpose of the EAJA is to reduce the danger that challenges to unreasonable governmental action would be deterred by the high cost of litigating against the government. H.R.Rep. No. 1418, 96th Cong., 2d Sess. 9-10, reprinted in 1980 U.S.Code Cong. & Ad.News 4953, 4984-88.
The determinative issue on the motion for counsel fees under the EAJA is whether the Secretary's position, i.e., the Secretary's decision denying benefits, see Cornella v. Schweiker, 728 F.2d 978, 983 (8th Cir.1984), was substantially justified,[2] which essentially turns upon the reasonableness in law and fact of the action taken. On this issue the government bears the burden. Washington v. Heckler, 756 F.2d 959, 961 (3d Cir.1985); Wolverton v. Heckler, 726 F.2d 580, 583 (9th Cir.1984). Although an adverse decision on the merits does not preclude a finding of substantial justification, Martin v. Heckler, 754 F.2d at 1264, the Secretary's position is unreasonable where she presents no evidence to support her position, e.g., Hicks v. Heckler, 756 F.2d 1022, 1025 (4th Cir.1985), or where she applies an erroneous legal standard, see Washington v. Heckler, 756 F.2d at 967-68; Howard v. Heckler, 581 F.Supp. 1231, 1233 (S.D.Ohio 1984). Similarly, substantial justification does not mean "non-frivolous," McDonald v. Schweiker, 726 F.2d 311, 316 (7th Cir.1983), and will not be found where the Secretary merely relies on "some evidence" of nondisability, see Tressler v. Heckler, 748 F.2d 146, 150 (3d Cir. 1984). Rather, to meet her burden the Secretary must make a "strong showing" that her position was justified. Washington v. Heckler, 756 F.2d at 961; Cornella v. Schweiker, 728 F.2d at 982 & 983 n. 9. But see Guthrie v. Schweiker, 718 F.2d 104, 108 (4th Cir.1983) [Secretary's position is substantially justified although she does no more than rely on an arguably defensible administrative record].
Upon review and consideration of the entire record the court finds that the position of the Secretary was not substantially justified.
The principal piece of medical evidence pertaining to plaintiff's various physical and mental impairments was the medical report of Dr. Leadley, a specialist in internal medicine. Dr. Leadley determined that plaintiff had a psychiatric problem, which probably was the result of an inadequate personality disorder with hysterical features and chronic anxiety with paresthesias. Dr. Leadley offered this assessment based on physical examinations of the plaintiff, as well as on his personal observations of two of plaintiff's "seizures" or "spells," which he described in great detail. At the hearing before the ALJ, Dr. Ordway, a board-certified psychiatrist serving as medical advisor, testified that the description of plaintiff's spells provided by Dr. Leadley "certainly is typical of hysterical conversion spells or seizures." Dr. Ordway also testified that based on Dr. Leadley's personal observations, plaintiff's medical history and plaintiff's description of her symptoms, which were also described in the testimony of plaintiff's husband, plaintiff met the listed impairment for functional nonpsychotic disorders set forth in 20 C.F.R. Part 404, Subpart P, Appendix I, § 12.04.
The ALJ rejected, as "speculative," Dr. Leadley's report and Dr. Ordway's testimony regarding plaintiff's seizure disorder, in that their conclusions were not supported by the requisite clinical and laboratory findings. The Secretary asserts that she reasonably argued that the report of Dr. Leadley was not supportive of a finding that plaintiff suffered from a severe mental impairment, and that the ALJ's characterization of Dr. Ordway's testimonial diagnosis, as "speculative," was not unreasonable given the absence of firm objective findings.
*866 The court's decision remanding this case makes clear that the Secretary's determination of nonseverity was not reasonable in law or in fact. There was no evidence in the record contraindicating Dr. Ordway's medical assessment and diagnosis, yet without asking any but the most open-ended questions of Dr. Ordway the ALJ simply concluded that Dr. Ordway's diagnosis was "speculative." In finding that there was no reason that Dr. Ordway's testimonial diagnosis did not constitute a medically acceptable clinical diagnostic technique, as contemplated by the Secretary's regulations, see 20 C.F.R. § 416.928(b); see also 42 U.S.C. § 1382c(a)(3)(C), the Court observed:
Dr. Leadley is an internist, not a psychiatrist like Dr. Ordway. Both Dr. Leadley, in his apparently disparaging description of the spells he observed (and then in his description of plaintiff's falling asleep in his waiting room), and the ALJ, in his quotation of Dr. Leadley's description of these spells, appear to suggest that plaintiff may have been feigning these spells. Yet Dr. Leadley's diagnosis does not question that plaintiff suffers from `episodic spells of unknown etiology,' only their etiology is questioned, see Tr. at 144. The ALJ does not base his finding (that there was insufficient medical evidence) on plaintiff's incredibility, but on the basis that Dr. Leadley's diagnosis (and Dr. Ordway's as well) is `speculative.' The fact is that Dr. Leadley observed these spells with his own eyes in his own office, and diagnosed them as `episodic spells,' and `speculated' (reasonably enough for an internist not trained in psychiatry) as to their etiology. Dr. Ordway, on the other hand, testified, as a medical advisor (board-certified psychiatrist) at the request of the Secretary, that he did believe the plaintiff suffers from such spells, see Tr. at 64-65, that the spells are `certainly ... typical of hysterical conversion spells or seizures,' see Tr. at 64, which was one of the possible diagnoses advanced by Dr. Leadley as well, see Tr. at 144. Furthermore, the ALJ seems to have believed plaintiff's and her husband's extensive testimony about these spells. [See Tr. at 55: `ALJ: Counsel I have no further belief problems if that's what you're going to say.']
Order at 14, n. 4. Clearly, Dr. Leadley provided the ALJ and Dr. Ordway with "observable facts that can be medically described and evaluated," 20 C.F.R. § 416.928(b), and hence provided the requisite "signs" from which Dr. Ordway could diagnose a mental impairment.[3] Yet despite this evidence and the ALJ's apparent acceptance of plaintiff's description of her "spells," the ALJ substituted his own lay conclusion in place of the medical diagnoses of two board-certified professionals. At the very least Dr. Ordway's conclusion that plaintiff met the Secretary's listing of impairments for functional nonpsychotic disorders should have alerted the ALJ to a need to explore further the basis for Dr. Ordway's findings.[4]
The court found the conclusory findings of the ALJ objectionable not only because the ALJ failed to take advantage of the opportunity to question Dr. Ordway, but also because the ALJ failed to develop the record properly in the face of evidence pointing to the possible, if not probable, presence of so many serious impairments, both physical and mental. The Secretary contends that it was not unreasonable to have argued that a represented claimant had an obligation to request additional consultative examinations in furtherance of the claimant's duty to submit medical evidence.
Responding to the Secretary's contentions, the court observed that although a *867 claimant is responsible for submitting medical evidence showing the existence of an impairment, see 20 C.F.R. §§ 416.912, 416.913(d), there is nothing in the Secretary's regulations which imposes an affirmative duty on the claimant to request additional consultative examinations. The regulations do provide that where the medical evidence is not sufficient to permit the Secretary to determine whether the claimant is disabled, the Secretary can request and will pay for additional tests. Even assuming with respect to plaintiff's physical maladies that plaintiff can somehow be charged with failing to submit adequate evidence or that her representative had some affirmative duty to request additional tests, it was unreasonable for the ALJ not to request additional tests for the purpose of obtaining "more detailed medical findings" or to obtain "technical or specialized medical information," 20 C.F.R. § 416.917(b)(1), (2), about plaintiff's mental condition, given plaintiff's testimony and that of her husband, the medical report of Dr. Leadley, the testimony of Dr. Ordway, and plaintiff's obviously destitute financial circumstances.
Because hearings on disability claims are not adversary proceedings, the Secretary shares some affirmative duty to develop the record and to ensure that all the necessary and relevant information is produced, irrespective of whether the claimant is represented. The ALJ's unexplicated conclusory determination that relevant testimony is "speculative" and his failure to ask Dr. Ordway any but the most open-ended questions fall far short of fulfilling the Secretary's responsibility. Furthermore, in light of Dr. Ordway's uncontroverted testimony it clearly cannot be fairly argued that plaintiff's representative was under any obligation to request additional testing of plaintiff's mental impairment.
Accordingly, and for the reasons set forth above, the court finds that the position of the Secretary was not substantially justified. There being no special circumstances making an award of counsel fees and costs unjust, and it appearing that the award is in all respects reasonable and appropriate in the circumstances,[5] it is ORDERED that judgment be entered in favor of Richard Estabrook, Esquire, in the sum of $2,114.
NOTES
[1] Administrative proceedings before the Social Security Administration are excluded from coverage under the EAJA. McGill v. Secretary of Health and Human Services, 712 F.2d 28, 30 (2d Cir.1983), cert. denied, ___ U.S. ___, 104 S.Ct. 1420, 79 L.Ed.2d 745 (1984).
[2] The Secretary does not dispute that plaintiff was a "prevailing party" or that the motion for counsel fees was timely under the EAJA.
[3] In the case of mental impairments it consistently has been recognized that precise diagnostic techniques are not always required to establish the existence of a mental impairment. See, e.g., Hawkins v. Heckler, 600 F.Supp. 832, 837 (D.Kan.1985) [and cases cited].
[4] As the court observed, plaintiff's representative may have decided to ask no questions of Dr. Ordway because he may well have believed that Dr. Ordway had made his client's case. Order at 9.
[5] The Secretary erroneously asserts that plaintiff's award of counsel fees should be reduced since his request for fees at the rate of $75 per hour is excessive. Counsel's affidavit in support of his motion requests fees at the rate of $60 per hour, which is reasonable.
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NO. 06-14-00131
FILED IN
CORNELL MCHENRY, § 6th COURT
ON APPEAL OF APPEALS
FROM THE
TEXARKANA, TEXAS
Appellant §
3/25/2015 10:35:00 AM
§ 202ND JUDICIAL DISTRICT
DEBBIE AUTREY
VS. § Clerk
§
STATE OF TEXAS, § COURT OF BOWIE COUNY
Appellee § TEXAS
MOTION FOR LEAVE FOR THE BELATED FILING OF APPELLEE’S
BRIEF
TO THE HONORABLE JUDGE OF SAID COURT:
COMES NOW the State of Texas by and through her below named Criminal
District Attorney and for its Motion for Belated Filing of Appellee’s Brief states as
follows:
I.
1. This case is pending from the 202ND Judicial District of Bowie County, Texas.
2. The case is styled State of Texas v. Cornell McHenry, Cause No. 12F0117-202.
3. Appellant was found guilty to the offense of Possession of a Controlled Substance
and sentenced to twenty-five (25) years in the Institutional Division of the Texas
Department of Criminal Justice and a $5,000 fine.
4. Appellant’s Brief was filed on January 21, 2015 making the State’s Brief
originally due on or about February 20, 2015.
6. The State has previously requested one extension of time for filing a brief, making
State’s Brief due on March 23, 2015
7. Appellee has now completed Appellee’s brief and requests leave of this Court for
the belated filing of the same. Appellee’s completed brief is filed simultaneously
with this Motion.
II.
The Brief was not timely prepared in this matter due to the press of the business,
both trial and appellate. Said business includes, but is not limited to, the following
since Appellant’s brief was filed:
Pre-trial conferences and trial preparation on State of Texas v. Antonio
Cochran, 14F0151-202-Sexual Assault, with jury selection and trial beginning
January 20, 2015. Trial lasted from January 20-21, 2015.
Preparation for the trial and pre-indictment dockets for the 202nd District
Court on February 2, 2015.
Preparation and attendance at the Grand Jury Proceedings on February 5,
2014.
Preparation for the trial and pre-indictment dockets for the 202nd District
Court on February 13, 2015.
Pre-trial conferences and trial preparation on State of Texas v. Pryce Brooks,
13F0871-202, Sexual Assault of a Child, with jury selection scheduled for
February 17, 2015. Defense motion for continuance filed and granted on
February 13, 2015.
Preparation of brief on Lyndon Anderson, 06-14-00168-CR, which due on
February 19, 2015 and was filed on February 18, 2015.
Jury trial on State of Texas v. Pryce Brooks, February 17-19, 2015.
Preparation for the trial and pre-trial dockets for the 202nd District Court on
March 2, 2015.
Preparation for the trial and pre-trial dockets for the 202nd District Court on
March 16, 2015.
Preparation for the trial of State v. Charles Jones, set for trial March 16, 2015.
III.
This motion is made in good faith and not for purposes of delay.
PRAYER
WHEREFORE, the State respectfully requests this Court permit leave for the belated
filing of Appellee’s Brief.
Respectfully submitted,
__/s/ Lauren N. Sutton______
LAUREN N. SUTTON
Texas Bar No. 24079421
601 Main Street
Texarkana, TX 75501
ASSISTANT DISTRICT
ATTORNEY
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and foregoing Motion to
Extend Time for Filing State’s Brief was forwarded to Mr. Bart Craytor, counsel
for Appellant, on this the 24th day of March 2015.
__/s/ Lauren N. Sutton______
LAUREN N. SUTTON
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16-1106
Ray v. Weit
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@). A PARTY CITING TO A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of
New York, on the 8th day of September, two thousand seventeen.
PRESENT:
ROSEMARY S. POOLER,
GERARD E. LYNCH,
Circuit Judges,
PAUL A. ENGELMAYER,*
District Judge.
_____________________________________
Shelda Ray,
Plaintiff - Appellant,
v. 16-1106
Brian Weit, New York City Department of Education,
New York City Department of Education,
Defendants - Appellees.
_____________________________________
FOR PLAINTIFF -APPELLANT: Shelda Ray, pro se, Brooklyn, NY.
* Judge Paul A. Engelmayer, of the United States District Court for the Southern District of
New York, sitting by designation.
1
FOR DEFENDANTS -APPELLEES: Eric Lee, Assistant Corporation Counsel, Scott
Shorr, Assistant Corporation Counsel, for
Zachary W. Carter, Corporation Counsel of the
City of New York, New York, NY.
Appeal from a judgment of the United States District Court for the Eastern District of New
York (Mauskopf, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED IN PART, VACATED IN
PART, AND REMANDED.
Appellant Shelda Ray, proceeding pro se, appeals the district court’s judgment dismissing
her complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6), for employment
discrimination based on race, gender, and disabilities under Title VII of the Civil Rights Act and
the Americans With Disabilities Act (“ADA”). In September 2016, this Court denied Appellant’s
motion for in forma pauperis status and dismissed her appeal as to all claims other than those
brought under the ADA based on Appellees’ failure to accommodate Appellant’s alleged
disabilities. We assume the parties’ familiarity with the underlying facts, the procedural history
of the case, and the issues on appeal.
This Court reviews de novo the dismissal of a complaint pursuant to Rule 12(b)(6).
Forest Park Pictures v. Universal Television Network, 683 F.3d 424, 429 (2d Cir. 2012). The
complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although all allegations contained in the complaint
are assumed to be true, this tenet does not apply to legal conclusions. Ashcroft v. Iqbal, 556 U.S.
2
662, 678 (2009). Courts should interpret pro se complaints liberally to raise the strongest claims
they suggest. Hill v. Curcione, 657 F.3d 116, 122 (2d Cir. 2011).
The ADA forbids an employer from discriminating against a qualified individual on the
basis of his or her disability. 42 U.S.C. § 12112(a). “Discriminat[ion]” includes failure to make
“reasonable accommodations to the known physical or mental limitations of an otherwise
qualified individual with a disability” unless the employer “can demonstrate that the
accommodation would impose an undue hardship on the operation of [its] business.” 42 U.S.C.
§ 12112(b)(5)(A). To prove a claim for failure to accommodate, a plaintiff must show that she is
disabled under the ADA, her employer had notice of the disability, she could perform the essential
functions of her job with reasonable accommodations, and her employer refused to make those
accommodations. McBride v. BIC Consumer Prods. Mfg. Co., 583 F.3d 92, 97 (2d Cir. 2009). It
is generally the employee’s responsibility to inform her employer that she needs an
accommodation. Graves v. Finch Pruyn & Co., 457 F.3d 181, 184 (2d Cir. 2006). The ADA
contemplates that employers will engage in an “interactive process,” working with their
employees to assess whether a disability can be reasonably accommodated. Stevens v. Rite Aid
Corp., 851 F.3d 224, 231 (2d Cir. 2017).
Under the ADA, a disability is a physical or mental impairment that substantially limits one
or more of the individual’s “major life activities,” a record of such impairment, or being regarded
as having such an impairment. 42 U.S.C. § 12102(1). Major life activities include, as relevant
here, “seeing,” “walking,” “standing,” and “breathing.” 42 U.S.C. § 12102(2)(A). An
impairment meets this standard if it substantially limits an individual’s major life activity “as
compared to most people in the general population.” 29 C.F.R. § 1630.2(j)(1)(ii).
3
Review of the record and relevant case law reveals that the district court properly
dismissed Appellant’s failure to accommodate claims based on her alleged asthma and podiatric
problems because the accommodations that Appellant sought for these disabilities—a locker and
work area in locations that were not cold or damp and did not require her to climb stairs—had
nothing to do with Appellant’s ability to perform the essential functions of her job or with the
reason she was terminated. Rather, Appellant was terminated solely because of her chronic and
excessive tardiness. She claimed the tardiness was due to her visual impairment and Appellees’
failure to grant her request for a modified work schedule—one that would allow her to start her
work day later in the morning and leave later in the afternoon, so that she did not have to leave her
house before the sun rose.
As to that impairment, the district court erred in finding that the major life activity that was
limited by Appellant’s 99% loss of vision in one eye was either working or commuting, that
Appellant’s vision did not substantially limit her ability to work, and that commuting was not a
major life activity. Rather, the major life activity limited by Appellant’s vision loss was “seeing.”
29 C.F.R. § 1630.2(i)(1)(i). And, although Appellant did not specifically allege how the 99% loss
of vision in one eye affected her ability to see before the sun rose, enough is alleged to raise a
plausible claim as to whether Appellant’s limited vision impacted her ability to arrive at work on
time. The details of exactly how, and to what extent, her impediment affected her ability to arrive
at work at 8:30 AM may await discovery. See Bell Atlantic Corp., 550 U.S. at 556 (to survive a
motion to dismiss, a complaint must merely provide enough facts to raise a reasonable expectation
that discovery will reveal the evidence needed to support the claim).
4
As to Appellant’s request for an accommodation for her vision loss, reasonable
accommodations under the ADA include “job restructuring” and “part-time or modified work
schedules.” 42 U.S.C. § 12111(9)(B). This Court has held that “[p]hysical presence at or by a
specific time is not, as a matter of law, an essential function of all employment.” McMillan v.
New York City, 711 F.3d 120, 126 (2d Cir. 2013). Thus, reasonable accommodations can include
a modified work schedule. Id. at 127; Rodal v. Anesthesia Group of Onondaga, P.C., 369 F.3d
113, 120 (2d Cir. 2004) (a modified work schedule may constitute a reasonable accommodation in
some circumstances, if it does not involve the elimination of an essential job function).
Appellees do not argue to the contrary. Rather, they argue only that Appellant’s visual
impairment/failure to accommodate claim should nevertheless fail because this Court can take
judicial notice that her visual impairment was not the reason why she could not arrive at work on
time. According to Appellees, although Appellant claimed that she could not leave the house
before the sun rose because of her visual impairment, the record showed that she needed to be at
work by 8:30 a.m., it took her no more than one hour to travel to work, and the sun always rose
before 7:30 a.m. during the 2012-13 school year.
However, in opposition to the motion to dismiss, Appellant maintained that she needed to
leave her house by 6:30 a.m. to make it to work on time. We observe that, although it may have
taken Appellant slightly less than one hour to walk to and then ride on public transportation, that
apparently did not account for any time spent waiting for the bus or train. In any event, a factual
dispute as to how long it took Appellant to commute to work could not have been resolved on a
motion to dismiss under Rule 12(b)(6). See Financial Guar. Ins. Co. v. Putnam Advisory Co.,
5
783 F.3d 395, 405 (2d Cir. 2015) (resolution of a factual dispute is inappropriate on a motion to
dismiss).
Accordingly, we VACATE the judgment of the district court to the extent it dismissed
Appellant’s failure to accommodate claim based on her visual impairment and REMAND for
further proceedings on that claim, but we AFFIRM the judgment in all other respects.
FOR THE COURT:
Catherine O=Hagan Wolfe, Clerk
6
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978 F.2d 1264
NOTICE: Eighth Circuit Rule 28A(k) governs citation of unpublished opinions and provides that they are not precedent and generally should not be cited unless relevant to establishing the doctrines of res judicata, collateral estoppel, the law of the case, or if the opinion has persuasive value on a material issue and no published opinion would serve as well.Kenneth E. MARTENSEN; Mary L. Martensen, Appellants,v.UNITED STATES TRUSTEE, Appellee.
No. 92-1874.
United States Court of Appeals,Eighth Circuit.
Submitted: October 12, 1992.Filed: October 27, 1992.
Before MAGILL, LOKEN, and HANSEN, Circuit Judges.
PER CURIAM.
1
Kenneth and Mary Martensen appeal the district court's1 order upholding the bankruptcy court's2 dismissal of their Chapter 11 petition.
2
Having carefully reviewed the record, we conclude that the district court properly affirmed the bankruptcy court's order. The arguments raised by the Martensens on appeal are meritless. A proceeding to dismiss a Chapter 11 petition is a "core proceeding." See In re Gardner, 913 F.2d 1515, 1518 (10th Cir. 1990) ("[c]ore proceedings are proceedings which have no existence outside of bankruptcy"). A bankruptcy court's dismissal of a Chapter 11 petition is authorized by statute and is within the court's limited jurisdiction. 11 U.S.C. § 1112(b) (court may dismiss Chapter 11 case if it is in best interest of creditors and estate and cause is shown); 28 U.S.C. § 157(b)(1) ("[b]ankruptcy judges may ... determine all cases under title 11"); Rudd v. Laughlin, 866 F.2d 1040, 1041 (8th Cir. 1989) (bankruptcy court has jurisdiction to administer case in accordance with Bankruptcy Code). The ability to file bankruptcy under federal law is not a vested personal right. McLellan v. Mississippi Power and Light Co., 545 F.2d 919, 925 n.22 (5th Cir. 1977). See also, In re Wood, 866 F.2d 1367, 1372 (11th Cir. 1989) (per curiam).
3
Accordingly, we affirm.
1
The Honorable Warren K. Urbom, Senior United States District Judge for the District of Nebraska
2
The Honorable John C. Minahan, Jr., United States Bankruptcy Judge for the District of Nebraska
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853 So.2d 584 (2003)
Gilbert ARAGON, Appellant,
v.
STATE of Florida, Appellee.
No. 5D02-2664.
District Court of Appeal of Florida, Fifth District.
September 5, 2003.
*585 Victoria L. Bloomer of Escobar, Ramirez, & Associates, P.A., Tampa, for Appellant.
Charles J. Crist, Jr., Attorney General, Tallahassee, and Robin A. Compton, Assistant Attorney General, Daytona Beach, for Appellee.
SAWAYA, C.J.
Gilbert Aragon appeals his convictions and sentences for first-degree felony murder with a firearm, attempted second-degree murder with a firearm and attempted robbery with a firearm. Of the several issues Aragon raises in these proceedings, the two that merit discussion are: 1) whether Aragon is entitled to a new trial *586 because the trial court erred in denying his motions to strike two jurors for cause; and 2) whether the trial court erred in denying Aragon's motion to interview a juror. We affirm on these and all other issues raised by Aragon.
In order to resolve these two issues, it is not necessary to expound upon the events surrounding the criminal episode that led to Aragon's convictions. Because the issues involve procedural matters surrounding the jury selection process and the polling of the jury subsequent to the verdict, we will proceed with our discussion of the issues in the order previously presented.
Denial of the Motions to Strike Jurors for Cause
Aragon strenuously argues that the trial court erred in denying his motions to strike two jurors for cause and, therefore, he is entitled to a new trial. In Barnhill v. State, 834 So.2d 836 (Fla.2002), cert. denied, ___ U.S. ___, 123 S.Ct. 2281, 156 L.Ed.2d 134 (2003), the court explained the standard that applies to determine whether a juror is competent to serve:
The test for determining juror competency is whether the juror can set aside any bias or prejudice and render a verdict solely on the evidence presented and the instructions on the law given by the court. A juror must be excused for cause if any reasonable doubt exists as to whether the juror possesses an impartial state of mind. A trial court has great discretion when deciding whether to grant or deny a challenge for cause based on juror incompetency. The decision to deny a challenge for cause will be upheld on appeal if there is competent record support for the decision. In reviewing a claim of error such as this, we have recognized that the trial court has a unique vantage point in the determination of juror bias. The trial court is able to see the jurors' voir dire responses and make observations which simply cannot be discerned from an appellate record. It is the trial court's duty to determine whether a challenge for cause is proper.
Id. at 844 (citations omitted). Based on this standard, even if we assume that Aragon is correct that the trial court erred in denying his cause strikes, we are prohibited from reviewing this error because Aragon failed to properly preserve the error for review by this court.
In order to preserve for appellate review a trial court's improper denial of a motion to strike a prospective juror for cause, the complaining party must establish that: 1) a motion to strike the juror for cause was timely made; 2) the trial court improperly denied the motion; 3) the complaining party exhausted all peremptory challenges; 4) a request for additional peremptory challenges was made; 5) the jurors to be stricken with the additional challenges were identified; 6) the request for additional challenges was denied; and 7) the objectionable jurors actually served on the jury.[1] In addition, the error of refusing to strike for cause must be brought to the trial court's attention once more before the jury is sworn.[2]
*587 The State contends that Aragon failed to properly preserve any error regarding the denial of Aragon's motions to strike for cause because after he exhausted his peremptory challenges, he failed to request additional challenges. Aragon argues that he did make such a request when the following exchange took place between his counsel, Mr. Couture, and the trial court:
Mr. Couture: Your Honor, no, I do not have a challenge to Catalano; but just to make the record clear, we've exhausted our peremptory challenges.
The Court: Right.
Mr. Couture: And if we couldif some of our cause challenges would have been granted, we would have excused jury [sic] number 25, William Layman.
The Court: All right. Okay. Thank you. Bring the jury in please.
In Carratelli v. State, 832 So.2d 850 (Fla. 4th DCA 2002), review denied, 848 So.2d 1153 (Fla.2003), a case analogous to the instant case, after the defendant exhausted all of his peremptory challenges and the state accepted the jury, the court addressed defense counsel: "`Those six jurors unless additional challenges from the defense, [defense counsel].'" Id. at 855. In response, defense counsel stated, "`Ifif there are others, I would challenge including Mr. Inman, and others, if you granted me more peremptories.'" Id. The court held that this statement "was neither a motion nor a request for additional peremptory challenges." Id. at 856. Here, Aragon's counsel stated that "[a]nd if we couldif some of our cause challenges would have been granted, we would have excused jury [sic] number 25, William Layman." If the statement made by defense counsel in Carratelli is not a request for additional peremptory challenges, the statement made by Aragon's counsel in the instant case certainly is not. Therefore, Aragon failed to properly preserve any error the trial judge may have made in denying his motions to strike for cause.
Denial of the Motion for Juror Interview
In order to be entitled to a juror interview, a defendant must present "sworn allegations that, if true, would require the court to order a new trial because the alleged error was so fundamental and prejudicial as to vitiate the entire proceedings." Johnson v. State, 804 So.2d 1218, 1225 (Fla.2001). If the defendant meets this burden, he "must establish actual juror misconduct [via] the juror interview." Baptist Hosp. of Miami, Inc. v. Maler, 579 So.2d 97, 100 n. 1 (Fla.1991); Miles v. State, 839 So.2d 814, 818 (Fla. 4th DCA 2003). If this burden is met, the defendant will be entitled to a new trial unless the state can show that the misconduct was harmless. Baptist Hosp.; Miles.
A juror interview is not permitted regarding inquiry into any matter that inheres in the verdict and relates to the jury's deliberations. § 90.607(2)(b), Fla. Stat. (2001) ("Upon an inquiry into the validity of a verdict or indictment, a juror is not competent to testify as to any matter *588 which essentially inheres in the verdict or indictment."); Marshall v. State, 854 So.2d 1235, 1240, n. 5, 2003 WL 21354775 (Fla. June 12, 2003); Reaves v. State, 826 So.2d 932 (Fla.2002); Johnson v. State, 593 So.2d 206, 210 (Fla.), cert. denied, 506 U.S. 839, 113 S.Ct. 119, 121 L.Ed.2d 75 (1992); Mitchell v. State, 527 So.2d 179, 181 (Fla.), cert. denied, 488 U.S. 960, 109 S.Ct. 404, 102 L.Ed.2d 392 (1988); State v. Goldwire, 762 So.2d 996 (Fla. 5th DCA 2000), review denied, 786 So.2d 1185 (Fla.2001).
In order to preserve the sanctity of jury deliberations, when determining whether a matter inheres in the verdict, the courts distinguish between external sources and internal sources that influence a jury's verdict. Marshall. The courts consistently agree that a jury interview may be granted regarding allegations of influence upon the jurors' deliberations arising from an overt prejudicial act or external sources, such as two or more jurors agreeing to disregard their oaths and instructions from the court; a juror receiving prejudicial information from outside the courtroom; a juror improperly approached by a party, his agent, or attorney; or a verdict determined by aggregation and average or by lot, game of chance, or other improper manner. Marshall; Reaves; Devoney v. State, 717 So.2d 501 (Fla.1998). On the other hand, inquiry may not be made regarding matters that inhere in the verdict such as the juror "`did not assent to the verdict; that he misunderstood the instructions of the Court; the statements of the witnesses or the pleadings in the case; that he was unduly influenced by the statements or otherwise of his fellow-jurors, or mistaken in his calculations or judgment, or other matter resting alone in the juror's breast.'" Marks v. State Rd. Dep't, 69 So.2d 771, 774-75 (Fla.1954) (quoting Wright v. Illinois & Miss. Tel. Co., 20 Iowa 195, 210 (1866)); see also Marshall; Devoney; Goldwire. As the court summarized in Marshall, "A juror is not competent to testify about matters inhering in the verdict, such as jurors' emotions, mental processes, or mistaken beliefs." Marshall, 854 So.2d at 1240.
In the instant case, Aragon alleges that when the jury was polled, one juror mentioned that she did not feel qualified to be there and that it was very difficult. Aragon also asserts that this juror "teared up." However, this contention does not imply that the jury was influenced by external sources or improper material, nor does it involve any agreement among the other jurors to disregard their oaths and ignore the law. Aragon's assertion, which involves a juror's feeling of inadequacy in making a very difficult decision in a serious case, relates to the juror's "emotions, mental processes, or mistaken beliefs," which are matters that inhere in the verdict.[3] Hence a juror interview is impermissible. Because Aragon has failed to properly make allegations of influence upon the jurors' deliberations arising from an overt prejudicial act or external sources, the trial court did not err in denying Aragon's request for a jury interview.
Aragon asserts that rule 4-3.5(d)(4) of the Rules Regulating the Florida Bar provides him the avenue to interview the juror without filing a motion and obtaining an order from the court. Rule 4-3.5(d)(4) prohibits a lawyer connected with the trial from initiating communication with any juror, except to determine whether the verdict may be subject to legal challenge.
*589 The rule specifically states that the lawyer "may not interview the jurors for this purpose unless the lawyer has reason to believe that grounds for such challenge may exist." Id. Although the Florida Supreme Court has not specifically addressed the issue regarding the propriety of interviews under this rule, the court seems to have given tacit approval of such interviews in cases involving postconviction relief proceedings, provided the procedure outlined in the rule is followed.[4]See Arbelaez v. State, 775 So.2d 909, 920 (Fla.2000); see also Vining v. State, 827 So.2d 201 (Fla. 2002); Johnson v. State, 804 So.2d 1218 (Fla.2001).
In Defrancisco v. State, 830 So.2d 131 (Fla. 2d DCA 2002), the court specifically held that a juror interview may be conducted under the rule if the movant's counsel provides sufficient notice under the rule and "had `reason to believe' the verdict might be subject to a legal challenge based on juror misconduct." Id. at 134. Here, Aragon's reason to believe that the verdict may be subject to a legal challenge is based on the juror's statement that she felt unqualified to make a difficult decision in a serious case and that she cried during the polling procedure. This is not misconduct by the juror and it does not form the basis of a reasonable belief that the verdict may be subject to legal challenge. See Bullard v. State, 324 So.2d 652, 654 (Fla. 1st DCA 1975) (indicating that in order to have a reason to believe that a verdict is subject to a legal challenge, there should be a "reason to believe that one or more of the jurors had violated their oath and disregarded the instructions of the court."), cert. denied, 336 So.2d 1180 (Fla.1976). Moreover, a juror crying during the polling process is not a reasonable ground to believe that the verdict may be subject to a legal challenge. Murray v. State, 356 So.2d 71 (Fla. 1st DCA 1978).
A trial represents the expenditure of valuable public and private resources. Jurors, as private citizens, are called upon to invest their time and energy in judicial proceedings for little financial remuneration with the expectation that fulfillment of their civic duty will be sufficient reward for their service. Summoned as they are from all walks of life, most jurors are not trained in the judicial process and many find it difficult when confronted for the first time with the niceties of the law and its array of procedures. The jurors hear the evidence and the legal instructions and then struggle to sort through it all as they search for the truth. Often times they must make extraordinarily difficult decisions in cases that have very serious consequences for all of the participants. To allow inquiry into the jurors' emotions and feelings of inadequacy as they go through this often difficult process is to expect something closer to perfection than they and our judicial system can legitimately be expected to give. Although there will always be disappointed litigants in search of a reason to undo what a jury has done, to allow improper inquiry of individual jurors in furtherance of that effort poorly serves *590 the ends of justice, obstructs finality in judicial proceedings, and cheapens the investment made by those who are willing to search for the truth through the judicial process and proclaim it through their verdict.
Conclusion
After Aragon exhausted his allotted peremptory challenges, he did not request additional challenges and, therefore, he failed to preserve any error the trial judge may have made in denying his motions to strike for cause. As to the second issue, Aragon has failed to establish that he was entitled to a juror interview. Accordingly we affirm.
AFFIRMED.
SHARP, W. and PALMER, JJ., concur.
NOTES
[1] Mendoza v. State, 700 So.2d 670, 674-75 (Fla.1997) (citing Trotter v. State, 576 So.2d 691, 692-93 (Fla.1990); Pentecost v. State, 545 So.2d 861, 863 n. 1 (Fla.1989)), cert. denied, 525 U.S. 839, 119 S.Ct. 101, 142 L.Ed.2d 81 (1998); see also Kearse v. State, 662 So.2d 677 (Fla.1995); Hill v. State, 477 So.2d 553 (Fla.1985); Jenkins v. State, 824 So.2d 977 (Fla. 4th DCA 2002), review denied, 842 So.2d 844 (Fla.2003); Chattin v. State, 779 So.2d 415 (Fla. 2d DCA 2000).
[2] Rimmer v. State, 825 So.2d 304 (Fla.), cert. denied, 537 U.S. 1034, 123 S.Ct. 567, 154 L.Ed.2d 453 (2002); Rodas v. State, 821 So.2d 1150, 1153-54 (Fla. 4th DCA 2002) ("The error must then be `called to the trial court's attention once more prior to the swearing of the jury, so that the court will be made aware that the objecting party is insisting on the objection, and so that the court will have a last clear chance to take corrective action if needed.'") (quoting Milstein v. Mut. Sec. Life Ins. Co., 705 So.2d 639, 640 (Fla. 3d DCA 1998) (relying on Joiner v. State, 618 So.2d 174 (Fla.1993))), review denied, 839 So.2d 700 (Fla.2003); Martin v. State, 816 So.2d 187, 188 (Fla. 5th DCA 2002) ("Jury selection issues are deemed waived after acceptance of the jury, unless the objection is renewed, or the jury is accepted subject to an earlier objections [sic]."); see also Berry v. State, 792 So.2d 611 (Fla. 4th DCA 2001); Gootee v. Clevinger, 778 So.2d 1005 (Fla. 5th DCA 2000), review denied, 794 So.2d 603 (Fla. 2001); Barnette v. State, 768 So.2d 1246 (Fla. 5th DCA 2000).
[3] Aragon does not allege that he has reason to believe that the juror was statutorily disqualified under section 40.013(1), Florida Statutes (2001), from serving on the jury.
[4] The rule requires that prior to conducting an interview, the lawyer must file a notice of intention to interview containing the names of the jurors to be interviewed. R. Regulating Fla. Bar 4-3.5(d)(4). A copy of the notice must be furnished to opposing counsel and the trial judge a reasonable time before the interview. Id. If an objection is made by the opposing party, the trial court is required to hear the objection to determine whether the moving party has reason to believe that grounds exist for a legal challenge to the verdict. Defrancisco v. State, 830 So.2d 131 (Fla. 2d DCA 2002). If the court overrules the objection, the movant may conduct the interview and, if it leads to additional information that would support a legal challenge to the verdict, counsel may then file an appropriate motion and supporting affidavits for the court to conduct a formal interview. Id.
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105 F.3d 1385
10 Fla. L. Weekly Fed. C 713
Theodore Augustus BASSETT, Jr., Petitioner-Appellant,v.Harry K. SINGLETARY, Jr., Secretary, Florida Department ofCorrections, Respondent-Appellee.
No. 95-2519.
United States Court of Appeals,Eleventh Circuit.
Feb. 20, 1997.
Steven H. Malone, Asst. Pub. Def., 15th Judicial Circuit, West Palm Beach, FL, for Petitioner-Appellant.
Kellie A. Nielan, Office of the Attorney General, Daytona Beach, FL, for Respondent-Appellee.
Appeal from the United States District Court for the Middle District of Florida.
Before HATCHETT, Chief Judge, DUBINA, Circuit Judge, and COHILL*, Senior District Judge.
PER CURIAM:
1
This case is an appeal by Theodore Augustus Bassett Jr. ("Bassett") from the denial by the district court of his Petition for Writ of Habeas Corpus. The case had been referred to a United States Magistrate Judge who recommended that the Writ be granted, but the district court rejected that recommendation and denied the Writ.
2
Bassett was convicted of two counts of first degree murder on January 17, 1980, and sentenced to death on both counts. The convictions and sentences were affirmed by the Florida Supreme Court. Bassett v. State, 449 So.2d 803 (Fla.1984). The Florida Supreme Court subsequently vacated the death sentences and ordered a new penalty phase. Bassett v. State, 541 So.2d 596 (Fla.1989). He was sentenced to consecutive life sentences on November 17, 1989.
3
The basis for the present petition is the denial of Bassett's Motion to Suppress his confession at his original trial.
4
During the investigation of the two murders, the court appointed private counsel to represent Bassett because his co-defendant was already represented by the public defender's office. At the time, Bassett was incarcerated on an unrelated felony charge. At the conclusion of the investigation, Bassett's counsel moved to withdraw since he would be leaving the area. The court granted the motion but did not immediately appoint new counsel. Bassett was not informed of his counsel's withdrawal.
5
The investigating officers approached Bassett in jail after his counsel had withdrawn. They advised Bassett of his Miranda rights, and he then asked to speak with his attorney. The officers told him his attorney had withdrawn, but they stated that they would contact another attorney for him. When the officers stood up to leave, Bassett said, "[w]ell, what do you want anyway?" The officers then told Bassett that they had discovered the bodies of the two victims and that Bassett's co-defendant had implicated him. This statement led to a two day confession. The officers continually gave Bassett Miranda warnings and obtained a signed waiver of rights form each day.1
6
Bassett asserts that the use of his confession at trial violated his rights under the Fifth, Sixth and Fourteenth Amendments. We look to the United States Supreme Court for guidance in deciding this issue.
7
In Edwards v. Arizona, 451 U.S. 477, 484, 101 S.Ct. 1880, 1884-85, 68 L.Ed.2d 378 (1981), the United States Supreme Court held that, once an accused has invoked his right to counsel, a valid waiver of that right cannot be established by showing only that he responded to a later police initiated interrogation after again being advised of his rights. An accused may not be subjected to further interrogation until counsel has been made available to him, unless the accused himself has initiated further communications with the police. Essentially, the Court held that a waiver of the right to counsel must not only be voluntary but must constitute a knowing and intelligent relinquishment of a known right or privilege. The Court stated that "[h]ad Edwards initiated the meeting [with police officers after having invoked his right to counsel], nothing in the Fifth and Fourteenth Amendments would prohibit the police from merely listening to his voluntary statements and using them against him at the trial." 451 U.S. at 485, 101 S.Ct. at 1885.
8
The situation we have here falls somewhat short of the scenario described by the Court in Edwards, where the police initiated the interrogation and the defendant made the incriminating statement. Here, the police initiated an interrogation of Bassett, but then started to leave when he chose to exercise his right to counsel. As the police began to leave, Bassett initiated further conversation by inquiring "well, what do you want, anyway?" Thus, the police appropriately terminated their interrogation when Bassett invoked his right to counsel. Bassett himself initiated further conversation by his inquiry.
9
In Minnick v. Mississippi, 498 U.S. 146, 111 S.Ct. 486, 112 L.Ed.2d 489 (1990), the Court refined Edwards. There, the Court held that in a custodial interrogation where the accused requests counsel, interrogation must cease, and the police may not reinstate interrogation without counsel being present. If Minnick applied to this case, it would cast doubt on the reopening of the interrogation without the presence of counsel. The district court, however, in rejecting the recommendation of the magistrate judge, held that Minnick announced a new rule of law and could not be applied to this case on collateral review. Thus, we must decide as a threshold issue whether the Minnick decision, which was rendered after Bassett's conviction, applies here.
10
To address that issue, we consider the Court's holding in Teague v. Lane, 489 U.S. 288, 109 S.Ct. 1060, 103 L.Ed.2d 334 (1989). There, the Court set out the criteria for determining whether a decision could apply retroactively, or whether it was a "new rule" with only prospective applicability. Under Teague, a new rule of constitutional law may not be applied on collateral review. 489 U.S. at 310, 109 S.Ct. at 1075. In other words, only a rule that is "not new" may be applied retroactively to a conviction that was final when the rule became law. This "new rule" principle "validates reasonable, good-faith interpretations of existing precedent made by state courts even though they are shown to be contrary to later decisions." Butler v. McKellar, 494 U.S. 407, 414, 110 S.Ct. 1212, 1217, 108 L.Ed.2d 347 (1990).
11
Teague provides two exceptions:(1) if the effect of the new rule is to remove a category of conduct from the reach of the criminal law or to remove a class of defendants outside the scope of a particular punishment; and (2) if the new rule requires procedures that are implicit to the concept of ordered liberty and 'enhance the accuracy of the fact finding process at trial in such a way that without them the likelihood of an accurate conviction is seriously diminished.'
12
489 U.S. at 311, 109 S.Ct. at 1077; See also Butler, 494 U.S. at 415-416, 110 S.Ct. at 1217-1218. Only if a case falls into one of these two exceptions may a new rule be applied retroactively.
13
A rule is new if it imposes a new obligation on the government, or if it breaks new ground and was not compelled by existing precedent. Penry v. Lynaugh, 492 U.S. 302, 314, 109 S.Ct. 2934, 2944, 106 L.Ed.2d 256 (1989). Put differently, "a case announces a new rule if the result was not dictated by precedent existing at the time the defendant's conviction became final." Id. (quoting Teague, 489 U.S. at 301, 109 S.Ct. at 1070).
14
In determining whether or not a rule is new, the Supreme Court focuses on the underlying rationale of the writ. "The relevant frame of reference ... is not the purpose of the new rule whose benefit the [defendant] seeks, but instead the purposes for which the writ of habeas corpus is made available." Teague, 489 U.S. at 306, 109 S.Ct. at 1073 (quoting Mackey v. United States, 401 U.S. 667, 682, 91 S.Ct. 1171, 1175, 28 L.Ed.2d 388 (1971)). A rule is not new (and thus may be applied retroactively) only if the underlying rationale of the rule advances the purposes of the writ. This purpose is to assure that a defendant in a criminal trial was afforded all constitutional guarantees that were in effect when the conviction became final, and not to guarantee the protection of rights that were later announced. Butler v. McKellar, 494 U.S. at 413, 110 S.Ct. at 1216-17 (quoting Teague, 489 U.S. at 306, 109 S.Ct. at 1073). The rationale here is finality: "Application of constitutional rules not in existence at the time a conviction became final seriously undermines the principle of finality which is essential to the operation of our criminal justice system." Teague, 489 U.S. at 309, 109 S.Ct. at 1074.
15
The Appellee cites Greenawalt v. Ricketts, 943 F.2d 1020 (9th Cir.1991), which holds Minnick to be a new rule of law. We agree. Also instructive is Arizona v. Roberson, a case in which the Court subsequently held that an interpretation of Edwards stated a new rule. 486 U.S. 675, 108 S.Ct. 2093, 100 L.Ed.2d 704 (1988). In Roberson, the Supreme Court held that, where a suspect has invoked his right to counsel and conferred with counsel, Edwards bars police-initiated interrogation about a separate crime. 486 U.S. at 682-83, 108 S.Ct. at 2098-99. The facts here show that, while Bassett was incarcerated for a different crime, the police initiated questioning regarding their murder investigation. After he had already requested an attorney, and the police began to leave, Bassett asked the question which led to further interrogation during which he confessed.
16
In Butler, the Supreme Court held that Roberson stated a new rule that was not a logical extension of Edwards. 494 U.S. at 416, 110 S.Ct. at 1218. The Court stated that its holding in Roberson placed added restrictions on the ability of the police to conduct investigations. Id. The Court's analysis in Butler applies equally to the facts of Minnick.
17
We hold that Minnick enunciates a new rule and is not retroactive. Bassett's conviction became final before the Minnick opinion was handed down in 1990. Therefore, it does not affect our analysis in this case. We find that, under the rule announced in the Edwards case, Bassett's rights were not violated. Consequently, we will affirm the district court.
18
AFFIRMED.
*
Honorable Maurice B. Cohill, Jr., Senior U.S. District Judge for the Western District of Pennsylvania, sitting by designation
1
This factual account is based on the opinion of the Supreme Court of Florida in affirming the denial of Bassett's Motion to Suppress his confession. The Supreme Court accepted the factual findings of the trial court. Bassett, 449 So.2d at 804-05. A trial court's factual findings are entitled to a presumption of correctness under 28 U.S.C. § 2254(d)
| {
"pile_set_name": "FreeLaw"
} |
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MARTHA E. PAYAN,
Plaintiff-Appellant,
v. No. 05-15978
ARAMARK MANAGEMENT SERVICES
LIMITED PARTNERSHIP, Aramark D.C. No.
CV-04-00002-SRB
Service Master Facility Services,
OPINION
Inc., aka/Aramark Service Master
Facility Services, Inc.,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Arizona
Susan R. Bolton, District Judge, Presiding
Argued and Submitted
October 20, 2006—San Francisco, California
Filed August 2, 2007
Before: Andrew J. Kleinfeld and Jay S. Bybee,
Circuit Judges, and Robert H. Whaley,* District Judge.
Opinion by Judge Bybee
*The Honorable Robert H. Whaley, United States District Judge for the
Eastern District of Washington, sitting by designation.
9241
9244 PAYAN v. ARAMARK MANAGEMENT SERVICES
COUNSEL
Mark E. McKane, Kirkland & Ellis LLP, San Francisco, Cali-
fornia, for the plaintiff-appellant.
Thomas L. Hudson, Esq., Meghan H. Grabel, Osborn Male-
don PA, Phoenix, Arizona, for the defendant-appellee.
OPINION
BYBEE, Circuit Judge:
Martha E. Payan (“Payan”) appeals the district court’s dis-
missal of her Title VII claims against Aramark Management
Services L.P. (“Aramark”). This appeal turns upon one nar-
row and discrete issue—how to determine whether a Title VII
action brought in district court after the receipt of an EEOC
right-to-sue letter has been timely filed when the actual date
of receipt by the litigant is unknown. Although we have
addressed this question in a handful of previous cases, our
earlier holdings fail to provide sufficient clarity to resolve the
current case. Here, we seek to establish a coherent rule to
PAYAN v. ARAMARK MANAGEMENT SERVICES 9245
apply to Payan’s case. Under that rule, we hold that in the
absence of evidence of actual receipt, we will apply a three-
day mailing presumption to determine notice of a right-to-sue
letter. We conclude that Payan’s claims are untimely and
affirm the district court’s decision granting summary judg-
ment for Aramark.
I
Payan’s term of employment with Aramark began on
August 8, 2002, and ended on July 11, 2003, when she was
terminated. On July 30, 2003, Payan submitted a charge of
discrimination to the Equal Employment Opportunity Com-
mission (“EEOC”) asserting sex discrimination and retaliation
against Aramark. The EEOC dismissed Payan’s charge and
issued a right-to-sue notice letter dated September 26, 2003.1
As Payan noted in her opening brief, “[t]he actual date
[Payan] received the notice is unknown.” However, the fact
of receipt itself is undisputed. Payan filed this lawsuit on Jan-
uary 2, 2004, ninety-eight days after the EEOC letter was
issued, alleging claims for sexual harassment, retaliation, and
discrimination under Title VII of the Civil Rights Act of
1964, 42 U.S.C. § 2000e (“Title VII”) and deprivation of civil
rights under 42 U.S.C. § 1983 against Aramark.2
In response, Aramark filed a motion for summary judg-
ment, contending that Payan’s complaint was untimely
because it was filed after the ninety-day period within which
a litigant must file suit after receiving notice of dismissal from
the EEOC. See 42 U.S.C. § 2000e-5(f)(1). The district court
concluded that Payan’s complaint was untimely and granted
Aramark’s motion for summary judgment. This appeal fol-
lowed.
1
When presented with the notice letter at her deposition, Payan identi-
fied the letter and its date of September 26, 2003.
2
The district court subsequently dismissed Payan’s § 1983 claims.
9246 PAYAN v. ARAMARK MANAGEMENT SERVICES
II
We review a district court’s ruling that a Title VII action
is barred by the statute of limitations de novo. See Hernandez
v. Spacelabs Med. Inc., 343 F.3d 1107, 1108-09, 1112 (9th
Cir. 2003). We also review a district court’s grant of summary
judgment de novo. See id.
III
[1] Title VII provides that upon dismissing a charge of dis-
crimination, the EEOC must notify the claimant and inform
her that she has ninety days to bring a civil action. See 42
U.S.C. § 2000e-5(f)(1) (“If a charge filed with the [EEOC]
. . . is dismissed by the [EEOC], . . . the [EEOC or otherwise
appropriate entity] shall so notify the person aggrieved and
within ninety days after the giving of such notice a civil
action may be brought.”). As we have previously explained,
this ninety-day period operates as a limitations period. See
Scholar v. Pac. Bell, 963 F.2d 264, 266-67 (9th Cir. 1992). If
a litigant does not file suit within ninety days “[of] the date
EEOC dismisses a claim,” then the action is time-barred. Id.
Therefore, ascertaining the date on which the limitations
period begins is crucial to determining whether an action was
timely filed.
[2] We measure the start of the limitations period from the
date on which a right-to-sue notice letter arrived at the claim-
ant’s address of record. See Nelmida v. Shelly Eurocars, Inc.,
112 F.3d 380, 384 (9th Cir. 1997); Scholar, 963 F.2d at 267.
Where that date is known, we will deem the claimant to have
received notice on that date, regardless of whether the claim-
ant personally saw the right-to-sue letter. See Nelmida, 112
F.3d at 384 (measuring the limitations period from the post
office’s first attempted delivery at the claimant’s address);
Scholar, 963 F.2d at 267 (calculating the ninety-day period
from the date on which the EEOC letter was “received and
signed for by [the petitioner’s] daughter”).
PAYAN v. ARAMARK MANAGEMENT SERVICES 9247
Here, Payan does not dispute having received the letter, but
does not claim to know when the letter arrived at her address
of record. As Payan noted in her opening brief, “[t]he actual
date [Payan] received the notice is unknown.” In her deposi-
tion, Payan suggested that “[the letter] could have been
delayed” and that “[she’d] gotten mail that’[d] been delayed
before . . . [s]ometimes about a week.” However, she does not
claim to know when the letter was delivered to her address of
record.
[3] Where the date of actual receipt is unknown, we will
estimate that date based on the date of EEOC disposition and
issuance of notice, with some compensation for mailing time.
See Baldwin County Welcome Ctr. v. Brown, 466 U.S. 147,
148 & n.1 (1984) (per curiam); Ortez v. Wash. County, 88
F.3d 804, 807 (9th Cir. 1996) (approximating notice based on
when the EEOC letter was apparently mailed). In accordance
with that logic, the district court here used the issuance date
of the EEOC letter, September 26, 2003, as a starting date,
and presumed receipt of the letter at Payan’s address of record
three days later.
Payan maintains that the district court erred in basing its
presumption on the EEOC letter issuance date without requir-
ing Aramark to prove the circumstances of mailing, including
proper address and postage. Payan offers two alternative argu-
ments in this regard. First, Payan asserts that as the non-
moving party, she is entitled to have all evidence construed in
her favor. She claims that by not requiring Aramark to prove
the circumstances of mailing, the district court erroneously
construed these material facts against Payan. Second, Payan
argues that Aramark had the burden to prove that the statute
of limitations had expired, as an affirmative defense, and
failed to meet that burden by not establishing the circum-
stances of mailing. Payan maintains that, for either reason,
necessary predicate facts were not established to justify the
district court’s presumption.
9248 PAYAN v. ARAMARK MANAGEMENT SERVICES
[4] Payan’s arguments are unsupported by law. Where the
actual date of receipt is unknown but receipt itself is not dis-
puted, we have not demanded proof of actual receipt but have
applied a presumption to approximate receipt. See Ortez v.
Wash. County, 88 F.3d 804, 807 (9th Cir. 1996). Payan is cor-
rect that because the statute of limitations is an affirmative
defense, the defendant bears the burden of proving that the
plaintiff filed beyond the limitations period. See Tovar v.
U.S.P.S., 3 F.3d 1271, 1284 (9th Cir. 1993) (“In every civil
case, the defendant bears the burden of proof as to each ele-
ment of an affirmative defense.”); Wyatt v. Terhune, 315 F.3d
1108, 1117-18 (9th Cir. 2003) (“[I]t is well-settled that stat-
utes of limitations are affirmative defenses, not pleading
requirements.”). See also Ebbert v. DaimlerChrysler Corp.,
319 F.3d 103, 108 (3d Cir. 2003) (holding that the burden to
prove expiration of statute of limitations, as an affirmative
defense, rests on the employer); Bowden v. United States, 106
F.3d 433, 437 (D.C. Cir. 1997); Donnelly v. Yellow Freight
Sys., Inc., 874 F.2d 402, 411 (7th Cir. 1989) (stating that the
defendant has burden of proof regarding its affirmative
defenses in Title VII actions).3 Contrary to Payan’s argument,
however, the defendant may do so by raising the limitations
defense and providing sufficient evidence to support the pre-
sumption. Here, Aramark has raised the defense and offered
proof of the right-to-sue letter. Thus, the undisputed facts
established in Payan’s case are that the EEOC issued a right-
to-sue notice letter to Payan on September 26, 2003, that the
EEOC mailed the letter to Payan’s address of record, and that
Payan received the notice letter at this address. From that
basis, we must calculate Payan’s date of receipt.
3
We note that our holding diverges from the Eleventh Circuit, which
holds that, if contested by defendant, the plaintiff must demonstrate filing
within the 90-day limitations period. See Green v. Union Foundry Co.,
281 F.3d 1229, 1233-34 (11th Cir. 2002) (“[F]or [a claimant] to maintain
his Title VII claims . . . , he has the initial burden of establishing that he
filed his Complaint within ninety days of his receipt of the EEOC’s right-
to-sue letter.”); see also Kerr v. McDonald’s Corp., 427 F.3d 947, 952
(11th Cir. 2005).
PAYAN v. ARAMARK MANAGEMENT SERVICES 9249
[5] We begin with the presumption that the letter issuance
date is also the date on which the letter was mailed. See id.;
see also Baldwin County Welcome Ctr. v. Brown, 466 U.S.
147, 148 & n.1 (1984) (per curiam); Taylor v. Books A Mil-
lion, Inc., 296 F.3d 376, 379-80 (5th Cir. 2002); Seitzinger v.
Reading Hosp. & Med. Ctr., 165 F.3d 236, 238-39 (3d Cir.
1999); Sherlock v. Montefiore Med. Ctr., 84 F.3d 522, 525-26
(2d Cir. 1996); Jarrett v. U.S. Sprint Commc’ns Co., 22 F.3d
256, 259 (10th Cir. 1994); Banks v. Rockwell Int’l N. Am. Air-
craft Operations, 855 F.2d 324, 326 (6th Cir. 1988). While
occasionally courts may have more evidence surrounding the
facts of mailing, see, e.g., Nelmida, 112 F.3d at 382 (describ-
ing the “envelope containing the original right-to-sue notice”),
we know of no rule requiring such proof. Indeed, in Baldwin,
the Supreme Court based its mailing date on the letter issu-
ance date, without additional proof. See 466 U.S. at 148 & n.1
(“A notice of right to sue was issued to [the petitioner] on Jan-
uary 27, 1981.”). Other federal courts have done the same.
See, e.g., Taylor, 296 F.3d at 380 (noting that “[t]he EEOC
issued a right-to-sue letter on September 29, 2000” and calcu-
lating the limitations based on that date); Sherlock, 84 F.3d at
526 (“[N]ormally it may be assumed, in the absence of chal-
lenge, that a notice provided by a government agency has
been mailed on the date shown on the notice.” (referring to
Baldwin, 466 U.S. at 148 & n. 1)); Coleman v. Potomac Elec.
Power Co., 310 F. Supp. 2d 154, 158 (D. D.C. 2004),
affirmed 2004 WL 2348144 (D.C. Cir. 2004) (per curiam)
(“The presumed date of a party’s receipt of a right-to-sue let-
ter from the EEOC is three days after issuance.”). This prac-
tice also accords with that in other federal areas, see, e.g., 20
C.F.R. § 422.210(c) (“[T]he date of receipt of notice . . . shall
be presumed to be 5 days after the date of such notice.”), to
which courts have analogized in the EEOC context, see, e.g.,
Hunter v. Stephenson Roofing, Inc., 790 F.2d 472, 475 (6th
Cir. 1986) (relying on § 422.210(c) to support a five-day
mailing presumption). The cases Payan cites to suggest that
courts have required additional proof involved claims where
9250 PAYAN v. ARAMARK MANAGEMENT SERVICES
the fact of receipt was disputed, not—as here—where the
issue is the timing of receipt.4
These assumptions may be rebutted with evidence to the
contrary. See infra at 9254-55. As a initial matter, however,
the district court here properly used the issuance date of Sep-
tember 26, 2003, as presumptive evidence of the mailing date.
IV
[6] Having established the mailing date, we next calculate
Payan’s receipt of her right-to-sue notice. In Baldwin, the
Supreme Court presumed, without discussion, that a right-to-
sue letter was received three days after its issuance date. See
466 U.S. at 148 & n.1 (citing FED. R. CIV. P. 6(e)). While
instructive, Baldwin may not settle the issue. Some courts
have not adhered to a three-day rule, perhaps viewing Bal-
dwin as setting only a minimum allowance for mailing time,
see, e.g., Graham-Humphreys v. Memphis Brooks Museum of
Art, Inc., 209 F.3d 552, 557 n.9 (6th Cir. 2000) (“The Sixth
Circuit allots two days for postal delivery of a [right-to-sue]
notice beyond the three day period allowed by Federal Rule
of Civil Procedure 6(e).” (referring to Baldwin, 466 U.S. at
148 n.1)), or interpreting Baldwin as establishing no holding
whatsoever as to mailing time, see, e.g., Carrasco v. City of
Monterey Park, 18 F. Supp. 2d 1072, 1076 (C.D. Cal. 1998)
4
In the cases cited by Payan, claimants sought to prove (or disprove) the
fact of mailing. See, e.g., Busquets-Ivars v. Ashcroft, 333 F.3d 1008, 1009-
10 (9th Cir. 2003) (finding an incorrect zip code sufficient proof of
improper mailing to dispute that receipt occurred); Schikore v.
BankAmerica Supp’l Ret’t Plan, 269 F.3d 956, 963-64 (9th Cir. 2001)
(accepting a sworn statement that claimant mailed the requisite form suffi-
cient proof to presume receipt). This question implicates the mailbox rule,
a long-established principle which presumes that, upon a showing of pred-
icate facts that a communication was sent, the communication reached its
destination in regular time. See Rosenthal v. Walker, 111 U.S. 185, 193
(1884). However, the mailbox rule applies only where the fact of receipt
is disputed. It is inapplicable here, where Payan acknowledges she
received the right-to-sue letter.
PAYAN v. ARAMARK MANAGEMENT SERVICES 9251
(“Baldwin made no holding, however, as to the time period in
which a letter should be presumed to arrive.”). In addition,
one court has treated Baldwin as establishing a presumption,
but without deciding whether the presumption may be rebut-
ted. See Sherlock v. Montefiore Med. Ctr., 84 F.3d 522, 526
(2d Cir. 1996) (citing Baldwin, 466 U.S. at 148 & n.1, 150
n.4).
Our cases similarly do not resolve the question of approxi-
mating receipt in Payan’s case. It appears that in one case we
used the issuance date as the receipt date. See Edwards v.
Occidental Chem. Corp., 892 F.2d 1442, 1444-45 (9th Cir.
1990) (concluding that the petitioner “recei[ved] her right to
sue letter on August 14, 1986” where “the [EEOC] issued a
right to sue letter on August 14, 1986”). In another case we
found timely an action filed 94 days after the EEOC letter was
apparently mailed. See Ortez v. Wash. County, 88 F.3d 804,
807 (9th Cir. 1996). Neither case establishes a rule that clearly
governs Payan’s case. The issue in Edwards was whether an
amended complaint related back to a timely filed complaint.
See Edwards, 892 F.2d at 1446-47. Because the court found
that it did, id. at 1447, the court’s approximated receipt date
of the second complaint was irrelevant to court’s central hold-
ing and thus may reflect some inexactness. And in Ortez, the
defendants did not object to the late filing where the letter was
issued on a Friday and the 90-day period, with an allowance
for Friday, then ended on a weekend. See Ortez, 88 F.3d at
807.
[7] With no clearly applicable rule in our own precedent,
we may look to other federal courts for insight. Most courts,
including the Supreme Court, have presumed a receipt date of
three days after EEOC letter issuance. See, e.g., Baldwin, 466
U.S. at 148 n.1; Seitzinger, 165 F.3d at 238-39; Sherlock, 84
F.3d at 525-26; Jarrett, 22 F.3d at 259. At least one court, the
Sixth Circuit, has used a five-day presumption. See, e.g.,
Banks, 855 F.2d at 326.5 In addition, some courts have sug-
5
At least two district courts in our circuit have also applied a five-day
presumption, apparently under the authority of Nelmida v. Shelly Euro-
9252 PAYAN v. ARAMARK MANAGEMENT SERVICES
gested, though not applied, a seven-day presumption. See,
e.g., Taylor, 296 F.3d at 379 (noting that courts have pre-
sumed receipt dates ranging from three to seven days after
mailing); Lozano v. Ashcroft, 258 F.3d 1160, 1164 (10th Cir.
2001) (same); Carrasco, 18 F. Supp. 2d at 1076 (same); Elli-
son v. Northwest Airlines, 938 F. Supp. 1503, 1509 (D. Haw.
1996) (“The [c]ourt need not decide however whether 3, 5 or
7 days is the appropriate period of time, although it finds that
the appropriate period should be no greater than 7 days.”).
The choice of a three-, five-, or seven-day presumption is
critical here. As the district court noted, Payan’s claim would
have been untimely under either a three- or five-day rule. The
EEOC issued a right-to-sue letter on September 26, 2003, and
mailed the letter to Payan’s address of record. Under a three-
day rule, we would presume Payan received the right-to-sue
letter on, or prior to, September 29, 2003. Because ninety
days after that date was December 28, 2003, a Sunday, Fed-
eral Rule of Civil Procedure 6(a) extends the ninety-day
period to December 29, 2003. See FED. R. CIV. P. 6(a); Sain
v. City of Bend, 309 F.3d 1134, 1138 (9th Cir. 2002) (apply-
cars, Inc., 112 F.3d 380 (9th Cir. 1997). See Stimson v. Potter, 2006 WL
449133, at *3 (N.D. Cal. 2006); Carrasco v. City of Monterey Park, 18 F.
Supp. 2d 1072, 1076 (C.D. Cal. 1998). One district court characterized
Nelmida as “not[ing] the applicability of the five-day period in dicta” and
adopted a five-day presumption on that basis. Carrasco, 18 F. Supp. 2d
at 1076. Another district court then applied the five-day presumption with-
out any discussion or explanation. See Stimson, 2006 WL 449133, at *3.
It would be erroneous to read our decision in Nelmida as establishing
a five-day presumption. In Nelmida, the post office had attempted to
deliver the right-to-sue letter and left several notices for pick up, but when
unclaimed, the post office returned the letter to the EEOC. See 112 F.3d
at 384. We concluded that the ninety-day limitations period begins to run
when “delivery of the right-to-sue notice was attempted at the address of
record.” Id. Although we discussed other courts’ approaches to receipt
issues, see id. at 383-84, this discussion was dicta. The Nelmida Court did
not apply a mailing presumption; indeed, such a presumption was unnec-
essary given the facts of the case.
PAYAN v. ARAMARK MANAGEMENT SERVICES 9253
ing Rule 6(a) in the § 1983 context); Hart v. United States,
817 F.2d 78, 80 (9th Cir. 1987) (applying Rule 6(a) to a claim
brought under the Federal Tort Claims Act). Under a five-day
rule, the presumed date of receipt would be October 1, 2003.
Ninety days after that date would be December 30, 2003.
However, Payan did not file suit until January 2, 2004. There-
fore, Payan’s claim would have been untimely under either
rule. By contrast, Payan’s claim would be timely under a
seven-day rule. Under a seven-day rule, we would presume
that Payan received the right-to-sue letter on, or prior to,
October 3, 2003. Ninety days after that date would be January
1, 2004, a holiday, which Rule 6(a) would extend to January
2, 2004, the date on which Payan filed suit. See FED. R. CIV.
P. 6(a).
[8] We adopt the three-day presumption. The three-day pre-
sumption accords with Federal Rule of Civil Procedure 6(e),
which provides that “[w]henever a party must or may act
within a prescribed period after service and service is made
[by mail], 3 days are added after the prescribed period would
otherwise expire.” FED. R. CIV. P. 6(e); see also Baldwin, 466
U.S. at 148 n.1 (citing Rule 6(e)); Seitzinger, 165 F.3d at 239
(same). This rule is well-known, and is reasonable in this con-
text as in other aspects of civil litigation. The five-day pre-
sumption has been explained as according with 20 C.F.R.
§ 422.210(c) (provision of Social Security Act presuming
receipt of notice five days after the date of a denial or a deci-
sion), see Hunter v. Stephenson Roofing, Inc., 790 F.2d 472,
475 (6th Cir. 1986), and alternatively, as an additional two-
day allotment beyond the mailing time allowed in Rule 6(e),
see Graham-Humphreys, 209 F.3d at 557 n. 9 (referring to
Baldwin, 466 U.S. at 148 n.1). We see no basis for adopting
such a presumption in this context. And although courts have
suggested the possibility of a seven-day rule, we can find no
articulated reason for allowing seven days for mailing.6 Based
6
The seven-day rule may have originated in Roush v. Kartridge Pak
Co., 838 F. Supp. 1328, 1335 (S.D. Iowa 1993), in which the defendants
9254 PAYAN v. ARAMARK MANAGEMENT SERVICES
on the Supreme Court’s use of the three-day presumption in
Baldwin, its adoption by an overwhelming number of circuits,
and its basis in Federal Rule of Civil Procedure 6(e), we adopt
the three-day presumption as the governing standard for this
circuit.
[9] This presumption—that the plaintiff received the right-
to-sue letter by the date presumed under a three-day rule—is
a rebuttable one. See, e.g., Issa v. Comp USA, 354 F.3d 1174,
1178-79 (10th Cir. 2003); Ebbert v. DaimlerChrysler Corp.,
319 F.3d 103, 108 n.5 (3d Cir. 2003); Green v. Union
Foundry Co., 281 F.3d 1229, 1234 (11th Cir. 2002); Lozano
v. Ashcroft, 258 F.3d 1160, 1165-67 (10th Cir. 2001);
Graham-Humphreys v. Memphis Brooks Museum of Art, Inc.,
209 F.3d 552, 557-58 (6th Cir. 2000); Sherlock v. Montefiore
Med. Ctr., 84 F.3d 522, 526 (2d Cir. 1996); Coleman v. Poto-
mac Elec. Power Co., 310 F. Supp. 2d 154, 158 (D. D.C.
2004), affirmed, 2004 WL 2348144 (D.C. Cir. 2004) (per
curiam). In reviewing whether the presumption has been
rebutted, courts look for evidence suggesting that receipt was
delayed beyond the presumed period. See Kerr v. McDonald’s
Corp., 427 F.3d 947, 952 (11th Cir. 2005) (adding that the
events causing delay must be “in no way [a complainant’s]
fault”). The Second Circuit, for example, found that “[i]f a
claimant presents sworn testimony or other admissible evi-
dence from which it could reasonably be inferred either that
the notice was mailed later than its typewritten date or that it
took longer than three days to reach her by mail, the initial
presumption is not dispositive.” Sherlock, 84 F.3d at 526 (not-
ing evidence of a copy of the letter with “stamps indicat[ing]
the timing of [the petitioner’s] own receipt of the letter,” but
argued that the plaintiff filed well beyond what even a seven-day pre-
sumption would allow. See McNeill v. Atchison, Topeka & Santa Fe Ry.
Co., 878 F. Supp. 986, 990 (S.D. Tex. 1995) (citing Roush); Ellison, 938
F. Supp. at 1509 (citing Roush). The courts of appeals that have referred
to a seven-day presumption have offered no source for the rule. See Tay-
lor, 296 F.3d at 379; Lozano, 258 F.3d at 1164-65.
PAYAN v. ARAMARK MANAGEMENT SERVICES 9255
rejecting that “self-serving” evidence as insufficient without
additional support such as an affidavit from the petitioner).
However, general claims that mail is sometimes delayed will
not be sufficient to rebut the presumption. We have all experi-
enced mail delays on occasion; but a general claim of occa-
sional delay is not sufficient to prove that a particular letter
was not delivered on time. Rather, to rebut a mailing pre-
sumption, the plaintiff must show that she did not receive the
EEOC’s right-to-sue letter in the ordinary course.
[10] Here, Payan has offered insufficient evidence to rebut
the three-day presumption. Although Payan suggested that
“[the notice letter] could have been delayed” and that “[she’d]
gotten mail that’[d] been delayed before . . . [s]ometimes
about a week,” none of these comments are sufficiently defi-
nite, without corroborating evidence, to conclude that the
right-to-sue letter arrived more than three days after issuance
by the EEOC. Payan also suggested that “[m]any reasonable
and logical reasons exist[ ] why . . . the EEOC may not have
mailed the right-to-sue notice until [after] September 29.”
However, Payan’s unsupported conjectures are insufficient to
suggest delayed receipt. Accord Cook v. Providence Hosp.,
820 F.2d 176, 178-179 & n.3 (6th Cir. 1987) (“[The petition-
er’s] denials are not sufficient to support a reasonable conclu-
sion that the letter was not received.”). Lastly, Payan has
proffered that she can “produce a witness that will testify that
the delivery of mail is not always within 3 days . . . and will
show mail that was delivered (1) month after being sent out.”
Such evidence, however, shows nothing with respect to the
receipt of the right-to-sue letter specifically, nor does it sug-
gest a routine mail failure that necessarily would affect the
right-to-sue letter. Without sufficient evidence to the contrary
from Payan, we presume that the right-to-sue notice arrived
at Payan’s address of record in accordance with the three-day
rule.
[11] Payan, therefore, had until December 29, 2003 to file
her complaint. Because Payan did not file her complaint until
9256 PAYAN v. ARAMARK MANAGEMENT SERVICES
January 2, 2004, three days beyond the ninety-day period, the
district court properly dismissed her claims as untimely.
Payan’s pro se status does not afford her different treatment
under these standards. See Baldwin, 466 U.S. 147 (dismissing
a pro se Title VII complaint filed outside of limitations).
V
For those reasons, we affirm the district court’s decision
granting summary judgment for Aramark on Payan’s claims.
AFFIRMED.
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NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS FEB 10 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 18-56570
Plaintiff-Appellee, D.C. No. 2:18-cv-01186-VAP-JEM
v.
MEMORANDUM*
GREGORY FRANK SPEROW,
Defendant-Appellant.
Appeal from the United States District Court
for the Central District of California
Virginia A. Phillips, District Judge, Presiding
UNITED STATES OF AMERICA, No. 19-30035
Plaintiff-Appellee, D.C. No. 1:06-cr-00126-BLW-2
v.
MEMORANDUM
GREGORY FRANK SPEROW,
Defendant-Appellant.
Appeal from the United States District Court
for the District of Idaho
B. Lynn Winmill, District Judge, Presiding
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Submitted February 4, 2020**
Before: FERNANDEZ, SILVERMAN, and TALLMAN, Circuit Judges.
In Appeal No. 18-56570, Gregory Frank Sperow appealed from the district
court’s dismissal of his motion for return of property under Federal Rule of
Criminal Procedure 41(g). In his reply brief, however, he requested to withdraw
the appeal. We treat this request as a motion for voluntary dismissal. So treated,
the motion is granted and this appeal is dismissed. See Fed. R. App. P. 42(b).
In Appeal No. 19-30035, Sperow challenges the district court’s final order of
forfeiture for the Mount Pleasant property. The government contends that this
appeal is barred by a valid appeal waiver. We review de novo whether a defendant
has waived his right to appeal. See United States v. Harris, 628 F.3d 1203, 1205
(9th Cir. 2011). The terms of the appeal waiver in Sperow’s plea agreement
unambiguously encompass the claims raised in this appeal. See id. The record
belies Sperow’s contentions that the district court modified the terms of his plea
agreement to exclude the Mount Pleasant property from forfeiture and that the
government breached the plea agreement. The record further belies Sperow’s
contention that he “provided complete and truthful cooperation” sufficient to
trigger the government’s obligation not to seek final forfeiture of the Mount
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
2 18-56570 & 19-30035
Pleasant property to the extent it was obtained through legitimate means.
Accordingly, we do not reach the merits of Sperow’s challenge to the district
court’s final order of forfeiture, but instead dismiss pursuant to the valid waiver.
See id. at 1207.
Appeal Nos. 18-56570 & 19-30055: DISMISSED.
3 18-56570 & 19-30035
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13 A.3d 984 (2010)
MILLER
v.
MILLER.
No. 2540 EDA 2009.
Superior Court of Pennsylvania.
September 15, 2010.
Affirmed.
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42 F.3d 686
26 Bankr.Ct.Dec. 450
CONGRESS CREDIT CORPORATION, Plaintiff, Appellant,v.AJC INTERNATIONAL, INC., et al., Defendants, Appellees.
No. 94-1766.
United States Court of Appeals,First Circuit.
Heard Nov. 7, 1994.Decided Dec. 15, 1994.
Ronald L. Rosenbaum, with whom Woods, Rosenbaum, Luckeroth & Perez Gonzalez, San Juan, PR, was on brief, for appellant.
Brian K. Tester, with whom Richard A. Lee Law Office, San Juan, PR, was on brief, for appellees.
Before CAMPBELL, Senior Circuit Judge, BOYLE* and FUSTE,** District Judges.
LEVIN H. CAMPBELL, Senior Circuit Judge.
1
Congress Credit Corporation ("Congress Credit") appeals from the district court's dismissal without prejudice of its diversity action to collect certain proceeds in the hands of the appellees, AJC International, Inc. ("AJC") and Fronex Commodities, Inc. ("Fronex") under a perfected factor's lien. The lien was allegedly granted to Congress Credit by United Western of Puerto Rico, Inc. ("United Western"), which later filed for bankruptcy. The district court has dismissed the lien action without prejudice, apparently believing that Congress Credit should not presently proceed with its lien action due to the pendency of several adversary proceedings brought in the bankruptcy court by the trustee of United Western to recover the same sums as preferences from these same defendants. This court initially affirmed, but upon considering Congress Credit's petition for rehearing, and after giving the matter further thought, has vacated its opinion and judgment of affirmance. We now hold that the district court was without authority to dismiss Congress Credit's diversity action to enforce its lien, and we vacate and remand for further proceedings in the district court.
FACTUAL AND PROCEDURAL BACKGROUND
2
Congress Credit is a commercial finance company. It financed the accounts receivable and inventory of United Western and claims to hold a recorded Factor's Lien and Assignment of Accounts Receivable given by United Western pursuant to the Puerto Rico Factors Lien and Assignment of Accounts Receivable Acts.1 On March 2, 1990, United Western filed a petition in bankruptcy under Chapter 11 of the Bankruptcy Code, which was converted to Chapter 7 on September 7, 1990.
3
Appellees were suppliers of United Western, who allegedly, within the ninety days prior to the bankruptcy filing, received bulk transfers of inventory from United Western in payment of its outstanding indebtedness to them--$376,610.79 in the case of AJC and $81,178.60 in the case of Fronex.2 On May 11, 1990, United Western commenced adversary proceedings in the bankruptcy court against the appellees, alleging that the inventory sales constituted preferential transfers. After the conversion to Chapter 7 the trustee was substituted for the debtor as plaintiff. Congress Credit commenced this action in the district court under diversity jurisdiction to recover essentially the same assets, or their proceeds, on June 1, 1990, alleging that the merchandise thus transferred had been subject to its factor's lien.
4
On June 7, 1990 (some six days after filing its lien action in the district court) Congress Credit filed an adversary proceeding in the bankruptcy court, asserting a claim to any recovery the estate might obtain in the preference actions. The trustee did not contest this proceeding; accordingly, judgment was entered on February 11, 1992 in favor of Congress Credit, securing Congress Credit's right to any such recovery.
5
The appellees having successfully obtained a stay of the lien action on August 31, 1990, pending resolution of the adversary proceedings in the bankruptcy court, Congress Credit next moved the district court to lift that stay on August 27, 1992. The appellees opposed that motion and moved to dismiss on September 28, 1992. The district court denied the motion to vacate the stay and granted the motion to dismiss in an opinion and order dated April 16, 1993. Congress Credit's unsuccessful motion for reconsideration was denied in a second opinion and order dated June 8, 1994, which reiterated the grounds stated in the first opinion. Congress Credit then appealed.
6
Congress Credit represents that there are no funds in United Western's estate and that the bankrupt's business has long since been liquidated.3 The record also shows that the bankruptcy judge has rejected a proposed agreement for Congress Credit to finance the trustee's preference actions and has ordered the trustee to show cause why the preference actions should not be dismissed, as none of the proceeds would benefit the estate (i.e. they would presumably all go to Congress Credit under the bankruptcy court's order of February 11, 1992).
7
The district court, nonetheless, reasoned that Congress Credit's interests were fully protected by and could await the results of the trustee's preference actions. The court seemed to base the dismissal of the lien action on its understanding that it was merely duplicative of the pending preference actions:
8
The trustee's adversary proceeding and this case involve the same transactions, property and parties. The only difference between the cases lies in the legal bases for challenging the validity of the transfers. A judgment in the civil action would most certainly have an effect on the debtor's estate.... [M]aintenance of two proceedings adjudicating the same issues consumes scarce judicial resources.
ANALYSIS
9
Shortly after hearing this appeal, we summarily affirmed the district court's judgment of dismissal as, at first blush, it seemed sensible to permit matters to be pursued and, if possible, concluded in the bankruptcy court. Like the district court, we were unhappy at the prospect of the two cases--the preference actions and the lien action--wasting scarce resources by proceeding on separate tracks in different courts, with the risk of multiple judgments. We are now persuaded, however, that the district court's proposed solution to this dilemma was legally insupportable. The correct, as well as most efficient solution, is for both proceedings to be consolidated for disposition in the district court, which is the only court with clear jurisdiction over both.
10
While the lien action and the preference actions apparently involve the identical property, they are not one and the same action, permitting dismissal of one as surplus to the other. They do not involve the same parties nor the same causes of action. The law suit from which this appeal is taken--the lien action--is a diversity action to enforce a lien created under Puerto Rico law. P.R. Laws Ann. tit. 10, Secs. 551-60, 581-88 (1976). Congress Credit must prove the existence and validity of the lien, and, in addition, that the lien attached to the inventory transferred to the appellees and followed to any claimed proceeds now in their hands. The trustee, on the other hand, must show, inter alia, that the inventory was property of the estate when transferred to appellees so that its transfer to them was a preference. 11 U.S.C. Sec. 547(b) (1988) ("the trustee may avoid any transfer of an interest of the debtor in property") (emphasis added); see generally 4 Collier on Bankruptcy, Sec. 547.01 (Lawrence P. King, ed. 1994) (discussing elements of a preference claim). This may require consideration of the extent to which Congress Credit's asserted lien removed the inventory from the debtor's property and made it instead the property of Congress Credit prior to the filing of United Western's bankruptcy petition.4 Thus, the legal operation and validity of the lien is an issue of some importance to both cases. However, the plaintiffs and the legal theories for recovery in each case are different.
11
The district court apparently viewed the two cases as based on identical, parallel theories, giving the earlier preference cases a right to proceed exclusive of the subsequent lien action. This analysis overlooked the major differences between the two causes of action. A district court may certainly dismiss an action which is merely "duplicative" of another action pending in another federal court. See Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 1246, 47 L.Ed.2d 483 (1976); Small v. Wageman, 291 F.2d 734, 735 (1st Cir.1961); 17A Charles Alan Wright et al., Federal Practice and Procedure Sec. 4247 nn. 7-8 and accompanying text (2nd ed. 1988). But for an action to be "duplicative" of another, so as to warrant its dismissal for that reason alone, the one must be materially on all fours with the other. The present lien action is not at all in that category. The plaintiff in the lien action is different from that in the preference actions, and the theory of recovery is altogether different. See, e.g., Thermal Dynamics Corp. v. Union Carbide Corp., 214 F.Supp. 773, 774 (S.D.N.Y.1963) (in order to properly enjoin suit in another court, the issues "must have such an identity that a determination in one action leaves little or nothing to be determined in the other"); Radio Corp. of America v. Rauland Corp., 16 F.R.D. 160, 163 (N.D.Ill.1954) (federal court should not stay proceedings in its own jurisdiction unless it appears that parties and issues are the same), mandamus denied, 217 F.2d 218 (7th Cir.1954), cert. denied, 348 U.S. 973, 75 S.Ct. 533, 99 L.Ed. 758 (1955), mandamus denied, 348 U.S. 968, 75 S.Ct. 543, 99 L.Ed. 754 (1955).
12
We think it clear, therefore, that there is no justification for dismissing the present lien action on the basis of a supposed identity between it and the preference actions. Nor can we see any bankruptcy-related theory allowing the district court to force Congress Credit to depend upon the preference proceedings in the bankruptcy court for the collection of its lien. We are advised that the automatic stay as to Congress Credit has long since been vacated. See 11 U.S.C. Sec. 362(a) (1988) (staying actions against the debtor, property of the debtor, or property of the estate). Direct enforcement of Congress Credit's lien must be accomplished by a state law action brought in the Puerto Rico courts or a federal court sitting in diversity. It is doubtful whether a bankruptcy court has jurisdiction at all over such a lien action, which is clearly not a core bankruptcy matter, see 28 U.S.C. Sec. 157(b) (1988). Conceivably, in proper circumstances, a bankruptcy court might handle a lien enforcement action as a non-core but "related" proceeding under the eye of the district court, which would have final say over its disposition. 28 U.S.C. Sec. 157(c) (1988) (bankruptcy court may hear a non-core proceeding, but final disposition of such must be by the district court). Most probably, although we do not rule on the question, the lien action is not even a "related" proceeding. The lien holder here claims, and has been awarded by order of the bankruptcy court, the right to all recovery in the preference actions. This suggests that, by now, the result in the lien proceeding can have no impact whatever upon the bankruptcy estate. See, e.g., In re North Star Contracting Corp., 146 B.R. 514, 519 (Bankr.S.D.N.Y.1992) (action is "related to" a bankruptcy if outcome could alter the debtor's rights, liabilities, options, or freedom of action, or in any way impacts upon the handling and administration of the bankruptcy estate); In re Chambers, 125 B.R. 788, 793 (Bankr.W.D.Mo.1991) (matter not "related to" Title 11 where neither amount of property available for distribution, not the allocation of property among creditors, is affected by the dispute). If the lien enforcement action is not a "related" proceeding, the bankruptcy court would lack any jurisdiction whatever over it. In any event, it is difficult to justify ousting Congress Credit, even temporarily, from the district court--which clearly has diversity jurisdiction over its lien action--leaving its rights under the lien to be secured in the more round about preference proceeding, requiring proof of additional elements, in a court probably lacking any jurisdiction to enforce the lien claim directly.
13
In these circumstances, we think it was erroneous to defer to the trustee's and the bankruptcy court's lead in the preference proceedings--proceedings which, at best, seem poorly tailored to Congress Credit's present needs, and which in any case seem to have lost steam. To be sure, it makes no sense for the two actions to proceed along separate tracks, inviting a defense strategy of divide and conquer. But there is a better solution to this problem, namely, to consolidate both proceedings in the one court, here the district court, where jurisdiction over both actions plainly exists. This will enable attention to be directed where it should have been directed all along--to the merits or demerits of the claims against the appellees, without the distraction of conceivable double or conflicting recoveries in different courts.
14
We, therefore, vacate and remand to the district court with instructions that it provide appropriate notice to the trustee in bankruptcy, directing him to show cause in the district court why the preference claims should not be brought up to the district court from the bankruptcy court and either abandoned or dismissed or else continued in consolidation with the lien claim.5 The district court can either dismiss the preference claims if it determines that they lack viability (assuming the bankruptcy court has not done so, see n. 5) or allow the trustee to pursue them in a consolidated proceeding in the district court together with the lien diversity action.
15
The power of the district court to consolidate the preference actions now pending in the bankruptcy court with the instant diversity lien action rests on its power to withdraw a case from the bankruptcy court "for cause shown." 28 U.S.C. Sec. 157(d) (1988). Courts have done this where necessary in analogous instances. See, e.g., In re Sevko, Inc., 143 B.R. 114, 117 (N.D.Ill.1992) (considerations of judicial economy adequate to meet "cause shown" requirement); Enviro-Scope Corp. v. Westinghouse Elec. Corp. (In re Enviro-Scope Corp.), 57 B.R. 1005, 1008-09 (E.D.Pa.1985) (same). We direct use of Sec. 157(d) not because of any fault on the part of the bankruptcy court, but because bringing the preference claims into the district court will allow all facets of these controversies affecting the same property and the same defendants to be disposed of by one tribunal having undoubted jurisdiction and authority.
16
We emphasize that the question of whether there is any reason to continue the preference claims should be speedily resolved at the outset. To pursue them at the expense of the estate and, potentially, of the appellant's recovery, may be inadvisable and a waste of money. On the other hand, we do not want to prejudge the matter. If the preference claims still serve a proper purpose and should be pursued, they should be pursued in the district court in a consolidated proceeding together with the lien claim. We are confident that the district court, having both matters before it, will give expedited attention to ending the existing gridlock. Congress Credit is entitled to have the merits of its claims determined without further delay.
17
The district court's judgment of April 19, 1993, and its opinion and order of June 8, 1994, are vacated, and this case is remanded to the district court for proceedings consistent with this opinion.6
*
Of the District of Rhode Island, sitting by designation
**
Of the District of Puerto Rico, sitting by designation
1
P.R. Laws Ann. tit. 10, Secs. 551-60, 581-88 (1976). The status and validity of this lien is not presently before us, although it plays a central role in the controversy
2
Two other suppliers of United Western also allegedly received bulk transfers within the ninety day preference period, in the amounts of $180,504.84 in the case of Agro International ("Agro") (originally a named defendant in this suit) and $23,000.00 in the case of Top Flight, Inc. ("Top Flight"). Congress Credit represents that both of these entities have been liquidated while this litigation has been pending
3
Not having the record in the bankruptcy case before us, we cannot know for certain that this is correct. If it is, and if, as may be the case, infra, the preference action cannot benefit the estate, there may be no point in having the trustee seek to recover property all of which must be turned over to Congress Credit, with the inflation of legal fees that this might entail. On the other hand, there may be legitimate reasons justifying continuance of the preference actions. Sorting out and making the best provision for these realities is something we leave to the district court on remand
4
The operation of the lien is a question of Puerto Rico law. See 4 Collier on Bankruptcy, Sec. 541.02 (Lawrence P. King, ed. 1994) ("Section 541 provides that the commencement of a case creates an estate consisting, most importantly, of all legal or equitable interests of the debtor in property at the time of the commencement of the case. Under this provision it will still be necessary to look to nonbankruptcy law, usually to state law, to determine whether the debtor has any legal or equitable interest in any particular item.")
5
The bankruptcy court has already instituted inquiry into whether the preference claims should be continued now that it is clear that the sole beneficiary will be Congress Credit. The district court may, but need not, allow that inquiry to be resolved by the bankruptcy judge if it thinks this is the most efficient way to proceed. Alternatively, the district court may take charge of and resolve that inquiry itself. Given the nearly four years of wheelspinning, we direct the district court to do whatever is necessary to speedily resolve, or have resolved, the status of the preference proceedings so that appellant's lien claim, either alone or in tandem, can move ahead and be decided without further delay
6
We treat the district court's opinion and order of June 8, 1994 as an appealable final judgment. See Bankers Trust Co. v. Mallis, 435 U.S. 381, 98 S.Ct. 1117, 55 L.Ed.2d 357 (1978)
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UNPUBLISHED ORDER
Not to be cited per Circuit Rule 53
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
January 18, 2006
Before
Hon. RICHARD D. CUDAHY, Circuit Judge
Hon. FRANK H. EASTERBROOK, Circuit Judge
Hon. ANN CLAIRE WILLIAMS, Circuit Judge
No. 04-2033
UNITED STATES OF AMERICA Appeal from the United States District
Plaintiff–Appellee, Court for the Northern District of
Illinois, Western Division
v. No. 03 CR 50038
DANIEL D. GRAP, Philip G. Reinhard,
Defendant–Appellant. Judge.
ORDER
This Court ordered a limited remand so the district court could state on the
record whether the sentence remains appropriate now that United States v. Booker,
543 U.S. 220 (2005), has limited the Federal Sentencing Guidelines to advisory status.
See United States v. Paladino, 401 F.3d 471 (7th Cir. 2005). The district court
determined that it would impose the same sentence upon Grap, now knowing that the
Guidelines’ are merely advisory. We invited the parties to file memoranda addressing
the appropriate disposition of the appeal in light of the district court’s determination,
but only the government did so.
No. 04-2033 Page 2
Sentences properly calculated under the sentencing guidelines are
presumptively reasonable. United States v. Mykytiuk, 415 F.3d 606, 608 (7th Cir.
2005). Grap’s failure to file a response leaves that presumption unrebutted. His
sentence does not appear to be unreasonable and is therefore AFFIRMED.
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67 F.3d 1394
33 Fed.R.Serv.3d 249, Bankr. L. Rep. P 76,673,95 Cal. Daily Op. Serv. 7974,95 Daily Journal D.A.R. 13,674
In re Fred LOWENSCHUSS, Debtor.RESORTS INTERNATIONAL, INC., Appellee,v.Fred LOWENSCHUSS, Appellant.
No. 94-16287.
United States Court of Appeals,Ninth Circuit.
Argued and Submitted July 12, 1995.Decided Oct. 10, 1995.
Alan R. Smith, Smith & Cope, Reno, Nevada, for appellant.
Mitchell A. Karlan, Gibson, Dunn & Crutcher, New York, New York, for appellee.
Appeal from the United States District Court for the District of Nevada.
Before CHOY, CANBY, and FERNANDEZ, Circuit Judges.
Opinion by Judge CHOY; Partial Concurrence and Partial Dissent by Judge FERNANDEZ.
CHOY, Circuit Judge:
1
Fred Lowenschuss appeals the district court's reversal of the bankruptcy court's decision. The district court held that the bankruptcy court erred when it (1) refused to allow Resorts International, Inc. ("Resorts") to withdraw its proofs of claim from Lowenschuss's bankruptcy proceedings without prejudice; (2) discharged all claims against the Fred Lowenschuss Associates Pension Plan (the "Pension Plan") when it confirmed Lowenschuss's Chapter 11 reorganization plan (the "Reorganization Plan"); and (3) retained jurisdiction over litigation between Resorts and the Pension Plan regarding an allegedly unauthorized transfer of money in exchange for Resorts stock. We affirm the district court's decision.
I.
2
In 1970, Lowenschuss established Fred Lowenschuss Associates, a professional corporation, with a Pension Plan for all employees of Fred Lowenschuss Associates. During the time period relevant to this appeal, Lowenschuss has been the trustee, administrator, sponsor, and sole beneficiary of the Pension Plan.1 The Pension Plan held assets valued in the neighborhood of $8,000,000, which included substantial holdings in Resorts stocks and bonds.
Resorts's complaint
3
On September 26, 1989, Resorts filed an action against Lowenschuss, individually and as trustee of the Fred Lowenschuss IRA and the Laurance Lowenschuss IRA, in the United States District Court for the Eastern District of Pennsylvania.2 Resorts claimed that Lowenschuss willfully and intentionally defrauded Resorts of $3,805,200 by tendering shares of Resorts stock for $36 per share when he knew that an appraisal proceeding was pending. Resorts sought to rescind the transaction on the grounds of unilateral mistake, fraud, and illegality of contract. On November 1, 1990, Resorts amended its complaint, adding claims for fraudulent conveyance.
4
By the time the amended complaint was filed, Resorts had filed for Chapter 11 reorganization in the United States Bankruptcy Court for the District of New Jersey ("New Jersey Bankruptcy Court"). Accordingly, Resorts's action against Lowenschuss was removed to the New Jersey Bankruptcy Court.
5
On February 9, 1992, the New Jersey Bankruptcy Court denied Lowenschuss's motion for summary judgment and/or dismissal of Resorts's complaint and granted in part Resorts's cross-motion for summary judgment, finding that the transaction between Resorts and Lowenschuss was an illegal contract. The court left the remedies of recision and restitution open for trial.
6
On June 16, 1992, because the New Jersey Bankruptcy Court could not ascertain the location of the money received in exchange for the allegedly illegally tendered Resorts stock, in order to enjoin the dissipation or transfer of the money, it entered an order which broadly applied to Lowenschuss, both personally and as the representative or trustee of "any fund," including the Fred Lowenschuss IRA, the Laurance Lowenschuss IRA, and the Pension Plan.
7
Lowenschuss Files for Chapter 11 Reorganization
8
On August 24, 1992, Lowenschuss commenced a voluntary Chapter 11 reorganization in the United States Bankruptcy Court for the District of Nevada ("Nevada Bankruptcy Court"). Resorts alleges that it was prepared to try its New Jersey fraud case against Lowenschuss weeks before Lowenschuss filed for Chapter 11. Upon the commencement of Lowenschuss's Chapter 11 bankruptcy in the Nevada Bankruptcy Court, Resorts's action against Lowenschuss in the New Jersey Bankruptcy Court was automatically stayed pursuant to 11 U.S.C. Sec. 362(a).
9
On March 8, 1993, Lowenschuss filed a Disclosure Statement and a Reorganization Plan. These documents revealed that Lowenschuss's ex-wife, Beverly Selnick, was the largest creditor in Lowenschuss's bankruptcy estate with a claim of $5.3 million. The Disclosure Statement indicated that Resorts's New Jersey action against the Pension Plan was a primary reason for Lowenschuss's Chapter 11 filing and classified the action as litigation affecting the bankruptcy estate.
10
The Reorganization Plan included a "Global Release" provision, which released numerous parties, including Lowenschuss and the Pension Plan, from all claims upon confirmation of the Reorganization Plan. Furthermore, the Reorganization Plan provided that it was being funded both by Lowenschuss's income from the Pension Plan and by the Pension Plan directly.
11
On May 25, 1993, Resorts, believing that the transferred money might constitute property of Lowenschuss's bankruptcy estate, asserted itself as the second largest creditor. Resorts filed two proofs of claim, one in an unliquidated amount, and the other in the amount of $3,805,200 plus interest. As the basis for the claims, Resorts annexed copies of its complaint and amended complaint against Lowenschuss. On June 24, 1993, Lowenschuss filed an objection to Resorts's claims on the grounds that (1) the claim has no legal basis because shareholders were permitted to withdraw their claim for appraisal and surrender shares for payment; (2) the claim has no legal basis because Resorts paid no money to Debtor; (3) in Resorts's bankruptcy proceeding, the judge entered a global release which released all shareholders who received $36 a share from all possible claims; (4) Resorts or its designee received full consideration for any payment made by receipt of stock in Resorts; and (5) Resorts received the same payment for stock from the Pension Plan as it did from all other shareholders who tendered stock.
12
On July 21, 1993, the Nevada Bankruptcy Court ruled that the Pension Plan was exempt from Lowenschuss's bankruptcy estate. In re Lowenschuss, No. BK-N-92-3174-JHT at 3 (Bankr.D.Nev. July 21, 1993) (the "Pension Plan Exemption Order").3
13
On September 17, 1993, Resorts filed an objection to the confirmation of the Reorganization Plan, arguing that the bankruptcy court does not have the power to grant the Global Release Provision because the provision purports to release claims against non-debtors, such as the Pension Plan. At the September 23, 1993 hearing on objections to the proposed plan, the Nevada Bankruptcy Court ruled that the Global Release Provision was improper and held that the Provision could not release non-debtors such as the Pension Plan.
14
The trial on Resorts's claim against Lowenschuss's bankruptcy estate had been postponed until October 14, 1993. Two weeks before the trial was to take place, Resorts moved to withdraw its proofs of claim from Lowenschuss's bankruptcy proceedings without prejudice and with certain conditions.4 By this time, Resorts had ascertained that the Pension Plan, which had been exempted from Lowenschuss's bankruptcy estate, held the allegedly illegally transferred funds. And on September 23, 1993, the Nevada Bankruptcy Court had ruled that the Reorganization Plan could not grant general releases to non-debtors like the Pension Plan. In light of these rulings, and because Resorts's complaint was essentially against the Pension Plan, Resorts argued that it would be futile for it to litigate against Lowenschuss's bankruptcy estate and unnecessary for it to continue to assert itself as a creditor in his bankruptcy estate. Resorts sought to withdraw conditionally, such that (1) it could reinstate its proofs of claim if that the Pension Plan Exemption Order were reversed on appeal or the bankruptcy court later consolidated the Pension Plan with the Debtor's estate; and (2) it would remain a party in interest in the case.
15
A hearing was held on Resorts's motion to withdraw its proofs of claim on October 12, 1993. At the hearing, the Nevada Bankruptcy Court denied Resorts's motion to withdraw conditionally and gave Resorts a choice between withdrawing its claim with prejudice and without conditions or proceeding to litigate its claim against Lowenschuss's bankruptcy estate, as it was then constituted, on the merits. When Resorts hesitated, the court denied the motion to withdraw. Resorts appealed this ruling and moved to stay further proceedings pending the appeal. On October 13, 1993, the Nevada District Court denied Resorts's emergency motion for a stay of further proceedings.
16
On October 14, 1993, the day the hearing on Resorts's claim was scheduled to begin, Resorts moved to withdraw unconditionally its proofs of claim from Lowenschuss's bankruptcy estate with prejudice. Over Lowenschuss's objections, the Nevada Bankruptcy Court granted the motion.
17
On October 27, 1993, the confirmation hearing for Lowenschuss's Reorganization Plan was held. Lowenschuss's counsel presented the originally-proposed Reorganization Plan, which included the Global Release Provision that Resorts previously had disputed. Lowenschuss's counsel justified the reintroduction of the original plan by arguing that Resorts was no longer a creditor and its objections should be ignored. When Resorts attempted to protest the confirmation, the Nevada Bankruptcy Court denied Resorts an opportunity to speak, reasoning that Resorts was no longer a party to the bankruptcy.
18
On October 28, 1993, the Nevada Bankruptcy Court confirmed Lowenschuss's Reorganization Plan, including the Global Release Provision. Furthermore, in the Confirmation Order, the bankruptcy court retained jurisdiction over future litigation between Resorts and Lowenschuss, individually and/or as trustee of the Pension Plan, and Lowenschuss's interest in the Pension Plan. Since the question of retaining jurisdiction appeared for the first time in the signed Confirmation Order, Resorts was never given an opportunity to object.
District Court's Ruling
19
Resorts appealed the Nevada Bankruptcy Court's Orders of October 12, 14, and 28, 1993. On June 9, 1994, the Nevada District Court ruled in Resorts's favor, holding that the bankruptcy court abused its discretion when it refused to allow Resorts to withdraw conditionally its proofs of claim. The district court reasoned that Resorts should have been permitted to withdraw with the condition that if the Pension Plan Exemption Order were reversed, it could reassert its proofs of claim.
20
The district court also vacated the Global Release Provision, finding that the bankruptcy court had no authority to discharge the liabilities of non-debtors, including the Pension Plan.
21
Finally, the district court vacated the bankruptcy court's assertion of jurisdiction over Resorts's future litigation against the non-debtor Pension Plan. The district court ruled that the bankruptcy court cannot assert jurisdiction over litigation between third parties, such as Resorts and the Pension Plan, where the litigation will not affect the bankruptcy estate.
22
Lowenschuss timely appealed the district court's decision, and we have jurisdiction pursuant to 28 U.S.C. Secs. 158(d) and 1291.
II.
23
A. RESORTS'S VOLUNTARY WITHDRAWAL WITH PREJUDICE
1. Mootness
24
First, we must consider whether Resorts's appeal from the bankruptcy court's refusal to permit Resorts to withdraw without prejudice its proofs of claim from Lowenschuss's bankruptcy estate is mooted by Resorts's subsequent voluntary unconditional withdrawal with prejudice.
25
Just as a plaintiff may appeal a voluntary dismissal without prejudice when the trial court has imposed a legally prejudicial condition on the dismissal, LeCompte v. Mr. Chip, Inc., 528 F.2d 601, 603-04 (5th Cir.1976), so too may a plaintiff appeal a voluntary dismissal with prejudice. Unioil, Inc. v. E.F. Hutton & Co., 809 F.2d 548, 556 (9th Cir.1986) ("a dismissal with prejudice ... [is] appealable, whether voluntary or involuntary.") (citation omitted), cert. denied, 484 U.S. 822, 108 S.Ct. 83, 98 L.Ed.2d 45 (1987), and cert. denied, 484 U.S. 823, 108 S.Ct. 85, 98 L.Ed.2d 47 (1987); see also Coursen v. A.H. Robins Co., 764 F.2d 1329, 1342 (9th Cir.1985), corrected, 773 F.2d 1049 (9th Cir.1985) ("While a plaintiff cannot appeal a voluntary dismissal without prejudice [unless a condition is imposed that creates legal prejudice], he or she may appeal a dismissal with prejudice."). The bankruptcy court's refusal to permit Resorts to withdraw conditionally its proofs of claim is therefore appealable.
26
Contrary to Lowenschuss's argument, we are in position to fashion effective and equitable relief for Resorts on this issue. See Spirtos v. Moreno (In re Spirtos), 992 F.2d 1004, 1007 (9th Cir.1993). We find that the bankruptcy court abused its discretion by refusing to allow Resorts to withdraw its proofs of claim from Lowenschuss's bankruptcy estate without prejudice. We therefore reverse this refusal. The bankruptcy court provided Resorts with no real alternative but to withdraw its proofs of claim with prejudice and without conditions. Resorts attempted to stay the bankruptcy court's order refusing a conditional withdrawal pending its appeal of the ruling, but to no avail. We can fashion effective relief by requiring that Resorts's withdrawal is without prejudice, with the requested conditions. If the Nevada Bankruptcy Court determines that the Pension Plan is part of Lowenschuss's estate, Resorts will be entitled to reinstate its proofs of claim.
27
2. The bankruptcy court's refusal of Resorts's request for a conditional withdrawal
28
We review de novo the district court's decision on an appeal from a bankruptcy court, applying the same standard of review to the bankruptcy court's findings as did the district court. In re Tucson Estates, Inc., 912 F.2d 1162, 1166 (9th Cir.1990). We review for abuse a bankruptcy court's exercise of discretion over a creditor's voluntary withdrawal of claims. See Koch v. Hankins, 8 F.3d 650, 652 (9th Cir.1993) ("district court's determination of the terms and conditions of dismissal under Fed.R.Civ.P. 41(a)(2) is reviewed for abuse of discretion."); see also Lawler v. Guild, Hagen & Clark, Ltd., (In re Lawler), 106 B.R. 943, 951 (Bankr.N.D.Tex.1989) (bankruptcy court's decision to grant withdrawal of proof of claim subject to review for abuse of discretion).
29
We recognize that the bankruptcy court's exercise of discretion should not be disturbed unless we have " 'a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors.' " Moneymaker v. CoBen (In re Eisen), 31 F.3d 1447, 1451 (9th Cir.1994) (quoting Nealey v. Transportacion Maritima Mexicana, S.A., 662 F.2d 1275, 1278 (9th Cir.1980)).
30
Federal Rule of Bankruptcy Procedure 3006, which is governed by the same considerations underlying Federal Rule of Civil Procedure 41(a)(2), provides that voluntary dismissals should be granted only upon an order of the bankruptcy court which "shall contain such terms and conditions as the court deems proper." Fed.R.Bankr.P. 3006; see id., Advisory Committee Note (1984). In deciding whether to grant a voluntary dismissal, a trial court must consider whether the defendant will suffer legal prejudice as a result of the court's dismissal. See Hyde & Drath v. Baker, 24 F.3d 1162, 1169 (9th Cir.1994); see also LeCompte, 528 F.2d at 604 ("[We] follow the traditional principle that dismissal should be allowed unless the defendant will suffer some plain prejudice other than the mere prospect of a second lawsuit.") (emphasis in original) (citations omitted) (cited with approval in Unioil, 809 F.2d at 556).
31
In LeCompte, 528 F.2d at 602, the plaintiff requested a voluntary dismissal without prejudice. In granting the dismissal, the district court attached several conditions, one of which was a requirement that the plaintiff preliminarily prove his case before relitigating. Id. at 604. The Fifth Circuit vacated and remanded the conditional dismissal because the district court failed to consider whether the defendant would be prejudiced legally by an unconditional dismissal and because, if such prejudice existed, the court failed to explain how the imposition of its conditions would alleviate legal prejudice to the defendant. The district court was instructed to "better determine what interests are at stake and to fashion only such conditions as are necessary to protect the legitimate interest of defendants." Id. at 605.
32
LeCompte is instructive on the issue at bar. The Nevada Bankruptcy Court appears to have denied summarily Resorts's request for a conditional withdrawal in its hurry to settle all of Resorts's claims against Lowenschuss's estate without considering "what interests are at stake." Id. The bankruptcy court did not consider adequately the fact that, at the time of its ruling, Resorts would have been litigating against the wrong defendant if it had gone ahead with the trial against Lowenschuss's bankruptcy estate because the Pension Plan had been exempted from the estate. Nor did the bankruptcy court properly consider the fact that dismissing Resorts's proofs of claim with prejudice would preclude Resorts from asserting its interest against the Pension Plan if the Pension Plan Exemption Order later were reversed and the Pension Plan again became a part of Lowenschuss's bankruptcy estate. Nor did the bankruptcy court consider whether Lowenschuss would be prejudiced legally by permitting Resorts to withdraw conditionally.
33
The following excerpt from the hearing transcript supports the conclusion that the bankruptcy court denied the conditional withdrawal without addressing any of Resorts's arguments and without finding that Lowenschuss would be prejudiced legally by a conditional dismissal:
34
Mr. Goodenow [Resorts's counsel]: And all our motion asks for, your Honor, is that we be allowed to withdraw the claim with prejudice with the condition that we can come back in if you're reversed on appeal on the order as to the pension plan. It's a pretty si--it's really not aggressive, an aggressive type of relief we're requesting for. We're just asking that this case go forward in an orderly fashion.
35
The Court: Why don't we go ahead and just hear [the claim] Thursday.
36
Mr. Smith [Lowenschuss's counsel]: Let's do that. That's--
37
The Court: Fine.
38
Mr. Goodenow: Your Honor, that does not make any sense for Resorts to pursue it in that manner.
39
The Court: Well,--
40
Mr. Goodenow: First of all, the order--the action's pending--
41
The Court: --you're the one that filed the claim.
42
Mr. Goodenow: That's correct. But it was filed before the objection to--Resorts' objection to the plan in this case was heard. And before the Court ruled with respect to the pension plan, that the pension plan was exempt, you remember that the--there was significant....
43
* * *
44
The Court: I'm either going to hear it Thursday or I'm going to get rid of it forever. Now which one, which do you want?
45
In re Lowenschuss, Reporter's Transcript of Hearing, No. BK-R 92-31474-JHT at 23-24 (Bankr.D.Nev. Oct. 12, 1993). When asked what the outcome would be if the Pension Plan were later deemed part of Lowenschuss's bankruptcy estate, the bankruptcy judge replied, "That's just tough. That's tough." Id. at 27.
46
Furthermore, there is no evidence that Lowenschuss would be prejudiced legally by a dismissal of Resorts's proofs of claim without prejudice. At most, Lowenschuss has been inconvenienced by expending time and resources in preparing for the trial and we have held that "[t]he inconvenience of defending another lawsuit or the fact that the defendant has already begun trial preparations does not constitute prejudice." Hyde & Drath, 24 F.3d at 1169. We also note that the inconvenience Lowenschuss has suffered is lessened by the fact that Lowenschuss's trial preparation will likely be relevant to defending the New Jersey action.5
47
In light of the foregoing, we conclude that the Nevada Bankruptcy Court committed a clear error of judgment in denying Resorts's request for conditional withdrawal. We therefore affirm the district court's reversal of that denial. See LeCompte, 528 F.2d at 605.
48
B. THE BANKRUPTCY COURT ERRED IN CONFIRMING A REORGANIZATION PLAN WHICH RELEASES CLAIMS AGAINST NON-DEBTORS
49
The district court vacated the Global Release Provision, holding that the bankruptcy court lacked the power to approve the provision which released claims against non-debtors. Whether a bankruptcy court has the power to release claims against a non-debtor is a question of law which we review de novo. See Sousa v. Miguel (In re United States Trustee), 32 F.3d 1370, 1372 (9th Cir.1994).
50
Lowenschuss's Reorganization Plan contained the following provision which broadly released the debtor and connected persons or entities, including the Pension Plan, from all claims:
51
Global releases will be given to Debtor, Debtor's children ... Fred Lowenschuss Associates, a professional corporation, Fred Lowenschuss Associates Pension Plan, as well as releasing of all liens against all trusts, custodian accounts, pension plan, Fred Lowenschuss Associates and satisfying of all outstanding judgments, executions, and levies against the aforementioned or any person or entity connected with them.
52
Plan of Reorganization p 5D. The Order confirming the Plan elaborated:
53
Entry of this Order shall constitute a release of all liens, levies, freezes, attachments and garnishments against Debtor, individually or as trustee, held or claimed to be held by Beverly Selnick, Resorts International, Inc., or anyone else, or issued by this Court or by any other court, and collections sought by Beverly Selnick by reason of any judgment, or for any other reason, against the Debtor, the Fred Lowenschuss Associates Pension Plan, Fred Lowenschuss Associates, a professional corporation, the Debtor's children ..., as well as all trusts and custodian accounts managed by Debtor.
54
Confirmation Order p 4.
55
Primarily relying on other circuits' precedent, Lowenschuss argues that the Global Release Provision was appropriate. We disagree.
56
The bankruptcy court lacks the power to confirm plans of reorganization which do not comply with applicable provisions of the Bankruptcy Code. 11 U.S.C. Sec. 1129(a)(1). Pursuant to 11 U.S.C. Sec. 524(a), a discharge under Chapter 11 releases the debtor from personal liability for any debts. Section 524 does not, however, provide for the release of third parties from liability; to the contrary, Sec. 524(e) specifically states that "discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt." 11 U.S.C. Sec. 524(e).
57
This court has repeatedly held, without exception, that Sec. 524(e) precludes bankruptcy courts from discharging the liabilities of non-debtors. American Hardwoods, Inc. v. Deutsche Credit Corp. (In re American Hardwoods, Inc.), 885 F.2d 621, 626 (9th Cir.1989); Underhill v. Royal, 769 F.2d 1426, 1432 (9th Cir.1985); Commercial Wholesalers, Inc. v. Investors Commercial Corp., 172 F.2d 800, 801 (9th Cir.1949); see also Sun Valley Newspapers, Inc. v. Sun World Corp. (In re Sun Valley Newspapers, Inc.), 171 B.R. 71, 77 (9th Cir. BAP 1994) (holding reorganization plans which proposed to release non-debtor guarantors violated Sec. 524(e) and were therefore unconfirmable); Seaport Automotive Warehouse, Inc. v. Rohnert Park Auto Parts, Inc. (In re Rohnert Park Auto Parts, Inc.), 113 B.R. 610, 614-17 (9th Cir. BAP 1990) (finding that a reorganization plan provision which enjoined creditors from proceeding against co-debtors violated Sec. 524(e)); In re Keller, 157 B.R. 680, 686-87 (Bankr.E.D.Wash.1993) (refusing to confirm a reorganization plan that compelled a creditor to release liens against a non-debtor's property).
58
In American Hardwoods, 885 F.2d at 625-26, we explicitly rejected the argument--advanced by Lowenschuss today--that the general equitable powers bestowed upon the bankruptcy court by 11 U.S.C. Sec. 105(a) permit the bankruptcy court to discharge the liabilities of non-debtors. Noting that "section 105 does not authorize relief inconsistent with more specific law," we concluded "the specific provisions of section 524 displace the court's equitable powers under section 105 to order the permanent relief [against a non-debtor] sought by [the debtor]." Id. at 625-26.
59
In essence, Lowenschuss argues that in American Hardwoods we recognized an exception to Sec. 524(e)'s prohibition on discharging the liabilities of non-debtors and urges us to find that the exception applies here. Lowenschuss looks to our discussion, in dictum in American Hardwoods, 885 F.2d at 626-27, of the Fourth Circuit's decision in Menard-Sanford v. Mabey (In re A.H. Robins Co.), 880 F.2d 694 (4th Cir.), cert. denied, 493 U.S. 959, 110 S.Ct. 376, 107 L.Ed.2d 362 (1989), as indicating our approval of the Fourth Circuit's approach. Lowenschuss ignores the clear language of American Hardwoods, where we expressly declined to adopt the approach set forth in In re A.H. Robins; we stated, in dictum, "[e]ven if we adopted In re A.H. Robins Co. ..., it would not dictate a different result." American Hardwoods, 885 F.2d at 626.6
60
Accordingly, because the Global Release Provision is contrary to Sec. 524(e) of the Bankruptcy Code, we affirm the district court's decision vacating the Global Release Provision.
61
C. THE BANKRUPTCY COURT'S JURISDICTION OVER RESORTS'S CLAIM AGAINST THE PENSION PLAN
62
Finally, Lowenschuss has waived consideration of the issue of whether the bankruptcy court improperly retained jurisdiction over future litigation of Resorts's claim against the Pension Plan because Lowenschuss failed to argue the issue in either his opening or his reply brief. An issue not discussed in a brief, although mentioned in the Statement of Issues, is deemed to be waived. Miller v. Fairchild Indus., Inc., 797 F.2d 727, 738 (9th Cir.1986) ("The Court of Appeals will not ordinarily consider matters on appeal that are not specifically and distinctly argued in appellant's opening brief.") (citation omitted); see also Simpson v. Union Oil Co., 411 F.2d 897, 900 n. 2 (9th Cir.) (issues referred to in appellant's Statement of the Case and Specifications of Error but not discussed in the briefs deemed to be abandoned), rev'd on other grounds by 396 U.S. 13, 90 S.Ct. 30, 24 L.Ed.2d 13 (1969).III.
63
Therefore, we AFFIRM the district court's ruling reversing the bankruptcy court's refusal to allow Resorts to withdraw its claims without prejudice, and we AFFIRM the district court's decision to vacate the Global Release Provision.
64
AFFIRMED.
65
FERNANDEZ, Circuit Judge, concurring and dissenting:
66
I concur with all but part II.A of the majority opinion, but dissent as to that part.
67
First of all, it is important to say what this case is not. This is not a case where a party sought to obtain a dismissal without prejudice and was then either denied that outright or subjected to intolerable terms and conditions. Far from it. Resorts asked that the case be dismissed with prejudice but asked for special terms and conditions that would bind the bankruptcy court to allowing Resorts to come back into this very case at some future time. It also wanted a condition that would permit it to remain a party-in-interest even though its claim had been dismissed at its own behest. It wanted to retain all of the rights of a party to the case while avoiding the necessity of a trial. In other words, Resorts claims that it should be allowed to tell the bankruptcy court if and when that court is permitted to adjudicate the basic issue in the Lowenschuss reorganization: did Mr. Lowenschuss himself commit fraud upon Resorts either for his own benefit or for someone else's? The bankruptcy court said that the time had come to try that issue, but Resorts disagreed. Resorts wanted to decide when and where it would pursue its assertion that Lowenschuss committed a wrong, but it never for one moment eschewed the pursuit. It wanted to control the bankruptcy court's calendar.
68
Of course, the bankruptcy court did not require Resorts to withdraw its claim with prejudice after Resorts had merely made a voluntary withdrawal motion. That court, at all times, afforded Resorts the right to go forward with its claim, even though Resorts thought that might turn out to be a useless act.1 If Resorts thought that withdrawal of its claim without the special conditions it demanded would be too burdensome, it could have proceeded with the case on the merits. See Lau v. Glendora Unified School Dist., 792 F.2d 929, 930-31 (9th Cir.1986) (per curiam order); see also Gravatt v. Columbia Univ., 845 F.2d 54, 56 (2nd Cir.1988).
69
Again, Resorts did not simply want to obtain a voluntary dismissal, which was denied to it. Cf. Hyde & Drath v. Baker, 24 F.3d 1162, 1169 (9th Cir.1994). It wanted a voluntary dismissal with prejudice and with a guarantee that it could stay in the fray at the same time. In my view, it was not entitled to that and still is not. It, like others who dismiss their actions, simply had to abide the vicissitudes of the future. Perhaps it would want to return, perhaps not. Perhaps it would be able to return, perhaps not. It was not entitled to an advance declaration that would allow it to continue participating in the bankruptcy proceedings and that would require the bankruptcy court to conduct all further proceedings with an eye on the possibility that Resorts would later demand a trial of the issue in question.
70
In fine, Resorts might have been permitted to leave this case and to hope that it could find a procedural way back in, if it found that necessary. Resorts was not permitted to dictate how the bankruptcy court was to handle the case, its calendar, and any possible later request by Resorts to return to the case.
71
Therefore, I respectfully dissent as to Part II.A.
1
In July of 1991, Laurance Lowenschuss began acting as a trustee of the Pension Plan
2
The caption has been modified by the New Jersey Bankruptcy Court, which took over the case, to include Lowenschuss individually and as trustee of the Pension Plan as defendants in the action. Resorts Int'l, Inc. v. Lowenschuss (In re Resorts Int'l, Inc.), Nos. 89-10119, 89-10120, 89-10461, 89-10462 (Bankr.D.N.J. June 13, 1995). The Order clarifies that the trustee of the Pension Plan "is and has been a party to this action." Id. at 2
3
On August 19, 1994, the Nevada District Court vacated the Pension Plan Exemption Order and remanded for further fact-finding. Selnick v. Lowenschuss (In re Lowenschuss), No. CV-N-93-565-ECR (Bankr.D.Nev. Aug. 19, 1994). When Lowenschuss appealed from this ruling, this court dismissed the appeal for lack of appellate jurisdiction. Selnick v. Lowenschuss (In re Lowenschuss), No. 94-16618 (9th Cir. Dec. 9, 1994). Consequently, to this date, the issue of whether the Pension Plan, or Lowenschuss's interest in the plan, is property of the Lowenschuss bankruptcy estate remains unresolved
4
Technically, in its motion to withdraw its proofs of claim, Resorts requested withdrawal with prejudice, but the conditions that it requested--that it be permitted to reinstate its proofs of claim in the bankruptcy estate should the Pension Plan become part of the estate upon a reversal of the bankruptcy court's Pension Plan Exemption Order and that it remain a party in interest to the bankruptcy--rendered its request the functional equivalent of a motion to withdraw without prejudice. Accordingly, we treat the requested withdrawal as such. Even Lowenschuss concedes that Resorts originally sought to withdraw without prejudice. See Brief of Appellee at 7, 8
5
Lowenschuss maintains that it would be unfair to allow Resorts to withdraw its claim days before the scheduled trial after he had expended a large sum of money and time in preparation. A possible remedy for this, however, is not for the district court to dismiss Resorts's claim with prejudice but for it to permit withdrawal without prejudice and to award attorney's fees if appropriate. See Kern v. TXO Production Corp., 738 F.2d 968, 972 (8th Cir.1984) ("The rule has long prevailed in both law and equity that a plaintiff may dismiss the case without prejudice only by payment of the costs....") (quoting Home Owners' Loan Corp. v. Huffman, 134 F.2d 314, 317 (8th Cir.1943))
6
A recent amendment to the Bankruptcy Code buttresses our conclusion that Sec. 524(e) does not permit bankruptcy courts to release claims against non-debtors. The Bankruptcy Reform Act of 1994 added Sec. 524(g) to the Code. That section provides that in asbestos cases, if a series of limited conditions are met, an injunction issued in connection with a reorganization plan may preclude litigation against third parties. The numerous requirements of Sec. 524(g) make it clear that this subsection constitutes a narrow rule specifically designed to apply in asbestos cases only, where there is a trust mechanism and the debtor can prove, among other things, that it is likely to be subject to future asbestos claims. See 11 U.S.C. Sec. 524(g)(2)(B)
That Congress provided explicit authority to bankruptcy courts to issue injunctions in favor of the third parties in an extremely limited class of cases reinforces the conclusion that Sec. 524(e) denies such authority in other, non-asbestos, cases.
1
I am dubious about Resorts's premise. By any account, Lowenschuss, the alleged wrongdoer, was the trustee, administrator, and sole beneficiary of the Pension Plan. Could it be that the Plan would not be bound by an adjudication that he had committed fraud when he engaged in the redemption transaction on its behalf? I doubt it
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107 F.3d 863
U.S.v.Ellen F. Cooke
NO. 96-5442
United States Court of Appeals,Third Circuit.
Feb 26, 1997
Appeal From: D.N.J. ,No.96cr00043 ,
Barry, J.
1
Affirmed.
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685 F.2d 1387
***U. S.v.Alvaro Banos
81-5819
UNITED STATES COURT OF APPEALS Eleventh Circuit
8/17/82
1
S.D.Fla.
AFFIRMED
*
Fed.R.App.P. 34(a); 11th Cir. R. 23
**
Local Rule: 25 case
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995 F.2d 231
NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.Mitchell Harrell JACKSON, aka Rashad Ali Muhammad, Plaintiff-Appellant,v.Samuel A. LEWIS, Director, Department of Corrections,Defendant-Appellee.
No. 92-16337.
United States Court of Appeals, Ninth Circuit.
Submitted April 27, 1993.*Decided May 18, 1993.
Before: BROWNING, KOZINSKI, and RYMER, Circuit Judges.
1
MEMORANDUM**
2
Mitchell Harrell Jackson, an Arizona state prisoner, appeals pro se the district court's summary judgment for defendants prison officials in his 42 U.S.C. § 1983 action. Jackson alleged violations of his eighth amendment rights arising from restrictions limiting his exercising, showering, and cell cleaning, and due process violations for being placed on administrative detention status. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
3
"This court reviews a grant of summary judgment de novo to determine whether, viewing the evidence in the light most favorable to the nonmoving party, there are any genuine issues of material fact and whether the district court applied the correct substantive law." Americana Trading Inc. v. Russ Berrie & Co., 966 F.2d 1284, 1287 (9th Cir.1992).
A. Eighth Amendment
4
Jackson contends that the prison officials violated his eighth amendment rights by reducing his exercise, showering and cell cleaning schedule from daily to only three times a week which is the schedule established for prisoners on administrative detention status. The district court found that the prison officials placed Jackson on the reduced schedule due to his shoulder injury which required that he refrain from work for thirty days.
5
To constitute cruel and unusual punishment in violation of the eighth amendment, prison conditions must involve "the wanton and unnecessary infliction of pain." Rhodes v. Chapman, 452 U.S. 337, 347 (1981). "[C]onditions that cannot be said to be cruel and unusual under contemporary standards are not unconstitutional. To the extent that such conditions are restrictive and even harsh, they are part of the penalty that criminal offenders pay for their offenses against society." Id. In establishing conditions of confinement, prison officials violate a prisoners eighth amendment rights when they manifest an unnecessary and wanton disregard for any resulting allegedly unconstitutional prison conditions. Wilson v. Seiter, 111 S.Ct. 2321, 2326 (1991); Whitley v. Albers, 475 U.S. 312, 319 (1986).
6
Here, the record indicates that the prison officials reduced Jackson's exercise, shower and cleaning schedule as part of his "medical lay-in" status to permit his shoulder injury to heal. Although this restriction is similar to that imposed on prisoners on administrative detention status, in this instance it was clearly not implemented to place Jackson on such status. Because the restriction was reasonable in light of Jackson's injury, there was no eighth amendment violation and the district court did not err by granting summary judgment for prison officials on this issue. See Wilson, 111 S.Ct. at 2326; Rhodes, 452 U.S. at 319.
B. Fourteenth Amendment
7
Jackson contends that he was placed on administrative detention status without notice or a hearing in violation of his due process rights. Jackson cites to the restrictions placed on his exercise and cleaning schedules to support his claim. Jackson's contention lacks merit.
8
Affidavits submitted by the prison officials state that Jackson was never placed on administrative detention status during the time in question, but rather was on medical lay-in status due to his shoulder injury. Although the exercise and cleaning schedules are identical for prisoners on medical lay-in and administrative detention status, this similarity does not entitle Jackson to notice and a hearing before being placed on medical lay-in status. Jackson presented no evidence other than his conclusory allegations to indicate that he was in fact placed on administrative detention status. Moreover, in his response to the prison officials' statement of facts, Jackson admitted that "[a]ll policies and procedures were adhered to in placing [him] on medical lay-in status from November 13, 1989 to December 13, 1989, and all rights were given to [him] as far as the medical provider knew." In the response Jackson also stated that the prison officials told him that "if he was on medical lay-in he would be ... placed on an [administrative detention] cleaning schedule...." Accordingly, the district court did not err by granting summary judgment for prison officials on this issue.
9
AFFIRMED.
*
The panel unanimously finds this case suitable for decision without oral argument. Fed.R.App.P. 34(a); 9th Cir.R. 34-4
**
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3
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488 F.Supp. 1057 (1980)
Carolyn B. HODGES, as Assignee of William S. Fanning and Birobal Corporation, Plaintiffs,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.
Ray C. HODGES, as Assignee of William S. Fanning and Birobal Corporation, Plaintiffs,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.
Civ. A. Nos. 78-1210-6, 78-1212-6.
United States District Court, D. South Carolina, Charleston Division.
March 7, 1980.
*1058 Michael T. Cole, Andrew Kenneth Epting, Jr., Charleston, S. C., for plaintiffs.
Claude M. Scarborough, Jr., Columbia, S. C., for defendant.
*1059 ORDER ON MOTIONS FOR SUMMARY JUDGMENT
HEMPHILL, Chief Judge.
Before this court are cross motions for summary judgment in two companion cases which seek to recover, inter alia, $200,000.00 in damages from an insurer as indemnification for a pair of default judgments rendered in state court, allegedly as a result of the insurer's failure to defend and/or timely settle. Plaintiffs in these actions are the assignors of the insureds, William S. Fanning and Birobal Corporation, and were also the plaintiffs in the state court actions. This unusual twist wherein plaintiffs occupy the shoes of their former adversaries, was precipitated by a collision between a Birobal Corporation motor vehicle, driven by Fanning, and a pedestrian, Ray C. Hodges, on June 27, 1975, in Charleston, South Carolina. Plaintiffs filed suit and obtained default judgments for $200,000.00 in two state court actions when Fanning's insurer, State Farm, failed to timely file an Answer to the Complaints. In settlement of that claim, Fanning and Birobal assigned to plaintiffs their causes of action in tort and contract against State Farm for failure to defend and/or failure to timely settle, which entitles plaintiffs to recovery in excess of the policy limits if negligence or bad faith is proven.
As discovery has been completed, this court has before it all essential evidence, in the form of affidavits, depositions, documents, the transcript of the hearing to set aside the default judgment, and the orders of the trial court and the Supreme Court of South Carolina upholding the default judgment. From the materials presented to this court, it is evident that the following facts are not in dispute.
Fanning was driving along Carterette Avenue in Charleston on the night of June 27, 1975 following a friendly gathering at a local lounge at which Fanning admits he had consumed eight to ten beers.[1] An eyewitness reported that the car was traveling at 45 miles per hour in a 15 mile per hour zone when he suddenly veered across the center of the street and up onto the grass on the opposite side of the street from his proper lane.[2] Hodges was standing a few feet from the road, in his own yard, when he was struck by Fanning. The impact knocked Hodges out of his shoes and through the air about thirty feet.[3] Hodges suffered a fractured femur, lacerations and abrasions. Fanning was observed to be weaving back and forth after the accident and smelled strongly of alcoholic spirits.[4]
State Farm began its investigation of the accident soon thereafter. Fanning was difficult to locate, resulting in State Farm sending to him a reservation of rights letter informing him that coverage could later be denied for failure to cooperate with the insurer.[5] The investigation soon revealed the less than optimal legal consequences of their insured's conduct, and inspired State Farm to reserve the entire policy limit of $15,000 for possible payment in settlement of a claim which could easily result in punitive damages.[6]
Due to a conflict in the testimony of the attorney for the Hodges at that time, Thomas Dewey Wise, and that of State Farm's agents, it cannot be determined for purposes of this motion whether, and to what extent, settlement negotiations were heard. However Wise did write State Farm that he had heard the policy coverage was for minimum limits and that he would proceed to file suit immediately since the policy limits would not be sufficient.[7] Wise later stated that he did not begin to evaluate the case for settlement purposes until the default case went to the Supreme *1060 Court.[8] Plaintiffs, in their depositions, confirm that no thought was given to settlement during the early stages of the lawsuit due to the minimal amount which the insurance company could be expected to contribute.[9] Subsequently, on July 9, 1975, less than two weeks after the accident, Hodges filed his action for personal damages and his wife filed suit for loss of consortium.
When Fanning was served, he immediately turned the papers over to attorney Malcolm Crosland, Esquire, asking him to look them over and deliver them to State Farm.[10] However, Fanning denies he ever hired Crosland as his attorney[11]. Crosland contacted State Farm which sent William Almers to pick the papers up from Crosland and deliver them to J. W. Cabaniss, Esquire, the attorney for State Farm.[12] The trial judge found that Cabaniss prepared Answers in each of the cases and forwarded these to Mr. Crosland under letter dated July 17, 1975. Cabaniss then departed on vacation on July 25, 1975 and did not return to his office until August 7, 1975. Crosland received the Answers in the next few days, reviewed them and signed the papers. Crosland states he then asked his secretary to return the papers to Cabaniss as he had been requested to do. According to Crosland's affidavit, "Mrs. Bates had an illness in her family and missed several days from work." Crosland discovered the Answers had not been returned on July 31, 1975. He personally carried them over to Mr. Cabaniss' law offices. The Default Order was properly taken on July 30, 1975 and on August 1, 1975, Cabaniss moved the court to reopen the proceedings.
At the August 8th hearing on the motion, Crosland and Cabaniss presented affidavits, and orally recited Fanning's version that Hodges had walked into the side of his car, although they were unable to present an affidavit from Fanning due to his failure to cooperate. On September 13, 1975, South Carolina Circuit Judge Clarence Singletary issued his order which found an absence of excusable neglect on the part of Fanning's attorneys and that no meritorious defenses existed to plaintiffs' causes of action. About this time State Farm, tendered its policy limits to plaintiffs but was refused. Judge Singletary's order upholding the default was appealed to the South Carolina Supreme Court which affirmed the trial court's finding as to inexcusable neglect without reaching the issue of meritorious defenses. Hodges v. Fanning and Birobal Corporation, 266 S.C. 517, 224 S.E.2d 713 (1976).
The case was remanded to Judge Singletary who referred the damage issue to a Master in Equity. Cabaniss appeared before the Master, on behalf of defendants, but his participation was limited to cross examination of plaintiffs' witnesses.[13] The Master recommended an award of $175,000, actual and punitive damages to Ray Hodges, and $25,000 to his wife. Judge Singletary adopted the recommendation and ordered such an award on July 25, 1977. When settlement negotiations failed with State Farm, plaintiffs took the assignments of Fanning and Birobal's causes of action on which these two cases are based.
Defendant's motion for summary judgment is based in part upon several defenses which would defeat plaintiffs' recovery in total without a trial on the merits. Since a decision in favor of defendant on any of these defenses would render all other questions moot, consideration will be given to these issues first.
Plaintiffs' third cause of action alleges defendant breached an implied contractual covenant, existing between it and plaintiffs' assignors, by failing to properly defend them. Defendants urge that Fanning's *1061 failure to cooperate with the investigation and hearing of the lawsuit breached the contract of insurance and discharged defendant from the duty to defend. Specifically, defendant submits that the failure of Crosland to return or file the Answer, the failure of Fanning to submit or return the affidavit for use in the hearing on the motion to set aside the default, and various other unspecified instances of failure to cooperate, constitute a prevention or hindrance by the insured under the contract.
In South Carolina the failure of the insured to comply with the obligations of the contract will release the insurer from liability. Tucker v. State Farm Mutual Insurance Company, 232 S.C. 615, 103 S.E.2d 272 (1958); Pharr v. Canal Insurance Co., 233 S.C. 266, 104 S.E.2d 394 (1958); Crook v. State Farm Mutual Automobile Insurance Company, 231 S.C. 257, 98 S.E.2d 427 (1957). But avoidance of coverage will only be allowed where the insurer has shown that the failure to cooperate prejudiced the insurer's defense of the case. Squires v. National Grange Mutual Ins. Co., 247 S.C. 58, 145 S.E.2d 673; Pharr v. Canal Insurance Co., supra.
The contract in this case made Fanning's cooperation a term of the policy, thus the question presented is whether State Farm can prove prejudice. This court thinks not.
Under the contract of insurance the insurer is obligated "to defend, with attorneys selected by and compensated by the company, any suit against the insured alleging such bodily injury . . . but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient."[14] Because of the large sums of money involved, and to insure the orderly and proper disbursement of the funds, the courts have construed such clauses as granting the insurer the exclusive control of the litigation, to the point of requiring the insured to surrender all control over his own defense. Allstate Ins. Co. v. Wilson, 259 S.C. 586, 193 S.E.2d 527 (1972); American Cas. Co. v. Timmons, 352 F.2d 563, 569 (6th Cir. 1965); Duke v. Hoch, 468 F.2d 973, 978 (1972), motion den. 475 F.2d 761 (5th Cir. 1973); Appleman, 7C Insurance Law and Practice § 4681 (1979). The right to control the lawsuit is determinative of this issue.
This court, considering the evidence in the light most favorable to defendant, finds no conduct on the part of Crosland which relieved State Farm of its duty to answer, or which prevented State Farm from answering in a timely fashion. Crosland's excuse that his secretary, Mrs. Marilyn Bates Chouinard, was absent from work for a few days has been contradicted by Mrs. Chouinard who states she was not absent from work at the time Crosland claimed and that she performed all duties promptly. Accepting her version, State Farm was still under an obligation to track the answer to insure a timely filing, or in the alternative to draft new pleadings and file them. However, in the cover letter transmitting the pleadings to Crosland, no due date for the answer was mentioned.[15] Further, in a meeting with Crosland some six to seven days before the deadline, Cabaniss did inquire about the pleadings but did not discuss the need for immediate action with Crosland.[16] Cabaniss departed for vacation, having made no specific arrangements concerning the filing of an answer other than to ask a member of his office to review correspondence and take whatever actions were necessary.[17] Since the primary, and indeed, exclusive, responsibility for the handling of the suit was State Farm's, Crosland's actions do not excuse State Farm's failure to answer and defendant fails to prove prejudice to its defense of the suit.
Nor did the failure of Fanning to furnish an affidavit for the hearing to set aside the default, prejudice defendant's case. First, Fanning's version of the incident was communicated *1062 to the judge by his attorneys. Second, his version flew in the face of the overwhelming weight of the evidence and might have been subject to impeachment as to credibility on the basis of a Florida bank fraud conviction.[18] Finally, of decisive force to this court is the finding of the trial court, subsequently affirmed by the Supreme Court, that the default should be upheld since the defense attorneys had shown no excusable neglect. Under state law, Fanning's testimony as to a meritorious defense would be irrelevant absent excusable neglect.
Defendant has raised a similar defense to the negligence causes of action, arguing that Crosland's negligence should be imputed to his client Fanning, thus defeating his assignors' recovery on grounds of contributory negligence. There is a dispute of fact as to whether Fanning ever retained Crosland, but assuming he did, this court believes that the Supreme Court of South Carolina would refuse to impute a third party's negligence to defeat the recovery of a plaintiff.
Defendants contend that Fanning had the right to control the conduct of his attorney, therefore he should be responsible for the acts of his agent. See cases cited in 65A C.J.S. Negligence § 157 (1955). Clearly, Fanning has already suffered the consequences of both of his attorneys' acts when the default judgment was entered against him. The question, as recognized by the Supreme Court of Colorado in Coerber v. Rath, 164 Colo. 294, 435 P.2d 228 (1967), is whether Fanning, through his assignee, should be punished a second time for his misplaced confidence. This court thinks there are limits implicit in the doctrine of imputed negligence which prevent its application in a second suit.
One legal encyclopedia has labeled imputed negligence as "a fiction of the law finding small favor with the courts; it is of artificial creation, and must in particular cases yield to reason and practical considerations." 65A C.J.S. Negligence § 157. And in the Restatement of Torts, 2d (1965) § 485, legal scholars have recognized that imputed negligence has been applied only in certain circumstances not relevant here. Comment (a) states:
During the latter part of the 19th century a good many courts implied the negligence of the third person to the plaintiff in a number of situations, because of theories of a fictitious agency relationship, which are now generally recognized as pure fiction and no longer valid . . .
A case in another jurisdiction which was factually similar to the present action, has held the doctrine of imputed negligence would not be given effect against a plaintiff whose attorney did not control the litigation. In Anderson v. Southern Surety Company, 107 Kan. 375, 191 P. 583 (1920), the court held that the negligence of a personal attorney would not be attributed to the client in order to bar that client's lawsuit against an insurance company for the negligent conducting of a defense pursuant to a policy of insurance. In Anderson the attorney appointed by the insured to defend the claim against the insured, was held to be negligent in failing to file a demurrer to the injured party's petition. The insurer attempted to argue that it was not liable since plaintiffs had employed able counsel of their own. The Anderson court was unimpressed with this reasoning since it found that the insurer controlled the litigation and should be held responsible. In this case, State Farm had exclusive control over the defense of the case. Since the insured has already been punished once for his attorneys' conduct, there is no reason to expand the application of a doctrine to a second action, which most courts apply cautiously to the first action. This court sees no reason why State Farm should be shielded from guilt by a fiction.
Contrary to defendant's position, the courts of this state have not gone beyond the specific exceptions for the doctrine and imputed the negligence of an attorney to a client so as to bar the client's prosecution of *1063 a claim. The case of Hucks v. Green's Fuel of South Carolina, 247 S.C. 457, 148 S.E.2d 149 (1966) stands for the proposition that Fanning was bound by State Farm's action when Fanning was a defendant, not later on when he sought to hold State Farm accountable for its acts. To read Hucks any more expansively would shield State Farm from responsibility for the failure to answer. Clearly this would be unjust where State Farm controlled the defense of the suit under the terms of the contract.
The next issue concerns State Farm's liability for failure to settle in excess of its policy limits. Defendant contends plaintiffs cannot recover on a theory that defendant wrongfully failed to settle the personal injury case because the evidence overwhelmingly shows that defendant was willing to settle with the Hodges and did attempt to negotiate a settlement.
Insofar as this court can determine, the issue presented here is one of first impression: whether an insurer has a duty to settle in excess of its policy limits where the insurer's failure to defend may make it liable for damages in excess of the policy limits. Clearly the insurer is liable for the losses occasioned by the insurer's negligent failure to settle within the policy limits. Tiger River Pine Co. v. Maryland Casualty Co., 163 S.C. 229, 161 S.E. 491 (1931). Were this case one in which the insurer knew with certainty that its failure to answer had caused the entire $200,000 in damages, it would certainly be in the insurer's best interest to settle since it would be liable for the entire amount any way under the Tiger River doctrine. But what duty does an insurer have when its liability for damages in excess of the policy is uncertain, as it was in this case?
This court must bear in mind that it was the insurer's negligent act[19] which precipitated all of its own difficulties. Had an answer been filed and the full policy limits offered by State Farm, there would have been no liability for failure to settle. An element of uncertainty entered this case however, when it became apparent to State Farm that its insureds would have little or no chance of challenging liability. As will be discussed infra, State Farm takes the position that its failure to answer did not cause any damages because there was going to be full liability with or without an answer. Therefore, even with a default judgment which was the fault of the insurer, the insurer could claim that it was not responsible for the damages.
Under Tiger River, an insurer in this state is bound "to sacrifice its interests in favor of those of the [insured]." Tiger River Pine Co. v. Maryland Cas. Co., 170 S.E. 346, 348 (1933). Even though the Tiger River line of cases involve offers within the policy limits, this court would apply the same standard where the insurer's negligence has, in effect, raised its policy limits to the extent necessary to compensate for all damages occasioned by its negligence. While the insurer may be uncertain as to its liability for the excess damages, insurers constantly deal in uncertainties, and are quite capable of ascertaining the probability of liability in a given case. The question of whether State Farm acted reasonably in not offering to settle in excess of its policy, is a question for the jury.
It is in precisely the situation where a prospective settlement will exceed the policy limits that the interests of the parties will be essentially hostile. "In such circumstances it becomes all the more apparent that the insurer must act with the utmost good faith toward the insured in disposing of claims against the latter." Bell v. Commercial Insurance Co. of Newark, N. J., 280 F.2d 514, 516 (3rd Cir. 1960). The burden is on the plaintiffs to show by a preponderance of the evidence that State Farm negligently failed to favor the best interests of its insured by not offering to make a reasonable settlement.
The courts have specified some of the factors which a jury may consider in finding *1064 negligence, and/or bad faith, on the part of the insurer in excess limits cases. While the factors considered in Bell v. Commercial Insurance Co. of Newark, N. J., supra, and Young v. American Casualty Company of Reading, Pa., 416 F.2d 906 (2d Cir.), cert. dismissed 396 U.S. 997, 90 S.Ct. 580, 24 L.Ed.2d 490 (1970), are not completely appropriate for this case, they do offer some guidance as to a proper analytical approach. In Young, the insurer failed to settle within policy limits or ask for a contribution from its insured, in spite of the likelihood that an excess verdict would be returned. The court isolated four factors which might indicate "bad faith" on the part of the insured: (1) failure to properly investigate the accident; (2) refusal to accept an offer within policy limits; (3) failure to inform the insured of a compromise offer; and (4) failure to attempt to induce a contribution from the insured. In Bell, the court found it significant that the insurer may have (1) failed to investigate the claim; (2) failed to pursue settlement negotiations after an offer was made by the opposing party; and (3) failed to conclude what the case might be worth for settlement purposes.
Given the unique facts of this litigation, some rewording of the above-listed factors is necessary. The jury should be allowed to consider, among other factors, the following:
(1) Whether the insurer calculated its potential liability for failure to defend;
(2) Whether the insurer investigated the potential recoverable damages;
(3) Whether the insurer concluded what a settlement value of the case would be after the default judgment;
(4) Whether the insurer initiated or pursued settlement negotiations after the default judgment;
(5) Whether the insurer sought to enlist a contribution from its insured commensurate with that portion of the settlement which the insured should contribute.
The final issue of substance raised by defendants is whether liability can exist for negligent failure to defend, absent the existence of a meritorious defense on the part of the insureds. Defendant has characterized this suit as a malpractice action against State Farm's attorney, which would require plaintiffs to prove that Fanning had a meritorious defense. Annot. 45 A.L.R.2d 9; Garguilo v. Schunk, 58 App.Div.2d 683, 395 N.Y.S.2d 751 (1977); Pusey v. Reed, 258 A.2d 460 (Del.Sup.1969); Nause v. Goldman, 321 So.2d 304 (Miss.1975); Masters v. Dunstan, 256 N.C. 520, 124 S.E.2d 574 (1962); Freeman v. Rubin, 318 So.2d 540 (Fla. 3rd D.C.A.); Wooddy v. Mudd, 258 Md. 234, 265 A.2d 458; Hansen v. Wightman, 14 Wash. App. 78, 538 P.2d 1238; Frost v. Hanscome, 198 Cal. 550, 246 P. 53 (1926). Failing this proof, there would be no proximate cause of damages since Fanning/Birobal would have been fully liable had an answer been filed. However, defendants characterization of this lawsuit in a malpractice claim is not persuasive nor is the narrowness of its view of the insurer's duty, the law.
The complaint reads in negligence arising out of the duty to defend and the failure to reasonably settle, and names a corporation, rather than an attorney, as the defendant. Furthermore, plaintiffs have alleged a failure to settle, a theory which focuses on the conduct of the insurance company rather than its attorney. Although damages for a failure to answer might normally be pursued by a claim of legal malpractice, the complaint implies that the insured was relying on a company attorney rather than a specific, personal attorney to defend him. This court is persuaded that plaintiffs are not bringing a legal malpractice action which requires a showing of meritorious defenses.
Defendant construes its duty to defend more narrowly than would this court. A policy of insurance guarantees not just a defense as to the merits but a comprehensive defense designed to minimize the exposure of an insured. Insurers do not fulfill this comprehensive obligation by defending only as to liability. The defense must be proffered even if the liability issue is clearly *1065 to be resolved against the insured. An answer is the opportunity for a defense. By filing an answer and placing the issue of liability in question the insurer protects the insured's right to discovery, to negotiate settlement, and to ultimately try the case before a jury which would include the insured's being given the opportunity to call witnesses and to cross-examine witnesses. The insured pays a premium in return for the insurer's promise, embodied in its duty to defend, to provide the insured these rights.
Defendant equates its duty to defend with its duty to indemnify. Thus two duties are not coextensive, and the cases have so held. Sloan Const. Co., Inc. v. Central Nat. Ins. Co. of Omaha, 269 S.C. 183, 236 S.E.2d 818 (1977); American Cas. Co. of Reading, Pa. v. Howard, 187 F.2d 322 (4th Cir. 1951). An insurer's duty to defend extends beyond the policy's term for indemnity, arising both where the suit is frivolous and where it exceeds the policy limits. The duty to defend is unconditional.
Defendant's argument that the entire matter of the judgment is attributable to its insured's conduct and has no relation whatsoever to the entry of default eviscerates its duty to defend. All lawyers involved in litigation utilize the doubt surrounding the ultimate determination of liability in order to secure an optimum settlement.[20] State Farm's insured never had this opportunity due to the default. Furthermore, under South Carolina law, the default prevented Fanning/Birobal from introducing testimony to contradict Hodges' medical testimony as to injury and damages.
Obviously the measure of damages in this suit is speculative, in that no one knows what the suit would have been settled for had an answer been filed or a settlement attempted. State Farm, the wrongdoer, having placed its insured in this position, must bear the onus of its wrongdoing. Missionaries of Co. of Mary, Inc. v. Aetna, 230 A.2d 21, 155 Conn. 104 (1967). "Where [a] wrongdoer creates [a] situation that makes proof of exact amount of damages difficult, . . . `juries are allowed to act upon probable and inferential as well as direct and positive proof.'" Powers v. Calvert Fire Ins. Co., 216 S.C. 309, 57 S.E.2d 638 (1950); See cases cited in 22 Am.Jur.2d, Damages, § 23. Plaintiffs' action should not be defeated for lack of damages, where, as here, defendant's conduct has caused the uncertainty.
Defendant claims that the Fourth Circuit's recent decision in Juel v. The Glen Falls Insurance Co., No. 77-1248, (decided October 18, 1979) (currently under reconsideration) vindicates its conduct in this case. In Juel, the trial judge held that the insurer, in a "duty to defend" action, had not engaged in conduct which would make it independently liable for failure to defend. On appeal the Fourth Circuit reversed, noting that the insurer could have: (1) moved for an extension of time in which to answer before the default had been entered; (2) resisted entry of the default judgment; (3) moved to set the default aside; (4) contested the amount of damages; and (5) appealed the default judgment. Thus, although its local agency failed to inform the insurer of the action prior to the default, the insurer should have moved to defeat the default.
State Farm correctly states that it engaged in the actions suggested in Juel, but Juel does not absolve State Farm of liability on these facts. First, State Farm's actions were responsible for the default, unlike the insurer in Juel. Thus the chain of events which State Farm set in motion could not be mitigated by taking those actions cited in Juel, for Juel speaks only to the duty of an insurer to make the best of a situation made unfortunate by another's acts. Merely closing the barn door does not relieve one from liability for loss of the *1066 horse, where the "door closer" allowed the horse to escape.
In fact, Juel supports plaintiffs' causes of action by stating that the defense rendered by an insurer must be reasonable and in good faith, not necessarily "meritorious." This court sees nothing in Juel which would prevent recovery by plaintiffs in this action, since under Juel, failure to try to "retrieve the situation" will result in liability.
In support of its cause of action, plaintiff has submitted the affidavit of an expert witness that defendant's failure to defend was the proximate cause of plaintiffs' damages. This evidence in combination with the other facts appearing in the materials presented for purposes of this motion, requires this court to deny defendant's motion for summary judgment.
This court leaves the determination of the punitive damages issue to the trial court which will be better equipped to handle the matter after plaintiffs have presented their case. On the matter of attorneys' fees, plaintiffs contend that the consequential damages flowing from the negligence and/or breach of contract of defendant should include the attorneys' fees paid in this action.
In Andrews v. Central Surety Insurance Company, 271 F.Supp. 814, aff'd 391 F.2d 935 (4th Cir. 1967), Judge Simons ruled that attorneys' fees are not recoverable at common law in this type of action. This holding is also consistent with Addy v. Bolton, 257 S.C. 28, 183 S.E.2d 708 (1971), which would allow recovery of attorneys' fees expended in defense of a suit where the defendant is a passive tortfeasor forced to defend because of the active negligence of another. That case impliedly reaffirmed the general rule that plaintiffs are not entitled to recover attorneys' fees for suits which they prosecute. Townsend v. Singleton, 257 S.C. 1, 183 S.E.2d 893 (1971). Because plaintiffs have not alleged any basis on which attorneys' fees can be awarded, plaintiffs' prayer for same is denied. Andrews, supra at 821.
The summary judgment motions are denied.
AND IT IS SO ORDERED.
NOTES
[1] Fanning dep., p. 10; Interview with Almers, p. 4.
[2] Free affidavit.
[3] Affidavit of C. T. Powell, the investigating officer.
[4] Affidavits of Powell and Virginia Jameson.
[5] Affidavits of Almers and Ledford.
[6] Ledford Affidavit.
[7] Wise deposition, Ex. 2.
[8] Wise deposition, p. 76.
[9] Depositions of Ray Hodges, p. 19; Carolyn Hodges, p. 8.
[10] Fanning deposition, p. 15.
[11] Fanning deposition, p. 16.
[12] Cabaniss deposition, p. 67; Almers' affidavit.
[13] S.C. Code § 15-35-320 (1976) allows the referee to "hear the allegations and evidence of the plaintiff."
[14] Section I, coverage B, of the Birobal policy.
[15] Cabaniss deposition, p. 9.
[16] Cabaniss deposition, p. 10.
[17] Cabaniss deposition, p. 11.
[18] Fanning deposition, pp. 20-24.
[19] At oral argument, counsel for defendant admitted that the insurer was negligent in its failure to file an answer.
[20] From the adjuster evaluation produced from the files of State Farm in the earlier litigation, it is known that the State Farm Insurance Company before default estimated the case at a minimum of $12,000 to $15,000. While this is only a minimum figure, it does suggest that a compromise figure short of $200,000 might have been negotiated.
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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 09-15525 ELEVENTH CIRCUIT
Non-Argument Calendar APRIL 8, 2010
________________________ JOHN LEY
CLERK
D. C. Docket No. 07-60219-CR-DMM
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ABEL RIVAS,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(April 8, 2010)
Before BARKETT, HULL and MARCUS, Circuit Judges.
PER CURIAM:
Abel Rivas appeals pro se the district court’s denial of his Fed.R.Civ.P.
60(b) motion. Rivas argues that the district court abused its discretion in denying
his Rule 60(b) motion based on his argument that after he pled guilty to the offense
of conviction, he requested that his counsel file an appeal, and counsel promised to
do so, but no notice of appeal was ever filed. After careful review, we affirm.
We review a district court’s denial of a Rule 60(b) motion for abuse of
discretion. Crapp v. City of Miami Beach, 242 F.3d 1017, 1019 (11th Cir 2001).
The Federal Rules of Civil Procedure “govern the procedure in all civil actions and
proceedings in the United States district courts.” Fed.R.Civ.P. 1. Rule 60(b)
provides that “the court may relieve a party . . . from a final judgment, order, or
proceeding” under certain circumstances. Fed. R. Civ. P. 60(b). However, Rule
60(b) does not provide for relief from a criminal order in a criminal proceeding.
See United States v. Mosavi, 138 F.3d 1365, 1366 (11th Cir. 1998).
Here, the district court initially construed Rivas’s motion as one requesting
leave to file an out-of-time appeal. Rivas, in a motion to reconsider, expressly
informed the district court that he was seeking relief under Rule 60(b). That civil
rule is unavailable to offer relief from the judgment in his criminal case. See id.
Because Rivas insists on appeal that he intended to rely on Rule 60(b) and not 28
U.S.C. § 2255, the district court did not err in failing to recharacterize his
pleadings, and properly denied him relief.
AFFIRMED.
2
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89 F.3d 830
NOTICE: Fourth Circuit Local Rule 36(c) 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.Tammy Sellars ENGLAND, Defendant-Appellant.
No. 95-5333.
United States Court of Appeals, Fourth Circuit.
Submitted April 30, 1996.Decided June 10, 1996.
Thomas J. Ashcraft, Charlotte, North Carolina; Stephen T. Daniel, DANIEL & LECROY, P.A., Morganton, North Carolina, for Appellant. Mark T. Calloway, United States Attorney, Peter Crane Anderson, Assistant United States Attorney, Charlotte, North Carolina, for Appellee.
Before MURNAGHAN and WILKINS, Circuit Judges, and CHAPMAN, Senior Circuit Judge.
OPINION
PER CURIAM:
1
Tammy S. England entered a guilty plea to an information charging her with bank embezzlement, 18 U.S.C.A. § 656 (West Supp.1996), and was sentenced to serve twelve months imprisonment. She appeals her sentence, contending that the district court clearly erred in adjusting her offense level upward for abuse of a position of trust, USSG § 3B1.3,* and more than minimal planning, USSG § 2B1.1(b)(5)(A). She also contests the court's decision not to depart on the basis of diminished capacity, USSG § 5K2.13. We affirm in part and dismiss in part.
2
England worked at Wachovia Bank in Morganton, North Carolina, for ten years, first as a teller and later as a customer service representative. In the latter position, she embezzled around $70,000 from the bank between February 1989 and September 1993. An audit of the Safe Deposit Income Account in August 1993 revealed numerous transfers of funds from that account to England's personal account. When the fraud was discovered, England entered a guilty plea and made restitution before she was sentenced. She explained that her embezzlement was caused by an overwhelming desire to shop and spend money. The probation officer recommended 2-level enhancements for more than minimal planning, USSG § 2B1.1(b)(5)(A), and for abuse of a position of trust, USSG § 3B1.3.
3
England argued at sentencing that she suffered from an obsessive compulsive disorder similar to kleptomania. Thus, her attorney argued, she had diminished capacity to control her actions, which presumably made each separate instance of embezzlement an unpremeditated action. England submitted three letters from a psychiatrist who stated that she had "a rather diminished capacity to control her behavior," as well as impaired judgment due to stress. The district court overruled her objection. The court's factual finding that she had engaged in more than minimal planning is reviewed under the clearly erroneous standard. United States v. Pearce, 65 F.3d 22, 26 (4th Cir.1995).
4
More than minimal planning is defined in the guidelines as "more planning than is typical for commission of the offense in a simple form." USSG § 1B1.1, comment. (n.1(f)). The commentary states that more than minimal planning is "deemed present in any case involving repeated acts over a period of time, unless it is clear that each instance was purely opportune." Id. An embezzlement committed by a single false book entry shows minimal planning. Id. England's offense involved multiple false book entries spanning a number of years and clearly falls within the definition. The district court did not clearly err in finding that England had not shown that she was mentally impaired to such an extent that the enhancement should not apply.
5
Defense counsel also argued that England did not have a position of trust because her job was one step above that of bank teller. Rather than having control over the Safe Deposit Income Account, as stated in the presentence report, counsel asserted that she functioned as secretary to the retail banking manager. After considering the statement England gave to the bank's investigator, in which she said that she was the custodian of the Safe Deposit Income Account and made the credit and debit entries, the court found that England had abused a position of trust.
6
The district court's decision on this factual issue is reversible only if it is clearly erroneous. United States v. Helton, 953 F.2d 867, 869 (4th Cir.1992). The factors to be considered in determining whether a defendant abused a position of trust are: (1) whether the defendant had special duties or special access to information not available to other employees; (2) what level of supervision or degree of managerial discretion was present; and (3) whether the particular defendant is more culpable than others who hold similar positions. United States v. Gordon, 61 F.3d 263, 269 (4th Cir.1995). The question of whether a defendant held a position of trust must be approached from the perspective of the victim. Id. The answer does not depend on formalistic definitions of job type. Id.
7
The commentary to USSG § 3B1.3 describes embezzlement by an attorney serving as a guardian as an example of an abuse of a position of trust, while a bank teller's embezzlement would not qualify for the adjustment because a teller is closely supervised and lacks professional discretion. England argues that her position was analogous to a bank teller's. From the information provided about her position it does appear that she had little or no professional discretion, a factor that weighs heavily against the finding that she had a position of trust. However, England had a special duty in that she was responsible for the day-to-day operation of the Safe Deposit Income Account, and she had access to those accounts. Most importantly, unlike a closely-supervised bank teller, England appears to have worked with little or no supervision, and was thus able to carry on her embezzlement for several years without its being discovered, even though she took no particular steps to conceal it. Thus, in practice, the victim bank seems to have reposed considerable trust in her. Although it is a close question, we cannot say that the district court's determination that England held a position of trust was clearly erroneous.
8
England also maintains that the district court did not make "a principled exercise of discretion" concerning departure and improperly considered the issue to be intertwined with its previous rulings. She does not argue that the district court failed to understand its authority to depart, nor would the record support such an argument. It is clear that the district court exercised its discretion in deciding against a departure. Consequently, its decision is not reviewable. United States v. Bayerle, 898 F.2d 28, 31 (4th Cir.), cert. denied, 498 U.S. 819 (1990).
9
We therefore affirm the sentence imposed. We dismiss that portion of the appeal in which England seeks to appeal the district court's decision not to depart. We dispense with oral argument because the facts and legal contentions are adequately presented in the materials before the court and argument would not aid the decisional process.
AFFIRMED IN PART, DISMISSED IN PART
*
United States Sentencing Commission, Guidelines Manual (Nov.1994)
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180 P.3d 785 (2008)
IN RE DETENTION OF YOUNG
No. 80385-4.
Supreme Court of Washington, Department II.
March 5, 2008.
Disposition of petition for review. Denied.
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782 So.2d 848 (2000)
Shane CARPENTER
v.
STATE.
CR-99-2414.
Court of Criminal Appeals of Alabama.
October 6, 2000.
*849 Shane Carpenter, appellant, pro se.
Submitted on appellant's brief only.
PER CURIAM.
The appellant, Shane Carpenter, appeals from the dismissal of his petition for habeas corpus, in which he attacks a prison disciplinary proceeding.
In processing this appeal, this Court realized that the trial court never ruled on Carpenter's affidavit of substantial hardship or his request to proceed in forma pauperis, see § 12-19-70, Ala.Code 1975, and that Carpenter never paid the docket fee in the circuit court. Because this issue affects the jurisdiction of the trial court to rule on the habeas corpus petition, we have, ex mero motu, noticed this defect in the proceedings. "`Jurisdictional matters are of such magnitude that [appellate courts] take notice of them at any time and do so even ex mero motu.'" Ex parte Hargett, 772 So.2d 481, 482 (Ala. Crim.App.1999), quoting Nunn v. Baker, 518 So.2d 711, 712 (Ala.1987).
This Court in Goldsmith v. State, 709 So.2d 1352 (Ala.Crim.App.1997), held that absent the payment of a filing fee or the granting of a request to proceed in forma pauperis the trial court fails to obtain subject matter jurisdiction to consider a postconviction petition. See Ex parte Beavers, 779 So.2d 1223 (Ala.2000). We believe that the same rationale applies to habeas corpus petitions. Because the trial court did not have jurisdiction to consider the merits of the habeas corpus petition, its judgment dismissing that petition is void, and this Court has no jurisdiction to consider this appeal; thus, this appeal is due to be dismissed.
We take this opportunity, however, to write to an issue that is becoming an ever increasing problem in this Court. Section 12-19-70, Ala.Code 1975, which addresses the waiving of the filing fee in circuit court, states:
"(a) There shall be a consolidated civil filing fee, known as a docket fee, collected from a plaintiff at the time a complaint is filed in circuit court or in district court.
"(b) The docket fee may be waived initially and taxed as costs at the conclusion of the case if the court finds that *850 payment of the fee will constitute a substantial hardship. A verified statement of substantial hardship, signed by the plaintiff and approved by the court, shall be filed with the clerk of court."
(Emphasis added.)[1]
Here, the trial court attempted to invoke this statute by taxing the filing fee as costs at the end of the proceeding. However, the trial court did not approve the affidavit of substantial hardship before it ruled on the petition. Section 12-19-70 provides that a filing fee shall be collected at the time a complaint or a postconviction petition is filed, unless a verified statement of substantial hardship is approved, in which event the docket fee may initially be waived and then taxed as costs at the conclusion of the case. A trial court does not obtain jurisdiction of an action until either a filing fee is paid or the fee is properly waived according to § 12-19-70. The Alabama Supreme Court stated the following concerning § 12-19-70:
"The use of the term `shall' in this provision [§ 12-19-70(a)] makes the payment of the filing fee mandatory. See Prince v. Hunter, 388 So.2d 546, 547 (Ala.1980). It was the obvious intent of the legislature to require that either the payment of this fee or a court-approved verified statement of substantial hardship accompany the complaint [petition] at the time of filing. No doubt the purpose behind the passage of this provision was to discourage the filing of frivolous suits and to insure that the clerks of the circuit court do not become `credit men.' Cf. Turkett v. United States, 76 F.Supp. 769 (N.D.N.Y.1948) (holding that payment of the filing fee is a prerequisite to filing an action under Rule 3, Fed.R.Civ.P., which is identical to our Rule 3, and 28 U.S.C.A., § 549 (now 28 U.S.C.A., § 1914), which provides that the party instituting a civil action must pay a filing fee, and commenting, `Any other construction would open the door to actions without merit by irresponsible parties, and make the clerk a credit man, whose accountability might result in his personal loss,' 76 F.Supp. at 770)."
De-Gas, Inc. v. Midland Resources, 470 So.2d 1218, 1220 (Ala.1985).
No person should be permitted to file a postconviction petition without paying the requisite filing fee, unless the petition is accompanied by a court-approved verified statement of substantial hardship signed by the petitioner. Here, Carpenter filed a habeas corpus petition. This Court is aware that, "`[I]n order to prevent "effectively foreclosed access" [to the courts], indigent prisoners must be allowed to file appeals and habeas corpus petitions without payment of docket fees.' Bounds v. Smith, 430 U.S. 817, 822, 97 S.Ct. 1491, 52 L.Ed.2d 72 (1977)." Ex parte Beavers, 779 So.2d at 1224. However, Alabama has provided indigent defendants with a means to file habeas corpus petitions without prepaying the filing fees, see § 12-19-70. We urge the trial courts to comply with this statute when entertaining both habeas corpus petitions and Rule 32 petitions.
Here, the trial court's order was void for lack of jurisdiction. The trial court did not approve the verified statement of substantial hardship. Because the trial court's actions were void, there is no judgment to support an appeal. McKinney v. State, 549 So.2d 166, 168 (Ala.Crim.App.1989).
*851 For the reasons stated above, this appeal is due to be, and is hereby, dismissed.
APPEAL DISMISSED.
LONG, P.J., and McMILLAN, COBB, BASCHAB, and FRY, JJ., concur.
NOTES
[1] Habeas corpus petitions are considered civil actions for procedural purposes. Hoppins v. State, 451 So.2d 363 (Ala.Crim.App.1982).
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In the United States Court of Federal Claims
OFFICE OF SPECIAL MASTERS
No. 16-0147V
Filed: March 16, 2017
UNPUBLISHED
*********************************
BRANDIE SANDERS, *
*
Petitioner, *
v. *
* Attorneys’ Fees and Costs;
SECRETARY OF HEALTH * Special Processing Unit (“SPU”)
AND HUMAN SERVICES, *
*
Respondent. *
*
****************************
Maximillian J. Muller, Muller Brazil, LLP, Dresher, PA, for petitioner.
Lynn E. Ricciardella, U.S. Department of Justice, Washington, DC, for respondent.
DECISION ON ATTORNEYS’ FEES AND COSTS1
Dorsey, Chief Special Master:
On February 2, 2016, Brandie Sanders (“petitioner”) filed a petition for
compensation under the National Vaccine Injury Compensation Program, 42 U.S.C.
§300aa-10, et seq.,2 (the “Vaccine Act”). Petitioner alleged that she suffered a shoulder
injury as a result of a “Tetanus, Diphtheria [acellular] Pertussis” (“Tdap”) vaccine on
February 14, 2015. On August 31, 2016, the undersigned issued a decision awarding
compensation to petitioner based on the parties’ joint stipulation. (ECF No. 23).
On February 3, 2017, petitioner filed a motion for attorneys’ fees and costs.
(ECF No. 29). Petitioner requests attorneys’ fees in the amount of $17,888.50, and
1
Because this unpublished decision contains a reasoned explanation for the action in this case, the
undersigned intends to post it on the United States Court of Federal Claims' website, in accordance with
the E-Government Act of 2002. 44 U.S.C. § 3501 note (2012) (Federal Management and Promotion of
Electronic Government Services). In accordance with Vaccine Rule 18(b), petitioner has 14 days to
identify and move to redact medical or other information, the disclosure of which would constitute an
unwarranted invasion of privacy. If, upon review, the undersigned agrees that the identified material fits
within this definition, the undersigned will redact such material from public access.
2
National Childhood Vaccine Injury Act of 1986, Pub. L. No. 99-660, 100 Stat. 3755. Hereinafter, for
ease of citation, all “§” references to the Vaccine Act will be to the pertinent subparagraph of 42 U.S.C. §
300aa (2012).
attorneys’ costs in the amount of $1,074.73, for a total amount of $18,963.23. Id. at 2.
In accordance with General Order #9, petitioner’s counsel represents that petitioner
incurred no out-of-pocket expenses.
On February 21, 2017, respondent filed a response to petitioner’s motion. (ECF
No. 30). Respondent argues that “[n]either the Vaccine Act nor Vaccine Rule 13
contemplates any role for respondent in the resolution of a request by a petitioner for an
award of attorneys’ fees and costs.” Id. at 1. Respondent adds, however, that she “is
satisfied the statutory requirements for an award of attorneys’ fees and costs are met in
this case.” Id. at 2. Respondent recommends that the undersigned exercise her
discretion and determine a reasonable award for attorneys’ fees and costs. Id. at 3.
The undersigned has reviewed the billing records submitted with petitioner’s
request. In the undersigned’s experience, the request appears reasonable, and the
undersigned finds no cause to reduce the requested hours or rates.
The Vaccine Act permits an award of reasonable attorneys’ fees and costs.
§ 15(e). Based on the reasonableness of petitioner’s request, the undersigned
GRANTS petitioner’s motion for attorneys’ fees and costs.
Accordingly, the undersigned awards the total of $18,963.233 as a lump
sum in the form of a check jointly payable to petitioner and petitioner’s counsel
Muller Brazil, LLP.
The clerk of the court shall enter judgment in accordance herewith.4
IT IS SO ORDERED.
s/Nora Beth Dorsey
Nora Beth Dorsey
Chief Special Master
3
This amount is intended to cover all legal expenses incurred in this matter. This award encompasses all
charges by the attorney against a client, “advanced costs” as well as fees for legal services rendered.
Furthermore, § 15(e)(3) prevents an attorney from charging or collecting fees (including costs) that would
be in addition to the amount awarded herein. See generally Beck v. Sec’y of Health & Human Servs.,
924 F.2d 1029 (Fed. Cir.1991).
4
Pursuant to Vaccine Rule 11(a), entry of judgment can be expedited by the parties’ joint filing of notice
renouncing the right to seek review.
2
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59 B.R. 18 (1985)
In re CARDI VENTURES, INC., Debtor.
Bankruptcy No. 85 B 10253.
United States Bankruptcy Court, S.D. New York.
September 6, 1985.
*19 Smith Panish & Shapiro by Philip Smith, New York City, for petitioner Mosco Realty.
Sherman, Citron & Karasik, P.C. by A. Mitchell Greene, New York City, for Cardi Ventures, Inc.
Kirschenbaum & Fleischman, New York City, for Nehning Bros.
Ronald A. Hollander, New York City, for debtor.
DECISION
HOWARD C. BUSCHMAN, III, Bankruptcy Judge.
Mosco Realty Company ("Mosco") seeks an order pursuant to 11 U.S.C.A. § 1112(b) dismissing the Chapter 11 petition filed by Cardi Ventures ("Cardi") on February 27, 1985 on the grounds that the petition was not filed in good faith and that Cardi lacks real creditors. Trial was held on July 17, 1985.
FACTS
Cardi is a New York corporation with its place of business at 1420 St. Nicholas Avenue, New York, New York. It holds these premises pursuant to a lease with Mosco's predecessor in interest dated October 27, 1972 and due to expire October 31, 1993 ("the lease"). It is this lease which lies at the center of the controversy between Cardi and Mosco. The lease contains a clause permitting the premises to be used only for *20 a restaurant. The premises have been used for this purpose since at least 1976.
In late 1984, Salvatore Di Carlo, Cardi's president and sole stockholder, entered into an agreement to assign Cardi's rights under the least to IPCO Corporation ("IPCO"), a New York corporation which operates a chain of retail optical stores under the name of Sterling Optical Company. The sale was contingent on Cardi's obtaining a change in the lease's use clause. IPCO deposited $133,333.00 in escrow with Ronald A. Hollander, Cardi's attorney, as security for the purchase of the lease. This sum was to be released to Cardi only upon consummation of the sale.
Cardi and Mosco proceeded to negotiate a possible change in the lease's use clause. While still in the process of negotiating with Mosco, Cardi filed a voluntary petition for relief under Chapter 11 of the Code. In May 1985, after Cardi's Chapter 11 filing, IPCO withdrew its offer to purchase the lease.
With the collapse of the sale to IPCO, Cardi resumed the negotiations with Cohen-Fashion Optical Inc. ("Cohen"), another optical company that had occurred prior to bankruptcy. It then brought an adversary proceeding to change the use clause. Because such relief is to be sought upon motion to approve an assignment under Section 365(f) of the Bankruptcy Code, 11 U.S.C. § 365 (1984), Cardi noticed such a motion seeking authority to assume the lease and assign it to Cohen pursuant to the terms of a lease purchase agreement.
Concurrently, Mosco moved to dismiss on the ground that Cardi has no real creditors, and that its Chapter 11 petition was only an attempt to force a change in the lease's use clause limiting use of the premises to a restaurant and therefore was not filed in good faith. Argument on the motion to dismiss and on the lease assignment was held for July 2, 1985. An evidentiary hearing on the motion to dismiss was ordered and both motions were adjourned to July 17, 1985.
At that hearing, Cardi averred that Cohen had refused to extend the lease purchase agreement's July 15 cancellation date and was at present not interested in buying the lease. It, nevertheless, moved to assume the lease in order to operate a restaurant on the premises. Under its proposal DiCarlo would guarantee performance of the lease. Mosco requested discovery as to whether it would thereby receive adequate assurance under § 365(b)(1) of the Code and the hearing on the motion to assume the lease was adjourned.
With respect to the motion to dismiss the petition, the evidence indicates that as of the petition date, Cardi's only asset was the lease at issue in these proceedings. Consistent with the use clause of the lease, Cardi operated a restaurant on the premises between 1976 and 1980. It then subleased the premises to a corporation known as Donna Barbara which operated a restaurant. Thereafter, its sole business was that of collecting rents and notes. The premises have been closed since at least November 1984. Sometime in 1984, DiCarlo purchased the sublease after Donna Barbara had filed for bankruptcy.
Cardi did not offer evidence of a business bank account, employees, or business being conducted at the premises. Cardi did submit as evidence a creditor register listing the following creditors: Ronald A. Hollander; IPCO Corporation; Franco Mazzella; Mosco Realty; Sheldon Hertz; Salvatore DiCarlo; New York State Tax Commission (listed twice for the same amount); and the City of New York.
IPCO, to whom Cardi claims to owe $133,333.00 is however not a creditor. This sum was deposited in escrow with Cardi's attorney and Cardi had no access to this money until a sale was finalized. Since no sale occurred neither Cardi nor its creditors had a right to this amount.
The City of New York is listed as a creditor in the amount of $15,600. DiCarlo however testified that Cardi had paid all taxes and disputed the claim.
Sheldon Hertz is listed as a creditor in the amount of $10,000.00 brokerage fee for services rendered in connection with the *21 attempted sale of the lease to Cohen. The brokerage agreement submitted by Mr. Hertz indicates this commission is due upon closing of a proposed sale which is no longer being contemplated. Furthermore, the agreement mentions DiCarlo as the party responsible for payment.
Franco Mazzella is listed as a creditor for $70,000. His attorney, Porcelli, testified that this debt arose from Mazzella's interest in the sale of his interest in this premises to Donna Barbara. In payment Donna Barbara gave notes to Cardi and to Mazzella. Payment on Mazzella's notes was to begin in July 1986. On February 7, 1985, shortly before Cardi filed its petition, Cardi gave Mazzella a note co-signed by DiCarlo and Equipment Repo Resale Corp., which he owns apparently in conjunction with DiCarlo's acquisition of the sublease. Mazzella's position was thereby kept intact. Payment commences in July 1986. No amount is owed prepetition.
Hollander, Cardi's attorney, is listed as a creditor in the amount of $24,980.55. The bills reflect work concerning the dispute with Mosco and prepetition negotiation with IPCO and Cohen. They, however, were addressed to Salvatore DiCarlo at his home address. Of these, only three of the last four mention Cardi in the address. They were sent to DiCarlo's home, two were rendered within approximately 3-4 months of Cardi's filing its petition and a third was rendered afterwards. There is no evidence that Hollander had a retainer agreement with Cardi. Absent same, the addresses on the bills coupled with Cardi's lack of funds to pay Hollander, would indicate that Hollander was looking to DiCarlo, not Cardi, to pay his fee. Particularly is this so since the proposed sale to IPCO and to Cohen each far exceeded the total alleged debt in this case and thereby would have afforded DiCarlo with a substantial premium.
The only creditors of consequence remaining are the New York State Tax Commission to whom Cardi is said to owe $2,287.18, DiCarlo who is a principal of the bankrupt company and is owed $56,000, and Mosco which is owed $28,104.73 in unpaid prepetition rents. The New York State Tax Commission does not oppose the motion. DiCarlo testified that he did not think that the claim was valid discounting the relatively minimal tax debt.
DISCUSSION
The central purpose of Chapter 11 is to provide debtors a respite from their financial obligations and to give them breathing space in which to rehabilitate their business. Matter of Levinsky, 23 B.R. 210 (Bankr.E.D.N.Y.1982); In re Eden Associates, 13 B.R. 578 (Bankr.S.D. N.Y.1981); Matter of Winshall Settlor's Trust, 758 F.2d 1136 (6th Cir.1985); Matter of Century City Inc., 8 B.R. 25 (Bankr.D. N.J.1980). In addition, Chapter 11 protects the interests of creditors who may benefit from the reorganization of the debtor's business. In re Johns-Mansville Corp., 36 B.R. 727 (Bankr.S.D.N.Y.1984).
The Code, in § 1112(b) however, permits dismissal of the case or its conversion to Chapter 7 for "cause" including nine specific examples. This enumeration, however, is not exhaustive of the causes for dismissal of a Chapter 11 petition. The word "including" is defined in 11 U.S.C.A. § 102(3) as not being limiting and courts may, if justified by the circumstances of a particular case, look to other factors as cause for dismissal. In Re Larmar States Inc., 6 B.R. 933, 3 CBC 2d. 218 (Bankr.E.D. N.Y.1980). Exactly what these factors are is not illuminated by resort to the legislative history. Congress indicated only that "courts will be able to consider other factors as they arise, and use its equitable powers to reach an appropriate result in individual cases." House Report No. 95-595, 95th Cong. 1st Sess. (1977) U.S.Code Cong. & Admin.News 1978, p. 5787.
In the exercise of that function, good faith in filing a Chapter 11 petition has become identified as one factor that courts consider in deciding whether or not to dismiss a case. In re Johns-Manville Corp., 36 B.R. 727, 737 (Bankr.S.D.N.Y. *22 1984), appeal dismissed 39 B.R. 234 (S.D.N.Y.1984); In re Allen Rogers & Co., 34 B.R. 631, 633 (Bankr.S.D.N.Y.1983); In re Eden Associates, 13 B.R. 578, 584 (Bankr. S.D.N.Y.1981).
As nebulous and elastic as that concept may seem, see e.g., In re Johns-Manville Corp., 36 B.R. at 737 (Bankr.S.D.N.Y. 1984) appeal dismissed 39 B.R. 834 (S.D.N.Y.1984), it has been refined to require inquiry as to whether the debtor has any assets, real debts and real creditors, In re Eden Associates, 13 B.R. at 585, and whether the debtor is abusing the jurisdiction of the bankruptcy court. In re Johns-Manville Corp., 36 B.R. at 737. Dismissal on this latter ground has been found, as in In re Wally Findlay Galleries, 36 B.R. 849 (Bankr.S.D.N.Y.1984), where debtor filed the petition solely as a litigation tactic and in In re Guglielmo, 30 B.R. 102 (Bankr.M. D.La.1983) where debtor used bankruptcy proceedings to the detriment of its creditors in executing a management agreement for his benefit. Bad faith was not found where an individual shifted a property to a newly formed corporation that subsequently filed a Chapter 11 petition, where it was established that the individual could have filed a chapter 11 petition himself and thus was not gaining any jurisdictional advantage by creating the corporation. Matter of Levinsky, 23 B.R. 210 (Bankr.E.D.N.Y. 1982).
The absence of "good faith" as a statutory criterion indicates that the doctrine is to be sparingly applied. Revival of an inactive corporation and using bankruptcy for purposes other than rehabilitation or liquidation or the purposes incident to chapter 13, however, demands close scrutiny, as is illustrated by In re American Property Corporation, 44 B.R. 180 (Bankr.M.D.Fla. 1984), which bears some resemblance to the instant case. There, the debtor had been inactive for some four years prior to filing a Chapter 11 petition. Shortly before filing the petition, it purchased real property which it knew was subject to foreclosure proceedings and unsuccessfully attempted to change the property's zoning from shopping center to residential development. Shortly after entry of a final judgment of foreclosure, the Chapter 11 petition was filed. Upon finding that the property was debtor's only asset, that it had no real creditors and that all of its business efforts had been devoted to rezoning the property, the court held that the case should be dismissed for lack of good faith at the time of filing. Similarly suspect are cases where the corporation was not engaged in any on going business activity and only a single creditor would benefit from reorganization under Chapter 11. In re FJD, Inc., 24 B.R. 138, 140 (Bankr.D.Nev.1982).
Here, the evidence reveals the lease as Cardi's only asset. Its premises are closed. Cardi did not offer evidence of employees, bank account or other indicia of an on-going business. Cardi's present posture is that it, with the IPCO and Cohen assignments having come to naught, will reopen the restaurant consistent with the use clause of its lease. Yet it is abundantly clear that it filed its petition with the sale to IPCO in place and with Cohen waiting in the wings for the principal reason of attempting to assign the lease notwithstanding the use clause and notwithstanding the bar of state law to an assignment contemplating a material variation of such a clause. See, 30-88 Steinway Street Inc., v. H.C. Bohack Co., 65 Misc.2d 1076, 319 N.Y.S.2d 679 (Civ.Ct.1971).
Secondly, this case appears to be one where the significant debt, other than to Mosco, was generated shortly before the filing of the bankruptcy petition or is owed to the debtor's principal. Since, moreover, the claims of non-insider creditors of consequence in this case, other than that of Mosco and the disputed New York State Tax Commission claims, are either not due or would appear to be owed by Cardi's principal, those creditors are not real creditors requiring the protections of the Bankruptcy Code. Upon analysis, this controversy reduces itself to a two party dispute between Cardi and its landlord, Mosco. Given Hollander's current status as co-counsel to the debtor, DiCarlo's status as *23 principal and that the payments to Mazzella are not yet due, it does not appear that Cardi filed its bankruptcy petition to resolve these debts.
The landlord-tenant relationship is the subject of state law. When a business has not opened its doors for five years, only holds a lease as its asset, avoids paying rent, and has only a minor debt it should not be allowed to use the Bankruptcy Code as a sword for the apparent purpose of bringing into play bankruptcy policy of estate maximization and the resulting flexibility, see In re Evelyn Byrnes, Inc., 32 B.R. 825, 829-30 (Bankr.S.D.N.Y.1983), accorded debtors attempting to assign leaseholds in premises other than shopping centers. Such forum shopping is an absence of good faith commanding dismissal for cause pursuant to § 1112(b).
For the foregoing findings of fact and conclusions of law, the motion to dismiss Cardi Ventures Chapter 11 petition should be granted leaving the parties free to pursue their landlord-tenant dispute in state court. Mosco's motion for costs and sanctions is denied.
SETTLE ORDER.
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8 N.Y.3d 1003 (2007)
In the Matter of JULIA BB. and Others, Children Alleged to be Severely Abused.
SARATOGA COUNTY DEPARTMENT OF SOCIAL SERVICES, Appellant;
DIANA BB., Respondent.
In the Matter of JULIA BB. and Others, Children Alleged to be Severely Abused.
SARATOGA COUNTY DEPARTMENT OF SOCIAL SERVICES, Appellant;
FRANCIS BB., Respondent.
Court of Appeals of the State of New York.
Submitted June 5, 2007.
Decided June 7, 2007.
Motion to vacate stay granted.
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F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
MAY 27 1997
TENTH CIRCUIT
PATRICK FISHER
Clerk
JESSICA KEOUGHAN,
Plaintiff - Apellant,
vs. No. 96-4072
(D.C. No. 95-CV-82)
DELTA AIRLINES, INC., (D. Utah)
Defendant - Appellee.
ORDER AND JUDGMENT*
Before KELLY, HOLLOWAY, and BRISCOE, Circuit Judges.
Plaintiff Jessica Keoughan filed this action against Defendant Delta Airlines, Inc.
(Delta), alleging that Delta violated the Americans with Disabilities Act of 1990 (ADA),
Pub. L. No. 101-336, 104 Stat. 327 (codified as amended at 29 U.S.C. § 706; 42 U.S.C.
§§ 12101-12213; 47 U.S.C. §§ 152, 221, 225, 611). Delta moved for summary judgment,
which the district court granted on the grounds that Ms. Keoughan was not disabled
within the meaning of the ADA. Ms. Keoughan appeals, arguing that the facts
surrounding her disability are in dispute. We exercise jurisdiction pursuant to 28 U.S.C.
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. This court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
§ 1291 and affirm.
Facts
Ms. Keoughan began her employment with Delta as a flight attendant in 1987.
She transferred to Salt Lake City in 1988, where she remained until her termination in
1994. Throughout her employment, Ms. Keoughan had trouble meeting Delta’s
expectations concerning dependability and attendance. Under Delta’s policy, attendants
who had six or more periods of absenteeism in one year were rated below standard. In
1993, the number was reduced to five periods. In her nearly six-year career with Delta,
Ms. Keoughan was rated below standard four times, and received thirteen notices that her
dependability and attendance were unacceptable.
In 1991, Ms. Keoughan was diagnosed with bipolar disorder. She underwent
counseling and began taking lithium carbonate. Ms. Keoughan alleges that she sought
professional help at the behest of her supervisors, and that she told her supervisors of the
diagnosis. Her supervisors deny that they knew about Keoughan’s illness until shortly
before her termination. She claims that her disorder manifested itself in physical
symptoms and severe mood swings, so that her absenteeism at work was a direct result of
the disorder. The four times that she missed a flight entirely, however, Ms. Keoughan’s
reasons had nothing to do with her disorder. The lithium stabilized Ms. Keoughan’s
disorder, and she stated that she was able to function normally. She stopped taking
lithium twice while with Delta, however, and had not taken her medication for at least a
-2-
year following her termination.
In 1992, Ms. Keoughan received a warning letter after missing a flight for the
fourth time. In September 1992, Ms. Keoughan called in sick, which was her third period
of absenteeism in four months. This prompted a final warning, after which any further
violations of attendance policy could result in termination. After successfully completing
a formal probation in March 1993, Ms. Keoughan had another five periods of
absenteeism. As a result, she was suspended in December 1993 and terminated on
January 11, 1994.
Discussion
We review the grant of summary judgment de novo, and apply the same legal
standard used by the district court under Rule 56(c). United States v. City and County of
Denver, 100 F.3d 1509, 1512 (10th Cir. 1996). Summary judgment is appropriate if
“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); see also Celotex Corp. v. Catrett, 477
U.S. 317, 322-23 (1986). A disputed fact is “material” if it might affect the outcome of
the suit under the governing law, and the dispute is “genuine” if the evidence is such that
a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty
Lobby, 477 U.S. 242, 248 (1986). We construe the factual record and reasonable
inferences therefrom in the light most favorable to the nonmovant. Gaylor v. Does, 105
-3-
F.3d 572, 574 (10th Cir. 1997).
The ADA prohibits employment discrimination against “a qualified individual
with a disability because of the disability of such individual,” 42 U.S.C. § 12112(a), and
further requires that employers make “reasonable accommodations to the known physical
or mental limitations of an otherwise qualified individual with a disability.” 42 U.S.C.
§ 12112(b)(5)(A). The ADA defines “qualified individual with a disability” as “an
individual with a disability who, with or without reasonable accommodation, can perform
the essential functions of the employment position that such individual holds . . . .” 42
U.S.C. § 12111(8). To state a claim under the ADA, then, a plaintiff must show that
(1) she is a disabled person within the meaning of the ADA; (2) she is qualified—that is,
with or without accommodation she is able to perform the essential functions of the job;
and (3) the employer terminated her because of her disability. White v. York Int’l Corp.,
45 F.3d 357, 360-61 (10th Cir. 1995).
The district court reasoned that a disabled individual is not “qualified” if she needs
accommodation precisely because she failed to manage an otherwise controllable
disorder. See Siefken v. Village of Arlington Heights, 65 F.3d 664, 666-67 (7th Cir.
1995) (holding that a diabetic who failed to monitor his controllable condition, and who
was fired as a result, did not state a cause of action under the ADA). Citing both Ms.
Keoughan’s deposition testimony and the affidavit of her expert, Dr. Lionel Mausberg,
the district court determined that it was undisputed that Ms. Keoughan’s disorder could be
-4-
controlled and stabilized with lithium, and therefore she could perform all the essential
functions of her job. Because the facts also show that Ms. Keoughan failed to take her
lithium, the court granted Delta’s motion for summary judgment. Aplt. App. at 21 (citing
Seifken, 65 F.3d at 666).
Ms. Keoughan contends that the district court was in error, because there exists a
factual dispute as to whether her bipolar disorder can be controlled by lithium. Citing
other parts of her deposition and Dr. Mausberg’s affidavit, she argues that the evidence
establishes only that lithium controls her disorder “in large part.” That is not inconsistent,
however, with the proposition that had Ms. Keoughan taken her medication, she still
could have performed the essential functions of her job.
Regardless, even if we were to agree that it is disputed whether lithium allows Ms.
Keoughan to perform all the essential functions of her job, another ground supports the
district court’s decision. See Bolton v. Scrivner, Inc., 36 F.3d 939, 942 (10th Cir. 1994)
(summary judgment may be affirmed “on grounds other than those relied upon by the
district court when the record contains an adequate and independent basis for that
result”), cert. denied, 115 S. Ct. 1104 (1995).
Under the ADA, a person is a “qualified individual with a disability” if she can
perform the essential functions of the job with or without reasonable accommodation. 42
U.S.C. § 12111(8). Ms. Keoughan does not dispute that an essential function of her job
with Delta was to show up for work when scheduled. The record also reflects that
-5-
attendance was the only essential function that proved difficult for Ms. Keoughan. Thus,
Ms. Keoughan requests that Delta accommodate her disability by increasing the number
of times she may miss work without being disciplined.
The accommodation Ms. Keoughan seeks, however, is really not an
accommodation at all. The accommodation she requests will not allow her to perform an
essential function—that is, show up for work on a regular and predictable basis—but
rather will relieve her of the duty to perform that essential function. “An accommodation
that eliminates the essential function of the job is not reasonable.” Smith v. Blue Cross
Blue Shield, 102 F.3d 1075, 1076 (10th Cir. 1996).
AFFIRMED. The mandate shall issue forthwith.
Entered for the Court
Paul J. Kelly, Jr.
Circuit Judge
-6-
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384 F.2d 927
GUEST HOUSE MOTOR INN, INC., Appellant,v.Mrs. Christine W. DUKE and John W. Duke, Appellees.
No. 24256.
United States Court of Appeals Fifth Circuit.
Nov. 15, 1967.
Joe R. Wallace, Davies, Williams & Wallace, Birmingham, Ala., for appellant.
Edward L. Hardin, Jr., Francis Hare, Jr., Hare, Wynn, Newell & Newton, Birmingham, Ala., for appellees.
Before RIVES, GOLDBERG and DYER, Circuit Judges.
PER CURIAM:
1
This is a slip and fall case in which the appellant complains that the district court erred in refusing appellant's request for an affirmative charge, with hypothesis, made pursuant to the practice in the state courts. Such a charge is substantially equivalent to a motion for a directed verdict under Rule 50, Federal Rules of Civil Procedure. City of Albertville, Ala. v. United States Fidelity and Guaranty Co., 5 Cir. 1960, 272 F.2d 594, 601, 84 A.L.R.2d 1. No specific grounds were stated in support of the charge, as required by Rule 50, Federal Rules of Civil Procedure and it was therefore properly refused. Moreover, when as here there was evidence which, if believed by the jury would authorize a verdict against the moving party, a directed verdict is not proper. Herron v. Maryland Cas. Co., 5 Cir. 1965, 347 F.2d 357.
2
The appellant's contentions that the district court should not have given certain charges and failed to give other charges are unavailing because appellant failed either to object to the giving or failing to give the charges or to state distinctly the grounds relied upon for its objections. Rule 51, Federal Rules of Civil Procedure; Pruett v. Marshall, 5 Cir. 1960, 283 F.2d 436, 440-441.
3
Finally, the record clearly shows that the mention of liability insurance by the Dukes' counsel was provoked by a question of the Motor Inn's counsel about Mrs. Duke's insurance. Motor Inn cannot therefore complain. Alabama Great S.R.R. v. Gambrell, 1955, 262 Ala. 290, 78 So.2d 619. Futhermore the district court made clear that such a collateral inquiry had no place in the case.
4
The judgment is affirmed.
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205 F.2d 423
NATIONAL LABOR RELATIONS BOARD, Petitioner,v.LEWIS INVISIBLE STITCH MACHINE COMPANY.
No. 14855.
United States Court of Appeals Eighth Circuit.
June 26, 1953.
David B. Findling, Associate General Counsel, National Labor Relations Board, and A. Norman Somers, Asst. General Counsel, National Labor Relations Board, Washington, D.C., for petitioner.
Charles H. Spochrer, St. Louis, Mo., for respondent.
PER CURIAM.
1
Order of National Labor Relations Board enforced, on petition for enforcement, and stipulation filed with Board.
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375 S.C. 48 (2007)
650 S.E.2d 84
Rita R. BROWN, Respondent,
v.
David E. BROWN, Appellant.
No. 4286.
Court of Appeals of South Carolina.
Heard June 5, 2007.
Decided August 9, 2007.
Rehearing Denied September 20, 2007.
*49 John S. Nichols, Ken H. Lester, of Columbia, for Appellant.
Peter L. Fuge, of Beaufort, for Respondent.
*50 HEARN, C.J.:
In this domestic action, David E. Brown (Husband) alleges the family court erred in finding that unallocated support payments were non-deductible to him and non-taxable to Rita R. Brown (Wife), and in ordering Husband to amend his tax returns, file a joint return with Wife, or compensate Wife for the tax consequences she suffered. We affirm as modified.
FACTS
The parties were married in May 1987. Wife instituted this action on November 13, 2003, seeking, inter alia, an award of temporary separate maintenance and support. In March, the family court entered a pendente lite order (the first order), which provided that "[t]his court will award unallocated family support to [Wife].... [Husband] shall pay as unallocated family support the amount of $8,500.00 per month."
Approximately one year later, Wife filed a motion for additional temporary relief, requesting that the family court declare the unallocated support award non-taxable to Wife and non-deductible to Husband. Husband argued that according to the Internal Revenue Service, he was permitted to deduct the unallocated support payment, and he had done so in his tax return. After a hearing, the family court issued an order (second order) granting Wife's motion. The order provided:
I know what I intended. It was and still is my intention that all pendente lite unallocated support that [Husband] was ordered to pay ... is and shall be non-taxable to [Wife] and non-deductible to [Husband]. I have traditionally issued orders for unallocated support and when I do so, it is my intention that the unallocated support for the parties' family to be paid by [Husband] and non-taxable to [Wife] for state and federal income tax purposes. If it was to be taxable, I would have said it.
The family court also ordered Husband to either amend his tax returns to eliminate the 2004 deduction he claimed, to file a joint return with Wife, or to compensate Wife for the tax consequences of the unallocated support award. The family *51 court denied Husband's subsequent Rule 59(e) motion. This appeal followed.[1]
STANDARD OF REVIEW
In appeals from the family court, the appellate court has the authority to find facts in accordance with its own view of the preponderance of the evidence. Wooten v. Wooten, 364 S.C. 532, 540, 615 S.E.2d 98, 102 (2005). In spite of this broad scope of review, we remain mindful that the family court judge saw and heard the witnesses and generally is in a better position to determine credibility. Id. The appellate court can, however, correct errors of law. E.D.M. v. T.A.M., 307 S.C. 471, 473, 415 S.E.2d 812, 814 (1992).
LAW/ANALYSIS
Husband argues the family court erred in holding the unallocated support payments were non-deductible to him and non-taxable to Wife. Specifically, Husband argues two errors by the family court. First, Husband alleges that the family court's first order awarding unallocated support allowed the amount to be deducted on his income tax returns. Second, he argues that the family court erred as a matter of law in holding that the unallocated support payments were non-deductible to him and non-taxable to Wife. We agree in part, disagree in part, and affirm as modified.
I.
Husband argues that an award of unallocated support is traditionally deductible by him as the supporting spouse and taxable to Wife as the supported spouse. Particularly, Husband contends that the family court's first order awarding unallocated support to Wife was unambiguous, and therefore, allowed the amount to be deducted on his income tax returns. We agree.
*52 The issue of the tax implications of an unallocated support award has been addressed in South Carolina in Delaney v. Delaney, 278 S.C. 55, 293 S.E.2d 304 (1982) and Beinor v. Beinor, 282 S.C. 181, 318 S.E.2d 269 (1984). In both cases, the supreme court cited approvingly the notion that by making the award unallocated, the amount is taxable to the supported spouse and non-taxable to the supporting spouse. The Delaney court, in reviewing an unallocated support award, noted:
[The supporting spouse] has substantial income, [the supported spouse] has little or no income. Under these circumstances we believe shifting tax liability from the supporting spouse to the supported spouse which permits the supported spouse to net tangibly more child support and alimony because of the decrease in the supporting spouse's tax burden is good cause for non-allocation of child support and alimony.
Delaney, 278 S.C. at 56-57, 293 S.E.2d at 304-05. The Beinor court also cited this rationale, stating: "The trial judge awarded... unallocated support for the [supported spouse] and children. By making the award `unallocated,' the amount is taxable to the [supported spouse] and non-taxable to the [supporting spouse]." Beinor, 282 S.C. at 183, 318 S.E.2d at 269-70. Accordingly, in South Carolina an unallocated award of support is traditionally taxable to the supported spouse and deductible to the supporting spouse.[2]
*53 The family court's first order provided that "[t]his court will award unallocated family support to [Wife].... [Husband] shall pay as unallocated family support the amount of $8,500.00 per month." This order made no reference whatsoever to the tax burdens of either Husband or Wife nor did it allocate the tax burdens in a manner different from the traditional rule found in Delaney and Beinor. Therefore, given the traditional treatment of the tax implications of an award of unallocated support, as well as the unambiguous language of the family court's order, Husband was justified in deducting the $8,500 in unallocated support from his 2004 individual tax return. Because we agree with Husband that the initial order was not ambiguous, it was error for the trial judge to make the second order retroactive.[3]
II.
The above holding, however, does not fully resolve this matter because the family court issued a second order addressing the respective tax burdens of each party.[4] Husband argues that the family court erred in holding the unallocated support payments were non-deductible to him and non-taxable to Wife in the second order. We disagree.
The South Carolina Code specifically allows a family court judge to allocate the intended tax consequences for support payments. It provides:
*54 The court may elect and determine the intended tax effect of the alimony and separate maintenance and support as provided by the Internal Revenue Code and any corresponding state tax provisions. The Family Court may allocate the right to claim dependency exemptions pursuant to the Internal Revenue Code and under corresponding state tax provisions and to require the execution and delivery of all necessary documents and tax filings in connection with the exemption.
S.C.Code Ann. 20-3-130(F) (Supp.2006). Additionally, the Internal Revenue Code includes in the definition of gross income an alimony or support payment only when the "the divorce or separation instrument does not designate such payment as a payment which is not includible in gross income under this section and not allowable as a deduction...." 26 U.S.C.A. 71(b)(1)(B).[5]
Both South Carolina law and the Internal Revenue Code provide the family court authority to allocate the intended tax consequences of the award of support for both Husband and Wife. Therefore, the family court has the authority to allocate the tax consequences, and we affirm the family court's decision in the second order to make the award of support non-deductible to Husband and non-taxable to Wife.[6]
*55 CONCLUSION
For the foregoing reasons, the order of the family court is hereby.
AFFIRMED AS MODIFIED.
STILWELL, J., and CURETON, A.J., concur.
NOTES
[1] Although Husband initially appealed from the denial of his post trial motion, this Court held the appeal in abeyance pursuant to Neville v. Neville, 278 S.C. 411, 297 S.E.2d 423 (1982), pending the issuance of the final order.
[2] Support for this South Carolina rule can also be found in Kean v. Commissioner of Internal Revenue, 407 F.3d 186 (3rd Cir.2005), a case cited to this court by both Husband and Wife. In Kean, the third circuit, in addressing the tax consequences of an award of unallocated support, stated:
Where support payments are unallocated, as in this case, the entire amount is attributable to the [supported] spouse's income. Otherwise, we would be left with a situation in which the portion of the unallocated payment intended for the support of the [supported] spouse would be taxable to the [supporting] spouse. This treatment of support payments is not accidental, and can benefit families going through a divorce.... By ordering the payor spouse to make an unallocated support payment taxable in full to the payee spouse, the couple may be able to shift a greater portion of their collective income into a lower tax bracket. Consequently, an unallocated payment order not only frees the parents from restrictive court instructions that dictate who pays for what, but may allow the parties to enjoy a tax benefit at a time when they face increased expenses as they establish independent homes. This advantage would be lost by taxing all unallocated payments to the payor spouse. Kean, 407 F.3d at 192-93.
[3] As a result of our holding, Husband does not need to amend his tax returns to eliminate the 2004 deduction he claimed on his individual tax return, file a joint return with Wife for that year, or to compensate Wife for the tax consequences of the unallocated support award. Husband must only take the steps necessary to comply with the family court's second order that rendered the unallocated support payments taxable to him and non-taxable to Wife for the period from the issuance of the second order to the final decree of divorce that allocated the support in this matter.
[4] This second order resulted from Wife's motion for additional temporary relief that requested the family court declare the unallocated support award non-taxable to her and non-deductible to Husband.
[5] The Internal Revenue Service has interpreted this section to allow courts to allocate the tax burden of an award of unallocated support. In answering how parties may alter the tax consequences of support payments to allow such payments to be excludible from the gross income of the supporting spouse and excludible in the income of the supported spouse, the IRS stated, "If the spouses are subject to temporary orders the designation of otherwise qualifying [support payments] as nondeductible [by the supporting spouse] and excludible [from the income of the supported spouse] must be made in the original or a subsequent temporary support order." 26 C.F.R. § 1.71-1T (2007).
[6] We find it necessary to provide clarification to the family court on this issue of unallocated support and the potential tax implications of such an award. The family court judge stated she traditionally issues orders for unallocated support, and it is always her intent that an award of unallocated support be non-deductible to the supporting spouse and non-taxable to the supported spouse. An award of unallocated support does not accomplish this tax consequence alone. See Delaney v. Delaney, 278 S.C. 55, 293 S.E.2d 304 (1982); Beinor v. Beinor, 282 S.C. 181, 318 S.E.2d 269 (1984). As we have already noted, an unallocated award of support is traditionally taxable to the supported spouse and deductible to the supporting spouse. Therefore, absent the family court specifically allocating the tax implications among the parties, as allowed under section 20-3-130(F) of the South Carolina Code and 26 U.S.C.A. § 71, an unallocated award of support is deductible to the supporting spouse and taxable to the supported spouse. Absent such a finding, unallocated support would be deductible to the supporting spouse and taxable to the supported spouse. Here, the family court judge made a specific finding that this award was to be non-deductible to the Husband and non-taxable to the Wife; however, had the court not made that specific allocation, the unallocated award of support would have been deductible by Husband and taxable to Wife.
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619 P.2d 474 (1980)
James HAYER and Estelle Hayer, Appellants,
v.
NATIONAL BANK OF ALASKA, an Alaskan Corporation, Appellee.
No. 4709.
Supreme Court of Alaska.
November 14, 1980.
*475 Paul Canarsky, James Q. Mery and Craig J. Tillery, Alaska Legal Services Corp., Fairbanks, for appellants.
No appearance for appellee.
Before RABINOWITZ, C.J., CONNOR, BURKE and MATTHEWS, JJ., and DIMOND, Senior Justice.
MATTHEWS, Justice.
In this appeal, in which appellee did not appear, James and Estelle Hayer attack the trial court's failure to award them costs, attorney's fees and prejudgment interest. We conclude that they were entitled to these items and remand for an adjustment of the trial court's award.
In May of 1977 the Hayers entered into a consumer credit agreement with the National Bank of Alaska. The bank lent the Hayers $2,300.00 for home improvements, which the Hayers agreed to repay over a three year period, in addition to interest and other charges. They subsequently defaulted and in June, 1978, the bank sued them for $2,359.86 plus accrued interest, costs and attorney's fees.
In their answer the Hayers generally denied all allegations and alleged numerous violations by the bank of the federal Truth-in-Lending Act, 15 U.S.C. §§ 1601-65, and Regulation Z of the Federal Reserve Board, 12 C.F.R. § 226, issued to implement the Act. The bank moved for summary judgment, conceding for the purposes of the motion that a truth-in-lending violation had occurred and contending that the Hayers were entitled to a setoff for one but not both obligors. In their opposition, the Hayers admitted the amount claimed by the bank and took issue only with the bank's contention that the Hayers were entitled to a setoff for only one obligor. The superior court ruled in favor of the Hayers, finding that their debt to the bank was offset by two statutory penalties totaling $1,849.20.
In entering final judgment, however, the court awarded prejudgment interest to the bank on its entire claim, without the Hayers' offset. It also determined that the bank, because of its net recovery, was the prevailing party in the action, and awarded the bank costs and attorney's fees under Alaska Rule of Civil Procedure 82(a)(1).[1] The court did not award costs and attorney's fees to the Hayers.
*476 A. Prejudgment Interest.
We find that the trial court abused its discretion in awarding prejudgment interest on the bank's entire claim, rather than its net recovery. Our opinion in National Bank of Alaska v. J.B.L. & K. of Alaska, Inc., 546 P.2d 579, 590-91 (Alaska 1976), clearly implies that prejudgment interest should be awarded on successful counterclaims except in very unusual cases. While the Hayers' Truth-in-Lending claims were asserted as setoffs, rather than counterclaims, we believe that J.B.L. & K. requires that setoffs also be considered in assessing prejudgment interest except in unusual cases. Since we find nothing in this case which warrants ignoring the Hayers' setoff, the bank is only entitled to receive prejudgment interest on its net recovery, which is to be calculated by subtracting from the gross amount due the bank the sum of $1,849.20 plus interest thereon at the statutory rate from the time the Hayers' cause of action accrued-the date of their loan agreement.[2]
B. Costs and Attorney's Fees.
15 U.S.C. § 1640(a)(3) provides that a creditor violating the Truth-in-Lending Act is liable "in the case of any successful action to enforce [rights under the act for] the costs of the action, together with a reasonable attorney's fee as determined by the court." This clause has been interpreted as providing for a mandatory award of attorney's fees where the debtor prevails under the Act. See Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 261 n. 34, 95 S.Ct. 1612, 1623 n. 34, 44 L.Ed.2d 141, 155 n. 34 (1975); Christiansburg Garment Co. v. E.E.O.C., 434 U.S. 412, 98 S.Ct. 694, 415-16, 54 L.Ed.2d 648, 653 (1978); McGowan v. Credit Center of North Jackson, Inc., 546 F.2d 73 (5th Cir.1977); Manning v. Princeton Consumer Discount, Inc., 533 F.2d 102, 106 (3rd Cir.1976). Congress has required the award of attorney's fees to encourage vindication of Truth-in-Lending Act rights and effect broad compliance with the Act by private rather than governmental action. McGowan v. Credit Center of North Jackson, Inc., 546 F.2d at 77; Ratner v. Chemical Bank New York Trust Co., 329 F. Supp. 270, 280 (S.D.N.Y. 1971). The requirement is, of course, applicable to state court proceedings. See Ferdinand v. City of Fairbanks, 599 P.2d 122 (Alaska 1979).
It might be argued that the rationale behind such an award of attorney's fees is inapplicable where the debtor is the defendant instead of the plaintiff and asserts the Truth-in-Lending violation as a setoff to a suit on the underlying debt. We see no reason to make such a distinction. At least one case holds that attorney's fees are to be awarded where the debtor prevails on a counterclaim, Robert Levitan & Sons, Inc. v. Francis, 88 Misc.2d 125, 387 N.Y.S.2d 35 (1976), and we can see no significant difference between a setoff and a counterclaim in this context. Because of the Hayers' assertion of their Truth-in-Lending Act claim, the appellee, a large state-wide bank, has been alerted to its non-compliance with the federal act and will presumably take steps to ensure future compliance. The congressional policy of enforcement through private litigation will thus have been furthered by assertion of the Hayers' claim. We believe therefore that the court should have awarded them a reasonable attorney's fee.
The Hayers also argue that Alaska Rule of Civil Procedure 82, under which partial attorney's fees are awarded to the prevailing party as a matter of course, is in derogation of the Act and therefore should not have been utilized. We do not agree. The Truth-in-Lending Act provides that if a debtor raises a claim under the Act, as a partial defense, the debtor may be awarded a reasonable attorney's fee for successful assertion of that claim. However, success *477 on one claim does not necessarily make the debtor the prevailing party in the entire action, and need not preclude the court from awarding offsetting attorney's fees to the prevailing party under Alaska Rule of Civil Procedure 82. The congressional policy of encouraging private claims under the Truth-in-Lending Act would not be thwarted by such an award.
The Hayers' final contention is that the trial court should have found them, rather than the appellee, to be the prevailing party. The determination of which party has prevailed is a matter committed to the broad discretion of the trial court. Owen Jones & Sons, Inc. v. C.R. Lewis Co., 497 P.2d 312, 314 (Alaska 1972). See also, Alaska Placer Co. v. Lee, 553 P.2d 54, 63 (Alaska 1976). However, we do not reach the question of whether the court abused its discretion in this case since it is apparent that the court, in making its determination, relied solely on the fact that appellee received an affirmative recovery. Buza v. Columbia Lumber Co., 395 P.2d 511, 514 (Alaska 1964), does contain language which supports the trial court's approach. However, we made clear in Owen Jones & Sons, Inc., 497 P.2d at 313-14 that "it is not an immutable rule that the party who obtains an affirmative recovery must be considered the prevailing party." See also Alaska Placer Co., 553 P.2d at 63. Thus, the court erred in regarding this as inevitably determinative.
REVERSED AND REMANDED for a redetermination of interest, costs and attorney's fees consistent with this opinion.
BOOCHEVER, J., not participating.
NOTES
[1] Civil Rule 82(a)(1) provides:
(a) Allowance to Prevailing Party as Costs.
(1) Unless the court, in its discretion, otherwise directs, the following schedule of attorney's fees will be adhered to in fixing such fees for the party recovering any money judgment therein, as part of the costs of the action allowed by law:
ATTORNEY'S FEES IN AVERAGE CASES
Without Non-Contested
Contested Trial
First $2,000 25% 20% 15%
Next $3,000 20% 15% 12.5%
Next $5,000 15% 12.5% 10%
Over $10,000 10% 7.5% 5%
Should no recovery be had, attorney's fees for the prevailing party may be fixed by the court as a part of the costs of the action, in its discretion, in a reasonable amount.
[2] See, e.g., Wachtel v. West, 476 F.2d 1062, 1065 (6th Cir.), cert. denied, 414 U.S. 874, 94 S.Ct. 161, 38 L.Ed.2d 114 (1973); Chevalier v. Baird Savings Ass'n, 371 F. Supp. 1282, 1284 (E.D.Pa. 1974).
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862 F.Supp. 737 (1994)
A. AIUDI & SONS, et al., Plaintiffs,
v.
TOWN OF PLAINVILLE, Defendants.
Civ. No. 3:93-2468(AHN).
United States District Court, D. Connecticut.
September 1, 1994.
*738 *739 Linda L. Morkan, Eric Lukingbeal, John Wenning Steinmetz, Robinson & Cole, Hartford, CT, for plaintiff.
Carl R. Ficks, Jr., Robert A. Michalik, Eisenberg, Anderson, Michalik & Lynch, New Britain, CT, for defendant.
NEVAS, District Judge.
After review and over objection, the Magistrate Judge's Recommended Ruling is approved, adopted and ratified. SO ORDERED.
MAGISTRATE JUDGE'S OPINION
SMITH, United States Magistrate Judge.
Plaintiffs brought the present action against the Town of Plainville in a thirteen-count complaint. Federal jurisdiction is purportedly founded on one count under 42 U.S.C. § 1983; the remaining twelve counts are pendent state law claims sounding, for the most part, in contract. Now pending before the court is defendant's motion to dismiss the complaint pursuant to Fed. R.Civ.P. 12(b)(1) and 12(b)(6).
I. STANDARD
In assessing a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a court must determine whether the plaintiff, under any possible theory, has a valid claim upon which relief can be granted. Steiner v. Shawmut Nat'l Corp., 766 F.Supp. 1236, 1241 (D.Conn. 1991). "`[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Presnick v. Santoro, 832 F.Supp. 521, 525 (D.Conn. 1993) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957)). The facts alleged in the complaint should be taken as true and any inferences from the plaintiff's allegations should be drawn in the light most favorable to the plaintiff. Id. at 524-25. These standards are applied with particular care when, as in this case, a plaintiff complains of a civil rights violation. Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir.1994).
II. FACTS
On or about April 1, 1989, plaintiffs entered into a purchase and sale agreement *740 with Costos Jones for the purchase of a forty-acre parcel of land in Plainville, Connecticut. Prior to signing the purchase agreement, Jones had applied for and received conditional approval for a residential subdivision of the land, which was to consist of nineteen building lots and 120 condominiums. Pursuant to the regulations of the Plainville Planning and Zoning Commission and Conn.Gen.Stat. § 8-25, the defendant conditioned the subdivision approval on the posting of security. The purpose of the security was to ensure the construction and installation of certain public improvements on the land and thereby protect the defendant from claims by future subdivision owners.
On or about June 6, 1989, plaintiff Elmo Aiudi, general partner of A. Auidi & Sons, signed a "Performance Bond for Use with Letter of Credit" ("Bond") for delivery to defendant. The Bond obligated A. Aiudi & Sons to complete the construction and installation of the required public improvements. Pursuant to the terms of the Bond, plaintiffs arranged for the issuance of an irrevocable letter of credit by Burritt Interfinancial Bancorporation ("Burritt"), in the amount of $607,709.00, naming the Town of Plainville as beneficiary.
Although the closing for the sale of the land was set to take place on October 1, 1989, plaintiffs did not obtain title to the land, and the improvements contemplated in the Bond were never made. A. Auidi & Sons was sued for specific performance and money damages for its failure to close on the purchase and sale agreement; this suit was resolved by a stipulated judgment in August, 1993. At some point following the entry of the judgment, A. Aiudi & Sons delivered to the defendant a restrictive covenant signed by Jones assuring the defendant that no lots from the subdivision would be sold until all public improvements were completed or new security was posted.
On or about April 26, 1991, in the absence of compliance with the terms of the Bond respecting the construction of the public improvements, the defendant made demand on Burritt for full payment under the letter of credit, and Burritt honored the demand. On or about October 21, 1992, Burritt commenced an action against the plaintiffs seeking indemnification for the payment made to the defendant under the letter of credit.[1]
Plaintiffs allege that, despite repeated demands for the return of the letter-of-credit funds and assurances that no lots would be sold until all required public improvements were completed or new security was posted, the defendant has refused to return the funds to A. Aiudi & Sons. Plaintiffs commenced this action on December 14, 1993, alleging, inter alia, that the defendant's actions in both calling the letter of credit and continuing refusal to release the funds violate 42 U.S.C. § 1983 in that the defendant, acting under color of state law, deprived plaintiffs of their rights to both substantive and procedural due process under the Fourteenth Amendment.
III. DISCUSSION
The analysis begins with the acknowledgment that "[s]ection 1983 `is not itself a source of substantive rights,' but merely provides `a method for vindicating federal rights elsewhere conferred.'" Albright v. Oliver, ___ U.S. ___, ___, 114 S.Ct. 807, 811, 127 L.Ed.2d 114 (1994) (quoting Baker v. McCollan, 443 U.S. 137, 144 n. 3, 99 S.Ct. 2689, 2695, 61 L.Ed.2d 433 (1979)). To state a claim under 42 U.S.C. § 1983, a complaint must allege that the defendant, acting under color of state law, deprived the plaintiffs of a right secured by the Constitution or laws of the United States. Gomez v. Toledo, 446 U.S. 635, 638, 640, 100 S.Ct. 1920, 1923, 64 L.Ed.2d 572 (1980); Costello v. Town of Fairfield, 811 F.2d 782, 784 (2d Cir.1987). "The first step in any such claim is to identify the specific constitutional right allegedly infringed." Albright, ___ U.S. at ___, 114 S.Ct. at 811. Where, as in this case, a violation of the Fourteenth Amendment is alleged, the plaintiffs must establish that a deprivation of a constitutionally protected interest occurred without due process of law. *741 Costello, 811 F.2d at 784 (citing Gendalia v. Gioffre, 606 F.Supp. 363, 366 (S.D.N.Y.1985)).
A. Property Interest
The range of interests protected by the Due Process Clause of the Fourteenth Amendment is not boundless. See Board of Regents v. Roth, 408 U.S. 564, 572, 92 S.Ct. 2701, 2706, 33 L.Ed.2d 548 (1972). In order to state a due process claim the plaintiffs "must show that the interests of whose deprivation he complains are substantial enough to invoke the protection of federal law and the federal courts." Waltentas v. Lipper, 636 F.Supp. 331, 334 (S.D.N.Y.1986). The interests claimed will not flow "from the Constitution itself, but from `existing rules or understandings that stem from an independent source such as state law.'" Kelly Kare, Ltd. v. O'Rourke, 930 F.2d 170, 175 (2d Cir.) (quoting Roth, 408 U.S. at 577, 92 S.Ct. at 2709), cert. denied, ___ U.S. ___, 112 S.Ct. 300, 116 L.Ed.2d 244 (1991); see also West Farms Assocs. v. State Traffic Comm'n, 951 F.2d 469, 472 (2d Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 1671, 118 L.Ed.2d 391 (1992). While such an independent source may be a contract with the state, see, e.g., Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972); S & D Maintenance Co. v. Goldin, 844 F.2d 962, 965 (2d Cir.1988), it is clear that the circumstances in which a contract will give rise to a constitutionally protected interest are drastically limited.
In Goldin the Second Circuit observed that the concept of property in the Due Process Clause has expanded "to include rights to some governmental benefits conferred by statute or by contract." 844 F.2d at 965 (citing Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970); Sindermann, supra). The court noted, however, "that all interests warranting procedural protection as property rights require something in addition to their importance to the claimant." Id. In a case raising similar concerns regarding contract interests and the Due Process Clause, the Seventh Circuit observed that:
In deciding whether a particular breach should be deemed a deprivation of property [a court] must bear in mind that the Fourteenth Amendment was not intended to shift the whole of the public law of the states into the federal courts. Most common law wrongs are not actionable under section 1983, though by definition they involve the deprivation of a legally protected interest. Only interests substantial enough to warrant the protection of federal law and federal courts are Fourteenth Amendment property interests. Whether an interest is that substantial depends on the security with which it is held under state law and its importance to the holder.
Brown v. Brienen, 722 F.2d 360, 364 (7th Cir.1983) (citations omitted); see also Jimenez v. Almodovar, 650 F.2d 363, 370 (1st Cir.1981) (stating that a "mere breach of contractual right is not a deprivation of property without due process.... Otherwise, virtually every controversy involving an alleged breach of contract by a government or governmental institution ... would be a constitutional case."). The danger of expanding section 1983 liability to include the breach of non-employment contracts is echoed in the opinions of the Second Circuit. In Waltentas v. Lipper, for example, the court noted that the Supreme Court
has carefully limited the rule to situations which involve contracts with tenure provisions and the like, or where a clearly implied promise of continued employment has been made. Courts have accordingly been wary of the consequences that might arise if section 1983 were expanded to encompass substantially all public contract rights.
862 F.2d 414, 418 (2d Cir.1988) (citations omitted); see also Goldin, 844 F.2d at 967 (holding "[t]hus far, the course of the law in this Circuit has not moved beyond according procedural due process protection to interests other than those well within the contexts illustrated by Goldberg and Roth").
Having recognized the need for something more than the assertion of an interest, Goldin identified the controlling analysis as an inquiry into the issue of whether the plaintiffs have "a contractual right giving rise to a `legitimate claim of entitlement' and thus a constitutionally protected property interest *742 under Roth." Id. at 966. Plaintiffs claim that they have a concrete property interest in the actual funds that Burritt disbursed pursuant to the Letter of Credit. (See Pl.s' Mem. in Opp'n, Filing 12, at 9-11). Because of this, they argue, "it is not necessary to delve into the `entitlement' analysis set forth in Roth, because the property interest at issue here is in the `actual ownership of real estate, chattels or money.'" (Id. at 12). While true that the language of Roth speaks in terms of "benefits," see 408 U.S. at 577, 92 S.Ct. at 2709, the entitlement scheme of that case does control the analysis here. See Goldin, 844 F.2d at 966. Roth held that "[t]o have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it." 408 U.S. at 577, 92 S.Ct. at 2709. The interests of the plaintiffs in this case do not rise to such a level.
Plaintiffs, understandably in light of the attendant liability, focus on their purported entitlement to the letter-of-credit funds; in doing so, however, they fail to see that their claim against the town is entirely dependent on the resolution of the issue of whether the defendant breached its obligations under the contract. See Christ Gatzonis Elec. Contractor, Inc. v. New York City Sch. Constr. Auth., 23 F.3d 636, 641 (2d Cir.1994) (holding that doubt surrounding amount of funds owed by municipality to contractor precluded assertion of clear entitlement); see also Waltentas v. Lipper, 862 F.2d 414, 419 (2d Cir.1988) (noting that the conditional nature of the asserted interest defeated claim of entitlement). Plaintiffs have never had a right to the funds that were disbursed by Burritt. Rather, at all relevant times the plaintiffs had only a right to performance of the underlying contract or damages for nonperformance.[2]
The plaintiffs in this case have pointed to no source other than the contract underlying the Bond as a basis for their interest in the letter-of-credit funds held by the defendant. As the underlying contract is not purported to confer benefits which could be considered to relate to plaintiffs' "status," Goldin, 844 F.2d at 966, the interests stemming from the relationship do not amount to constitutionally protected property interests. See id. at 967 (noting that "the course of the law in this Circuit has not moved beyond according procedural due process protection to interests other than those well within the contexts illustrated by Goldberg and Roth").
Plaintiffs claim that performance under the Bond was conditioned on the expected transfer of ownership of the parcel of land. Defendant claims that the Bond was intended to protect the Town of Plainville in the event the plaintiffs did not perform the subdivision improvements after the Town of Plainville had approved the residential subdivision. The dispute between the parties, therefore, focuses on the propriety of the defendant's calling the letter of credit. At bottom, plaintiffs' claims against the town are for breach of contract and not for a deprivation of rights secured by the United States Constitution, and a "contract dispute ... does not give rise to a cause of action under section 1983." Costello, 811 F.2d at 784. See also Goldin, 844 F.2d at 966; Boston Envtl. Sanitation Inspectors Ass'n v. City of Boston, *743 794 F.2d 12, 13 (1st Cir.1986); Coastland Corp. v. County of Currituck, 734 F.2d 175, 178 (4th Cir.1984); Brown, 722 F.2d at 364; Braden v. Texas A & M Univ. Sys., 636 F.2d 90, 93 (5th Cir.1981). Plaintiffs will not be allowed to wag their dog through the doors of federal court with a § 1983 tail.
B. Due Process
Even if the plaintiffs' interests amounted to interests protected by the Due Process Clause and assuming that there was a deprivation of these interests,[3] there has been no denial of due process in this case. Where state law supports an interest warranting protection by the Due Process Clause, "that benefit cannot be stripped without procedural due process; and federal law determines what process is due." Kelly Kare, 930 F.2d at 175.
Since there has been no allegation that plaintiffs cannot be made whole through a damages action against the town,[4] their claims of lack of due process relate only to the issue of whether the plaintiffs were entitled to some additional remedy prior to both the decision to call the letter of credit and the decision to refuse to release the funds after presented with assurances that no lots on the subdivision would be sold.
In Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), overruled on other grounds by Daniels v. Williams, 474 U.S. 327, 106 S.Ct. 662, 88 L.Ed.2d 662 (1986), the Court noted that, in most cases where a predeprivation hearing was found to be required process, the deprivation "was pursuant to some established state procedure and `process' could be offered before any actual deprivation took place." Id. at 537, 101 S.Ct. at 1913. In breach of contract cases it is difficult to see how the decision complained of, i.e. the determination to engage in behavior that is later challenged as constituting a breach, can ever be said to be based on "some established state procedure." Even if the official nature of the decision by a body to breach a contract renders it analogous to an established procedure, "either the necessity of quick action by the State or the impracticality of providing any meaningful predeprivation process, when coupled with the availability of some meaningful means by which to assess the propriety of the State's action at some time after the initial taking, can satisfy the requirements of procedural due process." Id. at 539, 101 S.Ct. at 1914. See also Mitchell v. W.T. Grant Co., 416 U.S. 600, 611, 94 S.Ct. 1895, 1902, 40 L.Ed.2d 406 (1974) ("`[w]here only property rights are involved, mere postponement of the judicial enquiry is not a denial of due process, if the opportunity given for ultimate judicial determination of liability is adequate'").
Plaintiffs in this case have not alleged that the State of Connecticut does not afford them a remedy for the alleged breach of contract. In these circumstances the court can discern no basis why the reasoning of Parratt should not control. See Buck v. Village of Minooka, 552 F.Supp. 298 (N.D.Ill. 1982). A contrary conclusion would result in the somewhat puzzling holding that, before engaging in behavior that may later be judicially determined to constitute a breach, the state must hold some kind of hearing to determine whether the proposed behavior is a breach. "[N]o matter how significant the private interest at stake and the risk of its erroneous deprivation, the State cannot be required to do the impossible by providing predeprivation process." Zinermon v. Burch, 494 U.S. 113, 129, 110 S.Ct. 975, 985, 108 L.Ed.2d 100 (1990) (citation omitted).
C. Substantive Due Process
The same factual bases for plaintiffs' procedural due process claim, both the calling *744 of the letter of credit and the continuing refusal to turn the funds over to A. Auidi & Sons, are alleged in the complaint to state a claim for a deprivation of substantive due process. "[T]he Due Process Clause of the Fourteenth Amendment confers both substantive and procedural rights." Albright v. Oliver, ___ U.S. ___, ___, 114 S.Ct. 807, 812, 127 L.Ed.2d 114 (1994). The former "protects the individual against certain government actions `regardless of the fairness of the procedures used to implement them.'" McClary v. O'Hare, 786 F.2d 83, 88 (2d Cir.1986) (quoting Daniels v. Williams, 474 U.S. 327, 331, 106 S.Ct. 662, 665, 88 L.Ed.2d 662 (1986)). It guards against "government action that is arbitrary, conscience-shocking, or oppressive in a constitutional sense, but not against government action that is `incorrect or ill-advised.'" Lowrance v. Achtyl, 20 F.3d 529, 537 (2d Cir.1994) (citations omitted). The Supreme Court recently observed that it
"has always been reluctant to expand the concept of substantive due process because the guideposts for responsible decision-making in this unchartered area are scarce and open-ended." The protections of substantive due process have for the most part been accorded to matters relating to marriage, family, procreation, and the right to bodily integrity.
Albright, ___ U.S. at ___, 114 S.Ct. at 812 (quoting Collins v. City of Harker Heights, 503 U.S. ___, ___, 112 S.Ct. 1061, 1068, 117 L.Ed.2d 261 (1992)).
In substantive due process cases the "first step ... is to identify the constitutional right at stake." Lowrance, 20 F.3d at 37. Plaintiffs refer to no right secured by the Constitution or federal laws other than the Due Process Clause of the Fourteenth Amendment simpliciter. In this sense, plaintiffs' claims can be reduced to the assertion that their substantive due process rights have been denied because their procedural due process rights were denied. In fact, the substantive due process claims mirror the procedural claims, and the adverse implications of holding that the characterization of the claim as a violation of substantive due process renders it materially different in a constitutional sense counsel hesitancy in accepting plaintiffs' argument. See Schaper v. City of Hunstville, 813 F.2d 709, 718 (5th Cir.1987) (noting that allowing such a claim "would effectively eviscerate the holding of Parratt").
Plaintiffs confine their substantive due process claim to the allegation that the defendant's actions were unconstitutional because they were arbitrary. In characterizing the defendant's actions as arbitrary, the plaintiffs seek refuge in one of the most fundamental and revered shelters constructed by the Due Process Clause. See, e.g., Wolff v. McDonnell, 418 U.S. 539, 558, 94 S.Ct. 2963, 2975, 41 L.Ed.2d 935 (1974) (calling the protection of the individual from arbitrary action of government the "touchstone" of due process). Plaintiffs, however, may not present their claim in a temporal vacuum.
Plaintiffs do not challenge the constitutionality of the defendant's authority to require the posting of a bond as a prerequisite to granting approval of a subdivision plan. It is clear that under the Bond the defendant had the authority to call the letter of credit. In agreeing to a contract that explicitly contemplated the possibility of this event, the plaintiffs cannot now complain that the occurrence of the event was arbitrary. Cf. Lowrance, 20 F.3d at 537 (holding that confinement of prisoner who created the event giving rise to alleged constitutional violation was not "arbitrary or conscience-shocking in the constitutional sense").
Moreover, when a state instrumentality acts pursuant to the terms of a contract, its behavior is far from the kind of oppressive conduct which the Fourteenth Amendment was designed to guard against. In this light, the court agrees with the holding of North Star Contracting Corp. v. Long Island R.R. that a substantive due process right is not implicated when "the only tie the government has to the case is the fact that it is one of the parties." 723 F.Supp. 902, 911 (E.D.N.Y.1989) (quoting McClary, 786 F.2d at 88); see Daniels, 474 U.S. at 332, 106 S.Ct. at 665 ("Our Constitution deals with the large concerns of the governors and the governed, but it does not purport to supplant traditional tort law in laying down rules of *745 conduct to regulate liability for injuries that attend living together in society").
IV. CONCLUSION
For the reasons stated above, defendant's motion to dismiss plaintiffs' section 1983 claim (filing 7) should be GRANTED. Since the sole claim arising under federal law has been dismissed, the basis upon which subject-matter jurisdiction rests has been obliterated. The remaining counts in the complaint therefore should be DISMISSED without prejudice to their pursuit in state court. 28 U.S.C. § 1367(c); see United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966).
Either party may seek review of this report and recommendation as provided in 28 U.S.C. § 636(b) (written objections to recommended ruling must be filed within 10 days of service of same); Fed.R.Civ.P. 6(a), 6(e), & 72; and Rule 2 of the Local Rules for United States Magistrate Judges. Failure to object in a timely manner may preclude further review. Small v. Secretary of Health & Human Servs., 892 F.2d 15, 16 (2d Cir.1989).
Dated at Hartford, Connecticut, this 4th day of August, 1994.
NOTES
[1] The Federal Deposit Insurance Corporation was appointed receiver for Burritt in December, 1992, and subsequently was substituted as the plaintiff in the action against A. Auidi & Sons.
[2] The disjunctive nature of this right entails that, unless the state refuses to pay damages for breaching the contract, plaintiffs have not been deprived of any interest. See Vail v. Board of Educ., 706 F.2d 1435, 1452-53 (7th Cir.1983) (Posner, J., dissenting). This logic is borne out by examining the case had A. Auidi & Sons completed the public improvements on the subdivision. In that situation defendant would not have called the bond; Burritt would not have honored the call; and plaintiffs would not be entitled to any of the funds in dispute in this case. Even if in that case the defendant called the bond, however, there would be no entitlement to the funds but only an entitlement to damages. A basis for this analogy is found in cases where a plaintiff's interest in obtaining a permit or license has been found to be a protected property interest. In these cases, "[t]he question of whether an applicant has a legitimate claim of entitlement to the issuance of a license ... depend[s] on whether, absent the alleged denial of due process, there is either a certainty or a very strong likelihood that the application would have been granted." Yale Auto Parts, Inc. v. Johnson, 758 F.2d 54, 59 (2d Cir.1985). Here, absent the alleged deprivation the plaintiffs would have no claim to the tangible funds disbursed by Burritt.
[3] See Brown, 722 F.2d at 366 ("since the plaintiffs' loss was of a kind readily compensable in monetary terms, it may even be doubted whether any deprivation in the constitutional sense has yet occurred, or will occur unless and until the state courts turn down a meritorious contract claim").
[4] Although plaintiffs may not receive all of the relief that they may have been entitled to under § 1983, the remedies provided for the contract claims in the complaint can fully compensate plaintiffs. See Parratt v. Taylor, 451 U.S. 527, 544, 101 S.Ct. 1908, 1917, 68 L.Ed.2d 420 (1981), overruled on other grounds by Daniels v. Williams, 474 U.S. 327, 106 S.Ct. 662, 88 L.Ed.2d 662 (1986).
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TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-05-00003-CV
Texas Department of Assistive and Rehabilitative Services
f/k/a Texas Rehabilitation Commission, Appellant
v.
Anna M. Abraham, Appellee
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 353RD JUDICIAL DISTRICT
NO. GN303143, HONORABLE DARLENE BYRNE, JUDGE PRESIDING
MEMORANDUM OPINION
This is an appeal from a jury’s award of damages in a retaliatory discharge case.
Anna M. Abraham sued her employer, the Texas Rehabilitation Commission (TRC),1 alleging that
she was unlawfully terminated after complaining of sexual harassment by her boss. See Tex. Lab.
Code Ann. § 21.055 (West 1996). A jury found in favor of Abraham and awarded her damages and
reasonable attorney’s fees and expenses. The TRC appeals this judgment contending that there was
legally insufficient evidence that Abraham was engaged in a protected activity or that there was any
causal link between that activity and her job loss, and that there was error in the jury charge. We
affirm the judgment.
1
The TRC no longer exists as an independent entity. It recently became part of a new state
agency, the Texas Department of Assistive and Rehabilitative Services. Because all of the events
in this case occurred before the TRC was reorganized, we will refer to appellant as “the TRC.”
BACKGROUND
Anna Abraham was discharged from her position as an auditor in the TRC’s
Management Audit Division within weeks of making an internal sexual harassment complaint
against her supervisor. There had been considerable upheaval in the audit division during the
months preceding Abraham’s discharge. Audit division employees had been criticized for
unprofessional behavior, and management was investigating the general operations of the division
and the alleged misconduct by its new head, Jim Gilger. Because the TRC challenges the legal
sufficiency of the evidence supporting the jury’s verdict, we will discuss the events leading up to
Abraham’s discharge in detail.
Abraham began working at the TRC in 1991. At trial, she was described by
Commissioner Vernon “Max” Arrell as an excellent employee. A “Performance
Appraisal/Development Plan” for the period of October 1999 to January 2001 concluded that
Abraham “exceeds” twelve of the fourteen performance standards and “meets” the remaining two.
The month before she lost her job, Gilger recommended, and Arrell approved, an immediate merit
pay increase for Abraham.2
2
Gilger’s memo to Arrell requesting the merit pay increase stated:
Ms. Abraham’s recent Performance Appraisal demonstrates she meets or exceeds
all her job standards and continues to perform at a high level. She communicates
effectively with clients, Division managers, and co-workers. I have observed
evidence that she develops and maintains professional relationships, including
liaison activities, with clients to promote teamwork, effective rapport, and
cooperation. She communicates in an articulate and professional manner, and
her writing is clear, concise, and constructive.
Ms. Abraham is a valuable member of the Management Audit staff and her
continued growth will be critical to the success of the department.
2
Gilger was hired as the audit division’s director in December 2001. Audit division
employees described Gilger as a “touchy-feely” boss who acted inappropriately around women.
Rumors circulated that he had been charged with sexual harassment at his prior workplace.
Commissioner Arrell confirmed that a complaint had been filed against him at the University of
Texas at El Paso and sent Gilger a warning on May 1, 2002, that “[a]ny confirmed allegations of
inappropriate behavior or sexual harassment will result in your immediate termination.”
Later that month, one of Abraham’s co-workers, Carolyn Briggs, made a sexual
harassment complaint against Gilger to the TRC’s Office of Civil Rights. Jenny Hall, the director
of that office, immediately informed Arrell of Briggs’s complaint. Arrell asked Hall to investigate,
and the entire audit division was interviewed about the alleged misconduct.
Hall interviewed Abraham on June 3. During the interview, Hall promised Abraham
that there would be no retaliation against her for participating candidly in the inquiry. Abraham
acknowledged that she knew Briggs was uncomfortable around Gilger and that Gilger’s behavior
toward other women in the office was inappropriate. She explained that Gilger was a “toucher” who
would sometimes put his arm around female employees to draw them closer during a conversation.
Abraham told Hall that she often stepped away when she felt he was too close, but that Gilger
typically stepped forward to close the gap between them. When Abraham asked whether this
behavior constituted sexual harassment, Hall explained that it could if it made Abraham
uncomfortable.
The day after the interviews concluded, Arrell called a meeting with all audit division
employees on June 5; his chief of staff, Mary Wolfe, and Jenny Hall also attended. It was unusual,
3
if not unprecedented, for the head of the agency and two other managers to meet with the audit
division staff as a group. Roxanne Rios, an auditor who attended, testified that Arrell was angry:
[Arrell] said that he was tired of us all walking around and complaining, and we
needed to put our noses to the grindstone and get back to work. He was tired of all
the trouble that we were causing. And he said, ‘I could outsource the whole lot of
you.’ And, you know, he pounded the table and said, ‘And this is not a threat.’3
Rios testified that she felt threatened and thought that her job was on the line.
Abraham and two other audit division employees did not attend the June 5 meeting
because they were out of the office that day. When they returned to work on June 6, Arrell
summoned Abraham, Christina Alvarado and Jack Mezzetti to a meeting. Alvarado testified that
Arrell was angry and that he pounded the table, much as he was described to have done the day
before. Abraham testified that Arrell’s “message was he didn’t want to have to deal with any more
problems in our department or he would get rid of us all. He was threatening to fire us.” Mezzetti
testified, “It was real, real clear to me what [Arrell] was talking about. . . . [I]t was because of the
timing of the meeting. The meeting was right about the time of the sexual complaints.” Alvarado
testified that, after the meeting, she was “very worried” about the information she had given Hall
during their interview.
Hall acknowledged that she attended both meetings “because we were involved in
a sexual harassment complaint.” However, Hall testified that the meetings were unrelated to those
3
At trial, Arrell acknowledged that he remembered telling the audit division employees that
“I would contract it out,” but later testified that he “did not say I would. I said I could if it didn’t
shape up.” Arrell also testified that he remembered saying that he could “recommend” such action.
4
complaints. Arrell explained that the purpose of the early June meetings was to direct audit division
staff members to “quit gossiping and carrying on and doing the things they were doing down there.”4
On June 7, Abraham filed a grievance with the TRC’s Office of Civil Rights, alleging
sexual harassment and retaliation by Gilger. Abraham’s grievance explained that Gilger had asked
Abraham to spend time alone with him outside of the office, repeatedly inviting her to play
racquetball, occasionally inviting her to have drinks after work, and once inviting her to have dinner
at his home. Abraham wrote that Gilger suggested that there must be somewhere the two of them
could have a drink “without being seen by anyone at the office,” and that he “bemoaned the fact that
we couldn’t go for a drink . . . which made [Abraham] very uncomfortable.” Hall notified Arrell and
Wolfe as soon as she received Abraham’s grievance.
On June 14, Hall concluded her investigation into Briggs’s earlier allegations, finding
“sufficient evidence to support that Mr. Gilger’s behavior” created “an intimidating, hostile or
offensive work environment.” After reviewing the report of Hall’s investigation and discussing
Gilger’s conduct with at least one member of the TRC Board of Directors, Arrell fired Gilger.
While Hall began to investigate Abraham’s complaint of Gilger’s sexual harassment,
Arrell asked Wolfe to undertake a “management assessment” of the audit division. Arrell testified
that he had some general concerns about the entire division and asked Wolfe to
4
It appears clear from the record that the atmosphere in the office was often tense; several
of the audit division employees did not get along with one another. For example, Briggs brought her
pet birds to the office, angering Abraham, who complained to management that the birds were a
health hazard. Abraham described the office as a “rumor mill” where members of the small staff
frequently gossiped about one another. She attributed the workplace problems to a lack of
management, while Arrell blamed the employees for acting like “junior high kids.” Hall described
the office as “a rather unhealthy place” plagued by “a lot of bickering.”
5
[g]o down and take a look at management audit or any other division and find out
whether or not—how it’s operating. Find out the—what the workload is. Find out
what the staffing is. And then give me a determination as to what—what’s needed
down there.
Arrell testified that he wanted Hall to conduct her sexual harassment investigation separately from
Wolfe’s management assessment. He instructed Hall and Wolfe not to share information unless, for
example, “management found [something] that had to do with civil rights,” or vice-versa.
The record indicates that Hall shared information with Wolfe and Arrell on a frequent
basis. For example, Hall forwarded Abraham’s grievance to Wolfe and Arrell immediately upon
receipt. Hall also forwarded a summary of a telephone conversation in which Gilger told Hall that
Briggs and Abraham were conspiring against him and that they were “lazy,” “dysfunctional”
employees.5 In addition, Hall provided Arrell and Wolfe with advance copies of her report:
because, one, I knew . . . a board meeting was coming. Two, I know they were
working on issues regarding management audit. So it wasn’t a decision kind of
sharing. It was an informational sharing with the executive management of the
agency.
Wolfe’s management assessment focused on personnel issues within the office and the office’s
workload. According to Arrell, the auditors were authorized to work only on audits listed on the
Annual Audit Plan; work on other projects was strictly forbidden. Wolfe testified that she
5
Hall’s notes also stated that Gilger “said that Carolyn [Briggs] and Anna [Abraham] have
taken very innocent facts and circumstances and events and put a completely different perspective
on it and if anything, he feels he should be complaining about a hostile work environment and not
them.”
6
discovered that audit division employees had been working on unapproved audits.6 Wolfe concluded
that there was insufficient work on the Annual Audit Plan to sustain the office’s current number of
employees.
Abraham disputed this conclusion at trial, presenting evidence that there was
sufficient work in the audit division. She alleged that Gilger had planned to ask the Board of
Directors to add certain audits to the Annual Audit Plan at its next meeting. She also presented
evidence that Arrell had approved the posting of two new job vacancies in the audit division on May
28—less than a month before Wolfe told the Board that there was insufficient work. Moreover,
other audit division employees testified that there was plenty of work to keep the staff busy.
The TRC Board met on June 20. The agenda of the closed executive session included
Wolfe and Arrell’s report on Gilger. Wolfe first testified that she updated the Board “regarding
everything I had found about Mr. Gilger,” including employee concerns about his “management
style.” She later testified that she failed to tell the Board that “Jim Gilger had been fired for sexually
harassing staffers in his office.” The second item on the executive session agenda was listed as
“Management Audit/RIF.” Wolfe presented the findings of her management assessment at this time,
informing the Board that “there were more people than there were work products.”
6
Evidence that Arrell and Wolfe received regular e-mails and memoranda from Gilger
summarizing the work being done by the audit division contradicted Wolfe’s assertion that she first
discovered the unapproved audits in the course of her investigation. Gilger’s updates included
projects not listed on the audit plan. E-mails from both Wolfe and Arrell confirm that they had
requested and reviewed these updates, hence they were aware of the unapproved audits long before
Wolfe’s management assessment.
7
After Wolfe left the executive session, Arrell recommended that the Board eliminate
unfilled positions and terminate four employees as part of a “reduction in force” (RIF).7 The Board
approved the “Reduction in Force Authorization and Implementation Plan” (RIF Plan) as proposed.
Two of the four employees identified for termination, Abraham and Briggs, had filed grievances
against Gilger. After the approved RIF Plan, only four auditors and one administrative technician
remained on staff.
Abraham established at trial that the TRC did not follow its own guidelines for
determining which positions to eliminate under the RIF. Those guidelines required temporary and
probationary employees to be fired first, followed by “regular employees with less than two years
total TRC service.” If more cuts were needed, regular employees with more than two years of
employment would be fired “based on current (prior twelve months) performance.”
Arrell explained that, as the director of the audit division, Gilger was the logical
person to have evaluated the employees. But because Gilger had been fired the week before, there
was no one who could rank employee performance. In light of these circumstances, the RIF Plan
relied solely on “tenure with TRC” to terminate employees.
On June 27, a week after the Board approved the RIF Plan, Arrell informed Abraham
and the other affected employees that they had been fired “[a]fter careful and thorough review of
7
TRC guidelines stated:
Factors that may require reductions in TRC staffing include budgetary
constraints, program curtailments or consolidation, or deletion of functions.
When such situations exist, every effort is made to accomplish needed reductions
through attrition. However, if the required reduction cannot be accomplished
through attrition, it may become necessary to separate employees through
reduction in force (RIF).
8
management audit staffing and work responsibilities and to ensure the most prudent use of resources
. . . .” Abraham filed a Charge of Discrimination with the Texas Commission on Human Rights
(TCHR). The TCHR referred the complaint to the Equal Employment Opportunity Commission
(EEOC). After an investigation, the EEOC found reasonable cause to believe unlawful retaliation
had occurred. Abraham filed this lawsuit in August 2003, alleging that she was fired in retaliation
for engaging in protected conduct, in violation of section 21.055 of the labor code. See id. The jury
found in favor of Abraham, and she was awarded $222,843.08 in lost pay and retirement benefits;
$25,000 in compensatory damages for emotional pain, suffering, inconvenience, mental anguish, loss
of enjoyment of life and other non-pecuniary damages; and reasonable attorney’s fees and expenses.
DISCUSSION
On appeal, the TRC challenges the legal sufficiency of the evidence and contends that
the jury was improperly instructed. In its first two points of error, the TRC asserts that Abraham
adduced no evidence that: (1) Abraham took part in an activity protected under section 21.055 of the
labor code or that (2) the TRC Board knew that she had done so before she was fired. See id. In its
third point of error, the TRC alleges that the district court erred by adopting what it terms a
“motivating factor” jury instruction, rather than a “but for” jury instruction.
Legal Sufficiency of the Evidence
The TRC’s legal sufficiency challenge is limited to two issues: Abraham produced
legally insufficient evidence that (1) she engaged in a protected activity and (2) the TRC Board was
aware of Abraham’s participation in the alleged protected activity when it approved the elimination
of her job. We will evaluate the TRC’s legal sufficiency claims in light of the supreme court’s recent
9
statement of the law in City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005). We will sustain a
legal sufficiency point if the record reveals: (a) the complete absence of a vital fact; (b) the court is
barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital
fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; or (d) the evidence
establishes conclusively the opposite of the vital fact. Id. at 810 (citing Robert W. Calvert, “No
Evidence” & “Insufficient Evidence” Points of Error, 38 Tex. L. Rev. 361, 362-63 (1960)). The
final test for legal sufficiency is whether the evidence at trial would enable reasonable and
fair-minded people to reach the verdict under review. See id. at 827.
When the evidence offered to prove a vital fact is so weak as to do no more than
create a mere surmise or suspicion of its existence, the evidence is less than a scintilla and, in legal
effect, is no evidence. See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004) (citing
Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983)). But, more than a scintilla of evidence
exists if the evidence rises to a level that would enable reasonable and fair-minded people to differ
in their conclusions. Ford Motor Co., 135 S.W.3d at 601 (citing Merrell Dow Pharm., Inc. v.
Havner, 953 S.W.2d 706, 711 (Tex. 1997)).
Under the City of Keller analytical framework, we review the evidence in the light
favorable to the verdict, crediting favorable evidence if reasonable jurors could and disregarding
contrary evidence unless reasonable jurors could not. See 168 S.W.3d at 807. Jurors are the sole
judges of the credibility of the witnesses and the weight to give their testimony. Id. at 819. When
there is conflicting evidence, it is the province of the jury to resolve such conflicts. Id. at 820. If
conflicting inferences can be drawn from the evidence, we assume jurors made all inferences in favor
of their verdict if reasonable minds could, and disregard all other inferences. Id. at 821. But if the
10
evidence allows only one inference, we may not disregard it. See id. So long as the evidence falls
within a zone of reasonable disagreement, we may not substitute our judgment for that of the trier-of-
fact. See id. at 822.
Protected Activity
TRC first contends that Abraham failed to show that she engaged in a legally
protected activity under section 21.055 of the labor code before she was fired. See Fabela v. Socorro
Indep. Sch. Dist., 329 F.3d 409, 414 (5th Cir. 2003) (retaliation plaintiff must demonstrate (1) she
engaged in protected activity, (2) adverse employment action occurred, and (3) causal link between
protected activity and adverse employment action); Mayberry v. Texas Dep’t of Agric., 948 S.W.2d
312, 315 (Tex. App.—Austin 1997, writ denied). Section 21.055 provides:
An employer, labor union, or employment agency commits an unlawful employment
practice if the employer, labor union, or employment agency retaliates or
discriminates against a person who, under this chapter: (1) opposes a discriminatory
practice; (2) makes or files a charge; (3) files a complaint; or (4) testifies, assists, or
participates in any manner in an investigation, proceeding, or hearing.
Tex. Lab. Code Ann. § 21.055.
The TRC argues that Abraham’s internal grievance and her participation in the
investigation of Briggs’s complaint did not constitute protected activities as defined in the
“participation clause” of the statute. See id. § 21.055(2)-(4). In support of this position, the TRC
draws our attention to the Eleventh Circuit’s opinion in Equal Employment Opportunity Commission
v. Total System Services, Inc., 221 F.3d 1171 (11th Cir. 2000). That case holds that the
“participation clause” of the federal analogue to section 21.055 protects only “proceedings and
11
activities which occur in conjunction with or after the filing of a formal charge with the EEOC,” and
not those who participate in an employer’s “internal, in-house investigation, conducted apart from
a formal charge with the EEOC.” Total Sys. Servs., Inc., 221 F.3d at 1174. According to the TRC,
neither Abraham’s participation in Hall’s internal investigation, nor Abraham’s filing of a grievance
with the TRC’s Office of Civil Rights, would be covered under the “participation clause” of the
statute.
However, the Texas statute has not been so narrowly construed. In Wal-Mart Stores,
Inc. v. Lane, the Corpus Christi Court of Appeals reversed a jury verdict finding retaliation, but held
that an informal, internal complaint of sexual harassment to a supervisor was a protected “complaint”
for the purposes of section 21.055(3) of the labor code. See 31 S.W.3d 282, 296 (Tex.
App.—Corpus Christi 2000, pet. denied). Lane, a Wal-Mart employee, informed his supervisor that
a female co-worker had been spreading rumors that he had sexually harassed her. See id. at 287.
After an investigation into his conduct, Lane was terminated. See id. Lane filed suit against Wal-
Mart and obtained a substantial damage award. See id. Among other claims, Lane alleged that he
was fired in retaliation for reporting the alleged sexual harassment by his co-worker. See id. at 295.
On appeal, the Corpus Christi court specifically addressed Wal-Mart’s contention that Lane’s
internal complaint was not a “statutorily protected activity,” and held that Lane had made a
complaint pursuant to section 21.055(3) of the labor code. Id. at 296; Tex. Lab. Code Ann.
§ 21.055(3) (retaliation prohibited against person who “files a complaint”).
Abraham made an internal complaint of sexual harassment that was considerably
more formal than the one in Lane—she filed her grievance in writing with the agency’s Office of
12
Civil Rights. Finding Lane persuasive, we hold that Abraham’s conduct was a protected activity
under the participation clause. See Lane, 31 S.W.3d at 296.
Additionally, there is ample evidence in the record that Abraham opposed a
discriminatory practice under section 21.055(1). See Tex. Lab. Code Ann. § 21.055. To establish
opposition to a discriminatory practice, an employee must first demonstrate a “good faith reasonable
belief that the underlying discriminatory practice of the employer violated the law.” Cox & Smith
Inc. v. Cook, 974 S.W.2d 217, 224 (Tex. App.—San Antonio 1998, pet. denied). The employee does
not have to show the actual existence of an unlawful practice; it is sufficient that she had a good faith
reasonable belief that the employer’s conduct was unlawful under the Texas Commission on Human
Rights Act. See id. The employee must also “demonstrate that she reported the challenged activity
to the employer.” Id.
Two key facts from the record support Abraham’s good faith reasonable belief that
Gilger’s conduct was illegal: (1) Hall, the TRC’s own civil rights investigator, told Abraham that
Gilger’s conduct “could be” sexual harassment if it made her uncomfortable, and (2) Abraham knew
that the TRC ultimately fired Gilger for similar conduct directed at another female employee.
Because the TRC believed that Gilger’s conduct was illegal, it was reasonable for Abraham to form
the same belief. The evidence is also clear that Abraham reported Gilger’s conduct to the TRC both
during her interview with Hall and two days later when she filed a formal grievance with the TRC’s
Office of Civil Rights. We hold that Abraham opposed a discriminatory practice under section
21.055 of the labor code. See Tex. Lab. Code Ann. § 21.055; Cox, 974 S.W.2d at 224.
Applying the court’s decision in Lane to the instant case and reviewing the evidence
of Abraham’s opposition to Gilger’s sexual harassment, we hold that she adduced legally sufficient
13
evidence that she engaged in activity protected by section 21.055. See Tex. Lab. Code Ann.
§ 21.055.8 We overrule TRC’s challenge to legally sufficient evidence of a protected activity.
Causal Link
In its second issue, the TRC contends that there is no evidence of a causal link
between Abraham’s protected activity and the loss of her job because Abraham did not demonstrate
that the TRC Board was aware of her complaint before it approved the RIF Plan. See Fabela, 329
F.3d at 414; Marsaglia v. University of Tex., El Paso, 22 S.W.3d 1, 4 (Tex. App.—El Paso 1999,
pet. denied). It is well established that the focus of our causal link analysis is on the final
decisionmaker. Ackel v. Nat’l Communications, Inc., 339 F.3d 376, 385 (5th Cir. 2003).
The TRC urges us to overturn the jury’s verdict because it claims that Abraham did
not prove that the TRC Board, the final decisionmaker in Abraham’s termination, ever knew of
8
According to the TRC, a new trial is required because it is impossible to determine whether
the jury premised liability on Abraham’s opposition to a discriminatory practice or participation in
a protected activity. We are required to order a new trial under Crown Life Insurance Co. v. Casteel
when “a single broad-form liability question incorporate[s] multiple theories of liability” in such a
way that we “cannot determine whether the jury based its verdict on an improperly submitted invalid
theory.” See 22 S.W.3d 378, 388 (Tex. 2000). Although the first jury question in this case included
multiple legal theories, they were proper, making it unnecessary for us to inquire into which theory
formed the basis for liability.
Even had the district court erred by including a participation theory of liability in the first jury
question, we hold that such error was harmless. The error of including a factually unsupported claim
in a broad-form jury question is not always reversible. Romero v. KPH Consol., Inc., 166 S.W.3d
212, 227 (Tex. 2005). To be reversible, the erroneous instruction must have “probably prevented
the appellant from properly presenting the case to the court of appeals.” See id.; Tex. R. App. P.
44.1(a)(2). Here, the underlying conduct upon which the jury found liability was the same, whether
characterized as participation or opposition. On this record, we are “reasonably certain that the jury
was not significantly influenced by issues erroneously submitted to it.” See Romero, 166 S.W.3d
at 227-28. Consequently, we find that any error in the jury instruction was harmless.
14
Abraham’s protected activities. According to the TRC, the Board considered only two sources of
information in approving the RIF: Wolfe’s management assessment and Arrell’s recommendation
to fire Abraham. Neither of those, the TRC contends, establishes the Board’s knowledge of
Abraham’s protected activity.
However, Abraham presented strong circumstantial evidence that the TRC Board was
aware of her protected activity. Hall testified that she provided advance copies of a draft of her
report on Gilger’s sexual misconduct to both Arrell and Wolfe on June 14, prior to their meeting
with the Board. The first paragraph of that report states that Abraham had filed an internal
grievance against Gilger. Abraham’s grievance form and a four-page statement in which Abraham
described Gilger’s behavior were also attached to Hall’s report. Hall testified that she provided the
report to Wolfe and Arrell so that the information could be given to the Board: “I wanted to share
information with executive management because one, I knew a board meeting was coming . . . .”
Arrell testified that he consulted with the Board before firing Gilger on June 14. He
explained that the “[B]oard and I together decided that he needed to go” and that the Board “gave
me the authority to fire him.” According to Gilger’s notice of termination, Arrell and the Board
based their decision to fire Gilger in large part upon “confirmed allegations of sexual harassment and
inappropriate behavior. . . .” Gilger’s name is also listed as a topic of discussion for executive
session at the June 20 board meeting—the same meeting in which the Board decided to eliminate
Abraham’s job. Arrell, who was fully aware of Abraham’s complaints, was present while the Board
deliberated on his recommended reduction in force.9 Wolfe testified that she relayed concerns about
9
Arrell testified at trial that he could not recall the events of the June 20 board meeting in
detail.
15
Gilger’s “management style” to the Board. Although Wolfe claimed that she did not tell the Board
that Gilger had been fired for sexual harassment, this answer does not address whether Wolfe
mentioned Abraham’s complaint. Moreover, there is no doubt that the Board knew Gilger had been
fired for sexual harassment—the Board had authorized his termination. The jury could have
reasonably inferred from this record that the Board was informed of the details of Hall’s report,
including Abraham’s complaint, before it terminated Gilger and eliminated Abraham’s position.
Because there is some evidence that the Board was aware of Abraham’s protected activity prior to
eliminating her position, we overrule the TRC’s second legal sufficiency challenge.10
Jury Instructions
In its third and final point of error, the TRC contends that the district court erred by
submitting a “motivating factor” jury instruction rather than a “but for” jury instruction. We review
the TRC’s claim under an abuse of discretion standard. See In re V.L.K., 24 S.W.3d 338, 341 (Tex.
2000). The trial court has great latitude and considerable discretion to determine necessary and
proper jury instructions. Louisiana-Pacific Co. v. Knighten, 976 S.W.2d 674, 676 (Tex. 1988).
Error in the jury charge is reversible if, when viewed in light of all the circumstances, it amounts to
such a denial of rights of the complaining party as was reasonably calculated and probably did cause
the rendition of an improper judgment. Niemeyer v. Tana Oil & Gas Co., 39 S.W.3d 380, 387 (Tex.
App.—Austin 2001, pet. denied) (citing Howell Crude Oil Co. v. Donna Refinery Partners, Ltd., 928
S.W.2d 100, 110 (Tex. App.—Houston [14th Dist.] 1996, writ denied)).
10
Because we hold that Abraham presented legally sufficient evidence that the Board was
aware of her protected activity, we need not consider Abraham’s “conduit theory” argument. See
City of Fort Worth v. Zimlich, 29 S.W.3d 62, 70 (Tex. 2000).
16
The district court charged the jury with the following two questions:
Question No. 1
Was Anna M. Abraham’s filing a complaint; testifying, assisting, or participating in
any manner in a sexual harassment investigation; or opposing sexual harassment a
motivating factor in the Texas Rehabilitation Commission’s decision to discharge
Anna M. Abraham?
A ‘motivating factor’ in an employment decision is a reason for making the decision
at the time it was made. There may be more than one motivating factor for an
employment decision.
Answer “Yes” or “No.”
Answer: ____
If you have answered “Yes” to Question No. 1, then answer the following question.
Otherwise, do not answer the following Question.
Question No. 2
Would the Texas Rehabilitation Commission have discharged Anna M. Abraham
when it did, in the absence of the impermissible motivating factor(s) described in
Question No. 1?
Answer “Yes” or “No.”
Answer: ____
The TRC contends that the district court erroneously submitted the two “motivating
factor” instructions. The proper causation standard for retaliation claims under section 21.055 of the
labor code is, as the TRC asserts, ultimately a “but for” standard. See Pineda v. United Parcel Serv.,
Inc., 360 F.3d 483, 487 (5th Cir. 2004); Thomann v. Lakes Reg’l MHMR Ctr., 162 S.W.3d 788, 799
17
(Tex. App.—Dallas 2005, no pet.).11 But the mere mention of the phrase “motivating factor” in the
first question does not convert the two instructions, considered together, into an improper instruction.
The first question required the jury to determine whether one of the TRC’s reasons for firing
Abraham, among others, was that she engaged in a protected activity. The second question then
required the jury to determine whether Abraham would have lost her job when she did if she had not
engaged in that protected activity.
In Department of Human Services v. Hinds, a case brought under the Whistleblower
Act, the court found that an employee is not required “to prove that his reporting illegal conduct was
the sole reason for his employer’s adverse actions.” See 904 S.W.2d 629, 634 (Tex. 1995). Thus,
the fact that there may have been additional, permissible factors that motivated the TRC to terminate
Abraham is irrelevant under Hinds if Abraham would not have lost her job when she did but for the
impermissible factor. See id. at 636 (“the standard of causation in whistleblower and similar cases
should be that the employee’s protected conduct must be such that, without it, the employer’s
prohibited conduct would not have occurred when it did”). Even if the first jury question raised the
possibility that there may have been permissible reasons for Abraham’s termination, the second
question made certain that the jury would not be able to assign liability on that basis. Instead, the
second question imposed the “but for” standard by requiring the jury to find liability only if Abraham
would not have lost her job in the absence of an impermissible reason for her termination. See id.
Accordingly, we overrule the TRC’s third issue.
11
The standard is considerably less stringent to establish the causal link in making a prima
facie case of retaliation. See Ackel v. Nat’l Communications, Inc., 339 F.3d 376, 385 (5th Cir. 2003).
18
CONCLUSION
Having overruled all of the TRC’s issues, we affirm the district court’s judgment
based on the jury’s verdict.
__________________________________________
Bea Ann Smith, Justice
Before Chief Justice Law, Justices B. A. Smith and Pemberton
Affirmed
Filed: January 27, 2006
19
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14 So.3d 1271 (2009)
SHLISHEY THE BEST, INC., Appellant,
v.
CITIFINANCIAL EQUITY SERVICES, INC.; and Darryl Lowery and Wedsel Lowery, Appellees.
No. 2D09-135.
District Court of Appeal of Florida, Second District.
July 8, 2009.
*1273 George J.F. Werner, Clearwater, for Appellant.
W. Glenn Jensen and Shayne A. Thomas of Roetzel & Andress, LPA, Orlando, for Appellee CitiFinancial Equity Services, Inc.
No appearance for Appellees Darryl Lowery and Wedsel Lowery.
VILLANTI, Judge.
Shlishey the Best, Inc., the third-party purchaser at a foreclosure sale, appeals the trial court's order that set aside the foreclosure sale and vacated the certificate of sale, contending that it was denied procedural due process because the trial court entered the order ex parte and with no opportunity for Shlishey to be heard. Because the record supports this assertion, we reverse and remand for further proceedings.
The facts here are very straightforward. CitiFinancial filed a foreclosure action against property owners Darryl and Wedsel Lowery. CitiFinancial obtained a final judgment of foreclosure for $168,856.75 on October 30, 2008. That final judgment set the foreclosure sale for December 4, 2008, at 2 p.m.
CitiFinancial subsequently began negotiating with the Lowerys in an effort to allow them to remain in their house. However, as the sale date approached, CitiFinancial did not file a motion seeking to have the foreclosure sale stayed or rescheduled. Instead, on the day of the sale, CitiFinancial apparently sent its representative to the clerk's office, where that representative told the clerk to remove the property from the sale list. The clerk did not do so, and the property was offered at the judicial sale on December 4 as scheduled. Shlishey bought the property at that judicial sale for $2000.
On December 5, 2008, CitiFinancial sent an unsworn letter to the trial judge asserting that the sale had been held due to a clerk's mistake and that the winning bid was insufficient. In the letter, CitiFinancial said that it was enclosing a proposed order vacating the foreclosure sale and the certificate of sale. This letter was not copied to Shlishey or otherwise provided to it.
On December 9, 2008, CitiFinancial served its "Objection to Foreclosure Sale; Motion to Vacate Foreclosure Sale of December 4, 2008; and Motion to Vacate Certificate of Sale." This motion was served by mail on Shlishey on December 9. However, the trial court signed CitiFinancial's proposed order granting its motion to vacate the foreclosure sale and certificate of sale on December 10. Thus, Shlishey never had an opportunity to object to the motion, and the trial court's decision to grant the motion was apparently based solely on the unsworn allegations of CitiFinancial's counsel. Shlishey now appeals, contending that it was denied due process when the court granted CitiFinancial's motion without an opportunity for Shlishey to be heard.
"Due process mandates that in any judicial proceeding, the litigants must be afforded the basic elements of notice and opportunity to be heard." E.I. DuPont De Nemours & Co. v. Lambert, 654 So.2d 226, 228 (Fla. 2d DCA 1995) (citing Cavalier v. Ignas, 290 So.2d 20, 21 (Fla. 1974)); see also Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950) ("`The fundamental *1274 requisite of due process of law is the opportunity to be heard.' Grannis v. Ordean, 234 U.S. 385, 394, 34 S.Ct. 779, 783, 58 L.Ed. 1363 [1914]. This right to be heard has little reality or worth unless one is informed that the matter is pending and can choose for himself whether to appear or default, acquiesce or contest."); Massey v. Charlotte County, 842 So.2d 142, 146 (Fla. 2d DCA 2003) ("Procedural due process requires both fair notice and a real opportunity to be heard `at a meaningful time and in a meaningful manner.'" (quoting Keys Citizens for Responsible Gov't, Inc. v. Fla. Keys Aqueduct Auth., 795 So.2d 940, 948 (Fla.2001))); Prunty v. State ex rel. Williams, 226 So.2d 448, 450 (Fla. 1st DCA 1969) (holding that it is "a denial of due process" to "enter an order on the motion without first giving the parties affected notice and an opportunity to be heard before a party's rights are taken away").
This court recently reversed the ex parte entry of an order vacating a previous order based in part on a finding that it resulted from a due process violation. In McCrea v. Deutsche Bank National Trust Co., 993 So.2d 1057 (Fla. 2d DCA 2008), the trial court had dismissed a foreclosure action brought by Deutsche Bank. Eleven days after the final order of dismissal was entered, Deutsche Bank faxed a cover sheet, unsigned letter, and proposed order to the trial court. Id. at 1058. In the letter, Deutsche Bank asserted that the dismissal order had been "wrongfully" entered based on the McCreas' alleged fraud. Id. A copy of the letter was also faxed to the McCreas. The day after the fax was sent and before the McCreas could respond, the trial court signed the order vacating the dismissal and reinstating the case. Id.
On appeal, the McCreas argued that the order vacating the dismissal order was improperly entered when the court had no jurisdiction to do so. Deutsche Bank asserted that the order was properly entered pursuant to Florida Rule of Civil Procedure 1.540(b), and it submitted documents in its appendix that purportedly supported the trial court's ruling. However, this court reversed, stating:
It may well be that the earlier order was the product of mistake, as opposed to judicial error, and was properly corrected by the trial court under rule 1.540(b). However, the McCreas were precluded from establishing the misapplication of rule 1.540(b) by the ex parte procedure that led to entry of the order. For this reason, we reverse and remand with directions for the court to hold a hearing on the matter.
Id. at 1058-59. While this court did not specifically reference "due process" in its ruling, the reversal due to lack of notice and opportunity to be heard is clearly a determination that entry of the order ex parte violated the McCreas' due process rights.
In a factual setting more similar to that presented by Shlishey, the Fourth District reversed an ex parte order vacating a judicial sale. In White v. Loschiavo, 597 So.2d 373 (Fla. 4th DCA 1992), the clerk held a judicial sale in a partition action. White was the winning bidder at the first sale, but she failed to timely pay the bid price. Id. at 373. The clerk held a second sale, and White was again the winning bidder, but she again failed to timely pay the bid price. Id. at 373-74. At that point, Loschiavo filed an ex parte motion to vacate the bids and sell the property again. Id. at 374. The court granted the motion without a hearing or notice to White, and Loschiavo was the winning bidder at the third sale. Id. White then filed a motion challenging the third sale. The Fourth District held that the order granting the *1275 third sale and declaring the prior bids false and fraudulent was entered in violation of White's due process rights because it was "the result of ex parte contact between the court and Loschiavo" and because the third sale was conducted without notice to White. Id. Thus, the court reversed and remanded with instructions to vacate the third sale and have a new sale. Id.
Here, as in McCrea and White, Shlishey had neither notice nor an opportunity to be heard before its rights to the property it purchased at a facially valid judicial sale were taken away by the court's order vacating that sale. CitiFinancial's December 5, 2008, letter to the trial court challenging the foreclosure sale was not copied to Shlishey. The actual motion to vacate the sale and certificate of sale was not served on Shlishey until December 9, and the trial court ruled on the motion on December 10quite possibly before Shlishey even received the motion served upon it by mail. It is apparent from this sequence of events that Shlishey was denied procedural due process relating to the entry of the order vacating the foreclosure sale.
In this appeal, CitiFinancial argues that Shlishey was not entitled to be heard on the objections because it had no protectable legal rights in the property. We disagree. Shlishey was the winning bidder at a properly noticed and facially proper foreclosure sale. It held a certificate of sale to the property at issue. Pursuant to that certificate of sale, Shlishey had the right to obtain title to the property unless objections to the sale were filed within ten days and sustained by the court. See § 45.031(5), Fla. Stat. (2008) (providing that the certificate of title will be automatically issued by the clerk ten days after the sale unless objections are filed); see also In re Jaar, 186 B.R. 148, 153-54 (Bankr. M.D.Fla.1995) (noting that a mortgagor's right of redemption expires with the filing of the certificate of sale, objections to the sale do not affect or cloud the title of the purchaser in any way, and that a certificate of sale must be set aside before a mortgagor can have any rights back and concluding based on these statutory provisions that "in Florida a residence is sold at a foreclosure sale ... at the time that the certificate of sale is filed by the clerk"). Thus, while Shlishey's rights in the property may have been inchoate during the ten-day objection period, see Roy v. Matheson, 263 So.2d 604, 606 (Fla. 4th DCA 1972), it nevertheless had protectable legal rights in the property. Accordingly, Shlishey was entitled to notice and an opportunity to be heard before those rights were taken away.
CitiFinancial also contends that the trial court's actions could not violate procedural due process because no specific post-sale procedure is statutorily mandated. It contends, in essence, that because there are procedural gaps in chapter 45, the trial court could proceed however it wished. This argument is baseless for two reasons. First, this court has previously held that when a statute contains procedural gaps, those gaps will be filled "by the commonsense application of basic principles of due process." Massey, 842 So.2d at 145 (quoting City of Tampa v. Brown, 711 So.2d 1188, 1189 (Fla. 2d DCA 1998)). Thus, the absence of an explicit statutory procedure for post-sale proceedings did not give the trial court liberty to simply ignore the procedural due process rights of interested parties.
Second, contrary to CitiFinancial's argument, the statute does set forth the required procedure. Section 45.031(8) provides that objections based on the amount of the bid may be filed within ten days after the clerk files a certificate of sale, and "[i]f timely objections to the bid *1276 are served, the objections shall be heard by the court." (Emphasis added.) For the court to "hear" objections, it must provide both notice and an opportunity for any interested party to address those objections. See, e.g., Nelson v. Santora, 570 So.2d 1374, 1376 (Fla. 1st DCA 1990) (interpreting former version of section 45.031(8) to require the court to hold an actual hearing on any objections). We recognize that "[t]he specific parameters of the notice and opportunity to be heard required by procedural due process are not evaluated by fixed rules of law, but rather by the requirements of the particular proceeding," Massey, 842 So.2d at 146, and we do not hold that a court may only "hear" objections to a foreclosure sale at an in-court proceeding with counsel physically present. However, we are certain that the word "heard" in section 45.031(8) does not contemplate that objections to a foreclosure sale may be decided ex parte and without notice to all interested parties, including the buyer holding the facially valid certificate of sale.
Because of the patent procedural due process violations in this case, we reverse the order setting aside the foreclosure sale and remand for further proceedings consistent with this opinion.
Reversed and remanded.
ALTENBERND and FULMER, JJ., Concur.
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United States Court of Appeals
For the Eighth Circuit
___________________________
No. 15-2601
___________________________
United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Thomas Harry Finley
lllllllllllllllllllll Defendant - Appellant
____________
Appeal from United States District Court
for the Northern District of Iowa - Cedar Rapids
____________
Submitted: December 24, 2015
Filed: January 12, 2016
[Unpublished]
____________
Before LOKEN, BOWMAN, and COLLOTON, Circuit Judges.
____________
PER CURIAM.
Thomas Finley appeals after the District Court1 denied him a sentence
reduction under 18 U.S.C. § 3582(c)(2). In 2011, Finley pleaded guilty to conspiring
1
The Honorable Linda R. Reade, Chief Judge, United States District Court for
the Northern District of Iowa.
to distribute 100 or more grams of heroin, 21 U.S.C. §§ 841(a)(1), (b)(1)(B); 846. In
a written, nonbinding plea agreement, the parties stipulated that one individual had
died as a result of using heroin distributed by Finley and that a 6-level upward
departure to the U.S. Sentencing Guidelines base-offense level was warranted under
U.S.S.G. § 5K2.1 (permitting a sentence above the authorized range “[i]f death
resulted”). The District Court imposed a 14-level upward departure under § 5K2.1
based on evidence that two victims had died as a result of using heroin that Finley
distributed; calculated a Guidelines range of 210–262 months; and sentenced Finley
to 262 months in prison. In March 2015, the District Court sua sponte considered the
applicability of Guidelines Amendment 782 (lowering by 2 levels certain base-
offense levels for drug offenses) to Finley’s case and declined to reduce the sentence.
The court indicated that it would have imposed the same sentence even with the
2-level reduction in base-offense level. On appeal, Finley argues that the District
Court abused its discretion by failing to reduce his sentence.
We hold that the District Court did not abuse its discretion in denying a
sentence reduction under § 3582(c)(2). See United States v. Anderson, 707 F.3d 973,
974 (8th Cir. 2013) (per curiam) (standard of review). We affirm the judgment, grant
counsel’s motion to withdraw, and deny as moot Finley’s motion for appointment of
counsel.
______________________________
-2-
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863 F.Supp. 1430 (1994)
Mary Jane DAVIES, Plaintiff,
v.
PHILIP MORRIS, USA, a Virginia Corporation, and Richard Mefford, Defendants.
Civ. A. No. 93-K-602.
United States District Court, D. Colorado.
October 17, 1994.
*1431 *1432 *1433 Richard S. Shaffer, Aurora, CO, for plaintiff.
James Scarboro, Lewis Steverson, Arnold & Porter, Denver, CO, for defendants.
MEMORANDUM OPINION AND ORDER ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
KANE, Senior District Judge.
Before me on Defendants' motion for summary judgment is another employment discrimination action brought by a former Philip Morris, USA ("Philip Morris") sales representative fired after allegedly falsifying cigarette sales records.[1] While Plaintiff's claims in the present action are similar to those pled and dismissed on summary judgment in Crumpton, the facts vary significantly and preclude a similar disposition. For the reasons set forth below, I deny Defendants' motion for summary judgment on Plaintiff's Title VII, outrageous conduct, and fraud claims. I grant summary judgment on Plaintiff's claim for tortious interference with contractual relations.
I. Summary Judgment Standards
Rule 56(c) of the Federal Rules of Civil Procedure permits entry of summary judgment where the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits, show there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. In reviewing the present motion, I must accept as true all of the evidence presented by Davies as the nonmovant and draw all justifiable inferences in her favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513, 91 L.Ed.2d 202 (1986). Summary judgment is appropriate only where the record, taken as a whole, could lead no rational trier of fact to find in Davies's favor. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).
II. Facts
Viewing the evidence in the light most favorable to Plaintiff, I rely on the following facts. Plaintiff Mary Jane Davies is a 41 year-old married mother of five children. She claims she worked every day of her adult work life until she was terminated by Philip Morris. Philip Morris hired Davies in February of 1987. She worked for the company as a sales representative until October 12, 1992, when she was fired for allegedly falsifying documents. She denies she falsified documents, and denies any wrongdoing.
Her regular performance appraisals while at Philip Morris ranged from "commendable" in 1988 to "superior" in 1989 and 1990. See Pl.'s Resp.Defs.' Amended Mot.Summ.J., Exs. 2-5. The copy of Davies's 1991 appraisal attached to her response is incomplete, but the marks indicated are consistent with those received the previous two years. She was specifically commended for exceeding sales *1434 goals, being "very professional," "always willing to participate in special events," being "at first call early each day," and having a "100% attendance record." Id., Ex. 6.
Philip Morris section sales director Barry Anderson described Davies as a "good sales representative" who was "upbeat," "enthusiastic," made "excellent calls" on her territory, and had an "excellent rapport" with all of her accounts. Anderson Dep. at 82:21-25 (attached as Ex. F to Defs.' Amended Mot. Summ.J.). In affidavits submitted by Davies, the manager of one of her accounts, a former colleague, and a former supervisor describe Davies in the same glowing terms. See Pl.'s Resp.Am.Mot.Summ.J., Exs. 7, 11; Pl.'s Surreply, Ex. 22.
Despite her qualities and performance, Davies claims she was treated as a "second class citizen" at Philip Morris. She maintains she received fewer training opportunities than male sales representatives and was not told of opportunities to move up in the company. In 1988, despite three requests by her supervisor to management, she was passed over for Philip Morris's Management Apprentice Program (MAP) in favor of at least two lesser qualified men, Bill Stahl and Vince Minnick. See Pl.'s Surreply, Ex. 22 (Crumpton Aff.) at 2. These individuals were under the supervision of Defendant Richard Mefford.
In 1988, Mefford approached Davies about "taking her under his wing" and Davies was transferred to his supervision. Davies claims Mefford would not accompany her in the field, rarely returned her phone calls, and generally treated her in a mean and demeaning manner. Pl.'s Resp. Amended Mot. Summ.J. at 5-6, Ex. 1 (Davies Aff.) at 5. He displayed favoritism toward male sales representatives, accompanying them in the field, letting them leave work at 3:00 p.m. on Fridays to play on all-male company softball teams, and leave early for special events where they were permitted to drink beer in the stands while women were expected to work the booths. Id.
These allegations are corroborated by the affidavits of former Philip Morris sales representatives Susan Wolf and Holly Brummett. Pl.'s Resp.Am.Mot.S.J., Exs. 12-13; Pl.'s Surreply, Ex. 25. If there were choices of better hours or better accounts for overtime pay, they would be assigned to the men. Wolf Aff. at 2. Wolf states Mefford's response was these men had to support their families. Id.
On September 12, 1989, Barry Anderson accompanied Davies for a day in the field. During the course of that day, Davies complained of Mefford's treatment and the company's failure to place her in the MAP program. Anderson sent Davies a letter the following day, stating he enjoyed working with her and commending her for being "aggressive" and "totally ha[ving] the company's best interests at heart." Pl.'s Resp.Amended Mot.Summ.J., Ex. 14. He expressed appreciation for the "frank conversation" they had "concerning [her] career as well as other issues," and assured her the conversation "did not fall on deaf ears." Id. Upon Anderson's request, Davies was finally placed in the MAP program. During the entire time she was with the company, Davies was the only woman in three Denver divisions to have been placed in MAP. Pl.'s Surreply, Ex. 22 (Crumpton Aff.) at 3.
Even after Davies was placed in MAP, Mefford's treatment of her did not improve. Pl.'s Resp.Am.Mot.S.J., Ex. 1 (Davies's Aff.) at 4. At a sales meeting in September of 1992 attended by Anderson, Davies again expressed displeasure with Mefford's management style. Id.; Pl.'s Resp. at 6. Another female sales representative, Denise Belton, also complained about Mefford at this meeting. Pl.'s Resp. at 6. Anderson was sufficiently concerned to ask district manager Mike Kronschnabel to meet with Mefford. Id.
In late September, early October of 1992, Davies was working with a new sales promotion for Marlboro cigarettes in a territory to which she had been assigned for six months. She had difficulty understanding the program, which involved the use of special displays and "gratis" (free product). Pl.'s Resp.Amended Mot.Summ.J., Ex. 1 at 5. On September 28, 1992, Davies made a sales call to Account 28, a Conoco/Texaco station managed by Lisa Douglas. Id. She computed *1435 the gratis due Account 28 for participating in the promotion, arriving at a figure of $131, which she recorded in several places on her Call Summary[2] sheet. Believing the amount to be incorrect, Davies crossed out the sum where it appeared on the Call Summary and told Douglas she needed to check with her boss before giving her the gratis. Id. Ultimately, no gratis was paid Account 28. Douglas, fearing theft of the product, moved the display from the floor to the counter, which disqualified it from the promotion. Id. Douglas submitted an affidavit in support of Davies's claims and corroborates Davies's recollection of the events on September 28th in every respect. See Pl.'s Resp.Amended Mot.Summ.J., Ex. 7 (Douglas Aff.) at 1-2.
Davies called Mefford at his home on September 30, 1992 and advised him of the confusion surrounding the $131 gratis computation.[3] She told Mefford she had entered $131 on her Call Summary, but had not paid it because it seemed too high. Davies claims she told Mefford she left the $131 on the Call Summary despite not having paid the gratis so she would have a record of the amount for further discussions. Id. at Ex. 1, p. 5. Davies states Mefford responded by stating, "That's fine, do what you have to do and take care of it." Id. According to Davies, Mefford specifically knew she had written down $131 in gratis but that she had not given it to Douglas. She understood Mefford's response to acknowledge this fact and to authorize her to indicate in her Call Summary the payment of gratis as a reminder when gratis was due, even if it had not yet been paid. Id. at 5-6.
After her conversation with Mefford, Davies wrote "Corrected gratis error after talking to you 9/30" on the bottom of her September 28, 1992 Call Summary sheet. Pl.'s Resp.Am.Mot.Summ.J. at 9 (referencing 9/28 Call Summary, attached as Ex. 8).
Mefford disputes Davies's version of the events on September 30, 1992. Defs.' Am. Mot.Summ.J., Ex. B (Mefford Aff.) at ¶ 7. He claims he had attempted to locate Davies all day on September 30th to "observe her" while she worked with her accounts, but that he had been unable to do so. Id. He acknowledges Davies phoned him that evening at home, but states the purpose of her call was to ask how much gratis she was supposed to give her accounts for the Marlboro promotion. Id. He states that after he told her, Davies informed him she had made a mistake on Account 28. Id. Mefford understood Davies had given Account 28 more gratis than she was supposed to, and that she intended to return to the account the following day to retrieve the excess gratis. Id.
The following day, after their telephone conversation, Mefford states he again tried to locate Davies in the field to no avail. Id. at ¶ 8. He then drove to Account 28 to determine whether Davies had retrieved the excess gratis. Id. On a Call Contact Verification form dated October 6, 1992, Mefford noted "Lisa [Douglas] told me she hasn't been given any gratis." Pl.'s Resp. Am.Mot.Summ.J., Ex. 9.[4] Mefford examined Davies September 28 Call Summary and "discovered" Davies had indicated she had given gratis to Account 28. Id.
Suspicions aroused, Mefford states he examined Davies's summaries for September 30 and October 1, 1992, contacting every account to which Davies had reportedly given gratis or coupons. Defs.' Am.Mot.Summ.J., Ex. B at ¶ 9. Mefford claims his investigation revealed six instances where receipt of gratis or coupons could not be verified or was disputed by managers at the accounts. Id. Davies contends she was "set up," a contention later supported by one of the managers Mefford visited that day.[5] Nevertheless, *1436 Mefford prepared and sent a memorandum detailing his findings to Barry Anderson and Philip Morris's assistant region personnel administrator in Los Angeles.
On October 12, 1992, Mefford and his immediate supervisor Mike Kronschnabel confronted Davies with the results of Mefford's investigation. Davies strongly denied wrongdoing, and offered to drive to the various accounts with Mefford and Kronschnabel to disprove their allegations. Pl.'s Resp. Am.Mot.Summ.J., Ex. 1 at 1. She states the men advised her it would be no use. This was a new territory for her and counter people and managers often changed. Id. Mefford disputes this, stating he, Kronschnabel, and Davies got in a car to go to the various accounts, but that Davies asked them to turn the car around and return to the office because it was "no use." Defs.' Am. Mot.Summ.J., Ex. B at ¶ 13. When they returned to the office, Mefford and Kronschnabel discussed the situation and determined Davies's employment should be terminated for falsification. Id. at ¶ 14.
As though these facts were not sufficiently intriguing, there is evidence in the record that Mefford himself has falsified documents while employed by Philip Morris. See Anderson Dep. at 80:24-81:25 (attached as Ex. 2, Pl.'s Opp.Defs.' Mot.Prot.Order) (admitting Mefford had been disciplined for falsifying the date on an employee's audit form). When questioned about Mefford's conduct, Anderson testified Mefford altered the date because "he had previously done the audit and wanted to do this individual's performance appraisal and basically terminate the individual for poor performance." Id. at 81:9-14. Anderson also admitted Mefford initially denied falsifying the date, and that Mefford received a written warning and a reduction in performance appraisal rating because of his conduct. Id. at 81:18-82:6. Mefford was not fired.
III. Merits
In her Complaint, Davies asserts four claims for relief: (1) discrimination based on sex under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e ("Title VII") (against Philip Morris); (2) fraud and deceit (against Philip Morris and Philip Morris employee Richard Mefford); (3) intentional infliction of emotional distress (against Mefford, only); and (4) tortious interference with contractual rights (same). Defendants contend Davies actually is asserting seven employment discrimination claims and three state law claims, each of which fails as a matter of law. Defendants maintain they are entitled to summary judgment on Davies's Title VII claims because some fail to state cognizable causes of action, and because Davies cannot establish a prima facie case with respect to others. They also contend Davies cannot satisfy certain necessary elements of her three state law claims.
A. Davies's Title VII Claim(s)
There is some confusion as to the nature and number of Davies's Title VII claim(s). The Complaint in this action asserts only one claim for relief under Title VII, titled "Sex Discrimination v. Defendant Corporation." In her Complaint, Davies alleges numerous examples of sex discrimination, including unlawful discharge; failure to promote or train; refusal to remedy or eliminate discriminatory practices; and retaliation. See Pl's Compl., ¶¶ 16-20. In an apparent "divide and conquer" strategy, Defendants set out these allegations as separate Title VII claims, then argue each fails as a matter of law. See Defs.' Am.Mot.Summ.J. at 2.
Davies does not challenge Defendants' "seven Title VII claims" argument directly. She frames her Title VII action as a single claim for unlawful discharge supported by evidence of discriminatory training, promotion, *1437 and termination practices at Philip Morris but also maintains she has stated a prima facie case for three additional Title VII claims. Compare Pl.'s Resp. Am.Mot.Summ.J. at pp. ii, 19-24 with Pl.'s Surreply at pp. 3-4.
Both sides confuse the issue. This is clearly a wrongful discharge case where Plaintiff claims she was fired for discriminatory reasons and Defendants say she was not. The dispute revolves around the question of pretext: Did Philip Morris and Richard Mefford fire Davies for falsifying documents, or was this an excuse behind which Defendants hid illegitimate motives? The issue is inherently factual. Given the facts presented and drawing all inferences in Davies's favor, Plaintiff's claim for wrongful discharge is one for the jury.
1. Analytical Framework
The purpose of Title VII is to protect the rights of certain categories of individuals to be free of discrimination. It provides, in pertinent part:
It shall be unlawful for an employer
(1) ... to discharge any individual, or otherwise to discriminate against any individual with respect to [her] compensation, terms, conditions, or privileges of employment, because of [her] ... sex.
42 U.S.C. § 2000e-2(a)(1) (1988 & Supp. III 1992).
To prevail on a claim of sex discrimination under Title VII, a plaintiff must prove, either directly or indirectly, that her sex was a motivating factor for the employment action of which she complains. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973) (construing 42 U.S.C. § 2000e-2(m)); Texas Dept. Community Affairs v. Burdine, 450 U.S. 248, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981). Direct evidence includes oral or written statements on the part of a defendant showing a discriminatory motivation for that defendant's actions; indirect or circumstantial evidence includes proof of a set of circumstances allowing a reasonable trier of fact to believe sex was a motivating factor in the defendant's actions.
Where there is inadequate direct evidence of discrimination, the United States Supreme Court has established a three-step burden-shifting format whereby a plaintiff may prove it indirectly. McDonnell Douglas, 411 U.S. at 801-04, 93 S.Ct. at 1823-25; Burdine, 450 U.S. at 252-56, 101 S.Ct. at 1093-95. This format has been adopted by the Tenth Circuit. See Cone v. Longmont Hosp., 14 F.3d 526 (10th Cir.1994); E.E.O.C. v. Flasher, 986 F.2d 1312, 1316 (10th Cir. 1992). The first step of the McDonnell Douglas framework requires the plaintiff to prove a prima facie case of discrimination. The central inquiry in evaluating whether plaintiff has met this initial burden is whether the circumstantial evidence is sufficient to create an inference (i.e., rebuttable presumption) that the basis for the challenged employment decision was an illegal criterion. Halsell v. Kimberly-Clark Corp., 683 F.2d 285 (8th Cir.1982), cert. denied 459 U.S. 1205, 103 S.Ct. 1194, 75 L.Ed.2d 438 (1983).
Once plaintiff has established a prima facie case, the burden of production shifts to the defendant to articulate a facially nondiscriminatory reason for its employment decision. McDonnell Douglas, 411 U.S. at 802-03, 93 S.Ct. at 1824, modified by Flasher, 986 F.2d at 1316, n. 4 (changing "nondiscriminatory" to "facially nondiscriminatory" because no examination is made at this point of whether reason given is pretextual or unequally applied). Defendant need not litigate the merits of its proffered reason, but must state it specifically and clearly. Flasher at 1316 (citations omitted). Once the defendant sets forth a facially nondiscriminatory reason for its action, the plaintiff assumes the normal burden of any plaintiff to prove her case. Id.
Contrary to Defendants' suggestion in this case, the elements of a prima facie case are flexible and are not to be applied rigidly. Cone, 14 F.3d at 530 n. 2, (citing Schwager v. Sun Oil Co., 591 F.2d 58, 61 n. 1 (10th Cir.1979) and Burdine, 450 U.S. at 253 n. 6, 101 S.Ct. at 1093 n. 6); see McDonnell Douglas, 411 U.S. at 802 n. 13, 93 S.Ct. at 1824 n. 13. In a wrongful discharge case, plaintiff meets her burden if she proves (1) *1438 she is a member of a protected class; (2) she was discharged; and (3) her sex was a motivating factor in that discharge.
The entire purpose for the three-step framework in McDonnell Douglas is to provide a basic "order of presentation of proof" so the controversy can be brought into focus. Carey v. United States Postal Service, 812 F.2d 621, 623 (10th Cir.1987), quoted in Flasher, 986 F.2d at 1316-17. It was never intended to provide a mechanistic approach to what ultimately becomes a straightforward trial about motive. Flasher at 1317. In the final analysis, the trier of fact is to determine whether plaintiff was the victim of intentional discrimination based upon protected class characteristics. Id. (citations omitted).
2. Applying the Legal Framework to Davies's Title VII Claim
To defeat the present motion for summary judgment, Davies must establish a prima facie case of sex discrimination, and, because Defendants assert a facially nondiscriminatory reason for her termination, she must also present evidence that creates a genuine question as to whether this reason is pretext. See Cone, 14 F.3d at 530 (citing MacDonald v. Eastern Wyoming Mental Health Center, 941 F.2d 1115, 1121-22 (10th Cir.1991)).
Davies's prima facie case.
Defendants concede the first two elements of Davies's prima facie case: Davies is a member of a protected class and she was fired. The only question is whether her sex was a motivating factor in Defendants' decision to fire her.
To satisfy this requirement, Davies need only create an inference that the basis for her firing was the fact she is a woman. MacDonald, 941 F.2d at 1119 (discriminatory discharge based on age) (citing Burdine, 450 U.S. at 254-55, 101 S.Ct. at 1094). She may do so by proffering credible evidence that she continued to possess the objective qualifications she held when she was hired, or by her own testimony that her work was satisfactory, even if this is disputed by her employer.[6]MacDonald, 941 F.2d at 1121.
Davies has met her burden here. She received excellent performance appraisals while working for Philip Morris and was described by management, colleagues, and clients as "professional," "responsive," "aggressive," and having "the interests of the company at heart." The record shows she consistently met or exceeded sales goals. She was the only woman in Philip Morris's three Denver offices to have been placed in MAP. Nevertheless, she was fired. Under analysis set forth in MacDonald, I conclude Davies has made a prima facie showing that her firing was discriminatorily motivated.
Pretext
Defendants maintain Davies was fired not for discriminatory reasons, but for falsifying documents. Davies counters this reason is pretext. Both sides argue vociferously the other is lying, citing affidavits, private investigator reports, and other evidence to "prove" their points. All that is required to defeat the present motion for summary judgment, however, is "enough evidence to support an inference that the employer's reason is merely pretext, by showing either `a discriminatory reason more likely motivated the employer or ... that the employer's proffered explanation is unworthy of credence.'" Cone, 14 F.3d at 530 (quoting MacDonald, 941 F.2d at 1121-22). The evidence presented by Davies through the affidavits of Susan Wolf, Holly Brummett, Willie Crumpton, and Lazell Petty together with Defendants' own admission that Mefford has altered documents in the past to fire an employee *1439 is more than sufficient to create a genuine issue of fact regarding pretext in this case. Thus, entry of summary judgment in favor of Defendants is precluded.
3. Davies' "Other" Title VII Claims.
Davies alleges several additional examples of discrimination by Philip Morris. Davies alleges Philip Morris maintained policies and practices that operated to affect women disparately and adversely as well as to deny them equal opportunity with respect to wages, job assignments, insurance, and other terms and conditions of employment. Pl.'s Compl. at ¶ 17(A)-(B). Davies also alleges Philip Morris discriminatorily trained and promoted employees based on sex. Id. at ¶ 17(A), (D). Defendants contend these allegations constitute separate causes of action based on "disparate impact" for which Davies has failed to establish prima facie cases. See, e.g., Defs.' Am.Mot.Summ.J. at 2, 21-22 (no statistical evidence of a specific Philip Morris employment practice that had a substantial and adverse impact on women).
Davies also alleges Philip Morris refused to negotiate contracts or take affirmative action to correct or eliminate discriminatory policies and practices. Pl's Compl. at ¶ 17(E)-(F). Defendants contend these allegations also constitute separate Title VII claims, but seek judgment on them because they do not state legally cognizable causes of action.
By extrapolating Davies's factual allegations to the concept of separate causes of action and then destroying them, Defendants seek to remove what essentially are factual allegations from consideration on summary judgment. Davies relies on these allegations (and the evidence supporting them) not as separate causes of action, but as indirect proof under the McDonnell Douglas framework of Defendants' discriminatory motives in firing her. For this reason, I need not reach Defendants' arguments with respect to these "separate" causes of action.
B. Plaintiff's State Law Claims
1. Fraud
Davies's state law claim for fraud and deceit is premised on the following statement made by Mefford during their September 30, 1992 telephone conversation: "That's fine, do what you have to do and take care of it." Pl.'s Resp.Am.Mot.Summ.J. at 25; Pl.'s Surreply at 12-13. Davies claims Mefford knew she had not given Lisa Douglas $131 in gratis; knew she had nevertheless written down $131 on her Call Summary to document her confusion regarding the proper gratis amount and have a record of it for further discussion; and approved it for those purposes. In this context, Davies maintains Mefford's statement constituted a direction, license, and approval of the manner in which she was handling the gratis problem at Account 28. She claims Mefford's statement was a "set up," undertaken in retaliation for complaints she made about Mefford to his superiors, and claims she relied on Mefford's statement to her detriment. Pl.'s Surreply at 13-14.
Defendants maintain this is insufficient to state a cause of action for fraud under Colorado law. Defs.' Am.Mot.Summ.J. at 24-27. They argue Mefford's statement was not a "representation" as that word is defined by Webster, and maintain it had no causal connection to her termination. Id. at 25. I reject both arguments out of hand.
Webster, while an expert lexicographer, is not the final arbiter of legal patois. Under Colorado law, a "representation" need be neither a "description, account, [n]or statement of fact" to be actionable, as Defendants suggest. An actionable "representation" may be oral, written, or consist solely of conduct; the gist of a fraudulent representation is the production of a false impression in the mind of the other party, "the means of accomplishing it are immaterial." Cahill v. Readon, 85 Colo. 9, 273 P. 653, 655 (1929); see generally, C.J.I.3d 19:3 (1990) (citations omitted). Davies's testimony regarding the nature of her conversation with Mefford, her impression, and his conduct raises a genuine issue of fact with respect to the fraudulent nature of Mefford's "representation."
Defendants' contention that Mefford's conduct was unrelated to the conduct for which Davies was fired (i.e. marking $131 in gratis before she had given it and falsifying *1440 signatures for accounts she indicated received coupons) begs the ultimate factual question in this case and is not susceptible to resolution on a motion for summary judgment. For these reasons, I deny Defendants' motion for summary judgment on Davies's fraud claim.
2. Intentional Infliction of Emotional Distress
Davies claims Mefford misled her with respect to the $131 gratis Call Summary entries; lied about having spoken with Lisa Douglas; and misrepresented his conversation with Lazell Petty, all for the purpose of firing her. Davies claims these lies, together with the fact Mefford had been disciplined in the past for altering an audit of an employee in order to fire that employee, constitute intentional infliction of emotional distress as that claim is recognized in Colorado. Pl.'s Resp. at 27-29, citing Restatement (Second) of Torts § 46 (1965).
Under Colorado law, conduct must be
so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.
Churchey v. Adolph Coors Co., 759 P.2d 1336, 1350 (Colo.1988) (internal quotes and citation omitted). Determination of whether the alleged conduct is sufficiently outrageous to satisfy this standard is properly made in the first instance by the court. Bauer v. Southwest Denver Mental Health Center, Inc., 701 P.2d 114, 118 (Colo.App.1985). If the court determines no reasonable person could conclude defendant's conduct was outrageous, summary judgment is appropriate. Id.
I have cautioned plaintiffs in the past that outrageous conduct claims are not some sort of "froth to be lathered over" employment discrimination claims for the purpose of augmenting damages. See, e.g., Gard v. Teletronics, 859 F.Supp. 1349, 1354 (D.Colo.1994). In this instance, however, I believe Davies's claim is one for the jury and therefore deny Defendants' motion for summary judgment on this issue.
3. Tortious Interference with Contractual Relations.
Central to a claim for tortious interference with contractual relations is the existence of a contractual relationship. See C.J.I.3d 24:1 (1990). Davies does not dispute Philip Morris sales representatives are generally "at will" employees; she claims, however, her "at will" status changed because she was offered an oral contract of employment by Debbie Kronschnabel after her December 11, 1991 performance appraisal. See Pl.'s Resp.Am.Mot.Summ.J. at 29. Davies claims Kronschnabel advised her as to what her increase in salary would be for the following year and told her she would continue working for Philip Morris as a sales representative. Id. Davies states she accepted the terms of this "offer" by her continued performance. Id. Davies's contention is so overreaching it approaches fatuity.
To defeat the presumption of "at will" employment in Colorado, Davies must demonstrate "an express stipulation as to the duration of employment" in exchange for consideration over and above her existing performance. See Lampe v. Presbyterian Med. Center, 41 Colo.App. 465, 590 P.2d 513, 514 (1979). Not only does Davies fail to allege additional consideration or the requisite duration element, she also fails to specify what Kronschnabel said or how being advised of one's pay increase changed her status from "at will" to that of a contractual employee. Davies's allegations, even if true, fail as a matter of law to support the existence of an employment contract in which Mefford could have interfered. For this reason, Defendants' motion for summary judgment with respect to Davies's claim for tortious interference with contractual relations is granted.
IV. Conclusion
For the foregoing reasons, Defendants' Amended Motion for Summary Judgment is GRANTED in part and DENIED in part. Defendants' motion for summary judgment on Davies's Title VII, fraud, and intentional infliction of emotional distress claims is DENIED, and Defendants' motion for summary *1441 judgment on Davies's claim for tortious interference with contractual relations is GRANTED.
NOTES
[1] An earlier case, Crumpton v. Philip Morris, USA, No. 93-K-123, was settled after I entered summary judgement in defendants' favor on plaintiff's Title VII claims. See 845 F.Supp. 1421 (D.Colo.1994).
[2] Philip Morris sales representatives use daily Call Summaries to record visits to accounts. These forms contain spaces to record displays and promotions placed, types of sales, amounts paid accounts, and managers' signatures. There is space at the bottom of each Call Summary for comments, which Davies used for notes.
[3] Davies claims she had to call Mefford at home because he would not return her calls at work. Pl.'s Resp. at 8.
[4] Douglas denies ever speaking with Mefford about the $131 gratis or Mary Jane Davies. Douglas Aff. at 1 (Ex. 7, Pl.'s Resp. Am.Mot.Summ.J.).
[5] In the context of the present lawsuit, Davies hired retired Denver Police Officer Truman Leuthauser to "investigate" Mefford's investigation. Leuthauser interviewed Lazell Petty, one of the managers of Davies's allegedly falsified accounts, who disputed Mefford's conclusion. See Leuthauser Letter, acknowledged and signed by Lazell Petty (Ex. 12, Pl.'s Resp.Am.Mot.Summ.J.). According to Petty, it is common practice for cigarette sales representatives to place a display in his liquor store one day and then return with the gratis or product owed at a later date. Petty states while Davies was his representative, he always was given the gratis he was due. Petty told Leuthauser he believed someone was "out to get" Davies from inside Philip Morris, and stated when Mefford questioned him about Davies, Mefford was uninterested in hearing the complete circumstances and "cut him off" when he tried to explain. Id.
[6] The employer's stated nondiscriminatory reason for the discharge cannot be considered at the prima facie stage of the McDonnell Douglas analysis. MacDonald, 941 F.2d at 1119 (reversing district court's entry of summary judgment in favor of defendant because plaintiffs failed to disprove stated reasons for discharge). The reason for keeping the prima facie and pretext stages of the analysis separate is to give plaintiff a full and fair opportunity to demonstrate pretext. Short-circuiting plaintiff's case at the prima facie stage would frustrate plaintiff's ability to do so. Id.
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176 Ill. App.3d 652 (1988)
531 N.E.2d 403
BARRY FLANNERY et al., Plaintiffs-Appellees,
v.
STEVEN K. LIN et al., Defendants (Good Samaritan Hospital, Defendant-Appellant).
No. 2-88-0030.
Illinois Appellate Court Second District.
Opinion filed November 23, 1988.
*653 Michael J. Gallagher and Richard A. Barrett, Jr., both of Cassiday, Schade & Gloor, of Chicago, for appellant.
Richard F. Mallen, and John G. Phillips and John F. Klebba, both of John G. Phillips & Associates, both of Chicago, for appellees.
Judgment reversed.
PRESIDING JUSTICE LINDBERG delivered the opinion of the court:
Defendant, Good Samaritan Hospital, appeals from an order finding it in civil contempt for failure to comply with a discovery order and fining it $100. Plaintiffs, Barbara and Barry Flannery, brought the underlying personal injury action against defendant hospital, Dr. Steven Lin and Dr. Jeanne Mercer which gave rise to the contempt proceedings. On appeal, defendant hospital contends that, because its code blue evaluation report was privileged under section 8-2101 et seq. of the Code of Civil Procedure (the Medical Studies Act) (Ill. Rev. Stat. 1987, ch. 110, par. 8-2101 et seq.), the trial court erroneously found it in contempt for its failure to disclose that document.
On January 10, 1977, Bridgit Flannery, who was approximately two months old, was brought to defendant hospital for treatment. While at the hospital, Bridgit developed pulmonary, respiratory, and infectious problems which caused her to suffer a respiratory or cardiac arrest. The lapse in breathing resulted in neurological damage to Bridgit.
On December 19, 1986, Bridgit's parents, Barbara and Barry, filed a four-count complaint against defendant hospital, Dr. Steven Lin and Dr. Jeanne Mercer. Counts I and III alleged negligence, and counts II and IV sought recovery under the family expense statute (Ill. Rev. Stat. 1987, ch. 40, par. 1015). Counts II and IV were dismissed with prejudice because the statute of limitations had expired for recovery under the family expense statute.
During 1987, written discovery proceeded on the remaining counts through the use of interrogatories and the production of hospital records. On July 10, 1987, the trial court ordered that all discovery be completed by October 30, 1987. On September 23, 1987, plaintiffs filed a motion to produce withheld records which included a request for a document entitled "Code Blue Evaluation Report." *654 Plaintiffs discovered evidence of this report when they searched Bridgit's medical records on microfiche. The report had an opaque sheet placed over it to preserve its confidentiality. Defendant informed plaintiffs that the report would not be produced because it was privileged under the Medical Studies Act (Ill. Rev. Stat. 1987, ch. 110, par. 8-2101).
The hospital filed a response to plaintiffs' motion supported by the affidavits of Patricia Anne Farley and Cheryl Jackson. In the relevant part, Farley's supplemental affidavit states the following:
"1. She is Director of Quality Management at Good Samaritan Hospital and has knowledge of the facts stated herein;
2. She is familiar with procedures at Good Samaritan Hospital in the areas of Risk Management and Quality Assurance in January, 1977, and is competent to testify to the facts stated herein;
3. The Code Blue Evaluation Record regarding Bridgit Flannery was presented to a member of the ICU/CCU Committee for review in February, 1977.
4. Said member of the ICU/CCU Committee, Mary Fecht, would then review the Code Blue Evaluation Record and make certain recommendations to the Committee based thereon;
5. Based upon the review of these reports, the ICU/CCU Committee would make policy recommendations to the Department of Medicine relative to changes which might be made in hospital policy and procedure in order to improve the quality of patient care.
6. Recommendations made by the Department of Medicine would be acted upon by the Executive Medical Officer and implemented to improve and assure the quality of patient care.
7. The Code Blue Evaluation Report was, and is, intended to be confidential in order to promote frank reporting by hospital personnel of conditions which should be brought to the attention of the appropriate internal hospital committees to assure quality in patient care."
Jackson's affidavit states:
"1. She is Manager of Medical Records at GOOD SAMARITAN HOSPITAL and is competent to testify to the facts stated herein;
2. She is generally familiar with the keeping of medical records at GOOD SAMARITAN HOSPITAL in the Year 1977.
3. The Code Blue Evaluation Report prepared during the *655 January, 1977 admission of BRIDGIT FLANNERY was not a part of the patient's chart for purposes of diagnosis or treatment; rather, said report was prepared as an internal document for purposes of quality control and to reduce mortality and morbidity."
On October 30, 1987, the trial court conducted a hearing on plaintiffs' motion to produce in which plaintiffs objected to the defendant hospital's supporting affidavits as conclusory and speculative. On December 14, 1987, the trial court ordered defendant hospital to produce the code blue evaluation report for plaintiffs on or before December 22, 1987. At a hearing conducted on December 23, 1987, defendant hospital refused to produce the report, was found in contempt of court, and fined $100. Defendant filed a timely notice of appeal from the order finding it in contempt.
1 Before proceeding to the issue raised on appeal, we must first discuss two preliminary matters. First, in their brief, plaintiffs cited to a document entitled "Respiratory Therapy Evaluation" in support of their position. Plaintiffs acknowledge that although this document is not part of the record, they have made a motion before this court for its inclusion in the record and appended a copy of the document to their brief. We granted plaintiffs' motion to supplement the record with certain interrogatories, not the respiratory therapy evaluation. Attachments to a brief not otherwise of record are not properly before a reviewing court and cannot be used to supplement the record. (Etten v. Lane (1985), 138 Ill. App.3d 439, 442, 485 N.E.2d 1177, 1179.) We therefore decline to consider the respiratory therapy evaluation attached to plaintiffs' brief.
2 Second, we note that a contempt citation is an appropriate method for testing the propriety of a discovery order. (People ex rel. General Motors Corp. v. Bua (1967), 37 Ill.2d 180, 189, 226 N.E.2d 6, 12; Sakosko v. Memorial Hospital (1988), 167 Ill. App.3d 842, 848, 522 N.E.2d 273, 277; Anderson v. St. Mary's Hospital (1981), 101 Ill. App.3d 596, 598, 428 N.E.2d 528, 530.) Where the trial court's discovery order is invalid, a contempt judgment for failure to comply with discovery must be reversed. (Anderson, 101 Ill. App.3d at 598, 428 N.E.2d at 530; Bauter v. Reding (1979), 68 Ill. App.3d 171, 174, 385 N.E.2d 886, 889.) Therefore, we must examine the propriety of the underlying discovery order.
The sole issue raised in this appeal is whether a code blue evaluation report is privileged under the Medical Studies Act (Ill. Rev. Stat. 1987, ch. 110, par. 8-2101), thereby barring it from discovery. The uncontradicted affidavit of the hospital's manager of medical records *656 described a code blue evaluation report as an internal document prepared for purposes of quality control and to reduce mortality and morbidity.
Defendant contends that its supporting affidavits clearly prove that the code blue evaluation report was used for internal quality control and should not be considered part of a patient's chart merely because it appeared on microfiche. Plaintiffs argue that because the report was authored contemporaneously with the events occurring during Bridgit's hospitalization, does not belong to any committee of the hospital, and was included in Bridgit's hospital chart, it is clearly outside the Act's protection.
Section 8-2101 of the Medical Studies Act states:
"All information, interviews, reports, statements, memoranda or other data of * * * committees of licensed or accredited hospitals or their medical staffs, including Patient Care Audit Committees, Medical Care Evaluation Committees, Utilization Review Committees, Credential Committees and Executive Committees, (but not the medical records pertaining to the patient), used in the course of internal quality control or of medical study for the purpose of reducing morbidity or mortality, or for improving patient care, shall be privileged, strictly confidential and shall be used only for medical research, the evaluation and improvement of quality care, or granting, limiting or revoking staff privileges, except that in any hospital proceeding to decide upon a physician's staff privileges, or in any judicial review thereof, the claim of confidentiality shall not be invoked to deny such physician access to or use of data upon which such a decision was based." Ill. Rev. Stat. 1987, ch. 110, par. 8-2101.
3 The purpose of the Medical Studies Act is "to encourage candid and voluntary studies and programs used to improve hospital conditions and patient care or to reduce the rates of death and disease. To promote these goals the legislature provided that any materials used in such studies or programs shall be confidential." (Niven v. Siqueira (1985), 109 Ill.2d 357, 366, 487 N.E.2d 937, 942.) "The Act is premised on the belief that, absent the statutory peer-review privilege, physicians would be reluctant to sit on peer-review committees and engage in frank evaluations of their colleagues." Jenkins v. Wu (1984), 102 Ill.2d 468, 480, 468 N.E.2d 1162, 1168.
4 The applicability of a discovery privilege is a matter of law for the court to determine, yet whether specific materials are part of internal quality control or part of a medical study is a factual question *657 within that legal determination. (See Niven, 109 Ill.2d at 368, 487 N.E.2d at 943.) According to plaintiffs, nothing in the record suggests that the report in question was collected by a committee of the hospital or members of its medical staff. Therefore, plaintiffs assert, the report is not privileged because it is part of Bridgit's patient records.
The plaintiffs in Niven raised an argument similar to that which plaintiffs have advanced here. In Niven, the plaintiffs moved to compel the production of certain documents in the possession of a third party, the Joint Commission on Accreditation of Hospitals. The trial court held that the documents in question were confidential and not discoverable. On appeal, the plaintiffs challenged the authenticity and accuracy of the documents. The plaintiffs asserted that the documents were not privileged unless their authenticity and accuracy were verified with supporting affidavits. The court dismissed the plaintiffs' contention because the plaintiffs failed to object to the documents' authenticity at trial. Niven, 109 Ill.2d at 360, 368, 487 N.E.2d at 939, 943.
In Sakosko v. Memorial Hospital (1988), 167 Ill. App.3d 842, 522 N.E.2d 273, the court found that three reports initiated and used by committees of an accredited hospital for internal quality control, medical study and improved patient care were privileged and nondiscoverable under the Medical Studies Act. Two of the reports were pathology reports of tests undertaken to determine the source of the infection to the plaintiffs in that case. They were initiated by the hospital's environmental services committee consisting of hospital staff concerned with the study, evaluation and control of infection in the hospital. The third report was a report to the committee by a physician specializing in infections. The court observed that the purpose of the committee was to maintain internal quality control and to improve patient care.
The parties in Sakosko did not dispute that the reports were protected from discovery by the Medical Studies Act but contended that they should be denied protection because certain information from them was made available to the hospital's risk management committee to assess the hospital's liability to the plaintiffs in that case. The court found that no such exception was found in the statute in effect at that time. Sakosko, 167 Ill. App.3d at 845-46, 522 N.E.2d at 276.
5 In this case, the record adequately demonstrates that the code blue evaluation report was part of the hospital's internal quality control. Despite plaintiffs' assertions as to the speculative and conclusory nature of defendant's affidavits, we determine that Patricia Anne Farley's affidavit was sufficient to support the conclusion that *658 the report was part of defendant's internal quality control. In her affidavit, Farley stated that she was defendant's director of quality management. According to Farley, the code blue evaluation report was presented to Mary Fecht, a member of the ICU/CCU committee, for review. Fecht made recommendations to the committee based on the report. The committee then made policy recommendations to defendant's department of medicine as to changes in procedure which might improve the quality of patient care. Defendant's executive medical officer implemented the department of medicine's recommendations.
Plaintiffs failed to submit any counteraffidavits to the trial court which contradicted Farley's affidavit. When the facts within an affidavit are not contradicted with a counteraffidavit, they must be taken as true notwithstanding the existence of contrary unsupported allegations. (Ligenza v. Village of Round Lake Beach (1985), 133 Ill. App.3d 286, 293, 478 N.E.2d 1187, 1191.) Inasmuch as none of the facts set forth in Farley's affidavit have been contradicted, defendant has adequately shown that the code blue evaluation report was used in the course of internal quality control. We therefore conclude that the report was privileged and not discoverable and reverse the trial court's judgment of contempt.
The judgment of the circuit court is reversed.
Reversed.
INGLIS and REINHARD, JJ., concur.
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556 F.2d 568
Stitzerv.Timpany
No. 76-2166
United States Court of Appeals, Third Circuit
5/10/77
1
E.D.Pa.
AFFIRMED IN PART AND REMANDED
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85 F.3d 774
Paul F. AHERN, d/b/a Ahern Associates, Plaintiff--Appellee,v.Donald Thomas SCHOLZ, Defendant--Appellant.Paul F. AHERN, d/b/a Ahern Associates, Plaintiff--Appellant,v.Donald Thomas SCHOLZ, Defendant--Appellee.
Nos. 95-1146, 95-1147, 95-1203 and 95-1204.
United States Court of Appeals,First Circuit.
Heard Dec. 4, 1995.Decided June 4, 1996.
Donald S. Engel, with whom Mark D. Passin, Engel & Engel, Los Angeles, CA, Lawrence G. Green, Susan E. Stenger and Perkins, Smith & Cohen, Boston, MA, were on brief, for Donald Thomas Scholz.
David C. Phillips, with whom David M. Given and Goldstein & Phillips, San Francisco, CA, were on brief, for Paul F. Ahern.
Before TORRUELLA, Chief Judge, BOWNES, Senior Circuit Judge, and STAHL, Circuit Judge.
TORRUELLA, Chief Judge.
1
The parties in this breach of contract case, a successful musician and his former manager, dispute whether royalties from record albums have been accounted for and paid to each other. The appeal is from a final judgment by the district court after a jury trial, disposing of all claims in respect to all parties.
BACKGROUND: A BAND OUT OF BOSTON
2
In this case, the parties dispute many of the facts and the inferences to be drawn from them. Thus we start with a sketch of the basic facts, and address the individual issues in more detail below. Appellant and cross-appellee Donald Thomas Scholz ("Scholz") is a musician, composer, and record producer who was, and is, a member of the musical group BOSTON ("BOSTON"). In late 1975, Scholz entered into three agreements with appellee and cross-appellant Paul F. Ahern ("Ahern"), who was engaged in the business of promoting and managing music groups, and his then partner, Charles McKenzie ("McKenzie") (collectively, the "1975 Agreements"). First, Scholz made a recording agreement (the "Recording Agreement") with Ahern and McKenzie d/b/a P.C. Productions, to which Bradley Delp, the lead singer of BOSTON, was also a party. Second was a management agreement (the "Management Agreement"), also between Scholz and P.C. Productions, under which Ahern and McKenzie were appointed Scholz' exclusive personal managers worldwide. The third agreement was a songwriter agreement made between Scholz and Ahern, under which Scholz was obligated to furnish Ahern his exclusive songwriting services for a period of five years.
3
In early 1976, CBS Records ("CBS") and Ahern Associates, a business name of Ahern and McKenzie, entered into a recording agreement for the exclusive recording services of BOSTON. The group's first album (the "first album") was released in 1976, and sold approximately 11 million copies--one of the highest-selling debut albums ever. Its second album (the "second album") was released in August 1978, and sold approximately 6 million copies.
4
In 1978, Scholz and the other members of BOSTON entered into a modification agreement with Ahern and P.C. Productions, dated April 24, 1978. Among other things, the First Modification Agreement modified the 1975 Agreements and changed the financial relationship between Scholz and his managers. Ahern and McKenzie dissolved their partnership. A few years later, in May of 1981, Ahern and Scholz, individually and under various business names, entered into a further modification agreement (the "Further Modification Agreement" or "FMA"), which is at the heart of this dispute. Ahern ceased to be Scholz' manager.
5
In 1982, with the third album not yet released, CBS cut off the payment of royalties generated from the first and second albums. In 1983, CBS brought suit against Scholz, Ahern, and the members of BOSTON for failure to timely deliver record albums. Scholz' counsel in that action was Donald S. Engel ("Engel"); Ahern had his own counsel. While that litigation was pending, the third album was released by MCA Records ("MCA") in 1986 and sold well over 4 million copies. At the close of trial--seven years after the CBS litigation began--the jury found that Scholz was not in breach of contract. Scholz incurred legal fees of about $3.4 million dollars.
6
In February 1991, Ahern commenced this action against Scholz for breach of the FMA claiming a failure to pay royalties due under the third album. Scholz asserted various affirmative defenses and counterclaims against Ahern, including breach of the FMA. During trial, Engel, Scholz' lead trial counsel, was twice called as a witness. At the close of the evidence, the court granted Scholz' directed verdict dismissing Ahern's Count III for fraud and IV for breach of implied covenant of good faith and fair dealing. The court also granted Ahern's motion for directed verdict dismissing Scholz' First, Second, and Third Counterclaims and his, Third, Fourth, and Fifth affirmative defenses. Only the parties' respective breach of contract claims went to the jury. The jury found that Scholz breached section 5.2.1 of the FMA to pay Ahern royalties from the third album, and found that Ahern had not breached the FMA to account for and pay Scholz royalties due from the first and second albums. It awarded Ahern $547,007 in damages.
7
The trial court sitting without a jury also found Scholz had breached the FMA, and heard Ahern's Count II for declaratory relief and Count V for violation of Mass. Gen. L. ch. 93A and Scholz' Fifth Counterclaim for recision of contract for failure to obtain a license. The court denied the declaratory relief Ahern sought in Count I, and awarded him costs, interest and attorney's fees pursuant to Count V for violation of Mass. Gen. L. ch. 93A §§ 2 & 11. The court denied the relief sought by Scholz in his Fifth Counterclaim and held that he waived his Counts VI and VII at oral argument. After a hearing on Ahern's bill of costs and application for reasonable attorney's fees and interest, the court awarded Ahern $265,000 in attorney's fees and $135,000 in costs.
8
The district court denied, without a hearing, Scholz' motion for a new trial, motion to amend the court's memorandum and order and judgment entered thereon, motion to admit new evidence, and motion to amend the court's memorandum and order and the judgment entered thereon regarding Scholz' Sixth Counterclaim. This appeal followed.
MOTION FOR A NEW TRIAL
9
Appellant first argues that the district court erred in denying his motion for a new trial, made pursuant to Fed.R.Civ.P. 59(a). We therefore review the record below to determine whether the evidence required that the district court grant the motion for a new trial. See de Perez v. Hospital del Maestro, 910 F.2d 1004, 1006 (1st Cir.1990). In reviewing the record of the 16-day trial, we note that both parties presented extensive evidence. The jury heard testimony regarding a history that spans two decades, involves at least seven contracts, includes detailed numerical accounting, and references more than half a dozen other legal battles. The parties called a total of fifteen witnesses, seven of whom, including Ahern, Scholz, and Engel, Scholz' counsel, testified twice. In short, the jury faced a complex and sometimes conflicting set of facts in making its decision as to whether either, neither, or both parties breached the 1981 Further Modification Agreement. Ultimately, we find that the jury's verdict was not against the clear weight of the evidence, and the district court did not abuse its discretion in so finding.
A. Standard of Review
10
"A verdict may be set aside and new trial ordered 'when the verdict is against the clear weight of the evidence, or is based upon evidence which is false, or will result in a clear miscarriage of justice.' " Phav v. Trueblood, Inc., 915 F.2d 764, 766 (1st Cir.1990) (quoting Torres-Troche v. Municipality of Yauco, 873 F.2d 499 (1st Cir.1989)); see Fed.R.Civ.P. 59(a); Sanchez v. Puerto Rico Oil Co., 37 F.3d 712, 717 (1st Cir.1994). In reaching its decision, "the district court has broad legal authority to determine whether or not a jury's verdict is against the 'clear weight of the evidence.' " de Perez, 910 F.2d at 1006. Nonetheless, "the trial judge's discretion, although great, must be exercised with due regard to the rights of both parties to have questions which are fairly open resolved finally by the jury at a single trial." Coffran v. Hitchcock Clinic, Inc., 683 F.2d 5, 6 (1st Cir.), cert. denied, 459 U.S. 1087, 103 S.Ct. 571, 74 L.Ed.2d 933 (1982); see Kearns v. Keystone Shipping Co., 863 F.2d 177, 178-79 (1st Cir.1988). Thus, the district court judge "cannot displace a jury's verdict merely because he disagrees with it or would have found otherwise in a bench trial." Milone, 847 F.2d at 37; see Coffran, 683 F.2d at 6. "The mere fact that a contrary verdict may have been equally--or even more easily--supportable furnishes no cognizable ground for granting a new trial." Freeman v. Package Mach. Co., 865 F.2d 1331, 1333-34 (1st Cir.1988).
11
Our review is circumscribed: we will disturb the district court's ruling on appellant's motion for a new trial only where there has been a clear abuse of discretion. See Simon v. Navon, 71 F.3d 9, 13 (1st Cir.1995); Newell Puerto Rico, Ltd. v. Rubbermaid Inc., 20 F.3d 15, 22 (1st Cir.1994).
12
In order to determine whether such an abuse occurred here, we must review the record below. We do this not in the role of "a thirteenth juror," assessing the credibility of witnesses and weighing testimony, but rather to isolate the factual basis for the trial court's ruling and provide the foundation for our action today.
13
Kearns, 863 F.2d at 179. "So long as a reasonable basis exists for the jury's verdict, we will not disturb the district court's ruling on appeal." Newell Puerto Rico, Ltd., 20 F.3d at 22.
14
With our standard of review established, we turn to Scholz' argument and the record below. We address each of the two breach of contract claims the jury decided in turn.
15
B. Did Ahern Breach the FMA?
16
Scholz argues that Ahern breached his obligations under the 1981 FMA to both account for and pay to Scholz, every six months, his share of the royalties from the compositions on the first and second albums: indeed, Ahern admitted at trial that he had failed to make some payments he owed Scholz under the FMA. The jury and the trial court disagreed with Scholz, however, and found that Ahern's breach of the FMA was not material.1 The question facing us, then, is whether the district court abused its discretion in finding that the jury's decision was not against the weight of the evidence. After careful review of the record, we find no abuse of discretion in the lower court's decision not to disturb the jury's finding.
17
Scholz argues at some length on appeal that Ahern's breach was by definition material, both for his failure to account and his failure to pay. As for the first contention, we note that while Scholz' reading of the FMA as requiring that Ahern render Scholz direct accountings every six months is a convincing one, it is not the only plausible one. Indeed, Ahern contends that the FMA only required him to send irrevocable letters of direction to various entities involved directing them to send Scholz his share of the royalties when collected. In the end, it would not be against the clear weight of the evidence to find that letters of directions would satisfy Ahern's accounting obligations under the FMA, and that such letters were sent. Therefore, Ahern's failure to account every six months was not a material breach.
18
As for the second contention, Scholz supports his position that Ahern's failure to pay constitutes a separate, material breach by drawing on both New York2 and Massachusetts case law. He points to the Second Circuit's refusal to overturn summary judgment in ARP Films, Inc. v. Marvel Entertainment Group, Inc., 952 F.2d 643, 649 (2d Cir.1991). In that case, where plaintiffs failed to account and pay royalties in excess of $400,000, the court stated that
19
the district court correctly concluded that the breach by plaintiffs in failing to make the payments and provide the reports required ... was material as a matter of law, thus authorizing Marvel to terminate the contract. [The parties' agreement] explicitly singled out plaintiffs' obligation to provide "prompt accounting" for distributions as a term and condition of the agreement, the substantial breach of which authorized Marvel to terminate the license provided by the agreement. In addition, failure to tender payment is generally deemed a material breach of contract. Finally, as the district court found, and the subsequent accounting confirmed, the amounts withheld from Marvel by plaintiffs were very substantial.
20
Id. (citations omitted). Scholz also points to a New York case holding that a licensee's failure to pay franchise fees totalling $40,129 over four months constituted a breach of contract, McDonald's Corp. v. Robert Makin, Inc., 653 F.Supp. 401, 402-04 (W.D.N.Y.1986), as well as Massachusetts language indicating that "[a] material breach of an agreement occurs when there is a breach of 'an essential and inducing feature of the contract.' " Lease-it, Inc. v. Massachusetts Port Auth., 33 Mass.App.Ct. 391, 600 N.E.2d 599, 602 (1992) (holding that six-month refusal to pay concession and rental fees was a material breach) (quoting Buchholz v. Green Bros. Co., 272 Mass. 49, 172 N.E. 101 (1930)). Scholz argues that Ahern's breach, spanning thirteen years, is more egregious than these cases of a six-month failure to pay concession and rental fees, four-month failure to pay license and lease fees, and seven-month failure to pay (and five-month failure to account).3 Therefore, Scholz concludes, Ahern's failure to pay Scholz at least $459,000 is clearly a substantial breach.
21
We are not convinced. We remind appellant that under our standard of review, we do not sit as a juror, evaluating credibility and weighing evidence, as he seems to ask us to do. Rather, we simply weigh whether the district court committed a clear abuse of its discretion in determining that the jury verdict was not against the clear weight of the evidence. Newell Puerto Rico, 20 F.3d at 22; Kearns, 863 F.2d at 179. Our review of the record reveals that Ahern's counsel presented testimony questioning, to varying degrees, nine of the thirteen items of the estimate Scholz' accounting expert made of how much Ahern owed Scholz. Phillip Ames ("Ames"), a certified public accountant who served as business manager for both Ahern and BOSTON from 1976 through sometime in 1981 or 1982, made several estimates of how much Ahern owed Scholz, which he labelled "ball park figures." While we note that Ames' final estimate was $277,000, for a total of $459,000 with interest, we cannot assume that the jury accepted this figure as gospel. Given that Ahern sought over a million dollars in principal and interest from Scholz, the jury may reasonably have found that the Ames figure was not a substantial breach in the particular context of this case. It may have determined that the amount of money Ahern owed, taken in the perspective of the contract, Ahern's obligations, and the total amounts of money concerned, was not so significant a breach as to violate "an essential and inducing feature of the contract." Lease-It, 600 N.E.2d at 602. Finally, addressing the case law Scholz relies on for support, we note that here, unlike in those cases, the amount of money owed was in question.
22
Ultimately, examining the record in full, the evidence clearly provides the jury and trial court with a basis for finding that Ahern did not substantially breach the FMA. As this Circuit stated on another occasion,
23
We can understand how a jury might have decided for [defendant] on the basis of this evidence. But the jury did not do this; it decided for [plaintiff]. We do not see how one could say that the jury clearly made a mistake. We do not see how one could say that the evidence overwhelmingly favored the [defendant]. Rather, the evidence simply was mixed and contradictory.
24
de Perez, 910 F.2d at 1008. Therefore we cannot say that the district court committed a clear breach of its discretion on this point.
25
C. Did Scholz Breach the FMA?
26
Ahern claimed below that Scholz breached his obligation under section 5.2.1 of the FMA to pay Ahern his share of the royalties due from the third album.4 The evidence presented at trial centered on a document entitled "Artist Royalty Statement" ("the Scholz Statement"), which Scholz presented to Ahern.5 That statement listed over $6 million in gross royalties reported by MCA prior to December 31, 1993, but reduced that figure by deducting, among other things, a producer share and artist costs, so that the net artist royalties fell to below zero--and Ahern was not entitled to any money. Scholz argued at trial that he did not breach the FMA, but the jury and the trial court disagreed.
27
On appeal, Scholz contends that their finding is against the weight of the evidence, because Ahern's prior material breaches excused Scholz' performance under the Further Modification Agreement. Scholz points out that paragraph 2 of the FMA states that
28
Scholz wishes to guarantee that Ahern shall receive at a minimum certain amounts of monies in connection with future recordings embodying the performances of the group "BOSTON" .... in exchange for the agreement of Ahern as set forth herein.
29
Scholz shapes his argument on appeal as follows: Since Ahern's only agreement of substance was his agreement to account for and pay royalties to Scholz for prior BOSTON albums, Ahern's breach of his commitment excused Scholz' performance. Indeed, Scholz notes, the parties' mutual commitments to account to and pay each other are expressly stated to be in consideration of each other. In such "bilateral contracts for an agreed exchange of performances, even though the promises are in form absolute, the law regards them as constructively conditioned in order to avoid an unjust result." Industrial Mercantile Fac. Co. v. Daisy Sportswear, 56 Misc.2d 104, 288 N.Y.S.2d 209, 211 (N.Y.Civ.Ct.1967), order aff'd, 56 Misc.2d 584, 289 N.Y.S.2d 332 (N.Y.Sup.Ct.1968); see Restatement (Second) of Contracts, § 237 cmt. a (1979). Moreover, Scholz continues, the non-occurrence of a condition of a party's duty excuses the non-breaching party's obligation to perform even though that party does not know of its non-occurrence, id., § 237 cmt. c, and the intention or scienter of a breaching party are not considered in the elements of breach of contract. See Agron v. The Trustees of Columbia Univ., 1993 WL 118495 (S.D.N.Y., April 12, 1993).
30
Considering this, Scholz points out that his first royalty statement regarding the third album was rendered by MCA on April 1, 1987. Thus the earliest he could have owed money to Ahern under the FMA was August 15, 1987--and by that date, he argues, Ahern had already failed to account to Scholz or pay him royalties with respect to the first two albums for over five years. Therefore, Scholz maintains he was excused, at least until Ahern tendered payment, from rendering an accounting or paying royalties to Ahern from the third album. At the very least, Scholz argues, he could have withheld payment of the $459,000 admittedly owed him as a set-off against any amount he owed Ahern. See Record Club of America v. United Artists Records, Inc., 80 B.R. 271, 276 (S.D.N.Y.1987), vacated on other grounds, 890 F.2d 1264 (2d Cir.1989).
31
In so arguing, Scholz does not contend that he did not in fact breach the FMA: he simply maintains that Ahern did so first. Since Scholz does not revisit the merits of the evidence presented at trial regarding his breach, we will not do so here.6 However, since we have already found that the verdict that Ahern did not substantially breach the FMA was not against the clear weight of the evidence, Scholz' argument here must fail. Clearly, it would be inconsistent with our acceptance of the verdict that Ahern did not substantially breach the FMA to find that Scholz' performance was excused by Ahern's material breach. Accordingly, we affirm the district court's decision to refuse the motion for a new trial on this issue.7
D. Sufficiency of the Evidence
32
In a footnote, Scholz adds that he is appealing the verdict not only in terms of the denial of his motion for a new trial, as discussed above, but also that he appeals each of the jury's findings--i.e. that Scholz breached the FMA, that Ahern did not breach the Agreement, and that Ahern was entitled to damages--on the grounds of insufficiency of the evidence. Scholz relies on Engine Specialties, Inc. v. Bombardier Ltd., 605 F.2d 1, 9 (1st Cir.1979), cert. denied sub nom. Durham Distribs., Inc. v. Bombardier Ltd., 449 U.S. 890, 101 S.Ct. 248, 66 L.Ed.2d 116 (1980), to claim that our review of his alternative argument is limited to asking whether there is sufficient support in the record for the jury's finding.
33
Engine Specialties outlines the standard of review as follows:
34
If we can reach but one conclusion after reviewing the evidence and all inferences drawn fairly therefrom in the light most favorable to the plaintiff (the prevailing party) and if that conclusion differs from the jury's, only then can the finding be set aside. Even if contrary evidence was presented and conflicting inferences could be drawn, it is for the jury to draw the ultimate conclusion, and such determination will not be disturbed unless the condition described above is met.
35
Id.; see Fleet Nat'l Bank v. Anchor Media Television, Inc., 45 F.3d 546, 552-53 (1st Cir.1995) (outlining application of standard). We note that, in fact, this is the standard of review applicable to motions for judgment as a matter of law under Federal Rule of Civil Procedure 50. While it is a circumscribed review, it is nonetheless not as limited as our review of the district court's disposition of the motion for new trial. See Sanchez, 37 F.3d at 716-17 (comparing the two standards of review). We find nothing in the record to establish that appellant Scholz made a motion for judgment as a matter of law, so that he would be entitled to this less deferential standard of review. Rather, he argues sufficiency of the evidence in his motion for a new trial. Our review of the record, therefore, must be under the abuse of discretion standard outlined above. See MacQuarrie v. Howard Johnson Co., 877 F.2d 126, 131 (1st Cir.1989) (noting that the strict "abuse of discretion" standard "is especially appropriate if the motion for a new trial is based on a claim that the verdict is against the weight of the evidence"); Freeman, 865 F.2d at 1341-43 (evaluating the weight of the evidence as part of a motion for a new trial, separately from its review of the denial of the motion for judgment notwithstanding the verdict).
36
Irrespective of which standard of review we apply, however, Scholz' alternative argument fails. First, the evidence was overwhelming that he breached the FMA by failing to pay Ahern his share of the royalties from the third album; indeed, Scholz does not attempt to argue otherwise. Second, although the issue of the materiality of Ahern's breach is fairly close, as discussed above, there was sufficient evidence in the record for the jury to determine that Ahern did not materially breach the Further Modification Agreement. Finally, having made these two determinations, the award of damages was appropriate. Therefore, given the scope of the evidence as described, we find that the district court's denial of appellant's motion for a new trial was amply supported and not an abuse of discretion.
E. The Length of the Jury Deliberations
37
Scholz next contends that the jury failed to follow its instructions.8 The district court instructed the jury that damages could only be awarded if it found one party breached the FMA and the other did not. If it found that both parties were in breach, no damages could be awarded. In making his contention, Scholz reiterates his argument that the evidence was insufficient, emphasizing that Ahern admitted he did not perform his obligations under the FMA, and maintaining that Ahern's accountant admitted that he both failed to pay at least $459,000 to Scholz and mischaracterized an advance from a foreign sub-publisher as a loan. Under the jury instructions, Scholz argues, these factors preclude the jury from finding that Scholz breached the FMA, or at least from awarding Ahern any royalties. These contentions have been dismissed in our discussion above.
38
However, Scholz raises a new factor: he argues that the jury's verdict and the extremely short period of deliberations--one and a half hours9 following fifteen days of testimony--reveal that the jury ignored the court's instructions and rendered an erroneous and inconsistent verdict. He cites the fact that one of the jurors planned to go on a cruise two days after the date of the verdict as proof that the jury was in a hurry to finish its deliberations. The jury's questions,10 Scholz adds, demonstrates that it was determined to award Ahern $547,000 regardless of who was in breach. Between the insufficient evidence and the perfunctory deliberations, Scholz concludes, the district court had an affirmative duty to grant a new trial. He seeks support for his argument in Kearns v. Keystone Shipping Co., 863 F.2d 177 (1st Cir.1988), where this Circuit held that a brief jury deliberation--one hour and eighteen minutes, following a three-day trial--coupled with a verdict contrary to the great weight of the evidence created a situation where the district court had an affirmative duty to set aside the verdict. Id. at 182.
39
We remain unswayed. Scholz' reliance on Kearns is misplaced. There, the court explicitly required that the brief deliberation be paired with a verdict contrary to the weight of the evidence, noting that " '[i]f the evidence is sufficient to support the verdict, the length of time the jury deliberates is immaterial.' " Kearns, 863 F.2d at 182 (quoting Marx v. Hartford Accident and Indemnity Co., 321 F.2d 70, 71 (5th Cir.1963)). We have already determined that, here, there was evidence sufficient to support the verdict. Therefore, Scholz is merely left with a complaint that the jury should have deliberated longer. His complaint is easily defeated, as "no rule requires a jury to deliberate for any set length of time." United States v. Penagaricano-Soler, 911 F.2d 833, 846 n. 15 (1st Cir.1990); see United States v. Brotherton, 427 F.2d 1286, 1289 (8th Cir.1970). Indeed, we have previously upheld a verdict on thirty-two counts which was reached in four hours, following a trial that lasted five weeks, incorporating more than fifty witnesses and hundreds of exhibits. Penagaricano-Soler, 911 F.2d at 846; see also United States v. Anderson, 561 F.2d 1301, 1303 (9th Cir.) (holding that jury's brief deliberation does not indicate it did not give full and impartial consideration to the evidence), cert. denied, 434 U.S. 943, 98 S.Ct. 438, 54 L.Ed.2d 304 (1977); Brotherton, 427 F.2d at 1289 (finding that jury deliberation of five to seven minutes did not demonstrate that jury did not consider court's instructions before reaching verdict).
40
We also refuse to read a determination to award Ahern a set amount of money from the jury's questions, which simply clarified where it could award damages, and whose evidence it should consider. Cf. Clark v. Moran, 942 F.2d 24, 32 (1st Cir.1991) (refusing to impute reasonable doubt of guilt or of witnesses' credibility from fact that jury deliberation was lengthy or from questions asked). Finally, we note that the jury's task was relatively simple. Although it heard complex testimony and was asked to weigh detailed evidence, the district court had already dismissed as a matter of law all the claims except for the respective contract claims, and the sums at issue had been clearly defined in the evidence and closing arguments.
ENGEL'S TESTIMONY AT TRIAL
41
As noted above, Engel, Scholz' lead counsel, was called by both parties as a witness. Maintaining that Ahern called Engel as an expert witness, instead of a percipient witness, Scholz now argues that the district court committed prejudicial error by, first, permitting Ahern to do so, and second, by refusing to allow follow-up questioning by Engel's co-counsel, Passin.11
42
Our examination of each of Scholz' contentions follows the same legal framework. In each analysis, two questions face us: first, whether the district court erred in admitting or refusing the testimony or motion; and second, whether that error was harmful. See Doty v. Sewall, 908 F.2d 1053, 1057 (1st Cir.1990). Only if we answer both questions in the positive will Scholz' argument on appeal prevail.
43
A trial court's error in an evidentiary ruling only rises to the level of harmful error if a party's substantial right is affected. See 28 U.S.C. § 2111; Fed.R.Evid. 103(a); Lubanski v. Coleco Indus., Inc., 929 F.2d 42, 46 (1st Cir.1991). "In determining whether an error affected a party's substantial right, '[t]he central question is whether this court can say with fair assurance ... that the judgment was not substantially swayed by the error.' " Espeaignnette v. Gene Tierney Co., 43 F.3d 1, 9 (1st Cir.1994) (quoting Lubanski, 929 F.2d at 46 (internal quotations omitted)). Factors we must consider in determining whether substantial rights are implicated include both the centrality of the evidence and the prejudicial effect of its exclusion or inclusion. Lubanski, 929 F.2d at 46. We weigh these factors in " 'the context of the case as gleaned from the record as a whole.' " Id. (quoting Vincent v. Louis Marx & Co., 874 F.2d 36, 41 (1st Cir.1989)). We have repeatedly noted that "no substantial right of the party is affected where the evidence omitted was cumulative as to other admitted evidence." Doty, 908 F.2d at 1057. Should a reviewing court be in "grave doubt" as to the likely effect an error had on the verdict, the error must be treated as if it had in fact affected the verdict. O'Neal v. McAninch, --- U.S. ----, ----, 115 S.Ct. 992, 994, 130 L.Ed.2d 947 (1995) (noting that "by 'grave doubt' we mean that, in the judge's mind, the matter is so evenly balanced as he feels himself in virtual equipoise as to the harmlessness of the error.").
44
We note that under Federal Rule of Evidence 103(a), we review the decision not only to determine whether a substantial right of the party is affected, but also to see whether a timely objection "appears of record, stating the specific ground of objection, if the specific ground was not apparent from the context." Fed.R.Evid. 103(a)(1); see Bonilla v. Yamaha Motors Corp., 955 F.2d 150, 153 (1st Cir.1992). Here, Scholz' counsel objected at the time of the challenged rulings. Therefore, this element of our analysis is not at issue.
45
Having established the legal framework, we examine each of Scholz' contentions in turn.
A. The Contested Testimony
46
Phillips, Ahern's counsel, put Engel on the stand on the seventh day of trial. The objected-to portion of his questioning sought testimony regarding the Scholz Statement, which purported to account to Ahern for the royalties from the third album. In the Statement, Scholz deducted $1.7 million for legal fees charged by Engel's law firm, which the Statement listed as equivalent to half of the fees charged in relation to the negotiation of the agreement with MCA and the CBS litigation. The immediate issue at trial was whether this deduction was permissible as a "commercially reasonable recording expense" deductible from the royalties under section 5.2.1 of the FMA. Because the record is determinative of this issue, we quote it at length:
47
Q. Now, as far as legal fees as recording costs are concerned, you've had some experience over the years, have you not, in reviewing the contracts of performing artists and groups in the musical field; is that right?
48
A. Yes.
49
Q. And could you give the Court and the jury some estimate of the number of contracts that you believe is an estimate that you reviewed over the period of time that you've been doing such matters in the entertainment field?
50
A. Hundreds and hundreds and hundreds and more.
51
Q. Okay.
52
Have you ever seen legal fees as a recording cost in any of those hundreds and hundreds of contracts?
53
MR. PASSIN: Your Honor, I object. He hasn't been called as an expert witness.
54
THE COURT: Overruled.
55
Do you mean, are you saying that he can't answer that question?
56
THE WITNESS: No, your Honor, I would--
57
THE COURT: Overruled. If you can't answer it, say you can't answer it.
58
THE WITNESS: I can answer it, but it's a little awkward to call me as a witness, as an expert in my client's case.
59
THE COURT: Overruled. You were advised that you were going to be called, and you said that you wished to stay in this case and your client was so advised. The objection has been made. Overruled.
60
MR. ENGEL: At one point we said we wished to be out of the case. I think it should be clear. At one point we said out.
61
THE COURT: Overruled.
BY MR. PHILLIPS:
62
Q. Do you have the question in mind, Mr. Engel? In the hundreds and hundreds of contracts that you've reviewed for performing artists such as Mr. Scholz and other groups in the music field, have you ever seen legal fees as a recording cost or expense?
63
A. I have never seen legal fees--You mean designated in a contract?
64
Q. Yes, as a recording cost or expense.
65
A. No, I have never seen legal fees designated in a contract as anything, and certainly not as recording costs.
66
(Day 7, pages 71-73).
67
Scholz claims the district court erred in admitting the testimony over his counsel's objection, because Ahern's counsel was using Engel as an expert witness against his own client. First, he points out that Engel was not designated as an expert under Federal Rule of Civil Procedure 26. See Prentiss & Carlisle Co. v. Koehring-Waterous Div. of Timberjack, Inc., 972 F.2d 6 (1st Cir.1992) (upholding trial court's refusal to hear expert testimony from witness not designated as an expert). Next, he maintains that under the applicable Rules of Professional Conduct, Engel should not have been required to testify against his client on an important and disputed point. See Model Code of Professional Responsibility DR 5-102(B). In turn, Ahern contends that the questions asked were not seeking Engel's expert opinion under Federal Rule of Evidence 701,12 or, in the alternative, that the district court acted within its discretion in admitting the testimony. See Espeaignnette, 43 F.3d at 10-11 ("Determinations of whether a witness is sufficiently qualified to testify as an expert on a given subject and whether such expert testimony would be helpful to the trier of fact are committed to the sound discretion of the trial court."); United States v. Sepulveda, 15 F.3d 1161, 1183 (1st Cir.1993) (stating that manifest error standard applies to trial judge's rulings regarding expert testimony), cert. denied, --- U.S. ----, 114 S.Ct. 2714, 129 L.Ed.2d 840 (1994). His final contention is that Scholz' complaint should be deemed waived because Scholz first injected Engel's opinion testimony into the case through his affidavits.
68
We need not consider these arguments, however, for we find that, even assuming the trial court erred in admitting the challenged section of Engel's testimony, it was not harmful error. Essentially, the challenged evidence was that in the "hundreds and hundreds and hundreds and more" contracts that he has reviewed, Engel never saw "legal fees designated in a contract as anything, and certainly not as recording costs." (Day 7, page 73). Having examined the record as a whole to determine if admitting this evidence affected Scholz' substantial rights, in accordance with our legal framework, we find that any court error did not amount to harmful error.
69
First, although the issue of whether Scholz breached the FMA was certainly a major focus of the case, and Engel's testimony related to the single largest deduction taken from the royalties on the Scholz Statement, we disagree with Scholz' contention that it was probably determinative for the jury, for several reasons. Ames and Stewart L. Levy ("Levy"), who has served as Ahern's counsel in the past and who was designated an expert on the subject of the reasonableness of the attorney's fees, both testified that attorney's fees are not recording expenses or recording costs. Ahern testified that they are not artist costs or expenses for recording purposes. We found no testimony, besides Engel's, contesting this point. Levy challenged the fees' inclusion on the Scholz Statement on another front as well, stating that Ahern was asked to pay for services that at times were working against his best interests, including time billed on motions to preclude a stipulation which would have had Sony or CBS dropping Ahern from the lawsuit. In short, he stated,
70
We start off with the proposition that here is Mr. Ahern who is not directing Mr. Scholz to jump labels, not instructing Mr. Engel to do anything. Because Mr. Scholz decides to do what he is doing, not only does Mr. Ahern get sued by CBS, not only is Mr. Ahern's income from CBS cut off, now Mr. Scholz and his attorney, Mr. Engel, expect Mr. Ahern not only to accept that but to defray part of the cost of Mr. Engel doing this. I find that outrageous.
71
(Day 7, page 95). Engel testified that the attempt to keep Ahern in the case was not directed solely at him, but was part of an attempt to keep CBS from making deals with potential witnesses.
72
The fees were not disputed solely on the basis of the appropriateness of their deduction. Levy testified at length that the fees themselves were unreasonable. He testified that he felt that Engel's firm
73
did the work without any regard to any kind of budget, without any cap on their work. Then they turned around and said, he said we had carte blanche.... Suddenly when the case is over in 1990, we are told it is $3 million.... There were no parameters. Mr. Engel did what he wanted to do. No one was checking what he did to say it was too expensive, don't do it.
74
(Day 7, pages 104-05). In turn, Engel testified that the fees were higher than originally estimated because the head of CBS personally pursued the litigation to the "bitter end," despite repeated attempts to settle. Ultimately, he maintained, Scholz prevailed and won moneys for the entire band--and Ahern.
75
In fact, the attorney's fees were not the only challenged deduction on the Scholz Statement. There was lengthy testimony questioning and defending many of the other deductions, most notably the producer's fee and the more than 11,000 hours of studio time Scholz charged for. Therefore, even if the jury felt the deduction of the attorney's fees--or of some of them--was appropriate, they could still have reasonably found that Scholz materially breached the FMA. Between the additional evidence, on both sides, as to whether the legal fees could be commercially reasonable recording expenses, whether the amount of fees charged were reasonable, and whether other deductions on the Statement were reasonable, we find that Engel's challenged testimony was not central to the case.
76
Second, the evidence admitted did not have an unduly prejudicial effect. When called to the stand by his co-counsel, Engel was able to clarify that, while he felt he was asked about "recording costs," the FMA actually addresses "recording expenses":
77
Q. Does the--The first question, does the further modification use the term "recording costs"?
78
A. My recollection is, the [F]irst Modification Agreement uses the term "recording expenses." I was asked about recording costs.
79
* * *
80
Q. Do recording contracts use the term "recording expenses" or "recording costs"?
81
A. I, in all the recording contracts I've seen, in many of them, I don't remember the term "recording expenses" ever used, it's always "recording costs" that I've seen in the clause.
82
(Day 13, pages 110-112). He followed up on this in his closing argument, stating that "[q]uestions were asked about recording costs, but recording costs is not the word used [in the FMA]." (Day 15, page 18). We find that this additional testimony by Engel counters the potential prejudicial effect of his challenged statement. Scholz argues on appeal that the prejudicial effect of the testimony was compounded by the statement of Ahern's counsel in his closing argument that
83
there is no testimony before you, ladies and gentlemen, that legal costs in litigation that Mr. Scholz was in is a recording cost. In fact, to the contrary, the only testimony here has been that legal costs--legal fees and legal costs are not recording costs.
84
You may recall Mr. Engel uncomfortably on the witness stand, after I qualified him on his expertise in matters of this sort, acknowledging that this was the case.
85
(Day 15, page 45). However, between the totality of the evidence at trial and the additional statements Engel himself made, both as witness and as counsel, we do not feel that this reference to Engel in the hour spent in closing argument by Ahern's counsel could be found to sway the jury's decision, prompting harmful error. See Espeaignnette, 43 F.3d at 9.
B. The Omitted Testimony
86
Scholz contends that the district court made a separate harmful error in upholding the objections made by Ahern's trial counsel when Engel's co-counsel called Engel to the stand on the thirteenth day of trial and tried to have him address his earlier testimony. After stating that the FMA used the term "recording expenses," not "recording costs," and reading out the pertinent section of the FMA, Engel's testimony continued as follows:
87
Q. Have you seen contracts using only [the] words "recording costs" where artists were paid for legal fees?
88
A. Yes.Q. As an expert, how do you interpret recording expenses as it's used in the Further Modification Agreement?
89
MR. PHILLIPS: Objection.
90
THE COURT: Sustained.
91
THE WITNESS: Your Honor, I was asked--
92
THE COURT: Sustained.
93
Q. Does the language in the Further Modification Agreement--
94
THE COURT: He asked you a question, did you ever see it before? Your answer was no. Now you're saying--I won't allow any questions as to where you saw it.
95
THE WITNESS: He asked me, your Honor, I remember the exact question, because I answered it, he asked me about interpreting recording costs. Now, if he can ask me to interpret--
96
MR PHILLIPS: Objection, your Honor.
97
THE COURT: Sustained, sustained. Sustained.
98
THE WITNESS: Well--
BY MR. PASSIN:
99
Q. Does the--Does the language of the Further Modification Agreement affect other deductions you mentioned in [the Scholz Statements]?
100
MR. PHILLIPS: Objection. He's simply interpreting the agreement.
101
THE COURT: I'm going to sustain it.
102
THE WITNESS: Your Honor, could we have a side bar, because I think--
103
THE COURT: No. No.
104
Let's get going.
105
(Day 13, pages 112-14).
106
On appeal, Scholz argues that the court "apparently believed that it would be too prejudicial to Ahern to permit Engel to explain his apparently adverse expert testimony but that it was not too prejudicial to Scholz to permit Engel to testify adversely to Scholz in the first place, a horrendous conclusion." (Appellant's Brief, page 34). We disagree. The first time Engel testified, he was asked about "contracts of performing artists and groups in the musical field." (Day 7, page 71). He stated in the disputed testimony that he had "never seen legal fees designated in a contract as anything, and certainly not as recording costs." (Day 7, page 73 (emphasis added)). When next called to the stand, Engel agreed that he had seen "contracts using only [the] words 'recording costs' where artists were paid for legal fees." (Day 13, page 112). The court's decision to sustain the objection made by Ahern's counsel in the ensuing dialogue was not a refusal to allow Engel to explain his evidence on the basis of its prejudicial effect against Ahern: it was evidently a reaction to the apparent inconsistency between these statements.
107
Essentially, on appeal Scholz maintains that Engel's co-counsel was not allowed to "cross-examine" him on the subject of his direct testimony for Ahern, thereby precluding him from presenting clarifying evidence or diminishing the "sting" of an attorney testifying against his own client. This error compounded the error of admitting Engel's expert testimony, Scholz contends. He complains that because of the court's ruling, the jury never got to hear Engel's testimony regarding other types of contracts, such as agreements between performers and managers, or the difference between "recording costs" and "recording expenses." Nor did they hear his explanation that his answer might differ if asked about "commercially reasonable recording expenses," not "recording costs," he notes. We view this final protest with some skepticism, however, in light of Engel's testimony on the stand that he had never seen legal fees designated "as anything," which would, presumably, include commercially reasonable recording expenses.
108
Assuming, arguendo, that Engel would have made the above testimony and that the district court erred in excluding the line of questioning, any resulting error was harmless. First, for the same reasons outlined above, the testimony, while related to a central issue, was not central in and of itself. Ames and Levy stated that they saw no difference between "recording costs" and "recording expenses." Additional testimony debated the total amount of fees charged as well as many other aspects of the Scholz Statement. As for the potential prejudicial effect, the testimony Engel was able to give, quoted above, made it clear that his earlier statement was directed to "recording costs," not "recording expenses," an argument he reiterated in his closing, mitigating the potential effect of the apparent inconsistency. Additionally, during his first day on the stand Engel stated, in response to questioning about the actual charging of recording costs or expenses by a group or a performing artist, that although he reviews accountings after the fact, he has never reviewed an accounting like that provided in the Scholz Statement. He testified that "[t]his is a special case. I don't remember any accounting that really falls into this category. This is not a standard contract." (Day 7, page 81). While this testimony does not go directly to his prior statements, it does emphasize that the FMA is not a standard contract, implying that his and others' statements about other contracts may not be pertinent. Weighing the above in the light of the record as a whole, see Doty, 908 F.2d at 1057, we cannot say that the court's evidentiary ruling excluded evidence that was either central or prejudicial in its effect such that it could have swayed the factfinders' decision. Thus, even if the court erred, it did not rise to the level of harmful error. See Lubanski, 929 F.2d at 46.
C. The Overall Impact of Engel's Testimony
109
Of course, it is not just the impact of the information elicited from Engel that we must evaluate under the harmless error standard. We must also address the potential prejudicial effect on the jury of seeing Engel, Scholz' counsel, take the stand, dispute with the court and opposing counsel over his testimony, and finally make a statement, apparently unwillingly, against his client's interest--a statement against which, he argues, he had to take an apparently inconsistent position in his closing argument. There is no doubt in our mind that this had some prejudicial effect on the jury. Nonetheless, we cannot say with " 'fair assurance ... that the judgment was [ ] substantially swayed by the error.' " Espeaignnette, 43 F.3d at 9 (quoting Lubanski, 929 F.2d at 46). The jury sat through fifteen days of trial, received substantial and often cumulative testimony on all points,13 and heard an hour of closing argument from each party's counsel. We find it highly unlikely that the verdict could have been the result of Engel's questioning and the attendant commentary. Cf. United States v. Rosales, 19 F.3d 763, 768 (1st Cir.1994) (holding that prosecutor's inappropriate argument in closing did not warrant new trial under harmless error standard).
110
There are significant reasons why trial counsel should not be able to testify at trial, no matter for which party counsel testifies.
111
The principal ethical considerations to a lawyer testifying on behalf of his client regarding contested issues are that the client's case will "be presented through the testimony of an obviously interested witness who is subject to impeachment on that account; and that the advocate is, in effect, put in the unseemly position of arguing his own credibility."
112
Siguel v. Allstate Life Ins. Co., 141 F.R.D. 393, 396 (D.Mass.1992) (quoting ABA Comm. on Ethics and Professional Responsibility, Formal Op. 339 (1975)). "Combining the roles of advocate and witness can prejudice the opposing party and can involve a conflict of interest between lawyer and client." Model Rules of Professional Conduct Rule 3.7 cmt. 1. When the attorney is called to the stand by his client's opponent, the concerns are just as substantial, if not more. See Siguel, 141 F.R.D. at 396 ("Although there are degrees of adverse testimony, there are few, if any, situations that justify acceptance or continued employment in this circumstance."). Accordingly, Model Rule of Professional Conduct 3.7 states that a lawyer shall not act as advocate at a trial where he or she is likely to be a necessary witness, except, among other things, where the testimony relates to an uncontested issue or disqualification of the attorney would work substantial hardship on the client. Finally, there is also the danger that the performance of the dual roles of counsel and witness will create confusion on the jury's part as to when the attorney is speaking as a witness, "raising the possibility of the trier according testimonial credit to the prosecutor's closing argument," United States v. Johnston, 690 F.2d 638, 643 (7th Cir.1982)--or, conversely, weighing the testimony as if it were argument.
113
All these concerns clearly come into play at a more heightened level when trial counsel acts as an expert. However, when counsel is asked to play that role for the length of one question in a fifteen-day trial, even acknowledging the impact of the attendant discussion with the court, attempts to examine him on the testimony and references to it in the closing arguments, we cannot hold that it rises to the level of harmful error affecting a party's substantial right where the testimony is cumulative and not a central part of the case. Any prejudice that resulted from the objected-to portions of Engel's testimony did not rise to the level of harmful error.
114
D. Denial of Pre-Trial Motion for Continuance
115
Prior to trial, Ahern filed two motions seeking to disqualify Engel as Scholz' counsel on the grounds that Engel was a percipient witness who ought to testify on Scholz' behalf. Scholz opposed, and the district court refused, both motions. When the parties presented their lists of witnesses, Engel appeared on both parties' lists. Approximately six weeks before trial was scheduled to begin, Ahern filed a third motion to disqualify. This time Scholz agreed to withdraw his counsel provided that he was given time to find new lead counsel. In his memorandum in support of his motion, Scholz stated that he "now [felt] he must retain new trial counsel in this matter, to avoid the risk of a disqualification of his counsel just prior to the trial, and for other reasons." (Scholz' Memorandum in Support of His Motion to Continue Trial, page 3). The district court, however, denied both Ahern's Renewed Motion to Disqualify and Scholz' Motion to Continue Trial.
116
As discussed above, Scholz maintains in his brief on appeal that the trial court erred by allowing Ahern to use Engel as his own expert against Scholz. One of the four contentions he uses to support this position is that
117
the trial court itself placed Scholz in his precarious predicament when it refused to grant the last motion by Ahern to disqualify Engel.... The failure to grant the continuance under these circumstances, which resulted in severe prejudice to Scholz, is, itself, reversible error.
118
(Appellant's Brief, page 34). In support of his statement, Scholz cites several cases weighing district court decisions on motions for continuances. See Lowe v. City of East Chicago, 897 F.2d 272, 274-75 (7th Cir.1990) (concluding that it was an abuse of discretion to deny motion for continuance where plaintiff was faced with choice between voluntary dismissal and going to trial although his attorney was not ready for trial); United States v. Flynt, 756 F.2d 1352, 1358-59 (9th Cir.) (finding that district court abused its discretion in denying motion for continuance where doing so effectively foreclosed defendant from presenting a defense), amended, 764 F.2d 675 (9th Cir.1985). We need not prolong our discussion. Simply put, we do not feel the district court abused its discretion in denying the motion for a continuance. Even if it did, the error was harmless.
119
Finally, we note that while we ultimately hold that the court did not commit harmful error in making its evidentiary ruling, we find it very disturbing that trial counsel testified in this case. In making his appeal, Scholz directs us to a series of cases, several of which are referenced above, which lay out the real and serious concerns implicated by allowing counsel to testify at trial. See, e.g., United States v. Dack, 747 F.2d 1172, 1172 n. 5 (7th Cir.1984) ("Where evidence is easily available from other sources and absent 'extraordinary circumstances' or 'compelling reasons,' an attorney who participates in the case should not be called as a witness."). We ask whether Scholz and his counsel read these cases before opposing Ahern's first two motions to disqualify. The concerns the cases voice are implicated whether counsel testifies for his or her own client or for the opposing party. What is more, even if Engel testified solely as to ministerial matters, we still doubt the wisdom of allowing him on the stand, as the matter of his firm's legal fees--not only whether, as a whole, they were commercially reasonable recording expenses but also whether they were reasonable at all--was a matter of testimony. The jury heard deposition testimony from Ahern's expert Levy that the legal fees from the CBS litigation were, among other things, "excessive and totally inappropriate" (Day 7, page 86); whether Engel was called to the stand by Scholz or Ahern, indeed, even had he never testified, his integrity and judgment could have been questioned by the factfinders.
120
COUNTERCLAIM FOR FRAUD AND DECEIT AND AFFIRMATIVE DEFENSES
121
The Further Modification Agreement provided that Ahern was entitled to a share of the royalties of any album completed before October 24, 1984. Had the parties adhered to this provision, Ahern would not be entitled to any moneys from the third album, as it was completed after that date. Instead, Scholz waived the deadline, conveying his waiver through communications between the parties' attorneys in May of 1984. In this action, Scholz drew on his waiver of the deadline in his third counterclaim and several of his affirmative defenses to argue for rescission of the waiver agreement on the grounds of fraud and deceit and, alternatively, its invalidation. On appeal before us, he appeals the district court's directed verdict against him on these claims.
122
Our standard of review is a familiar one. A motion for judgment as a matter of law "should be granted only when the evidence, and the inferences to be drawn therefrom, viewed in the light most favorable to the nonmovant ... could lead reasonable persons to but one conclusion." MacQuarrie, 877 F.2d at 128 (quoting Dopico-Fernandez v. Grand Union Supermarket, 841 F.2d 11, 12 (1st Cir.), cert. denied, 488 U.S. 864, 109 S.Ct. 164, 102 L.Ed.2d 135 (1988)). We review the district court's directed verdict de novo. See Fleet Nat'l Bank, 45 F.3d at 552. Accordingly, " 'we use the same stringent decisional standards that control the district court.' " Gallagher v. Wilton Enter., Inc., 962 F.2d 120, 125 (1st Cir.1992) (quoting Hendricks & Assocs., Inc. v. Daewoo Corp., 923 F.2d 209, 215 (1st Cir.1991)).
A. Rescission
123
In his Third Affirmative Defense and Third Counterclaim, Scholz sought recision of the waiver agreement on the grounds that Ahern fraudulently induced him to enter into the agreement by not disclosing that he had neither accounted for nor paid, since at least 1981, the royalties he owed Scholz under the FMA. Under New York law, applied here pursuant to the FMA choice of law provision, a party seeking to prove common law fraud must show that:
124
(1) the [cross-]defendant made a material false representation, (2) the [cross-] defendant intended to defraud the [cross-] plaintiff thereby, (3) the [cross-] plaintiff reasonably relied upon the representation, and (4) the [cross-]plaintiff suffered damage as a result of such reliance.
125
Banque Arabe et Internationale D'Investissement v. Maryland Nat'l Bank, 57 F.3d 146, 153 (2d Cir.1995) (analyzing elements in context of claim for rescission based on fraud); see also Keywell Corp. v. Weinstein, 33 F.3d 159, 163 (2d Cir.1994). The first element may be met by demonstrating not only a misrepresentation, but also a concealment or nondisclosure of a material fact. See Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir.1991); Bickhardt v. Ratner, 871 F.Supp. 613, 618 (S.D.N.Y.1994). In addition, the party claiming fraudulent concealment must demonstrate that the opposing party had a duty to disclose the material information in question and demonstrate each element of the claim by clear and convincing evidence. See Banque Arabe et Internationale D'Investissement, 57 F.3d at 153. We begin our analysis by weighing what duty Ahern owed Scholz, and then turn to the elements listed above, ultimately concluding that the district court erred in directing a verdict.
126
In the instant case, Scholz argues that Ahern owed Scholz a duty to disclose because he was a fiduciary. See Brass v. American Film Techs., 987 F.2d 142, 150 (2d Cir.1993). Ahern contests that at the time the waiver was given in May 1984, the Management Agreement had terminated and so there was no fiduciary duty and, thus, no duty to disclose. "Under New York law, a fiduciary relationship includes 'both technical fiduciary relations and those informal relations which exist whenever one [person] trusts in, and relies upon, another.' " Allen, 945 F.2d at 45 (quoting Penato v. George, 52 A.D.2d 939, 383 N.Y.S.2d 900, 904-05 (1976)); see Apple Records, Inc. v. Capitol Records, Inc., 137 A.D.2d 50, 529 N.Y.S.2d 279, 283 (1988) (noting that fiduciary relationship can be found between close friends or where confidence is based upon prior business dealings). "New York courts typically focus on whether one person has reposed trust or confidence in another who thereby gains a resulting superiority or influence over the first." Litton Inds., Inc. v. Lehman Bros. Kuhn Loeb Inc., 767 F.Supp. 1220, 1231 (S.D.N.Y.1991), rev'd on other grounds, 967 F.2d 742 (2d Cir.1992).
127
Scholz points us to the decision in Apple Records, Inc. v. Capitol Records, Inc., where the court found that plaintiffs, the New York corporation of the Beatles, stated a claim that a fiduciary relationship existed.
128
The business dealings between Capitol Records and the Beatles date back to 1962, when the still unacclaimed Beatles entrusted their musical talents to defendant Capitol records. It is alleged that this relationship proved so profitable to defendant that at one point the Beatles constituted 25 to 30 percent of its business. Even after the Beatles attained their remarkable degree of popularity and success, they still continued to rely on Capitol Records for the manufacture and distributing of their recordings. It can be said that from such a long enduring relationship was borne a special relationship of trust and confidence, one which existed independent of the contractual duties, and one which plaintiffs argue was betrayed by fraud....
129
529 N.Y.S.2d at 283. Like the parties in Apple Records, at the time of the waiver in 1984 Ahern and Scholz had a long history of business dealings, marked by a series of agreements and modification agreements. Also as in that case, the relationship between the parties here was a profitable one for Ahern. However, unlike that case, Ahern no longer, as of several years previously, was Scholz' manager. Indeed, Scholz testified that in 1978, when he first started the process that culminated in the FMA, he was no longer on speaking terms with Ahern. While we do not doubt--and Ahern admitted at trial--that Ahern had a fiduciary duty to Scholz until 1981, the question remains whether there was such a special relationship of trust and confidence between the parties at the time of the waiver that a fiduciary relationship, at least as regards Ahern's duty to pay Scholz' share of the royalties from the first and second albums, remained. Since a reasonable juror could find that it did, however, a directed verdict is inappropriate on the question of whether Ahern owed Scholz a fiduciary duty. Therefore, we continue our analysis and turn to the evidence presented on the elements listed above.
130
First, as for the material false misrepresentation or nondisclosure, it is undisputed that Ahern did not disclose his failure to pay, a fact which a reasonable juror could easily find material. On the other hand, both Ahern and Barbara Sherry ("Sherry"), who provided business management services for Ahern and BOSTON while Ames served as their business manager and served as Ahern's business manager from 1982 up through the time of trial, testified that they were not aware money was owed until after the waiver was made, and Scholz points to no evidence of concealment. Second, Scholz would have us read an intent to deceive into Sherry's testimony agreeing with Engel's statement that today, looking at a royalty statement from the company charged with administrating the publishing, "it's immediately plain to anyone who knows this business, that [the administration company] was not paying" the proper percentage to Scholz. (Day 6, pages 61-62). Scholz cannot rely on this as an admission that Sherry knew Scholz was not receiving all his moneys, however, since her actual testimony was that she did not know of the failure at the time. Instead, he seeks to build on her admission that one could have known from the face of the royalty statements that there was an error, as well as the fact that there was no evidence that letters of direction were prepared for the foreign sub-publishers, to support his contention that Ahern "had to have known" he was not making all his payments. Ahern presented no evidence indicating that he could not have known of the error, just that he did not. In essence, therefore, determining whether Ahern intended to deceive Scholz becomes an issue of credibility, one which of necessity is a question for the jury.
131
As for whether Scholz reasonably relied on Ahern's nondisclosure, his case is damaged by the fact that the evidence is undisputed that Ahern did not actually solicit the waiver. Scholz' attorney contacted his counsel and offered it to him. Scholz explained his motivation at trial:
132
A. Well, I figured if I, if I finished the record six months later and I missed that date that Paul Ahern was entitled to his 12 percent of the royalties, you know, I missed that date and then six months later delivered the record, I was sure he would be upset about that and, and want his 12 percent anyway, and I didn't want to fight with him.
133
Q. And was it your intention at that time--
134
A. I had enough trouble at that point.
135
Q. And did you ask for anything in return for that waiver?
136
A. No.
137
(Day 10, pages 38-39). However, Scholz points to his testimony at trial that he "obviously" would not have agreed to the waiver had he known of Ahern's failure to pay him publishing royalties as evidence of his reliance. Giving Scholz the benefit of all the inferences, a reasonable juror could find under these circumstances that Ahern sought to induce Scholz into a fraudulent agreement, once it had been offered to him, through nondisclosure of his failure to pay. The presence of the fourth element, damages, Scholz contends, is witnessed by the fact that he now owes Ahern money: had he not waived the deadline, Ahern would not have been entitled to royalties from the third album. Given all of the above, we find that Scholz has mustered sufficient evidence for the issue to go to the jury.
B. Invalidation of the Waiver
138
In his Fourth and Fifth Affirmative Defenses, Scholz argues that the waiver should be invalidated because he did not knowingly give his consent. He maintains here that in order to prevail, all he must prove is that he would not have agreed to the waiver if he had known of Ahern's failure to account to and pay him royalties. Since he testified to that effect, he argues, the district court erred in granting a directed verdict. We disagree. First, we note that none of the cases Scholz looks to for support discuss invalidation as an affirmative defense under Federal Rule of Civil Procedure 8(c). Although the case law indicates that there is precedent for such an affirmative defense, see, e.g., United States v. Krieger, 773 F.Supp. 580, 583 (S.D.N.Y.1991) (denying summary judgment on, inter alia, claim for invalidity of guarantees despite failure to claim it as an affirmative defense), we have found, and the parties present, no comprehensive discussion of its nature. See 2A James Wm. Moore et al., Moore's Federal Practice p 8.27 n.6 (2d ed.1995) (listing most common affirmative defenses, excluding invalidity).
139
We find no other support for Scholz' position in the cases he cites. Allen, which he looks to for the proposition that all he has to prove is that he would not have agreed to the waiver, does not address invalidity of a waiver or release. Rather, it notes that a court may rescind a release " 'where it finds either mutual mistake or one party's unilateral mistake coupled with some fraud ... of the other party.' " Allen, 945 F.2d at 44 (quoting National Union Fire Ins. Co. v. Walton Ins. Ltd., 696 F.Supp. 897, 902 (S.D.N.Y.1988)). Scholz did not plead mutual mistake, and his rescission claim based on fraud is addressed above.
140
Scholz states that he does not have to show Ahern owed him a fiduciary duty in order to state a claim for invalidation. Indeed, the court in Allen notes that where one party has superior knowledge not available to the other party, a duty to disclose may arise, apparently exclusive of a fiduciary duty, id. at 45, but Scholz does not point to any evidence that he could not have discovered that Ahern had not been paying him. His reliance on Gishen v. Dura Corp., 362 Mass. 177, 285 N.E.2d 117 (1972), apparently for the proposition that "[a] party cannot waive information with respect to an error in calculation whose existence is unknown to him, particularly where his ignorance is caused by the very lack of disclosure in question and where the parties are not fully at arm's length," id. 285 N.E.2d at 122, is misplaced. First and most importantly, under the choice-of-law provision of the FMA, the parties here are applying New York, not Massachusetts, law. Second, the Gishen opinion addressed a request for a jury instruction on waiver, which was denied because the party had not previously presented the argument; it does not involve an affirmative defense. Id. at 121. The quoted language is dicta--and seems to undercut Scholz' proposition that a fiduciary relationship is not necessary.
141
Scholz' citation to Werking v. Amity Estates, Inc., 2 N.Y.2d 43, 155 N.Y.S.2d 633, 137 N.E.2d 321 (1956), also proves unfruitful. There, the court defines a waiver as " 'the intentional relinquishment of a known right with both knowledge of its existence and an intention to relinquish it.' " Id. 155 N.Y.S.2d at 639, 137 N.E.2d at 327 (quoting Whitney on Contracts 273 (4th ed.1946)). The court found the waiver in question, of jurisdictional defects in a tax sale of plaintiff's farm, invalid because plaintiff "had no knowledge of the right he is charged with having knowingly and intentionally relinquished." Id. Here, however, Scholz knew exactly what right he was relinquishing: the right not to pay Ahern 12 percent of the royalties from the third album.
MASSACHUSETTS LAW CLAIMS
142
We next turn to Ahern's claim against Scholz under Massachusetts General Law Chapter 93A, sections 2 and 11 ("Chapter 93A"). The district court found that Scholz' failure to pay royalties as provided in the FMA violated Chapter 93A. More specifically, it held that the Scholz Statement regarding the royalties on the third album constituted an unfair and deceptive business practice, and that it was a "deliberate and blatant attempt to deprive Plaintiff Ahern of moneys rightfully due and owing to him." (District Court Memorandum and Order, page 3). The court awarded Ahern $547,000 as well as costs, interest, and reasonable attorney's fees.
143
Scholz now contends that his actions do not rise to the level of unfair or deceptive trade practices within the meaning of Chapter 93A. Section 11 of Chapter 93A provides a cause of action to
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[a]ny person who engages in the conduct of any trade or commerce and who suffers any loss of money or property, real or personal, as a result of the use or employment of another person who engages in any trade or commerce of ... an unfair or deceptive act or practice....
145
Mass. Gen. L. ch. 93A, § 11.14 We begin with our standard of review; once it is established, we address Scholz' attack on the sufficiency of the district court's findings, and his contention that his acts did not rise to the level of "rascality" courts require of Chapter 93A violations. See Quaker State Oil Ref. Corp. v. Garrity Oil Co., 884 F.2d 1510, 1513 (1st Cir.1989). Because we ultimately find that the district court erred as a matter of law in finding that Scholz violated Chapter 93A, we need not address the defenses Scholz raises to the application of that Chapter.
A. Standard of Review
146
We review the district court's findings of law de novo, and only set aside its findings of fact if "clearly erroneous." See Industrial Gen. Corp. v. Sequoia Pacific Sys. Corp., 44 F.3d 40, 43 (1st Cir.1995); see, e.g., Pepsi-Cola Metro. Bottling Co. v. Checkers, Inc., 754 F.2d 10, 17 (1st Cir.1985). "A finding of fact is ' "clearly erroneous" when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.' " Industrial Gen., 44 F.3d at 43 (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (citation omitted)). "Although whether a particular set of acts, in their factual setting, is unfair or deceptive is a question of fact, the boundaries of what may qualify for consideration as a [Chapter] 93A violation is a question of law." Schwanbeck v. Federal-Mogul Corp., 31 Mass.App.Ct. 390, 578 N.E.2d 789, 803 (1991), rev'd on other grounds, 412 Mass. 703, 592 N.E.2d 1289 (1992).
B. The District Court's Findings
147
The district court determined that Scholz had violated sections 2 and 11 through his failure to pay Ahern royalties from the third album, and made the following findings in its Memorandum and Order. First, it found that Scholz agreed to pay Ahern royalties after deduction of only a producer's royalty and all commercially reasonable recording expenses. Second, the court held that the Scholz Statement constituted an unfair and deceptive business practice. More specifically, it found that the deductions taken for legal fees, payment to Jeff Dorenfeld, time spent in the studio, and the resulting recording costs were all not commercially reasonable recording expenses. Rather, the court stated, $500,000 in recording expenses would be commercially reasonable. It next found that Scholz' Statement was
148
a deliberate and blatant attempt to deprive the Plaintiff Ahern of monies rightfully due and owing to him as royalties from the sales of the third BOSTON album. Such egregious conduct ... is patently an unfair and deceptive practice. The submission of [the Scholz Statement] as an accounting by Scholz to Ahern is a shocking display of arrogant disdain for Ahern's contractual rights and was rendered in obvious bad faith.
149
(District Court Memorandum and Order, page 3).
150
Scholz challenges the sufficiency of these findings. Federal Rule of Civil Procedure 52(a) mandates that courts "find the facts specially and state separately [their] conclusions of law thereon" when trying facts without a jury. See, e.g., Montanez v. Bagg, 24 Mass.App.Ct. 954, 510 N.E.2d 298, 300 (1987) (noting that judge did not make detailed findings of fact regarding Chapter 93A claims under Mass. R. Civ. P. 52(a)). Scholz notes that the court did not state that the deductions were actually deceptive, and reminds us that the Scholz Statement set forth in some detail what each of the deductions were. Since the court did not make more specific findings as to unfair or deceptive practices, he maintains, we should reverse the Chapter 93A finding against him.15 See Schwanbeck, 578 N.E.2d at 803 (holding that district court finding of Chapter 93A violation lacked foundation in the court's subsidiary findings).
151
However, we remind Scholz that under Rule 52(a) "the judge need only make brief, definite pertinent findings and conclusions on the contested matters." Makuc v. American Honda Motor Co., 835 F.2d 389, 394 (1st Cir.1987). Here, the district court found that Scholz breached the FMA, that four of his deductions were commercially unreasonable, while a figure of $0.5 million would be reasonable; and that the Scholz Statement was "a deliberate and blatant attempt to deprive" Ahern of moneys owed him. It is a question of law whether this attempt to deprive Ahern rises to the level of a violation of Chapter 93A, as the lower court held, and we believe the decision includes enough of a basis for the Chapter 93A finding to save the decision from remand. The district court has provided us with more than mere conclusions. See Sidney Binder, Inc., 552 N.E.2d at 572 (holding that explanatory findings were necessary where court merely recited the evidence without making findings and concluded that "neither party ha[d] sustained its burden of proof" that Chapter 93A had been violated). We note, however, that our task would have been much simpler in this and other issues had the district court seen fit to explicate more of its decision-making on paper. There is a gap between finding that deductions are commercially unreasonable and finding that the Scholz Statement as a whole is an attempt to deprive Ahern deserving of the modifiers "unfair" and "deceptive": while we are willing to follow the lower court across the distance between them, a bridge would have been more than welcome.
152
C. Scholz' Challenge to the Chapter 93A Findings
153
Having set forth our standard of review and the findings of the district court, we turn to the heart of Scholz' challenge to the Chapter 93A award. As noted above, whether an act was unfair and/or deceptive is a question of fact. Based on our review of the evidence, we do not hesitate to find that the district court's findings of fact are not clearly erroneous, and we will not disturb them.16 See United Truck Leasing Corp. v. Geltman, 26 Mass.App.Ct. 847, 533 N.E.2d 647, 653 (1989), aff'd, 406 Mass. 811, 551 N.E.2d 20 (1990). Thus, we assess the lower court's award under Chapter 93A in the light of its finding that four deductions--which totalled $4.2 million--were not reasonable, but $0.5 million would be commercially reasonable recording costs, and that the Scholz Statement was a deliberate attempt to deprive Ahern of his percentage of the royalties from the third album. We ask now whether these facts rise to the level of a violation of Chapter 93A, section 11.
154
There is no clear definition of what conduct constitutes an "unfair or deceptive" act. Mass. Gen. L. ch. 93A, § 11. The Massachusetts courts "have noted, however, that '[t]he statute "does not contemplate an overly precise standard of ethical or moral behavior. It is the standard of the commercial marketplace." ' " Shepard's Pharmacy, Inc. v. Stop & Shop Cos., 37 Mass.App.Ct. 516, 640 N.E.2d 1112, 1115 (1994) (quoting USM Corp. v. Arthur D. Little Sys., Inc., 28 Mass.App.Ct. 108, 546 N.E.2d 888 (1989)), review granted, 419 Mass. 1102, 644 N.E.2d 226 (1994). In the extensive case law on Chapter 93A, "a common refrain has developed. 'The objectionable conduct must attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble of the world of commerce.' " Quaker State, 884 F.2d at 1513 (quoting Levings v. Forbes & Wallace Inc., 8 Mass.App.Ct. 498, 396 N.E.2d 149, 153 (1979)). In short,
155
a chapter 93A claimant must show that the defendant's actions fell "within at least the penumbra of some common-law, statutory, or other established concept of unfairness," or were "immoral, unethical, oppressive or unscrupulous," and resulted in "substantial injury ... to competitors or other businessmen."
156
Id. (quoting PMP Assocs., Inc. v. Globe Newspaper Co., 366 Mass. 593, 321 N.E.2d 915, 917 (1975)). In evaluating whether an act or practice is unfair, we assess "the equities between the parties," including what both parties knew or should have known. Swanson v. Bankers Life Co., 389 Mass. 345, 450 N.E.2d 577, 580 (1983).
157
It is well established that breach of a contract can lead to a violation of Chapter 93A. See, e.g., Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 583 N.E.2d 806, 821 (1991). The simple fact that a party knowingly breached a contract does not raise the breach to the level of a Chapter 93A violation, however. Cf. Pepsi-Cola Metro. Bottling Co., 754 F.2d at 18 (stating that "mere breaches of contract, without more, do not violate [C]hapter 93A."). In the breach of contract context, the Massachusetts Supreme Judicial Court has "said that conduct 'in disregard of known contractual arrangements' and intended to secure benefits for the breaching party constitutes an unfair act or practice for [Chapter] 93A purposes." Anthony's Pier Four, 583 N.E.2d at 821; see Wang Labs., Inc. v. Business Incentives, Inc., 398 Mass. 854, 501 N.E.2d 1163, 1165 (1986). Relying on the Appeals Court of Massachusetts' decision in Atkinson v. Rosenthal, 33 Mass.App.Ct. 219, 598 N.E.2d 666 (1992), Scholz seeks to limit this test. There, the court examined a series of breach of contract cases and concluded that
158
[t]here is in those cases a constant pattern of the use of a breach of contract as a lever to obtain advantage for the party committing the breach in relation to the other party; i.e., the breach of contract has an extortionate quality that gives it the rancid flavor of unfairness. In the absence of conduct having that quality, a failure to perform obligations under a written lease, even though deliberate and for reasons of self-interest, does not present an occasion for invocation of [Chapter] 93A remedies.
159
Id., 598 N.E.2d at 670-71 (citation omitted). We have not addressed, and find no Massachusetts case law addressing, whether this language from Atkinson extends beyond its immediate context to limit award of Chapter 93A damages in breach of contract cases to cases with an "extortionate quality." See NASCO, Inc. v. Public Storage, Inc., 29 F.3d 28, 33 (1st Cir.1994) (quoting Atkinson and accepting, arguendo, that "in a breach of contract situation, liability does not attach under [Chapter] 93A, section 11 unless a defendant knowingly breached a contact in order to secure additional benefits to itself to the detriment of a plaintiff.").
160
We need not do so today, however. First, if we accept the test for Chapter 93A violation Scholz claims Atkinson frames, the district court's award here will not stand because there has not been an extortionate element to the breach: Scholz tried to hold on to Ahern's money, but he was not using the breach "to force [Ahern] to do what otherwise [he] would not be legally required to do."17 Pepsi-Cola Metro. Bottling Co., 754 F.2d at 18 (affirming Chapter 93A award where defendant withheld payment as a "wedge" to force plaintiff to supply more products); see, e.g., Anthony's Pier Four, 583 N.E.2d at 822 (holding that withholding approval as a pretext to force party into changing price of underlying contract violated Chapter 93A).
161
Second, if we were to find that Atkinson does not limit Chapter 93A liability to cases with an extortionate element, but rather address Scholz' acts under the test as stated in Anthony's Pier Four, we still find that Chapter 93A has not been violated. That test asks whether there has been conduct " 'in disregard of known contractual arrangements' and intended to secure benefits for the breaching party." Anthony's Pier Four, 583 N.E.2d at 821; see Wang Labs., 501 N.E.2d at 1165 (finding liability under Chapter 93A where interference with contract "constituted a willful act calculated to obtain the benefits of [the] contract ... without cost and in disregard of known contractual arrangements"). Here, the court found that Scholz knowingly breached the contract in order to gain a benefit--Ahern's share of the royalties. But that would be true of any knowing breach of a contract. The question, then, is whether the level of "rascality" is sufficient to rise to the level of a violation of Chapter 93A. We find it is not. First, while the deductions that the court deemed commercially unreasonable ate up more than half of the royalties reported, we note that Scholz did not seek to conceal the nature of the deductions: he laid them out on the Scholz Statement in varying levels of detail. Next, while Scholz has an extensive degree of control over the moneys from the third album, there has been no allegation that he did not report all of the royalties from MCA on the Scholz Statement. Evidence was presented that the number of hours spent on the album was reconstructed after the fact, but the district court did not find that the figures given were inaccurate, just that they were not deductible. Scholz' breach amounted to more than a dispute over the commercial reasonableness of certain deductions, as he would have us believe. Nonetheless, his acts did not rise to the level of rascality required for Chapter 93A liability.18 Ultimately, therefore, we conclude that the district court erred as a matter of law in finding Scholz violated Chapter 93A, and reverse that holding.
PREJUDGMENT INTEREST AND ATTORNEY'S FEES
162
As we have found that Scholz did not violate Chapter 93A, we need not address the parties' arguments regarding the award of attorney's fees under that statute. Nor do we weigh Ahern's cross-appeal of the district court's refusal to award prejudgment interest, since that is based on his Chapter 93A contention. See Mass. Gen. L. ch. 231 § 6C ("interest shall be added ... to the amount of damages, at the contract rate, if established, or at the rate of twelve percent per annum from the date of the breach or demand."). It does not apply to his breach of contract claim, as that was brought under New York law. See Aubin v. Fudala, 782 F.2d 287, 289 (1st Cir.1986) (noting that "[w]hen a Plaintiff secures a jury verdict based on state law, the law of that state governs the award of prejudgment interest.").
163
No costs on appeal to either party.
CONCLUSION
164
For the reasons stated above, we reverse the lower court's decision regarding Chapter 93A violations, affirm its other holdings except on rescission, and remand for trial on the issue of rescission.
1
Regarding substantial performance, the court's instructions to the jury stated that
The term "performance" contains within it substantial performance. Namely, if a person has substantially performed, that, in the eyes of the law, is full performance of one's obligations. So when I've used the term "performance" or "breach of the obligations," just include within those concepts the question of what is the definition of the term "substantial performance" or "substantial breach."
2
The FMA provides that it shall be "governed by and construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely in New York." "In the absence of a conflict of public policy, Massachusetts honors choice-of-law provisions in contracts, and, in this diversity case, so must we." Northeast Data Sys., Inc. v. McDonnell Douglas Computer Sys., Inc., 986 F.2d 607, 610 (1st Cir.1993) (citation omitted). As we find no public policy issue is implicated by this private dispute, we respect the parties' choice-of-law provision. See id
3
Scholz states that this is especially true here, where a transfer of copyrights are involved, and notes Ahern's admission that this imposed on him a heightened duty to account and pay royalties
4
That provision provided, in pertinent part,
With respect to the future commercial release of any albums embodying the musical performance of the group "Boston" ..., Ahern shall be entitled to receive eighteen percent (18%) of gross royalties after deduction and payment of only (i) a producer's royalty to Scholz (computed according to the terms and provisions of the agreement between CBS and Ahern Associates, as amended, at a basic rate of six percent (6%) of the wholesale royalty base price) and (ii) all commercially reasonable recording expenses, including Tom Scholz' recording services (i.e. commercially reasonable engineering and other recording services), or recording expenses incurred by CBS or such other company and deducted from royalties payable....
Because McKenzie was entitled to a percentage of the royalties, Ahern's actual rate was 12 percent.
5
In fact, Scholz sent Ahern two "Artist Royalty Statements," the first dated from inception to June 30, 1990, the second from inception through December 31, 1993. We address the second here, as being more recent. It listed the following figures:
Total Gross Royalties Reported by MCA Records $6,604,048.14
Gross Royalties--Audit Settlement 170,000.00
Less Producer Share (2,257,862.05 )
-------------------
Gross Artist Royalties 4,516,186.09
less MCA Costs Deducted 508,566.22
less MCA Costs--Audit Settlement (210,000.00 )
less Artist Costs (Schedule 1) 4,360,447.00
-------------------
Net Artist Royalties (142,827.13)
Of this final "Net Artist Royalties" figure, Ahern's percentage share was 12 percent, so that his share of the royalties was minus $17,139.26. "Artist Costs" included charges for 11,971 hours of studio time in Scholz' studio at $125 an hour; engineering and equipment for the studio, at a total of $60 an hour; and $1.7 million in legal fees to Engel's law firm for the CBS litigation and negotiation of the agreement with MCA.
6
We note, however, that our review of the record convinces us that the verdict is not against the clear weight of the evidence, and so the district court's ruling was not an abuse of its discretion
7
Scholz argues, in a footnote, that the jury's verdict violates the premise that a party cannot recover more than he would have obtained had no breach occurred. However, we need not address his contention. Scholz provides no more than a couple of citations to flesh out his position: he does not explain how the jury verdict places Ahern in a better position than he would have been if Scholz had not breached the FMA. It is by now axiomatic that "issues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived." United States v. Zannino, 895 F.2d 1, 17 (1st Cir.), cert. denied, 494 U.S. 1082, 110 S.Ct. 1814, 108 L.Ed.2d 944 (1990)
8
The jury was instructed, in pertinent part, that:
A party which has performed its obligations under a contract is entitled to have the other party do the same. Conversely, a party which has not performed its obligations under a contract is not entitled to performance from the other party. So once you understand the terms of the contract, you should determine whether any party has failed to perform any of the terms of the contract.
If your determination should be that the defendant or defendant in counterclaim breached the contract and that the plaintiff or plaintiff in counterclaim did not, at that point you would consider the issue of damages.
If you find that both parties breached their obligations under the Further Modification Agreement, then no damages should be accorded to either party under the contract.
(Day 15, pages 90-92).
9
For the purposes of this discussion, we accept Scholz' calculation of the time the jury spent deliberating its verdict
10
The jury's questions, and the court's answers, were as follows:
Question No. 1, if neither breached, are damages awarded?
[Answer:] No.
[Question No. 2:] Verdict sheet uses the words, quote, "only if," unquote, in question three. I assume this precludes us from awarding damages or from awarding damage, one, if both breach.
[Answer:] If both breach, no damages. If neither breach, no damages.
[Question No. 3:] If one did, do we only take account from one side?
[Answer:] As I said, you would only consider the claim of the non-breaching party, but your judgment on that claim has to be based on all the evidence that has been introduced.
(Day 15, page 104).
11
Scholz also argues that, since Engel's testimony was "highly prejudicial" to Scholz, its improper admission is grounds for a new trial, citing Conway v. Chemical Leaman Tank Lines, Inc., 687 F.2d 108 (5th Cir.1982) (upholding district court's grant of motion for new trial on grounds of unfair surprise due to testimony from surprise expert witness). Since we find that the testimony was not in fact highly prejudicial to Scholz, this sparsely drawn alternative argument fails
12
We note in passing that we are skeptical both of Ahern's claim that Engel was not called as an expert and of Scholz' position that Engel was surprised at being questioned as an expert, in light of the following discussion, held immediately before Engel took the stand:
MR. ENGEL: ... The other thing is this delicate situation. I'm an expert witness, right?
MR. PHILLIPS: Yes.
MR. ENGEL: So I'm being called as an expert?
THE COURT: Which you were on notice.
MR ENGEL: I understand.
(Day 7, pages 53-54). Despite Scholz' protestations in his brief that the reference to Engel as an expert must be a misstatement by Engel, an error by the court reporter, or based on something outside the reporter's hearing, it seems apparent to us that both parties foresaw the possibility of expert testimony being elicited. Indeed, the court's statement above suggests that it based its later ruling on the same premise.
13
Indeed, the evidence was so redundant that the court was prompted to exclaim that
in all my years, I have never seen a case in which the same matters have come up so many times. The accumulation of evidence in this case is really burdensome.... I'm telling you, I've told you many times, I don't know how much longer I can take cumulative evidence.
(Day 13, pages 89-90).
14
Section 2, which is also referred to in the current action, establishes that "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce" are unlawful. Mass. Gen. L. ch. 93A, § 2
15
We note that, contrary to Scholz' position, were we to find that the district court did not lay out sufficient findings of fact, we would likely remand so that the lower court could make subsidiary findings of fact and enter a new judgment on the basis of its findings. See, e.g., Sidney Binder, Inc. v. Jewelers Mut. Ins. Co., 28 Mass.App.Ct. 459, 552 N.E.2d 568, 572 (1990)
16
Scholz argues at length in his breach that the facts do not support a finding that his acts were unfair or deceptive. We decline, however, to enter into the record yet again to point to testimony and evidence refuting his contentions
17
Ahern tries to argue that not only the Scholz Statement, but also Scholz' defense of this case, in which he raised numerous defenses and counterclaims, fulfill the requirement of finding a "wedge" used by Scholz to force Ahern to abandon his share of the royalties from the third album. However, the district court's findings do not discuss Scholz' conduct in defending this lawsuit, either by reference or as a basis for its conclusions. We refuse to move as far afield from the district court's findings in order to find extortionate conduct as Ahern requests. His reliance on the court's discussion of the defendant's litigation practices in Quaker State is misplaced, because there the defendant's prosecution of the counterclaims was raised in the complaint, and was addressed by the district court below. 884 F.2d at 1513-14
18
Both parties devote sections of their briefs to six "factors" related to Scholz' "rascality" which Scholz raises, and Ahern disputes. We note that, for the most part, they prove irrelevant because we focus here on Scholz' actions in breaching the FMA, not the nature of the relationship between the parties for the last twenty years
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435 B.R. 525 (2010)
In re VILLAGE GREEN I, GP a Nevada general partnership, Debtor.
No. 10-24178-GWE.
United States Bankruptcy Court, W.D. Tennessee.
July 30, 2010.
*527 John L. Ryder, Memphis, TN, for Debtor.
MEMORANDUM OPINION GRANTING DEBTOR'S MOTION FOR ORDER (I) AUTHORIZING USE OF CASH COLLATERAL PURSUANT TO 11 U.S.C. §§ 363 AND 361, (II) GRANTING ADEQUATE PROTECTION PURSUANT TO 11 U.S.C. §§ 363 AND 361 AND (III) SCHEDULING A FINAL HEARING PURSUANT TO RULE 4001 AND DENYING MOTION FOR RELIEF FROM THE AUTOMATIC STAY
GEORGE W. EMERSON, JR., Bankruptcy Judge.
This matter is before the Court on the motion of the Debtor, Village Green I, GP, a Nevada general partnership, ("Debtor") "(I) Authorizing Use of Cash Collateral Pursuant to 11 U.S.C. §§ 363 and 361, (II) Granting Adequate Protection Pursuant to 11 U.S.C. §§ 363 and 361, and (III) Scheduling a Final Hearing Pursuant to Rule 4001(c)" and the Response thereto filed by Federal National Mortgage Association ("Fannie Mae"), the Motion for Relief from the Automatic Stay filed by Fannie Mae, and Debtor's objection thereto.
I. PROCEDURAL BACKGROUND
Debtor Village Green I, GP, filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code on April 16, 2010. On May 18, 2010, the Debtor filed its "Motion for Conditional Use of Cash Collateral, (I) Authorizing Use of Cash Collateral Pursuant to 11 U.S.C. §§ 363 and 361, and (II) Granting Adequate Protection Pursuant to 11 U.S.C. §§ 363 and 361 and (III) Scheduling a Final Hearing Pursuant to Rule 4001(c)" (the "cash collateral motion"), which was set for a hearing on June 3, 2010. On June 2, 2010, Fannie Mae filed its Response to the Debtor's cash collateral motion. At the hearing on June 3, 2010, the parties agreed to continue the hearing on the Debtor's motion, pending the future filing and setting of Fannie Mae's motion for relief from the automatic stay so that the hearing on the debtor's cash collateral motion would coincide with the motion for relief from the automatic stay. The parties have now filed supporting memoranda and a joint stipulation setting forth the facts and, for purposes of these two motions only, stipulating as to the authenticity and admissibility of the Exhibits listed therein.
This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (G).
II. FACTS
Debtor is a general partnership whose partners are EP Village Green Owner, *528 LLC and Village Green II, GP. On the Debtor's Chapter 11 petition, the Debtor listed the location of its principal assets as "3450 Fescue Lane, Memphis, Tennessee, XXXXX-XXXX," which is the address of the Village Green Apartments. This is a single asset real estate case as defined in 11 U.S.C. § 101(51)(B), and Fannie Mae is the Debtor's only secured creditor.
On or about September 30, 2003, Village Green, LTD, the prior owner of the property, entered into a Multifamily Note (the "Note"), in the principal sum of $9,200,000.00, with American Property Financing, Inc. That same day, Village Green, LTD, also executed a Multifamily Deed of Trust, Assignment of Rents and Security Agreement (the "Deed of Trust"), securing payment of the Note. The Deed of Trust, which encumbered the real property known as the Village Green Apartments, located at 3450 Fescue Lane, Memphis, Tennessee was also recorded with the Shelby County Register of Deeds that same day. Also on that date, American Property Financing, Inc. assigned and/or endorsed the Note to Fannie Mae along with all of its rights, title and interest as lender under the Deed of Trust. On October 13, 2003, a UCC Financing Statement was filed with the Shelby County Register of Deeds, setting forth Village Green, LTD. as debtor to Fannie Mae, secured party and covering certain real property as collateral. Village Green, LTD. also executed a number of collateral agreements ("Collateral Agreements") including a Replacement Reserve and Security Agreement, Assignment of Management Agreement, Operations and Maintenance Agreement, and a Completion Repair and Security Agreement, each of which were assigned to Fannie Mae.
On December 29, 2005, Debtor executed an Assumption and Release Agreement whereby Debtor assumed all of the obligations of Village Green LTD. as set forth in the Note, Deed of Trust and Collateral Agreements. The Assumption and Release Agreement was recorded with the Shelby County Register of Deeds. On that same day, the Debtor entered into a Master Lease Agreement with EP Village Green Operator, LLC ("Village Green Operator"), whereby Village Green Operator would collect rents, pay bills and remit net proceeds to the Debtor. Village Green Operator also entered into an Assignment of Leases and Rents, Security Agreement and Subordination of Master Lease, for the benefit of Fannie Mae as assignee, on December 29, 2005.
The Debtor and Fannie Mae have stipulated that there is no equity in the subject real property. The value of the property listed on Debtor's Schedule A is $6,500,000.00 and the amount of Fannie Mae's claim on Schedule D is listed at $8,500,000.00 of which $2,000,000.00 is unsecured. Prior to the petition date, the Debtor was in default under the terms of the Note and Deed of Trust. The Debtor's monthly operating report for the month ending April 30, 2010 reflected that the Debtor's delinquent mortgage payments at the time of filing were $354,708.17. See Joint Stipulation of Facts, Docket No. 58, Ex. 13, p. 6.
At the hearing on the two motions, the parties conceded that the issue upon which both of their motions depend is whether or not the rents collected by Village Green Operator and paid to the Debtor are property of the Debtor's estate, and thus eligible as cash collateral, or whether the language of the Deed of Trust granted a pre-petition absolute assignment to Fannie Mae, effectively terminating the Debtor's interest in the rents. As admitted by Fannie Mae's counsel at the hearing on this matter, Fannie Mae's motion hinges upon the Debtor's lack of available cash collateral *529 to effectuate a reorganization. Counsel for the Debtor conceded that its ability to formulate a plan and reorganize is dependent on the use of rents as cash collateral and that if the rents are not available as cash collateral, relief from the stay is appropriate.
The pertinent provisions of the Multifamily Deed of Trust, Assignment of Rents and Security Agreement ("Deed of Trust") are as follows:
Page 1, Paragraph 3, "Borrower, in consideration of the Indebtedness and the trust created by this instrument, irrevocably grants, conveys, bargains, sells, confirms and assigns to Trustee, in trust, with power of sale, the Mortgaged Property, including the Land ... TO SECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower's Multifamily Note payable to Lender dated as of the date of this Instrument, and maturing on October 1, 2013, in the principal amount of $9,200,000.00 and all renewals, extensions and modifications of the Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan Documents". (emphasis in the original).
"(Paragraph) 1. Definitions. The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:... (s) `Mortgaged Property' means all of Borrower's present and future right, title and interest in and to all of the following: ... (10) all Rents and Leases; ..."
"(Paragraph) 3. Assignment of Rents; Appointment of Receiver; Lender in Possession."
(a) ... Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only. For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the Mortgaged Property, "as that term is defined in Section 1(s). However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument."
"(Paragraph) 30. Governing Law; Consent to Jurisdiction and Venue."
(a) This Instrument and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the "Property Jurisdiction"). Ex. 2 to Joint Stipulation of Facts, No. 58.
A separate Assignment of Leases and Rents, Security Agreement and Subordination of Master Lease ("Assignment of Leases"), was executed by EP Village Green Operator, LLC, as assignor and Fannie Mae, as assignee, on December 29, 2005. Ex. 9 to Joint Stipulation of Facts, Docket No. 58. At the hearing on this matter, the Court heard proof that the Debtor is a general partnership whose partners are EP Village Green Owner, LLC, and Village Green II, General Partnership. The Debtor acknowledged the Assignment of Leases through the signature of its general partners, but appears to have no obligations whatsoever vis-a-vis the Assignment of Leases. No proof was offered to the Court to explain how the Debtor might be obligated thereunder, through its general partners or otherwise. *530 There may be documents which explain why EP Village Green Operator, LLC, executed the Assignment of Leases instead of the Debtor, but there was no testimony or argument to this effect at the hearing on this matter. Counsel for Fannie Mae stated at the hearing that the assignment language in the Assignment of Leases was exactly the same as the Deed of Trust and could be analyzed in identical fashion. While the language may indeed be the same, the Assignment of Leases was executed by a non-debtor entity (as "Assignor") who may not be subject to the Court's jurisdiction. The Court will limit its analysis and accordingly, focus on the language of the Deed of Trust.
III. DISCUSSION
11 U.S.C. § 541 provides that "(a) The commencement of a case ... creates an estate. Such estate is comprised of all of the following property, wherever located and by whomever held: (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.... (6) Proceeds, product, offspring, rents, or profits of or from property of the estate...." This provision was intended to be broadly construed. Forbes v. Lucas (In re Lucas), 924 F.2d 597, 600 (6th Cir.1991), citing United States v. Whiting Pools, Inc., 462 U.S. 198, 204-205, 103 S.Ct. 2309, 2313, 76 L.Ed.2d 515 (1983)(clear legislative history was provided by the Senate and House Report on the Bankruptcy Reform Act of 1978).
The "cash collateral" which the Debtor seeks to use to reorganize is defined in 11 U.S.C. § 363(a) as:
"cash, negotiable instruments, documents of title, securities, deposit accounts or other cash equivalents whenever acquired in which the estate and an entity other than the estate have an interest and includes the proceeds, products, offspring, rents or profits of property and the fees, charges, accounts or other payments for the use or occupancy of rooms and other public facilities in hotels, motels, or other lodging properties subject to a security interest .... whether existing before or after the commencement of a case under this title." (emphasis added).
According to the Code, then, property cannot be cash collateral unless it is also property of the estate. In re Kingsport Ventures, 251 B.R. 841, 845-846 (Bankr. E.D.Tenn.2000).
Further, 11 U.S.C. § 363(c)(2) provides that "The trustee may not use, sell or lease cash collateral ... unless(A) each entity that has an interest in such cash collateral consents; or (B) the court, after notice and a hearing, authorizes such use, sale or lease in accordance with the provisions of this section." "The ability to use cash collateral under § 363(c)(2) extends to the Debtor by virtue of 11 U.S.C.A. § 1107(a) which endows a Chapter 11 debtor in possession with `virtually all of the rights and powers of the bankruptcy trustee ...'." Id., citing United States v. Hunter (In re Walter), 45 F.3d 1023, 1027 (6th Cir.1995). Because Fannie Mae has not heretofore consented to the use of cash collateral, the Court must determine if such cash collateral is property of the estate and therefore available here for the Debtor's use, so long as the other provisions of § 363 are complied with, including the adequate protection required by § 363(e).
The Debtor bears the initial burden of proof as to the issue of "adequate protection." 11 U.S.C. § 363(p)(1). At the hearing, the Debtor offered the testimony of Mr. Eric Clauson, a minority owner of the Debtor and employee of the asset management firm that manages the Debtor's *531 real property. The Court found Mr. Clauson to be a credible witness whose testimony was very valuable by way of explaining the course of dealing between Fannie Mae and the Debtor.
Mr. Clauson testified that upon the purchase of the property in 2005, the Debtor immediately improved its profitability. Fannie Mae had initially required a significant reserve fund to be maintained until certain performance targets were met by the Debtor. The Debtor met its performance targets and the reserve fund was released. The property performed well financially until early 2009, when the area was impacted by an economic downturn which left many of the Debtor's tenants unemployed. Along with the increase in the number of non-paying tenants, the Debtor found that the process of evicting tenants for non-payment of rent was taking longer in the court system. These circumstances led to significantly lower collections for the Debtor and the Debtor's cash flow suffered accordingly.
In the meantime, the surrounding geographical area was deteriorating with a number of surrounding properties foreclosed upon and auctioned off. The Debtor then made a concerted effort to improve both collections and raise occupancy rates and saw improvements on a steady month-by-month basis. At the time of the hearing, the Debtor's occupancy rate was between eighty-eight and ninety per cent. The Debtor is now able to make its monthly mortgage payments and has surplus funds available for repairs.
According to Mr. Clauson's testimony, that the Debtor made an effort to resolve the default with Fannie Mae prior to filing the bankruptcy petition, but Fannie Mae had refused to negotiate with the Debtor. While Fannie Mae did send a "pre-negotiation" letter to the Debtor, Fannie Mae never engaged in discussion with the Debtor other than to provide the amount necessary to bring the loan current and to state that it was Fannie Mae's intention to foreclose on the property. Fannie Mae also accused the Debtor of failing to maintain the property without ever having performed an inspection. Conversely, Mr. Clauson testified that the Debtor had made meaningful improvements to the property such as replacing siding, repairing the roofs and repainting and renovating the property's clubhouse.
Mr. Clauson testified that the Debtor has positive cash flow, that the real property is being maintained and is insured, that the real property's occupancy level has been brought up to a profitable percentage, and that the Debtor can now pay the regular ongoing note payments to Fannie Mae. Fannie Mae offered no testimony or other proof to the contrary. The Court finds that the Debtor has established a prima facie case that, if the rents are found to be available as cash collateral, Fannie Mae will be adequately protected. "Once a prima facie case is established, the objecting party must come forward with sufficient evidence to controvert that which was adduced by the moving party." In re Carbone Cos., Inc., 395 B.R. 631, 637 (Bankr.N.D.Ohio 2008). Fannie Mae offered no additional evidence at the hearing other than the facts set forth in the Joint Stipulation and the supporting documents attached thereto. Docket No. 58, Ex. 1-13.
Fannie Mae argues that because the rents were subject to a pre-petition absolute assignment, they were not property of the estate. "[A]n absolute assignment divests the assignor of any legal right in the subject property as of the date of the assignment and vests those rights in the assignee." In re Kingsport Ventures, 251 B.R. 841, 848 (Bankr.E.D.Tenn.2000). The assignor's equitable rights in the *532 property are subordinate to the rights of the assignee. Id., see also In re Harbour Town Assocs., Ltd., 99 B.R. 823, 824 (Bankr.M.D.Tenn.1989) It is Fannie Mae's position that because ownership of the rents was already totally vested with Fannie Mae, the Debtor had no interest in the rents which could become property of the estate upon commencement of the case as set forth in 11 U.S.C. § 541.
The Court also has before it the motion of Fannie Mae requesting relief from the automatic stay "so that it may exercise any and all rights in the property". Docket No. 37, ¶ 32. 11 U.S.C. § 362(a) provides that the filing of the Debtor's petition operates as a stay of various actions against the Debtor and property of the estate. Fannie Mae has requested that the Court lift the stay pursuant to 11 U.S.C. § 362(d)(2) because the Debtor has no equity in the property and such property is not necessary to an effective organization. Because the parties here have conceded that there is no equity in the property, the burden has shifted to the Debtor to show that the collateral is necessary for an effective reorganization. Joint Stipulation of Facts, Docket No. 58, ¶ 22. 11 U.S.C. § 362(g) provides that "In any hearing under subsection (d) or (e) of this section concerning relief from the stay of any act under subsection (a) of this section(1) the party requesting such relief has the burden of proof on the issue of the debtor's equity in property; and (2) the party opposing such relief has the burden of proof on all other issues."
"What this requires is not merely a showing that if there is conceivably to be an effective reorganization, this property will be needed for it"; but that the property is essential for an effective reorganization that is in prospect. This means ... that there must be "a reasonable possibility of a successful reorganization within a reasonable time." United Sav. Ass'n of Texas v. Timbers of Inwood Forest Assoc., 484 U.S. 365, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988).[1]
A. THE LAW REGARDING ASSIGNMENTS OF RENTS
As one scholar has put it, "[t]he law regarding assignments of rents has been in great disarray for more than a century."[2] As early as 1807, security interests in rents were first recognized in the United States. In 1830, a Deed of Trust was recorded which allowed the Trustee to take possession of the property and collect rents and profits upon default. Id.
Early Tennessee case law demonstrates the progressive complexity in creating and *533 perfecting security interests in rents as well as the assignment of rents. As early as 1880, the general rule in Tennessee was that absent a contractual provision, a mortgagor in possession was entitled to rents. Moore v. Knight, 74 Tenn. 427, 1880 WL 4749 (Tenn.1880). At that time, even after default, a mortgagee could only collect rents upon the showing that a sale of the real property would not be sufficient to repay the underlying obligation. Id. at *7.
By 1883, the general law of mortgages in Tennessee had developed sufficiently so that there existed certain "rules" applicable to all rents cases,
"1. That `[a] trustee holding legal title to land under a deed of trust to secure creditors, but not in possession, is not entitled to the rents, nor can the same be attached by the beneficiary for the payment of his debt.' 2. That `[r]ents accruing after execution of the mortgage, and before sale, in absence of contract as to same, belong to mortgagor.' 3. `That in Tennessee the mortgage is always treated as mere security for the debt, and when the mortgagee is out of possession, it is the corpus of the property, not its rents and profits, which constitute the fund for the satisfaction of the debt.' 4. That `[a] mortgagee has no specific lien upon the rents and profits of the mortgage land unless he has in the mortgage stipulated for a specific pledge of them as part of his security.' 5....'[A] mortgagee, as against the mortgagor in possession, or those deriving title under him subsequent to the mortgage, is not entitled to a receiver of rents pendente lite.'" Cowan, McClung & Co., v. Gill, 79 Tenn. 674, 1883 WL 3775 at *6 (Tenn.1883)(emphasis in original).
During its later term in 1883, the Tennessee Supreme Court re-emphasized the importance of the mortgage's terms in defining the rights of the parties. "[I]n this State, it has been invariably held that the legal title to the property conveyed vests in the mortgagee, and he is entitled to the immediate possession, unless the mortgage otherwise provides." Lincoln Savings Bank v. Ewing, 80 Tenn. 598, 1883 WL 3861 at *1 (Tenn.1883). The court later stated that there had not been a reservation in favor of the grantor for possession and use of the property in the mortgage deed and as such, the mortgagee was entitled to request appointment of a receiver before default to protect the property. See also Reed Fertilizer Co., v. Thomas, 97 Tenn. 478, 37 S.W. 220, 221 (1896)(absent a provision for possession, rents pass to the grantee upon execution of the instrument, prior to default.)
Later cases provided additional protection to a mortgagor-in-possession. In Schoolfield v. Cogdell, 120 Tenn. 618, 113 S.W. 375 (1908), a mortgagor remained in possession of the land and the court found that where nothing appeared in the instrument to permit the trustee to collect rents, it followed that the rents from the property belonged to the mortgagor.
A mortgage given by a business that included income and profits, but where there was a right to enjoyment reserved until default, was held to not pass rights to income and profits to the trustee until after default and possession by the trustee. Even then the lien only attached to the income and profits arising after default and possession were taken. Morgan Bros. v. Dayton Coal & Iron Co., 183 S.W. 1019, 1023 (Tenn.1916).
By 1927, the general rule had developed that if the mortgagor remained in possession of the property, a conveyance which included income, rents and profits would not be effective until default. Any exceptions to the rule would have to be found *534 stipulated by the parties to the mortgage. Bank of Commerce and Trust Co., 155 Tenn. 63, 290 S.W. 990 (1927).
Bankruptcy Courts in Tennessee have relied upon state law for guidance as to the effect of assignment of rents on Chapter 11 debtors and their lenders. Absent an express assignment of rents, a bankruptcy court will not find that a mortgagee has a lien on or security interest in rents. In such a case, if a grantor is in possession of the real property, the grantor, not the creditor will be entitled to the rents until foreclosure. In re Crabtree, 51 B.R. 521 (Bankr.E.D.Tenn.1985) (citations omitted).
"An absolute assignment of rents would not be a pledge and would be superior to the mortgagor and third party creditors." In re Harbour Town Associates, Ltd., 99 B.R. 823 (Bkrtcy.M.D.Tenn.1989). It is obvious from the historical progression of Tennessee law that courts analyzing issues regarding security interests and assignments of rents must look closely at the language of the underlying documents.
The Court acknowledges that its opinion may not bring greater order to the disarray but will endeavor to take a pragmatic approach, taking into account the ramifications of such assignments on bankruptcy law and policy as well as the interpretation of transactional documents in Tennessee.[3] Even within this district, courts have reached differing results in their assignment analysis, although every analysis is dependent on the consideration of the totality of the particular facts and circumstances before the court. E.g., In re 460 Tennessee Street, LLC, No. 09-2816(Bankr.W.D.Tenn. Nov. 5, 2009), ht tp://www.tnwb.uscourts.gov/opinions/jdl/ pdf/jdl20091105nn1.pdf.; In re 5877 Poplar, L.P., 268 B.R. 140, 149 (Bankr. W.D.Tenn.2001). For every court, "[t]he determination of whether an assignment of rents is absolute or merely a pledge of security requires a thorough analysis of the language and provisions of the assignment." Id.
In addition, the Court is mindful that Chapter 11 reorganizations are intended to allow businesses to continue to operate, provide employees with jobs, pay creditors and produce a return for stockholders. Congressional policy favors reorganization because "[i]t is more economically efficient to reorganize than to liquidate, because it preserves jobs and assets." In re White Motor Credit Corp., 37 B.R. 631, 637 (D.C.Ohio, 1984), citing H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 220 (1977), reprinted in 1978 U.S.Code Cong. & Admin. News 5787, 5963, 6179.
B. ANALYSIS OF THE DEED OF TRUST
The Deed of Trust in this matter provides that it is governed by the laws of the jurisdiction in which the land is located, i.e. Tennessee. See Joint Stipulation of Facts, Docket No. 58, ¶ 2. Further, questions about what constitutes property of the estate are determined according to state law. Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 918, 59 L.Ed.2d 136 (1979).
*535 "Under Tennessee law an assignment of rents is presumed to be a pledge of rents as security." In re Harbour Town Assocs., Ltd., 99 B.R. 823 (Bankr. M.D.Tenn.1989). Such presumption is rebuttable, however, by proof that the assignment of rents was an absolute assignment rather than a pledge of security. In re Kingsport Ventures, 251 B.R. 841 (Bankr.E.D.Tenn.2000).
In examining the language of the purported assignment, the court will apply general principles of Tennessee contract law. Id. at 847. Written contracts whose terms are plain and unambiguous should be enforced according to their plain terms. Vargo v. Lincoln Brass Works, Inc., 115 S.W.3d 487, 494 (Tenn.Ct.App. 2003). This rule applies, even where the terms seem harsh or unjust absent proof of fraud or mistake. Ambiguity results when contract terms may fairly be understood more ways than one. Language which is ambiguous is construed against the drafter. In re 5877 Poplar, L.P. at 147 (citations omitted). "When a particular contractual provision is ambiguous, the `rule of practical construction' permits the courts to use the contracting parties' conduct and statements regarding the disputed provision as guides in construing and enforcing the contract." Vargo v. Lincoln Brass Works, Inc. at 494.
There can be no doubt that the form "Multifamily Deed of Trust, Assignment of Rents and Security Agreement" was meant to be a "one size fits all" agreement which would somehow simultaneously serve as an absolute assignment of rents and, alternatively, serve as a security agreement. Upon careful analysis, however, the Court finds that in consideration of the totality of the facts and circumstances before the Court, the Court concludes that the Deed of Trust is in reality a pledge of security, not an absolute assignment.
The first page of the Deed of Trust contains the following recitation: "[Debtor], in consideration of the Indebtedness and the trust created by this instrument, irrevocably grants, conveys, bargains, sells, confirms and assigns to Trustee, in trust, with power of sale, the Mortgaged Property [which in this instance includes Rents], including the Land ... TO SECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower's Multifamily Note ..." (emphasis in the original). Joint Stipulation of Facts, Docket No. 58, Ex. 2, p. 1.
The Deed of Trust provides that the Rents are included in the pledged collateral in some sections and conversely absolutely assigned to the Lender in other provisions. "Mortgaged Property" is defined to include "all Rents and Leases". Joint Stipulation of Facts, Docket No. 58, Ex. 2, Sec.1, ¶ (s)(10) p. 5. Section 3, "Assignment of Rents; Appointment of Receiver; Lender in Possession," states in paragraph (a) that "For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the `Mortgaged Property,' as that term is defined in Section 1(s)." The Court finds that these two provisions cannot be harmonized for purposes of its analysis. Further adding to the ambiguity as to whether the rents are "Mortgaged Property" or not, the UCC-1 filed by Fannie Mae on June 6, 2006 includes "All rents ..." in its collateral description. See Joint Stipulation of Facts, Docket No. 58, Ex. 10.
Additionally, within the Deed of Trust itself, it is acknowledged that the rents may or may not be absolutely assigned. Section 3, Paragraph (a) states "However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included *536 as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument." It is impossible from the terms of the contract to know which legal position the parties were relying upon. One party to the contract could understand that there was an unconditional assignment of rents while the other could understand that a security interest was granted because in Tennessee, the legal presumption is that the parties intended to create a security interest. An ambiguity is created by the language of the contract which attempts to encompass both an absolute assignment and a security interest.
Section 3, Paragraph (b) states that until default, Fannie Mae granted to Debtor a "revocable license to collect and receive all Rents ..." and at the same time so long as "no Event of Default has occurred and is continuing," all rents remaining after making payments then due and payable could be retained by Debtor "free and clear of, and released from [Fannie Mae's] rights with respect to Rents under this Instrument," (emphasis added). The Debtor apparently retained complete ownership of any funds collected, over and above the continuing monthly payments due under the Note and other loan documents. This provision is contrary to Section 3, Paragraph (a) which states that "Borrower absolutely and unconditionally assigns and transfers to Lender all Rents. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents ..." (emphasis added).
Like the contract in the 5877 Poplar, L.P. case, the Debtor here retained some interest in the rents. The Debtor retained an interest in the surplus funds generated after payment of monthly obligations, as well as after the Note is paid in full. See Joint Stipulation of Facts, Docket No. 58, Ex. 2 Sec. 44. RELEASE, p. 34, "Upon payment of the Indebtedness, Lender shall release this Instrument."
Fannie Mae urges the Court to review the Deed of Trust in light of the four-factor reasoning of the court in the Kingsport Ventures case. See Kingsport Ventures, 251 B.R. at 848. The case sub judice can be distinguished from the Kingsport case from the outset. In Kingsport, the court found that the absolute assignment language was clear and unambiguous. For the reasons set forth herein, the court has found that not to be the case with the Deed of Trust in question. Further, in this case, the Debtor retained an interest in monthly rent surplusage as well as upon payment of the entire indebtedness.
In the analysis of the assignment language, "statements within the assignment that the assignment was intended to secure a debt is strong evidence that the assignments are in fact a pledge of security", even if the assignment is referred to as "absolute." In re Kingsport Ventures, 251 B.R. 841, 847 (Bankr. E.D.Tenn.2000), citing BVT Chestnut Hill Apartments, Ltd. 115 B.R. at 117. In conducting its analysis, the Court must look to the reality of this particular transaction's structure, regardless of the "absolute" label that has been placed upon it.
Historically, there is support for giving effect to the realities of the underlying transaction despite the form placed on it by the parties. Prior to the codification of Tennessee's current version of the Uniform Commercial Code, there was much confusion created by agreements which were secured sales "disguised" *537 as leases.[4] In analyzing these agreements, courts looked to the substance of the transaction between the parties, regardless of the form. "The agreement creating a security interest can be in any form-sale, consignment, lease, bailment or whatever the parties can imagine. The agreement need not say that it is granting a security interest. The practical effect of the agreement determines whether it was intended to create a security interest." In re Village Import Enterprises, 126 B.R. 307, 309 (Bankr.E.D.Tenn.1991).
Hon. Ronald Lee Gilman, writing for the Sixth Circuit Court of Appeals, when determining whether separation agreement payments were alimony or really a "disguised property settlement" aptly stated, "There is a saying that if something looks like a duck, walks like a duck, and quacks like a duck, then it is probably a duck." Sorah v. Sorah (In re Sorah), 163 F.3d 397, 401 (6th Cir.1998). In Tennessee, the similar principle is stated as "[e]quity looks to substance and not to form," Williams v. Burmeister, 47 Tenn.App. 414, 338 S.W.2d 645 (1959).
Similarly, there is a longstanding Tennessee legal principle that even if a deed is labeled "absolute" on its face, if the actual circumstances dictate, the court will regard it as a mortgage. "If the instrument is in its essence a mortgage, the parties cannot by any stipulations, however express or positive, render it anything but a mortgage, or deprive it of the essential attributes belonging to a mortgage in equity." Harmon v. Faucette, 8 Tenn.App. 137, 1928 WL 2092 (Tenn.Ct.App.1928). Other bankruptcy courts have implemented similar state law principles in the assignment of rents analysis.
In In re Willows of Coventry, Ltd., 154 B.R. 959, 963 (Bankr.N.D.Ind.1993), the bankruptcy court applied the general principle that "if a conveyance is made as a security for money, in whatever form the conveyance is made, or whatever cover may be used to disguise the transaction and hide its real character from others ... it will be held and treated as a mortgage." The court went on to find that the assignment of rents at issue was nothing more than a security device. "There is absolutely no reason this court can identify which would indicate that the Indiana courts would not apply these same fundamental principles to an assignment of rents, in connection with determining whether such an agreement constitutes an absolute conveyance or a lien." Id. at 964.
The instrument in that case, like the Deed of Trust here, stated on its face that it was made for the purpose of securing a contemporaneously executed note. Likewise, upon full payment of the note, the assignment would become void, similar to the release provision in both the Deed of Trust before this Court and the instrument in the 5877 Poplar case, wherein the court commented, "Apparently, the Debtor did not assign its rights to the rents and revenues ad infinitum and retained some interest in the rents." 268 B.R. at 149.
Likewise, the court in In re Buttermilk Towne Center, LLC, 428 B.R. 700, 706 (Bankr.E.D.Ky.2010) found that Kentucky state law, like Indiana law, supported a finding of substance over form. In Kentucky, even if a document states on its face that it is a deed of conveyance, courts will hold that it is a mortgage if it is a security for money. Id. at 706 (citation omitted). The instrument in the Buttermilk Towne Center case, like the Deed of *538 Trust under analysis here, also contained language that it served to secure payment on indebtedness and was of limited duration, becoming null and void upon payment of all outstanding amounts. Id. The Deed of Trust under consideration here has similar features to the assignments in the both the Willows of Coventry and Buttermilk Towne Center cases. The substance of the transaction as a whole, significant provisions of the Deed of Trust, and Tennessee case law support a finding that the assignment of rents in question is not an absolute assignment but in reality an assignment meant to secure the underlying obligation to Fannie Mae.
IV. CONCLUSION
Based on a totality of the particular facts and circumstances, the stipulations and exhibits presented to the Court, witness testimony and arguments of counsel, the Court finds that Fannie Mae did not overcome the presumption that the assignment in question was in actuality a pledge of rents as security. As such, the court finds that the rents are property of the Debtor's estate and available for use as cash collateral.
Accordingly, Fannie Mae's Motion for Relief from the Automatic Stay (Docket No. 47) is hereby DENIED. Fannie Mae's Objection to the Debtor's Motion for Conditional Use of Cash Collateral (Docket No. 45) is hereby OVERRULED. Finally, for the reasons set forth herein, the Debtor's Motion for an Order Granting Adequate Protection Pursuant to 11 U.S.C. §§ 366 and 361 and Scheduling a Final Hearing Pursuant to Rule 4001 is GRANTED.
This matter is scheduled for a final hearing on the motion to use cash collateral on August 12, 2010 at 9:30 a.m. in the U.S. Bankruptcy Court, 200 Jefferson Avenue, Room 680, Memphis, TN 38103.
NOTES
[1] While the Debtor has stipulated that this is a "single asset real estate" case (and thus subject to the provisions of 11 U.S.C. § 362(d)(3)), Fannie Mae has not requested relief pursuant to that provision and the 90-day deadline from the entry of the order for relief has yet to expire. See also Kingsport Ventures, 251 B.R. 841, 846 n. 4 (Bankr. E.D.Tenn.2000).
[2] Julia Patterson Forrester, Still Crazy After All These Years: The Absolute Assignment of Rents in Mortgage Loan Transactions, 59 Fla. L.Rev. 487 (2007), later declaring that "The absolute assignment of rents is not a satisfactory method of creating a security interest in rents. It causes problems for lenders in drafting and enforcing the assignment of rents. It causes injustice for borrowers in bankruptcy. It causes unnecessary litigation that may raise the cost of credit. It is, nevertheless, the best alternative for lenders at this time. The absolute assignment of rents cannot simply be eliminated unless replaced by a workable solution to the problems it solves. Therefore, comprehensive change is necessary. This change has occurred gradually in some states through the judicial process, but the legislative process provides a faster and more comprehensive solution." Id. at 524.
[3] "The better-reasoned bankruptcy opinions look to the substance of the transaction and to factors such as the borrower's right to collect rents until default, the lender's obligation to apply rents to payment of the debt, and the termination of the assignment of rents upon payment of the loan in full. If the borrower has any remaining property rights in the rental stream under state law, bankruptcy law dictates that the rental stream be treated as part of the bankruptcy estate." Julia Patterson Forrester, Still Crazy After All These Years: The Absolute Assignment of Rents in Mortgage Loan Transactions, 59 Fla. L.Rev. 487, 522 (2007).
[4] In 1993, Article 2A of the Uniform Commercial Code, applicable to leases, was adopted in Tennessee.
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718 So.2d 609 (1998)
STATE of Louisiana, DEPARTMENT OF SOCIAL SERVICES, OFFICE OF FAMILY SUPPORT IN the INTEREST OF Michael GLASS, Delicia Glass, Felicia Glass and Ira Glass, minor children of Patricia A. Glass, Plaintiff-Appellee.
v.
Nathaniel ROBINSON, Defendant-Appellant.
No. 31025-CA.
Court of Appeal of Louisiana, Second Circuit.
September 23, 1998.
*610 Frederick Lewis, Jr., for Defendant-Appellant.
Melissa A. Capella, State of Louisiana, Office of Family Support, Haughton, for Plaintiff-Appellee.
Before MARVIN, C.J., and NORRIS and CARAWAY, JJ.
CARAWAY, Judge.
In this appeal, a default judgment establishing paternity is sought to be annulled by the appellant who now claims to have proof through blood tests that he is not the father. Finding no fraud or ill practice involved in the rendition of the initial default judgment, we affirm the trial court and dismiss appellant's nullity action.
Facts
In 1994, the State of Louisiana filed a petition to determine paternity and establish child support, naming Nathaniel Robinson as the defendant. On April 7, 1995, on application to confirm a default, Patricia Glass testified before a hearing officer that the defendant was the biological father of the four minor children named in the petition. Based on this testimony, the hearing officer found Nathaniel Robinson to be the natural and biological father of the four minor children, including one set of twins, born to Patricia Glass over a twenty-nine month period between February 1980 and July 1982. Subsequently, on April 24, 1995, a default judgment was rendered by the district judge against the defendant confirming the hearing officer's recommendations. The court ordered Robinson to pay child support, costs, and attorney fees.
On September 28, 1995, the defendant filed a petition to annul the judgment for fraud and ill practices under La. C.C.P. art.2004. In his petition to annul the judgment, he admitted that he was served with the original petition in April 1994, but alleged he was unaware, because of his poor reading skills, that he was required to file an answer to the petition. The defendant also admitted he was the father of one of the four minor children, but denied paternity of the other three.
After the initial default judgment but prior to the date of the trial of the nullity action, the mother and the defendant agreed to undergo blood tests. Those tests apparently confirmed that the defendant was not the biological father of three of the minor children.
The nullity action was tried on June 13, 1997. The defendant testified that he had no *611 sexual relations with the mother at the time she became pregnant with the three minor children. He also testified that an acquaintance, Levi Maxey, had claimed to be the father of two of the children. However, the defendant also admitted that the mother told him that he was the father of the twins.
Glass testified that when the matter had come on for trial initially, she believed the defendant to be the father of all four of the minor children. She stated that when she became pregnant with the twins and later the fourth child, she was dating both the defendant and Levi Maxey and had sexual relations with both men. According to the mother, her sexual relationship with the defendant, although not continuous, extended from 1978 until the time he discovered that this support proceeding had been brought. Finally, the mother stated that through the years the defendant had treated all four children equally, and that all four referred to him as "daddy."
At the hearing, the defendant offered the blood test results into evidence. The trial court determined the results were not relevant and denied the admission of them into evidence. The defendant proffered the results to the issue of whether Patricia Glass had falsely testified in the prior proceeding that the defendant was the father of the minor children.
Law
A final judgment obtained by fraud or ill practices may be annulled. La. C.C.P. art 2004. The Louisiana Supreme Court enunciated in Johnson v. Jones-Journet, 320 So.2d 533 (La.1975), the two criteria set forth in our jurisprudence to determine whether a judgment had been obtained by actionable fraud or ill practices. It must be shown that: (1) the circumstances under which the judgment was rendered showed the deprivation of legal rights of the litigant seeking relief; and (2) the enforcement of the judgment would have been unconscionable and inequitable. Id., at 537.
Furthermore, a party seeking an annulment must demonstrate how he was prevented or excused from asserting any defenses he may have had, i.e., that he was deprived of the knowledge of the existence of the defense relied on, or the opportunity to present it, by some fraud or ill practice on the part of the other party. Gramm v. Brock, 430 So.2d 199 (La.App. 2d Cir.1983), citing Jones v. Decuers, 320 So.2d 348 (La. App. 4th Cir.1975).
Our courts have also examined each case from an equitable viewpoint to ascertain whether allowing the judgment to stand would be inequitable or unconscionable considering the practice by which the party was able to obtain the judgment. Gramm, supra at 201. Thus the article is not limited to cases of actual fraud or intentional wrongdoing, but is sufficiently broad to encompass all situations wherein a judgment is rendered through some improper practice or procedure which operates, even innocently, to deprive the party cast in judgment of some legal right, and where the enforcement of the judgment would be unconscionable and inequitable. Kem Search Inc. v. Sheffield, 434 So.2d 1067 (La.1983).
Our jurisprudence is equally clear, however, that an action for nullity is not a substitute for an appeal from a default judgment, Smith v. Cajun Insulation, Inc., 392 So.2d 398 (La.1980), nor is it the solution to legal rights lost through one party's negligence or failure to act. Design Associates, Inc. v. Charpentier, 537 So.2d 1233 (La.App. 4th Cir.1989), writ denied, 540 So.2d 340 (La.1989); Berwick Bay Oil Co. v. Sunrise Shipping, 525 So.2d 239 (La.App. 1st Cir. 1988). "It is also not unconscionable or inequitable to enforce a default judgment even though a defendant had a valid defense but failed to timely assert it." Design Associates, Inc., supra at 1237; Johnson, supra at 537. Furthermore, a default judgment, otherwise legally valid, cannot be set aside and avoided for the purpose of affording a defendant an opportunity to offer a defense solely because that judgment is erroneous and such action would be in furtherance of justice. Gramm, supra at 201.
Discussion
In a similar situation involving an action for paternity and child support, the court *612 in State v. Beauchamp, 473 So.2d 323 (La. App. 1st Cir.1985), writ denied, 477 So.2d 1125 (La.1985), applied the above principles and refused to annul as inequitable a default judgment. Beauchamp, who was adjudicated the father in the default proceeding, raised the issue that the mother was married to another man at the time of the child's birth and that the mother's and the state's knowledge of that fact alone tainted the default proceeding.[1] The court, finding no fraud or ill practice, rejected Beauchamp's claims. We agree that the analysis in the Beauchamp case is likewise applicable in this case.
This nullity action was presented to the trial court with the assertion that Glass committed fraud by falsely testifying at the initial trial that the defendant was the father of the four minor children. While Glass admitted at trial that she had sexual relations with both the defendant and another man during the time period in the early 1980's when the children were born, she asserted that her belief at the time of her prior testimony for the confirmation of the default was that Robinson and not Maxey was the father of the children. Thus, despite Glass' awareness of a biological possibility that Maxey might have been the father, the longheld belief of Glass was that Robinson was the children's father based upon her knowledge of the extent of her relationship with him and his informal acknowledgment of the children as his own. Her testimony to that belief in the confirmation proceeding cannot be attacked as insufficient to support the default judgment and was not found by the trial court in this nullity action to have been given in bad faith, as a fraud on the court and against Robinson. The fact finding of the trial court in this instance, which weighed the testimony of both Glass and Robinson, will not be overruled for manifest error under these circumstances.
Additionally, we hold that Robinson's failure to have acted upon the sheriff's service upon him of the citation and the original suit petition raises no equitable basis for nullifying the default judgment. The formality of that personal service is a significant notice in and of itself, irrespective of a person's ability to read, so that the defendant at a minimum must have the citation and petition read to him and respond to the suit.
Finally, based upon our ruling above regarding Glass' testimony, the failure of the trial court to have allowed the result of the blood test into evidence did not affect the trial court's ability to make a judgment regarding Glass' belief of Robinson's paternity prior to the time of the blood test. In fact, Glass candidly admitted in her testimony in this nullity action that because of the blood test taken after her initial testimony, "the paternity test proved different" and her belief in Robinson's paternity has now been scientifically contested. That admission along with her admission regarding her involvement with Maxey was therefore before the trial court. Nevertheless, for the reasons stated above, we cannot say that the trial court was clearly wrong in his view that Glass' prior testimony was in good faith.
Conclusion
In the instant case, the mother's testimony was not so internally inconsistent or implausible on its face that a reasonable factfinder would not credit her story. After failing to respond to the suit and the entry of the default judgment, the defendant may not retry the case to offer a substantial defense. The trial judge correctly determined that the default judgment should not be annulled for fraud and ill practices. The judgment is affirmed at appellant's cost.
AFFIRMED.
MARVIN, C.J., dissents with written reasons.
*613 MARVIN, Chief Judge, dissenting.
I respectfully dissent because I believe the record in this appeal warrants our reversal and rendition of a judgment in favor of the father amending the judgment to decree him to be the parent of only one of the four children of his paramour.
This father-plaintiff alleged and factually supported his cause of action under La. C.C.P. art.2004 to annul the April 1995 default judgment. The evidence supporting the default judgment was heard by a hearing officer who recommended the default judgment to the district court judge who signed it. We have no transcript of the proceedings to confirm the April 1995 default judgment.
The father filed the nullity action in September 1995 when the State began enforcing the support order in the April default judgment against the father. Trial of the nullity action by the district judge was delayed until 1997[!] because it was inadvertently referred to, and was heard and denied, by the hearing officer.
Because of the father's objection or exception to the hearing officer's recommended denial of his demands in the nullity action, the matter was then referred to the district court for trial. The district judge who signed the April 1995 default judgment held the trial in 1997 to annul that judgment. When the nullity action was called for trial and after the father-plaintiff announced ready for trial, the court suggested that the State's attorney should seek a continuance to get her witnesses in court. This suggestion, of course, was followed.
The record shows that the mother's mere "belief" in 1995 served as the basis for the State's default judgment and that because the father is relatively illiterate he did not realize the significance of the State's demands premised on four children in the paternity-support action. In short, the father knew and acknowledged he was the parent of one of his paramour's children, whom he willingly had supported. When the State began enforcement of the support order in the default judgment for a greater amount for the four children than for the one, the father, realizing this, then consulted an attorney.
Thereafter, and before the eventual hearing of the father's action for nullity, blood tests proved the father's understanding that he was the parent of only the one child whose paternity he had long admitted. The blood tests made after September 1995 likewise excluded the plaintiff-father as being the parent of the other three children!
The district court refused to admit [and in my view, to consider,] the blood tests at the trial of the nullity action on the grounds that the tests were not made until after the plaintiff-father filed the nullity action. The tests are in the appellate record as a proffer.
The blood tests were clearly admissible and should have been considered. The mother's testimony in the annulment action that she "believed" in 1995 that Robinson was the father does not avail the State, and, moreover, supports the appellant-father's contention, that while living with the mother, he supported all of the children of his paramour, but was the father of only the one child. The blood tests confirm this.
The annulment action, of course, does not substitute for an appeal, but is purposely provided in the law to remedy such a situation as this record presents. The majority recognizes that the Art.2004 provisions are not limited to cases of actual fraud or wrongdoing, but are sufficiently broad enough to remedy all situations that may "innocently" deprive a litigant of some legal right by enforcement of a judgment that would be unconscionable and inequitable, citing authority.
Beauchamp, cited in support of affirming the judgment in this appeal, relied on express law [La. R.S. 46:236.1(F)] to support its result. There, the enforcement of a default judgment in a paternity-support action by the State was not considered inequitable or unconscionable simply because another man was statutorily or legally presumed to have been the father of the child in question. Each case, however, as the majority opinion recognizes, must stand on its own peculiar facts. Here, this fatherplaintiff in the nullity action does not rely *614 on a legal presumption to annul, but presents the peculiar facts in his case that are not akin to the facts in Beauchamp. The father-appellant here, unlike Beauchamp, is being required to support three children whom he can affirmatively prove he did not father.
Even though this default judgment may have been "innocently" obtained by the State without specific ill-practice or fraud on the part of the State, the enforcement of its support provisions by the State for three of the four children in question, that are absolutely not the children of this "father," in my opinion, should be deemed inequitable and unconscionable.
In the great cross-section of cases, express law applicable to a given situation does not allow a court, sworn to uphold the law, to resort to achieving equity or accomplishing "justice." One of the rare exceptions of long standing, in the wisdom of the legislature, is the case presenting an action to annul a judgment as provided in La. C.C.P. art.2004. This case is a proper case under that article.
I would amend the judgment appealed to grant the relief that I suggest is contemplated by Art.2004 to this plaintiff-appellant.
NOTES
[1] Regardless of any legal presumption of paternity regarding the other man, the court in Beauchamp did not consider the default judgment as inequitable or unconscionable. The court allowed the default adjudication of paternity to stand despite the cloud surrounding the mother's relationship with two men. The court also noted in a footnote that under La. R.S. 46:236.1(F), the state is authorized in these paternity proceedings to "take direct civil action, including actions to establish filiation against an alleged biological parent notwithstanding the existence of a legal presumption that another person is the parent of the child." State v. Beauchamp, supra at 327.
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437 S.E.2d 53 (1993)
Fred SINGLETON, Respondent,
v.
The STATE, Petitioner.
No. 23929.
Supreme Court of South Carolina.
Heard December 8, 1992.
Decided August 30, 1993.
*54 Nancy C. McCormick, of South Carolina Protection and Advocacy System, for the Handicapped, Inc., Jacqueline D. Belton, of Mental Health Ass'n in South Carolina, J. Steedley Bogan, of South Carolina Ass'n of Head Injury Groups, and Elizabeth G. Patterson, of South Carolina Psychiatric Ass'n, Columbia, for amici curiae.
T. Travis Medlock, Atty. Gen., Donald J. Zelenka, Chief Deputy Atty. Gen., and Delbert H. Singleton, Jr., Asst. Atty. Gen., Columbia, for petitioner.
John H. Blume, of S.C. Death Penalty Resource Center, and Thomas W. Bunch, II, of Robinson, McFadden & Moore, Columbia, for respondent.
TOAL, Justice:
The State appeals from an order, issued at a post conviction relief hearing on Respondent's sanity, which vacated a death sentence and re-sentenced the Respondent to life imprisonment. We AFFIRM in part and RVERSE in part.
Facts
Respondent, Singleton, was convicted and sentenced to death for murder, burglary, larceny of a motor vehicle, and first-degree criminal sexual conduct. We affirmed both the conviction and sentence on direct appeal in State v. Singleton, 284 S.C. 388, 326 S.E.2d 153, cert. denied, 471 U.S. 1111, 105 S.Ct. 2346, 85 L.Ed.2d 863 (1985). Respondent, in August 1985, filed a petition for post conviction relief in Newberry County which *55 was denied, on May 21, 1986. Singleton appealed, and we denied certiorari and dismissed the appeal.
Singleton's execution was stayed pending the filing of certiorari to the United States Supreme Court. Failing to timely pursue the petition for certiorari, we issued an order to the Commissioner of the South Carolina Department of Corrections, on August 17, 1987, directing Singleton's execution.
Prior to the imposition of sentence, Singleton filed a petition for writ of habeas corpus in the United States District Court for the District of South Carolina, on September 14, 1987. The District Court dismissed Singleton's petition without prejudice and required his return to state court to exhaust all state claims. The United States Court of Appeals for the Fourth Circuit affirmed the dismissal in an unpublished opinion. Singleton v. McKellar, 873 F.2d 1440 (4th Cir. Apr. 3, 1989) (unpublished opinion), cert. denied, 493 U.S. 874, 110 S.Ct. 210, 107 L.Ed.2d 163 (1989).
Singleton filed a second application for post conviction relief in Newberry County, in March 1990. In this latest petition, Singleton alleged that he was not competent to be executed. The PCR court conducted a hearing on November 13, 1990 to determine the proper standard to be utilized in assessing Singleton's competency to be executed. The PCR court adopted the American Bar Association Criminal Justice Mental Health Standard (A.B.A. Standard) proposed by Singleton in an order dated November 19, 1990.
After an evidentiary hearing, in December 1990, the PCR judge issued an order holding Singleton incompetent to be executed under either the A.B.A. Standard or the standard set forth in Justice Powell's concurring opinion in Ford v. Wainwright, 477 U.S. 399, 106 S.Ct. 2595, 91 L.Ed.2d 335 (1986). The PCR court's order, dated May 8, 1991, vacated Singleton's death sentence and imposed a sentence of life imprisonment. It is from this order that the State appeals.
Law/Analysis
The State asks us to find error on two primary issues. First, the State contends that the PCR court erred in adopting the A.B.A. Standard of incompetency rather than the standard set forth in Justice Powell's concurrence in Ford v. Wainwright, supra. Second, the State contends that the PCR judge erred in vacating Singleton's sentence and imposing a life sentence as a remedy, where the effect of the decision is to judicially commute a sentence in violation of Article IV, Section 14 of the South Carolina Constitution. A third and equally critical question is inherent in both of the issues raised by the State, and that is whether the State can employ forced medication to facilitate a prisoner's competency for execution.
The Applicable Competency Standard for Execution
The pivotal issue in this case is whether the PCR court erred in adopting the A.B.A. Standard of incompetency rather than the standard set forth in Justice Powell's concurrence in Ford. The Respondent relies on the A.B.A. Standard which is set forth in the Criminal Justice Mental Health Standard 7-5.6, as:
a. Convicts who have been sentenced to death should not be executed if they are currently mentally incompetent. If it is determined that condemned convict is currently mentally incompetent, execution should be stayed.
b. A convict is incompetent to be executed if, as a result of mental illness or mental retardation, the convict cannot understand the nature of the pending proceedings, what he or she was tried for, the reason for the punishment or the nature of the punishment. A convict is also incompetent if, as a result of mental illness or retardation, the convict lacks sufficient capacity to recognize or understand any fact which might exist which would make the punishment unjust or unlawful, or lacks the ability to convey such information to counsel or the court.
Id.
This A.B.A. Standard sets forth a twopronged test when inquiring into the competency of a defendant subject to execution. The first prong can be characterized as the cognitive prong, which is defined as the ability to recognize the nature of the punishment *56 and the reason for the punishment. The second prong is characterized as the assistance prong, which is defined as the ability to assist counsel, or the court, in identifying exculpatory or mitigating information.
In Ford v. Wainwright, 477 U.S. 399, 106 S.Ct. 2595, 91 L.Ed.2d 335 (1986) (Powell, concurring), the United States Supreme Court in a plurality opinion held that the execution of an inmate who becomes incompetent or insane after conviction and sentencing is violative of the Eighth Amendment. The plurality did not, however, set forth what standard was applicable in the determination of incompetence or insanity. Justice Powell, the swing vote in the opinion, proposed such a standard when he stated in his concurrence that, "I would hold that the Eighth Amendment forbids the execution only of those who are unaware of the punishment they are about to suffer and why they are to suffer it." Id. at 422, 106 S.Ct. at 2608, 91 L.Ed.2d at 354.
Justice Powell was a voice of one, yet the standard he posited was embraced by some courts as the constitutional minimum. Johnson v. Cabana, 818 F.2d 333 (5th Cir.1981), cert. denied, 481 U.S. 1061, 107 S.Ct. 2207, 95 L.Ed.2d 861 (1987).[1] The A.B.A. Standard reflects the Powell formulation in the cognitive prong of its test. Justice Powell in his concurrence discussed the rationale behind the Eighth Amendment prohibition of executing the insane.
[T]oday as at common law, one of the death penalty's critical justifications, its retributive force, depends on the defendant's awareness of the penalties existence and purpose. Thus, it remains true that executions of the insane both impose a uniquely cruel penalty and are inconsistent with one of the chief purposes of executions generally.....
....
A number of States have more rigorous standards, but none disputes the need to require that those who are executed know the fact of their impending execution and the reason for it.
Id. 477 U.S. at 421-422, 106 S.Ct. at 2607-2608, 91 L.Ed.2d at 354.
Justice Powell then addressed the states with more rigorous standards in footnote 3 of his concurring opinion.
[a] number of States have remained faithful to Blackstone's view that a defendant cannot be executed unless he is able to assist in his own defense.... Modern Case authority is sparse, and while some older cases favor the Blackstone view, those cases largely antedate the recent expansion of both the right to counsel and the availability of federal and state collateral review.... Under these circumstances, I find no sound basis for constitutionalizing the broader definition of insanity, with its requirement that the defendant be able to assist in his own defense. States are obviously free to adopt a more expansive view of sanity in this context than the one the Eighth Amendment imposes as a constitutional minimum.
Id. at 422 n. 3, 106 S.Ct. at 2608 n. 3, 91 L.Ed.2d at 354 n. 3 [emphasis added] [citations omitted]. This "more expansive" view is in full accord with the second prong of the A.B.A. Standard; however, Justice Powell rejected it.
As we decide the appropriate standard for South Carolina, it is helpful to review the development of the "assistance" prong. There is a significant common law background for the requirement that a defendant to be able to assist in his defense, even after conviction. "And it seems agreed at this Day, that if one who has committed a capital Offence, become Non Compos ... after [a] Conviction, that he shall not be executed." 1 Hawkins, Pleas of the Crown 2 (1716). In Hawles, Remarks on the Trial of Mr. Charles Bateman, 11 HOW. St.Tr. 474 (1685), the Solicitor-General commented: *57 for nothing is more certain in Law, than that a Person who falls mad ... after judgment, he shall not be executed: tho I do not think the reason given for the Law in that Point will maintain it, which is, that the End of Punishment is the striking a Terror into others, but the execution of a Madman had not that effect; which is not true, for the Terror to the living is equal, whether the Person be mad or in his Senses.... But the true reason of the Law I think to be this, a Person of non sana Memoria, and a Lunatick during his Lunacy, is by an Act of God ... disabled to make his just Defence, there may be Circumstances lying in his private Knowledg, which would prove his Innocency, of which he can have no advantage, because not known to the Persons who shall take upon them his Defence.
Id. at 476.
Sir Matthew Hale reasoned that "if after judgment he becomes non sane memory ... his execution shall be spared; for were he of sound memory, he might allege somewhat in stay of judgment of execution." 1 M. Hale, The History of the Pleas of the Crown 34-35 (1736). The greatest common law scholar, Sir William Blackstone, explained that "the law knows not but he might have offered some reason, if in his senses, to have stayed these respective proceedings." 4 W. Blackstone, Commentaries 389 (1769).
The Law Reporter for the A.B.A. Standards for Criminal Justice relating to Competency and Capital Punishment, Professor James Ellis, testified before the trial court concerning the derivation of the second or "assistance" prong. In his testimony, Professor Ellis explained that the origin of the "assistance" prong language was Justice Frankfurter's dissent in Solesbee v. Balkcom, 339 U.S. 9, 70 S.Ct. 457, 94 L.Ed. 604 (1950). In his dissent in Solesbee, Justice Frankfurter made a detailed analysis of the applicable common law, and concluded that:
[h]e should not be denied the opportunity to inform the mind of a tribunalbe it a Governor, a board or a judgethat has to decide between life and death, not as a matter of grace but on the basis of law. For if he be insane his life cannot be forfeit except in violation of the law of the land.
Id. at 24, 70 S.Ct. at 464, 94 L.Ed. at 613.
Other states have adopted similar views[2] where, in order to execute a defendant, he must have the intelligence to convey any knowledge of a fact which would make his punishment unjust or unlawful to his attorney. In re Smith, 25 N.M 48, 176 P. 819 (1918); see People v. Geary, 298 Ill. 236, 131 N.E. 652 (1921) (using a test for sanity identical to the current A.B.A. Standard); In re Grammer, 104 Neb. 744, 178 N.W. 624 (1920) (using the same assistance prong as that advocated in the A.B.A. Standard); see also 24 C.J.S. Crim. Law § 1619 (1961); 24 C.J.S. Crim. Law § 1547 (1989).
The "assistance" prong is not just a creature of early common law cases. As recently as 1990, the Supreme Court of Washington was faced with an almost identical issue. In State v. Harris, 114 Wash.2d 419, 789 P.2d 60 (1990), the Court, using a common law analysis, adopted a test very similar to the A.B.A. Standard. The "assistance" prong adopted in Washington differs only slightly and defines exactly what constitutes assistance as:
[t]he defendant need not be able to `suggest a particular trial strategy', however, or to `choose among alternative defenses'.... Nor does inability to recall past events necessarily constitute incompetence. For example, many courts have held or acknowledged that amnesia does not necessarily constitute incompetence....
....
Thus, to be `able to assist' in postconviction proceedings, the defendants need not be able to think of new issues for counsel to raise, nor must they necessarily be able to recall the events surrounding the crime. What is required is that they understand they have been sentenced to death for *58 murder and be able to communicate rationally with counsel.
Id. at 429, 789 P.2d at 66.
The common law remains in full force and effect in South Carolina unless changed by clear and unambiguous legislative enactment. See State v. Carson, 274 S.C. 316, 262 S.E.2d 918 (1980), citing, Coakley v. Tidewater Const. Corp., 194 S.C. 284, 9 S.E.2d 724 (1940); Nuckolls v. Great Atl. & Pac. Tea Co., 192 S.C. 156, 5 S.E.2d 862 (1939); see also State v. Charleston Bridge Co., 113 S.C. 116, 101 S.E. 657 (1919). The General Assembly has not addressed the level of competency required for execution, nor has there been any legislation concerning the test for incompetency in the execution context. Absent such legislation, the common law must apply.
The case authorities in South Carolina are sparse. In State v. Bethune, 88 S.C. 401, 71 S.E. 29 (1911), the appellant raised the issue of the assistance prong in the determination of competency. This Court never reached the issue because the defendant would not have prevailed under the more stringent standard which was actually applied. Id. In State v. Middleton, 295 S.C. 318, 368 S.E.2d 457 (1988), the defendant was not incompetent under any standard applied, and we were not asked to address the assistance prong issue. In Middleton, not only was it clear that the defendant appreciated the gravity of the crime and punishment, but it was equally clear that he was able to make statements and be actively involved in his defense. Id.
This leaves South Carolina firmly in the arms of the English common law. In S.C.Code Ann. § 14-1-50 (1986), the General Assembly adopted the common law of England, where it was not altered by the code or inconsistent with the constitution or laws of the state. This codification of the English Common Law should not be construed as limiting the Court from adapting this judgemade law. The codification of judge-made law does not transform it into a pure statutory creature. It has always been the purview of a court to change the common law; however, on these issues, there is little need. The correct standard, which is firmly rooted in the English and American common law, is the two-prong analysis adopted most recently by the Washington Supreme Court in Harris.
The A.B.A. Standard generally reflects this test, but is not tempered with the rational communication element for the assistance prong, as announced in Harris. We, therefore, must adopt a slightly modified standard in South Carolina which satisfies the mandates of federal due process, the common law, and the South Carolina Constitution. By so doing, we announce the appropriate test in South Carolina as a two-prong analysis. The first prong is the cognitive prong which can be defined as: whether a convicted defendant can understand the nature of the proceedings, what he or she was tried for, the reason for the punishment, or the nature of the punishment. The second prong is the assistance prong which can be defined as: whether the convicted defendant possesses sufficient capacity or ability to rationally communicate with counsel.
When this test is applied to the facts, it becomes obvious that Singleton is incapable of meeting even a modicum of competency. The record contains a wealth of evidence which supports the PCR judge's finding of incompetence. Singleton is completely unaware that he is capable of dying in the electric chair. His reliance on protective "genes" and his inability to respond to his counsel's questions with anything other than a yes-no are indicative of Singleton's failure to understand either the reason or the nature of his punishment. Singleton is also incapable of communicating any information to his counsel. Based on the direct examination in the record, there can be no doubt that Singleton is incapable of rational communication. Failure of either prong of the test is sufficient to warrant a stay, and in the present case, there is ample evidence to demonstrate that Singleton can not pass either prong.
Vacation of Sentence
The State's second issue on appeal is whether the PCR judge erred in vacating Singleton's sentence and imposing a life sentence as a remedy, where the effect of the *59 decision is to judicially commute a sentence in violation of Article IV, Section 14 of the South Carolina Constitution. The first step in this analysis is to examine the order issued by the PCR court.
In his discussion of remedy, Judge Thomas L. Hughston, Jr. stated that, based on the evidence, Singleton was not likely to ever regain competence. The judge then concluded that the appropriate remedy was "to commute Mr. Singleton's death sentence to one of life imprisonment." At the outset, the judge's use of the word "commute" is disturbing, but the reader must look further in the order. In his Conclusion the judge orders:
[f]or the reasons set forth above, I conclude that applicant is incompetent to be executed. As a result of his incompetency, his sentence of death is vacated, and he is hereby sentenced to life imprisonment.
[Emphasis added].
The PCR judge vacated the sentence of death and then reimposed a new sentence. This was not done as a matter of clemency, but as a remedy which the PCR judge found was supported by the evidence in the record. The State argues that the General Assembly provided in S.C.Code Ann. § 17-25-370 (1976) that an execution must be carried out "unless stayed by order of the Supreme Court or respite or commutation of the Governor." The State posits that this statute, along with the exclusivity of the Governor's commutation powers, precludes a court sitting in post-conviction relief from "commuting" a sentence of death.
South Carolina's Uniform Post-Conviction Procedure Act, S.C.Code Ann. §§ 17-27-10 et seq. (Supp.1990), establishes a civil proceeding that enables a prisoner to challenge the legality of his detention. In S.C.Code Ann. § 17-27-20(b) (1986), the remedy available to a PCR court is:
not a substitute for nor does it affect any remedy incident to the proceedings in the trial court, or of direct review of the sentence or conviction. Except as otherwise provided in this chapter, it comprehends and takes the place of all other common law, statutory or other remedies heretofore available for challenging the validity of the conviction or sentence. It shall be used exclusively in place of them.
Id. The procedural difficulty here is that, although in the nature of PCR, the hearing was held solely to determine the competency of an inmate awaiting execution.
The State cites the cases of Gilstrap v. State, 252 S.C. 625, 168 S.E.2d 88 (1969) (assuming all allegations are true, the relief to be granted on PCR is remand), and Young v. State, 250 S.C. 476, 158 S.E.2d 764 (1968) (a void indictment did not entitle defendant to release), as limitations on the court's ability to vacate a sentence and reimpose a new sentence in PCR proceedings. Both cases, although distinguishable on the facts, offer some guidance. In Gilstrap and Young, the applicants for post-conviction relief were seeking release from incarceration as a remedy, whereas, on the present facts, there is no such request; yet in both cases, we established the parameters for the appropriate remedy on PCR. Here the granted relief appears to be beyond the scope of an appropriate remedy on PCR.
The PCR judge did not commute the sentence, but in vacating the sentence, he erred. The order of the court was not a grant as a matter of grace in the fashion of a commutation, but it does ignore several relevant considerations. The first consideration is that the judge based his order on the assumption that Singleton was hopelessly insane, and that no cure for his illness was possible. Perhaps under the scope of our current psychological knowledge, this is true; but there is always a potential for change. To carve out a remedy which ignores the ebb and flow of medical science is to create a rule which potentially could be impossible to live with in years to come. The second consideration is that the remedy employed by the PCR judge exceeds the range of options available under post conviction relief.
The court certainly has the power to vacate a sentence, and under some circumstances, the vacation of a sentence may be the only appropriate remedy. Where a defendant has been falsely tried and convicted of a crime and the true perpetrator is discovered at a later date, then a clear cut remedy *60 is to vacate the original sentence. No such circumstance exists here; and without this predicate, the vacating of the sentence is not justified.
Recognizing that competency to be executed is not a common issue raised in PCR proceedings, the available remedies still should not venture beyond those normally granted to other PCR applicants. Here the more important questions, under these unusual circumstances, are: (1) what is the correct remedy; and, (2) what procedures must be followed to implement the proper remedy.
Remedy and Procedures
Upon the issuance of an Order for Execution by this Court, the defendant or his/her guardian may apply for subsequent Post Conviction Relief on the basis of competency, pursuant to S.C.Code Ann. § 17-27-20(a)(6) (1985). At the evidentiary hearing, the applicant, through competent evidence or expert testimony, must show by a preponderance of the evidence that he or she lacks the requisite competency for execution. If the PCR court finds the applicant incompetent in accordance with the standard adopted in this opinion, then the appropriate remedy is to issue a temporary stay of execution pending a mandatory review by this Court.
Once the defendant is found incompetent and the stay of execution is affirmed by this Court, the burden necessarily shifts to the State to move for a hearing upon the defendant's return to competency. At this subsequent hearing, the State must show by a preponderance of the evidence that the defendant is competent to be executed. If the State establishes competency, then the PCR court may lift the previous stay of execution subject to the review of this Court.
Forced Medication
The last issue which must be resolved is whether the State can administer, by force, medication to treat Singleton's incompetence in preparation for execution. The leading case on this controversial issue is Washington v. Harper, 494 U.S. 210, 110 S.Ct. 1028, 108 L.Ed.2d 178 (1990). In Harper, the Court held that the Due Process clause permits forced treatment with antipsychotic drugs only where the inmate is dangerous to himself, or to others, and the treatment is in his medical interest. Id. Writing for the Court, Justice Kennedy, using a substantive due process analysis, balanced the State's legitimate penological interest of combating the danger posed by a violent mentally ill inmate, against the inmate's liberty interest of being free from the unwanted administration of antipsychotic drugs. Id.
Another U.S. Supreme Court decision on forced medication was announced in May 1992, in Riggins v. Nevada, 504 U.S. ___, 112 S.Ct. 1810, 118 L.Ed.2d 479 (1992). In Riggins, there was a forced medication of a defendant during trial. The Court held this as violative of due process without a showing that there were no less intrusive alternatives, that the medication was medically appropriate, and that it was essential for the safety of the defendant and the safety of others. Id. This decision announced a more stringent standard for a defendant at the trial stage than for an inmate in the post conviction stage; however, the majority denied that it was to the level of strict scrutiny. Id. The Court also recognized the potential medical harm which stems from the use of antipsychotic drugs. Id.
Both the Riggins and Harper decisions have established the federal due process analysis required in a forced medication case. They do not, however, answer the state constitutional question. The most recent determination by a state court on the subject is found in Louisiana v. Perry, 610 So.2d 746 (La.1992).
In Perry, the Louisiana Supreme Court found a state constitutional basis for the prohibition of forced medication on a convicted inmate. Citing the Louisiana Constitutional provisions which provide for a right to privacy, the Court specifically stated that the forced medication violated, "the right to decide what is to be done medically with one's brain and body; the right to control one's mind and thoughts; and the freedom from unwarranted physical interference with one's person." Id. at 755. The Louisiana Constitution's provision which the court relied on guarantees that, "every individual shall be secure in his `person' against `unreasonable *61 searches, seizures, or invasions of privacy.'" Id.
South Carolina has a strikingly similar constitutional provision in S.C. Const. art. I, § 10, which provides:
[t]he right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures and unreasonable invasions of privacy shall not be violated....
Id. This provision in the S.C. Constitution is no less compelling than the provision in the Louisiana Constitution. Moreover, when the provision is weighed with the due process inquiry mandated by Harper, it becomes apparent that the analysis followed by Louisiana is correct.
We hold that the South Carolina Constitutional right of privacy would be violated if the State were to sanction forced medication solely to facilitate execution. An inmate in South Carolina has a very limited privacy interest when weighed against the State's penological interest; however, the inmate must be free from unwarranted medical intrusions. Federal due process and our own South Carolina Constitution require that an inmate can only receive forced medication where the inmate is dangerous to himself or to others, and then only when it is in the inmate's best medical interest.
Another thorny issue which arises in this context flows from the medical profession's ethical standards. The Louisiana Court in Perry cited Hippocrates and the physician's oath as:
I Swear by Apollo the physician, by Aesculapius, Hygeia, and Panacea, and I take to witness all the gods, all the goddesses, to keep according to my ability and my judgment the following Oath: ... I will prescribe regimen for the good of my patients according to my ability and my judgment and never do harm to anyone. To please no one will I prescribe a deadly drug, nor give advice which may cause his death.... I will preserve the purity of my life and my art.... In every house where I come I will enter only for the good of my patients, keeping myself far from all intentional ill doing....
Id. at 752.
The American Medical Society and the American Psychiatric Associations have adopted positions in their respective ethical codes opposing participation by medical professionals in the legally-authorized execution of a prisoner. Their reasoning is the causal relationship between administering a drug which allows the inmate to be executed, and the execution itself. They opine that the administration of the drug is responsible for the inmate's ultimate death. AMA Opinion 2.06 (prohibits a physician from participating in a legally authorized execution); see generally Wallace, Incompetency for Execution, 8 J.Legal Med. 265 (1987); American Psychiatric Association, The Principles of Medical Ethics: With Annotations Especially Applicable to Psychiatry § 1(4) (1985); Capital Punishment, Proc. House Delegate AMA 85 (1980).
The positions of the medical community are, if nothing else, an indication of the unusual nature of forced medication solely to facilitate execution.[3] In Singleton's case, the problem is exacerbated because of the extent of Singleton's organic brain damage. The record on PCR shows, through expert medical testimony, that Singleton likely will not become competent through the administration of antipsychotic drugs. It is also clear that, because of the organic brain damage, Singleton will probably have a hypersensitive reaction to the medication, which in turn increases the harmful side effects. On these facts, the medical ethical position reinforces the mandates of our constitutional law, which dictate that we prohibit the State's use of antipsychotic drugs solely to facilitate an execution.
We, therefore, hold today that the twoprong test for incompetency is the law of South Carolina. We further hold that the *62 appropriate remedy for an incompetent inmate on death row is to seek a stay, following the procedures outlined in this opinion. Finally, on the issue of forced medication, we find that justice can never be served by forcing medication on an incompetent inmate for the sole purpose of getting him well enough to execute.
For these reasons, the PCR court's decision is AFFIRMED in part, REVERSED in part, and REMANDED to the PCR court for proceedings consistent with this opinion.
HARWELL, C.J., CHANDLER and FINNEY, JJ., and BRUCE LITTLEJOHN, Acting Associate Justice, concur.
NOTES
[1] Justice Brennan and Justice Marshall, the plurality in Ford, dissented from the denial of certiorari in Johnson v. Cabana. In their dissent, they explained that Ford was applicable not only to the insane, but to the incompetent. This may be a distinction without a difference. Where the appropriate test is applied, the result should be the same regardless of incompetency or insanity. A more detailed discussion of the genesis of Ford and the procedural quagmire the opinion presents is contained in Martin v. Dugger, 686 F.Supp. 1523 (S.D.Fla.1988).
[2] The adoption of the "assistance" prong in most states has been by statute; however, this has not been exclusive. The trend seems to be a codification of the common law rules.
[3] There is also ample precedent which shows the deference the medical profession receives from the courts in medical matters. See Addington v. Texas, 441 U.S. 418, 99 S.Ct. 1804, 60 L.Ed.2d 552 (1979) (deferring to psychiatric diagnosis in fashioning clear and convincing standards for involuntary commitments); Vitek v. Jones, 445 U.S. 480, 100 S.Ct. 1254, 63 L.Ed.2d 554 (1980) (where the transfer of an inmate to a mental hospital was a medical decision).
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927 F.2d 1376
59 USLW 2623
UNITED STATES of America, Plaintiff-Appellee,v.Marvin BERKOWITZ, Defendant-Appellant.
No. 89-2125.
United States Court of Appeals,Seventh Circuit.
Argued May 18, 1990.Decided March 15, 1991.
Thomas M. Durkin, William V. Gallo, Asst. U.S. Attys., Office of the U.S. Atty., Chicago, Ill., for plaintiff-appellee.
William J. Stevens, Chicago, Ill., for defendant-appellant.
Before COFFEY, RIPPLE, and MANION, Circuit Judges.
MANION, Circuit Judge.
1
A jury convicted Marvin Berkowitz of two counts of obstruction of justice, 18 U.S.C. Sec. 1503, and one count of stealing government property, 18 U.S.C. Sec. 641. Berkowitz appeals, contending that the district court erred by denying his motion to suppress evidence, that certain actions by the district court deprived him of the assistance of counsel, that when he did have counsel he provided ineffective assistance, and that the district court improperly sentenced him. 712 F.Supp. 707. We reject Berkowitz's assistance of counsel and sentencing claims, but remand for an evidentiary hearing on his motion to suppress.
I.
2
A grand jury indicted Berkowitz (along with others) in April 1988, alleging numerous counts of tax fraud, mail fraud, and obstruction of justice centering around the sales of allegedly fraudulent tax shelters (the "tax fraud case"). During its investigation of Berkowitz's activities, an investigation that began in 1983, the government accumulated almost 18,000 documents, plus other exhibits, all of which filled more than 50 boxes.
3
The government stored this evidence in a file room in a secured area of the United States Attorney's (USA) office in Chicago, and in June 1988 established a procedure to allow the defendants in the tax fraud case to inspect, examine, and photocopy those documents that were discoverable to prepare for trial. Boxes that were available for immediate inspection were marked with a "Y" or the word "Yes." However, some documents such as witness statements, internal memoranda, and work product were either not discoverable or, under Fed.R.Crim.P. 16, Northern District of Illinois Local Rule 2.04, or the Jencks Act, 18 U.S.C. Sec. 3500, were not discoverable until a later date. The government kept these documents in boxes marked with an "N" or the word "No." To gain access to the documents, a defendant or his attorney had to make an appointment with IRS Special Agent Merle Shearer. On the appointed date, either Shearer or IRS Special Agent Frank Calabrese would escort the defendant or his attorney to the file room containing the documents.
4
Of the defendants in the tax fraud case, Berkowitz showed the keenest interest in examining the government's documents and exhibits; in fact, he was the only defendant to review documents personally at the USA's office. Between July and October 1988, Berkowitz arranged to examine the documents and exhibits 17 times. According to Shearer, the first time he met with Berkowitz and his attorney he escorted them to the file room, explained the procedures to them, showed them which documents were and were not available to inspect, and showed them a photocopier they could use.
5
Berkowitz, however, turned out to be not particularly scrupulous about following the procedure established for inspecting the documents. On August 17, Calabrese escorted Berkowitz from the file room to the elevators in the reception area of the USA's office after a reviewing session. Calabrese returned to the file room to retrieve his briefcase, went back to the elevators, and found Berkowitz gone. When Calabrese returned to the secured area of the USA's offices (the elevators being in an unsecured area) he found Berkowitz standing in a stall in the men's washroom, apparently hiding. Berkowitz had no permission to return to the secured area.
6
On October 5, after a reviewing session, Calabrese escorted Berkowitz and his attorney to the first floor of the Dirksen Federal Building, in which the USA's office is located. A little later that day, Assistant United States Attorney William Cook, who was prosecuting the tax fraud case, saw Berkowitz leave the men's bathroom in the secured area of the USA's office and walk to the file room unescorted. After trying to find Calabrese, Cook confronted Berkowitz and asked where Calabrese was. Berkowitz said he was in the men's room; he was not. Cook then went back to the file room, and asked Berkowitz what he was doing. Berkowitz told Cook that he had left something in the file room, and started moving "No" boxes around. Cook told Berkowitz those boxes were off-limits, and Berkowitz left.
7
Judge Marshall, who was presiding over the tax fraud case, ordered the government to produce by November 15, 1988, a list of the evidence it intended to present at trial and the names of and any background material concerning witnesses it intended to call. To comply with this deadline, Shearer began to review the documents on October 26. At that time, Shearer discovered that about twelve of the fifty boxes of evidence were missing. An investigation revealed that none of the missing documents had been misplaced in the USA's office. One box was found on the Dirksen Building's seventh floor, near a freight elevator accessible both from a public area on the seventh floor and from the secured area of the USA's office.
8
Cook advised Berkowitz's co-defendants' attorneys that documents were missing, and gave them an inventory of the missing documents. Cook learned on November 4 that documents had been delivered to two attorneys' offices. That same day, receptionists for each of the attorneys identified Berkowitz's picture from a photographic array as the man who had delivered the documents.
9
The IRS agents and Cook put two and two together and concluded Berkowitz had stolen the missing documents. On November 7, Shearer, Calabrese, and other IRS agents set out to Berkowitz's home to arrest him. But despite the knowledge they had (knowledge that indisputably amounted to probable cause to arrest Berkowitz), and for reasons not apparent to us, the agents did not bother to obtain an arrest warrant.
10
The parties agree that when the agents arrived at the house, Shearer knocked on the door and Berkowitz opened the door to answer. At this point, their stories diverge. According to Shearer, after Berkowitz opened the front door Shearer immediately told him he was under arrest. Berkowitz did not resist or attempt to close the door; he simply asked if he could have his sports coat. An agent retrieved the coat, which was draped over a chair inside Berkowitz's house. According to Berkowitz, however, immediately after the door was opened, Shearer stepped into the house and then told Berkowitz he was under arrest. As the government presents things, the arrest preceded the agents' entry; as Berkowitz tells it, the entry preceded the arrest.
11
After arresting Berkowitz, Shearer asked him if there was anything he wanted. Berkowitz responded that his keys were in his office. Berkowitz started walking toward his office, and Shearer and Calabrese followed him. According to Shearer, he noticed on top of a desk in Berkowitz's office and in an alcove area under the desk numerous files and other documents (including original tax returns) that he recognized as some of the files and documents missing from the USA's office. Shearer said he was able to recognize those files and documents, in part, because his own handwriting was on some of the files. Shearer seized some of the records, and took Berkowitz away.
12
That day, the government obtained a warrant to search Berkowitz's home; the next day, the government obtained a warrant to search a safe in Berkowitz's house. Those searches turned up numerous documents and evidence that had been missing, including checks that had been torn up and thrown in a wastebasket. But despite those searches, the government never recovered the vast majority of missing documents.
13
A grand jury indicted Berkowitz, charging him with two counts of obstruction of justice, 18 U.S.C. Sec. 1503, and one count of stealing government property, 18 U.S.C. Sec. 641. Before trial, Berkowitz's appointed attorney, William Huyck, filed a motion to suppress the evidence found in Berkowitz's home during his arrest and the subsequent searches. Judge Bua, who presided over this case, denied the motion without holding an evidentiary hearing.
14
About two weeks before trial, Huyck asked the district court to continue the trial because he had had insufficient time before trial to review documents in the government's possession. Judge Bua denied the motion but urged the government to accommodate Huyck's request to review the documents. The next day, Huyck moved to withdraw so that Berkowitz could retain a new attorney. However, since the new attorney could not be ready to try the case on the date set for trial, the judge denied this motion also.
15
On the first day of trial, after the jury was selected and immediately before the opening statements, Berkowitz told the court that he wanted to represent himself. Judge Bua asked Berkowitz whether he was insisting on his constitutional right to represent himself. Berkowitz responded that he wanted to "waive the right to counsel, but ... not waive the right to have counsel"; in other words, he wanted to try the case himself but have standby counsel. Without inquiring any further into Berkowitz's understanding of what trying a case entailed or the disadvantages he might face by trying the case himself, the judge granted Berkowitz's requests, declaring that "based on the little I know about your background [exactly what the judge knew does not appear in the record] ... if any defendant is competent to represent himself, it is you...."
16
At trial, Berkowitz testified on his own behalf (with Huyck asking the questions), and admitted taking government documents out of the USA's office. However, this admission was necessary within the context of Berkowitz's defense, which was to deny (or at least create doubt about) his intent to deprive the government of the documents or to obstruct justice. Thus, Berkowitz testified that he did not intend to obstruct the government's prosecution of his case. He took documents only because he believed that the government was withholding evidence and treating him unfairly in the tax fraud case. He testified that he intended only to copy and return the documents, and that he did in fact return many of the documents he took after copying them. He also testified that a number of the documents found at the time of his arrest were his own, not the government's, thus casting (or attempting to cast) doubt on the government's contention about how many documents he took. Berkowitz's cross-examinations of the government's witnesses (Shearer and Cook) followed this same theme.
17
In the end, though, the jury did not accept Berkowitz's defense, and convicted him of all three counts charged. The district court sentenced Berkowitz under the sentencing guidelines to sixty-three months imprisonment, which represented an upward departure from the sentencing guideline range that would have applied based on the severity of Berkowitz's offenses and his criminal history score.
II. Assistance of Counsel
18
Berkowitz contends that we must reverse his convictions because he received ineffective assistance of counsel. According to Berkowitz, Huyck was ineffective because he failed to examine documents. Moreover, Berkowitz says that the district court effectively deprived him of counsel by denying his motion to continue the trial date and by failing to admonish him properly about the pitfalls of proceeding pro se.
19
A. Denial of Continuance.
20
We first consider Berkowitz's contention that the district judge denied him effective assistance of counsel by denying Huyck's motion to continue the trial date. According to Berkowitz, denying the continuance left Huyck without adequate time to examine the government's documents before trial. This lack of preparation, Berkowitz says, led to his decision to proceed pro se.
21
The Sixth Amendment provides that "[i]n all criminal prosecutions, the accused shall enjoy the right ... to have the Assistance of Counsel for his defense." Normally, to show that his Sixth Amendment right to counsel has been violated, a defendant must show that deficiencies in counsel's conduct (such as poor preparation) actually prejudiced him by casting doubt on the reliability of the trial's outcome. See United States v. Cronic, 466 U.S. 648, 655-59, 104 S.Ct. 2039, 2044-47, 80 L.Ed.2d 657 (1984); Strickland v. Washington, 466 U.S. 668, 691-96, 104 S.Ct. 2052, 2066-69, 80 L.Ed.2d 674 (1984). However, in some cases where the defendant has no counsel at all, or an action by the prosecution or the trial court so hamstrings counsel as to effectively prevent counsel from actually assisting the defendant, prejudice is presumed and constitutional error is present without the defendant having to show actual prejudice. See, e.g., the cases cited in Cronic, 466 U.S. at 659 n. 25, 104 S.Ct. at 2047 n. 25. Berkowitz seems to be arguing that the trial judge's denial of a continuance hampered Huyck so much (by denying him adequate time to prepare) that the denial of the continuance prevented Huyck from actually assisting Berkowitz. We disagree with this characterization.
22
Trial judges have broad discretion in scheduling trials. Consequently, "only an unreasoning and arbitrary 'insistence upon expeditiousness in the face of a justifiable request for delay' violates the right to assistance of counsel." Morris v. Slappy, 461 U.S. 1, 11-12, 103 S.Ct. 1610, 1616-17, 75 L.Ed.2d 610 (1983). The district judge in this case did not abuse his discretion in denying the continuance motion, so that denial did not deprive Berkowitz of counsel's assistance. Huyck had almost two months (from November 14, 1988, the date of his appointment as counsel, to January 3, 1989, the trial date) to prepare for trial. He had almost two weeks from the time the trial judge denied the continuance to the trial date. The government provided Huyck and Berkowitz with a detailed inventory of the documents it claimed were missing, and made the remaining documents available for inspection at any time. The issues in the case--essentially, whether Berkowitz stole and destroyed documents, and whether Berkowitz intended to obstruct justice--were not complex. In short, the trial judge acted well within his discretion in denying a continuance, and that denial, by itself, did not deprive Berkowitz of Huyck's effective assistance. Cf. United States v. Blandina, 895 F.2d 293, 297 (7th Cir.1989); United States v. Studley, 892 F.2d 518, 521-23 (7th Cir.1989).
23
B. Failure to Examine Documents.
24
This brings us to Berkowitz's second contention concerning effective assistance of counsel: that Huyck failed to provide him effective assistance because he failed to examine documents. Adequate pretrial preparation, including the examination of documents, is essential to properly represent a criminal defendant. But how much preparation is enough (like the numerous other decisions an attorney must make in the course of representation) is a matter of professional judgment. The attorney's judgment is entitled to deference; thus, for Berkowitz to show Huyck's performance was deficient, he must overcome a "strong presumption that [Huyck's] conduct [fell] within the wide range of reasonable professional assistance" and show that Huyck's pretrial preparation fell below "an objective standard of reasonableness" based on "prevailing professional norms." Strickland, 466 U.S. at 687-91, 104 S.Ct. at 2064-66; see also United States v. Weaver, 882 F.2d 1128, 1138 (7th Cir.1989). Moreover, even if Huyck's pretrial preparation was objectively deficient, Berkowitz must show that lack of preparation prejudiced him in the sense that a reasonable probability exists that "but for counsel's unprofessional errors, the result of the proceeding would have been different." Strickland, 466 U.S. at 694, 104 S.Ct. at 2068.
25
Since we presume that Huyck's performance fell within the range of reasonable professional assistance, it is Berkowitz's task to show otherwise. The only evidence Berkowitz cites concerning Huyck's preparation is a statement in a new trial motion, prepared by Huyck, that he did not seek copies of the records the government had seized. But the motion states only that Huyck did not ask for copies; it does not state that Huyck did not inspect the government exhibits. Furthermore, there are indications in the record that Huyck spent considerable time reviewing records and preparing for trial. The evidence in the record is insufficient for Berkowitz to overcome the presumption that Huyck's preparation was reasonable.
26
Even if Huyck's preparation was deficient, Berkowitz has failed to show prejudice from this deficiency. Berkowitz says that because Huyck did not review all the government's documents, he could not show that the government never possessed many of the documents that Berkowitz allegedly stole. Berkowitz also argues that without knowing what documents the government had left after Berkowitz's theft, Huyck could not challenge the government's assertion that the loss of the stolen documents adversely affected the government's ability to try the tax fraud case. Neither of these complaints are sufficient to establish prejudice. First, the evidence that Berkowitz did steal and destroy at least some documents was overwhelming: Berkowitz himself admitted taking documents, and the government recovered torn checks that had been stolen from a wastebasket in Berkowitz's home. Second, obstruction of justice requires the government to show only that a defendant "endeavor[ed] to impede a prosecution, not that he actually impeded the prosecution. See 18 U.S.C. Sec. 1503. The key question at trial was Berkowitz's intent, not whether he actually impeded the tax fraud prosecution. The fact that Berkowitz actually did destroy documents and the fact that he had government documents in his house several weeks after his last visit to the USA's office raise a strong inference that Berkowitz intended to impede the tax fraud case. Why else would he keep or destroy government documents? During trial, Berkowitz was able to identify numerous documents that the government claimed were stolen that had already been in his possession. But given the overwhelming evidence that Berkowitz did steal and destroy some documents, it is not reasonably probable that showing that some other documents the government claimed were stolen were not would have changed the jury's verdict.
27
C. Waiver of Counsel.
28
Berkowitz's third, and potentially most substantial claim concerning assistance of counsel is his claim that the district court failed to properly admonish him about the pitfalls of representing himself. In Faretta v. California, 422 U.S. 806, 95 S.Ct. 2525, 45 L.Ed.2d 562 (1975), the Supreme Court held that criminal defendants have a constitutional right to self-representation. But before permitting a defendant to exercise this right, the trial judge must ensure that the defendant has knowingly and voluntarily waived his Sixth Amendment right to counsel. To do this, the judge should advise the defendant about and try to ensure he understands the benefits associated with the right to counsel, the pitfalls of self-representation, and the fact that it is unwise for one not trained in the law to try to represent himself. See United States v. Moya-Gomez, 860 F.2d 706, 731-32 (7th Cir.1988). In United States v. Mitchell, 788 F.2d 1232, 1236 n. 3 (7th Cir.1986), we stated that the district judge should engage in
29
a thorough and extensive inquiry of [defendant] by asking [him] his age and degree of education; informing him of the crimes with which he was charged and the maximum possible sentences; determining that [he] underst[ands] the nature of the charges; ascertaining that he ha[s] copies of the Federal Rules of Evidence and the Federal Rules of Civil Procedure and instructing him to read them and to abide by them, whether read or not; and telling [him] that he would be expected to conduct himself in accordance with those rules.
30
See also Moya-Gomez, 860 F.2d at 732. An excellent guideline for the appropriate inquiry a district judge should conduct when a defendant announces he wants to represent himself, and a guideline consistent with our pronouncements in Mitchell and Moya-Gomez, is contained in 1 Bench Book for United States District Judges Sec. 1.02 (3d ed.1986), which is reproduced as an appendix to the opinion in United States v. McDowell, 814 F.2d 245, 251-52 (6th Cir.1987).
31
It is important that district judges conduct a proper inquiry of and convey the necessary information to a defendant who wishes to represent himself. When the Supreme Court in Faretta announced the right to self-representation it placed trial judges between a rock and hard place. Whether the district court honors or denies the defendant's request to represent himself, the defendant is likely to appeal if he loses at trial. The appeal will almost inevitably revolve around whether or not the defendant was fully aware of his right to counsel, the benefits he receives because of that right, and the pitfalls of going alone. By conducting a formal inquiry such as the one set out in the District Judge's Bench Book, the judge will insulate the judgment from this type of attack. The trial judge is in the best position to assess whether a defendant has knowingly and voluntarily waived counsel. This court will most likely uphold the trial judge's decision to honor or deny the defendant's request to represent himself where the judge has made the proper inquiries and conveyed the proper information, and reaches a reasoned conclusion about the defendant's understanding of his rights and the voluntariness of his decision. We realize that such inquiries take time. But the few minutes a proper Faretta inquiry normally would take is a worthwhile alternative to a new trial.
32
It is clear the district judge in this case did not conduct a proper inquiry concerning Berkowitz's waiver of counsel. The judge did not inform Berkowitz of the benefits of having counsel or the pitfalls of representing himself. While the judge did recite to Berkowitz the old saw that "a lawyer [who] represents himself ... has a fool for a client," this hardly constitutes the kind of searching inquiry we spoke of in Mitchell and Moya-Gomez. But on appeal Berkowitz makes little of this shortcoming. He raised the Faretta issue as almost an afterthought, devoting only one sentence in his brief to this issue, not even attempting to explain what a proper inquiry should entail, and citing no pertinent authority to support his "argument." His nonchalant treatment of the omission on appeal leads us to conclude he considers the inquiry of little consequence. We repeatedly have made clear that perfunctory and undeveloped arguments, and arguments that are unsupported by pertinent authority, are waived (even where those arguments raise constitutional issues). See, e.g., United States v. Brown, 899 F.2d 677, 679 n. 1 (7th Cir.1990); United States v. Petitjean, 883 F.2d 1341, 1349 (7th Cir.1989); United States v. Williams, 877 F.2d 516, 518-19 (7th Cir.1989); Fed.R.App.P. 28(a)(4).
33
Given the complete lack of inquiry by the district judge, we might be willing to forgive Berkowitz's waiver but for one point: a failure to make a proper inquiry of a defendant who asks to represent himself, by itself, is not necessarily reversible error. The real question when a criminal defendant waives counsel is not the quality of the trial judge's inquiry; rather, it is whether the defendant knowingly and voluntarily waived his right to counsel. Thus, if a formal inquiry is deficient, or even lacking, we will not reverse the defendant's conviction if the record as a whole demonstrates the defendant knowingly and voluntarily waived his right to counsel. See Moya-Gomez, 860 F.2d at 733 (citing cases).
34
Berkowitz did not argue in his opening brief how the record as a whole does not show that his waiver of counsel was not knowing and voluntary. In fact, he did not mention this necessary analysis of the record or even assert that his waiver was not knowing and voluntary. He cited no pertinent authority on the point. The government in its response brief thoroughly analyzed the record to attempt to demonstrate that Berkowitz's waiver of counsel was knowing and voluntary, and cited authority to support its legal analysis. Despite the government's argument, Berkowitz ignored the waiver of counsel issue in his reply brief and at oral argument, making no attempt to refute the government's analysis either legally or factually.
35
A party urging us to reverse a district court's judgment has an obligation to argue why we should reverse that judgment, and to cite appropriate authority to support that argument. See Brown, 899 F.2d at 679 n. 1; see also Beard v. Whitley County REMC, 840 F.2d 405, 408-09 (7th Cir.1988). "The premise of our adversarial system is that appellate courts do not sit as self-directed boards of legal inquiry and research, but essentially as arbiters of legal questions presented and argued by the parties before them." Carducci v. Regan, 714 F.2d 171, 177 (D.C.Cir.1983) (Scalia, J.). It is not this court's responsibility to research and construct the parties' arguments. Williams, 877 F.2d at 518; Beard, 840 F.2d at 408-09. Since Berkowitz has chosen not to argue that his waiver of counsel was not knowing and voluntary, even despite the government's argument that it was, he has waived the issue.
36
In any event, there are several indications in the record that Berkowitz knowingly and voluntarily waived his right to counsel. Berkowitz is a college graduate. He knew he had the right to be represented by counsel, and affirmatively asked to represent himself. He understood the distinction between having counsel and being represented by counsel; while he asked to conduct the trial himself, he insisted that Huyck stay in the case as standby counsel. Not only did Berkowitz actively participate in the discovery process of the tax fraud case, but he also had represented himself in a prior civil action, so he had prior experience with judicial procedures. Moreover, Berkowitz's trial conduct demonstrated a fairly sophisticated understanding of the judicial process. Berkowitz made several evidentiary objections that the district court sustained. He also was able to cross-examine the government's witnesses on the subtleties of the best evidence rule, Northern District of Illinois Local Rule 2.04, Fed.R.Crim.P. 16, and the Jencks Act. While the district judge should have conducted a much more searching inquiry concerning Berkowitz's waiver of counsel, the facts we have noted are enough to demonstrate that Berkowitz's waiver was knowing and voluntary, at least absent any assertion by Berkowitz otherwise.
III. Arrest and Search
37
Berkowitz next asserts that the district court should have suppressed the evidence found in his home during his warrantless arrest and during the searches of his home the following day. (According to Berkowitz, information derived from the documents seized at the time of arrest was used in the affidavit Shearer submitted to obtain a search warrant; the government does not--at least now--contest this assertion.). Berkowitz posits three reasons why the district judge should have suppressed this evidence. First, Berkowitz argues that Shearer and other IRS agents illegally arrested him in his home without a warrant. Second, Berkowitz argues that even if the arrest was lawful, IRS agents had no right to follow him into his office, where they found the documents. Finally, Berkowitz argues that even if the agents had a right to be in his office, the documents Shearer seized were not seizable under the plain view exception to the warrant requirement because it was not readily apparent that those documents were among the ones Berkowitz stole.
38
A. Arrest at Berkowitz's Home.
39
The district judge denied the suppression motion without holding an evidentiary hearing because he found that Berkowitz had "failed to identify any factual dispute relevant to the disposition of the motion." But there was, as we have seen, a factual dispute concerning Berkowitz's arrest. The government claimed (supported by an affidavit by Shearer) that the IRS agents asserted their authority to arrest before entering Berkowitz's home, and that Berkowitz did not resist their authority; only after this did the agents enter the home to complete the arrest. On the other hand, Berkowitz claimed (supported by his own affidavit) that Shearer and the other IRS agents entered his home before informing him he was under arrest.
40
Despite this factual conflict, the district court was obliged to hold a hearing only if the difference in facts is material, that is, only if the disputed fact makes a difference in the outcome. See United States v. Rollins, 862 F.2d 1282, 1291 (7th Cir.1988); Nechy v. United States, 665 F.2d 775, 776 (7th Cir.1981); see also United States v. Sophie, 900 F.2d 1064, 1071-72 (7th Cir.1990). Whether the factual conflict here is material depends on whether the arrest's legality differs under the different versions of facts. If the arrest was legal under either version of the facts, we must affirm the district court; if the arrest was illegal under either version of the facts, we must reverse. Only if the arrest was legal under the government's facts but illegal under Berkowitz's must we remand for an evidentiary hearing.
41
Generally, police may not enter a person's home to arrest that person without an arrest warrant, unless exigent circumstances exist. Payton v. New York, 445 U.S. 573, 100 S.Ct. 1371, 63 L.Ed.2d 639 (1980); see also Minnesota v. Olson, --- U.S. ----, 110 S.Ct. 1684, 1687, 109 L.Ed.2d 85 (1990); Welsh v. Wisconsin, 466 U.S. 740, 104 S.Ct. 2091, 80 L.Ed.2d 732 (1984). The Fourth Amendment protects a person's reasonable expectation of privacy in a variety of settings, but the chief evil against which the amendment is directed is the physical entry of the home. See Payton, 445 U.S. at 585, 589, 100 S.Ct. at 1379, 1381. "In [no setting] is the zone of privacy more clearly defined than when bounded by the unambiguous physical dimensions of an individual's home...." Id. at 589, 100 S.Ct. at 1381. Thus, the Court held in Payton, the Fourth Amendment draws "a firm line at the entrance to the house. Absent exigent circumstances, that threshold may not reasonably be crossed without a warrant." Id. at 590, 100 S.Ct. at 1382.
42
A few years before deciding Payton, however, the Supreme Court had held in United States v. Santana, 427 U.S. 38, 96 S.Ct. 2406, 49 L.Ed.2d 300 (1976), that police could arrest without a warrant a person standing in the open doorway to her home because the open doorway was a public place. In Santana, police saw "Mom" Santana standing in the open doorway to her home shortly after a heroin transaction they had probable cause to believe she participated in. The police pulled their van up near her home, exited the van, identified themselves, and approached Santana to arrest her. Santana fled into her home; the police followed and arrested her. Id. at 40-41, 96 S.Ct. at 2408-09.
43
The Supreme Court upheld Santana's arrest. First, the Court held Santana had no reasonable expectation of privacy standing in her open doorway: "She was not merely visible to the public but was as exposed to public view, speech, hearing, and touch as if she had been standing completely outside her house." Id. at 42, 96 S.Ct. at 2409. Thus, the police could arrest Santana in her doorway under the Court's decision in United States v. Watson, 423 U.S. 411, 96 S.Ct. 820, 46 L.Ed.2d 598 (1976), that police with probable cause to arrest may arrest a person in a public place without a warrant.
44
The police, however, were not actually able to complete Santana's arrest in her doorway; they had to enter her home to bring her under their control. The Court upheld the arrest in the home, not because the home was a public place, but because Santana could not thwart an arrest begun in a public place (her open doorway) by retreating into her house. Id. 427 U.S. at 42-43, 96 S.Ct. at 2409-10. The entry into Santana's home was justified by an exigent circumstance: the police's "hot pursuit" of a fleeing felon. See id.
45
If Berkowitz's arrest occurred as the government says it did, the arrest was legal. Courts have generally upheld arrests such as that described by Shearer in this case, where the police go to a person's home without a warrant, knock on the door, announce from outside the home the person is under arrest when he opens the door to answer, and the person acquiesces to the arrest. See, e.g., McKinney v. George, 726 F.2d 1183, 1188 (7th Cir.1984); United States v. Carrion, 809 F.2d 1120, 1128 (5th Cir.1987); United States v. Whitten, 706 F.2d 1000, 1015 (9th Cir.1983); United States v. Botero, 589 F.2d 430 (9th Cir.1978); see generally 2 Wayne R. La Fave, Search and Seizure Sec. 6.1(e), at 589-61 (2d ed. 1987). While most of these cases have justified their holdings as applications of Santana, the arrests in these cases, and the arrest here as Shearer presents it, are consistent with Payton. It is true that Berkowitz was still standing inside his home when Shearer told him he was under arrest. But Payton prohibits only a warrantless entry into the home, not a policeman's use of his voice to convey a message of arrest from outside the home. See La Fave, supra, Sec. 6.1(e) at 590. Moreover, there is nothing in Payton that prohibits a person from surrendering to police at his doorway. Id. The agents in this case (even as Shearer tells it) did enter Berkowitz's house (remaining immediately adjacent to his doorway) after Shearer told Berkowitz he was under arrest. But from Shearer's affidavit, it appears Berkowitz submitted to the agents' authority to arrest him before they entered. For reasons we will explain shortly, we do not think the agents' entry (if the facts are as Shearer states) violated any reasonable privacy expectation of Berkowitz's, and therefore did not violate Payton.
46
As Berkowitz presents the arrest, however, Shearer and the other IRS agents entered his home before announcing he was under arrest. One might argue that this should not make a difference; Berkowitz was standing at or near his doorway, and Santana says the doorway is a public place. Moreover, one might argue that a search's legality should not turn on such subtle distinctions as whether the police announce an arrest before entering a home, or wait until after entry to announce the arrest (so long as the police stay near the doorway). We find these arguments unpersuasive for several reasons.
47
Payton holds the Fourth Amendment draws a clear line at the entrance of a person's house: "Absent exigent circumstances, that threshold may not reasonably be crossed without a warrant." 445 U.S. at 590, 100 S.Ct. at 1382. Entering a person's home without a warrant to arrest him, where no exigent circumstances exist, violates this clear command. The government has not cited any "knock and arrest" cases upholding arrests where the police entered the arrestee's home before telling the person he was under arrest. The Fourth Circuit has recently held that a warrantless nonconsenual entry into a hotel room to arrest a subject who answered a knock at his door and was standing near the door when the police entered violates Payton. United States v. McCraw, 920 F.2d 224, 228-30 (4th Cir.1990). A case from this circuit also indicates that such an arrest would be illegal. In United States v. Diaz, 814 F.2d 454 (7th Cir.1987), an undercover officer was in Diaz's hotel room testing cocaine he was supposed to buy from Diaz. The officer told Diaz the cocaine was acceptable, and left the room purportedly to call his "money man." After leaving the room, the officer gave a signal to other officers stationed near the room. The first officer then went back to the room, and knocked on the door. When Diaz answered, the other officers entered the room and arrested him. See id. at 456. This court upheld the search on the basis of Diaz's original consent to the first officer to be in the hotel room. But although Diaz was at the doorway to his hotel room when the other officers entered and arrested, we held there were no exigent circumstances to justify the entry, thus indicating that absent Diaz's consent to the first officer the warrantless entry to arrest Diaz would have violated the Fourth Amendment as interpreted in Payton. See id. at 458-59.
48
That warrantless entry before arrest is not legal (and, conversely, that a slight entry after the defendant has submitted to the police is legal) can be seen from analyzing the privacy interests involved in the situation. The Fourth Amendment protects people's legitimate expectations of privacy. A person's subjective privacy expectation in any situation is legitimate, and therefore worthy of Fourth Amendment protection, if it is "one that society is prepared to recognize as reasonable." Minnesota v. Olson, 110 S.Ct. at 1687 (citation omitted).
49
As the Court noted in Payton, there is no place where a person's expectation of privacy is greater than in his own home. See Payton, 445 U.S. at 589, 100 S.Ct. at 1381. A person does not abandon this privacy interest in his home by opening his door from within to answer a knock. Answering a knock at the door is not an invitation to come in the house. We think society would recognize a person's right to choose to close his door on and exclude people he does not want within his home. This right to exclude is one of the most--if not the most--important components of a person's privacy expectation in his home.
50
When the police assert from outside the home their authority to arrest a person, they have not breached the person's privacy interest in the home. If the person recognizes and submits to that authority, the arrestee, in effect, has forfeited the privacy of his home to a certain extent. At that point, it is not unreasonable for the police to enter the home to the extent necessary to complete the arrest. A person who has submitted to the police's authority and stands waiting for the police to take him away can hardly complain when the police enter his home briefly to complete the arrest. This is why, if Shearer's version of the arrest is true, it would not have violated the Fourth Amendment for Shearer and the other agents to enter Berkowitz's house after announcing the arrest, and remain near his door, to take Berkowitz under their control.
51
It is a different matter, however, for the police to enter a person's home, without his consent, before announcing their authority to arrest. In that case, the arrestee has not forfeited his privacy interest in the home; he has not relinquished his right to close the door on the unwanted visitors. See McCraw, 920 F.2d at 229; see also McKinney v. George, 726 F.2d at 1188 (suggesting that a person answering the police's knock may retreat into his home, and that police may not then enter without a warrant to arrest him); La Fave, supra, Sec. 6.1(e) at 591. Indeed, the police have not even given him a chance to exercise that right. Payton holds that police may not enter a person's home without a warrant to arrest him; to hold it was proper for Shearer and his cohorts to enter Berkowitz's home in this case before announcing his arrest would be to sanction the very conduct that Payton holds the Fourth Amendment forbids.
52
Santana does not require a different result. As far as reasonable privacy expectations go, there is a significant difference between a person who for no reason voluntarily decides to stand in his open doorway, and a person who merely answers a knock on his door. The person who answers the knock and stays within the house is not voluntarily exposing himself "to public view, speech, hearing, and touch as if [he is] standing completely outside [his] house." Santana, 427 U.S. at 42, 96 S.Ct. at 2409. Moreover, the entry in Santana was justified by hot pursuit; Santana had just completed a heroin transaction, she voluntarily relinquished her privacy expectation in her home by exposing herself to the public in her open doorway, the police began the arrest while Santana had no reasonable privacy expectation, and there was a real possibility that delaying her arrest would result in her destroying evidence. See id. at 42-43, 96 S.Ct. at 2409-10. In this case, there was no justification for Shearer and the other agents to enter Berkowitz's home to arrest him without a warrant.
53
One might argue that to disallow the minimal entry into the home to arrest in this case could hamstring police. But Payton forbids any non-consensual warrantless entry into the home absent exigent circumstances. Payton did not draw the line one or two feet into the home; it drew the line at the home's entrance. Also, if police go to a person's home to arrest him, and have reason to believe they may have to enter the home to make the arrest, they should obtain a warrant. There was no reason in this case for Shearer and his cohorts not to get a warrant, and plenty of reason to obtain a warrant. What would have happened if Berkowitz had refused to open his door to the police? Or if another member of Berkowitz's family had answered the door, but Berkowitz refused to come to the door? The agents would have had to go back and get a warrant (after having effectively warned Berkowitz that they suspected him of stealing documents, something that would have created a real danger that Berkowitz would destroy evidence or try to flee). Obtaining a warrant in the first place would have prevented these potential problems, to say nothing of the time it would have saved at trial and on appeal litigating the legality of Berkowitz's arrest.
54
Because there is a factual dispute in this case, and because resolving that dispute is necessary to determine whether Berkowitz's arrest was legal, the district judge should have held an evidentiary hearing. Therefore, we must reverse and remand so that the judge may hold that hearing.
55
B. Plain View Seizure of Documents.
56
There are two other questions we must answer concerning Berkowitz's motion to suppress, assuming that if on remand the court determines Berkowitz's arrest was legal. Both center around whether Shearer legally seized documents from Berkowitz's home office at the time of his arrest. Since Shearer did not have a warrant to seize those documents, the seizure was proper only under the plain view exception to the warrant requirement. A warrantless seizure is justified under the plain view doctrine if the officer has a legal right to be in the place from where he sees the object subject to seizure and "a lawful right of access to the object itself," and if " 'the object's incriminating nature is immediately apparent.' " Horton v. California, --- U.S. ----, 110 S.Ct. 2301, 2308, 110 L.Ed.2d 112 (1990). The two questions we must answer (assuming the arrest to be legal) are whether Shearer had a right to be in Berkowitz's office when he discovered the documents, and whether it was "immediately apparent" to Shearer that those were government documents. (There is no dispute, assuming Shearer's presence in the office was legal, about whether Shearer had a lawful right of access to the documents he seized, since they were lying in the open in a place he had a right to be.)There is no material factual dispute about Shearer's presence in Berkowitz's office. Both parties agree that Berkowitz told the agents that he wanted to get his keys, and that Shearer followed Berkowitz into his office where his keys were. While the government asserts that Berkowitz consented to being followed and Berkowitz asserts he did not consent, this factual dispute is unimportant. In Washington v. Chrisman, 455 U.S. 1, 102 S.Ct. 812, 70 L.Ed.2d 778 (1982), the Supreme Court held that when police lawfully arrest a person, they may follow that person into his home to monitor him, and seize any contraband they find in plain view. That is exactly what occurred here. The officer's authority to monitor a suspect does not depend on the suspect's consent; a suspect under arrest has no right to wander off on his own. Thus, the district court correctly held that Shearer could legally follow Berkowitz into his office.
57
The second requirement, that an object's incriminating nature be "immediately apparent," is met where a police officer, upon seeing the object, has probable cause to believe the object is contraband or evidence of a crime. Arizona v. Hicks, 480 U.S. 321, 327, 107 S.Ct. 1149, 1153, 94 L.Ed.2d 347 (1987). In this case, Shearer stated in his affidavit he observed "numerous files" on top of the desk in Berkowitz's office and under the desk's alcove area. Shearer stated that he "immediately recognized" the files as those that had been stored in the USA's office. He knew the files were from the USA's office because, among other things, he recognized his own handwriting on some of the files. Shearer also stated that he saw some original income tax returns.
58
Shearer's affidavit is sufficient to show that it was "immediately apparent" to him the files he saw in and seized from Berkowitz's office were taken from the USA's office. Berkowitz, however, disputes several of the facts in Shearer's affidavit. The question, therefore, is whether these disputed facts are material, so that the district court should have taken evidence concerning the seizure.
59
None of the factual disputes concerning the documents' seizure is material. Berkowitz states that it would not have been immediately apparent from looking at any files on his desk that they were government files. However, Berkowitz cannot contest what would have been apparent to Shearer (who was the agent responsible for investigating the tax fraud case) just by baldly asserting what he thinks would have been apparent.
60
Berkowitz also stated that there were no papers in the alcove area under his desk. But Shearer stated he saw files in the alcove area, not papers. In any event, even if Shearer was mistaken about seeing files in the alcove area, the fact remains that Shearer did seize files from Berkowitz's office that were in plain view. Any dispute about precisely where Shearer actually found the files is not relevant to the question of whether it was immediately apparent to Shearer that the files he did find were government files.
61
Finally, Berkowitz stated that there were no original tax returns on top of his desk. However, Berkowitz does not contest that Shearer actually seized original tax returns. Even if those tax returns were in the files, they were seizable because the files themselves were seizable. Berkowitz does not dispute that Shearer's handwriting was on the files, or that there were other reasons for him to recognize the files. Thus, the fact that there may have been no original tax returns on top of the desk is not material to whether Shearer legally seized the documents he found in plain view in Berkowitz's office. Since there is no material factual dispute concerning Shearer's seizure of documents at the time of the arrest, if Berkowitz's arrest was legal, the seizure of the documents was legal.1IV. Sentencing
62
A. Offense Level Increase for Destroying Documents.
63
Since Berkowitz's conviction may still stand after the district court holds an evidentiary hearing concerning his arrest, we consider Berkowitz's challenges to his sentence. Berkowitz first argues that the district court erred by increasing his offense level for the obstruction of justice counts eight levels because he destroyed documents. Sentencing Guideline Sec. 2J1.2(b)(1) provides for an eight-level increase for obstruction of justice offenses "[i]f the defendant obstructed or attempted to obstruct justice by causing or threatening to cause physical injury to a person or property...." Berkowitz argues that Sec. 2J1.2(b)(1)'s eight-level increase applies only when property damage is used to intimidate a witness or inflict emotional distress. That is not, however, what the guideline says, and there is nothing in the commentary to Sec. 2J1.2 to support Berkowitz's argument. Section 2J1.2(b)(1) provides for an eight-level increase where the offense involves property damage; since Berkowitz destroyed government documents, that increase applies here.
64
B. Amount of Loss.
65
Berkowitz next argues that the district court erred by increasing the offense level for his theft conviction by eight levels. Guideline Sec. 2B1.1 provides a base offense level of four for theft, and then increases the offense level as the amount of loss from the theft rises. For losses between $100,001 and $200,000, Sec. 2B1.1(b)(1)(I) provides for an eight-level increase. Berkowitz argues that the government did not introduce sufficient evidence to support the district judge's finding that the government's loss from his theft amounted to more than $100,000.
66
Section 2B1.1, Application Note 2, provides that "loss" ordinarily means the market value of the property stolen. However, "[w]here the market value is difficult to ascertain or inadequate to measure harm to the victim, the court may measure loss in some other way, such as reasonable replacement cost to the victim." Id. The government estimated that the replacement cost of the documents Berkowitz stole would be more than $100,000. The government based its estimate on the effort it would take to duplicate the missing documents, including the time at least a dozen banks would have to spend duplicating documents, and the time the government would have to spend reorganizing the documents, reinterviewing witnesses, obtaining new copies of documents the witnesses had previously supplied, and recopying stolen undercover tape recordings. Time is money, and the value of the labor involved in replacing the stolen documents is part of the cost of replacing them. Moreover, time a person spends doing one thing is time that person cannot spend doing something else; therefore, opportunity costs must also be factored into the cost of replacing the documents. "[L]oss need not be determined with precision, and may be inferred from any reasonably reliable information available...." Guideline Sec. 2B1.1, Application Note 3. Given that Berkowitz produced no evidence to challenge the government's assertions about replacing the documents, those assertions were sufficient to support the trial judge's finding that the loss exceeded $100,000.
67
Berkowitz also argues that the district court in determining the amount of loss should have considered the government's failure to mitigate. This argument is meritless. Berkowitz's crime is the same whether or not the government mitigated its loss, and the government's lack of mitigation is irrelevant to Berkowitz's culpability. Besides, Application Note 2 indicates that mitigation is not required. For example, the note provides that if a defendant steals a car, the loss refers to the value of the car even if the vehicle is recovered immediately. In that case, the victim's true loss is the value of not having his car for a certain amount of time, and any other losses flowing from not having the car. In the case where the car is returned immediately, that loss is likely to be very small. Yet, loss is still measured by the car's market value. Similarly, even though the government might have been able to mitigate its loss, the loss should still be measured by the value of the documents stolen--in this case, the documents' replacement cost.
68
C. Upward Departure.
69
Berkowitz next argues that the district court erred by departing upward from criminal history category I (the category based on Berkowitz's prior criminal record) to category III. Guideline Sec. 4A1.3 provides that "if the criminal history category does not adequately reflect the seriousness of the defendant's past criminal conduct or the likelihood that the defendant will commit other crimes" the court may depart upward. As an example of the kind of information the judge may consider in deciding to depart upward, Sec. 4A1.3(d) provides that the judge may consider "whether the defendant was pending trial ... on another charge at the time of the instant offense." Section 4A1.3 then gives as an example of when a departure is warranted "the case of a defendant who ... committed the instant offense while on bail or pretrial release for another serious offense."
70
The district judge quite logically applied the straightforward language in Sec. 4A1.3 and departed upward because "Berkowitz committed the instant offenses while serious tax fraud and mail fraud charges were pending against him, and after he had been released on bond." But despite Sec. 4A1.3's straightforward language, Berkowitz argues that the departure was unwarranted because the tax fraud case and this case were so closely related that the fact he stole the documents while out on bond for the tax fraud case indicates nothing about his likelihood of committing future crimes. We disagree. Most criminal defendants do not try to impede their prosecutions by stealing and destroying government evidence. Perhaps they realize stealing and destroying evidence would be wrong. More likely they realize that attempts to impede the prosecution will only land them in bigger trouble than they are already in. But neither the fact that such action was wrong nor the fact that his attempt to impede the prosecution could have serious adverse consequences deterred Berkowitz from stealing and destroying government documents. Given this, it is reasonable to conclude that Berkowitz might be more likely than the average offender to resort to crime in the future if he thought it to be to his advantage.
71
Berkowitz attempts to make two other arguments concerning the upward departure. First, he states that since 18 U.S.C. Sec. 3147 and Guideline Sec. 2J1.7 "cover" the commission of offenses while on bond, the court may not properly depart under Sec. 4A1.3. Second, he states that the district judge did not follow a proper procedure in deciding to depart to criminal history category III. Since his argument concerning 18 U.S.C. Sec. 3147 and Guideline Sec. 2J1.7 is a perfunctory two-sentence argument that does not explain how those provisions "cover" this situation, and that cites no applicable authority, he has waived it. See United States v. Petitjean, 883 F.2d at 1349. He has also waived his procedural argument because he raised it for the first time in his reply brief. See Fed.R.App.P. 28; Seventh Circuit Rule 28(f); Reynolds v. East Dyer Development Co., 882 F.2d 1249, 1253 n. 2 (7th Cir.1989).
72
D. Failure to Depart Downward.
73
Berkowitz finally argues that the district court should have departed downward from the otherwise applicable guideline range because of a psychiatrist's testimony about Berkowitz's mental state at the time of his offense. However, we have no jurisdiction to review a district court's decision not to depart, United States v. Franz, 886 F.2d 973 (7th Cir.1989), and thus may not consider this argument.
V.
74
To sum up: We reject Berkowitz's claims that he received ineffective assistance of counsel at trial and that the trial judge deprived him of assistance of counsel. We also hold that Berkowitz's sentence was proper. However, we reverse and remand this case to the district court to hold an evidentiary hearing concerning Berkowitz's arrest. Circuit Rule 36 shall not apply on remand.
75
COFFEY, Circuit Judge, concurring in part and dissenting in part.
I. Waiver of Counsel
76
Based on the record as a whole, I believe that the defendant made a knowing and intelligent waiver of counsel. In addition, I concur with that part of the majority opinion holding that Berkowitz has waived any waiver of counsel issue in light of the fact that he chose not to properly raise the issue before this court. This court has previously stated that "[a]n issue expressly presented for resolution is waived if not developed by argument." Anderson v. Gutschenritter, 836 F.2d 346, 349 (7th Cir.1988) (citing Hunter v. Allis Chalmers, 797 F.2d 1417, 1430 (7th Cir.1986)). The dissent's statement that "[t]he panel's 'one-sentence' characterization is, in my view, inaccurate" is itself inaccurate. Berkowitz's treatment of the waiver of counsel issue in his opening brief consists of only the following:
77
"In doing so the district court did nothing to admonish Berkowitz about the benefits of having trained legal counsel and advising him of the sixth amendment rights he had by being defended by counsel. The combination of Mr. Huyck's failure to inspect all the documents and the court's lack of admonition concerning attempting to try the case himself deprived Berkowitz of his right to effective assistance of counsel."
78
With the exception of this cursory treatment of the issue in his opening brief, Berkowitz has chosen to ignore the issue entirely. "[A]n appellant is required by Rule 28(a)(4) of the Federal Rules of Appellate Procedure to present in his brief to the appellate court the issues that he desires to litigate and to support his argument on those issues with judicial authority." United States v. Brown, 899 F.2d 677 n. 1 (7th Cir.1990) (citing Zelazny v. Lyng, 853 F.2d 540, 542 n. 1 (7th Cir.1988)). Berkowitz failed to address the waiver of counsel issue in his reply brief and at oral argument in spite of the government's thorough analysis of the issue in its response brief. Therefore, I am of the opinion that Berkowitz has waived this issue. (I would assume that Berkowitz's failure to address the issue in the face of the government's thorough analysis suggests that Berkowitz himself believes the argument is without merit.)
79
Instead, the dissent developed the two-sentence statement into an argument on Berkowitz's behalf, and cast aspersions on the seasoned trial judge and two of his fellow appellate judges assigned to the panel. If the dissent really believes the waiver of counsel issue has merit and wishes to argue on behalf of Berkowitz, it should acknowledge that Berkowitz did not properly raise the issue. As an experienced former trial judge, I disagree with the dissent and write separately to underscore my belief that the defendant made a knowing and intelligent waiver of his right to counsel.
80
Our review of the question of whether a defendant's decision to proceed pro se was made knowingly and intelligently depends not only on the inquiry made by the district court, but also the totality of the circumstances:
81
"Although we stress the need for a thorough and formal inquiry as a matter of prudence and as a means of deterring unfounded claims on appeal, we shall not reverse a district court where the record as a whole demonstrates the defendant knowingly and intelligently waived his right to counsel. See Mitchell, 788 F.2d at 1235. 'A determination of whether there has been an intelligent waiver of the right to counsel must depend, in each case, upon the particular facts and circumstances surrounding that case, including the background, experience, and conduct of the accused.' Johnson [v. Zerbst ], 304 U.S. at 464, 58 S.Ct. [1019] at 1023 [82 L.Ed. 1461 (1938) ]."
82
United States v. Moya-Gomez, 860 F.2d 706, 733 (7th Cir.1988) (citations omitted) (emphasis added). The author of Moya-Gomez is now dissenting on this very same issue in the case before us, and in the process, the dissent engages in an unwarranted attack on his fellow appellate judges, accusing his brethren of failing to apply precedent "in a straightforward, principled manner" hoping thereby "that the reader will be seduced into accepting the whole as greater than the sum of its parts." What makes the dissent's harsh and unfounded criticism all the more difficult to understand is the fact that his argument on behalf of Berkowitz is without merit. It is beyond comprehension to understand why the dissent chooses to carry a feeble case for waiver of counsel to such great lengths, when in Moya-Gomez he authored the opinion upholding the waiver of counsel on facts that are troublesome and less convincing than the facts in the case before us.
83
In United States v. Moya-Gomez, supra, the defendant was accused of heading an extensive cocaine network and proceeded pro se without standby counsel after the district court placed a $40,000 cap on attorneys' fees that would not be subject to forfeiture under the continuing criminal enterprise statute. 21 U.S.C. Sec. 853(c). The defendant chose to proceed without an attorney despite the fact that he faced life imprisonment if he was convicted on all counts. Moreover, the defendant was unable to understand English and required the services of an interpreter during the proceedings. After a month-long trial, the defendant was found guilty and sentenced to 70 years imprisonment.
84
On appeal, this court (with the dissent in the case before us authoring the opinion of the court) determined that the defendant's waiver of counsel was valid, despite "the limited scope of [the district court's] inquiry." Id. at 736. The court found that several factors "weigh[ed] on the side of finding waiver." Id. First, the court cited the factor that the record established that the defendant understood the dangers and disadvantages of self-representation, citing an October 27, 1986, hearing in which Mr. Cagney, the attorney whom the defendant initially wanted to represent him, stated that he "tried to explain" to the defendant some of the pitfalls to self-representation. However, the court overlooked the significance of the following exchange between the district court and the defendant at the October 27, 1986, hearing:
85
"THE COURT: Is that what you still want to do here, [represent yourself]?
86
THE INTERPRETER (FOR THE DEFENDANT): It is my great desire that Mr. Cagney would represent me. But if your decision is no, then I will proceed on my own. I asked him if he still wants to reinforce the decision to represent himself and he says I really don't know at this point. There's confusion, he says, in my head."
87
Id. at 733 (emphasis added). Thus, based upon the record, it is far from clear that the defendant understood the dangers and disadvantages of self-representation, given his "confusion" at the time. Moreover, the defendant claimed on appeal that he was unable to understand the court-appointed interpreter.
88
A second factor the court relied on in finding a valid waiver of counsel was "the background and experience of the defendant." Id. at 736. The court cited the record as indicating that the defendant had a prior felony conviction as well as "numerous contacts with the law in connection with related offenses." Id. Thus, the court determined that the defendant was "no stranger to the criminal justice system." Id. However, it did so while explicitly acknowledging that "the district court did not specifically question [the defendant] about his background." Id.
89
The final factor the court relied on in determining that the defendant made a valid waiver of counsel was "the context of the defendant's decision to proceed pro se." Id. at 736. The court found that the defendant's decision was in response to the district court's resolution of the attorneys' fees question and thus a "tactical one." Id. However, there is evidence in the record that the defendant's decision to proceed pro se was made because he was under the misapprehension that he had to do this to preserve the forfeiture issue relating to attorneys' fees for appeal. The court stated:
90
"If [the defendant] was under this misapprehension, then clearly his waiver of counsel was not made knowingly and intelligently. We note that Mr. Cagney's statements may be interpreted as manifesting a belief that proceeding pro se was necessary to preserve the issue. However, these statements also simply may manifest the litigation tactic to bolster [Mr. Cagney's] argument on the forfeiture question. In any event, we must consider the possibility that Mr. Cagney misled [the defendant] about his rights in order to force a decision by either the district court or this court on the forfeiture question." Id. at 737 (citations omitted).
91
Nevertheless, the court found and the court of appeals approved that the defendant, who could neither speak nor understand the English language, was not "confused about his rights." Id. at 738.
92
Unlike the record in Moya-Gomez, the record in our case presents a very strong argument for a valid waiver of counsel. "The majority of courts that have considered the issue have agreed that the ultimate question is not what was said or not said to the defendant but rather whether he in fact made a knowing and informed waiver of counsel." Moya-Gomez at 733 (citations omitted). While I agree that the district court in our case did not conduct an inquiry as in-depth as it should and might have regarding the issue of whether Berkowitz's decision to proceed pro se was intelligently and knowingly made, nonetheless, the record as a whole clearly demonstrates that Berkowitz, as a college graduate with master's training and an intelligent pro se litigator well versed in the English language, clearly understood the potential problems associated with self-representation. Thus, based on the "background, experience, and conduct" of Berkowitz, I am convinced that he made a knowing and informed waiver of counsel. Moya-Gomez, at 733.
93
As an example, the initial exchange at trial between Berkowitz and the trial judge regarding his decision to proceed pro se reveals that Berkowitz understood the difference between self-representation and having standby counsel:
94
"MR. HUYCK (STANDBY COUNSEL):EL): Mr. Berkowitz has a request he would like to make, Judge.
95
MR. BERKOWITZ: Your Honor, I would like henceforth to represent myself but retain counsel.
96
THE COURT: Well, you have an absolute constitutional right to represent yourself pro se, obviously. Do I understand that you are insisting on your constitutional right to represent yourself?
97
MR. BERKOWITZ: I would like to make a distinction between the right to be represented by counsel and the right to have counsel. I would like to represent myself, and in that regard I waive the right to be represented by counsel, but I do not waive the right to have counsel.
98
THE COURT: To have standby counsel, is that correct?
99
MR. BERKOWITZ: Yes.
100
THE COURT: Does the government have an objection?
101
MR. HELWIG (ASST. U.S. ATTORNEY): Mr. Huyck would like to be standby counsel?
102
THE COURT: Apparently. Would he be making the opening statements?
103
MR. BERKOWITZ: Yes.
104
THE COURT: And the closing statements?
105
MR. BERKOWITZ: Yes.
106
MR. HELWIG: The only problem is when he is going to testify, we will have an opportunity at cross-examination, obviously?
107
THE COURT: Obviously.
108
MR. HELWIG: He would be testifying through his examination of witnesses?
109
THE COURT: You are not going to say something in your opening statement or your closing statement that you don't intend to prove through credible evidence, is that correct?
110
MR. BERKOWITZ: That's correct.
111
THE COURT: Fine, by all means. And I find, based on the little I know about your background, that if any pro se defendant is competent to represent himself, it is you, Mr. Berkowitz, and I have no problem with it at all, provided that, as you request, Mr. Huyck stand by as standby counsel. Very well.
112
MR. BERKOWITZ: Thank you."
113
(Emphasis added).
114
On the second day of the trial, the trial judge again addressed Berkowitz's decision to proceed pro se:
115
"THE COURT:T: Have you, Mr. Berkowitz--here again, perhaps this is another good time to say it: While you do have the constitutional right, absolute constitutional right, to represent yourself, the old saying is--
116
MR. BERKOWITZ: I have heard it, your Honor.
117
THE COURT: --If a lawyer represents himself or herself, that lawyer has a fool for a client.
118
MR. BERKOWITZ: But I've only heard it applied to lawyers, your Honor.
119
THE COURT: O.K., and again, I reiterate, I think--
120
MR. BERKOWITZ: I have been consulting with counsel, though, as to the correct method of cross-examination.
121
THE COURT: Obviously I see you are making an attempt. Do you understand that the distinction between arguing to the jury that so and so and testimony under oath? (sic)
122
MR. BERKOWITZ: Yes, your Honor.
123
THE COURT: Do you understand that? You will try to work within those structures, will you?
MR. BERKOWITZ: Absolutely."1
124
(Emphasis added.)
125
Both of these dialogues between Berkowitz and the district court clearly demonstrate that Berkowitz possessed a clear understanding of the ramifications relating to his decision to proceed pro se, and that he weighed the pros and cons before making his final determination. His statement that he wanted to "waive the right to be represented by counsel but ... not waive the right to have counsel" demonstrates that Berkowitz clearly understood and wished to make use of the distinction between self-representation and having standby counsel. Also, Berkowitz stated that he was prepared to work within the "structures" set out by the court regarding the rules of evidence.
126
A review of the Berkowitz's trial conduct and questioning demonstrates most convincingly that he orchestrated and conducted his defense capably. Berkowitz made an opening statement, cross-examined government witnesses, called and examined defense witnesses and made his own closing argument. He also made a number of evidentiary objections, several of which were sustained. In my opinion, Berkowitz's trial performance would have been upheld under a Strickland analysis had he been a licensed practitioner of the bar representing a defendant in a similar case.
However, the dissent states:
127
"[T]he defendant's actual performance at trial raises great questions about whether he appreciated the magnitude of the task he had taken on. During the course of his direct and cross-examination (assisted by standby counsel), the defendant admitted that he took documents from the United States Attorney's Office without permission and retained some of them for a significant period of time. Thus, he established, as a practical matter, his own guilt for the government."
128
Yes, Berkowitz did do this, but I believe it is more accurate that we point out that the strategy of his defense was that even though he admitted taking the documents, the jury should not consider this an act of theft because he lacked the requisite intent to permanently deprive the government of possession in that he believed some of the documents were his and he only wished to make copies of others. Berkowitz during his opening statement stated:
129
"Now, there is a difference between stealing and taking. Some of those things--some of those documents were originally in my possession and, I maintain, belong to me. Some of those things perhaps I was entitled to. And some of those documents, which are originals, the government will try to show that I took from the U.S. Attorney's office. And that part is true; I did take them out of the U.S. Attorney's office. In order for an act like that, however, to be considered theft, the government must demonstrate that it was my intention to permanently deprive it of the use of those documents. In order for me to prove that it was not theft, I have to demonstrate to you that it was my intention not to deprive the government of their use but rather to make sure that they were used.... Why did I take them? Well, I took some of them because I wasn't able to copy them in the U.S. Attorney's office, and it is true that I made numerous copies of documents in the U.S. Attorney's office which the government would much rather I would not have copied or even known about."
130
It is clear that Berkowitz's trial strategy was to prove that he lacked the requisite intent to permanently deprive the government of the documents. Indeed, this was not a defense that Berkowitz pulled out of the air on the eve before his trial. At a December 22, 1988, hearing before the district court, almost two weeks before his opening statement, Berkowitz stated that "he intend[ed] to offer an extensive and comprehensive defense which goes to the heart of the issue which is the intent that is involved with these charges." This defense and his admission of taking the items from the government's possession was clearly a tactical decision as Berkowitz intended and explained. Berkowitz clearly knew what he was doing: he was caught taking documents from the government and he was not about to sit idly by while the prosecution piled up document after document he obviously purloined from their offices and files. His trial strategy, perhaps the only plausible one, was to personally try to convince the jury that he was just intent on making copies of the documents for his defense, that he had no intent to deprive the government of the documents, that he intended to return everything, that he believed the documents were his, etc. Unfortunately for Berkowitz, his theory of defense was not accepted by the jury. However, for the dissent to state that Berkowitz "established, as a practical matter, his own guilt for the government" as an explanation and/or justification for its holding that Berkowitz did not understand the proceedings is inaccurate (as fully explained above), as a defense of this nature was the only plausible one available to him.
131
In addition we must not forget that Berkowitz like the defendant in Moya-Gomez was not a first-time guest of the criminal justice system: he was convicted in 1970 of uttering a forged instrument. Furthermore, Berkowitz had on a previous occasion represented himself in a civil action in which he conducted pretrial discovery. Also, like the defendant in Moya-Gomez, Berkowitz had numerous contacts with the criminal justice system in connection with related offenses: he actively participated in the discovery process of the tax fraud case.
132
Unlike the defendant in Moya-Gomez, whom the dissent in this case found made a knowing and intelligent waiver of counsel despite the district court's failure to conduct an adequate inquiry on the issue, Berkowitz had the uninterrupted and undivided assistance of standby counsel present in the courtroom at all times and was able to conduct his defense quite capably (without the aid of an interpreter).2 In fact, Berkowitz and his standby counsel drafted and signed numerous motions on Berkowitz's behalf, including post-trial motions for a judgment of acquittal and for a new trial. The defendant in Moya-Gomez neither received help nor advice during trial from an attorney. Moya-Gomez at 738. Also, the defendant in Moya-Gomez represented himself without standby counsel in a complex one-month drug conspiracy trial; in contrast, Berkowitz's trial with standby counsel lasted a mere five days. Moreover, unlike the defendant in Moya-Gomez who received 70 years imprisonment for his offenses, Berkowitz was sentenced to only 63 months imprisonment. If the dissent found the defendant's waiver in Moya-Gomez to be knowingly and intelligently made, certainly the record in this case makes for an even more compelling argument for a valid waiver of counsel.
133
Finally, this is not a case in which a defendant of average or below average intellect bit off more than he could chew. Berkowitz's decision to proceed pro se was made by an intelligent and well educated individual. Berkowitz graduated from the University of California at Berkeley and had completed two quarters of advanced studies toward his master's in business administration. In addition, he furthered his educational pursuits through his attendance at Ner Israel Rabbinical College, located in Baltimore, Maryland.
134
"[T]he trial judge bears the 'serious and weighty responsibility ... of determining whether there is an intelligent and competent waiver by the accused.' " Moya-Gomez at 735, quoting Johnson v. Zerbst, 304 U.S. 458, 465, 58 S.Ct. 1019, 1023, 82 L.Ed. 1461 (1938). While the district court in our case did not conduct an inquiry as in-depth as it should have, the record as a whole demonstrates throughout trial that Berkowitz's waiver was both knowing and intelligent. Furthermore, the explicit finding made by the trial judge that Berkowitz was competent to represent himself should be given the same kind of deference that this court gave the trial judge in Moya-Gomez: "This explicit finding by the district court, which had the opportunity to assess by its sustained observation the demeanor of the participants, is entitled to our deference." Moya-Gomez at 739. I wish to emphasize that I do not believe that there are any particular buzz words that a trial judge need recite in order to ensure that a defendant makes a knowing and intelligent waiver of counsel. Instead, I agree with the majority opinion which states that "[t]he real question when a criminal defendant waives counsel is not the quality of the trial judge's inquiry; rather, it is whether the defendant knowingly and voluntarily waived his right to counsel."
135
I believe the record as a whole, as well as the "background, experience, and conduct" of Berkowitz, demonstrates that he made a knowing and intelligent waiver of his right to counsel. Moya-Gomez, at 733. Thus, I concur with the majority opinion in this aspect.
II. Validity of Arrest
136
I respectfully dissent from that portion of the majority opinion that would remand the case to the district court for an evidentiary hearing to determine where the officers were positioned when the arrest was made.
137
I agree with the majority and note that "the fourth amendment protects people's legitimate expectations of privacy." However, the fourth amendment should not be construed to provide protection to a defendant like Berkowitz, who upon opening the door of his home was immediately advised that he was under arrest and made no objection nor did he in any way resist or forestall the police officers' entry inside the doorway. In fact, he invited both officers into his home after being told that he would need an escort after the arrest when he requested an opportunity to enter into his house to get his wallet and keys.3
138
The Supreme Court in United States v. Watson, 423 U.S. 411, 96 S.Ct. 820, 46 L.Ed.2d 598 (1976), held that a warrantless arrest of an individual in a public place upon probable cause does not violate the fourth amendment. Shortly thereafter, the Supreme Court held that a warrantless arrest at the door of an individual's home, likewise, does not violate the fourth amendment because there is no protectable expectation of privacy in an open doorway. United States v. Santana, 427 U.S. 38, 96 S.Ct. 2406, 49 L.Ed.2d 300 (1976). Even though the defendant in Santana was standing in the doorway of her home when the officers arrived, the Court stated that "[s]he was not in an area where she had an expectation of privacy." Id. at 42, 96 S.Ct. at 2409. The Supreme Court reasoned:
139
"What a person knowingly exposes to the public, even in his own house or office, is not a subject of fourth amendment protection.... She was not merely visible to the public but was as exposed to public view, speech, hearing, and touch as if she had been standing completely outside her house.... Thus, when the police, who concededly had probable cause to do so, sought to arrest her, they merely intended to perform a function which we have approved in Watson."
140
Santana at 42, 96 S.Ct. at 2409 (citations omitted).
141
This court has upheld the validity of a doorstep arrest. McKinney v. George, 726 F.2d 1183, 1188 (7th Cir.1984). In McKinney, the defendant was arrested upon probable cause without a warrant when he opened his door in response to the officers' knock. The court noted that if the defendant had refused to surrender himself to the officers and the officers had gone inside the defendant's house and seized him, "we might have a different case." McKinney at 1188. Other courts that have ruled on the constitutionality of doorstep arrests have found no fourth amendment violation. See United States v. Mason, 661 F.2d 45 (5th Cir.1981); United States v. Botero, 589 F.2d 430 (9th Cir.1978), cert. denied, 441 U.S. 944, 99 S.Ct. 2162, 60 L.Ed.2d 1045 (1979); United States v. McCool, 526 F.Supp. 1206 (M.D.Tenn.1981); People v. Morgan, 113 Ill.App.3d 543, 69 Ill.Dec. 590, 447 N.E.2d 1025 (1983).
142
However, the majority opinion mistakenly applies the rationale of Payton v. New York, 445 U.S. 573, 100 S.Ct. 1371, 63 L.Ed.2d 639 (1980), to the facts of this case instead of applying Santana and its progeny. The officers in Payton went to the defendant's house to arrest him, and in response to the officers' knock on the door, the defendant's young son opened the door, allowing the officers to see the defendant sitting in bed. The officers then entered into the defendant's house and arrested him, and the man's home was no longer his castle. The Supreme Court held that the arrest was unconstitutional because the fourth amendment prohibits entry into an individual's home to make an arrest without a warrant absent exigent circumstances. Payton at 590, 100 S.Ct. at 1382. Thus, Payton is not applicable to this case because the officers did not enter into Berkowitz's house to make the arrest. Rather, the arrest occurred outside the house in the doorway; and under Santana a doorway is considered a public place. Unlike the defendant in Payton (where the door was answered by a young child incapable of giving consent), Berkowitz himself answered the door. Furthermore, Berkowitz does not allege that the IRS agents misrepresented themselves or that they were guilty of using either force or deception to compel him to open the door and submit to the arrest. Instead, Berkowitz's action in opening the door was completely voluntary. See United States v. Morgan, 743 F.2d 1158 (6th Cir.1984), cert. denied, 471 U.S. 1061, 105 S.Ct. 2126, 85 L.Ed.2d 490 (1985), where a sheriff's use of spotlights and a bullhorn in compelling the defendant to appear at his mother's front door rendered the arrest invalid; see also United States v. Johnson, 626 F.2d 753 (9th Cir.1980), aff'd 457 U.S. 537, 102 S.Ct. 2579, 73 L.Ed.2d 202 (1982), where agents' misrepresentations of their identities violated the defendant's fourth amendment right because the misrepresentations induced the defendant to open the door. Upon opening the door, Berkowitz was immediately advised he was under arrest. At this time, Berkowitz could have objected or refused to surrender himself and shut the door, thereby retaining his fourth amendment privacy interest and forcing the agents to secure a search warrant. However, he chose not to do so. Instead, Berkowitz's actions are tantamount to a voluntary arrest.
143
The majority's concern with whether the arrest proceeded the police officers' entry into the area immediately inside the doorway or whether the entry preceded the arrest needlessly obfuscates the fact that Berkowitz was arrested in his doorway, and under Santana, a warrantless arrest at the doorway of an individual's home does not violate the fourth amendment. Therefore, even if I were to believe Berkowitz's account of the incident, which I do not,4 the arrest would still be a valid one under the fourth amendment. Accordingly, I respectfully dissent.
144
RIPPLE, Circuit Judge, dissenting.
145
I respectfully dissent from that portion of the panel majority opinion that excuses the failure of the district court to comply with the mandate of Faretta v. California, 422 U.S. 806, 95 S.Ct. 2525, 45 L.Ed.2d 562 (1975), that a criminal defendant "should be made aware of the dangers and disadvantages of self-representation, so that the record will establish that 'he knows what he is doing and his choice is made with eyes open.' " Id. at 835, 95 S.Ct. at 2541 (quoting Adams v. United States ex rel. McCann, 317 U.S. 269, 279, 63 S.Ct. 236, 242, 87 L.Ed. 268 (1942)).
146
This issue turns on two irrefutable propositions:
147
1. The Supreme Court of the United States has held that it is the duty of the trial judge to ensure that a waiver of the right to counsel be a knowing and intelligent one. Emphasizing the mandate of Faretta, the Court has remarked recently:
148
[W]e have imposed the most rigorous restrictions on the information that must be conveyed to a defendant, and the procedures that must be observed, before permitting him to waive his right to counsel at trial.
149
Patterson v. Illinois, 487 U.S. 285, 298, 108 S.Ct. 2389, 2397, 101 L.Ed.2d 261 (1988).
150
2. As an intermediate appellate court in the federal system, it is our duty to apply that precedent in a straightforward, principled manner. Today, the panel majority evades this responsibility by suggesting two justifications. It is important to note that they are alternate justifications--proffered apparently in the hope that the reader will be seduced into accepting the whole as greater than the sum of its parts.
151
First, the majority suggests that we ought to ignore the Faretta argument as underdeveloped and therefore waived. It is true that we have employed this ground in the context of a direct criminal appeal. However, when a fundamental right is at stake, it ought to be invoked with great prudence and circumspection. Indeed, the Supreme Court's explicit mandate in Faretta ought to counsel particular care. The panel's "one sentence" characterization is, in my view, inaccurate. Such a characterization ignores the reality that the Faretta argument is made as part of a broader submission that the appellant was denied his right to counsel. Certainly, the appellant sufficiently oriented the court and the government to this contention. Indeed, the government extensively and candidly presented the matter to the court both in its briefs and at oral argument. When an error is as egregious as the one made by the trial judge, it does not take a book-length brief to point it out.
152
Second, apparently realizing that its waiver argument will be received skeptically by bench and bar, the panel majority suggests that the error, while egregious, is not reversible because the record, read as a whole, establishes a knowing and intelligent waiver. To support this suggestion, the panel majority distorts the precedent of this court and ignores important facts that are of record.
153
My brothers are quite correct in noting that, if a formal inquiry is deficient, we shall not reverse automatically. That principle was set forth and discussed extensively by the court in United States v. Moya-Gomez, 860 F.2d 706 (7th Cir.1988) (Ripple, J.). In that case, there was a formal inquiry, albeit a deficient one. Id. at 734. Moreover, there was extensive evidence that the defendant in that case fully understood the pitfalls of self-representation and the advantages of having counsel. See id. at 733-37. Indeed, the record made clear that the position taken by the defendant was a tactical one. Id. at 737.
154
By contrast, not only was there no formal inquiry here, but the district court affirmatively stated on the record that it knew little about the capacity of the defendant to proceed pro se:
155
The Court: Fine, by all means. And I find, based on the little I know about your background, that if any pro se defendant is competent to represent himself, it is you, Mr. Berkowitz, and I have no problem with it at all, provided that, as you request, Mr. Huyck stand by as standby counsel.
156
Tr. at 3 (emphasis supplied).
157
The ability of the defendant to handle his own representation, assessed with the benefit of hindsight from the record, is an appropriate factor for an appellate court to consider in assessing whether a waiver of counsel was knowing and intelligent. See Moya-Gomez, 860 F.2d at 736. Such information is at least somewhat relevant and probative with respect to the defendant's background and intelligence. We must not forget, however, that the fundamental issue is not whether the defendant was able to hold his head above water in the trial arena, but whether he understood the important right he was sacrificing. In any event, here, the defendant's actual performance at trial raises great questions about whether he appreciated the magnitude of the task he had taken on. During the course of his direct and cross-examination (assisted by standby counsel), the defendant admitted that he took documents from the United States Attorney's Office without permission and retained some of them for a significant period of time. Thus, he established, as a practical matter, his own guilt for the government.
158
The mandate of the Supreme Court is clear. The doctrines of stare decisis and precedent impose on us a duty to apply this mandate. While the cost of retrial is a great one from both a financial and social perspective, the cost imposed on the judicial system is even greater if we fail to require what the law requires of us. Accordingly, I respectfully dissent.1
1
If Berkowitz's arrest was not legal, it follows that Shearer had no right to follow Berkowitz into his office, and we could not uphold the seizure of the documents on the basis that Chrisman allowed Shearer to be in the office where he saw the documents in plain view. However, nothing in this opinion prevents the government from arguing any other theory to uphold the seizure (e.g., inevitable discovery) if the district court finds Berkowitz's arrest illegal. We express no view about whether any other theory the government might argue would be successful
1
This exchange reveals that Berkowitz interrupted the trial court as the court was attempting to inform Berkowitz of the dangers of self-representation. While the "trial judge need not give a hypothetical lecture on criminal law," he should at least be given a chance to address the defendant free of interruptions (no matter how witty and intelligent) on the ramifications of the defendant's decision to proceed pro se. Moya-Gomez at 732 (citations omitted). One factor courts consider in determining whether there has been a valid waiver is whether the defendant was attempting to delay or manipulate the proceedings. "Evidence of manipulation or intentional delay implies a greater understanding of the proceedings and an understanding of the risks and complexities of a criminal trial." Moya-Gomez at 737, quoting McQueen v. Blackburn, 755 F.2d 1174, 1178 (5th Cir.) cert. denied, 474 U.S. 852, 106 S.Ct. 152, 88 L.Ed.2d 125 (1985). Given the intelligence and general knowledge and experience of the defendant, this interruption of the trial court might very well have been an attempt to preserve the waiver of counsel issue on appeal
2
The defendant in Moya-Gomez argued on appeal that his decision to represent himself was not a voluntary one because of the district court's fee decision. This court stated that "[a] voluntary decision to waive counsel is not necessarily one that is entirely unconstrained." Moya-Gomez at 739. In finding that the defendant's decision was voluntary, the court noted the fact that "[a] criminal defendant may be asked to choose between waiver and another course of action as long as the choice presented to him is not constitutionally offensive." Id. Unlike the defendant in Moya-Gomez, Berkowitz received exactly what he wanted--pro se representation along with a standby counsel
3
Berkowitz does not challenge the fact that the officers had probable cause to arrest him
4
I have serious doubts as to Berkowitz's credibility on this issue given that he has already admitted to stealing and destroying government evidence while fraud and mail fraud charges were pending against him. Moreover, Berkowitz's criminal history indicates a predisposition for being less than truthful (he was convicted in 1970 for uttering a forged instrument in Indiana). Finally, the district court at sentencing increased Berkowitz's offense level by two because it found that "Berkowitz impeded the administration of justice by committing perjury at his trial."
1
Judge Coffey has filed a separate opinion that expresses disagreement with the views set forth here. The ad hominem argumentation in that opinion demonstrates, far better than anything more that could be written here, the deficiencies of his criticism
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316 S.W.3d 431 (2010)
Richard HOWARD, Appellant,
v.
David TURNBULL, Nancy Turnbull and Turnbull Investments, LLC, Respondents.
No. WD 70989.
Missouri Court of Appeals, Western District.
May 4, 2010.
Application for Transfer to Supreme Court Denied June 29, 2010.
Application for Transfer Denied August 31, 2010.
*433 James C. Wirken, Kansas City, MO, for Appellant.
Allan E. Coon, Frank W. Lipsman, and Kevin D. Wait Olathe, KS, for Appellant.
Before Division I: KAREN KING MITCHELL, Presiding Judge, and LISA WHITE HARDWICK and CYNTHIA L. MARTIN, Judges.
KAREN KING MITCHELL, Presiding Judge.
Appellant Richard Howard sued Dave Turnbull, Nancy Turnbull, and Turnbull Investments, LLC ("Turnbull Investments") (collectively, "Respondents" or "defendants") for unjust enrichment. On February 20, 2009, the Circuit Court of Jackson County, the Honorable Justine E. Del Muro presiding, held a bench trial on Howard's claim. On March 31, 2009, the circuit court entered judgment for the defendants. We affirm.
Factual and Procedural Background[1]
This is an unjust enrichment case. Appellant Richard Howard's claim concerns property that he pledged to secure a line *434 of credit made available to Ganin Homes, LLC ("Ganin Homes"). Ganin Homes was formed in 2002 as a limited liability company whose purpose was real estate development. Ganin Homes was owned by Sabeam LLC and Turnbull Investments. Turnbull Investments, in turn, was owned by Dave Turnbull and Nancy Turnbull. Sabeam LLC was owned by Greg Howard, Richard Howard's brother.
On August 26, 2002, Ganin Homes apparently received a loan of $79,000 from the Bank of Blue Valley ("the Bank"), and the loan was apparently secured by (1) a promissory note, executed by Ganin Homes, for the principal amount of $79,000,[2] and (2) the personal guarantees of Dave Turnbull, Nancy Turnbull, Greg Howard, Greg Howard's trust, and Sabeam LLC.[3] The next day, August 27, 2002, Ganin Homes executed a second promissory note to the Bank, in the principal amount of $200,000, evidencing a line of credit that the Bank extended to Ganin Homes. The August 27, 2002 promissory note was secured by a deed of trust on property owned by Richard Howard and JoAnn Howard ("Howard Deed of Trust"). The Howard Deed of Trust secured future advances against the line of credit to Ganin Homes up to a maximum principal amount of $150,000. The August 27, 2002 promissory note was also secured by a deed of trust on property owned by Dave Turnbull and Nancy Turnbull ("Turnbull Deed of Trust"). The Turnbull Deed of Trust secured future advances against the line of credit to Ganin Homes up to a maximum principal amount of $50,000.
Appellant contends, and the Respondents apparently do not dispute, that the August 26, 2002 personal guarantees of Dave Turnbull and Nancy Turnbull ("Turnbull guarantees") were continuing and unlimited, which would mean that they secured all indebtedness of Ganin Homes to the Bank "now existing or hereinafter incurred or created," including the $200,000 line of credit evidenced by the August 27, 2002 promissory note, despite the fact that the August 27, 2002 promissory note does not state that the line of credit was secured by the pre-existing Turnbull guarantees.
In exchange for granting the Howard Deed of Trust to the Bank, Richard Howard and his wife received from Ganin Homes a resolution ("Resolution"), dated September 11, 2002, that provided as follows:
RESOLVED: Assets committed to secure a line of credit for Ganin Homes, LLC by Dick & JoAnn Howard in the amount of $150,000 and Dave and Nancy Turnbull in the amount of $50,000 will be treated in the following manner:
1.) 5% annual interest will be paid to each party on 100% of the asset committed regardless of whether the line *435 of credit is ever accessed or not for the term of commitment.
2.) Interest payments will be made at 6-month intervals beginning with the first payment on Feb. 28, 2003.
3.) In the event that the line of credit is accessed for operating costs associated with Ganin Homes, all the other assets of Ganin Homes immediately become attached for the same amount to insure payment of the line of credit and release of the pledged asset.
4.) In the event that something unforeseen occurs and Ganin Homes does not continue operating, it is agreed by all the partners of Ganin Homes that sufficient assets of Ganin Homes necessary to clear any claim on Dick and JoAnn Howard's property will be liquidated and the proceeds applied towards the secured line of credit. The partners of Ganin Homes will then take whatever action necessary to release Dick and JoAnn Howard's asset immediately from the line of credit.
5.) The assets will be used to secure the line of credit for a period not to exceed 18 months at which time the line of credit will be retired and all assets will be released.
The Resolution was signed by Greg Howard in his capacity as managing member of Ganin Homes. However, Greg Howard had no authority to speak or act for the Respondents in their individual capacities. In fact, the Turnbulls specifically refused to personally guarantee Howard's pledge of collateral evidenced by the Howard Deed of Trust.
The line of credit was not retired within eighteen months. Pursuant to the terms of the Resolution, Ganin Homes made interest payments to Richard Howard, totaling $11,500.
Sometime in 2005, Ganin Homes defaulted on its indebtedness to the Bank. The Bank threatened to exercise its rights under the Howard Deed of Trust and the Turnbull Deed of Trust, which included foreclosure. To avoid foreclosure of his property, Richard Howard paid the Bank $150,000 in exchange for a release of the Howard Deed of Trust. Likewise, the Turnbulls paid the Bank $50,000 in exchange for a release of the Turnbull Deed of Trust. In return, the Bank cancelled the August 27, 2002 promissory note. However, at the time of trial, Ganin Homes remained indebted to the Bank for a principal amount of $387,517.50.
Greg Howard abandoned any managerial role in Ganin Homes in 2005, and he has contributed nothing to pay down the company's debt. By contrast, Dave and Nancy Turnbull are still operating Ganin Homes in an effort to liquidate its assets and pay its debts. In addition, the Turnbulls paid, from their own funds, the following on behalf of Ganin Homes: $42,667 in interest payments, $14,267 to clear liens from Ganin Homes properties, and $82,116 in various other expenses.
Richard Howard sued the Respondents for unjust enrichment. Howard argued that, because the Turnbull guarantees were continuing and unlimited, they were responsible for the $200,000 line of credit obtained on August 27, 2002, including the $150,000 secured by the Howard Deed of Trust, and thus the Respondents were unjustly enriched in that their debt to the Bank was decreased by $150,000 when Howard paid the Bank $150,000 in exchange for a release of the Howard Deed of Trust. On February 20, 2009, the circuit court held a bench trial on Howard's claim. On March 31, 2009, the circuit court entered judgment for the Respondents, finding that the evidence did not *436 support a finding of at least two of the three elements required to support awarding a remedy based on the doctrine of unjust enrichment. First, the benefit was not conferred by the plaintiff on the defendants because the benefit was conferred directly upon Ganin Homes, not the defendants. Second, even if a benefit had been conferred on the defendants, the acceptance and retention of the benefit by them would not render the retention inequitable because Howard pledged his property to the Bank "voluntarily, deliberately, and without complaint" and received "precisely what [he] bargained for." This appeal follows.
Standard of Review
In a court-tried case, we will affirm the circuit court's judgment unless there is no substantial evidence to support it, it misstates or misapplies the law, or it goes against the weight of the evidence. Conseco Fin. Servicing Corp. v. Mo. Dep't of Revenue, 98 S.W.3d 540, 542 (Mo. banc 2003) (citing Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976)). "Appellate courts should exercise the power to set aside a decree or judgment on the ground that it is `against the weight of the evidence' with caution and with a firm belief that the decree or judgment is wrong." Murphy, 536 S.W.2d at 32.
Legal Analysis
Howard lists five points on appeal, but he concedes in his reply brief that they can be consolidated into a single point. Howard argues that the trial court erred in entering judgment for the Respondents because he established the necessary elements of his unjust enrichment claim and because no other circumstances apply that would prevent him from recovering under an unjust enrichment theory. We disagree.
To establish the elements of an unjust enrichment claim, the plaintiff must prove that (1) he conferred a benefit on the defendant; (2) the defendant appreciated the benefit; and (3) the defendant accepted and retained the benefit under inequitable and/or unjust circumstances. Hertz Corp. v. Raks Hospitality, Inc., 196 S.W.3d 536, 543 (Mo.App. E.D.2006); Graves v. Berkowitz, 15 S.W.3d 59, 61 (Mo.App. W.D.2000). Even if a benefit is "conferred" and "appreciated," if no injustice results from the defendant's retention of the benefit, then no cause of action for unjust enrichment will lie. White v. Pruiett, 39 S.W.3d 857, 863 (Mo.App. W.D. 2001). Unjust retention of benefits only occurs when the benefits were "conferred (a) in misreliance[4] on a right or duty; or (b) through dutiful intervention in another's affairs; or (c) under constraint." Graves, 15 S.W.3d at 62 (quoting Rolla Lumber Co. v. Evans, 482 S.W.2d 519, 520 (Mo.App.1972) (internal quotation marks omitted).
In addition, "[t]here can be no unjust enrichment if the parties receive what they intended to obtain." Am. Standard Ins. Co. of Wisconsin v. Bracht, 103 S.W.3d 281, 293 (Mo.App. S.D.2003). If the plaintiff has entered into an express contract for the very subject matter for which he seeks recovery, unjust enrichment does not apply, for the plaintiff's rights are limited to the express terms of the contract. Farmers New World Life Ins. Co. v. Jolley, 747 S.W.2d 704, 707-08 (Mo.App. W.D.1988); 66 Am.Jur. 2D Restitution and Implied Contracts § 24 (1998). *437 Further, a voluntary payment, made under a mistake of law but not fact, cannot be recovered in an unjust enrichment claim. Am. Motorists Ins. Co. v. Shrock, 447 S.W.2d 809, 811 (Mo.App.1969).
1. No benefit to the Respondents
The trial court found that the Howards conferred a benefit on Ganin Homes, not the Respondents. We agree.
For the purposes of unjust enrichment, the owners of a limited liability company do not receive a benefit when a third party pledges collateral[5] to secure a debt incurred by the company. Beeler v. Martin, 306 S.W.3d 108, 112-13 (Mo.App. W.D. 2010). In such cases, the benefit flows to the limited liability company itself, not to the owners of the company.[6]Id.; see also JB Contracting, Inc. v. Bierman, 147 S.W.3d 814, 820 (Mo.App. S.D.2004) (holding that, for the purposes of plaintiff's unjust enrichment claim, the benefit of improvements to property owned by a limited liability company did not flow to the defendant, who owned the company).
Beeler is directly on point. There, the parents of one of the owners of a limited liability company pledged their $46,000 certificate of deposit as collateral for a loan made to the company. 306 S.W.3d at 109-10. The owners of the company guaranteed the loan in their individual capacities. Id. at 109-10. The company defaulted, the creditor bank seized the certificate of deposit, and the parents sued the owners of the company for indemnity and unjust enrichment, seeking to recover the entire $46,000. Id. at 110. The trial court found that the owners had been unjustly enriched only to the extent they disbursed company assets to themselves that were worth more than the company's liabilities.[7]Id. at 112. However, with respect to the remainder of the $46,000, the trial court found that the individual owners had not been unjustly enriched. Id. at 112. We affirmed, holding that, in pledging the certificate of deposit as collateral for the loan to their son's company, the parents had benefitted the borrower, i.e., the company, not the owners of the company, even though the owners guaranteed the loan in their individual capacities. Id. at 112-13. To the extent the company's assets (in excess of its liabilities) were in the defendants' hands, the parents could recover; however, the individual owners were not otherwise personally benefitted by the pledge, and therefore no further recovery could be had from them by way of an unjust enrichment claim. Id. at 112-13.
It is true that, if owners of a limited liability company have personally guaranteed the company's debt, and if the plaintiff has paid a portion of the company's debt, a cause of action may or may not lie against the owners for contribution *438 among co-sureties, depending on whether the plaintiff unofficiously paid more than his or her proportionate share of a jointly owed debt. § 433.110; Beeler, 306 S.W.3d at 112-13 n. 5; RESTATEMENT OF RESTITUTION, § 84 (1937). It is also true that, if one of two secondary obligors occupies the position of a sub-surety to the other's position of principal surety, reimbursement may be had, under certain circumstances, from the latter when the former discharges the obligation. RESTATEMENT (THIRD) OF SURETYSHIP & GUARANTEE, §§ 53, 59-60 (1996).[8] However, a circuit court does not err, when, as here, it declines to advocate for the plaintiff by treating his unjust enrichment claim as one for contribution or subsuretyship. See Beeler, 306 S.W.3d at 111-12 n. 4 (holding that the trial court did not err in refusing to treat plaintiff's claim for indemnity as one for contribution).
Thus, the trial court did not err in finding that, for the purposes of Howard's unjust enrichment claim, the Respondents did not directly benefit by Howard's execution of the Howard Deed of Trust as collateral for the loan made to Ganin Homes. Id.
2. Any enrichment was not unjust
The trial court also found that, even if Howard had conferred a benefit on the Respondents, Howard could not recover because any benefit was conferred "voluntarily, deliberately, and without complaint" and because Howard received "precisely what he bargained for." As such, the court found that the Respondents were not unjustly enriched. We agree.
A venture voluntarily entered into, with known risks and with the expectation of a profit, cannot be compensated for via a claim for unjust enrichment. Jolley, 747 S.W.2d at 707 (holding that plaintiff's entering into an agreement with known risks precluded recovery under an unjust enrichment claim when an anticipated contingency occurred); Bierman, 147 S.W.3d at 820 (holding that, when the benefits to the defendant were created by the plaintiff in the expectation of receiving a profit, a cause of action for unjust enrichment did not lie). When a person enters into a potentially risky venture, it is simply not unjust for him to bear the adverse consequences of the risk, given that he surely would have accepted the beneficial consequences had they materialized. Jolley, 747 S.W.2d at 707; Bierman, 147 S.W.3d at 820. In other words, under such circumstances, the retention of a benefit by the defendants would not have been inequitable.
In Jolley, the plaintiff's insured had disappeared, and he was presumed dead. 747 S.W.2d at 704-05. The plaintiff agreed to settle with the presumed decedent's wife after she had filed suit on her husband's life insurance policy. Id. at 705. The settlement provided that the wife would repay the settlement proceeds ($250,000), plus interest and attorneys' fees, should her husband be found alive. Id. However, the insurance company entered into no agreement with the wife's attorney, despite knowing that he would be paid a percentage of the settlement proceeds pursuant to his contingency fee agreement with the wife. Id. at 706. The husband was found alive, and the insurance company (having exhausted its remedies against the wife but still being owed $113,000 plus interest and attorneys' fees) sued the attorney for unjust enrichment. Id. at 705-06. The circuit court entered summary *439 judgment for the defendant, and we affirmed. In doing so, we noted that "[t]he situation is one of a contract in which one of the parties ... was unable completely to perform. [The attorney] is a third person, not a party to the contract, and not the insurer of the promise of its client." Id. at 706. Further, we held that, in entering into the settlement agreement, with the knowledge that the insured could have been alive, the plaintiff "assume[d] the risk of payment in order to avoid difficulty which might arise from nonpayment. In such case, the [plaintiff] is not entitled to restitution" beyond the specific protections that were built into the settlement agreement. Id. at 707.
Likewise, Howard assumed the risk inherent in his execution of the Howard Deed of Trust, with full knowledge that Ganin Homes could default on its debt and in the expectation that he would receive the benefits of the Resolution. Had the venture gone as planned, Howard would have received regular interest payments on his property, the use of which he continued to enjoy; his brother's company would have succeeded, which was apparently a valuable consideration to Howard; and Ganin Homes would have secured the release of the Howard Deed of Trust at no cost to Howard. Just as it would not have been unjust for Howard to have reaped these benefits, it is not unjust for him to bear the adverse consequences of the risk he voluntarily undertook. See Jolley, 747 S.W.2d at 707; Bierman, 147 S.W.3d at 820.
Howard contends that the above principles of law do not apply because, in reliance on the Resolution and the personal guarantees, he mistakenly believed that the Turnbulls were required to repay him and that, as a consequence, he did not pledge his property "voluntarily" and he did not receive what he expected (repayment).
However, Howard's alleged mistake does not permit him to recover. While a mistake of fact may affect the voluntariness of a payment, a mistake of law does not. Rather, a voluntary payment, made under a mistake of law but not fact, cannot be recovered in an unjust enrichment claim. Shrock, 447 S.W.2d at 811 ("The rule of law is well settled that where money has been voluntarily paid with full knowledge of the facts it cannot be recovered on the ground that the payment was made ... under a mistake of law."). Here, Howard knew that the Respondents had signed no personal guarantees to him; he knew that the Resolution was not signed by the Respondents in their individual capacities (or in any capacity); he knew that there was a possibility that Ganin Homes would default on its debt and that the Bank would exercise its rights under the Howard Deed of Trust. That Howard was under the erroneous impression that he could enforce either the Turnbulls' personal guarantees (which were executed in favor of the Bank, not Howard) or the Resolution (which bound Ganin Homes, not the Respondents) is irrelevant. Howard's mistake was one of law, not fact, and such a mistake does not insulate him from the principles stated above, which bar recovery for unjust enrichment under circumstances such as this. See Shrock, 447 S.W.2d at 811; Jolley, 747 S.W.2d at 707; Bierman, 147 S.W.3d at 820.[9]
*440 As such, Howard's voluntary pledge of his property, with knowledge of the potential risks, in the expectation of a profit, and under no mistake of relevant fact, renders the principles of unjust enrichment inapplicable to the facts of this case.[10]
Conclusion
For the reasons stated above, we deny Howard's points on appeal and affirm the trial court's judgment in all respects.
LISA WHITE HARDWICK and CYNTHIA L. MARTIN, JJ., concur.
NOTES
[1] In an appeal from a bench-tried case, we review the facts in the light most favorable to the judgment. Stahlhuth v. SSM Healthcare of St. Louis, 289 S.W.3d 662, 664 (Mo.App. E.D.2009).
[2] The August 26, 2002 promissory note was not entered into evidence below, nor was it attached as an exhibit to the appeal.
[3] Although they were introduced as trial exhibits, the personal guarantees were not included as exhibits to this appeal (although an unsigned portion of one of the guarantees appears as an attachment to a motion in the legal file). It is the appellant's responsibility to include trial exhibits that are necessary to our disposition of the appeal, Rule 81.12(e), and his failure to do so results in an assumption that the guarantee documents are immaterial to the appeal. Rule 81.16(c). The guarantees, however, are clearly not immaterial: they are in fact crucial to appellant's theory of the case. Appellant's failure to attach documents that are critical to his appeal would ordinarily be grounds for dismissal. However, since we would affirm the trial court's judgment even if the guarantees had been attached to the appeal, we will exercise our discretion and address the merits.
[4] "Misreliance," in this context, means mistake of fact. Rolla Lumber Co. v. Evans, 482 S.W.2d 519, 522 n. 1 (Mo.App. 1972).
[5] Howard contends that he only "conferred a benefit" when he actually paid the Bank $150,000 in exchange for a release of the Howard Deed of Trust. The contention is meritless. Howard testified that his property was worth well in excess of $150,000. Under the Howard Deed of Trust, the Bank, upon Ganin Homes's default, could have foreclosed on the property and collected $150,000 even if Howard had not paid for the release. Thus, the fact that Howard paid the $150,000 is irrelevant, for he had already conferred a $150,000 benefit on Ganin Homes the moment he executed the Howard Deed of Trust.
[6] Or, in the Turnbulls' cases, the owners of a separate limited liability company that in turn owned a part of the limited liability company that received the loan.
[7] No such facts are present here: Ganin Homes's assets are worth less than its liabilities, and Ganin Homes therefore has not (and could not) disburse left-over equity in the company to the Respondents.
[8] Although subsuretyship is recognized by the RESTATEMENT (THIRD) OF SURETYSHIP & GUARANTEE, we express no opinion on whether we would recognize the theory had it been properly pled.
[9] Howard also argues that Jolley does not apply because Jolley concerned a contract, whereas Howard entered into no contract with the Respondents. However, the plaintiff in Jolley had no contract with the defendant either, for the subject contract was only between the insurer and the defendant's client. 747 S.W.2d at 705-06. The rule is that, where "a third person benefits from a contract entered into between two other persons, in the absence of some misleading act by the third person, the mere failure of performance by one of the contracting parties does not give rise to a right of restitution." 66 Am.Jur. 2D Restitution and Implied Contracts § 32 (1998) (emphasis added). No misleading act on the defendant's part was alleged in Jolley, and no such act is alleged here. Accordingly, even if the defendants benefitted from, but were not parties to, the agreement Howard made with Ganin Homes (evidenced by the Resolution), Jolley would still apply, for the defendant in that case was also a third party beneficiary of, and not a party to, the subject agreement.
[10] Again, based on the Resolution, Howard may or may not have had a valid contract claim against Ganin Homes. However, unjust enrichment cannot be used to make the owners of a limited liability company liable for the company's obligations, absent circumstances that would justify piercing the company's corporate veil. Beeler, 306 S.W.3d at 111 n. 3. Therefore, Howard cannot simply recast his potential breach of contract claim against Ganin Homes as a claim for unjust enrichment against the owner and managing members of that entity.
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697 F.2d 296
Rivoli Trucking Corp.v.New York Shipping Ass'n, Inc.
81-7788
UNITED STATES COURT OF APPEALS Second Circuit
4/19/82
1
S.D.N.Y.
AFFIRMED
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386 U.S. 127
87 S.Ct. 902
17 L.Ed.2d 778
Hugh Wendell MacDONALDv.CALIFORNIA.
No. 503, Misc.
Supreme Court of the United States
February 20, 1967
Rehearing Denied March 27, 1967.
See 386 U.S. 987, 87 S.Ct. 1289.
Vasken Minasian, for appellant.
PER CURIAM.
1
The motion to dismiss is granted and the appeal is dismissed for want of jurisdiction. Treating the papers whereon the appeal was taken as a petition for a writ of certiorari, certiorari is denied.
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NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT APR 29 2015
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
UNITED STATES OF AMERICA, No. 14-10145
Plaintiff - Appellee, D.C. No. 4:12-cr-00860-YGR-1
v.
MEMORANDUM*
SALEEM M. KHAN,
Defendant - Appellant.
UNITED STATES OF AMERICA, No. 14-10344
Plaintiff - Appellee, D.C. No. 4:12-cr-00860-YGR-1
v.
SALEEM M. KHAN,
Defendant - Appellant.
Appeal from the United States District Court
for the Northern District of California
Yvonne Gonzalez Rogers, District Judge, Presiding
Argued and Submitted February 10, 2015
San Francisco, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
-2-
Before: SCHROEDER and SILVERMAN, Circuit Judges and GARBIS,** Senior
District Judge.
Saleem Khan appeals the sentence and restitution award imposed by the
district court on the grounds that the Government failed to present sufficient
evidence to meet its burden of proof for determining loss to calculate the
sentencing guidelines and for determining restitution. Based on comments made
by the district court at sentencing, Khan also seeks remand to a different district
judge.
"A calculation of the amount of loss is a factual finding reviewed for clear
error." United States v. Stargell, 738 F.3d 1018, 1024 (9th Cir. 2013) (citation
omitted) (internal quotation marks omitted). We review a district court's
underlying factual findings supporting an order of restitution for clear error, while
the valuation methodology is reviewed de novo. United States v. Fu Sheng Kuo,
620 F.3d 1158, 1162 (9th Cir. 2010).
The district court did not err in determining, for purposes of calculating the
sentencing guidelines, that the amount of loss Khan caused to E*TRADE Bank
was between $200,000.00 and $400,000.00 or in ordering Khan to pay
$313,665.98 in restitution.
**
The Honorable Marvin J. Garbis, Senior District Judge for the U.S.
District Court for the District of Maryland, sitting by designation.
-3-
Khan pled guilty to a fraudulent scheme starting "no later than in or about
July 2010." On July 13, 2010, Khan falsely told PNC Bank, the servicer of the
home equity line of credit ("HELOC"), that he could not make payments on the
HELOC because he had been laid off. As a result of this false statement, PNC
decided to charge off the loan. By making more false statements on January 13,
2011, Khan convinced PNC to settle with him for $45,000.00 and reconvey the
property used to secure the HELOC. At the time of both of these false statements,
the total outstanding balance on the HELOC was $358,665.98.
Thus, the appropriate measure of the loss Khan caused to E*TRADE, for
purposes of calculating the sentencing guidelines, is the amount of the HELOC
advanced to Khan minus the settlement amount; or $299,850.00.
For purposes of restitution, the appropriate measure of the actual loss Khan
caused to E*TRADE is the total outstanding balance on the HELOC (including
associated costs and accrued interest) totaling $358,665.98, reduced by the
$45,000.00 that E*TRADE fraudulently was induced to accept in settlement; or
$313,665.98.
Contrary to Khan's argument, the district court did not use the amount
advanced to him on the HELOC as a "proxy" for loss. Rather, the district court
correctly decided that the actual loss Khan caused was the amount due from Khan
-4-
in excess of the $45,000.00 paid to settle the HELOC debt. The fraudulent
scheme was not Khan’s obtaining funds from the HELOC but his obtaining a
release for less than full payment by virtue of false statements. The "pump and
dump" cases on which Khan relies are inapposite.
Accordingly, we conclude that the district court correctly determined that the
loss amount for sentencing guidelines purposes was $299,850.00 and correctly
ordered $313,665.98 in restitution.
AFFIRMED.1
1
While it is not necessary to address Khan's contention regarding a
reassignment of the case to a different district judge for further sentencing, it is
appropriate to state that we find no reason to conclude that the district judge acted
improperly or would be unable to preside fairly over any further proceedings.
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731 F.Supp. 1422 (1990)
Bernard NASSIF, Plaintiff,
v.
NATIONAL PRESTO INDUSTRIES, INC., Defendant.
No. Civil 87-835-A.
United States District Court, S.D. Iowa, C.D.
January 25, 1990.
*1423 William Scherle of Hansen, McClintock & Riley, Des Moines, Iowa, for plaintiff.
Richard Sapp of Nyemaster, Goode, McLaughlin, Voigts, West, Hansel & O'Brien, Des Moines, Iowa, for defendant.
RULING GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
WOLLE, District Judge.
Defendant's motion for summary judgment, reduced to essentials, presents three questions: (1) Did defendant, manufacturer of a space heater, act negligently or produce a defective product in failing to warn users the heater could burn them; (2) Did defendant owe a duty to give special warning to users who have sensory loss; and (3) Were the instructions accompanying defendant's space heater inadequate or misleading, making the product defective or defendant liable for negligence? The court answers no to all three questions. Defendant's motion for summary judgment is granted.
The plaintiff, a diabetic, purchased the Presto Quartz Heater manufactured by defendant for use in his home. Plaintiff's diabetic condition caused him to have a reduced sensitivity to heat; he was fully aware of this sensory loss. On November 5, 1985, the plaintiff received severe burns on his left foot when he fell asleep while using the heater to warm himself. He contends the product was defective and the manufacturer was negligent in failing to give appropriate warnings, in particular a special warning to persons with sensory deficit like himself. He also contends the written directions were misleading and made the heater unsafe for his use.
The written directions that accompanied the heater included an explanation that the Quartz Heater "warms you directly, comfortably, almost instantly, from head to toe without first heating the entire room." The "Important Safeguards" section included standard warnings about use of electricity and the additional statements:
2. Do not use heater in places where solvents or other flammable materials may come in contact with the heater. Never use heater for drying or heating when painting with lacquer or oil base paints, as they may ignite.
....
4. Close attention is necessary when this heater is used where children are present.
....
11. Do not allow heater to operate unattended in a small, well insulated room, as overheating may occur.
12. Do not place heater in closed areas such as beneath furniture, in cabinets or beneath or behind curtains or drapes. Always allow at least 30 inches of space between the front and sides of the heater and any other surface.
13. Keep heater away from materials which may be damaged by heat and from flammable materials such as drapes, curtains and delicate fabrics.
A further written statement explained how the heater "keeps you warm ..."
The Presto Quartz heater is designed to heat people and objects, directly without first heating the air space around them. This allows the actual room temperature to be kept at a lower level while personal comfort is maintained.
Heat is produced by a coiled wire element encased in a translucent quartz tube. When this element is energized, heat is produced on two "wave-lengths." One wave-length is in the "visible range" and can be seen as the red glow of the hot tube. The majority of the heat, however, is in the "infra-red" range. These "infra-red waves" pass through the air with very little energy loss. Instead of heating the air, they heat any solid objects, including people in their path.
The instruction concerning "Locating the heater ..." provides:
The location selected for the heater is very important for efficient operation. Follow these rules for best results:
*1424 1. Place the heater so the front grille faces the person to be heated. Direction is important since the unit heats people and objects directly. Do not try to heat the entire room. Also remember that infra-red heat will travel through glass, just like the sun's rays. If the heater is aimed at a window, objects outside will be heated.
For maximum effectiveness, place heater 3 to 10 feet away from people being warmed. Avoid sitting too close because intense heat may dry eyes and cause irritation. Heating efficiency begins to drop at locations over 10 feet away from heater.
2. For safety, the heater should be in a stable, upright position with at least 30 inches of space between the front and sides of the unit and any other surface.
Do not place the heater in a closed area, such as beneath furniture, in cabinets or beneath or behind curtains or drapes. Do not hang the unit from a wall or ceiling.
The extensive summary judgment record includes deposition testimony of the plaintiff's product-safety expert, Doctor Jerry Hall, who had inspected the heater. Hall expressed the opinion that a hand held twelve inches from the heater for thirty seconds would sustain a burn unless withdrawn because of the pain felt by a person with ordinary sensitivity. He conceded that a person with no sensory deficit would feel the heat and move the hand before it would be burned. Hall expressed the opinion the written product warnings were inadequate because the heat is transmitted by space, not by touch, and therefore the hazards are more subtle and require a specific warning. He did not explain what he meant by subtle; nothing in this record suggests that a person with ordinary sensitivity would be injured before feeling the heat transmitted by the space heater. This court held, following an earlier hearing, that Hall would be allowed to testify as to the criteria by which he would form an opinion on warnings that should accompany the product, but he would not be allowed to testify, without a further showing, that the product was defective in having inadequate warnings. The court based this ruling in limine on Federal Rule of Evidence 702 and Harris v. Pacific Floor Mach. Mfg. Co., 856 F.2d 64, 67-68 (8th Cir.1988). Plaintiff made no further showing to support admissibility of such testimony.
Plaintiff concedes his foot would not have been injured if he had not been afflicted with a sensory deficit in his left foot. An ordinary person would have felt the heat and withdrawn the foot to a safe distance from the heater. The motion papers disclose the only factual issue in dispute is the length of time plaintiff's foot was near the space heater and how near he placed it. Those fact issues might be material to questions of comparative negligence, assumption of risk, or product misuse, but they are not material to the questions here addressed the extent of the duty to warn owed by defendant to users of the heater and whether inappropriate directions accompanied the heater.
Defendant had the burden to demonstrate that the summary judgment record does not disclose a genuine dispute on a material fact. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has satisfied that requirement, the other party has an affirmative burden to demonstrate that evidence generates a genuine dispute and the case cannot be decided without a trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); City of Mount Pleasant, Iowa v. Associated Elec. Co-op., Inc., 838 F.2d 268, 273-74 (8th Cir.1988).
I. Scope of Duty to Warn. Both on the theory of negligent failure to warn and the theory the product was defective for inadequate warning, plaintiff relies on the Restatement (Second) of Torts sections 388 and 402A. When inadequate warning is the sole theory for product liability, the difference between a strict liability and negligence case usually disappears. See generally Prosser, Handbook of the Law of Torts, 644-46 (4th ed.1971) (liability of manufacturer, though called strict, rests primarily upon departure from proper standards *1425 of care in giving warning); accord, Prosser & Keaton, Handbook of the Law of Torts, § 96 at 685-86 (5th ed.1984). The claimant seeking recovery on a theory that a product contained inadequate warnings ordinarily must prove that the manufacturer was negligent. Id. § 99, at 697, and cases cited at ftnt. 20.
In product liability cases involving questions of appropriate warning, the Iowa Supreme Court has adopted Restatement section 388:
One who supplies ... a chattel ... is subject to liability ... for physical harm caused by the use of the chattel in the manner for which and by a person for whose use it is supplied, if the supplier: (a) knows or has reason to know that the chattel is or is likely to be dangerous for the use for which it is supplied; (b) has no reason to believe that those for whose use the chattel is supplied will realize its dangerous condition; and (c) fails to exercise reasonable care to inform them of its dangerous condition or of the facts which make it likely to be dangerous.
See, e.g., Moore v. Vanderloo, 386 N.W.2d 108, 116 (Iowa 1986); Henkel v. R & S Bottling Co., 323 N.W.2d 185, 188-90 (Iowa 1982). Defendant is entitled to summary judgment on the question of warning, because plainly defendant had every reason to believe persons using the space heater would realize it could burn flesh held too close to it for too long a time. See Strong v. E.I. duPont de Nemours Co., 667 F.2d 682, 687-88 (8th Cir.1981); Nichols v. Westfield Indus., 380 N.W.2d 392, 401 (Iowa 1985).
Because the space heater's dangerous propensity to burn persons too close to it was an obvious danger, plaintiff cannot establish liability for failure to give a general warning.
II. Duty to Warn One With Sensory Deficit. The second question is whether defendant had a duty to warn persons like the plaintiff who, unlike ordinary users, would not be warned by feeling extreme heat. The plaintiff argues that the defendant should reasonably have anticipated that persons with sensory deficits would be using the heater. The Restatement (Second) of Torts, section 402A, does provide that a product, although faultlessly made, may be deemed defective if placed without a suitable warning in the hands of a user. But plaintiff reads too much into that section of the Restatement. Comment j of section 402A provides that a special duty of warning persons with special problems arises only when two conditions are met: (1) the product contains a characteristic to which a substantial number of the population are unusually susceptible, and (2) the condition is one whose danger is not generally known or which the user would not expect to find in the product. Plaintiff does not meet either requirement. Nothing in this record suggests that a substantial number of persons have sensory deficits of the type plaintiff's diabetic condition creates. Moreover, any danger that a space heater could burn a person with heat insensitivity is plain and obvious. The defendant manufacturer reasonably expected that persons with sensory deficits would know the space heater could burn them and take steps to avoid being burned. The court cannot distinguish any danger created by this space heater from the obvious danger of being burned by coils on an electric stove or charcoal in a grill.
Granted plaintiff's expert witness Hall would testify, if allowed, that this space heater has a "subtle" danger because the heat radiates. It is not for the expert witness to determine as a matter of law what warning is required of a product whose danger is open and obvious. Aller v. Rodgers Mach. Mfg. Co., 268 N.W.2d 830, 840 (Iowa 1978). Nothing in this summary judgment record supports Hall's opinion that the danger of being burned by this space heater is subtle in any way for the ordinary user. Plaintiff has failed to satisfy his burden to prove both that the product was defective and that it was "dangerous to an extent beyond that which would be contemplated by the ordinary consumer ... with the ordinary knowledge common to the community as to its characteristics." Restatement (Second) of Torts § 402A, *1426 comment i, quoted in Aller v. Rodgers Mach. Mfg. Co., 268 N.W.2d at 834.
III. Were the Written Directions Misleading? This court has already explained that the danger to the ordinary user was open and obvious, precluding recovery on a theory of negligent failure to warn or defectiveness of the product due to inadequate warning. The remaining question is whether the instructions that accompanied the heater misled the plaintiff concerning how the space heater might safely be used.
Plaintiff focuses on those printed directions that teach the user to "allow at least 30 inches of space between the front and sides of the heater and any other surface." The instructions do not explicitly state, however, that no harm will befall the user who is more than thirty inches from the space heater. The court has carefully read all of the instructions together. (They are quoted above.) Giving the plaintiff the benefit of all reasonable inferences that might be drawn from the evidence in this record, the instructions could not mislead the plaintiff into believing he could safely position his foot where he placed it for the amount of time he placed it there. Those conditions would cause ordinary users to feel the heat and remove their feet. The instructions do not teach the contrary. The warnings, considered as a whole, are sufficient and not misleading in any respect.
Defendant owed plaintiff no duty to warn that a person using the space heater might be burned if the person had a sensory deficit. Neither was defendant obligated to provide any warning about the obvious danger that a foot placed too close to the heater for too long a time could be injured.
Defendant has demonstrated it is entitled to summary judgment. The clerk of court shall enter summary judgment for the defendant and against the plaintiff, with costs taxed to the plaintiff.
IT IS SO ORDERED.
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 18-1454
BIANCA JOHNSON; DELMAR CANADA; RODNEY HUBBARD;
SAVANNAH HUBBARD,
Plaintiffs - Appellants,
v.
ANDREW HOLMES,
Defendant - Appellee,
and
JOHN DOES 1-3; ALBEMARLE COUNTY,
Defendants.
Appeal from the United States District Court for the Western District of Virginia, at
Charlottesville. Norman K. Moon, Senior District Judge. (3:16-cv-00016-NKM; 3:16-
cv-00018-NKM)
Argued: May 7, 2019 Decided: August 26, 2019
Before MOTZ, KING, and THACKER, Circuit Judges.
Affirmed in part, reversed in part, and remanded by unpublished per curiam opinion.
ARGUED: Jeffrey Edward Fogel, Charlottesville, Virginia, for Appellants. Jim H.
Guynn, Jr., GUYNN & WADDELL, P.C., Salem, Virginia, for Appellee. ON BRIEF:
Julian F. Harf, GUYNN & WADDELL, P.C., Salem, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
In this consolidated Fourteenth Amendment equal protection case, Bianca
Johnson, Delmar Canada, Rodney Hubbard, and Savannah Hubbard (“Appellants”), who
are all African American, assert that they were stopped and searched by Albemarle
County Police Officer Andrew Holmes as a result of racial profiling.
To prove their selective enforcement actions against Officer Holmes, Appellants
offered statistical evidence obtained from Albemarle County. Appellants assert that this
statistical evidence demonstrates a striking disparity between the percentage of traffic
summonses that Holmes issues to African Americans, the percentage of traffic
summonses that all other officers on the police force issue to African Americans, and the
population of African Americans in Albemarle County. According to Appellants,
Holmes made it a practice to stop and ticket three times as many African Americans as
Caucasians as compared to all other officers on the force, and more than twice as many as
compared to all officers who worked the same sectors 1 as Holmes.
The district court concluded that Appellants’ statistical evidence failed to
demonstrate that similarly situated drivers of a non-protected class were treated
differently than Appellants, and, therefore, the district court held that such evidence could
not be admitted to prove that Holmes’s conduct had a discriminatory effect. Specifically,
according to the district court, Appellants’ statistics failed to identify white drivers
1
While on patrol duty, officers are assigned to patrol a particular area of the
county, called a sector.
3
presenting “no distinguishable legitimate enforcement factors that might justify making
different enforcement decisions with respect to them.” J.A. 65–66. 2
Because we conclude that the district court applied an improperly narrow
definition of “similarly situated,” we reverse the district court’s decision to exclude the
statistics for the purpose of proving discriminatory effect. However, because the record
before us is insufficient for this court to determine whether the statistics offered establish
Appellants’ claims as a matter of law, we remand to the district court for further fact
finding consistent with the proper standard described herein.
I.
A.
Appellants’ Traffic Stops
This consolidated case arises from two separate traffic stops conducted by
Holmes. The first stop involves Appellant Delmar Canada, the driver of the stopped car,
and Appellant Bianca Johnson, the owner of the car and Canada’s fiancée. The second
stop involves Appellant Rodney Hubbard, the driver of the stopped car, and his mother,
Appellant Savannah Hubbard.
2
Citations to the “J.A.” refer to the Joint Appendix filed by the parties in this
appeal.
4
1.
Delmar Canada and Bianca Johnson
Holmes was on duty as a patrol officer for the Albemarle County Police
Department on April 26, 2014. As the district court described it, Holmes’s “main goal
that day was to use traffic enforcement . . . as a tool to do criminal interdiction,”
including using traffic stops to search for evidence of narcotics. J.A. 39–40 (internal
quotation marks omitted). As Holmes explained in his deposition, this was necessary
because “[n]o one drives around with signs on the side of their car that say ‘I’m carrying
drugs.’” Id. at 40. In furtherance of these criminal interdiction efforts, Holmes parked
his patrol vehicle in the parking lot of a Super 8 motel in Charlottesville, Virginia, which
was located across the street from a 7-Eleven convenience store. Holmes then ran the
license plates of vehicles in the parking lots of both businesses through a police database.
After running the license plates on several other vehicles, Holmes ran the plates on
a BMW 7 Series sedan and learned that the vehicle was registered to Appellant Johnson.
Holmes then ran Johnson’s information in another police database, where Appellant
Canada was listed as a person associated with Johnson. Holmes reviewed Canada’s
information in the database, obtained a photograph of Canada, and learned that Canada’s
driver’s license had been suspended for failing to pay child support.
At some point during this process, an African American man exited the 7-Eleven
and got in the driver’s seat of the BMW. Holmes matched the photograph from the
police database to the man who entered the vehicle and determined that Canada was the
driver. After Canada left the 7-Eleven’s parking lot, Holmes initiated a traffic stop of the
5
vehicle. Holmes informed Canada that his license was suspended. Canada stated that he
did not know his license had been suspended. Canada contacted Johnson and arranged
for her to bring the vehicle registration to him at the stop, which she did. After speaking
with Appellants Canada and Johnson, Holmes and another officer who had joined the
scene returned to Holmes’s patrol vehicle. While there, the other officer observed that
Canada was driving a “nice car.” J.A. 42. Holmes noted that it was an “expensive car.”
Id. Holmes then issued Canada a summons for driving on a suspended license.
The next day, Holmes applied for and received a search warrant to search
Appellants Canada and Johnson’s home for a license suspension notice, which DMV
records showed had been sent to the home a year earlier. 3 In his trial testimony, Holmes
expressed the view that obtaining a search warrant to search an individual’s home for a
suspension notice could be used as an “investigative tool” by law enforcement to find
evidence of possible other, non-traffic-related crimes for which there was not probable
3
Of note, the search warrant application was only for the suspension notice and
made no mention of any other criminal activity. Despite this, at some point after the stop
but before obtaining the search warrant, Holmes contacted the Jefferson Area Drug
Enforcement (“JADE”) task force and inquired as to whether Canada was involved in any
active drug investigations. Holmes was advised that Canada’s name was familiar, but he
was not involved in any open investigations by the task force.
Holmes testified that contacting JADE was in line with his “common practice,”
because he “didn’t want to mess up anything they may have been doing” regarding
Canada or his residence. J.A. 128. However, Holmes did not inquire about any active
JADE investigations involving Johnson, who also resided in the home Holmes intended
to search.
6
cause to search. J.A. 100. 4 Holmes testified that he had never before obtained a search
warrant to search for a suspension notice, and he was unaware of any other officer in the
department who had done so. According to Holmes, he had only recently learned about
the use of search warrants in suspended license cases from another officer, Detective
Schenk, who learned of the tactic during a police training session on gangs.
The warrant directed officers to “forthwith search” Appellants’ residence, “either
in day or night.” J.A. 43. Holmes waited five days before executing the warrant. Then,
4
In this case, the evidence of possible other, non-traffic-related crimes that
Holmes apparently thought he might find at Appellants’ residence was related to
narcotics:
Q: You had found out that using a search warrant in a traffic
matter was a useful investigative tool, hadn’t you?
A: Yes, sir.
Q: And that tool was useful beyond the fact of the actual
traffic ticket.
A: It’s an investigative tool. Yes, sir.
...
Q: You knew if you went to the house with this search
warrant and you found drugs, you could arrest him for the
possession of drugs.
...
A: [Y]es, if you find drugs in an apartment while you’re
searching for something else that you’re legally there to
search for, then you can begin an investigation into drugs.
J.A. 100–101; see also id. at 112 (“Q: You were really there looking for narcotics. A: I
was there looking for a DMV notification . . . . I wouldn’t have been surprised if I found
drugs; but I was looking, searching for a DMV notification form.”).
7
on a Friday night at 11:19 PM, Holmes and two other officers arrived at Appellants’
home and conducted the search, ostensibly for the one-page license suspension
notification. They found nothing.
2.
Rodney Hubbard and Savannah Hubbard
On September 11, 2015, Appellant Rodney Hubbard and his mother, Appellant
Savannah Hubbard, were driving north on Route 29 and entered Albemarle County.
Hubbard slowed down when he passed Holmes, who was standing outside his patrol car.
A mile or two later, Hubbard noticed Holmes in his patrol car following behind Hubbard.
This continued for three to four miles, until Holmes passed Hubbard. After another mile
or two, Hubbard again noticed Holmes following him in his patrol car. At that point,
Holmes pulled Hubbard over. Holmes claimed he stopped Hubbard because he had
driven 65 mph in a 60 mph zone, but Hubbard denied he was speeding.
Holmes asked Hubbard for his license and registration, but Hubbard did not have
his license with him and gave Holmes an identification card instead. Holmes then asked
Hubbard to step out of the vehicle and asked him whether Hubbard’s license was
suspended in Virginia. Hubbard said he was unsure, but that his license in Maryland was
expired. Holmes learned later during the stop that Hubbard’s Virginia license was, in
fact, suspended.
Holmes claimed he smelled marijuana and asked Hubbard why the vehicle
smelled like marijuana. Hubbard denied that the vehicle smelled like marijuana and said
there was no marijuana in the car, but he admitted that someone had smoked in the
8
vehicle three or four days before the stop. Hubbard stated he had placed an air freshener
in his car to conceal the marijuana smell from his mother. In her deposition, Savannah
Hubbard denied smelling marijuana.
Holmes told Hubbard he was not under arrest. Nevertheless, Hubbard was
handcuffed, searched, and placed in the back of Holmes’s patrol car due to the alleged
marijuana Holmes claimed he smelled in Hubbard’s vehicle. Savannah Hubbard, who
was 75 years old, 5 was also searched and placed in another patrol car, and Hubbard’s car
was searched. No drugs were found in the car. Holmes issued Hubbard a summons for
driving with a suspended license.
B.
Appellants’ Proffered Statistical Evidence
Pursuant to Appellants’ discovery request, Albemarle County generated the
statistical evidence at issue in this case, which is located at J.A. 74, 75, 76, 77, and 78. 6
Although the parties dispute what conclusions are to be drawn from these statistics, a
general discussion of the charts created by the county is necessary at the outset.
1.
The chart at J.A. 75 depicts the general demographic data of Albemarle County as
of 2016, as well as the demographic data of the specific sectors of the county that Holmes
5
Savannah Hubbard’s age is not in the record, but during oral argument,
Appellants’ counsel noted that she was 75.
6
For reference, these pages of the J.A. are attached to this opinion.
9
patrolled most often. Overall in Albemarle County, 80.66% of the population is white,
and just 9.69% of the population is black. Holmes usually patrolled Sector 1 or 2. J.A.
75 shows that 68.04% of the population of Sectors 1 and 2 is white, while 18.21% is
black.
2.
J.A. 74 depicts the number of Holmes’s traffic stops and summonses for the years
2009 to 2015. In this timeframe, Holmes conducted 1,205 traffic stops and issued 655
summonses. For these 655 summonses, J.A. 74 also includes a breakdown of the
summonses issued per year sorted by the race of the driver receiving the summons. 7 Per
the charts provided by Albemarle County, in 2015, Holmes issued 92 summonses. Of
these 92, he issued 47 summonses, or 51.08%, to black individuals and 44 summonses, or
47.82% to white individuals. Out of the 655 summonses that Holmes issued from 2009
to 2015, he issued 305 summonses, or 46.56%, to black individuals and 348 summonses,
or 53.13%, to white individuals.
3.
J.A. 76 is titled “2015 County Traffic Statistics,” and it contains a chart of all
summonses issued by the Albemarle County Police Department in 2015 sorted by the
race of the driver receiving the summons. Per these statistics, in 2015, officers in the
7
Albemarle County tracks the number of traffic stops an officer conducts, but it
does not record the race of the stopped driver if no summons was issued. Accordingly,
data based on a driver’s race is only available for actual traffic summonses, not stops.
10
department issued a total of 8,219 summonses. Of those summonses, 6,626, or 80.6%,
were issued to white drivers, and 1,412, or 17.2%, were issued to black drivers.
4.
J.A. 77 lists all officers other than Holmes who patrolled Sectors 1 and 2, along
with the number of summonses 8 each officer issued in 2015 sorted by the race of the
person receiving the summons. In total, the other officers on the force who worked the
same sectors as Holmes 9 issued 285 summonses. Of these, 210 summonses, or 73.68%,
8
Of the statistics generated by Albemarle County, J.A. 77 is the only page that
references “citations” rather than “summonses.” Although these terms are not defined in
the record, all parties agreed during oral argument that “citations” and “summonses” are
synonymous and can be used interchangeably to mean “writing a ticket.” See Oral
Argument at 3:38–4:03, Johnson v. Holmes, No. 18-1454 (4th Cir. May 7, 2019),
http://www.ca4.uscourts.gov/oral-argument/listen-to-oral-arguments (hereinafter “Oral
Argument”) (“Court: ‘Are summonses and citations the same thing?’ Appellants’
Counsel: ‘I believe so. . . . As far as I know, they are. But there’s nothing in the record to
indicate that.’”); see also id. at 18:25–36 (“Appellee’s Counsel: ‘I think that summonses
and citations are . . . two different words for the same thing. . . . Basically, that’s writing a
ticket.’”). For the purposes of this opinion, we will use the term “summonses.”
J.A. 77 is also the only page of statistics that does not reference traffic stops or
summonses specifically. Accordingly, and as further discussed below, it is unclear
whether the data in this chart reflects only traffic summonses, or if it includes non-traffic
summonses issued by officers in Sectors 1 and 2.
9
Holmes testified that he was occasionally assigned to patrol Sector 3;
accordingly, the data reflected on J.A. 74 could contain summonses he issued outside of
Sectors 1 or 2. Although the specific demographic data on J.A. 75 and the summonses of
other officers on J.A. 77 only pertain to Sectors 1 and 2, both counsel agreed at oral
argument that Sector 3 is a more rural area than Sectors 1 and 2 and contains a higher
percentage of white individuals and a lower percentage of black individuals.
Accordingly, Holmes’s stops and summonses issued in Sector 3 cannot explain the racial
disparity in Appellants’ statistics.
11
were issued to white individuals, and 62 summonses, or 21.75%, were issued to black
individuals.
5.
J.A. 78 is titled “Traffic Unit.” Similar to J.A. 76 (which pertained to 2015), J.A.
78 contains a chart of all summonses issued by the Albemarle County Police Department
in 2014 sorted by the race of the driver receiving the summons. In 2014, officers in the
department issued a total of 10,250 summonses. Of those summonses, 8,315, or 81.1%,
were issued to white drivers, and 1,716, or 16.7%, were issued to black drivers.
6.
Thus, as portrayed in J.A. 74, 75, and 77, the population of Sectors 1 and 2 is
68.04% white and 18.21% black. In 2015, Albemarle County police officers other than
Holmes patrolling Sectors 1 and 2 issued 73.68% of summonses to white individuals and
21.75% to black individuals. Meanwhile, in 2015, Holmes issued 47.82% of his
summonses to white individuals and 51.08% to black individuals.
C.
Procedural History
Appellants Canada and Johnson and Appellants Rodney and Savannah Hubbard
each brought 42 U.S.C. § 1983 actions against Holmes, other unknown police officers,
and Albemarle County. Both cases were originally assigned to Judge Glen E. Conrad of
the United States District Court for the Western District of Virginia.
12
1.
Canada/Johnson Case
In the case of Appellants Canada and Johnson, Holmes and Albemarle County
moved for summary judgment. Judge Conrad granted summary judgment to Albemarle
County on the municipal liability claim, but denied summary judgment on Appellants’
equal protection claim against Holmes. Specifically, Judge Conrad concluded that based
on Appellants’ proffered statistics and other evidence, a jury could reasonably infer that
Holmes’s stop and subsequent search of Appellants’ residence “were motivated by a
discriminatory purpose and had a discriminatory effect.” J.A. 52.
The case was subsequently reassigned to Judge Norman K. Moon, also of the
United States District Court for the Western District of Virginia, and it proceeded to trial.
Holmes filed a motion in limine to exclude Appellants’ statistical evidence. Judge Moon
granted Holmes’s motion in part, concluding that although the statistics could be
admitted for the purpose of showing discriminatory intent, 10 they could not be used to
10
As to discriminatory intent, Judge Moon concluded:
Plaintiffs[] need only prove that racial animus was but one of
the reasons Holmes undertook the course of action he did
against them. In answering that question, the jury can take
many factors into consideration, including any pattern of
racially motivated actions by Holmes or any “historical
background” of his actions that might reveal racial
discrimination. In light of these jury considerations, the data
showing Holmes’[s] comparably high arrest and citation rates
of blacks is somewhat probative of his intent -- at least when
combined with other evidence Plaintiffs may adduce at trial.
(Continued)
13
show discriminatory effect because they “lack[ed] any information about Holmes’[s]
actions against similarly situated individuals of a different race.” J.A. 70.
During the course of the trial, Appellants sought to introduce a portion of the trial
deposition of Captain Darrell Byers of the Albemarle County Police Department, wherein
Captain Byers stated that in his career as a captain and a patrol officer, he had never
sought a search warrant for a suspended license case and he was unaware of any other
officer in the department who had done so. Holmes objected to this testimony on the
basis that without proof that Captain Byers had faced similar circumstances, it was not
relevant. The district court sustained Holmes’s objection, concluding that Captain
Byers’s testimony was insufficient to show that Holmes had deviated from normal
procedure by obtaining a warrant for the suspension notice. See J.A. 169 (“Well, we
don’t know that it’s a deviation. We don’t know how often we have the same or similar
circumstances in all these cases.”).
At the close of the plaintiffs’ case, Holmes moved for judgment as a matter of law.
Judge Moon granted the motion in Holmes’s favor, reasoning that Appellants failed to
provide evidence that Holmes’s conduct had a discriminatory effect, an element of
Appellants’ selective enforcement claim.
J.A. 64–65 (citations omitted). On appeal, the parties do not ask this court to disturb
Judge Moon’s ruling as to discriminatory intent.
14
2.
Hubbard/Hubbard Case
Appellants Rodney and Savannah Hubbard’s case was also reassigned to Judge
Moon. Following Judge Moon’s exclusion of Appellants’ statistics in the
Canada/Johnson case, Holmes moved for summary judgment in the Hubbards’ case on
the basis that Appellants similarly could not prove discriminatory effect based on the
statistics sought to be introduced in the Johnson/Canada trial. The district court granted
Holmes’s motion. Consistent with his decision in the Johnson/Canada trial, Judge Moon
concluded Appellants’ statistical evidence was insufficient to demonstrate discriminatory
effect in the Hubbards’ case because it lacked information on white individuals who were
similarly situated to Appellants but were treated differently.
II.
We review de novo the legal question of whether Appellants’ proffered statistics
satisfied the standard for selective enforcement cases set out in United States v. Hare, 820
F.3d 93 (4th Cir. 2016) (adopting the standard in United States v Armstrong, 517 U.S.
456, 465 (1996), as the standard for selective enforcement cases), and we review a
district court’s relevancy and Federal Rule of Evidence 403 determinations for abuse of
discretion. See United States v. Hassouneh, 199 F.3d 175, 182 (4th Cir. 2000). A trial
court’s evidentiary ruling will be overturned only if it is “arbitrary and irrational.” Noel
v. Artson, 641 F.3d 580, 591 (4th Cir. 2011).
15
III.
The Equal Protection Clause of the Fourteenth Amendment prohibits police
officers from selectively enforcing laws based on race. See Whren v. United States, 517
U.S. 806, 813 (1996). To prevail on a selective enforcement claim, Appellants must
prove that Holmes’s conduct (1) was motivated by a discriminatory intent; and (2) had a
discriminatory effect. See United States v. Armstrong, 517 U.S. 456, 465 (1996); Cent.
Radio Co. v. City of Norfolk, 811 F.3d 625, 634–35 (4th Cir. 2016). As noted above,
Judge Moon ruled that Appellants’ proffered statistics were admissible to prove
discriminatory intent, but not discriminatory effect. On appeal, the parties dispute only
the discriminatory effect element.
A.
Appellants’ Statistics
Establishing discriminatory effect requires a plaintiff to show that similarly
situated individuals of a different race were treated more favorably. See Armstrong, 517
U.S. at 465. A plaintiff may make this showing by (1) naming similarly situated
individuals of a different race who were treated differently by law enforcement; or (2)
providing statistics that address this question. See Farm Labor Org. Comm. v. Ohio State
Highway Patrol, 308 F.3d 523, 534 (6th Cir. 2002) (quoting Chavez v. Ill. State Police,
251 F.3d 612, 638 (7th Cir. 2001)).
The law has repeatedly recognized that statistics can be used to prove
discriminatory effect. See, e.g., Yick Wo v. Hopkins, 118 U.S. 356, 374 (1886) (finding
that a San Francisco ordinance banning the operation of laundries in wooden buildings
16
was discriminatorily applied to Chinese launderers where the city denied the petitions of
some two hundred Chinese applicants who applied for exemption from the ordinance, but
granted all but one of the eighty petitions of the non-Chinese launderers who applied);
Armstrong, 517 U.S. at 467 (noting that the similarly situated requirement was met by the
“indisputable evidence” in Hunter v. Underwood, 471 U.S. 222 (1985), that African
Americans were 1.7 times as likely as whites to suffer disenfranchisement under the law
in question).
The ultimate question presented in this case is exactly what these statistics must
show in order to meet the similarly situated requirement. Holmes does not dispute the
fact that as a general matter statistics can be used, but he contends that, in this case,
Appellants’ statistics were insufficient to demonstrate that similarly situated individuals
of another race were treated differently.
1.
Standard for Similarly Situated Using Statistics
We have held that individuals are similarly situated when there are “no
distinguishable legitimate enforcement factors that might justify making different
enforcement decisions with respect to them.” United States v. Hare, 820 F.3d 93, 99 (4th
Cir. 2016) (quoting United States v. Venable, 666 F.3d 893, 900–01 (4th Cir. 2012)); see
also United States v. Olvis, 97 F.3d 739, 744 (4th Cir. 1996). In other words, the
statistics must show “similarly situated white individuals who could have been targeted
for [the enforcement action] but were not.” Hare, 820 F.3d at 99. The statistics must
compare apples to apples.
17
2.
Holmes’s Proposed Enforcement Factors
According to Holmes, Appellants’ proffered statistics failed to establish that other
white drivers were similarly situated to Appellants because the statistics were not detailed
enough to rule out possible legitimate enforcement factors that might justify making
different enforcement decisions notwithstanding race.
Specifically, Holmes asserts the following faults with Appellants’ statistical
evidence, which he argues could constitute distinguishable legitimate enforcement
factors: (1) the statistics are not (according to Holmes) limited to traffic stops and
searches, but may include calls for service; 11 (2) the statistics do not include the reason a
driver was pulled over; (3) the statistics do not identify individuals who were not stopped
but could have been; (4) the statistics regarding summonses issued to white individuals
by other officers on the force do not break down the types of offenses charged, the
specific location of the offenses within Sectors 1 and 2, or specify whether the summons
originated with a traffic stop or involved a search; and (5) “the statistics do not account
for potential racial disparities that might result from crime-based assignments, such as if
Holmes or his fellow officers were directed to focus on one type of crime or another.”
Appellee’s Br. 11.
11
A call for service is when an officer is dispatched to a certain location in
response to an emergency or nonemergency police call. See J.A. 154 (“[A]s a patrol
officer, one of my duties is to answer what I was referring to as calls for service. It’s
where dispatch dispatches you to a particular location to handle a call.”).
18
Thus, according to Holmes, Appellants’ statistics are insufficient because they are
not detailed enough to exclude certain possible legitimate law enforcement factors that
may explain the stark disparity in Holmes’s rate of traffic summonses for African
American individuals.
The district court agreed with Holmes, noting, “[T]he statistics do not break down
citations and arrests by particular kind of crime, nor do they account for potential racial
disparities that might result from crime-based assignments, such as if Holmes or his
fellow officers were directed to focus on one type of crime or another.” J.A. 66. The
district court concluded this was fatal to Appellants’ claim because “[w]ithout these types
of information, the raw statistics simply don’t advance the ball because they leave the
jury without any indication of whether ‘distinguishable legitimate enforcement factors’
differentiate [Appellants] from some (as yet unidentified) non-black citizen who (by
hypothesis) received different treatment.” Id. at 66–67.
However, for the reasons explained below, none of Holmes’s proposed
enforcement factors -- that is, the five alleged statistical faults he raised -- prevent
Appellants’ statistical evidence from comparing apples to apples as a matter of law.
a.
Proposed Factor 1: Traffic Summonses and Calls for Service
First, Holmes makes much of his assertion that Appellants’ statistics may include
summonses resulting from calls for service in addition to traffic stops.
19
We note that nothing on the face of the statistical evidence at J.A. 74–78 suggests
that the data includes calls for service, and Appellants dispute that it does. 12 However,
even if true, we fail to see how the inclusion of calls for service in Appellants’ statistics
could explain the racial disparity in Holmes’s traffic summonses as compared to other
officers working the same sectors. As Holmes himself explained, a call for service
occurs when dispatch sends an officer to a particular location to respond to a police call.
Thus, even if calls for service are included in the statistics, this would affect the
statistics for all officers, not only Holmes. Unless dispatch assigns Holmes, and no other
officers, to respond to calls for service when a black individual is involved -- an absurd
hypothetical that is nowhere supported in the record -- the inclusion of calls for service
into Appellants’ statistics could not explain the stark disparity in the number of
summonses that Holmes issues to black individuals as compared to other officers.
12
And, although Holmes’s briefing before this court argues unequivocally that
Appellants’ statistical evidence was not limited to traffic summonses because it included
summonses that resulted from calls for service, see Appellee’s Br. 3 (“Appellants
mistakenly refer to the statistics on summonses as representing ‘traffic summonses.’”),
Holmes testified at trial that he did not know whether the data was limited to traffic
summonses. See J.A. 135–36 (“Q: So you don’t think these were traffic summonses that
were on this document. A: I don’t know. The only thing that was on that document, as I
recall, when it was presented, was total summonses issued. Again, I don’t know -- again,
I don’t know whether they’re traffic summonses or whether they include all my
summonses issued.”). Meanwhile, at oral argument before this panel, Holmes’s counsel
seemed to acknowledge that Appellants had requested only traffic summonses from
Albemarle County, not all summonses. See Oral Argument at 33:51–57 (“[Appellants’
counsel] never asked for a breakdown of the summonses as to what they were for. It was
just simply traffic summonses.” (emphasis supplied)).
20
Accordingly, this alleged fault does not prevent the statistics from meeting the similarly
situated requirement.
b.
Proposed Factors 2, 3, and 4: Details the Statistics Do Not Show
Holmes next takes issue with the particular details of each stop and summons that
are not reflected in the aggregate data. Specifically, he faults Appellants’ statistical
evidence for not revealing the reason each driver was stopped; whether a driver received
more than one summons during the same stop; the specific types of offenses charged; the
specific location of the traffic stop within the sector; or whether the encounter involved a
search. Holmes also faults the statistical evidence for failing to identify individuals who
were not stopped.
Significantly, Holmes does not explain how the lack of these details makes
Appellants’ statistics unreliable for the purpose of proving that Holmes’s conduct had a
discriminatory effect, or how any of these factors could explain the racial disparity in
Holmes’s traffic summonses. Appellants do not assert that Holmes’s alleged selective
enforcement of traffic laws depended on, for example, the specific type of traffic offense
at issue or the exact location of the stop within a sector. As for the statistics’ failure to
identify individuals who were not stopped, such data is not recorded by the county -- and,
indeed, would likely be impossible to track. How could something that was not done
possibly be tracked? Further, all of the information that Holmes claims is missing with
respect to his traffic summons statistics are similarly not included in the statistics for all
21
other officers on the force, so the statistics (at least facially) appear to compare apples to
apples.
More broadly, the level of detail that Holmes seeks from Appellants’ statistics is
fundamentally at odds with the nature of aggregated data, which cannot include every
conceivable detail about each traffic stop. Without an indication in the record that the
details Holmes seeks would affect Appellants’ claims, the allegedly missing information
does not constitute distinguishable legitimate enforcement factors that justify excluding
the statistics.
c.
Proposed Factor 5: Accounting for Potential Crime-Based Assignments
Finally, Holmes faults Appellants’ statistics for failing to “account for potential
racial disparities that might result from crime-based assignments, such as if Holmes or his
fellow officers were directed to focus on one type of crime or another.” Appellee’s Br.
11. But there is zero evidence in the record, including in Holmes’s own testimony, that
Albemarle County police officers in fact received crime-based traffic patrol assignments.
Similarly, contrary to Holmes’s suggestion, there is no evidence that Holmes focused on
patrolling different streets than other officers assigned to the same sector. 13
These proposed “distinguishable legitimate enforcement factors” are not apparent
on the face of Appellants’ statistics, but are instead possible differences that Holmes says
13
In fact, Holmes testified at trial that he patrolled the entire sector to which he
was assigned: “We have an assigned sector and we’ll patrol that whole sector . . . in
between calls for service in that sector.” J.A. 80.
22
might exist. In other words, Holmes assails the data -- which came from his employer and
original co-defendant, Albemarle County Police Department -- for failing to affirmatively
rule out his proposed enforcement factors when there is no record basis to believe such
factors exist.
It is notable that Holmes is in the best position to know whether his proposed
enforcement factors are true; however, even he does not claim that he in fact received
crime-based assignments or that he in fact patrolled different streets than the other
officers assigned to the same sectors. Holmes merely asserts that Appellants’ statistics do
not show whether he did or not.
Holmes’s entirely speculative proposed factors do not constitute “distinguishable
legitimate enforcement factors,” and they cannot justify excluding Appellants’ statistical
evidence from proving discriminatory effect.
3.
The Proper Meaning of Distinguishable
By accepting Holmes’s proposed enforcement factors as legitimate reasons to
exclude Appellants’ statistics, the district court improperly defined “distinguishable
legitimate enforcement factors” too narrowly. Rather than interpreting “distinguishable”
to mean an enforcement factor that was identifiable or discernable from the statistics
themselves or other evidence in the record, the district court interpreted it to mean any
possible differentiating feature -- even if not supported by the evidence
-- between Appellants and the other drivers represented in Appellants’ statistics. Such a
definition would require a plaintiff’s statistics to affirmatively disprove every conceivable
23
distinguishable factor that a defendant could raise. Aggregated data could never be so
detailed.
Although selective enforcement and selective prosecution claims may be difficult
to prove, the Supreme Court has clarified that they are not (and should not be) impossible
to prove. See Armstrong, 517 U.S. at 466 (“The similarly situated requirement does not
make a selective-prosecution claim impossible to prove.”). Accordingly, we conclude
that when a plaintiff offers statistical evidence to prove discriminatory effect in a
selective enforcement case, a “distinguishable legitimate enforcement factor” is one that
is identifiable on the face of the statistics or made apparent from other evidence in the
record. To hold otherwise would mean interpreting the law to permit a claim (and an
avenue for bringing that claim through statistics), while simultaneously making it
impossible for such a claim to make it to a jury (by imposing a standard of proof that
defies statistics). This cannot be right.
It is significant that Holmes may raise his proposed enforcement factors, if true,
before the jury to attack Appellants’ statistical evidence at trial. Conversely, requiring a
plaintiff’s statistics to be so detailed as to disprove any possible enforcement factor that a
defendant may assert, even when there is no record evidence that any such factor exists,
would mean a plaintiff’s proof must be completely unassailable both factually and as a
matter of law to even submit it to a jury.
Finally, Appellants could only bring this claim by relying on data received from
Albemarle County. In other words, the very entity who decides what data to record is the
same entity that would benefit from vague or incomplete statistics in selective
24
enforcement cases like this one. Although the burden of proving a selective enforcement
claim is on the plaintiff, we cannot ignore the reality that the recordkeeping is entirely
under the county’s control. Defendants could evade liability by simply omitting
necessary information from their records. The law should not create or allow such an
incentive.
4.
Whether Appellants’ Statistics are Sufficient
The remaining question is whether Appellants’ statistics are sufficient evidence of
discriminatory effect when applying the correct standard -- that is, whether the statistics
or other evidence in the record reveal no distinguishable legitimate enforcement factors
that justify making different enforcement decisions between Appellants and the white
drivers reflected in the statistics.
At the outset, we note that Appellants’ statistics avoid the pitfall of the statistics at
issue in United States v. Armstrong, United States v. Hare, and United States v. Olvis. 14
Crucially, in each of these cases, the proffered statistics faltered because they said
nothing about individuals of other races who committed the same crimes but were treated
more favorably. For example, in Armstrong, the Supreme Court rejected the statistical
evidence proffered by the criminal defendants, which was (as relevant here) a “study”
14
Although Armstrong and Olvis are selective prosecution claims, they apply the
same standard as selective enforcement claims. See Hare, 820 F.3d at 99 (“This Court
has adopted Armstrong’s standard for proving selective prosecution as the standard for
proving selective enforcement.”).
25
conducted by the criminal defendants’ lawyers showing that “in every one” of the Office
of the Federal Public Defender’s 24 cases in 1991 in which a defendant was prosecuted
for conspiring to possess and distribute crack cocaine, the defendant was black.
Armstrong, 517 U.S. at 468–69. The Court held that the study was insufficient because it
addressed only the prosecuted black defendants and did not include evidence that
similarly situated white defendants could have been prosecuted but were not. Instead, the
study “presum[ed] that people of all races commit all types of crimes,” a presumption
that the Court determined “ha[d] no proper place in the analysis of this issue.” Id. at
469–70 (emphasis omitted). Thus, the flaw in the proffered study in Armstrong was that
it did not demonstrate that anyone outside of the 24 black defendants could have been
prosecuted, and the Court was unwilling to assume without evidence that such
individuals of other races existed.
But, significantly, Appellants’ statistics are unique in this respect. Because
Appellants charge one officer, Holmes, with selectively enforcing traffic laws based on
race (as opposed to an entire department), Appellants can compare data about Holmes’s
traffic stops and summonses by race with similar data from the rest of the police force
and from individual officers assigned to the same sectors as Holmes. Thus, even though
Albemarle County does not (and could not) record the races of specific drivers who could
have been stopped but were not, nor does it record the races of drivers who were stopped
but not ticketed, the percentage of white drivers stopped and ticketed by the other officers
patrolling the same locations as Holmes serves as a proxy to show the general racial
composition of drivers on the road that Holmes could have pulled over but did not.
26
But this is not necessarily enough to prove Appellants’ claims. As explained
above, to satisfy the similarly situated requirement, there can be no distinguishable
legitimate enforcement factors identifiable on the face of Appellants’ statistics or made
apparent from other evidence in the record that justify making different enforcement
decisions between Appellants and the white drivers reflected in the statistics. In this case,
we cannot conclude on the current record that no legitimate enforcement factors are
identifiable on the face of the statistics, because it is not clear whether Appellants’
statistics on J.A. 77, which shows the summonses issued by other officers in Sectors 1
and 2, are limited to traffic summonses.
We have already addressed Holmes’s contention that Appellants’ statistical
evidence may include summonses resulting from calls for service. As we noted, this
argument does not explain the racial disparity in Holmes’s summonses, since any racial
disparities created by calls for service would affect the other officers in Sectors 1 and 2 as
well. Separate from the calls for service issue, however, Holmes more broadly attacks
Appellants’ statistics as not being limited to traffic stops and traffic summonses, but as
including all summonses issued by an officer for any reason.
In response, Appellants maintain that the statistics reflect only traffic summonses.
Appellants first assert that the statistics were provided by Albemarle County in response
to a discovery request for traffic summonses. See Oral Argument at 3:34–38 (“All that
we requested were traffic summonses and traffic stops.”). Secondly, Appellants argue,
“the context of the charts demonstrate that they are traffic statistics.” Appellants’ Reply
Br. 1 n.1.
27
As to Appellants’ second point, we agree that the titles and context of the charts
provided by the county and proffered by Appellants on J.A. 74, 75, 76, and 78 indicate
that these statistics refer to traffic stops and summonses. J.A. 74, which relates to
Holmes’s traffic stops and summonses issued from 2009 to 2010, contains first a chart
titled “Number of Traffic Stops Conducted by Year,” followed by an identically
formatted chart titled “Number of Summonses Issued by Year.” The number of
summonses appear to be a subset of the number of traffic stops (those stops that resulted
in a summons being issued), and there is nothing on the face of the statistics nor any other
evidence in the record to suggest that the data includes summonses from any source other
than traffic stops. J.A. 75 includes only demographic data; nevertheless, it notes:
“Demographic data is not available for traffic stops unless a summons/citation is issued.”
The inclusion of this note on J.A. 75, which otherwise contains no data about summonses
or other enforcement activities, suggests that the statistics were generated in response to a
data request specific to traffic enforcement. J.A. 76 and 78, titled “2015 County Traffic
Statistics” and “Traffic Unit,” respectively, appear clearly tailored to traffic data and
include charts related to traffic crashes, traffic fatalities, and DUI arrests.
However, J.A. 77 does not specify that the summonses contained in that chart
were traffic summonses. In fact, J.A. 77 is the only chart that contains no mention of
“traffic.” Notably, Holmes is not included in the chart on J.A. 77, so we cannot
determine the value of the statistics on this chart. Thus, it is unclear whether all of
28
Appellants’ statistics compare Holmes’s traffic summonses to the other Sector 1 and 2
officers’ traffic summonses. 15
This leaves us with Appellants’ first point: that the statistics were provided by
Albemarle County in response to Appellants’ discovery request for traffic summonses.
However, the specific language of this data request is not in the record before us, and it
was apparently not in the record before the district court. As discussed at oral argument:
COURT: What did you ask for?
APPELLANTS’ COUNSEL: I asked for traffic summonses.
COURT: Traffic summonses?
COUNSEL: Yes. In fact, I have the request here.
COURT: Is the request in the record?
COUNSEL: No.
Oral Argument at 4:44–55.
The question of what data is depicted in J.A. 77 arose repeatedly in oral argument,
and Appellants’ counsel offered to supplement the record with Appellants’ original data
request to show specifically what Appellants asked the county for:
COURT: What we don’t know is what you asked for.
You’ve made a representation to us about what you asked for.
Both [counsel] told us, I think, that those discovery requests
are not in the record, and the responses to them are not in the
15
If further fact-finding reveals that the data underlying J.A. 77 is not limited to
traffic summonses, whether this is a distinguishable legitimate enforcement factor
precluding Appellants’ statistics from satisfying the similarly situated requirement is a
question for the district court to resolve in the first instance. We express no opinion on
this matter.
29
record . . . . It was also suggested . . . that you all could move
to supplement the record. You haven’t done that yet, right?
APPELLANTS’ COUNSEL: But it’s not too late, I hope.
COURT: You’re never going to know unless you make a
motion, will you?
Oral Argument at 37:06–41.
But Appellants’ subsequent motion to supplement did not include Appellants’
original data request to the county, but instead contained only the raw data used to
compile the chart in J.A. 74. Thus, Appellants have so far been unable to support their
assertion that they specifically requested traffic summonses from Albemarle County.
Accordingly, this court is unable to decipher on this record whether Appellants’
statistics satisfy the similarly situated requirement as a matter of law. Therefore, we
reverse the district court’s ruling excluding Appellants’ statistics from trial for the
purpose of proving discriminatory effect, and remand to the district court for further fact-
finding and analysis per the correct standard explained in this opinion. 16
Specifically, the question for the district court is whether there are distinguishable
legitimate enforcement factors apparent from the face of the statistics themselves or other
record evidence that justify making different enforcement decisions between Appellants
and the white drivers reflected in the statistics, bearing in mind the unique power
imbalances inherent in selective enforcement cases when plaintiffs are forced to rely on
16
In light of this remand, we accordingly dismiss as moot Appellants’ Motions to
Supplement, ECF Nos. 45 and 48.
30
the police department’s statistics to prove their claim. If Appellants show that they asked
for traffic stops and traffic summonses, they may rely on the information the county
provides about its own officers in response to that request. Thus, in that case, the district
court may safely presume J.A. 77 -- and the remaining statistical evidence created by the
county -- reflects traffic summonses.
B.
Captain Byers’s Testimony
Appellants also assert that the district court erred in excluding deposition
testimony by Captain Byers of the Albemarle County Police Department that he had
never sought a search warrant to look for a license suspension notice, nor was he aware
of any other officer who had done so. The district court ruled this evidence inadmissible
because Captain Byers’s statement did not establish that he had confronted similar
circumstances as Holmes’s stop and subsequent citation of Appellant Canada -- that is,
Captain Byers’s testimony did not state that he had issued a suspended license ticket to a
driver who denied receiving a suspension notice in the mail.
It strikes us that Captain Byers’s testimony could serve as evidence that Holmes
deviated from standard procedure in applying for a search warrant for the suspension
notice, which a jury may consider as evidence of discriminatory intent, if Captain Byers
testified that he has, in fact, faced similar circumstances as Holmes but chose not to apply
for a search warrant for a suspension notice. However, in the absence of such testimony,
we cannot conclude that the district court’s evidentiary ruling was “arbitrary and
31
irrational.” Noel v. Artson, 641 F.3d 580, 591 (4th Cir. 2011). Accordingly, the district
court did not abuse its discretion by excluding the evidence.
IV.
For these reasons, we affirm the district court’s evidentiary ruling regarding
Captain Byers’s testimony. However, the district court erred in applying an improperly
narrow definition of “similarly situated.” Therefore, we reverse the district court’s ruling
excluding Appellants’ statistical evidence proffered to prove discriminatory effect.
Because the record before us is insufficient for this court to determine whether the
proffered statistics establish Appellants’ claims as a matter of law, we remand to the
district court for further fact finding consistent with the proper standard described herein.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED
32
| {
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} |
41 F.3d 661
Hudsonv.Sam**
NO. 94-40270United States Court of Appeals,Fifth Circuit.
Nov 15, 1994
Appeal From: W.D.La., No. 6:93-CV-1184
1
AFFIRMED.
| {
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COURT OF
APPEALS
SECOND
DISTRICT OF TEXAS
FORT WORTH
NO. 2-01-408-CV
WILLIAM
J. MILLER APPELLANT
V.
KENNEDY
& MINSHEW, PROFESSIONAL APPELLEES
CORPORATION
A/K/A KENNEDY, MINSHEW,
CAMPBELL
& MORRIS, P.C., AND A/K/A
KENNEDY,
MINSHEW & CAMPBELL, P.C.,
AND
ROBERT MINSHEW
------------
FROM
THE 235TH DISTRICT COURT OF COOKE COUNTY
------------
OPINION
------------
I. Introduction
In
this fee forfeiture case, the primary issue we must decide is whether the trial
court abused its discretion by ruling that no forfeiture was required where the
jury found that appellees, who are attorneys, breached their fiduciary duty to
their client, appellant William J. Miller; that Miller ratified appellees’
misconduct and committed fraud; and that both appellees and Miller breached
their retainer fee agreement and were negligent, but only appellees suffered
damages. Because we conclude that the trial court’s ruling was not an abuse of
discretion and that none of Miller’s other complaints require a reversal of
this case, we affirm the trial court’s judgment.
II. Factual and Procedural Background
In
January 1994, Miller, accompanied by his accountant, contacted Robert Minshew,
an attorney with the law firm of Kennedy & Minshew, P.C. (the law firm),1 about defending Miller in a lawsuit involving a dispute
over losses on a commercial building (the Snuggs matter). Miller and the law
firm entered into a contingency fee agreement concerning the Snuggs matter.
Minshew eventually obtained a reversal of an arbitration award of $30,000
against Miller and secured Miller’s release from 90% of the debt on the
building.
Meanwhile,
in February 1994, Miller discussed with Minshew problems related to his
ownership in and control of North Texas Communications Company, Inc. (NTCC), a
telephone and cable television business. Miller was chairman of the board of
NTCC. He and his wife, Terese, owned 2500 shares, or 50%, of NTCC’s stock.
Alvin Fuhrman, NTCC’s president, and his wife owned the other 50% of the
stock.
Miller
was unhappy with his role in NTCC. He believed Fuhrman was “running the
company like it was his own,” rather than as an equal partnership, that
Fuhrman was not keeping him adequately informed of company business, and that
NTCC should have been paying dividends. Miller told Minshew that he had
contemplated selling the Millers’ interest in NTCC to either Fuhrman or a
third party, but had not been able to negotiate an acceptable sale price. For
example, a company had offered to purchase the Millers’ stock for $5 million
in 1992, but that deal fell apart when the company could not acquire 100% of
NTCC’s stock. In February 1994, Miller had also offered to sell the Millers’
stock to Fuhrman for $5.5 million. Fuhrman had countered with an offer for
$4,577,201, including interest, over a nine-year period, which had a cash value
equivalency of approximately $3 million.
At
meetings in February and December 1994, Miller and Minshew discussed Miller’s
concerns and what could be done to address them. There is conflicting evidence
concerning what representations Minshew made to Miller during these meetings
about his expertise. Miller and Fran Voth, Miller’s secretary and business
partner, 2 testified that Minshew said he could
take care of all of Miller’s problems, including getting NTCC to pay $200,000
per year in dividends, getting Miller equal control in the company, and getting
Fuhrman to allow Miller’s family members to work there. Miller and Voth
further testified that Minshew stated he could throw NTCC into receivership
anytime Miller wanted—something that was very attractive to Miller. Minshew
denied representing that he had any expertise in the area of retained earnings
or dividend potential, but acknowledged stating that he had experience with
corporate receiverships and that he knew the threat of a receivership got
everyone’s attention.
By
December 1994, Miller was ready to hire appellees to represent him in his
dealings with NTCC, and Miller and Minshew discussed the terms of a retainer fee
agreement (RFA). Although Minshew offered to work for $150 per hour, Miller
insisted on a contingent fee arrangement. Thus, the compensation section of the
RFA provided that, if appellees were “instrumental” in obtaining a sale of
the Millers’ NTCC stock to Fuhrman or a third party on terms and conditions
acceptable to the Millers, appellees would receive a fee equal to 20% of the net
sale proceeds, up to $500,000. The $500,000 cap was included at Miller’s
request. The law firm was hesitant to agree to a contingent rather than an
hourly fee because a forced sale might never occur for reasons unrelated to the
law firm’s work or the possibility of the sale itself. Consequently, Miller
agreed to a section providing for the transfer of eighty shares of the
Millers’ stock to the law firm in the event work had been performed but the
stock was not sold within twelve months.
Minshew
gave Miller a draft of the RFA, which Miller took home to review and discuss
with Voth. The Millers kept the RFA for approximately two weeks before returning
to the law firm to sign it. On January 27, 1995, after reading the agreement
aloud, the Millers and the law firm executed the RFA. The Millers acknowledged
in the RFA that appellees had “made no guarantees regarding the successful
resolution of matters for which [they had] been retained, and all expressions
relative thereto are matters of [appellees’] opinion only and shall not be
considered as express or implied warranties of the outcome of any such efforts
on behalf of [appellees].” Before execution of the agreement, Minshew had
never met or represented Terese Miller.
Although
the Millers employed Minshew to assist in selling the NTCC stock, they did not
intend to sell the stock. Miller testified that he had no intention of selling
in 1995, 1996, or 1997. He also admitted there was nothing for Minshew to do
until the Millers were ready to sell. Miller failed to disclose this information
to appellees and instead allowed Minshew to work on the stock sale and other
matters from January 1995 through February 1998, without pay or demand for pay.
In
February 1995, the Millers borrowed $100,000 from the law firm. Minshew
testified that, although the loan was discussed before the RFA was signed and
was secured by half of the Millers’ NTCC stock, it was not a condition of the
RFA. Miller testified that he doubted he would have entered the RFA if the
$100,000 loan had not been “part of” the agreement because he needed some
ready cash; however, there is no reference in the RFA to the loan.
The
RFA contained a section entitled “Duties and Authority of Attorneys,” which
provided that appellees were to “perform various legal duties in carrying out
the purposes and intents of this Agreement, and [were] authorized, but [were]
not to be limited,” to do several things, including:
1.examine
all books and records of NTCC and its subsidiary and affiliated companies,
including careful examination of all compensation paid to and fringe benefits
received by Fuhrman and his family members;
2.examine
all records and reports of NTCC and its subsidiary and affiliated companies on
file with any state or federal regulatory agency;
3.take
legal action, if necessary, to establish the Millers’ right and authority to
“effectively participate” in NTCC’s business affairs and to be effectively
represented by their 50% ownership in NTCC;
4.file
suit, if necessary, to recover on NTCC’s behalf any “unreasonable”
compensation or benefits provided Fuhrman or his family;
5.file
suit, if necessary, to establish NTCC’s capability to pay dividends to its
shareholders.
Minshew
did not personally do any of these things, but in June 1995 he hired James
Keller, a CPA, to prepare a valuation of NTCC and the Millers’ stock. Minshew
assumed that Keller would do anything listed in the first two categories of the
“Duties and Authority” section that was necessary to properly value a
company; however, Keller did not know about this provision and therefore did not
do everything listed in it. Keller did go to NTCC’s accounting firm in the
fall of 1995, where he reviewed NTCC’s audit and tax files, but he did not
examine any of NTCC’s books and records because they were not available at the
accounting firm. He then prepared a valuation of NTCC and placed a maximum value
of $4.5 million on the Millers’ stock.
Miller
rejected Keller’s stock valuation as unacceptable. Although Miller said he
would suggest alternative terms for the stock sale, he did not do so. Keller
also investigated the possibility of NTCC paying dividends in 1995, but Minshew
did not make a demand on Fuhrman for payment of a dividend. In February 1996,
however, Minshew prepared a letter to Fuhrman that addressed many of Miller’s
concerns and threatened a receivership. Miller told Minshew not to send the
letter. After several months passed, Miller stated that NTCC was expanding its
fiberoptic cables routes and that, as a result, he preferred not to strap the
company for cash through a forced stock buyout.
By
September 1996, the Millers still had not authorized any action on the potential
sale of their NTCC stock. Consequently, at the law firm’s request, the Millers
confirmed in writing that they did not want the law firm to take any action on
the stock sale. Although the Millers’ stock had not sold within the first
twelve months after the RFA was executed, appellees did not seek to enforce the
alternative compensation provision that entitled them to eighty shares of the
stock.
Meanwhile,
in August 1995, Miller sought a second loan from the law firm for $75,000
because he wanted to invest more money in oil leases. This loan, like the
previous one, was secured by the Millers’ stock in NTCC, but was unrelated to
the RFA. Although the Millers became badly delinquent on both notes, the law
firm never made any demand for payment or took any other action on the notes or
security.
Minshew
also continued to do other work for Miller. He assisted Miller in obtaining
revocation of a power of attorney that Miller had executed regarding a business
venture, prepared contracts for Miller regarding a pump business, assisted
Miller with his problems as Mayor of the City of Muenster, recovered $80,000 for
Miller from Fuhrman based on the use of NTCC money on an investment project, and
helped the Millers recover $186,500 in payments from NTCC or its subsidiary.
Miller did not offer to pay Minshew anything for his services in 1995, 1996, or
1997 because Miller considered him to be working on a contingency fee basis.
Terese
Miller passed away in January 1997. At a board of directors’ meeting in April
1997, Miller was reminded that he would need legal proof of who had the right to
vote Terese’s stock by the annual shareholders’ meeting in September, or he
would not be allowed to vote Terese’s stock at that meeting. The minutes from
the April meeting were read and approved at the May 1997 board of directors’
meeting, at which Miller was present.
Minshew
eventually learned of Terese’s death from a third party. He knew that Miller
could not vote Terese’s stock until it was transferred to him. In June 1997,
Minshew offered to handle the probate of Terese Miller’s estate so that
unclear ownership of her stock would not preclude or delay sale of the stock
when Miller decided to sell it. In July, Miller provided Minshew Terese’s will
to probate and said he wanted to pursue the stock sale. In the inventory and
appraisement that Minshew prepared and filed in probate, Miller valued the 2500
shares of NTCC stock at $6 million.
In
late May or early June 1997, Miller became angry with Fuhrman and instructed
Minshew to “throw the company into receivership immediately.” On August 22,
1997, Minshew, with Miller’s approval, sent Fuhrman a letter demanding
$9,600,000 in cash or a $10,600,000 term price for the Millers’ 50% stock
interest. Alternatively, the letter threatened a receivership proceeding against
NTCC.
Also
in August 1997, Miller asked appellees for help in obtaining a $550,000 bank
loan, part of which he intended to use to pay off his indebtedness to appellees.
Minshew referred Miller to American Bank of Texas and talked with the loan
officers there about the value of and ongoing efforts to sell Miller’s NTCC
stock. In order to induce the bank to make the loan to Miller, appellees agreed
to subordinate their security interest in Miller’s NTCC stock to the bank’s
interest. In return, the bank agreed to withhold approximately $220,000 in
disbursements from the loan to pay off Miller’s notes and accrued interest to
appellees.
In
a financial statement furnished to the bank, Miller valued the NTCC stock at $7
million. During the loan application process, the bank’s vice president,
Howard Manning, reviewed the RFA, which Miller had provided him, and pointed out
that if the stock sold, Miller would owe appellees 20% of the sale price up to
$500,000. Miller acknowledged this provision in the RFA, but told Manning he was
not going to pay appellees that much money.
On
the afternoon of September 2, 1997, Miller called and asked Minshew to meet him
at NTCC. Minshew had not read NTCC’s bylaws or the minutes from its board
meetings, so he was unaware that NTCC’s annual shareholders’ meeting was
scheduled for September. Minshew assumed that the purpose of the meeting was to
discuss the August 22 letter; however, he learned upon arrival that NTCC’s
annual shareholders meeting was scheduled for that evening. Miller was not
allowed to vote Terese’s stock at the meeting because it had not yet been
transferred to him in the probate proceeding. As a result, the composition of
NTCC’s board changed so that it was stacked against Miller. At the meeting,
Minshew threatened NTCC with litigation, and Fuhrman offered to buy the
Millers’ stock for $5 million to avoid litigation. When Miller did not accept
Fuhrman’s $5 million offer, Minshew suggested an independent appraisal, to
which Fuhrman agreed.
After
the shareholders’ meeting, Minshew told Miller that the “worst case
scenario” as a result of the realignment of NTCC’s board was that it might
delay for one year Miller’s ability to throw the company into receivership.
Minshew explained that it is much harder to force a company into receivership if
there is no deadlock within the board of directors. Minshew believed that a sale
of Miller’s stock could be achieved without a receivership, however, because
of Fuhrman’s desire to avoid litigation and purchase Miller’s stock. Miller
had lost all confidence in Minshew because of the shareholders’ meeting;
nonetheless, he continued to seek legal services from appellees.
Minshew
began working with Fuhrman’s attorney to obtain an independent appraisal of
the stock, and the attorneys located and agreed upon an independent appraiser.
Meanwhile, Fuhrman asked Cathey, Hutton, and Associates, a telecommunications
management consulting firm, to prepare a valuation of NTCC. Based on that
valuation, Fuhrman raised his offer for Miller’s stock to $6 million. Miller
did not accept the offer.
In
late January 1998, while Minshew worked to obtain the independent appraisal,
Miller tentatively agreed to sell his NTCC stock to a Mr. Flusche for a
purported $6.5 million, which included a $200,000 loan. Miller asked the law
firm to review the contracts that he planned to execute the next morning.
Minshew worked late into the night to review the documents and discovered that
the structure of the deal could have resulted in Miller’s loss of his stock
for only $200,000. The next morning, Minshew faxed Miller a four-page document
outlining why Miller should not consummate the sale and then spoke with him by
telephone. Miller explained that he needed $200,000 cash that day. Minshew
advised Miller that, if he needed the $200,000 immediately, he should ask
Fuhrman to buy the stock for $6 million and pay $200,000 up front.
After
the discussion with Minshew, Miller agreed to sell his stock to Fuhrman for $6
million, including $200,000 cash “up front” and $800,000 cash at closing.
The deal closed on February 13, 1998. In a state inheritance tax return later
prepared by Miller’s CPA, Miller reported that he had sold his stock in an
“arms length” transaction for $6 million.
After
the February 1998 closing, the law firm requested in writing that Miller pay the
contingency fee as provided by the RFA. Miller initially agreed to pay the fee
after he received his second million-dollar payment from Fuhrman. Shortly
thereafter, however, Miller stated that he would not pay the $500,000. Instead,
he offered to pay Minshew only on an hourly basis.
Minshew
prepared the federal estate tax return for Terese Miller’s estate, and Miller
signed it on June 11, 1998. Six days earlier, on June 5, Miller had filed the
underlying lawsuit. Miller sued appellees for breach of contract, legal
malpractice and negligence, breach of fiduciary duty, fraud, and DTPA
violations. Appellees counterclaimed for breach of contract, fraud, and to
recover their unpaid attorney’s fees.
After
a jury trial, the jury found in favor of Miller on his breach of fiduciary duty,
negligence, DTPA violations, and breach of contract claims, but that Miller had
suffered no damages as a result of the alleged conduct underlying these claims.
On appellees’ counterclaims, the jury found that Miller had breached the RFA
and committed fraud and that Minshew and the law firm had suffered $500,000 in
damages as a result of the breach and $500,000 in damages as a result of the
fraud. The jury found, however, that some or all of appellees’ claims for
damages were barred by appellees’ breach of their fiduciary duty to Miller.
Finally, the jury found that Minshew was instrumental in obtaining the sale of
Miller’s NTCC stock on terms and conditions that were acceptable to Miller and
that appellees were entitled to recover $500,000 from Miller as a result.
Based
on the jury’s verdict, the trial court rendered a take-nothing judgment for
Miller and a judgment for appellees for $500,000, plus pre- and post-judgment
interest and attorney’s fees. This appeal followed.
III. Issues on Appeal
Miller
complains that the trial court’s judgment is erroneous because:
•the RFA
was invalid;
•the RFA
and appellees’ attorney’s fees were unreasonable;
•the trial
court abused its discretion by concluding that no fee forfeiture was required
under the facts of this case;
•appellees’
recovery under the RFA is barred by their prior material breaches of the RFA;
•the
trial court improperly construed the “Duties and Authority of Attorneys”
section of the RFA;
•appellees
waived their right to compensation under the RFA;
•Miller
did not ratify appellees’ failure to comply with the RFA or their wrongful
acts;
•Miller
did not commit fraud;
•the
jury charge did not comply with the evidence;
•the
trial court abused its discretion by allowing two undesignated defense experts
to testify at trial;
•Miller
is entitled to recoup from appellees the interest he paid on the two loans that
they made to him; and
•Miller
is entitled to recover attorney’s fees based on the jury’s breach of
contract and DTPA findings.
IV. Invalidity of RFA
In
the first issue raised in his opening brief, Miller contends that the RFA was
invalid as a matter of law because it was “legally unconscionable,”
“unethical,” and “unenforceable” for various reasons. Miller abandons
this position in his reply brief, however, asserting instead that “[t]he
standard for fee disputes in civil litigation is reasonableness” and that
the unconscionability standard applies only to situations involving disciplinary
matters. Accordingly, we will not address Miller’s invalidity arguments.
V. Reasonableness of RFA and Attorney’s Fee
Miller
contends the $500,000 judgment for appellees is erroneous because there is no
evidence that the RFA or appellees’ fee was fair and reasonable.3 Although no jury issue was submitted on the fairness
and reasonableness of the RFA, the jury was specifically instructed in the
court’s charge that appellees had the burden to prove that the RFA was fair
and reasonable. We must assume that the jury properly followed this instruction.4
In
determining a “no-evidence” issue, we are to consider only the evidence and
inferences that tend to support the finding and disregard all evidence and
inferences to the contrary.5 Anything more
than a scintilla of evidence is legally sufficient to support the finding.6 More than a scintilla of evidence exists if
the evidence furnishes some reasonable basis for differing conclusions by
reasonable minds about the existence of a vital fact.7
When
an attorney-client relationship exists at the time a fee agreement is made, a
rebuttable presumption of unfairness or invalidity attaches to the agreement,
and the attorney has the burden of proving its fairness and reasonableness.8 Whether the fee agreement is fair and reasonable is
judged at its inception.9 Factors to be
considered in determining reasonableness include, but are not limited to:
1)
the time and labor required, the novelty and difficulty of the questions
involved, and the skill requisite to perform the legal service properly;
2)
the likelihood . . . that the acceptance of the particular employment will
preclude other employment by the lawyer;
3)
the fee customarily charged in the locality for similar legal services;
4)
the amount involved and the results obtained;
5)
the time limitations imposed by the client or by the circumstances;
6)
the nature and length of the professional relationship with the client;
7)
the experience, reputation, and ability of the lawyer or lawyers performing the
services; and
8)
whether the fee is fixed or contingent on results obtained or uncertainty of
collection before the legal services have been rendered.10
In
this case, the record contains the following evidence of the fairness and
reasonableness of the RFA and appellees’ attorney’s fee:
A. Fee customarily charged
Frank
Douthitt, an experienced trial lawyer, a former general counsel for the State
Bar of Texas, and a former state district judge, testified that a 20% contingent
fee was less than a typical contingent fee. Douthitt explained that a contingent
attorney fee could range from twenty-five to fifty percent, but that the most
common contingent fee was one-third. In addition, Miller himself insisted on
contracting for a contingent fee, rather than an hourly one, and negotiated the
$500,000 cap on the fee for the stock sale.
B. Uncertainty of collection
Douthitt
opined that there was “certainly nothing unreasonable or unethical” about
the RFA and that appellees “got the short end of the deal” because Miller
had the right to refuse to sell his stock, in which case there would be no fee.
Indeed, the 20% contingent fee with the $500,000 cap was not triggered unless
and until Miller decided to sell his stock—something he did not intend to do
when he entered the RFA and did not do for several years. Even the eighty-share
alternative compensation provision did not eliminate the risk of nonpayment. Had
it been enforced, appellees would have recovered only $192,000—if they had
sold the eighty shares to Fuhrman on the same terms as Miller—and they would
have been required to provide another three years’ legal services at no
charge.11
C. Time and labor required; Amount involved and
results obtained
The
law firm was hired to represent the Millers “in all matters relating to the
affairs of [NTCC] and its affiliated and subsidiary companies,” but appellees’
compensation was tied primarily to their being “instrumental” in obtaining a
sale of the Millers’ stock on terms acceptable to them or their obtaining
dividends for the Millers. Miller implies that appellees drafted the RFA in this
way so that a minimal amount of work under the agreement would entitle them to
their fee. This argument ignores the fact that Minshew offered to work for an
hourly fee and that it was Miller, not appellees, who insisted on the contingent
fee arrangement. Further, Minshew anticipated that obtaining a forced sale of
the Millers’ stock might not occur at all. Indeed, the RFA itself contemplated
that the stock sale might not occur for a year or more despite appellees’
provision of legal services. Finally, the RFA obligated appellees to represent
the Millers in “all matters” relating to NTCC, even though only certain
legal services would entitle them to any compensation.
This
evidence is more than a scintilla of evidence that the RFA and the $500,000
contingent fee provision were fair and reasonable when the RFA was executed.12 We overrule Miller’s first issue.
VI. Fee Forfeiture
In
his second and fourth issues, Miller contends that, in light of the evidence
supporting the jury’s findings on Miller’s claims against appellees and the
evidence that appellees improperly loaned Miller money, the trial court abused
its discretion by concluding that no fee forfeiture was required in this case.
“A
lawyer engaging in clear and serious violation of duty to a client may be
required to forfeit some or all of the lawyer’s compensation for the
matter.”13 Fee forfeiture is an equitable
remedy whose primary purpose is not to compensate the injured client, but to
protect the relationship of trust between attorney and client by discouraging
attorney disloyalty.14 Forfeiture is not
justified in each instance in which a lawyer violates a legal duty; some
violations are inadvertent or do not significantly harm the client.15 Thus, the remedy is restricted to “clear and
serious” violations of duty.16
Whether
a fee forfeiture should be imposed must be determined by the trial court based
on the equity of the circumstances.17 Certain
matters, however, are fact issues for the jury to decide.18
Such issues include but are not limited to whether or when the alleged
misconduct occurred, the attorney’s mental state and culpability, the value of
the attorney’s services, and the existence and amount of harm to the client.19
Once
the necessary factual disputes have been resolved, the trial court must
determine whether the attorney’s conduct was a clear and serious breach of
duty to his client, whether any of the attorney’s compensation should be
forfeited, and if so, the amount.20 Factors
the trial court is to consider in making these determinations include the
adequacy of other remedies, the weight to be given all other relevant issues,
and, most importantly, whether forfeiture is necessary to satisfy the public’s
interest in protecting the integrity of the attorney-client relationship.21
We
review the trial court’s fee forfeiture determination under an abuse of
discretion standard.22 A trial court does not
abuse its discretion unless it acts arbitrarily or unreasonably, without
reference to any guiding rules or principles.23
Merely because a trial court may decide a matter within its discretion in a
different manner than an appellate court would in a similar circumstance does
not demonstrate that an abuse of discretion has occurred.24
We may not substitute our judgment for the trial court’s unless the trial
court’s action was so arbitrary that it exceeded the bounds of reasonable
discretion.25
Legal
and factual sufficiency are relevant factors to be considered in assessing
whether the trial court abused its discretion.26
An abuse of discretion does not occur, however, where the trial court bases its
decisions on conflicting evidence, as long as some evidence reasonably supports
the trial court’s decision.27
In
this case, the jury made the following fact findings necessary for the trial
court to determine whether appellees’ fee should be forfeited:
•Appellees
failed to comply with their fiduciary duty to Miller; made negligent
misrepresentations to him (Minshew only); and engaged in false, misleading, or
deceptive acts or practices.28 The jury also
found, however, that appellees committed no willful misconduct—no fraud, no
unconscionable conduct, and no knowing or intentional misconduct.29
•Appellees
were negligent. The jury attributed 40% of the negligence to Minshew and 19% to
the law firm,30 but found that appellees were not
grossly negligent.
•Appellees
and Miller breached the RFA, but Miller was estopped from denying that he was
bound by the terms of the contract.
•Appellees’
breach of their legal duty to Miller occurred early in the parties’
relationship and several years before the stock sale in February 1998; Miller
should have discovered appellees’ breach of their fiduciary duty by January
27, 1995, which was the date the RFA was executed; and Miller should have
discovered appellees’ DTPA violations and negligence by October 15, 1996.
•Minshew
was instrumental in obtaining a sale of Miller’s NTCC stock upon terms and
conditions acceptable to him, and appellees were entitled to a $500,000 fee as a
result.
•Miller
ratified appellees’ conduct and their failure to comply with the RFA, and he
was estopped from claiming that the value of his NTCC stock at the time of the
stock sale was more than $6 million.
•Miller
suffered no damages as a result of any of appellees’ conduct.31
Based
on these jury findings, the trial court determined that the timing of appellees’
misconduct or duty violations caused Miller no significant harm and did not
affect the value of appellees’ work for him.32
The trial court also concluded that appellees’ misconduct or violations of
duty were not clear and serious; that appellees’ misconduct had no impact or
effect on the public’s interest in protecting the attorney-client
relationship;33 and that Miller’s request
for a fee forfeiture should therefore be denied.
We
conclude that the jury’s findings reasonably support the trial court’s
findings and conclusions. Thus, we hold that the trial court did not abuse its
discretion in determining that no fee forfeiture was required in this case.
Miller
contends that the jury’s finding that some or all of appellees’ claims for
damages were barred by their breach of fiduciary duty clearly shows the
“public’s viewpoint” that a fee forfeiture should be required in this
situation. We disagree. Not every breach of fiduciary duty requires a fee
forfeiture.34 Moreover, the propriety and
amount of a fee forfeiture are legal issues for the court, not the jury.35 A jury question on a legal issue is immaterial
because it calls for a finding beyond the province of the jury36
Therefore, both the question regarding appellees’ damages claims and the
jury’s answer to it were immaterial. Thus, to the extent that the jury’s
answer can be read as a finding that appellees’ recovery of their fee is
barred because of their breach of their fiduciary duty to Miller, the trial
court properly disregarded this finding.37
VII. Prior Material Breaches
Miller
contends that appellees’ material breaches of the RFA excuse him from paying
appellees their attorney’s fees under the RFA because appellees’ breaches of
the RFA preceded his breach of the RFA.38 The
jury found, however, that Miller’s breach of the RFA was not excused,
and Miller does not challenge the sufficiency of the evidence to support this
finding. In light of this finding and the evidence supporting it, we hold that
appellees’ alleged material breaches of the RFA did not preclude them from
recovering their attorney’s fees. We overrule Miller’s second and fourth
issues.
VIII. Trial Court’s Construction of the RFA
In
his third issue, Miller complains that the trial court misconstrued the
“Duties and Authority of Attorneys” section of the RFA by ruling that this
section did not impose any contractual duties on appellees.39
Miller asserts that the trial court’s erroneous construction prevented him
from fully presenting his case to the jury because it precluded him from putting
on evidence that appellees’ failure to do the things listed in the “Duties
and Authority” section proximately caused his breach of contract damages.
Miller also argues that the trial court’s ruling prohibited the jury from
finding that he suffered damages as a result of appellees’ breach of the RFA.
The
parties agreed that the RFA was unambiguous, so the trial court construed it as
a matter of law.40 Miller did not object
during trial to the trial court’s construction of the “Duties and
Authority” section. As a result, his complaints regarding the trial court’s
construction of this section are waived.41 We
overrule Miller’s third issue.
IX. Waiver of Compensation
In
his fifth issue, Miller contends that appellees are precluded, as a matter of
law, from recovering damages under the RFA because they waived their right to
compensation under the RFA. The jury found, however, that appellees did not
waive their claims for damages against Miller and were not estopped from
asserting those claims. Miller does not challenge these findings. Instead, he
asserts that, because appellees waived their right to eighty shares of the
Millers’ stock under the alternate compensation provision in paragraph (c) of
the RFA, they waived any rights they may have had to contractual compensation as
a matter of law. This argument is premised entirely upon Miller’s contention
that “[p]roper construction” of compensation paragraphs (a) and (c)
“confirms that they are mutually exclusive.”42
Miller offers no explanation for this assertion, and we are unable to discern
why he believes the paragraphs are mutually exclusive. Because this argument is
not adequately briefed, Miller’s fifth issue is overruled.43
X. Miller’s Ratification of Appellees’ Actions
In
his sixth issue, Miller challenges the legal and factual sufficiency of the
evidence to support the jury’s ratification findings.44
In addition, Miller asserts that the trial court should have disregarded the
jury’s ratification findings because they irreconcilably conflict with the
findings that appellees breached their fiduciary duty to Miller and engaged in
false, misleading, or deceptive acts or practices, and because the ratification
defense is not available where a breach of fiduciary duty has occurred. We will
address these arguments in turn.
A
person ratifies an unauthorized act if, by word or conduct, with knowledge of
all material facts, he confirms or recognizes the act as valid.45 Ratification may be inferred by a party’s course
of conduct and need not be shown by express word or deed.46
Ratification may also occur when a principal retains the benefits of a
transaction after acquiring full knowledge of his agent’s unauthorized act.47 The critical factor is the principal's knowledge
of the transaction and his actions in light of such knowledge.48
In
this case, the jury found that Miller ratified appellees’ “failure to
comply.” The jury was instructed that, for ratification of appellees’
failure to comply to occur, Miller had to continue to accept benefits under the
RFA after he became aware of the failure to comply, with full knowledge of the
failure to comply at the time of the ratification and with intent to ratify the
RFA in spite of the failure to comply.
The
jury also found that Miller ratified appellees’ “conduct.” The jury was
instructed that, for ratification of appellees’ conduct to occur, Miller had
to continue to accept benefits under the RFA after he became aware of the
misrepresentations, or to recognize the RFA as binding, with full knowledge of
the misrepresentations at the time of the ratification and with intent to ratify
the RFA in spite of the misrepresentations.
Miller
testified that, when he learned at the September 1997 shareholders’ meeting
that he could not vote Terese’s stock, he “lost all confidence” in Minshew
because “he didn’t take care of me. Everything that he promised me before,
why, it was out the window.” Miller contends that, at that time, he decided he
was not going to pay appellees for their services under the RFA because “they
hadn’t earned it.”
After
the September 1997 meeting, however, Miller allowed Minshew to continue to
attempt to obtain an independent appraisal of his NTCC stock, asked Minshew to
review his agreement to sell his stock to Mr. Flusche, and, based on Minshew’s
advice against the Flushe deal, decided to sell his stock to Fuhrman instead for
an arrangement that involved the immediate cash that Miller claimed he needed.
Minshew testified that the closing on the sale of Miller’s stock to Fuhrman
was “a pretty festive occasion,” that Miller was very happy, and that he
shook Minshew’s hand and thanked him. After the closing, appellees asked
Miller to pay the $500,000 contingency fee as provided by the RFA. Miller
initially agreed to pay the $500,000 fee after he received his second
million-dollar payment from Fuhrman. It was only later that Miller stated he
would not pay the $500,000, but instead wanted to pay only on an hourly basis.
This
evidence shows that Miller continued to accept benefits under the RFA with full
knowledge of appellees’ unauthorized acts and that, at least initially after
the stock sale occurred, he recognized the RFA as binding. Thus, we hold that
the evidence is legally and factually sufficient to support the jury’s
findings that Miller ratified appellees’ misconduct and failure to comply with
the RFA.49
Despite
sufficient evidentiary support for the jury’s ratification findings, Miller
contends that these findings irreconcilably conflict with the jury’s breach of
fiduciary duty and DTPA findings. He asserts that the breach of fiduciary duty
and DTPA findings were based on a finding that appellees failed to “fully and
fairly disclose all important information to [him] concerning the transaction”
and that he therefore could not have ratified with full knowledge of appellees’
misconduct. Failure to disclose, however, was only one of several acts or
omissions submitted to the jury as a basis for Miller’s breach of fiduciary
duty and DTPA claims.50 The jury could have
found a breach of fiduciary duty and DTPA violations based on any of the other
acts or omissions, none of which conflict with the ratification findings.
Moreover, the jury found that Miller should have discovered appellees’ breach
of fiduciary duty and DTPA violations by January 1995 and October 1996,
respectively.
We
must try to interpret jury findings in a manner that upholds the trial court’s
judgment.51 If there is any reasonable basis
upon which jury findings can be reconciled, we may not disregard them on the
ground of conflict.52 Because other grounds
submitted to the jury support the breach of fiduciary duty and DTPA findings and
the jury found that Miller discovered the facts that appellees allegedly failed
to disclose early in the parties’ relationship, we hold that there is a
reasonable basis upon which the challenged findings can be reconciled.
Accordingly, we overrule Miller’s sixth issue.53
XI. Miller’s Fraud
Miller
challenges the legal and factual sufficiency of the evidence to support the
jury’s finding that he committed fraud against appellees based on his failure
to disclose a material fact.54 Miller asserts
that, at most, his actions amounted to a mere breach of contract, not fraud. In
addition, Miller contends that the evidence does not support the damages award
for fraud.
A
person commits fraud if he (1) makes a false, material misrepresentation (2)
that he either knows to be false or asserts recklessly without knowledge of its
truth (3) with the intent that it be acted upon, (4) and the person to whom the
misrepresentation is made acts in reliance upon it (5) and is injured as a
result.55 A misrepresentation may consist of
the concealment or nondisclosure of a material fact when there is a duty to
disclose.56 The duty to disclose arises when
one party knows that the other party is ignorant of the true facts and does not
have an equal opportunity to discover the truth.57
A fact is material if it would likely affect the conduct of a reasonable person
concerning the transaction in question.58
The
record shows that Minshew offered to work for an hourly fee, but Miller insisted
on a fee arrangement that was contingent, in large part, upon appellees being
instrumental in obtaining a sale of the Millers’ NTCC stock on terms and
conditions acceptable to them. The $500,000 cap on the contingent fee was
included in the RFA at Miller’s request. When the parties entered into the RFA
in January 1995, however, Miller had no intention of selling his stock. Indeed,
Miller testified that he had no intention of selling in 1995, 1996, or 1997.
Minshew, on the other hand, believed that Miller desired to pursue a forced
buyout of the stock from December 1994 forward. Based on the RFA, Minshew
rendered Miller legal services on the stock sale and other matters from January
1995 through February 1998, without pay or demand for pay. In addition,
appellees never attempted to enforce the alternative compensation provision in
the RFA that entitled them to eighty shares of Miller’s stock if the stock did
not sell within a year.
Miller
testified that he never offered to pay for Minshew’s services “[b]ecause it
was a contingency basis.” Miller told a bank loan officer, however, that he
did not intend to perform the $500,000 contingency provision in the RFA.
This
evidence shows that Miller induced appellees to enter into the $500,000
contingent fee provision in the RFA by withholding from them the fact that he
had no intention of doing the very thing that would give rise to his contractual
duty to perform under that provision—sell his NTCC stock. The evidence also
shows that appellees reasonably relied on Miller’s failure to disclose in
entering into the RFA and that the bulk of the work they performed under the RFA
for three years was done in reliance upon it. After Miller’s stock eventually
sold, he still did not pay the $500,000 fee, but offered to pay Minshew an
hourly rate. Although Miller testified that he did not want to pay the $500,000
contingent fee because appellees had not earned it, the jury could have
concluded, based on the evidence, that Miller had never intended to pay this
fee. Thus, the evidence is legally and factually sufficient to support the
jury’s finding that Miller committed fraud.59
The
evidence also supports the jury’s finding that appellees were entitled to
recover $500,000 as benefit-of-the-bargain damages. Benefit-of-the-bargain
damages are simply the difference between the value as represented and the value
received.60 Under this measure of damages,
the defrauded party may recover lost profits that he would have made if the
bargain actually struck had been performed as promised.61
Here, the record shows that appellees would have received $500,000 if Miller had
performed as promised under the RFA, but that Miller paid nothing.62 Thus, Miller’s evidentiary challenge to the
jury’s damages award for fraud fails. We overrule Miller’s arguments
concerning the jury’s fraud findings.
XII. Jury Charge
A. Excuse
In
his seventh issue, Miller complains about several parts of the charge. Miller
first challenges the jury question on whether he or appellees were excused from
failing to comply with the RFA. The jury was instructed that failure to comply
with the RFA was excused if Miller waived compliance with the RFA, if Miller
committed fraud upon which appellees relied, or if the parties had agreed that a
new term would take the place of the breached term. Miller requested an
additional instruction that his failure to comply was excused if appellees
waived compliance with the RFA or if appellees committed fraud upon which Miller
relied. The trial court denied this request, and the jury found that none of the
parties’ conduct was excused.
Miller
asserts that the trial court’s overruling of his requested instruction was
reversible error because the instruction given misled the jury by not
instructing them how his failure to comply with the RFA could be excused. We
disagree. The jury was instructed that Miller’s breach of the RFA was excused
if the parties had agreed that a new term would take the place of the breached
term. Further, the waiver and fraud grounds for excuse that Miller requested
were submitted elsewhere in the charge, and the jury found against Miller on
both issues. The jury found that appellees did not waive their claims for
damages against Miller, that their claims against him were not barred by fraud,
and that appellees did not fraudulently induce Miller to enter the RFA. Thus,
assuming, for argument’s sake, that the trial court’s ruling, or the jury
instruction as given, was improper, no reversible error occurred.63 We overrule this argument.
B. Estoppel
Next,
Miller asserts that the trial court erred by submitting a jury question on
whether he was judicially estopped from claiming that the value of his NTCC
stock at the time of the February 1998 sale was more than $6 million. Miller
objected to the estoppel question on the basis that he had not taken an
inconsistent position against appellees in a prior judicial proceeding. “Under
the doctrine of judicial estoppel . . . a party is estopped merely by the fact
of having alleged or admitted in his pleadings in a former proceeding under oath
the contrary to the assertion sought to be made.”64
The party invoking the doctrine need not have been a party to the former
proceeding.65
Miller’s
sworn statement in the inventory and appraisement that his stock was worth $6
million was made under oath in a prior judicial proceeding, and it was contrary
to his assertion at trial that his stock was worth much more than that amount.
Accordingly, the trial court did not err by overruling Miller’s objection to
the judicial estoppel issue. We overrule this argument.
C. Damages
Miller
also contends that trial court reversibly erred by submitting the jury
instruction on breach of contract damages because the instruction improperly
told the jury to consider as an element of Miller’s damages the loss of his
NTCC stock’s fair market value as a consequence of appellees’ fraud, rather
than their failure to comply with the RFA. The reference to appellees’ fraud
was only one element of the damages instruction. The instruction also told the
jury to consider two other elements of damages for Miller: (1) the difference
between his financial position as a result of appellees’ failure to comply
with the RFA and his position if they had complied; and (2) the difference
between the amount he received for his NTCC stock and the market value of his
stock. Miller does not explain how, in light of the entire damages instruction,
the wording of the challenged element probably caused the rendition of an
improper judgment.66 Accordingly, we
overrule this argument.
D. Waived Complaints
Finally,
Miller makes numerous complaints about the jury charge that are waived because
they either were not raised at the charge conference or are inadequately briefed
on appeal,67 including:
•the
doctrine of judicial estoppel does not apply to the inventory and appraisement
he filed in Terese’s probate proceeding—in which he swore under oath that
the 2500 shares of NTCC stock were worth $6 million—because (1) appellees were
responsible for preparing the inventory and “advising him in how to complete
the forms,” (2) due to appellees’ misconduct, he was unaware of the true
value of his stock when he signed the document, and (3) the inventory could be
supplemented;
•the
estoppel questions were immaterial because they were questions of law for the
trial court to decide;
•the
evidence is insufficient to support the jury’s estoppel finding;68
•the
trial court erred by submitting a jury question on whether he was equitably
estopped from denying that he was bound by the terms of the RFA; and
•the
fraud issue was immaterial and should not have been submitted to the jury
because it was not supported by appellees’ pleadings.
We
overrule Miller’s seventh issue.
XIII. Undesignated Experts
In
his eighth issue, Miller asserts that the trial court reversibly erred by
allowing Alan Rohmer and Hubert G. Bares to testify regarding their valuations
of NTCC because neither Rohmer nor Bares was designated as a testifying expert
in appellees’ response to Miller’s request for disclosure.
A
party may request disclosure of a testifying expert’s identity, the subject
matter on which the expert will testify, a summary of the expert’s mental
impressions and opinions, and the data that the expert reviewed in anticipation
of his testimony.69 The purpose of this
pretrial disclosure rule is to give the opposing party sufficient information
about the expert's opinions to prepare to cross-examine the expert and to
prepare expert rebuttal evidence.70 A party
who fails to timely provide this information once it has been requested may not
offer the expert’s testimony unless the trial court finds that there was good
cause for the failure to timely provide the information or that the failure to
provide the discovery will not unfairly surprise or prejudice the other party.71 The burden of establishing good cause or lack of
unfair prejudice or surprise is on the party seeking to call the witness, and
the trial court’s finding of good cause or lack of prejudice or surprise must
be supported by the record.72 We review the
trial court’s ruling under an abuse of discretion standard.73
In
this case, Rohmer was designated as a fact witness in appellees’ response to
Miller’s disclosure request, but neither Rohmer nor Bares was listed as a
testifying expert. Consequently, Miller moved to exclude Rohmer’s and
Bares’s expert testimony.
At
the hearing on Miller’s motion, appellees pointed out that they had listed
both Rohmer and Bares as expert witnesses on their anticipated trial witness
list; Miller had deposed Bares by written questions; over a year before trial,
appellees had provided Miller Bares’s interrogatory responses and the written
valuation of NTCC that he had prepared for Cathey, Hutton, and Associates;74 Miller had deposed Rohmer, a NTCC employee who had also
valued NTCC, over a year before trial; and Rohmer had provided Miller all of the
data underlying his valuation of NTCC. Appellees argued that Miller would not be
unfairly surprised by Rohmer’s and Bares’s testimony because he had had the
substance of their testimony, as well as their discovery responses, valuations,
and underlying data, for over a year and had devoted considerable expert
testimony at trial to attacking their methodologies and valuations.
The
trial court ruled that Rohmer and Bares could testify because of the length of
time Miller had known of the substance of their testimony and because Miller’s
experts had devoted so much time to attacking their valuation reports. This
record supports the trial court’s finding that allowing Rohmer and Bares to
testify would not unfairly surprise or prejudice Miller; therefore, the trial
court’s ruling allowing their testimony was not an abuse of discretion.75 We overrule Miller’s eighth issue.
XIV. Recoupment of Interest
In
his ninth issue, Miller contends that, as a matter of law, he is entitled to
recoup the $42,000 in interest he paid to appellees on the two loans that they
made to him because the loans constituted a breach of appellees’ fiduciary
duty.76 Miller asserts that the loans were
impermissible because they were made to induce him to enter the RFA.
There
is no indication in the record that the jury’s finding that appellees breached
their fiduciary duty was based on the loans. None of the instructions on the
breach of fiduciary duty issue mentions the loans. In addition, the jury found
that Miller should have discovered appellees’ breach of their fiduciary duty
by January 27, 1995, which was before either loan was made. The jury also found
that Miller ratified appellees’ misconduct by continuing to accept benefits
under the RFA. In view of these jury findings, there is no basis for awarding
Miller the interest he paid on the loans; therefore, Miller is not entitled to
recoup this interest from appellees.77 We
overrule this argument.
XV. Attorney’s Fees
Finally,
Miller asserts that he is entitled to attorney’s fees based on the jury’s
breach of contract and DTPA findings. A party is not entitled to recover
attorney’s fees on a breach of contract or DTPA claim absent a recovery of
actual damages or something of value.78 A
plaintiff who receives nominal or zero damages is not entitled to attorney’s
fees.79
The
jury did not award Miller damages or anything of value. Therefore, the trial
court did not err by not awarding him attorney’s fees.80
We overrule Miller’s ninth issue.
XVI. Conclusion
Having
disposed of all of Miller’s issues, we affirm the trial court’s judgment.
JOHN
CAYCE
CHIEF
JUSTICE
PANEL
A: CAYCE, C.J.; WALKER, J.; and SAM J. DAY, J.
(Retired, Sitting by Assignment).
DELIVERED:
November 20, 2003
NOTES
1.
The law firm has also been known as Kennedy, Minshew, Campbell & Morris,
P.C. and Kennedy, Minshew & Campbell, P.C. We sometimes refer to Minshew and
the law firm collectively as “appellees.”
2.
Voth was present at the meetings between Minshew and Miller.
3.
Miller also asserts that the judgment is erroneous because appellees did not
plead that their fee was reasonable or submit a jury issue on reasonableness.
Miller does not, however, direct us to any place in the record where this
complaint was raised in the trial court, and our review of the record has
revealed none. Therefore, this argument is waived, and we will not consider it. See
Tex. R. App. P. 33.1(a); Bushell
v. Dean, 803 S.W.2d 711, 712 (Tex. 1991) (op. on reh’g); see also
Rogers v. Stell, 835 S.W.2d 100, 101 (Tex. 1992) (holding that complaint on
appeal must be the same as that presented in the trial court).
4.
See Turner, Collie & Braden, Inc. v. Brookhollow, Inc., 642 S.W.2d
160, 167 (Tex. 1982).
5.
Bradford v. Vento, 48 S.W.3d 749, 754 (Tex. 2001); Cont’l Coffee
Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex. 1996); In re King's
Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951).
6.
Cazarez, 937 S.W.2d at 450; Leitch v. Hornsby, 935 S.W.2d 114, 118
(Tex. 1996).
7.
Rocor Int’l, Inc. v. Nat’l Union Fire Ins. Co., 77 S.W.3d 253, 262
(Tex. 2002).
8.
Archer v. Griffith, 390 S.W.2d 735, 739 (Tex. 1964); accord Keck,
Mahin & Cate v. Nat’l Union Fire Ins. Co., 20 S.W.3d 692, 699 &
n.3 (Tex. 2000); Honeycutt v. Billingsley, 992 S.W.2d 570, 582 (Tex.
App.—Houston [1st Dist.] 1999, pet. denied) (op. on reh’g).
Appellees argue that Miller, not appellees, had the burden to prove the fairness
and reasonableness of the RFA because there was no attorney-client relationship
between them and Miller regarding NTCC at the time the RFA was executed.
Appellees did not, however, object to the trial court’s instruction on these
grounds; therefore, this argument is waived. See Tex. R. App. P. 33.1(a); Rogers,
835 S.W.2d at 101. Further, we note that the evidence shows that Miller and
appellees’ attorney-client relationship regarding NTCC began in February 1994,
when Miller first discussed with Minshew his problems related to NTCC.
9.
Archer, 390 S.W.2d at 740.
10.
Tex. Disciplinary R. Prof’l Conduct
1.04(b), reprinted in Tex. Gov’t
Code Ann., tit. 2, subtit. G app. A (Vernon 1998) (Tex. State Bar R. art. X, § 9); Arthur
Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997).
11.
We do not consider whether the eighty-share alternative compensation provision
was fair and reasonable because appellees never sought to enforce the provision.
12.
In one sentence, Miller contends that the jury’s breach of fiduciary duty
finding “effectively negates” the jury’s finding that the RFA was fair and
reasonable. We do not address this argument because it is not briefed. See
Tex. R. App. P. 38.1(h); see
also Fredonia State Bank v. Gen. Am. Life Ins. Co., 881 S.W.2d 279, 284
(Tex. 1994) (noting that argument may be waived due to inadequate briefing). In
addition, because there is some evidence that the RFA and appellees’ fee were
reasonable, we need not reach Miller’s assertion that the contractual and
fraud damages cannot be upheld on the ground that there is no evidence of the
fee’s fairness and reasonableness. See Cazarez, 937 S.W.2d at 450; Archer,
390 S.W.2d at 740.
13.
Burrow v. Arce, 997 S.W.2d 229, 241 (Tex. 1999) (quoting Restatement (Third) of Law Governing Lawyers
§ 37 (2000)).
14.
Id. at 238, 245.
15.
Id. at 241.
16.
Id.; Restatement (Third) of Law
Governing Lawyers § 37 & cmt. d.
17.
Burrow, 997 S.W.2d at 245; State v. Tex. Pet Foods, Inc., 591
S.W.2d 800, 803 (Tex. 1979).
18.
Burrow, 997 S.W.2d at 245-46; see also Tex. Pet Foods, 591 S.W.2d
at 803 (stating that, in an equitable proceeding, “ultimate issues of fact are
submitted for jury determination”).
19.
Burrow, 997 S.W.2d at 246.
20.
Id.
21.
Id. at 245-46.
22.
See id. at 242-43; Restatement
(Third) of Law Governing Lawyers § 37 cmt. b (both stating that the fee
forfeiture remedy should be applied with discretion); Jackson Law Office,
P.C. v. Chappell, 37 S.W.3d 15, 23 (Tex. App.—Tyler 2000, pet. denied)
(applying abuse of discretion standard of review to trial court’s fee
forfeiture determination).
23.
See Carpenter v. Cimarron Hydrocarbons Corp., 98 S.W.3d 682, 687 (Tex.
2002); Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.
1985), cert. denied, 476 U.S. 1159 (1986).
24.
Downer, 701 S.W.2d at 241-42.
25.
Butnaru v. Ford Motor Co., 84 S.W.3d 198, 211 (Tex. 2002).
26.
Beaumont Bank v. Buller, 806 S.W.2d 223, 226 (Tex. 1991); Tex. Dep’t
of Health v. Buckner, 950 S.W.2d 216, 218 (Tex. App.—Fort Worth 1997, no
pet.).
27.
Butnaru, 84 S.W.3d at 211; Davis v. Huey, 571 S.W.2d 859, 862
(Tex. 1978).
28.
The jury was not asked whether appellees’ loans to Miller were improper and
therefore did not make a finding on that issue. Irrespective of the propriety of
the loans, the evidence does not show, as Miller implies, that appellees simply
waited for him to default on the loans, rather than rendering services under the
RFA, because of the stock interest he had given them to secure the loans. To the
contrary, in September 1996, the Millers confirmed in writing that they did not
want appellees to take any action on the stock sale, and appellees never took
any action against Miller on the loans, even though he became badly delinquent
on both of them.
29.
Conversely, the jury found that Miller committed fraud against appellees.
30.
The jury attributed the remaining 41% of the negligence to Miller.
31.
In contrast, the jury found that appellees suffered $500,000 in damages due to
Miller’s breach of the RFA and $500,000 in damages because of his fraud. The
jury also found that appellees had not waived their damages claims against
Miller and were not estopped from asserting them.
32.
Miller contends that these trial court findings are irrelevant and immaterial
because only the jury can resolve factual disputes in a forfeiture proceeding.
Where an abuse of discretion standard of review applies to a trial court's
ruling, findings of fact and conclusions of law aid us in reviewing the
propriety of the ruling by providing us with an explanation for the ruling. Chrysler
Corp. v. Blackmon, 841 S.W.2d 844, 852 (Tex. 1992); Samuelson v. United
Healthcare of Tex., Inc., 79 S.W.3d 706, 710 (Tex. App.—Fort Worth 2002,
no pet.). The trial court’s fact findings are helpful in this case because
they demonstrate how the court weighed “all other relevant considerations”
to the forfeiture issue. Burrow, 997 S.W.2d at 245.
33.
Although the trial court mislabeled some of its conclusions of law as
“Findings of Fact,” they are nonetheless legal conclusions on matters
committed to the court’s discretion. See id. at 246.
34.
Id. at 241.
35.
Id. at 246; Jackson Law Office, 37 S.W.3d at 23.
36.
S.E. Pipe Line Co. v. Tichacek, 997 S.W.2d 166, 172 (Tex. 1999); Spencer
v. Eagle Star Ins. Co. of Am., 876 S.W.2d 154, 157 (Tex. 1994).
37.
See S.E. Pipe Line Co., 997 S.W.2d at 172; Great Am. Prods. v.
Permabond Int’l, 94 S.W.3d 675, 682 (Tex. App.—Austin 2002, pet.
denied). Even assuming the jury’s breach of fiduciary duty findings were
material to the trial court’s fee forfeiture determination, the jury was asked
only whether appellees’ damages claims were barred, not whether appellees
should be required to forfeit their fee. Indeed, in response to a different
question, the jury found that appellees were entitled to recover $500,000 from
Miller as a result of being instrumental in obtaining a sale of his stock upon
terms and conditions acceptable to him.
38.
Generally, a party’s breach of mutually dependent, reciprocal promises in a
contract excuses performance by the other party. Hanks v. GAB Bus. Servs.,
Inc., 644 S.W.2d 707, 708 (Tex. 1982); Shaw v. Kennedy, Ltd., 879
S.W.2d 240, 247 (Tex. App.—Amarillo 1994, no writ). Treating a contract as
continuing after a breach, however, deprives the nonbreaching party of any
excuse for terminating his own performance. Hanks, 644 S.W.2d at 708; Chilton
Ins. Co. v. Pate & Pate Enters., Inc., 930 S.W.2d 877, 888 (Tex.
App.—San Antonio 1996, writ denied).
39.
See supra at part II for the contents of this section.
40.
See MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650
(Tex. 1999); Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983).
41.
See Tex. R. App. P.
33.1(a); Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex.), cert. denied,
530 U.S. 1244 (2000).
42.
Compensation paragraph (a) provided:
In
the event that actions of attorneys are instrumental in obtaining a sale of
Clients’ shares to Fuhrman or to a third party, upon terms and conditions
acceptable to Clients, Attorneys shall receive[] a fee equal to 20%, not to
exceed $500,000.00, of the net proceeds to be received by Clients from such
sale, to be paid by Clients to Attorneys if and when received by Clients.
Compensation
paragraph (c) provided:
In
the event that Attorney’s services are rendered as set forth above, but do not
result in a sale of Clients’ stock on terms and conditions acceptable to
Clients . . . Clients agree to assign eighty shares of stock in [NTCC] to
Attorneys in return for which Attorneys agree to continue to represent Clients
in all legal matters relating to the affairs of [NTCC] and all other personal
legal matters, without additional fee, for a period of three (3) years from and
after the date of such transfer of stock. The obligation to transfer stock in
accordance with the provision of this paragraph shall arise if and only if
Clients[‘] shares have not been sold as set forth above within twelve (12)
months from the date hereof.
43.
Because Miller has waived his argument that appellees waived their right to
compensation under the RFA, we do not address Miller’s related arguments that
appellees breached their fiduciary duty by waiving their right to compensation
in the form of stock in order to “gain the economic advantage of obtaining a
greater fee” and by failing to disclose their waiver to Miller.
44.
Miller also complains that the jury questions on ratification did not properly
define ratification because the trial court did not instruct the jury that
Miller was required to have full knowledge of all material facts. This complaint
is waived because Miller did not raise it at the charge conference. See Tex. R. App. P. 33.1(a); Osterberg,
12 S.W.3d at 55.
45.
Mo. Pac. R.R. Co. v. Lely Dev. Corp., 86 S.W.3d 787, 792 (Tex.
App.—Austin 2002, pet. dism’d); Garrison Contractors, Inc. v. Liberty Mut.
Ins. Co., 927 S.W.2d 296, 302 (Tex. App.—El Paso 1996), aff’d,
966 S.W.2d 482 (Tex. 1998).
46.
Mo. Pac. R.R. Co., 86 S.W.3d at 792.
47.
Land Title Co. of Dallas, Inc. v. F.M. Stigler, Inc., 609 S.W.2d 754, 756
(Tex. 1980).
48.
Id.
49.
Miller’s related argument that the acceptance of benefits doctrine applies to
this case is waived because Miller did not request that the issue be submitted
to the jury. See Tex. R. Civ. P.
278.
50.
In addition to failure to disclose, five other acts or omissions were submitted
to the jury in support of Miller’s breach of fiduciary claim: (1) the
transactions in question were not fair and equitable to him; (2) appellees did
not make reasonable use of the confidence Miller placed in them; (3) appellees
did not act in utmost good faith and exercise the most scrupulous honesty
towards Miller; (4) appellees placed their interests before Miller’s or used
their position to gain a benefit for themselves at Miller’s expense; and (5)
appellees placed themselves in a position where their self-interests might
conflict with their fiduciary obligations. In addition, the jury was instructed
that appellees violated the DTPA if they represented that their services had or
would have characteristics or benefits that they did not; that the services were
or would be of a particular standard or quality if they were of another; or that
an agreement conferred or involved rights, remedies, or obligations that it did
not have or involve.
51.
First Fed. Sav. & Loan Ass'n v. Sharp, 359 S.W.2d 902, 903 (Tex.
1962); Rice Food Mkts., Inc. v. Ramirez, 59 S.W.3d 726, 733-34 (Tex.
App.—Amarillo 2001, no pet.).
52.
Bender v. S. Pac. Transp. Co., 600 S.W.2d 257, 260 (Tex. 1980).
53.
We do not address Miller’s contention that ratification is inapplicable in
this case due to the jury’s breach of fiduciary duty finding, because he cites
no relevant authority to support his position. See Tex. R. App. P. 38.1(h); Fredonia
State Bank, 881 S.W.2d at 284. The sole case on which Miller relies is
inapposite because it involved a breach of fiduciary finding that the agent had
committed constructive fraud and had significantly benefitted from his breach at
his principal’s expense. See Spangler v. Jones, 861 S.W.2d 392, 395-96
(Tex. App.—Dallas 1993, writ denied), disapproved on other grounds by
Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507
(Tex. 1998). Here, however, the jury found that Miller committed fraud,
but that appellees did not, and that Miller was not harmed by appellees’
breach of their fiduciary duty.
54.
Miller’s related complaints, that the fraud issue is immaterial and that the
trial court should not have submitted the issue to the jury because it was not
supported by appellees’ pleadings, are waived because they either are
inadequately briefed on appeal or were not raised at the charge conference. See
Tex. R. App. P. 33.1(a), 38.1(h); Osterberg,
12 S.W.3d at 55; Fredonia State Bank, 881 S.W.2d at 284.
55.
Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc.,
960 S.W.2d 41, 47-48 (Tex. 1998); State Nat’l Bank v. Farah Mfg. Co., 678
S.W.2d 661, 681 (Tex. App.—El Paso 1984, writ dism’d by agr.).
56.
Custom Leasing, Inc. v. Tex. Bank & Trust Co., 516 S.W.2d 138, 142
(Tex. 1974); New Process Steel Corp. v. Steel Corp. of Tex., Inc., 703
S.W.2d 209, 214 (Tex. App.—Houston [1st Dist.] 1985, writ ref’d
n.r.e.).
57.
New Process Steel Corp., 703 S.W.2d at 214.
58.
Custom Leasing, 516 S.W.2d at 142. Here, the jury was instructed that
Miller committed fraud if he concealed or failed to disclose a material fact
within his knowledge; knowing that appellees were ignorant of the fact and did
not have an equal opportunity to discover the truth; with the intent to induce
appellees to take some action due to the concealment or failure to disclose; and
appellees suffered injury as a result of acting without knowledge of the
undisclosed fact.
59.
See Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 406 (Tex.), cert.
denied, 525 U.S. 1017 (1998); Cazarez, 937 S.W.2d at 450
60.
Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 681 (Tex. 2000); Formosa
Plastics Corp., 960 S.W.2d at 49.
61.
Formosa Plastics Corp., 960 S.W.2d at 50. In this case, the jury was
instructed to consider the difference, if any, between the amount of contractual
benefits agreed to under the RFA and the amount of contractual benefits paid.
62.
Miller erroneously relies on the Texas Supreme Court’s decision in Conoco
for the proposition that, to recover benefit-of-the-bargain damages, appellees
were required to prove the bargain they would have made if they had known that
Miller did not intend to pay the $500,000 fee. The plaintiff in Conoco
sought, as benefit-of-the-bargain damages, lost profits for a bargain that
allegedly would have been struck, but was not, due to the defendant’s fraud.
The supreme court held that a party may recover lost profits in that situation
if there is evidence of the bargain that would have been struck had the
defrauded party known the truth. Conoco, 52 S.W.3d at 681-82. We do not
have the Conoco situation here; instead, appellees sought only the lost
profits that they would have received if the bargain actually struck—the
$500,000 contingency fee provision in the RFA—had been performed as promised.
63.
See Tex. R. App. P.
44.1(a)(1) (providing that trial court’s judgment may not be reversed based on
error of law unless error probably caused rendition of an improper judgment).
64.
Long v. Knox, 155 Tex. 581, 291 S.W.2d 292, 295 (1956).
65.
Id.
66.
See Tex. R. App. P.
44.1(a)(1).
67.
See Tex. R. App. P.
33.1(a); Osterberg, 12 S.W.3d at 55; Fredonia State Bank, 881
S.W.2d at 284.
68.
Miller cites neither evidence nor case law to support his evidentiary challenge.
We note, however, that the same evidence that supports the jury’s fraud
finding is legally and factually sufficient to support an equitable estoppel
finding. See Nelson v. Jordan, 663 S.W.2d 82, 87 (Tex. App.—Austin
1983, writ ref’d n.r.e.) (stating that elements of equitable estoppel are a
false representation or concealment of material fact, made with knowledge of the
facts, to a party without knowledge of or the means of knowing those facts, with
the intention that it should be acted upon, and detrimental reliance by the
party to whom it was made).
69.
Tex. R. Civ. P. 194.2(f).
70.
Exxon Corp. v. W. Tex. Gathering Co., 868 S.W.2d 299, 304 (Tex. 1993); Taylor
Foundry Co. v. Wichita Falls Grain Co., 51 S.W.3d 766, 773 (Tex. App.—Fort
Worth 2001, no pet.).
71.
Tex. R. Civ. P. 193.6(a); Vingcard
A.S. v. Merrimac Hospitality Sys., Inc., 59 S.W.3d 847, 855 (Tex.
App.—Fort Worth 2001, pet. denied) (op. on reh’g).
72.
Tex. R. Civ. P. 193.6(b).
73.
Bodnow Corp. v. City of Hondo, 721 S.W.2d 839, 840 (Tex. 1986); Vingcard,
59 S.W.3d at 855.
74.
Before the stock sale, Fuhrman hired Cathey, Hutton, and Associates to prepare a
valuation of NTCC. Bares prepared the valuation for Cathey, Hutton.
75.
See Carpenter, 98 S.W.3d at 687 (stating that trial court abuses its
discretion if it acts without reference to any guiding rules and principles).
76.
Miller also contends that the loans violated the Texas Disciplinary Rules, but
acknowledges that disciplinary rule violations do not constitute independent
causes of action.
77.
The cases on which Miller relies to support his claim for recoupment are
inapposite because, unlike this case, they involved situations in which the
agents secretly benefitted from the transactions they performed on behalf of
their principals. See Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d
193, 200-01 (Tex. 2002); Anderson v. Griffith, 501 S.W.2d 695, 701-02
(Tex. Civ. App.—Fort Worth 1973, writ ref’d n.r.e.) (both holding that agent
who secretly benefits from transaction performed on behalf of principal must
disgorge profit).
78.
Gulf States Utils. Co. v. Low, 79 S.W.3d 561, 567 (Tex. 2002); Green
Int’l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997); ITT Commercial
Fin. Corp. v. Riehn, 796 S.W.2d 248, 256 (Tex. App.—Dallas 1990, no writ).
79.
Low, 79 S.W.3d at 567.
80.
The two cases Miller cites to demonstrate that the trial court erred in not
awarding him attorney’s fees are not on point. In those cases, the jury
findings indicated that the prevailing parties were entitled to recover
something of value, even though no damages were awarded. See Atl. Richfield
Co. v. Long Trusts, 860 S.W.2d 439, 450 (Tex. App.—Texarkana 1993, writ
denied) (upholding attorney’s fee award where jury found that breaching party
did not owe prevailing party any money on breach of contract claim because
prevailing party had been able to recoup most of its damages from breaching
party while litigation was pending); Martini v. Tatum, 776 S.W.2d 666,
669-70 (Tex. App.—Amarillo 1989, writ denied) (upholding attorney’s fee
award where jury’s findings indicated that prevailing party would have been
entitled to recover damages, but no damages issue was submitted).
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237 P.3d 221 (2010)
348 Or. 621
ALLEN
v.
OREGON STATE BD. OF NURSING.
(S058547).
Supreme Court of Oregon.
July 29, 2010.
Petition for Review Denied.
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72 So.3d 757 (2011)
ALEXIS
v.
STATE.
No. 3D10-761.
District Court of Appeal of Florida, Third District.
October 5, 2011.
DECISION WITHOUT PUBLISHED OPINION
Affirmed.
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United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT June 9, 2006
Charles R. Fulbruge III
Clerk
No. 05-60835
Summary Calendar
CEASAR AUGUSTO AVILA IBANEZ,
Petitioner,
versus
ALBERTO R. GONZALES, U.S. ATTORNEY GENERAL,
Respondent.
--------------------
Petition for Review of an Order of the
Board of Immigration Appeals
BIA No. A75 523 074
--------------------
Before JOLLY, DAVIS, and OWEN, Circuit Judges.
PER CURIAM:*
Ceasar Augusto Avila Ibanez (Avila), a native and citizen of
Guatemala, petitions this court to review the decision of the
Board of Immigration Appeals (BIA) adopting and affirming the
decision of the Immigration Judge (IJ) denying his application
for withholding of removal. Avila argues that he demonstrated
both past persecution and a well-founded fear of future
persecution as a result of his activities in a defunct political
party.
*
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.
No. 05-60835
-2-
We conclude from a review of the record that the BIA’s
determination is supported by substantial evidence, and the
record does not compel a conclusion contrary to the BIA’s denial
of withholding of removal. See Roy v. Ashcroft, 389 F.3d 132,
138 (5th Cir. 2004); Efe v. Ashcroft, 293 F.3d 899, 906 (5th Cir.
2002); 8 C.F.R. § 208.16(b). The petition for review is DENIED.
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225 U.S. 623 (1912)
MURPHY
v.
PEOPLE OF THE STATE OF CALIFORNIA.
No. 204.
Supreme Court of United States.
Argued March 11, 1912.
Decided June 7, 1912.
ERROR TO THE SUPERIOR COURT OF LOS ANGELES COUNTY, STATE OF CALIFORNIA.
*624 Mr. Alfred S. Austrian, with whom Mr. Levy Mayer was on the brief, for plaintiff in error.
Mr. John E. Carson, with whom Mr. Lynn Helm was on the brief, for defendant in error.
*627 MR. JUSTICE LAMAR delivered the opinion of the court.
In 1908 the city of South Pasadena, California, in pursuance of police power conferred by general law, passed an ordinance which prohibited any person from keeping or maintaining any hall or room in which billiard or pool tables were kept for hire or public use, provided it should not be construed to prevent the proprietor of a hotel using a general register for guests, and having twenty-five bedrooms and upwards, from maintaining billiard tables for the use of regular guests only of such hotel, in a room provided for that purpose.
The plaintiff in error was arrested on the charge of *628 violating this ordinance. His application for a writ of habeas corpus was denied by the Court of Appeals and Supreme Court of the State. In re Murphy, 8 Cal. App. 440; 155 California, 322. Thereafter the case came on for trial in the Recorder's Court, where the defendant testified that, at a time when there was no ordinance on the subject, he had leased a room in the business part of the city, and at large expense fitted it up with the necessary tables and equipments; that the place was conducted in a peaceable and orderly manner; that no betting or gambling or unlawful acts of any kind were permitted, and "that there was nothing in the conduct of the business which had any tendency to immorality or could in the least affect the health, comfort, safety or morality of the community or those who frequented said place of business." This evidence was, on motion, excluded and testimony of other witnesses to the same effect was rejected.
The defendant was found guilty and sentenced to pay a fine, or in default thereof to be imprisoned in the county jail. The conviction was affirmed by the Superior Court of the County, the highest court to which he could appeal. The case was then brought here by writ of error, the plaintiff contending that the ordinance violated the provisions of the Fourteenth Amendment, claiming, in the first place, that in preventing him from maintaining a billiard hall it deprived him of the right to follow an occupation that is not a nuisance per se, and which therefore could not be absolutely prohibited.
The Fourteenth Amendment protects the citizen in his right to engage in any lawful business, but it does not prevent legislation intended to regulate useful occupations which, because of their nature or location, may prove injurious or offensive to the public. Neither does it prevent a municipality from prohibiting any business which is inherently vicious and harmful. But, between the *629 useful business which may be regulated and the vicious business which can be prohibited lie many non-useful occupations, which may, or may not be harmful to the public, according to local conditions, or the manner in which they are conducted.
Playing at billiards is a lawful amusement; and keeping a billiard hall is not, as held by the Supreme Court of California on plaintiff's application for habeas corpus, a nuisance per se. But it may become such; and the regulation or prohibition need not be postponed until the evil has become flagrant.
That the keeping of a billiard hall has a harmful tendency is a fact requiring no proof, and incapable of being controverted by the testimony of the plaintiff that his business was lawfully conducted, free from gaming or anything which could affect the morality of the community or of his patrons. The fact that there had been no disorder or open violation of the law does not prevent the municipal authorities from taking legislative notice of the idleness and other evils which result from the maintenance of a resort where it is the business of one to stimulate others to play beyond what is proper for legitimate recreation. The ordinance is not aimed at the game but at the place; and where, in the exercise of the police power, the municipal authorities determine that the keeping of such resorts should be prohibited, the courts cannot go behind their finding and inquire into local conditions; or whether the defendant's hall was an orderly establishment, or had been conducted in such manner as to produce the evils sought to be prevented by the ordinance. As said in Booth v. Illinois, 184 U.S. 425, 429:
"A calling may not in itself be immoral, and yet the tendency of what is generally or ordinarily or often done in pursuing that calling may be towards that which is admittedly immoral or pernicious. If, looking at all the circumstances that attend, or which may ordinarily attend, *630 the pursuit of a particular calling, the State thinks that certain admitted evils cannot be successfully reached unless that calling be actually prohibited, the courts cannot interfere, unless, looking through mere forms and at the substance of the matter, they can say that the statute enacted professedly to protect the public morals has no real or substantial relation to that object, but is a clear, unmistakable infringement of rights secured by the fundamental law."
Under this principle ordinances prohibiting the keeping of billiard halls have many times been sustained by the courts. Tanner v. Albion, 5 Hill. 121; City of Tarkio v. Cook, 120 Missouri, 1; City of Clearwater v. Bowman, 72 Kansas, 92; City of Corinth v. Crittenden, 94 Mississippi, 41; Cole v. Village of Culbertson, 86 Nebraska, 160; Ex parte Jones, 97 Pac. Rep. 570.
Indeed, such regulations furnish early instances of the exercise of the police power by cities. For Lord Hale in 1672 (2 Keble, 846), upheld a municipal by-law against keeping bowling alleys because of the known and demoralizing tendency of such places.
Under the laws of the State, South Pasadena was authorized to pass this ordinance. After its adoption, the keeping of billiard or pool tables for hire was unlawful, and the plaintiff in error cannot be heard to complain of the money loss resulting from having invested his property in an occupation which was neither protected by the state nor the Federal Constitution, and which he was bound to know could lawfully be regulated out of existence.
There is no merit in the contention that he was denied the equal protection of the law because, while he was prevented from so doing, the owners of a certain class of hotels were permitted to keep a room in which guests might play at the game. If, as argued, there is no reasonable basis for making a distinction between hotels with 25 rooms and those with 24 rooms or less, the plaintiff *631 in error is not in position to complain, because not being the owner of one of the smaller sort, he does not suffer from the alleged discrimination.
There is no contention that these provisions, permitting hotels to maintain a room in which their regular and registered guests might play were evasively inserted, as a means of permitting the proprietors to keep tables for hire. Neither is it claimed that the ordinance is being unequally enforced. On the contrary, the city trustees are bound to revoke the permit granted to hotels in case it should be made to appear that the proprietor suffered his rooms to be used for playing billiards by other than regular guests. If he allowed the tables to be used for hire he would be guilty of a violation of the ordinance and, of course, be subject to prosecution and punishment in the same way, and to the same extent, as the defendant.
Affirmed.
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-1277
LARRY JAMES,
Plaintiff - Appellant,
versus
PRATT AND WHITNEY, UNITED TECHNOLOGIES
CORPORATION,
Defendant - Appellee.
Appeal from the United States District Court for the District of
South Carolina, at Charleston. David C. Norton, District Judge.
(CA-03-1022-2-18)
Argued: December 2, 2004 Decided: March 23, 2005
Before WILKINSON, Circuit Judge, W. Craig BROADWATER, United States
District Judge for the Northern District of West Virginia, sitting
by designation, and Norman K. MOON, United States District Judge
for the Western District of Virginia, sitting by designation.
Affirmed in part, reversed in part and remanded by unpublished per
curiam opinion.
Chalmers Carey Johnson, Charleston, South Carolina, for Appellant.
Ellis Reed-Hill Lesemann, Cherie W. Blackburn, NELSON, MULLINS,
RILEY & SCARBOROUGH, L.L.P., Charleston, South Carolina, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
Appellant Larry James filed this action on February 6, 2003,
in the Court of Common Pleas of the County of Charleston, South
Carolina, against Pratt and Whitney, United Technologies
Corporation, asserting claims of civil conspiracy, intentional
interference with contractual relations, and intentional infliction
of emotional distress. After removal, the district court granted
Pratt & Whitney’s motion for partial judgment on the civil
conspiracy claim and the intentional infliction of emotional
distress claim. James seeks review of that decision. For the
reasons set forth below, we hold that the district court did not
err when it dismissed James’s intentional infliction of emotional
distress claim. We, therefore, affirm that portion of the district
court’s decision. We further hold, however, that the district
court erred when it dismissed appellant’s civil conspiracy claim.
Consistent with this determination, we vacate that portion of the
judgment of the district court and remand the case for further
proceedings consistent with this opinion.
I.
James is an aircraft mechanic employed in a supervisory
position by United Airlines, Inc., at the Charleston, South
Carolina, Air Force Base. James is also a shop steward and union
representative for the International Association of Machinists and
2
Aerospace Workers. James’s job duties include conducting
maintenance and certification of aircraft engines for the United
States Air Force. Pratt & Whitney designed and manufactured the
aircraft engines on which James works. United contracts with Pratt
& Whitney to provide maintenance to the aircraft engines and
certify that the engines are safe for use. Despite this
arrangement, James is not an employee of Pratt & Whitney but James
is employed by United.
In 2000, another aircraft mechanic discovered a crack in one
of the engines and notified his supervisor, James. James inspected
the crack, confirmed that it was unsafe for use, and reported the
damage to United. United’s foreman confronted James and the
mechanic who discovered the crack and demanded that the damage
report be withdrawn. The foreman told James that an employee with
Pratt & Whitney demanded that the damage report be altered. After
refusing to falsify the damage report, James was called to a
meeting with the foreman and a representative from Pratt & Whitney.
At this meeting, Pratt & Whitney’s representative demanded that the
report be altered. Again, James refused to falsify the damage
report.
After this incident, James claims that representatives of
Pratt & Whitney began showing up at his work area and scrutinizing
his work. James asserts that this scrutiny continued over time and
became extremely oppressive and hostile. Shortly thereafter, James
3
received a disciplinary notice terminating his employment on
November 30, 2000. James was off the job for approximately five
months. In the interim, he filed a grievance pursuant to the
collective bargaining agreement between United and the union. The
grievance procedure reached a positive conclusion, and James
returned to his job on April 30, 2001.
As a result of this termination, James lost salary and other
benefits. Specifically, the complaint asserts that during the time
he was unemployed, James suffered lost wages, lost benefits,
consequential economic damages, severe emotional distress, and
injury to his reputation. The instant complaint was filed on
February 6, 2003, alleging that as the result of his refusal to
falsify the maintenance report, Pratt & Whitney (1) unlawfully
conspired with United to have James terminated, (2) intentionally
interfered with James’s employment contract with United, and (3)
intentionally inflicted emotional distress on James.
Pursuant to 28 U.S.C. §§ 1332 and 1442, Pratt & Whitney
removed the action to the United States District Court for the
District of South Carolina on April 2, 2003. On October 10, 2003,
Pratt & Whitney filed a motion for partial judgment on the
pleadings for dismissal of the claims for civil conspiracy and
intentional infliction of emotional distress pursuant to Rule 12(c)
of the Federal Rules of Civil Procedure. Pratt & Whitney argued
that retaliatory discharge alone may not serve as a basis for a
4
claim of intentional infliction of emotional distress. Therefore,
Pratt & Whitney claimed it was not liable for intentional
infliction of emotional distress. Pratt & Whitney also argued that
the claim for civil conspiracy should be dismissed because the
complaint did not specifically allege special damages, a pleading
requirement under South Carolina law.
The district court held a hearing on the motion for partial
judgment on the pleadings on December 30, 2003. At the hearing,
the district court orally granted Pratt & Whitney’s motion for
partial judgment and stated that a written order would follow.
During the pendency of the motion for partial judgment, discovery
continued between the parties. In his deposition, James conceded
that due to the collective bargaining agreement between United and
the union, the claim for intentional interference with contractual
relations was not viable under applicable law. Pratt & Whitney,
therefore, filed a motion for summary judgment on the intentional
interference of contractual relations claim on January 30, 2004.
On February 10, 2004, the district court issued its written order
granting Pratt & Whitney’s motion to dismiss the civil conspiracy
claim and the intentional infliction of emotional distress claim.
By consent of James, the district court dismissed the
intentional interference of contractual relations claim on February
23, 2004. On March 1, 2004, James filed a notice of appeal of the
district court’s February 10, 2004 order granting Pratt & Whitney’s
5
motion to dismiss the claims for civil conspiracy and intentional
infliction of emotional distress.
II.
The court reviews a decision to grant judgment on the
pleadings de novo, applying the same standard for Rule 12(c)
motions as for motions made pursuant to Rule 12(b)(6). Burbach
Broad. Co. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir.
2002); Edwards v. City of Goldsboro, 178 F.3d 231,243 (4th Cir.
1999). “Accordingly, we assume the facts alleged in the complaint
are true and draw all reasonable factual inferences in appellant’s
favor.” Id.
A.
The first ground of appeal is that the district court erred
when it dismissed the claim for civil conspiracy. Under South
Carolina law, when asserting a claim for civil conspiracy, one must
allege and specifically plead special damages. The district court
determined that James failed to meet that requirement.
James argues that it is permissible under Rule 8(e)(2) of the
Federal Rules of Civil Procedure to plead alternate causes of
action or legal theories. He maintains that at the motion to
dismiss stage, it is permissible under the rules of civil procedure
to plead as many separate causes of action as the facts may
support, regardless of the fact that some may be inconsistent or
6
mutually exclusive. He further argues that even if the complaint
failed to adequately plead special damages, he should be allowed to
amend his complaint under Rule 15(a) of the Federal Rules of Civil
Procedure. Pratt & Whitney counters that special damages is an
element of the claim that must be properly pled. James’s complaint
asserts the three claims described above. At the end of the
sections asserting the causes of action for civil conspiracy and
intentional interference with contractual relations, James uses the
same named items of damages: 1) suffered lost wages; 2) suffered
lost benefits; 3) suffered consequential economic damages; 4)
suffered severe emotional distress; and 5) suffered injury to his
reputation as a mechanic and union member in a leadership position.
It is this repetition of damages that Pratt & Whitney alleges is
insufficient1.
A cause of action for civil conspiracy is defined as “(1) a
combination of two or more persons, (2) for the purpose of injuring
the plaintiff, (3) which causes him special damage.” Vaught v.
Waites, 387 S.E.2d 91, 95 (S.C. Ct. App. 1986) (citing Lee v.
Chesterfield Gen. Hosp. Inc., 344 S.E.2d 379 (S.C. Ct. App. 1986)).
1
In the cause of action for intentional infliction of
emotional distress James does not recite the same demand for
damages as in the other two causes of action. In the intentional
infliction of emotional distress cause of action, James states that
as a proximate result of Pratt & Whitney’s conduct, he suffered
severe emotional distress and mental anguish. James further states
that as a result of this conduct, he is entitled to actual damages,
consequential damages, punitive damages, and other damages as
determined by the court.
7
Special damages are defined as “[d]amages for losses that are the
natural and proximate, but not the necessary, result of the injury
may be recovered only when such special damages are sufficiently
stated and claimed.” Sheek v. Lee, 345 S.E.2d 496, 497 (S.C. 1986)
(emphasis in original). “Special damages must be alleged in the
complaint to avoid surprise to the other party.” Id. (citation
omitted).
An early South Carolina case involving a claim and delivery
for certain articles of personal property compares general damages
and special damages as follows:
[W]hat are called general damages, as contradistinguished
from special damages, are admitted in evidence under a
general allegation,-indeed, are inferred by the law
itself,- for the reason that they are the immediate,
direct, and proximate result of the act complained of,
as, for instance, an injury to the property itself, or
its value, by detention, etc., while damages which,
although the natural, are not the necessary, consequence
of the act, being outside of the costs and disbursements
allowed by law, and consequently, in their nature, are
not admissible in evidence without special notice of the
claim in the allegations of the complaint, are therefore
called special damages.
Loeb v. Mann, 18 S.E. 1, 2 (S.C. 1893) (internal quotations
omitted). The concept that a defendant must be on notice of the
special circumstances was also found in a breach of contract
action. See Givens v. North Augusta Elec. Improvement Co., 74 S.E.
1067, 1069 (S.C. 1912) (noting that since the complaint
unequivocally claimed special circumstances, defendant was on
notice and could be held liable for special damages).
8
Special damages appear to arise in two types of cases other
than civil conspiracy: disputes involving real property and causes
of action for libel and slander. See e.g., Smith v. Phoenix
Furniture Co., 339 F.Supp. 969, 971 (D.S.C. 1972) (“[s]pecial
damages in the context of libel or slander, are damages with
respect to the property, business, profession or occupation which
are computable in money . . . [s]uch special damages must be a loss
of money or some other material temporal advantage capable of being
assessed at monetary value”); Stern & Stern Associates v. Timmons,
423 S.E.2d 124, 125 (S.C. 1992) (defining special damages in a suit
for specific performance of a real estate contract as “by their
very nature conditioned by the particular circumstances of each
case . . . [t]he party claiming special damages must show that the
defendant was clearly warned of the probable existence of unusual
circumstances or that because of the defendant's own education,
training, or information, the defendant had reason to foresee the
probable existence of such circumstances . . . special damages are
considered within the contemplation of the parties at the time the
contract was signed”) (internal citations omitted); Capps v. Watts,
246 S.E.2d 606, 609 (S.C. 1978) (stating that in a suit for libel
“[g]eneral damages are those damages which the law presumes,
without proof, to have resulted from the publication of the libel
. . . [s]pecial damage is actual damage and must be pled and
proved”) (quotations omitted); Windham v. Honeycutt, 348 S.E.2d
9
185, 187 (S.C. Ct. App. 1986) (“[s]pecial damages are those that
may reasonably be supposed to have been in the contemplation of
both parties, at the time of contracting, as the probable result of
the breach”) (citation omitted).
There are two key South Carolina cases involving special
damages for a claim of civil conspiracy. See Vaught, 387 S.E.2d
91; Todd v. S.C. Farm Bureau Mutual Ins. Co., 278 S.E.2d 607 (S.C.
1981) rev’d on other grounds, 321 S.E.2d 602 (1984) quashed in part
on other grounds, 336 S.E.2d 472 (1985). In Todd, Plaintiff sued
his former employer for various causes of action, including a civil
conspiracy claim, relating to the termination of his employment
relationship with the Farm Bureau defendants. Todd, 278 S.E.2d at
608. The issue presented on appeal was whether the amended
complaint properly pled a claim for civil conspiracy. Id. at 610.
The Supreme Court of South Carolina ruled that the trial court
erred when it overruled defendant’s demurrer. Id. at 611. In so
holding, the court stated that
[T]he fifth cause of action [civil conspiracy claim] does
no more than incorporate the prior allegations and then
allege the existence of a civil conspiracy and pray for
damages resulting from the conspiracy. No additional
acts in furtherance of the conspiracy are plead. The
only alleged wrongful acts plead are those for which
damages have already been sought.
Id.
In Vaught, a director of sanitation sued the city manager and
members of city council for civil conspiracy for terminating his
10
employment without just cause. Vaught, 387 S.E.2d at 92.
Partially relying on Todd, the trial court granted summary judgment
for defendants holding that no conspiracy existed as a matter of
law because Vaught could not predicate his conspiracy claim on the
same facts as a breach of contract claim and defendants were the
alter egos of the City and, therefore, could not conspire with
themselves. Id. at 94. In upholding the trial court, the Court of
Appeals held that the trial court had correctly determined that the
civil conspiracy action was nothing more than an “embellishment of
his breach of contract action.” Id. The court concluded that the
civil conspiracy claim inadequately pled special damages in that
“[t]he damages sought in the conspiracy cause of action are the
same as those sought in the breach of contract cause of action.”
Id. The court further held that the plaintiff in Vaught did the
same thing as the plaintiff in Todd in that the complaint “does no
more than incorporate the prior allegations and then allege the
existence of a civil conspiracy.” Id. at 95 (quoting Todd, 278
S.E.2d at 611).
In this case, the district court’s decision relies heavily on
the unpublished decision of Little v. Brown & Williamson Tobacco
Corp., No. C.A. 2:98-1879-23, 1999 WL 33291385 (D.S.C. March 3,
1999)2. In discussing the element of special damages, the district
2
In Little, the district court was faced with reviewing
twelve causes of action: 1) voluntary assumption of a special
undertaking, 2) breach of implied warranties, 3) unfair acts or
11
court in this case states:
The third element of a conspiracy claim requires
plaintiff to plead and prove special damages.
Essentially, this means that the complaint must describe
damages that occurred as a result of the conspiracy
itself, in addition to any damages alleged as a result of
any other claims. That is, the damages allegedly
resulting from the conspiracy must not overlap with or be
subsumed by the damages resulting from the other claims.
J.A. 147 (quoting Little, 1999 WL 33291385, at *14). The district
court then found that James had not pled a viable cause of action
for civil conspiracy because he did not specifically plead special
damages. Specifically, the district court stated that “[s]pecial
damages are an essential element of pleading a cause of action for
civil conspiracy in the first place; one need not make a prima
facie case in pleading special damages, but one must at least plead
them in order to state a claim.” J.A. 149. The district court
concluded that James’s complaint did not meet this basic pleading
standard and granted Pratt & Whitney’s motion to dismiss the claim.
Based upon Todd and Vaught, the issue presented in this
appeal, therefore, is not necessarily whether the damages pled
practices in violation of the South Carolina Unfair Trade Practices
Act (UPTA), 4) deceptive acts or practices in violation of the
UTPA, 5) unfair methods of competition in violation of the UTPA, 6)
fraudulent misrepresentation, concealment and nondisclosure, 7)
negligent misrepresentation, concealment and nondisclosure, 8)
negligence, 9) strict liability, 10) civil conspiracy, 11) aiding
and abetting, and 12) loss of consortium. Regarding the motion to
dismiss, the trial court noted that the plaintiffs for their civil
conspiracy claim re-alleged the damages that they had already
alleged in association with all of their other claims. Id. at *14.
Unpublished district court opinions are not binding precedence on
this court. Loc. R. 36(c)
12
overlapped, or were subsumed by, the other damages asserted.
Rather, the issue is whether James’s civil conspiracy claim just
incorporated prior factual allegations from the other causes of
action then recited the same demand for damages. In sum, the
question to be answered is whether James’s complaint adequately set
forth “additional acts in furtherance of the conspiracy.” Todd, 278
S.E.2d at 611.
Therefore, the allegations of each of the causes of action
must be compared. If appellant failed to allege facts for his
civil conspiracy claim separate and distinct from his other two
claims, then his civil conspiracy claim would fail under Todd. If
appellant, however, did allege separate civil conspiracy
allegations then the court would need to determine if appellant
pled damages that “are the natural and proximate, but not the
necessary result of the injury.” Sheek, 354 S.E.2d at 497.
The complaint reveals that James adequately asserted
independent allegations such that Pratt & Whitney was adequately
put on notice that it was being sued for civil conspiracy. See
e.g., Swierkiewicz v. Sorema N. A., 534 U.S. 506, 511 (2002)
(stating that “under a notice pleading system, it is not
appropriate to require a plaintiff to plead facts establishing a
prima facie case”); see also Fed. R. Civ. P. 8(a) (stating that “a
claim shall contain . . . a short and plain statement of the
claim.”). As set forth in paragraph 24, the complaint states in
13
the “Facts” section, prior to the statement of the causes of
action, that Pratt & Whitney
[C]onspired to take unlawful action against the
Plaintiff, to harm him in retaliation for his refusal to
participate in action which would have been in violation
of his duty as a mechanic, applicable FAA regulations,
and that would have put Men and Women of the United
States Air Force, and civilian citizens of the United
States in danger of injury or death.
J.A. 10.
The language of the civil conspiracy cause of action likewise
contains independent allegations of a civil conspiracy that are not
identical to the language contained in the other causes of action.
J.A. 12-14. Specifically, in the civil conspiracy cause of action,
the complaint incorporates James’s earlier allegations and then
alleges “[t]hat the Defendant conspired and acted to harm the
Plaintiff in retaliation for the Plaintiff’s refusal to falsify
maintenance records concerning the C-17 Globemaster.” J.A. 12.
Thus, James here did assert independent allegations in furtherance
of a civil conspiracy.
Further, an analysis of the damages claimed in the complaint
indicates that appellant complied with South Carolina law. In the
first cause of action for civil conspiracy, appellant sets forth in
paragraph 48 of the complaint the following named items of damages:
1) suffered lost wages; 2) suffered lost benefits; 3) suffered
consequential economic damages; 4) suffered severe emotional
distress; and 5) suffered injury to his reputation as a mechanic
14
and union member in a leadership position. J.A. 12. Thus, special
damages as alleged in this case appear to be a “loss of money or
other material temporal advantage capable of being assessed a
monetary value.” Phoenix Furniture Co., 339 F.Supp. at 971.
Under federal notice pleading standards, James is only
required to meet the requirements of Rule 8(a) and put Pratt &
Whitney on notice of the claim. Obviously, James met that standard
here. In addition, under Rule 15(a), James should have been given
the opportunity to amend the complaint and properly plead special
damages. In addressing the standard for a motion for leave to
amend the Supreme Court has stated that “[i]f the underlying facts
or circumstances relied upon by a plaintiff may be a proper subject
of relief, he ought to be afforded an opportunity to test his claim
on the merits. In the absence of any apparent or declared reason--
such as . . . futility of amendment . . . the leave sought should,
as the rules require, be ‘freely given.’” Foman v. Davis, 371 U.S.
178, 182 (1962).
At the hearing on the motion for partial judgment, the
district court specifically addressed the issue of whether the
complaint properly pled special damages and whether James would be
permitted to amend the complaint. The district court closed the
hearing by granting the motion to dismiss the civil conspiracy
claim then stating “and if, in fact, there are special damages that
[James’s counsel] can find, then [James’s counsel] can file a
15
motion to amend the pleading . . . and you can bring them back in.”
J.A. 101. In the written order, the district court did not allow
James to amend his complaint because it found that “an amendment
should not be allowed where it is apparent from the alleged facts
that no basis for the separate damages exists.” J.A. 149. The
district court did not elaborate as to how the basis did not exist.
The district court also did not explain how the damages set forth
by James did not constitute special damages under South Carolina’s
definition. By dismissing the claim because of duplicative
damages, the district court did not address whether the alleged
damages such as lost wages, benefits, and consequential economic
damages were the proximate, but not the necessary result of Pratt
& Whitney’s alleged conspiracy. Thus, the decision of the district
court should be reversed and the case remanded in order for the
district court to review the issue of special damages in light of
this opinion and to allow, if necessary, James an opportunity to
amend the complaint to properly plead special damages.
B.
The second ground for appeal is that the district court erred
when it dismissed the claim for intentional infliction of emotional
distress. The district court ruled that, as a matter of law,
James’s termination was not sufficiently outrageous to support a
claim for intentional infliction of emotional distress. James
contends that this is not the typical retaliatory discharge case
16
because Pratt & Whitney was not his employer. The allegation is
that Pratt & Whitney, a third party, conspired with the employer,
United, to have James terminated. It is the involvement of the
third party here that James argues makes Pratt & Whitney’s conduct
outrageous and extreme. Pratt & Whitney counters that the district
court properly determined as a matter of law that its actions do
not meet the standard for outrageous conduct under applicable South
Carolina law. The fact that Pratt & Whitney is a third party is
immaterial because if an employer cannot be held liable for
intentional infliction of emotional distress as the result of a
retaliatory discharge then a third party certainly cannot be held
liable for intentional infliction of emotional distress as the
result of conspiring with an employer to cause a retaliatory
discharge.
Under South Carolina law, the tort of intentional infliction
of emotional distress has four elements: (1) defendant
intentionally or recklessly inflicted severe emotional distress or
was certain or substantially certain that such distress would
result from his conduct, (2) the conduct was so extreme and
outrageous as to exceed all possible bounds of decency and must be
regarded as atrocious, and utterly intolerable in a civilized
community, (3) the actions of the defendant caused the plaintiff's
emotional distress; and (4) the emotional distress suffered by the
plaintiff was severe so that no reasonable man could be expected to
17
endure it. Ford v. Hutson, 276 S.E.2d 776, 778 (S.C. 1981) (citing
Vicnire v. Ford Motor Co., 401 A.2d 148 (Me. 1979)) (quotations
omitted).
It is permissible for a court to find as a matter of law that
based on the allegations contained in a complaint that a
defendant’s conduct is not so extreme and outrageous to allow
recovery for intentional infliction of emotional distress. See
Todd, 321 S.E.2d at 609 (stating that “[i]t is for the court to
determine in the first instance whether the defendant’s conduct may
reasonably be regarded as so extreme and outrageous as to permit
recovery, and only where reasonable persons may differ is the
question one for the jury”) (citation omitted). Thus, the question
of whether Pratt & Whitney’s conduct here was extreme and
outrageous may be decided by the district court upon a review of
the pleadings.
South Carolina courts have been reluctant to find outrageous
conduct in a variety of settings. See Gattison v. S.C. State
College, 456 S.E.2d 414 (S.C. Ct. App. 1995) (holding that hostile
work environment was not outrageous); Shupe v. Settle, 445 S.E.2d
651 (S.C. Ct. App. 1994) (failing to find outrage where doctor
mistakenly informed daughter of father’s death when father was
still alive); Manley v. Manley, 353 S.E.2d 312 (S.C. Ct. App. 1987)
(finding good faith, involuntary committal of mother to state
hospital not outrageous); Folkens v. Hunt, 348 S.E.2d 839, 845
18
(S.C. Ct. App. 1986) (holding “not all conduct . . . causing
emotional distress in a business setting may serve as a basis for
an action alleging outrage”); Save Charleston Foundation v. Murray,
333 S.E.2d 60 (S.C. Ct. App. 1985) (holding conversion of
promissory note and bringing action on note not sufficient).
In light of this authority, Pratt & Whitney’s conduct here was
not sufficiently outrageous to maintain the claim for intentional
infliction of emotional distress. James’s argument that Pratt &
Whitney’s conduct here was outrageous because it was a third party
and not the employer is a distinction without a difference. It is
a short step to infer from South Carolina’s case law holding that
mere retaliatory discharge does not constitute outrageous conduct,
to the holding that a third party’s involvement or procurement of
a retaliatory discharge does not constitute outrageous conduct.
The Court concludes, therefore, that under these facts, the South
Carolina courts would not find this conduct so extreme such that it
would be actionable for intentional infliction of emotional
distress. Thus, the district court’s decision dismissing the claim
for intentional infliction of emotional distress should be
affirmed.
III.
The judgment of the district court is affirmed as to the claim
for intentional infliction of emotional distress and reversed and
19
the case remanded for disposition consistent with this opinion as
to the claim for civil conspiracy.
AFFIRMED IN PART, REVERSED IN PART AND REMANDED
20
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414 So.2d 876 (1982)
SOUTH CENTRAL BELL TELEPHONE COMPANY
v.
Herbert SUMRALL, et al.
No. 12889.
Court of Appeal of Louisiana, Fourth Circuit.
May 11, 1982.
Rehearing Denied June 18, 1982.
Stephen D. Ridley, Steven Hymowitz, Christopher P. Charlton, McCalla, Thompson, Pyburn & Ridley, New Orleans, for defendant-appellant.
Thomas L. Giraud, Robert M. Loev, Giraud, Cusimano, Verderame & Loev, New Orleans, for defendants-appellees.
Before BARRY, WARD and WILLIAMS, JJ.
*877 WILLIAMS, Judge.
This is an appeal from a judgment by the trial court upholding a decision by the Louisiana Board of Review that awarded unemployment benefits to a discharged employee of the plaintiff South Central Bell Telephone Co. ["Bell"].
John E. Boe was employed by Bell as an assistant cable splicer. When he was hired by Bell he was required to read a booklet entitled "A Professional Responsibility." This booklet outlined, among other things, Bell's policy toward employees who "engage in the illegal use, possession or sale of drugs, whether occurring on Company time or during off-duty hours..." Violation of this Company policy subjects the employee to disciplinary action, and possible dismissal. After reading the booklet, Boe signed an acknowledgment that he had read and understood it. This acknowledgment also contained the following provision:
"I fully realize the necessity of protecting our company's reputation; preserving the privacy of communications; safeguarding proprietary and classified national security information; properly handling company funds, property and records, guarding against espionage and sabotage; and adhering to the company's drug policy."
On May 31, 1979, Boe was arrested and charged with possession of cocaine, marijuana, and Diazepam (Valium) with intent to distribute. Bell conducted an investigation into the incident and subsequently discharged Boe on the ground of employmentrelated misconduct.
Boe applied for unemployment benefits but was denied them because of his discharge for employment-related misconduct. La.R.S. 23:1601(2). The Agency Adjudicator and Appeals Referee both concluded that Boe's discharge properly was based on misconduct connected with employment. The Board of Review reversed this decision. The Board based its decision on the fact that the misconduct in question occurred while Boe was off-duty and not on company premises. This decision was appealed by Bell to the district court where it was upheld. Bell has now appealed to this court.
La.R.S. 23:1601(2) provides:
"If the administrator finds that he has been discharged by a base period or subsequent employer for misconduct connected with his employment [sic]. Such disqualification shall continue until such time as the claimant (a) can demonstrate that he has been paid wages for work subject to the Louisiana Employment Security Law or to the employment insurance laws of any other state or of the United States equivalent to at least ten times his weekly benefit amount subsequent to a claim for a compensable week for unemployment benefits under this Act and (b) has not left his last work under disqualifying circumstances. A compensable week is defined as a week for which benefits would otherwise be payable except for the disqualification imposed by this Paragraph or by the provisions of R.S. 23:1600(4). In addition, if the administrator finds that such misconduct has impaired the right, damaged or misappropriated the property of, or has damaged the reputation of a base period employer, then the wage credits earned by the individual with the employer shall be cancelled and no benefits shall be paid on the basis of wages paid to the individual by such employer."
Boe does not contend that Bell was without authority to terminate his employment. He does claim that his misconduct was not related to employment, and he should be entitled to unemployment compensation.
The law in Louisiana is clear that there must be a relationship between the misconduct and the employment in order to deny a discharged employee unemployment benefits. E.g., Johnson v. Board of Comm'rs., 348 So.2d 1289, 1291 (La.App. 4th Cir. 1977).
Boe has argued that misconduct occurring off-duty and not on the employer's premises is not a basis for denial of unemployment benefits unless the misconduct renders the discharged employee unable to perform his duties. Our attention has been directed specifically to the decisions in *878 Grimble v. Brown, 247 La. 376, 171 So.2d 653 (1965) cert. den. 382 U.S. 861, 86 S.Ct. 123, 15 L.Ed.2d 99 and Jackson v. Doyal, 198 So.2d 469 (La.App. 2d Cir. 1967). These cases do involve discharged employees unable to perform their duties because of their off-duty misconduct. The cases do not hold, however, as Boe contends, that only off-duty misconduct rendering an employee unable to perform is sufficient for a denial of unemployment compensation.
In Johnson v. Board of Comm'rs, an off-duty patrolman for the Port of New Orleans was discharged for carrying concealed weapons, which was in violation of Port rules. The patrolman was denied unemployment compensation on the ground that he "violated the regulations concerning his conduct to the detriment of his employer and its duty to the citizens of the state." Id. at 1292.
The facts of the instant case are similar to those presented by Johnson v. Board of Comm'rs. The claimant was discharged for violation of a company policy. Although a worker for the telephone company may not necessarily be as sensitive a position as that of a patrolman, that worker nevertheless does work for a public utility and is charged with serving the public. The rule against drug possession and usage promulgated by Bell was reasonable in light of the duty with which a public utility is charged. We, therefore, find that the misconduct perpetrated by Boe was related to his employment. Boe should be denied any unemployment compensation pursuant to La.R.S. 23:1601(2).
For the foregoing reasons, the decision of the trial court is reversed.
REVERSED.
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506 F.2d 233
165 U.S.App.D.C. 172
DOROTHY W. JACKSON et al., Individually and on behalf of allothers similarly situated, Appellants,v.James T. LYNN, Individually and as Secretary of theDepartment of Housing and Urban Development, andUnited States of America, et al.
No. 73-1510.
United States Court of Appeals, District of Columbia Circuit.
Argued March 8, 1974.Decided Oct. 17, 1974.
G. Dan Bowling and Michael Diamond, Washington, D.C., for appellants.
Robert P. vom Eigen, Atty., Dept. of Housing and Urban Development, of the bar of the supreme Court of Connecticut, pro hac vice, by special leave of court, with whom Harold H. Titus, Jr., U.S. Atty. at the time the brief was filed, John A. Terry, Thomas G. Corcoran, Jr., and Michael G. Scheininger, Asst. U.S. Attys., and Arthur J. Gang, Atty., Dept. of Housing and Urban Development, were on the brief, for appellee. Earl J. Silbert, U.S. Atty., also entered an appearance for appellee.
Before HASTIE,* Senior Circuit Judge, and WRIGHT and WILKEY, Circuit Judges.
HASTIE, Senior Circuit Judge:
1
Each of the appellants purchased a house in the District of Columbia, giving a mortgage which the Federal Housing Administration (FHA) insured pursuant to section 221 of the National Housing Act as amended, 12 U.S.C. 1715l (1970). Later, they joined in this suit against the United States and three federal administrators of the FHA program. The complaint alleged that various real estate brokers led plaintiffs, inexperienced home buyers making their first such purchases, to believe that the houses were in FHA approved condition, and that the government would stand by the houses. It further alleged that the brokers purposely deterred plaintiffs from adequately inspecting the houses prior to purchase, asserting that the government would require repair of any defective conditions or that the brokers themselves would make any necessary repairs after purchase. Defects were never repaired, and the houses as sold were and are in violation of the Housing Regulations of the District of Columbia.
2
Appellants sought to represent the class of all persons in the District of Columbia who have purchased, are in the process of purchasing, or will purchase homes with mortgages insured pursuant to section 221. They sought a declaration that subsection (d)(2) allows the Secretary to insure mortgages only if the houses comply with local housing regulations, and an injunction to restrain defendant officials from insuring mortgages on homes which do not so comply. Appellants also sought damages from the United States equal to the difference between the value of their homes when purchased and the value their homes would have had when purchased had they then conformed to the housing code; or, as an alternative to damages, an order requiring the FHA to finance appellants' purchases, without down payment, of other homes in proper repair by insuring mortgages for the entire purchase price.
3
On defendants' motion the district court dismissed the damage claim for lack of jurisdiction and the requests for injunction and prospective declaratory relief for lack of standing. 1973, 355 F.Supp. 737. The request for a declaration that plaintiffs' mortgages were illegally insured was dismissed for failure to state a claim on which relief could be granted.1
4
On this appeal the district court's jurisdiction over all of the claims is challenged. However, this court has recently determined that section 10 of the Administrative Procedure Act, 5 U.S.C. 701-706 (1970), constitutes an independent grant of jurisdiction to the district courts. Pickus v. United States Board of Parole, 1974, 165 U.S.App.D.C. , 507 F.2d 1107 (1974) and cases cited therein. Thus, the district court had jurisdiction over all claims that challenged 'agency action' as that term is defined in the Act, 5 U.S.C. 551. District court jurisdiction over the damage claim, subject however to possible sovereign immunity bar, exists under 28 U.S.C. 1346(a)(2), since this is an action for less than $10,000 founded upon the National Housing Act, an Act of Congress. Cf. Bell v. Hood, 1946, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939.2
5
The record contains neither a certificate or any showing that the district court agreed to hear this case as a class action, nor any judicial pronouncement to define the scope of the class. Rule 23(c)(1), F.R.Civ.P. provides for a determination by order of the district court whether an action brought as a class action may be so maintained. Courts have treated an affirmative order under that Rule as prerequisite to class action maintenance whether or not the defendant challenges the class action allegations. E.g., Dorfmann v. Boozer, 1969, 134 U.S.App.D.C. 272, 414 F.2d 1168, 1171 n. 8; Davis v. Romney, supra n. 2. Thus, this court may not consider this appeal as a class action, and may reach issues only to the extent that named plaintiffs are affected.
6
Damages are sought only against the United States. The plaintiffs predicate their damage claim upon the Tucker Act which gives the district courts jurisdiction over any 'civil action or claim against the United States, not exceeding $10,000 in amount, founded . . . upon . . . any Act of Congress'. 28 U.S.C. 1346(a)(2). Thus, to state a cause of action for damages plaintiffs must rely upon an Act of Congress which expressly or impliedly creates a statutory right to such relief. For jurisdictional purposes it may suffice that a plaintiff is attempting to show that conduct of which he complains violates an Act of Congress. But to state a claim upon which relief may be granted his contention as to the meaning and reach of that Act must be legally correct. He must show that a statute, properly construed, sanctions a private claim against the government, and for the payment of money at that.
7
The plaintiffs assert that HUD's action in insuring their mortgages on dwellings that were not in conformity with the Housing Regulations of the District of Columbia violated the requirement of section 221(d)(2) of the National Housing Act that, in order for a mortgage to be insurable under this section a dwelling must meet 'the requirements of all State Laws, or local ordinances or regulations, relating to the public health or safety . . . which may be applicable thereto . . ..' For present purposes we assume that this is correct in fact and in law. But beyond that, plaintiffs must show that section 221(d)(2) confers upon them a right of redress against the United States for HUD's violation of its statutory duty. The National Housing Act contains no language to this effect. So plaintiffs must establish that a private right to recover from the United States is properly implied.
8
Appellants rely specifically on no more than brief comments of Mr. Cole,Administrator of the Housing and Home Finance Agency, at the 1958 House hearings and Senator Douglas at the 1959 Senate hearings.3 The 1958 House proceedings consumed several full days of testimony and more than seven hundred published pages. Questions of finance, raised ceilings, interest rates, expanded scope of housing programs, and the like occupied by far the greatest part of the testimony of various interested groups. Mr. Cole's isolated comment related to mortgage co-insurance proposals under which the lender and insurer would share the risk, although apparently the lender's risk would be minimal. He was not speaking of any existing FHA program. Such a comment on a different section and scheme cannot support an implication that section 221(d) (2) was intended to benefit buyers who normally look to their sellers for redress when their property proves defective.
9
Similarly, the context of Senator Douglas' equally brief comment during the Senate hearing shows that it is at best tangentially relevant here. His point was that the purpose of the public housing program was not limited to rehousing in public projects persons displaced by government clearance and construction activity, but included moving from unsatisfactory living conditions into public housing persons unaffected by such activity. Its relevance here is minimal since section 221 is not a public housing provision. Thus, the cumulative weight of the two cited passages is unimpressive. Appellants have not cited other particular comments in the hearings, and we have found none that support the implication they would draw.
10
In addition, the effort to imply a cause of action is impeded in this case because it requires a conclusion of waiver of sovereign immunity. Courts should not lightly imply that the United States has consented to forego the normal immunity of the sovereign from suit.4
11
It also merits consideration at this point that on March 2, 1972 the Senate passed Senate Bill 3248, which later died in the House Committee on Banking and Currency. That bill would have authorized HUD to correct, or compensate mortgagors for, defects in their homes that had been insured under section 221. A 1970 amendment to the Act had conferred that benefit upon section 235 mortgagors. 12 U.S.C. 1735b. The later abortive legislative effort to grant equivalent relief to section 221 mortgagors indicates that the Senate, at least, did not view existing law as entitling section 221 mortgagors of defective houses to redress from the government.
12
For these reasons we hold that the claim against the United States for damages failed to state a cause of action upon which relief could be granted.
13
We now consider plaintiffs' claim, alternative to damages, for corrective administrative action that could result in their acquisition of homes other than their present defective ones. Arguably, such a remedy might be considered in this case, viewed as judicial review under section 10(a) of the Administrative Procedure Act, 5 U.S.C. 702, of 'agency action' violative of section 221(d)(2) that has injured the plaintiffs. But plaintiffs do not allege and the record does not suggest that plaintiffs have asked the agency for the relief under discussion. Thus, the 'agency action' under review cannot be denial of any request. Hence, the only action which can be complained of is the agency's policy and practice of insuring mortgages on non-conforming dwellings. But under that approach the power of the reviewing court is limited in a way that precludes the relief now under consideration.
14
Section 10(e) of the Act, 5 U.S.C. 706, states the applicable scope of review. The court may only hold unlawful and set aside wrongful agency action, 706(1), and compel action unlawfully withheld or delayed, 706(2). Holding unlawful past insuring practices would not achieve the affirmative relief plaintiffs desire. Moreover, they cannot establish that the relief they seek is 'action unlawfully withheld' since, as noted above, there is nothing in the record to suggest that they have requested it from the agency. Thus, the desired insuring of new homes for plaintiffs may not be ordered by way of judicial review of agency action under the Administrative Procedure Act.
15
Finally, appellants have urged that, whatever may be decided about their other prayers for relief, the court should issue an injunction or hand down a declaratory judgment authoritatively determining that section 221 imposes upon HUD a legal duty to require that dwellings conform to the requirements of the local housing code before it grants section 221 mortgage insurance. This aspect of the controversy, which focuses upon HUD's anticipated future conduct, has now become moot.
16
In its brief, the government has informed this court that HUD has changed policy and practice and now requires that a dwelling comply with the applicable local housing code in order to qualify for mortgage insurance under section 221(d)(2). Moreover, it is now required that compliance be evidenced at each closing by a letter from the local code enforcement agency so certifying.
17
Of course, as concerns the alleged wrongful injury that plaintiffs already have suffered, full relief is being sought through damages or alternative corrective action, and we have found that plaintiffs have not stated a cause upon which relief can be granted. Therefore, no significant interest of the plaintiffs would be served by a declaratory ruling whether or not Congress limited the insurance program under section 221 to homes that comply with local codes. Cf. Gross v. Fox, 3d Cir. 1974, 496 F.2d 1153.
18
For these reasons, the judgment dismissing this suit is
19
Affirmed.
*
Of the Third Circuit, sitting by designation pursuant to 28 U.S.C. 294(d) (1970)
1
The district court assumed arguendo that plaintiffs had standing to obtain such a judgment. 355 F.Supp. at 742
2
An alternative source of jurisdiction over all but the damage claim is asserted under 28 U.S.C. 1337. The legislative debates strongly suggest that a primary purpose of the Act was to stimulate interstate commercial activity as a means of combating the economic depression in existence in 1934. 78 Cong.Rec. 11191, 11973 (1934). So reasoning, the Court of Appeals for the Third Circuit has held that the Act is sufficiently related to the commerce power to bring it within the 1337 jurisdiction. Davis v. Romney, 3d Cir. 1974, 490 F.2d 1360
3
Housing Act of 1958, Hearings before the Subcommittee on Housing, Committee on Banking and Currency, House of Representatives, 85th Cong., 2d Sess. (1958); Housing Act of 1959, Hearings, Senate Banking and Currency Committee, 86th Cong., 1st Sess. (1959). The statements relied upon appear at p. 15 of the House hearings and p. 145 of the Senate hearings
4
We do not agree with a suggestion by the Court of Claims that the Tucker Act's jurisdictional designation of the district courts as the forum in which claims against the United States for monetary awards may be litigated constitutes a waiver of sovereign immunity from suit on claims not otherwise authorized. National Bank of Newark v. United States, 1966, 174 Ct.Cl. 872, 357 F.2d 704
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In the
United States Court of Appeals
For the Seventh Circuit
No. 99-3224
WASHINGTON C. ALSTON,
Plaintiff-Appellant,
v.
SCOTT L. KING, individually,
as Mayor of the City
of Gary, Indiana, and as Special
Administrator of Gary Sanitary
District, OTHO LYLES,
III, individually and as a
member of the Board of
Commissioners of the Gary Sanitary
District, ROLAND ELVAMBUENA,
individually and as a
member of the Board of
Commissioners of the
Gary Sanitary District, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Indiana, Hammond
Division.
No. 96 C 36--Rudy Lozano, Judge.
Argued May 16, 2000--Decided November 2, 2000
Before EASTERBROOK, RIPPLE, and ROVNER,
Circuit Judges.
ROVNER, Circuit Judge. This is the
second appeal in this case, and the facts
underlying the case are set forth in
detail in Alston v. King, 157 F.3d 1113
(7th Cir. 1998). We will repeat only
those facts necessary for resolution of
this appeal.
Washington Alston was the Director of
the Gary Sanitary District when Scott
King, the new mayor of Gary, terminated
his employment. Alston then filed an
action against King, the City of Gary,
and the Gary Sanitary District
(collectively referred to as "King")
alleging retaliatory discharge, violation
of procedural due process, conspiracy to
violate constitutional rights, and breach
of contract. The undisputed evidence
established that King had failed to
provide Alston with a pretermination
hearing as required under the employment
contract, and that a suspension prior to
the hearing would have protected the
City’s interest in preventing further
harm. The district court therefore
entered judgment in favor of Alston on
the breach of contract and procedural due
process claims, and the jury awarded
damages of $40,600 for breach of contract
and $92,500 for the procedural due
process violation. In the earlier appeal,
we reversed the award of damages on the
procedural due process count because an
erroneous jury instruction was given, and
remanded the case for further
proceedings. We held that the jury, in
awarding damages for the procedural due
process violation, did not appear to
understand that its award had to be
limited to any additional damages that
Alston might have incurred as a result of
the denial of a pretermination hearing,
and that were not included in the award
for the breach of contract. Id. at 1118.
On remand, the district court held a
trial solely relating to the issue of
damages. Prior to that trial, King filed
a motion in limine seeking to preclude
testimony regarding compensatory damages
that were litigated under the contract
claim. The motion noted that damages
compensable under the contract claim had
already been awarded to Alston, and
therefore that the evidence must be
limited to damages for emotional distress
that resulted from the failure to provide
a pretermination hearing. The motion
specifically sought to exclude the
following evidence that had been fully
litigated under the contract claim:
earnings under the contract; pension
benefits; social security income
contributions and benefits; and the loss
of employability, life insurance,
medical, dental and vision benefits,
savings, deferred compensation, sick pay,
and vacation pay. The motion also sought
to prevent testimony regarding physical
injuries and conditions not disclosed
prior to or during the first trial. The
district court tentatively granted the
motion, stating: "Motion in limine is
granted. And counsel, that does not mean
you’re going to get it in or not get it
in, you’ll have to come to side bar as
the evidence presents itself." The court
then conducted a trial to determine the
procedural due process damages, and
Alston presented only his own testimony
to establish damages. At the close of
Alston’s case, King sought judgment as a
matter of law awarding only nominal
damages. The district court agreed that
Alston had failed to prove any damages
attributable to the procedural due
process violation, and granted judgment
as a matter of law, awarding one dollar
in nominal damages. Alston appeals that
decision, arguing that the district court
improperly limited the scope of damages
so as to preclude damages arising from
the termination itself, and that even
given those limitations by the court, he
had presented sufficient evidence to
avoid judgment as a matter of law. We
take these arguments in turn.
I.
Alston contends that by granting King’s
motion in limine and adhering to that
ruling during the trial, the district
court improperly limited the scope of the
damages to emotional distress caused by
the failure to provide a hearing, and
excluded damages caused by the improper
termination. In addressing this
contention, it may be helpful to once
again clarify the type of damages that
are permissible for a procedural due
process violation. As we stated in our
prior opinion, a plaintiff who succeeds
on a procedural due process claim is
entitled to those damages that are caused
by the denial of the process required by
the Constitution. Id. at 1117-18, citing
Carey v. Piphus, 435 U.S. 247, 263
(1978).
The Carey decision clarified the type of
damages available for a violation of
procedural due process. The Court began
by recognizing that the procedural due
process clause has the dual purpose of
protecting persons from the mistaken or
unjustified deprivation of life, liberty
or property, and of conveying to the
individual a feeling that the government
has dealt with her fairly. 435 U.S. at
259, 261-62. Accordingly, damages for a
procedural due process violation can
include damages for a termination if
there is a causal connection between the
termination and the failure to provide a
hearing. The converse is true as well;
where the employer can prove that the
employee would have been terminated even
if a proper hearing had been given, the
terminated employee cannot receive
damages stemming from the termination in
an action for a procedural due process
violation. Id. at 260. In such a case,
the employee may still obtain damages for
emotional distress attributable to the
deficiencies in procedure if the employee
can convince the trier of fact that the
distress is attributable to the denial of
procedural due process itself rather than
to the justified termination. Id. at 263.
Alston argues that the district court
denied him the opportunity to establish
damages resulting from the termination.
Under Carey, such damages are unavailable
if the termination would have occurred
even if the hearing had been provided.
King contends, persuasively, that the
undisputed facts establish that Alston
would have been terminated for cause
because the jury and the court in the
first trial found that Alston was
responsible for $16,000-$18,000/1 in
misappropriated funds. Alston’s response
is that the evidence demonstrated only
improper documentation of funds, not
theft of funds. That is irrelevant,
however, because Alston presents no
evidence that mismanagement of funds
under his control would not constitute
cause for his termination. Because the
undisputed evidence establishes cause for
his termination, damages from that
termination could not be attributed to
the failure to provide a hearing.
Even if we were to recognize a disputed
issue of fact regarding the inevitability
of the termination decision, the result
would be no different in this case
because the district court did not in
fact exclude evidence relating to
thetermination. The motion in limine
merely sought to exclude evidence
relating to damages litigated in the
contract claim and for which Alston had
been compensated, and to limit the
evidence to damages for emotional
distress resulting from the failure to
provide a pretermination hearing. That
position is fully consistent with Carey
and our prior decision in Alston.
Moreover, an inquiry into the court’s
rulings during trial reveals the same
conclusion. Because the ruling on the mo
tion in limine was tentative, we must
examine the particular evidentiary
rulings made during the trial. See Wilson
v. Williams, 182 F.3d 562, 565-66 (7th
Cir. 1999) (when court’s ruling on a
motion in limine is tentative, litigant
must raise it during trial in order to
preserve the issue). Alston asserts that
as a result of the court’s restrictions
on evidence relating to the termination,
he was prevented from presenting evidence
regarding: his employment contract; his
humiliation immediately after being
terminated; his feelings about not
receiving a name-clearing hearing; his
ability to obtain other employment; the
video of the press conference held after
the termination; the damage to his
reputation; his removal from the Black
History Month program; his beliefs as to
why his termination was unjustified; and
his ability to use his educational
degrees after termination. The transcript
reveals, however, that without exception
those evidentiary rulings were the result
of Alston’s failure to properly present
that evidence, and were unrelated to any
opinion by the court regarding the
propriety of damages for the termination.
For instance, the district court
precluded testimony regarding damage to
his reputation, his removal from the
Black History program, and his inability
to use his educational degrees because in
each case Alston’s testimony was based
upon hearsay and not his own personal
knowledge. The court did not rule that
such evidence was irrelevant, only that
it was not admissible through hearsay
testimony. Alston chose not to call the
individuals who could have properly
presented such evidence, such as the
person who decided to remove him from the
Black History program or individuals who
refused to offer him a job.
Similarly, testimony regarding the press
conference was ultimately excluded
because Alston failed to tie it to any
damages. Prevalent throughout the
transcript are repeated instances in
which Alston failed to lay a proper
foundation for testimony, or attempted to
introduce testimony that called for
speculation or was based on hearsay. For
instance, some testimony about how he
felt at not receiving a name-clearing
hearing was excluded for lack of
foundation and because it was
speculative. Another predominant problem
was Alston’s proclivity for testifying in
the narrative rather than confining his
answers to the question before him. His
testimony regarding the humiliation he
suffered immediately after being
terminated was stricken because it was
provided in an ongoing narrative directly
after the court had issued three warnings
that such testimony was improper, the
last of which directed that such
testimony would be stricken if it
continued. Alston’s counsel did not then
ask further questions to properly
introduce that testimony. The court
excluded testimony regarding Alston’s
employment contract because he was
introducing it to show that the contract
called for arbitration, which was not
relevant to the issue of damages given
that the due process violation was
already established. Finally, Alston
asserts that the court excluded testimony
of his beliefs as to why the termination
was unjustified. That is an inaccurate
characterization of the record. The court
in fact allowed testimony on that matter,
repeatedly overruling King’s objections.
That line of questioning was restricted
only when Alston attempted to introduce
hearsay testimony.
Thus, although significant limitations
were ultimately placed on the testimony,
those restrictions were a result of
Alston’s failure to rely on competent,
admissible testimony to make his case for
damages. King’s objections were
undoubtedly distracting in their sheer
volume and repetition, but Alston
consistently failed to adhere to basic
principles of evidence in eliciting the
testimony. We find no support in the
record for Alston’s contention that the
district court improperly excluded
damages evidence relating to the
termination.
II.
Alston nevertheless argues that despite
the court’s adverse evidentiary rulings,
he submitted sufficient evidence of
damages to avoid judgment as a matter of
law. The evidence relating to emotional
distress that was admitted at the trial
is sparse. We have Alston’s bare
testimony that as a result of being
denied a hearing, he suffered
"humiliation, embarrassment, stress [and]
rejection." We also have his testimony
that the deprivation of a hearing caused
him to become depressed, that he had a
tendency to abuse alcohol, and that it
materially affected the quality of his
relationship with the woman he was dating
and that he was no longer engaged to her.
On cross-examination, however, Alston was
confronted with inconsistent trial
testimony of October 20, 1997, and he
then acknowledged that he was not abusing
alcohol and had never sought professional
counseling. He also acknowledged that he
first became engaged to the woman in
question more than a year after the
termination.
Alston also presented some testimony
regarding the circumstances surrounding
the termination. He testified that after
King terminated him, he was escorted by
another person to his former office to
remove his personal effects. He further
testified that employees were gathered
around and some were crying, some were
mocking or laughing at him, and others
were befuddled.
When the injured party provides the only
evidence of emotional distress, he must
reasonably and sufficiently explain the
circumstances of the injury rather than
relying on mere conclusory statements.
Biggs v. Village of Dupo, 892 F.2d 1298,
1304 (7th Cir. 1990), citing Rakovich v.
Wade, 819 F.2d 1393, 1399 n.6 (7th Cir.
1987), vacated on reh. en banc on other
grounds, 850 F.2d 1180 (1988). Moreover,
"we require that a plaintiff show
’demonstrable emotional distress,’ not
just point to circumstances of the
constitutional violation which might
support an inference of such injury."
Biggs, 802 F.2d at 1305, quoting
Rakovich, 819 F.2d at 1399 (emphasis in
original). We have previously held
insufficient statements by a plaintiff
that he is "depressed, a little
despondent, or even completely
humiliated," Biggs, 892 F.2d at 1305, but
the sufficiency of such statements
ultimately depends upon the particular
facts of the case. As this court
clarified in United States v.
Balistrieri, 981 F.2d 916, 932 (7th Cir.
1992), an injured person’s testimony may,
by itself or in conjunction with the
circumstances of a given case, be
sufficient to establish emotional
distress without more. Balistrieri set
forth certain factors relevant to
determining when such evidence will
suffice, as follows:
[I]n determining whether the evidence of
emotional distress is sufficient to
support an award of damages, we must look
at both the direct evidence of emotional
distress and the circumstances of the act
that allegedly caused the distress. . . .
The more inherently degrading or
humiliating the defendant’s action is,
the more reasonable it is to infer that a
person would suffer humiliation or
distress from that action; consequently,
somewhat more conclusory evidence of
emotional distress will be acceptable to
support an award of emotional distress.
Id. [citations omitted]. The act that
allegedly caused the distress in this
case is the denial of the hearing, not
the termination itself. That is not the
type of inherently degrading conduct that
would portend emotional distress. See,
e.g., Balistrieri, 981 F.2d at 932
(recognizing that racial discrimination,
one of the "relics of slavery," is the
type of conduct that is reasonably
expected to cause emotional distress).
Therefore, Alston’s bare allegations of
humiliation would not, without more,
preclude judgment as a matter of law.
Therefore, we must examine the more
specific testimony of emotional distress
provided by Alston, to determine whether
it is sufficient to raise a jury issue.
Alston testified to alcohol abuse and the
demise of his engagement, but that
testimony was contradicted by Alston
himself on cross-examination, when he
acknowledged that as of the first trial,
he suffered no alcohol abuse and that he
did not even become engaged until over a
year after the termination. Alston
introduced no testimony from which a
finder of fact could attribute the
subsequent alcohol and relationship
problems as a long-delayed reaction to
the denial of the hearing. Accordingly,
that testimony provides no basis for a
jury to conclude that he suffered damages
in the form of emotional distress from
the failure to provide the hearing.
Alston also testified, however, as to
the sequence of events at the office that
occurred immediately after he was
informed of his termination. According to
that testimony, Alston was escorted by "a
police officer or someone that the Mayor
directed" to take him to his District.
Once there, he was taken to his former
office and he removed his personal
effects. In the meantime, employees were
gathered around, and some were crying,
others were befuddled, and still others
were mocking or laughing at him. That
testimony is sufficient to raise a jury
issue of emotional distress damages
related to the denial of procedural due
process. The portrayal of the incident
certainly gives credence to his claim of
feeling humiliated and suffering
emotional distress, particularly the
allegation of co-workers laughing and
mocking him as he cleaned out his desk.
Moreover, a reasonable juror could
conclude that the humiliating office
scene would not have occurred if Alston
had not been summarily terminated. For
instance, a jury could conclude that if
he was suspended pending a hearing, he
would not have been immediately taken
back to his desk and forced to clean out
his desk in the presence of his co-
workers, without any explanation.
Although he may have had to clear out his
desk eventually after the hearing, we
cannot say that the humiliation would
have been the same given the opportunity
for the other employees to at least have
learned what was happening in the
interim, and possibly given the potential
for him to choose a less visible time to
accomplish the task. In other words,
there was enough evidence to infer that
the humiliation he experienced was
attributable to the summary nature of the
proceedings, rather than to the
termination itself. Alston therefore
presented sufficient evidence of damages
to withstand judgment as a matter of law.
Accordingly, the district court erred in
granting judgment as a matter of law and
awarding only nominal damages. The
decision of the district court is
reversed and the case remanded for
further proceedings consistent with this
opinion.
/1 The district court initially determined on
summary judgment that Alston was responsible for
a set-off of $18,372.33 for funds misappropriated
by him from the City. The issue was later submit-
ted to the jury, which held Alston responsible
for a $16,857.99 set-off.
| {
"pile_set_name": "FreeLaw"
} |
No. 12714
I N THE SUPREME COURT O THE STATE O M N A A
F F OTN
1974
MAXINE I. RASMUSSEN ,
Claimant and Respondent,
-vs -
GIBSON PRODUCTS C M A Y O BOZEMAN,
O PN F
Employer and A p p e l l a n t ,
UNIVERSAL UNDERWRITERS INSURANCE
COMPANY,
Defendant and A p p e l l a n t .
Appeal from: D i s t r i c t Court o f t h e E i g h t e e n t h ~ u d i c i a lD i s t r i c t ,
Honorable W. W. L e s s l e y , Judge p r e s i d i n g .
Counsel o f Record:
For Appellants :
K e e f e r and Roybal, B i l l i n g s , Montana
N e i l S. K e e f e r a r g u e d , B i l l i n g s , Montana
F o r Respondent :
D r y s d a l e , McLean and S c u l l y , Bozeman, Montana
James A. McLean a r g u e d , Bozeman, Montana
Submitted: September 1 6 , 1974
,;r- - -: 8 .+
Decided :
M r . Chief J u s t i c e James T. H a r r i s o n d e l i v e r e d t h e o p i n i o n of t h e
Court .
T h i s i s an a p p e a l from a judgment o f t h e d i s t r i c t c o u r t
of G a l l a t i n County r e v e r s i n g a n o r d e r of t h e Worlunen's Compensa-
t i o n Division (the Division). The D i v i s i o n had d e n i e d t h e p e t i -
t i o n of r e s p o n d e n t , Maxine Rasmussen, f o r a d d i t i o n a l workmen's
compensation b e n e f i t s f o r a n o l d i n j u r y s h e s u s t a i n e d on October
1 4 , 1969, w h i l e employed by Gibsons i n Bozeman, Montana.
The h e a r i n g b e f o r e t h e D i v i s i o n was h e l d f i r s t on J u n e
11, 1973, and a g a i n on August 22, 1973, when i t was c o n c l u d e d .
A t t h i s hearing t h e following evidence w a s presented: Respondent
t e s t i f i e d t h a t on October 1 4 , 1969, s h e s u f f e r e d a n i n j u r y t o h e r
back d u r i n g t h e c o u r s e of h e r employment w i t h Gibsons i n Bozeman;
t h a t t h e I n d u s t r i a l A c c i d e n t Board (now t h e Workmen's Compensation
D i v i s i o n ) compensated h e r f o r wages l o s t from October 16 t h r o u g h
October 27, 1969, and f o r m e d i c a l e x p e n s e s i n c u r r e d from October
20 t h r o u g h December 8 , 1969; t h a t s h e r e t u r n e d t o work a t Gibsons
a f t e r October 27, 1969, b u t p e r s i s t e n t back t r o u b l e compelled h e r
t o q u i t d u r i n g t h e summer of 1970; t h a t i n J u n e 1970, d u r i n g a
t r a i n r i d e t o Oregon h e r back problems i n t e n s i f i e d and s h e t h e r e -
a f t e r v i s i t e d a c h i r o p r a c t o r i n Oregon who gave minor r e l i e f ; t h a t
on August 3 , 1970, s h e commenced work a t A r t c r a f t P r i n t e r s i n
Bozeman, b u t i n a b i l i t y t o l i f t a n y t h i n g and back p a i n from j u s t
s i t t i n g c a u s e d h e r t o q u i t on October 30, 1970; t h a t from December
1970, t o September 1971, s h e a t t e m p t e d s e v e r a l l i g h t housekeep-
i n g j o b s , b u t was f o r c e d t o q u i t a l l of them on a c c o u n t of h e r
back; t h a t i n December 1 9 7 1 , s h e o b t a i n e d employment on Tom
H o l d s w o r t h l s egg farm n e a r Bozeman, b u t h e r back b o t h e r e d h e r
d o i n g t h e work; t h a t i n J u n e 1972, s h e t o o k a n o t h e r t r i p t o
Oregon, b u t t h e s i t t i n g b o t h e r e d h e r s o s e v e r e l y t h a t s h e c o u l d
h a r d l y walk, and when s h e r e t u r n e d home s h e was u n a b l e t o l i f t
anything; t h a t i n J u l y 1972, Holdsworth f i n a l l y l e t h e r go
b e c a u s e h e r back s i m p l y would n o t p e r m i t h e r t o do any work; t h a t
on J u l y 1 4 , 1972, s h e f i l e d a c l a i m w i t h t h e D i v i s i o n a l l e g i n g
a n i n j u r y o r a r e c u r r e n c e t h e r e o f on J u l y 5 , 1972; t h a t s h e knew
Holdsworth d i d n o t c a r r y workmen's compensation i n s u r a n c e b u t he
d i d c a r r y m e d i c a l i n s u r a n c e t h a t he t h o u g h t might c o v e r h e r , b u t
s h e was u n f a m i l i a r w i t h t h e p r o c e d u r e s f o r f i l i n g workmen's
compensation c l a i m s .
Dr. De H e e t d e r k s , who t r e a t e d r e s p o n d e n t f o r h e r 1969
i n j u r y a t Gibsons, d i a g n o s e d r e s p o n d e n t ' s c o n d i t i o n t h e n a s a
muscle s t r a i n and r e l e a s e d h e r from h i s c a r e i n December 1969.
Respondent d i d n o t s e e a d o c t o r a g a i n u n t i l sometime i n 1972, b u t
t e s t i f i e d t h i s was b e c a u s e D r . De H e e t d e r k s s a i d s h e would j u s t
have t o l i v e w i t h h e r c o n d i t i o n . A f t e r seeing D r . D e Heetderks
a g a i n i n 1972, r e s p o n d e n t a l s o v i s i t e d D r s . Varberg, Hurnberger,
and Robinson a t d i f f e r e n t t i m e s b e g i n n i n g i n J u n e 1972, and
ending A p r i l 1973. Dr. Humberger t e s t i f i e d t h a t r e s p o n d e n t t o l d
him s h e was u n s u c c e s s f u l i n work b e c a u s e of back p a i n ; t h a t i n
December 1972, he d i a g n o s e d r e s p o n d e n t ' s c o n d i t i o n a s a p o s s i b l e
h e r n i a t e d d i s c ; b u t t h a t h e c o u l d n o t s a y w i t h any d e g r e e of
c e r t a i n t y whether t h e r e w a s a c a u s a l r e l a t i o n s h i p between t h e i n -
j u r y s u s t a i n e d by r e s p o n d e n t on October 1 4 , 1969 and h e r c o n d i t i o n
i n J u l y 1972, b u t more w i l l be s a i d a b o u t t h i s h e r e a f t e r .
On t h e b a s i s of t h i s e v i d e n c e , t h e D i v i s i o n found t h a t
a p r e p o n d e r a n c e of c r e d i b l e e v i d e n c e f a i l e d t o s u s t a i n a f i n d i n g
o f p r o x i m a t e c a u s e between r e s p o n d e n t ' s p r e s e n t d i s a b i l i t y and h e r
i n j u r y of October 1 4 , 1969, and concluded t h a t r e s p o n d e n t was
n o t e n t i t l e d t o f u r t h e r workmen's compensation b e n e f i t s .
Respondent t i m e l y p e t i t i o n e d f o r a r e h e a r i n g b u t t h e Div-
i s i o n on October 30, 1 9 7 3 , d e n i e d t h e p e t i t i o n . T h e r e a f t e r respond-
e n t p e r f e c t e d a n a p p e a l t o t h e d i s t r i c t c o u r t under t h e p r o v i s i o n s
o f s e c t i o n 92-833, R.C.M. 1947.
The h e a r i n g b e f o r e t h e d i s t r i c t c o u r t was h e l d on J a n -
u a r y 1 4 , 1974. I n a d d i t i o n t o having t h e c e r t i f i e d r e c o r d of
t h e D i v i s i o n , t h e d i s t r i c t c o u r t h e a r d t e s t i m o n y from respond-
e n t , D r . Humberger, Roberta Adams, a former co-worker o f re-
s p o n d e n t ' s a t A r t c r a f t , and Tom Holdsworth, h e r l a s t employer.
R e s p o n d e n t ' s t e s t i m o n y was more o r d e r l y t h a n t h a t h e a r d by t h e
D i v i s i o n , b u t i n s u b s t a n c e c o n t a i n e d n o t h i n g new e x c e p t f o r t h e
f a c t s h e had undergone s u r g e r y f o r a h e r n i a t e d d i s c a f t e r t h e
D i v i s i o n p r o c e e d i n g s had c l o s e d .
Adams t e s t i f i e d t h a t r e s p o n d e n t complained of back t r o u b l e
a f t e r o n l y two weeks a t A r t c r a f t and a g a i n b e f o r e s h e q u i t .
Holdsworth t e s t i f i e d t h a t r e s p o n d e n t t o l d him a b o u t h e r back
problems b e f o r e s h e t o o k t h e job; t h a t r e s p o n d e n t t h e r e a f t e r con-
t i n u e d t o complain a b o u t h e r back, which became p r o g r e s s i v e l y
worse, e s p e c i a l l y a f t e r h e r J u n e 1 9 7 2 , t r i p t o Oregon; and t h a t
s i n c e r e s p o n d e n t f e l t s h e had a g g r a v a t e d t h e o l d i n j u r y s u f f e r e d
a t Gibsons, a f t e r h e found s h e was n o t c o v e r e d by h i s own m e d i c a l
i n s u r a n c e he a d v i s e d h e r t o reopen t h e m a t t e r w i t h t h e D i v i s i o n .
Dr. Humberger t e s t i f i e d t h a t on November 7 , 1973, h e p e r -
formed s u r g e r y on r e s p o n d e n t f o r removal of a h e r n i a t e d d i s c ; t h a t
t h e h e r n i a t e d d i s c c o u l d be r e l a t e d back t o t h e 1969 i n j u r y a t
Gibsons; and t h a t t h e symptoms i n g e n e r a l of r e s p o n d e n t ' s back
t r o u b l e d a t e d back t o t h e i n j u r y a t Gibsons.
The d i s t r i c t c o u r t found t h a t r e s p o n d e n t c o n t i n u e d t o
s u f f e r from and complain of i n t e r m i t t e n t low back p a i n from t h e
t i m e o f h e r i n j u r y a t Gibsons i n 1969 t o t h e p r e s e n t ; t h a t t h i s
c o n d i t i o n p r e v e n t e d h e r from working a t l e n g t h a t any job; and
t h a t a preponderance of t h e e v i d e n c e e s t a b l i s h e d t h a t r e s p o n d e n t ' s
p r e s e n t back c o n d i t i o n w a s c a u s a l l y r e l a t e d t o t h e i n j u r y a t Gibsons.
The c o u r t concluded t h a t a p p e l l a n t U n i v e r s a l U n d e r w r i t e r s I n s u r -
a n c e Company w a s r e s p o n s i b l e f o r any compensation due r e s p o n d e n t
and that the cause should be remanded to the Division in order
to determine the extent of respondent's disability and the amount
of her award.
It is from this decision that appellants appeal.
Two issues are presented to us for review: (1) Did the
district court abuse its discretion in admitting additional evi-
dence? (2) Was there a preponderance of credible evidence to
support the findings and conclusions of the district court?
A district court has authority to take "additional evidence"
in the workmen's compensation cases it hears on appeal from the
Division. Section 92-834, R.C.M. 1947 provides:
" * * * The court may, upon the hearing, for good
cause shown, permit additional evidence to be
introduced, but, in the absence of such permission
from the court, the cause shall be heard on the
record of the board, as certified to the court by
it. The trial of the matter shall be de novo,
and upon such trial the court shall determine
whether or not the board regularly pursued its
authority, and whether or not the findings of the
board ought to be sustained, and whether or not
such findings are reasonable under all the cir-
cumstances of the case."
It should be noted that appellants timely objected to
all the "additional evidence" in the instant case--the testimony
of respondent, Adams, Holdsworth, and Dr. Humberger.
We think respondent's testimony as a whole is beyond the
scope of "additional evidence" as that term is used in the stat-
ute. Except for clarifying a few dates and relating the fact
of her subsequent back operation, respondent simply gave a repeat
of her performance before the Diuision. Similar testimony has
met with our approval in the past, but only because of exigent
circumstances not present here. -See, for example, Best v. London
Guarantee & Acc. Co., 100 Mont. 332, 47 P.2d 656 (claimant neither
personally present nor represented by counsel, board's decision
denying compensation was based on insurance carrier's version
of t h e f a c t s ) and Tweedie v . I n d u s t r i a l A c c i d e n t Board, 101
Mont. 256, 53 P.2d 1145 ( c l a i m a n t n o t r e p r e s e n t e d by c o u n s e l a t
board h e a r i n g , e v i d e n c e adduced was s o i n c o m p l e t e and c o n f u s -
i n g t h a t an i n t e l l i g e n t d e c i s i o n c o u l d n o t have been r e a c h e d ) .
On t h e o t h e r hand, t h e t e s t i m o n y o f Adams, Holdsworth,
and D r . Humberger i s a d d i t i o n a l e v i d e n c e f o r good c a u s e shown.
Dr. Humberger d i d n o t h i n g e l s e t h a n r e p o r t r e s p o n d e n t ' s m e d i c a l
c o n d i t i o n from t h e c l o s e of t h e D i v i s i o n h e a r i n g t o t h e d a t e o f
t h e d i s t r i c t court hearing. It is well s e t t l e d t h a t t h e d i s t r i c t
c o u r t may r e c e i v e e v i d e n c e b r i n g i n g t h e f a c t u a l r e c o r d up t o d a t e .
Sykes v . Republic Coal Co., 94 Mont. 2 3 9 , 244, 22 P.2d 157.
A p p e l l a n t s c o n t e n d t h a t r e s p o n d e n t was n e g l i g e n t i n f a i l i n g t o
have Adams and Holdsworth t e s t i f y b e f o r e t h e D i v i s i o n and conse-
q u e n t l y h a s n o t d e m o n s t r a t e d "good c a u s e " under s e c t i o n 92-834,
R.C.M. 1947. Had t h e s e w i t n e s s e s merely c o r r o b o r a t e d r e s p o n d e n t ' s
t e s t i m o n y t h a t s h e o f t e n s u f f e r e d back p a i n a f t e r t h e i n j u r y a t
Gibsons i n 1969, w e m i g h t be i n c l i n e d t o a g r e e . However, Adams
and Holdsworth a l s o spoke t o t h e i m p o r t a n t i s s u e of whether t h e r e
w a s a n i n t e r v e n i n g i n j u r y which c o u l d have been r e s p o n s i b l e f o r
r e s p o n d e n t ' s back t r o u b l e . The t e s t i m o n y of Holdsworth i s p a r -
t i c u l a r l y s i g n i f i c a n t i n t h i s regard:
"Q. P r i o r t o M r s . Rasmussen commencing work f o r
you, d i d s h e t e l l you a b o u t any of h e r p r e v i o u s
background? A. Yes. She a p p l i e d f o r t h e j o b
and I t o l d h e r we would l i k e h e r t o l o o k o v e r
t h e j o b and see what s h e w a s e x p e c t e d t o do.
She d i d come o u t and o v e r l o o k t h e work. - She
t o l d m e a t t h a t t i m e s h e had been i n j u r e d w h i l e
working a t Gibsons, t h a t s h e t h o u g h t s h e would
be a b l e t o h a n d l e t h e j o b , and s h e would l i k e t o
try.
"Q. Did s h e s a y a n y t h i n g a b o u t h e r back b o t h e r -
i n g h e r a t t h a t - t i m e ? AI Not s p e c i f i c a l l y a t
that particular time. She s a i d s h e had been
i n j u r e d a t Gibsons, and t h a t h e r back had b o t h e r -
ed h e r . And a g a i n s h e d i d n ' t s a y i t was a t t h a t
p a r t i c u l a r time. She j u s t s a i d s h e hoped s h e
would be a b l e t o h a n d l e t h i s p a r t i c u l a r work.
"Q. A f t e r s h e worked f o r you f o r w h i l e , d i d
s h e complain a b o u t h e r back? A . Y e s , s h e d i d .
"Q. Do you r e c a l l when t h i s was, f i r s t ? A.
She complained of h e r back j u s t g r a d u a l l y .
h d i n watching h e r work, I c o u l d s e e h e r back
was b o t h e r i n g h e r , W began t o r e s t r i c t t h e
e
t y p e of work t h a t s h e w a s d o i n g . I n o t h e r
words, t h e r e a r e c e r t a i n j o b s i n t h e p r o c e s s -
i n g p l a n t , t h e c a n d l i n g j o b , t h e r e i s no l i f t -
i n g a t a l l . I n u n l o a d i n g t h e egg p r o c e s s i n g
machines, t h e l i f t i n g i s v e r y r e s t r i c t e d . W e
began t o r e s t r i c t t h e amount of t h e a r e a i n
which s h e worked. She began t o complain v e r y
s e v e r e l y of h e r back problems a f t e r s h e came
back from t h i s v a c a t i o n . Her work t h e n was
r e s t r i c t e d e n t i r e l y t o t h e c a n d l i n g . And
a f t e r a s h o r t w h i l e , it became a p p a r e n t s h e
c o u l d n ' t d o t h a t , and had t o q u i t . " (Emphasis
added)
Obviously t h i s t e s t i m o n y l e n d s i n d e p e n d e n t s u p p o r t t o D r .
Humberger's o p i n i o n t h a t a c a u s a l r e l a t i o n s h i p e x i s t e d between
r e s p o n d e n t ' s back t r o u b l e i n 1972 and h e r i n j u r y a t Gibsons i n
1969. I n s h o r t , t h e t e s t i m o n y t o o k on added r e l e v a n c e i n l i g h t
of what D r . Humberger had t o s a y a t t h e d i s t r i c t c o u r t h e a r i n g .
Respondent c o u l d n o t r e a s o n a b l y have f o r s e e n t h i s a t t h e t i m e t h e
D i v i s i o n conducted i t s p r o c e e d i n g s ; a c c o r d i n g l y , a p p e l l a n t s '
o b j e c t i o n on t h i s p o i n t i s n o t w e l l t a k e n .
W e t h i n k t h e d i s t r i c t c o u r t could f i n d a preponderance
o f c r e d i b l e e v i d e n c e t o s u s t a i n r e s p o n d e n t ' s c l a i m , b o t h from t h e
a d d i t i o n a l e v i d e n c e p r e s e n t e d a t t h e d i s t r i c t c o u r t h e a r i n g and
t h e r e c o r d of t h e D i v i s i o n .
The c r u c i a l element of r e s p o n d e n t ' s c a s e w a s whether
s h e c o u l d show t h a t h e r back t r o u b l e i n 1972 was c a u s a l l y r e l a t e d
t o h e r i n j u r y a t Gibsons i n 1 9 6 9 . Dr. Humberger t e s t i f i e d a t
t h e d i s t r i c t c o u r t h e a r i n g that i n h i s o p i n i o n , based on a medi-
c a l h i s t o r y of r e s p o n d e n t and t h e f a c t of h e r o p e r a t i o n f o r a
h e r n i a t e d d i s c , such a c a u s a l r e l a t i o n s h i p d i d i n d e e d e x i s t . This
o p i n i o n was s u p p o r t e d n o t o n l y by t h e t e s t i m o n y of Adams and Holds-
w o r t h , a s d i s c u s s e d above, b u t a l s o by two o t h e r d o c t o r s . Dr.
D e H e e t d e r k s w r o t e a l e t t e r d a t e d September 1, 1972, t o Douglas
D r y s d a l e , r e s p o n d e n t ' s a t t o r n e y , wherein h e s t a t e d i n s u b s t a n c e
t h a t i n 1969 he f e l t r e s p o n d e n t ' s i n j u r y a t Gibsons w a s r e l a t i v e -
l y minor and a p p a r e n t l y r e s o l v e d i t s e l f ; t h a t h i s e x a m i n a t i o n
of r e s p o n d e n t i n 1972 was i n c o n c l u s i v e a s t o t h e n a t u r e and
c a u s e of h e r back d i f f i c u l t i e s t h e n ; and t h a t h e r e f e r r e d r e s p o n -
d e n t t o D r . Varberg who, a f t e r e x a m i n a t i o n , f e l t s h e might have
some d i s c o g e n i c d i s e a s e . The l a s t p a r a g r a p h of t h i s l e t t e r ,
however, q u a l i f i e s any u n c e r t a i n t i e s D r . De H e e t d e r k s may have
had and c l e a r l y s u p p o r t s D r . Humberger's o p i n i o n :
" I t i s d i f f i c u l t t o s a y w i t h c e r t a i n t y whether
o r n o t t h e low back t r o u b l e of O c t o b e r , 1969 i s
r e l a t e d t o t h e J u l y , 1972 back problems. How- -
e v e r , i f t h e p a t i e n t t r u l y d o e s have d i s c o g e n l c
d i s e a s e i n t h e low back a r e a , i t v e r y p r o b a b l y
is related. I would encourage you t o c o n s u l t
w i t h D r . Varberg on t h i s m a t t e r . " (Emphasis
added)
On October 6, 1972, D r . Varberg a l s o w r o t e t o D r y s d a l e and r e l a t e d
h i s e x a m i n a t i o n of r e s p o n d e n t . H e concluded w i t h t h i s p a r a g r a p h :
" I t is highly l i k e l y there is a causal r e l a t i o n -
s h i p between t h e a c c i d e n t o f October 1 4 , 1969 and
her present condition. I f s h e d o e s undergo a
myelogram and t h i s i s p o s i t i v e toward t h i s d i s e a s e
t h e n it would be m o p i n i o n t h a t t h e r e i s a d i r e c t
y
c a u s a l r e l a t i o n s h i p between t h e i n c i d e n t o f October
1 4 , 1969 and h e r p r e s e n t c o n d i t i o n . I would have
t o r e s e r v e a n a b s o l u t e d e f i n i t e o p i n i o n , however,
u n t i l t h e myelogram was accomplished." (Emphasis
added)
While t h e r e s u l t s of t h e myelogram w e r e n o t p o s i t i v e , t h e r e i s
no g e t t i n g around t h e f a c t t h a t r e s p o n d e n t i n November, 1973, was
found t o have a h e r n i a t e d d i s c and underwent s u r g e r y f o r t h a t
reason. I t d o e s n o t seem u n f a i r t o s a y D r . Varberg would concur
i n D r . Humberger's o p i n i o n a s t o t h e c a u s e of r e s p o n d e n t ' s back
trouble.
The D i v i s i o n i n d e c i d i n g a g a i n s t r e s p o n d e n t a p p a r e n t l y
gave c o n s i d e r a b l e w e i g h t t o t h e f a c t t h a t b e f o r e f i l i n g t h e p r e s e n t
c l a i m a g a i n s t Gibsons r e s p o n d e n t f i l e d a c l a i m a g a i n s t Holdsworth
who c a r r i e d no workmen's compensation i n s u r a n c e . This a c t i o n
might imply t h a t r e s p o n d e n t was aware s h e s u f f e r e d a new i n j u r y
while working at Holdsworth's and that the claim against Gibsons
was founded upon something less than good faith. At the Division
hearing respondent explained she really did not know the correct
procedures for filing a workmen's compensation claim; but the
Division was not convinced. However, we think the record is
replete with evidence from which the district court could find
assurance respondent was telling the whole story. For one thing,
both Adams and Holdsworth testified that respondent complained
of back trouble during her employment with Artcraft and the egg
farm. For another, the Division's interoffice communications of
July 10 and July 28, 1972, reveal that respondent phoned the office
to inquire about eligibility for workmen's compensation benefits,
saying she "(was) having difficulty with her back resulting from
her accident of October 14, 1969'' and "did not feel she had a
new injury but that it was a recurrence of the accident she had
on October 14, 1969, while employed by Gibsons * * *".
The case of Vetsch v. Helena Transf. & Stor. Co., 154 Mont.
106, 460 P.2d 757, was relied on by the Division as controlling,
but in our view this reliance is misplaced because of factual
distinctions from the instant case. Vetsch involved a workmen's
compensation claimant who in 1964 fell on a flight of stairs. He
claimed injuries to his back and elbows, but the accident was not
reported or compensated as an industrial accident. Eventually he
quit Helena Transfer & Storage over a commission dispute. There-
after during a period of more than two years claimant worked for
nine firms as a heavy construction worker. He never complained
to any of these employers of back trouble, nor did he ever give
it as a reason for quitting. During the winter of 1967, claim-
ant strained his back while shoveling snow. In holding that
claimant failed to show the 1964 fall was the proximate cause of
his present condition, the Court stressed the fact that claimant
subsequently performed heavy construction work and his working
ability was not impaired until after the winter of 1967. Here
the situation is very different: (1) respondent suffered a
previous industrial accident and received benefits therefor;
(2) she thereafter regularly complained of back trouble to sub-
sequent employers; and (3) she attempted to do only relatively
light work, and her back would not even permit her to do that for
any length of time.
The judgment of the district court is affirmed.
..............................
Chief Justice
We concur:
..............................
Justices
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624 S.W.2d 867 (1981)
James L. McNAMEE and Marylin H. McNamee, Plaintiffs-Respondents,
v.
Frazier E. GARNER, Defendant-Appellant.
No. 43196.
Missouri Court of Appeals, Eastern District, Division Three.
October 13, 1981.
Murray A. Marks, Clayton, for defendant-appellant.
Jack Gallego, Troy, for plaintiffs-respondents.
SNYDER, Judge.
James McNamee and Marylin McNamee, his wife, sued Frazier Garner for trespass to realty and the destruction of trees under § 537.340, RSMo 1978. The jury found for defendant. The trial court granted plaintiffs' motion for a new trial, ruling that defendant's converse instruction was given in error, and defendant appealed. The judgment ordering the new trial is reversed.
The sole issue in this case is whether it was prejudicial error for the court to instruct the jury that plaintiffs had to prove defendant trespassed upon plaintiffs' land in order to prevail on their claim for the value of the trees.
Plaintiffs-respondents and defendant-appellant both live in St. Louis County, Missouri. Plaintiffs, defendant and defendant's father own separate parcels of forested land in Lincoln County, Missouri. All three parcels lie along a private road off Highway H in Lincoln County.
Plaintiffs alleged in their petition that defendant trespassed upon plaintiffs' land and destroyed 50 of plaintiffs' trees. According to plaintiffs' evidence, when plaintiff James McNamee visited his land in September 1977, he discovered that several trees on his land had been cut down. He met defendant at that time and asked him if he had cut down the trees. According to plaintiff James McNamee, defendant admitted cutting down the trees, but claimed they were on his land. When plaintiffs visited their property in September 1978, they found that many more trees had been cut down and removed. A total of 50 trees had been felled.
On October 26, 1978 plaintiff James McNamee, along with his brother-in-law, Herbert Gross, Jr., went to defendant's home to ask if defendant had cut down any *868 more trees. According to Gross, defendant admitted cutting down the trees, but claimed the trees were on a road easement that crossed plaintiffs' property. James McNamee said that he at no time gave defendant permission to come onto his land or to cut trees on his land.
Defendant admitted having the conversation but denied that he told plaintiff James McNamee he cut down the trees or that he had in fact cut down the trees. According to defendant, plaintiff James McNamee never asked him in the 1977 conversation whether he had cut down any trees on plaintiffs' property. In the 1978 conversation, according to defendant, plaintiff James McNamee asked whether defendant had cut any wood on "the property" and defendant admitted cutting wood on "the property," meaning defendant's and defendant's father's properties. The jury found for defendant after which the trial court granted plaintiffs a new trial.
Defendant's jury Instruction No. 5 which plaintiffs complain of read as follows:
"Your verdict must be for the Defendant on Count I and Count II of Plaintiffs' Petition unless you believe that the Defendant did trespass on the land of the Plaintiffs enter in and cut down trees growing on the land of the plaintiffs on or about September 1977 and September 1978; that Defendant had no right or interest in the trees; and that Plaintiffs sustained damages thereby."
There is no approved MAI instruction applicable to trespasses to land. Plaintiffs moved for a new trial because defendant's Instruction No. 5 required the jury to believe that defendant trespassed upon plaintiffs' land before they could find for plaintiffs. Plaintiffs argued that trespassing on the land was not a required element for recovery under § 537.340. On this basis the trial court granted plaintiffs' motion for a new trial. This court finds the submitted instruction was appropriate to the facts and followed the law. The judgment is, therefore, reversed.
Instructions not in MAI "shall be simple, brief, impartial, free from argument, and shall not submit to the jury or require findings of detailed evidentiary facts." Rule 70.02(e). The ultimate test for such instructions is whether they follow the substantive law and can be readily understood. Bayne v. Jenkins, 593 S.W.2d 519, 530[9, 10] (Mo.banc 1980); Streeter v. Hundley, 580 S.W.2d 283, 287[4, 5] (Mo.banc 1979).
Section 537.340, RSMo 1978, entitled "Trespass on realtytreble damages recoverable, when," reads in part:
"If any person shall cut down, injure or destroy or carry away any tree placed or growing for use, shade or ornament, ... on the land of any other person, ... the person so offending shall pay to the party injured treble the value of the things so injured, broken, destroyed or carried away, with costs."
The statute does not require specifically that the offending party enter the land wrongfully; however, the statute does require that the tortfeasor trespass on the land. The section imposes liability for the wrongful cutting down of trees. A person can wrongfully fell trees in only one of two wayshe can enter the land wrongfully and fell the trees or he can enter with the landowner's consent and then exceed the scope of that consent by felling trees without permission. Both entering land wrongfully and entering land with consent or license and exceeding the scope of that consent or license constitute a trespass. Griesenauer v. Emsco Corporation, 399 S.W.2d 147, 151[3-6] (Mo.App.1965); 1 Harper & James, The Law of Torts, § 1.11 (1956). It was therefore proper for the trial court to instruct the jury that defendant had to trespass on plaintiffs' land before he could be held liable under § 537.340.
The instruction was proper as a matter of law. It was error for the trial court to grant plaintiffs' motion for a new trial on the basis of this instruction. Bayne v. Jenkins, supra at 530[6-8].
The judgment of the trial court in ordering a new trial is reversed and the cause is *869 remanded with directions to reinstate the jury's verdict for defendant.
CRIST, P.J., and REINHARD, J., concur.
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Filed 11/6/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION ONE
In re W.R., a Person Coming Under the
Juvenile Court Law.
THE PEOPLE,
Plaintiff and Respondent,
v. A150435
W.R.,
(San Francisco County
Defendant and Appellant. Super. Ct. No. JW14-6119)
INTRODUCTION
Minor W.R. appeals from the San Francisco Superior Court’s order denying his
motion to seal certain records pursuant to Welfare and Institutions Code section 786. 1
This appeal involves the meaning of the phrase “in the case” used in several subsections
of that statute. We find that the phrase does not reference the entire juvenile court file, as
the minor contends. Nevertheless, we conclude for other reasons the court should have
sealed the records in a case dismissed as part of a plea bargain with another case; had the
discretion under section 786, subdivision (e)(1) to seal the records pertaining to another
petition in which the allegations were found not true; but did not have the discretion
under section 786, subdivisions (b) or (e)(1) to seal the records pertaining to a petition
filed subsequent to the last petition for which the minor was placed on probation.
However, as to that petition, the minor may seek to have his records sealed pursuant to
1
All subsequent statutory references are to the Welfare and Institutions Code
unless otherwise indicated.
section 781. Thus, we reverse in part and affirm in part the court’s orders and remand for
further proceedings consistent with the views expressed in this opinion.
STATEMENT OF THE CASE 2
A. Original San Mateo County Petition No. 82358.
“On January 15, 2013, the San Mateo County District Attorney filed an original
wardship petition under Welfare and Institutions Code section 602 charging appellant
with possession of a dirk or dagger (Pen. Code, § 21310, count 1), battery (Pen. Code,
§ 242, count 2), and resisting arrest (Pen. Code, § 148, subd. (a)(1), count 3). At his
jurisdictional hearing, appellant admitted a violation of count 1, with the remaining
counts dismissed. At his disposition hearing, the court found minor a ward of the court
and removed custody from his parents but ordered him to reside with his mother under
the supervision of the Family Preservation Program.” (In re W.R., supra,
A144659/A145118, at p. *2.)
B. Second San Mateo County Petition No. 82358.
“On July 24, 2013, the San Mateo District Attorney filed a second wardship
petition accusing appellant of vandalism (Pen. Code, § 594, subd. (b)(2)(A)). The minor
admitted the charge on August 14, 2013. Minor’s supervision under the Family
Preservation Program was extended and he was detained at the Youth Services Center for
24 consecutive days.” (In re W.R., supra, A144659/A145118, at p. *2.)
2
On our own motion, we take judicial notice of our prior unpublished opinion in
this case (In re W.R. (Jan. 6, 2016, A144659/145118 [nonpub. opn.]). Parts of our factual
summary are drawn from that opinion. Citation of our prior unpublished opinion is
permitted by California Rules of Court, rule 8.1115(b)(1) “to explain the factual
background of the case and not as legal authority.” (Pacific Gas & Electric Co. v. City
and County of San Francisco (2012) 206 Cal.App.4th 897, 907, fn. 10; The Utility
Reform Network v. Public Utilities Com. (2014) 223 Cal.App.4th 945, 951, fn. 3; Conrad
v. Ball Corp. (1994) 24 Cal.App.4th 439, 443, fn. 2 [discussing Cal. Rules of Court,
former rule 977(a).) Further factual or procedural details are included as needed to
address defendant’s arguments.
2
C. Probation Violation Petitions in San Mateo County No. 82358.
“The probation officer filed a notice of probation violation against appellant under
. . . section 777, subdivision (a) on December 19, 2013. The petition alleged minor failed
to attend the Community Care Program, was truant in school attendance, failed to
observe curfew, and tested positive for marijuana. The minor admitted the truancy
violation and the court dismissed the remaining allegations. As a result of the violation,
the court ordered 30 consecutive days of detention.
“On March 5, 2014, the juvenile probation department filed a new notice of
probation violation. The notice alleged continued truancy, failure to attend Community
Care Program, failure to follow his curfew restrictions, and positive tests for marijuana
use. The minor admitted to truancy and the remaining contentions were dismissed. He
was ordered detained for 45 consecutive days and the court terminated the original
condition placing the minor in the Family Preservation Program. On April 17, 2014, the
court permitted the minor to reside with his father at his home, as well as with his mother
at her residence, after the probation officer agreed with the recommendation.
“The San Mateo Superior Court ordered the minor’s case transferred to San
Francisco on April 28, 2014. San Francisco County did not accept the transfer and the
case went back to San Mateo County on May 19, 2014.” (In re W.R., supra,
A144659/A145118, at pp. *2–*3, italics added.)
D. Third Petition Filed in San Francisco County No. JW14-6119.
“On September 5, 2014, the San Francisco District Attorney filed a third wardship
petition charging appellant with robbery (Pen. Code, § 211, count 1), assault by force
likely to cause great bodily injury (Pen. Code, § 245, subd. (a)(4), count 2), and false
personation (Pen. Code, § 148.9, subd. (a), count 3). After a contested jurisdiction
hearing, the trial court found the allegations not true and returned the case back to San
Mateo County on October 1, 2014.” (In re W.R., supra, A144659/A145118, at p. *3,
italics added.)
3
E. Fourth and Fifth Petitions Filed in San Mateo County No. 82358.
“A fourth wardship petition was filed on October 3, 2014, alleging false
personation (Pen. Code, 148.9, subd. (a)), possession of vandalism tools (Pen. Code,
§ 594.2, subd. (a)) and possession of cigarettes (Pen. Code, § 308, subd. (b)). A fifth
wardship petition was filed in the same county on October 9, 2014, for possession of a
controlled substance (Health & Saf. Code, § 11377, subd. (a)) and resisting arrest (Pen.
Code, § 148, subd. (a)(1)). On October 24, 2014, the minor admitted the possession
charge in the fifth petition and the remaining allegations were dismissed.” (In re W.R.,
supra, A144659/A145118, p. *3.)
F. Sixth Petition Filed in San Mateo County No. 82358 and Transferred to
San Francisco County for Disposition.
“A new petition was filed on December 9, 2014. It alleged vandalism (Pen. Code,
§ 594, subd. (d)(2)). The minor admitted the charge at the initial hearing on
December 15, 2014. The San Mateo court transferred the case to San Francisco and San
Francisco accepted the transfer. On January 23, 2015, the court continued the minor as a
ward but ordered out-of-home placement. Appellant filed a timely appeal.” (In re W.R.,
supra, A144659/A145118, at pp. 3*–*4.) All six petitions were transferred to San
Francisco under case No. JW14-6119.
G. Denial of Motion to Modify Disposition.
“On April 20, 2015, the minor moved to modify the order imposing out-of-home
placement. He alleged changed circumstances pursuant to . . . section 778. The court
denied his motion on April 30, 2015. The minor filed a timely appeal.” (In re W.R.,
supra, A144659/A145118, at p. *4.) The two appeals, case Nos. A144659 and A145118,
were consolidated. (In re W.R., at p. *1, fn.1.) This court affirmed the juvenile court’s
orders on January 6, 2016. (In re W.R., at p. *8.)
H. Seventh Petition Filed in San Francisco County No. JW14-6119.
On October 6, 2015, while the minor was in custody in San Francisco’s juvenile
hall awaiting placement, the San Francisco County District Attorney filed a wardship
4
petition charging the minor, age 16, with assault by means of force likely to cause great
bodily injury, a felony. (Pen. Code, § 245, subd. (a)(4).) The court found the minor not
competent to stand trial and suspended proceedings on December 4, 2015.
On February 8, 2016, the San Francisco County juvenile court ordered the minor
placed at Summit Academy in Pennsylvania. 3 The minor was transported to
Pennsylvania on March 8, 2016, and returned to San Francisco on September 9, 2016.
On October 11, 2016, the minor was detained pending completion of a new competency
evaluation. Home detention, previously revoked, was reinstated. Pursuant to a new
competency evaluation filed November 17, 2016, the court again found the minor
incompetent to stand trial on the October 6, 2015 petition.
I. Motion to Dismiss Petitions.
On November 17, 2016, the minor filed a motion in San Francisco County
juvenile court to seal his juvenile court records. (§ 786.) At a hearing on November 21,
2016, minor’s counsel made an oral motion to dismiss the minor’s October 6, 2015
petition pursuant to section 782. Regarding “the pending petitions,” the deputy district
attorney argued for unsuccessful termination of probation. With respect to the section
782 dismissal, she had no opinion and submitted the matter.
The court observed that the minor was “doing really well” and “working really
hard,” was “testing clean,” had “really improved” his attendance and behavior at school,
and was participating with the Center on Juvenile and Criminal Justice Case Management
and Wraparound Services. With respect to the motion to seal records under section 786,
the court terminated the misdemeanor probation terms satisfactorily, “given how well
you’ve been doing since being released on home detention and given that you did
3
On March 7, 2016, the minor filed a petition for writ of mandate and/or
prohibition and stay request to prevent his imminent removal to Pennsylvania. (W.R. v.
Superior Court, A147657.) Although this court issued an order granting the stay on
March 7, 2016, the order did not reach the juvenile court before the minor left for
Pennsylvania.
5
complete a program, you have your difficulty with the program, for sure. But you
weren’t kicked out of the program and the program indicated that there was improvement
over the period of the program.” The court also granted the motion to dismiss under
section 782 “the single felony count that you picked up while you were in custody here.”
The court deferred ruling on the minor’s motion to seal his juvenile records.
At a hearing on January 4, 2017, the district attorney argued that section 786 did
not authorize the sealing of the minor’s records pertaining to the October 2015 petition
because “the plain reading of the statute indicates that the minor has to . . . have
successfully or satisfactorily completed probation, 602 probation or have been on 725
probation, or have been on a grant of informal probation. [¶] . . . [H]e was only on
probation for the cases where he was competent. So this case does not fall under 786 just
by the plain reading because he was never on 602 probation, or 725, or 654. So I don’t
believe that just by the plain reading of the statute that a 786 should be granted for the
petition.” The minor’s counsel argued that nothing in section 786 precluded the court
from granting record sealing because the minor did, in fact, successfully complete
probation for all the petitions included in his unitary juvenile case file when he completed
the program in Pennsylvania while he was incompetent to stand trial on the 2015 petition,
and it “just doesn’t seem equitable” not to include it.
The juvenile court granted the minor’s request under section 786 to seal his
records from the “petitions dated 1/15/13, 7/24/13, 12/19/13, 3/5/14, 10/9/14 and
12/9/14.” The court did not mention, or dismiss, or seal the records pertaining to the
petition filed in San Francisco on September 5, 2014, which was not sustained, or the
petition filed in San Mateo County on October 3, 2014, which was dismissed as part of a
negotiated disposition with the petition filed in that county on October 9, 2014. The
court declined to seal the records pertaining to the October 2015 petition, which it had
dismissed pursuant to section 782. The court stated: “I agree with the district attorney
that whether it’s a position that this court can infer is certainly not clear by the statute.
6
It’s silent on this type of dismissal. And given that it’s not silent on different—other
types of probation, the court is not going to guess that a 782 falls within this.” This
appeal follows.
DISCUSSION
The issues on appeal include whether section 786 requires (1) the sealing of
records pertaining to a petition dismissed under section 782 in the interest of justice, for
which the minor was never placed on probation, but which was part of the corpus of the
minor’s juvenile court file while the minor was on probation under other petitions; (2) the
sealing of records pertaining to a prior petition which was dismissed pursuant to a plea
bargain involving an admission in another petition, for which the minor was placed on
probation; and (3) the sealing of a prior petition for which the minor was never placed on
probation because the allegations of the petition were not sustained. Noting that all of the
minor’s petitions were eventually transferred to and subsumed under San Francisco
County Juvenile Court case No. JW14-6119, the minor argues that “in the case” means
the minor’s entire juvenile case file under that number. (See In re Jose S. (2017)
12 Cal.App.5th 1107, 1119 [§ 781].) Thus, as long as the minor satisfactorily completed
juvenile probation in his case, the record sealing required by the statute encompasses all
the accumulated records in the minor’s juvenile case file. The Attorney General argues
the only records subject to sealing are those pertaining to a specific dismissed petition for
which the minor was placed on probation. 4 Both parties argue that the plain language of
section 786, subdivisions (a) and (b), supports their position.
4
Both parties refer to the minor’s October 2015 petition, on which he was found
incompetent to stand trial before it was dismissed, as “unadjudicated.” To adjudicate
means “to make an official decision about who is right in (a dispute): to settle judicially.”
(<https://www.merriam-webster.com/dictionary/adjudicate> [as of Nov. 6, 2017, 2017].)
The court made a judicial decision, on the minor’s motion and with the district attorney’s
consent, to settle the matter by dismissing the petition in the interests of justice. (§ 782.)
In this sense, the petition was adjudicated.
7
Section 786 requires the court, upon the satisfactory completion of probation
(formal or informal), to “order the petition dismissed” and further “order sealed all
records pertaining to that dismissed petition in the custody of the juvenile court, and in
the custody of law enforcement agencies, the probation department, or the Department of
Justice.” (§ 786, subd. (a), italics added.) And, “[u]pon the court’s order of dismissal of
the petition, the arrest and other proceedings in the case shall be deemed not to have
occurred.” (§ 786, subd. (b), italics added.)
We review the trial court’s decision under section 786 for abuse of discretion. (In
re A.V. (2017) 11 Cal.App.5th 697, 711 (A.V.).) However, we review a question of
statutory construction de novo. (In re Jeffrey T. (2006) 140 Cal.App.4th 1015, 1018.)
“We start with the statute’s words, which are the most reliable indicator of legislative
intent. [Citation.] ‘We interpret relevant terms in light of their ordinary meaning, while
also taking account of any related provisions and the overall structure of the statutory
scheme to determine what interpretation best advances the Legislature’s underlying
purpose.’ ” (In re R.T. (2017) 3 Cal.5th 622, 627.)
In A.V., supra, 11 Cal.App.5th 697, this court recently considered “ ‘ “the
legislative history of the statute and the wider historical circumstances of its
enactment” ’ ” (id. at p. 705) to ascertain the legislative intent behind section 786. 5 We
noted that section 786 was enacted in 2014 “to address a ‘serious shortcoming of our
juvenile justice system.’ ” (A.V., at p. 707.) Existing procedures for sealing juvenile
records “often involved ‘lengthy delays as well as significant costs . . .’ ” and many
affected youth remained “ ‘unaware of their right to seal their juvenile record, or [were]
unable to complete the process due to procedural, logistical or financial barriers.’ ”
(Ibid.) The purpose of section 786 was to “ ‘streamlin[e] the process for sealing a
5
Because the court below ruled on the minor’s motion to dismiss and seal in 2017,
the 2017 version of the statute governs here. A.V. considered the 2016 version of the
statute, but the differences between the 2016 and 2017 versions do not affect our analysis.
(See A.V., supra, 11 Cal.App.5th at p. 709, fn. 4.)
8
juvenile’s record. . . .’ [Citation.] ‘In doing so, this bill will further the dual purposes of
the juvenile justice system: rehabilitation and reintegration, by better ensuring that
juveniles have a clear pathway to clearing their records, when in compliance with
existing statutory and probationary requirements. The bill recognizes the established role
of California’s Juvenile Courts as institutions of reform, not punishment, and will help
individuals with juvenile records to find and hold jobs, and become fully functioning
members of society.’ ” (A.V., at p. 707, quoting Sen. Com. on Public Safety, Analysis of
Sen. Bill No. 1038 (2013-2014 Reg. Sess.) as amended Mar. 28, 2014, p. 7.)
Section 786 was amended in 2015 by Assembly Bills Nos. 666 (Stats. 2015,
ch. 368, § 1, p. 3442) and 989 (Stats. 2015, ch. 375; § 1.5, p. 3465.) (In re A.V., supra,
11 Cal.App.5th at p. 708.) With respect to the issues under consideration here, Assembly
Bill No. 666 added subdivision (e)(1), which states: “The court may, in making its order
to seal the record and dismiss the instant petition pursuant to this section, include an
order to seal a record relating to, or to dismiss, any prior petition or petitions that have
been filed or sustained against the individual and that appear to the satisfaction of the
court to meet the sealing and dismissal criteria otherwise described in this section.”
(Italics added.)
This subdivision has remained a feature of the statute through later amendments.
Commonweal, a sponsor of both Assembly Bill No. 1038 and Assembly Bill No. 666
wrote in support of this provision: “A new amendment to [Assembly Bill No.] 666
would permit the court to order the sealing and dismissal of prior petitions the individual
may have, so long as the court determines that the person has met all other Section 786
criteria for sealing and dismissal in relation to the prior petitions. This discretion to seal
priors would apply only in cases where the current petition (in an active probation case)
is before the court. It would not apply retroactively by requiring the Court to initiate
sealing in older cases. The added burden of sealing priors in a case that is already before
the court under Section 786 is viewed as minimal. Defense counsel in particular have
9
identified the need to be able to seal prior petitions in qualifying cases in order to meet
the fundamental [Senate Bill No.] 1038 policy goal of opening pathways to employment
and education for children who have completed their justice system obligations. The
authorizations to seal prior petitions, added at a new subdivision (e), is entirely
discretionary and would be applied only if the court determines that the prior petitions
merit sealing by meeting all [section] 786 sealing requirements.” (June 12, 2015 letter to
Hon. Loni Hancock, Chair, Sen. Pub. Safety Com., from David Steinhart, Director,
Commonweal Juvenile Justice Program, p. 5.) We note that Senate Bill No. 666 also
added new subdivisions (f)(1)(C) and (D), which limit what information can be disclosed
“[i]f a new petition has been filed against the minor for a felony offense” (§ 786,
subd. (f)(1)(C), italics added), and “[u]pon a subsequent adjudication of a minor whose
record has been sealed under this section and finding that the minor is a person described
by Section 602 based on the commission of a felony offense.” (§ 786, subd. (f)(1)(D).)
Our task is to “ ‘ “harmonize ‘the various parts of a statutory enactment . . . by
considering the particular clause or section in the context of the statutory framework as a
whole.” ’ ” (A.V., supra, 11 Cal.App.5th at p. 705.) We see nothing in the language of
the statute or the legislative history of Senate Bill No. 666 to suggest that the phrase “in
the case,” as used in section 786, subdivisions (a) and (b), means the entire juvenile court
file. Viewed in its ordinary syntactic context, “in the case” clearly tethers the records to
be sealed to the dismissed petition. This same meaning appears elsewhere in the statute.
(See, e.g., § 786, subd. (f)(1)(H) [“Access to the sealed record under this subparagraph
shall not be construed as a modification of the court’s order dismissing the petition and
sealing the record in the case,” italics added]; § 786, subd. (f)(1)(D) [“Access,
inspection, or use of a sealed record as provided under this subparagraph shall not be
construed as a reversal or modification of the court’s order dismissing the petition and
sealing the record in the prior case,” italics and underscoring added.)
10
Viewed as a whole, the language used in these subdivisions strongly suggests that
the records to be sealed are those pertaining to a particular petition: a petition for which
probation was imposed and satisfactorily completed or, under section 786, subdivision
(e)(1), a prior petition either filed or sustained, and that otherwise appears to the
satisfaction of the court to meet the sealing and dismissal criteria described in section
786. The inclusion of the word “filed” signals that the disposition of a petition—i.e.,
whether it was dismissed or resulted in its own grant of probation—is not dispositive if
other prerequisites are met. But, as currently written, the streamlined sealing procedure
codified in section 786 does not reach a petition that was filed subsequently to the last
petition for which the minor was placed on probation, and which did not result in a grant
of probation.
Our conclusion means the juvenile court had the discretion under section 786,
subdivision (e)(1) to seal the records pertaining to the petition filed in San Francisco on
September 5, 2014, which was not sustained, and therefore could never have resulted in a
grant of probation. For the same reasons, the court certainly had the discretion under
section 786, subdivision (e)(1) to dismiss the prior petition filed in San Mateo County on
October 3, 2014, which was dismissed as part of a negotiated disposition with a petition
filed on October 9, 2014, for which the minor was placed on probation. 6 Considering the
minor was essentially on a continuous grant of probation for all of his sustained petitions
when he was sent to, and satisfactorily completed, the program in Pennsylvania, there
were equities to be considered, but the court did not consider them because, so far as our
record shows, the court was not aware of its discretion in this regard.
6
The Attorney General argues we should not consider the minor’s argument
concerning the October 3, 2014 petition because he did not raise it below. However,
since the issue involves a purely legal question decided on undisputed facts, we exercise
our discretion to address the minor’s contention. (In re I.F. (2017) 13 Cal.App.5th 679,
687.)
11
However, in our view, the court was required to seal the records pertaining to the
October 3, 2014 petition under section 786, subdivisions (a) and (b) for the reasons
identified in In re G.F. (2017) 12 Cal.App.5th 1 (G.F.). There, upon the prosecutor’s
motion, the section 602 petition was dismissed and the minor was placed on informal
supervision pursuant to section 654, instead of section 654.2. After he satisfactorily
completed his program of informal supervision, he moved to seal his records pursuant to
section 786. The prosecutor opposed the motion, on the ground section 786 did not apply
because the minor did not complete a program of supervision under 654.2, as specified in
section 786. The trial court found the equities with the minor, but the law with the
district attorney, and denied the motion. (G.F., at p. 4.)
The Court of Appeal reversed, finding that supervision under sections 654 and
654.2 were, in that case, essentially indistinguishable, the dismissal procedure employed
by the prosecutor was not contemplated by the statutory scheme, and the minor was not
told, when he acquiesced to the dismissal under section 652, that his lack of opposition
would result in the loss of his right to record sealing under section 786. (G.F., supra,
12 Cal.App.5th at p. 6.) The court concluded the minor’s entitlement “to relief under
section 786 is also consistent with the purpose of the statute, which is to provide a
streamlined sealing process for minors who satisfactorily complete a program of
supervision or term of probation after a delinquency petition has been filed against them.
(In re Y.A. (2016) 246 Cal.App.4th 523, 526–528.) The People cannot deprive minors of
their right to this relief simply by initiating a premature dismissal of their section 602
petitions pursuant to a ‘motion’ that is contrary to the controlling statutory scheme.”
(G.F., at p. 7.)
The difference between G.F. and this case is that in G.F., the prosecutor employed
an unconventional dismissal procedure and here the prosecutor employed a conventional
one: instead of filing one petition which included all of the charges, dismissing some
charges and securing a plea to one charge which resulted in a probationary grant, the
12
prosecutor filed two petitions a few days apart and then negotiated a plea bargain which
resulted in the dismissal of all the charges in one petition and the minor’s continuation on
probation pursuant to an admission of wrongdoing in the other petition. When
consenting to the plea bargain, the minor was not informed he would be waiving his
future right to relief under section 786 if he satisfactorily completed probation. In our
view, the minor should not forfeit his rights under subdivision (b) of section 786 because
the prosecutor chose to file two separate petitions, which resulted in one grant of
probation. We do not constrain in any way the prosecutor’s discretion to proceed as he or
she sees fit with respect to the filing, consolidation, or negotiation of delinquency
petitions. But we also do not approve a formalistic approach to pleading that results in
the frustration rather than the furtherance of the salutary purposes of section 786 when
the minor satisfactorily completes a probationary grant imposed pursuant to the
simultaneous disposition of two unconsolidated petitions.
People v. Soria (2010) 48 Cal.4th 58, which held that for the purpose of assessing
separate restitution fines in adult criminal cases, “[u]nconsolidated cases resolved jointly
by plea bargain remain formally distinct,” does not compel a different result. (Id. at
p. 64.) “[T]he juvenile wardship system and the adult criminal system are two distinct
systems, the two systems use different terminology, and their underlying purposes have a
different focus.” (Alejandro N. v. Superior Court (2015) 238 Cal.App.4th 1209, 1219.)
For example, in juvenile court “it has long been the practice to file successive juvenile
petitions under a single case number . . . [which] has important practical considerations.
It allows the court to keep track of the minor’s progress (or lack thereof), to determine
whether ordered rehabilitative programs are succeeding or failing and whether new ones
should be tried, and to aggregate offenses in order to extend the maximum term of
confinement for a new offense where the minor appears to be sliding toward
incorrigibility.” (In re Kasaundra D. (2004) 121 Cal.App.4th 533, 540–541.) In our
view, this distinction warrants treating the disposition of two petitions, resulting in the
13
continuation or grant of probation which the minor ultimately completes to the court’s
satisfaction, as one petition for the purposes of record sealing under section 786, whether
or not the petitions were formally consolidated. We therefore reverse and remand to the
juvenile court to issue an order sealing the records pertaining to the October 3, 2014
petition.
We also conclude, however, that section 786 as currently configured does not
authorize the juvenile court to seal the records pertaining to the minor’s October 2015
petition, which the court dismissed in the interests of justice (§ 782). It is true the minor
was on probation for other offenses when the charge underlying that petition arose, and
when he was sent to Pennsylvania. However, because it was not a petition for which
probation was granted, and was not filed prior to the last petition for which probation was
granted, he was not entitled to dismissal or record sealing under section 786.
Nevertheless, as we are informed the minor has attained the age of 18, on remand the
juvenile court may consider sealing the minor’s records pertaining to the October 2015
petition pursuant to section 781. We also reverse and remand to the trial court so that it
may exercise its broad discretion under section 786, section (e)(1) with respect to the
September 5, 2014 petition.
DISPOSITION
The juvenile court’s order denying the minor’s request to seal records pertaining to
the October 2015 petition, which was dismissed pursuant to section 782 in the interest of
justice, is affirmed. The juvenile court’s order denying the minor’s request to seal
records pertaining to the September 5 and October 3, 2014 petitions is reversed. The
matter is remanded for (1) reconsideration of the minor’s request for dismissal and/or
sealing of the prior petition filed on September 5, 2014, under section 786, subdivision
(e)(1); (2) for consideration of minor’s request for sealing of the October 2015 petition
under section 781; and (3) for the issuance of an order to seal the records pertaining to the
October 3, 2014 petition, in light of the views expressed in this opinion.
14
_________________________
Dondero, J.
We concur:
_________________________
Margulies, Acting P. J.
_________________________
Banke, J.
A150435 In re W.R./People v. W.R.
15
Trial Court: San Francisco County Superior Court
Trial Judge: Hon. Linda Colfax
Counsel:
Jeffrey A. Glick, under appointment of the Court of Appeal under the First District
Appellate Project, Independent Case System.
Xavier Becerra, Attorney General, Gerald A. Engler and Jeffrey M. Laurence,
Assistant Attorneys General, Donna M. Provenzano and Christina Vom Saal, Deputy
Attorneys General, for Plaintiff and Respondent.
A150435 In re W.R./People v. W.R.
16
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721 F.2d 420
Anthony J. GARAFOLA, Appellee,v.G.C. WILKINSON, Warden.G.C. Wilkinson, Appellant.
No. 83-3175.
United States Court of Appeals,Third Circuit.
Argued Sept. 29, 1983.Decided Nov. 15, 1983.Rehearing and Rehearing In Banc Denied Dec. 9, 1983.
Douglas B. Schoppert (argued), Lewisburg Prison Project, Lewisburg, Pa., for appellee.
David Dart Queen, U.S. Atty., James W. Walker, Asst. U.S. Atty., Scranton, Pa., Henry J. Sadowski (argued), Regional Counsel, U.S. Parole Commission, Philadelphia, Pa., for appellant.
Before ALDISERT and BECKER, Circuit Judges, and COHILL,* District Judge.
OPINION OF THE COURT
BECKER, Circuit Judge.
1
This appeal presents the question whether the United States Parole Commission acted within its statutory authority when it promulgated a rule under which a federal prisoner who has been paroled to a state detainer, upon subsequent conviction for a crime punishable by imprisonment, committed while subject to the jurisdiction of the Commission, can be denied credit in the calculation of his parole-violation term for the time that he was incarcerated in state prison pursuant to the state detainer. The case turns on whether a "parole to a state detainer" is a "parole" within the meaning of the Parole Commission and Reorganization Act, 18 U.S.C. Secs. 4201-4218 (1976) ("Parole Act").
2
The district court held that a prisoner is "paroled" only when he is released into the community, that a parole to a state detainer was the equivalent of a transfer to state custody, and therefore that the time spent by appellee Anthony J. Garafola in state prison after being paroled to the state detainer must be credited towards satisfaction of his federal sentence. Because we hold that a "parole to a state detainer" made pursuant to section 2.32(a)(2) of the Parole Commission's regulations, see 28 C.F.R. Secs. 2.1-2.60 (1982), is a "parole" within the meaning of the Parole Act, we reverse.
I.
3
On October 8, 1974, Garafola was sentenced in the United States District Court for the District of Massachusetts to a total regular adult term of six-years imprisonment on convictions of one count of conspiracy and eight counts of disposing of falsely made and forged securities in interstate commerce. On June 2, 1976, Garafola had his initial parole hearing. At this hearing, the Parole Commission was advised that Garafola had been convicted in New Jersey for assault and battery and had received a one- to three-year sentence, to run concurrently with his federal sentence. The Commission decided to parole Garafola "effective August 19, 1976 to the actual physical custody of the New Jersey authorities; however, if the New Jersey detainer is withdrawn, parole effective September 7, 1976, via Community Treatment Center."
4
On August 19, 1976, pursuant to this decision, Garafola was paroled from his six-year federal sentence to the New Jersey detainer; at that time 1452 days remained to be served on his federal sentence. On January 10, 1978, after 509 days in a New Jersey state prison, Garafola was released by the State of New Jersey from his one- to three-year state sentence, and he became subject to active supervision under his federal parole; on that date 943 days remained to be served on his federal parole.
5
On March 18, 1980, Garafola was convicted in a New Jersey state court of conspiracy. The criminal acts committed by Garafola that resulted in this conspiracy conviction occurred in September 1977, while Garafola was still in custody on his state sentence. On April 14, 1980, Garafola was sentenced to two years and eleven months imprisonment on this conspiracy conviction. On April 23, 1980, the Commission issued a parole violation warrant against Garafola, based upon his new conviction. This warrant was lodged as a detainer against Garafola with the New Jersey State prison authorities.
6
After conducting a hearing, the Commission decided, by notice of action dated September 24, 1981, to revoke Garafola's parole, to forfeit all time he had spent on parole, to begin his parole violation term on his release from state custody, and to deny him reparole on the parole violation term. The Commission found that August 19, 1976, was the date that Garafola was paroled from his federal sentence and thus computed the parole violation term to be 1452 days. On October 27, 1981, Garafola was released from his new state sentence, at which time the federal parole violation warrant was executed. The federal parole violation term of 1452 days began to run on that date.
7
On August 12, 1982, Garafola, acting pro se, petitioned in the District Court for the Middle District of Pennsylvania under 28 U.S.C. Sec. 2241 (1976), for a writ of habeas corpus against his custodian George C. Wilkinson, Warden of United States Penitentiary, Lewisburg, Pennsylvania. Garafola requested credit towards the federal parole violation term for the time he had spent in custody pursuant to the state sentence to which he had been paroled in August 1976, and from which he was released on January 10, 1978.
8
On February 2, 1983, the district court granted Garafola's petition for a writ of habeas corpus. The district court held that the "parole to the state sentence" was not a "parole", and that therefore, the Commission could not deny a federal prisoner credit for time spent in state prison pursuant to a state detainer. The court ordered the Commission to credit Garafola for the time that he spent in state prison from August 19, 1976, to January 10, 1978. Garafola v. Wilkinson, 555 F.Supp. 1002 (M.D.Pa.1983).1
II.
9
The Parole Commission has express statutory authority to revoke the parole of any parolee who is convicted of any new criminal offense punishable by imprisonment, and to order that that individual receive no credit towards time served from the date he was released on parole until he returns to federal custody following completion of any new sentence of incarceration. 18 U.S.C. Sec. 4210(b)(2) (1976).2 The term "parole" is not defined in the Parole Act;3 however, this omission is not surprising given that the subject of the Parole Act is parole, and Congress clearly intended to define that term by reference to the structure and substance of the entire Act. Nor is there any express definition in the regulations promulgated by the Parole Commission pursuant to its express statutory authority to promulgate regulations to implement the goals of the Parole Act. However, the Commission has promulgated regulations that have the effect of making "parole to a state detainer" one form of "parole."4 The real question in this case then is whether these regulations are valid.
10
If we determine that the regulations are valid, then Garafola was "paroled" when he was "paroled to the state detainer" on August 19, 1976, and upon his subsequent conviction and revocation of his parole, he is liable to serve the full amount of time that remained on his federal sentence calculated from the day he was paroled (i.e., 1452 days). If, however, the regulations are invalid, then Garafola was not a "parolee" while he was in state prison, and the Commission had no authority to deny credit to Garafola for the time he spent in state prison.5
III.
11
At the threshold, we note that Congress has committed substantive parole determinations to the absolute discretion of the Parole Commission.6 This statutory restriction on judicial review does not preclude the federal courts, however, from considering a claim that the guidelines for exercising discretion, as promulgated and applied, violate the intent and directives of the Parole Act. "Such an inquiry into the legality of agency action, as opposed to its appropriateness within legal bounds, is uniquely appropriate for judicial determination." Garcia v. Neagle, 660 F.2d 983, 988 (4th Cir.1981) (quoting Scanwell Laboratories, Inc. v. Schaffer, 424 F.2d 859, 875 (D.C.Cir.1970)), cert. denied, 454 U.S. 1153, 102 S.Ct. 1023, 71 L.Ed.2d 309 (1982); see 5 U.S.C. Sec. 706 (1976). If, therefore, the Commission's regulations that make a "parole to a detainer" a form of "parole" are outside the statutory mandate granted to the Parole Commission by Congress in the Parole Act, then the regulations are invalid, and the Commission may not deny Garafola credit for the time he served in state prison. The district court in effect found that the Commission's regulations equating "parole to a detainer" with "parole" violated the statutory mandate of the Parole Act.7 This determination is in turn subject to review by this court for error of law. Garcia, 660 F.2d at 989.
12
The district court pointed to three factors that persuaded it that the Parole Commission's regulations treating a "parole to a detainer" as a "parole" exceeded the Commission's statutory mandate. First, the court stated its view that "parole" necessarily requires release to the community, not to another prison authority.
13
Release to a detainer is not, however, an ordinary circumstance of "parole." Indeed calling such release "parole" is pure hyperbole and a gross twisting of the concept. Release on parole usually results in termination of the prisoner's period of incarceration. The parolee lives in a community or other less intrusive setting under supervision of appropriate authorities .... While the parolee is subject to a variety of "conditions of release" ... he has substantial freedom to adjust to the non-prison environment.
14
555 F.Supp. at 1004. We disagree.
15
Congress has charged the Parole Commission with making the determination whether a federal prisoner should be paroled. In Garafola's case the Commission applied the appropriate federal criteria and determined that he should be. In separate legislation Congress has also charged the Commission with cooperating with state authorities by honoring state detainers lodged against federal prisoners. See Interstate Agreement on Detainers Act, 18 U.S.C. Appendix (1976). In paroling Garafola to the state detainer the Parole Commission honored both of these Congressional directives. A state prison authority to which a federal prisoner has been paroled must make an entirely separate and independent judgment whether, under state criteria, the prisoner is entitled to state parole. The characterization of the federal action does not depend on actions taken by state authorities.8 Where a prisoner has violated both state and federal law and is convicted by both forums, he has brought down upon himself the possibility of being paroled from federal prison to state prison; and there is nothing about a "parole to a state detainer" that inherently contradicts the notion of "parole". Moreover, in most cases, federal prisoners who find themselves subject to a state concurrent sentence will prefer a regime in which they can legitimately be paroled to a state detainer; a rule to the contrary would compel federal authorities to deny parole until termination of the state's concurrent sentence and thus eliminate the possibility of a shorter overall period of incarceration that might otherwise flow from federal parole followed by state parole. See Clay v. Henderson, 524 F.2d 921, 924 (5th Cir.1975), cert. denied, 425 U.S. 995, 96 S.Ct. 2210, 48 L.Ed.2d 820 (1976) (decided under pre-1976 Parole Act).
16
The second factor relied on by the district court is that the Parole Commission's own regulations place certain restrictions on a parolee that are inconsistent with incarceration in state prison. For example, one of the express conditions of release is that a parolee shall not "associate with persons who have a criminal record," 28 C.F.R. Sec. 240(a)(10) (1982). But, by paroling Garafola to the New Jersey detainer, the Commission obviously suspended this regulation and gave its permission for Garafola to associate with other prisoners to the extent required by his state sentence. See 18 U.S.C. Sec. 4203(b) (1976) ("The Commission, by majority vote, and pursuant to the procedures set out in this chapter, shall have the power to ... impose reasonable conditions on an order granting parole ...."); see also Arciniega v. Freeman, 404 U.S. 4, 92 S.Ct. 22, 30 L.Ed.2d 126 (1971).
17
Finally, the district court pointed to the fact that, if a prisoner is paroled to a state detainer under section 2.32(a)(1) of the Commission's regulations, once that detainer is withdrawn the prisoner is required to be returned to federal prison and is not to be released unless and until the Commission makes a new order of parole. 28 C.F.R. Sec. 2.32(a)(1) (1982).9 The district court reasoned that, where the existence of a state detainer is one factor in favor of federal parole, and where withdrawal of that detainer results not in release to the community, but rather in automatic reincarceration in federal prison and reconsideration of the parole question de novo, the Parole Commission must credit the prisoner with the time spent in the state prison towards satisfaction of his federal sentence.
18
Whatever the merits of this argument, it is not relevant here. On this appeal both Garafola and the Parole Commission agree that Garafola was not paroled under 28 C.F.R. Sec. 2.32(a)(1) (1982), but under 28 C.F.R. Sec. 2.32(a)(2) (1982).10 Under this latter section the prisoner is paroled to the state detainer, but once the detainer is withdrawn, the prisoner is paroled to the community.11 Thus there was an actual and binding determination by the Parole Commission to parole Garafola from federal prison.
IV.
19
In sum, we hold that the parole of a federal prisoner to a state detainer pursuant to 28 C.F.R. Sec. 2.32(a)(2) (1982) is in all respects a "parole" within the meaning of the Parole Act. None of the factors cited by the district court impel the conclusion that the Parole Commission's regulations are outside the statutory mandate of the Parole Act; nor can we think of any other reason why they might be invalid. We therefore conclude that these regulations are within the province of the Parole Act and that they are valid. Thus, upon revocation of Garafola's federal parole because of the subsequent state conviction, he was liable to serve the full amount of time remaining on his federal sentence on the date he was paroled from federal prison (i.e., 1452 days). The judgment of the district court will therefore be reversed.
*
Honorable Maurice B. Cohill, Jr., United States District Judge for the Western District of Pennsylvania, sitting by designation
1
In its brief the Commission informs us that it has complied with the district court's order but reserves the right to void the credit if we reverse. The Commission has calculated a new full term release date for Garafola of May 26, 1984, and a new statutory mandatory release date (i.e., his full term less good-time deductions) of September 21, 1983. Thus presumably Garafola was released on September 21, 1983 "as if released on parole." 18 U.S.C. Sec. 4164 (1976). Assuming that Garafola has committed no new parole violations this period of new parole will expire one hundred and eighty days prior to May 26, 1984 (i.e., Nov. 27, 1983). Id. The Commission's good-faith compliance with the district court's order does not render this case moot. See U.S. Ex Rel. Forman v. McCall, 709 F.2d 852, 855-56 n. 9 (3d Cir.1983); Campbell v. U.S. Parole Comm'n, 704 F.2d 106, 109 n. 2 (3d Cir.1983)
2
The subsection reads:
(2) in the case of a parolee who has been convicted of a Federal, State, or local crime committed subsequent to his release on parole, and such crime is punishable by a term of imprisonment, detention or incarceration in any penal facility, the Commission shall determine, in accordance with the provisions of section 4214(b) or (c), whether all or any part of the unexpired term being served at the time of parole shall run concurrently or consecutively with the sentence imposed for the new offense, but in no case shall such service together with such time as the parolee has previously served in connection with the offense for which he was paroled, be longer than the maximum term for which he was sentenced in connection with such offense.
18 U.S.C. Sec. 4210(b)(2) (1976) (emphasis added); see 28 C.F.R. Secs. 2.47(d)(2) & 2.52(c)(2); H.Conf.R. No. 838, 94th Cong., 2d Sess. 19, reprinted in 1976 U.S.Code Cong. & Ad.News 335, 351, 364; United States v. Newton, 698 F.2d 770 (5th Cir.1983); Harris v. Day, 649 F.2d 755, 758-60 (10th Cir.1981). See also 28 C.F.R. Sec. 2.10.
3
Appellee points to the definition of "parole" in 18 U.S.C. Sec. 4101(f) (Supp. II 1978) ("parole" is "any form of release of an offender from imprisonment to the community") as support for his conclusion that "parole" requires that the prisoner must be released to the community, not to another prison. However, Sec. 4101(f) is part of chapter 306 ("Transfer to or from Foreign Countries") and is limited by its express terms to that chapter ("Sec. 4101 Definitions. As used in this chapter the term--... (f) 'Parole' means ...."). The Parole Act (chapter 311) has its own list of definitions in Sec. 4201, and "parole" is not included
4
The Parole Commission has express statutory authority to promulgate regulations to implement the Parole Act. 18 U.S.C. Sec. 4203(a)(1) (1976). Pursuant to this authority the Commission has promulgated regulations at 28 C.F.R. Secs. 2.1-2.60. Although the regulations contain a section of definitions (section 2.1), the term "parole" is not defined. The regulations, however, do address parole where a detainer has been lodged against a federal prisoner. 28 C.F.R. Sec. 2.32(c) (1982) ("As used in this section 'parole to a detainer' means release to the 'physical custody' of the authorities who have lodged the detainer.") First, the regulations provide that the existence of a detainer, by itself, is not sufficient justification to deny parole where a prisoner otherwise meets the parole criteria. 28 C.F.R. Sec. 2.31(a) (1982). Second, the regulations provide for two types of parole where a detainer is outstanding: parole to the detaining authority with the proviso that the prisoner be returned to the Federal authorities once the detainer is withdrawn; and parole to the detaining authorities, but once the detainer is withdrawn, parole to the community. 28 C.F.R. Sec. 2.32(a)(1) & (2) (1982). Plainly then, the Parole Commission has promulgated regulations that make a "parole to a detainer" one form of "parole". Thus, whatever the "ultimate essence" of parole is, by dint of these regulations "parole" includes "parole to a state detainer."
5
The typical context in which the problem of credit for time served in state prison will arise, is where a prisoner is paroled to a state detainer, serves his time in state prison, and is released to active supervision under his federal parole and then, while free but still on federal parole, the parolee commits some new crime. In this situation the Commission clearly has statutory authority to revoke the parole and require the parolee to serve his entire term, calculated at least from the day he was released from state prison. The only issue in this hypothesized case would be whether the parolee could be required to serve time calculated from the date he was released from federal prison; that is, whether the time spent in state prison was as a federal parolee (in which case denial of credit is permissible) or as a federal prisoner (in which case denial of credit is not permissible)
Garafola's situation is more problematic because he committed his new crime while in state prison. If the Commission's regulations are invalid, then Garafola was not a parolee while he was in state prison. The Parole Commission only has authority to deny credit for time spent on parole where the parolee commits a crime while on parole. 18 U.S.C. Sec. 4210(b)(2) (1976). Thus, in Garafola's case, assuming the regulations are invalid, the Commission not only cannot deny credit for time spent in state prison because Garafola was not then on parole, but also the Commission cannot deny credit for the time after Garafola was released from state prison because, even supposing he became a federal parolee upon his release from state prison, he committed no crime while on parole.
6
18 U.S.C. Sec. 4218(d) (1976); see Portley v. Grossman, 444 U.S. 1311, 100 S.Ct. 714, 62 L.Ed.2d 723 (1980); Garcia v. Neagle, 660 F.2d 983, 988 (4th Cir.1981), cert. denied, 454 U.S. 1153, 102 S.Ct. 1023, 71 L.Ed.2d 309 (1982)
7
The district court's opinion is actually not clear as to what standard of review it applied, or indeed, as to what the precise rationale for its holding was. To the extent that the district court's opinion is bottomed on the notion that Garafola was "transferred" and not "paroled" to state prison, we note our disagreement. Exclusive authority to designate the place of confinement for a federal prisoner and to administer transfers is vested by statute in the Attorney General, through the Bureau of Prisons. 18 U.S.C. Sec. 4082 (1976). Yet Garafola was released to the detainer not by the Bureau of Prisons or the Attorney General, but by action of the Parole Commission, which has exclusive statutory authority to grant paroles but no authority to make transfers. See Clay v. Henderson, 524 F.2d 921 (5th Cir.1975), cert. denied, 425 U.S. 995, 96 S.Ct. 2210, 48 L.Ed.2d 820 (1976) (decided under pre-1976 Parole Act)
8
Certainly, if a prisoner is paroled to the community and an hour later the state authorities arrest him on the street, and require him to serve out the remainder of a pending concurrent state sentence, there could be no doubt that the federal action was a parole. We are unable to conceive, and counsel for the appellee was unable at oral argument to suggest, any principled distinction between this hypothetical and Garafola's case. The mere fact that the federal and state authorities, motivated by considerations of comity, cooperate with each other through the detainer mechanism--thereby eliminating the hour of "street time" and the consequent administrative burden of recapturing paroled prisoners--is not sufficient to make the federal action not a parole
9
The regulation states:
(1) Parole to the actual physical custody of the detaining authorities only. In this event, release is not to be effected except to the detainer. When such a detainer is withdrawn, the prisoner is not to be released unless and until the Commission makes a new order of parole.
10
The regulation states:
(2) Parole to the actual physical custody of the detaining authorities or an approved plan. In this event, release is to be effected regardless of whether the detaining officials take the prisoner into custody, providing there is an acceptable plan for community supervision.
11
Garafola was paroled "effective August 19, 1976 to the actual physical custody of the New Jersey authorities; however, if the detainer is withdrawn, parole effective September 7, 1976 via Community Treatment Center." Notice of Action of Parole Commission, at 1 (June 17, 1976)
If the Parole Commission had timely informed the district court that Garafola's parole was pursuant to Sec. 2.32(a)(2) instead of Sec. 2.32(a)(1), we doubt that the district court would have ordered the Commission to credit Garafola with the time he spent in state prison. Indeed, if Garafola had in fact been paroled pursuant to Sec. 2.32(a)(1), it would present a very different case than a parole pursuant to Sec. 2.32(a)(2). Under a Sec. 2.32(a)(2) parole, the prisoner is not subject to reincarceration in federal prison unless he violates a condition of his parole.
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Fourth Court of Appeals
San Antonio, Texas
JUDGMENT
No. 04-13-00288-CV
Scherry JEFFCOAT,
Appellant
v.
James ARNOLD,
Appellee
From the 198th Judicial District Court, Kerr County, Texas
Trial Court No. 101202B
Honorable M. Rex Emerson, Judge Presiding
BEFORE CHIEF JUSTICE STONE, JUSTICE ANGELINI, AND JUSTICE CHAPA
In accordance with this court’s opinion of this date, this appeal is DISMISSED. We
ORDER that appellant, Scherry Jeffcoat, bear all costs of this appeal.
SIGNED May 29, 2013.
_________________________________
Luz Elena D. Chapa, Justice
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NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT MAY 24 2010
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
EDGAR MOSQUERA GAMBOA, No. 09-55431
Petitioner - Appellant, D.C. No. 2:09-cv-00656-DSF-RC
v.
MEMORANDUM*
JOSEPH NORWOOD, Warden,
Respondent - Appellee.
Appeal from the United States District Court
for the Central District of California
Dale S. Fischer, District Judge, Presiding
Argued and Submitted May 6, 2010
Pasadena, California
Before: B. FLETCHER and PAEZ, Circuit Judges, and EZRA, District Judge.**
Edgar Mosquera Gamboa appeals the district court’s dismissal of his habeas
corpus petition under 28 U.S.C. § 2241 for lack of jurisdiction. We affirm.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable David A. Ezra, United States District Judge for the
District of Hawaii, sitting by designation.
In 1993, a jury in the Southern District of Texas convicted Gamboa and his
co-defendants of various crimes related to their involvement in a cocaine
trafficking operation. Among the charges of which the jury found Gamboa guilty
was money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i). In 2001,
Gamboa filed a habeas corpus petition under 28 U.S.C. § 2255 in the Southern
District of Texas, which was denied. On January 28, 2009, Gamboa filed the
instant habeas corpus petition under 28 U.S.C. § 2241 in the Central District of
California, the district in which Gamboa is serving his life sentence.
We review de novo whether the district court had jurisdiction over
Gamboa’s 28 U.S.C. § 2241 petition. Stephens v. Herrera, 464 F.3d 895, 897 (9th
Cir. 2006). Jurisdiction over Gamboa’s petition is appropriate if he (1) makes a
claim of actual innocence and (2) shows he has not had an unobstructed procedural
shot at presenting that claim. Id. at 898. Gamboa argues that he is “actually and
factually innocent” of the money laundering charge because of a change in the law
under United States v. Santos, 553 U.S. 507, 128 S. Ct. 2020 (2008). He claims he
did not use the illegal profits from the cocaine operation for anything except
operating expenses and that, therefore, under Santos, the profits are not “proceeds.”
Page 2 of 4
The Santos case involved an interpretation of the federal money laundering
statute in the context of an illegal lottery. Santos, 128 S. Ct. at 2022-23. The
Court considered “whether the term ‘proceeds’ in the federal money-laundering
statute, 18 U.S.C. § 1956(a)(1), means ‘receipts’ or ‘profits.’” Id. at 2022. No
opinion in Santos, however, garnered a majority of votes. Id.
We interpreted Santos in United States v. Van Alstyne, 584 F.3d 803 (9th
Cir. 2009), concluding that “[o]nly the desire to avoid a ‘merger problem’ united
the five justices who held that Santos’ payments to winners and runners did not
constitute money laundering.” Van Alstyne, 584 F.3d at 814. Thus, “the holding
that commanded five votes in Santos [was] that ‘proceeds’ means ‘profits’ where
viewing ‘proceeds’ as ‘receipts’ would present a ‘merger’ problem of the kind that
troubled the plurality and concurrence in Santos.” Id.
Our interpretation of Santos in Van Alstyne precludes Gamboa’s argument of
factual innocence. Gamboa was convicted of conspiracy to possess with intent to
distribute cocaine and aiding and abetting possession with intent to distribute
cocaine along with the money laundering conviction. These crimes do not merge
and thus the narrow definition of “proceeds” as “profits” does not apply. See
United States v. Smith, 601 F.3d 530, 544 (6th Cir. 2010) (“[T]he predicate offense
of conspiracy to distribute cocaine does not fall within the category of offenses for
Page 3 of 4
which ‘proceeds’ means ‘profits.’”); see also Santos, 128 S. Ct. at 2032 (Stevens,
J., concurring) (“[T]he legislative history of § 1956 makes it clear that Congress
intended the term ‘proceeds’ to include gross revenues from the sale of
contraband.”).
Because Gamboa cannot make a claim of actual innocence, the district court
correctly dismissed the petition for lack of jurisdiction. See Harrison v. Ollison,
519 F.3d 952, 961 (9th Cir. 2008).
AFFIRMED.
Page 4 of 4
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IN THE SUPREME COURT OF THE STATE OF DELAWARE
IN THE MATTER OF THE §
PETITION OF VERNON L. § No. 575, 2018
MONTGOMERY FOR A WRIT OF §
MANDAMUS. §
Submitted: December 6, 2018
Decided: December 17, 2018
Before VALIHURA, SEITZ, and TRAYNOR, Justices.
ORDER
(1) The petitioner, Vernon L. Montgomery, was indicted in 2017 on
charges of Robbery First Degree and other felony offenses.1 In June 2017, the
Superior Court granted Montgomery leave to proceed without counsel and represent
himself in the criminal case. Trial is scheduled to begin on February 5, 2019.2
(2) Montgomery seeks the issuance of a writ of mandamus to compel the
Superior Court to correct a September 20, 2018 ruling in his case. Montgomery also
would have us compel the Superior Court to dismiss the indictment. The State of
Delaware, as the real party in interest, has filed an answer opposing the petition.
(3) A writ of mandamus is an extraordinary remedy issued by this Court to
compel a trial court to perform a duty.3 When invoking this Court’s original
jurisdiction to issue a writ of mandamus, the burden is upon the petitioner to establish
1
State v. Montgomery, Del. Super., Cr. ID No. 1710001043.
2
Id. Docket at 108.
3
In re Bordley, 545 A.2d 619, 620 (Del. 1988).
a clear entitlement to the relief sought and that no other adequate remedy is
available.4 Montgomery has failed to carry that burden in this case.
(4) First, Montgomery has not shown that he has a clear right to a
correction of the Superior Court’s September 20, 2018 ruling. Montgomery sought
such a correction in October 2018, when he filed an appeal from the ruling. We
dismissed the appeal for this Court’s lack of jurisdiction to hear an interlocutory
appeal in a criminal case.5 Montgomery cannot use the extraordinary writ process
to overcome that jurisdictional hurdle.6
(5) Second, Montgomery has not shown that the Superior Court has
arbitrarily failed or refused to perform a duty owed to him. The Superior Court case
docket reflects that Montgomery recently filed a motion seeking a dismissal of the
indictment.7 That motion and the State’s response were referred to the Trial Judge
for action.8 Absent “a clear showing of an arbitrary refusal or failure to act, this
Court will not issue a writ of mandamus to compel a trial court to perform a
4
In re Cannon, 2018 WL 4212136 (Del. Sept. 4, 2018) (citing In re Wittrock, 649 A.2d 1053,
1054 (Del. 1994)).
5
Montgomery v. State, 2018 WL 5291244 (Del. Oct. 23, 2018) (citing Del. Const. art. IV, §
11(1(b); Gottlieb v. State, 697 A.2d 400, 401 (Del. 1997)).
6
Harris v. State, 1987 WL 37710 (Del. June 2, 1987) (citing Hodsdon v. Superior Court, 239 A.2d
222 (1968)).
7
Supra note 1. Docket at 106.
8
Id. Docket at 115.
2
particular judicial function, to decide a matter in a particular way, or to dictate the
control of its docket.”9
(6) Finally, in the event his Superior Court criminal proceeding leads to a
judgment of conviction, Montgomery has not shown that he is without an adequate
remedy. “The right to appeal a criminal conviction is generally considered a
complete and adequate remedy to review all of the questions presented in a criminal
proceeding.”10
NOW, THEREFORE, IT IS ORDERED, that the petition for a writ of
mandamus is DISMISSED.
BY THE COURT:
/s/ Gary F. Traynor
Justice
9
Supra note 3.
10
In re Noble, 2014 WL 5823030 (Del. Nov. 6, 2014) (quoting In re Hovey, 545 A.2d 626, 628
(Del. 1988)).
3
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688 F.2d 828
Williamsv.Harris
82-1001
UNITED STATES COURT OF APPEALS Third Circuit
6/28/82
1
E.D.Pa.
AFFIRMED
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56 Ill. App.3d 157 (1977)
371 N.E.2d 1044
MARY KOHLER et al., Plaintiffs-Appellants,
v.
SEARS, ROEBUCK & COMPANY et al., Defendants-Appellees.
No. 76-988.
Illinois Appellate Court First District (1st Division).
Opinion filed December 27, 1977.
Heller & Morris, and Jerome H. Torschen, Ltd., both of Chicago (Jerome H. Torshen and Edward G. Wierzbicki, of counsel), for appellants.
Arnstein, Gluck, Weitzenfeld & Minow, of Chicago (John L. Ropiequet, of counsel), for appellees.
Orders affirmed.
Mr. JUSTICE O'CONNOR delivered the opinion of the court:
Plaintiffs, Mary Kohler, Robert Kohler and Gloria Dickson, filed their complaint for damages against the defendants, Sears, Roebuck & Company, Kenmore, Inc., and Whirlpool Corp., on June 4, 1973. Defendants Sears and Whirlpool filed an answer and served interrogatories on plaintiffs Mary Kohler and Gloria Dickson on August 4, 1973. On October 9, 1973, plaintiffs were ordered to answer the *158 interrogatories within 28 days. Plaintiffs Mary Kohler and Gloria Dickson filed answers to the interrogatories on November 19, 1973. On February 1, 1974, on defendants' motions, plaintiffs Gloria Dickson and Mary Kohler were each ordered to re-answer many of defendants' interrogatories within 28 days. On March 22, 1974, and May 3, 1974, plaintiffs Mary Kohler and Gloria Dickson were again ordered to re-answer defendants' interrogatories within 28 days. The May 3, 1974, order also provided that the case would appear on the June 3, 1974, compliance call. On June 4, 1974, Judge Jiganti struck plaintiff Mary Kohler's and plaintiff Gloria Dickson's complaint and dismissed their cause of action for failure to file their re-answers.
On January 29, 1976, defendants' attorney responded to a motion by plaintiffs' attorney to present a section 72 petition. On that date, plaintiffs' attorney failed to appear and the matter was stricken. On February 9, 1976, plaintiffs' attorney filed a written unverified section 72 petition with amended answers to the interrogatories attached. Plaintiffs' petition alleged that a number of reassignments of the file and the fact that a number of attorneys had left the law firm of plaintiffs' attorneys had caused the failure to re-answer defendants' interrogatories. It further alleged the "file was lost and not found until now." On February 19, 1976, the attorney appearing for plaintiffs stated that he was not prepared to argue the section 72 petition and that the attorney who was prepared to argue was on trial. The argument was continued to March 11, 1976, at which time, after arguments of counsel, the circuit court denied plaintiffs' petition. On April 5, 1976, plaintiffs filed a motion to vacate the March 11, 1976, order, together with an amended verified section 72 petition. This petition also alleged that the failure to re-answer defendants' interrogatories was due to a large turnover of attorneys in the offices of plaintiffs' attorneys and that the time lapse between the dismissal order and the filing of the motion for section 72 relief was due to the loss of the file. Plaintiffs' amended petition was denied on April 5, 1976.
Plaintiffs appealed from the March 11, 1976, and the April 5, 1976, orders. Plaintiffs argue that the trial court abused its discretion in denying the petition for section 72 relief (Ill. Rev. Stat. 1975, ch. 110, par. 72) and that justice requires a reversal. They assert that their failure to re-answer the interrogatories and to attack the dismissal with due diligence resulted from inadvertence on the part of plaintiffs' counsel.
1-3 This court will reverse a section 72 determination only if there is an abuse of discretion by the trial court. (Taylor v. City of Chicago (1975), 28 Ill. App. 962, 329 N.E.2d 506; Goldman v. Checker Taxi Co. (1967), 84 Ill. App.2d 318, 228 N.E.2d 177.) The burden is on the petitioner to demonstrate facts warranting section 72 relief and he must demonstrate due diligence in seeking that relief. (Diacou v. Palos State *159 Bank (1976), 65 Ill.2d 304, 357 N.E.2d 518.) Inadvertent failure to follow the case is not a ground for relief. (Diacou; Esczuk v. Chicago Transit Authority (1968), 39 Ill.2d 464, 236 N.E.2d 719.) Some fraud or fundamental unfairness must be shown in order to invoke the court's equitable powers. Elfman v. Evanston Bus Co. (1963), 27 Ill.2d 609, 190 N.E.2d 348.
4 On this record, the trial court's ruling on the section 72 petition was correct. The inadvertent failure to follow the case before the dismissal is no ground for relief from the dismissal order (Diacou; Esczuk); and, even if it were, the plaintiffs have failed to show due diligence. Plaintiffs' re-answers to the interrogatories were dated December 4, 1975, but no petition for relief was sought to be filed until late January 1976, more than 19 months after the dismissal of plaintiffs' complaint. When an unverified petition was filed in February 1976, no attorney appeared to argue it. The matter was continued to March 11, 1976, and, after a hearing, it was denied on that date. Plaintiffs for the first time submitted a verified petition in April, 1976, four months after the signing of the re-answers to the interrogatories. Clearly, the section 72 relief was not pursued with due diligence.
Plaintiff Robert Kohler has filed an appearance in this court and joined in the briefs of the other plaintiffs. Our review of the record indicates that no interrogatories, motions to re-answer, motions for sanctions or orders of the circuit court were directed to Robert Kohler. In our opinion, Robert Kohler's cause of action has remained alive, if not active, since the filing of plaintiffs' complaint. His complaint still pends against defendants.
The orders of the circuit court denying relief to plaintiffs Mary Kohler and Gloria Dickson are affirmed.
Affirmed.
GOLDBERG, P.J., and McGLOON, J., concur.
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Cohen v Cohen (2015 NY Slip Op 07239)
Cohen v Cohen
2015 NY Slip Op 07239
Decided on October 7, 2015
Appellate Division, Second Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided on October 7, 2015
SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Second Judicial Department
RUTH C. BALKIN, J.P.
SHERI S. ROMAN
SANDRA L. SGROI
HECTOR D. LASALLE, JJ.
2013-07948
(Index No. 204031/01)
[*1]Allan Cohen, appellant,
vJoan Cohen, respondent.
Allan Cohen, Syosset, N.Y., appellant pro se.
Victor Levin, P.C., Garden City, N.Y., for respondent.
DECISION & ORDER
Appeal from an order of the Supreme Court, Nassau County (Jerome C. Murphy, J.), entered June 20, 2013. The order denied the plaintiff's motion for leave to renew his prior motion, inter alia, to compel the defendant to compensate him for damages resulting from the diminution in value of the marital residence caused by the defendant, which had been denied in an order of that court dated October 15, 2012.
ORDERED that the order entered June 20, 2013, is affirmed, with costs.
The Supreme Court providently exercised its discretion in denying the plaintiff's motion for leave to renew his motion, inter alia, to compel the defendant to compensate him for damages resulting from the diminution in value of the marital residence caused by the defendant. The plaintiff failed to demonstrate that the "new facts" upon renewal would have changed the prior determination (CPLR 2221[e][2]; see US Bank, N.A. v Morrison, 120 AD3d 1222, 1223).
BALKIN, J.P., ROMAN, SGROI and LASALLE, JJ., concur.
ENTER:
Aprilanne Agostino
Clerk of the Court
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100 Cal.Rptr.2d 585 (2000)
84 Cal.App.4th 112
Jim RUSCIGNO, Plaintiff and Appellant,
v.
AMERICAN NATIONAL CAN COMPANY, INC., Defendant and Respondent.
No. B136917.
Court of Appeal, Second District, Division Four.
October 11, 2000.
*586 Hamrick & Evans, A. Raymond Hamrick, III, Universal City, and Raymond C. Dion, for Plaintiff and Appellant.
Thelen, Reid & Priest, David L. Bacon and Remy Kessler, San Francisco, for Defendant and Respondent.
CHARLES S. VOGEL, P.J.
INTRODUCTION
Plaintiff Jim Ruscigno appeals from the judgment entered in favor of defendant American National Can Company, Inc., after defendant's demurrer was sustained without leave to amend.[1] Plaintiffs suit arose out of the termination of his employment by defendant. Plaintiff alleged he was terminated because he testified unfavorably to defendant during an employee's grievance proceeding held pursuant to a collective bargaining agreement. The trial court sustained defendant's demurrer on the ground that plaintiffs complaint is preempted by the National Labor Relations Act (29 U.S.C. § 151 et seq.; hereafter NLRA) and exclusive primary jurisdiction over the matter is vested in the National Labor Relations Board. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The facts alleged in plaintiffs complaint are assumed to be true for the purpose of demurrer. A demurrer admits all facts properly pleaded, but not contentions, deductions, or conclusions of fact or law. (Freis v. Soboroff (2000) 81 Cal. App.4th 1102, 1104, 97 Cal.Rptr.2d 429.)
*587 Plaintiff alleged: Plaintiff began working for defendant in April 1975, pursuant to an employment contract that was part oral, written, implied in fact, and implied in law. Plaintiff alleged he understood and reasonably relied on the representation that his employment would continue indefinitely unless and until said employment was terminated for good cause. As required by law, defendant was at all times obligated to act in good faith and deal fairly with plaintiff with respect to his employment.
Plaintiff was employed as a supervisor, and at the time of his termination, was one of the most senior production supervisors at defendant's plant. He alleged that he had come to expect that he would have a job with defendant until his retirement; defendant's employees had an expectation of continued employment so long as they performed their duties in a satisfactory manner. On his annual reviews plaintiff was "oftentimes" rated excellent or above average; he received yearly raises and bonuses for good performance. Because of his expectation of continued employment, he declined several other offers of employment.
Plaintiff supervised John Adams, an hourly employee. Around December 1996 Adams was arrested by the FBI; during a subsequent search of Adams's company locker a key was found to a room referred to as the new shipping office. Adams was first suspended and later terminated for, among other things, unauthorized possession of the key.
In mid-1997, plaintiff first learned from some unspecified individuals that Adams was accused of unauthorized possession of the key. Plaintiff told those individuals that he had given Adams the key so he could perform certain duties in setting up the new shipping office.
Arbitration proceedings were filed involving the termination of Adams, which proceedings included review of Adams's unauthorized possession of the key, and Adams's alleged falsification of his employment application. Plaintiff was instructed to appear as a witness in the arbitration proceedings. Plaintiff alleged he was "concerned about giving sworn testimony" and "initially resisted attempts to compel his testimony for fear that it would materially effect [sic] his continued employment." He spoke with his immediate supervisor, the assistant plant manager, and expressed concern about testifying. His supervisor told him he should not worry and that "`you [plaintiff] won't be fired and, if you are, you will own the Company.'"
Plaintiff testified at the arbitration proceeding that he had given Adams the key. Defendant's counsel told the arbitrator that the company could not vouch for plaintiffs testimony, and that plaintiff was called to testify in order to cross-examine him about his statements that he had given Adams the key.
The arbitrator's decision was rendered in October 1997. The arbitrator concluded that defendant had just cause to discharge Adams because he had lied on his employment application. The arbitrator stated that plaintiffs testimony appeared to be truthful.
Shortly thereafter, the plant manager delivered a letter to plaintiff informing him that he was being placed "on notice about your recent actions in the Adams matter." The letter stated plaintiff "told a union official in the presence of several hourly employees in the lunchroom that you [plaintiff] had given the key to the new shipping office to Adams ..." and that "[y]ou [plaintiff] were grossly disloyal to the Company in not telling management of this discussion." Plaintiff alleges that, in fact, he told the plant manager about the conversation the next time he and the plant manager worked together. The letter further stated that "[y]our [plaintiffs] statements were refuted by other management personnel." The plant manager stated that "... my faith, trust and confidence in your ability to perform your job as a *588 supervisor has been brought into serious question."
In January 1998, plaintiff was told by the plant manager that his employment was being terminated, effective immediately. Plaintiff alleged his termination was pretextual in that defendant purported to terminate him because of a reduction in work force, whereas he "was terminated for other and improper reasons including, without limitation the fact that [defendant] was displeased with [plaintiffs] sworn testimony in the arbitration proceedings and wished to punish [plaintiff] for his sworn testimony as well as influence other employees should they ever be in a similar situation." Plaintiff alleged that, during the meeting at which plaintiff was informed of his termination, the plant manager confirmed that plaintiff was being terminated because of his testimony in the Adams arbitration proceedings. Defendant stated in a letter to plaintiff that his termination was simply a reduction in work force. However, plaintiffs position was filled by another employee with substantially less experience than plaintiff, and defendant continued to hire supervisors.
Plaintiffs first cause of action was for breach of the employment contract. He alleged that at all relevant times he "performed in accordance with his obligations pursuant to the Employment Contracts, and all conditions to the performance of [defendant] have occurred, or the occurrence thereof has been prevented or excused as a result of the wrongful acts or omissions of [d]efendant...." Defendant breached the employment contract in that it wrongfully terminated plaintiffs employment as alleged and deprived plaintiff of the benefits thereof, failed and refused to act in good faith and deal fairly with plaintiff with respect to the employment contract, and committed or permitted others to commit the wrongful acts and omissions as alleged.
Plaintiff stated a second cause of action for wrongful termination in violation of public policy. He averred that it is the fundamental public policy of California as expressed in its Constitution and statutes (1) that individuals shall not be unlawfully discriminated against in their employment on the grounds of being a witness in a legal proceeding or because of testimony offered in a legal proceeding; and (2) that the pursuit of any lawful business, calling or profession shall not be intentionally interfered with. "[T]he reason given for [p]laintiff's termination was pretextual for other, undisclosed and improper reasons in that the termination was on account of the testimony provided under oath by [plaintiff in a legal proceeding brought against [defendant]."
Plaintiff pled a third cause of action for tortious breach of the implied covenant of good faith and fair dealing. Therein he alleged that as implied by law, defendant covenanted with plaintiff to do nothing to deprive him of benefits due under the employment contract, but by acting and failing to act as alleged, defendant breached the implied covenant of good faith and fair dealing.
Finally, plaintiff stated fourth and fifth causes of action for intentional and negligent infliction of emotional distress.
Defendant demurred to the complaint. Defendant contended that plaintiffs complaint is preempted by the National Labor Relations Act (29 U.S.C. § 151 et seq.) and exclusive primary jurisdiction over the matter is vested in the National Labor Relations Board (NLRB) because plaintiff claims he was discharged solely for giving testimony adverse to defendant's interest during an arbitration, held pursuant to a collective bargaining agreement, regarding an employee's grievance. Defendant asserted separately as to each of plaintiffs five causes of action that the trial court did not have subject matter jurisdiction because the claims are barred by the exclusive primary jurisdiction of the NLRB.
In conjunction with its demurrer, defendant filed a request that the trial court *589 take judicial notice of the collective bargaining agreement which governed the grievance proceedings regarding Adams during which plaintiff testified, and of the opinion and award of the arbitrator in the Adams matter.
Plaintiff filed opposition to the demurrer, disputing that his complaint was subject to federal preemption. Defendant filed reply papers, and the matter was heard in May 1999.[2] The complaint was dismissed without leave to amend by order filed May 17, 1999. Defendant later moved for an order entering judgment, and judgment was entered in favor of defendant in October 1999. This appeal followed.
DISCUSSION
Defendant contends that California state courts have no jurisdiction over any of the causes of action stated in plaintiffs complaint because they are within the exclusive jurisdiction of the National Labor Relations Board under the federal preemption doctrine announced in San Diego Unions v. Garmon (1959) 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775.
"In Garmon, the United States Supreme Court established `general guidelines' for determining the permissible scope of state regulation of activity touching upon labor-management relations, and held that when an activity is arguably prohibited or protected by section 7 or section 8[3] of the National Labor Relations Act as amended (NLRA) (29 U.S.C. § 151 et seq.), the state courts must defer to the exclusive competence of the NLRB in order to avoid state interference with national labor policy. (359 U.S. at p. 245 [79 S.Ct. 773].) More recently, the court has refined its preemption analysis and has held that where the alleged conduct falls within the 'arguably prohibited' prong of the Garmon preemption test, the critical inquiry is 'whether the controversy presented to the state court is identical to ... or different from ... that which could have been, but was not, presented to the Labor Board.' (Sears, Roebuck & Co. v. Car
penters (1978) 436 U.S. 180, 197 [98 S.Ct. 1745, 56 L.Ed.2d 209].)" (Kelecheva v. Multivision Cable T.V. Corp. (1993) 18 Cal.App.4th 521, 527-528, 22 Cal.Rptr.2d 453.)
"When it is clear or may fairly be assumed that the activities which a State purports to regulate are protected by § 7 of the [NLRA], or constitute an unfair labor practice under § 8, due regard for the federal enactment requires that state jurisdiction must yield." (San Diego Unions v. Garmon, supra, 359 U.S. 236, 244, 79 S.Ct. 773, 3 L.Ed.2d 775.) "If the Board decides, subject to appropriate federal judicial review, that conduct is protected by § 7, or prohibited by § 8, then the matter is at an end, and the States are ousted of all jurisdiction." (Id. at p. 245, 79 S.Ct. 773.)
According to defendant, plaintiffs action is preempted by the NLRA because it arguably involves an unfair labor practice, i.e., that defendant terminated plaintiff for giving testimony favorable to Adams during an arbitration held pursuant to a collective bargaining contract. We agree.
In Parker-Robb Chevrolet, Inc. and Automobile Salesmen's Union (1982) *590 262 NLRB 402, 1982 WL 90211, enforced by Automobile Salesmen's Union v. N.L.R.B. (1983) 229 App.D.C. 105, 711 F.2d 383, the NLRB addressed the issue of whether and under what circumstances the discharge of a supervisor violates the NLRA. The NLRB declared: "Notwithstanding the general exclusion of supervisors from coverage under the Act, the discharge of a supervisor may violate section 8(a)(1) in certain circumstances," although none of those circumstances was present in the case before it. (Parker-Robb Chevrolet, Inc. and Automobile Salesmen's Union, supra, 262 NLRB 402.) "Thus, an employer may not discharge a supervisor for giving testimony adverse to an employer's interest either at an NLRB proceeding or during the processing of an employee's grievance under the collective-bargaining agreement.[4] Similarly, an employer may not discharge a supervisor for refusing to commit unfair labor practices, or because the supervisor fails to prevent unionization. In all these situations, however, the protection afforded supervisors stems not from any statutory protection inuring to them, but rather from the need to vindicate employees' exercise of their section 7 rights." (Id. at pp. 402-403, italics added, fns. omitted.) "[W]hen a supervisor is discharged for testifying at a Board hearing or a contractual grievance proceeding, for refusing to commit unfair labor practices, or for failing to prevent unionization, the impact of the discharge itself on employees' section 7 rights, coupled with the need to ensure that even statutorily excluded individuals may not be coerced into violating the law or discouraged from participating in Board processes or grievance procedures, compels that they be protected despite the general statutory exclusion." (Id. at p. 404.)
"In the final analysis, the instant case, and indeed all supervisory discharge cases, may be resolved by this analysis: The discharge of supervisors is unlawful when it interferes with the right of employees to exercise their rights under section 7 of the Act, as when they give testimony adverse to their employers' interest or when they refuse to commit unfair labor practices." (Ibid., italics added.)
Plaintiff contends that his case is not subject to preemption because his termination, and in fact the arbitration proceedings regarding Adams, did not involve conduct protected by section 7 or prohibited by section 8 of the NLRA. He argues: "Adams'[s] proceedings simply involved alleged falsification of an employment application and theft of company property. [Fn. omitted.] Obviously aware of the fact that the NLRB would not exercise jurisdiction over these proceedings, in part, because the underlying proceedings did not involve an exercise of Adams'[s] right to engage in concerted activities for mutual aid and protection, [defendant] now seeks to invoke the protection afforded by the preemption argument through reliance on the insinuation that the purported interference with underlying proceedings is governed by section 7 and section 8 of the NLRA. However, preemption is not appropriate in this case. There was no alleged actual or intended interference with the Adams'[s] proceedings."
The distinction plaintiff attempts to rely on is ineffectual; the nature of the events which give rise to the arbitration proceeding regarding an employee, at which arbitration a supervisor testifies and for which the supervisor is terminated, are not determinative. In Ebasco Services, Inc., supra, 181 NLRB 768, some 40 employees were discharged for alleged poor production (not a matter which in itself implicates the NLRA). Most of the employees filed grievances, and a formal hearing on the grievances was scheduled. The official entity established to conduct the hearing requested the appearance of several foremen. *591 However, their superintendent told the foremen that if they attended the hearing they would no longer be supervisors, preventing them from working without a foreman being present. In other words, they would lose status and would receive a reduction in their hourly rate.
The employer disputed that the demotion of the supervisors interfered with the employees' statutory rights to have all pertinent testimony presented before the board under the contract grievance procedure. The NLRB disagreed, affirming and adopting the decision of the trial examiner. That decision stated: "It is well settled that discharge of a supervisor for testifying in proceedings under the Act is a coercion of nonsupervisory employees in violation of section 8(a)(1), where the employees knew he gave testimony or the circumstances show they had good reason to believe they might suffer a similar fate if they gave testimony, for such conduct has a tendency to obstruct and impede the Board in its investigative and trial procedures, and to deprive employees of their right to seek vindication by Board process of their statutory rights. General Counsel argues that the same rule should apply where employees resort to contract grievance procedures to vindicate their rights under such contract, and supervisors take it on themselves to appear before tribunals created under those procedures. This argument has merit, for the Act itself recognizes and favors employees' right to use, and actual use of, contract grievance procedures to settle labor disputes, and so do the courts. The Board has specifically protected employees from employer interference with their right to resort to such procedures under contracts, as well as procedures before outside tribunals, to enforce contract rights, on the theory that the filing of claims by employees in either instance was a form of implementation of the collective bargaining agreement and thus an extension of the concerted activity which gave rise to that agreement.... Therefore, it appears to be no more than a reasonable extension of the above principle and Board policy to say that employees have a corollary right to a full and fair hearing on their grievances under contract procedures which must likewise be protected from interference or limitation." (Ebasco Services, Inc., supra, 181 NLRB 768, 769-770, fns. omitted.) The employer's "order for [the supervisors] not to attend, followed by the announcement of their demotion before the employees' representative, and climaxed by their actual demotion, was conduct which had a substantial tendency to inhibit employees in the exercise of one of their important rights under the contract, protected by the Act, but which on the facts in this record had no countervailing importance in maintaining continuance of operations at the project." (Id. at p. 770.)
In Illinois Fruit & Produce Corp. (1976) 226 NLRB 137, 1976 WL 7416, two employees were discharged for leaving work at the end of their shift but without securing permission to do so. A supervisor gave testimony favorable to the employees at a grievance hearing, contrary to the instructions given him by management, and was terminated. The NLRB affirmed the decision of the administrative law judge finding that the employer violated section 8(a)(1) of the NLRA by discharging the supervisor.
Similarly in the case before us, plaintiff was discharged for giving testimony during a grievance proceeding held pursuant to a collective bargaining contract. The nature of events giving rise to that grievance proceeding were of no consequence to the finding that the actions taken against the supervisors interfered with protected rights of the employees.[5]
*592 Plaintiff further contends that discharging a supervisor is not unlawful under the NLRA unless the supervisor was coerced into violating the law or discouraged from participating in labor proceedings. He argues that he "has specifically alleged facts demonstrating that [plaintiff] was encouraged to testify and to testify truthfully in the Adams'[s] proceedings. [Fn. omitted.] Moreover, there are no allegations that [plaintiff] was coerced into violating the law or discouraged from participating in a Board or grievance procedure. [Fn. omitted.] Consequently, there are no facts suggesting that [defendant] sought, through [plaintiff], to interfere with Adams'[s] rights." We disagree with plaintiffs contention that the facts as pleaded in his complaint fail to demonstrate that he was discouraged from participating in labor proceedings by way of his after-the-fact termination.
Plaintiff relies on Pontiac Osteopathic Hospital (1987) 284 NLRB 442, 1987 WL 89711, in which an employee was discharged for writing a satirical newsletter critical of management. The employee's supervisor was also discharged for the stated reason that she had not supported the management decision to discharge the employee. At no time was the supervisor asked to carry out the discharge or in any way participate in the discipline. Under these circumstances, the NLRB reversed the finding of the administrative law judge that the supervisor's discharge violated section 8(a)(1) of the NLRA. "[W]e are faced with the question of whether the discharge of a supervisor for failure to support management action amounting to an unfair labor practice constitutes a violation of the Act. The judge concluded that it did, reasoning that there was no difference between discharging a supervisor for refusing to commit an unfair labor practice and discharging a supervisor for failing to support management action amounting to an unfair labor practice. We disagree with the judge's conclusion. When an employer asks a supervisor to commit an unfair labor practice, the supervisor is forced to choose between violating the law or disobeying the employer's request-a choice that could lead to discipline or discharge. Consequently, in such situations, an employer is able to pressure a supervisor into violating the law on its behalf. On the other hand, when a supervisor, acting on his or her own initiative, chooses to express disapproval of a management policy, the supervisor is not coerced at all (i.e., he or she has not been forced to choose between violating the law or risking the consequences of the employer's wrath). Admittedly, the discharge in either situation may have a secondary effect on the employees' exercise of their Section 7 rights, but there is no need to protect the supervisor from coercion when the supervisor is acting on his or her own initiative. As we found in Parker-Robb [Chevrolet, Inc. and Automobile Salesmen's Union, supra, 262 NLRB 402], it is the need to ensure that statutorily excluded employees are not coerced into violating the law or discouraged from participating in Board or grievance proceedings that compels protection for supervisors. As we find that [the supervisor] was in no way coerced into violating the law or discouraged from participating in Board or grievance procedures here, her discharge was not a violation of the Act." (Pontiac Osteopathic Hospital, supra, 284 NLRB 442, 443, fns. omitted.)
Plaintiff points to the fact that in Pontiac Osteopathic Hospital the employee had requested that the supervisor testify at an appeals board meeting, but the supervisor "was informed that she could not appear at those proceedings on behalf of the employee." Even then, the NLRB found the employer's actions did not violate the NLRA. However, in contrast to the case before us, the NLRB observed that while the supervisor was discouraged from testifying at the appeals board proceedings, "those proceedings, as the judge found and we affirm, were not proceedings implemented *593 pursuant to a collective-bargaining agreement, to which we would be willing to defer.... Consequently, they are not proceedings that enjoy recognition under the Act. Further, as noted, [the supervisor] was not even asked, let alone required, to participate in those proceedings in support of the [employer's] position." (Pontiac Osteopathic Hospital, supra, 284 NLRB at p. 469, fn. 7.)
Thus, it was important to the NLRB's decision in Pontiac Osteopathic Hospital that the appeals board proceedings regarding the employee were not held pursuant to a collective bargaining agreement; the NLRB indicates that otherwise the outcome would have been different. While the NLRB also noted that the supervisor was not asked to testify at the proceedings on behalf of the employer, other cases make clear that such a request is not a prerequisite to a finding that a supervisor has been discouraged from participating in grievance procedures in violation of the NLRA.
For example, in Rohr Industries, Inc., supra, 220 NLRB 1029,[6] an employee initiated grievance proceedings, as was his right under a collective bargaining agreement, regarding alleged violation of seniority rules set forth in the union agreement. The employee's supervisor, as requested by a union business representative, supplied a statement favorable to the employee which was submitted at the arbitration. Management had no knowledge of the fact the supervisor had provided a statement before it was presented at the arbitration, and the subject of the employee's grievance hearing was not discussed by the supervisor and management prior to the arbitration. The supervisor was laid off shortly after the arbitration. Despite the absence of any conduct by the employer intended to discourage the supervisor from participating in the proceedings prior to the arbitration, the NLRB affirmed the order of the administrative law judge finding that the layoff of the supervisor violated sections 7 and 8 of the NLRA. In his decision, the judge noted that various departmental workers were aware of the supervisor's layoff and considered his termination chargeable directly to the fact he gave a statement supportive of the employee's grievance. (Id. at p. 1038.) Thus, other employees could readily conclude that they would suffer a similar fate for participating in grievance proceedings, in violation of section 7.
Similarly in the present case, plaintiff alleged in his complaint that management accused him of stating to a union official, in the presence of several employees, that he had given Adams the key to the new shipping office. Other employees were thus aware of the situation and could infer that they would also suffer termination if they testified adversely to defendant in future grievance proceedings. Although plaintiff was instructed by defendant to testify, and to do so honestly, at the hearing, the direct interference with employees' rights under the NLRA was still palpable given plaintiffs termination for testifying unfavorably to defendant.
Plaintiff urges that even if his causes of action sounding in tort[7] are preempted, his causes of action for breach of contract and for breach of the implied covenant of good faith and fair dealing[8] are not. He *594 relies on Kelecheva v. Multivision Cable T.V. Corp., supra, 18 Cal.App.4th 521, 22 Cal.Rptr.2d 453, in which the appellate court decided that the trial court had erred in ruling that the plaintiff supervisor's causes of action for breach of an implied contract to terminate for cause and for breach of the covenant of good faith and fair dealing were preempted. However, plaintiffs reliance on Kelecheva is misplaced.
In Kelecheva, a supervisor was discharged for the sole reason that he refused to engage in union busting activity. The Court of Appeal readily concluded that the supervisor's attempt to assert a state law cause of action for wrongful discharge in violation of public policy was clearly preempted. (18 Cal.App.4th at p. 528, 22 Cal.Rptr.2d 453.) However, the court concluded as a matter of first impression that under the circumstances present there, preemption of the supervisor's contractbased claims was not required.
"[T]he [United States] Supreme Court has held that the NLRA does not preempt state court jurisdiction of state law breach of contract claims against an employer where the controversy presented to the state court is not identical to that which could be presented to the NLRB." (Kelecheva v. Multivision Cable T.V. Corp., supra, 18 Cal.App.4th at p. 530, 22 Cal.Rptr.2d 453, citing Belknap, Inc. v. Hale (1983) 463 U.S. 491, 511-512, 103 S.Ct. 3172, 77 L.Ed.2d 798.) The Kelecheva court concluded that the supervisor could present a state law controversy which was not identical to what could be presented to the NLRB. "Plaintiff is asking the state court to determine whether defendant breached an implied-in-fact contract by terminating his employment without adequate notice or good cause. The state court inquiry would be directed first to the existence of the implied contract, which would turn on factors such as the duration of plaintiffs employment, defendant's personnel policies and practices, and plaintiffs performance history, commendations, merit raises, and promotions. (Foley [v. Interactive Data Corp. (1988) ] 47 Cal.3d [654] at pp. 680-682 [254 Cal.Rptr. 211, 765 P.2d 373]; see also Pugh v. See's Candies, [Inc. (1981) ] 116 Cal.App.3d [311] at pp. 326-327 [171 Cal.Rptr. 917].) On the issue of breach, the state court litigation would focus on whether plaintiff, in fact, violated employer work rules relating to insubordination and unsatisfactory performance, and whether defendant honored other implied-in-fact commitments as to warnings, grievance procedures, and fair treatment. Plaintiffs contract cause of action does not require any showing of an unlawful motive for the alleged breach, and he would only be entitled to contractual remedies if he proves his case. (See Foley, supra, 47 Cal.3d at pp. 699-700, fn. 41 [254 Cal.Rptr. 211, 765 P.2d 373].)
"The controversy before the state court on plaintiffs claim for breach of the covenant of good faith and fair dealing would also be distinctly different from the litigation of an unfair labor practice charge that might have been, but was not, presented to the NLRB. If plaintiff is able to establish the existence of an employment agreement, California law will supply a covenant of good faith and fair dealing, which requires that neither party do anything to deprive the other of the benefits of the agreement. (Seaman's Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 768 [206 Cal.Rptr. 354, 686 P.2d 1158].) A breach of the covenant may then be established, inter alia, by a showing that defendant engaged in `"... bad faith action, extraneous to the contract, with the motive intentionally to frustrate the [employee's] enjoyment of contract rights, ..."' including the right to continued employment absent good cause for discharge. (Hejmadi v. AMFAC, Inc. (1988) 202 Cal.App.3d 525, 549 [249 Cal. Rptr. 5], quoting Sawyer v. Bank of America *595 (1978) 83 Cal.App.3d 135, 139 [145 Cal.Rptr. 623].) The state court inquiry on this claim would likely focus on whether defendant failed to follow its own personnel policies and/or falsified the asserted grounds for discharge. (Kerr v. Rose (1990) 216 Cal.App.3d 1551, 1561-1562 [265 Cal.Rptr. 597]; Pugh v. See's Candies, Inc.[, supra,] 203 Cal.App.3d 743, 764 [250 Cal.Rptr. 195].) Although evidence of defendant's antiunion animus may be relevant to plaintiffs claim of breach of the covenant of good faith and fair dealing, plaintiff would not be required to prove that defendant, in fact, discharged him for reasons that would violate federal or state labor law. Additionally, only contract remedies would be available if plaintiff establishes his right to recover under this theory. (Foley, supra, 47 Cal.3d at p. 700 [254 Cal.Rptr. 211, 765 P.2d 373].)" (Kelecheva v. Multivision Cable T.V. Corp., supra, 18 Cal.App.4th at pp. 531-532, 22 Cal.Rptr.2d 453.)
If plaintiff is allowed to amend to plead an implied in fact contract, he will bear the burden of showing that such contract existed. The factors required to prove an implied in fact employment contract include duration of employment, evaluations by supervisors, employment history, commendations, merit raises, promotions, and respondent's personnel policies. (Kelecheva v. Multivision Cable T.V. Corp., supra, 18 Cal.App.4th at p. 531, 22 Cal.Rptr.2d 453.) It is probable that plaintiff will be able to produce sufficient evidence to show the existence of an implied in fact contract based on his 23 years of employment and his supervisorial position and other aspects of his employment history.
If plaintiff's evidence of implied in fact contract is sufficient to show a prima facie case of wrongful termination, "[t]he burden of coming forward with evidence as to the reason for appellant's termination now shifts to the employer." (Pugh v. See's Candies, Inc., supra, 116 Cal.App.3d 311, 329, 171 Cal.Rptr. 917.) Plaintiff may "attack the employer's offered explanation, either on the ground that it is pretextual (and that the real reason is one prohibited by contract or public policy [citation] ), or on the ground that it is insufficient to meet the employer's obligations under contract or applicable legal principles." (Id. at pp. 329-330, 171 Cal.Rptr. 917.)
In the present matter, if plaintiff proves a prima facie case, the burden would shift to defendant to show good cause for plaintiffs termination, whether it is evidence of work force reduction or otherwise. Defendant's showing will surely be challenged as pretextual by plaintiff with evidence that his termination was retaliatory for his testimony in the Adams arbitration. Therefore, unlike the court in Kelecheva, we cannot conclude that "The controversy before the state court on plaintiffs claim for breach of the covenant of good faith and fair dealing would also be distinctly different from the litigation of an unfair labor practice charge that might have been, but was not, presented to the NLRB." (Kelecheva v. Multivision Cable T.V. Corp., supra, 18 Cal.App.4th 521, 531, 22 Cal. Rptr.2d 453, italics added.) Nor may we conclude, based on the record before us, that plaintiff would not be "required to prove that defendant, in fact, discharged him for reasons that would violate federal or state labor law." (Id. at p. 532, 22 Cal.Rptr.2d 453.) Without evidence that his termination was based on his testifying in the Adams arbitration, he simply cannot challenge defendant's showing of "good cause."
It is unrealistic to assume that plaintiff would forego the introduction of such critical evidence to counter defendant's presumed excuse that plaintiff was terminated simply as part of company downsizing. In other words, the evidence in the state court would not be distinctly different than the evidence that would be presented to the NLRB. It would be the same and it implicates sections 7 and 8 of the National Labor Relations Act. Therefore, plaintiffs claim is perforce preempted by the NLRB.
*596 DISPOSITION
The judgment is affirmed.
CURRY, J., concurs.
EPSTEIN, J.
I dissent because I believe that appellant can state a cause of action that is not preempted by federal law. I agree that his tort claims are preempted by the National Labor Relations Act (29 U.S.C. § 151 et seq.) under the Garmon theory. (San Diego Unions v. Garmon (1959) 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775.) But that does not end the matter.
Plaintiff has pleaded that his employment arrangement with defendant gave him a right of continued employment, terminable only for cause, and he claims that he was terminated in violation of that arrangement. This sets up a simple suit for breach of contract. The majority takes the position that defendant will claim that plaintiffs termination was the result of a reduction in work force, and that plaintiff will counter with an assertion that this reason is pretextual, set up to mask the real reason-that he was fired because he testified against the company at an arbitration hearing. Since that hearing was conducted pursuant to a collective bargaining agreement, the majority reasons, the exclusive jurisdiction of the National Labor Relations Board would be invoked.
I suspect that defendant's principal defense will be that plaintiff was an at-will employee, and, as such, that he was terminable without the necessity of a showing of cause. It is not unlikely that defendant will tender the pretext issue the majority anticipates. The issue before us is whether that prospect ousts the state court of jurisdiction if plaintiffs action is for breach of contract alone. Kelecheva v. Multivision Cable T.V. Corp. (1993) 18 Cal. App.4th 521, 22 Cal.Rptr.2d 453 addressed substantially the same question, and concluded that Garmon does not require preemption of the contract-based claim. (Id. at p. 529, 22 Cal.Rptr.2d 453.) I believe Kelecheva was correctly decided and is not meaningfully distinguished from this case. I therefore would reverse the trial court's order of dismissal, and remand to allow plaintiff to plead a single cause of action for breach of contract.
NOTES
[1] Steven R. Clover was named individually as a defendant in plaintiff's complaint. However, he apparently was not served with the complaint and, in any event, is not a party to this appeal.
[2] The record before us does not include a reporter's transcript of the hearing.
[3] 29 U.S.C. section 157 (referred to as section 7) provides: "Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection...." 29 U.S.C. section 158 (referred to as section 8) provides in subdivision (a)(1) that it shall be an unfair labor practice for an employer "to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 157 of this title."
The NLRA defines employees as not including any individual employed as a supervisor. (29 U.S.C. § 152(3); see Balog v. LRJV, Inc. (1988) 204 Cal.App.3d 1295, 1302, 250 Cal. Rptr. 766.)
[4] In a footnote, the NLRB cited for this proposition, with which we are concerned here, the cases of Ebasco Services, Inc. (1970) 181 NLRB 768, 1970 WL 25826 and Rohr Industries, Inc. (1975) 220 NLRB 1029, 1975 WL 6063.
[5] In any event, we note that Adams contended in the arbitration proceedings regarding his discharge that he was not afforded certain protections guaranteed under the "Justice and Dignity" clause of the collective bargaining agreement. Thus, while the reason for his discharge was not related to an unfair labor practice, the arbitration proceeding did address the issue of whether Adams was subjected to an unfair labor practice.
[6] Rohr Industries, Inc. is one of the cases cited with approval in Parker-Robb Chevrolet, Inc. and Automobile Salesmen's Union, supra, 262 NLRB at pages 402-403, and 406, footnote 6, for the tenet that an employer may not discharge a supervisor for giving testimony adverse to an employer's interest during the processing of an employee's grievance under a collective bargaining agreement.
[7] These include plaintiff's second cause of action for wrongful discharge in violation of public policy, and his fourth and fifth causes of action for intentional and negligent infliction of emotional distress.
[8] Plaintiff actually attempted to state a third cause of action for tortious breach of the implied covenant. For purposes of this appeal, we will consider this to have been an error which plaintiff theoretically could correct on remand. However, as we explain, we find that the entirety of plaintiff's complaint, whether sounding in contract or tort, is preempted.
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246 F.2d 754
The ISMERT-HINCKE MILLING COMPANY, Appellant,v.UNITED STATES of America, Appellee.
No. 5542.
United States Court of Appeals Tenth Circuit.
July 11, 1957.
Robert E. Rosenwald, Kansas City, Mo. (Philip L. Levi and Joseph Cohen, Kansas City, Kan., on the brief), for appellant.
Carolyn R. Just, Atty., Dept. of Justice, Washington, D. C. (Charles K. Rice, Asst. Atty. Gen., Ellis N. Slack, Lee A. Jackson and Walter Akerman, Jr., Attys., Dept. of Justice, Washington, D. C., and William C. Farmer, U. S. Atty., Topeka, Kan., on the brief), for appellee.
Before PHILLIPS, PICKETT and LEWIS, Circuit Judges.
PHILLIPS, Circuit Judge.
1
This is an appeal from a judgment denying a claim for refund of corporation income and excess profits taxes for the fiscal year ending May 31, 1946. The question presented is whether the taxpayer sustained a loss in that fiscal year entitling it to a deduction under § 23(f) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 23(f).
2
The taxpayer, the Ismert-Hincke Milling Company,1 is a Kansas corporation, having its principal place of business at Kansas City, Missouri. Victor M. Hinojosa was a citizen of Mexico. He resided at Kansas City, Missouri from about 1933 until 1952. During the years 1945 and 1946 he maintained an office in the Board of Trade Building in Kansas City, Missouri and did business under the name Pan-American Trading Company. From 1937 until December 31, 1948, he was director of the Milling Company's export department and in its name and on its behalf handled all of its foreign transactions. During that period, and acting within the scope of his authority so to do, he carried on all correspondence with respect to foreign transactions, including the writing of letters and telegrams on behalf of the Milling Company. All communications received by the Milling Company from abroad during that period were directed by it to him for attention and response. The Milling Company furnished him with letterheads with the name "Ismert-Hincke Milling Co., Kansas City, U. S. A." at the top and upon which was imprinted in the upper left-hand corner, "Departamento de Exportacion V. M. Hinojosa, Director."
3
In July, 1945, a Spanish corporation, Sociedad Orbea, S. A.,2 with its principal office at Tangier, Morocco, made inquiry of the Milling Company concerning the purchase of a quantity of flour. The inquiry was made through Orbea's agent, Bernardo Orive Riano, who was engaged in the import and export business at Las Palmas, Canary Islands. It was referred by the Milling Company to Hinojosa. After extended negotiations, an agreement for the purchase of flour by Orbea from the Milling Company was entered into with Hinojosa, acting on behalf of and with authority of the Milling Company. However, on September 1, 1945, on the Milling Company letterhead, Hinojosa wrote Orbea that arrangements for the shipment of the flour were being made through the Pan-American Trading Company, which Hinojosa represented to Orbea to be the export department of the Milling Company. On September 4, 1945, Hinojosa, acting for the Milling Company, sent a wire to Orbea, directing that an irrevocable letter of credit should be opened in the name of Pan-American Trading Company of Kansas City, Missouri. The original negotiations contemplated the purchase of 75,000 bags of flour. However, further negotiations resulted in an agreement for the sale of 10,000 bags of flour by the Milling Company to Orbea for $30,000 cash, and thereupon, on October 2, 1945, Orbea transmitted to Commerce Trust Company of Kansas City a bank draft in the sum of $30,000, payable to the Pan-American Trading Company, as a prepayment for the 10,000 bags of flour. Hinojosa receipted for the $30,000 in the name of the Pan-American Trading Company and deposited it to the Pan-American Trading Company account in the Commerce Trust Company. Subsequently, at different times in October, November, and December, 1945, Hinojosa, as export director of the Milling Company, and on the stationery of the Milling Company, acknowledged to Orbea that the Milling Company had received the sum of $30,000. However, Hinojosa failed to remit the $30,000 to the Milling Company and withdrew the proceeds from the Pan-American Trading Company account and appropriated them to his own use, during the Milling Company's fiscal year, ending May 31, 1946. During that fiscal year Orbea made demands of Hinojosa that the Milling Company return the $30,000. The Milling Company made no delivery of flour to Orbea during such fiscal year or thereafter.
4
After the lapse of several years, the Milling Company received actual notice that Orbea, on October 2, 1945, remitted the sum of $30,000 to the Pan-American Trading Company, pursuant to Hinojosa's direction. Thereafter, and in August, 1950, Orbea instituted suit against the Milling Company for the sum of $30,000, with interest, in the United States District Court for the Western Division of Missouri. Unavailing efforts were made to cause Hinojosa to pay the sum into court. In the answer filed in the case, the Milling Company denied that Hinojosa was its agent and denied that it was liable to Orbea for the payment made to Pan-American Trading Company. It was not until long after the Milling Company had filed its answer in the Orbea action that it acquired full information surrounding the transaction between Orbea and Hinojosa. On October 14, 1953, after elaborate preparations had been made for the trial of the Orbea action and pursuant to a release agreement entered into by the parties to that action, judgment for $20,000 was entered in favor of Orbea and against the Milling Company and satisfaction of the judgment was acknowledged in open court.
5
In the meantime, Hinojosa was convicted in a state court of Missouri of manslaughter for a death which had occurred on December 3, 1948. He was sentenced to a term of 10 years. He was released on bond pending appeal and fled to the Republic of Mexico. His conviction was affirmed3 and his bond was forfeited.
6
The Milling Company filed a timely corporation income and declared value excess profits tax return on Form 1120 and a timely corporation excess profits tax return on Form 1121 for the fiscal year ending May 31, 1946. These returns did not reflect as income of the Milling Company the $30,000 received by Hinojosa from Orbea. Neither did they reflect a liability to Orbea on account of the payment of $30,000 to the Pan-American Trading Company. Subsequently, upon audit of these returns, deficiency assessments were made against the Milling Company. The Milling Company paid the deficiency assessments, as recomputed, with penalties.
7
On March 28, 1952, the Milling Company filed a claim for refund for corporation excess profits tax and penalties in the amount of $16,488.67, plus interest, and for corporation income and declared value excess profits taxes and penalties in the amount of $12,080.44, plus interest, which was disallowed.
8
The precise issue presented is whether the Milling Company suffered a loss by reason of Hinojosa's alleged embezzlement in the fiscal year ending May 31, 1946.
9
It is well settled that "the general requirement that losses be deducted in the year in which they are sustained calls for a practical, not a legal, test."4 A loss resulting from an embezzlement is ordinarily deductible in the year in which the embezzlement occurred, although discovery of the embezzlement is not made until a later date.5 But the rule is not inflexible. "Whether and when a deductible loss results from an embezzlement is a factual question, a practical one to be decided according to surrounding circumstances."6 In referring to an alleged embezzlement loss the court, in Burnet v. Huff, 288 U.S. 156, 53 S.Ct. 330-332, 77 L.Ed. 670, said: "The loss must be actual and present."7 And in Boehm v. Commissioner, 326 U.S. 287, 292, 66 S.Ct. 120, 123, 90 L.Ed. 78, the court said: "* * * a loss, to be deductible under § 23(e), must have been sustained in fact during the taxable year. * * *"
10
The contract for sale of 10,000 bags of flour, entered into by Hinojosa with Orbea on behalf of the Milling Company, was binding on it. Hinojosa received the check for $30,000 from Orbea in behalf of the Milling Company as its agent, although he caused the check to be made payable to the Pan-American Trading Company. We conclude, therefore, that the proceeds of the check were the property of the Milling Company and that the misappropriation thereof by Hinojosa constituted an embezzlement. The moneys when embezzled by Hinojosa were not general funds of the Milling Company, entrusted to him, but the specific moneys that were prepaid by Orbea for the 10,000 bags of flour.
11
While the record is not specific as to the date the flour was to be delivered, we are of the opinion that it is a fair and reasonable inference from the evidence that the flour was to be delivered shortly after the receipt of the check and during the fiscal year ending May 31, 1946.
12
We are of the opinion that the contract of sale and the payment of the purchase price imposed a legal obligation on the Milling Company to deliver the flour to Orbea and when it failed to deliver the flour, although unintentionally, it breached the contract of sale and became liable to Orbea for such breach. But it was a liability which the Milling Company denied and resisted when asserted.
13
However, since the Milling Company did not deliver any flour, it suffered no immediate loss by reason of the embezzlement and none would have accrued to it, unless and until Orbea asserted and recovered on its claim arising by reason of the nondelivery of the flour.
14
Moreover, the Milling Company denied any liability to Orbea and resisted the latter's claim up to the eve of the trial of the action brought by Orbea against the Milling Company. Where a taxpayer on an accrual basis predicates a claim of loss upon a liability asserted against him and in an action brought to enforce the claim of liability, denies such liability and contests the action, the liability is rendered uncertain and the taxpayer may only claim a deduction in the taxable year in which its liability is finally adjudicated.8
15
The Milling Company suffered no loss by reason of the embezzlement until it consented to a judgment in the action brought by Orbea, which judgment was immediately satisfied. The actual loss was not the full $30,000 embezzled, with interest, but the $20,000 it paid to Orbea.
16
Accordingly, we conclude that no loss accrued to the Milling Company from the embezzlement until October 14, 1953, when the amount of Orbea's claim was definitely adjudicated and satisfied.
17
Affirmed.
Notes:
1
Hereinafter referred to as the Milling Company
2
Hereinafter called Orbea
3
State v. Hinojosa, Mo., 242 S.W.2d 1
4
See Lucas v. American Code Co., Inc., 280 U.S. 445, 449, 50 S.Ct. 202, 203, 74 L.Ed. 538; Burnet v. Huff, 288 U.S. 156, 161, 53 S.Ct. 330, 77 L.Ed. 670
5
Alison v. United States, 344 U.S. 167, 169, 73 S.Ct. 191, 97 L.Ed. 186
6
Alison v. United States, 344 U.S. 167, 170, 73 S.Ct. 191, 192, 97 L.Ed. 186; Boehm v. Commissioner, 326 U.S. 287, 292, 293, 66 S.Ct. 120, 90 L.Ed. 78
7
See also Weiss v. Wiener, 279 U.S. 333, 335, 49 S.Ct. 337, 73 L.Ed. 720
8
Dixie Pine Products Co. v. Commissioner, 320 U.S. 516, 519, 64 S.Ct. 364, 88 L.Ed. 270; Security Flour Mills Co. v. Commissioner, 321 U.S. 281, 284, 64 S.Ct. 596, 88 L.Ed. 725
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886 F.Supp. 813 (1995)
UNITED STATES of America, Plaintiff,
v.
Wayne WARDEN, Defendant.
No. 94-10040-01.
United States District Court, D. Kansas.
May 15, 1995.
*814 Carl Warner Eisenbise, Leslie F. Hulnick, Charles A. O'Hara, O'Hara, O'Hara, & Tousley, Wichita, KS, for defendant.
Lanny D. Welch, Office of U.S. Atty., Wichita, KS, for U.S.
MEMORANDUM AND ORDER
THEIS, District Judge.
The defendant Wayne Warden is charged by superseding indictment with possession of methamphetamine with intent to distribute, possession of marijuana with intent to distribute, use of a firearm during a drug trafficking offense, and possession of a firearm with serial number obliterated. Doc. 43. This case comes before the court on the defendant's motion to suppress (Doc. 55) and motion for hearing pursuant to Franks v. Delaware, 438 U.S. 154, 98 S.Ct. 2674, 57 L.Ed.2d 667 (1978) (Doc. 56). The court conducted an evidentiary hearing on April 21, 1995. The court has considered the testimony of the witnesses and is prepared to rule. For the reasons set forth herein, the court denies the defendant's motion to suppress.
The affidavit of Bruce Morton, Sedgwick County Sheriff's Deputy assigned to the Drug Enforcement Administration Task Force, was presented to the Magistrate Judge to obtain a search warrant. The affidavit provides as follows. On March 24, 1994, at approximately 5:37 a.m., Sedgwick County Sheriff's Deputies Greg Lathrop, Rusty Crafton and Kevin Bradford were dispatched to 14420 West 101st Street North, Sedgwick County, Kansas on a report of domestic violence. The call to 911 was reported to have come from Lacy Pore, the daughter of the defendant, who reported to the dispatcher that her father was beating her mother. The deputies made contact with Sandra Warden inside the residence. She asked the deputies to leave, stating that her husband had only pushed her. Sandra Warden was arrested on an outstanding warrant. Wayne Warden was arrested for domestic violence for pushing his wife.
After the defendant was arrested, the officers searched him. The search turned up *815 approximately $5,800 in cash on his person, two white pills identified as Lortab (a controlled substance) and a small baggie containing a white powder. An open dresser drawer was observed next to the bed where the defendant had been observed. Inside this open drawer were a .45 caliber pistol, a 9 mm pistol and a tin containing a white powder residue. The deputies noticed that the television the defendant was watching in the bedroom was a closed circuit television monitor. Also on the bed was a purse which contained identification of Sandra Warden and a quantity of a substance believed to be marijuana.
Deputies interviewed Lacy Pore, the daughter of the defendant and Sandra Warden, about the source of her parents' income. Lacy said she thought her parents sold drugs, because she saw her father with a large plastic baggie containing a white powder and with a great deal of marijuana. Lacy stated that her father keeps a can in the garage that he brings out when people come over, and takes back out to the garage when they leave. Her father has instructed her never to touch this can or the safe he keeps in the house.
Prior to the date of this arrest, Morton had received information from a confidential informant that Wayne and Sandra Warden were involved in trafficking methamphetamine from their residence. Surveillance on March 9, 1994 by Deputy Bradford showed over 20 cars arriving, staying for only a few minutes, and then leaving during the course of a one hour period in the middle of the night.
The white powder substance located on the defendant Wayne Warden field tested positive for methamphetamine. The suspected marijuana also tested positive for marijuana. Affidavit of Bruce Morton, Att. to Doc. 56. Based on this information, Magistrate Judge Humphreys issued a search warrant.
At the evidentiary hearing, the testimony of the Sheriff's officers was consistent with the information contained in the search warrant affidavit. Deputy Gregory Lathrop testified that on March 7, 1994, he received information from a confidential source that Wayne and Sandra Warden were possibly manufacturing methamphetamine at their home at 14420 West 101st Street North. Lathrop verified that the Wardens lived at the address on West 101st Street North, checked for outstanding warrants, found an outstanding warrant for Sandra Warden, and obtained photos of the Wardens from Sheriff's Department files. On March 9, 1994, Deputy Bradford was watching the Warden residence from approximately 3:20 a.m. to 4:15 a.m. Bradford observed approximately 20 cars arrive at the residence, stay a short time, and leave. On two or three occasions between March 9 and March 24, Lathrop went by the Warden residence but did not see any unusual activity.
On March 24, 1994, Lathrop and Deputy William Crafton were dispatched to the Warden residence on a domestic disturbance call. The dispatcher learned that the caller was a juvenile who reported that her father was beating her mother. Lathrop arrived at approximately 5:48 a.m., Crafton about two minutes later. The deputies knocked on the front door. The door was answered by Lacy Pore, who motioned for them to come in quickly. Lacy stated that her parents were in the bedroom.
When the officers entered the home, they encountered Sandra Warden in the kitchen area. Sandra was crying and appeared to be upset. Crafton described her as being "frantic." She had a pronounced red mark on the left side of her face. Sandra denied that her husband had hit her. When Lathrop asked why Lacy might have called 911, Sandra admitted that her husband had pushed her. Lathrop testified that then he proceeded to the bedroom. Lathrop had his hand on his gun at this point. Lathrop testified that he had received information that there might have been guns in the residence. Lathrop opened the door and observed the defendant sitting up on the bed watching television. Lathrop asked to see Warden's hands, then ordered Warden to stand up. Lathrop handcuffed Warden and arrested him for domestic violence.
At this point, Sandra Warden became very upset and began yelling at the officers. Lathrop told Crafton to place Sandra Warden *816 under arrest on an outstanding traffic warrant.
Lathrop searched the defendant's pockets and removed the Lortabs and approximately $5,800 in currency. Lathrop observed what appeared to be a gun located in an open drawer and also observed an open purse on the bed. After both Wayne and Sandra Warden were removed from the home and placed in separate squad cars, Lathrop returned to the home and looked inside the open purse and open drawer. Lathrop observed some rifles in the closet, but did not seize those.
Lathrop and Crafton spoke to Lacy at the home. Lacy indicated that she was very scared and that she was tired of her father hurting her mother. Lacy also stated that she believed her parents were dealing drugs from the house. Lacy stated that her mother did not work and that her father rarely worked. Lathrop interviewed Lacy later that day at her uncle's house. Lacy provided Lathrop with the same general information about her parents at this second interview.
Lathrop did not search the entire trailer prior to obtaining the search warrant. Lathrop admitted that they did not have enough evidence prior to the 911 call to obtain a search warrant.
Detective Morton testified that he had spoken to the confidential informant (CI) in this case. Morton would not call this CI "reliable" and acknowledged that he had never used this CI before. Morton conceded that, standing alone, the information from the CI was not worth a great deal of weight.
Lacy Pore, now age 12, testified and admitted that in the early morning hours of March 24, 1994, she called 911 because she heard her parents arguing. Lacy denied that she invited the officers into the house. Lacy testified that Lathrop pushed her out of the way. Lacy testified that after arresting her father, Lathrop searched the house for about 15 minutes, opening doors, cabinets, the microwave oven and the refrigerator. Lacy denied telling Lathrop that her parents were involved in drug dealing. Lacy admitted that she later told Morton that she was concerned that her father would think everything was her fault. The court found Lacy's testimony only partially credible.
Sandra Warden, the defendant's wife, also testified at the hearing. She testified that Lathrop kept his hand on his gun during the entire time he was in the Warden home. Sandra testified that she told the officers they could not go into the bedroom, but that the officers went in anyway. She denied that she had been crying and denied that any domestic violence had occurred. Sandra denied having any drugs in the home or in her purse. She did admit that on an earlier occasion, 911 had been called because she had been beaten by her husband. The court found Sandra Warden's testimony only partially credible.
Sandra Warden's brother Christopher Pore testified at the hearing. Pore received a call from law enforcement authorities at approximately 6:15 on the morning in question. Pore was asked to come to the Warden home and pick up Lacy and her friend. When Pore arrived at the Warden home, he was told by the officers that Sandra and Wayne Warden had been arrested, that the officers were waiting on a search warrant, and that the officers wanted him to pick up the girls. In the afternoon or evening of March 24, 1994, Pore received a call from Agent Morton. In response to Pore's questioning regarding what was going on, Morton responded that the officers went to the Warden home on a 911 call, but that they had been planning on going out there anyway. Morton stated that the officers had been watching the house for approximately 30 days and that they had received information about a methamphetamine lab on the property. Morton stated that the 911 call provided the ideal circumstance for the officers to enter the home.
In the motion to suppress, defendant asserts that his residence was entered on a pretext, that illegally seized evidence was submitted in support of the application for search warrant, that the affidavit did not demonstrate probable cause, and that there was no basis for determining the veracity of the confidential informant. In the motion for Franks v. Delaware hearing, the defendant asserts that DEA Task Force Agent Morton *817 intentionally or recklessly omitted material facts from his affidavit submitted to the Magistrate Judge in support of the application for search warrant, that Agent Morton also made knowing and intentional false statements or made statements with reckless disregard for the truth, and that these statements were material to the finding of probable cause.
The affidavit is summarized above. The matters set forth therein clearly establish probable cause to search the residence. See United States v. Wicks, 995 F.2d 964, 972-73 (10th Cir.1993) (standards governing determination of probable cause). The court finds no evidence of pretext in either the entry into the home or the defendant's arrest. Since Lacy was only 11, she may not have been able to consent to the entry into the home. However, the court has no concern about the validity of the initial entry into the home. The officers were responding to a 911 call reporting a beating. The officers were justified in entering the home to investigate the complaint.
The testimony of the officers at the hearing indicated that Sheriff's Department policy mandates arrests in all cases reporting domestic violence. The existence of this policy is not challenged. Likewise, the defendant does not challenge that "pushing" constitutes a battery under Kansas law. Sandra Warden's admission that her husband pushed her provided probable cause to arrest Wayne Warden for battery. The search of the defendant and the area within his immediate control were incident to that arrest.
The defendant argues, based on Franks v. Delaware, 438 U.S. 154, 98 S.Ct. 2674, 57 L.Ed.2d 667 (1978), that the officers submitted false information to the Magistrate Judge. Under Franks v. Delaware, if the defendant makes a substantial preliminary showing that a false statement knowingly and intentionally or with reckless disregard for the truth was included in the affidavit, and if the allegedly false statement was necessary to the finding of probable cause, then a hearing must be held at the defendant's request. If at the hearing, the allegation of falsity or reckless disregard is established by the defendant by a preponderance of the evidence, and with the false material excised the affidavit fails to establish probable cause, then the search warrant is voided and the fruits of the search excluded. Franks v. Delaware, 438 U.S. 154, 155-56, 98 S.Ct. 2674, 2676, 57 L.Ed.2d 667 (1978). The burden is on the defendant to demonstrate deliberate falsity or reckless disregard for the truth by the affiant, supported by an offer of proof. United States v. $149,442.43 in United States Currency, 965 F.2d 868, 874 (10th Cir.1992).
After considering the testimony presented at the hearing, the court finds that the defendant's allegations of falsity or reckless disregard have not been established by a preponderance of the evidence.
The defendant argues that Agent Morton intentionally or recklessly failed to inform the Magistrate Judge of Deputy Lathrop's observations of defendant's residence from March 9, 1994 to March 24, 1994. Morton's affidavit discussed Deputy Bradford's observations from surveillance on March 9, 1994, that many cars came and went during one hour in the middle of the night. As noted in his report, Lathrop conducted surveillance on "several other nights" between March 9 and March 24, 1994 without observing anything unusual. The defendant argues that the inclusion of these facts would negate a finding of probable cause. The defendant further argues that the failure to inform the Magistrate Judge of the fifteen day period of observation conducted by Lathrop in which he observed nothing unusual is an intentional or reckless material omission.
The evidence presented at the hearing indicated that Lathrop observed the residence a couple of times during the month of March. Contrary to the implication contained in the defendant's brief, the residence was not under constant surveillance during the month of March. The failure to observe anything suspicious on two or three other occasions during the course of one month does not detract from a finding of probable cause. The inclusion of these facts would not eliminate probable cause. The fact that a great deal of traffic was observed on one night is consistent with the operation of a drug lab. The *818 failure to include this information in the affidavit was not misleading.
The defendant next asserts that Morton intentionally or recklessly misled the Magistrate Judge by including in his affidavit the details of an illegal search conducted by Lathrop and Crafton and that Morton failed to include information in the affidavit which would have shown the pretextual nature of the search. The defendant argues that Lathrop used the report of domestic violence as a pretext to conduct an illegal search of the residence. As noted above, the court finds no evidence of pretext in the domestic violence arrest. The search incident to that arrest was valid.
The defendant argues that on March 8, 1994, Lathrop had attempted to make a warrantless entry into the residence. Defendant asserts that at approximately 4:10 a.m., Lathrop arrived at the defendant's residence to check on the source of smoke seen from the roadway. Lathrop encountered Sandra Warden, who was allegedly burning trash in a trash barrel outside the residence. According to the defendant, Lathrop twice indicated that he wanted to check if the residence was on fire.
The court finds that Lathrop approached the residence on March 8, 1994 to check on the source of the smoke. The court finds no credible evidence to support the assertion that Lathrop was trying to gain entry into the home.
The defendant argues that after March 8, 1994, Lathrop conducted regular surveillance of the residence and did not find anything unusual. The defendant's argument is unsupported by the evidence. No regular surveillance was conducted.
The defendant also argues that Morton committed misstatements and omissions in describing the search conducted by Lathrop and Crafton following the 911 call and arrest of the defendant and Sandra Warden. The defendant complains about the failure to include in the affidavit the statements of Sandra Warden that there was no problem and that her husband had not beaten her. The defendant complains further that the affidavit fails to disclose that there was no further investigation of the domestic violence complaint and no interview of the defendant prior to his arrest. Defendant argues that the inclusion of this information in the affidavit would have established a lack of probable cause for Lathrop to enter the residence and arrest the defendant. The defendant also complains that the affidavit fails to disclose that the search of the defendant's bedroom was conducted only after the defendant had been arrested and handcuffed, and was a thorough search of the entire home.
Sandra Warden's statement that her husband had pushed her was sufficient to justify the arrest of the defendant for domestic violence. There was no challenge to the existence and application of the Sheriff's Department's mandatory arrest policy for domestic violence calls. State law and department policy mandated the arrest. It was not necessary for the deputies to interview the defendant prior to his arrest. Lathrop testified that he could not ask the defendant any questions regarding the domestic violence charge until after arresting the defendant and reading the defendant his rights.
The court did not find credible the testimony that Lathrop conducted a thorough search of the entire house prior to obtaining the search warrant. The court finds that Lathrop made a limited search of the area where the defendant was arrested. The search of the defendant and a portion of the bedroom was proper as a search incident to a lawful arrest and/or plain view search.
The defendant next argues that Morton's affidavit intentionally or recklessly misstates the statements made by Lacy Pore. At the hearing, Lacy Pore denied making the statements attributed to her regarding seeing evidence of drugs in the home. The court did not find Lacy's denials to be credible. The court concludes that she made the statements attributed to her in the affidavit.
The court concludes that the defendant failed to establish by a preponderance of the evidence the falsity of the statements in the warrant affidavit. The court found the testimony of the officers more credible than the testimony of the defendant's wife and daughter. While it may indeed have been serendipitous (from the officers' standpoint) that *819 Lacy Pore called 911 on the date in question, it is not disputed that she called 911. It is not disputed that Lacy called to report a domestic violence situation of some sort. Given her age, Lacy may not have been able to give consent to the police entry into the home. However, the court does not believe that consent is necessary in this situation. It cannot seriously be argued that the officers lacked the authority to enter the home to investigate the report of violence received in a telephone call to the 911 emergency number.
In the memorandum in support of the motion to suppress, submitted on the date of the hearing, the defendant repeats some of his prior arguments. The court cannot find the defendant's arrest to be a pretext. Sandra Warden's statement to the officers was sufficient to justify the arrest. The fact that neither the defendant nor his wife consented to the officers' entry into the home is not determinative. While the defendant argues that there was nothing to suggest that anyone's life was in danger, the court must disagree. The officers had very limited information regarding the situation in the Warden home. For all the officers knew, Sandra Warden's life was in danger. The defendant cites no authority for his argument that the officers could not enter the home to investigate the 911 call. The court is not troubled by the officers' failure to interview Lacy immediately about the basis for her call to 911. Sandra Warden appeared almost immediately to discuss the situation with the officers. The initial limited search of the person of the defendant and the bedroom was lawful as a search incident to arrest and/or plain view search. The subsequent search of the home was conducted pursuant to a search warrant. Consent from the defendant or his wife was not necessary.
The defendant argues that the affidavit fails to set forth any facts from which it could be concluded that any evidence of a crime could be found at the place to be searched. The court has already rejected the defendant's argument that the facts set forth in Morton's affidavit fail to establish probable cause. Since there was no Franks violation, the court need not consider the impact of removing various statements from the affidavit. The court finds that the affidavit does provide probable cause to believe that contraband could be found at the Warden residence.
The defendant next argues that the affidavit contained no facts from which the Magistrate Judge could determine the veracity of the confidential informant or his/her basis of knowledge of alleged drug activity. Morton admitted at the hearing that his affidavit did not refer to this confidential informant as "reliable." The information provided by the informant was not necessary to the determination of probable cause. The tip from the confidential informant appears to have caused the investigation to begin. The defendant cites no authority requiring law enforcement officers determine the veracity of an informant before investigating a tip. If Morton had relied on nothing more than the information provided by the informant, the court would be faced with an entirely different situation.
Since there is no basis for finding the warrant invalid, the court need not address the defendant's arguments regarding the good faith exception to the exclusionary rule.
IT IS BY THE COURT THEREFORE ORDERED that defendant's motion to suppress (Doc. 55) is hereby denied.
IT IS FURTHER ORDERED that defendant's motion for hearing pursuant to Franks v. Delaware (Doc. 56) is moot.
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542 F.2d 1167
International Fidelity Insurance Co.v.Rosdor Construction Corp.
No. 76-1168
United States Court of Appeals, Third Circuit
9/21/76
1
M.D.Pa.
AFFIRMED
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COURT OF APPEALS FOR THE
FIRST DISTRICT OF TEXAS AT HOUSTON
ORDER
Appellate case name: In the Interest of B.R., A Child v. Department of Family Protective
and Services; In the Interest of I.A.R., A Child v. Department of
Family Protective and Services
Appellate case number: 01-13-00023-CV; 01-13-00024-CV
Trial court case number: 2011-00845J;2010-05141J
Trial court: 315th District Court of Harris County
On March 11, 2013, this Court determined that appellant Ivan Rodarte is indigent. The
trial court is responsible for appointing counsel to represent an indigent parent, like Rodarte, who
responds in opposition to a parental termination suit. See TEX. FAM. CODE ANN. § 107.013(a)(1)
(West Supp. 2012). Once appointed, the attorney must continue to represent the parent until the
suit is dismissed, the appeals are exhausted or waived, or the attorney is relieved of his duties or
replaced by another attorney after a finding of good cause is rendered by the court on the record.
See TEX. FAM. CODE ANN. § 107.016(2) (West Supp. 2012).
Appellant Ivan Rodarte’s appointed trial counsel, William Thursland, has filed an
unopposed motion to withdraw and to appoint appellate counsel. The trial court is directed to
appoint appellate counsel.
Appellant Perla Yannie Gonzalez has filed a brief. Appellant Ivan Rodarte must file a
brief no later than 20 days after the date of the appointment of new counsel.
Appellee’s brief must be filed no later than 20 days after appellant Ivan Rodarte’s
brief has been filed.
Because this is a termination case, the Court is required to bring this appeal to final
disposition within 180 days of the date the notice of appeal was filed so far as reasonably
possible. See Tex. R. Jud. Admin. 6.2, reprinted in TEX. GOV’T CODE ANN., tit. 2, subtit. F app.
(West Supp. 2012). For this reason, no extensions of time to file the brief will be granted. See
TEX. R. APP. P. 38.6(d).
The submission date of the case will change to June 5, 2013.
Judge=s signature: /s/ Jane Bland
Acting individually Q Acting for the Court
Date: April 19, 2013
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876 F.2d 626
58 USLW 2026, 1989 Copr.L.Dec. P 26,428,54 Ed. Law Rep. 146,11 U.S.P.Q.2d 1041
APPLIED INNOVATIONS, INC., Appellant/cross-appellee,v.REGENTS OF THE UNIVERSITY OF MINNESOTA and National ComputerSystems, Inc., Appellees/cross-appellants.
Nos. 88-1072, 88-5052.
United States Court of Appeals,Eighth Circuit.
Submitted April 11, 1988.Decided May 30, 1989.
William F. Patry, Washington, D.C., for appellant/cross-appellee.
Thomas Tinkham, Minneapolis, Minn., for appellees/cross-appellants.
Before McMILLIAN, Circuit Judge, BRIGHT, Senior Circuit Judge and BOWMAN, Circuit Judge.
McMILLIAN, Circuit Judge.
1
Applied Innovations, Inc. (defendant), appeals from a final judgment entered in the District Court1 for the District of Minnesota, after a bench trial, in favor of the Regents of the University of Minnesota (the university) and National Computer Systems, Inc. (NCS) (together referred to as plaintiffs), finding that AI had infringed the university's copyrights in a psychological test, the Minnesota Multiphasic Personality Inventory (MMPI). Regents of University of Minnesota v. Applied Innovations, Inc., No. 3-86-CIV-683 (D.Minn. Oct. 9, 1987) (reported at 685 F.Supp. 698), amended (Jan. 4, 1988) (order).
2
For reversal defendant argues the district court erred in (1) holding that the university had standing to sue for copyright infringement, (2) holding that the university owned a valid copyright in works funded in part with government grants, (3) holding that the work was copyrightable and that defendant had infringed the university's copyrights, and (4) calculating the amount of the damages. On cross-appeal, plaintiffs argue the district court erred in (1) holding that the social introversion and correction (K) scales and the correlation or conversion tables are copyrightable only as compilations, (2) refusing to require defendant to recall and destroy software from its customers, and (3) refusing to award reasonable attorney's fees.
3
For the reasons discussed below, we affirm the judgment of the district court. The appeal and cross-appeal are denied. Defendant's motion to strike the first 19 pages of plaintiffs' reply brief is granted.
PROCEDURAL BACKGROUND
4
Much of the following statement of facts is taken from the district court memorandum opinion (as amended by order dated January 4, 1988).
5
NCS is a Minnesota corporation and the university's exclusive commercial licensee in the United States for marketing the MMPI and associated products and services; its principal place of business is located in Minnesota. Defendant is a New Jersey corporation; its principal place of business is located in Rhode Island.
6
The MMPI is a psychometric test used by medical and psychological professionals to make objective assessments of major personality characteristics that affect professional and social adjustment, such as truthfulness, hypochondria, introversion, depression, and sexual orientation. Plaintiffs describe the MMPI as a revolutionary development in the field of psychological testing. The MMPI consists of four types of materials: (1) 550 "test statements," or short declarative sentences, to which subjects respond by answering "true," "false," or "cannot say"; (2) scale membership or definitions (there are 10 clinical scales and 4 validity scales); (3) normative statements (t-scores); and (4) correlation or conversion tables. The test statements can be administered at random in card format or in one of three "Form" booklets. The correlation or conversion tables sort the test statements in each format of the MMPI by identification number. The responses can be "hand-scored," but hand-scoring is time-consuming. Most tests are scored by computer. NCS markets the MMPI test and related products and services, including several forms of computerized scoring services. NCS bills its customers on a per-test or per-use basis.
7
In early 1984 defendant had developed personal computer software to administer, score and interpret the MMPI test. One version of defendant's software, MMPI Scoring Program I, included 38 MMPI test statements known as the "Grayson critical items" and scored and interpreted the test. A second version of the software, MMPI Scoring Program II, did not include any test statements and only scored and interpreted the test. Defendant sold its MMPI software and on an unlimited-use per program basis. Plaintiffs promptly informed defendant that its MMPI scoring software infringed plaintiffs' MMPI copyrights. In 1986 plaintiffs filed a five-count complaint against defendant, alleging copyright infringement, trademark infringement and unfair competition, and deceptive trade practices. Defendant denied any copyright infringement and counterclaimed for a declaratory judgment that plaintiffs' claimed copyrights were invalid or had not been infringed, misuse of copyright, intentional interference with business relations, and antitrust violations.
8
In the meantime, in April 1985, NCS had begun marketing its own personal computer software for scoring the MMPI, Microtest. However, Microtest was more expensive than defendant's MMPI software.
9
The district court dismissed defendant's counterclaims against the university except to the extent that they sought declaratory or prospective injunctive relief. The district court also dismissed the misuse of copyright counterclaim against NCS. The parties agreed to bifurcate for later trial the intentional interference and antitrust counterclaims. After an eight-day bench trial, the district court generally found in favor of plaintiffs on their copyright claims, but in favor of defendant on the trademark infringement, unfair competition, and deceptive practices counts. The parties stipulated that, in developing its MMPI scoring software, defendant had copied directly or indirectly 38 test statements (the Grayson critical items), scale membership and item direction scoring for 13 basic scales, t-scores for those scales, the correction (K) factors or scale, the Minnesota adult norms for five corrected (K) scales, and the correlation or conversion tables (from the Form R booklet to the Group Form booklet).
10
The district court found that defendant's MMPI scoring software copied everything of commercial significance with regard to the scoring and interpreting of MMPI scores and held that defendant's software infringed plaintiffs' MMPI copyrights, except for the social introversion and correction (K) scales and the correlation or conversion tables. The district court permanently enjoined defendant from reproducing or distributing software, documentation or copies of the MMPI test statements and scale definitions, correction (K) factors and normative or t-scores for 12 MMPI scales and from inducing or authorizing others to reproduce any portion of those parts of the MMPI, and required defendant to deliver to plaintiffs all of its copies of the infringing software and documentation. The district court awarded NCS $226,598 for lost profits and the university $162,161 for lost royalty payments, plus costs and disbursements. The district court denied plaintiffs' request for attorney's fees. This appeal and cross-appeal followed.
THE MMPI
11
Two University of Minnesota professors, Starke R. Hathaway and J. Charnley McKinley, developed the MMPI over a 10-year period during the late 1930s and early 1940s. Other university researchers, in particular Paul E. Meehl and Lewis E. Drake, also worked on the MMPI. Hathaway and McKinley began their work with psychometric tests used to evaluate mental patients and then simplified and revised them for use on "normal" individuals. Their basic hypothesis was that individuals who share a particular psychological symptom or personality trait or characteristic were likely to respond to certain groups of test statements in the same way and that each response to a particular test statement was indicative of a particular psychological symptom or personality trait or characteristic.
12
Their basic research method, greatly simplified, involved administering the test statements to clinical patients and "adult normals," comparing the responses given by the clinical patients with those of the "adult normals," converting the "raw scores" into normative scores or "t-scores," reviewing the t-scores and assigning varying "weights" to particular test statements and responses in light of their clinical experience and expertise, and then testing the accuracy of the resulting scores by using validation tests. For example, the correction (K) scale adjusted the score to account for a subject's conscious and unconscious efforts to make his or her score "look better."
13
Sometime before August 1942, Hathaway and McKinley had distributed test statements to a limited group of individuals for research and comment purposes, including the United States Navy, Dr. Burton P. Grimes of the state hospital in Fort Benning, Georgia, Mr. H.D. Rempel of the federal reformatory at El Reno, Oklahoma, and Col. G.W. Guthrie of the Minnesota State Home for Girls.
14
The hypochondriasis scale was the first to be developed. Hathaway and McKinley published two articles about the MMPI in a 1940 issue of the Journal of Psychology. Part I described the MMPI in general; Part II described the hypochondriasis scale and included 103 test statements and scoring direction and t-score conversion data. There was a general copyright notice to the Journal Press, the publisher of the Journal of Psychology, but no copyright notice to Hathaway and McKinley or to the university.
15
In May 1942 Hathaway and McKinley published the Minnesota Multiphasic Personality Schedule (MMP Schedule ). The copyright notice was in the name of the university. The MMP Schedule was a comprehensive work and contained the 550 test statements, scale membership, scoring direction, and t-score conversion data for the hypochondriasis, depression, hysteria, psychopathic deviate, sexual interest, question, truthfulness, and validity scales.
16
In July 1942 Hathaway and McKinley published a third article about the MMPI in the Journal of Psychology. This article contained the scale membership, scoring direction and t-score conversion data for the depression scale.
17
In October 1942 the MMPI Manual was published under a copyright notice to the university; this work contained, among other things, the scale membership, scoring direction and t-score conversion data for the psychasthenia scale. The psychasthenia scale materials were also published in November 1942 in an article in the Journal of Applied Psychology.
18
In 1943 a revised edition of the MMPI was published under a copyright notice to the university. This work contained all the scale materials previously published as well as testing materials and scoring data for the hypomania scale.
19
In 1944 Hathaway and McKinley published an article in the Journal of Applied Psychology containing the testing materials and data for the hysteria, hypomania and psychopathic deviate scales. In 1946 two additional MMPI articles were published in the Journal of Applied Psychology, one by Drake about the social introversion scale in card format and the other by Hathaway and Meehl about the correction (K) scale in card format.
COPYRIGHT OWNERSHIP AND STANDING TO SUE
20
At trial the university introduced certificates of registration for copyrights and certificates of renewal registration in various versions of the MMPI works. The university also introduced recorded assignments of copyrights to the university from Hathaway and McKinley, Nettie M. Evans, Louise E. Swedien, Meehl, W. Grant Dahlmstrom, George Schlager, Mildred Drake, the Helen Dwight Reid Educational Foundation (for the Journal Press) and assignments of copyrights from the Psychological Corp. On the basis of this evidence, the district court concluded that the university was the sole proprietor of the MMPI copyrights.
21
As a preliminary matter we note that the Copyright Act of Mar. 4, 1909 (formerly codified at 17 U.S.C. Secs. 1-216 (1972)) (hereinafter 1909 Act), applies in this case because all the MMPI works in question were published before January 1, 1978. The 1909 Act was revised in its entirety and superseded by the Copyright Act of Oct. 19, 1976 (effective date Jan. 1, 1978) (now codified at 17 U.S.C. Secs. 101-810 (1988) (hereinafter 1976 Act)).
22
Defendant first argues the district court erred in holding that the university had standing to sue for infringement of the MMPI works first published as articles in periodicals. According to defendant, the university can only claim a copyright interest as the assignee of either the authors of the articles or the publishers of the periodicals. Defendant argues that, in fact, the university received nothing via these assignments because the authors and the publishers, with the exception of the Journal Press, failed to renew their copyrights and therefore this material is now in the public domain. Defendant argues the district court erroneously extended the constructive trust holding in Goodis v. United Artists Television, Inc., 425 F.2d 397 (2d Cir.1970) (Goodis ), from the author of a work first published in a periodical to a mere assignee of the publisher of the periodical. Defendant further argues that Goodis should not be extended in any event to the copyright renewal term.
23
Plaintiffs admit that the MMPI articles published in the 1940 issue of the Journal of Psychology contained a significant, although comparatively small, portion of the total MMPI work. Plaintiffs argue that Goodis does apply here and that publication of the articles under a copyright notice in the name of the publisher of the periodical, the Journal Press, was sufficient to impose a constructive trust on the publisher in order to secure the authors' copyrights in the articles. Plaintiffs note that the authors assigned their MMPI copyrights to the university in 1942. Plaintiffs further note that the Journal Press renewed its Journal of Psychology copyright in 1968 and that its assignee, the Helen Dwight Reid Educational Foundation, subsequently assigned its interest to the university in 1987. Thus, plaintiffs argue that the university does have standing to sue for copyright infringement as the assignee of both the authors and the publisher.
24
The university, as the indirect assignee of a previously registered copyright, had the burden of persuasion and production to establish the chain of title. Once the university presented evidence of its chain of title, the burden of production shifted to defendant to establish invalidity. See 3 M. Nimmer, Nimmer on Copyright Sec. 12.11[C], at 12.81-.82 (1988) (hereinafter Nimmer). We think the university presented sufficient evidence of its chain of title to the copyright in these articles as the assignee, through the Helen Dwight Reid Educational Foundation, of the Journal Press.
25
The MMPI articles were first published in the Journal of Psychology bearing a copyright notice in the name of the publisher only. There was no separate notice in the names of the authors. Nor was there any evidence that the authors had registered the unpublished manuscripts or that they had reserved all rights other than the right to reproduce the articles in periodical form. Thus, under the 1909 Act, the Journal Press was the proprietor of the statutory copyright in the entire Journal of Psychology issue, including the individual articles. There was no evidence that the Journal Press had assigned the copyright in any component part of that issue of the Journal of Psychology to the authors. Under these circumstances, the authors had no copyright in the articles, and publication of the articles with a general copyright notice in the name of the publisher prevented the articles from being thrust into the public domain. See generally 3 Nimmer Sec. 10.01[C]. Compare Sec. 201(c) of the 1976 Act, 17 U.S.C. Sec. 201(c) (absent an express transfer from the author, the publisher of a collective work such as a periodical acquires only the privilege of reproducing and distributing the contribution as part of that collective work).
26
In our view, the university cannot rely upon the authors' copyrights in the articles published in the 1940 Journal of Psychology to establish its chain of title because, as discussed above, the authors had no statutory copyright interest in the articles. Instead, the university established its chain of title to the 1940 Journal of Psychology articles as the assignee of the publisher's copyright. The university presented certificates of registration of copyright and renewal of copyright for most of the other MMPI works. Certain MMPI articles, for example, those published in the Journal of Applied Psychology, are in the public domain. However, those articles are derivative works. Much of the work discussed in those articles originally appeared in works that had been published earlier with a proper copyright notice in the name of the university, and the underlying works remain protected by copyright. See 1 Nimmer Sec. 3.04, at 3-16.
27
THE DOCTRINE OF INDIVISIBILITY AND THE GOODIS CASE
28
Under the analysis set forth above, it is not necessary to apply the Goodis holding. The Goodis court was forced to adopt a constructive trust theory in order to avoid the "doctrine of indivisibility of copyright." The doctrine of indivisibility arose because the 1909 Act referred to a single "copyright" and to a single "copyright proprietor," and "it was inferred that the bundle of rights which accrued to a copyright owner were 'indivisible,' that is, incapable of assignment in parts." 3 Nimmer Sec. 10.01[A] at 10-4. Under this view of the nature of the right of copyright, it was "impossible to 'assign' anything less than the totality of rights commanded by copyright. A transfer of anything less than such a totality was said to be a 'license' rather than an assignment." Id. at 10-4 to -5 (footnotes omitted). Because "only the copyright proprietor (which would include an assignee but not a licensee) had standing to bring an infringement action," the doctrine of indivisibility protected alleged infringers from successive law suits. Id. at 10-5 (footnotes omitted).
29
Unfortunately, as noted by Professor Nimmer, "[w]hatever justification for indivisibility remained in terms of avoidance of multiplicity of actions was far outweighed by the impeding effect it had upon commerce in copyrighted works.... and produced technical pitfalls for both buyers and sellers." Id. at 10-5 to -6.
30
Perhaps the most serious consequence of the doctrine of indivisibility occurred by reason of the rule that statutory copyright in a theretofore unregistered work was obtained by publication bearing a copyright notice in the name of the copyright owner. The problem thereby raised was felt most acutely and can best be illustrated in the field of magazine rights. If an author of an unpublished (and unregistered) manuscript granted to a magazine publisher the right to reproduce the work in magazine form, but reserved all other rights (e.g., motion picture and book publication rights) then ... the publisher would be merely a licensee, and not the proprietor of the work. Therefore, if, as was and is usually the case, the magazine carried a notice only in the name of the magazine publisher without a separate notice in the name of the contributing author, applying the doctrine of indivisibility the result was that the author's work was published without a valid notice in the name of the work's "proprietor" and it was consequently injected into the public domain.
31
Id. Sec. 10.01[C], at 10-12 (footnotes omitted).
32
The court in Goodis was confronted with just such a fatal technical pitfall. In that case the author of a novel had arranged to publish the novel and had also sold the motion picture rights. Before the novel was published, however, the author made arrangements for the novel to appear in serial form in a magazine. The book publisher postponed distribution of the novel and the novel was first published in the magazine. Each issue of the magazine contained a copyright notice in the name of the magazine, and there was no notice in the author's name. The defendant, a television network which had produced a successful television series based on the novel, argued that the novel had fallen into the public domain because the magazine was a mere licensee. The court refused to apply the doctrine of indivisibility and held that first publication in a magazine under a general copyright notice in the name of the magazine was sufficient to secure the author's copyright in his or her contribution, even though the author had reserved all rights other than magazine rights. 425 F.2d at 400-01; see, e.g., Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191, 1201 (7th Cir.1987).
33
In the present case the doctrine of indivisibility did not affect the publisher's copyright. Because the authors had not granted some rights in their articles to one publisher and some rights in the same works to another, the publisher was not a mere licensee and was therefore not in the same position as the magazine in Goodis. Moreover, "[t]he most frequently cited policy for applying the indivisibility rule is to avoid multiple infringement actions, each brought by the holder of a particular right in a literary work without joining as co-plaintiff the author or proprietor of the copyrighted work." Goodis, 425 F.2d at 400, citing New Fiction Publishing Co. v. Star Co., 220 F. 994 (S.D.N.Y.1915). Because the university had obtained assignments from all of its potential "rival" copyright claimants, there is no possibility of multiple infringement actions.
34
In sum, we do not need to apply the Goodis holding, and we hold the university has standing to sue for infringement of copyright, either as the proprietor or as an assignee.
GOVERNMENT FUNDING FOR MMPI RESEARCH
35
As noted above, the MMPI was developed primarily during the late 1930s and early 1940s. The university paid the salaries of the university professors and graduate students, a total of approximately $117,000. In 1937 Hathaway and McKinley applied for and received government funding for their MMPI research through the Works Progress Administration (WPA). In accepting WPA funding, Hathaway and McKinley agreed, among other things, to publish the results of their research in professional journals, to acknowledge their receipt of government support, to make their basic research data available to the public, and to comply with applicable WPA regulations. From March 1938 to February 1943 they received a total of $7,462.46 from WPA as Subproject Nos. 262 and 379. These WPA funds were used to pay clerical workers for transcribing, tabulating and summarizing the data collected from administration of the MMPI.
36
WPA supervisors monitored the MMPI subprojects and prepared periodic reports. Most of the MMPI works published during the period of WPA funding included acknowledgements of WPA support. The district court found that none of the periodic WPA reports referred to copyright. A WPA report dated January 4, 1939, noted that all the original MMPI research materials were to be filed in Millard Hall at the university and to be accessible to the public. Another WPA report dated August 29, 1942, referred to the MMP Schedule by title and contained extensive references. In the spring of 1942 Hathaway and McKinley sent pre-publication copies of their third Journal of Psychology article to the WPA.
37
There was evidence that there were at least three versions of WPA regulations addressing the copyrightability of WPA-funded research materials: Operating Procedure No. W-11 (Mar. 13, 1937) (hereinafter WPA regulation), No. W-11 (rev. July 1, 1938), and No. G-5 (Jan. 10, 1940). The parties stipulated that, if applicable, the relevant WPA regulation would be the 1938 version. The copyright section of the 1938 version provided (emphasis added):
38
Data secured or reports published from studies financed in whole or in part by funds allotted to the Works Progress Administration are intended for public use. Copyrighting of any such research, statistical and survey materials by an individual or organization, public or private, shall not be sought "except where such materials are included in copyrighted scientific periodicals, books, or other publications not devoted primarily to the results of Works Progress Administration projects. Whenever research project reports are included, together with other scientific materials, in such copy-righted publications it shall be understood that holders of the copyrights shall not be entitled to restrict public use of the data collected and/or analyzed as activities of survey and research projects operated under the auspices of the Works Progress Administration."
39
None of the WPA Operating Procedures was published in the Federal Register. There was no direct evidence that Hathaway and McKinley or other university officials knew about the WPA regulation. The district court held that the issue of government funding, and its potential effect on the copyrightability of the MMPI works, was an affirmative defense and accordingly placed the burden of persuasion and production on defendant. The district court held that the WPA regulation was not legally binding because it had never been published in the Federal Register and university officials had no actual knowledge of it. Alternatively, the district court held that the MMPI works were copyrightable because they had been "included in copyrighted scientific periodicals, books, or other publications not devoted primarily to the results of Works Progress Administration projects."
40
Defendant argues the district court erred in holding that the university could own valid copyrights in works funded in part by government funds because the university had agreed to follow WPA rules and regulations as a condition of WPA funding. Defendant argues the WPA regulations, specifically the 1938 revision, barred any copyright in the 1942 MMP Schedule and other MMPI works. Defendant also argues that the finding that the university did not have actual knowledge of the WPA regulation is clearly erroneous. We disagree.
41
The WPA regulation was promulgated by WPA as a statement of "general applicability and legal effect." Because it was never published in the Federal Register as required by the Federal Register Act, 44 U.S.C. Sec. 1505 (formerly 44 U.S.C. Secs. 5, 7), the WPA regulation was not legally binding in the absence of actual knowledge. See, e.g., Timber Access Industries Co. v. United States, 213 Ct.Cl. 648, 553 F.2d 1250, 1255 (1977) (Forest Service Manual); Andrews v. Knowlton, 509 F.2d 898, 905 (2d Cir.) (Cadet Honor Code), cert. denied, 423 U.S. 873, 96 S.Ct. 142, 46 L.Ed.2d 105 (1975); United States v. Aarons, 310 F.2d 341, 345-48 (2d Cir.1962) (Coast Guard order); In re Pacific Far East Line, Inc., 314 F.Supp. 1339, 1348 (N.D.Cal.1970) (navy port regulations), aff'd, 472 F.2d 1382 (9th Cir.1973).
42
As the party seeking to assert the legal effectiveness of the WPA regulation, defendant had the burden of persuasion and production on the issue of actual knowledge. Resolution of this issue necessarily required the reconstruction of events that occurred more than forty-five years ago. There was no direct evidence of actual knowledge and the circumstantial evidence on this issue was not conclusive. There was evidence that, as required by the WPA regulation, the authors used the form of acknowledgement of government support specified by the WPA regulation and made their basic research data accessible to the public. There was also evidence, however, that the WPA supervisors had reviewed a copy of the 1942 MMP Schedule, which contained a copyright notice to the university, and had not raised any objections about its copyrightability. Nor was there any evidence that the WPA regulation restricting copyright had been incorporated into the WPA funding agreement. Cf. S & H Computer Systems, Inc. v. SAS Institute, Inc., 568 F.Supp. 416, 418-19 (M.D.Tenn.1983) (Department of Agriculture contract funding development of computer software contained provisions restricting copyright and granting "all benefits of all patentable results of all research" to the public). Defendant failed to carry its burden of proof on the issue of actual knowledge.
43
Given the above analysis, we need not review the district court's alternate holding that the MMPI works were copyrightable because they were "publications not devoted primarily to the results of Works Progress Administration projects" within the meaning of the WPA regulation.
44
Nor do we reach defendant's argument that the governmental exception, Sec. 8 of the 1909 Act authorized WPA to promulgate regulations about the copyrightability of works created under government grants. WPA's authority to promulgate regulations such as Operating Procedure No. W-11 was not disputed. In any event, we note that the Copyright Office did accept the MMPI works for registration and did not reject them because the works had been funded in part by the government. Cf. Schnapper v. Foley, 215 U.S.App.D.C. 59, 667 F.2d 102, 108-12 (1981) (governmental exception in 1909 and 1976 Acts does not bar registration of works commissioned by the government or assignment of copyrights in such works to the government; Copyright Office consistently accepted for registration federally commissioned works under 1909 Act), cert. denied, 455 U.S. 948, 102 S.Ct. 1448, 71 L.Ed.2d 661 (1982).
45
In sum, we hold the district court did not err in holding that the university could copyright the MMPI works even though the works were funded in part by the government.
COPYRIGHT PROTECTION
46
The district court held that the MMPI test statements could be copyrighted. The test statements are for the most part short, simple, declarative sentences, such as "I am a good mixer." and "No one seems to understand me." The district court held that the authors had used sufficient creativity and originality in drafting the test statements or in revising the questions and statements used in earlier psychometric tests. The district court further held that the testing data (scale membership, scoring directions, t-scores) could be copyrighted as the expressions of discovered scientific facts or processes. Plaintiffs do not claim copyright interests in their research per se; in fact, plaintiffs acknowledge that other researchers have used their MMPI research to develop other psychometric tests. The district court found that although the authors used statistical rules and algebraic formulas in developing their testing data, they selected particular formulas and then, on the basis of their clinical experience and expertise, adjusted the results they had obtained by applying those formulas.
47
Defendant argues the district court erred in holding that the MMPI test statements and testing data could be copyrighted. Defendant argues the test statements cannot be copyrighted because they are "short phrases" within the meaning of 37 C.F.R. Sec. 202.1(a) and because they are derivative works that do not contain any variation recognizable as that of the authors and therefore lack the requisite "originality." Defendant also argues the testing data (scale membership, scoring directions, t-scores) cannot be copyrighted because they constitute noncopyrightable facts or processes. In particular, defendant argues that the t-scores represent an attempt to copyright an algebraic formula.
48
Computer programs may be protected by copyright. E.g., Whelan Associates, Inc. v. Jaslow Dental Laboratory, Inc., 797 F.2d 1222, 1233 (3d Cir.1986) (Whelan ) (overall structure, sequence and organization of computer software), cert. denied, 479 U.S. 1031, 107 S.Ct. 877, 93 L.Ed.2d 831 (1987); Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1246-47 (3d Cir.1983) (computer object and source code), cert. dismissed, 464 U.S. 1033, 104 S.Ct. 690, 79 L.Ed.2d 158 (1984). Defendant's personal computer-based software, MMPI Scoring Program I and II, duplicated first NCS's in-house computerized MMPI scoring and interpreting services and then NCS's own personal computer-based MMPI software, Microtest. Because we have already determined that plaintiffs owned the MMPI copyrights and it is not disputed that defendant's software copied at least some of the test statements (only MMPI Scoring Program I) and all the testing data needed to score and interpret the MMPI (both MMPI Scoring Program I and II), we are concerned only with whether the test statements and testing data are per se uncopyrightable.
49
Defendant's first argument is that the test statements are not copyrightable because they lack originality.
50
The standard for "originality" is minimal. It is not necessary that the work be novel or unique, but only that the work have its origin with the author--that it be independently created. Little more is involved in this requirement than a "prohibition of actual copying."
51
To be the original work of an author, a work must be the product of some "creative intellectual or aesthetic labor." However, "a very slight degree of such labor[,] ... almost any ingenuity in selection, combination or expression, no matter how crude, humble or obvious, will be sufficient" to make the work copyrightable.
52
West Publishing Co. v. Mead Data Central, Inc., 799 F.2d 1219, 1223 (8th Cir.1986) (West ) (citations omitted) (1976 Act; page numbering due to publisher's arrangement of opinions in reporters), cert. denied, 479 U.S. 1070, 107 S.Ct. 962, 93 L.Ed.2d 1010 (1987).
53
The test statements are short, simple, declarative sentences, but they are not merely fragmentary words and phrases within the meaning of 37 C.F.R. Sec. 202.1(a). They are not names or titles or slogans.
54
We think the test statements satisfy the minimal standard for original works of authorship within the meaning of the copyright laws, at least within the context of the administration of the MMPI. Clearly, the test statements that Hathaway and McKinley, and their university colleagues, independently created meet the originality standard. Rubin v. Boston Magazine Co., 645 F.2d 80, 83 (1st Cir.1981) (particular questions about love and romance held copyrightable as original forms of expression); cf. Educational Testing Service v. Katzman, 793 F.2d 533, 539 (3d Cir.1986) (questions in scholastic aptitude and achievement tests); Association of American Medical Colleges v. Mikaelian, 571 F.Supp. 144, 150 (E.D.Pa.1983) (questions in medical school admission test), aff'd without opinion, 734 F.2d 3 (3d Cir.1984); National Conference of Bar Examiners v. Multistate Legal Studies, Inc., 495 F.Supp. 34, 36 (N.D.Ill.1980) (questions in bar exam), aff'd in part and rev'd in part, 692 F.2d 478 (7th Cir.1982), cert. denied, 464 U.S. 814, 104 S.Ct. 69, 78 L.Ed.2d 83 (1983).
55
We also think the test statements that are revisions of the questions in pre-existing psychometric tests represent "distinguishable" variations of the prior works. 1 Nimmer Secs. 2.01[B], 3.01, 3.03. The revisions are recognizable as the work of the authors and thus are sufficiently original to warrant copyright protection as derivative works. See Toro Co. v. R & R Products Co., 787 F.2d 1208, 1213 (8th Cir.1986) (citations omitted); see generally 1 Nimmer Sec. 3.04.
56
Defendant's second argument is that the test statements and testing data cannot be copyrighted because they are facts or methods or processes for discovering facts. Plaintiffs do not claim copyright protection for the MMPI research in itself, that is, the fact that there is a correlation between certain responses to certain test statements and particular psychological traits or characteristics. What they do claim is protected by copyright are the specific testing data developed by Hathaway and McKinley and their university colleagues to measure and evaluate this correlation. In other words, plaintiffs argue the MMPI testing data are copyrightable as expressions of facts or processes.
57
Copyright protection does not extend to ideas or facts in published works. E.g., Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 547, 105 S.Ct. 2218, 2223, 85 L.Ed.2d 588 (1985) (Harper & Row ); Worth v. Selchow & Richter Co., 827 F.2d 569, 572 (9th Cir.1987) (Worth ) (works on trivia), cert. denied, --- U.S. ----, 108 S.Ct. 1271, 99 L.Ed.2d 482 (1988); Frybarger v. International Business Machines Corp., 812 F.2d 525, 529 (9th Cir.1987) (Frybarger ) (video games). "The discovery of a fact, regardless of the quantum of labor and expense, is simply not the work of an author." 1 Nimmer Sec. 2.11[E], at 2-169 to -170. "The copyright is limited to those aspects of the work--termed 'expression'--that display the stamp of the author's originality." Harper & Row, 471 U.S. at 547, 105 S.Ct. at 2224. This is particularly true of factual works. "Because authors who wish to express ideas in factual works are usually confined to a 'narrow range of expression ..., similarity of expression may have to amount to verbatim reproduction or very close paraphrasing before a factual work will be deemed infringed.' " Worth, 827 F.2d at 572, citing Landsberg v. Scrabble Crossword Game Players, Inc., 736 F.2d 485, 488 (9th Cir.), cert. denied, 469 U.S. 1037, 105 S.Ct. 513, 83 L.Ed.2d 403 (1984); see also Wainwright Securities, Inc. v. Wall Street Transcript Corp., 558 F.2d 91 (2d Cir.1977) (abstracts of financial reports), cert. denied, 434 U.S. 1014, 98 S.Ct. 730, 54 L.Ed.2d 759 (1978); Toro Co. v. R & R Products Co., 787 F.2d at 1211-12 (parts numbers).
58
This is a close question. We think the MMPI testing data are copyrightable as expressions of facts or processes. Our conclusion is expressly based upon the district court's findings of fact about the methods the authors used to develop the MMPI testing data. The district court found that although the authors began with certain discovered facts, statistical models and mathematical principles, which cannot be copyrighted, they then made certain adjustments on the basis of their expertise and clinical experience. In other words, the MMPI testing data, at least for purposes of analysis under the copyright law, do not represent pure statements of fact or psychological theory; they are instead original expressions of those facts or processes as applied and as such are copyrightable. Rubin v. Boston Magazine Co., 645 F.2d at 83; see generally 1 Nimmer Sec. 2.03[E], 2.11.
59
On cross-appeal plaintiffs argue the district court erred in holding that the social introversion and correction (K) scales and the correlation or conversion tables are copyrighted only as compilations. We disagree. "If the underlying work is in the public domain, a copyright in the derivative work will not render the underlying work protectible." 1 Nimmer Sec. 3.04, at 3-16 to -16.1 (footnote omitted). Plaintiffs conceded at trial that the social introversion and correction (K) scales in the card format were in the public domain, apparently because these materials were first published in the Journal of Applied Psychology under a copyright notice in the name of the publisher and the publisher of that periodical failed to renew the copyright. Under these circumstances, the district court correctly extended copyright protection only to the revised formats of these materials as they appeared in the 1960 MMPI Handbook or in other copyrighted publications.
CALCULATION OF DAMAGES
60
The district court awarded plaintiffs damages for the loss of profits they would have earned but for defendant's copyright infringement. On the basis of financial information provided by NCS, the district court determined that NCS's average revenue for the Microtest program was $1104 per customer. The district court then determined that NCS lost 222 customers to defendant's MMPI scoring software (total of 584 customers, less 24 duplicate and 4 foreign customers, reduced by 20% for cost differential, further reduced by 50% as allowance for incompatible computer hardware). NCS's yearly lost revenue was $245,088. Again using financial information provided by NCS, the district court determined that NCS's profit margin was 20% and that NCS's yearly lost profits were $49,018. The district court then determined that defendant's customers would use their software for an average of 5 years because, according to expert testimony, the average "life" and amortization period for computer hardware was 5 years. Thus, NCS's total amount of lost profits was $245,090. The district court reduced this amount to present value, using the discount rate specified by state law, and awarded NCS a total of $226,598. The district court also awarded the university a total of $162,161, reduced to present value, for lost royalty payments.
61
Defendant argues there was insufficient evidence to support the 20% profit margin and the 5 year period of use. We disagree. The evidence in the record supported the district court's calculation of damages on the basis of a 20% profit margin and 5 years as the period of time defendant's customers would use their computer hardware and their MMPI scoring software.
62
Defendant also argues the district court improperly awarded NCS damages for lost profits in 1984 and early 1985 when Microtest was not on the market. We disagree. The district court recognized that Microtest was not available until April 1985 and did not award NCS any lost profits for defendant's 1984 and early 1985 sales. Because defendant's pre-April 1985 sales adversely affected NCS's Microtest sales in the future, the district court properly awarded NCS the profits it would have earned after April 1985 and in future years, but for defendant's 1984 and early 1985 sales.
63
Defendant also argues the district court should have calculated NCS's lost profits from the month each sale was made and not on a year-to-year basis. Calculation of damages from the month each sale was made rather than on a year-to-year basis would not have made a difference. For example, the district court awarded NCS lost profits for defendant's 1985 sales for years 1985-1989. The 5-year period for all of defendant's 1985 sales ended as of December 31, 1989. Otherwise, the 5-year period for July 1985 sales would have ended in July 1990, August 1985 sales in August 1990 and so forth. Calculation on a year-to-year basis was simpler and did not distort the award.
64
Nor do we think the district court erred in refusing to reduce the award of royalties to the university to reflect its profit margin; there was no evidence in the record that the university incurred any costs in collecting their royalties from NCS.
RECALL
65
On cross-appeal plaintiffs argue the district court abused its discretion in refusing to require defendant to recall and destroy its MMPI scoring software from its customers. In the present case the district court structured the damages award to cover a 5-year period. As noted above, this 5-year period reflects the average period of time defendant's customers would use their software. The district court did not abuse its discretion in awarding damages over a period of several years in lieu of recall. Moreover, it is doubtful that recall would be an available remedy against defendant's customers who are innocent third-parties in this copyright infringement litigation. See generally 3 Nimmer Sec. 14.08, at 14-63 & n. 6.
ATTORNEY'S FEES
66
On cross-appeal plaintiffs argue the district court abused its discretion in refusing to award them reasonable attorney's fees. The decision whether to award attorney's fees in copyright cases is committed to the sound discretion of the district court. See generally id. Sec. 14.10[D]. In some circuits reasonable attorney's fees are routinely awarded to the prevailing party. See, e.g., Micromanipulator Co. v. Bough, 779 F.2d 255, 259 (5th Cir.1985). Some circuits distinguish between prevailing plaintiffs and prevailing defendants and award attorney's fees to prevailing defendants only if the plaintiff's claims are not colorable. See, e.g., Original Appalachian Artworks, Inc. v. McCall Pattern Co., 825 F.2d 355, 356 (11th Cir.1987); Diamond v. Am-Law Publishing Corp., 745 F.2d 142, 148 (2d Cir.1984). Other circuits require a showing of bad faith or frivolity. See, e.g., Cooling Systems & Flexibles, Inc. v. Stuart Radiator, Inc., 777 F.2d 485, 493 (9th Cir.1985). It does not appear that this circuit has adopted a definitive standard for awarding attorney's fees in copyright cases. See United Telephone Co. v. Johnson Publishing Co., 855 F.2d 604, 612 (8th Cir.1988) (reference to abuse of discretion standard in general); Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 122-23 (8th Cir.1987) (affirming denial of attorney's fees to prevailing defendant where plaintiff's claim was not baseless).
67
We are reluctant to adopt a particular standard. For purposes of this appeal, it is sufficient to decide that attorney's fees should not be awarded to a prevailing plaintiff as a matter of course. See, e.g., Lieb v. Topstone Industries, Inc., 788 F.2d 151, 156 (3d Cir.1986). In the present case the district court decided not to award attorney's fees to plaintiffs because the litigation involved numerous complex or novel questions which defendant had litigated vigorously and in good faith. The district court's assessment of this case is amply supported by the record and the issues raised on appeal and cross-appeal. We cannot say that the district court abused its discretion in refusing to award reasonable attorney's fees to plaintiffs.
68
Accordingly, the judgment of the district court is affirmed. The appeal and cross-appeal are denied. Defendant's motion to strike portions of plaintiffs' reply brief is granted. Each party shall bear its own costs on appeal.
69
BRIGHT, Senior Circuit Judge, concurring.
70
I concur in the judgment of the majority; however, I write separately to express my differences with regard to the standing issue.
71
The majority gratuitously decided that the authors of the MMPI had no copyright interest in the articles in question. This determination, however, ignores the fact that there may have been some private agreement between the university and the authors entitling the authors to retain some interest in the articles. In any event, the determination is unnecessary. It is clear, as the majority held, that the university established its chain of title to the 1940 Journal of Pyschology as the assignee of the publisher's copyright and that it presented certificates of registration and renewal of copyright for most of the other MMPI works. Thus it was unnecessary for the majority to determine what interest, if any, the authors may have retained in the articles. Furthermore, because the majority correctly determined that the university established its chain of title as assignee of the publisher's copyright and through registration and renewal of copyrights on its own, any discussion of the Goodis case is unnecessary to a resolution of the standing issue.
1
The Honorable Donald D. Alsop, Chief Judge, United States District Court for the District of Minnesota
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9 F.3d 1543
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.Frank L. HINTON, Plaintiff-Appellant,v.Richard CHENEY, Secretary of Defense, Defendant-Appellee,andJay STEVENS, Honorable; William Barr, Honorable, Defendants.
No. 93-1263.
United States Court of Appeals,Fourth Circuit.
Argued: July 12, 1993.Decided: November 9, 1993.
Appeal from the United States District Court for the District of Maryland, at Baltimore. Alexander Harvey, II, Senior District Judge. (CA-92-1591-H)
Argued: Erroll D. Brown, Landover, Maryland, for Appellant.
James G. Warwick, Assistant United States Attorney, Baltimore, Maryland, for Appellee.
On Brief: Gary P. Jordan, United States Attorney, Baltimore, Maryland, for Appellee.
D.Md.
AFFIRMED.
Before WILKINSON, WILKINS, and NIEMEYER, Circuit Judges.
OPINION
PER CURIAM:
1
Frank L. Hinton filed suit against the Secretary of Defense under Title VII of the Civil Rights Act of 1964, 42 U.S.C.s 2000e-16, alleging that he was the victim of racial discrimination and retaliation for engaging in protected activity when he was removed from a special training program at the Defense Mapping Agency ("DMA"), a division of the Department of Defense. His original complaint, which was filed on the last day permitted by the applicable statute of limitation in the district court for the District of Columbia, was dismissed for improper venue. Thirty-nine days later, without appealing that order of the D.C. district court or a subsequent order denying his request to transfer the case to the proper forum, Hinton filed a second complaint in the district court for the District of Maryland. The Maryland district court dismissed this second complaint as untimely. Hinton now appeals, arguing that equitable tolling should apply to excuse his late filing in Maryland. Because we determine that equitable relief is not appropriate under the circumstances of this case, we affirm.
2
* Hinton, a black male, worked as a lithographic trainee in the DMA's Upward Mobility Program. If he had successfully completed the program, he would have been eligible for a position in the Graphic Arts Department at a higher grade level and salary. On October 3, 1989, however, program supervisors decided to terminate Hinton's involvement in the program and return him to a position equivalent to that of a supply clerk, the position he held before entering the program. The reasons given for the decision to remove Hinton were poor attendance; lack of motivation, initiative, and cooperation; unwillingness to learn training assignments; inability to work with others; and low productivity.
3
Hinton challenged his demotion, arguing that it was based on racial discrimination and retaliation for prior protected activity. The Chief of the Graphic Arts Department reviewed the supervisors' decision and agreed with it, concluding that the demotion was warranted by Hinton's erratic performance and inability to meet the requirements of the program as demonstrated over the preceding 34 months. On review by the Merit Systems Protection Board ("Board"), an administrative law judge affirmed the agency action, concluding that Hinton was unable to establish a prima facie case of discrimination or to show that his supervisors were aware of any prior protected activity. Hinton's petition for review by the full Board was denied.
4
Hinton then sought review by the Equal Employment Opportunity Commission ("EEOC"), which agreed with the Board and also concluded that Hinton had failed to present a prima facie case of either discrimination or retaliation. The EEOC's decision, issued on February 7, 1991, and sent to Hinton, contained the following admonition:
RIGHT TO FILE A CIVIL ACTION
5
This decision of the Commission is final, and there is no further right of administrative appeal from the Commission's decision. However, you have the right to file a civil action in the appropriate United States District Court, based on the decision of the Merit Systems Protection Board, WITHIN THIRTY (30) DAYS of the date that you receive the commission's decision. See 29 C.F.R. § 1613.421(c) and (d).
6
On March 11, 1991, Hinton, acting pro se, filed suit in the district court for the District of Columbia, alleging claims under Title VII and the common law. Determining that the suit should have been filed in the District of Maryland, the court dismissed the action on March 12, 1992 for improper venue. Acting through an attorney, Hinton then filed a motion for reconsideration, arguing in part that "any result which puts the plaintiff in the position of having to refile in another court subjects him to economic hardship and the threat of a second filing being ruled untimely." He requested alternatively that the case be transferred to the District of Maryland. The court denied this motion on April 27, 1992, stating in its order,"contrary to plaintiff's assertion that dismissal of this case will result in a subsequent filing being ruled untimely, plaintiff filed this case well within the 90-day statutory time limit for Title VII." The actual limit governing Hinton's action, however, is, as Hinton argued and as stated in the EEOC decision, 30 days. See 5 U.S.C. § 7703(b)(2).
7
Hinton took no appeal from the D.C. district court's decisions. Rather, acting again through counsel, he filed a second action in the district court for the District of Maryland on June 5, 1992, 39 days after the D.C. district court's order. Pursuant to the Secretary's motion to dismiss, based on the suit's untimeliness, the Maryland district court dismissed the case.
8
The court applied the 30-day time limit for filing a challenge to a decision by the Board, found in 5 U.S.C. § 7703, treating it as a statute of limitations. The court concluded that the filing in the District of Columbia was untimely, and even if it were timely, the subsequent filing in the District of Maryland was not. The court also refused to apply equitable tolling of the running of the limitations period as requested by Hinton, based on the D.C. district court's misstatement in its order of dismissal.
II
9
Hinton contends that his filing in the District of Columbia was timely, and that even if his filing in the District of Maryland was not, equitable tolling should apply, primarily because of the erroneous statement made by the D.C. district court that the applicable statute of limitations was 90 days. The government now concedes that Hinton's case was timely filed in the District of Columbia.1 With regard to Hinton's filing in Maryland, however, the government asserts that it is untimely because Hinton did not file it within 30 days after he received notice of the EEOC opinion, nor even within 30 days of the dismissal of his first suit, and that the district court was correct in declining to afford equitable relief in the circumstances of this case.
10
Hinton sought review of the DMA's decision to demote him, first by the Merit Systems Protection Board and then by the EEOC. See 5 U.S.C. § 7702(a)(3), (b)(1)(employee may seek review by the EEOC within 30 days of notice of the Board decision). Because the EEOC concurred in the Board decision, the Board's decision is the judicially reviewable action, see 5 U.S.C.s 7702(5)(A), and review of that decision is governed by § 7703, which provides that
11
Cases of discrimination subject to the provisions of section 7702 of this title shall be filed under section 717(c) of the Civil Rights Act of 1964 (42 U.S.C. 2000e-16(c)).... Notwithstanding any other provisions of law, any such case filed under any such section must be filed within 30 days after the date the individual filing the case received notice of the judicially reviewable action under such section 7702.
12
5 U.S.C. § 7703(b)(2) (emphasis added); see 29 C.F.R. § 1613.421(d).
13
Although Hinton did not file his action in Maryland within 30 days after he received the EEOC's opinion, he asserts that a doctrine of equitable tolling should apply, relying on Irwin v. Department of Veterans Affairs, 498 U.S. 89 (1990). The Supreme Court there determined that the 30-day time limit under 42 U.S.C.s 2000e-162 was a statute of limitations subject to equitable tolling, rather than an absolute jurisdictional limit. The Court observed, however, that because the statute is one waiving sovereign immunity and allowing suits against the government, it must be construed strictly, but not unnecessarily narrowly. The Court concluded that "rebuttable presumption of equitable tolling applicable to suits against private defendants should also apply to suits against the United States," 498 U.S. at 95-96, noting that "[s]uch a principle is likely to be a realistic assessment of legislative intent as well as a practically useful principle of interpretation." Id. at 95. It observed that Congress remains free to indicate in any case that it does not wish equitable tolling to be available.
14
In this case, however, we are called on to construes 7703, not § 2000e-16. Although similar, the language of the two statutes differs slightly. The language of § 7703 provides that the 30-day time limit applies "Notwithstanding any other provisions of law," whereas § 2000e-16 states only that a claim must be filed "[w]ithin thirty days." Notwithstanding that difference, some courts have applied equitable tolling principles to § 7703. See Nunnally v. MacCausland, 996 F.2d 1, (1st Cir. 1993); Williams-Scaife v. Department of Defense Dependent Schools, 925 F.2d 346, 348 & n.4 (9th Cir. 1991); but see Dean v. Veterans Admin. Regional Office, 943 F.2d 667, 670 (6th Cir. 1991) (concluding that Irwin did not overrule Hilliard v. United States Postal Service, 814 F.2d 325 (6th Cir. 1987), which held that equitable tolling does not apply to § 7703), vacated on other grounds, 112 S. Ct. 1255 (1992). Without deciding whether, in the proper circumstances, equitable tolling should be applied tos 7703, we hold that in this case the circumstances do not justify its application.
15
Equitable tolling is a remedy traditionally applied only sparingly. See Irwin, 498 U.S. at 96; English v. Pabst Brewing Co., 828 F.2d 1047, 1049 (4th Cir. 1987), cert. denied, 486 U.S. 1044 (1988). Hinton nevertheless argues that he is entitled to equitable relief because he relied on the misstatement in the opinion of the D.C. district court that the limitations period was 90 days. The government argues in response that Hinton was aware of the discrepancy and could have appealed the decision of the District of Columbia court. More importantly, he was specifically advised in the EEOC's written order that the time was 30 days. Because he was aware of the 30-day limit, the government argues, Hinton should not be entitled to assume that 90 days was correct. At a minimum, the government argues, Hinton should have been on notice to check. We agree with the government's position.
16
We have generally allowed for equitable relief only when the defendant misled or deceived the plaintiff in order to prevent the plaintiff either from discovering the existence of a cause of action or from filing a timely claim.3 See Olson v. Mobile Oil Corp., 904 F.2d 198, 201 (4th Cir. 1990); English, 828 F.2d at 1049. Hinton argues, however, that Irwin recognized additional grounds for equitable relief which are not dependent upon defense misconduct and should apply to this case. In Irwin, the Supreme Court discussed the application of equitable relief generally, stating:
17
We have allowed equitable tolling in situations where the claimant has actively pursued his judicial remedies by filing a defective pleading during the statutory period, or where the complainant has been induced or tricked by his adversary's misconduct into allowing the filing deadline to pass. We have generally been much less forgiving in receiving late filings where the claimant failed to exercise due diligence in preserving his legal rights.
18
498 U.S. at 96 (footnotes omitted). Even assuming that Irwin does require us to broaden the scope of factors that we consider with regard to equitable relief, it is Hinton's failure "to exercise due diligence" that leads us to deny equitable relief. Hinton was explicitly advised, in writing, that he had 30 days to appeal. On the last day of the time period, he filed suit in the wrong forum. When the D.C. district court dismissed the case for improper venue, Hinton asked for reconsideration based on the potential time prejudice and for a transfer. When the D.C. district court rejected his plea, Hinton failed to appeal to the Court of Appeals for the D.C. Circuit. Moreover, he waited yet 39 days more before filing a second suit in Maryland. The Maryland suit was thus filed almost 16 months after the EEOC's order, and, even if the time when the District of Columbia case was pending is not counted, an issue which we need not decide, the suit was still filed some 70 days after the EEOC's order and, indeed, 39 days after the D.C. district court's order.
19
Because of Hinton's own failure to exercise due diligence, we refuse to consider the principles of equitable tolling, and we affirm the district court's order dismissing this case.
AFFIRMED
1
Hinton apparently received the EEOC decision on February 8, 1991. Because the thirtieth day thereafter fell on March 10, 1991, a Sunday, Hinton's filing the next business day, March 11, was timely under Federal Rule of Civil Procedure 6(a)
2
The time period in § 2000e-16 has since been extended to 90 days. Civil Rights Act of 1991, Pub. L. No. 102-166, § 114(1), 1991 U.S.C.C.A.N. (105 Stat.) 1071, 1079 (codified as amended at 42 U.S.C. § 2000e-16)
3
Although Hinton originally argued that misconduct by the DMA led him to file his first complaint in the wrong court, he conceded at oral argument that the actions by the DMA as alleged were not sufficient to warrant equitable tolling on this basis. Hinton had pointed only to the facts that the DMA phone number is listed in the government section of the Washington D.C. phone book and that the DMA gives its address as 6500 Brooks Lane, Washington, D.C., when in fact the office is located in Maryland. As Hinton acknowledged, these actions are simply inadequate to support a conclusion that the DMA acted to mislead Hinton into filing his complaint in the wrong court
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32 F.Supp. 21 (1940)
LEWIS et al.
v.
UNITED AIR LINES TRANSPORT CORPORATION et al.
No. 1044.
District Court, W. D. Pennsylvania.
March 12, 1940.
Watrous, Hewitt, Gumbart & Corbin and Wm. B. Gumbart and Morris Tyler, all of New Haven, Conn., for third party defendant, Bethlehem Steel Co.
Haight, Griffin, Deming & Gardner and Donald Havens, all of New York City, and Sterrett, Acheson, Childs & Barnett, of Pittsburgh, Pa., for United Air Lines Transport Corp. and witnesses, Robt. F. Mehl and Horace C. Knerr.
McVICAR, District Judge.
The motion of the Bethlehem Steel Company, third party defendant, for an order compelling Robert F. Mehl to answer certain questions addressed to him in the taking of a deposition in the City of Pittsburgh, Pennsylvania, was reargued. The questions which Mehl refused to answer and the privilege claimed by Mehl and the United Air Lines Transport Corporation appear in the opinion filed by this court at the time an order was made thereon, February 26, 1940. D.C., 31 F.Supp. 617.
The court held in said opinion that the burden of proving privilege rests upon the person asserting it; that "The authorities relied upon by The United Air Lines Transport Corporation relate to communications and reports between attorneys and clients, and in one case, to a communication between attorneys and an engineer. These authorities are not applicable to the questions under consideration, as they do not involve any reports or communications from the deponent to The United Air Lines Transport Corporation. As these questions do not fall within the authorities relied upon by The United Air Lines Transport Corporation, nor within any other rule cited by said corporation, the deponent should be required to answer said questions."
The United Air Lines Transport Corporation, in its reargument, contends that not only are reports and communications made by Mehl to it or its attorneys privileged, but that the examinations and tests made by *22 Mehl which have been the subject of such reports or communications, and any opinions formed by him, are also privileged. There are authorities in support of this contention. In 70 C.J., page 432, section 581, it is stated: "It has been held that communications between a client and agent respecting matters concerning litigation, had with the intention of submitting the information obtained to an attorney, are privileged, especially where the communication was at the instance of the attorney, and that information obtained by the client, by means of communications or otherwise, from persons other than his legal advisers, with a view to litigation actual or contemplated, is likewise protected. But it has also been held that the privilege does not extend to communications had by the client with agents or strangers, without the suggestion or direction of the attorney, whether or not litigation is threatened or pending. However, communications between a principal and agent, such as between an officer of a company and the company, with a view to litigation, are privileged; and this is also true of statements submitted by an agent to his principal at the request of the latter for the purpose of being laid before a solicitor or attorney for his advice and opinion or for guidance in litigation, * * *."
On the same page, in note 7(c), it is stated: "Evidence obtained by attorney or at his instance after litigation has been commenced or threatened, or with a view to the defense or prosecution of such litigation, is protected even if obtained by the client. Wheeler v. Le Marchant, 17 Ch.D. 675 (quot with appr Kennedy v. Lyell, 23 Ch.D. 387)."
On the same page in note 8(a) (2) it is stated: "Where claims have been made for injuries, or litigation is reasonably apprehended, the results of investigations made with a view to prepare a defense are privileged. Cossey v. London, etc., R. Co., L.R. 5 C.P. 146; Skinner v. Great Northern R. Co., L.R. 9 Exch. 298; Collins v. London Gen. Omnibus Co., 57 J.P. 678; London, etc., R. Co. v. Kirk, 51 L.T.Rep.,N.S. 599."
On pages 432 and 433 in note 11 (a) and (b) it is stated.
"(a) Railroad agent. Report by railroad operating agents for submission to counsel for his advice and to enable him to prepare defense was a privileged communication. Atlantic Coast Line R. Co. v. Williams, 21 Ga.App. 453, 94 S.E. 584.
"(b) Reports regarding accidents made by the employees of a railway company for the information of the claim agent, and turned over by him to counsel of the company for his use in case of suit, are privileged. Ex p. Schoepf, 74 Ohio St. 1, 77 N.E. 276, 6 L.R.A.,N.S., 325."
On page 402 in note 76(b) and (c) it is stated:
"(b) Skilled investigator of documents. A report of a skilled interpreter or translator of ancient documents, employed by the solicitor because he could not so effectually do the work himself to search ancient records and report such as he thinks will tend to support the client's case, is privileged. Churton v. Frewen, 2 Dr. & Sm. 390, 62 Reprint 669.
"(c) Report of accountant. The reports of an accountant employed by a solicitor to investigate books are privileged from production. Walsham v. Stainton, 2 Hem. & M. 1, 71 Reprint 357."
In McCarthy v. Palmer, E.D. N.Y., 29 F.Supp. 585, 586, Judge Moscowitz held: "In connection with the particular evidence in question, a further problem was brought into focus, namely, the extent to which the new Rules of Civil Procedure permit the examination by one party of affidavits and similar materials secured by the other party by independent investigation incident to the preparation of the case for trial. While the Rules of Civil Procedure were designed to permit liberal examination and discovery, they were not intended to be made the vehicle through which one litigant could make use of his opponent's preparation of his case. To use them in such a manner would penalize the diligent and place a premium on laziness. It is fair to assume that, except in the most unusual circumstances, no such result was intended."
In Rule 35 of Rules of Civil Procedure, 28 U.S.C.A. following section 723c, it is provided that in an action in which the mental or physical condition of a party is in controversy, the court may direct him to submit to a physical or mental examination by a physician; furthermore, that if requested, the person examined shall be entitled to receive from the party causing the examination a copy of the report of the examining physician setting out his findings and conclusions. If such request is made and acceded to, the party causing the examination to be made shall be entitled to receive from the party examined *23 a like report of any examination previously or thereafter made of the same mental or physical condition. This rule impliedly recognizes that an examination made by a physician of a party is privileged unless the privilege is waived by pursuing the course referred to in the Rule.
To permit a party by deposition to examine an expert of the opposite party before trial, to whom the latter has obligated himself to pay a considerable sum of money, would be equivalent to taking another's property without making any compensation therefor. To permit parties to examine the expert witnesses of the other party in land condemnation and patent actions, where the evidence nearly all comes from expert witnesses, would cause confusion and probably would violate that provision of Rule 1 which provides that the rules "shall be construed to secure the just, speedy, and inexpensive determination of every action."
I am of the opinion, under the foregoing authorities and for the reasons aforestated, that the witness Mehl should not be required to disclose any reports or communications which he has made to the defendant, the United Air Lines Transport Corporation, or its attorneys, nor should he be required to answer questions as to any examination or tests made by him which have been the subject of such reports or communications, or that he should be required to answer any question calling for his opinion. If it should appear, however, that Mehl made changes in the cylinder, he should tell what those changes were; he should describe the appearance of the cylinder prior thereto and after the changes were made; furthermore, if he made any tests of the cylinder which cannot be repeated now with the same results because of the changes he has made, he should describe such tests and the results thereof.
In accordance with the foregoing opinion, it is directed that Robert F. Mehl answer the questions set forth in Exhibit A attached to the motion of the Bethlehem Steel Company with the exception of the questions which read as follows:
"To state the nature and scope of the examination made.
"What tests, if any, he had made of said cylinder and engine, or any parts thereof. What were the results of any such test.
"Whether he found anything the matter with cylinder 3."
The order of this court made February 26, 1940 is modified and changed so as to read as provided above.
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267 S.E.2d 105 (1980)
Christopher W. GILLULY
v.
COMMONWEALTH of Virginia.
Record No. 790871.
Supreme Court of Virginia.
June 6, 1980.
Allen H. Sachsel, Falls Church (Stephen A. Armstrong, G. James Frick, Armstrong & Frick, Falls Church, on briefs), for appellant.
Vera S. Warthen, Asst. Atty. Gen. (Marshall Coleman, Atty. Gen., on brief), for appellee.
*106 Before I'ANSON, C. J., and CARRICO, HARRISON, COCHRAN, POFF, COMPTON and THOMPSON, JJ.
CARRICO, Justice.
The defendant, Christopher W. Gilluly, was indicted for rape, sodomy, abduction, and assault and battery. Prior to trial, he moved to suppress certain evidence seized from his apartment pursuant to a search warrant issued by a special magistrate. The defendant contended that the seizure was illegal because the warrant failed to state the offense in relation to which the search was to be conducted. After argument, the trial court granted the defendant's motion and ordered the disputed evidence suppressed. Upon the Commonwealth's motion for reconsideration, however, the court reversed itself and denied the defendant's motion to suppress.
In a subsequent jury trial at which the items seized under the search warrant were introduced into evidence, the defendant was convicted of abduction and assault and battery, but was acquitted of the other charges. Upon each conviction, the jury fixed the defendant's punishment at six months in jail and a fine of $1,000. The trial court imposed the punishment fixed by the jury, but suspended both the jail sentence and the fine on the assault and battery conviction.
The record shows that on the evening of July 7, 1978, on their second date, the defendant, a naval officer, and the victim attended a formal military dinner and afterward visited in the home of the defendant's commanding officer until approximately 2:30 a. m. Upon the defendant's invitation, the victim accompanied him to his apartment "to learn disco." After dancing approximately 45 minutes, she asked to be taken home. He refused and, according to the victim, he took her to the bedroom and there raped and sodomized her. During the course of the attack, he beat her with a riding crop and a "fraternity" paddle.
Clad only in a bathrobe, the victim managed to escape from the apartment when the defendant entered the bathroom. Later in the day, she reported the attack to the police. The next day, July 9, Investigator Ann Melchior of the Alexandria Police Department appeared before a special magistrate and made an affidavit for a warrant to search the defendant's apartment. The affidavit stated that the "offense in relation to which the search is to be made is: Rape." The magistrate issued the warrant, but he left blank the space provided in the search warrant form for insertion of the name of the offense in relation to which the search was to be conducted.
Investigator Melchior and other officers executed the search warrant and seized from the defendant's apartment the various items which were later introduced into evidence at the defendant's trial. The items seized included a riding crop and a "fraternity" paddle.
On appeal, the sole question for decision is whether the items seized pursuant to the search warrant were inadmissible into evidence because of the failure of the warrant to state the offense in relation to which the search was to be conducted. The items were inadmissible, the defendant contends, because, without a recital of the offense, the warrant became a general warrant forbidden by both the Fourth Amendment to the Constitution of the United States[1] and Article I, Section 10 of the Constitution of Virginia.[2] Furthermore, the defendant asserts, Code § 19.2-56 requires that every search warrant shall "recite the offense in relation to which the search is to be made" *107 and Rule 3A:27(c) contains an identical requirement.
On the other hand, the Attorney General contends that the disputed items were admissible into evidence. The Attorney General argues first that the affidavit made by Investigator Melchior recited rape as the offense in relation to which the search was to be conducted and because, under Code § 19.2-56, the affidavit becomes a part of the warrant when the two are attached, the recital of the offense in the affidavit sufficed to supply the deficiency in the warrant. The ready answer to this argument, however, is that, although the affidavit and the search warrant are stapled together as they appear in the record on appeal, the evidence below established conclusively that the two documents were not attached until after the search warrant had been executed and the disputed items seized.
The Attorney General argues next that even if the search warrant failed to meet all the requirements of Virginia law, it does not follow that the evidence seized thereunder was inadmissible. The exclusionary rule made applicable to the states by Mapp v. Ohio, 367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed.2d 1081 (1961), the Attorney General asserts, eliminates only evidence obtained in violation of the federal Constitution. The Fourth Amendment, the Attorney General continues, admittedly is intended to curb the use of general warrants. But the warrants thus proscribed, the Attorney General maintains, are limited to those that do not describe the place to be searched or the things to be seized. The failure of a search warrant to recite the offense in relation to which the search is to be conducted, the Attorney General concludes, does not render the warrant a general one within the meaning of the Fourth Amendment or require suppression of the evidence seized thereunder.
We disagree with the Attorney General. In our opinion, the Fourth Amendment does require that a search warrant recite the offense in relation to which the search is to be conducted. We believe this requirement is made clear by the decision in Berger v. New York, 388 U.S. 41, 87 S.Ct. 1873, 18 L.Ed.2d 1040 (1967). Treating the case as a search and seizure matter, the Supreme Court struck down as violative of the Fourth Amendment a New York statute which permitted a court to authorize by ex parte order the installation of an eavesdropping device. In the course of its opinion, the Court stated:
"The Fourth Amendment commands that a warrant issue not only upon probable cause supported by oath or affirmation, but also `particularly describing the place to be searched, and the persons or things to be seized.' New York's statute lacks this particularization. It merely says that a warrant may issue on reasonable ground to believe that evidence of crime may be obtained by the eavesdrop. It lays down no requirement for particularity in the warrant as to what specific crime has been or is being committed, nor `the place to be searched,' or `the persons or things to be seized' as specifically required by the Fourth Amendment." 388 U.S. at 55-56, 87 S.Ct. at 1882 (emphasis added).
Finally, the Attorney General argues that the introduction into evidence of the disputed items, if error, was harmless beyond a reasonable doubt. The testimony of the victim, the Attorney General says, clearly was sufficient to sustain the defendant's convictions without the introduction into evidence of any of the items seized under the search warrant.
We cannot say, however, that introduction of the disputed items was harmless beyond a reasonable doubt. To prove the harmful effect of the alleged error, we cite only two of the items in question, the riding crop and the "fraternity" paddle. The display to the jury of these two items, coupled with the evidence that they were found in the defendant's apartment soon after the alleged attack, may well have served not only to corroborate the victim's testimony that she was beaten with these instruments but also to tip the scales in favor of a *108 conviction of assault and battery for that beating.
We agree with the defendant that the search warrant was fatally defective for its failure to state the offense in relation to which the search was to be conducted and that the items seized thereunder were erroneously introduced into evidence. Accordingly, we will reverse the convictions appealed from and remand the case for a new trial at which the seized items shall be excluded from evidence.
Reversed and remanded.
NOTES
[1] "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized."
[2] "That general warrants, whereby an officer or messenger may be commanded to search suspected places without evidence of a fact committed, or to seize any person or persons not named, or whose offense is not particularly described and supported by evidence, are grievous and oppressive, and ought not to be granted."
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843 F.Supp. 1160 (1994)
Shirley MAYBERRY, Plaintiff,
v.
Cheryl C. VON VALTIER and Rochester Family Practice Associates, Defendants.
No. 93-CV-71383-DT.
United States District Court, E.D. Michigan, S.D.
February 8, 1994.
*1161 Sidney Kraizman, Detroit, MI, for plaintiff.
Stephen D. McGraw, Thomas R. Williams, Christopher A. Cornwall, Kerr, Russell and Weber, Detroit, MI, for defendant Cheryl C. Von Valtier.
*1162 Charles E. Murphy, Cox & Hodgman, Troy, MI, for defendant Rochester Family Practice Associates.
MEMORANDUM OPINION AND ORDER DENYING DEFENDANT VON VALTIER'S MOTION FOR SUMMARY JUDGMENT
WOODS, District Judge.
This matter having come before the Court on defendant Cheryl C. Von Valtier's Motion for Summary Judgment;
The Court having reviewed the pleadings submitted herein, and being otherwise fully informed in the matter;
The Court finds that defendant's Motion shall be, and hereby is, DENIED.
Defendant, Cheryl C. Von Valtier, is a physician licensed to practice medicine in the State of Michigan. Plaintiff, Shirley Mayberry, is a 67 year old deaf woman. Since 1987, Dr. Von Valtier has treated Ms. Mayberry as her family physician. Ms. Mayberry testified that she was able to lipread until she completely lost her hearing in 1990, and that she is able to understand simple notes. Ms. Mayberry and Dr. Von Valtier communicated during physical examinations by passing notes back and forth, or by using a signor. The signor was often one of Ms. Mayberry's children, and on three occasions a professional interpreter had been used. Dr. Von Valtier testified that visits with Ms. Mayberry took twice as long with an interpreter than when they passed notes, but that she did not mind spending the extra time.
On March 15, 1991, Ms. Mayberry brought her daughter Claudia Langston to her appointment with Dr. Von Valtier. Ms. Langston told Dr. Von Valtier that her mother's hearing had gotten progressively worse. During that visit, Dr. Von Valtier discovered that the back pain Ms. Mayberry had earlier complained of was higher than she had originally understood. Dr. Von Valtier wrote the following note on her chart: "[Ms. Mayberry] [s]tates pain has not moved, but this is higher than I had understood her to say. Probably due to poor communication." Ms. Langston swears in her affidavit that Dr. Von Valtier told her that an interpreter made communication with Ms. Mayberry clearer and easier than writing notes. In addition, Dr. Von Valtier told her that she wanted Ms. Mayberry to have an interpreter when she was seen at her medical office.
On three occasions, Ms. Mayberry had an interpreter from Deaf, Hearing and Speech Services Senior Citizens present during appointments with Dr. Von Valtier. On two of those occasions, once in 1989 and once in 1990, Dr. Von Valtier did not have to pay for the interpreter. On the third occasion, December 18, 1992, Ms. Mayberry was due to have a general examination, and she requested an interpreter because she felt she needed one. Dr. Von Valtier's office consented to pay for the interpreter's services pursuant to its duty under the Americans with Disabilities Act. Dr. Von Valtier wrote to Ms. Mayberry on January 7, 1993, summarizing the results of her examination.
Dr. Von Valtier was billed $28.00 by Monalee Ferrero for her interpreting services. Dr. Von Valtier paid the bill, and sent the following letter to Ms. Ferrero.
Enclosed is payment for your services to Shirley Mayberry in this office 12/18/92. The Medicare payment for Mrs. Mayberry's office visit has been received, and I would now like to explain why I won't be able to utilize your services in the future, or indeed why I really can't afford to take care of Mrs. Mayberry at all.
My regular fee for a 15 minute office visit is $40.00. I spent about 45 minutes with Mrs. Mayberry on December 12, 1992, for this I was paid $37.17 by Medicare and (hopefully) $9.29 by Mrs. Mayberry. My office overhead expense rate is a rather steady 70% of my gross receipts, which means that for that 45 minutes I was able to "pocket" $13.94, that is, until I paid your bill for $28.00.
I certainly hope that the Federal Government does not further slash this outrageous profit margin.
A copy of this letter was also sent to Ms. Mayberry.
After Ms. Mayberry received the letter addressed to Ms. Ferrero, she became angry and called Dr. Von Valtier's office to ask for *1163 her records. Ms. Mayberry admits that she did not ask Dr. Von Valtier what she intended by the letter. Ms. Mayberry interpreted the letter to mean that Dr. Von Valtier would not hire an interpreter for her again, and that she had been discharged as a patient. (Mayberry deposition, p. 120). At her deposition, Dr. Von Valtier explained that the letter was poorly written and ambiguous, and it was not her intention to discharge Ms. Mayberry from her practice, nor did she intend to refuse to pay for an interpreter in the future. Dr. Von Valtier claims to have a specific protocol for discharging patients, and that protocol was not initiated in this case. Dr. Von Valtier sums up the purpose of her letter as a protest of the Americans with Disabilities Act, saying:
I felt that although this ADA is the law of the land, and I have to obey it, I don't think it's fair. I wanted to protest it. I feel that I have a right to protest it even though I have to obey it. And this was one protest that I could make because of the fact that for six years, Shirley Mayberry and I successfully communicated with each other with pencil and paper. (Von Valtier Deposition, p. 58-59).
Plaintiff's complaint alleges that she has been denied future treatment by defendant because she is deaf. Plaintiff alleges that defendant's actions in refusing to provide interpreter services in the future, and in terminating her medical care, amounts to discrimination in violation of the Americans with Disabilities Act of 1990 (ADA), Section 504 of the Federal Rehabilitation Act of 1973, and the Michigan Handicappers' Civil Rights Act.
Plaintiff seeks an injunction against defendant, ordering her to provide medical treatment to plaintiff, and to pay for an interpreter during medical appointments. It is requested that the injunction also order defendant to promulgate policies and procedures for providing interpreters to ensure effective communication for plaintiff and other deaf patients. Plaintiff additionally seeks an order that defendant be required to notify plaintiff and other deaf patients of their right to auxiliary aids and services. Plaintiff further seeks recovery for her emotional suffering in the amount of $10,000, along with attorney fees and court costs.
Pursuant to Fed.R.Civ.Proc. 56(c) a motion for summary judgment is to be granted only if the evidence indicates that no genuine issue of material fact exists. In order to avoid summary judgment, the opposing party must have set out sufficient evidence in the record to allow a reasonable jury to find for him at trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Matsushita Electric Ind. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The sufficiency of the evidence is to be tested against the substantive standard of proof that would control at trial. Anderson, 477 U.S. 242, 106 S.Ct. 2505. The moving party has the burden of showing that there is an absence of evidence to support the non-moving party's case. Celotex v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). "[A] party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256, 106 S.Ct. at 2514. In disposing of a motion for summary judgment, this Court must consider the evidence in the light most favorable to the non-moving party, but may weigh competing inferences for their persuasiveness. Matsushita, 475 U.S. 574, 106 S.Ct. 1348.
A. Americans with Disabilities Act (ADA)
Under the ADA, the general rule prohibiting discrimination by public accommodations states that:
No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.
42 U.S.C. § 12182(a). A place of public accommodation is defined to include the professional office of a health care provider. 42 U.S.C. § 12181(7)(F). Defendant Dr. Von *1164 Valtier's medical office is therefore a place of public accommodation for purposes of the ADA. The term disability means "a physical or mental impairment that substantially limits one or more of the major life activities of such individual...." It is undisputed that plaintiff's deafness is a disability under the ADA.
The ADA defines discrimination as including a failure to take necessary steps to ensure that no individual with a disability is denied services because of the absence of auxiliary aids and services. The Department of Justice has promulgated regulations to implement the ADA, and states in its commentary on the final regulations:
The auxiliary aid requirement is a flexible one. A public accommodation can choose among various alternatives as long as the result is effective communication.
Fed.Reg., Vol 56, No. 144, Page 35566 (July 26, 1991); 28 CFR 36.303, App. B. The regulations include examples of auxiliary aids and services required to be furnished where necessary to ensure effective communication. The examples given for persons with hearing losses include qualified interpreters and notetakers. 28 CFR § 36.303(b)(1). The effective communication requirement of the ADA has been interpreted such that Congress expects places of public accommodation to consult with disabled persons when it comes to auxiliary aids for effective communication, but Congress does not mandate primary consideration of their expressed choices. 28 CFR 36.303, App. B.
The construction provision of the ADA states that the standards of title V of the Rehabilitation Act of 1973, and its regulations, are to apply, except where the ADA has explicitly adopted a different standard. 42 U.S.C. § 12201(a). In order to make out a prima facie case under title III of the ADA, the plaintiff must prove (1) that she has a disability; (2) that defendant's office is a place of public accommodation; and (3) that she was discriminated against by being refused full and equal enjoyment of medical treatment because of her disability. Defendant maintains that intent to discriminate is a fourth element of plaintiff's prima facie case, relying on traditional disparate-treatment/disparate-impact and burden-shifting analyses used in discrimination cases.
Federal courts have struggled with the issue of whether intent to discriminate is an element to stating a prima facie case under the Rehabilitation Act. This Court will look to the cases interpreting the Rehabilitation Act for guidance, as there are no reported cases analyzing the requirements for sustaining a claim under the effective communication by a public accommodation provisions of the ADA. The Supreme Court has looked to the objective behind enactment of the Rehabilitation Act, concluding that "[d]iscrimination against the handicapped was perceived by Congress to be most often the product, not of invidious animus, but rather of thoughtlessness and indifference of benign neglect." Alexander v. Choate, 469 U.S. 287, 295, 105 S.Ct. 712, 717, 83 L.Ed.2d 661 (1985). Alexander involved a change in Medicaid policy whereby the number of annual inpatient hospital days covered was to be reduced from 20 to 14 days. A class of Medicaid recipients alleged that the reduction would have a disproportionate effect on the handicapped, and therefore violated § 504 of the Rehabilitation Act. The Court found that there were two competing considerations in the context of the discriminatory impact a program or action has on the handicapped. On the one hand is the need to give effect to the Act's objectives of preventing discrimination, and on the other hand is the desire to keep § 504 within manageable bounds. Id. at 299, 105 S.Ct. at 719. That is, not every action that touches the handicapped should be subjected to analysis under the Act. The Court refused to hold that all showings of disparate impact on the handicapped constitute prima facie cases under § 504, nor would it hold that proof of discriminatory intent was necessary in every case. Id. Alexander has been interpreted by Courts of Appeals to stand for the proposition that plaintiffs need not establish an intent to discriminate in order to prevail on a disparate impact case under § 504. See, Nathanson v. Medical College of Pennsylvania, 926 F.2d 1368, 1384 (3rd Cir.1991).
A disparate impact case is one in which a facially neutral practice impacts *1165 more harshly on one group of people than on others. For example, if defendant Von Valtier had announced a policy not to hire sign language interpreters for any patient, the impact would obviously be more profound on deaf patients. Such a policy, however, is not facially neutral in the same manner as the policy to reduce the number of annual inpatient hospital days that state Medicaid would pay for, which was the issue in Alexander v. Choate. The case presently before the Court does not involve a disparate impact, as plaintiff alleges that defendant specifically declined to provide her with an interpreter because she was disabled. Even though the Supreme Court addressed the issue of intent in a case where the discrimination complained of was in the form of a policy's impact rather than specific treatment, other courts have come to the same conclusion.
The Tenth Circuit Court of Appeals discussed the issue of intent and the Rehabilitation Act in the case of Pushkin v. Regents of University of Colorado, 658 F.2d 1372 (10th Cir.1981). The court refused to require that plaintiff prove discriminatory intent in a case where the handicapped plaintiff was denied admittance to a psychiatric residency program. The court held that plaintiff's claim must "stand or fall according to the principles enunciated" in § 504 of the Act. Id. at 1384. The court was not persuaded by defendant's argument that plaintiff's Rehabilitation Act claim should be subjected to an equal protection clause analysis, which requires proof of invidious discrimination. Nor would the court apply the traditional burden-shifting test established in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973), and refined in Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981), for determining whether an individual has been subjected to "disparate treatment" because of his or her protected status. Pushkin, 658 F.2d at 1384-85. The court concluded that § 504 of the Rehabilitation Act does not contemplate a disparate treatment or disparate impact analysis. Id. at 1385. Instead, the court used the statutory language of § 504 as a starting point to modify the Burdine burden-shifting analysis for handicap discrimination cases brought pursuant to the Rehabilitation Act. Under this new model, a plaintiff must establish a prima facie case by showing that he or she was an otherwise qualified handicapped person, apart from his or her handicap, and was rejected under circumstances which gave rise to the inference that such rejection was based solely on his or her handicap. Id. at 1387. The burden then shifts to defendant to prove that plaintiff was not an otherwise qualified handicapped person, or that plaintiff's rejection was for reasons other than his or her handicap. Id. At this point the burden shifts back to plaintiff to rebut defendant's stated reasons as pretextual. Id. The Sixth Circuit adopted the Pushkin analysis in the case of Jasany v. United States Postal Service, 755 F.2d 1244, 1249-50 n. 5 (6th Cir.1985) (applied modified burden-shifting test in case in which plaintiff alleged handicap discrimination in violation of § 504 in employment context).
The Second Circuit Court of Appeals found that the deaf parents of public school students had a cause of action under the Rehabilitation Act because they were denied effective communication at school functions related to their children's education. The parents were handicapped, the school district received federal financial assistance, and the parents were denied the opportunity to participate in school-initiated activities concerning their children's education by reason of their handicap. The court found that the parents were "otherwise qualified" to participate in the activities, and that the parents had stated a prima facie case of discrimination under the Rehabilitation Act. Intent to discriminate was not a separate element of stating a prima facie case. Rothschild v. Grottenthaler, 907 F.2d 286, 290 (2nd Cir. 1990). The court then shifted the burden to defendant to "present evidence to rebut the inference of illegality." Id. The District Court for the Western District of Michigan has also held that proof of intentional discrimination is not necessary in order to sustain a case under the Rehabilitation Act. Sanders by Sanders v. Marquette Public Schools, 561 F.Supp. 1361, 1372 (W.D.Mich. 1983).
*1166 In Southeastern Community College v. Davis, 442 U.S. 397, 99 S.Ct. 2361, 60 L.Ed.2d 980 (1979), a woman with a hearing disability was denied admission to a nursing program because her handicap made it impossible for her to participate in the normal clinical training, or to care for patients. The Supreme Court held that the College did not violate § 504 of the Rehabilitation Act. The College was permitted to take into account the applicant's physical restrictions, and was not required to make major adjustments to its nursing program, especially when that would entail lowering the standards of the program. The Court did not inquire into the College's intent in refusing the applicant's admission into the nursing program. The Court did, however, discuss a situation where a refusal to modify an existing program might become unreasonable and discriminatory: "[i]t is possible to envision situations where an insistence on continuing past requirements and practices might arbitrarily deprive genuinely qualified handicapped persons of the opportunity to participate in a covered program." Southeastern Community College v. Davis, 442 U.S. 397, 412, 99 S.Ct. 2361, 2370, 60 L.Ed.2d 980 (1979).
One of the stated purposes of the ADA is "to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities." 42 U.S.C. § 12101(b)(1). Congress specifically found that "individuals with disabilities continually encounter various forms of discrimination, including outright intentional exclusion [and] the discriminatory effects of ... communication barriers...." 42 U.S.C. § 12101(a)(5). Given that statement, Congress appears to have intended the ADA to address the discriminatory effects of benign actions or inaction, as well as intentional discrimination. Based on the cases analyzing alleged violations of § 504, the Court concludes that the Rehabilitation Act does not require a plaintiff to prove discriminatory intent in order to make out a prima facie case of handicap discrimination. The Court will apply the modified burden-shifting analysis developed in cases under the Rehabilitation Act to the ADA.
In order to set forth a prima facie case under title III of the ADA, plaintiff must prove that she has a disability, that defendant's office is a place of public accommodation, and that she was denied full and equal medical treatment because of her disability. Plaintiff must additionally show that she was denied treatment under circumstances which give rise to the inference that such denial was based solely on her handicap. If plaintiff succeeds in stating a prima facie case, the burden shifts to defendant to prove either that plaintiff was not denied medical treatment, or that such denial was not unlawful. The burden then shifts back to plaintiff to rebut defendant's reasons as pretext for unlawful discrimination.
In her attempt to make out a prima facie case under title III of the ADA, plaintiff has clearly proven that she has a disability and that defendant's office is a place of public accommodation. Plaintiff has also produced evidence giving rise to an inference that she was unlawfully discriminated against by being refused full and equal enjoyment of medical treatment because of her disability. As proof that defendant intended to refuse to hire an interpreter in the future, and to discharge plaintiff, plaintiff submits defendant's own words in the February 22, 1993 letter to Ms. Ferrero. In addition, plaintiff provides the affidavit of her daughter Ms. Langston which states that defendant wanted plaintiff to bring an interpreter to future appointments. Plaintiff also points to a note written by defendant on plaintiff's chart, that defendant misunderstood the exact location of plaintiff's pain due to poor communication. Finally, plaintiff submits a note written by defendant which instructs plaintiff to see an ophthalmologist, and suggests that she "take someone with her who signs so you can explain problem & answer their questions completely."
The burden of proof shifts to defendant to prove that she did not refuse to hire an interpreter for plaintiff, nor did she refuse to treat plaintiff in the future. Defendant may attempt to show that an interpreter was not necessary to ensure effective communication with plaintiff during her medical appointments. Furthermore, places of public accommodation *1167 are exempt from complying with the ADA if they can demonstrate that taking such steps would fundamentally alter the nature of the services being offered, or would result in an undue burden. 42 U.S.C. § 12182(b)(2)(A)(iii). Defendant, however, admitted at her deposition that she could afford to pay Ms. Ferrero's fee for interpreter services.
Defendant maintains that her letter to Ms. Ferrero was a protest of the ADA, and that she could adequately communicate with plaintiff by passing notes back and forth. The issue is how far defendant was willing to take her protest. It is true that plaintiff did not ask defendant what she intended by her letter, but it is not implausible for plaintiff to believe that defendant meant her words literally. Plaintiff has submitted evidence which would tend to show that passing notes did not result in effective communication with defendant. Commentary by the Department of Justice states that "[i]t is not difficult to imagine a wide range of communications involving areas such as health, legal matters, and finances that would be sufficiently lengthy or complex to require an interpreter for effective communication." 28 CFR § 36.303, App. B.
Plaintiff has come forth with enough evidence to survive summary judgment on her ADA claim. Plaintiff, however, is not entitled to money damages under the ADA, which limits the remedies available to private individuals to those set forth in the Civil Rights Act of 1964, 42 U.S.C. § 2000a-3(a). 42 U.S.C. § 12188(a)(1). Such remedies include permanent or temporary injunctions and restraining orders. Only when the Attorney General becomes involved in the matter may the Court award monetary damages to aggrieved persons. 42 U.S.C. § 12188(b)(2)(B). Plaintiff is permitted to seek injunctive relief under the ADA, as well as attorneys fees. 42 U.S.C. §§ 12188(b)(2), 12205.
B. Rehabilitation Act of 1973
Defendant next seeks summary judgment on plaintiff's claim brought under the Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq. Subchapter V of the Act covers Rights and Advocacy, and § 504 specifically addresses nondiscrimination under federal grants and programs. 29 U.S.C. § 794. That section provides:
No otherwise qualified individual with a disability in the United States ... shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity conducted by any Executive agency ... 26 U.S.C. § 794.
To establish a prima facie violation of section 504, plaintiff must prove that: (1) she is a "handicapped person" under the Act; (2) she is "otherwise qualified" for participation in the program; (3) she is being excluded from participation in, being denied the benefits of, or being subjected to discrimination under the program solely by reason of her handicap; and (4) the relevant program or activity receives federal financial assistance. Doherty v. Southern College of Optometry, 862 F.2d 570, 573 (6th Cir.1988). In the present case, defendant concedes that Ms. Mayberry is a handicapped person for purposes of the Act, and that defendant's office receives federal funds. There is also no issue that plaintiff is otherwise qualified to receive medical treatment from defendant. In support of a finding that plaintiff has been denied future medical treatment solely by reason of her handicap, plaintiff sets forth enough evidence, principally the February 22, 1993 letter, to state a prima facie case. As discussed at length above, proof of discriminatory intent is not a separate element of stating a prima facie case. Defendant's motion for summary judgment on the Rehabilitation Act claim is DENIED.
C. Michigan Handicappers' Civil Rights Act
Defendant also seeks summary judgment on plaintiff's claim under the Michigan Handicappers' Civil Rights Act ("MHCRA"). M.C.L.A. § 37.1101 et seq. The Michigan Act guarantees full and equal utilization of public accommodations and services without discrimination because of a handicap. A public accommodation is defined in section 301 to include a health facility of any kind *1168 whose services are made available to the public, such as defendant's medical office. M.C.L.A. § 37.1301(a).
Article 3 of the MHCRA addresses places of public accommodation and public services, and provides that a person shall not:
(a) Deny an individual the full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of a place of public accommodation or public service because of a handicap that is unrelated to the individual's ability to utilize and benefit from the goods, services, facilities, privileges, advantages, or accommodations or because of the use by an individual of adaptive devices or aids. Section 302; M.C.L.A. § 37.1302.
Section 103 defines the term "handicap" as:
(i) A determinable physical or mental characteristic of an individual, which may result from disease, injury, congenital condition of birth, or functional disorder, if the characteristic:
(B) For purposes of article 3, is unrelated to the individual's ability to utilize and benefit from a place of public accommodation or public service. M.C.L.A. § 37.1103.
The phrase "unrelated to the individual's ability" is defined at § 103(l) as:
[W]ith or without accommodation, an individual's handicap does not prevent the individual from doing 1 or more of the following:
(ii) For purposes of article 3, utilizing and benefiting from a place of public accommodation or public service. (emphasis added).
Plaintiff must first show that she is handicapped pursuant to the definition in the MHCRA. Plaintiff must demonstrate that her handicap, i.e., her deafness, is unrelated to her ability to utilize and benefit from defendant's medical services. It is clear that, with the aid of a sign language interpreter, plaintiff can utilize and benefit from the medical services offered in defendant's office. Therefore, plaintiff is handicapped for purposes of the MHCRA.
The burden then shifts to defendant to show a legitimate, nondiscriminatory reason for her refusal to accommodate plaintiff, or that indeed plaintiff was never refused an accommodation in the first place. Crittenden v. Chrysler Corp., 178 Mich.App. 324, 331, 443 N.W.2d 412 (1989). In this case, defendant sent a letter to the interpreter, a copy of which letter was also sent to plaintiff, stating that she could not afford to treat plaintiff in the future. As discussed above, there is ample evidence to establish an issue of fact whether defendant intended to discriminate against plaintiff and withhold future accommodation, or was merely protesting her duty to accommodate handicapped patients. Defendant's motion for summary judgment on plaintiff's claim under the MHCRA is therefore DENIED.
Defendant's motion for summary judgment is DENIED in its entirety.
So Ordered.
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768 P.2d 359 (1988)
ENTERPRISE MANAGEMENT CONSULTANTS, INC., An Oklahoma Corporation; John Clark Caldwell, III, Leroy Wheeler and Buster F. Wilburn, Appellants,
v.
The STATE of Oklahoma ex rel. the OKLAHOMA TAX COMMISSION, Appellee.
No. 66708.
Supreme Court of Oklahoma.
July 19, 1988.
Rehearing Granted in Part and Denied in Part February 7, 1989.
David W. Edmonds, Randy Witzke, Messrs. Edmonds, Cole, Hargrave & Givens, Oklahoma City, for appellants.
J. Lawrence Blankenship, General Counsel, Oklahoma Tax Com'n, Robert C. Jenkins, Oklahoma City, for appellee.
*360 OPALA, Justice.
Enterprise Management Consultants, Inc., and its officers and directors [collectively referred to as EMCI] bring this appeal from an Oklahoma Tax Commission [OTC or Commission] order that denied their protest of a sales tax on the revenues from bingo games and food concession sales. EMCI conducted these games pursuant to its contracts with the Citizen Band Potawatomi Tribe of Oklahoma [Tribe] on land held in trust by the United States for the Tribe's benefit.[1] Three issues are presented for our decision: [1] Is EMCI the Tribe's agent and hence immune from liability for the collection and remittance of sales tax on revenues from the bingo and concession activities? [2] Is the imposition of a sales tax on such revenues an unconstitutional infringement upon tribal self-government? and [3] Is a tax on bingo activities on tribal land preempted by federal law? We answer the first question in the negative because EMCI has failed to prove that it was the Tribe's agent in regard to the bingo operation and we deem such question dispositive of this appeal. We, thus, have determined it is unnecessary for us to decide the second and third issues presented and we decline to do so.
FACTS
EMCI is a non-Indian corporation that conducted bingo games and food concession sales on tribal lands. This operation was governed by three business agreements between the Tribe and EMCI a management agreement,[2] a lease and a sublease. These agreements state that *361 EMCI was responsible for the construction and maintenance of the bingo facilities and for the operation of the bingo games. The management agreement referred to the Tribe as "principal" and EMCI as "agent." It guaranteed the Tribe a minimum payment each month, plus a small percentage of the gross profits from the games and food concession revenues.[3] "Gross profits" were to be computed as "less and subtracting taxes."[4] EMCI was responsible for the operating expenses but not the taxes.[5] Taxes defined in this contract were to include state sales tax.[6]
Following OTC's audit of EMCI's records, state and city sales taxes were assessed on unreported sales. EMCI's timely protect was denied initially by an administrative law judge and then by the OTC en banc. The OTC determined that EMCI's bingo operation and food concession sales on the tribal land constituted a "sale"[7] and that EMCI was a "vendor"[8] within the meaning of the Oklahoma Sales Tax Code [Code].[9] The Commission based this conclusion upon its findings that EMCI was not the Tribe's agent because the Tribe lacked control over EMCI; EMCI held itself out as operator of the bingo games; and the Tribe received only a small portion of the profits. The OTC also ruled that its assessment on the bingo revenues was a tax imposed on the consumer which is to be collected by the vendor, EMCI.
*362 PRINCIPAL/AGENT STATUS
EMCI asserts that it is not liable for the tax because under the terms of the management agreement it is the Tribe's agent in the operation of the bingo games and food concessions. It directs us to various provisions in these agreements to support its theory of agency status. The Commission argues to the contrary that these documents fail to establish EMCI's claimed legal position vis-a-vis the Tribe.
The law does not presume an agency status is present. The burden of proving the existence, nature and extent of the agency relationship rests ordinarily upon the party who asserts it.[10] EMCI must not only meet this burden, but, as a protesting taxpayer, it also must sustain the burden of proving the tax assessment was erroneous.[11] Neither of these responsibilities was met here.
A written contract which leaves the parties' true status in doubt may not be accepted as conclusive of agency status. Status is determined from the facts and the interaction of the parties one vis-a-vis the other.[12] If the facts show control by the principal, then agency can be established regardless of the labels attached by the contract.[13] EMCI had an opportunity at the Commission hearings to establish its agency status dehors the written arrangements with the tribe but it failed to do so. No testimony was presented at the hearings relating to the parties' conduct. The evidence focused mainly on the three contractual agreements between EMCI and the Tribe.[14] These documents do not establish that the essential characteristics of an agency relationship were present i.e. that EMCI owed a fiduciary duty to the Tribe and had agreed to be subject to its control.[15]
*363 In short, the taxpayer/EMCI must bear here a double burden to establish agency and to demonstrate the tax was erroneous. EMCI did not sustain its onus when it showed merely the contractual arrangements with the Tribe. The writings by themselves fail to establish agency; they leave the precise legal status in a clouded or inconclusive state. The contractual arrangements reveal no more than amorphous notions compatible both with franchisor-franchisee or an independent contractor relation. EMCI needed to go one step further and show that the factual interaction revealed an agency relation. This could have been done by demonstrating the Tribe's control in two important areas control over the finances of the bingo operation and the Tribe's exclusive control of the revenue collected from the bingo and concession sales. Because there is no evidence in this record dehors the inconclusive written arrangements to prove EMCI's status as the Tribe's agent, we must hold that EMCI has failed to show that it was the Tribe's agent in the operation of the bingo games and concession sales.[16]
*364 EMCI also disclaims any liability for the payment of the sales tax because its written agreement with the Tribe releases it from that responsibility. This argument is without merit. The incidence of the tax on revenue from bingo activities cannot be governed by private arrangement; rather, it is exacted by law. People who take funds that are subject to tax are responsible to the government for its payment regardless of any private arrangement to the contrary.[17] The agreements under review do not indicate who is responsible for the payment of taxes; there is merely a provision which attempts to immunize EMCI from that liability.[18] The tax was assessed against EMCI because it was a "vendor" rather than "agent" in the conduct of the bingo games in question and collected the revenues from that activity. There is nothing in the record to indicate that the Tribe had exclusive control of these revenues. In short, because EMCI failed to establish its agency status vis-a-vis the Tribe, it cannot be exonerated by its written agreement with the Tribe from the incidence of the tax which falls as a matter of law. We hence conclude that EMCI has not met its burden of proving that the assessment was erroneously made.
Affirmed.
DOOLIN, C.J., and LAVENDER, SIMMS, KAUGER and SUMMERS, JJ., concur.
HODGES, J., dissents.
HARGRAVE, V.C.J., disqualified.
KAUGER, Justice, with whom OPALA, Justice, joins, concurring:
Perhaps the most basic principle of all Indian law, supported by a host of decisions, is that those powers which are vested in an Indian tribe are not, in general, delegated powers granted by express acts of Congress. Rather, these are inherent powers of a limited sovereignty which have never been extinguished what is not expressly limited remains within the domain of tribal sovereignty.[1] Native American Tribes, thus, continue to occupy a distinct and unique legal/political status with the federal government of this country, which predates the formation and union of the States. This special relationship, from which states are excluded absent congressional consent, is rooted in the United States Constitution at Article 1, Sec. 8, cl. 3:
"The Congress shall have Power ...; To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;"
Such constitutional power over Indians and their lands, exercised by Congress, has been characterized as plenary, exclusive, *365 and complete.[2] While a tribe by inaction or through inadvertant omission may limit the scope and exercise of its own tribal powers, only Congress can limit modify, eliminate or expand the powers of local self government which tribes otherwise possess. States are without power to do so unless Congress exhibits a clear intention to terminate tribal sovereign immunity within the proscriptions of a particular stated prupose.[3]
Consistent with Congress' plenary role with respect to Indians and their lands, the Enabling Act of the State of Oklahoma in its recitation of the conditions of statehood, prohibits limiting or impairing rights of persons or property associated with Indians. It provides:
"That the inhabitants of all that part of the area of the United States now constituting the Territory of Oklahoma and the Indian Territory, as at present described, may adopt a constitution and become the State of Oklahoma, as hereinafter provided: Provided, that nothing contained in the said constitution shall be construed to limit or impair the rights of persons of property pertaining to the Indians of said Territories (so long as such rights shall remain unextinguished) or to limit or affect the authority of the Government of the United States to make any law or regulation respecting such Indians, their lands, property or other rights by treaties, agreement, law or otherwise, which it could have been competent to make if this Act had never passed."
Oklahoma has not amended the Constitution, nor has it complied with the conditions of any federal law to invoke jurisdiction over Indian tribes in contradiction to its Enabling Act.
In 1953, Congress manifested a conditional intent to permit states to assume civil and criminal jurisdiction by the passage of P.L. 280.[4] The Act required some states, including California, Nebraska, Oregon and Wisconsin, to assume mandatory jurisdiction over Indian Tribes.[5] However, *366 other states, including Oklahoma, whose Enabling Acts contained Indian restrictions, required the people of the state to either amend State Constitutions or statutes to remove the impediment. (States which did not have such restrictions were required to give consent by affirmative legislative action. This Section of P.L. 280 was repealed in 1968.)[6] I concur with the majority that California v. Cabazon Bank of Mission Indians, 480 U.S. 202, 107 S.Ct. 1083, 94 L.Ed.2d 244 (1986), is not controlling because Oklahoma is not a P.L. 280 state. Therefore, there is no distinction between tribal lands or Indian reservations. Indian Country is Indian Country.
Even assuming that a state constitutional amendment were not necessary the alleged assumption of jurisdiction by individual law enforcement officers and court officials does not constitute a binding exercise of jurisdiction. The states must by affirmative political action express the willingness and the ability to discharge responsibilities in order to make effective the assumption of jurisdiction.[7]
In Williams v. Lee, 358 U.S. 217, 222, 79 S.Ct. 269, 271, 3 L.Ed.2d 251 (1959), the Court stated that Congress had expressed its willingness to have states assume jurisdiction over reservation Indians if the state legislature or the people had voted affirmatively to accept such responsibility. It found that Arizona was a disclaimer state because of a provision in its Enabling Act, and that Arizona had not affirmatively accepted jurisdiction. Oklahoma is in the identical situation thus far no one with the power and authority has accepted jurisdiction. The Court speculated that the most likely reason for the failure of the people of Arizona to accept jurisdiction was the anticipated burdens accompanying such power.
Conversely, it may be that the disclaimer states have recognized the opportunity for economic development which is offered by locating free trade zones on tribal land, and by acknowledging the beneficial ramifications of cooperation between the states and the sovereign tribes and nations.[8] On May 12, 1988, the Oklahoma Legislature enacted S.B. No. 210, which will be codified as 74 O.S.Supp. 1988 §§ 1221, 1222. Subsections (A), (B), and (C) of § 1221 provide:
A. The State of Oklahoma acknowledges federal recognition of Indian Tribes recognized by the Department of Interior, Bureau of Indian Affairs.
B. The State of Oklahoma recognizes the unique status of Indian Tribes within the federal government and shall work in a spirit of cooperation with all federally recognized Indian Tribes in furtherance of federal policy for the benefit of both the State of Oklahoma and Tribal Governments.
C. The Governor, or his named designee, is authorized to negotiate and enter into cooperative agreements on behalf of this state with federally recognized Indian Tribal Governments within this state to address issues of mutual interest. Such agreements shall become effective upon approval by the Joint Committee on *367 State-Tribal Relations and the Secretary of the Interior or his designee.
I write to express my separate views because in my opinion, the focus on the status of principal-agent is not the controlling factor. Commerce, in the constitutional sense, includes bingo operations because it includes not only traditional commercial dealings, but also intercourse and traffic between the citizens of the United States and the Tribes, in all its branches, the transportation of persons and property for that purpose, as well as the traditional purchase, sale, and exchange of goods, commodities, and services.[9] The determinative issue is whether this activity is a legally constituted tribal enterprise. If it is the activity is exempt from taxation. A tribal enterprise may be proven by meeting these criteria:
1) Tribal retention of full ownership rights over the land and facility;
2) Ultimate control over the bingo activities;
3) Development of the bingo enterprise by the Tribe;
4) Benefits accruing to the Tribe in the form of profits and employment;
5) Approval of the management contract by the Bureau of Indian Affairs if the tribal charter, constitution or by-laws so provides.[10]
Tribal initiative and managerial decision making result in a more effective implementation of tribal enterprises, and consequently, Indian self determination. A Tribe may fully comply with the stated criteria for exemption by incorporating. The BIA is authorized to issue a charter of incorporation to any tribe applying. The charter conveys comprehensive power to manage and dispose of tribal property subject to the proviso that tribal land within the limits of the reservation may not be leased for periods exceeding ten years. The charter may or may not provide for departmental approval of tribal leases.[11] If the charter does not provide for approval the only limitation is the ten year limit on leasing tribal property. Most charters provide for a trial period during which all tribal leases are subject to departmental approval; this supervision terminates automatically after a specified period.[12] The record does not disclose whether the Pottawatamies are incorporated, and an independent search of documents of which we may take judicial notice[13] does not reveal a corporate charter. Apparently, the tribe is not incorporated and must have the Congressionally mandated BIA approval for all contracts. If this be the case, the management agreement was null and void and *368 thwarted the legal consummation of the attempted tribal enterprise.[14]
The tribe complied with some of the necessary guidelines. It retained the ownership rights over the land and it could purchase the improvements made by EMCI. The tribe received 35% of the bingo profits and 15% of the concessions with a guaranteed monthly income of $10,000.00 a month. Nevertheless, pervasive problems exist which dictate taxation by the state of Oklahoma:
1) EMCI leased the land from the tribe for $12,000.00 a year and subleased the land back to the tribe for $1.00 a year. (Although these leases were approved by the BIA, the management contract was not and BIA approval was required because apparently the tribe had not incorporated.)
2) There is no evidence in the record that the tribe is involved in the control of the bingo activities, e.g. gaming ordinances.
3) The management agreement required ECMI to purchase an annual license from the tribe to conduct bingo games. Neither testimony nor a license was presented to support this one factor of control.
Tribes must effectively assume the substantial responsibilities involved in securing and maintaining a tribal enterprise. Apparently, from the evidence presented, the Tribe abdicated its right to control bingo activities, or to participate in the development of the enterprise. Nor did it obtain the necessary BIA approval to meet the federal standards. Had these elements been met, this activity could constitute a legitimate tribal enterprise and thus invoke tribal immunity from state taxation. Here, the tribal limitation was due more to the omission or oversight of the tribe to follow the Congressional directive, than by federal limitation of power.
Current federal policy is to encourage and foster tribal self-government and to promote economic development.[15] Tribal bingo games have been recognized as one way to support this policy. The Department of Interior has sought to implement these policies by making grants and guaranteed loans to construct bingo facilities, approve tribal ordinances establishing and regulating the gaming activities involved, and by reviewing tribal bingo management contracts under 25 U.S.C. § 81. The Department of Housing and Urban Development and the Department of Health and Human Services also has provided financial assistance to develop tribal gaming enterprises.[16] These policies and actions demonstrate the federal government's approval and promotion of very strong tribal and federal interest in bingo enterprises.
In Montana v. Blackfeet Tribe, 471 U.S. 759, 765, 105 S.Ct. 2399, 2403, 85 L.Ed.2d 753, 758-59 (1985), the United States Supreme Court held that Montana could not tax the Tribe's royalty interests in oil and gas leases issued to non-Indian lessees under the Indian Mineral Leasing Act of 1938. The Court stated:
*369 "In keeping with its plenary authority over Indian affairs, Congress can authorize the imposition of state taxes on Indian tribes and individual Indians. It has not done so often, and the Court consistently has held that it will find the Indians' exemption from state taxes lifted only when Congress has made its intention to do so unmistakably clear."
The United States Supreme Court acknowledged that the federal practice of enforcing tribal immunity from state taxation is very strong, while the corresponding state interest is weak.[17] Here, the Tribe did not meet the requirements for establishing a tribal enterprise.
However, the federal and tribal interests would outweigh the state's interest of taxation had the Pottawatomies complied with the controlling criteria for tax exemption. The majority opinion should not be construed to foreclose exemption from state taxation insofar as tribal bingo enterprises are concerned and it should be limited to the narrow facts of this case.
NOTES
[1] The land was conveyed to the Tribe by Pub.L. 86-701, 74 Stat. 903 [1960]. It was reconveyed to the United States in trust for the Tribe to allow the Tribe to qualify for funding under the Economic Development Act. S.Rep. No. 93-877, 93d Cong., 2d Sess. [1974].
[2] The management agreement's pertinent provisions include the following text:
"This AGREEMENT ... by and between the Citizen Band Potawatomi Tribe of Oklahoma ... (hereinafter referred to as PRINCIPAL) ... and Enterprise Management Consultants, Inc ... . (hereinafter referred to as AGENT) ...
1. Definitions.
* * * * * *
B. `Gross Profit from Game Sales', as used herein, means all revenues derived from the sale of bingo cards, as well as all revenue derived from any other game or games of chance, less and subtracting therefrom payouts, taxes and bank.
C. `Gross Profit from Food Concession Sales', as used herein, means all revenue derived from the sale of food items, beverages, souvenirs or of any other merchandise, less and subtracting taxes.
D. `Payouts', as used herein, means the money value of the prize of the game given, at the conclusion of each game played, to the winning player or players, whether paid in cash or the actual sum paid for merchandise.
E. `Bank', as used herein, means a sum of money advanced by AGENT for the sole purpose of making change to accommodate customers.
F. `Taxes', as used herein, means any tax imposed on game or food concession sales or both, including without limitation license fees, permit fees, sales tax, excise tax or any other tax imposed on said operation or the realty by the government of the United States of America, the State of Oklahoma, the City of Shawnee or Pottawatomie County; but, specifically excluding income taxes.
* * * * * *
8. Operating expenses. AGENT shall be responsible for the payment of all operating expenses incurred with the construction and management of said Bingo and Food Concession Operation, as well as the cost to maintain said building improvements and the contents therein contained, except as to the payment of taxes as hereinabove defined.
* * * * * *
11. Profit to Principal. PRINCIPAL shall be entitled to thirty-five percent (35%) of Gross Profits from Game Sales and fifteen percent (15%) of Gross Profits from Food Concession Sales.
12. Guarantee to PRINCIPAL In consideration of such appointment, AGENT guarantees to PRINCIPAL $120,000.00 per annum for the first year of operation which sum is to be paid in advance in monthly installments of $10,000.00 each on or before the first day of each month as an accumulative credit against PRINCIPAL's Gross Profit from Game Sales, whereby in those months that said AGENT'S guarantee exceeds PRINCIPAL'S Gross Profit from Game Sales, such excess will be credited on behalf of AGENT against those months when said PRINCIPAL'S Gross Profit from Game Sales exceeds said AGENT'S monthly guarantee. Said adjustment, if any, shall be accomplished at the end of the first year, and shall not exceed $10,000.00. Further and in the event PRINCIPAL'S monthly Gross Profit from Game Sales for any given month exceeds said AGENTS guarantee, then, AGENT shall disburse to PRINCIPAL such excess on or before the 15th day of the following month. During the second year and thereafter, said guarantee shall be $10,000.00 per month, payable in advance on the first day of the month, or PRINCIPAL'S Gross Profit participation, as set forth in paragraph 11 hereof, whichever is greater. Further, should PRINCIPAL'S Gross Profit participation be greater, then such excess above the monthly guarantee shall be disbursed to PRINCIPAL on or before the 15th day of the following month. In addition, said AGENTS first monthly guaranteed payment shall be paid on or before the Commencement Date... .
* * * * * *
18. License Fee. In addition other sums due hereunder, AGENT shall purchase from PRINCIPAL an Annual License, at a cost not to exceed $100.00, which permits AGENT to conduct said Bingo and Food Concession Operation, according to the proposed Regulations of PRINCIPAL.
19. Counting of Gross Receipts. Counting of Gross Receipts resulting from said Bingo and Food Concession Operation shall be jointly done on a daily basis at the close of business by representatives of both PRINCIPAL and AGENT. Said counting agents of both PRINCIPAL and AGENT shall agree, in writing, prior to their employment, to submit to a polygraph test as required by PRINCIPAL AND AGENT, the cost of which shall be shared by the parties hereto on an equal basis.
20. Accounting Records. AGENT shall maintain accounting records of said Bingo and Food Concession Operation in accordance with accepted accounting methods. Said accounting records shall be kept at AGENT'S principal office, and PRINCIPAL shall have, upon five (5) days advance written notice, the right to inspect and examine said accounting records during normal business hours. Such right may be exercised through an agent, employee or independent certified public accountant designated by PRINCIPAL, all at PRINCIPAL'S sole cost. * * *"
[3] See paragraphs 11 and 12 of the Management Agreement, supra note 2.
[4] See paragraphs 1(B) and (C) of the Management Agreement, supra note 2.
[5] See paragraph 8 of the Management Agreement, supra note 2.
[6] See paragraph 1(F) of the Management Agreement, supra note 2.
[7] 68 O.S.Supp. 1985 §§ 1352(L) and 1354. The 1987 amendment of these sections (Okl.Sess.L. 1987, Ch. 213, § 1 pgs. 1282 and 1289 and Ch. 113, § 16, pg. 438) did not change the pertinent provisions under review in this case.
[8] 68 O.S.Supp. 1985 §§ 1352(R) and 1361. See footnote 17 infra for the pertinent text of §§ 1352(R) and 1361. Section 1352's amendment in 1987 (Okl.Sess.L. 1987, Ch. 213, § 1, pgs. 1282 and 1289) did not change the pertinent provisions under review in this case.
[9] 68 O.S. 1981 §§ 1350 et seq.
[10] Coe v. Esau, Okl., 377 P.2d 815, 818 [1963]. In resolving the issue whether a gas station operator is the agent of his lessor, the court held that the law makes no presumption of agency. The burden of proving the existence, nature and extent of the agency relationship rests on the party alleging it. See also, Sturm v. Green, Okl., 398 P.2d 799, 804 [1965].
[11] Bert Smith Road Mach. Co. v. Okl. Tax Commission, Okl., 563 P.2d 641, 643 [1977] (the taxpayer who appealed from the sales tax assessment had the burden of proving the property sold came within a statutory exemption from the tax); Continental Oil Co. v. Okl. State Bd. Etc., Okl., 570 P.2d 315, 317 [1977] (the taxpayer had the burden to provide the Board of Equalization with sufficient evidence to determine whether it was entitled to a tax adjustment). See also Appeal of Billings Community Elevator, Inc., Okl., 510 P.2d 953, 956 [1973] (in a district court trial de novo on appeal from a county equalization board's decision, the burden of proof is on the taxpayer who is seeking affirmative relief).
[12] The labels used in the contracts do not alone determine whether parties litigant stand vis-a-vis one another in a principal-agent relation. The parties' status is revealed by considering the intent and effect of the contractual language in conjunction with the parties' actual conduct. See Hinson v. Cameron, Okl., 742 P.2d 549, 557 n. 32 [1987] (a principal/agent relationship is determined by the parties' status which is found from surrounding facts and is not dictated by the contract; in the event of a discrepancy, facts control over contrary contractual language); Brewer v. Bama Pie, Inc., Okl., 390 P.2d 500, 502 [1964] (the status of one who seeks to establish himself as an employee against the contention that he was an independent contractor is not determined from the written contract alone but from all the facts and circumstances presented by the evidence) and Brown v. Burkett, Okl., 755 P.2d 650, [1988] (involuntary employer status will not be imputed absent substantive proof that the master-servant relationship exists).
[13] A central factor in determining the existence of an agency relationship is a right of control vested in the principal. See Smith v. St. Francis Hosp., Inc., Okl.App., 676 P.2d 279, 281 [1983]. In deciding whether an emergency room doctor was an employee/agent of the hospital the appellate court looked to the Restatement (Second) of Agency § 1 to define the principal-agent status as:
"a fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." [Emphasis added.]
Smith, supra, at 281. See Appleby v. Kewanee Oil Company, 279 F.2d 334, 336 [10th Cir.1960]. The essence of an agency relation is the right of the principal to give directions that the agent is under a duty to obey as long as he remains the agent. The agent should act in the principal's interest and at his control.
[14] The evidence presented by EMCI was limited to the management agreement, the lease and sublease, two advertising fliers and the Tribe's Constitution.
[15] See discussion in footnote 13 supra.
The management agreement between EMCI and the Tribe resembles a franchise agreement in some respects, e.g. a minimum profit is guaranteed to the Tribe and a license is issued by the Tribe to EMCI, but the contract lacks the detailed assertion of control which may make a franchise agreement the source of an agency relationship. Compare Drexel v. Union Prescription Centers, Inc., 582 F.2d 781, 789 [3d Cir.1978] (the franchisor retained broad discretionary power to impose upon its franchisee virtually any regulation it desired which raised a potential agency relationship); Taylor v. Checkrite, Ltd., 627 F. Supp. 415, 417 [S.D.Ohio 1986] (the franchisor retained the right to exercise complete control over its franchisee's business operations which created an agency status); Singleton v. International Dairy Queen, Inc., 332 A.2d 160, 163 [Del. Super. Ct. 1975] (the franchisor's control over virtually every aspect of its franchisee's business gave rise to possibility of an agency relationship) with Oberlin v. Marlin American Corp., 596 F.2d 1322, 1326-27 [7th Cir.1979] (there was no agency relationship because control was not constant or detailed but limited to a discrete area); Broock v. Nutri/System, Inc., 654 F. Supp. 7, 9 [S.D.Ohio 1986] (agency status was not present where the franchisor had only a one-time veto power over its franchisee rather than a continuing right to control and franchisor's directions were advisory, not mandatory); Thiokol Chemical Corporation v. Peterson, 15 Utah 2d 355, 393 P.2d 391, 394 [1964] (agency status is not present where the contract's intent is to require the party to pursue its own course of operation to achieve the end result desired by the second party).
[16] This controversy is distinguishable from a recent federal court case in which the Indian Tribe and the corporate/manager of the tribe's bingo enterprise sought declaratory and injunctive relief against the State of Oklahoma to prevent enforcement of state bingo regulations and remittance of state sales taxes on bingo activity sales. See Indian Country, U.S.A. v. Oklahoma Tax Com'n, 829 F.2d 967 [10th Cir.1987]. In Indian Country, U.S.A. both the Creek Nation and its manager (a non-Indian corporate entity) were parties to the suit. The court found ample evidence in the record to support the conclusion that the bingo operation was a tribal enterprise: (1) the bingo enterprise was "owned, governed and controlled" by the Creek Nation; (2) it was established by the Creek National Council and controlled and supervised by the Muscogee (Creek) Public Gaming Commissioner; (3) the Creek Nation retained ultimate control over the bingo activities; (4) the Creek Nation developed the bingo enterprise for the benefit of the tribe; and (5) there was testimony that the Tribe benefitted in the form of employment. The court concluded that the tribal enterprise was immune from state regulation and that this immunity extended to the non-Indian corporate manager. The court therefore did not need to deal with the issue of whether the non-Indian manager had established an agency relationship vis-a-vis the Tribe. In the present case, we do not have any evidence as to the degree or extent of the Tribe's involvement in the bingo operation. There are only contract provisions and advertising flyers which, at most, indicate the bingo games are to be conducted in the Tribe's name. The contracts do not identify the bingo operation as a tribal enterprise. Furthermore, assuming Justice Kauger is correct in her concurring opinion that the focus on the status of principal-agent is not the controlling factor, but that the focus is on whether the existence of a tribal enterprise is established, and that a tribal enterprise would be exempt from the sales tax assessment in this case under the analysis found in Indian Country, U.S.A. or under the recent decision of the United States Supreme Court in California v. Cabazon Band of Mission Indians, 480 U.S. 202, 107 S.Ct. 1083, 94 L.Ed.2d 244 (1986) we believe, as with the question of agency, that EMCI failed to prove the operation was a tribal enterprise for the reasons disclosed in that part of Justice Kauger's concurring opinion, which begins with the first full paragraph at page 368, column 1, and ends at the conclusion of the first paragraph in column 2 of that page. Of course, we note that California v. Cabazon, etc. would not be directly applicable here in regard to its analysis or discussion of the applicability of P.L. 280 primarily for the reason OTC does not rely on that federal statute as its basis for the propriety of taxation here. See Justice Kauger's concurring opinion for a discussion of the history of P.L. 280.
[17] Section 1361 infra of the Oklahoma Sales Tax Code specifically provides that the vendor has the duty to collect and remit the sales tax. This duty cannot be avoided by contrary contract provisions. See United States v. United States Cartridge Co., 198 F.2d 456, 464 [8th Cir.1952]. The pertinent terms of 68 O.S.Supp. 1986 § 1361 provide:
"(A) The tax levied by this article shall be paid by the consumer or user to the vendor as trustee for and on account of this state. Each and every vendor in this state shall collect from the consumer or user the full amount of the tax levied... . Every person required to collect any tax imposed by this article, and in the case of a corporation, each principal officer thereof, shall be personally liable for said tax. * * *" [Emphasis added.]
The definition of "vendor" is found in 68 O.S. Supp. 1987 § 1352(R). Its pertinent terms provide:
"`Vendor' shall mean and include:
(1) Any person making sales of tangible personal property or services in this state, the gross receipts or gross proceeds from which are taxed by this article; * * *." [Emphasis added.]
[18] See paragraph 8 of the Management Agreement, supra note 2.
[1] F. Cohen, Handbook of Federal Indian Law, Chapter 7, p. 122 (1986); B. Pipestem and G. Rice, "The Mythology of the Oklahoma Indians: A Survey of the Legal Status of Indian Tribes in Oklahoma," 6 American Indian L.Rev. 259 (1978).
[2] Talton v. Mayes, 163 U.S. 376, 380, 16 S.Ct. 986, 988, 41 L.Ed. 196-97 (1896).
[3] Bryan v. Itasca County, 426 U.S. 373, 392, 96 S.Ct. 2102, 3112, 48 L.Ed.2d 710 (1976).
[4] Section 2 of P.L. 280, 18 U.S.C. § 1162 (1953) provides:
"Sec. 2. Title 18, United States Code, is hereby amended by inserting in chapter 53 thereof immediately after section 1161 a new section, to be designated as section 1162, as follows: § 1162. State jurisdiction over offenses committed by or against Indians in the Indian country
(a) Each of the States listed in the following table shall have jurisdiction over offenses committed by or against Indians in the areas of Indian country listed opposite the name of the State to the same extent that such State has jurisdiction over offenses committed elsewhere within the State, and the criminal laws of such State shall have the same force and effect within such Indian country as they have elsewhere within the State:
State of Indian country affected
California......All Indian country within the
State
Minnesota.......All Indian country within the
State except the Red Lake
Reservation
Nebraska........All Indian country within the
State
Oregon .........All Indian country within the
State, except the Warm Springs
Reservation
Wisconsin.......All Indian country within the
State, except the Menominee
Reservation
(b) Nothing in this section shall authorize the alienation, encumbrance, or taxation of any real or personal property, including water rights, belonging to any Indian or any Indian tribe, band, or community that is held in trust by the United States or is subject to a restriction against alienation imposed by the United States; or shall authorize regulation of the use of such property in a manner inconsistent with any Federal treaty, agreement, or statute or with any regulation made pursuant thereto; or shall deprive any Indian or any Indian tribe, band, or community of any right, privilege, or immunity afforded under Federal treaty, agreement, or statute with respect to hunting, trapping, or fishing or the control, licensing, or regulation thereof.
(c) The provisions of sections 1152 and 1153 of this chapter shall not be applicable within the areas of Indian country listed in subsection (a) of this section."
[5] Section 6 of Pub.L. 280, 67 Stat. 590 (1953), states:
"Notwithstanding the provisions of any Enabling Act for the admission of a State, the consent of the United States is hereby given to the people of any State to amend, where necessary, their State constitution or existing statutes, as the case may be, to remove any legal impediment to the assumption of civil and criminal jurisdiction in accordance with the provisions of this Act: Provided, That the provisions of this Act shall not become effective with respect to such assumption of jurisdiction by any such State until the people thereof have appropriately amended their State constitution or statutes as the case may be."
[6] Title 25 U.S.C. § 1323 (1983) provides:
"(a) The United States is authorized to accept a retrocession by any State of all or any measure of the criminal or civil jurisdiction, or both, acquired by such State pursuant to the provisions of section 1162 of Title 18, section 1360 of Title 28, or section 7 of the Act of August 15, 1953 (67 Stat. 588), as it was in effect prior to its repeal by subsection (b) of this section.
(b) Section 7 of the Act of August 15, 1953 (67 Stat. 588), is hereby repealed, but such repeal shall not affect any cession of jurisdiction made pursuant to such section prior to its repeal."
[7] Kennerly v. District Court of Montana, 400 U.S. 423, 427, 91 S.Ct. 480, 482, 27 L.Ed.2d 507, 511 (1971).
[8] See S.B. 210 (May 12, 1988); Walker, "Report to the Oklahoma Department of Commerce Cultural Diversity and Economic Development Task Force," The Sovereignty Symposium, § 3, p. 7 (1988).
[9] Philadelphia v. New Jersey, 437 U.S. 617, 622, 98 S.Ct. 2531, 2534, 57 L.Ed.2d 475 (1978).
[10] Indian Country, U.S.A. v. Oklahoma Tax Comm'n, 829 F.2d 967, 982-83 (10th Cir.1987). See also, Pipestem, "The Mythology of the Oklahoma Indians Revisited: A Survey of the Legal Status of Indian Tribes in Oklahoma Ten Years Later," The First Annual Sovereignty Symposium, § VI, p. 60 (1988).
[11] Title 25 U.S.C. § 503 (1936) provides:
"Any recognized tribe or band of Indians residing in Oklahoma shall have the right to organize for its common welfare and to adopt a constitution and bylaws, under such rules and regulations as the Secretary of the Interior may prescribe. The Secretary of the Interior may issue to any such organized group a charter of incorporation, which shall become operative when ratified by a majority vote of the adult members of the organization voting: Provided, however, That such election shall be void unless the total vote cast be at least 30 per centum of those entitled to vote. Such charter; may convey to the incorporated group, in addition to any powers which may properly be vested in a body corporate under the laws of the State of Oklahoma, the right to participate in the revolving credit fund and to enjoy any other rights or privileges secured to an organized Indian tribe under sections 461, 462, 463, 646, 645, 466 to 470, 471 to 473, 474, 475, 476 to 478, and 479 of this title: Provided, That the corporate funds of any such chartered group may be deposited in any national bank within the State of Oklahoma or otherwise invested, utilized, or disbursed in accordance with the terms of the corporate charter."
See also, F. Cohen, Handbook of Federal Indian Law, Chapter 15, p. 287, 329 (1986).
[12] F. Cohen, Handbook of Federal Indian Law, id.
[13] Title 12 O.S. 1981 § 2201 which provides in pertinent part:
"Judicial notice shall be taken by the court of the common law, constitutions and public statutes in force in every state, territory and jurisdiction of the United States."
[14] Title 25 U.S.C. § 81 provides in pertinent part:
"No agreement shall be made by any person with any tribe of Indians, or individual Indians not citizens of the United States, for the payment or delivery of any money or other thing of value, in present or in prospective, or for the granting or procuring any privilege to him, or any other person in consideration of services for said Indians relative to their lands, or to any claims growing out of, or in reference to, annuities, installments or other monies, claims, demands, or thing, under laws or treaties with the United States, or official acts of any officers thereof, or in any way connected with or due from the United States, unless such contract or agreement be executed and approved as follows: ...
(2) It shall bear the approval of the Secretary of the Interior and the Commissioner of Indian Affairs endorsed upon it... .
All contracts or agreements made in violation of this section shall be null and void."
[15] New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 334-35, 103 S.Ct. 2378, 2386-87, 76 L.Ed.2d 611, 620 (1983); Cabazon Band v. County of Riverside, 783 F.2d 900, 904 (9th Cir.1986).
[16] California v. Cabazon Band of Mission Indians, 480 U.S. 202, ___, 107 S.Ct. 1083, 1092-93, 94 L.Ed.2d 244, 253 (1987); Cabazon Band v. County of Riverside, see note 15, supra; Mashantucket Pequot Tribe v. McGuigan, 626 F. Supp. 245-46 (Conn. 1986). See also S.Rep. No. 99-493, p. 5 (1986) and H.R.Rep. No. 99-488, p. 10 (1986).
[17] California v. Cabazon Band of Mission Indians, see note 16, 107 S.Ct. at p. 1091, supra.
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ACCEPTED
01-15-00326-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
12/21/2015 3:00:20 PM
CHRISTOPHER PRINE
CLERK
No. 01-15-00326-CV
_____________________________________________________________
FILED IN
IN THE COURT OF APPEALS 1st COURT OF APPEALS
HOUSTON, TEXAS
FIRST DISTRICT OF TEXAS
12/21/2015 3:00:20 PM
HOUSTON, TEXAS CHRISTOPHER A. PRINE
_____________________________________________________________
Clerk
DON ABBOTT HOLMES, GAYLE EISLER HOLMES,
and the COMMUNITY PROPERTY ESTATE OF
DON ABBOTT HOLMES and GAYLE EISLER HOLMES,
Appellants,
v.
JETALL COMPANIES, INC.,
Appellee.
On Appeal from the 127th District Court
Harris County, Texas
CORRECTED BRIEF AND APPENDIX OF APPELLANTS
Geoffrey Berg Martin J. Siegel
Texas Bar No. 00793330 Texas Bar No. 18342125
BERG FELDMAN JOHNSON LAW OFFICES OF
BELL, LLP MARTIN J. SIEGEL, P.C.
4203 Montrose Blvd., Suite 150 2222 Dunstan Road
Houston, Texas 77006 Houston, Texas 77005
Telephone: (713) 526-0200 Telephone: (281) 772-4568
[email protected] [email protected]
Attorneys for Appellants
Oral Argument Requested
IDENTITY OF PARTIES AND COUNSEL
Appellants:
Don Abbott Holmes
Gayle Eisler Holmes
Trial and Appellate Counsel for Appellants:
Christopher D. Nunnallee
Law Offices of Christopher D. Nunnallee
1413 Brittmoore Road
Houston, Texas 77043
Charles T. Kelly
Julie Hamrick
Kelly & Smith, P.C.
4305 Yoakum Blvd.
Houston, Texas 77006
Martin J. Siegel
Law Offices of Martin J. Siegel, P.C.
2222 Dunstan Road
Houston, Texas 77005
Geoffrey Berg
Berg Feldman Johnson Bell, LLP
4203 Montrose Boulevard, Suite 150
Houston, Texas 77006
Appellee:
Jetall Companies, Inc.
i
Trial and Appellate Counsel for Appellees:
Mark D. Goranson
GoransonKing PLLC
550 Westcott Street, Suite 415
Houston, Texas 77007
Mike O’Brien
Mike O’Brien PC
14355 Highway 105
Washington, Texas 77880
Stephen D. Fox
2500 West Loop South, Suite 255
Houston, Texas 77027
Richard D. Howell
Buckley, White, Castaneda & Howell, L.L.P.
2401 Fountainview, Suite 1000
Houston, Texas 77057
ii
TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL ................................................................ i
TABLE OF CONTENTS ...................................................................................... iii
INDEX OF AUTHORITIES ................................................................................... v
STATEMENT OF THE CASE ................................................................................ x
STATEMENT REGARDING ORAL ARGUMENT ................................................... xi
ISSUES PRESENTED ........................................................................................ xii
INTRODUCTION ................................................................................................ 1
STATEMENT OF FACTS ..................................................................................... 2
I. The Parties’ Contract And Don’s Efforts To Comply With It ....... 2
II. Jetall’s Refusal To Close Unless Don And Gayle
Lowered The Sales Price By At Least $12,000 ............................. 6
III. The Proceedings Below ............................................................... 11
SUMMARY OF THE ARGUMENT ...................................................................... 16
ARGUMENT .................................................................................................... 18
I. Jetall Failed To Prove Lost Profits Damages .............................. 19
A. Standard Of Review ........................................................... 19
B. Jetall Offered Legally Insufficient Evidence
Of Lost Profits .................................................................... 20
C. The Lost Profits Award Is Further Suspect
Because The Jury Plucked A Figure Out
Of Thin Air ......................................................................... 27
iii
II. The District Court Erred By Disallowing A Jury
Question On Whether The Holmeses’ Breach
Was Excused By Jetall’s Prior Repudiation ........................ 30
A. Standard Of Review ................................................... 30
B. Ample Evidence Supported Don And
Gayle’s Position That Jetall Repudiated .................... 31
PRAYER ......................................................................................................... 39
CERTIFICATE OF SERVICE .............................................................................. 41
CERTIFICATE OF COMPLIANCE ....................................................................... 42
iv
INDEX OF AUTHORITIES
page
Case
Builders Sand, Inc. v. Turtur,
678 S.W.2d 115 (Tex. App. – Houston [14th Dist.] 1984) ....................... 32
Callejo v. Brazos Elec. Power Co-op., Inc.,
755 S.W.2d 73 (Tex. 1988) ................................................................ 27, 28
City of Keller v. Wilson,
168 S.W.3d 802 (Tex. 2005) .................................................................... 19
CMA-CGM (America), Inc. v. Empire Truck Lines, Inc.,
416 S.W.3d 495 (Tex. App. – Houston [1st Dist.] 2013, rev. denied) ...... 31
Coastal Transport Co., Inc. v. Crown Cent. Petroleum Corp.,
136 S.W.3d 227 (Tex. 2004) .................................................. 19, 20, 26, 27
Crown Life Ins. Co. v. Reliable Machine and Supply Co., Inc.,
427 S.W.2d 145 (Tex. App. – Austin 1968, writ ref’d n.r.e.) ................. 36
Cuidado Casero Home Health of El Paso, Inc. v.
Ayuda Home Health Care Serv., LLC,
404 S.W.3d 737 (Tex. App. – El Paso 2013) ........................ 21, 23, 25, 26
Cunningham v. Haroona,
382 S.W.3d 492 (Tex. App. – Ft. Worth 2012, rev. denied) .................... 15
Dror v. Mushin,
2013 WL 5643407 (Tex. App. – Houston [14th Dist.] 2013,
rev. denied) ............................................................................................... 36
Dunham and Ross Co. v. Stevens,
538 S.W.2d 212 (Tex. App. – Waco 1976) .............................................. 32
Elbaor v. Smith,
845 S.W.2d 240 (Tex. 1992) .................................................................... 30
v
Estrada v. Cheshire,
__ S.W.3d __, 2015 WL 4101195
(Tex. App. – Houston [1st Dist.] July 7, 2015) ......................................... 19
Examination Mgmt. Serv. v. Kersh Risk Mgmt, Inc.,
367 S.W.3d 835 (Tex. App. – Dallas 2012) ................................. 24, 26, 28
E-Z Mart Stores, Inc. v. Ronald Holland’s A-Plus
Transmission & Automotive, Inc.,
358 S.W.3d 665 (Tex. App. – San Antonio 2011, pet. denied)................. 18
First Fed. Sav. & Loan Assoc. of Wilmette, Ill. v. Pardue,
545 F. Supp. 433 (N.D. Tex. 1982),
aff’d, 703 F.2d 555 (5th Cir. 1983) ........................................................... 36
First State Bank v. Keilman,
851 S.W.2d 914 (Tex. App. – Austin 1993, writ denied)......................... 27
Great Pines Water Co. v. Liqui-BoxCorp.,
203 F.3d 920 (5th Cir. 2000) ..................................................................... 24
Grp. Life and Health Ins. Co. v. Turner,
620 S.W.2d 670 (Tex. Civ. App. – Dallas 1981) ..................................... 31
Gulf States Utilities v. Low,
79 S.W.3d 561 (Tex. 2002) ...................................................................... 27
Hampton v. Minton,
785 S.W.2d 854 (Tex. App. – Austin 1990)............................................. 32
Helena Chem. Co. v. Wilkins,
47 S.W.3d 486 (Tex. 2001) ...................................................................... 21
Hernandez v. Gulf Grp. Lloyds,
875 S.W.2d 691 (Tex. 1994) .................................................................... 33
Holt Atherton Indus., Inc. v. Heine,
835 S.W.2d 80 (Tex. 1992) .................................................... 20, 21, 23, 24
vi
Humphrey v. Placid Oil Co.,
142 F. Supp. 246 (E.D. Tex. 1956),
aff’d, 244 F.2d 184 (5th Cir. 1957) ..................................................... 36, 37
Hunter Bldgs. & Mfg., L.P. v. MBI Global, LLC,
436 S.W.3d 9 (Tex. App. – Houston [14th Dist.] 2014, rev. denied)........ 23
Hyundai Motor Co. v. Rodriguez,
995 S.W.2d 661 (Tex. 1993) .................................................................... 30
In re Interest of Doe,
917 S.W.2d 139 (Tex. App. – Amarillo 1996, writ denied) ..................... 33
Jon-T Farms, Inc. v. Goodpasture, Inc.,
554 S.W.2d 743 (Tex. App. – Amarillo 1977,
writ ref’d n.r.e., disapproved on other grounds,
McKinley v. Drozd, 685 S.W. 2d 7 (Tex. 1985))...................................... 36
Kellmann v. Workstation Integrations, Inc.,
332 S.W.3d 679 (Tex. App. – Houston [14th Dist.] 2010) ................. 24, 27
Knox v. Taylor,
992 S.W.2d 40 (Tex. App. – Houston [14th Dist.] 1999) ......................... 29
Lytle Lake Water Control and Imp. Dist. v. Shaw Envtl., Inc.,
2006 WL 6863698 (N.D. Tex. 2006) ................................................. 35, 36
M & A Technology, Inc. v. iValue Group, Inc.,
295 S.W.3d 356 (Tex. App. – El Paso 2009, rev. denied) ................. 28, 29
Marriage of Braddock,
64 S.W.3d 581 (Tex. App. – Texarkana 2001) ........................................ 31
Natural Gas Pipeline Co. of Am. v. Justiss,
397 S.W.3d 150 (Tex. 2012) .................................................................... 20
Phillips v. Carlton Energy Grp., LLC,
___ S.W.3d ___, 2015 WL 2148951 (Tex. May 8, 2015) .................. 21, 22
vii
Phillips v. Phillips,
820 S.W.2d 785 (Tex. 1991) .................................................................... 28
Powell Elec. Sys., Inc. v. Hewlett Packard Co.,
356 S.W.3d 113 (Tex. App. – Houston [1st Dist.] 2011) .......................... 29
Preston Reserve, L.L.C. v. Compass Bank,
373 S.W.3d 652 (Tex. App. – Houston [14th Dist.] 2012) ................. 22, 29
Rusty’s Weigh Scales and Serv., Inc. v. N. Tex. Scales, Inc.,
314 S.W.3d 105 (Tex. App. – El Paso 2010) ..................................... 23, 24
Saenz v. Martinez,
2008 WL 4809217 (Tex. App. – San Antonio 2008) ............................... 32
Schroeder v. HB Assoc., LLC,
2002 WL 1494351 (Tex. App. – Dallas 2002)
(not designated for publication)................................................................ 27
Sewing v. Bowman,
371 S.W.3d 321 (Tex. App. – Houston [1st Dist.] 2012,
rev. dismissed) .......................................................................................... 30
Silver Oak Custom Homes LLC v. Tredway,
2013 WL 3522916 (Tex. App. – Houston [1st Dist.] 2013) ..................... 15
State v. Hufstutler,
871 S.W.2d 955 (Tex. App. – Austin 1994)............................................. 29
State ex rel D.L.S.,
446 S.W.3d 506 (Tex. App. – El Paso 2014) ........................................... 18
Stevens v. Nat’l Education Ctrs.,
11 S.W.3d 185 (Tex. 2000) (Mem. Op.) .................................................. 31
Superior Broadcast Prod.v. Doud Media Grp., LLC,
392 S.W.3d 198 (Tex. App. – Eastland 2012).......................................... 25
Szczepanik v. First So. Trust Co.,
883 S.W.2d 648 (Tex. 1994) .............................................................. 21, 25
viii
Tabrizi v. Daz-Rez Corp.,
153 S.W.3d 63 (Tex. App. – San Antonio 2004) ..................................... 27
Taylor v. Trans-Continental Properties, Ltd.,
739 S.W.2d 873 (Tex. App. – Tyler 1987) ................................................ 22
Texas Instruments, Inc. v. Teletron Energy Mgmt., Inc.,
877 S.W.2d 276 (Tex. 1994) .................................................................... 21
U.S. Tire-Tech, Inc. v. Boeran, B.V.,
110 S.W.3d 194 (Tex. App. – Houston [1st Dist.] 2003,
rev. denied) ............................................................................................... 30
Rules
TEX. R. CIV. P. 278 ....................................................................................... 30
TEX. R. EVID. 401 ......................................................................................... 20
ix
STATEMENT OF THE CASE
Nature of the case: This is a suit for breach of contract. CR 6-12.1
Trial court and District Court No. 127, Harris County, Texas; Hon.
Judge: Ravi Sandill.
Course of The case was tried to a jury, which awarded Appellee
Proceedings and $975,000 in damages as well as attorneys’ fees. App.
Disposition in Tab 1 (CR 302-16). The trial court entered judgment
the trial court: on the verdict on January 22, 2015, and later denied
Appellants’ post-trial motions. Id. (CR 300-01), CR
338).
1
“CR __” refers to a specific page number in the clerk’s record. “SCR”
refers to the supplemental clerk’s record requested on July 30, 2015. “RR __/___”
refers to a specific volume and page number in the reporter’s record. “App. Tab
__” refers to a specific tab in Appellants’ Appendix.
x
STATEMENT REGARDING ORAL ARGUMENT
The Court should hear argument in this appeal. Although the legal
principles are familiar, the facts are somewhat complex, involving a failed
real estate transaction. Moreover, one issue involves whether Appellee is
entitled to a substantial award of lost profits from Appellants, two
individuals, and the Court has traditionally applied a rigorous, fact-intensive
review of such awards. Hence, Appellants respectfully submit that the Court
would benefit from an in-person exploration of the issues at stake in this
appeal with counsel for the parties.
xi
ISSUES PRESENTED
1. A jury awarded $900,000 in lost profits to a developer who was
unable to acquire property needed to build two new townhomes, but
the developer offered no evidence at all of the applicable real estate
market or comparable sales, and could only roughly estimate what the
townhomes would cost to build. An award of lost profits requires
objective and detailed facts and figures in support, and cannot be
speculative. Should the award be reversed?
2. Before closing, the developer said it would withhold at least $12,000
from the property’s $450,000 purchase price because the seller
supposedly failed to perform certain minor terms of the sales contract.
There was evidence, however, that this was unjustified and that the
developer simply wanted to pay less for the land. Should the jury
have been asked whether the seller’s breach in failing to close the sale
was excused by the developer’s prior refusal to pay the full sales
price?
xii
INTRODUCTION
Appellant Don Holmes signed a contract to sell a vacant lot he and his
wife Gayle owned in a residential neighborhood in Houston to Appellee
Jetall Companies for $450,000, but the sale never closed. Jetall sued for
breach and the jury awarded $900,000 for profits supposedly lost when Jetall
was unable to build and sell two townhomes on the property.
The Court should reverse the lost profits award for legal insufficiency
because the sole evidence propping it up – brief testimony from Ali
Choudhri, a principal in Jetall – falls far short of the exacting requirements
for proving lost profits. Choudhri did not testify about the market for homes
in the applicable neighborhood, comparable sales, what he planned to charge
for the townhomes, why he believed he could sell them and for what, and so
on. Nor did he provide precise and detailed figures about costs, making it
impossible to calculate lost profits with any specificity. Instead, Choudhri
just baldly asserted that Jetall would have netted $1.2 million on the project,
and introduced no corroborating facts, figures or data. To make matters
worse, the jury arbitrarily awarded $900,000 – a sum never mentioned at
trial and 25% less than what Choudhri testified to – for no discernible reason
in the record. Choudhri’s ipse dixit is legally insufficient evidence of lost
profits, and this portion of the award should be reversed.
1
Reversal is also required by the district court’s refusal to submit a
question on whether Jetall’s prior repudiation or anticipatory breach of the
contract excused Don and Gayle’s breach. Don testified that Choudhri said
Jetall would not pay the full $450,000 purchase price at closing but would
instead withhold $12,000 or $15,000. This was ostensibly to compensate
Jetall for what Choudhri claimed was Don’s failure to perform certain minor
provisions of the contract, such as the duty to replat the property into two
separate lots. But a jury could find that Jetall had no rightful basis to pay
less than the full sales price, and that Choudhri’s expressed reason for doing
so was simply a pretext to obtain the property more cheaply. In that event,
Choudhri’s insistence on paying less than $450,000 at closing was a breach
or repudiation of the contract, and Don and Gayle were entitled to a question
on whether it excused their own failure to close the sale. This error calls for
reversal and a new trial.
STATEMENT OF FACTS
I. The Parties’ Contract And Don’s Efforts
To Comply With It
Don and Gayle own a vacant lot at 1204 Banks Street in Houston as
community property. RR 2/206. In 2011, they decided to sell the property,
initially posting a “for sale by owner” sign on the lot and later exploring a
potential partnership with a friend and developer, Robert Davis, to build
2
townhouses there. RR 2/216-17, 265. Don and Gayle never entered into a
formal agreement with Davis, however, and nothing came of the idea. RR
2/265-66.
Choudhri is a principal in Jetall Companies, a property development
and management firm. RR 3/25-29. After seeing a “for sale” sign on the
Holmeses’ lot, he inquired about buying it and contacted Don. RR 3/33-40.
They met in Jetall’s offices on October 28, 2011, and Choudhri told Don that
he was interested in building and selling two townhomes on the property.
RR 3/32. Don agreed to sell the lot to Jetall for $450,000, and they executed
a form contract memorializing the sale. RR 3/40-42, 54; App. Tab 2 (Pl.
Exh. 1).
In addition to its form terms, the sales contract contains five “special
provisions” added to the document by Choudhri during the meeting. App.
Tab 2 (Pl. Exh. 1, ¶ 11); RR 3/43-44. Four of these were warranties that the
property (i) is unrestricted and has no positive or negative easements, (ii) is
not on a fault line, (iii) is “environmentally clean,” and (iv) has no height
restrictions. Id. The other special condition states: “Seller to provide
replatting with elec. survey and soil test report.” Id. Closing was to occur
within thirty business days of the title commitment. Id., ( Pl. Exh. 1 ¶ 9).
3
After Don signed the contract, Choudhri gave him an earnest money
check payable to Declaration Title Company for $10,000, which the title
company later picked up from him along with the contract. RR 2/224-25,
RR 3/54-55, Pl. Exh. 2. The following week, Choudhri transferred $450,000
to the title company in order to facilitate a quick closing, which Don
preferred in light of certain financial problems he was having. RR 3/43, 67-
68; RR 2/245-46; Pl. Exh. 14.
Don emailed Choudhri a soil report for the property, completed in
1997, a few days after their meeting. Pl. Exh. 10. Although the contract
didn’t require a soil report of any particular age, App. Tab 2 (Pl. Exh. 1 ¶ 11),
Choudhri testified that Don told him at their meeting that the report he
would deliver was only two years old. RR 3/65-66. Choudhri called Don
and they discussed obtaining a new report. RR 3/66-67. But Don later
called the company that had performed the 1997 report and was told a new
one was unnecessary because soil conditions hadn’t changed on the property.
RR 2/269, RR 4/95-96.
At his October 28 meeting with Choudhri, Don offered to provide an
existing survey he had of 1204 Banks Street. RR 2/270. The following
week, he emailed it in electronic form to the title company but the company
lacked the software to open it. RR 2/257, RR 4/95. Because the survey
4
dated to 1998, it did not reflect a replatting of the property. RR 3/73, 184.
The title company also objected that the survey’s failure to show the lot as
vacant precluded using it for closing. RR 3/72-73, Pl. Exh. 11. Don
therefore inquired whether a new survey was necessary, and later emailed
stating that he assumed the title company would order a new one if needed.
Pl. Exh. 13, Pl. Exh. 15, RR 2/257-58. He had previously closed the sale of
a different property using a fifteen year-old survey and so assumed that sale
of the Banks Street lot could proceed using his 1998 survey. RR 2/257-58.
Don had done most of the work to compete the replatting of the
property, incurring $3,000 in cost, before he entered into the contract with
Jetall because he had previously explored dividing the lot in order to build
townhouses. RR 2/254-56, RR 4/100-01. All that remained was to pay a
$525 fee to the City of Houston and file an application to record the
replatting. RR 2/254-56, 271-72. At their meeting, Don told Choudhri that
he would not finalize the replatting before closing because, if the sale fell
through, a replatting would prevent the Holmeses or another buyer from
doing something different with the property, such as building a single family
5
home or more than two townhouses. Id., RR 4/100-01. Don testified that
Choudhri told him this was fine. RR 2/271-72, 255.2
II. Jetall’s Refusal To Close Unless Don And Gayle
Lowered The Sales Price By At Least $12,000
In the weeks following their execution of the contract, Don and
Choudhri spoke and emailed about closing the sale and what Choudhri
believed Don still had to do to fulfill the contract’s special provisions. RR
3/72-74, Pl. Exh. 13-18. On November 15, the title company obtained a new
survey of the property at Don’s direction and emailed it to Choudhri, adding:
“The seller is ready to close do you want to do this on Wednesday, Thursday
or Friday of this week.” Pl. Exh. 18, 19.
Rather than close, however, Choudhri demanded that Don complete
the replatting of the property. Pl. Exh. 20; RR 3/74-75, 82-83. Frustrated by
what he believed were Choudhri’s new demands, Don emailed Choudhri on
November 18, writing:
Ali
I am not sure what is going on. When we were working on an
agreement I told you I had an old electronic survey but that
would be an advantage for your designer. Additionally we
discussed that I had started getting the lot replated [sic] but that
2
There was also testimony at trial that the Holmes lot may have had an
easement toward the back of the property in violation of the seller’s warranty of no
easements, but Choudhri confirmed that this was not a material concern. RR
3/220.
6
had not been filed so it would not impact your desire to build a
single family home on the lot. Thirdly, I offered a soil test that
I had performed a few years ago to you. After you later refused
to accept the electronic survey, I had a new survey done which
showed the lot as vacant and undivided. Now I am told you
want the lot replated [sic], which is new, and that the soil
surveys are old, which was known. I assume you are having
buyers [sic] remorse and wish that you had purchased the other
lot you were considering. I certainly have no interest in trying
to sell something to someone that doesn’t want it so I think it is
probably best that we just back away and you can pursue the
other location.
Pl. Exh. 21. Don also called the title company and learned for the first time
that Choudhri had instructed the company to deduct $12,000 from the price
to be paid at closing. RR 4/96.
On December 12, Choudhri emailed and hand-delivered a letter to
Don stating that Jetall “looks forward” to closing the sale on December 15.
Pl. Exh. 24. The letter asserted that Don had not replatted the property or
provided an electronic survey or soil report; demanded performance of these
tasks; and indicated that Jetall “is entitled to specific performance as well as
other relief under law, such as damages and attorney’s fees” for Don’s
supposed noncompliance. Id. “Notwithstanding the forgoing,” however, the
letter stated that Jetall would attend the closing on December 15 while
reserving its rights under the contract. Id.
The next day, Choudhri emailed Don with a similar message, asking
“please let me know if you intend to honor the contract and all terms we
7
entered into?” Pl. Exh. 23. The email asked whether Don would provide a
completed replatting, electronic survey, and soil report – or if not, “will you
offset the costs for me off the sales price?” Id. Choudhri asserted that “[t]he
estimated costs” for these items “is at least $12,000 plus the time and
carrying costs of doing do [sic].” The email concluded:
If you need more time to complete these items I am amenable to
extended [sic] the contract to allow you to complete.
Alternatively, I am willing to accommodate you and close and
fund the transaction December 15, 2011 as long as you credit
me at least $12,000 for the cost of accomplishing these items at
closing.
I am trying my best to resolve this matter at hand before it is
escalated.
Please reply by 10:00 am December 14, 2011.
Id. Although Choudhri wrote that the soil report, replatting, and survey cost
“at least $12,000,” he later acknowledged that he did not actually know the
exact price of performing these tasks. RR 4/61-62.
Don went to Jetall’s offices to meet with Choudhri on December 13 in
an effort “to resolve the issues and close.” RR 3/6. According to Don,
Choudhri told him during this meeting that he would close on the sale but
would deduct $15,000 or $12,000 from the $450,000 purchase price in order
to complete the disputed items Choudhri claimed had not been performed.
RR 2/272-73; RR 3/11, 23; RR 4/102-03. As Don testified:
8
What happened, on Tuesday the 13th, I went by his office in an
attempt to negotiate some kind of settlement that we could
conclude the transaction and at that point in time we discussed
– you know, I told him that I wasn’t going to pay more for the
items that he wanted to charge me. I think that during the day
he said $15,000 but I see that he was back down to $12,000, but
the amount kind of varied.
But he was going to take off for these items and I said
that I had given him what I promised and that was what I had
already developed or what I had already purchased and all I was
giving him was old documents. I didn’t – had never agreed to
any of the new ones and that if we were going to close, that I
wanted the full amount. And he told me that he was losing
money by not being able to move ahead and that he was going
to sue me and if I didn’t close immediately, I better get a lawyer.
And this was the most threatening he had been and I had just
gone to his office trying to resolve it.
RR 4/102-03. A title company employee also told Don that $15,000 of the
price would be placed in escrow, and Choudhri told Don that Don would be
unable to access these funds until Choudhri “fe[lt] like it.” RR 2/272-73.
Gayle objected to the special provisions in the contract and to
consummating the deal under the agreement Don signed. RR 2/274, RR 3/7,
RR 4/77-79. Nonetheless, they were ready to close on December 13 and
would have willingly done so but for Choudhri’s demand to lower the
purchase price. RR 4/106, RR 3/11. They also feared “that even if we
conceded the $15,000, that he was going to come back again on other – on
the other points. It was just going to be an ongoing dilemma of trying to get
money from him.” RR 2/274.
9
Choudhri gave a different account of the parties’ December 13
meeting, testifying that Don asked to increase the sales price and that the
discussion ended when Choudhri told him “We have a deal” and that he was
“not even going to entertain” a higher price. RR 3/97. Choudhri testified
that, in fact, Jetall would have closed the sale on December 15 without
further action by the Holmeses, and without deducting anything from the
$450,000 sales price. RR 3/98-105, RR 4/64-65. He denied demanding
anything from Don. RR 4/64. As Choudhri put it: “to get the deal closed,
he [Don] didn’t even have to do anything more under my letter to him. He
just had to come and sign and close… Sign the deed and take his funds and
it was our reservation if we wanted to go after him later and we wouldn’t
have.” RR 3/98-99, 127, 185-86. Still, Choudhri acknowledged that he
never told Don he would not sue for alleged breach of the special provisions
after the sale closed. RR 3/181-82.
On December 14, Don emailed Choudhri in response to Choudhri’s
December 13 email and communicated that he had an appointment with his
lawyer that morning and that he still “would like to work this out and [g]et
the deal done but I do need to talk to my attorney before going forward.” Pl.
Exh. 25. A week later, Jetall’s lawyer wrote Don demanding that the
Holmeses close by December 31. Pl. Exh. 29. The letter reprised the claim
10
that Don was obligated to comply with the special provisions but stated that,
if he chose not to, Jetall “would be willing” to deduct their cost from them at
closing, and that the cost was estimated to be $12,000. Id. The letter
warned that Jetall would file suit if no closing occurred and invited Don to
request a copy of Jetall’s draft petition (though one was actually included
with the letter). Id., RR 4/81.
On January 5, Don’s attorney wrote Jetall’s lawyer and agreed to
close the sale if the original contract was declared null and void and the
parties released each other from any liabilities under it, if the purchase price
was increased to $456,000, and if Jetall paid outstanding ad valorem taxes
on the property. Pl. Exh. 30. The Holmeses increased the purchase price by
$6,000 in this offer to cover fees they had to pay their attorney while dealing
with Jetall. RR 3/10-11. The parties then stopped negotiating, and the sale
was never completed.
III. The Proceedings Below
Jetall sued Don and Gayle and their community property estate for
breach of contract and fraud, seeking damages and specific performance.
CR 6-12. The case eventually proceeded to a jury trial.
At trial, Choudhri argued that he had wanted to close the sale on
December 15 and would not have deducted any funds from the purchase
11
price at closing. RR 3/95-105. As for damages, Choudhri testified as
Jetall’s expert witness on the topic. CR 17, RR 5/9. He claimed that the
profit Jetall would have reaped on the sale of the two townhomes planned
for the lot “would have been in excess of $1.2 million.” RR 3/122. Jetall
offered an exhibit (Exhibit 36) its counsel called a “pro forma” for the
project, including “calculations of the cost, expenses… [and] profitability”
of the planned development, but the document was never admitted. RR
3/115-17, 133-34. On cross-examination, Choudhri gave the following
testimony about what it would cost to build the townhomes:
Q. And you previously told me it would have cost you
approximately $850,000 in cost to build those homes,
correct?
A. I don’t recall what I told you, but if – the numbers are
about $800,000 per home. If you’re saying it’s 850, I
know my depo was about a year ago; so I don’t know if I
– I can’t recall exactly, but close, yes sir.
Q. North of $800,000 it was going to cost you to build these
homes, correct?
A. Yes.
RR 3/125-26. Other than that, Jetall offered no evidence about expenses
connected to the project. RR 3/115-26.
Choudhri did not testify about how long construction would take,
when the homes would be for sale, what the real estate market was like then,
12
what other comparable townhomes near 1204 Banks Street were selling for,
or any other data about Jetall’s planned development. Id. He testified
generally that buyers were interested in Jetall’s homes, RR 3/29-32, 84, and
he stated that his sister initially wanted one of the townhouses planned on
the Holmes lot. RR 3/32. But Choudhri gave no more no more specific
information about the likelihood of selling the townhomes, what he planned
to charge for them, how many buyers might be available, what and whether
they could pay, and so forth. RR 3/115-26. In addition to lost profits, Jetall
sought to recover the claimed rise in the value of the land. RR 4/163-64.
Don and Gayle defended against Jetall’s claim for breach by arguing
that the company breached first when Choudhri told Don that Jetall would
withhold $12,000 or $15,000 from the purchase price under the pretext that
Don failed to complete the special provisions. RR 2/192-93. Gayle,
represented by separate counsel, also defended by arguing that she never
signed the contract or ratified it, that Don did not act as her agent in the
transaction, and that the contract was therefore void given Don’s incapacity
to sell their community property on his own. RR 2/186-87, 192. Thus,
much of the trial testimony concerned whether Gayle intended to enter into
the contract with Jetall and authorized Don to act for her. The Holmeses
13
also argued that Choudhri failed to substantiate Jetall’s damages for lost
profits. RR 4/181.
The parties began discussing the charge before testimony concluded
on the last day of trial. The district court indicated that he would find that
Jetall waived performance of the special provisions as a matter of law, but
that Jetall could not have committed breach because Choudhri had
previously transferred the purchase price to the title company. RR 4/4-10.
“So once the 450 is at the title company,” the court stated, “he can’t breach.”
RR 4/9. When Gayle’s counsel objected that Choudhri had instructed the
title company to withhold part of the sales proceeds due to Don’s supposed
failure to have completed the replatting process, the court responded:
“There’s no evidence of that,” and added: “The issue in this case is at the
time of closing was the land conveyed. Nothing else matters.” RR 4/12-13.
At the charge conference later that day, Don and Gayle’s counsel
requested a question on whether their breach was excused by Jetall’s prior
anticipatory breach, that is, Choudhri’s stated intention to withhold at least
$12,000 from the purchase price to compensate for supposed non-
performance of the special provisions. RR 4/118-120, 127; SCR (Jury
Question No. 4). Consistent with its earlier comments, the court refused,
finding that there was no fact question on the issue and that, as a matter of
14
law, the Holmeses breached the contract but Jetall did not. RR 4/119, 127,
131.3 As a result, the charge did not include questions on whether either
party breached or whether any breach by Don and Gayle was excused by
Jetall’s prior anticipatory breach or repudiation. App. Tab 1 (CR 306-16).
The jury found that Gayle authorized Don to enter into the contract,
and that the Holmeses did not commit fraud. Id. It awarded $75,000 in
breach of contract damages for the difference in the value of the property,
and $900,000 in damages for Jetall’s lost profits. Id. (CR 308). The jury
also awarded Jetall $52,800 in attorneys’ fees through trial, and additional
fees if the company prevails on appeal. Id. (CR 314). The court later
entered judgment on the jury’s verdict. Id. (CR 300-01).
Don and Gayle timely moved for a new trial, to disregard the jury’s
findings, and for judgment notwithstanding the verdict based on the trial
3
In later colloquy, the court stated that Gayle could not request an
anticipatory breach question while also asking the jury to decide whether Don was
authorized to agree to the sale on her behalf. RR 4/129-30. The court evidently
thought that an anticipatory breach question would mean Gayle was “admitting
that she’s party to the contract,” thus conceding the authority issue. RR 4/130. In
fact, parties may place alternative theories before the jury. See Silver Oak Custom
Homes LLC v. Tredway, 2013 WL 3522916 at * 5 (Tex. App. – Houston [1st Dist.]
2013). Faced with this erroneous ruling and the unnecessary choice imposed by
the court, Gayle indicated she was withdrawing her request for an anticipatory
breach question. RR 4/130. Nevertheless, her earlier objection notified the court
of the issue and thereby preserved the point for appellate review. See, e.g.,
Cunningham v. Haroona, 382 S.W.3d 492, 510 (Tex. App. – Ft. Worth 2012, rev.
denied) (“The trial court clearly understood [plaintiff’s] complaint, and this is all
that was required”).
15
court’s refusal to submit a question on breach and excused performance and
the lack of evidence of lost profits. CR 317-26. At the hearing on the
motion, the court reiterated: “I found as a matter of law that there was a
breach” by Don and Gayle. RR 5/4. On the issue of lost profits, the court
dismissed the Holmeses’ argument that, among other failings, Choudhri
never testified to the cost of building the townhomes by stating: “Everyone
knows, I mean, you go to a builder today, they’ll build you a house for $150
a square foot. They’ll tell you that, correct?” RR 5/7. Jetall defended
Choudhri’s testimony on the basis that he was qualified as an expert to opine
on the topic. RR 5/9. The court denied the motion. CR 338.
SUMMARY OF ARGUMENT
First, there is legally insufficient evidence of Jetall’s lost profits.
Choudhri testified that the failure to acquire the land and build and sell two
townhouses cost Jetall $1.2 million in profits, but little besides his ipse dixit
supports the claim. Choudhri did not testify at all about the relevant real
estate market at the relevant time. The record is silent on comparable sales
near 1204 Banks at whatever time Jetall expected to finish the project
(Choudhri didn’t say), what Jetall intended to charge for the townhomes,
whether sales could have been achieved and why, what buyers might have
paid, and so forth. Without this kind of basic evidence, Jetall’s claim is
16
entirely speculative. Moreover, claims for lost profits must be supported by
objective and detailed facts, figures and data, but Jetall introduced none of
this. Choudhri gave only a rough estimate of what building the homes
would cost, but the lack of specificity makes it impossible to tally Jetall’s
damages with any precision. On top of all that, the jury ignored Jetall’s
evidence and its request for $1.2 million and randomly awarded only
$900,000, though no evidence at all supports this figure and it was never
mentioned by anyone at trial. Given the lack of any evidentiary basis for the
jury’s award, it should be reversed. See Point I, infra.
Second, the Court should reverse the judgment because the trial court
erred in declining to submit a question on whether Jetall’s prior repudiation
or anticipatory breach of the contract excused Don and Gayle’s breach.
Choudhri told Don that Jetall would withhold $12,000 or $15,000 from the
purchase price at closing. Title company employees in communication with
Choudhri said the same thing. Choudhri’s reason for this was Don’s claimed
nonperformance of the special provisions, but a jury could find that this was
just an excuse to pay less for the lot. The trial court decided that Jetall
waived performance of the special provisions as a matter of law, and a jury
could have found that they were non-material. Moreover, Don performed
these terms adequately, and no evidence in the record supports the claim that
17
Jetall would have incurred as much as $12,000 or $15,000 to take care of
them after closing. As a result, a jury could have determined that Jetall’s
insistence on withholding such a substantial portion of the sales price was an
anticipatory breach or repudiation of the contract that excused the Holmeses’
later failure to close the sale, and the court consequently should have
included a question on this issue in the charge. Its failure to do so mandates
reversal. See Point II, infra.
ARGUMENT
Don and Gayle urge reversal on two grounds: insufficiency of the
evidence supporting lost profits damages, and the trial court’s erroneous
failure to include a question for the jury on whether the Holmeses’ breach of
contract was excused. Because the legal insufficiency point would require
rendition and should therefore be decided first, it is addressed first in this
brief. See State ex rel D.L.S., 446 S.W.3d 506, 519 (Tex. App. – El Paso
2014) (“Where the finding is legally insufficient, reversal and rendition are
the proper remedies”); E-Z Mart Stores, Inc. v. Ronald Holland's A-Plus
Transmission & Automotive, Inc., 358 S.W.3d 665, 670 (Tex. App. – San
Antonio 2011, pet. denied) (“Because legal sufficiency is a rendition issue,
we must address it before addressing issues that would require a remand”).
18
I. Jetall Failed To Prove Lost Profits Damages
A. Standard Of Review
A jury’s finding is legally insufficient and must be reversed “if the
record shows: (1) that a vital fact is completely absent; (2) that the court is
barred by rules of law or evidence from giving weight to the only evidence
offered to prove a vital fact; (3) that the evidence offered to prove a vital fact
is not more than a scintilla; or (4) that the evidence establishes conclusively
the opposite of the vital fact.” Estrada v. Cheshire, __ S.W.3d __, 2015 WL
4101195 at * 6 (Tex. App. – Houston [1st Dist.] July 7, 2015) (citing City of
Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005)). The Court should
consider the evidence in the light most favorable to the finding under review
and indulge all reasonable inferences that would support the finding. See
City of Keller, 168 S.W.3d at 822.
Findings supported only by conclusory expert or lay opinion
testimony must also be reversed. “[A]lthough expert opinion testimony
often provides valuable evidence in a case, it is the basis of the witness’s
opinion, and not the witness’s qualifications or his bare opinions alone, that
can settle an issue as a matter of law; a claim will not stand or fall on the
mere ipse dixit of a credentialed witness.” Coastal Transport Co., Inc. v.
Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex. 2004) (quotation
19
omitted). Thus:
Opinion testimony that is conclusory or speculative is not
relevant evidence, because it does not tend to make the
existence of a material fact “more probable or less probable.”
See TEX. R. EVID. 401. This Court has labeled such testimony
as “incompetent evidence,” and has often held that such
conclusory testimony cannot support a judgment. Furthermore,
this Court has held that such conclusory statements cannot
support a judgment even when no objection was made to the
statements at trial.
Id. (citations omitted). The Supreme Court has specifically singled out lost
profits testimony by business owners as the sort of opinion or quasi-expert
testimony governed by this rule. See Natural Gas Pipeline Co. of Am. v.
Justiss, 397 S.W.3d 150, 157 (Tex. 2012) (“We have also recognized that a
business owner’s conclusory or speculative testimony of lost profits will not
support a judgment,” citing Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d
80, 84 (Tex.1992)).
B. Jetall Offered Legally Insufficient Evidence Of Lost
Profits
Jetall’s sole evidence of lost profits consisted of brief testimony from
Choudhri. The company also offered a document supposedly detailing
“calculations of the cost, expenses… [and] profitability” of the townhomes,
but it was not admitted. RR 3/115-17, 133-34. Because Choudhri’s
testimony on this subject was purely speculative and self-serving rather than
a factual account rooted in objective data, that portion of the award must be
20
reversed.
Lost profits must be shown with “reasonable certainty.” Helena
Chem. Co. v. Wilkins, 47 S.W.3d 486, 505 (Tex. 2001). “As a minimum,
opinions or estimates of lost profits must be based on objective facts, figures,
or data from which the amount of lost profits can be ascertained.” Phillips v.
Carlton Energy Grp., LLC, ___ S.W.3d ___, 2015 WL 2148951 at * 10 (Tex.
May 8, 2015) (quoting Holt Atherton Indus., 835 S.W.2d at 84). Moreover,
“[t]he record must show how the lost profits were calculated.”
Cuidado
Casero Home Health of El Paso, Inc. v. Ayuda Home Health Care Serv.,
LLC, 404 S.W.3d 737, 744 (Tex. App. – El Paso 2013); see also Szczepanik
v. First So. Trust Co., 883 S.W.2d 648, 650 (Tex. 1994) (“There is nothing
in the record to show how FST determined the amount of lost profits”).
“Profits which are largely speculative, as from an activity dependent on
uncertain or changing market conditions… cannot be recovered.” Phillips,
2015 WL 2148951 at * 10 (quoting Texas Instruments, Inc. v. Teletron
Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994)).
In this case, Jetall’s scant evidence of lost profits is both speculative
and lacking the objective data needed to justify an award. The claim is
speculative because Choudhri provided no information at all about the real
estate market in Houston at the time he would supposedly be selling the
21
townhomes he planned to build. RR 3/115-24. In fact, he did not even say
when he expected to complete any sale of the townhomes – that is, how long
it would take to construct them, how long they might be on the market, and
how long it would take to complete a sale. Nor did Jetall introduce evidence
of what other similar homes near 1204 Banks Street sold for at any time, let
alone at or near the time he expected to offer the townhomes on the Holmes
lot for sale.
Obviously, the market for real estate fluctuates based on a wide
variety of factors. See, e.g., Preston Reserve, L.L.C. v. Compass Bank, 373
S.W.3d 652, 667 (Tex. App. – Houston [14th Dist.] 2012); Taylor v. Trans-
Continental Properties, Ltd., 739 S.W.2d 873, 881 (Tex. App. – Tyler 1987).
Conditions in the market may be “uncertain or changing,” Phillips, 2015 WL
2148951 at * 10, in light of the wider economy, the dynamics of a particular
neighborhood, the level of supply, and many other considerations. Neither a
robust nor an anemic market can simply be assumed by the parties or the
factfinder. Without knowing the condition or specifics of the relevant
market at the relevant time, it is impossible to know if the townhomes likely
would have sold, or for how much. Claiming that a sale would have
generated $1.2 million in profits is therefore entirely speculative.
Choudhri did generically refer to having unspecified “buyers” for the
22
townhomes. RR 3/29-32, 84. He identified one of these as his sister, though
she later became uninterested in the project and it is unclear if she would
have paid the market rate as a buyer when her family’s own company was
the seller. CR 2/32. Again, Choudhri did not say. Id. No other potential
buyer was named. Yet “[t]he bare assertion that contracts were lost does not
demonstrate a reasonably certain, objective determination of lost profits.”
Hunter Bldgs. & Mfg., L.P. v. MBI Global, LLC, 436 S.W.3d 9, 17 (Tex.
App. – Houston [14th Dist.] 2014, rev. denied); accord Holt Atherton Indus.,
835 S.W.2d at 85; Cuidado Casero Home Health, 404 S.W.3d 744. Lost
profits must be non-speculative and corroborated.” Cuidado Casero Home
Health, 404 S.W.3d 745 (emphasis added); accord Rusty’s Weigh Scales and
Serv., Inc. v. N. Tex. Scales, Inc., 314 S.W.3d 105, 111 (Tex. App. – El Paso
2010). It is insufficient to assert baldly that buyers or customers were lost
without providing corroborative detail and proof, such as the buyers’
identities, evidence that they had firmly agreed to buy, proof that their loss
or cancellation is the defendant’s fault rather than the result of other market
forces, information about the transactions that had to be cancelled (such as
pricing), and so on.
For example, a company seeking $2 million in lost profits due to a
former employee’s theft of trade secrets asserted that the theft led to a loss of
23
buyers, but it failed to offer proof that it had actual contracts lined up or that
customers hadn’t switched for other reasons. See Rusty’s Weigh Scales, 314
S.W.3d at 111. The mere assertion that unspecified customers defected was
not enough. See id. Likewise, in Great Pines Water Co. v. Liqui-BoxCorp.,
a business owner testified that a supplier’s malfunctioning equipment
resulted in 4,000 lost customers based on his observations of the company’s
plant, talking to the company’s drivers, and “conversations with an unknown
number of customers who complained.” 203 F.3d 920, 923 (5th Cir. 2000).
But the lack of hard proof that 4,000 customers actually discontinued service
and why doomed any claim for lost profits. See id. For the same reasons,
Choudhri’s blanket, uncorroborated statement that he had buyers for the
townhomes cannot, without more, justify an award of lost profits.
Jetall’s bid for $1.2 million in lost profits is not only speculative, it
lacks the necessary supporting, “objective facts, figures, or data.” Holt
Atherton Indus., 835 S.W.2d at 84. Plaintiffs seeking lost profits must detail
the expenses of the work or project they claim would have yielded the profit.
See Examination Mgmt. Serv. v. Kersh Risk Mgmt, Inc., 367 S.W.3d 835,
843 (Tex. App. – Dallas 2012) (faulting plaintiff’s failure to “enumerate
costs”);
Kellmann v. Workstation Integrations, Inc., 332 S.W.3d 679, 685-86
(Tex. App. – Houston [14th Dist.] 2010). Yet Choudhri barely referred to
24
expenses at all. He ignored the subject entirely during his direct testimony.
RR 2/115-24. Questioned in cross examination about the costs of building
the townhomes, he stated that “the numbers are about $800,000 per home,”
then agreed that it was actually “close” to $850,000 (the figure he gave in his
deposition), then agreed it was “north of $800,000.” RR 2/125-26. He
provided no supporting detail or back-up documentation at all, such as
evidence showing what specific items in the budgets for construction and
marketing would have cost. “Rough estimates” cannot support recovery, but
Choudhri offered nothing more. Superior Broadcast Prod.v. Doud Media
Grp., LLC, 392 S.W.3d 198, 212 (Tex. App. – Eastland 2012).
It is impossible to determine precisely “how [Jetall’s] lost profits were
calculated” in the absence of specific, exact evidence of expenses. Cuidado
Casero, 404 S.W.3d at 744; Szczepanik, 883 S.W.2d at 650. The trial court
appears to have let Jetall off the hook on this score because “[e]veryone
knows, I mean, you go to a builder today, they’ll build you a house for $150
a square foot.” RR 5/7. But presumed common knowledge about building
costs is no substitute for actual, admitted evidence a fact-finder could
properly have used to calculate the profits Jetall claims to have lost.
Equally problematic, Choudhri never testified to what he would
charge for the townhouses. When Jetall designated him as an expert witness,
25
it stated that “[e]ach townhouse would have sold for at least $400,000.” CR
18. But if it cost $800,000 or $850,000 to build each townhome, Jetall
would have lost approximately $400,000 on each and earned no profit at all
with anything close to a $400,000 sales price. How and why these figures
changed radically between Choudhri’s expert designation and trial, such that
Choudhri claimed the company would have made $1.2 million, is a mystery.
Lacking concrete and objective facts and figures, all that remains are
Choudhri’s qualifications and his “take my word for it” figure of $1.2
million. Don and Gayle have never questioned that, given his experience in
real estate development, Choudhri could opine on Jetall’s lost profits. RR
5/9. But what matters is the basis of his opinion, not his “qualifications or
his bare opinions alone… [A] claim will not stand or fall on the mere ipse
dixit of a credentialed witness.” Coastal Transport, 136 S.W.3d at 232.
Choudhri testified at length about his credentials, RR 2/117-19, but he failed
to go much beyond his background as a developer and adequately support
his opinion about this specific project. Courts have repeatedly reversed lost
profits awards based on nothing more than an expert’s or business owner’s
say so – cases where the plaintiff’s witness testified to a net amount but
failed to provide detailed supporting evidence. See, e.g., Cuidado Casero,
404 S.W.3d at 745-46; Examination Mgmt. Serv., 367 S.W.3d at 839-44;
26
Tabrizi v. Daz-Rez Corp., 153 S.W.3d 63, 68 (Tex. App. – San Antonio
2004); Schroeder v. HB Assoc., LLC, 2002 WL 1494351 at * 3 (Tex. App. –
Dallas 2002) (not designated for publication). This case is no different, and
Choudhri’s conclusory opinion testimony is “incompetent evidence” that
cannot justify the jury’s award. Coastal Transport, 136 S.W.3d at 232.
“When a review of the surrounding circumstances establishes that the
profits are not reasonably certain, there is no evidence to support the lost
profits award.” Kellmann, 332 S.W.3d at 684. The Court should therefore
reverse the $900,000 award.
C. The Lost Profits Award Is Further Suspect Because
The Jury Plucked A Figure Out Of Thin Air
The jury’s decision to award $900,000 in lost profits – when Choudhri
testified that the sum was actually $1.2 million – further illustrates its legal
insufficiency.
“In determining damages, the jury has discretion to award damages
within the range of evidence presented at trial.” Gulf States Utilities v. Low,
79 S.W.3d 561, 566 (Tex. 2002). But jurors may not “arbitrarily assess an
amount neither authorized nor supported by the evidence presented at trial.
In other words, a jury may not ‘pull figures out of a hat’; a rational basis for
calculation must exist.” First State Bank v. Keilman, 851 S.W.2d 914, 930
(Tex. App. – Austin 1993, writ denied); accord Callejo v. Brazos Elec.
27
Power Co-op., Inc., 755 S.W.2d 73, 75 (Tex. 1988) (jurors may not “leap
entirely outside of the evidence” and award a sum unsupported by proof).
This rule is particularly apt in breach of contract cases, where damages
should neither exceed nor understate the loss. See Phillips v. Phillips, 820
S.W.2d 785, 788 (Tex. 1991) (“The universal rule for measuring damages
for the breach of a contract is just compensation for the loss or damage
actually sustained. By the operation of that rule a party generally should be
awarded neither less nor more than his actual damages” (quotation omitted)).
In this case, however, the jury did not award Jetall the only sum that
Choudhri tried to justify at trial and which Jetall’s lawyer argued for in
closing: $1.2 million. RR 4/165. Rather, the jury inexplicably awarded
$900,000 in lost profits. There is no basis in the record whatsoever for
determining that Jetall’s lost profits were $900,000. Jurors may have chosen
to lop off a quarter of what Jetall requested for some reason known only to
them, but the $900,000 figure does not appear in any testimony or document.
When juries deviate dramatically from the damages proven at trial – whether
by awarding too much or too little – reversal is necessary. See, e.g.,
Examination Mgmt. Serv., 367 S.W.3d at 844 (reversing lost profits award in
part because it was $8,262 less than the amount indicated by plaintiff’s
evidence); M & A Technology, Inc. v. iValue Group, Inc., 295 S.W.3d 356,
28
368 (Tex. App. – El Paso 2009, rev. denied) (award higher than range
supported by evidence); Preston Reserve,
373 S.W.3d at 667 (“It follows
that the trial [court] was not authorized to find that the property's value was
$2.4 million when the only competent evidence presented at trial supports a
fair market value of at least $2.7 million”); State v. Hufstutler, 871 S.W.2d
955, 959-60 (Tex. App. – Austin 1994) (same).
True, “[e]vidence corresponding to the exact amount found by the
trier of fact is not essential,” and juries can pick a figure that falls on a
spectrum supported by the evidence. Powell Elec. Sys., Inc. v. Hewlett
Packard Co., 356 S.W.3d 113, 126 (Tex. App. – Houston [1st Dist.] 2011).
The jury may also sometimes blend conflicting expert testimony to arrive at
a proper figure. See Knox v. Taylor, 992 S.W.2d 40, 63 (Tex. App. –
Houston [14th Dist.] 1999). But here, Choudhri did not testify that Jetall’s
profits would fall within a particular range; he claimed simply that the
company lost $1.2 million. RR 3/115-24. Nor did Don and Gayle offer
expert testimony of some lower amount that might permit the jury to blend
the two contrasting views and somehow arrive at $900,000. Moreover, the
jury did not stray only slightly from the evidence. It unaccountably reduced
Jetall’s claimed amount by a full 25%. In these circumstances, the jury’s
arbitrary award lends further support to Don and Gayle’s argument that it is
29
devoid of record support and thus legally insufficient.
II. The District Court Erred By Disallowing A Jury Question
On Whether The Holmeses’ Breach Was Excused By
Jetall’s Prior Repudiation
A. Standard Of Review
“In its charge to the jury, a trial court must submit all questions,
instructions, and definitions raised by the pleadings and evidence. TEX. R.
CIV. P. 278; Hyundai Motor Co. v. Rodriguez, 995 S.W.2d 661, 663
(Tex.1999).” U.S. Tire-Tech, Inc. v. Boeran, B.V., 110 S.W.3d 194, 202
(Tex. App. – Houston [1st Dist.] 2003, rev. denied). “A trial court may
refuse to submit an issue only if no evidence exists to warrant its
submission.” Id. (citing Elbaor v. Smith, 845 S.W.2d 240, 243 (Tex.1992)).
“Conflicting evidence presents a fact question for the jury to decide.”
Sewing v. Bowman, 371 S.W.3d 321, 339 (Tex. App. – Houston [1st Dist.]
2012, rev. dismissed).
In this case, Don and Gayle requested submission of a question asking
whether their non-performance of the contract – failure to close the sale of
the property – was excused by Jetall’s prior anticipatory breach or
repudiation, but the court refused. RR 4/118-20, 127; SCR (Jury Question
No. 4). As a result, this Court should examine the record for any evidence
supporting the Holmeses’ defense of excuse, and if it exists, reverse and
30
remand for a new trial. See Stevens v. Nat’l Education Ctrs., 11 S.W.3d 185
(Tex. 2000) (Mem. Op.) (remand for new trial is remedy for charge error).
B. Ample Evidence Supported Don And Gayle’s Position
That Jetall Repudiated
Don and Gayle presented more than enough evidence that Jetall
committed an anticipatory breach or repudiation by using a demand for
performance from the Holmeses beyond that required under the agreement
as cover for withholding $12,000 to $15,000 from the purchase price. This
anticipatory breach excused Don and Gayle’s own breach of refusing to
close the sale. Given the evidence in the record supporting this theory, the
trial court should have submitted the issue to the jury.
“The terms ‘repudiation’ and ‘anticipatory breach’ are used somewhat
interchangeably by our courts.” Grp. Life and Health Ins. Co. v. Turner, 620
S.W.2d 670, 673 (Tex. Civ. App. – Dallas 1981). They refer to one party’s
“positive and unconditional refusal to perform the contract in the future,
expressed either before performance is due or after partial performance. It is
conduct that shows a fixed intention to abandon, renounce, and refuse to
perform the contract.” CMA-CGM (America), Inc. v. Empire Truck Lines,
Inc., 416 S.W.3d 495, 519 (Tex. App. – Houston [1st Dist.] 2013, rev.
denied). The intent to repudiate may be expressed through either words or
actions. See Marriage of Braddock, 64 S.W.3d 581, 585 (Tex. App. –
31
Texarkana 2001); Builders Sand, Inc. v. Turtur, 678 S.W.2d 115, 120 (Tex.
App. – Houston [14th Dist.] 1984). When one party repudiates, the other
party’s performance is excused. See Hampton v. Minton, 785 S.W.2d 854,
857 (Tex. App. – Austin 1990); accord Saenz v. Martinez, 2008 WL
4809217 (Tex. App. – San Antonio 2008); Dunham and Ross Co. v. Stevens,
538 S.W.2d 212, 216 (Tex. App. – Waco 1976).
Don testified that, at his meeting with Choudhri on December 13,
2011, Choudhri told him he would deduct $15,000 or $12,000 from the
$450,000 purchase price of the property – ostensibly because Don had not
completed the special provisions. RR 2/272-73; RR 3/11, 23; RR 4/102-03.
Don also testified that title company employees told him that $15,000 of the
funds wired to the company for closing would be placed in escrow, and that
Don could not access these funds until Choudhri “fe[lt] like it.” RR 2/272-
73. Another title company employee told him that Choudhri would deduct
$12,000 from the price to be paid at closing. RR 4/96. This evidence
establishes that Jetall decided not to perform the contract by paying the
required $450,000 purchase price, but instead resolved to pay no more than
$435,000 or $438,000 for the property. If credited by a jury, it excuses Don
and Gayle’s failure to go through with the closing, since they were not
32
obliged to part with the lot for less than Choudhri agreed to when the
contract was signed.
According to Don, Choudhri justified his insistence on lowering the
purchase price by claiming that Don failed to complete the special
provisions, but a jury could find that this was nothing more than a pretext to
pay less than the contract required. After all, Choudhri testified that he
wanted to close the sale regardless of Don’s supposed non-performance, that
he would have done so on December 15, and that he would not have sued for
reimbursement afterward. RR 3/98-105, 127, 185-86; RR 4/64-65. Indeed,
the trial court found that Jetall waived performance of the special provisions
as a matter of law. RR 4/4, 9. A jury could therefore have found that they
were not material elements of the Holmeses’ performance, that Jetall was
therefore obligated to pay the full purchase price at closing, and that
demanding to pay significantly less based on the special provisions
constituted repudiation. See Hernandez v. Gulf Grp. Lloyds, 875 S.W.2d
691, 692-93 (Tex. 1994) (discussing materiality of breach); In re Interest of
Doe, 917 S.W.2d 139, 142 (Tex. App. – Amarillo 1996, writ denied)
(substantial compliance excuses “contractual deviations or deficiencies
which do not seriously impair the purpose underlying the contractual
provision”).
33
Even forgetting about waiver and non-materiality, a jury could have
found that Don adequately performed the special provisions and that Jetall
lacked any justification for withholding $12,000 or $15,000 from the sales
price. The contract obligated Don and Gayle to provide a soil report and an
electronic survey. App. Tab 2 (Pl. Exh. 1 ¶ 11). The parties agree that Don
provided a soil report. Pl. Exh. 10; RR 3/65-67. Choudhri complained that
it dated to 1997, RR 3/65-67, but the contract does not expressly require a
new or recent report. App. Tab 2 (Pl. Exh. 1 ¶ 11). Moreover, Choudhri
admitted telling Don: “Don’t worry about the soil report. That’s fine. I’ll
deal with it.” RR 3/85-86, 200-01 (Choudhri “willing to… forgive and
forget” soil report). Likewise, Don testified that he provided an electronic
survey. RR 2/257, RR 4/95. As with the soil report, Choudhri testified that
he was expecting a newer one, RR 3/184, but the contract does not expressly
require a new survey or one completed only after the replatting. App. Tab 2
(Pl. Exh. 1 ¶ 11). And any understandings or expectations Choudhri may
have had about these items based on conversations with Don are irrelevant
to what the literal terms required of the Holmeses. Id. (Pl. Exh. 1 ¶ 22)
(“entire agreement” clause). Thus, a jury could find that Don and Gayle
fully complied with the soil report and survey provisions.
34
As for the replatting, Don acknowledged that he did not finish the task,
based on his understanding that this would happen after the closing. RR
2/254-56, 271-72; RR 4/100-01. While this was not compliant with the
contract, Don testified that finishing the process would only have cost $525.
Id. Thus, a jury could find that there was no basis to withhold $12,000 to
$15,000 in order to compensate for the failure to complete the replatting
before closing, and that Choudhri’s stated insistence that he would do so
(according to Don) was a repudiation of his obligation to pay $450,000 for
the lot. In fact, even if all three items – the soil report, the survey and the
replatting – are considered breaches by Don and Gayle, there is no evidence
that they would cost Jetall $12,000 to $15,000 to ameliorate. On the
contrary, Choudhri conceded that he did not know exactly how much
obtaining these items would actually have cost. RR 4/61-62. Hence, there is
ample evidence that Choudhri simply resolved to pay a lower price for the
property, set out to use the special provisions as a smokescreen for doing so,
and thereby anticipatorily breached.
“An anticipatory breach has been committed when one party demands
of the other party a performance to which he has no right under the contract
and states definitively that unless demand is complied with he will not
render the promised performance.” Lytle Lake Water Control and Imp. Dist.
35
v. Shaw Envtl., Inc., 2006 WL 6863698 at * 5 (N.D. Tex. 2006); accord Jon-
T Farms, Inc. v. Goodpasture, Inc., 554 S.W.2d 743, 746 (Tex. App. –
Amarillo 1977, writ ref’d n.r.e., disapproved on other grounds, McKinley v.
Drozd, 685 S.W. 2d 7 (Tex. 1985)) (citing comment to Tex. Bus & Com.
Code § 2.610: “repudiation occurs when one party… declares that he will
not perform except on conditions which go beyond the contract”);
Humphrey v. Placid Oil Co., 142 F. Supp. 246, 252 (E.D. Tex. 1956), aff’d,
244 F.2d 184 (5th Cir. 1957).
Examples of this sort of repudiation include refusing to fund a
previously agreed settlement unless a party acquiesced in new demands
concerning an exchange of stock, see Dror v. Mushin, 2013 WL 5643407 at
* 5 (Tex. App. – Houston [14th Dist.] 2013, rev. denied); refusing to pay for
dredging unless the payee used a different measurement of sediment than the
contract prescribed, see Lytle Lake, 2006 WL 6863698 at * 5; refusing to
close a real estate sale absent changes to a loan at odds with the sales
contract, see First Fed. Sav. & Loan Assoc. of Wilmette, Ill. v. Pardue, 545 F.
Supp. 433, 436-37 (N.D. Tex. 1982), aff’d, 703 F.2d 555 (5th Cir. 1983);
refusing to reinstate an insurance policy without extra, unauthorized
premium payments, see Crown Life Ins. Co. v. Reliable Machine and Supply
Co., Inc., 427 S.W.2d 145, 150 (Tex. App. – Austin 1968, writ ref’d n.r.e.);
36
and refusing to make payments unless oil well operators ran additional tests
not required by the contract. Humphrey, 142 F. Supp. at 254.
This is the sort of repudiation that occurred in this case. Here too, a
jury could find that Don and Gayle adequately performed the special
provisions, that not performing them did not add up to $12,000 or $15,000
anyway, that they were not material, and that Jetall waived them. Under any
of these circumstances, Jetall would have no basis under the contract to
lodge the new and additional demand of a significantly lower sales price as
its condition for consummating the sale. Telling Don that closing would
only occur with Jetall withholding or escrowing part of the previously
decided purchase price due to the special provisions communicated a
repudiation that excused the Holmeses’ performance.
In rejecting this argument at trial, the district court construed the
written correspondence from Choudhri to Don in December 2011 to be
making a new offer – withholding $12,000 in exchange for relief from the
special provisions – and that, when Don declined, the new offer “died on the
vine.” RR 4/7-8, 52-58; Pl. Exh. 23, 24, 29. But the court overlooked the
more unequivocal testimony from Don that Choudhri told him at their
December 13 meeting that he would withhold $12,000 or $15,000 at closing
or place it in escrow, as well as Don’s testimony that title company
37
employees told him the same thing. See supra. This testimony alone is
some evidence that Jetall committed anticipatory breach. To the degree that
Choudhri’s writings might have communicated a different or mixed message,
it was the jury’s job to choose among the disputed facts and multiple
potential meanings once properly instructed by the court on repudiation and
excuse.
Moreover, the trial court misconstrued Choudhri’s written
correspondence. In his December 13 email, Choudhri did not simply
indicate that Jetall would close the sale; he flatly demanded performance of
the special provisions (“The property is to be delivered with this done”) and
insisted that Don either delay the closing or credit $12,000 to Jetall. Pl. Exh.
23. If, as discussed above, a jury could find that Don and Gayle had already
substantially complied with the special provisions by this time, that they
were waived or non-material, or that, at most, they should credit $525 to
Jetall to finish the replatting, Choudhri’s requirement of either an
unspecified delay or the forfeiture of $12,000 was a new and extra-
contractual demand that could be construed as repudiation. See pp. 35-36,
supra (and authority cited therein). This is even more true of Jetall’s
lawyer’s letter to Don dated December 21. Pl. Exh. 29. That letter did not
propose deferring the closing but demanded either compliance with the
38
special provisions or deduction of $12,000 from the sales price, and
threatened litigation to boot. Id. In any event, while these documents may
be subject to more than one reading, Don’s testimony alone is some
evidence of Jetall’s repudiation.
In the end, whether Jetall would have simply closed the sale on
December 15 and paid the full purchase price was a disputed issue of fact.
Choudhri testified that Jetall would have, and would have forgiven any
supposed noncompliance with the special provisions. The documentary
evidence is arguably open to interpretation. But Don’s testimony directly
contradicted Choudhri’s account and would permit a jury to find that closing
would only have occurred if he and Gayle accepted $12,000 to $15,000 less
for their property. Given that testimony, they were entitled to a question on
anticipatory breach, and the trial court’s failure to submit one requires
reversal and a new trial.
PRAYER
The Court should reverse the award of lost profits and render
judgment for Jetall in the amount of $127,800 – representing the $75,000
award for the difference in value of the property and the $52,800 award for
attorneys’ fees incurred through trial – plus allowable interest. Failing that,
the Court should reverse the judgment and remand the case for retrial solely
39
on liability and on damages based only on the difference between the price
Jetall agreed to pay and the market value of the property. As a last option,
the Court should remand and order a retrial on all issues. In addition, since
the district court’s judgment will be altered by this Court’s judgment, the
Court should dissolve the abstract of judgment filed by Jetall during the
pendency of this appeal.
August 10, 2015 Respectfully Submitted,
/s/ Martin J. Siegel
Martin J. Siegel
Texas State Bar No. 18342125
LAW OFFICES OF MARTIN J. SIEGEL, P.C.
2222 Dunstan Road
Houston, Texas 77005
Telephone: (713) 226-8566
[email protected]
Geoffrey Berg
Texas Bar No. 00793330
BERG FELDMAN JOHNSON BELL, LLP
4203 Montrose Blvd., Suite 150
Houston, Texas 77006
Telephone: (713) 526-0200
[email protected]
Attorneys for Appellants
40
CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing corrected brief was served
on counsel of record for Appellee on December 21, 2015, by electronic
means:
Lori Twomey
George May
Twomey May PLLC
2 Riverway, 15th Fl.
Houston, TX 77056
Counsel for Appellee
/s/ Martin J. Siegel
Martin J. Siegel
41
CERTIFICATE OF COMPLIANCE
I certify that this brief complies with the word limit of TEX. R. APP. P.
9.4(i)(2) because this brief contains 9,389 words, excluding the parts of the
brief exempted by TEX. R. APP. P. 9.4(i)(1).
/s/ Martin J. Siegel
Martin J. Siegel
Dated: December 21, 2015
42
APPENDIX
INDEX
Tab:
Final Judgment and Charge of the Court ........................................................ 1
Jetall-Holmes Sales Contract, Plaintiff’s Exh. 1 ............................................ 2
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982 F.2d 526
NOTICE: Eighth Circuit Rule 28A(k) governs citation of unpublished opinions and provides that they are not precedent and generally should not be cited unless relevant to establishing the doctrines of res judicata, collateral estoppel, the law of the case, or if the opinion has persuasive value on a material issue and no published opinion would serve as well.William M. PRUETT, M.D., Appellant,v.Hunter RAWLINGS, President of University of Iowa; John W.Eckstein, Dean, University of Iowa College of Medicine;Robert E. Fellows, Professor and Director of PhysicianScientist Program; C. Marlin Stoltzfus, Professor;Francois Abboud, Professor and Chairman of the Department ofInternal Medicine; Gary Gussin, Professor; NationalInstitutes of Health, of the United States Department ofHEW, Appellees.
No. 92-1651.
United States Court of Appeals,Eighth Circuit.
Submitted: December 18, 1992.Filed: December 30, 1992.
Before MAGILL, Circuit Judge, HEANEY, Senior Circuit Judge, and BEAM, Circuit Judge.
PER CURIAM.
1
William M. Pruett, M.D., alleges that the defendants denied him procedural and substantive due process in terminating his position as a graduate student, participant in a grant program, and fellow in the Department of Internal Medicine at the University of Iowa Hospitals and Clinics. After a bench trial, the district court1 held that Pruett had failed to prove facts supporting his theory and granted judgment in favor of the defendants. This court holds that the district court's findings of facts are not clearly erroneous. Furthermore, the district court did not err in its application of the law. Because we conclude that Pruett has not satisfied his burden of proof in this case, we do not reach the issue of whether defendants are entitled to qualified immunity. The judgment of the district court is affirmed. See 8th Cir. R. 47B.
1
The Honorable Charles R. Wolle, United States District Judge for the Southern District of Iowa
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J-S62034-17
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P 65.37
COMMONWEALTH OF PENNSYLVANIA, : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellee :
:
v. :
:
KEVIN ANTHONY CLARKE, :
:
Appellant : No. 460 MDA 2017
Appeal from the Judgment of Sentence February 13, 2017
in the Court of Common Pleas of Berks County,
Criminal Division, at No(s): CP-06-CR-0002521-2014
BEFORE: STABILE, MOULTON, and STRASSBURGER,* JJ.
MEMORANDUM BY STRASSBURGER, J.: FILED OCTOBER 23, 2017
Kevin Anthony Clarke (Appellant) appeals from his February 13, 2017
judgment of sentence to an aggregate one to three years’ imprisonment
following the revocation of his probation. Counsel has filed a petition to
withdraw and a brief pursuant to Anders v. California, 386 U.S. 738
(1967). We affirm Appellant’s judgment of sentence and grant counsel’s
petition to withdraw.
On September 30, 2014, Appellant pled guilty to criminal trespass and
terroristic threats and was sentenced to less than two years of incarceration
followed by seven years’ probation.
Once paroled from his sentence of incarceration, Appellant
violated the terms of his probation because of a new arrest at
*Retired Senior Judge assigned to the Superior Court.
J-S62034-17
CP-06-CR-0003249-2014. At the Gagnon II[1] hearing,
Appellant admitted the violations and proceeded informally.
Following the recommendations of the Commonwealth, []
Appellant was resentenced to not less than one (1) nor more
than three (3) years’ incarceration at the Bureau of Corrections.
Concurrent to this sentence, [for count three, terroristic threats],
Appellant was resentenced to not less than one (1) nor more
than three (3) years’ incarceration at the Bureau of Corrections.
Following sentencing, a timely post sentence motion was
filed. [The trial court] denied the motion on February 27, 2017.
Appellant then filed an appeal on March 13, 2017.
Subsequently, Appellant filed a concise statement of errors
pursuant to Rule 1925(b) of the Pennsylvania Rules of Appellate
Procedure.
Trial Court Opinion, 5/23/2017, at 1 (citation omitted).
In this Court, counsel filed both an Anders brief and a petition to
withdraw as counsel. Accordingly, the following principles guide our review.
Direct appeal counsel seeking to withdraw under Anders
must file a petition averring that, after a conscientious
examination of the record, counsel finds the appeal to be wholly
frivolous. Counsel must also file an Anders brief setting forth
issues that might arguably support the appeal along with any
other issues necessary for the effective appellate presentation
thereof….
Anders counsel must also provide a copy of the Anders
petition and brief to the appellant, advising the appellant of the
right to retain new counsel, proceed pro se or raise any
additional points worthy of this Court’s attention.
If counsel does not fulfill the aforesaid technical
requirements of Anders, this Court will deny the petition to
withdraw and remand the case with appropriate instructions
(e.g., directing counsel either to comply with Anders or file an
advocate’s brief on Appellant’s behalf). By contrast, if counsel’s
petition and brief satisfy Anders, we will then undertake our
1
Gagnon v. Scarpelli, 411 U.S. 778 (1973).
-2-
J-S62034-17
own review of the appeal to determine if it is wholly frivolous. If
the appeal is frivolous, we will grant the withdrawal petition and
affirm the judgment of sentence. However, if there are non-
frivolous issues, we will deny the petition and remand for the
filing of an advocate’s brief.
Commonwealth v. Wrecks, 931 A.2d 717, 720-21 (Pa. Super. 2007)
(citations omitted). Further, our Supreme Court has specified the following
requirements for the Anders brief:
[I]n the Anders brief that accompanies court-appointed
counsel’s petition to withdraw, counsel must: (1) provide a
summary of the procedural history and facts, with citations to
the record; (2) refer to anything in the record that counsel
believes arguably supports the appeal; (3) set forth counsel’s
conclusion that the appeal is frivolous; and (4) state counsel’s
reasons for concluding that the appeal is frivolous. Counsel
should articulate the relevant facts of record, controlling case
law, and/or statutes on point that have led to the conclusion that
the appeal is frivolous.
Santiago, 978 A.2d at 361.
Based upon our examination of counsel’s petition to withdraw and
Anders brief, we conclude that counsel has substantially complied with the
technical requirements set forth above.2 Thus, we now have the
responsibility “‘to make a full examination of the proceedings and make an
independent judgment to decide whether the appeal is in fact wholly
frivolous.’” Commonwealth v. Flowers, 113 A.3d 1246, 1249 (Pa. Super.
2015) (quoting Santiago, 978 A.2d at 354 n. 5).
2 Appellant has not filed a response to counsel’s petition to withdraw.
-3-
J-S62034-17
In his Anders brief, counsel states the following question for this
Court’s review:
Whether Appellant’s sentence of 1 to 3 years in a state
correctional institution on two counts (concurrent) was
manifestly excessive, clearly unreasonable, and contrary to the
fundamental norms underlying the Sentencing Code, where the
court imposed a sentence that failed to fully account for
Appellant’s remorse and the nature of the probation violation?
Anders Brief at 9.
We consider this question mindful of the following. It is within this
Court’s scope of review to consider challenges to the discretionary aspects of
an appellant’s sentence in an appeal following a revocation of probation.
Commonwealth v. Ferguson, 893 A.2d 735, 737 (Pa. Super. 2006)
The imposition of sentence following the revocation
of probation is vested within the sound discretion of
the trial court, which, absent an abuse of that
discretion, will not be disturbed on appeal. An abuse
of discretion is more than an error in judgment—a
sentencing court has not abused its discretion unless
the record discloses that the judgment exercised was
manifestly unreasonable, or the result of partiality,
prejudice, bias or ill-will.
In determining whether a sentence is manifestly
excessive, the appellate court must give great
weight to the sentencing court’s discretion, as he or
she is in the best position to measure factors such as
the nature of the crime, the defendant’s character,
and the defendant’s display of remorse, defiance, or
indifference.
Upon revoking probation, a sentencing court may choose
from any of the sentencing options that existed at the time of
the original sentencing, including incarceration. [U]pon
revocation [of probation] ... the trial court is limited only by the
maximum sentence that it could have imposed originally at the
-4-
J-S62034-17
time of the probationary sentence. However, 42 Pa.C.S.[]
§ 9771(c) provides that once probation has been revoked, a
sentence of total confinement may only be imposed if any of the
following conditions exist[s]:
(1) the defendant has been convicted of another
crime; or
(2) the conduct of the defendant indicates that it is
likely that he will commit another crime if he is not
imprisoned; or
(3) such a sentence is essential to vindicate the
authority of the court.
In addition, in all cases where the court resentences an
offender following revocation of probation ... the court shall
make as a part of the record, and disclose in open court at the
time of sentencing, a statement of the reason or reasons for the
sentence imposed [and] [f]ailure to comply with these provisions
shall be grounds for vacating the sentence or resentence and
resentencing the defendant. A trial court need not undertake a
lengthy discourse for its reasons for imposing a sentence or
specifically reference the statute in question, but the record as a
whole must reflect the sentencing court’s consideration of the
facts of the crime and character of the offender.
Commonwealth v. Colon, 102 A.3d at 1033, 1044 (Pa. Super. 2014)
(citations and quotation marks omitted).
An appellant is not entitled to the review of challenges to the
discretionary aspects of a sentence as of right. Rather, an
appellant challenging the discretionary aspects of his sentence
must invoke this Court’s jurisdiction. We determine whether the
appellant has invoked our jurisdiction by considering the
following four factors:
(1) whether appellant has filed a timely notice of
appeal, see Pa.R.A.P. 902 and 903; (2) whether the
issue was properly preserved at sentencing or in a
motion to reconsider and modify sentence, see
Pa.R.Crim.P. 720; (3) whether appellant’s brief has a
fatal defect, Pa.R.A.P. 2119(f); and (4) whether
-5-
J-S62034-17
there is a substantial question that the sentence
appealed from is not appropriate under the
Sentencing Code, 42 Pa.C.S.A. § 9781(b).
Commonwealth v. Samuel, 102 A.3d 1001, 1006-07 (Pa. Super. 2014)
(some citations omitted).
Here, Appellant filed a notice of appeal after preserving the issue by
filing a motion to modify sentence, and the Anders brief contains a
statement pursuant to Pa.R.A.P. 2119(f). We thus consider whether there is
a substantial question that Appellant’s sentence is inappropriate.
Appellant contends
that the [trial] court failed to state reasons [for imposing
Appellant’s sentence that] comport with the requirements under
42 Pa.C.S. § 9721(b). The [trial] court failed to follow the
general principle that the sentence imposed should call for
confinement that is consistent with the protection of the public,
the gravity of the offense as it relates to the impact on the life of
the victim and on the community, and the rehabilitative needs of
the [Appellant], thereby creating a sentence that offends the
fundamental norms underlying sentencing. The [trial] court’s
failure to give these factors their proper weight in deciding
Appellant’s sentence raises a substantial question as to the
appropriateness of the sentence under the Sentencing Code.
Anders Brief at 17. With respect to Appellant’s latter argument, Appellant
claims that the court did not “consider the requisite factors under 42
PA.C.S.[ ] § 9721(b), particularly the rehabilitative needs of Appellant[,]”
noting that he had expressed remorse and sought to stay out of jail to
maintain his employment and be there for his children. Appellant’s Brief at
19. Appellant also argues that the trial court did not “fully consider” the
applicable sentencing factors. Appellant is essentially requesting this Court
-6-
J-S62034-17
to reweigh the factors in his favor, averring the trial court failed to give
“these factors proper weight.” Id. at 17. Such a claim does not raise a
substantial question for our review. “We cannot re-weigh the sentencing
factors and impose our judgment in the place of the sentencing court.”
Commonwealth v. Macias, 968 A.2d 773, 778 (Pa. Super. 2009).
Moreover, in this case, the trial court had the benefit of a presentence
investigation report and thus is presumed to have considered all relevant
information. Commonwealth v. Boyer, 856 A.2d 149, 154 (Pa. Super.
2004). Additionally, the trial court had the opportunity to listen to
Appellant’s allocution, on the record, at the time of sentencing. N.T.,
2/13/2017, at 4.
Furthermore, the trial court did state reasons on the record for
sentencing Appellant to a term of total incarceration.3
The thing that is most troubling about this matter is in a very
short period of time after you are convicted at this docket you
did basically the exact same thing and were sentenced by Judge
Barrett for the same thing, terroristic threats. … And you know,
[Appellant], I believe in giving somebody a break and giving
somebody a second chance but your sheet goes back here
[seven] years. I mean you’ve got plenty of time and you got a
3
Under 42 Pa.C.S. § 9711(c), as cited supra, there are limitations on a
sentence of total confinement after the revocation of probation. A trial court
may impose a term of incarceration if it determines, inter alia, that a
defendant has been convicted of another crime. See 42 Pa.C.S.
§ 9711(c)(1). Here, Appellant admitted that he had been convicted of
another crime, prompting the revocation of his probation. See N.T.,
2/13/2017, at 2 (indicating that, when asked if Appellant acknowledged that
he was in violation of his probation because of a new arrest and conviction,
Appellant answered “yes.”).
-7-
J-S62034-17
real mix of cases here[,] sexual assault, delivery of controlled
substances, criminal trespass. You show no signs of good faith
here that can be relied on.
Id. at 4-5.
Thus, we agree with counsel that Appellant’s issue regarding his
sentence is frivolous. Moreover, we have conducted “a full examination of
the proceedings” and conclude that “the appeal is in fact wholly frivolous.” 4
Flowers, 113 A.3d at 1248. Accordingly, we affirm the judgment of
sentence and grant counsel’s petition to withdraw.
Judgment of sentence affirmed. Petition to withdraw granted.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 10/23/2017
4 We reviewed the record mindful of the fact that “the scope of review in an
appeal following a sentence imposed after probation revocation is limited to
the validity of the revocation proceedings and the legality of the sentence
imposed following revocation.” Commonwealth v. Infante, 888 A.2d 783,
790 (Pa. 2005)
-8-
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397 So.2d 130 (1980)
Roger GILLESPIE
v.
Donald and Martha BAILEY.
Civ. 2356.
Court of Civil Appeals of Alabama.
November 12, 1980.
Rehearing Denied December 17, 1980.
*131 Judith S. Crittenden of Clark, James & Crittenden, Birmingham, for appellant.
Lee Clyde Traylor of Traylor & McGee, Fort Payne, for appellee.
BRADLEY, Judge.
This is an adoption case.
The natural father, Roger Gillespie, appeals from a judgment of the Circuit Court of DeKalb County holding that he had abandoned his infant daughter, Jennifer.
The sole issue on appeal is whether the evidence supports the trial court's finding that Gillespie had abandoned his daughter and, therefore, his consent to her adoption was unnecessary.
Section 26-10-3, Code of Alabama 1975, provides that the consent of a child's parents must be obtained for the child's adoption unless the parents have abandoned the child.
The record reveals the following facts:
On September 6, 1976 the mother of Jennifer was killed and Jennifer's father, Roger Gillespie, was arrested and charged with her death. He later pleaded guilty to voluntary manslaughter and was sentenced to serve four to twelve years in an Illinois prison. Gillespie served two and one-half years of this sentence, was paroled, and now lives with his parents in West Virginia.
Shortly after the mother's death, Jennifer was taken to Alabama where she stayed for a short while with a maternal aunt. Jennifer was four and one-half months old. After several weeks, the aunt entrusted the care of Jennifer to Mr. and Mrs. Donald Bailey, who were neighbors. Jennifer has been with the Baileys since that time except for one night after the district court had given custody of Jennifer to the maternal aunt and her husband.
The Baileys filed a petition for adoption of Jennifer in the DeKalb County Probate Court on September 9, 1977. Roger Gillespie's mother and father filed a petition in the DeKalb County District Court on December 7, 1977 seeking custody of Jennifer. (At no time has Gillespie sought the custody of his daughter from an Alabama court.) In said petition they also asked that the Baileys' adoption proceedings be transferred to the district court for hearing. The adoption matter was transferred to the district court on December 15, 1977.
After a hearing, temporary custody of Jennifer was placed with the Baileys. No *132 further action was taken on the adoption matter. Both proceedings were appealed to the circuit court.
After an ore tenus hearing in the circuit court, custody of Jennifer was awarded to the Baileys. Later the Baileys moved the circuit court to hear and decide their petition for adoption of Jennifer. The natural father was notified and the matter came on for hearing before the court. After testimony was taken the court held that the natural father had abandoned his daughter and his consent to her adoption by the Baileys was, therefore, not required.
The evidence also shows that after Roger Gillespie was charged with killing his wife, he was released on bond and remained so for ten months. During the time that he was free on bond, Gillespie on three occasions sent the Baileys small amounts of money for Jennifer. For the two and one-half years that he was in prison, he did not send his daughter any money, gifts, cards or letters. After being released from prison on parole, Gillespie obtained a job with a bakery in West Virginia and after his second payday sent Jennifer $50. This money was sent about two weeks before the trial of the adoption matter. Although he sent some money to his daughter after being released from prison, Gillespie did not write or call his daughter nor make any other effort to see her or contact her.
From the time the child was taken from Illinois after her mother's death until the trial of the abandonment issue, Gillespie had seen his daughter one time for a period of fifteen minutes. This visit took place in Alabama at a relative's house. Mrs. Bailey took the child to the relative's house for the visit. She stated that Gillespie did not speak to the child, did not ask to hold the child and did not touch the child. Furthermore, at no time while the father was out on bond did he write to the child, call her on the telephone, or send her gifts, cards or letters. He did, however send small amounts of money to the Baileys on three different occasions. During the period when he was out of jail on bond, Gillespie asked Mr. Bailey to keep Jennifer and not let the maternal grandparents have her. After being incarcerated Gillespie was requested to give his consent to Jennifer's adoption by the Baileys but he refused.
In order for a parent to be deemed to have abandoned his child within the purview of the adoption statute, i. e. § 26-10-3, it must appear that the parent has intentionally abandoned the child. That is, the parent has undertaken a course of conduct toward the child which would imply a conscious disregard or indifference to parental obligations owed to the child. Straszewicz v. Gallman, Ala.Civ.App., 349 So.2d 593 (1977); Henderson v. Feary, Ala.Civ.App., 340 So.2d 808, cert. denied, Ala., 340 So.2d 811 (1976).
Assessing the evidence of the case in the light of the presumption of correctness, we conclude that the judgment at bar is sufficiently supported by the evidence to withstand the appeal.
In summary, the evidence to which we refer is the unlawful killing of the child's mother, resulting in the father's imprisonment on a four to twelve year sentence; the father's relinquishment of the child's care to relatives; the father's consent for strangers to keep the child so long as they did not allow the maternal grandparents to have her; the father's failure to call, write or send his daughter gifts during the entire time that she has been in Alabama; and the total lack of concern for and interest in the daughter exhibited by the father during his one visit with her. Thomas v. Culpepper, Ala.Civ.App., 356 So.2d 656 (1978). The few instances in which he sent money to the Baileys for the child and his refusal to consent to the adoption do not require a different finding.
We are not to be understood as holding that incarceration per se constitutes abandonment, but we do hold that it is a factor to be considered along with the other factors indicating abandonment. Thomas v. Culpepper, supra.
*133 Therefore we hold that the evidence supports the trial court's finding that Gillespie had intentionally relinquished the rights and obligations of parenthood and, as a result, had abandoned his daughter within the meaning of the adoption statute.
AFFIRMED.
HOLMES, J., concurs.
WRIGHT, P. J., concurs in the result.
| {
"pile_set_name": "FreeLaw"
} |
658 F.Supp.2d 1372 (2009)
Teresa DEVORE, Plaintiff,
v.
HOWMEDICA OSTEONICS CORPORATION, a New Jersey corporation d/b/a Stryker Orthopaedics; Orthopedic Solutions, Inc., d/b/a Stryker South Florida Agency, Defendants.
Case No. 3:09-cv-690-J-32HTS.
United States District Court, M.D. Florida, Jacksonville Division.
September 28, 2009.
*1373 Douglass A. Kreis, Neil Duane Overholtz, Aylstock, Witkin, Kreis & Overholtz, PLLC, Pensacola, FL, for Plaintiff.
Francis M. McDonald, Jr., Sarah A. Long, Carlton Fields, PA, Orlando, FL, for Defendants.
ORDER
TIMOTHY J. CORRIGAN, District Judge.
This case is before the Court on plaintiff Teresa Devore's Motion to Remand for lack of complete diversity and insufficient amount in controversy. (Doc. 4). Defendants Howmedica Osteonics Corporation d/b/a Stryker Orthopaedics ("HOC") and Orthopedic Solutions, Inc. d/b/a Stryker South Florida Agency ("Orthopedic Solutions") oppose remand on the grounds that Devore has both understated her damages demand and fraudulently joined Orthopedic Solutions for the purpose of circumventing removal. (Doc. 17).
I. Background
On January 29, 2009, Devore, a Florida citizen, filed suit in state court against HOC, a New Jersey corporation with its principal place of business in New Jersey, and Orthopedic Solutions, a Florida corporation with its principal place of business in Florida. (Doc. 1 ¶¶ 4, 9, 10). HOC is a manufacturer of hip prostheses, including the "Trident Ceramic Acetabular System" ("Stryker Trident"). (Doc. 2 ¶ 4). Orthopedic Solutions is a distributor of HOC products within the territory of South Florida. (Doc. 17 at 4). It does not distribute HOC products in North Florida. Id. at 11.
In her complaint, Devore alleges that on December 14, 2004, a Styker Strident hip prosthesis manufactured by HOC was implanted in Devore's right hip. (Doc. 2 ¶ 17, 18). Within two months of implantation, the device failed, causing Devore injury.[1]Id. ¶¶ 20, 21. Devore contends that both defendants: i) are strictly liable for her injuries due to the defective design and manufacture of the prosthesis; ii) breached both express and implied warranties regarding the safety and quality of the product; iii) breached their duty of care by the negligent design, manufacture, and provision of warnings regarding the product; and iv) deceptively and unlawfully induced Devore to purchase the defective prosthesis in violation of Florida's Deceptive Trade and Unfair Trade Practices Act ("FDUPTA"), Fla. Stat. §§ 501.201 et seq. Id. ¶¶ 27-66. While Devore does not assert that Orthopedic Solutions directly *1374 supplied the allegedly defective product to her, she contends that the company is a properly joined defendant due to its engagement in "the retailing, distributing, marketing, and/or supplying [of the subject medical device], either directly or indirectly, to members of the general public within the State of Florida, including [Devore]." Id. ¶ 5. The complaint alleges damages in excess of $15,000, the state court jurisdictional threshold.
On May 27, 2009, HOC served Devore with Damages Interrogatories asking her to admit or deny that the damages she sought would exceed the federal diversity jurisdiction threshold of $75,000.[2] Devore responded on June 26, 2009 that she could not deny that claimed damages would exceed $75,000 because she intended to seek "the maximum amount of compensation which the jury may award based on the facts of her case."[3]Id. On July 24, 2009, HOC and Orthopedic Solutions filed a notice of removal to this Court (Doc. 1), contending that federal jurisdiction is proper because i) Devore's responses to the interrogatories established that the amount in controversy is greater than $75,000, and ii) the presence of Orthopedic Solutions, as a fraudulently joined defendant, does not defeat diversity jurisdiction.
Regarding fraudulent joinder, defendants provided the affidavit of Gordon Ballard, Director of Distribution for HOC. (Doc. 1, Ex. 4). Ballard's affidavit identifies the particular Stryker Trident implanted in Devore's hip, and states that a review of the invoice and distribution documentation for the subject device "establishes conclusively that Orthopedic Solutions, Inc., d/b/a Stryker South Florida Agency did not participate in any way in the sale or distribution of the subject device." Id. ¶ 4. Ballard's statements are supplemented by exhibits purportedly tracking the subject device from HOC's Cork, Ireland manufacturing facility to its New Jersey headquarters, after which it was shipped directly to an HOC warehouse facility in Jacksonville, Florida.[4] (Doc. 1, Ex. 4 ¶ 5). From there, Ballard contends (and HOC provides documentation to support) that the subject device was sent to Flagler Hospital pursuant to a requisition request, where it was implanted in Devore's hip by her surgeon, Dr. James Grimes, on December 14, 2004.
On July 29, 2009, Devore moved to remand the case to state court, arguing that she had met her burden of demonstrating "even a possibility" of a valid claim against Orthopedic Solutions and that the defendants had failed to establish beyond "mere *1375 conclusory allegations" that the amount in controversy was greater than $75,000. (Doc. 4 at 3, 10). Devore's motion offers no rebuttal to Ballard's affidavit or the documentation supporting it, other than to note that the Southern District of Florida had rejected defendants' attempted removal of a matter allegedly involving similar claims.[5] Devore also restates her contention that Orthopedic Solutions was properly joined because the company was "involved extensively in the Stryker Trident's promotion, distribution, supply and sale throughout Florida and specifically related to the device ultimately sold and implanted into [Devore]." Id. at 8. As to the question of jurisdictional amount, Devore contends that defendants' only support for their argument that damages exceed $75,000 is a "misrepresentation of [Devore]'s responses to Interrogatories," as she "responded directly and by incorporation that she was unable to make such assertion but rather `seeks the maximum amount of compensation which the jury may award based on the facts of her case.'" Id. at 3, 10.
On August 19, 2009, HOC and Orthopedic Solutions filed a response to Devore's motion, which proffers further documentation in support of removal. (Doc. 17). One such document is the affidavit of Rosemarie Morisco, HOC's Senior Director of Sales Operations/Finance (Doc. 17, Ex. D), in which Morisco stated that she had reviewed the exclusive agency agreements governing the relationship between HOC and Orthopedic Solutions, and that those documents "conclusively show[ ] that Orthopedic [Solutions] was not authorized to conduct business in or compensated for business generated in areas of Florida other than those listed in the agreements," with the listed territory being "limited to South Florida."[6]Id. ¶ 7. Further, Morisco stated that "[since 2002], the territory described as North Florida, including St. John's County specifically, was exclusively covered by [HOC] directly." Id. ¶ 8.
To rebut Devore's assertions regarding claimed damages, Defendants also provide a presuit demand letter dated February 22, 2007 from Devore's counsel[7] to HOC. (Doc. 17, Ex. F). The letter estimates that a jury verdict in Devore's favor could be expected to approximate $646,009.66, comprised of: (1) Medial Bills (Past): $101,009.66[8]; (2) Intangible Damages (Past): $120,000; and (3) Intangible Damages (Future): $425,000. Id. at 5. The letter closes with the following: "[p]lease note that the above total does not include any amounts for the future medical expenses [Devore] is certain to incur for treatment of her ongoing, permanent injuries. A significant award of future medical expenses will likely drive [Devore]'s future intangible damages *1376 even higher!" Id. (emphasis in original).
II. Discussion
A. The Law of Fraudulent Joinder
A defendant may remove a civil case from state to federal court if the federal court has original jurisdiction. 28 U.S.C. § 1441(a). For a federal court to have original jurisdiction over a case alleging only state law claims, as here, there must be complete diversity and the threshold amount in controversy. 28 U.S.C. § 1332(a). To satisfy the diversity requirement for removal jurisdiction, "no defendant can be a citizen of the state in which the action was brought." Tillman v. R.J. Reynolds Tobacco, 253 F.3d 1302, 1305 (11th Cir.2001) (citing 28 U.S.C. § 1441(b)).
The doctrine of fraudulent joinder provides an exception to this diversity of citizenship requirement. Tran v. Waste Mgmt., Inc., 290 F.Supp.2d 1286, 1292 (M.D.Fla.2003). A plaintiff cannot defeat removal to federal court by joining a non-diverse defendant with no true connection to the controversy. Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 66 L.Ed. 144 (1921). Where a defendant is found to be fraudulently joined, its citizenship is not considered for the purposes of determining whether complete diversity exists. Henderson v. Washington Nat'l Ins. Co., 454 F.3d 1278, 1281 (11th Cir.2006).
The burden of proving fraudulent joinder rests on the removing party, Tran, 290 F.Supp.2d at 1293, and is a "heavy one." Pacheco de Perez v. AT & T Co., 139 F.3d 1368, 1380 (11th Cir.1998). A defendant must show by clear and convincing evidence that "there is no possibility that the plaintiff can prove a cause of action against the resident defendant."[9]Henderson, 454 F.3d at 1281. "[T]he district court must evaluate the factual allegations in the light most favorable to the plaintiff and must resolve any uncertainties about state substantive law in favor of the plaintiff.... The federal court makes these determinations based on the plaintiff's pleadings at the time of removal; but the court may consider affidavits and deposition transcripts submitted by the parties." Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir.1997) (internal citation omitted); see also Legg v. Wyeth, 428 F.3d 1317, 1322 (11th Cir.2005).
In resolving a claim of fraudulent joinder, the court will proceed in a fashion "similar to that used for ruling on a motion for summary judgment under Fed.R.Civ.P. 56(b)." Tran, 290 F.Supp.2d at 1293 (quoting Crowe, 113 F.3d at 1538). However, "as with a summary judgment motion we resolve factual controversies in favor of the nonmoving party only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts. We do not, however, in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts." Legg, 428 F.3d at 1323 (emphasis in original and internal citation omitted). In other words, "there must be some question of fact before the district court can resolve that fact in the plaintiff's favor." Id. "When the Defendants' affidavits are undisputed by the Plaintiff[ ], the court cannot then resolve facts in the Plaintiff['s] favor based solely on the unsupported allegations in the Plaintiff['s] complaint." Id.
In their notice of removal, HOC and Orthopedic Solutions present an affidavit, supported by documentary evidence, demonstrating that Orthopedic Solutions *1377 had no involvement in the sale or distribution of the medical device allegedly implanted in Devore. In her motion to remand, Devore ignores that issue entirely and instead attaches a series of exhibits supporting the fact that Orthopedic Solutions retails and distributes HOC products, including the Stryker Trident, within the state of Florida. That Orthopedic Solutions distributes HOC products in Florida, however, is not disputed by the defendants.[10] What defendants do assert is that "Orthopedic Solutions was not involved in any way, shape, or form with the sale or distribution of [Devore]'s hip prosthesis." (Doc. 17 at 8)(emphasis added). Devore has provided no evidence to dispute this statement and the documentation supporting it, and rests solely upon the allegation that Orthopedic Solutions is liable because it has marketed and distributed the same type of product that injured her within the same state she purchased the product.
Devore's complaint contends that both defendants are liable on the grounds of strict liability defective design, manufacture, and failure to warn; breach of both express and implied warranties; negligent design, manufacture, and failure to warn; and FDUPTA. Despite this, neither Devore's complaint nor her motion to remand specifically allege that Orthopedic Solutions owed her any particular duty, was in privity with her, or made any representation to her whatsoevernecessary components of all but her strict liability claim. In an apparent concession of this fact, Devore's motion to remand addresses only the validity of her strict liability claim vis-a-vis Orthopedic Solutions. As a result, since Devore has not contended that remand is proper on the basis of the remaining claims, the Court considers only whether she has shown "even a possibility" of establishing a valid strict liability action against Orthopedic Solutions.
1. Strict Liability
Florida adopted the doctrine of strict liability, as stated in A.L.I. Restatement (Second) of Torts § 402A[11] (1965), in West *1378 v. Caterpillar Tractor Co., 336 So.2d 80 (Fla.1976). In West, the Florida Supreme Court held that "[i]n order to hold a manufacturer liable on the theory of strict liability in tort, the user must establish the manufacturer's relationship to the product in question." West, 336 So.2d at 87 (emphasis added). Florida courts have since expanded the doctrine beyond manufacturers of defective products "to others in the distributive chain including retailers, wholesalers, and distributors." Samuel Friedland Family Enter v. Amoroso, 630 So.2d 1067, 1068 (Fla.1994). The purpose behind such expansion "is that those entities within a product's distributive chain `who profit from the sale or distribution of [the product] to the public, rather than an innocent person injured by it, should bear the financial burden of even an undetectable product defect.'" Id. (quoting North Miami General Hosp., Inc. v. Goldberg, 520 So.2d 650, 651 (Fla. 3d DCA 1988)) (emphasis added, alteration in original).
It is therefore true, as Devore asserts, that a distributor or retailer is answerable in strict liability when it is within the distributive chain via which the allegedly defective product made its way from the manufacturer to the injured consumer or user. See Rivera v. Baby Trend, Inc., 914 So.2d 1102, 1104 (Fla. 4th DCA 2005). As a necessary precursor to stating a valid strict liability claim against a distributor or retailer, however, a plaintiff must establish that it has properly identified the defendant as actually being within the distributive chain of the product which caused injury. See Id.; see also Siemens Energy & Automation, Inc. v. Medina, 719 So.2d 312, 315 (Fla. 3d DCA 1998) (finding that motion for directed verdict should have been granted because defendant acted as a "conduit of information" but did not serve as distributor or retailer for product that injured plaintiff, and thus was not part of the product's distributive chain); Mahl v. Dade Pipe and Plumbing Supply Co., Inc., 546 So.2d 740, 741 (Fla. 3d DCA 1989) (granting summary judgment in a products liability action where plaintiff "relied on faith and hope alone" and failed to present any evidence that defendants actually manufactured or supplied the allegedly defective product).
Regardless of the theory which liability is predicated upon, whether negligence, breach of warranty, strict liability in tort, or other grounds, it is obvious that to hold a producer, manufacturer, or seller liable for injury caused by a particular product, there must first be proof that the defendant produced, manufactured, sold, or was in some way responsible for the product. Although the matter of identification is thus inherent in every products liability action, it becomes an issue in only a relatively small number of cases, since the identity of the manufacturer or seller is usually well-known and not in dispute.
Annot., Products Liability: Necessity and Sufficiency of Identification of Defendant as Manufacturer or Seller of Product Alleged to Have Caused Injury, 51 A.L.R 3d *1379 1344 § 2(a) (1973)(emphasis added and footnotes omitted).
The Florida Standard Jury Instructions for Product Liability are clear on this point in that they presuppose a defendant's involvement with the defective product. The standard charge in a products liability action reads: "[t]he issues for your determination on the claim of (claimant) against (defendant) are whether the (describe product) [sold] [supplied] by (defendant) was defective when it left the possession of (defendant) and, if so, whether such defect was a legal cause of [loss] [injury] [or] [damage] sustained by (claimant or person for whose injury claim is made)." Florida Standard Jury Instructions, PL Product Liability (emphasis added). While Florida courts have found that a plaintiff need not prove the defendant was ever in physical possession, Devore must still establish that Orthopedic Solutions possessed some element of "control over the allegedly defective product." Rivera, 914 So.2d at 1104 (describing the following as queries relevant to the issue of defendant's control: "whether the person or entity placed the product in the stream of commerce, is in a position to control the risk of harm a product might cause once put into the stream of commerce, or either created or assumed the risk of harm for the defective product")(internal quotation and citation omitted).
It is undisputed that HOC was both the manufacturer and distributor from which Flagler Hospital, Dr. Grimes, and ultimately, Devore, obtained the Stryker Trident that allegedly caused Devore's injury, and it is undisputed that Orthopedic Solutions was completely uninvolved with that particular device.[12] Since Devore has presented nothing to contradict the uncontroverted evidence that Orthopedic Solutions was not involved in any way in the sale or distribution of the hip prosthesis that allegedly caused her injury, she cannot establish a vital element of her strict liability claimthat Orthopedic Solutions was within the distributive chain for the product that injured her. As Orthopedic Solutions cannot otherwise be liable, Devore has failed to establish that her strict liability claim "is an arguable one under state law." Crowe, 113 F.3d at 1538. Since the Court is instructed by Legg that it may not, "in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts," Legg, 428 F.3d at 1323 (internal citation and emphasis omitted), Devore has not established "even a possibility" of a valid claim against Orthopedic Solutions.
B. Amount in Controversy
The sole remaining issue is whether the amount in controversy exceeds $75,000, the threshold for federal diversity jurisdiction. See 28 U.S.C. § 1332(a). For the purposes of this determination, the Court must "review the propriety of removal on the basis of the removing documents." Lowery v. Alabama Power Co., 483 F.3d 1184, 1211 (11th Cir.2007). Where a plaintiff has not pleaded a specific amount in damages, the removing defendant bears the burden to show by a preponderance of the evidence that the amount in controversy meets the jurisdictional requirement. Id. at 1208-09; Miedema v. Maytag Corp., 450 F.3d 1322, 1326 (11th Cir.2006).
*1380 In Lowery, the Eleventh Circuit addressed "how a district court must proceed in evaluating its jurisdiction after removal." Lowery, 483 F.3d at 1187. The Court found that, pursuant to 28 U.S.C. § 1446(b), a defendant may remove based on either the plaintiff's original pleading or "a copy of an amended pleading, motion, order, or other paper." Id. at 1212 (quoting 28 U.S.C. § 1446(b)). Regarding what constitutes "other paper," the Court noted that a number of documents have been judicially recognized as such, including interrogatory responses. Id. at 1213, n. 61. The Court stated that a district court, "in assessing the propriety of removal, ... considers the document received by the defendant from the plaintiffbe it the initial complaint or a later received paper and determines whether that document and the notice of removal unambiguously establish federal jurisdiction." Id. at 1213. The Court concluded that "[i]f the jurisdictional amount is either stated clearly on the face of the documents before the court, or readily deducible from them, then the court has jurisdiction." Id. at 1211.
Defendants, as required by 28 U.S.C. § 1446(b), filed their notice of removal within thirty days of receiving Devore's responses to the damages interrogatories, which did not deny that she sought damages greater than $75,000.[13] Devore contends that her equivocal responses to the interrogatories do not create the necessary clarity required to support removal under Lowery. It is true that Devore's refusal to stipulate the actual amount of damages sought does not, standing alone, support jurisdiction. Williams v. Best Buy Co., 269 F.3d 1316, 1320 (11th Cir.2001). However, this Court has stated that a plaintiff's "`refusal to stipulate or admit that she is not seeking damages in excess of the requisite amount' should be considered" when assessing the amount in controversy. Morock, 2007 WL 1725232 at *2 (quoting Hanna v. Miller, 163 F.Supp.2d 1302, 1306 (D.N.M.2001)). Further, Lowery does not so handcuff a district court that it may not find jurisdiction where a plaintiff purposefully refuses to acknowledge that she is seeking the requisite damages. See Roe v. Michelin North America, Inc., 637 F.Supp.2d 995, 999-1000 (M.D.Ala.2009) (wrongful death action in which the court stated that "[n]othing in Lowery says a district court must suspend reality or shelve common sense in determining whether the face of a complaint, or other document, establishes the jurisdictional amount"; "[w]hile it would be speculative to specify the exact dollar amount at issue in this case, it is not speculative to conclude... that the amount, whatever it is, far exceeds $75,000").
While Devore's is not a wrongful death action as in Roe, it is a products liability action in which she claims to have suffered significant injuriesinjuries severe enough for her to have amassed over $100,000 in medical bills (with several yet to be tallied) according to her presuit demand letter of February 22, 2007.[14] Although this Court has held that presuit demand letters are not "other paper" *1381 based on the plain language of 28 U.S.C. 1446(b), Depina v. Iron Mountain Info. Mgmt., Inc., 2005 WL 1319231, at *1 (M.D.Fla. June 1, 2005), and therefore cannot be relied on by defendants as the sole basis for removal, the letter serves to supplement Devore's deliberately equivocal interrogatory responses as "proof that [Devore]'s prayer is grossly inconsistent with her alleged damages." Burns v. Windsor Ins. Co., 31 F.3d 1092, 1097 (11th Cir. 1994). Such evidence can persuade the court that the demand letter was "an honest assessment of damages." See Golden v. Dodge-Markham Co., Inc., 1 F.Supp.2d 1360, 1364-65 (M.D.Fla.1998).
Ignoring completely the past and future "intangible damage" amounts of $120,000 and $425,000, that Devore's past medical expenses are stated so specifically makes this demand letter distinguishable from one which is "too cryptic to be considered anymore [sic] than `posturing by counsel seeking to stake out a position for settlement purposes.'" Id. at 1365 (quoting Sfirakis v. Allstate Ins. Co., 1991 WL 147482, at *3 (E.D.Pa. July 24, 1991)). Unless the Court were to "suspend reality," it is hard to imagine that Devore would not, at the very least, seek to recover her past medical expenses in an action alleging that a defective product caused her injuries. Combining the interrogatory responses with the demand letter (and adding a dose of common sense), the Court is persuaded that defendants have met their burden of showing by a preponderance of the evidence that amount in controversy has been met.
Conclusion
Having found fraudulent joinder, Orthopedic Solutions will be dismissed as a defendant from this case.[15] Without the inclusion of Orthopedic Solutions, the parties are diverse. Having also found that the amount in controversy is met, this Court has diversity jurisdiction over this case, and remand is therefore inappropriate.
Accordingly, it is hereby
ORDERED:
1. Plaintiff's Motion to Remand (Doc. 4) is DENIED.
2. Defendant Orthopedic Solutions, Inc. is dismissed from this action without prejudice. Defendant Orthopedic Solutions, Inc.'s Motion to Dismiss (Doc. 12) is terminated as moot.
3. Plaintiff's Motion to Stay Briefing on All Pending Motions (Doc. 7) is terminated as moot. Plaintiff shall have until October 19, 2009 to respond to Defendant Howmedica Osteonics Corporation's Motion to Dismiss (Doc. 10).
*1382 4. The parties should file a Case Management Report no later than October 19, 2009.
NOTES
[1] According to Devore's complaint, a batch of Stryker Trident hip prostheses were recalled on March 13, 2006 after a U.S. Food and Drug Administration investigation identified "dimensional anomalies in the recalled components." Id. at ¶ 22.
[2] The Court notes that the more proper discovery device for this purpose might have been a Request for Admission.
[3] Devore provided this answer in response to Interrogatory No. 4, which asked: "Does plaintiff claim damages in this law suit do not exceed $75,000.00, exclusive of interest and costs?" Devore also answered "see Answer to Interrogatory No. 4" in response to Interrogatory No. 5, which asked: "Do you admit that plaintiff will not seek damages in this action in excess of $75,000.00, exclusive of interest and costs?" (Doc. 1, Ex. 3 at 5).
[4] Attached to Ballard's affidavit are the following exhibits: i) a replenishment order history purporting to show shipment of the subject medical device from HOC's New Jersey facility to an HOC warehouse facility in Jacksonville, Florida designated as Warehouse A6 (Doc. 1, Ex. 4, Ex. A); ii) a shipment tracking report purporting to show shipment of the device from Warehouse A6 to Flagler Hospital, where Devore underwent her surgery; iii) an invoice from HOC to Flagler Hospital for the device with the comment "Dr. Grimes/PN: T.E.D./DOS: 12/14/04" (Doc. 1, Ex. 4, Ex. C); and HOC's order history for order number 640233, which corresponds to the order number listed on both the invoice and the shipment tracking report (Doc. 1, Ex. 5).
[5] In her motion to remand, Devore states: "On December 18, 2007, the Southern District of Florida remanded a nearly identical claim in Hughes v. Howmedica et al., Case No. 07-61721-CIV-ZLOCH, 2007 WL 4521237 (S.D. Fla., Dec 18, 2007) based on finding that a proper claim was brought against [Orthopedic Solutions], a non-diverse party. The Hughes claim has proceeded in Broward County, Florida." Id. at 2, n. 2.
[6] Defendants supplemented Morisco's affidavit with several exhibits identifying the specific counties and hospitals which comprise Orthopedic Solutions' territory. Id., Ex. A-C. Neither Flagler Hospital nor St. John's County (where the hospital is located) are within Orthopedic Solutions' listed territory.
[7] The demand letter appears to have been sent from different counsel than are currently representing Devore.
[8] The demand letter states that, as of February 22, 2007, Devore "ha[d] incurred medical expenses in excess of $101,009.66," as well as "additional medical expenses, the bills for which have been requested, but have not been obtained." Id. at 4, n. 1.
[9] There are other ways to prove fraudulent joinder, see Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir.1998), but none are relevant to this case.
[10] Defendants do not, as Devore contends, claim that Orthopedic Solutions was not a retailer or distributor of HOC products. To the contrary, defendants state in their response: "[w]hile Orthopedic Solutions is in fact a distributor for HOC, Orthopedic Solutions' territory is strictly limited to South Florida" and "[t]he materials attached to [Devore]'s motion for remand support the point only that Orthopedic Solutions does business in South Florida. Defendants do not dispute this point." (Doc. 17 at 4, 11)(emphasis in original). The Court notes that HOC and Orthopedic Solutions apparently did argue that Orthopedic Solutions was not a retailer for HOC in Hughes v. Howmedica et al, No. 07-61721-CIV-ZLOCH (M.D.Fla. December 18, 2007), which was rebutted by the plaintiff in that action. (Doc. 4, Ex. A at 2). This has no relevance, however, to the question of whether joinder of Orthopedic Solutions is proper in this case, and Devore's reliance on Judge Zloch's order is therefore misplaced. Even if any weight were given to the fact that HOC and Orthopedic Solutions were unsuccessful in their attempt to remove an unrelated case with disparate facts to federal court, the order (which Devore attaches as Exhibit A to her motion to remand) does not require a similar result here. In ordering remand, Judge Zloch stated only that he could not find that Orthopedic Solutions did not distribute the product alleged to have injured the Hughes plaintiff based solely on one affidavit which had been directly contradicted by the plaintiff. (Doc. 4, Ex. A at 3). This is inapposite here, where defendants have provided ample documentary evidence to support the contention that Orthopedic Solutions was uninvolved in the sale or distribution of the subject hip prosthesis to Devore, and Devore has produced no evidence to the contrary.
[11] The Restatement definition provides:
(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
(a) the seller is engaged in the business of selling such a product, and
(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.
(2) The rule stated in Subsection (1) applies although
(a) the seller has exercised all possible care in the preparation and sale of his product, and
(b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.
A.L.I. Restatement (Second) of Torts § 402A (1965)(emphasis added).
Comment "(g)" to § 402A states: "[t]he rule stated in this Section applies only where the product is, at the time it leaves the seller's hands, in a condition not contemplated by the ultimate consumer, which will be unreasonably dangerous to him." Id. (emphasis added).
[12] Presented with documentary evidence establishing these facts, Devore had no rebuttal other than to rest on her original allegation that Orthopedic Solutions is a properly joined defendant due to its engagement in "the retailing, distributing, marketing, and/or supplying [of the subject medical device], either directly or indirectly, to members of the general public within the State of Florida, including [Devore]." (Doc. 2 ¶ 5).
[13] Devore's responses did not admit this fact, either. However, if Devore were sincere in her contention that the amount in controversy is not met, she could "have submitted affidavits admitting the claim was less than the jurisdictional amount if that is what the motion to remand was meant to accomplish." Morock v. Chautauqua Airlines, Inc., No. 8:07-CV-210-T17MAP, 2007 WL 1725232, at *2 (M.D.Fla. June 14, 2007) (citing Steele v. Underwriters Adjusting Co., Inc., 649 F.Supp. 1414, 1415 (M.D.Ala.1986)). It appears that Devore "crafted [her] unclear, equivocal responses in a manner intended to circumvent the federal forum." Id. The Court does not countenance such gamesmanship.
[14] Thus, based on this objective measure of past medical expenses alone, plaintiff's case exceeds the jurisdictional amount.
[15] Having found Orthopedic Solutions was fraudulently joined, dismissal of the claims against it is appropriate. Accordino v. Wal-Mart Stores East, L.P., No. 3:05-CV-761/MCR, 2005 WL 3336503, at *6 (M.D.Fla. Dec. 8, 2005); see also Smith v. Amoco Corp., 113 Fed.Appx. 19, 20-21 (5th Cir.2004) (finding that the district court committed no error in dismissing a fraudulently joined defendant from the plaintiff's personal injury action); Fowler v. Wyeth, No. 3:04-CV-83/MCR, 2004 WL 3704897, at *4 (N.D.Fla. May 14, 2004) (dismissing all claims against fraudulently joined defendants); TKI, Inc. v. Nichols Research Corp., 191 F.Supp.2d 1307, 1316 (M.D.Ala.2002) (dismissing a fraudulently joined defendant as a party to the case); Fed. R.Civ.P. 21 (stating that in the case of party misjoinder, "[p]arties may be dropped ... by order of the court ... of its own initiative at any stage of the action and on such terms that are just."); Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 832, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989) ("[I]t is well settled that Rule 21 invests district courts with the authority to allow a dispensable nondiverse party to be dropped at any time.").
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617 So.2d 936 (1993)
Nicky DUNCAN
v.
BALCOR PROPERTY MANAGEMENT, INC. et al.
No. 93-C-0915.
Supreme Court of Louisiana.
May 14, 1993.
Denied.
LEMMON, J., would grant the writ.
MARCUS, J., not on panel.
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295 F.3d 771
Gregory J. MOORE, Petitioner-Appellant,v.Steven BRYANT, Warden, Robinson Correctional Center, Respondent-Appellee.
No. 01-3619.
United States Court of Appeals, Seventh Circuit.
Argued April 25, 2002.
Decided July 9, 2002.
Martin J. Ryan (argued), Office of State Appellate Defender, Fourth Judicial Dist., Springfield, IL, for Gregory Moore.
Margaret M. O'Connell (argued), Office of Attorney Genernal, Chicago, IL, for Steven Bryant.
Before: CUDAHY, RIPPLE and ROVNER, Circuit Judges.
RIPPLE, Circuit Judge.
1
Illinois inmate Gregory Moore brought a petition for a writ of habeas corpus under 28 U.S.C. § 2254, alleging that his trial counsel was ineffective for incorrectly advising him about the sentencing consequences of pleading guilty. The district court denied the petition on the ground that Mr. Moore had procedurally defaulted his ineffective assistance claim in state court, but granted Mr. Moore a certificate of appealability. For the reasons set forth in this opinion, we reverse the judgment of the district court and remand the case for further proceedings.
2
* BACKGROUND
A. State Court Proceedings
3
In 1994, when Mr. Moore was 15 years old, he was charged as an adult with first-degree murder for his involvement in a shooting. Attorney James Kuehl was appointed to represent Mr. Moore. In May 1995, just before the case was scheduled to go to trial, Mr. Moore pleaded guilty in exchange for the state's recommendation that he receive the minimum twenty-year prison sentence. The trial court accepted the guilty plea and sentenced Mr. Moore to 20 years of imprisonment. Shortly thereafter, however, Mr. Moore moved to withdraw his plea, and the trial court appointed another attorney, Sherman Brown, to represent him. Attorney Brown then filed an amended motion to withdraw the guilty plea. That motion submitted that Mr. Moore's plea was not knowingly or voluntarily made because, among other things, Attorney Kuehl had told Mr. Moore that, if he were convicted after a trial, Illinois' newly enacted good-time credit statute would require that he serve 85% of the sentence imposed. By comparison, if he pleaded guilty immediately, he would serve, under the then-current Illinois law, 50% of a twenty-year sentence. However, Mr. Moore did not face the choice posed to him by his counsel. The new good-time statute, 730 ILCS 5/3-6-3(a)(2), only applied to offenses committed after its passage in August 1995, and thus did not apply to Mr. Moore's 1994 offense.
4
At the hearing on the amended motion to withdraw his guilty plea, Mr. Moore testified that, about a week before trial was to begin, Attorney Kuehl told him that he thought Mr. Moore would lose at trial and that a new good-time statute was going into effect soon that would require him to serve 85% of his sentence. Attorney Kuehl told Mr. Moore that, if convicted, the court would impose a sentence within the range of 25 to 30 years of which he would have to serve 22 to 27 years; if he accepted the plea offer, he would only have to serve 10 years of a twenty-year sentence. Attorney Kuehl therefore had recommended that Mr. Moore accept the state's offer.
5
Mr. Moore testified that he was scared at the time. He did not want to accept the offer, but did not know what else to do. Mr. Moore's mother corroborated her son's testimony. Attorney Kuehl also testified at the hearing. He stated that he indeed was concerned about Mr. Moore's having to serve more time if he was convicted after the new good-time statute became effective and that he had discussed those concerns with Mr. Moore. Attorney Kuehl, however, said that, at the time he gave the advice, he did not have a copy of the statute and was unsure whether it would apply to Mr. Moore. Attorney Kuehl testified that Mr. Moore ultimately decided that it was in his best interest to accept the plea offer, but did so reluctantly.
6
The trial court denied the motion to withdraw the plea; it concluded that Mr. Moore had entered his plea knowingly and voluntarily. The Illinois Appellate Court affirmed his conviction in June 1997. The appellate court noted that Mr. Moore had waived his ineffective assistance claim by failing to argue it in the trial court, but the court then went on to reject the claim on the merits. Mr. Moore then petitioned the Supreme Court of Illinois for leave to appeal. The court denied leave to appeal, but vacated part of the appellate court's decision denying Mr. Moore presentence credit. In May 1998, Mr. Moore filed a timely pro se petition for post-conviction relief under the Illinois Post-Conviction Hearing Act, 725 ILCS 5/122-1, et seq. In the petition, he primarily alleged that he was denied effective assistance of counsel because of Attorney Kuehl's incorrect advice regarding his potential sentence. The trial court dismissed this petition as frivolous, holding that, because the appellate court had addressed this ineffective assistance argument on direct appeal, Mr. Moore was barred by the res judicata doctrine from asserting the issue again in his post-conviction petition. In July 1999, the appellate court affirmed, and the Supreme Court of Illinois denied leave to appeal in October 1999.
B. District Court Proceedings
7
In May 2000, Mr. Moore filed his petition for a writ of habeas corpus under § 2254, again raising his ineffective assistance of counsel claim. The district court denied the petition without reaching the merits; it concluded that the Illinois state courts had rejected the claim based on the independent and adequate state procedural grounds of waiver and res judicata. Therefore, federal review was barred. The district court, however, granted Mr. Moore a certificate of appealability because "jurists of reason" would find it debatable whether Mr. Moore was denied his constitutional right to effective assistance of counsel and whether the court's procedural ruling was correct. See Slack v. McDaniel, 529 U.S. 473, 484, 120 S.Ct. 1595, 146 L.Ed.2d 542 (2000). When, as here, both constitutional and procedural issues are certified for appeal, we resolve the procedural issue first. See id. at 485, 120 S.Ct. 1595.
II
ANALYSIS
8
We review the district court's procedural default ruling de novo. See Franklin v. Gilmore, 188 F.3d 877, 882 (7th Cir.1999). Mr. Moore submits that he did not procedurally default his ineffective assistance claim because, on direct review, the Illinois Appellate Court did not clearly rely on waiver as an independent and adequate state ground for its decision, but rather denied his claim on its merits. We agree.
9
A federal court will not review a question of federal law decided by a state court if the decision of the state court rests on a state procedural ground that is independent of the federal question and adequate to support the judgment. Stewart v. Smith, ___ U.S. ___, 122 S.Ct. 2578, 2580-81, 153 L.Ed.2d 762 (2002); Coleman v. Thompson, 501 U.S. 722, 729, 111 S.Ct. 2546, 115 L.Ed.2d 640 (1991). The independent and adequate state ground doctrine "applies to bar federal habeas when a state court declined to address a prisoner's federal claims because the prisoner had failed to meet a state procedural requirement." Id. at 729-30, 111 S.Ct. 2546. But this doctrine will not bar habeas review unless the state court actually relied on the procedural default as an independent basis for its decision. Harris v. Reed, 489 U.S. 255, 261-62, 109 S.Ct. 1038, 103 L.Ed.2d 308 (1989); Braun v. Powell, 227 F.3d 908, 912 (7th Cir.2000). Thus, if the decision of the last state court to which the petitioner presented his federal claims fairly appears to rest primarily on the resolution of those claims, or to be interwoven with those claims, and does not clearly and expressly rely on the procedural default, we may conclude that there is no independent and adequate state ground and proceed to hear the federal claims. Harris, 489 U.S. at 263-65, 109 S.Ct. 1038; Coleman, 501 U.S. at 735, 111 S.Ct. 2546.
10
Here, the Illinois Appellate Court's decision on direct appeal fairly appears to rest primarily on its resolution of Mr. Moore's ineffective assistance claim or to be intertwined with that claim. The appellate court noted that, despite having raised the issue in his amended motion to withdraw, Mr. Moore's newly appointed counsel did not argue Kuehl's ineffectiveness at the plea withdrawal hearing. Thus, the court stated that Mr. Moore had "waived consideration of that argument on appeal." People v. Moore, 289 Ill.App.3d 357, 224 Ill. Dec. 468, 681 N.E.2d 1089, 1091-92 (Ill. App.Ct.1997). But the Illinois Appellate Court then discussed the merits of that argument in some detail. The court ultimately concluded that Kuehl's advice, even if it was incorrect, did not prejudice Mr. Moore's decision to plead guilty. The court then stated, "[a]ccordingly, we hold that the trial court did not abuse its discretion by denying defendant's motion to withdraw his guilty plea." Id. at 1092.
11
A state court may reach the merits of a federal claim in an alternative holding; if it does so explicitly, then the independent and adequate state ground doctrine "curtails reconsideration of the federal issue on federal habeas." Harris, 489 U.S. at 264 n. 10, 109 S.Ct. 1038; see also Brooks v. Walls, 279 F.3d 518, 522-23 (7th Cir.2002); Prihoda v. McCaughtry, 910 F.2d 1379, 1383-84 (7th Cir.1990). As the district court noted, the Illinois Appellate Court prefaced its analysis of Mr. Moore's ineffective assistance claim with language suggesting the alternative nature of its holding: "Even if defendant had not waived this argument, we would conclude that he failed to demonstrate ineffective assistance of counsel." Moore, 224 Ill.Dec. 468, 681 N.E.2d at 1092. But "[s]tate procedural bars are not immortal, ... they may expire because of later actions by state courts." Ylst v. Nunnemaker, 501 U.S. 797, 801, 111 S.Ct. 2590, 115 L.Ed.2d 706 (1991); see also Brooks, 279 F.3d at 522 ("[W]hen state courts disagree about the right ground of decision, the ruling of the last state court to articulate a reason governs."). The Illinois Appellate Court's decision on direct appeal did not mark the end of Mr. Moore's ineffective assistance challenge in state court. Mr. Moore also filed a petition for post-conviction relief, arguing not only that Kuehl was ineffective for failing to properly advise him regarding his potential sentence, but also that Brown, counsel appointed to represent him at the plea withdrawal hearing, was ineffective for failing to argue Kuehl's alleged ineffectiveness.
12
The Illinois courts' treatment of Mr. Moore's ineffective assistance claims on collateral review demonstrates that, on direct appeal, the appellate court's merits determination had not been merely an alternative holding. Under Illinois law, "where a petitioner has previously taken a direct appeal from a judgment of conviction, the judgment of the reviewing court is res judicata as to all issues actually decided by the court, and any other claims that could have been presented to the reviewing court, if not presented, are waived." People v. Flores, 153 Ill.2d 264, 180 Ill.Dec. 1, 606 N.E.2d 1078, 1083 (Ill. 1993). Significantly, the Illinois post-conviction court did not conclude that the direct appeal court's waiver determination barred consideration of Mr. Moore's claim on collateral review. Rather, the post-conviction court stated that the direct appeal court only "noted" that Mr. Moore had waived the issue but actually held that the claim was meritless. People v. Moore, No. 95-CF-12 (Ill.Cir.Ct. May 26, 1998) (unpublished order) (Pet.App.29, 31). Because the issue had been "specifically addressed" on direct appeal, the court concluded, it was barred by res judicata. Id. Likewise, the post-conviction court rejected Mr. Moore's argument that Brown was ineffective for waiving the ineffectiveness argument in the trial court, stating that "[i]n light of the Appellate Court holding that the original trial counsel [Kuehl] was not ineffective, there can be no argument that the subsequent trial counsel or the appellate counsel were ineffective for failure to raise the issue of the ineffectiveness of the original trial counsel." Id. at 31.
13
The post-conviction appellate court affirmed the dismissal of Mr. Moore's petition on res judicata. People v. Moore, No. 4-98-487 (Ill.App.Ct. July 1, 1999) (unpublished order) (Pet.App.19, 26). In its order —authored by the same justice who wrote for the court on Mr. Moore's direct appeal—the court explained that its decision on direct appeal primarily rested not on waiver, but on its resolution of Mr. Moore's ineffective assistance claim. The appellate court stated that on direct appeal it "considered at length defendant's claim that Kuehl's ineffectiveness resulted in defendant's involuntary guilty plea." Id. at 26. Because that claim was considered and rejected on its merits, the court concluded that "the trial court here correctly determined that further consideration of defendant's claim was barred by res judicata." Id.
14
Before us, the state nevertheless argues that the post-conviction appellate court used the term "res judicata" to mean that it had previously found waiver.1 But the appellate court did not discuss its prior waiver determination in its post-conviction order. To the contrary, the court stated that "[a]t the hearing on the motion, defendant presented evidence in support of his motion and testified in his own behalf. Thus, defendant properly presented his ineffective assistance of counsel claim on direct appeal." Id. In its order, the court also reiterated its reasons for rejecting that claim on direct appeal—that the trial court fully admonished Mr. Moore regarding the consequences of his guilty plea and that Mr. Moore's responses did not reveal "any misunderstanding or hesitancy in his decision to plead guilty." Id. at 25. Those conclusions, the court stated, "were essential to our decision on direct appeal." Id. Thus, the post-conviction appellate court applied res judicata because it had already resolved the ineffective assistance claim on direct appeal.
15
Notably, our colleagues in the Third Circuit have held that a waiver determination on direct appeal is not an independent and adequate state ground when on collateral review the state courts treated the direct appeal decision as resting on the merits and not on waiver. See Riley v. Taylor, 277 F.3d 261, 274-75 (3d Cir.2001) (en banc). In Riley, the state supreme court concluded on direct appeal that the petitioner's federal claim was not fairly presented to the trial court, but held "in the alternate" that the claim failed on the merits. Id. at 274. When the petitioner attempted to reassert his federal claim on state collateral review, the trial court addressed the claim, and the state supreme court "expressly reaffirmed" that his federal claim lacked merit. Id. Notably, the Third Circuit stated, the post-conviction appellate court did not reaffirm its prior holding regarding procedural default; nor did it discuss that holding in its decision. Because the post-conviction appellate court treated its previous decision as a rejection of the petitioner's claim on the merits, the petitioner was not barred from seeking federal habeas review of that claim. Id. at 274-75. We are confronted with the same situation and resolve the matter in the same way as did our colleagues in the Third Circuit. Here, the post-conviction appellate court treated its direct appeal decision as rejecting Mr. Moore's ineffective assistance claim on the merits rather than on waiver. Thus, waiver is not an independent and adequate state ground precluding federal review of that claim.
16
Because the district court concluded otherwise, it did not address Mr. Moore's ineffective assistance claim on the merits. Moreover, the state has not yet addressed the merits in the district court or in its brief to this court. The district court is in the best position to make the first assessment of the underlying merit of Mr. Moore's ineffective assistance claim. See Rice v. Bowen, 264 F.3d 698, 702 (7th Cir.2001).
Conclusion
17
Mr. Moore did not procedurally default his ineffective assistance of counsel claim. Therefore, we reverse the judgment of the district court and remand this case for further proceedings consistent with this opinion.
REVERSED AND REMANDED
Notes:
1
The state also argued, and the district court agreed, that the post-conviction appellate court's res judicata holding was an additional independent and adequate state ground barring federal review. At oral argument, however, the state abandoned that argument, acknowledging that we have repeatedly held that res judicata is not a bar to consideration of claims in a federal habeas actionSee Patrasso v. Nelson, 121 F.3d 297, 301 (7th Cir.1997); Porter v. Gramley, 112 F.3d 1308, 1316 (7th Cir.1997). Indeed, a state court's invocation of res judicata "simply means that the state courts have already resolved the matter and want nothing more to do with it." Porter, 112 F.3d at 1316. Thus, the district court also erred in concluding that res judicata prevented it from reviewing the merits of Mr. Moore's federal claim.
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Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
10-20-2006
Prior v. Innovative Comm Corp
Precedential or Non-Precedential: Non-Precedential
Docket No. 05-2044
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2006
Recommended Citation
"Prior v. Innovative Comm Corp" (2006). 2006 Decisions. Paper 309.
http://digitalcommons.law.villanova.edu/thirdcircuit_2006/309
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
Nos. 05-2044/2199
____________
CORNELIUS PRIOR, JR.
v.
INNOVATIVE COMMUNICATIONS CORP
f/n/a ATLANTIC TELE-NETWORK CO
Cornelius B. Prior, Jr.,
Appellant
______________________
On Appeal from the District Court
of the Virgin Islands
(Division of St. Thomas District Court No. 99-cv-00232)
District Judge: Honorable Stanley S. Brotman
Argued on May 9, 2006
Before: FISHER, COWEN, and ROTH*, Circuit Judges
(Opinion Filed: October 20, 2006)
________________
*Judge Roth assumed senior status on May 31, 2006.
Joel H. Holt, Esquire (Argued)
Law Offices of Joel H. Holt
2132 Company Street
Suite 2
Christiansted, St. Croix
U.S. Virgin Islands, 00820
Counsel for Appellee
J. Daryl Dodson, Esquire (Argued)
Moore, Dodson & Russell
P.O. Box 310
5035 Norre Gade
Charlotte Amalie, St. Thomas
U.S. Virgin Islands, 00804
Counsel for Appellant
_________________
OPINION
ROTH, Circuit Judge:
Cornelius Prior has appealed the decision of the District Court for the Virgin Islands
holding that the restructured company, Atlantic Telenetwork, Inc., is liable for Prior’s
supplemental pension benefit. For the reasons stated below, we will affirm the judgment of
the District Court.
I. Background
Cornelius Prior and Jeff Prosser were co-CEOs of Atlantic Tele-Network, Inc., (old
ATNI), a telecom company with assets in the Virgin Islands and Guyana. Prior and Prosser
2
controlled the majority of ATNI’s stock. The rest was publicly held. Prior and Prosser had
personal disagreements that deadlocked ATNI’s management. The deadlock resulted in a
split-up of ATNI in December 1997.
In the split-up transaction, ATNI transferred all the stock of its subsidiary Atlantic
Tele-Network Co. (ATNC) and its ownership interest in the Virgin Islands Telephone
Company to a company now called ICC (formerly ECI). Prosser exchanged all of his ATNI
stock for a majority interest in ICC. Prior exchanged all of his ATNI stock for $17.4 million
and a majority interest in restructured ATNI (new ATNI), which retained ownership of
Guyanese Telephone & Telegraph (GT&T). The public shareholders of ATNI exchanged
their stock for stock in ICC and new ATNI. Thus, after the split-up, Prosser controlled the
Virgin Island assets in a company now called ICC, while Prior retained control of the
Guyanese assets via new ATNI. New ATNI retained only five of the old ATNI employees;
the others went to ICC.
The issue in this case is the allocation after the split-up of the obligation to pay Prior’s
supplemental pension benefit. Prior’s 1987 ATNC employment agreement granted him a
regular ERISA qualified pension benefit and a supplemental, non-ERISA qualified “top hat”
pension. Unlike the regular pension benefit, the supplemental benefit was an unfunded
liability; no dedicated trust asset existed before the split-up to fund the supplemental benefit.
The documentation for the split-up transaction included an Employee Benefits
Agreement (EBA) that allocated various pension assets and liabilities to ICC. The EBA,
which provides that it shall be governed by New York law, contained three clauses dealing
3
with allocation of pension assets and liabilities.
1. Effective as of the Closing, (i) [ICC] shall adopt as its own the Atlantic Tele-
Network, Inc. Defined Benefit Plan for Salaried Employees, the Atlantic Tele-
Network, Inc. Management Employees’ Savings Plan, and the Atlantic Tele-Network,
Inc. Employees’ Stock Ownership Plan (collectively, the “ATNI Plans”), (ii) each of
the trusts (and all the assets thereof) forming a part of the ATNI Plans shall be assumed
by [ICC], and (iii) [ICC] and [ATNI] shall take such action, including amendments to
the ATNI Plans (or the trusts forming a part thereof), as is necessary in order for [ICC]
to be the sponsor and “Employer” under such ATNI Plans. As of the Closing,
employees of ATNI and its subsidiaries shall cease participation in the ATNI Plans
maintained by ICC or any of its subsidiaries.
2. All other employee benefit plans maintained by ATN Co., a U.S. Virgin Islands
corporation (“ATNC”), by Virgin Islands Telephone Corp., a U.S. Virgin Islands
corporation (“Vitelco”) or by any of their subsidiaries (the “ATNC/Vitelco Plans”),
including but not limited to the Virgin Islands Telephone Corporation Pension Plan for
Hourly Employees, the United Steelworkers of America 401(k) Plan for Bargaining
Unit Employees of Vitelco, the Welfare Plan for Salaried Employees and the Welfare
Plan for Bargaining Employees, shall continue to be sponsored by such entities after
the Closing. As of the Closing, employees of the ATNI and its subsidiaries shall cease
participation in the ATNC/Vitelco Plans maintained by [ICC], ATNC, Vitelco or any
of their subsidiaries.
3. Effective as of the Closing, [ICC] and its subsidiaries shall assume all
employment-related liabilities and obligations of ATNI toward those employees who
prior to the Closing were employed by ATNI and who after the Closing will be
employed by [ICC] or its subsidiaries. Such employment-related liabilities and
obligations shall include, but are not limited to, liabilities and obligations with respect
to wages, withholding taxes, benefits, accrued vacation, employee benefit plan
contributions and administrative expenses, whether incurred or accrued before, on or
after the Closing and whether or not reported as of the Closing.
The EBA also includes an integration clause:
5. The foregoing is the entire agreement of the parties with respect to the subject
matter hereof and may not be amended, supplemented, canceled or discharged except
by a written instrument executed by the parties hereto. This Employee Benefits
Agreement supercedes any and all prior agreements among the parties hereto with
respect to the matters covered hereby.
4
Prior claims that ICC owes him a lump sum supplemental benefit of $723,113.57. ICC
initially counterclaimed for damages due to an accounting of funds between the parties after
the split-up transaction. ICC then moved to amend its counterclaim to include a claim for
reformation of the split-up transaction to reflect the parties’ intent. Prior opposed the motion
to amend and moved to dismiss the existing counterclaims.
The District Court found that ICC’s counterclaims based on accounting for the split-up
transaction were not logically related to Prior’s claim, and thus non-compulsory. For that
reason, it dismissed them for lack of jurisdiction. The District Court denied as moot the
motion to add the counterclaim to reform the EBA since that motion did “not affect the
Court’s determination that subject matter jurisdiction does not exist over Defendant’s
counterclaim.”
Regarding the allocation of Prior’s supplemental benefit in the EBA, the District Court
found that “[i]n consideration of the conflicting testimony and the document itself,” the EBA
was ambiguous regarding the assignment of liability for Prior’s supplemental benefit.
Therefore, it looked to extrinsic evidence to determine allocation of the liability. The District
Court concluded that the history of the parties’ negotiations showed that the original idea was
to divide pension assets and liabilities, including the supplemental benefits of Prior and
Prosser, between the successor entities, according to where the transaction allocated old ATNI
employees, including Prior and Prosser. This was the plan in the parties’ preliminary
negotiations and was included in their Principal Terms Agreement (PTA).
Before the split-up transaction closed, however, the parties decided, on the advice of
5
their accounting firm, Deloitte & Touche, to allocate all employee benefit liabilities to ICC,
which would then terminate the plan participation of the five old ATNI employees who
remained with new ATNI. These employees would receive a lump sum payment of their
accrued pension benefits. Prior claimed that based on this new transaction structure, ICC
assumed liability not only for his basic ERISA-qualified benefit but also for his non-qualified
supplemental benefit. ICC, however, contended that the new arrangement was intended to
cover only ERISA-qualified plans.
The District Court found that, based on the course of negotiations, the parties intended
a new structure only for ERISA-qualified plans and that the weight of the extrinsic evidence
was that the parties intended to retain their original allocation of Prior and Prosser’s
supplemental benefits. Accordingly, the District Court entered judgment in favor of ICC.
Prior appealed, asserting that the District Court erred in considering extrinsic evidence
in its evaluation of contract ambiguity; in its finding that the EBA was ambiguous, and in its
conclusion that the EBA did not allocate liability for Prior’s supplemental benefit to ICC.
ICC has cross-appealed, contending that the District Court erred in denying its motion to
amend its counterclaim because, unlike its other counterclaims, the claim for contract
reformation was a compulsory counterclaim. Thus, ICC asserts that the District Court did
have jurisdiction over the reformation claim and that the motion was not mooted by the
District Court’s dismissal of the original counterclaims.
The District Court had jurisdiction under 28 U.S.C. § 1331 and 29 U.S.C. § 1132(a).
We have jurisdiction under 28 U.S.C. § 1291.
6
III. Discussion
A. What Law Applies?
The EBA provides that it “shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and performed wholly therein.”
The District Court did not consider choice of law. Indeed, it did not cite any cases in its
discussion of allocation of liabilities under the EBA.
ICC argues in a footnote that Prior waived the choice of law provision by not arguing
that the District Court should follow New York law. Prior, however, stated that the EBA
provides that New York law governs interpretation of the agreement. He also cited to New
York cases or to Third Circuit cases applying New York law in his Memorandum in Support
of Summary Judgment and Proposed Findings of Fact and Conclusions of Law. For that
reason, the choice of law issue was not waived. Prior set out his choice of law claim. ICC
clearly noticed it but never made it a point of contention before the District Court. Thus, if
there was any waiver of the choice of law issue, it was by ICC for not countering Prior’s
reliance on New York law.
Federal courts sitting in diversity must apply the choice of law rules of the state in
which they sit. Klaxon Co. v. Stentor Co., 313 U.S. 487 (1941). The territorial law of the
Virgin Islands incorporates by statute the ALI Restatements of the Law. V.I. CODE ANN. tit.
1, § 4; Swift, 16 Pet. at 18-19. The Restatement (Second) of Conflicts of Laws § 187 provides
that, with certain exceptions not relevant here, “the law of the state chosen by the parties to
govern their contractual rights and duties will be applied.” Accordingly, we will defer to the
7
EBA’s choice of law provision and apply New York law.
B. Did the District Court Err in Considering Extrinsic Evidence to Determine
Contractual Ambiguity?
Prior claims that the District Court erred in considering extrinsic evidence because the
EBA was an integrated contract. The EBA contains an integration clause, but such a clause
affects only the application of the parol evidence rule. See Sunbury Textile Mills, Inc. v.
Comm’r, 585 F.2d 1190, 1197 (3d Cir. 1978). The parol evidence rule “prohibits the
admission of extrinsic evidence of prior or contemporaneous oral agreements, or prior written
agreements, to explain the meaning of a contract when the parties have reduced their
agreement to an unambiguous integrated writing.” Richard A. Lord, Williston on Contracts,
§ 33 (4th ed. 1999). Under New York law, “A completely integrated contract precludes
extrinsic proof to add to or vary its terms.” Primex Int’l Corp. v. Wal-Mart Stores, 679
N.E.2d 624, 627 (N.Y. 1997).
An integration clause, however, does not preclude the use of extrinsic evidence,
including the course of negotiations, to interpret ambiguous terms in order to determine
parties’ intent. Martin v. Monumental Life Ins. Co., 240 F.3d 223, 233 (3d Cir. 2001)
(“Agreements and negotiations prior to or contemporaneous with the adoption of a writing are
admissible, however, to establish the meaning of ambiguous terms in the writing, whether or
not the writing is integrated.”). “An integration clause, no matter how well-crafted, cannot
change whether words in a contract are ambiguous and thus subject to varied interpretations.”
Harbour Cove Marine Servs. v. Rabinowitz, 2005 U.S. Dist. LEXIS 36794, at *9 (D.N.J.
8
2005). See also Mellon Bank, N.A. v. Aetna Bus. Credit, Inc., 619 F.2d 1001, 1010, n.9 (3d
Cir. 1980).
Under New York law, a contract’s ambiguity must be determined solely in reference
to the text of the contract.1 Chimart Assocs. v. Paul, 489 N.E.2d 231, 233 (N.Y. 1986). See
also, Breed v. Ins. Co. of N. America, 385 N.E.2d 1280, 1282 (N.Y. 1978); Hatco Corp. v.
W.R. Grace & Co., 59 F.3d 400, 405 (3d Cir. 1995) (applying New York law); Banque Arabe
et Internationale d'Investissement v. Md. Nat'l Bank, 57 F.3d 146, 152 (2d Cir. 1995); Burger
King Corp. v. Horn & Hardart Co., 893 F.2d 525, 527 (2d Cir. 1990); Grumman Allied Indus.,
Inc. v. Rohr Indus., Inc., 748 F.2d 729, 734 & n. 9 (2d Cir. 1984) (disagreeing with trend
toward making contextual inquiry to determine whether language ambiguous). Intrinsic and
parol evidence is not admissible to create an ambiguity in a written agreement which is
complete and clear and unambiguous upon its face. W.W.W. Assoc., Inc. v. Giancontieri, 566
N.E.2d 639, 642 (N.Y. 1990).
The District Court examined both intrinsic and extrinsic evidence in making its
determination that the EBA was ambiguous; it noted that “In consideration of the conflicting
testimony and the document itself, . . . the EBA [is] ambiguous and not controlling.” Under
New York law, the court erred in considering extrinsic evidence. This does not mean,
1
The general trend among courts is that the presence of an integration clause does not
prevent the examination of extrinsic evidence to determine whether a contract is
ambiguous. See Senior Exec. Benefit Plan Participants v. New Valley Corp. (In re New
Valley Corp.), 89 F.3d 143, 150 (3d Cir. 1996). New York, however, has not followed
this majority position.
9
however, that reversal and remand are necessary.
C. Did the District Court Err in Determining Contractual Ambiguity?
A contract’s ambiguity is a matter of law that we review de novo. Hatco Corp., 59
F.3d at 405 (applying New York law); Reliance Ins. Co. v. Colonial Penn Franklin Ins. Co.
(In re Montgomery Ward & Co.), 428 F.3d 154, 161 (3d Cir. 2005). Under New York law,
[a] term is ambiguous when it is capable of more than one meaning when
viewed objectively by a reasonably intelligent person who has examined the
context of the entire integrated agreement and who is cognizant of the customs,
practices, usages and terminology as generally understood in the particular
trade or business.
Curry Road Ltd. v. Kmart Corp., 893 F.2d 509, 511 (2d Cir. 1990) (internal quotations and
citations omitted). Examining the terms of the EBA, we conclude that it is ambiguous in the
language which supposedly governs the allocation of Prior’s supplemental benefit.
The dispute in contract interpretation between Prior and ICC arises from the scope of
the catchall provision in Clause 2. This language must be read in the context of the entire
agreement. Rentways, Inc. v. O'Neill Milk & Cream Co., 126 N.E.2d 271, 273 (N.Y. 1955).
Clause 1 of the EBA transfers the specific pension liabilities and funding assets of specific
plans to ICC. Prior’s supplemental benefit is not among the specific liabilities listed in Clause
1. Clause 2 provides that:
All other employee benefit plans maintained by ATN Co. (“ATNC”) . . .by
Virgin Islands Telephone Corp. . . . or by any of their subsidiaries, including
but not limited to [several enumerated plans] shall continue to be sponsored by
such entities after the Closing.
Clause 2 also provides that employees of new ATNI will cease participation in those plans
10
after the closing. Clause 3 of the EBA provides that ICC will be responsible for:
all employment-related liabilities and obligations of ATNI toward those
employees who prior to the Closing were employed by ATNI and who after the
Closing will be employed by [ICC] . . . [including] wages, withholding taxes,
benefits, accrued vacation, employee benefit plan contributions and
administrative expenses,
even if accrued before the closing.
Prior claims that his supplemental benefit is covered by Clause 2's catchall language,
“All other employee benefit plans maintained by ATNC Co.” He argues that his supplemental
benefit is a “plan” that was “maintained” by ATNC. Prior’s expert witness, Michael J.
Tierney, testified that, for a non-qualified top hat plan, no active maintenance is required—a
plan is “maintained” simply by existing. Prior also introduced extrinsic evidence about the
drafting history of the EBA to support his claim, particularly that the PTA stated that
“Obligations under any such employee benefit or pension plan with respect to Messrs. Prior
and Prosser shall be allocated to Old ATNI and New ATN, as the case may be . . ..”
ICC, on the other hand, contends that the supplemental benefit is not covered by the
EBA. ICI alleges that the supplemental benefit is not a “plan” but a benefit under an
individually negotiated contract. ICC notes that the benefit was never referred to as a “plan”
in any of the documents generated by the parties. ICC, however, has not appealed the District
Court’s conclusion of law that “the supplemental benefit claimed by Plaintiff under the terms
of the 1987 Employment Agreement constitutes a plan under ERISA and also qualifies as a
‘top hat’ plan.” ICC nevertheless insists that “plan,” as used in the EBA, refers solely to
ERISA-qualified plans because the word “maintained” means that there must be plan
11
maintenance, i.e., routine work such as ERISA filings required by 29 U.S.C. § 1023. No such
filings were required for Prior’s supplemental benefit.
A disagreement between parties about the meaning of a term in a contract does not
mean that the contract is ambiguous. Bayer Chems. Corp. v. Albermarle Corp., 2006 U.S.
App. LEXIS 6994, 21-22 (3d Cir. 2006). We believe, however, that, read as a whole, the EBA
is ambiguous in its allocation of liability for the supplemental benefits.
The terminology of employee benefits comes from the provisions of ERISA. ERISA’s
terminology is consistent with Prior’s interpretation. ERISA refers to pension plans as “plans
maintained” regardless of whether the plan is qualified. An unqualified plan falls under
section 201(2) of ERISA which exempts from ERISA’s participation and vesting standards
“a plan which is unfunded and is maintained by an employer primarily for the purpose of
providing deferred compensation for a select group of management or highly compensated
employees.” 29 U.S.C. § 1051(2). This language indicates that the use of the term
“maintained” in the EBA does not limit Clause 2 to ERISA-qualified plans; the natural way
to read “plan” is as a broad term covering all pensions, ERISA-qualified or not.
Moreover, it is not difficult to communicate an intent that a catch-all cover only
qualified plans or that it cover both qualified and unqualified ones. The plans specifically
mentioned in Clause 2 are qualified plans. ICC has provided no reason why a distinction in
the catch-all language would matter beyond avoiding liability for Prior’s supplemental benefit,
nor has ICI explained what function the catchall would serve if it did not cover Prior’s
supplemental benefit. New York law disfavors contract interpretations that lead to
12
superfluous language. Fleischman v. Furgueson, 119 N.E. 400, 401 (N.Y. 1918).
Yet, if we adopt Prior’s interpretation, the catchall language would cover only Prior’s
supplemental benefit, and the choice of the language used would be an unusual way to express
such intent – especially in a document drafted by experienced attorneys who could easily have
clarified the intent. Prior, however, has not suggested that the catch-all covers anything other
than Prior’s supplemental benefit. In view of the fact that there is no other mention of Prior’s
supplemental benefit in the EBA, the catch-all language of Clause 2 simply does not read like
a contract provision allocating a specific non-ERISA-qualified liability to ICC.
The most natural reading of the catchall is simply that it is surplusage resulting from
overcautious draftsmanship and that it does not reflect any specific intent of the parties that
it include or exclude unqualified plans. While a surplusage reading is disfavored, it is not an
inelastic principle. Prior’s reading of “any other plans” to mean only his supplemental benefit
stretches the EBA’s language. Because, therefore, there is no clear, objective manifestation
of the parties’ subjective intent in the use of language in the catch-all and because the catch-
all itself could cover two scenarios, the EBA is ambiguous. This determination of ambiguity
has been made solely from the text of the EBA – and we can now look at extrinsic evidence
to interpret the EBA.
D. Did the District Court Correctly Resolve the Ambiguity in the EBA?
We review the District Court’s interpretation of an ambiguous contract on a clear error
basis. Reliance Ins. Co.,428 F.3d at 161; John F. Harkins Co. v. Waldinger Corp., 796 F.2d
657, 660 (3d Cir. 1986). The District Court’s interpretation of the EBA, based on extrinsic
13
evidence, was not clearly erroneous. It was supported by evidence that the parties intended
the change in the transaction structure to apply only to funded, ERISA-qualified benefits.
This evidence, as related in the District Court’s findings of fact, which have not been
contested, included the deal structure considered throughout the course of negotiations, shown
in the January 24th Memo and the PTA, in which the allocation of liability for supplemental
benefits to Prior and Prosser would be to their respective companies after the division of
ATNC. Deloitte and Touche’s recommendation regarding a change in the transaction
structure was found by the District Court to address only ERISA-qualified pension plans, as
the recommendation stated “[y]ou have indicated that there are no non-qualified pension or
deferred compensation arrangements to be concerned about.”
Therefore, the District Court reasonably concluded that the change in transaction
structure that was affected between the PTA and the EBA was only a change in respect to
ERISA-qualified plans, and not to the non-qualified supplemental benefits. The District Court
rejected Prior’s claim that the EBA was meant to apply to both qualified and non-qualified
benefits because “Insufficient evidence was presented to support Plaintiff’s contention that
[the] understanding [in the PTA] was modified during the subsequent negotiations or
incorporated into the EBA.” Moreover, “[i]nsufficient evidence was offered to show that the
parties departed from their original understanding under the January 24th Memo and PTA with
respect to the allocation of the liabilities for the supplemental benefit plans for Prior and
Prosser. The Court finds that the parties did not seek to change the allocation of supplemental
benefit plans at any point later in the transaction.”
14
Moreover, it is unlikely that ICC would have assumed responsibility for Prior’s
unfunded supplemental benefit unless that obligation were reflected in the price of the deal.
Prior has brought forth no evidence showing an alteration in the bargained-for price to
account for ICC’s assumption of the liability. If ICC were to have assumed an additional
liability of over $700,000, it surely would have been reflected in a change in the deal’s price
structure.
We conclude, therefore, that the judgment of the District Court is supported by
sufficient evidence and that Prior has not presented overwhelming counter-evidence. For that
reason, the District Court has not committed clear error.2
In light of our ruling on Prior’s appeal, we need not address ICC’s cross-appeal from
the District Court’s denial of its motion to amend its counterclaim to include contract
reformation.
Accordingly, we will affirm the order of the District Court, granting summary
judgment in favor of ICI.
2
While Prior has argued that any ambiguity should be resolved under the principle of
contra proferentum in his favor as the non-drafting party, contra proferentum is an
interpretative device of last resort, used only when a court cannot resolve an ambiguity.
Rottkamp v. Eger, 346 N.Y.S.2d 120, 127-128 (N.Y. Sup. Ct. 1973) (citing 3 Corbin,
Contracts, § 559). Moreover, in this case, both parties were active in the drafting of the
EBA; thus, the case for contra proferentum is not as strong as it would be in the situation
of a contract of adhesion.
15
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} |
781 F.Supp. 445 (1991)
Dallas MUSICK, Plaintiff,
v.
UNITED STATES of America, Defendant.
Civ. A. No. 86-0073-B.
United States District Court, W.D. Virginia, Big Stone Gap Division.
September 27, 1991.
*446 *447 Lynn Lauderback, Kingsport, Tenn., Pat Cline, Norton, Va., for plaintiff.
E. Montgomery Tucker, U.S. Atty., Roanoke, Va., for defendant.
MEMORANDUM OPINION
GLEN M. WILLIAMS, Senior District Judge.
By Memorandum Opinion and Order dated June 26, 1991, this court found that the United States is liable for its negligence in injuring Dallas Musick. This matter is now before the court on the sole issue of damages. The plaintiff seeks a judgment in the amount of three million dollars ($3,000,000). The United States denies any liability for damages. The court has jurisdiction over this action via 28 U.S.C.A. § 1346(b) (West 1976).
FINDINGS OF FACT
On August 30, 1991, the court held a bench trial on the issue of damages. Based on the evidence presented at trial, the court makes the following findings of fact: On June 7, 1984, Musick was fifty-seven. He was self-employed in the lumber business and had been so employed for the previous thirty-four years. He planned to retire at age sixty-two.
Musick testified that his take home pay was forty thousand dollars. However, his counsel introduced income tax returns showing gross receipts of $40,908.00 in 1982 with a net profit of $7,546.00 (Plaintiff's Exhibit # 11) and $39,193.00 in 1983 with a net profit of $1,264.00. (Plaintiff's Exhibit # 12).
On June 7, 1984, Musick entered the Holston Valley Hospital for a head injury and multiple contusions, abrasions, and lacerations. On June 11, 1984, a CT scan showed an accumulation of subdural fluid. On June 21, 1984, the physicians elected to proceed with Burr holes for drainage. A subsequent CT scan showed further accumulation of air and fluid, and a subdural tap was performed. Musick remained confused but slowly improved until he was discharged on July 2, 1984. The final diagnosis indicated: 1) a cerebral contusion; 2) subdural fibroma, due to trauma; and 3) a fractured right scapula. (Plaintiff's Exhibits # 1, 9).
Musick testified that he does not remember the events of June 7, 1984, nor does he *448 remember anything which occurred while he was hospitalized.
Since leaving the hospital, Musick has complained of the following:
1) Musick characterized his hearing before the accident as "excellent." However, Musick testified that, since the accident, he has no hearing in his right ear and only twenty percent in his left ear. Musick also stated that he has "roaring" and "clicking" sounds in his ears which have resulted in trouble sleeping. Eva Nell Musick, the plaintiff's wife, and H. Edward Musick, the plaintiff's son, corroborated this testimony.
On August 13, 1984, Musick saw Dr. Paul F. Brookshire. Dr. Brookshire's examination revealed a complete nerve type hearing loss in the right ear and a severe nerve type hearing loss in the high frequencies in the left ear.
On February 11, 1985, Musick was examined by Dr. Claude H. Crockett. Dr. Crockett stated, "Apparently as a result of the accident he has a total sensorineural hearing loss in the right ear and a moderate sensorineural hearing in the left ear." Dr. Crockett noted, "Since his hearing in the left ear falls well below that of the normal range, the patient could certainly benefit from a hearing aid evaluation and possible hearing aid dispensation."
In his February 25, 1985 report, Dr. A. Sheldon Gelburd noted that Musick faced his left ear toward him in an effort to better hear. (Plaintiff's Exhibit # 2).
After an April 6, 1987 examination, Dr. Russell D. McKnight noted that Musick had deafness most marked on the right as a result of the injury. (Plaintiff's Exhibit # 4(a)). McKnight also noted this in his August 14, 1991 report. (Plaintiff's Exhibit # 4(b)).
Musick was examined by Dr. Kenneth L. Carrico on October 22, 1987. Dr. Carrico noted that Musick is totally deaf in his right ear and has a twenty percent hearing loss in his left ear. (Plaintiff's Exhibit # 5).
Following a November 18, 1987 visit, Dr. Earl K. Wilson observed that he had to talk loudly in order for Musick to hear him. Dr. Wilson stated that the hearing loss was post-traumatic, secondary to the head injury, and greater in the right ear than in the left. (Plaintiff's Exhibit # 6(a)). Dr. Wilson also noted the hearing difficulty following a May 23, 1989 visit and stated that the loss was related to the injury and would not improve. (Plaintiff's Exhibit # 6(b)).
In his August 14, 1991 report, Dr. McKnight wrote that Musick's "severe deafness interferes with the interview situation and I have to shout at him to be understood." (Plaintiff's Exhibit # 4(b)).
At trial, Musick appeared to be able to hear counsel's questions by positioning himself so that his left ear was toward the examiner.
2) Musick testified that at the time of the accident his teeth were "excellent." However, over the three years after the accident, he began to lose his teeth. He testified that his gums continue to hurt. This testimony was corroborated by the plaintiff's wife and son.
Following a May 23, 1989 examination, Dr. Wilson noted Musick's tooth loss and opined that this condition was, at least historically, related to the injury. (Plaintiff's Exhibit # 6(b)).
In an August 23, 1991 letter, Dr. Howard E. Quillen reported that on April 23, 1984 he desensitized a tooth for Musick. Musick returned on December 11, 1984 complaining of two teeth that needed pulling. Dr. Quillen was unable to anesthetize Musick, so the teeth were not pulled. Dr. Quillen has not seen Musick since. (Plaintiff's Exhibit # 7).
3) Musick testified that before the accident he had no problems smelling or tasting. Since the accident, he cannot smell or taste anything. The plaintiff's wife and son corroborated this testimony.
On November 18, 1987, Dr. Wilson administered a smell identification test which showed that, out of three smells, Musick could smell none. Dr. Wilson concluded that the loss of smell was secondary to the head injury and that it would not improve. (Plaintiff's Exhibit # 6(a)). Wilson again noted the loss of smell after a May 23, 1989 *449 visit, however, he noted "taste is intact." (Plaintiff's Exhibit # 6(b)).
In his August 14, 1991 report, Dr. McKnight noted neurological defects in terms of loss of smell and taste. Dr. McKnight's report also states that Musick weighed 150 pounds. Musick alleged this reflected a weight loss of fourteen pounds over the last three or four months. Dr. McKnight attributed this to lack of appetite and interest in food due to loss of smell and taste. (Plaintiff's Exhibit # 4(b)).
However, Mrs. Musick testified that the plaintiff eats six to eight meals a day. Also, in his April 6, 1987 report, Dr. McKnight had noted that, although Musick lost thirty-six pounds while in the hospital, he had regained the weight and presently weighed 150 pounds. (Plaintiff's Exhibit # 4(a)). Dr. Carrico also noted that Musick had lost thirty-six pounds, but had regained it. (Plaintiff's Exhibit # 5). Similarly, Dr. Wilson's November 18, 1987 report stated that most of Musick's weight loss occurred while he was hospitalized. (Plaintiff's Exhibit # 6(a)).
4) Musick testified that since the accident his buttocks and lower legs get numb if he sits for any length of time. He also reported that his right hand aches. His wife and son corroborated this testimony.
On April 6, 1987, Dr. McKnight reported, "Clinical impression here is that this man is suffering from a traumatic head injury with a cerebral injury which is producing a hyperreflexia in his legs and reduced touch in his legs and feet." (Plaintiff's Exhibit # 4(a)).
After his November 18, 1987 visit, Dr. Wilson noted that "reflexes are hyperactive, particularly at the knees." (Plaintiff's Exhibit # 6(a)).
In his August 14, 1991 report, Dr. McKnight noted that Musick has neurological defects in terms of loss of power in his right grip and numbness in feet. (Plaintiff's Exhibit # 4(b)).
5) Musick also testified that he has headaches. He stated that these occur only on the right side, and he characterized them as throbbing.
Dr. McKnight noted that Musick suffers from a post traumatic stress disorder and, in this respect, continues to complain of recurrent headaches. (Plaintiff's Exhibit # 4(b)).
6) There was also evidence of a decrease in mental capacities. Musick has not been able to work since the accident and has drawn Social Security benefits for full disability beginning on the date of the accident. (Plaintiff's Exhibit # 3).
On February 20, 1985, Dr. Gelburd examined Musick and obtained a full scale IQ of 77. Gelburd considered these scores to be regressions of previous capacity, which was estimated to have been above the 85 IQ level. This was suggestive of some intellectual deterioration. Dr. Gelburd opined, "The protocol is suggestive of brain impairment, as evidenced by impaired ability to abstract, impaired short term memory, clouded thinking, evidence of confusion... He could not adapt to and function in any ordinary work setting at this time. However, he is capable of handling his own funds." (Plaintiff's Exhibit # 2).
On October 22, 1987, Dr. Carrico found a full-scale IQ of 82. The Bender-Gestalt, a test used for neurological assessments, was highly suggestive of cerebral damage. Dr. Carrico examined Musick again on November 3, 1987 noting a full scale IQ of 85 on the Luria-Nebraska scale, which corrects for age, education and intelligence. The results of testing confirmed the presence of cognitive impairment. (Plaintiff's Exhibit # 5).
In his November 18, 1987 report, Dr. Wilson stated, "The degree of forgetfulness that he describes may also be trauma related with a mild organic brain syndrome, although by bedside examination no definite deficits are realized." (Plaintiff's Exhibit # 6(a)). Following a May 23, 1989 examination, Dr. Wilson noted that Musick's lack of ability to work and function normally were related to the injury and would not improve. (Plaintiff's Exhibit # 6(b)).
In a August 14, 1991 report, Dr. McKnight stated that Musick has cognitive *450 difficulties related to his injury with severe impairment of new learning ability and memory retention. McKnight stated that Musick will never be suitable for employment and that he is not competent to handle his own affairs. (Plaintiff's Exhibit # 4(b)).
7) Musick also complained about loss of vision. He informed Dr. Carrico that he did not wear glasses before the accident but now needs bifocals to read. (Plaintiff's Exhibit # 5).
However, in his April 6, 1987 report, Dr. McKnight noted, "Vision is good without glasses." (Plaintiff's Exhibit # 4(a)). On November 18, 1987, Dr. Wilson noted a visual acuity of 20/70 on the left and 20/50 on the right corrected. (Plaintiff's Exhibit # 6(a)). On May 23, 1989, Dr. Wilson reported a visual acuity is 20/20 on the left and 20/50 on the right. (Plaintiff's Exhibit # 6(b)).
In regard to all of the above, Musick testified that he has missed the pleasures which his respective senses gave him. He has also missed the active life he once led.
In addition to the problems described above, Mrs. Musick testified that, since the accident, her husband loses his temper two or three times a week. Mr. Musick has become increasingly belligerent toward her to the point that she moved to Gate City for a period of time. In addition, his hygiene has deteriorated and he bathes only once a week. The couple has not had intercourse since the accident.
Based on the information from Mrs. Musick, Dr. McKnight stated that Musick suffers from a paranoid state characterized by irritability, suspiciousness, confabulation, and apathy, all of which appears to be secondary to cerebral damage. (Plaintiff's Exhibit # 4(a)).
In a August 14, 1991 report, Dr. McKnight stated that his opinion is that Musick suffers from post traumatic head injury, a post concussive personality syndrome and a post traumatic stress disorder. He additionally suffers from a psychotic illness as a result of his organic brain syndrome which causes him to have severe marital paranoia and severe personal neglect. (Plaintiff's Exhibit # 4(b)).
Following the testimony in the case, the parties stipulated to Musick's life expectancy. At the time of the accident, his life expectancy was 20.4 years. At trial, his life expectancy was 15.4 years. (Plaintiff's Exhibit # 10). Musick also submitted medical bill totaling $21,862.70. (Plaintiff's Exhibit # 8).
CONCLUSIONS OF LAW
Under the Federal Tort Claims Act, the United States is liable "in the same manner and to the same extent as a private individual under like circumstances." 28 U.S.C.A. § 2674 (West 1965). The law of the place where the act or omission occurs, in this case Virginia, governs the issue of liability as well as the issue of damages. 28 U.S.C.A. § 1346(b). However, punitive damages are not allowable. 28 U.S.C.A. § 2674.
Although the law of Virginia is applicable, a situation may arise in which damages ordinarily allowable under state law as "compensatory" are "in excess of those necessary to provide compensation for injuries and losses actually sustained." Flannery v. United States, 718 F.2d 108, 110 (4th Cir.1983), cert. denied, 467 U.S. 1226, 104 S.Ct. 2679, 81 L.Ed.2d 874 (1984). "The question of the allowance of such damages is one of federal law." Id.
Under Virginia law, a plaintiff may recover for: 1) any bodily injuries which he sustained and their effect on his health according to their degree and probable duration; 2) any physical pain and mental anguish he suffered in the past and any that he may be reasonably expected to suffer in the future; 3) any disfigurement or deformity and any associated humiliation or embarrassment; 4) any inconvenience caused in the past and any that may be reasonably expected to occur in the future; 5) any medical expenses incurred in the past and any that may be reasonably expected to occur in the future; 6) any earnings he lost because he was unable to work at his calling; 7) any loss of earnings and lessening of earning capacity, or either, *451 that he may reasonably be expected to sustain in the future; and 8) property damage. Bulala v. Boyd, 239 Va. 218, 231, 389 S.E.2d 670, 677 (1990); see also DeWald v. King, 233 Va. 140, 143, 354 S.E.2d 60, 61 (1987); Doe v. West, 222 Va. 440, 443-44, 281 S.E.2d 850, 851-52 (1981). Each of these elements will be discussed as they pertain to Musick.
1. Bodily Injuries
A plaintiff must prove "with reasonable certainty the amount of damages and the cause from which they resulted." Medcom, Inc. v. C. Arthur Weaver Co., 232 Va. 80, 87, 348 S.E.2d 243, 248 (1986). "Proof with mathematical precision is not required, but there must be at least sufficient evidence to permit an intelligent and probable estimate of the amount of damage." Hailes v. Gonzales, 207 Va. 612, 614, 151 S.E.2d 388, 390 (1966) (citing Gwaltney v. Reed, 196 Va. 505, 507-08, 84 S.E.2d 501, 501-02 (1954)). "Damages which cannot be established with reasonable certainty are speculative or conjectural and may not be recovered." Miller v. Johnson, 231 Va. 177, 187, 343 S.E.2d 301, 307 (1986).
It is undisputed that Musick was admitted into the Holston Valley Hospital on June 7, 1984 for what was later diagnosed as a cerebral contusion, a subdural fibroma, and a fractured right scapula. Similarly, it is undisputed that, on June 11, 1984, the treating physicians proceeded with Burr holes to relieve the accumulation of subdural fluid. Also, a subsequent subdural tap was performed.
This court also finds that, as a result of the accident, Musick suffered total, permanent deafness in his right ear. As for the left ear, there is conflicting evidence concerning the amount of hearing loss. The court finds that, based on Dr. Crockett's diagnosis, there has been a moderate loss of hearing in the left ear. However, Musick was able to hear counsel's questions at trial. The court also notes that Musick did not wear a hearing aid and, to that extent, he has not minimized his damages.
The court finds that Musick has failed to satisfy his burden of proving that his tooth loss was related to the accident. Dr. Wilson states only that, historically, the tooth loss was related to the accident. Dr. Quillen's letter does not address the cause of Musick's discomfort. Therefore, causation is speculative and no damages may be recovered for the tooth loss.
The court finds that Musick's loss of smell is permanent and causally related to the accident as stated in Dr. Wilson's report. (Plaintiff's Exhibit # 6(a)). As for the loss of taste, there is conflicting evidence. The court finds Dr. Wilson's statement that "taste is intact" persuasive. (Plaintiff's Exhibit # 6(b)). The court also find that the loss of smell has not created problems with loss of appetite or interest in food. At trial, Musick appeared to be healthy and well nourished. Mrs. Musick's testified that her husband eats six to eight times a day. The evidence shows that, aside from the thirty-six pounds lost while hospitalized, Musick has maintained a weight of 150 pounds.
The court finds that Musick suffers from numbness in his lower extremities and from a loss of power in his right grip as a result of the accident.
The court also finds that Musick suffers from headaches as a result of the accident and accepts his testimony that they are throbbing.
The court also finds that Musick suffers from permanent cognitive impairment as a result of the accident. This has resulted in impairment of new learning ability and memory retention. (Plaintiff's Exhibit # 4(b)).
The court finds that Musick has not met his burden of proving that his vision has been impaired as a result of the accident. Dr. McKnight noted that "Vision is good without glasses." The fact that Musick needs glasses to read is not unusual in a man of his age and has not been shown to be causally related to the accident.
As for the change in personality attested to by the plaintiff's wife, it is clear *452 from the record that Musick is not aware of his change in personality. At trial, he made no mention of any such change. It was only after he had exited the courtroom that his wife took the stand and raised these problems. Similarly, in the medical reports, it was the plaintiff's wife that raised these concerns.
To the extent that Musick is unaware of his loss, this case is similar to Flannery. In Flannery, plaintiff became permanently comatose as a result of extensive brain damage suffered in an automobile accident. 718 F.2d at 110. The Fourth Circuit certified the following question to the state court, "[I]s a plaintiff in a personal injury action, who has been rendered permanently semi-comatose by his injuries and is therefore unable to sense his injuries, entitled to recover for the impairment of his capacities to enjoy life." The state court found that, as a matter of state law, damages for the loss of enjoyment of life were assessable even though this particular plaintiff was unaware of his loss. Flannery v. United States, 171 W.Va. 27, 297 S.E.2d 433, 438-39 (1982).
The Fourth Circuit found that, even though these damages were allowed under state law, they were punitive under the FTCA. The court stated:
It is perfectly clear, however, that an award of $1,300,000 for the loss of enjoyment of life cannot provide him with any consolation or ease any burden resting upon him.... He cannot use the $1,300,000. He cannot spend it upon necessities or pleasures. He cannot experience the pleasure of giving it away....
Since the award of $1,300,000 can provide Flannery with no direct benefit, the award is punitive and not allowable under the FTCA.
718 F.2d at 111.
The plaintiff argues that, unlike in Flannery, Musick could spend the money and experience the pleasure of giving it away. This is true. Since Musick is not comatose, an award for his change in personality could provide him with direct benefit and is therefore allowable under Flannery. Burke v. United States, 605 F.Supp. 981, 992 (D.Md.1985).
The court finds that Musick suffers from a psychotic illness as a result of his organic brain syndrome which causes him to have severe marital paranoia and severe personal neglect. (Plaintiff's Exhibit # 4(a)). However, the court notes that there can be no recovery for loss of consortium under Virginia law. Carey v. Foster, 345 F.2d 772, 776 (4th Cir.1965). The recovery is limited to compensating Musick for his injuries and cannot serve to compensate his wife for any loss she may have suffered.
Based on the above, the court finds the United States is liable in the amount of $120,000 for bodily injuries.
2. Pain and Suffering
Under Virginia law, the plaintiff may recover for past and future pain and mental anguish. Bell v. Kirby, 226 Va. 641, 645-46, 311 S.E.2d 799, 802 (1984). "It has been universally recognized ... that an award for the future effects of an injury, such as pain and suffering and medical expenses, is appropriate when there is evidence to support it." Hailes, 207 Va. at 614, 151 S.E.2d at 390. Mental anguish and physical pain may be proved directly or it may be inferred "from the circumstances of the injury, including the violence with which it was inflicted." Wallen v. Allen, 231 Va. 289, 294, 343 S.E.2d 73, 76 (1986).
The term "mental anguish" also encompasses "plaintiff's cognitive anguish at the loss of pleasures he formerly enjoyed." Bulala, 239 Va. at 232, 389 S.E.2d at 677. Thus, although Virginia has not recognized "loss of enjoyment of life" as being separately compensable, any such loss is to be considered as mental anguish. See id.
Regarding past physical pain and mental anguish, Musick suffered a violent injury resulting in a cerebral contusion, a subdural fibroma, and a fractured right scapula. Treatment for this included Burr holes and a subdural tap. Musick specifically *453 testified that he does not remember the events of June 7, 1984, nor does he remember being hospitalized. However, physical pain and mental anguish can be inferred from violence with which the injuries were inflicted. Wallen, 231 Va. at 294, 343 S.E.2d at 76.
As for future pain and mental anguish, the court finds that Musick will suffer from: 1) "roaring" and "clicking" sounds in his ears; 2) numbness in his lower extremities and loss of power in his right grip; and 3) headaches. As for "loss of enjoyment of life" as included under mental anguish, Musick will not hear as well as he could before the accident; miss his sense of smell; and not enjoy the pleasures that working outside brought him.
Based on the above, the court finds the United States is liable in the amount of $100,000 for past and future pain and mental anguish.
3. Disfigurement and Deformity
There was no evidence of deformity or any resulting humiliation or embarrassment. Therefore, no award can be had for this type of damage. Armstead v. James, 220 Va. 171, 174, 257 S.E.2d 767, 769 (1979); see also Swersky v. McPeek, 214 Va. 253, 254-55, 199 S.E.2d 507, 508 (1973).
4. Inconvenience
A plaintiff may recover for any inconvenience and discomfort caused in the past and any which will probably be caused in the future. Todt v. Shaw, 223 Va. 123, 128, 286 S.E.2d 211, 214 (1982). However, aside from the evidence of pain and mental anguish above, there is no evidence of further inconvenience. Therefore, any award in addition to that awarded for pain and suffering would be duplicative and is not allowable under Flannery. 718 F.2d at 112.
5. Medical Expenses
"Plaintiff is clearly entitled to recover for past and future medical expenses under the FTCA, provided these items are proved with reasonable certainty." Corrigan v. United States, 609 F.Supp. 720, 732 (E.D.Va.1985), rev'd on other grounds, 815 F.2d 954, cert. denied, 484 U.S. 926, 108 S.Ct. 290, 98 L.Ed.2d 250 (1987).
The parties stipulated that Musick's past medical expenses were $21,862.70. Therefore, the United States is liable for medical expenses in the amount of $21,862.70. There was no evidence of future medical expenses, so none will be awarded. Hailes, 207 Va. at 614-15, 151 S.E.2d at 390.
6. & 7. Loss of Earnings
Any past earnings lost and any future lost earnings will be considered together because Musick has not worked since the accident. "An award of lost earnings is generally made so that the injured party can pay for those necessities and amenities which he would have provided for himself out of his earned income had he not been injured. Such an award is usually proper under Virginia law." Corrigan, 609 F.Supp. at 732-33; see also Clark v. Chapman, 238 Va. 655, 662, 385 S.E.2d 885, 889 (1989).
Musick has not worked since the accident. The medical evidence indicates that Musick will never again be suitable for employment. For the two years prior to the accident, Musick's net profits from his business were $7,546.00 and $1,264, giving an average of $4,405.00. He was fifty-seven at the time of the accident and planned to retire at age sixty-two, giving him five more years of income. After retiring, Musick planned to collect Social Security, and he is currently doing so.
The court therefore finds that Musick's lost earning are $4,405.00/year multiplied by five years equaling $22,025.
"It has been repeatedly held that federal income taxes must be deducted in computing lost future earnings, notwithstanding the fact that such deductions are not permissible under state law." Flannery, 718 F.2d at 111. However, the burden is on the government to raise the issue and to prove the extent of the reduction. Barnes v. United States, 685 F.2d 66, 69 (3d Cir.1982); Javanovich v. United States, 813 F.2d 1035, 1037 (9th Cir.1987). The government has not raised the issue, therefore it will not be considered.
*454 The government also raised the issue that Musick received Social Security benefits during the five years for which lost earnings have been calculated. However, the government is not entitled to a reduction for these benefits because these come from a collateral source. See United States v. Price, 288 F.2d 448, 451 (4th Cir.1961); Carroll v. United States, 625 F.Supp. 1, 8 (D.Md.1982); Manko v. United States, 830 F.2d 831, 836-37 (8th Cir.1987).
8. Property
The defendant has not proved any property damage, therefore, no damages can be awarded.
CONCLUSION
For the foregoing reasons the court finds the United States liable in the amount of: 1) $120,000 for bodily injuries; 2) $100,000 for past and future pain and mental anguish; 3) $0.00 for disfigurement and deformity; 4) $0.00 for inconvenience; 5) $21,862.70 for past and future medical bills; 6) $22,025.00 for lost earnings; and 7) $0.00 for property damage. The court will enter an appropriate order.
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290 F.2d 938
RUSSELL & PUGH LUMBER COMPANYv.UNITED STATES.
No. 322-59.
United States Court of Claims.
June 7, 1961.
John I. Heise, Jr., Washington, D. C., Warren E. Miller, Washington, D. C., on the briefs, for plaintiff.
Kenneth H. Masters, Washington, D. C., with whom was Ramsey Clark, Asst. Atty. Gen., for defendant.
DURFEE, Judge.
1
The plaintiff and the Bureau of Land Management, Department of the Interior, entered into a contract for the sale of an estimated quantity of standing timber on designated public lands. After the full contract price had been paid it was discovered by the contractor that there was a deficiency of about twenty percent between the number of board feet estimated in the contract and the number of board feet contained in the designated trees actually cut and removed. Administrative claim on the Department of the Interior for the amount of the shortage was properly made and has been denied.
2
The position of the defendant is that the contract reflects a lump-sum transaction which, by its very terms, places the risk of shortage on the purchaser. The plaintiff insists that the contract which it signed was a unit-price contract and, that having paid for each of the estimated units of timber it is entitled to a refund to the extent that the actual production fell short of the estimate. By this suit for money damages representing the alleged overcharge the plaintiff relies on its interpretation of the agreement as the correct one.
3
In any event, the plaintiff vigorously contends that this action cannot be appropriately disposed of on motion for summary judgment because, among other reasons, there are material issues of fact. It becomes necessary, then, to assay the factual setting of this case to determine whether the solution of this problem will require a trial before a commissioner of the court.
4
In furtherance of its desire to clear certain standing and fallen timber from public lands in Idaho, the Bureau of Land Management in June 1953 gave public notice of a proposed sale of a specified number of trees estimated to contain 6,715 thousand board feet of lumber. The notice which was published on several occasions in a weekly newspaper listed quantities of different species of trees and stated that the board foot volumes given were estimates and might be more or less than the actual amounts. The notice further said that a total purchase price of $68,080.25 would be considered with a minimum deposit of $4,050.00.
5
The day before the notice of sale first appeared in public print, the defendant's District Forester wrote to four timber operators, including the plaintiff. It informed the addressees that the trees which were the subject of the sale had been cruised by the defendant and a summary of the cruise and appraisal data, giving numbers and species of trees, volume of board feet, and price per thousand board feet, was included.
6
The letter enclosing the cruise summary advised that a standard form contract would be used to consummate the sale but that certain special stipulations including the following would apply to the sale:
7
"All trees that are to be cut are marked. They were cruised 100 per cent and are sold by tree measurement. No scaling is done by the Bureau. You pay for the advertised volume by species. No additional charge is made if you cut out more and no refund is allowed if you cut out less than the advertised volume."
8
A similar statement was also included in the summary of cruise and appraisal data.
9
The plaintiff bid orally and offered the exact total price and downpayment suggested in the public notice. The contract prepared by defendant on a standard form was sent to the plaintiff which was given thirty days to complete and return it. Section 3 of the contract pertains to the amount and price of materials and contains (a) and (b) subsections, both of which are marked with the same footnote. That footnote says, "Strike out (a) or (b), which ever is inapplicable." The defendant followed this instruction and drew ink lines through subsection (b) which provides that total price is to be determined by multiplying the total quantity of each kind of tree by its unit price. Subsection 3(a) which remains intact in the contract reads as follows:
10
"The total estimated amount of materials sold under this contract, and the total price, therefor, subject to modification by reappraisal are as follows: [here each variety of tree is listed with the estimated number of board feet for each, the unit price and total price for each variety, the total estimated quantity of board feet and the total contract price.]
11
"The Purchaser shall be liable for the full purchase price shown above except as it may be changed by reappraisal, even though the quantity of materials actually severed, extracted, or removed or designated for taking is less than the estimated quantity set forth above."
12
The plaintiff complains of several physical irregularities in the contract. The first concerns Section 3. Although the defendant struck out one of the subsections, as Footnote 2 directed, the tabular listing of quantities and prices which forms a part of 3(a) was attached in such a manner that a flap of typed material conceals parts of 3(a) and the stricken 3(b). This flap is not, however, permanently affixed and it can be lifted to reveal both subsections in their entirety. We have examined the contract which is on file as Defendant's Exhibit A and we are convinced, contrary to the contention of the plaintiff, that anyone looking at the contract, be he casual reader or prospective purchaser, would lift the flap to see what, if anything, appears beneath.
13
If this were the only unusual feature of this particular contract we would have no hesitancy in saying that no reasonable and prudent party thereto could have understood it to be anything other than a lump-sum sale. However, subsection (b) to section 4 contains a footnote to the effect that that subsection should be stricken if subsection 3(a) is applicable. Although subsection 3(a) was clearly made applicable, to the exclusion of subsection 3(b), the defendant failed to strike out subsection 4(b), apparently through inadvertence. Section 4 covers payments, passage of title, risk of loss and reappraisals. The important provision of the (b) paragraph recites that "[t]he total purchase price, whether more or less than the `estimated total price,' shall equal the sum of the total quantities severed or extracted, or designated therefor, multiplied by their respective unit prices." The failure of the defendant to delete the 4(b) provision from the standard form contract has created a cloud on an otherwise clear document.
14
We have alluded to the public notice of sale and the informational letter addressed to plaintiff not as a means of showing what plaintiff intended or believed when it entered into the contract. As the plaintiff has pointed out, there has been no showing that the lumber company officials received those items or relied on them. Our consideration of these items is, on the other hand, for the purpose of showing what the seller, the Government, understood the terms of sale to be. The public utterances of the defendant contain numerous references to the fact that no adjustment would be made if the trees cut out at less than the estimated quantity and that the purchaser was to pay for the advertised volume. But for the erroneous inclusion of provision 4(b) this intent was clearly reflected in the formal contract. Furthermore, upon being informed of the shortage, the District Forester promptly denied any adjustment on the ground that it was a lump-sum contract and referred the plaintiff to the provisions of subsection 3(a).1 We think that all of the competent indications lead clearly to the conclusion that the defendant intended to enter into a sale of an estimated quantity of lumber for a fixed lump-sum.
15
Any reader would have experienced one of three reactions after examining the contract as drawn. He could have determined that the failure to strike subsection 4(a) was clearly an oversight in view of the earlier provisions of the contract and, therefore, have disregarded it, thereby acquiescing in the meaning placed on the whole document by the defendant. Or he could have viewed the contradiction as an irreconcilable ambiguity and requested clarification during the thirty day period allowed for signing. This reaction apparently did not take place in this case. Or finally, he could have read the terms of the instrument as one creating a unit price contract. A careful and intelligent reading of the contract, in which the 3(b) provision relating to a unit price agreement was clearly deleted, could not, in our opinion, have resulted in an understanding of the instrument, whatever its defects, as a unit price agreement.
16
Yet the plaintiff alleges that this is the meaning which it took from the contract furnished it by the Bureau of Land Management and we must accept as fact the allegation of what its intent was for the purposes of the present discussion. Mistake, as the word is used in contract law, is a mental attitude which when coupled with an act having legal significance, such as the execution of a contract, itself acquires legal consequences. Restatement, Contracts § 500 (1932); 5 Williston, A Treatise On The Law Of Contracts § 1535 (Revised ed. 1937). The misapprehension under which the plaintiff labored was not one caused or induced by the defendant since it should have been apparent that the failure to omit provision 4(b) was an unintentional oversight. And the apparent inconsistency did not trouble the agents of the plaintiff enough to move them to request clarification from the defendant. We are confronted, then, with an unreasonable mistake on the part of the plaintiff neither induced nor shared by the defendant and of which it had no reason to have known, since the plaintiff did not bring the matter of the erroneous inclusion of 4(b) to its attention. This, we think, is the kind of unilateral mistake which the courts and the treatise writers believe does not permit judicial relief. Restatement, Contracts § 503 (1932); 5 Williston, A Treatise On The Law of Contracts §§ 1573, 1578 (Revised ed. 1937); American Water Softener Co. v. United States, 1915, 50 Ct.Cl. 209; Korrick v. Tuller, 1933, 42 Ariz. 493, 27 P.2d 529; Bowes Co. v. Inhabitants of Town of Milton, 1926, 255 Mass. 228, 151 N.E. 116; Potter v. Miller, 1926, 191 N.C. 814, 133 S.E. 193.
17
The issues of fact referred to by the plaintiff, such as which party was responsible for the shortage, whether the plaintiff's logging methods were sound and whether the timber cruise was accurate, are not, in our opinion, material and hence the cases relied on for the proposition that summary judgment is inappropriate for situations in which there are disputes concerning material facts are inapposite. Since we have, in effect, determined that the document in question was not susceptible of an intelligent meaning other than that intended by the defendant, the line of cases which holds that an ambiguous contract susceptible of several possible meanings must be construed against the party which drew it likewise has no applicability to the present situation. See e. g., Breese Burners, Inc. v. United States, 1954, 121 F.Supp. 530, 128 Ct.Cl. 649; Peter Kiewit Sons' Co. v. United States, 1947, 109 Ct.Cl. 390.
18
Without admitting the possibility that its position as to the effect of the written agreement is untenable, the plaintiff raises another point which retains its pertinency notwithstanding our decision as to what the agreement meant. It says that the discrepancy of approximately twenty percent below the estimated quantity resulted from a gross error in the defendant's estimate and that it relied on it to its detriment. As we understand the argument, it is relevant even if the agreement is taken to be one providing for a lump-sum sale. However, even if it is accepted as true that the defendant's estimate was incorrect and that the plaintiff presumed that it was at least generally accurate and, further, that there was a shortage of as much as twenty percent, this does not, as a matter of law, entitle the plaintiff to recover.
19
The plaintiff understands that the estimated quantities were qualified by the phrase "more or less" which has been held to cover only minor deviations. Neither the fact nor the conclusion is precisely so. Unlike the kind of contract which the plaintiff has in mind, typified by the one which created the controversy in Brawley v. United States, 1877, 96 U.S. 168, 24 L.Ed. 622, this contract does not qualify the estimate with any such term as "more or less." On the contrary, it emphasizes that it is an estimate only and it provides that the purchase price is due and payable even if the actual production falls short of the estimate. Nor is there anything to suggest that this means somewhat short or slightly short. This contract is clearly distinguishable from the contract in Rupley Bros. v. United States, 1952, 124 Ct.Cl. 59 in which the words "more or less" appearing therein were held to cover only a minor variance. The crux of that decision was the fact that the Government had violated the spirit of the agreement in failing to mark additional trees for cutting.
20
The unreported case of W. C. Green and S. A. Warg d/b/a G. M. W. Logging Co., Civil No. 6779, United States District Court for the District of Oregon, which involved a shortage in excess of one-third in a timber sale contract, has come to our attention. The District Court determined that the contract there in suit was a lump-sum contract. It denied recovery for the substantial shortage despite the fact that the transaction contemplated the sale of an estimated quantity, "more or less." The court apparently felt that where the intention is clearly that the sale price shall be payable regardless of the quantity cut, the words "more or less" are not significant. The present case presents perhaps a stronger situation than that before the Oregon District Court for rejecting the position that only a minor quantity variance is admissible. Furthermore, it appears that in the thinking of that particular District Court, a deficiency of twenty percent would not constitute a major one. And, in the instant case we think that that attitude would be correct, certainly since the petition does not suggest any deliberate misrepresentation on the part of the defendant.
21
We find no material issue of fact to justify referring this case to a trial commissioner and, accordingly, the defendant's motion will be granted and the petition dismissed.
22
It is so ordered.
23
JONES, Chief Judge, and LARAMORE and WHITAKER, Judges, concur.
24
MADDEN, Judge, took no part in the consideration and decision of this case.
Notes:
1
The interpretation of the contract as one for a lump-sum given it by the defendant does not appear, as has been suggested by plaintiff, to have been decided on as an afterthought by higher echelons of the Department of the Interior
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20 F.3d 838
40 Fed. R. Evid. Serv. 813
Gregory FOSTER; Reginald Cline, Appellants,v.GENERAL MOTORS CORPORATION, Appellee.
No. 93-3279EA.
United States Court of Appeals,Eighth Circuit.
Submitted March 18, 1994.Decided March 23, 1994.
Sheila F. Campbell, Little Rock, AR, for appellants.
Robert L. Henry, III and Shayne D. Smith, Little Rock, AR, for appellee.
Before FAGG, Circuit Judge, BRIGHT, Senior Circuit Judge, and WOLLMAN, Circuit Judge.
PER CURIAM.
1
Gregory Foster and Reginald Cline brought this product liability action against General Motors Corporation (GMC), claiming they were injured in an accident caused by a design defect in the gearshift of Foster's Chevrolet automobile. Foster and Cline appeal the jury's verdict for GMC, contending the district court erroneously admitted two versions of the police accident report. We disagree and affirm.
2
At trial, GMC offered the original police report prepared by the investigating officer. The officer was experienced in motor vehicle accident investigations, he conducted a neutral investigation shortly after the accident occurred, and he prepared his report the next day. This report was clearly admissible under the hearsay exception for public records. Fed.R.Evid. 803(8); Simmons v. Chicago & N.W. Transp. Co., 993 F.2d 1326, 1327-28 (8th Cir.1993).
3
GMC also offered a copy of the police report (the second report) that its investigator received from Foster and Cline's attorney. The second report was a copy of the original report with alterations in a different handwriting blaming the accident on the automobile's gearshift. Foster testified the investigating officer gave him the second report and he delivered the report to his attorney. Contrary to Foster and Cline's argument that the second report lacked the trustworthiness needed for admission under the public records hearsay exception, the second report was not hearsay because GMC did not offer the report to prove its truth. See Fed.R.Evid. 801(c). Instead, GMC offered the second report, and the investigating officer's testimony denying that he made the alterations, to impeach Foster's direct testimony that he did not alter the report before giving it to his attorney.
4
Foster and Cline also argue the second report was extrinsic evidence barred for impeachment purposes by Federal Rule of Evidence 608(b). We disagree. Rule 608(b) does not apply to extrinsic evidence that is offered to impeach a witness's testimony on a material issue. See Boutros v. Canton Regional Transit Auth., 997 F.2d 198, 205 (6th Cir.1993). Thus, the district court properly admitted the second report because the report was relevant to GMC's defense that Foster and Cline manufactured their claim that a defective gearshift caused the accident.
5
Finally, we reject Foster and Cline's argument that the second report should have been excluded under Federal Rule of Evidence 403. Admission of the second report did not unfairly prejudice Foster and Cline after Foster testified he did not alter the report.
6
Accordingly, we affirm.
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FILED BY CLERK
JAN 10 2013
COURT OF APPEALS
IN THE COURT OF APPEALS DIVISION TWO
STATE OF ARIZONA
DIVISION TWO
THE STATE OF ARIZONA, ) 2 CA-CR 2012-0063
) DEPARTMENT B
Appellee, )
) OPINION
v. )
)
GUILLERMO C. BECERRA, )
)
Appellant. )
)
APPEAL FROM THE SUPERIOR COURT OF GRAHAM COUNTY
Cause No. CR2008191
Honorable C. Robert Pursley, Judge Pro Tempore
Honorable R. Douglas Holt, Judge
VACATED AND REMANDED
Thomas C. Horne, Arizona Attorney General
By Kent E. Cattani, Joseph T. Maziarz,
and David A. Sullivan Tucson
Attorneys for Appellee
Harriette P. Levitt Tucson
Attorney for Appellant
K E L L Y, Judge.
¶1 Guillermo Becerra appeals from his convictions and sentences for one
felony count of aggravated driving with a prohibited drug in his body and one
misdemeanor count of driving with a prohibited drug in his body. He argues the trial
court erred by denying his motion to suppress, he was denied his constitutional right to a
jury trial, and the combined convictions and sentences violate his double jeopardy rights.
We conclude the court did not err in denying Becerra’s motion to suppress, but vacate his
convictions and sentences and remand for a new trial.
Factual and Procedural Background
¶2 We view the facts in the light most favorable to upholding Becerra’s
convictions and sentences. See State v. Francis, 224 Ariz. 369, ¶ 2, 231 P.3d 373, 374
(App. 2010). Around 9:00 one evening, Graham County Sheriff’s Deputy Jacob
Carpenter pulled over the vehicle Becerra was driving after he noticed the right taillight
was not working. Based on observations that suggested Becerra was under the influence
of a stimulant, Carpenter administered field sobriety tests and ultimately arrested him.
Becerra was charged with driving while under the influence of an intoxicant (DUI),
aggravated DUI, driving with a prohibited drug in his body, and aggravated driving with
a prohibited drug in his body.
¶3 Becerra filed a motion to suppress evidence, arguing the stop of his vehicle
was illegal. The trial court denied the motion after a hearing. Following a two-day bench
trial, the court found Becerra guilty of driving with a prohibited drug in his body and
aggravated driving with a prohibited drug in his body, and not guilty of the other DUI
2
charges. The court suspended imposition of sentence, placed Becerra on concurrent four-
year and three-year terms of supervised probation, and imposed six-month and ten-day
prison terms as a condition of probation. This appeal followed.
Discussion
Motion to Suppress
¶4 Becerra first argues the trial court erred by denying his motion to suppress
because the initial stop of his vehicle was illegal. We review the court’s denial of a
motion to suppress for an abuse of discretion. State v. Gay, 214 Ariz. 214, ¶ 30, 150 P.3d
787, 796 (App. 2007). We consider only the evidence presented at the suppression
hearing, and view it in the light most favorable to upholding the court’s ruling. Id.
¶5 “An investigatory stop of a vehicle constitutes a seizure under the Fourth
Amendment,” State v. Fornof, 218 Ariz. 74, ¶ 5, 179 P.3d 954, 956 (App. 2008), and is
permissible only if the officer has reasonable suspicion of criminal activity, State v.
Teagle, 217 Ariz. 17, ¶ 20, 170 P.3d 266, 271-72 (App. 2007). Becerra maintains
Carpenter testified “the only reason” he had stopped Becerra’s vehicle “was that the right
taillight was inoperable.” He argues a broken tail lamp does not provide reasonable
suspicion of criminal activity to justify an investigatory stop because the relevant statute
regulating vehicle safety, A.R.S. § 28-925, requires only that one tail lamp function
properly.
¶6 Becerra contends State v. Fikes, 228 Ariz. 389, 267 P.3d 1181 (App. 2011)
is dispositive of this issue. In Fikes, an officer observed that one of three brake lights on
3
the defendant’s vehicle was not working and stopped him for violating A.R.S. § 28-939.
228 Ariz. 389, ¶ 2, 267 P.3d at 1182. Section 28-939(B)(1) provides that stop lamps shall
be “maintained at all times in good working condition.” The court concluded § 28-939
required only one stop lamp be maintained, based on the statute’s language and context.
Id. ¶¶ 7, 11. For that reason, the officer had lacked reasonable suspicion to stop the
defendant’s vehicle based on a violation of the statute. Id. ¶ 16.
¶7 The relevant statute in this case, § 28-925, is similar to that discussed in
Fikes; it requires vehicles to be equipped with “at least one tail lamp.” § 28-925(A).
Therefore, Fikes would suggest that stopping a driver solely to investigate a suspected
violation of § 28-925 would be improper if at least one other tail lamp was working.
However, the state argues this case is not controlled by the narrow holding of Fikes
because Carpenter provided additional reasons for stopping Becerra’s vehicle based on
public safety concerns. We agree.
¶8 As the trial court noted, A.R.S. § 28-982 provides an officer may stop a
vehicle “any time there is reasonable cause to believe that a vehicle is unsafe” in order to
issue a written notice to the driver. And A.R.S. § 28-921 provides a person shall not
drive a vehicle “in an unsafe condition that endangers a person.” Moreover, police
officers frequently engage in “community caretaking functions” involving vehicle stops
that are “totally divorced from” criminal investigations. Cady v. Dombrowski, 413 U.S.
433, 441 (1973). Evidence discovered without a warrant is admissible under the
“community caretaker” doctrine if the intrusion is reasonable. State v. Mendoza-Ruiz,
4
225 Ariz. 473, ¶ 8, 240 P.3d 1235, 1237 (App. 2010); State v. Organ, 225 Ariz. 43,
¶¶ 14-18, 234 P.3d 611, 615 (App. 2010) (stop of vehicle proper as community
caretaking function when reasonable to believe vehicle having trouble); see also State v.
Harrison, 111 Ariz. 508, 509, 533 P.2d 1143, 1144 (1975) (proper exercise of police
power to stop vehicle for public safety reasons because tire “bouncing”).
¶9 In Fikes, the officer “did not testify that he was motivated by public safety
or community welfare.” 228 Ariz. 389, ¶ 15, 267 P.3d at 1184. And “nothing in the
record indicate[d] any other driver was or could have been confused.” Id. ¶ 15. For those
reasons, we explicitly declined to address in Fikes whether the stop may have been
permissible “under a public-safety or community-welfare exception.” Id.
¶10 In this case, however, Carpenter testified that one reason he decided to stop
the vehicle was that “it caused a danger to other vehicles on the road.” He was concerned
another vehicle approaching from the rear would not be able to perceive accurately the
vehicle’s position and could “collide with it.” In its ruling on the motion, the trial court
found Carpenter’s stop of the vehicle justified because it “was being operated in an
unsafe condition.” The reasonableness of an officer’s response is a question of fact left to
a trial court’s discretion, Organ, 225 Ariz. 43, ¶ 16, 234 P.3d at 615, and Carpenter’s
testimony supports the court’s conclusion that the stop was justified by considerations of
5
public safety and did not violate the Fourth Amendment.1 Mendoza-Ruiz, 225 Ariz. 473,
¶ 8, 240 P.3d at 1237.
¶11 The record supports the trial court’s conclusion that the stop of Becerra’s
vehicle was reasonable and Becerra does not dispute the constitutionality of any further
investigation that occurred after the vehicle had been stopped. Therefore, the court did
not abuse its discretion by denying Becerra’s motion to suppress evidence. Gay, 214
Ariz. 214, ¶ 30, 150 P.3d at 796.
Waiver of Jury Trial
¶12 Becerra argues his state constitutional right to a jury trial was violated as a
result of an invalid waiver. See Ariz. Const. art. 2, §§ 23, 24. A defendant’s waiver of
his or her right to a jury trial must be knowing, voluntary, and intelligent. State v. Innes,
227 Ariz. 545, ¶ 5, 260 P.3d 1110, 1111 (App. 2011). To be valid, the defendant must
“manifest[] an intentional relinquishment or abandonment” of the right, id., and must
“understand that the facts of the case will be determined by a judge and not a jury,” State
v. Conroy, 168 Ariz. 373, 376, 814 P.2d 330, 333 (1991). The failure to obtain a
defendant’s waiver of his or her right to a jury trial constitutes structural error. Innes, 227
Ariz. 545, ¶ 9, 260 P.3d at 1112.
1
Becerra argues the lights on his vehicle necessarily “compli[ed] with the standard
of care for public safety” because they complied with the requirements of § 28-925(A).
However, he has not supported his suggestion that law enforcement’s public safety
function is limited to identifying statutory violations, and relevant case law suggests
otherwise. See Mendoza-Ruiz, 225 Ariz. 473, ¶ 9, 240 P.3d at 1237 (community
caretaking function includes “infinite variety of services” including “prevent[ing]
potential hazards from materializing”).
6
¶13 Rule 18.1(b), Ariz. R. Crim. P., protects a defendant’s right to a jury trial
by providing:
The defendant may waive the right to trial by jury with
consent of the prosecution and the court. . . .
(1) Voluntariness. Before accepting a waiver the court
shall address the defendant personally, advise the
defendant of the right to a jury trial and ascertain that
the waiver is knowing, voluntary, and intelligent.
(2) Form of Waiver. A waiver of jury trial under this
rule shall be made in writing or in open court on the
record.
See also A.R.S. § 13-3983.
¶14 Becerra argues his convictions must be reversed because nothing in the
record demonstrates he knowingly, intelligently, and voluntarily waived his right to a jury
trial. During a pretrial status conference, the trial court asked whether Becerra desired to
waive his right to a jury trial. Counsel replied that he “ha[d]n’t talked about it with
[Becerra], but . . . could do so right now and see if he’s willing to waive a jury.” After an
off-the-record discussion, counsel stated: “my client indicates he’d be willing to waive a
jury.” The court then vacated the jury trial and set the matter for a bench trial.
¶15 The record does not show a valid waiver and “[w]e cannot presume a valid
waiver of a jury right based on a silent record” where the trial court has failed to address
the defendant personally. State v. Baker, 217 Ariz. 118, ¶ 8, 170 P.3d 727, 729 (App.
2007). The state concedes Becerra’s waiver did not meet the requirements of Rule
18.1(b), but urges us to remand “for the limited purpose of determining whether he was
7
sufficiently aware of his jury trial rights.” It contends a “proper colloquy between
Appellant and the trial court will allow the trial court—and, upon appeal, this Court—to
determine whether [Becerra]’s waiver was made knowingly, voluntarily, and
intelligently.”
¶16 We conclude instead the proper remedy for the error is to order a new trial.
See Innes, 227 Ariz. 545, ¶ 9, 260 P.3d at 1112 (failure to obtain valid waiver of right to
jury trial structural error requiring reversal and new trial); see also State v. Offing, 113
Ariz. 287, 289, 551 P.2d 556, 558 (1976) (remanding for new trial); but see State v. Le
Noble, 216 Ariz. 180, ¶ 20, 164 P.3d 686, 691 (App. 2007) (remanding for finding
regarding validity of waiver). To order a new trial “is consistent with the majority of
reported decisions in Arizona in which the trial record failed to show a proper jury trial
waiver.” Baker, 217 Ariz. 118, ¶ 21, 170 P.3d at 731-32 (listing cases).
¶17 Additionally, as discussed in Innes, practical difficulties would arise if we
were to remand for the limited purpose of determining whether Becerra had waived his
right to a jury trial. 227 Ariz. 545, ¶ 13, 260 P.3d at 1112. The record shows Becerra’s
counsel had consulted with him only immediately before informing the trial court Becerra
would waive his right to a jury. To ascertain whether Becerra had understood fully his
rights based on that discussion “likely would require an impermissible inquiry into
privileged communications between him and his counsel.” Id.
¶18 Becerra also contends the state may not retry him because jeopardy has
attached. However, he fails to develop or provide any authority in support of this
8
argument. Therefore, it is waived on appeal. See State v. King, 226 Ariz. 253, ¶ 11, 245
P.3d 938, 942 (App. 2011) (opening brief must present significant argument supported by
authority); Ariz. R. Crim. P. 31.13(c)(1)(vi) (same). Moreover, we note that federal and
state prohibitions on placing a defendant in double jeopardy generally do not bar retrial
after a successful appeal unless the conviction is reversed on grounds of insufficient
evidence. State v. Porras, 133 Ariz. 417, 419, 652 P.2d 156, 158 (App. 1982); see also
State v. Moody, 208 Ariz. 424, ¶ 26, 94 P.3d 1119, 1134 (2004) (original conviction
nullified when case reversed for reason other than insufficient evidence).
Lesser-Included Offense
¶19 Becerra also argues driving with a prohibited drug in the body is a lesser-
included offense of aggravated driving with a prohibited drug in the body and, therefore,
his combined convictions violate A.R.S. § 13-116 and constitutional prohibitions against
double jeopardy. Although we have determined Becerra’s convictions and sentences
must be vacated, we address this issue because it might recur on remand. See State v.
May, 210 Ariz. 452, ¶ 1, 112 P.3d 39, 40 (App. 2005).
¶20 A defendant’s right not to be subjected to double jeopardy is violated if he
is convicted of both a greater and lesser-included offense. State v. Welch, 198 Ariz. 554,
¶¶ 6, 13, 12 P.3d 229, 230-31, 232 (App. 2000). An offense is lesser-included if it
contains all but one of the elements of the greater offense. State v. Estrella, 230 Ariz.
401, ¶ 17, 286 P.3d 150, 155 (App. 2012). A person commits driving with a prohibited
drug in the body by operating a vehicle while any drug defined in A.R.S. § 13-3401 or its
9
metabolite is in his or her system. A.R.S. § 28-1381(A)(3). And a person commits
aggravated driving with a prohibited drug in the body by committing the simple
misdemeanor offense while his or her license is suspended. A.R.S. § 28-1383(A)(1).
Should this issue recur on remand, Becerra would be entitled to a curative instruction as
described in Merlina v. Jejna, 208 Ariz. 1, ¶ 18, 90 P.3d 202, 206 (App. 2004), and may
not be convicted and sentenced on both counts. See Welch, 198 Ariz. 554, ¶ 13, 12 P.3d
at 232.
Disposition
¶21 For the foregoing reasons, the trial court’s ruling on Becerra’s motion to
suppress is upheld. We vacate his convictions and sentences and remand for a new trial.
/s/ Virginia C. Kelly
VIRGINIA C. KELLY, Judge
CONCURRING:
/s/ Garye L. Vásquez
GARYE L. VÁSQUEZ, Presiding Judge
/s/ Philip G. Espinosa
PHILIP G. ESPINOSA, Judge
10
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539 F.3d 1108 (2008)
Viet Mike NGO, Plaintiff-Appellant,
v.
J.S. WOODFORD, Warden; A.P. Kane, Chief Deputy, Defendants-Appellees.
No. 03-16042.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted May 22, 2007.
Filed August 21, 2008.
Meir Feder, Kate Bushman and Sari H. Schneider, Jones Day, New York, NY, for the plaintiff-appellant.
Kenneth Roost, Deputy Attorney General; Bill Lockyer, Attorney General of the State of California; James M. Humes, Chief Assistant Attorney General; Frances T. Grunder, Senior Assistant Attorney General; Barbara C. Spiegel, Supervising Deputy Attorney General, San Francisco, CA, for the defendants-appellees.
Before: ALEX KOZINSKI, Chief Judge, HARRY PREGERSON and JAY S. BYBEE,[*] Circuit Judges.
*1109 Opinion by Chief Judge KOZINSKI; Concurrence by Judge PREGERSON.
KOZINSKI, Chief Judge:
On remand from the Supreme Court, Woodford v. Ngo, 548 U.S. 81, 126 S.Ct. 2378, 165 L.Ed.2d 368 (2006), we consider whether a prisoner exhausted his administrative remedies for purposes of the Prison Litigation Reform Act (PLRA).
Facts
Ngo, a prison inmate serving a life sentence, was placed in administrative segregation on October 26, 2000, for inappropriate activity with a prison church volunteer. At a December 22, 2000, hearing, the prison classification committee informed Ngo that he would be released from administrative segregation the next day, but that he could not participate in prison "special programs." Three months later, on March 20, 2001, Ngo wrote to Deputy Warden Kane, asking whether he could play on the prison's baseball team and whether he was "entitled to participate in any and all special programs." Kane explained that Ngo could participate in "any recreational programs," and that the prison's community resources manager was authorized "to review [Ngo's] request to participate in any other program." On June 18, 2001, Ngo submitted a formal appeal to the prison's Appeals Coordinator. This appeal was denied as untimely under Cal.Code Regs. tit. 15, § 3084.6(c), which requires prisoners to "appeal within 15 working days of the event or decision being appealed." Ngo resubmitted his appeal one week later, arguing that his exclusion from special programs was a continuing violation of his constitutional rights. The next day the appeal was again rejected as untimely.
Ngo sued in federal district court under 42 U.S.C. § 1983, alleging First Amendment and due process violations. The district court dismissed for failure to exhaust administrative remedies. We reversed, holding that Ngo was not required to exhaust administrative remedies. Ngo v. Woodford, 403 F.3d 620, 626 (9th Cir.2005). The Supreme Court then reversed us, explaining that the PLRA requires "proper exhaustion of administrative remedies," Woodford v. Ngo, 126 S.Ct. at 2382, so "a prisoner must complete the administrative review process in accordance with the applicable procedural rules, including deadlines, as a precondition to bringing suit in federal court," id. at 2384. We now consider whether Ngo exhausted his administrative remedies.
Analysis
1. It was the December 22, 2000, order that barred Ngo from participating in prison special programs. Pursuant to Cal. Code Regs. tit. 15, § 3084.6(c), Ngo was required to appeal within 15 working days of that order, or about January 16, 2001. Ngo didn't appeal until June 18, 2001, long after the limitations period expired.
Ngo argues that the December 22 determination resulted in a continuing denial of his constitutional rights, so the 15-day limitations period restarts each day he is unable to participate in prison special programs. We rejected this argument in Knox v. Davis, 260 F.3d 1009 (9th Cir. 2001). Knox held that a limitations period began running on the date of a prison board's initial determination, when a prisoner "had notice of all of the wrongful acts she wished to challenge at the time of the [initial determination]." Id. at 1014. Rejecting a continuing violation theory, we explained that any continuing effects are "nothing more than the delayed, but inevitable, consequence of the [initial determination]." Id. And in the context of employment discrimination, the Supreme Court recently emphasized that limitations periods begin to run when the "discrete act" adverse to the plaintiff occurs-"not from *1110 the date when the effects of [that act] were felt." Ledbetter v. Goodyear Tire & Rubber Co., ___ U.S. ___, 127 S.Ct. 2162, 2168, 167 L.Ed.2d 982 (2007). Here, the December 22 determination is the discrete act adverse to Ngo, so the 15-working-day limitations period began running against him on that date rather than on the date he actually felt the effects of the order.
Ngo had ample notice: At the December 22 hearing, he was informed that he would be barred from all special programs after being released from administrative segregation. This restriction was presumptively permanent. If a warden bars a prisoner from activities and doesn't set a date when this restriction will lapse, the restriction remains in force until the prisoner is transferred or the warden reconsiders. Here, neither Deputy Warden Kane nor the prison classification committee told Ngo that the restriction was temporary. Indeed, Ngo's March 20, 2001, letter recognized that the restriction was still in effect when he asked for permission to play on the prison's baseball team and participate in special programs. Deputy Warden Kane partially rescinded the restriction and allowed Ngo to participate in recreational activities, but this doesn't change the fact that Ngo had notice on December 22 that he was subject to an indefinite restriction. If Ngo wanted to challenge this restriction, he needed to appeal within 15 working days of the date he learned of it. Cal. Code Regs. tit. 15, § 3084.6(c). Having failed to do so, Ngo has not exhausted his administrative remedies and so cannot sue in federal court. See Woodford v. Ngo, 126 S.Ct. at 2384.
2. Ngo argues that 15 working days does not give him a "meaningful opportunity," id. at 2392, to exhaust. But see id. at 2393 (recognizing "the informality and relative simplicity of prison grievance systems like California's"). We need not determine whether California's 15-working-day limitations period for prisoner administrative appeals amounts to a meaningful opportunity to exhaust, because Ngo waited months after that period elapsed to challenge the restriction. Even if we were to double or triple the 15-day period, Ngo would still come nowhere close to meeting the deadline. Ngo didn't even question the restriction until three months after it was imposed, and didn't formally appeal it until five months after the limitations period had elapsed. And Ngo had every opportunity to appeal earlier because he knew the restriction's scope and duration as soon as the prison classification committee imposed it. See pp. 11359-60 supra. This is therefore not a case where the plaintiff lacked a meaningful opportunity to exhaust on the grounds that he "fail[ed] to appreciate the ... nature of [his] injuries." Felder v. Casey, 487 U.S. 131, 146, 108 S.Ct. 2302, 101 L.Ed.2d 123 (1988). Ngo sat on his grievance for months, so it is irrelevant here whether California's 15-working-day limitations period provides a meaningful opportunity to exhaust.
3. It is unclear whether we can read exceptions into the PLRA's exhaustion requirement. Compare Woodford v. Ngo, 126 S.Ct. at 2393 (Breyer, J., concurring in the judgment), with Booth v. Churner, 532 U.S. 731, 741 n. 6, 121 S.Ct. 1819, 149 L.Ed.2d 958 (2001). Even if we could, no such exception applies here. Ngo hasn't shown that administrative procedures were unavailable, that prison officials obstructed his attempt to exhaust or that he was prevented from exhausting because procedures for processing grievances weren't followed. Ngo argues that prison officials didn't follow procedures and misled him. However, the acts he complains about took place only after Ngo sent his March 20, 2001, letter to Deputy Warden Kane. As a result, they could have no effect on Ngo's *1111 ability to exhaust, as he had already missed the deadline.
AFFIRMED.
PREGERSON, Circuit Judge, concurring:
I concur in the majority's determination that Ngo did not exhaust his administrative remedies because Ngo did not challenge the decision by prison authorities until three months after the decision was made. I write separately, however, to note my serious concerns about the constitutionality of California's prisoner grievance process. As Justice Stevens noted in his dissent, the Supreme Court's majority opinion in this case "le[ft] open the question whether a prisoner's failure to comply properly with procedural requirements that do not provide a `meaningful opportunity for prisoners to raise meritorious grievances' would bar the later filing of a suit in federal court." Woodford v. Ngo, 548 U.S. 81, 120, 126 S.Ct. 2378, 165 L.Ed.2d 368 (2006) (Stevens, J., dissenting). It is not clear to me that California's system provides a meaningful opportunity for prisoners to raise meritorious grievances.
In particular, I write to address two problems with the grievance process: (1) the requirement that appeals must be filed within fifteen days; and (2) the lack of clarity about how appeals should be filed.
1.
The statute of limitations for § 1983 claims in California is two years. Ngo v. Woodford, 403 F.3d 620, 630 n. 4 (9th Cir.2005). California regulations, however, require an inmate to appeal a decision made by prison authorities "within 15 working days of the event or decision being appealed." Cal.Code Regs. tit. 15, § 3084.6(c). There does not appear to be any justification for such a short filing deadline. The Supreme Court has noted that shortened timelines for filing prisoner suits may be appropriate for instances of urgency. See McCarthy v. Madigan, 503 U.S. 140, 152, 112 S.Ct. 1081, 117 L.Ed.2d 291 (1992). However, there does not appear any urgency or exigency justifying such draconian timetables for filing prisoners' § 1983 claims.
While a fifteen day statute of limitations would be extremely short under any circumstances, it is especially problematic in the prison context. One issue with such a short timeline is the informal nature of the prison discipline process. In this case, for example, Ngo never received a written explanation of the restrictions imposed on him. In such a situation, fifteen days could pass before a prisoner is able to clarify the scope of the sanction against him.[1] This fifteen day timeline might also prove insufficient where a decision made by prison authorities does not even affect the prisoner in the first fifteen days. Further, even if prisoners are aware of the scope of the sanction against them, it may take more than fifteen days to formulate a grievance. If a prisoner researches his rights before filing the grievance, the short time frame might not allow for enough time in the prison library. Prison officials, meanwhile, have significant incentive to find that claims are procedurally barred, given the large number of prisoner grievances.
In sum, it is difficult to see how due process would allow such a draconian timeline to prevent a prisoner from vindicating important constitutional rights.
*1112 2.
The rule that prisoners must properly exhaust their administrative remedies also raises difficult questions about what constitutes compliance with the confusing California prisoner grievance system. I do not believe that California regulations adequately inform prisoners of the required process. The regulations explain that prisoners are to complete a Form 602 when making a grievance. Cal.Code Regs. tit. 15 § 3084.2(a). The regulations also indicate, though, that there is an informal attempt prerequisite. Id. § 3084.2(b). Section 3084.5(a), explains that "[t]he informal level is that at which the appellant and staff involved in the action or decision attempt to resolve the grievance informally." Read together, these code subsections indicate that the informal process does not involve the filing of a Form 602, especially given that filing forms with prison officials is not logically an "informal" process.[2] Other code sections, however, belie the assumption that a Form 602 is not necessary for an informal appeal. For example § 3084.5(a)(2) explains that when a petitioner attempts to obtain review at the informal level, the prison employee involved "shall review and if practical resolve the grievance. The employee shall report the action taken in the response space provided on the appeal form, and shall sign and date the form." This implies that Form 602 is part of the informal review process.
Given these contradictory provisions, a prisoner could hardly know from the regulations whether a Form 602 is required for an informal appeal. It is also not clear whether the prisoner has exhausted his administrative remedies by filing an informal appeal in cases where the informal step could be waived under the regulations. The regulations provide that the informal level of appeal is waived for certain types of appeals, including classification committee actions. Cal.Code Regs tit. 15 § 3084.5(a)(3)(A). Here, Ngo could have bypassed the informal appeal stage because he was challenging a classification committee action, but he chose to first approach the warden in an informal capacity. The regulations offer no clarity as to whether, in such circumstances, a prisoner is required, or simply allowed, to skip the informal appeal step.
Given the Supreme Court's directive that prisoners must properly exhaust state administrative remedies, the lack of clarity in the California regulations is troublesome. The constitutional rights of prisoners should not be taken away based on a confusing administrative process with such a short timeline.
NOTES
[*] Circuit Judge Bybee was drawn to replace Senior District Judge John S. Rhoades, Sr., who died after this case was submitted.
[1] In this case, for example, the duration of the restriction against Ngo was not clear. If Ngo had attempted to clarify the restriction, it could easily have consumed a significant portion of the fifteen days.
[2] The summary of the process used by many California district courts appears to assume that the informal stage does not require a Form 602. See, e.g., Cockcroft v. Kirkland, 548 F.Supp.2d 767 (N.D.Cal.2008) (citing Barry v. Ratelle, 985 F.Supp. 1235, 1237 (S.D.Cal.1997)) (describing the four levels of appeal as "(1) informal resolution, (2) formal written appeal on a CDC 602 inmate appeal form, (3) second level appeal to the institution head or designee, and (4) third level appeal to the Director of the California Department of Corrections.").
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519 N.W.2d 249 (1994)
246 Neb. 384
STATE of Nebraska, Appellee,
v.
Schuyler DAWN, Appellant.
No. S-93-396.
Supreme Court of Nebraska.
July 15, 1994.
*252 Dean S. Forney, Box Butte County Public Defender, for appellant.
Schuyler Dawn, pro se.
Don Stenberg, Atty. Gen., Delores Coe-Barbee, and J. Kirk Brown, Lincoln, for appellee.
Dennis R. Keefe, Lancaster County Public Defender, Michael D. Gooch, and Julie B. Hansen, Lincoln, for amicus curiae NE Crim. Defense Attys. Ass'n.
HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, FAHRNBRUCH, LANPHIER, and WRIGHT, JJ.
FAHRNBRUCH, Justice.
Further review of Schuyler Dawn's appeal of his conviction for distribution of a controlled substance has been granted to remedy the failure of the lower courts to appoint counsel for Dawn's direct appeal and to address his claims that in the trial court (1) he received ineffective assistance of counsel, (2) the prosecutor failed to disclose information material to his defense, and (3) the trial court abused its discretion in setting his appeal bond.
The Nebraska Court of Appeals affirmed Dawn's conviction on direct appeal even though Dawn had not been afforded his constitutional right to counsel during his appeal. That affirmation is a nullity.
After appointing counsel for Dawn for his appeal to this court, after receiving briefs from the parties, after hearing arguments, and after our own review of Dawn's remaining assignments of error, we affirm Dawn's conviction.
FACTS
Dawn was charged by information with (1) criminal conspiracy, (2) two counts of distribution of a controlled substance, and (3) being a habitual criminal.
After Dawn's arraignment on an information in the district court for Box Butte County, his trial counsel filed a motion for discovery. Dawn asked, inter alia, for any "[r]eports prepared or statements given, either orally or in writing, by any law enforcement officers or any agent of the state ... who participated in any way in the investigation or surveillance of the defendant at any time."
In connection with that motion, the State, pursuant to Neb.Rev.Stat. § 29-1912(4) (Reissue 1989), filed a confidential affidavit with the court. Section 29-1912(4) provides:
Whenever the prosecuting attorney believes that the granting of an order under the provisions of this section will result in the possibility of bodily harm to witnesses or that witnesses will be coerced, the court may permit him or her to make such a showing in the form of a written statement to be inspected by the court alone.
In an affidavit filed in Dawn's case, a police official stated that police investigatory reports contained information about a confidential informant who was not endorsed as a State's witness and a coconspirator who, at that time, was a fugitive. The official also stated his belief that Dawn might harm or coerce witnesses in this case. The official stated that in the past, he and other officers had received complaints from citizens that Dawn had threatened or physically harmed them. In cases police investigated, "it has been impossible to gather enough evidence to prosecute Schuyler for the offenses complained of because witnesses refuse to cooperate and testify against Schuyler Dawn." The official listed specific instances, some of which he observed and others which were reported to him, which led him to believe that Dawn "is a violent person capable of *253 causing serious injury or death to a person who is a witness against him." The district court overruled Dawn's motion to produce the requested police reports.
Dawn's trial counsel later filed a motion to depose the informant used by law enforcement officers to apprehend Dawn. At the hearing on that motion, Dawn's trial counsel identified a person who he thought was the informant. The State would not verify that identification. The district court advised Dawn's trial counsel to contact the individual he identified and, if he refused to talk to Dawn's trial counsel, to issue a subpoena for the individual to testify at trial. The district court denied Dawn's trial counsel's motion to depose the alleged informant.
Dawn has not assigned as error the district court's overruling of his motion for discovery of the police reports or his motion to depose the State's informant.
On March 1, 1993, Dawn pled guilty to one count of distributing a controlled substance on January 24, 1992. In exchange for the plea, the State agreed to dismiss the other charges.
At the guilty plea hearing on March 1, the State recited the following facts upon which the charge was founded: On January 18, 1992, an individual involved in drug trafficking in western Nebraska (the confidential informant) went with an undercover law enforcement officer to a bar in Alliance and introduced the officer to Dawn. The three discussed whether cocaine was available. Eventually, the officer saw Dawn meet and make an exchange with a fourth man behind the bar. Dawn then delivered cocaine to the officer, and the officer paid Dawn for it.
On January 22, the same confidential informant and officer met Dawn at his house. On that night, Dawn said he was again looking for cocaine. Dawn met with the same man he had met behind the bar, but was told that cocaine could not be obtained on such short notice.
On January 24, the officer met Dawn at a bar and observed him meet again with the man who had previously been involved in the cocaine deliveries to the officer. Immediately after that, Dawn placed a Kool cigarette package containing cocaine in the officer's hand, and the officer paid for it. It is not entirely clear from the prosecutor's recitation of facts at the plea hearing as to when the informant was present, if at all, during the controlled drug buy from Dawn on January 24. However, the police reports indicate that the confidential informant was present during the drug buy. Those reports are part of Dawn's presentence investigation report and were made available to Dawn's counsel prior to sentencing. At the sentencing hearing, Dawn's counsel advised the court that he had "gone over" the report with his client.
The prosecutor further stated at the plea hearing that both the officer and informant were wearing body microphones and that tapes of the conversations between the officer, the informant, and Dawn would have been introduced as evidence, together with corroboration from other officers who witnessed Dawn's activities on the days in question.
On April 13, 1993, after considering Dawn's presentence investigation report, the trial judge sentenced Dawn to not less than 5 nor more than 20 years' imprisonment.
Although Dawn's trial counsel had not filed a motion to withdraw as counsel at this point, Dawn proceeded pro se and timely filed a notice of appeal, a motion for permission to proceed in forma pauperis, a poverty affidavit, and a motion for appointment of counsel. All of these documents were filed at the same time on May 12 in the district court for Box Butte County. Dawn subsequently filed a motion for an appeal bond.
The district court sustained Dawn's motion to proceed in forma pauperis, appointed the public defender to represent Dawn on appeal, and set an appeal bond at $50,000 cash. Dawn filed a motion for reduction of the appeal bond, which the district court denied.
The prosecutor then filed a motion to set aside the court's order appointing the public defender as Dawn's counsel on appeal. No notice was given to Dawn of the motion or that it was set for hearing, although apparently notice was sent to Dawn's trial counsel and court-appointed public defender. Present *254 at the hearing on this motion were the prosecutor, the judge, and Dawn's court-appointed public defender who had no objection to the motion to set aside his appointment. The district court granted the prosecutor's motion to set aside the appointment of the public defender on the ground that the court was without jurisdiction to enter the order after Dawn's appeal had been perfected to the Court of Appeals.
Dawn then filed several motions for appointment of counsel alternately in the Court of Appeals and district court, with each court determining that it had no jurisdiction to appoint counsel. By memorandum entry on February 9, 1994, the Court of Appeals affirmed Dawn's conviction. The entry stated, "Appeal considered and no need is present for a detailed opinion. See State v. Dixon, 237 Neb. 630, 467 N.W.2d 397 (1991). Conviction affirmed."
Dawn filed a petition for further review by the Supreme Court. The State joined in seeking further review. Upon consideration of Dawn's petition, we granted further review, appointed counsel to represent Dawn in this court, and granted leave for Dawn and the State to file briefs.
On May 12, 1994, Dawn's trial counsel, stating that he had not been retained or appointed to represent Dawn on appeal and that he had no involvement or connection with Dawn's appeal, belatedly filed a motion to withdraw as counsel. The Nebraska Criminal Defense Attorneys Association (NCDAA) filed a brief amicus curiae in support of Dawn's arguments regarding the failure of the lower courts to appoint counsel for Dawn on direct appeal. The only issue commented upon by NCDAA is that the district court and Court of Appeals erred in not appointing Dawn counsel on direct appeal in violation of his rights under the U.S. and Nebraska Constitutions.
ASSIGNMENTS OF ERROR
Summarized and restated, Dawn assigns as error that (1) the Court of Appeals erred in refusing to appoint him counsel on direct appeal, (2) he received ineffective assistance of counsel because his trial counsel failed to investigate the State's use of a county jail inmate as an undercover agent and because trial counsel failed to file a motion to suppress all evidence derived from that informant, (3) his right to due process was violated by prosecutorial misconduct because the prosecutor failed to disclose that the State used an inmate as an undercover agent to apprehend Dawn, and (4) the district court abused its discretion by setting a $50,000 appeal bond for an indigent defendant.
ANALYSIS
APPOINTMENT OF COUNSEL
The rules of practice and procedure for the Nebraska Supreme Court and Court of Appeals provide in substance that the attorneys of record of the respective parties in the court below shall be deemed the attorneys of the same parties in an appellate court, until a withdrawal of appearance has been filed. Counsel in any criminal case pending in this court may withdraw only after obtaining permission of the appellate court. See Neb.Ct.R. of Prac. 1 F(1) (rev. 1993).
Dawn's trial counsel filed a motion to withdraw as counsel on May 12, 1994, after this court appointed counsel for Dawn on his petition for further review of his case here. We granted trial counsel's motion to withdraw, but take this opportunity to remind trial attorneys of the foregoing court rule and their duty to fulfill their responsibilities to clients on appeal.
In this case, Dawn's trial counsel violated the foregoing rule by purporting to withdraw from Dawn's criminal case without filing a motion to withdraw and without obtaining permission from the Court of Appeals after Dawn perfected his appeal to that court.
Dawn's right to counsel on direct appeal was, therefore, violated when he was forced to proceed with his direct appeal pro se. It is beyond dispute that upon showing that he was an indigent and upon his request for counsel, Dawn had the right to appointed counsel for his direct appeal. See, Evitts v. Lucey, 469 U.S. 387, 105 S.Ct. 830, 83 L.Ed.2d 821 (1985); Douglas v. California, 372 U.S. 353, 83 S.Ct. 814, 9 L.Ed.2d 811 *255 (1963). When an indigent defendant is deprived of his constitutional right to counsel by not being furnished an attorney to present his direct appeal to an appellate court, the defendant is not afforded an effective appeal, and the decision thereon is deemed a nullity. See State v. Blunt, 197 Neb. 82, 246 N.W.2d 727 (1976).
We have remedied this defect in this case by granting Dawn's petition for further review and, through our inherent power to do those things reasonably necessary for the administration of justice in the exercise of our jurisdiction, by appointing counsel to represent Dawn on appeal to this court. See Kovarik v. County of Banner, 192 Neb. 816, 224 N.W.2d 761 (1975).
Nevertheless, the question remains unresolved as to which level of the judicial branch has jurisdiction to appoint counsel for an indigent defendant in circumstances similar to Dawn's. Because this situation affects the public interest and is capable of repetition, yet evading review, we now resolve that question. See Williams v. Hjorth, 230 Neb. 97, 430 N.W.2d 52 (1988).
Without representation from his trial counsel and upon filing his notice of appeal, Dawn became trapped in a procedural Catch-22. When Dawn sought appointment of counsel from the district court, that court denied his motion based on the rule that upon perfection of an appeal to an appellate court, the district court loses jurisdiction. See Zeeb v. Delicious Foods, 231 Neb. 358, 436 N.W.2d 190 (1989). When Dawn sought appointment of counsel from the Court of Appeals, that court followed the usual appellate court practice of overruling such motions without prejudice to refile the request for counsel in the district court.
Because the district court has explicit statutory authority under Neb.Rev.Stat. § 29-3901 et seq. (Cum.Supp.1992) to appoint counsel for indigent defendants, our appellate courts have in the past followed the practice that the Court of Appeals employed in this case. We now modify that practice and hold that after a defendant has perfected his or her direct appeal to an appellate court, if the defendant is without counsel, the appellate court, in its supervisory capacity and through its inherent power to do those things reasonably necessary for the administration of justice, may enter an order directing the trial court to appoint counsel to represent that defendant on direct appeal if the defendant asks that counsel be appointed and the defendant satisfactorily shows by affidavit to the district court that he or she is indigent. See Kovarik, supra.
We now turn to Dawn's remaining assignments of error.
INEFFECTIVE ASSISTANCE OF COUNSEL
Dawn argues that his trial counsel failed to investigate whether the State, in violation of Neb.Rev.Stat. § 29-2262.01 (Reissue 1989), used an inmate as an undercover agent or employee of the state. We note that there is nothing in the record or presentence investigation showing that the State violated § 29-2262.01. That section provides, in substance, that a person placed on probation, an inmate of any jail, or an inmate who has been released on parole, probation, or work release is prohibited from acting as an undercover agent or employee of any law enforcement agency of the state and that any evidence derived in violation of this rule is not admissible against any person in any proceeding whatsoever.
Dawn argues that if his trial counsel had conducted an investigation, he would have discovered that the State's informant was a jail inmate at the time he was used in the State's investigation and apprehension of Dawn and that all evidence derived from the informant could have been suppressed. Dawn further argues that his guilty plea was not voluntary because, if his trial counsel had moved to suppress the evidence under § 29-2262.01, he would not have pled guilty, but would have insisted on going to trial.
To state a claim of ineffective assistance of counsel as violative of the Sixth Amendment to the U.S. Constitution and article I, § 11, of the Nebraska Constitution and thereby obtain reversal of a conviction, a defendant must show that his or her counsel's performance was deficient and that such deficient performance prejudiced the defense, that is, demonstrate a reasonable *256 probability that, but for counsel's deficient performance, the result of the proceeding would have been different. State v. Lindsay, 246 Neb. 101, 517 N.W.2d 102 (1994); State v. Gibbs, 238 Neb. 268, 470 N.W.2d 558 (1991).
When a defendant has entered a guilty plea, counsel's deficient performance constitutes prejudice if the defendant shows with a reasonable probability that but for counsel's errors, the defendant would have insisted on going to trial rather than pleading guilty. State v. Johnson, 243 Neb. 758, 502 N.W.2d 477 (1993).
We first note that Dawn did not raise his claim of ineffective assistance of counsel at the trial court level. Claims of ineffective assistance of counsel raised for the first time on direct appeal do not require dismissal ipso facto; the determining factor is whether the record is sufficient to adequately review the question. State v. Morley, 239 Neb. 141, 474 N.W.2d 660 (1991). When the issue has not been raised or ruled on at the trial court level and the matter necessitates an evidentiary hearing, an appellate court will not address the matter on direct appeal. See, State v. Morley, supra; State v. Dixon, 223 Neb. 316, 389 N.W.2d 307 (1986).
The record before this court is insufficient to adequately review the question. The record fails to disclose what Dawn's trial counsel did or did not do to investigate the possibility that the State's informant was on probation, a jail inmate, or an inmate released on parole, probation, or work release at the time he was used in the investigation and arrest of Dawn.
The record does show that Dawn's trial counsel filed a motion for discovery of any reports of the police or agents of the State who participated in the investigation of Dawn and that he later filed a motion to depose the State's informant. The record does not disclose that Dawn's trial counsel filed these motions because he was seeking information as to the informant's status as a jail inmate.
When Dawn's trial counsel sought to depose the State's informant, the district court suggested that he interview the individual he thought was the informant and, if that individual refused to talk, issue him a subpoena to testify at trial. The record does not disclose whether Dawn's trial counsel interviewed that individual. Nor does the record show whether Dawn's trial counsel pursued any other investigation of the informant or the informant's possible status as a jail inmate. The record is silent as to whether Dawn's trial counsel interviewed or attempted to take the deposition of the principal undercover law enforcement officer to determine whether his confidential informant was in jail, on probation, on parole, or on work release when he assisted the officer in receiving a delivery of cocaine from Dawn. Therefore, we are unable to review Dawn's claim that his trial counsel's performance was deficient.
Even if we could determine whether Dawn's trial counsel's performance was deficient, the record contains no information showing that Dawn was prejudiced by his counsel's failure to investigate the informant's status as set forth in § 29-2262.01. The record does not show that the state's confidential informant was on probation, a jail inmate, or an inmate released on parole, probation, or work release at the time the confidential informant was used in the State's investigation and apprehension of Dawn. Nor does the record disclose what basis, if any, Dawn has for suspecting that the informant was used in violation of § 29-2262.01 at that time.
During the hearing on Dawn's motion to depose the State's confidential informant, the prosecutor stated that the person Dawn alleged to be the informant was in jail at the time of the hearing. In his brief to this court, Dawn highlights this statement. However, that hearing was held more than a year after Dawn's arrest. Evidence that the alleged informant was in jail at that time provides no basis for determining that the confidential informant was on probation, a jail inmate, or an inmate released on parole, probation, or work release at the time of his involvement around the time Dawn was alleged to have committed the crimes referred to in this case.
*257 Without such evidence in the record, we cannot determine with reasonable probability whether any failure of Dawn's trial counsel to investigate the matter prejudiced Dawn such that, but for his counsel's alleged failure to investigate, Dawn would have insisted on going to trial rather than pleading guilty.
We find that the record in this case is insufficient to adequately review on direct appeal Dawn's claim of ineffective assistance of counsel at the trial level. Because the issue was not raised or ruled on by the trial court and the matter necessitates an evidentiary hearing, we will not address the matter further on direct appeal.
PROSECUTORIAL MISCONDUCT
Dawn also argues that his due process rights were violated because the prosecutor failed to disclose that the State's informant was a jail inmate at the time of the investigation.
In Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), the U.S. Supreme Court held that irrespective of the good or bad faith of the prosecution, its suppression of evidence favorable to an accused violates due process if the evidence is material to either guilt or punishment. See State v. Boppre, 243 Neb. 908, 503 N.W.2d 526 (1993).
Dawn did not make a specific request for information regarding the status of the State's confidential informant at the time of the crime with which Dawn was convicted, nor did he request Brady material in general. Nevertheless, the U.S. Supreme Court has stated that if the evidence is so clearly supportive of a claim of innocence that it gives the prosecution notice of a duty to produce, that duty arises even if no request is made. United States v. Agurs, 427 U.S. 97, 96 S.Ct. 2392, 49 L.Ed.2d 342 (1976). In such situations, if the omitted evidence creates a reasonable doubt that did not otherwise exist, constitutional error has been committed. Id.
Section 29-2262.01 prohibits law enforcement agencies from using as undercover agents persons on probation, inmates of any jail, or inmates released on parole, probation, or work release. In this case, the State used an informant to introduce an undercover officer to Dawn for the purpose of making controlled drug purchases. In addition, the informant wore a microphone during these encounters to obtain evidence for use against Dawn.
Assuming, without deciding, that the State's use of this informant violated § 29-2262.01, any evidence derived from that informant would be inadmissible. Therefore, evidence that the State violated § 29-2262.01 would constitute evidence material to Dawn's guilt or innocence because most, if not all, of the State's evidence against Dawn apparently was derived from the State's use of its confidential informant. Dawn, however, never raised this issue at the trial court level. In the absence of plain error, when an issue is raised for the first time in an appellate court, the issue will be disregarded inasmuch as the trial court cannot commit error regarding an issue never presented and submitted for disposition in the trial court. State v. Huebner, 245 Neb. 341, 513 N.W.2d 284 (1994).
The record before this court shows that Dawn apparently attempted to discover the identity of the informant, first through a motion to obtain police reports and then through a motion to depose the informant. The record fails to show that Dawn filed these motions because he was seeking information as to the informant's status as a jail inmate, probationer, parolee, or an inmate on work release or information of the prosecutor's failure to disclose such information. The record fails to reflect that Dawn presented the issue for disposition to the trial court or that Dawn even suggested that he suspected the prosecutor had failed to disclose information in violation of Brady.
Our rule precluding appellate courts from reviewing issues not raised at the trial court level is consistent with the usual duties of the prosecutor, defense counsel, and court with regard to Brady material. The U.S. Supreme Court has stated that in the typical case where a defendant makes only a general request for exculpatory material under Brady, it is the State that decides which information *258 must be disclosed. Unless defense counsel becomes aware that other exculpatory evidence was withheld and brings it to the court's attention, the prosecutor's decision on disclosure is final. Pennsylvania v. Ritchie, 480 U.S. 39, 107 S.Ct. 989, 94 L.Ed.2d 40 (1987).
Because Dawn never presented the issue to the trial court, we must disregard this issue in the absence of plain error. Plain error is error plainly evident from the record and of such a nature that to leave it uncorrected would result in damage to the integrity, reputation, or fairness of the judicial process. See State v. Flye, 245 Neb. 495, 513 N.W.2d 526 (1994). In this case, the record contains nothing to show that the prosecutor failed to disclose that the State used an informant in violation of § 29-2262.01. As stated in our discussion of Dawn's ineffectiveness of counsel claim, the record fails to disclose any evidence that the State's informant was on probation, a jail inmate, or an inmate released on parole, probation, or work release at the time he was used in the State's investigation and apprehension of Dawn. Without such evidence in the record, we cannot find plain error on the record to support a finding that the prosecutor failed to disclose material information in violation of Brady.
APPEAL BOND
Dawn argues that the district court abused its discretion by setting an appeal bond in the amount of $50,000 cash for an indigent. Once a defendant has been convicted of the felony charged, he is not entitled to be released on bail; such determination is left to the discretion of the trial court, which may prescribe the amount of the bond and the conditions thereof if one is set. See, Neb.Rev.Stat. § 29-2303 (Reissue 1989); State v. Woodward, 210 Neb. 740, 316 N.W.2d 759 (1982).
Dawn was convicted of a Class III felony, which carries a penalty of up to 20 years' imprisonment, a $25,000 fine, or both. See Neb.Rev.Stat. §§ 28-416 (Cum.Supp. 1992) and 28-105 (Reissue 1989). In addition, the record shows that in two prior cases, Dawn had failed to appear after being released on bail in each case. Under these circumstances, we find no abuse of discretion in the district court's decision to set the appeal bond at $50,000 cash.
CONCLUSION
Until this court appointed counsel for Dawn, he was denied his constitutional right to counsel on direct appeal. We hold that after a defendant has perfected his or her direct appeal to an appellate court, if the defendant is without counsel, the appellate court, in its supervisory capacity and through its inherent power to do those things reasonably necessary for the administration of justice, may enter an order directing the trial court to appoint counsel to represent that defendant on appeal if the defendant asks that counsel be appointed and the defendant satisfactorily shows by affidavit to the district court that he or she is indigent.
We further find that the record in Dawn's case is inadequate to review on direct appeal his claim of ineffectiveness of counsel. Because he failed to present the issue of prosecutorial misconduct to the trial court and because the record is insufficient to support a finding of plain error on this issue, we also are unable to find that the prosecutor violated Dawn's due process rights by failing to disclose material information. Finally, we find no abuse of discretion in the district court's decision to set Dawn's appeal bond at $50,000 cash. Therefore, the trial court's judgment is in all respects affirmed.
AFFIRMED.
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